A PROJECT REPORT ON

WORKING CAPITAL MANAGEMENT

OF
BHARTI AIRTEL

For the partial fulfillment of

BACHELOUR OF BUSINESS ADMINISTRATION
Of
BERHAMPUR UNIVERSITY,BERHAMPUR ,ODISHA

Submitted by
SUSHMITA BACHHAR
ROLL NO :- GB17218

Under the guidance of

MR.P.NARASIMHA MURTY (ASST.PROFESSOR , FINANCE)

GANDHI INSTITUTE OF BIOLOGICAL STUDIES

(Affilated to berhampur university)
 GANDHI INSTITUTES OF BIOLOGICAL SCIENCE
(AFFILIATED TO BERHAMPUR UNIVERSITY, BERHAMPUR, A PPROVED BY
AICTE)

CERTIFICATE

This is certify that the project report entitled WORKING CAPITAL

MANAGEMENT of “BHARATI AIRTEL” a bonafied work carried out by
SUSHMITA BACHHAR,bearing Roll no:GB17218 from “Gandhi Institution of
Biological Studies” affiliated to Berhampur University,Berhampur, during the
year 2017-20, in the partial fulfillment of the requirement for the degree of BBA
and that the project has not formed the basis for the Award previously of any
degree, diploma or any other similar title or prizes and that the work has not
been published in any magazine. Thus, this project is approved and is
acceptable in form and qualities.

Mr.P.NARASIMHA MURTY

ASSTIANT PROFESSOR

(FINANCE)
 ACKNOWLEDGEMENT

I am truly privileged that I got the opportunity to do my project in a

reputed organisation like bharati airtel. The report titled “WORKING
CAPITAL MANAGEMENT”a study in “BHARATI AIRTEL” represents the
guidance and cooperation of few individuals, to whom I would like to
express my deep sense of gratitude.

I am also grateful to Mr.RAMAKANT TRIPATHY, C.A. of FINANCE

department, “BHARATI AIRTEL”, for giving me this opportunity to conduct
the project study in “BHARATI AIRTEL” Finance department
,bhubaneswer.
I whole heartedly thank Mr P.NARSIMHA
MURTY,Asst.professor(finance)GIMS gunupur, for guiding me in my work
and providing me with valuable information and suggestions.
I am grateful to the executives of different departments who have
been a great help and showed their support as and when required. The
study reinforced the theoretical and practical knowledge acquired in
terms of applicant.
 Bharti airtel limited www.airtel.in

Circle office : iiird & ivth floor , call +917314222555

Metro tower , sch.no.54, fax +917314031101

Nr.vijay nagar square.

a.b.road,indore-10 (mp)

Date – 16 july 2019

TO WHOM SO EVER IT MAY CONCERN

This is to certify that Sushmita Bachhar Pursuing BBA form GANDHI
INSTITUTE OF BIOLOGICAL STUDIES , GUNUPUR has completed his one
month project for “ WORKING CAPITAL MANAGEMENT AT BHARATI CAPITAL
LTD.” Starting from 13th june 2019 to 15th july 2019 , in our organization on
“Bharti Airtel Ltd”.

We want him success for all his future endeavors.

Thanks & regards

RAMAKANT TRIPATHY

C.A (FINANCE DEPARTMENT)

BHUBANESWAR
 DECLARATION

I do hereby declare that this piece of project report entitled “A Study on WORKING
CAPITAL MANAGEMENT OF BHARATI AIRTEL” for partial fulfilment of the

requirements for the award of the degree of “BACHLOR IN BUSINESS

ADMINISTRATION” is a record of original work done by me under the
supervision and guidance of MrP.NARSIMHA MUTRY, GIMS, Gunupur .This project
work is my own and has neither been submitted nor published elsewhere.

PLACE:

DATE:

SIGNATURE OF THE STUDENT

SUSHMITA BACHHAR

Batch-2017-2020
 PREFACE
The study group found that there was a substantial gap between the sanctioned limit of
cash credit and the extent of their utilization. They recommended that the bank should
strictly ensure that a review of all borrowers accounts, enjoying working capital credit
limits of Rs 10 cores and over from the banking system is made at least once a year. A
working capital limit will include all fund-based limits for working capital purposes. It
will verify the continued viability of the borrowers and also assess the need-based
character of their limit.
This project has been done on a Working Capital Management in Bharti Airtel
Services Ltd. It was complicated but exiting as well to do a project on a company with
such a large strength and whose work operations are actually complicated from normal
companies. The project starts with a background & study of the working Capital activities
of the company and followed by recognizing the major subsystems of Comparative study
with Vodafone of the company. The focus then shifts to the performance of these
subsystems. How these were achieved in the past and how they are achieved presently
and is there any transformation over the years. It then goes in the study of what activities
are being outsourced and what the company does internally. Also the balance between the
two is highlighted.. The focus then shifts to whether the employees are satisfied with the
working Capital activities of the company or not. The answer we found was, positive.
Apart from this the factors that influence the decision for outsourcing are also
highlighted.
Overall the project involves work that will give interest to the reader and provide
information to him/her that will improve their knowledge as well as make them wonder
about the working as well as the vast changes in Working Capital Management in

Bharti Airtel Services Ltd and the way it discharges its functions. But to know

more you have to flip through all the pages in detail…….

 TABLE OF CONTENTS

S.No. Topic

1. Chapter – 1 INTRODUCTION

2. Chapter – 2 COMPANY PROFILE

3. Chapter – 3 LITERATURE REVIEW

4. Chapter – 4 OBJECTIVE

5. Chapter – 5 METHODOLOGY

6. Chapter – 6 RESULTS

7. Chapter – 7 RECOMMENDATIONS

8. Chapter – 8CONCLUSIONS & IMPLICATIONS

9. Chapter -9 BIBLIOGRAPHY

10. Chapter -10 Appendices

FINANCIAL STATEMENTS
 Chapter – 1
INTRODUCTION

WORKING CAPITAL - OVERALL VIEW

Working Capital management is the management of assets that are current in nature. Current assets, by
accounting definition are the assets normally converted in to cash in a period of one year. Hence
working capital management can be considered as the management of cash, market securities
receivable, inventories and current liabilities. In fact, the management of current assets is similar to
that of fixed assets the sense that is both in cases the firm analyses their effect on its profitability and
risk factors, H differ on three major aspects.
1. In managing fixed assets, time is an important factor discounting and compounding aspects of time
play an important role in capital budgeting and a minor part in the management of current assets.
2. The large holdings of current assets, especially cash, may strengthen the firm’s liquidity position,
but is bound to reduce profitability of the firm as ideal car yield nothing.
3. The level of fixed assets as well as current assets depends upon the expected sales, but it is only
current assets that are ad the fluctuation in the short run u a
business.
To understand working capital better we should have basic knowledge about the various aspects of
working capital. To start with, there are two concepts of working capital:
¾ Gross Working Capital
¾ Net working Capital
Gross Working Capital: Gross working capital, which is also simply known as working capital,
refers to the firm’s investment in current assets: Another aspect of gross working capital points out the
need of arranging funds to finance the current assets. The gross working capital concept focuses
attention on two aspects of current assets management, firstly optimum investment in current assets
and secondly in financing the current assets. These two aspects will help in remaining away from the
two danger points of excessive or inadequate investment in current assets. Whenever a need of
working capital funds arises due to increase in level of business activity or for any other reason the
arrangement should be made quickly, and similarly if some

1
surpluses are available, they should not be allowed to lie ideal but should be put to some effective
use.
Net Working Capital: The term net working capital refers to the difference between the current
assets and current liabilities. Net working capital can be positive as well as negative. Positive
working capital refers to the situation where current assets exceed current liabilities and negative
working capital refers to the situation where current liabilities exceeds current assets. The net
working capital helps in comparing the liquidity of the same firm over time. For purposes of the
working capital management, therefore Working Capital can be said to measure the liquidity of the
firm. In other words, the goal of working capital management is to manage the current assets and
liabilities in such a way that a acceptable level of net working capital is maintained.
Importance of working capital management:
Management of working capital is very much important for the success of the business. It has been
emphasized that a business should maintain sound working capital position and also that there
should not be an excessive level of investment in the working capital components. As pointed out
by Ralph Kennedy and Stewart MC muller, “the inadequacy or mis-management of working capital
is one of a few leading causes of business failure.

Determinants of Working Capital

There is no specific method to determine working capital requirement for a business. There are a
number of factors affecting the working capital requirement. These factors have different
importance in different businesses and at different times. So a thorough analysis of all these factors
should be made before trying to estimate the amount of working capital needed. Some of the
different factors are mentioned here below :-Nature of business: Nature of business is an
important factor in determining the working capital requirements. There are some businesses which
require a very nominal amount to be invested in fixed assets but a large chunk of the total
investment is in the form of working capital. There businesses, for example, are of the trading and
financing type. There are businesses which require large investment in fixed assets and normal
investment in the form of working capital.
Size of business : It is another important factor in determining the working capital requirements of
a business. Size is usually measured in terms of scale of operating
cycle. The amount of working capital needed is directly proportional to the scale of operating cycle
i.e. the larger the scale of operating cycle the large will be the amount working capital and vice
versa.
Business Fluctuations: Most business experience cyclical and seasonal fluctuations in demand for
their goods and services. These fluctuations affect the business with respect to working capital
because during the time of boom, due to an increase in business activity the amount of working
capital requirement increases and the reverse is true in the case of recession. Financial arrangement
for seasonal working capital requirements are to be made in advance.
Production Policy: As stated above, every business has to cope with different types of
fluctuations. Hence it is but obvious that production policy has to be planned well in advance with
respect to fluctuation. No two companies can have similar production policy in all respects because
it depends upon the circumstances of an individual company.
Firm’s Credit Policy: The credit policy of a firm affects working capital by influencing the level
of book debts. The credit term are fairly constant in an industry but individuals also have their role
in framing their credit policy. A liberal credit policy will lead to more amount being committed to
working capital requirements whereas a stern credit policy may decrease the amount of working
capital requirement appreciably but the repercussions of the two are not simple. Hence a firm
should always frame a rational credit policy based on the credit worthiness of the customer.
Availability of Credit: The terms on which a company is able to avail credit from its suppliers of
goods and devices credit/also affects the working capital requirement. If a company in a position to
get credit on liberal terms and in a short span of time then it will be in a position to work with less
amount of working capital. Hence the amount of working capital needed will depend upon the
terms a firm is granted credit by its creditors.
Growth and Expansion activities: The working capital needs of a firm increases as it grows in
term of sale or fixed assets. There is no precise way to determine the relation between the amount
of sales and working capital requirement but one thing is sure that an increase in sales never
precedes, the increase in working capital but it is always the other way round. So in case of
growth or expansion the aspect of working capital needs to be planned in advance.
Price Level Changes: Generally increase in price level makes the commodities dearer. Hence with
increase in price level the working capital requirements also increases. The companies which are in
a position to alter the price of these commodities in accordance with the price level changes will face
less problems as compared to others. The changes in price level may not affect all the firms in same
way. The reactions of all firms with regards to price level changes will be different from one other.
CIRCULATION SYSTEM OF WORKING CAPITAL
In the beginning the funds are obtained from the issue of shares, often supplemented by long term
borrowings. Much of these collected funds are used in purchasing fixed assets and remaining funds
are used for day to day operation as pay for raw material, wages overhead expenses. After this
finished goods are ready for sale and by selling the finished goods either account receivable are
created and cash is received. In this process profit is earned. This account of profit is used for paying
taxes, dividend and the balance is ploughed in the business.
Working capital is considered to efficiently circulate when it turns over quickly. As circulation
increases, the investment in current assets will decrease. Total Assets is the sum of all assets, current
and fixed. The asset turnover ratio measures the ability of a company to use its assets to efficiently
generate sales. The higher the ratio indicates that the company is utilizing all its assets efficiently to
generate sales. Companies with low profit margins tend to have high asset turnover.
Bharit Airtel.
Ratios useful to analyze working capital management
(A) Efficiency Ratios
2016-17 2017-18

1. Working Capital Turnover (times) 4.84 10.23

2. Current Assets Turnover (times) 1.78 2.98

3. Inventory turnover (times) 9.49 9.20

(B) Liquidity Ratio and Solvency Ratio

1. Current Ratio 1.02 0.65

2. Quick Ratio 1.37 0.75

3. Debt Equity Ratio 0.29 0.24

The Company generates healthy operational cash flows and maintains sufficient cash and
financing arrangements to meet its strategic objectives. It deploys a robust cash management
system to ensure timely servicing of its liquidity obligations. The Company has also been able to
arrange for adequate liquidity at an optimized cost to meet its business requirements and has
minimized the amount of funds tied-up in the current assets.

As of March 31, 2012, the Company has cash and cash equivalents of Rs.
20,300 Mn and short term investments of Rs. 18,132 Mn. During the year
ended March 31, 2012, the Company generated operating free cash flow of
Rs. 101,319 Mn. The net debt - EBITDA ratio as on March 31, 2012 was at
2.56 and the net debt - equity ratio was at 1.29. The net debt in USD
terms decreased from USD 13,427 Mn as on March 31, 2011 to USD 12,714
Mn as on March 31, 2012.

