Project Report

(Submitted for the Degree of B.Com Honours in Accounting & Finance under the University
of Calcutta)

WORKING CAPITAL MANAGEMENT

An Analysis Of Hindustan Unilever Limited

Submitted by
Name of the Candidate : Abhishek Kumar Singh

Registration No : 126-1111-0019-19
CU Roll No : 191126-21-0029
College Roll No : 09
Name of the College: Umeschandra College

Supervised by
Name of the Supervisor: Dr. Gopa Ghosh
Name of the College: Umeschandra College

Month & Year of Submission

April 2022

UNIVERSITY OF CALCUTTA
Annexure- IA

SUPERVISOR’S CERTIFICATE

This is to certify that MR. ABHISHEK KUMAR SINGH a student of

B.Com. Honours in Accounting & Finance of UMESCHANDRA COLLEGE,
under the University of Calcutta has worked under my supervision and
guidance for his/her Project Work and prepared a Project Report with the title
“WORKING CAPITAL MANAGEMENT AN ANALYSIS OF
HINDUSTAN UNILEVER LIMITED” which he is submitting, is his genuine
and original work to the best of my knowledge.

Place : KOLKATA Signature:

Date:
Name: Dr. GOPA GHOSH

Designation: PROFESSOR

Name of the College: UMESCHANDRA COLLEGE

Annexure-IB

STUDENT’S DECLARATION

I hereby declare that the Project Work with the title “WORKING CAPITAL
MANAGEMENT AN ANALYSIS OF HINDUSTAN UNILEVER
LIMITED” submitted by me for the partial fulfilment of the degree of B.Com.
Honours in Accounting & Finance under the University of Calcutta is my original
work and has not been submitted earlier to any other University /Institution for the
fulfilment of the requirement for any course of study.

I also declare that no chapter of this manuscript in whole or in part has been
incorporated in this report from any earlier work done by others or by me.
However, extracts of any literature which has been used for this report has been
duly acknowledged providing details of such literature in the references.

Place: KOLKATA. Signature:

Date:
Name: MR. ABHISHEK KUMAR SINGH

CU Registration No.: 126-1111-0019-19

CU Roll No.: 191126-21-0029

College Roll No : 09
 ACKNOWLEDGEMENT

It is my immense pleasure to present this project on “Working Capital

Management on Finance Industries.” I would hereby like to thank our respected
principal, Dr. Md. TOFAZZAL HAQUE for giving us this opportunity to
prepare a project report on the suggested topic and guided us through the various
stages of the project. I am very thankful to my supervisor Dr. GOPA GHOSH
for his full support in completing this project work. I gratefully acknowledge the
support of my family and friends and would also like to thank all the people who
participated in the survey by filling up the questionnaire and helped me to carry
out the research work.
 EXECUTIVE SUMMARY
The project undertaken is on ― “WORKING CAPITAL MANAGEMENT IN
HINDUSTAN UNILEVER”. It describes about how the company manages its working
capital and the various steps that are required in the management of working capital.

An insight view of the project will encompass – what it is all about, what it aims to achieve,
what is its purpose and scope, the various methods used for collecting data and their sources,
including literature survey done, further specifying the limitations of our study and in the last,
drawing inferences from the learning so far.

Hindustan Unilever Limited, founded in 1933 as Lever Brothers India Limited and, in 1956,
became known as Hindustan Lever Limited is recognized as one of the largest Fast Moving
Consumer Goods Company. With over 35 brands spanning 20 distinct categories such as soaps,
detergents, shampoos, skin care, toothpastes, deodorants, cosmetics, tea, coffee, packaged
foods, ice cream, and water purifiers, the Company is a part of the everyday life of millions of
consumers across India. Its portfolio includes leading household brands such as Lux, Lifebuoy,
Surf Excel, Rin, Wheel, Fair & Lovely, Pond’s, Vaseline, Lakme, Dove, Clinic Plus, Sunsilk,
Pepsodent, Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality Wall’s and Pureit.

The working capital management refers to the management of working capital, or precisely to
the management of current assets. A firm’s working capital consists of its investments in
current assets, which includes short-term assets—cash and bank balance, inventories,
receivable and marketable securities.

