A Project Report On

Working Capital
Submitted to
BCCL Dhanbad

In partial fulfillment for the course of ´Post Graduate Diploma in Managementµ

Under the Supervision of: Mr.J.P.BHAGAT

Batch: PGDM 2009-2011 Roll No: 37

Mangalmay Institute of Management Studies (Greater Noida)


INDEX CH. No. Particulars
Declaration Preface Acknowledgement

Page No.
4 5 6 7 8 9 10 11-12 13 14 15 16-17 18 19 20 20-21 22 23-24 25-28 29 30-31 32 32 32


About BCCL Board of Directors Coal Reserve Product & Services Gradation of Coal Suitability of Coal Areas Washery Performance


Working Capital Concept of Working Capital Working Capital Management  Types of Working Capital  Factors Determining of Working Capital  Estimate of Working Capital Requirement  Financing of Working Capital  Management of Inventory o Need to Hold Inventory o Objective of Inventory Management


Management of Cash o Need to Hold Cash  Management of Receivables  Operation Cycle  Components of Working Capital Management  Significance of Working Capital Management

3. 4.

Working Capital Current Ratio Acid-Test Ratio Debtors Turnover Ratio Inventory Turnover Ratio Net Working Capital Turnover Ratio Debt Collection Ratio Statement of Ratio Analysis

34 34 35 35-36 37 38 39-41 42

5. 6.


43-44 45-46 47-48 49-50 51-52 53-54 55-56 57 58-61 62


J. Place: Date: B.Bhagat submitted in partial fulfillment of the requirements for the award of the degree of Post Graduate Diploma in Management.C.C.P.L.PROJECT REPORT ON WORKING CAPITAL I. undersigned Mr. from Mangalmay Institute of Management Study is my original work ² research study ² Carried out during 24th May. (Dhanbad) 24-7-2010 Signature Raj Kishor Verma 4 . 2010 and not submitted for the award of any other degree/diploma/fellowship or other similar titles or prizes to any other institution/organization or university by any other person. Raj Kishor Verma. hereby declare that the project report entitled ´WORKING CAPITAL MANAGEMENTµ under the guidance of Mr. 2010 to 24th July.

At the end findings and suggestions are reported. It is more applicable in the field of the management especially a professional course like Post Graduate Diploma in Management from Mangalmay Institute of Management Studies has prescribed 8 to 10 week of practical training & a project report during the 4th Tri. which provide perfect direction of invest the money. The project report on Working Capital Of Company. Sem. There is requirement to go for practical training of any subject supplement to the theoretical knowledge and clarified concept. magazines related to the cement association and discussion with concerned employees and experts. I hope this serves the Purpose. as a part of PGDM programmers my training at the Bharat coking Coal Limited is to comply with this requirements also. 5 . The data collections were by annual report of the different companies.PROJECT REPORT ON WORKING CAPITAL ´Practice makes it more perfectµ In the field of management every time there is a requirement of understanding or practical aspect of the organization with managerial mind.

Fund) & Mr. This pro ect would not have been successful without the help of Mr. I am really than ul to Mr. Shyam Agarwal for assigning me a pro ect of such a great learning experience and acquainting me with real life pro ect financing and appraisal.P. Anupam Narula. His systematic way of working and incomparable guidance has inspired the pace of the pro ect to a great extent.P.Banar ee (General Manager Finance. and very thankful to all lecturers of MIMS for their useful guidance and advise. ¦ ¥¤ £ ¢ £ ¢ ¡  6 .Bhagat (General Manager Finance CA & T) for making all kinds of arrangements to carry the pro ect successfully and for guiding and helping me to solve all kinds of quarries regarding the pro ect work.PR C R POR ON WOR NG C PITAL Wor ar in inadequate to con ey my deep sense o gratitude to all those who have helped me in completing this summer pro ect to the best o my ability Being a part o this pro ect has certainly been a unique and a very productive experience on my part. Last but not least I would like to thank all the employees of Bharat coking Coal Ltd. Dean of Mangalmay Institute of Management Study Who has given me the opportunity to do this pro ect in the Bharat Coking Coal Ltd.J.Chakraborty (Chief General Manager Finance) of Bharat coking Coal Ltd.P. I am very grateful to Mr. who have directly or indirectly helped me with their moral support for the completion of my pro ect.K. I would also like to thank my mentor and pro ect ² coordinator Mr.

PROJECT REPORT ON WOR ING CAPITAL BR EF PR F A t BCC B of Di tors Coal R serve Product & Services Gradation of Coal Suitabilit of Coal Areas Washery Performance § E OF THE COMPA 7 .

L RTI Act 2005 | y Tenders | Contact Us Bharat Coking Coal Limited (BCCL) is a Public Sector Undertaking engaged in mining of coal and allied activities. 2 non -coking coal washeries.PROJECT REPORT ON WORKING CAPITAL ABOUT B.C.4. 1972 to operate coking coal mines (214 Nos) operating in the Jharia & Raniganj Coalfields.05 was 92. BCCL was incorporated in January. of India on 16th Oct.04. taken over by the Govt. Currently.268 and as on 01.2010. It occupies an important place in as much as it produces bulk of the coking coal mined in the country.222. 18 opencast & 23 mixed mines as on 01. The mines are grouped into 13 areas for administrative convenience. the Company operates 81 coal mines which include 40 un derground. y y y y y y 8 . The total manpower as on 1.1971 to ensure planned development of the scarce coking coal resources in the country.C.03. BCCL meets almost 50% of the total prime coking coal requirement of the integrated steel sector. The Company also runs 6 coking coal washeries.2010 is 72.


