A

SUMMER INTERNSHIP PROJECT REPORT

ON

“A -STUDY OF WORKING CAPITAL FOR THE YEAR 2018-19 V –MART

RETAIL PVT. LTD”

for the partial fulfilment of the requirement

for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

2018-20
SUBMITTED TO: SUBMITTED BY:

Dr. SHRUTI SRIVASTAVA SANTOSH KUMAR VERMA

MANGALMAY INSTITUTE OF MANAGEMENT & TECHNOLOGY

GREATER NOIDA (U.P.)

Dr. A.P.J. ABDUL KALAM TECHNICAL UNIVERSITY,

LUCKNOW
1
 Certificate

This is to certify that Mr. SANTOSH KUMAR VERMA University Roll No. 1815270099 is a
regular student of MBA 2nd year, full time degree course at out institute. His/her Project Report
work titled, ‘A-STUDY OF WORKING CAPITAL FOR THE YEAR 2018-19 V-MART
RETAILS PVT.LTD.’ submitted as part of the curriculum for the award of the degree of Master
of Business Administration from Dr. A.P.J. ABDUL KALAM TECHNICAL UNIVERSITY,
LUCKNOW, is an original work done by him/her. This work has not been submitted earlier in
any form partially or fully to this or any other Institute/University for any degree or diploma.

(Dr.Shruti Srivastava) (Dr. Amit Gupta)

Supervisor Head of Department

2
 Student Declaration

I,Santosh Kumar Verma bearing University Roll No. 1815270099 of APJ University, Lucknow,
enrolled as student of MBA at Mangalmay Institute of Management & Technology, Greater
Noida, solemnly declare that the project report titled A Study Of Working Capital For The Year
2018-19 V –Mart Retails Pvt.Ltd. ’ embodies the results of original research work carried out by
me and the same has not been submitted in any form partially or fully for award of any diploma
or degree of this or any other University/Institute.

(Santosh Kumar verma )

Roll No.:1815270099

3
 PREFACE

Summer training is essential to get the practical orientation of theoretical knowledge and analysis
of the business realities at the corporate level .These 1month 15 Days training procedure made
me understand the working culture of the business organization.The summer training in V-Mart
Retail limited had been a challenging and exciting experience which brought me closer to the
business organization.My topic is Ascertainment of Working Capital Requirement of V-Mart
Retail Limited for the Financial Year 2019-20( Clothes and Speciality product division ) in V-
Mart retail Ltd.near Vodafone store civil line road Azamgarh (U.P).

4
 TABLE OF CONTENTS

S No. CONTENT PAGE

NUMBER

1 TITLE 1
2 CERTIFICATE 2
3 STUDENT DECLARATION 3
4 PREFACE 4

5 CHAPTER -1 INTRODUCTION 7

6 *HISTORY OF V-MART PVT.LTD. 9

7 *ABOUTN THE COMPANY 10
8 *PRODUCT 13-14
9 *BOARD OF DIRECTORS 15
10 *ORGANIATIONAL STRUCTURE 16

11 CHAPTER-2 LITERATURE REVIEW 17-29

12 CHAPTER-3 STUDY OF WORKING CAPITAL 30

13 *INTRODUTION OF WORKING CAPITAL 31

14 *SINIFICATION OF WORKING CAPITAL 32-33
15 *CLASSIFICATION OF WORKING CAPITAL 34-35
16 *FINANCING OF WORKING CAPITAL 36
17 *FACTORS DETERMINING OF WORKING CAPITAL 37-38
18 *WORKIN CAITAL CYCLE 39
19 *SOURCE OF WORKING CAPITAL 40
20 *V-MART FINANCIAL PERFORMANCE 41
21 *WORKIN CAPITAL POSITION 42-46
22 *WORKING CAPITALCASH MANAGEMENT 47-49
23 *WORKING CAPITAL CASH/FUND MANAGEMENT 50-51
24 *CASH MANAGEMENT CYCLE 52
25 *DEBTORS MANAGEMENT 53-54

26 CHAPTER-4 RESEARCH METHODOLOGY 55

27 *SCOPE OF STUDY 56

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28 *OBJECTIVE OF STUDY -
29 *RESEARCH METHODOLOGY 57
30 *INTRODUCTION -
31 *TYPES OF RESEARCH -
32 *SOURCE OF DATA -
33 *PRIMARY DATA -
34 *SECONDARY DATA 58
35 *SAMPLIN DEGINE -
36 *TOOLS USE FOR ANALYSIS DATA -
37 LIMITATIONOF THE STUDY -

38 CHAPTER-5 DATA AND RATIO ANALYSIS 59-65

39 *STATEMENT OF WORKING CAPITAL DATA -

40 *CHANGES IN WORKING CAPITALOF COMPANY 66-70
41 *INTERPRETATION 71
42 *RATIO ANALYSIS 72-81
43 *ADVANTAGE OF RATIO ANALYSIS 82
44 *LIMITATION OF FINANCIAL RATIO 83-90
45 *FINDING 91
46 *SUGGETTIONS 92
47 *CONCLUSION 93

48 CHAPTER-6 RECOMMENDATION 94

49 CHAPTER-7 CONCLUSION 95

50 CHAPTER-8 BIBLIOGRAPHY 96-97

51 CHAPTER -9 QUESTIONAIRE 98-100

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7
CHAPTER 1

INTRODUCTION

8
A -STUDY OF WORKING CAPITAL MANAGEMENT
OF V-MART RETAILS PVT LTD.

9
10
 ABOUT THE COMPANY

Company was originally incorporated as Varin Commercial Private Limited under the
Companies Act, 1956 vide certificate of incorporation dated July 24, 2002 issued by the
Registrar of Companies, West Bengal. The name of our Company was subsequently changed to
V-Mart Retail Private Limited vide a fresh Certificate of Incorporation Consequent upon Change
of Name dated July 11, 2006 issued by the Registrar of Companies, West Bengal. The registered
office of our Company was changed from the state of West Bengal to Delhi vide an order dated
April 27, 2007 of the Company Law Board, Eastern Region Bench at Kolkata, and subsequently,
a Certificate of Registration of the Company Law Board order for Change of State dated May 22,
2007 was issued by the Registrar of Companies, National Capital Territory of Delhi and
Haryana. Company‟s name was changed to V-Mart Retail Limited upon conversion into a
public limited company vide a Fresh Certificate of Incorporation Consequent upon Change of
Name on Conversion to a Public Limited Company dated July 11, 2008 issued by the Registrar
of Companies, National Capital Territory of Delhi and Haryana. The Corporate Identification
Number (“CIN”) of Company is

. Registered Office: F-11, Udyog Nagar

Industrial Area, Peeragarhi, Rohtak Road, New Delhi – 110 041, India Tel: +91 11 4525 4444;
Fax: +91 11 4525 4429; Email: compliance@vmart.co.in; Website: www.vmart.co.in Company
Secretary and Compliance Officer: Yogesh Bhardwaj

V-Mart Retail Ltd retails readymade garments accessories etc. and is engaged inthe business of
Value Retailing through the chain of stores situated at various citiesin India. The company
operates its retail stores under the V-Mart brand.V-Maris one of the pioneers in setting up stores

