PROJECT REPORT

ON
WORKING CAPITAL MANAGEMENT OF TATA MOTORS LTD

Submitted in partial fulfillment of requirements for the award

on the degree of
MASTER OF BUSINESS ADMINISTRATION
Submitted by

Ammulu Vedala

M21MB027
Under the guidance of
Assistant Prof. Dr.S.Sarika
(PROJECT SUPERVISOR)

DEPARTMENT OF MANAGEMENT
(2021-2023)

1
 ACKNOWLEDGEMENT

I, express my deep sense gratitude to Assistant Professor Dr.S.Sarika

madam, Kakatiya Institute of Technology & Science, Warangal for permitting me
to carry out this report and guiding me throughout this endeavor, and also
helping me to complete the report.

My utmost thanks also go to the faculty members of department of

management for their co-operation and help for the completion of this report.

Finally, my sincere thanks to one and all who have contributed to my work
directly or indirectly.

With Gratitude

Ammulu Vedala
(M21MB027)

2
 DECLARATION

I, AMMULU VEDALA bearing Roll No: M21MB027 hereby declare that the
Major project entitled “WORKING CAPITAL MANAGEMENT OF TATA
MOTORS LTD” is submitted by me for the partial fulfillment for the award of the
degree of Master of Business Administration to the Department of Management,
Kakatiya Institute of Technology and Science- Warangal.

Place: Warangal AMMULU VEDALA

Date: ROLLNO: M21MB027

3
 INDEX
SI PAGE
CONTENTS
NO: NO:

1. Chapter - 1

1.1 Introduction 5-13

1.2 Objectives of the study 13

1.3 Need of the study 13

1.4 Scope of the study 13-14

1.5 Limitations of the study 14

1.6 Research methodology 14

2. Chapter – 2

2.1 Company profile 16-19

3. Chapter - 3

3.1 Data & Interpretations 21-34

4. Chapter – 4

4.1 Conclusions 36

4.2 Suggestions 37

4.3 Bibliography 38

4
CHAPTER – 1

5
1.1. INTRODUCTION
WORKING CAPITAL

Working capital management refers to a company’s managerial accounting strategy designed to

monitor and utilize the two components of working capital, current assets and current liabilities,
to ensure the most financially efficient operation of the company. The primary purpose of
working capital management is to make sure the company always maintains sufficient cash to
make sure the company always maintains sufficient cash flow to meet its short-term operating
costs and short-term debt obligations. Working capital management involves relationship
between a firm’s short-term assets and liabilities.

Definition:

Working Capital (abbreviated WC) is a financial metric which represents operating liquidity
available to a business, organization, or other entity, including governmental entities. Along with
fixed assets such as plant and equipment, working capital is considered a part of operating
capital. If current assets are less than current liabilities, an entity has a working capital
deficiency, also called a working capital deficit. Many scholars gave many definitions regarding
term working capital some of these are given below. According to Weston & Brigham,
“Working capital refers to a firm’s investment in short-term assets cash, short term securities,
accounts receivables and inventories. – According to Mead Malott & Field, “Working capital
means current assets”. According to Bonneville, “Any acquisition of funds which increases the
current assets increases working capital for they are one and the same”. Formula for Working
Capital: “Current Assets – Current Liabilities”

FACTORS EFFECTING WORKING CAPITAL:

● Nature of business: generally working capital is higher in manufacturing compared to service-

based organizations.

● Volume of sales: higher the sale, higher the working capital required.

● Seasonality: peak seasons for sales need more working capital.

● Length of operating and cash cycle: longer the operating and cash cycle, more is the
requirement of working capital.

6
SOURCES OF WORKING CAPITAL:

● Funds from business operations.

● Other incomes such as from dividends, transfer fees, donations, interest from investments

● Sale of non-current assets such as useless and obsolete plant and machinery.

● Long-term borrowings.

● Issue of additional equity capital or preference share capital.

CHARACTERISTICS OF WORKING CAPITAL:

Needs that are Short Term: Working capital is being utilized in acquiring current assets
which will be converted to cash for a short period only.

Circular Movement: Working capital is being converted to cash constantly which will just be
turned as a working capital all over again.

Permanency: Although it is just a kind of short-term capital, working capital is needed by a

business forever and always.

Fluctuation: Working still fluctuates every now and then even it is something permanent.

Liquidity: It is very liquid for it can be converted as cash any time without losing anything.

