PROJECT WORK

JAMSHEDPUR WOMENS COLLEGE, JAMSHEDPUR

TITLE - ROLE OF WORKING CAPITAL MANAGEMENT

Submitted By: Name: - SANA AFREEN
CLASS: - B-COM
SEMESTER: - VI
CLOEEGE ROLL NUMBER: - 502
SUBJECT: - COMMERCE
EXAMS ROLL NUMBER: - 13BCOM08130
SESSION: - 2013-2016
REGISTRATION NO: - 13JWC07285

A
PROJECT REPORT
ON
ROLE OF WORKING CAPITAL MANAGEMENT & CAPITAL
STRUCTURE IN
BAJAJ ALLIANZ LIFE INSURANCE

SUBMITTED TO KOLHAN UNIVERSITY

IN PARTIAL FULLFILMENT OF THE REQUIREMENT FOR THE
AWARD OF DEGREE OF
BACHELOR IN COMMERCE
BY
SANA AFREEN
UNDER THE GUIDANCE OF
PROF. CHAGGAN

JAMSHEDPUR WOMEN COLLEGE

BISTUPUR, JAMSHEDPUR- 831001
2013-2016

CERTIFICATE

This is to certify that Mrs. Sana Afreen, B.Com, Semester VI,

Faculty of Commerce of Jamshedpur Womens College,
Jamshedpur, has completed her project, under supervision. She
has taken proper care and utmost sincerity in completion of
project.
I certify that the project completed is as per the guidelines.


.
Signature of Guide
Signature of Head & Dean
Department of Commerce

DECLARATION
This is to certify that the project work titled Role of Working
Capital Management has been submitted by Mrs. Sana Afreen
under the guidance of Prof. Chaggan

..
Sign
ature of Student
Date: -.

ACKNOWLEDGEMENT
I owe a great many thanks to a great many people who helped and
supported me during the completion of project.
My deep sense of gratitude to Mr.Santosh Singh Chief Branch Manager for
support and guidance. Thanks and appreciation to the helpful people at
BAJAJ ALLIANZ LIFE INSURANCE, for their support.
I would like to take this opportunity as privilege to express my deep sense
of gratitude to for their continuous encouragement, invaluable guidance and
help for completing the present research work. They have been a source of
inspiration to means I am indebted to them for initiating me in the field of
research.
My deepest thanks to Prof Chaggan, the guide of the project for guiding and
correcting various documents of mine with attention and care. He has taken
pain to go through the project and make necessary correction as and when
needed.
I would also thank my institution and my faculty members without whom
this project would have been a distant reality. I also extend my heartfelt
thanks to my family and well wishers.

INDEX

Chapter

Particulars

Page No.

No.

Executive Summary

1.

Introduction

1-3

2.

Profile of the organization

4-8

3.

Research Methodology

4.

Conceptual Background

10-24

5.

Data presentation and interpretation

25-39

6.

7.

Finding, Suggestions and conclusion

40-42

Limitations

43

Bibliography

Appendix

EXECUTIVE SUMMARY

Executive Summary:
Working Capital is the required for maintenance of day to day
business operations. The present day competitive market
environment calls for an efficient management of working
capital. The reason for this is attributed to the fact that an
ineffective working capital management mat force the form to
stop its business operations, may even lead to bankruptcy.
Hence the goal of working capital management is not just
concerned with the management of current assets and current
liabilities but also in maintaining a satisfactory level of working
capital.
Holding current assets in substantial amount strengthens the
liquidity position and reduces the riskiness but only at the
expense

of

profitability.

Therefore

achieving

risk-return

tradeoff is significant in holding of current assets. While cash

outflows are predictable it runs contrary in case of case of
cash inflows. Sales program of any business concern does not
bring back cash immediately. There is a time lag that exists
between sale of goods of services and sales realization. The
capital requirement during this time lag is maintained by the
operating cycle concept.
This study gives in detail the working capital management
practices in BALIC. Management of each current asset, namely
cash

management,

studied

permanent

accounts
to

BALIC.

receivable

management

is

Similarly

management

of

accounts payable, deposit are studied to understand the

managing of current liabilities. A part from this concept of
operating cycle is studied.
The research methodology adopted for this study is mainly
from secondary source of data which include annual reports of

BALIC, and website of the company. The use of primary

sources is limited to interviews with few of the employees in
credit department.
The study of working capital management has shown that
BALIC has a strong working capital position. The Company is
also enjoying reasonable profits.

INTRODUCTION

The overall success of the company depends upon its working capital
position. So it should be handled properly because it shows the efficiency
& financial strength of a company.
WCM is highly important in firms as it is used to generate further returns
for the stakeholders.
Working Capital Management is a very important fact of financial
management due to:
Investments in current assets represent a substantial portion of
Total investment.
Investment in current assets & the level of current liabilities have
tobe geared quickly to change sales.
The working capital is the life blood & nerve center of a business firm.
The importance of working capital in any industry needs no special
emphasis. No business can run effectively without a sufficient quantity of
working capital.
It is crucial to retain right level of working capital. WCM is one of the most
important functions of corporate management. A business enterprise with
ample working capital is always in a position to avail advantages of any
favorable opportunity either to buy raw material or to implement a
special order or to wait for enhanced market status.
Working capital can be utilized for operating costs that are involved in the
everyday life of business. Even very successful business owners may
need working capital funds when the unexpected circumstances arise.
WCM is highly important in firms as it is used to generate further return
for the stakeholders. When working capital is managed improperly,
allocating more than enough of it will render management non-efficient &
reduce the benefits of short term investments. On the other hand, if
working capital is too low, the company may miss a lot of profitable

investment opportunities or suffer short term liquidity crises, leading to

degradation of company credit, as it cannot respond effectively to
temporary capital requirement
Some the points to be studied under this topic are:
How much cash should a firm hold?
What should be the firms credit policy?
How to & when to pay the creditors of the firm?
OBJECTIVES
The objectives of project on evaluation of working capital
are as follows:
1. To

study

concept

of

working

capital

&

components of working capital.

2. To study change of working capital.
3. To analyze profitability, liquidity & working
capital position of the company.
SCOPE
The management of working capital helps us to maintain
the working capital at satisfactory level by managing the
current assets and current liabilities. It also helps to
maintain proper balance between profitability, risk and
liquidity of the business significantly.
By managing the working capital, current liabilities are
paid in time. If the firm makes payment to it creditors for
raw material in time, it can have the availability of raw
material regularly, which does not cause any obstacles
in

production

process.

Adequate

working

capital

increases paying capacity of the business but the excess

working capital causes more inventory, increases the

possibility of delay in realization of debts. On the other

hand, absence of adequate working capital leads to
decrease in return on investment. The goodwill of the
firm is also adversely affected due to the inability to pay
current liabilities in time.
Hence, the management of working capital helps to
manage all the factors affecting the working capital in
the most profitable manner.

