A REPORT ON

WORKING CAPITAL MANAGEMENT AT NATIONAL

ALUMINIUM COMPANY LIMITED (NALCO)

BY:

SARTHAK PANDA

22BSPHH01C1048

(MBA 2022-24)

NATIONAL ALUMINIUM COMPANY LIMITED

BHUBANESWAR

1
 A REPORT ON

WORKING CAPITAL MANAGEMENT AT NATIONAL

ALUMINIUM COMPANY LIMITED (NALCO)

BY:

SARTHAK PANDA

22BSPHH01C1048

(MBA 2022-24)

NATIONAL ALUMINIUM COMPANY LIMITED

A report submitted in the partial fulfilment

ofthe requirements of MBA program of

IBS Hyderabad

Faculty Guide Company Guide

Dr. Aruna Kumar Dash Mr. Abhimanyu Padhi

Associate Professor, Economics Assistant General Manager (Finance)

IBS Hyderabad NALCO Bhubaneswar

Date of Submission: 12.05.2023

2
 AUTHORIZATION

This is to certify that this interim report is submitted for the partial fulfillment of the MBA program of ICFAI
Business School, Hyderabad. The report titled, “Working Capital Management at National Aluminium Company
Limited (NALCO)” is a work done by Sarthak Panda as part of the internship program under the guidance of
faculty guide Dr. Aruna Kumar Dash, Associate Professor- Economics, IBS Hyderabad, along with Mr.
Abhimanyu Padhi, Assistant General Manager (Finance), National Aluminium Company Limited (NALCO).

3
 ACKNOWLEDGMENT

Behind any successful task, there is a combined effort of a lot of people and this interim report is no exception. At
the start of my interim report, I would want to express my profound gratitude to all the individuals who have
assisted me in this quest. Throughout the interim report, I am grateful for their guidance, invaluable constructive
criticism, and pleasant advice. To begin, I'd like to offer my sincere appreciation to Dr. Aruna Kumar Dash,
Associate Professor, IBS Hyderabad, for her unwavering support in completing this interim report. His extensive
expertise, support, and excellent leadership were the primary factors in the success of this report. I'd like to convey
my heartfelt gratitude to IBS Hyderabad for providing me with the summer internship at the National Aluminium
Company Limited (NALCO). I am very much thankful to Mr. Abhimanyu Padhi, Assistant General Manager
(Finance), who has been a great help and support to me in completing this interim report. I also extend my sincere
thanks to my parents and other members of my family, who have always supported me morally as well as
financially

4
 TABLE OF CONTENTS

Sr. No. Particulars Page No.

1 Authorization 3

2 Acknowledgment 4

3 Abstract 12

4 Introduction 13

4.1. Objectives 13

4.2. Methodology 13

4.3. Limitations of the study 13

4.4. Scope of the study 14

4.5. Aluminium Industry in India 14

4.6. About NALCO 16

4.7. Operations of NALCO in brief 18

4.8. Products of NALCO 20

5 Working Capital 20

5.1. Meaning of Working Capital 20

5.2. Importance of Working Capital 20

5.3. Issues due to over-assessment of working capital 21

5.4. Issues due to under assessment of working capital 21

5.5. Method of calculating Working Capital 22

6 Data analysis and interpretations of NALCO 23

6.1. Analysis of Total Current Assets, Total Current 23

Liabilities, andNet Working Capital

5
Sr. No. Particulars Page No

6.2. Analysis of Current Ratio (NALCO) 27

6.3. Analysis of Quick Ratio (NALCO) 29

6.4. Analysis of Gross Working Capital Turnover Ratio 31

(NALCO)
6.5. Analysis of Current Assets to Fixed Assets Ratio 32
(NALCO)
6.6. Analysis of Current Assets to Total Assets Ratio 34
(NALCO)
6.7. Analysis of Sales to Average Stock Ratio (NALCO) 35

6.8. Analysis of Debtors Turnover ratio (NALCO) 37

6.9. Analysis of Average Collection Period Ratio (NALCO) 38

6.10. Analysis of Inventory Turnover Ratio (NALCO) 39

6.11. Inventory Turnover in day (NALCO) 41

7 Analysis and Interpretation of HINDALCO 43

7.1. Current Assets (HINDALCO) 43

7.2. Current Liabilities (HINDALCO) 44

7.3. Net Working Capital (HINDALCO) 46

7.4. Analysis of Current Ratio (HINDALCO) 47

7.5. Analysis of Quick Ratio (HINDALCO) 49

7.6. Analysis of Gross Working Capital Turnover Ratio 50

(HINDALCO)
7.7. Analysis of Current Assets to Fixed Assets Ratio 52
(HINDALCO)
7.8. Analysis of Fixed Assets Turnover Ratio (HINDALCO) 53

7.9. Analysis of Current Assets to Total Assets Ratio 55

(HINDALCO)
7.10. Analysis of Total Assets Turnover Ratio (HINDALCO) 56

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Sr. No. Particulars Page No

7.11. Analysis of Inventory Turnover Ratio (HINDALCO) 58

7.12. Analysis of Inventory Turnover in days (HINDALCO) 59

8 Comparison between Working Capital Management of 61

NALCO and HINDALCO

8.1. Current Assets 61

8.2. Current Liabilites 62

8.3. Net Working Capital 63

8.4. Comparison of Current Ratio 65

8.5. Comparison of Quick Ratio 66

8.6. Comparison of Gross Working Capital Turnover Ratio 68

8.7. Comparison of Current Assets to Fixed Assets Ratio 70

8.8. Comparison of Fixed Assets Turnover Ratio 71

8.9. Comparison of Current Assets to Total Assets Ratio 73

8.10. Comparison of Inventory Turnover Ratio 74

8.11. Inventory Turnover in days 75

9 FINDINGS and CONCLUSION 77

10 . RECOMMENDATIONS 78

11 References 79

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 List of Figures
Fig. no Particular Page.No
1 The production process of Aluminum 15

2 Graph of Current Asset (NALCO) 24

3 Graph of Current Liabilities (NALCO) 25

4 Comparative Graph (NALCO) 26

5 Graph of Current Ratio (NALCO) 28

6 Graph of Quick Ratio (NALCO) 30

7 Graph of Gross Working Turnover ratio (NALCO) 32

8 Graph of the Current to fixed asset Ratio (NALCO) 33

9 Graph on Current Asset and Total Assets Ratio (NALCO) 35

10 Graph of Sales to Avg Stock Ratio (NALCO) 36

11 Graph of Debtors Turnover ratio (NALCO) 37

12 Graph of Average Collection Period Ratio (NALCO) 39

13 Graph of Inventory Turnover Ratio (NALCO) 40

14 Graph Of Inventory Turnover in Days (NALCO) 42

15 Graph of the Current Assets (HINDALCO) 44

16 Graph on Current Liabilities (HINDALCO) 45

17 Graph of Net Working Capital (HINDALCO) 47

18 Graph of Current Ratio (HINDALCO) 48

19 Graph of Quick Ratio (HINDALCO) 50

20 Graph of Gross Working Capital Turnover Ratio 51

(HINDALCO)

21 Graph of Ratio CA/FA (HINDALCO) 53

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Fig no Particular Page No
22 Graph of Fixed Asset Turnover Ratio (HINDALCO) 54

23 Graph of Ratio (CA/TA) (HINDALCO) 56

24 Graph of Total Assets Turnover Ratio (HINDALCO) 57

25 Graph of Inventory Turnover Ratio (HINDALCO) 59

26 Graph of Inventory Turnover in days (HINDALCO) 60

27 Graph of Current Assets (Comparative) 62

28 Graph of Current Liabilities (Comparative) 63

29 Graph on Comparison of Net Working Capital 64

(Comparative)
30 Graph of Comparison of Current Ratio (Comparative) 66

31 Graph of Comparison of Quick Ratio (Comparative) 67

32 Graph of Comparison of Gross Working Capital Turnover 69

Ratio (Comparative)
33 Graph of Comparison of CA to FA Ratio (Comparative) 71

34 Graph of Fixed Assets Turnover Ratio (Comparative) 72

35 Graph of Comparison of Current Assets Total Assets Ratio 74

(Comparative)
36 Graph of Comparison of Inventory Turnover Ratio 75
(Comparative)
37 Graph of Inventory Turnover in days (Comparative) 76

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 List Of Tables

Table. No Particular Page no

1 Current Assets (NALCO) 23

2 Current Liabilities (NALCO) 24

3 Net Working Capital (NALCO) 25

4 Current Ratio (NALCO) 27

5 Quick Ratio (NALCO) 29

6 Gross Working Capital Turnover Ratio (NALCO) 31

7 Current Assets to Fixed Assets Ratio (NALCO) 32

8 34
Current Assets to Total Assets Ratio (NALCO)

9 Sales to Average Stock Ratio (NALCO) 35

10 Net sales to debtors ratio (NALCO) 37

11 Average Collection Period Ratio (NALCO) 38

12 Inventory Turnover Ratio (NALCO) 39

13 Inventory Turnover in days (NALCO) 41

14 Current Assets (HINDALCO) 43

15 Current Liabilities (HINDALCO) 44

16 Net Working Capital (HINDALCO) 46

17 Current Ratio (HINDALCO) 47

18 Quick Ratio (HINDALCO) 49

19 Gross Working Capital Turnover Ratio (HINDALCO) 50

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Table.No Particular Page No
20 Ratio CA/FA (HINDALCO) 52

21 Fixed Asset Turnover Ratio (HINDALCO) 53

22 Ratio (CA/TA) (HINDALCO) 55

23 Total Assets Turnover Ratio (HINDALCO) 56

24 Inventory Turnover Ratio (HINDALCO) 58

25 Inventory Turnover in days (HINDALCO) 59

26 Current Assets (Comparative) 61

27 Current Liabilities (Comparative) 62

28 Comparison of Net Working Capital (Comparative) 63

29 Comparison of Current Ratio (Comparative) 65

30 Comparison of Quick Ratio (Comparative) 66

31 Comparison of Gross Working Capital Turnover Ratio 68

(Comparative)
32 Comparison of CA to FA Ratio (Comparative) 70

33 Fixed Assets Turnover Ratio (Comparative) 71

34 Comparison of Total Assets Turnover Ratio (Comparative) 73

35 Comparison of Inventory Turnover Ratio (Comparative) 74

36 Graph of Inventory Turnover in days (Comparative) 75

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 ABSTRACT
The focus of this report is on working capital management, which is a short-term part of corporate
finance. Effective working capital management aims to guarantee that a company has sufficient finances
for day-to-day operations while also ensuring that the company's assets are invested in the most
productive way possible. Achieving this objective necessitates a delicate balancing of interests.
Insufficient cash flow might lead to a company's severe restructuring, which could include asset sales,
reorganization through bankruptcy procedures, or final liquidation. Excessive cash and liquid asset
investment, on the other hand, may not be the optimal use of corporate resources.

