INTRODUCTION

Introduction Working capital management

Working capital refers to that part of the firm’s capital which is required for financing short- term or current assets such as cash, marketable securities,

1

debtors & inventories. Funds, thus, invested in current assts keep revolving fast and are being constantly converted in to cash and this cash flows out again in exchange for other current assets. Hence, it is also known as revolving or circulating capital or short term capital.

Working capital management is concerned with the problems arise in attempting to manage the current assets, the current liabilities and the inter relationship that exist between them.

The term current assets refers to those assets which in ordinary course of business can be, or, will be, turned in to cash within one year without undergoing a diminution in value and without disrupting the operation of the firm. The major current assets are cash, marketable securities, account receivable and inventory. Current liabilities ware those liabilities which intended at there inception to be paid in ordinary course of business, within a year, out of the current assets or earnings of the concern. The basic current liabilities are account payable, bill payable, bank over-draft, and outstanding expenses.

The goal of working capital management is to manage the firm’s current assets and current liabilities in such way that the satisfactory level of working capital is mentioned.

Definition:-According to Guttmann & Dougall-

“Excess of current assets over current liabilities”.

According to Park & Gladson-

“The excess of current assets of a business (i.e. cash, accounts receivables, inventories) over current items owned to employees and others (such as salaries & wages payable, accounts payable, taxes owned to Government)”.

Capital required for a business can be classified under two main categories via,

1)     Fixed Capital

2)     Working Capital

2

        Every business needs funds for two purposes for its establishment and

to carry out its day- to-day operations. Long terms funds are required to

create production facilities through purchase of fixed assets such as p&m,

land, building, furniture, etc. Investments in these assets represent that part

of firm’s capital which is blocked on permanent or fixed basis and is called

fixed capital. Funds are also needed for short-term purposes for the purchase

of raw material, payment of wages and other day – to- day expenses etc.

CONCEPT OF WORKING CAPITAL

There are two concepts of working capital:

3

1.     Gross working capital

2.     Net working capital

The gross working capital is the capital invested in the total current assets of

the enterprises current assets are those assets which can convert in to cash

within a short period normally one accounting year.

CONSTITUENTS OF CURRENT ASSETS

1)     Cash in hand and cash at bank

2)     Bills receivables

3)     Sundry debtors

4)     Short term loans and advances

5)     Inventories of stock as:

a.      Raw material

b.     Work in process

c.     Stores and spares

d.     Finished goods

6. Temporary investment of surplus funds.

7. Prepaid expenses

8. Accrued incomes.

9. Marketable securities.

4

 In a narrow sense, the term working capital refers to the net

working. Net working capital is the excess of current assets over

current liability, or, say:

NET WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES.

Net working capital can be positive or negative. When the current

assets exceeds the current liabilities are more than the current assets.

Current liabilities are those liabilities, which are intended to be paid

in the ordinary course of business within a short period of normally

one accounting year out of the current assts or the income business.

CONSTITUENTS OF CURRENT LIABILITIES

1.     Accrued or outstanding expenses.

2.     Short term loans, advances and deposits.

3.     Dividends payable.

4.     Bank overdraft.

5.     Provision for taxation, if it does not amt. to app. of profit.

6.     Bills payable.

7.     Sundry creditors.

5

  CLASSIFICATION OF WORKING CAPITAL

Working capital may be classified in to ways:

o       On the basis of concept.

o        On the basis of time.

On the basis of concept working capital can be classified as gross

working capital and net working capital. On the basis of time,

working capital may be classified as:

     Permanent or fixed working capital.

     Temporary or variable working capital

Amount of Working

Capital

Temporary capital

Permanent Capital

Time

6

PERMANENT OR FIXED WORKING CAPITAL

Permanent or fixed working capital is minimum amount which is required to

ensure effective utilization of fixed facilities and for maintaining the

circulation of current assets. Every firm has to maintain a minimum level of

raw material, work- in-process, finished goods and cash balance. This

minimum level of current assts is called permanent or fixed working capital

as this part of working is permanently blocked in current assets. As the

business grow the requirements of working capital also increases due to

increase in current assets.

TEMPORARY OR VARIABLE WORKING CAPITAL

Temporary or variable working capital is the amount of working capital

which is required to meet the seasonal demands and some special

exigencies. Variable working capital can further be classified as seasonal

working capital and special working capital. The capital required to meet the

seasonal need of the enterprise is called seasonal working capital. Special

working capital is that part of working capital which is required to meet

special exigencies such as launching of extensive marketing for conducting

research, etc.

Temporary working capital differs from permanent working capital in the

sense that is required for short periods and cannot be permanently employed

gainfully in the business.

7

IMPORTANCE OR ADVANTAGE OF ADEQUATE WORKING

CAPITAL

SOLVENCY OF THE BUSINESS:

Adequate working capital helps in maintaining the solvency of the

business by providing uninterrupted of production.

Goodwill:

Sufficient amount of working capital enables a firm to make prompt

payments and makes and maintain the goodwill.

8

Easy loans:

Adequate working capital leads to high solvency and credit standing can

arrange loans from banks and other on easy and favorable terms.

Cash Discounts:

Adequate working capital also enables a concern to avail cash discounts

on the purchases and hence reduces cost.

Regular Supply of Raw Material:

Sufficient working capital ensures regular supply of raw material and

continuous production.

Regular Payment Of Salaries, Wages And Other Day TO Day

Commitments:

It leads to the satisfaction of the employees and raises the morale of its

employees, increases their efficiency, reduces wastage and costs and

enhances production and profits.

Ability to Face Crises:

A concern can face the situation during the depression.

.

9

FACTORS DETERMINING THE WORKING CAPITAL

REQUIREMENTS

1.  NATURE OF BUSINESS:

The requirements of working is very limited in public utility

undertakings such as electricity, water supply and railways because

they offer cash sale only and supply services not products, and no

funds are tied up in inventories and receivables. On the other hand the

trading and financial firms requires less investment in fixed assets but

have to invest large amt. of working capital along with fixed

investments.

2.  SIZE OF THE BUSINESS:

Greater the size of the business, greater is the requirement of working

capital.

3.  PRODUCTION POLICY:

If the policy is to keep production steady by accumulating inventories

it will require higher working capital.

4.  LENTH OF PRDUCTION CYCLE:

The longer the manufacturing time the raw material and other supplies

have to be carried for a longer in the process with progressive

increment of labor and service costs before the final product is

obtained. So working capital is directly proportional to the length of

the manufacturing process.

10

Sources of working capital

The company can choose to finance its current assets by1. Long term sources2. Short term sources3. A combination of them.

Long term sources of permanent working capital include equity and preference shares, retained earning, debentures and other long term debts from public deposits and financial institution. The long term working capital needs should meet through long term means of financing. Financing through long term means provides stability, reduces risk or payment and increases liquidity of the business concern. Various types of long term sources of working capital are summarized as follow:

1. Issue of shares:

It is the primary and most important sources of regular or permanent working capital. Issuing equity shares as it does not create and burden on the income of the concern. Nor the concern is obliged to refund capital should preferably raise permanent working capital.

2. Retained earnings:

Retain earning accumulated profits are a permanent sources of regular working capital. It is regular and cheapest. It creates not charge on future profits of the enterprises.

3. Issue of debentures:

It crates a fixed charge on future earnings of the company. Company is obliged to pay interest. Management should make wise choice in procuring funds by issue of debentures.

Short term sources of temporary working capital

Temporary working capital is required to meet the day to day business expenditures. The variable working capital would finance from short term

11

sources of funds. And only the period needed. It has the benefits of, low cost and establishes closer relationships with banker.Some sources of temporary working capital are given below:

1. Commercial bank:

A commercial bank constitutes significant sources for short term or temporary working capital. This will be in the form of short term loans, cash credit, and overdraft and though discounting the bills of exchanges.

2. Public deposits:

Most of the companies in recent years depend on this source to meet their short term working capital requirements ranging fro six month to three years.