On further analysis, inventory constitutes a major proportion of total current assets. Among its
various components, raw materials, stocks, spared and finished goods in particular need further
analysis as here stand out to the problem areas.
 Schedule of Changes in Working Capital

Particulars Amount
Assets 31 March 2018 31 March 2017
Gross Block 71911.80 63885.40
(-) Acc. Depreciation 28729.20 23444.60
Net Block 43182.60 40440.80
Capital Work in Progress 1030.80 4466.50
Investments 28199.10 12337.80
Sundry Debtors 2246.80 2134.50
Cash and Bank 362.70 481.20
Loans and Advances 12859.10 20430.80
Total Current Assets 15470.70 23078.60

Current Liabilities 20061.70 16067.20

Provisions 695.50 697.50
Total Current Liabilities 20757.20 16764.70

Working capital (CA-CL)

Working Capital (5286.5) 6313.90
 Chapter – 2
COMPANY PROFILE
Bharti Airtel Limited
Bharti Airtel to Observe Silent period from June 30, 2012
New Delhi June 25, 2011 : Bharti Airtel, India’s leading private telecom
services provider would observe a 'Silent Period' from the close of business on
June 30, 2011 (Wednesday), till the declaration of results for the first quarter
ending June 30, 2011, as a commitment towards highest level of corporate
governance.
Details about the quarterly and annual results announcement and the earnings
call will be made available on the website.
The practice of silent period does not refrain the company and its representatives
from any press conference & public dissemination of information. The
observation of silent period is only a practice and hence does not imply any legal
obligation for the company under any circumstances.
About Bharti Airtel Limited: Bharti Airtel Limited, a group company of Bharti
Enterprises, is among Asia’s leading integrated telecom services providers with
operations in India, Sri Lanka and Bangladesh. The company has an aggregate
of around 138 million customers across its operations. Bharti Airtel has been
ranked among the six best performing technology companies in the world by
Business Week. Bharti Airtel is structured as four strategic business units -
Mobile, Telemedia, Enterprise and Digital TV. The mobile business offers
services in India, Sri Lanka and Bangladesh. The Telemedia business provides
broadband, IPTV and telephone services in 89 Indian cities. The Enterprise
business provides end-to-end telecom solutions to corporate customers and
national and international long distance services to carriers. The Digital TV
business provides DTH Airtel’s national high-speed optic fiber network
currently spans over 126,357 Rkms across India. Airtel's international network
infrastructure includes ownership of the i2i submarine cable system and
consortium ownership in five global undersea cable systems, SEA-ME-WE 4,
EIG, I-ME-WE, AAG and Unity. For more information, visit www.airtel.in
Bharti Airtel
Airtel comes to you from Bharti Airtel Limited, one of Asia’s leading integrated
telecom services providers with operations in 19 countries across Asia and
Africa.
 Bharti Airtel since its inception, has been at the forefront of technology and has pioneered several
innovations in the telecom sector.
The company is structured into four strategic business units - Mobile, Telemedia, Enterprise and
Digital TV. The mobile business offers services in India, Sri Lanka and Bangladesh. The Telemedia
business provides broadband, IPTV and telephone services in 89 Indian cities. The Digital TV
business provides Direct-to-Home TV services across India. The Enterprise business provides end-to-
end telecom solutions to corporate customers and national and international long distance services to
telcos.
Vision and Values
Our vision
By 2020 we will build India's finest conglomerate by:
• Always empowering and backing our people
• Being loved and admired by our customers and -respected by our partners
• Transforming millions of lives and making a positive impact on society
• Being brave and unbounded in realizing our dreams
Our values
Empowerment
We respect the opinions and decisions of others. We encourage and back people to do their best
Entrepreneurship
We always strive to change the status quo. We Innovate with new ideas and energise with a strong
passion and entrepreneurial spirit.
Transparency
We believe we must work with honesty, trust and the innate desire to do good.
Impact
Are driven by the desire to create a meaningful difference in society
Flexibility
We are ever willing to learn and adapt to the environment, our partners and the customer's evolving
needs.
Bharti Airtel Limited (BSE: 532454) formerly known as Bharti Tele-Ventures LTD (BTVL) is an
Indian company offering telecommunication services in 19 countries. It is the largest cellular service
provider in India, with more than 141 million subscriptions as of August 2011[update] Bharti Airtel is
the world's third largest, single-country mobile operator and fifth largest telecom operator in the
world with a
subscriber base of over 180 million It also offers fixed line services and
broadband services. It offers its telecom services under the Airtel brand and is
headed by Sunil Bharti Mittal. Bharti Airtel is the first Indian telecom service
provider to achieve this Cisco Gold Certification. To earn Gold Certification,
Bharti Airtel had to meet rigorous standards for networking competency, service,
support and customer satisfaction set forth by Cisco. The company also provides
land-line telephone services and broadband Internet access (DSL) in over 96
cities in India. It also acts as a carrier for national and international long distance
communication services. The company has a submarine cable landing station at
Chennai, which connects the submarine cable connecting Chennai and
Singapore.
It is known for being the first mobile phone company in the world to outsource
everything except marketing and sales and finance. Its network (base stations,
microwave links, etc.) is maintained by Ericsson and Nokia Siemens Network,
business support by IBM and transmission towers by another company. Ericsson
agreed for the first time, to be paid by the minute for installation and
maintenance of their equipment rather than being paid up front. This enables the
company to provide pan-India phone call rates of Rs. 1/minute (U$0.02/minute).
During the last financial year [2010-10], Bharti has roped in a strategic partner
Alcatel-Lucent to manage the network infrastructure for the Telemedia Business.
The company is structured into four strategic business units - Mobile, Telemedia,
Enterprise and Digital TV. The mobile business offers services in 18 countries
across the Indian Subcontinent and Africa. The Telemedia business provides
broadband, IPTV and telephone services in 89 Indian cities. The Digital TV
business provides Direct-to-Home TV services across India. The Enterprise
business provides end-to-end telecom solutions to corporate customers and
national and international long distance services to telcos.
Globally, Bharti Airtel is the 3rd largest in-country mobile operator by subscriber
base, behind China Mobile and China Unicom. In India, the company has a
30.7% share of the wireless services market. In January 2011, company
announced that Manoj Kohli, Joint Managing Director and current Chief
Executive Officer of Indian and South Asian operations, will become the Chief
Executive Officer of the International Business Group from 1 April 2011. He
will be overseeing Bharti's overseas business. Current Dy. CEO, Sanjay Kapoor,
will replace Manoj Kohli and will be the CEO, effective from 1 April 2011.
 Airtel digital TV launches two attractive offers for new customers this festive season
- Offer 1: Now get 4 month free subscription to Economy Pack with all new Airtel digital
connections @Rs.1690
- Offer 2: Purchase a new Airtel digital TV connection for just Rs. 999
New Delhi, October 7, 2011 : Airtel digital TV, the DTH arm of Bharti Airtel, today announced two
powerful combos on new subscriptions for customers across India. The Limited Period Offers come
on the eve of the festival season.
Offer 1: Customers purchasing a new Airtel digital TV connection @ Rs.1690 need not recharge
their Airtel digital TV accounts for the next 4 months. They would be entitled to 4 months free
subscription to the Economy Pack (around 150 popular channels, worth Rs.200+taxes) thereby
enabling them to make the move to the next generation DTH technology on Airtel, for an effective
price of just Rs.806!
Offer 2: New customers who purchase a new Airtel digital TV connection for Rs.999 and get started
with an initial recharge of just Rs.200.
Announcing the offers, Sugato Banerji, CMO-DTH Services, Bharti Airtel, said "We believe that
these two new entry offers will provide yet another compelling reason for customers to join the
growing Airtel digital TV family. By significantly bring down the Total Cost of Ownership these
offers will make it more easier for more customers, to move to the next generation home
entertainment options like Airtel digital TV."
Airtel digital TV – the DTH service from Bharti Airtel – has 3.8 million customers and is one of the
leading national level DTH service in the country which offers its customers MPEG 4 with DVBS 2 –
currently the most advanced digital broadcasting technologies available in the world after HD
broadcasting. Additionally, Airtel digital TV was the first to bring many firsts to the DTH segment in
India including a Universal Remote which operates both the Set Top Box and TV set as well as
several unique Interactive Applications. Airtel digital TV recorder was the first to offer the capability
to record live television, anytime, anywhere and recently added HD services to its portfolio. Users
can also update themselves on the latest stock news. All this is backed by 24x7 customer care. Airtel
digital TV launched its services in October 2009.
About Bharti Airtel Limited : Bharti Airtel Limited is a leading global telecommunications company
with operations in 19 countries across Asia and Africa. The company offers mobile voice & data
services, fixed line, high speed broadband,
IPTV, DTH, turnkey telecom solutions for enterprises and national & international long distance
services to carriers. Bharti Airtel has been ranked among the six best performing technology
companies in the world by BusinessWeek. Bharti Airtel had over 188 million customers across its
operations at the end of August 2011. To know more visit www.airtel.in
Services
Mobile Services
Airtel is the name of the company's mobile services brand. It operates in 19 countries and the Channel
Islands. It is the 5th largest mobile operator in the world in terms of subscriber base. Airtel's network
consists of 3G and 2G services depending on the country of operation.
Airtel
In India, the company's mobile service is branded as Airtel. It has nationwide presence and is the
market leader with a market share of 30.07% (as of May 2011). On 19 October 2004, Airtel
announced the launch of a Black Berry Wireless Solution in India. The launch is a result of a tie-up
between Bharti Tele-Ventures Limited and Research In Motion (RIM).
The Apple iPhone 3G was rolled out in India on 22 August 2009 by Airtel & Vodafone. Both the
cellular service providers rolled out their Apple iPhone 3GS in the first quarter of 2011. However,
high prices and contract bonds discouraged consumers and it was not as successful for both the
service providers as much as the iPhone is successful in other markets of the world.
On May 18, 2011, 3G spectrum auction was completed and Airtel will have to pay the Indian
government Rs. 12,295 crores for spectrum in 13 circles, the most amount spent by an operator in this
auction. Airtel won 3G licences in 13 telecom circles of India: Delhi, Mumbai, Andhra Pradesh,
Karnataka, Tamil Nadu, Uttar Pradesh (West), Rajasthan, West Bengal, Himachal Pradesh, Bihar,
Assam, North East, Jammu & Kashmir. Bharti is expecting to launch its 3G service by December
2011.
On 20 September 2011, Bharti Airtel said that it has given contracts to Ericsson India, Nokia Siemens
Networks (NSN) and Huawei Technologies to set up infrastructure for providing 3G services in the
country. These vendors will plan, design, deploy and maintain 3G-HSPA (third generation, high
speed packet access) networks in 13 telecom circles where the company has won 3G licences. While
Bharti Airtel has awarded network contracts for seven 3G circles to Ericsson India, NSN would

11
 manage networks in three circles. Chinese telecom equipment vendor Huawei Technologies has
been introduced as the third partner for three circles.
Subscriber base in India
The Airtel subscriber base according to Cellular Operators Association of India (COAI) as of
August 2011 was:
Metros
• Chennai - 2,877,029
• Delhi - 6,950,079
• Mumbai - 3,201,916
• Kolkata - 2,947,042
"A" Circle
• Andhra Pradesh - 14,240,429
• Gujarat - 5,980,024
• Karnataka - 13,434,418
• Maharashtra - 7,209,072
• Tamil Nadu - 8,744,937
"B" Circle
• Haryana - 1,580,398
• Kerala - 3,332,095
• Madhya Pradesh - 7,496,236
• Punjab - 5,171,278
• Rajasthan - 11,004,105
• Uttar Pradesh (East) - 8,534,334
• Uttar Pradesh (West) - 4,923,409
• West Bengal - 6,644,688
"C" Circle
• Assam - 2,683,243
• Bihar - 12,600,521
• Himachal Pradesh - 1,452,709
• Jammu and Kashmir - 1,751,239
• North Eastern States - 1,612,005
• Orissa - 4,840,243
Airtel is the market leader in India with about 31.18% market share of 481 million GSM mobile
connections as of August 2011.

12
Criticism
There has been lot of criticism about Airtel for its unauthorised VAS activation. Many of its services
were activated automatically according to a complaint forum. In return Airtel launched
STOP/START 121 services for such issues.
Airtel-Vodafone (Jersey and Guernsey)
On 1 May 2007, Jersey Airtel and Guernsey Airtel, both wholly owned subsidiaries of the Bharti
Group, announced they would launch mobile services in the British Crown Dependency islands of
Jersey and Guernsey under the brand name Airtel-Vodafone after signing an agreement with
Vodafone.
Airtel Lanka
In December 2009, Bharti Airtel rolled out 3.5G services in Sri Lanka in association with Singapore
Telecommunications. Airtel's operation in Sri Lanka, known as Airtel Lanka, commenced operations
on 12 January 2010. Airtel Lanka has 1.4 million mobile customers in Sri Lanka, across 20
administrative districts.
Airtel in Bangladesh
In January 2011, it was announced that the Bangladesh Telecommunications Regulatory Commission
(BTRC) had given Bharti Airtel the go ahead to acquire a 70% stake in the Bangladesh business of
Abu Dhabi based Warid Telcom. The latter had till date invested a total of $600 million, with plans to
bring their Bangladesh investments to the $1 billion mark. Airtel's 70% stake in the company is said
to be at a cost of an initial $300 million. The service is being operated under the brand name Warid
Telecom.
Warid Telecom covers the entire country and has over 2.5 million customers.
Airtel in Africa
On 14, February 2011 a statement issued by Zain Ghana, said "the Board of Directors of Kuwait's
Zain Group, after its meeting on February 14, 2011, issued a resolution to accept a proposal received
from Bharti Airtel Limited (Bharti) to enter into exclusive discussions until 25 March 2011, regarding
the sale of its African unit, Zain Africa BV." The offer was for $10.7 billion. The deal would provide
Bharti access to 15 more countries in the region, adding around 40.1 million subscribers to its already
125 million-plus user base. The combined revenue of the two entities would be around $12 billion.
The deal ran into hurdles after the government of the of Gabon had come out against the deal, but
later approved the sale. The government of Congo Republic had also said

