Summer project- 2010

A PROJECT REPORT ON WORKING CAPITAL MANAGEMENT AT “TATA STEEL”

SUBMITTED BY: MANISHA REGIONAL COLLEGE OF MANAGEMENT [A], BHUBANESWAR BATCH:-2010-11 UNDER GUIDANCE OF MR.I ROY

Working Capital Management-Comparative Analysis

DELCLARATION
I, Manisha, the undersigned, a student REGIONAL COLLEGE OF

MANAGEMENT AUTONOMOUS, BHUBANESWAR, declare that project report titled “working capital management at TATA STEEL” submitted in partial fulfillment of the requirement for the summer internship project during the MBA, a prestigious Post graduate diploma awarded by Regional College of management. The project duration was from 20th may 2011 to 20th July 2011.

This is my original work and has not been submitted as part of another degree or diploma of other business school or university. The findings and conclusions of this report are based on my personal study and experience, during the tenure of my summer internship.

Name: Manisha Regional College of Management Autonomous Bhubaneswar Signature:
DATE: 20 July 2011 PLACE: TATA STEEL (Jamshedpur)
th

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Working Capital Management-Comparative Analysis

ACKNOWLEDGEMENT
I would like to extend my gratitude to Mr. Indrajit Roy (Head Financial Account) for giving me opportunity to work in such an important sphere and sharing his vision and experience. Mr. Imtiaz Ahmed for his continuous support and guidance; Mr. Nr Saifi (Manager, Tata Management Development Centre (TMDC) for providing me the opportunity to learn and complete my summer internship in this esteemed organization. I also take the opportunity to thanks Mr.Ashok Kumar Rath (Regional College of Management) for his guidance and invaluable inputs in the development of the project, and in terms of managing the real time issues that we faced in the corporate world. Last but not the least I would like to extend my thanks to all the employees at finance department, my family and friends for their cooperation, valuable information and feedback during my project.
Manisha Regional College of Management Autonomous Bhubaneswar.

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BHUBANESWAR Page 4 . Having spent some mature individual. Bhubaneswar REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. This report added immensely to my knowledge how a corporate world actually work as a team to achieve its goals .Working Capital Management-Comparative Analysis PREFACE It has been a fruitful summer project. I will be grateful to TATA STEEL for giving me the opportunity to be part of this repudiated organization and help me throughout in understanding some of the important facts concerned with this prestigious institution. The summer training has been a greater into the corporate culture and has enriched my knowledge about conducting my business. prepared to take on the pressure of the business world. MANISHA Regional college of Management [A].the spirit and the enthusiasm of the leading ahead from its competitors and the above all true and fair view as the main motto and the most of all various techniques used to maximize efficiency and increase production.

3.  Vision. 4. Value and Goal  Product Portfolio  Awards.Working Capital Management-Comparative Analysis Table of contents 1. 7. Particulars DECLARATION ACKNOWLEDGEMENT PREFACE EXECUTIVE SUMMARY  Project Discretion  Scope of Project  Project Objectives  Limitations RESEARCH METHODOLOGY STEEL INDUSTRY PROFILE INTRODUCTION OF TATA STEEL LTD. – Data Analysis  Net Working capital  Percentage Change in Working Capital REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. BHUBANESWAR . Recognitions and Certifications Working Capital Management  Definition  Need and Objectives of working capital  Type of Working Capital       8. Mission. TATA Steel Ltd. Sources of working capital Components of working capital Importance of adequate working capital Factors Influencing working capital Principle of Working Capital Excess or Inadequate working capital management Page No 2 3 4 7-8 7 7 7 7 8-11 12-20 21-49 21 23 25 35 39 41 44 48 50-54 51 51 52 52 52 53 53 54 54 55-68 56 57 Page 5 5. 6.  HISTORY  Founders  Tata steel organizational profile  Company profile  Management of TATA Steel Ltd. 7. 2.

16.Last five year Balance Sheet as on 2009-2010 Profit And Loss as on 2009-2010 59 67 68 69-82 70 72 73 80 83-98 84 86 87 96 99-112 100 105 113 114 115 116 117-119 10. 15.  Financial Ratio  Operating Cycle  Methods of calculations SAIL – DATA ANALYSIS  Net Working Capital  Percentage Change In Working Capital  Financial Ratios  Operating cycle JSW STEEL – DATA ANALYSIS  Net Working Capital  Percentage Change In Working Capital  Financial Ratios  Operating cycle COMPARATIVE ANALYSIS  Operating Cycle  Financial Ratios CONCLUSIONS RECOMMENDATIONS LIMITATIONS BIBLOGRAPHY ANNEXTURE Cost Sheet.Working Capital Management-Comparative Analysis 9. Executive Summary Project description REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. 14. 12. 11. BHUBANESWAR Page 6 . 13.

 To extrapolate the company’s position with the steel industry. Working Capital Management.  To analyze the effectiveness and efficiency of existing working capital control system  To compare the working capital position of Tata Steel with other players in global and domestic market  To identify the areas of strength and improvement  To suggest possible remedial measures RESEARCH methodology REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. BHUBANESWAR Page 7 .  To find out the area of the weakness in the existing Working Capital control mechanism.Working Capital Management-Comparative Analysis To study the working capital management practices of TATA STEEL and compare with Indian firms SAIL and JSW STEEL. Scope of the project  To carry out a critical analysis of the Tata steel Ltd. Project objective  To understand the concept of working capital management  To understand the technique and process of working capital management at Tata Steel.

4. By ratio analysis and trend analysis the result of the control mechanism can be summarized which will help in identifying the effectiveness of the system under the preview. 4. Observation method Direct interview method Indirect method Department visit: comprises of discussion with concern persons and interviewing few officers in the account and finance department. Secondary source of data 1. 5.e. 2. 2. Primary source stands for that information i. 3. BHUBANESWAR Page 8 . 3. Collection of Data (Data information source) Data will be collected from both the primary and secondary sources.Working Capital Management-Comparative Analysis The study is based on the descriptive and applied research. Primary source of data 1. The accounting as well as the planning of the Working Capital needs a thorough study. Annual report Journal and book Study of files and office documents Different records by the accounts and bills sections Company websites Selection of Companies REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. Hence the ratio and trend analysis will be used to arrive at the conclusion. The whole project has been made by collecting data through primary and secondary sources. collected by direct queries to concern.

Purpose of study The main aim of any firm is to maximize the wealth of shareholders. transaction time). Some prominent issues that are to be addressed are:  Duration of raw material stage (depend on regularity of supply. consistency in capacity of utilization). Thus a detail study regarding the working capital management in Tata Steel Limited is to be considering the effectiveness of working capital management. Which in turn depend on successful sales activity? To generate sales. SAIL and JSW STEEL are the Indian companies selected and they are ranked in first and third respectively based on production capacity. namely operation cycle. The capital requirement for each department in an organization of Tata Steel Limited is large which (Depends on the product target for that particular year) calls for an effective working capital management the operation on cycle duration is an important aspect of working capital.Working Capital Management-Comparative Analysis Companies are selected based on their production capacity and availability of data. BHUBANESWAR Page 9 .  Duration at the finished good state (depends on pattern of production and sales). identify the short coming in management and to suggest for improvement in working capital management. This can be achieved only by a steady flow of profits. as the sales don’t convert in to cash immediately but involved a cycle of operations. Tata Steel Limited is multi product manufacturing unit with varying cycle for each product.  Duration of work in progress (depends on length of manufacturing cycle. investment of sufficient funds in current assets is required. The need of current assets should be emphasized. Limitations:REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.

REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. 3. The study is based on a very short time frame which may have impact on the Scope of the project in terms of the detailed analysis of the aspects of working capital management. However. the choice of different accounting policies and practices followed by these companies might distort the comparative analysis 4. Ratio analysis cannot be taken as the same indicator of the financial performance the company. The study is based on the comparison across company in the steel industry. the topic being wide.Working Capital Management-Comparative Analysis 1. The study of limited to the scope of the data available publically. BHUBANESWAR Page 10 . 2.

Working Capital Management-Comparative Analysis TATA STEEL (Jamshedpur) REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. BHUBANESWAR Page 11 .

Hit by the economic downturn. CIS deterioration in the economy resulted in a sharp decline of demand in key steel using sectors.Working Capital Management-Comparative Analysis STEEL INDUSTRY PROFILE World steel production graph The crude steel production for 66 countries reporting to the World Steel Association was 1220 million metric tons for calendar year 2009. The following table shows the growth in terms of crude steel production for the top ten steel producing nations: REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. the drop in production was nearly in all steel producing countries barring positive growth recorded in China. the U..S. BHUBANESWAR Page 12 . lower by 8% against that of 2008. Brazil. India and the Middle East. Japan.A. In most countries including the developed steel markets of the EU.

820 29.82% 14.572 32. BHUBANESWAR .594 67.11% 12.838 48.002 2009 573.848 58.453 43.507 25.196 60.855 26. the list of the top ten steel producing companies during 2009 was dominated by Chinese companies.815 33.534 58.304 Change 9.559 32.Working Capital Management-Comparative Analysis Rank 1 2 3 4 5 6 7 8 9 10 Country China Japan U.34% 34.38% 20.68% 6.654 109.21% 38.26% 25.49% 11. Rank Company Country 2010 Crude steel output per year Page 13 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.011 62.S.41% 23. Russia India South Korea Germany Ukraine Brazil Turkey 2010 626.021 66.61% (Figures in Thousand Metric Tons) As a result of the strong growth in China in sharp contrast to the decline in major parts of the globe.670 29.600 80.567 87.

400.Working Capital Management-Comparative Analysis in MT .300.700. the Indian government has taken some reformatory steps that have helped the Indian steel industry to grow at a good pace.000 33. There are different factors that are responsible for this development. The production of flat products and long products of major Indian companies is estimated to have grown by around 12% and 8% respectively during the financial year 2009-10 when compared with the previous financial year. India was at the seventh place among the crude steel producing companies. The imports on the other hand were higher for both fl at products as well as long products by around 17% REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.03.000 23. 1 2 3 4 5 6 7 8 9 10 Arcelor Mittal Nippon Steel Bao Steel POSCO Hebei Iron & Steel Group JFE Holdings Wuhan Steel (WISCO) Tata Steel (TISCO) Jaingsu Shagong Group US Steel Luxemburg Japan China South Korea China Japan China India China USA 1.200.400.300.000. the Indian steel industry is expected to produce nearly 110 million tons of crude steel.700.000 23. Firstly. The Indian government has set a target to increase the crude steel production and till 2019-20.000 27.000 (Figures in million metric tons) Steel Industry in India The efforts to develop the steel industry in India started during the first five year plan but the real developments started happening from 1980s onwards.000 35. Although the Indian steel industry increased its production. BHUBANESWAR Page 14 .000 33. While the long products exports were almost at the same level as that in the last year.000 34. fl at products exports dipped by around 30% on account of the global slowdown. in the nineties India imported huge quantity of steel to meet the growing demand of steel in the country.000 37.000 24.500. This scenario was totally changed in 2004 when India stood at the ninth position in terms of crude steel production in the whole world and in 2006.300.

the apparent steel consumption dropped by around 35% during 2009.4 million tones. placed import of hot rolled coils on the „restricted list‟ thus making them available to direct users only and withdrew countervailing duty on import of Thermo-Mechanically Treated (TMT) bars and structural. The exports during 2009 are estimated to have reduced by around 9% and the EU was a net exporter in long products.Working Capital Management-Comparative Analysis and 35% respectively as the fl at products and long products segments experienced around 23% and 9% increase in steel consumption. the increase was not sufficient to offset the sharp drop in the consumption in the first half of the year. In line with the fiscal stimulus package announced in the country. the ASEAN apparent steel demand for 2009 is around 42.3 million tones which is 8% lower than the last year. supported by government stimulus measures and improvements in international trade. the production during 2009 reduced by around 20% over 2008 with sharp reduction experienced particularly during the first half of the year. South East Asian Steel Industry Preliminary assessment suggests that the steel consumption in the Association of South East Asian Nations (ASEAN) picked up significantly in the second half of 2009. the EU steel market supply and demand became much better balanced by the quarter ending December 2009. However imports and exports dropped significantly. reduced excise duty to 8% for major part of the year. export duty on iron ore lumps has been increased from 5% to 10% and a 5% export duty has been imposed on iron ore fines to regulate the exports. stable and low level of stocks through the supply chain and reduced levels of domestic steel business. reintroduced import duty of 5% on steel. The steel prices during the financial year 2009-10 have increased from the level prevailing in the quarter ended March 2009 driven primarily by the increase in the prices of input raw materials during the same period. The market downturn began to level out in the second half of the year as business conditions began to improve slowly. With the unprecedented drop in the activity levels. As a result. restored DEPB benefits. the Government of India removed export duty on all steel items. UK and European Steel Industry In the EU. BHUBANESWAR Page 15 . Production of fl at products and long products during the year was stable at around 24. Total imports reduced from 30 million REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. In order to ensure adequacy of availability of iron ore in domestic market. There was a decline of around 45% during the first half of 2009 driven by extremely weak activity in the steel using sectors and continuing sharp de-stocking. With imports dropping by around 47% as compared to 2008. However.

8 million tones in the second half of 2009. reduced by 4% as compared to 2008.1 million tons in 2009. high skilled labour WEAKNESS:    To extrapolate the company‟s position with the steel industry. was close to the pre-crisis levels resulting in domestic producers benefitting from the demand growth. SWOT ANALYSIS: STRENGTH:     Strong brand name like Tata Steel & Corus Indian operation capable of meeting its own requirement Strong supply chain for raw material leading sales & distribution Low cost. Consumption of Long Products recorded at 20. Low R & D Investment Unscientific mining method Page 16 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.7 million tons in 2009 and exports dropped by 50% from 8 million tons in 2008 to 4 million tons in 2009. The production declined to 16.4 million tons while exports dropped to 5. BHUBANESWAR .Working Capital Management-Comparative Analysis tons in 2008 to 19.9 million tones. The demand for long products seemed to pick up fast and at 11.

REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. These forces help in analyzing the industry from the intensity of competition to the probability and attractiveness of an industry. BHUBANESWAR Page 17 .Working Capital Management-Comparative Analysis   Technologically backward Low productivity OPPURTUNITY:      Unexplored rural markets Growing domestic market Growing global market Carbon trade High investment in infrastructure sector THREATS:      Major player entering Indian market China set to become a net exporter High duties and taxes from the government Environmental concerns & laws Global slowdown MICHAEL PORTER ANAYLYSIS: Michael Porter had identified five competitive forces that shape every single industry and the market.

Steel industry is highly capital intensive and is estimated that to set up 1 MTPA capacity of integrated steel plant. However. it requires around Rs. However. 30 billion of investment depending upon the location of the plant and technology used. most of the sale of steel is to the other industries or to through the distribution network and very less to the common man. Bargaining power of Buyer: In the steel industry unlike the household goods market the buyers have a very low bargaining power. because of the durability and other features of the steel. The only effort which can be done towards ensuring that the buyers are saved in the curb or ceiling laid by the government on the prices which can be charged by the companies on its product. However. still a few companies have to depend up on suppliers for the raw materials. Threats of substitutes: The presence of substitute products increases the propensity of customers to switch to alternatives. Bargaining power of suppliers: If one supplier has large impact on the company‟s margin and volume then it holds substantial power. aluminum does not stand as a threat in the market REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. the more cut-throat competition there will be. The usage of aluminum has been constantly growing in the automobile sector which used to be the major customer of the steel industry. BHUBANESWAR Page 18 . Competitive Rivalry: In India the steel industry is dominated by a major few players only and the degree of competitive rivalry is very low as the demand is always more than the supply or the production of the companies. The government follows a favorable policy for steel manufacturers but certain discrepancies involved in allocation of iron ore mines and land acquisition in India.Working Capital Management-Comparative Analysis Threat of new Entrants: The easier it is for new companies to enter the industry. In the steel industry the bargaining power of supplier is very low because the big players in the industry have their own mines for major raw materials.