3. Various credits:

Trade credit, business credit papers and customer credit are other sources of short term working capital. Credit from suppliers, advances from customers, bills of exchanges, etc helps to raise temporary working capital

4. Reserves and other funds:

Various funds of the company like depreciation fund. Provision for tax and other provisions kept with the company can be used as temporary working capital.The company should meet its working capital needs through both long term and short term funds. It will be appropriate to meet at least 2/3 of the permanent working capital equipments form long term sources, whereas the variables working capital should be financed from short term sources. The working capital financing mix should be designed in such a way that the overall cost of working capital is the lowest, and the funds are available on time and for the period they are really required.

12

SOURCES OF ADDITIONAL WORKING CAPITAL

Sources of additional working capital include the following-1. Existing cash reserves2. Profits (when you secure it as cash)3. Payables (credit from suppliers)4. New equity or loans from shareholder5. Bank overdrafts line of credit6. Long term loans

If we have insufficient working capital and try to increase sales, we can easily over stretch the financial resources of the business. This is called overtrading. Early warning signs include

1. Pressure on existing cash2. Exceptional cash generating activities. Offering high discounts for clear cash payment3. Bank overdraft exceeds authorized limit4. Seeking greater overdrafts or lines of credit5. Part paying suppliers or there creditor.6. Management pre occupation with surviving rather than managing.

Different Aspects of Working Capital Management

Management of InventoryManagement of Receivables/DebtorsManagement of CashManagement of Payables/Creditors

MANAGEMENT OF INVENTORY

Inventories constitute the most significant part of current assets of a large majority of companies. On an average, inventories are approximately 60% of current assets. Because of large size, it requires a considerable amount of fund. The inventory means and includes the goods and services being sold by the firm and the raw material or other components being used in the manufacturing of such goods and services.

13

Nature of Inventory:

The common type of inventories for most of the business firms may be classified as raw-material, work-in-progress, finished goods.

Raw material: it is basic inputs that are converted into finished productsthrough the manufacturing process. Raw materials inventories are those units which have been purchased and stored for future productions.

Work–in–process: Work-in-process is semi-manufactured products.

They represent products that need more work before them become finished products for sale.

Finished goods: These are completely manufactured products which areready for sale. Stocks of raw materials and work-in-process facilitate production, while stock of finished goods is required for smooth marketing operations. Thus inventories serve as a link between the production and consumption of goods.The levels of three kinds of inventories for a firm depend on the nature of business. A manufacturing firm will have substantially high levels of all the three kinds of inventories. While retail or wholesale firm will have a very high level of finished goods inventories and no raw material and work-in-process inventories.

14

So operating cycle can be known as following:-

Sales

15

Raw Material

Work in Progress

Cash Collection from Debtors

Finished Goods

Credit Sales Cash Sales

Need to hold inventories

Maintaining inventories involves trying up of the company’s funds and incurrenceof storage and holding costs. There are three general motives for holdinginventories:

Transactions Motive: IT emphasizes the need to maintain inventories to facilitate smooth production and sales operation.

Precautionary Motive: It necessitates holding of inventories to guard against the risk of unpredictable changes in demand and supply forces and other factors.

Speculative Motive: It influences the decision to increase or reduce inventory levels to take advantage of price fluctuations.

Management of Receivables/Debtors

The Receivables (including the debtors and the bills) constitute a significant portion of the working capital. The receivables emerge whenever goods are sold on credit and payments are deferred by customers. A promise is made by the customer to pay cash within a specified period. The customers from whom receivable or book debts have to be collected in the future are called trade debtors and represents the firm’s claim or assets. Thus, receivable is s type of loan extended by the seller to the buyer to facilitate the purchase process. Receivable Management may be defined as collection of steps and procedure required to properly weight the costs and benefits attached with the credit policy. The Receivable Management consist of matching the cost of increasing sales (particularly credit sales) with the benefits arising out of increased sales with the objective of maximizing the return on investment of the firm.

16

Nature

The term credit policy is used to refer to the combination of three decision variables:

1. Credit standards: It is the criteria to decide the type of customers towhom goods could be sold on credit. If a firm has more slow –paying customers, its investment in accounts receivable will increase. The firm will also be exposed to higher risk of default.

2. Credit terms: It specifies duration of credit and terms of payment by Customer Investment in accounts receivable will be high if customers are allowed extended time period for making payments.

3. Collection efforts: It determine the actual collection period. The lower the collection period, the lower the investment in accounts receivable and vice versa.

Management of Cash

Cash management refers to management of cash balance and the bank balance and also includes the short terms deposits. 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 term cash includes coins, currency, and cheque held by the firm and balance in the bank accounts.

Factors of Cash Management:

Cash management is concerned with the managing of 1. Cash flows into and out of the firm 2. Cash flows within the firm and3. Cash balance held by the firm at a point of time by financing deficit or

17

investing surplus cash. Sales generate cash which has to be disbursed out. The surplus cash has to be invested while deficit has to borrow. Cash management seeks to accomplish this cycle at a minimum cost and it also seeks to achieve liquidity and control.

Motives of holding cash

A distinguishing feature of cash as an asset is that it does not earn any substantial return for the business. Even though firm hold cash for following motives:

Transaction motive: Precautionary motiveSpeculative motivesCompensatory motive

Transaction motive : This refers to the holding of cash to meet routine cash requirement to finance. The transactions, which a firm carries on in the ordinary course of business.

1.Precautionary motive: This implies the needs to hold cash to meet unpredictable contingencies such as strike, sharp increase in raw materials prices. If a firm can borrow at short notice to pay them unforeseen contingency, it will need to maintain relatively small balances and vice-versa.

2. Speculative motives: It refers to the desire of the firm to take advantage of opportunities which present themselves at unexpected movements and which are typically outside the normal course of business.

3. Compensatory motive: Bank provides certain services to their client free of cost. They therefore, usually require client to keep minimum cash balance with them to earn interest and thus compensate them for the free service so provided.

18

Management of Payables/Creditors

Creditors are a vital part of effective cash management and should be managed carefully to enhance the cash position. Purchasing initiates cash outflows and an over-zealous purchasing function can create liquidity problems. Consider theFollowing:

Who authorizes purchasing in our company-is it tightly managed or spread among a number of people?Are purchase quantities geared to demand forecasts?Do we use order quantities which take account of stock-holding and purchasing costs?Do we know the cost to the company of carrying stock?Do we have alternative source of supply?How many of ours suppliers have a returns policy?Are we in a position to pass on cost increases quickly through price increase?

MANAGEMENT OF WORKING CAPITAL

Management of working capital is concerned with the problem that

arises in attempting to manage the current assets, current liabilities.

The basic goal of working capital management is to manage the

current assets and current liabilities of a firm in such a way that a

satisfactory level of working capital is maintained, i.e. it is neither

adequate nor excessive as both the situations are bad for any firm.

There should be no shortage of funds and also no working capital

should be ideal. WORKING CAPITAL MANAGEMENT POLICES

of a firm has a great on its probability, liquidity and structural health

of the organization. So working capital management is three

dimensional in nature as

19

1.     It concerned with the formulation of policies with regard to

profitability, liquidity and risk.

2.     It is concerned with the decision about the composition and level

of current assets.

3.     It is concerned with the decision about the composition and level

of current liabilities.

 WORKING CAPITAL ANALYSIS

As we know working capital is the life blood and the centre of a

business. Adequate amount of working capital is very much essential

for the smooth running of the business. And the most important part is

the efficient management of working capital in right time. The

liquidity position of the firm is totally effected by the management of

working capital. So, a study of changes in the uses and sources of

working capital is necessary to evaluate the efficiency with which the

working capital is employed in a business. This involves the need of

working capital analysis.

The analysis of working capital can be conducted through a number of

devices, such as:

1.     Ratio analysis.

2.     Fund flow analysis.

3.     Budgeting.

20

METHODS OF WORKING CAPITAL ANALYSIS

There are so many methods for analysis of financial statements but RIL LTD used the following techniques:-

Comparative size statements

Trend analysis

Cash flow statement

Ratio analysis

A detail description of these methods is as follows:-

COMPARATIVE SIZE STATEMENTS:-

When two or more than two years figures are compared to each other than we called comparative size statements in order to estimate the future progress of the business, it is necessary to look the past performance of the company. These statements show the absolute figures and also show the change from one year to another.

