Summer Project Report: Working Capital Management and Ratio Analysis at Tata Steel

SUMMER PROJECT REPORT
ON
WORKING CAPITAL MANAGEMENT AND
RATIO ANALYSIS
At
TATA STEEL
Submitted in Partial fulfillment of the Master of business administration
(Finance) at Bhadrak autonomous College, bhadrak
BY
ARUP JYOTI MOHANTY
Roll No – 18MBA052, Session- 2018-2020
Under the guidance of:
Asst. Finance Manager. M.R. TAPAN KUMAR HOTA
TATA STEEL KALINGA NAGAR,JAJPUR ROAD,ODISHA
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APPROVAL SHEET
This is to certify that summer project entitled “Working capital management and
Ratio analysis” at Tata Steel has been prepared by Arup jyoti mohanty in partial
fulfilment of the requirement for the award of Master of business administration
(Finance) at Bhadrak autonomous college, bhadrak.
The study embodies data collected, analyzed & compiled by the researcher under
the guidance of the Summer Internship Coordinator & there by approved as
indicating the proficiency of the researcher.
Summer Internship Coordinator (Finance)
DECLARATION
I hereby declare that the project report entitled “Working capital analysis and
Ratio analysis” has been prepared by me during the period from 22 th May to 17th
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June 2019 under the guidance of Mr. TAPAN KUMAR HOTA (Asst. Finance
Manager) , Tata Steel Ltd., Kalinganagar, jajpur road, odisha .
I also declare that the project has not been submitted nor shall it be submitted in
future to any other University or Institution for the award of any other degree or
diploma.
ARUP JYOTI MOHANTY
Date: 17.06.2019
Place: JAJPUR
ACKNOWLEDGEMENT
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The fundamental characteristic of summer internship program lies not just in the successful
completion of a given project but also in the positive expansion of the professional business person inside a
student.
I would like to extend my gratitude to Mr. Tapan kumar Hota (Asst finance manager) for giving
me opportunity to work in such an important sphere and sharing his vision and experience.
And also 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.
CONTENT
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S. No TOPIC PAGE NO
1. EXECUTIVE SUMMARY 06
2. OBJECTIVE OF STUDY 07
3. RESEARCH METHODOLOGY 07
4. COLLECTION OF DATA 08
5. COMPANY PROFILE 09
6. SWOT ANALYSIS 15
7. WORKING CAPITAL 16
8. NET WORKING CAPITAL 25
9. FINANCIAL RATIOS OF TATA STEEL 28
10. COMPARITIVE ANALYSIS OF TATA STEEL, 38
SAIL, JSW
11. FINANCIAL RATIOS OF TATA STEEL, SAIL, JSW 48
12. RECOMMENDATION 84
13. CONCLUSION 85
EXECUTIVE SUMMARY
Different businesses will have different working capital characteristics. There are 3 main aspects to these
differences:
a) Holding inventory
b) Taking time to pay suppliers and other accounts payable
c) Allowing customers (accounts payable) time to pay
a) Food supermarkets and other retailers receive most of their sales in the form of cash, credit card or
debit card. However, they will buy on credit from suppliers. They will therefore have the benefit of
significant cash holdings which they may chose to invest.
b) A wholesaler supplies other companies and is likely to buy and sell mainly on credit. The flow of
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cash will have to be managed carefully. Such a company may have to rely on short-term borrowings and
overdrafts.
c) Small companies with a limited trading record may find it difficult to obtain trade credit. At the same
time customers will expect to receive the normal credit period to settle accounts.
Working capital is the capital required for maintenance of day-to-day business

operations. The present day competitive market environment calls for an efficient management of working
capital. The reason for this is attributed to the fact that an ineffective working capital management may force
the firm to stop its business operations, may even lead to bankruptcy. Hence the goal of working capital
management is not just concerned with the management of current assets & current liabilities but also in
maintaining a satisfactory level of working capital. Holding of current assets in substantial amount
strengthens the liquidity position & reduces the riskiness but only at the expense of profitability. Therefore
achieving risk-return trade off is significant in holding of current assets. While cash outflows are predictable
it runs contrary in case of cash inflows. Sales program of any business concern does not bring back cash
immediately. There is a time lag that exists between sale of goods & sales realization. The capital
requirement during this time lag is maintained by working capital in the form of current assets. The whole
process of this conversion is explained by the operating cycle concept.
Working capital management involves the relationship between a firm's short-

term assets and its short-term liabilities. The goal of working capital management is to ensure that a firm is
able to continue its operations and that it has sufficient ability to satisfy both maturing short-term debt and
upcoming operational expenses. The management of working capital involves managing inventories,
accounts receivable and payable, and cash.
There are many ratios that can be calculated from the financial statements pertaining to
a company's performance, activity, financing and liquidity. Some common ratios include the price-earnings
ratio, debt-equity ratio, earnings per share, asset turnover and working capital.
OBJECTIVES OF THE STUDY
TATA STEEL has been managing the various aspect of working capital through continuous efforts over
a long period of time.
The present study is trying to investigate the different aspects of working capital
management at TATA STEEL. Working capital is generally the net difference between the total assets
and the liabilities of the company. So an attempt to understand as to how the company manages the
working capital has been done.
In my project work we are trying to identify the various systematic processes in

managing the working capital.
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The study is trying to identify the various liquidity, profitability, solvency and the
turnover positions of the company as a tool of performance which will lead us to identify the financial
soundness of the company.
RESEARCH METHODOLOGY
The study will be based on the QUANTATIVE and QUALITATIVE approach of the working capital
management model at TATA STEEL needs a thorough study. With the help of RATIO ANALYSIS
& TREND ANALYSIS the result of the control mechanism can be summarised which will help in
identifying the effectiveness of the system under the preview. The data for the companies under
analysis has been taken from their respective websites of the companies. `MICROSOFT EXCEL has
been used as a tool for different calculation purposes and developing the charts.
COLLECTION OF DATA:
The data has been collected from the primary and secondary sources:
i) Primary data
(1) Department visit- discussion with the concerned person and interviewing officers in accounts
and finance sector.
(2) Observation method.
ii) Secondary data

(1) Annual reports
(2) Journals and magazines
(3) Study of files and office documents
(4) Websites of TATA STEEL and other steel companies.
CHAPTER: - 2 COMPANY PROFILE
The Tata Group of Companies has always believed strongly in the concept of collaborative growth, and this
vision has seen it emerge as one of India's and the world's most respected and successful business
conglomerates. The Tata Group has traced a route of growth that spans through six continents and embraces
diverse cultures. The total revenue of Tata companies, taken together, was 67.4 billion USD (around
Rs319,534 crore) in 2009-10, with 57 per cent of this coming from business outside India. In the face of
trying economic challenges in recent times, the Tata Group has steered India’s ascent in the global map
through its unwavering focus on sustainable development. Over 395,000 people worldwide are currently
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employed in the seven business sectors in which the Tata Group Companies operate. It is the largest
employer in India in the Private Sector and continues to lead with the same commitment towards social and
community responsibilities that it has shown in the past.
The Tata Group of Companies has business operations (114 companies and subsidiaries) in seven defined
sectors – Materials, Engineering, Information Technology and Communications, Energy, Services,
Consumer Products and Chemicals. Tata Steel with its acquisition of Corus has secured a place among the
top ten steel manufacturers in the world and it is the Tata Group’s flagship Company. Other Group
Companies in the different sectors are – Tata Motors, Tata Consultancy Services (TCS), Tata
Communications, Tata Power, Indian Hotels, Tata Global Beverages and Tata Chemicals.
Tata Motors is India’s largest automobile company by revenue and is among the top five commercial
vehicle manufacturers in the world. Jaguar and Landrover are now part of Tata Motor’s portfolio.
Tata Consultancy Services (TCS) is an integrated software solutions provider with delivery centres in more
than 18 countries. It ranked fifth overall, and topped the list for IT services, in Bloomberg Businessweek's
12th annual 'Tech 100', a ranking of the world's best performing tech companies.
Tata Power has pioneered hydro-power generation in India and is the largest power generator (production
capacity of 2300 MW) in India in the private sector.
Indian Hotels Company (Taj Hotels, resorts and palaces) happens to be the leading chain of hotels in India
and one of the largest hospitality groups in Asia. It has a presence in 12 countries in 5 continents.
Tata Global Beverages (formerly Tata Tea), with its major acquisitions like Tetley and Good Earth is at
present the second largest global branded tea operation.
When Jamshedji Tata gave shape to his vision of nation building by forming what was to become the Tata
Group in 1868, he had envisaged India as an independent strength – politically, economically and socially.
In order to become a force that the world has to reckon with, the Tata Group has always ventured into path
breaking territory and pioneered developments in industries of national importance.
As a policy, the Tata Group Companies promote and encourage economic, social and educational
development in the community, returning wealth to the society they serve. Two-thirds of the equity of Tata
Sons is held in philanthropic trusts that take care of endowments towards improvement programmes in these
spheres.
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Through the years, the Tata Group has been amongst the most prestigious corporate presences in the world
governed by its principles of business ethics. Its foray into international business has been recognised by
various bodies and institutions. Brand Finance, a UK based consultancy firm after a recent valuation of the
Tata brand at $11.22 billion has ranked it 65th among the world's top 100 brands. In Business
Week magazine's list of the 25 most innovative companies the Tata name appears 13th and The Reputation
Institute, USA has evaluated the Tata Group as the 11th in a global study of the most reputed companies.
In the road ahead, the Tata Group is focusing on integration of new technologies in its operations and
breaking new grounds in product development. The Eka supercomputer had been ranked the world’s fourth
fastest in 2008 and the launch of the Nano has been a benchmark for the auto industry specifically and the
economy in general.
With a holistic approach in all its business operations, a loyal and dedicated workforce and its rooted belief
in value creation and corporate citizenship, the Tata Group is always ready to realise its vision and
objectives. The challenges of the future will only help to enhance the Group’s performance and transform
newer dreams to reality.
FOUNDERS OF TATA STEEL
JAMSEDJI NUSSERWANJI TATA (1839 – 1904)

He was a visionary behind Tata Steel .He realized that India’s real
freedom depended upon its self-sufficiency in scientific knowledge,
power and steel, thus devoted the major part of his life, and his fortune
to three great enterprises-The Indian institute of Science at Bangalore,
the Hydro-electric schemes and the Iron & Steel Works at Jamshedpur
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.He envisaged and conceived a steel town to the very last detail, later to be named as Jamshedpur.
J.N. Tata had exhorted to his sons to pursue and develop his life’s work ; his elder son, Sir Dorabji
Tata(1859-1933) carried out the bequest with scrupulous zeal and distinction .Thus , even though it was
Jamshedji Tata who had envisioned the mammoth projects, it was in fact Dorabji Tata who actually brought
the ventures to existence and fruition. He was the first chairman of the gigantic Tata enterprises.
It was in 1907 that the village of Sakchi was discovered at the confluence of two rivers, Subarnarekha and
Kharkhai and the railways station of Kalimati .The Tata Iron and Steel Company was floated.
SIR DORABJI TATA (1859 – 1933)
Sir DorabjiTata(1859-1933) carried out the bequest with scrupulous zeal

and distinction.
Thus , even though it was Jamshedji Tata who had envisioned the
mammoth projects, it was in fact Dorabji Tata who actually brought the
ventures to existence and fruition. He was the first chairman of the gigantic
Tata enterprises.
BHARAT RATNA JEHANGIR RATANJI DADABHAI TATA (1904 – 1993)
J.R.D.Tata has been one of the greatest builders and personalities of modern
India in the twentieth century.
He assumed Chairmanship of Tata Steel at the young age of 34, but his
charismatic, disciplined and forward looking leadership over the next 50 years
led the Tata Group to new height of achievement, expansion and
modernization.
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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. He was never interested for Micro- Management. It was he who zeroed in on Sumant
Moolgaokar, the engineering genius who successfully steered our company for many years. He was a
visionary whose thinking was far ahead of his time, which helped Tata Group launching its own Airlines,
now known as Air India. He was awarded the country’s highest civilian honor, The Bharat Ratna in 1992.
RATAN NAVAL TATA