In order to improve its performance further the company engaged the internationally reputed Consultants Mckinsey & Co.000 tones of bars. TATA STEEL was registered in Bombay( now Mumbai) on August 26. The human resource management division of TATA STEEL has developed what is called the “mindset programme”.70. It saw for the first time in India coal injection in blast furnace and coke oven battery with 54 ovens using stampcharging technology.Working Capital Management-Comparative Analysis HISTORY OF TATA STEEL Formerly known as Tata Iron and Steel Ltd. who suggested the Total Operational Performance(TOP) Enhancement Programme structured time bound.3 MTPA 9million ton per annum) wire rod mill. Since the company has continued to add new units and increase capacity. Rather than create new personal assets.At a project cost of Rs 1600 crores. 00. a bar forging machine.8MTPA.60. two vertical twin shaft lime kilns and a tar-dolo brick plant. The programme Seeks to inculcate in the employees self-awareness and a positive outlook. two 250 ton a day Oxygen Plants. The second phase (1985-1992) involved a project cost ofRs780crores. the focus has now shifted to how best to use those assets to get optimum value.”The first phase.000 tones of rails. (TISCO). A 0. In 1917.2MT (million tone) capacity Cold rolling Mill Complex . This phase. As of today The Tata steel facility has a Hot Metal Capacity of 3. It also had a power house. auxiliary facilities and a laboratory. betwee1981and1985. team-based programme.making facilities in the world.Which is designed to bring about an attitudinal change among the employees. In the 1980’s the company undertook in various phases an ambitious “Modernization Programme. hoops and rods. corresponding to a saleable steel Capacity of 3. a 2.000 tones of ingot steel. beams and shapes and 20.It had an initial capacity of 1. 1907. it REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.4 MTPA. This Four-Phase Modernization Programmed has enabled Tata steel to be equipped with the most modern steel. involved a total project cost of Rs 223 crores. the company increased its steel Capacity to 5. a six-strand billet caster and a 130-tonne vacuum arc-refining unit were installed that too in the integrated steel plant. among others saw the installation of two 130 ton LD converters. In the fifth phase stress s laid on the utilization of the intellectual capabilities of the employees to generate sustainable value for the shareholders. The company recently commissioned its 1. Significantly. a bedding and blending plant and a waste recycling plant of 1 MTPA were installed.5mtpa sinter plant. BHUBANESWAR Page 19 .000 tons and introduced the Modern Duplex process of making steel.

In 2005 Tata Steel acquired Singapore based steel company Nat Steel by subscribing to 100per cent equity of its subsidiary. Orissa. the combined entity will be the 6th largest steel producer and the 2nd most geographically diversified steel company in the World. NatSteel Asia. India (to be commissioned in 2010) and another 2.It acquired Singapore’s NatSteel in August 2004. Tata Steel is rapidly expanding capacity and plans to produce 15MT of steel annually by 2010.Working Capital Management-Comparative Analysis uses the creativity and energy of the employees to increase output with the minimum investment and in the shortest possible time. This has added 2 MT to its capacity. After partnership with Corus Group. The expansion is scheduled to be completed by September 2005. TATA IRON AND STEEL COMPANY LTD FOUNDERS OF TATA STEEL REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. It is close to completing a 1 MT capacity expansion in its Jamshedpur plant. BHUBANESWAR Page 20 .4 MT capacity expansion will be taken up in Jamshedpur. In addition a 6 MT green field plant is to be developed in Kalinganagar.

even though it was Jamshedji Tata who had envisioned the mammoth projects. later to be named as Jamshedpur.N. it was in fact Dorabji Tata who actually brought the ventures to existence and fruition.Tata has been one of the greatest builders and personalities of modern India in the twentieth century. Thus.Thus . REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. his elder son.He envisaged and conceived a steel town to the very last detail. power and steel. Bharat Ratna Jehangir Ratanji Dadabhai Tata (19041993) J. It was in 1907 that the village of Sakchi was discovered at the confluence of two rivers. BHUBANESWAR Page 21 .He realized that India’s real freedom depended upon its self-sufficiency in scientific knowledge.The Tata Iron and Steel Company was floated. He was the first chairman of the gigantic Tata enterprises. the Hydroelectric schemes and the Iron & Steel Works at Jamshedpur . it was in fact Dorabji Tata who actually brought the ventures to existence and fruition. J. He was the first chairman of the gigantic Tata enterprises. thus devoted the major part of his life. and his fortune to three great enterprises-The Indian institute of Science at Bangalore.D. Sir Dorabji Tata (1859 – 1933) Sir Dorabji Tata (1859-1933) carried out the bequest with scrupulous zeal and distinction.R. Tata had exhorted to his sons to pursue and develop his life’s work . Subarnarekha and Kharkhai and the railways station of kalimati .Working Capital Management-Comparative Analysis Jamshedji Nusserwanji Tata (1839 – 1904) He was a visionary behind Tata Steel . even though it was Jamshedji Tata who had envisioned the mammoth projects. Sir Dorabji Tata(1859-1933) carried out the bequest with scrupulous zeal and distinction .

He worked on the floor with the other blue collar employees. REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. His style of management was to pick the best person for the job at hand and let him have the latitude to carry out the job. the third highest decoration that might be awarded to a civilian. On the occasion of India’s 58th Republic day on 26 January. and the Advance management Program from Harvard Business School in 1975. Ratan Tata completed his degree in architecture with structural engineering from Cornell University in 1962. shoveling limestone and handling the blast furnaces. BHUBANESWAR Page 22 . which helped Tata Group launching its own Airlines .now known as Air India. He was appointed the Director In Charge of The National Radio & Electronics Company Limited (Nelco) in 1971 and was successful in turning Nelco around. The Bharat Ratna in 1992. It was he who zeroed in on Sumant Moolgaokar. His mother moved out and both he and his brother were raised by his grandmother Lady Navarjbai. when he was about seven and his younger brother was five. He was never interested for Micro. the engineering genius who successfully steered our company for many years.Working Capital Management-Comparative Analysis He assumed Chairmanship of Tata Steel at the young age of 34. 1937. He is one of the most well known and respected industrialists in India. He was a visionary whose thinking was far ahead of his time. Ratan Tata was honoured with the padma Bhushan. He is the present Chairman of Tata Group. RATAN NAVAL TATA Ratan Navel Tata was born on December 28. he became the chairmen of Tata industries and was instrumental in ushering in a wide array of reforms. but his charismatic. disciplined and forward looking leadership over the next 50 years led the Tata Group to new height of achievement. in Surat. He was first sent to Jamshedpur to work at Tata steel. 2000. expansion and modernization. He joined the Tata Group in December 1962 on the advice of JRD Tata. He was awarded the country’s highest civilian honour. IN 1981. It was under his stewardship that Tata consultancy services went public and Tata Motors was listed in the New York stock Exchange. His childhood was troubled as his parents separated in the mid 1940s. India’s largest conglomerate founded by jamshedji Tata and consolidated and expanded by later generation of his family. Tata was born into wealthy and famous family of Mumbai.Management.

Working Capital Management-Comparative Analysis

His recent achievements have been the acquisition of Corus Group, and Anglo-Dutch steel and aluminium producer. This acquisition has made Tata steel the fifth largest producer of steel in the world.

TATA STEEL: AN ORGANISATIONAL PROFILE
Established in 1907, Tata Steel is Asia's first and India's largest private sector steel company. Tata Steel is among the lowest cost producers of steel in the world and one of the few select steel companies in the world that is EVA+ (Economic Value Added).

Tata Steel has operations in 10 countries and maintains a strategic presence in select Geographic‟s through exports.

GROWTH AND GLOBALISATION
Jamshedpur, India 5 million tons per annum, slated to reach 7 MTPA in 2008&10 MTPA by 2011.

Partnership with Corus
On partnership with Corus group, the combined entity will be the 6th largest steel producer and the 2nd most geographically diversified steel company in the world.

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Nat steel Asia Singapore
2 million tons; Singapore, China, Vietnam, Thailand and three other South East Asian countries.

Tata Steel, Thailand1.7 million tons Limestone mining in Thailand. Low ash coal in Australia.Wire manufacturing unit in Sri Lanka known as Lanka special steel captive raw material resources in India give it a competitive advantage.

Other Projects:
India
1.2 MTPA Metcoke project in West Bengal Deep sea port in Dhamra, Orissa Titanium Dioxide project in Tamil Nadu Joint Venture with BlueScope Steel for metallic coating and painting steel unit

Overseas:
Development of a source of low ash coal from Queensland, Australia
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Working Capital Management-Comparative Analysis

Ferro Chrome production in Richards Bay, South Africa

SOME MAJOR BRANDS
Tata Steelium: This is world’s first branded Cold Rolled Steel product.

Tata Shaktee: Galvanized corrugated sheets.

Tata Tiscon: Re-bars

Tata Pipes: It is the most valued brand in plumbing segment.

Tata agrico: It caters to the equipment needs of the farming, mining &construction.

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Tata Bearings: It has made deep inroads in the highly competitive auto market. BHUBANESWAR Page 26 . REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. agriculture. Tata Wiron: It services requirements in a wide gamut of industries including automotive. fencing and power.Working Capital Management-Comparative Analysis Agrico: Tata Agrico products are the most sought after hand tools and implements for agriculture and industrial application in the country.

Tayo Rolls Ltd: Country's leading roll manufacturer and supplier Tata Sponge Iron Ltd: Has an installed capacity of 240. bus bodies etc.Working Capital Management-Comparative Analysis Tata Galvano: Galvano is galvanized plain (GP) steel offering available in sheet & coil forms for all customer segments like white goods . Subsidiary / Associates / JVs The Tinplate Company of India Ltd: 35% market share in industry.000 tons REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. Galvano offers commitment to deliver high performances to meet diverse and stringent needs of the General Engineering Segment. BHUBANESWAR Page 27 . panels.

Indian Steel and Wire Products: Comprises a wire unit and a steel rolling manufacturing unit REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.Working Capital Management-Comparative Analysis Tata Metalliks Ltd: Among the top wealth creators in the country. BHUBANESWAR Page 28 . Jamshedpur Injection Powder Ltd: Produces 15.000 tonnes of desulphurising compounds per annum. TM International Logistics Limited: Services include material handling and port operations. Tata Pigments Ltd: Produces synthetic iron oxide pigments.

Overseas REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. Jamshedpur Utility and Service Company :The country's first municipal and civic services enterprise.com: Provides e-business services and solutions to Indian Industry. TRF Ltd: An engineered-to-order equipment and systems provider. BHUBANESWAR Page 29 .\ ASSOCIATES & SUBSIDIARIES.Working Capital Management-Comparative Analysis Metal junction. Tata BlueScope : Metallic coating and painting facility. a 50:50 JV between Tata Steel and L&T. Dhamra Port: Deep drafted port project.

Thailand: Long products rolling. mainly long products Millennium Steel. BHUBANESWAR Page 30 .Working Capital Management-Comparative Analysis Lanka Special Steel Limited: A wholly owned subsidiary it is the only unit in Sri Lanka manufacturing galvanized wires Sila Eastern Company Limited: A 49% joint venture to undertake development of limestone mines in Thailand. Tata NYK: A 50:50 JV for shipping dry. bulk and break bulk cargo. REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. NatSteel Asia Singapore: Presence in six countries in S E Asia and China.

BHUBANESWAR Page 31 .Working Capital Management-Comparative Analysis Corus: Now a part of Tata Steel Group. It manufactures processes and distributes metal products as well as provides design. Introduction OF REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. technology and consultancy services.

Working Capital Management-Comparative Analysis TATA STEEL LIMITED REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. BHUBANESWAR Page 32 .

BHUBANESWAR . India Area served Key people Products Worldwide Ratan Tata(Chairman) Steel Automobiles Telecommunications Page 33 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.Working Capital Management-Comparative Analysis COMPANY PROFILE Type Industry Founded Founder(s) Private Conglomerate 1868 Jamsedji Tata Headquarters Bombay House Mumbai.

517 (2009-10) Tata Steel Tata Steel Europe Tata Motors Tata Consultancy Services Tata Technologies Tata Tea Titan Industries Tata Power Tata Communications Page 34 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. BHUBANESWAR .4 billion (2009-10) $1.74 billion (2009-10) $52.8 billion (2009-10) 396.Working Capital Management-Comparative Analysis Power IT Services/ITES Hotels Consumer goods Retail Agriculture Financial services Defense Chemicals Hospitality Engineering Beverages Construction Aerospace Pharmacy Revenue Profit Total assets Employees Subsidiaries $67.

ranks TATA steel on 6th position in metal industry category.Working Capital Management-Comparative Analysis Tata Teleservices Taj Hotels Tata Chemicals Tata Global Beverages An overview of the company TATA Steel has been ranked at the top of the Nielsen‟s corporate image monitor study followed by TATA Motors. is the world‟s seventh largest steel company. REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. The growth rates in the economies of the developed world are still extremely moderate. while countries in the developing world have registered high levels of economic growth and some have become new centres of global capacity. The company is listed on Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). published by Fortune Magazine. Ranked 315th on Fortune Global 500.393 crores during the year ended March 31st. formerly known as TISCO (Tata Iron and Steel Company limited). with an annual crude steel capacity of 30 Million Tons Per Annum (MTPA). The registered office of Tata Steel is in Mumbai. It is the world‟s second most geographically diversified steel producer. Tata Steel has a balanced global presence in over 50 developed European and fast growing Asian markets. It is the second largest private sector steel company in India in terms of domestic production. With its acquisition of the Corus. Performance after global economic downturn Following two years of the worst global economic downturn. BHUBANESWAR Page 35 .000 people and an employee strength over 81. 2010.000 across 5 continents. it is based in Jamshedpur. Its main plant is located at Jamshedpur in Jharkhand. Also it is the world‟s lowest cost producer of steel with shareholder base of 800. Tata Steel. Jharkhand. Nat Steel and Millennium Steel it has become a multinational company with operations in various countries. Tata Steel is backed by 100 glorious years of experience in steel making with its establishment in 1907. with manufacturing units in 26 countries. India. It is part of Tata Group of companies in private sector with consolidated turnover of Rs.102.The world‟s most admirable companies 2011.

several countries in Asia. BHUBANESWAR Page 36 . Tata Steel has struggled to adhere to its long-term strategies. The steel industry has also been impacted by these global shifts. Chairman In the coming years. Equal importance has been given to raw material security through the acquisition of iron ore and coal resources overseas to feed its UK and European plants.Working Capital Management-Comparative Analysis demand and control over natural resources. Tata Steel expects to emerge as a global steel producer with a total annual output of between 40-50 million ton. the UK and Continental Europe. the basic foundation material for national growth and the industry will continue to be an important ingredient in a global economic recovery. Tata Steel‟s European operations remained underutilised and hence unprofitable. While Tata Steel‟s Indian operations have remained profitable. whereas the markets for steel in the United Kingdom and Continental Europe have remained depressed. In 2025.” Ratan N. There has nevertheless been need to re-schedule and reprioritise investment strategies in consonance with market conditions during this period. “Steel has been and will be. it is forecast that the BRIC countries will have 42% of the global population. REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. the Company has given top priority to the 2. while rationalizing capacities to make them viable in this period of slack demand. with the rationalization. Through these difficult times. In India. Tata Steel Asia has steelmaking and finishing facilities in various Asian countries (including India) aggregating 10. albeit at a lower level than the previous year. The benefits of the rationalization will of course be more evident in 2010-11. Tata. However. The requirement of steel is growing in Asia. both in India and overseas. with major manufacturing plants in India. the European operations have become EBITDA positive for the last two quarters of 2009-10.5 million tons.9 million tone expansion programme at its Jamshedpur Works and its major Greenfield 6 million tone integrated steel plant in Orissa. where downstream user industries are experiencing high demand. will consume 60% of the global production and will have 70% of the global GDP. supported by integrated mining operations in several geographies.

Kirby Adams Mr. Wadia Mr. Iahaat Hussain Mr. Tata Steel Europe Managing Director.Ulrich Kohler Koushik Chatterjee Jean Sebastien Jacques Manzer Hussain Kees Gerretse Avneesh Gupta Dr. Tata Mr. Nerurkar Chairman Vice Chairman Company Director Board Member Board Member Non-Executive Independent Director Board Member Non-Executive Independent Director Company Director Financial Institutions Nominee Managing Director & CEO.Working Capital Management-Comparative Analysis MANAGEMENT OF TATA STEEL Board of Directors Mr. Tata Steel Limited Tata Steel Group Senior Management H. H. Ratan N. Andrew Robb Mr. Tata Steel Europe Group Chief Financial Officer Group Director (Strategy) Group Director (Communication) Group Director (Procurement) Group Director (Total Quality Management) Director (Research.M. Jamshed J. Debashish Bhattacharjee Managing Director. Nerurkar Kirby Adams Dr. Nusli N. Development and Technology) REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. S. Karl. Tata Steel Limited Managing Director & CEO. M. BHUBANESWAR Page 37 . Irani Mr. Palia Mr. Jacobus Schraven Dr.M. Tata Steel Europe Chief Operating Officer. B. Muthuraman Mr. Subodh Bhargava Mr. Suresh Krishna Mr.

