evaluation of working capital management

8/13/2019 evaluation of working capital management

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A

PROJECT REPORT

ON

EVALUATION OF WORKING CAPITAL MANAGEMENT IN

BAJAJ ALLIANZ LIFE INSURANCE

SUBMITTED TO UNIVERSITY OF PUNE

IN PARTIAL FULLFILMENT OF THE REQUIREMENT FOR THE

AWARD DEGREE OF

MASTER OF BUSINESS ADMINISTRATION

BY

SURESH KUMAR

UNDER THE GUIDANCE OF

PROF. SALAKHA SHAKREKAR

S.K.N SINHGAD SCHOOL OF BUSINESS MANAGEMENT,

AMBEGAON (BK.), PUNE-411041

2012-14


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CERTIFIC TE

This is to certify that the Project report titled Evaluation of working

capital management in Bajaj Allianz Life Insurance submitted by

Suresh kumar. Enrolment No. MS111201 during Semester III of the MBA

Program (Class Of 2013) embodies original work done by him.


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ACKNOWLEDGEMENT

I owe a great many thanks to a great many people who helped and supported me during thecompletion of project.

My deepest thanks to MR. SALAKA SAKEREKAR the guide of the project for guiding and

correcting various documents of mine with attention and care.

He has taken pain to go through the project and make necessary correction as and when needed.

My deep sense of gratitude to Mr. Santosh Singh Chief Branch Manager for support and

guidance. Thanks and appreciation to the helpful people at BAJAJ ALLIANZ LIFE

INSURANCE, for their support.

I would also thanks my institution and my faculty members without whom this project would

have been a distant reality. I also extend my heartfelt thanks to my family and well wishers.

PLACE: PUNE SURESH KUMAR


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DECLARATION

I here by declare that the project work entitled EVALUATIONOF WORKING CAPITAL

MANAGEMENT IN BAJAJ ALLIANZ LIFE INSURANCE submitted to the Pune university,

is a record of an original work done by me under the guidance of SALAKA SAKREKAR,

faculty member, from SKN SINHGAD SCHOOL OF BUSINESS MANAGEMENT, PUNE

I further declare that this project is the result of my own efforts.

Place: PUNE SURESH KUMAR

Date:


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EXECUTIVE SUMMARY


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Executive Summary:

Working Capital is the required for maintenance of day to day business operations. The present

day competitive market environment calls for an efficient management of working capital. The

reason for this is attributed to the fact that an ineffective working capital management mat force

the form to stop its business operations, may even lead to bankruptcy. Hence the goal of

working capital management is not just concerned with the management of current assets and

current liabilities but also in maintaining a satisfactory level of working capital.

Holding current assets in substantial amount strengthens the liquidity position and reduces the

riskiness but only at the expense of profitability. Therefore achieving risk-return trade off is

significant in holding of current assets. While cash outflows are predictable it runs contrary in

case of case of cash inflows. Sales program of any business concern does not bring back cash

immediately. There is a time lag that exists between sale of goods of services and sales

realization. The capital requirement during this time lag is maintained by the operating cycle

concept.

This study gives in detail the working capital management practices in BALIC. Management of

each current asset, namely cash management, accounts receivable management is studied

permanent to BALIC. Similarly management of accounts payable, deposit are studied to

understand the managing of current liabilities. A part from this concept of operating cycle is

studied.

The research methodology adopted for this study is mainly from secondary source of data which

include annual reports of BALIC, and website of the company. The use of primary sources is

limited to interviews with few of the employees in credit department.

The study of working capital management has shown that BALIC has a strong working capital

position. The Company is also enjoying reasonable profits.


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INTRODUCTION

The overall success of the company depends upon its working capital position. So it should

be handled properly because it shows the efficiency & financial strength of a company.

WCM is highly important in firms as it is used to generate further returns for the

stakeholders.

Working Capital Management is a very important fact of financial management due to:

Investments in current assets represent a substantial portion oftotal investment.

Investment in current assets & the level of current liabilities have to be gearedquickly to change sales.

The working capital is the life blood & nerve centre of a business firm. The importance of

working capital in any industry needs no special emphasis. No business can run effectively

without a sufficient quantity of working capital.

It is crucial to retain right level of working capital. WCM is one of the most importantfunctions of corporate management. A business enterprises with ample working capital is

always in a position to avail advantages of any favourable opportunity either to buy raw

material or to implement a special order or to wait for enhanced market status.

Working capital can be utilized for operating costs that are involved in the everyday life of

business. Even very successful business owners may need working capital funds when the

unexpected circumstances arises.

WCM is highly important in firms as it is used to generate further return for the

stakeholders. When working capital is managed improperly, allocating more than enough of

it will render management non-efficient & reduce the benefits of short term investments. On

the other hand, if working capital is too low, the company may miss a lot of profitable

investment opportunities or suffer short term liquidity crises, leading to degradation of

company credit, as it cannot respond effectively to temporary capital requirements.


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Some the points to be studied under this topic are:

How much cash should a firm hold?

What should be the firms credit policy?

How to & when to pay the creditors of the firm?

OBJECTIVES

The objectives of project on evaluation of working capital are as follows-:

1. To study concept of working capital & components of working capital.2. To study change of working capital.3. To analyze profitability, liquidity & working capital position of the company.

SCOPE

The management of working capital helps us to maintain the working capital at a

satisfactory level by managing the current assets and current liabilities. It also helps to

maintain proper balance between profitability, risk and liquidity of the business

significantly.

By managing the working capital, current liabilities are paid in time. If the firm makes

payment to it creditors for raw material in time, it can have the availability of raw

material regularly, which does not cause any obstacles in production process. Adequate

working capital increases paying capacity of the business but the excess working capital

causes more inventory, increases the possibility of delay in realization of debts.

On the other hand, absence of adequate working capital leads to decrease in return on

investment. The goodwill of the firm is also adversely affected due to the inability to pay

current liabilities in time.

Hence, the management of working capital helps to manage all the factors affecting the

working capital in the most profitable manner.


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Limitation of the study:

The scope of the present study has been limited interns of period of study as well as sources

and nature of data. The period covered by the study extends over 5 years from F.Y 2008/9 to

2012/13. At the time of study, the data could be available up to 2012/13. The limitations of

this study are as follows:

1. The study is mainly on secondary data. It is cone mostly on the basis of andpublished financial documents, like balance sheet, profit and loss account and other

related journals, magazines and books etc.2. The study follows with specific tools financial ratio analysis.3. The lack of sufficient time and resources is another limitation of the study. The study

is fully based on the students financial resources and is to be completed within

limited time. The report has taken only 5-years data for the study from year 2008/09

to 2012/13.

4. The study is limited from the point of view of submission on partial fulfillment of therequirement for the Master degree in Business Administration(MBA).


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BAJAJ ALLIANZ LIFE INSURANCE

Name and location of the Company:

Name : Bajaj Allianz Life Insurance Company

Address : GE Plaza, Airport Road, Yerawada, Pune 411006

Tel : +91 020 66026777

Fax : +91 020 66026789

E-mail : [email protected]

Introduction:

Bajaj Allianz Life Insurance is a union between Allianz SE, one of the largest Insurance

Company and Bajaj Finserv.

