A STUDY ON WORKING CAPITAL MANAGEMENTAT D-MART

Mr. S. VENKATREDDY,
Assistant Professor Department of Master of Business Administration J.B. Institute of Engineering &
Technology, Moinabad,
[email protected]
ANUGULA SOUJANYA,
Student J.B. Institute of Engineering & Technology, Moinabad.
Dr. P. SUBRAMANYAM
HOD, Department of Master of Business Administration J.B. Institute of Engineering & Technology,
Moinabad,
Corresponding author: DR. DANDA UDAYA SHEKHAR

I. ABSTRACT
Working capital refers to the money that a company uses to finance its daily operations. Proper
management of working capital is critical to financial health and operational success. Working
capital management (WCM) aims to maximize operational efficiency by maintaining a delicate
balance among growth, profitability, and liquidity. WCM is a continuous responsibility focusing on a
firm's day-to-day operations involving short-term assets and liabilities. By efficiently managing a
firm's cash, accounts receivable, inventories, and accounts payable, managers can help maintain
smooth operations and improve a company's earnings and profitability. By contrast, poor WCM
could lead to a lower credit score, financial insolvency, legal troubles, liquidation of assets, and
potential bankruptcy.
II. STATEMENT OF THE PROBLEM
The problem of working capital management involves the problem of decision making regarding
investment in various current assets with an objective of maintaining the liquidity of funds of the firm
to meet its obligations promptly and efficiently.
III. INTRODUCTION
Cash is the lifeline of a company. If this lifeline deteriorates, the company's ability to fund
operations, reinvest and meet capital requirements and payments also deteriorate. Understanding a
company's cash flow health is essential for making investment decisions. A good way to judge a
company's cash flow prospects is to look at its working capital management (WCM).
Working capital of a company reveals more about the financial condition of a business than almost
any other calculation. It tells you what would be left if a company raised all of its short term
resources, and used them to pay off its short term liabilities. The more working capital, the less
financial strain a company experiences.
Working capital also gives investors an idea of the company's underlying operational efficiency.
Money that is tied up in inventory or money that customers still owe to the company can't be used to
pay off any of its obligations. So, if a company is not operating in the most efficient manner (slow
collection) it will show up in the working capital. This can be seen by comparing the working capital
from one period of time to another; slow collection may signal an underlying problem in the
company's operations.
The definition of working capital is that it is the difference between an organization’s current assets
and its current liabilities. Of more importance is its function which is primarily to support the day-to-
day financial operations of an organization, including the purchase of stock, the payment of salaries,
wages and other business expenses, and the financing of credit sales. It’s a measure of both a

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 company's efficiency and its short-term financial health.
IV. NEED OF THE STUDY:
Working capital management is one of the key areas of financial decision-making. It is significant
because, the management must see that an excessive investment in current assets should protect the
company from the problems of stock-out. Current assets will also determine the liquidity position of
the firm.
The goal of working capital management is to manage the firm current assets and current liabilities in
such a way that a satisfactory level of working capital is maintained. If the firm cannot maintain a
satisfactory level of working capital, it is likely to become insolvent and may be even forced into
bankruptcy.
V. OBJECTIVE OF THE STUDY:
1. To study the existing working capital management system of D MART.
2. To understand how the company finances its working capital.
3. To find the liquidity position of the company.
4. To examine feasibility of present system of managing working capital.
5. To analyse the financial performance of the company with reference to working capital.
VI. SCOPE OF THE STUDY:
A study of the Working capital involves an examination of long term as well as short term sources
that a company taps in order to meet its requirements of finance. The scope of the study is confined
to the sources that D MART tapped over the years under study i.e. 2017- 2022.The present study of
working capital management of D MART analysis the efficiency of working capital management
and its components and attempts to determine the effectiveness of management in each segment of
the working capital. Since the net concept of the working capital has been taken in use.
VII. RESEARCH METHODOLOGY
Sources of data collection
They are two sources of data collections they are primary source and secondary source.
The method which I have considered for collecting the data for research purpose through Secondary
sources.
SECONDARY DATA:
The secondary data for the research was collected from journals, research articles, books and
company websites and other websites. The source of secondary data was drawn from the annual
reports of the D MART, for the year 2018-2022.
DATA ANALYSIS
The collected data has been processed using the tools of
Ratio analysis Debtor Turnor ratio Current ratio
Quick ratio
Working capital turnover ratio.
The secondary data was collected from company’s annual reports from 2017-18 to 2021-2022
various books and websites.
VIII. LIMITATIONS OF THE STUDY:
1. Working capital management is sowide topic however to cover all these would affect the depth and
quality of the study.
2. Some items of the information are not available in the published annual reports for the purpose of
analysis.
3. We cannot do comparisons with other companies unless and until we have data of other companies