TREND ANALYSIS:-

To analyze many years financial statements RIL LTD uses this method. This

indicates the direction on movement over the long time and help in the

financial statements.

Procedure for calculating trends:-

1. Previous year is taken as a base year.

2. Figures of the base year are taken 100.

3. Trend % are calculated in relation to base year.

21

CASH FLOW STATEMENT:-

Cash flow statements are the statements of changes in the financial position prepared on the basis of funds defined in cash or cash equivalents. In short cash flow statement summaries the cash inflows and outflows of the firm during a particular period of time.

Benefits for the RIL LTD:-

To prepare the cash budget.

To compare the cash budgets .

To show the position of the cash and cash equivalents.

RATIO ANALYSIS:-

Ratio analysis is the process of the determining and presenting the

relationship of the items and group of items in the statements.

Benefits of ratio analysis to RIL LTD:-

1. Helpful in analysis of financial statements.

2. Helpful in comparative study.

3. Helpful in locating the weak spots of the RIL LTD.

4. Helpful in forecasting.

5. Estimate about the trend of the business.

6. Fixation of ideal standards.

7. Effective control.

8. Study of financial soundness.

22

Types of ratio:-

Liquidity ratio: They indicate the firms’ ability to meet its current

obligation out of current resources.

Current ratio:- Current assets / Current liabilities

Quick ratio:- Liquid assets / Current liabilities

Liquid assets =Current assets – Stock -Prepaid expenses

Leverage or Capital structure ratio: This ratio discloses the firms

ability to meet the interest costs regularly and long term solvency

of the firm.

Debt equity ratio:- Long term loans / Shareholders funds

or net Worth

Debt to total fund ratio:- Long terms loans/ share holder

funds +long term loan

Proprietary ratio:- Shareholders fund/ shareholders

fund+long term loan

Activity ratio or Turnover ratio:- They indicate the rapidity with

which the resources available to the concern are being used to

produce sales.

Stock turnover ratio:- Cost of good sold/Average stock

(Cost of good sold= Net sales/ Gross profit,

Average stock=Opening stock+closing stock/2)

Debtors turnover ratio:- Net credit sales/ Average debtors

23

+Average B/R

Average collection period:- Debtors+B/R /Credit sales per

(Credit sales per day=Net credit sales of the year/365)

Creditors Turnover Ratio:- Net credit purchases/ Average

Creditors + Average B/P

Average Payment Period: - Creditors + B/P/ Credit

purchase per day.

Fixed Assets Turnover ratio:- Cost of goods sold/Net

fixed Assets

(Net Fixed Assets = Fixed Assets – depreciation)

Working Capital Turnover Ratio:- Cost of goods sold/

Working Capital

(Working capital= current assets – current liability)

Profitability Ratios or Income ratios:- The main objective of

every business concern is to earn profits. A business must be able

to earn adequate profit in relation to the risk and capital invested in

it.

Gross profit ratio:- Gross profit / Net Sales * 100

24

(Net sales= Sales – Sales return)

Net profit Ratio:- Net profit / Net sales * 100

(Operating Net Profit= operating net profit/ Net Sales *100

or operating Net profit= gross profit – operating expenses)

Operating Ratio :- Cost of goods sold + Operating

expenses/Net Sales * 100

(Cost of goods sold = Net Sales – Gross profit, Operating

expenses = office & administration expenses + Selling &

distribution expenses + discount + bad debts + interest on

short term loans)

Earning per share(E.P.S.) :- Net Profit – dividend on

preference share / No. of equity shares

Dividend per share (D.P.S.):- Dividend paid to equity

share Holders / No. of equity shares *100.

Dividend Payout ratio(D.P.) :- D.P.S. / E.P.S. *100

25

COMPANY PROFILE

26

"Growth has no limit at Reliance. I keep revising my

vision.

Only when you can dream it, you can do it."

Dhirubhai H. Ambani

Founder Chairman Reliance Group

December 28, 1932 - July 6, 2002

The Reliance Group, founded by Dhirubhai H. Ambani

(1932-2002), is India's largest private sector enterprise, with

businesses in the energy and materials value chain. Group's

annual revenues are in excess of US$ 44 billion. The

flagship company, Reliance Industries Limited, is a Fortune

Global 500 company and is the largest private sector

company in India.

Reliance enjoys global leadership in its businesses, being the largest

polyester yarn and fibre producer in the world and among the top five to ten

producers in the world in major petrochemical products.

27

Major Group Companies are Reliance Industries Limited (including main

subsidiary Reliance Retail Limited) and Reliance Industrial Infrastructure

Limited

ABOUT TELECOM INDUSTRY

World telecom industry is an uprising industry, proceeding towards a goal

of achieving two third of the world's telecom connections. Over the past few

years information and communications technology has changed in a

dramatic manner and as a result of that world telecom industry is going to be

a booming industry. Substantial economic growth and mounting population

enable the rapid growth of this industry. The world telecommunications

market is expected to rise at an 11 percent compound annual growth rate at

the end of year 2010. The leading telecom companies like AT&T, Vodafone,

Verizon, SBC Communications, Bell South, Qwest Communications are

trying to take the advantage of this growth. These companies are working on

telecommunication fields like broadband technologies, EDGE(Enhanced

28

Data rates for Global Evolution) technologies, LAN-WAN inter networking,

optical networking, voice over Internet protocol, wireless data service etc.

Economical aspect of telecommunication industry: World telecom industry

is taking a crucial part of world economy. The total revenue earned from this

industry is 3 percent of the gross world products and is aiming at attaining

more revenues. One statistical report reveals that approximately 16.9% of

the world population has access to the Internet.

Present market scenario of world telecom industry: Over the last couple of

years, world telecommunication industry has been consolidating by allowing

private organizations the opportunities to run their businesses with this

industry. The Government monopolies are now being privatized and

consequently competition is developing. Among all, the domestic and small

business markets are the hardest.

INDIAN OVERVIEW

29

Today the Indian telecommunications network with over 375 Million

subscribers is second largest network in the world after China. India is also

the fastest growing telecom market in the world with an addition of 9- 10

million monthly subscribers. The teledensity of the Country has increased

from 18% in 2006 to 33% in December 2008, showing a stupendous annual

growth of about 50%, one of the highest in any sector of the Indian

Economy. The Department of Telecommunications has been able to provide

state of the art world-class infrastructure at globally competitive tariffs and

reduce the digital divide by extending connectivity to the unconnected areas.

India has emerged as a major base for the telecom industry worldwide. Thus

Indian telecom sector has come a long way in achieving its dream of

providing affordable and effective communication facilities to Indian

citizens. As a result common man today has access to this most needed

facility.

ABOUT RELIANCE INDUSTRIES LIMITED

MISSION & VISION

30

“Continuously innovate to remain Partners in human progress by

Harnessing science & technology in the petrochemicals domain”

OUR MISSION

“Be a globally preferred Business associate with responsible

Concern for ecology, society, and stake holder’s value”.

VALUES & QUALITY POLICY

OUR VALUES

“Integrity, Respect for People, Unity of Purpose, Outside-in Focus,

Agility and Innovation”.

QUALITY POLICY

“Bare committed to meet customers’ requirements through

continual improvement Of our quality management systems. We

shall sustain organizational excellence through visionary

leadership and innovative efforts”.

RIL MILESTONE

31

YEAR EVENTS

1969 IPCL was incorporated under company act.

1970 Construction of our first Petrochemicals complex commenced at

Vadodara, Gujarat.

1973 Commenced commercial operation at Vadodara.

1992 Initial public offering and listing on the Vadodara stock exchange

1992 Second Petrochemical Complex commenced at Nagothane,

Maharashtra

1996 Third Petrochemical Complex commenced at Gandhar

1999 Gandhar complex commissioned.

2000 Completion of the second phase of the Gandhar complex

2002 Reliance took over IPCL.

2004 Amendment agreement between the government and the strategic

partner, Reliance petroleum limited, a Reliance group company.

