Project Report Accounting & Finance Under The University of Calcutta)

Project Report
(Submitted for the Degree of B.Com. Honours in

Accounting & Finance under the University of Calcutta)
TITLE OF THE PROJECT
WORKING CAPITAL MANAGEMENT

AT
ITC LIMITED
Submitted by
Name of the Candidate:
Registration No.:
C.U. Roll No. :
Name of the College: Syamaprasad College
Supervised by
Name of the Supervisor: Prof. Tapas Kumar Ghosh
Month & Year of Submission: February, 2019

WORKING CAPITAL MANAGEMENT OF ITC LIMITED
ACKNOWLEDGEMENT
I take this opportunity to place on record my grateful thanks and gratitude to all
those who gave me valuable advice and inputs for my study. My study could
not have been completed if I had not been able to get the reference materials
from the company. I express my sincere regards to my guide “Prof. Tapas
Kumar Ghosh” for support and guidance. Last but not least, I would also like to
express my thanks to my family members who inspired me to put in my best
efforts for the research / project report.
Student’s Signature
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TABLE OF CONTENT
Chapter Particulars Page no
1. Introduction
1.1 Background
1.2 Rationale of the study
1.3 Brief review of the study
1.4 Objectives
1.5 Methodology
1.5.1 Area of study
1.5.2 Sample
1.5.3 Type of study
1.5.4 Tools for data collection
1.5.5 Method of analysis
1.6 Limitations of study
1.7 Chapter planning
2. Conceptual frame work/National/International
Scenario
2.1 Conceptual framework
2.2 National/International Scenario (Company profile)
3. Presentation, Analysis & findings
4. Conclusion and Recommendation
Bibliography
Annexure
I A - Supervisor's Certificate
I B - Student's Declaration
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Chapter-1
INTRODUCTION
1.1 BACKGROUND OF STUDY:
Whatever may be the organization, working capital plays an important role, as the company
needs capital for its day to day expenditure. Thousands of companies fail each year due to
poor working capital management practices. Entrepreneurs often don't account for short
term disruptions to cash flow and are forced to close their operations.
In simple term, working capital is an excess of current assets over the current liabilities.
Good working capital management reveals higher returns of current assets than the current
liabilities to maintain a steady liquidity position of a company. Otherwise, working capital is
a requirement of funds to meet the day to day working expenses. So a proper way of
management of working capital is highly essential to ensure a dynamic stability of the
financial position of an organization.
ITC LIMITED, is the largest biscuit company in India with a dominant presence in India.
Seeing the good opportunity to study financial systems and practices of ITC LIMITED, it is
relatively important to take up a project to be titled as “Study of Working Capital
Management of ITC LIMITED. During the project work, it is being analyzed the working
capital position of this organization, its size and assessment of performance of the
organization in managing working capital.
The goal of Working capital management is to ensure that the firm is able to continue its
operations and that it has sufficient money flow to satisfy both maturing short-term debt
and upcoming operational expenses.
Working capital management deals with maintaining the levels of working capital to
optimum, because if a concern has inadequate opportunities and if the working capital is
more than required then the concern will lose money in the form of interest on the blocked
funds. Therefore working capital management plays a very important role in the profitability
of a company. And also due to heavy competitions among different organization’s it is now
compulsory to look after working capital.
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1.2 Rationale of the study
ITC Limited or ITC is an Indian conglomerate headquartered in Kolkata, West Bengal. Its
diversified business includes five segments: Fast Moving Consumer Goods (FMCG), Hotels,
Paperboards, Paper & Packaging and Agri Business. In 2017-18 ITC generated Rs. 67082.00
crore in form of Gross sales value and increased shareholders return by 22.4% since 1996 till
31/03/18. A company with its presence of more than 100 years with diversified business
activity with such a robust financial background, I thought it proper to take up a project on
working capital management at ITC Limited or ITC
1.3 Review Literature
Every business needs funds for two purposes basically; they are for establishment and to
carry day-to-day operations. Long term funds are required for establishment of the
organization.
Working capital refers to that part of the firm's capital which is required for financing
short term or current assets such as cash, marketable securities, debtors and inventories. It
is also known as CIRCULATING CAPITAL or REVOLVING CAPITAL or SHORT TERM CAPITAL.
According to Eljelly, in 2004[International Journal of Commerce &
Management. 14(2)].
Elucidated that efficient liquidity management involves planning and controlling current
assets and current liabilities in such a manner that eliminates the risk of inability to
meet due short-term obligations and avoids excessive investment in these assets. The
relation between profitability and liquidity was examined, as measured by current ratio
and cash gap (cash conversion cycle) on a sample of joint stock companies in Saudi
Arabia using correlation and regression analysis. The study found that the cash conversion
cycle was of more importance as a measure of liquidity than the current ratio that affects
profitability. The size variable was found to have significant effect on profitability at the
industry level. The results were stable and had important implications for liquidity
management in various Saudi companies. First, it was clear that there was a negative
relationship between profitability and liquidity indicators such as current ratio and cash gap
in the Saudi sample examined.
According to Deloof, in 2003[Journal of Business Finance & Accounting. 30(3) & (4)].
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Discussed that most firms had a large amount of cash invested in working capital. It can
therefore be expected that the way in which working capital is managed will have a
significant impact on profitability of those firms. Using correlation and regression tests he
found a significant negative relationship between gross operating income and the number
of days accounts receivable, inventories and accounts payable of Belgian firms. On basis of
these results he suggested that managers could create value for their shareholders by
reducing the number of days accounts receivable and inventories to a reasonable minimum.
The negative relationship between accounts payable and profitability is consistent with the
view that less profitable firms wait longer to pay their bills.
1.4 PROJECT OBJECTIVE
The primary objective of taking up a study on working capital management of ITC LIMITED is
to critically evaluate the performance of the management in managing working capital of
the firm
Secondary objectives: To evaluate the performance of the organization in managing working

capital by making an in-depth study on
 Working capital structure of the organization.
 Different components of working capital and their changes
 Liquidity of the organization with the help of different liquidity ratio.
 Trend of working capital by analyzing change in working capital
 Management of Debtors, Inventories and cash
1.5 METHODOLOGY
1.5.1 Area of Study:
My study is mainly concerned with assessing of Working Capital of ITC LIMITED and my
comments on their performance and to suggest remedial measures to overcome the
shortcomings in managing working capital came out of my study.
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1.5.2 Type of Study:
The data i s collected using o nl y by secondary sources. The project is discursive in nature
based on published data. Our data is based on mainly:
 Calculation
 Observation
1.5.3.Tools For Data collection:

Data that is used from web sites and published materials related to working capital
management as well as any relevant information on capital of the company from its official
website. For data I used:
 Annual report
 Internet
 Books and Journals
1.5.4 METHODS OF ANALYSIS
For analyzing data I used following statistical and analytical tools:
1. Table
2. Graphs
3. Statement of changes of fund
4. Ratio analysis
1.6 LIMITATIONS
1) Due to implementation of revised Schedule VI for all final accounts prepared on or after
01/04/14, method of presentation of data in final accounts was changed. As such I can
be able compare data for 4 years, no data prior to financial year 2010-11 can be
considered.
2) Improper availability of data.
3) Price level change affects the validity of comparisons of ratios computed for different
time periods.
4) If company resort to ‘window dressing’, outsiders cannot look into the facts and affect
the validity of comparisons.
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5) The scope off study is very wide .A large sample would have provided more confidence
in the findings but due to cost and time constraint the sample size was kept small.
6) Creditor’s management and calculation of operating cycle cannot be done due to
absence of required data.
1.7 CHAPTER PLANNING
Following are the chapterisation of the study:
Chapter-1 represents the background of the study, relevance of the study, brief review of
literature, objectives as well as research methodology, limitation of study.
Chapter-2 represents Conceptual frame work and national and international scenario i.e
company profile of ITC LIMITED Industries Ltd.
Chapter-3 represents presentation, analysis and findings
Chapter-4 conclusion and recommendations
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CHAPTER-2
2.1. CONCEPTUAL FRAME WORK
Capital
Capital refers to the amount of money invested in business by the owner or owners. In
other words, capital means the amount of money necessary to perform the various
functions like production, distribution, management and control of the business since its
inception. But that money alone is not capital, because it does not have its own production
capacity. It cannot be directly consumed.
Features: Capital contains certain characteristics which are stated below:
i. Output of past labour: The portion of goods produced by means of human labour,
which is again employed for production is called capital.
ii. Productivity: Capital is a productive thing. The more will be the use of capital, the
more will be the production of goods.
Working Capital
Working capital is defined as the capital which is needed for the daily working of an
organization. Funds required for short-term purposes for the purchase of raw materials,
payment of wages and for other day-to-day expenses are known as working capital.
According to Shubin,”Working Capital is the amount of funds necessary to cover the cost of
operating the enterprise”. In simple words working capital refers to that part of the firm’s
capital which is required for financing short-term or current assets such as stock, debtors,
marketable securities, cash, etc. it is defined as the excess of current assets over current
liabilities and provisions. Symbolically, Working Capital = current asset (CA) minus current
liabilities (CL).
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Working Capital Management
Working Capital Management is one of the most important areas in the day-to-day
management of the firm. It is concerned with the short-term financial decisions. As the
name indicates, the term ‘Working Capital’ is defined as the capital which is needed for the
daily working of an organization. It is also known as circulating capital. Working Capital to a
company is like the blood to a human body. As the blood circulates continuously within a
living being working capital also circulates continuously within an organization, the effective
and efficient management of which assures the health of the organization. It refers to that
part of total capital which is used for carrying out the routine or regular business operation.
It is concerned with the problems arising in attempt to manage the current assets, current
liabilities and the inter-relationship that exists between them. The term current asset refers
to those assets which in ordinary course of business will be turned into cash within one year
without undergoing a diminution in value and without disrupting the operation of the firm.
For example cash, marketable securities, bills receivable, debtors, and inventories. Current
liabilities are those liabilities which are intended to be paid in the ordinary course of
business within a year out of current assets or earnings of the concern. For example
accounts payable, bills payable, bank overdraft, outstanding expenses.
The goal of working capital management is to manage the firm’s current assets and current
liabilities in such a way that a satisfactory level of working capital is maintained. The firm is
likely to become insolvent if it cannot maintain a satisfactory level of working capital as it
keeps the wheels of a business enterprise running. In order to ensure a reasonable margin
of safety current asset should be large enough to cover its current liabilities.
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CLASSIFICATION OF WORKING CAPITAL
Working Capital may be classified in two ways:
1. On the basis of Concept.

2. On the basis of Time.
1. On the basis of concept
There are two concepts of working capital:
 Balance Sheet concepts

 Operating Cycle or circular flow concept
Balance Sheet Concept
There are two interpretation of working capital under the balance sheet concept:
 Gross Working Capital

 Net Working Capital
The term working capital refers to the Gross working capital and represents the
amount of funds invested in current assets. Thus, the gross working capital is the capital
invested in total current assets of the enterprises. Current assets are those assets which are
converted into cash within short periods of normally one accounting year.
Example of current assets is:
CONSTITUENTS OF CURRENT ASSETS
1) Cash in hand and cash at bank

2) Bills receivables
3) Sundry debtors
4) Short term loans and advances.
5) Inventories of stock as:
a) Raw material
b) Work in process
c) Stores and spares
d) Finished goods
6) Temporary investment of surplus funds.

7) Prepaid expenses
8) Accrued incomes.
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9) Marketable securities.
In a narrow sense, the term working capital refers to the net working. Net working capital is
the excess of current assets over current liability, or, say:
NET WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES
Net working capital can be positive or negative. When the current assets exceeds the
current liabilities are more than the current assets. Current liabilities are those liabilities,
which are intended to be paid in the ordinary course of business within a short period of
normally one accounting year out of the current assets or the income business.
CONSTITUENTS OF CURRENT LIABILITIES
1. Accrued or outstanding expenses.