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 on the same subject.
4. Analysis is purely based on historical factors and information.
5. Information and data reliability are limited bytime period.
IX. REVIEW OF LITERATURE Article: 1
Title: Working Capital Management In Steel Industry A Comparative Study Of Selected Companies
Author: Jaiswal, Swarnima
Abstract:
newlineWorking capital isconsideredto be the core to the whole system of business operations and
involvement of finance therein. It directly influences the liquidity and profitability of a business concern.
Therefore, it holds an important place in financial management. Precisely, working capital management refers
to the process of planning and controlling the level and mix of current assets and its financing. Thus, efficient
and effective working capital management plays an important role in maintaining the financial health of a
business by maintaining the solvency, liquidity, profitability and goodwill of a business.
Article: 2
Title: Management of working capital
Authors: Singh, J.P; Pandey, Shishir
Source: ICFAI journals of financial economic. December 2018, volume 6 issue 4, p62- 7211p.5
charts, 1 graph.
Abstract:
For the successful working of any business organization, fixed and current assets play a vital
role.Management of working capital is essential as it has a directworking capital components and the
impact of working capital management on profitability of Hindalco industries limited. The paper also
makes an attempt to study the correlation between liquidity,profitability and profit before tax (PBT)
of Hindalco.The study is based on secondary data collected from annual reports of Hindalco for the
study period 2002-2017.The ratio analysis, percentage method and coefficient of correlation have
been used to analyse the data. Multiple regressions are used to check the significant impact on the
profitability of Hindalco.
Article: 3
Title: Working Capital Management
Author:Seth, Himanshu
Guide(s): Chadha, Saurabh and Sharma, Satyendra Kumar Keywords: Economics and Business
Abstract: In today s globalized economy, WCM is of extreme importance, specifically in a
capital- and abor-intensive sector, like manufacturing, where the onus is on continual advancement of
products and technologies. So, integrating a mix of firm-level as well as macro-economic
determinants influencing efficiency would assess the WCM at its best. This would expand the
performance dimensions and opportunities for the overall manufacturing sector. Additionally, a better
newlinemanagement of working capital adds to the value, profitability, and other opportunities
(Sharma newlineand Kumar, 2011).
Article: 4
Title:Working Capital Management In Steel Industry A Comparative Study Of Selected Companies
Author: Jaiswal, Swarnima
Abstract: newlineWorking capital is considered to be the core to the whole system of business
operations and involvement of finance therein. It directly influences the liquidity and profitability of
a business concern. Therefore, it holds an important place in financial management. Precisely,
working capital management refers to the process of planning and controlling the level and mix of
current assets and its financing. Thus, efficient and effective working capital management plays an
Volume 07, Issue 05, Nov 2023 ISSN 2581 – 4575 Page 43
important role in maintaining the financial health of a business by maintaining the solvency,
liquidity, profitability and goodwill of a business.
Pagination:
URI: http://hdl.handle.net/10603/347443
Appears in Departments: Faculty of Commerce
Article: 5
Title: Shorter range or working capital decision making
Authors:Smith Keith V
Sources: Journals of economics and international finance, Vol 5, No.9, Pg 373-379.
Abstract:
It believes that research which concerns shorter range or working capital decision making would
appear to have been less productive. The inability of financial managers to plan and control properly
the current assets and current liabilities of their respective firms has been the probable cause of
business failure in recent years. Current assets collectively represents the single largest investment
for many firms, while current liabilities account for major part of total financing in many instances.
This paper covers eight distinct approaches to working capital management. The first three aggregate
guidelines, constraint set and cost balancing are partial models; two other approaches probability
model and portfolio theory, emphasize future 94 uncertainty and interdepencies while remaining
three approaches mathematical programming, multiple goals and financial simulation have a wider
systematic focus.
X. DATA ANALYSIS AND INTERPRETATIONData Analysis
Table1:SizeofcurrentassetsandliabilitiesandNetworkingcapitalofDMARTduringtheperiod20 17-18
to2021-22.
Formula: current assets-current liabilities=Net Working Capital (Allamountsarein Cr)
Curren Current Net
Year t assets liabilities W.C