The study has been conducted on the National Aluminium Company Limited (NALCO) to ascertain the
effectiveness of the working capital management practices at the particular company during the period
2010-11 to 2021-22.

This report highlights various concepts related to the working capital, their major components, and the
factors that influence the working capital of NALCO during the period of study. This report gives
detailed interpretations of the major financial ratios which are relevant in analyzing the working capital
management along with their graphical representations to make the report more effective.

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4. INTRODUCTION

4.1 Objectives

(1) To assess the Net Working Capital Position of NALCO

(2) To understand the impacts of various items of Current Assets and Current Liabilities on NALCO’s
Working Capital.

(3) To understand how working capital impacts profitability

(4) To find out the relationship between working capital and sales.

(5) To assess the impact of inventory management, trade credit management, and cash management on
working capital.

4.2 Methodology

(1) Secondary data is mainly used to complete this report.

(2) Mostly the annual report of the company is used to gather much of the information.

(3) Selective techniques like mean, standard deviation, correlation is used to determine the results.

(4) Ratio Analysis have been used as one of the main tools for the report.

4.3 Limitations of the study

(1) Since the project report is formulated with the help of secondary data hence the inherent limitations
of secondary data are one of the constraints of the report.

(2) Only a few selective techniques are used in the report.

(3) Ratio analysis is concerned with quantitative values and so excludes qualitative components of the
business.

(4) Since the interim report is made in a very short period of time, it is not possible to examine all
components of the company's working capital in such a limited time frame.

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4.4 Scope of the study

The scope of this report is as follows:

(1) The report will analyze the effectiveness of NALCO’s working capital management practices.

(2) The report will analyze the data for the last ten years with the help of few statistical techniques and
ratio analysis to make proper interpretations.

(3) The interim report will be further used to compare the performance and practices of NALCO with
one of its major competitors, HINDALCO in order to assess the strength and weakness of NALCO in
terms of working capital management.

(4) Relevant suggestions will be made in order to help the company (NALCO) make its working capital
practices more effective.

4.5 Aluminium industry in India

India's aluminium industry is one of the country's most important industries. Diversification and
discovery of new frontiers for the aluminium metal sector in India would keep the industry growing.
India has vast natural resource deposits in the form of minerals such as copper, chromite, iron ore,
manganese, bauxite, gold, and so on. The aluminium industry in India is classified as noniron based,
which includes the manufacture of copper, tin, brass, lead, zinc, aluminium, and manganese.

Mining of ores, refining of ores, casting, alloying, sheeting, and rolling into foils are the key processes of
the Indian aluminium industry. Hindalco and Nalco are currently among the most cost-effective
aluminium producers in the world. The aluminium sector in India must create research and development
departments to aid manufacturing and enhance quality methods to maintain tight quality control in order
to sustain expansion.

Among the other industries, the Indian aluminium Metal Industries sector saw a lot of success in the
preceding decade. The aluminium sector in India is growing rapidly, and technological advancements are

accelerating that expansion. The fast expansion of the Indian aluminium sector was aided by the use of
both foreign and indigenous resources. The Indian aluminium business has become well-known among
investors as a result of its fast growth. The Indian aluminium industry has a bright future because it has
the potential to become one of the largest players in the global aluminium market. The reason being
consumption in India is relatively low, the industry could use excess production to meet the global
demand for aluminium, which is used in a variety of applications such as aircraft manufacturing,
automobile manufacturing, and utensils. In India, per capita use of aluminium is only 0.5 kg, as opposed
to 25 kg in the United States, 19 kg in Japan, and 10 kg in Europe and the rest of the world's average per
capita consumption is around ten times that of India. One factor for the country's low consumption might
be that India's consumption pattern of aluminum differs greatly from that of developed countries. .
Aluminum 3 demand is predicted to expand at a rate of roughly 9% per year from current levels. This
14
 industry is undergoing consolidation, and current companies are working to increase
their production capacity in order to bridge a potential demand-supply imbalance.
Aluminum is one of the lightest metals in the world, and as a result, it is widely employed in the
manufacture of a variety of items. This metal has a gleaming silver color and is malleable, which means
it can be bent without breaking.

India's aluminum industry can be classed as follows:

(a) The primary producers who use bauxite to make ingots and billets (the primary form of aluminium).
(b) Secondary producers who add value to ingots and billets in order to generate semi-fabricated
goods. • At the moment, the main aluminium market is dominated by five companies: Hindalco,
Indian Aluminum (INDAL), Madras Aluminium (MALCO), National Aluminium (NALCO), and
Vedanta Limited.

The figure below shows the procurement process from mining to secondary production

Fig.1. The production process of Aluminium (Source: Science Direct)

Sector wise break up of aluminium usage:

Electrical ---65%
Packaging---5%
Industrial Machinery---4%
Consumer Durable---4%
Steel Sweetening Power& Chemicals---13%
Transport---21%
Construction---8%

15
 About NALCO

National Aluminium Company Limited (NALCO) is regarded as a pivotal moment in the Indian
aluminium industry's history. NALCO has taken a giant step ahead by not only addressing the
country's demand for aluminium self-sufficiency, but also giving it a technological advantage in
manufacturing this critical metal to world-class standards. Nalco was formed in the public sector in
1981 to utilize a portion of the vast bauxite reserves discovered on the East Coast. Near Angul,
NALCO has its captive power plant (CPP) and a smelter plant.
Bauxite mining, alumina refining, aluminium smelting and casting power generation, rail and port
activities are all encompassed as a part of NALCO, which is Asia's largest integrated complex.
National Aluminium Company Limited (NALCO) obtained 7263 acres of land in Damanjodi,
Koraput district, and 4057 acres in Angul, Odisha, in 1981 to build Asia's biggest integrated
alumina-aluminium complex. 635 families were displaced in 51 villages at the company's
beginning, including 600 households in the Damanjodi area and 35 families in the Angul sector.
Employment has been offered to 625 nominees from these 635 displaced households. The
confusion over the educational backgrounds and nomination status of the other ten families has
been brought to the attention of the competent authorities. In addition, 1495 households in the
Angul area were significantly impacted (i.e., losing one-third or more of their land). Even so, 1060
people have been employed as a result of these efforts. Nalco has also been financing ITI training
for these individuals, with a total of 543 people receiving technical training so far. Nalco has
invested more over Rs. 100 crores on different social sector development programs in addition to
cash compensation, job, and rehabilitation packages. The company's perimeter development plans
prioritize the construction of infrastructure for communication, education, health care, and drinking
water in the adjacent communities. Apart from community engagement innovative farming,
pisciculture, social forestry, and sanitation programs, Nalco's strong commitment in the community
includes support for sports, art, culture, and literature. The company's successful activities have
resulted in considerable employment and income generation for the local community.
Since May 1989, NALCO has been registered with the London Metal Exchange (LME), making it
the country's first public sector enterprise to access the overseas market in a significant way. Since

16
1902, the company has been listed on the Bombay Stock Exchange (BSE) and the National
Stock Exchange (NSE). The company has also embraced ISO 50001 standards for its
Energy Management System, in addition to ISO 9001, ISO 14001, OHSAS 18000, and SA
8000 certifications.

A new corporate plan has been developed with a well-defined three-year action plan,
seven-year strategy, and fifteen-year vision of being a Premier and Integrated Company in
the Aluminum Value Chain with strategic presence in the Mining, Metals, and energy
sectors to meet the challenges of an ever-changing market and position the Company on
a sustainable growth path. The company has formulated a blueprint for the growth of sales
and profit by multifold.

As a responsive corporation, the Company is harnessing renewable energy in accordance

with the Government of India's ambitious programs. The company has already put in
place 198 MW of wind power facilities, with another 25 MW on the way, making it the
largest generator of renewable energy among PSUs.

The Company has developed a New All-Weather Business Model to be more robust to
market fluctuations. It has a number of brownfield and greenfield expansion projects in the
works, including the current 5th Stream Refinery project at Damanjodi (Brownfield), the
development of Pottangi bauxite mines, Utkal D&E coal mines in Odisha, and the building
of 5 lakh TPAbrownfield smelters in Odisha.

NALCO is a well-known name in the industrial landscape of Eastern India. In keeping

with the philosophy, the company is leading the charge to transform Odisha's industrial
landscape. The company has launched a joint venture with Odisha Industrial Infrastructure
Development Corporation (IDCO) called Angul Aluminium Park Private Ltd (AAPPL) to
promote ancillary, upstream, and downstream goods connected to the aluminium sector.
In response to the Government of India's call, NALCO actively participated in the Swachh
Bharat Abhiyan by constructing 479 toilets in various districts across its operating areas,
as well as a noble initiative to make 11 periphery villages in the Damanjodi and
Angul sectors completelyOpen Defecation Free (ODF).