Allianz SE is a leading insurance conglomerate globally and one of the largest asset

managers in the world, managing assets worth over a Trillion (Over INR. 55,00,000Crores).

Allianz SE has over 119 years of financial experience and is present in over 70 countries

around the world.

At Bajaj Allianz Life Insurance, customer delight is our guiding principle. Our business

philosophy is to ensure excellent insurance and investment solutions by offering customized

products, supported by the best technology.

Vision:

To be the first choice insurer for customersTo be the preferred employer for staff in the insurance industryTo be the number one insurer for creating shareholder value


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Mission:

As a responsible, customer focused market leader, we will strive to understand the insurance

needs of the consumers and translate it into affordable products that deliver value for money.

Our Achievements:

Bajaj Allianz has received IAAA rating, From ICRA Limited, an associate of Moodys

Investors Service, for Claims Paying ability. This rating indicates highest claims paying

ability and a fundamentally strong position.

Awards:

Best Insurance Company in Private sector at the IPE Banking Financial Service andInsurance (BFSI) 2013.

SKOCH Financial Inclusion-Organization of the year 2013. Best Life Insurance Provider (Runner up) at the Outlook Money Award 2012. Best Investor Education and Category Enhancement. Best utilization of Information Technology. SKOCH Financial Inclusion Award.


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Member in Board of Director:

Chairman Rahul Bajaj

Directors

Niraj Bajaj

Sanjiv Bajaj

S.H Khan

Ranjit Gupta

Sanjay Asher

Suraj Mehta

Manu Tandon


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FACTSHEET

Note: * The value are as on 31stMarch 2013

**The values are for FY 2012-13

1

Date of Incorporation 12th

March 2001

2

Started Operation on 3r August 2001

3

Head office Pune, India

4

World Wide Web Address www.bajajallianz.com

5

Toll free number 1800-209-5858

6

Brand Statement Jiyo Befikar

7

Chairman Mr. Sanjiv Bajaj

8MD & CEO Mr.V.Philip

9

Total assets under Management 38,003 crore*

10

Solvency ratio 643.31%**

11

Claim Settlement Ratio NOP 91.56%**

12

Total no. of lives covered 1.56crore**

13

Total no. of office 992*

14

Latest Award Won 1.SKOCH Financial Inclusion Award

2013- Organization of the Year

2.SKOCH Financial Inclusion Award

for Micro Insurance initiatives in the

following categories:

Micro Insurance InitiativeSecuring the Unsecured

Setting the Claims atNominees doorsteps

Insurance Awareness &Education Micro Insurance Renewals &

Persistency Management

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Sour product cater to all the financial needs like Protection, Savings, Retirements, Investment

& Health for Individuals and Groups


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Growing at a breakneck pace with a strong pan Indian presence Bajaj Allianz

has emerged as a strong player in India...

Bajaj Allianz Life Insurance Company Limited is a joint venture between two leading

conglomerates Allianz AG and Bajaj Auto Limited.

Characterized by global presence with a local focus and driven by customer orientation to

establish high earnings potential and financial strength, Bajaj Allianz Life Insurance Co.

Ltd. was incorporated on 12th March 2001. The company received the Insurance Regulatory

and Development Authority (IRDA) certificate of Registration (R3) No 116 on 3rd August

2001 to conduct Life Insurance business in India.

Product:

Life Insurance Motor Insurance Health Insurance Travel Insurance Home Insurance

Channel Partner:

1. Standard Chartered Bank

2. Dhanlaxmi Bank

3. Team Life Care Co. India Ltd.


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The data in this project is enabling in secondary in nature. Financial reports,

company records were referred for data analysis. The study has been undertaken by

collecting relevant data from the balance sheet, profit and loss a/c, annul report & Audit

report of the BALIC the company is used financial tools for the analyzing and interpretation

data.

However primary data is also collected by observation discussing with company

officials. This primary data is used to fill in the gaps while preparing this report and to know

the latest procedures adopted by the company. This has helped to draw inferences and

conclusions.

Sources of data

This study is based on Secondary data:-

The secondary data are those, which have been collected by some other and

which have been processed. Generally speaking secondary data are information, which

have been previously collected by some organization to satisfy his own need. But the

department under reference for an entirely different reason is using it.

For this project secondary sources used are:

1. Annual reports of the company.2. Company website3. Books4. Other company documents

SAMPLING DESIGN

Sampling unit : Financial Statements & Audit Reports

Sampling Size :Last four years financial statements


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WORKING CAPITAL:

Introduction:

Financial management looks after two types of capital need: for fixed capital to invest it

tings such as buildings, plants & equipments and working capital principally to pay for stock

and to cover the amount of credit extended to customers. Fixed capital, as the name implies,

tends not vary in the short but to move up or down in jumps when major investment

decisions are made (or assets sold). Working capital on the other hand, is much more fluid

and fluctuates with level of business.

Working capital is a furnish investment in short term assets. Working capital is the firms

investment in short term assets cash, short term securities. Account receivables and

inventories.

Working capital management is the important branch of the financial management which

gives answers the questions such as:

1. How much should we invest in each category of current assets?

2. How should we finance this investment in current assets i.e. appropriate mix of shortand long term sources to finance?

In most business, funds are deployed in assets which are in the form of cash or bank deposits

or will be turned into cash in a relatively short period as part of normal business activities. In

short the working capital is the sources of financing current assets and it includes short as

well as long term financing.

The management of the funds of business can be described as financial management.

Financial management is mainly concerned with two aspects. Firstly, Fixed assets and fixed

liabilities, in other words, long term investment and sources of funds. Secondly, current

assets and current liabilities. Both of these types of funds play a vital role in business

finance.

Management of working capital usually involves management or administration of current

assets, namely cash, marketable securities, account receivables and inventories and also the


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administration of current liabilities such as creditors, account payable, notes and bills

payables, bank overdraft, outstanding expenses, temporary loans and provisions. A firm

should always maintain the right cash balance so that flow of funds is maintained at a

desirable speed not allowing slowdowns or stoppage. Thus, the enterprises can have a

balance between liquidity and profitability.

The term working capital is often used to refer the firms current assets like primarily cash,

marketable securities, account receivables and inventories. Working capital refers to the fact

that most of its components have their impact over weeks and month rather than years. For

this reason, working capital management is often referred to as short-term finance. The term

working capital is closely related to the term funds and has two common meaning. It is used

to mean current assets of current assets means current liabilities.

Working capital management is concerned with the problems that arise in attempting to

manage the current assets. The term current assets refers to those assets which is ordinary

course of business can be or will be turned into cash within one year without undergoing a

diminution in value and with our disrupting the operations of the firm. The major current

assets are cash, marketable securities, account receivables and inventory.

Current liabilities are those liabilities, which are intended at their inception to be paid in theordinary course of business within a year, out of the current assets of earnings of the

concern. The basis current liabilities are accounts payable, bank overdraft and outstanding

expenses. The goal of working capital management is to management the firms current

assets and current liabilities in such a way that a satisfactory level of working capital is

maintained.