2. Short term loans, advances and deposits.
3. Dividends payable.
4. Bank overdraft.
5. Provision for taxation, if it does not amt. to app. of profit.
6. Bills payable.
7. Sundry creditors.
The gross working capital concept is financial or going concern concept whereas net working
capital is an accounting concept of working capital. Both the concepts have their own
merits.
Operating cycle concept
Operating Cycle or Working Capital Cycle may be defined as the period that a business
enterprise takes in converting cash back to cash. It is the time duration that starts from
procurement of raw materials and ends with the realization of cash through sales. Suppose,
a company has a certain amount of cash which is needed to purchase raw materials. Some
raw materials will be available on credit but, cash is required for labour cost and other
overhead expenses. These three combined together is required to complete the production
process. After the production process is complete finished products are sold for or credit.
When cash is realized from debtors, working capital is restored to its original form and the
cycle of working capital is completed.
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Collection from Debtors Payment to

Cash
Creditors
(AccountsPayable)
Purchase of
Stock of Raw
Operating Cycle of a Manufacturing
Accounts Materials
Concern. (Assuming all purchases and
Receivables sales are on credit)
(Debtors)
Issue of
Materials
Sales to prod.
floor
Production of Finished Goods

Stock of Finished Materials added with
Goods Labour and Overheads
(W-I-P)
On the basis of time working capital is classified as:
Permanent or fixed working capital:
Permanent or fixed working capital is the 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.
Temporary or variable working capital
Temporary or variable working capital is the amount of working capital which is required to
meet the seasonal demands and some special exigencies. Variable working capital
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can further be classified as seasonal working capital and special working capital. The capital
required to meet the seasonal need of the enterprise is called seasonal working capital.
Special working capital is that part of working capital which is required to meet special
exigencies such as launching of extensive marketing for conducting research, etc.
Fig. 1-Amount of Working Capital
The above figure shows the fixed and temporary amount of working capital. The Fixed
Working Capital always remains fixed irrespective of the time factor. But the Variable
Working Capital fluctuates over the period of time in accordance with the firm’s short-term
needs.
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The classification of working capital is shown in the following chart:
Classification of Working Capital
On the basis of concept

On the basis of time
Gross working Net working Fixed working capital Temporary

capital capital working capital
Positive working Negative working

Regular Reserve working
capital capital
workingcapital capital
Seasonal working Special working

capital capital
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Sources of Working Capital
A firm has to arrange finance after determining of the level of working capital. It has to
arrange finance both for its Permanent or Fixed working capital as well as for Temporary or
Variable working capital
The various sources from which financing of working capital can be shown in the following
chart:
Sources of Financing or Working Capital
Permanent or Fixed Working Temporary or Variable

Capital Working Capital
Internal External Internal 1.External

Loan from
Sources Sources Sources Sources
banks
2. Loan from
financial
institutions
1. Ploughing back 1. Issue of 1. Provision for 3. Public
of profit/ deposits
shares depreciation
4. Trade
Retention creditors
2. Issue of 2. Provision for
5. Installment
debentures taxation
credit
3. Loan from 6. Commercial
3. Outstanding
paper
financial wages & 7. Advance
institutions expenses. from
customers
8. Factoring
9. Pre-
received
incomes
10. Government
aid
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Significance of Working Capital

The significance of working capital in a business enterprise is undeniable. It is very essential
to maintain the smooth running of the business. Lack of working capital may endanger the
survival of the business.
The need for maintaining adequate amount of working capital is as follows:
1. Regular supply of raw materials: For continuous production, a regular supply of raw
materials is needed. Working Capital ensures a regular supply of raw materials and
continuous production.
2. Availability of cash discount: The business can avail the advantage of cash discount
by paying cash for the purchase of raw materials and merchandise. If proper cash
balance is maintained, this will reduce the cost of production.
3. Regular Payment of wages and salaries: If a company has ample working capital, it
can make regular payment of salaries and wages which increases efficiency of its
employees and raises their morale.
4. Increase in efficiency and Productivity: The regular flow of working capital enhances
productivity of labour and increases managerial efficiency.
5. Solvency: Adequate working capital helps in maintaining the solvency of the
business.
6. Increase in profitability: Adequate amount of working capital and its proper
management helps in completing operating quickly which results in increased level
of productivity as well as profitability.
Followings are the disadvantages of redundant/excessive working capital:
 Unnecessary increase in Inventories resulting in waste, theft, damage etc.

 Increase in numbers of Debtors and delays in collection of receivables.
 Lower rate of return to the Shareholders leads to lower dividend which helps to
reduction of the market value of shares. Therefore, Shareholders loose confidence in
the Company.
 Excessive Working Capital gives birth to over capitalization with all its evil.
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 There may be an imbalance between liquidity and profitability. A company may

enjoy high liquidity and at the same time suffer lower profitability.
 Excessive working capital makes management inefficient in respect of increase in
production capacity and so on..
Followings are the disadvantages of shortage working capital:
 The firm is unable to take advantages of new opportunities.

 Trade discounts are lost. A form with sufficient working capital is able to finance
larger stocks and therefore can place large orders.
 Financial reputation is lost due to non-payment of trade creditors.
 Creditors may apply to the court for winding up if the firm fails to pay their
obligations on time.
 Cash discounts are lost. Some firm will try to persuade their debtors to pay early by
offering cash discounts.
Determinants of Working Capital
Working capital requirement is determined and influenced by a number of factors. The

following factors need considerations for determining the working capital requirements:
1. Nature of business: The working capital requirement of a company basically

depends upon the nature business it conducts. The service organization needs
lesser amount of working capital than trading, manufacturing or financial
organizations. Manufacturing Organization may require more working capital than
trading concerns. Again, for manufacturing concerns, shorter the manufacturing
process, the lower is the requirement for the working capital.
2. Size of business: Large business where number of operations are more, require
large amount of working capital than a small business where operations are
relatively less. So, working capital requirement also depends on the size of the
business.
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3. Volume of sales: Volume of sales also affects the requirement of working capital.
As volume of sales increases, the investment of working capital increases and when
the volume of sales decreases, the investment of working capital also decreases.
4. Working capital cycle: Working capital cycle refers to the period which starts
with the purchase of materials to the realization of cash out of the sale of the
finished goods. The speed with which the working capital cycle completes one cycle
determines the requirement of working capital.
5. Operating efficiency: Operating efficiency means the optimum utilization of