2005 Government of India withdrew its nominee directors from the

board of directors of India petrochemicals co. ltd.

2006 Amalgamation of six polyester companies i.e. Apollo fibres ltd,

Central India ploysters ltd, India polyfibres ltd, Orissa polyfibres

ltd, Recron synthetics ltd and Silvassa industries Pvt ltd with

IPCL.

2007 RIL complete a landmark acquisition of IPCL.

2008 RIL signed MOU with GAIL(INDIA) Ltd. to explore

opportunities of setting of petrochemical plants.

Products & Brands

32

The Company expanded into textiles in 1975. Since its initial public offering

in 1977, the Company has expanded rapidly and integrated backwards into

other industry sectors, most notably the production of petrochemicals and

the refining of crude oil.

The Company from time to time seeks to further diversify into other

industries. The Company now has operations that span from the exploration

and production of oil and gas to the manufacture of petroleum products,

polyester products, polyester intermediates, plastics, polymer intermediates,

chemicals and synthetic textiles and fabrics.

The Company's major products and brands, from oil and gas to textiles are

tightly integrated and benefit from synergies across the Company. Central to

the Company's operations is its vertical backward integration strategy; raw

materials such as PTA, MEG, ethylene, propylene and normal paraffin that

were previously imported at a higher cost and subject to import duties are

now sourced from within the Company. This has had a positive effect on the

Company's operating margins and interest costs and decreased the

Company's exposure to the cyclicality of markets and raw material prices.

The Company believes that this strategy is also important in maintaining a

domestic market leadership position in its major product lines and in

providing a competitive advantage.

The Company's operations can be classified into four segments namely:

Petroleum Refining and Marketing business

Petrochemicals business

Oil and Gas Exploration & Production business

Others

33

The Company has the largest refining capacity at any single location.

The Company is:

Largest producer of Polyester Fibre and Yarn

4th largest producer of Paraxylene (PX)

5th largest producer of Polypropylene (PP)

7th largest producer of Purified Terephthalic Acid (PTA) and Mono

Ethylene Glycol (MEG)

Manufacturing Facilities

Reliance Industries Limited operates world-class manufacturing facilities

across the country at Allahabad, Barabanki, Dahej, Hazira, Hoshiarpur,

Jamnagar, Nagothane, Nagpur, Naroda, Patalganga, Silvassa and Vadodara.

Allahabad Manufacturing Division is located in Allahabad, Uttar Pradesh. It

is equipped with batch polymerization and continuous polymerization

facilities.

Barabanki Manufacturing Division is located near Lucknow, Uttar Pradesh.

It manufactures Black Fibre.

Dahej Manufacturing Division is located near Bharuch, Gujarat. It comprises

of an ethane / propane recovery unit, a gas cracker, a caustic chlorine plant

and 4 downstream plants, which manufacture polymers and fibre

intermediates.

Hoshiarpur Manufacturing Division is located in Hoshiarpur, Punjab. It

manufactures a wide range of PSF, PFF, POY and polyester chips.

34

Hazira Manufacturing Division is located near Surat, Gujarat. It comprises

of a Naptha cracker feeding downstream fibre intermediates, plastics and

polyester plants.

Jamnagar Manufacturing Division is located near Jamnagar. It comprises of

a petroleum refineries and associated petrochemical plants. The refineries

are equipped to refine various types of crude oil (sour crude, sweet crude or

a mixture of both) and manufactures various grades of fuel from motor

gasoline to Aviation Turbine Fuel (ATF). The petrochemicals plants

produces plastics and fibre intermediates.

Nagothane Manufacturing Division is located in Raigad, Maharashtra. It

comprises of an ethane and propane gas cracker and five downstream plants

for the manufacture of polymers, fibre intermediates and chemicals.

Nagpur Manufacturing Division is located in Nagpur, Maharashtra. It

manufactures polyester filament yarn, dope-dyed specialty products of

different ranges, fully drawn yarn and polyester chips.

Naroda Manufacturing Division is located near Ahmedabad, Gujarat, is

RIL’s first manufacturing facility. This synthetic textiles and fabrics

manufacturing facility manufactures and markets woven and knitted fabrics

for home textiles, synthetic and worsted suiting and shirting, ready to wear

garments and automotive fabrics.

Patalganga Manufacturing Division is located near Mumbai, Maharashtra. It

comprises of polyester, fibre intermediates and linear alklyl benzene

manufacturing plants.

Silvassa Manufacturing Division is located in the Union Territory of Dadra

and Nagar Haveli. It manufactures a wide range of specialty products such

35

as Recron Stretch, Linen Like, Melange, Thick-n-thin and Bi-shrinkage

yarns.

Vadodara Manufacturing Division is located in Vadodara, Gujarat. It

comprises of a Naptha cracker and 15 downstream plants for the

manufacture of polymers, fibres, fibre intermediates and chemicals.

Each of these complexes has world class manufacturing facilities.

INOVATIONS OF RIL

For those who study innovative organizations Reliance Industries will be a

shining example of how innovation is practised in almost everything that

they do. Here are few things that set them apart:

"Impossible is an inspiring word" - Nothing turns on the leadership

at Reliance Industries than this magical word. Again to quote the

Jamnagar example, it was considered impossible to turn a barren land

36

into a greenbelt. Today mangoes grown in Jamnagar are sold in

Harrods London.

"Hands on thinking, hands off execution." - It is characteristic of

Reliance leadership. They think everything through and meticulous

planning is their hall mark. When it comes to execution empowerment

delegation down to the last employee in the chain is clearly

demonstrated.

"First time it is learning. Second time it is a mistake." - Mistakes

are never frowned upon; instead they are treated as a learning

opportunity. It is one such mistake converted to learning that created

the world's largest 'Craft Centre' located at Jamnagar. Cumulatively it

has trained 1, 50,000 workmen - electricians, welders, carpenters.

"Sense of urgency" - Reliance speed is legendary now. Reliance has

mastered project management skills and has made it virtually into a

fine art. It is this sense of speed that restored operations in record time

in Jamnagar, Patalganga and Hazira after being affected by cyclones

and floods.

"Hard work, timely decisions, speed and ingenuity" says one of the senior

managers of Reliance Industries to sum up what Reliance is all about.

It is evident that Reliance Industries is where it is today because of

Innovation in thinking and execution. Given its ambition for India and its

own organization Reliance leadership has now taken on a major initiative in

the innovation domain.

37

OBJECTIVESOF

THE STUDY

OBJECTIVES OF STUDY

Find out Ratios related to working capital management of RIL and

compare with last 5 years.

38

Find deviation of calculated from standard or Norms.

To study the customer preference towards reliance communications as

compared to its competitors namely Airtel, Vodafone, Idea, Tata

Docomo.

To suggest measures to improve its market share and positioning.

SCOPE OF STUDY

The scope of this study is to provide an insight into concept of working capital management and illustrate it by actually working capital management of RIL. This study also provides insight of the customer preference of Reliance Communications and its market share as compared to Airtel, Vodafone, Idea, Tata Docomo

39

RESEARCH

METHODOLOGY

RESEARCH METHODOLOGY

40

For every comprehensive research a proper research methodology is

indispensable & it has to be properly conceived. The methodology adopted

by me is as follows:-

RESEARCH PROBLEM

To know the working capital management of RIL with the help of

ratio analysis.

To analyze the market strength of reliance communications.

HYPOTHESIS OF THE STUDY

A research hypothesis is the statement created by a researcher when they

speculate upon the outcome of a research or experiment.

For the study of customer preference towards Reliance Communications the

following hypothesis was set up.

H0: There is no significant relationship between factors and

satisfaction level.

H1: There is significant relationship between factors and satisfaction

level.

RESEARCH DESIGN

41

According to Clifford Woody, “research comprises defining and redefining

problems, formulating hypothesis or suggested solutions; collecting,

organizing and evaluating data; making deductions and reaching

conclusions; and at last carefully testing the conclusions to determine

whether they fit the formulating hypothesis.