11
across various small Indiantowns and cities including Sultanpur Ujjain Motihari. The company
primarilyoperates in Tier-II and Tier-III cities with a chain of 'value retail' departmental
storesoffering apparels general merchandise and kirana catering to the entire family. The
company has established stores in Metro Tier-I Tier-II and Tier-III cities which are primarily
located as standalone stores in high-street areas and shopping hubs ofsuch cities. The averagesize
of the store is approximately 8000 Sq. Ft. It followsthe concept of `value retailing' t target the
strata of the population belonging to the expanding `aspiring class' and `middle class' based on
customer's socio-economic conditions purchasing power demographic details and customer
trends.V-Mart Retail Ltd was originally incorporated as Varin Commercial Private Limited on
24th July 2002 in West Bengal. In October 2003 the company opened it's first store by the name
of 'V-Mart' at Ahmedabad Gujarat and currently own and operate 62 storesspread across 53
cities and 10 states and union territories with a total area of 5.06 lac Sq. Ft. Its stores are located
in New Delhi Gujarat Uttar Pradesh Bihar Punjab a Chandigarh Haryana Jammu and Kashmir
Rajasthan and Madhy Pradesh. The name of the company was subsequently changed to V-Mart
Retail Private Limitedon 11th July 2006. Its name was further changed to V-Mart Retail Limited
uponconversion into a public limited company on 11th July 2008.In February 2013 the company
successfully concluded the pubic issue of equity shares aggregatingto Rs. 36435 million. The
initial public offer of the company was subscribed 1.19 times. While the qualified institutional
buyers' portion in the offer was subscribed 1.52times the non-institutional investors and retail
investors segments were subscribed1.39 and 0.79 times respectively.During the financial year
ended 31 March 2014 the company opened 23 new stores under the brand V-Mart spread over
an area of712256 sq ft. During the year 3 stores were closed due to lower footfall poor sales and
nonprofit making. During the year under review the company implemented a space policy at the
stores with an objective of allocating space to the line of biz which has the higher propensity to
generate better returns on the space allocated. to strengthen its back-end and The company
continued front-end processes duringthe year by taking various initiatives. The three core focus
areas for the company were supply chain management capability building and investment in
infrastructure. During the year the company took on lease premises for a new warehouse.
Duringthe year under review the company organised various events so as to be in constanttouch
with the customers and get a better understanding of their needs.During the financial year ended
31 March 2015 the company opened 19 new stores under the brand V-Mart spread over an area

12
of 1.71 lacs sq. ft. During the year the companyalso completed the transition to a new
warehouse and corporate office keeping into account the existing and future growth.During the
financial year ended 31 March 2016 the company opened 17 new stores under the brand V-Mart
spread over an area of 1.48 lacs sq. ft. The company closed two stores during the year.During
the financial year ended 31 March 2017 the company continued with its existing approach to
endeavor to establish its growth pattern in the Retail Industry with a chain of stores under the V-
Mart brand in the north and eastern part of India.During the year the company opened 20 new
stores under the brand V-Mart which were spread over an area of 1.80 lacs sq. ft. The company
closed two stores during the year.During the financial year ended 31 March 2018 the company
opened 31 new stores under the brand V-Mart which were spread over an area of 2.4 Lac sq. ft.
The Company closed 1 store during the year. During the year under review thecompany
continued to focus on enhancing the capability of the organisation. During the year the company
ventured into Tier-IV towns for the first .

13
 PRODUCTS
Following products are sale by the V –Mart Retails Pvt. Ltd

14
V –Mart Retails shop allocated all over india in different cities.

15
 V –MART RETAILS PVT. LTD.COMPANY BOARD OF
DIRECTORS

1.Lalit Agarwal Chairman and Managing Director (CMD)

2. Madan Agarwal Whole Time Director

3. Aakash Moondhra Independent Director

4. Govind Shridhar Shrikhande Independent Director

5. Samir Misra Coo

6. Anand Agarwal Cfo

7. Rajan Sharma President – Sourcing & Procurement

8. Snehal Shah VP – Operations & Marketing

9. Srinivasan VP - Planning and Supply Chain

10. Ramesh Agarwal VP – Supply Chain Management & FMCG

11. Syed Akhtar Head, Skill Development Initiative

12. Ranjan Kumar VP, Strategy and Corporate Communication

13. Anjali Goel AVP – Human Resources

16
ORGANIZATIONAL
STRUCTURE

17
 CHAPTER 2

Literature Review

18
1.1 Introduction

This chapter provides both the theoretical framework and the discussion o f empirical
literature for the study and completed with an overview o f store image consumerbased
retailer equity research, with specific reference to empirical findings on the dimensions
and sub dimensions o f store image and consumer-based retailer equity and their
relevance in the current retail industry environment.

1.2 V –Mart Retails Pvt. Ltd.

Retailing is the final stage in the distribution process; hence retailing is a process of selling
goods and services to the final consumers for their personal, or their family’sconsumption.
Retailing is one o f the most important elements o f a domestic economy and the international
economy as a whole, with the process o f retail internationalization gaining momentum, retailing
is fast becoming a global industry. In another definitionMorgenstein and Strongin (1 9 8 3 , p. 6)
retailing "Consists o f the selling o f goods andservices to their ultimate consumers, that is,
individuals who buy something for personalor household use." D.M. Lewison (1 9 8 9 ) defines
retailing as the final commercial link inthe distribution chain, where retailers sell the final
products to end consumers. Rosenberg1993, p. 291 defines retailing as "The activity o f
purchasing for resale to a customer".Whereas J. A. Dawson (1 9 9 4 ) emphasizes not only the
function o f selling, but also the functions o f buying and manufacturing.

Retail industry has been one o f the growth areas and one o f the most important parts inthe
global economy. It has witnessed a high growth rate in the developed countries and ispoised for
an exponential growth, in the emerging economies. Retailing is the largestprivate sector
employer in many countries. The history o f retailing is marked by anumber o f watershed events
that have reshaped the industry. Among these are the advento f new formats such as the discount

19
store and the superstore and the introduction o f newtechnologies such as the point-of-purchase
(POS) terminal (Rauh & Shafton, 2 0 0 1 ).

20
Therefore, the retail industry today is all about choices; consumers have a choice shopping
channels, including brick-and-mortar stores, catalogs and the Internet Along with the rapid
growth, retailing scenario has also been characterized by emergence o f increasingly new
retailing Formats and competition and increasing sophistication and modernization o f the
lifestyle (Popkowski Leszczyc, Sinha, & Timmermans, 2 0 0 0 ). Withan overlap o f products
being offered across different retail formats, the competition has become unpredictable intense in
terms o f the direction where it is coming from (S.Tripathi &. Sinha, 2 0 0 8 ). important part o f
economic activities and major sectors o f bothdeveloped and developing countries’ economies is
retail industry, retailing influenceconsumers to purchase a particular products category at a
particular retail store (Risch,1991).
Amongst academicians, there was a global approved definitions for retailing from Four decades
ago (C. B . Saunders & Logsdon, 1969): "Retailing consists o f the activitiesinvolved in selling
directly to the ultimate consumer". However, currently it seems impossible to find a universally
accepted definition o f retailing. According to Peterson and Balasubramanian (2 0 0 2 )
understanding, explaining and predicting retailing phenomena requires a coherent and consistent
definition o f retailing. Based"broadranging review" they complain that the definition o f
retailing (1 ) often tends to be taken for granted, (2 ) is either too ambiguous or too all-
encompassing and hence meaningless, (3 ) or is assumed to be a generic form o f store-based
(fixed location) selling. Despite the authors’ persistent emphasis on the need for a comprehensive
and consistent definition, Peterson and Balasubramanian (2 0 0 2 ) unfortunately do not propose
a new definition o f retailing themselves, "as such a proposal would be overly ambitious and
might be viewed as presumptuous". Instead, Peterson and Balasubramanian (2 0 0 2 ) list a
number o f dictionary and textbook definitions. From these definitions, it is clear that retailing
consists o f "the business activities involved in the sale o f products and services directly to
ultimate consumers".
Dunne and Lusch (2 0 0 8 , p. 4 ) write that retailing consists o f "the final activities ansteps
needed to place a product made elsewhere in the hands o f the consumer or to provide services to
the consumer." The retail sector is a large part o f the tertiary industry and
constitutes a significant part o f city functions related to the flow o f customers, goods,
finance and information.Basically the retail sector can be classified in to two segment; organized
and unorganizedretail sector. Trading activities undertaken by licensed retailers (those who are

