SUMMER INTERNSHIP PROJECT

REPORT
ON

WORKING CAPITAL
MANAGEMENT
IN

MARATHON ELECTRIC INDIA PVT.

LTD.

INDEX
SR
NO.

PARTICULARS

PAGE
NO.

Front Page

II

Declaration

ii

III

Company certificate

Iii

IV

Acknowledgement

iv

Executive Summery

VI

Index

vi

Chapter 1

1 10

About the Company Profile

2

Chapter 2

11 19

Introduction to the topic

3

Chapter 3

20 25

Objective and Methodology

4

Chapter 4

26 47

Data analysis and interpretation

6

Chapter 5

48 50

Finding & Conclusions

7

Limitation for further study

51

Appendices

vii xi

CHAPTER 1
INTRODUCTION
&
ABOUT
THE COMPANY PROFILE

COMPANY PROFILE

Marathon Electric India Pvt. Ltd. Was established in 1913. Since 1913, Marathon
Electric has been dedicated to providing customers with quality products for targeted
applications.

Headquartered: Wausau, Wisconsin, USA

Regd. Office & Works:
Product:

(HYDERABAD)

Motors

Nature of business:

Manufacturing & Assembling

Website: www.marathonelectric.in

INTRODUCTION
In India, Marathon Electric delivers efficient mechanical power solutions using AC
electric motors up to 4.5MW. Marathon Electric India has manufacturing facilities,
Marathon Electric India Pvt. Ltd. At Faridabad & Marathon Electric Motors (India)
Ltd in Kolkata. Together, Marathon Electric in India is the Largest
Manufacturer & Exporter of Electric Motors. MEIPL strategic product lines
include Motors and Fans. Our range of Fractional Horsepower motors serves
applications such as Heating, Ventilating, Air-conditioning & Commercial
Refrigeration (HVAC), General Purpose Applications, Evaporative Coolers & Cooler
Kits, and Washing Machines & Wet Rice Grinders. MEIPL Integral Horsepower
motors range up to 11KV serving a wide range of applications such as pumps,
compressors, fans, crushers, conveyors, kilns etc. We also manufacture Propeller,
Axial Flow and Centrifugal Flow type of industrial fans used for various purposes.

Marathon Electric is part of Regal Beloit

Corporation. The Regal Beloit Corporation is a
leading manufacturer of electrical and mechanical
motion control and power generation products
serving markets throughout the world. Regal
Beloit is headquartered in Beloit, Wisconsin, and
5

has manufacturing, sales, and service facilities

throughout North America and in Mexico,
Europe, and Asia.

Global Technology Center - India (GTCI)

The Global Technology Center (Marathon) - India, also known as GTCI is
located at the ve y heart of the city of Hyderabad, the city of pearls. The
technology center is the global hub for Engineering and Information Technology.
GTCI has world class facilities with Engineering and IT teams working
collaboratively with Regal Beloit locations globally. This center started its
operations in August 2005. Since then the technological improvements and
world class delivery has made GTCI a truly competitive advantage for Regal
Beloit Corporation.

Our Brands
Marathon in India is also well known for its brands Genteq, AUE & Cool Home.

Our Products
AC motors, single / Three phase
Cooler motors and Fans
Air Circulator
Wet Rice Grinder
Cage Induction Motors
7

 Roller Table Motors

ECM Motors
Fitness Equipment Motors

Marathon Electric Business units

India Headquarter/ MEIPL Faridabad, Haryana
Manufacturing Unit of Fractional Horsepower Motors
MEMIL Kolkata, West Bengal
Manufacturing unit of Integral Horsepower HVAC Motors
Global Technology Center (Marathon) India Hyderabad
The technology center is the global hub of Engineering and information
Technology.

Our Vision
We will clearly differentiate our products and services as the best value to our
customers, as measured by our customers. We will maintain a sustainable, competitive
advantage through the excellence of our people and our processes creating value for
all our stakeholders.

Our Mission
We will live our values, demonstrating integrity in all our actions. We will function
with a high level of personal energy, energizing those around us. We will have the
courage to make difficult decisions and execute to accomplish our vision.

Award and recognitions

Safety Award, 2007

Haryana State Safety and Welfare Awards 2007

2008 Annual S.A.F.E. Award

Safety Awareness for Employees Award

9

Award for Export Excellence

ISO 9001:2000

ISO 9001:2008 Certificate from NSF

Award for Excellence in Cost Management

10

Objectives
To deliver world class performance to customers through innovation, quality,
delivery, responsiveness and cost.
Develop, attract,& retain the best people by providing and engaging work
environment while helping them achieves their career goals.
Stand top quartile performance in the diversified industrial sector with respect
to revenue growth, profitability, and cash flow.

Factors of Success
Wide range of motors.
Well advanced manufacturing plant and localization.
Brand value and excellent service after sales.
A developer in FHP motors and hasa major export marketof India.
80 percent market of market share in India for FHP motors.
20 percent market share in IHP motors.

SWOT Analysis
Strength
Innovative products
Largest manufacturing unit in
India
Best technology
Customized product
Indigenous technology

Weakness
Lack of HRD measure to
retain skilled professional
Complex organization
structure
Pricing of products

11

Threats

Opportunities
Power sector growth in India
Global opportunities

Flood of imports from china

New competitors
SME built duplicate products

CHAPTER 2
12

INTRODUCTION,
OBJECTIVE AND SCOPE OF STUDY

INTRODUCTION
Meaning of Capital
In the ordinary sense of the word capital means an initial investment invested by a
businessman or owner at the time of commencing the business.

Introduction of Working Capital

It 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 companys
ability to fund operations, reinvest, and meet capital requirements and payments.
Understanding a companys cash flow prospects is to look at its Working Capital
Management.
Thus, in very simple words, working capital may be defined as capital invested in
current assets. Here current assets are those assets, which can be converted into cash
within a short period of time and the cash received is again invested in these assets.