This is so because if the firm cannot maintain to satisfactory level of working capital, it is

likely to become insolvent and may be forced into bankruptcy. The current assets should be

large enough to cover its current liabilities in order to ensure a reasonable margin of safety.

Each of the current assets must manage efficiently in order to maintain the liquidity of the

firm while not keeping too high level of any of them. Each of the short-team sources of

financing must be continuously managed to ensure that they are abstained and used in the

best possible way. The interaction between current assets and current liabilities is, therefore,

the main theme of the theory of working capital management.


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Working capital may be defined more particularly as the assets held for current use within a

business less the amount due to those who await settlement in short term in whatever form.

Working capital is an important aspect manufacturing compares that have so far developed

country. Among all available options proper management of working capital is the only best

possible option to improve their operational viability. Working capital is the financial

management practice in manufacturing enterprises. Working capital represents portion that

circulates from one form to another in the ordinary conduct of business. This idea embraces

recurring transaction from cash to inventories to receivable to cash that forms the

conventional chain of business operations.

Fund deployed for short term are mainly for working capital or operational purpose.

Towards the day-to-day operation, a firm will have to provide money towards the purchase

of raw materials, payment of wage and salaries to extend credit to buyers of goods as well as

to meet other day to day operations.

By analyzing about the working capital, we concluded that, all the corporations. Weather

public or private, manufacturing or non-manufacturing have just adequate working capital to

serve in competitive market. It is because excessive or inadequate working capital is

dangerous from the firms point of view.Excessive investment on working capital affects a

firms profitability just idle investment, yields nothing. In the same way, inadequate

investment on working capital affects the liquidity position of the company and leads to

financial embarrassment and failure of the company.

It is therefore, recognized fact that any mistake made in management of working capital can

lead to adverse effects in business and reduced the liquidity, turnover, profitability and

increases the cost of financing of the enterprises.

DEFINITIONS OF WORKING CAPITAL:

The following are the most important definitions of Working capital:

1) Working capital is the difference between the inflow and outflow of funds. In other words

it is the net cash inflow.


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2) Working capital represents the total of all current assets. In other words it is the Gross

working capital, it is also known as Circulating capital or Current capital for current assets

are rotating in their nature.

3) Working capital is defined as The excess of current assets over current liabilities and

provisions. In other words it is the Net Current Assets or Net Working Capital

CONCEPTS OF WORKING CAPITAL:

There are two concepts of working capital:- gross & net. Gross working capital, simplycalled working capital, refers to the firms investment in current assets. Current assets are

the assets which can be converted into cash within an accounting period (or operating cycle)

and cash, short-term securities, receivables, debtors and stock (inventory) are included in

current assets. Net working capital refers to the difference between current assets and current

liabilities. Current liabilities are those claims of outsiders, which are expected to mature for

payment within an accounting period and include creditors, bills payable and outstanding

expenses.

1) Gross working capital:According to this concept, total current assets are working capital which presents both

owned capital as well as loan capital used for financing current assets. It includes cash,

short-term securities and receivables inventories. These assets can be converted into cash

within a year. Generally, when it comes to current assets, cash is the most valuable element

because it is immediately available to settle bills and debtors are more value than stock

which is nearer to being turned into cash. The gross concept of working capital refers to the

amount funds invested in short-term assets that are employed in the enterprise. Gross

working capital is the firms total current asset and net working capital is current assets

minus current liabilities.

Another name of gross working capital is circulating capital. Circulating capital means

circular flow of cash. This is also called operating cycle in case of manufacturing firm. This

cycle starts with which is used to pay for raw materials. Raw materials are converted intowork-in progress which is again converted into finished goods. When it is ready for sale, it is


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a circular cash-flow from cash into inventories to receivables and back to cash, this cycle

will be repeat again for the whole life of the firm.

The value represented by current assets circulates from one working capital to another

working capital from purchase accounts to goods manufacturing accounts. From inventory

accounts to sales accounts, from sales accounts to cash accounts, this is described as

circulating nature of current assets of in other work working capital has circulating nature.

The speed of circulating of working capital of the turnover of current assets is an indicator of

degree of efficiency of the management. The faster the turnover shows the higher degree of

efficiency.

The working capital cycle can be presented in the diagram as:

COLLECTION PAYMENTS

DEBTORS

SALES

PRODUCTION

VALUE ADDED CONVERSION

CREDITORSCASH

RAW MATERIALS

WORK-IN-

PROGRESS

FINISHED GOODS

Figure: 4.1 The working capital cycle of manufacturing firms.

If the business is profitable the firms assets at the end of each cycle will be greater than the

original investment. In this manner, each cycle will produce a gross profit, and the amount

of net earnings for the year will depend. In part, on number of times the cycle occurs or how


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measured by the ratio of sales to current assets. The higher the ratio, the more efficiency the

operations, fewer current assets are needed to support each dollar of sales.

The flow of working capital does not always proceeds as it is pre- planned when it moves

through different stage of cash cycle, for example, sales may decline due to can in consumer

taste, slow economy and receivable become more difficult to collect the working capital

cycle will be interrupted. This leads to decline in profitability and firm could suffer

bankruptcy if this adverse situation prevails for sometimes.

There is also a much shorter cycle of activity where in goods and materials are held for

manufacture and sale, and credit is advanced to customers for rapid conversion into cash to

provide the funds with which to continue in business and to make a profit distribution

possible.

The working capital cycle shown in figure 4.1 is the operating cycle for non- manufacturing

firm where, cash is required to purchase raw materials which are needed to convert into

work-in- progress, which is again converted into finished goods. Are sold for cash and

credit and ultimately debtors will be realized.

The non manufacturing firms such as wholesalers and retailers do not manufacture goods.

So, they have the direct conversion of cash into stock of finished goods into debtors and

then into cash. This can be shown graphically as:

CASH

Figure: 4.2 Operation cycle of non-manufacturing firms.

DEBTORS STOCK OF FINISHED GOODS


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Sometimes service and financial concerns may not have any inventory. In this case the

operations cycle will be shortest as follows:

CASH

Figure: 4.3 Operating cycle of service and financial firms.

The gross capital working capital focuses on two aspects of current assets

management:

a) Optimum investment in current assets: As state earlier, both excessive andinadequate investment is harmful for the business. This aspects thus, emphasis on the

optimum adequate level of current assets, working capital depends upon the business

activated. It also changes with the change in business activities. This may cause

excess or shortage of working capital frequently. The management should be active

and alert to correct the imbalance.

b)

Financing of current assets: This aspect focus on the need of arranging funds tofinance current assets when more working capital is required due to the increase in

business activities. Then the arrangement should be made quickly. Similarly, when

surplus funds arise, then they should be invested in short term securities.

DEBTORS


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2) Net working capital:Net working capital comprises short term net assets: stock, debtors and cash less

creditors. Working capital management then is to do with management of all aspects of

both current assets and current liabilities, so as to minimize the risk of insolvency while

maximizing return on assets.

