Working capital of hcl

PROJECT REPORT

ON

FOR

BY

JEENAL N.RATHOD

“WORKING CAPITAL OF HCL”

WORKING CAPITAL OF HCL

SUBMITTED BY

NAME: Ms. JEENAL N. RATHOD

CLASS: M.COM PART – II ACCOUNTS (SEM IV)

SUBMITTED TO

UNIVERSITY OF MUMBAI

PROJECTED GUIDE: Mrs. Dr. LIPI

BHATTACHARYA

RAJATHANI SAMMELAN’S

GHANSHYAMDAS SARAF GIRL’S COLLEGE,

AFFILLIATED TO UNIVERSITY OF MUMBAI

REACCREDITED BY NAAC WITH “A” GRADE

&

DURGADEVI SARAF JUNIOR COLLEGE

( ARTS & COMMERCE)

S.V.ROAD MALAD (W)

MUMBAI – 400064

YEAR: 2013-14

RAJASTHANI SAMMELAN’S


Ghanshyamdas Saraf College

Affiliated to University of Mumbai

REACCREDITED BY NAAC WITH ‘A’ GRADE

R. S. Campus, S. V. Road,

Malad (W), Mumbai: 400 064

Year: 2013-2014

CERTIFICATE

I Prof. REKHA BHATIA here by certify that Ms. Jeenal Navratana

Rathod a student of Ghanshyamdas Saraf College of M.COM

PART II ACCOUNT (Semester IV) has completed Project on

“WORKING CAPITAL OF HCL” in the Academic year

2013-2014.

Thus information submitted is true and Original to the best of my

Knowledge.

External Examiner: Principal:

Date:

Project Co-ordinator: College Seal:

Date:

ACKNOWLEDGEMENT


I take this opportunity to thank the UNIVERSITY OF MUMBAI

for giving me a chance to do this Project.

I express my sincere gratitude to the Principal Mrs. Sujata

Karmarkar, course co-ordinator and Guide Prof. Mrs. Dr. Lipi

Bhattacharya, our librarian and other teachers for their constant

support and helping me for completing the project.

I am also grateful to my friends for giving support in my project.

Lastly, I would like to thank each and every person who helped me

in completing the project especially MY PARENTS.

Date: Signature of the Student :

DECLARATION


I Miss JEENAL NAVARATNA RATHOD a student of

Ghanshyamdas Saraf College of Arts and Commerce, Malad (W)

M.COM PART II ACCOUNT (Semester IV) hereby declare that I

have completed project on “WORKING CAPITAL OF

HCL” in the academic Year 2013-2014. This information

submitted is true and original to best of my Knowledge.

Date : Signature of the Student:

INDEX


Sr. No TITLE Page. No.

CHAPTER 1

1.1 Executive Summary (Preface) 7

1.2 Objectives of the Study 8

CHAPTER 2

2.1 HCL Company Overview 9-10

2.2 Introduction to HCL Career Development Centre 11CHAPTER 3

3.1 Introduction to Working Capital 12-14

3.2 Types Of Working Capital 15-24

3.3 Importance of Working Capital 25-28

3.4 Factors Determining Working Capital 29-30

3.5 Need and Objectives of Working Capital 31-33

3.6 Principle of Working Capital Management/Policy 34

3.7 Forecasting/Estimation of Working Capital Requirement 35-41

CHAPTER 4

4.1 Performa of Working Capital Estimating 42-43

4.2 Working capital financing policies 44-45

4.3 Conclusion 46

4.4 Findings 47-48

4.5 Questionnaire of working capital 49-51

4.6 Bibliography 52

1.1EXECUTIVE SUMMARY:


Working capital management refers to the administration of all aspects

of current assets, namely cash, marketable securities, debtors and stock

(inventories) and current liabilities. The financial manager must

determine levels and composition of current assets. He must see that

right sources are tapped to finance current assets, and that current

liabilities are paid in time. He must see that right sources are tapped to

finance current assets, and that current liabilities are paid in time. There

are many aspects of working capital management, which make it an

important function of the financial manager:

• Time: working capital management requires much of the financial

manager’s time.

• Investment: working capital represents a large portion of the total

investments in assets.

• Significance: working capital management has great significance for all

firms but it is very critical for small firms.

• Growth: the need for working capital is directly related to the firm’s

growth. Investment in current assets represents a very significant portion

of the total investment in assets.

Working capital management is critical for all firms. A small firm may

not have much investment in fixed assets, but it has to invest to in

current assets. Small firms in India face a severe problem of collecting

their debtors. Banks have their own policies to assess the working

capital of the firm to finance them with the shortage. Bank of

Maharashtra adopts certain method for financing their customer’s

working capital requirements. It may, thus, be concluded that all

precautions should be taken for the effective and efficient management

of working capital. The finance manager should pay regular attention to

the levels of current assets and the financing of current assets.

1.2 OBJECTIVES OF THE STUDY:


Since working capital management is one of the most important aspects

of finance, it enables to study in-depth the methods involved in it; so that

as a student of finance it gives me a chance to study the financial

perspectives of the industry. It offers scope to understand various aspects

of finance and all these aspects are reflected in this report. The

estimation of required working capital differs from organization to

organization. So doing this project in an industry will help in

knowing more about the working capital, its preparation and

execution.

The study has the following

objectives:-

1. To see whether the working capital in “HCL”

is an effective one.

2. To find out the extent of the need and adequacy of the working capital

of the firm.

3. To evaluate or analyze the organizational financial discipline and

fiscal soundness.

4. To find out the variance attained in related to projected and actual figure.

5. To see the liquidity position of the company.

6. To see the changes in the working capital.

7. To see the components of working capital is properly maintained.

8. To determine the requirements of working capital.


2.1 COMPANY OVERVIEW:

Hindustan Computers Limited

Hindustan Computers Limited, also known as HCL Enterprise, is one of

India's largest electronics, computing and information Technology

Company. Based in Noida, near Delhi, the company comprises two

publicly listed Indian companies, HCL Technologies and HCL Info

systems.

HCL was founded in 1976 by Shiv Nadar, Ajay Chowdhry and four of

their colleagues. HCL was focused on addressing the IT hardware

market in India for the first two decades of its existence with some

sporadic activity in the global market. In 1981, HCL seeded a company

focused on addressing the computer training industry, NIIT, though it

has currently divested its stake in the company. In 1991, HP took

minority stake in the company (26%) and the company was known as

HCL HP for the five years of the joint venture. On termination of the

joint venture in 1996, HCL became an enterprise which comprises HCL

Technologies (to address the global IT services market) and HCL

Infosystems (to address the Indian and APAC IT hardware market).

HCL has since then operated as a holding company.

HCL Technologies is a global IT Services company headquartered in

Noida, a suburb of Delhi, India led by Mr Vineet Nayar, HCL

Technologies, along with its subsidiaries, had consolidated revenues of

US$ 5 billion, as of 2010, and employed more than 60,000 workers.

