Jaipuria Institute of Management Summer Training Report: Voltas Ltd.

This summer training report, submitted by a student from Jaipuria Institute of Management, presents a comprehensive study on the working capital management of Voltas Ltd. The report begins with an introduction to working capital and its importance, followed by an overview of factors affecting it. It includes a detailed company profile of Voltas Ltd., covering its business divisions and operations. The core of the report focuses on the student's job description, analysis, and data interpretation, using financial data from Voltas Ltd. to analyze key ratios and trends. The report also includes findings, suggestions, and conclusions regarding Voltas Ltd.'s financial performance, drawing on both primary and secondary sources. The student's experience at Voltas Ltd. provided practical insights into the finance and commercial departments of the company. The report concludes with a bibliography and tables of figures.

SUMMER TRAINING REPORT
For the Proposed Summer Internship Project
A STUDY ON WORKING CAPITAL MANAGEMENT OF VOLTAS LTD.
JAIPURIA INSTITUTE OF MANAGEMENT
A-32, Sector 62, Institutional Area, Noida- 201309 (U.P.)
Under the Supervision of
Prof. Ajay Bansal
Submitted by
Agrima Shrivastava
JN170006
AGRIMA SHRIVASTAVA | JN170006 1

DECLARATION
I, Agrima Shrivastava,of Jaipuria Institute of Management, NOIDA, hereby affirm that this
report on Summer Internship Project titled “A Study on Working Capital Management of
Voltas Ltd.” at Voltas corporate office, Delhi,is solely my work and is prepared by me only.
I also declare that I have not revealed any sort of critical information of the organization.
I also declare that all the information collected from numerous secondary sources has been duly
acknowledged in this project report.
Place: New Delhi
Date: 5 July 2018 (Agrima Shrivastava)
AGRIMA SHRIVASTAVA | JN170006 2

AGRIMA SHRIVASTAVA | JN170006 3

AGRIMA SHRIVASTAVA | JN170006 4

ACKNOWLEDGEMENT
I would like to extend my heartfelt thankfulness towards the Management of Voltas Ltd for
providing me an opportunity to experience my Summer Internship Project in their respected
organization. I am extremely grateful to my guide Mr. Gurudev Singh for his guidance and
supportive nature that helped me in completing this project report. I have learned severalnew
things about the organizational finance system while working at Voltas Ltd.
I would also like to thank Mohd. Kalimuzzama Siddiqui and Mr. Amol Bhise forallowing me to
work on my project and for their timely support and guidance that helped me in preparation of
this report.
Last but not the least I would like to thank my faculty mentor Mr. Ajay Bansal for his continuous
support and guidance.
(Agrima Shrivastava)
AGRIMA SHRIVASTAVA | JN170006 5

ABSTRACT
This project is on working capital management of VOLTAS Ltd. This study has been
done to take a glance atfunctioning of finance and commercial department of the company and
take an overview of working capital management and analyse it toevaluate the performance of
the company financially. For major part of the project, I have used my understanding of the job
in the F&C department but for the study of last part that is working capital management I have
used the annual reports of Voltas Ltd for five years. In the end of the report, I speak about my
results, conclusions, recommendations and learning outcomes.
AGRIMA SHRIVASTAVA | JN170006 6

TABLE OF CONTENT
Content
s
SUMMER TRAINING REPORT...............................................................................................................1
TABLE OF FIGURES................................................................................................................................8
CHAPTER 1................................................................................................................................................9
INTRODUCTION.......................................................................................................................................9
FACTORS AFFECTING WORKING CAPITAL.....................................................................................10
CHAPTER 2..............................................................................................................................................13
COMPANY PROFILE..............................................................................................................................13
CHAPTER 3……………………………………………………………………………………………………………………………………………15
JOB DESCRIPTION ……………………………………………………………………………………………………………………………….15
JOB ANALYSIS………………………………………………………………………………………………………………………………………16
CHAPTER 4……………………………………………………………………………………………………………………………….19
DATA ANALYSIS AND INTERPRETATIONS.....................................................................................20
INTERPRETATION.................................................................................................................................22
CHAPTER 5..............................................................................................................................................32
FINDINGS................................................................................................................................................32
SUGGESTIONS........................................................................................................................................33
CONCLUSION.........................................................................................................................................35
BIBLIOGRAPHY.....................................................................................................................................36
AGRIMA SHRIVASTAVA | JN170006 7

