Full Summer Project

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COMPANY PROFILE

ORIGIN INFOSYS is a leader in providing complete infrastructure

business solutions for IT / ITES . Our aim has been to provide clients

with smart IT solutions that allow their business to meet short term

deadlines, while achieving long term success.

ORIGIN INFOSYS was founded by two young enterprising

engineers P Thangavel, and S Loganathan in 1993 under the name

Origin Information Technology. It was started with the goal of providing

high-quality computer hardware and service on a contractual basis. In

course of time, the operations were expanded to include sales of

computers and other equipment too.

In 1998, Origin Information Technology was incorporated as a

Private Limited Company under the name Origin Infosys Private Limited

(ORIGIN). Over the years, ORIGIN gradually spread its wings to cater to

other areas of IT. With the single focus of providing high-quality

equipment and service, and encouraged b

ORIGIN's range of services includes:

Business Infrastructure

IT Facility Management

Hardware Sales

Computer and Peripherals Rental

Annual Maintenance Contracts

Software Development

Web Design & Development


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TIE UP WITH COMPUTER COMPANY

IT INFRASTRUCTURE, TECHNOLOGY AND OUTSOURCING

CAREERS AT ORIGIN COLLECTION. CULTURE, SUPPORT,

DEVELOPMENT

Joining Origin translates into continual opportunities to expand on

what you can do. Challenge yourself with interesting work focused on

delivering innovation and proven solutions. Our employees come

together with a wide variety of skills and backgrounds to create talented

teams of problem-solvers. We help clients become high-performance

business.

At ORIGIN, you will find an informal atmosphere and an

approachable management. It's a place where everyone is passionate


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about their work and wants to be part of the growth and success of the

organization.

We are committed to total customer satisfaction and recognize that

our employees are critical to our pursuit of excellence. Hence we are

committed to providing an excellent working environment and

competitive benefits benefits.

We believe that any job can be fun if you have the opportunity to

use your insight and intelligence to improve a task or process.

OUR VISION STATEMENT

Here's the vision that guides us in our growth and success.

We are committed to customer satisfaction through timely

and accurate fulfillment of customer needs. We will

continuously improve our processes and adhere to the

principle of Quality Management System in all aspects of

our business.

We will be a world-class provider of IT-enabled solutions by

making technology work for customers, while benchmarking

with the best.

We will strive for long-term relationships with our

customers by sharing their vision and developing a win-win

association.

We will deliver value by going beyond the contract and

becoming the client's preferred outsourcing partners.


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We will strive to create a workplace that fosters superior

customer service through teamwork and creating an

organization-wide learning environment.

Plan and effectively utilize technology and human resources

Improve customer satisfaction

Provide high-quality, value-added, customer-focused

solutions


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THE ORIGIN ADVANTAGE

ORIGIN is in the business of fulfilling clients' IT requirements.

Our state-of-the-art infrastructure, vast experience in various service

sectors, technical competence, and dynamic team ensures that clients get

the best value for money and maximum returns on their investments.

Each of ORIGIN's staff has a single point objective - 100%

customer satisfaction. We take pride in our high standards of customerservice and the ability to keep up commitments at all times. This

approach has brought clients back to us again and again.

Our reputation for providing the highest quality in services and

equipment has won the trust of many clients. An index of our excellent

customer service levels can be judged by the fact that most of our

business is through repeat orders from existing clients and from their

references.

ORIGIN conducts regular technical training sessions and

personality development programs for all employees, with the objective

of increasing customer delight. However, the underlying qualities of

sincerity and dedication of our management and staff forms the

foundation on which these values are built.


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NEED FOR THE STUDY

Being a manufacturing company it is essential for the management

to have a check on the working capital of the organization. An ideal

working capital is always necessary, and this will give a very good

operating leverage to the company which has to be monitored time and

again for running the organization without any financial descriptions.

With the rapid growth in the industry and higher Competition level.

Working capital have a pivotal role to play to sustain and growth thick

and fast in this area of manufactures.

PRIMARY OBJECTIVE :

To study the WORKING CAPITAL management of

ORIGIN INFOSYS PVT LTD.

SECONDARY OBJECTIVE :

To estimate the working capital requirement of the company

by analyzing the past record of the company.

To analyze the sources of and appilication of short term

financial resources of the company.

To find out the status of net working capital ang grossworking capital of the company

SCOPE OF THE STUDY:

The study is mainly conducted to know the working capital

management of the firm. The working capital management is

concerned With the firms current assets and current liabilities. It is


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an important and Integral part of financial management as short-

term survival to the long-term success.


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REVIEW OF LITRACTURE

INTRODUCTION

The perfect world does not requires or concentrates about current

assets or current liabilities because there would not be uncertainty, no

transaction costs, information search costs, scheduling costs or

production and technology constraints. The unit cost of production would

not vary with the quantity produced. Capital, Labour and products

markets shall be perfectly competitive and would reflect all available

information. Thus in such an environment, there would be no advantage

for investing in short term assets. Whereas, the world in which we live is

not perfect. It is characterized by considerable amount of uncertainty

regarding the demand, market price, quality and availability of own

products and those of suppliers. There are transaction costs for

purchasing or selling goods or securities. Information is costly to obtainand is not equally distributed. There are spreads between the borrowing

and lending rates for investments and financing of equal risk. Similarly

each organization is faced with its own limits on the production capacity

and technology it can employ. There are fixed as well as variable costs

associated with producing goods. In other words, the markets in which

real firms operate are not perfectly competitive.

