`

Department of Management

SUMMER INTERNSHIP PROJECT REPORT

Role of Working Capital Management on Organisational

Profitability With Special Reference to JK Tyre Ltd.

FOR THE PARTIAL FULLFILMENT OF THE REQUIREMENT

FOR THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION

SUBMITTED TO:
Jiwaji University, Gwalior (M.P)

SUBMITTED BY:

Mr. Ritik Agrawal

MBA III SEMESTER

(BATCH-2021-2023)

Roll No: -211064901

Website: www.itmgoi.in
 DECLARATION

The undersigned, hereby declare that the Project report entitled “ROLE OF WORKING CAPITAL

MANAGEMENT ON ORGANISATIONAL PROFITABILITY WITH SPECIAL

REFERENCE TO JK TYRE LTD.” written and submitted by me to the ITM Gwalior, in partial

fulfilment of the requirements for the award of degree of Master of Business administration (MBA)

for academic year 2021-2023 under Guidance of Dr. Prashant sharma Assistant Professor

Department of management ITM, Gwalior and (CA Vijay Singh Rajawat) is my original work

and the conclusion drawn therein are based on the material collected by me.

Date: Ritik Agrawal

 ACKNOWLEDGEMENT

The efforts that have gone in to the project have proved to be of immense value and has left me far
richer, not only in knowledge of the subject but also of the subject but also of various other
disciplines and system that l have come across in the course of my project.

I wish to place on record my deep sense of gratitude to all those who contributed to the success in the
completion of my project.

I would like to specially thank CA Vijay Singh Rajawat for the valuable guidance provided by her
during the course of the project.

I would like to extend my special thanks of gratitude to my teacher HOD Dr. Preeti Singh ma’am
Department of management in ITM as well as our mentor Dr. Prashant Sharma sir Assistant
Professor ITM GOI (M.P) who gave me the golden opportunity to do this wonderful project. for their
guidance and constant supervision as well as for providing necessary information regarding the
project and also for there support in complete in the project.

I am sure that the experience l have gained during the completion of this project will prove to be
beneficial in the process of attainment of my educational and career goals.
Certificate of Internship
 TABLE OF CONTENTS

Chapter -1 Company Profile

Chapter -2 Introduction of the topic

Chapter -3 Review of Literature

Chapter -4 Analysis of the study

Chapter -5 Finding, Suggestion and Conclusion

Bibliography
 Chapter -1
Company profile
 A STUDY OF WORKING CAPITAL MANAGEMENT

JK TYRE
Founder: Lt. Lala Juggilal Singhania & Lt. Kamlapat Singhania
Current Chairman: Raghu Pati Singhania
 “INDUSTRY PROFILE”

History

The group rose in importance in the 1950s to 1980s, when it was the third-largest industrial
conglomerate in India after the Birla and Tata conglomerates. The group has multi-business, multi-
product, and multi-location operations, with interests in many countries. It has overseas
manufacturing operations in Mexico, Indonesia, Romania, Belgium, Portugal, the UAE, and
Switzerland. The organization also includes research and development institutes in various fields.
The family is currently divided into three main groups headed by Dr. Gaur Hari Singhania based in
Kanpur, Shri Hari Shankar Singhania based in Delhi and Shri Vijay pat Singhania based in
Mumbai. The three men are cousins who now run independent businesses, which are technically
and legally separate entities and have no cross-holdings or common directors and employees,
sharing only the family history.

The Kanpur family runs JK Cement Ltd and JK Techno soft, which provides technology solutions
to organizations, while the Delhi family runs JK Tyre, JK Paper, JK Lakshmi Cement, JK Fenner
India Ltd, Umang Dairies Ltd, JK Seeds, Global Strategic Technologies (a military solutions and
equipment division), JK Risk Managers & Insurance Brokers. The Mumbai family runs the
Raymond Group of companies. Though run independently of each other, the various companies
that are part of the organization all use the JK Group Logo, in recognition of the family's history.
By tradition, the oldest male member of the family becomes the President of the JK Organisation
and grants use of the logo to companies run by various family members when they apply for
membership and pay an annual fee.
 Shri Hari Shankar
Singhania (20th June
1933- 22nd February
2013)
Shri Hari Shankar Singhania,
was President of J.K.
Organisation and Chairman
of JK Tyre & Industries
Limited for nearly four
decades, from the year 1974
onwards. Hari Shankar
contributed immensely not
only in the growth of this
company but also in the
industrialization and
economic development of
India. In recognition, he
received numerous
prestigious Indian &
International Awards.

1.1.1.1 Tracing the roots

JK Tyre & Industries Ltd. is part of JK
Organisation, one of the leading Private
Sector Groups with multi-product, multi-
location and multi-business operations in
India founded over 100 years ago. The
Vision of JK Tyre & Industries Ltd. is
“To be amongst the most trusted
companies with a global tyre brand”.

1.1.1.2
1.1.1.3 The Indian Powerhouse
showcase
JK Tyre & Industries Ltd. has many firsts
to its credit in the industry; this includes
pioneering radial technology in India way
back in 1977, leading it to be the Radial
Leader in the country. It is the first Indian
tyre manufacturer to make Radial tyres for
an entire range of vehicles– Truck/Bus,
LCV, Passenger Cars, MUV and Tractors.

1.1.1.4
 1.1.1.5 Winning chemistry
JK Tyre has established its mark with
automotive Original Equipment
Manufacturers by partnering some
of the biggest names in the Indian
automobile industry, including
Maruti Suzuki, Tata Motors,
Ashok Leyland, Mahindra &
Mahindra, Volvo Eicher, General
Motors, Volkswagen, Fiat,
Nissan, and TAFE.

1.1.1.6

1.1.1.7 Power Communication

JK Tyre has actively engaged with its
customers with its continual mass media
presence. Through one of its print
advertisements, JK Tyre states itself as
‘The Badshah of radial tyres on Indian
roads’ with more than 15 million truck
and bus radial tyres on Indian roads. It is
India’s No. 1 truck and bus radial tyre
manufacturer. JK Tyre’s campaign 'Made
for India and Made for You' is built
around the advantage of using JK truck
and bus radial tyres.

1.1.1.8

1.1.1.9 The ultimate

benchmark of achievement
The Company has been actively
promoting various disciplines of
motorsport in India and has invested
over Rs. 100 crores towards building
infrastructure. The Racing and Karting
programmes are the breeding ground
for the country's young motorsport
talent. JK Tyre prodigies like Narain
Karthikeyan, Armaan Ebrahim and
Karun Chandhok have done India
proud in the global arena.
1.1.1.10 Environmental Quotient
JK Tyre is a green citizen and all its
plants are ISO 14001-certified for
environmental conservation. It has taken
many green initiatives and launched the
‘Soles with Souls’ programme, an eco-
friendly initiative to use discarded tyres
as a lifestyle accessory, which has been
acclaimed internationally. JK Tyre
Mysore Plant is a recipient of the
‘Golden Peacock Environment Award’.

1.1.1.11

1.1.1.12 Gearing up for future

JK Tyre is a leading corporate entity,
which believes in excellence,
innovation and technology. It has
continuously modernised and expanded
its manufacturing facilities to retain the
edge in several markets across the
world. The key area of thrust continues
to be in enlarging its offering to expand
the customer base, providing them with
better quality of products and value
added services.