TABLE OF FIGURES
S.NO
PARTICULARS PAGE NO.
1. Summary of Balance confirmation of Delhi 14
2. Summary of balance confirmation of Haryana 15
3. Relationship between trade receivables and trade payables 19
4. Relationship between short term borrowings and short term
advances
20
5. Relationship between current assets and current liabilities 21
6. Relationship between current ratio and quick ratio 22
7. Cash Turnover Ratio 23
8. Cash to Current Liabilities 24
9.
10.
11.
Average collection and average payable period
Account Receivable Turnover and Accounts Payable Turnover
Operating Cycle and Cash Conversion Cycle
25
29
30
AGRIMA SHRIVASTAVA | JN170006 8

CHAPTER 1
INTRODUCTION
A business no matter how small or big it is in terms of revenues and profits requires
money to carry out its activities and operations to achieve its goals. In fact, finance has become
so necessary in the business today that it can be termed as the essence of an enterprise. Without
adequate amount of finances in the business, almost no enterprise can accomplish its objectives
completely. So this chapter deals with studying various aspects of working capital management
which are necessary to carry out the daily operations. The term working capital refers to the part
of business’s capital which is required for financing short term or current assets such as
marketable securities,cash,inventories and debtors etc. Since the funds invested in current assets
keep revolving fast and are being constantly converted in to cash, that is the reason it is known
asr circulating or revolving capital. In a nutshell, Working Capital Management performs a very
important key role and is at topmost priority for every finance manager. But all managers,
however, must keep in mind that in their pursuit to attain high liquidity, they must never lose the
sight of their basic goal which is profitability. A judicious mix of liquidity and profitability must
be achieved while managing the working capital requirement of firm.
The decisions relating to short term financing and working capital are referred to as
working capital management. These involve managing the relationship between a firm's short-
term assets and its short-term liabilities. The goal of working capital management is to ensure
that the firm is able to continue its day to dayoperations and that it has sufficient cash flow to
satisfy both short-term debt and future operational expenses.
Working Capital management is the management of assets that are current or short term in
nature.Current assets, by definition are the assets normally converted in to cash in a period of one
year. Therefore, working capital management can be considered as themanagement of market
securities receivable, cash, inventories and current liabilities. The management of current assets
AGRIMA SHRIVASTAVA | JN170006 9

is almost similar to fixed assets (only depreciation is not applied on current assets),in the sense
that in both the cases the firm analyses their effect on its profitability and risk factors.
It differs on three major aspects:
1. In managing fixed assets, time is an important factor as discounting andcompounding of time
plays an important role in capital budgeting and aalso a minor part in the management of current
assets.
2. The large holdings of current assets, especially cash equivalents or cash, may strengthen the
firm’sliquidity position, but is may reduce the profitability of the firm after sometime as ideal
cash yields nothing.
3. The level of fixed assets as well as current assets depends upon the expectedsales, but current
assets fluctuate in the short run of abusiness.
FACTORS AFFECTING WORKING CAPITAL
There is no mention of a specific method by which a company can determine working capital
requirement for a business. There are a lot of factors that affect the working capital requirement.
These factors might differ in importance from business to business and time to time. So a
thorough analysis of these factors must be undertaken before trying to estimate the amount of
working capital needed in the business. Some of the different factors are mentioned below:
1. Nature of business:Nature of business is an important factor in determining the working
capital requirements. There are a few businesses which require a very nominal amount to
be invested in fixed assets. But they require a large chunk of the total investment is in the
form of working capital. There businesses, for example, are of the trading and financing
type. There are businesses which require huge investment in fixed assets and a negligible
amount in the form of working capital.
AGRIMA SHRIVASTAVA | JN170006 10

2. Size of business: Size is usually measured in terms of scale of operations of a company.
The scale of operating cycleis directly proportional to amount of working capital needed
i.e. the larger the scale of operating cycle the large will be the amountworking capital and
vice versa.
3. Business Fluctuations:Most business experience cyclical and seasonal fluctuationsin
demand for their goods and services. These fluctuations affect the business withrespect to
working capital because during the time of boom, due to an increase in business activity
the amount of working capital requirement increases and the reverseis true in the case of
recession. Financial arrangement for seasonal working capitalrequirements are to be
made in advance.
4. Production Policy: Every business has to cope with different typesof fluctuations. Hence
it is obvious that production policy has to be planned for future wellin advance
considering the fluctuations. No two companies can have similar productionpolicy in all
respects because it depends upon the circumstances of an individualcompany.
5. Firm’s Credit Policy:The credit policy of a firm affects working capital byinfluencing
the level of book debts. Individuals also have their role in framing their credit policy. A
liberal creditpolicy will lead to more amount being committed to working capital
requirementswhereas a stern credit policy may decrease the amount of working capital
requirementappreciably but the repercussions are not simple to handle. Hence a firm
mustalways frame a rational credit policy based on the credit worthiness of the customer.
6. Availability of Credit:The terms on which a company is able to avail credit from
itssuppliers of goods and devices credit/also affects the working capital requirement. If
accompany in a position to get credit on liberal terms and in a short span of time then
Itwill be in a position to work with less amount of working capital. Hence, the amountof
working capital needed will depend upon the terms a firm is granted credit by
itscreditors.
AGRIMA SHRIVASTAVA | JN170006 11

