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CHAPTER- 1
INTRODUCTION TO THE COMPANY



















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COMPANY PROFILE
ICICI Bank was established by the Industrial Credit and Investment Corporation of India
(ICICI), an Indian financial institution, as a wholly owned subsidiary in 1955. The parent
company was formed in 1955 as a joint-venture of the World Bank, India's public-sector banks
and public-sector insurance companies to provide project financing to Indian industry. The bank
was initially known as the Industrial Credit and Investment Corporation of India Bank, before it
changed its name to the abbreviated ICICI Bank. The parent company was later merged with the
bank.
ICICI Bank launched internet banking operations in 1998.
ICICI's shareholding in ICICI Bank was reduced to 46 percent, through a public offering of
shares in India in 1998, followed by an equity offering in the form of American Depositary
Receipts on the NYSE in 2000. ICICI Bank acquired the Bank of Madura Limited in an all-stock
deal in 2001 and sold additional stakes to institutional investors during 2001-02.
In the 1990s, ICICI transformed its business from a development financial institution offering
only project finance to a diversified financial services group, offering a wide variety of products
and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank.
In 1999, ICICI become the first Indian company and the first bank or financial institution from
non-Japan Asia to be listed on the NYSE.
In 2000, ICICI Bank became the first Indian bank to list on the New York Stock Exchange with
its five million American depository shares issue generating a demand book 13 times the offer
size.
In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of ICICI
and two of its wholly owned retail finance subsidiaries, ICICI Personal Financial Services
Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was approved by
shareholders of ICICI and ICICI Bank in January 2002, by the High Court of Gujarat at
Ahmedabad in March 2002 and by the High Court of Judicature at Mumbai and the Reserve
Bank of India in April 2002.
In 2008, following the 2008 financial crisis, customers rushed to ICICI ATMs and branches in
some locations due to rumours of adverse financial position of ICICI Bank. The Reserve Bank of
India issued a clarification on the financial strength of ICICI Bank to dispel the rumours.

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ICICI Bank is an Indian multinational banking and financial services company headquartered
in Mumbai. As of 2014 it is the second largest bank in India in terms of assets and market
capitalization. It offers a wide range of banking products and financial services for corporate
and retail customers through a variety of delivery channels and specialized subsidiaries in the
areas ofinvestment banking, life, non-life insurance, venture capital and asset management. The
Bank has a network of 3,539 branches and 11,162 ATMs in India, and has a presence in 19
countries.
ICICI Bank is one of the Big Four banks of India, along with State Bank of India,Punjab
National Bank and Bank of Baroda. The bank has subsidiaries in the United Kingdom, Russia,
and Canada; branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and
Dubai International Finance Centre; and representative offices in United Arab Emirates, China,
South Africa, Bangladesh, Thailand, Malaysia and Indonesia. The company's UK subsidiary has
also established branches in Belgium and Germany.
In March 2013, Operation Red Spider showed high-ranking officials and some employees of
ICICI Bank involved in money laundering. After a governmentinquiry, ICICI Bank suspended
18 employees and faced penalties from theReserve Bank of India in relation to the activity.




PRODUCTS
Pockets by ICICI Bank
In September 2013, ICICI Bank launched a one of its kind app on Facebook 'Pockets by ICICI
Bank' to enable customers to carry out a wide range of financial transactions on
Facebook Customers can access the ICICI Bank app by logging into their Facebook account and
then going to the official ICICI Bank Facebook page, and clicking on the tab for Pockets by
ICICI Bank. The customer then registers online with their debit card number and PIN, and
selecting a new four digit PIN for subsequent logins. Through the app, customers can make
payments to friends, recharge prepaid mobile and book movie tickets. One can also carry out
non-financial transactions such as accessing a mini statement of their savings bank account,
getting demat holding statements, opening fixed or recurring deposit, order a cheque book, stop
a cheque payment, upgrade debit card, among others.
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Some of the key features of 'Pockets by ICICI Bank' are:
Split n share: It allows customers to split and track group expenses and share them with
friends on Facebook. The app also gives the customer the option of sending messages to
remind friends on pending payments.
Pay a friend: It allows customers to transfer funds to their friends without knowing their
bank account details like account number, bank branch, branch IFSC code etc. Through this
facility, customers can create electronic coupons that can be redeemed by their friends on the
bank website icicibank.com

MySavings Rewards
ICICI Bank has rolled-out the programme 'MySavings Rewards' from 1 September 2012, where
reward points are offered to individual domestic customers for a variety of transactions done
through the savings bank account. Reward points are offered automatically to customers for
activating Internet banking, shopping online/ paying utility bills with Internet banking and auto-
debit from savings account towards equated monthly installments for home/ auto/ personal loan/
recurring deposit. Customers are required to maintain a monthly average balance of 15,000 or
more.


iWish- the flexible recurring deposit
iWish is a flexible recurring deposit product launched by ICICI Bank for its savings account
customers. Unlike a traditionalrecurring deposit, iWish allows customers to save varying
amounts of money at any time of their choice. Customers can create several goals and track their
progress on an online interface.
ICICI Bank has developed this product in collaboration with Social Money.






