A Project Report submitted in partial fulfillment of the requirement for (Affiliated To Ch.Charan Singh University, Meerut)


UNDER THE GUIDANCE OF Internal Supervisior Mr.TUSHAR JINDAL(faculty) IMS Ghaziabad External Supervisior Mr. K S M MATHEW Submitted by Rahul 9351722



This is to certify that the work presented in the project entitled “DEBTORS MANAGEMENT in partial fulfilment of the requirement for the award of degree of ‘BBA, INSTITUTE OF MANAGEMENT STUDIES,GHAZIABAD, is an authentic work carried out under my supervision and guidance. To the best of my knowledge, the content of this project does not form a basis for the award of any previous degree to anyone else.

Date: name &signature)

(Guide’s Department of Management BBA IMS, GHAZIABAD


The foregoing thesis entitled “DEBTORS MANAGEMENT at TATA

approved as a creditable study and has been presented in satisfactory manner to warrant its acceptance as prerequisite to the degree for which it has been submitted. It is understood that by its approval, the undersigned do not necessarily endorse any conclusion drawn or opinion expressed therein, but approve the project for the purpose for which it is submitted.

Co-ordinator- BBA ordinator

Academic Co-

Director IMS-GZB.


Acknowledgement It is my privilege to work on the project “Debtors management at Tata Steel Ltd and its comparison with other key players”. I express my sincere sentiments of gratitude to Mr. At the very outset. K S M MATHEW (Head Sales & EPA A/c) who guided me throughout this project. PADMA MOHANTY (Accountant) who has been a source of inspiration through their constant guidance.VANDANA KHEMKA (Manager Sales & EPA A/c) & Ms. PRANAV JHA (Sr. encouragement and help 4 . It is the spirit of being associated with the Finance and Accounts department particular and Tata Steel in general who inspired me to complete this project successfully. Last but not the least. I am indebted to my mentor Mr. Manager Sales & EPA A/c) for his continuous assistance without which this project would not have been a success. I also thank Ms. I am obliged to TATA STEEL for the permission to undertake training program and provide me with the basic infrastructure and facilities. personal interest. I would also like to thank Mr. by constantly discussing the project matter and helping me in clarifying my thinking in several pertinent issues and providing a meaning full insight into the subject. K B SINGH for extending his untiring guidance to me.

1. I am also grateful to them for reposing confidence in my abilities and giving me the freedom to work on my project..5 9 Determinants of size of receivables……………………………….. TABLE OF CONTENTS EXECUTIVE SUMMARY 1 CHAPTER 1 INTRODUCTION 1.4 8 1.... Debtors management……………………………………….1.. In spite of their busy schedule they have always found time to guide me through the project.…..…. Need for trade credit……………………………………….……. Account receivable-definition…………………………. I owe my deep sense of gratitude and sincere thanks to all of them Thank you.….1.& has made my stay in the company such a pleasant memory.1.…..2 6 1.1 5 1.. 5 .

.1.…….………….2.1.…….2 16 Expert view ……………………………………….2.1 14 1.4 Tata steel stand alone ……………………………………….4 60 Sources of data collection……………………………………………. ……... 19 1. 1.….. Type of Research……………………………………………. 57 1....1.2 60 2.... 58 CHAPTER 2 RESEARCH METHODOLOGY 2.2.……… 6 .7 13 Company Profile 1...…………….6 Cost & benefits 11 associated with receivable management……….2..... 1.5 Overview of the finance division of Tata steel…………………...6 Sundry debtors section…………………………………………... Indian Steel Industries …………………………………….3 60 2.2. 45 1.. Scope of Study …………………………………………………….3 Company Overview …………………………………………….2. History of steel……………………………………….…..1 60 2.… Objective of the study……………………………………………….

Steel authority of India limited (sail)…………………...…………… Tata steel vs.1 Tata steel’s credit monitoring and control……………………… 65 3. Jindal steel & power ltd …………………. Tata steel vs.2 Operational working 68 financing…………………………………………. TATA STEEL & RECESSION 7 .1 89 4... Arcelor Mittal (Mittal steel) …………………………… Tata steel vs..2 95 4.. 3.3 70 Channel 3. CHAPTER 3 CREDIT DECISION 3.….3 99 CHAPTER 5 ..4 Credit assessment modules………………………………….2..…… at Tata steel for managing debtors…….....…… 72 3.5 Understanding the debtor’s process system………………. …………… 84 CHAPTER 4 COMPARATIVE ANALYSIS OF TATA STEEL WITH OTHER STEEL COMPANY 4..5 60 Sampling…………………………………………………………….

…… 117 118 6..3 newspapers…………………………………….…………..5 Views of debtor management expertise……………………………. 5. REFERENCE ANNEXURE ..5..... After 109 the Articles 111 from 6...1 113 6..4Conclusion…………………………………...1 Tata steel’s game plan to beat recession……………………..Bibliography 8 ...………………………...... 108 5.2 recession…………………………………………..3 SWOT analysis of debtors management process at Tata steel…………… 115 Suggestion…………………………………………………………………..... ……..2 Limitation of the Study……………………………………………...………..... 114 6... CHAPTER 6 CONCLUSION AND SUGESSTIONS 6.

Tata Steel could no longer afford this policy. The customers were required to pay the outstanding amount on the due date. This resulted in credit sales going up significantly. Receivable management is one of the most important aspects of the organization. Trade credit is the most prominent force of modern business. Further in order to capture a greater amount of market share. A credit limit was sanctioned to every customer. The profit of the company mainly depends on the accounts receivables. It is considered as a marketing tool acting as a bridge for the movement of goods through production and distribution stages to customers. it was compelled to go by the industry norms and thus it ushered into the new era of credit sales. However. Debtors occupy an important position in the structure of current assets of a firm. with an increasing domestic and international competition. Therefore it needs a careful analysis and proper management. in order to maintain its premium position. Till few years back. Tata Steel had a very strict policy of selling against advance payments.Executive Summary The project deals in “DEBTORS MANAGEMENT AT TATA STEEL & ITS COMPARISON WITH OTHER KEY PLAYERS”. They are the outcome of rapid growth of trade credit granted by the firms to their customers. as it deals with the management of the outstanding. That was an era of controlled economy. 9 .


allowance for doubtful accounts. 11 . In most business entities this is typically done by generating an invoice and mailing or electronically delivering it to the customer. BOOK KEEPING FOR ACCOUNTS RECEIVABLE Companies have two methods available to them for measuring the net value of account receivables. The amount of the bad debt provision can be computed in two ways either by reviewing each individual debt and deciding whether it is doubtful (a specific provision) or by providing for a fixed percentage. one must debit a receivable and credit a revenue account.1.1What is an account receivable? Accounts receivable is an accounting transaction which deals with the billing of customer who owes money to a person. Other common payment terms include Net 45 and Net 60 but could in reality be for any time period agreed upon by the vendor and the customer. which establishes a liability account. of total debtors (a general provision). Other types of accounting transactions include accounts payable. say 2%. payroll. meaning payment is due in the amount of the invoice 30 days from the date of invoice. one debits cash and credits the receivable in the journal entry. To record a journal entry for a sale on account. On a company's balance sheet. The ending balance on the trial balance sheet for accounts receivable is always debit. An example of a common payment term is Net 30. Sometimes called trade receivables. company or organization for goods and services that has been provided to the customers. accounts receivable is the amount that customers owe to that company. who in turn must pay it within an established timeframe called credit or payment terms. When the customer pays off their accounts. The first method is the allowance method. they are classified as current assets assuming that they are due within one year. The change in the bad debt provision from year to year is posted to the bad debt expense account in the income statement. which is computed by subtracting the balance of an allowance account from the accounts receivable account. or bad debt provision. and trial balance. that has the effect of reducing the balance for accounts receivable. Accounts receivable departments use the sales ledger.

The entry would consist of debiting a bad debt expense account and crediting the respective account receivable in the sales ledger. 12 . known as the direct write-off method.The second method. is simpler than the allowance method in that it allows for one simple entry to reduce accounts receivable to its net realizable value.

Trade credit thus creates receivable / book debts. These customer from whom receivable or book debt are to be collected in the future are called as “trade debtors” or simply as “debtor” and represents the firm’s claim on assets. it requires careful attention and adequate management. Since receivables often accounts for the significance portion of total assets. a company is providing no cost financing to the customer to encourage the purchase of the company’s product/services. The extension of credit can be justified only if the increase in the sales and related cash collections (discounted for the time until collection) exceeds the amount otherwise cash generated under a “cash only” policy. 13 . Trade debtors are expected to be converted into cash within a short period and are included in the current assets.” The receivable represents an important component of the current assets of the firm. which the firm is expected to collect in near future. Receivables may be known as accounts receivables. which bear no interest in essence.1.2 Receivable management – CONCEPT The term receivable management is defined as “debt owed to the firm by customer arising from the sale of goods/ services in the ordinary course of business. Accounts receivable are thus amounts due from customers. When a firm its products / services and does not receive cash for it immediately. the firm has said to be granted trade credit to the customers. It is skill demanding field because the customer has to be bestowed with trust along with a continuous vigilance. trade creditors or customer receivable.

cost of capital)” 14 .e. it is not possible to avoid credit sales without adversely affecting the sales. Credit sale is generally made in an open account in the sense that there is no formal acknowledgement of debt obligation through a financial instrument. The sales of goods have become an essential part of the modern competitive economic system. Hence the firm is required to allow the credit sale in order to expand its sales volume. Management should weigh the benefits as well as the costs to determine the goals of receivable management. Thus the objective of receivable management is: “To promote sales and profit until that point is reached where the return on investment in further funding of receivable is less than the cost of funds raised to finance that additional credit(i. As a marketing tool they are indene to promote sales and thereby profits.OBJECTIVE OF DEBTORS MANAGEMENT It is not always possible to sell goods on cash basis only. sometimes other firms in that line might have establish a practice of selling goods on credit under these circumstances. However extension of credit involves risk and cost. The increase in sales is also essential to increase profitability. In fact credit sales and receivables are treated as a marketing tool to aid the sale of goods.

1. Various factors that favours credit Market factors Customers’ requirement Competition Marketing Tool Recessionary economic conditions 15 . Under any circumstances investment in receivable is growth oriented.4 NEED FOR GRANTING TRADE CREDIT: Trade credit is an important marketing tool. A policy of trade credit is followed nearly in all capital intensive industries either for sales expansion and /or sales retention.

 MARKET FACTOR: Market factors like price.  CUSTOMER’S REQUIREMENT: As the market has changed to the buyer’s market. credit plays an effective role in this context. For example. it may bring about a proportional increase in the magnitude of receivable.  Credit policies: The firm with the liberal credit policy will have a higher level of receivable than with a conservative or rigid credit policy. and TATA STEEL is not an exception. a number of factors also influence the size of receivables.5 DETERMINANT OF SIZE OF RECIEVABLES Beside sales. COMPETITION: In view of stiff competition from both domestic and international players. the company is left with no option then to grant credit. TATA STEEL whose price is comparatively higher is forced to grant credit in order to maintain sale. With an increase in the size of the sales.  16 . Competition is another vital factor. If the customer expects credit and is worthy of it.  1. the customers have become kings. The following factors directly or indirectly determine the size accounts receivables. which affects the credit policy of a firm.  MARKETING TOOL: T o push up sales of slow moving products and encourage bulk purchase of fast moving products. he gets it.  RESESSIONARY ECONOMIC CONDITIONS: Liquidity crunch forces the company to grant credit. Level of sales: The most important factor in determining the volume of receivable is the level of firm’s credit sales. forces accompany to grant credit.

if not losses.  Operating efficiency: The degree of operating efficiency in billing.  Collection policies: The vigour with which affirm collects its dues from the customers also affects its receivables.  Paying habit of the customer: The paying habits of the customers also have a bearing on the size of receivables. for if the amounts due are not collected timely. then also the size of the receivable will increase. In doing so. It will be beneficial to increase sales beyond a point because it will bring more profit. the additional cost incurred are less than the increase in revenue. The increase in profit will be followed by an increase in the size of the receivable. the size of receivable will increase.  17 . The customers may be in habit of delaying payments even though they are financially sound.Terms of trade: The size of receivables also depends upon the term of trade. In such case.  Profit: The level of receivables increases as a result of increase in sales.  Grant of credit: Size of the receivable depends upon the policies and practices of the firm in determining which customer are to be granted credit. The period of credit allowed and rates of discounts given are linked with receivables. If the credit period allowed is more. the receivable will also be more similarly if the rate of discount are reasonable. a firm suffers some financial difficulties. the firm should remain in constant touch with its customers. record keeping and other function also exercise some influence on a firm’s credit policy which in turn influences its receivables. When sales increase beyond a certain level. One of the attractive way in which a firm enters a new market is by giving incentives to the customers in the form of credit facilities.  Market: It may be necessary for the firm to explore a new market for its products/services.

