Performance of Working Capital Management

The study was conducted at Parisons Roller Flour Mills Private Limited with an attempt to analyses working capital management of the company for a period of 5 years (2005 – 2009) and How to improve better performance of Working Capital Management in the company.

In our present day economy, finance is defined as the provision of money at the time when it is required. Every enterprise, whether big, medium or small, needs finance to carry on its operations and to achieve its targets. In fact, business is so indispensable today that it is rightly said to be the lifeblood of an enterprise. Different authorities have interpreted the term ‘finance’ differently. However there are three main approaches to the term finance:

  • The first approach views finance as to providing of funds needed by a business on most suitable terms. This approach confines finance to the raising of funds and to the study of financial institutions and instruments from where funds are procured.
  • The second approach relates finance to cash.
  • The third approach views finance as being concerned with rising of funds and their effective utilization.

So, in short, the main aims of the finance function are:

Acquiring sufficient funds.

Ensuring effective utilization of the funds.

Increasing profitability.

Working capital is vital to a business. They have to have funds available to pay their day to day bills, wages and so on. The working capital is made up of the current assets net of the current liabilities. It is very important to a company to manage its working capital carefully. This is particularly true where there is a substantial time lag between making the product and receiving the money for it. In this situation the company has paid out all the costs associated with making the product (labour, raw materials and so on) but not yet got any money for it. They must therefore ensure they have enough cash to do this.


Working capital is how much in liquid assets that a company has on hand. Working capital is needed to pay for planned and unexpected expenses, meet the short-term obligations of the business, and to build the business. The accounting formula used to calculate the available working capital of a business is:-

Current Assets – Current Liabilities = Working Capital




The study has covered the working capital at the Parisons Roller Flour Mills Private Limited from 2005 to 2009 years.

This study will help for applying the various methods for reducing working capital.

We can reduce the rate of working capital.

The study has conducted at Parisons Roller Flour Mills Private Limited a unit of under SSI. It covers the pattern of the working capital, the sources which bring down the rate of absenteeism in company.


The main objective of the study was to find out the overall working capital management of the company. The study can be helpful for the company to get a clear cut idea about the performance of the working capital, and can be make necessary changes to improve the working capital.

   General objectives:

  • To find out the level of current assets and current liabilities maintained by the company.
  • To find out how the fluctuation in the working capital affects the cost of production.
  • To find out the liquidity position of the firm.
  • To understand how efficiently the inventory is utilized.
  • To find out whether the operating expenditures are incurred in the right manner.

Specific Objectives:

  • To find out what is the minimum amount invested in current asset which is required at all times to carry out minimum level of business activities.
  • To suggest the optimum level of current assets and current liabilities to be maintained for effective working of the company.


Overview of Company:

Parisons, a legacy of trust envisioned by late Janab A.V.Kunhipari in the 1950’s.From its humble beginnings in a small hamlet to a leading corporate entity in south India; the group recorded a phenomenal growth over the years. Thanks to the farsighted vision of the founder and the commitment of the younger generation to carry forward this glorious legacy.

The Parisons Group with their corporate base in Calicut Kerala is the largest manufacturers and marketers of two basic food commodities, Wheat Flour and Edible Oils in South India. Started in a humble way, PARISONS has reached a stage that it has grown into a formidable Omni-presence at every phase of the Agri Business cycle including Production, Processing and Distribution. Having made their presence felt in the food commodities market, Parisons diversified their activities into Rubber, Tea Plantations and Infrastructure Leasing.


Theoretical Background

Financial management practices can be considered as providing a sound framework for asset management. Investment in fixed asset is an area of management focus and research activity. This situation can be contrasted with working capital management which until recently received relatively little attention from researchers. At the same time, the efficient management of working capital is likely to yield significant result and its neglect can be highly problematic. The literature on corporate failure contains a rich set of evidence, linking poor working capital management as an important factor in corporate collapse. Altman’s (1968) multivariate predictor model based on US companies includes working capital as one of the model components. Taffler (1977) using data drawn from the UK companies developed a four-variable model of failure prediction.

All the four variables include a variant on working capital as component. Parosh and Tamari (1978) developed a predictor model for Israeli companies and include the current ratio as one of the variables of the mode. Deloof (2004) also found that the way of working capital is managed as significant impact on the profitability of businesses.

Working capital management is also important from the perspective of sources and use of funds. We describe working capital as a spontaneous source and use of funds as it arises from trading activities based on a significant number of business transactions. In many companies the amount of funds committed to current asset can often exceed that of fixed assets.

Decisions relating to working capital and short-term financing are referred to as working capital management. These involve the relationship between a firm’s short-term assets and its short-term liabilities. The goal of working capital management is to ensure that the firm is able to continue its operations and that it has sufficient cash flow to satisfy both maturing short-term debt and upcoming operational expenses. A business can fail because of lack of cash than for want of profit. If a business is operating profitably, then it should generate cash surpluses. If it does not generate cash surpluses, then the business will eventually run out of cash and close down.


