MBA (2008-10)
ACKNOWLEDGMENT
“Knowledge is an experience gained in life, it is the choicest possession, which should not be shelved but should be happily shared with others�. No work in this world can be completed successfully if guidance is not provided in the right direction. In this regard, I express my gratitude to my esteemed mentor, Mrs. AMITA RANI for her valuable critiques, assistance and encouragement, which enabled me to carry on the project successfully. I thank her for giving me a wonderful opportunity to work on this project. Her time-to-time guidance and incessant support helped me to broaden my outlook on the project I am highly obliged for their support throughout the preparation of this project. I would also like to thank Mr. Deepak Puri for providing company details like Annual Statements and some more valuable information and guidance. Last but not the least I would also like to thank the respondents who spared their valuable time to fill the questionnaire. I would like to thank all for giving their valuable inputs and time.
DECLARATION
This is to state that the Project titled “WORKING CAPITAL MANAGEMENT OF RIL & CUSTOMER PREFERENCE TOWARDS RELIANCE COMMUNICATIONS’’ is based on the original work carried out by me and is being submitted towards partial fulfillment of the requirement for the MBA program of the Punjab Technical University, Jalandhar. This has not been submitted for the award of any other degree or diploma.
(SWATI SABHERWAL)
EXECUTIVE SUMMARY
It gives me an immense pleasure in presenting this final project report on “WORKING CAPITAL MANAGEMENT
OF
RIL
&
CUSTOMER
PREFERENCE
TOWARDS
RELIANCE
COMMUNICATIONS� for the partial fulfillment of the degree of Masters of Business
Administration (2008-10). This report gives the reader an overview of the concept of working capital in the simplest language as far as possible. It also gives information on the working capital management of Reliance Industries Limited and customer preference towards Reliance Communications. The result is purely based on a complete survey carried out for the project. Both Primary Data i.e. by exploratory research, information from residents of sector 8 and 9, Chandigarh and people coming to recharge dealers in sector 8 and Secondary Data i.e. by annual reports, newspapers, magazines and scheme brochures. To make the report simpler and easier to understand graphs, pie- charts, tables and Chi-Square Test are used wherever possible and interpretation of the same has been given. Special care has been taken to ensure that this report is free of any printing mistakes but I apologize if any printing error creeps in. At the end, I hope this report fulfills its purpose by providing an in-depth knowledge of mutual funds.
CHAPTER NUMBER
CHAPTER 1
NAME OF THE CHAPTER
INTRODUCTION
CHAPTER 2
REVIEW OF THE LITERATURE
CHAPTER 3
RESEARCH METHODOLOGY
CHAPTER 4
ANALYSIS AND INTERPRETATION
CHAPTER 5
FINDINGS
CHAPTER 6
SUGGESTIONS
CHAPTER 7
CONCLUSION
CHAPTER 8
REFERENCES
CHAPTER 9
ANNEXURES
WHAT IS WORKING CAPITAL?
Fixed Capital is that part of which is required for the purchase of fixed assets like Land and Building , Plant and machinery etc. The fixed capital provides the basic means for the business to earn its return... But by themselves, these fixed assets would not produce anything. For instance, to operate the machines, we require men, materials, power, tools, accessories etc. These factors involve expenses. In addition, we have to maintain certain current assets like stocks, stores, equipments, etc. All these require enough resources to keep the wheels of the business in motion. Therefore, in addition to the amount of fixed capital every business – whether new or growing requires Working Capital. Working Capital is that portion of a business concern’s total capital, which is employed in term of operations. Without working capital, fixed capital would be idle and ineffectual. A number of definitions have been formulated: perhaps the most widely acceptable would be: “WORKING CAPITAL represents the excess of CURRENT ASSETS over CURRENT LIABILITIES”. The same may be designated in the following equation: WORKING CAPITAL= CURRENT ASSETS – CURRENT LIABILITIES: Funds thus invested in current assets keep revolving fast and are being constantly converted in to cash and this cash flows out again in exchange for other current assets. Thus it is known as revolving or circulating capital or short term capital.
WORKING CAPITAL MANAGEMENT Working Capital Management refers to management of current assets and current liabilities. The major thrust of course is on the management of current assets. This is understandable because current liabilities arise in the context of current assets. Working Capital Management is a significant fact of financial management. Its importance stems from two reasons:
Investment in current assets represents a substantial portion of total investment.
Investment in current assets and the level of current liabilities have to be geared quickly to change in sales. To be sure, fixed asset investment and long term financing are responsive to variation in sales. However, this relationship is not as close and direct as it is in the case of working capital components.
The importance of working capital management is effected in the fact that financial managers spend a great deal of time in managing current assets and current liabilities. Arranging short term financing, negotiating favorable credit terms, controlling the movement of cash, administering the accounts receivable, and monitoring the inventories consume a great deal of time of financial managers. The problem of working capital management is one of the “best” utilization of a scarce resource. Thus the job of efficient working capital management is a formidable one, since it depends upon several variables such as character of the business, the lengths of the merchandising cycle, rapidity of turnover, scale of operations, volume and terms of purchase & sales and seasonal and other variations.
TYPES OF WORKING CAPITAL Working Capital may be classified in to two ways: a)
On the basis of concept.
b)
On the basis of time.
I ) ON THE BASIS OF BALANCE SHEET CONCEPT Gross working capital is the total of all current assets. Net working capital is the difference between current assets and current liabilities.
Though the later concept of working capital is commonly used it is an accounting concept with little sense to say that a firm manages its net working capital. What a firm really does is to take decisions with respect to various current assets and current liabilities. The constituents of current assets & current liabilities are shown in table A. TABLE A: Constituents of Current Assets and Current Liabilities PART –A: CURRENT ASSETS
Inventories – Raw materials and components, Work in progress, Finished goods, other.
Trade Debtors.
Loans and Advances.
Investments.
Cash and Bank balance.
PART –B: CURRENT LIABILITIES
Sundry Creditors.
Trade Advances.
Borrowings.
Provisions.
II) ON THE BASIS OF TIME: Permanent or Fixed Working Capital: Permanent or Fixed Working capital is the minimum amount which is required to ensure effective utilization of fixed facilities and for maintaining the circulation of current assets. There is always a minimum level of current assets that is continuously required by the enterprise to carry out its normal business operation. For example every firm has to maintain minimum level of raw materials, work in process, furnished goods and cash balance. The minimum level of current assets is called permanent or fixed working capital as their part of working capital is permanently blocked in current assets. With the growth of business there is an increase in current assets.
ďƒ˜ Temporary or Variable Working Capital: Temporary or Variable Working Capital is the amount of working capital that is required to meet the seasonal demands and some special exigencies. Variable working capital can be further classified as:a) Seasonal Working Capital. b) Special Working Capital. Most of the enterprises have to provide additional working capital to meet the special and seasonal needs. The capital required to meet the seasonal needs of enterprise is called Seasonal working capital. Special working capital is the part of working capital which is required to meet the special exigencies such as part of working capital which is required to meet special exigencies such as launching of extensive marketing campaigns for conducting research etc. is called Special working capital.
FACTORS DETERMINING WORKING CAPITAL REQUIREMENTS With the type of business and the ambition of proprietors the amount is bound to vary. For instance, a small business would need lesser amount of working capital than a larger business engaged in the same line. As the business expands the amount needed would grow. Similarly, business with seasonal demand would require larger amount of working capital. Therefore, an estimate of requirements of working capital will differ from concern and from industry to industry. Further, cyclical changes, periods of prosperity and depression cause wide variations in the demand for working capital. Other unexpected happenings are likely to create unusual demands for working capital. There is no concrete formula to decide the amount of workings capital required by a business. There are also business in which fixed is small in relation to working capital. The Major determinants of the proportion of fixed to working capital are as follows: ďƒ˜ Nature of Business : Business units selling service (like public utilities) instead of a commodity, have little need for working capital, as they have little demand for large inventories. Generally they operate on cash and prepaid basis. But trading concerns (merchandising companies) make a greater use of working capital, since inventory represents a major item of investment. A relatively small proportion will consist of working capital in case of manufacturing concerns. Larger working capital will require
in labor intensive industries than in highly mechanized industries. In chemical or engineering industries, working capital would be relatively larger. Size of Business : The working capital requirements of a concern are directly influenced by the size of the business which may be measured in terms of scale of operations. Greater the size of a business unit generally larger will be the requirement of working capital. However, in some cases even a smaller
concern
may
need more
working capital
due to high
overhead charges
Insufficient use of available resources and other economic disadvantages of small size. Production Policy : In certain industries the demand is subject to wide fluctuation due to seasonal variation. The requirement of working capital, in such cases depends upon the production policy. The production could be kept either steady by accumulating inventories during slack period with a view to meet high demand during the peak season or the production could be curtailed during the slack season and increased during peak season. If the policy is to keep production steady by accumulation inventories it will require higher working capital. A company should have some production policy i.e. to maintain the production is a considerable range in order to meet the changing demand. A company like RIL whose productive capacities can be utilized for manufacturing varied products can have the advantages of diversified activities and solve their working capital problem. Manufacturing Process/ Length of the production cycle : In manufacturing business, the requirements of working capital increase in direct proportion to length of manufacturing process, longer the process period of manufacture, longer is the amount of working capital required. The longer the manufacturing time, the raw materials and other supplies have to be carried for a longer period in the process with progressive increment of labor and service costs before the finished product is finally obtained. Therefore, if there is alternative process of production, the process with the shortest production period should be chosen. Working Capital Cycle : In manufacturing concern, working capital cycle starts with the purchase of raw materials and ends with realization of cash from the sale of finished goods. The cycle involves the purchase of
raw materials and ends with the realization of cash from the sale of finished products. The cycle involves purchase of raw materials and stores, its conversion in to stock of finished goods through work in progress with progressive increment of labor and service cost, conversion of finished stick in to sales and receivables and ultimately realization of cash and this cycle continuous again from cash to purchase of raw materials and so on. Market Condition : The degree of competition prevailing in the market places has an important bearing on working capital needs. When competition keen, a larger inventory of finished goods is required to promptly serve customer who may not be inclined to wait because other manufacturers are ready to meet their needs, further, generous credit terms may have to be offered to attract customers in a highly competitive market. Thus, working capital needs tends to be high because of greater investment in finished goods inventory and accounts receivable. If the market is strong and completion weeks a firm can manage with a smaller inventory of finished goods because customers can be served with some delay. Further in such situation the firm can insist on cash payment and avoid lock – up of funds in accounts receivable, it can even ask for advance payment, partial or total. Credit Policy : The credit policy is concerned in its dealings with debtors and creditors influence considerably the requirements of the working capital. A concern that purchases its requirements on credit and sells its products/services on cash requires lesser amount of working capital. On the other hand a concern buying its requirements for cash and allowing credit to its customers, shall need larger amount of funds are bound to be tied up in debtors or bills receivables. Business Cycle : Business Cycle refers to alternate expansion and contraction in general business activities. In a period of born i.e. when the business is prosperous there is a need for larger amount of working capital due to increase in sales, rise in prices, optimistic expansion of business etc. On the country at the time of depression i.e. when there is a down swing of the cycle, business contracts, sales
decline, difficulties are faced in collections from debtors and firms may have a large amount of working capital lying ideal Rate of Growth Of business : The working capital requirements of a concern increase with the growth and expansion of its business activities. Although it is difficult to determine the relation between growth in the volume of the business and in the growth of the working capital of the business, yet it may be concluded that for normal rate of expansion in the volume of the business, we may have retained profits to provide for more working capital but in the first growing concerns, we shall require larger amount of capital. Earning Capacity And Dividend policy : Some firms have more earning capacity than others due to the quality of their products, monopoly conditions etc. Such firms with high earning capacity may generate cash profits from operations and contribute to their capital. The dividend policy of a concern also influences the requirements of the working capital. A firm that maintains steady high rate of cash dividend irrespective of its generation of profits needs more capital than the firm retains larger part of its profits and does not pay high rate of cash dividend. Price Level Changes : Changes in the prices level also effects the working capital requirements. Generally the rising prices will require the firm to maintain larger amount of working capital as more funds will require maintaining the same current assets. The effect of rising prices may be different for different firms. Some firms may be affected much while some other may not be affected at all by the rise in prices. Other Factors : Certain other factors such as operating efficiency, management ability, irregularities a supply, import policy, asset structure, importance of labor, banking facilities etc. also influences the requirement of working capital.