Ratan Navel Tata was born on December 28, 1937, in Surat. He is the
present Chairman of Tata Group, India’s largest conglomerate founded
by Jamshedji Tata and consolidated and expanded by later generation of
his family. He is one of the most well-known and respected industrialists
in India.
Tata was born into wealthy and famous family of Mumbai. His
childhood was troubled as his parents separated in the mid-1940s,
when he was about seven and his younger brother was five. His
mother moved out and both he and his brother were raised by his grandmother Lady Navarjbai.
Ratan Tata completed his degree in architecture with structural engineering from Cornell University in 1962,
and the Advance management Program from Harvard Business School in 1975. He joined the Tata Group in
December 1962 on the advice of JRD Tata. He was first sent to Jamshedpur to work at Tata steel. He
worked on the floor with the other blue collar employees, shoveling limestone and handling the blast
furnaces. He was appointed the Director In Charge of The National Radio & Electronics Company Limited
(Nelco) in 1971 and was successful in turning Nelco around.
LIST OF BOARD OF DIRECTORS
Board of Directors
Ratan N Tata Chairman
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Ms Mallika Srinivasan Independent Director
Mr O P Bhatt Independent Director
Mr Aman Mehta Independent Director
Mr Deepak Kapoor Independent Director
Dr Petrus Blauwhoff Independent Director
Mr Saurabh Agrawal Non-Executive Director
Mr V K Sharma Non-Executive Director
Mr T V Narendran CEO & Managing Director
Mr Koushik Chatterjee Executive Director (Finance & Corporate)
AWARDS AND RECOGNITIONS
CORPORATE AWARDS
 The Businessworld Most Respected Company Award 2011 in the Metals category.
 Recognised as India’s Most Admired Knowledge Enterprise (MAKE) Award Winner 2010 at the CII
KM India Summit 2010.
 Awarded Asia MAKE (Most Admired Knowledge Enterprise) Award 2010. This is the seventh time
that the Company was conferred with this honour.
 Tata Steel Europe awarded the Lifecycle Analysis Leadership Award 2010.
 Awarded Steel Industry Website of the Year 2010 by the World Steel Association.
 Tata Steel won the following awards at Asia’s Best Employer Awards hosted by the Employer
Branding Institute in Singapore in July 2010: the Award for Talent Management, the Award for Best
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HR Strategy in line with Business and the Award for Excellence in Training.
 Tata Steel Processing and Distribution Limited won the JIPM Award for 2009, awarded by the Japan
Institute of Plant Management, for excellence in TPM in plant operations.
 FE-EVI Green Business Leadership Award 2009-2010.
AWARDS FOR EXCELLENCE IN CORPORATE SOCIAL RESPONSIBILITY
 Conferred with the Safety and Health Excellence Recognition Award 2010 by the World Steel
Association.
 Awarded the Rashtriya Khel Protsahan Puruskar for the second consecutive year.
 Recognised in six of the seven categories at the annual awards function organised by the Joint
Committee on Safety, Health and Environment in Steel Industry (JCSSI).
 Awarded the CSR Excellence Award 2010 by ASSOCHAM, National CSR Committee and CSR
Organising Committee.
 Awarded the Businessworld-FICCI-SEDF Corporate Social Responsibility Award 2009.
 Awarded the Best Corporate Social Responsibility Practice at the 6th Social and Corporate
Governance Awards 2010 by the Bombay Stock Exchange.
 NatSteel awarded the Platinum HEALTH Award 2010 by the Singapore Health Promotion Board.
 NatSteel conferred with the Work-Life Excellence Award 2010 by the Singapore Ministry of
Manpower for the fourth consecutive time.
TOP COMPETITORS OF TATA STEEL

 Jindal Steel
 SAIL
 Essar steel
SOME OTHER MAJOR PLAYER IN THIS INDUSTRY

 Saw pipes
 Uttam steel Ltd
 Ispat industry Ltd
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 Mukand Ltd
 Mahindra Ugine steel co. Ltd
 Ushaispat Ltd
 Kalyani steel Ltd
 Electro steel casting Ltd
 Sesa Goa Ltd
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, high skilled labor.
WEAKNESS:
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 Low R & D Investment
 Unscientific mining method
 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
CHAPTER.3. WORKING CAPITAL MANAGEMENT
WHAT IS WORKING CAPITAL???
Working capital is the cash needed to pay for the day to day operation of the business. Working capital is a
financial metric which represents operating liquidity available to a business, organization or other entity,
including governmental entity. Along with fixed assets such as plant and equipment, working capital is
considered a part of operating capital. Net working capital is calculated as current assets minus current
liabilities.. It is a derivation of working capital, that is commonly used in valuation techniques such as DCFs
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(Discounted cash flows). If current assets are less than current liabilities, an entity has a working capital
deficiency, also called a working capital deficit.
A company can be endowed with assets and profitability but short of liquidity if its assets cannot
readily be converted into cash. Positive working capital is required to ensure that a firm is able to continue
its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming
operational expenses. The management of working capital involves managing inventories, accounts
receivable and payable, and cash.
Working capital management is a very important component of corporate finance because it directly
affects the liquidity and profitability of the company. It involves the decision of the amount and composition
of current assets and the financing of these assets. Efficient working capital management involves planning
and controlling current assets and current liabilities in a manner that eliminates the risk of inability to meet
due short term obligations on the one hand and avoid excessive investment in these assets on the other hand.
“Working capital” means that part of the total assets of the business that change from one form to
another form in the ordinary course of business operations.” Also known as revolving or circulating capital
or short-term financial management it is nothing but the difference between current assets and current
liabilities. The word “working capital” is made of two words- Working & Capital. The word „working‟
means day to day operation of the business, whereas the word „capital‟ means monetary value of all assets
of the business. Working capital is of major importance to internal and external analysis because of its close
relationship with the current day-to- day operations of a business.
Every business needs funds for two purposes.

 Long term funds are required to create production facilities through purchase of fixed assets such as
plants, machineries, lands, building, etc.
 Short term funds are required for the purchase of raw materials, payment of wages, and other day-
to-day expenses.
Working capital management deals with the management of these short term funds.
The constituents of current assets & current liabilities is as follows-
CURRENT ASSETS CURRENT LIABILITIES

1. INVENTORY 1. SUNDRY CREDITORS
a) RAW MATERIAL 2. TRADE ADVANCES
b)WORK-IN-PROGRESS 3. BORROWINGS (short term)
c) FINISHED GOODS a) COMMERCIAL BANKS
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d) OTHERS b) OTHERS
2. TRADE CREDITORS 4. PROVISIONS
3. LOANS AND ADVANCES
4.CASH AND BANK BALANCE
WORKING CAPITAL COMPRISES OF THE FOLLOWING:-
1. Cash and cash equivalents: - This most liquid form of working capital requires constant
supervision. A good cash budgeting and forecasting system provides answers to key questions such
as:
 Is the cash level adequate to meet current expenses as they come due?
 What is the timing relationship between cash inflow and outflow?
 When would cash need occur?
 When and how much bank borrowing will be needed to meet any cash shortfalls?
 When will repayment be expected and will the cash flow cover it?
2. Accounts receivables: - Many businesses extend credit to their customers.
 If you do, is the amount of accounts receivable reasonable relative to sales?

 How rapidly are receivables being collected?
 Which customers are slow to pay and what should be done about them?
3. Inventory: - Inventory is often as much as 50 percent of a firm's current assets, so naturally it

requires continual scrutiny.
 Is the inventory level reasonable compared with sales and the nature of your business?
 What's the rate of inventory turnover compared with other companies in your type of business?
4. Accounts payable: - Financing by suppliers is common in small business; it is one of the major
sources of funds for entrepreneurs.
 Is the amount of money owed suppliers reasonable relative to what you purchase?
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 What is your firm's payment policy doing to enhance or detract from your credit rating?
5. Accrued expenses and taxes payable: - These are obligations of your company at any given time
and represent a future outflow of cash.
THERE ARE TWO DIFFERENT CONCEPTS OF WORKING CAPITAL:-
1. Balance sheet or Traditional concept - It shows the position of the firm at certain point of time. It is
calculated in the basis of balance sheet prepared at a specific date. In this method there are two types of
working capital:-
a) Gross working capital - It refers to the firm’s investment in current assets. The sum of the current assets
is the working capital of the business. The sum of the current assets is a quantitative aspect of working
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capital. Which emphasizes more on quantity than its quality, but it fails to reveal the true financial position
of the firm because every increase in current liabilities will decrease the gross working capital.
b) Net working capital - It is the difference between current assets and current liabilities or the excess of
total current assets over total current liabilities. It is also can defined as that part of a firm’s current assets
which is financed with long term funds. It may be either positive or negative. When the current assets
exceed the current liability, the working capital is positive and vice versa.
2. Operating cycle concept - The duration or time required to complete the sequence of events right from
purchase of raw material for cash to the realization of sales in cash is called the operating cycle or working
capital cycle
Raw
material
Work-in-
Cash
progress
Operating
cycle
Debtors
Finished
and bills
goods
recievable
Sales
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The investment in working capital is influenced by four key events in the production & sales cycle of the
firm:
 Purchase of raw materials.

 Payment of raw materials.
 Sale of finished goods.
 Collection of cash for sales.
The firm begins with the purchase of raw materials which are paid after a delay which represents the
“accounts payable period”. The raw materials are then converted into finished goods which are then sold.
The time lag between the purchase of raw materials and the sale of finished goods is called the “inventory
period”. The time lag between the date of sales & the date of collection of receivables is the “accounts
receivable period”. The time lag between purchase of raw materials & the collection of cash for sales is
referred to as “operating cycle.” The time lag between payment for raw material purchases & the collection
of cash for sales is referred to as “cash cycle”.
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IMPORTANCE OF WORKING CAPITAL
The advantages of working capital or adequate working capital may be enumerated as below: -
1. Cash Discount:
If a proper cash balance is maintained, the business can avail the advantage of cash discount by
paying cash for the purchase of raw materials and merchandise. It will result in reducing the cost of
production.
2. It creates a Feeling of Security and Confidence:

The proprietor or officials or management of a concern are quite carefree, if they have proper
working capital arrangements because they need not worry for the payment of business expenditure
or creditors. Adequate working capital creates a sense of security, confidence and loyalty, not only
throughout the business itself, but also among its customers, creditors and business associates.
3. ‘Must’ for Maintaining Solvency and Continuing Production:

In order to maintain the solvency of the business, it is but essential that the sufficient amount t of
fund is available to make all the payments in time as and when they are due. Without ample working
capital, production will suffer, particularly in the era of cut throat competition, and a business can
never flourish in the absence of adequate working capital.
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4. Sound Goodwill and Debt Capacity:
It is common experience of all prudent businessmen that promptness of payment in business creates
goodwill and increases the debt of the capacity of the business. A firm can raise funds from the
market, purchase goods on credit and borrow short-term funds from bank, etc. If the investor and
borrowers are confident that they will get their due interest and payment of principal in time.
5. Easy Loans from the Banks:

An adequate working capital i.e. excess of current assets over current liabilities helps the company to
borrow unsecured loans from the bank because the excess provides a good security to the unsecured
loans, Banks favour in granting seasonal loans, if business has a good credit standing and trade
reputation.
6. Distribution of Dividend:
If company is short of working capital, it cannot distribute the good dividend to its shareholders in
spite of sufficient profits. Profits are to be retained in the business to make up the deficiency of
working capital. On the other contrary, if working capital is sufficient, ample dividend can be
declared and distributed. It increases the market value of shares.
7. Exploitation of Good Opportunity:

In case of adequacy of capital in a concern, good opportunities can be exploited e.g., company may
make off-season purchases resulting in substantial savings or it can fetch big supply orders resulting
in good profits.
8. Meeting Unseen Contingency:

Depression shoots the demand of working capital because sock piling of finished goods become
necessary. Certain other unseen contingencies e.g., financial crisis due to heavy losses, business
oscillations, etc. can easily be overcome, if company maintains adequate working capital.
9. High Morale:
The provision of adequate working capital improves the morale of the executive because they have
an environment of certainty, security and confidence, which is a great psychological, factor in
improving the overall efficiency of the business and of the person who is at the hell of fairs in the
company.
10. Increased Production Efficiency:

A continuous supply of raw material, research programme, innovations and technical development
and expansion programmes can successfully be carried out if adequate working capital is maintained
in the business. It will increase the production efficiency, which will, in turn increases the efficiency
and morale of the employees and lower costs and create image among the community.
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DISADVANTAGES OF EXCESSIVE WORKING CAPITAL
E v e r y b u s i n e s s c o n c e r n s h o u l d h a v e a d e q u a t e w o r k i n g c a p i t a l t o r u n i t s business
operations. It should have neither redundant or excessive working capital nor inadequate nor shortage
of working capital. Both excessive as well as short working capital positions are bad for any
business.
1. Excessive working capital means idle funds which earn no profits for the business and hence the business
cannot earn a proper rate of return on its investments.
2. When there is redundant working capital, it may lead to unnecessary purchasing and accumulation of
inventories causing more chances of theft waste and losses.
3. Excessive working capital implies excessive debtors and defective credit Policy which may cause higher
incidence of bad debts.
4. It may result into overall inefficiency in the organization.
5. When there is an excessive working capital relation with the banks and other financial institutions may
not be maintained.
6. Due to low rate of return on investments the value of shares may also fall
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DISADVANTAGES OF INADEQUATE WORKING CAPITAL
1) A concern, which has inadequate working capital, cannot pay its short-term liabilities
in time. Thus it will loose its reputation and shall not be able to get good credit facilities.
2) The firm cannot pay day-to-day expenses of its operations and it creates
inefficiencies, increases costs and reduces the profits of the business.
3) It becomes impossible to utilize efficiently the fixed assets due to non