5





















CHAPTER-2
INTRODUCTION TO THE TOPIC


















6

INTRODUCTION TO THE TOPIC
Introduction
Working capital management is concerned with the problems arise in attempting to manage the
current assets, the current liabilities and the interrelationship that exist between them. The term
current assets refers to those assets which in ordinary course of business can be, or, will be,
turned in to cash within one year without undergoing a diminution in value and without
disrupting the operation of the firm. The major current assets are cash, marketable securities,
account receivable and inventory. Current liabilities ware those liabilities which intended at there
inception to be paid in ordinary course of business, within a year, out of the current assets or
earnings of the concern .The basic current liabilities are account payable, bill payable, bank over-
draft ,and outstanding expenses. The goal of working capital management is to manage the
firms current assets and current liabilities in such way that the satisfactory level of working
capital is mentioned. The current should be large enough to cover its current liabilities in order to
ensure a reasonable margin of the safety.
Working Capital = Current Assets Current Liabilities
Definition:-
1. According to Guttmann & Douglas-
Excess of current assets over current liabilities.

2. According to Park & Glad son-
The excess of current assets of a business (i.e. cash, accounts receivables, inventories) over
current items owned to employees and others (such as salaries & wages payable, accounts
payable, taxes owned to government).
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Need of working capital management
The need for working capital gross or current assets cannot be over emphasized. As already
observed, the objective of financial decision making is to maximize the shareholders wealth. To
achieve this, it is necessary to generate sufficient profits can be earned will naturally depend
upon the magnitude of the sales among other things but sales can not convert into cash. There is
a need for working capital in the form of current assets to deal with the problem arising out of
lack of immediate realization of cash against goods sold. There fore sufficient working capital is
necessary to sustain sales activity. Technically this is refers to operating or cash cycle. If the
company has certain amount of cash, it will be required for purchasing the raw material may be
available on credit basis.
The company has to spend one amount for labor and factory overhead to convert the raw goods.
These finished goods convert in to sales on credit basis in the form of sundry debtors. Sundry
debtors are converting into cash after expiry of credit period. Thus some amount of cash is
blocked in raw materials, WIP, finished goods, and sundry debtors and day to day cash
requirements. How ever some part of current assets may be financed by the current liabilities
also. The amount required to be invested in this current assets is always higher than the funds
available from current liabilities. This is the precise reason why the needs for working capital
arise

1.3) Gross working capital and Net working capital
There are two concepts of working capital management
1. Gross working capital
Gross working capital refers to the firms investment I current assets. Current assets are the
assets which can be convert in to cash within year includes cash, short term securities, debtors,
bills receivable and inventory.
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2. Net working capital
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 year and include creditors, bills payable and outstanding expenses. Net working
capital can be positive or negative efficient working capital management requires that firms
should operate with some amount of net working capital, the exact amount varying from firm to
firm and depending, among other things; on the nature of industries.net working capital is
necessary because the cash outflows and inflows do not coincide. The cash outflows resulting
from payment of current liabilities are relatively predictable. The cash inflow are however
difficult to predict. The more predictable the cash inflows are, the less net working capital will be
required. The concept of working capital was, first evolved by Karl Marx. Marx used the term
variable capital means outlays for payrolls advanced to workers before the completion of work.
He compared this with constant capital which according to him is nothing but dead labour.
This variable capital is nothing wage fund which remains blocked in terms of financial
management, in work-in-process along with other operating expenses until it is released through
sale of finished goods. Although Marx did not mentioned that workers also gave credit to the
firm by accepting periodical payment of wages which funded apportioned of W.I.P, the concept
of working capital, as we understand today was embedded in his variable capital.

1.4) Type of working capital
The operating cycle creates the need for current assets (working capital).
However the need does not come to an end after the cycle is completed to explain this continuing
need of current assets a destination should be drawn between permanent and temporary working
capital.


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1) Permanent working capital
The need for current assets arises, as already observed, because of the cash cycle. To carry on
business certain minimum level of working capital is necessary on continues and uninterrupted
basis. For all practical purpose, this requirement will have to be met permanent as with other
fixed assets. This requirement refers to as permanent or fixed working capital
2) Temporary working capital
Any amount over and above the permanent level of working capital is temporary, fluctuating or
variable, working capital. This portion of the required working capital is needed to meet
fluctuation in demand consequent upon changes in production and sales as result of seasonal
changes Temporary