HCL offers services including software-led IT solutions, remote

infrastructure management, Engineering and R&D Services and BPO.

The company provides services across industries including Financia


Services, Retail & Consumer, Life Sciences & Healthcare, Aerospace &

Defense, Automotive, Telecom and Media, Publishing and Entertainment,

amongst others. HCL’s key services include:

Custom Application Services

Enterprise Application Services

Enterprise Transformation Services

Infrastructure Management

Engineering and R&D Services

Business Processing outsourcing

TypePublicBSE: 500179BSE: 532281

Industry IT Services

Founded August 11, 1976

HeadquartersDelhi metropolitan areaNoida, India

Key people Shiv Nadar, Founder-Chairman and Chief Strategy Officer, HCL TechnologiesRoshni Nadar, CEO HCL Corp.[1]

Ajai Chowdhry - Founder-Chairman and CEO, HCL Infosystems , Vineet Nayar - CEO, HCL Technologies. Jagadeshwar Gattu- Vise President of HCL.

Revenue ▲ US$5.0 billion (2009)

Employees 62,000+ (2010)

Website HCL.in

2.2 HCL Career Development Centre:


http://en.wikipedia.org/wiki/File:HCL_Technologies_logo.svg

HCL Career Development Centre or LEARNING DIVISION is an

initiative that enables individuals to benefit from HCL expertise in the

space and become Industry ready IT professionals. HCL dominates the

IT space as a leader. 45,000 gifted professionals, a colossal US $4

Billion turnover, an international presence in 17 countries, and most

importantly a deep-rooted commitment to innovate, makes it a true

Technology Giant. HCL CAREER DEVELOPMENT CENTRE career

program equips a student to meet emerging industry challenges with

finesse and ease. Opportunities to grow with HCL CAREER

DEVELOPMENT CENTRE are limitless, catapulting a student to high

level controlling positions in Mega Corporate. With top HCL

professionals as the trainers, customized career programs, hands on

experience, state of art infrastructure and world class training program

the student's career graph is bound to follow a steep rise. HCL

CAREER DEVELOPMENT CENTRE provides specially designed

courses in high-end software, hardware and networking integration to

groom students into industry-ready professionals. HCL CAREER

DEVELOPMENT CENTRE also offers placement support to all their

students who excel in their academics and display a remarkable

performance during the course. Among the fastest growing IT education

brands in India, HCL CAREER DEVELOPMENT CENTRE offers a

complete spectrum of quality training programs on software, hardware,

networking as well as global certifications in association with leading IT

organizations worldwide.

Certification of quality standards:

"In its pursuit of excellence", the company has developed a quality management system in line with ISO 9001:2000 standards.

Business Excellence Initiatives :

The organization follows a framework developed by EFQM (European Foundation for Quality Management). Organization policies and strategies are aligned with EFQM Model. The "Quest of Excellence" is taken as a mission who drives the quality of Training Delivery and associated services.


3.1 Working Capital

Introduction:

In a working capital we focus on short term finance of a company. In

a business we include two terms of finance i.e. short term and long

term finance it lies in the timing of cash flows. Short term financial

decisions typically involve cash inflows and outflows that take place

within a year or less. For examples, short term financial decisions are

involved when a firm orders raw material, pays in cash, and anticipate

selling finished goods within one year for cash. On the other hand,

long term financial decisions are involved when a firm buys a machine

that is expected to reduce operating costs over, says, the next seven

year.

The types of decisions that fall under the general heading of short term

finance are many; to mention a few:

The level of cash the firm should maintain.

The level of short term borrowing to have.

Credit to be extended to customers.

Inventories to be maintained and so on.

Frequently, the term working capital management is used in place of

short term financial decisions and we shall also stick only to this only.

We start with the types of working capital followed by concept and

application of operating cycle in estimating working capital needs. We


also discuss the factors affecting working capital requirements and the

policy of financing working capital.

Definition of working capital:

Working capital can be defined as the amount of capital required for

the smooth and interrupted functioning of normal business

operations of a company. Working Capital refers to that part of the

firm’s capital, which is required for financing short-term or current

assets such a cash marketable securities, debtors and inventories. Funds

thus, invested in current assets keep revolving fast and are constantly

converted into cash and this cash flow out again in exchange for other

current assets. Working Capital is also known as revolving or

circulating capital or short-term capital.

In the words of Shubin, “Working capital is the amount of funds

necessary to cover the cost of operating the enterprise”.

According to Genestenberg, “Circulating capital 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, receivables into

cash”.

According to J.S. Mill, “The sum of the current assets is the

working capital of a business”.

It is helpful for us, as a business owner, to think of working

capital in terms of five components:

1. Cash and equivalents . This most liquid form of working capital

requires constant supervision. A good cash budgeting and forecasting

system provides answers to key questions such as: Is the cash level

adequate to meet current expenses as they come due? What is the

timing relationship between cash inflow and outflow? When will

peak cash needs occur? When and how much bank borrowing will


be needed to meet any cash shortfalls? When will repayment be

expected and will the cash flow cover it?

2. Accounts receivable. Many businesses extend credit to their

customers. If you do, is the amount of accounts receivable

reasonable relative to sales? How rapidly are receivables being

collected? Which customers are slow to pay and what should be

done about them?

3. Inventory . Inventory is often as much as 50 percent of a firm's

current assets, so naturally it requires continual scrutiny. Is the

inventory level reasonable compared with sales and the nature of

your business? What's the rate of inventory turnover compared with

other companies in your type of business

4. Accounts payable . Financing by suppliers is common in small

business; it is one of the major sources of funds for entrepreneurs.

Is the amount of money owed suppliers reasonable relative to what

you purchase? What is your firm's payment policy doing to enhance

or detract from your credit rating?

5. Accrued expenses and taxes payable . These are obligations of your

company at any given time and represent a future outflow of cash.


3.2 Types of working capital:

Basis of concept:-

There are two type of working capital on the basis of concept, namely

gross and net working capital.

Gross working capital is firm’s total investment in current assets.

Current assets are the assets which can be converted into cash within a

year. For examples cash, short term securities, account receivable, bills

receivable and inventory.

Net working capital , on the other hand, 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: examples include accounts payable, bills payable and

outstanding expenses.It must be noted that net working capital could be

both positive as well as negative. A positive net working capital will be

arise when current assets exceeds current liabilities. A negative net

working capital occurs when current liabilities are in excess of current

assets. The term working capital is commonly used interchangeably with

net working capital. Working capital is the amount of capital required

for the smooth and interrupted functioning of normal business operations

of a company ranging from the procurement of raw material, converting


WORKING CAPITAL

BASIS OF

CONCEPT

BASIS OF

TIMEGross

Working Capital

Net Work

ing Capit

al

Permanent

/ Fixed WC

Temporary

/ Varia

ble WC

Regular

WC

Reserve

WC

Special

WC

Seasonal WC

the same into finished products for sale and realizing cash along with

profit from the accounts receivables that arise from sale of finished

goods on credit.