FINANCING OF WORKING CAPITAL The working capital requirements of a business concern can be classified as:a)
Permanent or Fixed working capital requirements.
b)
Temporary or variable capital requirements.
In concern, a part of working capital investments are as permanent investment in fixed assets. This is so because there always a minimum level of current assets which are continuously required by the enterprise to carry out its day-to-day business operations and this minimum cannot be expected to reduce at any time. This minimum level of current assets gives rise to permanent or fixed working capital as this part of working capital is permanently blocked in current assets. Similarly some amount of working capital may be required to meet the seasonal demands and some special exigencies such as rise in prices, strikes etc. this proportion of working capital gives rise to temporary or variable working capital which cannot be permanently employed gainfully in business. The fixed proportion of working capital should be generally financed from the fixed capital sources while the temporary or variable working capital requirements of a concern may be met from the short term sources of capital. The various sources for the financing of working capital are:PERMANENT OR FIXED SOURCES OF WORKING CAPITAL 1) Shares 2) Debentures 3) Public Deposits 4) Ploughing back of profits 5) Loans from financial institutions TEMPORARY OR VARIABLE SOURSES OF WORKING CAPITAL 1) Commercial banks 2) Indigenous bankers 3) Trade creditors 4) Installment credit 5) Advances
6) Accounts receivable- credit/factoring 7) Accrued expenses 8) Commercial paper Commercial banks are the most important sources of short term capital. The major portions of working capital loans are provided by commercial banks. They provide of wide variety of loans tailored to meet the specific requirements of a concern. The different forms in which the banks normally provide loans and advances are as follows:a) Loans b) Cash credits c) Overdrafts d) Purchasing and discounting of bills In addition to the above mentioned forms of direct finance, commercial banks help their customers in obtaining credit form their suppliers through the letter of credit arrangements. It is always a test to the prudence of a financial manager to obtain the correct amount of working capital at the right time, at a reasonable cost and at the most favorable terms. •
MANAGEMENT OF INVENTORY
•
MANAGEMENT OF CASH
•
MANAGEMENT OF RECEIVABLES •
MANAGEMENT OF INVENTORY
Inventories constitute the most significant part of current assets of a large majority of companies in India. On an average, inventories are approximately 60 % of current assets in public limited companies in India. Because of the large size of inventories maintained by firms maintained by firms, a considerable amount of funds is required to be committed to them. It is, therefore very necessary to manage inventories efficiently and effectively in order to avoid unnecessary investments. A firm neglecting a firm the management of inventories will be jeopardizing its long run profitability and may fail ultimately. The purpose of inventory management is to ensure availability of materials in sufficient quantity as and when required and also to minimize investment in inventories at considerable degrees,
without any adverse effect on production and sales, by using simple inventory planning and control techniques. •
MANAGEMENT OF CASH
Cash is the important current asset for the operation of the business. Cash is the basic input needed to keep the business running in the continuous basis, it is also the ultimate output expected to be realized
by selling or product manufactured by the firm.
The firm should keep sufficient cash neither more nor less. Cash shortage will disrupt the firm’s manufacturing operations while excessive cash will simply remain ideal without contributing anything towards the firm’s profitability. Thus a major function of the financial manager is to maintain a sound cash position. Cash is the money, which a firm can disburse immediately without any restriction. The term cash includes coins, currency and cheques held by the firm and balances in its bank account. Sometimes near cash items such as marketing securities or bank term deposits are also included in cash. Generally when a firm has excess cash, it invests it is marketable securities. This kind of investment contributes some profit to the firm. NEEDTO HOLD CASH The firm’s need to hold cash may be attributed to the following three motives:The Transaction Motive: The transaction motive requires a firm to hold cash to conduct its business in the ordinary course. The firm needs cash primarily to make payments for purchases, wages and salaries, other operating expenses, taxes, dividends, etc. The Precautionary Motive: A firm is required to keep cash for meeting various contingencies. Though cash inflows and outflows are anticipated but there may be variations in these estimates. For example a debtor who pays after 7 days may inform of his inability to pay, on the other hand a supplier who used to give credit for 15 days may not have the stock to supply or he may not be in opposition to give credit at present. Speculative Motive: - The speculative motive relates to the holding of cash for investing in profit making opportunities as and when they arise. The opportunities to make profit changes. The firm will hold cash, when it is expected that interest rates will rise and security price will fall.
•
MANAGEMENT OF RECEIVABLE
A sound managerial control requires proper management of liquid assets and inventory. These assets are a part of working capital of the business. An efficient use of financial resources is necessary to avoid financial distress. Receivables result from credit sales. A concern is required to allow credit sales in order to expand its sales volume. It is not always possible to sell goods on cash basis only. Sometimes other concern in that line might have established a practice of selling goods on credit basis. Under these circumstances, it is not possible to avoid credit sales without adversely affecting sales. The increase in sales is also essential to increases profitability. After a certain level of sales the increase in sales will not proportionately increase production costs. The increase in sales will bring in more profits. Thus, receivables constitute a significant portion of current assets of a firm. But for investment in receivables, a firm has to insure certain costs. Further, there is a risk of bad debts also. It is therefore, very necessary to have a proper control and management of receivables.
Operating cycle Operating cycle refers to the time duration required to convert sales ,after the conversion of recourses into inventories, into cash .the operating cycle of a manufacturing company like RIL includes: 1.) Acquisition of resources such as raw materials, labor, power and fuel etc. 2.) Manufacture of the product which includes conversion of materials into work-in-progress into finished goods. 3.) Sale of the product either for cash or on credit. Credit sales create account receivables for collection.
COMPONENTS OF WORKING CAPITAL ARE CALCULATED AS FOLLOWS 1) Raw Materials Storage Period=Avarage stock of raw materials/Avarage cost of raw material consumption per day. 2.) W-I-P Holding period=Average w-i-p in inventory/Average cost of production per day. 3.) Stores and spares conversion period= Average stock of
Stores and spares/ Avarage
consumption per day. 4.) Finished goods conversion period= Average stock of finished goods/Avarage cost of of goods sold per day. 5.) Debtors collection period=Avarage book debts/Avarage credit sales per day. 6.) Credit period availed=Avarage trade creditors/Average credit purchase per day.
SIGNIFICANCE OF WORKING CAPITAL
ABOUT TELECOM INDUSTRY World telecom industry is an uprising industry, proceeding towards a goal of achieving two third of the world's telecom connections. Over the past few years information and communications technology has changed in a dramatic manner and as a result of that world telecom industry is going to be a booming industry. Substantial economic growth and mounting population enable the rapid growth of this industry. The world telecommunications market is expected to rise at an 11 percent compound annual growth rate at the end of year 2010. The leading telecom companies like AT&T, Vodafone, Verizon, SBC Communications, Bell South, Qwest Communications are trying to take the advantage of this growth. These companies are working on telecommunication fields like broadband technologies, EDGE(Enhanced Data rates for Global Evolution) technologies, LAN-WAN inter networking, optical networking, voice over Internet protocol, wireless data service etc. Economical aspect of telecommunication industry: World telecom industry is taking a crucial part of world economy. The total revenue earned from this industry is 3 percent of the gross world products and is aiming at attaining more revenues. One statistical report reveals that approximately 16.9% of the world population has access to the Internet. Present market scenario of world telecom industry: Over the last couple of years, world telecommunication industry has been consolidating by allowing private organizations the opportunities to run their businesses with this industry. The Government monopolies are now being privatized and consequently competition is developing. Among all, the domestic and small business markets are the hardest.
INDIAN OVERVIEW Today the Indian telecommunications network with over 375 Million subscribers is second largest network in the world after China. India is also the fastest growing telecom market in the world with an addition of 9- 10 million monthly subscribers. The teledensity of the Country has increased from 18% in 2006 to 33% in December 2008, showing a stupendous annual growth of about 50%, one of the highest in any sector of the Indian Economy. The Department of
Telecommunications has been able to provide state of the art world-class infrastructure at globally competitive tariffs and reduce the digital divide by extending connectivity to the unconnected areas. India has emerged as a major base for the telecom industry worldwide. Thus Indian telecom sector has come a long way in achieving its dream of providing affordable and effective communication facilities to Indian citizens. As a result common man today has access to this most needed facility. The reform measures coupled with the proactive policies of the Department of Telecommunications have resulted in an unprecedented growth of the telecom sector. The thrust areas presently are: 1. Building a modern and efficient infrastructure ensuring greater competitive environment. 2. With equal opportunities and level playing field for all stakeholders. 3. Strengthening research and development for manufacturing, value added services. 4. Efficient and transparent spectrum management 5. To accelerate broadband penetration 6. Universal service to all uncovered areas including rural areas. 7. Enabling Indian telecom companies to become global players. Recent things to watch in Indian telecom sector are: 1. 3G and BWA auctions 2. MVNO 3. Mobile Number Portability 4. New Policy for Value Added Services 5. Market dynamics once the recently licensed new telecom operators start rolling out 6. Services. 7. Increased thrust on telecom equipment manufacturing and exports. 8. Reduction in Mobile Termination Charges as the cost per line has substantially reduced 9. Due to technological advancement and increase in traffic. India's telecom sector has shown massive upsurge in the recent years in all respects of industrial growth. From the status of state monopoly with very limited growth, it has grown in to the level of an industry. Telephone, whether fixed landline or mobile, is an essential necessity for the
people of India. This changing phase was possible with the economic development that followed the process of structuring the economy in the capitalistic pattern. Removal of restrictions on foreign capital investment and industrial de-licensing resulted in fast growth of this sector. At present the country's telecom industry has achieved a growth rate of 14 per cent. Till 2000, though cellular phone companies were present, fixed landlines were popular in most parts of the country, with government of India setting up the Telecom Regulatory Authority of India, and measures to allow new players country, the featured products in the segment came in to prominence. Today the industry offers services such as fixed landlines, WLL, GSM mobiles, CDMA and IP services to customers. Increasing competition among players allowed the prices drastically down by making the mobile facility accessible to the urban middle class population, and to a great extend in the rural areas. Even for small shopkeepers and factory workers a phone connection is not an unreachable luxury. Major players in the sector are BSNL, MTNL, Bharti Teleservices, Hutchison Essar, BPL, Tata, Idea, etc. With the growth of telecom services, telecom equipment and accessories manufacturing has also grown in a big way. Indian Telecom sector, like any other industrial sector in the country, has gone through many phases of growth and diversification. Starting from telegraphic and telephonic systems in the 19th century, the field of telephonic communication has now expanded to make use of advanced technologies like GSM, CDMA, and WLL to the great 3G Technology in mobile phones. Day by day, both the Public Players and the Private Players are putting in their resources and efforts to improve the telecommunication technology so as to give the maximum to their customers.