1.1.1.13

JK ORGANISATION

JK Organisation
JK Organisation’s footprint in India: JK
 Organisation, the Rs21,000-crore conglomerate
with a workforce of over 40,000, has business
interests across the globe, spanning over 90
countries. The JK Organisation traces its origin in
the 18th century, when it came into being under
the leadership of Lala Kamlapatji and his father
Lala Juggilalji, therefore the name ‘J.K.’.

JK Tyre
The company is the undisputed market leader in
Truck/Bus Radials in India, with 400+ selling
locations, 4,000 strong dealer network served by 9
plants in India and 3 plants in JK Tornal, Mexico.
With state-of-the-art modern production facilities in
all 12 plants, total production capacity is over 20
million tyres p.a.

JK Paper
JK Paper Ltd. has two large integrated paper
manufacturing units - JK Paper Mills (JKPM),
Ravaged, Odisha and Central Pulp Mills(CPM),
Songadh, Gujarat with a combined capacity of
4,55,000 TPA. It is the market leader in Branded
Copier paper segment and among the top two
players in Coated Paper and High-end Packaging
Boards.
JK Lakshmi Cement
JK Lakshmi Cement, a renowned and well-
established name in the Indian cement industry, now
in its 32nd year, has a formidable presence in
Northern & Western India’s cement markets. Its
current capacity stands at 5.60 Million MT per
annum.

Umang Dairies Limited

JK’s dairy business produces and markets skimmed
milk powder, butter pure ghee, varieties of dairy
whiteners and premixes compatible with tea & coffee
vending machines and liquid milk in poly pouches for
retail and institutional customers.

JK Lakshmi pat University

Besides the various schools running under Lakshmi
pat Foundation, JKLU is one of the recent initiatives
of the group that offers management and
engineering courses and best facilities that are
producing new-age technocrats and business
leaders.
 JK Agri Genetics Ltd (JKAL)
A leading Agri-biotech hybrid seed company
with pan-India presence. Its activities include
plant breeding & biotechnology research, seed
production, processing and marketing of
hybrid seeds of various field crops.

JK Fenner (India Limited)

Company manufactures Industrial and
Automotive V-Belts, Oil seals, Engineering
Products, and a host of new products
providing Total Mechanical Power
Transmission and Sealing Solutions.
2
3
4 VISION & MISSION

4.1 VISION-

 To be amongst the most trusted companies with a global tyre brand.

4.2
4.3 MISSION-

 Be a Customer Obsessed Company - Customer First 24x7.

 Most profitable tyre company in India - deliver enhanced value to all stakeholders.

 No. 1 tyre brand in India and amongst leading tyre brands globally.

 Lead with premium products through technological edge.

 Enhance global presence through acquisitions/JV/strategic partnerships.

 Be a socially responsible corporate citizen.

 Be a learning & innovative Organisation with a motivated team.

5 HR VISION & MISSION

5.1
5.2 HR VISION-

 “To be amongst top 25 best employers in India”

5.3 HR MISSION-

 To contribute substantially to Short Term and Long Term Business Results by aligning our
HR initiatives.

 Facilitating each one of us to deliver 125% (and more) of our capacity and capability.

 An Enabling Climate for attracting, retaining and nurturing Talent contributing to

Organizational Excellence with an innovative mindset.

Financial Details……

Last 5 Years Share Price

Revenue Last 5 Years
SWOT ANALYSIS
 CHAPTER-2
Working Capital Management
 TOPIC: WORKING CAPITAL

Working capital is the difference between a company’s current assets and current liabilities. It is a
financial measure, which calculates whether a company has enough liquid assets to pay its bills
that will be due within a year. When a company has excess current assets, that amount can then be
used to spend on its day-to-day operations.

FORMULA: Working Capital = Current Assets – Current Liabilities

CURRENT ASSET: Current assets, such as cash and equivalents, inventory, accounts receivable,
and marketable securities, are resources a company owns that can be used up or converted into
cash within a year.
.
1.Cash and cash equivalent: Cash and cash equivalents is a line item on the balance sheet,
stating the amount of all cash or other assets that are readily convertible into cash. Any items
falling within this definition are classified within the current assets category in the balance
sheet. The two primary criteria for classification as a cash equivalent are that an asset be
readily convertible into a known amount of cash, and that it be so near its maturity date that
there is an insignificant risk of changes in value due to changes in interest rates by the time
the maturity date arrives. If there is any question about whether a financial instrument can be
classified as a cash equivalent, consult with the company's auditors.

 Current Accounts: A current account, also known as financial account is a type of deposit
account maintained by individuals who carry out significantly higher number of transactions
with banks on a regular basis. It is created by the bank on request of the applicant and is made
available for frequent or immediate access.

 Deposit Accounts: Bank Deposit Account shall be defined as that bank account held at a bank
or banks designated by bank and made known to company and into which bank shall deposit, via
Automated Clearing House Network or other electronic entries, as permitted by applicable law,
the amounts set forth on each repayment check and the daily receipts otherwise collected by
company for the benefit of bank and applied to the transactions.

 Remittance in transit and cheques on hand: A remittance is a payment of money that is

transferred to another party. Broadly speaking, any payment of an invoice or a bill can be called
a remittance. However, the term is most often used nowadays to describe a sum of money sent
by someone working abroad to his or her family back home.

 Cash on hand: Cash on hand is a critical component of responsible business operations and
informs many decisions businesses make. If you want to maximize revenue, you might benefit
from reviewing the idea of cash on hand. In this article, we define cash on hand, review the
differences between it and petty cash and list some tips to help you maintain the right amount of
cash on hand.

2.INVENTORIES: Inventory is the accounting of items, component parts and raw materials
that a company either uses in production or sells. As a business leader, you practice inventory
management in order to ensure that you have enough stock on hand and to identify when there’s
a shortage.
The verb “inventory” refers to the act of counting or listing items. As an accounting term, inventory is
a current asset and refers to all stock in the various production stages. By keeping stock, both
retailers and manufacturers can continue to sell or build items. Inventory is a major asset on the
balance sheet for most companies, however, too much inventory can become a practical liability.

 Raw Materials: Raw materials are materials or substances used in the primary production or
manufacturing of goods. Raw materials are commodities that are bought and sold.

 on commodities exchanges worldwide. Traders buy and sell raw materials in the factor

market because raw materials are factors of production, as are labor and capital.

 Work in progress: Work in progress (WIP) refers to partially completed goods that are
still in the production process. These items may currently be undergoing transformation in
the production process, or they may be waiting in queue in front of a production
workstation. Work in progress items do not include raw materials or finished goods. Work
in progress is usually comprised of the full amount of raw materials required for a product,
since that is added at the beginning of production, plus the cost of additional processing as
each unit progresses through the various manufacturing steps.

 Finished Goods: Finished goods are products that have passed or completed the
manufacturing process, but are not yet sold or distributed to the final consumer.
When the product gets to the end users, the processing of  goods is then at the final
stage.
While  finished goods are final products of one company, the goods may be
components or raw materials to another. In essence, the components are used to
further the production of different products .

