I.1.

BACKGROUND OF THE STUDY

The Major Objective of this study is to understand the working capital
management of National Fertilizers Limited and to suggest necessary measures to
overcome the shortfalls if any in the industry
The project Working Capital Management of National Fertilizers Limited
describes about how the company manages its working capital and the various
steps that are required in the management of working capital. Cash is the lifeline
of a company. If this lifeline deteriorates, so does the company's ability to fund
operations, reinvest and meet capital requirements and payments. Understanding a
company's cash flow health is essential in making investment decisions. A good
way to judge a company's cash flow prospects is to look at its Working Capital
Management (WCM).
Working capital refers to the cash of a business requires for day-to-day operations
or, more specifically, for financing the conversion of raw materials into finished
goods, which the company sells for payments. Other important items of working
capital are levels of inventory, accounts receivables and accounts payables.
Analysts look at these items for signs of a company's efficiency and financial
strength. Since working capital is an important yardstick to measure the
companys operational and financial efficiency the company should have a right
amount of cash and lines of credit for its business needs at all times.
There are numerous instances in the history of business world where inadequacy
of working capital i.e. when a firm finds it difficult to meet day to day affairs, has
led to business failures. Operating expenses may have to be postponed, operating
plans will go out of gear and enterprise objectives on investment slumps the
suppliers and creditors of the firm may have to wait longer to raise their dues and
will hesitate to extend further credit to the firm.
Thus efficient management of working capital is an important prerequisite for
successful working of the business. It reduces the chances of business failures, and
generates a feeling of security and confidence in the minds of stakeholders. This
assures steadiness in the organization.
I.2. PROBLEM STATEMENT

To understand the working capital management in National Fertilizers Ltd.

To analyze the liquidity position of NFL.
To study the different factors that affects the working capital of the company.
To assess the impact of working capital on profitability
To examine the combine effect of the ratios relating to working capital
management and profitability with the assistance of multiple correlation
coefficient and multiple correlation coefficient and multiple regression
equation and to test the significance of the regression coefficients.
To determine the working capital leverage for examining the sensitivity of
ROE to changes in the level of gross working capital of the company

I.3. NEED AND IMPORTANCE OF THE STUDY

This project is helpful in knowing the companys position of funds

maintenance and setting the standards for working capital inventory levels,
current ratio level, quick ratio, current asset turnover level and size of current
liability etc.
This project is also useful as it combines the present year data with the
previous year data and thereby it shows the trend analysis, i.e. increasing or
decreasing funds.
The project is done as a whole and will give an overall view of the
organization and it is usefulness in further expansion decision to be taken by
management.

I.4. HYPOTHESIS
H1: There is a significant impact of working capital on the profitability of the
company
H2: There is a significant impact that is created by the ratios (Working Capital
Ratio, Acid Test Ratio, Current Assets to Total Assets Ratio, Current assets to
Sales Ratio, Working Capital Turnover Ratio, Inventory Turnover Ratio, Debtors
Turnover Ratio and Cash Turnover Ratio) relating to working capital management
and profitability on the company.
H3: There is a significant sensitivity of ROE to changes in the level of gross
working capital of the company.
II.
II.1.

RESEARCH DESIGN
METHEDOLOGY

Methodology may be a description of process, or may be expanded to include a

philosophically coherent collection of theories, concepts or ideas as they relate to
a particular discipline or field of inquiry. This project requires a detailed
understanding of the concept Working Capital Management. Therefore, firstly
we need to have a clear idea of, what is working capital, how it is managed in
National Fertilizers Limited, what are the different ways in which the financing of
working capital is done in the organization etc. In order to understand further data
was collected from departments Finance and Accounting and Marketing
department at corporate office.
II.1.1. COLLECTION OF DATA
There are two ways of collecting data Primary data and secondary data.
Primary Data
The first handed information collected through various methods is known as
primary data. The primary data was gathered through personal interaction with
various functional and technical personnel of NFL. Some information was also
collected by observation.
Secondary Data

Secondary data is data collected by someone other than the user. Common sources
of secondary data for social science include censuses, surveys, organizational
records and data collected through qualitative methodologies or qualitative
research. Secondary data was collected from various reports, annual reports,
documents charts, internet etc.
The analysis of the information gathered has been made on the basis of the
clarifications sought during the personal discussions with the concerned people
and perception during the personal visits to the important areas of services. In
marking observations identifying problems and suggesting certain remedies such
emphasis was given on the basis of opinions gathered during the personal
discussions and with the personal experience gained during the academic study of
M.B.A course.