7. Growth and Expansion activities:The working capital needs of a firm increases asit
grows in term of sale or fixed assets. There is no precise way to determine therelation
between the amount of sales and working capital requirement but one thing issure that an
increase in sales never precede, the increase in working capital but it isalways the other
way round. So in case of growth or expansion the aspect of workingcapital needs to be
planned in advance.
8. Price Level Changes:Generally increase in price level makes the commoditiesdearer.
Hence with increase in price level the working capital requirements alsoincreases. The
companies which are in a position to alter the price of thesecommodities in accordance
with the price level changes will face lesser problems ascompared to others. The changes
in price level may not affect all the firms in sameway. The reactions of all firms with
regards to price level changes will be differentfrom one other.
AGRIMA SHRIVASTAVA | JN170006 12

CHAPTER 2
COMPANY PROFILE
VOLTAS LTD
FMCD giant Voltas Ltd is the flagship company of Tata group. The Tata Group has a diverse
business portfolio and has created global brands in various sectors. Voltas has recently expanded
its business into consumer durables like washing machine, dish washer, microwave etc under a
joint venture with a Turkey based company beko which is a subsidiary of Arcelik. The company
is broadly structured into projects and products business. The projects business is divided into
Domestic Projects Group (DPG) and International Operations Business Group (IOBG).
Meanwhile, the products business is classified into Unitary Products Business Group (UPBG),
Mining & Construction Equipment Division (MCED), and Textile Machinery Division. (TMD).
The company was incorporated on 6th September, 1954 in Mumbai. It was a team effort between
Tata Sons and Volkart Brothers. The Chairman of the company is Mr. Noel N Tata and the
Managing Director and Chief Executive Officer of the company is Mr. Pradeep Bakshi. Its
shares are traded on the Bombay Stock Exchange under symbol 500575.
The Unitary Products business group manufacture products in categories including air
conditioners, air coolers, commercial refrigerators, water coolers and water dispensers. Voltas is
the largest air-conditioning brand in India. Voltas produced India's first window air conditioner
AGRIMA SHRIVASTAVA | JN170006 13

with DC-inverter-based variable-speed motors. Voltas also has an large network of repair
centres. The firm is also a major producer of evaporative coolers, which are widely used for
comfort cooling in dry and semi-dry weather.
Voltas has also entered into a Joint Venture business with Turkey based Arcelik, part of the Koc
Group making home appliances under the Beko brand. It began producing refrigerators, washing
machines and kitchen appliances under the name of Volt Beko.
BUSINESS DIVISIONS
Set up in 1954, Voltas is India's premiere engineering and air conditioning service company,
with a focus on delivering smart and best of class business solutions. With over 5000 workers
spread across India, the Middle east, Singapore and Africa, Voltas is among the top ten
companies within TATA group. The companies consolidated gross sales from operations for
2016-17 was 6073 crores, with an ROCE of
21%.Voltas manufactures and market india's no.1 brand of air conditioners, with a big lead over
manyhuge companies and local competitors. It also has a lead position in commercial
refrigeration products and has recently forayed into fresh air coolers,a new proposition in
cooling. For over 40 years , Voltas has been a well recognized engineering, procurement and
construction(EPC) Contractor in India, Middle East and South East Asia, undertaking iconic
electro mechanical projects encompassing HVAC(Heating, ventilation , air contioning) electrical
and other building utilities such as plumbing, fire fighting, and security systems. Over time, our
project execution has moved beyond malls and office complexes to ships, hospitals, air ports and
metro rails.
Voltas India business now includes rural electrification and water treatment project as well. The
company has repeatedly won many prestigious awards such as the middle east award for the
MEP contactor of the year and overall GCC project of the year.
In the field of engineering products and services, Voltas represents around 35 renowned global
manufacturers. In mining and construction business we undertake various service and sales
activities for a variety of clients. In textile machinery, the company services span an entire
spectrum form plant design and sourcing to installation, training , parts supply and maintainence.
AGRIMA SHRIVASTAVA | JN170006 14