These real world facts introduce problems and require the necessity

of working capital. The most important areas in the day to day

management of the firm, is the management of working capital. Working

capital management is the functional area of finance that covers all thecurrent accounts of the firm. It is concerned with management of the level


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of individual current assets as well as the management of total working

capital. Working capital management involves the relationship between a

firm's short-term assets and its short-term liabilities. The goal of working

capital management is to ensure that a firm is able to continue its

operations and that it has sufficient ability to satisfy both maturing short-

term debt and upcoming operational expenses. The management of

working capital involves managing inventories, accounts receivable and

payable, and cash.

For example, an organization may be faced with an uncertainty

regarding availability of sufficient quantity of crucial inputs in future at

reasonable price. This may necessitate the holding of inventory ie.,

current assets. Similarly an organization may be faced with an uncertainty

regarding the level of its future cash inflows and insufficient amount of

cash may incur substantial costs. This may necessitate the holding of a

reserve of short term marketable securities, again a short term capital

asset. The unpredictable and uncertain global market plays a vital role in

working capital. Though the globalization of economy and free trading of

products envisages the continuous availability of products but how much

its cost effective and quality based varies concern to concerns.

Working capital refers to the funds invested in current assets, ie.,

investment in stocks, sundry debtors, cash and other current assets.

Current assets are essential to use fixed assets profitably. The term

current assets refers to those assets which in the ordinary course of

business can be converted into cash within one year without undergoing

diminish in value and without disrupting the operations of the firm. The

current assets are cash, marketable securities, accounts receivable and

inventory. Current liabilities are those which are to be paid within a year


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out of the current assets or earnings of the concern. The current liabilities

are accounts payable, bills payable, bank overdraft and outstanding

expenses.

The financial manager plays a vital role in management of working

capital. The financial management of any business organization involves

the three following vital functions:

1. Management of Long Term Assets

2. Management of Long Term Capital

3. Management of Short Term Assets and Liabilities

In most of the organizations the first & second one which refers to

Capital Budgeting and Capital Structure respectively will be maintained

and cope up with organization growth. The third one which refers to

Working Capital Management requires more skills for sustaining and

steady growth rate for any organization.

The working capital management includes decisions

i. How much stock/inventory to be hold

ii. How much cash/bank balance should be maintained

iii. How much the firm should provide credit to its

customers

iv. How much the firm should enjoy credit from its

suppliers

v. What should be the composition of current assets


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vi. What should be the composition of current liabilities

For eg., a machine cannot be used without raw material. The

investment on the purchase of raw material is identified as workingcapital. It is obvious that a certain amount of funds is always tied up in a

raw material inventories, work in progress, finished goods, consumable

stores, sundry debtors and day to day cash requirements. However the

businessman also enjoys credit facilities from his suppliers who may

supply raw material on credit. Similarly, a businessman may not pay

immediately for various expenses. For instance, the labourers are pain

only periodically. Therefore, a certain amount of funds is automatically

available to finance the current assets requirements. However, the

requirements for current assets are usually greater than the amount of

funds payable through current liabilities. The satisfactory level of

working capital is the main object of working capital management. Any

organization which fails to maintain satisfactory level of working capital

may be forced to bankruptcy. The current assets should always be large

enough to cover its current liabilities in order to ensure a reasonable

margin of safety. Thus the interaction between current assets and current

liabilities is the main aim of working capital management.

The basic objective of financial management is to maximize

shareholders wealth. This objective can be achieved when the company

earns sufficient profits. The amount of profits largely depends on the

magnitude of sales. But, sales do not convert into cash instantly. There is

time lag between the sale of goods and the receipt of cash. Working

capital is required to purchase the materials, pay wages and other

expenses in order to sustain sales activity the time lag. The time gap


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between the sale of goods and realization of cash is called operating

cycle. What operating cycle stands for?

a. Conversion of cash into raw materials

b. Conversion of raw materials to finished goods

c. Conversion of finished goods into receivables

d. Conversion of receivables into cash

WHERE IS WORKING CAPITAL ANALYSIS MOST CRITICAL?

On the one hand, working capital is always significant. This is

especially true from the lender's or creditor's perspective, where the main

concern is defensiveness: can the company meet its short-term

obligations, such as paying vendor bills?

But from the perspective of equity valuation and the company's

growth prospects, working capital is more critical to some businesses

than to others. At the risk of oversimplifying, we could say that the

models of these businesses are asset or capital intensive rather than

service or people intensive. Examples of service intensive

companies include H&R Block, which provides personal tax services,

and Manpower, which provides employment services. In asset intensive

sectors, firms such as telecom and pharmaceutical companies invest

heavily in fixed assets for the long term, whereas others invest capital

primarily to build and/or buy inventory. It is the latter type of business -

the type that is capital intensive with a focus on inventory rather than

fixed assets - that deserves the greatest attention when it comes to

working capital analysis. These businesses tend to involve retail,


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consumer goods and technology hardware, especially if they are low-cost

producers or distributors.

2. CONCEPTS & DEFINITIONS OF WORKING CAPITAL

There are two concepts of working capital

1. Gross Working Capital : It represents the total current assets

and is also referred to as

circulating capital because current

capital as current assets, are

circulating in nature.

2. Net Working Capital : It is a measure of liquidity and it

can be defined in two ways.

a. The most usually implied definition of net working

capital is that it represents the difference between

current assets and current liabilities. Some people also

define it as excess of current assets over the current

liabilities.

b. It is that portion of the firms current assets, which is

financed by long term funds.