Concept of time:-

Permanent Working capital and

Temporary Working capital.

Permanent Working capital

Permanent working capital refers to the minimum amount of all current

assets that is required at all times to ensure a minimum level of

uninterrupted business operations. Some minimum amount of raw

materials, work-in-progress, bank balance, finished goods etc., a business

has to carry all the time irrespective of the level of manufacturing or

marketing operations. This level of working capital is referred to as

core working capital or core current assets. But the level of core

current assets is not a constant sum at all the times. For a growing

business the permanent working capital will be rising, for a declining

business it will be decreasing and for a stable business it will almost

remain the same with few variations. So, permanent working capital is

perennially needed one though not fixed in volume. This part of the

working capital being a permanent investment needs to be financed

through long-term funds. The permanent working capital can be further

divided into two parts:

Regular working capital

Reserve working capital

It required ensuring circulation of current assets from cash to

inventories, from inventories to receivables and from receivables to cash

and so on. Reserve working capital is the excess amount over the

requirement for regular working capital which may be provided for

contingencies that way arise at unstated period such as strikes, rise in

prices, depression, etc.


Temporary Working capital

The temporary or varying working capital varies with the volume of

operations. It fluctuates with the scale of operations. This is the

additional working capital required from time to time over and above

the permanent or fixed working capital. During seasons, more

production/sales take place resulting in larger working capital needs. The

reverse is true during off-seasons. As seasons vary, temporary working

capital requirement moves up and down. Temporary working capital can

be financed through short term funds like current liabilities. When the

level of temporary working capital moves up, the business might use

short-term funds and when the level for temporary working capital

recedes, the business may retire its short-term loans. Variable working

capital can be further classified as:

Seasonal working capital

Special working capital

Most of enterprises have to provide additional working capital to meet

the seasonal and special needs. The capital required to meet the

seasonal needs of the enterprise is called seasonal working capital.

Special working capital is that part of working capital which is required

to meet special exigencies such as launching of extensive marketing

campaigns for conducting research etc.


Amount Variable Working Capitalof WorkingCapital

Permanent Working Capital

Time

Both permanent and temporary working capitals are necessary to

facilitate the sales and production process through operating cycle.

Operating cycle and cash cycle:

The primary concerns in working capital management include firms

short run operating and financing activities. For a typical manufacturing

firm, the major short run activities will consist of the following

activities and related decisions:

These activities entail cash inflows and cash outflows; but the cash

flows are both unsynchronized and uncertain. They are unsynchronized

because the payment of cash for raw materials does not take place at

the same time as the receipt of cash from sales of the finished product.

They are uncertain because future sales and costs cannot be precisely

predicted. These give rise to what is called as operating cycles and

cash cycle.


Variable Working CapitalAmount of WorkingCapital

Permanent Working Capital

TimeActivity

Buy raw materialPay for purchasesManufacture productsSell the productCollection for sales

Decision

How much to orderWhether to borrow or pay cashChoice of technologyWhether to extend credit or to sell on cashHow to collect

Operating cycle:

The entire cycle, from the time the firm acquires inventory to the time

it collects the cash, takes 100 days. This is called the operating cycle.

The operating cycle is the length of time it takes to acquire inventory,

sell it, and collect for it. This cycle has two distinct parts- the time it

takes to acquire and sell the inventory; a 60 day span in our case, is

called the inventory conversion period; and the time it takes to collect

cash for the sales, 40 days in our case; called as accounts receivable

(debtors) conversion period. Thus, operating cycle is just the sum of the

inventory conversion period and accounts receivable conversion periods:

For a typical manufacturing company, the inventory conversion period is

the total time needed for producing and selling the product and

includes:

Raw material conversion period.

Work in process conversion period.

Finished goods conversion period.

Cash cycle –

There are number of days that pass before the firm collects cash for

sales, measured from it actually pays for the inventory. Thus, cash

cycle is the difference between the operating cycle and the accounts

payment period.

For example, the firm does not pay cash for inventory until 30 days

after acquiring it. The intervening 30 days period is called the accounts

payable (creditors) period. Next, though the firm spends cash on 30th

day, it does not collect cash till 100th day. Somehow, the firm must

arrange to finance the Rs 1000 for 100-30 = 70 days. This period is

called the cash cycle or net operating cycle.


Determining Operating And Cash Cycle:-

Raw material conversion period:-

Raw material conversion period is the average time period taken to

convert material into work in process.

Annual consumption of raw material component etc.

A. Average daily consumption (A /360)

B. Average stock of raw material = (Opening stock + closingstock)

2

Raw material storage period (C / B) = n1 days

Conversion / work in progress period:

Work in progress conversion period is the average time taken to complete the semi finished goods convert work in progress into finished goods.

A. Annual cost of production = opening stock of WIP + consumption of raw material + other manufacturing Cost Such as wages, salary +Depreciation – Closing Stock WIP

B. average daily cost of production (A / 360)

C. average stock of WIP = (Opening stock + closing stock)

2

D. average conversion period (C / B) = n2

Finished goods storage period:

Finished goods conversion period is the average time taken to sell the

finished goods.

A. Annual cost = opening stock of finished goods + cost of

production + Of sales Excise Duty + selling & distribution cost +

general Administration cost+ financial cost – closing stock Of

finished goods

B. Average daily cost of sales (A / 360)

C. Average stock of finished goods = (Opening stock + closing stock)

2


D. Finished goods storage period (C / B) = n3

Average Collection Periods:

It is the average time taken to convert accounts receivables into cash.

A. Annual credit sales of company

B. Average daily credit sales ( A / 360)

C. Average balance of sundry debtors = (opening stock + closing stock)

2

D. Average collection period C / B = n4

Average Payment Periods:

It is average time taken to convert accounts payable into cash payment.

A. Annual credit purchase company

B. Average daily credit purchase ( A / 360 )

C. Average balance sundry creditors = (opening balance +closing balance )

2

D. Average payment period n5 = C / B

Operating cycle = raw material conversion period + work in progress

conversion period + finished goods conversion period +account

receivable conversion period

Operating Cycle = n1 + n2 + n3 + n4

Cash cycle = raw material conversion period + work in progress

conversion period + finished goods conversion period +account

receivable conversion period – accounts payable conversion period

Cash Cycle = n1 + n2 + n3 + n4 – n5

Example-


Particulars

Raw material, component etc.

Work in progress

Finished goods

A/c receivable

A/c payable

Purchases of raw materials

Manufacturing expenses

Depreciation

Custom & excise duties

Selling, administration, financial

expenses

Sales

Opening

Balance

3454.84

56.15

637.92

756.45

2504.18

Closing

Balance

4095.41

72.50

1032.74

1166.32

3084.47

10676.10

1146.76

247.72

35025.56

4557.48

54210.65

Calculate operating cycle ?

