Management of Working Capital in Selected Companies of FMCG Sector in India

Abstract

Working capital is the life blood and nerve centre of a business. Just as circulation ofblood is essential in the human body for maintaining life, working capital is very essential to maintain the smooth running of a business. No business can run successfully without an adequate amount of working capital. Working capital refers to that part of firm s capital which is required for financing short term or current assets such as cash, marketable securities, debtors, and inventories. In other words working capital is the amount of funds necessary to cover the cost of operating the enterprise. The success of an organization to a greater extent depends upon the effective management of working capital. It guarantees the financial soundness of the organization and therefore keeps it away from the sickness zone. The present work therefore is a modest attempt in this direction by undertaking a study of working capital management. The current study has tried to examine the sources used by newlinethe companies to finance their working capital requirements and to analyze and evaluate the working capital management. The study has also examined the liquidity position of the companies. The scope of the study is identified after and during the study is conducted. The main scope of the study is to check the management of working capital (current assets and current liabilities) of only FMCG sector. The study analyzed the liquidity position and working capital management of a limited sample consisting of only five companies i.e. Nestle, HUL, Britannia, ITC and Dabur. The study of working capital is based on only newlineone tool i.e. Ratio Analysis. Further the study is based on last 10 years Annual Reports newlineof the five companies taken into consideration. As only FMCG sector was studied so the newlinefindings could only be generalized to this sector s firms. newline