The Company is equipped with a fully integrated facility, an automated laboratory and ultra-modern machinery for offering complete turnkey Pre-Engineered Building (PEB) solutions for hi-end applications across diverse sectors. The group's construction prowess and over two decades of experience have armed Era Buildsys with remarkable design, execution, erection and on-time delivery capabilities.
Working capital is the life blood of the company. From February to May 2011, I propose to conduct a thorough analysis of the working capital management at Era Buildsys Limited. I plan to study the working capital requirements of the company by analyzing the secondary information available in annual reports, company records and other internal reports.
The project contain the basic postulates of working capital, procedure of analysis of working capital, ratio being used to define the working capital and the impact of working capital in the company in case of excess or inadequacy. Also, the project contains analysis of estimation of working capital requirement and the procedure to estimate working capital requirement in manufacturing and trading concern and from the data available it can be concluded that it holds a very strong position in the market.
Working capital management is a very important facet of financial management due to:
Investment in current asset represents a substantial portion of total investment.
Investments in current asset and level of current liability have to be geared quickly to change sales.
I also plan to collect the data regarding company policies, future plans, possible expansions etc. by interviewing head of departments and other staff for deriving my own set of assumptions to come out with the projected financial figures, which are needed for the completion of credit monetary assessment form.
After compilation and tabulation of the above said data, I plan to analyze it with the help of different financial ratios and other financial instruments and compare the result with industry benchmarks, hence identifying the financial strengths and weakness of the company.
Finally after a thorough analysis of the data, a set of most important attributes/ components can be found out, which has a major contribution to the working capital cycle or requirement of the company. So that steps or methods can be identified to control or manage these components.
Review of literature:
An Empirical Study- Impact of working capital policies on corporate performance.
Bhupesh Kr. Shah, Sushma Vishnani(2007)
This study is done to study the impact of working capital policies on profitability of a company. Conventionally, companies use to take a greater risk in order to gain higher returns i.e. profits. In order to do this a company needs to reduce its working capital with respect to its sales. While for improving its liquidity, it has to increase the level of its working capital. However, this policy leads to a reduction in sales and in turn profitability. Hence, a company should maintain a balance between its profitability and liquidity. In this study, an empirical study has been made for assessing the impact working capital practices & policies on the profitability of Indian Consumer Electronics Industry during the period of 1994-95 to 2004-05. The impact has been examined by computing correlation coefficient and running regression between key working capital indicator ratios.
An Evidence from Turkey- Effect of working capital policies on profitability of company.
K. Demirgunes and F. Samiloglu (2008)
This study is aimed to analyze the effect of working capital management policies on company's profitability. In this paper, a sample of Istanbul Stock Exchange (ISE) listed manufacturing firms for the time period of 1998- 2007 has been analyzed under a multiple regression model in order to consider the relation between attributes of cash conversion cycle and company's profitability at a stretch. Findings of this study show that inventory period, leverage and accounts receivables period affect company's profitability negatively; while sales growth affects company's profitability positively.
Working Capital Practices in the Small Firm Sector
Nicholas Wilson, Michael J. Peel,(2008)
A lecturer, Michael J. Peel, in finance and accounting department, Cardiff Business School, and Nicholas Wilson, Professor of Credit Management at Bradford University, England. Little research has been conducted on the capital budgeting and working capital practices of small firms. The purpose of this study is to present the results of a preliminary study on the financial management practices and working capital of small firms located in the north region of England. In general, the results of the survey indicated that a relatively high proportion of small firms in the sample claimed to use quantitative capital budgeting and working capital techniques and to review various aspects of their companies' working capital.
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Objective of the Project:
To make item wise analysis of the elements or component of working capital to identify the items responsible for change in working capital.
To study liquidity position of the company by taking various measurement.
To analyze the management of Non- Fund based Working Capital limits of the company.
To evaluate company's performance relating to financial statement analysis.
To find out the utility of financial ratio in credit analysis and determining the financial capacity of the company.
To identify the effectiveness of working capital management in Era Buildsys Limited and make suggestions for its improvement.
Methodology:
Collection of Data:
In this project, I intend to collect the primary and secondary financial data about the company through various sources which are within and outside the company like annual reports, corporate magazines, policy manuals of different department etc.
Collection of the primary financial data by interviewing the executives and staff of the company.
Understanding the assumptions made by the company for the projection of its financial reports.
Research Design: The research design for the comparative study is of exploratory type and the focus is given to discover the possible measures, by detailed analysis, for the company which would be helpful up to some extent to retain a good position in the competitive market. The research design is not formal and rigid one as the focus depends upon the availability of new ideas and relationship among variables.
Analysis of Data: In order to analyze the data I would be using various tools. Those are as follows:
Ratio analysis: It is an important and age-old technique. It is a powerful tool of financial analysis. It is defined as "the indicated quotient of two mathematical expression" and as "the relationship between two or more things". Systematic use of ratio is to interpret the financial statement so that the strength and weakness of a firm as well as its historical performance and current financial condition can be determined.
Trend analysis
Analysis of components of working capital
Schedule:
EXPECTED DATE
ACTIVITY
31st March 2011
Study of literature available on the topic
10th April 2011
Collection of relevant data
14th April 2011
Analyze the collected data and use technical analysis
15th April 2011
Submit the interim report
25th April 2011
Interpret the data
30th April 2011
Contact executives working in various departments and collect their views on the topic and result of the data.
7th May 2011
Draft the project report
14th May 2011
Edit the report and submit it to the organization and college
Limitations of the study:
The financial statements contain only historical data and would not necessarily reflect the future.
It is difficult to account in price level changes in financial accounting.
The reliability and accuracy of calculations and interpretation depends very much on the information supplied in the form of annual reports and other records.
The bank may or may not show true financial result in annual report.
Time factor plays a vital role. The study was conducted within 14 weeks & is restricted for a period of three years.