8 37.PROJECT REPORT ON WORKING CAPITAL Coal Reserve COAL RESERVES IN INDIA : (As on 1st April.8 Indicated Reserve 13.8 109.3 105.9 10 .4 233.2 Proved Reserve 17.5 Inferred Reserve 2.7 123.5 88.1 35.8 267. 2009) (in billion tonnes) Total Reserve Coking Non-Coking Total 33.

y y y Used in manufacturing of hard coke for steel making Beneficiated and washed non-coking coal is used mainly for power generation Beneficiated non-coking coal is used by cement. when heated in the absence of air. glass. fertilizer. Such coals are blended with coking coal in adequate proportion to make coke. this coal is not acceptable for washing in washeries. when heated in the absence of air. ceramic. NON-COKING COAL : These are coals without coking properties. y y These have comparatively less coking properties than coking coal Mainly used as blend-able coal in steel making. free from volatiles. 11 . y y Mainly used as thermal grade coal for power generation Also used for cement. as a fraction of feed raw coal. form coherent beads not strong enough to be directly fed into the blast furnace. called coke. resulting in value addition of coal due to reduction in ash percentage. merchant coke manufacturing and other metallurgical industries NLW COKING COAL : This coal is not used in metallurgical industries. with strong and porous mass. Because of higher ash content.PROJECT REPORT ON WORKING CAPITAL Product & Services COKING COAL : These coals. paper. chemical and brick manufacturing. y y y These have coking properties Mainly used in steel making and metallurgical industries Also used for hard coke manufacturing SEMI COKING COAL : These coals. sponge iron and other industrial plants MIDDLINGS : Middlings are by-products of the three stage coal washing / beneficiation process. form coherent beads. y y Mainly used in metallurgical industries Also used in industrial plants utilising furnaces WASHED AND BENEFICIATED COAL : These coals have undergone the process of coal washing or coal beneficiation. This coal is used for power utilities and non-core sector consumers. and for other heating purposes HARD COAL : Hard coke is formed from coking / semi-coking coal through the process of carbonisation.

dye. cement plants. y Used in furnaces and boilers of industrial plants as well as power houses. briquette (domestic fuel) making. as a fraction of feed raw coal. environment friendly product of the Dankuni Coal Complex. etc. etc. industrial plants. etc.PROJECT REPORT ON WORKING CAPITAL y y Used for power generation Also used by domestic fuel plants. REJECTS : Rejects are the products of coal beneficiation process after separation of cleans and / or middlings. pharmaceutical industries. road repairs. COAL FINES / COKE FINES : These are the screened fractions of feed raw coal and LTC coke / CIL Coke respectively. hotels. land filling. 12 . obtained from the Dankuni Coal Complex and other coke oven plants. etc. CIL COKE / LTC COKE : CIL Coke / LTC Coke is a smokeless. obtained through low temperature carbonisation. brick manufacturing units. oil. y Used in industrial furnaces as well as for domestic purposes TAR / HEAVY OIL / LIGHT OIL / SOFT PITCH : These are products from Dankuni Coal Complex using low temperature carbonisation of non-coking coal in vertical retorts. y Used for Fluidized Bed Combustion (FBC) Boilers for power generation. y y Used in furnaces and kilns of industrial units Also used as domestic fuel by halwais.

HARD COKE Grade By Product Premium By Product Ordinary Beehive Premium Beehive Superior Ash % Not exceeding 25 % Exceeding 25 % but not exceeding 30 % Not exceeding 27 % Exceeding 27 % but not exceeding 31 % 13 UHV RANGE (KCALS/KG) Exceeding 6200 Exceeding 5600 but not exceeding 6200 Exceeding 4940 but not exceeding 5600 Exceeding 4200 but not exceeding 4940 Exceeding 3360 but not exceeding 4200 Exceeding 2400 but not exceeding 3360 Exceeding 1300 but not exceeding 2400 . COKING COAL Grade Steel ± I Steel ± II Washery ± I Washery ± II Washery ± III Washery ± IV Parameter Ash not exceeding 15% Ash exceeding 15% but not exceeding 18 % Ash exceeding 18% but not exceeding 21 % Ash exceeding 21% but not exceeding 24 % Ash exceeding 24% but not exceeding 28 % Ash exceeding 28% but not exceeding 35 % B. SEMI COKING COAL Grade Semi Coking ± I Semi Coking ± II Parameter Ash + moisture not exceeding 19 % Ash + moisture exceeding 19 % but not exceeding 24 % C.PROJECT REPORT ON WORKING CAPITAL GRADATION OF COAL A. NON-COKING COAL Grade A B C D E F G D.

low ash % Assam and Ranigunj coal Non-coking coal of high Initial Deformation Temperature (IDT) (>1200 degrees Celcius) Coking and semi-coking coal Semi-coking and non-coking coal. CIL Coke / LTC Coke Steel making. etc. hotels. domestic use. washed coal of non-coking coal washeries Non-coking coal. 14 . middlings of coking coal washeries Superior grades of non-coking coal Non-coking coal.PROJECT REPORT ON WORKING CAPITAL Beehive Ordinary Exceeding 31 % but not exceeding 36 % SUITABILITY OF COAL E. sponge iron industry Cokeries / coke oven plants Briquette making / domestic fuel making Special Smokeless Fuel (SSF) Power sector Cement sector Glass and potteries Cast iron castings Steel castings Bricks Old boilers Halwais. middlings of coking coal washeries. direct feed and washed. HARD COKE Industry Steel making Type of Coal Required Coking and semi-coking coal. blendable coal. middlings of coking coal washeries Long Flame non-coking coal Hard coke Non-coking coal Non-coking coal. middling & rejects of washeries Semi-coking coal of Coking Index 8 ± 10 Non-coking coal.