Efficient credit collection machinery will reduce the size of receivable.Credit collection: The collection of credit should be streamlined. Individual firm of tern set up their own well organised credit collection department.  18 .


and the payment by. 2. the customers. Cost associated with steps that have to be initiated to collect the overdue. the firm should arrange for additional funds to meet its own obligations. Thus. DEFAULT COST 20 . legal charges. and so on. the cost on the use of additional capital to support credit sales is therefore apart of the cost of extending credit. Meanwhile the firm has to pay employees and suppliers of raw material i. accounting. records. postage and other related items.e. where necessary . Additional expenses on the creation and maintenance of a credit department with staff. DELINQUENCY COST: This cost arises out of the failure of the customer to meet their obligations when payment on credit sales becomes due after the expiry of the period of credit. have to be financed involving a cost. CAPITAL COST: Accounts receivables. stationary. There is a time lag between the sale of goods to.COSTS: The major categories of cost associated with extension of credit and receivable are:     Collection cost Capital cost Delinquency cost Default cost COLLECTION COST: These costs are administrative cost incurred in collecting the receivable from the customers. Such cost includes:   Blocking up of funds for an extended period. such as reminders and other collection efforts. being an investment in current assets. This category includes: 1. Expenses involved in acquiring credit information either through outside specialist agencies or by the staff of the firm itself.

Such debts are treated as bad debts and have to be written off.e. the benefits would depend upon the credit policy adopted by the firm.. another factor that has a bearing on accounts receivable is the benefit emanating from credit sales. i. one cannot altogether rule out the possibility of this cost. The benefits are: “The increased sale and thereby profits” However. 21 . the result the result of increased sales is the increase the profit of the firm. This motive is growth oriented. a conservative or liberal credit policy. Though a concern may be able to reduce bad debts through efficient collection mechanism. ii. as they cannot be realized. Sales expansion Sales retention In sales expansion a firm may grant credit either to increase sales or to attract new customer. on the other hand the sales retention the firm may grant credit to protect its current sales against emerging competition. The impact of liberal credit policy is likely to have two forms:i.In addition of the above cost the firm may not be able to recover the overdue because of inability of the customers. No matter whatever is the motive. BENEFITS: Apart from the cost.

On the basis of market performance and credit rating company decides the time period of payback of the amount. the amount which they are not able to pay at the same time of buying the amount is known as DEBT. The total amount called as debt is called as OUTSATNDING. above 3yrs. In their balance sheet company is a CREDITOR. and above 5 yrs. 22 . This time period is known as CREDIT PERIOD. 6-12 months. CURRENT LIABILITIES are those liabilities which are repaid within 12 months starting from company’s financial year. 1 to 2 yrs. This amount use for decreasing the effect of bad debts is called as PROVISION. 2-3 yrs. The total overdue is divided in different parts such as overdue within 3months. CURRENT ASSETS are those assets which can be converted into cash within the period of 12 months starting from the company’s financial year. When the customer is not able to pay back the due after five years then this amount is known as BAD DEBTS.SOME BASIC DEFINITION When the buying and selling process steps forward and the customer is not able to pay the total amount. from 3-6 months. When this total outstanding is not paid within the credit period the amount remained to be collected is called as OVERDUE. Tata Steel has kept some amount for this type of time of contingencies. In the balance sheet of companies those customers are DEBTORS.

The key function of credit management is to optimize the sales at the minimum possible cost of credit. The offer of trade credit should not only optimize sales but also lead to maximization of overall return on investment. Management of receivables. "The purpose of any commercial enterprise is the earning of profit. 23 . should be based on sound credit policies and practices. Trade debtors represent amounts owed to the firm as a result of credit sale of goods or services in the ordinary course of business.EXPERT VIEW It is generally believed that credit policy stimulates sales as it helps in retaining existing customers and winning clients from rivals. therefore. According to Joseph. Credit in itself is utilized to increase sales. but sales must return a profit".


with the change in time and technology. In the 17th century. Using iron had some disadvantages but this alloy of iron and carbon fulfilled all that iron couldn’t do. the smiths in the Middle East developed techniques to produce sharp and flexible steel blades.3. people were able to find an even stronger and harder material than iron that was steel. From China. Prior to steel. Also. High quality steel was being produced in southern India in as early as 300 BC.1 HISTORY OF STEEL Steel was discovered by the Chinese under the reign of Han dynasty in 202 BC till 220 AD. iron was a very popular metal and it was used all over the globe. One legend says that the sword of the first Han emperor was made of steel only. the process of making steel from iron spread to its south and reached India. smiths in Europe came to know about a new process of cementation to produce steel. 25 . But. The Chinese people invented steel as it was harder than iron and it could serve better if it is used in making weapons. Even the time period of around 2 to 3 thousand years before Christ is termed as Iron Age as iron was vastly used in that period in each and every part of life. Around 9th century AD. other new and improved technologies were gradually developed and steel soon became the key factor on which most of the economies of the world started depending. Most of the steel then was exported from Asia only.

economic growth. The subprime crisis has lead to the recession in economy of different countries. supply in sufficient quantities for the foreseeable future. 3. However steel production and consumption will be supported by continuous economic growth. And there is many more merger and acquisitions which overall buoyed the industry and showed some good results. The demand expectations for steel products are rapidly growing for coming years.FIG: Stages in Global Production of Steel • • • India is one of the world’s top ten steelmakers its domestic output is insufficient to Consumption of steel is very fast and as a consequence of the prospective dynamic Secondly.2 THE GLOBAL STEEL INDUSTRY The current global steel industry is in its best position in comparing to last decades. 26 . there is demand for high-quality products which India will not be able to meet the demand in all segments. which may lead to have a negative effect on whole steel industry in coming years. The shares of steel industries are also in a high pace. The price has been rising continuously. The steel industry is enjoying its 6th consecutive years of growth in supply and demand.

The survival strategy provides a foundation upon which a potent growth strategy could be formulated. A twostep strategy is suggested for the sustainable turnaround in the industry. Problems and solutions may vary with organizations but there is more a commonality than initially meets the eye. which all totally becomes more than 50% of global production. • • Indian steel industry is poised for rapid growth. the growth strategy would simultaneously take care of its total transformation towards a better future.e. Apart from this USA. are essential to enable the industry overcome the present imbroglio. China accounts for one third of total production i.3% in 2008. India’s share in world production of crude steel increased from 1. Both stages. India and South Korea are in the top of the above in steel production in Asian countries.5% in 1981 to around 7. 419m ton. to be implemented through an integrated plan. aimed to ensure survival and growth have been termed survival strategy and growth strategy.CONTRIBUTION OF COUNTRIES TO GLOBAL STEEL INDUSTRY The countries like China.e. BRAZIL. 27 . The secret of sustainable turnaround lies in how Indian steel industry faces the challenges and develops combative and anticipatory prowess. While the survival strategy would ensure the survival of the ailing steel industry. Japan. These stages. India accounts for 53m ton and South Korea is accounted for 49m ton. 118 m ton.3 INDIAN STEEL INDUSTRIES The challenges that confront Indian steel industry in the age of globalization are complex in nature. Japan accounts for 9% i. UK accounts for the major chunk of the whole growth. 3.

and steel flats  Steel Authority of India: Manufacturer of steel and iron  Ambica Steel: Producer of carbon steel. and stainless steel  Bokaro Steel Plant: Steel manufacturer  Central Steel Corporation: Producer of alloy and tool steels  Allied Ferromelt: Producer of non alloy and alloy steel  Anchor Engineers' Files: Producer of steel files for engineers 28 . SOME OF THE LEADING COMPANIES IN INDIAN STEEL INDUSTRY ARE AS FOLLOWS:  Tata Steel: Producer and supplier of wire rods.• The private sector is considered engine of growth in the steel industry and technological changes and modernization are taking place in both the public and the private sector integrated steel plants in India. bars. alloy.

 Essar Steel: Producer of sponge iron. steel and iron ore pellets  ColdFab: Producer of pre-fabricated buildings of steel  Hisar Metal: Producer of strips and stainless cold rolled steel coils  Buyao Info: Producer of steel products and re-rolled iron  Jindal Iron & Steel: Producer of galvanized steel products  Kanoi Group: Dealer of corrugated sheets and steel coils  Jindal Steel & Power: Manufacturer of mild steel slabs and sponge iron  Metalman Industries: Producer of tubular and flat steel items 29 .

The iron ore mines and collieries in India give the Company a distinct advantage in raw material sourcing.7 MTPA. Ivory Coast (West Africa) and Oman. has operations in the UK. Norway and Belgium. Tata Steel is the world’s 6th largest steel company with an existing annual crude steel production capacity of 30 Million Tons Per Annum (MTPA). with manufacturing units in 26 countries. Tata Steel. Millennium Steel (renamed Tata Steel Thailand) and NatSteel Holdings. through its joint venture with Tata BlueScope Steel Limited. Tata Steel has proposed a 0. Tata Steel is also striving towards raw materials security through joint ventures in Thailand. Orissa and Chhattisgarh in India with additional capacity of 23 MTPA and a Greenfield project in Vietnam. Corus. Tata Steel has created a manufacturing and marketing network in Europe.3 Company overview Backed by 100 glorious years of experience in steel making.8 MTPA which is slated to increase to 10 MTPA by 2010. Australia.5 MTPA mini blast furnace project in Thailand. Germany. has also entered the steel building and construction applications market. Mozambique. NatSteel Holdings produces about 2 MTPA of steel products across its regional operations in seven countries. Through investments in Corus. the Netherlands. which manufactured over 20 MTPA of steel in 2008. The Company also has proposed three Greenfield steel projects in the states of Jharkhand. France. Established in 1907. Tata Steel Thailand is the largest producer of long steel products in Thailand. Tata Steel has signed an agreement with Steel Authority of India Limited to establish a 50:50 joint 30 . Tata Steel`s Jamshedpur (India) Works has a crude steel production capacity of 6.3. it is the first integrated steel plant in Asia and is now the world`s second most geographically diversified steel producer and a Fortune 500 Company Tata Steel has a balanced global presence in over 50 developed European and fast growing Asian markets. Singapore. South East Asia and the pacific-rim countries. with a manufacturing capacity of 1.

India's first luxury hotel. outside Japan. The Indians hotels company is incorporated to set up the Taj Mahal Palace and Tower. which opened in 1903. Exploration of opportunities in titanium dioxide business in Tamil Nadu. Canada for iron ore mining. 31 for advanced . The central INDIA spinning. MILESTONes 1868 1874 1902 Jamshedji Nauserwanji TATA started a private trading firm. marking the group entry into textiles. (now TATA Power) is set up. The first of the three TATA Electric Companies. to be awarded the Deming Application Prize 2008 for excellence in Total Quality Management. Also. laying the foundation of the TATA Group. Tata Steel has bought 19. The Tata Hydro-Electric Power Supply Company. 1907 1910 1911 The TATA Iron and Steel Company (now TATA Steel)is established to set up India's first iron and steel plant in Jamshedpur. weaving and manufacturing company is set up. Tata Steel’s vision is to be the global steel industry benchmark for Value Creation and Corporate Citizenship. The Indian Institute of Science is established in Bangalore to serve as a centre learning. Ferro-chrome plant in South Africa and setting up of a deep-sea port in coastal Orissa are integral to the Growth and Globalisation objective of Tata Steel.venture company for coal mining in India.9% stake in New Millennium Capital Corporation. Tata Steel India is the first integrated steel company in the world.

1912 1917 1932 TATA Steel introduces eighthour working days. is established to opening up the aviation sector in India. detergents $ cooking oils. The TATAs entered the TATA airlines. is established. a division of TATA sons. well before such a system was implemented by law in much of the West. • established. Today the company renamed as TATA export is TATA sons. to publish educational and technical TATA tea). consumer goods industry. with the TATA Oil Mills Company being established to make soaps. manufacture manufacture locomotive and engeneering leading to satting up the 1962 1968 1970 • TATA finlat (now TATA consultancy services company is TATA McGraw-Hill Publishing Company is created books. requested cosmetics LAKME. 1939 1945 1952 TATA Chemicals. Locomotive (renamed as established products. established as a division of 32 . TATA TATA engeneering MOTORS) to and is Jawahar lal Nehru India’s first Group prime the in to minster TATA India. one of the (TCS) India’s first software largest tea producers is services estblished. now the largest producer of soda ash in the country.