Less Risky: Investments in current assets such as working capital comes with less risk for it is
just for short term.

No Need for Special Accounting System: Since working capital is a short-term asset that will
last for a year only, there will be no need for adoption of a special accounting system.

USES OF WORKING CAPITAL:

a. Loss from business operations would decrease the working capital.

b. The purchase of non-current assets generally causes a decrease in current assets or increase in
current liabilities. Therefore, it should appear as the use of funds.

c. The retirement of long-term liabilities such as payment to preference shareholders and

debenture holders involves the use of cash.

d. Dividend to shareholders.

e. Interest to lenders.

7
WORKING CAPITAL APPROACHES:

a) Matching or hedging approach: This approach matches assets and liabilities to maturities.
Basically, a company uses long term sources to finance fixed assets and permanent current assets
and short-term financing to finance temporary current assets.

b) Conservative approach: it is conservative because the company prefers to have more cash on
hand. That is why, fixed and part of current assets are financed by long-term or permanent funds.
As permanent or long-term sources are more expensive, this leads to “lower risk lower return”.

c) Aggressive approach: The Company wants to take high risk where short term funds are used
to a very high degree to finance current and even fixed assets.

PRACTICAL USAGE EXPLANATION:

Positive Working Capital is always a good thing because it means that the business is about to
meet its short-term obligations and bills with its liquid assets. It also meansthat the business
should be able to finance some degree of growth without having to acquire and outside loan or
raise funds with a new stock issuance.

Importance or Advantages of Positive Working Capital:

Working capital is the life blood and nerve centre of a business. Just as circulation of blood is
essential in the human body for maintaining life, working capital is very essential to maintain
the smooth running of a business. The main advantages of maintaining adequate amount of
working capital are as follows:

1. Solvency of the business.

2. Goodwill

3. Easy loans.

4. Cash discounts.

5. Regular supply of raw materials.

6. Regular payment of salaries, wages and other day to day commitments.

7. Exploitation of favorable market conditions.

8. Ability to face crisis.

9. Quick and regular return on investments.

10. High morale.

8
Negative Working Capital, on the other hand, means that the business doesn’t have enough
liquid assets to meet it current or short-term obligations. This is often caused by inefficient asset
management and poor cash flow. If the business does not have enough cash to pay the bills as
they become due, it will have to borrow more money, which will in turn increase its short-term
obligations.

Disadvantages or Dangers of Inadequate Working Capital :

1. It cannot pay its short-term liabilities and lose its reputation.

2. It cannot buy its requirements in bulk and cannot avail discounts.

3. It cannot exploit the favorable opportunities in the market.

4. The non-payment of day-to-day expenses results in inefficiency.

5. It becomes impossible to utilize efficiently the fixed assets.

6. The rate of return on investments falls.

NEED FOR WORKING CAPITAL:

In order to earn sufficient profits, a firm has to depend on its sales activities apart from others.
We know that sales are not always converted into cash immediately, i.e., there is a time- lag
between the sale of a product and the realization of cash.

So, an adequate amount of working capital is required by a firm in the form of different current
assets, for its activities to continue uninterrupted and to tackle the problems that may arise
because of the time-lag.

TIME AND MONEY CONCEPT IN WORKING CAPITAL:

Every component of working capital (namely inventory, receivables, and payables) has two
dimensions TIME and MONEY, in managing working capital. By making the money move
faster around the cycle, one can reduce the amount of money tied up. This helps the business
generate more cash or it will need to borrow less money to fund its working capital.
Consequently, it would either reduce the cost of interest or have free funds to support additional
sales growth or investments of the company. Similarly, if one can negotiate on better terms with
suppliers i.e., get an increased credit limit or longer credit; it will effectively create additional
cash to help fund future sales.

9
Hence, working capital in laymen terms can be compared to the blood vessels in any human
body which makes the body function properly and thus make maximum utilization of the human
or company assets.

CLASSIFICATION OF WORKING CAPITAL:

Working capital may be classified as follows:

1. On the basis of concept Working Capital may be classified as:

a. Gross Working Capital:

Gross Working Capital is the sum of all of a company's current assets (assets that are convertible
to cash within a year or less). Gross working capital includes assets such as cash, accounts
receivable, inventory, short-term investments, and marketable securities.

Gross working capital fewer current liabilities is equal to net working capital, or simply
"working capital," a more useful measure for balance sheet analysis.

