IMPACT OF WORKING CAPITAL MANAGEMENT ON FINANCIAL PERFORMANCE A STUDY OF RUSHIL DÉCOR LTD Dr. Bhumika Raval* 1, Falguni Prajapati 1, Dipika Sharma 1

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1 ISSN: IJMRR/Nov. 2016/ Volume 6/Issue 11/Article No-4/ ABSTRACT IMPACT OF WORKING CAPITAL MANAGEMENT ON FINANCIAL PERFORMANCE A STUDY OF RUSHIL DÉCOR LTD Dr. Bhumika Raval* 1, Falguni Prajapati 1, Dipika Sharma 1 1 Asst. Prof, Chaudhari Technical Institute, Gandhinagar, Gujarat, India. Present study investigates the impact of working capital which comprises of interest in current resources. Rushil Decor Ltd is the lead organization of the Rushil Group. The organization offers complete built inside items incorporate Decorative Laminate Sheets and Plain Particle Boards. This paper explores working capital administration at "RUSHIL DÉCOR LTD" which incorporates stock administration and receivable administration and 5 years financial proclamation of the organization from 2011 to 2015 broke down the working capital ratio, quick proportion and turn over proportion on "RUSHIL DÉCOR LTD".This paper demonstrates a relationship of working capital on a budgetary execution of an organization. Keywords: Working capital, inventory management, different ratios. 1. INTRODUCTION "Working Capital is the Life-Blood and Controlling Nerve Center of a business." Working capital is to bolster the everyday running typical operations of an endeavor. This working capital considers the critical components of cost viz., material, wages, and costs. The working capital administration accurately worried with an administration of current resources and liabilities. A company's working capital comprises of its interest in current resources, which incorporate fleeting resources, for example, Cash and bank equalization, Inventories, Receivables (counting account holders and bills), Marketable securities, Working capital is usually characterized as the contrast between current resources and current liabilities. Working capital is an essential fixing in the smooth working of business substances. Rushil Decor Ltd is the lead organization of the Rushil Group. The organization offers far reaching designed inside items incorporate Decorative Laminate Sheets and Plain Particle Boards. They have coordinated multi-item current offices deliberately situated in Gujarat. The covers and plywood industry is exceptionally divided and chaotic. Among the disarray, Vir Laminates rises as a tried and true and dependable brand. Vir Laminates, a brand of Rushil Décor Limited, commands the business sector with a broad item go, for improving covers for home and business use. Having a stake in the covers business since 1993, it has been a pioneer in the assembling of Laminate Sheets and complimentary items for over two decades. *Corresponding Author

2 2. RESEARCH METHODOLOGY 2.1 Hypothesis of the study H 1 : There is a relationship of working capital on the financial performance of a company. H 2 : sound management of working capital positively affects the performance of a company. 2.2 Objective 1. To study and analyze working capital management at RUSHIL DÉCOR LTD which includes. i. Inventory management ii. Receivable management iii. Cash management 2. To study the different working capital ratio on RUSHIL DÉCOR LTD 3. To examine the working capital performance of the selected company. 2.3 Sources of data Secondary data: company s websites, annual reports of Rushil décor ltd, Balance sheet for 5 years of the company, Credit Monitoring Arrangement data 2.4 Type of research: Quantitative research 2.5 Research techniques: 5 years comparative analysis of working capital and 4 different ratios. 2.6 Research area: Rushil Décor Ltd, Gandhinagar 3. DATA ANALYSIS Table No. 1: Working capital position analysis in Rushil Décor limited YEAR Current Assets Inventories cash and bank balance loan and advances Total current Assets Less Current Liabilities Provision short term borrowing sundry creditors Total current liabilities Net working capital Interpretation: The above table shows that total resource and liabilities of the organization from 2011 to It demonstrates that organization has adequate working funding to meet its fleeting risk, it is a great pointer for the organization however in 2014, and working capital is expanded by cr. which demonstrates that an adequate sum has been hindered in working capital which could be utilized for some other more valuable reason. Copyright 2016 Published by IJMRR. All rights reserved 1566

3 Table No. 2: Components of Current asset and liabilities Analysis of Rushil Décor Limited Year Inventories Sundry debtors Cash and Bank Balance Loan and Advances Current liabilities Sundry Creditors Provision Interpretation Inventories: The stock is expanded from 2011 to 2014 on the grounds that the organization is purchasing crude material in more numbers and remembers of and in the year 2015, it diminished by Sundry Debtors: Account holders increment just when deals increment and decline if deals diminish. Thusly, sundry indebted individuals expanded from 2011 to 2015 by shows that offers of the organization are additionally expanded. Cash and Bank Balance: In the year 2011, money and bank parity are high which not a decent sign is for the organization since it demonstrates that organization is not utilizing its money for gainful exercises. Be that as it may, in the year 2014 to 2015 money has expanded from 5.59 to 6.89 cr. that is not a decent sign for the organization. Credit and Advances: In credit and advances demonstrates an uneven example which shows that organization is giving advances for the extension of plants and hardware and modernization. The organization concentrates on expanding inflow. Current Liabilities: Current liabilities expanded due to credit and sundry indebted individuals. In the year 2013 to 2014, it is expanded from to Thusly the company is giving advances for the development of plants and hardware. Furthermore, in the following year 2015, it is diminished by when company has least liabilities it makes a superior goodwill in the business sector. Sundry Creditors: From 2011 to 2015, loan bosses are expanded by to demonstrates that creditors increment just when buys expanded. Provision: The above table it demonstrates that arrangement is an uneven pattern. In the year 2011 to 2012 that are diminished by 1.91 to 1.47 and in the year 2013 that are expanded by 1.89 and then in the following two-year arrangement are diminished by 1.27 to Table No. 3: Position of working capital ratio in Rushil décor Ltd Year Inventory Receivable Payable Sales Working Capital Ratio Copyright 2016 Published by IJMRR. All rights reserved 1567