 Stock in Trade:

TRADE RECEIVABLE:  Trade receivables are the total amounts that a company has billed to a
customer for goods and services that they have delivered but haven’t yet received payment for. These
amounts are reflected in the invoices that a company sends to its clients. Trade receivables are likely
to be one of the largest assets on your company’s books, aside from inventory. It’s important to
remember that trade receivables are also known as accounts receivable, so you may see these terms
used interchangeably with one another.

MARKETABLE SECURITIES: Marketable securities are unrestricted short-term

financial instruments that are issued either for equity securities or for debt securities of a publicly
listed company. The issuing company creates these  instruments for the express purpose of raising
funds to further finance business activities and expansion. Governments also issue debt securities of
this type in the form of T-bills, used for funding of public projects and expenditures.

Current liabilities: Current liabilities are the amount of money a company owes, such as accounts
payable, short-term loans, and accrued expenses, that are due for payment within a year.
Trade payables: A trade payable is an amount billed to a company by its suppliers for goods
delivered to or services consumed by the company in the ordinary course of business. These
billed amounts, if paid on credit, are entered in the accounts payable module of a company's
accounting software, after which they appear in the accounts payable aging report until they are
paid. Any amounts owed to suppliers that are immediately paid in cash are not considered to be
trade payables, since they are no longer a liability.

SHORT-TERM LOANS: A short term loan is a type of loan that is obtained to support a temporary
personal or business capital need. As it is a type of credit, it involves repaying the principle amount
with interest by a given due date, which is usually within a year from getting the loan.

A short term loan is a valuable option, especially for small businesses or start-ups that are not yet
eligible for a credit line from a bank. The loan involves lower borrowed amounts, which may range
from $100 to as much as $100,000. Short term loans are suitable not only for businesses but also for
individuals who find themselves with a temporary, sudden cash flow issue.

ACCURED EXPENSES: An accrued expense, also known as accrued liabilities, is an accounting

term that refers to an expense that is recognized on the books before it has been paid. The expense is
recorded in the accounting period in which it is incurred.

Importance of working capital

Working capital is very important because it helps business manage their day-to-day operations and
make key investment decisions in such a way that they are never out of cash and don’t face liquidity
issues.

5.3.1.1 1. – Liquidity Management

By properly analyzing the income, expenses and payables, the financial and accounting team of an
enterprise can easily plan for their funds accordingly.

5.3.1.2 2. – Out of Cash

Inappropriate management of day-to-day expenses may result in enterprise liquidity issues. Therefore,
the planned management of working capital can avoid such a situation.

5.3.1.3 3. – Helps in Decision Making

By correctly analyzing the requirement of funds for day-to-day operations, the finance team can
appropriately manage the funds and can decide on available funds and the needed funds.

5.3.1.4 4. – Addition in the Value of Business

Proper working capital management results in timely payment to the lenders, which creates goodwill
in the market.

5.3.1.5 5. – Helps in the Situation of Cash Crunches

By properly managing the liquid funds, one can help the organization avert any cash crunch and pay
for its day-to-day expenses on a timely basis.

5.3.1.6 6. – Perfect Investments Plans

Correctly managing the funds or working capital, the company can plan for their investments
accordingly and maximize its return.
5.3.1.7 7. – Helps in Earning Short Term Profits
Some enterprises keep a large buffer of funds as working capital, which is way over and above the
required level of working capital. By correctly estimating the required working capital, the extra
funds can be invested in other projects that may result in higher profits.

5.3.1.8
5.3.1.9 Strengthening the Work Culture of the Entity
Timely payment of all day-to-day expenses like the salary of the employees creates a good
environment and motivates employees to work harder.

Factors Affecting working capital:

There are many factors which affects working capital and those factors are as follows:

a) Length of Operating Cycle: The amount of working capital directly depends upon the length of
operating cycle. Operating cycle refers to the time period involved in production. It starts right from
acquisition of raw material and ends till payment is received after sale.

b)  Nature of Business: The type of business, firm is involved in, is the next consideration while
deciding the working capital. In case of trading concern or retail shop the requirement of working
capital is less because length of operating cycle is small.

c) Scale of operation: The firms operating at large scale need to maintain more inventory, debtors,
etc. So they generally require large working capital whereas firms operating at small scale require less
working capital.

d)  Business Cycle Fluctuation: During boom period the market is flourishing so more demand,
more production, more stock, and more debtors which mean more amount of working capital is
required. Whereas during depression period low demand less inventories to be maintained, less
debtors, so less working capital will be required.

e) Seasonal factors: The working capital requirement is constant for the companies which are selling
goods throughout the season whereas the companies which are selling seasonal goods require huge
amount during season as more demand, more stock has to be maintained and fast supply is needed
whereas during off season or slack season demand is very low so less working capital is needed.

f) Technology and Production Cycle: If a company is using labor intensive technique of production,
then more working capital is required because company needs to maintain enough cash flow for
making payments to labour whereas if company is using machine-intensive technique of production
then less working capital is required because investment in machinery is fixed capital requirement and
there will be fewer operative expenses.

5.3.1.10 g)  Credit Allowed: Credit policy refers to average period for collection of sale proceeds. It
depends on number of factors such as creditworthiness, of clients, industry norms etc. If
company is following liberal credit policy then it will require more working capital whereas
if company is following strict or short term credit policy, then it can manage with less
working capital also.
 Need for Working Capital:

Working capital plays a vital role in business. This capital remains blocked in raw materials, work in
progress, finished products and with customers. The needs for working capital are as given below:

i) Adequate working capital is needed to maintain a regular supply of raw materials, which in turn
facilitates smoother running of production process.
ii) Working capital ensures the regular and timely payment of wages and salaries, thereby improving
the morale and efficiency of employees.
iii). Working capital is needed for the efficient use of fixed assets.
iv). In order to enhance goodwill a healthy level of working capital is needed. It is necessary to build
a good reputation and to make payments to creditors in time.
v) Working capital helps avoid the possibility of under-capitalization.
vi) It is needed to pick up stock of raw materials even during economic depression.
vii) Working capital is needed in order to pay fair rate of dividend and interest in time, which
increases the confidence of the investors in the firm.

Importance of Working Capital

It is said that working capital is the lifeblood of a business. Every business need funds in order to run
its day-to-day activities. The importance of working capital can be better understood by the
following:

I) It helps measure profitability of an enterprise. In its absence, there would be neither production nor
profit.

ii) Without adequate working capital an entity cannot meet its short-term liabilities in time.

iii) A firm having a healthy working capital position can get loans easily from the market due to its
high reputation or goodwill.

iv) Sufficient working capital helps maintain an uninterrupted flow of production by supplying raw
materials and payment of wages.

v) Sound working capital helps maintain optimum level of investment in current assets.
vi) It enhances liquidity, solvency, credit worthiness and reputation of enterprise.

vii) It provides necessary funds to meet unforeseen contingencies and thus helps the enterprise run
successfully during periods of crisis.

Classification of Working Capital

(a) Gross Working Capital:

Gross working capital refers to the amount of funds invested in various components of current assets.
It consists of raw materials, work in progress, debtors, finished goods, etc.
(b) Net Working Capital: The excess of current assets over current liabilities is known as Net
working capital. The principal objective here is to learn the composition and magnitude of current
assets required to meet current liabilities.