This project tries to evaluate how the management of working capital is done in HUL through
inventory ratios, working capital ratios, trends, computation of cash, inventory and working
capital, and short term financing.
 INDEX
Serial Chapter Name Page
No. No.
INTRODUCTION-1 1-4

1.1 Background of Study 2

1.2 Needs of the Study 2
1.3 Literature Review 2-3
1.4 Overall Objectives of the Study 3
1.5 Methodology 4
1.6 Limitations of Study 4
1.7 Chapter Planning 4
CONCEPTUAL FRAMEWORK-2 5-8

2.1 Company Profile 6

2.2 National Scenario 6-7
2.3 International Scenario 7-8
ANALYSIS AND FINDINGS-3 9-14

3.1 Research Design 10

3.2 Data Analysis 10-11
3.3 Findings 12-14
CONCLUSION & RECOMMENDATIONS-4 15-17

4.1 Overall Conclusion 16

4.2 Hypothesis 17
4.3 Recommendations 17
5 References 18
CHAPTER-1

INTRODUCTION

1
 BACKGROUND OF STUDY
Whatever may be the organization, working capital plays an important role, as the company
needs capital for its day to day expenditure. Cash is the lifeline of a company. If this lifeline
deteriorates, so does the company's ability to fund operations, reinvest and meet capital
requirements and payments. Understanding a company's cash flow health is essential to making
investment decisions. A good way to judge a company's cash flow prospects is to look at its
working capital management (WCM). Thousands of companies fail each year due to poor
working capital management practices. Entrepreneurs often don't account for short term
disruptions to cash flow and are forced to close their operations.
In simple term, working capital is an excess of current assets over the current liabilities. Good
working capital management reveals higher returns of current assets than the current liabilities
to maintain a steady liquidity position of a company Otherwise, working capital is a
requirement of funds to meet the day to day working expenses. So, a proper way of
management of working capital is highly essential to ensure a dynamic stability of the
financial position of an organization.
Working capital management deals with maintaining the levels of working capital to optimum,
because if a concern has inadequate opportunities and if the working capital is more than
required then the concern will lose money in the form of interest on the blocked funds.
Therefore, working capital management plays a very important role in the profitability of a
company. And also due to heavy competitions among different organization’s it is now
compulsory to look after working capital.
NEED FOR THE STUDY
Working capital Management is referred as short term Financial Management which is in the
terms of the timing of cash. The need of working capital management is to:
a. Ensure that a firm is able to continue its operations and that it has sufficient ability to satisfy
both maturing short-term debt and upcoming operational expenses.
b. Maintain the optimum balance of each of the working capital components.
c. Increase the Profitability of the company.
d. Highlight the necessity of managing current assets and current liabilities.

LITERATURE REVIEW
The purpose of this topic is to present a review of literature relating to the working capital
management. The following are the literature review by different authors and different research
scholars.
Pass C.L., Pike R.H1(1984), studied that over the past 40 years major theoretical
developments have occurred in the areas of longer-term investment and financial decision
making. Many of these new concepts and the related techniques are now being employed
successfully in industrial practice. By contrast, far less attention has been paid to the area of
short-term finance, in particular that of working capital management.
Herzfeld B2(1990), studied that “Cash is king”--so say the money managers who share the
responsibility of running this country's businesses. And with banks demanding more from their
prospective borrowers, greater emphasis has been placed on those accountable for so-called
working capital management.

2
Samilogluf and Demirgunes K3(2008), studied that the effect of working capital management
on firm profitability. In accordance with this aim, to consider statistically significant
relationships between firm profitability and the components of cash conversion cycle at length,
a sample consisting of Istanbul Stock Exchange (ISE) listed.
Appuhami, Ranjith B4 (2008), studied impact of firms' capital expenditure on their working
capital management. The author used the data collected from listed companies in the Thailand
Stock Exchange. The study used Schulman and Cox's (1985) Net Liquidity Balance and
Working Capital Requirement as a proxy for working capital measurement and developed
multiple regression models. with working capital management.
ThachappillyG5(2009),“Working Capital Management Manages Flow of Funds”,(2009)
describes that Working capital is the cash needed to carry on operations during the cash
conversion cycle, i.e. the days from paying for raw materials to collecting cash from customers.
Raw materials and operating supplies must be bought and stored to ensure uninterrupted
production. Wages, salaries, utility charges and other incidentals.
Dubey R6 (2008), studied The working capital in a firm generally arises out of four basic
factors like sales volume, technological changes, seasonal , cyclical changes and policies of the
firm. The strength of the firm is dependent on the working capital as discussed earlier but this
working capital is itself dependent on the level of sales volume of the firm.
McClure B7 (2007), “Working Capital Works” describes that Cash is the lifeline of a company.
If this lifeline deteriorates, so does the company's ability to fund operations, reinvest and meet
capital requirements and payments. Understanding a company's cash flow health is essential to
making investment decisions.

