EXECUTIVE SUMMARY
The management of current assets deals with determination, maintenance, control and monitoring the level of all the individual current assets. Current assets are referred to as assets, which can normally be converted into cash within one year therefore investment in current assets should be just adequate no more no less” to the needs of the business. Excessive investments in current assets should be avoided, because it impairs firm’s profitability, as idle investment in current assets and are non-productive and so they can earn nothing, on the other hand inadequate amount of working capital can threaten solvency of the firm, if it fails to meet its current obligations.
Thus the working capital is a qualitative concept
1. It indicates the liquidity position of the firm and
2. It suggests the extent to which working capital needs may be financed by permanent source of fund. Current assets should be sufficiently in excess of current liabilities to constitute a margin or buffer for maturing obligation within the ordinary cycle of business.
The basic learning objective behind the study was-
• Computation of Working Capital Management
• Operating Cycle of the firm
• Financial plan estimated for 2007-2008 and projected for 2008-2009
• Working capital credit limits
• Ratio analysis
On the basis of above calculations following conclusions can be made-
• Birla power ltd. has both long term as well as short term sources for current asset financing. It implies that company follows matching principle for raising funds.
• Right now company is following aggressive policy, which means that company is maintaining lower ratio of current assets to fixed assets.
• Birla power solutions ltd has high collection peri0od which shows that money has been unnecessarily blocked with the debtors.
So to overcome the above problems following are the recommendations—
• Increase the proportion of current assets over fixed assets to come to proper proportion of current assets and fixed assets as per the basic norms and guidelines.
• Company should shift from aggressive policy to conservative current assets policy.
• Company should reduce the holiday period else the company will have to pay high carrying cost.
Download Project Report
The management of current assets deals with determination, maintenance, control and monitoring the level of all the individual current assets. Current assets are referred to as assets, which can normally be converted into cash within one year therefore investment in current assets should be just adequate no more no less” to the needs of the business. Excessive investments in current assets should be avoided, because it impairs firm’s profitability, as idle investment in current assets and are non-productive and so they can earn nothing, on the other hand inadequate amount of working capital can threaten solvency of the firm, if it fails to meet its current obligations.
Thus the working capital is a qualitative concept
1. It indicates the liquidity position of the firm and
2. It suggests the extent to which working capital needs may be financed by permanent source of fund. Current assets should be sufficiently in excess of current liabilities to constitute a margin or buffer for maturing obligation within the ordinary cycle of business.
The basic learning objective behind the study was-
• Computation of Working Capital Management
• Operating Cycle of the firm
• Financial plan estimated for 2007-2008 and projected for 2008-2009
• Working capital credit limits
• Ratio analysis
On the basis of above calculations following conclusions can be made-
• Birla power ltd. has both long term as well as short term sources for current asset financing. It implies that company follows matching principle for raising funds.
• Right now company is following aggressive policy, which means that company is maintaining lower ratio of current assets to fixed assets.
• Birla power solutions ltd has high collection peri0od which shows that money has been unnecessarily blocked with the debtors.
So to overcome the above problems following are the recommendations—
• Increase the proportion of current assets over fixed assets to come to proper proportion of current assets and fixed assets as per the basic norms and guidelines.
• Company should shift from aggressive policy to conservative current assets policy.
• Company should reduce the holiday period else the company will have to pay high carrying cost.
Download Project Report
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