Nett working capital as a measure of liquidity is generally not very

useful to compare the performance of different units due to difference in

scales of operation, efficiency, and creditability in the market etc.,

between the different firms. However it is a very useful measure for

internal control purposes. It can also be used to compare the liquidity

position of the same unit over a period of time. This will help in

maintaining the acceptable level of net working capital.


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Implementing an effective working capital management system is

an excellent way for many companies to improve their earnings. The two

main aspects of working capital management are ratio analysis and

management of individual components of working capital.

A few key performance ratios of a working capital management

system are the working capital ratio, inventory turnover and the collection

ratio. Ratio analysis will lead management to identify areas of focus such

as inventory management, cash management, accounts receivable and

payable management.

3. OBJECTIVES OF WORKING CAPITAL MANAGEMENT

The main objective is to ensure the maintenance of satisfactory

level of working capital in such a way that it is neither inadequate nor

excessive. It should not only be sufficient to cover the current liabilities

but ensure a reasonable margin of safety also.

i. To minimize the amount of capital employed in financing

the current assets. This also leads to an improvement in the

Return of Capital Employed.

ii. To manage the current assets in such a way that the marginal

return on investment in these assets is not less than the cost

of capital acquired to finance them. This will ensure the

maximization of the value of the business unit.

iii. To maintain the proper balance between the amount of

current assets and the current liabilities in such a way that

the firm is always able to meet its financial obligations,


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whenever due. This will ensure the smooth working of the

unit without any production held ups due to paucity of funds.

4. TYPES OF WORKING CAPITAL

A. Permanent Working Capital

B. Temporary Working Capital

PERMANENT WORKING CAPITAL:

The operating cycle is a continuous feature in almost all the going

concerns and therefore creates the need for working capital and their

efficient management. However the magnitude of working capital

required will not be constant, but will fluctuate. At any time, there is

always a minimum level of current assets which is constantly and

continuously required by a business unit to carry on its operations. This

minimum amount of current assets, which is required on a continuous and

uninterrupted basis is after referred to as fixed or permanent working

capital. This type of working capital should be financed (along with other

fixed assets) out of long term funds of the unit. However in practice, a

portion of these requirements also is met through short term borrowings

from banks and suppliers credit.

For eg., In a manufacturing unit, basic raw materials required forproduction has to be available at all times and this has to be financed

without any disturbance.

TEMPORARY WORKING CAPITAL

Any amount over and above the permanent level of working capital

is variable, temporary or fluctuating working capital. This type of

working capital is generally financed from short term sources of finance


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such as bank credit because this amount is not permanently required and

is usually paid back during off season or after the contingency. As the

name implies, the level of fluctuating working capital keeps on

fluctuating depending on the needs of the unit unlike the permanent

working capital which remains constant over a period of time.

5. DETERMINANTS OF WORKING CAPITAL

Working capital management is an indispensable functional area of

management. However the total working capital requirements of the firm

are influenced by the large number of factors. It may however be addedthat these factors affect differently to the different units and these keep

varying from time to time. In general, the determinants of working capital

which are common to all organizations can be summarized as under:

a. Nature and Size of Business

b. Production Cycle

c. Business Cycle

d. Production Policy

e. Credit Policy

f. Growth & Expansion

g. Proper availability of raw materials

h. Profit level

i. Inflation

j. Operating Efficiency


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6. ESTIMATING OF WORKING CAPITAL REQUIREMENTS

The amount of the different constituents of the working capital

such as debtors, cash, inventories, creditors, etc are estimated separately

and the total amount of working capital requirement is worked out

accordingly.

Percent Sales method is the most simple and widely used method

in combination with other scientific methods. A ratio is determined for

estimating the future working capital requirements. This is generally

based on the past experience of the management as this ratio varies from

industry to industry and unit to unit with in the same industry.

Operating Cycle method points towards the length of time

considered necessary to complete the following cycle of events:

a. Purchase of raw materials by converting cash

b. Storage of raw materials including for buffer stock and

safety margin

c. Conversion of raw materials into work in progress

d. Conversion of work in progress into finished goods

e. Conversion of finished goods into debtors and bills

receivable

f. Conversion of debtors into cash

Cash Conversion Cycle is a measure of working capital efficiency,

often giving valuable clues about the underlying health of a business. The

cycle measures the average number of days that working capital is


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invested in the operating cycle. It starts by adding days inventory

outstanding (DIO) to days sales outstanding (DSO). This is because a

company "invests" its cash to acquire/build inventory, but does not

collect cash until the inventory is sold and the accounts receivable are

finally collected.

The finance profession recognizes the three primary reasons

offered by economist John Maynard Keynes to explain why firms hold

cash. The three reasons are for the purpose of speculation, for the purpose

of precaution, and for the purpose of making transactions. All three of

these reasons stem from the need for companies to possess liquidity.

SPECULATION:

Economist Keynes described this reason for holding cash as

creating the ability for a firm to take advantage of special opportunities

that if acted upon quickly will favor the firm. An example of this would

be purchasing extra inventory at a discount that is greater than the

carrying costs of holding the inventory.

PRECAUTION:

Holding cash as a precaution serves as an emergency fund for a

firm. If expected cash inflows are not received as expected cash held on a

precautionary basis could be used to satisfy short-term obligations that

the cash inflow may have been bench markedfor.

TRANSACTION:

Firms are in existence to create products or provide services. The

providing of services and creating of products results in the need for cash

inflows and outflows. Firms hold cash in order to satisfy the cash inflow

and cash outflow needs that they have.