Tata Steel International. Sinterand Iron and IR) TSL Managing Director. UK and Ireland) TSE Group Head (Mergers and Acquisitions) TSL Manufacturing Director (Corus Strip Products IJmuiden) TSE Vice President (Corporate Services) TSL Vision.K. Misra Theo Henrar Varun Jha Tor Farquhar Radhakrishnan Nair Adriaan Vollebergh Partha Sengupta Hridayeshwar Jha Alastair Altken N. Corus Strip Products UK. TSL Managing Director. Mission. Paul Brooks Shreekant Mokashi Uday Chaturvedi Anand Sen Frank Royle AbanIndra M. We will achieve our vision through: Our conduct By fostering teamwork.Working Capital Management-Comparative Analysis Andrew Page Dr. TSE Vice President (Raw Material) TSL Vice President (Orissa Project) TSL Managing Director (Distribution. BHUBANESWAR Page 38 . nurturing talent. enhancing leadership capability and working together with pace. TSE Vice President (TQM and shared services) TSL Director (Finance) TSE Vice President (Coke. Value and Goal Our Vision Our vision is to be the global steel industry benchmark for value creation and corporate citizenship. pride and passion Our offer By developing leading-edge solutions in technology. TSE Vice President (Engineering and Chhattisgarh Project) TSL Director (Human Resource) TSE Chief Human Resource Officer. processes and products Our people REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. Corus Strip Products I Jmuiden. Misra Dook van den Boer Sanjeev Paul Director (Health and Safety) Director (Environment) Chief (Group Information Services) Managing Director.

BHUBANESWAR Page 39 . Our Mission Consistent with the vision and values of the founder Jamshedji Tata. and thereby reaffirms its faith in democratic values. Tata Steel strives to strengthen India’s industrial base through the effective utilization of staff and materials.Working Capital Management-Comparative Analysis By becoming the supplier of choice.  Excellence We must constantly strive to achieve the highest possible standards in our day-today work and in the quality of the goods and services we provide. respecting the environment. compassion and humanity for our colleagues and customers around the world. and always work for the benefit of the communities we serve. and creating value in close partnership with our customers Our innovation By providing a safe and healthy workplace.  Understanding We must be caring. caring for our communities and demonstrating high ethical standards. show respect. with honesty and transparency. Tata Steel recognizes that while honesty and integrity are the essential ingredients of a strong and stable enterprise. Everything we do must stand the test of public scrutiny. Overall. profitability provides the main spark for economic activity. delivering premium products and services. the Company seeks to scale the heights of excellence in all that it does in an atmosphere free from fear. consistent with modern management practices. Our values The Tata Group has always been driven by five core values:  Integrity We must conduct our business fairly. REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. The means envisaged to achieve this are high technology and productivity.

cost escalation of raw material inputs. communities and environments in which we work. Value creating partnership with customers and supplier. EVA Positive Core Business At the present level of investment. always ensuring that what comes from the people goes back to the people many times over. understanding and mutual cooperation. 800 Cr ) to become EVA positive . changing fast and the lowest cost status is constantly under threat from new technologies.  Responsibility We must be responsible and responsive to the countries. BHUBANESWAR Page 40 . currency depreciation in other countries. Our Goals Move from commodities to brands To beat the industry trend in a situation of over-supply they need to move away from selling commodities by converting them into brands. energy and labour etc. 800 to 1000 Cr (at MAT level of taxation the PBT requirement is at Rs. however. Maintaining the world benchmark will be one of the greatest challenges for the core steel business. they require a PBT of Rs. building strong relationships based on tolerance.they expect to complete this journey in about 3 year’s time.the world outside is.Working Capital Management-Comparative Analysis  Unity We must work cohesively with our colleagues across the group and with our customers and partners around the world. REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. Continue to be lowest cost producer of steel They required the status of the lowest cost producer of steel in 2001.

Working Capital Management-Comparative Analysis They hope to build the new business models by forging alliances with their customers and supplier to strengthen the value chain helping them to reduce the system costs. PRODUCT PORTFOLIO: LONG PRODUCTS    Wire rod mill. They wish to see the smile on every face every day. improve service levels. BHUBANESWAR Page 41 . Bar mill. Merchant mill REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. reach and offer new products and services. Sustainable Growth They wish to grow but intend to temper their ambitions for growth with financial prudence to ensure a long-term sustainable future. Enthused & Happy employees They aim to accelerate their efforts to provide a work environment that will ensure a sense of purpose and personal growth for individual.

BHUBANESWAR Page 42 . cold rolling mill REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.Working Capital Management-Comparative Analysis Flat products:   Hot strip mill.

furniture and office equipment. Materials Handling REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. seating and interior. Consumer Goods Domestic appliances. closures. The Group‟s brand building endeavors have always been directed at building assurance. engine and rotor shafts. engine fan casings and blades. chassis and suspension. non-residential and infrastructure. including applications such as structural steelwork and building envelopes (cladding and roofing). battery cases. the Tata Steel Group has placed a continuous emphasis on improving processes. Aerospace Landing gear. structural pylons. lighting.Working Capital Management-Comparative Analysis Over the years. enhancing quality and thereby achieving better performance benchmarks in all areas. reliability and value creation for products in every segment. Construction Designing solutions to serve all sectors including residential. slat and flap tracks. High integrity gear steels for planes. bake-ware. Automotive Body-in-white. helicopters and motor sport applications. decorative pre-finished metals plus many others. power train wheels and tyre bead wire. BHUBANESWAR Page 43 . with a view to consistently increasing efficiencies. racking and shelving. enamel-coated applications.

plate for use in wind turbines. sections.g. South Asia and South East Asia. plus a range of structural. encompassing hot rolled and cold rolled sheets.Working Capital Management-Comparative Analysis Construction and earth-moving. crushers. special rails for metro and tramways. forestry equipment and agricultural equipment. Rail Rails for high-speed lines. Steel sleepers and track accessories. which serve a multitude of small engineering companies in Europe. BHUBANESWAR Page 44 . modular platforms and tuned dampers for noise reduction. wire rod and wire. drills. conventional and heavy loaded tracks. as well as for switches and crossings. forklift trucks. Engineering : General Engineering: Tata Steel manufactures a range of steel products. cranes. plate. electrical and specialty engineering steels used in power generation and transmission. roof supports. trailers. Energy and Power Submerged arc-welded pipe for the global oil and gas industry. structural systems for the solar power industry. bearings and tubes. screeners and conveyors). REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. mining (e.

container ships and aircraft carriers. physical perimeter security applications.Working Capital Management-Comparative Analysis Agricultural Tools and Implements: Tata Steel manufactures a range of high quality agricultural implements making it the first choice in India‟s rural markets. redeployable vehicle barriers. Packaging: Consumer: Light metal packaging for food and beverages cans as well as for paint and aerosols. Security and Defense: Blast protection structures. ferries. RECOGNITIONS AND CERTIFICATIONS Corporate Awards  The rating of being one of the world‟s top ten “Most Admired Companies” by FORTUNE Magazine and the Hay Group in the Industry-Metal category. Industrial: Steel for drums. BHUBANESWAR . Plant and Equipment: A multi-disciplinary engineering approach for the design. Services range from routine testing. erection and commissioning to full business consulting. off shore support vessels. AWARDS. blast containment structures. Its wire products find their way into farming. industrial bulk containers and gas bottles . manufacture and supply of high precision equipment is offered to various industry sectors. poultry and fencing applications. walls and security solution designs. Page 45 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. Engineering Services. Shipbuilding Wide range of vessels including cruise liners. bollards.

The Good Governance for Environment in the Factory and Enterprise Award to SIW. The Outstanding Award for Employee Relations & Welfare 2009 to Siam Industrial Wires (SIW). The TERI CSR Award. Pratibha Devi Singh Patil. Awards for Excellence in Knowledge   Awards for Excellence in Corporate Social Responsibility (CSR)           The Golden Peacock Global Award. Company with Highest Corporate Image by Nielsen . The Ispat Paryavaran Puraskar Special Award. The UKTI India Business Award. The Superbrand Award to Tata Tiscon. The Fifth BML Munjal Award for Excellence in Learning & Development. The Most Admired Knowledge Enterprise (MAKE) Asia Award 2009 for the sixth time. The Ashtray Khel Protsahan Puraskar. The Best Establishment Award by the President of India. The Xiamen City Top Employers‟ Award to NatSteel Xiamen for the second time. Page 46 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. BHUBANESWAR .Working Capital Management-Comparative Analysis     The Economic Times Company of the Year Award. The Times of India CSR Award. Thailand. Mrs. The Significant Achievement in Sustainability certification from CII-ITC.

BHUBANESWAR Page 47 . The Green Star Award from the Industrial Estate Authority of Thailand (IEAT) to Siam Construction Steel Company (SCSC).Working Capital Management-Comparative Analysis   The Corporate Social Responsibility – Department of Industrial Work Award to SIW. WORKING CAPITAL MANAGEENT REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.

advance incomes . the amount of current assets which is more than current liabilities is known as Working Capital. it means Company have liquid assets. prepaid expenses. outstanding expenses. FORMULA OF WORKING CAPITAL Working Capital = Current Assets . Working capital shows strength of business in short period of time. outstanding bills.power . we include cash. If a company have some amount in the form of working capital. To meet selling costs such as packaging and advertising expenses. with this money company can face every crises position in market.Working Capital Management-Comparative Analysis WORKING CAPITAL MANGEMENT Definition “Working capital is an excess of current assets over current liabilities.Current Liabilities Current Assets Current assets are those assets which can be converted into cash within One year or less than one year . we includes creditors. In current assets. In other words. bills payable and short term loans. debtors. working capital will equal to current assets.office and expenses. BHUBANESWAR Page 48 . bank overdraft. bank. Current Liabilities Current Liabilities are those liabilities which can be paid to respective parties within one year or less than one year at their maturity. If current liabilities are nil then. "In other words it is also known as the cash available for the day to day operation of the organization. NEED AND OBJECTIVES OF WORKING CAPITAL       For the purchase of raw materials To pay wages and salaries To ensure day to day overhead costs such as fuel . To provide credit facilities to the customers To maintain the inventories of raw materials . outstanding incomes. In current liabilities.work in progress and finished goods REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. bill receivables.

Net Working Capital Net working capital is the excess of current assets over current liabilities. Net Working Capital = Total Current Assets – Total Current Liabilities This amount shows that if we deduct total current liabilities from total current assets. Gross working capital Total or gross working capital is that working capital which is used for all the current assets. at that time we need working capital which is more than permanent working capital. Inventory REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. 4. then balance amount can be used for repayment of long term debts at any time.Permanent Working Capital Permanent working capital is that amount of capital which must be in cash or current assets for continuing the activities of business. Sources of Working Capital: 1. Long Term Loan 3. we don‟t need such capital. Sales of Capital Asset 4. Cash 2. Total value of current assets will equal to gross working capital. 3. Temporary Working Capital Sometime. Net Income 2. Component: 1.Working Capital Management-Comparative Analysis Type of Working Capital There are following types of Working Capital are: 1. In normal working of business. Receivables 4. it may possible that we have to pay fixed liabilities. BHUBANESWAR Page 49 . then this excess amount will be temporary working capital. Marketable Securities 3. 2. Injection of Fund by Stockholders .

Risk here refers to a firm‟s ability to honour its obligation as and when they become due for payment. lower the risk higher the cost. On the other hand the reverse situation will increase risk and profitability and reduce liquidity thus there is direct relationship between risk and profitability and inverse relationship between liquidity and risk. reduces risk and thereby decrease the opportunity for gain or loss.Working Capital Management-Comparative Analysis IMPORTANCE OF ADEQUATE WORKING CAPITAL        Solvency of the business Goodwill Cash discounts Regular supply of raw materials Ability to face crisis High morale Easy loans FACTORS INFLUENCING WORKING CAPITAL           Nature of the business Size of the business Seasonality of operation Production policy Credit policy Working capital cycle/operation cycle Business cycle Price level changes Growth and expansion Scarce availability of raw materials Principles of Working Capital There are four principle of working Capital management. Short term borrowing increase liquidity. BHUBANESWAR Page 50 . 2. Principle of Risk Variation: The goal of working capital management is to establish a suitable trade between profitability and risk. They are being depicted as follow: 1. Generally higher the cost lower the risk. A Working Capital Management Should always try to achieve the balance between these two. Larger investment in current assets will lead to dependence. REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. Principle of cost capital: The various source of raising Working capital finance have different cost of capital and the degree of risk involved.

Excess or inadequate working capital management Every business concern should have adequate amount of working capital to run its business operations. It should have neither redundant nor excess working capital or inadequate of working capital. However. BHUBANESWAR Page 51 . Current Assets as a percentage of total Sales. REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. Principle of Maturity Payment: This principle is considered with planning the source of finance for Working Capital.Working Capital Management-Comparative Analysis 3. As per the principle the amount of Working Capital investment in each component should be adequately justified by a firm equity position every rupee contributed current assets should contribute to the Net Worth of the firm level of current assets may be measured with help of two ratios. it is the inadequate working capital which is more dangerous from the point of view of the firm. They are: Current Assets as a percentage of Total Assets. As per this principle a firm should make every effort to relate maturity of its flow of internally generated funds in other word it should plan its cash inflow in such way that it could easily cover its cash out flows or else it will fail to meet its obligation in time. Both excess as well as short working capital positions are bad for any business. 4. Principle of equity position: The principle is considered with planning the total investment in current assets.

98 2009-10 623.54 631.868.83 Page 52 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.67 2.66 1. BHUBANESWAR .09 539.19 2.047.732.827.44 1.76 2.453.28 635.Working Capital Management-Comparative Analysis DATA ANALYSIS OF TATA STEEL NET WORKING CAPITAL CURRENT ASSETS stores and spares stock in trade sundry debtors 2005-06 442.31 543.99 434.40 2006-07 505.48 2008-09 612.63 2007-08 557.

46 0. Current Liabilities and Net Working Capital REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.60 2.60 4340.54 854.022. Crores) Net Working Capital = Current Assets-Current Liabilities *Note: Current Assets for 2007-08.49 0.68 18. so it is excluded Graph showing Current Assets.514.234.145.99 40.37 34.5 3. for the acquisition of Corus and cannot be used for day to day expenses.247.61 3.51 3.20 288.07 30.41 3.127.81 0.12 709.23 0.37 719.91 0.30 676.534.39 1.14 10301.590.61 47.77 8.08 CURRENT LIABILITIES sundry creditors subsidiary companies interest accrued but not due advances received from the customers liability towards investors education and protection fund provision for retiring gratuities provision for employee benefits provision for taxation provision for fringe benefits proposed dividend TOTAL (B) NET WORKING CAPITAL (A-B) (Figures are in Rs.12 6.03 62.29 0.143.59 19.31 470.86 4237.04 2.91 5.808. exclude the loan amount Rs.37 24.20 455.29 185.74 19.03 39.00 1.73 6475.00 1.04 3.00 250.08 493.00 1.086.50 507.43 10047.72 428.278.95 3.12 1.00 848.842.65 1.66 334.29 3.12 506.191. BHUBANESWAR Page 53 .48 0.20 465.055.74 231.14 3554.62 6636.999.768.78 1.Working Capital Management-Comparative Analysis interest accrued on investment cash and bank balances loans and advances TOTAL (A) 0.358.42 115.243.40 8.02 0.66 1.68 297.15 4.05 226.974.37 943.11 198.21 49.28 29.12 1.88 0.13 2.62 Cr. 3022.022.453.05 1073.32 3.19 448.78 -132.99 102.234.