21
registeredfor sale tax, income tax, etc) is organized retailing. The corporate - backed
hypermarketsand retail chains, and also privately ovmed large retail businesses are some
example o forganized retail. Modem/organized retail formats provide wide variety to customers
andoffer an ideal shopping experience with an amalgamation o f product and shoppingambience,
entertainment and service, all under a single roof and friendly layout and asingle point-of-
purchase laced with the lure o f discounts. The Malls, hyper/supermarkets,convenience stores,
departmental stores, specialty stores and discount stores are theemerging retail formats that
provide different shopping experience to consumers, (Kotler,Haider, & Rein, 1993; Piyush &
Sanjoy, 2 0 0 7 ). On the other hand the unorganizedretailing refers to the traditional formats o f
low-cost retailing and is more common indeveloping countries, for example, the local Kirana
shops, owner managed general stores,convenience stores, hand cart and pavement vendors, etc
and run by a single owner withhis family members and with few hired workers mainly known to
the owner’ s family.This market is characterized by typically small retailers, more prone to tax
evasion andlack o f labour law supervision.
2.2.1 Retailing in India
In the Indian economy, retail industry has become one o f the fastest growing sectors over the
last few years. The retail sector o f Indian economy also is categorized into two segments such as
organized retail sector and unorganized retail sector (the larger share o f the retail market is
unorganized sector). Unorganized Indian retail sector historically has been dominated by small
independent players such as traditional, small grocery stores, local Kirana shops, owner manned
general stores and others.
India got started with organized chain retailing just a few years ago, Shopping malls and
supermarkets are growing at a very faster rate, which offer shopping, entertainment and food all
under one ro o f Recently organized, multi-outlet retail concept has gained acceptance and has
since then accelerated. Driven by changing lifestyles, strong income growth and favorable
demographic patterns, Indian retail is expanding at a rapid pace.
According to McKinsey Report (2 0 0 7 ) study, 41 percent o f India's population would be in the
middle class bracket by the year 2 0 2 5 . Mall space, from a meager one million square feet in 2
0 0 2 , is has reached to touch 4 0 million square feet by end-2007 and 6 0 million square feet by
end-2008, says Jones Lang LaSalle’s third annual Retailer Sentiment Survey-Asia. India is at
second position in global retailing development Index

22
after Vietnam which shows the importance o f retailing sector in Indian economy (A.T.Keamey,
2 0 0 8 ). According to Srinivas and Jagtap (2 0 0 7 ) Indian retail is expected to grow 2 5 percent
annually. Modem retail in India could be worth US$ 1 7 5 -2 0 0 billion by 2 0 1 6 . According to
Tata Consultancy Services (TCS) 2 0 1 2 , India is a high growth economy and retail market is
expected to cross 1.3 trillion USD by 2 0 2 0 from the current market size o f 5 0 0 billion USD,
ranking it among the top retail markets in the world.
Modem retail with a penetration o f only 5% is expected to grow about six times from the market
size o f 5 0 0 billion USD to 2 2 0 billion USD, with tremendous potential for growth across
categories and segments. The future o f the India Retail Industry looks promising with a higher
share in the growing o f the market, with the government policies becoming more favorable and
the emerging technologies facilitating operations.
India is the second fastest growing economy behind China's in the world. It is third largest
economy in the world in terms o f GDP (Gross Domestic Product) and after USA, Japan, and
China is the fourth largest economy in terms o f PPP (Purchasing Power Parity) (Handa &
Grover, 2 0 1 2 ). Over the past few years as the Indian economy has grown at a rapid and steady
rate o f around 8-9% it has also seen a significant growth in the Indian Retail Sector. India With
a contribution o f 14% to the national GDP and employing 7% o f the total workforce (only
agriculture employs more) in the country, the retail industry is definitely one o f the pillars o f
the Indian economy (Roychowdhury,2 00 9)
Retailing in India is receiving global recognition and attention and this emerging market is
witnessing a significant change in its growth and investment pattem. It is not just the global
players like Wal-Mart, Tesco and Metro group are eying to capture a pie o f this market but also
the domestic corporate behemoths like Reliance, KK Modi, Aditya Birla group, and Bharti group
too are at some stage o f retail development (P. K. Sinha & Kar, 2 0 0 7 ).
The Indian retailing industry market is currently estimated to be a USD 2 0 0 billion, o f which
organized retailing (i.e., modem retail formats) makes up 3 percent or USD 6 .4 billion (Kumar,
2 0 1 2 ).The phenomenal growth o f retail in India is reflected in the rapid increase in number o
fsupermarkets, departmental stores and hypermarkets in the country. Buoyed by thisstrong
growth potential, India has become a hotbed o f investment in the retail sector. Thishas seen a
significant increase in the competition as more and more national andinternational players are

23
embarking upon plans to enter the Indian retail market. Retailershave more ambitious expansion
plans than they did just a few years ago. Most retailers
plan to expand by increasing store outlets and augmenting product ranges/services.Retailers who
are looking to the world’s emerging markets to drive the success o f theirbusinesses in the future
identify India as the most sought-afler market. India isparticularly considered attractive because
o f the size o f its market and the low presence o finternational retailers. With foreign ownership
rules, being gradually relaxed, foreigninvestment is also now possible, allowing single-brand
retailers to own up to 51 % o ftheir India operations (Kundnani, 2 0 1 0 ).The Retail sector is one
o f the fastest growing industries in India, catering to the world’ ssecond largest consumer
market. Retailing is being hailed as the future o f Indian industry,spurred by country’ s huge
consumer market o f Rupees 17 trillion at present and forecaststhat aggregate consumption will
grow to Rupees 7 0 trillion by 20 2 5 (McKinsey, 2 0 0 7 ).
Globally, India is the fifth largest retail market in the world. After Vietnam, India is also
the most attractive destination for retail investment (A.T.Keamey, 2 0 0 8 ). India isparticularly
considered attractive because o f the size o f its market and the low presence o finternational
retailers. The retail industry overall is estimated at $511 billion and at the2 0 0 8 rate o f growth,
will reach $ 8 3 0 billion by 2 0 1 3 . In 2 0 0 7 , retail contributed 8 -1 0%to the country’s GDP
and contributed up to 2 0% b 2 0 1 0 . It is expected that modernizing retail will generate
employment for 15 million people in different activities. Organized
retail currently accounts for about 5% o f the total retail market and is expected to register
a Compounded Annual Growth Rate (CAGR) o f 4 0% and grow to US$107 billion by
2 0 1 3 (CB Richard Ellis, 2 0 0 8 ).
Over the past five years, India has witnessed a frenetic speed o f retail development withan
increased acceptance o f organized retail formats. According to Goldman and Sach,(2 0 0 5 )
Indian economic growth could actually exceed that o f China by year 2 0 1 5 . Thesectors growth
was partly a reflection o f the impressive Indian economic growth andoverall rise in income level
o f consumers (Handa &, Grover, 2 0 1 2 ). It is believed that the
Country has potential to deliver the faster growth over the next 5 0 years (Bijapurkar,2 0 0 3 ).
Indian retail market has around 12 million outlets and it is the largest retail outlet density
in the world (Sinha &. Kumar, 2 0 0 4 ). This has seen a significant increase in thecompetition as
more and more national and international players are embarking uponplans to enter the Indian

24
retail market (Chowdhury, 2 0 0 9 ). However, it has 98%unorganized retail market (CII-
Mckinsey, 2 0 0 4 ). Interestingly, this huge growth inorganized retail does not involve a decline
in the business o f unorganized retail, the salesof the unorganized sector is expected to grow by
10% p.a., from US$ 3 0 8 .8 billion 2 0 0 6 -0 7 to US $ 4 9 5 .6 billion in 2 0 1 1 -1 2 . Market is
controlled by a handful o f distributors and wholesalers (Handa & Grover, 2 0 1 2 ). Traditionally
the retail business is run by small convenient stores, having shop in the front and house at the
back. More than 99%n retailers function in less than 5 0 0 square feet. Most o f these outlets
have very basicofferings, fixed prices and no ambience. These are highly competitive stores due
to cheap land prices and labor. In addition, these stores avoid the taxes as they belong to a small
industry sector (Piyush Kumar & Arindam, 2 0 0 4 ).
There is increased sophistication in the shopping pattern o f customers, which has resulted to the
emergence o f big retail chains in most metros; mini metros and towns being the next target.
Customer taste and preferences are changing leading to radical transformation in lifestyles and
spending patterns, which in turn is giving rise to new business opportunities (P. K. Sinha & Kar,
2 0 0 7 ).
Retailer inspired by the Wall-Mart story o f growth in small town America, are tempted tofocus
on smaller towns and villages in India. However, a careful analysis o f the town strata-wise
population, population growth, migration trends o f customer spending analysis reveals a very
different picture o f India (A. P. Tripathi, 2 0 0 8 ).
There are fundamental but significant changes underway in India’s economy. In January 2 0 0 6 ,
the government announced that foreign companies can own up to 51 percent o f a single brand
retail company, such as Nike or Adidas. This decision would certainly encourage retailers such
as Zara (India today, August, 2 0 0 5 ) and Gap (Marketing White Book, 2 0 0 6 ) to enter this
market. According to a report Tesco was planning to enter the market through a partnership with
Home Care Retail Mart Pvt. Ltd and expects to open 5 0 stores by 2 0 1 0 (Euro monitors report,
2 0 0 6 ). It is difficult to fit a successful international format directly and expect a similar
performance in India. The lessons from multinationals expanding to new geographies also point
to this. For example, Wal-Mart is highly successful in USA but the story is different in Asian
countries like India and China. Therefore, it is important for a retailer to look at local conditions
and insights into the local buying behavior before shaping the format choice (Marketing White
Book 2 0 0 6 ), Considering the diversity in terms o f tasteand preferences prevailing in India, the

