A

SUMMER INTERNSHIP PROJECT REPORT

ON
“WORKING CAPITAL MANAGEMENT OF JHARKHAND
COAL MINES UNIT”
IN
HINDALCO INDUSTRIES LIMITED

SUBMITTED IN THE PARTIAL FULFILLMENT FOR THE AWARD

OF
DEGREE OF MATSER IN BUSINESS ADMINISTRATION (MBA)
UNDER THE GUIDENCE OF
Mr. KISHAN JEE (Asst. Prof) – INTERNAL
Mr. MANPREET SINGH BHATIA (FINANCE MANAGER) – EXTERNAL
SUBMITTED BY
MR. AMAN KUMAR
ROLL NO – 18MBA049
BATCH NO – 2018-20

FACULTY OF MANAGEMENT STUDIES

GOPAL NARAYAN SINGH UNIVERSITY
(Approved by UGC, New Delhi) Jamuhar, Rohtas, Bihar - 821305

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 DECLARATION

I the undersigned solemnly declare that the project report “WORKING CAPITAL
MANAGEMENT OF JHARKHAND COAL MINES UNIT” in HINDALCO
INDUSTRIES LTD. is based on my own work carried out during the course of our study
under the supervision of Mr. MANPREET SINGH BHATIA.
 I assert the statements made and conclusions drawn are an outcomes of my research
work. I further certify that.
 The work contained in the report is original and has been done by me under the general
supervision of my supervisor.
 The work has not been submitted to any other Institution for any other
degree/diploma/certificate in this university.
 Whenever we have used materials (data, theoretical analysis, and text) from other
source, we have given due credit to them in the text of the report and giving their details in
the references.

Place: Ranchi Signature:

Date: Aman Kumar

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 PREFACE

The need for working capital to run the day-to-day business activities is to be emphasized.
We will hardly find a business firm which does require any amount of working capital. The
goal of working capital management is to manage firm’s current assets and liabilities in such
a way that a satisfactory level of working capital is maintained. This is important because if it
cannot maintain a satisfactory level of working capital, it is likely to have liquidity crunch
and may even be forced into bankruptcy. The current assets should be large enough to cover
its current liabilities in order to ensure a reasonable margin of safety. The interaction and
balance of current assets and current liabilities is therefore the main theme of the theory of
working capital.

Thus for the fulfilment of the above requirement a project was undertaken by me on the topic
“WORKING CAPITAL MANAGEMENT OF JHARKHAND COAL MINES UNIT” in
HINDALOC INDUSTRIES LTD. For the convenience of study the whole current assets
and current liabilities are further divided into cash management, receivables management and
inventory management however the emphasis in the study is on the financing of working
capital requirement which in mainly through treasury department of Hindalco.

After a thorough analysis of various facts and stand figures, a set of conclusion has been
given the prime considerations, while compiling the report and are authoritative and
authentic.

I make sure that anyone who goes through the report will learn how much I have learnt so
for, and can get the benefit of the same.

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 ACKNOWLEDGEMENT

I offer my sincere thanks and humble regards to FACULTY OF MANAGEMENT

STUDIES, GNS UNIVERSITY for imparting us very valuable professional training in
MBA.
I pay my gratitude and sincere regards to Mr. Kishan Jee (Asst. Prof), my project guide for
giving me the cream of his knowledge. I am thankful to him for giving his suggestions and
encouragement throughout the project work.
I express my warm thanks to our Dean Dr. Alok Kumar (Professor) for providing me a big
platform for internship program and also thankful for their support, motivation and
inspiration throughout the project work.
I would also like to thanks my project external guide Mr. Manpreet Singh Bhatia (Finance
Manager) and all the employees who provided me with the facilities being required and
conductive conditions for my MBA project.
I am using this opportunity to express my gratitude to my family and friends who supported
me throughout the course of this MBA project. I am thankful for their aspiring guidance,
invaluably constructive criticism and friendly advice during the project work.

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 TABLE OF CONTENTS

Sl. No. CONTENT PAGE NO.

01 Part 1 - Executive Summary
02 Part 2 – Introduction
 Problem definition
 Objective of the study
 Scope of the study
 Literature survey
 Research methodology
 Limitation
03 Part 3 – Company overview
04 Part 4 – Conceptual Framework
 Introduction to Working capital management
 Hindalco (Coal Mines) working capital position
 Inventory management
 Cash management
 Receivables management
05 Part 5 – Data Analysis and Interpretation
06 Part 6 – Finding, and conclusion
07 Part 7 – Bibliography

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 PART – 1

EXECUTIVE SUMMERY

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 EXECUTIVE SUMMARY

Title of the study:

“Working capital management of Jharkhand Coal Mines (HINDALCO)”
As a part of curriculum, every student studying MBA has to undertake a project on a
particular subject assigned to him/her. According to that I have been assigned the project
work on the study of working capital management of Jharkhand Coal Mines unit in Hindalco
Industries Ltd. Ranchi.
Decision relating to working capital (current assets – current liabilities) and short term
financing are known as working capital management. It involves the relationship between a
firm’s short term assets and its short term liabilities.
There are two captive coal mines i.e. Kathautia coal mines and Dumri coal mines under the
Jharkhand Coal Mines. Kathautia Open Cast Coal Mines is a captive mine for Mahan Power
Plant (MP). The mining activity at the Kathautia Coal Mine is fully outsource to a Mine
development operator. Coal transportation up to Railway siding is done through road and
thereafter by Rail.
The goal of working capital management is to ensure that the firm is able to continue its
operation and that it has sufficient cash flow to satisfy both maturing short term debt and
upcoming operational expenses.
Working capital is used in Jharkhand Coal Mines for following purpose:-
Raw material, work in progress, inventories, day to day cash requirements. The Hindalco
Industry ltd. maintains fund which is automatically available to finance the current assets
requirements.
The various information regarding “working capital management” such as classification,
determinants, sources have been discussed relating to Jharkhand Coal Mines unit.
Ratio Analysis has been carried out using financial information for last two accounting years
i.e., 2018 and 2019. Ratio like working capital turnover ratio, quick ratio, current ratio,
inventory turnover ratio, etc. have also been analysed. A statement of changes in working
capital has also been analysed.
At Jharkhand Coal Mines the working capital management has shown an increase in the
period of study. This shows working capital is managed effectively and all the other
department are working in perfect co-ordination to ensure the progress of Jharkhand Coal
Mines but I have given conclusion on the basis of my project study.