Merits:

a. Working Capital at any time.

b. Management of current assets individually.

c. Maximize returns on current assets.

d. Increases financial responsibility.

b. Net Working Capital:

Working Capital, also known as net working capital, is the difference between a company’s
current assets, such as cash, accounts receivable (customers’ unpaid bills) and inventories of raw
materials and finished goods, and its current liabilities, such as accounts payable. Net operating
working capital is a measure of a company's liquidity and refers to the difference between
operating current assets and operating current liabilities. In many cases these calculations are the
same and are derived from company cash plus accounts receivable plus inventories, less accounts
payable and less accrued expenses.

It is a measure of a company's liquidity, operational efficiency and its short term financial health.
If a company has substantial positive working capital, then it should have the potential to invest
and grow. If a company's current assets do not exceed its current liabilities, then it may have
trouble growing or paying back creditors, or even go bankrupt.

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Merits:

a. Give importance to liquidity.

b. To evaluate short term solvency.

c. To determine the financial soundness.

d. To know the amount of working capital from long term funds.

ON THE BASIS OF PERIODICITY OF REQUIREMENT:

Permanent (or Fixed) Working Capital:

This capital is permanently locked up in the current assets to carry out the business smoothly.
This investment in current assets is of the permanent nature and will increase as the size of
business expands.

Permanent working capital is that minimum amount of investment in raw materials, work-in-
process inventory, finished goods, stores and spares, accounts receivable and cash balance which
a firm is required to have in order to carry on a desirable level of business activity.

Such an amount cannot be reduced if the firm wants to carry on the business operations without
interruption. It is that minimum amount which is absolutely essential throughout the year on a
continuous basis for maintaining the circulation of current assets. Minimum cash is required for
making payment of wages, salaries, and other expenses; minimum stock is required to maintain
regular supplies and minimum investment in debtors is essential on account of credit sales
according to the period of credit allowed to the customers. Since the requirement of permanent or
hard-core working capital is on a permanent basis, such working capital should be financed out
of long-term funds.

Characteristics of Permanent Working Capital:

• The size of Permanent Working Capital grows with the growth of business.

• It keeps on changing its form from one current asset to another.

• As long as the firm is a going concern, Working Capital cannot be substantially reduced.

Regular Working Capital:

It is the minimum amount of liquid capital needed to keep up the circulation of the capital from
cash to inventories, to receivable and again to cash. This would include sufficient minimum bank
balance to discount all bills, maintain adequate supply of raw materials etc.

11
Reserve Margin or Cushion Working Capital:

It is the excess over the needs or regular Working Capital that should be kept in reserve for
contingencies that may arise at any time. These contingencies include rising prices, strikes,
special operations such as experiments with new products etc.

Variable Working Capital:

Variable Working Capital requires changes with the increase or decrease in the volume of
production or business. Variable working capital can be classified as:

a. Seasonal Working Capital:

The Working Capital required to meet the seasonal needs of the industry

or business is known as seasonal Working Capital. For example, if an enterprise is marketing

woolen garments, it needs more money for that purpose during winter months than in summer
season. Similar is the case with a factory/business engaged in the production or marketing or
coolers, refrigerators, or air-conditioners. They are all Seasonal products.

b. Special Working Capital:

Special Working Capital is that part of the variable working capital which is meant for meeting
the special business operations such as extensive marketing campaigns, experiments with
products or methods of production, etc.

The distinction between fixed and variable Working Capital is of great significance particularly
in raising the funds for an enterprise. Fixed working capital should be raised in the same way as
fixed capital is procured. Variable working capital is procured out of short-term borrowings from
the bank or from the public.

o Inventory Management
o Debtors / accounts receivables
o Creditors / accounts payable
o Cash and Cash equivalents

FACTORS AFFECTING REQUIREMENTS FOR WORKING CAPITAL:

12
In addition to the investment in a fixed asset, it is sometimes necessary to carry additional cash,
receivables, or inventories. This investment in working capital is treated as a cash outflow at the
time it occurs.

Estimating the Working Capital of your business:

1. Unless it is specified otherwise, the calculation of stocks of the finished products and debts
should be made at cost.

2. Profits are to be ignored when calculating the working capital as profits may or may not use as
working capital and even in the scenario of it being used the amount will be reduced due to
taxes, dividends, etc. 3. Unless mentioned otherwise, take into consideration the 100 percent
value of WIP.