25
retailers may go for experimentation to identify the winning format suited to different
geographies and segments. For example, the taste in south is different from that in north and this
brings challenges to the retailers. Therefore, most o f grocery retailers are region centric at this
point in time.
2.2.2 Retail Formats
The ever changing consumer’ s psychographic variables like activities, interests, opinions,
values and lifestyles have also completely changed the retail formats in India. In the
postliberalization, consumer buying behavior and lifestyles in India too are changing and the
concept o f "value for money, product selection, quality o f service and value for time" is fast
catching on in Indian retailing. Thus, it is imperative to understand the modem formats, (a)
Convenience Stores: These stores have an area o f 5 0 0 - 1,000 sq. ft, usually located near
residential areas or in petrol bunks. They are open for long hours e.g.. Speed Mart and In and
Out. The prices are generally higher and volumes are low-to-medium. Mom and Pop stores are
informal versions o f convenience stores, (b) Supermarkets; These stores operate in an area o f 8
0 0 -5 ,0 0 0 sq. ft. They are self- service, low cost, low margins and high volume operator’s e.g..
Food World, Food Bazaar and Nilgiri’s, (c) Hypermarkets: These are the largest stores offering
food as one o f their categories in an area o f 4 0 ,0 0 0 -7 5 ,0 0 0 sq. ft. e.g.. Big Bazaar and
Giant (Lamba, 2 0 03).
One o f the consequences o f the intense transformation experienced by the retail sector in recent
decades has been the diversification o f store formats (Kumar, 1997; Morganosky, 1997). For
example, in the context o f purchasing groceries, the introduction o f the supermarket as a
generic self-service format was followed by the hypermarket as a larger version o f supermarket
and the development o f the discount store as a low-price-oriented supermarket. Although
definitions o f this store formats, or types, are often inexact and sometimes confiising (John
Dawson, 2 0 0 0 ), they reveal the increasing variety o f store models in the ever more
heterogeneous retail market.
The retail format is the store "package" that the retailer presents to the shopper. A format
is defined as a type o f retail mix, used by a set o f retailers (Michael Levy & Weitz, 2 0 0 2 ).
Store Formats are formats based on the physical store where the vendor interacts with the
customer (Enders & Jelassi, 2 0 0 0 ). It is the mix o f variables that retailers use to develop their
business strategies and constitute the mix as assortment, price, transactional convenience and

26
experience (Messinger & Narasimhan, 1997). Therefore, each retailer needs to evaluate the
enablers and deterrents in the retail marketplace. This primarily involves identifying the key
drivers o f growth, the shoppers’ profile and shopper expectations. It also means evaluating the
nature o f competition and challenges in the market place. Then the retailer decides the elements
o f the retail mix to satisfy the target markets’ needs more effectively than its competitors.
According to, the evolution o f the shopping center into its contemporary form began in the 19 5
0 ’s. The biggest change in retail establishments was the development o f regional shopping
malls with full line departmental store anchors, multiple levels, and an enclosed climate
controlled atmosphere including pedestrian hallways lined with shops on both sides. To deal with
the emerging competition and changing dynamics o f the market.
developers had to not only sell the goods people wanted to buy, but also create a unique
atmosphere that would tempt people to go to the stores. In her discussion about the growth o f
suburban regional malls, Cohen (1 9 9 6 ) says that malls were built to deal with the
inefficiencies o f the downtown by centralizing control and to make sure there was plenty o f
parking, shopping was safe, and congestion minimized. They were designed to idealize the
downtown shopping experience by directly catering to consumer needs. Early shopping center
developments can be classified into four major types o f shopping centers. The neighborhood
center is a relatively small center catering to a local area. The purpose o f the center is to cater to
peoples’ everyday needs. The size o f the center allows for one anchor store that is typically a
supermarket. Community centers offer a range o f goods from general merchandise to
convenience goods. These centers contain at least two anchors that are generally discount
department stores or home improvement stores. Regional centers are malls comprised o f at least
two anchors, usually full line department stores. The types o f goods they sell include general
fashion merchandise and accessories. Super-regional centers are very similar to regional centers
in that its primary products sold are general fashion merchandise goods. Super-regional centers
have at least three full line department anchor stores and have more variation in the types o f
goods sold (ICSC, 2 0 0 4 ).
The Indian retail industry is divided into organized and unorganized sectors. Organized retailing
refers to trading activities undertaken by licensed retailers, that is, those who are registered for
sales tax, income tax, etc. These include the corporate-backed hypermarkets and retail chains,
and also the privately owned large retail businesses. Unorganized retailing, on the other hand,

27
refers to the traditional formats o f low-cost retailing, for example, the local Kirana shops, owner
manned general stores, Paan/Beedi shops, convenience stores, hand cart and pavement vendors,
etc (A Report on Indian Retail Industry, 2 0 1 0 ).
D. M. Lewison (1 9 9 7 ) highlights the importance o f the format to retail competition:
"Competitive advantages are realized by creating a retail format that is tailored to specific needs
o f a carefully determined segment o f the total market". "Retail formats encompass the total mix
o f operating and merchandising tactics and practices used by the retail firm to distinguish and
differentiate itself from other competing retail formats" D. M. Lewison (1 9 9 7 ). Formats can be
seen as "combinations o f technologies" and retailing involves the bundling o f these
technologies in ways considered most appropriate for the marketplace (Gary Davies & Brooks,
1989; J. Dawson, Larke, & Mukoyama, 2 0 0 6 ). Viewing them in this way can help us to
understand format variation. In a more detailed consideration o f the nature o f the format,
Goldman views it as consisting o f two parts: the offering (external) and the know-how (internal)
(Goldman, 2 0 0 1 ). The first includes elements such as product assortment, shopping
environment, service, location and price. The second part, the know-how, he considers to
determine a retailer’s operational strength and strategic direction.
The literature on format choice differentiates across various store formats, (S. Tripathi & Sinha,
2 0 0 8 ) such as convenience stores, supermarkets, supercenters and mass merchandisers. The
convenience stores have the lowest breadth o f assortment, but the highest price, while
supermarkets have higher breadth as compared to convenience stores but lower prices
(Bhatnagar & Ratchford, 2 0 0 4 ) Super centers are differentiated from the traditional
supermarkets, as they have the offer items at lower prices and offer one-stop shopping
(Carpenter & Moore, 2 0 0 6 ). Mass merchandisers while offering, the lowestprices also offer a
one-stop convenience (F o x et al, 2 0 0 4 ), however they are generally located in out o f town
locations, and the distances to be traveled are therefore larger. The classification in the literature
is not very rigid, for example Messinger and Narasimhan (1 9 9 7 ) demonstrated, that
supermarkets owe their success to one-stop shopping, it seems the terms have been used loosely.
The different demographic and socio economic factors can affect the format choice and the store
choice in two different ways. One is that these factors directly affect the format and the store
choice. The other way is that, these affect the shopping basket, and the timing o f the shopping
trip, and therefore indirectly affect the format choice (S. Tripathi & Sinha, 2 0 0 8 ).