56 6.35 11.15 64.08 PERCENTAGE CHANGE IN WORKING CAPITAL CURRENT ASSETS stores and spares stock in trade sundry debtors cash and bank balances loans and advances TOTAL (A) 2005-06 26.46 223.95 5. BHUBANESWAR .453.96 -93.808.42 119.02 242.53 147.89 -14.36 278.63 103.03 -13.24 24.29 1073.15 8.68 3.75 2008-09 9.48 2009-10 10301.48 1.247.073.52 93.23 7.89 -10.247.88 2006-07 6475.77 2006-07 14.65 Page 54 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.35 -71.00 18.61 3.10 17.Working Capital Management-Comparative Analysis Net Working Capital 12000 10000 8000 6000 4000 2000 0 -132.51 17.32 6.33 20.022.13 19.70 -7.563.34 2007-08 10.10 12.6 3.58 2009-10 1.78 40.45 14.974.50 33.88 1.80 390.04 -30.66 1.95 1.999.29 16.18 5.81 13.78 -132.55 12.48 3.47 -7.07 CURRENT LIABILITIES sundry creditors subsidiary companies interest accrued but not due advances received from the customers 9.29 31.72 428.08 -74.95 7.08 428.768.44 -31.33 12.29 2007-08 6636.14 3.46 -2000 Current Asset Current Liability Net Working Capital 2005-06 4237.022.46 2008-09 10047.10 2.5 8.05 1073.

19 43. scrap and raw materials was lower by 14% than that of last year.00 -11.11 31.00 .987.25 0.51 -88.Working Capital Management-Comparative Analysis liability towards investors education and protection fund provision for retiring gratuities provision for employee benefits provision for taxation provision for fringe benefits proposed dividend TOTAL (B) 11.91 -44.65 0. The increase of Rs.00 79.71 -42. Debtors as on 31st March. The raw material Stocks in The Company‟s Ferro Alloys & Minerals division was also lower than the last year level.37 5. While the stock of stores and spares as on 31st March.00 63.40 Cr. But there is no significant increase in current liability side.014 2. inventory decreased by 14% compared to FY 09. from Rs.94 -3. Purchase of finished and semifinished products was much lower compared to previous year as requirements of Agrico and Wires Division were fully met from steel works in the FY 10 as against partial purchases from outside suppliers/imports in the previous year.278.98 0. BHUBANESWAR Page 55 . semi-finished goods. in loans and advances represents increase in advance against equity (to Centennial Steel) and advances to subsidiary companies (to Tata Steel KZN) partly offset by reduction in the amount receivable against forward covers.74 -88. 2010 was lower by 32% as compared to 31st March.50 4.77 Cr.04 -10.48 -50. Non purchase of sponge iron also contributed to lower value of purchase of finished and semi-finished products.33 1232. FINANCIAL RATIOS Working Capital Turnover Ratio: REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. 2009.00 0. 1. net working capital increased by 147% compared to previous year.19 638.34 90.00 7. 2010 remained almost at the same level as on 31st March.01 15. Also Tata steel reduced the proposed dividend to Rs.08 26.00 2. of Previous Year. It is because of increase in cash and bank balances and loans and advances in current assets side. 939 cr.19 33. 2009 primarily due to stringent credit control measures and lower exports. The raw materials inventory was also lower due to lower prices of coal and coke along with lower volume of coke. the inventories of finished.04 0.58 0.53 0.92 0.44 675.61 Interpretation In 2009-10. During FY 10. 709.00 34.

021. Current Ratio: A liquidity ratio that measures a company ability to pay Short term obligations.28 -132.552.247. or how efficiently the management is using its working capital to generate sales Revenue. Decrease in working capital turnover is because of the increase in net working capital.71 WORKING CAPITAL TURNOVER RATIO 35.169 22. The reason for increase in net working capital is the increase in cash and bank balances and loans and advances.315.77 1073.29 17. PARTICULARS NET SALES NET WORKING CAPITAL WORKING CAPITAL TURNOVER RATIO 2005-06 15.139.30 2006-07 17.693.169 2007-08 19.65 WORKING CAPITAL TURNOVER RATIO.88 35. Working Capital Turnover Ratio = Net Sales / Net Working Capital.02 1022. Tata Steel has a huge increase in working capital turnover in 2008-09 but could not keep the momentum to FY 10.65 2009-10 25. BHUBANESWAR Page 56 .Working Capital Management-Comparative Analysis Ratio that shows the number of times the working capital is converted into revenue in an accounting period.08 7.48 22. REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.3 40 20 0 -20 -40 -60 -80 -100 -120 -140 -160 -148.71 times in 2009-10 compared to 22.46 -148.67 2008-09 24.65 in 2008-09.67 2005-06 2006-07 2007-08 2008-09 2009-10 17. 7. Reduction in working capital turnover is not a good sign.98 3.71 Interpretation Working capital turnover ratio has been decreased to 7.39 428.

50 8.Working Capital Management-Comparative Analysis Current Ratio = Current Assets/Current Liabilities PARTICULARS CURRENT ASSETS CURRENT LIABILITIES Current Ratio 2005-06 4.187 2007-08 6636.15 8.66 1.000. the better the position of the company.18 which is higher as compared to previous years.119 1.61 1.98 1.32 6.00 4.60 3.000.00 1.119 2009-10 10301.72 1.144 CURRENT LIABILITIES Current Ratio Interpretation: The Financial position is supposed to be very sound if the current ratio is more than 2:1 .000.95 5453. It is observed that the company has met the crucial period during 2005 to 2006 when the current asset was almost equal to its current liability which is 1.98 2008-09 10047. REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.000.11 this is because of low market and depression in the economy throughout the Country.00 10.768.11 0.00 2.05 1.974.000. The quick ratio measures a company’s ability to meet its Short term obligations with its most liquid assets.78 0.237. In 2006 to 2007 Tata steel has improved its financial soundness as the current ratio is 1.187 0. Quick Ratio: An indicator of company Short term liquidity. BHUBANESWAR Page 57 .000.144 Current Ratio 12.11 2006-07 6475.00 8.00 2005-06 2006-07 2007-08 2008-09 2009-10 1.808. The higher the Quick Ratio.999.00 CURRENT ASSETS 6.

974. It is also seen that 2005 to 2006 the liquid position of company was affected due to sufficient financing arrangement for CORUS acquisition. Stock Turnover Ratio: A ratio showing how many times a company inventory is sold or replaced over a period.00 8.09 3.85 2007-08 6636.000.Inventory) / Current Liability PARTICULARS CURRENT ASSETS STOCK IN TRADE CURRENT LIABILITIES QUICK RATIO 2005-06 4.32 2.85 0.00 6.237.453. Stock Turnover Ratio = Cost of Goods Sold / Average Stock Average Stock = Opening Stock +Closing Stock /2 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.000. In 2009 to 2010 the liquid ratio of Tata steel is 0.047.61 0.72 0.54 5.68 0.00 2005-06 2006-07 2007-08 2008-09 2009-10 0.05 0.000.453.15 2.Working Capital Management-Comparative Analysis Quick Ratio = (Current Assets .00 2.85 which is also near to standard value 1 and hence during 2006 to 2007 and 2009 to 2010 company can meet with its short term obligations. BHUBANESWAR Page 58 .8 0.31 6.000.00 10.871 Quick Ratio 12.87 which is aprox to standard 1:1.28 8.99 8. In 2006 to 2007 the quick ratio is 0.868.732.66 2006-07 6475.999.808.871 CURRENT ASSETS STOCK IN TRADE CURRENT LIABILITIES QUICK RATIO Interpretation: Higher the ratio the better is the capacity of business to meet its current obligations.000.78 0.60 1.5 2.00 4.768.95 1.000.80 2009-10 10301.66 0.66 0.68 2008-09 10047.827.00 0.

000.183. BHUBANESWAR Page 59 .63.14 6.000.000. Debtors Turnover Ratio:- REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.000.00 16.00 4.00 2005-06 2006-07 2007-08 AVERAGE STOCK 2008-09 2009-10 6.000. During the course of our audit.000.101.00 14. any major weakness has not been observed in such internal control system.661.05 1.627.000.72 6.00 2.44 times in 2009-10 is also a good value as it is above 6.8 7.779.7 2.00 6. but it is less than 7.00 18.44 COST OF GOODS SOLD STOCK TURNOVER RATIO Interpretation: Stock turnover ratio evaluates the efficiency of the firm in managing its inventory.457.43 6.21 6.00 12. Turnover of 6.63 2009-10 17140.937.50 2007-08 13.82 6.80 2008-09 18759.94 1. Tata Steel shows a constant increase in stock turnover till 2008-09.63 is good in terms of liquidity.00 8.000.21 2006-07 11.00 0. This ratio indicates the number of times inventory has been converted into sales during the year.5 6. Stock turnover of 7.000. It shows the efficient management of inventory.80 7.09 2.00 10.571.42 1. There is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchases of inventory and fixed assets and the sale of goods and services.44 Stock Turnover Ratio 20.Working Capital Management-Comparative Analysis PARTICULARS COST OF GOODS SOLD AVERAGE STOCK STOCK TURNOVER RATIO 2005-06 10.63 6.000.

Accounts payable turnover ratio is calculated by taking total purchase made from suppliers and dividing it by the average account payable amount during the same period. BHUBANESWAR Page 60 .01 2006-07 17.00 5.000.01 2006-07 29.73 41.00 15.693.00 10. It is an indication of stringent collection methods followed by Tata Steel.73 times in 2009-10 means Tata Steel collects the cash immediately after giving the delivery i.00 2005-06 NET SALES 27.52 29. It increases the cash balance of the company and keeps the liquidity.Working Capital Management-Comparative Analysis Debtor turnover ratio indicates the velocity of debt collection of firm.98 535. Payables Turnover Ratio = Net Credit Purchase / Average Creditors REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.000..00 0. Payables Turnover Ratio: A short term liquidity measures used to quantify the rate at which a company pays off its suppliers.28 587.39 560. Another fact is. they keep only a small portion that is around 4% as provision for bad debts.e.139.61 27.56 33. In simple words it indicates the number of times average debtors (Receivable) are turned over during year.73 AVERAGE DEBTORS DEBTOR TURNOVER RATIO Interpretation:Debtor turnover ratio indicates the time lag between credit sales and cash collection period.552.41 46.02 585.315. Debtor Turnover Ratio = Net Sales / Average Debtors Average Debtor = Opening Debtor +Closing Debtor /2 PARTICULARS NET SALES AVERAGE DEBTORS DEBTOR TURNOVER RATIO 2005-06 15. Also.73 Debtor Turnover Ratio 30.23 2009-10 25.000.00 20.021.52 2008-09 24.000.23 2009-10 46.8 days after the sales on an average.98 2007-08 19.98 2007-08 33. debtor turnover ratio is increasing continuously last 5 years.000. 7. It is a marvelous turnover many companies dreaming to achieve.00 25.77 589.000.52 2008-09 41. Debtor turnover ratio of 46.

79 1.72 2009-10 8.72 2.All purchases are assumed as credit purchase.06 1. They manage this turnover for last five years.15 Payables Turnover Ratio 3.521.00 2.118. Iron ore is excluded as it is obtained from captive mines) Interpretation: Payables turnover ratio of Tata Steel is an exceptional case.99 2.96 2.25 3.953.00 2005-06 2006-07 2007-08 2008-09 2.15 2009-10 Payables Turnover Ratio (Note*.971.96 2008-09 8. Debtor turnover is around 40 times in a year and payables turnover is only two times! It clearly shows the competitive advantage Tata Steel has over its suppliers and customers.00 1. It is just slightly greater than two times.06 2. This shows that they pay creditors only two times in a year.97 2.00 0. The study understands the liquidity strength of Tata Steel when the payables turnover is read along with debtor turnover.36 2007-08 4.10 2006-07 4.878.964. It helps them to keep the cash with them for a long period and it can be used for other activities.36 1.981.88 2.CDP 2005-06 2006-07 2007-08 2008-09 2009-10 raw material conversion period REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.10 2.05 2.72 2.Working Capital Management-Comparative Analysis Average Creditor = Opening creditor +Closing creditor / 2 PARTICULARS NET CREDIT PURCHASE AVERAGE CREDITORS PAYABLES TURNOVER RATIO 2005-06 3. OPERATING CYCLE Gross Operating Cycle (GOC) Net Operating Cycle (NOC) ITEMS = RMCP + WIPCP + FGCP + DCP = GOC . BHUBANESWAR Page 61 .110.535.95 2.993.

06 10.84 5494.72 222.85 28.60 collection period credit sales at cost sales per day debtors DCP ( Debtor Collection Period ) credit purchase purchase per day creditors CDP ( Creditor Deferral Period ) GROSS OPERATING CYCLE NET WORKING CYCLE 15.79 183.43 181.35 32.74 4.442. RMHP was reduced from 222.01 10.17 7.183.03 3.91 15.28 180.41 7.076.39 42.64 50.38 3.50 28.521.315.039.33 12.67 1.981.309.44 1.18 29.17 1.90 17140.87 80.25 23. It is a clear indication of efficiency of inventory management techniques Tata Steel follows.72 167.69 232. REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.39 28.419.51 535.98 1.26 2453.05 36.937.99 160.18 1.56 158.73 8.87 10.82 187.81 2.89 26.21 51.53 2.64 11.67 3.94 32. Tata Steel has been reducing the Raw Material Holding Period.14 1.05 17.05 171.50 200.11 1141.101.73 80.01 creditors deferral period 3.86 2868.44 32.Working Capital Management-Comparative Analysis raw material consumption raw material consumption per day raw material inventory RMCP ( Raw Material Conversion Period ) 2.02 48.76 19.98 69.21 1.33 1.50 1. BHUBANESWAR Page 62 .693.26 9.61 223.28 54.7 52.42 28.77 67.62 1.92 33.571.06 152.82 47.88 13.953.118.971.841.33 finished goods cost of goods sold cost of goods sold per day finished goods inventory FGCP ( Finished goods Conversion Period ) 10.058.95 13.99 132.535.54 589.05 Interpretation  From 2005-06.46 9.964.52 13.75 18698.993.779.878.40 21.06 943.39 18759.97 22.03 270.021.552.08 days in 2009-10.03 days in 2005-06 to 145.87 2.93 73.40 17124.94 560.33 13.75 22.43 39.61 1361.74 15.639.56 10.70 587.35 212.627.52 25.61 585.26 99.55 5709.23 4.110.139.81 work in progress cost of production cost of process per day work in progress inventory WIPHP ( Work in Progress Conversion Period ) 8.09 47.73 8.65 3.82 24.23 26.70 8.

521. This shows that there were no stoppages in the production process. Methods Of Calculation: Raw Material conversion period: Raw material Consumption The value of raw material consumption is taken from schedule 4 of the profit & loss account. Creditors Deferral Period is at 167 days during FY 2010 which implies that company pays the creditors after 167 days of the purchase.Working Capital Management-Comparative Analysis    Work in Progress Holding Period (WIPHP) is maintained below 2 days till 2008-09 which is very good. Finished Goods Holding Period (FGHP) has been reducing constantly from FY 2006 to 2010. Holding Days are calculated by the dividing raw material inventory by raw material consumption per day. BHUBANESWAR Page 63 . Debtors Collection Period is also decreasing and it has come down to 7. It shows the prompt collection policy of Tata Steel from its customers. 23. spending on equipments and infrastructure.25 crores while the purchase per day has also increased to Rs. The overall creditor‟s value is Rs 8. It‟s a positive signal for the company because it implies that the cash is available for other uses such as investing in new capital. as well as preparing for possible share buybacks down the road. Raw Material Consumption per Day Raw Material Inventory Raw Material Holding Days REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. The opening and closing raw material is taken from schedule G contains the breakup of entire inventories.67 crores. The last year closing is consider as the opining for the current year and average is calculated.   Net Operating Cycle (NOC) is coming down to 12 days for the past five years.70 days in FY 2010. The value of raw material consumption per day is taken by dividing raw material consumption by 360 days. It is achieved by efficient supply chain management and good relationship with customers and dealers. It is because of the increase in Creditors Deferral Period. Increase in WIPHP in 2009-10 is because of the increase in work in progress.

