Profitability maximization:- a case study of Mansfield cable co.

Project guide: Dr.J.D.Agarwal (Chairman , IIF)

Academic Guide
Mr. M.K. Jafery (DGM, Finance)

Company profile
Established in the year 1978 Sri K.S Chadha(founder) Manufacturing and testing setup for meeting the demands of insulated rubber cables, PVC, XLPE, PE, induction heating cables, Rubber, PTFE cables in different voltage grades & up to 1000 sq. mm.

Company products
Power Cables Single Core Cables Control Cables

Literature review

Working capital management is a very important component of corporate finance because it directly affects the liquidity and profitability of the company. It deals with current assets and current liabilities. Working capital management is important due to many reasons. For one thing, the current assets of a typical manufacturing firm accounts for over half of its total assets. For a distribution company, they account for even more. Excessive levels of current assets can easily result in a firms realizing a substandard return on investment. However firms with too few current assets may incur shortages and difficulties in maintaining smooth operations. Efficient working capital management involves planning and controlling current assets and current liabilities in a manner that eliminates the risk of inability to meet due short term obligations on the one hand and avoid excessive investment in these assets on the other hand .

Objective of study
To establish a relationship between Working Capital Management and Profitability over a period of 3years. To find out the effects of different components of working capital management on profitability. To establish a relationship between the two objectives of liquidity and profitability of the Mansfield cable co. To find out the relationship between profitability and size of the Mansfield cable co. To find out the relationship between debt used by the Mansfield cable co. and its profitability. To draw conclusion about relationship of working capital management and profitability of the Mansfield cable co..

Methodology
Primary data
questionnaires interviews focus group interviews observation case-studies

Secondary data
annual reports financial statements of companies, Statistical statements

Regression model
NOP it =0 + 1 (ACP i t)+ 2 ( LOS it) + 3 ( CR it)+ 4 (DR it)+ 5 (FATA i t) + NOPi t : Net Operating Profitability of firm i at time t; i = 1, 2, , 94 firms. 0 : The intercept of equation i: : Coefficients of X it variables X it : The different independent variables for working capital Management of firm i at time t. t : Time = 1, 2,,6 years

Limitation of study
The present study is limited to Mansfield cable co. Data is restricted to Delhi and NCR region only. The authenticity of the suggestions and recommendations depend upon the rationality of the data provided to me. Have to rely upon the data supplied. Executives are not ready to part with the information beyond a limit.

Findings and suggestion

In view of the analysis and with the change in industrial scenario it is felt that a company must reorient its policies for betterment. MANSFIELD CABLE CO. produces flat product and now a days there is tough competition in the market of flat product. Hence company needs certain best policies for competition with its competitor in domestic as well as global market.

Suggestion
In brief the following suggestions are: Company use perpetual inventory, which is very costly. Hence the company should use both perpetual and periodic inventory. Besides automatic procurement items there is no specific system for calculating reorder level, minimum and maximum level. A proper system for different items should be developed. Lead time for receipt of stores and spare items is around 6 months, which is very high. The lead time should be brought down by decreasing the time duration in paper work. As understand from the explanation of the management, there is huge volume of non-moving and obsolete stores and spare items which are yet to be disposed of. Moreover their should be proper E-payment software for paying client online.

Conclusion
Live Project has given lot of practical experiences from on the job culture to theoretical implications at different levels. There is a great learning in financing to corporate. During 201112, profit before tax of Mansfield cable co. is Rs. 1286.50 which is less as compared to profit before tax of 2010-11 that is Rs. 2830.43, although production has been increased. It is because of decrease in price of flat product in domestic and global market due to recession. Although the market is dull, Mansfield cable co. is able to make profit which shows the continuous strengthening of the companys financial fundamentals. This was the outcomes of multi-pronged strategy including increase in production and sales volume, improvement in product mix, cost reduction major, reduction in borrowing coupled with buoyancy in the cable market.