ABOUT RELIANCE INDUSTRIES LIMITED (Enhancing Lives. Energizing India. The Reliance Way)
HISTORY OF IPCL 2002 ONWARDS-RELIANCE ACQISITION The government of India handled over management control to Reliance group on June 4, 2002, since then the company is being managed by reliance. The new management team has reendorsed the company’s mission to create value for all stakeholders. All over efforts are being made to enhance productivity and control cost for superior value addition. The physical and cultural integration began from the word go, both IPCL and Reliance started adopting “Best Practices” from each other. This led to optimal utilization of available resources for enhancing productivity. The profit for the first financial year(2002-03) under the reliance management stood at INR 2.04 billion, 90% jump over the previous year’s profit of INR 1.07 billion. Commenting on the results for 2002-2003, Mr. Mukesh Ambani, Chairman, said “we are delighted with the complete turnaround in IPCL’s performance in the very first year of acquisition by reliance. The successful absorption of Reliance’s best practice by IPCL in all areas of operations, and positive impact of measures introduced for cost reduction and productivity and efficiency gains. We have great confidence in the capabilities of IPCL and its people, and are confident of further improvement in the company’s performance in the future”.
MISSION & VISION “Continuously innovate to remain Partners in human progress by Harnessing science & technology in the petrochemicals domain” OUR MISSION “Be a globally preferred Business associate with responsible Concern for ecology, society, And stakeholder’s value”.
VALUES & QUALITY POLICY OUR VALUES “Integrity, Respect for People, Unity of Purpose, Outside-in Focus, Agility and Innovation”.
QUALITY POLICY “Bare committed to meet customers’ requirements through continual improvement Of our quality management systems. We shall sustain organizational excellence through visionary leadership and innovative efforts”.
HIGHLIGHTS(2008-09)
Turnover
:
Rs 1,46,328 crore ($ 28,850 million)
PBDIT
:
Rs 25,743 crore ($ 5,076 million)
Cash Profit
:
Rs 22,365 crore ($ 4,410 million)
Net Profit
:
Rs 15,309 crore ($ 3,018 million)
Net Profit (excl. exceptional item) :
Rs 15,637 crore ($ 3,083 million)
Net Profit 5 years CAGR
:
25 %
Total Assets
:
Rs. 2,45,706 crore ($ 48,444 million)
SIGNIFICANT CONTRIBUTION TO INDIA’S ECONOMIC GROWTH 10.4 % of India’s total exports. 2.9 % of the Government of India’s indirect tax exports. 6.1 % of the total market capitalization in India.
Weightage of 13.6 % in the BSE Sensex. Weightage of 11.1 % in the S&P CNX Nifty Index.
COMPANY LOGOS
The first logo, which consisted of a tetrahedron - representing the molecular structure of the simplest organic chemical, methane - in a circle.
This decision of the government, “Every thing under one roof” inspired the second logo of IPCL. IPCL took up the challenge of setting up the entire integrated complex at Vadodara.
IPCL, as a corporate entity, is and what it shall strive to be. This symbol, or logo, reflects what IPCL is a single matrix of the many; a diversity of activities and products, emerging from one sourceand branching out in different directions, yet retaining its unity and identity. The lines flow upwards and outwards from a common base into infinity,
reaching for unending growth, universal goodwill, general prosperity and excellence in everything. The green colour used in the design reinforces the theme - aspiration and growth, rooted in the earth and in harmony with the other elements - water, light, air and space
The government of India handled over management control to Reliance group on June 4, 2002, since then the company is being managed by reliance.
RIL MILESTONE
YEAR
EVENTS
1969 1970 1973 1992 1992 1996 1999 2000 2002 2004
IPCL was incorporated under company act. Construction of our first Petrochemicals complex commenced at Vadodara, Gujarat. Commenced commercial operation at Vadodara. Initial public offering and listing on the Vadodara stock exchange Second Petrochemical Complex commenced at Nagothane, Maharashtra Third Petrochemical Complex commenced at Gandhar Gandhar complex commissioned. Completion of the second phase of the Gandhar complex Reliance took over IPCL. Amendment agreement between the government and the strategic partner, Reliance
2005
petroleum limited, a Reliance group company. Government of India withdrew its nominee directors from the board of directors of
2006
India petrochemicals co. ltd. Amalgamation of six polyester companies i.e. Apollo fibres ltd, Central India ploysters ltd, India polyfibres ltd, Orissa polyfibres ltd, Recron synthetics ltd and
2007 2008
Silvassa industries Pvt ltd with IPCL. RIL complete a landmark acquisition of IPCL. RIL signed MOU with GAIL(INDIA) Ltd. to explore opportunities of setting of
2009
petrochemical plants. RPL merged with RIL Ltd : value creation through scale & synergies. GROWTH THROUGH CHALLENGES
Life at Reliance is challenging, fulfilling and exciting! Reliance offers access to world-class resources for personal and professional growth. At Reliance, you'll have the chance to take on challenging responsibilities, working with top-notch, world-class professionals from around the globe. You will be part of a culture of excellence. People are central to Reliance's growth strategy. A large in-house pool of intellectual capital is the driving force behind Reliance's rapid growth, and is one of its competitive advantages. Reliance is a young company, with an average age of 39 years. Talent is drawn from diverse academic and professional backgrounds. World-class exposure, growth opportunities and competitive compensation packages offered by Reliance enables it to attract and retain excellent talent. Reliance targets the world market for talent, provides global perspectives and has a large number of expatriates on its rolls. Reliance endeavours to create a workplace where every person can reach his or her full potential. Growth is care for good health Reliance's occupational health centres carry out pre-employment and periodic medical checkups as well as other routine preventive services. Specialised tests like biological monitoring, health risk assessment studies and audits for exposure to various materials are also performed. Health education and awareness form an integral part of the health care programme at Reliance.
Growth is care for safety We believe that the safety of each employee is the responsibility of the individual as well as of the whole community of employees. Growth is care for the environment
Reliance believes that a clean environment in and around the workplace fosters health and prosperity for the individual, the group and the larger community to which they belong. Environmental protection is an integral part of the planning, design, construction, operation and maintenance of all our projects. Growth is betting on our people Reliance builds with care a workplace that proactively fosters professional as well as personal growth. There is freedom to explore and learn; and there are opportunities that inspire initiative and intrinsic motivation. We believe that people must dream to achieve, that these dreams will drive the company's excellence in all its businesses. Reliance thinks, behaves, lives and thrives with a global mindset, encouraging every employee to reach his / her full potential by availing opportunities that arise across the group. Growth is thinking beyond business As corporate citizens, we invest in social infrastructure, believing strongly that our business strength fuels our social contributions. To this end, Reliance encourages, funds and develops numerous education, health, human capital and infrastructure initiatives. These initiatives are undertaken through partnerships with non-governmental organizations, corporate and trusts. For those who study innovative organizations Reliance Industries will be a shining example of how innovation is practised in almost everything that they do. Here are few things that set them apart: •
"Impossible is an inspiring word" - Nothing turns on the leadership at Reliance Industries than this magical word. Again to quote the Jamnagar example, it was considered impossible to turn a barren land into a greenbelt. Today mangoes grown in Jamnagar are sold in Harrods London.
•
"Hands on thinking, hands off execution." - It is characteristic of Reliance leadership. They think everything through and meticulous planning is their hall mark. When it comes to execution empowerment delegation down to the last employee in the chain is clearly demonstrated.
•
"First time it is learning. Second time it is a mistake." - Mistakes are never frowned upon; instead they are treated as a learning opportunity. It is one such mistake converted to learning that created the world's largest 'Craft Centre' located at Jamnagar. Cumulatively it has trained 1, 50,000 workmen - electricians, welders, carpenters.
•
"Sense of urgency" - Reliance speed is legendary now. Reliance has mastered project management skills and has made it virtually into a fine art. It is this sense of speed that restored operations in record time in Jamnagar, Patalganga and Hazira after being affected by cyclones and floods.
•
"Think. Anticipate. Be prepared." Part of meticulous thinking is the ability to anticipate problems. "Every transformation initiative will face resistance. It is our job to anticipate the resistance, take the responsibility to earn the respect of all stakeholders to create a win-win business model."
•
"Dreams and Vision are the most potent fuels in the world." - This is an unmistakable Reliance hallmark espoused both by the founder Chairman Sh. Dhirubhai Ambani and the current Chairman Sh. Mukesh Ambani. To a question on what would be his next big ambition Sh. Mukesh Ambani answered
•
"Rural transformation.” - Creating direct employment for half a million people in rural India. Creating a supply chain that the world will envy."
•
"Measuring success differently" - Developing a metric to measure how much money was spent, is just one example of inspiring people to think and act differently and effectively.
It is evident that Reliance Industries is where it is today because of Innovation in thinking and execution. Given its ambition for India and its own organization Reliance leadership has now taken on a major initiative in the innovation domain. The leadership of RIL recognizes that its biggest competitive advantage and differentiator in the future would be innovation. Innovation has to become the language, the behaviour definer, the culture and the soul of Reliance, even more explicitly than ever before.
ABOUT RELIANCE COMMUNICATIONS
The Late Dhirubhai Ambani dreamt of a digital India — an India where the common man would have access to affordable means of information and communication. Dhirubhai, who singlehandedly built India’s largest private sector company virtually from scratch, had stated as early as 1999: “Make the tools of information and communication available to people at an affordable cost. They will overcome the handicaps of illiteracy and lack of mobility.” It was with this belief in mind that Reliance Communications (formerly Reliance Infocomm) started laying 60,000 route kilometers of a pan-India fiber optic backbone. This backbone was commissioned on 28 December 2002, the auspicious occasion of Dhirubhai’s 70th birthday, though sadly after his unexpected demise on 6 July 2002. Reliance Communications has a reliable, high-capacity, integrated (both wireless and wireline) and convergent (voice, data and video) digital network. It is capable of delivering a range of services spanning the entire infocomm (information and communication) value chain, including infrastructure and services — for enterprises as well as individuals, applications, and consulting. Today, Reliance Communications is revolutionizing the way India communicates and networks, truly bringing about a new way of life.