This research is divided in two parts:

(i) Working Capital Management through secondary data based on

certain parameters;

(ii) an exploratory research based on a survey of the concerning

literature. A sample survey was conducting with the help of

Scheduling Method of collecting data i.e. personally the

enumerator visited and got the questionnaires filled from the

respondents. The enumerator in this method helps the respondents

in recording their answers to various questions in the said

schedules.

SOURCES OF DATA

There are two types of data viz. primary and secondary. The primary data

are those which are collected afresh and for the first time, and thus happen to

be original in character.

The secondary data, on the other hand, are those which have already been

collected by someone else and which have already been passed through the

statistical process.

For this research report, primary data was collected through questionnaires

from customers and recharge dealers of sector 8 and 9 and there was no bias

on the part of the enumerator while selecting the sample for the analysis

concerning Reliance Competitors.

42

Secondary data was used for the working capital management of RIL that is

company annual reports, profit and loss account and balance sheet for the

years 2004-05, 2005-06, 2006-07, 2007-08, 2008-09, brochures from

recharge dealers, magazines and newspapers.

SAM

PLE SIZE

For this research, in part one, a sample size of annual reports for 5 years

2004-05, 2005-06, 2006-07, 2007-08, 2008-09 were taken.

For the second part, a sample size of 100 respondents was taken out of the

total customers using mobile phones.

SAMPLE AREA

The sample area was Bhopal involved respondents coming to recharge

dealers in sector 8 and 9 and the residents of sector 8.

STATISTICAL TOOLS USED

The various statistical tool used were data distribution tables, graphs and pie

charts. Ratio analysis was used for determining the working capital

management of RIL. Hypothesis testing through Chi Square test was used in

Customer Preference Towards Reliance Communications.

43

LIMITATIONS OF THE STUDY

Following were the limitations of the study:

Time was limited.

The sample size of 100 is very small and more than that could not be

possible.

The study was only based on the survey of respondents in

CHANDIGARH and no other area could be undertaken for the survey

due to lack of transport and time.

This of working capital management is based solely upon the annual

reports of the company in hard copy and through company website.

Only 5 companies could be compared for the market analysis in order to avoid complexity of data.

44

DATA COLLECTION

Types of data collection

There are two types of data collection methods available.1. Primary data collection2. Secondary data collection

45

1) Primary data collection method

The primary data is that data which is collected fresh or first hand, and for first time which is original in nature. Primary data can collect through personal interview, questionnaire etc. to support the secondary data.

2) Secondary data collection method

The secondary data are those which have already collected and stored.Secondary data easily get those secondary data from records, journals, annual reports of the company etc. It will save the time, money and efforts to collect the data. Secondary data also made available through trade magazines, balance sheets, books etc.This project is based on primary data collected through personal interview ofhead of account department, head of SQC department and other concerned staff member of finance department. But primary data collection had limitations such as matter confidential information thus project is based on secondary information collected through five years annual report of the company, supported by various books and internet sides. The data collection was aimed at study of working capital management of the company

46

Data analysis&

Interpretation

(WORKING CAPITAL MANAGEMENT OF RIL)

CURRENT RATIO

It is also known as “working capital ratio” .It is a measures of short-term

financial strength of the business and shows whether the business will be

able to meet it’ s current liabilities as when they mature.

47

Current Assets including assets which can be converted in to cash easily

and itself like market securities debtors, inventory, prepaid expenses etc.

Current Liabilities included creditors, bills payable, accrual expenses, short

term bank loan, income tax liabilities and long term debt maturity in current

year. In short it can be said as all obligation within a year are included in

current liabilities.

Current ratio is a measure of the firm’s short term solvency. It indicate the

availability of current assets in rupee of current liabilities. As a conventional

rule, a current ratio should be or slightly more. It focuses the strong of weak

position of the company.

For the year:

2008 - 09 = Rs. 58746.07 = 1.61:1

Rs. 35756.98

2007 - 08 = Rs. 51488.87 = 2.19:1

48

Rs. 23417.51

2006 - 07 = Rs. 29913.35 = 1.77:1

Rs. 16865.53

2005 - 06 = Rs. 24574.45 = 1.96:1

Rs. 12563.50

2004 - 05 = Rs. 28452.51 = 2.14:1

Rs. 13283.95

INTERPRETATION:

YEARS CURRENT RATIO

2008-09 1.61:1

2007-08 2.19:1

2006-07 1.77:1

2005-06 1.96:1

2004-05 2.14:1

49

CURRENT RATIO

1.61

2.19

1.771.96

2.14

0

0.5

1

1.5

2

2.5

2008-09

2007-08

2006-07

2005-06

2004-05

YEARS

CU

RR

EN

T R

AT

IO

CURRENTRATIO

It is generally believed that 2:1 ratio shows a comfortable working capital

position. The tendon committee appointed by RBI had wide recommended a

current ratio of 2:1.

Company has maintained this ration and increased it year by year. A current

ratio is 1.61 in the current year. But in the other year the ratio is nearer to 1:2

so we can say that the company having comfortable working capital

position.

ACID-TEST RATIO

The measure of absolute liquidity may be obtained only cash and bank

balance as well as only ready marketable security with liquid liabilities. This

is every existing standard of liquidity and it is satisfaction if the ratio is

1.50:1.

For the year:

2008 - 09 = Rs. 58746.07 – 20109.61 = 1.08:1

Rs. 35756.98

50

ACID-TEST RATIO

0

0.20.4

0.6

0.8

11.2

1.41.6

1.8

2008-09 2007-08 2006-07 2005-06 2004-05

YEARS

AC

ID-T

ES

T R

AT

IO

ACID-TESTRATIO

2007 - 08 = Rs. 51488.87 - 19126.14 = 2.19:1

Rs. 23417.51

2006 - 07 = Rs. 29913.35 – 12136.51 = 1.38:1

Rs. 16865.53

2005 - 06 = Rs. 24574.45 – 10119.82 = 1.15:1

Rs. 12563.50

2004 - 05 = Rs. 28452.51 – 7412.88 = 1.58:1

Rs. 13283.95

YEARS ACID-TEST RATIO

2008-09 1.08:1

2007-08 1.38:1

2006-07 1.05:1

2005-06 1.15:1

2004-05 1.58:1

51

INTERPRETATION:

Acid-test ratio is near to one in current year that is 1.08 as compare to 1.38

in the previous year. Over all the acid-test ratio of last five year is very

satisfactory so we can conclude that the absolute liquidity of the Reliance

Industries Limited is in favor.

DEBTORS TURNOVER RATIO

This ratio shows the proportion of sales to average receivables. It shows the

efficiency of the collection policy of the firm. The higher the ratio, the less

satisfactory position of the firm. Higher ratio indicates weak collection

policy of the firm.

For the year:

2008 - 09 = Rs. 151224.01 = 31.21:1

Rs. 4844.97

2007 - 08 = Rs. 137146.66 = 22.60:1

Rs. 6068.30

2006 - 07 = Rs. 111692.72 = 29.92:1

Rs. 3732.42

52

2005 - 06 = Rs. 81211.33 = 19.50:1

Rs. 4163.62

2004 - 05 = Rs. 66051.30 = 16.82:1

Rs. 3927.81

INTERPRETATION:

We know that the higher Debtor’s turnover ratio is not good for the firm. In

the year 2008-09 it is 31.21:1 but in the previous year it was 22.60:1. So

some improvement is needed.

YEARS DEBTORS TURNOVER RATIO

2008-09 31.21:1

2007-08 22.60:1

2006-07 29.92:1

2005-06 19.50:1

2004-05 16.82:1

53

CREDITOR’S TURNOVER RATIO :

Creditor’s turnover ratio shows the proportion of purchase to account

payable number of days within which we make payment to our creditors for

credit purchases estimated the creditors ratio if this ratio is higher it means

company has to check whether company is making payment within credit

period available. If it is making payment before the due date means the

company is not taking full advantage of it credit period and if company

making the payment the period that indicates that the company is not taking

the benefit of discount allowed.