13

Thus, it is constantly receiving or circulating. Hence, working capital is also known as

circulating capital or floating capital.

Meaning of working capital

Working capital means the funds (i.e., capital) available and used for day to day
operation (i.e.; working) of a company. In Accounting

Working Capital = Current Assets Current Liabilities

Definition of working capital
According to Weston & Brigham
Working capital refers to a firms investment in short term assets - cash, short
term securities, account receivable, and inventories.
According to Mead Mallett& Field
Working capital means current assets
The project describes how the management of working capital takes place at
Marathon Electric India Pvt. Ltd.

Classification of working capital

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

Kinds of Working Capital

On the basis of
concept

Gross
working
capital

Net

working
capital

On the basis of time

Permanent/
Fixed working
capital

Temporary
/Variable
working capital
14

Regular
working
capital

Reserve
working
capital

Seasonal
working
capital

Special
working
capital

According to concepts, there are two types of working capital these are Gross working capital
Net working capital

1. Gross working capital

Gross working capitalrefers to investment in all current assets -raw materials, workin-progress, finished goods, book debts, bank balance and cash balance. The gross
concept of working capital is significant in the context of measuring working capital
needed, measuring the size of the business, continued and smooth flow of operations
of the business and the like.

2. Net working capital

Net working capitalrefers to the excess of current assets over current liabilities. That
is, the value of current assets minus the value of current liabilities (currentliabilities
includetrade creditors, bills payable, outstanding expenses such as wages, salaries,
dividend payable and tax payable, bank overdraft, etc.) The net concept of working
capital is significant in the context of financing of working capital, the short term
liquidity aspects of the business, and the like.
Net working capital may be positive or negative. A positive net working capital arises
when current assets exceed current liabilities and a negative working capital occurs
when current liabilities are in excess of current assets. It shows bad liquidity position.
This is a qualitative concept which highlights the character of the sources from which

15

the funds have been procured to support that portion of the current assets which is in
excess of current liabilities.

According to time there are two kinds of working capital. These are Permanent working capital.
Temporary/varying working capital.

1. Permanent Working Capital

Permanent working capitalrefers to the minimum amount of all current assets
that is required at all times to ensure a minimum level of continuous business
operations. Some minimum level of raw materials, working process, bank
balance, finished goods, etc. a business has to carry all the time irrespective of
the level of manufacturing/marketing operations. This level of working capital
is referred to as core working capital or core current assets. Permanent
working capital is defined as the amount of current assets required to meet a
firms long-term minimum needs. You should note, that the level of core
current assets is not, however, a constant sum all the times. For a growing
business the permanent working capital will be rising, for a declining business
it will be decreasing and for a stable business it will be remaining more, or
lessstay-put. So permanent working capital perennially needs one though not
16

fixed in volume. This part of the working capital being a permanent

investment needs to be financed through long-term funds.Depending upon the
changes inthe production and sales, the need for working capital, over and
above the permanent working capital, will fluctuate.

Initial Working Capital:In the initial period of its operation, a firm must
need enough money to pay certain expenses before the business profits. In the
initial years the banks may not funding loans or overdrafts, sales may have to
be made on credit and it may be necessary to pay the creditors immediately.
Therefore the owners themselves have to provide the necessary funds in the
initial period, which may be known as initial working capital.

Regular Working Capital: The firm is always required to keep certain

funds with it to continue the regular business operations, which is called as
Regular Working Capital. It is required to maintain regular stock of raw
materials and work-in-progress and also of the finished goods, which must be
maintained permanently at a definite level. Regular working capital is the
excess of current assets over current liabilities. It ensures smooth operation of
business.

2. Temporary or Variable Working Capital

Temporary or variable working capitalvaries with the volume of operations. If
fluctuates with scale of operations. This is the additional working capital required
during up sessions over the above the fixed working capital. During seasons more
production/sales takeplace, resulting in larger working capital needs. The reverse
is true during off-seasons. As seasons alternate, temporary working capital moves
up and down like tides. Temporary working capital is defined as the amount of
current assets that varies with seasonal requirements. Temporary working capital
can be financed through short term funds, i.e. current liabilities. When the level of
temporary working capital moved up, the business might use short-term funds and
when the level of temporary working capital recedes, the business might retire its
short term loans.
17

Seasonal Working Capital:Some business operations require additional

working capital during a particular season. For example, the groundnut oil
producers may have to purchase groundnut in a particular season and have to
employ additional labor for that purpose. These may require additional funds
for a temporary period, which may be called as seasonal working capital.

Special Working Capital: In all enterprises, some unforeseen events do

occur like a sudden increase in demand, downward movement of prices of raw
materials, strike, or natural calamities, when extra funds are needed to tide
over such situation. Such type of extra funds is called as Special working
capital.

Importance of working capital

Working capital is one of the important measurements of the financial position. The
words of H. G. Guthmann clearly explain the importance of working capital.
Working Capital is the lifeblood and the nerve center of the business. The object of
working capital management is to manage firms current assets and liabilities in such
a way that a satisfactory level of working capital is maintained. If the firm cannot
maintain a satisfactory level of working capital, it is likely to become insolvent
andmay even be forced into insolvency. Thus, the need for working capital to run dayto-day business activities smoothly cant be overstated.