Job Description
Phase 1:
My first task in Voltas was to make a summary of balance confirmation for Delhi and Haryana
collected from channel partners at the end of the quarter. When I joined, Balance confirmation
for Q4 was being collected. My job was to follow up with Area Sales Managers to bring the
balance confirmations from dealers, distributors and service franchisees under their region,
record the balances and claims by the dealers and report the status daily.
Phase 2
I was allotted to punch the bills of HDB Financial and Capital First and cross checked them with
our books. These financial institutions claimed the money for services like 0% finance and credit
extension to channel partners. Once the claims were checked they were further put into and the
payments were made.
Also, I verified the claims made by employees for their tours and travel expenditure.
Phase 3
The third phase was to collect the aging outstandings of Voltas. Here, my job was to retrieve the
invoice numbers and invoice amount from SAP and follow up with the key account debtors by
sending them letters and reminding them over calls to pay the outstanding amount.
Phase 4
I did field visits for the company for reconciliation of statements for the dealers. During this
period, I studied the working capital management of the company.
AGRIMA SHRIVASTAVA | JN170006 15

Job Analysis
Phase 1– Summary and collection of Balance confirmation for Quarter 4
My first task was to make a summary of balance confirmation for Delhi and Haryana collected
from channel partners at the end of the quarter. When I joined, Balance confirmation for Q4 was
being collected. My job was to follow up with Area Sales Managers to bring the balance
confirmations from dealers, distributors and service franchisees under their region and record the
balances and claims by the dealers.
Balance confirmation is a legal statement which is required to be submitted by all the channel
partners, service franchisees etc on their letter heads along with the stamp and signature, at the
end of every quarter showcasing the balances of their books and the claims that they have over
the company both in inventory as well as monetary form.
So, when the balances of the books of Voltas, did not match with the claims and balances of the
channel partners, reconciliation was done.
This reconciliation was done with the statement of accounts of channel partners available with
the company and statement of account of Voltas available with them.
I was required to match those and find the discrepancies of any kind.
The claims of inventories were cross checked by the sales return invoices, punched purchase
orders of respective channel partners and report from service franchisees and Area Sales
Managers.
There were very less discrepancies in the balance confirmation of Haryana region as a major
chunk of dealers were small and not educated. Out of 90 dealers and service franchisee in
Haryana, 39% gave blank letter heads, 20% gave the wrong balance confirmation and rest 41%
gave the correct balance confirmation out of which more than 50% channel partners had
claims.When they used to send the blank letter heads duly signed and stamped, and we put the
balances on that in accordance with our books. And hence, there were no claims from their side.
AGRIMA SHRIVASTAVA | JN170006 16

Haryana
Blank letter heads
Wrong Balance confirmation
Correct balance confirmatin
No. of Dealers: 90
There are total of 48 dealers and service franchisees in Delhi out of which 75% of channel
partners had claims, 10% gave wrong claims and only .90% gave the blank letter heads.
Delhi
Correct balance
confirmatin
Wrong Balance
confirmation
Blank letter heads
No.of dealers:48
AGRIMA SHRIVASTAVA | JN170006 17
FIG.1
FIG.2

The discrepancies arose in Haryana due to the following reasons:
 Level of education
 Lack of maintenance of records
 Casual Approach and Trust in the brand
Phase 2– Punching of bills
I was allotted to punch the bills of HDB Financial and Capital First and cross checked them with
our books. HDB financial had claimed the money for services like 0% finance and credit
extension to channel partners. Once the claims were checked they were further processed and the
payments were made.
These financial institutions sent a lot of bills in hardcopies and then we check them from our
books. We had the details in softcopies. The company got the information from channel partners
as to when the product was financed and to whom it was financed. Whether the product for
which the financing was done was ours or some other company’s product has been financed in
the name of Voltas. There were a lot of cases when the dealers to increase the sales of their
products avail the 0% financing scheme by Voltas and sell a different product to customer and
finance it in the name of Voltas. While punching, we match the dates, invoice numbers, name of
dealers etc.
Also, along with punching of the bills I verified the claims made by employees for their tours
and travel expenditure. When the employees visited Mumbai, it was mandatory for them to
reside in the company’s guest house. It was a must to attach all the bills for getting them passed.
Phase 3– Summary and collection of Outstandings
I collected and made the summary of outstandings of Voltas. Here, my job was to retrieve the
invoice numbers and invoice amount from SAP. Then, I had to check the outstanding amount on
invoices. One the outstanding amount was retrieved, I had to get those invoices and details, call
the key account debtors, ask for the payments. If they denied or delayed, I used to send them the
AGRIMA SHRIVASTAVA | JN170006 18