- availability of liquid funds.
4 ) T h e r a t e o f r e t u r n o n i n v e s t m e n t s a l s o f a l l s w i t h t h e s h o r t a g e o f w o r k i n g capital.
NET WORKING CAPITAL
CURRENT ASSETS 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

STORES AND SPARE 505.44 557.67 612.19 623.76 716.18
PARTS
STOCK-IN-TRADE 1827.54 2047.31 2868.28 2453.99 3237.58
SUNDRY DEBTORS 631.63 543.48 635.98 434.83 428.03
INTREST ACCRUED 0.20 0.20 0.00 0.29 0.00
AND INVESTMENTS
CASH AND BANK 455.41 465.04 1590.60 3234.14 4141.54
LOANS AND 3055.73 2452.78 4330.43 3628.28 9553.19
ADVANCES
TOTAL(A) 6475.95 6066.28 10037.48 10375.29 18076.52
CURRENT 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

LIABILITIES
SUNDRY 3145.99 3243.42 3842.78 4086.65 4721.07
CREDITORS
SUBSIDIARY 102.61 115.74 1358.12 1514.30 1711.07
COMPANIES
INTEREST 47.11 231.05 506.68 676.66 679.31
ACCRUED BUT NOT
DUE
ADVANCE 198.28 226.03 297.37 334.99 293.84
24
RECEIVED FROM
THE CUSTOMER
UNCLAIMED 0.00 0.02 0.01 0.00 0.00
MATURED
DEPOSITS(DUE)
INTEREST 0.03 0.08 0.07 0.00 0.00
ACCRUED ON
UNPAID DIVIDENDS
AND UNCLAIMED
MATURED
DIVIDENDS(DUE)
UNPAID DIVIDENDS 23.37 29.33 33.08 39.44 41.26
APPLICATION 0.01 5.65 0.24 0.14 0.61
MONEY PENDING
REFUND
UNPAID MATURED 0.00 0.00 0.00 0.73 0.54
DIVIDENDS
UNPAID MATURED 2.59 1.73 1.03 0.00 0.00
DEPOSITS
UNPAID MATURED 1.76 1.79 0.14 0.00 0.00
DEBENTURES
INTEREST 1.45 0.42 0.34 0.18 0.13
ACCRUED ON
UNPAID DIVIDENDS
AND MATURED
DIVIDENDS
PROVISION FOR 49.31 0.00 0.00 0.00 0.00
RETIRING
GRATUITIES
PROVISION FOR 470.19 848.54 1143.08 1127.50 1601.75
EMPLOYEE
BENEFITS
PROVISION FOR 448.68 854.74 493.59 507.13 791.29
TAXATION
PROVISION FOR 18.37 19.12 19.12 2.12 3.88
FRINGE BENEFITS
PROPOSED 943.91 1278.40 1278.40 709.77 1151.06
DIVIDEND
TOTAL(B) 5453.66 6768.78 8974.05 8999.61 10995.81
NET WORKING 1022.29 (702.5) 1063.43 1375.68 7080.71

CAPITAL
25
PERCENTAGE CHANGE IN NET WORKING CAPITAL
CURRENT ASSETS 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

STORES AND 14.18 10.33 9.78 1.89 14.81
SPARE PARTS
STOCK-IN-TRADE 5.51 12.03 40.10 -14.44 31.93
SUNDRY DEBTORS 17.10 -13.96 17.02 -31.63 -1.56
CASH AND BANK 57.91 2.11 242.04 103.33 28.06
LOANS AND 147.46 -19.73 76.55 -16.21 163.30
ADVANCES
TOTAL(A) 242.16 -9.22 385.49 42.98 236.54
CURRENT 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

LIABILITIES
SUNDRY 24.15 3.10 18.48 6.35 15.52
CREDITORS
SUBSIDIARY 64.52 12.80 1073.42 11.50 12.99
COMPANIES
INTEREST 93.95 390.45 119.29 33.55 0.39
ACCRUED BUT NOT
DUE
ADVANCE 7.14 14.00 31.56 12.65 -12.28
RECEIVED FROM
26
THE CUSTOMER
PROVISION FOR 5987.65 0.00 0.00 0.00 0.00
RETIRING
GRATUITIES
PROVISION FOR 0.00 63.34 34.71 0.014 42.06
EMPLOYEE
BENEFITS
PROVISION FOR 79.44 90.50 -42.25 2.74 56.03
TAXATION
PROVISION FOR 675.11 4.08 0.00 -88.91 83.01
FRINGE BENEFITS
PROPOSED 31.19 26.19 7.33 -44.48 62.17
DIVIDEND
TOTAL(B) 6959.78 638.04 1232.01 -50.61 264.96
PERCENTAGE -6717.62 -647.26 -846.52 93.59 -28.42

CHANGE OF NET
WORKING
CAPITAL
(A-B)
FINANCIAL RATIOS
1. WORKING CAPITAL TURNOVER RATIO
It is a ratio that reflects the amount of working capital needed to maintain a given level of
sales. A high ratio indicates the firm is in a good liquidity position and vice-versa.
FORMULA = NET SALES

NET WORKING CAPITAL
PARTICULARS 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

NET SALES 17551.09 19693.28 24315.77 25021.98 29396.35
NET WORKING 1022.29 (702.5) 1063.43 1375.68 7080.71
CAPITAL
WORKING 17.17 -28.03 22.87 18.19 4.15
CAPITAL
TUNRNOVER
RATIO
27
40
working capital turnover ratio
20 22.87
17.17 18.19
4.15
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
-20
-28.03
-40
INTERPRETATION:
The net working capital of TATA STEEL Ltd. has been fluctuating over the years. A sharp decrease in the
working capital in the year 2015-2016, where the working capital was negative was mainly because of a
decrease in current assets.
As compared to the year 2017-2018 where the working capital ratio was 18.19, the ratio this year has fallen
down to 4.15. The reason for decrease can be accredited to the increase in the current assets such as
inventory, cash & bank balances and loans and advances that has increased tremendously this year. There
has been an increase in the sales and the production capacity this year. The raw materials consumption has
also increased by 13.64%.
2. CURRENT RATIO
The current ratio is used to evaluate a company’s overall short – term liquidity position. It
tells us whether a company is in a position to meet its obligations.
FORMULA = CURRENT ASSETS

CURRENT LIABILITIES
PARTICULARS 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

CURRENT 6475.95 6066.28 10037.48 10375.29 18076.52
ASSESTS
CURRENT 5453.66 6768.78 8974.05 8999.61 10995.81
LIABILITIES
CURRENT 1.19 0.90 1.12 1.15 1.64
RATIO
28
current ratio
1.8
1.6 1.64
1.4
1.2 1.19 1.15
1.12
1
0.9
0.8 current ratio
0.6
0.4
0.2
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
INTERPRETATION:
The ideal current ratio is considered to be 2:1. The current ratio has been increasing steadily over the years.
As compared to the previous year in 2017-2018 the ratio has increased to 1.64 in the year 2018-2019. The
reason for increase might be continuous investments in the current assets over the years.
3. QUICK RATIO
Quick ratio / Liquid ratio is an indicator of a company’s short – term solvency or liquidity
position. It is the relationship between liquid assets and liabilities. An asset is said to be liquid if it can be
converted into cash within a short period without loss of value.
FORMULA = CURRENT ASSETS – INVENTORY

CURRENT LIABILITIES
PARTICULARS 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

CURRENT 6475.95 6066.28 10037.48 10375.29 18076.52
ASSETS
INVENTORY 1827.54 2047.31 2868.28 2453.99 3237.58
CURRENT 4648.41 4018.97 7169.2 7921.3 14838.94
ASSETS-
INVENTORY
CURRENT 5453.66 6768.78 8957.05 8999.61 10995.81
LIABILTY
QUICK RATIO 0.85 0.59 0.80 0.88 1.34
29
QUICK RATIO
1.6
1.4 1.34
1.2
1
0.8 0.85 0.8 0.88
0.6 0.59
0.4 QUICK RATIO
0.2
0
INTERPRETATION:
The ideal standard in case of quick ratio is 1:1. And if it is more it is considered to be better. The idea behind
this is that for every rupee of current liabilities, there should be at least one rupee of liquid asset.
Quick ratio is thus a rigorous test of liquidity and gives a better picture of short term financial position of
the firm. As shown in the graph above, we can see that after a steep fall in the quick ratio from the year
2006-2007 to 2007-2008 there has been a steady increase in the quick ratio and for the year 2010-2011 the
ratio is 1.34 which signifies that the liquidity position of the firm has improved and this is because of
increase in the cash that is lying with the firm.
4. DEBTORS TURNOVER RATIO
Debtors Turnover Ratio or Receivables Turnover Ratio indicates the relationship

between net sales and average debtors. It shows the rate at which cash is generated by the turnover of
debtors.
FORMULA = AVERAGE DEBTORS

NET SALES
AVERAGE DEBTORS= (OPENING DEBTORS + CLOSING DEBTORS) / 2
PARTICULARS 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

AVERAGE 585.515 587.55 589.73 535.40 431.43
DEBTORS
NET SALES 17551.09 19693.28 24315.77 25021.98 29396.35
DEBTORS 29.98 33.52 41.23 46.73 68.13
TURNOVER
RATIO
30
DEBTORS TURNOVER RATIO
80
70 68.13
60
50 46.73
40 41.23
30 29.98 33.52
DEBTORS TURNOVER
20 RATIO
10
0
INTERPRETATION:
Debtors’ turnover ratio indicates the speed with which the amount is being collected from the debtors.
The higher the ratio the better it is, since it indicates the amount from the debtors is being collected more
quickly. The more quickly the debtors pay, the less risk from bad debts, and so lower is the expenses of
collection and increase in the liquidity of the firm. By comparing the debtors’ turnover ratio of the current
year with the previous year, it may be assessed whether the sales policy of the management is efficient or
not.
As shown in the graph above, there has been an increase in the ratio from 2014-2015 to
2018-2019 from 29.98 to 68.13 which shows that the sales management of the firm is quite efficient.
31
5. DEBT COLLECTION PERIOD
Days Sales Outstanding is a short – term (operating) Activity ratio which tells us about the
debtors holding time. The more the holding period the more risky it becomes for the company. A high debt
collection period indicates that the company is taking time to collect cash from its debtors. The cash is not
being collected on time which is not a good sign for the company, it is a red flag.
FORMULA = 365/ DEBTORS TURNOVER RATIO
PARTICULARS 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

DEBTORS 29.98 33.52 41.23 46.73 68.13
TURNOVER
RATIO
NO. OF DAYS 365 365 365 365 365
DEBT 12 11 9 8 5
32
COLLECTION
PERIOD
DEBT COLLECTION PERIOD

12
10
8
6 12 11
9 8
4 DEBT COLLECTION PERIOD
5
2
0
INTERPRETATION:
Debt collection period means the average number of days that the debtors take to get converted to cash. In
other words, credit sales are locked up in debtors for the number of days.
As we can see here, the debt collection period has come down from 12 days to 5 days which means that
the debtors get converted to cash in 5 days. An increase in the ratio indicates excessive blockage of funds
with the debtors which increases the chances of bad debts. In this case as we can see that there is a decrease
in the average collection period which indicates prompt payment by debtors which reduces the chances of
bad debts.
Therefore, from the above data it can be concluded that the company is in a better position and is
improving as compared to its previous years.
33
6. STOCK TURNOVER RATIO
The Inventory Turnover Ratio measures the efficiency of the firm’s inventory
management. A higher ratio indicates that inventory does not remain in warehouses or on the shelves but
rather turns over rapidly from the time of acquisition to sales. A lower inventory turnover ratio means
accumulation of inventories, over investment in inventory or unsalable goods.
FORMULA = COST OF GOODS SOLD

AVERAGE STOCK
AVERAGE STOCK= (OPENING STOCK+CLOSING STOCK)/2
PARTICULARS 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

COST OF 10174.97 11155.5 14928.65 15730.67 17471.83
GOODS SOLD
AVERAGE 1779.82 1937.43 2457.8 2661.14 2845.78
STOCK
STOCK 5.72 5.76 6.07 5.91 6.13
34
TURNOVER
RATIO
.
STOCK TURNOVER RATIO

