Fixed Capital Management

The developing economies are generally faced with the problem of inefficient utilization of resources available to them. Capital is the scarcest productive resource in such economies and proper utilization of these resources promotes the rate of growth, cuts down the cost of production and improve the performance of the company. Fixed capital and working capital are the dominant contributors to the total capital of the developing country.

Fixed capital investment generates productive capacity whereas working capital makes the utilization of that capacity possible. Thus, the study of working capital behavior occupies and important role in financial management. The earlier emphasis of financial management was more on long term financial decisions.

Statistical techniques namely co-efficient of correlation are used for analyzing the date. In this study, for the purpose of describing combination between working capital ratios and profitability ratio, correlation analysis has been implemented. It implies the interdependence of the set of variables. Further, in order to ascertain the influence of profitability, a linear multiple regression model were used. In the analysis, working capital ratios like, Current Ratio, Liquid Ratio, Working capital Turnover Ratio, ITR, RTR and WC/TA are taken as the independent variables and Profit before Tax to total assets ratios is used as dependent variable. However, in the course of analysis, it was found that CR and RTR are highly correlated. Therefore, CR and RTR are omitted for the analysis. The model used was PBT/TA = b0 +b1 LR+b2WTR+b3 ITR+b4WC/TA Where b0 , b1 , b2 , b3 and b4 are parameters to be

It is evident from the table that the percentage of long-term funds used for financing working capital has shown fluctuating trend during the period under study. It is 34.2 percent in 2011 to 33.2 percent in 2014 and afterwards it middle of years it is continues fluctuating in nature. This decreasing trend shows that VBL utilized its long-term funds more effectively by investing them in the Fixed Assets. It also shows the fact that the capability of the VBL to make efficient management of its current assets namely receivables and inventories.

Working Capital Trend:- In working capital analysis more emphasizing the importance of analysis of working capital trends, it provides a base to judge whether the practice and prevailing policy of the management with regard to working capital is good enough or an improvement is needed to manage the working capital. The working capital trend of VBL is presented in Table 1.3. It is signifies that the working capital of VBL marked an increasing trend during the period under review except in 2013. The net working capital of VBL increased to Rs. 2,72,52,96,694.32 in 2014 from Rs. 2,20,73,17,937.00 in