Under the PM's Iconic Shrine Development Program, the Company has assumed
responsibility for Shri Jagannath Temple, Puri, and its environs to upgrade infrastructure
and maintain cleanliness, with a particular focus on Gandhi Park as a tourist attraction,
temple illumination, beautification of Puri town with thematic painting based on
Jagannatha culture, and battery-operated vehicle in railway station for differently-abled
passengers and sick people.

The Company's proclivity for promoting the State's famous heritage, art, and culture has
drew widespread praise, particularly for the Company's patronage of live cultural and
sporting icons.
With the country's demand for skilled manpower expected to increase by a factor of ten,

17
 the Company is playing its part by establishing a Centre of excellence for the
mining sector at a cost of Rs 20 crore, as well as providing skill training to unemployed
youths in collaboration with training partners in areas such as retail, healthcare,
beauticians, sewing machine operators, and so on.

Since its beginning, the corporation has pursued sustainable growth and permanent profits
while demonstrating profound sympathetic care for society. The firm has been able to
carve out a particular place for itself for the people it works with in the hearts of millions
of Odisha residents as contemporary industrial "Konark." The primary driver of the
company's growth has been to increase the wealth of its stakeholders, but the driving spirit
has remained to bring smiles to the faces of its many stakeholders.
Vision:
To be a Premier and Integrated company in the Aluminium value chain with
strategic presence in Mining both domestic & global, Metals and Energy sectors.
Mission:
To sustainably grow multi-fold in Mining, Alumina and Aluminium business along
with select diversification in Minerals, Metals and Energy sectors, while continuously
improving on efficiency and business practices thus enhancing value for all
stakeholders.

Operations of NALCO in brief:

NALCO's operations begin with the mining of bauxite from its Panchpatmalli mines. The
excavated bauxites are transported to the Alumina refinery in Damanjodi by a 14.6-kilometer-
long conveyor belt. The bauxite is subsequently refined into alumina and shipped to the Angul
smelting facility, which is powered by a captive power plant with a 1200 MW generating
capacity. The smelter is powered by ten captive power units. The smelter turns the alumina
into primary aluminium, which is either utilized domestically or exported to numerous
countries via a nearby port in Visakhapatnam.

Aluminium Smelter

The aluminium smelter at Angul, Orissa, has a capacity of 2,30,000 TPA. The smelter facility
has been in operation since 1987, using energy efficient state-of-the-art smelting and pollution
control equipment. The capacity is now been increased to 345000 TPA.

18
Salient Features:
• 180 K A Cell Technology Advancement.
• Fume Treatment Plant with Dry Scrubber system for pollution control and Fluoride Salt
Recovery
• Microprocessor based pot regulating system
• Integrated facility for the production of carbon anodes, bars, as well as an anode ingot
casting equipment.
• 2x15 tph and 2x20 tph ingot casting machines, as well as 4x45 tones and 4x35 tone
furnaces.
• 2x9.5 tph wire rod mills and 4x45 tone furnaces
• 2x45-ton furnaces and a billet casting machine with a drop rate of 60/42
• 2x1.5 tone introduction furnaces and a 4 tph alloy ingot casting
• 26,000tpa strip casting machine

Captive Power Plant:

Close to the Angul aluminium smelter, a captive power plant with a capacity of 720
MW and6x120 MW clusters had been erected to provide electricity to the smelting.
The capacity is now being increased to 960 MW.

Salient Features

• For the optimum thermal efficiency there is microprocessor-based burner and

managementsystem.

• Computer control data collecting system for online monitoring

• Automatic turbine run up system
• Specially built barrel type high pressure turbine
• Electrostatic precipitators with advanced intelligent controllers
• Wet disposal ash

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 Products of NALCO:
• Alloy Rods
• Wire Alloy Rods
• Cast Strips
• Aluminium Metal
• Ingots
• Billets
• Alumina and Hydrate
• Zeolite- A
• Calcined Alumina
• Sows
• Alumina Hydrate

5.Working capital

Meaning of Working Capital:

To start any business, we first need funds, and the success of any firm is totally dependent on how well
day-to-day finances are managed.
The management of the business's short-term capital or finance is referred to as Working
capital Management.
Working capital management is important in financial management since it is responsible for
keeping the business's wheels moving. Every business needs money to grow, and it can't grow
without it. In any business the needed capital may be separated into two types: fixed capital
and working capital. Working capital is required to keep the business going, whereas fixed
capital is required to establish the business. Without current assets, fixed asset cannot be
utilized. It's similar to the human body's blood, without which there would be no body.

Importance of Working Capital Management:

Businesses require working capital on a daily basis to make normal payments, cover unforeseen
expenditures, and acquire basic supplies used in the manufacturing of commodities.

Effective working capital management may help a company maintain smooth operations while
also improving earnings and profits. Inventory management, as well as accounts receivables
and payables management, are all part of working capital management. Working capital
management's key objectives are to keep the working capital operating cycle running
smoothly, lower the cost of capital spent on working capital, and optimize the return on current
asset investments.

Working capital is a simple concept to grasp since it is tied to an individual's cost of living and

20
so can be grasped on a more personal level. Individuals must collect money
owing to them and set aside a specific amount each day to pay day-to-day expenses, bills, and
other recurring obligations.

Working capital is a frequent indicator of a business's efficiency, liquidity, and overall health.
It shows the results of a variety of business activities, including revenue collection, debt
management, inventory management, and supplier payments. Inventory, payables and
receivables, cash, debt due in less than a year, and other short-term accounts are all covered.

The amount of working capital required varies by sector and even across similar firms. This is
attributable to a variety of factors, including variances in collection and payment procedures,
asset acquisition timing, the possibility of a firm writing down part of its past-due accounts
receivable, and, in certain cases, capital-raising attempts.

Working capital management is simply an accounting approach that focuses on keeping a

company's current assets and liabilities in a healthy balance. A good working capital
management system may help a company not only meet its financial responsibilities but also
increase its profits.

Managing working capital entails keeping track of inventories, cash, payables, and
receivables. Key performance ratios, such as the working capital ratio, inventory turnover ratio,
and collection ratio, are frequently used in an effective working capital management system to
assist identify areas that require attention in order to preserve liquidity and profitability.

Issues due to Over Assessment of Working Capital:

• An excess of working capital might lead to a buildup of inventory that isn't essential.
• It might lead to too lenient credit terms for buyers, as well as a shoddy recovery
procedureand cash management
• It may cause managers to become complacent, resulting in inefficiency
• Overinvesting in working capital reduces the productivity of capital and may lower
thereturn on investment.

Issues due to Under Assessment of Working Capital:

• It is possible that the growth of the enterprise will be slowed down. Due to a lack
ofoperating cash, it may be difficult for the company to execute profitable ventures.
• Operating strategies may become difficult to implement, and profit targets may not be
metas a result.
• Due to a lack of operating capital, a cash crisis may occur.
• Due to a lack of working cash, optimal capacity utilization of fixed assets may not be

21
 possible.
• The company's credibility might be harmed if it fails to meet its commitments on time.
Thiscondition may result in the closure of the company.
• It's possible that the company will be forced to acquire raw materials on credit and sell
finished goods for cash. It's possible that the procedure may result in higher purchasing
costs and lower selling prices as a result of discounts. Both of these scenarios would have
a negative impact on profitability.
• In the event that inventories are unavailable owing to a lack of cash, manufacturing may
be halted.

Method of calculating Working Capital:

Net Working Capital can be calculated using the simple formula:

Net Working Capital= Current Assets – Current Liabilities

Current assets are assets that can be turned into cash within a year (this doesn’t include
fixed assets, which are considered long-term assets on the balance sheet). These assets
include accountsreceivable, inventories, and short-term investments.

Current Liabilities constitutes short term obligations that is to be paid within a year. These
includesitems such as overdrafts, accounts payables, payroll expenses and wages etc.

The business should aspire to have more current assets than liabilities or positive working
capital to guarantee favorable short-term financial health. If current assets don’t exceed
current obligations, the business has a deficit and it could run into cash flow issues, and
may not be able topay creditors.

22
6. Data Analysis and Interpretation Of NALCO (*Figures in Crore):

6.1.Analysis of Current Assets, Current Liabilities and Net

WorkingCapital:

Current Assets
Year Current Assets
2010-11 6045.17
2011-12 7022.33
2012-13 7075.81
2013-14 7426.20
2014-15 7712.18
2015-16 7182.02
2016-17 5655.79
2017-18 5613.90
2018-19 5600.70
2019-20 4557.80
2020-21 4306.33
2021-22 6,485.00
Table: 1 Current Assets

Interpretation: The graph below (Fig. 2) shows that initially the current assets of NALCO
has increased significantly between financial year 2011-2015 and then the company has
drastically decreased the current assets between the years 2016-2020 and again increased in
the year 2020-21. Surplus current assets indicate a firm's favorable liquidity position, but this
isn't always a good thing since when excess current assets aren't needed, it can have a negative
impact on profitability and hence we can see that the company has slowly reduced its current
assets.

23
 Graph of Current Asset
9000
8000
7000
6000
5000
4000
3000 Graph of Current Asset
2000
1000
0

Fig 2

CURRENT LIABILITIES:

Year Current Liabilities

2010-11 2740.95
2011-12 2676.89
2012-13 3211.93
2013-14 3242.75
2014-15 1967.04
2015-16 2209.24
2016-17 2651.93
2017-18 2440.93
2018-19 2905.12
2019-20 2720.02
2020-21 2049.80
2021-22 3099.14

Table: 2 Current Liabilities

24
Interpretation: The graph below (Fig.3) shows that the current liabilities was
on the higher end for the financial year 2013,2014 and 2022 while it was on the lower end for
the financial year 2015. For the other years taken for the study, the current liabilities
somewhat oscillates within the same levels.