REVEIEW OF LITERATURE FOR WORKING CAPITAL Working capital policy refers to the firm's policies regarding : 1) Target levels for each category of current operating assets and liabilities, and 2) How current assets will be financed. Generally good working capital policy (i.e. under conditions of certainty) is considered to be one in which holdings of cash, securities, inventories, fixed assets, and accounts payables are minimized.
The level of accounts receivables should be used as a means of stimulating sales and other income. Previous literature on working capital management has found a negative association, overall, between level of working capital and operating performance as measured by operating returns and operating margins (Peterson and Rajan, 1997). Under conditions of certainty (i.e. sales, costs, lead times, payment periods, and so on, are known), firms have little reason to hold more working capital than a minimum level. Larger amounts would increase the level of operating assets, increase the need for external funding, resulting in lower return on assets and a lower return on equity, without any increase in profit. However the picture changes when uncertainty (i.e. uncertain growth) is introduced (Brigham and Houston, 2000). Larger amounts of cash, securities, accounts receivables, marketable securities, inventories, and fixed assets will be needed to support increased sales Required levels will be based on expected sales levels and expected order lead times. Additional holdings may be needed to enable the firm to deal with departures from the expected values. Further, firms will also attempt to increase their accounts payable balances as a means of financing increased levels of current operating assets. Firms which are in high growth stages will face the challenge of maintaining the necessary level of operating assets to support subsequent growth, while at the same time attempting to maintain adequate performance indicators.
From the above reviews it can be concluded that many researches have been conducted before relating to the concept of working capital but no researches have been conducted to study the working capital management of Reliance Industries Limited. This gap has been fulfilled by this research report which gives an practical insight into the concept of working capital management.
LITERATURE REVIEW FOR TELECOM INDUSTRY Cygnus Business Consulting & Research Pvt. Ltd. (2008), in its “Performance Analysis of Companies (April-June 2008)� has analyzed the Indian telecom industry in the awake of recent global recession and its overall impact on the Indian economy. With almost 5-6million
subscribers are being added every month, and the country is witnessing wild momentum in the telecom industry, the Indian telecom industry is expected to maintain the same growth trajectory. •
Internet service providers in India, Rao (2000), provide a broad view of the role of an Internet service provider (ISP) in a nascent market of India. Building local content, foreknowledge of new Internet technologies, connecting issues, competitiveness, etc. would help in their sustainability.
•
The role of technology in the emergence of the information society in India, Singh (2005), describes the role that information and communication technologies are playing for Indian society to educate them formally or informally which is ultimately helping India to emerge as an information society.
•
T.H. Chowdary (1999) discusses how Telecom reform, or demonopolization, in India has been bungled. Shaped by legislation dating back to the colonial era and post Second World War socialist policies, by the mid-1980s India realized that its poor telecommunications infrastructure and service needed reform. At the heart of the problem lay the monopoly by the government’s Department of Telecommunications (DOT) in equipment, networks and services. The National Telecom Policy 1994 spelt out decent objectives for reform but tragically its implementation was entrusted to the DOT. This created an untenable situation in which the DOT became policymaker, licenser, regulator, operator and also arbitrator in disputes between itself and licensed competitors. He discusses the question: ‘Why did India get it so wrong? and What India should do now?
•
Thomas (2007), in his article describes the contribution made by telecommunications in India by the state and civil society to public service, this article aims to identify the state’s initial reluctance to recognize telecommunications provision as a basic need as against the robust tradition of public service aligned to the postal services and finds hope in the renewal of public service telecommunications via the Right to Information movement. The article follows the methodology of studying the history of telecommunications approach that is conversant with the political economy tradition. It uses archival sources, personal correspondence, and published information as its research material. The findings of the paper suggests that public service in telecommunication is a relatively ‘‘new’’ concept in the annals
of Indian telecommunications and that a deregulated environment along with the Right to Information movement holds significant hope for making public service telecommunications a real alternative. The article provides a reflexive, critical account of public service telecommunications in India and suggests that it can be strengthened by learning gained from the continual renewal of public service ideals and action by the postal services and a peoplebased demand model linked to the Right to Information Movement. All studies done by the researcher suggests that the right to information movement has contributed to the revitalization of participatory democracy in India and to a strengthening of public service telecommunications.
GROWTH IN SEGMENTS According to a Frost & Sullivan industry analyst, by 2012, fixed line revenues are expected to touch US$ 12.2 billion while mobile revenues will reach US$ 39.8 billion in India. Fixed line capex is projected to be US$ 3.2 billion, and mobile capex is likely to touch US$ 9.4 billion. Further, according to a report by Gartner Inc., India is likely to remain the world's second largest wireless market after China in terms of mobile connections. According to recent data released by the COAI, Indian telecom operators added a total of 10.66 million wireless subscribers in December 2008. Further, the total wireless subscriber base stood at 346.89 million at the end of December 2008. The overall cellular services revenue in India is projected to grow at a CAGR of 18 per cent from 2008-2012 to exceed US$ 37 billion. Cellular market penetration will rise to 60.7 per cent from 19.8 per cent in 2007. The Indian telecommunications industry is on a growth trajectory with the GSM operators adding a record 9.3 million new subscribers in January 2009, taking the total user base to 267.5 million, according to the data released by COAI. However, this figure does not include the number of subscribers added by Reliance Telecom. In WiMax, India is slated to become the largest WiMAX market in the Asia-Pacific by 2013. A recent study sees India's WiMAX subscriber base hitting 14 million by 2013 and growing
annually at nearly 130 per cent. And investments in WiMAX ventures are slated to top US$ 500 million in India, according to a report by US-based research and consulting firm, Strategy Analytics.
VALUE-ADDED SERVICES MARKET A report by market research firm IMRB stated that the mobile value-added services (MVAS) industry was valued at US$ 1.15 billion in June 2008, and is expected to grow rapidly at 70 per cent to touch US$ 1.96 billion by June 2009. Currently, MVAS in India accounts for 10 per cent of the operator's revenue, which is expected to reach 18 per cent by 2010. According to a study by Stanford University and consulting firm BDA, the Indian MVAS is poised to touch US$ 2.74 billion by 2010. Mobile advertising, which is an important VAS segment, offers great potential to become an important revenue source. Marketers are increasingly using MVAS as a step ahead of SMSbased marketing to sell soaps and shampoos, banking, insurance products and also entertainment services, and rural markets are proving to be very receptive for such marketing. Further, Venture Capitalists like Canaan Partners, Draper Fisher Juvertson, Helion, and Nexus India are also innovating with services like mobile payment options, advertising, voice-based SMS and satellite video streaming. According to Venture Intelligence, there were nine deals worth US$ 41 million in 2007 in the mobile VAS space, and till August 2008, seven deals worth US$ 91 million had already been finalized. Presently, mobile VAS has a US$ 700 million market with a 20 per cent y-o-y growth, which is likely to touch US$ 3 billion by 2012.
From the above reviews it can be concluded that many researches have been conducted before but no researches have been conducted to study the performance of leading players. This topic had been chosen keeping in mind the increasing competition in telecom industry and to study the position of
Reliance communications as compared to 4 other top players. This gap has been fulfilled by this research report which gives a practical insight into the concept of working capital management.
RESEARCH METHODOLOGY For every comprehensive research a proper research methodology is indispensable & it has to be properly conceived. The methodology adopted by me is as follows:-
CHAPTER: 3(a) RESEARCH PROBLEM ďƒ˜ To know the working capital management of RIL with the help of ratio analysis. ďƒ˜ To analyze the market strength of reliance communications.
CHAPTER: 3(b) HYPOTHESIS OF THE STUDY A research hypothesis is the statement created by a researcher when they speculate upon the outcome of a research or experiment. For the study of customer preference towards Reliance Communications the following hypothesis was set up. •
H0: There is no significant relationship between factors and satisfaction level.
•
H1: There is significant relationship between factors and satisfaction level.
CHAPTER 3(c) OBJECTIVES OF STUDY •
Find out Ratios related to working capital management of RIL and compare with last 5 years.
•
Find deviation of calculated from standard or Norms.
•
To study the customer preference towards reliance communications as compared to its competitors namely Airtel, Vodafone, Idea, Tata Docomo.
•
To suggest measures to improve its market share and positioning.
CHAPTER 3(d) SCOPE OF STUDY The scope of this study is to provide an insight into concept of working capital management and illustrate it by actually working capital management of RIL. This study also provides insight of the customer preference of Reliance Communications and its market share as compared to Airtel, Vodafone, Idea, Tata Docomo.
CHAPTER 3(e) RESEARCH DESIGN
According to Clifford Woody, “research comprises defining and redefining problems, formulating hypothesis or suggested solutions; collecting, organizing and evaluating data; making deductions and reaching conclusions; and at last carefully testing the conclusions to determine whether they fit the formulating hypothesis. This research is divided in two parts: (i)
Working Capital Management through secondary data based on certain parameters;
(ii)
an exploratory research based on a survey of the concerning literature. A sample survey was conducting with the help of Scheduling Method of collecting data i.e. personally the enumerator visited and got the questionnaires filled from the respondents. The enumerator in this method helps the respondents in recording their answers to various questions in the said schedules.
CHAPTER 3(f) SOURCES OF DATA There are two types of data viz. primary and secondary. The primary data are those which are collected afresh and for the first time, and thus happen to be original in character. The secondary data, on the other hand, are those which have already been collected by someone else and which have already been passed through the statistical process. For this research report, primary data was collected through questionnaires from customers and recharge dealers of sector 8 and 9 and there was no bias on the part of the enumerator while selecting the sample for the analysis concerning Reliance Competitors. Secondary data was used for the working capital management of RIL that is company annual reports, profit and loss account and balance sheet for the years 2004-05, 2005-06, 2006-07, 200708, 2008-09, brochures from recharge dealers, magazines and newspapers.
CHAPTER 3(g) SAMPLE SIZE For this research, in part one, a sample size of annual reports for 5 years 2004-05, 2005-06, 2006-07, 2007-08, 2008-09 were taken.
For the second part, a sample size of 100 respondents was taken out of the total customers using mobile phones.
CHAPTER 3(h) SAMPLE AREA The sample area was Chandigarh and involved respondents coming to recharge dealers in sector 8 and 9 and the residents of sector 8.
CHAPTER 3(i) STATISTICAL TOOLS USED The various statistical tool used were data distribution tables, graphs and pie charts. Ratio analysis was used for determining the working capital management of RIL. Hypothesis testing through Chi Square test was used in Customer Preference Towards Reliance Communications.
CHAPTER 3(j) LIMITATIONS OF THE STUDY Following were the limitations of the study: Time was limited. The sample size of 100 is very small and more than that could not be possible. The study was only based on the survey of respondents in CHANDIGARH and no other area could be undertaken for the survey due to lack of transport and time. This of working capital management is based solely upon the annual reports of the company in hard copy and through company website. Only 5 companies could be compared for the market analysis in order to avoid complexity of data.