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 PART - 2

INTRODUCTION

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 INTRODUCTION

The project undertaken is on “WORKING CAPITAL MANAGEMENT OF JHARKHAND

COAL MINES UNIT IN HINDALCO”.
It describes about how the company manages its working capital and the various steps that
are required in the management of working capital.
Cash is the lifeline of a company. If this lifeline deteriorates, so does the company’s ability to
fund operations, reinvest and meet capital requirement and payments. Understanding a
company’s cash flow health is essential to making investment decisions. A good way to judge
a company’s cash flow prospects is to look at its working capital management (WCM).
Working capital refers to the cash a business requires for day-to-day operations or, more
specifically, for financing the conversion of raw material into finished goods, which the
company sells for payment. Among the most important items of working capital are levels of
inventory, accounts receivable and account payable. Analysis look at these items for signs of
a company’s efficiency and financial strength.
The working capital is an important yardstick to measure the company’s operational and
financial efficiency. Any company should have a right amount of cash and lines of credits for
its business needs at all times.
This project describes how the management of working capital takes place at Jharkhand Coal
Mines Unit.

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 PROBLEM DEFINITION

In the management of working capital, the firm faces the key problems:
Given the level of production and the relevant cost considerations, what are the optimal
amounts of cash, accounts receivable and inventories that a firm should maintain?

OBJECTIVE OF THE STUDY

The objective of this project was mainly to study the inventory, cash and receivables at
JHARKHAND COAL MINES UNIT (HINDALCO), but there are some more and they are –
The objective purpose of our study is to render a better understanding of the concept
“Working Capital Management”.
To understand the planning and management of working capital of Mines.

SCOPE OF STUDY

The project is important for me as well as for company which are as under –
 The project will be a learning device for the finance students.
 I have been studied the various methods of the working capital management.
 This will show different methods of holding inventory and dealing with cash
and receivables.
 This will show the liquidity position of the company and also how do they
maintain a particular liquidity position.

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 RESEARCH METHODOLOGY

For the purpose of preparing the project both primary and secondary have been usedthe
information collected from the following sources.
Primary data:
The primary data has been collected from personal interaction with Mr. Manpreet Singh
Bhatia (Finance Manager) and other staff members of finance department.
Secondary data:
The major source of data for this project was collected through annual working capital report
and trial balance of 2 year i.e., 2018 and 2019 and some more information collected from
internet and text sources.
SAMPLING DESIGN
1. Sampling unit : Trial Balance
2. Sampling unit : Last 2 years WC report
3. Tool used : MS-Excel has been used for calculations
4. Analysis : Ratio analysis used for analysis and interpretation

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 LIMITATIONS OF THE STUDY

We cannot do comparisons with other companies unless and until we have the

data of other companies on the same subject.

Only the printed data about the unit will be available and not the back-end

details.

Future plans of the unit will not be disclosed to the trainees.

Confidential data could not be provided by the company.

Some analysis could not be applicable because this is only a captive mining

division of HINDALCO and the consumption of product by its own power plant.

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 PART – 3

COMPANY OVERVIEW

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 ORGANIZATION DETAILS

Company: Hindalco Industries Limited

Parent company: Aditya Birla Group
Type: Public
Industry: Metals
Founded: 1958
Headquarters: Mumbai, Maharashtra, India
Area Served: World-Wide
Products: Aluminium, Copper & Chemicals
Board of Directors:-
Chairman: Mr. Kumar Mangalam Birla
Managing Director: Mr. Satish Pai
Whole-time Director and CFO: Mr. Praveen Maheshwari
Vice-Chairman and Non-Executive Director: Mr. Debnarayan Bhattacharya
Mrs. Rajashree Birla
Mr. AK Agarwala
Mr. KN Bhandari
Mr. MM Bhagat
Mr. Ram Charan
Mr. YP Dandiwala
Mr. Girish Dave
Ms. Alka Marezban Bharucha
Revenue:
Net Income:
Total Assets:
No. of Employees: 39712 (July 2018)
Traded as: BSE: 500440
NSE: HINDALCO
BSE SENSEX Constituent
Website: www.hindalco.com

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 COMPANY OVERVIEW

HINDALCO PROFILE
Hindalco Industries Limited, metals Flagship Company of the Aditya Birla Group, is the
industry leader in aluminium and copper. With a consolidated turnover of US$18 billion,
Hindalco is the world’s largest aluminium rolling company and one of Asia’s biggest
producers of primary aluminium. Its state-of-art copper facility comprises a world-class
copper smelter and a fertiliser plant along with a captive jetty. The copper smelter is among
the world’s largest custom smelters at a single location.
In India, the company’s aluminium units across the country encompass the gamut of
operations from bauxite mining, alumina refining, coal mining, captive power plants and
aluminium smelting to downstream rolling, extrusions and foils. Today, Hindalco ranks
among the global aluminium majors as an integrated producer and a footprint in 11 countries
outside India.

Hindalco has been accorded Star Trading House status in India, its aluminium is accepted for
delivery under the High-Grade Aluminium Contract on the London Metal Exchange (LME),
while its copper quality is also registered on the LME with Grade-A accreditation.

PRODUCT

 ALUMINIUM
 COPPER
 CHEMICALS
VISION
To be a premium metals major, global in size and reach, excelling in everything we do, and
creating value for its stakeholders.
MISSION
To relentlessly pursue the creation of superior shareholder value, by exceeding customer
expectation profitably, unleashing employee potential, while being a responsible corporate
citizen, adhering to our values.
VALUES
 INTEGRITY – Honesty in every action.
 COMMITMENT – Deliver on the promise
 PASSSION – Energized action
 SEAMLESSNESS – Boundary less in letter and spirit
 SPEED – One step ahead always

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 HISTORY

The Hindalco story dates back to the young Indian democracy of the 1950s. Ready to take a
giant leap, India was geared to make it big, especially in terms of innovation and
industrialisation.

Hindalco embarked on its journey in 1958. Its first real contribution to the vision of an
industrial India occurred four years later, when the late visionary GD Birla set up India's first
integrated aluminium facility at Renukoot, in the eastern fringe of Uttar Pradesh, India. It
was backed by a captive thermal power plant at Renusagar in 1967. Hindalco attained its
leadership position in the aluminium industry under the dynamic leadership of the late
Aditya Vikram Birla — a formidable force in the Indian industry.

And it was through the vision and guidance of Mr Kumar Mangalam Birla, the Group
Chairman that the business segments of aluminium and copper were consolidated to make
Hindalco the non-ferrous metals powerhouse it is today. This was achieved in part by
expansion through mergers and acquisitions with companies such as Indal and Birla Copper.
Hindalco also secured copper reserves and amplified its operating base by acquiring
Australian copper mines.

Over the years, Hindalco has grown into a major vertically integrated aluminium company in
the country and among the largest primary producers of aluminium in Asia. Its copper
smelter is today one of the world's largest custom smelter at a single location.

In 2007, the landmark acquisition of Novelis Inc., the world's largest aluminium rolling
company, placed Hindalco's footprint across the globe, securing it a rank amongst the top
five global aluminium.

