1

SYNOPSIS
OF MINOR PROJECT
ON
“FINANCIAL ANALYSIS AND WORKING
CAPITAL MANAGEMENT”
AT
ESCORTS CONSTRUCTION EQUIPMENT LTD.
Submitted in the Partial Fulfillment of the award of
Master Degree of Business Administration (MBA)
Session (2004-2006)

Under the guidance of: Submitted by:

Mrs. Anju Dalal --------------------
MBA (Finance) Roll No. --------
Accounts Manager M/s Sandhu Trades Links Ltd

MAHARSHI DAYANAND UNIVERSITY

ROHTAK
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ACKNOWLEDGEMENT

We take this opportunity to express our sincere thanks & deep gratitude to all those
extended their wholehearted co-operation & helped us in completing our project synopsis
successfully.

We would like to thank guide Mrs. Anju Dalal for providing us the proper guidance &
basic infrastructure for completing our project synopsis.

(--------------------)
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CONTENTS

1) INTRODUCTION
2) CONCEPT OF WORKING CAPITAL MANAGEMENT
3) CLASSIFICATION OF WORKING CAPITAL MGT.
4) RESEARCH METHODOLOGY
5) OBJECTIVE OF STUDY
6) LIMITATION OF STUDY
7) RESEARCH DESIGN
8) METHODS USED FOR FINANCIAL ANALYSIS
9) CONCLUSIONS
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INTRODUCTION

WORKING CAPITAL MANAGEMENT

Meaning of Working Capital

Capital required for a business can be classified under the two main
categories viz.

1. Fixed Capital
2. Working Capital
Every business needs funds for two purposes – for its establishments
and to carry out its day to day operations.
Long term fund are required to create production facilities through
purchase of fixed assets such as plant and machinery, land and building,
furniture etc. investment in these represent that parts of firm capital. Funds
are also blocked on a permanent or fixed basis and are called fixed capital.
Funds are also needed for short term purposes for purchase of raw material,
payment of wages and other day to day expenses, etc. These funds are
known as working capital, which is required for financing of current assets
such as cash, marketable securities, debtors and inventories.
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CONCEPT OF WORKING CAPITAL

There are two types of working capital:

a) Gross Working Capital
b) Net Working Capital

In the broad sense, the terms working capital refers to the gross
working capital and represents the amount of funds invested the current
assets. Thus the gross working capital is the capital invested in the total
current assets of the enterprise.
Current assets are those assets, which in the ordinary course of
business can be converted into cash with a short period of normally one
accounting year.

Constitutes of Current Assets

1) Cash in hand and Bank balance

2) Bills receivables
3) Sundry Debtors
4) Short term Loans and Advances
5) Inventories of Stocks
a) Raw Materials
b) Bills receivables
c) Work in Progress
d) Finished Goods
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NET WORKING CAPITAL=CURRENT ASSETS-CURRENT LIABILITIES

Net working capital may be positive or negative.

Constituents of Current Liabilities:

1) Bills Payable
2) Sundry creditors
3) Accrued or Outstanding Expenses
4) Short Term Loans
5) Dividends Payable
6) Bank Overdrafts
7) Provisions for Taxations

Gross working capital is a concept of financial or ongoing concerned

concepts where as networking capital is an accounting concepts of
working capitals/ these two concepts of working capitals are not
exclusive rather both have their merits, and the gross concepts of
working capitals for the following reason:
a) It enables the enterprise to provide the correct working capital

management at the right time.

b) Every management is more interested in the total current assets
with which it has to operate than the sources from where it is
made available.
c) The gross concept takes into the considerations the fact that
every increase in the funds of the enterprise would increase its
working capital
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CLASSIFICATION OR KINDS OF WORKING CAPITAL

Working Capital may be classified in two ways:

1. On the basis of concept
2. On the basis of time
On the basis of concept working capital is classified as gross working
capital and net working capital as discussed earlier.
On the basis of time working capital can be classified as:
1. Permanent or Fixed working capital
2. Temporary or Variable working capital

FACTOR AFFECTING WORKING CAPITAL

Business should prepare its financial plan in such a way that it has neither
surplus nor inadequate working capital. The need of every business is
different but generally the following factors must be considered while
determining the required working capital:
1. Name of the Business
2. Growth and Expansion
3. production Cycle
4. Business Fluctuations
5. Production Policies
6. Credit policy
7. Availability of Raw Material
8. Availability of Bank Credit
9. Magnitude of Profit
10.Level of Taxes
11.Dividend Policy
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RESEARCH METHODOLOGY

Research in common refers to a search for knowledge. One can also define
research as a systematic and scientific search for patient information on a
specific topic. So search is an art of investigation.
According to Clifford Woody: - Research comprise defining and
redefining problems, formulating hypothesis or suggested solutions,
collecting, organizing & evaluation data; make deduction & reaching
conclusions; and at last testing the conclusions to determine weather they fit
the formulating hypothesis.
Research methodology is a way of combination of steps which starts
from finding the problem, for which research is undertaken then setting up
the objective and scope of the research, taking up the research project,
analyzing and interpreting the data and getting required results. So research
methodology is nothing but basically it constitutes how a particular research
is undergone.

STATEMENT OF PROBLEM

It’s always important for a company to continuously keep checking

and managing its financial soundness as to as finance proficiency which
ultimately leads to the attainment of goals of the organization.
I tried to evaluate the financial soundness of the company by using
financial analysis and the working capital management. It’s always a
challenge before the management to make financial decisions as prudence as
to keep the financial position so management also tries to make sufficient
funds available to carry out the company day to day making.
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OBJECTIVE OF THE STUDY

1. To study the financial position of the company.

2. To find out the working capital requirement of the company and the
efficiency of working capital management.
3. To suggest them better techniques for the evaluation of the financial
soundness of the company.
4. To analyze the financial performance of the company in the light of
the ratio analysis.

LIMITATION OF THE STUDY

Every research project has some limitation. Limitations are the natural
any rather essential phenomena. Therefore the person should not be
considered as a perfectly accurate measure of the problem studied.

1. It was difficult to obtain the current and actual data.

2. Time period was short for extensive study.
3. Cost factor was also a hindrance in the study.
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RESEARCH DESIGN

Research Design is a conceptual structure within which research is carried

out. It consists of blueprint for collection, measurement and analysis of data.
In the research design we decide about:

• The area to be studied

• The type of data
• From whom to get data

DATA SOURCE: - SECONDARY DATA

SOURCE: - ANNUAL REPORTS, BOOKS VARIOUS
WEBSITES
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METHODS USED FOR FINANCIAL ANALYSIS

A number of methods are used to the study of the relationship between

different statements. But the following methods are generally used:
1. Trend Analysis
2. Ratio Analysis
3. Comparative Statement
4. Fund Flow Analysis
5. Cash Flow Analysis
6. Common size Statement
7. Cost-Value-Profit analysis

I used methods like Comparative Statement, Ratio Analysis, and Trend

Analysis to analyze the financial position of the company.
I have also used techniques like Economic Value Added (EVA), Z-Score.
Sustainable Growth and Du Pont analysis for analyzing the various
aspects of financial position.