(WORKING CAPITAL MANAGEMENT OF RIL)
CURRENT RATIO
ACID-TEST RATIO DEBTORS TURNOVER RATIO CREDITORS TURNVOER RATIO INVENTORY TURNOVER RATIO NET WORKING CAPITAL RATIO DEBT COLLECTION RATIO STATEMENT OF RATIO ANALYSIS
CURRENT RATIO It is also known as “working capital ratio” .It is a measures of short-term financial strength of the business and shows whether the business will be able to meet it’ s current liabilities as when they mature. Current Assets including assets which can be converted in to cash easily and itself like market securities debtors, inventory, prepaid expenses etc.
Current Liabilities included creditors, bills payable, accrual expenses, short term bank loan, income tax liabilities and long term debt maturity in current year. In short it can be said as all obligation within a year are included in current liabilities. Current ratio is a measure of the firm’s short term solvency. It indicate the availability of current assets in rupee of current liabilities. As a conventional rule, a current ratio should be or slightly more. It focuses the strong of weak position of the company.
For the year: 2008 - 09 =
Rs. 58746.07
= 1.61:1
Rs. 35756.98 2007 - 08 =
Rs. 51488.87
= 2.19:1
Rs. 23417.51 2006 - 07 =
Rs. 29913.35
= 1.77:1
Rs. 16865.53 2005 - 06 =
Rs. 24574.45
= 1.96:1
Rs. 12563.50 2004 - 05 =
Rs. 28452.51 Rs. 13283.95
= 2.14:1
YEARS
CURRENT RATIO
2008-09
1.61:1
2007-08
2.19:1
2006-07
1.77:1
2005-06
1.96:1
2004-05
2.14:1
INTERPRETATION:
It is generally believed that 2:1 ratio shows a comfortable working capital position. The tendon committee appointed by RBI had wide recommended a current ratio of 2:1. Company has maintained this ration and increased it year by year. A current ratio is 1.61 in the current year. But in the other year the ratio is nearer to 1:2 so we can say that the company having comfortable working capital position.
ACID-TEST RATIO The measure of absolute liquidity may be obtained only cash and bank balance as well as only ready marketable security with liquid liabilities. This is every existing standard of liquidity and it is satisfaction if the ratio is 1.50:1.
For the year: 2008 - 09 =
Rs. 58746.07 – 20109.61 = 1.08:1 Rs.
2007 - 08 =
Rs. 51488.87 - 19126.14 = 2.19:1 Rs.
2006 - 07 =
= 1.38:1
16865.53
Rs. 24574.45 – 10119.82 Rs.
2004 - 05 =
23417.51
Rs. 29913.35 – 12136.51 Rs.
2005 - 06 =
35756.98
= 1.15:1
12563.50
Rs. 28452.51 – 7412.88
= 1.58:1
Rs.
13283.95
YEARS
ACID-TEST RATIO
2008-09
1.08:1
2007-08
1.38:1
2006-07
1.05:1
2005-06
1.15:1
2004-05
1.58:1
ACID-TEST RATIO
ACID-TEST RATIO 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0
ACID-TEST RATIO
2008-09
2007-08
2006-07 YEARS
2005-06
2004-05
INTERPRETATION: Acid-test ratio is near to one in current year that is 1.08 as compare to 1.38 in the previous year. Over all the acid-test ratio of last five year is very satisfactory so we can conclude that the absolute liquidity of the Reliance Industries Limited is in favour.
ďƒ˜ DEBTORS TURNOVER RATIO This ratio shows the proportion of sales to average receivables. It shows the efficiency of the collection policy of the firm. The higher the ratio, the less satisfactory position of the firm. Higher ratio indicates weak collection policy of the firm.
For the year: 2008 - 09 =
Rs. 151224.01 = 31.21:1 Rs. 4844.97
2007 - 08 =
Rs. 137146.66 = 22.60:1 Rs.
2006 - 07 =
6068.30
Rs. 111692.72
= 29.92:1
Rs. 3732.42 2005 - 06 =
Rs. 81211.33
= 19.50:1
Rs. 4163.62 2004 - 05 =
Rs. 66051.30 Rs. 3927.81
= 16.82:1
YEARS
DEBTORS TURNOVER RATIO
2008-09
31.21:1
2007-08
22.60:1
2006-07
29.92:1
2005-06
19.50:1
2004-05
16.82:1
DEBTORS TURNOVER RATIO
DEBTORS TURNOVER RATIO 35 30 25 20
DEBTORS TURNOVER RATIO
15 10 5 0 2008-09 2007-08 2006-07 2005-06 2004-05
INTERPRETATION:
YEARS
We know that the higher Debtor’s turnover ratio is not good for the firm. In the year 2008-09 it is 31.21:1 but in the previous year it was 22.60:1. So some improvement is needed.
CREDITOR’S TURNOVER RATIO : Creditor’s turnover ratio shows the proportion of purchase to account payable number of days within which we make payment to our creditors for credit purchases estimated the creditors ratio if this ratio is higher it means company has to check whether company is making payment within credit period available. If it is making payment before the due date means the company is not taking full advantage of it credit period and if company making the payment the period that indicates that the company is not taking the benefit of discount allowed.
For the year: 2008 - 09 =
Rs. 118961.16 = 3.33:1 Rs. 35756.98
2007 - 08 =
Rs. 108270
= 4.62:1
Rs. 23417.51 2006 - 07 =
Rs. 92301.09
= 5.47:1
Rs. 16835.53 2005 - 06 =
Rs. 69043.43
= 5.49:1
Rs. 12563.50 2004 - 05 =
Rs. 52715.92 Rs. 13283.95
= 3.96:1
YEARS
CREDITOR’S TURNOVER RATIO
2008-09
3.33:1
2007-08
4.62:1
2006-07
5.47:1
2005-06
5.49:1
2004-05
3.96:1
CREDITOR’S TURNOVER RATIO 5.47 5.49
6
4.62
5 4
3.33
3.96
3 2
CREDITOR’S TURNOVER RATIO
1 0
2008- 2007- 2006- 2005- 200409 08 07 06 05 YEARS
INTERPRETATION: Higher Ratio of creditor turnover forces the company to check that payment is made with in credit period properly or not. The creditors’ turnover ratio is 3.33 in 2008-09 as compare to 2007-08 the ratio is 4.62 which is higher than the other years.
INVENTORY TURNOVER RATIO This ratio is also known as “stock turnover ratio”. The number of times the average stock is turnover during the year is known as stock turnover. It is computed by deciding the sales by the inventory. The ratio is important in joining the ability of management which it can move the stock.
For the year: 2008 - 09 =
Rs. 151224.01 = 7.51 times Rs. 20109.61
2007 - 08 =
Rs. 137146.66 = 7.17 times Rs. 19126.14
2006 - 07 =
Rs. 111692.72
= 9.20 times
Rs. 12136.51 2005 - 06 =
Rs. 81211.33
= 8 times
Rs. 10119.82 2004 - 05 =
Rs. 66051.30 Rs. 7412.88
= 8.91 times
INVENTORY TURNOVER RATIO
2008-09
7.51 times
2007-08
7.17 times
2006-07
9.20 times
2005-06
8.00 times
2004-05
8.91 times
INVENTORY TURNOVER RATIO 10 RATIO
INVENTORY TURNOVER
YEARS
9.2
8
7.51
8
7.17
6 4 2 0 2008-09
2007-08
2006-07
2005-06
YEARS INVENTORY TURNOVER
RATIO
INTERPRETATION: Higher the ratio more profitability the business would be. The ratio is joining the ability of management with which it can move the stock. Inventory turnover ratio is highest in the year 2006-07 is 9.20 as compare to the other year but in current year it is 7.51 which is little lower than previous year but it is obvious that in heavy industries like Reliance Industries Limited have lower ration as compare to FMCG.
ďƒ˜ NET WORKING CAPITAL TURNOVER RATIO Net working capital turnover ratio is obtained by net working capital joining to sales. The excess of current assets over current liabilities is called working capital. It is found for measuring firm liquidity. It also measures the firm potential reserve of funds.
For the year: 2008 - 09 =
Rs. 151224.01 = 5.83 times Rs. 19874.06
2007 - 08 =
Rs. 137146.66
= 5.57 times
Rs. 24622.18 2006 - 07 =
Rs. 111692.72
= 9.85 times
Rs. 11334.95 2005 - 06 =
Rs. 81211.33
= 10 times
Rs. 8119.97 2004 - 05 =
Rs. 66051.30 Rs. 11320
= 5.83 times
YEARS
WORKING CAPITAL TURNOVER RATIO
2008-09
7.60 times
2007-08
5.57 times
2006-07
9.85 times
2005-06
10.00 times
2004-05
5.83 times
W ORKING CAPITAL TURNOVER RATIO
5.83
YEARS
2004-05 2005-06
10
2006-07
9.85 5.57
2007-08
WORKING CAPITAL TURNOVER RATIO
7.6
2008-09
W ORKING CAPITAL TURNOVER RATIO
INTERPETATION: As per the balance sheet data of the creditor the working capital turnover ratio is different for the different years. The ratio is 7.60 in 2008-09 and 5.57 in 2007-08 but the best favorable ratio is in 2005-06 which is 10 times. So it means that higher the ratio better the working capital condition of the company.
DEBTOR COLLECTION PERIOD The Debt Collection shows the number of days taken to collect the debts of credit sales. It shows the efficiency and collection policy of the company. The ratio is computed by dividing the Debtor’s turnover ratio in to 365 days.
For the year: 2008 - 09 = 365 days
= 11 days
31.21 2007 - 08 = 365 days
= 16.15 days
22.60 2006 - 07 = 365 days
= 12.20 days
29.92 2005 - 06
= 365 days
= 18.71 days
19.50 2004 - 05 = 365 days
= 21.70 days
16.82
YEARS
DEBTORS COLLECTION PERIOD
2008-09
11.00 days
2007-08
16.15 days
2006-07
12.20 days
2005-06
18.71 days
2004-05
20.71 days
INTERPRETATION:
The collection period is highest in 2004-05 is 20.71 days as compare to very low in 2008-09 is only 11 days. This shows the improvement in collection policy of the Reliance Industries Limited. So it is very important for any company to collect the debs which this company do very well.
STATEMENT OF RATIO ANALYSIS RATIOS
2008-09
2007-08
2006-07
2005-06
2004-05
Current ratio
1.64
2.19
1.77
1.96
2.14
Acid-test ratio
1.08
1.38
1.05
1.15
1.58
Debtor’s turnover ratio
31.21
22.60
29.92
19.50
16.82
Creditor’s turnover ratio
3.33
4.62
5.47
5.49
3.96
Inventory turnover ratio
7.51
7.17
9.20
8.00
8.91
Net-working capital turnover 7.60 ratio
5.57
9.85
10.00
5.83
16.15
12.20
18.71
21.70
Debt collection period
11
S.NO
NAME OF THE SERVICE
NUMBER OF
PROVIDER
RESPONDENTS
1
Reliance Communications
49
2
Airtel
54
3
Vodafone
61
4
Idea
23
5
Tata Docomo
39
TABLE 1 CONSUMER PREFERENCE TOWARDS CELL PHONE SERVICE PROVIDERS
INTERPRETATION: •
Most of the Respondents prefer Vodafone followed by Airtel, Reliance Communications, Tata Docomo and Idea respectively.
