Reliance Communications

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Reliance Communications : 

Reliance Communications Managing working capital

Working Capital : 

Working Capital is the amount of Capital that a Business has available to meet the day-to-day cash requirements of its operations WC = (CA - CL) It is required for Financing Short-Term or Current Assets such as Cash, Marketable Securities etc. Working Capital is also known as Revolving or Circulating Capital or Short-Term Capital Working Capital

Factors affecting Working Capital : 

Nature of Business/Industry Size of Business/Scale of Operations Growth prospects Business Cycle Manufacturing Cycle Operating Cycle Operating Efficiency Factors affecting Working Capital

Cont : 

Depreciation Policy Taxation Policy Dividend Policy Government Regulation Cont

Working Capital Management : 

Working Capital Management is concerned with the problems that arise in attempting to manage the Current Assets, Current Liabilities and the interrelationship that exists between them Working Capital Management means the deployment of current assets and current liabilities efficiently so as to maximize short-term liquidity Working Capital Management

Cont : 

Working capital management entails short term decisions - generally, relating to the next one year period - which are "reversible" Two Steps involved in the Working Capital Management: Forecasting the Amount of Working Capital Determining the Sources of Working Capital Cont

Slide 7: 

Importance: Working Capital is the Life Blood of the Business Fixed Assets (Long Term Assets) can be purchased on Lease/Hire Purchase but Current Assets cannot be Liquidity V/s Profitability

Objectives: : 

Deciding Optimum Level of Investment in various WC Assets Decide Optimal Mix of Short Term and Long Term Capital Decide Appropriate means of Short Term Financing Objectives:

Case Analysis: Reliance : 

Reliance is one of the leading player in the telecom industry Huge customer base of 85 billion including 2.2 million overseas retail customer. It has a pan-India presence covering the entire value chain of telecommunication offering service in more than 24000 towns and 6 lac villages. Case Analysis: Reliance

Cont : 

The total Assets of the company increased over the years and had a satisfactory liquidity position with a current ratio of 2.73. Cont

Working Capital: Ratios : 

Current Ratio: 2008= 1.64 2009= 2.73 Cash Ratios: 2008= 0.017 2009= 0.057 Working Capital: Ratios

Slide 12: 

Quick Ratio: 2008= 1.62 2009= 2.70 NWC Ratio: 2008= 0.23 2009= 0.32

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