A

PROJECT REPORT
ON
“Study of Capital Management
in Public Works”
1.1 INTRODUCTION:-

Financial management is that specialized branch of general

management, which is concerned, with, procurement of adequate finance and its
effective utilization for the achievement of common goals of organization. It
includes each and every aspects of financial activity in the business. Before we
take up the study of this subject let us have some idea about business finance,
and its importance.

BUSINESS finance: -

Finance have been aptly been called “The science of Money”. It studies the
principles and methods of obtaining of money from those who have saved it and
of administering it by those in to whose control it posses. Thus the finance is
process of conversion of accumulated funds to productive use.

Objectives of Financial Management:-

The main objectives of financial management aim at maintenance of adequate

liquid assets, with the firm to meet its obligations at all times. Liquidity is the
ability of enterprise to make available, the ready cash whenever required to make
disbursements.
A business firm is profit-seeking organization. Hence, profit organization is an
important objective of financial management. The fair profit is a sign of efficient,
effective and economical utilization of financial resources by the management.
Wealth Maximization means maximizing the net present of a course of action.
The net present value of a course action is the difference between the gross
present value of the benefits of the action and the amount of investment required
to achieve those benefits.

Scope of Financial Management:

Financial management as an academic discipline has undergone

significant changes over years as regards its scope & coverage. As such the role
of finance manager has also undergone fundamental changes over the years. To
understand financial management deeply we are followed the modern approach
which has various advantages over traditional approach.
Modern Approach:
The traditional approach outlived its utility due to the changed business
situations since mid 1950”s. Technological developments, innovations &
inventions, development of strong corporate structure, keen & healthy business
competitions, population growth & widened markets, etc, during & after mid
1950”s necessitated the efficient & effective utilization of the firms resources,
including financial resources. Development of management skills & decision-
making techniques facilitated to implement, a system of optimum allocation of
firms resources. As a result, the approach to & the scope of financial
management also changed. The emphasis shifted from raising of funds to
efficient & effective use of funds.

Thus, according to modern approach, financial management is concerned

with both acquisition of funds, as well as their allocation. The new approach
views the term financial management in broader sense. In this sense, the central
issue of financial policy is the wise use of the funds. The modern approach is an
analytical way of looking at the financial problem of a firm.
1.2 OBJECTIVES OF STUDY: -
1. To study the existing procedure of the fulfillment of government
tenders.

2. To understand the capital required investing in such kind of projects

related to public work.

3. To make aware to any organization about how to arrange the finance

required for the accomplishment of the work

4. To understand whether the profit is gained or the organization is in

loss.

5. To test the correlation between working capital & profitability of Ace

construction

6. To make suggestions if necessary.

1.3 SCOPE OF STUDY: -

1. This study is limited for only one firm i.e. ACE CONSTRUCTION.

2. This study is done only to understand the process and procedure

followed by ACE CONSTRUCTION

3. Period covered is 30 days.

RESEARCH METHODOLOGY:-

Research methodology is the base of any project. It helps to do the

systematic study of the subject. Research method includes the way in
which the study is processed. It shows the procedure and material used
for doing the study and getting the results.

The method and technique used for the study are as follows:
 A. SELECTION OF TOPIC:-

The topic was selected after understanding the requirement of

documentation for reference to other organizations to understand the
financial status required while initiating these kinds of government
related projects. The methodology of the study includes the data
collected from the accountant, the proprietor, the site supervisor and
the labours at work.

B. SOURCES OF DATA COLLECTION:-

1. PRIMARY DATA: -

For the collection of primary data, researcher has used the

questioner method with employees, workers in each department of the
organization.

2. SECONDARY DATA: -

The secondary data is available already, which has been collected

and analyzed by someone else. The secondary data is helpful in
understanding about the firm over the past years. The secondary data is
collected by firm’s annual reports, record manuals, and reference books,
web sites, Internet to get proper information, data, and profile.

Chapter 2
Company Profile

Chapter 3
Conceptual Framework
3.1 Working Capital: -

1.1 Introduction
Working Capital:-

The capital requirement of the business enterprise can broadly classified in 2

categories: -
1. Fixed Capital Requirement
2. Working Capital Requirement

The term “Working Capital” stands for that part of capital, which is required for
financing of working or current needs of company. Apart of investment in fixed
assets, every enterprise has to arrange for adequate funds for meeting the day to
day expenditure. Working capital is usually invested in raw materials, in stock of
partly finished products in accounts receivable, in saleable securities and cash.
This cash flows out again in exchange for other forms of working capital. Thus it
is constantly “Revolving or Circulating”, hence it is also known as circulating
capital. It is also designed as short term capital because as compared to fixed
capital its investment is usually for short period.