Graph of Current Liabilities

3500
3000
2500
2000
1500
Graph of Current Liabilities
1000
500
0

Fig - 3
Analysis of Net Working Capital:
Year Net Working Capital
2010-11 3304.22
2011-12 4345.44
2012-13 3863.88
2013-14 4183.45
2014-15 5745.14
2015-16 4972.78
2016-17 3003.86
2017-18 3172.97
2018-19 2695.58
2019-20 1837.78
2020-21 2256.53
2021-22 3385.86

Table: 3 Net Working Capital

25
 Net Working Capital = Total Current Assets – Total Current Liabilities

Interpretation: If a comparison is to be made between the graph of Net Working Capital

and Current Assets, it can be clearly seen the trend in the Net Working Capital follows the
trend of the Current Assets. In most cases the Net Working Capital increases with the
increase in the Current Assets and decreases with the decrease in the current assets.

The comparative graph between Net Working Capital, Current assets and Current Liabilities is
given below.

9000
8000
7000
6000
5000
Current Assets
4000
Current Liabiities
3000
Net Working Capital
2000
1000
0

Fig -4

26
6.2.Analysis of Current Ratio:
Year Current Assets Current Current Ratio
Liabilities (CA/CL)
2010-11 6045.17 2740.95 2.21
2011-12 7022.33 2676.89 2.62
2012-13 7075.81 3211.93 2.20
2013-14 7426.20 3242.75 2.29
2014-15 7712.18 1967.04 3.92
2015-16 7182.02 2209.24 3.25
2016-17 5655.79 2651.93 2.13
2017-18 5613.90 2440.93 2.30
2018-19 5600.70 2905.12 1.93
2019-20 4557.80 2720.02 1.68
2020-21 4306.33 2049.80 2.1
2021-22 6,485.00 3,099.14 2.09
Mean 2.30
Standard 0.61
Deviation
Table -4 (Analysis of Current Ratio)

Interpretation: The current ratio is the most common and general ratio to test
liquidity.It indicates a company's capacity to meet short-term obligations using current
assets. The ratio was lowest for the year 2019-20 during which it stood at 1.68 times and the
highest was for the year 2014-15 during which it stood at 3.92 times. The mean value for the
current ratio is 2.30, which indicates that the company maintain Rupee 2.30 of current assets for
every 1 Rupee of current liabilities. The standard deviation of 0.61 indicates that the data are
clustered around the mean. If we compare the current ratio for all the years with the
banker’s standard of 2:1 then we canobserve that the ratio seems to be satisfactory mostly for
all the years except 2018-19 , 2019-20 and 2020-21 which falls below the banker’s standard. The
current ratio for 2014-15 and 2015-16 also does not show a positive picture for the company
since it is above 3 and signifies that the company mightnot be much efficient to utilize its
current assets during those years. However, after 2014-15 the ratio slowly decreased and moved
towards the banker’s standard which is a good sign.

27
 Graph of Current Ratio
5
4
3
2
1 Graph of Current Ratio
0

Fig-5

28
6.3.Analysis of Quick Ratio:

Quick
Quic Ratio
Curren Inventories
k Current (Quick
Year t Assets
Asset Liabilities Assets /
(CA) (INV)
s Curren
(CA- t
INV) Liabilities)
2010-11 6045.17 1058.47 4986.70 2740.95 1.82
2011-12 7022.33 1212.70 5809.63 2676.89 2.17
2012-13 7075.81 1380.64 5695.17 3211.93 1.77
2013-14 7426.20 1173.66 6252.54 3242.75 1.93
2014-15 7712.18 1165.56 6546.62 1967.04 3.33
2015-16 7182.02 1126.97 6055.05 2209.24 2.74
2016-17 5655.79 1155.93 4499.86 2651.93 1.70
2017-18 5613.90 1194.08 4419.82 2440.93 1.81
2018-19 5600.70 1210.01 4390.69 2905.12 1.51
2019-20 4557.80 1696.90 2860.90 2720.02 1.05
2020-21 4306.33 1476.32 2830.01 2049.80 1.37
2021-22 6,485.00 1,646.17 4838.83 3,099.14 1.56
Mean 1.74
Standard 0.59
Deviation
Table: 5 Quick Ratio

Interpretation: The quick ratio, which excludes inventory from current assets, assesses a
company's ability to satisfy short-term obligations with its most liquid assets. During the
period of study taken into consideration, the quick ratio ranges between 1.05 in 2019-20 to
3.33 in 2014-15. The mean for the quick ratio data set is 1.74 while 0.59 is the standard
deviation. A higher quick ratio indicates that a business is more liquid and has better debt
coverage. In the above case the ratio appears to be satisfactory for all the years when we view
it against the banker’s standard 1:1. If we observe the year 2014-15, it shows a quick ratio of
3.33, although it indicates that the company has the ability to cover its current liabilities by
approximately 3 times but it also somewhat indicates that during 2014-15 the company was not

29
efficient enough to utilize its current assets. If we further dive deep into the
balance sheet of the company, we can understand the company was holding a lot of cash and
bank balance. However, the ratio saw a little improvement in the year 2015-16 which looks
quite good for the company. In 2020-21 and 2021-22 the business is more liquid and has better
debt coverage.

Graph of Quick Ratio

3.5

2.5

1.5 Graph of Quick Ratio

0.5

Fig-6

30
6.4.Analysis of Gross Working Capital Turnover Ratio:

Ratio
Gross Working
Year Sales (Sales/Working
Capital
Capital)
2010-11 5958.98 6045.17 0.99
2011-12 6611.57 7022.33 0.94
2012-13 6916.48 7075.81 0.98
2013-14 6780.85 7426.20 0.91
2014-15 7382.81 7712.18 0.96
2015-16 6816.00 7182.02 0.95
2016-17 8050.02 5655.79 1.42
2017-18 9618.31 5613.90 1.71
2018-19 11,499.32 5600.70 2.05
2019-20 8471.84 4557.80 1.86
2020-21 8955.79 4306.33 2.07
2021-22 14,180.81 6,485.00 2.18
Mean 1.34
Standard 0.52
Deviation

Table: 6 Gross Working Capital Turnover Ratio

Interpretation: The efficiency with which the current assets of a firm is utilized is
indicated by the gross working capital turnover ratio. Ideally higher the ratio, better it is
for the business as it indicates the firm is more efficient in utilization of its current assets.
From the above table, the lowest gross working capital turnover ratio appears to be for
the year 2013-14 which is 0.91 and the highest is for the year 2021-22 which is 2.18. Over
all the gross working capital turnover ratio looks to be inefficient for most of the years
and the same is indicated by the mean which stands at 1.28 for the period of study. The
company therefore was not efficient enough to utilize its current assets for most of the
years. In 2020-21 and 2021-22 the ratio increased but not significantly but higher the ratio
the firm is more efficient in utilization of its current assets.

31
 Graph of Gross Working Turnover ratio
2.5

1.5

1 Graph of Gross Working

Turnover ratio
0.5

Fig -7

6.5.Analysis of Current Assets to Fixed Assets Ratio:

Year Current Assets Fixed Assets Ratio (CA/FA)

2010-11 6045.17 7200.35 0.84
2011-12 7022.33 7296.79 0.96
2012-13 7075.81 7630.81 0.93
2013-14 7426.20 7560.68 0.98
2014-15 7712.18 7195.15 1.07
2015-16 7182.02 7283.38 0.99
2016-17 5655.79 7710.43 0.73
2017-18 5613.90 8054.68 0.70
2018-19 5600.70 8168.49 0.69
2019-20 4557.80 8911.47 0.51
2020-21 4306.33 9235.91 0.46
2021-22 6485.00 9665.41 0.67
Mean 0.79
Standard 0.19
Deviation

Table: 7 Current Assets to Fixed Assets Ratio

32
 Interpretation: The current assets to fixed assets ratio is also a measure of a company's
liquidity. By altering current assets while keeping the number of fixed assets constant, the
trade-off between risk and profitability may be examined. From table 7 it is evident that
the mean of current assets to fixed assets for the period of study is 0.84. The ratio varies
between 0.46 for the year 2020-21 to 1.07 for the year 2014-15. Here we can also observe
the dominance of fixed assets over the current assets thus indicating that the fixed assets
constitute a larger component of the total assets for the period of study except for the year
2014-15.

Graph of the Current Asset to Fixed Asset Ratio:

Graph of the Current to fixed asset Ratio

1.2

0.8

0.6
Graph of the Ratio
0.4

0.2

Fig. 8

33
6.6.Analysis of Current Assets to Total Assets Ratio:

Year Current Assets Total Assets Ratio (CA/TA)

2010-11 6045.17 14613.90 0.41
2011-12 7022.33 15520.78 0.45
2012-13 7075.81 16326.95 0.43
2013-14 7426.20 16548.51 0.45
2014-15 7712.18 16177.67 0.48
2015-16 7182.02 16710.19 0.43
2016-17 5655.79 14501.65 0.39
2017-18 5613.90 14613.80 0.38
2018-19 5600.70 15146.96 0.37
2019-20 4557.80 14549.62 0.31
2020-21 4306.33 14708.89 0.29
2021-22 6485.00 17277.79 0.37
Mean 0.39
Standard 0.05
Deviation

Table: 8 Current Assets to Total Assets Ratio

Interpretation: The table above depicts the current assets to total assets ratio which shows a
mean of 0.39. The ratio varies between 0.31 for the year 2019-20 to 0.48 for the year 2014-15. It
can be understood the Total assets is always higher than the current assets, it is simply because
the total assets also include the components of non-current assets into it. The highest proportion
of current assets as compared to total assets is for the year 2014-15 with approximately 48%. The
standard deviation stands at 0.05 indicating that the numbers are closely compressed towards the
mean.