Limitation of the study:

The scope of the present study has been limited interns
of period of study as well as sources and nature of data.
The period covered by the study extends over 5 years
from F.Y 2010/11 to 2015/16. At the time of study, the
data could be available up to 2015/16. The limitations of
this study are as follows:

1. The study is mainly on secondary data. It is cone

mostly on the basis of and published financial
documents, like balance sheet, profit and loss
account and other related journals, magazines and
books etc.
2. The study follows with specific tools financial ratio
analysis.
3. The lack of sufficient time and resources is another
limitation of the study. The study is fully based on

the students financial resources and is to be

completed within limited time. The report has
taken only 5-years data for the study from year
2008/09 to 2012/13.
4. The study is limited from the point of view of
submission

on

partial

fulfillment

of

the

requirement for the Master degree in Business

Administration(MBA).

BAJAJ ALLIANZ LIFE INSURANCE

Name and location of the Company:

Name: Bajaj Allianz Life Insurance Company

Address: GE Plaza, Airport Road, Yerawada, Pune
411006
Tel: +91 020 66026777

Fax: +91 020 66026789

E-mail: websaleslife@bajajallianz.co.in

Introduction:
Bajaj Allianz Life Insurance is a union between Allianz SE,
one of the largest Insurance Company and Bajaj Finserv.
Allianz SE is a leading insurance conglomerate globally
and one of the largest asset managers in the world,
managing assets worth over a Trillion (Over INR. 55,
00,000Crores). Allianz SE has over 119 years of financial
experience and is present in over 70 countries around
the world.
At Bajaj Allianz Life Insurance, customer delight is our
guiding principle. Our business philosophy is to ensure
excellent insurance and investment solutions by offering
customized products, supported by the best technology.

Vision:
To be the first choice insurer for customers
To be the preferred employer for staff in the
insurance industry
To be the number one insurer for creating
shareholder value

Mission:
As a responsible, customer focused market leader, we
will strive to understand the insurance needs of the
consumers and translate it into affordable products that
deliver value for money.

Our Achievements:

Bajaj Allianz has received IAAA rating, From ICRA

Limited, an associate of Moodys Investors Service, for
Claims Paying ability. This rating indicates highest claims
paying ability and a fundamentally strong position.

Awards:
Best Insurance Company in Private sector at the
IPE Banking Financial Service and Insurance (BFSI)
2013.
SKOCH Financial Inclusion-Organization of the year
2013.
Best Life Insurance Provider (Runner up) at the
Outlook Money Award 2012.
Best
Investor
Education

and

Enhancement.
Best utilization of Information Technology.
SKOCH Financial Inclusion Award.

Member in Board of Director:

Category

Chairman

Rahul Bajaj

Niraj Bajaj
Sanjiv Bajaj
S.H Khan
Directors
Ranjit Gupta
Sanjay Asher
Suraj Mehta
Manu Tandon

FACTSHEET
1

Date of Incorporation

12th March 2001

2
3
4
5
6
7
8
9
10
11
12
13
14

15

Started Operation on

3rd August 2001

Head office

Pune, India

Worldwide Web Address

www.bajajallianz.com

Toll free number

1800-209-5858

Brand Statement

Jiyo Befikar

Chairman

Mr. Sanjiv Bajaj

MD & CEO

Mr.V.Philip

Total assets under Management

38,003 crore*

Solvency ratio

643.31%**

Claim Settlement Ratio NOP

91.56%**

Total no. of lives covered

1.56crore**

Total no. of office

992*

Latest Award Won

1.SKOCH Financial Inclus

Award 2013- Organizatio
the Year
2.SKOCH Financial Inclus
Award for Micro Insuranc
initiatives in the followin
categories:
Micro Insurance In
Securing the
Unsecured
Setting the Claims
Nominees doorste
Insurance Awarene
Education
Micro Insurance
Renewals & Persist
Management
Sour product cater to all the financial needs like Protection, Savings,
Retirements, Investment & Health for Individuals and Groups

Note: *The values are as on 31st March 2016

** The values are for FY 2015-16

Growing at a breakneck pace with a strong pan
Indian presence Bajaj Allianz has emerged as a
strong player in India...
Bajaj Allianz Life Insurance Company Limited is a joint venture
between two leading conglomerates Allianz AG and Baja Auto
Ltd. Characterized by global presence with a local focus and

driven

by

customer

orientation

to

establish

high

earnings potential and financial strength, Bajaj Allianz

Life Insurance Co. Ltd. was incorporated on 12th March
2001. The company received the Insurance Regulatory
and

Development

Authority

(IRDA)

certificate

of

Registration (R3) No 116 on 3rd August 2001 to conduct

Life

Insurance

business

in

Product:

Life Insurance
Motor Insurance
Health Insurance
Travel Insurance
Home Insurance

Channel Partner:
1. Standard Chartered Bank

2. Dhanlaxmi Bank

India.

3. Team Life Care Co. India Ltd.

The data in this project is enabling in secondary in

nature. Financial reports, company records were referred
for data analysis. The study has been undertaken by
collecting relevant data from the balance sheet, profit
and loss a/c, annul report & Audit report of the BALIC the
company is used financial tools for the analyzing and
interpretation data.
However

primary

data

is

also

collected

by

observation discussing with company officials. This

primary data is used to fill in the gaps while preparing
this report and to know the latest procedures adopted by
the company. This has helped to draw inferences and
conclusions.

Sources of data
This study is based on Secondary data:The secondary data are those, which have
been collected by some other and which have been
processed. Generally speaking secondary data are
information, which have been previously collected by
some organization to satisfy his own need. But the

10

department under reference for an entirely different

reason is using it.
For this project secondary sources used are:
1. Annual reports of the company.
2. Company website
3. Books
4. Other company documents

SAMPLING DESIGN
0

Sampling unit

: Financial Statements

& Audit Reports

1

Sampling Size

:Last

four

years

financial statements

WORKING CAPITAL:
Introduction:
Financial management looks after two types of capital
need: for fixed capital to invest it tings such as buildings,
plants &equipments and working capital principally to
pay for stock and to cover the amount of credit
extended to customers. Fixed capital, as the name
implies, tends not vary in the short but to move up or
down in jumps when major investment decisions are
made (or assets sold). Working capital on the other
hand, is much more fluid and fluctuates with level of
business.

11

Working capital is a furnish investment in short term

assets. Working capital is the firms investment in short
term assets cash, short term securities. Account
receivables and inventories.
Working capital management is the important branch of
the financial management which gives answers the
questions such as:
1. How much should we invest in each category of
current assets?
2. How should we finance this investment in current
assets i.e. appropriate mix of short and long term
sources to finance?