resources at minimum costs as a result of which profitability increases. Thus, it
helps in increasing generation of internal funds which reduces the pressure on
working capital.
6. Growth and expansion of business: Growing firm and the firm which is
diversifying to other business activities need larger amounts of working capital than
the firm which is static.
2.2 COMPANY PROFILE
Registered office of ITC LIMITED is situated in West Bengal. This company is registered
under Companies Act, 1956.ITC LIMITED Biscuits Company Limited was originally
incorporated on 21st March 1918 under Indian Companies Act under the name “The ITC
LIMITED Biscuits Company Limited” under section 21 of Companies Act and approval of
Central Government. The main aim of the Company is to make available good and improved
quality biscuits to each and every part of the country. The Company has got ISO14001
certificate and it is ISO 22000 certified. The Company was established at the Pantnagar
branch on 1st April 2005mainly for production with a production coverage area
of approximately 20acres.The control of management is through Board of Directors. ITC
LIMITED –the ‘biscuit’ leader with a history-has withstood the tests of time. Part of the
reason for its success has been its ability to resonate with the changes in consumer needs-
needs that have varied significantly across its100+ year epoch. With consumer democracy
reaching new levels, the one common thread to emerge in recent times has been the shift in
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lifestyles and corresponding awareness of health. People are increasingly becoming

conscious of dietary care and its correlation to wellness and matching the new pace to their
lives with improved nutritional and dietary habits. This new awareness has seen
consumers seeking foods that complement their lifestyles while offering convenience,
variety and economy, over and above health and nutrition.
ITC LIMITED PRODUCTS
 LITTLE HEARTS
 ITC LIMITED GOOD DAY
 TIGER
 TREAT
 MARIE GOLD
 NUTRICHOICE
 MILK BIKIS
 BREAD
 CAKES
 RUSKS
COMPANY OVERVIEW
Registered Office
Virginia House
37 Jawaharlal Nehru Road, Kolkata 700 071, India
Phone: 033-2288 9371
CIN: L16005WB1910PLC001985
ITC Corporate Website: www.itcportal.com
Investor Service Centre
37 Jawaharlal Nehru Road, Kolkata 700 071, India
Phone: 033-2288 6426/0034
Fax: 033-2288 2358
E-mail: isc@itc.in
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Auditors
Deloitte Haskins & Sells, Chartered Accountants, Kolkata
ITC Limited : An Overview
ITC was incorporated on August 24, 1910 under the name Imperial Tobacco Company of
India Limited. As the Company's ownership progressively Indianised, the name of the
Company was changed from Imperial Tobacco Company of India Limited to India Tobacco
Company Limited in 1970 and then to I.T.C. Limited in 1974. In recognition of the
Company's multi-business portfolio encompassing a wide range of businesses - Fast Moving
Consumer Goods comprising Foods, Personal Care, Cigarettes and Cigars, Branded Apparel,
Education and Stationery Products, Incense Sticks and Safety Matches, Hotels, Paperboards
& Specialty Papers, Packaging, Agri-Business and Information Technology - the full stops in
the Company's name were removed effective September 18, 2001. The Company now
stands rechristened 'ITC Limited,'where ‘ITC’ is today no longer an acronym or an
initialised form.
A Modest Beginning
The Company's beginnings were humble. A leased office on Radha Bazar Lane, Kolkata, was
the centre of the Company's existence. The Company celebrated its 16th birthday on August
24, 1926, by purchasing the plot of land situated at 37, Chowringhee, (now renamed J.L.
Nehru Road) Kolkata, for the sum of Rs 310,000. This decision of the Company was historic
in more ways than one. It was to mark the beginning of a long and eventful journey into
India's future. The Company's headquarter building, 'Virginia House', which came up on that
plot of land two years later, would go on to become one of Kolkata's most venerated
landmarks.
1925: Packaging and Printing: Backward Integration
Though the first six decades of the Company's existence were primarily devoted to the
growth and consolidation of the Cigarettes and Leaf Tobacco businesses, ITC's Packaging &
Printing Business was set up in 1925 as a strategic backward integration for ITC's Cigarettes
business. It is today India's most sophisticated packaging house.
1975: Entry into the Hospitality Sector - A 'Welcom' Move
The Seventies witnessed the beginnings of a corporate transformation that would usher in
momentous changes in the life of the Company. In 1975, the Company launched its Hotels
business with the acquisition of a hotel in Chennai which was rechristened 'ITC-
Welcomgroup Hotel Chola' (now renamed My Fortune, Chennai). The objective of ITC's
entry into the hotels business was rooted in the concept of creating value for the nation. ITC
chose the Hotels business for its potential to earn high levels of foreign exchange, create
tourism infrastructure and generate large scale direct and indirect employment. Since then
ITC's Hotels business has grown to occupy a position of leadership, with over 100 owned
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and managed properties spread across India under four brands namely, ITC Hotels - Luxury
Collection, WelcomHotels, Fortune Hotels and WelcomHeritage.
ITC Hotels recently took its first step toward international expansion with an upcoming
super premium luxury hotel in Colombo, Sri Lanka. In addition, ITC Hotels also recently tied
up with RP Group Hotels & Resorts to manage 5 hotels in Dubai and India under ITC Hotels'
5-star 'WelcomHotel' brand and the mid-market to upscale 'Fortune' brand.
1979: Paperboards & Specialty Papers - Development of a Backward Area
In 1979, ITC entered the Paperboards business by promoting ITC Bhadrachalam