Graph shows that the permanent level is fairly castanet; while temporary working capital is
fluctuating in the case of an expanding firm the permanent working capital line may not be
horizontal. This may be because of changes in demand for permanent current assets might be
increasing to support a rising level of activity.
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Importance of working capital
Investment in fixed assets only is not sufficient to run the business. It is must for purchase of
raw materials, meeting the day to day expenditure on salaries, wages, rents, advertising etc
and for maintaining the fixed assets.
1. Time devoted to working capital management
Survey indicate that the largest portion of a financial managers time is devoted to the day by
day internal operation of the firm; this may be appropriate subsumed under the heading
working capital management
Since so much time is spent on working capital decisions, it is appropriate that the subject be
covered carefully in managerial finance courses.
2. Investment in current assets
Characteristically, current assets represent more than the total assets of a business firm.
Because they are represent a large investment because this investment tends to be relatively
volatile, current assets worthy of the financial managers careful attention.
3. Importance for small firms
Working capital management is particularly important for small firms. A small firm may
minimize its investment in fixed assets by renting or leasing plant and equipment, but there is
no way it can avoid an investment in cash, receivable and inventory. Therefore, current assets
are particularly significant for the financial managers of small firm. Further, because a small
firm has relatively limited access to the long term capital markets, it must necessarily rely
heavily on trade credit and short term bank loans, both of which affect networking capital by
increased current liabilities.
4. Relationship between sales growth and current assets
The relationship between growth and the need to finance current assets is close and direct.
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Advantage of working capital
A. Cash discount- if proper cash balance is maintained the business can avail the
advantages of cash discount by paying cash for the purchase of raw materials and the
merchandise. It will result in reducing the cost of production.
B. It creates a feeling of security and confidence- adequate working capital creates a sense
of security, confidence and loyalty not only throughout the business itself but also among
its customers credit and business associates.
C. Sound goodwill and debt capacity- the promptness of payment in business creates
goodwill and increase the debt capacity of business.
D. Easy loans for the banks- an adequate working capital helps the company to borrow
loans from the banks because the access provides a good security to the insecure loans.
Banks favor in generating seasonal loans, if business has a good credit standing and
reputation.
E. Distribution of dividend- if company is sort of working capital it cannot distribute the
good dividend to its shareholders in spite of sufficient profits. On the contrary if the
working capital is sufficient, sample dividend can be declared and distributed. It increases
market value of shares.
F. Exploitation of good opportunities- in case of adequate of capital in a concern, good
opportunities can be exploited. Company may make off- season purchase resulting in
substantial savings or it can fetch big supply orders resulting in good profits.
G. Meeting unseen contingencies- financial crisis due to heavy losses, business oscillations
etc can easily be overcome if company maintains adequate working capital
H. It increases fixed assets efficiency- adequate working capital increase the efficiency of
fixed assets of the business because of its proper maintenance.
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I. High moral- the provision of adequate working capital improves the moral of the
executive because they have an environment of certainty, security and confidence, which
is a great psychological, factor in improving the overall efficiency of the business and of
the person who is at helm of affaires in the company.



Working capital decisions

Decisions relating to working capital and short term financing are referred to as working capital
management. These involve managing the relationship between a firms short term assets and its
long term liabilities. The goal of working capital management is to ensure that the firm is able to
continue its operations and that it has sufficient cash flow to satisfy both maturing short-term
debt and upcoming operating expenses. The short term decisions of the firm are similar to those
of long term in terms of risk and return, but they differ in many other ways like time factor,
discounting consideration, liquidity etc. So these decisions are not taken on the same basis as
long term decisions.
It, in other words means, managerial accounting strategy focusing on maintaining efficient levels
of both components of working capital, current assets and current liabilities, in respect to each
other. Working capital management ensures a company has
Sufficient cash flow in order to meet its short-term dept obligation and operating
expenses.

Implementing an effective working capital management system is an excellent way for many
companies to improve their earnings. The two main aspect of working capital management are
ratio analysis and management of individual components of working capital. A few key
performing ratios of a working capital management system are the working capital ratio,
inventory turnover and the collection ratio. Ration analysis will lead management to identify
areas of focus such as inventory management, cash management, accounts receivable and
payable management.

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The most important criterion for making short term decisions is cash flows. And the best
measure of cash flow is net operating cycle or cash conversion cycle. It represents the time
difference between cash payment for raw materials and cash collection for sales.


Operating cycle or working capital cycle
The working capital cycle or cash conversion cycle as it is also called is usually expressed in
terms of the number of days. This figure is the average time that it takes to turn investment in
books into cash and profit. Typically, investment in raw material, work-in-progress and finished
goods is followed by sales for cash or on credit. Credit sales funds are usually may be expressed
in terms of the length of time between the acquisition of raw material and other inputs and the
flow of cash from the sale of goods. The following diagram shows the operating cycle of a
manufacturing firm:-


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Operating cycle refers to the length of time necessary to complete the following cycle of events.
1. Conversion of cash into raw materials.
2. Conversion of raw material into work in progress.
3. Conversion of work in progress into finished goods.
4. Conversion of finished goods into receivable.
5. Conversion of receivable into cash.
6. In symbols it can be expressed as follows:



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O = R+W+F+D-C
Where,
O = time duration of operating cycle
R = raw material and storage period
W = work in progress period
F = finished goods storage period
D = debtors collection period
C = creditors period
The components of operating cycle can be calculated as follows:-
Average stock of raw materials and stores
R = -------------------------------------------------------------------
Average raw materials and stores consumption per day

Average work in process inventory
W = --------------------------------------------------------------------
Average cost of production per day



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Average finished goods inventory
F = ----------------------------------------------------------------------
Average cost of goods sold per day

D = Average trade debtors
---------------------------------------------------------------------
Average credit sales per day

C = Average trade creditors
----------------------------------------------------------------------
Average credit purchase per day

An adequate level of current assets assures a smooth, interrupted sales process, thus enhancing
stock holder wealth maximization.
Working capital decision criteria
By definition, working capital management entails short term decision-generally, relating to the
next one year period-which is reversible. These decisions are therefore not taken on the same
basis as capital investment decisions (NPV or related, as above) rather they will be based on cash
flows and/or profitability.
One measure of cash flow is provided by the cash conversion cycle-the net number of days from
the cash for raw material to receiving payment from the customer. As a management tool, this
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metric makes explicit the inter-relatedness of decisions related to inventories, accounts
receivable and payable, and cash. Because this number effectively corresponds to the time that
the firms cash is tied up in operations and unavailable for other activities, management
generally aims at a low net count.
In this context, the most useful measure of profitability is Return on capital (ROC). The result is
shown as a percentage, determine by dividing relevant income for the 12 months by capital
employed; return on equity (ROE) shows this result for the firms shareholder. Firm value is
enhanced when, and if, the return on capital, which results from working capital management,
exceeds the cost of capital, which results from capital investment decisions as above. ROC
measures are therefore useful as a management tool, in that they link short-term policy with long
term decision making. See economic value added (EVA).