Cost of Process per day Works In Progress Inventory Work in Progress Holding Days Finished Goods :Cost of Goods Sold The value of cost of goods sold is calculated by subtracting profit before taxation from net sales. The net sale is taken from profit and loss account as well as profit before taxation. Cost of Goods Sold Per Day Finished Goods Inventory Finished Goods Holding Days REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. Holding days are calculated by dividing work in progress inventory by cost of process per day. The end value is taken as cost of production. BHUBANESWAR Page 64 .Working Capital Management-Comparative Analysis Work In Progress Conversion Period: Cost of production The value of cost production is taken from schedule 4 of profit and loss account under manufacturing expenses. The value is calculated by dividing finished goods sold per day. The entire manufacturing is given in the cost sheet format. The last year closing balance is considered as opening of current year and average is calculated. Then the result is calculated. The opening and closing value of finished goods inventory is taken from schedule G of the balance sheet. The value is calculated by dividing cost of goods sold by 360 days. The last year closing balance is considered as opening for current year and average is calculated. The schedule G contains the break up of entire inventories. The schedule G contains the breakup of entire inventory. The opening and closing value of work in progress inventory is taken from schedule G of the balance sheet. The value of cost of process per day is calculated by dividing cost of production by 360 days.

The entire net sales are considered as credit sales. Debtor comes under the head of current asset in the balance sheet. The value of creditor is taken from the schedule of current liabilities and provision. Therefore we have calculated the percentage from raw material consumed and then the entire calculation is done. The value of debtor is taken from balance sheet.Working Capital Management-Comparative Analysis Collection Period: Credit Sales Sales Per Day Debtor Debtor Outstanding Days The value of entire net sales from profit and loss account is taken as credit sales for particular year. REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. The value of deferral period is calculated by dividing by purchase per day. BHUBANESWAR Page 65 . Creditor Deferral Period: Credit Purchase For the year 2008 – 2009 no purchase is shown. The value is calculated by dividing the entire credit sales by 360. The value of outstanding days is calculated by dividing debtors by sales per day. Purchase Per Day Creditors Creditors Deferral Period The value is calculated by dividing the entire credit purchase by 360 days.

88 17.04 2007-08 1.11 2. BHUBANESWAR .80 549.549.16 337.16 337.585.19 98.39 0.42 398.70 2006-07 1.96 1.28 342.42 513.24 2009-10 2.744.25 287.87 979.14 419.22 842.00 Page 66 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.Working Capital Management-Comparative Analysis DATA ANALYSIS OF JSW STEEL NET WORKING CAPITAL CURRENT ASSETS Inventories Sundry Debtors Cash and Bank Balances Loans and Advances Other Current Assets 2005-06 924.77 563.23 229.051.35 245.62 2008-09 2.39 339.011.15 18.123.

20 53.16 18.00 38. Current Liabilities and Net Working Capital REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.14 0.00 7.655.41 0.31 198.80 21.58 58.00 0.50 3.652.621.75 1.31 268.295.062.04 125.00 27.293.09 1.06 261.57 5.00 24.63 1.30 15.00 0.287.00 0.38 76.14 51.015.37 -1.19 0.00 12.99 18.53 0.77 28.87 49.64 5.90 177.17 43.21 -2.24 0.41 1.Working Capital Management-Comparative Analysis TOTAL (A) CURRENT LIABILITIES Acceptances Sundry Creditors Rents and Other Deposits Advances from the Customers Interest accrued but not due on loans Other Liabilities Premium payable on redemption of FCCBs & Preference Shares Investor Education and Protection Fund Provision for Income Tax Provision for Wealth Tax Provision for Fringe Benefits Provision for Employee Benefits Proposed Dividend on Preference Shares Proposed Dividend on Equity Shares Corporate Dividend Tax Tax on Equity Preference Dividend Provision for Leave Encashment TOTAL (B) NET WORKING CAPITAL (A-B) (All the figures are in Rs.65 180.26 0.27 0.00 510.83 4.00 40.047.74 0.94 0.027.745.29 2.71 8.45 56.44 0.26 1.83 142. BHUBANESWAR Page 67 .00 0.70 72.48 27.559.67 188.557.50 0.00 27.11 0.90 0.46 2.90 125.58 0.40 0.95 23.00 0.43 164.93 213.102.29 65.48 142.00 7.478.060.51 1.00 21.87 0.12 425.99 29.70 34.52 5.72 20.21 17.89 -2.59 115.59 0.17 31.00 10.086.37 Graph showing Current Assets.00 4.46 74.925.33 0.32 3.00 2. Cr) 2.00 0.25 28.78 0.00 4.00 7.54 2.55 0.485.00 0.320.33 612.631.

83 -2062.92 -33.66 -43.87 -16.56 24.80 107.62 0.05 41.32 -94.32 -14.43 6.02 24.42 53.86 0.41 50.95 2006-07 9.18 2008-09 32.00 44.51 112.Working Capital Management-Comparative Analysis 8000 6000 4000 2000 425.00 6.91 27.63 21.42 -9.40 153.97 241.79 16.62 0.03 -19.92 22.63 0.42 18.00 20.06 2009-10 26.64 0.04 9.82 0.63 0.19 -7.27 39.69 -100.00 111.28 28.27 119.29 0 -1015.27 -4.00 84.03 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.47 -31.98 Page 68 2005-06 24.01 23.14 156.18 37.57 198.41 13.21 35.55 -54.37 -4000 -2925.75 43.46 2007-08 53. BHUBANESWAR .32 CURRENT ASSETS CURRENT LIABILITIES -2000 2005-06 2006-07 2007-08 2008-09 2009-10 PERCENTAGE CHANGE IN WORKING CAPITAL CURRENT ASSETS Inventories Sundry Debtors Cash and Bank Balances Loans and Advances Other Current Assets TOTAL (A) CURRENT LIABILITIES Acceptances Sundry Creditors Rents and Other Deposits Advances from the Customers Interest accrued but not due on loans 54.

96 0.00 0.00 0.04 0.00 -100.00 84.86 Interpretation For past three years JSW Steel has a negative net working capital as the current liabilities are more than current assets.00 30.00 66.Working Capital Management-Comparative Analysis Other Liabilities Premium payable on redemption of FCCBs & Preference Shares Investor Education and Protection Fund Provision for Income Tax Provision for Wealth Tax Provision for Fringe Benefits Provision for Employee Benefits Proposed Dividend on Preference Shares Proposed Dividend on Equity Shares Corporate Dividend Tax Tax on Equity Preference Dividend TOTAL (B) 26. 2008-09 Inventories increased by 32% from Rs. 21% increase in loans and advances was mainly due to increase in entitlement of Minimum Alternative Tax credit of Rs.00 0.00 94.41 100.25 -72.00 943.35 -8.75 8.00 0.43 0.09 -0. BHUBANESWAR Page 69 .16 0.95 69.22 3.87 160.00 -100.27 18.00 -100. 2.00 -27.8 mtpa expansion project and other projects.47 -85.98 -100.051 crores in 2008-09.76 849.64 0. 259 crores.54 -4.00 79. Increase of Finished Goods was mainly due to inventory (Rs.00 -1. Increase in stores & spares were mainly due to commencement of new facilities. Increase in current liabilities is because of increase in acceptances from subsidiary companies and customers which occurred due to increase in the value of purchases/services on account of expansion projects. It is very important for a company to keep a ratio of 2 between current assets and current liabilities to meet its daily liquidity requirements.00 34.24 -92.76 320.00 22.76 30. 1. It is mainly due to payment of project creditors relating to new 2.00 0.25 14. inventory has been increased by 26% compared to previous year.8 MTPA REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. During same year debtors have been increased by 41% in connection with 30% increase in sales.26 -75. 101 crores) arising out of trial run production of 2.00 -100.04 0.15 196.64 0. 2009-10 During 2009-10.60 0.67 -91.00 2.99 0.17 42.00 53.47 0.86 -83. Current liabilities are almost same as previous year.00 4.00 44.67 0.549 crores in 2007-08 to Rs.30 0.99 -3. Higher inventory of raw materials & spares is mainly due to commencement of new facilities.21 0.

or how efficiently the management is using its working capital to generate sales revenue .35 crores as on 31 March 2007 a growth of about 53. FINANCIAL RATIOS Working Capital Turnover Ratio: Ratio that shows the number of times the working capital is converted into revenue in an accounting period. Loans and Advances increased by from Rs.Working Capital Management-Comparative Analysis expansion project.102 crores in 2007-08 to Rs. Sundry debtors increased by 18% from Rs. 337. 1.87 crores during 200506. 98. BHUBANESWAR . 2007-08 The inventory increased to Rs. Decrease in net working capital is because of the decrease in loans and advances and other current assets. The increase was mainly due to increase in the value of purchases/services on account of expansion projects. amounting to Rs. 245. The current liabilities increased from Rs.011. 842 crores in 2007-08 to Rs. b) Minimum Alternative Tax credit entitlement of Rs. 425 crores of previous year. Even as debtors increased from Rs. 337 crores in 2006-07 from Rs. 2006-07 Cash and Bank balances increased to Rs. 1. The increase was mainly due to a) Loans and advance given to JSW Steel (Netherlands) B.39 crores in 2007-08. 95 crores.18%.V.744 crores in 2008-09. the debtors‟ cycle remained at 9 days (of gross sales) to that of in 2006-07.16 crores in 2006-07 to Rs. Net working capital decreased to Rs. 7.557 crores in 2008-09. 4. 1. Working Capital Turnover Ratio = Net Sales / Net Working Capital PARTICULARS 2005-06 2006-07 2007-08 2008-09 2009-10 Page 70 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.549. 398 crores in 2008-09. 664 crores.16 crores as on 31 March 2008 from Rs. 198 crores from Rs. 337 crores in 2007-08 to Rs.

24 -8.83 2008-09 2009-10 -20.34 11.00 14.202.594.53 8.34 -4.37 -8.015.10 425.79 18.001.00 40.79 -11.57 -4.00 10.Working Capital Management-Comparative Analysis NET SALES NET WORKING CAPITAL WORKING CAPITAL TURNOVER RATIO 6. Increase in current liabilities is because of increase in acceptances from subsidiary companies and customers.53 43.29 14. Current Ratio: A liquidity ratio that measures a company’s ability to pay Short term obligations .180.00 2005-06 2006-07 2007-08 Working Capital Turnover Ratio Interpretation Working capital turnover ratio of JSW Steel is showing negative values for past three years.24 14.44 198.062.00 -10.25 -2.925.00 -1. Current Ratio = Current Assets / Current Liabilities Particulars 2005-06 2006-07 2007-08 2008-09 2009-10 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. It is really not good for a company to have a negative working capital turnover ratio. BHUBANESWAR Page 71 .420. Also it is not showing any sign of improving as it is fluctuating between -5 and -10.00 30.83 50.00 0. It is because their net working capital is negative.00 20. It will affect the daily liquidity requirements of the company.83 -11.48 -2.32 43.

63 2.4 1. Quick Ratio = (Current Assets – Inventories) / Current Liabilities PARTICULARS 2005-06 2006-07 2007-08 2008-09 2009-10 Page 72 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. Because of the negativity of net working capital.31 1.Working Capital Management-Comparative Analysis CURRENT ASSETS CURRENT LIABILITIES CURRENT RATIO 2. current ratio falls below one.41 2.557. Quick Ratio: An indicator of a company’s Short term liquidity .61 5.320.64 7.752379722 0.6 0.729414883 1.54 4.12 1.086704469 Interpretation The interpretations given for working capital turnover ratio suit current ratio also.09 3.75 4. The quick ratio measures a company’s ability to meet its Short term obligations with its most liquid assets.73 Current Ratio 1.287.183305174 1.485.18 2. BHUBANESWAR .2 1 0. the better the position of the company.559.2 0 2005-06 2006-07 2007-08 2008-09 2009-10 0.21 0.102. Increase in current liabilities is because of increase in acceptances from subsidiary companies and customers as part of expansion projects.8 0. The higher the Quick Ratio.37 0.745.086.621.631.89 0.52 7.612876974 0.4 0. Standard value for current ratio is 2 and JSW has to take the initiatives to increase the current ratio.

549.00 2005-06 2006-07 2007-08 2008-09 2009-10 0.745.20 0.64 Interpretation The quick ratio has decreased over the last 5 years due to considerable increase in Current Liabilities which increased on account of increase in acceptances.280.34 5.60 0.621.54 1.39 Quick Ratio 0.631.78 2.39 0.60 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.784.320.23 2.29 2009-10 15.559.793.Working Capital Management-Comparative Analysis CURRENT ASSETS INVENTORIES CURRENT LIABILITIES QUICK RATIO 2.800.02 1.193.78 0.77 7.485. Stock Turnover Ratio: A ratio showing how many times a company inventory is sold or replaced over a period.37 4. BHUBANESWAR Page 73 .011.915.63 1.89 0.90 0.557.16 4.30 0.37 0.261.82 2006-07 6.12 0.70 0.41 967.52 2.051.34 0.35 2.318.40 0.05 1.64 3.50 0.21 0.79 2007-08 9.92 833.287.086.64 2.10 0.26 2008-09 12.41 924.102.80 0.585.42 7. Stock Turnover Ratio = Cost of Goods Sold / Average Stock Average Stock =Opening stock +Closing stock / 2 PARTICULARS COST OF GOODS SOLD AVERAGE STOCK 2005-06 5.37 0.67 2.31 0.

In spite of the increase in inventory from Rs. the Company has hired independent agencies for physical verification of such stocks.86 Interpretation: Stock turnover ratio of JSW Steel is showing a steady trend at 7. BHUBANESWAR .60 6. coke. The procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.01 7.11 6. Debtors Turnover Ratio: Debtor turnover ratio indicates the velocity of debt collection of firm. Debtor Turnover Ratio = Net Sales / Average Debtors PARTICULARS 2005-06 2006-07 2007-08 2008-09 2009-10 Page 74 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.40 6. The Company has maintained proper records of its inventories and no material discrepancies were noticed on physical verification. 833 Cr in FY 2006 to Rs.00 5. except for inventories lying with third parties where confirmations have been received.18 7. requiring technical expertise for establishing the quality and the quantification thereof.40 7.18 7.11 6. 2318 Cr in FY 2010.80 2005-06 2006-07 2007-08 2008-09 2009-10 6.31 7.01 7.20 6.86 Stock Turnover Ratio 7. As the Company‟s inventory of raw materials mostly comprises bulk materials such as coal.00 6. In simple words it indicates the number of times average debtors (Receivable) are turned over during year. they could manage the inventory turnover.20 7. pellets etc.Working Capital Management-Comparative Analysis STOCK TURNOVER RATIO 6.31 7.80 6. Inventories were physically verified during the year by the management at reasonable intervals.

93 8.00 15.21 35. company‟s sales and average debtors have increased drastically. Accounts payable turnover ratio is calculated by taking total purchase made from suppliers and dividing it by the average account payable amount during the same period.90 24.00 20.34 11.28 1.00 291.426.Working Capital Management-Comparative Analysis NET SALES AVERAGE DEBTORS DEBTOR TURNOVER RATIO 6.202.180. BHUBANESWAR Page 75 .70 37.21 867.28 39. Payables Turnover Ratio = Net Credit Purchase / Average Creditors Average Creditor = Opening Creditor +Closing Creditor / 2 PARTICULARS NET CREDIT PURCHASE AVERAGE CREDITORS 2005-06 3.44 243.381.594.34 38.23 604.643.51 1.87 Debtor Turnover Ratio 45.87 Interpretation: Debtor turnover ratio has shown a steady trend over the last 3 years which shows the company‟s efficient policy of collection from customers.48 480.10 247. Payables Turnover Ratio: A short term liquidity measures used to quantify the rate at which a company pays off its suppliers .25 367.386.34 2007-08 6.377.87 2006-07 4.00 40.00 0.93 39.77 38.21 35.00 30.58 2009-10 11.495. It is a good indicator of company‟s capacity to increase the sales without compromising on its collection policies.81 551.07 18. At the same time.89 2008-09 9.00 35.00 25.001.00 10.39 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.07 37.00 5.527.00 2005-06 2006-07 2007-08 2008-09 2009-10 24.21 14.420.