Requirements of working capital

There are no set rules or formula to determine the working capital requirements of the
firms. A large number of factors influence the working capital need of the firms. All
factors are of different importance and also an important change for the firm over
time. Therefore, an analysis of the relevant factors should be made in order to
determine the total investment in working capital. Generally the following factors
influence the working capital requirements of the firm:
Nature and size of the business
Seasonal fluctuations
18

 Production policy
Taxation
Depreciation policy
Reserve policy
Dividend policy
Credit policy:
Growth and expansion
Price level changes
Operating efficiency

Sources of working capital

The financial manager is always interested in obtaining the working capital at the
right time at a reasonable cost and at the best possible favorable terms. A part of the
working capital investment is a permanent investment in fixed assets. These following
are the various sources of working capital:-Source of working capital divided into two
parts
Long - term
Short - term
Sources of long term working capital

Issues of share
Floating of debenture
Public deposit
Loans

Sources of short term working capital

Internal source
Depreciation
Taxation
19

Accrued expense
Ploughing back of profit
External source
Bank credit
Trade credit
Government assistance
Loan from Director
Security of employee

Need of working capital

The need for working capital arises due to the time gap between production and
realization of cash from sales. Working capital is must for every business for
purchasing raw materials, semi-finished goods, stores & spares etc. and the following
purpose
To purchase raw material, spare parts and other components.
To meet overhead expenses.
To hold finished and spare parts etc.
To pay selling and distributing expenses.
To repair& maintenance both machinery as well as factory built.
To pay wages, salaries and other charges.
To helpful in maintaining uncertainties involved in business fields.

Working capital management

Working capital management means management or administrating of all aspects of
working capital: current assets and current liabilities.
In other word of Adam Smith; working capital management is concerned with the
problems that arise in attempting to manage the current assets, current liabilities and
the interrelationship that exist between them

Structure of Working Capital

20

The different elements or components of current assets and current liabilities

constitute the structure of working capital, which can be illustrated in the shape of a
chart as follows:-

Structure of Current Assets and Current Liabilities

Current Liabilities

Current Assets

Bank Overdraft

Cash and Bank Balance

Creditors
Outstanding Expenses

Inventories: Raw-Materials
Work-in-progress
Finished Goods
Spare Parts

Bills Payable

Accounts Receivables

Short-term Loans

Bills Receivables

Proposed Dividends

Accrued Income

Provision for Taxation, etc.

Prepaid Expenses
Short-term Investments

CHAPTER 3
21

OBJECTIVE, SCOPE
AND
METHODOLOGY

Need of the Study

The need of the study is the important part of the project. My purpose of doing this
study is to find out the cause of shortage of working capital. Working capital is the
lifeblood and the nerve center of business. Working capital is very essential to
maintain the smooth running of a business. No business can run successfully without
an adequate amount of working capital. How the business retain their market share as
well as the goodwill of the company. So that company has to maintain its cash to run
the business and accomplishing their day to day expenses.

Objective of the study

To study the Working Capital position of Marathon Electric India Pvt. Ltd.
22

 To study the movement of Working Capital components ( Inventory,

Creditor's, Debtors )

To evaluate the cash management performance in terms ( Size, Liquidity

control ) of Marathon Electric India Pvt. Ltd.

Scope of the study

The scope of study is identified after and during the study is conducted. The main
scope of the study was to put into practical and theoretical aspect of the study into real
life work experience. The study of working capital is based on tools like Ratio
Analysis, Statement of change in working capital. Further the study is based on the
last four years, i.e. 2010-2011 to 2013-2014 annual report of Marathon Electric India
Pvt. Ltd.

23

INTRODUCTON
The research methodology is a way to systematically solve the research problem. It
may be understood as a science of studying new research is done systematically. In
that various steps, those are generally adopted by a researcher in studying his problem
along with the logic behind them.
The procedure by which a researchergoes about their work of describing, explaining
predicting phenomenon is called methodology.

Research Design
A research design is an arrangement of condition for collection at analysis of data in a
manner that combines relevance to the research purpose with the economy in the
process.

24

Process of Research
Formulating the objective of the study(What the study is about and why it is
being made)
Designing the method of data collection (What technique of gathering data will
be adopted)
Selecting the sample (How much material will be needed)
Collecting the data (Where can be required data can be found and with what
time period should the data be related)
Processing and analysis the data
Reporting and finding

Sampling Design
A sample design is a definite plan for obtaining a sample from a given population. It
refers to the technique or the procedure adopted in selecting items for the sample. The
main constituents of the sampling design below Sampling unit
Sample size

Sampling unit
A sampling framework, i.e. developed roe the target population that will be sampled,
i.e. who is to be surveyed

Sample unit taken by me Financial statement of the company

Sample size
It is the substantial portions of the largest population that are sampled achieve reliable
results.
25

Sample size the last four years, i.e. 2010-2011 to 2013-2014 financial
statements of the company.

A tool used for calculation MS-Excel.

Data collection
The datahave been collected from two types Primary data
Secondary data

Primary data
Primary data are the data which is collected from first hand, for the first time which is
original in nature.

Secondary data
Secondary data are those data which have already collected and stored. Secondary
data easily get those secondary data from records annual reports of the company, etc.
It will save the time, money and to collect the data.
The major source of data of this project was collected through annual reports, profit
and loss account of the four year period of company, i.e. from 2010-2011 to 20132014 and some more information collected from the internet and text source.

Tools used for Analysis of data

The data were analyzed using the following tools. They are Ratio Analysis.
Statement of changes in working capital.
26

CHAPTER 4
DATA ANALYSIS
AND
27

INTERPRETATION

DATA ANALYIS AND INTERPRETATION

An analysis of working capital will be very helpful for knowing the operation
efficiency of the company. The following table provides data relating to the net
working capital of MIEPL.