Net working capital represents the excess of total current assets over total current

liabilities. It is a qualitative concept which shows the financial soundness of current

financial position. Net working capital may be positive or negative according to the size

of current assets and current liabilities. Current assets should be sufficiently in excess of

current liabilities for the positive working capital. This concept lives idea about the case

and cost of raising working capital to the management.

Not only for the management, is it also a major importance to investors and lenders.

They always like a company to maintain current assets should be two fold of current

liabilities and these concepts is measured by the current ratio via current assets current

liabilities. Which should be 4:1. A large ratio indicates greater solvency and makes it

unsafe and unsound. A negative working capital denotes negative liquidity which is also

dangerous for the company.

Management should always be alert to improve the imbalance in the liquidity position of

the firm. Mathematically, it is presented as:

Net working capital Current assetsCurrent liabilities

An alternatives definition of net working capital is that portion of a firms current assets

financed with long term funds.

For every firm today, minimum portion of working capital is financed with the

permanent sources of funds such as owners capital, debentures, long-term debt, and

preference capital or retained earnings; this portion of working capital which is financed

with long term funds is called permanent working capital. Management must therefore,

decide the extent to which current assets should be financed with equity capital or/ and

borrowed capital.


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Both the concepts of working capital, gross and net, are not mutually exclusive,

however. They are equally important from the management point of view in the gross

concept points out two important aspects of current assets: (i) Optimum investment in

each of the component of current assets and (ii) Financing of these current assets; while

the net concept indicates (i) The liquidity position and (ii) The extent to which working

capital may be financed by permanent sources of funds. Both the concepts have their

own advantages and disadvantages, which concept to choose depend upon the purpose of

the firm. The concept of gross capital is a financial concept where as that of net concept

is an accounting concept. Management is interested in current assets to operate the

business with efficiency. To evaluate the efficiency, gross concept is appropriate. On the

other hand interest of investors and lenders is in concept of net working capital because

it helps in the judgment if liquidity position of the enterprise.

4.3) Objective of Working capital:

Even profitability companies fail if they have inadequate cash flow. Liabilities dare

settled with cash and net profits. The primary objective of working capital management

is to ensure that sufficient cash is available to:

Meet day to day cash flow needs; Pay wages and salaries when they fall due; Pay creditors to ensure continued suppliers of goods and services; Pay government taxation and providers of cash dividends; and Ensure the long term survival of the business entity.

4.4) IMPORTANCE OF WORKING CAPITAL

Working capital may be regarded as the lifeblood of the business. Without insufficient

working capital, any business organization cannot run smoothly or successfully.

In the business the Working capital is comparable to the blood of the human body. Therefore

the study of working capital is of major importance to the internal and external analysis


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because of its close relationship with the current day to day operations of a business. The

inadequacy or

mismanagement of working capital is the leading cause of business failures.

To meet the current requirements of a business enterprise such as the purchases of services,

raw materials etc. working capital is essential. It is also pointed out that workings.

Growth and Expansion Activities

As a company grows, logically, larger amount of working capital will be needed, though it is

difficult to state any firm rules regarding the relationship between growth in the volume of afirm's business and its working capital needs. The fact to recognize is that the need for

increased working capital funds may precede the growth in business activities, rather than

following it. The shift in composition of working capital in a company may be observed

with changes in economic circumstances and corporate practices. Growing industries require

more working capital than those that are static.

Operating Efficiency

Operating efficiency means optimum utilization of resources. The firm can minimize its

need for working capital by efficiently controlling its operating costs. With in-creased

operating efficiency the use of working capital is improved and pace of cash cycle is

accelerated. Better utilization of resources improves profitability and helps in relieving the

pressure on working capital.

Price Level Changes

Generally, rising price level requires a higher investment in working capital. With increasing

prices the same levels of current assets need enhanced investment. However, firms which

can immediately revise prices of their products upwards may not face a severe working

capital problem in periods of rising levels. The effects of increasing price level may,

however, be felt differently by different firms due to variations in individual prices. It is

possible that some companies may not be affected by the rising prices, whereas others may

be badly hit by it.


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Other Factors

There are some other factors, which affect the determination of the need for working capital.

A high net profit margin contributes towards the working capital pool. The net profit is a

source of working capital to the extent it has been earned in cash. The cash inflow can be

calculated by adjusting non-cash items such as depreciation, out-standing expenses, losses

written off, etc, from the net profit, (as discussed in Unit 6).

The firm's appropriation policy, that is, the policy to retain or distribute profits also has a

bearing on working capital. Payment of dividend consumes cash resources and thus reduces

the firm ',s working capital to that extent. If the profits are retained in the business, the firm'

s

working capital position will be strengthened.

In general, working capital needs also depend upon the means of transport and

communication. If they are not well developed, the industries will have to keep huge stocks

of raw materials, spares, finished goods, etc. at places of production, as well as at

distribution outlets.

4.5) Determinants of working capital:

There are no hard and fast rules or certain formulae to determine the working capital

requirement of the firm. The importance of efficient working capital management is an

aspect of overall financial management. Thus a firm plans its operations with adequate

working capital requirement or it should have neither too excess nor too inadequate working

capital. A number of factors affect the working capital. Generally, the following factors

affect the working capital requirement of the firm.

i) Nature and size of business:

The working capital requirement of a firm is basically related size and nature of the

business. If the size of the firm is bigger, then or requires more working capital whereas

small firm needs less working capital relatively to public utilities.

ii) Manufacturing Cycle:

Working capital requirement of an enterprise are also influenced by the manufacturing or

production cycle. It refers to the time involved to make finished goods from the raw


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materials. During the process of manufacturing cycle funds are tied up longer the

manufacturing cycle, the larger will be working capital requirement and vice-versa.

iii) Production Policy:

Working capital requirement is also determined by its production policy. If a firm produces

seasonal foods, the its production and sales volume fluctuate with different seasons. This

type of fluctuating policy affects the working capital policy of the firm.

iv) Credit Policy:

Credit policy affects the working capital of a firm. Working capital requirement depends on

terms of sales. Different term may be followed by different customers according to their

credit worthiness. If the firm follows the liberal credit policy, then it requires more working

capital. Conversely, if a firm follows the stringent policy, it requires less working capital.

v) Availability of Credit:

Availability of credit facility is another factor that affects the working capital requirement. If

the creditors avail a liberal credit terms then the firm will need less working capital and vice-

versa. In other works, the firm can get credit facility easily on favorable conditions. Thus, it

requires less working capital to run the firm otherwise more working capital is required to

operate the firm smoothly.

vi) Growth and Expansion:

Growth and expansion also affects the working capital requirement of firm. However, it is

difficult to precise; determine the relationship between the growth and expansion of the firm

and working capital needs, however, the other things being the same growing firms needs

more working capital than those static ones.

vii) Price level Change:

Price level change also affects the working capital requirement of a firm. Generally, a firm

requires maintaining the higher amount of working capital, if the price level rises. Because

the same level of current assets needs more due to the increasing price. In conclusion, the

implications of changing price level of working capital position will vary from firm to firm

depending on the nature and another relevant consideration of the operation of the consernedfirm.


