MBA Project Report on letter of Credit and Working Capital

This project is study of inland bill discounting under letter of credit and Analysis of Working capital and of Yarn division Of Vardhman textiles limited.

The study was conducted at the commercial department of textiles limited under Account Receivable Department.

The project was of 6 weeks duration. During the project interviewed the executives & staff to collect the data, & also made use of company records & annual reports. The data collected were then compiled, tabulated and analyzed.

The objective of my internship was the knowledge of sale under letter of credit of yarn customers and to operate the working capital cycle of the management.

Working Capital Management is a very important facet of financial management due to:

ü Investments in current assets represent a substantial portion oftotal investment.

Investment in current assets & the level of current liabilities have toBe geared quickly to change sales.

Some the points to be studied under this MBA Project Report are:

  • How much cash should a firm hold?
  • What should be the firms credit policy?
  • How to & when to pay the creditors of the firm?
  • How much to invest in inventories?

By studying about the company s different areas I came to know certain things like:

Summary Of MBA Project Report on letter of Credit and Working Capital

  • Acid test ratio is more than one but it does not mean that company has excessive liquidity.
  • Creditors turnover ratio also improved so it is better for company
  • Inventory turnover ratio is improving from 2006-7 to 2007-08, which means inventory is used in better way so it is good for the company.

A study of letter of credit deals with studying and understanding the Letter of credit, different fields of letter of credit and different types of L/C charges namely L/C Advising charges, L/C Amendment charges and discrepancy charges and calculating saving potential and making recommendations.

A letter of credit (LC) is a binding document that a buyer can request from his bank in order to guarantee that the payment for goods will be transferred to the seller. Basically, a letter of credit gives the seller reassurance that he will receive the payment for the goods.

By studying the LC of Yarn division I came to know

  • All the dealing of LC is centralized of yarn customers.
  • It reduces the credit risk of company
  • It even reduces the payment delays
  • It increase the liquidity position of company

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About Haja

Software Engineer by profession, Author and the Founder of "bench3" you can connect with me on Twitter , Facebook and also on Google+

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