Answer-

Raw Material Storage Period: A. Annual consumption = opening stock + purchase – closing stock

= 3454.84 +10676.10 – 4095.41 = 10035.53

B. Average daily consumption = 10035.53/36 = 27.88

C. Average stock of raw material = (3454.84+ 4095.41)/ 2 = 3775.125D. Raw material storage period=3775.125/27.8n1

135.40 = 135

Conversion Period:

A. Annual cost of production = 56.15 + 10035.53 + 1146.76 +

247.72 -72.50 = 11413.66

B. Average daily cost of production = 11413.66/360 =31.70

C. Average stock of Work in progress = (56.15 + 72.50) / 2 = 64.32


D. Average conversion period = 64.32/ 31.70

n2 = 2

Finished goods storage period:

A. Annual cost of sales = 637.92 + 11413.66 + 35025.56 + 4557.48

– 1032.7 = 50601.88

B. Average daily Cost of sales = 50601.88 / 360 = 140.56

C. Average stock of Finished goods =(637.92 +1032.74) / 2 =835.33

D. Finished goods Storage period = 835.33/140.56

E. n3 = 5.9 ≈ 6days

Average collection period:

A. Annual credit sales = 54210.65

B. Average daily credit sales = 54210.65 / 360 = 150.59

C. Average balance of Sundry debtors = (756.45 + 1166.32) / 2

=961.38 Average collection period = 961.38/ 150.59 = 6.38 = 6

days

Average payment period

Annual credit purchase’s company = 10676.10

Average daily credit purchases = 10676.10/360 = 29.66

Average balance sundry creditors = (2504.18+3084.47)/2 = 2794.32

Average payment period = 2794.32/29.66 = 94.21 = 94 days

Operating cycle = 135 + 2 + 6 + = 149 days

Net operating/ cash cycle = 135 + 2 + 6 + 6 – 94 = 55 days

Deferred wages :

The firm pays to labor ager a gap of 10 days. The amount could be

calculated in the same way as accounts payable for purchases:

Wages Payment Period= Average Wages Payable * 360/ total wages

10 = Average Wages Payable * 360/ total wages

Average Wages Payable =10* total wages / 360

Example-


Number of toys per year = 70000

Labor cost per unit / toy = Rs.19.5

Average wages payable = ?

So,Wages PaymentPeriod = Average Wages Payable * 360/ Total Wages

10 = Average Wages Payable * 360 / (70000*19.5)

Average Wages Payable = 10 * 70000 * 19.5 / 10 = Rs.37916

Deferred overheads:

One month (30 days), means that overheads are paid after one month.

The amount will be as follows:

Overheads Payment Period = Average Overheads Payable * 360 / Total

Overhead

30 = Average Overheads Payable * 360 / Total Overhead

Average Overheads Payable = 30* Total Overheads / 360

Example –

Number of toys per year = 70000

Overheads per unit = Rs. 39

Average over heads payable = ?

So, Overheads Payment Period = Average Overheads Payable * 360 /

Total Overheads

30 = Average Overheads Payable * 360 / (70000*39)

Average Overheads Payable = 30*70000*39/360 = Rs. 2, 27,50


3.3 Importance of Working Capital Ratios:

Ratio analysis can be used by financial executives to check upon the

efficiency with which working capital is being used in the enterprise.

The following are the important ratios to measure the efficiency of

working capital. The following, easily calculated, ratios are important

measures of working capital utilization.

Ratio Formulas Result Interpretation

Stock Turnover(in days)

Average Stock * 365/Cost of Goods Sold

= x days On average, you turn over the value of your entire stock every x days. You may need to break this down into product groups for effective stock management.

Obsolete stock, slow moving lines will extend overall stock turnover days. Faster production, fewer product lines, just in time ordering will reduce average days.

Receivables Ratio(in days)

Debtors * 365/Sales

= x days It take you on average x days to collect monies due to you. If your official credit terms are 45 day and it takes you 65 days... why?

One or more large or slow debts can drag out the average days. Effective debtor management will minimize the days.


Payables Ratio(in days)

Creditors * 365/Cost of Sales (or Purchases)

= x days On average, you pay your suppliers every x days. If you negotiate better credit terms this will increase. If you pay earlier, say, to get a discount this will decline. If you simply defer paying your suppliers (without agreement) this will also increase - but your reputation, the quality of service and any flexibility provided by your suppliers may suffer.

Current Ratio

Total Current Assets/Total Current Liabilities

= x times Current Assets are assets that you can readily turn in to cash or will do so within 12 months in the course of business. Current Liabilities are amount you are due to pay within the coming 12 months. For example, 1.5 times means that you should be able to lay your hands on $1.50 for every $1.00 you owe. Less than 1 times e.g. 0.75 means that you could have liquidity problems and be under pressure to generate sufficient cash to meet oncoming demands.

Quick Ratio (Total Current Assets - Inventory)/Total Current Liabilities

= x times Similar to the Current Ratio but takes account of the fact that it may take time to convert inventory into cash.

Working Capital Ratio

(Inventory + Receivables - Payables)/Sales

As % Sales

A high percentage means that working capital needs are high relative to your sales.


Other working capital measures include the following:

Bad debts expressed as a percentage of sales.

Cost of bank loans, lines of credit, invoice discounting etc.

Debtor concentration - degree of dependency on a limited number of

customers.

Significance Of Working Capital:

1. Cash Discount : If a proper cash balance is maintained, the business can avail the advantage of cash discount by paying cash for the purchase of raw materials and merchandise. It will result in reducing the cost of production.

2. It creates a Feeling of Security and Confidence: The proprietor or officials or management of a concern are quite carefree, if they have proper working capital arrangements because they need not worry for the payment of business expenditure or creditors. Adequate working capital creates a sense of security, confidence and loyalty, not only throughout the business itself, but also among its customers, creditors and business associates.

3. ‘Must’ for Maintaining Solvency and Continuing Production: In order to maintain the solvency of the business, it is but essential that the sufficient amount t of fund is available to make all the payments in time as and when they are due. Without ample working capital, production will suffer, particularly in the era of cut throat competition, and a business can never flourish in the absence of adequate working capital.

4. Sound Goodwill and Debt Capacity : It is common experience of

all prudent businessmen that promptness of payment in business creates

goodwill and increases the debt of the capacity of the business. A firm

can raise funds from the market, purchase goods on credit and borrow

short-term funds from bank, etc. If the investor and borrowers are

confident that they will get their due interest and payment of principal

in time.

5. Easy Loans from the Banks: An adequate working capital i.e

excess of current assets over current liabilities helps the company to

borrow unsecured loans from the bank because the excess provides a


good security to the unsecured loans, Banks favor in granting seasonal

loans, if business has a good credit standing and trade reputation.