letters demanding the money back. If after 5-7 days of sending the letter, there was no response,
then again a warning cum reminder letter was issued on their names and after that the case was
escalated for legal action. For this entire process to go smoothly I had to rigorously follow up
with the debtors and sometimes had to go and meet them to ask for the money. The outstanding
was for more than 15 days and less than a year. The total outstanding amount was approximately
1.6 crores. Out of which I was able to bring 10% of the amount back to the organization.
Phase 4- Field visits
I also did the field visits as a dummy customer and as an intern for reconciliation of the
statements.
As a dummy customer I visited the 5-6 big stores in Laxmi nagar and found out that there was a
de-sale for Voltas. As Voltas is a brand that falls in the medium range together with a brand
name of Tata , the product has pull and in store demonstrators did not need to push that product
to a customer. Moreover, there were no ISDs who were trying to push Voltas to the customers.
Rather, Panasonic & Godrej were promoted with arguments for best technology, 18 months
warranty, copper body, and free installation. Voltas was demoted in most of the stores by
claiming that the body is of aluminium, high installation charges, 6 months warranty etc.
As an intern, I went to Gurugram along with my boss to reconcile the statements of dealers.
Generally, the marketing and sales people, to complete their numbers do false commitments
about the prices of products to the dealers. So when the statement of account of that particular
dealer is made at Voltas, it differs from statement of account of Voltas in his books. In these
cases, the dealers do not submit their balance confirmation on time or else if they submit, their
balance doesn’t match with the books of the company. Hence, there is a need for reconciliation
of statements. A mutual decision is taken over rates at which the ASM has sold the inventory to
the dealers. If the amount matches, and the dealer agrees on a mutual cost, it gets settled.
Otherwise , we issue a credit note in the name of the dealer for which he can purchase the
inventory in the coming time.
AGRIMA SHRIVASTAVA | JN170006 19

CHAPTER 4
DATA ANALYSIS AND INTERPRETATIONS
Relationship between Receivables and Payables (Rs. in crores)
Year Trade Payables Trade Receivables
2017-18 2,114.50 1,277.05
2016-17 1792.15 1187.97
2015-16 1792.15 1017.92
2014-15 1456.39 1149.58
2013-14 1,461.03 1,059.06
2017-18 2016-17 2015-16 2014-15 2013-14
0.00
500.00
1,000.00
1,500.00
2,000.00
2,500.00
Trade Payables
Trade Receivables
AGRIMA SHRIVASTAVA | JN170006 20
FIG-3

INTERPRETATION:
As per fig-3 the relationship between receivables and payables here doesn’t look
satisfactory. Always receivables must be much more than payables. For the entire five years,
receivables are less than payables. But the ideal case is just opposite. The receivables should be
much more than payables. For effective working capital company must always count back debtor
days and count forward creditor days. Company must always pull creditor days up to 90 days
and customers days must not be extended above 60 days. Therefore company can maintain
liquidity position.
Relationship between Short term borrowings and Short term loans & advances
(Rs. In crores)
Year Short Term Borrowings Short Term Loans And Advances
2017-18 27.82 3.39
2016-17 69.08 1.53
2015-16 119.49 142.68
2014-15 53.06 146.91
2013-14 193.38 173.03
2017-18 2016-17 2015-16 2014-15 2013-14
0
50
100
150
200
250
Short Term Borrowings
Short Term Loans And Advances
AGRIMA SHRIVASTAVA | JN170006 21
FIG-4

INTERPRETATION:
As per the above table and fig-4 we can see that the relationship between
short term borrowings and loans & advances. In the year 2013-14, borrowings were a little above
of advances. The short term loans and advances were higher than the short term loans in the
period of 2015-16 and 2014-15 but in 2016-17 and 2017-18 the short term loans and advances
have drastically fallen. There may be cash crunch in the system and this may be the company’s
part of strategy to invest the amount somewhere else.
Relationship between Current Assets and Current Liabilities
(Rs. in Crore)
Year Current Liabilities Current Assets
2017-18 2,887.36 3,762.88
2016-17 2,533.36 3,075.81
2015-16 2,261.16 3,045.19
2014-15 2,296.11 3,084.21
2013-14 2,405.71 3,343.98
Fig.5 Relationship between Current Assets and Current Liabilities
2017-18 2016-17 2015-16 2014-15 2013-14
0.00
500.00
1,000.00
1,500.00
2,000.00
2,500.00
3,000.00
3,500.00
4,000.00
Current Liabilities
Current Assets
AGRIMA SHRIVASTAVA | JN170006 22
FIG-5