2017-18 2029 1212 817

2018-19 2292 721 1571
2019-20 3960 1071 2889
2020-21 3351 1094 2257
2021-22 5337 1332 4005

Interpretation:
The current assets and current liabilities of DMART is increasing year by year only except 2020-2021
there is a slight downfall in that year with the range of 2257 of net capital
compare to previous one which is 2889.But it increased in the year 2021-2022 with the range of 4005 of
capital.
Table2:

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 WORKINGCAPITALTURNOVERRATIO
Formula: working capital turnover ratio = net sales/working capital
(Allamountsarein Cr)

Year
Sales(Income) Networking Capital Turnover Ratio

2017-18 4816.17 7997.23 0.60222977

2018-19 7028.66 17518 0.40122434
2019-20 9203.2 20493.2 0.44908555
2020-21 15186.8 20903 0.72653725
2021-22 16748.3 19330.9 0.86640056
Interpretation:
The debtor’s Turnover Ratio expresses the relationship between debtors and sales. The above graph shows
that there are some fluctuations in the ratio. There was a continuous increment from year 2018-2019.
Table3:
The tables hows the Debtors Turnover Ratio of D MART.
Formula: DEBTORS TURNOVER RATIO=Net Credit Sales/Avg Accounts Receivables
(All amounts are inCr)
Debtors
turnover
Net credit Avg Accounts
year Ratio
sales(income) Receivables
2017-2018 4816.17 40984.92 0.1175108
2018-2019 7028.66 55182.04 0.1273722
2019-2020 9203.2 71939.39 0.1279299
2020-2021 15186.83 72067.91 0.2107294
2021-2022 16748.32 87015.02 0.1924762
Interpretation:
From the above table, it is observed that the D MART debtor’s turnover ratio shows a good sign. The
company noted a maximum ratio of 0.210 in the year 2020-21 and aminimum ratio ofin theyear2017-18 is
0.1175.In the year i.e. 2021-22is0.1924762 which decreased slightly. Table4:
QUICKRATIO
Formula: Quick ratio = quickassets /current liabilities (All amounts are in Cr)
Year Quick Assets Current Liabilities Quick Ratio
2017-18 32000.29 23803.06
1.335975

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 2018-19 41918.78 29207.75
1.428664
2019-20 52208.19 32664.91
1.596763
2020-21 53987.54 36584.71
1.475685
2021-22 62548.67 58092.20 1.076719

Interpretation:
It is observed that D MART is currently rationing an increasing trend the company’s liquidity position is
satisfactory.
The current ratio in the year2017-18is 1.33. But in 2018-19 it declined because of an increase in current
liabilities and then it started to decrease further in 2020-21at1.475.
If the company maintains to increase the ratio it can meet obligations.
Table5:Statement of Changes in Working Capital for 2017-18.

