Cash and Credit Management Practices of Naga Limited, Dindigul

Dr.R.Amudha,C.R. Sathiya Narayanan

To incorporate and progress any business, finance is the sine qua non. Management of funds has become a vibrant element in business. Though strategic planning and raising of funds are essential, controlling and administering of funds receives equal significance as it deals with daily operation of the business. The administering of funds is often referred as working capital management, or fund management, which ensures the sufficient ability in terms of money to endure the day to day operations. Cash investment levels (Capex) and changes in trade receivables result in the rise of alternative costs affecting net working capital level. The rise and fall of working capital level require the balancing of future free cash flows which influences firms’ value changes. Thus, management of cash and receivables influence the firm’s value. The study focuses on the cash and credit management of the Naga Ltd. – Retail division (as a credit giver). The object of the study is to analyze the management of cash and credit and its effect on the firm’s value of Naga Ltd. The secondary data for the study were taken from the records of the company for the period of five years from March 2011 to March 2015. The values are extrapolated and correlations are computed with the help of the SPSS Package to study the co-relationship between net working capital (NWC), future free cash flow (FFCF) and firm’s value. It is inferred that firm’s value has a stronger positive correlation with FFCF than NWC. The firm must take FFCF into account while planning the NWC to increase the firm’s value. By extrapolating NWC, a decreasing trend is anticipated in the near future of the company. It is suggested that the company should revamp its financial strategy to avoid the expected situation and to maintain a favourable working capital position. This will assist the company to enhance its firm’s value in future.