Working Capital Management HCL Infosystems

Description
Document about indian hardware product scenario , Hardware industry growth, Domestic market ,Challenges , MAJOR PLAYERS , ALLIANCES and PARTNERSHIPS, OBJECTIVES, WORKING CAPITAL MANAGEMENT , OPERATING CYCLE

WORKING CAPITAL MANAGEMENT OF HCL Infosystems Ltd
Indian hardware product scenario looking up India has made its mark in software exports but few Indian companies have ventured into the hardware product arena. Though the hardware industry doesn’t enjoy the level of hype that goes with the Indian software sector, there are companies that are doing extremely well INDIA must be as strong in the hardware sector as she is in the software sector, feel many Indian hardware product companies. While Indian software companies get all the attention, hardware players are side-lined. Most hardware companies have been successful in carving a niche in the domestic market but few have made their mark in the global market. Even in the software sector India has been able to do well in the services arena but when it comes to software product development it still has a long way to go. MAIT (Manufacturers Association of Information Technology) is working hard on popularising hardware product development in the country and is trying to instil interest among Indian entrepreneurs to come forward and take the hardware product path. Much remains to be done, as Indian hardware companies face a long and winding road in the hardware sector Hardware industry growth The Top 100 hardware companies grew their revenues a modest 3.1% on average, when compared to the previous year. Many financial analysts describe the hardware sector as cyclical, assuming that hardware spend declines quickly when the economy is in a slump, as it was in the last two years. The Top 100 growth figure is not in line with that assumption. As hardware companies tend to choose organic growth over acquisitive growth, the positive revenue growth figure cannot be explained from acquisitions. It seems as if the everincreasing pervasiveness of technology in our lives, and the resulting positive momentum for the technology industry makes it capable of weathering a storm unscathed. The top 20 hardware and software companies had average revenues of $2 billion in 2009-10, according to the latest survey conducted by Dataquest, Cyber Media group journal. However, the top 20 companies just about managed to match the Indian gross domestic product growth rate of 8.4 per cent in rupee terms to report a combined revenue of Rs180,193 crore ($39.52 billion) in FY '10 compared to Rs 174,605 crore (Rs 1,746.05 billion) in FY '09, according to the survey. All the company revenues are from April 2009 to March 2010.
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WORKING CAPITAL MANAGEMENT OF HCL Infosystems Ltd
Domestic market focus Unlike software product companies that primarily concentrate on the overseas market, Indian hardware product companies have focused on the domestic market and the majority of their revenues accrue from it. Many of them have concentrated on increasing their hold on the domestic market before venturing into the highly competitive international market, where they face stiff competition from MNCs. TVS-E Sprint, an "all-in-one" integrated hardware platform for automation of transactions, combines the functions of a printer, UPS, smart card and a credit card monitor and is targeted at Indian retailers Capital-intensive nature It is a well-known fact that hardware product development requires heavy investments that dwarf those required for software product development. This is one possible reason why few Indian entrepreneurs have ventured into this domain. Companies have to spend heavily on R&D for hardware product development. Challenges Developing a top-notch development team The foremost challenge for Indian hardware manufacturers is to assemble an excellent product team that can think and create truly world class products. If the team comprises dedicated people who have prior experience in working with products, they are able to design and conceptualise state-of-the-art products. Developing a world class product To deliver a truly world-class product in terms of looks and styling is a big challenge that Indian hardware product manufacturers face while competing against MNCs who score over their Indian counterparts in product styling. Hence Indian manufacturers have to work hard to succeed in both the domestic and the international markets.

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WORKING CAPITAL MANAGEMENT OF HCL Infosystems Ltd
Product customisation To be successful in India and, gradually, in the global market, Indian hardware product manufacturers need to customise their products as per the needs of particular markets. For instance, for a hardware product to be successful in the Indian market it should provide interfaces in various Indian languages. If successfully implemented, the product would have the ability to capture the Indian domestic market. Branding the product One of the challenging exercises that Indian hardware vendors face is that of branding their products in India and abroad. The key, many companies say, lies in working closely with customers and generating a value for them through the product. This is possible if the company understands the customer‘s specific requirements and tailors its product to them. It is worth considering that a product that suits Indian conditions may be unsuitable for other countries. The strength of a brand can be gauged by the faith customers place in it. That faith generates word-of-mouth publicity about the product amongst other potential customers The Current Scenario Export target for IT products and services of $50 billion a year, making India the number one IT design centre, and the number one provider of IT products, are indeed go Report on IT Hardware Development Production and Export This report starts with a question "given the same degree of incentives and simplification of procedures bestowed on the software industry, is there a feasible policy regime which can give similar buoyancy to the Indian IT hardware industry, in spite of the capital intensiveness of the industry as a whole without conflicting with the growth of the software and IT service industry?" The report states that the protection to hardware industry in the past (in the form of high import duties) resulted in high cost of PCs and other IT products, which adversely affected the growth of IT in India. This resulted in smaller volume of production which made the industry unviable. The IT hardware industry thereby got transformed primarily into direct or indirect dealerships of foreign brands. The report points out that with government advancing zero import duty date to Jan. 2002 from Jan. 2005

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WORKING CAPITAL MANAGEMENT OF HCL Infosystems Ltd
(proposed by WTO), only those hardware companies which carry out higher value addition are likely to survive. The report notes that making "IT hardware manufacture viable is a major challenge", reconciling the need for import for software development, the need of the hardware industry for rational duties such that duty on inputs is always less than that on finished goods, and the need of the government to increase revenue. The report also calls for considerable procedural simplifications in customs and excise regulations, addresses a number of banking issues which would help hardware industry, and calls for high-tech habitats. The report recognises that India virtually imports all its components including Integrated Circuits, and calls for special action by the Government in changing this situation. Future scenario Don‘t expect an immediate rise in the number of Indian hardware product companies in the near future. That said, the potential for Indian hardware companies to grow is immense, especially in the domestic market. Indian hardware companies have not yet attempted to target the international market in a big way and have concentrated their efforts mainly on the domestic market where much needs to be done as far as product customisation to Indian needs is concerned. Indian hardware manufacturers do not have many role models to follow in the hardware sector. However, there are few success stories in Indian hardware. Still many feel that the Indian domestic market holds immense potential for hardware companies, more than it does for the software sector. Companies are coming forward to set up businesses but they are only a handful when compared to the hundreds in the software sector. The immediate need is to work towards strengthening existing hardware clusters in India such as Pondicherry, Goa, Noida and Bangalore and to set up a hardware technology park. The streamlining custom procedures for the Indian hardware sector. Under the initiative, hardware companies would be able to declare imports and exports without undergoing physical checks of product consignments. The significantly simplified clearance
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WORKING CAPITAL MANAGEMENT OF HCL Infosystems Ltd
system, using computer-based risk assessment and management techniques, will help reduce transaction costs and improve turnaround time. MAJOR PLAYERS OF HARDWARE MARKET IN INDIA: Rank 1 2 3 4 5 6 7 8 9 10 Company Hp Samsung Foxconn Nokia Dell Toshiba Intel LG Electronics Cisco Canon Hardware Revenues 85,393 74,763 61,800 46,412 44,877 44,242 36,320 33,429 32,840 29,299

HCL POSITION IN HARDWARE MARKET: HCL was ranked at 48th place in the world level as per the update on September 2011. HCL was rated in 30 most trusted brand in India. SCOPE OF THE STUDY: The analysis is mainly carried out to find out the financial performance of the HCL Infosystems ltd. The study is mainly conducted to analysis the performance of the company for a period of 5 years from Fy 2005- 2006 to Fy 2009-2010 as revealed from the financial data of HCL Infosystems ltd annual reports, manuals, and accounting records. This indirectly help the investors, government, employees, creditors and other stakeholders in financial forecasting and planning and also for decision making.

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WORKING CAPITAL MANAGEMENT OF HCL Infosystems Ltd
NEED OF THE STUDY: During the post liberalization arc the worlds assail as economic India‘s scenario has shown a great progress and is growing with increased phase this has necessitated the complex and efficient ways of management .thinking practically the main concern is of the influence of external environment on business providing a modern dimension to business to management they find solution for many problems in the aspect of financial analysis. Financial establishes inter relationship that exists among. The different items appeared in the financial statements, which are effectively helpful to describe the company should monitor key indication of operating performance and where possible must compare, itself with the competitors in the industry. A systematic financial analysis of accounting figure helps to analysis the probable caused relationship among different items after analysing scrutinizing the past result which helps the management to prepare budgets to formulate company policy and to prepare future plan of action. It focuses on company's relative performance in sales growth margins and assets management it is a simple tool where by a company can make its internal audit to evaluate internal strengths and weakness of the part of the strategic planning OBJECTIVES OF THE STUDY: Working capital is the most widely used and powerful technique of financial analysis .The main objective of the present study is to know the financial condition of the company. ? To determine the amount of working capital requirement and to calculate various ratios relating to working capital ? To study the components, determinants of working capital ? To make an item wise study of the components of the working capital ? To suggest the steps to be taken to increase the efficiency in the management of working capital ? To know how the working capital is being financed ? To study how to keep the capital that is tied up in the working capital cycle at a minimum and maximizing profit.
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WORKING CAPITAL MANAGEMENT OF HCL Infosystems Ltd
? To know the overall operational efficiently and performance of Devaki group of companies. ? To interpret the financial position of the company.

METHODOLOGY The methodology adopted for this study is based upon secondary data. The financial details of the company were collected from the annual reports for five years starting from 2006-07 to 2010-11. The working capital details were collected from the respective balance sheets and profit & loss accounts. PERIOD OF STUDY The study has been carried out in HCL INFOSYSTEMS LTD for a period of 45 days starting from the date of 23rd May 2011 to 6th July 2011. PURPOSE OF THE STUDY The main purpose of this study is to comply with the requirements of M.Com (B.F.) post-graduation degree program and to bridge the gap between theoretical knowledge we acquired from different subjects and practical functions of a company carried out in its day to day life. LIMITATIONS OF THE STUDY The study conducted and done is analytical, subject to the following limitations ? The study is mainly carried out based on the secondary data provided in the financial statements. ? This study is based on the historical data and information provided in the annual reports therefore it may not be a future indicator. ? There may be sonic fractional differences in the calculated ratios as the study was for short span of 8 weeks and due to lack of time other areas could not be well focused.

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WORKING CAPITAL MANAGEMENT OF HCL Infosystems Ltd
TOOLS USED FOR THE STUDY: 1. WORKING CAPITAL CALCULATION 2. RATIO ANALYSIS PRESENTATIONS OF CHAPTERS: ? Introduction ? Company Profile ? Theoretical Frame Work Of working capital management ? Analysis and Interpretations ? Findings, Suggestions and Conclusion

CONCLUSION: This chapter has given detailed information regarding introduction about the Hardware Company, the scope of the study, the objectives of the study, methodology and the limitations of the study. In the next chapter a detailed discussion on the profile and working of HCL Info Systems ltd, where I had undergone training, is given.