63 2.5mm).5mm).5mm). Coking Coal: Dugda-II Bhojudih Patherdih Moonidih Sudamdih Mohuda Madhuban TOTAL (Coking Coal) 1968 1962 1964 1983 1981 1990 1998 16 .70 1. No.00 1.W/O Cyclone(-0.60 0.5mm) 2 Stage HM Cyclone (30-0.50 11.5mm) Deshaling Jig(75-0mm). The Washed Power Coal/Washed Non-Coking Coal/Middlings is dispatched to various Power Houses. HM Cyclone (13-0.60 1.5mm) 2 Stage HM Cyclone (37-0.5mm) Dugda-II Bhojudih Patherdih Sudamdih Moonidih Mohuda Madhuban Details of Existing Washeries : S. HM Bath(75-13mm). Batac Jig (25-0.5mm) Batac Jig (13-0. The Washed Coking Coal is meant for Steel Plants.63 A. HM Bath (75-25mm). Flotation (-0. Flotation (-0. Flotation (-0. Flotation (-0.PROJECT REPORT ON WORKING CAPITAL Washery BCCL WASHERIES Introduction : Coal Washing is a process of separation mainly based on difference in Specific Gravity of Coal and associated impurities like Shale.5mm).5mm) Deshaling Jig (75-0mm).5mm) HM Cyclone (25-0. Flotation(-0.5mm).60 1.5mm). Washing Process: Washery System of Washing HM Cyclone (13-0. 1 2 3 5 4 6 7 Name of Washery Year of Commissioning Operable Capacity MTY 2. Sand & Stones etc so that we get relatively pure marketable coal without changing its physical properties.

00 12. Dugda-II.63 TOTAL (Non-Coking Coal) GRAND TOTAL Remarks: Dugda-I stoped since Oct. 54.PROJECT REPORT ON WORKING CAPITAL B.e.f. Study was undertaken by CMPDI for performance improvement. 125 Crores for Renovation of Washeries. Non-Coking Coal: 1 Dugda ± I 1961/1998 1. Madhuban Washery was originally designed for washing Coking Coal. Sudamdih. the Washery was temporarily converted for Washing Non-Coking Coal which has been reverted back to washing coking coal again from October 2008. the Revival Schemes involving an expenditure of Rs. Bhojudih. Modernization of Washeries: Revival Plan of BCCL provides Rs. Moonidih & Mohuda Washeries and they are under various stages of implementation. '98. In the 1st Phase.'96 for safety reasons and its Sink Upgradation Section is being used for production of washed power coal w.80 Crores has been approved by BCCL Board for Dugda-I.00 1.Due to nonavailability of Coking Coal because of stoppage of Block-II OCP. 17 .

68 22.PROJECT REPORT ON WORKING CAPITAL Performance PRODUCTION (Figs in Million Tonnes) 2009 1974 1984 1994 2001 2002 2003 2004 2005 2006 2007 2008 10 .34 11.09 Company Type BCCL U/G 15.32 23.03 .84 19.75 .38 5.46 4.30 20.75 21.64 13.85 ± 95 ± 02 .15 22.13 3.04 ± 05 .75 25.9 OC 2.86 15.49 7.59 7.07 .61 TOTAL 17.31 24.29 6.21 25.74 6.25 24.38 23.84 28.06 .47 4.21 25.66 16.94 17.26 17.10 8.51 18 .94 15.74 21.51 27.90 4.50 17.08 .


in addition to the amount of fixed capital every business ± whether new or growing requires Working Capital. Net working capital is the difference between current assets and current liabilities. But by themselves. Therefore. which is employed in term of operations. equipments. b. tools. stores. etc. TWO CONCEPT OF WORKING CAPITAL :a. These factors involve expenses. power. Though the later concept of working capital is commonly used it is an accounting concept with little sense 20 . Gross working capital is the total of all current assets. we have to maintain certain current assets like stocks. to operate the machines. we require men. In addition. All these require enough resources to keep the wheels of the business in motion. materials. Without working capital.. fixed capital would be idle and ineffectual. Net Working Capital. ³WORKING CAPITAL represents the excess of CURRENT ASSETS over CURRENT LIABILITIES´ The same may be designated in the following equation: WORKING CAPITAL= CURRENT ASSETS ± CURRENT LIABILITIES: Funds thus invested in current assets keep revolving fast and are being constantly converted in to cash and this cash flows out again in exchange for other current assets.PROJECT REPORT ON WORKING CAPITAL What is WORKING CAPITAL? Fixed Capital is that part of which is required for the purchase of fixed assets like Land and Building .. these fixed assets would not produce anything. Plant and machinery etc. The fixed capital provides the basic means for the business to earn its return. Thus it is known as revolving or circulating capital or short term capital. accessories etc. A number of definitions have been formulated: perhaps the most widely acceptable would be. For instance. Working Capital is that portion of a business concern¶s total capital. Gross Working Capital.

What a firm really does is to take decisions with respect to various current assets and current liabilities. The constituents of current assets and current liabilities are shown in table A. Work in progress. Trade Advances.PROJECT REPORT ON WORKING CAPITAL to say that a firm manages its net working capital. Provisions. TABLE A: Constituents of Current Assets and Current Liabilities PART ±A: CURRENT ASSETS  Inventories ± Raw materials and components. 21 . PART ±B: CURRENT LIABILITIES     Sundry Creditors.  Trade Debtors.  Cash and Bank balance.  Loans and Advances. other. Borrowings. Finished goods.  Investments.


WORKING CAPITAL MANAGEMENT:Working Capital Management refers to management of current assets and current liabilities. The major thrust of course is on the management of current assets This is understandable because current liabilities arise in the context of current assets. Working Capital Management is a significant fact of financial management. Its importance stems from two reasons: Investment in current assets represents a substantial portion of total investment.  Investment in current assets and the level of current liabilities have to be geared quickly to change in sales. To be sure, fixed asset investment and long term financing are responsive to variation in sales. However, this relationship is not as close and direct as it is in the case of working capital components. The importance of working capital management is effected in the fact that financial manages spend a great

deal of time in managing current assets and current liabilities. Arranging short term financing, negotiating favorable credit terms, controlling the movement of cash, administering the accounts receivable, and monitoring the inventories consume a great deal of time of financial managers. The problem of working capital management is one of the ³best´ utilization of a scarce resource. Thus the job of efficient working capital management is a formidable one, since it depends upon several variables such as character of the business, the lengths of the merchandising cycle, rapidity of turnover, scale of operations, volume and terms of purchase & sales and seasonal and other variations.