Paperboards Limited. Bhadrachalam Paperboards amalgamated with the Company effective
March 13, 2002 and became a Division of the Company, Bhadrachalam Paperboards
Division. In November 2002, this division merged with the Company's Tribeni Tissues
Division to form the Paperboards & Specialty Papers Division. ITC's paperboards'
technology, productivity, quality and manufacturing processes are comparable to the best in
the world. It has also made an immense contribution to the development of Sarapaka, an
economically backward area in the state of Andhra Pradesh. It is directly involved in
education, environmental protection and community development. In 2004, ITC acquired
the paperboard manufacturing facility of BILT Industrial Packaging Co. Ltd (BIPCO), near
Coimbatore, Tamil Nadu. The Kovai Unit allows ITC to improve customer service with
reduced lead time and a wider product range.
1985: Nepal Subsidiary - First Steps beyond National Borders
In 1985, ITC set up Surya Tobacco Co. in Nepal as an Indo-Nepal and British joint venture. In
August 2002, Surya Tobacco became a subsidiary of ITC Limited and its name was changed
to Surya Nepal Private Limited (Surya Nepal). In 2004, the company diversified into
manufacturing and exports of garments.
1990: Paperboards & Specialty Papers - Consolidation and Expansion
In 1990, ITC acquired Tribeni Tissues Limited, a Specialty paper manufacturing company and
a major supplier of tissue paper to the cigarette industry. The merged entity was named the
Tribeni Tissues Division (TTD). To harness strategic and operational synergies, TTD was
merged with the Bhadrachalam Paperboards Division to form the Paperboards & Specialty
Papers Division in November 2002.
1990: Agri Business - Strengthening Farmer Linkages
Also in 1990, leveraging its agri-sourcing competency, ITC set up the Agri Business
Division for export of agri-commodities. The Division is today one of India's largest
exporters. ITC's unique and now widely acknowledged e-Choupal initiative began in 2000
with soya farmers in Madhya Pradesh. Now it extends to 10 states covering over 4 million
farmers. Also, through the 'Choupal Pradarshan Khet' initiative, the agri services vertical has
been focusing on improving productivity of crops while deepening the relationship with the
farming community.
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2002: Education & Stationery Products - Offering the Greenest products
ITC launched line of premium range of notebooks under brand Paperkraft in 2002. To
augment its offering and to reach a wider student population, the Classmate range of
notebooks was launched in 2003. Classmate over the years has grown to become India's
largest notebook brand and has also increased its portfolio to occupy a greater share of the
school bag. Years 2007- 2009 saw the launch of Practical Books, Drawing Books, Geometry
Boxes, Pens and Pencils under the 'Classmate' brand. In 2008, ITC positioned the business as
the Education and Stationery Products Business and launched India's first environment
friendly premium business paper under the 'Paperkraft' Brand. 'Paperkraft' offers a diverse
portfolio in the premium executive stationery and office consumables segment. In
2010, Colour Crew was launched as a new brand of art stationery.
2000: Lifestyle Retailing - Premium Offerings
ITC also entered the Lifestyle Retailing business with the Wills Sport range of international
quality relaxed wear for men and women in 2000. The Wills Lifestyle chain of exclusive
stores later expanded its range to include Wills Classic formal wear (2002) and Wills
Clublife evening wear (2003). ITC also initiated a foray into the popular segment with its
men's wear brand, John Players, in 2002. In 2006, Wills Lifestyle became title partner of the
country's most premier fashion event - Wills Lifestyle India Fashion Week - that has gained
recognition from buyers and retailers as the single largest B-2-B platform for the Fashion
Design industry. To mark the occasion, ITC launched a special 'Wills Signature', taking the
event forward to consumers.
2000: Information Technology - Business Friendly Solutions
In 2000, ITC spun off its information technology business into a wholly owned subsidiary, ITC
Infotech India Limited, to more aggressively pursue emerging opportunities in this area.
Today ITC Infotech is one of India's fastest growing global IT and IT-enabled services
companies and has established itself as a key player in offshore outsourcing, providing
outsourced IT solutions and services to leading global customers across key focus verticals -
Banking Financial Services & Insurance (BFSI), Consumer Packaged Goods (CPG), Retail,
Manufacturing, Engineering Services, Media & Entertainment, Travel, Hospitality, Life
Sciences and Transportation & Logistics.
2001: Branded Packaged Foods - Delighting Millions of Households
ITC's foray into the Foods business is an outstanding example of successfully blending
multiple internal competencies to create a new driver of business growth. It began in August
2001 with the introduction of'Kitchens of India' ready-to-eat Indian gourmet dishes. In
2002, ITC entered the confectionery and staples segments with the launch of the
brands mint-o and Candyman confectionery and Aashirvaad atta (wheat flour). 2003
witnessed the introduction of Sunfeast as the Company entered the biscuits segment. ITC
entered the fast growing branded snacks category with Bingo! in 2007. In 2010, ITC
launched Sunfeast Yippee! to enter the Indian instant noodles market. In just over a decade,
22
the Foods business has grown to a significant size under seven distinctive brands, with an
enviable distribution reach, a rapidly growing market share and a solid market standing.
2002: Agarbattis & Safety Matches - Supporting the Small and Cottage Sector
In 2002, ITC's philosophy of contributing to enhancing the competitiveness of the entire

value chain found yet another expression in the Safety Matches initiative. ITC now markets
popular safety matches brands like iKno,Mangaldeep and Aim.
ITC's foray into the marketing of Agarbattis (incense sticks) in 2003 marked the
manifestation of its partnership with the cottage sector. Mangaldeep is a highly established
national brand and is available across a range of fragrances like Rose, Jasmine, Bouquet,
Sandalwood and 'Fragrance of Temple'.
2005: Personal Care Products - Expert Solutions for Discerning Consumers
ITC entered the Personal Care Business in 2005. In eight years, the Personal Care portfolio
has grown under'Essenza Di Wills', 'Fiama Di Wills', 'Vivel' and 'Superia' brands which have
received encouraging consumer response and have been progressively extended nationally.
In May 2013, the business expanded its product portfolio with the launch of Engage - one of
India's first range of 'couple deodorants'
2010: Expanding the Tobacco Portfolio
In 2010, ITC launched its handrolled cigar, Armenteros, in the Indian market. Armenteros
cigars are available exclusively at tobacco selling outlets in select hotels, fine dining
restaurants and exclusive clubs.
Board of Directors
Chairman Non-Executive Directors

Yogesh Chander Deveshwar Anil Baijal
Angara Venkata Girija Kumar
Executive Directors Serajul Haq Khan
Nakul Anand Robert Earl Lerwill
Pradeep Vasant Dhobale Suryakant Balkrishna Mainak
Kurush Noshir Grant Sunil Behari Mathur
Pillappakkam Bahukutumbi Ramanujam
Sahibzada Syed Habib-ur-Rehman
Anthony Ruys
Meera Shankar
Krishnamoorthy Vaidyanath
23
24
25
Chapter-3
PRESENTATION OF DATA, ANALYSIS AND FINDINGS
DATA, ANALYSIS AND INTERPRETATION
Net working capital analysis (Rs in crores)