4 Interpretation: This proportion demonstrates whether the interests in current resources or net current resources (i.e., working capital) have been appropriately used. All together words, it demonstrates the relationship amongst deals and working capital. Higher the proportion lower is the interest in working capital and higher is the gainfulness. In any case, too high proportion shows over exchanging. This proportion is an essential pointer of the working capital position. Presently from the above table and graph, it demonstrates the five-year information, that it takes after the expanding pattern which implies that its interest in working capital is higher and the organization is using less of its benefit. Table No. 4: Position of current ratio in Rushil Décor Ltd. Year Total current assets Total current liabilities Current ratio Interpretation: This proportion reflects financial stability of the enterprise. The standard of the ordinary proportion is 2:1 yet in a large portion of organization's standard is taken by Tendon Committee which is taken as 1.33:1.By break down from the above table five years information it can be anticipated that it holds a steady position all through period however it is observed that it holds a low position than the standard one and the organization is required to enhance its position. Table No. 5: Position of Quick ratio in Rushil Décor Ltd Year Total Current Assets Inventories Total Current Liabilities Quick Ratio Interpretation: This ratio shows relationship between quick liquid assets and quick liabilities. The ordinary worth for such proportion is taken to be 1:1. This is working as an assessment tool for liquidating situation testing of the firm. It shows the relationship between strictly liquid whose feasible worth is verging on sure on one hand and strictly liquid liabilities then again. Liquid assets involve every present resource short stock. By analyzing five years information it can be said that its position feeble in the year 2011 yet it enhanced essentially in the following year and again it is declined in the year 2013 to It is to be said that it doesn't meet the standard however in the year It was near the standard and it can be said that its liquidity position is not up to the mark but holding a stable position. Copyright 2016 Published by IJMRR. All rights reserved 1568

5 Table No. 6: Position of receivable ratio in Rushil décor Ltd Year Debtors Sales Receivable Ratio Interpretation: By and large, a low debtor s turnover ratio implies that it considered amicable for the business as it infers better income. The proportion shows the time at which the obligations are gathered on an average during the year. Obviously that a high Debtors Turnover Ratio infers a shorter Collection period, this shows brief installment made by the client. Table No. 7: Position of payable ratio in Rushil décor ltd. Year Receivable Sales Payable Ratio Interpretation: It shows the ability of the firm to benefit the credit facility from the suppliers consistently. By and large a low loan boss' turnover proportion infers ideal since the firm appreciates extensive credit period. 4. CONCLUSION The study implies to analyze the determinants of firm s financial soundness connected with the management of working capital with organization's financial related information of the period On working capital ratio, it follows the increasing trend which shows its higher investment in working capital and the company is utilizing less of its profit. But beside of this quick ratio is very close to the standard and also said that its liquidity position is not good & stable. Clinched alongside any case, adjacent should for this smart extent is close to the standard and it could make said that its liquidity position will be awful and stable. It is Needless to say that a high Debtors turnover ratio infers a shorter collection period which exhibits short portion settled on by the customer. Eventually, a low creditor's turnover ratio extent proposes incredible since the firm appreciates in length credit period. In relation to the main objective, it shows that the working capital management of Rushil Décor Ltd. is satisfactory during all the years under study additionally; the company has shown an immense progress. Previously, liquidity position all around the considerable length of time under study. REFERENCES Copyright 2016 Published by IJMRR. All rights reserved 1569

6 [1] Joshi L, Ghosh S. Working Capital Management of Cipla Limited: An Empirical Study. International Journal of Marketing, Financial Services & Management Research 2012; 1(8). [2] Srinivas KT. A study on working capital management through ratio analysis with reference to karnataka power corporation limited. National monthly refereed Journal of research in Commerce & Management. [3] Madhavi K. Working Capital Management of Paper Mills. International Journal of Research in Business Management. [4] Arshad Z, Muhammad YG. Impact of Working Capital Management on Profitability: A Case of The Pakistan Cement Industry. Interdisciplinary Journal of Contemporary Research In Business. [5] Chandra P. Financial Management. New Delhi: Tata Mcgraw- Hill Publishing company, [6] Pandey IM. Financial Management. New Delhi: Vikas Publishing House Ltd, [7] Zikmund BC. Business research method. New Delhi: Cengage learning India Pvt. Ltd, [8] Kothari CR. Research Methodology Methods & Techniques, New age International Publishers, 2 nd Revised Edition, [9] Bhattacharya DK. Research Methodology, Excel Books, 2 nd edition. Copyright 2016 Published by IJMRR. All rights reserved 1570