(c) Positive Working Capital: This refers to the surplus of current assets over current liabilities.

(d) Negative Working Capital: Negative working capital refers to the excess of current liabilities
over current assets.

(e) Permanent Working Capital: The minimum amount of working capital which even required
during the dullest season of the year is known as Permanent working capital.

(f) Temporary or Variable Working Capital: It represents the additional current assets required at
different times during the operating year to meet additional inventory, extra cash, etc.

Positive vs Negative Working Capital

A company has positive working capital if it has enough cash, accounts receivable and other liquid
assets to cover its short-term obligations, such as accounts payable and short-term debt.

In contrast, a company has negative working capital if it doesn’t have enough current assets to cover
its short-term financial obligations. A company with negative working capital may have trouble
paying suppliers and creditors and difficulty raising funds to drive business growth. If the situation
continues, it may eventually be forced to shut down.

5.3.2 Management of working capital

5.3.3
Guided by the above criteria, management will use a combination of policies and techniques for the
management of working capital. The policies aim at managing the current
assets (generally cash and cash equivalents, inventories and debtors) and the short-term financing,
such that cash flows and returns are acceptable.

 Cash management: Identify the cash balance which allows for the business to meet day to day
expenses, but reduces cash holding costs.

 Inventory management: Identify the level of inventory which allows for uninterrupted
production but reduces the investment in raw materials—and minimizes reordering costs—and
hence increases cash flow. Besides this, the lead times in production should be lowered to
reduce Work in Process (WIP) and similarly, the Finished Goods should be kept on as low level
as possible to avoid overproduction—see Supply chain management; Just In
Time (JIT); Economic order quantity (EOQ); Economic quantity.

 Debtors management: Identify the appropriate credit policy, i.e. credit terms which will attract
customers, such that any impact on cash flows and the cash conversion cycle will be offset by
increased revenue and hence Return on Capital (or vice versa); see Discounts and allowances.

 Short-term financing.
 Identify the appropriate source of financing, given the cash conversion cycle: the inventory is
ideally financed by credit granted by the supplier; however, it may be necessary to utilize a
bank loan (or overdraft), or to "convert debtors to cash" through "factoring".
 Chapter-3

REVIEW OF LITERATURE
 REVIEW OF LITERATURE

Review of literature aims to summarize major studies that have been published on the
topic. It provides theoretical knowledge on the selected topic.

1. Hossain Saiyed Zabid and Akon MD Habibur Rahman (1997) emphasize the
basic objective of working capital management. In order to get a trade off between
liquidity and profitability, working capital funds should be arranged at the right time,
right cost and from right source. The analysis revealed that the BTMC had followed
an aggressive working capital financing policy taking the risk of liquidity. This study
concludes that the BTMC had exploited the entire short term sources available
without considering the actual needs, because there was an increasing trend of
negative net working capital through out the period of study.

2. Sing ravel P (1999) focused on study which revealed the interdependency among
working capital, liquidity and profitability of which liquidity comes in first preference
when compared with others. This article is an in-depth analysis of liquidity and it’s
interred relationship with working capital and profitability. None among this three is
dispensable. Excess of stock-in-trade over bank overdraft and excess of liquid assets
over current liabilities other than bank overdraft generate working capital for
business. Also working capital requirement is made for long term funds which affects
the profitability.

3. Jain P K and Yadav Surendra S (2001) studied the corporate practises related to
management of working capital in India, Singapore and Thailand. Through this study
they have tried to understand working capital management and current assets and
current liabilities and their inter relationship. Further the authors have also done an
aggregative analysis of current assets and current liabilities in terms of major liquidity
ratios. They also stated that the working capital position of various industries with
respect to these ratios. Towards the end the author suggest that serious considerations
is to be given by the government as well as industry groups in these three countries in
order to take corrective measures to take care of and rectify the area of concern.

4. Filbeck Greg and Krueger Thomas M (2005) base their study on ratings of working
capital management published in CFO magazines. The findings of their study give
insights to working capital management, which is explained by macro-economic
factors, interest rates, competition etc. and their impact on working capital
management. They also studied the impact of working capital management on stock
prices.

5. bThappa Sankar (2007) focuses on working capital management of Sun

Pharmaceuticals Company. They studied about concept of working capital, working
 capital policy, components of working capital and factors affecting working capital in
Sun Pharmaceutical Company during the last five years and identified the factors
which are responsible for the improvement of working capital of the company. They
concluded with a warning that if the company doesn’t maintain proper level of
working capital, it will bankrupt.

6. Dinesh M (2008) studied the concepts of working capital, different challenges faced
by the business firms in managing the working capital and strategies to be adopted
for its proper management. This study concluded that most of the business failed not
because of lack of profit, but because of lack of cash. The fast growth in production
and sales will increase the need of resources and the assets such as inventories,
account receivables will become illiquid.

7. Rahman Mohammad M (2011) studied the inter relationship between working

capital and profitability. An effective working capital management has a positive
impact on profitability of firms. This study also states that textile industries
profitability and working capital management position are up to the mark.

8. Dr Arbab Ahmed and Dr Matarneh Bashar (2011) found that registration

technique can be a best statistical technique which will help in working capital
forecasting. It helps in making future projections after establishing the average
relationship in the past between sales and working capital and its various components.
The analysis can be done with the help of graphic portrayals or mathematical
formulas.

9. Chandra H and Selvaraj A (2012) analyses the working capital management of

selected steel companies of India for the period from 2000-01 to 2009-10. They
measured the utilization of working capital by analyzing the operating cycle and cash
conversion cycle. This study concluded that the size of a company plays a vital role in
determining the efficiency of working capital management.

10. Dr Panigrahi Ashok Kumar (2012) studied the relationship between working capital
management and profitability of ACC Cement Company, the leading cement
manufacturer of the country for assessing the impact of working capital management
on profitability during the period 1999-2000 to 2009-10. This study is based on
secondary data. They conducted this study to find out whether there is any
relationship between working capital management and performance of the firm and they
found that there is moderate relationship between working capital management and
firm’s profitability.

11. Bagchi B and Kamrul B (2012) studied about the relationship between working
capital management and companies’ profitability. They conducted an empirical study
using a sample of Indian FMCG companies. This study concludes that both cash
conversion cycle and debt used by the firm are negatively associated with
companies’ profitability. T h i s study also analyzed that if the companies manage
their working capital in more efficient ways, it will ultimately increase their
profitability.

12. Joshi Lalith Kumar and Gosh sudipta (2012) study the working capital
performance of Cipla Ltd during the period 2004-05 to 2008-08. Financial ratios have
been applied in measuring the working capital performance, and statistical as well as
 econometric techniques have been used. It was observed that the selected ratios show
satisfactory performance, and significant negative relationship between liquidity and
profitability is found exist.

13. Singh Moirangthem B and Singh Tejmani N (2013) emphasize on the efficient
management of working capital. According to them it means proper management of
various components of working capital due to which adequate amount of working
capital and liquidity is maintained in the larger interest of successful running of an
enterprise. They also suggest that, the industry should try to maintain proper
level of net working capital by trying to control the growth rate of current assets as
compared to current liabilities to some extend and also the industry should also try
to maintain balance between liquidity and profitability position by improving current
and quick ratio.