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WORKING CAPITAL MANAGEMENT OF HCL Infosystems Ltd
Hindustan Computers Limited HCL is an Indian group company that focuses on global technology and IT enterprise services. Today, also known as HCL Enterprise, the company is a holding company that comprises two publicly listed Indian companies, HCL Technologies and HCL Info systems. HCL was founded in 1976 by Mr. Shiv Nadar, Mr. Ajai 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 was split as 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. History In 1976, Mr. Nadar quit an executive job with Delhi Cloth Mills (DCM) along with five of his friends to start a new company, Micro comp Limited. The focus of the company was design and manufacturing of scientific calculators. The venture provided its founders money to start a company that focused on manufacturing computers. The company was renamed as Hindustan Computers Limited (HCL) and received support from the Uttar Pradesh government to setup their manufacturing in Noida. The founders put together Rs 2 million in the venture. In 1981, NIIT was started to cater to the increasing demand in computer education. By early 2000s, Nadar divested his stake in this venture. Government policy shaped HCL, as was the case with all Indian companies of those eras. In 1977, policies of Indian industries minister Mr. George Fernandes meant that global giants like IBM left India creating a major void in the computers industry (even Coca-Cola left India during this timeframe opposing the policies of the minister). HCL designed and shipped microcomputers to address this gap, around the same time Apple introduced personal computers in USA. HCL had many more accomplishments in the next half decade, introducing 16 bit processor computer in 1981 and relational data based management system, networking operating system and client server architecture solutions by 1983.
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WORKING CAPITAL MANAGEMENT OF HCL Infosystems Ltd
In the last days of Mrs. Indira Gandhi government, a radical policy shift changed the landscape of the computer industry by permitting the import of technology. HCL utilized the opportunity to launch its first brand of personal computers - Busy bee. By 1986, HCL became the largest IT Company in India. When Mr. Manmohan Singh opened the Indian economy in 1991 as the Finance minister, HCL entered into a partnership with HP to form HCL HP Limited. HP picked up 26% stake in the company to leverage on HCL's sales and distribution channels to sell its products in India as well as utilize the R&D team of HCL to customize its products to the Indian environment in 1994, HCL HP looked beyond PCs and tied up with Nokia for mobile phone distribution and Ericsson for telephone switch distribution. HCL had always tried to address the global market and initially with mixed results. In 1979, the company set up a subsidiary in Singapore - Far East Computers focused on selling its computer products in the APAC region. In 1989, on the basis of a joint study with McKinsey, HCL ventured into the US computer market with SCI roped in as manufacturing partners. HCL America was born but in the words of the founder, "the project fell flat on its face". HCL had failed to follow a very crucial step necessary to enter the US market; the computers didn't get environmental clearances. By 1996, Nadar realized that fellow Indian companies, TCS, Wipro and Infosys, had successfully entered the global software services market and realized the immense opportunity. When the partnership of HCL HP was ended in 1996, HCL was split into two companies - HCL Technologies and HCL Infosystems. HCL Technologies was created from the R&D division of erstwhile HCL HP and was to focus on providing third party engineering and software services to global companies while HCL Infosystems would focus on manufacture and sale of computer hardware in the Indian market. HCL INFOSYSTEMS LTD WHO WE ARE: Incorporated in 1976, HCL Infosystems Ltd is among the largest India facing ICT companies and the pioneers of modern computing in India today. HCL is engaged in developing and implementing solutions for diverse market segments across a range of technologies.

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WORKING CAPITAL MANAGEMENT OF HCL Infosystems Ltd
Part of the $5 billion HCL enterprises, HCL Infosystems ltd is a leading ICT

hardware and system integration company, operating in the diverse areas of ICT products & solutions, Systems Integration, office automation, digital lifestyle products, managed ISP services, homeland security and managed network solutions. With the clear vision to bring technology solutions that make a difference to the lives of the people, HCL has evolved from being an IT Products manufacturing company in India to becoming a leading multi-faceted technology ICT Products, services and system Integration Company. Endorsed with ISO 9001:2000 certification for ICT services & system integration and ISO14001 for manufacturing, HCL is fast emerging as the preferred next generation partner for companies looking to build the intelligent infrastructure of tomorrow. HCL Infosystems Ltd, a listed subsidiary of HCL, is an India-based hardware and systems integrator. It claims a presence in 170 locations and 300 service centres. VISION STATEMENT: "Together we create the enterprises of tomorrow" MISSION STATEMENT: "To provide world-class information technology solutions and services to enable our customers to serve their customers better? MANAGEMENT OBJECTIVES: ?To fuel initiative and foster activity by allowing individuals, freedom of action and innovation in attaining defined objectives?. PEOPLE OBJECTIVES: To help people in HCL Infosystems Ltd., Share Company‘s success, which they make possible; to provide job security based on their performance; To recognize their individual achievements; and help them gain a sense of satisfaction and accomplishment from their work.

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CORE VALUES: ? ? ? ? Nothing transforms life like education. We shall honour all commitments We shall be committed to Quality, Innovation and Growth in every endeavour. We shall be responsible corporate citizens

BUSINESS MODEL: The HCL Enterprise comprises two companies listed in India, HCL Technologies and HCL Infosystems. HCL Technologies is the IT and BPO services arm focused on global markets, while HCL Infosystems is the IT, Communication, Office Automation Products & System Integration arm focused on the Indian market. Together, these entities have uniquely positioned HCL as an enterprise with service offerings spanning the IT Services and Product spectrum.

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WORKING CAPITAL MANAGEMENT OF HCL Infosystems Ltd
HCL Enterprises The range of offerings span Product Engineering and Technology Development, Application Services, BPO Services, Infrastructure Services, IT Hardware, Systems Integration, and Distribution of Technology and Telecom products in India. CORPORATE INFORMATION BOARD OF DIRECTORS Chairman & Chief Executive Officer Mr. Ajai Chowdhry Whole-time Director Mr.J.V.Ramamurthy Mr. S. Bhattacharya, Mr. D.S. Puri, Mr. R.P. Khosla, Mr. E.A. Kshirsagar M/s Anita Ramachandran Mr. T.S. Purushothaman Mr. Narasimhan Jegadeesh, Mr. V.N. Koura Mr. Sushil Kumar Jain Mr. Sandeep Kanwar State Bank of India Canara Bank HDFC Bank Ltd. ICICI Bank Ltd. Societe Generale Standard Chartered Bank State Bank of Patiala Price Waterhouse, New Delhi 806, Siddharth, 27, 96 Nehru Place, New Delhi -19. E - 4, 5, 6, Sector XI, Noida-201 R.S. Nos: 34/4 to 34/7 and part of 34/1, Sedarapet, Puducherry - 605 111.
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DIRECTORS

COMPANY SECRETARY CHIEF FINANCIAL OFFICER BANKERS

AUDITORS REGISTERED OFFICE

CORPORATE OFFICE WORKS

WORKING CAPITAL MANAGEMENT OF HCL Infosystems Ltd
R.S. Nos: 107/5, 6 & 7, Main Road, Sedarapet, Puducherry - 605 111. Plot No 78, South Phase, Ambattur Industrial Estate, Chennai – 600 058. Plot No SPL. A2, Thattanchavadi, Industrial Area, Puducherry - 605 009 Plot Nos. 1, 2, 27 & 28, Sector 5, 11E, Rudrapur,Distt. - Udham Singh Nagar, Uttarakhand - 263 145. OUR MANUFACTURING FACILITIES: With four states- of - the -art manufacturing facilities -2 at Puducherry, 1 at Chennai & 1 at Uttarakhand HCL has a production based that is well – positioned to develop and produce built to order products & peripherals across the entire range of products in ICT hardware. Manufacturing Facilities Puducherry manufacturing facility Uttarakhand manufacturing facility Installed Capacity 1.0 million computers 1.0 million computers

The plant located in Puducherry are situated 165 kms south of Chennai on the coast of the Bay of Bengal with proximity to Chennai Air/Sea port, special policies for Industries of local Govt, , Inland Container Depots, attractive power and labour rates - makes Puducherry an ideal for business. The plant is networked & online with HCL branch and head offices. The Pondicherry plant has its own Product Engineering All 3 factories are ISO 9001:2000 and ISO 14001, ISO 13485:2003, TS 16949-2002 TUV-Accredited certified. PMO was also Awarded MAIT Level 2 - by European Foundation for Quality Management in the year 2001. HCL was also awarded ELCINA's (Electronic Component Industries Association) Quality Award for the year 2002- 2003. State of the art IT systems in MRP, ERP, Online configurations enables this latest unit of HCL (Rudrapur) to leverage the power of IT in delivering optimum efficiency. Group (PEG) and R&D teams constantly engaged in developing new products and solutions. Driven
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WORKING CAPITAL MANAGEMENT OF HCL Infosystems Ltd
by a strong manufacturing objective, HCL promises to deliver defect free products, services and solutions to meet the requirements of its external and internal customers, right from the commencement of the relationship. Driven by a strong Manufacturing Objective "We shall deliver defect-free products, services and solutions to meet the requirements of our external and internal customers, the first time, every time." All processes in the manufacturing are aligned to this guiding objective. A strong emphasis of "Quality by Process" is ensured across all processes. The products manufactured here undergo stringent tests that ensures their ruggedness & durability , which may be deployed anywhere in India and may have to face severe conditions like - heat , humidity , rough transportation & handling .Our products undergo drop tests , hot & cold temperature chamber , client-site simulation tests , reliability tests at all . Computers are shipped to locations all over India with an extensive network of professional logistic support partners. There is also a Customer satisfaction cell, in plant, to take care of problems reported from field. Customers, sales & marketing, support personnel, dealers & distributors are encouraged to visit the plant to see, for themselves, what all goes in making a quality. HCL‘s products range encompasses Notebooks, Desktops, Business servers, Workstations, LCD Monitors, colour monitors, Keyboards, Think clients, terminals, POS products, Networking products, self service Kiosks and more. QUALITY AT HCL INFOSYSTEMS LTD "We shall deliver defect-free products, services and solutions to meet the requirements of our external and internal customers, the first time, every time?. The history of structured quality implementation in HCL Infosystems began in the late 1980s with the focus on improving quality of its products by using basis QC tools and Failure Reporting and Corrective Active Systems (FRACAS). We also employed concurrent engineering practices including design reviews, and rigorous reliability tests to uncover latent design defects.
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WORKING CAPITAL MANAGEMENT OF HCL Infosystems Ltd
In the early 90s, the focus was not merely on the quality of products but also the process quality systems. Our manufacturing unit at NOIDA was certified initially to ISO 9002:1994 by Bureau Veritas Certification in 1994 and later on to ISO 9001:1994 in 1997. As of now, all our manufacturing units are certified by Bureau Veritas Certification as per ISO 9001:2000 and ISO 14001: 2004 In early 1995, a major quality initiative was launched across the company based on Mr. Philip B. Crosby's methodology of QIPM (Quality Improvement Process management). This model was selected to because it considered the need and commitment by an organization to improve but more importantly, the individual's need towards better quality in his personal life. Under our Quality Education System program, we train our employees on the basic concepts and tools of quality. A number of improvement projects have been undertaken by our employees, whereby process deficiencies and bottlenecks are identified, and Corrective Action Projects (CAPs) are undertaken. This reduces defect rates and improves cycle times in various processes, including personal quality. We have received MAIT's 'Level II recognition for Business Excellence' for our initiatives in the Information Technology Industry, adding another commendation to our fold. MAIT's Level II recognition is based on the 'European Foundation for Quality Management' (EFQM), for gaining quality leadership and business competitiveness. Our certifications / awards in 2003 include ISO 9001-2000 by Bureau Veritas Certification for our Info Structure Services and award of First Prize by ELCINA (Electronic Component Industries Association) for Quality, 2002-03. The ELCINA award criteria consider two aspects. (1) Enablers (Leadership & Management commitment, Resource Management, Product Realization, Measurement Analysis & Improvement) and Results (Product Quality, Customer / Stake holder satisfaction , Business results). The tryst for continuous quality improvement is never-ending in HCL Infosystems. We always strive to maintain high quality standards, which help us fulfill our mission to provide world-class information technology solutions and services, to enable our customers to serve their customers better.

