Working Capital Management HCL Infosystems - 122559769

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 ever-
increasing 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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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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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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(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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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 Company Hardware Revenues

1 Hp 85,393
2 Samsung 74,763
3 Foxconn 61,800
4 Nokia 46,412
5 Dell 44,877
6 Toshiba 44,242
7 Intel 36,320
8 LG Electronics 33,429
9 Cisco 32,840
10 Canon 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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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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 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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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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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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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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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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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
DIRECTORS 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
COMPANY SECRETARY Mr. Sushil Kumar Jain
CHIEF FINANCIAL OFFICER Mr. Sandeep Kanwar

BANKERS State Bank of India
Canara Bank
HDFC Bank Ltd.
ICICI Bank Ltd.
Societe Generale
Standard Chartered Bank
State Bank of Patiala
AUDITORS Price Waterhouse, New Delhi
REGISTERED OFFICE 806, Siddharth, 27, 96

Nehru Place, New Delhi -19.
CORPORATE OFFICE E - 4, 5, 6, Sector XI, Noida-201
WORKS R.S. Nos: 34/4 to 34/7 and part of 34/1,

Sedarapet, Puducherry - 605 111.
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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 Installed Capacity

Puducherry manufacturing facility 1.0 million computers
Uttarakhand manufacturing facility 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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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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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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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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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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MILESTONES:
-Hindustan computers limited is born.

1976
-First 4-Bit Micro Processor based scientific computer made by HCL labs.
-Successfully ships in house designed microcomputers at the same time as
1978
apple.
-Indigenously develops an RDBMS, a networking OS and client server
1983
architecture in the same period as global IT peers.
1985 -HCL launched country’s first Desktop enterprise PC brand-Busy Bee.
-HCL Frontline division setup to address the emerging market for home
1993
computers.
1995 -HCL launches HCL Beanstalk-India’s First Multi-Media Home Computers.
2000 -HCL Infinet launches with the announcement of the national ISP/NLD policy.
-HCL Infosystems becomes the first company to cross the 100k unit milestone
2003 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
2004
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.
2005 -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.
2006
-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.
2007
-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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-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.
2008 -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.
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.
OTHER TOP-LEVEL RECOGNITIONSAWARDED TO THE COMPANY

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
awards2008-09. He was also ranked third in the power list of 75 most powerful brand
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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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 are:-
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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
BASIS OF TIME
CONCEPT
GROSS
NET WORKING PERMANENT TEMPORARY /
WORKING
CAPITAL /FIXED WC VARIABLE WC
CAPITAL
REGULAR REERVE SEASONAL SPECIAL

WC WC WC WC
CONCEPT OF WORKING CAPITAL
There are two concepts of working capital:

1. Gross working capital
2. 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. Prepaid expenses
8. 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. Nature of the industry.
2. Demand of industry.
3. Cash requirements.
4. Nature of business.
5. Manufacturing time.
6. Volume of sales.
7. Terms of purchase and sales.
8. Inventory turnover.
9. 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. It is concerned with the decision about the composition and level of current assets.
3. 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. Ratio analysis.
2. Fund flow analysis.
3. 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 RAW
RECIEVABLE MATERIAL
FINISHED
WIP
GOODS
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 long-
term 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 Working
Capital Capital
Preliminary
Raw Material
Expenses
Purcase of
Inventories
Fixed Assets
Fixed working Goods in

capital process
Establishment
others
work exp.
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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 Short-term source
(Fixed working capital) (Temporary working capital)
a) Loan from financial institution a) Factoring
b) Floating of Debentures b) Bill discounting
c) Accepting public deposits c) Bank overdraft
d) Issue of shares 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:
Sales/cost of Sales
Working Capital turnover ratio = _______________
Net working Capital
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 Amount (Rs) Amount (Rs)
Current assets:
Inventories 469.61
Sundry debtors 703.30
Cash & Bank Balance 214.92
Other Current assets 97.25
Loans & advance 55.49
Total Current assets (a) 1542.57 1542.57
Less: Current Liabilities:
Current liability 1086.70
Provisions 56.14
Total Current liabilities (b) 1142.84 1142.84
Net Working capital (a-b) 399.73
Add : Contingency 10.25
Average working capital 409.98
Required
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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Current assets:
Inventories 791.88
Loans& advance 67.86
Provisions 80.88
add : Contingency 27.74
Required
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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Current assets:
Inventories 898.53
Provisions 69.15
Required
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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Current assets:
Inventories 889.09
Provisions 78.33
Required
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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Current assets:
Inventories 839.57
Provisions 128.57
Required
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 Net working capital (Rs)

2005-06 409.98
2006-07 712.98
2007-08 1025.3
2008-09 941.25
2009-10 1312.54
Net working capital

1400
1312.54
1200
1000 1025.3
941.25
800
712.98
600 net working capital
400 409.98
200
0
2005-06 2006-07 2007-08 2008-09 2009-10
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 current asset current liabilities Ratio
2005-06 1542.57 1142.84 1.35
2006-07 2160.53 1475.29 1.46
2007-08 2704.52 1712.51 1.58
2008-09 2911.59 2013.73 1.45
2009-10 3614.57 2355.83 1.53
Average 1.47
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Current Ratio
1.6
1.58
1.55
1.53
1.5
1.45 1.46 1.45
1.4
Ratio
1.35 1.35
1.3
1.25
1.2
2005-06 2006-07 2007-08 2008-09 2009-10
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 Liquid assets Current liabilities Ratio
2005-06 1072.96 1142.84 0.94
2006-07 1368.65 1475.29 0.93
2007-08 1805.99 1712.51 1.05
2008-09 2022.5 2013.73 1
2009-10 2775 2355.83 1.18
Average 1.02
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Liquid Ratio
1.4
1.2 1.18
1 1.05
1
0.94 0.93
0.8
0.6 Ratio
0.4
0.2
0
2005-06 2006-07 2007-08 2008-09 2009-10
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, 2008-
09 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