OVERALL OBJECTIVES OF THE PROJECT

The objectives of this project were mainly to study the inventory, cash and receivable at
HINDUSTAN UNILEVER LIMITED, but there are some more as under-
The main purpose of our study is to render a better understanding of the concept
―Working Capital Management.
To understand the planning and management of working capital at HUL.
To measure the financial soundness of the company by analyzing various ratios.
To suggest ways for better management and control of working capital at the concern.
To study the various components of working capital.
Primary Objective:
Determine Operating Cycle and Cash Cycle.
Evaluation of Cash requirements for working capital.
Analyzing and controlling of accounts receivables.
Monitoring and Controlling of Inventories.
Analysis of Working Capital Leverage.
Secondary Objective:
Analyze the ratios which affect the Working capital Requirements of the company
and estimate the projections for the year 2007.
Analysis of working capital components.

3
 METHODOLOGY
The methodology involved for data collection was mainly through secondary data and was
obtained from the company’s financial statements and the company’s website. The Balance
Sheets and the Profit & Loss Accounts for the last 5 years was the source based on which
forecasting was done which was from the company’s archives. Extreme care was taken in
collecting the data from the financial statements and only relevant data was taken for the
analysis based on.
Source Of Data:
Both primary and secondary sources of data have been used in the project.
Primary Data:
Primary data have been collected from the organization. These data were obtained from the
interactions with the financial executives in the company. These are in the form of verbal
reports, computer reports, etc.
Secondary Data:
Secondary data are drawn from annual reports, records, sales report, Purchase order and
Inventory Report.

Tools Used For Analysis:

Financial Ratio Analysis
Trend Analysis
Time Series Analysis

LIMITATIONS OF STUDY
The following are the limitations of the study:-
The topic working capital management is itself a very vast topic yet very important also
due to time restraints it was not possible to study in depth in get knowledge what
practices are followed at HUL The scope of the study was limited to HINDUSTAN
UNILEVER LIMITED.
Availability of the financial data was very limited which is not disclosed due to
sensitive nature for the company.

CHAPTER PLANNING
In the project, we take into consideration
The Annual report of various years.
The Profit and Loss Statement of various years.
Detailed description and data regarding cash discounts, collection effort, terms of
payment of customers, credit policy variables, interest rates, credit risk, average
collection period, credit period.
Information about the raw materials, their annual usage and the price of each raw
material.
Information about the sources of finance and their Investment options.

4
 CHAPTER-2
CONCEPTUAL FRAMEWORK

5
 COMPANY PROFILE
HUL Limited is India’s foremost manufacturer of cement and ready mix concrete with a
countrywide network of factories and marketing offices. Established in 1936, HUL has been a
pioneer and trend-setter in cement and concrete technology. HUL brand name is synonymous
with cement and enjoys a high level of equity in the Indian market. Among the first companies
in India to include commitment to environment protection as a corporate objective, HUL has
won several prizes and accolades for environment friendly measures taken at its plants and
mines. The company has also been felicitated for its acts of good corporate citizenship.
HUL has a unique track record of innovative research, product development and specialized
consultancy services. It is an important benchmark for the cement industry in respect of its
production, marketing and personnel management processes. Sustainable development is
recognized by us as a process of development that "meets the needs of the present without
compromising the ability of future generations to meet their own needs". We believe this
constitutes balancing the Triple Bottom Line – defined as the achievement of three
interdependent and mutually reinforcing goals of economic development, social development,
and environmental protection.