Management by working capital
Guided by the above criteria, management will use a combination of polices and techniques
for the management of working capital. These policies aim at managing the current assets
(generally cash and cash equivalents, inventory and debtors) and the short term financing,
such that cash flows and returns are acceptable.
Cash management. Identify the cash balance which allows for the business to meet
day to day expenses, but reduces cash holding costs.
Inventory management. Identify the level of inventory which allows for
uninterrupted production but educes the investment in raw material-and minimizes
reordering costs and hence increases cash flow; see supply chain management; just in
time (JIT); economic order quantity (EOQ); economic production quantity (EPQ).
Debtors management. Identify the appropriate credit policy, i.e. credit terms which
will attract customers, such that any impact on cash flows and the cash conversion cycle
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will be offset by increased revenue and hence return on capital(or vice versa); see
discounts and allowances.
Short-term financing: Identify the appropriate source of financing, given the cash
conversion cycle: the inventory is ideally financed by credit granted by the supplier;
however, it may be necessary to utilize a bank loan (or overdraft), or to convert debtors
to cash through factoring.
Main aspects in working capital management:
There are two aspect of working capital management via:
o Management of individual components of working capital
o Ratio analysis
Managing individual components
(a) Handling receivables (debtors)
Accounts receivable is one of a series of accounting transactions dealing with the billing of
customers who owe money to a person, company or organization for goods and services that
have been provided to the customer. In most business entities this is typically done by
generating an invoice and mailing or electronically delivering it to the customer, who in turn
must pay it within an established timeframe called credit or payment terms.
An example of a common payment term is net 30; meaning payment is due
in the amount of the invoice 30 days from the date of invoice. Other common payment terms
include NET 45 & NET 60 but could in reality be for any time period agreed upon by the
vendor and client. While booking a receivable is accomplished by a simple accounting
transaction, the process of maintaining and collection payments on the account receivable
subsidiary account balances can be a full time proposition.
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Depending on the industry in practice, accounts receivable payments can be received
up to 10-15 days after the due date has been reached. Theses types of payments practices are
sometimes developed by industry standards, corporate policy, or because of the financial
condition of the client. On a companys balance sheet, accounts receivable is the amount that
customers owe to that company.
So called trade receivables, they are classified as current assets. To record a journal entry for
a sale on account, one must debit a receivable and credit a revenue account. When the
customer pays off their accounts, one debits cash and credits the receivable in the journal
entry. The ending balance on the trial balance sheet for accounts receivable is always debit.
Business organizations which have become too large to perform such tasks by hand will
generally use accounting software on a computer to perform this task. Associated accounting
issues include recognizing accounts receivable, valuing accounts receivable and disposing of
accounts receivable. Accounts receivable department use the sales ledger.
Debtors are the persons who owe money to the business. Debtors affect the working capital
in the following ways:
Cash flow can be significantly enhanced if the amounts owing to a business are collected
faster. Every business needs to know . Who owes moneyhow much is owed.how long
it is own for what it is owed.
Slow payment has a crippling effect on business; in particular on small business who can
least afford it. If one doesnt manage debtors, they will begin to manage as one will gradually
lose control due to reduced cash flow leading to an increased incidence of bad debit.
The following measures are available to manage the debtors:
1. Have the right mental attitude to the control of credit and make sure that it gets the priority it
deserves.
2. Establish clear credit practices as a matter of company policy.
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3. Make sure that these practices are clearly understood by staff, suppliers and customers.
4. Be professional when accepting new accounts and especially larger ones.
5. Check out each customer thoroughly before you offer credit. Use credit agencies, bank
references, industry sources etc.
6. Establish credit limits for eachand stick to them.
7. continuously review these limits when you suspect tough times are coming or if operating in
a volatile sector
8. Keep very close to your larger customer.
9. Invoice promptly and clearly.
10. Consider charging penalties on overdue accounts.
11. Consider accepting credit/debit as a payment option.
12. Monitor your debtors balances and ageing schedules, and dont let any debts get too larger
or too old.
If the average age of the debtors is getting longer, or is already very long, one may need to look
for the following possible defects:
Weak credit judgment
Poor collection procedures
Lax enforcement of credit terms
Slow issue of invoice or statement
Errors in invoice or statements
Customer dissatisfaction
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Debtors due over 90 days should generally demand immediate attention. Look for the warning
signs of a future bad debt.
Longer credit terms taken with approval, particularly for smaller orders
Use of post-dated checks by debtors who normally settle within agreed terms
Evidence of customer switching to additional suppliers for the goods
Managing payables (creditors)-
Accounts payable is a file or account that contains money that a person or company owes to
suppliers, but hasnt paid yet (a form of debt). When you receive an invoice you add it to the file,
and then you remove it when you pay. Thus, the A/P is a form of credit that suppliers offer to
their purchasers by
Allowing them to pay for a product or service after it has received. In household, accounts
payable are ordinarily bills from the electric company, Telephone Company, cable television or
satellite dish service, newspaper subscription, and other such regular services. Householders
usually track and pay on a monthly basis by hand using cheque or credit cards. In a business,
there is usually a much border range of services in the A/P file, and accountants or bookkeepers
usually use accounting software to track the flow of money into this liability account when they
receive invoices and out of it when they make payments.
Commonly, a supplier will ship a product , an invoice , and collect payment letter, which
Creates a cash conversion cycle, a period of time during which the supplier has already paid for
raw material but hasnt been paid in return by the final customer. Certain companies, most
famously dell have been able to profit handsomely by reversing the conversion cycle: they
receive payment before they ship the product, instead of granted credit to their customer, they
receive it from them.
When the invoice arrives it is matched to the packing slip and purchase order, and if all is in
order, the invoice is paid. This is referred to as the three-way match.
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Creditors are a vital part of effective cash management and should be managed carefully to
enhance the cash position. There is an old adage in business that if you can buy well then you
can sell well. Management of the creditors and suppliers is just as important as the management
of the debtors. It is important to look after the creditors-slow payment to them may create ill-
feeling and can signal that the company is inefficient.
Remember, a good supplier is someone who will work with the business to enhance the future
viability and profitability of the company.
Inventory Management
Inventory is an integral part of every business origination. The role of inventory has grown with
advances in production technology. Inventory management is the vital area of management
covering the sum total of activities need for the acquisition, storage and raw material. It is a
technique of controlling the purchase, use and transformation of materials in an optimal manner.
In simple words inventory refers to the stock of products that a concern is offering for sale and
the components that make up the product. The various form in which inventory exists in a
company.
Inventory management can be defined that co-ordinate function responsible to plan for, acquire,
store, move and control material and products to optimize usage of facilities, personnel, capital
goods and to provide customer service in line with corporate goal.
The following are the important factors affecting inventory management.
Availability of credit in the economy
Government policy and role of colonial sing agencies in procurement and distribution of
material.
Complexities of business.