In most business, funds are deployed in assets which are

in the form of cash or bank deposits or will be turned
into cash in a relatively short period as part of normal
business activities. In short the working capital is the
sources of financing current assets and it includes short
as well as long term financing.
The management of the funds of business can be
described

as

financial

management.

Financial

management is mainly concerned with two aspects.

Firstly, Fixed assets and fixed liabilities, in other words,
long term investment and sources of funds. Secondly,
current assets and current liabilities. Both of these types
of funds play a vital role in business finance.
Management

of

working

capital

usually

involves

management or administration of current assets, namely

cash, marketable securities, account receivables and
inventories and also the administration of current

12

liabilities such as creditors, account payable, notes and

bills payables, bank overdraft, outstanding expenses,
temporary loans and provisions. A firm should always
maintain the right cash balance so that flow of funds is
maintained at a desirable speed not allowing slowdowns
or stoppage. Thus, the enterprises can have a balance
between liquidity and profitability.
The term working capital is often used to refer the firms
current assets like primarily cash, marketable securities,
account receivables and inventories. Working capital
refers to the fact that most of its components have their
impact over weeks and month rather than years. For this
reason, working capital management is often referred to
as short-term finance. The term working capital is
closely related to the term funds and has two common
meaning. It is used to mean current assets of current
assets means current liabilities.
Working capital management is concerned with the
problems that arise in attempting to manage the current
assets. The term current assets refers to those assets
which is ordinary course of business can be or will be
turned into cash within one year without undergoing a
diminution

in

value

and

with

our

disrupting

the

operations of the firm. The major current assets are

cash, marketable securities, account receivables and
inventory.
Current liabilities are those liabilities, which are intended
at their inception to be paid in the ordinary course of
business within a year, out of the current assets of
earnings of the concern. The basis current liabilities are

13

accounts

payable, bank

overdraft

and

outstanding

expenses. The goal of working capital management is to

management the firms current assets and current
liabilities in such a way that a satisfactory level of
working capital is maintained.
This is so because if the firm cannot maintain to
satisfactory level of working capital, it is likely to
become insolvent and may 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 current assets must manage
efficiently in order to maintain the liquidity of the firm
while not keeping too high level of any of them. Each of
the

short-team

sources

of

financing

must

be

continuously managed to ensure that they are abstained

and used in the best possible way. The interaction
between

current

assets

and

current

liabilities

is,

therefore, the main theme of the theory of working

capital management.
Working capital may be defined more particularly as the
assets held for current use within a business less the
amount due to those who await settlement in short term
in whatever form. Working capital is an important aspect
manufacturing compares that have so far developed
country.

Among

all

available

options

proper

management of working capital is the only best possible

option to improve their operational viability. Working
capital

is

the

financial

management

practice

in

manufacturing enterprises. Working capital represents

portion that circulates from one form to another in the
ordinary conduct of business. This idea embraces

14

recurring

transaction

from

cash

to

inventories

to

receivable to cash that forms the conventional chain of

business operations.
Fund deployed for short term are mainly for working
capital or operational purpose. Towards the day-to-day
operation, a firm will have to provide money towards the
purchase of raw materials, payment of wage and
salaries to extend credit to buyers of goods as well as to
meet other day to day operations.
By analyzing about the working capital, we concluded
that, all the corporations. Weather public or private,
manufacturing or non-manufacturing have just adequate
working capital to serve in competitive market. It is
because excessive or inadequate working capital is
dangerous from the firms point of view. Excessive
investment

on

working

capital

affects

firms

profitability just idle investment, yields nothing. In the

same way, inadequate investment on working capital
affects the liquidity position of the company and leads to
financial embarrassment and failure of the company.
It is therefore, recognized fact that any mistake made in
management of working capital can lead to adverse
effects in business and reduced the liquidity, turnover,
profitability and increases the cost of financing of the
enterprises.
DEFINITIONS OF WORKING CAPITAL:
The following are the most important definitions of
Working capital:

15

1) Working capital is the difference between the inflow

and outflow of funds. In other words it is the net cash
inflow.
2) Working capital represents the total of all current
assets. In other words it is the Gross working capital, it is
also known as Circulating capital or Current capital for
current assets are rotating in their nature.
3) Working capital is defined as The excess of current
assets over current liabilities and provisions. In other
words it is the Net Current Assets or Net Working Capital

CONCEPTS OF WORKING CAPITAL:

There are two concepts of working capital:- gross & net.
Gross working capital, simply called working capital,
refers to the firms investment in current assets. Current
assets are the assets which can be converted into cash
within an accounting period (or operating cycle)and
cash, short-term securities, receivables, debtors and
stock (inventory) are included in current assets. Net
working capital refers to the difference between current
assets and current liabilities. Current liabilities are those
claims of outsiders, which are expected to mature for
payment within an accounting period and include
creditors, bills payable and outstanding expenses.

1) Gross working capital:

According to this concept, total current assets are
working capital which presents both owned capital as
well as loan capital used for financing current assets. It
includes cash, short-term securities and receivables
inventories. These assets can be converted into cash
within a year. Generally, when it comes to current

16

assets, cash is the most valuable element because it is

immediately available to settle bills and debtors are
more value than stock which is nearer to being turned
into cash. The gross concept of working capital refers to
the amount funds invested in short-term assets that are
employed in the enterprise. Gross working capital is the
firms total current asset and net working capital is
current assets minus current liabilities.
Another name of gross working capital is circulating
capital. Circulating capital means circular flow of cash.
This

is

also

called

operating

cycle

in

case

of

manufacturing firm. This cycle starts with which is used

to pay for raw materials. Raw materials are converted
into work-in progress which is again converted into
finished goods. When it is ready for sale, it is a circular
cash-flow from cash into inventories to receivables and
back to cash, this cycle will be repeat again for the
whole life of the firm.
The value represented by current assets circulates from
one working capital to another working capital from
purchase accounts to goods manufacturing accounts.
From inventory accounts to sales accounts, from sales
accounts

to

cash

accounts,

this

is

described

as

circulating nature of current assets of in other work

working capital has circulating nature. The speed of
circulating of working capital of the turnover of current
assets is an indicator of degree of efficiency of the
management. The faster the turnover shows the higher
degree of efficiency.