NATIONAL SCENARIO
Hindustan Unilever Limited (HUL) is India's one of the largest fast moving consumer goods
company owned by the European company Unilever. The Anglo-Dutch company Unilever
owns a 52% majority stake. HUL was formed in 1933 as Lever Brothers India Limited and
came into being in 1956 as Hindustan Lever Limited through a merger of Lever Brothers,
Hindustan Vanaspati Mfg. Co. Ltd. and United Traders Ltd. The company was renamed in June
2007 as “Hindustan Unilever Limited”. It is headquartered in Mumbai, India and has employee
strength of over 15,000 employees and contributes to indirect employment of over 52,000
people. Its products have been sold in India since 1888.
HUL is the market leader in Indian consumer products touching the lives of two out of three
Indians with over 20 distinct categories in Home and Personal Care products and foods &
beverages. Endow of the company with a scale of combined volumes of about 4 million tones
and sales of Rs.10, 000 crores. HUL is also one of the countries largest exporters. It has been
recognized as a golden super star Trading House by the Government of India. Sixteen of HUL’s

6
brands are featured in the ACNielsen Brand Equity list of 100 Most Trusted Brands Annual
Survey (2008). According to Brand Equity, HUL has the largest number of brands in the Most
Trusted Brands List. It has consistently had the largest number of brands in the Top 50, and in
the Top 10 (with 4 brands).The company owns 35 major Indian brands and has a distribution
channel of 6.3 million retail outlets reaching the entire urban population and about 250 million
rural consumers. Its brands include soaps, detergents, shampoos, skin care, toothpastes,
deodorants, cosmetics, tea, coffee, packaged foods, ice cream, and water purifiers. Its portfolio
also includes leading household brands such as Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair &
Lovely, Pond’s, Vaseline, Lakme, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe,
Brooke Bond, Bru, Knorr, Kissan, Kwality Wall’s and Pureit.
Hindustan Unilever Research Centre (HLRC) was set up in 1958 to incorporate latest
technology in all its operations, now has facilities in Mumbai and Bangalore. HUL is focusing
on health & hygiene education, women empowerment and water management. It is also
involved in education and rehabilitation of special or underprivileged children, care for the
destitute and HIV positive and rural development.

INTERNATIONAL SCENARIO
HUL exports offer high level of service with flexibility and responsiveness throughout the
chain supply. It has a dedicated organisation structure to support this endeavor and this has
helped in growth of these businesses in particular. Intrinsic cost competitiveness in the end to
end supply chain with appropriate technology and competitive capital investment operations
while delivery best in class quality enables HUL to position itself as akey sourcing hub for
Unilever and also become a preferred partner for Global customers in categories we operate.
HUL’s key focus in the export business is on two broad categories. It is asourcing base for
Unilever brands in Home and Personal Care(HPC)and Food and Beverages(F&B)for supplies
to other unilever companies. It also focuses on becoming a preferred supplier to both non-
Unilever and Unilever clients in three categories in which India as a country, has competitive
advantage –Branded Rice, Marine Products and Castor and its Derivatives. HUL enjoys
international recognition within Unilever and outside for its quality, reliability and speed of
customer service.
HUL’s Exports geography comprises, at present, countries in Europe, Asia, Middle East,
Africa, Australia, and North america etc.

Classification Of Working Capital

7
Working Capital Cycle
The duration of time required for completing the following sequence of an eventin case of a
manufacturing firm is called as operating cycle.
Conversion of cash into raw materials.
Conversion of raw material into work in progress.
Conversion of work in progress into finished goods.
Conversion of finished goods into debtor and bills receivable through sale.
Conversion of debtor and bills receivable into cash.
Factors Affecting Working Capital Requirements
The following are the factors which generally influence the working capital requirement of the
firm:
Nature of business
Scale of operations
Manufacturing cycle
Rate of growth of business
Price level changes
Business fluctuations
Production policy

Common Policies And Techniques For The Management Of Working Capital

Cash management: identify the optimal balance. This allows a business to meet day
to day expenses and payments, but reduces cash holding cost;
Inventory management: identify the optimal level of inventory. This allows a business
continue uninterrupted its production but reduces the investment in raw materials,
minimizes reordering cost and hence increase cash flow;
Debtors management: identify the appropriate credit policy. This allows a business to
use credit terms which will attract more customers but the impact on cash flow will be
offset by increased revenues;
Short term financing: identify the appropriate source of financing, by choosing
between supplier credit (ideal for inventory financing), bank loan or factoring (accounts
receivable financing), or create a mix of financing.

A company can be endowed with assets and profitability but short of liquidity if these assets
cannot readily be converted into cash.