28
Demographic and socio economic factors can be: family size and composition, income level o f
the family, Employment status o f the family members (S. Tripathi & Sinha, 2 0 0 8 ).
2 .2 .3 Classification o f Retail Formats
Retail formats are likely to vary between countries. Retail stores come in all shapes and sizes and
can be classified by the length and breadth o f their product assortments. The major types o f
retailers, as defined by Kotler (1 9 9 1 ), are presented below: Departmental Stores: carry several
product lines, typically clothing, home furnishings, and household goods. Each line is operated
as a separate department managed by merchandisers or buyers o f the products being sold in the
department. Department stores seek to enhance customer service and satisfaction in order to shift
the focus away from price. A "department store" is interpreted here as a store that sells apparel
and accessories along with household goods and electronics (Ko & Kincade, 1997). A
department store is one o f the most complicated retail formats catering to the most diversified
set o f consumer needs and is a large retail unit with an extensive assortment (width and depth) o
f goods and services that are organized into separate departments for purposes o f buying,
promotion, customer service and control under direct management. It has the greatest selection o
f any general merchandise retailer and often serves as the anchor store in a shopping centre or
district. Department stores usually sell products including apparel, ftimiture, appliances,
electronics, and additionally select other lines o f products such as paint, hardware, toiletries,
cosmetics, photographic equipment, jewellery, toys, and sporting goods. Specialty Stores: carry a
narrow product line with a deep assortment within that line for specific target markets. Specialty
stores are not only types o f stores, but also a method o f retail operation specializing in a given
type o f merchandise. Discount Stores: are large-scale retailing institutions that have a broad but
shallow product assortment, and offer low prices and few customer services. Discount stores
regularly sell their merchandise at lower prices by accepting lower margins and selling at higher
volumes.
Supermarkets: are relatively large, low-cost, low-margin, high-volume, self-service
operations designed to satisfy consumers’ needs for food, laundry, and householdmaintenance
products. Modem supermarkets are planned for maximum efficiency for both retailers and
shoppers.
Hypermarkets: are very large stores that combine supermarket and discount retailing. In
addition to food, hypermarkets carry furniture, appliances, clothing, and other products.

29
Convenience Stores: are small self-service stores that carry a selection o f the most
commonly needed household products. Typically, convenience stores are located in residential
areas and are open many hours each day and usually seven days a week. These stores must
charge relatively high prices to make up for higher operating costs. Consumers use convenience
stores for fill-in purchases at off hours or when time is short and they are willing to pay for the
convenience.
E-Retailing: The importance o f internet retailing is growing all over the world (AP Tripathi,
2 0 0 5 ). Some internet retailers such as e Bay and rediff.com are providing a platform to
vendors to sell their products online and they do not take the responsibility o f delivering the
product to buyer. They provide virtual shopping space to the vendors. On the other hand online
retailers like amazon.com and walmart.com have to maintain their warehouse to stock products
and take the responsibility o f delivering products to the buyer. So, most o f the brick and mortar
stores are entering into online retailing as they have physical Infrastructure and they can use that
to capture additional consumer wallet.

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 CHAPTER :3
STUDY OF WORKING CAPITAL
MANAGEMENT

31
 INTRODUCTION TO WORKING CAPITAL

“Working Capital is the Life-Blood and Controlling Nerve Center of a

business”

The working capital management precisely refers to management of current assets. A firm’s
working capital consists of its investment in current assets, which include short-term assets such
as:
· Cash and bank balance,
· Inventories,
· Receivables (including debtors and bills),
· Marketable securities.
Working capital is commonly defined as the difference between current assets
and current liabilities

WORKING CAPITAL = CURRENT ASSETS-CURRENT LIABILITIES

There are two major concepts of working capital:

· Gross working capital
· Net working capital

Gross working capital:

It refers to firm's investment in current assets. Current assets are the assets, which can be
converted into cash with in a financial year. The gross working capital points to the need of
arranging funds to finance current assets.

Net working capital:

It refers to the difference between current assets and current liabilities. Net working capital can
be positive or negative. A positive net working capital will arise when current assets exceed

32
current liabilities. And vice-versa for negative net working capital. Net working capital is a
qualitative concept. It indicates the liquidity position of the firm and suggests the extent to which
working capital needs may be financed by permanent sources of funds. Net working capital also
covers the question of judicious mix of long-term and short-term funds for financing current
assets.

Significance Of Working Capital Management

The management of working capital is important for several reasons :

· For one thing, the current assets of a typical manufacturing firm account for half of its total
assets. For a distribution company, they account for even more.

· Working capital requires continuous day to day supervision. Working capital has the effect on
company's risk, return and share prices,

· There is an inevitable relationship between sales growth and the level of current assets. The
target sales level can be achieved only if supported by adequate working capital Inefficient
working capital management may lead to insolvency of the firm if it is not in a position to meet
its liabilities and commitments.

LIQUIDITY VS PROFITABILITY: RISK - RETURN TRADE

OFF
Another important aspect of a working capital policy is to maintain and provide sufficient
liquidity to the firm. Like the most corporate financial decisions, the decision on how much
working capital be maintained involves a trade off- having a large net working capital may
reduce the liquidity risk faced by a firm, but it can have a negative effect on the cash flows.
Therefore, the net effect on the value of the firm should be used to determine the optimal
amount of working capital. Sound working capital involves two fundamental decisions for the
firm. They are the determination of:
 The optimal level of investments in current assets.

33
  The appropriate mix of short-term and long-term financing used to support this investment in
current assets, a firm should decide whether or not it should use short-term financing. If
short-term financing has to be used, the firm must determine its portion in total financing.
Short-term financing may be preferred over long-term financing for two reasons:
 The cost advantage
 Flexibility
But short-term financing is more risky than long-term financing. Following
table will summarize our discussion of short-term versus long-term financing.

Maintaining a policy of short term financing for short term or temporary assets needs (Box 1)
and long- term financing for long term or permanent assets needs (Box 3) would comprise a set
of moderate risk –profitability strategies. But what one gains by following alternative strategies
(like by box 2 or box 4) needs to weighed against what you give up.

CLASSIFICATION OF WORKING CAPITAL

On Working capital can be classified as follows:
 the basis of time
 On the basis of concept

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 TYPES OF WORKING CAPITAL NEEDS
Another important aspect of working capital management is to analyze the total working capital
needs of the firm in order to find out the permanent and temporary working capital. Working
capital is required because of existence of operating cycle. The lengthier the operating cycle,
greater would be the need for working capital. The operating cycle is a continuous process and
therefore, the working capital is needed constantly and regularly. However, the magnitude and
quantum of working capital required will not be same all the times, rather it will fluctuate.
The need for current assets tends to shift over time. Some of these changes reflect permanent
changes in the firm as is the case when the inventory and receivables increases as the firm grows
and the sales become higher and higher. Other changes are seasonal, as is the case with increased
inventory required for a particular festival season. Still others are random reflecting the
uncertainty associated with growth in sales due to firm's specific or general economic factors.

The working capital needs can be bifurcated as:

 Permanent working capital

35
  Temporary working capital

Permanent working capital:

There is always a minimum level of working capital, which is continuously required by a firm in
order to maintain its activities. Every firm must have a minimum of cash, stock and other current
assets, this minimum level of current assets, which must be maintained by any firm all the times,
is known as permanent working capital for that firm. This amount of working capital is
constantly and regularly required in the same way as fixed assets are required. So, it may also be
called fixed working capital.

Temporary working capital:

Any amount over and above the permanent level of working capital is temporary, fluctuating or
variable working capital. The position of the required working capital is needed to meet
fluctuations in demand consequent upon changes in production and sales as a result of seasonal
changes.

36
The permanent level is constant while the temporary working capital is fluctuating increasing
and decreasing in accordance with seasonal demands as shown in the figure.
In the case of an expanding firm, the permanent working capital line may not be horizontal. This
is because the demand for permanent current assets might be increasing (or decreasing) to
support a rising level of activity. In that case line would be rising.

FINANCING OF WORKING CAPITAL

There are two types of working capital requirements as discussed above. They are:

 Permanent or Fixed Working Capital requirements

 Temporary or Variable Working Capital requirements

]Therefore, to finance either of these two working capital requirements, we have long-term as
well as short-term sources.

37
 FACTORS DETERMINING WORKING CAPITAL
REQUIREMENTS

There are many factors that determine working capital needs of an enterprise.
Some of these factors are explained below:

 Nature or Character of Business .