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 JHARKHAND COAL MINES UNIT

Jharkhand coal mines unit operates two coal mines in Jharkhand, one is Kathautia Coal
Mines and another one is Dumri Coal Mines.

Hindalco acquired Kathautia Coal Mines in 2015 for 30 years in Rs.6800 crores.

Brief Overview of the Mines”

Name of the Mines- Kathautia Open Cast Coal Mines
Location: About 20 km from Daltanganj Town
Prior Allottee: M/S Usha Martin Ltd
Vesting Date: 01.04.2015
Grade of Coal: G6 (Around 5500 Kcal)
Bidding Price: Rs.2860 per tonne
Coal Reserves as at 01.04.15: 23.1 MT
Annual approved Capacity for mining: 0.8 million T
Average Stripping Ratio: 9.71
Date of Commencement of Operations: 25.02.2017
ML Area: 1699 Acres (6.87 sq. km)
End Use Plant: Mahan Power Plants
Mode of Dispatch: Up to Rajhara Public Siding (15km) through Road, thereafter through Rail
Manpower: 115 Workers (Land Losers), Around 70 Officers
Average Cost per Tonne- Rs.5000-5200
Mining Operation: Outsourced to MDO Contractor (except Explosives which is responsibility
of the Mine Owner)
Dumri Coal Mines is the 4th captive open cast coal mine of Hindalco which is situated in
Hazaribag district, Jharkhand. The company has secured around 3.2 million tonne of coal in
the linkage auctions that concluded during FY18. With this, the total quantity of secured coal
via linkages reached to 11.9 million tonne. This accounts for 71 percent of the annual coal
requirements of the company. Currently, three captive mines- Gare Palma IV/4, Gare Palma

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IV/5 and Kathautia are operational. The fourth captive mine at Dumri is in the process of
obtaining necessary statutory clearances.

PART – 4
CONCEPTUAL FRAMEWORK

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 WORKING CAPITAL MANAGEMENT
Working capital management is a significant in Financial Management due to the fact that it
plays a pivotal role in keeping the wheels of a business enterprise running. Working capital
management is concerned with short-term financial decisions. Shortage of funds for working
capital has caused many businesses to fail and in many cases, has related their growth. Lack
of efficient utilization of working capital leads to earn low rate of return on capital employed
or even compels to sustain losses. A firms invests a part of its permanent capital in fixed
assets and keeps a part of it for working capital i.e., for meeting the day to day requirement.
Working capital refers to a firm’s investment in short-term assets viz., cash, short term
securities, amount receivables and inventory of raw materials, work-in-process and finished
goods. It refers to all aspects of current assets and current liabilities. In other words Working
capital defines as ‘the excess of current assets over current liabilities’.

WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES

OBJECTIVES OF WORKING CAPITAL MANAGEMENT

The basic objective of working capital management are as follows:
 By optimizing the investment in current assets and by reducing the level of
current liabilities, the company can reduce the locking-up of funds in working
capital thereby, it can improve the return on capital employed in the business.
 The second important objective of working capital management is that the
company should always be in a position to meet its current obligations which
should properly be supported by the current assets available with the firm. But
maintaining excess funds in working capital means locking of funds without
return.
 The firm should manage its current assets in such a way that the marginal
return on investment in these assets is not less than the cost of capital
employed to finance the current assets.
 The firm should maintain proper balance between current assets and current
liabilities to enable the firm to meet its day to day financial obligations.

CURRENT ASSETS
Current assets are those assets which are convertible into cash within a period of one year and
are those which are required to meet the day operations of the business. The working capital
management, to be more precise the management of current assets. The current assets are or
near cash resources. These includes:

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  Cash and bank balance
 Temporary investment
 Short-term advances
 Prepaid expenses
 Receivables
 Inventory of raw materials, stores and spares
 Inventory of work-in-progress
 Inventory of finished goods
CURRENT LIABILITIES:
Current liabilities are those claims of outsiders which are expected to mature for payment
within an accounting year.
These includes:
 Creditors for goods purchased
 Outstanding expenses
 Short-term borrowing
 Advances received against sales
 Taxes and dividends payable
 Other liabilities maturing within a year

There are two major concept of working capital:

1. Gross working capital
2. Net working capital

 GROSS WORKING CAPITAL

The term ‘gross working capital’ refers to the firm’s investment in current assets. According
to this concept working capital refers to a firm’s investment in current assets. The amount of
current liabilities is not deducted from the total of current assets.
This concept have following advantages:
 Financial manager profoundly concerned with the current assets.
 Gross working capital provides the current amount of working capital at right
time.
 It enables the firm to realise the greatest return on its investment.

 NET WORKING CAPITAL

The term ‘net working capital’ refers to the excess of current assets over current liabilities
and it is the difference between current assets and current liabilities. The net working capital
is a qualitative concept which indicates the liquidity position of a firm and the extent to which
working capital needs may be financed by permanent source of funds. The concept looks into

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the angle of judicious mix of long-term and short—term funds for financing current assets. A
portion of net working capital should be financed with permanent sources of funds.

ON THE BASIS OF TIME

 PERMANENT WORKING CAPITAL

Permanent or fixed working capital is minimum amount which is required to ensure effective
utilization of fixed facilities and for maintaining the circulation of current assets. Every firm
has to maintain a minimum level of raw material, work-in-process, finished goods and cash
balance. This minimum level of current assets is called permanent or fixed working capital as
this part of working is permanently blocked in current assets. As the business grow the
requirements of working capital also increases due to increase in current assets.
a) Initial working capital
At its inception and during the formative period of its operations a company must
have enough cash fund to meet its obligations. The need for initial working capital
is for every company to consolidate its position.
b) Regular working capital
Regular working capital refers to the minimum amount of liquid capital required
to keep up the circulation of the capital form the cash inventories to account
receivable and from account receivables to back again cash. It consists of
adequate cash balance on hand and at bank, adequate stock of raw materials and
finished goods and amount of receivables.
 TEMPORARY WORKING CAPITAL
Temporary working capital is the working capital needed to meet seasonal as well as
unforeseen requirements. It may be divided into two types.
a) Seasonal working capital
There are many lines of business where the volume of operation are different and
hence the amount of working capital vary with the seasons. The capital required to
meet the seasonal needs of the enterprise known as seasonal working capital.
b) Special working capital
The capital required to meet any special operation such as experiment with new
products or new techniques of production and making interior advertising
campaign etc. are also known as special working capital.