17

The working capital cycle can be presented

in the diagram as:
CASH

CREDITORS

COLLECTION

PAYMENTS

RAW MATERIALS

DEBTORS

SALES
PRODUCTION
WORK-INPROGRESS

18

FINISHED GOODS

VALUE ADDED CONVERSION

Figure: 4.1 the working capital cycle of manufacturing

firms.
If the business is profitable the firms assets at the end of each
cycle will be greater than the original investment. In this
manner, each cycle will produce a gross profit, and the
amount of net earnings for the year will depend. In part,
on number of times the cycle occurs or how measured
by the ratio of sales to current assets. The higher the
ratio, the more efficiency the operations, fewer current
assets are needed to support each dollar of sales.
The flow of working capital does not always proceeds as
it is pre- planned when it moves through different stage
of cash cycle, for example, sales may decline due to can
in

consumer

taste,

slow

economy

and

receivable

become more difficult to collect the working capital cycle

19

will be interrupted. This leads to decline in profitability

and firm could suffer bankruptcy if this adverse situation
prevails for sometimes.
There is also a much shorter cycle of activity where in
goods and materials are held for manufacture and sale,
and

credit

is

advanced

to

customers

for

rapid

conversion into cash to provide the funds with which to

continue in business and to make a profit distribution
possible.
The working capital cycle shown in figure 4.1 is the
operating cycle for non- manufacturing firm where, cash
is required to purchase raw materials which are needed
to convert into work-in- progress, which is again
converted into finished goods. Are sold for cash and
credit and ultimately debtors will be realized.
The non manufacturing firms such as wholesalers and
retailers do not manufacture goods. So, they have the
direct conversion of cash into stock of finished goods
into debtors and then into cash. This can be shown
graphically as:
CASH

DEBTORS

STOCK OF FINISHED GOODS

20

Figure: 4.2 Operation cycle of nonmanufacturing firms.

Sometimes service and financial concerns may not have
any inventory. In this case the operations cycle will be
shortest as follows:
CASH

DEBTORS

Figure: 4.3 Operating cycles of service and financial

firms.

The gross capital working capital focuses on two

aspects of current assets management:
a) Optimum investment in current assets: As state
earlier, both excessive and inadequate investment
is harmful for the business. This aspects thus,
emphasis on the optimum adequate level of
current assets, working capital depends upon the
business activated. It also changes with the
change in business activities. This may cause
excess or shortage of working capital frequently.
The management should be active and alert to
correct the imbalance.
b) Financing of current assets: This aspect focus on
the need of arranging funds to finance current
assets when more working capital is required due
to the increase in business activities. Then the
arrangement should be made quickly. Similarly,
when surplus funds arise, then they should be
invested in short term securities.

21

2) Net working capital:

Net working capital comprises short term net assets:
stock, debtors and cash less creditors. Working
capital management then is to do with management
of all aspects of both current assets and current
liabilities, so as to minimize the risk of insolvency
while maximizing return on assets.
Net working capital represents the excess of total
current assets over total current liabilities. It is a
qualitative

concept

which

shows

the

financial

soundness of current financial position. Net working

capital may be positive or negative according to the
size of current assets and current liabilities. Current
assets should be sufficiently in excess of current
liabilities

for

the

positive

working

capital.

This

concept lives idea about the case and cost of raising

working capital to the management.
Not only for the management, is it also a major
importance to investors and lenders. They always like
a company to maintain current assets should be two
fold of current liabilities and these concepts is
measured by the current ratio via current assets

current liabilities. Which should be 4:1. A large ratio

indicates greater solvency and makes it unsafe and
unsound.

negative

working

capital

denotes

negative liquidity which is also dangerous for the

company.

22

Management should always be alert to improve the

imbalance in the liquidity position of the firm.
Mathematically, it is presented as:
Net working capital Current assets Current
liabilities
An alternatives definition of net working capital is
that portion of a firms current assets financed with
long term funds.
For every firm today, minimum portion of working
capital is financed with the permanent sources of
funds such as owners capital, debentures, long-term
debt, and preference capital or retained earnings; this
portion of working capital which is financed with long
term funds is called permanent working capital.
Management must therefore, decide the extent to
which current assets should be financed with equity
capital or/ and borrowed capital.
Both the concepts of working capital, gross and net,
are not mutually exclusive, however. They are equally
important from the management point of view in the
gross concept points out two important aspects of
current assets: (i) Optimum investment in each of the
component of current assets and (ii) Financing of
these current assets; while the net concept indicates
(i) The liquidity position and (ii) The extent to which
working capital may be financed by permanent
sources of funds. Both the concepts have their own
advantages and disadvantages, which concept to
choose depend upon the purpose of the firm. The
concept of gross capital is a financial concept where

23

as that of net concept is an accounting concept.

Management

is

interested

in

current

assets

to

operate the business with efficiency. To evaluate the

efficiency, gross concept is appropriate. On the other
hand interest of investors and lenders is in concept of
net working capital because it helps in the judgment
if liquidity position of the enterprise.

4.3) Objective of Working capital:

Even

profitability

companies

fail

if

they

have

inadequate cash flow. Liabilities dare settled with

cash and net profits. The primary objective of working
capital management is to ensure that sufficient cash
is available to:

Meet day to day cash flow needs;

Pay wages and salaries when they fall due;
Pay creditors to ensure continued suppliers of

goods and services;

Pay government taxation and providers of cash

dividends; and
Ensure the long term survival of the business
entity.

4.4) IMPORTANCE OF WORKING CAPITAL

Working capital may be regarded as the lifeblood of the
business.

Without

insufficient

24

working

capital,

any

business

organization

cannot

run

smoothly

or

successfully.
In the business the Working capital is comparable to the
blood of the human body. Therefore the study of working
capital is of major importance to the internal and
external analysis because of its close relationship with
the current day to day operations of a business. The
inadequacy or
mismanagement of working capital is the leading cause
of business failures.
To

meet

the

current

requirements

of

business

enterprise such as the purchases of services, raw

materials etc. working capital is essential. It is also
pointed out that workings.

Growth and Expansion Activities

As a company grows, logically, larger amount of working
capital will be needed, though it is difficult to state any
firm rules regarding the relationship between growth in
the volume of a firm's business and its working capital
needs. The fact to recognize is that the need for
increased working capital funds may precede the growth
in business activities, rather than following it. The shift in
composition of working capital in a company may be
observed with changes in economic circumstances and
corporate practices. Growing industries require more
working capital than those that are static.
Operating Efficiency

25

Operating

efficiency

means

optimum

utilization

of

resources. The firm can minimize its need for working

capital by efficiently controlling its operating costs. With
in-creased operating efficiency the use of working
capital

is

improved

and

pace

of

cash

cycle

is

accelerated. Better utilization of resources improves

profitability and helps in relieving the pressure on
working capital.
Price Level Changes
Generally, rising price level requires a higher investment
in working capital. With increasing prices the same
levels of current assets need enhanced investment.
However, firms which can immediately revise prices of
their products upwards may not face a severe working
capital problem in periods of rising levels. The effects of
increasing price level may, however, be felt differently
by different firms due to variations in individual prices. It
is possible that some companies may not be affected by
the rising prices, whereas others may be badly hit by it.