Concept of Working Capital:-

There are two concepts regarding the working capital. According to one school of
the though, consisting of eminent writers like Lincoln Doris, Stevens and Saliers
states that working capital is excess of current liabilities. As designated in the
following equation : (Net concept of working capital)

Working Capital = current assets – current liabilities

According to the second school of thought supported by authority like E.S.Mead,

views that the working capital represents only the current capital assets (gross
concept of working capital)
Current assets are those, which are to be converted into cash within a
period not exceeding one year normally. The examples of current assets are :
Cash in hand and at bank, bills receivable, sundry debtors, inventories of all
kinds, prepaid expenses and accrued income.
Current liabilities are those, which are to be paid within a period not exceeding
one year normally out of current assets or income of the business. The examples
of current assets are: bills payable out standing expenses, sundry creditors, bank
overdraft, dividend payable etc.
Considering the above facts, in short we may say that, these two concepts
of working capital are two
“Circulating Capital means current assets of accompany that are changed in the
ordinary course of business, from one form to another, as for example from cash
to inventories, to receivable into cash”.
Working Capital is the amount of funds necessary to cover the cost of
operating the enterprise. Working Capital in a going concern is revolving fund, it
consists of cash receipts, from sales which are to cover the cost of current
operations”.
Working Capital of a business enterprise essentially entails a process of
conversion of cash into goods, in to cash, with intermediate stages of stocks,
sales, bills receivables and realization of cash.

Importance/Advantages of Working Capital:-

Adequacy of working capital is a source of strength and stability to the enterprise;

this is because the day to day working of the enterprise is facilitated by the
availability of adequate working capital. The adequacy of working capital is the
lifeblood and controlling newer center of a business. No concern can be
successful without an adequate of working capital.
The important advantages of having a sufficient amount of working capital
may be enumerated as follows: -
1. Adequacy of Working Capital creates a feeling of security and confidence.
2.Adequacy of working capital is a must for maintaining Solvency and continuous
Production.
3.It helps in creation of sound goodwill.
4.Easy availability of Cash Discount
5.Steady work for employees and efficiency in production
6.Easy loans from banks
7.Period of slum can easily overcome.
8.Facility of off season purchasing
9.Quick and steady return to the investors
10.Better market opportunities
11.General rise in management morale

Factors determining Working Capital Requirements: -

 The amount of working capital depends upon the nature of the business.
Depending upon the size of the business the amount required changes
correspondingly.
 Size of business unit is also an important factor for determining the total
working capital.

Findings of the study:

The below findings are based on the data analysis and

interpretation. Suggestions are also given wherever researcher feels it
necessary.
1. One of the important findings is that as the company deals with the
government sectors, the bills received are on time and there is no
bargaining matter.
2. If the work is done upto their satisfaction, the company receives Optimum
profit which motivates them to be loyal towards the government
3. One more positive point is that it has many facilities and from government
and there is no interference of any private companies
4. A lot of competitive market is developed due to the number of increasing
contractors to acquire the projects
SUGGESTIONS:

1) At present company almost deals with Government related projects. It has

not yet entered deep into private projects; it is recommended that they
should also concentrate on private sectors.
2) As the work is related to Government, the company has to pay certain
deposit for security purpose. But if the work is in private sector the
company can ask for some advance payments so that they don’t need to
invest to their working capital. Instead they can invest in other words.
3) The company has to accept future dated cheques, bills receivables etc
from the debtors.
4) The company has to keep close look on expenses because it is reason of
very low profit.
5) There is need to increase capital limit (amount) are very low and debt are
more.