TYPES OF WORKING CAPITAL:Working Capital may be classified in to two ways:a) On the basis of concept. b) On the basis of time.






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. There is always a minimum level of current assets that is continuously required by the enterprise to carry out its normal business operation. For example every firm has to maintain minimum level of raw materials, work in process, furnished goods and cash balance. The minimum level of current assets is called permanent or fixed working capital as their part of working capital is permanently blocked in current assets. With the growth of business there is an increase in current assets.



1) Temporary or Variable Working Capital:Temporary or Variable Working Capital is the amount of working capital that is required to meet the seasonal demands and some special exigencies. Variable working capital can be further classified as:a) Seasonal Working Capital.
b) Special Working Capital. Most of the enterprises have to provide additional working capital to meet the special and seasonal needs. The capital required to meet the seasonal needs of enterprise is called Seasonal working capital. Special working capital is the part of working capital which is required to meet the special exigencies such as part of working capital which is required to meet special exigencies such as launching of extensive marketing campaigns for conducting research etc. is called Special working capital.


There is no concrete formula to decide the amount of workings capital required by a business. Further. A relatively small proportion will consist of working capital in case of manufacturing concerns.Nature of Business:Business units selling service (like public utilities) instead of a commodity. have little need for working capital. Generally they operate in cash and prepay basis. cyclical changes. in some cases even a smaller concern may need more working capital due to high over head charges Insufficient use of available resources and other economic disadvantages of small size. since inventory represents a major item of investment. 1) Size of Business : The working capital requirements of a concern are directly influenced by the size of the business which may be measured in terms of scale of operations. As the business expands the amount needed would grow. In chemical or engineering industries. However. Similarly. business with seasonal demand would require larger amount of working capital. There are also business in which fixed is small ion relation to working capital.PROJECT REPORT ON WORKING CAPITAL FACTORS DETERMINING WORKING CAPITAL RE UIREMENTS:With the type of business and the ambition of proprietors the amount is bound to vary. But trading concerns (merchandising companies) make a greater use of working capital. an estimate of requirements of working capital will differ from concern and from industry to industry. Greater the size of a business unit generally larger will be the requirement of working capital. Other unexpected happenings are likely to create unusual demands for working capital. For instance. periods of prosperity and depression cause wide variations in the demand for working capital. a small business would need lesser amount of working capital than a larger business engaged in the same line. as they have little demand for large inventories. Larger working capital will require in labor intensive industries than in highly mechanized industries. 25 . The Major determinants of the proportion of fixed to working capital are as follows:- 1. Therefore. working capital would be relatively larger.

The requirement of working capital. The cycle involves the purchase of raw materials and ends with the realization of cash from the sale of finished products. Therefore. its conversion in to stock of finished goods through work in progress with progressive increment of labor and service cost. A company like BCCL whose productive capacities can be utilized for manufacturing varied products can have the advantages of diversified activities and solve their working capital problem. if there is alternative process of production. the process with the shortest production period should be chosen. The production could be kept either steady by accumulating inventories during slack period with a view to meet high demand during the peak season or the production could be curtailed during the slack season and increased during peak season. longer is the amount of working capital required. the raw materials and other supplies have to be carried for a longer period in the process with progressive increment of labor and service costs before the finished product is finally obtained. 26 . in such cases depends upon the production policy.e. working capital cycle starts with the purchase of raw materials and ends with realization of cash from the sale of finished goods. 3) Working Capital Cycle:In manufacturing concern. A company should have some production policy i.PROJECT REPORT ON WORKING CAPITAL 1) Production Policy:In certain industries the demand is subject to wide fluctuation due to seasonal variation. longer the process period of manufacture. conversion of finished stick in to sales and receivables and ultimately realization of cash and this cycle continuous again from cash to purchase of raw materials and so on. If the policy is to keep production steady by accumulation inventories it will require higher working capital. The longer the manufacturing time. to maintain the production is a considerable range in order to meet the changing demand. The cycle involves purchase of raw materials and stores. the requirements of working capital increase in direct proportion to length of manufacturing process. 2) Manufacturing Process/ Length of the production cycle:In manufacturing business.

e. 5) Credit Policy:The credit policy is concerned in its dealings with debtors and creditors influence considerably the requirements of the working capital. further. a larger inventory of finished goods is required to promptly serve customer who may not be inclined to wait because other manufacturers are ready to meet their needs. business contracts. rise in prices. partial or total. optimistic expansion of business etc. when the business is prosperous there is a need for larger amount of working capital due to increase in sales. generous credit terms may have to be offered to attract customers in a highly competitive market. If the market is strong and completion weeks a firm can manage with a smaller inventory of finished goods because customers can be served with some delay. A concern that purchases its requirements on credit and sells its products/services on cash requires lesser amount of working capital. sales decline. working capital needs tends to be high because of greater investment in finished goods inventory and accounts receivable. when there is a down swing of the cycle. difficulties are faced in collections from debtors and firms may have a large amount of working capital lying ideal 27 . On the country at he time of depression i. 6) Business Cycle:Business Cycle refers to alternate expansion and contraction in general business activities. In a period of born i. it can even ask for advance payment. On the other hand a concern buying its requirements for cash and allowing credit to its customers. When competition keen. Thus. shall need larger amount of funds are bound to be tied up in debtors or bills receivables.PROJECT REPORT ON WORKING CAPITAL 4) Market Condition:The degree of competition prevailing in the market places has an important bearing on working capital needs.e. Further in such situation the firm can insist on cash payment and avoid lock ± up of funds in accounts receivable.