6.2
6.13
6.1
6.07
6
5.9 5.91
5.8 STOCK TURNOVER RATIO

5.76
5.7 5.72
5.6
5.5
2014-20152015-20162016-20172017-20182018-2019
INTERPRETATION:
This ratio indicates the relationship between the cost of goods sold during the year and average stock kept
during that year. The ratio indicates whether the stock has been efficiently used or not. It shows the speed
with which the stock is turned into sales during the year.
The graph above shows that after an increase in the ratio from the year 2015-2016 to 2016-2017 (5.76-6.07)
there in the year 2017-2018(5.91) after which again a rise in the ratio in the year 2018-2019(6.13). A high
ratio is indicative that the stock is selling quickly.
35
7. PAYABLES TURNOVER RATIO
Although accounts payable are liabilities rather than assets, their trend is significant as they represent an
important source of financing for operating activities. The creditors turnover ratio is an important tool of
analysis as a firm can reduce its requirement of current assets by relying on supplier’s credit. This shows the
relationship between credit purchases and average accounts payable. Higher ratio shows that accounts are to
be settled rapidly whereas, low ratio reflects liberal credit terms granted by suppliers.
FORMULA- NET CREDIT PURCHASE

AVERAGE CREDITORS
AVERAGE CREDITORS= (OPENING CREDITORS+CLOSING CREDITORS)/2
PARTICULARS 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

NET CREDIT 2263.01 2353.80 6241.61 5215.42 6853.95
PURCHASE
AVERAGE 2840.01 3194.70 3543.10 3964.72 4383.86
CREDITORS
PAYABLES 0.79 0.73 1.76 1.31 1.56
36
TURNOVER
RATIO
PAYABLES TURNOVER RATIO

2 1.76
1.31 1.56
1.5
0.79 0.73
1
0.5 PAYABLES
0 TURNOVER RATIO
INTERPRETATION:
The ratio indicates the speed with which the amount is being paid to the creditors. A higher ratio is better
since it would indicate that the creditors are being paid more quickly and this increases the credit worthiness
of the firm.
Here, the graph above shows a steep fall in the ratio from the year 2016-2017(1.76) to 2017-2018(1.31) and
then again a rise to the year 2018-2019(1.56). The reason for the fall can be attributed to a decrease in the
net credit purchases in the year 2017-2018.
COMPARITIVE
ANALYSIS OF
“TATA STEEL”,
“SAIL”
37
&
“JSW”
SAIL
Steel Authority of India Limited (SAIL) is the leading steel-making company in India. It is a fully
integrated iron and steel maker, producing both basic and special steels for domestic construction,
engineering, power, railway, automotive and defence industries and for sale in export markets. SAIL is
also among the five Maharatnas of the country's Central Public Sector Enterprises.
SAIL manufactures and sells a broad range of steel products,

including hot and cold rolled sheets and coils, galvanised
sheets, electrical sheets, structural, railway products, plates,
bars and rods, stainless steel and other alloy steels. SAIL
produces iron and steel at five integrated plants and three
special steel plants, located principally in the eastern and
central regions of India and situated close to domestic sources
of raw materials, including the Company's iron ore, limestone
and dolomite mines. The company has the distinction of
being India’s second largest producer of iron ore and of
having the country’s second largest mines network. This
gives SAIL a competitive edge in terms of captive availability
of iron ore, limestone, and dolomite which are inputs for steel making.
38
SAIL's wide range of long and flat steel products are much in demand in the domestic as well as the
international market. This vital responsibility is carried out by SAIL's own Central Marketing
Organisation (CMO) that transacts business through its network of 37 Branch Sales Offices spread across
the four regions, 25 Departmental Warehouses, 42 Consignment Agents and 27 Customer Contact Offices.
CMO’s domestic marketing effort is supplemented by its ever widening network of rural dealers who
meet the demands of the smallest customers in the remotest corners of the country. With the total number
of dealers over 2000 , SAIL's wide marketing spread ensures availability of quality steel in virtually all the
districts of the country.
SAIL's International Trade Division ( ITD), in New Delhi- an ISO 9001:2000 accredited unit of CMO,
undertakes exports of Mild Steel products and Pig Iron from SAIL’s five integrated steel plants.
With technical and managerial expertise and know-how in steel making gained over four decades, SAIL's
Consultancy Division (SAILCON) at New Delhi offers services and consultancy to clients world-wide.
SAIL has a well-equipped Research and Development Centre for Iron and Steel (RDCIS) at Ranchi which
helps to produce quality steel and develop new technologies for the steel industry. Besides, SAIL has its
own in-house Centre for Engineering and Technology (CET), Management Training Institute (MTI) and
Safety Organisation at Ranchi. Our captive mines are under the control of the Raw Materials Division in
Kolkata. The Environment Management Division and Growth Division of SAIL operate from their
headquarters in Kolkata. Almost all our plants and major units are ISO Certified.
BACKGROUND & HISTORY
The Precursor
SAIL traces its origin to the formative years of an emerging nation - India. After independence the builders
of modern India worked with a vision - to lay the infrastructure for rapid industrialisaton of the country. The
steel sector was to propel the economic growth. Hindustan Steel Private Limited was set up on January 19,
1954.
Expanding Horizon (1959-1973)
Hindustan Steel (HSL) was initially designed to manage only one plant that was coming up at Rourkela. For
Bhilai and Durgapur Steel Plants, the preliminary work was done by the Iron and Steel Ministry. From April
1957, the supervision and control of these two steel plants were also transferred to Hindustan Steel. The
registered office was originally in New Delhi. It moved to Calcutta in July 1956, and ultimately to Ranchi in
December 1959.
The 1 MT phases of Bhilai and Rourkela Steel Plants were completed by the end of December 1961. The 1
MT phase of Durgapur Steel Plant was completed in January 1962 after commissioning of the Wheel and
Axle plant. The crude steel production of HSL went up from .158 MT (1959-60) to 1.6 MT. A new steel
39
company, Bokaro Steel Limited, was incorporated in January 1964 to construct and operate the steel plant at
Bokaro.The second phase of Bhilai Steel Plant was completed in September 1967 after commissioning of
the Wire Rod Mill. The last unit of the 1.8 MT phase of Rourkela - the Tandem Mill - was commissioned in
February 1968, and the 1.6 MT stage of Durgapur Steel Plant was completed in August 1969 after
commissioning of the Furnace in SMS. Thus, with the completion of the 2.5 MT stage at Bhilai, 1.8 MT at
Rourkela and 1.6 MT at Durgapur, the total crude steel production capacity of HSL was raised to 3.7 MT in
1968-69 and subsequently to 4MT in 1972-73.
Holding Company
The Ministry of Steel and Mines drafted a policy statement to evolve a new model for managing industry.
The policy statement was presented to the Parliament on December 2, 1972. On this basis the concept of
creating a holding company to manage inputs and outputs under one umbrella was mooted. This led to the
formation of Steel Authority of India Ltd. The company, incorporated on January 24, 1973 with an
authorized capital of Rs. 2000 crore, was made responsible for managing five integrated steel plants at
Bhilai, Bokaro, Durgapur, Rourkela and Burnpur, the Alloy Steel Plant and the Salem Steel Plant. In 1978
SAIL was restructured as an operating company.
Since its inception, SAIL has been instrumental in laying a sound infrastructure for the industrial
development of the country. Besides, it has immensely contributed to the development of technical and
managerial expertise. It has triggered the secondary and tertiary waves of economic growth by continuously
providing the inputs for the consuming industry.
JSW
JSW Group is one of the fastest growing business conglomerates with a strong presence in the core
economic sector. This Sajjan Jindal led enterprise has grown from a steel rolling mill in 1982 to a multi
business conglomerate worth US $ 9 billion within a short span of time.
As part of the US $ 15 billion O. P. Jindal Group, JSW Group has diversified interests in Steel, Energy,
Minerals and Mining, Aluminium, Infrastructure and Logistics, Cement and Information Technology.
On its road to growth and expansion, the Group is also conscious about its responsibility towards
environment and social development. Eco-efficiency is a matter of principle. Preventive measures for
damage to the environment are taken into account at the planning stage of production and growth.
JSW Foundation, an integral part of the Group, is the CSR wing, with a vision to create
socio economic difference in the fields of Education, Health and Sports, Community
Relationship/Propagation as well as Art, Culture and Heritage.
JSW Foundation plans and implements social development activities of the JSW group of companies. It is
an independent institution and is governed by a Board of Trustees who is drawn from the senior
management of the JSW group of companies. The Foundation is headed by Mrs Sangita Jindal while the
executive is headed by Shri Jugal Tandon in his capacity as CEO, Corporate Sustainability. A team of social
development professionals is based in Mumbai and at every location where JSW has its operations and
40
undertake community based activity in consultation with their respective managements. An Advisory Board
comprising of eminent NGO leaders has been constituted recently to render advice on social processes and
participatory planning and execution of projects.
A social development policy has been accepted by the group. JSW cherishes people and believes in
inclusive growth to facilitate creation of a value based and empowered society through continuous and
purposeful engagement of all stakeholders. In partnership with external development agencies, JSW would
strive toachieve sustainable development in all spheres of life including integrated community development,
promotion of arts and culture, environment protection and sports .
As a responsible corporate, JSW would integrate its environment, HR and ethical business policies with
appropriate community engagement and gender equity. JSW is committed to allocation of 1.5% of its PAT
to pursue its CSR policy. In tune with this, JSW Foundation works closely with village communities and
creates synergies with other verticals of the JSW group to assimilate their intervention in a social
development framework.
1. WORKING CAPITAL RATIO
It is a ratio that reflects the amount of working capital needed to maintain a given level of sales. A
high ratio indicates the firm is in a good liquidity position and vice-versa.
FORMULA = NET SALES

NET WORKING CAPITAL
PARTICULARS 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

TATA STEEL 17.17 -28.03 22.87 18.19 4.15
SAIL 3.63 3.01 2.48 1.85 2.06
JINDAL 42.79 -10.49 -4.78 -8.82 187.34
41
200
150
100 TATA STEEL

SAIL
50 JINDAL
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
-50
INTERPRETATION:
The working capital ratio of TATA STEEL has been fluctuating over the years. The reason for negative
working capital for the year 2015-2016 can be attributed to the decrease in current assets whereas a sharp
decrease in working capital for the year 2018-2019 is because of the increase in current assets such as cash
and bank balances, loans and advances and also because of an increase in the raw material consumption.
The working capital ratio of SAIL Ltd. has been falling constantly from the year 2014-2015
to the year 2017-2018 after which there was an increase in the ratio.
The working capital of JSW has shown a sharp decrease from the year 2014-2015 to 2015-
2016 where the working capital ratio remained constantly negative for three consecutive years and after that
there was an increase in the ratio. The reason for the increase in the ratio is an increase in the current assets,
loans and advances.
2. CURRENT RATIO
The current ratio is used to evaluate a company’s overall short – term liquidity position. It
tells us whether a company is in a position to meet its obligations.
FORMULA = CURRENT ASSETS

CURRENT LIABILITIES
PARTICULARS 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

TATA STEEL 1.19 0.90 1.12 1.15 1.64
SAIL 1.86 1.99 2.02 1.78 1.84
JINDAL 1.08 0.74 0.61 0.73 1.01
42
2.5
2 1.99 2.02
1.78 1.84
1.64 1.64
1.5 TATA STEEL
1.19 1.12 1.15 SAIL
1 1.08 1.01
0.9 JINDAL
0.74 0.73
0.61
0.5
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
INTERPRETATION:
The current ratio of TATA STEEL has been rising from the year 2015-2016and it has shown a positive
graph. The reason for the constantly rising graph since 2015-2016 has been investment in the current assets,
i.e. inventories, debtors, loans and advances and the liquid cash and bank balances.
SAIL has a fluctuating current ratio over the years with various rises and falls over the
time. The reason for the fall in the ratio from the year 2016-2017 to the year 2017-2018 was the decrease in
the current assets.
JSW had witnessed a steep downfall till the year 2016-2017 after which there was a
rise in the ratio till 2018-2019. The reason for decrease in the ratio from the year 2015-2016 to the year
2016-2017 was because of the increase in current liabilities and again a rise in the year 2017-2018 was
because of the increase in the current assets.
Current ratio should therefore be maintained around its ideal standard and for
achieving this the company’s should therefore maintain its current assets and current liabilities in the right
proportion.
3. QUICK RATIO
Quick ratio OR Liquid ratio is an indicator of a company’s short – term solvency or

liquidity position. It is the relationship between liquid assets and liabilities. An asset is said to be liquid if it
can be converted into cash within a short period without loss of value.
FORMULA = CURRENT ASSETS – INVENTORY

CURRENT LIABILITIES
PARTICULARS 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