8
 CHAPTER-3

PRESENTATION OF DATA
ANALYSIS AND FINDINGS

9
 RESEARCH DESIGN

Hindustan Unilever Limited (HUL) is India's one of the largest fast moving consumer goods
company owned by the European company Unilever.
HUL is the market leader in Indian consumer products touching the lives of two out of three
Indians with over 20 distinct categories in Home and Personal Care products and foods &
beverages. Endow of the company with a scale of combined volumes of about 4 million tones
and sales of Rs.10, 000 crores. HUL is also one of the countries largest exporters. It has been
recognized as a golden super star Trading House by the Government of India. Sixteen of HUL’s
brands are featured in the ACNielsen Brand Equity list of 100 Most Trusted Brands Annual
Survey (2008). According to Brand Equity, HUL has the largest number of brands in the Most
Trusted Brands List. It has consistently had the largest number of brands in the Top 50, and in
the Top 10 (with 4 brands).The company owns 35 major Indian brands and has a distribution
channel of 6.3 million retail outlets reaching the entire urban population and about 250 million
rural consumers. Its brands include soaps, detergents, shampoos, skin care, toothpastes,
deodorants, cosmetics, tea, coffee, packaged foods, ice cream, and water purifiers. Its portfolio
also includes leading household brands such as Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair &
Lovely, Pond’s, Vaseline, Lakme, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe,
Brooke Bond, Bru, Knorr, Kissan, Kwality Wall’s and Pureit.
HUL supplies high quality goods and services to meet the daily needs of consumers and
industry. In doing so the company is committed to exhibit the highest standards of corporate
behaviour towards its consumers, employees, the societies and the world where we live. HUL
recognizes its joint responsibility with the government and the public to protect environment
and is committed to regulate all its activities so as to follow best practicable means for
minimizing adverse environmental impact arising out of its operations.

DATA ANALYSIS
In order to analyze the data the techniques of financial statement analysis like comparative
statements, ratio analysis etc. has been done.

Ratio Analysis
It is possible to look at the financial health of a corporation by looking at some of its key
financial ratios. Ratio analysis can also be used as a diagnostic tool to find the sources
of financial trouble at a company.

10
An Explanation of the Liquidity Ratio
Current Ratio: The current ratio is a financial ratio that measures whether or not a firm has
enough resources to pay its debts over the next 12 months. It compares a firm's current assets
to its current liabilities. It is expressed as follows:
Current Assets
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑅𝑎𝑡𝑖𝑜 =
Current Liabilities
Quick Ratio: Acid-test or quick ratio or liquid ratio measures the ability of a company to use
its near cash or quick assets to extinguish or retire its current liabilities immediately. Quick
assets include those current assets that presumably can be quickly converted to cash at close to
their book values.
Current Assets − 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
𝐴𝑐𝑖𝑑 𝑇𝑒𝑠𝑡 𝑅𝑎𝑡𝑖𝑜 =
Currnet Liabilities
An Explanation Of The Operating Working Capital Ratio
The three turnover (or Day's) ratios can be used to calculate the cash conversion cycle. That
is, the average amount of time it takes to convert cash into inventory, convert the inventory
into a receivable, and then converts the receivable back into cash.

Cash Conversion Cycle

The cash conversion cycle is simply the length of time it takes to turn cash into inventory,
inventory into an account receivable, and convert the account receivable back into cash. In
order to calculate the cash conversion cycle, one needs to be able to calculate the day's accounts
payable, inventory, and accounts receivable ratios "Working Capital Management Ratios."
The following is a picture of the cash conversion cycle

If a firm pays cash for all of its inventory purchases, calculating the cash conversion cycle is
easy.
Day's Inventory + Day's Receivables = Cash Conversion Cycle

11
 FINDINGS
A) Working Capital Position Analysis Of HUL
Particulars March '17 March '18 March '19 March '20 March '21
Current Assets
Current Investment 3,519 2,855 2,693 1,248 2,683
Inventories 2,362 2,359 2,422 2,636 3,383
Trade Receivables 928 1,147 1,673 1,046 1,648
Cash & Cash 1,671 3,373 3,688 5,017 4,321
Equivalents
Short Term Loans & 673 657 537 648 486
Advances
Other Current Assets 885 1,405 898 1,961 1,605
Total 10,038 11,796 11,911 12,556 14,126
Less
Current Liabilities
Trade Payable 6,006 7,013 7,070 7,399 8,627
Other Current Liabilities 809 972 782 1,287 1,723
Short Term Provisions 387 651 501 418 491
Total 7,202 8,636 8,353 9,104 10,841
Net Working Capital 2,836 3,160 3,558 3,452 3,285

Source: Compiled from the Annual Reports of HUL.