For the year:

2008 - 09 = Rs. 118961.16 = 3.33:1

Rs. 35756.98

2007 - 08 = Rs. 108270 = 4.62:1

Rs. 23417.51

2006 - 07 = Rs. 92301.09 = 5.47:1

Rs. 16835.53

2005 - 06 = Rs. 69043.43 = 5.49:1

Rs. 12563.50

2004 - 05 = Rs. 52715.92 = 3.96:1

Rs. 13283.95

54

INTERPRETATION:

Higher Ratio of creditor turnover forces the company to check that payment

is made with in credit period properly or not. The creditors’ turnover ratio is

3.33 in 2008-09 as compare to 2007-08 the ratio is 4.62 which is higher than

the other years.

INVENTORY TURNOVER RATIO

This ratio is also known as “stock turnover ratio”. The number of times the

average stock is turnover during the year is known as stock turnover. It is

computed by deciding the sales by the inventory. The ratio is important in

joining the ability of management which it can move the stock.

YEARS CREDITOR’S TURNOVER RATI

2008-09 3.33:1

2007-08 4.62:1

2006-07 5.47:1

2005-06 5.49:1

2004-05 3.96:1

55

INVENTORY TURNOVER RATIO

7.51 7.17

9.28

0

2

4

6

8

10

2008-09 2007-08 2006-07 2005-06

YEARS

INV

EN

TO

RY

TU

RN

OV

ER

RA

TIO

INVENTORY TURNOVER RATIO

For the year:

2008 - 09 = Rs. 151224.01 = 7.51 times

Rs. 20109.61

2007 - 08 = Rs. 137146.66 = 7.17 times

Rs. 19126.14

2006 - 07 = Rs. 111692.72 = 9.20 times

Rs. 12136.51

2005 - 06 = Rs. 81211.33 = 8 times

Rs. 10119.82

2004 - 05 = Rs. 66051.30 = 8.91 times

Rs. 7412.88

YEARS INVENTORY TURNOVER RATIO

2008-09 7.51 times

2007-08 7.17 times

2006-07 9.20 times

2005-06 8.00 times

2004-05 8.91 times

56

INTERPRETATION:

Higher the ratio more profitability the business would be. The ratio is

joining the ability of management with which it can move the stock.

Inventory turnover ratio is highest in the year 2006-07 is 9.20 as compare to

the other year but in current year it is 7.51 which is little lower than previous

year but it is obvious that in heavy industries like Reliance Industries

Limited have lower ration as compare to FMCG.

NET WORKING CAPITAL TURNOVER RATIO

Net working capital turnover ratio is obtained by net working capital joining

to sales. The excess of current assets over current liabilities is called working

capital. It is found for measuring firm liquidity. It also measures the firm

potential reserve of funds.

For the year:

2008 - 09 = Rs. 151224.01 = 5.83 times

Rs. 19874.06

2007 - 08 = Rs. 137146.66 = 5.57 times

Rs. 24622.18

57

2006 - 07 = Rs. 111692.72 = 9.85 times

Rs. 11334.95

2005 - 06 = Rs. 81211.33 = 10 times

Rs. 8119.97

2004 - 05 = Rs. 66051.30 = 5.83 times

Rs. 11320

YEARS WORKING CAPITAL TURNOVER RATIO

2008-09 7.60 times 2007-08 5.57 times2006-07 9.85 times2005-06 10.00 times2004-05 5.83 times

58

WORKING CAPITAL TURNOVER RATIO

7.6

5.57

9.85

10

5.83

2008-09

2007-08

2006-07

2005-06

2004-05

YE

AR

S

WORKING CAPITAL TURNOVER RATIO

WORKINGCAPITALTURNOVERRATIO

INTERPETATION:

As per the balance sheet data of the creditor the working capital turnover

ratio is different for the different years. The ratio is 7.60 in 2008-09 and 5.57

in 2007-08 but the best favorable ratio is in 2005-06 which is 10 times. So it

means that higher the ratio better the working capital condition of the

company.

DEBTOR COLLECTION PERIOD

The Debt Collection shows the number of days taken to collect the debts of

credit sales. It shows the efficiency and collection policy of the company.

The ratio is computed by dividing the Debtor’s turnover ratio in to 365

days.

59

For the year:

2008 - 09 = 365 days = 11 days

31.21

2007 - 08 = 365 days = 16.15 days

22.60

2006 - 07 = 365 days = 12.20 days

29.92

2005 - 06 = 365 days = 18.71 days

19.50

2004 - 05 = 365 days = 21.70 days

16.82

YEARS DEBTORS COLLECTION PERIOD

2008-09 11.00 days 2007-08 16.15 days 2006-07 12.20 days 2005-06 18.71 days 2004-05 20.71 days

60

INTERPRETATION:

The collection period is highest in 2004-05 is 20.71 days as compare to very

low in 2008-09 is only 11 days. This shows the improvement in collection

policy of the Reliance Industries Limited. So it is very important for any

company to collect the debs which this company do very well.

STATEMENT OF RATIO ANALYSIS

RATIOS 2008-09 2007-08 2006-07 2005-06 2004-05

Current ratio 1.64 2.19 1.77 1.96 2.14

Acid-test ratio 1.08 1.38 1.05 1.15 1.58

Debtor’s turnover ratio 31.21 22.60 29.92 19.50 16.82

Creditor’s turnover ratio 3.33 4.62 5.47 5.49 3.96

61

Inventory turnover ratio 7.51 7.17 9.20 8.00 8.91

Net-working capital turnover ratio

7.60 5.57 9.85 10.00 5.83

Debt collection period 11 16.15 12.20 18.71 21.70

COMPREHENSIVE ANALYSIS

05

101520253035

Cur

rent

ratio

Aci

d-te

stra

tio

Deb

tor’s

turn

over

ratio

Cre

dito

r’stu

rnov

erra

tio

Inve

ntor

ytu

rnov

erra

tio Net

-w

orki

ngca

pita

ltu

rnov

er

Deb

tco

llect

ion

perio

d

RATIOS

VALU

ES

2008-09 2007-08 2006-07 2005-06 2004-05

TABLE 1

CONSUMER PREFERENCE TOWARDS CELL PHONE SERVICE PROVIDERS

S.NO NAME OF THE SERVICE

PROVIDER

NUMBER OF

RESPONDENTS

1 Reliance Communications 49

62

2 Airtel 54

3 Vodafone 61

4 Idea 23

5 Tata Docomo 39

INTERPRETATION:

Most of the Respondents prefer Vodafone followed by Airtel,

Reliance Communications, Tata Docomo and Idea respectively.

The number of respondents are more than 100 because of multiple

responses by the respondents.

TABLE 2SERVICE PREFERENCE OF RESPONDENTS ON THE BASIS

OF AGE WISE

CLASSIFICATION

S.NO NAME OF THE SERVICE

PROVIDER

UPTO 20 years. 21-30 years

NO. OF RESPONDENTS

% OF RESPONDENTS

NO. OF RESPONDENTS

% OF RESPONDENTS

63

1 Reliance Communications 8 32 21 33.8

2 Airtel 9 36 19 30.2

3 Vodafone 6 24 21 33.87

4 Idea 2 8 0 0

5 Tata Docomo 0 0 1 1.6

TOTAL 25 100 62 100

31-40 years 40 years and Above TOTAL

NO. OF RESPONDENTS

% OF RESPONDENTS

NO. OF RESPONDENTS

% OF RESPONDENTS

NO. OF RESPONDENTS

% OF RESPONDENTS

1 16.67 2 28.57 32 32

2 33.33 4 57.14 34 34

3 50 1 14.29 31 31

0 0 0 0 2 2

0 0 0 0 1

6 100 7 100 100 100

64

INFERENCE:

Among respondents upto 20 years of age group, majority of them (i.e.

36%) are using Airtel folllowed by Reliance users(32%).