TATA STEEL 0.85 0.59 0.80 0.88 1.34
SAIL 1.25 1.47 1.42 1.37 1.29
JINDAL 0.64 0.36 0.34 0.39 0.60
43
3
2.5
2.4
2
TATA STEEL
1.5 1.47 1.42 1.37 1.29 SAIL
1.34
1 JINDAL
0.85 0.8 0.88
0.64 0.59 0.6
0.5
0.36 0.34 0.39
0
2014-2015 2015-2016 2016-2017 2017-2018
INTERPRETATION:
The quick ratio of TATA STEEL has been rising since 2015-2016 and the investments should be made
enough in the current assets so as to maintain the ratio of current assets and current liabilities as 1:1.
The quick ratio of SAIL had declined from 2014-2015(2.4) to 2015-2016(1.47) and
thereafter the ratio has been declining throughout but the company has maintained the ratio above the ideal
standard.
The ratio of JSW had fallen from the year 2015-2016(0.36) to 2016-2017(0.34) negligibly
and thereafter it rose to 0.39 in 2016-2017 and finally to 0.60 in 2018-2019. The reason for the increase in
the ratio in 2018-2019 was increase in the cash and bank balances maintained with the company.
4. DEBTORS TURNOVER RATIO
Debtors Turnover Ratio or Receivables Turnover Ratio indicates the relationship between
net sales and average debtors. It shows the rate at which cash is generated by the turnover of debtors
FORMULA = AVERAGE DEBTORS

NET SALES
AVERAGE DEBTORS= (OPENING DEBTORS + CLOSING DEBTORS) / 2
44
PARTICULARS 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
TATA STEEL 29.98 33.52 41.23 46.73 68.13
SAIL 16.31 14.73 14.21 12.44 11.16
JINDAL - 33.83 38.07 37.87 33.05
80
70 68.13
60
50 TATA STEEL
46.73
40 41.23
33.52 SAIL
30 29.98 38.07
33.8 33.05 JSW
20
16.31 14.73 14.21
10 12.44 11.16
0 7.87
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
INTERPRETATION:
The debtors turnover ratio has shown a positive rising graph throughout which is very good for the company
since it shows the speed with which the money is being recovered from the debtors. And rising graph
throughout shows that the sales management is quite efficient in recovering the money from the debtors.
SAIL has a declining graph throughout which is not a good sign and therefore it
means that credit sales have been made to the debtors who do not deserve so much of credit and therefore
the company must revise its sales policy.
JSW has a fluctuating graph and after a steep fall in the year 2017-2018 the ratio
rose to 33.5 in the year 2018-2019. The debtors and the sales figures have risen for the year 2018-2019 and
the reason for the rise in the ratio can be efficient sales management and a sound sales policy.
5. DEBT COLLECTION PERIOD
Days Sales Outstanding is a short – term (operating) Activity ratio which tells us about
the debtors holding time. The more the holding period the more risky it becomes for the company. A high
debt collection period indicates that the company is taking time to collect cash from its debtors. The cash is
not being collected on time which is not a good sign for the company, it is a red flag.
FORMULA = 365/ DEBTORS TURNOVER RATIO
PARTICULARS 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

TATA STEEL 12 11 9 8 5
45
SAIL 22 24 26 29 33
JINDAL 10 9 9 11
35
30
25
20
TATA STEEL
15
10 SAIL
5 JSW
0
INTERPRETATION:
The lower the debt collection period the lesser the chances of bad debts and thus is better for the firm.
TATA STEEL has a sound sale policy and the average collection period has been decreasing over the years
and finally the debtors are converted to cash in 5 days as in the year 2018-2019 and lesser is the collection
period shorter is the operating cycle.
SAIL’s average collection period has been increasing in the number of days which means
that they have a liberal sales policy and the credit period is thus extended for the debtors. A higher debt
collection period generally increases the chances of bad debts and reduces the chances of recovery of money
from the debtors.
JSW has maintained its collection period at more or less a constant platform. The debtors
are converted to cash in 11 days (2018-2019). Here we can conclude that TATA STEEL is in a better
position as compared to the other two firms. SAIL should make some serious efforts to reduce its debt
collection period
6. STOCK TURNOVER RATIO
The Inventory Turnover Ratio measures the efficiency of the firm’s inventory
management. A higher ratio indicates that inventory does not remain in warehouses or on the shelves but
rather turns over rapidly from the time of acquisition to sales. A lower inventory turnover ratio means
accumulation of inventories, over investment in inventory or unsalable goods.
FORMULA = COST OF GOODS SOLD

AVERAGE STOCK
46
AVERAGE STOCK= (OPENING STOCK+CLOSING STOCK)/2
PARTICULARS 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

TATA STEEL 5.72 5.76 6.07 5.91 6.13
SAIL 4.22 4.68 4.68 3.62 4.09
JINDAL 5.87 5.89 5.74 5.29
7 6.07 6.13
5.72 5.76 5.91
6
5.87 5.89
5 5.74
4.68 4.68 5.29
4 4.22 4.09 TATA STEEL
3.62
3 SAIL
2 JSW
1
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
INTERPRETATION:
The stock turnover ratio of TATA STEEL has been rising throughout and the cost of goods sold has also
been rising with a rise in the average stock maintained with the company. A higher stock ratio turnover is
indicative that the stock is selling quickly, that is reflected with the higher sales.
SAIL has fluctuating ratio throughout.
JSW has a declining ratio, though the cost of goods sold and the average debtors has
been rising but certain items which have to be excluded from the cost of goods sold have been rising over
the time.
7. PAYABLES TURNOVER RATIO
Although accounts payable are liabilities rather than assets, their trend is
significant as they represent an important source of financing for operating activities. The creditors turnover
ratio is an important tool of analysis as a firm can reduce its requirement of current assets by relying on
supplier’s credit. This shows the relationship between credit purchases and average accounts payable.
Higher ratio shows that accounts are to be settled rapidly whereas, low ratio reflects liberal credit terms
granted by suppliers.
47
FORMULA- NET CREDIT PURCHASE
AVERAGE CREDITORS
AVERAGE CREDITORS= (OPENING CREDITORS+CLOSING CREDITORS)/2
PARTICULARS 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

TATA STEEL 0.79 0.73 1.76 1.31 1.56
SAIL 5.46 5.21 6.14 3.13 3.82
JINDAL 7.17 6.28 6.51 8.57
9 8.57
8 7.17
7 6.28 6.51
6 6.14
5.46 5.21
5 TATA STEEL
4 SAIL
3.82
3 3.13 JSW
2
1.76 1.56
1.31
1 0.79 0.73
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
INTERPRETATION:
The payables turnover ratio means the speed with which the creditors are being paid. TATA STEEL has a
rising graph which indicates that the creditors of the firm are being paid on time and quite frequently and
this helps in increasing the credit worthiness of the firm.
SAIL has had a fall in the ratio drastically from the year 2016-2017 to the year
2017-2018.
48
JSW is quite efficient in paying off its creditors. A ratio of 8.57 times mans that the
speed with which the company pays to its creditors is quite high.
RATIO ANALYSIS
WHAT IS RATIO ANALYSIS???
A tool used by individuals to conduct a quantitative analysis of information in a company's financial

statements. Ratios are calculated from current year numbers and are then compared to previous years, other
companies, the industry, or even the economy to judge the performance of the company. Ratio analysis is
predominately used by proponents of fundamental analysis.
49
Single most important technique of financial analysis in which quantities are converted into ratios for
meaningful comparisons, with past ratios and ratios of other firms in the same or different industries. Ratio
analysis determines trends and exposes strengths or weaknesses of a firm.
Ratios can be found out by dividing one number by another number. Ratios show how one number is related
to another. It may be expressed in the form of co-efficient, percentage, proportion, or rate. For example the
current assets and current liabilities of a business on a particular date are $200,000 and $100,000
respectively. The ratio of current assets and current liabilities could be expressed as 2 (i.e. 200,000 /
100,000) or 200 percent or it can be expressed as 2:1 i.e., the current assets are two times the current
liabilities. Ratio sometimes is expressed in the form of rate. For instance, the ratio between two numerical
facts, usually over a period of time, e.g. stock turnover is three times a year.
Classification of Accounting Ratios:
Ratios may be classified in a number of ways to suit any particular purpose. Different kinds of ratios are
selected for different types of situations. Mostly, the purpose for which the ratios are used and the kind of
data available determine the nature of analysis. The various accounting ratios can be classified as follows:
Classification of Accounting Ratios / Financial Ratios

(A) (B) (C)
Traditional Classification or Functional Classification or Significance Ratios or Ratios
Statement Ratios Classification According to Tests According to Importance
 Profit and loss account  Profitability ratios  Primary ratios
ratios or revenue/income  Liquidity ratios  Secondary ratios
statement ratios  Activity ratios
 Balance sheet ratios or  Leverage ratios or long
position statement ratios term solvency ratios
 Composite/mixed ratios
or inter statement ratios
Advantages of Ratios Analysis:
Ratio analysis is an important and age-old technique of financial analysis. The following are some of the
advantages / Benefits of ratio analysis:
1. Simplifies financial statements: It simplifies the comprehension of financial statements. Ratios tell
the whole story of changes in the financial condition of the business
2. Facilitates inter-firm comparison: It provides data for inter-firm comparison. Ratios highlight the
factors associated with successful and unsuccessful firm. They also reveal strong firms and weak
firms, overvalued and undervalued firms.
3. Helps in planning: It helps in planning and forecasting. Ratios can assist management, in its basic
functions of forecasting. Planning, co-ordination, control and communications.
50
4. Makes inter-firm comparison possible: Ratios analysis also makes possible comparison of the
performance of different divisions of the firm. The ratios are helpful in deciding about their
efficiency or otherwise in the past and likely performance in the future.
5. Help in investment decisions: It helps in investment decisions in the case of investors and lending
decisions in the case of bankers etc.
Limitations of Ratios Analysis:
The ratios analysis is one of the most powerful tools of financial management. Though ratios are simple
to calculate and easy to understand, they suffer from serious limitations.
1. Ratios are based only on the information which has been recorded in the financial
statements. Financial statements themselves are subject to several limitations. Thus ratios derived,
there from, are also subject to those limitations. For example, non-financial changes though
important for the business are not relevant by the financial statements. Financial statements are
affected to a very great extent by accounting conventions and concepts. Personal judgment plays a
great part in determining the figures for financial statements.
2. Comparative study required: Ratios are useful in judging the efficiency of the business only when
they are compared with past results of the business. However, such a comparison only provide
glimpse of the past performance and forecasts for future may not prove correct since several other
factors like market conditions, management policies, etc. may affect the future operations.
3. Ratios alone are not adequate: Ratios are only indicators, they cannot be taken as final regarding
good or bad financial position of the business. Other things have also to be seen.
4. Problems of price level changes: A change in price level can affect the validity of ratios calculated
for different time periods. In such a case the ratio analysis may not clearly indicate the trend in
solvency and profitability of the company. The financial statements, therefore, be adjusted keeping in
view the price level changes if a meaningful comparison is to be made through accounting ratios.
5. Lack of adequate standard: No fixed standard can be laid down for ideal ratios. There are no well
accepted standards or rule of thumb for all ratios which can be accepted as norm. It renders
interpretation of the ratios difficult.
6. Limited use of single ratios: A single ratio, usually, does not convey much of a sense. To make a
better interpretation, a number of ratios have to be calculated which is likely to confuse the analyst
than help him in making any good decision.
7. Personal bias: Ratios are only means of financial analysis and not an end in itself. Ratios have to
interpreted and different people may interpret the same ratio in different way.
8. Incomparable: Not only industries differ in their nature, but also the firms of the similar business
widely differ in their size and accounting procedures etc. It makes comparison of ratios difficult and
misleading.
FINANCIAL RATIOS
1. NET DEBT TO EQUITY
Debt is the borrowed funds and Equity is the owned funds of an organization. This ratio is calculated to
measure the extent to which debt financing has been used in a business. A ratio of 1:1 is considered to be
satisfactory. This ratio is also known as External-Internal ratio as it indicates the relationship between
the external equities or the outsider’s funds and the internal equities or the shareholders funds.
FORMULA = NET DEBT

SHAREHOLDER’S FUND
51
NET DEBT= SECURED LOANS+ UNSECURED LOANS- CASH AND BANK BALANCE-
CURRENT INVESTMENTS
EQUITY= SHAREHOLDER’S FUND- MISCELLANOUS EXPENSES
FINANCIAL YEAR 2014-2015

COMPANY NET DEBT SHAREHOLDER’S DEBT- EQUITY
FUND RATIO
TATA STEEL (1728.55) 15108.68 (0.12)
SAIL (5454.57) 17184 (0.32)

JSW 3642.29 5788.92 0.63

FUND RATIO
TATA STEEL 16519.85 27455.84 0.61
SAIL (10737.77) 23004.09 (0.47)
JSW 6283.78 7677.25 0.82

COMPANY NET DEBT SHAREHOLDER’S DEBT-EQUITY
FUND RATIO
TATA STEEL 22086.25 30281.33 0.73
SAIL (10714.20) 0.79841 (0.38)
JSW 9602.56 7959.25 1.21