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viii) Operating Efficiency:

Operating efficiency is also an important factor, which influences the working capital

requirements of the firm. It refers to the efficient utilization of available resources at

minimum cost. Thus, financial manager can contribute to strong working capital position

through operating efficiency. If a firm has strong operation efficiency then it needs lesser

amount of working capital and vice-versa.

ix) Profit Margin:

The level of profit margin differs from firm to firm. It depends upon the nature and quality

of product has a sound marketing management and enjoy the monopoly power in the market

then it earns quite high profit and vice-versa. Profit is sources of working capital because it

contributes towards the working capital as a pol by generating more internal funds.

x) Level of Taxes

The level of taxes also influences working capital requirement of firm. The amount of taxes

to be paid in advances is determined by the prevailing tax regulations. But the firms profit

is not constant, or can note be predetermined. Tax liability in a sense of short-term liquidity

is payable in cash. Therefore, the provision for tax amount is one of the important aspects ofworking capital planning. If tax liability increase, it needs to increase the working capital

and vice-versa.

4.6) Financing of Working Capital:

The firms working capital assets policy is never set in a vacuum; it is always established in

conjunction with the firms working capital policy. Every manufacturing concern of industry

requires additional assets whether they are instable or growing conditions. The most

important function of financial manager is to determine the level of working capital and to

decide how it is to financed. Financial of any assets is concerned with two major factors-

cost and risk. Therefore, the financial manager must determine an appropriate financing mix,

or decide how current liabilities should be used to finance current assets. However, a number

of financing mixes are available to the financial manager. He can resort generally there kinds

of financing.


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i) Long-term financing:Long-term financing has high liquidity and low profitability, Ordinary share, Debenture,

Preference share; retained earnings and long-term debt of financial institution are major

sources of long-term finance.

ii) Short-term financing:

A firm must arrange its short-term credit in advance. The sources of short-term financing

of working capital are trade credit and bank borrowing.

Bank credit: Bank credit is the primary institutional sources for working capital

financing for the purpose of bank credit, amount of working capital requirement has to

be estimated by the borrowers and banks are approached with the necessary supporting

data.

After availability of this data, bank determines the maximum credit based on the margin

requirements of the security. The types of loan provided by commercial banks are loan

arrangement, overdraft arrangement, commercial paper etc.

4.7) APPROACHES TO MANAGING WORKING CAPITAL

Two approaches are generally followed for the management of working capital: (i) the

conventional approach, and (ii) the operating cycle approach.

The Conventional Approach

This approach implies managing the individual components of working capital (i.e.

inventory, receivables, payables, etc) efficiently and economically so that there are neither

idle funds nor paucity of funds. Techniques have been evolved for the management of each

of these components. In India, more emphasis is given to the management of debtors

because they generally constitute the largest share of the investment in working capital. On

the other hand, inventory control has not yet been practised on a wide scale perhaps due to

scarcity of goods (or commodities) and ever rising prices.


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The Operating Cycle Approach

This approach views working capital as a function of the volume of operating expenses.

Under this approach the working capital is determined by the duration of the operating cycle

and the operating expenses needed for completing the cycle. The duration of the operating

cycle is the number of day involved in the various stages, commencing with acquisition of

raw materials to the realization of proceeds from debtors. The credit period allowed by

creditors will have to be set off in the process. The optimum level of working capital will be

the requirement of operating expenses for an operating cycle, calculated on the basis of

operating expenses required for a year.

In India, most of the organizations use to follow the conventional approach earlier, but now

the practice is shifting in favour of the operating cycle approach. The banks usually apply

this approach while granting credit facilities to their clients.

ADEQUACY OF WORKING CAPITAL

The firm should maintain a sound working capital position. It should haveadequate working

capital to run its business operations. Both excessive aswell as inadequate working capital

positions are dangerous from the firms point of view. Excessive working capital not only

impairs the firmsprofitability but also result in production interruptions and inefficiencies.

The dangers of excessive working capital are as follows:

It results in unnecessary accumulation of inventories. Thus, chances ofinventory mishandling, waste, theft and losses increase.

It is an indication of defective credit policy slack collections period.Consequently, higher incidence of bad debts results, which adversely

affects profits.

Excessive working capital makes management complacent whichdegenerates into managerial inefficiency.

Tendencies of accumulating inventories tend to make speculativeprofits grow. This may tend to make dividend policy liberal and difficult

to cope with in future when the firm is unable to make speculative

profits.


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Inadequate working capital is also bad and has the following dangers:

It stagnates growth. It becomes difficult for the firm to undertakeprofitable projects for non- availability of working capital funds.

It becomes difficult to implement operating plans and achieve the firm sprofit target.

Operating inefficiencies creep in when it becomes difficult even to meetday commitments.

Fixed assets are not efficiently utilized for the lack of working capitalfunds. Thus, the firm s profitability would deteriorate.

Paucity of working capital funds render the firm unable to availattractive credit opportunities etc.

The firm loses its reputation when it is not in a position to honour itsshort-term obligations.

As a result, the firm faces tight credit terms.

An enlightened management should, therefore, maintain the right amount of working capital

on a continuous basis. Only then a proper functioning of business operations will be ensured.

Sound financial and statistical techniques, supported by judgment, should be used to predict

the quantum of working capital needed at different time periods.

A firm s net working capital position is not only important as an index of liquidity but it is

also used as a measure of the firms risk.

Risk in this regard means chances of the firm being unable to meet its obligations on due

date. The lender considers a positive net working as a measure of safety. All other things

being equal, the more the net working capital a firm has, the less likely that it will default in

meeting its current financial obligations. Lenders such as commercial banks insist that the

firm should maintain a minimum net working capital position.

In this study four years data ( 2008 to 2012 have been presented and analyzed. It covers to

analyze the ratio as well trend and composition of working capital, which means current

assets, current liabilities, liquidity, turnover, leverage and profitability of BALIC.


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Components of current assets:

For the day to day business operation different types of current assets are required. Current

assets refer those assets that are cash or can be converted into cash within a year. The

composition of current assets or the main components of current assets at BALIC are cash

and bank balance, loan and advances and government securities. Miscellaneous current

assets are also a component of current assets. Prepaid expenses, outstanding income like

interest receivable and other current assets are also included in miscellaneous current assets.

The following table shows the amount of cash and bank balance, money at call or short

notice, loan and advanced government securities and other current assets of Bajaj Allianz

Life Insurance Company Pvt. Ltd.

Component of Current Assets of BALIC

Rs. 000

Fiscal Year Cash and Bank

balance

Loan and advance Other C.A Total

2008/09 3,552,963 76,970 1,828,423 5,460,356

2009/10 2,186,908 130,275 3,111,630 5,428,813

2010/11 4,385,098 147,078 3,832,457 8,364,633

2011/12 4,382.396 170,660 5,364,592 9,917,648

Source:- Annual Report of BALIC From 2008/09 to 2012/13

Assets of Company was amounted to Rs. 5,460,356 which included Rs. 3,552963 of

cash and bank balance, Rs. 76,970 of loan and advance, Rs. 1,828,423 of

miscellaneous current assets. Current assets of the company increase in all four years.