Data Interpretation:
If we analyse the five years working capital position of the company, we find out that Company
has insufficient working capital in the financial year 2016- 17, which indicates a bad finance
position of the company and it is insufficient to meet its short term liability, but in the year 2017-
18, 2018-19, the working capital is increased which shows that a sufficient amount is
there which can be utilized to meet the short term liabilities of past years too. Bu t i n 2019 - 20
an d 2020 - 21 w e f o u n d so m e d ecr easem en t . It is also evident from the above mentioned
table that among current assets, inventories has the largest share except in financial year 2016-
17 and it dominants the gross working capital during study period.
B) Key Financial Ratios Of HUL
Particulars March '17 March '18 March '19 March '20 March '21
Liquidity Ratio
Current Ratio 1.30 1.29 1.36 1.31 1.26
Quick Ratio 0.97 1.02 1.07 1.02 0.95
Operating Working Capital Ratios
Working Capital Turnover Ratio(in 14.46 13.55 12.46 13.64 16.18
times)
Trade Payables Turnover Ratio(in 0.72 0.70 0.58 0.62 0.65
times)
Day’s Payables (in day’s ) 507.89 522.03 631.24 561.09 558.97
Trade Receivables Turnover Ratio in 21.56 17.43 11.95 19.12 12.13
times)
Day 's Receivables (in Day’s ) 31.48 9.28 10.64 15.56 11.21
Inventory Turnover Ratio (in times) 13.25 14.38 13.98 14.52 13.39
Day’s Inventory (in Day’s) 28.85 30.83 35.78 35.75 41.52

12
 Financial Ratio Analysis For Working Capital Management
II) Liquidity Ratio Analysis :
Current Ratio :
Particulars March '17 March '18 March '19 March '20 March '21
Current Ratio 1.30 1.29 1.36 1.31 1.26

Data Interpretation
The optimum current ratio of any organization should be 2:1, i.e. it should have twice the
amount of current assets as compared to its current liabilities. In the present case, if we analyze
the last five years’ current ratios of HUL, we find that it has an average ratio of 1 which is just
the half of the optimum ratio. Hence we can draw a conclusion that it is following a balanced
approach of keeping same amount of current assets and liabilities. It has a current ratio of 1.30,
1.29, 1.36, 1.31, and 1.26 for the financial years 16-17, 17-18, 18-19, 19-20, 20-21
respectively.

Quick Ratio:
Particulars March '17 March '18 March '19 March '20 March '21
Current Ratio 0.97 1.02 1.07 1.02 0.95

Data Interpretation:
The average quick ratio of the company for the last five years has been 1. The immediate
solvency position of the company is good. In the above data the pandemic situation have no any
huge impact of the financial position but the average figure of 2020 and 2021 is near about
It indicates the company take good decision in those condition there is suffer all over the
world.
Iii) Operating Working Capital Ratio Analysis:
Working Capital Turnover Ratio:
Particulars March '17 March '18 March '19 March '20 March '21
Working Capital Turnover 14.46 13.55 12.46 13.64 16.18
Ratio(in times)

Trade Payable Turnover Ratio:

Particulars March '17 March '18 March '19 March '20 March '21
Trade Payables Turnover Ratio(in 0.72 0.70 0.58 0.62 0.65
times)

Data Interpretation:
This ratio informs to the entity. How much used its working capital to generate its sales . The
arranging of this data we find the value of working capital turnover ratio was 14.06 . Which is
not bad , but the entity also letting its sales due to working capital. This data indicates not only
usage of working capital but also sales performance of the entity.

The performance of the sales increases by entity from last five years.

13
 Trade Receivables Turnover Ratio
Particulars March '17 March '18 March '19 March '20 March '21
Trade Receivables Turnover Ratio(in 21.56 17.43 11.95 19.12 12.13
times)

Data Interpretation: It ratio measures how much credit sale have been taken by the entity.
The above analysis of the data we find decrease the credit sales by the entity. Which is
satisfactory. It means there is no rise of bad debt and discounts related to debtor but they also
impact on profitability.

Inventory Turnover Ratio

Particulars March '17 March '18 March '19 March '20 March '21
Inventory Turnover Ratio 13.25 14.38 13.98 14.52 13.39

Data Interpretation:
The average of stock turnover ratio is 13.90. From the above data the company increases its
sales. We find growth of sales from March 2017 to 2018. In the year March, 2019 there is small
decrease of figure but after march 2019. March 2020 again increases, after March 2020, March
2021 was small decrease in the amount. It means sales affects external factors of the entity.
Due to market situation, government policy etc. But few years later there is a good as well as
bad condition prevail in the market. Hence this impact on stock turnover ratio.