Effect
o
Particulars AS on 31-03-2017 AS on 31-03-2018 n Working
capital
Increase Decrease
CURRENT ASSETS
Inventories 3,728.40 4,213.05 484.65 -
Sundry Debtors 6,397.39 6,433.77 36.38 -

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 Cash & Bank 7,473.83 4,516.04 - 2,957.79
Balance
Loans and Advances 6,421.70 5,752.73 - 668.97
(A) Total 24,021.32 20,915.59 521.03 3,626.76
Current Assets

CURRENT
LABILITIES

Current Liabilities 7,444.64 4,099.77 3,344.87 -

Provisions 796.29 830.83 - 34.54

(B) Total 8,240.93 4,930.60 3,344.87 34.54

Current
Liabilities
(A)-(B) Net Working 15,780.39 15,984.99 - -
Capital

Net Increase 204.6 - - -

in Working
Capital
Interpretation:
Financial statement (Amount in lakh) In the above table, it is seen that during the financial
year 2017-2018 there was a net increase in working capital of Rs. 204.6 lakh which indicates
that there is an adequate working capital in D-MART.
This is because of :-
 Increase in Current Assets such as Inventories by Rs. 484.65 lakh and other such as
Sundry debtors by Rs. 36.38 lakh.
 Decrease in Cash & Bank Balance by Rs. 2,957.79 lakh and other current assets such
as Loans and Advances by Rs. 668.97 lakh.
 Decrease in Current Liabilities by Rs. 3,344.87 lakh. Increase in provisions by Rs.
34.54 lakh.

XI. FINDINGS
1. TheD MARTnetworkingcapitalissatisfactorybetweentheyears2017-22sinceit shows
an increasing trend till 2020 but after that it is in a declining position in 2021 but it recorded
in 2021-2022.
2. The current ratio of D MART is satisfactory during the period of studyfrom2017-18
to202-22.Itincreased but afterthat, except in 2020-2021.
3. The working capital turnover ratio of D mart was low in two years i.e,2018-2019
and2019-2020.
4. The debtor turnover ratio performed well till the year 2020-2021 but it got slightly
decline in the year 2021-2022.
5. Thequickratioperformance of D mart from 2017- 2022 was on fluctuation. Where it got
increased in 2019-2020 but got decline in 2020-21& 2021-2022.
6. It is seen that during the financial year 2017-2018 there was a net increase in working

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 capital of Rs. 204.6 lakh which indicates that there is an adequate working capital in D-
MART.
7. It is seen that during the financial year 2018-2019 there was a net decrease in
working capital of Rs. 920.18 lakh. It indicates that there is an inadequate working capital in
D- MART.
8. It is seen that during the financial year 2019-2020 there was a net decrease in
working capital of Rs. 2,748.43 lakh. It indicates that there is an inadequate working capital
in D- MART.
XII. SUGGESTIONS
1. As per the analysis it is suggested to improve position funds should be utilized
properly.
2. Better Awareness to increase sales is suggested.

3. Cost cut-down mechanics can be employed.

4. Better production techniques can be employed.

5. The investment in raw materials should be made as per the requirement. Unnecessary
investment may block up the funds.
XII. CONCLUSION
The study on working capital management was conducted in D MART to analyze the
financial position of the company. The company’s financial position is analyzed by using the
tool of financial statements from 2017-2018 to 2021-2022. Working capital may be regarded
as lifeblood of a business. Working capital management techniques are playing significant
role in assisting the management for decision making. The study of working capital
management at is found to be very effective. It contains the management of Cash, Debtors,
and creditors. The financial status of D MART is good. The company’s liquidity position is
goodwith regardto the investment in current assets as there are adequate funds invested in it.
XIII. BIBLIOGRAPHYBOOKS:
BOOKS
 Kothari.R(1995),“ResearchMethodology”,VishwaPrakashPublications,NewDelhi
.
 S.C.Guptha(1993),“StatisticalMethod”,SulthanChandandSonsPublications,
NewDelhi.
 PreethiSing(2002),“FinancialManagement”,HimalayaPublications,NewDelhi.
 PrasannaChanda(2005),“InvestmentAnalysis”,McGrawHillPublishingCompany.

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