6. Distribution of Dividend : If company is short of working capital, it

cannot distribute the good dividend to its shareholders inspite of

sufficient profits. Profits are to be retained in the business to make up

the deficiency of working capital. On the other contrary, if working

capital is sufficient, ample dividend can be declared and distributed. It

increases the market value of shares.

7. Meeting Unseen Contingency: Depression shoots the demand of

working capital because sock piling of finished goods become necessary.

Certain other unseen contingencies e.g., financial crisis due to heavy

losses, business oscillations, etc. can easily be overcome, if company

maintains adequate working capital.

8. Increased Production Efficiency : A continuous supply of raw

material, research programme, innovations and technical development and

expansion programmes can successfully be carried out if adequate

working capital is maintained in the business. It will increase the

production efficiency, which will, in turn increases the efficiency and

morale of the employees and lower costs and create image among the

community.

Strategies to overcome the problem:

• Manage working capital investment or financing such as

• Holding additional cash balances beyond expected needs

• Holding a reserve of short term marketable securities

• Arrange for availability of additional short-term borrowing

capacity

• One of the ways to address the problem of fixed set-up cost

may be to hold inventory.

• One or combination of the above strategies will target the

problem


3.4 Factors Determining Working Capital:

1. Nature of the Business

2. Size of business

3. Production policies

4. Production cycle

5. Credit policy

6. Rapidity of turnover

7. Seasonal fluctuation

8. Price level changes

9. Others factors

1. Nat u re of the b u siness: Working capital also depends upon the nature

of the business. Public utility concerns like railway, electricity etc. have a

very little need of working capital since most of their transaction are on

cash basis. On the other hand ordinary manufacturing and trading

concerns require sufficient working capital, since they have to invest

substantially in inventories and debtors.

2. Size of Business : Size of business is another influencing factor. As size

increases, the working capital requirement is also more and vice

versa.

3. P r o d uction p o l i ci e s : The production policies pursued by the

management have a significant effect on the requirement of working

capital of the business. The decision about the management regarding

a u t o m a t i o n , etc. will also have its effect on working capital

4. Production cycle: The time lapse between feeding of raw material

into the machine and obtaining the finished goods out from the

machine is what is described as the length of manufacturing process.

It is otherwise known as conversion time. Longer this time period,

higher is the volume and value of work-in-progress and hence higher

the requirement of working capital and vice versa.

5. Credit policy: A company which allows liberal credit to its

customers may have higher sales but will need more working

capital. A concern that purchases i t s requirements on credit and

sells its products/services on cash requires less amount of


working capital .

6. Ra p i d ity of tur n ov e r: A company having high rate of turnover will

need lower amount of working capital as compared to a company

which has a lower turnover.

7. Seaso n al fluctu a tions: In case of seasonal industries like sugar

and woollen textiles, their working capital required during the

particular season will be higher than other periods.

8. P r ic e le ve l c h ange s : Changes in the price level also affect the

working capital requirements. Generally, the rising prices will

require the firm to maintain larger amount of working capital as

more funds will be required to maintain the same current assets.

The effect of rising prices may be different for different

firms. Some firms may be affected much while some others

may not be affected at all by the rise in prices.

9. Other fact o r s : Certain other factors such as operating

efficiency, management ability, irregularities of supply,

import policy, asset structure, importance of labour, banking

facilities, etc. Also influences the requirements of working capital.

Disadvantages or Dangers of Inadequate or Short Working Capital -

Can’t pay off its short-term liabilities in time. Economies of scale are not

possible.

Difficult for the firm to exploit favourable market situations Day-to-day liquidity worsens Improper utilization the fixed assets and ROA/ROI falls sharply


3.5 The need or objects of working capital:

The need for working capital cannot be over emphasized. Every business

needs some amount of working capital. The need for working capital arises

due to the gap between production and realization of cash from sales.

There is an operating cycle involved in the sales and realization of

cash. To pay wages and salaries.

1. To incur day to day expenses and overheads costs such as fuel,

power and office expenses, etc.

2. To meet the selling costs as packing, advertising, etc.

3. To provide credit facilities to the customers.

4. To maintain the inventories of raw material, work in progress, stores

and spares and finished stock.

Management Of Working Capital (WCM):

Management of working capital is concerned with the problems that

arise in attempting to manage the current assets, the current liabilities

and the inter-relationship that exists between them. In other words, it

refers to all aspects of administration of CA and CL. management will

use a combination of policies and techniques for the management of

working capital. The policies aim at managing the current assets

(generally cash and cash equivalents, inventories 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 reduces the investment in raw materials

and minimizes reordering costs - and hence increases cash flow. Besides

this, the lead times in production should be lowered to reduce Work in

Process (WIP) and similarly, the Finished Goods should be kept on as

low level as possible to avoid over production - see Supply chain

management; Just In Time (JIT); Economic order quantity (EOQ);

Economic quantity.


Debtor’s 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 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"

Aims of Working Capital Management:

The goal of working capital management is to manage the firm’s

current assets and current liabilities in such a way that a satisfactory

level of working capital is maintained, to meet the short-term

obligations as and when they arise.

1. A significant objective of working capital management is to

ensure short-term liquidity and to see that profitability is not

affected by the way current assets and current liabilities are

managed.

2. The main theme of working capital management is the interaction

between the current assets and the current liabilities and arrives

at the optimum level of both. The optimum level thus arrived

must have provision for contingencies.

3. Trade-off between Profitability and Risk: The level of a firm’s

Net working capital has a bearing on its profitability as well as

risk. The term profitability used in this context is measured by

profits after expenses. The term risk is defined as the probability

that a firm will become technically insolvent so that it will not

be able to meet its obligations when they become due for

payment. The risk of becoming technically insolvent is measured

using Net Working Capital. The greater the net working capital,

the more liquid the firm is and therefore the less likelihood of it


becoming technically insolvent. The relationship between liquidity,

net working capital and risk is such that if either net working

capital or liquidity increases, the firm's risk decreases.

4. Trade-off: If a firm wants to increase its profits, it must also

increase its risk. Inversely, if it decreases risk, its profitability

too tends to decrease. The trade-off between these variables is

that regardless of how the firm increases its profitability through

the manipulation of working capital, the consequence is a

corresponding increase in risk as measured by the level of Net

working capital.

5. Apart from the profitability – risk – trade-off, another important

ingredient of the theory of working capital management is

determining the financing mix. Financing mix refers to the

proportion of current assets that would be financed by current

liabilities and by long-term resources.


3.6Principles of Working Capital Management/Policy:

1. Principle of risk variation:-

Risk here refers to the inability of a firm to meet its obligation as and

when they become due payment. Larger investment in current assets

with less dependence on short term borrowings increase liquidity,

reduces dependence on short term borrowings increases liquidity, reduces

risk and thereby decrease the opportunity for gain or loss. On the other

hand less investment in current assets with dependence on short term

borrowings, reduce liquidity and increase profitability.