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FACTOR DETERMINING WORKING CAPITAL REQUIREMENT
 Nature of business:
The working capital requirement of a firm is closely related to the nature of its
business. For example, a firm involved in sale of services rather than manufacturing or
a firm is allowing only cash sales. In the first instance, no investment is required in
either raw materials or work-in-progress or finished goods, while in second instance
there exist no receivables as there is immediate of cash. Hence the requirement of
working capital will be lower.
Jharkhand coal mines is a mining firm of coal, so the requirement of working capital is
high.
 Size of business:
Working capital also depend on the size of business. Jharkhand coal mines has a good
position in its segment and they provide one of the best quality of coal to their power
plant. The scale of production makes it a must for them to hold their inventory and
current assets at a huge level.
 Rate of growth of business:
The rate of growth of business is also a factor of determining working capital
requirement. If Jharkhand coal mines want to increase rate of production of coal, it
indicates a need for increase in the working capital requirements of the firm.
APPROACHES OF FINANCIAL WORKING CAPITAL:
 Hedging approach:
This approach matches assets and liabilities to maturities. Basically, a company uses
long term sources to finance fixed assets and permanent current assets and short term
financing to finance temporary current assets.

 Conservative approach:
It is conservative because the company prefers to have more cash on hand. That is
why, fixed and part of current assets are financed by long term or permanent funds. As
permanent or long term sources are more expensive, this leads to “lower risk lower
return”.

 Aggressive approach:
The company wants to take high risk where short funds are used to a very high degree
to finance current and even fixed assets.

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SOURCES OF WORKING CAPITAL
The company can choose to finance its current assets by
 Long term sources:
Long term sources of permanent working capital include equity and preference shares,
retained earnings, debentures and other debts from public deposits and financial institution.
Financing through long term means provides stability, reduce risks or payment and increase
liquidity of the business concern. Various types of long term sources of working capital are
summarized as follows:
1. Issue of shares: It is a primary and most important sources of regular or permanent
working capital. Issuing equity shares as it does not create and burden on the income of
the concern.
2. Retained earnings: Retain earning accumulated profits are permanent sources
of regular working capital. It is regular and cheapest. It creates not charge on
future profits of the enterprise.
3. Issue of debentures: It creates a fixed charge on future earning of the
company. Company is obliged to pay interest. Management should make wise
choice in procuring funds by issue of debentures.
4. Long term debt: Company can raise fund from accepting public deposits,
debts from financial institution like banks, corporation etc. the cost is higher
than the other financial tools.
5. Other sources: Sale of idle fixed assets, securities received from employees
and customers are examples of other sources of finance.

 Short term sources:

Temporary working capital is required to meet the day to day business expenditures.
The variable working capital would finance from short term sources of funds. And only
the period needed. It has the benefits of, low cost and establishes closer relationship
with banker.
Some sources of temporary working capital are given below:
1. Commercial bank: A commercial bank constitutes significant sources for
short term or temporary working capital. This will be in the form of short term
loans, cash credit, and overdraft and though discounting the bills of exchange.

2. Public deposits: Most of the companies in recent years depend on this source
to meet their short term working capital requirements ranging from six months
to three years.

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 3. Various credits: Trade credit, business credit papers and customer credit are
other sources of short term working capital. Credits from suppliers, advances
from customers, bills of exchanges, etc. helps to raise temporary working
capital.

WORKING CAPITAL MANAGEMENT AT HINDALCO (JHARKHAND COAL

MINES UNIT)
To maintain the optimum level of working capital in such a big organisation is really a
challenging task. The only source of finance is treasury department of Hindalco.
WORKING CAPITAL REPORT OF KATHAUTIYA COAL MINES

Particulars As on 31-03-2018 As on 31-03-2019

  Values (in lakh) Values (in lakh)

Current Assets    
Inventories 10,081.41 12,302.23
148.
Prepaid expenses 61.56 83
Cash and Bank balance 153.57 413.25
10.
loans and advances 5.25 12
1,136.
GST credits 835.62 92
Deposits 1.56 156.01
(A) Total Current Assets 11,138.97 14,167.36
     
     
Current Liabilities    
340. 1,233.
Other taxes 70 45
Premium 701.90 1,326.66
Royalty 996.85 986.99
Other payables 594.47 782.66
Provision and other payables 4,150.14 4,406.21
6,784. 8,735.
(B) Total Current Liabilities 05 97
     
4,354. 5,431.
(A)-(B) Net Working Capital 92 39
1,076.
Increase in WC 47  
Here company has high working capital, it has more than enough liquid funds to meet its
short-term obligations. The difference between WC of 2018 and 2019 is Rs.1076.47 lakhs.
Working capital, also called net working capital, is a liquidity metric used in corporate
finance to assess a business' operational efficiency. It is calculated by subtracting a
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company's current liabilities from its current assets. High working capital is considered a sign
of a well-managed company with the potential for growth. Also every high NWC show low
risk and low profitability according to trade off approach but this approach is not applicable
in JCM UNIT because unit is only a captive mine.

CAPITAL WORK-IN-PROGRESS

The asset which are not completed till the date of the preparation of balance sheets, all costs
incurred on that asset up to the balance sheet date are transferred to an account called Capital
Work in Progress Account. This account is shown separately in the balance sheet below the
fixed asset. Capital work in progress account contains all expenses incurred on the asset until
it is converted into working condition. All these expenses will become part of the cost of that
asset.
CWIP IN JCM (HINDALCO)
For example, I took the data from Trial Balance of April-2019

FOR TNAGIBLE ASSETS

GL CODE DESCRIPTION AMOUNT All

1608021 ADDITION - SHOP ORDER IN PROGRESS 134,117,563.84 payments
1608022 ADDITION - PROGRESS AND ADVANCE PAYMENTS 1,797,651.00 made for
1608051 CAPITALISATION - SHOP ORDER IN PROGRESS -3,321,744.83
1608062 DEDUCTION - PROGRESS AND ADVANCE PAYMENTS -3,152,351.00
NET CWIP 129,441,119.01

FOR INTANGIBLE ASSETS

GL CODE DESCRIPTION AMOUNT

1508021 ADDITION - SHOP ORDER IN PROGRESS 68,247,880.00
1508051 CAPITALISATION - SHOP ORDER IN PROGRESS -66,833,754.00
NET CWIP 1,414,126.00

procurement for fixed assets is put in GL code – 1608021 (for tangible assets) and 1508021
(for intangible assets). And any capitalization made is put in GL code – 1608051 (for
tangible assets) and 1508051 (for intangible assets). Thus CAPITAL WORK-IN-
PROGRESS is a combined impact of Addition – shop order in progress and Addition –
progress and advance payments less Capitalisation – shop order in progress and Deduction –
progress and advance payments for tangible assets. And Addition – shop order in progress
less Capitalisation – shop order in progress.
Capital work-in-progress is used to record current costs related to long-term projects like
purchasing of lands, furniture etc.