13
Bharti-Zain deal broke law. There was also a dispute about minority ownership of Zain's operations in
Nigeria, the biggest market in the deal. Minority shareholder Econet was seeking to overturn a 2006
deal by Zain - then called Celtel - in which it bought a majority stake in Nigerian mobile operator Vee
Networks Ltd, now Zain Nigeria. On 8, June 2011, Bharti said the Nigeria ownership dispute had
been settled. On 8, June 2011, Bharti Airtel, in the largest ever telecom takeover by an Indian firm,
completed a deal to buy Kuwait-based Zain Telecom's businesses in 15 African countries for $10.7
billion. The transaction is the largest ever cross-border deal in an emerging market and will result in
combined revenues of about $13 billion."The overall integration should be complete by the end of
this financial year.
On September 1, 2011, Chairman and Managing Director Sunil Bharti Mittal said that Bharti Airtel
Ltd would change its Africa operations brand from Zain to Airtel by 15 October 2011.
Airtel Seychelles
On August 11, 2011, Bharti Airtel announced that it would acquire 100% stake in Telecom
Seychelles for US$62 million taking its global presence to 19 countries. Telecom Seychelles began
operations in 1998 and operates 3G, Fixed Line, ship to shore services satellite telephony, among
value added services like VSAT and Gateways for International Traffic across the Seychelles under
the Airtel brand. The company has over 57 percent share of the mobile market of Seychelles.
Airtel announced plans to invest US$10 million in its fixed and mobile telecoms network in the
Seychelles over three years , whilst also participating in the Seychelles East Africa submarine cable
(SEAS) project. The US$34 million SEAS project is aimed at improving the Seychelles’ global
connectivity by building a 2,000 km undersea high speed link to Dar es Salaam in Tanzania.
Telemedia
The Telemedia business provides services in 89 Indian cities and consists of two brands.
Airtel Broadband provides broadband and IPTV services. Airtel provides both capped as well as
unlimited download plans. The maximum speed available for home users is 16Mbps.
Airtel Fixed Line which provides fixed line services.
Airtel has about 3.15 million wireline customers, of which 42.6% are broadband/internet subscribers
as of August 2011. Until September 18, 2004, Bharti
provided fixed-line telephony and broadband services under the Touchtel brand. Bharti now provides
all telecom services including fixed-line services under a common brand "Airtel".
Digital Televison
Main article: Airtel Digital TV
The Digital TV business provides Direct-to-Home (DTH) TV services across India under the brand
name Airtel Digital TV. It started services on 9 October 2009 and has about 32.44 million customers
as of August 2011.
Enterprise
The Enterprise business provides end-to-end telecom solutions to corporate customers and national
and international long distance services to telcos through its nationwide fiber optic backbone, last
mile connectivity in fixed-line and mobile circles, VSATs, ISP and international bandwidth access
through the gateways and landing stations.
Merger talks
In May 2009, it emerged that Bharti Airtel was exploring the possibility of buying the MTN Group, a
South Africa-based telecommunications company with coverage in 21 countries in Africa and the
Middle East. The Financial Times reported that Bharti was considering offering US$45 billion for a
100% stake in MTN, which would be the largest overseas acquisition ever by an Indian firm.
However, both sides emphasize the tentative nature of the talks, while The Economist magazine
noted, "If anything, Bharti would be marrying up," as MTN has more subscribers, higher revenues
and broader geographic coverage. However, the talks fell apart as MTN group tried to reverse the
negotiations by making Bharti almost a subsidiary of the new company.
In May 2011, Bharti Airtel again confirmed that it is in Talks with MTN and companies have now
agreed discuss the potential transaction exclusively by July 31, 2011. Bharti Airtel said in a statement
"Bharti Airtel Ltd is pleased to announce that it has renewed its effort for a significant partnership
with MTN Group".
Talks eventually ended without agreement, due to the South African government opposition
Consecutively for four years 1997,1998,1999 and 2000, AirTel has been voted as the Best Cellular
Service in the country and won the coveted
Techies award.
 AirTel has consistently strived hard to, not only deliver as per customer expectation, but also go
beyond that. According to its those at AirTel, their vision, mission and values are as follows….
VISION
To make mobile communications a way of life and be the customers' first choice
MISSION
We will meet the mobile communication needs of our customers through :
Ø Error-free service delivery
Ø Innovative products and services
Ø Cost efficiency
VALUES
We will always put our customers first. We will always trust and respect each other. We will respect
our associates as we respect each other. We will work together through a process of continuous
improvement
Airtel (Bharti Airtel Ltd.)
Bharti Airtel Limited was incorporated on July 7, 1995 for promoting investments in
telecommunications services. Its subsidiaries operate telecom services across India. Bharti Airtel is
India's leading private sector provider of telecommunications services based on a strong customer
base consisting of 50 million total customers, which constitute, 44.6 million mobile and 5.4 million
fixed line customers, as of March 31, 2011.
Airtel comes to us from Bharti Airtel Limited - a part of the biggest private integrated telecom
conglomerate, Bharti Enterprises. Bharti provides a range of telecom services, which include Cellular,
Basic, Internet and recently introduced National Long Distance. Bharti also manufactures and exports
telephone terminals and cordless phones. Apart from being the largest manufacturer of telephone
instruments in India, it is also the first company to export its products to the USA. Bharti has also put
its footsteps into Insurance and Retail segment in collaboration with Multi- National giants. Bharti is
the leading cellular service provider, with a footprint in 23 states covering all four metros and more
than 50 million satisfied customers.
SERVICES
9 Airtel Prepaid
9 Strong Network Coverage
9 Other Services
9 Voice Mail
9 SMS (Short Messaging Service)
9 Subscription Alerts
9 Airtel Live!
9 Airtel Live! WAP Services: Airtel Live! Voice Services:
Airtel Live! SIM Services.
9 Airtel Live! SMS Services
9 Hello Tunes
9 121@airtelindia.com.
Airtel Postpaid
9 Easy Billing
9 Easy Payment Options. Anytime Anywhere
9 Long Distance Calling Facility
9 Widest Roaming - National and International GPRS - Roaming
Say it. In more than just words, with Services from Airtel
Conference call
Missed call alert
Subscription Alerts
Airtel Live!
GPRS (General Packet Radio Services)
Get the EDGE
Business Divisions
Bharti Airtel offers GSM mobile services in all the 23-telecom circles of India and is the largest
mobile service provider in the country, based on the number of customers. The group focuses on
delivering telecommunications services as an integrated offering including mobile, broadband &
telephone, national and international long distance and data connectivity services to corporate,
small and medium scale enterprises.
The group offers high speed broadband internet with a best in class network. With Landline
services in 94 cities we help you stay in touch with your friends & family and the world.
The Company compliments its mobile and broadband & telephone services with national and
international long distance services. It has over 35,016 route kilometers of optic fibre on its national
long distance network. For international connectivity to east, it has a submarine cable landing station
at.
Bharti Airtel Limited
(A Bharti Enterprise)
Bharti Airtel is one of India's leading private sector providers of telecommunications services based
on an aggregate of 42,685,530 customers as on May 31, 2009, consisting of 40,743,725 GSM mobile
and 1,941,805 broadband & telephone customers.
The businesses at Bharti Airtel have been structured into three individual strategic business units
(SBU’s) - mobile services, broadband & telephone services (B&T) & enterprise services. The mobile
services group provides GSM mobile services across India in 23 telecom circles, while the B&T
business group provides broadband & telephone services in 94 cities. The enterprise services group
has two sub-units - carriers (long distance services) and services to corporates. All these services are
provided under the Airtel brand.
Company shares are listed on The Stock Exchange, Mumbai (BSE) and The National Stock Exchange
of India Limited (NSE).
Partners
The company has a strategic alliance with SingTel. The investment made by SingTel is one of the
largest investments made in the world outside Singapore, in the company.
The company’s mobile network equipment partners include Ericsson and Nokia. In the case of the
broadband and telephone services and enterprise services (carriers), equipment suppliers include
Siemens, Nortel, Corning, among others. The Company also has an information technology alliance
with IBM for its group-wide information technology requirements and with Nortel for call center
technology requirements. The call center operations for the mobile services have been outsourced to
IBM Daksh, Hinduja TMT, Teletech & Mphasis.
Chapter – 3
LITERATURE REVIEW

CIRCULATION SYSTEM OF WORKING CAPITAL

In the beginning the funds are obtained from the issue of shares, often supplemented by long
term borrowings. Much of these collected funds are used in purchasing fixed assets and
remaining funds are used for day to day operation as pay for raw material, wages overhead
expenses. After this finished goods are ready for sale and by selling the finished goods either
account receivable are created and cash is received. In this process profit is earned. This account
of profit is used for paying taxes, dividend and the balance is ploughed in the business.
Working capital is considered to efficiently circulate when it turns over quickly. As circulation
increases, the investment in current assets will decrease. Current assets turnover ratio speaks
about the efficiency of Airtel in the utilization of current assets. Fast turnover current assets
results in a better rate on investment.
Table showing Current assets turnover ratio
Year Ratio (in times)

2016-17 1.38

2017-18 0.74
 BHARTI AIRTEL SERVICES LTD.
Ratios useful to analyze Working Capital Management
2016-17 2017-18

(A) Liquidity and Solvency

Ratio

1. Long Term Debt Equity

Ratio 0.18 0.17

2. Quick Ratio 0.75 1.37

3. Debt Equity Ratio 0.57 0.08

(B) Management
Efficiency Ratios

Ratio/Year 2017-18 2016-17

Debtors Turnover Ratio 20.70 23.14

Fixed Assets Turnover

Ratio 0.82 0.84

Total Assets Turnover Ratio 0.90 0.84

Asset Turnover Ratio 0.69 0.71

Number of Days In Working

Capital -53.47 43.95

Interpretation (Ratio Analysis)

¾ As shown by current assets turnover ratio, the utilisation of current assets in terms of sales has
shown a decreasing trend which shows that current assets has been effectively used to achieve sales.
¾ Again if we look at the efficiency with which individual elements of working capital have been
utilised, the picture of inventory turnover is not very bright and moved on a same trend.
¾ Receivables turnover also shows a declining trend.
¾ As we look at the extent of liquidity of working capital, we notice that the ration shows a increasing
trend.
¾ If we analyse the structural health of working capital, the proportion of current
assets to total asests has been appropriate during this period.
Our analysis above indicates the areas of concern to management in making best possible use of
resources. Decreasing efficiency in the use of current assets hints of the possibility of problems
in working capital management.
On further analysis, inventory constitutes a major proportion of total current assets. Among its
various components, raw materials, stocks, spared and finished goods in particular need further
analysis as here stand out to the problem areas.

Sources March 2018 (in cr) March 2017 (in cr)

Net Profit Before Tax 6454.80 6956.20

Net Cash From Operating Activities 13884.70 11437.80

Net Cash (used in)/from (10725.90) (12611.80)

Investing Activities

Net Cash (used in)/from Financing (3185.70) 1400.80

Activities

Net (decrease)/increase In Cash and (26.90) 226.80

Cash Equivalents

Opening Cash & Cash Equivalents 354.80 128.00

Closing Cash & Cash Equivalents 327.90 354.80

Cash Flow of Bharti Airtel

 Interpretation (Cash Flow Statement)
¾ In the year 2012-13 cash from operation is more from previous years. The company should take
appropriate steps in order to continue the trend.
¾ In the 2012-13 company has major spending in terms of spending in form of
Acquisition/subscription/investment in subsidiaries.
¾ Out of total cash flow from operating activites there has been increase in trade and other payables.

COMPARISON OF OPERATING CYCLE OF BHARTI AIRTEL SERVICES LTD WITH

VODAFONE ESSAR MOBILE SERVICES LTD.
Operating cycle
A direct result of our interest in both liquidity and activity ratios in the concept of a firm’s operating
cycle. A firm’s operating cycle is the length of time from the commitment of cash for purchases until
the collection of receivables resulting from the sale of goods or services. It is as if we start a stop
watch when the purchase raw material and stop the watch only when we receive cash after the
finished goods have been sold. The time appearing on our watch (usually in days) is the firm’s
operating cycle.
Oper ating Cycl e (Bharti Airtel Service s Ltd.) 2012

Total 47 days

Oper ating Cycl e (VODAFO NE ESSA R MOBILE SERVICES LTD.) 2012

Total 45 days (A pprox.)