It is mandatory to keep the payables turnover ratio as lower as possible as it will increase the availability of cash for day to day activities.05 51.964.280.80 6.00 5.34 833.460.08 2009-10 10.60 6.40 6.79 1.40 7.065.735.Working Capital Management-Comparative Analysis PAYABLES TURNOVER RATIO 6.12 Page 76 raw material conversion period 3.39 6.58 38.99 12.58 which again increased to 6.26 96.48 Interpretation: JSW Steel‟s payables turnover ratio is high as compared industry ratio.51 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.58 6.46 87.800. The fact JSW has a negative working capital for last three years has to be read along with its high payables turnover ratio which will again reduce its liquidity.24 7.06 2.58 6.93.82 29.318.53 8.19 11.29 74. During 2008-09 it has come down to 6.20 6.39 7.62 16. BHUBANESWAR .64 11.00 5.27 5.40 41.48 6.24 7.433.01 16.05 3.40 22.32 80.14 31.69 123.82 967.112. OPERATING CYCLE Gross Operating Cycle (GOC) = RMCP + WIPCP + FGCP + DCP Net Operating Cycle (NOC) = GOC – CDP ITEMS raw material consumption raw material consumption per day raw material inventory RMCP cost of production cost of process per day work in progress inventory 2005-06 2006-07 2007-08 2008-09 8.02 88.17 8.80 2005-06 2006-07 2007-08 2008-09 2009-10 6.929.883.27 1.70 24.00 6.168.777.89 78.60 79.93 7.20 7.34 work in progress 4.79 13.93 Payables Turnover Ratio 7.60 7.

17 247.80 14.34 49. they are not able to reduce WIPHP.193.52 3.56 480.18 15.73 71.25 38.23 12.180.32 6.90 14.495.261.420. Finished Goods Holding Period (FGHP) is increasing constantly from FY 2006.51 26.00 31.63 1.19 finished goods 6.61 18.16 604. It is shown in the profit and loss accounts that the sales is increasing in every year.02 25.04 867.62 150. It is 16 days for FY 2010 which is very less and good.24 16.48 50.80 551.29 47. It indicates company applies new inventory management techniques to efficiently utilize its inventory and reduce the stock of inventory.13 5.386. At the same time they reduce RMHP.74 102.44 3. The company has to implement some techniques to reduce WIPHP as they do for raw material.) Interpretation :  Because of increase in raw material consumption per day.87 56.48 8.85 9.426.58 54.21 18. It means that the company gets the payment within 9 days of the credit sales to Page 77    REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.06 1. Increase in FGHP may be because of increase in sales.793.28 11.67 44.09 57. But it has increased in last three consecutive years.001.32 127. Debtors Collection Period (DCP) stands at 9 days for last three years which is a good number.58 12.19 4.41 Cr which arising out of trial run production.96 109.28 31.89 48.77 9.87 243.10 17.73 53. If they can increase sales without increasing finished goods.70 112.81 9.784.84 12.202.377.74 63.36 11. 101.80 10.21 10.72 291.04 1.28 9. BHUBANESWAR .05 35. Raw Material Holding Period (RMHP) has come down to 79 days during FY 2010 from 96 days in FY 2006. it would be appreciable.39 51.915.54 315.41 Collection period creditors deferral period (Note*: Finished goods of 2008-09 excludes Rs.21 734.527.643.92 14.46 9.Working Capital Management-Comparative Analysis WIPCP cost of goods sold cost of goods sold per day finished goods inventory FGCP credit sales at cost sales per day debtors DCP credit purchase purchase per day creditors CDP GROSS OPERATING CYCLE NET WORKING CYCLE 6.381.54 561.18 6.41 18.10 101.51 11.63 2.49 15.44 23.54 3.85 216. Work in Progress Holding Period (WIPHP) is only three days during 2009-10 which is a good number.594.70 9.89 367.

Working Capital Management-Comparative Analysis

customers. This satisfies the liquidity requirements of the company. In spite of the increase in sales, they could maintain DCP. It shows company‟s efficient collection policy and its business relationship with customers.  Creditor‟s Deferral Period (CDP) stands around 50 days for last five years. Even though the credit purchase has increased in these years, there is no increase in CDP. The company should try to increase CDP as its purchases are increasing. It will increase the availability of cash for working capital. During FY 2010, Net Operating Cycle (NOC) has increased to 57 days from 47 days during FY 2009. It is because of decrease in CDP. So the company should increase CDP to reduce NOC.

DATA ANALYSIS OF SAIL
REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS, BHUBANESWAR Page 78

Working Capital Management-Comparative Analysis

NET WORKING CAPITAL
CURRENT ASSETS Inventories Sundry Debtors Cash & Bank Balances Interest Received / Accrued Loans Claims Recoverable Contractors & Suppliers Income Tax Paid in Advance / Recoverable Export Incentive Receivable Others Deposits TOTAL (A) CURRENT LIABILITIES Sundry Creditors Advances Security Deposits Interest Accrued but not due Liability Towards Investor Education and Protection Fund 2,427.36 536.26 232.30 375.82 11.60 2,545.07 631.68 257.76 198.79 7.43 2,985.24 643.49 243.09 115.64 8.89 4,156.77 565.64 431.20 95.58 10.03 6,232.36 699.28 517.08 401.12 11.00
Page 79

2005-06 6,210.06 1,881.73 6,172.64 85.48 254.14 455.62 115.18 1,763.13 22.49 306.32 116.94 17,383.73

2006-07 6,651.47 2,314.75 9,609.83 152.56 306.83 623.50 116.56 10.50 107.07 350.95 134.60 20,378.62

2007-08 6,857.23 3,048.12 13,759.44 273.08 372.67 779.26 158.99 11.62 58.56 464.16 534.49 26,317.62

2008-09 10,121.45 3,024.36 18,228.53 1,014.47 434.34 860.70 102.87 67.07 16.27 394.60 246.21 34,510.87

2009-10 9,027.46 3,493.90 22,436.37 780.34 472.19 1,450.84 104.67 140.84 41.00 433.52 700.03 39,081.16

REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS, BHUBANESWAR

Working Capital Management-Comparative Analysis

Other Liabilities PROVISIONS Gratuity Accrued Leave Taxation Pollution and Peripheral Development Exchange Fluctuation Proposed Dividend Tax on Dividend Employee Benefits Wage Revision Mines Closure / Afforestation Others TOTAL (B) NET WORKING CAPITAL (A-B)

1,608.36

1,757.47

2,404.57

2,454.17

3,076.02

2,289.75 1,223.82 1,939.75 86.44 13.95 309.78 43.45 776.30 342.52 142.12 68.56 12,428.14 4,955.59

1,718.20 1,371.43 44.32 83.11 0.00 619.56 105.29 795.18 512.58 223.96 77.15 10,948.98 9,429.64

718.16 1,346.70 38.18 89.05 0.00 743.47 125.54 872.21 2,459.66 351.05 53.81 13,198.75 13,118.87

573.17 1,602.08 364.01 99.73 0.00 536.95 91.26 1,070.18 4,552.94 467.29 50.60 17,121.60 17,389.27

89.26 1,979.71 2.71 112.92 16.43 702.17 116.62 1,276.72 1,243.22 607.01 64.90 17,148.53 21,932.63

(All Figures are in Rs. Cr) Graph showing Current Assets, Current Liabilities and Net Working Capital

REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS, BHUBANESWAR

Page 80

The decrease in finished/semi-finished inventories by 20% was due to decrease in quantity and valuation rate on account of reduction in both cost of production or Net Sales Realisation. raw material inventory by Rs.3248 crore was mainly on account of increase in sundry creditors for capital works.87 17389.873 crore. advances from customers. Inventories increased mainly on account of increase in semi/finished inventory by Rs. security deposits etc. Net Working Capital also has increased consistently over the last five years. there was increase in raw material inventory by Rs.1157 crore and stores & spares inventory by Rs. taxation and wage revision.1.46 crore. The Current Liabilities has also increased but the rate of increase of Current Liabilities is less than the increase in Current Assets.64 13118. However. Increase in current liabilities by Rs.27 21932. BHUBANESWAR Page 81 .22 crore.183 crore and stores & REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. 2008-09 The inventory has increased by 47%.63 CURRENT ASSETS CURRENT LIABILITIES NET WORKING CAPITAL Interpretation The graph clearly indicates that the Current Assets of SAIL has increased over the last five years following a linear trend. 2009-10 During this year inventory has been decreased by 10% compared to previous year.1.The stores & spares inventory was reduced by 1% and raw material inventory had increased marginally by 2%. The provisions were decreased by Rs.59 9429.Working Capital Management-Comparative Analysis 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 2005-06 2006-07 2007-08 2008-09 2009-10 4955.3239 crore mainly on account of decrease in provision for gratuity. The inventories decreased mainly on account of reduction in semi/finished inventory by Rs.

railways. The increase of Rs. dividend and tax on dividend. wage revision. etc. The increase was mainly on account of loans to employees and advances for operational supplies. in terms of number of days of turnover. 1250 crore to a separate Gratuity Fund constituted during the previous year. Raw materials inventory was at 37 days consumption as on 31.2. employees. Loans and Advances increased by Rs 730 crore. Increase in current liabilities by Rs 1003 crore were mainly on account of increased level of operations and employees related year-end dues. Increase in current liabilities by Rs.03. While there were increase in provisions on account of mines afforestation / restoration / closure costs.03. the debtors increased from 22 days as on 31.2008. wage revision. The reduction was mainly on account of decrease in advances recoverable from contractors and suppliers.03. deposits with port trust. Loans and Advances reduced by Rs. Despite increase in sales turnover. excise authorities. In terms of number of days.1. stores and spares inventory was almost at the same level of 31. REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.03. BHUBANESWAR Page 82 . The increase in inventory of finished/semi-finished products by 12% was on account of valuation at increased cost of production. the inventory of finished/semi-finished products reduced to 32 days as on 31. taxation. the sudden meltdown of world economy during the middle of the year resulted in lower sales and accumulation of stocks.Working Capital Management-Comparative Analysis spares inventory by Rs.312 crore was mainly on account of increase in sundry creditors for capital works. Also. 733 crore in net debtors was mainly on account of increase in turnover.2008 against 33 days as on 31.2008 as against 49 days consumption as on 31. However.258 crore. 2007-08 The inventory has increased by 3% this year. Increase in stores & spares inventory by 10% was due to price escalations and procurement for major repairs to be carried out in various plants.03.610 crore mainly on account of increase in provision for accrued leave. Increase in stores & spares inventory was partly due to price escalations and partly due to procurement for major repairs to be carried out in various plants. security deposits etc. there was marginal reduction in net debtors. Increase in finished/semi-finished inventories was due to increase in quantity and valuation rate on account of increase in cost of production and Net Sales Realization.03.03.2007 to 24 days as on 31.209 crore.2007.2007. overall increase was marginal due to reduction in provision for gratuity on account of transfer of Rs.2007. The provisions were increased by Rs. In terms of number of days of turnover.

PERCENTAGE CHANGE IN WORKING CAPITAL CURRENT ASSETS Inventories Sundry Debtors Cash & Bank Balances Interest Received / Accrued Loans Claims Recoverable Contractors & Suppliers Income Tax Paid in Advance / Recoverable Export Incentive Receivable Others Deposits TOTAL (A) CURRENT LIABILITIES Sundry Creditors Advances Security Deposits 9.18 79.40 0.85 17. Inventory of Iron and Steel (including by-products) has increased by Rs.98 36.46 24.22 -14.60 -0.989 crore.40 10.47 20.57 15.75 109.26 297. Raw Materials by Rs.09 crore.66 -39.11 23.09 136.08 -23.23 2007-08 3.19 -72.97 133.Working Capital Management-Comparative Analysis 2006-07 The increase of Rs.85 1.30 1.49 16.10 17. Loans and Advances increased by Rs 369.00 21.87 -5.53 23.20 -99.14 2008-09 47.53 2006-07 7.09 31.94 31.99 152.08 14.05 4.76 -61. advances for operational supplies etc.73 44. 400 crore and Stores and Spares by Rs.88 45.38 49.96 2.92 Page 83 2005-06 47.24 -12. BHUBANESWAR .59 6. 314 crore.276 crore.10 77. 1.02 crore in net debtors was mainly on account of increase in turnover.32 13.57 1.79 10.01 55.48 271. 2005-06 Working capital has increased mainly due to increase in inventory by Rs.08 8.67 -45.13 -1.40 376.68 78.10 29.13 2009-10 -10.99 -53.20 16.31 32. export incentives recoverable.86 184.96 17.30 477. 1.78 32.55 10.71 68. 433.68 43.24 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.00 9.23 22.81 15.69 39.93 23.31 4.73 36.45 -35. The increase was mainly on account of loans to employees.63 19.

69 29.20 -1.87 2008-09 43.85 100.82 2.26 13.62 -58.16 26.Working Capital Management-Comparative Analysis Interest Accrued but not due Liability Towards Investor Education and Protection Fund Other Liabilities PROVISIONS Gratuity Accrued Leave Taxation Pollution and Peripheral Development Proposed Dividend Tax on Dividend Employee Benefits Wage Revision Mines Closure / Afforestation Others TOTAL (B) NET WORKING CAPITAL (A-B) -28.80 -13.57 0.69 20.19 18. BHUBANESWAR .72 32.77 27.17 22.10 -35.65 36.90 28.59 12.32 2.75 -30.24 -24.10 33.55 -84.35 12.38 21.70 85.27 2009-10 40.26 0.45 13.551.33 -58.27 -41.25 20.72 -3. or how efficiently the management is using its working capital to generate sales revenue .150.12 9.55 39.955.00 142.30 -72.99 -27.13 FINANCIAL RATIOS Working Capital Turnover Ratio: Ratio that shows the number of times the working capital is converted into revenue in an accounting period .95 9.25 23.90 90.429.08 17.64 2007-08 39. Working Capital Turnover Ratio = Net Sales / Net Working Capital PARTICULARS NET SALES NET WORKING CAPITAL 2005-06 27.79 19.12 -20.97 29.77 159.59 2006-07 33.23 9.06 -97.83 19.28 -58.35 23.57 4.53 -11.96 853.118.65 57.923.719.40 11.31 22.79 -29.85 7.389.67 9.34 23.00 1.43 23.00 19.837.96 12.06 319.30 -47.508.78 -27.33 1.82 -17.57 -99.30 2.67 25.72 -0.69 379.932.63 Page 84 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.15 20.86 56.11 -5.23 30.43 49.

62 10.87 17.40 2006-07 20.081. BHUBANESWAR Page 85 .60 3. Current Ratio: A liquidity ratio that measures a company’s ability to pay Short term obligations.60 3.00 5.383.00 4.378.428.86 2007-08 26.01 2.00 3.60 2.48 1.62 Interpretation: The graph clearly indicates that the working capital turnover ratio has decreased over the last five years.16 17.14 1.85 5.00 2005-06 2006-07 2007-08 2008-09 2009-10 3.317.73 12.01 2.198.Working Capital Management-Comparative Analysis WORKING CAPITAL TURNOVER RATIO 5.75 1. It is an indication that the company is not utilizing its current assets in an efficient manner. This means that the firm is not being efficient in employing its working capital. There is also a piling up of cash and bank balanced which again shows company is not using its cash.948. Current Ratio = Current Assets / Current Liabilities PARTICULARS CURRENT ASSETS CURRENT LIABILITIES CURRENT RATIO 2005-06 17.00 0.00 2.53 2.62 3.510.62 13.148.99 2008-09 34. This is due to the drastic increase in net working capital which is a result of increase in current assets.98 1.48 1.28 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.00 1.02 2009-10 39.121.85 Working Capital Turnover Ratio 6.

027.121.948.42 2009-10 39.651.317.081.98 1. The higher the Quick Ratio.00 0.73 6.121.28 Interpretation: The interpretations given for working capital turnover ratio suit current ratio also.25 2007-08 26.62 6.86 1.06 12.00 2005-06 2006-07 2007-08 2008-09 2009-10 1.47 10.02 2. the better the position of the company. The quick ratio measures a company’s ability to meet its Short term obligations with its most liquid assets.383.23 13. current ratio falls below one.00 1.510. Because of the negativity of net working capital.62 6.Working Capital Management-Comparative Analysis Current Ratio 2. Quick Ratio: An indicator of a company’s Short term liquidity.198.40 1.46 17.50 0.857.47 2008-09 34.87 10.378.75 1. so it is favorable for company but in 2009 to 2010 the ratio is increasing more than standard level to 2.14 0.53 1.428.148. BHUBANESWAR Page 86 .60 1.99 2.45 17.50 2. Standard value for current ratio is 2 and in 2008 to 2009 SAIL is meeting with standard level of 2 .28 so company may face problem to meet its obligations .50 1.210.16 9.75 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. Quick Ratio = (Current Assets – Inventories) / Current Liabilities PARTICULARS CURRENT ASSETS INVENTORIES CURRENT LIABILITIES QUICK RATIO 2005-06 17.90 2006-07 20.