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 CASH ASSETS MANAGEMENT
Cash assets management is rapidly emerging as a vital area in any business organization.
Cash is the basic input needed to keep the business running in the continuous basis. The
management of cash resources holds a central position in the area of short-term financing
decisions.
The basic objectives of cash assets management are:-
 To ensure availability of cash as per payment schedule, and
 To minimise the amount of idle cash.
 To meet day to day cash requirement
 To maximise the profits on available investment opportunities
Effective cash assets management encompasses proper management of cash inflows and
outflows which entails:
 Improving forecast of cash flows
 Synchronizing cash inflows and outflows
 Accelerating collection
 Getting available funds to where they are needed
 Controlling disbursement
Motive for holding cash
The motive for holding cash arises from a variety of reasons which are
1. Transaction motive: A company is always entering into transaction with other
entities. While some of these transaction may not result in an immediate
inflow/outflow of cash (e.g. credit purchase and sales), other transactions cause
immediate inflows and outflows. So firms keep a certain of cash so as to deal
without routine transactions where immediate cash payment is required.
2. Precautionary motive: Contingencies have a habit of cropping up when least
expected. A sudden fire may break out, accident may happen, employee may
go on a strike, creditors may present bills earlier than expected or the debtors
may make payment earlier than warranted. The company has to be prepared to
meet these contingencies to minimize the losses. For this purpose companies
generally maintain some amount in the form of cash.
3. Speculative motive: Firms also maintain cash balances in order to take
advantages of opportunities that do not take place in the course of routine
business activities. For example, there may be a sudden decrease in the price of
raw materials which is not expected to last long or the fire may want to invest
in securities of other companies when the prices is just right. These
transactions are purely of speculative nature for which the firms need cash.

27 | P a g e
CASH MANAGEMENT IN HINDALCO (JHARKHAND
COAL MINES UNIT)

 The sources of funds in Hindalco (Jharkhand Coal Mines) only from treasury
department at Mumbai of the organization as it is a captive coal mine where in
all coal transferred to Mahan Power Project.
 The Finance department makes a cash forecast every month in which they
projected the estimated expenditure under the various heads on a weekly basis
of cash for next month. Such heads are – Raw material, employment, GST,
stores & spares, etc.
 If Jharkhand coal mines need of heavy amount on urgent basis which is not
mentioned in cash forecast statement between running months, office needs
approval from higher authorities for allocation of cash.

BANK RECONCLIATION STATEMENT Rupees Rupees

Balance as per cash book (after compilation) Xxx

Add: cheques issued but not yet presented
Cheque No. ……………………………… Xxx
Cheque No. ……………………………… Xxx
Cheque No. ……………………………… Xxx
xxx
Total XXX

Less: Cheques deposited but not yet credited by the Bank

Deposited on …………………… Xxx
Deposited on …………………… Xxx
Deposited on …………………… Xxx
xxx

Balance as per Bank Statement XXX

 Corporate office will take 48 hours after the cash call for transferring the cash.

28 | P a g e
 If there is a cash which was not utilized in estimated expenditure should be
either return or utilized in other expenditure along with justification.
 The Finance department makes Bank Reconciliation Statement (BRS) for
confirms whether the money leaving an account matches the amount that's
been spent, and ensures the two are reconciled at the end of the recording
period.
 There are two bank accounts, one is located on mines location for small
payments and other one located in Ranchi for regular payment.
 Hindalco (Jharkhand coal mines) have two signatories one belonging to
finance and other one is belonging to non-finance department. These
signatories assigned by Board of Director of Hindalco. It is an important
internal control related to cash disbursements can include requiring two
authorized signatures on all company cheques generally over a specific amount
that has been set by management. By requiring two signatures, the company is
verifying that both signers agree that the payment is proper and reasonable.
The requirement of two signatures reduce the likelihood that one will write
improper cheques to themselves or writing cheques to a fictitious company.
 The Finance department of Jharkhand Coal Mines also makes monthly
working capital report. Working capital report shows whether the cash should
be utilized in proper and effective manner or not. Working capital management
is essentially an accounting strategy with a focus on the maintenance of a
sufficient balance between a company’s current assets and liabilities.
Managing working capital means managing inventories, cash, accounts
payable and accounts receivable.
 The Finance department of Jharkhand coal mines take 30 days (usually credit
period) for making the payment to the vendors after submission of bills (only
in case of huge amount i.e., more than 10 lakhs).

PHYSICAL CASH

 The finance department of Jharkhand Coal Mines have average holding of physical
cash of Rs.30000 every month.
 These cash are used in imprest office expenses.

 These physical cash are kept in a Safe.

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  The SAFE has 2 keys. Two keys for each SAFE deposit box is a standard procedure
for safe deposit operation. Two different office employees are the holder of these keys
and jointly the same is operated.

CASH FORECAST FORMAT

Cash Forecast : July- 2019
Location :

Rs.in
                    Lacs      
Actu
Forecast
    al  
3r
2n 4th
A M J d
1st d Wk 5th
p a u Wk
Wk Wk (22 Wk
Sr. r y n (15 Jul- Aug- Sep Reason,
Heads of Expenditure (1st (8th nd (29th
No. - - - th 19 19 -19 if any
to to to to
1 1 1 to
7th) 14t 28t 31st)
9 9 9 21
h) h)
st)

Raw Material - - -
1 - - - - - - - -
 

Employment - - -  
2 - - - - - - - -

Power& Fuel - - -
3 - - - - - - - -
 

GST - - -
4 - - - - - - - -
 

TDS and other taxes - - -

5 - - - - - - - -
 

Freight - - -
6 - - - - - - - -
 

Store & Spares - - -

7 - - - - - - - -
 

Repair & Maintenance - - -

8 - - - - - - - -
 

30 | P a g e
 Routine Capex - - -
9 - - - - - - - -
 

Others - - -    
10 - - - - - -
 
Interest on Term Loan ( If
- - -
11 any) - - - - - - - -
 

  Sub Total-A - - -
- - - - - - - -
 
                           
  Capex                        

Non Routine (Project) Capex - - -

1 - - - - - - - -
 

  Sub Total-B - - -
- - - - - - - -
 
                           

  - - -
Grand Total - - - - - - - -  

INVENTORY MANAGEMENT

In a manufacturing unit usually about 20 to 30% of the total assets are in the form of
inventory and any effort in stock control will bring major benefits for the enterprise. An
efficient management of inventory is an essential requirement for the success of the
enterprise. The classification of inventory of a particular firm depends upon the nature of
business it carries. The efficiency shown in inventory will have direct impact on profitability
of a business enterprise.
NATURE OF INVENTORIES:
 Raw Materials – It include direct material used in the manufacturing of a product and
it also includes the components, fuel etc. used in the manufacture.
 Work in progress – It includes partly finished goods and materials, subassemblies etc.
held between manufacturing stages. Stock of work-in-progress are in the process of
production.

31 | P a g e
  Finished goods – The goods ready for sale or distribution will come under this
category.