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WORKING CAPITAL MANAGEMENT OF HCL Infosystems Ltd
OUR SERVICE SUPPORT NETWORKS: Focusing on the Indian market through 505 service locations reaching out to 4000 towns, HCL offer a wide spectrum of services through a direct support service infrastructure – the widest in the country. With state of art Network operations centers, for delivery of managed network service and the setting up of the Remote Infrastructure management center, HCL Offers Range of High Availability Software & hardware services including operations & facility management. We provide 24/7 customer care support for our personal computer customer through our ?HCL Touch? service these services are accessible over, phone, mail, chat & SMS for the convenience of our customers. Our geographic network: ? ? ? ? ? ? Service locations catering to 4000 towns and cities. 505 HCL touch points owned by and manned by HCL. Network on regional response centres & contact centers. 3600+ direct services engineers on field. 33+ Years of experience in delivering ICT services. Network of test & repair centers backed by logistics chain that reaches to all corners of India. ? ? ? ? ? Certified test & repair centers with components level repair capability. 200 seat training centre with state of the art labs. Support base of over 3 million assets in 75000+ sites. Established escalation & management process. ISO 9001-2008 for ICT services & system integration delivery.

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WORKING CAPITAL MANAGEMENT OF HCL Infosystems Ltd
HCL’s core strengths make it a leader in the ICT market... ? HCL is among the largest ICT Companies in India with an India facing focus and over three decades of trusted relationship with our customers. ? ? Stands for quality and innovation a specialist IT technology player. A pioneer who has played a leading role in moulding the IT industry of India as we see it today. ? A range of technology solutions, domain expertise and products catering to business needs across the sectors of Telecom, BFSI, power, e-governance, infrastructure, health, education, media & entertainment, and retail over the last three years. ? HCL executed many large SI rollout projects in India including the single largest rollout of ERP licenses in the enterprises segment, one of the largest VOIP networks for the defence sector and the national Internet Backbone Infrastructure for Broadband Service. ? The HCL “Best Assured? stamps of quality that ensures that the best is deliver to our customers. ? Sustainable growth through an integrated environmentally friendly programs-HCL Ecosafe. ? One of the largest distribution and retail network, to market a range of IT & Digital lifestyle products. ? ? A network reaches out to 93000 retail outlets over 11000 plus towns. An unmatched services and support infrastructure that reached out to all corners of India. ? World class support services ranked No.1 Company in IT services as per DQ CSA 2009.

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WORKING CAPITAL MANAGEMENT OF HCL Infosystems Ltd
MILESTONES: -Hindustan computers limited is born. -First 4-Bit Micro Processor based scientific computer made by HCL labs. -Successfully ships in house designed micro- computers at the same time as apple. -Indigenously develops an RDBMS, a networking OS and client server architecture in the same period as global IT peers. -HCL launched country‘s first Desktop enterprise PC brand-Busy Bee. -HCL Frontline division setup to address the emerging market for home computers. -HCL launches HCL Beanstalk-India‘s First Multi-Media Home Computers. -HCL Infinet launches with the announcement of the national ISP/NLD policy. -HCL Infosystems becomes the first company to cross the 100k unit milestone in the Indian Desktop PC market. -HCL launches India‘s first window XP enabled Beanstalk media center PC. -HCL Infinet managed Nokia Care Centres to receive ISO 9001:2000 certification. -HCL Infosystems maintains No.1 positions in the Desktop PC segment for year 2003. -IDC India–Dataquest Customer Satisfaction Audit 2004 rates HCL Infosystems as number one in the desktop PC category. -IDC Rates HCL Infosystems as a Number One Desktop PC Company In India. -HCL Infosystems announces landmark initiative to increase PC penetration and creating computing for masses in India by launching sub 10k PC. -HCL Infosystems tie up with Apples for iPod distribution. -HCL Completes 30 years in India. -HCL Infosystems maintain its commercial Desktop PC leadership for the fifth consecutive Year. -HCL Infosystems showcases computer solutions for the rural markets in India. -HCL unveils India‘s first segment specific range of Notebooks branded-?HCL Leaptops‘. -HCL Commences production in its ISO 9001:2000 certified manufacturing facility in Rudarpur, Uttarkand. -HCL becomes the market leader in India for thin clients. -HCL Infosystems wins CNBC Awaaz consumer award for personal computers. -HCL announces ?HCL ecosafe‘ program to spearhead its environment protection Initiatives Launches a new range of eco-friendly Desktop & laptops. -HCL Launches Best Assured Campaign. -HCL Launches its innovative offering – Data centre in a box and wins Intel innovation Excellence award for the same.
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1976 1978 1983 1985 1993 1995 2000 2003

2004

2005

2006

2007

WORKING CAPITAL MANAGEMENT OF HCL Infosystems Ltd
-HCL awarded as one of the best 3 companies to work for in India by Business Today. -HCL unveils the future of personal computing- unveils next generation, ultra portable, sub Rs.14000/- laptops for the first time in India. -HCL Digitize chain becomes the most awarded retail chain in 2007-08. -HCL securities ltd a 100% subsidiary to provide system integration solutions for security &surveillance. -Launch of HCL Touch – pioneering initiatives in the Indian ICT sector for customer Care services. -Largest selling enterprise desktop brand for the seventh consecutive year. -Recognized as best employer in Indian IT industry 2009 by DQ-IDC survey 2009. -HCL rank No.1 Company in IT services as per DQ CSA 2009. -HCL wins prestigious Dun and Bradstreet Rolta Corporate Award for being leaders in the Computer Hardware and peripherals category. TOP-LEVEL RECOGNITIONSAWARDED TO THE COMPANY

2008

2009

OTHER

INCLUDED: ? ? Ranked among the top three best companies to work, across industry segments by Business Today January 2009. In a strong endorsement of his visionary strength‘s the company‘s founder chairman& CEO Mr. Ajai Chowdhry was facilitated by times ascent Asia pacific HR congress with the “CEO WITH HR ORIENTATION” Award during the global HR excellence was also ranked third in the power list of 75 most powerful brand

awards2008-09. He

builders of India and has been adjudged among India Inc‘s most powerful CEO‘S by The Economic Times?. ALLIANCES and PARTNERSHIPS: To provide world-class solutions and services to all our customers, HCL Infosystems have formed Alliances and Partnerships with leading IT companies worldwide. HCL Infosystems has alliances with global technology leaders like Intel, AMD, Microsoft, Bull, Toshiba, Nokia, Sun Microsystems, Ericsson, NVIDIA, SAP, Scansoft, SCO, EMC, Veritas, Citrix, CISCO, Oracle, Computer Associates, RedHat, Infocus, Duplo, Samsung and Novell.

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WORKING CAPITAL MANAGEMENT OF HCL Infosystems Ltd
These alliances on one hand give us access to best technology & products as well as enhancing our understanding of the latest in technology. On the other hand they enhance our product portfolio, and enable us to be one stop shop for our customers. DEPARTMENTS IN HCL INFOSYSTEM LTD: ? ? ? ? Production Department. Human resource Department Administrative Department Accounting Department

PRODUCTION DEPARTMENT: Production is the core functions of any business set up. No enterprise can survive in the absence of production. The wage bill, the administrative expenses and other overheads could only be paid when there is continuous production of the right quantity at right time through the best and cheapest means. Every society aims to maximize production from all the three sectors- the primary, secondary and the territory. Production in industrial establishment involves a number of steps which gives new shape to the raw material. In a broader sense Production includes the mental work of designing, planning, controlling, recording and accounting as well as the physical manipulation of material. All these functions become operative with the help of material movement, employment of workers and the operation of machines in a well defined manner. Each of these components has to coordinate with one another in such a way, so that the desired object of the production may be achieved with maximum efficiency. In HCL Infosystems ltd. There are various segment in the production process. They are as follows:Various departments in production process: ? ? ? ? ? PPC ( PRODUCTION PLANNING AND CONTROL) PROCUREMENT IQC (INCOMING QUALITY CONTROL) STORES FPL (FINAL PRODUCTION LINE)
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? ? ? ? QA (QUALITY ASSURANCE) PEG (PRODUCT/ PROCESS ENGINEERING GROUP) SHIPMENT LOGISTICS

PPC (PRODUCTION PLANNING AND CONTROL):This department will plan and control the requirement of the production activities. They set the target in order to achieve the goal. PROCUREMENT:They purchase the materials from the vendors to carry out the production process as per the directions given by the production planning and control department. IQC (INCOMING QUALITY CONTROL):It checks the incoming materials. If it satisfies they will send it to the stores department otherwise they will return back the raw materials to the concerned supplier. STORES:This department stores both the raw materials and finished goods. It sends out the materials and the finished products by FIFO (FIRST IN FIRST OUT) method by using color coding. And it is the physical storage of materials carried into the storeroom in a scientific manner with a view of saving them from all kind of damages. Proper storage of materials helps in minimizing production cost and providing efficient services. FPL (FINAL PRODUCTION LINE):This department carries out the assembling process. According to the instructions given by the NMO (NOIDA MANUFACTURING UNIT) production materials are used. It has some stages as follows:? ? ? DD/MDP – Disk Duplication/ Master Disk Preparation Assembling Testing flow
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QA (QUALITY ASSURANCE):After the productions process is over, all the products are sent to the QA(QUALITY ASSURANCE) department for the testing process. All processes in the manufacturing are aligned to this guiding objective. A strong emphasis of "Quality by Process" is ensured across all processes. The products manufactured here undergo stringent tests that ensures their ruggedness & durability , which may be deployed anywhere in India and may have to face severe conditions like - heat , humidity , rough transportation & handling .Our products undergo drop tests , hot & cold temperature chamber , client-site simulation tests , reliability tests et al . PEG (PRODUCT / PROCESS ENGINEERING GROUP):According to the customer satisfaction they design and redesign the product and present their views to the FPL. This is done / carried out in the production process. The Pondicherry plant has its own Product Engineering Group (PEG) and R&D teams constantly engaged in developing new products and solutions SHIPMENT:After the QA and inspection all the products are safely packed. And with the required document all the products are handed over to the logistics department. Computers are shipped to locations all over India with an extensive network of professional logistic support partners. There is also a Customer satisfaction cell, in plant, to take care of problems reported from field. LOGISTICS:The key role of this department is to hand over the finished goods to the customer through the messenger. They decide the quickest mode of transportation which is economically best. They enable faster and defect free delivery of the consignment to its customers.