10-11 11-12 12-13 13-14
Current assets 13045.54 14443.57 17591.47 20928.73

Current liabilities 8477.48 9101.83 10330.73 11504.32
Net working capital 4568.06 5341.74 7260.74 9424.41
Net working capital

10000.00
8000.00
6000.00
4000.00 Net working capital
2000.00
0.00
10- 11- 12- 13-
11 12 13 14
Interpretations & findings
On scrutiny of the above statement and graph it appears that net working capital of ITC
LIMITED had gradually increased from Rs. 4568.06 crores in the 2010-11 to Rs 9424.41
crores in the year 2013-14 which denotes current asset of the company is increasing
disproportionately with current liabilities.
26
Current asset analysis (Rs in crores)

Analysis of composition of Current assets
% to % to % to % to
total total total total
Components 10-11 11-12 12-13 13-14
current current current current
asset asset asset asset
Current
3991.32 30.60 4363.31 30.21 5059.43 28.76 6311.26 35.88
investments
Inventories 5269.17 40.39 5637.83 39.03 6600.20 37.52 7359.54 41.84
Trade
885.10 6.78 986.02 6.83 1163.34 6.61 2165.36 12.31
receivables
Cash & Bank
2243.24 17.20 2818.93 19.52 3615.00 20.55 3289.37 18.70
balances
Short term loans
563.45 4.32 500.59 3.47 512.14 2.91 783.51 4.45
& advances
Other current
93.26 0.71 136.89 0.95 641.36 3.65 1019.69 5.80
assets
13045.54 100.00 14443.57 100.00 17591.47 100.00 20928.73 100.00
8000.00
6000.00
4000.00
2000.00 10-11
0.00 11-12
12-13
ts
ts
es
es
es
ie
en
se
l
or
c
nc
ab
an
as
m
13-14
t
la
iv
en
st
v
ba
nt
ce
ad
ve
re
In
re
nk
in
&
r
cu
e
Ba
t
s
ad
en
an
er
&
Tr
rr
lo
th
Cu
sh
O
Ca
er
tt
or
Sh
 Current investments to Gross Working Capital of 2013-14, 2012-13,2011-12 and 2010-

2011 were 35.88%, 28.76%, 30.21 and 30.60% respectively. Current investments to
Gross Working Capital in 2013-14 have increased substantially from that of 2012-13.
27
 Inventories to Gross Working Capital of 2013-14, 2012-13, 2011-12 and 2010-2011

were 41.84%, 37.52%, 39.05%, and 40.39%, respectively. Inventories to Gross
Working Capital in 2013-14 have slightly increased from that of 2012-13.
 Trade Receivables to Gross Working Capital of 2013-14, 2012-13, 2011-12 and 2010-
11 were 12.31%, 6.61%, 6.83% and 6.78% respectively. This ratio of 2013-14 has
increased from that of 2012-13. This shows that the credit collection policy of the
Company was not good enough.
 Cash and Bank as a percentage of Current Assets of 2013-14, 2012-13, 2011-2012

and 2010-2011 were 18.70%, 20.55%, 19.52%, and 17.20% respectively. Cash and
Bank as a percentage of Current Assets in the year 2013-14 had decreased from that
of during 2012-13. It indicates inadequate Cash holding.
 Short term loans & advances as a percentage of Current Assets of 2013-14, 2012-13,
2011-2012 and 2010-2011 were 4.45%, 2.91%, 3.47% and 4.32% respectively. Short
term loans & advances as a percentage of Current Assets during 2013-14 has
increased from that of during 2012-13.
 Other Current Assets to Gross Working Capital of 2013-14, 2012-13, 2011-12 and
2010-11 were 5.80%, 3.65%, 0.95% and 0.71% respectively. Other Current Assets to
current assets in 2013-14 have increased slightly from that of 2012-13.
10-11 11-12 12-13 13-14
Current asset to total asset ratio
Current asset 13045.54 14443.57 17591.47 20928.73
Total assets 25433.82 28966.40 34017.43 39229.39
Ratio 51.29 49.86 51.71 53.35
28
Current asset to total asset

54.00
ratio
53.00
52.00
51.00 Current as s et to total

as s et rati o
50.00
49.00
48.00
10-11 11-12 12-13 13-14

This ratio showed a gradual increase from 51.29% to 53.35% from 2010-11 to 2013-14
which indicates the company is Steady increase in this ratio since 2011-12 shows that
company’s fixed asset is increasing disproportionately with current assets.
Current liabilities analysis (Rs in crores)
10-11 % to 11-12 % to total 12-13 % to 13-14 % to

Analysis of total current total total
composition of current liabilities curren curren
Current liabilitie t t
liabilities s liabiliti liabiliti
es es
Short term
1.94 0.02 1.77 0.02 0.00 0.00 0.14 0.00
borrowing
Trade payable 1395.31 16.46 1424.84 15.65 1668.98 16.16 1987.59 17.28
other current
3067.77 36.19 3371.27 37.04 3528.62 34.16 3631.88 31.57
liabilities
Short term
4012.46 47.33 4303.95 47.29 5133.13 49.68 5884.71 51.15
provisions
8477.48 100.00 9101.83 100.00 10330.73 100.00 11504.32 100.00
29
6000.00
5000.00
4000.00
10-11
3000.00 11-12
2000.00 12-13
13-14
1000.00
0.00
Short term Trade payable other current Short term
borrowing liabilities provisions
 Short Term Borrowings as a percentage of Current Liabilities of 2013-14, 2012-

13, 2011-12 and 2010-11 were 0.00%, 0.00%, 0.02% and 0.02% respectively.
Short term borrowings has decreased in the financial year 2013-14.
 Trade Payables as a percentage of Current Liabilities of 2013-14, 2012-13, 2011-
12 and 2010-11 were 17.28%, 16.16%, 15.65% and 16.46% respectively. Trade
Payables as a percentage of Current Liabilities has increased from 2012-13 in the
financial year 2013-14.This indicates that the company increased its dependence
on creditors for financing working capital.
 Other Current Liabilities as a percentage of Current Liabilities of 2013-14, 2012-
2013, 2011-2012 and 2010-2011 were 31.57%, 34.16%, 37.04% and 36.19%.
Other current Liabilities had increased in the year 2013-14 from 2012-13.
 Short Term Provisions as a percentage of Current Liabilities of 2013-14, 2012-13,
2011-12 and 2010-11 were 51.15%, 46.69%, 47.29% and 47.33% respectively.
Short Term Provisions as a percentage of Current Liabilities has increased from
2012-13 in the financial year 2013-14.
30
Working capital trend analysis (Rs in crores)