34
 Graph on Current Asset and Total Assets
Ratio
0.6
0.4
0.2 Graph on Current Asset
and Total Assets Ratio
0

Fig-9

6.7.Analysis of Sales to Average Stock Ratio:

Year Sales Avg. Stock Ratio (sales/Avg

stock)
2010-11 5958.98 1001.69 5.95
2011-12 6611.57 1141.85 5.79
2012-13 6916.48 1288.22 5.37
2013-14 6780.85 1277.15 5.31
2014-15 7382.81 1169.61 6.31
2015-16 6816.00 1146.26 5.95
2016-17 8050.02 1141.45 7.05
2017-18 9618.31 1175.00 8.19
2018-19 11499.32 1202.04 9.57
2019-20 8471.84 1453.45 5.83
2020-21 8955.79 1586 5.64
2021-22 14180.81 1561.24 9.08
Mean 6.67
Standard 1.47
deviation

Table: 9 Sales to Average Stock Ratio

35
Interpretation: Table 9 assesses the NALCO's processing and inventory management
efficiency. Every year, the company's ratio has been consistent with the industry average.
NALCO did not have any difficulties in converting its inventory into sales during the periods
of study since stock turnover was never less than one, indicating that inventory was converted
into sales and there was no situation of stock unavailability between the period 2010-11 to
2021-22. Higher the ratio better it is since it indicates that the stock is converted into sales
really fast hence, the best stock to average inventory ratio was for the year 2018-19 with 9.57
times. The average conversion of stock into sales during the period was 6.67 times.

Graph of Sales to Avg Stock Ratio:

Graph of Sales to Avg Stock Ratio

0.6

0.5

0.4

0.3
Graph of Sales to Avg Stock
0.2 Ratio
0.1

Fig-10

36
6.8.Analysis of Debtors Turnover ratio:

Year Sales Debtors Ratio

(Sales/Debtors)
2010-11 5958.98 112.4 53.02
2011-12 6611.57 138.12 47.87
2012-13 6916.48 142.99 48.37
2013-14 6780.85 243.57 27.84
2014-15 7382.81 120.82 61.11
2015-16 6816.00 235.21 28.98
2016-17 8050.02 184.25 43.69
2017-18 9618.31 258.13 37.26
2018-19 11499.32 240.52 47.81
2019-20 8471.84 140.09 60.47
2020-21 8955.79 147.39 60.76
2021-22 14180.81 75.25 188.44
Mean 47.01
Standard 42.36
deviation

Table: 10 Net sales to debtors ratio

Interpretation: NALCO’s credit and collection policy is highlighted through table 10.
The debtors turnover ratio remains close to the industry norms with average being 47.01
times andvolatility about the average debtors turnover being 42.36.

Graph of Debtors Turnover ratio

200

150

100
Graph of Debtors Turnover ratio
50

Fig-11

37
 6.9.Analysis of Average Collection Period Ratio:

Ratio (Days in ayear/

Year Days in Years Debtors Debtors Turnover
Turnover Ratio Ratio) in days

2010-11 365 53.02 7

2011-12 365 47.87 8
2012-13 365 48.37 8
2013-14 365 27.84 13
2014-15 365 61.11 6
2015-16 365 28.98 13
2016-17 365 43.69 8
2017-18 365 37.26 10
2018-19 365 47.81 8
2019-20 365 60.47 6
2020-21 365 60.76 6
2021-22 365 188.44 2
Mean 8
Standard 3
deviation

Table-11 Average Collection Period Ratio

Interpretation: In terms of accounts receivable, the word average collection period refers to the
time it takes for a firm to obtain payments due by its customers. The average collection period is
used by businesses to ensure that they have enough cash on hand to satisfy their financial
obligations. The average collection period is a measure of a company's ability to handle its
accounts receivables effectively. The debtor’s collection period of NALCO is in sync with the
industry standards. It can be observed from table 11 that the average collection period between
2010-11 to 2021-22 has been 8 days approximately and the volatility for the average collection
period has been approximately 3 days.

38
 Graph of Average Collection Period Ratio
14
12
10
8
6 Graph of Average Collection
4 Period Ratio
2
0

Fig -12
6.10.Analysis of Inventory Turnover Ratio :

YEAR SALES Avg. Stock Ratio

(sales/Avg
stock)

2010-11 5958.98 1001.69 5.95

2011-12 6611.57 1141.85 5.79
2012-13 6916.48 1288.22 5.37
2013-14 6780.85 1277.15 5.31
2014-15 7382.81 1169.61 6.31
2015-16 6816.00 1146.26 5.95
2016-17 8050.02 1141.45 7.05
2017-18 9618.31 1175.00 8.19
2018-19 11499.32 1202.04 9.57
2019-20 8471.84 1453.45 5.83
2020-21 8955.76 1586 5.64
2021-22 14,180.81 1561.24 9.08
Mean 6.45
Standard 1.47
Deviation

Table: 12 Inventory Turnover Ratio

39
Interpretation: Table 11 assesses the NALCO's processing and inventory management
efficiency. Every year, the company's ratio has been consistent with the industry average.
NALCO did not have any difficulties in converting its inventory into sales during the
periods of study since stock turnover was never less than one, indicating that inventory
was converted into sales and there was no situation of stock unavailability between the
period 2010-11 to 2021-22. Higher the ratio better it is since it indicates that the stock is
converted into sales really fast hence, the best stock to average inventory ratio was for the
year 2018-19 with 9.57 times. The average conversion of stock into sales during the period
was 6.45 times.

Graph of Inventory Turnover Ratio:

Graph of Inventory Turnover Ratio

12

10

6
Graph of Inventory Turnover
Ratio
4

Fig-13

40
 6.11. Analysis of Inventory Turnover in day:

YEAR Days in Inventory Turnover Ratio (in

Years Ratio days)
2010-11 365 5.95 61
2011-12 365 5.79 63
2012-13 365 5.37 68
2013-14 365 5.31 69
2014-15 365 6.31 58
2015-16 365 5.95 61
2016-17 365 7.05 52
2017-18 365 8.19 45
2018-19 365 9.57 38
2019-20 365 5.83 63
2020-21 365 5.64 64
2021-22 365 9.08 40
Mean 60
Standard 10.60
Deviation
Table: 13 Inventory Turnover in days

Interpretation: After calculating the inventory turnover ratio, the inventory turnover in
days can be determined. Through the above mentioned table we can observe that the
fastest turnover of NALCO’s inventory was during the financial year 2018-19 where it was
38 days and the highest amount of days taken by NALCO to turnaround the inventory
during our period of study was for the financial year 2013-14 during which the number of
days taken by it was 69 days. On an average during the 10 years of our study NALCO’s
inventory turnover in days stood at 60 days.

41
Graph on the Inventory turnover ratio in days:

Graph Of Inventory Turnover in Days

80
70
60
50
40
Graph Of Inventory Turnover in
30
Days
20
10
0

Fig-14

42
 7. Data Analysis and Interpretation of HINDALCO (*Figures in Crore)

7.1 Analysis of Current Assets, Current Liabilities and Net Working

Capital:

Current Assets:

YEAR Current Assets

2010-11 15929.20
2011-12 16479.44
2012-13 20150.03
2013-14 21951.89
2014-15 22929.20
2015-16 24260.30
2016-17 28334.82
2017-18 21956.65
2018-19 23536.91
2019-20 24341.00
2020-21 20208.00
2021-22 38867.00
Table: 14 Current Assets

Interpretation: From the table number 14 above and the graph below it can be clearly
visible that the current assets of HINDALCO is way higher compared to that of NALCO,
one of its primary reasons is that HINDALCO is also involved in the copper business and
thus have higher proportion of all the current assets components as compared to NALCO.

43
Graph of the Current Assets:

Current Assets
45000
40000
35000
30000
25000
20000
15000 Current Assets
10000
5000
0

Fig. 15
7.2.Current Liabilities:
YEAR Current Liabilities
2010-11 9842.64
2011-12 10035.04
2012-13 9736.76
2013-14 12581.78
2014-15 13092.72
2015-16 12309.09
2016-17 18700.82
2017-18 12949.69
2018-19 14007.12
2019-20 15414.00
2020-21 19077.00
2021-22 28277.00

Table:15 Current Liabilities

44
Interpretation: The graph below (Fig.16) shows that the current liabilities reached an
surprisingly higher level for the financial year 2021-22 it was mainly due to increase in
the inventories, cash and cash equivalents and other investments while for the years
before financial year 2021-22 that the current liabilities showed a steady increase with
little decline for few alternate years.

Graph on Current Liabilities:

Graph on Current Liabilities

30000

25000

20000

15000
Graph on Current Liabilities
10000

5000

Fig - 16

45
 7.3.Net Working Capital:

YEAR Net Working Capital

2010-11 6086.56
2011-12 6444.40
2012-13 10413.27
2013-14 9370.11
2014-15 9836.48
2015-16 11951.21
2016-17 9634.00
2017-18 9006.96
2018-19 9529.79
2019-20 8927.00
2020-21 9131.00
2021-22 10590.00

Table: 16 Net Working Capital

Net Working Capital = Current Assets – Current Liabilities

Interpretation: From the comperative graph given below it can be observed that the trend
in the Net Working Capital of HINDALCO initially follows the trend of the Current Assets
till the financial year 2012-13 and then we find a sudden dip which slowly recovers and
reaches its highest point on the financial year 2015-16and then the Net Working Capital for
the company start declining which continue to decline till the end period of our study.
From the graph it is also evident that the trend in the current liabilities follows the trend in
the current assets between in the financial year 2015-16 to the financial year 2021-22.