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KEY OBJECTIVES: 1) To maximize the customer satisfaction by -improving product quality -reducing delivery cycle time -improving responsibilities -introducing new and competitive products 2) To maximize the shareholders benefit by continually -reducing the cost of operation -reducing inventory cost 3) To maximize the satisfaction of employees and to continually improve their competitiveness. 4) To contribute to the society at large by minimizing any environmental form due to our operation. 5) To maximize the mutual benefits out of our strategic partnership with suppliers. 6) To know about the Union Management Relations. 7) To know about the quality of supervision. 8) To specify the interaction of the work. Conclusion: The production is the transformation of inputs into goods and services. There are five input factors namely information, management, materials, land and labour, and capital are employed within a firm to create a mix of output (finished goods) goods and services. HUMAN RESOURCE DEPARTMENT: At HCL, Human Resource is considered amongst the company‘s most precious assets, this is why we have laid special emphasis on every aspect that helps in constant growth of our 5921 employees….. For the successful functioning of any business organization Finance, Machines, Materials, and Manpower resources are essential of these; HUMAN RESOURCE plays a vital role because of its distinctive character. It is the controlling authority and it fulfills the employees‘ requirements. Arrangement regarding the manpower is done by the HR department. All the formalities are legally carried
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out as per the company policy. Salary should be correctly and accurately processed. At HCL often they conduct recruitment programs, training and campus interviews in various places. HUMAN RESOURCES AND INDUSTRIAL RELATIONS: A pioneering and unique concept in the industry where HR follows the model of relationship management for internal customers. The relationship with the employees

continued to be cordial and peaceful. Attracting, retaining and motivating employees and creating an environment that nurtures them to deliver their best had been a constant challenge for the company. And directors wish to place a record the excellent cooperation and contribution made by the employees at all levels in the organization resulting in the continued growth of the company. HCL‘s People power is driven by a variety of stimulating factor, which includes:? ? ? ? ? Opportunity to work on different technologies with multi location exposure & latest technology. 80% of the top management has joined straight from the campus. Opportunities to move from technical to functional to general management roles Housing and asset building schemes for employees Involvement of employees in all decision- making concerning their welfare

The company introduced several new programmes aimed at HR development:? ? ? ? ? Performance management New career development programme HR relationship managers Applause Alumni connect

Going ahead, the company plans to strive continuously to further strengthen its HR systems to align them even more intricately with the ever-changing needs of the customers. ADMINISTRATIVE DEPARTMENT:A futuristic management team with in-depth experience and high level of expertise, successfully translating the company‘s vision into a game-changing strategy, is at the core of
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HCL‘s business model. Its primary responsibility in HCL is to expand company‘s capability to lead large, complex, global businesses. In HCL Major Parts of the activities in the organization are controlled by the administrative department. It is also known as service department. To fulfil the demands and needs of the employees and customers this department has a very dominant role in the organizations. All the contracts such as housekeeping, vendors, canteen etc. are done by preparing agreement and the value of the agreement is based on the consignment. It keeps the working environment clean and hygiene. The infrastructure of the company is properly maintained. It satisfies the employees by providing transportation, accommodation and other facilities such as bus facilities for the employees who are from long distance. All the registers are well maintained. It ensures that the working areas are clean at all time. Often notice boards are updated. Files and folders after use should be placed in the respective racks and arranged properly. And these above said works are purely carried out by the admin department. And thus it plays a very important role in the HCL. OBJECTIVES OF HR AND ADMIN DEPARTMENT, 1. The performance of man power in the company is evaluated in three ways: Quarterly Appraisal Probation and confirmations Annual appraisal

2. Recruitment within 60days from the date of man power approval, 3. Training: Technical training Skill based/ knowledge based training Technical training quality rating Skill based/ knowledge based quality training Feedback on quality of training secession conducted

4. Attendance: Absences- max 5% performance measure Late coming- max 5% performance measure

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5. Legal compliance: Full 100% of compliance to the calendar. These are the key objectives of the personnel and administrative department. TYPES AND TECHNIQUES OF TRAINING: Training is the application of knowledge with a specific and in a view. Throughout the training the trainees are given specific task which they have to follow to perform their operation as mentioned below. They various types of training given at HCL: ? ? ? ? ? ? ? ? On-the-job training Demonstration Job instruction training Vestibule training Apprenticeship Job rotation Role playing Case study

Objectives of manpower planning:The various objectives of man power planning are: ? ? ? ? ? Determination of future recruitment and selection needs. Assessment of future skill requirements. Determination of future training and management development dismissals. Control of wages and salary costs. Ensuring optimum utilization of human resources currently employed.

Fire, First Aid and Safety:The main goal of every organization is to ensure safety program and to raise the awareness to the employees. They have to work safety in the areas such as machine usage in the factory which can create hazardous situation. And they have to wear safety belts when working at heights. Regarding this the employees of the company have to follow certain rules and regulations. They areage 27

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a. All employees, apprentice, visitors, trainees, labours etc. should walk on the pedestrian line in the premises of the company regarding safety. b. No fast walking or running in the company premises because the employee and other members may think that fire has been caused. c. Alarm has been set in all the places. After hearing the alarm all the company members are supposed to leave their respective places and come outside the buildings. Logistics:The main role of this department is to handover the materials to the customer through messenger. They enable faster and defect free delivery of the consignment to its customers and decides which is the quickest mode of transportation of the goods and services which is economically best. This department updates physical shipment date and waybill in SAP. They segregate the invoices according to the permitted region. They check the delivery chellan, invoice and waybill. Material legal document like road permit, ED exemptions, customer invoices, transporting facilities etc. are dealt by the logistics department. The function like pending delivery and SDC report, transport bill passing is carried out. Objectives: ? ? ? ? ? Its main objectives are delivery dragging shipment and correct material delivery. In logistics there will only be mail communications This department will contain the (cycle time) in agreement base and fix the place rate also. Twice in a month the payment will be given to the transporter. The bills are compulsorily within 30days. The bill should be submitted 4times in every particular month to the Accounts department. Functions: ? ? ? ? ? Updation of physical shipment date and waybill in SAP Segregation of invoice SAP report Covering sheet Daily shipment report
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? ? ? Updation of delivery date and SDC received date In SAP Pending delivery and SDC report Transporter

Accounting Department: Accounting is an ancient art of which was followed mainly to record transactions of the business to satisfy the requirements imposed by the fiduciary relationship between the business and its owners as well as the third party connected with business credits, financial institutions, etc., it is the skeleton part of each and every business organization without which it is very difficult for the business organization to survive. However, the modern accounting technique is much more developed and scientific where they use accounting principles for decision making so that they can plan accordingly. The accounts department of the HCL Infosystems ltd, functions well so as to keep a systematic record of daily transactions. It maintains records of financial transactions to find out the profit and loss during the year and to know the financial status of the company, which helps them to make quick and correct decisions. Main Objectives: ? To monitor and effectively supervise the company‘s financial reporting process with a view to provide accurate, timely disclosure and ensure the integrity and quality of financial reporting and internal control. ? ? ? Done in smooth way without any corrective and corruption. Mobilizing of funds Monitoring of funds

The accounts department of HCL Infosystems ltd. Function so as to fulfill the following objectives: ? ? To help the management to analyze the financial status of the company so that they can take quick and correct decisions. To provide useful information to management debtors and creditors in taking decisions in future.

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? To obtain the result of the company so as to communicate them to the groups interested viz. Government shareholders, creditors and employers.

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WORKING CAPITAL MANAGEMENT AN OVERVIEW Working capital management is significant in financial management. It plays a vital role in keeping the wheel of the business running. Every business requires capital .without it can't be promoted. Investment decisions is concerned with investment in current assets and fixed assets .working capital plays a key role in a business enterprise just as the role of heart in human body. It acts as grease to run the wheels of fixed assets its effective provision can ensure the success of business while its inefficient management can lead not only to loss but also to the ultimate downfall of what otherwise might be considered as a promising concern. Efficiency of a business enterprise depends largely on its ability to its working capital .working capital management is one of the important facts of a firms overall financial management. For increasing shareholder's wealth a firm has to analyse the effect of fixed assets and current assets on its return and risk. Working capital management of current assets. The management of current assets on the basis of the following points: 1. Current assets are for short period while fixed assets are for more than one year 2. The large holding of current assets especially cash, strengthens liquidity position but also reduce overall profitability ,and to maintain an optimal level of liquidity and profitability , risk return trade-off is involved holding current assets 3. Only current assets can be adjusted with sales fluctuating in the short run. Thus the (inn has greater degree of flexibility in managing current assets. The management of current assets help affirm in building a good market reputation regarding its business and economic conditions. Now first let us discuss the paradigms of working capital management. NATURE OF WORKING CAPITAL Working capital management 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. The term current refers to those assets which in the ordinary course of business can be or will be converted into cash within one year without undergoing a diminution in value and without disrupting the operation of the firm, the major current assets

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are cash, marketable securities, accounts receivables and inventory, current liabilities are those liabilities, which are intended at their inception .to be paid in the ordinary course or business, within a year out of the current or the earning of the concern The basic current liabilities arc accounts payable, bills payable ,bank overdrafts and outstanding expense. The goal of working management is to manage the firm‘s assets and liabilities in such a way that a satisfactory level of working capital is maintained. This is because if the firms cannot maintain a satisfactory level of working capital, it is likely to become insolvent and may even be forced into bankruptcy. The current assets should be large enough to cover its current liabilities in order to ensure a reasonable margin of safety. Each of the short term sources of financing must be continuously managed to ensure that they are obtained and used in the way. MEANING AND DEFINITION: A part from investment in fixed assets, every enterprise has to arrange for adequate funds for meeting day (operations) expenses to keep it a colleen]. So originally speaking working capital refers to the flow funds. Necessary for working of enterprise however this is no agreement among the financial experts regarding the meaning of working capital. They define working capital in the following ways. ACCORDING TO MEAD MALLOT: -Working capital means current assets". ACCORDING TO 'WESTON AND BRIGHAM: "Working capital refers to a firm investment in short term assets, cash, short term securities, accounts receivable and inventories"

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TYPES OF WORKING CAPITAL:

WORKING CAPITAL

BASIS of CONCEPT

BASIS OF TIME

GROSS WORKING CAPITAL

NET WORKING CAPITAL

PERMANENT /FIXED WC

TEMPORARY / VARIABLE WC

REGULAR WC

REERVE WC

SEASONAL WC

SPECIAL WC

CONCEPT OF WORKING CAPITAL There are two concepts of working capital: 1. 2. Gross working capital Net working capital

The gross working capital is the capital invested in the total current assets of the enterprises current assets are those assets which can convert in to cash within a short period normally one accounting year. CONSTITUENTS OF CURRENT ASSETS 1. Cash in hand and cash at bank 2. Bills receivables 3. Sundry debtors 4. Short term loans and advances. 5. Inventories of stock as: a. Raw material b. Work in process c. Stores and spares
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d. Finished goods 6. Temporary investment of surplus funds. 7. 8. Prepaid expenses Accrued incomes.

9. Marketable securities. In HCL Infosystem ltd the current assets that considered are: ? ? ? ? ? Inventories Sundry debtors Cash & Bank Balance Loans& advance Other Current assets Considered goods: Deposits Lease and rental receivables Unbilled revenue

Deposits considered doubtful In a narrow sense, the term working capital refers to the networking. Net working capital is the excess of current assets over current liability, or, say: NET WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES. Net working capital can be positive or negative. When the current assets exceeds the current liabilities are more than the current assets. Current liabilities are those liabilities, which are intended to be paid in the ordinary course of business within a short period of normally one accounting year out of the current assets or the income business. CONSTITUENTS OF CURRENT LIABILITIES 1. Accrued or outstanding expenses. 2. Short term loans, advances and deposits. 3. Dividends payable. 4. Bank overdraft. 5. Provision for taxation, if it does not amt. to app. of profit.
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6. Bills payable. 7. Sundry creditors. In HCL Infosystem ltd the current liabilities that considered are: ? ? Acceptance Sundry creditors: ? ? Due to subsidiaries Due to micro and small enterprises Other than micro and small enterprises

Sundry deposits Interest accrued but not due: On secured loans On unsecured loans

?