INTERPRETATION:
On the basis of fig-5 we can find out that the average company’s working
capital ratio is quite good. The relationship between current assets and current liabilities is good.
Average current assets are higher than the average current liabilities. Average current ratio is
more than 1. This ratio is not upto the industry standards but as long as it is exceeding the entire
current liabilities, it can meet its regular operational expenses of the business. It can easily get
funds from banks and other financial institutions, if needs be.
Liquidity and Adequacy of Cash: One of the most important jobs of the finance manager is to
maintain sufficient liquidity to enable the firm to pay off its obligations when they fall due. To
test a firm’s liquidity and solvency we commonly use current and quick ratios. Traditionally 2:1
current ratio and 1:1 quick ratio are taken as satisfactory standards for the purpose. The former
indicates the extent of the soundness of the current financial position of a firm and the degree of
safety provided to the creditors, the later signifies the ability of a firm to settle all its current
obligations on a particular date.
Year Current Ratio Quick Ratio
2017-18 1.30 1.05
2016-17 1.21 0.91
2015-16 1.35 1.08
2014-15 1.34 1.04
2013-14 1.39 1.09
AGRIMA SHRIVASTAVA | JN170006 23

2017-18 2016-17 2015-16 2014-15 2013-14
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
Current Ratio
Quick Ratio
Current Ratio is used to assess short term financial position of business concern. It isindicator of
firm’s ability to meet its short term obligations. Current Ratio represents amargin of safety i.e. a
“cushion” of protection for creditors.Quick Ratio also tests short term liquidity of the firm. It is a
measurement of the firm’s ability to convert its current assets quickly into cash in order to meet
currentliabilities.
The analysisfrom the fig-7 shows that the company’s current and quick ratios are on the higher
side when compared with the standards. The current and quick ratio of the company prevails
when company takes less short term loans i.e. when the company is in a position to arrange the
cash as and when needed, which in turn is the result of an increase in profit. Here, these ratios are
higher than standards . Moreover, the strategic move of the company to reduce short term
advances drastically might be because it wanted to lower its current ratio. This is because the
higher current ratio is also not good. It depicts that the funds are not utilized efficiently for the
growth purposes. Instead they are left idle, and there is excessive liquidity is the company which
is not being effectively utilized.
The expansion and growth plans through joint venture might be one of the reasons of lowering
down the short term advances.
AGRIMA SHRIVASTAVA | JN170006 24
FIG-7

Control of Cash: One of the major objectives of cash management from the stand point of
increasing return on investment is to economize on the cash holding without impairing the
overall liquidity requirements of the firms. This is possible by effecting tighter controls over cash
flows. The following ratios have applied to assess the efficiency of cash control:
 Cash to Current Asset Ratio
 Cash Turnover Ratio
 Cash to Current Liabilities Ratio
Year
Cash to Current
Asset Cash Turnover
Ratio
Cash to Current
Liabilities
2017-18 0.053 0.034 0.069
2016-17 0.069 0.039 0.084
2015-16 0.043 0.025 0.058
2014-15 0.0481 0.028 0.064
2013-14 0.0623 0.040 0.086
2017-18 2016-17 2015-16 2014-15 2013-14
0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
Cash to Current Asset
Cash to Current Asset
AGRIMA SHRIVASTAVA | JN170006 25
FIG-8

2017-18 2016-17 2015-16 2014-15 2013-14
0
0.005
0.01
0.015
0.02
0.025
0.03
0.035
0.04
0.045
CASH TURNOVER
CASH TURNOVER
2017-18 2016-17 2015-16 2014-15 2013-14
0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
0.1
Cash to Current liabilities
Cash to Current liabilities
Conclusion:
 It can be inferred from the above table and fig-8 the company’s cash to current asset ratio
is on a lower side which ultimately shows that company have a very low cash and cash
AGRIMA SHRIVASTAVA | JN170006 26
FIG-9
FIG-10

equivalents. Which means that the current asset comprises of very little portion of highly
liquid assets which are its cash and cash equivalents.
 In the above table and fig-9, we see that the cash turnover of the company was highest in
the year 2013-14. The company was most efficient in replenishing its cash and cash
equivalents through sales in 2013-14. After that the ratio has been reducing for two
consecutive year and it increased in the year 2016-17 and went down again. There is no
pattern in the ratio and it might have gone up and down for a number of reasons.
 As per fig-10, Cash to Current liability ratio shows the cash balance maintained by the
company at a certain point of time for meeting its current liabilities. The lesser the ratio,
proves the efficiency of the company for maintaining liquidity at a minimum level of
cash balance.
Receivables Management:
Years Trade Receivables Long Term Loans And
Advances
2017-18 1,277.05 0.50
2016-17 1,187.97 0.72
2015-16 1,017.92 120.02
2014-15 1,149.58 134.87
2013-14 1,059.06 146.23
AGRIMA SHRIVASTAVA | JN170006 27