FUND RATIO
TATA STEEL 20285.83 36961.80 0.55
SAIL (5925.12) 33316.70 (0.18)
JSW 9529.64 9706.34 0.98

COMPANY NET DEBT SHAREHOLDER’S DEBT-EQUITY
FUND RATIO
TATA STEEL 21159.81 46944.63 0.45
SAIL 2638.56 37069.47 0.07
JSW 5965.65 17225.27 0.35
52
1.4
1.21
1.2
0.98
1
0.82
0.8 0.73
0.63 0.61
0.55
0.6 0.45 TATA STEEL
0.35
0.4 SAIL
0.2 0.07 JSW
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
-0.2 -0.12
-0.18
-0.4 -0.32
-0.38
-0.6 -0.47
INTERPRETATION:
The debt-equity ratio is calculated to assess the firm’s ability to meet its long term liabilities. Generally, a
ratio of 2:1 is considered to be safe for the long term lenders and a ratio below 2:1 provides sufficient
protection to the long term lenders and thus they are more secure and a higher ratio thus would indicate a
more risky financial position of the firm.
The debt- equity ratio for all the year and of all the three companies has been less than 2:1 and
this is indicative of a sound financial position of the firm.
2. SHAREHOLDER’S EQUITY RATIO
This ratio helps to determine how much shareholders would receive in the event of a company-wide
liquidation. It represents the amount of assets on which shareholders have a residual claim. The higher the
ratio the more shareholders may receive and vice-versa.
53
FORMULA= SHAREHOLDRE’S EQUITY
TOTAL ASSETS

COMPANY SHAREHOLDER’S TOTAL SHAREHOLDER’S
EQUITY ASSETS(TANGIBLE) EQUITY RATIO
TATA STEEL 580.67 25597.50 0.023
SAIL 4130.40 22906.33 0.18
JSW 525.80 10779.74 0.049

TATA STEEL 6203.30 47075.52 0.132
SAIL 4130.40 27677.41 0.15
JSW 537.01 16475.62 0.032

TATA STEEL 6203.45 58741.77 0.11
SAIL 4130.40 36855.04 0.11
JSW 537.01 20653.04 0.03

COMAPNY SHAREHOLDER’S TOTAL SHAREHOLDER’S
TATA STEEL 887.41 64232.78 0.014
SAIL 4130.40 51242.87 0.08
JSW 527.11 23256.39 0.023

TATA STEEL 959.41 78555.91 0.012
SAIL 4130.40 58726.03 0.07
JSW 563.18 31493.65 0.018
54
0.2
0.18
0.18
0.16 0.15
0.14 0.132
0.12 0.11
0.11
TATA STEEL
0.1
SAIL
0.08
0.08 0.07 JSW
0.06 0.049
0.04 0.032 0.03

0.023 0.023
0.018
0.02 0.014 0.012
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
INTERPRETATION:
A ratio used to help determine how much shareholders would receive in the event of a company-wide
liquidation. The ratio is calculated by dividing total shareholders' equity by total assets of the firm, and it
represents the amount of assets on which shareholders have a residual claim.
If we consider as in the case of TATA STEEL, the ratio for the year 2014-2015 is
0.023 so this means that the shareholders would have a claim of 2.3% on the assets in the event of the wind
up of the company.
The lower the ratio, the better it is for the company since the company would be then
able to pay off to its shareholders in case of liquidation without any burden.
TATA STEEL has made efforts to lower the ratio and finally succeeded to do so. If we
consider the ratios for the year 2018-2019, we can see that TATA ATEEL is in a better position than the
other two companies.
55
3. DEBT TO NET WORTH RATIO - The net debt to net worth ratio has significance to lenders, analysts
and business managers. If affects the ability of a company to borrow money and to finance its growth. A
business owner needs to know the optimal debt to net worth ratio for the benefit of its company. The net
debt should never be higher than the net worth; it is a bad sign for the company.
FORMULA = LONG TERM DEBT

NET WORTH
LONG TERM DEBT = SECURED LOANS + UNSECURED LOANS – CASH & BANK –
CURRENT INVESTMENTS
NET WORTH= EQUITY SHARE CAPITAL + PREFERENCE SHARE CAPITAL+ RESERVES &
SURPLUS – MISCELLANOUS EXPENSES TO THE EXTENT NOT WRITTEN OFF.

COMPANY LONG TERM NET WORTH DEBT- NET
DEBT WORTH RATIO
TATA STEEL (1728.55) 13893.62 (0.125)
SAIL (5454.57) 17184 (0.32)
JSW 3642.29 5399.18 0.67

DEBT WORTH RATIO
TATA STEEL 16519.85 27145.62 0.61
SAIL (10737.77) 23004.09 (0.47)
JSW 6283.78 7677.25 0.82

DEBT WORTH RATIO
TATA STEEL 22086.25 30071.19 0.73
SAIL (10714.20) 27984.10 (0.38)
JSW 9602.56 7959.25 1.21

DEBT WORTH RATIO
TATA STEEL 20285.83 36961.80 0.55
SAIL (5925.12) 33316.70 (0.18)
JSW 9529.64 9706.34 0.98

DEBT WORTH RATIO
TATA STEEL 21159.81 46944.63 0.45
SAIL 2638.56 37069.47 0.07
JSW 5965.65 16695.89 0.36
56
1.4
1.21
1.2
0.98
1
0.82
0.8 0.73
0.67
0.61
0.6 0.55
0.45 TATA STEEL
0.36
0.4 SAIL
JSW
0.2
0.07
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
-0.2 -0.125
-0.18
-0.4 -0.32
-0.38
-0.47
-0.6
INTERPRETATION:
This ratio is used in the analysis of financial statements to show the amount of protection available to
creditors. A high ratio usually indicates that the business has a lot of risk because it must meet
principal and interest on its obligations.
TATA STEEL has a fluctuating ratio throughout the five years. But anyhow it has tried to
maintain its position by reducing the debts and increasing the net worth of the company.
SAIL has a negative ratio but in the year 2018-2019 it has finally achieved a positive ratio.
JSW has a fluctuating graph throughout the five years but in the year 2018-2019, it has
been able to lower the ratio and thus reduce the risk involved in the business.
57
4. FIXED ASSETS TO LONG TERM RATIO - This ratio indicates the proportion of long-term funds
deployed in fixed assets. The higher the ratio, the safer will be the funds available in case of liquidation.
It also indicates the proportion of funds that is invested in working capital.
It indicates the level of fixed assets owned by a company in relation to the long-term debts of the
company. The higher the ratio the better it is for a company and the assets which are debt free and
fully owned by the company.
FORMULA = FIXED ASSETS
LONG TERM LOANS
FIXED ASSETS = GROSS FIXED ASSETS – DEPRICIATION
LONG TERM LOANS = SHARE CAPITAL+ RESERVES+ LONG TERM LOANS

COMPANY FIXED ASSETS LONG TERM FIXED ASSTES TO
FUNDS LONG TERM
RATIO
TATA STEEL 11040.56 23594.42 0.47
SAIL 11597.71 21493.67 0.54
JSW 8189.10 9767.08 0.84

FUNDS LONG TERM
RATIO
TATA STEEL 12623.56 45322.42 0.28
SAIL 11571.31 26108.81 0.44
JSW 10955.49 15223.78 0.72

FUNDS LONG TERM
RATIO
TATA STEEL 14482.22 57122.44 0.25
SAIL 12268.83 35522.89 0.35
JSW 13086.44 19231.88 0.68

FUNDS LONG TERM
RATIO
TATA STEEL 16006.03 62201 0.26
SAIL 13615.28 49827.95 0.27
JSW 16866.14 21291.44 0.79

58
FUNDS LONG TERM
RATIO
TATA STEEL 18774.48 75067.57 0.25
SAIL 15082.66 57234.96 0.26
JSW 21102.15 28647.23 0.74
0.9 0.84
0.79
0.8 0.74
0.72
0.68
0.7
0.6 0.54
0.5 0.47 TATA STEEL

0.44
0.4
SAIL
0.35
0.28 0.27
JSW
0.3 0.25 0.26 0.25 0.26
0.2
0.1
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
INTERPRETATION:
This is a difficult set of ratios to interpret as asset values are based on the historical cost. An increase
in the fixed asset figure may result from the replacement of an asset at an increased price or the
purchase of an additional asset intended to increase the production capacity.
A latter transaction might be expected to result in increased sales.
59
5. PROPERITARY RATIO - This ratio indicates the proportion of long-term funds deployed in fixed
assets. The higher the ratio, the safer will be the funds available in case of liquidation. It also indicates
the proportion of funds that is invested in working capital.
It indicates the level of fixed assets owned by a company in relation to the long-term debts of the
company. The higher the ratio the better it is for a company and the assets which are debt free and
fully owned by the company.
FORMULA = NET WORTH

TOTAL ASSETS
NET WORTH = EQUITY SHARE CAPITAL + PREFERENCE SHARE CAPITAL+ RESERVES

& SURPLUS – MISCELLANOUS EXPENSES TO THE EXTENT NOT WRITTEN OFF.
TOTAL ASSETS = FIXED ASSETS + CURRENT ASSETS

COMPANY NET WORTH TOTAL ASSETS PROPERITARY
RATIO
TATA STEEL 13893.62 25597.50 0.54
SAIL 17184 22906.33 0.75
JSW 5399.18 10779.74 0.50

RATIO
TATA STEEL 27145.62 47075.52 0.57
SAIL 23004.09 27677.41 0.83
JSW 7677.25 16475.62 0.47

RATIO
TATA STEEL 30071.19 58741.77 0.52
SAIL 27984.10 36855.04 0.76
JSW 7959.25 20653.04 0.39

RATIO
TATA STEEL 36961.80 64232.78 0.58
SAIL 33316.70 51242.87 0.65
JSW 9706.34 23256.39 0.42
FIANANCIAL YEAR 2018-2019

RATIO
TATA STEEL 46944.63 78555.91 0.60
SAIL 37069.47 58726.03 0.63
JSW 17225.27 31493.65 0.55
60
0.9
0.83
0.8 0.75 0.76
0.7 0.65
0.63
0.6
0.57 0.58
0.6 0.54 0.55
0.52
0.5
0.5 0.47 TATA STEEL
0.42
0.39 SAIL
0.4
JSW
0.3
0.2
0.1
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
INTERPRETATION:
Proprietary ratio indicates the proportion of total assets funded by owners or shareholders. A higher
proprietary ratio is an indicator of sound financial position from the long term point of view because
it means a large proportion of total assets are provided by equity and hence the firm is thus less
dependent on the external sources of finance. A lower proprietary ratio is a danger signal for l.ong
term lenders as it indicates a lower margin of safety available to them.
TATA STEEL has maintained an overall consistent ratio throughout as in

the five year time.
The proprietary ratio of SAIL has been declining since the year 2015-2016.
The proprietary ratio of JSW has been increasing since 2016-2017.
TATA STEEL has been improving over the years and though SAIL has a
declining ratio throughout but anyhow it is in a better position than the other companies.
61
6. INTEREST COVER - This ratio is also known as “time – interest - earned ratio”. It measures the firm’s
ability to make contractual interest payments. This ratio measures the debt servicing capacity of a firm
insofar as fixed interest on long term loan is concerned. It indicates the extent to which a fall in EBIT is
tolerable in that the ability of the firm to service its interest payments would not be adversely affected.
For instance, coverage of five times would indicate that a fall in operating earnings only to up to one-
fifth level can be tolerated.
The higher the ratio the greater is the ability of the firm to handle fixed charge
liabilities and the more assured is the payment of interest to them. However, too high a ratio would imply
unused debt capacity. A low ratio is danger signal that the firm is using excessive debt and does not have the
ability to offer assured payment of interest to the lenders.
FORMULA = PBIT
INTEREST

COMPANY PBIT INTEREST INTEREST
COVER
TATA STEEL 6435.55 173.90 37.01
SAIL 9754.75 332.13 29.37
JSW 2314.72 399.54 5.79
COVER
TATA STEEL 7945.06 878.70 9.04
SAIL 11719.67 250.94 46.70
JSW 2924.56 440.44 6.64

COVER
TATA STEEL 8468.30 1152.69 7.35
SAIL 9656.69 253.24 38.13
JSW 1474.88 797.25 1.85
COVER
TATA STEEL 8722.70 1508.40 5.78
SAIL 10534.04 402.01 26.20
JSW 3678.57 858.92 4.28
COVER
TATA STEEL 11077.34 1300.49 8.52
SAIL 7669.26 474.95 16.15
JSW 3477.46 695.18 5.00
62
50 46.7
45
37.01 38.13
40
35
29.37
30 26.2 TATA STEEL
25 SAIL
20 16.15 JSW
15
9.04 8.52
10 6.64 7.35
5.79 5.78 5
4.28
5 1.85
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
INTERPRETATION:
The interest cover ratio is used to determine how easily a company can be relieved of its burden to pay
interest expenses on outstanding debt. The lower the ratio, the more the company is burdened by debt
expense. When a company's interest coverage ratio is only 1.5 or lower, its ability to meet interest expenses
may be questionable.
TATA STEEL has had a steep fall in the ratio from the year 2014-2015(37.01) to the year
2015-2016(9.04) and this was mainly because the interest expenses had risen by leaps and bounds. And
thereafter the interest expenses continued to rise.
SAIL has a fluctuating ratio. The rise in the ratio was because of the reduction in the interest
expenses and a sudden fall was when the interest expenses were high.
JSW has witnessed a ratio of 1.85 for the year 2016-2017 because this year the profit before
interest and tax was 1474.88 which was quite less as compared to the previous year and the interest expenses
were 797.25 which had risen by 1.8 times as compared to the previous year.
63
7. DIVIDEND COVER RATIO - It measures the ability of a firm to pay dividend on preference shares
which carry a stated rate of return. This ratio is the ratio of net profits after taxes (EAT) and the amount
of preference dividend. The higher the coverage the better it is and vice versa
FORMULA = NET PROFIT AFTER TAX