•
The number of respondents are more than 100 because of multiple responses by the respondents. TABLE 2 SERVICE PREFERENCE OF RESPONDENTS ON THE BASIS OF AGE WISE CLASSIFICATION
S.NO
NAME OF THE SERVICE
UPTO 20 years.
21-30 years
1
Reliance
NO. OF % OF RESPONDENTS RESPONDENT S 8 32
2
Communications Airtel
9
36
19
30.2
3
Vodafone
6
24
21
33.87
4
Idea
2
8
0
0
5
Tata Docomo
0
0
1
1.6
TOTAL
25
100
62
PROVIDER
NO. OF RESPONDENTS
% OF RESPONDENTS
21
33.8
100
31-40 years
40 years and Above
TOTAL
NO. OF RESPONDENT S
% OF RESPONDENT S
NO. OF RESPONDENT S
% OF RESPONDENT S
NO. OF RESPONDENT S
% OF RESPONDEN TS
1
16.67
2
28.57
32
32
2
33.33
4
57.14
34
34
3
50
1
14.29
31
31
0
0
0
0
2
2
0
0
0
0
1
6
100
7
100
100
100
INFERENCE: •
Among respondents upto 20 years of age group, majority of them (i.e. 36%) are using Airtel folllowed by Reliance users(32%).
•
Consumers in the age group of 21 – 30 years 57% of respondents are mostly prefer Vodafone and Reliance(33.8% and 33.87% respectively) and 30% of the respondents are using Airtel.
•
50% of customers are using Vodafone, who are in the age group of 31 – 40 years.
•
41 and above – 57% of the respondents are using Airtel and 28.57% of respondents are using Reliance.
TABLE 3 COMPOSITION OF RESPONDENTS ON THE BASIS OF MARITAL STATUS S.NO.
MARITAL STATUS
NUMBER OF RESPONDENTS
% OF RESPONDENTS
1.
MARRIED
33
33
2
UNMARRIED
67
67
100
100
TOTAL
INFERENCE: The married respondents are using cell phones in 33%, but the unmarried respondents are using cell phones in 67%.
TABLE 4 COMPOSITION OF RESPONDENTS ON THE BASIS OF EDUCATION QUALIFICATION S.NO.
EDUCATIONAL QUALIFICATION
NUMBER OF RESPONDENTS
% OF RESPONDENTS
1.
32
32
2
UPTO HIGHER SENIOR SECONDARY GRADUATES
61
61
3
PROFESSIONALS
7
7
4
OTHERS
0
0
100
100
TOTAL
INFERENCE: The majority of the respondents 62.50% (graduates) are using cell phones and 30.77% (upto HSC) respondents are using cell phones.
TABLE 5
COMPOSITION OF RESPONDENTS ON THE BASIS OF CCUPATION S.NO.
OCCUPATION
NUMBER OF RESPONDENTS
% OF RESPONDENTS
1.
BUISNESS
12
12
2
PROFESSIONAL
2
2
3
EMPLYOEE
33
33
4
HOME MAKER
8
8
5
STUDENT
44
44
6
OTHERS
1
1
100
100
TOTAL
INFERENCE: 44% of the total sample who are students are using cell phones, followed by employees (33%), businessmen (8%), home makers (8%) and others (1%).
TABLE 6 COMPOSITION OF RESPONDENTS ON THE BASIS OF FAMILY INCOME (PER MONTH)
S.NO.
OCCUPATION
NUMBER OF RESPONDENTS
% OF RESPONDENTS
1.
Less than Rs. 5,000
31
31
2
Rs. 5,001 to Rs. 10, 000
45
45
3
Rs. 10,001 to Rs. 15,000
13
13
4
Above Rs. 15,000
11
11
100
100
TOTAL
INFERENCE: 45% of respondents are get monthly income of Rs.5,000 – Rs.10,000, and 31% of respondents are get monthly income as less than Rs.5,000. On the other hand, 13% of the respondents get a monthly income of Rs. 10,000 – Rs. 15,000 and 11% get Rs. 10,000 and above. TABLE 7 TABLE SHOWING SOURCE OF INFORMATION TO SELECT SERVICE PROVIDERS
S.NO.
OCCUPATION
NUMBER OF RESPONDENTS
% OF RESPONDENTS
1.
Family Members
40
40
2
Neighbours
2
2
3
Relations
5
5
4
Friends
37
37
5
Advertisement
4
4
6
Dealers
6
6
7
Others
6
6
100
100
TOTAL
INFERENCE: The most influencing factor for choosing the service provider according to the respondents is Family Members (40%) followed by Friends (37%), Dealers and Others (6% both), Relations (5%), Advertisement (4%) and Neighbours (2%).
TABLE NO: 8 COMPOSITION OF RESPONDENTS ON THE BASIS OF PURPOSE OF PURCHASE OF THE CELL PHONES S.NO.
PURPOSE
NUMBER OF RESPONDENTS
% OF RESPONDENTS
1.
For Business
42
42
2
For Personal
58
58
100
100
TOTAL
INFERENCE: 42% of respondents are using cell phones for their business, and 58% of respondents are using cell phones for their personal usage.
TABLE 9 TYPE OF CONNECTION PEFERRED
S.NO SERVICE PROVIDERS
PREPAID
POST PAID
TOTAL NO. OF RESPONDENTS
1
21
28
49
2
Reliance Communnications Airtel
51
3
54
3
Vodafone
52
9
61
4
Idea
37
1
38
5
Tata Docomo
24
2
24
INFERENCE: Majority of people prefer prepaid connections with Vodafonel at top followed by Airtel, Idea and Tata Docomo. People prefer postpaid connection of Reliance but substantial but less people prefer prepais connection for Reliance.
TABLE 10 AWARENESS OF VARIOUS SCHEMES S.No
1
VARIOUS SERVICES SCHEME OF INITIAL PURCHASE
AWARE NO.OF RESPON DENTS 61
% OF RESPON DENTS 61
UNAWARE NO.OF RESPON DENTS 39
% OF RESPON DENTS 39
TOTAL NO.OF RESPOND ENTS 100
% OF RESPONDEN TS 100
2 3 4
5
BALANCE OF TALK CHARGES PERIODICA L OFFERS CALL WAITING AND CALL DIVERTING OPTION MODES OF PAYMENT
63
63
37
37
100
100
58
58
42
42
100
100
61
61
39
39
100
100
54
54
46
46
100
100
INFERENCE: 63% of respondents are aware about the talk charges, 58% of respondents are aware about various periodical offers and 39 % are unaware of call waiting and call diverting option. 46% of respondents are unaware about the modes of payment and 61% of respondents only aware about the schmes of initial purchase
TABLE NO: 11 INFLUENCING FACTORS TO SELECT THE SERVICE PROVIDER
S.NO.
FACTORS
NUMBER OF RESPONDENTS
% OF RESPONDENTS
1.
Deposit Amount
13
13
2
Brand Image
45
45
3
Availability
10
10
4
Credit
5
Connection Customer Care Service
17
17
6
Service Charges
7
7
100
100
TOTAL
Facility
for 8
8
INFERENCE: 45% of respondents are purchasing a particular service provider by its Brand Image, 17% of respondents are choosing the particular service provider by their customer care service, 13% by
Deposit Amount, 10% by Availability, 8% by Credit Facility for Connection and 7% by Service Charges.
TABLE NO: 12 CONSUMER’S SATISFACTION LEVEL ON THE BASIS OF PRICE OF THE CELL PHONE PROVIDERS
S.N O
SERVICE PROVIDER
1
Reliance Comunication s Airtel Vodafone Idea Tata Docomo
2 3 4 5
HIGHLY SATISFACTOR Y 28
SATISFACTOR Y
TOTA L
12
NON SATISFACTOR Y 9
30 38 10 14
20 13 5 7
4 10 13 3
54 61 38 24
49
INFERENCE: 38% of the respondents are highly satisfied for the price of Vodafone followed by Airtel, reliance Communications, Tata Docomo and Idea respectively. People using Idea service are not satisfied in majority out of the total number of respondents using Idea service.
TABLE NO: 13 CONSUMER’S SATISFACTION LEVEL ON THE BASIS OF AFTER SALES SERVICE OF THE SERVICE PROVIDER S.N O
SERVICE PROVIDER
1
Reliance Comunication
HIGHLY SATISFACTOR Y 31
SATISFACTOR Y 12
NON SATISFACTOR Y 6
TOTA L 49
2 3 4 5
s Airtel Vodafone Idea Tata Docomo
45 39 9 15
5 12 5 6
4 10 14 3
54 61 38 24
INFERENCE: Majority of the respondents (45) are highly satisfied about after sales service by Airtel, followed by Vodafone, Reliance, Tata Docomo and Idea respectively. 12 (Reliance users) and 5 (Airtel users) are satisfied (average) by the after sales service. 14 respondents of total Idea users are dissatisfied by the after sales service whereas only 6 and 4 users of Reliance and Airtel are dissatisfied. TABLE NO: 14 CONSUMER’S SATISFACTION LEVEL THE BASIS OF PERIODICAL OFFERS PROVIDED BY THE SERVICE PROVIDERS S.N O
SERVICE PROVIDER
1
Reliance Comunication
HIGHLY SATISFACTOR Y 33
SATISFACTOR Y 12
NON SATISFACTOR Y 4
TOTA L 49
2 3 4 5
s Airtel Vodafone Idea Tata Docomo
25 42 9 14
12 5 5 7
1 14 14 3
54 61 38 24
INFERENCE: On the basis of periodical offers 42 of Vodafone respondents followed by 33 of Reliance are highly satisfied, and only 9 respondents for Idea. 12 respondents are satisfied (average) of Airtel’s and Reliance’s periodical offers. 14 respondents of Vodafone and Idea are dissatisfied whereas 4 and 1 respondents are dissatisfied for Reliance and Airtel respectively.
TABLE NO 15 CONSUMER’S ATTITUDE TOWARDS THE IMPORTANCE OF CELL PHONES CALCULATION OF SATISFACTORY SCORES S.NO. 1 2 3
NATURE
NUMBER OF
%age OF
Necessity Status Luxury
RESPONDENTS 64 25 11
RESPONDENTS 64 25 11
TOTAL
100
100
INFERENCE: 64% of the respondents state that cell phones are necessity, 25% state cell phones as a status symbol and 11% of respondents are only states that cell phones are luxury.
TABLE 16 REASONS FOR FACING DIFFICULTY IN CELL PHONE CONNECTION REASONS
NO. OF RESPONDENTS
Coverage
42
Service
32
Clarity
45
Network Busy
56
INFERENCE: Majority of respondents face difficulty in their cell phone connection due to Network problem followed by Coverage problem, clarity and Service. CHI-SQUARE TEST Chi-square test is one of the simplest and most widely used nonparametric tests in statistical work. This test was first used by Karl Pearson in the year 1900. The quantity describes the magnitude of the discrepancy between theory and observation. It is a method to test the relationship between the theoretical (hypothesis) & the observed value. Chi – square test (χ2) = Σ (O – E)2 / E Degrees Of Freedom = V = (R – 1) (C -1) Were, ‘O’ = Observed Frequency ‘E’ = Expected Frequency (Emn = total of column ‘m’ * total of row ‘n’) Total number of frequencies ‘R’ = Number of Rows ‘C’ = Number of Columns For all the chi-square test the table value has taken @ 5% level of significance. Q11 has been used for the chi-square test.