14. Kaur harsh V and Singh Sukhdev (2013) analyses empirically BSE 200
manufacturing companies spread over 19 industries for the period 2000 to 2010. The
study explores scope to increase the efficiency and profitability of 145 companies by
improving the parameters of analysis. The study tests the relationship between the
working capital score and profitability measured by income to current assets and
income to average total assets. This article concentrates on cash conversion efficiency
and planning the operating cycle days. At the end, the study emphasizes that efficient
management of working capital significantly affects profitability.

15. Joseph Jisha (2014) closely examines the study of working capital management in
Ashok Leyland and points out that the liquidity and profitability position of the
company is not satisfactory, and needed to be strengthened in order to be able to
meet its obligations on time.

16. Hoan-Lan Le, Khieu-Trang Vu, Ngoc-Khan Du, Manh Dung Tran (2018)
investigated the impact of working capital management on financial performance by
using the data collected from listed firms on Ho Chi Minh Stock Exchange (HOSE).
They used the variable cash conversion cycle as measurement for working capital
management by taking the following variables in to consideration which includes
growth, cash flow, liquidity, risk leverage. The results imply that working capital
management positively impacts the financial performance of firms in the sample.
Their study also gives insights to the managers on how to improve the financial
performance with working capital management
.
17. Sandip Dhole, Sagarika Mishra, NADA Mohan Pal (2019) examined the
association between efficient working capital management and financial constraints
for a sample of Australian firms. Using a text- b a s e d measure of financial
constraints, they show that the efficient working capital management is associated
with lower financial constraints in firms in the next two to three years. They were
the first who used this text-based measure of financial constraints for Australian
firms. They also show that the negative association between financial constraints
and future share price is significantly weakened for firms with efficient working
capital management.

18. Ben Le (2019) examined the effect of working capital management on firms’
valuation, profitability and risk using panel data methodology. He found out a
 negative relationship between net working capital and firms valuation, profitability
and risk. The results suggests that in managing working capital firms managers must
make a trade off between their objectives for profitability and risk control. Working
capital management is of particular importance in firms with less access to capital;it is
also important when firms are expanding their investments during periods of
economic recovery.

19. Sawarni KS, Narayanaswamy S and Ayalusamy K(2020) investigated the impact
of the efficiency of working capital management on the performance of a sample of
Indian companies and explore how the nature of the firms business influences the
significance and direction of this impact. The data for this study was collected for the
period of 2012-2018 for 414 non financial firms listed in Bombay Stock Exchange.
Working capital efficiency has a significant impact on the performance of the sample
firms. Non financial Indian firms deliver better financial performance by maintaining
lower Net Trade Cycle. The significance of relationship varies depending upon the
nature of the firm’s business.
 CHAPTER 4
ANALYSIS OF THE STUDY
 ANALYSIS OF WORKING CAPITAL IN JK TYRE

BALANCE SHEET OF JK TYRE

The data below is the balance sheet of JK Tyre for the last five financial years:

BALANCE SHEET OF JK TYRE AND Mar- Mar- Mar- Mar- Mar-

INDUSTRIES (in Rs. Cr.) 22 21 20 19 18
12 12 12 12 12
  mths mths mths mths mths
EQUITIES AND LIABILITIES          
SHAREHOLDER'S FUNDS          
Equity Share Capital 49.25 49.25 49.25 49.24 45.36
TOTAL SHARE CAPITAL 49.25 49.25 49.25 49.24 45.36
Reserves and Surplus 2,476. 2,349. 2,113. 1,945. 1,598.
85 14 25 88 93
TOTAL RESERVES AND SURPLUS 2,476. 2,349. 2,113. 1,945. 1,598.
85 14 25 88 93
TOTAL SHAREHOLDERS FUNDS 2,526. 2,398. 2,162. 1,995. 1,644.
10 39 50 12 29
           
NON-CURRENT LIABILITIES          
8Long Term Borrowings 972.0 1,188. 1,465. 1,558. 1,457.
6 48 00 22 75
Deferred Tax Liabilities [Net] 342.7 311.4 243.6 404.9 373.8
6 3 7 1 4
Other Long Term Liabilities 565.5 568.4 501.7 314.3 308.3
2 5 6 5
Long Term Provisions 30.8 28.88 31.33 26.66 24.15
TOTAL NON-CURRENT LIABILITIES 1,911. 2,097. 2,241. 2,304. 2,164.
14 24 70 15 09
           
CURRENT LIABILITIES          
Short Term Borrowings 1,848. 748.2 1,528. 1,451. 1,522.
87 5 13 85 38
Trade Payables 1,380. 1,196. 943.7 979.1 961.3
52 15 1 9
Other Current Liabilities 471.9 809.2 590.6 667.4 880.1
3 8 6 7 3
Short Term Provisions 6.26 6.9 21.79 7.69 6.13
TOTAL CURRENT LIABILITIES 3,707. 2,760. 3,084. 3,106. 3,370.
58 58 29 11 03
TOTAL CAPITAL AND LIABILITIES 8,144. 7,256. 7,488. 7,405. 7,178.
82 21 49 38 41
           
ASSETS          
NON-CURRENT ASSETS          
Tangible Assets 3,428. 3,329. 3,489. 3,320. 3,566.
20 74 99 46 82
Intangible Assets 0 1.93 3.14 3.93 5.06
Capital Work-In-Progress 0 64.12 60.88 73.8 83.31
Other Assets 0 5.73 5.83 5.93 6.04
           
FIXED ASSETS 3,428. 3,406. 3,559. 3,404. 3,661.
20 17 84 12 23
Non-Current Investments 791.1 733.1 723.8 596.6 544.8
1 1 7
Deferred Tax Assets [Net] 0 0 0 0 0
Long Term Loans And Advances 0 42.64 44.39 47.99 45.94
Other Non-Current Assets 137.9 105.8 135.2 116.0 124.5
9 7 3 5
TOTAL NON-CURRENT ASSETS 4,357. 4,287. 4,463. 4,164. 4,376.
30 78 23 75 59
           
CURRENT ASSETS          
Current Investments 0 0 0 0 0
Inventories 1,532. 1,194. 1,095. 1,136. 1,026.
84 58 53 12 01
Trade Receivables 1,667. 1,367. 1,436. 1,632. 1,289.
38 28 03 45 72
Cash And Cash Equivalents 76.27 62.97 46.28 100.3 72.29
Short Term Loans And Advances 0 0 0 0 0
Other Current Assets 511.0 343.6 447.4 371.7 413.8
3 2 6
TOTAL CURRENT ASSETS 3,787. 2,968. 3,025. 3,240. 2,801.
52 43 26 63 82
TOTAL ASSETS 8,144. 7,256. 7,488. 7,405. 7,178.
82 21 49 38 41
 CALCULATION OF WORKING CAPITAL IN JK TYRE FOR THE LAST FIVE YEARS:
Below is given the working capital of JK Tyre for the last five financial years i.e., (march 2018 to
march 2022)

Current assets in 2018:(figures are in Cr.)