Investor education and production fund: Unclaimed dividend

? ?

Advances from customer Deferred revenue

The gross working capital concept is financial or going concern concept whereas net working capital is an accounting concept of working capital. Both the concepts have their own merits. The gross concept is sometimes preferred to the concept of working capital for the following reasons: ? It enables the enterprise to provide correct amount of working capital at correct time.

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? ? Every management is more interested in total current assets with which it has to operate then the source from where it is made available. It take into consideration of the fact every increase in the funds of the enterprise would increase its working capital. This concept is also useful in determining the rate of return on investments in working capital. The net working capital concept, however, is also important for following reasons: It is qualitative concept, which indicates the firm‘s ability to meet to its operating expenses and short-term liabilities. It is an indicator of the financial soundness of enterprises. CLASSIFICATION OF WORKING CAPITAL Working capital may be classified in two ways: ? ? On the basis of concept. On the basis of time.

On the basis of concept working capital can be classified as gross working capital and net working capital. On the basis of time, working capital may be classified as: ? Permanent or fixed working capital. ? Temporary or variable working capital

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PERMANENT OR FIXED WORKING CAPITAL Permanent or fixed working capital is minimum amount which is required to ensure effective utilization of fixed facilities and for maintaining the circulation of current assets. Every firm has to maintain a minimum level of raw material, work- in-process, finished goods and cash balance. This minimum level of current assets is called permanent or fixed working capital as this part of working is permanently blocked in current assets. As the business grow the requirements of working capital also increases due to increase in current assets.

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TEMPORARY OR VARIABLE WORKING CAPITAL Temporary or variable working capital is the amount of working capital which is required to meet the seasonal demands and some special exigencies. Variable working capital can further be classified as seasonal working capital and special working capital. The capital required to meet the seasonal need 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 for conducting research, etc. Temporary working capital differs from permanent working capital in the sense that is required for short periods and cannot be permanently employed gainfully in the business.

IMPORTANCE OR ADVANTAGE OF ADEQUATE WORKING CAPITAL ? Solvency of the Business: Adequate working capital helps in maintaining the solvency of the business by providing uninterrupted of production. ? Goodwill: Sufficient amount of working capital enables a firm to make prompt payments and makes and maintain the goodwill.
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? Easy loans: Adequate working capital leads to high solvency and credit standing can arrange loans from banks and other on easy and favourable terms. ? Cash Discounts: Adequate working capital also enables a concern to avail cash discounts on the purchases and hence reduces cost. ? Regular Supply of Raw Material: Sufficient working capital ensures regular supply of raw material and continuous production. ? Regular Payment of Salaries, Wages and Other Day TO Day Commitments: It leads to the satisfaction of the employees and raises the morale of its employees, increases their efficiency, reduces wastage and costs and enhances production and profits. ? Exploitation of Favourable Market Conditions: If a firm is having adequate working capital then it can exploit the favourable market conditions such as purchasing its requirements in bulk when the prices are lower and holdings its inventories for higher prices. ? Ability to Face Crises: A concern can face the situation during the depression. ? Quick And Regular Return On Investments: Sufficient working capital enables a concern to pay quick and regular of dividends to its investors and gains confidence of the investors and can raise more funds in future. ? High Morale: Adequate working capital brings an environment of securities, confidence, high morale which results in overall efficiency in a business.

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EXCESS OR INADEQUATE WORKING CAPITAL Every business concern should have adequate amount of working capital to run its business operations. It should have neither redundant or excess working capital nor inadequate nor shortages of working capital. Both excess as well as short working capital positions are bad for any business. However, it is the inadequate working capital which is more dangerous from the point of view of the firm. DISADVANTAGES OF REDUNDANT OR EXCESSIVE WORKING CAPITAL 1. Excessive working capital means ideal funds which earn no profit for the firm and business cannot earn the required rate of return on its investments. 2. Redundant working capital leads to unnecessary purchasing and accumulation of inventories. 3. Excessive working capital implies excessive debtors and defective credit policy which causes higher incidence of bad debts. 4. It may reduce the overall efficiency of the business. 5. If a firm is having excessive working capital then the relations with banks and other financial institution may not be maintained. 6. Due to lower rate of return on investments, the values of shares may also fall. 7. The redundant working capital gives rise to speculative transactions DISADVANTAGES OF INADEQUATE WORKING CAPITAL Every business needs some amounts of working capital. The need for working capital arises due to the time gap between production and realization of cash from sales. There is an operating cycle involved in sales and realization of cash. There are time gaps in purchase of raw material and production; production and sales; and realization of cash. Thus working capital is needed for the following purposes: ? For the purpose of raw material, components and spares. ? To pay wages and salaries ? To incur day-to-day expenses and overload costs such as office expenses. ? To meet the selling costs as packing, advertising, etc. ? To provide credit facilities to the customer.
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? To maintain the inventories of the raw material, work-in-progress, stores and spares and finished stock. For studying the need of working capital in a business, one has to study the business under varying circumstances such as a new concern requires a lot of funds to meet its initial requirements such as promotion and formation etc. These expenses are called preliminary expenses and are capitalized. The amount needed for working capital depends upon the size of the company and ambitions of its promoters. Greater the size of the business unit, generally larger will be the requirements of the working capital. The requirement of the working capital goes on increasing with the growth and expensing of the business till it gains maturity. At maturity the amount of working capital required is called normal working capital. There are others factors also influence the need of working capital in a business. DETERMINANTS OF WORKING CAPITAL There are no set rules or formula to determine the working capital requirements of firms. A large number of factors, each having a different importance, influence working capital needs of firms. Also, the importance of factors changes for a firm over time. Therefore, an analysis of relevant factors should be made in order to determine total investment in working capital. The following is the description of factors which generally influence the working capital requirements of firms. 1. 2. 3. 4. 5. 6. 7. 8. 9. Nature of the industry. Demand of industry. Cash requirements. Nature of business. Manufacturing time. Volume of sales. Terms of purchase and sales. Inventory turnover. Business turnover.

10. Business cycle. 11. Current assets requirements. 12. Production cycle. 13. Credit control. 14. Inflation or price level changes.
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15. Profit planning and control. 16. Repayment ability. 17. Cash reserves. 18. Operational efficiency. 19. Change in technology. 20. Firm‘s finance and dividend policy. 21. Attitude towards risk.

Nature of Business: Working capital requirements of a firm are basically influenced by the nature of its business. Trading and financial firms have a very small investment in fixed assets, but require a large sum of money to be invested in working capital. Retail stores, for example, must carry large stocks of a variety of goods to satisfy varied and continuous demand of their customers. Some manufacturing business, such as tobacco manufacturers and construction firm, also have to invest substantially in working capital and a nominal amount in fixed assets. In contrast, public utilities have a very limited need for working capital and have to invest abundantly in fixed assets. Their working capital requirements are nominal because they may have only cash and supply services, not products. Thus, no funds will be tied up in debtors and stock (inventories). Working capital requires most of the manufacturing concerns to fall between the two extreme requirements of trading firms and public utilities. Such concerns have to make adequate investment in current assets depending upon the total assets structure and other variables. Sales and Demand Conditions: The working capital needs of a firm are related to its sales. It is difficult to precisely determine the relationship between volume of sales and working capital needs. In practice, current assets will have to be employed before growth takes place. It is, therefore, necessary to make advance planning of working capital for a growing firm on a continuous basis. A growing firm may need to invest funds in fixed assets in order to sustain its growing production and sales. This will, in turn, increase investment in current assets to support enlarged scale of operations. It should be realized that a growing firm needs funds continuously. It uses external sources as well as internal sources to meet increasing needs of
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funds. Such a firm faces further financial problems when it retains substantial portion of its profits. It would not be able to pay dividends to shareholders. It is, therefore, Imperative that proper planning be done by such companies to finance their increasing needs for working capital. Technology and Manufacturing Policy: The manufacturing cycle (or the inventory conversion cycle) comprises of the purchase and use of raw material the production of finished goods. Longer the manufacturing cycle, larger will be the firm working capital requirements. For example, the manufacturing cycle in the case of a boiler, depending on its size, may range between six to twenty- four months. On the other hand, the manufacturing cycle of products such as detergent powder, soaps, chocolate etc. may be a few hours. An extended manufacturing time span means a larger tie- up of funds in inventories. Thus, if there are alternative technologies of manufacturing a product, the technological process with the shortest manufacturing cycle may be chosen. Once a manufacturing technology has been selected, it should be ensured that manufacturing cycle is completed within the specified period. Credit Policy: The credit policy of the firm affects the working capital by influencing the level of debtors. The credit terms to be granted to customers may depend upon the norms of the industry to which the firm belongs. But a firm has the flexibility of shaping its credit policy within the constraint of industry norms and practices. The firm should be discretion in granting credit terms to its customers. Depending upon the individual case, different terms may be given to different customers. A liberal credit policy, without rating the creditworthiness of customers, will be detrimental to the firm and will create a problem of collections. A high collection period will mean tie- up of large funds in book debts. Slack collection procedures can increase the chance of bad debts.

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In order to ensure that unnecessary funds are not tied up in debtors, the firm should follow a rationalized credit policy based on the credit standing of customers and periodically review the creditworthiness of the exiting customers. The case of delayed payments should be thoroughly investigated. Availability of Credit: The working capital requirements of a firm are also affected by credit terms granted by its creditors. A firm will need less working capital if liberal credit terms are available to it. Similarly, the availability of credit from banks also influences the working capital needs of the firm. A firm which can get bank credit easily on favourable condition will operate with less working capital than a firm without such a facility. Operating Efficiency: The operating efficiency of the firm relates to the optimum utilization of resources at minimum costs. The firm will be effectively contributing in keeping the working capital investment at a lower level if it is efficient in controlling operating costs and utilizing current assets. The use of working capital is improved and pace of cash conversion cycle is accelerated with operating efficiency. Better utilization of resources improves profitability and, thus, helps in releasing the pressure on working capital. Although it may not be possible for a firm to control prices of materials or wages of labour, it can certainly ensure efficiency and effective use of its materials, labour and other resources. Price Level Changes: The increasing shifts in price level make functions of financial manager difficult. He should anticipate the effect of price level changes on working capital requirement of the firm. Generally, rising price levels will require a firm to maintain higher amount of working capital. Same levels of current assets will need increased investment when price are increasing. However, companies which can immediately revise their product price levels will not face a server working capital problem. Further, effects of increasing general price level will be felt differently by firm as individual price may move differently. It is possible that some companies may not be affected by rising price will be different for companies. Some

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will face no working capital problem, while working capital problems of other may be aggravated. MANAGEMENT OF WORKING CAPITAL Management of working capital is concerned with the problem that arises in attempting to manage the current assets, current liabilities. The basic goal of working capital management is to manage the current assets and current liabilities of a firm in such a way that a satisfactory level of working capital is maintained, i.e. it is neither adequate nor excessive as both the situations are bad for any firm. There should be no shortage of funds and also no working capital should be ideal. WORKING CAPITAL MANAGEMENT POLICES of a firm has a great on its probability, liquidity and structural health of the organization. So working capital management is three dimensional in nature as 1. It concerned with the formulation of policies with regard to profitability, liquidity and risk. 2. 3. It is concerned with the decision about the composition and level of current assets. It is concerned with the decision about the composition and level of current liabilities.