TABLE NO. 5.1 CHI-SQUARE ANALYSIS ON THE RELATIONSHIP BETWEEN AGE AND SATISFACTION WITH REGARDING THE CELL PHONE SERVICE PROVIDER AGE UPTO 20 yrs. 21-30 yrs. 31-40 yrs. 40 yrs. and above TOTAL
LEVEL OF SATISFACTION MODERATE LOW 22 1 34 13 6 0 4 2 66 16
HIGH 2 15 0 1 18
TOTAL 25 62 6 7 100
H0: There is no significant relationship between age and level of satisfaction. H1: There is significant relationship between age and level of satisfaction.
O 2 15 0 1 22 34 6 4 1 13 0 2
E 4.50 11.16 1.08 1.26 16.50 40.92 3.96 4.62 4 9.92 0.96 1.12
(O-E) - 2.50 3.84 - 1.08 - 0.26 5.50 - 6.82 2.04 - 0.62 -3 3.08 - 0.96 0.88
(O-E)2 6.25 14.7 1.16 0.07 30.25 46.5 4.16 0.38 9 9.5 0.92 0.77
(O-E)2/E 1.39 1.32 1.08 0.05 1.83 1.14 1.05 0.08 2.25 0.96 0.96 0.69
Since some expected values are less than 5 we are clubbing 1 st,3rd,4th, 7th, 8th, 9th, 11th and 12th frequencies: O 15 16 22 34 13 TOTAL
E 11.16 21.5 16.50 40.92 9.92
(O-E) 3.84 - 5.5 5.5 - 6.82 3.08
(O-E)2 14.7 30.25 30.25 46.5 9.5
(O-E)2/E 1.32 1.341 1.83 1.14 0.96 6.591
χ2 = Σ (O-E)2 / E = 6.591 Number of degree of freedom: ndf = (row-1) (column –1) = (3) (2)= 6
Table value of χ2 at 5% level of significance = 12.59 Conclusion: H0 is accepted since the calculated value of χ2 (6.591) less than the table value of χ2 (12.59) hence there is no significant relationship between level of satisfaction and age. TABLE NO. 5.2 CHI-SQUARE ANALYSIS ON THE RELATIONSHIP BETWEEN MARITAL STATUS AND SATISFACTION WITH REGARDING THE CELL PHONE SERVICE PROVIDER
AGE Married Unmarried TOTAL
LEVEL OF SATISFACTION MODERATE LOW 26 3 25 13 51 16
HIGH 4 29 33
TOTAL 33 67 100
H0: There is no significant relationship between gender and level of satisfaction. H1 : There is significant relationship between gender and level of satisfaction. O 4 29 26 25 3 13 TOTAL
E 10.89 22.11 16.83 34.17 5.28 10.72
(O-E) - 6.89 6.89 9.17 - 9.17 - 2.28 2.28
(O-E)2 47.5 47.5 84 84 5.20 5.20
χ2 = Σ (O-E)2 / E = 15.43 Number of degree of freedom: ndf = (row-1) (column –1) = (1) (2) = 2 Table value of χ2 at 5% level of significant = 5.99
(O-E)2/E 4.36 2.15 4.99 2.46 0.98 0.49 15.43
Conclusion: H1 is accepted since the calculated value of χ2 (15.43) more than the table value of χ2 (5.99) hence there is significant relationship between level of satisfaction and marital status.
TABLE NO. 5.3 CHI-SQUARE ANALYSIS ON THE RELATIONSHIP BETWEEN EDUCATIONAL QUALIFICATION AND SATISFACTION WITH REGARDING THE CELL PHONE SERVICE PROVIDER EDUCATIONAL HIGH
QUALIFICATION HSC 12 GRADUATE PROFESSIONAL OTHERS TOTAL
34 2 0 48
LEVEL OF SATISFACTION MODERATE LOW
TOTAL
19
1
32
23 3 0 45
4 2 0 7
61 7 0 100
H0: There is no significant relationship between educational qualification and level of satisfaction. H1: There is significant relationship between educational qualification and level of satisfaction O 12 34 2 0 19 23 3 0 1 4 2 0 MERGING:
E 15.36 20.74 3.36 0 14.40 27.45 3.15 0 2.24 4.27 0.49 0
O 12
E 15.36
(O-E) - 3.36
(O-E)2 11.29
(O-E)2/E 0.74
34 19 23 12 TOTAL
20.74 14.40 27.45 13.51
13.26 4.60 - 4.45 - 1.51
175.8 21.16 19.80 2.28
8.48 1.47 0.72 0.17 11.58
χ2 = Σ (O-E)2 / E = 11.58 Number of degree of freedom: ndf = (row-1) (column –1) = (3) (2) = 6 Table value of χ2 at 5% level of significant = 12.59 Conclusion: H0 is accepted since the calculated value of χ2 (11.58) less than the table value of χ2 (12.59) hence there is significant relationship between level of satisfaction and educational qualification.
TABLE NO. 5.4 CHI-SQUARE ANALYSIS ON THE RELATIONSHIP BETWEEN OCCUPATION AND SATISFACTION WITH REGARDING THE CELL PHONE SERVICE PROVIDER EDUCATIONAL HIGH
QUALIFICATION BUISNESS 6
LEVEL OF SATISFACTION MODERATE LOW
TOTAL
5
1
12
PROFESSIONAL
1
1
0
2
EMPLYOEE
15
15
3
33
HOME MAKER
3
4
1
8
STUDENT
35
5
4
44
OTHERS
1
0
0
1
TOTAL
61
30
9
100
H0 There is no significant relationship between occupation and level of satisfaction. H1 : There is significant relationship between occupation and level of satisfaction
O 6 1 15 3 35 1 5 1 15 4 4 0 1 0 3 1 4 0 MERGING:
E 7.32 1.32 20.13 4.88 26.84 0.61 3.60 0.60 9.90 2.40 13.20 0.30 1.08 0.18 2.97 0.72 3.96 0.09
O 24 6 15 35 15 TOTAL
E 22.63 7.32 20.13 26.84 9.90
(O-E) 1.37 - 1.32 - 5.13 - 13.84 5.10
(O-E)2 1.88 1.74 26.32 191.55 26.01
(O-E)2/E 0.08 0.24 1.31 7.14 2.63 11.40
χ2= Σ (O-E)2 / E = 11.40 Number of degree of freedom: ndf = (row-1) (column –1) = (5) (2) = 10 Table value of χ2 at 5% level of significant = 18.30 Conclusion: H0 is accepted since the calculated value of χ2 (11.40) less than the table value of x2 (18.30) hence there is no significant relationship between level of satisfaction and occupation.
TABLE NO. 5.5
CHI-SQUARE ANALYSIS ON THE RELATIONSHIP BETWEEN MONTHLY INCOME AND SATISFACTION WITH REGARDING THE CELL PHONE SERVICE PROVIDER MONTHLY INCOME Less than Rs. 5,000
HIGH
LEVEL OF SATISFACTION MODERATE LOW
TOTAL
16
13
2
31
Rs. 5,001 to Rs. 10, 22
20
3
45
000 Rs. 10,001 to Rs. 3
5
5
13
15,000 Above Rs. 15,000 TOTAL
6 44
3 13
11 100
2 43
H0: There is no significant relationship between monthly income and level of satisfaction. H1: There is significant relationship between monthly income and level of satisfaction. O 16 22 3 2 13 20 5 6 2 3 5 3
E 13.33 19.35 5.59 4.73 13.64 19.80 5.72 4.84 4.03 5.85 1.69 1.43
MERGING: O
E
(O-E)
(O-E)2 1.64 7.13 7.02 6.71 0.41 0.04 0.52 8.12
18 16.72 1.28 16 13.33 2.67 22 19.35 2.65 3 5.59 - 2.59 13 13.64 - 0.64 20 19.80 0.2 5 5.72 - 0.72 3 5.85 - 2.85 TOTAL χ2= Σ (O-E)2 / E = 3.702 Number of degree of freedom: ndf = (row-1) (column –1) = (3) (2) = 6
(O-E)2/E 0.10 0.53 0.36 1.20 0.03 0.002 0.09 1.39 3.702
Table value of χ2 at 5% level of significant = 12.59 Conclusion: H0 is accepted since the calculated value of χ2 (3.702) less than the table value of χ2 (12.59) hence there is no significant relationship between level of satisfaction and monthly income. TABLE NO. 5.6 CHI-SQUARE
ANALYSIS
ON
THE
RELATIONSHIP
BETWEEN
SERVICE
PROVIDERS AND SATISFACTION NAME OF THE SERVICE
HIGH
LEVEL OF SATISFACTION MODERATE LOW
TOTAL
PROVIDER Reliance
38
8
3
49
Communications Airtel Vodafone Idea Tata Docomo
49 23 13 12
4 35 7 18
1 3 3 9
54 61 23 39
TOTAL 135 72 19 226 (The total number of respondents here is more than 100 because of multiple responses by respondents.) H0: There is no significant relationship between service providers and level of satisfaction. H1: There is significant relationship between service providers and level of satisfaction. O 38 49 23 13 12 8 4 35 7 18 3 1 3 3 9
E 29.27 32.26 36.44 13,74 23.30 15.61 17.20 19.43 7.33 12.42 4.12 4.54 5.13 1.93 3.28
MERGING: O 16 38 49 23 13 12 8 4 35 7 18 3
E 13.87 29.27 32.26 36.44 13.74 23.30 15.61 17.20 19.43 7.33 12.42 4.12
(O-E) 2.13 8.73 16.74 - 13.44 - 0.74 - 11.3 - 7.61 - 13.20 15.57 - 0.33 5.58 - 1.12
(O-E)2 4.53 76.2 280.23 180.63 0.55 127.69 57.91 174.24 242.42 0.11 31.14 1.25
(O-E)2/E 0.33 2.60 8.69 4.9 0.04 5.48 3.71 10.13 12.48 0.02 2.51 0.30
1 3 3 9 TOTAL
4.54 5.13 1.93 3.28
- 3.54 - 2.13 1.07 5.72
12.53 4.54 1.14 32.72
2.76 0.88 0.59 9.98 65.40
χ2= Σ (O-E)2 / E = 21.06 Number of degree of freedom: ndf = (row-1) (column –1) = (6) (2) = 12 Table value of χ2 at 5% level of significant = 21.06 Conclusion: H1 is accepted since the calculated value of χ2 (65.40) is more than the table value of χ2 (21.06) hence there is significant relationship between level of satisfaction and service provider. TABLE NO. 5.7 CHI-SQUARE ANALYSIS ON THE RELATIONSHIP BETWEEN USE OF CELL PHONE AND SATISFACTION PURPOSE For Buiness For Personal TOTAL
HIGH 16 12 28
LEVEL OF SATISFACTION MODERATE LOW 24 2 22 24 46 26
TOTAL 42 58 100
H0: There is no significant relationship between use of cell phone and level of satisfaction. H1: There is significant relationship between use of cell phone and level of satisfaction. O 16 12 24 22 2 24 TOTAL
E 11.76 16.24 19.32 26.68 10.92 15.08
χ2= Σ (O-E)2 / E = 14.42
(O-E) 4.24 - 4.24 4.68 - 4.68 - 8.92 8.92
(O-E)2 17.98 17.98 21.90 21.90 79.57 79.57
(O-E)2/E 1.11 1.11 0.82 0.82 5.28 5.28 14.42
Number of degree of freedom: ndf = (row-1) (column –1) = (1) (2) = 2 Table value of χ2 at 5% level of significant = 5.99 Conclusion: H1 is accepted since the calculated value of χ2 (14.42) is more than the table value of χ2 (5.99) hence there is significant relationship between level of satisfaction and use of cell phone.