Needs for Inventory management in Jharkhand Coal Mines Unit:

In the Hindalco, Jharkhand coal mines excavate coal is only one raw material. It is essential
Part of the raw material for production of power. In this Organization, Inventory
Management System is required for smooth supply of the raw material (Coal) and for
maintaining the optimum level of Inventory for the production of power and to ensure
continuous supply of coal for the generation power for Mahan power plant.

Inventory management involves:

1. Inventory management is the active control program which allows the management of
sales purchases and payment.
Coal is extracted by the way of contractual mining. While storing the Coal Inventory
management Policy provides the control over Inter unit transferring of the Coal for
production of power.
2. System and processes that identify inventory requirements, set targets, provide
replenishment techniques and report actual and projected inventory status.
Firstly Jharkhand Coal Mines production and planning division is planned the production
of coal then operation department tries to achieve the target. After that department will
stores the Coal to maintain the actual Inventory level.
3. Inventory management helps providing a good understanding ground and the capacity to
control financial costs as well as Operation cost.
Effective Inventory management helps to reduce the carrying cost of Coal which will have
positive impact over the operation cost which ultimately reduces the working capital
requirement of the organization.

4. Order Quantity
If Jharkhand Coal Mines are not maintaining the optimum inventory then it won't be able to
dispatch the required quantity of raw material to the plant. Therefore Effective Management
is required for smooth working of the plant.

Advantages of Inventory Management:

The following are suggested advantages:
1. It reduces the risk of loss due to pilferage.
Inventory management records & maintain the quantity of Coal that reduced the risk and
losses due to pilferage in Jharkhand Coal Mines.
2. It protects against uncertainty in demand.
3. It reduces cost of storage.

32 | P a g e
 An effective inventory management system helps in maintaining an optimum level of stock
which avoids an occurrence of unnecessary storage cost which can be occurred in the
absence of an effective IMS as it can result in holding unnecessary inventory.

Disadvantages of not having Inventory Management:

Every firm has to maintain optimal level of inventories. It not the following will be the result
in form of losses.
1. Opportunity cost: Every firm has to maintain inventory for that some investment is
needed it is known as opportunity cost and handle the investment in inventory are more the
funds are blocks up with inventory.
Even by having an effective IMS we cannot avoid the holding and storage cost of the
inventory. Even by maintaining the optimum level of stock we have to incur some holding
and storage cost by which our fund gets blocked and we have an opportunity loss over it.
2. Excessive inventories: excess of Inventory required more funds for carrying cost or
storage cost of the Inventory. It increased the working capitals which ultimately have
negative impact over the Organization.
3. Inadequate Inventory: It is another danger which results is production holds-up and
failure to meet delivery commitments. Inadequate raw materials and work - in - process
inventories will results in frequent production interruptions. If finished goods are not
sufficient customers may shifts to competitors.

Role of Inventory Management in different Sector:

There are three aspects of Inventory management-
1. Physical Inventory Management:
Keeping goods is also a type of management. Whenever requirements comes from
Production department, Providing those required materials in a proper manner at specific
time period is main motto of Physical Inventory Management.
In the process of production of power, Coal is an essential part of raw material. Effective
physical Inventory Management refers to smooth supply of the raw material (Coal) for
regular generation of power.
2. Financial Inventory Management:
“Recording, maintaining and evaluating the Stocks in a value term is known as Financial
inventory Management.”

33 | P a g e
Financial Inventory Management is divided into three different categories:
A. Based on Valuation
B. Based on Cost Analysis
C. Based on Financial Statement
In this unit financial Inventory Management refers the Recording & maintaining the quantity
of Coal and also evaluating the value of Coal through weighted average value cost methods.
3. Logistic Inventory Management:
Logistic Inventory Management is the service and supply chain of the Organization in
effective or proper manner in specific time period.
In Jharkhand Coal Mines Logistic Inventory Management avoid the movement of unloaded
transport, load the optimum quantity of Coal for transport & supply it on need basis.
Concept of Inventory management Techniques:
These are the techniques of Inventory Management system which are classified on different
basis:
ABC Analysis- On the basis of consumption cost.
VED Analysis- On the basis of criticality and importance of the goods.
VED Stand for
V- Vital
E- Essential
D- Desirable
XYZ Analysis- On the basis of Inventory holding cost.
X item is those items whose value is high while Z items are those items whose values are low
and Y items are those items whose value between both.
SDE Analysis- On the basis of problem in the procurements of goods.
SDE stand for
S- Scarce items- Which are not easily available in the market.
D- Difficult items- Which are non-available in the market.
E- Easy items- Which are easily available in the market.
FSN Analysis- On the basis of movement of the goods.
FSN Stand for
F- Fast moving items having consumption in at least one year.
S- Slow moving items having consumption in alternative year.
N- Non-moving consumption items in last 5-6 years.
HML Analysis- On the basis of unit cost of goods.
HML Stand for

34 | P a g e
H- High cost items (in Unit)
M- Medium cost items (in Unit)
L- Low cost items (in Unit)
Age Analysis- On the basis of age of the spares being stored in stores.
SOS Analysis- On the basis of Seasons (specific time period) or off seasons.
SOS Stand for
Seasonal items – Off Seasonal items.
GOLF Analysis- On the basis of Availability of goods in the Market.
GOLF Stand for
Government - Open market - Local market - Foreign sources.

RECEIVABLE MANAGEMENT
Receivables or debtors are the one of the most important parts of the current assets which is
created if the company sells the finished goods to the customer but not receive the cash for
the same immediately. To increase the sales volume, generally the credit facility will be
offered to the customers which result in investment in receivables to maximize return on
capital employed. The balance in receivables account is determined by the number of
customers length of credit, amount of credit allowed to each customers etc.
Trade credit arises when a company sales its products or services on credit and does not
receive cash immediately. It is an essential marketing tool, acting as a bridge for the
moment of goods through production and distribution stages to customers. A company gives
trade to protest its sales from the competitors and to attract the potential customers to buy is
product at favourable terms. Trade credit creates receivables or book debts that the company
is accepted to collect in the near future. The customers from who receivables have to be
collected are called as “Trade Debtors” receivables constitute a substantial position of
current assets.
35 | P a g e
The management of receivables broadly covers the study of credit policy, credit analysis,
credit control, management of investment in debtors balance, increase in efficiency of short-
term fund management. But simultaneously it should consider the costs involved in liberal
credit policy which leads to the increased investment in receivables balances, risk of bad
debts, cost of administration of receivables, the problem of liquidity, etc. To saving in costs
of maintaining receivables, the firm will considered the rate of default risk and
administrative cost on outstanding balance and attached it to find out the cost of credit.
Hence, it helps to minimize the costs and risk; and maximise the firm’s profitability and
return.
Cash discount are offered by the seller to the customer to encourage early payment. This is
to encourage payment before the end of the credit period. The buyer may decide to pay early
and take advantage of cash discount or can wait until the end of the credit period without
availing cash discount. The benefits of cash discount are:-
 If sensibly priced, they encourage customers to pay earlier, thereby avoiding some of the
financing cost arising out of the granting of credit. Thus they can affect profitability.
 The seller may be suffering from cash flow problems. If settlement discount encourage
earlier payment, it enable a company to maintain liquidity. In the short term, liquidity is
often more important than profitability.
 Settlement discount might affect the volume of demand if they encourage customer to
buy.
Analysis of receivables
Debtor’s turnover ratio indicates the speed of debt collection of the firm.
Debtor’s turnover ratio = Net sales/avg. debtors