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Receivable are essentially loans extended to customers that

consume working capital; therefore, greater levels of DIO and DSO

consume more working capital. However, days payable outstanding

(DPO), which essentially represent loans from vendors to the company,

are subtracted to help offset working capital needs. In summary, the cash

conversion cycle is measured in days and equals DIO + DSO DPO:

7. SOURCES OF WORKING CAPITAL

The working capital necessary and what constitutes working

capital have been analyzed in depth. Now we look out what are the wayswe can generate working capital.

a. Trade Credits

b. Bank Credit

c. Current provisions and non-bank short term borrowings: and

d. Long term sources ie., equity share capital, preference share

capital and other long term borrowings.

Short term source of funds are generally available at comparatively

lower costs but theoretically these funds can be called back any moment

and therefore it is more appropriate to meet at least two thirds of the

permanent working capital requirements from the long term sources. The

advantages of long term sources is, it reduces risk as there is no need to

repay the loans at frequent intervals and funds can be employed gainfully

and it increases liquidity.
http://www.investopedia.com/terms/d/dpo.asphttp://www.investopedia.com/terms/d/dpo.asphttp://www.investopedia.com/terms/d/dpo.asp


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WORKING CAPITAL:

Funds that ensures the smooth operation of a company.

DEFINITION:

In the words of SHUBIN working capital the amount of funds

Necessary to cover the cost of operating the enterprise.

According to GENESTENBERG circulating means current

assets of a company that are changed in the ordinary course of business

from one Form to another, as for example from cash to inventories,

inventories to receivables, and receivables into cash.

CONCEPTS OF WORKING CAPITAL:

There are two concepts of working capital

1. Gross working capital.

2. Net working capital.


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CLASSIFICATION OF WORKING CAPITAL:

Working capital

Permanent or FixedTemporary or

Variable

Regular ReserveSeasonal Special


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Sources of working

capital

Permanent or FixedTemporary or

Variable

Shares,

Debentures,

Public Deposits,

Plaguing back

of profits,

Loans from

financial

Institution.

Commercial banks,

Indigenous

bankers,

Trade

creditors,

Installment

Credit,

Advances,

Accounts

receivables

Credit.

SOURCES OF WORKING CAPITAL:


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Inventory of raw-material stores and spares.

Inventory of finished goods.

COMPONENTS OF WORKING CAPITAL:

CURRENT ASSETS:

Cash and bank balances

Temporary investments


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Short term advances

Prepaid expenses

Receivables

Inventory of raw-material stores and spares.

Inventory of finished goods.

CURRENT LIABILITIES:

Creditors for goods purchased

Outstanding expenses,

Short term borrowings,

Advances received against sales,

Taxes and dividends payable,

Others liabilities maturing within a year.

CASH CYCLE:


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GROSS WORKING CAPITAL:

Gross working capital is the amount of funds invested in the

various component of current assets. This components has the following.

ADVANTAGES:

Financial managers are concerned with current assets.

Cash

Materials, Labor

ExpensesReceivables

SalesWork-in-Progress

Finished

Goods


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Gross working capital provides the correct amount of working capital

At the right time.

It enable a firm to realize the greatest on its investments.

It helps in the fixation of various areas of financial responsibility.

It enable a firm to plan and control funds and to maximize the

return of investment.

PERMANENT WORKING CAPITAL

Permanent or fixed working capital is the minimum amount

required to ensure effective utilization of fixed assets and support the

normal operations of the business. There is always a minimum level of

the current assets which is continuously required by the enterprises the

carry out its normal business operations.

TEMPORARY OR VARIABLES WORKING CAPITAL:-

Temporary working capital is the amount of working capital

required for short period. It is intended to meet seasonal demand and

some special Exchanges. Variable working capital cannot be permanently

employed the gainfully in the business.

BALANCE SHEET WORKING CAPITAL:

The balance sheet working capital is one which is calculated form

the items appearing in the balance sheet. Gross working capital which is

represented by current assets and networking capital, which is represented

by the excess assets over current liabilities are example of the balance

sheet working capital.


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CASH WORKING CAPITAL:

Cash working capital is one which is calculated from the items

appearing in he profit and loss account. It shows the real flow of money is

value at particular time and is considered to be the most realistic

approach in working capital management. It is the basis of the operation

cycle, which has assumed a great importance in financial management in

recent years. The reasons is that the cash working capital indicates the

adequacy of the cash flow, which is an essential pre requisite of a

business.

NEGATIVE WORKING CAPITAL:-

Negative working capital emerges when current liabilities exceed

current assets. Such a situation is not absolutely theoretical and occur

when a firm is nearing a crises of some magnitude.


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FACTORS DETERMING WORKING CAPITAL:-

1. Nature of the business,

2. Size of the business,

3. Time consumed in manufacturing,

4. Seasonal fluctuations,

5. Fluctuations in supply,

6. Speed of turn over,

7. Terms of sales,

8. Terms of purchase,

9. Labors intensive Vs Capital intensive industries,

10. Growth and Expansion of Business,

11. Volume of sales,

12. Demand of creditors,

13. Receivable turnover,

14. Cash requirements,

15. Business cycle,

16. Time,

17. Value of current assets,


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18. Variation of sales,

19. Production cycle,

20. Credit control,

21. Liquidity and profitability,

22. Inflation,

23. Profit planning and control,

24. Repayment ability,

25. Cash reserve,

26. Operational and financial efficiency,

27. Changes in technology,

28. Firms policy,

29. Activities of the firms.

30. Attitude risk.


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RESEARCH METHODOLOGY

The term research is derived from French word research meaning,

search back, research is a careful inquiry or examination in seeking fact

or principle intelligent investigation in order to ascertain something web

masters international dictionary.

