WORKING

CAPITAL
MANAGEMENT
WITH
REFERENCE
TO RCF
LTD.
Vedangi thorve
45. Finance
 INTRODUCTION
The project undertaken is on “WORKING CAPITAL MANAGEMENT IN RASHTRIYA
CHEMICALS AND FERTILIZERS LTD”. Working capital refers to the cash a business
requires for day-to-day operations or, more specifically, for financing the conversion of
raw materials into finished goods, which the company sells for payment. Among the
most important items of working capital are levels of inventory, accounts receivable,
and accounts payable.
 The study of working capital is measures the financial health of
the business. The other objective of study are as follows:

To identify financial strength and weakness of the company.

To study the working capital of Rashtriya Chemicals and

Fertilizers ltd. (RCF)

Evaluating company’s performance relating to financial

statement analysis.
OBJECTIVE To study the various components of working capital.

To study the liquidity position of the same company through

various ratios relating to working capital.

Through the net profit, understand the profitability of the

company.

To study the position of RCF in comparison with other firms.

RESEARCH &
METHODOLOGY
The basic type of research used to prepare this
project is descriptive. The study is mainly based on
primary data which are collected and from the
company. These include internal sources within the
company and external sources like books and
periodically published annual report of RCF.
Interaction with various employees of Finance
department had a major source of information. The
study is limited to four financial year i.e. from 2012-
2016. The data used in this study has taken from the
financial statement and their related schedules of
RCF . Calculation of various ratios related to working
capital (like current, quick, working capital ratio) has
done in this report to know the liquidity position of
RCF.
 YEAR 2019 - 2020 -
DATA ANALYSIS NET SALES
2020
9827.12
2021
8413.83

CURRENT ASSET 7240.41 42.15

Current Asset turnover = CURRENT 1.35 1.99

Net sales / Current asset TURNOVER
RATIO

INTERPRETATION:
In the year 2019-2020, Current
asset turnover ratio was 1.35:1.
In the year 2020-2021, Current
asset turnover ratio is 1.99:1.
There was an increase in Current
asset turnover ratio in the year
2020-2021 by 0.64.
 YEAR 2019 - 2020 2020 - 2021
Net profit ratio

INTERPRETATION:

OPERATING 711.96
In the year 2019-2020, Gross profit ratio was 2.12:1. 865.66
Operating profit ratio = PROFIT In the year 2020-2021, Gross profit ratio is 4.43:1.

Working capital ratio

operating profit / net INTERPRETATION:

NET SALES 9827.12 8413.83

sales ×100
In the year 2019-2020, Working Capital Ratio was 6.94:1.

In the year 2020-2021, Working Capital Ratio is 5.08:1.

There was an increase in Working Capital Ratio in the year

2020-2021 by 1.86%.

GROSS PROFIT 7.24 10.29

RATIO

INTERPRETATION:

In the year 2019-2020,

Operating profit ratio was
7.24:1.
In the year 2020-2021,
Operating profit ratio is 10.29:1.
There was an increase in
Operating profit ratio in the
year 2020-2021 by 3.05.
 YEAR 2019 - 2020 2020 - 2021
Net profit ratio =
Net profit / Net
NET PROFIT 208.15 373.11 sales × 100

NET SALES 9827.12 8413.83

NET PROFIT 2.12 4.43

RATIO

INTERPRETATION:

In the year 2019-2020, Gross profit ratio was

2.12:1.
In the year 2020-2021, Gross profit ratio is
4.43:1.
There was an increase in Gross profit ratio in
the year 2020-2021 by 2.13.
 YEAR 2019 - 2020 2020 - 2021
Working capital ratio =
Net sales / Net working
NET SALES 9827.12 8413.83 capital × 100

NET WORKING 1416.72 1656.14

CAPITAL

WORKING 6.94 5.08

CAPITAL RATIO

INTERPRETATION:
In the year 2019-2020, Working Capital
Ratio was 6.94:1.
In the year 2020-2021, Working Capital
Ratio is 5.08:1.
There was an increase in Working
Capital Ratio in the year 2020-2021 by
1.86%.
 1. The management should estimate the
requirements of the requisite inventories of raw
materials based on proper analysis of the trends of
the company and future demand of the products.

2. Company should take control on debtor’s

collection periods which is major part of current
assets.
SUGGESTIONS
3. Company should maintain positive working
capital.

4. Effective policies &techniques should be

adopted for maintaining the working capital.
 CONCLUSION
Working capital is one such niche area that needs to get aggressively and tactfully
addressed in every company. At the same time working capital is an effective tool that
synergies the total profitability of the company. The study was conducted on working
capital with the help of ratio analysis etc. some of the limitations faced while
conducting the study were as follows :

1. The main limitation was time. The study was conducted for only 25 days which was
restricted the scope of the study.

2. As the financial information of every company is very confidential, obtaining the

date for study was limited.
 BIBLIOGRAPHY
Financial Statements (Annual Reports) of RCF Ltd
Internet website : Rashtriya Chemicals and Fertilizers
Limited (official )
Books :
1. Management accounting (vikas publication) -
I.M.pandey
2. Management accounting (H.P.H) - M.N.arora
3. Management accounting (seth Publication) –
I.N.chopde
4. Investment analysis & portfolio management ( rishabh
publication)
Websites :
www.rcfltd.com
www.investopedia.com
www.accountingformanagement.org