Other Factors
There

are

some

other

factors,

which

affect

the

determination of the need for working capital. A high net

profit margin contributes towards the working capital
pool. The net profit is a source of working capital to the
extent it has been earned in cash. The cash inflow can
be calculated by adjusting non-cash items such as
depreciation, out-standing expenses, losses written off,
etc, from the net profit, (as discussed in Unit 6).

26

The firm's appropriation policy, that is, the policy to

retain or distribute profits also has a bearing on working
capital. Payment of dividend consumes cash resources
and thus reduces the firm ',s working capital to that
extent. If the profits are retained in the business, the
firm's working capital position will be strengthened.
In general, working capital needs also depend upon the
means of transport and communication. If they are not
well developed, the industries will have to keep huge
stocks of raw materials, spares, finished goods, etc. at
places of production, as well as at distribution outlets.

4.5) Determinants of working capital:

There are no hard and fast rules or certain formulae to
determine the working capital requirement of the firm.
The importance of efficient working capital management
is an aspect of overall financial management. Thus a
firm plans its operations with adequate working capital
requirement or it should have neither too excess nor too
inadequate working capital. A number of factors affect
the working capital. Generally, the following factors
affect the working capital requirement of the firm.
i)Nature and size of business:
The working capital requirement of a firm is basically
related size and nature of the business. If the size of the
firm is bigger, then or requires more working capital
whereas small firm needs less working capital relatively
to public utilities.

ii) Manufacturing Cycle:

27

Working capital requirement of an enterprise are also

influenced by the manufacturing or production cycle. It
refers to the time involved to make finished goods from
the raw materials. During the process of manufacturing
cycle funds are tied up longer the manufacturing cycle,
the larger will be working capital requirement and viceversa.
iii) Production Policy:
Working capital requirement is also determined by its
production policy. If a firm produces seasonal foods, the
its production and sales volume fluctuate with different
seasons. This type of fluctuating policy affects the
working capital policy of the firm.
iv) Credit Policy:
Credit policy affects the working capital of a firm.
Working capital requirement depends on terms of sales.
Different term may be followed by different customers
according to their credit worthiness. If the firm follows
the liberal credit policy, then it requires more working
capital. Conversely, if a firm follows the stringent policy,
it requires less working capital.
v) Availability of Credit:
Availability of credit facility is another factor that affects
the working capital requirement. If the creditors avail a
liberal credit terms then the firm will need less working
capital and vice-versa. In other works, the firm can get
credit facility easily on favorable conditions. Thus, it
requires less working capital to run the firm otherwise

28

more working capital is required to operate the firm

smoothly.
vi) Growth and Expansion:
Growth and expansion also affects the working capital
requirement of firm. However, it is difficult to precise;
determine the relationship between the growth and
expansion of the firm and working capital needs,
however, the other things being the same growing firms
needs more working capital than those static ones.
vii) Price level Change:
Price level change also affects the working capital
requirement of a firm. Generally, a firm requires
maintaining the higher amount of working capital, if the
price level rises. Because the same level of current
assets needs more due to the increasing price. In
conclusion, the implications of changing price level of
working capital position will vary from firm to firm
depending

on

the

nature

and

another

relevant

consideration of the operation of the concerned firm.

viii) Operating Efficiency:
Operating efficiency is also an important factor, which
influences the working capital requirements of the firm.
It refers to the efficient utilization of available resources
at

minimum

cost.

Thus,

financial

manager

can

contribute to strong working capital position through

operating efficiency. If a firm has strong operation
efficiency then it needs lesser amount of working capital
and vice-versa.
ix) Profit Margin:

29

The level of profit margin differs from firm to firm. It

depends upon the nature and qualities of product have a
sound marketing management and enjoy the monopoly
power in the market then it earns quite high profit and
vice-versa. Profit is sources of working capital because it
contributes towards the working capital as a poll by
generating more internal funds.
x) Level of Taxes
The level of taxes also influences working capital
requirement of firm. The amount of taxes to be paid in
advances

is

determined

by

the

prevailing

tax

regulations. But the firms profit is not constant, or can

note be predetermined. Tax liability in asense of shortterm liquidity is payable in cash. Therefore, the provision
for tax amount is one of the important aspects of
working capital planning. If tax liability increase, it needs
to increase the working capital and vice-versa.
4.6) Financing of Working Capital:
The firms working capital assets policy is never set in a
vacuum; it is always established in conjunction with the
firms

working

capital

policy.

Every

manufacturing

concern of industry requires additional assets whether

they are instable or growing conditions. The most
important function of financial manager is to determine
the level of working capital and to decide how it is to
financed. Financial of any assets is concerned with two
major factors- cost and risk. Therefore, the financial
manager must determine an appropriate financing mix,
or decide how current liabilities should be used to
finance current assets. However, a number of financing

30

mixes are available to the financial manager. He can

resort generally there kinds of financing.

i) Long-term financing:
Long-term financing has high liquidity and low
profitability, Ordinary share, Debenture, Preference
share; retained earnings and long-term debt of
financial institution are major sources of long-term
finance.
ii) Short-term financing:
A firm must arrange its short-term credit in advance.
The sources of short-term financing of working capital
are trade credit and bank borrowing.
Bank credit: Bank credit is the primary institutional
sources for working capital financing for the purpose
of bank credit, amount of working capital requirement
has to be estimated by the borrowers and banks are
approached with the necessary supporting data.
After availability of this data, bank determines the
maximum credit based on the margin requirements of
the

security.

The

types

of

loan

provided

by

commercial banks are loan arrangement, overdraft

arrangement, commercial paper etc.

4.7) APPROACHES TO MANAGING WORKING

CAPITAL

31

Two

approaches

are

generally

followed

for

the

management of working capital: (i) the conventional

approach, and (ii) the operating cycle approach.
The Conventional Approach
This

approach

components

of

implies

managing

working

capital

the

individual

(i.e.

inventory,

receivables, payables, etc.) efficiently and economically

so that there are neither idle funds nor paucity of funds.
Techniques have been evolved for the management of
each of these components. In India, more emphasis is
given to the management of debtors because they
generally constitute the largest share of the investment
in working capital. On the other hand, inventory control
has not yet been practiced on a wide scale perhaps due
to scarcity of goods (or commodities) and ever rising
prices.