For example –

Year Net sales Avg. Debtors Debtors turnover ratio

2007-08 278.94 lakhs 18.05 lakhs 15.44 times
2008-09 384.96 lakhs 37.87 lakhs 10.16 times
2009-10 423.45 lakhs 43.55 lakhs 9.72 times
In 2007-08 turnover ratio is 15.44 times but it decrease to 10.16 times and 9.72 times in the
year 2008-09 and 2009-10 respectively. This shows that company not collecting their debt
rapidly.
Debtor’s collection period:-

36 | P a g e
Debtor’s collection period measures the quality of debtors since it measure the rapidity or
the slowness with which money is collected from them a shorter collection period. It
reduces the chances of bad debts.
Avg. collection period = Days in a Year/Debtors turnover ratio

Year Days in a year Debtors turnover ratio Debtors collection period

2007-08 365 15.44 times 23.64 days
2008-09 365 10.16 times 35.92 days
2009-10 365 9.72 times 37.55 days
Debtor’s collection period changing over the years. It was 23.64 days in 2007-08 but it
increase in 2008-09 by 35.92 days and in 2009-10 by 37.55 days.
This shows the inefficient credit collection performance of the company.
CREDIT CONTROL

PART - 5

DATA ANALYSIS AND

INTERPRETATION

 Establish credit control department.

 Establish credit policy.
 Establish credit standard.
 Assess credit risk.
 Assess customer creditworthiness.
 Establish policy on bad debt.
In Jharkhand coal mining unit, there are no debtors as Kathautia Coal Mines is a
captives mines and all coal extracted is transferred to Mahan Power Plant. They only
excavate coal from mines and supply to their own power plant.

37 | P a g e
 DATA ANALYSIS AND INTERPRETATION

A. RATIO ANALYSIS
Ratio analysis is a powerful tool of financial analysis. Ratio analysis is a process of
comparison of one figure other, which makes a ratio and appraisal of the ratios of the
ratios to make proper analysis about the strengths and weakness of the firm’s operations.
The term ratio refers to the numerical or quantitative relationship between two accounting
figures. Ratio analysis of financial statements stands for the purpose of determining and
presenting the relationship of items and group of items in the statements.
NOTE: I have used the ratio analysis in this project in order to substantiate the meaning
of working capital. For this, I used some of the ratios to get the required output.
Various working capital ratios used by me are as follows:
 Liquid ratio:
Liquidity refers to the ability of a firm to meet its current obligations as and when these
become due. The short-term obligations are met by realizing amount from current, floating
or circulating assets.
 CURRENT RATIO
It is a ratio, which express the relationship between the total current assets and current
liabilities. It measures the firm’s ability to meet its current liabilities. It indicates the
availability of current assets in rupees for every one rupee of current liabilities. A ratio
of greater than one means that the firm has more current assets than current liabilities
claims against them. A standard ratio between is 2:1.
Current ratio = current assets/current liabilities

STANDARD
Current Ratio = Current assets/Current liabilities
RATIO IS 2:1
Year Current Assets Current Liabilities Current Ratio

2017-2018 11138.97 6784.05 1.64

2018-2019 14167.36 8735.97 1.62

38 | P a g e
 INTERPRETATION
current ratio
It is seen from the above chart that during the year
2 2017-18 the current ratio was 1.64 and during the year
2018-19 it was 1.62. The current ratio is near the
standard ratio i.e., 2:1. Hence it can be said that there
is sufficient current assets in Jharkhand Coal Mines
unit to meet its current liabilities.

1.6
year 2017- year2018-19
18

 LIQUIDITY RATIO
This ratio establishes a relationship between quick/liquid assets and current liabilities. It
measures the firm’s capacity to pay off current obligations immediately. An assets is
liquid if it can be converted in to cash immediately without a loss of value; inventories are
considered to be less liquid. Because inventories normally require some time for realizing
into cash. This ratio is also known as acid-test ratio. The standard quick ratio is 1:1. Is
considered satisfactory.

Liquidity Ratio = Liquidity Assets (current assets - inventory)/current liabilities

Year Liquidity Assets Current Liabilities Quick Ratio

2017-2018 1057.56 6784.05 0.16

2018-2019 1865.13 8735.97 0.21

Quick rati o
0.25 INTERPRETATION

0.2
During the year 2017-18 the liquidity ratio was 0.16 and in
the year 2018-19 it increases to 0.21. Here the changes in
0.15 the ratio held because of changes in inventory value of both
year and also in the change in the value of other taxes.
0.1

 ABSOLUTE LIQUID RATIO

0.05
Absolute liquid ratio may be defined as the relationship
0 between absolute liquid assets and current liabilities.
Category 1 Category 2
Absolute liquid assets include cash in hand and cash at
bank. The standard ratio is 0.5:1.

39 | P a g e
 ABSOLUTE LIQUIDITY RATIO = Cash and bank balance/Current Liabilities

Year Cash & bank balance Current Liabilities Absolute Liquid Ratio

2017-2018 153.57 6784.05 0.023

2018-2019 413.25 8735.97 0.047

INTERPRETATION
Absolute liquid rati o
0.05 During the year 2017-18 the absolute liquidity ratio was
0.05 0.023 and during the year 2018-19 it was 0.047. This
0.04
shows the absolute liquidity ratio increases every year.
The liquidity ratio of the unit is not comparable to
0.04
standard ratio because JCM unit is not a profit centre
0.03
unit, this is a cost centre unit and all fund comes from
0.03 treasury department of Hindalco as per the requirement.
0.02

0.02

0.01

0.01

0
Year 2017- Year2018-
18 19

 INVENTORY TURNOVER RATIO:

Inventory turnover ratio is the ratio, which indicates the number of times the stock is turned
over i.e. sold during the year. This measures the efficiency of the sales and stock levels of a
company. A high ratio means high sales, fast stock turnover and a low stock level. A low
stock turnover ratio means the business is slowing down or with a high stock level.