The working capital requirement of a firm is closely related to the nature of its business. A
service firm, like an electricity undertaking or a transport corporation, which has a short
operating cycle and which sells predominantly on cash basis, has a modest working capital
requirement. Oh the other hand, a manufacturing concern like a machine tools unit,
which has a long operating cycle and which sells largely on credit, has a very substantial
working capital requirement. V-MART RETAILS PVT LTD. carry on activities related to
computer systems. Though they are primarily an assembling firm they also have manufacturing
facilities in Chennai and Pondicherry. This requires them to keep a very sizeable amount in
working capital.

 Size of Business /Scale of Operations.

V-MART is the leader in its segment in both consumer as well as commercial market share.
They have increased their share in the consumer segment notably in the last four years. This they
have achieved through retail expansion. The scale of operations and the sizeit holds in the Indian
Retails Market makes it a must for them to hold their inventory and current asset at a huge level.

38
  Rate of Growth of Business.

The rate of growth of sales indicates a need for increase in the working capital requirements of
the firm. As the firm is projected to increase their sales by 80% from what it was in 2016, it is
required to guard them against the increasing requirements of the net current asset by way of
efficient working capital management. The sales and projected sales level determine the
investment in inventories and receivables.

 Price Level Changes.

Changes in the price level also affect the working capital requirements. It was the reduced
margins in the price of the raw materials that had prompted them to go for bulk purchases thus
making on additions to their net current assets. They might have gone for this large-scale
procurement for availing discounts and anticipating a rise in prices, which would have meant that
more funds are required to maintain the same current assets.

39
 WORKING CAPITAL CYCLE

The upper portion of the diagram above shows in a simplified form the chain of events in a
manufacturing firm. Each of the boxes in the upper part of the diagram can be seen as a tank
through which funds flow. These tanks, which are concerned with day-to-day activities, have
funds constantly flowing into and out of them.

 The chain starts with the firm buying raw materials on credit.
 In due course this stock will be used in production, work will be carried
out on the stock, and it will become part of the firm’s work-in-progress.
 Work will continue on the WIP until it eventually emerges as the finished
product.
 As production progresses, labor costs and overheads need have to be met.
 Of course at some stage trade creditors will need to be paid.
 When the finished goods are sold on credit, debtors are increased.
 They will eventually pay, so that cash will be injected into the firm.

Each of the areas- Stock trade debtors, cash (positive or negative) and trade creditors – can be
viewed as tanks into and from which funds flow.
Working capital is clearly not the only aspect of a business that affects the
amount of cash.
 The business will have to make payments to government for taxation.
 Fixed assets will be purchased and sold
 Lessors of fixed assets will be paid their rent
 Shareholders (existing or new) may provide new funds in the form of
cash
 Some shares may be redeemed for cash
 Dividends may be paid
 Long-term loan creditors (existing or new) may provide loan finance, loans will need to be
repaid from time-to-time, and

40
  Interest obligations will have to be met by the business Unlike, movements in the working
capital items, most of these ‘non-working capital’ cash transactions are not every day
events. Some of them are annual events (e.g. tax payments, lease payments, dividends,
interest and, possibly, fixed asset purchases and sales). Others (e.g. new equity and loan
finance and redemption of old equity and loan finance) would typically be rarer events

SOURCES OF WORKING CAPITAL

HCL Infosystems has the following sources available for the fulfillment of its working capital
requirements in order to carry on its operations smoothly:
 Banks:
These include the following banks –
 State Bank of India
 Canara Bank
 HDFC Bank Ltd.
 ICICI Bank Ltd.
 Societe Generale
 Standard Chartered Bank
 State Bank of Patiala
 State Bank of Saurashtra
·

Commercial Papers:

Commercial Papers have become an important tool for financing working capital requirements of
a company. Commercial Paper is an unsecured promissory note issued by the company to raise
short-term funds. The buyers of the commercial paper include banks, insurance companies, unit
trusts, and companies with surplus funds to invest for a short period with minimum risk.

41
V -Mart issues Commercial Papers and had 4000 commercial papers
in the year 2016.

V-MART FINANCIALS PERFORMANCE

CONSOLIDATED FINANCIAL PERFORMANCE:

42
 WORKING CAPITAL POSITION :

The current asset percentage on total asset is the highest over the years. This increasing
percentage of current assets to the total assets at first might indicate a preference for liquidity in
place of profitability, but a look into the nature of the business carried on by V-Mart reveal the
reason behind it. How far their preference to current assets has affected the sales is shown
below.

The sales has increased and the profits risen despite the 16.12% increase in working capital. But
what is noteworthy here is that the firm has managed to maintain the trend of an increase in net
current assets. Whether the change has worked for the company has to be analysed in the context
of the growth in sales as compared to the previous year. There has been a 19.14% rise in the
sales or revenue generated. This would automatically suggest towards a very efficient working
capital management where the assets of the firm which are short-term in nature have been
utilized optimally in connection to their fixed assets. The firm has gone towards such a dramatic

43
shift in their working capital position might be because of the tremendous growth witnessed in
the
Domestic retaill market.

The ratio of the net current asset to the fixed ones is an indicator as to the liquidity position of the
firm. This ratio has declined for the firm compared to the previous year. There could be an
argument as to whether the increased ratio of working capital to net block is a conservative
policy and whether it would be detrimental to the interest of the company. Or, whether it would
have been proper if the company invested more into the capital expenditure in the form of plant
and machinery or invested in any other form that would have got them an internal rate of return.
What has to be kept in mind before coming to a conclusion as to the policy of the company, is
the fact that the firm being primarily into assembling, its investment in the fixed asset segment
need not be high. A look into the capacity utilization of the plant would reaffirm this point. It
would be ideal for the firm to continue in the same line and not have excessive investment in the
fixed asset as they can easily add onto this part.

44
The 16.12% increase in Net Current assets despite of the fact that there has been an increase in
the Current Assets by 23.84% and increase in Current Liability has been by 29.57% over that of
the previous year has to be attributed to the fact that in 2005, the company showed such a high
increase in CA, that it is still being offset. This is an indication as to the expanding operations of
the firm. V-Mart has increased its current assets in order to meet the increasing sales.
The firm’s level of liquidity being high, we need a check on whether it affects the return on
assets.

45
46
47
 CASH MANAGEMENT

SOURCES OF CASH:
Sources of additional working capital include the following:
 Existing cash reserves
 Profits (when you secure it as cash!)
 Payables (credit from suppliers)
 New equity or loans from shareholders
 Bank overdrafts or lines of credit.
 Long-term loans
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
 Frequent short-term emergency requests to the bank (to help pay wages,
pending receipt of a cheque).

48
 CASH MANAGEMENT IN V-MART RETAIL PVT LTD:

The cash management system followed by the V-Mart Retails Pvt Ltd. is mainly
lock box system.

Cash Management System involves the following steps:

1. The branch offices of the company at various locations hold the collection of cheques of the
customers.
2. Those cheques are either handed over to the CMS agencies or bank of the particular location
take charge of whole collection.
3. These CMS agencies or bank send those cheques to the clearing house to make them realized.
These cheques can be local or outstation.
4. The CMS agencies or bank send information to the central hub of the company regarding
realization/cheque bounced.
5. The central hub passes on the realized funds to the company as per the agreed agreements.
6. The CMS agencies or concerned bank provides the necessary MIS to the company as per
requirement. In cash management the collect float taken for the cheques to be realized into cash
is irrelevant and non-interfering because banks such as Standard Chartered, HDFC and CitiBank
who give credit on the basis of these cheques after charging a very small amount. These credits
are given to immediately and the maximum time taken might be just a day. The amount they
charge is very low and this might cover the threat of the cheque sent in by two or three customers
bouncing. Even otherwise the time taken for the cheques to be processed is instantaneous. Their
Cash Management System is quite efficient.

49
 Shareholding pattern-V-Mart Retails Ltd.

The shareholding pattern says that only around 10% of the total shares are open for the general
public. The company’s shares had Face Value of INR 5.00 from 2014-19; however the year
ending ’08 it has been changed to INR 1.00.

