A STUDY ON WORKING CAPITAL

MANAGEMENT AT MANALI PETROCHEMICALS

LIMITED, CHENNAI

A SUMMER PROJECT REPORT

Submitted by

T.CHARLES DARWIN

(Reg. No. 11209631013)

Of

R.M.D. ENGINEERING COLLEGE

in partial fulfilment for award of the degree

of

MASTER OF BUSINESS ADMINISTRATION

IN

FINANCE

AUGUST 2010

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 DECLARATION

I, T.CHARLES DARWIN, (Reg.No 11209631013) a bonafide student of Department of

Management Studies, R.M.D. Engineering College, Chennai would like to declare that the

project entitled, “A STUDY ON WORKING CAPITAL MANAGEMENT OF MANALI

PETROCHEMICALS LIMITED, CHENNAI” in partial fulfillment of Master of Business

Administration course of the Anna University is my original work.

SIGNATURE

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 ACKNOWLEDGEMENT

I would like to express my sincere thanks to our Chairman Mr. R.S. Munirathinam, and

Vice Chairman Mr. R.M. Kishore who provided me an opportunity to study in this esteem

institution.

I wish to express my gratitude to our Principal Dr. K. Sivaram of R.M.D.Engineering

College for giving me the opportunity to do this project work.

I wish to take this opportunity to express my deep sense of gratitude Prof J. Mark, MBA.,

Ph.D, Head of the Department of Master of Business Administration of R.M.D.Engineering

College, Kavaraipettai for this valuable guidance’s in this endeavour.

I express my deep gratitude to my external guide Mr.K.K.Rajagopalan, Director (Finance),

Manali Petrochemicals Ltd, Chennai who has enlightened me in various aspects of Working

Capital Management and other functions of Finance Department, and I like to thank

Mr. G.Ragunath, H.R (Head), Mr. Prabaharan, H.R who provided me an opportunity to

do this project work in this organisation.

I like to thank my internal guide Mrs. G. Nirmala MBA, M.Phil of MBA Department of

R.M.D.Engineering College, Kavaraipettai for her support, guidance and motivation

throughout this Research.

I would like to thank the other Faculty Members of of MBA Department of

R.M.D.Engineering College, Kavaraipettai for their support, and motivation throughout this

Research. They had been a constant source of inspiration to prepare this project effectively.

Finally it is my foremost duty to express my gratitude to my Parents and Friends for their

moral support and encouragement without which it would not have been a complete one.

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 TABLE OF CONTENTS

S.No. Title Page No.

Title page I
Bonafide Certificate II
Organisation Certificate III
Declaration IV
Acknowledgement V
Table of Contents VI
List of Tables VII
List of Figures VIII
Abstract IX

1. INTRODUCTION 1
1.1 Background of the Study 2
1.2 Need of the Study 14
1.3 Objectives of the Study 15
1.4 Scope of the Study 16

2. REVIEW OF LITERATURE 17

3. RESEARCH METHODOLOGY 24
3.1 Introduction 25
3.2 Research Design 25
3.3 Types of Data Collection 26
3.4 Limitations of the Study 27
3.5 Tools used in this Study 28

4. INTRODUCTION OF THE COMPANY 29

4.1 Industry Profile 30
4.2 Company Profile 33

5. DATA ANALYSIS 41

6. SUMMARY AND CONCLUSION 57

6.1 Findings 58
6.2 Recommendations 59
6.3 Conclusion 60

APPENDICES 61
Bibliography 62
Balance sheet, Profit and Loss Account 64

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 LIST OF TABLES

TABLE PARTICULARS PAGE

NO. NO.
4.1 Statement showing the plant capacity details 40
4.2 Statement showing the financial performance of last four years 40
5.1 Statement showing the size of Working Capital 42
5.2 Statement showing the Working Capitan indices 43
5.3 Statement showing the statement of changes in working capital of 44

2007 to 2008
5.4 Statement showing the statement of changes in working capital of 45

2008 to 2009
5.5 Statement showing the Operating Cycle 46
5.6 Statement showing the Working Capital turnover 48
5.7 Statement showing the Inventory turnover 49
5.8 Statement showing the Receivables turnover 50
5.9 Statement showing the current Asset turnover 51
5.10 Statement showing the current ratio 52
5.11 Statement showing the Quick ratio 53
5.12 Statement showing the Absolute liquid ratio 54
5.13 Statement showing the Working capital from 2007 to 2011 55
5.14 Statement showing the Working capital from 2007 to 2011 56

LIST OF TABLES

TABLE PARTICULARS PAGE

NO. NO.
1.1 Diagram showing the Types of Working capital 5
1.2 Diagram showing the Temporary and permanent working capital 6
1.3 Diagram showing the Sources of Working capital 10
1.4 Diagram showing the Operating cycle 11

4.1 Diagram showing the Process of Petrochemical industry 30

4.2 Diagram showing the Flow of petrochemicals from raw materials 31

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 source to end use markets
4.3 Diagram showing the view of plant 1 34
4.4 Diagram showing the view of plant 2 35
5.1 Diagram showing the working capital indices 43
5.2 Diagram showing the net operating cycle 46
5.3 Diagram showing the working capital turnover ratio 48
5.4 Diagram showing the inventory turnover ratio 49
5.5 Diagram showing the receivables turnover ratio 50
5.6 Diagram showing the current asset turnover ratio 51
5.7 Diagram showing the current ratio 52
5.8 Diagram showing the quick ratio 53
5.9 Diagram showing the absolute liquid ratio 54
5.10 Diagram showing the working capital 56

ABSTRACT

This study on Working Capital needs and management of Manali Petrochemical Ltd., is to

evaluate the Working Capital position of the company because Working Capital plays a vital

role in the profitability and the continued existence of the company.

The primary objective of the study is to analyse the Working Capital Management of Manali

Petrochemical Ltd., for the period 2007-2009.

The research design adopted in the study is the Descriptive Research.

The tools used to describe the performance of Working Capital of the company are Ratio

analysis, Schedule of Changes in Working Capital and Regression Analysis.

This analysis has been carried out in the basis of data relating to the past three years. Each

component of Working Capital such as Inventories, Receivables has been included in the

study and detailed analysis has been carried out with the help of financial ratios which would

be extremely useful for the management in making certain important decision regarding

Working Capital.

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The overall performance of Working Capital of Manali Petrochemical Ltd., during the period

2007-2009 been found to be good according to the information provided.

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