 Inventories: 1026.01
 Trade Receivables: 1289.72
 Cash and Cash Equivalents: 72.29
 Other Current Assets: 413.8
Total Current Assets: 2801.82
Current Liabilities in 2018:(figures are in Cr.)
 Short Term Borrowings: 1522.38
 Trade Payables: 961.39
 Other Current Liabilities: 880.13
 Short team provision: 6.13
Total Current Liabilities: 3370.03
Working capital in 2018:
Total current assets in 2018  Total current liabilities in 2018
= 2801.82 – 3370.03
= -568.21 Cr.

Current Assets in 2019:(figures in Cr.)

 Inventories: 1136.1
 Trade Receivables: 1632.45
 Cash and Cash Equivalent: 100.3
 Other Current Assets: 371.76
Total Current Assets: 3240.63
Current Liabilities in 2019:(figures in Cr.)
 Short Term Borrowings:1,451.85
 Trade Payables: 979.1
 Other Current Liabilities: 667.47
 Short Term Provision: 7.69
Total Current Liabilities:3,106.11
Working Capital in 2019:
Total Current Assets in 2019 – Total current liabilities in 2019
= 3240.63 – 3106.11
= 134.52 Cr.

Current Assets in 2020: (figures in Cr.)

 Inventories:1,095.53
 Trade Receivables: 1436.03
 Cash and Cash Equivalents: 46.28
 Other Current Assets: 447.42
Total Current Assets: 3025.26
Current Liabilities in 2020:(figures in Cr.)
 Short Term Borrowings:1,528.13
 Trade Payables: 943.71
 Other Current Liabilities: 590.66
 Short term provision: 21.79
Total Current Liabilities: 3084.29
Working Capital in 2020:
Total Current Assets in 2020 – Total Current Liabilities in 2020
= 3025.26 – 3084.29
= -59.03 Cr.

Current Assets in 2021:(figures in Cr.)

 Inventories: 1194.58
 Trade Receivables :1367.28
 Cash and Cash Equivalents: 62.97
 Other Current Assets:343.6
Total Current Assets: 2968.43
Current Liabilities in 2021: (figures in Cr.)
 Short Term Borrowings: 748.25
 Trade Payables: 1196.15
 Other Current Liabilities: 809.28
 Short term provision: 6.9
Total Current liabilities: 2760.58
Working Capital in 2021:
Total Current Assets in 2021 - Total Current liabilities in 2021
= 2968.43 – 2760.58
= 207.85 Cr.

Current Assets in 2022: (figures in Cr.)

 Inventories: 1532.84
 Trade Receivables: 1667.38
 Cash and Cash Equivalents: 76.27
 Other Current Assets: 511.03
Total Current Assets:3,787.52
Current Liabilities in 2022:(figures in 2022)
 Short Term Borrowings: 1848.87
 Trade Payables: 1380.52
 Other Current Liabilities: 471.93
 Short term provision: 6.26
Total Current Liabilities: 3707.58
Working Capital in 2022:
Total Current Assets in 2022 – Total Current Liabilities in 2022
= 3787.52 – 3707.58
= 79.94 Cr.

5.4 DATA ANALYSIS

This chapter deals with analysis and interpretations. Gross working capital is used to analyse
the structure of working capital and ratio analysis is used to analyze the profitability and
liquidity of the company and efficiency of working capital management.
4.1 Components of Current Assets

Gross working capital is the total of current assets. Working capital management involves
deciding upon the amount and composition of current assets and how to finance these assets.
There should be an optimum investment in each component of current asset. The solvency of
the firm is largely depended upon the optimum use of current asset. Thus the management
should be concerned about the investment in each of the component of current asset.
 Table 4.1 (Amount in Crores)

Particulars 2022 2021 2020 2019 2018 Average

Current 0 0 1339.05 394.44 501.77 447.052

Investments
Inventories 1808.25 2051.48 1721.49 1729.4 1019.75 1666.074

Trade Receivables 445.08 779.5 550.15 386.49 292.76 490.796

Cash and Cash 236.58 217.57 260.52 139.38 290.97 229.004

Equivalent
Short Term Loans 0 0 576.16 175.52 1.82 150.7
and Advances
Other Current 427.63 461.9 429.55 363.77 314.26 399.422
Assets
Total 2917.54 3510.45 4876.92 3189 2421. 33 3383.048

(Source: Compiled from published annual reports of the company)

5.4.1 Interpretation:

From the table 4.1 it is found that major portion of current asset is in the form of inventory.
Current assets in the form of short term loans and advances has the amount of investment as
compared to others.
Diagram 4.1

Components of current assets

Current Inventories

Trade Receivables

Cash and Cash

Equivalent

Short Term Loans and Advances

Other Current Assets

4.2 LIQUIDITY RATIOS

4.2.1 Current Ratio

It measures the firm’s short term solvency or ability of the firm to pay off it’s current
liabilities out of current assets. The ideal current ratio is 2:1.

Table 4.2 (Amount in Crores)

Current Current Current

Year Assets Liabilities Ratio

2017-2018 2421.33 2078.82 1.16

2018-2019 3189 2876.2 1.11
2019-2020 4876.92 3071.67 1.59
2020-2021 3510.44 2649.1 1.33
2021-2022 2917.55 4092.48 0.71
Average 3383.048 2953.654 1.18
(Source: Compiled from published annual reports of the company)

Interpretation:

The table 4.2 shows the current ratio for the last five years. Current ratio for the year 2019-
2020 is higher. It is 1.59 for that year. The financial year 2021-2022 has the lowest current
ratio which is 0.71. the average ratio is 1.18.
5.4.2 Diagram 4.2

5.5 CURRENT
RATIO
2.00
1.50
Current Ratio

1.00
0.50
0.00 Current Ratio

5.5.1 Year
4.2.2 Quick Ratio
It establishes the relationship between quick assets and current liabilities. It is a measure of
instant debt paying ability of the firm. The ideal quick ratio is 1:1
Table 4.3 (Amount in Crores)

Year Liquid Current Quick

Assets Liabilities Ratio

2017-2018 613.08 2078.82 0.29

2018-2019 1137.52 2876.2 0.40
2019-2020 3155.43 3071.67 1.03
2020-2021 1781.04 2649.1 0.67
2021-2022 1897.8 4092.48 0.46
Average 1716.974 2953.654 0.57
(Source: Compiled from published annual reports of the company)

Interpretation:

The table 4.3 shows the quick ratio for last five years. The financial year 2019-2020 has the
highest quick ratio which is 1.03. the financial year 2017-2018 has the lower quick ratio of
0.29. the average quick ratio is 0.57.
5.5.2 Diagram 4.3

5.6 QUICK RATIO

1.2
1
Quick ratio

0.8
0.6
0.4 Quick Ratio
0.2
0

5.6.1 Year
4.2.3 Absolute Liquid Ratio
Absolute Liquid Ratio is the ratio showing the relationship between cash and cash
equivalents and current liabilities. The ideal absolute liquid ratio is 0.5:1.
Table 4.4 (Amount in Crores)

Year Absolute Current Absolute Liquid

Liquid Assets Liabilities Ratio
2017-2018 236.58 2078.82 0.11
2018-2019 217.57 2876.2 0.08
2019-2020 260.52 3071.67 0.08
2020-2021 139.38 2649.1 0.05
2021-2022 290.97 4092.48 0.07
Average 229.004 2953.654 0.08
(Source: Compiled from published annual reports of the company)