Research methodology is way to systematically solve the problem

when we talk of research methodology we not mean the research

methods. Also, consider the logic behind the methods used in the context

of research study and explain why a particular method or technique is

used, so that research results are capable of being evaluated.

RESEARCH DESIGN:

Research design is purely and simply framework or plan for study

that guides the collection and analysis of the data.

RESEARCH TYPE:

The type of research used in this study is desk research.

DESCRIPTIVE RESEARCH:

Desk research (sometimes known as secondary data or secondary

research ) involves gathering data that already exists either from internalsome of the client, publications of governmental institutions, free access

data on the internet, in professional newspapers and magazines, in annual

reports of companies and commercial databases to name but a few. In

many projects, carrying out an initial desk research stage is strongly

recommended to background knowledge to a subject as well as providing

useful leads that will help to get the maximum from a research budget.


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DATA COLLECTION METHODS:

SECONDARY DATA:

The rest of the data is collected from the annual report brochures

and websites of the organization.

ANALYSIS TOOLS:

Ratio analysis,

Schedule of changes in working capital.

LIMITATION OF THE STUDY:

The main limitation of the study isbase on figures available from

balance sheet and profit/loss account. So the actual position may

be slightly different from the conclusions made with the use of

these figure.

Data taken for comparison is only for three years. Therefore,

detailed study could not be undertaken.

The executive being busy with their yearly audit works. Therefore,

they could not able to devote sufficient time..

Time is the major constraint for this study. The study cannot be

finished with in the stipulated period allowed.

As the analysis is done using secondary data like publishing

reports, annual reports and statement of the study is limited only to

the extents.


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DATA ANALYSIS AND INTERPRETATION

WORKING CAPITAL TURNOVER RATIO

Working capital ratio measures the effective utilization of workingCapital. It also measures the smooth running of business or otherwise, the

Ratio establishes relationship between cost of sales and working capital.

Working capital turnover ratio = Sales or cost of sales

Net working capital

TABLE NO 5.1.1

Working capital turnover ratio

INFERENCE:

During 2006 working capital turnover ratio is 8.2778 it has been

increased when compare to 4.177 times in 2004

CHART 5.1.1 WORKING CAPITAL TURNOVER RATIO

85715065

17294097

10367036

14201468

0

10000000

20000000

30000000

40000000

50000000

60000000

70000000

80000000

90000000

2006-07 2005-06 2004-05 2003-04

YearCost of sales (or)

direct sales] Rs

Working capital

RsRatio in times

2007 262844360 85715065 3.0664

2006 143158718 17294097 8.2778

2005 84759630 10367036 8.1758

2004 58082829 14201468 4.0899


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DEBTOR COLLECTION PERIOD

This ratio is inter-related to and depends the debtors turnover ratio.

High turnover ratio and short collection period convey quick payment on

the part of debtors.

Debtors collection period = Day/month in the year

Average debtors turnover ratio

TABLE NO 5.1.2

DEBTOR COLLECTION PERIOD

Inference:

During 2004 sales was Rs. 1.156 it has been gradually increased to

Rs. 1.1970 in 2007.

Chart 5.1.2 DEBETOR COLLECTION PERIOD

10994026

18689041506067 1621717

0

20000000

40000000

60000000

80000000

100000000

120000000

2 00 6-0 7 2 00 5-0 6 2 00 4-0 5 2 00 3-0 4

Year Net CR sales Avg a/c receivables Total

2007 216689843 109940267 1.970

2006 82545874 18689046 4.41

2005 33321303 15060677 2.212

2004 18749948 16217174 1.156


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DEBTOR TURNOVER RATIO

Debtor collection is also called as receivable turnover ratio or

debtors velocity, a business concern generally adopt different methods of

sales.

Debtor Turnover Ratio = Net Credit Sales

Average Account Receivables

TABLE NO 5.1.3 DEBTOR TURNOVER RATIO

Inference:

In this debtor collection period the highest debtor turnover ratio is

6.1 and it is high in the year of 2007.

Chart No 5.1.3: DEBTOR TURNOVER RATIO

1.97

4.41

2.212

1.156

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5

2006-07

2005-06

2004-05

2003-04

Year Months in a

year

Dr collection period Ratio in times

2007 12 1.970 6.12006 12 4.41 2.72

2005 12 2.212 5.4

2004 12 1.156 10.38


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CREDITOR TURNOVER RATIO

This ratio is also known as accounts payable or creditor velocity.

A business concern usually purchase raw materials, service and goods on

credit.

Creditor Turnover Ratio = Net Purchase

Avg Account Payable

TABLE 5.1.4

CREDITOR TURNOVER RATIO

Inference:

During 2004 purchases was Rs. 3.65 it has been gradually

increased to Rs. 4.061 in 2006.

CHART 5.1.4: CREDITOR TURNOVER RATIO

109569181

19615613

13029571

8583433

Year Net purchase Avg A/C payable Total

2007 207304284 109569181 1.891

2006 79667516 19615613 4.061

2005 44857284 13029571 3.442

2004 31332314 8583433 3.65


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CREDITOR PAYMENT PERIOD:

This ratio is also known as accounts payable or creditors velocity.

A Business concern usually purchases raw materials, services and goods

on credit.