2. Principle of cost of capital:-

The various sources of raising working capital finance have different

cost of capital and degree of risk involved. Generally, higher the risk

lower is the cost and lower the risk higher is the cost. A sound

working capital management should always try to achieve a proper

balance between these two.

3. Principle of Equity position:-

This principle is concerned with planning the total investment in

current assets. According to this principle, the amount of working

capital invested in each component should be adequately justified by a

firm’s equity position. Every rupee invested in current 4assets should

contribute to net worth of the firm. The level of current assets may be

measured with the help of two ratios:

Current assets as a percentage of total assets.

Current assets as a percentage of total sales.

4. Principle of maturity of payment:-

This principle is concerned with planning the sources of finance for

working capital. According to this principle, a firm should make every

effort to relate maturities of payment to its flow of internally generated

funds. Maturity pattern of various current obligations is an important

factor in risk assumptions and risk assessments. Generally, shorter the

maturity schedule of current liabilities in relation to expected cash

inflows, the greater inability to meet its obligations in time.


2.6 Forecasting / Estimation of Working Capital

Requirements:

“Working capital is the life blood and controlling nerve centre of a

business.” No business can be successfully run without an adequate

amount of working capital. To avoid the shortage of working capital at

once, an estimate of working capital requirements should be made in

advance so that arrangement can be made to procure adequate working

capital.

Methods of forecasting working capital requirements-The following

methods are usually followed in forecasting working capital requirements

of a firm:

1. Percentage of sales method:-

This method of estimating working capital requirements is based on the

assumption that the level of working capital for any firm is directly

related to its sales value. If past experience indicates a stable

relationship between the amount of sales and working capital, then this

basis may be used to determine the requirements of working capital for

future period. If sales for the year 2007 amounted to ₨ 30, 00,000 and

working capital required as ₨ 6, 00,000; the requirement of working

capital for the year 2008 on an estimated sales of ₨ 40, 00,000 shall

be ₨ 8,00,000; i.e. 20% of ₨ 40, 00,000. The individual items of

current assets and current liabilities can also be estimated on the basis

of the past experience as a percentage of sales. This method is simple

to understand and easy to operate but it cannot be applied in all cases

because the direct relationship between sales and working capital may

not be estimated.

Example- the following information has been provided by a company

for the year ended 30.6.2008.


Liabilities ₨ Assets ₨

Equity share capital8% debentureReserve and surplusLong term loanSundry creditors

2,00,0001,00,00050,00050,00080,0004,80,000

Fixed assets less depreciationInventoriesSundry debtorsCash and bank

3,00,000

1,00,000

70,000

10,000

4,80,000

Sales for the ended 30.6.2008 amounted to ₨ 10,00,000 and it is

estimated that the same will amount to ₨ 12,00,000 for the year 2008-

09. You are required to estimate the working capital requirements for

the year 2008-09 assuming a linear relationship between sales and

working capital.

Solution-

Estimating of working capital requirements

Actual2007-08

(₨)

%age to sales2007-08

Estimate

2008-09(₨)

Sales 10,00,000 100 12,00,000

Current assets:InventoriesSundry debtorsCash and bankTotal current assets (CA)

1,00,00070,00010,000

1,80,000

107118

1,20,000

84,00012,0002,16,00

0

Current liabilities:Sundry creditorsTotal current liabilities (CL)

80,00080,000

88

96,00096,000

Working capital (CA-CL) 1,00,000 10 1,20,000


1. Regression analysis method (average relationship between sales

and working capital):-

This method of forecasting working capital requirements is based upon

the statistical technique of estimating or predicting the unknown value

of a dependent variable from the known value of an independent

variable. It is the measure of the average relationship between two or

more variables, i.e.; sales and working capital, in terms of the original

units of data. The relationship between sales and working capital is

represented by equation:


y = a + bx

Where, y = working capital (dependent variable)

a = intercept of the least square

b = slope of the regression line

x = sales (independent variables)

For determining the value ‘a’ and ‘b’ two normal equations are used

which can be solved simultaneously:

Example- The sales and working capital figures of Suvidha ltd. for a

period of 5 years are given as follows:

Year Sales

(in lakhs)

Working capital

(in lakhs)

2003-04

2004-05

2005-06

2006-07

2007-08

60

80

120

130

160

12

15

20

21

23

You are required to forecast the working capital requirements of the

company for the year 2008-09 taking the estimated sales of ₨ 200

lakhs.

Solution-

The relationship between sales and working capital can be represented

by: y = a + bx

Year Sales

(x)

Working

capital (y)

Xy x2


∑y = na + b∑x

∑xy = a∑x + b∑x2

2003-04

2004-05

2005-06

2006-07

2007-08

60

80

120

130

160

12

15

20

21

23

720

1200

2400

2730

3680

3600

6400

14400

16900

25600

n = 5 ∑x =550 ∑y = 91 ∑xy =

10730

∑x2 = 66900

∑y = na + b∑x

∑xy = a∑x + b∑x2

Putting the values in the above equations:

91 = 5a + 550b

(1)

10730 = 550a + 66900b

(2)

Multiplying equation (1) with 110, we get:

10010 = 550a + 60500b

(3)

Subtracting equation (3) equation (2)

720 = 0 + 6400b

b = 0.1125

Putting the value of b in equation (1)

91 = 5a + 550 * 0.1125

91 = 5a + 61.875

5a = 29.125

a = 5.825

Now, putting the value of ‘a’ and ‘b’ in the equation y = a + bx

(where y and x are estimated working capital and estimated sales

respectively)

y = a + bx


y = 5.825 + 0.1125 * 200

y = 27.825

Thus, when estimated sales for 2008-09 are ₨ 200 lakhs, the amount

of estimated working capital shall be ₨ 27.825 lakhs.

2. Cash forecasting method:-

This method of estimating working capital requirements involves

forecasting of cash receipts and disbursements during a future period of

time. Cash forecast will include all possible sources from which cash

will be received and the channels in which payments are to be made so

that a consolidated cash position is determined.

This method is similar to the preparation of a cash budget. The excess

of receipts over payments represents surplus of cash and the excess of

payments over receipts causes deficit of cash or the amount of working

capital required. The following example explains the cash forecasting

method of estimating working capital requirements.

Examples- Texas manufacturing company Ltd. is to start production on

1 January 2009. The prime cost of a unit is expected to be ₨ 40 out

of which ₨ 16 is for materials and ₨ 24 for labor. In addition,

variable expense per unit are expected to be ₨ 8 and fixed expense

per month ₨ 30000. Payment for material is to be made in the month

following the purchases. One third of sales will be for cash and the

rest on credit for settlement in the following month. Expense are

payable in the month in which they are incurred. The selling price is

fixed at ₨ 80 per unit.The numbers of units manufacturing and sold

are expected to be as under:


January 900

February 1200

March 1800

April 2100

May 2100

June 2400

Draw up a statement showing requirements of working capital from

month to month, ignoring the question of stocks.