2017-18 2016-17 2015-16 2014-15 2013-14
0.00
200.00
400.00
600.00
800.00
1,000.00
1,200.00
1,400.00
Trade Receivables
Long Term Loans And Advances
Conclusion:According to the fig -15,Long term loans and advances were decreasing at a very
low rate in the early years whereas they have decreased long term loans and advances drastically
in 2016-17 and 2017-18 to a negligible amount. Both long and short term advances have been
decreased drastically which is a strategic move in order to invest in Joint Venture of Voltas with
Arcelik. On the other hand, trade receivables are mostly increasing with a decreasing rate for the
duration of study except for the year 2015-16. There is no specific reason that is coming out for
this exception. Average collection period was the lowest in this year, this might be the reason
that receivables were lowest as the company collected the outstanding efficiently.
Average Collection Period and Average Payable Period:
Year Average Collection Period Average Payable Period
2017-18 79.64030572 131.8659617
2016-17 79.74737078 120.3054375
2015-16 70.97379721 124.9564707
2014-15 80.63974186 103.5804948
AGRIMA SHRIVASTAVA | JN170006 28
FIG-11

2013-14 74.26 102.4475414
2017-18 2016-17 2015-16 2014-15 2013-14
0
20
40
60
80
100
120
140
Average Collection Period
Average Payable Period
Conclusion:As per fig-16, the average collection period of the company is much lower than the
average payable period. This goes to show that Voltas avails a much higher credit period than it
actually allows. It gives the leverage to firm as it collects the outstanding money early and make
the payments much after receipts.
Account Receivable Turnover and Account Payable Turnover
Year ACCOUNT RECEIVABLE
TURNOVER
ACCOUNTS PAYABLE
TURNOVER
INVENTORY TURNOVER
2018 4.04 1.29 26.75
2017 4.10 1.69 -17.73
2016 4.16 1.91 56.58
2015 3.84 1.87 173.38
2014 3.92 1.94 26.81
AGRIMA SHRIVASTAVA | JN170006 29
FIG-12

Mar 18 17-Mar 16-Mar 15-Mar 14-Mar
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
ACCOUNT RECEIVABLE TURNOVER
ACCOUNTS PAYABLE TURNOVER
Account Receivable Turnover shows that in five years Voltas converts it sales to account
receivable on an average 4 times a year whereas the company pays to its creditors on an average
of 1.5 times of sales. The gap is considered to be very good and is apt for companies.
Operating Cycle and Cash Conversion Cycle
Year 18-Mar 17-Mar 16-Mar 15-Mar 14-Mar
Cash conversion cycle -175.434 -145.4 -94.8 -96.355 -80.0538
Operating cycle 102.3842 67.38088 92.81942 95.7522 105.0894
AGRIMA SHRIVASTAVA | JN170006 30
Fig. 13

14-Mar 15-Mar 16-Mar 17-Mar 18-Mar
-200
-150
-100
-50
0
50
100
150
CASH CONVERSION CYCLE
OPERATING CYCLE
Interpretation:
The operating cycle is the summation of days sales outstanding and days sales inventory.
Whereas, the cash conversion cycle is the difference between operating cycle and days payable
outstanding. Voltas throughout has a negative cash conversion cycle. Since 2014, it is on an
average growing. In 2018, its cash conversion cycle is -175 days which means it collects cash
from its customer 175 days before it pays to its supplier. This is fantastic as many great
companies do have such negative cash conversion cycle. Companies like Apple have negative
cash conversion cycle which means that their suppliers finance their current assets and also
provide them with additional cash which it can invest and enjoy the interest benefits.
CHAPTER 5
FINDINGS
The study conducted on working capital management of Voltas Ltd. shows the evaluation of
management performance in this regard. Major findings thereon are narrated as under:
AGRIMA SHRIVASTAVA | JN170006 31
Fig 14