50
Cash, the most liquid asset and also referred to as the life blood of a business enterprise is of
vital importance to the daily operations of business firms . Its efficient management is crucial to
the solvency of the business because cash is the focal point of the funds flow in a business. Cash
plays a very important role in the entire economic life of an organization. A firm needs cash to
make payments to its suppliers, to incur day to day expenses and to pay salaries, wages, interest
and dividend etc. Cash is money that is easily accessible either in the bank or any business It is
very essential for a business to maintain an adequate balance of a concern operates profitably
and yet it cash. But many a times becomes very difficult to pay taxes and dividends. This may
be because:
• Although huge profit have been earned yet cash may not have been received because of large
credit sale was made.

• Even if cash has been received, it may have drained out (used for some other purposes). This
movement of cash is of vital importance to the management, so proper management of cash is
very important.

Cash/Fund Management

Cash/Fund, the most liquid assets is the vital importance to the daily operations of the business
firms. The proportion of corporate assets held in the form of cash is very mall, often between 1
and 3 percent, its efficient management is crucial to the solvency of the business enterprise
because in a very important sense cash is the focal point of fund flows in business. It is generally
referred to as the “life blood of a business enterprise”.

51
There are three possible motives for holding cash:

i. Transaction motive

ii. Precautionary motive

iii. Speculative motive

The need for holding cash arises from a variety of reasons which are

briefly summarized below.

Transaction Motive:

A company is always entering into transactions with other entities . While some of these
transactions may not result in an immediate inflow/outflow of cash (e.g. credit purchases and
sales), other transactions cause immediate cash inflow .and outflows. So firms always keep a
certain amount as cash to deal with routine transactions where immediate cash payment is
required.

Precautionary Motive: ,

Contingencies have a habit of cropping up when least expected A sudden fire may break out,
accidents may happen, employees may go on strike, creditors may present bills earlier than
expected or debtors may make payments later than warranted. The company has to be prepared
to meet these contingencies to minimize its losses. For this purpose companies generally
maintain some amount in the form of cash.

Speculative motive :
Firms would like to tap profit making opportunities arisin from fluctuation in commodity price,
security price, interest rate, and foreign rates. A cash rich firm is exchange better prepared to
exploit such bargains. Firms which have such speculative leanings may carry additional

52
liquidity. Most firms their reserve borrowing capacity and marketable securities would suffice to
meet their speculative needs

Cash Management Cycle

Cash management is concerned with the managing of

• Cash flows into and out of the firm.

• Cash flows within the firm.

• Cash balances held by the firm at a point of time by financing deficit

or investing surplus cash.

It can be represented by a cash management cycle as shown below. Sales generate cash which
has to be disbursed out. The surplus cash has to be invested while deficit has to be borrowed.
Cash management seeks to accomplish this cycle at a minimum cost. At the same time, it also
seeks to achieve liquidity and control The management of cash is important because it is
difficult to predict cash flows accurately, particularly the inflows and there is no perfect
coincidence between the inflows and outflows of cash. During some periods, cash outflows
exceed cash inflow because payment for taxes, dividends or seasonal inventory builds , At other
times, cash inflow can be more than cash payment because there may be large cash sales and
debtors may be realized in large sums promptly Cash management is also important because cash
constitutes the smallest portion of the total current assets, yet management’s considerable time is
devoted in managing it. An obvious aim of the firm now-a-days is to manage its cash affairs in
such a way as to keep cash balance at a minimum level and to invest the surplus cash in
profitable investment opportunities.

53
 DEBTORS MANAGEMENT

The basic objectives of the debtor’s management are to optimize the return on investment on the
assets. Its main aim is to promote sales and profit until that point is reached where the return on
investment is further funding of debtors is less than the cost of funds raised to finance that
additional credit. When a firm makes sale of goods and services and does not receive payment, it
grants trade credit and creates Debtors accounts, which would be collected in the future. These
represent the extension of credit on an open A/c by the firm to its customers, as the substantial
amount is tied up in trade debtors; it needs careful analysis and proper management.

Size of Investment in Debtors: ,Investment in debtors A/c is a major part of their

assets in most of business enterprises. Debtors A/c is one of the major components of working
capital. The financial executives should pay due attention to the management of debtors, so that
each rupee invested in debtors may contribute to the net worth of the organization.

54
The Basic Problem of Debtors Management: The basic problem of

debtor’s management is the balancing of profitability & liquidity. Soft credit terms

attract sales and so the longer the time a company allows to pay to its customers the

greater the sales .

55
 Chapter 4
Research Methodology

56
 RESEARCH METHODOLOGY

Scope Of The Study

The scope of study is identified after and the during the college conducted .The main

Scope of the study was to put into practical and theoretical aspect of the study into real

Life work experience . The study of working capital is based on tool like ratio anlysis

Statement of change in working capital .Further the Study Based on 5 year annual report

V –mart Retails Pvt Ltd.

OBJECTIVES OF THE STUDY

• To study and analyze the working capital policy of the V Mart Retail Ltd.

• To study the affairs of the company with reference to the working capital ascertainment and

methods of its estimation used in the company.

• To understand the general performance of the company.

• To use quantities data for defining company’s financial performance.

• To know the profitability, production and efficiency of the firm.

• To study the methods of financing working capital.

• To analyses the performance effectiveness of the company

57
 RESEARCH METHDOLOGY

INTRODUCTION.

Research methdology is way to systematically solve the research problems .It may beUnderstood
as science of study now research is done systematicallty . In that Various Steps, those are
generally adopted by a researcher in studying his problems along with The logic behind them.
“The procedure by which researcher go about their work of describing, explaining and Predicting
phenomenon are called Methodology.

TYPES OF RESEARCH

This project is studying of “Working capital requirement of the V –Mart Retails Pvt, Ltd”
company is considered as an analytical research . Analytical research is defind as research in
which ,reseracher has to use facts or information Already availabe ,and analysis these to make
critical evalution of the facts ,figure ,data or material.

Source Of Research Data

There are mainly two through which data required for the research is collected.

PRIMARY DATA

The primary data is that data which is collected fresh and first hand ,and for the first time

Which is original in nature.

In this study the primary data has been collected from personl interaction with finance

Manger i.e, Mr. Mahesh Nandkami and other staff member.

58
SECONDARY DATA

The secondary data are those data which have already collected and stored.secondary data

Easily those secondary data from records , annual reports of the company etc. It will save the

time money ,and efforts to collect the data .

The major source of data for this project collect through annual report ,profit and loss account

Of year 2018-19 & some more information collected from internet and text source .

SAMPLIN DEGINE

Sampling unit : Financial Statement

Sampling size: last two years of financial statement

TOOLS USE FOR ANALYSIS DATA

The data analysis using the following financial tools .they are

 Ratio Analysis

 Statement of change of working capital .

LIMITATION OF THE STUDY

 The study during ( summer) is short

 The analysis is limited to just two year of the study data 2018-19 finanacial statement

 Limited interection with the concerned heads due to their buzy schedule

 The finding of the study are based on the information retreived by the selected unit .

59
 Chapter 5
DATA AND RATIO
ANALYSIS
INTERPRETATION

60
 Data Analysis and Interpretation

INTRODUCTION

In the Previous chapter, concept of financial performance analysis has been discussed in detail. In the
present chapter, the data have been analyzed with the help of suitable tools and techniques to assess
the financial strength and to estimate the financial Performance of Steel Authority of India Ltd. In the
present study, the focus has been made on ratio analysis, Economic Value Added (EVA) analysis and
Market Value Added (MVA) analysis. A comparison has also been made between Financial Ratios
of V-Mart Retails pvt. Ltd. average financial ratios. Required statistical tools have been used for the
analysis to achieve the objectives of the study. The results have been presented in the form of tables
along with interpretationsin the following pages.