OPERATING CYCLE OF WORKING CAPITAL:

The working capital cycle reserves to the length of time between the firm paying cash for
materials etc., this working capital also known as operating cycle. Working capital cycle or
operating cycle indicates the length of time between companies paying for materials entering
into stock and receiving the cash from sales of finished goods. The operating cycle (Working
Capital) consists of the following events. Which continues throughout the life of business?

• Price level changes.

• Other factors.

DISADVANTAGES OF REDUNDANT OR EXCESSIVE WORKING CAPITAL

1. Idle funds earn no profits for the business.

2. It results in unnecessary purchasing and accumulation of inventories causing more chances

of theft, waste and losses.

3. It implies excessive debtors and defective credit policy which may

4. Cause higher incidence of bad debts.

5. It may result in overall inefficiency.

6. The relation with the financial institutions gets affected adversely.

7. The value of shares may fall due to low rate of return.

8. It gives rise to speculative transactions

WORKING CAPITAL AND RATIO ANALYSIS:

13
Ratio analysis is one of the important techniques that can be used to check efficiency with which
working capital is being managed by a firm. The most important ratios for working capital
management are as above shown in the figure. Liquidity Ratios are an important class of
financial metrics used to determine a debtor's ability to pay off current debt obligations without
raising external capital. Liquidity ratios measure a company's ability to pay debt obligations and
its margin of safety through the calculation of metrics including the current ratio, quick ratio, and
ratio. Current liabilities are analyzed in relation to liquid assets to evaluate the coverage of short-
term debts in an emergency.

1.2. NEED FOR THE STUDY:

Tata motors Ltd. is big manufacturing unit with varying automobile products are being produced.
The requirement of capital for each department is very high in an organization like Tata motors
Ltd. Therefore, I have under taken my study in this organization to understand the requirement of
capital and its effective allocation of resources in working capital management. Some important
points are taken into consideration. To study the adequacy of working capital in this
organization. The duration of the work-in-progress state depends on length of the manufacturing
cycle, consistency in capacity utilization in different stages and efficient co-ordination of various
inputs.

The duration of raw material stage depends on the regularity of supply, degree of perishable
ability, price fluctuations and economic of bulk purchases. Having this detailed study on working
capital management, identify the shortage of Working Capital and suggest improving the
working capital management in the company.

1.3. OBJECTIVES OF THE STUDY:

The main purpose of the present study is to know the Working Capital Management of Tata
motors.

The following are the objectives of the study.

1) To understand the concept of Working Capital Management of the Tata motors.

2) To determine the requirements of Working Capital of Tata motors Ltd.

3) To find the Working Capital turnover of Tata motors Ltd.

4) To analyze the liquidity position of Tata motors Ltd.

5) To offer suggestions based on the conclusions of the study.

1.4. SCOPE OF THE STUDY:

The following is the scope of the study:

14
 1. The study reveals the Working Capital performance of Tata motors Ltd. from 2017-18 to
2021-22.
2. The study reveals the liquidity position and Working Capital turnover of the
Organization.
3. The study also focuses on determinants Working Capital Management at Tata motors
Ltd.

1.5. RESEARCH METHODOLOGY:

The present study is based on secondary data. The data has been collected through the following
methods.

• Annual reports of the organization from 2017-18 to 2021-22.

• Books

• journals.

• websites.

1.6. LIMITATIONS OF THE STUDY:

1. The study is restricted to Working Capital Management of Tata motors Ltd only.

2. The study is mainly based on the data provided in annual reports of the

company. Therefore, the accuracy of the study depends upon the accuracy of the

data.