TATA Teleservices (TTSL) is established to spearhead the Group's foray into the telecom sector. spearheading the Group's entry into the passenger car segment. raising nearly $1. • Singapore-based steel company NatSteel by subscribing to 100 per cent equity of its subsidiary. Motors.a joint venture between TATA Group and Tamil Nado Industrial Development corporation is set up to manufacture watches. NatSteel Asia. India's leading international telecommunications service provider. 33 .TATA International.2 billlion. is one of the leading export houses in india. 1984 1996 1998 TITAN Industries. TATA Indica – India's first designed launched by indigenously and TATA manufactured car – is MOTORS. 2002 2004 2005 • • The TATA Group • TATA MOTORS acquires the heavy vehicles unit of Daewoo Korea. • VSNL acquired TCS goes public in July 2004 in the largest private sector initial public offering (IPO) in the Indian market. • • TATA Consultancy Services (TCS) becomes the first Indian software company to cross one billion dollars in revenues. South • TATA Steel acquires acquires a controlling stake in VSNL.

2007 2008 TATA steel acquires CORUS thus world. 34 . • • Idea Cellular. the slimmest watch in the world. the umbrella brand for telecom services from the TATA Teleservices stable. is launched. • • TATA Indicom. the Birla Group and AT&T. starts operations. becoming the sixth largest steel maker of the TATA Group acquires JAGUAR & LAND ROVER from FORD MOTERS.• Titan launches Edge. the cellular service born of a tie-up involving the TATA Group.

by fostering team work. by providing a safe working place. by becoming the supplier of choice. We make the difference through: • Our people. delivering premium products and services. Our innovative approach. 35 . • and creating value with our customers. • and products. processes acting with pace. nurturing talent. enhancing leadership capability and Our offer.We aspire to be the global steel industry benchmark for Value Creation and Corporate Citizenship. respecting the environment. pride and passion. • Our conduct. by developing leading edge solutions in technology. caring for our communities and demonstrating high ethical standards .

36 . Our INNOVATIVE APPROACH. by fostering team work. We make the difference through: Our PEOPLE. by developing leading edge solution in technology. enhancing leadership capability and acting with pace. delivering premium products and services and creating value with our customers. by becoming the supplier of choice. process and products. Our OFFER. by providing a safe working place respecting the environment. nurturing talent.GROUP VISION We aspire to be the global steel industry benchmark for Value Creation and Corporate Citizenship. pride and passion. Our CONDUCT. caring for our communities and demonstrating high ethical standards.

37 .

PC wires and PC strand. The NatSteel group produces construction grade steel such as rebars. construction rebars and bearings. mesh. ‘cut-and-bend’ cages for construction. Tata Steel has introduced brands like Tata Steelium (the world's first branded Cold Rolled Steel). tubes. Tata Wiron (galvanized wire products). Corus’ main operating divisions comprise Strip Products. Tata Agrico (hand tools and implements). 38 .Products Tata Steel`s Jamshedpur Works produces hot and cold rolled coils and sheets. precage bore pile. Tata Tiscon (re-bars). Tata Bearings. Tata Shaktee (Galvanized Corrugated Sheets). Tata Steel Thailand produces round bars and deformed bars for the construction industry. Tata Pipes (pipes for construction) and Tata Structura (contemporary construction material). the company also has in its folds a service brand called “steel junction”. Long Products and Distribution & Building Systems Division. galvanized sheets. wire rods. In an attempt to 'decommoditise' steel.Apart from these product brands.

Corporate Sustainability Regarded globally as a benchmark in corporate social responsibility. is a reiteration of its commitment towards the Company's employees. The SA 8000 certification for work conditions and improvements in the workplace at the steel works in Jamshedpur. fully conscious of its responsibilities to the future generations. The Company. This is reflected in the ISO-14001 certification that all its operations have achieved for environment management. Its mammoth social outreach programme covers the company-managed city of Jamshedpur and over 800 villages in and around its manufacturing and raw materials operations through uplift initiatives in the areas of income generation. along with its Ferro Alloys and Minerals Division. education. Tata Steel's commitment to the community remains the bedrock of its hundred years of sustainability. INVESTMENTS OF TATA STEEL In INDIA     12 MTPA plant in Jharkhand 6 MTPA plant in Orissa 5 MTPA plant in Chhattisgarh Jamshedpur steel works became a 7 MTPA unit in 2008 OVERSEAS    VIETNAM SOUTH AFRICA AUSTRALIA 39 . has always taken pro-active measures to ensure optimum utilization of natural resources. sports. Tata Steel has pioneered numerous employee welfare measures such as the 8 hours working day and the three tier joint consultation system of management which have been the platform for nearly 80 years of industrial harmony in its Steel Works in Jamshedpur. health and medical care. and relief.



• Best governed company Award 2006 for setting high standards in governance practices. It is the first integrated steel company in the world. • World Steel Dynamics has ranked Tata Steel as the world's best steel maker (for two Tata Steel has been conferred the Prime Minister of India's Trophy for the Best It has been awarded Asia's Most Admired Knowledge Enterprise award five times in Conferred the prestigious Global Business Coalition Award for Business Excellence Tata Steel works has been conferred the prestigious social accountability (SA) 8000 consecutive years) in its annual listing in February 2006. • certification by social. USA. 2004. • Corporate Sustainability Report of Tata Steel hailed by United Nations Environment Programme (UNEP) and Standard and poor as strongest. submitted by any corporate house from emerging economies. • 2003. 2007 and 2008. Accountability international (SAI). 2006. • in the Community in recognition of its pioneering work in the field of HIV/ AIDS awareness. • Integrated Steel Plant five times. It is the first steel company in the world to receive this certificate. 42 .Awards and Recognitions • Tata Steel India awarded the Deming Application Prize 2008 for excellence in Total Quality Management. outside Japan to get this award.

A D Baijal Mr. 2009) Mr. B K Singh Mr. H M Nerurkar Managing Director Executive Director. Varun K Jha Mr. Chhattisgarh Project Vice President. Safety & Long Products Vice President & Tata Steel Group Head. N K Misra Mr. Abanindra M. Raw Materials & CSI Vice President. Om Narayan Mr. R P Singh Mr. J C Bham 43 . Flat Products & TQM Vice President.(As on 7th May. Shared Services Chief Human Resource Officer Vice President. M&A Vice President. Radhakrishnan Nair Mr. Partha Sengupta Mr. H Jha Mr. Global Mineral Resources Vice President. B Muthuraman Mr. Koushik Chatterjee Mr. Orissa Project Company Secretary Mr. Corporate Services Vice President. Misra Mr. Anand Sen Mr. Engineering Services & Projects Group CFO. Tata Steel Vice President. India and South East Asia Operations Vice President & Tata Steel Group Director.

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Strategic Business Units OF TATA STEEL 48 .

(www. improve operational efficiency and reinforce existing competitive position. including the development of new advanced high strength steels.co. in the Netherlands and at Scunthorpe in the UK as part of its drive to strengthen product differentiation. (www.tayo.000 employees worldwide. it is the industry leader in India.tatatinplate. automotive.com) Tayo Rolls Limited: India's leading roll manufacturer and supplier. (www. Corus is implementing major investments at its plants at IJmuiden.com) Tinplate Company of India Limited (TCIL): With a market share of over 35%.Corus: Europe’s second largest steel maker with operations in the UK and mainland Europe and over 40. Its long and strip products cater to the construction. (www. engineering and other markets worldwide. packaging. power plants.tataryerson. It offers hot and cold rolled flat steel products in customised sizes and quantities through processing services and materials management services. particularly in the construction and automotive sectors. the paper.corusgroup. and the government mint.in) Tata Ryerson Limited (TRYL): TRYL Is in the business of steel processing and distribution.com) 49 . textile and food processing sectors. the company produces rolls which find application in integrated steel plants. It has the capability to supply all tinning line products including electrolytic tinplate / tin-free steel and cold-rolled products.

tatapigments. dry cement paint. procurement and re-lining applications services.Tata Refractories Limited (TRL): It produces High Alumina. (www.tataref. Basic. (www.com) Tata Pigments Limited: TPL's range of products includes oxides of iron.com) Tata Sponge Iron Limited (TSIL): TSIL is the first Indian sponge iron plant based on Tata Steel's Direct Reduction Technology. Dolomite.com) Tata Metaliks: Amongst the top wealth creating companies (EVA+) in the country. (www. Its major product lines are sponge iron lumps and fines. exterior emulsion paint and distemper. Its products are used in paints. cement floors.com) Jamshedpur Injection Limited (Jamipol): Powder JAMIPOL manufactures carbide de-sulphurising compounds which are used for desulphurising hot metal for the production of low-sulphur.jamipol. It is one of the few companies worldwide to produce silica refractories for coke ovens and the glass industry.com) 50 . (www.tatametaliks. Tata Metaliks is engaged in the business of manufacturing and selling foundry grade pig iron. The Company has a basic bricks manufacturing unit in China. high-quality steel. Silica and Monolithic Refractories and offers design. plastic etc.tatasponge. emulsion. (www.

coal dust injection systems for blast furnaces and coal beneficiation systems. reclaiming and blending. JUSCO is the only EMS 14001 civic services provider in the country. Mjunction offers a wide range of selling. TRF has also made its mark in the fields of coke oven equipment.com) Jamshedpur Utility and Service Company Limited (JUSCO) : Re-engineered out of Tata Steel's town services.juscoltd. (www. manufacture.com) mjunction : mjunction.mjunction.tmilltd. : (www. sourcing and knowledge services that empower businesses with greater process efficiencies. is a 50:50 venture of SAIL and Tata Steel. operating at the cutting edge of Information Technology.in) services limited TRF Limited TRF.TM International Logistics Limited (TMILL):TMILL provides material handling and port operation services at Haldia and Paradip Ports in addition to providing freight forwarding and chartering services. processing. It is India's largest eCommerce company and the world's largest eMarketplace for steel. one of India's leading companies in the business of design. (www. installation and commissioning of engineered-to-order equipment and systems in the areas of bulk material handling. JUSCO is a wholly owned subsidiary of Tata Steel and is the country's first enterprise that provides municipal and civic services for townships. (www.trfltd.com) 51 . supply.

a wire unit comprising wire drawing mills.. the company will build a deepdraft (18 metres) all weather port on the east coast of India.2 million tonnes and 90 MW of electric power. (www. Australia.com) Lanka Special Steel Limited: The only unit in Sri Lanka manufacturing galvanised wires. wire rod mills and a fastener division and a steel roll manufacturing unit named Jamshedpur Engineering and Machining Company JEMCO. The port will handle 80 million tonnes per annum of cargo..The Indian Steel and Wire Products Limited (ISWP) : Recently acquired by Tata Steel.hooghlymetcoke. (www. 52 . HMC&PC envisages an annual met coke production capacity of 1. and Tata Steel Ltd.dhamraport. Tata BlueScope Steel Limited offers a comprehensive range of branded steel products for building and construction applications. Orissa: A JV between Larsen & Toubro Ltd. Tata BlueScope Steel Limited: A joint venture with BlueScope Steel Limited. ISWP has two units . (www.com) Hooghly Met Coke & Power Company: A joint venture with West Bengal Industrial Development Corporation Ltd.com) Dhamra Port Company.tatabluescopesteel. The Company is constructing a state-of-the-art metallic coating and painting facility at Jamshedpur.

Tata NYK: A joint venture with Nippon Yusen Kabushiki Kaisha (NYK Line) for setting up a shipping company to cater to dry bulk and break bulk cargo.Sila Eastern Company Limited: Established to develop limestone mines in Thailand. The company has the capacity to produce 1.tatasteelthailand. NatSteel Holdings became a 100% subsidiary of Tata Steel in February 2004. The plant is slated to be commissioned by October 2007 with an annual production capacity of 135.000 tonnes during Phase 1.com) Tata Steel KZN: Proposes to set up high carbon ferrochrome plant in South Africa. mainly for the captive use of Tata Steel.7 million tonnes of steel for the construction industry per year. (www. (www. Tata Steel and NYK will each hold 50% stake in the joint venture company.sg) Tata Steel Thailand: The company is the dominant steel producer in Thailand.natsteel. NatSteel Holdings (NSH) : A leading supplier of premium steel products for the construction industry. NSH produces about 2 MT of steel products annually across its regional operations in seven countries.com. 53 .

as a part of its growth strategy.Dhamra The Company has set itself the objective of expanding its capacities and becoming globally competitive in its business. the Company believes in adopting the ‘best practices’ that are followed in the area of Corporate Governance across various 54 .National Jharkhand Chhattisgarh Orissa Kalinganagar Port Tamil Nadu - International Vietnam South Australia Mozambique Ivory Coast (West Africa) Oman Africa .

The Board considers itself as a Trustee of its Shareholders and acknowledges its responsibilities towards them for creation and safeguarding their wealth. 55 . in order to protect the interests of its stakeholders.geographies. The Company emphasises the need for full transparency and accountability in all its transactions.

Energy: The Tata group is a significant player in power generation and is also involved in the oil and gas segment. with operations in automobiles and auto components and a variety of other engineering products and services. as also in insurance. Engineering: The Tata group has a robust presence in engineering. Services: The Tata group has widespread interests in the hospitality business. Materials: The Tata group is among the global leaders in this business sector. with operations in steel and composites. SOME OF WHICH ARE: • • • • • • • • • • Tata Tele Services Tata Power Tata Consultancy Services Tata Chemicals Tata Assets Management Tata Motors Tata Capital Titan Industries Tanishq Taj Group of Hotels 56 . telecommunications and industrial automation.Tata groups Diversified area of business Information systems and communications: The Tata group has well-established enterprises in the fields of software and other information systems. realty and financial and other services.