60 0.75 Interpretation: Quick ratio is also higher as net working capital is high.Working Capital Management-Comparative Analysis Quick Ratio 2. Interpretations for current ratio apply for quick ratio also.48 6.907.34 8.80 0. It is observed that company is in position to meet its obligations.57 2009-10 35.60 1.255.34 4.75 during 2009-10 from 1. Stock Turnover Ratio = Cost of Goods Sold / Average Stock Average Stock = Opening Stock +Closing Stock / 2 PARTICULARS COST OF GOODS SOLD AVERAGE STOCK STOCK TURNOVER RATIO 2005-06 25.00 0.20 1.20 0.42 1.73 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.07 9.33 3.34 2007-08 32. BHUBANESWAR Page 87 .80 2006-07 27.027.430.25 1.00 1.754.47 1.00 2005-06 2006-07 2007-08 2008-09 2009-10 0.779.215.80 1.90 1.40 0.77 4. Higher the ratio the better is the capacity of business to meet its current obligations Stock Turnover Ratio: A ratio showing how many times a company inventory is sold or replaced over a period.42 during 2008-09. Quick ratio has increased to 1.594.764.78 2008-09 38.35 4.69 6.83 5.489.38 4.40 1.

568004109 3.17 2007-08 39.44 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.45 2. During 2009-10.260. BHUBANESWAR Page 88 . Company may improve the efficiency of its supply chain in this aspect.24 16. Debtors Turnover Ratio: Debtor turnover ratio indicates the velocity of debt collection of firm.150.09 14.727625587  Interpretation Stock turnover ratio of SAIL is very less. It seems like the company is very conservative in its approach to stock of inventories.775543168 4.84 12.895.73 times.24 14. It was around 4.508.036.44 14.21 2009-10 40.798850707 4. It is strongly recommended that the company has to decrease stock of inventory thereby increase its stock turnover.57 1. it has decreased to 3.837.5 times during the period of 2005-06 to 2008-09.551.69 2006-07 33. Debtor Turnover Ratio = Net Sales / Average Debtors Average Debtor = Opening Debtor +Closing Debtor /2 PARTICULARS NET SALES AVERAGE DEBTORS DEBTOR TURNOVER RATIO 2005-06 27.73 2008-09 43.Working Capital Management-Comparative Analysis Stock Turnover Ratio 6 5 4 3 2 1 0 2005-06 2006-07 2007-08 Stock Turnover Ratio 2008-09 2009-10 4.681.923.08 3. The company has to take some stringent actions to increase turnover.098.38 3. It is a serious matter of concern. In simple words it indicates the number of times average debtors (Receivable) are turned over during year. The sole reason for less stock turnover is high stock of inventory.339679385 4.12 2.

44 times during 2009-10.43586929 Interpretation: Debtor turnover ratio has been coming down since 2006-07.698.29 2008-09 21. which in fact increase the current assets. It is also a reason for the high current ratio.21168287 12. Delay in collection shows a large number for sundry debtors in balance sheet.86 2006-07 14.04 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. So it is recommended that the company should tighten its collection policies and bring up the debtor turnover. It is a good number.68931291 16.Working Capital Management-Comparative Analysis Debtor Turnover Ratio 18 16 14 12 10 8 6 4 2 0 2005-06 2006-07 2007-08 2008-09 2009-10 14. but in today‟s highly competitive industrial environment. But in the case of SAIL debtor turnover is reducing year by year. Payables Turnover Ratio = Net Credit Purchase / Average Creditors Average Creditor =Opening Creditor +Closing Creditor / 2 PARTICULARS NET CREDIT PURCHASE 2005-06 13.64 2009-10 18.662.828. It was at 12. Accounts payable turnover ratio is calculated by taking total purchase made from suppliers and dividing it by the average account payable amount during the same period.763.73404216 14.532.97 2007-08 15. Payables Turnover Ratio: A short term liquidity measures used to quantify the rate at which a company pays off its suppliers . Debtor turnover of 12 times means that on an average company takes 30 days to collect payment from debtors.1674165 14. companies are trying to collect its receivables fast. BHUBANESWAR Page 89 .

62 3.16 5.61 times during 2009-10 from 6. BHUBANESWAR .91 2.) Interpretation Payables turnover ratio has decreased to 3. OPERATING CYCLE Gross Operating Cycle (GOC) Net Operating Cycle (NOC) ITEMS = RMCP + WIPCP + FGCP + DCP = GOC – CDP 2005-06 2006-07 2007-08 2008-09 2009-10 Page 90 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.00 1.572.00 6.62 6.62 3.61 Payables Turnover Ratio 7.00 2005-06 2006-07 2007-08 2008-09 2009-10 3.Working Capital Management-Comparative Analysis AVERAGE CREDITORS PAYABLES TURNOVER RATIO 2.00 0.765. So iron ore purchased is excluded from net credit purchase.61 Payables Turnover Ratio 5.94 2.317.22 5.486.) (Note*-SAIL has captive mines for iron ore and coal. it would be appreciated.94 5.11 times during 2008-09.All the purchases are assumed to be credit purchases.00 3.11 (Note*.11 5. It is very interesting that although the credit purchase has decreased. It procures iron ore from these mines.00 4. company could delay its payments to creditors thereby decreasing payables turnover.43 5.168. If the company can keep this lower payables turnover.00 5. This may be due to the decrease in sales. But it is not completely dependent on its mines for coal and its imported.01 6.91 5.00 2.

90 196.46 67.95 18.09 253.586.27 39.33 1.30 15.960.Working Capital Management-Comparative Analysis Raw Material Holding Period raw material consumption raw material consumption per day raw material inventory RMHP 12.255.63 34.90 220.77 174.89 24.726.763.44 24.43 633.78 3.19 Work in Progress Holding Period cost of production cost of process per day work in progress inventory WIPHP 21.17 9.18 48.33 199.168.53 188.532.32 35.24 5.274.62 99.55 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.57 196.52 2.57 77.72 4.93 160.71 296.594.64 60.74 Debtors Collection Period credit sales at cost sales per day debtors DCP credit purchase purchase per day creditors CDP GROSS OPERATING CYCLE NET WORKING CYCLE 27.681.91 36.210.79 6.23 94.489.39 13.91 37.895.486.83 41.130.09 87.150.062.59 38.14 38.52 3.33 21.91 255.08 119.317.036.369.77 8.48 77.75 2.881.098.51 33.33 13.29 38.828.24 25.765.027.923.69 89.23 2.40 28.38 152.38 112.907.07 99.87 6.01 58.40 43.38 79.12 94.275.90 43.43 43.12 52.42 13.60 3.34 152.325.84 28.662.366.62 249.754.83 69.64 3.64 189.24 22.05 1.70 Finished Goods Holding Period cost of goods sold cost of goods sold per day finished goods inventory FGCP 25.337.22 60.764.508.46 32.35 174.43 60.01 2.10 1.260.076.92 405.837.39 58.31 33.03 41.99 40.09 24.779.572.698.86 14. BHUBANESWAR Page 91 .34 107.21 27.43 34.16 64.340.119.78 6.05 2.86 3.64 3.22 17.215.34 5.86 Creditors Deferral Period 13.41 45.430.03 31.04 51.92 55.18 20.45 109.476.15 2.239.84 5.551.97 15.83 9.

Despite of the decrease in credit sales during 2009-10.Working Capital Management-Comparative Analysis Interpretation  Because of its large stock of inventory. It is again recommended to reduce the stock. NOC did not come down. DCP has increased to 29 days. It is the highest in last five years. It seems a very high number which means the company keeps its finished goods idle for 52 days after the production. During FY 2010. SAIL‟s NOC is very high.      REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. Net Operating Cycle (NOC) was 197 days during 2009-10. But it has decreased to half during FY 2010. The company has to reduce its further and make it a single digit number. Raw Material Holding Period (RMHP) of SAIL was at 199 days during 2009-10. Creditors Deferral Period has increased to 99 days from 59 days in FY 2009. Finished Goods Holding Period (FGHP) is increasing year by year and stood at 52 days during 2009-10. It would be appreciated if the company can keep this momentum in future. A solution for all of these is to reduce the stock of inventory. Despite the increase in CDP. BHUBANESWAR Page 92 . It shows that the company‟s collection policies are not strong. Comparing to other companies in steel industry. Since FY 2006. Work in Progress Holding Period (WIPHP) has increased to 33 days in during FY 2009. Debtors Collection Period (DCP) shows a steady trend for last five years. It was because of the drastic increase in RMHP during this period.

Working Capital Management-Comparative Analysis Comparative analysis COMPARISON OF OPERATING CYCLE FOR THE YEAR 2009-10 PARTICULARS TATA STEEL JSW SAIL RMHP 145.70 FGCP 24.06 99.71 ICP 172.86 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.08 79.96 99.62 GOC 179.61 52.51 28.79 199.74 DCP 7.84 3.50 51.57 NOC 12.76 109.15 16.95 CDP 167.27 57.18 15.19 WIPHP 2.09 296.58 267. BHUBANESWAR Page 93 .13 196.70 9.

But JSW Steel‟s average stock of raw material was less compared to Tata Steel. BHUBANESWAR Page 94 . To a certain extent. Lesser the holing period higher the turnover of inventory. Tata Steel has the lowest work in progress inventory during FY 2010. 18 crores inventory per day.00 100.00 50. JSW Steel has the lowest RMHP. At the same period. Tata steel‟s WIPHP was slightly less than 3 days while JSW Steel‟s value was 3. Tata Steel also could achieve by the reduction of RMHP from 222 days to 145 days during the same period. 29 crores per day during FY 2010. Tata steel keeps the lowest Work in Progress Holding Period (WIPHP).00 200.00 RMHP WIPHP FGCP DCP CDP ICP GOC NOC TATA STEEL JSW SAIL Interpretation:  Among Raw Material Holding Period (RMHP) of the three companies. It had a RMHP of 152 days during FY 2006 and increased to 199 days. SAIL is not showing a good RMHP.18. Their RMHP is only 80 days compared to 145 days of Tata Steel and 199 days of SAIL. Although its work in progress inventory has increased drastically during last five years. SAIL is far away from its competitors with a WIPHP of 16 days. Comparison between JSW Steel and Tata Steel shows that JSW Steel had consumed raw material of Rs. It is REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.Working Capital Management-Comparative Analysis 300.00 150. RMHP of JSW indicates that the company has efficient inventory policies They are successful in reducing RMHP to 80 days which was at 96 days during 2005-06.00 250. it keeps WIHP around 2. This helped them to achieve low RMHP.00 0. Tata Steel consumed only Rs.  Among the three companies.

JSW Steel had reduced WIPHP to 2 days during FY 2008 from 6. It is a good indication to the implementation of efficient distribution activities.Working Capital Management-Comparative Analysis an indication of company‟s efficiency to convert its raw material into finished goods in a short period of time. But in the case of Tata Steel.  JSW Steel has the lowest Finished Goods Holding Period (FGHP) of 16 days followed by Tata steel at 24 days and SAIL at 52 days. Tata Steel‟s DCP is 7. Companies should follow moderately strict collection policies so that it gets the payments in short period of time and reduce the bad debts. Tata Steel and JSW Steel have comparatively less Debtors Collection Period(DCP). this gap is 12 at the same time it is 47 and 38 for Tata Steel and JSW Steel respectively. The only reason for short DCP is the strict collection policies. But it‟s increasing last two years and reached 3 days during FY 2010. It is evident that from the ratio of sales to debtors. For SAIL. During FY 2010. But Tata Steel does not face such a fluctuation in WIPHP. BHUBANESWAR Page 95 .It is strongly recommended SAIL has to reduce its work in progress inventory stock thereby reduce WIPHP. JSW Steel and SAIL pay its suppliers after REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. The lowest FGHP indicates the efficiency of JSW‟s supply chain. So it may be concluded that Tata Steel is little better than JSW steel in FGHP.5 days during FY 2006. FGHP of JSW Steel has increased from 10 days during FY 2006 to 16 days during FY 2010. Among the three companies studied in this project. Among the three companies analysed. it has decreased to 24 days from 33 days during the same period. SAIL‟s DCP is very high at 28. The capacity of the company to make the payment late increases the cash availability of the company. It helps them to decrease idle time of finished goods. SAIL held its finished goods in its warehouses for 52 days which is increasing continually since FY 2006. Tata Steel stands far beyond the other two companies. They should reduce the idle time of its finished goods.  Creditors Deferral Period (CDP) is the time taken by the company to settle its payments to the creditors. company should collect receivables as soon as possible.7 days and that of JSW Steel‟s is 9.9 days during 2009-10.  To ensure the availability of cash for the day to day activities. It has a CDP of 167 days which indicates the capacity of the company to use the creditors‟ money for another purposes for 167 days.5 days.

But when comes to Net Operating Cycle (NOC).83 1.73 2.61 TATA STEEL JSW SAIL 1.73 DEBTOR TURNOVER RATIO 46.Another noticeable factor is that the three companies are maintaining CDP around a particular time period. No high deviation from this period has been observed in the last five years performance of these companies.01 6. BHUBANESWAR Page 96 .75 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.  Coming to Gross Operating Cycle (GOC).39 1. But average creditors of JSW is less than Tata. Tata achieve this by its higher CDP. A comparison between Tata Steel and JSW Steel shows that credit purchase of JSW Steel is higher than Tata Steel.871 0. Tata Steel could reduce NOC to 12 days from 99 days during 2005-06.73 37. It indicates Tata Steel pays its suppliers after longer period than JSW Steel after the purchase.71 -8.86 3.15 6. Tata Steel has the best NOC COMPARISON OF FINANCIAL RATIOS FOR THE YEAR 2009-10 PARTICULARS WORKING CAPITAL TURNOVER RATIO 7.28 . JSW Steel is the best with 109 days. It‟s very difficult to keep a NOC near to a one digit. Tata Steel is the best with NOC of just 12 days. Analysis shows that JSW Steel has the best ICP (100 days) followed by TATA Steel (172 days) and SAIL (268 days). So among the companies analysed.144 0.93 3.Working Capital Management-Comparative Analysis 52 and 100 days respectively.  Inventory Conversion Period (ICP) is the duration for which inventory is held in the company in any of its form.87 12.44 PAYABLES TURNOVER RATIO 2.85 CURRENT RATIO QUICK RATIO STOCK TURNOVER RATIO 7.

Tata Steel Working capital turnover ratio has been decreased to 7. BHUBANESWAR Page 97 . Reduction in working capital turnover is not a good sign. The reason for increase in net working capital is the increase in cash and bank balances and loans and advances. Decrease in working capital turnover is because of the increase in net working capital.Working Capital Management-Comparative Analysis Comparision Chart 50 40 30 TATA STEEL 20 JSW SAIL 10 0 Working Capital Turnover Ratio Current Ratio Quick Ratio Stock Turnover Ratio Debtor Turnover Ratio Payable Turnover Ratio -10 Interpretation Comparing the Working Capital Ratio of three companies.65 in 2008-09. Tata Steel has a huge increase in working capital turnover in 2008-09 but could not keep the momentum to FY 10. it was found that this ratio was maximum for Tata Steel at 18.5 and 7.71 times in 2009-10 compared to 22. REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.7 times for last two consecutive years followed by SAIL and JSW Steel.

28 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. This is due to the drastic increase in net working capital which is a result of increase in current assets. It is because their net working capital is negative.Working Capital Management-Comparative Analysis JSW Steel Working capital turnover ratio of JSW Steel is showing negative values for past three years. It will affect the daily liquidity requirements of the company. It is really not good for a company to have a negative working capital turnover ratio.02 2009-10 1.86 2007-08 0. There is also a piling up of cash and bank balanced which again shows company is not using its cash.119 0.98 0.09 1.73 2. Current Ratio: PARTICULARS Tata Steel JSW Steel SAIL 2005-06 1. BHUBANESWAR Page 98 .40 2006-07 1.18 1. This means that the firm is not being efficient in employing its working capital.61 2. It is an indication that the company is not utilizing its current assets in an efficient manner.75 1.99 2008-09 1. SAIL The working capital turnover ratio has decreased over the last five years.144 0.11 1. Increase in current liabilities is because of increase in acceptances from subsidiary companies and customers. Also it is not showing any sign of improving as it is fluctuating between -5 and -10.18 1.