The Operating Cycle Approach

This approach views working capital as a function of the
volume of operating expenses. Under this approach the
working capital is determined by the duration of the
operating cycle and the operating expenses needed for
completing the cycle. The duration of the operating
cycle is the number of day involved in the various
stages, commencing with acquisition of raw materials to
the realization of proceeds from debtors. The credit
period allowed by creditors will have to be set off in the
process. The optimum level of working capital will be the
requirement of operating expenses for an operating

32

cycle, calculated on the basis of operating expenses

required for a year.
In India, most of the organizations use to follow the
conventional approach earlier, but now the practice is
shifting in favor of the operating cycle approach. The
banks usually apply this approach while granting credit
facilities to their clients.
ADEQUACY OF WORKING CAPITAL
The firm should maintain a sound working capital
position. It should have adequate working capital to run
its business operations. Both excessive as well as
inadequate working capital positions are dangerous from
the firms point of view. Excessive working capital not
only impairs the firms profitability but also result in
production interruptions and inefficiencies.
The dangers of excessive working capital are as
follows:
It

results

in

unnecessary

accumulation

of

inventories. Thus, chances of

Inventory mishandling, waste, theft and losses increase.
It is an indication of defective credit policy slack
collections period.
Consequently, higher incidence of bad debts results,
which adversely
Affects profits.
Excessive working capital makes management
complacent which
Degenerates into managerial inefficiency.

33

 Tendencies of accumulating inventories tend to

make speculative
Profits grow. This may tend to make dividend policy
liberal and difficult
To cope with in future when the firm is unable to make
speculative
Profits.
Inadequate working capital is also bad and has
the following dangers:
It stagnates growth. It becomes difficult for the
firm to undertake
Profitable projects for non- availability of working capital
funds.
It becomes difficult to implement operating plans
and achieve the firm s
Profit target.
Operating inefficiencies creep in when it becomes
difficult even to meet
Day commitments.
Fixed assets are not efficiently utilized for the lack
of working capital
Funds. Thus, the firm s profitability would deteriorate.
Paucity of working capital funds render the firm
unable to avail
Attractive credit opportunities etc.
The firm loses its reputation when it is not in a
position to honor its
Short-term obligations.
An enlightened management should, therefore, maintain
the right amount of working capital on a continuous
basis. Only then a proper functioning of business

34

operations

will

be

ensured.

Sound

financial

and

statistical techniques, supported by judgment, should be

used to predict the quantum of working capital needed
at different time periods.
A firm s net working capital position is not only
important as an index of liquidity but it is also used as a
measure of the firms risk.
Risk in this regard means chances of the firm being
unable to meet its obligations on due date. The lender
considers a positive net working as a measure of safety.
All other things being equal, the more the net working
capital a firm has, the less likely that it will default in
meeting its current financial obligations. Lenders such as
commercial banks insist that the firm should maintain a
minimum net working capital position.
In this study four years data ( 2012 to 2016 have been
presented and analyzed. It covers to analyze the ratio as
well trend and composition of working capital, which
means current assets, current liabilities, liquidity,
turnover, leverage and profitability of BALIC.

5.1) Components of current assets:

For the day to day business operation different types of
current assets are required. Current assets refer those
assets that are cash or can be converted into cash within
a year. The composition of current assets or the main
components of current assets at BALIC are cash and
bank balance, loan and advances and government
securities. Miscellaneous current assets are also a
component of current assets. Prepaid expenses,
outstanding income like interest receivable and other
current assets are also included in miscellaneous current
assets. The following table shows the amount of cash
and bank balance, money at call or short notice, loan

35

and advanced government securities and other current

assets of Bajaj Allianz Life Insurance Company Pvt. Ltd.

Table 1 :
Current Assets
Fiscal
Year

Sundry
Debtors

Cash
and Loan and Other C.A
Bank balance advance

Tota

2012/13

639,948

3,515,993

76,970

1,148,475

5,38

2013/14

1,089,070

2,186,908

130,275

2,022,560

5,29

2014/15

1,341,359

4,285,098

147,078

2,344,020

8,21

2015/16

1,223,706

4,520,165

170,660

3,832,457

9,74

Source: - Annual Report of BALIC From 2012/13 to

2015/16
An asset of Company was amounted to Rs.
5,460,356 which included Rs. 3,552963 of cash and
bank balance, Rs. 76,970 of loan and advance, Rs.
1,828,423 of miscellaneous current assets. Current
assets of the company increase in all four years.

INTERPRETATION 1 :

36

As stated in above figure the current assets of BALIC

increases all the four year from FY 2008/09 t0
2011/12. In the cash of FY 2009/10, the increasing
trend is low from FY 2008/09. But the overall
increasing trend of current assets is higher.

5.2) Component of Current Liabilities:

Current liabilities is a short-term obligation which is
payable within a year. The composition of current
liabilities or the main components of current liabilities.
Tax provision, staff bonus, proposed dividend payable
and other liabilities are included in other current
liabilities. The following table shows the amount of
deposit and other accounts, short term loan, bills
payable and other current liabilities of BALIC.
Table 2 :
Current Liabilities
Fiscal
Year
2012/13

Creditors

Deposit

2,249,357

3,318,900

2013/14

3,701,079

4,129,900

2014/15

3,281,079

2015/16

4,246,449

Bills
Payable
87,607

Other C.L

Total

2,396,492

8,052,35

196,168

2,491,564

10,51871

4,430,900

98,372

1,690,564

9,500,91

4,142,491

97,087

2,368,827

10,654,8

In the above table, the component of current liabilities

which consists deposits. Source annual report of
company.

37

Interpretation 2 : In the above figure shows that the current liabilities of

the company is increasing In fiscal year 2008/09 the
total amount of current liabilities Rs. 8,052,356 for the
increasing impact of deposits and other current
liabilities. In all four year deposits and other current
liabilities are increased.
5.3) Working capital of BALIC:

38

Working capital is required to run business smoothly and

efficiently in the context of set objectives. It is no doubt
that no organization can achieve its goal without proper
use of working capital. It means money invested on
working capital should be neither more nor less because
both the position of working capital affects not only
liquidity but also profitability of the organization. The
investment decision should be made on any type of
current assets by considering their role in company and
determining which one is more beneficial to the
company and which is not. The following table shows the
amount of working capital of BALIC of the study period.

Table 3 :
Working capital of Company

39

Sources: Annual Report of company.

INTERPRETATION3:
In the above figure we clearly show the current assets,
current liabilities and working capital condition of BALIC
from fiscal year 2008/09 to 2011/12. Working capital
condition of the company is at satisfactory level. All the
year of the study period the working capital of the
company is negative.

Liquidity Ratio:
Liquidity ratios measures ability of the firms to
meet its short-term obligations. Liquidity of any
business organization is directly related with
working capital or current assets and current
liabilities of that organization. In other words, one
of the main objectives of working capital
management is keeping sound liquidity position.
Company is a different organization which is
engaged in Mobilization of funds. So, without
sound liquidity position of ability to meet its shortterm obligation various liquidity ratios are
calculated and to know the trend of liquidity are
trend analysis of major liquidity ratios have been
considered.