(A) Net Working Capital = Current Assets Current Liabilities

Table showing Net Working Capital
Year

Current Assets

Current Liabilities

Net Working Capital

2010-2011

20,915.61

4,930.54

15,985.07

2011-2012

20,743.18

5,678.34

15,064.84

2012-2013

22,775.58

10,459.17

12,316.41

2013-2014

28,195.36

11,337.50

16,858.86

Source: financial statement (Amount in lakh)

28

Net Working Capital

18000
16000
14000
12000
Net Working Capital

10000
8000
6000
4000
2000
0

(Amount in lakh)

Interpretation
The above chart shows that during the financial year 2010-2011 the company had Net
Working Capital about Rs.15, 985.07 lakh. Duringthe next year, i.e.2011-2012 it
decreased by Rs.920.23lakh. It was Rs.15, 064.84lakh in the year 2011-12.And in the
year 2012-2013 it was Rs.12, 316.41lakh which again decreased by Rs.2, 748.43 lakh
as compared to last year, i.e. 2011-1012. The above chart interprets that the company
iscontinuingdecrease in the NWC till 2012-2013. But in the year 2013-2014it was
increased by Rs.4, 542.45 lakh. Duringthis year NWC was about Rs.16, 858.86 lakh.
This means that the company is in a positive position in the year 2013-2014 and it
hassufficient capital to pay off its current liabilities.

(B) Ratio Analysis

29

Introduction
Ratio analysis is a powerful tool financial analysis. Ratio analysis is a process of
comparison of one figure against another, which makes a ratio and the appraisal of the
ratios to make a proper analysis about the strengths and weakness of the firms
operations. The term ratio refers to the numerical or quantitative relationship between
two accounting figures. Ratio analysis of financial statement stands for the process of
determining and presenting the relationship of items and group of items in the
statements.

Types of Ratio Analysis

Liquidity Ratio
Turnover/Activity Ratio

1. Liquidity Ratios
Liquidity refers to the ability of a firm to meet its current obligations as and when
these become due. The short term obligations are met by realizing amounts of current,
floating, or circulating assets.
Following are the ratios which can help to assess the ability of a firm to meet its
current liabilities
1. Current Ratio
2. Acid Test Ratio /Quick Ratio / Liquidity Ratio
3. Absolute Liquidity Ratio

2. Turnover / Activity Ratios

These are the ratios which indicate the speed with which assets are converted or
turned over into sales.
1. Inventory Turnover Ratio
30

2. Debtors/Account receivable Turnover Ratio

3. Creditors/Account payable Turnover Ratio
4. Working Capital Turnover Ratio

1.1Current Ratio
The Current ratio is a ratio, which express the relationship between the total current
assets and current liabilities. It measures the firms ability to meet its current
liabilities. It indicates the availability of current assets in rupees for every one rupee
of current liabilities. A ratio of greater than one means that the firms has more current
assets in the comparison of current liabilities. A standard ratio between them is 2: 1.

Current Ratio = Current Assets

Current Liabilities
Table showing the current ratio
Year

Current Assets

Current Liabilities

Current Ratio

2010-2011

20,915.61

4,930.54

4.24

2011-2012

20,743.18

5,678.34

3.65

2012-2013

22,775.58

10,459.17

2.17

2013-2014

28,195.36

11,337.50

2.48

Source: financial statement (Amount in lakh)

31

Current Ratio
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0

Current Ratio

2010-2011

2011-2012

2012-2013

2013-2014

(Amount in lakh)

Interpretation
The above chart shows that during the financial year2010-2011 the company had a
current ratio of 4.24:1.During the nextyear, i.e.2011-2012 it decreased by 0.59. It was
about3.65:1 in the year 2011-2012. And in theyear 2012-2013 it was again decreased
by 1.48. During this year, i.e. 2012-2013 it was about 2.17:1. These show that the
current ratio was decreased every year.But in the last year,i.e. 2013-2014 the current
ratio was increased to 2.48:1, due to increase in current assets. The current ratio is
greater to the standard ratio, i.e. 2:1. Hence it can be said that there are enough current
assets in Marathon Electric India Pvt. Ltd. to meet its current liabilities.

1.2 Acid Test Ratio /Quick Ratio / Liquidity Ratio

The Acid test ratio/Quick ratio/Liquidity ratio establishes a relationship between
quick/liquid assets and current liabilities. It measures the firms capacity to pay off the
current obligation immediately. An asset is liquid if it can be converted into cash
immediately without a loss of value; Inventories are considered to be less liquid.
Becauseinventorysnormally require some time for converting into cash. This ratio is
also known as an acid-test ratio. The standard quick ratio is 1:1 is considered
satisfactory.
32

Quick Ratio = Quick Assets (current assets Inventory)

Current Liabilities
Table showing Quick Ratio
Year

CurrentAssets

Inventories

Quick Assets

2010-2011

20,915.61

4,213.05

16,702.56

Current
Liabilities
4,930.54

Quick Ratio

2011-2012

20,743.18

5,759.21

14,983.97

5,678.34

2.63

2012-2013

22,775.58

5,875.76

16,899.82

10,459.17

1.61

2013-2014

28,195.36

5,240.57

22,954.79

11,337.50

2.02

3.38

Source: Financial statement (Amount in lakh)

Quick Ratio
4
3.5
3
2.5

Quick Ratio

2
1.5
1
0.5
0
2010-2011

2011-2012

2012-2013

2013-2014

(Amount in lakh)

Interpretation
The above chart shows that during the financial year 2010-2011 the company had a
Quick ratio of 3.38:1. In the next year, i.e.2011-2012 it decreasesby 0.75. It was about
2.63:1 in the year 2011-2012. During the year 2012-2013 the quick ratiowas
againdecreasedby1.02. And it was about1.61:1 in the year 2012-2013 due to increase
in current liabilities and decrease in Quick assets. But in the last year 2013-2014 the
quick ratio increased by 0.41. And it was increased to 2.02:1. The quick ratio of the
33

company is greater to the standard ratio, i.e., 1:1. Hence it shows that the liquidity
position of the company is adequate.