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Motives for holding inventories
The transaction motives, which emphasizes the need to maintain inventories to facilities smooth
production and sales operation. Precautionary motive, which is necessities holding of inventories
to guard against the risk of unpredicted changes in demand and supply forces and other factors.
Speculative motive, which is influence the decisions to increase or reduce, inventory level to take
advantage of price fluctuations.
Objectives of Inventory Management
The objective of the inventory management is therefore, to determine and maintain the optimum
level of investment in inventories which help in achieving the following objectives.
Ensuring a continuous supply of material of production department facilitating
uninterrupted production.
Maintaining sufficient stock of raw material in periods of short supply.
Maintaining sufficient stock of finished goods for smooth sales operations
Minimizing the carrying costs.
Investment in inventory at the optimum level.
Managing inventory is a juggling act. Excessive stocks can place a heavy burden on the cash
resources of a business. Insufficient stocks can result in lost sales, delays for customers etc. the
key is to know how quickly your overall stock is moving or, put another way, how long each
item of stock sit on shelves before being sold. Obviously, average stock-holding periods will be
influenced by the nature of the business. For example, a fresh vegetable shop might turn over its
entire stock every few days while a motors factor would be much slower as it may carry a wide
range of rarely-used spare parts in case somebody needs them.

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(d) Cash Management
Cash management has existed in business since the initial use of money as medium of exchange.
Cash to an organization is what food to human bodies. It is both the means and ends of an
organization. For cash management purpose cash is used broadly to cash and generally accepted
equivalents of cash such as demand and time deposit in banks, claques, drafts, etc. and also
marketable security i.e. short term investment of cash.
Cash management is simple terminology means forecasting cash requirement and
marketing arrangement there of. In other words, it is refers to his manageability to forecast cash
problems and to solve them when they arise with help of an expert in this field. The system of
cash management thus, aims at making the optimum use of the cash resources. Though, the
specific nature of cash management of an organization depends upon the nature of the concerned
finance executive, yet he is expected to carry out certain specific generalized functions in the
field of cash management which are as enumerated below.
1) Collection and custody of cash and securities.
2) Control of distribution
3) Maintenance of adequate supply of cash to meet projected cash requirement, cash
budgets and day to day demands
4) Investment of surplus cash in marketable security to keep it fully employed and working
towards greater profits
5) Maintenance of sound baling relations and adequate deposit to meet operating needs and
to compensate the banks for their services.
Management is equally important of both small concerns and big concerns. Even a fast
growing concern yielding handsome profit may face shortage of cash posing threat to the
interrupter flow of production. So deducing adequate fund requirements for the operating
needs of the organization happens to be the perennial objective of finance executive.
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Motives of holding cash
A distinguishing futures of cash as an assts irrespective of the firm in which it is held, is that
it does not earn any substantial return for the business. In spite of this fact cash in held by the
firm and with following motives.
1) Transaction motives
The transaction motives for holding cash arise to enable the concern to conduct its
business in the normal course. A firm needs cash to make payment for purchases, wages,
operating expense, taxes, dividend etc.
2) Precautionary motive
A firm keep cash balance to meet unexpected cash needs arising out of unexpected
contingencies such as floods, presentment of bills of payment earlier than the expected
data, unexpected slowing down of collection of account receivable, sharp increase in
price of raw material etc.
3) Speculative motive
The speculative motive for holding cash is deriving benefits out of changes in security
price, material prices etc. the concern may, if possible postpone the purchase of material
when its prices are high or it may go to than the required mater.
4) Compensation motive
Banks provide certain services to their clients free of charge. They for, usually require
clients to keep minimum cash balances with them which help them to earn interest and
thus compensate them for free services so provided.