Products of Tata group 57 .


96 FY2004-05 15876.87 FY 2005-06 17144.57 FY 2007-08 22191.8 59 .22 FY 2006-07 19762.TREND OF SALES YEARS SALES FY 2003-04 11920.

PRODUCT WISE NET SALES ARE AS FOLLOWS Figures in Rs (crs) FY 2006-07 STEEL TUBES FERRO ALLOYS AND MINERALS BEARINGS 14858 1099 1454 140 FY 2007-08 16541 1217 1808 127 Analysis: 60 .

The increase in the net sales of Tubes division was due to the increase in both the volume as well as prices. The Ferro Alloys and Minerals division of the company registered a growth of 24% in terms of value though there was a decline in terms of quantity due to the company’s decision during the year to stop the sale of ores. There was a decline in the net sales of the Bearings division of the company mainly due to lower off -take by the automotive sector, which is a major customer sector of the division.


YEARS DEBTORS FY 200304 756.06 FY200405 581.82 FY 200506 539.4 FY 200607 631.63 FY 200708 543.48

There has been decrease in the trend of debtors in last five years, from Rs.756.6crores to Rs.543.48 crores. This decrease in debtors shows a more profit to the company. The increase in the debtors during 2006-07year might be due to the acquisition of CORUS.


PROFIT CENTERS STEEL WIRE DIVISION TUBES BEARINGS F.A.M.D TOTAL DEBTORS For the FY 06-07 509.09 43.82 37.01 7.01 70.44 667.37 For the FY 07-08 397.84 33.30 31.13 7.29 107.59 577.15


TRENDS OF DEBTORS IN TATA STEEL Debtors FY 06-07 FY 07-08 Apr 614 694 May 688 687 Jun 756 662 Jul 663 683 Aug 658 669 Sep 753 767 Oct 680 733 Nov 670 636 Dec 731 677 Jan 709 691 Feb 774 716 Mar 667 577 64 .

In the year 2006-07 the ratio is very high which is not desirable since it means there was less efficient use of funds which was lowering down the profitability of the concern. 65 . the ratio has quite improved to 0.1 FY 2005-06 1.9 from 1. An ideal current ratio is 1:1.18 FY 2007-08 0.03 in the year 2003-04 and is coming closer to the ideal ratio.9 ANALYSIS: The ratio is constant. In year 2007-08.1 FY 2006-07 2.TREND OF CURRENT RATIO YEARS CURRENT RATIO FY 2003-04 1.03 FY2004-05 1.

is measured through the debtors' turnover rate. 66 .38times to 35.81 FY 2005-06 28. The liquidity of debtors.38 FY2004-05 23.9 FY 2007-08 35.66 times in the year 2007-08.73 FY 2006-07 31.TREND OF DEBTORS TURNOVER RATIO YEARS Debtors Turnover Ratio FY 2003-04 13. therefore. From the above chart it is clear that the debtors turnover has been kept on increasing from 2003-04. A higher debtors turnover coupled with quick average collection of debtors enables the firm to transact a larger volume of business without corresponding rise in the investment in debtors.66 ANALYSIS: Debtors' turnover rate indicates how quickly receivables or debtors are converted into cash. where it was 13.

23 days in 200708. An average collection period is a measure of how long it takes from the time the sales is made to the time the cash is collected from the customers.7 FY 2006-07 11.27 FY200405 15.33 FY 2005-06 12. 67 .7 days in 2003-04 to 10. which is a good sign for the company. In case of TATA STEEL there is a continuous fall in average collection period from 27.44 FY 2007-08 10.TREND OF AVERAGE COLLECTION PERIOD YEARS AVERAGE COLLECTION PERIOD FY 2003-04 27.23 ANALYSIS: The turnover rate converted into average collection period is a significant measure of the collection activity of debtors. Lesser the period better the situation for the company.

This can be easily seen in case of TATA STEEL where the average debtors to turnover has been decreased from 6.TREND OF AVERAGE DEBTORS TO TURNOVER RATIO YEARS Debtors Turnover Ratio FY 2003-04 13. it is also a symptom of fairly favorable credit policy. An uninterrupted upward trend in sales accompanied by downward trend in debtors indicates that the credit policy implemented by the company is very effective in stimulating more sales. 68 .81 FY 2005-06 28.9 FY 2007-08 35.75% in 2003-04 to 2.73 FY 2006-07 31.66 ANALYSIS: The analysis of the trends in sales and trade debtors shows the effectiveness of the credit policy in activating sales. if the pace of increase in sales is more than the pace of increase in debtors.Further.65% in 2007-08.38 FY2004-05 23.

PROVISION OF BAD DEBTS TO NET DEBTORS IN LAST FIVE YEARS year 03-04 651 6 1 04-05 582 3 9 05-06 539 3 2 06-07 632 3 6 07-08 543 3 4 Debtors Provision for doubtful debt 69 .

41 FY 2005-06 108. When compared with a previous period. asset turnover ratio indicates whether the investment in fixed assets has been judicious or not.ASSET TURNOVER RATIO IN LAST FIVE YEARS YEARS ASSET TURNOVER RATIO (%) FY 2003-04 100. There has been an increase in the Fixed Assets Turnover Ratio.76 FY 2006-07 77. 70 .78 FY2004-05 110. this might be due to increase in net sales or due to the acquisition of CORUS during the year2007.02 FY 2007-08 106.25 ANALYSIS: This ratio indicates the extent to which the investments in fixed assets contribute towards sales.

Sales and indirect taxation group is responsible for accounting for activities such as:  FREIGHT.2. 4. which is dealt by sales and indirect taxation group. CASH OFFICE FINANCE AND COSTS PAYROLL ACCOUNTS PURCHASE AND CAPITAL GROUP SALES AND INDIRECT TAXATION This project is related to DEBTORS MANAGEMNET. 2.OUTWARD & INWARD (ROAD AND RAIL) INVOICE INDIRECT TAXATION MATTERS (EXCISE AND SALES)   It is also related to post sales activities like debtors and town accounting. 5.5 OVERVIEW OF THE FINANCE DIVISION OF TATA STEEL The whole finance and accounts department of Jamshedpur is divided in different groups and sections. Everything related to debtors is termed as sundry debtors work. 3. It comprises of the following sections: EXCISE SECTION FREIGHT SECTION TOWN DEBTOR’S SECTION OUTWARD INVOICE SECTION 71     . These were: 1.1.


Notes are often put up to the concerned profit centres to highlight probable cases of default. ACTIVITIES OF SUNDRY DEBTORS SECTION: 73 .SUNDRY DEBTORS SECTION As the name suggests. The section plays a major role in monitoring the movements of debts & advising recoveries from the bills of those vendors who are also the defaulting customer of the company. this section is responsible for the consolidated reporting of all the debts due to the company and related information to the management.

 Updating the status of the minutes of the CCCM 74 . OTHER ACTIVITIES:  Inputs for the credit control meeting  Preparation of the minutes of the CCCM. Agrico & town. • Annual Business Plan Report The Memorandum of understanding of sundry debtors section and continuous monitoring of the performance against targets set.  Preparation of reports: • Board note on debtors (Tata steel debtors) • Associated company’s outstanding debtor’s report.  Updating of debtors ledger and preparation of reviews for reconciliation of debtors ledger balances with the corresponding balances as per financial accounts  Updating of advance ledger maintained for tender sales and for preparation of reviews of advance ledger  Updating of auction ledger and preparation of monthly review foe auction ledger  Maintenance of security deposit ledger for the purpose of refund of security deposits and for payments of interest on security deposits. Rings. Inter office collection (on behalf of other divisions/ profit centres /sales offices). • Preparation of the outstanding report for secondary products. • VP (F) Report (Gives the detailed outstanding of all major parties).

The scope encompassed with the debtors section of the company which is a part of finance and accounting department.RESEARCH METHODOLOGY 2. 2.1 Type of Research The study is descriptive in nature in the sense that it focuses basically on analyzing the debtors management at TATA STEEL.   Comparison of Tata Steel with other key players with respect to the debtors.3 SCOPE OF THE STUDY The scope of this study is limited to the study of Debtors Management at TATA STEEL. Position of debtors in different industries.2 OBJECTIVE OF THE STUDY  The process of debtors management in TATA STEEL how the outstanding debtors are accounted & what steps and actions are taken and should be taken to recover these dues on time. 2. 75 .

2. STEEL. CREDIT DECISION PROCEDURE OF CREDIT DECISION 76 .4 sources of data Collection • • Primary data are collected by interviewing customers and employees of TATA Secondary data are collected by using internet. magazines and text books.5 Sampling The study was done by using the age wise analysis of debtors. 2.

The policy is influenced by the 77 .WHAT IS CREDIT POLICY? The credit policy provides the yardstick for measurement of credit level of receivables and is the indentified and compared monthly. as per the requirements.

The committee meets at least in two months. thereby keeping the financing of the working capital cost effective and preventing any liquidity problems from arising. CREDIT TERMS Credit terms refer to the terms and conditions on which the trade credit will be made available. which in turn is a significant influence both ion payment terms and on the whole of the credit control operation. since it determines how much tolerance. 78 .M (F&A) and other concerned executives as its members. if any.P & E. These relate to the repayment of the amount under the credit sale. credit is allowed to customer who takes large and repeated orders. The annual limit of credit sale is provided by Sr. These terms can be finalalized after the scrutiny of number of factors. both regional and party wise credit limit is set by the body.V. which formulates and gives the final approval for many credit policy matters. also the availability of capital to finance the payment of other overheads. is to be shown to slow paying customer. The various factors which must be taken into account are:  The seller company’s place in the market and the credit terms on which it is buying from its own suppliers.  The availability of the capital it needs to finance its own credit sales and whether this is to be borrowed and if so at what cost. Thus the stipulations under which the goods are sold on credit are referred to as credit terms.D (F&A) and consists of all product and sales manager from various divisions along with G. The policy clearly defines the standard for target debtor level.V. Hence the basic purpose this committee is to set the standard and also have the overall control of the credit situation. The credit control committee is headed by Sr. One time customers are not entertained for credit.e.nature of market and strength of the competition. As a general rule. The committee then discusses in detail about the breakup of the above lump into the credit limits for different sales offices and also for various customers i. CREDIT POLICY OF TATA STEEL TATA STEEL has a body known as credit control committee. The credit guidelines as they have emerged today are combined efforts of finance and marketing department.P (F&A) in consultation with other management officials.

The character of the market    A. the buying company’s inventory turnover and average collection period will ultimately decide the selling company’s credit terms. The period the buyer will have the goods i. These credit terms usually written in abbreviation for e. The competitive factors. The customers can take advantage of discount if they pay the amount within the stipulated time. 2/10net 30 where: • 2 signifies the rate of cash discounts (2%) 79 . During this period the customers must pay the overdue amount. CREDIT LIMIT: is decided by the top management and varies according to the market condition. CREDIT TERMS HAS THREE COMPONENTS i. The condition of the customer finances and the degree of the credit risk. which is further segregated into monthly limits within which the different parties have to accommodate. ii. The profit margin to be obtained.  The existence of buyer and seller’s market The volume of sales planned and how these will be spread over the range of customers.e. This function is performed by the credit control committee as discussed above. which the credit sale will involve. Credit period Credit limit Cash discount CREDIT PERIOD: is the duration of time for which trade credit is extended. This total amount is broken up into regional limits. CASH DISCOUNT: is offered to induce the customers to make prompt payments. B. iii.g.

e.• 10 represent the time duration (10days)within which a customer must pay to be entitled to the discount • 30 represent the credit period. followed by TATA STEEL are as follows: • CREDIT PERIOD: the credit period is decided on the basis of the type of the product and is generally of fixed nature.e.5% 20. there is a penal interest of 3% over the applicable rate of interest. The rate of interest for unsecured credit is1% more than the corresponding rate under secured credit .5% 19. whose inventory turnover have also ignored the discounts and debtor’s turnover is low or whose operating cycle is long 80 .5% CASH DISCOUNT: Cash discount of 2% has also been allowed for certain products in different division.5% 20. special customer may be allowed a variance in the set credit period depending upon the volume of sales and customer relationships. However. i. Time period After 30 days After 60 days After 90 days Secured credit 18. the credit period and cash discount. • INTEREST CHARGED: interest free credit is allowed for 30 days in most cases. The discounts had a positive response from certain customers who had working capital problems i. Credit terms of Tata steel The credit terms.5% 21.5% Unsecured credit 19. A every 30 days extension there is a 1% rise in interest rate for secured credits.