1.3Absolute Liquidity Ratio

The absolute liquidity ratio may be defined as the relationship between Absolute
liquid assets and current liabilities. Absolute liquid ratio includes cash in hand and
cash at bank. The standard ratio is 0.5:1.

Absolute Liquidity Ratio =

Cash & Bank Balance

Current Liabilities
Table Showing Absolute Liquidity Ratio
Year

Cash & Bank Balance

Current Liability

Absolute Liquidity Ratio

2010-2011

4,516.04

4,930.54

0.91

2011-2012

396.01

5,678.34

0.06

2012-2013

1,607.07

10,459.17

0.15

2013-2014

5,098.44

11,337.50

0.44

Source: Financial statement (Amount in lakh)

34

Absolute Liquidity Ratio

1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0

Absolute Liquidity Ratio

2010-2011

2011-2012

2012-2013

2013-2014

(Amount in lakh)

Interpretation
The above chart shows that during the financial year 2010-2011 the absolute liquidity
ratio of the company was about 0.91:1.In the next year 2011-2012 it decreased by
0.85.It was about 0.06:1, in the year 2011-2012.In the year2012-2013 absolute
liquidity ratio increased by 0.09, and it was about0.15:1, in the year 2012-2013. In the
last year,i.e. 2013-2014 it increased by 0.29, and it was about0.44:1. After 2011-2012
the absolute liquidity ratio of the company is increasingevery year. But besides of
2010-2011 the absolute liquidity ratio of the company is less thanto the standard rate
i.e., 0.5:1. Hence it shows that the liquidity position of the company is satisfactory.

2.1.Inventory Turnover Ratio

The Inventory turnover ratio is the ratio, which indicates the number of times the
stock is turned over i.e., sales during the year. This measures the efficiency of the
sales and stock levels of the company. A high ratio means high sales, fast stock
turnover, and a low stock level. A low stock turnover ratio means the business slows
down or with a high stock level.

Inventory Turnover Ratio =

Net sales

Closing Inventory
35

Table showing the Inventory turnover ratio

Year

Net Sales

Closing Inventory

Inventory Turnover Ratio

2010-2011

37,102.41

4,213.05

8.80 Times

2011-2012

49,374.65

5,759.21

8.57 Times

2012-2013

52,052.91

5,875.76

8.85 Times

2013-2014

55,254.01

5,240.57

10.54 Times

Source: Financial statement (Amount in lakh)

Inventory turnover ratio

12
10
8
Inventory turnover ratio

6
4
2
0
2010-2011

2011-2012

2012-2013

2013-2014

(Amount in lakh)

Interpretation
The above chart shows that during the financial year 2010-2011, 2011-2012, and
2012-2013 in all three years there is no major differencein the inventory turnover
ratio, which is in all three years, the inventory turnover ratio was about 8.80
times,8.57 times, and 8.85 times, respectively.But in the last year, i.e. 2013-2014 it
increased by 1.69 times as compared to the previous year, i.e. 2012-2013. And it was
about 10.54 times in the year 2013-2014. It shows that in all three years the company
had general sales, but in the last year 2013-2014 the company increased in its sales as
compared to last three previous years i.e. 2010-2011, 2011-2012, and 2012-2013.
36

2.2 Debtors/Account receivable Turnover Ratio

The Debtors/Account receivable turnover ratio indicates the speed of debt collection
of the firm. This ratio computes the number of times debtors (receivables) has been
turned over during the particular period.

Debtors Turnover Ratio =

Net sales

Average Debtors
Note: In MEIPL, we have taken the total net sales instead of the credit sales, because
the credit sales information has not available for the calculation of Debtors Turnover
Ratio.

Table showing the Debtors turnover ratio

Year

Net Sales

Average Debtors

Debtors Turnover Ratio

2010-2011

37,102.41

6,433.77

5.76 Times

2011-2012

49,374.65

7,653.72

6.45 Times

2012-2013

52,052.91

8,461.06

6.15 Times

2013-2014

55,254.01

10,904.96

5.06 Times

Source: Financial statement (Amount in lakh)

Debtors turnover ratio

7
6
5
4

Debtors turnover ratio

3
2
1
0
2010-2011

2011-2012

2012-2013

2013-2014

37

(Amount in lakh)

Interpretation
The above chart shows that the debtor turnover ratio is fluctuating over the years. It
was about 5.76 times in the year 20010-2011. It increased by 0.69 times in the year
2011-2012. It was about 6.45 times in the year 2011-2012. But in the year 2012-2013
it was decreased by0.30 times, and it was about 6.15 times in the year 2012-2013.
During the next year, i.e. 2013-2014 it was 5.06 which again decreased by 1.09 times
as compared to the last year i.e. 2012-2013. This graph is showing that the company is
not collecting debt rapidly.

2.3. Creditors/Account payable Turnover Ratio

The creditors turnover ratio is the ratio, which indicates the number of times the
debts are paid in the year. This ratio is calculatedto be as follows:

Creditors Turnover Ratio =

Net Purchases

Average Creditors
Note:In the MEIPL, we have taken the cost of materials consumed instead of credit
purchases, because the credit purchase information has not available for the
calculation of Creditors Turnover Ratio.

Table showing the creditors turnover ratio

Year

Net Purchases

Average Creditors

Creditors Turnover Ratio

2010-2011

21,711.73

4,022.49

5.39 Times

2011-2012

30,560.39

4,416.68

6.91 Times

2012-2013

30,864.81

6,048.81

5.10 Times

2013-2014

30,195.25

4,616.96

6.54 Times

Source: Financial statement (Amount in lakh)

38

Creditors Turnover Ratio

8
7
6
5

Creditors Turnover Ratio

4
3
2
1
0
2010-2011

2011-2012

2012-2013

2013-2014

(Amount in lakh)

Interpretation
The above chart shows that the creditors turnover ratio is fluctuating over the years.
It was about 5.39 times in the year 2010-2011.During the next year, i.e. 2011-2012 it
was increased by 1.52 times.During that year the creditors turnover ratio was about
6.91 times. But in the next year 2012-2013 it was decreased by 1.81 times and it was
about 5.10 times in the year 2012-2013. During the last year, i.e. 2013-2014 it was
about 6.54 times, which due to decreasein creditors. This chart is showing that the
company has made prompt payment to the creditors.