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Objectives of Cash Management
Cash is the vital component of the working capital of a firm, as every transaction results
either in an inflow or an outflow of cash. The main objectives behind effective
management of cash are:
a) The precision of cash needed to meet operational requirement.
b) The provision of reserves liquidity against the forecast outflow and expected
payments of cash.
c) Minimum balance of cash to be held with the objective of channel zing otherwise
used cash into earning assets. A part of cash required as compensating balance
with the banks.

Ratio analysis
Ratio analysis is a technique of analysis and interpretation of financial statements. It is the
process of establishing and interpreting various ratios for helping in making certain decisions.
However, ratio analysis is not an end itself. T is only a means of better understanding of financial
strength and weakness of a firm. Calculation of ratio does not serve any purposes, unless several
appropriate ratios are analyzed and interpreted. There are a number of ratios which can be
calculated from the information given in the financial statement, but the analyst has to select the
appropriate data and calculate only a few appropriate ratios from the same keeping in mind the
objective of analysis.
The following are four steps involved in the ratio analysis:-
Selection of relevant data from financial statement depending upon objective of analysis.
Calculation of the appropriate ratios from the above data.
27

Comparison of the calculated ratios with the ratio of same firm in the past, or the ratios
developed from projected financial statement or the ratio of some other firms or the
comparison with ratios of the industry to which the firm belongs.
Interpretation of the ratios
Ratio analysis is one of the most powerful tools of financial analysis. It is used as a device to
analyze and interpret the financial health of enterprise. It is with help of ratios that the financial
statement can be analyzed more clearly and decisions mad from such analysis. The use of ratios
is not confined to financial manager only. There are different parties interested in the ratio
analysis for knowing the financial position of a firm for different purpose. The supplier of goods
on credit, banks, financial institution, investors, shareholder and management all make use of
ratio analysis as a tool in evaluating the financial position and performance of a firm for granting
credit, providing loans or making investment in the firm. With the uses of ratio analysis, one can
measure the performance of the firm is improving or deteriorating. Thus, ratios have wide
applications and are of immense use today.








28

OBJECTIVES OF THE STUDY
Study of working capital management is important because unless the working capital is
managed effectively, monitored efficiently, planned properly and reviewed periodically at
regular intervals to remove bottlenecks if any. The bank cannot earn profits and increase its
turnover with these primary objectives of the study; the following further objectives are framed
for a depth analysis

1. To analysis the requirements of funds for the routine activity of the business.
2. To study on the sources of fund generated and their method of utilization.
3. To know the amount of funds allocated in current asset & to forecast the working capital
trend.
4. To study cash receivable position of the organization.

Limitation of study
Ratio analysis is not much reliable medium of measuring any firms financial health. It suffers
from many limitations while calculating I have taken several assumption regarding adding or nor
adding any particular sentence. All conclusions are made on their face value.
Since the balance sheet is only a snapshot of the business as a particular time, any ratio based on
the figures maintained in the balance sheet may not be representative of the operational position
of the company for the year whole.
1. Limited data:-
The project has completed with annual report; it just constitutes one part of data collection
I.e. secondary. There were limitations for primary data collection because of confidentiality.
29

2. Limited period:-
This project on three years annual report, conclusion and recommendation based on such
limited data. the trend of last five year may or may not reflect the real working position
of company.
3. Limited area:-
Also it was difficult to collect data regarding the competitors and their financial
information Industry figure also difficult to set.
I have spent only 7 weeks in the company and whatever information during that short period I
could do, and work upon that. Thus my study does not present an overall view of the working
capital management of ICICI BANK.













30






















CHAPTER- 3

Review of Literature



















31

Review of Literature
Gamble, Richard h.(2005) working capital is a holistic approach to managing capital that
can increase a company cash flow and operational profile but yet to receive wide spread
acceptance. Working capital management is unlike traditional cash many with its emphasis
on float and collection and disbursement programs. working capital addresses the full time
line from raw material to payment and strives to free capital wherever possible. Just in
time inventory managing is a good example of working capital. working capital
management runs counter to the standard divisional line around which most companies
are organized; its acceptance may increase, however as us business strive to become more
efficient and competitive and as a financial professional grow learn and assumes greater
responsibilities for their company future.
The present study was done by Manoj Anand and Chandra parkas guota (2002) in
continuation of their early attempt of developing quantitative benchmarks at the firm as well as
at the industry level to evaluate working capital management performance of corporate India
from time to time. The previous attempt was based on the methodology designed by CFO Europe
magazine and REL consultancy group in their first working capital survey 1997. This time we
experimented with a number of new parameters and different weights in the overall score to have
better picture of working capital management performance of corporate India. Finally, we
selected three financial parameters for this purpose-CCE, DOC and DWC. The present study
provides their estimates by using data of 427 companies over the period 1998-1999 to 200-01 for
each company and for each industry. It is believed that the presence of theses three in the overall
working capital performance criterion not only helps in performance evaluation but also will
capture the dynamics of risk-return trade off
DITTINAR. A and J. MAHRT(2005) working capital management is important part in firm
financial management decisions. An optimal working capital management is expected to
contribute positively to the creation of firm value. To reach optimal working capital
management firm manage should control the trade off between profitability and liquidity
accurately. The purpose of this study is to investigate the working capital management.
32