The Parisons Group is already a brand presence in South India, especially Kerala with an established market, distribution network and high brand equity for its products coming from its existing units namely:

Parisons Roller Flour Mills Private Limited

Yenkey Roller Flour Mills

Khemka Flour Mills Private Limited

Kodandaram Roller Flour Mills Private Limited

Parisons Milling Company Private Limited

Parisons Roller Flour Mills Private Limited

Parisons Roller Flour Mills Pvt. Ltd was set up at West Hill, Calicut. Established in October 1992, the Mill began operations with an installed capacity of 80 MT per Day. The capacity was enhanced to 100MT and then to 120 MT per day as part of step-by-step expansion plans in 1995 and 1997 respectively.

This Rs.350 million companies located at West Hill, Calicut, with state-of-the-art facility, is presently producing 30,000 TPA of high quality wheat products like Maida, Sooji and Atta, Marketed under the premium brand name of ‘Parisons Liberty’, also dispensed in consumer packs, packed with high-tech automated packing facility. We at PARISONS believe that quality is of paramount importance in customer satisfaction. Their range of products is tested and quality checked by their in-house Labs provided with latest equipments. (

Yenkey Roller Flour Mills

Yenkey Roller Flour Mills, with an installed capacity of 90 MT per day started production in 1994.

The ‘Coconut Tree’ brand of supreme quality Maida, Sooji and Atta produced and marketed by Yenkey Roller Flour Mills enjoys a sizeable share of the market. The Yenkey Roller Mills located at West Hill, Calicut, registered a turnover of Rs. 2240 lakh / anum and has been one of the front-runners in the Group, producing products that enjoy a sizeable market share. (

Khemka Flour Mills Private Limited

In 1994, in an effort to capitalise on the opportunities in the market place and to establish its position as the market leaders, the Group took over Khemka Flour Mills Private Limited, the plant with largest installed capacity, 120 TPD in Kerala. After renovation and modernisation, the plant commenced operations in 1997. It has now grown into a Rs. 1800 Lakh /Annum Company. (

Kodandaram Roller Flour Mills Private Limited

The PARISONS Group of companies took over this ailing company unit at Angamaly, with 80 TPD capacities in the year 1999. The unit was revived in the year 2000 with commencement of full-fledged operations in a short span of 2 years, achieving a remarkable turnaround. Production of flour products, with brand name ‘Chakra’, an established trade name in Ernakulam and Thrissur Districts is done here. (

Parisons Milling Company Private Limited

A 100 TPD wheat flourmill owned by the ailing company Star Agro Wheat Products Pvt Ltd, at Kuttipuram, was taken over by the PARISONS Group as part of its mission to revive ailing units. Parisons Milling Co. was formed to smoothen the take over and revival of the ailing Company and operations are expected to begin shortly. (


Research methodology is a way to systematically solve the research problem. It may be understood as a science of studying now research is done systematically. In that various steps, those are generally adopted by a researcher in studying his problem along with the logic behind them. It is important for research to know not only the research method but also know methodology. The procedures by which researchers go about their work of describing, explaining and predicting phenomenon are called methodology. Methods comprise the procedures used for generating, collecting and evaluating data. All this means that it is necessary for the researcher to design his methodology for his problem as the same may differ from problem to problem.

Data collection is important step in any project and success of any project will be largely depend upon now much accurate you will be able to collect and how much time, money and effort will be required to collect that necessary data, this is also important step. The study is primarily based on the internal records and the annual records of the company. Besides, information is gathered through discussions held with the officers of the company.


Data would be collected from newspapers, journals, business magazines, books and internet and would be interpreted in the form of graphs and charts. The success of any research depends on the accurate data collection. Two types of data are very important in any research. These are Primary Data and Secondary Data. Primary Data can be collected by two ways Qualitative Research and Quantitative Research. Qualitative research mainly involves understanding the data collected and then trying to relate it with the concepts in hand. This is a very subjective technique. Quantitative research mainly involves numerical and statistics. This helps in classifying the answers in to meaningful segmentation.

Primary data

The primary data is that data which is collected fresh or first hand, and for first time which is original in nature. Primary data can collect through personal interview, questionnaire etc. to support the secondary data. This will be the first step of the research. Primary Data can be collected by Qualitative Research. In the research the primary data will mainly be collected through interviews. The types of interviews that could be used are, Interviewing through emails, Telephone interviews, Computer assisted telephone interviews.

Secondary Data

The secondary data are those which have already collected and stored. Secondary data easily get those secondary data from records, journals, annual reports of the company etc. It will save the time, money and efforts to collect his data. Secondary data also made available through trade magazines, balance sheets, books etc. The data were collected from secondary source. It includes last five years financial statements of the company (2005-2009) and web sites (



I. M. Pandey – Financial Management – Vikas Publishing

House Pvt. Ltd. – Ninth Edition 2006

2. K.V. Smith- managementof Working Capital- Mc-Grow-Hill New York

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