2.4. Working Capital Turnover Ratio

TheWorking Capital Turnover Ratio indicates the number of times the working capital
is turned over in the course of the year. This ratio measures the efficiency with which
the working capital is used by the firm. A higher ratio, efficient utilization of working
capital and a low ratio indicates inefficient utilization of the working capital. But a
very high working capital turnover ratio is not a good situation for any company.

Working Capital Turnover Ratio =

Net Sales

Net Working Capital

Table showing the working capital turnover ratio
39

Year

Net Sales

Net Working Capital

Working capital Turnover Ratio

2010-2011

37,102.41

15,985.07

2.32 Times

2011-2012

49,374.65

15,064.84

3.27 Times

2012-2013

52,052.91

12,316.41

4.22 Times

2013-2014

55,254.01

16,858.86

3.27 Times

Source: Financial statement (Amount in lakh)

Working Capital Turnover Ratio

4.5
4
3.5
3

Working Capital Turnover

Ratio

2.5
2
1.5
1
0.5
0
2010-2011

2011-2012

2012-2013

2013-2014

(Amount in lakh)

Interpretation
The above chart shows that the working capital turnover ratio is fluctuating year to
year that was minimum in the year 2010-2011,about 2.32 times. There was a
subsequent increase in the year 2011-2012 from 0.95 times, and it was about 3.27
times. It was again increased in the year 2012-2013 from0.95 times, due to decrease
in net working capital.It was about 4.22 times in the year. But in the last year i.e.
2013-2014 it was decreased by 0.95 times, due to increase in net working capital.
During that year the working capital turnover ratio was about 3.27 times. This chart
shows that the company is utilizing working capital effectively.
40

(C) Fund Flow Statements

Principles of working capital for calculating purposes

Current Assets
If the current assets increase as a result of this, working capital also increases. If the
current assets decrease as a result of this, working capital also decreases.

Current liabilities
If the current liabilities increase as a result of this, working capital also decreases. If
the current liabilities decrease as a result of this, working capital also increases.

Statement of Change in Working Capital:

The purpose of preparing this statement is for finding out the increase or decrease in
working capital and to make a comparison between two financial years.

41

Table 1:
Statement of Change in Working Capital of the Year
2010-2011
AS on

AS on

Effect on Working capital

31-03-2010

31-03-2011

Increase

Inventories

3,728.40

4,213.05

484.65

Sundry Debtors

6,397.39

6,433.77

36.38

Cash & Bank Balance

7,473.83

4,516.04

2,957.79

Loans and Advances

6,421.70

5,752.73

668.97

Particulars

Decrease

CURRENT
ASSETS

(A) Total
Assets

Current 24,021.34

20,915.61

CURRENT
LIABILITIES
Current Liabilities

7,444.64

4,099.77

3,344.87

Provisions

796.29

830.83

34.54

15,985.07

6,416.06

6,416.06

32,262.27

6,971.63

6,971.63

(B)
Total
Liabilities

current 8,240.93

(A)-(B) Net Working

Capital
15,780.41
Decrease in Working
Capital
TOTAL

32,262.27

4,930.54

Source: Financial statement (Amount in lakh)

42

Interpretation
In the above table, it is seen that during the financial year 2010-2011 there was a net
decrease in working capital of Rs.6, 416.06 lakh which indicates that there is not an
adequate working capital in Marathon Electrical India Pvt. Ltd.
This is because of:-

Increase Current Assets such as Inventories by Rs.484.65lakh and other such

as Sundry debtors by Rs.36.38 lakh.
Decrease in Cash & Bank Balance by Rs.2, 957.79 lakh. And other current
assets such as Loans and Advances by Rs.668.97 lakh.
Decrease in Current Liabilities by Rs.3, 344.87lakh.
Increase in provisions by Rs.34.54 lakh.

Table 2:
43

Statement of Change in Working Capital of the Year

2011-2012
AS on

AS on

Effect on Working capital

31-03-2011

31-03-2012

Increase

Inventories

4,213.05

5,759.21

1,546.16

Sundry Debtors

6,433.77

7,653.72

1,219.95

Cash & Bank Balance

4,516.04

396.01

4,120.03

Loans and Advances

5,752.73

6,934.21

1,181.48

(A) Total Current Assets

20,915.61

20,743.18

Current Liabilities

4,099.77

4,717.48

617.71

Provisions

830.83

960.86

130.03

575.37

26,421.52

4,695.33

4,695.33

Particulars

Decrease

CURRENT ASSETS

CURRENT
LIABILITIES

(B)
Total
Liabilities
(A)-(B)
Capital

Net

Increase
Capital

in

current 4,930.54

5,678.34

Working
15,985.07
Working 575.37
26,421.52

15,064.84

TOTAL
Source: Financial statement (Amount in lakh)

Interpretation
44

In the above table, it is seen that during the financial year 2011-2012 there was a net
increase in working capital of Rs.575.37 lakh. It indicates that an adequate working
capital in Marathon Electrical India Pvt. Ltd.
This is because of:-

Increase in Current Assets such as Inventories by Rs.1, 546.16 lakh, Sundry

debtors by Rs.1, 219.95 lakh, and Loans and advances by Rs.1, 181.48 lakh.
Decrease in Cash and bank balance of Rs.4, 120.03.
Increase in Current Liabilities by Rs 617.71lakh, and Provisions by Rs.130.03
lakh.