Current asset 2012-13 2013-14 Increase Decrease
Current investments 5059.43 6311.26 1251.83
Inventories 6600.20 7359.54 759.34
Trade receivables 1163.34 2165.36 1002.02
Cash & Bank balances 3615.00 3289.37 325.63
Short term loans &
512.14 783.51 271.37
advances
Other current assets 641.36 1019.69 378.33
17591.47 20928.73 3662.89 325.63
Current liabilities
Short term borrowing 0.00 0.14 0.14
Trade payable 1668.98 1987.59 318.61
other current liabilities 3528.62 3631.88 103.26
Short term provisions 5133.13 5884.71 751.58
10330.73 11504.32 1173.59 0.00
2489.30 325.63
Net change in working capital 2163.67
2489.30 2489.30
2011-12 2012-13
Current asset Increase Decrease
Current investments 4363.31 5059.43 696.12
Inventories 5637.87 6600.20 962.33
Trade receivables 986.02 1163.34 177.32
Cash & Bank balances 2818.93 3615.00 796.07
Short term loans &
500.59 512.14 11.55
advances
Other current assets 136.89 641.36 504.47
14443.57 17591.47 3147.90 0.00
Current liabilities
Short term borrowing 1.77 0.00 1.77
Trade payable 1424.84 1668.98 244.14
other current liabilities 3371.27 3528.62 157.35
Short term provisions 4303.95 5133.13 829.18
9101.83 10330.73 1230.67 1.77
1917.23 1.77
Net change in working capital 1915.46
1917.23 1917.23
31

From the above statements it is clear that the company’s working capital had increased by
1915.46 crores in the year 2012-13 from that of 2011-12 and further increased by 2163.67
crores during the year 2013-14 which denotes sources of fund as current liabilities had
decreased disproportionally with current assets.
Inventory management (Rs in crores)
Inventory turnover ratio 10-11 11-12 12-13 13-14

Sales 21167.58 24798.43 29605.58 32882.56
Closing inventory
1504.04 1640.97 2526.79 2298.01
(finished goods)
RATIO 14.07 15.11 11.72 14.31
Inventory turnover ratio

16.00
14.00
12.00
10.00
8.00 Inventory turnover
6.00 ratio
4.00
2.00
0.00
10-11 11-12 12-13 13-14
32
Inventory conversion
10-11 11-12 12-13 13-14
period
Days 360.00 360.00 360.00 360.00
Inventory turnover ratio 14.07 15.11 11.72 14.31
Days 25.59 23.83 30.72 25.16
Inventory conversion period

35.00
30.00
25.00
20.00
Inventory conversion
15.00 period
10.00
5.00
0.00
10-11 11-12 12-13 13-14

Increasing inventory turnover ratio with decreasing conversion period shows management
efficiency in conversion of finished goods to sales transaction rapidly.
Debtors management (Rs in crores)
Debtors turnover ratio 10-11 11-12 12-13 13-14

Sales 21167.58 24798.43 29605.58 32882.56
Debtors 947.57 935.56 1074.68 3328.70
RATIO 22.34 26.51 27.55 9.88
33
Debtors turnover ratio

30.00
25.00
20.00
15.00 Debtors turnover

ratio
10.00
5.00
0.00
10-11 11-12 12-13 13-14
Average collection period 10-11 11-12 12-13 13-14

Days 360.00 360.00 360.00 360.00
Inventory turnover ratio 22.34 26.51 27.55 9.88
Days 16.11 13.58 13.07 36.44
Average collection period

40.00
35.00
30.00
25.00
20.00 Average collection
15.00 period
10.00
5.00
0.00
10-11 11-12 12-13 13-14

Debtors Turnover Ratio of the year 2010-11, 2011-12, 2012-13, 2013-14 were 22.34, 26.51,
27.55 and 9.88respectively with corresponding average collection period being 16.11 days,
13.58 days, 13.07 days and 36.44 days. Gradual decrease in this ratio with subsequent
34
increase in average collection period indicate decline in management,s inefficiency in

collection of debtors.
Working capital turnover ratio (Rs in crores)
Working capital turnover ratio 10-11 11-12 12-13 13-14
Sales 21167.58 24798.43 29605.58 32882.56

Current asset 13045.54 14443.57 17591.47 20928.73
Current liabilities 8477.48 9101.83 10330.73 11504.32
Working capital 4568.06 5341.74 7260.74 9424.41
RATIO 4.63 4.64 4.08 3.49
Working capital turnover ratio

5.00
4.00
3.00
Working capital
2.00 turnover ratio
1.00
0.00
10-11 11-12 12-13 13-14

Working Capital Turnover Ratio for the year 2013-14, 2012-13, 2011-12 and 2010-11 were
3.49, 4.08, 4.64 and 4.63 respectively. Working capital turnover ratio has decresed in the year
2013-14 which indicates that management could not be able to utilize working capital for
generation of sales efficiently.
Liquidity ratios (Rs in crores)
35
Current ratio 10-11 11-12 12-13 13-14

Current asset 13045.54 14443.57 17591.47 20928.73
Current Liabilty 8477.48 9101.83 10330.73 11504.32
RATIO 1.54 1.59 1.70 1.82
Current ratio
1.90
1.80
1.70
Current ratio
1.60
1.50
1.40
10-11 11-12 12-13 13-14

Current Ratio for the year 2013-14, 2012-13, 2011-12 and 2010-11 were 1.82, 1.70, 1.59,
and 1.54 respectively. Current ratio showed gradual increase from 2010-11 to 2013-14 .The
standard current ratios are 2:1, as current ratio of the company could not be able to attain
the standard, short term liquidation of the firm is not sound enough to meet its obligations.
Quick ratio (Rs in crores)
Quick ratio 10-11 11-12 12-13 13-14