14
CHAPTER-4

CONCLUSION

15
 OVERALL CONCLUSION
On the basis of data analysis on working capital management in HUL, the following
conclusions are arrived:

The HUL manages the liquidity position of the company. The situation of
the liquidity position was indicating due to increase in total current liabilities
and decrease in total current assets which led to the decrease in the net
working capital of the company

The company will have more attention pay to its liquidity position. Where
the net working capital changes due to little amount. It is acceptable but
effective working capital management have a crucial role to play enhancing
and growth of the firm further more. Company make a new policy for the
much more regulating his working capital management.

The average collection period of the company during the year 2015-16 is
174 days, it decreases to 13.94 days in 2016-17 and the average collection
period again decrease to 11.21 days in 2017-18. But again increases in the
year 2018-19 is 13.22 days but later periods, it decreases in the previous
year which is a good indication of management.

Though the net working capital of the company is decreased, still the company overall
working capital position is good.

They are able to manage their cash, funds and debts.

Positive Working Capital
It is noticed by the study of positive working capital in essence is not a sign of trouble situation
and there are certain industries for which it is in fact a very viable option. Fast moving
consumer goods industry stands a perfect example. Some leading, FMCG companies used
negative working capital as a way to earn profits, more dividend, maximize shareholder
wealth.
When ratio of current assets over current liabilities, becomes less than one is negative
indication but current ratio is more than one is positive indication. The standardisation of these
ratio is not fixed i.e. 2:1 . It vary industry to industry operations.

However there are situations in which positive working capital is likely to be very favorablefor
the company. Certain reasons:
Positive working capital is a good indicator of liquidity position of cash & cash
equivalents. It results increases the current assets.
It increases the short term debt paying capacity of company.
If company pay to its debt, timely it increases the goodwill.
But every aspect have two side . One is positive and negative. In this scenario positive
working capital have creates disadvantageous effect in the company.
Positive working capital indicates increases the operational efficiency but decrease
profitability due to high amount blocked in stock in the form of current assets.
Growth of the overall performance of the entity which led to decrease in idle amount of
cash generated in current assets.

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 HYPOTHESIS
The following are the hypothesis of the study:
The company facing less difficulty to pay short term debt.
The company have good credit policy amongst debtors.

RECOMMENDATIONS

The following are the recommendations of the study:

With the help of proper inventory management systems, like demand-based
management, etc. the company can reduce the need for working capital and inventories
can be financed through accounts payable.
The company should try and maintain an optimum level of working capital in order to
improve upon the workings of the company.
It is suggested to maintain a favorable current and quick ratios which shows a lesser
than ideal figures. It can be done either through increasing current assets or decreasing
liabilities.

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 References

1. V. K. Bhalla (2002), Financial Management and Policy: Text and Cases, Third Edition,
Anmol Publication Pvt. Ltd, New Delhi
2. James C. Van Horne, John M. Wachowicz, Jr. (1995), Fundamentals Of Financial
Management, Ninth Edition, Prentice Hall Of India Pvt. Ltd, New Delhi
3. Haim Levy (1998), Principles of Corporate Finance, First Edition, South Western
College (An International Thomson Publisher), USA

4. I M Pandey (1978), Financial Management, Ninth Edition, Vikas Publishing House Pvt
Ltd, New Delhi
5. Prasanna Chandra (1984), Financial Management, Theory and Practice, Fifth Edition,
Tata Mc Graw-Hill Publishing Company Ltd,
6. New Delhi George E. Pinches (1990), Financial Management, Third Edition, Harper
Collins Publishers, New York
7. Bhabatosh Banerjee (1984), Financial Policy and Management Accounting, Seventh
Edition, Prentice-Hall of India Pvt Ltd, New Delhi
8. Cooper, The Credit Management essential guide 2006, Credit Management,
9. Richard seadon, DSO Benchmarking, Risk Management Innovation,
10. Matthew Waes, Liam Reddy, Effective Collections, Credit Management,

WEBSITES:

www.hul.co.in
www.google.com
www.moneycontrol.com
www.wikipedia.com
www.acc.com

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