Table 3:
Statement of Change in Working Capital of the Year
2011-2012
45

AS on

AS on

Effect on Working capital

31-03-2012

31-03-2013

Increase

Inventories

5,759.21

5,875.76

116.55

Trade Receivables

7,653.73

8,461.06

807.33

Cash & Bank Balance

396.01

1,607.07

1,211.06

Loans and Advances

5,258.50

5,223.86

34.64

Other Current Assets

1,675.73

1,607.83

67.90

(A) Total Current Assets

20,743.18

22,775.58

Trade Payables

4,313.68

4,616.96

303.28

Short term Borrowings

3,265.20

3,265.20

Provisions

960.86

154.64

806.22

Other Current Liabilities

403.80

2,422.37

2,018.57

current 5,678.34

10,459.17

Particulars

Decrease

CURRENT ASSETS

CURRENT
LIABILITIES

(B)
Total
Liabilities
(A)-(B)
Capital

Net

Working 15,064.84

12,316.41

Increase
Capital

in

Working 6,813.23

6,813.23

33,234.75

7,721.99

7,721.99

33,234.75
TOTAL

Source: Financial statement (Amount in lakh)

Interpretation
In the above table, it is seen that during the financial year 2012-2013 there was a net
increase in working capital of Rs.6, 813.23 lakh. It indicates that an adequate working
capital in Marathon Electrical India Pvt. Ltd.
46

This is because of: Increase in Current Assets such as Inventories by Rs.116.76 lakh, Trade
Receivable by Rs.807.33 lakh, and Loans and advances by Rs.1, 211.06 lakh.
Decrease in Cash and bank balance of Rs.34.64 lakh, and other Current Assets
by Rs.67.90 lakh.
Increase in Current Liabilities, such as Trade Payables by Rs.303.28 lakh,
short-term Borrowing by Rs.3, 265.20 lakh, and other Current Liabilities by
Rs.2, 018.57 lakh.
Decrease in Provisions by Rs.806.22 lakh.
Note:
According to Company Law, there were some changes in Schedule VI. These changes
were effective from 01 April11. Some changes in Balance Sheet for the financial year
2011-2012 such as:
In Current Assets, current assets are divided into two parts such as Current
assets and Non-Current assets. Loans and Advances are divided in two parts
such as Short-term loans and advances and Long term loans and advances.
Short-term loans and advances include in Current Assets and Long-term loans
and advances include in noncurrent assets. And added some entries such as
other current assets.
In Current Liabilities added some entries such as Short-term Borrowing and
other current liabilities.

Table 4;
Statement of Change in Working Capital of the Year
2013-2014

47

AS on

AS on

Effect on Working capital

31-03-2013

31-03-2014

Increase

Inventories

5,875.76

5,240.57

635.19

Trade Receivables

8,461.06

10,904.96

2,443.90

Cash & Bank Balance

1,607.07

5,098.44

3,491.37

Loans and Advances

5,223.86

4,592.60

631.26

Other Current Assets

1,607.83

2,358.79

750.96

(A) Total Current Assets

22,775.58

28,195.36

Trade Payables

4,616.96

6,048.81

1,431.85

Short term Borrowings

3,265.20

3,530.58

265.38

Other Current Liabilities

2,422.37

1,521.16

901.21

Provisions

154.64

236.95

82.31

current 10,459.17

11,337.50

Particulars

Decrease

CURRENT ASSETS

CURRENT
LIABILITIES

(B)
Total
Liabilities
(A)-(B)
Capital

Net

Working 12,316.41

16,857.86

Increase
Capital

in

Working 6,298.11

6,298.11

39,532.86

8,465.77

8,465.77

39,532.86
TOTAL

Source: Financial statement (Amount in lakh)

Interpretation
In the above table, it is seen that during the financial year 2013-2014 there was net
increasing in working capital of Rs.6, 298.11 lakh. It indicates that an adequate
working capital in Marathon Electrical India Pvt. Ltd.
48

This is because of:-

Increase in Current Assets such as Trade Receivable by Rs.2, 443.90 lakh,

Cash, and bank balance of Rs.3, 491.37 lakh. And other Current Assets by
Rs.750.96 lakh.
Decrease in Current Assets such as Inventories by Rs.635.19 lakh, and Loans
and advances by Rs.631.26 lakh.

Increase in Current Liabilities, such as Trade Payables by Rs.1, 431.85 lakh,

Short-term Borrowing by Rs.265.38 lakh, and Provisions by Rs.82.31lakh.
Decrease in other Current Liabilities by Rs.901.21 lakh.

49

CHAPTER 5
FINDINGS
AND
CONCLUSIONS

FINDINGS
Working capital of Marathon Electric India Pvt. Ltd was decreasing every
year showing the negative working capital, besides of 2013-2014.After that
the company is higher than standard rate, i.e. 2:1, and the position of the
company is satisfactory.
50

 The Marathon Electric India Pvt. Ltd. hada higher Current ratiobeing4.24:1
and Quick ratio was 3.38:1.
The MEIPL hadan Absolute liquidity ratiovery low in the year 2011-2012.
During the next year, it was increased by 0.09 times as compared to 20112012. And in the last year, i.e. 2013-2014 it was again increased.
The MEIPL hadan inventory turnover ratiovery low in the year 2011-2012.
During the next year, it was increased by 0.28 times as compared to 20112012.And in the last year, i.e. 2013-2014 it was again increased.
The MEIPL had Debtors turnover ratio very high in the year 2011-2012.
During the next year, it was decreased by 0.30 times as compared to 20112012.And in the last year, i.e.2013-2014 it was again decreased.
The Creditors turnover ratioof MEIPL was fluctuating year to year. It was
very high in the year 2011-2012. During the next year, i.e. 2012-2013 it was
decreased by 1.81 times as compared to 2011-2012. And in the last year 20132014 it was again increased.
The MEIPL hada working capital turnover ratio very low in the year 20102011. During the nexttwo years, i.e. 2011-2012 & 2012-2013, it was increased
by 0.95 & 0.95 times respectively, as compared to the previous year, i.e.20102011. And in the last year, i.e. 2013-2014 it was decreased by 0.95 times as
compared to the previous year, i.e. 2011-2012.