yet it may be concluded that for normal rate of expansion in the volume of the business. management ability. import policy. also influences the requirement of working capital. importance of labor. Although it is difficult to determine the relation between growth in the volume of the business and in the growth of the working capital of the business. 28 . we may have retained profits to provide for more working capital but in the first growing concerns. The effect of rising prices may be different for different firms. asset structure.PROJECT REPORT ON WORKING CAPITAL 7) Rate of Growth Of business:The working capital requirements of a concern increase with the growth and expansion of its business activities. 10) Other Factors:Certain other factors such as operating efficiency. Such firms with high earning capacity may generate cash profits from operations and contribute to their capital. irregularities a supply. we shall require larger amount of capital. A firm that maintains steady high rate of cash dividend irrespective of its generation of profits needs more capital than the firm retains larger part of its profits and does not pay high rate of cash dividend. The dividend policy of a concern also influences the requirements of the working capital. banking facilities etc. Generally the rising prices will require the firm to maintain larger amount of working capital as more funds will require maintaining the same current assets. 9) Price Level Changes:Changes in the prices level also effects the working capital requirements. Some firms may be affected much while some other may not be affected at all by the rise in prices. 8) Earning Capacity And Dividend policy:Some firms have more earning capacity than others due to the quality of their products. monopoly conditions etc.

6) 7) The average amount of cash required to make advance payment. 2) The length of the production cycle or work in progress.PROJECT REPORT ON WORKING CAPITAL 4.e. wages and overheads. Factors requiring consideration while estimating working capital:-Total costs incurred on materials. i. 29 . But estimation of working capital requirements is not an easy task and a large number of factors have to be considered before starting this exercise. the time taken for conversion of raw materials into finished goods. 4) The average period of credit allowed to customers. The average period expected to be allowed by suppliers. 5) The amount of cash required to pay day-to-day expenses of the business. 1) The length of time for which raw materials are to remain in stores before they are issued for production. 3) The length of sales cycle during which finished goods are kept waiting for sales.d)Estimate of working capital requirements: To avoid the storage of working capital at once an estimate of working capital requirements should be made in advances so that arrangement can be made to procedure adequate working capital. 8) Time lag in the payment of wages and other expenses.

The various sources for the financing of working capital are:- PERMANENT OR FIXED SOURCES OF WORKING CAPITAL: 1) Shares 2) Debentures 3) Public Deposits 4) Ploughing back of profits 5) Loans from financial institutions TEMPORARY OR VARIABLE SOURSES OF WORKING CAPITAL:Commercial banks Indigenous bankers Trade creditors Installment credit Advances 30 1) 2) 3) 4) 5) . this proportion of working capital gives rise to temporary or variable working capital which cannot be permanently employed gainfully in business. b) Tempory ot variable capital requirements. a part of working capital investments are as permanent investment in fixed assets.PROJECT REPORT ON WORKING CAPITAL FINANCING OF WORKING CAPITAL:The working capital requirements of a business concern can be classified as:a) Permanent or Fixed working capital requirements. Similarly some amount of working capital may be required to meet the seasonal demands and some special exigencies such as rise in prices. In concern. This minimum level of current assets gives rise to permanent or fixed working capital as this part of working capital is permanently blocked in current assets. The fixed proportion of working capital should be generally financed from the fixed capital sources while the temporary or variable working capital requirements of a concern may be met from the short term sources of capital. This is so because there always a minimum level of current assets which are continuously required by the enterprise to carry out its day-to-day business operations and this minimum cannot be expected to reduce at any time. strikes etc.

at a reasonable cost and at the most favorable terms. y MANAGEMENT OF INVENTORY y MANAGEMENT OF CASH y MANAGEMENT OF RECEIVABLES 31 .credit/factoring 7) Accrued expenses 8) Commercial paper Commercial banks are the most important sources of short term capital.PROJECT REPORT ON WORKING CAPITAL 6) Accounts receivable. It is always a test to the prudence of a financial manager to obtain the correct amount of working capital at the right time. commercial banks help their customers in obtaining credit form their suppliers through the letter of credit arrangements. They provide of wide variety of loans tailored to meet the specific requirements of a concern. The different forms in which the banks normally provide loans and advances are as follows:A) Loans b) Cash credits c) Overdrafts D) Purchasing and discounting of bills In addition to the above mentioned forms of direct finance. The major portions of working capital loans are provided by commercial banks.

2. by using simple inventory planning and control techniques. without any adverse effect on production and sales. a considerable amount of funds is required to be committed to them. inventories are approximately 60 % of current assets in public limited companies in India.PROJECT REPORT ON WORKING CAPITAL MANAGEMENT OF INVENTORY:Inventories constitute the most significant part of current assets of a large majority of companies in India.2. The operational mean that means that the materials and spares 32 . Because of the large size of inventories maintained by firms maintained by firms. The purpose of inventory management is to ensure availability of materials in sufficient quantity as and when required and also to minimize investment in inventories at considerable degrees. 1. 2) Precautionary motive necessities holding of inventories to guard against the risk of unpredictable changes in demand and supply forces and other factors. A firm neglecting a firm the management of inventories will be jeopardizing its long run profitability and may fail ultimately.1 Need to Hold Inventories:There are three general motives for holding inventories:1) Transaction motive emphasizes the need to maintain inventories to facilitate smooth production and sales operation. It is. On an average. 3) Speculative motive influences the decision to increases or reduce inventory levels to take advantage of price fluctuations and also for saving in re-ordering costs and quantity discounts etc. Objective of Inventory Management:The main objectives of inventory management are operational and financial. therefore very necessary to manage inventories efficiently and effectively in order to avoid unnecessary investments.