WORKING CAPITAL ANALYSIS As we know working capital is the life blood and the centre of a business. Adequate amount of working capital is very much essential for the smooth running of the business. And the most important part is the efficient management of working capital in right time. The liquidity position of the firm is totally effected by the management of working capital. So, a study of changes in the uses and sources of working capital is necessary to evaluate the efficiency with which the working capital is employed in a business. This involves the need of working capital analysis. The analysis of working capital can be conducted through a number of devices, such as: 1. 2. 3. Ratio analysis. Fund flow analysis. Budgeting.

WORKING CAPITAL CYCLE:The working capital requirement of a firm depends, to a great extent up on the operating cycle of the firm. The operating cycle may defined as the duration from the
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procurement of goods or raw materials and ending with sales realization. The length and nature of the operating cycle may differ from one firm to another depending up or the size and nature of the firm. In a treading concern there is a serious of activities starting from procurement of goods ending with realization of sales revenue. Similarly in case manufacturing concern. This serious start form procurement of raw material and ending with the sales realization of finished foods. In both the cases however there is a time gap between the happening of the first event and the happening of last event. This time gap is called operating cycle. Thus the operating cycle of a firm consists of time required for the completion of chronological sequence of sonic or all of the following. ? Procurement of raw material and services. ? Conversion of raw material in the work in progress. ? Conversion of work in progress in to finished goods. ? Sales of finished goods. (Cash or credit). ? Conversion of receivable into cash. The firm is after required to extend credit facilities to customers. The finished goods must be kept in store to take care of the orders and minimum cash balance must be maintained. It must also have minimum of raw material to have smooth and uninterrupted production process. So in order to have a proper and smooth running of the business activities, the firm must make investment in all these current assets. This requirement of funds depend up on the operating cycle period of the firm and also denoted as the working capital needs of the firm. OPERATING CYCLE PERIOD:The length of time duration of the operating cycle of any firm can be defined as the sum of its inventory conversion period and the receivable conversion period. 1. INVENTORY CONVERSION PERIOD:It is the time required for the conversion of raw material in to finished goods sales. In a manufacturing concern the ICP is consisting of raw materials conversion period (RMCP), work in progress conversion period (WPCP), and the finished goods conversion period (MCP). The RIMCP refers to the period for which the raw material is generally kept in store
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before is issued to the production department. The WPCP refers to the period for which the raw material remains in the production process before it is taken out as a finished unit. The MCP refers to the period for which finished units remain in stores before being sold to the customers. 2. RECEIVABLES CONVERSION PERIOD: (RCP) It is the time required to convert the credit sales in to cash realization. It refers to the period between the occurrence of credit sales and collection of debtors. The total of ICP and RCP is also known as total operating cycle period (TOCP). The firm might be getting sonic credit facilities from the supplier of raw material, wage earners etc. this period for which the payment it these parties are deferred or delayed is known as deferral period. The net operating cycle of a firm is arrived at by deducting the deferral period from total operating cycle period. Thus NOC = TOCP-D = ICP+RCP- DP OPERATING CYCLE The duration of time required for completing the following sequences of events in case of manufacturing firm s called the operating cycle. 1. Conversion of cash into raw material. 2. Conversion of raw material into work in progress. 3. Conversion of work in progress into finished goods. 4. Conversion of finished goods into debtors & bills receivable through sale. 5. Conversion of debtors & bills receivable into cash.

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CASH

ACCOUNTS RECIEVABLE

RAW MATERIAL

FINISHED GOODS

WIP

The duration of the operating cycle for the purpose of estimating working capital requirement is equalvalent to the sum of duration of each of these tables less the credit period allowed by the suppliers of the firm. In the form of an equation, the operating cycle process can be expressed. As follows: Operating cycle = R + W + F + D C R = Raw material storage period W = Work in progress holding period F = Finished goods storage period D = Debtors collection period C = Credit period availed CHOOSING THE WORKING CAPITAL POLICY:The overall working capital policy adopted by the firm may broadly:1. Conservative 2. Moderate 3. Aggressive

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CONSERVATIVE: A conservative overall working capital policy means that the firm chooses conservative current assets policy along with conservative current assets financing policy.

MODERATE: A moderate overall working capital policy reflects a combination of a conservative current assets policy and aggressive current assets financing policy or a combination of an aggressive current assets policy and conservative current assets financing policy.

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AGGRESSIVE: An aggressive overall working capital consists of an aggressive current assets policy and aggressive current assets financing policy.

FINANCING OF WORKING CAPITAL:Normally, financing arrangements are planned for a combination of needs including capital expenditure and working capital investment the assessment of sources of funds from a package and rarely will be possible to concept up to a particular shows to a specific application or use at the same time financing manager does make an assessment of the investment needs as well as current assets and decider an a proper mix of long and short term funds. Taking note of the internal generation of funds for 56 &57 the period in question be decisions on the extent to which the firm would resort to issue of share or long short-term borrowing to mobile the required sources. Typically the current assets of a firm are supported by the combination of long term and short term sources of financing long term sources of finance are equity, preference term loans and debentures which primarily are fixed assets and secondarily provide working capital margin. Where the commitments are certain but cash flows are not clearly predictable, it would Re to cut down drastically the number and extent of short term debts to manageable levels and prefer longer maturity schedules for debts. Short term debts can take care of the seasonal needs of the organization even here to take care of vagaries in cash flow; a part of the funds required may be obtained from sources with longer maturity schedules of the debts.
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Thus usually permanent and long-term finance is used to finance the permanent requirements or fixed assets and the net permanent current assets and an apart of the reasonable short term needs. The important sources of finance which more or less exclusively support current assets are: 1. Trade credit 2. Working capital advances by commercial bank 3. Public corporate deposits 4. Inter corporate deposits 5. Short term loans from financial institutions 6. Rights debentures for working capital. 7. Emerging sources commercial paper and factoring Of all the above the most significant sources of working capital finance are trade credit and bank borrowings, after trade credit bank borrowing are the next important sources of financing working capital requirements of firms in India. T3111011 committee has suggested guidelines for the ratio allocation and optimum use of the bank credit for the working capital requirement.

TANDON COMMITTEE RECOMNIENTIONS:1. The borrowers should indicate the likely demand for credit. For this purpose, he should draw operating plans for the ensuring year and supply them bankers. This procedure will facilitate credit planning at the bankers credit needs in a realistic manner and the periodic follow up during the ensuring year 2. The bankers should finance only the genuine production needs of the borrower. The borrower should maintain the reasonable levels of the investor and receivable. He should hold just enough to carry on his targets production. Efficient management of resources should. Therefore be ensured to eliminate slow moving and flabby inventories.

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3. The working capital needs of the borrower cannot be entirely financed by the bankers. They will finance only a reasonable part for the remaining borrower should depend upon his own funds, generated internally and externally. As per the recommendations of Tandon Committee, the corporates should be discouraged from accumulating too much of stocks of current assets and should move towards very lean inventories and receivable levels. The committee even suggested the maximum levels of Raw Material, Stock-in-process and Finished Goods which a corporate operating in an industry should be allowed to accumulate. These levels were termed as inventory and receivable norms. Depending on the size of credit required, the funding of these current assets (working capital needs) of the corporates could be met by one of the following methods: FIRST METHOD OF LENDING: Banks can work out the working capital gap, i.e. total current assets less current liabilities other than bank borrowings (called Maximum Permissible Bank Finance or MPBF) and finance a maximum of 75 per cent of the gap; the balance to come out of longterm funds, i.e., owned funds and term borrowings. This approach was considered suitable only for very small borrowers i.e. where the requirements of credit were less than Rs.10 lacs. SECOND METHOD OF LENDING: Under this method, it was thought that the borrower should provide for a minimum of 25% of total current assets out of long-term funds i.e., owned funds plus term borrowings. A certain level of credit for purchases and other current liabilities will be available to fund the build-up of current assets and the bank will provide the balance (MPBF). Consequently, total current liabilities inclusive of bank borrowings could not exceed 75% of current assets. RBI stipulated that the working capital needs of all borrowers enjoying fund based credit facilities of more than Rs. 10 lacs should be appraised (calculated) under this method. THIRD METHOD OF LENDING: Under this method, the borrower's contribution from long term funds will be to the extent of the entire CORE CURRENT ASSETS, which has been defined by the Study
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Group as representing the absolute minimum level of raw materials, process stock, finished goods and stores which are in the pipeline to ensure continuity of production and a minimum of 25% of the balance current assets should be financed out of the long term funds plus term borrowings

CHORE COMMITTEE RECOMMENDATIONS:1. Borrowers should submit quarterly projection of cash credit banks. 2. The banks while assessing the credit requirements from borrowers should fix separate limits whereas feasible. 3. As far as possible the borrowers should be discouraged for approaching the bank frequently limitation in excess of sanction limits. 4. Suitable provision should be made for charging rate of interest in even of any defaults in the timely repayment of working capital loan. 5. REQUIREMENTS OF FUNDS Fund requirements of the company

Fixed Capital
Preliminary Expenses

Working Capital
Raw Material

Purcase of Fixed Assets

Inventories

Fixed working capital

Goods in process

Establishment work exp.

others

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Every company requires funds for investing in two types of capital i.e. fixed capital, which requires long-term funds, and working capital, which requires short-term funds. SOURCES OF WORKING CAPITAL SOURCES OF WORKING CAPITAL

Long-term source (Fixed working capital) a) Loan from financial institution b) Floating of Debentures c) Accepting public deposits d) Issue of shares

Short-term source (Temporary working capital) a) Factoring b) Bill discounting c) Bank overdraft d) Trade credit

If you have insufficient working capital and try to increase sales, you can easily over-stretch the financial resources of the business. This is called overtrading. Early warning signs include: ? Pressure on existing cash ? Exceptional cash generating activities e.g. offering high discounts for Early cash payment ? Bank overdraft exceeds authorized limit ? Seeking greater overdrafts or lines of credit ? Part-paying suppliers or other creditors ? Paying bills in cash to secure additional supplies ? Management pre-occupation with surviving rather than managing

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? Frequent short-term emergency requests to the bank (to help pay wages, pending receipt of a cheque). 3D NATURE OF WORKING CAPITAL MANAGEMENT ? ? ? DIMENSION I PROFITABILITY, RISK, & LIQUIDITY DIMENSION II COMPOSITION & LEVEL OF CA DIMENSION III COMPOSITION & LEVEL OF CL

TIME & MONEY CONCEPTS IN WORKING CAPITAL CYCLE Each component of working capital (namely inventory, receivables and payables) has two dimensions ........TIME ......... and MONEY, when it comes to managing working capital

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RATIO ANALYSIS:Ratio analysis is the process of determining and presenting the relationship of items and group of items in the statements. According to Batty J. Management Accounting ?Ratio can assist management in its basic functions of forecasting, planning coordination, control and communication?. It is helpful to know about the liquidity, solvency, capital structure and profitability of an organization. It is helpful tool to aid in applying judgement, otherwise complex situations. Ratio analysis can represent following three methods: Ratio may be expressed in the following three ways: 1. Pure Ratio or Simple Ratio:- It is expressed by the simple division of one number by another. For example, if the current assets of a business are Rs. 200000 and its current liabilities are Rs. 100000, the ratio of ?Current assets to current liabilities‘ will be 2:1. 2. ?Rate‘ or ?So Many Times:- In this type , it is calculated how many times a figure is, in comparison to another figure. For example , if a firm‘s credit sales during the year are Rs. 200000 and its debtors at the end of the year are Rs. 40000 , its Debtors Turnover Ratio is 200000/40000 = 5 times. It shows that the credit sales are 5 times in comparison to debtors. 3. Percentage:- In this type, the relation between two figures is expressed in hundredth. For example, if a firm‘s capital is Rs.1000000 and its profit is Rs.200000 the ratio of profit capital, in term of percentage, is 200000/1000000*100 = 20% Working Capital Ratio: 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.