 Our Analysis clearly indicates that Bharti Airtel has improved its operating cycle from the year 2011.
It needs to improve its operating cycle in coming years to achieve profitability.
CASH MANAGEMENT
Cash is the important current asset for the operations of the business. Cash is the basic input needed
to keep the business running on a continuous basis It is also the ultimate output expected to be
realized by selling the service or product manufactured by the firm. The firm should keep sufficient
cash, neither more nor less. Cash shortage will disrupt the firm’s operations while excessive cash will
simply remain idle, without contributing anything towards the firm’s profitability. Thus a major
function of the Financial Manager is to maintain a sound cash position.
Cash is the money which a firm can disburse immediately without any restriction. The term cash
includes currency and cheques held by the firm and balances in its bank accounts. Sometimes near
cash items, such as marketable securities or bank time deposits are also included in cash. The basic
characteristics of near cash assets are that they can readily be converted into cash. Cash management
is concerned with managing of:
i) Cash flows in and out of the firm
ii) Cash flows within the firm
iii) Cash balances held by the firm at a point of time by financing deficit or
inverting surplus cash.
Sales generate cash which has to be disbursed out. The surplus cash has to be invested while deficit
cash 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. Therefore the aim of Cash Management is to
maintain adequate control over cash position to keep firm sufficiently liquid and to use excess cash in
some profitable way.
The Cash Management is also important because it is difficult to predict cash flows accurately.
Particularly the inflows and that there is no perfect coincidence between the inflows and outflows of
the cash. During some periods cash outflows will exceed cash inflows because payments for taxes,
dividends or seasonal inventory build up etc. On the other hand cash inflows will be more than cash
payment because there may be large cash sales and more debtors’ realization at any point of time.
Cash Management is also important because cash constitutes the smallest portion of the
 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 funds in profitable opportunities. In order to resolve the
uncertainty about cash flow prediction and lack of synchronization between cash receipts and
payments, the firm should develop appropriate strategies regarding the following four facets of cash
management.
1. Cash Planning: - Cash inflows and cash outflows should be planned to project cash surplus or
deficit for each period of the planning period. Cash budget should prepared for this purpose.
2. Managing the cash flows: - The flow of cash should be properly managed. The cash inflows
should be accelerated while, as far as possible decelerating the cash outflows.
3. Optimum cash level: - The firm should decide about the appropriate level of cash balances. The
cost of excess cash and danger of cash deficiency should be matched to determine the optimum level
of cash balances.
4. Investing surplus cash: - The surplus cash balance should be properly invested to earn profits. The
firm should decide about the division of such cash balance between bank deposits, marketable
securities and inter corporate lending.
The ideal Cash Management system will depend on the firm’s products, organization structure,
competition, culture and options available. The task is complex and decision taken can affect
important areas of the firm.
Functions of Cash Management:
Cash Management functions are intimately, interrelated and intertwined Linkage among different
Cash Management functions have led to the adoption of the following methods for efficient Cash
Management:
¾ Use of techniques of cash mobilization to reduce operating requirement of cash.
¾ Major efforts to increase the precision and reliability of cash forecasting.
¾ Maximum effort to define and quantify the liquidity reserve needs of the firm.
¾ Development of explicit alternative sources of liquidity.
¾ Aggressive search for relatively more productive uses for surplus money assets.
 The above approaches involve the following actions which a finance manager has to perform.
1. To forecast cash inflows and outflows
2. To plan cash requirements
3. To determine the safety level for cash.
4. To monitor safety level for cash
5. To locate the needed funds
6. To regulate cash inflows
7. To regulate cash outflows
8. To determine criteria for investment of excess cash
9. To avail banking facilities and maintain good relations with bankers
Motives for holding cash:
There are four primary motives for maintaining cash balances:
1. Transaction motive
2. Precautionary motive
3. Speculative motive
4. Compensating motive
1. Transaction motive: - The transaction motive refers to the holding of cash to meet anticipated
obligations whose timing is not perfectly synchronized with cash receipts. If the receipts of cash and
its disbursements could exactly coincide in the normal course of operations, a firm would not need
cash for transaction purposes. Although a major part of transaction balances are held in cash, a part
may also be in such marketable securities whose maturity conforms to the timing of the anticipated
payments.
2. Precautionary motive: - Precautionary motive of holding cash implies the need to hold cash to
meet unpredictable obligations and the cash balance held in reserve for such random and unforeseen
fluctuations in cash flows are called as precautionary balances. Thus, precautionary cash balance
serves to provide a cushion to meet unexpected contingencies. The unexpected cash needs at short
notice may be the result of various reasons as: unexpected slowdown in collection of accounts
receivable, cancellations of some purchase orders, sharp increase in cost of raw materials etc. The
more unpredictable the cash flows, the larger the need for such balances. Another factor which has a
bearing on the level of precautionary balances is the availability of short term
 credit. Precautionary cash balances are usually held in the form of marketable securities so that
they earn a return.
3. Speculative motive: - It refers to the desire of a firm to take advantage of opportunities which
present themselves at unexpected movements and which are typically outside the normal course of
business. The speculative motive represents a positive and aggressive approach. Firms aim to
exploit profitable opportunities and keep cash in reserve to do so. The speculative motive helps to
take advantage of: In opportunity to purchase raw materials at a reduced price on payment of
immediate cash; a chance to speculate on interest rate movements by buying securities when
interest rates are expected to decline; delay purchases of raw materials on the anticipation of
decline in prices; etc.
4. Compensation motive: - Yet another motive to hold cash balances is to compensate banks for
providing certain services and loans. Banks provide a variety of services to business firms, such as
clearances of cheques, supply of credit information, transfer of funds, etc. While for some of the
services banks charge a commission of fee for others they seek indirect compensation. Usually
clients are required to maintain a minimum balance of cash at the bank. Since this balance can not
be utilized by the firms for transaction purposes, the bank themselves can use the amount for
services rendered. To be compensated for their services indirectly in this form, they require the
clients to always keep a bank balance sufficient to earn a return equal to the cost of services. Such
balances are compensating balances. Compensating balances are also required by some loan
agreements between a bank and its customer.

CASH MANAGEMENT: OBJECTIVES

The Basic objective of cash management are two fold: (a) to meet the cash disbursement needs
(payment schedule); and (b) to minimize funds committed to cash balances. These are conflicting
and mutually contradictory and the task of cash management is to reconcile them.
Meeting the payments schedule: - A basic objective of the cash management is to meet the
payment schedule, i.e. to have sufficient cash to meet the cash disbursement needs of the firm. The
importance of sufficient cash to meet the payment schedule can hardly be over emphasized. The
advantages of adequate cash are : (i) it prevents insolvency or bankruptcy arising out of the
inability of the firm to meet its
obligations; (ii) the relationship with the bank is not strained; (iii) it helps in fostering good relations
with trade creditors and suppliers of raw materials, as prompt payment may also help their cash
management; (v) it leads to a strong credit rating which enables the firm to purchase goods on
favorable terms and to maintain its line of credit with banks and other sources of credit; (vi) to take
advantage of favorable business opportunities that may be available periodically; and (vi) finally the
firm can meet unanticipated cash expenditure with a minimum of strain during emergencies, such as
strikes , fires or a new marketing campaign by competitors.
Minimizing funds committed to cash balances: - The second objective of cash management is to
minimize cash balances. In minimizing cash balances two conflicting aspects have to be reconciled. A
high level of cash balance will, ensure prompt payment together with all the advantages, but it also
implies that large funds will remain idle ultimately results less to the expected. A low level of cash
balances, on the other hand, may mean failure to meet the payment schedule, that aim of cash
management should be to have an optimal amount of cash balances.
Cash management techniques and process
The following are the basic cash management techniques and process which are helpful in better cash
management:-
Speedy cash collection: In managing cash efficiently the cash in flow process can be accelerated
through systematic planning and refined techniques. These are two broad approaches to do this which
are narrated as under:
Prompt payment by customer: One way to ensure prompt payment by customer is prompt billing
with clearly defined credit policy. Another and more important technique to encourage prompt
payment the by customer is the practice of offering trade discount/cash discount.
Early conversion of payment into cash: Once the customer has makes the payment by writing its
cheques in favor of the firm, the collection can be expedited by prompt encashment of the cheque. It
will be recalled that there is a lack between the time and cheque is prepared and mailed by the
customer and the time funds are included in the cash reservoir of the firm.
Concentration Banking: In this system of decentralized collection of accounts receivable, large
firms which have a large no. of branches at different places, select some of these which are
strategically located as collection centers for receiving payment for customers. Instead of all the
payments being collected at the head office
of the firm, the cheques for a certain geographical areas are collected at a specified local collection
centers. Under this arrangement the customers are required to send their payments at local collection
center covering the area in which they live and these are deposited in the local account of concerned
collection, after meeting local expenses, if any. Funds beyond a predetermined minimum are
transferred daily to a central or disbursing or concentration bank or account. A concentration banking
is one with which the firm has a major account usually a disbursement account. Hence this
arrangement is referred to as concentration banking.
Lock-Box System: - The concentration banking arrangement is instrumental in reducing the time
involved in mailing and collection. But with this system of collection of accounts receivable,
processing for purposes of internal accounting is involved i.e. sometime in elapses before a cheque is
deposited by the local collection center in its account. The lock-box system takes care of this kind of
problem, apart from effecting economy in mailing and clearance times. Under this arrangement, firms
hire a post office box at important collection centers. The customers are required to remit payments to
lock-box. The local banks of the firm, at respective places, are authorized to open the box and pick up
the remittance received from the customers. Usually the authorized banks pick up the cheques several
time a day and deposit them in the firm’s account. After crediting the account of the firm the banks
send a deposit 4epo slip along with the list of payments and other enclosures, if any, to the firm by
way of proof and record of the collection.
Slowing disbursements: A basic strategy of cash management is to delay payments as long as
possible without impairing the credit rating/standing of the firm. In fact, slow disbursement represents
a source of funds requiring no interest payments. There are several techniques to delay payment of
accounts payable namely (1) avoidance of early payments; (2) centralized disbursements; (3) floats;
(4) accruals.
Avoidance of early payments: One way to delay payments is to avoid early payments. According to
the terms of credit, a firm is required to make a payment within a stipulated period. It entitles a firm
to cash discounts. If however payments are delayed beyond the due date, the credit standing may be
adversely affected so that the firms would find it difficult to secure trade credit later. But if the firm
pays its accounts payable before the due date it has no special advantage. Thus a firm would be well
advised not to make payments early i.e. before the due date.
Centralized disbursements: Another method to slow down disbursements is to have centralized
disbursements. All the payments should be made by the head office from a centralized disbursement
account. Such an arrangement would enable a firm to delay payments and conserve cash for several
reasons. Firstly it involves increase in the transit time. The remittances from the head office to the
customers in distant places would involve more mailing time than a decentralized payment by a local
branch. The second reason for reduction in operating cash requirement is that since the firm has a
centralized bank account, a relatively smaller total cash balance will be needed. In the case of a
decentralized arrangement, a minimum cash balance will have to be maintained at each branch which
will add to a large operating cash balance. Finally, schedules can be tightly controlled and
disbursements made exactly on the right day.
Float: - A very important technique of slow disbursements is float. The term float refers to amount of
money tied up in the cheques that have been written, but have yet to be collected and enchased.
Alternatively, float represents the difference between the bank balance and book balance of cash of a
firm. The difference between the balance as shown in the firm’s record and the actual bank balance is
due to transit and processing delays. There is time lag between the issue of a cheque by the firm and
its presentation to its bank by the customer’s bank for payment. The implication is that although a
cheque has been issued cash would be required later when the cheque resented for encashment.
Therefore, a firm can send remittance although it does not have cash in its bank at the time of
issuance of cheque. Meanwhile, funds can be arranged to make payments when the cheque is
presented for collection after a few days. Float used in this sense is called cheque kitting.
Accruals: - Finally, a potential tool for stretching accounts payable is accruals which are defined as
current liabilities that represent a service or goods received by a firm but not yet paid for instance,
payroll, i.e. remuneration to employees, who render services in advance and receive payment later. In
a way they extend credit to the firm for a period at the end of which they are paid, say, a week or
month. The longer the period after which payment is made, the greater the amount of free financing
and the smaller the amount of cash balances required. Thus, less frequent payrolls, i.e. monthly as
compared to weekly, are important sources of accruals. They can be manipulated to slow down
disbursements.
Determining the optimum level of cash balance:
Cash balance is maintained for the transaction purposes and additional amount may be maintained as
a buffer or safety stock.
The Finance manager should determine the appropriate amount of cash balance. Such a decision is
influenced by trade-off between risk and return. If the firm maintains small cash balance, its liquidity
position becomes week and suffers from a paucity of cash to make payments. But a higher
profitability can be attained by investing released funds in some profitable opportunities. When the
firm runs out of cash it may have to sell its marketable securities, if available, or borrow. This
involves transaction cost.
On the other hand if the firm maintains a higher level of cash balance, it will have a sound liquidity
position but forego the opportunities to earn interests. The potential interest lost on holding large cash
balance involves opportunities cost to the firm. Thus the firm should maintain an optimum cash
balance, neither a large nor a small cash balance.
To find out the optimum cash balance the transaction cost and risk of too small balance should be
matched with opportunity costs of too large a balance should be matched with opportunity cost of too
large a balance. Figure shows this trade-off graphically. If the firm maintains larger cash balances its
transaction cost would decline, but the opportunity cost would increase. At point X the sum of two
costs is minimum. This is the point of optimum cash balance. Receipts and disbursement of cash are
hardly in perfect synchronization. Despite the absence of synchronization it is not difficult to
determine the optimum level of cash balance.
If cash flows are predictable it is simply a problem of minimizing the total costs - the transaction cost
and the opportunity cost.
The determination of optimum working cash balance under certainty can thus be viewed as an
inventory problem in which we balance the cost of too little cash ( transaction cost) against the cost of
too much cash( opportunity cash)
Cash flows, in practice, are not completely predictable. At times they may be completely random .
Under such a situation, a different model based on the technique of control theory is needed to solve
the problem of appropriate level of working cash balance.
With unpredictable variability of cash flows, we need information on transaction costs, opportunity
costs and degree of variability of net cash flows to determine the
 appropriate cash balance. Given such data the minimum and maximum of cash balances should be
set. Greater the degree of variability, higher the minimum cash balance. Whenever the cash balance
reaches a maximum level, the differences between maximum and minimum levels should be invested
in marketable securities. When balance is falls to zero, marketable securities should be sold and
proceed should be transferred to the working cash balances.
Evaluation of cash management performances
To assess the cash management performance this phase is divided as follows:
a) Size of Cash
b) Liquidity and Adequacy of cash
3) Control of cash

A) Size of cash : The quantum of cash held by Bharti Airtel during the study period is
presented in the table. The trend percentage also calculated and shown in the table:
Size of cash and bank balance (Rs. in Crores)
Year Cash
31 March 2018 36.27
31 March 2017 48.12
(B) Operating Profit & OPM
Operating Profit gives an indication of the current operational profitability of the
business and allows a comparison of profitability between different companies
after removing out expenses that can obscure how the company is really
performing.

Interest cost depends on the management's choice of financing, tax can vary
widely depending on acquisitions and losses in prior years, and depreciation and
amortization policies may differ from company to company.
(C) EBITDA, PBT & PAT:
EBITDA is an acronym for Earnings before Interest, Taxes, Depreciation, and
Amortization. PBT stands for Profit before Tax, and PAT stands for Profit After
Tax.

The graph visually shows how the net profit of the company stand reduced due to
the impact of Interest, Depreciation, and Tax.

(D) Total Assets & Asset Turnover Ratio:

Total Assets is the sum of all assets, current and fixed. The asset turnover ratio
measures the ability of a company to use its assets to efficiently generate sales.
The higher the ratio indicates that the company is utilizing all its assets efficiently
to generate sales. Companies with low profit margins tend to have high asset
turnover.
 (E) Net Sales: Sales is the total amount of products or services
sold by the company.

(F) Return On Capital Employed %:

Capital Employed is defined as total assets less current liabilities. Return
On Capital Employed is a ratio that shows the efficiency and profitability
of a company's capital investments. The ROCE should always be higher
than the rate at which the company borrows money.

CONCEPTS OF WORKING CAPITAL

There are two broad concepts of working capital:
a) Gross Concept
b) Net Concept
Gross working capital, simply called as working capital, refers to the firm’s
investment in current assets. Net working capital refers to the difference between
current assets and current liabilities.
The two concepts of working capital i.e., gross and net are not exclusive; rather
they have equal significance from the point of view of the management.
The gross working capital concept focuses attention on two aspects of current
asset management:
a) Optimum investment in current assets
b) Financing of current assets
Net working capital, being the difference between current assets and current
liabilities, is a qualitative concept. It focuses attention on: -
a) Indicates the position if the firm
 b) Suggests the extent to which working capital needs may be financed
by permanent sources of funds.
“An expert is someone who knows all the answers if you ask the right questions.”