46
Graph of Net Working Capital:

Graph of Net Working Capital

14000
12000
10000
8000
6000
4000 Graph of Net Working Capital
2000
0

Fig-17

7.4. Analysis of Current Ratio:

Year Current Current Current

Assets Liabilities Ratio
(CA/CL)
2010-11 15929.20 9842.64 1.62
2011-12 16479.44 10035.04 1.64
2012-13 20150.03 10035.04 2.07
2013-14 21951.89 12581.78 1.74
2014-15 22929.20 13092.72 1.75
2015-16 24260.30 12309.09 1.97
2016-17 28334.82 18700.82 1.52
2017-18 21956.65 12949.69 1.70
2018-19 23536.91 14007.12 1.68
2019-20 24341.00 15414.00 1.58
2020-21 20208.00 19077.00 1.05
2021-22 38867.00 28277.00 1.37
Mean 1.55
Standard 0.26
Deviation
Table: 17 Current Ratio

47
Interpretation: The current ratio is the most common and general ratio to test liquidity.
It indicates a company's capacity to meet short-term obligations using current assets. The
ratio was lowest for the year 2016-17 during which it stood at 1.52 times and the highest
was for the year 2012-13 during which it stood at 2.07 times. The mean value for the
current ratio is 1.55, which indicates that the company maintain Rupee 1.73 of current
assets for every 1 Rupee of current liabilities. The standard deviation of 0.26 indicates
that the data are highly clustered around the mean. If we compare the current ratio for all
the years with the banker’s standard of 2:1 then we can observe that the ratio does not
seems to be satisfactory for any of the years except the financial year 2012-13.

Graph on Current Ratio:

Graph of Current Ratio

2.5

1.5

0.5

Fig- 18

48
 7.5. Analysis of Quick Ratio:

Year Current Inventories Quick Current Quick Ratio

Assets (INV) Assets Liabilities (Quick Assets /
(CA) (CA-INV) Current
Liabilitie s)

2010-11 15929.20 7651.40 8277.80 9842.64 0.84

2011-12 16479.44 7742.86 8736.58 10035.04 0.87
2012-13 20150.03 7702.61 12447.42 9736.76 1.28
2013-14 21951.89 8914.58 13037.31 12581.78 1.04
2014-15 22929.20 8821.23 14107.97 13092.72 1.08
2015-16 24260.30 8405.49 15854.81 12309.09 1.29
2016-17 28334.82 9268.03 19066.79 18700.82 1.02
2017-18 21956.65 10738.38 11218.27 12949.69 0.87
2018-19 23536.91 11394.46 12142.45 14007.12 0.87
2019-20 24341.00 11225.00 13116.00 15414.00 0.85
2020-21 20208.00 15989.00 4219.00 19,077.00 0.22
2021-22 38867.00 20948.00 17919.00 28,277.00 0.63
Mean 0.90
Standard 0.28
Deviation
Table: 18 Quick Ratio

Interpretation: The quick ratio, which excludes inventory from current assets, assesses a
company's ability to satisfy short-term obligations with its most liquid assets. During the
period of study taken into consideration, the quick ratio ranges between 0.84 in 2010-11 to
1.29 in 2015-16. The mean for the quick ratio data set is 0.90 while 0.28 is the standard
deviation. A higher quick ratio indicates that a business is more liquid and has better debt
coverage. In the above case the ratio appears to be satisfactory only for the financial years
between 2012-13 to 2016-17 when we view it against the banker’s standard 1:1

49
 Graph of Quick Ratio
1.4
1.2
1
0.8
0.6
0.4 Graph of Quick Ratio
0.2
0

Fig-19
7.6.Analysis of Gross Working Capital Turnover Ratio:

Year Sales Gross Ratio

Working (Sales/Working
Capital Capital)
2010-11 23626.87 15929.20 1.48
2011-12 26353.06 16479.44 1.60
2012-13 25784.31 20150.03 1.28
2013-14 27573.06 21951.89 1.26
2014-15 34094.41 22929.20 1.49
2015-16 33875.19 24260.30 1.40
2016-17 36499.14 28334.82 1.29
2017-18 42809.15 21956.65 1.95
2018-19 45207.16 23536.91 1.92
2019-20 39830.00 24341.00 1.64
2020-21 132,008 67,486 1.95
2021-22 195,059 98,543 1.97
Mean 1.60
Standard 0.28
Deviation
Table:19 Gross Working Capital Turnover Ratio

50
Interpretation: The efficiency with which the current assets of a firm is utilized is
indicated by the gross working capital turnover ratio. Ideally higher the ratio, better it is
for the business as it indicates the firm is more efficient in utilization of its current assets.
From the above table, the lowest gross working capital turnover ratio appears to be for
the year 2013-14 which is 1.26 and the highest is for the year 2017-18 which is 1.95.
Over all the gross working capital turnover ratio looks to be inefficient for the years and
the same is indicated by the mean which stands at 1.60 for the period of study. The
company therefore was not efficient enough to utilize its current assets.

Graph of Gross Working Capital Turnover Ratio:

Graph of Gross Working Capital Turnover Ratio

2.5

1.5

Graph of Gross Working Capital

1
Turnover Ratio

0.5

Fig-20

51
 7.7. Analysis of Current Assets to Fixed Assets Ratio:

Year Current Fixed Assets Ratio

Assets (CA/FA)
2010-11 15929.20 13614.79 1.17
2011-12 16479.44 23407.14 0.70
2012-13 20150.03 30702.77 0.66
2013-14 21951.89 35331.94 0.62
2014-15 22929.20 36803.52 0.62
2015-16 24260.30 35331.58 0.69
2016-17 28334.82 35095.83 0.81
2017-18 21956.65 35100.89 0.63
2018-19 23536.91 34504.60 0.68
2019-20 24341.00 34650.00 0.70
2020-21 20208.00 34099.00 0.59
2021-22 38867.00 33881.00 1.14
Mean 0.69
Standard 0.19
Deviation
Table: 20 Current Assets to Fixed Assets Ratio

Interpretation: The current assets to fixed assets ratio is also a measure of a company's
liquidity. By altering current assets while keeping the number of fixed assets constant, the
trade-off between risk and profitability may be examined. From table 19 it is evident that
the mean of current assets to fixed assets for the period of study is 0.69. The ratio varies
between 0.62 for the year 2013-14 and 2014-15 to 1.17 for the year 2010-11. Here we can
also observe the dominance of fixed assets over the current assets thus indicating that the
fixed assets constitute a larger component of the total assets for the period of study except
for the year 2010-11 and 2021-22.

52
Graph of Current Assets to Fixed Assets Ratio:

Graph of Ratio CA/FA

1.4
1.2
1
0.8
0.6
Graph of Ratio CA/FA
0.4
0.2
0

Fig-21
7.8. Analysis of Fixed Assets Turnover Ratio:

Year Sales Avg. Fixed Ratio (Sales/Avg.

Assets FA)
2010-11 23626.87 12526.20 1.89
2011-12 26353.06 18510.97 1.42
2012-13 25784.31 27054.96 0.95
2013-14 27573.06 33017.36 0.84
2014-15 34094.41 36067.73 0.95
2015-16 33875.19 36067.55 0.94
2016-17 36499.14 35213.71 1.04
2017-18 42809.15 35098.36 1.22
2018-19 45207.16 34802.75 1.30
2019-20 39830.00 34577.30 1.15
2020-21 132,008 103737 1.27
2021-22 195,059 110517 1.76
Mean 1.22
Standard 0.32
Deviation
Table: 21 Fixed Assets Turnover Ratio

53
 Average Fixed Assets = (Opening Fixed Assets + Closing Fixed Assets)/2

Interpretation: The Fixed Asstes Turnover Ratio tells us the efficiency with which a
particular company is able to generate sales from its fixed assets. From the table above
and the graph below, we can understand that the company was better in generating sales
from its fixed assets during the financial years 2010-11, 2011-12, 2016-17, 2017-18,
2018-19, 2019-20 and 2021-22. Generally higher the ratio better the company at
generating sales from fixed assets, going by this rule HINDALCO was most efficient at
generating sales for the year 2010-11 which is 1.89 times and was least efficient during
the year 2013-14 during which the ratio stood at 0.84 times but overall for the period of
study HINDALCO’s efficiency at generating sales from fixed assets was good as the
ratio is above one.

Graph for Fixed Assets turnover Ratio

Graph of Fixed Asset Turnover Ratio

2
1.8
1.6
1.4
1.2
1
0.8 Graph of Fixed Asset Turnover
0.6 Ratio
0.4
0.2
0

Fig-22

54
7.9. Analysis of Current Assets to Total Assets Ratio:
Year Current Total Ratio
Assets Assets (CA/TA)
2010-11 15929.20 46536.34 0.34
2011-12 16479.44 55647.62 0.30
2012-13 20150.03 66618.56 0.30
2013-14 21951.89 73769.95 0.30
2014-15 22929.20 76000.64 0.30
2015-16 24260.30 80441.52 0.30
2016-17 28334.82 86634.99 0.33
2017-18 21956.65 82728.91 0.27
2018-19 23536.91 81502.23 0.29
2019-20 24341.00 80058.00 0.30
2020-21 20208.00 87947.00 0.22
2021-22 38867.00 99057.00 0.39
MEAN 0.30
STANDARD 0.04
DEVATION

Table: 22 Current Assets to Total Assets Ratio

Interpretation: The table above depicts the current assets to total assets ratio which
shows a mean of 0.30 The ratio varies between 0.27 for the year 2017-18 to 0.39 for the
year 2021-22. It can be understood the Total assets is always higher than the current
assets, it is simply because the total assets also include the components of non-current
assets into it. The highest proportion of current assets as compared to total assets is for
the year 2021-22 with approximately 36% The standard deviation stands at 0.04
indicating that the numbers are closely compressed towards the mean.

55
Graph of Current Assets to Total Assets Ratio:

Graph of Ratio (CA/TA)

0.45
0.4
0.35
0.3
0.25
0.2
0.15 Graph of Ratio (CA/TA)
0.1
0.05
0

Fig. 23
7.10. Analysis of Total Assets Turnover Ratio:

Year Sales Avg. Total Assets Ratio (Sales/Avg.

