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Introduction:
Bank of India was founded on 7th September, 1906 by a group of eminent
businessmen from Mumbai. The Bank was under private ownership and control till July
1969 when it was nationalized along with 13 other banks.
Beginning with one office in Mumbai, with a paid-up capital of Rs.50 lakh and 50
employees, the Bank has made a rapid growth over the years and blossomed into a
mighty institution with a strong national presence and sizable international operations.
In business volume, the Bank occupies a premier position among the nationalized
banks.
The Bank has 4963 branches in India spread over all states/ union territories including
specialized branches. These branches are controlled through 54 Zonal Offices. There
are 60 branches/ offices and 5 Subsidiaries and 1 joint venture abroad.
should be taken off at regular intervals. It must show a sufficiently "liquid" position to
satisfy the banker that his loan can and will be repaid when due. To show this, there
must be an ample margin of quick assets (those readily convertible into cash) over
current liabilities to enable the borrower, despite any natural shrinkage of values in
liquidation, readily to meet his obligations..
Project Description:
Working capital management involves the relationship between a firms short-term
assets and its short-term liabilities. The goal of working capital management is to ensure
that a firm is able to continue its operation and that it has sufficient ability to satisfy
both maturing short-term debt and upcoming operational expenses. The management of
working capital involves managing inventories, accounts receivable and payable, and
cash.
The Working Capital comprises of Amount for raw material of various kind;
Amount of stock in progress;
Amount for all finish goods in store and in transit;
Amount for receivables or sundry debtors;
Other routine expenses;
Means to finance the Working Capital is:
1.
2.
3.
Any enterprise whether industrial, trading or other acquires two types of assets to run its
business as has already been emphasised time and again. It requires fixed assets which
are necessary for carrying on the production/business such as land and buildings, plant
and machinery, furniture and fixtures etc. For a going concern these assets are of
permanent nature and are not to be sold. The other types of assets required for day to day
working of a unit are known as current assets which are floating in nature and keep
changing during the course of business. It is these 'current assets' which are generally
referred to as 'working capital'. We are by now already aware of the short-term nature of
these assets which are classified as current assets. It may be noted here that there may not
be any fixed ratio between the fixed assets and floating assets for different projects as
their requirement would differ depending upon the nature of project. Big industrial
projects may require substantial investment in fixed assets and also large investment for
working capital. The trading units may not require heavy investment in fixed assets while
they may be carrying huge stocks in trade. The service units may hardly require any
working capital and all investment may be blocked in creation of fixed assets.
A set financing pattern is evolved to meet the requirement of a unit for acquisition of
fixed assets and current assets. Fixed assets are to be financed by owned funds and
long-term liabilities raised by a unit while current assets are partly financed by long-term
liabilities and partly by current liabilities and other short-term loans arranged by the unit
from the bank. The balance sheet of a unit under such dispensation may be represented as
in next page.
The total current assets with the firm may be taken as gross working capital whereas the
net working capital with the unit may be calculated as under:
Net Working Capital
(NWC)
= Current Assets
(GWC)
Current Liabilities
(including bank borrowings)
This net working capital is also sometimes referred to as 'liquid surplus' with the firm and
has been margin available for working capital requirements of the unit. Financing of
working capital has been the exclusive domain of commercial banks while they also grant
term loans for creation of fixed assets either on their own or in consortium with State
level/All India financial institutions. The financial institutions are also now considering
sanction of working capital loans.
The current assets in the example given in the earlier paragraph are financed asunder:
Current Assets =
Current liabilities + Working capital limits from banks + Margin
from long-term liabilities
CASH
Debtors
Overheads
Inventory
Sales
The main purpose of this ratio is to ascertain the relative stakes of the creditors i.e. the
owners of an enterprise.
Favorable Ratio for
Term liabilities to net Worth=2:1
Total Liability to Net Worth=3:1
For the sake of taxation laws, it is cheaper to raise money by way of loans etc., instead
of raising money by way of equity.
2.
Interest Coverage Ratio: EBIT/Interest
This ratio is widely used by lenders to assess a firms debt capacity. It is a major
determinant of bond rating. A high Interest Coverage ratio means that the firm can
easily meet its interest burden even if earnings before interest and taxes suffer a
considerable decline.
II. Liquidity Ratio:
Its objective is to find out whether the company will have sufficient cash and other
resources to meet the liabilities as and when they arise.
The two ratios generally computed. They are;
1)
This is an important liquidity ratio. It expresses the relationship between Current assets
and Current Liabilities. If the ratio is 1 or more than 1, it would mean that value of
current assets exceeds the Current Liabilities.
It show the earnings left to the shareholders as a % of Net sales. It measures the overall
efficiency of the firm.
IV. Inventory + Receivable/Sales
Completed Tasks:
25th April to 30nd May -2016-Introduction of Banking
2nd May to 7th May 2016-Gained Basic Knowledge about banking sector
9th May to 14th May 2016-Analysis of Balance Sheet
15th May to 21th May 2016- Analysis of Balance Sheet
23rd May to 28th May 2016-Reviewing Working Capital Limit
30th May to 4th June 2016- Reviewing Working Capital Limit
6th June to 13th June 2016-Reviewing working Capital Limit
Remaining Task
13th June to 20th June 2016-Making Proposal
20th June to 24th June 2016-Making Proposal
Refrence:
http://www.academia.edu/9871184/3.3_Functions_of_the_Credit_Department_of_Commercial_
Bank
http://www.bankofindia.co.in/english/history3.aspx
http://www.rushabhinfosoft.com/webpages/BHTML/CH-15.HTM
https://en.wikipedia.org/wiki/Balance_sheet
Guidance from the Book of Working Capital Management of the Bank.