DETERMINANTS OF WORKING CAPITITAL

A firm should plan its operations in such a way that it should neither have too
much nor too little working capital. The total working capital requirement is
determined by a wide variety of factors. It should be however noted that these
factors affect different enterprises differently. They also vary from time to time.
In general, these are some of the factors, which are involved, in the proper
assessment of the quantum of working capital required.
1) GENERAL NATURE OF BUSINESS
The working capital requirements of an enterprise are basically related to the
conduct of the business. Enterprises fall into some broad categories depending on
the nature of their business. For instance, public utilities have certain features,
which have a bearing on their working capital needs. The two relevant features
are:
a) Cash nature of business, i.e., cash sale
b) Sale of services rather than commodities.
In view of these features they do not maintain big inventories and have, therefore,
probably the latest requirement of working capital. At the other extreme are the
trading and financial enterprises. The nature of their business is such that they
have to maintain a sufficient amount of cash, inventories and book debts. They
have necessarily to invest proportionately large amounts in working capital.

2) PRODUCTION CYCLE
Another factor, which has a bearing on the quantum of working capital, is the
production cycle. The term ‘production’ or ‘manufacturing cycle’ refers to the
time involved in the manufacturing of goods. It covers the time span between the
procurement of the raw materials and the completion of the manufacturing
process leading to the production of finished goods. Funds will have to be
necessarily tied-up during the process of manufacture, necessitating enhanced
working capital. In other words, there is some gap before raw materials become
finished goods. To sustain such activities the need for working capital is obvious.
The longer the time span (i.e., the production cycle), the larger will be the funds
tied-up and, therefore, the larger the working capital needed and vice-versa. There
are enterprises, which due to the nature of business will have a shorter operating
cycle. A distillery, which has an aging process, has relatively to make a heavy
investment in inventory. The bakery provides the other extremes. The bakeries
sell their products at short intervals and have a very high inventory turnover. The
investment in inventory and, consequently, working capital is not large.
 3) BUSINESS CYCLE
The working capital requirements are also determined by the nature of the business
cycle. Business fluctuations lead to cyclical and seasonal changes, which, in turn,
cause a shift in the working capital position, particularly for temporary working
capital requirements. The variations in business conditions may be in two directions:
1) Upward phase when boom conditions prevail
2) Downswing phase when economic activities are marked by a decline.
During the upswing of business activity the need for working capital is likely to grow
to cover the lag between increased sales and receipt of cash as well as to finance
purchase of additional material to cater to the expansion of the level of the activity.
Additional funds may be required to invest in the plant and machinery to meet the
increased demand. The downswing phase of the business cycle will have exactly and
opposite effect on the level of working capital requirement. The decline in the
economy is associated with a fall in the volume of sales which, in turn, will lead to
fall in the level of inventories and book debts. The need for working capital in the
recessionary conditions is bound to decline. In brief, business fluctuations influence
the size of working capital mainly through the effect on inventories. The response of
inventory to business cycles is mild or violent according to the mild or violent nature
of the business cycle.

4) CREDIT POLICY
The level of working capital is also determined by credit policy, which relates to
sales and purchases. The credit policy influences the requirement of the working
capital in two ways:
a) Through credit terms granted by the firm to its customers/buyers of goods.
b) Credit terms available to the firm from its creditors.
The credit terms granted to the customers have a bearing on the magnitude of the
working capital by determining the level of book debts. The credit sales will
result in higher book debts (receivables). Higher book debts will mean more
working capital. On the other hand, if liberal credit terms are available from the
suppliers of the goods (trade creditors), the need for working capital will be less.
 The working capital requirements of a business are, thus, affected by the terms of
purchase and sale and the role given to credit by a company in its dealings with
the creditors and the debtors.
3) PROFIT LEVEL
 The level of profits earned differs from to enterprise to enterprise. In general,
the nature of the products, hold on the market, quality of management and
monopoly power would by and large determine the profit earned by the firm. A
priori, it can be generalised that a firm dealing in a high quality product, having
a good marketing arrangement and enjoying monopoly power in the market is
likely to earn high profits and vice-versa. Higher profit margin would improve
the prospects of generating more internal funds thereby contributing to the
working capital pool. The net profit is a source of working capital to the extent
that it has been earned in cash. The cash profit can be found by adjusting non-
cash items such as depreciation, outstanding expenses and losses written off, in
the net profit. But, in practice, the net cash inflows from operations cannot be
considered as cash available for use at the end of the cash cycle. Even as
company’s operations are in progress, cash is used for augmenting stock, book
debts and fixed assets. It must, therefore, be seen that cash generation has been
used for furthering the use of enterprise. It is in this context that elaborate
planning and projections of expected activities and the resulting cash inflows
on a day to day, week to week and month to month basis assume importance
because steps can then be taken to deal with surplus and deficit cash.
The availability of internal funds for working capital requirements is determined
not merely by the profit margin but also on the manner of appropriating profits.
The availability of such funds would depend upon the profit appropriations for
taxation, dividend, reserves and depreciation.

No person was ever honoured for what he received. Honour has been the reward
for what he gave.”
NEED FOR WORKING CAPITAL
The need for working capital (gross) or current assets can not be over
emphasized. As the objective of financial decision making is to maximize the
shareholder’s wealth, it is necessary to generate sufficient profits. The extent to
which profits can be earned will naturally depend upon the magnitude of the
sales, among other things. A successful sales program is, in other words,
 necessary for earning profits by any business enterprise. However, sales do not
convert into cash instantly; there is invariably a time lag between the sale of
goods and the receipt of cash. There is, therefore, a need for working capital in
the form of current assets to deal with the problem arising out of the lack of
immediate realisation of cash against goods sold. Therefore, sufficient working
capital is necessary to sustain sales activity.

Technically, this is referred to as the operating or cash-cycle. The operating cycle

can be said to be at the heart of the need for working capital. The continuing flow
from cash to suppliers, to inventory, to accounts receivable and back into cash.
The cycle refers to the length of time necessary to complete the following cycle
of events:
1) Conversion of cash into inventory.
2) Conversion of raw materials into work in progress
3) Conversion of work in progress into finished goods
4) Conversion of finished goods into account receivable
5) Conversion of account receivable into cash

“Make no little plans, they have no magic t stir man’s blood.. Make big plans, aim
high in hope and work”
If it were possible to complete the sequences instantaneously, there would be no
need for current assets (working capital). But since it is not possible, the firm is
forced to have current assets. Since cash inflows and cash inflows do not match,
firms have to necessarily keep cash or invest in short-term liquid securities so that
they will be in position to meet obligations when they become due. Similarly, firm
must have adequate inventory to guard against the possibility of not being able to
meet a demand for their products. Adequate inventory, therefore, provides a
cushion against being out of stock. If firms have to be competitive, they must sell
goods to their customers on credit, which necessitates the holding of accounts
receivable. It is in these ways that an adequate level of working capital is
absolutely necessary for smooth sales activity which, in turn, enhances the
owner’s wealth.
“Being ignorant is not so much a shame as being unwilling to learn to do the
things the right way.”
PERMANENT AND TEMPORARY WORKING CAPITAL:

The operating cycle thus, creates the need for current assets (working capital). To
explain this continuing need of current assets, a distinction should be drawn
between permanent and temporary working capital.
The need for current assets arises, as already observed, because of the cash cycle.
Business activity does not come to an end after the realization of cash from the

customer. For a company, the process is continuous and, hence, the need for the
regular supply of working capital. However, the magnitude of working capital
required will not be constant, but will fluctuate. To carry on business a certain
minimum level of working capital is necessary on a continuous and uninterrupted
basis. For all practical purposes, this requirement will have to be met permanently
as with other fixed assets. This requirement is referred to as permanent or fixed
working capital.
Any amount over and above the permanent level of working capital is temporary,
fluctuating or variable working capital. This portion 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. ‘Obstacles are those
frightful things you see when you take your eyes off the goal.”
Both kinds of working capital are necessary to facilitate the sales process through
the operating cycle. Temporary working capital is created to meet liquidity
requirements that are of a purely transient nature.

“The quality of a persons life is in direct proportion to their commitment to

excellence, regardless of their chosen field of endeavor.”

SOURCES OF FINANCE FOR WORKING CAPITAL

 The sources of finance for working capital may fall into four categories,
namely:
1) BANK FINANCE
2) COMMERCIAL PAPER
3) FIXED DEPOSITS
4) INTER CORPORATE DEPOSITS.
The relative importance of these sources from country and from time to time
depending on the environment. In India, the primary sources for financing
working capital are trade credit and short term bank credit. According to an
estimate, both these sources together finance about three fourth of the working
capital requirements of the industry:
The above points are elaborated as below:
1) BANK FINANCE
It is the primary institutional source for working capital finance. To obtain
short- term bank credit, working capital requirements have to be estimated by
the borrowers, and

the banks are approached with the necessary supporting data. The banks
determine the maximum credit based on the margin requirement of the security.
The margin represents a percentage of the value of the asset offered as security
by the borrower. The margin is based on the nature of goods and is laid down
by the Reserve Bank of India. It is changed from time to time to suit the
requirements of the banker; the borrower draws funds periodically.
FORMS OF BANK FINANCE
Working capital advance is provided by the commercial banks in three
primary ways:
i) Cash credits/overdrafts
ii) Loans
iii) Purchase/Discount of bills.
In addition to these forms of direct finance, commercial banks help their
customers in obtaining credit from other sources through the letter of credit
agreement.
i) Cash credits/overdrafts
Under a cash credit or overdraft agreement, a predetermined limit for
borrowing is specified by the bank. The borrower can draw as often as
required, provided the outstanding do not exceed the cash credit/overdraft
limit. The borrower also enjoys the facility of repaying the amount fully or
partially, as and when he desires. Interest is charged only on the running
balance, and not on the limit sanctioned. A minimum charge may be payable,
irrespective of the level of borrowing, for availing this facility. This form of
advance is highly attractive from the borrower’s point of view because while
the borrower has freedom drawing the amount in installments as and when
required, interest is payable only on the amount actually outstanding.
ii) LOANS
These are advances of fixed amounts, which are credited to the current
account of the borrower or released to him in the form of cash. The borrower
is charged with interest on the entire loan amount, irrespective of how much
he withdraws. In this respect this system differs markedly from the overdraft
or the cash credit arrangement wherein interest is payable only on the
amount actually utilized. Loans are supported by a demand promissory note
executed by the borrower. There is often a possibility of renewing the loan.
iii) PURCHASE/DISCOUNT OF BILS
A bill arises out of a trade transaction. The seller of goods draws the bill on
the purchaser. The bill may be either clean or documentary (a documentary
bill is
supported by a document of the title of goods like a railway receipt or a bill of
lading) and may be payable on demand or after absence period which does not
exceed 90 days. On acceptance of the bill by the purchaser, the seller offers it to
the bank for discount/purchase. When the bank discounts/purchases the bill it
releases the funds to the seller. The bank presents the bill to the purchaser (the
acceptor of the bill) on the due date and gets its payment.
The Reserve Bank of India launched the new market scheme in 1970 to
encourage the use of bills as an instrument of credit The objective was to reduce
the reliance and the cash credit arrangement because of its amenability to abuse.
The new bill market scheme sought to promote an active market for bills as a
negotiable instrument so that the lending activities of a bank could be share by
other banks. It was envisaged that a bank, when short of funds, would sell or
rediscount the bill that it has purchased or discounted. Likewise, a bank, which
has surplus funds, would invest in bill. Obviously, for such a system to work
there has to be a lender of last resort which can come to the succor of the banking
system as a whole. This role naturally has been assumed by the Reserve Bank of
India, which rediscounts the bills of commercial banks up to a certain limit.

SECURITY
For working capital advances, commercial banks seek security either in the form
of hypothecation or in the form of pledge.
HYPOTHECATION
Under this agreement the owner of the goods borrows money against the security
of movable property, usually inventories. The owner does not part with the
possession of property. The rights of the lender (hypothecatee) depend on the
agreement of the lender and the borrower. Should the borrower default in paying
his dues, the lender can file a suit to realise his dues by sale of the goods
hypothecated.
PLEDGE
In a pledge agreement, the owner of the goods (pledgor) deposits the goods with
the lender (pledgee) as security for the borrowing. Transfer of possession of
goods is a precondition for pledge. The lender is expected to take reasonable care
of goods pledged with him. The pledge contract gives the lender the right to sell
the goods and recover dues, should the borrower default in paying debt.
2) COMMERCIAL PAPER

Commercial paper represents short-term unsecured promissory notes issued by

firms, which enjoy a fairly high credit rating. Generally, large firms with
considerable financial strength are able to issue commercial paper. The
important features of commercial paper are as follows:
# The maturity period of commercial paper mostly ranges from 90 to 150
days.
# Commercial paper is sold at a discount from its face value and
redeemed at its face value. Hence the implicit interest rate is a function of the
size of the discount and the period of maturity.
# Commercial paper is either directly placed with the investors or sold
through the dealers.