Statement Showing Requirement Of Working Capital

Jan.

₨

Feb.

₨

March

₨

April

₨

May

₨

June

₨

Payments:

Materials

Wages

Fixed expenses

Variable expenses

Receipts:

Cash sales

Debtors

Working capital

required

(payments-receipts)

Surplus

Cumulative

Requirements of

working capital:

Surplus working

capital

-

21600

30000

7200

58800

24000

-

24000

34800

-

34800

14400

28800

30000

9600

82800

32000

48000

80000

2800

-

37600

19200

43200

30000

14400

106800

48000

64000

112000

-

5200

32400

28800

50400

30000

16800

126000

56000

96000

152000

-

26000

6400

33600

50400

30000

16800

130800

56000

112000

168000

-

37200

-

30800

33600

57600

30000

19200

140400

64000

112000

176000

-

35600

-

66400

As payment for material is made in the month following the purchase,

there is no payment for material in January. In February, material

payment is calculated as 900 * 16 = ₨14400 and in the same manner

for other months.

Cash sales are calculated as:


For January 900 ‘80’1/3 = ₨24000 and in the same manner for other

months.

Receipts from debtors are calculated as:

For Jan. – Nil because cash from debtors is collected in the

month following the sales.

For Feb. – 900’80’2/3 = ₨ 48000

For March – 1200’80’2/3 = ₨ 64000, and so on.

Factors requiring consideration while estimating working

capital:

The estimating of working capital requirement is not an easy task and

large numbers of factors have to be considered before starting this

exercise. For a manufacturing organization, the following factors have to

be taken into consideration while making an estimate of working capital

requirements:

Factors to be considered-

• Total costs incurred on materials, wages and overheads • The length of time for which raw materials remain in stores before

they are issued to production.• The length of the production cycle or WIP, i.e., the time taken for

conversion of RM into FG. • The length of the Sales Cycle during which FG are to be kept

waiting for sales.• The average period of credit allowed to customers. • The amount of cash required to pay day-to-day expenses of the

business. • The amount of cash required for advance payments if any. • The average period of credit to be allowed by suppliers. • Time – lag in the payment of wages and other overheads• The average amount of advance received, if any

4.1 Performa - Working Capital Estimates:

Trading Concern-


2. Manufacturing concern –

3. Columnar form:

An alternative preformed for estimating of working capital requirements

in columnar form given below:


STATEMENT OF WORKING CAPITAL REQUIREMENTS

Amount (Rs.)

Current Assets(i) Cash ----(ii) Receivables ( For…..Month’s Sales)---- ----(iii) Stocks ( For……Month’s Sales)----- ----(iv)Advance Payments if any ----Less : Current Liabilities(i) Creditors (For….. Month’s Purchases)- ----(ii) Lag in payment of expenses -----_WORKING CAPITAL ( CA – CL )

xxxAdd : Provision / Margin for Contingencies -----

NET WORKING CAPITAL REQUIRED XXX


Amount (Rs.)

Current Assets(i) Cash ----(ii) Receivables ( For…..Month’s Sales)---- ----(iii) Stocks ( For……Month’s Sales)----- ----(iv)Advance Payments if any ----Less : Current Liabilities(i) Creditors (For….. Month’s Purchases)- ----(ii) Lag in payment of expenses -----_WORKING CAPITAL ( CA – CL )

xxxAdd : Provision / Margin for Contingencies -----

NET WORKING CAPITAL REQUIRED XXX


Amount (Rs.)Current Assets(i) Stock of R M( for ….month’s consumption)

-----(ii)Work-in-progress (for…months) (a) Raw Materials

----- (b) Direct Labour ----- (c) Overheads -----(iii) Stock of Finished Goods ( for …month’s sales) (a) Raw Materials ----- (b) Direct Labour ----- (c) Overheads -----(iv) Sundry Debtors ( for …month’s sales) (a) Raw Materials ----- (b) Direct Labour ----- (c) Overheads -----(v) Payments in Advance (if any)

-----(iv) Balance of Cash for daily expenses

-----(vii)Any other item -----

Less : Current Liabilities(i) Creditors (For….. Month’s Purchases)

-----(ii) Lag in payment of expenses

-----(iii) Any other -----WORKING CAPITAL ( CA – CL )xxxxAdd : Provision / Margin for Contingencies

-----

NET WORKING CAPITAL REQUIREDXXX

4.2WORKING CAPITAL FINANCING POLICIES:-

A growing firm can be thought of as having a total assets requirement

consisting of the current assets and long term assets and long term



Current Assets Period Total Raw Work In Finished Debtors Cash& Week Material Progress Goods

Bank Rs. Rs. Rs. Rs.

Rs. Rs.1. Raw materials:In stockIn work in progressIn finished goodsCredit to debtorsDirect labor:In work in progressIn finished goodsCredit to debtorsOverheads:In work in progressIn finished goodsCredit to debtorsCash and bank

Total current assets

B. Current liabilities Period Total For Raw For For Week Material Wages Overheads Rs. Rs. Rs. Rs.

5. Credit by suppliers6. Lag in payment of wages7. Overheads (B) Total current liabilities

Working capital Requirements ( A – B )

assets for its efficient operations. It seldom happens that net working

capital goes to zero. As discussed earlier, companies have some

permanent working capital, which is the net working capital on hand at

the low point of the business cycle. Then, as sales increase, net

working capital must be increased, and this addition is the temporary

part of net working capital. The manner in which the permanent and

temporary portions of net working capital are financed is called as

working capital financing policies.

1. Maturity Matching / Self-Liquidating Approach:-

Maturity matching means to match asset and liability maturities. This

strategy minimizes the risk that the firm will be unable to pay off its

maturing obligations. To illustrate, suppose a company arises a one year

loan to and uses the funds obtained to build and equip a plant.

Obviously, cash flow from the plant (that is profits and depreciation)

would not be enough to pay off the loan at the end of only one year,

therefore the firm would be force to renew the loan. As a limiting

case, the company could try to match exactly the maturity of all of its

assets and liabilities. For example, inventory expected to be sold in 30

days could be financed with a 30 days bank loan; and a 20 year

building could be financed with a 20 year mortgage and so on. In

simple words, the source of finance use has same maturity as the life

of the assets for which the financing has been done. The policy looks

quite useful as it minimizes the wastage of funds. However, the risk

that this policy entails is that if the cash from the assets do not take

place on time, the firm would not be able to pay back and forced into

renewal situation. The cost of funds for the renewal case could be

unattractive, and might it the profit of the company.

2. Aggressive Approach:-


a relatively aggressive company finances all of its long term assets and

a part of permanent net working capital with long term assets and rest

permanent working capital with short term debt. The term ‘relatively’

has been used because there can be different degrees of aggressiveness.