DIVIDEND
COMPANY PROFIT AFTER DIVIDEND DIVIDEND COVER

TAX
TATA STEEL 4222.15 1104.33 3.82
SAIL 6202.29 1478.40 4.20
JSW 1292 199.39 6.48

TAX
TATA STEEL 4687.03 1393.55 3.36
SAIL 7536.78 1787.16 4.22
JSW 1728.19 241.49 7.16

TAX
TATA STEEL 5201.74 1492.5 3.49
SAIL 6174.81 1255.16 4.92
JSW 958.50 55.41 17.30

TAX
TATA STEEL 5046.80 878.45 5.75
SAIL 6754.37 1590.55 4.25
JSW 2022.74 240.93 8.40

TAX
TATA STEEL 6865.69 1307.77 5.25
SAIL 4904.74 1152.45 4.26
JSW 2010.67 350.09 5.74
64
20
18 17.3
16
14
12
TATA STEEL
10
8.4 SAIL
8 7.16 JSW
6.48
5.75 5.74
6 4.92 5.25
4.22 4.25 4.26
3.824.2 3.49
4 3.36
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
INTERPRETATION:
The dividend cover ratio means that how easily the company can be relieved of its burden of paying the
dividends to the company.
TATA STEEL has been paying off its dividends at a consistent rate. And it seems that it has been
following a conservative approach.
JSW had paid a very high dividend for the year 2016-2017, which means that the company had declared
ala large part of its profit as dividend and thus following a liberal approach for paying the dividends.
65
8. EBIDTA TO TURNOVER RATIO - This ratio is used to assess a company’s profitability by comparing
its turnover and earnings. Since EBITDA is derived from revenue this would indicate the percentage of a
company remaining after operating expenses.
Generally a higher ratio would indicate that the company is able to

keep its earnings at a good level through efficient processes that have kept certain expenses low.
FORMULA = EARNING BEFORE INTEREST, TAX AND DEPRICIATION

TURNOVER

COMPANY EBIDTA TURNOVER EBIDTA TO
TURNOVER
RATIO
TATA STEEL 7254.84 17984.76 0.40
SAIL 10966.23 35924.07 0.31
JSW 2812.95 8699.59 0.32

TURNOVER
RATIO
TATA STEEL 8779.67 20028.28 0.44
SAIL 12955.15 41890.91 0.31
JSW 3611.74 11677.14 0.31

TURNOVER
RATIO
TATA STEEL 9441.70 24624.04 0.38
SAIL 10941.81 46248.61 0.24
JSW 2302.54 14260.81 0.16

TURNOVER
RATIO
TATA STEEL 9805.88 25875.77 0.38
SAIL 11871.28 43319.61 0.27
JSW 4801.98 18735.32 0.26

TURNOVER
RATIO
66
TATA STEEL 12223.53 30187.02 0.40
SAIL 9155.06 44918.67 0.20
JSW 4856.17 23445.88 0.21
0.5
0.44
0.45
0.4 0.4
0.4 0.38 0.38
0.35
0.31 0.32 0.31 0.31
0.3 0.27
0.26 TATA STEEL
0.24
0.25
SAIL
0.2 0.21
0.2 JSW
0.16
0.15
0.1
0.05
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
INTERPRETATION:
EBIDTA to turnover ratio signifies that higher the ratio the better it is. Since it means that earnings
before interest, depreciation and taxation.
TATA STEEL has maintained a positive rising graph throughout. And it has a ratio better than
the other two companies.
67
9. EARNING PER SHARE - This ratio measures the profitability on a per share basis i.e. the amount that
they can get on every share held. The higher the ratio the more amount the equity shareholders receive.
FORMULA = PROFIT ATTRIBUTABLE TO SHAREHOLDERS

WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES FOR BASIC EPS

COMPANY PROFIT O WEIGHTED EARNING PER
ATTRIBUTABLE AVERAGE NO. OF SHARE
SHAREHOLDERS ORDINARY SHARES
TATA STEEL 4222.15 646823122 73.76
SAIL 6202.29 4130400545 15.02
JSW 1259.35 157208820 80.11

COMPANY PROFIT WEIGHTED EARNING PER
ATTRIBUTABLE TO AVEARGE NO. OF SHARE
TATA STEEL 4687.03 697748601 67.17
SAIL 7536.78 4130400545 18.25
JSW 1694.19 177855318 95.26

TATA STEEL 5073.69 730584834 69.45
SAIL 6174.81 4130400545 14.95
JSW 424.58 187048666 22.70

TATA STEEL 4993.12 828550811 60.26
SAIL 6754.37 4130400545 16.35
JSW 1989.01 187048682 106.34

TATA STEEL 6861.15 907252572 75.63
SAIL 4904.74 4130400545 11.87
JSW 1978.24 203595864 97.17
68
97.17
2018-2019 11.87
75.63
106.34
2017-2018 16.35
60.26
22.7 JSW
2016-2017 14.95
69.45 SAIL
TATA STEEL
95.26
2015-2016 18.25
67.17
80.11
2014-2015 15.02
73.76
0 20 40 60 80 100 120
INTERPRETATION:
The ratio is helpful in the determination of the market price of the equity share of the company. The ratio is
also helpful in estimating the capacity of company to declare dividends on equity shares.
Higher the EPS the better is the capital productivity. It is an important measure of the economic
performance of a corporate entity.
JSW has the highest EPS as compared to the other two firms. And TATA STEEL has been quite
consistent in maintaining its ratio throughout.
69
10. GROSS PROFIT MARGIN - The ratio measures the margin of profit available on sales. The higher the
ratio the better it is for the company. It reflects the efficiency with which a firm produces its products.
FORMULA = GROSS PROFIT * 100

SALES
COMPANY GROSS PROFIT SALES GROSS PROFIT
MARGIN
TATA STEEL 6153.98 17551.09 35.06
SAIL 8656.19 34223.92 25.29
JSW 2169.49 8554.36 25.36

MARGIN
TATA STEEL 7388.93 19693.28 37.52
SAIL 10057.87 39508.45 25.46
JSW 2667.42 11420.00 23.35

MARGIN
TATA STEEL 8160.03 24315.77 33.55
SAIL 8040.59 43150.08 18.63
JSW 2005.45 14001.25 14.32

MARGIN
TATA STEEL 7868.91 25021.98 31.44
SAIL 8190.83 40551.38 20.20
JSW 3149.49 18202.48 17.30

MARGIN
TATA STEEL 10286.67 29396.35 34.99
SAIL 5304.80 42718.71 12.42
JSW 3194.82 23163.24 13.79
70
40 37.52
35.06 34.99
35 33.55
31.44
30
25.36
25.29 25.46
25 23.35
20.2 TATA STEEL
20 18.63
17.3 SAIL
14.32 13.79 JSW
15 12.42
10
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
INTEPRETATION:
The ratio measures the margin of profit available on sales. The higher the ratio the better it is. The ratio of
TATA STEEL has been fluctuating but it has been on a constant platform. The sales figures have been rising
so the fluctuations in the ratio can be attributed to the difference in the prices of the raw materials, freights
and wages.
The gross profit ratio of SAIL has been falling and which is again because of
the rise in the prices of the raw materials, wages and freight which have ultimately reduced the margin of the
gross profit.
The gross profit margin of JSW has also decreased since the selling prices
have not risen in the same proportion to the increase in the cost of the raw materials and other expenses.
TATA STEEL has a much favourable ratio as compared to the other two
companies. SAIL can take some measures such as procure raw materials at a cheaper price or to increase the
selling price in order to improve its gross profit margin.
71
11. NET PROFIT MARGIN - This ratio measures the relationship between EBIT to sales. It indicates the
efficiency of the management in manufacturing, selling, administration and other activities of the firm. It
is the overall measure of a firm’s profitability. It is represented as a percentage.
A high net profit margin would ensure adequate returns to the
owners as well as enable a firm to withstand adverse economic conditions when selling price is
declining, cost of production is rising and demand for product id falling. A low net profit margin
has the opposite implication.
FORMULA = NET PROFIT BEFORE INTEREST AND TAX * 100

SALES
COMPANY NPBIT SALES NET PROFIT

MARGIN
TATA STEEL 6435.55 17551.09 36.67
SAIL 9754.75 34223.92 28.50
JSW 2314.72 8554.36 27.06

MARGIN
TATA STEEL 7945.06 19693.28 40.34
SAIL 11719.67 39508.45 29.66
JSW 2924.56 11420.00 25.60

MARGIN
TATA STEEL 8468.30 24315.77 34.82
SAIL 9656.69 43150.08 22.38
JSW 1474.88 14001.25 10.53

MARGIN
TATA STEEL 8722.70 25021.98 34.86
SAIL 10534.04 40551.38 25.98
JSW 3678.57 18202.48 20.21

MARGIN
TATA STEEL 11077.34 29396.35 37.68
SAIL 7669.26 42718.71 17.95
JSW 3477.46 23163.248 15.01
72
45
40.34
40 37.82
36.67
34.82 34.86
35
29.66
28.5
30 25.98
27.06 25.6
TATA STEEL
25 22.38
20.21 SAIL
17.95
20
15.01 JSW
15
10.53
10
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
INTERPRETATION:
Net profit ratio reflects the net profit margin on the total sales after deducting all the expenses but before
deducting the interest and taxation. This ratio measures the efficiency of the operation of the company.
The trend of the graph of the net profit ratio is quite similar to that of the gross profit
margin ratio. Higher the ratio the better it is. TATA STEEL has been quite efficient in managing the
operating expenses of the firm.
73
12. CASH PROFIT RATIO - The Cash Ratio is the most conservative of all these measures of cash
resources, as only actual cash and securities easily convertible to cash are used to measure cash
resources. The short-term liquidity of a company may be measured through cash ratio.
FORMULA = CASH PROFIT

SALES
CASH PROFIT= NET PROFIT+ DEPRICIATION

COMPANY CASH PROFIT SALES CASH PROFIT
RATIO
TATA STEEL 5041.44 17551.09 28.72
SAIL 7413.77 34223.92 21.85
JSW 1790.23 8554.36 20.93

RATIO
TATA STEEL 5521.64 19693.28 28.38
SAIL 8772.26 39508.45 22.20
JSW 2415.37 11420.00 21.15

RATIO
TATA STEEL 6175.14 24315.77 25.40
SAIL 7459.93 43150.08 17.29
JSW 1313.16 14001.25 9.38

RATIO
TATA STEEL 6129.98 25021.98 24.50
SAIL 8091.61 40551.38 19.95
JSW 3146.15 18202.48 17.28

RATIO
TATA STEEL 8011.88 29396.35 27.25
SAIL 6890.54 42718.71 14.95
JSW 3389.38 23163.25 14.63
74
28.72 28.38
30
27.25
25.4
24.5
25
21.85 22.2
20.93 21.15 19.95
20 17.29
17.28 TATA STEEL
14.95
14.63
15 SAIL
JSW
10 9.38
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
INTERPRETATION:
The ratio measures the cash generation in the business as a result of the operation expressed in terms
of sales. The cash profit ratio is more reliable indicator of performance where there are sharp
fluctuations in profit before tax and the net profit from year to year owing to the difference in
depreciation.
It facilitates the inter firm comparison of performance since different methods of depreciation
may be adopted by different companies.
TATA STEEL is ahead of the other two companies and has a better graph as compared to SAIL
and JSW.
75
13. RETURN ON ASSETS - Here the profitability is measured in terms of the relationship between net
profits and assets. The ROA may be also called as profit-to-asset ratio. It can be interpreted in two ways.
First, it measures management’s ability and efficiency in using the firm’s assets to generate (operating)
profits. Second, it reports the total return accruing to all providers of capital (debt and equity),
independent of the source of capital.
FORMULA = EBIT
AVERAGE TOTAL ASSETS
COMPANY EBIT AVERAGE TOTAL RETURN ON