Inventory turnover ratio = Annual consumption/Average inventory

Year Annual Consumption (in lakh) Avg. inventory (in lakh) Inventory turnover ratio

2017-18 30695.76 14631.74 2.10

INVENTORY TURNOVER
2018-19 26966.18 14121.00 1.91
RATIO
2.15 INTERPRETATION
2.1
It is seen from the above chart that during the year
2.05
2017-18 the Inventory turnover ratio was 2.10 times, but
2 in the year 2018-19 it decreased to 1.91 times. This ratio
1.95 2.1
1.9
40 | P a g e
1.85 1.91
1.8
Year 2017- Year2018-
18 19
shows that the coal mines have high stock level of coal but the reason of high stock discussed
in next analysis.

 INVENTORY HOLDING PERIOD

This period measures the average time taken for clearing the stocks. It indicates that how
many day’s inventories take to convert from raw material to finished goods but in JCM it
indicates that how many day’s inventories take to dispatch the material (coal) to Mahan
Power Plant.

Inventory Holding Period = Days in a Year/Inventory turnover ratio

Year Days in a year Inventory turnover ratio Inventory holding period

2017-18 365 2.10 173.98

2018-19 365 1.91 191.13

INTERPRETATION
IHR Inventory holding period fluctuating over the years. It was
195 173.98 days in the year 2017-18, but in the year 2018-19
it increased to 191.13 days. The ratio shows that the
190
holding days of inventory is high because coal mines
185 depend on the availability of goods wagon in Indian
Railways. Due to unavailability of goods wagon makes
180
191.13 delay in dispatching of Coal to Mahan power plant (MP).
175

170 41 | P a g e
173.98

165
Year 2017- Year2018-
18 19
  WORKING CAPITAL TURNOVER RATIO
This ratio indicates the number of times the working capital is turned over in the course of the
year. This ratio measures the efficiency with the working capital is used by the firm. A higher
ratio indicates efficient utilization of working capital and a low ratio indicates otherwise. But
very high working capital turnover is not a good situation for any firm.

Working capital turnover ratio = Annual consumption/Avg. working capital

Year Annual consumption (in lakh) Net working capital (in lakh) WC turnover ratio

2017-18 30923.13 4627 6.68 times

2018-19 27111.53 5431 4.99 times

INTERPRETATION
WCTR
8 It seen from the above chart, the WC turnover ratio in
7 the year 2017-18 was 6.68 times, but it was decreased
6 to 4.99 times in the Year 2018-19 because increase in
5 the value of current assets. This shows that the unit is
4
6.68
utilizing working capital effectively.
3
4.99
2 An extremely high working capital turnover ratio can
1 indicate that a company does not have enough capital
0
Year 2017- Year2018-19 to support its sales growth.
18

Column2

STATEMENT OF CHANGES IN WORKING CAPITAL

The purpose of preparing this statement is for finding out the increase or decrease in working
capital and to make a comparison between two financial years.
Statement of changes in working capital for the year of 2017-18 and 2018-19

Particulars As on 31-03-2018 As on 31-03-2019 Effect on working capital

      Increase Decrease
Current Assets      
(2,2
Inventories 10,081.41 12,302.23 20.82)  

Prepaid expenses 61.56 148.83 87.27  

Cash and Bank balance 153.57 413.25 259.68  

loans and advances 5.25 10.12 4.87  

GST credits 835.62 1,136.92  

42 | P a g e
 301.30
Deposits 1.56 156.01 154.45  
(A) Total Current Assets 11,138.97 14,167.36    
       
       
Current Liabilities      

Other taxes 340.70 1,233.45 892.75  

Premium 701.90 1,326.66 624.76  
(
Royalty 996.85 986.99   9.87)
Other payables 594.47 782.66 188.19  
Provision and other
payables 4,150.14 4,406.21 256.08  
(B) Total Current 6,
Liabilities 784.05 8,735.97    
       
(A)-(B) Net Working 4,
Capital 354.92 5,431.39    
1,
Increase in WC 076.47    

PART - 6

FINDING AND CONCLUSION

INTERPRETATION
In the above table, it is seen that during the year 2017-18 and 2018-19 there was a net
increase in working capital of Rs.1076.47 lakh. This is because of increase in current assets
and current liabilities in the year 2018-19. It indicates an adequate working capital in
Jharkhand Coal Mines.

43 | P a g e
 FINDING

According to my study working capital of the JHARKHAND COAL MINES

UNIT was increasing and showing positive working capital per year.

The JCM has preferable current and liquidity ratios are i.e., 1.62 and 0.21

respectively but lower absolute liquid ratio because JCM unit a cost centre unit

and fund comes from treasury when unit need arises.

Inventory turnover ratio is 1.91 times in year 2019 and inventory holding

period is also high i.e., 191.13 days in year 2019 this is because Company

depend on the availability of goods wagon in Indian Railways for dispatching

the coal to Mahan Power Plants.

Debtor’s turnover ratio is not applicable in JCM because unit don’t sale their

products to customers.

Working capital turnover ratio is favourable to unit in 2017-18 i.e., 6.68 but it

was decreased by 4.99 in the year 2018-19 but not below the critical level i.e.,

1.

44 | P a g e
 CONCLUSION

Liquidity is an attribute that signifies the capacity to meet financial obligations of the
company when required. The importance of liquidity to meet the day to day operations and
urgent payment to contractors and other creditors. A firm should maintain adequate level of
working capital to meet the day to day operations and maintain business operations. The
effective management of working capital requires both medium-term planning and immediate
reactions to the fast changes taking in the present business environment. The effectiveness of
working capital depends on all current assets and current liabilities.
Working capital management of JCM unit is highly effective. The project is very much
profitable. There is available internal source of fund is satisfactory. They have no difficulties
in management of inventory, cash balance and current liabilities and the liquidity position of
the company is also very much satisfactory. The unit enjoys good facility of cash credit and
there is no difficulty in payment of current liabilities.
Working capital management of JCM unit has been very important to the organization. It has
lots of challenges as competition increases in the coal mining sector. If challenges can be
faced technically by maintaining continuous support to mining teams of this unit can be more
effective to the overall development of the organization.

45 | P a g e
 PART - 7

BIBLIOGRAPHY

46 | P a g e
 BIBLIOGRAPHY

WEBSITES
 http://www.hindalco.com/

 https://www.investopedia.com/terms/w/workingcapitalmanagement.asp

 https://www.accountingtools.com/articles/ratio-analysis.html

 https://www.scribd.com/doc/50575794/HINDALCO-WC-PROJECT

 https://www.slideshare.net/rameshankathi/projectreportonworkingcapital

BOOKS

 Ravi M. Kishore Book “FINANCIAL MANAGEMENT” Taxman Publication

(P.) Ltd. New Delhi.

 I M PANDEY Book “FINANCIAL MANAGEMENT” Vikas Publishing Pvt.

Ltd. Noida.

COMPANY DATA

 Trial Balance of the year 2018 and 2019

 Working capital report of the year 2018 and 2019

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48 | P a g e