COLLECTION EFFORT: A constant touch with the customers is the best way of reminding him about his payment schedule in a polite but firm manner. weekly. Customer’s Accounts 81 . In cases.1TATA STEEL’S CREDIT MONITORING AND CONTROL As the most of the credit is unsecured. In case of secured credit where Tata Steel is also a debtor of its customers. A daily. monthly reports are generated and are sent for review to credit control committee chaired by V. Tata steel ‘s collection efforts were not up to the mark that is the reason why outstanding of greater than six months were increasing continuously which has now improved to a great extent. for monitoring the debtors TATA STEEL is using some steps. monthly report regarding the sales is done to keep track on debtors and the cash position. it uses its accounts payable as tool to realize its accounts receivables. keeping a timely vigilance on the debtors is important from the safety and the liquidity position of the firm. 4. FOLLOW UP Proper follow up is done for the timely collection of debts. A daily. Efficient and capable Customer’s Accounts Managers are appointed for this purpose. which have the symptoms of becoming the bad. and increase the % of bad debt. This primarily requires an efficient collection process because slackness in the collection efforts lengthens the average collection period. However in the worst case legal action is pursued and bad debts are not written off before five year. These steps are: • • • Preparation of a ageing schedule Calculation of days sales o/s Calculation of ACP With the help of these.P (F&A). a reconciliation statement is prepared and the mutual agreement arrived at. weekly and monthly report regarding the total sale is done to keep a track on debtors and cash position.

Managers is responsible for the collection of debts and follow up of the customers. II. b) I. TOTAL 100% 100% 100% 100% 2) c) I. LEGAL CASE Above three years Recoverable 100% 82 . II. Now TATA STEEL has adopted many ways to follow-ups: • • • • • Phone Fax E-mail Letters Personal visit TATA STEEL PROVISION POLICY DEBTORS STATUS AS ON ……………… SUMMARY AS ON………………… DEBTORS PROVISION GUIDELINE %Age Provisions required BIFR CASES Above three years Recoverable Non Recoverable Total Below three years Recoverable Non Recoverable Total Amount of Provision outstanding required 1) a) I.

Non Recoverable Total TOTAL h) 0% 100% 100% 100% 83 . II. Recoverable II. II. Non Recoverable Total TOTAL I. Non Recoverable Total i) Above 2 years I. Recoverable II. d) I. e) 0% 100% 50% 100% 100% 100% 4)SUBSIDUARY COMPANIES 6 months-2 years I. Non Recoverable Total g) Above 2 years I. Recoverable II. Non Recoverable Total Below three years Recoverable Non Recoverable Total 100% 100% 100% TOTAL 3) GOVT./TOWN DUES 6 month-1 year Recoverable Non Recoverable Total f) 1-2 Years I. Recoverable II.II.

5)OTHERS j) I. II. k) I. II. l) I. II. 6 months-three years Recoverable Non Recoverable Total 3 years-5 years Recoverable Non Recoverable Total Above 5 years Recoverable Non Recoverable Total 0% 100% 100% 100% 100% 100%




Managing the debtors for Tata steel is an important and chief function of the sales accounts division of finance and accounts. All the transactions of commercial nature are dealt with by this department in a detailed outline frame of working. The debtors arise each month out of the sales made on credit and suitable feeding of the required figures has to be made once in a month. This function is very much a difficult task owing to the various subsidiaries and associate companies being controlled by TISCO itself.


The activities of each of the companies are diverse in operations and require different policy formulations and strategies for complying with the existing market requirements. But they are controlled in a centralized manner so that they give an actual overview of the standing of the company. The profitability of each of the above is equally important to arrive at a consensus for finding out the actual earnings and future prospects. As such each of the company under subsidiary and associate is incorporated under distinct centres as Profit Centre.

To flatten the organizational structure and developed authority and responsibility for the quicker responsiveness to changing market conditions and greater initiative in dealing with different target markets, Tata steel has brought in the concept of profit centre. For all practical purpose, each profit centre functions as a separate company within the hold of Tata steel. From the debtors management point of view also each profit centre has the responsibility of appraising and dealing with its customers. However the overall control is centralized and is in the hands of the finance department. The main function which lies at the hands of Tata steel, Jamshedpur is to report such standings of the actual debtors as on a particular date to the MD in the form of a monthly report. The figures thus arrived at give an overview of which profit centres contribute the most to the debtor’s standing and the specific reasons for the same. Being a steel manufacturing concern, Tata steel is mainly concerned with the actual debtors arising for the following profit centres:      STEEL WIRE DIVISIONS FERRO ALLOYS AND MINERALS DIVISION TUBES DIVISION BEARINGS

Each of the above profit centers have debtors of their own which are handled and managed in a centralized manner. For an example, tubes division is one of the most important division which has the maximum contribution to the total sales taking together all the profit centers at 85

a point of time. It has various parties of its own as debtors such as ESSAR STEEL LIMITED, BLUE STAR LIMITED, TATA CHEMICALS LIMITED, MECHATRONICS and many debtors. A database relating to the different parties is maintained in a pre specified format which helps in understanding the actual standing of the debtor from the point of view of the actual sale being made to the party on credit till date. This format helps in maintaining the records in a form which helps in judging the actual ageing of the debtors and the amount being recovered from the total debt. By ageing we mean to give an actual definition to the debtors in terms of how old has the debt been to him and thereby categorizing him for the purpose. A same prescribed format is used by all the profit centers for managing their respective debtors.

Through this preparation we get to know the actual total debtors figures and the major parties that have contributed to the increase and decrease in the debtors as when compared with the previous financial period. It mainly emphasizes upon the total debtors figures and the overdue debtors and their major contributors in the form of party names and figures. It also gives all list of indications for the debtors whose standing are for periods beyond six months. This reporting is crucial for the reason that it gives the management the indicative areas for focus, the reasons for a rise in debtors and suitable control for future standing which is profitable to the company as a whole.

The core objective of channel financing is to provide integrated commercial and financial solutions to the supply and distribution channels of a given industry. Channel finance gives support to the commercial relationship between our clients and their suppliers and customers. The commercial aim of the channel finance is to add value supply and distribution channels by providing unique solutions that meet our customer’s demand.


Forward and backward linkages in a business organisation play a significant role in the success or failure of the business entity. Channel financing relates to ensuring that integrated financial and commercial solutions are available to the entire chain of supply and distribution that could ensure health of the firm. reduced account receivables and improved control of the sales/ distribution channels. How channel financing is different from conventional lending? Channel financing is different from the conventional lending since in conventional lending the financing banks are generally not concerned as how the suppliers of the firm and dealers of teh product of the firm are financing their activity. The bank can also allow loan to the dealer for credit term that has been fixed 87 . the supplier of the inputs or the dealer/ buyer or the financing bank. it need not avail of credit from the bank to pay off the supplier. while the suppliers of the raw material are important as they provide input for production. drawee bills financing.By providing short term lending to clients utilizing qualified receivables as collateral. Hence. be it the manufacturer/trader . the financing bank may have to find the ways and means as to how the suppliers and the buyers(dealers of the product) can be financed through various instruments/facilities. In addition. The weak financials of the supplier(leading to delay in supply and non availability of market credit)or the dealers of the product (delay in receipt of payments leading to higher book debts) could adversely impact the top line sales and bottom line profits of the financed firms.(say) a manufacturing or trading firm. equally important is the role of its distributors which sell products manufactured by the firm through retailers to the ultimate consumers. payables discounting serves to add value by improving supplier relationships and enhancing cash flow management. For instance. financed by the bank. the channel financing adds value to the transaction for all the parties concerned. if the supplier gets the finance in his own name from the bank for raw materials supplied on credit in the form of say. value is added to the client by way of working capital support. In the channel financing. For. METHODOLOGY Through channel financing the business firms can outsource a major part of their working capital needs thereby reducing their dependence on bank finance.

GAINS TO BANKS The bank also gain substantially from the process of channel financing which include increased customer base.between the firm and the dealer in the form of receivable finance or finance against book debts or factoring of receivables. This firm functions as the principal customer which suggests the names of its suppliers and dealers to the bank. Such firms can concentrate more on their core competence area of production and marketing their products besides saving time and costs involved in arranging creditors and monitoring recovery. 88 . Thereafter the bank makes the a due diligence assessment of the suppliers/dealers standing credit worthiness and decides to provide finance on merit. Hence the channel financing is a very convenient tool in managing their assets portfolio. Since the risk is diversified through finance to supplier. the major benefit is that they get payments promptly. As regards the suppliers and the dealers. THE SUPPLIER AND THE DEALERS/BUYERS The pre and post sale of working capital requirement of the manufacturing concern would be scaled down. BENEFITS TO THE FINANCED CONCERN. Besides. This also helps them as well as bank to cut level of counter party risks. the credit exposure norms are better observed. the banks will be able to ensure better credit discipline. This enables the manufacturing firm to get the cash immediately for the finished goods supplied. effective due diligence and smoothness of lending activity and loan origination process. which improve their liquidity position and cost. manufacturer and the dealers.

Credit assessment modules Cam-1(solvency) Cam-2(financials) Cam-3(technology and commercial) Cam-4(quality and credibility) 4. enhance the profitability and lead to better structuring of credit.4 Credit assessment policy Credit management module (based on lotus notes) Behind every credit decision there is an inherent potential for loss informed credit decision will minimize the risk. For 89 .

undertakings)   UNORGANISED SECTOR (traders. CPWD) Credit risk assessment of the customer is assessed based on the following parameters:  ABILITY TO PAY. The assessment criteria are:     Quality of management Credibility Past performance Health of group companies CREDIT DECISION: • Risk classification of the entry i. irrigation. PWD.credit appraisal and risk assessment customers are broadly classified into three groups namely  ORGANISED SECTOR (public and private ltd. power . companies including govt. SIS units etc) GOVERNMENT DEPARTMENT (defence . railways.it is based on the judgement and is applicable to both organised and unorganised sectors.e. low/medium/ high • Should we extend credit to this entity? 90 . partnership firms. This is the only criterion adopted for assessing the customers in the unorganised sectors.It is easy to assess the ability of the customer to pay and is applicable to the organized sector Solvency Financial viability Technological soundness • • •  Commercial feasibility WILLINGNESS TO PAY.

the recommended credit limit • The structure of the credit i.e. SOLVENCY FINANCIAL VIABILITY TECHNOLOGICAL SOUDNESS COMMERCIAL FEASIBILITY Depending upon the above basis Tata steel have developed a module for assessing the risk associated with each and every accounts and to judiciously take a decision based on the information available This system is based on the lotus notes applications. 4. 2. which have been described as below: 91 .• If yes. 3. Secured (%) Unsecured (%) • Recommend credit as per % of the net worth • Sanctioned credit limit(specify the structure and the amount) • Individual firm / company wise credit limits(in case the entity has different firms or companies) • Sales centre wise allocation of the sub limits The assessment criteria are: 1.

00 TO BE CONSIDERED AS LOW RISK 92 MEDIUM RISK HIGH .Credit assessment module-1 Solvency Corporate bankruptcy prediction (“Z”) ratios description result Coefficient “ Z ” X1 Working capital/ total assets Retained earnings/ total assets EBIT/ total assets A1 Z 1 Z 2 X2 A2 - X3 A3 - Z 3 X4 Net worth/ total liabilities A4 - Z 4 TOTAL (Z1+Z2+Z3+Z4) CREDIT DECISION (tick the appropriate column) LOW RISK RISK NOTE: “Z” SCORE ABOVE4.

60 TO BE CONSIDERED AS HIGH RISK “Z” SCORE LESS THAN 1.00 & 2.60 TO BE CONSIDERED AS MEDIUM RISK “Z” SCORES LESS THAN 2.60 IS A SIGN OF BANKRUPTCY CREDIT ASSESMENT MODULE -2 RATIOS DESCRIPTION Structural ratio Debt equity ratio interest coverage ratio Debt/ equity PBIT/interest on debt Liquidity ratio Current ratio Acid test ratio Current asset/ current liabilities Quick asset/ current liabilities Turnover ratio Assets turnover ratio Inventory turnover ratio Receivables turnover ratio Sales/ total assets Sales/ inventory Sales /receivables Profitability ratio Gross profit ratio Net profit ratio PBIT/sales PAT /sales Credit decision (tick the appropriate column) LOW RISK MEDIUM RISK HIGH RISK Note: 1& 2 year are immediately preceding financial years 93 .“Z” SCORE BETWEEN 4.