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As stated in above figure 4.1 the current assets of BALIC increases all the four year

from FY 2008/09 t0 2011/12. In the cash of FY 2009/10, the increasing trend is low

from FY 2008/09. But the overall increasing trend of current assets is higher.

5.2) Component of Current Liabilities:

Current liabilities is a short-term obligation which is payable within a year. The composition

of current liabilities or the main components of current liabilities. Tax provision, staff bonus,

proposed dividend payable and other liabilities are included in other current liabilities. The

following table shows the amount of deposit and other accounts, short term loan, bills

payable and other current liabilities of BALIC.

Fiscal Year Deposit Other C.L Total

2008/09 318,900 426,735 745,635

2009/10 323,900 660,226 984,126

2010/11 2,899,500 1,068,189 3,957,689

2011/12 3,857,000 1,368,827 5,225,827

In the above table, we can found that the component of current liabilities which consists

deposits. In fiscal year 2008/09 the total amount of current liabilities Rs. 745,635for the

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

2008/09 2009/10 2010/11 2011/12

Cash&Bank balance

Loan&advance

Other C.A

Total


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increasing impact of deposits and other current liabilities. In all four year deposits and other

current liabilities are increased.

In the above figure 5.2 shows that the current liabilities of the company is increasing.

5.3) Working capital of BALIC:

Working capital is required to run business smoothly and efficiently in the context of set

objectives. It is no doubt that no organization can achieve its goal without proper use of

working capital. It means money invested on working capital should be neither more nor

less because both the position of working capital affects not only liquidity but also

profitability of the organization. The investment decision should be made on any type of

current assets by considering their role in company and determining which one is more

beneficial to the company and which is not. The following table shows the amount of

working capital of BALIC of the study period.

Fiscal Year Total C.A Total C.L WC= CA-CL

2008/09 5381386 8052356 4,470,970

2009/10 5,298,538 10,518,711 5,220,173

2010/11 8,217,555 9,500,915 1,283,360

2011/12 9,746,988 10,654,854 907,866

Sources: Annual Report of company.

2008/09 2009/10 2010/11 2011/12

Deposits 318900 323900 288900 387000

Other C.L 426735 660226 1068189 1368827

Total 745635 984126 3957689 5225827

0

1000000

2000000

3000000

4000000

5000000

6000000

Current Liabilities


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In the above figure we clearly show the current assets, current liabilities and working capital

condition of BALIC from fiscal year 2008/09 to 2011/12. Working capital condition of the

company is at satisfactory level. All the year of the study period the working capital of the

company is negative.

Liquidity Ratio:Liquidity ratios measures ability of the firms to meet its short-term obligations.

Liquidity of any business organization is directly related with working capital or

current assets and current liabilities of that organization. In other words, one of the

main objectives of working capital management is keeping sound liquidity position.

Company is a different organization which is engaged in Mobilization of funds. So,

without sound liquidity position of ability to meet its short-term obligation various

liquidity ratios are calculated and to know the trend of liquidity are trend analysis of

major liquidity ratios have been considered.

5.4) Current Ratio:This ratio indicates the short-term solvency position of bank. In other words current

ratio indicates better liquidity position. It is calculated as follows:

Current assets (CA)

Current liabilities (CL)

The following table shows the current ratio to compare the following capital management of

BALIC.

2008/09 2009/10 2010/11 2011/12

Total CA 5381386 5298538 8217555 9746988

Total CL 8052356 10518711 9500915 10654854WC=CA-CL 4470970 5220173 1283360 907866

0

2000000

4000000

6000000

8000000

10000000

12000000

working capital


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Current Ratio of BALIC

Fiscal Year Total CA Total CL Current ratio

2008/09 5,381,386 8,052,356 0.67

2009/10 5,298,538 10,518,711 0.50

2010/11 8,217,555 9,500,915 0.86

2011/12 9,746,988 10,654,854 0.91

Average=0.74

Sources: Annual Report of BALIC from 2008/09 to 2012.

Current Ratio of BALIC

INTERPRETATION:

The above table 5.4 shows the CA, CL and current ratio of the BALIC. The

current ratio of the BALIC is fluctuating over the year. The highest current ratio is in fiscal

year 2011/12 0.91. And in all year it is increasing. The average ratio is 0.74.

0.67

0.5

0.860.91

0

0.1

0.2

0.3

0.4

0.50.6

0.7

0.8

0.9

1

2008/09 2009/10 2010/11 2011/12

Ratio %


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5.6) Cash and bank balance to Current Assets:

The cash and bank balance is almost liquids from the current assets, this ratio shows the

percentage of readily available fund within the banks. It can be calculated by dividing cash

and bank balance by current assets, which is given below.

Cash and bank balance

Current assets

This ratio shows that the percentage of current assets cover cash and bank balance. The

following table and figure shows the cash and bank balance to current assets ratio of BALIC

over the study period.

Table 5.6

Cash and Bank to Current Assets Ratio of BALIC

Fiscal Year Cash& Bank

Balance

Current Assets Ratio (%)

2008/09 3,552,963 5,381,386 0.67

2009/10 2,186,908 5,298,538 0.41

2010/11 4,385,098 8,217,555 0.53

2011/12 4,382.396 9,746,988 0.44

Sources: Annual Report of Company

INTERPRETATION:

Cash and Bank balance to current assets ratio of the company is in 2009/10decreased and in 2010/11 it increased and again in 2011/12 is decreased

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

2008/09 2009/10 2010/11 2011/12

Ratio %


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5.7) Cash and Bank Balance to Total deposit:

The ratio shows the ability of bank immediate funds to cover their deposits. It can be

calculated by dividing cash and bank balance by deposits. The ratio can be expressed as:

The following table and figure shows the cash and bank balance to total deposits ratio of theBALIC over the study period.

Cash and Bank balance to total Deposit Ratio of BALIC

Fiscal Year Cash & bank Total deposit Ratio

2008/09 3,552,963 2,318,900 1.53

2009/10 2,186,908 2,123,900 1.03

2010/11 4,385,098 2,899,500 1.51

2011/12 4,382.396 3,857,000 1.14

Sources: Annual report of Company

INTERPRETATION:

The above figure depicts that the cash and bank balance to total deposit of

BALIC has been slightly decreasing in FY 2009/10, 2010/11, 2011/12.

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2008/09 2009/10 2010/11 2011/12

Ratio%


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5.8) Net Profit to Total Assets:

This ratio is very much crucial for measuring the profitability of funds invested in the bank

assets. It measures the return on assets it computed by using the following formula.

Net profit after tax

Total assets

Table 5.8

Net Profit to Total assets Ratio of BALIC

Fiscal Year Net Profit Total assets Ratio(%)

2008/09 5,605,846 5,336,042 1.05

2009/10 6,182,978 5,298,538 1.17

2010/11 10,387,412 8,217,555 1.26

2011/12 23,499,431 9,746,988 2.41

Sources: Annual Report of company

INTERPRETATION:

Net Profit to total asset ratio in 2008/09 1.05 and it increasing slightly in

financial year 2009/10, 2010/11 and 2011/12.