TA)
2010-11 23626.87 44208.45 0.53
2011-12 26353.06 51091.98 0.52
2012-13 25784.31 61133.09 0.42
2013-14 27573.06 70194.26 0.39
2014-15 34094.41 74885.30 0.46
2015-16 33875.19 78221.08 0.43
2016-17 36499.14 83538.26 0.44
2017-18 42809.15 84681.95 0.51
2018-19 45207.16 82115.57 0.55
2019-20 39830.00 80780.12 0.49
2020-21 132008 179613.50 0.73
2021-22 195059 206404 0.94
MEAN 0.53
STANDARD 0.15
DEVIATION
Table:23 Total Assets Turnover Ratio

56
 Average Total Assets = (Opening Total Assets + Closing Total Assets)/2

Interpretation: The Total Assets Turnover Ratio indicates the efficiency of a company
in generating sales from its total assets. Generally higher the total assets turnover ratio
better it is for the company as it indicates the company is efficient enough to drive sales
from its existing total assets at the end of the year. From the table above it is evident that
HINDALCO was not at all efficient in generating sales from its total assets as the ratio is
below 1 for all the years taken into study.

Graph for Total Assets Turnover Ratio:

Graph of Total Assets Turnover Ratio

1
0.9
0.8
0.7
0.6
0.5
Graph of Total Assets Turnover
0.4
Ratio
0.3
0.2
0.1
0

Fig-24

57
7.11. Analysis of Inventory Turnover Ratio:

Year Sales Avg. Stock Ratio (sales/Avg

stock)
2010-11 23626.87 6786.40 3.48
2011-12 26353.06 7697.13 3.42
2012-13 25784.31 7722.73 3.34
2013-14 27573.06 8308.59 3.32
2014-15 34094.41 8867.90 3.84
2015-16 33875.19 8613.36 3.93
2016-17 36499.14 8836.76 4.13
2017-18 42809.15 10003.20 4.28
2018-19 45207.16 11066.42 4.09
2019-20 39830.00 11309.73 3.52
2020-21 132,008 26526 4.97
2021-22 195,059 37575 5.19
MEAN 3.39
STANDARD 0.61
DEVIATION
Table: 24 Inventory Turnover Ratio

Interpretation: Table 24 assesses the HINDALCO's processing and inventory

management efficiency. Every year, the company's ratio has been consistent with the
industry average. HINDALCO did not have any difficulties in converting its inventory
into sales during the periods of study since stock turnover was never less than one,
indicating that inventory was converted into sales and there was no situation of stock
unavailability between the period 2010-11 to 2019-20. Higher the ratio better it is since it
indicates that the stock is converted into sales really fast hence, the best stock to average
inventory ratio was for the year 2021-22 with 5.19 times. The average conversion of
stock into sales during the period was 3.39 times.

58
Graph for Inventory Turnover Ratio:

Graph of Inventory Turnover Ratio

6

3
Graph of Inventory Turnover
2 Ratio
1

Fig-25
7.12. Analysis of Inventory Turnover in days:

Year Days in Years Inventory Ratio (in

Turnover Ratio days)
2010-11 365 3.48 105
2011-12 365 3.42 107
2012-13 365 3.34 109
2013-14 365 3.32 110
2014-15 365 3.84 95
2015-16 365 3.93 93
2016-17 365 4.13 88
2017-18 365 4.28 85
2018-19 365 4.09 89
2019-20 365 3.52 104
2020-21 365 4.97 73
2021-22 365 5.19 70
MEAN 365 3.95 94
STANDARD 13.59
DEVIATION
Table: 25 Inventory Turnover in days

59
Interpretation: After calculating the inventory turnover ratio, the inventory
turnover in days can be determined. Through the above mentioned table we can observe
that the fastest turnover of HINDALCO’s inventory was during the financial year 2021-
22 where it was 70 days and the highest amount of days taken by HINDALCO to
turnaround the inventory during our period of study was for the financial year 2013-14
during which the number of days taken by it was 110 days. On an average during the 10
years of our study HINDALCO’s inventory turnover in days stood at 94 days.

Graph of Inventory Turnover in days:

Graph of Inventory Turnover in days

120
100
80
60
Graph of Inventory Turnover in
40
days
20
0

Fig-26

60
8. Comparison between Working Capital Management of NALCO and
HINDALCO:

8.1 Comparison of Current Assets, Current Liabilities and Net Working

Capital:

Year Current Assets Current Assets

(NALCO) (HINDALCO)
2010-11 6045.17 15929.20
2011-12 7022.33 16479.44
2012-13 7075.81 20150.03
2013-14 7426.20 21951.89
2014-15 7712.18 22929.20
2015-16 7182.02 24260.30
2016-17 5655.79 28334.82
2017-18 5613.90 21956.65
2018-19 5600.70 23536.91
2019-20 4557.80 24341.00
2020-21 4,306.33 20208.00
2021-22 6,485.00 38867.00
Table: 26 Current Assets

Interpretation: From the table number 26 above and the graph below it can be clearly
visible that the current assets of HINDALCO is way higher compared to that of NALCO,
one of its primary reasons is that HINDALCO is also involved in the copper business and
thus have higher proportion of all the current assets components as compared to NALCO.

61
Graph of Current Assets:
45000
40000
35000
30000
25000
20000 NALCO
15000
10000 HINDALCO
5000
0

Fig. 27

8.2.Current Liabilites:

Year Current Liabilities Current Liabilities

(NALCO) (HINDALCO)
2010-11 2740.95 9842.64
2011-12 2676.89 10035.04
2012-13 3211.93 9736.76
2013-14 3242.75 12581.78
2014-15 1967.04 13092.72
2015-16 2209.24 12309.09
2016-17 2651.93 18700.82
2017-18 2440.93 12949.69
2018-19 2905.12 14007.12
2019-20 2720.02 15414.00
2020-21 2,049.80 19077.00
2021-22 3,099.14 28277.00

Table: 27 Current Liabilities

62
Interpretation: From the table number 27 above and the graph below it can be
clearly visible that the current Liabilities of HINDALCO is way higher compared to that
of NALCO, one of its primary reasons is that HINDALCO is also involved in the copper
business and thus have higher proportion of all the current Liabilities components as
compared to NALCO.
Graph of Current Liabilities:
30000

25000

20000

15000
Current Liabilities(NALCO)
10000 Current Liabilities(HINDALCO)

5000

Fig. 28
8.3.Net Working Capital:
Year Net Working Capital Net Working Capital
(NALCO) (HINDALCO)
2010-11 3304.22 6086.56
2011-12 4345.44 6444.40
2012-13 3863.88 10413.27
2013-14 4183.45 9370.11
2014-15 5745.14 9836.48
2015-16 4972.78 11951.21
2016-17 3003.86 9634.00
2017-18 3172.97 9006.96
2018-19 2695.58 9529.79
2019-20 1837.78 8927.00
2020-21 2256.53 9131.00
2021-22 3385.86 10590.00
Table: 28 Net Working Capital

63
Interpretation: It can be observed here that the Net Working Capital of HINDALCO is
higher when compared to NALCO, this is because as we have seen previously that the
current assets and current liabilities of HINDALCO is much higher when compared to
NALCO hence the result of it is seen in the net working capital. Just by looking at the
numbers of the net working capital we can comprehend that HINDALCO is at a much
better position in order to run its day to day operations without falling short of cash but
we must also keep in mind that HINDALCO not only needs to run its aluminium
business but the copper business as well.

Graph on Comparison of Net Working Capital:

14000

12000

10000

8000

6000 Net Working Capital (NALCO)

Net Working Capital(HINDALCO)
4000

2000

Fig-29

64
8.4. Comparison of Current Ratio:

Year Current Ratio Current Ratio

(NALCO) (HINDALCO)
2010-11 2.21 1.62
2011-12 2.62 1.64
2012-13 2.20 2.07
2013-14 2.29 1.74
2014-15 3.92 1.75
2015-16 3.25 1.97
2016-17 2.13 1.52
2017-18 2.30 1.70
2018-19 1.93 1.68
2019-20 1.68 1.58
2020-21 2.10 1.47
2021-22 2.09 1.37
MEAN 2.39 1.67
STANDARD 0.61 0.19
DEVIATION
Table: 29 Current Ratio

Interpretation: Although in the previous comparisons we have see that HINDALCO

was way ahead of NALCO in terms of Ccuurent Assets, Current Liabilities and Net
Working Caapital but when it comes to the Current Ratio, NALCO is at a comparatively
better position than HINDALCO as for most of the years NALCO has met the bankers
standard of 2:1 while HINDALCO has just achieved it during one financial year. Thus it
can be concluded that NALCO is at a much better position to meet its short term
liabilities with the help of its current assets as compared to HINDALCO.

65
Graph of Comparison of Current Ratio:
4.5
4
3.5
3
2.5
2 Current Ratio(NALCO)
1.5 Current Ratio(HINDALCO)
1
0.5
0

Fig-30

8.5. Comparison of Quick Ratio:

Year Quick Ratio Quick Ratio

(NALCO) (HINDALCO)
2010-11 1.82 0.84
2011-12 2.17 0.87
2012-13 1.77 1.28
2013-14 1.93 1.04
2014-15 3.33 1.08
2015-16 2.74 1.29
2016-17 1.70 1.02
2017-18 1.81 0.87
2018-19 1.51 0.87
2019-20 1.05 0.85
2020-21 1.36 0.22
2021-22 1.57 0.63
MEAN 1.89 0.90
STANDARD 0.61 0.28
DEVIATION
Table: 30 Quick Ratio

66
Interpretation: From the table above, it is clear that the Quick Ratio of NALCO
is better when compared to HINDALCO and thus indicate that NALCO is much more
liquid and is at better position to meet its short term liabilities.