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1. CURRENT RATIO : This ratio is used to assess the firm‘s ability to meet its current liabilities. The relationship of current assets to current liabilities is known as current ratio. The ratio is calculated as: Current Assets Current Ratio = ———————— Current Liabilities Current Assets are those assets, which are easily convertible into cash within one year. This includes cash in hand, cash at bank, sundry debtors, bills receivable, short term investment or marketable securities, stock and prepaid expenses. Current Liabilities are those liabilities which are payable within one year. This includes bank overdraft, sundry creditors, bills payable and outstanding expenses. 2. LIQUID RATIO This ratio is used to assess the firm‘s short term liquidity. The relationship of liquid assets to current liabilities is known as liquid ratio. It is otherwise called as Quick ratio or Acid Test ratio. The ratio is calculated as: Liquid Assets Liquid Ratio = ———————— Current Liabilities Liquid assets means current assets less stock and prepaid expenses. 3. ABSOLUTE LIQUID RATIO It is a modified form of liquid ratio. The relationship of absolute liquid assets to liquid liabilities is known as absolute liquid ratio. This ratio is also called as ?Super Quick Ratio‘. The ratio is calculated as: Absolute Liquid Assets Absolute Liquid Ratio = ———————–—— Liquid Liabilities Absolute liquid assets mean cash, bank and short term investments. Liquid liabilities mean current liabilities less bank overdraft.

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Absolute Liquid Assets = Cash + Bank + Short term investments Liquid Liabilities = Current liabilities –– Bank overdraft 4. WORKING CAPITAL TURNOVER RATIO: Working capital ratio measures the effective utilization of working capital. It also measures the smooth running of business or otherwise. The ratio establishes relationship between cost of sales and working capital. Working capital turnover ratio is calculated with help of the following formula. Formula: Working Capital turnover ratio = Net working Capital Sales/cost of Sales _______________ Net working Capital

= Current assets – Current liabilities

Higher sales in comparison to working capital indicate overtrading and lower sales in comparison to working capital indicate under trading. A higher ratio is the indication of lower investment of working capital and more profit. 5. DEBT EQUITY RATIO This ratio helps to ascertain the soundness of the long term financial position of the concern. It indicates the proportion between total long term debt and shareholders‘ funds. This also indicates the extent to which the firm depends upon outsiders for its existence. The ratio is calculated as: Total long term Debt Debt-Equity Ratio = ———————— Shareholders‘ funds Total long term debt includes Debentures, long term loans from banks and financial institutions. Shareholders’ funds include Equity share capital, Preference share capital, Reserves and surplus. 6. DEBTORS TURNOVER RATIO: This establishes the relationship between credit sales and average accounts receivable. Debtor‘s turnover ratio indicates the efficiency of the business concern towards the collection of amount due from debtors.
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The ratio is calculated as: Credit Sales Debtors turnover Ratio = ———————————— Average Accounts Receivable Accounts receivable includes sundry debtors and bills receivable. Opening (debtors + bills receivable) + Closing (debtors + bills receivable) Average accounts receivable = ————————————— 2 In case credit sales is not given, total sales can be taken as credit 7. STOCK TURNOVER RATIO: This ratio is otherwise called as inventory turnover ratio. It indicates whether stock has been efficiently used or not. It establishes a relationship between the cost of goods sold during a particular period and the average amount of stock in the concern. The ratio is calculated as: Cost of goods sold Stock turnover ratio = ———————— Average stock Opening stock + closing stock Average stock = ————————————— 2 If information to calculate average stock is not given then closing stock may be taken as average stock.

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Statement of working capital requirement (Rs in Crores) 2006 Particulars Current assets: Inventories Sundry debtors Cash & Bank Balance Other Current assets Loans & advance 469.61 703.30 214.92 97.25 55.49 Amount (Rs) Amount (Rs)

Total Current assets (a) Less: Current Liabilities: Current liability Provisions Total Current liabilities (b) Net Working capital (a-b) Add : Contingency

1542.57

1542.57

1086.70 56.14 1142.84 1142.84 399.73 10.25

Average working capital Required

409.98

INTERPRETATION:
The value of the current asset should be sufficient to meet out the current liabilities here the current assets Rs.1542.57 are more than the current liabilities Rs.1142.84. the net working capital for this year is Rs.409.98. This exhibits that the company is able to meet out the expenses in the year 2006.
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Statement of working capital requirement (Rs in Crores) 2007 Particulars Current assets: Inventories Sundry debtors Cash & Bank Balance Other Current assets Loans& advance 791.88 1005.23 197.63 97.95 67.86 Amount (Rs) Amount (Rs)

Total Current assets (a) Less: Current Liabilities: Current liability Provisions Total Current liabilities (b) Net Working capital (a-b) add : Contingency

2160.53

2160.53

1394.41 80.88 1475.29 1475.29 685.24 27.74

Average working capital Required

712.98

INTERPRETATION:
In the year 2007 the net working capital amount was Rs.712.98 the total current asset is 2160.53 and the current liabilities is 1475.29 here the working capital was increased when compared to the previous year. It shows that company was in the good reputations.

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Statement of working capital requirement (Rs in Crores) 2008 Particulars Current assets: Inventories Sundry debtors Cash & Bank Balance Other Current assets Loans& advance 898.53 1248.08 819.20 95.20 143.51 Amount (Rs) Amount (Rs)

Total Current assets (a) Less: Current Liabilities: Current liability Provisions Total Current liabilities (b) Net Working capital (a-b) add : Contingency

2704.52

2704.52

1643.36 69.15 1718.51 1718.51 992.01 33.29

Average working capital Required

1025.30

INTERPRETATION:
In the year 2008 the table shows that the net working capital is Rs.1025.30 current assets value is Rs. 2704.52 and the current liabilities are Rs. 1718.51. When comparing to the past years the table shows the increasing trends in the net working capital requirement.

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Statement of working capital requirement (Rs in Crores) 2009 Particulars Current assets: Inventories Sundry debtors Cash & Bank Balance Other Current assets Loans& advance 889.09 1506.31 210.07 104.68 201.44 Amount (Rs) Amount (Rs)

Total Current assets (a) Less: Current Liabilities: Current liability Provisions Total Current liabilities (b) Net Working capital (a-b) add : Contingency

2911.39

2911.39

1933.40 78.33 2013.73 2013.73 897.56 43.39

Average working capital Required

941.25

INTERPRETATION:
In the year 2009 the net working capital requirement was lesser than the previous year. The net working capital Rs.941.25 current assets are Rs.2911.39 and the current liabilities are Rs. 2013.73. Company having effective control over the current assets.

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Statement of working capital requirement (Rs in Crores) 2010 Particulars Current assets: Inventories Sundry debtors Cash & Bank Balance Other Current assets Loans& advance 839.57 1967.31 300.19 252.51 254.99 Amount (Rs) Amount (Rs)

Total Current assets (a) Less: Current Liabilities: Current liability Provisions Total Current liabilities (b) Net Working capital (a-b) add : Contingency

3614.57

3614.57

2227.26 128.57 2355.83 2355.83 1258.74 53.80

Average working capital Required

1312.54

INTERPRETATION:
In the year 2010 again the working capital requirement was increased as compared with the past years this shows the high amount of net working capital requirement. Amount of net working capital is Rs. 1312.54 the total current assets Rs. 3614.57 and the current

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liabilities are Rs. 2355.83. in the five years the company showing the effective control over the working capital management. Net working capital for the period from 2005-2006 to 2009-2010 Year 2005-06 2006-07 2007-08 2008-09 2009-10 Net working capital (Rs) 409.98 712.98 1025.3 941.25 1312.54

Net working capital
1400 1200 1000 800 600 400 200 0 2005-06 2006-07 2007-08 2008-09 2009-10 409.98 712.98 1025.3 941.25 net working capital 1312.54

INTERPRETATION:
The net working capital is the difference of current assets and current liabilities. Here in HCL Infosystem ltd all the years the working capital required was keep on increasing in the other sense showing increasing trend. The firm was financially sound in its position. Current assets are in the good position to meet out the current liabilities.

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CURRENT RATIO:
Current ratio may be defined as the relationship between current assets and current liabilities. It is the most common ratio for measuring liquidity. It is calculated by dividing current assets by current liabilities Current Assets Current Ratio = ———————— Current Liabilities

Components of current assets = Inventories, Sundry debtors, Cash & Bank Balance , Other Current assets, Loans& advance Current ratio for period from 2005-2006 to 2009-2010 Year 2005-06 2006-07 2007-08 2008-09 2009-10 Average current asset 1542.57 2160.53 2704.52 2911.59 3614.57 current liabilities 1142.84 1475.29 1712.51 2013.73 2355.83 Ratio 1.35 1.46 1.58 1.45 1.53 1.47

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Current Ratio
1.6 1.55 1.5 1.45 1.4 1.35 1.3 1.25 1.2 2005-06 2006-07 2007-08 2008-09 2009-10 1.35 1.46 1.45 Ratio 1.58 1.53

Industrial ratio that has been extracted from the prowess that shows average current ratio for the hardware companies is1.51 for the past five years. In HCL Infosystem ltd the average current ratio was 1.47 this shows that the company near to the industrial ratio position.

INTERPRETATION:
The ratio reflects the financial stability of the enterprise the standard o the normal ratio is 2:1. From the chart it is clear that the company was sound in the financial position. In 2005-06, shows current ratio as 1.35, 2006-07 the current ratio is 1.46, 2007-08 the current ratio is 1.58, 2008-09 the current ratio is 1.45; 2009-10 the current ratio is 1.53. In the year 2007-08 the current ratio is increased. In HCL Infosystem ltd it shows the company have lower than standard ratio. But it sufficient to meet out company financial needs. So the company is having good financial position.

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LIQUID RATIO:
The term liquidity refers to the ability of a firm to pay its short-term obligations as and when they become due. The term quick assets or liquid assets refer current assets, which can be converted into cash immediately. It comprises all current assets except stock and prepaid expenses. The ratio is determined by dividing quick assets by quick liabilities. Liquid Assets Liquid Ratio = ———————— Current Liabilities Components of liquid asset = current asset- inventories. Liquid ratio for period from 2005-2006 to 2009-2010 Year 2005-06 2006-07 2007-08 2008-09 2009-10 Average Liquid assets 1072.96 1368.65 1805.99 2022.5 2775 Current liabilities 1142.84 1475.29 1712.51 2013.73 2355.83 Ratio 0.94 0.93 1.05 1 1.18 1.02

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Liquid Ratio
1.4 1.2 1 0.8 0.6 0.4 0.2 0 2005-06 2006-07 2007-08 2008-09 2009-10 Ratio 1.05 0.94 0.93 1 1.18

Industrial ratio that has been extracted from the prowess that shows average liquid ratio for the hardware companies is 0.80 for the past five years. In HCL Infosystem ltd the average liquid ratio was 1.02 this shows that the company ratio position is higher than the average of the whole industrial ratio.