3. The study is limited to a period of five years 2017-18 to 2021-22 only.

4. The study is based on second data only.

15
CHAPTER – 2

16
2.1 HISTORY OF TATA MOTORS
Tata Motors was founded in 1945 and started its operations as a manufacturer of locomotives.
After 9 years in 1954, In collaboration with Daimler-Benz AG, manufactures its first commercial
vehicle in history; its partnership with Daimler-Benz AG was ended in 1969.
In 1988, Tata Motors started the manufacturing of passenger vehicles, with the launch of the
model Tata Mobile and after that Tata Sierra in 1991 and become the first Indian automobile
company to manufacture a fully indigenous automobile.
After the successful lunch of Sierra, in 1998, Tata Motors launched the first fully indigenous
passenger car named Indica in India, and in 2008 it launched the Tata Nano, which is also
promoted as the world’s cheapest car. Tata Motors also expands its portfolio in commercial
vehicles by launching lighter trucks, called LCV (Light Commercial Vehicles), which would
lead to the appearance of the first light truck, the Tata 407. It also started exporting cars to South
Africa.
Tata Motors has its own manufacturing and assembly facilities in Jamshedpur, Pantnagar,
Lucknow, Sanand, Dharwad, and Pune in India, and also outside the country as in Argentina,
South Africa, Great Britain, and Thailand. It has also R&D centres in Pune, Jamshedpur,
Lucknow, Dharwad, South Korea, Great Britain, and Spain.
The company grew within the South Asian continent, achieving great success. In the year 2004
Tata Motors listed on the stock market BSE and became the most important corporation in India.
On 27 September 2004, it also listed on the New York Stock Exchange.
In the same year, it acquired the South Korean company Daewoo’s truck manufacturing unit and
named as Tata Daewoo. Its expansion goes beyond its borders, in 2005 it acquired 21% of the
shares of the Spanish bus and coach manufacturer company Hispano Carrocera SA. And jointly
developed the buses named Star bus and Globus.
After that in 2006, Tata Motors formed a joint venture with the Brazilin company Marco polo
and manufactures a bus named Tata Marco polo Bus. This year it also signed a production and
distribution agreement with Fiat Group. In 2008, it acquired the English car maker Jaguar and
Land Rover brands from Ford Motor Company. In 2009, it acquired full ownership of the
Spanish company Hispano Carrocera SA.

2.2 MAJOR PRODUCTS ARE:

Tata Ace, launched in 2005, was the first home-grown sub-one-ton mini-truck of India, and
even turned out to be a huge success. The company also exports Tata Ace to South
America, Europe and Africa. Tata 407, the LCV, was launched in 1986, and it has sold
more than 500,000 units since then. In India, this model dominates 75% of the LCV

17
market. Tata Bravo and Tata Prima Racing truck are other notable models of Tata Motors.
Tata Motors has recently unveiled Tata Hexa Crossover in 2015, which is an upcoming 6 -
seater crossover to be launched by 2016.

2.3 FOUNDER OF TATA MOTORS:

Ratan Naval Tata, GBE (born 28 December 1937) is an Indian industrialist and former
chairman of Tata Sons. He was also the chairman of the Tata Group from 1990 to 2012, serving
also as interim chairman from October 2016 through February 2017. He continues to head its
charitable trusts.[2][3] In 2008, he received the Padma Vibhushan, the second highest civilian
honour in India, after receiving the Padma Bhushan, the third highest civilian honour in 2000.[4]

He is the son of Naval Tata, who was adopted by Ratanji Tata, son of Jamsetji Tata, the founder
of the Tata Group. He graduated from the Cornell University College of Architecture with a
bachelor's degree in architecture, and the Harvard Business School through a management course
he completed in 1975.[5] He joined Tata in 1961, where he worked on the shop floor of Tata
Steel. He later succeeded J. R. D. Tata's as chairman of Tata Sons upon the latter's retirement in
1991. Under his tenure the Tata Group acquired Tetley, Jaguar Land Rover, and Corus, in an
attempt to turn Tata from a largely India-centric group into a global business. Tata is also one of
the largest philanthropists in the world, having donated around 60-65% of his income to charity.

18
2.4 KEY EXECUTIVES:

S.NO NAME DESIGNATION

1 Natarajan Chandrasekaran Non-Executive Director & Chairman

2 O P Bhatt Non-Executive,Independent Director

3 Thomas Flack President & Chief purchasing Officer

4 P B Balaji Group Chief Financial Officer

5 Rajendra Patkar President & Chief Technology Officer

19
6 Mitsuhiko Yamashita Non-Executive,Non-Independent
Director

7 K V Chowdary Non-Executive, Independent

Director

8 Vedika Bhandarkar Non-executive, Independent Director

20
CHAPTER – 3

21
3.1 DATA INTERPRETATION AND ANALYSIS

WORKING CAPITAL STATEMENT OF TATA MOTORS LTD. AS ON

31ST MARCH 2018

(Rupees in crores)

PARTICULARS 2016-17 2017-18 INCREASE DECREASE

(RS) (RS) (RS) (RS)
CURRENT
ASSETS
Cash and cash 2,878 2,626 252
equivalents
Short-term 2,609 2,031 578
deposits and
other
investments
Trade 1,273 1,612 339
receivables
Other financial 218 494 276
assets
Inventories 3,464 3,767 303