Consumers in the age group of 21 – 30 years 57% of respondents are

mostly prefer Vodafone and Reliance(33.8% and 33.87%

respectively) and 30% of the respondents are using Airtel.

50% of customers are using Vodafone, who are in the age group of 31

– 40 years.

41 and above – 57% of the respondents are using Airtel and 28.57%

of respondents are using Reliance.

TABLE 3

65

COMPOSITION OF RESPONDENTS ON THE BASIS OF MARITAL STATUS

S.NO. MARITAL STATUS

NUMBER OF RESPONDENTS

% OF RESPONDENTS

1. MARRIED 33 33

2 UNMARRIED 67 67

TOTAL 100 100

INFERENCE:

The married respondents are using cell phones in 33%, but the unmarried

respondents are using cell phones in 67%.

TABLE 4

66

COMPOSITION OF RESPONDENTS ON THE BASIS OF

EDUCATION QUALIFICATION

S.NO. EDUCATIONAL QUALIFICATION

NUMBER OF RESPONDENTS

% OF RESPONDENTS

1. UPTO HIGHER SENIOR SECONDARY

32 32

2 GRADUATES 61 61

3 PROFESSIONALS 7 7

4 OTHERS 0 0

TOTAL 100 100

INFERENCE:

The majority of the respondents 62.50% (graduates) are using cell phones

and 30.77% (upto HSC) respondents are using cell phones

TABLE 5

67

COMPOSITION OF RESPONDENTS ON THE BASIS OF OCCUPATION

S.NO. OCCUPATION NUMBER OF RESPONDENTS

% OF RESPONDENTS

1. BUISNESS 12 12

2 PROFESSIONAL 2 2

3 EMPLYOEE 33 33

4 HOME MAKER 8 8

5 STUDENT 44 44

6 OTHERS 1 1

TOTAL 100 100

INFERENCE:

44% of the total sample who are students are using cell phones, followed by

employees (33%), businessmen (8%), home makers (8%) and others (1%).

TABLE 6TABLE SHOWING SOURCE OF INFORMATION TO SELECT

SERVICE PROVIDERS

68

S.NO. OCCUPATION NUMBER OF RESPONDENTS

% OF RESPONDENTS

1. Family Members 40 40

2 Neighbours 2 2

3 Relations 5 5

4 Friends 37 37

5 Advertisement 4 4

6 Dealers 6 6

7 Others 6 6

TOTAL 100 100

INFERENCE:

The most influencing factor for choosing the service provider according to

the respondents is Family Members (40%) followed by Friends (37%),

Dealers and Others (6% both), Relations (5%), Advertisement (4%) and

Neighbours (2%).

69

TABLE NO: 8

COMPOSITION OF RESPONDENTS ON THE BASIS OF PURPOSE

OF PURCHASE OF THE CELL PHONES

S.NO. PURPOSE NUMBER OF RESPONDENTS

% OF RESPONDENTS

1. For Business 42 42

2 For Personal 58 58

TOTAL 100 100

INFERENCE:

42% of respondents are using cell phones for their business, and 58% of

respondents are using cell phones for their personal usage.

TABLE 10

70

AWARENESS OF VARIOUS SCHEMES

S.No VARIOUS SERVICES

AWARE UNAWARE TOTALNO.OF RESPONDENTS

% OF RESPONDENTS

NO.OF RESPONDENTS

% OF RESPONDENTS

NO.OF RESPONDENTS

% OF RESPONDENTS

1 SCHEME OFINITIALPURCHASE

61 61 39 39 100 100

2 BALANCEOF TALKCHARGES

63 63 37 37 100 100

3 PERIODICALOFFERS

58 58 42 42 100 100

4 CALLWAITINGAND CALLDIVERTINGOPTION

61 61 39 39 100 100

5 MODES OFPAYMENT

54 54 46 46 100 100

71

INFERENCE:

63% of respondents are aware about the talk charges, 58% of respondents

are aware about various periodical offers and 39 % are unaware of call

waiting and call diverting option.

46% of respondents are unaware about the modes of payment and 61% of

respondents only aware about the schmes of initial purchase

TABLE NO: 11

72

INFLUENCING FACTORS TO SELECT THE SERVICE PROVIDER

S.NO. FACTORS NUMBER OF RESPONDENTS

1. Deposit Amount 13

2 Brand Image 45

3 Availability 10

4 Credit Facility for Connection 8

5 Customer Care Service 17

6 Service Charges 7

TOTAL 100

INFERENCE:

45% of respondents are purchasing a particular service provider by its Brand

Image, 17% of respondents are choosing the particular service provider by

their customer care service, 13% by Deposit Amount, 10% by Availability,

8% by Credit Facility for Connection and 7% by Service Charges.

73

TABLE NO: 12

CONSUMER’S SATISFACTION LEVEL ON THE BASIS OF PRICE

OF THE CELL PHONE PROVIDERS

S.NO

SERVICE PROVIDER

HIGHLY SATISFACTORY

SATISFACTORY

NON SATISFACTORY

TOTAL

1 Reliance Comunications

28 12 9 49

2 Airtel 30 20 4 54

3 Vodafone 38 13 10 61

4 Idea 10 5 13 38

5 Tata Docomo

14 7 3 24

INFERENCE:

38% of the respondents are highly satisfied for the price of Vodafone

followed by Airtel, reliance Communications, Tata Docomo and Idea

respectively. People using Idea service are not satisfied in majority out of the

total number of respondents using Idea service.

TABLE NO: 13

74

CONSUMER’S SATISFACTION LEVEL ON THE BASIS OF AFTER

SALES SERVICE OF THE SERVICE PROVIDER

S.NO

SERVICE PROVIDER

HIGHLY SATISFACTORY

SATISFACTORY

NON SATISFACTORY

TOTAL

1 Reliance Comunications

31 12 6 49

2 Airtel 45 5 4 54

3 Vodafone 39 12 10 61

4 Idea 9 5 14 38

5 Tata Docomo 15 6 3 24

INFERENCE:

Majority of the respondents (45) are highly satisfied about after sales service

by Airtel, followed by Vodafone, Reliance, Tata Docomo and Idea

respectively. 12 (Reliance users) and 5 (Airtel users) are satisfied (average)

by the after sales service. 14 respondents of total Idea users are dissatisfied

by the after sales service whereas only 6 and 4 users of Reliance and Airtel

are dissatisfied.

75

TABLE NO 15

CONSUMER’S ATTITUDE TOWARDS THE IMPORTANCE OF

CELL PHONES

CALCULATION OF SATISFACTORY SCORES

S.NO. NATURE NUMBER OF

RESPONDENTS

%age OF

RESPONDENTS

1 Necessity 64 64

2 Status 25 25

3 Luxury 11 11

TOTAL 100 100

INFERENCE:

64% of the respondents state that cell phones are necessity, 25% state cell

phones as a status symbol and 11% of respondents are only states that cell

phones are luxury.

76

TABLE 16

REASONS FOR FACING DIFFICULTY IN CELL PHONE CONNECTION

REASONS NO. OF RESPONDENTS

Coverage 42

Service 32

Clarity 45

Network Busy 56

INFERENCE:

Majority of respondents face difficulty in their cell phone connection due to Network problem followed by Coverage problem, clarity and Service.

77

OBSERVATIONS&

FINDINGS

OBSERVATIONS & FINDINGS

78

Findings of working capital management of RIL

The company having comfortable working capital position.

The absolute liquidity of the Reliance Industries Limited is in favour.

The collection policy of the company is very good.

The creditors turnover ratio is 3.33 in 2008-09 as compare to 2007-08

the ratio is 4.62 which is higher than the other years.

Inventory turnover ratio is highest in the year 2006-07 is 9.20 as

compare to the other year but in current year it is 7.51 which is little

bit lower than previous year but it is obvious that in heavy industries

like Reliance Industries Limited have lower ratio as compared to

FMCG.

The working capital ratio is 7.60 in 2008-09 and 5.57 in 2007-08 but

the best favorable ratio is in 2005-06 which is 10 times. So it indicates

better working capital condition of the company.