This study is used panel data of 1628 firm year for period 1996-06 that consist of six
different economic sectors which are listed in bursa Malaysia. The coefficient results of
looked regression analysis period a stronger negative significant cash conversion cycle and
firm profitability. This revels that reducing cash conversion period also profitability merease.
The research done by PASS C. L ,PIKE R.H, an overview of working capital management
(1984) described that over the past 40 years major theoretical development have claimed
in the areas of longer term investment and financial decisions making, many of these new
concept and related techniques are now being employed successfully in industry practice
by contrast, for less attention has been paid to the area so short term finance ,in particular
that of working capital management. Such neglect might be acceptable were working
capital management has a crucial role to play in enhancing the profitability and growth
of firm indeed, experience show that inadequate planning and control of working capital
is one of the more common size of business failure.
The research done by HERRFELDT B, how to understand working capital management
describes that cash is king-so say the money manager who share the responsibility of
running this countrys business and with banks demanding more from their prospective
borrowers, greater emphasis has been placed on those accountable for so called working
capital management. Working capital management refers to management of current or short
term assets and short term liabilities. In essences the purpose of that function is to make
certain that company has enough assets to operate his business.
According to Western Brigham.Op. cit., pp. 512-13.
A firm should decide whether or not it should use short term financing. If short term financing
has to be used, the firm must determent its portion in total financing. The decision of the firm
will be guided by the risk-return trade off short term financing may be preferred over long term
financing for two reasons.
a) the cost advantage
b) eligibility
33


















CHAPTER - 4
RESEARCH METHODOLOGY





















34

Research Design : Research Design call for designing the game plan of gathering the data to
search same information on the basis of which management can make some logical decisions. In
other words research design is a catalogue of the various phases and facts relating to the
formulation of a research effort. It is the arrangement of conditions for collecting and analysis of
data in a manner that aims to combine relevance to the research purpose with economy in
procedure. The research conducted by me is exploratory Research
Data collection Method:
Primary Data primary data is the data which is collected by investor for his own purpose.
Primary data are first hand data and thus happen to be original in character. However, there are
many methods of collecting the Primary data; all have been used company balance sheet for the
purpose of this project.
Secondary data-the secondary source of data includes the annual report, website of company
which contains details which is helping for making my project report.








35






CHAPTER-5
DATA ANALYSIS AND INTERPRETATION

















36

Ratio analysis
Introduction
Ratio analysis is the powerful tool of financial analysis. A ratio is defined as the indicator
quotient of two mathematical expressions and as relationship between two or more things.
The absolute figures reported in the financial statements do not provide meaningful
understanding of the performance and financial position of the firm. Ratio helps to
seminaries larger quantities of financial data and to make quantitative judgments of the
firms financial performance.
Role of ratio analysis
Ratio analysis helps in apprise the firm in the term of these profitabilitys an efficiency of
performance, either individually or in relation to other firms in same industry. Ratio analysis
is one of the best possible techniques available to management to impact the basis function
like planning and control. As future is closely related to the immediately part, ratio calculated
on the basis historical financial data may be of good assistance to predict the future.


Limitations of ratio analysis
1. The basic limitation of ratio analysis is that it may be difficult to find a basis for making the
comparison.
2. Normally, the ratios are calculated on the basis of historical financial statement on
organization for the hint regarding the future happiness rather than those in the past.
3. The technique of ratio analysis has certain limitations of use in the sense that it only
highlights the strong problem arises, it does not provide any solution to rectify the problem
arise.
37

Classification of working capital ratio
Working capital ratio means ratio which are related with working capital management e.g.
current assets, current liabilities, liquidity profitability and risk turnover etc. these ratio are
classified as follows:-
Liquidity ratios: the important of adequate in the sense of the ability of a firm to meet
current or short term obligation when they become due for payment can hardly be over
stressed. In fact, liquidity is a prerequisite for the very survival of a firm. The short term
creditors of the firm are interested in the short-term solvency or liquidity of a firm. But
liquidity implies, from the view point of utilization of the funds of the firm that funds are idle
or they earn very little. A proper balance between the two contradictory requirements that is
liquidity and profitability is required for efficient financial management. The liquidity ratios,
measure the ability of a firm to meet its short term obligations and reflect the short term
financial strength or solvency of the firm.
The ratios that indicate the liquidity of a firm are:
Current ratio
Liquid ratio
Cash ratio






38


Activity ratios: funds are invested in various assets in business to make sales and earn
profits. The efficiency with which assets are managed directly effect the volume of sales. The
better the management of assets, the larger is amount of sales and profits. Activity ratios
measures are efficiency or effectiveness with which a firm manages it resources of assets.
These ratios are also called turnover ratios because they indicate the speed with which assets
all are converted into sales. Depending upon the purpose, a number of turnover ratios can be
calculated.
Following are the activity ratios:
Stock turnover ratio
Debtors turnover ratio
Average collection period
Working capital ratio








39

CURRENT RATIO:-

YEAR 2011-2012 2012-2013 2013-2014
CURRENT
ASSETS
1007100541 673296147 950916934
CURRENT
LIABILITIES
525987623 338735655 590856428
CURRENT
RATIO
1.91 1.98 1.60

INTERPRETATION : From the above figure it is evident that CR increase from 1.91% to
1.98% and in next year decrease to 1.98% to 1.60%. Ideal CR is 2:1. In the year 2011-2012 CR
was higher than the normal standard and 2012-2013 also. But in the year 2013-2014 it decreases
shortly.
0
0.5
1
1.5
2
2011-2012 2012-2013 2013-2014
Current Ratio
40

ABSOLUTE LIQUID RATIO

Year 2011-2012 2012-2013 2013-2014
Cash & bank
balance
56881975 47441959 46078448
Current liabilities 525987623 338735655 590856428
Absolute liquid
ratio
0.11 0.14 0.07