Graph of Comparison of Quick Ratio:

3.5

2.5

Quick Ratio(NALCO)
1.5
Quick Ratio(HINDALCO)
1

0.5

Fig-31

67
8.6. Comparison of Gross Working Capital Turnover Ratio:
Year Gross Working Gross Working
Capital Turnover Capital Turnover
Ratio (NALCO) Ratio
(HINDALCO)
2010-11 0.99 1.48
2011-12 0.94 1.60
2012-13 0.98 1.28
2013-14 0.91 1.26
2014-15 0.96 1.49
2015-16 0.95 1.40
2016-17 1.42 1.29
2017-18 1.71 1.95
2018-19 2.05 1.92
2019-20 1.86 1.64
2020-21 2.07 1.95
2021-22 2.18 1.97
MEAN 1.41 1.60
STANDARD 0.52 0.28
DEVIATION
Table:31 Gross Working Capital Turnover Ratio

Interpretation: From the above table we can understand that HINDALCO is better than
NALCO in terms of working capital turnover ratio since its working capital turnover ratio
is consistent and higher than that of NALCO except for the financial years 2016-17,
2018-19 and 2019-20. The financial years where HINDALCO has a better ratio indicates
that it can generate more sales from every rupee of working capital that it has put to use,
same goes for the years where NALCO has performed well.

68
Graph of Comparison of Gross Working Capital Turnover
Ratio:

2.5

1.5
Gross Working Capital Turnover
Ratio (NALCO)
1
Gross Working Capital Turnover
Ratio (HINDALCO)
0.5

Fig-32

69
8.7. Comparison of Current Assets to Fixed Assets Ratio:

Year Current Assets to Current Assets to

Fixed Assets Ratio Fixed Assets Ratio
(NALCO) (HINDALCO)
2010-11 0.84 1.17
2011-12 0.96 0.70
2012-13 0.93 0.66
2013-14 0.98 0.62
2014-15 1.07 0.62
2015-16 0.99 0.69
2016-17 0.73 0.81
2017-18 0.70 0.63
2018-19 0.69 0.68
2019-20 0.51 0.70
2020-21 0.46 0.59
2021-22 0.67 1.14
MEAN 0.79 0.75
STANDARD 0.19 0.19
DEVIATION
Table: 32 Current Assets to Fixed Assets Ratio

Interpretation: From the above table it is clear that for both the companies Fixed assets
were higher compared to the current assets and that is the reason for the ratio to be below
1 in most of the cases but for the financial year 2014-15 NALCO had more current assets
compared to its fixed assets, Hindalco also had more fixed assets compared to its current
assets for the year 2010-11.

70
Graph of Comparison of CA to FA Ratio:
1.4

1.2

0.8
Current Assets to Fixed Assets
0.6 Ratio (NALCO)
Current Assets to Fixed Assets
0.4 Ratio (HINDALCO)
0.2

Fig-33
8.8. Comparison of Fixed Assets Turnover Ratio:

Year Fixed Assets Fixed Assets

Turnover Ratio Turnover Ratio
(NALCO) (HINDALCO)
2010-11 0.83 1.89
2011-12 0.91 1.42
2012-13 0.93 0.95
2013-14 0.89 0.84
2014-15 1.00 0.95
2015-16 0.94 0.94
2016-17 1.07 1.04
2017-18 1.22 1.22
2018-19 1.42 1.30
2019-20 0.99 1.15
2020-21 0.98 1.27
2021-22 1.50 1.76
MEAN 1.05 1.22
STANDARD 0.21 0.32
DEVIATION
Table: 33 Fixed Assets Turnover Ratio

71
Interpretation: The Fixed Asstes Turnover Ratio tells us the efficiency with which a
particular company is able to generate sales from its fixed assets. From the above
comparison it is evident that HINDALCO was better at generating sales from its fixed
assets in comparison to NALCO as the average value of HINDALCO’S fixed assets
turnover ratio performance for the period of study is higher than that of NALCO.

Graph of Fixed Assets Turnover Ratio:

1.8

1.6

1.4

1.2

1 Fixed Assets Turnover Ratio

(NALCO)
0.8
Fixed Assets Turnover Ratio
0.6 (HINDALCO)

0.4

0.2

Fig-34

72
8.9. Comparison of Current Assets to Total Assets Ratio:

Year Current Assets to Current Assets to

Total Assets Ratio Total Assets Ratio
(NALCO) (HINDALCO)
2010-11 0.41 0.34
2011-12 0.45 0.30
2012-13 0.43 0.30
2013-14 0.45 0.30
2014-15 0.48 0.30
2015-16 0.43 0.30
2016-17 0.39 0.33
2017-18 0.38 0.27
2018-19 0.37 0.29
2019-20 0.31 0.30
2020-21 0.29 0.22
2021-22 0.37 0.39
MEAN 0.28 0.30
STANDARD 0.05 0.04
DEVIATION
Table: 34 Current Assets to Total Assets Ratio

Interpretation: The Total Assets Turnover Ratio indicates the efficiency of a company
in generating sales from its total assets. Generally higher the total assets turnover ratio
better it is for the company as it indicates the company is efficient enough to drive sales
from its existing total assets at the end of the year. From the above comparison it is
evident that NALCO was better at generating sales from its total assets in comparison to
HINDALCO as the average value of NALCO’S total assets turnover ratio performance
for the period of study is higher than that of HINDALCO.

73
Graph of Comparison of Total Assets Turnover Ratio:
0.6

0.5

0.4

0.3 Current Assets to Total Assets

Ratio (NALCO)
0.2 Current Assets to Total Assets
Ratio (HINDALCO)
0.1

Fig-35
8.10. Comparison of Inventory Turnover Ratio:

Year Inventory Turnover Inventory Turnover

Ratio (NALCO) Ratio (HINDALCO)
2010-11 5.95 3.48
2011-12 5.79 3.42
2012-13 5.37 3.34
2013-14 5.31 3.32
2014-15 6.31 3.84
2015-16 5.95 3.93
2016-17 7.05 4.13
2017-18 8.19 4.28
2018-19 9.57 4.09
2019-20 5.83 3.52
2020-21 5.64 4.97
2021-22 9.08 5.19
MEAN 6.67 3.95
STANDARD 1.47 0.61
EVIATION
Table: 35 Inventory Turnover Ratio

74
Graph of Comparison of Inventory Turnover Ratio:
12

10

6 Inventory Turnover Ratio

(NALCO)
4 Inventory Turnover Ratio
(HINDALCO)
2

Fig-36
8.11.Inventory Turnover in days:

Year Inventory Inventory

Turnover in days Turnover in days
(NALCO) (HINDALCO)
2010-11 61 105
2011-12 63 107
2012-13 68 109
2013-14 69 110
2014-15 58 95
2015-16 61 93
2016-17 52 88
2017-18 45 85
2018-19 38 89
2019-20 63 104
2020-21 64 73
2021-22 40 70
MEAN 57 94
STANDARD 10.60 13.59
DEVIATION
Table: 36 Inventory Turnover in days

75
Interpretation: From the above data it can be concluded that NALCO is more efficient
in terms of the inventory turnover ratio since it takes lesser days in comparison to
HINDALCO to turnover its inventories. HINDALCO’s inventory turnover in days is
higher since it also operates in the copper business and hence needs to maintain a higher
inventory level than NALCO.

Graph of Inventory Turnover in days:

120

100

80

60 Inventory Turnover in days

(NALCO)
40 Inventory Turnover in days
(HINDALCO)
20

Fig-37

76
 9. FINDINGS and CONCLUSION

From the calculations done as a part of this report regarding the Working Capital
Management at NALCO between the financial years 2010-11 to 2021-22, we can derive
the following findings and conclusions :

1. There were instances during the period of study when NALCO’s current ratio had
become very high indicating lack of proper utilization of current assets, for example in
the financial year 2014- 15 and 2015-16

2. NALCO was found to be much more liquid compared to HINDALCO in terms of its
ability to meet its short time liabilities with the help of its liquid assets.

3. Between the financial years 2010-11 and 2015-16 the gross working capital turnover
of NALCO was less than one thus indicating it generated less sales from every rupee of
working capital that is put to use by the company.

4. During the period of the study it was evident that NALCO was not as effective as
HINDALCO in generating sales from its fixed assets.

5. NALCO was better at generating sales from its total assets as compared to
HINDALCO but its total assets turnover ratio was still low and not upto the mark.

6. NALCO was better in terms of its inventory turnover ratio as compared to

HINDALCO.

77
 10. RECOMMENDATIONS

The following recommendations has been arrived at after carefully analyzing all the
aspects of the working capital management at NALCO. The recommendations will help
the company manage its working capital more effectively and hence will serve as a
benefit to the entire firm. I would like to give the following recommendations :

1. NALCO must try to utilize its current assets more productively and ensure that the
current assets are not kept idle.

2. The firm must try to manage its cash and cash equivalents in an effective way as cash
generally is a non earning asset if not properly deployed.

3. The gross working capital turnover ratio must be properly utilized to generate more
sales.

4. NALCO must also try to reduce its inventory turnover cycle as the inventory turnover
in days indicates that it takes too long for the firm to covert its inventories into sales.

5. NALCO must also try to diversify into different businesses just like some of its major
competitors.

78
 11.REFERENCES

1. NUNN, K.,1981. The Strategic Determinants of Working Capital: A Product Line

Perspective. Journal Of Financial Research, 4, pp. 207-219.

2. SINGH, S., 1988. Managing Working Capital by Strategic Choice. Vikalpa, 13(1), pp.
17- 23.

3. CHAUDHURY, S.K. and PATHI, S.N., 2015. Working Capital Management in

Aluminium Sector: A Case Study of NALCO. International Journal of Innovative
Research and Practices, 3(3), pp. 1-11

4. KHATIK, S.K. and DHOTE, K.K.,2018. Working Capital Management of National

Aluminium Company Limited. International Journal of Research in Management,
Economics and Commerce, 08(04), pp. 39-52.

5. AGARWAL, N.K., 1990. Management of Working Capital in India. International

Journal of Research in Commerce and Management Studies, 3, pp. 213-216

6. PANDEY, S. and JAISWAL, V.K., 2012. Management of Working Capital in National

Aluminium Company. International Journal of Management Research and
Development, 2(1), pp. 52-63.

7. DELOOF, M., 2003. Does Working Capital Management Affects Profitability of

Firms.Journal of Business Finance & Accounting, 30(3), pp. 33-43.

79