Other current 517 630 113

assets
Current tax 3 10 7
assets
Total current 10,962 11,170 1,208
assets(A)
CURRENT
LIABILITIES
Accounts 6,508 7,614 1,106
payable
Short-term 179 652 473
borrowings
Other financial 2,139 1,189 950
liabilities

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 Provisions 644 758 114

Other current 490 547 57

liabilities
Current tax 144 160 16
liabilities
Total current 10,104 10,920 816
liabilities (B)
Net working 858 250
capital(A-B)

INTERPRETATION:
• From the table, it can be observed that

• Cash & Cash equivalents were increased by Rs.121 crores due to sales growth and
controlling expenses.

• Trade receivables were decreased by Rs.250 crores due to companies credit policies.

• Other financial & current assets , inventories and current tax assets were decreased.

• Short term borrowings, provisions and other current liabilities were increased due to
company expenses.

• Total current liabilities were decreased by Rs.168 crores.

• The overall working capital position of the company was not satisfactory.

23
WORKING CAPITAL STATEMENT OF TATA MOTORS LTD. AS ON
31ST MARCH 2019

(Rupees in crores)

PARTICULARS 2017-18 2018-19 INCREASE DECREASE

(RS) (RS) (RS) (RS)

CURRENT
ASSETS
Cash and cash 2,626 2,747 121
equivalents
Short-term 2,031 1,208 823
deposits & other
investments
Trade receivables 1,612 1,362 250

Other financial 494 314 160

assets
Inventories 3,767 3,608 159

Other current 630 570 60

assets
Current tax assets 10 10

Total current 11,170 9,639 1,531

assets(A)
CURRENT
LIABILITIES
Accounts payable 7,614 7,083 531

Short- term 652 881 229

borrowings
Other financial 1,189 1,042 147
liabilities
Provisions 758 988 230

24
 Other current 547 664 117
liabilities
Current tax 160 94 66
liabilities
Total current 10,920 10,752 168
liabilities (B)
Net working 250 -1,113
capital(A-B)

INTERPRETATION:
From the table, it can be observed that

• Cash & Cash equivalents were increased by Rs.121 crores due to sales growth and
controlling expenses.

• Trade receivables were decreased by Rs.250 crores due to companies credit policies.

• Other financial & current assets , inventories and current tax assets were decreased.

• Short term borrowings, provisions and other current liabilities were increased due to
company expenses.

• Total current liabilities were decreased by Rs.168 crores.

• The overall working capital position of the company was not satisfactory.

25
WORKING CAPITAL STATEMENT OF TATA MOTORS LTD. AS ON
31ST MARCH 2020

(Rupees in crores)

PARTICULARS 2018-19 2019-20 INCREASE DECREASE

(RS) (Rs.) (RS) (RS)
CURRENT
ASSETS
Cash and cash 2,747 2,145.30 601.7
equivalents
Short-term 1,208 2,272.2 1064.2
deposits & other
investments
Trade receivables 1,362 1,978.06 616.06
Other financial 314 1,546.56 1232.56
assets
Inventories 3,608 3,831.92 223.92

Other current 570 1,371 801

assets
Current tax assets 10 -
Total current 9,639 13,145.04 3506.04
assets(A)
CURRENT
LIABILITIES
Accounts payable 7,083 8,102.25 1,019.25

Short-term 881 6,121.36 5,240.36

borrowings
Other financial 1,042 5,976.35 4,934.35
liabilities
Provisions 988 1,406.75 418.75

26
 Other current 664 1,347.63 683.63
liabilities
Current tax 94 31.49 62.51
liabilities
Total current 10,752 22,985.83 12,233.83
liabilities (B)
Net working -1,113 -9,840.79
capital(A-B)

INTERPRETATION:
From the table it can be observed that

• Short term deposits and other investments were increased by Rs.1,064.2 crores.

• Inventories were increased by Rs.223.92 crores due to purchase of more goods.

• Trade receivables and other current assets also fluctuated.

• Total current assets were increased by Rs.3,506.04 crores.

• Short term borrowings, provisions, other current liabilities were increased.

• Accounts payable were increased by Rs.1,019.25 crores due to buying more goods on
credit.

• Total current liabilities were increased by Rs.12,233.83 crores.

