Working capital Management of HUL . pptx

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1. A STUDY ON WORKING CAPITAL MANAGEMENT AT HINDUSTAN UNILEVER LIMITED VADAMANGALAM PUDUCHERRY PRESENTED BY SUGUMARAN R MBA ⅼⅼ YEAR Registration 23810049 INTERNAL GUIDE Mrs. HEMALATHA .M MBA., MCOM ASSISTANT PROFESSOR RGCET

2. COMPANY PROFILE Hindustan Unilever Limited (HUL) is a British-owned Indian final goods company headquartered in Mumbai. It is a subsidiary of the British company Unilever. Its products include foods, beverages, cleaning agents, personal care products, water purifiers, and other fast-moving consumer goods (FMCGs). Hindustan Unilever Limited is a Public incorporated on 17 October 1933. It is classified as Non-government company and is registered at Registrar of Companies, ROC Mumbai. H industan U inilever 's brands across the country and span many categories - soaps, detergents, personal products, tea, coffee, branded staples, ice cream and culinary products. They are manufactured in over 35 factories, several of them in backward areas of the country. The operations involve over 2,000 suppliers and associates. H industan Univerlever 's distribution network covers 6.3 million retail outlets including direct reach to over 1 million. The mission that inspires H industan U nilever 's more than 15,000 employees, including over 1,400 managers, is to "add vitality to life". The company meets everyday needs for nutrition, hygiene, and personal care, with brands that help people feel good, look good and get more out of life. It is a mission H industan U nilever shares with its parent company, Unilever, which holds about 52% of the equity.

3. MEANING Working capital is the capital or funds available to a company for its day-to-day operations. It represents the difference between a company’s current assets and current liabilities, providing insight into its short-term financial position. Paying attention to working capital allows businesses to assess their ability to produce cash flow, that is, liquidity. In addition, it allows for manoeuvring assets and liabilities in a balanced way. -RASHMI KARAN Shishka Journal ,2023 DEFINITION Managing a firm’s current assets and current liabilities (working capital management) is highly revelant to success of the firm. While the short-term liquidity effects of working capital management are straightforward to derive, it is an empirical literature questions how it affects firm profitability. - THORSTEN KNAUER Journal of Management control ,2013

4. OBJECTIVES OF THE STUDY To find the Working capital position of the company by using comparative balance sheet. To find the profitability and liquidity position of the company using ratio analysis.

5. RESEARCH METHODOLOGY Type of Research : Analytical Research Type of Data : Secondary Data Financial Tools : 1. Ratio Analysis. 2. Comparative Balance sheet

6. Ratio Analysis Current ratio The current ratio, also known as the working capital ratio, measures the capability of a business to meet its short-term obligations that are due within a year. The ratio considers the weight of total current assets versus total current liabilities. It indicates the financial health of a company and how it can maximize the liquidity of its current assets to settle debt and payables. The current ratio formula (below) can be used to easily measure a company’s liquidity. Current Ratio = Current Assets / Current Liabilities Debtor turnover ratio The accounts receivable turnover ratio, also known as the debtor’s turnover ratio, is an efficiency ratio that measures how efficiently a company is collecting revenue – and by extension, how efficiently it is using its assets. The accounts receivable turnover ratio measures the number of times over a given period that a company collects its average accounts receivable. Accounts Receivable Turnover Ratio = Net Credit Sales / Average Accounts Receivable

7. Fixed asset turnover ratio Fixed Asset Turnover (FAT) is an efficiency ratio that indicates how well or efficiently a business uses fixed assets to generate sales. This ratio divides net sales by net fixed assets, calculated over an annual period. The net fixed assets include the amount of property, plant, and equipment, less the accumulated depreciation. Generally, a higher fixed asset ratio implies more effective utilization of investments in fixed assets to generate revenue. This ratio is often analyzed alongside leverage and profitability ratios. Fixed Asset Turnover = Net Sales / Average Fixed Assets Working capital turnover ratio Working capital turnover is a ratio that measures how efficiently a company is using its working capital to support sales and growth. It's also known as net sales to working capital. Working capital turnover measures the relationship between the funds used to finance a company's operations and the revenues a company generates to continue operations and turn a profit. Working Capital Turnover= Average Working Capital / Net Annual Sales ​ ​

8. Net profit ratio Net Profit Margin (also known as “Profit Margin” or “Net Profit Margin Ratio”) is a financial ratio used to calculate the percentage of profit a company produces from its total revenue. It measures the amount of net profit a company obtains per dollar of revenue gained. The net profit margin is equal to net profit (also known as net income) divided by total revenue, expressed as a percentage. Net Profit Ratio = Net Profit ⁄ Total Revenue x 100

9. COMPARITIVE BALANCESHEET Acomparative balance sheet is a statement that shows the financial position of an organization over different periods for which comparison is made or required. The financial position is compared with 2 or more periods to depict the trend, direction of change, analyze and take suitable actions. Given the usefulness of the comparative balance sheet, most of the business who have different business vertical, prepare a comparative balance sheet in comparison with other business vertical. In preparing a comparative balance sheet, the items are placed in rows, and years and amounts are shown in the columns.

10. REVIEW OF LITREATURE SHIN AND SOENEN (1998) point out that a corporation’s working capital is the result of the time lag between the expenditure for the purchase of raw materials and the collection from the sale of finished goods. As such, it involves many different aspects of corporate operational management: management of receivables, management of inventories, management and use of trade credit. DELOOF (2003) used a sample of 1009 large Belgian non-financial firms for a period of 1992-1996. He used correlation and regression analysis and found a significant negative relation between gross operating income and the collection period of accounts receivable, average days in inventories and accounts payable of Belgian firms. These results suggest that managers can create value for shareholders by reducing collection period of accounts receivable and average days in inventories to a reasonable minimum. JOSE AT AL. (2003) tested the corporate returns and cash conversion cycle of 2,718 firms for the period 1974-1993 by using multiple regression analysis. In their research, an aggressive liquidity management (lower CCC) is associated with higher profitability for several industries, including natural resources, manufacturing, service, Retail/wholesale, and professional services. Lazaridis and Trigoniids (2006) used a sample of 131 companies listed in the Athens Stock Exchange (ASE) for the period of 2001-2004.They founded a significant negative relationship between cash conversion cycle and gross operating profit. The findings reveal that managers can create profits for their companies by handling correctly the cash conversion cycle and keeping each component (accounts receivable, accounts payable and inventory) to an optimal level. To extend Lazaridis and Trigoniids' findings, Gill et al., (2010) used a sample of 88 American firms listed on New York Stock Exchange for a period of 3 years from 2005 to 2007. They found statistically significant relationship between cash conversion cycle and profitability, measured through gross operating profit as in Lazaridis

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