Case study on working capital mangement

These delays will reduce the cash requirement, especially during the initial stage of construction.

In India, contractors are required to pay a certain amount of money for insurance, bonds, and other preliminary items to fulfill the tender specifications.

This is because the actual cost of each element is not available during the planning stage, and thus the estimated percentage of these costs makes the estimation of LWC easier. Many contractors attempt to benchmark their key ratios to industry standards without understanding what the ratios or benchmarks mean.

The purpose of this research paper is to provide a basic understanding of the requirement of LWC Least working capital concepts for Indian construction contractors. So, what can one do to meet the intermediate needs of construction projects? Since these costs are different for projects in different segments, cost structure of a particular construction company depends upon its order mix.

Infrastructure segments involve construction projects in different sectors like roads, rails, ports, irrigation, power etc.

Hence the distribution of jobs to subcontractors should be handled properly to avoid the occurrence of other problems while reducing the working capital requirement. Kaka suggested that further variables be added to enhance the flexibility of the cash flow produced and proposed a model designed to use more than 50 variables to calculate cash flow for one individual contract.

Working capital case study (coca cola)

Hassim; M. The factor of inflation has a positive correlation with the requirement for LWC. Both actual and predicted values of LWC have been compared and it was found that the mean actual LWC for the projects studied is 7. These values were then compared to the actual LWC being used in various construction projects in India. When the least working capital requirement concept is used then it was discovered that working capital management efficiency has been improved by predicting least working capital requirement during the bidding stage of the infrastructure projects. In principle, to compile the cost flow for a project, the costs of each activity have to be distributed over its duration. Unfortunately, this money may not be enough to complete the project. Increased subcontractor involvement at a site will definitely reduce the amount of labor, material, and equipment required by the main contractor. From the above review of empirical works, it is clear that different authors have approached working capital management and performance in different ways in varying levels of analysis. Even a profitable business may fail if it does not have adequate cash flows to meet its liabilities as they fall a due. Download