CONCLUSIONS
The study on working capital management conducted in Marathon Electric
India Pvt. Ltd. to analyze the financial position of the company. The
companys financial position is analyzed by using the tool of financial
statements from 2010-2011 to 2013-2014.
The financial status of Marathon Electric India Pvt. Ltd is good. In the last
year i.e., 2013-2014 the inventory turnover ratio has increased, this is a good
sign for the company.
51

 The companys liquidity position is not good with regard to the investment in
current assets as there are adequate funds invested in it.
The company is managing its financial position in a better way. There is a
balance between Current assets and current liabilities and also current ratio is
always above the standard rate.
Further, Companys creditors turnover ratio is not so good because of this
company may face the shortage of the funds to pay off its debts. To avoid such
situation, companies should use their funds in a productive way and there
should be timely payment of creditors.
Company net working capital is decreasing, but in the last year i.e., 2012-2013
it was increased, still the company is in a better management position, and the
company present status of maintaining current liabilities and current assets is
satisfactory.
They are able to manage their cash, funds, and debts. By adopting better
management practices, the company may attain a sound financial position in
the future and will be able to manage its working capital very effectively and
efficiently.

LIMITATIONS OF THE STUDY

The study is conducted in very short duration (summer training).
The analysis is limited to just 4 years of data study (from 2009 to 2013) for
financial analysis.
Limited interaction with the concerned head due to their busy schedule.
The findings of the study are based on the information retrieved from the
selected unit.
Very less information and time spent with the company staff.
This study is done on the basis of the historical data not in the actual
workplace.
52

 The financial data sensitive in nature the same could not acquire easily.
Every personhas its own preparation to analyze the financial data so maybe it
varies from person to person.
The companyhas not provided their financial data properly because of it is
confidential in nature.

APPENDICES
Balance sheet and
Profit and loss account of the company
Marathon Electric India Pvt. Ltd.
Provisional Balance sheet as at 31st March 2012

SOURCES OF
FUNDS

CURRENT
YEAR
(2013)

PREVIOUS
YEAR
(2012)

Equity and
Liabilities
Shareholders
Funds

Share capital

332.00

312.00

Reserves and
surplus

27614.01

24630.37
27946.01

24942.37

Non-current
liabilities
53

Long-term
borrowings
Long-term
provisions

4.00

916.34

823.20
916.34

827.20

Current
liabilities

Short-term
borrowings
Trade payables

3265.20

5314.36

4616.96

4313.68

Other current
liabilities
Short-term
provisions
Total current
liabilities

2422.37

415.54

154.64

137.66

Total funds
employed
Assets

10459.17

10181.24

39321.52

35950.81

Non-current
assets

Fixed assets
Tangible assets

14107.94

14117.31

Intangible assets

112.64

14220.58

14117.31

442.57

96.39

Capital work in
progress

14663.15

Deferred tax assets

(net)
Long-term Loans
and advances

14213.70

1760.02

799.88

1739.84

1968.14
3499.86

2768.02

Current Assets

Inventories

5875.76

5759.21

Trade receivable

8461.06

7653.73

54

Cash and bank

balances
Short-termLoans
and advances
Other current assets

1607.07

396.01

3606.79

3484.41

1607.83

1675.73

Net Current
Assets
Total
application of
Funds

21158.51

18969.09

39321.52

35950.81

Source: Financial statement (Amount in lakh)

Marathon Electric India Pvt. Ltd.

Provisional Balance sheet as at 31st March 2013

SOURCES OF
FUNDS

CURRENT
YEAR
(2014)

PREVIOUS
YEAR (2013)

Equity and
Liabilities
Shareholders
Funds

Share capital

332.00

332.00

Reserves and
surplus

31360.10

27614.01
31692.10

27946.01

Non-current
liabilities
55

Long-term
provisions

994.90

916.34
994.90

916.34

Current
liabilities

Short-term
borrowings
Trade payables

3530.58

3265.20

6048.81

4616.96

Other current
liabilities
Short-term
provisions
Total current
liabilities

1521.16

2422.37

236.95

154.64

Total funds
employed
Assets

11337.50

10459.17

44024.50

39321.52

Non-current
assets

Fixed assets
Tangible assets

13589.42

14107.94

Intangible assets

71.06

112.64

13660.48

14220.58

531.52

442.57

Capital work in
progress

14192.00

Deferred tax assets

(net)
Long-term Loans
and advances

14663.15

1409.50

1760.02

2132.65

1739.84
3542.15

3499.86

Current Assets

Inventories

5240.57

5875.76

Trade receivable

10904.96

8461.06

56

Cash and bank

balances
Short-term Loans
and advances
Other current assets

5098.44

1607.07

2687.59

3606.79

2358.79

1607.83

Net Current
Assets
Total
application of
Funds

26290.35

21158.51

44024.50

39321.52

Source: Financial statement (Amount in lakh)

BIBLIOGRAPHY
Following sources have been sought for the preparation this project report-

Company profile
Annual reports of the company from 2010-2011 to 2013-2014
Direct interaction with the employees of the company.
Internet

www.marathonelectric.in
www.google.com
www.wikipidea.org

57

58