This is an improvement in collection policy of the Reliance Industries

Limited.

FINDINGS FOR RELIANCE COMMUNICATIONS

79

(CUSTOMER PREFERENCE)

On the basis of consumer preference, majority of the peoples are

preferred Vodafone and Reliance at the 3rd position.

On the basis of age group, most of the respondents (33.8%), are using

Reliance, who are in the age group of 21-30 years.

On the basis of marital status mostly unmarried respondents are using

cell phones than married respondents.

On the basis of educational qualification, most of the graduates are

using cell phones.

On the basis of occupation, the students and employees are using cell

phones in more level.

On the basis of family income, 45% of the respondents are using cell

phones, who are all get family income of Rs.5, 001 – 10, 000.

Majority of the peoples choose the service provider by family

members influence.

4% of respondents are only influenced by advertisements.

Majority of the peoples are using cell phones for personal usage.

Majority of the peoples are using prepaid scheme.

Majority of the people are aware of the various schemes provided by

the service providers.

Majority of the people keep in mind the brand image before selecting

their service provider.

Majority of the respondents are highly satisfied about the price of

Airtel

80

People using Idea service are not satisfied in majority out of the total

number of respondents using Idea service.

On the basis of after sales service, the majority of the respondents are

highly satisfied in Airtel, Vodafone and Reliance respectively.

On the basis of periodical offers, majority of the people are highly

satisfied by Vodafone and Reliance respectively.

On the basis of consumer’s attitude, majority of the people are states

that cell phones are necessity to all.

Reasons for facing difficulty in cell phone connection are Network

problem followed by Coverage problem, clarity and Service.

81

CONCLUSION&

SUGGESTION

82

CONCLUSION

In the present study I have analyzed the working capital management of RIL INDUSTRY Limited.The study involves practical and conceptual over view of decisions

concerning current assets like cash and bank balance ,inventories( like raw

materials ,w-i-p,finished goods ),sundry debtors, loans and advances, other

current assets and current liabilities like sundry creditors, securities and

other deposits, other current liabilities and provisions of RIL. Was with the

objective of maximizing the overall net profit of the bank. And complete

synchronization and co ordination among the working capital components

which shall contribute to optimum level of operations. Mismanagement of

each or any of these components shall be detrimental to the objectives of

efficient operation, profitability and maximization of overall value of the

bank.

The working capital limits would be considered only after the project

nearing completion and after ensuring control over the inventory. The

inventory is a great concern for RIL and it need proper procurement and

management.

Eligible working capital limits would be assessed by cash Budget method

And Projected production method depending the market condition, scale of

operation, nature of activity/enterprise and duration/length of operating cycle

etc.

This study also attempts to find out the satisfaction of consumer regarding

cell phone service providers. This is an information era significance of

information cannot be over emphasized.

83

This decade, most of the peoples using cell phones. So, service providers are

increasing in more level increasing the level of competition. This leads to

adding new features, schemes, periodical offers to their service and the

consumers get maximum benefit from their service provider.

Now-a-days, cell phones are very necessity to all. Because, it is give safety

to the men and women also. They have also become a status symbol for

young geeration.

But one should also not forget the disadvantages of cell phones and should try avoiding it especiaaly for children as it hampers their development mentally and can endager their health. Crimes are also increasing relating to cell phones and people should be careful

84

SUGGESTIONS

The recommendation & suggestion for effective management of working capital at RIL are given bellow:1) For inventory, in order to improve the position, RIL can reduce the level of stocks by resorting to phased production i.e. producing according to requirement and disposing off or recycling the unserviceable inventories. However, the low turnover of stock may also be due to problems with generation of sales. Inventory management is a great concern for RIL especially stores and spares. The purchase manager should take proper steps for procurement of inventories.

2.) The company must take certain steps to decrease the working capital cycle. One way can be better management of inventories.

3.) RIL is suggested to maintain a balance in capacities, synchronization of various inputs availability of some materials or parts which are not easily available.

4.) Short term credit period availed must be reduced and sundry creditors should be paid faster.

5.) It should maintain inventory at an optimum level rather than a very optimistic level. 6.) The procurement for materials requisition processing should be reduced so as to minimize the lead time. 7.) Freedom should be there in deciding the credit policies, cash discount or credit ratings.

8). RIL can also consider negotiating its creditors for relaxing the debt repayment period and repaying only on or just before the expiry of the credit period.

85

The recommendation & suggestion for effective management of working

capital at RIL are given bellow:

Reliance Comm. should expand their customer base. But it also has an

advantage over Tata Docomo and Idea.

Reliance Comm. should try to attract old people also.

It should concentrate on good advertisements for their service

because, advertisements take little part for influencing the consumers.

It should try to increase post paid users.

More awareness of their services should be spread to the customers.

Reliance should attract the customers by reducing their price.

Reliance should try to increase their after sales services and decrease

their dissatisfied customers by providing good after sales services.

Reliance should give more periodical offers to its customers.

It should come up with more reasonable and attractive plans for

business use.

It needs to focus on providing good clarity of signals as customers

prefer Airtel in terms of signal clarity.

86

BIBLIOGRAPHY

BIBLIOGRAPHY

87

www.ril.com

http://www.ril.com/html/investor/financials.html

Annual Report for the year 2008-2009  

Annual Report for the year 2007-2008  

Annual Report for the year 2006-2007

Annual Report for the year 2005-2006    

Annual Report for the year 2004-2005  

http://www.studyfinance.com/lessons/workcap/

http://en.wikipedia.org/wiki/Working_capital

www.rcom.co.in

www.trai.gov.in

http://www.ibef.org/industry/telecommunications.aspx

Financial Management Khan & in

Financial Management I.M.Pandey

Research Methodology C.R.Kothari

88

ANNEXURE

QUESTIONNAIRE

89

I am DINESH SHARMA, a student of MILLENNIUM Institute of tech. & science, Bhopal and this questionnaire is a part of my research on “A STUDY OF WORKING CAPITAL MANAGEMENT OF RELIANCE INDUSTRY & CUSTOMER PREFERENCE TOWARDS RELIANCE COMMUNICATION”. I would therefore request you to give your response to the questionnaire.

Name :

Sex :

Male Female

Age :

Upto 20 yrs 21-30 yrs

31-40 yrs 40 yrs. and above

Marital Status :

Married Unmarried

90

Q1. What is the qualification Educational Qualification?

Up to HSC Graduation

Professional

Others _____________________________________

Q2. What is your occupation ?

Business Professional

Employee Student

Home maker others

Q3. what is your Family income (Per/month)

Less than Rs.5, 000/-

Rs. 5,000/- to 10,000/-

Rs. 10,000/- to 15,000/-

Above Rs. 15, 000/-

Q4.) Which cell phone (Service Provider) do you possess?

Reliance Communications Airtel

Vodafone Tata Docomo

Idea

Q5.) Who influenced you to by the particular cell phone service

91

Provider?

Family Member Neighbors Relations Friends Advertisement Dealers

Q6.) Why do you buy the cell phones?

For business for personal

Q7) Which type of scheme is most preferable by you?

Prepaid Postpaid

Q8) If you have postpaid / prepaid connection mention scheme Name &

Monthly rental

Charges?

________________________________________________

Q9) Are you aware of the following details relating in your connection?

(Pre / Postpaid connection)

92

SCHEME AWARE UNAWARE

Scheme of Initial Purchase

Balance of Talk Charges

Periodical Offers

Call Waiting and Call Diverting Option

Modes of Payment

Q10) What factor influenced you to decide your Cell Phones service?

Deposit amount Brand Image

Availability Credit facility for your connection

Customer care service Service charges

Q11) Are you satisfied with your cell phone service provider?

HIGHLY

SATISFACTORY

SATISFACTORY NOT

SATISFACTORY

Price

After Sales

Service

Periodical

Offers

Q12) You consider mobile as a:

Necessity Status Luxury

93

Q10.) What are the reasons of difficulty you face in you cell phone connection (if any)?

Coverage Service

Clarity Network Busy

THANKING YOU

94