INTERPRETATION:
The ratio reflects the financial stability of the enterprise. The standard ratio is 1:1. Liquid assets minus stock. By analyzing the five years data it clear that the company is improving its liquid assets and it is reducing its assets into its investment on stock year by year. The ratio of 0.94, 093, 1.05, 1 and 1.18 for the year 2005-06, 2006-07, 2007-08, 200809 and 2009-10.During the years 2005-2007 it was below a standard ratio1:1 in HCL Infosystem ltd. But from the year 2008-2010 shows an increasing trend. So the company is sufficient to meet it current liabilities.

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CASH POSITION RATIO:
It is a modified form of liquid ratio. The relationship of absolute liquid assets to liquid liabilities is known as absolute liquid ratio or ?Super Quick Ratio‘. The ratio is calculated when liquidity is highly restricted in the terms of cash and cash equivalents. This ratio measures liquidity in terms of cash and near cash items and short term current liabilities. This ratio is more rigorous measure of the firm liquidity position. Cash position ratio was calculated with the help of the formula

Absolute Liquid Assets Absolute Liquid Ratio = ———————–—— Liquid Liabilities Components of absolute liquid assets = cash and bank balance + marketable securities

Absolute liquid ratio for the Period from 2005-06 to 2009-10 Year 2005-06 2006-07 2007-08 2008-09 2009-10 Average Absolute Liquid assets 214.92 197.65 319.2 210.07 300.19 Liquid liabilities 1142.84 1475.29 1712.51 2013.73 2355.83 Ratio 0.19 0.13 0.12 0.1 0.13 0.13

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Absolute liquid Ratio
0.2 0.18 0.16 0.14 0.12 0.1 0.08 0.06 0.04 0.02 0 2005-06 2006-07 2007-08 2008-09 2009-10 0.13 0.12 0.1 0.13 Ratio 0.19

INTERPRETATION:
The standard ratio for cash position ratio is 0.75:1in HCL Infosystem ltd. The ratio of 0.19, 0.13, 0.12, 0.10 and 0.13 for the year 2005-06, 2006-07, 2007-08, 2008-09 and 200910. A higher rtio indicates the greater risk and lower safety to the owners. The ratio exibits the cash and bank balance of the company. The cash position ratio have some fluctuations in the past five years. It was decreased from the year 2006 to 2009. But in the year it was increased to 0.13.

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DEBT EQUITY RATIO:
This ratio helps to ascertain the soundness of the long term financial position of the concern. It indicates the proportion between total long term debt and shareholders‘ funds. This also indicates the extent to which the firm depends upon outsiders for its existence. The ratio is calculated as: Debt-Equity Ratio = Total long term Debt ———————— Shareholders‘ funds

Components of total long term Debt = loans and financial obligations

Debt Equity Ratio the period from 2005-06 to 2009-10 Year 2005-06 2006-07 2007-08 2008-09 2009-10 Average Total long term debt 95.4 248.37 361.24 226.85 520.59 Shareholders fund 697.68 859.68 1016.19 1121.9 1892.67 Ratio 0.14 0.29 0.36 0.2 0.28 0.25

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Debt equity Ratio
0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2005-06 2006-07 2007-08 2008-09 2009-10 0.14 0.2 Ratio 0.29 0.36 0.28

Industrial ratio that has been extracted from the prowess that shows average liquid ratio for the hardware companies is 1.072 for the past five years. In HCL Infosystem ltd the average liquid ratio was 0.25 this shows that the company near ratio position is very lesser than the industrial ratio because it is acquiring its own funds.

INTERPRETATION:
When a company has lower debt equity ratio, it means that company is utilizing its own funds and reserves rather than takings loans from outsiders. The ratio eposes the longterm solvency position of the company. The above table presents the Debt Equity Ratio of the firm for the last five year. The debt equity ratio in HCL Infosystem ltd 0.14, 0.29, 0.36, 0.20 and 0.28 for the year 2005-06, 2006-07, 2007-08, 2008-09 and 2009-10. The debt is more in 2007-08 and 2009-10 periods. But debt equity ratios shows that the firm was using its own funds as compared to the borrowings.

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STOCK TURNOVER RATIO:
This ratio is otherwise called as inventory turnover ratio or stock velocity ratio. It indicates whether stock has been efficiently used or not. It establishes a relationship between the cost of goods sold during a particular period and the average amount of stock in the concern. It indicates the number of times the inventory is turned over during a particular accounting period. Cost of goods sold Stock turnover ratio = ———————— Average stock Opening stock + closing stock Average stock = ————————————— 2 Stock turnover Ratio the period from 2005-06 to 2009-10 Year Cost of goods sold 10941.89 10794.8 10587.98 10799.54 10587.98 Average Stock Ratio

2005-06 2006-07 2007-08 2008-09 2009-10 Average

409.5 630.75 845.21 893.81 874.33

26.72 17.11 12.53 12.08 12.11 16.11

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Stock turnover Ratio
30 25 20 17.11 15 12.53 10 5 0 2005-06 2006-07 2007-08 2008-09 2009-10 12.08 12.11 Ratio 26.72

INTERPRETATION:
This ratio is helpful to evaluate the review of inventory policy. The Inventory turnover ratios in HCL Infosystem ltd for 2006-2007, 2007-2008, 2008-2009 and 2009-2010 are 25.86, 17.11, 13.48, 12.49 and 12.51 times respectively. This ratio indicates whether investment in stock is within proper limit or not. Here the ratio indicates that the company selling the stock in the correct time intervals. The company was maintaining satisfactory control over the stocks of the company.

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WORKING CAPITAL TURNOVER RATIO:
This ratio establishes the relationship between the sales and working capital. Working capital ratio measures the effective utilization of working capital. It also measures the smooth running of business. A higher in comparison to working capital indicates ?over trading? and a lower sale in comparison to working capital indicates ?under trading?. A higher ratio is the indication of lower investments of working capital and vice versa. Sales Working turnover ratio = Net Working Capital Components of sales in hcl = gross business income – exercise duty

Working capital Turnover Ratio for the period from 2005-06 to 2009-10 year sales net working capital ratio 409.98 712.98 1025.3 941.25 1312.54 Ratio

2005-06 2006-07 2007-08 2008-09 2009-10 Average

11402.16 11721.79 12489.36 12289.54 12114.44

27.81 16.44 12.18 13.06 9.23 15.74

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working capital turnoverRatio
30.00 27.81 25.00 20.00 15.00 10.00 5.00 0.00 2005-06 2006-07 2007-08 2008-09 2009-10 16.44 12.18 13.06 9.23 Ratio

INTERPRETATION:
The working capital ratio measures the smooth running of business. This ratio indicates whether the investments in current assets have been properly utilized. In the other words it shows the relationship between sales and the working capital. Higher the ratio is the investment in working capital and higher is the profitability. The working capital turnover ratios in HCL Infosystem ltd at 9.06, 13.05, 12.7, 17.9 and 15.27 on 2005-2006, 2006-2007, 2007-2008 2008-2009 and 2009-2010 respectively.

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DEBTOR TURNOVER RATIO:
Debtor turnover ratio is also called as receivables turnover ratio or Debtors velocity. A business concern generally adopts different methods of sales. Debtor Turnover ratio measure the number of times the receivables are rotated in a year time of sales. The ratio indicates the efficiency of credit collection and the efficiency of credit policy.

Debtor turnover ratio =
Components sales in hcl = gross business income – exercise duty Debtor Turnover Ratio the period from 2005-06 to 2009-10 Year 2005-06 2006-07 2007-08 2008-09 2009-10 Average Sales 11402.16 11721.79 12489.36 12289.54 12114.44 Average Debtors 618.85 855.26 1126.65 1377.19 3473.62 Ratio 18.42 13.71 11.09 8.92 3.49 11.126

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Debtors turnover Ratio
20 18 16 14 12 10 8 6 4 2 0 2005-06 2006-07 2007-08 2008-09 2009-10 3.49 13.71 11.09 8.92 Ratio 18.42

INTERPRETATION:
This ratio is helpful in determining the operational efficiency of business concern and the effectiveness of its credit policy. The Debtor turnover ratio in HCL Infosystem ltd for 2005-2006, 2006-2007, 2007-2008, 2008-2009 and 2009-2010 are 18.42, 13.71, 11.09, 8.9, and 3.42 times respectively. Year by year debtor‘s turnover ratio shows the declining trend. The quality of the debtors is in the good position.

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FINDINGS AND CONCLUSIONS:
HCL Infosystem ltd indicates the good financial position in the company shown by the ratio and the working capital requirement calculation. The company was maintaining good level of current asset. The cash position also in the better position.

FINDINGS:
? ? ? ? The net working capital of this company is in a healthy trend in the study of periods from 2006-2010 and especially in the year 2010 it is high. Here in all the years the working capital required was keep on increasing in the other sense showing increasing trend. The firm was financially sound in its position. Current assets are in the good position to meet out the current liabilities. In general the current ratio 2:1 indicate the sound liquidity position of the company in the HCL Infosystem ltd it is less than the standard but it is showing increasing trend and the company is financially sound. ? The standard of the liquid ratio is 1:1. whereas the liquid ratio of this company is increasing gradually especially it is higher in the year 2010 when compared to the previous years. ? The liquid ratio exibits the cash and bank balance of the company. The cash position ratio have some fluctuations in the past five years. It was decreased from the year 2006 to 2009. But in the year it was increased to 0.13. ? The debt equity ratio of the company shows the source of fund which it borrows but here the company was using its own fund. Lesser amount only borrowed from the outside. ? ? The stock turnover ratio shows high range in the year 2006. After that company shows the declining trend but the range of the ratio was maintained at the proper level. Here this ratio indicates that the company selling the stock in the correct time intervals. The company was maintaining satisfactory control over the stocks of the company.

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? The debtors turnover ratio it indicates the HCL Infosystem ltd operational efficiency in the good control. The sales of the company increased but the debt of the company was in the higher rate. But still the company having control in debtor‘s turnover. ? ? The working capital ratio shows the efficiency in the effective working capital management in the HCL Infosystem ltd. Thus the working capital ratio shows the smooth running of business. This ratio indicates the investments in current assets have been properly utilized in the company.

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CONCLUSION:
Here by conclude that the HCL Infosystem ltd was functioning in the good financial position. From The study of working capital management analysis it found out that the company was maintaining the working capital at the good position. The current assets are equal to meet out the current liabilities of the company. The firm was financially sound. The financial ratios regarding to the working capital management clearly shows that the current financial status of the company is good; it is much satisfactory in the condition as prevailing.

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BIBLIOGRAPHY
Following sources have been sought for the preparation of this report:
• • • •

Corporate Intranet Financial Statements (Annual Reports) Direct interaction with the employees of the company Internet----www.hclinfosystems.in

Textbooks on financial management –

I.M. Pandey Khan and Jain Prasanna Chandra

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