Interpretation:

The table 4.4 shows the absolute liquid ratio for the last five financial years. The highest
absolute liquid ratio is for the year 2017-2018 which is 0.11 and the lowest is for the year
2020-2021 which is 0.05. The average absolute liquid ratio is 0.08 which is far lesser than
the ideal ratio which is 0.5.
Diagram 4.4

Absolute Liquid Ratio

Absolute liquid ratio

0.12
0.1
0.08
0.06
0.04
Absolute Liquid Ratio
0.02
0

Year
4.3 PROFITABILITY RATIOS

4.3.1 Gross Profit Ratio

It is the ratio of gross profit to sales expressed as percentage. It is also known as gross
margin. A gross profit ratio of 65% is considered as healthy.
Table 4.5 (Amount in Crores)

Gross
Year Gross Profit Net Sales Profit
Ratio
2017-2018 3880.76 8648.51 44.87
2018-2019 3821.62 8816.7 43.35
2019-2020 3839.54 10133.24 37.89
2020-2021 4767.21 12089.58 39.43
2021-2022 4646.92 10832.7 42.90
Average 4191.21 10104.146 41.69
(Source: Compiled from published annual reports of the company)

Interpretation:

The table 4.5 shows the gross profit ratio for the last five financial years. The higher gross
profit ratio is for the year 2017-2018 which is 44.87% and the lowest ratio is for the year
2019-2020. The average gross profit ratio is 41.69.
Diagram 4.5

5.7 GROSS PROFIT RATIO

46
44
Gross profit ratio

42
40
38
36
34
Gross Profit Ratio

Year
4.3.2 Operating Profit Ratio
Operating profit ratio shows the relationship between operating profit and net sales. It
measures the operational efficiency of the firm.
Table 4.6 (Amount in Crores)

Year Operating Net Sales Operating

Profit Profit Ratio
2017-2018 1416.62 8648.51 16.38
2018-2019 1142.96 8816.7 12.96
2019-2020 968.3 10133.24 9.56
2020-2021 1504.13 12089.58 12.44
2021-2022 1194.57 10832.7 11.03
Average 1245.316 10104.146 12.47
(Source: Compiled from published annual reports of the company)

Interpretation:

The table 4.6 shows the operating profit ratio for the last five financial years. The highest
operating profit ratio is for the year 2017-2018 which is 16.38% and the lowest ratio is 9.56
for the year 2019-2020 The average operating profit ratio is 12.47%.
Diagram 4.6

5.8 OPERATING PROFIT

RATIO
18
16
Operating profit ratio

14
12
10
8
6 Operating Profit Ratio
4
2
0

Year
4.3.3 Operating Ratio
Operating ratio express the relationship between operating cost and sales. It indicates the
overall efficiency in operating the business. The ideal ratio is 65%.
Table 4.7 (Amount in Crores)

Year Cost of goods Net Sales Operating

sold+Operating expenses Ratio
2017-2018 7231.89 8648.51 83.62
2018-2019 7673.74 8816.7 87.04
2019-2020 9164.94 10133.24 90.44
2020-2021 10585.45 12089.58 87.56
201-2022 9638.12 10832.7 88.97
Average 8858.828 10104.146 87.53
(Source: Compiled from published annual reports of the company)

Interpretation:

The table 4.7 shows the operating ratio for the last five financial years. Highest ratio is for
the financial year 2019-2020 which is 90.44%. lowest ratio is 83.62% for the financial year
2017-2018. The average ratio is 87.53%.
5.8.1 Diagram 4.7

Operating Ratio
92
Operating ratio

90
88
86
84
82 Operating Ratio

80

Year
4.3.4 Net Profit Ratio

Net profit Ratio shows the relationship between net profit and net sales. It measures the
overall profitability as well as efficiency of the business. The ideal net profit ratio is 5%-10%.
Table 4.8 (Amount in Crores)

Year Net Profit Net Sales Net Profit

Ratio

2017-2018 1002.15 8648.51 11.59

2018-2019 802.76 8816.7 9.10
2019-2020 622.39 10133.24 6.14
2020-2021 592.11 12089.58 4.90
2021-2022 508.62 10832.7 4.70
Average 705.606 10104.146 7.29
(Source:Compiled from published annual reports of the company)

Interpretation:

The table 4.8 shows the net profit ratio for the last five financial years. Highest ratio is
11.59% for the year 2017-2018 and the lowest ratio is 4.70% for the financial year 2021-
2022. The average ratio is 7.29%.
5.8.2 Diagram 4.8

Net Profit Ratio

14
12
10
Net profit ratio

8
6
4
Net Profit Ratio
2
0

Year
4.3.5 Return on Investment

It is also known as return on capital employed. It shows the relationship between profit
before interest and tax and capital employed. The ideal return on investment is 15%.
Table 4.9 (Amount in Crores)

Year Operating Profit

Capital Return on
employed Investment
2017-2018 1416.62 5440.73 26.04
2018-2019 1142.96 6999.81 16.33
2019-2020 968.3 10070.91 9.61
2020-2021 1504.13 10999.84 13.67
2021-2022 1194.57 12389.51 9.64
Average 1245.316 9180.16 15.06
(Source: Compiled from published annual reports of the company)

Interpretation:

The table 4.9 shows the return on investment for the last five financial year. The highest ratio
is 26.04% for the financial year 2017-2018 and the lowest ratio is 9.61% for the year 2019-
2020. The average ratio is 15.06%.
5.8.3 Diagram 4.9
Return on investment

Return on Investment
30
25
20
15
10 Return on
Investmen
5
t
0

Year
4.3.6 Return on Total Asset
Return on total assets measures the earning when compared with total assets of the firm.
It shows the relationship between net profit and total assets.
Table 4.10 (Amount in Crores)

Year Net Profit Total assets Return on

Total Assets
2017-2018 1002.15 7519.55 13.33
2018-2019 802.76 9876.01 8.13
2019-2020 622.39 13142.58 4.74
2020-2021 592.11 13648.94 4.34
2021-2022 508.62 16481.99 3.09
Average 705.606 12133.814 6.72
(Source: Compiled from published annual reports of the company)

Interpretation:

The table 4.10 shows the Return on Total asset for the last five financial year. The highest
ratio is 13.33% for the year 2017-2018 and the lowest is 3.09% for the year 2021-2022. The
average return on total asset is 6.72%.
Diagram 4.10

5.9 RETURN ON TOTAL

ASSETS
1
4
Return on total assets

1
2
1
0 Return on
8 Total Assets
6
4
2
0

Year
4.3.7 Return on Shareholders Fund
Return on shareholders fund shows the relationship between net profit and shareholders’
fund. It measures the profitability from shareholders point of view.
Table 4.11 (Amount in Crores)

Share Return on
Year Net Profit Holders Share
Fund Holders
Fund
2017-2018 1002.15 4657.84 21.52
2018-2019 802.76 5331.19 15.06
2019-2020 622.39 7260.61 8.57
2020-2021 592.11 7641.16 7.75
2021-2022 508.62 7692.15 6.61
Average 705.606 6516.59 11.90
(Source: Compiled from published annual reports of the company)

Interpretation:

The table 4.11 shows the Return on Shareholders fund for the last five financial years. The
highest ratio is 21.52% for the year 2017-2018 and the lowest ratio is 6.61% for the year
2021-2022. The average return on shareholders fund is 11.90%.
Diagram 4.11

5.10 RETURN ON SHAREHOLDERS FUND

25
Return on shareholders fund

20

15

10
Return on Share holders
5 Fund
0

Year
4.4 ACTIVITY RATIOS
4.4.1 Inventory Turnover Ratio

Inventory turnover ratio shows the relationship between cost of goods sold and average
inventory. It shows how frequently the inventory is converted to sales.
Table 4.12 (Amount in Crores)

Average Inventory
Year Cost Of Goods Sold Inventory Turnover
Ratio
2017-2018 4767.75 1102.47 4.32
2018-2019 4995.08 1374.575 3.63
2019-2020 6293.7 1725.445 3.65
2020-2021 7322.37 1886.485 3.88
2021-2022 6185.78 1929.865 3.21
Average 5912.936 1603.768 3.74
(Source: Compiled from published annual reports of the company)

Interpretation:

The table 4.12 shows the inventory turnover ratio for the last five financial years. The highest
ratio is 4.32 for the year 2017-2018 and the lowest ratio is 3.21 for the year 2021-2022. The
average ratio is 3.74.
5.10.1 Diagram 4.12

5.11 INVENTORY TURNOVER RATIO

5
Inventory Turnover ratio

4
3.5
3
2.5 Inventory
2 Turnover Ratio
1.5
1
0.5
0

Year
5.11.1 4.4.2 Working Capital Turnover Ratio

Working capital turnover ratio shows the relationship between net sales and net
working capital.

Table 4.13 (Amount in Crores)

Working
Net Working Capital
Year Net Sales
Capital Turnover
Ratio
2017-2018 8648.51 342.51 25.25
2018-2019 8816.7 312.8 28.19
2019-2020 10133.24 1805.25 5.61
2020-2021 12089.58 861.34 14.04
2021-2022 10832.7 -1174.93 -9.22
Average 10104.146 429.394 12.77
(Source: Compiled from published annual reports of the company)

Interpretations:

The table 4.13 shows the working capital turnover ratio for the last five financial
years. The highest ratio is 28.19 for the year 2016-2017. The lowest ratio is -9.22 for
the year 2019-2020. The average ratio is 12.77.

Diagram 4.13
Working Capital Turnover Ratio
35
30
25
Working capital turnover ratio

20
15
10 Working Capital Turnover
5 Ratio
0
-5
-10
-15
Year
4.5 Cash Flow Statement

Table 4.14 (Amount in Crores)

2017-
Cash flow 2018- 2019- 2020- 2021-2022
2018
2019 2020 2021
Net profit
1414.53 1085.63 867.31 806.39 581.39
before
tax
Net cash flow
from 1784.90 329.85 933.34 592.67 1895.37
operating
Activities
Net cash used
-
in investing -1395.38 -2754.05 -456.71 -2675.14
1077.60
activities
Net cash used
in financing -640.98 906.05 1933.83 -178.01 807.26
activities
Net increase or
decrease in cash
66.32 -159.48 113.12 -42.05 27.49
and cash
Equivalents
Cash and cash
equivalents at 220.16 286.48 127.00 240.11 198.06
Beginning
Cash and cash
equivalents at 286.48 127.00 240.11 198.06 225.56
the end
 (Source: Compiled from published annual reports of the company)

Interpretations:

The above table shows the cash flow position of the company for the last five years.
Cash and cash equivalents for the year 2017-2018is the higher amount which is
286.48. cash and cash equivalents for the year 2018-2019 is the lowest which is
127.00. But in the year 2017-2018 it has increased to 240.11 and in the year 2019-
2020 it has decreased to 198.06. for the financial year 2021-2022 cash and cash
equivalents increased to 225.56.
 CHAPTER 5
FINDINGS, SUGGESTIONS AND
CONCLUSION
5.11.2 FINDINGS, SUGGESTIONS AND CONCLUSION

This chapter deals with findings , suggestions and conclusion of the study.

5.1 FINDINGS

1. The working capital position of the company is not satisfactory. The company is
showing a downward trend. Most of the current assets are held in the form of
inventory, so the company should maintain a good cash balance.
2. The standard Current Ratio is 2:1. For all the five years current ratio of the company
is below this standard.
3. The standard Quick Ratio is 1:1. It was below this standard for all the five years
except for one year.
4. Absolute liquid ratio is below the standard 0.5:1 for all the years. It is showing a
downward trend for last two years.
5. Gross profit ratio is showing a increasing trend for the last two years.
6. There is an instability in operating profit of the company.
7. Operating Ratio is showing a upward trend.
8. Every year Net Profit ratio is between 80%-90%.Net profit ratio is showing a
downward trend for the last four years.
9. Return on Investment is instable for the last five years. It is showing a decreasing
trend except for the year 2019-2020.
10. Return on total assets is showing a decreasing trend for the last five years. The least
value is for the year 2020-2021 which is 3.09.
11. Return on Shareholders Fund is showing a decreasing trend for the last five years.
12. Inventory Turnover Ratio is instable for the last five years. It shows decreasing trend
for the first one year and then it started increasing for the next two years, after that it
started showing an decreasing trend for the last one year.
13. Working Capital Turnover ratio. It is instable for the last five years. It has become -
9.22 for the year 2019-2020.
14. Cash flow position of the company is fluctuating. The company has satisfactory
working capital held in the form of cash and cash equivalents.

79
5.2 SUGGESTIONS

a) Cash position of the company is satisfactory. The investment in the form of inventory
and should be reduced and appropriate method should be adopted to make it better.

b) In order to increase the net profit, the company should reduce the cost to the
maximum.

c) Better consistency should be maintained by the company in relation with working

capital of the company.

d) The overall performance of the company is not satisfactory. The company need to
adopt good working capital management policy to improve the performance and to
avoid fluctuating trends.

5.3 CONCLUSION

The study was conducted to evaluate the working capital management of JK Tyres lOn

the basis of secondary data collected from the annual reports of the company for five years

starting from 2015-2016 to 2019-2020 data was analyzed using ratio analysis and cash flow

statement. Through analyzing this data it is found out that the company has enough cash and

cash equivalents to meet its current obligations. Here all the ratios are not up to the ideal ratio

, and also most of the ratios are showing a downward trend. Hence the company needs to

improve it’s working capital position.

To conclude optimum capital is necessary for the smooth running of the business. The

working capital management is a very important aspect. The management need to adopt

efficient working capital policies to overcome this position.

80
6 BIBLIOGRAPHY
 BOOKS

 Dr S N Maheshwari, Cost and Management Accounting, New Delhi: Sultana C handand

Sons Publishers, fourth revised edition 1997.

 A Vinod, Accounting for Management, Calicut University.

 Annual Reports of JK Tyres Ltd.

 D K Sharma and A K Gupta, Business Reasearch Method, New Delhi: Vayu Education of
India.

 Bhatt V V, (1972), Working Capital Finance: Criteria of Appraisal, Economic and Political
weekly.

WEBSITES

 www.jktyres.com
 www.moneycontrol.com
 www.wikipedia.org
 www.bseindia.co

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