This chapter is allocated to express the findings of this study. Statistical tools are applied to analyze the data. It includes the result of each and every tables, charts and tests. FINDINGS FOR RELIANCE INDUSTRIES LIMITED •
The company having comfortable working capital position.
•
The absolute liquidity of the Reliance Industries Limited is in favour.
•
The collection policy of the company is very good.
•
The creditors turnover ratio is 3.33 in 2008-09 as compare to 2007-08 the ratio is 4.62 which is higher than the other years.
•
Inventory turnover ratio is highest in the year 2006-07 is 9.20 as compare to the other year but in current year it is 7.51 which is little bit lower than previous year but it is obvious that in heavy industries like Reliance Industries Limited have lower ratio as compared to FMCG.
•
The working capital ratio is 7.60 in 2008-09 and 5.57 in 2007-08 but the best favorable ratio is in 2005-06 which is 10 times. So it indicates better working capital condition of the company.
•
This is an improvement in collection policy of the Reliance Industries Limited.
FINDINGS FOR RELIANCE COMMUNICATIONS ( CUSTOMER PREFERENCE) On the basis of consumer preference, majority of the peoples are preferred Vodafone and Reliance at the 3rd position. On the basis of age group, most of the respondents (33.8%), are using Reliance, who are in the age group of 21-30 years. On the basis of marital status mostly unmarried respondents are using cell phones than married respondents.
On the basis of educational qualification, most of the graduates are using cell phones. On the basis of occupation, the students and employees are using cell phones in more level. On the basis of family income, 45% of the respondents are using cell phones, who are all get family income of Rs.5, 001 – 10, 000. Majority of the peoples choose the service provider by family members influence. 4% of respondents are only influenced by advertisements. Majority of the peoples are using cell phones for personal usage. Majority of the peoples are using prepaid scheme. Majority of the people are aware of the various schemes provided by the service providers. Majority of the people keep in mind the brand image before selecting their service provider. Majority of the respondents are highly satisfied about the price of Airtel People using Idea service are not satisfied in majority out of the total number of respondents using Idea service. On the basis of after sales service, the majority of the respondents are highly satisfied in Airtel, Vodafone and Reliance respectively. On the basis of periodical offers, majority of the people are highly satisfied by Vodafone and Reliance respectively.
On the basis of consumer’s attitude, majority of the people are states that cell phones are necessity to all.
Reasons for facing difficulty in cell phone connection are Network problem followed by Coverage problem, clarity and Service. FINDINGS FROM CHI-SQUARE TEST •
Chi-square test reveals that there is no significant relationship between satisfaction level and age.
•
There is significant relationship between the marital status and level of satisfaction.
•
There is significant relationship between education qualification and level of satisfaction.
•
Chi-square test reveals that there is no significant relationship between occupation and level of satisfaction.
•
Chi-square test shows that there is no significant relationship between monthly income and level of satisfaction.
•
Chi-square test indicate that there is significant relationship between service provider and satisfaction level.
•
There is significant relationship between level of satisfaction and use of cell phone.
OVERALL CONCLUSION: Since majority of the factors have significant relationship with the satisfaction level we can conclude that there is significant relationship between the factors and the satisfaction and hence we accept the alternative hypothesis of the project i.e. H1.
SUGGESTIONS The recommendation & suggestion for effective management of working capital at RIL are given bellow: 1) For inventory, in order to improve the position, RIL can reduce the level of stocks by resorting to phased production i.e. producing according to requirement and disposing off or recycling the unserviceable inventories. However, the low turnover of stock may also be due to problems with generation of sales. Inventory management is a great concern for RIL especially stores and spares. The purchase manager should take proper steps for procurement of inventories. 2.) The company must take certain steps to decrease the working capital cycle. One way can be better management of inventories. 3.) RIL is suggested to maintain a balance in capacities, synchronization of various inputs availability of some materials or parts which are not easily available. 4.) Short term credit period availed must be reduced and sundry creditors should be paid faster. 5.) It should maintain inventory at an optimum level rather than a very optimistic level. 6.) The procurement for materials requisition processing should be reduced so as to minimize the lead time.
7.) Freedom should be there in deciding the credit policies, cash discount or credit ratings. 8). RIL can also consider negotiating its creditors for relaxing the debt repayment period and repaying only on or just before the expiry of the credit period.
The recommendation & suggestion for effective management of working capital at RIL are given bellow: •
Reliance Comm. should expand their customer base. But it also has an advantage over Tata Docomo and Idea.
•
Reliance Comm. should try to attract old people also.
•
It should concentrate on good advertisements for their service because, advertisements take little part for influencing the consumers.
•
It should try to increase post paid users.
•
More awareness of their services should be spread to the customers.
•
Reliance should attract the customers by reducing their price.
•
Reliance should try to increase their after sales services and decrease their dissatisfied customers by providing good after sales services.
•
Reliance should give more periodical offers to its customers.
•
It should come up with more reasonable and attractive plans for business use.
•
It needs to focus on providing good clarity of signals as customers prefer Airtel in terms of signal clarity.
The study involves practical and conceptual over view of decisions concerning current assets like cash and bank balance ,inventories( like raw materials ,w-i-p,finished goods ),sundry debtors, loans and advances, other current assets and current liabilities like sundry creditors, securities and other deposits, other current liabilities and provisions of RIL. Was with the objective of maximizing the overall net profit of the bank. And complete synchronization and co ordination among the working capital components which shall contribute to optimum level of operations. Mismanagement of each or any of these components shall be detrimental to the objectives of efficient operation, profitability and maximization of overall value of the bank. The working capital limits would be considered only after the project nearing completion and after ensuring control over the inventory. The inventory is a great concern for RIL and it need proper procurement and management. Eligible working capital limits would be assessed by cash Budget method And Projected production method depending the market condition, scale of operation, nature of activity/enterprise and duration/length of operating cycle etc. This study also attempts to find out the satisfaction of consumer regarding cell phone service providers. This is an information era significance of information cannot be over emphasized. This decade, most of the peoples using cell phones. So, service providers are increasing in more level increasing the level of competition. This leads to adding new features, schemes, periodical offers to their service and the consumers get maximum benefit from their service provider. Now-a-days, cell phones are very necessity to all. Because, it is give safety to the men and women also. They have also become a status symbol for young geeration. But one should also not forget the disadvantages of cell phones and should try avoiding it especiaaly for children as it hampers their development mentally and can endager their health. Crimes are also increasing relating to cell phones and people should be careful.
•
www.ril.com
•
http://www.ril.com/html/investor/financials.html
•
Annual Report for the year 2008-2009
•
Annual Report for the year 2007-2008
•
Annual Report for the year 2006-2007
•
Annual Report for the year 2005-2006
•
Annual Report for the year 2004-2005
•
http://www.studyfinance.com/lessons/workcap/
•
http://en.wikipedia.org/wiki/Working_capital
•
www.rcom.co.in
•
www.trai.gov.in
•
http://www.ibef.org/industry/telecommunications.aspx Financial Management
Khan & Jain
Financial Management
I.M.Pandey
Research Methodology
C.R.Kothari
QUESTIONNAIRE
I am Swati Sabherwal, a student of Rayat and Bahra Institute of Management, Kharar and this questionnaire is a part of my research on “Performance comparison of Midcap Funds”. I would therefore request you to give your response to the questionnaire. •
Name :
•
Sex : Male
•
Female
Age : Upto 20 yrs
21-30 yrs
31-40 yrs
40 yrs. and above •
Marital Status : Married
•
Unmarried
Educational Qualification Upto HSC
Graduation
Professional
Others _____________________________________ (Please Specify) •
Occupation : Business
Professional
Home maker •
Student
Family income (Per/month) :
Less than Rs.5, 000/Rs. 10,000/- to 15,000/-
Rs. 5,000/- to 10,000/Above Rs. 15, 000/-
Q1.) Which cell phone (Service Provider) do you possess?
Employee Others
Reliance Communications Idea Q2.)
Airtel
Vodafone
Tata Docomo
Who influenced you to by the particular cell phone service provider ? Family Member Friends
Neighbours
Relations
Advertisement
Dealers
Others Q3.)
Why do you buy the cell phones? For business
Q4)
For personal
Which type of scheme is most preferable by you ? Prepaid
Q5)
Postpaid
If you have postpaid / prepaid connection mention scheme Name & Monthly rental charges ?
______________________________________________________ Q6)
Are you aware of the following details relating in your connection? (Pre / Postpaid connection)
SCHEME Scheme of Initial Purchase Balance of Talk Charges Periodical Offers Call Waiting and Call Diverting Option Modes of Payment
AWARE UNAWARE
Q7)
What factor influenced you to decide your Cell Phones service ? Deposit amount Brand Image Availability
Credit facility for your connection Customer care service Service charges Q8.) Are you satisfied with your cell phone service provider ? HIGHLY
SATISFACTORY
SATISFACTORY
NOT SATISFACTORY
Price After Sales Service Periodical Offers Q9.) You consider mobile as a: Necessity
Status
Luxury
Q10.) What are the reasons of difficulty you face in you cell phone connection (if any)? Coverage
Service
Clarity
Network Busy Q11.) Rate the service connection you are using on the basis of some factors as follows: AGE HIGH
LEVEL OF SATISFACTION MODERATE
LOW
UPTO 20 yrs. 21-30 yrs. 31-40 yrs. 40 yrs. and above Marital Status HIGH
LEVEL OF SATISFACTION MODERATE
LOW
QUALIFICATION HSC GRADUATE PROFESSIONAL OTHERS EDUCATIONAL
HIGH
LEVEL OF SATISFACTION MODERATE
LOW
QUALIFICATION BUISNESS PROFESSIONAL EMPLYOEE HOME MAKER STUDENT OTHERS MONTHLY INCOME
HIGH
LEVEL OF SATISFACTION MODERATE
LOW
HIGH
LEVEL OF SATISFACTION MODERATE
LOW
Married Unmarried EDUCATIONAL
Less than Rs. 5,000 Rs. 5,001 to Rs. 10, 000 Rs. 10,001 to Rs. 15,000 Above Rs. 15,000
THANKYOU