Chapter 5
DATA INTERPRETATION :-

PROJECT REPORT OF 'M/S. ACE CONSTRUCTIONS'

PROJECTED INCOME & PROFITABILITY STATEMENT FOR 3 YEARS

(Amount in Rupees)
PARTICULARS I II III
INCOME
Contract Receipts 58,092,130 63,901,343 70,291,477
Pockland,Vehicle,Compressor Rent 2,400,000 2,640,000 2,904,000

TOTAL 60,492,130 66,541,343 73,195,477

EXPENDITURE
Purchase of Materials 14,000,000 16,660,000 19,492,200
Blasting Expenses 1,440,000 1,584,000 1,742,400
Machinery Diesel & Fuel Expenses 13,200,000 14,520,000 15,972,000
Pockland, Compressor etc. Rent 1,500,000 1,650,000 1,815,000
Salary to Operators & Helpers 1,440,000 1,500,000 1,600,000
Sub-Contracting Expenses 1,400,000 1,540,000 1,694,000
Site Expenses 460,000 506,000 556,600
Transport & Octroi 1,800,000 1,980,000 2,178,000
Wages & Labour Charges 11,300,000 12,769,000 14,045,900
Works Contract Tax 220,000 242,000 266,200
Total Direct Expenses 46,760,000 52,951,000 59,362,300
GROSS PROFIT C/F. 13,732,130 13,590,343 13,833,177
TOTAL 60,492,130 66,541,343 73,195,477

PROJECTED PROFITABILITY STATEMENT FOR 3 YEARS

(Amount in Rupees)
PARTICULARS I II III
GROSS PROFIT B/F. 13,732,130 13,590,343 13,833,177

Machinery Repairs &

Maintenance 1,500,000 1,725,000 2,052,750
Car Petrol & Maintenance 320,000 352,000 394,240
Machinery & Vehicle Insurance 370,000 421,800 485,070
Bank Commission & Charges 240,000 264,000 290,400
Telephone & Mobile Charges 60,000 66,000 72,600
Electricity Charges 24,000 26,400 29,040
Office Expenses 36,000 39,600 43,560
Printing & Stationery 24,000 26,400 29,040
Salary to Office Staff 420,000 420,000 450,000
Travelling & Conveyance 150,000 165,000 181,500
Tender Form Fees 84,000 92,400 101,640
Accounting Charges 20,000 20,000 24,000
Audit & Consultation Fees 45,000 45,000 50,000
Bank Interest on Existing Loans 1,509,949 1,236,000 948,000
Interest on Bank Cash Credit 2,062,500 2,062,500 2,062,500
Depreciation 3,020,124 2,565,638 2,180,716
Interest on Capital 1,265,464 1,608,522 1,978,367

TOTAL EXPENDITURE 11,151,038 11,136,260 11,373,423

PROFIT BEFORE SALARY 2,581,092 2,454,083 2,459,754

SALARY TO PARTNERS 240,000 240,000 240,000
NET PROFIT BEFORE TAX 2,341,092 2,214,083 2,219,754
INCOME TAX 795,737 752,567 754,494
NET PROFIT AFTER TAX 1,545,355 1,461,516 1,465,260

GP RATIO 22.70 20.42 18.90

NP RATIO
[[
11.35 9.96 9.04
Calculations to determine the Gross Profit and Net Profit :-

STATEMENT SHOWING CALCULATION OF WORKING CAPITAL :-

(A
PARTICULARS JAN. 08 FEB. 08 MAR. 08 APL. 08 MAY. 08 JUN. 08 T

Project 1
Raw Materials 253750 253750 253750 253750 253750 253750
Transportation Charges 32000 32000 32000 32000 32000 32000 1
Wages & Labour Charges 600000 600000 600000 600000 600000 600000 3
Petrol, Diesel etc. for Machines 855000 855000 855000 855000 855000 855000 5
Blasting Expenses 290000 290000 290000 290000 290000 290000 1
Total Amount Invested [ B ] 2030750 2030750 2030750 2030750 2030750 2030750 1

Total Working Capital Required 2030750 2030750 2030750 2030750 2030750 2030750 1

Less: Sundry Creditors 850000 850000 850000 850000 850000 850000 5

Net Working Capital Required 4247750 4247750 4247750 4247750 4247750 4247750 2

75% of Working Capital 3185813 3185813 3185813 3185813 3185813 3185813 1

Working Capital Finance Required 2500000 2500000 2500000 2500000 2500000 2500000 1
CONCLUSION

1. The conducted study reveals that recruitment & selection procedure is the
most important, function, which employee’s right person on right job.
2. It is most important for the smooth running of organization.
3. Written examinations, job test, personal interviews etc are the steps, which
make recruitment and selection procedure effective, sound & defect less.
4. Since, recruitment and selection procedure in the organization is the traditional
one, but it is sound and defect less. Hence, it is vital reason behind the success
of this organization