7) To design proper organization for inventory control so that management. Clear cut account ability should be fixed at various levels of the organization.PROJECT REPORT ON WORKING CAPITAL Should be available in sufficient quantity so that work is not disrupted for want of inventory. The following are the objectives of inventory management:1) To ensure continuous supply of materials. 9) To ensure right quality of goods at reasonable prices. spares and finished goods. 6) To minimize losses through deterioration. 8) To ensure perpetual inventory control so that materials shown in stock ledgers should be actually lying in the stores. 10) To facilitate furnishing of data for short-term and long term planning and control of inventory 33 . 4) To keep material cost under control so that they contribute in reducing cost of production and overall purchases. 3) To maintain investments in inventories at the optimum level as required by the operational and sale activities. pilferage. This is possible with the help of centralizing purchases. wastages and damages. The financial objective means that investments in inventories should not remain ideal and minimum working capital Should be locked in it. 5) To eliminate duplication in ordering or replenishing stocks. 2) To avoid both over-stocking of inventory.

Speculative Motive: . The opportunities to make profit changes. Thus a major function of the financial manager is to maintain a sound cash position. This kind of investment contributes some profit to the firm.PROJECT REPORT ON WORKING CAPITAL MANAGEMENT OF CASH:Cash is the important current asset for the operation of the business. it invests it is marketable securities. when it is expected that interest rates will rise and security price will fall. taxes. wages and salaries. it is also the ultimate output expected to be realized by selling or product manufactured by the firm. on the other hand a supplier who used to give credit for 15 days may not have the stock to supply or he may not be in opposition to give credit at present. The firm needs cash primarily to make payments for purchases. which a firm can disburse immediately without any restriction. Sometimes near cash items such as marketing securities or bank term deposits are also included in cash. Cash is the money. dividends. currency and cheques held by the firm and balances in its bank account. 34 . etc. Cash shortage will disrupt the firm¶s manufacturing operations while excessive cash will simply remain ideal without contributing anything towards the firm¶s profitability. Though cash inflows and outflows are anticipated but there may be variations in these estimates. The firm should keep sufficient cash neither more nor less. The Precautionary Motive: A firm is required to keep cash for meeting various contingencies. The firm will hold cash. Generally when a firm has excess cash. For example a debtor who pays after 7 days may inform of his inability to pay. Cash is the basic input needed to keep the business running in the continuous basis.The speculative motive relates to the holding of cash for investing in profit making opportunities as and when they arise. other operating expenses. NEEDTO HOLD CASH: The firm¶s need to hold cash may be attributed to the following three motives:The Transaction Motive: The transaction motive requires a firm to hold cash to conduct its business in the ordinary course. The term cash includes coins.

PROJECT REPORT ON WORKING CAPITAL MANAGEMENT OF RECEIVABLE:A sound managerial control requires proper management of liquid assets and inventory.the operating cycle of a manufacturing company like BCCL includes: 1. 35 . Sometimes other concern in that line might have established a practice of selling goods on credit basis. 2. The increase in sales will bring in more profits. into cash . It is therefore. An efficient use of financial resources is necessary to avoid financial distress. labor. there is a risk of bad debts also.) Sale of the product either for cash or on credit. The increase in sales is also essential to increases profitability. a firm has to insure certain costs. Operating cycle: Operating cycle refers to the time duration required to convert sales .) Manufacture of the product which includes conversion of materials into workin-progress into finished goods. Credit sales create account receivables for collection.) Accusation of resources such as raw materials. it is not possible to avoid credit sales without adversely affecting sales. These assets are a part of working capital of the business. Further.after the conversion of recourses into inventories. A concern is required to allow credit sales in order to expand its sales volume. receivables constitute a significant portion of current assets of a firm. Thus. It is not always possible to sell goods on cash basis only. Under these circumstances. 3. very necessary to have a proper control and management of receivables. Receivables result from credit sales. power and fuel etc. After a certain level of sales the increase in sales will not proportionately increase production costs. But for investment in receivables.


6. 5.PROJECT REPORT ON WORKING CAPITAL COMPONENTS OF WORKING CAPITAL ARE CALCULATED AS FOLLOWS: 1) Raw Materials Storage Period=Avarage stock of raw materials/Avarage cost of raw material consumption per day.) Finished goods conversion period = Average stock of finished goods/Avarage cost of of goods sold per day. 2.) Debtors collection period=Avarage book debts/Avarage credit sales per day. 37 . 4.) W-I-P Holding period=Average w-i-p in inventory/Average cost of production per day. 3.) Credit period availed =Avarage trade creditors/Average credit purchase per day.) Stores and spares conversion period = Average stock of Stores and spares/ Avarage consumption per day..

4A !44D #  33&  I IX FA D6D ) E39 ! 4 D! 8 C I I I I F  3 33 !4D!8 C I )( 0 &   '"%$ # !     I I I % A5 B 8A 4 @ 939 9 8! 65 4 %)4) 3761 ( 2 I 4HCDB G" 8# % 0 1 3 PROJECT REPORT ON WORKING CAPITAL SIGNIFICANCE OF WORKING CAPITAL:- I - I -- IVI I I I- 38 .


Suggestion Suggestion has been given in order to improve performance of the firm. liabilities. Conclusion On the basis of analysis conclusion has been drawn. The analysis is based upon available information & interpreted accordingly. security. bankers. stock level & other financial information. @ Information about firm¶s loan. 40 . Data Collection My data collection source was secondary i. investment etc. @ Annual reports of companies @ Balance sheet @ Profit & Loss Accounts Analysis & Interpretation The data collected and analysed subjectively as well as graphically where it is possible. Information needed @ Information about firm¶s assets.PROJECT REPORT ON WORKING CAPITAL Research Methodology For Every Comprehensive research a proper research methodology is indispenensable & it has to be properly conceived. @ Find deviation of calculated from standard or Norms @ Calculating the working capital requirement of Bharat Coking Coal Ltd. The methodology adopted by me is as follows:- Research Design Problem Identification @ Find out Ratios related to working capital management of BCCL and compare with last 2 years. expenditure. revenue.e.