Current asset 13045.54 14443.57 17591.47 20928.73
Less inventories 5,734.80 6,426.87 7,522.09 8,255.24
Quick asset 7310.74 8016.70 10069.38 12673.49
Current Liabilty 8477.48 9101.83 10330.73 11504.32
Less bank overdraft (short term
0.00 0.00 0.00 0.00
borrowing)
Quick liability 8477.48 9101.83 10330.73 11504.32
RATIO (1/2) 0.86 0.88 0.97 1.10
36
Quick ratio
1.20
1.00
0.80
0.60 Quick ratio
0.40
0.20
0.00
10-11 11-12 12-13

Quick Ratio for the year 2013-14, 2012-13, 2011-12 and 2010-11 were 1.10, 0.97, 0.88 and
0.86 respectively. The standard quick ratio is 1:1. increasing quick ratio with company’s
ability to attain the standard in the year 2013-14, it can be interpreated that company’s
quick assets are sound enough to cover quick liabilities of the company.
Chapter-5
CONCLUSION AND RECOMMENDATIONS

From the above analysis I can conclude and recommend that:
1. Increase in net working capital with positive change during 2012-13 and 2013-14 indicates
company is able to meet its operating expenses and short term obligations. It also indicates
that its creditor’s funds are safe in the company.
2. Efficient management of inventory also supports quick conversion of stock of finished

goods to sales transaction.
3. Company’s liquidity position is also good with increasing current ratio followed by quick
ratio.
From the above we can easily conclude that company is properly managing its working
capital apart from management of debtors and is using its working capital for generation of
sales. Hence it can be recommended that:
37
a) Company should take proper steps to increase its current ratio to 2:1.
b) Pay more attention so that funds lying with debtors should be collected quickly and also
increase its efficiency and managing its working capital for generation of sales.
38
Chapter-6
BIBLIOGRAPHY
 Herzfeld B; “How to Understand Working Capital Management” (1990).
 Hardcastle; “Working Capital Management”,(2009).
 Beneda, Nancy; Zhang, Yilei, “Working Capital Management, Growth and
Performance of New Public Companies”, Credit & Financial Management
Review, (2008)
 www.ITC LIMITED.co.in
 en.wikipedia.org/wiki/ITC LIMITED_Industries
 Corporate Accounting, M Hanif and AMukherjee.
 An introduction to Financial Management, Mazumdar, Ali, Nesha.
39
Chapter-7
ANNEXURES
ANNEXTURE-I
Student’s Declaration
I hereby declare that the Project Work with the title “Working Capital Management of ITC
LIMITED Industries Limited” submitted by me for the partial fulfillment of the degree of
B.Com. Honours in Accounting & Finance under the University of Calcutta is my original
work and has not been submitted earlier to any other University / Institution of the
requirement for any course of study.
I also declare that no chapter of this manuscript in whole or in part has been incorporated in
this report from any earlier work done by others or by me. However, extracts of any literature
has been used for this report has been duly acknowledged providing details of such literature
in the references.
Place :Kolkata Signature :
Date : Name : Ankit Kumar Dokania
Address : 56/50, N.S.C. Bose Road
Kolkata- 700040
Registration No. - 016-1121-1382-12

Roll No. :
40
ANNEXTURE-II
Supervisor’s Certificate
This is to certify that Ankit Kumar Dokania a student of B.Com. Honours in Accounting &
Finance of Syamaprasad College under the University of Calcutta has worked under my
supervision and guidance for his Project Work and prepared a Project Report with title
“Working Capital Management of ITC LIMITED Industries Limited”
The Project Report, which he is submitting his genuine and original work to the best of my
knowledge.
Place: Kolkata Signature:
Date: Name: Prof. Tapas Kumar Ghosh
Designation : Govt. approved PTT of Commerce
41
ANNEXURE-III
42
43
44
ANNEXURE-IV
45
46
47
48

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Project Report

(Submitted for the Degree of B.Com. Honours in

TITLE OF THE PROJECT

WORKING CAPITAL MANAGEMENT

Name of the Candidate:

C.U. Roll No. :

Name of the College: Syamaprasad College

Name of the Supervisor: Prof. Tapas Kumar Ghosh

Name of the College: Syamaprasad College

Month & Year of Submission: February, 2019

1.1 BACKGROUND OF STUDY:

1.2 Rationale of the study

1.3 Review Literature

According to Eljelly, in 2004[International Journal of Commerce &

1.4 PROJECT OBJECTIVE

Secondary objectives: To evaluate the performance of the organization in managing working

 Working capital structure of the organization.

 Different components of working capital and their changes

 Liquidity of the organization with the help of different liquidity ratio.

 Trend of working capital by analyzing change in working capital

 Management of Debtors, Inventories and cash

1.5.1 Area of Study:

1.5.2 Type of Study:

1.5.3.Tools For Data collection:

1.7 CHAPTER PLANNING

Following are the chapterisation of the study:

Chapter-3 represents presentation, analysis and findings

Chapter-4 conclusion and recommendations

2.1. CONCEPTUAL FRAME WORK

Features: Capital contains certain characteristics which are stated below:

Working Capital Management

CLASSIFICATION OF WORKING CAPITAL

Working Capital may be classified in two ways:

1. On the basis of Concept.

1. On the basis of concept

There are two concepts of working capital:

 Balance Sheet concepts

Balance Sheet Concept

 Gross Working Capital

Example of current assets is:

CONSTITUENTS OF CURRENT ASSETS

1) Cash in hand and cash at bank

6) Temporary investment of surplus funds.

NET WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES

CONSTITUENTS OF CURRENT LIABILITIES

1. Accrued or outstanding expenses.

Operating cycle concept

Collection from Debtors Payment to

Production of Finished Goods

On the basis of time working capital is classified as:

Permanent or fixed working capital:

capital as this part of working is permanently blocked in current assets.

Temporary or variable working capital

exigencies such as launching of extensive marketing for conducting research, etc.

Fig. 1-Amount of Working Capital

The classification of working capital is shown in the following chart:

Classification of Working Capital

On the basis of concept

Gross working Net working Fixed working capital Temporary

Positive working Negative working

Seasonal working Special working

Sources of Working Capital