Working Capital of WIPRO

OBJECTIVES  To study the concept of working capitalTo analyze profitability, liquidity & working

capital position of the company.To find out the working capital of the

company To analyze the current ratio of the company To analyze the working capital turnover ratio

of the company .

INTRODUCTION

 WCM is highly important in firms as it is used to generate further returns for the stakeholders.

Investments in current assets represent a substantial portion of total investment.

Investment in current assets & the level of current liabilities have to be geared quickly to change sales.

The working capital is the life blood & nerve center of a business firm. The importance of working capital in any industry needs no special emphasis

It is crucial to retain right level of working capital.

DESCRIPTION

Financial management looks after two types of capital need: for fixed capital to invest in things such as buildings, plants &equipments and working capital principally to pay for stock and to cover the amount of credit extended to customers.

Fixed capital, as the name implies, tends not vary in the short but to move up or down in jumps when major investment decisions are made (or assets sold).

Working capital is the firm’s investment in short term assets cash, short term securities. Account receivables and inventories.

DEFINITIONS OF WORKING CAPITALWorking capital is the difference between the

inflow and outflow of funds. In other words it is the net cash inflow.

Working capital represents the total of all current assets. In other words it is the Gross working capital, it is also known as Circulating capital or Current capital for current assets are rotating in their nature.

Components of current assets:For the day to day business operation different types

of current assets are required. Current assets refer those assets that are cash or can be converted into cash within a year.

The composition of current assets or the main components of current assets at Wipro Limited are cash and bank balance, loan and advances and government securities.

Miscellaneous current assets are also a component of current assets. Prepaid expenses, outstanding income like interest receivable and other current assets are also included in miscellaneous current assets

CURRENT ASSETS OF THE COMPANY FOR DIFFERENT YEARS

FISCAL YEAR CURRENT ASSETS

2013 4,39,7302014 5,02,3042015 6,00,033

FIG. IN CRORE

Component of Current Liabilities:The composition of current liabilities or the

main components of current liabilities. Tax provision, staff bonus, proposed dividend payable and other liabilities are included in other current liabilities.

The following table shows the amount of deposit and other accounts, short term loan, bills payable and other current liabilities of Wipro limited.

CURRENT LIABILITIES OF THE COMPANY FOR DIFFERENT YEARS

FISCAL YEAR CURRENT LIABILITIES

2013 1,54,7472014 1,57,4182015 1,90,405

FIG. IN CRORE

Working capital of Wipro limited:

Working capital is required to run business smoothly and efficiently in the context of set objectives.

It is no doubt that no organization can achieve its goal without proper use of working capital. It means money invested on working capital should be neither more nor less because both the position of working capital affects not only liquidity but also profitability of the organization.

The investment decision should be made on any type of current assets by considering their role in company and determining which one is more beneficial to the company and which is not

WORKING CAPITAL OF A COMPANY

FISCAL YEAR CA CL WC=CA-CL

2013 4,39,730 1,54,747 2,84,983

2014 5,02,304 1,57,418 3,44,886

2015 6,00,033 1,90,405 4,09,628

Current Ratio:

This ratio indicates the short-term solvency position of bank. In other words current ratio indicates better liquidity position. It is calculated as follows:

Current assets (CA)Current liabilities (CL)

The following table shows the current ratio to compare the following capital management of Wipro limited.

CURRENT RATIOFiscal Year

Total CA Total CL Current ratio

2013 4,39,730 1,54,747 2.842014 5,02,304 1,57,418 3.242015 6,00,033 1,90,405 3.15

Average = 3.077

Working Capital Turnover Ratio:- It is taken as one of the primary indicators of

the short-term solvency of the business. It establishes the relationship with the net sales. It measures the efficiency with which the working capital is being used by the firm.

WORKING CAPITAL TURNOVER RATIO = Net Sales

Net Working Capital

WORKING CAPITAL TURNOVER RATIOYear Net Sales Net

Working Capital

Ratio

2013 3,74,256 2,84,983 1.31

2014 4,34,269 3,44,886 1.25

2015 4,69,545 4,09,628 1.14

ANALYSIS Working capital condition of the company is very good, it is

clearly seen it is increasing every year . In all the year of the study period the working capital of the company is positive.

. The current ratio of the Wipro limited is between 2-3.5 over the years. It is generally considered for a healthy company to have a current ratio 2:1. The highest current ratio is in fiscal year 2014 is 3.24. The average ratio is 3.077

In The year 2013 working capital t/o ratio was 1.31 time , 1.25 time in the year 2014. In the year 2015 the working capital was 1.14. it is slightly reducing every year . for a company it is required to have a positive and increasing working capital turnover ratio , the more the cash company has the more it has capability to turn that cash into revenues.

OBSERVATIONS Current assets for the year 2013-14 increases and it is

good condition for the company and current liabilities of the company is also increased that’s shows the working capital of the company is increased.

 Current ratio (C.R) of fiscal year 2013-2014 showed

slightly increase i.e. 2.84 to 3.24 But in fiscal year 2015 C.R decreased at 3.15 comparatively in factors which influence it. 

Cash and Bank balance to current assets ratio of the company is in 2009/10 decreased and in 2010/11 it increased and again in 2011/12 is decreased..

  The Working capital of the Wipro ltd is increasing in all the

three years from 2,84,983 in first year, 3,44,886 in 2nd year and 4,09,628 in the 3rd year. Which means working capital is increasing gradually and the company is financially strong.

. Company should work in the same manner so as to earn more profit and revenue.

The company has able to repay the liability of the creditors because the profit of the company has increased every year.

Company has able to full fill the standard level of current ratio i.e. 2:1 .There for the company has able to repay the liability and loan of company