Balance sheet of units for analysis 41 .PROJECT REPORT ON WORKING CAPITAL Limitation My scope of study is limited to the annual reports.


81 16049.20 11706.63 13247.63 63798. 9411.72 22070.32 3426.53 18682.18 49138.89 4966.96 5578.05 43 .78 340733.02 39380.21 15933. Contractors.76 31950.50 91088. Repair & Maintainance Other Expences Bank Overdraft CISF Exp.31 6093. In Lakhs YEAR 2009 CURRENT ASSETS: Inventories Sundry Debtors Cash & Bank Balances Loans & Advances TOTAL CURRENT ASSETS (A) % Change in Current Assets 93890.& Others Employees Remunaration & Benefits Power & Fuel Contractual Exp.40 254.64 27.A CURRENT LIABILITIES: Sundry Creditor¶s Small Scale Industries Deposits From: Customers.91 321673.74 4077.12 70725.24 92302.29 237.PROJECT REPORT ON WORKING CAPITAL WORKING CAPITAL PARTICULARS YEAR 2010 Rs.62 257523.12 12370.92 1893.74 16011.67 N.30 2874.92 202567.

PROJECT REPORT ON WORKING CAPITAL Audit Fees & Exp.61 794790.34 22377.29 17987.45 6237.95 834296.51 145.34 -4.71 165.73 26857.43 N.34 20014.70 -631728. Enter Subsidiary Current A/c Balances CIL & CMPDIL Statutory Dues Pension Fund & Interest Unutilised Grants CBM Project Grants Other Liabilities & Provisions TOTAL CURRENT LIABILITIES (B) % Change in Current Liabilities 41.54 33231.09 39.26 10278.64 11324.20 297766.76 44 .A NET WORKING CAPITAL (A-B) -537266.45 283142.

    Current Assets including assets which can be converted in to cash easily and itself like market securities debtors.2009 CURRENT RATIO 0.32    =   = 0.32 0.It is a measures of short-term financial strength of the business and shows whether the business will be able to meet it¶ s current liabilities as when they mature. It focuses the strong of weak position of the company. Current ratio is a measure of the firm¶s short term solvency. inventory. short term bank loan. bills payable. Current Liabilities included creditors.24 45 . In short it can be said as all obligation within a year are included in current liabilities. prepaid expenses etc.  For the year:   0.24 YEAR 2009 . It indicate the availability of current assets in rupee of current liabilities. income tax liabilities and long term debt maturity in current year.PROJECT REPORT ON WORKING CAPITAL CURRENT RATIO It is also known as ³working capital ratio´ . As a conventional rule.2010 2008 . accrual expenses. a current ratio should be or slightly more.

25 0. Company doesn¶t maintain this ration but trying to increase it year by year.05 0 2010 2009 Interpretation: It i generall believed t at 2:1 rati shows a comfortable working capital position.2 0.PROJECT REPORT ON WOR ING CAPITAL 0. The tendon committee appointed by RBI had wide recommended a current ratio of 2:1. But in the previous year the ratio is nearer to 0. A current ratio is 0.1 0.15 0.24:1 so we can say that the company doesn¶t having comfortable working capital position previous year but the company is trying to increase its current ratio. Q CURRENT RATIO CURRENT RATIO 46 .32 in the current year.35 0.3 0.

This is every existing standard of liquidity and it is satisfaction if the ratio is 1.50:1  For the year        = 0.158 47 .205      = 0.PROJECT REPORT ON WORKING CAPITAL ACID-TEST RETIO The measure of absolute liquidity may be obtained only cash and bank balance as well as only ready marketable security with liquid liabilities.158 YEARS 2009-2010 2008-2009 ACID-TEST RATIO 0.205 0.

Over all the acid-test ratio of last year & this year is not very satisfactory so we can conclude that the absolute li uidity of the Bharat Coking coal ltd.158 in the previous year.05 0 Interpretation : Acid-test ratio is near to one in current year that is 0.PROJECT REPORT ON WOR ING CAPITAL 0.TEST RATIO 2008-2009 48 .2 0. 2009-20 0 R ACID .25 0. 5 0.205 as compare to 0. T S 0.TEST RATIO S ACID . is in favour.

          = 8.018 days    = 7.018 Days 7. It shows the efficiency of the collection policy of the firm.PROJECT REPORT ON WORKING CAPITAL DEBTORS TURNOVER RATIO This ratio shows the proportion of sales to average receivables. the less satisfactory position of the firm. Higher ratio indicates weak collection policy of the firm. The higher the ratio.102 Days 49 .102 days YEARS 2009-2010 2008-2009 DEBTORS TURNOVER RATIO 8.

2 8 7.2 7 6.6 7. The lesser the period of the collection the better policy of collection of the company.018 days to collect the debts.6 2009-2010 2008-2009 Interpretation : We know that the higher Debtor¶s turnover ratio is not good for the firm.4 7. So we can say that the collection policy of the company is excellent that they recover their debts near to 1/3 of month.8 7. But we also consider that in previous year this is 7.8 6.PROJECT REPORT ON WOR ING CAPITAL 8. In the year 2009-10 it is 8.102 days so we can say that the company have to maintain this ratio. U DEBTORS TUR OVER RATIO DEBTORS TURNOVER RATIO 50 .

PROJECT REPORT ON WORKING CAPITAL INVENTORY TURNOVER RATIO This ratio is also known as´ stock turnover ratio´.25 times YEARS 2009-2010 2008-2009 INVENTORY TURNOVER RATIO 4. It is computed by deciding the sales by the inventory.         = 4.25 times 51 .80 times   = 5. The number of times the average stock is turnover during the year is known as stock turnover.80 times 5. The ratio is important in joining the ability of management which it can move the stock.