FINANCIAL VIABILITY: Understanding the ratio CURRENT RATIO: Current ratio of the business concern indicates the availability of its current assets to meet its current liabilities. a Liquidity or the short term solvency means ability of the ratio of 1:1 is considered to be satisfactory. Creditors are very much interested to know its state of liquidity because of their financial stake. As convection. Inability to payoff short term liabilities affects its credibility as well as credit rating. business to pay its short term liabilities. An increase in the current ratio represents an improvement in the liquidity position and vice versa. Higher the ratio better is the coverage. A ratio equal to 1:1 is considered to be satisfactory. Eventually such commercial bankruptcy may lead to its sickness and dissolution.• A high debt equity ratio and increasing trend of this ratio is a common trait among the failing companies. • No ratio should be interpreted in isolation and the credit decision should be taken after reviewing the ratios in totality. Continuous default on the part of business leads to commercial bankruptcy. 94 . ACID TEST RATIO: Liquidity A high acid test ratio is an indication that the ratio firm is liquid and has ability to meet its current or liquid liabilities in time and vice versa. A relatively higher current ratio indicates that the firm is liquid and has the ability to fulfill its current obligation on time.

Long term creditors of the firm are interested in knowing the firm’s ability to pay interest on long term borrowing. INTEREST COVERAGE RATIO It indicates the firm’s ability to interest obligations. the firm will be able to meet its commitment of fixed interest charge. However the creditor would prefer the lower one. as a consequence on the long term solvency position. A ratio of 1:1 is considered to be a satisfactory ratio. This ratio indicates the proportion of debt fund in relation to equity. These ratios indicate the mix off funds provided by owners and lenders and assures the lenders of the long term funds with regard to: Periodic payment of interest during the period of loan and Repayment of principal amount on maturity DEBT EQUITY RATIO dc These ratios provide an insight into the financing technique used by the business and focus. Generally. higher the ratio safer is the creditor because even if the earnings fall. Creditors are very keen to know this ratio since it shows the relative weight of debt and equity. It indicates proportionate claim of owners and outsiders against the firm’s assets. 95 . A lower ratio indicates excessive use of debt and inefficient operations.It measures the long term stability of the firm.

It measures the efficiency of utilization of working capital. It measures the efficiency of the firm in selling its products.TURNOVER RATIO WORKING CAPITAL RATIO DEBTORS TURNOVER RATIO INVENTORY TURNOVER RATIO WORKING CAPITAL RATIO: Working capital ratio establishes the relationship between sales and working capital. It enables the enterprise to compare the real collection period with the granted/theoretical credit period 96 . a reducing period of time is an indicator of increasing efficiency. stock accumulation. A high ratio indicates efficient management of inventory because more is frequency of selling the stock. slow business. DEBTORS TURNOVER RATIO: Indicates the relation between net credit sales & average accounts receivables of the year. lower is the investment in working capital & greater are the profits. The higher is the ratio. DEBT COLLECTION PERIOD: Indicates the average time taken to collect trade debts. The ratio indicates the efficiency of the concern to collect the amount due from the debtors. INVENTORY TURNOVER RATIO: It indicates that how fast inventory is used/ sold. Higher the ratio. Low inventory turnover ratio indicates over investment in inventory. accumulation of obsolete slow moving stock and low profit compared to total investment. In other words. poor quality of good. better it is as it proves that debts are collected quickly.

CREDIT ASSESSMENT MODULE -3 TECHNOLOGICAL AND COMMERCIAL STRONG Technological Product quality Product mix Technological know how Power availability Process suitability Plant / equipment MEDIUM WEAK Credit decision (tick the appropriate one) LOW RISK RISK MEDIUM RISK HIGH CREDIT ASSESMENT MODULE -4 97 .

Quality and credibility of management (Willingness to pay) strong Quality of management • • • • • Track record Market reputation Experience in field Ownership dispute Technical competence medium Weak Credibility of management • • • Ethical in business dealings Commitment level Relationship with regulatory authorities Relation with bank Relation with competitors • • Past performance with us • • • • Length of sound dealing Promptness in payment Honouring commitments Payment patterns & 98 .

adherence to credit terms • • • • Willingness s to furnish information Capacity to hold stocks Ability to absorb supply spikes Avoidance of over trading Health of group companies • Financial soundness of group companies • Possible diversion of funds to new business ventures Bank rating • Credit decision (tick the appropriate column) LOW RISK HIGH Risk MEDIUM RISK CREDIT DECISION MODULE Module CAM-1 CAM-2 CAM-3 Criteria solvency Financials Technical & commercia 99 Low Risk Medium Risk High Risk .

CAM-4 l Quality & credibility Notes: • Maximum weight age should be given to criteria no 1 & 2 for customers in organised sector • In case of a new company. TMH is now a days the biggest hospital in the city with most appropriate 100 . financial data’s may not be available and hence it is suggested that the promoters past record and performance of the group companies should be considered as guide. repayment patterns and adherence to credit. finance & A/c s dept. criteria 1 & 2 are relevant In case of government department past performance. This project is basically to get in touch with the customers and finding out the reason for their default of payment. K. guided by Mr. Abhinav Kumar.M.S. Mathew (Head Sales & EPA a/c) TATA MAIN HOSPITAL (TMH) was introduced in 1908 and restructured in 1909 and as the days passed. Binita Gupta) were selected as a part of this ongoing project at Tata steel. 3. (Nidhi Kedia. • • In case customers in organized sector. Four trainees. Shital Verma. Discipline should be considered as guide as others criteria are not relevant.5 Understanding the debtor’s process system During this project I got an opportunity to become a part of an ongoing project “understanding the debtor’s process system” &“Recovery of Outstanding” of TATA MAIN HOSPITAL (medical services provided by TATA STEEL to its employees and to its other associates).

Implementation and check/control).Finalise Reconciliation with customer Step 7. Surgeons. of Medical and non Medical Staff. Collect the Outstanding list Step 3.and valuable services to the city. So TMH has stopped its services for a day. for that company whose books of accounts showed outstandings for a long period. TATA STEEL and its associates provide free services to their employees and their dependants through TATA MAIN HOSPITAL. The whole process consisted of eight steps: Step 1. even after TATA STEEL’S reminder calls customers are not paying their outstandings. Facilities & sufficient no. The GURU MANTRA of the project was DMAIC (Determine.Take out Customer wise Statement Step 2. Reconcile and identify the bills pending Step 4. Take Print outs of Bills . This hospital has the most sophisticated equipments for the investigation of medical purposes with well experienced Doctors.As duplicate copy Step 5. Specialists. Fix an appointment with the Customer Step 6. Collect Money Step 8. Analysis.Make documents for write off proposals if required 101 . for these services companies are paying to hospital. Measure. In this process TMH has accumulated a huge outstanding from its corporate customers.


103 .

concerned persons of associated companies will be called for a meeting with all their records and TATA STEEL accounts and finance division also will be ready with their records to cross check the bills and records. Ray) of TMH and the management. A copy of detailed report we have submitted in the company. On the basis of management system chart. 104 . We prepared a detailed report of our findings and made Management System Chart for all the organizations to show how their work flow is going on and who is responsible for any particular work done in concerned company related to medical services.THREE MAJOR AREAS AND THEIR RESPECTIVE ACTIVITIES: The project is still in progress and yet to complete the last three steps. When the cross check will be done a signature will be taken from the concerned person and dues will be collected. The report submitted by our team was appreciated by everyone at TMH and TATA STEEL. which we had made. After this we are asked by our guide to give a presentation (related to customers complains and suggestions) before MANAGING DIRECTOR (Dr.

Comparative analysis of Tata steel with other STEEL companies 105 .

SAIL has three special and alloy steel plants viz.1 STEEL AUTHORITY OF INDIA LIMITED (SAIL) Steel Authority of India Limited (SAIL) is a company registered under the Indian Companies Act. SAIL’s steady ascent has been facilitated by all round improvement in performance. Alloy Steels Plant at Durgapur (West Bengal). Centre for Engineering & Technology (CET). Durgapur (West Bengal). 1956 and is an enterprise of the Government of India. bear testimony to the organization’s efforts towards improving efficiencies.“Businessworld-FICCI–SEDF Corporate Social Responsibility Award – 2006”. Bokaro (Jharkhand) and Burnpur (West Bengal). The Central Marketing Organisation (CMO). In addition. Raw Materials Division (RMD). SAIL today presents a picture of dynamic and buoyant business entity moving ahead to maintain and Consolidate its leadership position in the fast growing Indian steel sector. “SCOPE Gold Trophy for Excellence and Outstanding Contribution to the Public Sector Management”– institutional category for the year 2004-05. and several other awards to SAIL. 106 . at Chandrapur is a subsidiary of SAIL. It has five integrated steel plants at Bhilai (Chhattisgarh). Environment Management Division (EMD) and Growth Division (GD) at Kolkata. Central Coal Supply Organisation (CCSO) at Dhanbad.5. SAIL has Research & Development Centre for Iron & Steel (RDCIS). Rourkela (Orissa). with its head quarters at Kolkata. SAIL Safety Organisation (SSO) and Management Training Institute (MTI) all located at Ranchi. Salem Steel Plant at Salem (Tamil Nadu) and Visvesvaraya Iron & Steel Plant at Bhadravati (Karnataka). coordinates the country-wide marketing and distribution network. a Ferro Alloy producing plant Maharashtra Elektrosmelt Ltd.

61 28.Tata steel vs.94 28.94% in 2007-08 TATA STEEL has proved itself.47% in 2003-04 to 41. From 32. Whereas SAIL‘s operating margin profit% has been just 20.19% in 2007-08.71% in year 2003-04 to 28.47 20.1 36.24 FY 2006-07 39. SAIL OPERATING MARGIN OPERATING MARGIN (%) YEARS TATA STEEL SAIL FY 2003-04 32.71 FY2004-05 41. it is clear that TATA STEEL has been always in a better position in terms of operating margin profit (%) when compared to SAIL.88 23.19 ANALYSIS: From the above graph. 107 .53 FY 2005-06 38.09 FY 2007-08 41.


CURRENT RATIO YEARS TATA STEEL SAIL FY 2003-04 FY2004-05 FY 2005-06 FY 2006-07 FY 2007-08 0.68 0.71 0.72 1.77 3.92 0.91 1.18 1.23 1.59 1.73


ANALYSIS: An ideal current ratio is 1:1. When compared to SAIL, current ratio of TATA STEEL is not a desirable one. In the year 2007-08 the ratio is very high which is not desirable since it means


there was less efficient use of funds which was lowering down the profitability of the concern. In case of SAIL the ratio is almost coming closer to the ideal ratio.


QUICK RATIO YEARS TATA STEEL SAIL FY 2003-04 0.39 0.57 FY2004-05 0.33 0.76 FY 2005-06 0.29 0.72 FY 2006-07 1.37 1.01 FY 2007-08 3.52 1.23

ANALYSIS: Quick ratio shows short-term solvency of a business in a true manner. It is also called acidtest ratio and liquid ratio. It is calculated in order to know how quickly current liabilities can be paid with the help of quick assets. Quick assets mean those assets, which are quickly convertible into cash. While comparing TATA STEEL with SAIL it can be clearly seen that TATA STEEL is in a better position. SAIL’s ratio as on 2003-04 was 0.57 which increased to 1.23 in 2007-08. When compared to TATA STEEL it is clear that the increase in the ratio is more than that of SAIL. 110

12 FY 2006-07 17.DEBTORS TURNOVER RATIO DEBTORS TURNOVER RATIO YEARS TATA STEEL SAIL FY 2003-04 12. better it 111 . This ratio is also known as Debtors’ Velocity.73 16.47 13. It determines the efficiency with which the trade debtors are managed.64 FY2004-05 15. Higher the ratio.64 FY 2005-06 16. This ratio indicates the efficiency of the concern to collect the amount due from debtors.52 15.32 16.77 FY 2007-08 12.74 15.52 ANALYSIS: Debtors turnover ratio indicates the relation between net credit sales and average accounts receivables of the year.

12 FY 2006-07 21.06 21. it depends on the nature of the industry.75 FY2004-05 23.64 23.is as it proves that the debts are being collected very quickly.089 24.93 FY 2005-06 22.24 26. In case of TATA 112 .75 FY 2007-08 28.51 ANALYSIS: This ratio indicates how quickly and efficiently the debts are collected. TREND AVERAGE COLLECTION PERIOD IN LASTFIVE YEARS AVERAGE COLLECTION PERIOD YEARS TATA STEEL SAIL FY 2003-04 29. The shorter the period the better it is and longer the period more the chances of bad debts. TATA STEEL and SAIL both has an increasing trend in debtors turnover ratio when compared to last five years. Although no standard period is prescribed anywhere.19 21.