For example, the dashed line in panel ‘b’ could have been drawn below

the line showing long term assets, indicating that all of the permanent

net working capital even some part of long term assets have been

financed with short term debt; this would be a highly aggressive

position, and the firm would be very much exposed to dangers from

rising interest rates as well as to loan renewal problems. However,

because short term debt is generally cheaper than long term debt, some

companies are ready to sacrifice safety for the chance of better profit.

3. Conservative Approach:-

permanent net working capital, meaning that long term sources have

been employed to finance all permanent assets and also to meet some

of the temporary requirements. The peak requirements could be met out

of small amount of short term debt; but it also finances a part of the

seasonal needs by putting the money in marketable securities. This

approach, as the name suggests, is a very safe, conservative working

capital financing policy as there is no risk of going out of liquidity.

However, since long term debt is normally costlier, investments in cash

and marketable securities are zero net present value investments at best,

the safety comes at the cost of lower profits.

4.3Conclusion:


Hindustan Computers Limited, also known as HCL Enterprise, is

one of India's largest electronics, computing and information

Technology Company.

HCL Career Development Centre or LEARNING DIVISION is an

initiative that enables individuals to benefit from HCL expertise in

the space and become Industry ready IT professionals. HCL

dominates the IT space as a leader.

Any change in the working capital will have an effect on a

business's cash flows. A positive change in working capital

indicates that the business has paid out cash, for example in

purchasing or converting inventory, paying creditors etc. Hence, an

increase in working capital will have a negative effect on the

business's cash holding. However, a negative change in working

capital indicates lower funds to pay off short term liabilities

(current liabilities), which may have bad repercussions to the future

ofthecompany.

4.4 Findings:


1. During my survey well asking that which IT institute do you prefer

then out of 100 Customer 30% said that they will prefer HCL

learning division. The reason which is given by them is HCL

learning division is one of the good brand in IT firm & by joining

HCL there placement got secure.

2. As HCL learning division is providing major type of courses which

I have surveyed the area of interest which I find out of student

more towards CCNA. Which is one of the hardware courses the

reasons behind that is most of the student are mainly concern with

hardware or they may be having a degree or diploma in software

which is provided by many other institute. of quantity in HCL

which is later on followed by brand name because the student know

that HCL company is known to everyone & is very much obvious

that the courses which provided by HCL will be quality oriented.

When I asked from the student why they like HCL learning division

then most of them had answered that they will get a quality instead

3. During my survey related to its awareness amongst student most of

the student replied they get the information related to HCL learning

division is mainly through newspapers and broachers. As one of the

new courses so most of the students are not aware of these courses

so because of very few students can able to know about the courses

to their friends.

4. As HCL is providing various facilities like discount coupons, Bank

loans so where asking which offer is beneficial to students most of

them i.e. almost 64% is said that they will prefer opt for Bank loan

instead for discount and coupon the reason which is got is most of

them were having the perception that they will go for loan it will

be the responsibility of HCL to provide the job.

5. The promotion activities of HCL were graded as fair by 80% of the

students because for its facility of loan brand name and courses that

is offered.

6. Well I curiously asked for most of the students that why they are

choosing the HCL learning division the answer which I got very

much similar which I expected most of them choosing HCL learning


division because HCL having brand and good reputation in the

market. The marker apart from its quality and price.

7. Company was doing various promotional activities like Hand Billing,

Road shows, Seminar and area campaign but where asking which

was the most prefer by the students 41% said that area campaign is

one of the best way to contact with them 35% were agreed for

seminar and 23% for Hand billing this is so because area campaign

the way by which most of the students weather he is from college

or school going or road side one can able to know what exactly

HCL learning division offering them which is not fulfil by seminar

or hand billing in a satisfactory position.

8. After asking which courses mostly preferred by the students the

answer which I got is majority for short term courses which is

having duration of six month or one year minority were asking long

term courses which is having duration of two year. This is so

because the majority of students which I surveyed were doing job

so they mostly preferred short term courses over within six month

and one year.

Lastly I asked that which timing is mostly suits them 47% said that

evening is most suitable for them as I have said earlier that most of

them doing job so they don’t want to hamper their job for this course

but as this course was really suited to them they really want to do it

as a part time courses.

4.5 WORKING CAPITAL QUESTIONNAIRE:

This questionnaire is to be used entirely for the purpose of conducting

a study. The information provided by you shall be kept confident. I


therefore shall appreciate your cooperation for being frank an expressive

in your answers.

Name: - Age: -

Education:

Income level: - Occupation:

Contact No:

1. To financial analysts, "working capital" means the same thing as

__________.

o Total Assets

o Fixed assets

o Current assets

o Current assets minus current liabilities

2. The amount of current assets required to meet a firm's long-term

minimum needs is referred to as __________ working capital.

o Permanent

o Temporary

o Net

o Gross

3. The amount of current assets that varies with seasonal requirements

is referred to as __________ working capital.

o Permanent

o Temporary

o Net

o Gross

4. To financial analysts, "net working capital" means the same thing as

__________.

o Total assets

o Fixed assets


o Current assets

o Current assets minus current liabilities

5. Companies may adopt an aggressive or a conservative working

capital policy. An aggressive policy means that a company

o Holds high levels of cash and inventories

o Has a low level of flexibility

o Faces a low level of risk

o Expects a lower level of profitability

6. Given the following information, what is the cash conversion cycle

in days of PP plc?

£000

Total sales 276Costs of goods sold 200Purchases 120Stocks 37Debtors 43Creditors 15

o 78.8 days

o 125.6 days

o 60.2 days

o 170.0 days

7. Which of the following would be consistent with a hedging

(maturity matching) approach to financing working capital?

o Financing short term needs with short term funds

o Financing short term needs with long term debt


o Financing seasonal needs with long term funds

o Financing some long term needs with short term funds

8. Having defined working capital as current assets, it can be further

classified according to __________.

o Financing method and time

o Rate of return and financing method

o Time and rate of return

o Components and time

9. Varies inversely with profitability.

o Liquidity

o Risk

o Blue

o False

10. Ideally, which of the following types of assets should be financed

with long-term financing?

o Fixed assets only

o Fixed assets and temporary current assets

o Fixed assets and permanent current assets

o Temporary and permanent current assets.

4.6 BIBLOGRAHY:


BOOK NAME AUTHOR NAME

FINANCIAL MANAGEMENT Shahs K. Gupta & R.K. Sharma

FINANCIAL MANAGEMENT I.M. Pandey

ACCOUNTING FOR MANAGEMENT T. Ramachandran

MANAGEMENT ACCOUNTING R.S.N. Pillai & Bagavathi

FINANCIAL MANAGEMENT Navdeep Aggerwal

Websites Search-

• www.wiki.com

• www.google.com

• www.hcl.com

• www.hclcdc.in


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Working capital of hcl

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