Creditors Turnover ratio = Net credit purchases

Average account payables

TABLE 5.1.5

CREDITOR PAYMENT PERIOD

Inference:

During 2004 the amount has been paid to creditors in 3.28 days but

it has been decreased to 2.95 days during 2006

CHART 5.1.5: CREDITOR COLLECTION PERIOD

1.891

4.061

3.442

3.65

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5

2006-07

2005-06

2004-05

2003-04

Year Months in a year Cr a/c turn over ratio Total

2007 12 1.891 6.34

2006 12 4.061 2.95

2005 12 3.442 3.48

2004 12 3.65 3.28


39/60


40/60

INVENTORY TURNOVER PERIOD

This ratio should be compared against industry averages. A low

turnover implies poor sales and, therefore, excess inventory. A high ratio

implies either strong sales or ineffective buying.

High inventory levels are unhealthy because they represent an

investment with a rate of return of zero. It also opens the company up to

trouble should prices begin to fall

Inventory Turnover Period = Days In A Year

Inventory Turnover Ratio

TABLE 5.1.7 INVENTORY TURNOVER PERIOD

Inference:

During 2004 the amount has been collected from inventory in

1.204 days but it has been increased to 14.53 days during 2007.

Chart 5.1.7 INVENTORY TURNOVER PERIOD

25.129

134.57

153.89

303.1

0

50

100

150

200

250

300

350

2006-07 2005-06 2004-05 2003-04

Year Days in a year Inventory turnover ratio Ratios in times

2007 365 25.129 14.53

2006 365 134.57 2.71

2005 365 153.89 2.37

2004 365 303.10 1.204


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FINISHED GOODS TURNOVER RATIO

If average inventory at cost is not known then inventory at selling

price may be taken as the denominator and where the opening inventory

is also not known the closing inventory figure may be taken as the

average inventory.

Finished Goods Turnover Ratio= Goods Sold

Avg Finished Goods Inventory

TABLE 5.1.8 FINISHED GOODS TURNOVER RATIO

Inference:

During 2004 cost of goods sold was Rs. 58082829it has been

gradually decreased to Rs. 262844360 in 2007.

CHART 5.1.8 : FINISHED GOODS TURNOVER RATIO

19667396

1251675875828

225691

0

2000000

4000000

6000000

8000000

10000000

12000000

14000000

16000000

18000000

20000000

2006-07 2005-06 2004-05 2003-04

Year Cost of goods sold Avg finidhed goods Ratio

2007262844360 19667396 13.36

2006 143158718 1251675 114.37

2005 84759630 875828 96.77

2004 58082829 225691 257.355


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FINISHED GOODS STORAGE PERIOD

Firms produce goods in order to sell them in the market. There may

be a delay in them sales or in meeting seasonal demand for finished

goods.

Cost of goods sold Finished = Turnover ratio

goods inventory Average finished goods inventory

TABLE 5.1.9: FINISHED GOODS STORAGE PERIOD

Inference:

During 200 the amount has been collected from inventory in 1.44

days but it has been increased to 27.3 days during 2006

CHART 5.1.9 FINISHED GOODS STORAGE PERIOD

13.36

114.37

96.77

257.35

Year Days in a year Finished good inventory total

2007 365 13.36 27.3

2006 365 114.37 3.19

2005 365 96.77 3.77

2004 365 257.35 1.44


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CURRENT RATIO

The ratio of current assets towards liabilities is called current

ratio. The current assets includes cash, securities, sundry debtors and

inventory, current liabilities includes bills of payable, deposits , advances,

and then short term loans, including cash creditors and provisions.

Current Ratio = current assets

current liability

TABLE 5.1.10: CURRENT ASSET/ CURRENT LIABILITIES

Inference:

During 2004 current was Rs. 24230239 it has been graduallyincreased to Rs. 202635677 in 2007.

CHART 5.1.10: CURRENT ASSET/ CURRENT LIABILITIES

202635677

40522249

25267333 24230239

0

50000000

100000000

150000000

200000000

250000000

2006-07 2005-06 2004-05 2003-04

Year C.asset C.liabilities Total

2007 202635677 116920611 1.73

2006 40522249 23228152 1.74

2005 25267333 14900297 1.69

2004 24230239 10028771 2.42


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LIQUID RATIO

Liquid ratio calculated by comparing the quick assets with

current liabilities. Quick or liquid assets refer to assets, which are

quickly convertible into cash.

Liquid ratio= Quick assets

Current liabilities

TABLE 5.1.11 LIQUID RATIO

Inference:

During 2004 quick asset was Rs. 2.4 it has been gradually

decreased to Rs. 1.56 in 2007.

CHART 5.1.11 : LIQUID RATIO

182968281

39270574

24391505

24004548

0 50000000 100000000 150000000 200000000

2006-07

2005-06

2004-05

2003-04

Year Quick asset C.liabilities Total

2007 182968281 116920611 1.56

2006 39270574 23228152 1.7

2005 24391505 14900297 1.63

2004 24004548 10028771 2.4


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SCHEDULE OF CHANGES IN WORKING

CAPITAL AS ON 31.3.2007

Particulars 2007(Rs. In crores)

2006(Rs. In crores)

CURRENT ASSETS:

Inventories

Sundry debtors

Cash & bank

Deposit, loanTotal(A)


Current liabilities

Provision

TOTAL(B)

Working capital(A-B)

Increase in working

capital

19667396

109940267

63426

72941555202612644

109569181

7351430

116920611

85692033

99598602

185290635

1251675

18689046

117311

20319655208578787

19615613

3612539

23288152

185290635

185290635


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SCHEDULE OF CHANGES IN WORKING

CAPITAL AS ON 31.3.2004

Particulars 2004

(Rs. In crores)

2005

(Rs. In crores)

CURRENT ASSETS:

Inventories

Sundry debtors

Cash & bank

Deposit, loan

Bank account

TDS at sources

Total(A)


Sundry creditor

provision

TOTAL(B)

Working capital(A-B)

Increase in working

capital

875828

15060677

58640

6817322

26911

2427955

25267333

13029571

1870726

14900297

10367036

3834432

185290635

225691

16217174

23719

6336002

16000

1411653

24230239

8583433

1445338

10028771

14201468

185290635


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FINDINGS

During 2006 working capital turnover ratio is 8.2778 it has

been increased when compare to 4.177 times in 2004 in

working capital

During 2004 sales was Rs. 1.156 it has been gradually

increased to Rs. 1.1970 in 2007 in debt collection period

In this debtor collection period the highest debtor turnover

ratio is 6.1 and it is high in the year of 2007in debt turnover

ratio

During 2004 purchases was Rs. 3.65 it has been gradually

increased to Rs. 4.061 in 2006 in creditor turnover ratio.

During 2004 the amount has been paid to creditors in 3.28

days but it has been decreased to 2.95 days during 2006

in creditor payment period.

During 2005 cost of goods sold was Rs. 58082829 it has

been gradually decreased to Rs. 262844360 in 2007 in

inventory turnover ratio.

During 2004 the amount has been collected from inventory

in 1.204 days but it has been increased to 14.53 days during

2007 in inventory turnover period.

During 2004 cost of goods sold was Rs. 58082829it has been

gradually decreased to Rs. 262844360 in 2007 in finished

turnover period.


48/60

During 200 the amount has been collected from inventory in

1.44 days but it has been increased to 27.3 days during

2006 in finished goods storage period.

During 2004 current was Rs. 24230239 it has been gradually

increased to Rs. 202635677 in 2007 in current ratio.

During 2004 quick asset was Rs. 2.4 it has been gradually

decreased to Rs. 1.56 in 2007 in liquid ratio.


49/60

SUGGESTION & RECOMMENDATIONS

The working capital was decreasing year by year and collection

period is reducing. The company as to maintain some ratio and collection

period in the year in future year. It observed that finished goods working

capital utilization is decreasing year after year. It increasing market share

and profitability of the company in the future year.

The company meet major fluctuation is the working capital that

will affects the current assets and current liabilities and sources of fund

will affects a lot. Therefore the firm has to find way to increase the source

of fund. The creditors of the company is fluctuating year by year the

company has to concentrate on creditors.


50/60

CONCLUSION

A study on working capital management at ORIGIN INFOSYS

PRIVATE Limited, Chennai has been enlightening experience on the

position aspects on previous year Balance sheets has done in whole lot of

good to the issuer, Investor, companies and country.

Excellence in all aspects of ORIGIN INFOSYS PRIVATE

Limited Honesty integrity and ethical business. People as the source of

strength. Respect for the individual & personal growth. Tackling

challenges and solving problems continued self improvement, never

being satisfied.

The origin Infosys limited has increasing to the profits. So the

company has become improve to the high position.


51/60

BIBLIOGRAPHY

Management accounting by (R.P. trivedi &manoj Pankaj

publications Hyd.)

Financial Management By (I.M. Pandey) vikas publishing

house ltd.

Management Accounting By (R.k. Sharma, Shashi) k.Gupta,

Kalyani pub.

Financial management (text & problem) By (M.Y. Khan,

P.K. Jain)

Tata McGraw Hill

Management Account by T.S. Reddy Andy Hari Prasad

Reddy

WEBSITE:

WWW.GOOGLE.COM

WWW.WIKEPADIA.COM

WWW.ORIGININFOSYS.COM
http://www.google.com/http://www.wikepadia.com/http://www.origininfosys.com/http://www.google.com/http://www.wikepadia.com/http://www.origininfosys.com/


52/60

A STUDY ON WORKING CAPITAL MANAGEMENT

OF ORIGIN INFOSYS PRIVATE LIMITED

Undertaken at

ORIGIN INFOSYS LTD.CHENNAI

A SUMMER PROJECT REPORT

Submitted by

V.SHYAM SUNDAR(Reg. No. 10607631051)

of

JAYA ENGINEERING COLLEGE

In partial fulfillment for award of the degreeof

MASTER OF BUSINESS ADMINISTRATIONIN

FINANCE

JULY -2008


53/60

DECLARATION

I, V.SHYAM SUNDAR,(Reg. No.10607631051) a bonafide student of

Department of Management Studies, Jaya Engineering

College, Chennai would like to declare that the project

entitled, A STUDY ON WORKING CAPITAL

MANAGEMENT OF ORIGIN INFOSYS PRIVATE Ltd

in partial fulfillment of Master of Business Administration

course of the Anna University is my original work.

SHYAM SUNDAR.V


54/60

BONAFIDE CERTIFICATE

Certified that this project report A STUDY ON WORKING

CAPITAL MANAGEMENT OF ORIGIN INFOSYS PRIVATE Ltd

is the bonafide work of SHYAM SUNDAR.V (Reg. No.10607631051)

who carried out the project work under my supervision.

Certified further, that to the best of my knowledge the work

reported herein does not form part of any other project or dissertation on

the basis of which a degree or award was conferred on an earlier occasion

on this or any other candidate.

SIGNATURE SIGNATURE

(DR. LATHA KRISHNADASS) (MR.S.VIJAYANKANTH)

Head Of The Department FACULITY GUIDE


55/60

ACKNOWLEDGEMENT

This project was completed with the support of many persons.