3) FIXED DEPOSIT/PUBLIC DEPOSIT

Many firms, large and small, have solicited unsecured deposits from the public
in the recent years, mainly to finance their working capital requirements.
Evaluation
Company’s Point of View — Public deposits offer the following advantages to
the company:
# The procedure for obtaining public deposits is fairly simple.
# No restrictive covenants are involved.
# No security is offered against public deposits. Hence the mortgageable
assets of the firm are conserved.
The post-tax cost is fairly reasonable. The demerits of public deposit are:
¾ The quantum of funds that can be raised by way of public deposits is
limited.
¾ The maturity period is relatively short.
Investor’s Point of View — Investors find the following advantages in public
deposit:
¾ The rate of interest is higher than several alternative forms of financial
investment.
¾ The maturity period is fairly short i.e., one to three years.
The negative features are as follows:
¾ There is no security offered by the company.
¾ The interest on public deposits is not exempt from taxation.
4) INTER- CORPORATE DEPOSITS

A deposit made by one company with another, normally for a period up to six
months, is referred to as an inter-corporate deposit. Such deposits are usually
of three types. They are as follows:
Call deposits
 In theory, a call deposit is withdraw able by the lender on giving a day notice.
In practice, however, the lender has to wait for at least three days. The interest
rate on such deposits may be around 14 per cent per annum.
Three-months Deposits
More popular in practice, these deposits are taken by borrowers to tide over a
short-term cash inadequacy that may be caused by one or more of the
following factors: disruption in production, excessive import of raw material,
tax payment, delay in collection, dividend payment and unplanned capital
expenditure. The interest rate on such deposits is around 16 per cent per
annum.
Six-months Deposits
Normally, lending companies do not extend deposits beyond this time frame.
Such deposits, usually made with first class borrowers, carry an interest rate of
around 18 per cent per annum.
Non-fund based facilities
Credit facilities, which do not involve actual deployment of funds by the
banks, but
help the obligates to obtain certain facilities from third parties, are termed as
non-fund
based facilities. These facilities include:
Letter of credit (LC)
¾ Guarantees
¾ Guarantees
¾ Co-acceptance of Bills/Deferent payment Guarantees.

1) LETTER OF CREDIT
A letter of credit is an arrangement whereby a bank helps its customers to
obtain credit from its (customers) suppliers. When bank opens a letter of credit
in favour of its customer for some specific purchases, the bank undertakes the
responsibility to honour the obligation of its customer, should the customer fail
to do so. To illustrate, suppose a bank opens a letter of credit in favour of A for
some purchases that A plans to make from B. if A does not make payment to B
within the credit period offered by B, the bank assumes the liability of A for
the purchases covered by the letter of credit arrangement. Naturally, B would
hardly have any hesitation to extend credit to a
 when a bank opens a letter of credit in favour of A. It is clear from the
preceding illustration that under a letter of credit arrangement the credit is
provided by the supplier but the risk is assumed by the bank which opens the
letter of credit. Hence, this is an indirect form of financing as against overdraft,
cash credit, loans and bill purchasing/discounting, which are direct forms of
financing. It may be noted here that in direct financing the bank assumes risk as
well as provides finance.
2) GUARANTEES
A contract of guarantee can be defined as a “contract to perform the promise or
discharge the liability of the third party in case of default”. The guarantee facilities
cannot be sanctioned in isolation. Financial guarantees can be issued by banks
only if they are satisfied that the customer will be in a position to reimburse the
bank in case the guarantee is invoked and the bank is required to make the
payment in terms of guarantee.
3) CO-ACCEPTANCE OF BILLS
Facilities of co-acceptance of bills are generally required for acquiring plant and
machinery and may be technically taken as a substitute for term loan which would
require detailed appraisal of the borrower’s needs and financial position in the
same manner as in the case of any other term loan proposal. The banks will
sanction limits of co-acceptance of bills after detailed appraisal of customer’s
requirements is completed and the bank is fully satisfied about the genuineness of
the need of the customer
“Things may come to those who wait, but only the things left by those who
hustle.”
“The critic is one who knows the price of everything and value of nothing.”

ASSESSMENT OF WORKING CAPITAL

In the good old days, when the banks were mainly adopting security oriented
approach in lending, no emphasis whatsoever was placed on assessment of limits
as the credit decision was mainly based on the security available to cover the
advance. The concept of assessment of working capital gained currency in early
seventies and Reserve Bank of India, proposed a scientific method for such
purpose.
Assessment of working capital is always done for future period. It is always to be
assessed on the basis of projections made for the next year, keeping in view the
previous year’s figures.
 The banks may not be willing to finance all the components of the working capital,
which have been taken into consideration for Gross Working Capital requirements.
Banks also stipulate margin requirements on the value of security of raw material,
semi-finished and finished goods etc. while sanctioning the limits.
APPROACH TO LENDING
A group constituted by the Reserve Bank of India with Shri Prakash Tandon stipulated
that the firm should finance part of its currant assets from owned funds and term
liabilities, It prescribed a minimum margin of 25% to be brought in by the firm and
suggested three different methods of lending to arrive at the contribution of the
borrower in the above manner. They are as follows:

Method I :
The borrower should bring in 25% of the Net Working Capital (CA-CL) from its
owned funds and long term liabilities and 75% will be financed by the banks.

Method II:
The borrower should finance 25% of all Current Assets and the balance is financed by
the banks.

Method III :
The hard core current assets i.e., the borrower must exclusively finance current assets,
which are permanently required by the firm for its functioning. The borrower should
also provide 25% of the remaining current assets and only the bank will finance the
balance.
1) Application starts with the preparation of a) Operating statement (Form-Il)
b) Balance sheet (Form-Ill)
c) Comparative Statement of Current Assets and Current Liabilities (Form-IV)
d) Fund flow statements (Form-VI)
Working capital is assessed on the basis of projection made for next year keeping in
mind the previous figures.

Computation of maximum permissible bank finance is done (Form-V). A

statement which shows total current assets, total current liabilities, working capital
gap, firm’s contribution i.e., 25% of the current assets and actual Net Working
Capital. Then the firm’s contribution (25% of the CA) and the actual calculated
 net working capital is subtracted from working capital gap. Banks finance the
amount, which comes lower.

2) Second step is the documentation. Working capital advance is

provided by the banks in generally three ways :-
a) Cash credit against - Stock - Book Debt
b) Bill discounting facilities C) Clean li/U
For instance, a firm needs Rs. 1000 Lacs ,then the bank according to its
prescribed limit will sanction different amounts to each of above as:-
1) CC - Stock 400
- Book Debts 350
2) Bill discounting 200
3) Clean D/D 50
1000
Documentation consists of several agreement made with the bank like
1) Agreement of hypothecation of book debts
2) Agreement of hypothecation of goods to secure a demand cash credit.
3) Agreement for Clean DD limit
4) Agreement for Bill discounting limit.
5) Availment: In this the firm has to submit stock statements of the
stocks hypothecated as security to different banks.
6) Statutory Periodical Documents: Prompt submission of Forms I, II,
III under
the Quarterly Information System.
Form-I: Being estimates of the ensuing quarter and to be submitted in the week
preceding the commencement of the quarter to which it relates.
Form-II: Being a statement showing performance for previous quarter to be
furnished within 6 weeks of the close of quarter to which it relates.
Form-III: Being half yearly operating and fund flow statement to be furnished
within 2 months from the close of the half year to which it relates.
 FINANCIAL STATEMENTS
Financial analysis involves the use of various financial statements. A financial
statement is a collection of data organised according to logical and consistent
accounting procedures. Its purpose is to convey an understanding of some financial
aspects of a business firm. It may show a position at a moment in time, as in the
case of Balance Sheet ( A summary of firm’s financial position on a given date that
shows total assets = total liabilities + owner’s equity ), or may reveal a series of
activities over a given period of time; as in the case of an Income Statement ( A
summary of the firm’s revenues and expenses, over a specified period ending with
net income or loss for the period ), or may show the sources and uses of funds, as
in the case of Fund Flow Statement (A summary of a firm’s changes in financial
position from one period to another).
BALANCE SHEET
The balance sheet is the first of the three major financial statements. The balance
sheet shows the assets, liabilities and the equity for the firm as of the last day of
the accounting period. In effect, it matches resources (assets) with sources
(liabilities and equity). It is commonly presented in two columns that illustrate the
relationship between assets and the sources of these assets. The assets or resources
of the firm are displayed in the right hand column and the sources of these assets in
the left hand column.
ASSETS
Current Assets is a subsection that contains all assets either held in form of cash or
those expected to be converted into cash within the current accounting period or
within the next year, through the ordinary operations of the business. It includes
the following:-
# Gash and bank balance
# Marketable securities
# Bills receivable
# Inventory
# Loans and advances
FIXED ASSETS is the subsection that contains the assets used by the firm to
generate revenues. They are acquired for use over relatively long period for
carrying on operation of firm and they are ordinarily not meant for sale in the
normal course of business.
 It includes:-
# Land
# Building
# Machinery
# Equipment
# Furniture
INTANGIBLE FIXED ASSETS are the ones which do not have physical
existence but which help in earning, like goodwill, patent, trademark etc. The
cost of intangible fixed assets is amortized over their useful lives.
Anything less than a conscious commitment to the important is an
unconscious
commitment to the unimportant.”
NON CURRENT ASSETS
It include:
# Investment in non marketable securities
# investment in long term loans to sister or allied or associated firm.
# Other long term investments.
# Non consumable stores and spares.
# Loans and advances of long term nature.
# Prepaid expenses of long term nature.
LIABILITIES
Liabilities are debts of the firm. They represent sources of assets since the
firm either borrows the money listed as liabilities or makes use of certain
assets that have not yet been paid for. Liabilities are divided into current and
long term.
CURRENT LIABILITIES are the debts of the firm that must be paid
during the current accounting period, that is normally one year. Examples are
the following :-
# Creditors
# Bills Payable
# Bank Overdraft
# Tax Payable
# Outstanding Expenses
# Income Received in Advance
LONG TERM LIABILITIES are the firm’s debts mat need not e paid off
during the next year. Examples are the following :-
 # Long - Term Secured Financing — This covers mortgages and notes where a
building or other fixed assets are pledged as specific collateral for the debt.
# Long — Term Unsecured Financing — This consists largely of notes and
bonds. Notes payable are promissory notes with maturity periods in excess of one
year. When the note enters into final year, it is transferred to current liabilities
account.
EQUITY
Equity represents the ownership rights in the company and arises from several
sources. Owners purchase the preferred or common stock either through an initial
offering or through later sales by the firm, or the firm retains a portion of its
profits and reinvests them in the firm. Equity does not represent the money held
by the firm but does show the sources of assets and approximately what portion
of the assets is financed by the owners and retention of the earnings. Term Net
Worth is used for owners equity. Types of equity include :-
# Paid up Share Capital or Proprietors Capital
# Retained Profit (General Reserve)
# Unappropriated earning (Surplus)
# Reserves of various types namely Capital Reserve, Share Premium,
share/debenture redemption reserve.
INCOME STATEMENT
The income statement, is a report of the firm’s activities during a given
accounting period. Firms often publish income statements showing the results of
each quarter, each half year and the full accounting year. It shows the revenues
and expenses of the firm, the effect of interest and taxes, and the net income for
the period. It may be called by other titles, such as the profit-and-loss statement or
the statement of earnings.
It is an accounting device designed to show stockholders and creditors whether
the firm is making money. It can also be used as a tool to identify the factors that
affect the degree of profitability.
The income statement is prepared according to generally accepted accounting
procedures. The various accounts on the books of the firm are carefully defined
and then placed in a specific format on the statement. Most large firms hire a
Chartered Accountant at the end of the fiscal period to certify the fairness of the
firm’s financial statements. When this is done, we can usually rely on the
accuracy of the profit picture presented by the income statement.
 The art of getting rich is found not in saving, but in being at the right spot at the right time.”
FLOW OF FUNDS STATEMENTS
A third important financial statement is the flow-of-funds or sources-of- funds statement. This
statement shows the movement of funds into the form’s current asset account from external sources
such as stockholders, creditors and customers. It also shows the movement of funds to meet the firm’s
obligations, retire stock or pay dividends. The movements are shown for a specific period of time,
normally the same time period as the firm’s income statement. The financial manager makes
decisions to ensure that the firm has sufficient funds to meet financial obligations when they are due
and to take advantage of financial opportunities. To help the analyst appraise these decisions (made
over a period of time), we need to study the firm’s “flow of funds”. By arranging the firm’s flow of
funds in the systematic fashion, the analyst can better determine whether the decisions made for the
firm resulted in a reasonable flow of funds, or in questionable flows, which warrant further
inspection.
SOURCES OF PONDS
The sources of funds which are important to the most firms are
# Sale of fixed assets
# Sale of stock
# Long term borrowings
# Fund from operations
USES OF FUNDS
A firm may apply its funds in a number of areas. A portion of the funds is expended for operations.
The uses are the following:-
# Purchase fixed assets
# Pay dividends
# Retire long term debts
# Make up losses
# Buy back stock
FINANCIAL ANALYSIS
Financial analysis is the process of determining the significant operating and financial characteristics
of a firm from accounting data and financial statements. The goal of such analysis is to determine the
efficiency and performance of the firm’s management, as reflected in the financial records and
reports. The analyst is attempted
 to measure the firm’s liquidity, profitability and other indications that business is conducted in a
rational and orderly way. Financial analysis is used primarily to gain insights into operating and
financial problems confronting the firm. Ratio analysis is the primary tool for examining the firm’s
financial position and performance.
“Obstacles like money, habit, fear and other people can all be overcome. Nothing can stop you when
you are moving in the direction of your dreams.”
NATURE OF RATIO ANALYSIS
Ratio analysis is a powerful tool of financial analysis. A ratio is defined as “the indicated quotient of
two mathematical expressions” and as “the relationship between two or more things”. In financial
analysis, a ratio is used as an index or yardstick for evaluating the financial position and performance
of the firm. The absolute accounting figures reported in the financial statements do not provide a
meaningful understanding of the performance and financial position of the firm. An accounting figure
conveys meaning when it is related to some other relevant information. For example, a Rs. 5 crore net
profit may look impressive, but the firm’s performance can be said to be good or bad only when the
net profit figure is related to the firm’s investment. Ratios help to summarise the large quantities of
financial data and to make qualitative judgment about the firm’s performance.
Anyone who takes himself too seriously always runs the risk of looking ridiculous; anyone who can
consistently laugh at himseff does not.
TYPES OF RATIOS
Several ratios, calculated from the accounting data, can be grouped into various classes according
to the financial activity or function to be evaluated. The parties which generally undertake
financial analysis are short and long term creditors owners and management. Short term creditor’s
main interest is in the liquidity position or the short term solvency of the firm. Long term creditors
on the other hand are more interested in the long term solvency and profitability of the firm.
Similarly, owners concentrate on the firm’s profitability and the analysis of the firm’s financial
conditions. Management is interested in evaluating every aspect of the firm’s performance. They
have to protect the interest of all parties and see that the firm grows profitably. In view of the
requirement of the various user of ratios, we may classify them into the following four categories:
1. Liquidity Ratios
2. Leverage Ratios
3. Activity Ratios
4. Profitability Ratios
Liquidity ratios measures the firm’s ability to meet current obligation; Leverage ratios show the
proportion of debt and equity in financing the firm’s assets; Activity ratios reflect the firm’s
efficiency in utilising its assets, and Profitability ratios measure the overall performance and
effectiveness of the firm.
life is difficult, this is a great truth, one of the greatest truths. it is a great truth because
once we truly see this truth, we transcend il once we know that life is difficult — it is no
longer difficult,”
LIQUIDITY RATIOS
1) CURRENT RATIO
The current ratio is calculated in dividing current assets by current liabilities.

