Study of Working Capital Management at Spark Minda

(Approved by AICTE, Govt. of India)

PREFACE

Having a practical knowledge about the different thesis is as important as to understand the
concepts. We can learn theories, but until and unless we apply them, we cannot understand
the purpose of learning.

Theoretical exposure build-up a path which we can apply in our practical world. The Summer
internship program connects us to the real world closely, which has a wide influence on our
perceptions, concepts, thoughts and our learning. In this report, I had a golden opportunity to
do the summer internship with SPARK MINDA for two months. It leads to the enhancement
of professional and personal skills.

The present report is an outcome of two months' training on the topic of “Working Capital
Management”. The main objective of the report is to connect a student with the real-world of
corporate and familiarize us with the implementation of the knowledge which we have
learned on the campus.

The Summer internship report is a crucial path for every management student. Every
management student has to do research related to the topic.

This project has offered an opportunity to put all an effort, theoretical knowledge,
understanding of different concepts and it also helped to enhance knowledge.

In this report, each and every work was done with dedication. The report has tried to cover
every aspect which will support the study.

In two months, journey, the report helped to learn not only about finance but also about the
HR department.

Spark Minda is a trading company. In their premises, they have an assembly lines, where they
assemble their products and supply to Business partners and to the customers.

In the starting phase, Intern got to know more about the company. The privilege to visit their
Delhi NCR market. Which was more about their products, how exactly they deal with their
customers, who are their ultimate customers and how they cover their market. In this, Intern
got to know how actually markets work, what type of schemes they use to attract their
customers to gain the market share and the ultimate main point of how well they can satisfy
the customers.

During the internship, the evaluation of Trial balance and calculation of working capital with
respect to different months was carried out. To support the study analysis, the ratios were
analysed through available data. Then the comparison was done with other top listed
companies for better understanding with the help of financial statements of 2018-2019.

Understanding of sales policy, which somehow is the backbone of an organization was

done for better clarification. It also helps to tackle their sales and flow of cash.

Apart from this, the second phase came with an understanding of BRS (Bank Reconciliation
Statement). BRS is considered to be the crucial part so the understanding was must and how
actually companies make BRS on a daily basis with the help of their BAN software and E-
statements made this journey interested. Being an intern, it is not possible to work on BRS
practically as they make BRS on a daily basis and no one can do entries again. One person is
assigned to this profile who can take care of BRS. The second phase of the journey is
concerned with The HR department who gave the privilege to learn more. They gave a
chance to interact with new people. In this report different projects are mentioned which was
a part of CSR activity. Meeting with NGO, with the Deputy Manager of HR for the proposal
for their sustainability. Simultaneously writeup has been written that will publish in the
magazine of Spark Minda.

This project will majorly talk about the working capital, its components, factors, and the
analysis of ratios just to get an overview of how working capital and its components
affect the profitability of the company. At the end of the project, it is clearly specified, the
correlation between profitability, receivables period, inventory period, and payable periods.

The whole journey in Spark Minda was interesting.

EXECUTIVE SUMMARY

This report presents the findings of a study that was carried out to gain information, how we
can calculate the working capital, importance, usefulness, comparison and the current
scenario.

To measure the extent of relationship between liquidity and profitability of the company and
the comparison, with other companies and to examine the impact of inventory holding period,
receivables collection period, creditors payment period and the net working capital.

In this report, the actual base of my research is financial statements, balance sheet, Income
statement. All these are the actual base of my research.

Working capital is an important part of an organization. Every firm whether small, medium
or big needs finance to carry its own operations. A firm required to make balance between
liquidity and profitability while conducting day to day operations. Liquidity ensures that the
firm is able to meet its short-term obligations and continued the flow of cash.

What is working capital? To understand this, I had tried to relate the concept with Spark
Minda.

In Spark Minda, Trade Receivables period and Trade Payable period is 60 days. We have 15
days of working capital to operate the business.

Working capital management involves the relationship between a firm’s short and its short-
term liabilities.

From above point, we can easily understand, the management of working capital involves
managing inventories, accounts receivables, accounts payables and cash.

For further understanding, I have calculated the ratio for analysis. Whereby I have taken the
current ratio, receivables period, inventory turnover period and operating cycle

Comparison has been done with rival companies. Uno Minda and JBM group.

Spark Minda is an automotive industry. where they are dealing in aftermarket where they
cover 2-wheeler, tractors and 4-wheeler. There are 12 products and Locks, Wiring Harness
and Instruments. Total revenue of the company is Rs. 30,920. They observed the growth of
19.8%.
In this report I have covered the finance department of the company. Where I tried to
understand the sales policies of the company, the procedure of the debtors, the basic
knowledge regarding Bank Reconciliation Statement.

Spark Minda is a trading company where finance works as a support system. Most of the
department handle Debtors of the company.

Working capital is a main origin for every company. It contains proportion balance of
working capital components i.e., Debtors, Inventory and Payables and use of cash effectively.

There is a strong link between working capital and profitability of the company. Company’s
sales policies are designed is such a way that they attract debtors to pay amount within a
prescribed date.

Company provides cash discount, if the distributor completing the payment within 21 days
with the discount of 2.15%

And there is monthly CD bonus of 0.25%, if the company getting payment within 7 days
from the date

This helps a company to receive the payments within 45 days. And they have a credit period
of 60 days, in this way they have 15 days of working capital.

This report is an outcome of my study for working capital in Minda to support my thesis, I
have taken Trial balance of the company month wise for the period of 2018-2019. In this, I
covered every ratio which could be related to the profitability of the company. I have
calculated the Working capital ratio, current ratio, Debt equity ratio, Receivables period,
inventory turnover period and payable period.

Ratio analysis talk about the company’s liquidity power, its efficiency and the profitability.
Through this we can relate working capital and profitability for better understanding.

At the end of the report I have done the comparison with two other companies, to relate the
Spark Minda’s performance. And their market appearance as compared to rivalry companies.
OBJECTIVE OF THE STUDY

 To analyse the trend of the company with the help of ratio analysis on a month data
 To find out the impact of components on profitability of the firm

RESEARCH METHODOLOGY

A descriptive research technique is carried to study the working capital management of

the firm.

Financial ratio and statistical techniques like correlation and multi -regression analysis is
conducted to infer the relation between working capital components and profit of the
firm.

PRIMARY DATA

Primary data is data that is collected by a researcher from first-hand sources, using
methods like surveys, interviews, or experiments. It is collected with the research
project in mind, directly from primary sources.

SECONDARY DATA:

Secondary data is data gathered from studies, surveys, or experiments that have been run
by other people or for other research.
CONCLUSION

This study has been done on the basis of the following objectives. In this the main objective
is to study the relationship between working capital and Profitability. After studying the
components of working capital management in Spark Minda Corporation.
It is found that the company has a sound and effective policy and its performance is good.
It is one of the top leading company in automotive industry.
Working capital of an organization is acceptable to operate its day to day operation.
Here the study tried to find out the relationship of three components, receivable period,
payable period and inventory period with profit.
For better analysis we tried to correlate these three components and multi regression (the
impact of these components) with profitability of the firm.
The correlation between profit and receivable period is 0.51.
The correlation between profit and inventory period is 0.5412.
The correlation between profit and payable period is 0.50.
It shows the strong positive relationship between profit and other three components. we
normally considered correlation above 0.4 to be relatively strong.
From multi regression analysis, we can see the impact of three components that is receivable
period, payable period and inventory period on profitability of the firm.
We can interpret that 80% impact on profit can be defined by these three components.
It clearly shows that the profitability of the company basically dependent on these factors and
rest is the error.