INTERPRETATION : The thumb rule for this ratio is 0.5: 1. This absolute ratio for the
year 2011-2012 is 0.11 and for the year 2012-2013 is 0.14, and for the year 2013-2014 is 0.07.
There is increase by 0.3 in 2012-2013 but then decrease in 2013-2014. The
ratio is not satisfied for firm as the firm did not have sufficient cash.
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
2011-2012 2012-2013 2013-2014
Absolute Liquid Ratio
41

CASH RATIO

Year 2011-2012 2012-2013 2013-2014
Cash 56881975 47441959 46078448
Current
liabilities
525987623 338735655 590856428
Cash ratio 0.10 0.14 0.07


INTERPRETATION : The cash ratio was good in the year 2012-2013, but in the year
2013-2014, it has shown a big decline which is not good sign for the company. Normally 20% of
the current liabilities should be kept in form of cash and bank balance.
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
2011-2012 2012-2013 2013-2014
Cash Ratio
42

STOCK TURNOVER RATIO

Year 2011-2012 2012-2013 2013-2014
Sales 7588016557 8038969705 8063630700
Inventory 281650419.5 289333717.5 381155557
S.T.R 25.54 27.78 21.15

INTERPRETATION : Stock turnover ratio measure the time of conversion of stock into
sales with in a year. Usually, a high stock turnover indicates efficient management of inventory.
The ratios in year 2012-2013 increases.but fall in year 2013-2014. The fall in ratio is not good
for company.

0
5
10
15
20
25
30
2011-2012 2012-2013 2013-2014
Stock Turnover Ratio
43

DEBTORS TURNOVER RATIO

YEAR 2011-2012 2012-2013 2013-2014
Sales 7588016557 8038969705 8063630700
Debtors 166222180 107547562 65866184
Debtor turnover
ratio
45.64 74.74 122.42

INTERPRETATION : It indicate the number of times debtors turnover each year.
Generally the higher value of debtor turnover the more is the management. Increasing debtors
turnover ratio therefore reveals better management of credit. In fact in last three years, this ratio
has been excellent for the company.
0
20
40
60
80
100
120
140
2011-2012 2012-2013 2013-2014
Debtors Turnover Ratio
44

AVERAGE COLLECTION PERIOD

Year 2011-2012 2012-2013 2013-2014
Debtors 166222180 107547562 65866184
Sales 7588016557 8038969705 8063630700
Average collection
period
7.88 4.81 2.94

INTERPRETATION : Generally, the shorter the average collection period is better in the
quality of debtors as a short collection period implies quick payment by debtors. Hence, the
period is short an all the days i.e. 7days, 4days, or 2.9days etc. which represent good quality of
debtors.
0
2
4
6
8
2011-2012 2012-2013 2013-2014
Average Collection Period
45

WORKING CAPITAL RATIO

YEAR 2011-2012 2012-2013 2013-2014
CURRENT
ASSETS
1007100541 673296147 950916934
CURRENT
LIABILITIES
525987623 338735655 590856428
W.C.R 1.91 1.98 1.60


INTERPRETATION : From the above figure it is evident that CR increase from 1.91% to
1.98% and in next year decrease to 1.98% to 1.60%. Ideal CR is 2:1. In the year 2011-2012 CR
was higher than the normal standard and 2012-2013 also. But in the year 2013-2014 it decreases
shortly.
0
0.5
1
1.5
2
2011-2012 2012-2013 2013-2014
Working Capital Ratio
46






CHAPTER-6
FINDINGS







47


Findings
1. In this study, quick ratio is higher than ideal value; it indicates the firm ability to pay
the immediate debts.
2. Cash ratio clearly indicates firms debt borrowing power from the financial institution
and other sources.
3. Working capital turnover ratio was decreased which clearly shows that bank reduced
to use networking for sales.














48






CHAPTER-7
RECOMMENDATION







49


Recommendation
Recommendation can be used by the firm for the betterment increase of the firm after study and
analysis of project report on study and analysis of working capital. I would like to recommend.
1. Company should rises funds through short term sources for short term requirement of
funds, while comparatively economical as compare to long term funds.
2. Company should take control on debtors collection period which is major part of current
assets.
3. Company has to take control on cash balance because cash is none earning assets and
increase cost of funds
4. Company should reduce the inventory holding period the use of zero inventory concepts.
Over all company has good liquidity position and sufficient funds to repayment of
liabilities. Company has accepted conservative financial policy and thus maintaining
more current assets balance.






50







CHAPTER-8
CONCLUSION





51



Conclusion
ICICI BANK at a fast pace as it can be seen through the increase in sales. The company
is effectively using its human resources. The company has been doing good business and
earning profits as it is evident from the profit & loss A/C of the company ratios. Moreover the
company is efficient using its fixed assets and working capital for generating sales.
The company is into a lot of modernization and expansion for growth of the company and to
increase its sales. The firm should also invest one fund outside the business to increase its
earning. The company should keep more cash for the liquidity position of the company.
The various turnover ratios indicate sound management policies of the company overtime. The
company has very well managed its debtors and also has good policies o recover its debts. The
inventory has also been very well managed by the company. The unnecessary expenses have also
been under control by the company. Hence it can be said that on overall basis the company is on
sound and profitable track.






52

Bibliography
Websites References
http://www.rbi.org.in
http://www.investopedia.com
http://www.economictimes.com
http://www.management.com
http://www.icicibank.com























53