Current Assets
Current
Current Ratio = Liabilities
31.03.17 31.03.18

0.38 0.44

Current Ratio is used to assess short term financial position of business concern. It is indicator of
firm’s ability to meet its short term obligations. Current Ratio represents a margin of safety i.e. a
“cushion” of protection for creditors. A Current Ratio of 1.33:1 is considered satisfactory.
2. QUICK RATIO
Quick Ratio is calculated by dividing the total of quick assets to current liabilities. An asset is
liquid if it can be converted into cash immediately or reasonably soon.
31.03.17 31.03.18
0.47 0.44
Quick Ratio is test short term liquidity of the firm. It is a measurement of the firm’s ability to
convert its current assets quickly into cash in order to meet current liabilities. Generally a Quick
Ratio of 1:1 is considered a satisfactory current financial condition.
LEVERAGE RATIOS
1) DEBT EQUITY RATIO
Debt Equity Ratio is calculated by dividing Total Term Liabilities by Net Worth. (Net Worth –
Intangible Asseets0
Equity Ratio = Total Term Liabilities
Net Worth

31.03.17 31.03.18
1.36 1.45

Debt Equity Ratio is the ratio of amount invested by outsiders to the amount invested by the
others of the business. The ratio reflects the relative contribution of creditors and owners of
business in its financing. It is a measure of long term financial position of firm. Ideal ratio is 2:1

Management Efficiency Ratios

1) Inventory Turnover Ratio

Inventory Turnover Ratio is calculated by dividing sold by average inventory.
Average inventory =Average of opening and Closing balance of the inventory.
Inventory Turnover Ratio = Cost of Goods Sold/ Average inventory
Inventory Turnover Ratio measures how quickly the inventory or the stock is sold. It is a test of
efficient inventory management

31.03.17 31.03.18
546.68 724.61

2. Debtors Turnover Ratio

Debtors Turnover Ratio is calculated by dividing credit sales by average debtor (including bills
receivables).
Debtors Tunover Ratio = Total Credit Sales
Average Debtor
Debtors Turnover Ratio indicates how quickly receivables or debtors are converted into cash.
Generally the higher the value of Debtors Turnover Ratio, the more efficient is the management of
credit.

31.03.17 31.03.18
12.05 12.35

3. Average Collection Period

Average Collection Period is calculated by dividing the number of days in a year (generally taken as
360) by the Debtors Turnover Ratio.
360
Average Collection Period = Debtors Turnover Ratio
31.03.17 31.03.18

360/12.05 360/12.35

30 days 29 days

Average Collection Period measure the quality of debtors since it indicates the rapidly or slowness of
collectability. The ratio should be compared against firm’s credit term and policy to judged its credit
and collection efforts.

4. Total Asset Turnover Ratio

Total Asset Turnover is calculated by dividing the total sales by the total tangible assets.
Tangible Assets = Total Asset – Intangible Assets

Total Sales
Total Assets Turnover = Tangible Assets

31.03.17 31.03.18

1.27 1.36

55
Total Assets Turnover Ratio shows the firm’s ability in generating sales from all financial resources
committed to total assets. It measure the efficiency of firm in managing and utilizing its assets.

VALUATION RATION
Valuation Ratio indicates how the equity stock of the company is assessed in the market. In practice,
the company calculates many other ratios.
1. Earning Per Share
Earning Per Share is calculated by dividing the profit after tax by the total number of common shares
outstanding.

Net Pr ofit
Earning Per Share =
No. of Shares
31.03.17 31.03.18

Rs. 15.09 Rs. 13.42

Earning Per Share is only for equity shares. It is a measure of profitability of the firm from the point
of view of the ordinary shareholder. It measures the profit available to equity holder on a per share
basis.
2. Dividend Per Share
The Dividend Per Share is the earning distributed to the common share holders divided by the
number of common shares outstanding.
Earning paid to shareholder
Dividened Per Share =
No. of outs tan ding shares
31.03.17 31.03.18

Rs. 1.00 Rs. 1.00

Dividend Per Share is the dividend paid to the shareholder on per share basis. Dividend Per Share is
a better indicator than Earning Per Share as the former shows what exactly is received by the
shareholders.

56
3. Dividend Payout Ratio Net Profit
Dividend Payout Ratio is obtained by dividing dividend per share by earning per share.
Payout Ratio = Dividend per Share
Earning Per Share

Retained Earnings = 100 – Payout Ratio

31.03.17 31.03.18

7.70 7.43

Dividend Payout Ratio measures the relationship between the earning of the ordinary share holder
and the dividend paid to them or what percentage share of net profits after taxes and preference
dividend is paid out as dividend to the equity holder.

4. Earning Retention Ratio

Earning Retention Ratio is also called as Plowback Ratio. As per definition, Earning Retention
Ratio or Plowback Ratio is the ratio that measures the amount of earnings retained after dividends
have been paid out to the shareholders. The prime idea behind earnings retention ratio is that the
more the company retains the faster it has chances of growing as a business. This is also known as
retention rate or retention ratio. There is always a conflict when it comes to calculation of Earnings
retention ratio, the managers of the company want a higher earnings retention ratio or plowback
ratio, while the shareholders of the company would think otherwise, as the higher the plowback ratio
the uncertain their control over their shares and finances are.

Earnings retention ratio = (Net income - dividends) / Net income

31.03.17 31.03.18

92.30 92.57

57
PROFITABILITY RATIO

Net Pr ofit
Sales
1. Gross profit Ratio
Gross Profit Ratio is calculated by dividing the gross profit of the firm by the total sales in that
stipulated period.

Gross Pr ofit Ratio = Gross Pr ofit

OR Sales

Sales − Cost of Goods Sold

Sales
31.03.17 31.03.18

12872.20/41603.80*100 13281.50/45350.90*100

30.93% 29.20%

Gross Profit Ratio reflects the efficiency with which management produces each unit of product. The
ratio indicates the average speed between the cost of goods sold and the sales revenue.
2. Cost of Goods Sold
Cost of Goods Sold = 100 – Gross Profit Ratio
31.03.17 31.03.18
69.07 70.8%

Cost of Goods Sold shows the equal cost incurred in the goods sold.
3. Net Profit Ratio
Net Profit Ratio is calculated by dividing the net profit of the firm by the total sales of the firm.

Net Pr ofit =

31.03.17 31.03.18

5,730.00/41,603.80 5,096.30/45,350.90

13.77% 11.23%

58
Net P rofit Ratio is indicative of the man agement’s ability to operate the business with suffi cient
succes s not only to recover from revenues of the period, the cost of merchandise or service, the e
xpenses of operating the business etc., but also to leave a margin of reasonable compensation to
owner for pr oviding their capital at risk. Ratio expre sses the cost price effectiveness of the
operation.

4. Return On Capital Employed(%)

ROCE is used to prove the v alue the business gains from its assets and liabilities. A busin ess which
owns lots of land will ha ve a smaller ROCE compared to a business which owns little land but m
akes the sam e profit.
It bas ically can be used to show how much a business is gaining for its asset s, or how much it is
losing for its liabilities.

31.03 .17 31.03.18

12.07% 13.14 %

The r eal owners of the company are the shareholder s who bear a ll the risk, participate in the
managem ent and are entitled to all profits remaining after all outside claims including preference
dividend are met in full.
This is probably the single m ost importa nt ratio to judge wheth er the firm h as earned a satisfactory
ret urn for equity holders or not.
EXPENSES RATIO
Another profitability ratio related to sales is expenses ratio. It is computed by dividing expenses
by sales. The ratios indicate as to what proportion of the sales is used for meeting out different
expenses. Expenses ratio is used to determine the operating efficiency of management in
controlling the expenses.

1. Manufacture Expenses Ratio

Manufacturing Expenses Ratio = Manufacturing Expenses
Net Sales

31.03.17 31.03.18

15,138.50/41,603.80*100 17895.20/45350.90*100

36.3% 39.4%

2. Selling & Administration Expenses

Selling & Ad min istration Expenses = Selling & Admn. Expenses Net Sales

31.03.17 31.03.18

10502.80/41,603.80*100 12302.70/45350.90*100

25.2% 27.12%
 Chapter – 4
OBJECTIVES

• The main objective of the study is to have an insight into the current practices of the company with
regards to management of various elements of working capital.
• Apart from the above more specifically the present study is conducted to find out the following.
• To what extent the management of working capital in Airtel, which is one of the leading concern in
the fastener industry contribute to the overall objective of the firm i.e. Wealth examination.
• To study management policies regarding inventory management, whether the management have
applied various inventory control techniques for proper utilization of resources.
• To analysis the nature, effectiveness and style of functioning of various process of payments.
• To make aware the different methods of payments that are available for the foreign transaction, and
• To suggest the best and appropriate method of payment of foreign transaction, and
• Also to keep in mind the other aspects of the methods this can effect the organization.
Scope of the Study
As we were seen as a liability towards the organization since there was no contribution from our side
towards, nobody actually paid any attention towards Working Capital.
It was very difficult to actually take out relevant information from the Comparative Study with
Vodafone were very hesitant to let us meet the company.
 Chapter – 5
METHODOLOGY

MANAGERIAL USEFULNESS OF THE STUDY

This type of analysis helps the management of the company to plan its future polices according
to the external environment. Any sound research must have an proper design to achieve the
required result, this study id constructed on the basis of descriptive design.
The methodology, I have adopted for my study is the various tools, which basically analyze
critically financial position of to the organization:
I. COMMON-SIZE P/L A/C
II. COMMON-SIZE BALANCE SHEET
III. COMPARTIVE P/L A/C
IV. COMPARTIVE BALANCE SHEET
V. TREND ANALYSIS
VI. RATIO ANALYSIS
The above parameters are used for critical analysis of financial position. With the evaluation of
each component, the financial position from different angles is tried to be presented in well and
systematic manner. By critical analysis with the help of different tools, it becomes clear how the
financial manager handles the finance matters in profitable manner in the critical challenging
atmosphere, the recommendation are made which would suggest the organization in formulation
of a healthy and strong position financially with proper management system.
I sincerely hope, through the evaluation of various percentage, ratios and comparative
analysis, the organization would be able to conquer its in efficiencies and makes the desired
changes.

ANALYSIS OF FINANCIAL STATEMENTS

 FINANCIAL STATEMENTS:
Financial statement is a collection of data organized according to logical and consistent accounting
procedure to convey an under-standing of some financial aspects of a business firm. It may show
position at a moment in time, as in the case of balance sheet or may reveal a series of activities over a
given period of time, as in the case of an income statement. Thus, the term ‘financial statements’
generally refers to the two statements
(1) The position statement or Balance sheet.
(2) The income statement or the profit and loss Account.
OBJECTIVES OF FINANCIAL STATEMENTS:
According to accounting Principal Board of America (APB) states The following objectives of
financial statements: -
1. To provide reliable financial information about economic resources and obligation of a business
firm.
2. To provide other needed information about charges in such economic resources and obligation.
3. To provide reliable information about change in net resources (recourses less obligations) missing
out of business activities.
4. To provide financial information that assets in estimating the learning potential of the business.
LIMITATIONS OF FINANCIAL STATEMENTS:
Though financial statements are relevant and useful for a concern, still they do not present a final
picture a final picture of a concern. The utility of these statements is dependent upon a number of
factors. The analysis and interpretation of these statements must be done carefully otherwise
misleading conclusion may be drawn.
Financial statements suffer from the following limitations: -
1. Financial statements do not given a final picture of the concern. The data given in these statements
is only approximate. The actual value can only be determined when the business is sold or liquidated.
2. Financial statements have been prepared for different accounting periods, generally one year,
during the life of a concern. The costs and incomes are apportioned to different periods with a view to
determine profits etc. The allocation of expenses and income depends upon the personal judgment of
the accountant. The existence of
contingent assets and liabilities also make the statements imprecise. So financial statement are at the
most interim reports rather than the final picture of the firm.
3. The financial statements are expressed in monetary value, so they appear to give final and accurate
position. The value of fixed assets in the balance sheet neither represent the value for which fixed
assets can be sold nor the amount which will be required to replace these assets. The balance sheet is
prepared on the presumption of a going concern. The concern is expected to continue in future. So
fixed assets are shown at cost less accumulated deprecation. Moreover, there are certain assets in the
balance sheet which will realize nothing at the time of liquidation but they are shown in the balance
sheets.
4. The financial statements are prepared on the basis of historical costs Or original costs. The value of
assets decreases with the passage of time current price changes are not taken into account. The
statement are not prepared with the keeping in view the economic conditions. the balance sheet loses
the significance of being an index of current economics realities. Similarly, the profitability shown by
the income statements may be represent the earning capacity of the concern.
5. There are certain factors which have a bearing on the financial position and operating result of the
business but they do not become a part of these statements because they cannot be measured in
monetary terms. The basic limitation of the traditional financial statements comprising the balance
sheet, profit & loss A/c is that they do not give all the information regarding the financial operation of
the firm. Nevertheless, they provide some extremely useful information to the extent the balance sheet
mirrors the financial position on a particular data in lines of the structure of assets, liabilities etc. and
the profit & loss A/c shows the result of operation during a certain period in terms revenue obtained
and cost incurred during the year. Thus, the financial position and operation of the firm.
FINANCIAL STATEMENT ANALYSIS
It is the process of identifying the financial strength and weakness of a firm from the available
accounting data and financial statements. The analysis is done
CALCULATIONS OF RATIOS
Ratios are relationship expressed in mathematical terms between figures, which are connected with
each other in some manner.