Working Capital Management-Comparative Analysis Current Ratio 2.5 1.5 2.75 0.02 0 2005-06 2006-07 2007-08 2008-09 2009-10 Interpretation Among the three companies analyzed. The decrease in current assets is accounted to the decrease in cash and bank balances which was caused by the acquisition of Corus.144 Tata Steel JSW Steel SAIL 1.73 1. Tata Steel Current ratio of Tata Steel is moving good as it is increasing from the year 2008-09 after its decrease in 2007-08.5 0.86 1.18 1.98 0. Increase in current liabilities is because of increase in acceptances from subsidiary companies and customers as part of expansion projects.11 1 1. REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. BHUBANESWAR Page 99 . Tata Steel has a current ratio of more than 1.61 0.09 0. current ratio falls below one. Current ratio in FY 2009 and 2010 are above 1.18 1.119 1.4 1.28 2 1. Decrease in current ratio to 0. JSW Steel Because of the negativity of net working capital. JSW Steel‟s current ratio is less than 1 for last three years. JSW has to take the initiatives to increase the current ratio.99 2.98 was because of the decrease in current assets which resulted in a negative net working capital. SAIL‟s current ratio is matched with standard value of 2.

68 0.4 0.2 0 2005-06 2006-07 2007-08 2008-09 2009-10 0.85 0. As the company has a current ratio of more than 1. Quick Ratio: PARTICULARS Tata Steel JSW Steel SAIL 2005-06 0.28 in last five years. BHUBANESWAR Page 100 .66 0.37 1.47 1.34 Interpretation REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.75 Quick Ratio 2 1.871 0.871 1.66 0.68 0.78 .80 0.4 1. it may be concluded that the company is not managing its working capital properly. It can deploy its current assets for investments.39 0.37 0.39 1. Or it may avail more current liabilities to reduce current ratio.64 0.40 to 2. it was increasing .8 1.8 0.42 2009-10 .25 2007-08 0.90 2006-07 0.78 0.25 Tata Steel JSW Steel SAIL 1.34 1.6 1.75 0.47 2008-09 0.2 1 0.6 0.28 during FY 2010.80 0. to increase production or for new developments. But during FY 2006 to 2009.9 0.85 0.64 1.Working Capital Management-Comparative Analysis SAIL The current ratio has decreased to 2.42 1.

18 4. JSW Steel The quick ratio has decreased over the last 5 years due to considerable increase in Current Liabilities which increased on account of increase in acceptances.34 2007-08 6.01 6. Interpretations for current ratio apply for quick ratio also. quick ratio is too low and it‟s too high for SAIL.31 4. In FY 2008. The reasons given above for the decrease in current ratio are applicable for quick ratio also. Tata Steel Quick ratio follows the same path of current ratio with an increase in FYs 2009 and 2010 after a decrease in FY 2008.11 4. Quick ratio has increased to 1.42 during 2008-09.57 2009-10 7. For JSW Steel.01 4. BHUBANESWAR Page 101 . It is observed that company is in position to meet its obligation.80 2006-07 6.Working Capital Management-Comparative Analysis Tata Steel shows the best quick ratio among the companies analysed. SAIL Quick ratio is also higher as net working capital is high.21 6. Higher the ratio the better is the capacity of business to meet its current obligations Stock Turnover Ratio : PARTICULARS Tata Steel JSW Steel SAIL 2005-06 6.80 7. there is a 40% increase in inventory due to the increase in volume and prices.86 3.78 2008-09 7.73 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.04 7.75 during 2009-10 from 1.50 7. The only factor which can make a change in quick ratio from current ratio – inventory – does not show any drastic change in the past five years.

21 7. During the course of our audit.86 4. It shows the efficient management of inventory.04 7.8 4.34 4.01 6.18 6.57 3.04 is good in terms of liquidity. Tata Steel Tata Steel shows a constant increase in stock turnover till 2008-09. SAIL has very low stock turnover around 4. Stock turnover of 7.31 6. There is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchases of inventory and fixed assets and the sale of goods and services. any major weakness has not been observed in such internal control system. JSW Steel REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.73 Tata Steel JSW Steel SAIL Interpretation: Stock turnover ratio evaluates the efficiency of the firm in managing its inventory.8 7. It means they are able to convert their stock into sales 7 times in an year. Turnover of 7.78 4.11 7.Working Capital Management-Comparative Analysis Stock Turnover Ratio 8 7 6 5 4 3 2 1 0 2005-06 2006-07 2007-08 2008-09 2009-10 6.01 times in 200910 is also a good value as it is above 7.01 6.5 7. BHUBANESWAR Page 102 .Both Tata Steel and JSW Steel have good stock turnover ratio around 7 times for last five years. This ratio indicates the number of times inventory has been converted into sales during the year.

21 2009-10 46.23 38. Company may improve the efficiency of its supply chain in this aspect.87 12.52 39. 2318 Cr in FY 2010. In spite of the increase in inventory from Rs.17 2007-08 33.73 2008-09 41. JSW Steel physically verifies inventories during the year by the management at reasonable intervals.Working Capital Management-Comparative Analysis Stock turnover ratio of JSW Steel is showing a steady trend at 7.98 35. the Company has hired independent agencies for physical verification of such stocks. requiring technical expertise for establishing the quality and the quantification thereof.07 14. The company has to take some stringent actions to increase turnover. As the Company‟s inventory of raw materials mostly comprises bulk materials such as coal. 833 Cr in FY 2006 to Rs. coke.93 14.73 37. It is strongly recommended that the company has to decrease stock of inventory thereby increase its stock turnover. it has decreased to 3. they could manage the inventory turnover. During 2009-10. pellets etc.34 16.73 times. SAIL Stock turnover ratio of SAIL is very less. Debtor Turnover Ratio: PARTICULARS Tata Steel JSW Steel SAIL 2005-06 27.5 times during the period of 2005-06 to 2008-09. except for inventories lying with third parties where confirmations have been received.69 2006-07 29. The sole reason for less stock turnover is high stock of inventory. BHUBANESWAR Page 103 .01 24. It was around 4.21 14.44 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.

e. This ratio tells us the number times the firm receives payments from its debtors. BHUBANESWAR Page 104 . It is a marvelous turnover many companies dreaming to achieve.52 41.21 33. It is an indication of stringent collection methods followed by Tata Steel.8 days after the sales on an average. It increases the cash balance of the company and keeps the liquidity.07 37. Another fact is that debtor turnover ratio is increasing continuously last 5 years.69 16. Also.73 12.21 27.87 46.93 35. Tata Steel Debtor turnover ratio of 46.17 14.01 24. REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.73 times in 2009-10 means Tata Steel collects the cash immediately after giving the delivery i.23 38. 7. they keep only a small portion that is around 4% as provision for bad debts.44 Interpretation: Tata Steel has the best debtor turnover ratio among the three companies.73 14..Working Capital Management-Comparative Analysis Debtor Turnover Ratio 50 45 40 35 30 25 20 15 10 5 0 2005-06 2006-07 2007-08 2008-09 2009-10 14.34 29.98 Tata Steel JSW Steel SAIL 39.

which in fact increase the current assets. It is a good indicator of company‟s capacity to increase the sales without compromising on its collection policies. It is a good number.10 6.94 2007-08 1. It is also a reason for the high current ratio.24 5.93 3.44 times during 2009-10.58 6.62 2008-09 2. SAIL Debtor turnover ratio has been coming down since 2006-07. It was at 12.96 7.48 5. Delay in collection shows a large number for sundry debtors in balance sheet. Debtor turnover of 12 times means that on an average company takes 30 days to collect payment from debtors. company‟s sales and average debtors have increased drastically.15 6. Payables Turnover Ratio: PARTICULARS Tata Steel JSW Steel SAIL 2005-06 2.61 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. But in the case of SAIL debtor turnover is reducing year by year.72 6. BHUBANESWAR Page 105 .91 2006-07 2. At the same time. but in today‟s highly competitive industrial environment.Working Capital Management-Comparative Analysis JSW Steel Debtor turnover ratio has shown a steady trend over the last 3 years which shows the company‟s efficient policy of collection from customers.36 7. So it is recommended that the company should tighten its collection policies and bring up the debtor turnover.11 2009-10 2. companies are trying to collect its receivables fast.39 5.

62 5.58 6.15 JSW Steel SAIL 6.96 2. Tata Steel Payables turnover ratio of Tata Steel is an exceptional case. BHUBANESWAR Page 106 .61 times in FY 2010.36 1.24 7. They manage this turnover for last five REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.91 7. It is just slightly greater than two times. This shows that they pay creditors only two times in a year.11 5. but it shows a sudden decrease to 3.72 2.93 6.Working Capital Management-Comparative Analysis Payable Turnover Ratio 8 7 6 5 Tata Steel 4 3. JSW Steel has a turnover around 6 times and SAIL has around 5 times.48 6.39 5.1 2.94 Interpretation: In payables turnover ratio also.61 3 2 1 0 2005-06 2006-07 2007-08 2008-09 2009-10 2. Tata Steel is the bestwith a turnover just above 2 times for last five years.

93.58 which again increased to 6. BHUBANESWAR Page 107 . Debtor turnover is around 40 times in a year and payables turnover is only two times! It clearly shows the competitive advantage Tata Steel has over its suppliers and customers. This may be due to the decrease in sales.61 times during 2009-10 from 6. The study understands the liquidity strength of Tata Steel when the payables turnover is read along with debtor turnover.11 times during 2008-09. it would be appreciated. REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. During 2008-09 it has come down to 6.Working Capital Management-Comparative Analysis years. It is very interesting that although the credit purchase has decreased. company could delay its payments to creditors thereby decreasing payables turnover. It is mandatory to keep the payables turnover ratio as lower as possible as it will increase the availability of cash for day to day activities. It helps them to keep the cash with them for a long period and it can be used for other activities. JSW Steel JSW Steel‟s payables turnover ratio is high as compared industry ratio. The fact JSW has a negative working capital for last three years has to be read along with its high payables turnover ratio which will again reduce its liquidity. If the company can keep this lower payables turnover. SAIL Payables turnover ratio has decreased to 3.

Some of these costs and benefits may be hard to quantity in practice. BHUBANESWAR Page 108 . We have seen that the management of capital requires an evaluation of both the cost and the benefits associated with each element. Some assessment must be in order to try and optimize the user of funds within a business.Working Capital Management-Comparative Analysis CONCLUSION AND RECOMMENDATION CONCLUSION We have identified and examined the main elements of working capital. These techniques vary in their sophistication. We have examined various techniques for management of working capital. some REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.

The company has primarily been operating on cash drawn from the market and reaping full benefits of its brand name. while other adopts a more objective. inventory which constitutes an important component of working capital in a steel manufacturing company has also been managed well. There should be a proper co-ordination between working capital group and its related department i. The company has a well built supply chain and all its processes of inventory maintenance are SAP linked. RECOMMENDATIONS 1. It has a competent control system in place for managing stores. Its efficiency in receivable and deferral management is reflected in the constantly decreasing operating cycle. quantitative approach. inventory etc.Working Capital Management-Comparative Analysis really heavily on management judgments. Adequate planning is required for procurement of store items. New and advanced concept must be introduced in inventory control management. REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. the conversion period of raw material need to be worked upon. 2. Tata steel maintains sound position interns of working capital. 3. debtors. spares and finished goods. However.e. BHUBANESWAR Page 109 . Nevertheless there is scope for improvements in raw material management. This is evident from the high inventory turnover in comparison to the industry average.

LIMITATIONS Data Are Confined to Annual Report: The analysis of financial ratios is done on the basis of data available in the annual report of” TATA STEEL. 5. and they are not calculating Industrial Average for the Year 2009-10. Limited Coverage for the Company:Mostly data is from steel Producing Companies. So the effect of unforeseen demands of working capital should be factored in. 6. The essence of effective working capital management is proper cash flow forecasting. This has avoided centpercent accurate result. Data Are Confidential:There are many data which are confidential and cant exposed to the public.”Hence. BHUBANESWAR Page 110 . JINDAL STEEL AND TATA STEEL. Details of working capital should be available at the department level. Advance payments should be avoided. Accounting Principle Are Different:REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS. market cycles. loss of a prime customer and actions by competitors. If at all advance payments are required. Hence a major part of important information is not available. Therefore analysis was possible within the domestic industries. And only a few companies‟ data are available like SAIL. it should be against securities like banks guarantee etc.Working Capital Management-Comparative Analysis 4. only a limited exposure is available to make the report. These are not accessible for analysis. so that efficiency can be analyzed at departmental level. This should take into account the impact of unforeseen events.

co.html http://www.com www. 2007.sail.tatasteel. has not been made public. BIBLIOGRAPHY          B P RADHAKRISHAN.php?tag=investor http://www. Limited Data Of The Year 2009-10:Since the annual report of the “TATA STEEL” For the Financial Year 2009-10. BREALEY MYERS 2003.in/investor.moneycontrol. Boom in India’s Iron and steel industry.com/investors/annual-reports. 2009. So only few ratios were been calculated as per the data available to us from the website. New Delhi: Vikash Publishing house Pvt Ltd. Financial Management. BHUBANESWAR .marti-tech.aspx http://www.php?tag=company-background http://www.Working Capital Management-Comparative Analysis It has been difficult to calculate and analyze the ratio of foreign companies.in/aboutus.com Page 111 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.com/investors/annual-report-2009-10/index. http://www. because their accounting policies are different compare to Indian financial accounting principles.sail. Current Science Vol 92. New Delhi: Tata McGraw Hill publishing house.co. The Indian companies follow the Indian “GAAP”where as Foreign Companies follow the US GAAP.jindalsteel. NO 9 I M PANDEY. Principles of cororate finance.

Working Capital Management-Comparative Analysis   http://www. BHUBANESWAR Page 112 .com/details.asp?articleID=3541 ANNEXTURE REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.pk/articles www.accountancy.com.azom.

75 2006-07 3121.77 1098.27 12414.083.95 -1074.17 16357 1074.80 6.08 (1.23 4038.74 7.65 4647.48 -73.1 0 5499.00) 73.18 81.49 2009-10 5.6 -1078.826.Working Capital Management-Comparative Analysis Cost Sheet of Tata Steel Cost Sheet of TATA Steel PARTICULARS Raw material consumption Salaries & Wages Freight & Handling charges Depreciation (+)Excise duty PRIME COST Operation & Expenses (-)Commission.4 -32.27 358.74 2.94 11183.59 5068.93 -0.89 16428.09 5930.80 Page 113 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.226.08 11556.21 52.91 2305.71 -80.33 -82.88 -52.83 1117.28 -64.58 -61.48 1.40) 17. BHUBANESWAR .361.62 450.56 80.75 10088.54 -1 71.81 1251.95 28.5 6990.49 16489.93 9464.93 -28.38 64.44 819.022.53 12466.42 -23.03 (1.08 -1000.32 775.94 -71.53 2008-09 5709.25 61.52 1589.45 1078.87 -1361.08 446.813.8 32.71 11621.19 834.63 6606.75 10207. discount & Rebate (-)Provision for wealth taxes (+)O/S of WIP (-)C/S of WIP FACTORY COST (+) O/S of FG (+)Purchases of FG (-)C/S of FG COST OF PRODUCTION (+)Commission to selling agents COST OF GOODS SOLD PROFIT 2005-06 2368.65) 17.48 1.85 169.24 1000.97 23.6 6213.13 10.494.08 -0.01 82.88 887.494.412.17 (158.22 656.31 5051.141.71 2007-08 3429.29 93.17 -0.62 10007.48 11963.46 1454.74 7.17 17.18 7.51 1004.3 1351.527.61 38.23 973.377.27 1.357.361.

315.214.31 6.5 -335 381.152.73 11.44 -112.021.02 19.99 173.65 5292.23 8.61 1.65 -308.508.95 1 1.79 313.69 -343.76 12.16 878.49 118.28 24.83 6413. debts and adv (+)INTEREST (-)Expenditure (-)Other income TOTAL DIFFERENCE(PROFITTOTAL) 0.9 -236.39 17552.7 -175.693. BHUBANESWAR Page 114 .11 -853.Working Capital Management-Comparative Analysis SALES 15139.315.67 -482.02 -433.98 NOT CONSIDERED IN COST SHEET (+)Provision for wealth taxes (+)Provision for D.27 510.97 0.62 -254.65 -16 1.00 6.50 7.8 0.77 25.845.40 -326.38 7.30 REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS.76 -241.

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