 Due to attrition of employees, the company suffers losses in terms of late collection and
sometimes rising bad debts.
 There is a horizontal communication gap in the organization due to which many Area
Sales Manager and dealers remain unaware about the offers, discounts and latest prices of
inventory due to which the sales and the relationships with dealers get affected.
 The company doesn’t treat its dealers equally, as even after qualifying the desired
criteria, some of the dealers are not given the incentives and trips (Dealers meet to Dubai,
Singapore etc), which in turn upsets the dealers and can affect the business in the long
run.
 A lot of paper work is still preferred over computerization as auditors demand the
hardcopies of Balance Confirmation and many other documents.
 The company’s operational management is good as during the fiveyear period of study,
there is overall improvement of sales and profit of the company. Also, the expenses have
been kept in control so as to increase profit margin.
 The accounts payable turnover ratio of the company shows that company is able to avail
the credit period facility effectively as the average payment period is much more than
average collection period .
 The Days Sales Outstanding and Days sales Inventory are very efficiently managed.
 Cash conversion cycle is negative for all the five years and has kept increasing since
2014, which represents wonderful management of receivables, payables and inventory.
SUGGESTIONS
Keeping in view of the job done and my findings mentioned above, the following suggestions
shall be helpful in increasing the efficiency inworking capital management:
General Suggestions:
AGRIMA SHRIVASTAVA | JN170006 32

 The company should start accepting Balance Confirmation through mails. The work of
employees get affected if hard copy of balance confirmation is not produced timely.
 Updated prices of inventory should be regularly communicated through mails to every
Area sales manager who should further send it to channel partners of their respective
territories.
 Effective horizontal communication to educate channel partners about offers and discount
on early bird payments.
Debtors & Receivables:
 Company must keep a strong follow up about key accounts outstanding amount on a
weekly basis.
 Company mustcontinue to count back debtor days as long as possible.
Creditors & Payables:
 Make an effective bills payable policy.
 Company has a high average payable period. It musttry to make payment on due dates to
avoid interest expense.
Inventory:
 Company must ensure an on time delivery mechanism to ensure that there are no delays
in the orders and hence inventory cost will be reduced.
Liquidity:
AGRIMA SHRIVASTAVA | JN170006 33

 Company has maintained liquidity in terms of cash and cash equivalents but decreased
the short term loans and advances tremendously which might affect the company in long
run.
Cash Conversion Cycle:
 Since 5 years receivables days are less than payables days which must be maintained in
the long term.
LEARNING OUTCOMES
 I have learnt the functioning and processes of finance department in FMCD sector
 I have learnt to reconcile the statements of dealers and channel partners.
 I have understood why the differences of balances occur in the statements of the company
and the channel partners.
 I have understood the procedure of the company to deal with outstanding, when can they
take legal actions and the supporting documents required to file a legal case.
AGRIMA SHRIVASTAVA | JN170006 34

CONCLUSION
The company is doing fairly well in terms of growth and development. From 2003 Big Bang
strategy, it has taken multiple lessons. It has transformed itself from an engineering to a
marketing company. A little bit here and there in operational activities is needed to be looked
upon. The employees have time and again proved that they are the biggest asset of the company.
AGRIMA SHRIVASTAVA | JN170006 35

Liquidity is acharacteristic that signifies the capability to meet financial obligations of the
company whenever required. The importance of liquidity to fulfill the day to day operations
and urgent payment to suppliers. A firm must maintain adequate level of working capital to meet
the day to day operations and maintain business operations. The effectiveness of working capital
requires both medium-term planning and immediate reactions to the fast changes taking in
the present business environment. The effectiveness of working capital depends on all current
assets and current liabilities and hence short term advances should be taken into consideration.
For an effective working capital company needs to take care of its current assets and current
liabilities i.e. Receivables, Payables, Inventory, liquidity etc.
Voltas must count back credit days of customers by strong follow up about outstanding amount .
Company must settle outstanding amount of customers timely to avoid the conversion into bad
debts.
BIBLIOGRAPHY
BOOKS
• Khan M.Y. and Jain P.K., Financial Management
• Dalal Street Journal
• Annual Report – Voltas
AGRIMA SHRIVASTAVA | JN170006 36

• Economic Times
• Seth, A.K., (2003); International Financial Management
• Vij, Madhu, (2002); Multinational Financial Management
• Apte, P.G., (2003); International Financial Management
• Majumdar, Bhaskar, (2002); Concept and Practice of Global Finance
• Global Trade And Investment Finance – Lawrence Tuller
WEBSITE:
 http://www.voltas.com/
 https://www.moneycontrol.com/financials/voltas/balance-sheetVI/V#V
 http://www.voltas.com/investor_info/images/2017/Voltas_Annual_Report_2016-17.pdf
 https://www.moneycontrol.com/financials/voltas/financial-graphs/operating-profit-
ebitda-percentage/V
AGRIMA SHRIVASTAVA | JN170006 37