25 as compare to current year it is 4.7 4. The ratio is joining the ability of management with which it can move the stock.6 Interpretation: Higher the ratio more profitability the business would be. 2009-20 0 V I VE TORY TUR OVER RATIO INVENTORY TURNOVER RATIO 2008-2009 52 .PROJECT REPORT ON WOR ING CAPITAL 4. it is not a huge difference.9 4.8 4. Inventory turnover ratio is highest in the year 2008-09 is 5.2 .3 .80 which is little bit lower than previous year but it is obvious that in heavy industries like Bharat Coking coal ltd. ` W 4. W YX W W .

84 times   = -0.PROJECT REPORT ON WORKING CAPITAL NET WORKING CAPITAL TURNOVER RATIO Net working capital turnover ratio is obtained by net working capital joining to sales.            = -0. The excess of current assets over current liabilities is called working capital. It is found for measuring firm liquidity.58 times YEARS 2009-2010 2008-2009 INVENTORY TURNOVER RATIO -0.84 times -0.58 times 53 . It also measures the firm potential reserve of funds.

c -0 4 a b b a b b a b b NET WORKING CAPITAL T RNOVER RATIO 54 .PROJECT REPORT ON WORKING CAPITAL NET WORKING CAPITAL TURNOVER RATIO 0 -0 1 -0 2 -0 3 2009-2010 2008-2009 -0 5 -0 6 -0 7 -0 8 -0 9 INTERPRITATION: As per the balance sheet data of the creditor. The ratio is -0. the working capital turnover ratio is different for the different years.58 in 2008-09. So it means that higher the ratio better the working capital condition of the company. BCCL having a negative ratio in both year so it doesn¶t shows the sound position of the company.84 in 2009-10 and -0.

56 days   = 51. It shows the efficiency and collection policy of the company.          = 45.PROJECT REPORT ON WORKING CAPITAL DEBT COLLECTION PERIOD The Debt Collection shows the number of days taken to collect the debts of credit sales.40 days 55 .56 days 51.40 days YEARS 2009-2010 2008-2009 INVENTORY TURNOVER RATIO 45. The ratio is computed by dividing the Debtor¶s turnover ratio in to 365 days.

ee 50 45 40 35 30 25 20 15 10 5 0 d DEBT COLLECTION PERIOD DEBT CO ECTION PERIOD 56 . This shows the improvement in collection policy of the Bharat Coking Coal Limited. So it is very important for any company to collect the debs which this company do very well.40 days as compare to low in the year 2009-10 is 45.56 only days.PROJECT REPORT ON WOR ING CAPITAL 2009-2010 2008-2009 INTERPRETATION: The collection period is highest in 2008-09 is 51.

24 0.018 days 4.40 Days 57 .102 days 5.56 Days 2008-2009 0.205 8.158 7.PROJECT REPORT ON WORKING CAPITAL STATEMENT OF RATIO ANALYSIS RATIOS Current ratio Acid-test ratio Debtor¶s turnover ratio Inventory turnover ratio Net-working capital turnover ratio Debt collection period 2009-2010 0.80 Times -0.25 Times -0.32 0.84 Times 45.58 Times 51.


scale of operation. The working capital limits would be considered only after the project nearing completion and after ensuring control over the inventory.inventories( like raw materials . profitability and maximization of overall value of the bank. Eligible working capital limits would be assessed by cash Budget method And Projected production method depending the market condition. other current assets and current liabilities like sundry creditors. nature of activity/enterprise and duration/length of operating cycle etc. 59 .PROJECT REPORT ON WORKING CAPITAL CONCLUSION The study involves practical and conceptual over view of decisions concerning current assets like cash and bank balance . loans and advances. And complete synchronization and co ordination among the working capital components which shall contribute to optimum level of operations. The inventory is a great concern for BCCL and it need proper procurement and management. Was with the objective of maximizing the overall net profit of the bank. securities and other deposits. Mismanagement of each or any of these components shall be detrimental to the objectives of efficient operation.sundry debtors.w-i-p. other current liabilities and provisions of BCCL.finished goods ).

3. 6. are given bellow: 1) For inventory.) The procurement for materials requisition processing should be reduced so as to minimize the lead time.PROJECT REPORT ON WORKING CAPITAL RECOMMENDATION & SUGGESTION: The recommendation & suggestion for effective management of working capital at BHARAT COKING COAL LTD. 5. 4. cash discount or credit ratings.) Plant should given freedom in deciding the credit policies.) The plant must take certain steps to decrease the working capital cycle. BCCL can reduce the level of stocks by resorting to phased production i. One way can be better management of inventories. However. in order to improve the position. synchronization of various inputs availability of some materials or parts which are not easily available.) The plant is suggested to maintain a balance in capacities.e.) The company must increase its Current Assets & decrease their Current Liabilities to overcome from Negative Working Capital. 60 . the low turnover of stock may also be due to problems with generation of sales Inventory management is a great concern for BCCL especially stores and spares.) The plant should maintain inventory at an optimum level rather than a very optimistic level. 7. producing according to requirement and disposing off or recycling the unserviceable inventories. The purchase manager should take proper steps for procurement of inventories. 2.

PROJECT REPORT ON WORKING CAPITAL 8). BCCL can also consider negotiating its creditors for relaxing the debt repayment period and repaying only on or just before the expire of the credit period. 61 . And help from: Google search engine 62 .M.cmpdi.PROJECT REPORT ON WORKING CAPITAL Bibliography The Reference Books: Author Financial Management Financial Management Research Methodology BCCL last 2 year annual reports Khan & Jain www.Pandey C.Kothari bccl.

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