ArcelorMittal recognises that it has a significant responsibility to tackle the global climate change challenge. Bilbao. from emerging to mature. quality and leadership. With an industrial presence in over 20 countries spanning four continents. Brussels (MT). Paris (MT).9 billion and crude steel production of 103. ArcelorMittal is listed on the stock exchanges of New York (MT). safety and wellbeing of its employees. In 2008. ArcelorMittal had revenues of $124.Through its core values of sustainability. household appliances and packaging. representing approximately 10 per cent of world steel output. Luxembourg (MT) and on the Spanish stock exchanges of Barcelona.STEEL & SAIL.2 Arcelor Mittal ArcelorMittal is the world's leading steel company. construction. Amsterdam (MT). it takes a leading role in the industry's efforts to develop breakthrough steelmaking technologies and is actively researching and developing steel-based technologies and solutions that contribute to combat climate change. including automotive. but SAIL has less chance of bad debt since its average collection is 23. ArcelorMittal is the leader in all major global steel markets.3 million tonnes. contractors and the communities in which it operates.51 days as& when compared to TATA STEEL’s average collection period of 28.64 days. Madrid and Valencia (MTS). with leading R&D and technology. as well as sizeable captive supplies of raw materials and outstanding distribution networks. the Company covers all of the key steel markets. ArcelorMittal commits to operating in a responsible way with respect to the health. 5. the average collection period has decreased when compared to 2003-04 to 2007-08. 113 . with operations in more than 60 countries. It is also committed to the sustainable management of the environment and of finite resources.

77 1.54 FY2004-05 0. ARCELOR MITTAL (MITTAL STEEL) TREND OF CURRENT RATIO IN LAST FIVE YEARS CURRENT RATIO YEARS TATA STEEL MITTAL STEEL FY 2003-04 0.72 1. 114 .02 FY 2005-06 0.68 1. More the ratio indicates idleness of working capital.this signifies the ability of the company to pay off its current liabilities.6 FY 2006-07 1.92 1. The current ratio of ARCELOR MITTAL is better when compared to TATA STEEL.71 2.44 Analysis: Current ratio shows the short-term financial position of the business.41 FY 2007-08 3.Tata steel vs. The ideal current ratio is 1:1.

32 10.04 FY 2006-07 17.47 13. This ratio indicates the efficiency of the concern to collect the amount due from debtors. But MITTAL has a better turnover ratio than TATA STEEL. TATA STEEL and ARCELOR MITTAL both have an increasing trend in debtors turnover ratio when compared to last five years. This ratio is also known as Debtors’ Velocity. It determines the efficiency with which the trade debtors are managed. Higher the ratio.DEBTORS TURNOVER RATIO Debtors Turnover Ratio YEARS TATA STEEL MITTAL STEEL FY 2003-04 12.73 11.53 FY2004-05 15.74 14.64 Analysis: Debtors turnover ratio indicates the relation between net credit sales and average accounts receivables of the year.99 FY 2007-08 12.71 FY 2005-06 16. better it is as it proves that the debts are being collected very quickly.52 10. AVERAGE COLLECTION PERIOD 115 .

3 JINDAL STEEL AND POWER LTD.97 FY2004-05 23.24 26. The shorter the period the better it is and longer the period more the chances of bad debts.21 FY 2007-08 28. Although no standard period is prescribed anywhere.Average Collection Period YEARS TATA STEEL MITTAL STEEL FY 2003-04 29.34 FY 2006-07 21. 116 .91 Analysis: This ratio indicates how quickly and efficiently the debts are collected.089 36. In case of TATA STEEL & SAIL.14 FY 2005-06 22. it depends on the nature of the industry. the average collection period has decreased when compared to 2003-04 to 2007-08 4.64 24.06 33.19 31.

It has been a momentous journey for the O P Jindal Group from its small beginnings to becoming one of the most respected business and industrial houses today. O P Jindal Group is a US$ 10 billion conglomerate.P. O. has set up a 1000 MW power project at Raigarh. Jindal Power Limited (JPL). JPL has planned more hydro and thermal power projects and has an aggressive blueprint to increase domestic power production to help in contributing towards achieving Government of India's goal of 'affordable power for all by 2012'. In 1952. the first Mega Power Project of India in private sector. Jindal wondered why steel pipes could not be made in India when he spotted one with foreign markings. He got working on the idea and started a small pipe unit at Liluah in Howrah district of West Bengal. Today. 117 . No one at that point of time dreamt where this visionary would take this humble beginning. a subsidiary of JSPL.

47% in year 2003-04.from 32.47 37.it increased to 42. JINDAL STEEL & POWER LTD OPERATING MARGIN PROFIT OPERATING MARGIN PROFIT (%) YEARS TATA STEEL LTD.42 FY200405 41.01 FY 2007-08 41.65 FY 2005-06 38.61 40.76 Analysis: The trend shows there is an almost stagnant range for JSP.94 42. JINDAL STEEL AND POWER LTD FY 2003-04 32.1 40.TATA STEEL vs.26 FY 2006-07 39.88 40.42% in the year 200304. In case of TATA STEEL there was a steep increase in 2004-05 but then the operating margin profit decreased for two consecutive years and finally in the year 2007-08 it reached to 41.94%.it increased more than 9% till 2007-08. From 37. 118 .76% in 2007-08.

whereas in case of JINDAL STEEL AND POWER LTD.29 2 4338. but when both are compared.93 FY 200607 FY 200708 134089. From Rs.53 1550.52 2775.02 crores in 2007-08.12372. TATA STEEL ‘sales has reached Rs.14 3273.42 crores.0 27437.24 crores in 2003-04 which increased only toRs.24 FY200405 17414.134089.42 SALES TATA STEEL JSPL ANALYSIS: The trend of sales of TATA STEEL AND JINDAL STEEL AND PWER LTD. has been increasing year after year. the sales wasRs.TREND OF SALES IN LAST FIVE YEARS FY 200304 12372. the increase in sales of TATA STEEL is more than JINDAL.54 6822.6822.53 crores in year 2003-04.32 FY 200506 22272. 119 .1550.

19 120 .34 FY 200708 19169.65 FY200405 1402.55 324.67 FY 2005-06 1292.05 359.71 FY 2006-07 1874.94 174.DEBTORS TREND IN LAST FIVE YEARS DEBTORS TREND YEARS TATA STEEL JSPL FY 2003-04 810.23 212.81 300.

This ratio measures the ability of the business to pay its current liabilities.92 1.13 3. are called current liabilities.72 1. 121 . where current assets are those assets which are either in the form of cash or easily convertible into cash within a year. which are to be paid within an accounting year. Similarly. Current ratio shows the short-term financial position of the business.71 1.56 CURRENT RATIO TATA STEEL LTD. liabilities. This ratio explains the relationship between current assets and current liabilities of a business. JINDAL STEEL AND POWER LTD Analysis: This ratio is also called working capital ratio.26 FY FY 2006-07 2007-08 1.TREND OF CURRENT RATIO FY 200304 0.35 FY 2005-06 0.68 1.77 1.21 FY200405 0.

122 . But JSPL has shown a better performance in last five years.52 17. better it is as it proves that the debts are being collected very quickly.96 Analysis: Debtors turnover ratio indicates the relation between net credit sales and average accounts receivables of the year.77 13. Higher the ratio.47 15.33 13. TATA STEEL and JSPL both have an increasing trend in debtors turnover ratio when compared to last five years.19 14. This ratio is also known as Debtors’ Velocity.32 12.FY 20072003-04 -05 06 07 08 12. This ratio indicates the efficiency of the concern to collect the amount due from debtors. It determines the efficiency with which the trade debtors are managed.87 19. JINDAL STEEL AND POWER LTD FY FY2004 FY 2005.FY 2006.74 8.73 16.DEBTORS TURNOVER RATIO DEBTORS TURNOVER RATIO TATA STEEL LTD.

which was 44.55 25. In case of TATA STEEL & JSPL. the average collection period has decreased when compared to 2003-04 to 2007-08.64 days only in 2007-08.64 44.089 21.06 28.28 ANALYSIS: This ratio indicates how quickly and efficiently the debts are collected. the average collection period was 29. Whereas in case of TATA STEEL.19 22. 123 .FY 2006. The shorter the period the better it is and longer the period more the chances of bad debts.24 23.49 26.FY 2005.3 18.but Jindal has decreased more than half of the average period from 2003-04.28 days in 2007-08.FY2004.FY 200704 05 06 07 08 29.24 days in2003-04 which reduced to 28.AVERAGE COLLECTION PERIOD Average Collection Period YEARS TATA STEEL JSPL FY 2003. Although no standard period is prescribed anywhere. it depends on the nature of the industry.46 26.55days to 18.

124 .

If GDP is growing.    Unemployment Rate Consumption Rate Actual Personal Income etc. GDP is a good indicator of economy. other indicators could be. many macroeconomic indicators vary in a similar way.Recession is the economy shrinking for two consecutive quarters (=6 months) with a decrease in the GDP (=Gross Domestic Product). or a business cycle contraction. In economics. a recession is a general slowdown in economic activity over a sustained period of time. then market is growing due to increased demand.. investment.. 125 . and corporate profits. GDP = Value of all the reported goods and services produced by the people operating in the country. During recessions. A recession has many attributes that can occur simultaneously and can include declines in coincident measures of activity such as employment.

The subprime crisis has lead to the recession in economy of different countries. Tata steel & recession The steel industry has not been spared with the impacts of the financial crises. “Recession will have a positive effect”: Tata Steel MD NewKerla.A severe (GDP down by 10%) or prolonged (three or four years) recession is referred to as an economic depression. Muthuraman said. Talking to reporters here after participating in Dr. which may lead to have a negative effect on whole steel industry in coming years. However steel production and consumption will be supported by continuous economic growth. By the year-end. Mr. I urge all of you to take the New Year as an opportunity rather than threat. ''We are moving ahead with our expansion plans as scheduled. We are going to increase our production this year. J J Irani award for excellence in education programme. although some argue that their causes and cures can be different. ''The recession has a positive impact on us. We are also going to pay more salary to our employees. The private sector is considered engine of growth in the steel industry and technological changes and modernization are taking place in both the public and the private sector integrated steel plants in India. which has created a slowdown in not only the Industrial sector but all walks of life. our production capacity in India will 126 . Mr. Tata Steel vice president (corporate-services) Partho Sengupta said the company was selling its products at premium rates and there was no order shortage. the company in India would increase its total production this year.'' Later. Muthuraman said that “The year 2008 has been an unprecedented one in recent history starting on a very high note and ending with a deep and wide global economic downturn.5% in 1981 to around 7. India’s share in world production of crude steel increased from 1.” World's sixth largest steelmaker Tata Steel Managing Director B Muthuraman claimed that despite global slowdown in the steel sector.com reported that TATA Steel MD gave tips to defeat the deadly slowdown.3% in 2008. The year 2009 will be a challenging one for all of us.

Tata Steel plans to make and sell 20 per cent more steel in the current fiscal.S.000-crore Jamshedpur expansion plan. Muthuraman also revealed the company’s plans on securing raw material supplies for its European operations through partnerships in South Africa. we will tide it over as we have done in the past. Mr. he said Europe and the U.4 million tonnes against 5. Canada and Mozambique. On the current year’s sales plan. its Managing Director B. while work on the new project in Orissa would commence after the elections and as soon as it got iron ore allocation from State Government. the company was beginning to get land and had applied for iron ore allocation. He admitted that the project had been delayed by over two years but said that this was mainly because the company was waiting for iron ore allocation from the Government. 5. were badly hit by the global meltdown and the company’s operations in Europe had responded to the market place in a swift and efficient manner effecting cost-savings and tuning itself fast to customer requirements. which were expected to increase to one billion pound in 2009-10. Muthuraman said. would be ready by April 2010.1 Tata Steel’s game plan to beat recession Beating the recessionary trends in the market. a four million tonne 127 . 15. “Our strategy is to look at small mines so that major capital outlay is not required. Elaborating on the programme to develop overseas mines. Mr. Muthuraman said the Rs.2 million tonnes in the previous year. involving a new blast furnace. The recession is not a new thing to us. Addressing a press meet.4 MT from 5 MT. In Seraikela in Jharkhand. the Managing Director said the company was planning capacity exploitation above its nameplate capacity and sales were being targeted at 6. he said. although there seems to be little activity on that front. being developed through a partnership. but he was hopeful of a marginal recovery in prices by the third quarter.” he said. he said there were three projects on the anvil — A two million tonne iron ore project in South Africa. The measures taken had translated into cost savings of 650 million pound in fiscal 2009. This time also. He said he was not happy with the steel prices.increase to 6.'' He said there was no plan for production cut or employee reduction due to slowdown.

Tata Steel did not release quarterly figures.iron ore project in Canada and a coal block in Mozambique with estimated reserves of one billion tonnes. Global steel production has tumbled this year. AFTER "The recession in world demand looks deeper than what we thought six months ago. Tata Steel reported a net profit after minority interest and share of profit of associates of 49.5 trillion in a Reuters poll of six brokerages. Consolidated net sales for the year rose to 1. he said. Production from these projects would commence between 2010 and 2011. compared to a consolidated net profit of 123. 128 . forcing steelmakers such as Arcelor Mittal to sharply reduce capacity.Muthuraman told a news conference.5 billion rupees ($1.2 RECESSION…………………………………………. its steepest fall since World War II. Nine month consolidated profit stood at 94.2 trillion." Managing Director B. A Reuters calculation showed it suffered a consolidated loss of about 45.86 billion rupees.!!! 26 June 2009. That compared with a forecast for net profit of 84. the World Steel Association forecast steel demand would tumble 15 percent in 2009.23 billion rupees. In April.5 billion rupees reported a year ago. on net sales of 1. as demand in key steel consuming sectors such as construction and automotive shrank.4 billion rupees in the January-March quarter. 5. on net sales of 1.46 trillion rupees from 1.31 trillion rupees reported a year earlier.02 billion) in 2008/09.