1.05

1.17 1.26

2.41

2008/09 2009/10 2010/11 2011/12

Ratio


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5.9) Debtors Turnover Ratio:

Concept: -

Debtors are expected to be converted into cash over a short period of time

and therefore are included in current assets. It shows how many times debtors are converted

into cash in a year.

Debtors Turnover Ratio = Net credit sales

Average Debtors

Year Credit sales Average Debtors Ratio

2008/09 102,199,181 19,080,194 5.35

2009/10 132,858,985 27,192,101 4.88

2010/11 171,671,451 36,302,837 4.72

2011/12 221,246,824 42,584,634 5.19

Diagram:-

INTERPRETATION:-

The debtors turnover ratio was very less in the year 2010/11 at 4.72

times, but them it has increased to 5.19, 5.66 times in the year 2011/12 and 2008-09. This

shows that the company is making all the offers to speed up the collection process.

4

4.2

4.4

4.6

4.8

5

5.2

5.4

5.6

2008/09 2009/10 2010/11 2011/12

Debtors Turnover Ratio


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5.9) Creditors Turnover Ratio:

Concept: -

Creditors turnover ratio establishes relationship between not credit purchases

and average trade creditors and accounts payable. The ratio indicates the velocity with which

the creditors are turned over in relation to purchases.

Creditors Turnover Ratio = Net Credit Purchases

Average creditors

Year Credit Purchases Average Creditors Ratio

2008/09 96,724,469 82,074,994 1.17

2009/10 127,553,879 112,554,635 1.13

2010/11 165,680,148 146,617,013 1.13

2011/12 213,323,185 189,501,666 1.12

Diagram:-

INTERPRETATION:-

The creditors turnover ratio was 1.17 times in the year 2008/09 & it

decreased to 1.13 times in the year 2009-2010 but creditor turnover will be remain same two

year 2009/10 and 2011/12.

1.09

1.1

1.11

1.121.13

1.14

1.15

1.16

1.17

1.18

2008/09 2009/10 2010/11 2011/12

Creditors Turnover Ratio


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5.10) Working Capital Turnover Ratio:-

It is taken as one of the primary indicators of the

short-term solvency of the business. It establishes the relationship with the net sales. It

measures the efficiency with which the working capital is being used by the firm.

WORKING CAPITAL TURNOVER RATIO = Net Sales

Net Working Capital

Year Net Sales Net Working Capital Ratio

2008/09 102,199,181 20,229,751 5.05

2009/10 132,858,985 23,244,807 5.72

2010/11 171,671,451 36,879,727 4.65

2011/12 221,246,824 32,265,850 6.86

Source: Annual report of BALIC

Diagram:

INTERPRETATION:

In The year 2008/09 working capital t/o ratio was5.05 time ,5.72 time in the

year 2009/10. In the year 2009/10 the working capital has increases. And in financial year

2010/11 it decreased and again in financial year 2011/12 it increased.

0

1

2

3

4

5

6

7

8

2008/09 2009/10 2010/11 2011/12

Working Capital Turnover Ratio


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Statement of changes in working Capital for the year 2008/09

Particular 31-03-2005 31-03-2004 Increase

Sources)

Decrease

(Application)

Current Asset

Sundry debtors

o/s more than 6 month Nil - -

o/s less than 6 month 25,402,556 12,757,833 12,644,722

Cash & Bank Balance

Cash in hand 322,305 119,298 203,007

Balance with bank 0.00 - -

Loans & Advance

Margin against Bank

guarantee

600,000 650,000 - 50,000

Accrued interest on

Margin Money

16,250 1,625 0.00 0.00

Tax deducted at source 11,270.00 39,761.00 - 28491.00

Total 26,352,381 13,583,142 12,769,238 -Current Liabilities

Sundry creditors 5,366,937 4,909,228 457,708 -

Lalit Bajaj 10,000 0.00 10,000 -


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O/D with Bank of Baroda - 4,665,878 - 4,665,878

Provisions for exp 482,193 363,239 118,953 -

Mr.Pawan choudhary 1,000,000 - 1,000,000

Mr.Babita Choudhary 500,000 - 500,000

N.B Shetty 30,000 10,000 20,000 -

Income tax 2007-08 20000 - 20000.00

Income tax 2008-09 233,500 168,000 65,500.00

Total

6,122,630 11,636,347 - 5,513,717

Networking Capital

(Current Asset

Current Liability)

20,229,751.69 1,946,795.28 18,282,956.41


Particular 31-03-06 31-03-05 Increase Decrease

Current Asset

Sundry debtors

o/s more than 6 month - -

Others 28,981,646.00 25,402,556.11 3,579,089.89 -

Cash & Bank Balance

Cash in hand 151,478 322,306 - 170,828

Balance with schedule

bank

In Current A/C - - - -

In Fixed Deposit 600,000 600,000 0.00 0.00


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Loans & Advance

Unsecured considered

goods, subject to recoveradvance recover in cash or

kind or value.

49,243 16,250 32,993 -

T.D.S & Income Tax paid 305,604 11,270 294,334 -

Total 30,087,971 26,352,381 3,735,589 -

Current Liabilities

Sundry creditors 5,663,415 5,366,937 296,478 -

Other Liabilities 617,659 522,193 95,465 -

Provisions

Provisions for taxation 527,500 233,500 294,000 -

Provisions for F.B.T 34,590 -

Total 6,843,164 6,122,630 720,533 -

Networking Capital

(Current Asset

Current Liability)

23,244,807 20,229,751 3,015,055 -


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Current Asset

Sundry debtors

o/s more than 6 month 833,104 - 833,104 -

Others 42,790,924 28,981,646 13,809,278 -

Cash & Bank

Balance

Cash in hand 125,254 151,478 - 26,224

Balance with

schedule bank

In Current A/C - -

In Fixed Deposit 600,000 600,000 0.00 0.00

Loans & Advance


goods, subject to

recover advance

recover in cash or kind

or value.

182,081 49,243 132,838 -

Sundry Advances 1,331,945 - 1,331,945 -

T.D.S & Income Tax

paid

995,525 305,604 689,921 -

Total 46,858,833 30,087,971 16,770,862 -

Current Liabilities


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Sundry creditors 8,090,866 5,663,415 2,427,451 -

Other Liabilities 891,150 617,659 273,491 -

Provisions

Provisions for taxation 927,500 527,500 400,000 -

Provisions for F.B.T 69,590 34,590 35,000 -

Total 9,979,106 6,843,164 3,135,942 -

Networking Capital

(Current Asset

Current Liability)

36,879,727 23,244,807 13,634,920 -


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Current Asset

Sundry debtors

o/s more than 6

month

386,945.00 833,104.00 - 446,159.00

Others 41,158,296 42,790,924 - 1,632,628.0

0

Cash & Bank

Balance

Cash in hand 95,663.00 125,254.00 - 29,591.00

Balance with

schedule bank

In Current A/C - -

In Fixed Deposit 600,000.00 600,000.00 0.00 0.00

Loans & Advance


goods, subject to

recover advance

recover in cash or

kind or value.