ASSETS ASSETS
TATA STEEL 6435.55 20107.33 0.32
SAIL 9754.75 20644.91 0.47
JSW 2314.72
FINANCILA YEAR 2015-2016

ASSETS ASSETS
TATA STEEL 7945.06 36336.51 0.22
SAIL 11719.67 25291.87 0.46
JSW 2924.56 13627.68 0.21

ASSETS ASSETS
TATA STEEL 8468.30 52908.65 0.16
SAIL 9656.69 32266.23 0.30
JSW 1474.88 18564.33 0.08

ASSETS ASSETS
TATA STEEL 8722.70 61487.28 0.14
SAIL 10534.04 44143.57 0.24
JSW 3678.57 21954.72 0.17

ASSETS ASSETS
TATA STEEL 11077.34 71394.35 0.11
SAIL 7669.26 54984.45 0.14
JSW 3477.46 27375.02 0.13
76
0.5 0.47 0.46
0.45
0.4
0.35 0.32
0.3
0.3
TATA STEEL
0.24
0.25
0.21 0.21 SAIL
0.2 0.17 JSW
0.16 0.150.14
0.14 0.13
0.15
0.1 0.08
0.05
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
INTERPRETATION:
The ratio indicates how profitable a company is relative to its total assets. The ratio illustrates how well
management is employing company’s total assets to make a profit. The higher the return, the more
efficient management is in utilizing the assets base.
Here we can conclude that SAIL has not been utilizing its asset base efficiently and so the graph has
taken a downward trend.
TATA STEEL has also not been very efficient in utilizing the asset base of the company.
77
14. RETURN ON AVERAGE NET WORTH - This ratio measures the return on the total equity funds of
ordinary shares. From this ratio it can be judged whether the firm has earned a satisfactory return for its
shareholders or not. The higher the ratio, the better it is for the shareholders.
FORMULA= PROFIT AFTER TAX

AVERAGE NET WORTH

COMPANY PROFIT AFTER AVERAGE NET RETURN ON
TAX WORTH AVEARGE NET
WORTH
TATA STEEL 4222.15 11697.83 0.36
SAIL 6202.29 14784.80 0.42
JSW 1292

WORTH
TATA STEEL 4687.03 20519.62 0.23
SAIL 7536.78 20094.05 0.38
JSW 1728.19 6538.22 0.26

WORTH
TATA STEEL 5201.74 28608.41 0.18
SAIL 6174.81 25494.10 0.24
JSW 958.50 7827.25 0.12

WORTH
TATA STEEL 5046.80 33516.50 0.15
SAIL 6754.37 30650.40 0.22
JSW 2022.74 8832.80 0.23
FIANANCIAL YEAR 2018-2019

WORTH
TATA STEEL 6865.69 41953.22 0.16
SAIL 4904.74 35193.09 0.14
JSW 2010.67 13465.81 0.15
78
0.45 0.42
0.4 0.38
0.36
0.35
0.3 0.26
0.23 0.24 TATA STEEL
0.25 0.22 0.23
SAIL
0.2 0.18
0.15 0.16 JSW
0.14 0.15
0.15 0.12
0.1
0.05
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
INTERPRETATION:
It expresses the net profit in terms of equity shareholders fund. It is an important yardstick of performance
for equity shareholders since it indicates the return on funds employed by them. However this measure is
based on the historical net worth and will be high for old plants and low for new plants.
The factor which motivates the shareholders to invest in a company is the

expectations of an adequate rate of return on their funds, they will want to assess the rate of return in order
to decide whether to continue their investments or not.
79
15. RETURN ON AVERAGE CAPITAL EMPLOYED - Return on average capital employed is a
profitability ratio. The term capital employed refers to long-term funds supplied by the lenders and
owners of the firm. Capital employed basis provides a test of profitability related to the sources of long-
term funds. It is an insight into how efficiently the long-term funds of owners and lenders are being used.
The higher the ratio, the more efficient is the use of capital employed.
CAPITAL EMPLOYED = TOTAL FUNDS EMPLOYED – MISCELLANOUS EXPENSES TO

THE EXTENT NOT WRITTEN OFF
COMPANY EBIT AVERAGE CAPITAL RETURN ON

EMPLOYED AVERAGE CAPITAL
EMPLOYED
TATA STEEL 6435.55 19879.43 0.32
SAIL 9754.75 20601.58 0.47
JSW 2314.72

EMPLOYED
TATA STEEL 7945.06 36157.69 0.22
SAIL 11719.67 25326.71 0.46
JSW 2924.56 13530.25 0.22

EMPLOYED
TATA STEEL 8468.30 52778.56 0.16
SAIL 9656.69 32236.49 0.30
JSW 1474.88 18564.33 0.08

EMPLOYED
TATA STEEL 8722.70 61434.74 0.14
SAIL 10534.04 44048.96 0.24
JSW 3678.57 21954.72 0.17

EMPLOYED
TATA STEEL 11077.34 71394.35 0.16
SAIL 7669.26 54984.45 0.14
JSW 3477.46 27375.02 0.13
80
0.5 0.47
0.46
0.45
0.4
0.35 0.32
0.3
0.3
TATA STEEL
0.24
0.25 0.22 0.22 SAIL
0.2 0.17 JSW
0.16 0.16
0.14 0.14
0.15 0.13
0.1 0.08
0.05
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
INTERPRETATION:
Return on average capital employed ratio narrows the focus to gain a better understanding of a company's
ability to generate returns from its available capital base.
By comparing net income to the sum of a company's debt and equity
capital, investors can get a clear picture of how the use of leverage impacts a company's profitability.
Financial analysts consider the ROCE measurement to be a more comprehensive profitability indicator
because it gauges management's ability to generate earnings from a company's total pool of capital.
81
16. DIVIDEND PAYOUT RATIO - This ratio indicates the percentage PAT distributed as dividends to
equity shareholders. It is also known as pay-out ratio. For instance PAT are Rs. 500000 and the dividend
is Rs. 300000 then the dividend pay -out ratio would be 60%. This implies that 40% of the profits of the
firm are retained (retention ratio) and 60% distributed as dividends. Therefore, the higher the ratio the
more dividends can be received.
= DIVIDEND (EQUITY)/ PROFIT AFTER TAX

COMPANY DIVIDEND(EQUITY) PROFIT AFTER DIVIDEND PAYOUT
TAX RATIO
TATA STEEL 1104.33 4222.15 26.16
SAIL 1478.40 6202.29 23.89
JSW 199.39 1292 15.43

TAX RATIO
TATA STEEL 1393.55 4687.03 29.73
SAIL 1787.16 7536.78 23.71
JSW 241.49 1728.19 13.97

TAX RATIO
TATA STEEL 1492.5 5201.74 28.69
SAIL 1255.16 6174.81 20.33
JSW 55.41 958.50 5.78

TAX RATIO
TATA STEEL 878.45 5046.80 17.41
SAIL 1590.55 6754.37 23.55
JSW 240.93 2022.74 11.91

TAX RATIO
TATA STEEL 1307.77 6865.69 19.05
SAIL 1152.45 4904.74 23.50
JSW 350.09 2010.67 17.41
82
35
29.73
30 28.69
26.16
25 23.89 23.71 23.55 23.5
20.3
20 19.05
17.41 17.41 TATA STEEL
15.43 SAIL
15 13.97
11.97 JSW
10
5.78
5
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
INTERPRETATION:
This ratio identifies the percentage of earnings (net income) per common share allocated to paying
cash dividends to shareholders. The dividend payout ratio is an indicator of how well earnings support the
dividend payment.
It indicates the extent to the net profit distributed to the shareholders as dividend. A high payout
signifies a liberal distribution policy and a low payout reflects conservative distribution policy,
83
RECOMMENDATION:
 Tata steel should try to improve its solvency so that at the time of crisis they don’t have to sell of
their inventory to pay off debts.
 They should maintain quick ratio above or equal to 1.0.
 Fluctuations in operating cycle should be reduced.
 TATA STEEL must keep eye on its WIP conversion period.
 TATA STEEL should try to minimize its inventory conversion period and also try to minimize the
average age of stock to reduce the cost of inventories.
 As sale price per unit is lesser than the competitors it must keep trend increasing mode of sales to
reduce the blockage of its price in its inventory.
 Try to generate more revenue from other country.
 TATA STEEL should try for acquisition of more mines in India to reduce the raw material
outsourcing or import cost.
 There should be a proper balance between the current assets and the currents liabilities. The working
capital became negative due to an improper balance.
 It should not allow its net debt to become negative. A negative net debt indicates more cash and less
debt which means that the company is not investing enough in its growth.
 New and advanced concept must be introduced in inventory control management.
 Adequate planning is required for procurement of store items.
 Advance payments should be avoided. If at all advance payments are required, it should be against
securities like bank guarantees etc.
 The essence of effective working capital management is proper cash flow forecasting. This should
take into account the unforeseen events, market cycles, sudden fall in demand, fall in selling price,
loss in prime customers etc. This is a very important factor that has to be taken into account.
84
CONCLUSION
Tata Steel has been analyzed in terms of financial aspects especially working capital and financial ratios. A
comparison has been made with JSW and SAIL to see the position of Tata Steel Ltd. in the industry.
Working capital management is a very crucial part of any organization. It needs to maintain its working
capital efficiently for its day to day operations to take place. An organization needs proper liquidity to meet
its obligations on time.
Ratio analysis is also a very important part of a business. It is a platform to judge a company based on
liquidity, profitability etc. It is very crucial for banks, investors, creditors etc. It also makes comparisons
easier.
Tata Steel has been able to maintain a good liquidity position throughout. It has been able to pay back its
liabilities on time and also has been able to give dividends on time to its shareholders. It has also maintained
a good level of EPS. The inventory turnover has been maintained efficiently which we can see from the high
inventory turnover ratio.
85

Summer Project Report: Working Capital Management and Ratio Analysis at Tata Steel

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SUMMER PROJECT REPORT

TATA STEEL KALINGA NAGAR,JAJPUR ROAD,ODISHA

Summer Internship Coordinator (Finance)

Working capital is the capital required for maintenance of day-to-day business

Working capital management involves the relationship between a firm's short-

OBJECTIVES OF THE STUDY

In my project work we are trying to identify the various systematic processes in

ii) Secondary data

CHAPTER: - 2 COMPANY PROFILE

FOUNDERS OF TATA STEEL

JAMSEDJI NUSSERWANJI TATA (1839 – 1904)

SIR DORABJI TATA (1859 – 1933)

Sir DorabjiTata(1859-1933) carried out the bequest with scrupulous zeal

BHARAT RATNA JEHANGIR RATANJI DADABHAI TATA (1904 – 1993)

RATAN NAVAL TATA

LIST OF BOARD OF DIRECTORS

Ratan N Tata Chairman

Mr O P Bhatt Independent Director

Mr Aman Mehta Independent Director

Mr Deepak Kapoor Independent Director

Dr Petrus Blauwhoff Independent Director

Mr Saurabh Agrawal Non-Executive Director

Mr V K Sharma Non-Executive Director

Mr T V Narendran CEO & Managing Director

Mr Koushik Chatterjee Executive Director (Finance & Corporate)

AWARDS AND RECOGNITIONS

AWARDS FOR EXCELLENCE IN CORPORATE SOCIAL RESPONSIBILITY

TOP COMPETITORS OF TATA STEEL

SOME OTHER MAJOR PLAYER IN THIS INDUSTRY

 Strong brand name like Tata Steel & Corus

 Unexplored rural markets

 Major player entering Indian market

CHAPTER.3. WORKING CAPITAL MANAGEMENT

WHAT IS WORKING CAPITAL???

Every business needs funds for two purposes.

CURRENT ASSETS CURRENT LIABILITIES

WORKING CAPITAL COMPRISES OF THE FOLLOWING:-

2. Accounts receivables: - Many businesses extend credit to their customers.

 If you do, is the amount of accounts receivable reasonable relative to sales?

3. Inventory: - Inventory is often as much as 50 percent of a firm's current assets, so naturally it

THERE ARE TWO DIFFERENT CONCEPTS OF WORKING CAPITAL:-

 Purchase of raw materials.

2. It creates a Feeling of Security and Confidence:

3. ‘Must’ for Maintaining Solvency and Continuing Production:

5. Easy Loans from the Banks:

7. Exploitation of Good Opportunity:

8. Meeting Unseen Contingency:

10. Increased Production Efficiency:

4. It may result into overall inefficiency in the organization.

3) It becomes impossible to utilize efficiently the fixed assets due to non

NET WORKING CAPITAL

CURRENT ASSETS 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

CURRENT 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

NET WORKING 1022.29 (702.5) 1063.43 1375.68 7080.71

CURRENT ASSETS 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

CURRENT 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

PERCENTAGE -6717.62 -647.26 -846.52 93.59 -28.42

1. WORKING CAPITAL TURNOVER RATIO

FORMULA = NET SALES

PARTICULARS 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

FORMULA = CURRENT ASSETS

PARTICULARS 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

FORMULA = CURRENT ASSETS – INVENTORY