Tata Steel it took a restructuring and impairment charge of $805 million in the year for its Europe operations. Shares in Tata Steel ended down 2. Tata Steel. Tata Steel it took a restructuring and impairment charge of $805 million in the year for its Europe operations.95 rupees. said it had strong liquidity and no material repayment obligations or refinancing for the next 12 months.1 billion on June 20 and an undrawn bank facility of $1.5 percent. The shares are up 85 percent so far in 2009 after tumbling 77 percent in 2008. Tata Steel. ahead of the results. The shares are up 85 percent so far in 2009 after tumbling 77 percent in 2008. It said profits would have been lower by 54. in a Mumbai market that fell 0.3 billion.3 billion. 129 . ahead of the results. said it had strong liquidity and no material repayment obligations or refinancing for the next 12 months. in a Mumbai market that fell 0. which last month won approval from banks to ease conditions on 3. Shares in Tata Steel ended down 2.1 percent at 397.5 percent. It said profits would have been lower by 54.1 percent at 397. It said it had cash and equivalents of $2. which last month won approval from banks to ease conditions on 3.95 rupees.97 billion rupees had it charged changes in its actuarial valuations on its European employee pension plan to the profit and loss account instead of the reserves and surplus account. It said it had cash and equivalents of $2.97 billion rupees had it charged changes in its actuarial valuations on its European employee pension plan to the profit and loss account instead of the reserves and surplus account.7 billion pounds of loan it took to buy Corus.1 billion on June 20 and an undrawn bank facility of $1.7 billion pounds of loan it took to buy Corus.

4 mn tonnes last month against 8 lakh tonne in the same month a year ago. Paswan said his Ministry has been holding consultations with the industry and recently the Government rolled back export duty on all categories of steel items. Steel Ministry. the reserves of which in the country are very limited. The sharp rise in imports was due to low-priced shipments 130 .Articles from the newspapers India aiming to double steel production by 2011-12 Sunday. The global economic slowdown has seen growth in steel consumption in the country fall to 1. Replying to supplementary during Question Hour. "Our National Steel Policy had targeted 124 million tonnes of steel production by 2020. except melting sap. 14 December 2008 India is aiming to more than double its steel production to 124 million tonnes by 2011-12 and further raise it to 280 million tonnes by 2020. But we have now brought the target forward to 2011-12 and for 2020 we are aiming to raise production capacity to 280 million tonnes. was of the view that high quality iron ore. Steel Minister Ram Vilas Paswan told Rajya Sabha today. to help producers tide over fall in consumption levels in the country." he said. Also. The exports cannot be fully stopped as iron ore mines employ some 500.000 people and their employment cannot be risked. should not be exported or their export discouraged through high export duties. he said adding export duty on iron ores has already been levied. STEEL IMPORT STRENGTHEN 70% IN NOV (Source-economic times 13th December) India’s steel imports jumped more than 70% to 1. prices of steel products have fallen since June.75 per cent from a high of 13 per cent. he said. Paswan said India ranked eighth in world steel production when UPA Government took office in 2004 and has today climbed to 5th spot with 54 million tonnes of annual steel production.

The steel ministry’s Joint Planning Committee that collects data on iron and steel on a monthly basis shows that steel imports dipped 10. then ruling at $600-700 per tonne.coming from China. But steel producers feel the move is insufficient to bring down imports as china as withdrawn export tax on some steel products to get rid of surplus stock.88 million tonnes in the corresponding period a year ago. the government imposed 5% import duty on steel products to protect domestic industry against cheap imports. The government has also initiated investigation into dumping from China but steel firms feel it’s a lengthy process and will take at least 8-9 months to complete.25 million tonnes in April-October against 5. 131 . Last month. Availability of low-priced imports from some countries resulted in huge imports in November. 25% cheaper than the international price.7% to 5. Thailand and Ukraine into India at $450-500 per tonne. This happened when domestic steel makers were cutting production due to lower demand.

The company should rate the parties by seeing its past performances. 6. Though SAP is implemented in the company. 5. thus not hampering the goodwill of the company and also taking care of the collection process. The state government & other government departments are another problem area in town division. Now a day. which must be kept with the concern authority. because of which lot of manual work is done.SUGGESTIONS 1. It should be without recourse and a third party should be legally appointed. 3. The selection of customer must be done carefully. its repayment capacity etc. by properly checking the company’s background. The company must negotiate with the government about their repayment of dues. If SAP is implemented then this problem would be solved. ex-once in 15 days that they have to pay their dues. The person in charge must see that the defaulter must not be entertained. it is not fully implemented in town division. The company must send frequent reminders. These ratings must be updated every year. 132 . even though it is an emergency case. 4. Channel financing is a way through which problems of dues can be controlled to a great extent but it should be taken care that the company won’t be liable for any default made by the middle person. 2. The company is facing problem in collecting the medical bills from corporate customers. The company must make the list of defaulter in medical bills. it has become a normal practice of appointing a third party for collection of dues which should be taken into account as it removes the burden of collection for the company. until he pays his old dues. Proper agreement between the third party and the company should be formulated in which all the terms and conditions must be mentioned.

Annual reports of various companies) collected from the internet which might not be correct. 2) 3) 133 .6.2 LIMITATION OF THE STUDY 1) The time horizon is very short. The study has been done on only a handful of data so it cannot be generalized to the entire industry. so in depth analysis could be done only of few schemes. The project is dependent on the relevance of the secondary data (e.g.

The SAP integration helps the company n classifying each debtor into specific business areas for tracking the records of various parties regarding amounts due to them and receipts made from time to time.3 SWOT ANALYSIS OF DEBTORS MANAGEMENT PROCESS AT TATA STEEL STRENGTHS:  With the implementation of ERP (enterprise resource planning) system SAP in November ’99 the credit control methodology at TATA STEEL.  The reporting authorities at Tata Steel prepare a monthly report of the current debtors standing to be presented to the higher officials. The entire debtors management process at TATA STEEL is aimed at finding out the state of affairs of debtors of steel products of the company including FAMD (FERRO ALLOYS AND MINERAL DIVISION) TUBES DIVISION. This facilitates the controlled and systematic process of evaluation of the current state of debtors. The most important of them is it facilitates better control over debtors. This report is presented to the Chief Operating Officer and VP’s of the related areas like flat and long products.  The company has classified its customers into well defined categories and has laid down guideline for evaluating their credit worthiness on an individual basis. integrated work culture. This enables the reporting authorities in focussing their attention in one common direction and as such they strive to improve the performance in each category. quick updates and many more. This enables the company to track the party status regarding the payments made. 134 . WIRE DIVISION AND BEARING DIVISION.6. JAMSHEDPUR has become a centralized function which has given a several advantage to the company like. in a constant manner. accurate results.

All these practices indicate that the credit management at Tata steel is highly efficient and flexible enough to meet the future changes.  The parties to whom sales have been made on credit have to be given constant reminders although the financial state of the concern is sound to pay off the debt. This reduces the burden of marketing executives.But extreme level of competency is required to derive the maximum benefits as they are unable to exercise the same kind of control on the overdue. It adopts such policies of recovering the amounts. The credit period is generally fixed but there are deviations in few cases. WEAKNESS:  An entire transaction with a party is a combination of sales and credit period. 135 .  The responsibility of reviewing the collection process lies with the credit management group. The company also has a well defined policy for provision for bad and doubtful debts and initiation of legal action. As such the credit worthiness of the parties has to be judged rigours terms which affect the party concerned. credit sales form a major percentage of the total sales being made by Tata steel . when the demand for the steel is in a boom phase. its other divisions and subsidiaries are also following the process of credit evaluation similar to that of the steel division . which otherwise would have not been possible had company gone for legal action. The credit management group does an in-depth analysis on the debtors arising. This enables the company to keep a better control on the overdue.  The sales of the company have been increasing year by year while the debtors have decreased as compared to it. OPPORTUNITY  Following the success story of Tata steel. The company has also been able to increase its receivable turnover ratio.  The company tries all the possible options for recovery of the debt before initiating legal action.Hence the company should formulate norms or policies which facilitate cash and carry business in this market situation to sustain a worthy competition.  In the current market scenario.

4. THREATS  The company should ensure that the employees don’t develop the feeling of complacency due to good performance in credit management after the implementation of SAP. When an account comes overdue move your company up the debtor’s priority list. 136 . If you’re giving credit.  The Company should make continuous efforts to increase their volume of exports because credit given in the international market is better secured and the risks too are minimal as compared to domestic market. 2. 3. The squeakiest wheel gets the most oil.5 Views of Debtor Management Expertise Paul Bailey. Take action early. Ask for payment. have a written contract – your Terms of Trade – in place. This will highly benefit the performance of the entire company as a whole.  The employees should be encouraged and motivated to contribute their ideas and suggestions towards using the system more effectively. Managing Director Cash Flow Doctors Ltd Debtor management: Paul’s top tips for a thriving business in 2009 1. 6. The company should try to implement SAP in this division as well. It’s surprising how many people don’t actually ask for the money.  They must be encouraged to keep themselves well informed about the practices being followed by the competitors and be receptive to new idea. Use a third party for the right reasons. Your third party should be a normal part of your debtor management process rather than the collection means of last resort.

If you don’t have a full name. it turns the big stick of the threat of an adverse credit rating into an ineffective twig. We recommend you have some sort of form to capture these details.5. They should be simple and practical enough for you to use every day. Conclusion 137 . Use your diary or electronic calendar in Outlook to remind yourself to follow up on payments. Professional. 8. Whilst they need to be persistently and consistently recorded they don’t need to be flash and fancy. When you first sign up a new client always ask for their full name. Register on the Personal Properties Securities Register. 6. Keep records of debtor contacts. and unethical debtors are aware of listing requirements and will take full advantage of the fact that their full names are not known. You are unable to list debtors as defaulters unless a full name is given. 7. This is a government website that collects security interests onto a single register and allows you to retain a financial interest in goods you sell.

Many businesses need to sell their goods on credit. If you can get money to move fester around the cycle (collect monies due from debtors more quickly) or reduce the amount of money tied up (i. so too is debtors' control. While in the income statement a company can book sales and profits to its heart's content. A key strategy in lowering bad debt is reducing the time to recover the invoiced amounts. since industries do provide credit. but the best possible under the circumstances. its balance sheet and its cash-flow. Nevertheless. cash conversion cycle or just cash cycle. In the same way that stock control is a vital aspect of working capital management. this could mean losing customers to the opposition. TIME IS MONEY. then cash 138 . receivables and payables) has two dimensions TIME and MONEY. they do so as optimally as possible. debtor and creditor days are a crucial link between the company's income statement. Each component of working capital (namely inventory. otherwise they might find it difficult to survive if their competitors provide such credit facilities.Together with stock days. reduce inventory level relative to sales). The business will generate more cash or it will need to borrow less money to fund working capital. When it comes to managing working capital. is used in the financial analysis of a business.e.Working capital cycle. also known as the asset conversion cycle. operating cycle. if it is slower than before at collecting its bills and suppliers demand faster payment. The word used is 'optimal' before and let me confirm that it doesn't necessarily mean the best possible..

it collects its overdue invoices slower and is forced to pay its own debts faster) it is a sign of weakness. particular the leader in the industry. the absolute level of debtor and creditor days is less important than the trend over time and how the company compares with its competitors. It merits closer monitoring by investors than it sometimes gets. It is this divergence between profits and cash that is often the biggest and best signal that a company might be in trouble. As with some other ratios. If a company's performance in this area is inferior to its competitors (that is. Deterioration in credit control over time is a worrying trend in any business. 139 .receipts will not reflect the trend in profits.

2007. MAY-2008 ECONOMIC TIMES.studyfinance.com www.newssteel.org/?action=programs&id=64 www.businesslink.financialexpress.com http://steel.gov.economywatch.com www.com www.com www. EXIM NEWSLETTER ANNUAL REPORT OF TATA STEEL Books Financial management – KHAN & JAIN Working capital management – HRISHIKES BHATTACHARYA 140 .nic.uk www.com Magazines TATA SEARCH.BIBLIOGRAPHY Websites www.indianindustry.org/wiki/steel www.com www.tatasteel100.wikipedia.tatasteel. VOLUME-2 TATA REVIEW.worldsteel.in/ http://en.

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