40

5.4) Current Ratio:

This ratio indicates the short-term solvency
position of bank. In other words current ratio
indicates better liquidity position. It is calculated
as follows:
Current assets (CA)
Current liabilities (CL)

The following table shows the current ratio to compare

the
following
capital
management
of
BALIC.
Table 4 :

Current ratio
Fiscal Year

Total CA

Total CL

Current ratio

2012/13

5,381,386

8,052,356

0.67

2013/14

5,298,538

10,518,711

0.50

2014/15

8,217,555

9,500,915

0.86

2015/16

9,746,988

10,654,854

Sources: Annual Report of BALIC from 2012/13to 2016.

41

0.91
Average=0.74

Current Ratio of BALIC

INTERPRETATION4 :
The above table shows the CA, CL and current ratio of
the BALIC. The current ratio of the BALIC is fluctuating
over the year. The highest current ratio is in fiscal year
2011/12 0.91. And in all year it is increasing. The
average ratio is 0.74.
5.6) Cash and bank balance to Current Assets:
The cash and bank balance is almost liquids from the
current assets, this ratio shows the percentage of readily
available fund within the banks. It can be calculated by
dividing cash and bank balance by current assets, which
is given below.

Cash and bank balance

Current assets

42

This ratio shows that the percentage of current assets

cover cash and bank balance. The following table and
figure shows the cash and bank balance to current
assets ratio of BALIC over the study period.

Table 5 :
Cash and Bank to Current Assets Ratio of BALIC
Fiscal Year
2012/13

Cash& Bank
Balance
3,552,963

Current Assets

Ratio (%)

5,381,386

0.67

2013/14

2,186,908

5,298,538

0.41

2014/15

4,385,098

8,217,555

0.53

2015/16

4,382.396

9,746,988

0.44

Sources: Annual Report of Company

INTERPRETATION5 :
Cash and Bank balance to current assets ratio of the
company is in 2009/10 decreased and in 2012/13 it
increased and again in 2013/14 is decreased.

43

5.7) Cash and Bank Balance to Total deposit:

The ratio shows the ability of bank immediate funds to
cover their deposits. It can be calculated by dividing
cash and bank balance by deposits. The ratio can be
expressed as:
The following table and figure shows the cash and bank
balance to total deposits ratio of the BALIC over the
study period.
Table 6 :
Cash and Bank balance to total Deposit Ratio of BALIC
Fiscal Year

Cash & bank

Total deposit

Ratio

2012/13

3,552,963

2,318,900

1.53

2013/14

2,186,908

2,123,900

1.03

2014/15

4,385,098

2,899,500

1.51

2015/16

4,382.396

3,857,000

1.14

Sources: Annual report of Company

44

INTERPRETATION6:
The above figure depicts that the cash and bank balance
to total deposit of BALIC has been slightly decreasing in
FY 2009/10, 2010/11, 2011/12.

5.8) Net Profit to Total Assets:

This ratio is very much crucial for measuring the
profitability of funds invested in the bank assets. It
measures the return on assets it computed by using the
following formula.

Net profit after tax

Total assets

Table 7
Net Profit to Total assets Ratio of BALIC
Fiscal Year

Net Profit

45

Total assets

Ratio(%)

2012/13

5,605,846

5,336,042

1.05

2013/14

6,182,978

5,298,538

1.17

2014/15

10,387,412

8,217,555

1.26

2015/16

23,499,431

9,746,988

2.41

Sources: Annual Report of company

INTERPRETATION7:
Net Profit to total asset ratio in 2008/09 1.05 and it
increasing slightly in financial year 2009/10, 2010/11
and 2011/12.
5.9) Debtors Turnover Ratio:
Concept: Debtors are expected to be converted into
cash over a short period of time and therefore are
included in current assets. It shows how many times
debtors are converted into cash in a year.
Debtors Turnover Ratio = Net credit sales
Average Debtors
Table 8 :

46

Debtors Turnover Ratio

Year

Credit sales

Ratio

102,199,181

Average
Debtors
19,080,194

2012/13
2013/14

132,858,985

27,192,101

4.88

2014/15

171,671,451

36,302,837

4.72

2015/16

221,246,824

42,584,634

5.19

Diagram:-

INTERPRETATION8:
The debtors turnover ratio was very less in
the year 2010/11 at 4.72 times, but them it has
increased to 5.19, 5.66 times in the year 2011/12 and
2008-09. This shows that the company is making all the
offers to speed up the collection process.
5.9) Creditors Turnover Ratio:
Concept: -

47

5.35

Creditors

turnover

ratio

establishes

relationship between not credit purchases and average

trade creditors and accounts payable. The ratio indicates
the velocity with which the creditors are turned over in
relation to purchases.
Creditors Turnover Ratio = Net Credit Purchases
Average creditors
Table 9 :
Creditors Turnover Ratio
Year

Credit Purchases

Average
Creditors

Ratio

2012/13

96,724,469

82,074,994

1.17

2013/14

127,553,879

112,554,635

1.13

2014/15

165,680,148

146,617,013

1.13

2015/16

213,323,185

189,501,666

1.12

INTERPRETATION9:
The creditors turnover ratio was 1.17 times in the year
2008/09& it decreased to 1.13 times in the year 20132014 but creditor turnover will be remain same two year
2014/15 and 2015/16.

5.10) Working Capital Turnover Ratio:-

48

It is taken as
one of the primary indicators of the short-term
solvency

of

the

business.

It

establishes

the

relationship with the net sales. It measures the

efficiency with which the working capital is being
used by the firm.
WORKING

CAPITAL

TURNOVER

RATIO

Net Sales

Net Working Capital

Table 10 :
Year

Net Sales

2012/13

102,199,181

Net Working
Capital
20,229,751

2013/14

132,858,985

23,244,807

5.72

2014/15

171,671,451

36,879,727

4.65

2015/16

221,246,824

32,265,850

6.86

Source: Annual report of BALIC

INTERPRETATION10:

49

Ratio
5.05

In The year 2012/13 working capital t/o ratio was5.05

time ,5.72 time in the year 2013/14. In the year 2013/14
the working capital has increases. And in financial year
2014/15 it decreased and again in financial year 204/15
it increased.