I have great pleasure to express my sincere and profound thanks

to our Chairman Prof. A. KANAGARAJ, M.A, M.Phil,

Mrs K.VIJAYAKUMARI ,M.A, B.Ed, Secretary of Jaya Educational

Trust, MR. K. NAVARAJ, M,Tech, Vice chairman , Jaya Engineering

College.

I owe my sincere thanks to Prof. DR R.RAJA M.E.,PH.D.,

Principal of Jaya Engineering College who provided me an opportunity to

do this project work.

I would like to express my sincere thanks to Dr. LATHA

MAZUMDER, Director and Head of the Department, Department of

Management Studies, Jaya Engineering College.

My Institutional Guide Mr.S.VIJAYANKANTH, MBA., M.Phil.

for his valuable suggestions and support throughout this project. I am also

grateful to other Faculty Members of MBA Department for having shown

interest during the project work.

I would like to thank sincerely MR.KALYAN, HR Manager,

ORIGIN INFOSYS and my company guidance in finance department.

I would like to thank my parents for their valuable support without

which the project would not have been completed successfully.

Last but not least, I would like to thank all the respondents.

Company staffs and friends who have directly and indirectly helped me to

complete this project.


56/60

ABSTRACT

This project was undertaken with a view of study the impact of

working capital management origin Infosys private limited.

The study was conducted for a period of one months. The research

design used in this study is case study method. The research design used

in this study of interim reports.

Data was collected through different source to proceed further in

this project and also for its fulfillment primary data was collected from

the company afficials and staff in origin Infosys private ltd. Secondary

data was provided for study through , company records and internet.

The analysis has been carried based on the secondary data and will

be displayed in tables and charts. This tables and charts help the

researcher for findings of the study.

After the analysis of data it was found that working capital

management in origin Infosys private limited. This study is useful to give

the few suggestion for the organization.

Through there were certain limitations faced during the time of

research, this was an excellent learning experience by the researchers.


57/60

TABLE OF CONTENTS

CHAPTERNO TITLE PAGE NO

ABSTRACT

LIST OF TABLES

LIST OF FIGURES

1. GENERAL INTRODUCTION 1

1.1 INDUSTRY PROFILE

2. INTRODUCTION OF THE STUDY

2.1 TITLE OF THE PROJECT 8

2.2 NEED FOR THE STUDY 8

2.3 OBJECTIVES OF THE STUDY 8

2.4 SCOPE OF THE STUDY 8

3. REVIEW OF LITERATURE 9

4. RESEARCH METHODOLOGY

4.1 RESEARCH DESIGN 30

4.2 RESEARCH TYPE 30

4.3 DESCRIPTIVE RESEARCH 30

4.4 DATA COLLECTION METHOD 31

4.5 ANALYSIS TOOLS 31

4.6 LIMITATION OF THE STUDY 31


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5. DATA ANALYSIS & INTERPRETATION

5.1 WORKSING CAPITAL TURNOVER RATIO 32

5.2 DEBTORS COLLECTION PERIOD 33

5.3 DEBTORS TURN-OVER RATIO 34

5.4 CREDITOR TURNOVER RATIO 35

5.5 CREDITOR PAYMENT PERIOD 36

5.6 INVENTORY TURNOVER RATIO 37

5.7 INVENTORY TURNOVER PERIOD 38

5.8 FINISHED GOODS INVENTORY

TURNOVER RATIO

39

5.9 FINISHED GOODS STORAGE PERIOD 40

5.10 CURRENT RATIO 41

5.11 LIQUID RATIO 42

SCHEDULE OF CHANGE IN WORKISNG

CAPITAL

43-44

6. FINDINGS 45-46

7. SUGGESTIONS & RECOMMENDATIONS 47

8. CONCLUSION 48

APPENDICIES

BIBLIOGRAPHY


59/60

LIST OF TABLES

TABLENO

TITLE PAGENO

5.1 ANALYSIS OF WORKSING CAPITAL

TURNOVER RATIO32

5.2 ANALYSIS OF DEBTORS COLLECTION PERIOD 33

5.3 ANALYSIS OF DEBTORS TURN-OVER RATIO 34

5.4 ANALYSIS OF CREDITOR TURNOVER RATIO 35

5.5 ANALYSIS OF CREDITOR PAYMENT PERIOD 36

5.6 ANALYSIS OF INVENTORY TURNOVER RATIO 37

5.7 ANALYSIS OF INVENTORY TURNOVER

PERIOD38

5.8 ANALYSIS OF FINISHED GOODS INVENTORYTURNOVER RATIO

39

5.9 ANALYSIS OF FINISHED GOODS STORAGE

PERIOD40

5.10 ANALYSIS OF CURRENT RATIO 41

5.11 ANALYSIS OF LIQUID RATIO 42


60/60

LIST OF CHARTS

TABLENO TITLE PAGENO

5.1 A CHART OF WORKSING CAPITAL

TURNOVER RATIO

32

5.2 A CHART OF DEBTORS COLLECTION

PERIOD

33

5.3 A CHART OF DEBTORS TURN-OVER RATIO 34

5.4 A CHART OF CREDITOR TURNOVER RATIO 35

5.5 A CHART OF CREDITOR PAYEMNT PERIOD 36

5.6 A CHART OF INVENTORY TURNOVER

RATIO

37

5.7 A CHART OF INVENTORY TURNOVER

PERIOD

38

5.8 A CHART OF FINISHED GOODS

INVENTORY TURNOVER RATIO

39

5.9 A CHART OF FINISHED GOODS STORAGE

PERIOD

40

5.10 A CHART OF CURRENT RATIO 41

5.11 A CHART OF LIQUID RATIO 42

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