CLASSIFICATION OF RATIOS
Ratios can be classified in to different categories depending upon the basis of
classification

The traditional classification has been on the basis of the financial statement to which
the determination of ratios belongs.
These are:-
Profit & Loss account ratios Balance Sheet ratios
Composite ratios
RESEARCH DESIGN
For the proper analysis of data simple statistical techniques such as percentage were

use. It helped in making more accurate generalization from the data available.
TOOLS OF ANALYSIS
It is essential to use a systematic research methodology for the assessment of a
project because without the use of a research methodology analysis of any company
or organization will not be possible.
In the present analysis mostly secondary data have been used. Its is worth a white to
mention that I have used the following types of published data:
™ Balance sheet ™ Profit & Loss A/c ™ Schedules

LIMITATIONS OF THE STUDY

Non monetary aspects are not considered making the results unreliable.
Different accounting procedures may make results misleading.
In spite of precautions taken there are certain procedural and technical limitations.
Accounting concepts and conventions cause serious limitation to financial analysis.
Lack of sufficient time to exhaust the detail study of the above topic became a hindering
factor in my research.
Chapter – 6
RESU LTS – R EPORT OF DAT A COL LECTION

1. CURRENT RAT IO

Current As sets
Curren t Ratio Current Liab
= ilities

31.03.17 31.03.18
0.38 0.44

Inter pretation:-
As we know that id eal current ratio for any firm is 2:1. If we see the current ratio of the
company for last three years it has increased f rom last year. The current ratio of company is
more than the ideal ratio. This depicts that company’s liquidity posit ion is sound. Its current
assets are mo

2. QUICK RATIO
QUICK RATIO = Liquid Assets/ Current liabilities

re than its current liabilities.

31.03 .17 31.03.18

0.47 0.44
 Inter pretation :
A quick ratio is an indication that the firm is liq uid and has th e ability to meet its current
liabilities in time. The ideal qui ck ratio is 1:1. Company’s quick ratio is more tha n ideal ratio.
This shows com

3. IN VENTORY T URNOVER O R STOCK TURNOVER R ATIO:

Inven tory Turno ver Ratio is calculated by dividing s old by average inventor y.
Average invento ry =Average of opening and Closing balance of the inventory.
Inven tory Turno ver Ratio = Cost of Goods Sold/ Av erage inventory

p any has no liqu idity problem.

31.03.1 7 31.03.18

5 46.68 7 24.61
 Inter pretation: This ratio sh ows how ra pidly the inventory is turning into receivable through sales,
sh ows that th e company’s inventory manageme nt technique is more efficient as compare to last
year.

4. Debtors Turnover Ratio

Debtors Turnov er Ratio is calculated by dividing credit sale s by average debtor (incl uding bills r
eceivables).

Debtors Tunover Ratio = Total Cr edit Sales

Averag e Debtor

31.03.1 7 31.03.18

12.05 12.35
Inter pretation :
This ratio indicates the speed with which debtors are being converted or turn over into sales. The
higher the values or turnov er into sales. The higher th e values of debtors turnover, the more efficient
is the manag ement of cred it. But in the company the debtor turnover ratio is decreasing year t o year.
This shows that company is not utilizi ng its debtors efficiency. No w their credit policy becom e
liberal as comp are to previous year.

5. Av erage Coll ection Period

Average Collection Period is calculate d by dividin g the num ber of days in a year (gene rally taken
as 360) by t he Debtors Turnover Ratio.

360
Average Collection Period = De btors Turno ver Ratio

31.03 .17 31.03.18

360/1 2.05 360/12.35

30 da ys 29 days
Inter pretation:
The average collection period measures the quality of debtors and it helps in analy zing the efficiency
of collection efforts. It also helps to ana lysis the cre dit policy adopted by comp any. In the firm
average collection period increasing year to year. It shows that the firm has Lib eral Credit policy. Th
ese changes in policy a re due to comp etitor’s cred it policy.

FINANCIAL RES ULTS AND RESULTS OF OPERATION S

In line with the amended statutory guidelines, t he Company has adop ted IFRS (Inte rnational Fi
nancial Reporting Stand ards) for co nsolidation of accounts from the financial year 2010-11 onwa
rds. Consolidated and Standalone financial hig hlights of the operations of the Compa ny are as
follows:
LIQUIDITY

The Company generates healthy operational cash flows and maintains sufficient cash and financing
arrangements to meet its strategic objectives. It deploys a robust cash management system to ensure
timely servicing of its liquidity obligations. The Company has also been able to arrange for adequate
liquidity at an optimized cost to meet its business requirements and has minimized the amount of funds
tied-up in the current assets.

As of March 31, 2012, the Company has cash and cash equivalents of Rs.
20,300 Mn and short term investments of Rs. 18,132 Mn. During the year
ended March 31, 2012, the Company generated operating free cash flow of
Rs. 101,319 Mn. The net debt - EBITDA ratio as on March 31, 2012 was at
2.56 and the net debt - equity ratio was at 1.29. The net debt in USD
terms decreased from USD 13,427 Mn as on March 31, 2011 to USD 12,714
Mn as on March 31, 2012.

The Company manages the short-term liquidity to generate optimum returns by deploying surpluses
albeit only in the debt and money market

instruments including in high rated liquid and income debt fundschemes, fixed
maturity plans, bank fixed deposits and other similar instruments.

The Company is comfortable with its present liquidity position and foreseeable
liquidity needs. It has adequate facilities in place and robust cash flows to meet
liquidity requirements for executing its business plans and meeting with any
evolving requirements. The Company also enjoys strong access to capital markets
across debt, equity and hybrids.
 Chapter – 7
RECOMMENDATIONS

The study conducted on working capital management of Bharti Airtel shows the
evaluation of management performance in this regard. Major findings and
suggestions thereon are narrated as under:
• Current assets comprise/a significant portion of total investment in assets of the
company. There is fluctuating and rather increasing trend of this ratio during the
period which shows management in-efficiency in managing working capital in
relation to total investment. Further current assets to fixed assets ratio also shows
on fluctuating trend during the study period which substantiate above mentioned
criterion of in-effectiveness in management of working capital by the company.
• Assets turnover ratio for the given years of study shows stagnant trend which is
due to significant increase in sales.
• The ratio used for analysis of liquidity position is current ratio and quick ratio.
This ratio reveals that company has sound liquidity position throughout the period
of study. Company should maintain significant balance in terms of resources to
improve these ratios.
• Inventory turnover ratio depict the fluctuating trend which indicates the
accumulation of inventory in turn which cause loss to the company by way of
deterioration of stock, interest loss on blockage of stock etc. Further composition
of inventory reveals that portion of individual element of inventory has fluctuating
trend which indicates that management has no policy in respect of inventory
management.
• Debtors Turnover ratio reveals a decreasing trend during the period of study
and average collection period ranges have not improved. It reveals that
management has no specific policy in respect of debtor’s management.

Keeping in view of detailed analysis of study and our findings mentioned in above
paragraphs, the following suggestions shall be helpful in increasing the efficiency
in working capital management.
• Company should make a policy in respect of investment of excess cash, if any;
in marketable securities and overall cash policy should be introduced.
• In case of inventory management ABC analysis, FSN technique, VED
technique should be adopted to increase the efficiency of inventory
management. Further a inventory monitoring system should be introduced to
avoid holding of excess inventory.
• Management should develop a credit policy and proper self realisation system
from customers so that efficient and effective management of accounts
receivable can be ensured. This will significantly improve the profitability and
liquidity of the company.
• Purchase policy regarding raw material, consumables, tools and packing
materials etc. should be introduced which ultimately helps in planning of
inventory, availment of maximum trade! cash discount and availment of
maximum credit period from suppliers.
 Chapter – 8
CONCLUSIONS & IMPLICATIONS
Bifurcation of credit limits
Bifurcation of cash credit limits into a demand loan portion and a fluctuating cash
credit component has not found acceptance either on the part of the banks or the
borrowers. Such bifurcation may not serve the purpose of better credit planning by
narrowing gap between sanctioned limits and the extent of utilization thereof.
2. Reduction in over dependence on bank finances
The need for reducing the over dependence of the medium and large borrowers
both in private and public sectors on bank finance for their production / trading
purposes is recognized. The net surplus cash generation on established industrial
unit should be utilized partly at least for reducing borrowing for working capital
purposes.
3. Increase in owner’s contribution
In order to ensure that the borrowers do enhance their contributions working
capital and to improve their current ratio, it is necessary to place them under the
second method of sending recommended by hand on committee which would give
a minimum current ration of 1.33:1. As many of the borrowers may not be
immediately in a position to work under the second method of lending the excess
borrowings should be segregated and treated as working capital term loan which
should be made repayable loan, it should be charged at higher rate of interest.
4. AD-HOC or temporary Limits
Borrowers should be discouraged from approaching banks frequently for ad-hoc or
temporary limits in excess of sanctions and limit to meet unforeseen contingencies.
Banks should charge additional interest of 1% pa over normal rate on these 1
limits.
 5. Separation of Normal Non-Peak Level & Peak Level Requirements
While assessing the credit requirement, the bank should appraise and the
separate limits or the normal non-peak level as also or the ‘peak level’ or
requirement indicating also the periods during which the separate limits would
be extended to all borrowers having working capital of Rs. 10 lacs and above.
One of the imp. Criteria for deciding such limit should be the borrowers’
utilization of cr. Limits in the past.

Temporary Accommodation through loan

If any ad-hoc or temporary accommodation is req. in excess of the sanctioned
limit to meet unproven contingencies the additional finance should be given,
where necessary, through a separate demand loan A/C
Or a separate non-operable cash Cr. A/C. There should be a stiff penalty for
such demand loan or non-operable cash cr. Portion, ablest 2% above the normal
rate unless the RBI exempts such penalty. The discipline may be made
applicable in cases involving working capital limits of Rs. 10 lacs and above.
7. Penal Information
The borrower should be asked to give his quarterly requirements of funds
before the commencement of the quarter on the basis of his budget, the actual
requirements being within the sanctioned limit for the particular peak level/non-
peak level periods. Drawings of less than or in excess of the operative limit so
fined (with a tolerance o 10% either way) but not exceeding the sanctioned limit
would be subject to a penalty to be fined by the RBI from time to time. For the
time being, the penalty may be fixed at 2% p.a. The borrower would be required
to submit his budgeted requirements in triplicate & a copy of each would be
sent immediately by the branch to the controlling office and head office for
record. The penalty would be applicable only in respect of parties enjoying cr.
Limits of Rs. 10 lacs and above subject to certain exemptions.
8. Info. Systems
The non-submission of the returns in time is partly due to certain features in the
forms themselves. To get over this difficulty, simplified forms have been
proposed. As the quarterly info. System is part and parcel of the revised style of
lending under the cash cr. System, I the borrower does not submit the return
within the prescribed time, he should be penalized by charging the whole
 outstanding in the A/C at a penal rate of mt., 1% p.a. more than the contracted date for the advance
from the due date of the return till the date of its actual submission.
After completing this project it can now be concluded that an after great effect on Airtel. Working
Capital (Airtel) to very important in which have higher unit value.
After doing my survey I have concluded that most of the consumer prefers to buy because Airtel give
the excellent after sale service than any other brand. and their after sale service is also very good. But
beside these points I have concluded on my survey that sharp give the better after sale service than any
brand. Airtel give the prompted after sale service than any other company most of the customer are
satisfied with the after sale service of Airtel and attitude of compliant handler is very sensitive.
Prime lending rate:
The RBI had given the total freedom of changing the rate of interest on the amount of credit facilities,
which are extended by it. The banks has now been advised to stick to concept of PLR, which is the
minimum rate of interest, which every bank can charge from its clients and constituents. It keeps on a
changing as per the direction of RBI. Factors taken into consideration which fixing actual ROI:
1. The project / product
2. The promoter
3. The prospects
4. The performance of the group co.
5. Promoters contribution in the project.
6. The structural ratios like the debt equity ratio.
7. The earlier operation of the a/c.
8. The submission of QIS
9. The timely submission of the production/sales figure etc.
10. The difference between actuals and projections
 BIBLIOGRAPHY
BOOKS
• Khan M.Y. and Jain P.K., Financial Management
• Dalal Street Journal
• Annual Report – Bharti Airtel
• Financial Express
• Seth, A.K., (2003); International Financial Management
• Vij, Madhu, (2002); Multinational Financial Management
• Apte, P.G., (2003); International Financial Management
• Rajwade, A.V., (2003); Foreign Exchange International Finance and Risk Management
• Avadhani, V.E., (2003); Global Business Finance
• Majumdar, Bhaskar, (2002); Concept and Practice of Global Finance
• Global Trade And Investment Finance – Lawrence Tuller
• Corporate Finance IMT Gaziabad

WEBSITE:
ƒ www.airtelindia.com
ƒ http://www.hinduonnet.com/2004/12/22/stories/2004122202441700.htm
ƒ http://bhartiairtel.in/index.php?id=14
ƒ http://bhartiairtel.in/index.php?id=264
ƒ http://bhartiairtel.in/index.php?id=265
ƒ http://bhartiairtel.in/index.php?id=company_profile
ƒ http://economictimes.indiatimes.com/bharti-airtel-ltd/balancesheet/companyid-2718.cms
ƒ http://www.moneycontrol.com/annual-report/bhartiairtel/directors-report/BA08#BA08
ƒ http://www.moneycontrol.com/financials/bhartiairtel/financial-graphs/operating-profit-
ebitda-percentage/BA08
ƒ http://www.indianotes.com/research-analysis/company/company-financial.php?
cc=MTUyMDAwMjIuM

APPENDICES
FINANCIAL STATEMENTS
Bharti Airtel Services Ltd.
Consolidated Statement of Financial Position
(Amounts in millions of Indian Rupees, except share and per share data and as
stated otherwise)