Table 11 :
Statement of changes in working Capital for the
year 2009/10
Particulars

31-3-2014

31-3-2015

Increase

639,948

1,089,070

449,122

Decrease

Current assets
Sundry debtors

Cash&
balance

bank 3,515,993

2,186,908

1,366,055

Loan& advance

76,970

130,275

53,310

Other C.A

1,148,475

2,022,560

834,085

Total 5,381,386

5,298,538

1,336,517

1,366,055

Current
Liabilities
Sundry creditors

2,249,357

3,701,079

1,451,722

Deposit

3,318,900

4,129,900

811,000

Bills payable

87,607

196,168

108,561

Other C.L

2,396,492

95,072

2,491,564

50

Total 8,052,356

10,518,711

2,466,355

INTERPRETATION 11:
Current assets for the year 2009/10 is increases and it is
good condition for the company and current
liabilities of the company is increased by
2,466,355.and by putting formula (W.C= C.AC.L)working capital of the company for year
2014/15 is 4,470,970. Here working capital of
company is increasing that means profitability of
company also increasing.
Table 12:
Statement of changes in working Capital for the
year 2m, 2014/15
Particulars

31-3-2014

31-3-2015

Increase

1,089,070

1,341,359

298,850

bank 2,186,908

4,285,098

2,198,190

Decrease

Current assets
Sundry debtors
Cash&
balance

Loan& advance

130,275

147,078

16,803

Other C.A

2,022,560

2,344,020

468,538

Total 5,298,538

8,217,555

2,982,381

Current
Liabilities
Sundry creditors

3,701,079

3,281,079

Deposit

4,129,900

4,430,900

51

420,000
301,000

Bills Payable
Other C.L

196,168

98,372

97,796

2,491,564

1,690,564

801,000

Total 10,518,711

9,500,915

301,000

1,318,796

INTERPRETATION12:
Current assets for the year 2014/15 is increases and it is
good condition for the company and current liabilities of
the company is decreased by 1,017,796 thats shows the
working capital of the company is increased. Here
debtors increased means cash balance of company
decreased.
Table 13:
Statement of changes in working Capital for the
year 2015/16
Particulars

31-3-2011

31-3-2012

Increase

1,341,359

1,223,706

bank 4,285,098

4,520,165

235,067

Decrease

Current assets
Sundry debtors
Cash&
balance

117,653

Loan& advance

147,078

170,660

23,582

Other C.A

2,344,020

3,832,457

1,488,437

Total 8,217,555

9,746,988

1,747,086

Current
liabilities

52

117,653

Sundry
creditors

3,281,079

4,246,449

765,370

Deposit

4,430,900

4,142,491

98,372

97,087

1,690,564

2,368,827

678,263

10,654,854

1,443,633

Bills payable
Other C.L

Total 9,500,915

1,285

INTERPRETATION13:
Current assets for the year 2014/15 is increases and it is
good condition for the company and current liabilities of
the company is increased by 1,153,939 thats shows
working capital of company decreased. Here debtors
decreased thats good for company it shows cash of
company increased.

53

288,409

289,694

FINDINGS
1. Current assets for the year 2013/14 is decreases
and its application for the company and current
liabilities of the company is increased by
2,466,355.and by putting formula (W.C= C.A- C.L)
working capital of the company for year 2013/14 is
4,470,970.
2. Current assets for the year 2009/10 is increases
and it is good condition for the company and
current liabilities of the company is decreased by
1,017,796 thats shows the working capital of the
company is increased. Here debtors increased
means cash balance of company decreased.
3. Current assets for the year 2013/14 is increases
and it is good condition for the company and
current liabilities of the company is increased by
1,153,939 thats shows working capital of
company decreased. Here debtors decreased
thats good for company it shows cash of company
increased.
4. Current ratio (C.R) of fiscal year 2012/13 to
2013/14 showed slightly increase i.e. 0.67 to 0.91.
But in fiscal year 2014/15 C.R decreased

54

comparatively in deposits and in fiscal year

2010/11 C.R is again increase 0.86 due to increase
in factors which influence it.
5. Cash and Bank balance to current assets ratio of
the company is in 2013/14 decreased and in
2014/15 it increased and again in 2015/16 is
decreased.
6. The above figure depicts that the cash and bank
balance to total deposit of BALIC has been slightly
decreasing in FY 2013/14, 2014/15, 2015/16.
7. Net profit to total asset ratio in 2012/13 1.05 and it
increasing slightly in financial year 2013/14,
2014/15 and 2015/16.
8. The debtors turnover ratio was very less in the
year 2014/15 at 4.72 times, but them it has
increased to 5.19, 5.66 times in the year 2013/14
and 2012-13. This shows that the company is
making all the offers to speed up the collection
process.
9. The creditors turnover ratio was 1.17 times in the
year 2012/13& decreased to 1.13 times in the year
2013-2014 but creditor turnover will be remain
same two year 2014/15 and 2015/16.
10.
In The year 2012/13 working capital t/o ratio
was5.05 time, 5.72 time in the year 2013/14. In
the year 2012/13 the working capital has
increases. And in financial year 2014/15 decreased
and again in financial year 2015/16 increased.

55

SUGGESTION
On the basis of the analysis and observation an
attempt made to present some suggestions.

1. In the year 2013-2014 the current assets of the

company has declined and current liability of the
company has increases therefore the net working
capital declined. There for the current ratio has

56

declined. The net working capital of the company

has increased remaining year.

2. The company has able to repay the liability of the

creditors because the profit of the company has
increased every year.

3. Because of the current assets has declined in the

year 2010-2011 but profit of the company has
increased in the year 2012-2013. There for the
return on current assets is high.

4. Company has able to full fill the standard level of

current ratio i.e. 2:1 .There for the company has
able to repay the liability and loan of company.

CONCLUSION
At the end it is stated that the working capital
management is a part of money invested in the
business. Working capital may be regarded as lifeblood

57

of a business. Its effective provision can do much to

ensure the success of a business.
The Working Capital Management contributes much in
the overall management of the organization affairs,
efficiency of organization operations depend on how it
manages its short term business dealings. Working
Capital management contributes for the firm efficiency
as well as the finance manager is proper utilizing the
available wealth and maintaining the required liquidity.
Working capital is considered to be an
important

tool

for

progress.

Working

capital

management techniques are playing significant role in

assisting the management for decision making. The
study of working capital management at Bajaj Allianz
Life Insurance Pvt. Ltd.Is found to be very effective. The
working capital contains the management of Cash,
Debtors, and creditors. The Bajaj Allianz Life Insurance
Pvt. Ltd has profit oriented company .The profit of the
company will be increases every year .The company has
able to the repay the amount of the creditor.

The

company has more working capital and also sale has

increases year to year.

58

LIMITATIONS
1. The analysis is limited to three years of data study
(for the year 2012/13 to 2015/16) for financial
analysis.
2. The

estimation

financial

and

statements

expectation
may

differ

made

in

from

the

actual

performance due to various economic conditions,

government policies and other related factors.
3. All the data accumulated and presented in this
project is procured from secondary sources which
may have been subject to stealthy biased nature.

59