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STATEMENT OF V-MART RETAILS PVT.LTD. FOR THE YEAR 2014--15

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STATEMENT OF V-MART RETAILS PVT.LTD. FOR THE YEAR 2015-16

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STATEMENT OF V-MART RETAILS PVT.LTD. FOR THE YEAR 2016-17

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STATEMENT OF V-MART RETAILS PVT.LTD. FOR THE YEAR 2017-18

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STATEMENT OF V-MART RETAILS PVT.LTD. FOR THE YEAR 2018-19

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 CHANGES IN WORKING CAPITAL

STATEMENT OF V-MART RETAILS PVT.LTD. FOR THE YEAR 2014-15

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 CHANGES IN WORKING CAPITAL

STATEMENT OF V-MART RETAILS PVT.LTD. FOR THE YEAR 2015—16

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 CHANGES IN WORKING CAPITAL

STATEMENT OF V-MART RETAILS PVT.LTD. FOR THE YEAR 2016-17

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 CHANGES IN WORKING CAPITAL

STATEMENT OF V-MART RETAILS PVT.LTD. FOR THE YEAR 2017-18

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 CHANGES IN WORKING CAPITAL

STATEMENT OF V-MART RETAILS PVT.LTD. FOR THE YEAR 2018-19

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 INTERPRETATION

V-Mart Retails Pvt.Ltd has current ratio in the year 2014-15 it was 3.11 and in the year 2015-16
It was 2.99 after 2016-17 it was decresing trend but in the year 2018-19 it was 2.94 which is
below the standerd ratio .

The company in the year 2014-15 and 2015-16 as 1.61 where as in the year 2016-17 it was
decresed to 1.86 and in the year 2017-18 it was incresed .At the last company overall liquidity

Position is not good.

The absolute liquidity ratio of the company was upto the mark during all the year.from the year
2014-15 it shown an decresing trend up into next year .In the year 2016-17 is same.

During the year 2016-17 it was incresing that means it has reached the standerd of 0.5

The sitution is due to very small balance of cash maintain by the firm for its working capital

Requirement in the year 2014-19 the firm shown an decresing trend .

For the company efficiency is incresing .in the year 2015-16 it is 7.29 .which is highest recorded

After that I went on incresing to lowest of 1.86 in 2018-19 .It shows that there is proper

Control over 72th inventry by the management ,

The company showed the holding period return of nearly 37 days in the year 2014-15 which is

Very better compare to the other year.then it is gradually incresed to 94 days in 2018-19 which

Means liquidity of inventry is not good .

The above satement showing about the details of stock at the opening of the year and at the

Closing of the year .in the year 2017-18 there is decresing in the stock at the end of year.

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 CHAPTER : 6

RECOMMENDATIONS

A well designed and implemented Analysis of Financial statement is expected

to contribute positively to the creation of a firm’s value. The analyzed in

financial statement needs and profitability of firms are examined to identify the

causes for any significant differences between the industries. High investment in

inventories and receivables is associated with lower profitability.

A firm is required to maintain a balance between liquidity and profitability

while conducting its day to day operations. Liquidity is a precondition to ensure

that firms are able to meet its short-term obligations and its continued flow can

be guaranteed from a profitable venture. The importance of cash as an indicator

of continuing financial health should not net surprising in view of its crucial role

within the business. This requires that business must be run both efficiently and

profit ably. In the process, and asset-liability mismatch may insolvency. On the

other hand, too much focus on liquidity will be at the expense of profitability.

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 CHAPTER : 7 CONCLUSION
The summer training was an endeavour to critically understand the practical implication of
the Production process at an industry. Though the industry is a small one as compared to many
others companies at Big bazar,Vishal Mega Mart etc. it was quite an interesting experience to
interact with the industry environment. There are transparent and clear objectives which one has
to achieve. The industry is one of very unique in nature and the findings may be applied to
similar type of industries only.
At this stage I strongly fell that the area of production is so vast that the Summer Training may
be conducted again and again focusing on various aspect of the production in order to gain
effectiveness and efficiencies. I hope this project will prove as a turning point in my
Management Career.
Product:-
• V Mart product has good demand in market

• V Mart product are well tested and inspected by the world class testing authorities like
ABS,IRS,LOYDS

Price:-

• Overheads are quite high as compare to other companies

• From customer point of views due to high cost of V Mart product it loses certain prospective
customer

• From geographical point of view V Mart plant in Azamgarhis well positioned , but there are
certain problems like band & strikes & lack of infrastructural facilities .
• After sales service of V Mart is well appreciated

Packaging:-

• V Mart is at par with current packaging brands

• The iron rods are used mostly these days. They are well painted to give nice loo

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 CHAPTER : 8

BIBLIOGRAPHY

 WEB SITE

www.Vmart retail .com

 The references for the study include the various sources from where data is collected.

The various sources which comes under references includes-

 V MART RETAIL LTD.’s magazines and brochures, etc.

 Annual report of V MART RETAIL LTD (2018-19)

 Praveen Kumar Jain, Analyze the Basic Components of Working Capital”, Management

 of working Capital, Jaipur: RBS Publishers, 1993.

 Sukamal Datta, “Working Capital Management Through Financial Statements: Analysis

 of Paper Industry in West Bengal”, The Management Accountant, Volume-30(1),

 November 1995, Pp.826-832.

 Gaur Jighyasu, “Financial Performance Measures of Business Group Companies:

Journal of Business Strategy, Volume -7, Issue-4, Decmber-2010, Pp.45-53.

 Kartik Chandra Nandi, “Trends in Liquidity Management and Their Impact on

 Profitability: A Case Study”, Great Lakes Herald Volume 6, No. 1, March 2012, Pp. 16-

30.

 Owolabi, Ajao & Obida, “Liquidity Management and Corporate Profitability: Case Study

 of Selected Manufacturing Companies Listed on The Nigerian Stock Exchange” Business

 Management Dynamics, Volume.2, No.2, August 2012, Pp.10-25.

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  Seyed Mohammad Alavinasab and Esmail Davoudi, “Studying the relationship between

 working capital management and profitability of listed companies in Tehran stock

 exchange”, Business Management Dynamics, Volume.2, No.7, January 2013, Pp.01-08.

BOOKS

• Financial Management: M.Y KHAN AND P.K. JAIN, Tata McGraw Hill Education Pvt.

Ltd., New Delhi, Fifth Edition

• Financial Management: I.M. PANDEY, Tata McGraw Hill Education Pvt. Ltd., New Delhi.

• Financial Management (BMS): M.R. Kale

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 CHAPTER : 9
QUESTIONNAIRE

1. Name:____________________________________________

2. Gender: Male Female

3. Age: 21-35 36-50 Above 50

4. Education: ___________________________________

5. Occupation: Professional Businessman

Govt. Employee Employess working

Q1 Do you know about working capital management ?

Yes No

Q2. What IS the objective of Working Capital Managemenf?

(Tick more than one if necessary)

i) Efficient use of current assets

ii) Liquidity and profitability
iii) Liquidity profitability and efficient use of current assets
iv) Profitability
v) Confer stnctly to Govt regulation vO Any other (Please Specify)

Q3. Q 2 State the policies of Working Capital to achieve its objectives '>

(Tick more than one if necessary)

I) Efficient and timely production

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II) Minimum level of cash balance in each component of working capital and continuous reviews
of situation
III) Managing inflows and outflows without affecting production and sales
IV) Maximizing creditors and minimizing receiveables
V) Effective management of inventory
VI) Review and follow up of credits
VII) Any other (Please Specify)

Q4. Q 3 What are the different methods of determining working capital requirements

' (Tick more than one if necessary)

i) Over all budgeting methods

ii) Cash forecasting
iii) Any mathematical/statistical methods
iv) Any other (Please Specify)

Q 4 Which of the following forms the basis for working capital determination '>

a. Productio
b. Sale
c. Operating Cycle
d. Installed capacity
e. Capicity Actually used
f. Any other (Please Specify)

Q5. : What is the approach of financing of worlcing capital?

i) Hedging approach
ii) Conservative approach
iii) Any other (please specify)

Q6. : What is the duation of operating cycle? Days

Q7. Does the operating cycle remain constant / varies during an accounting year ?

Yes No

Q8. Is the concept of operating cycle incorporated in forecasting working capital requirement ?

Yes No

Q 9. What are the major forms of financing working capital requirements ?

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 (Tick more than one if necessary)

i) Current liability
ii) Cash credit
iii) Deferred credit 9 0 ;
iv) Working capital loan from central government
v) Equity/long term loans
vi) Any other (please specify)

Q10. : What is the overall policy of the organisation regarding financing of working capital ?

i) All variable need with short terms sources and only for the periods needed
ii) A portion of the variable need with long term sources
iii) Inventories only from long term sources
iv) A portion of the permanent needs from short term sources
v) One half of the cun'ent assets financed by long term sources.
vi) Any other (please specify)

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