276,894.00 182,081.00 94,813.00 -

Sundry Advances 431,945.00 1,331,945.00 - 900,000.00

T.D.S & Income Tax

paid

1,439,475.00 995,525.00 443,950.00 -

Total 44,389,218.00 46,858,833.00 - 2,469,615.0

0


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Current Liabilities

Sundry creditors 9,854,397.00 8,090,866.00 1,763,531.00 -

Other Liabilities 801,881.00 891,150.00 - 89,269.00

Provisions

Provisions for

taxation

1,362,500.00 927,500.00 435,000.00 -

Provisions for F.B.T 104,590.00 69,590.00 35,000.00 -

Total 12,123,368.00 9,979,106.00 2,144,262.00 -

Networking Capital

(Current Asset

Current Liability)

32,265,850.00 36,879,727.00 - 4,613,877.0

0


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FINDINGS

Table no. 6.1

S. no. Particulars 2008/09 2009/10 2010/11 2011/12

1 Current ratio 0.67 0.50 0.86 0.91

2 Cash and bank balance to

current assets

0.67 0.41 0.53 0.44

3 Cash and bank balance to

total deposit

1.53 1.03 1.51 1.14

4 Net profit to total assets 1.05 0.03 1.26 2.41

5 Debtors Turnover Ratio 5.35 4.88 4.72 5.19

6 Creditors Turnover Ratio 1.17 1.13 1.13 1.12

7 Working Capital Turnover

Ratio

5.05 5.72 4.65 6.86

1. Current ratio (C.R) of fiscal year 2008/09 to 2011/12 showed slightly increase i.e.0.67 to 0.91. But in fiscal year 2009/10 C.R decreased comparatively in deposits and

in fiscal year 2010/11 C.R is again increase 0.86 due to increase in factors which

influence it.

2. Cash and Bank balance to current assets ratio of the company is in 2009/10decreased and in 2010/11 it increased and again in 2011/12 is decreased.

3. The above figure depicts that the cash and bank balance to total deposit of BALIChas been slightly decreasing in FY 2009/10, 2010/11, 2011/12.

4. Net profit to total asset ratio in 2008/09 1.05 and it increasing slightly in financialyear 2009/10, 2010/11 and 2011/12.

5. The debtors turnover ratio was very less in the year 2010/11 at 4.72 times, but themit has increased to 5.19, 5.66 times in the year 2011/12 and 2008-09. This shows that

the company is making all the offers to speed up the collection process.


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6. The creditors turnover ratio was 1.17 times in the year 2008/09 & it decreased to1.13 times in the year 2009-2010 but creditor turnover will be remain same two year

2009/10 and 2011/12.

7.

In The year 2008/09 working capital t/o ratio was5.05 time ,5.72 time in the year2009/10. In the year 2009/10 the working capital has increases. And in financial year

2010/11 it decreased and again in financial year 2011/12 it increased.


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SUGGESTION

On the basis of the analysis and observation an attempt made to present somesuggestions.

In the year 2009-2010 the current assets of the company has declined and currentliability of the company has increases there for the net working capital declined.

There for the current ratio has declined. The net working capital of the company

has increased remaining year .But profit has increased because the sales has

increased in the year 2007-2008.

The company has able to repay the liability of the creditors because of thecurrent ratio of SDT&TPL is above the standard of current ratio i.e. 2:1. The

profit of the company has increased every year.

Because of the current assets has declined in the year 2010-2011 but profit of thecompany has increased in the year 2008-2009. There for the return on current

assets is very high.

Company has able to full fill the standard level of current ratio i.e. 2:1 .There forthe company has able to repay the liability and loan of company and the change

in working capital declined in the year 2009-2010 due to the sundry creditors has

more and Provision of tax has been very high.


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CONCLUSION

At the end it is stated that the working capital management is a part of money

invested in the business. Working capital may be regarded as lifeblood of a business. Its

effective provision can do much to ensure the success of a business.

The Working Capital Management contributes much in the over all management of

the organization affairs, efficiency of organization operations depend on how it manages its

short term business dealings. Working Capital management contributes for the firm

efficiency as well as the finance manager is proper utilizing the available wealth and

maintaining the required liquidity.

Working capital is considered to be an important tool for progress. Working capital

management techniques are playing significant role in assisting the management for decision

making. The study of working capital management at Bajaj Allianz Life Insurance Pvt. Ltd.

Is found to be very effective. The working capital contains the management of Cash,

Debtors, and creditors. The Bajaj Allianz Life Insurance Pvt. Ltd has profit oriented

company .The profit of the company will be increases every year .The company has able to

the repay the amount of the creditor. The company has more working capital and also sale

has increases year to year.


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BIBILIOGRAPHY

Books:

I.M Pandey (1955), Financial Management, New delhi: Vikash Publishing House.

Van Horne, Jemes C. (2000), Financial management and Policy, New Delhi: Prentice Hall

of India Pvt. Ltd.

And

Annual Report of Bajaj Allianz Life Insurance Company Pvt. Ltd.

Websites:

www.bajajallianz.co.in

www.investorwords.com

www.studyfinance.com

www.wikipedia.org
http://www.investorwords.com/http://www.investorwords.com/http://www.studyfinance.com/http://www.studyfinance.com/http://www.wikipedia.org/http://www.wikipedia.org/http://www.wikipedia.org/http://www.studyfinance.com/http://www.investorwords.com/


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APPENDIX-1

BAJAJ ALLIANZ LIFE INSURANCE COMPANY PVT. LTD.

PROVISIONAL BALANCE SHEET AS AT 31stMARCH, 2009

Particulars SCHEDULE

As At

31.03.2009

SOURCES OF FUNDS

SHAREHOLDERS FUNDS

Share capital

Reserves and Surplus

Share Application money Pending allotment

Secured Loans

Unsecured Loans

Deferred Tax Liability (Refer Note No. 10)

TOTAL

APPLICATIONS OF FUNDS

Fixed Assets:

Gross Block

Less: Accumulated Depreciation

Net Block

INVESTMENTS

Current Assets, Loans & Advances

A

B

C

D

-

E

F

45,00,000.00

36,81,572.008181572.00

3,73,46,016.00

64,85,778.00

5,146.00

52,018,512.00

12,91,998.00

2,67,700.00

10,24,298.00

0


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Sundry Debtors

Cash and bank balances

Loans and Advances

Less: Current Liabilities & provisions

Current Liabilities

Provisions

NET CURRNT ASSETS

Miscellaneous Expenditure

( To the extent not written off or adjusted)

TOTAL

G

H

I

(A)

J

K

(B)

(A-B)

K

5,94,88,569.00

6,64,627.00

23,41,845.00

62,495,041.00

93,35,077.00

21,92,090.00

5,09,67,874.00

26,340.00

5,20,18512.00

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