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

0.2
0.19
0.18
0.16
0.14
0.13 0.13
0.12 0.12
0.1 0.1
Ratio
0.08
0.06
0.04
0.02
0
2005-06 2006-07 2007-08 2008-09 2009-10
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 2009-
10. 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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Infosystems Ltd
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
Components of total long term Debt = loans and financial obligations
Debt Equity Ratio the period from 2005-06 to 2009-10

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

0.4
0.35 0.36
0.3 0.29 0.28

0.25
0.2 0.2
Ratio
0.15 0.14
0.1
0.05
0
2005-06 2006-07 2007-08 2008-09 2009-10
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 long-
term 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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Infosystems Ltd
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 Average Stock Ratio
sold
2005-06 10941.89 409.5 26.72
2006-07 10794.8 630.75 17.11
2007-08 10587.98 845.21 12.53
2008-09 10799.54 893.81 12.08
2009-10 10587.98 874.33 12.11
Average 16.11
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Infosystems Ltd
Stock turnover Ratio

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

ratio
2005-06 11402.16 409.98 27.81
2006-07 11721.79 712.98 16.44
2007-08 12489.36 1025.3 12.18
2008-09 12289.54 941.25 13.06
2009-10 12114.44 1312.54 9.23
Average 15.74
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Infosystems Ltd
working capital turnoverRatio

30.00
27.81
25.00
20.00
16.44
15.00
13.06 Ratio
12.18
10.00 9.23
5.00
0.00
2005-06 2006-07 2007-08 2008-09 2009-10
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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Infosystems Ltd
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.
𝑆𝑎𝑙𝑒𝑠
Debtor turnover ratio =
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐷𝑒𝑏𝑡𝑜𝑟𝑠
Components sales in hcl = gross business income – exercise duty
Debtor Turnover Ratio the period from 2005-06 to 2009-10
Year Sales Average Debtors Ratio
2005-06 11402.16 618.85 18.42
2006-07 11721.79 855.26 13.71
2007-08 12489.36 1126.65 11.09
2008-09 12289.54 1377.19 8.92
2009-10 12114.44 3473.62 3.49
Average 11.126
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Infosystems Ltd
Debtors turnover Ratio

20
18 18.42
16
14 13.71
12
11.09
10
8.92 Ratio
8
6
4 3.49
2
0
2005-06 2006-07 2007-08 2008-09 2009-10
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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Infosystems Ltd
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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Infosystems Ltd
 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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Infosystems Ltd
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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Infosystems Ltd
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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WORKING CAPITAL MANAGEMENT OF HCL

Indian hardware product scenario looking up

Hardware industry growth

Domestic market focus

TVS-E Sprint, an "all-in-one" integrated hardware platform for automation of

It is a well-known fact that hardware product development requires heavy investments

Developing a top-notch development team

The foremost challenge for Indian hardware manufacturers is to assemble an excellent

Developing a world class product

To be successful in India and, gradually, in the global market, Indian hardware

Branding the product

The Current Scenario

Report on IT Hardware Development Production and Export

The immediate need is to work towards strengthening existing hardware clusters in

MAJOR PLAYERS OF HARDWARE MARKET IN INDIA:

Rank Company Hardware Revenues

HCL POSITION IN HARDWARE MARKET:

SCOPE OF THE STUDY:

NEED OF THE STUDY:

A systematic financial analysis of accounting figure helps to analysis the probable

OBJECTIVES OF THE STUDY:

 To determine the amount of working capital requirement and to calculate various

 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

 To know how the working capital is being financed

 To know the overall operational efficiently and performance of Devaki group of

 To interpret the financial position of the company.

PURPOSE OF THE STUDY

LIMITATIONS OF THE STUDY

TOOLS USED FOR THE STUDY:

1. WORKING CAPITAL CALCULATION

Hindustan Computers Limited

HCL INFOSYSTEMS LTD

 Nothing transforms life like education.

The range of offerings span Product Engineering and Technology Development,

BOARD OF DIRECTORS Chairman & Chief Executive Officer

DIRECTORS Mr. S. Bhattacharya,

COMPANY SECRETARY Mr. Sushil Kumar Jain

CHIEF FINANCIAL OFFICER Mr. Sandeep Kanwar

AUDITORS Price Waterhouse, New Delhi

REGISTERED OFFICE 806, Siddharth, 27, 96

CORPORATE OFFICE E - 4, 5, 6, Sector XI, Noida-201

WORKS R.S. Nos: 34/4 to 34/7 and part of 34/1,

R.S. Nos: 107/5, 6 & 7, Main Road,

OUR MANUFACTURING FACILITIES:

With four states- of - the -art manufacturing facilities -2 at Puducherry, 1 at Chennai

Manufacturing Facilities Installed Capacity

Uttarakhand manufacturing facility 1.0 million computers

Driven by a strong Manufacturing Objective

HCL’s products range encompasses Notebooks, Desktops, Business servers,

QUALITY AT HCL INFOSYSTEMS LTD

The history of structured quality implementation in HCL Infosystems began in the

Our certifications / awards in 2003 include ISO 9001-2000 by Bureau Veritas

The tryst for continuous quality improvement is never-ending in HCL Infosystems.

OUR SERVICE SUPPORT NETWORKS:

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.

 200 seat training centre with state of the art labs.