• The overall working capital position of the company was not satisfactory.

27
WORKING CAPITAL STATEMENT OF TATA MOTORS LTD. AS ON
31ST MARCH 2021

(Rupees in crores)

PARTICULARS 2019-20 2020-21 INCREASE DECREASE

(Rs.) (Rs.) (RS) (RS)

CURRENT
ASSETS
Cash and cash 2,145.30 2,365.54 220.24
equivalents
Short-term 2,272.2 3,531.66 1,259.46
deposits & other
investments
Trade receivables 1,978.06 2,087.51 109.45

Other financial 1,546.56 1,745.99 199.43

assets
Inventories 3,831.92 4,551.71 719.79

Other current 1,371 1,166.89 204.11

assets
Current tax assets - -

Total current 13,145.04 15,449.3 2,304.26

assets(A)
CURRENT
LIABILITIES
Accounts payable 8,115.01 6,102.1 2,012.91

Short- term 5,421.95 9,129.91 3,707.96

borrowings
Other financial 1,376.12 1,113.26 262.86
liabilities
Provisions 1,043.54 608.06 435.48

28
 Other current 2,287.50 2,047.27 240.23
liabilities
Current tax 37.84 49.67 11.83
liabilities
Total current 18,281.96 19,050.27 768.31
liabilities (B)
Networking 2,832.66 -3569.33
capital(A-B)

INTERPRETATION:
From the table, it can be observed that

• Cash & Cash equivalents were increased by Rs.84.69 crores.

• Trade receivables were increased by Rs.24.27 crores due to companies credit policies.

• Other financial assets were decreased by Rs.936.48 crores.

• Total current assets were decreased by Rs.74.94 crores.

• Short term borrowings were increased by Rs.3,707.96 crores.

• Total current liabilities were increased by Rs.768.31 crores.

• The overall working capital position of the company was not satisfactory.

29
WORKING CAPITAL STATEMENT OF TATA MOTORS LTD. AS ON
31ST MARCH 2022

(Rupees in crores)

PARTICULARS 2020-21 2021-22 INCREASE DECREASE

(Rs.) (Rs.) (RS) (RS)

CURRENT
ASSETS
Cash and cash 2,365.54 2,450.23 84.69
equivalents
Short-term 3,531.66 5,298.98 1,767.32
deposits & other
investments
Trade receivables 2,087.51 2,111.78 24.27

Other financial 1,745.99 809.51 936.48

assets
Inventories 4,551.71 3,718.49 833.22

Other current 1,166.89 1,091.95 74.94

assets
Current tax assets - -

Total current 15,449.3 15,480.94 31.64

assets(A)
CURRENT
LIABILITIES

Accounts payable 8,115.01 6,102.1 2,012.91

Short- term 5,421.95 9,129.91 3,707.96

borrowings
Other financial 1,376.12 1,113.26 262.86
liabilities

30
 Provisions 1,043.54 608.06 435.48

Other current 2,287.50 2,047.27 240.23

liabilities
Current tax 37.84 49.67 11.83
liabilities
Total current 18,281.96 19,050.27 768.31
liabilities (B)
Net working 2,832.66 -3569.33
capital(A-B)

INTERPRETATION:
From the table, it can be observed that

• Cash & Cash equivalents were increased by Rs.84.69 crores.

• Trade receivables were increased by Rs.24.27 crores due to companies credit policies.

• Other financial assets were decreased by Rs.936.48 crores.

• Total current assets were decreased by Rs.74.94 crores.

• Short term borrowings were increased by Rs.3,707.96 crores.

• Total current liabilities were increased by Rs.768.31 crores.

• The overall working capital position of the company was not satisfactory.

31
 RATIO ANALYSIS

CURRENT RATIO:
The current ratio is the relationship between current assets and current liabilities. The current
ratio is a measure of general liquidity and this most widely used to analyze a short-term financial
position or liquidity of a firm. The standard ratio is 2:1, the current ratio is calculated by using
the following formula:

Current Ratio: Current Assets/Current Liabilities

The standard current ratio = 2:1

Current Assets Current Liabilities

Year Ratio
(Rs.) (Rs.)

2017-2018 11,170 10,920 1.02:1

2018-2019 9,639 10,752 0.89:1

2019-2020 13,145.04 22,985.83 0.57:1

2020-2021 15,449.3 18,281.96 0.84:1

2021-2022 15,480.94 19,050.27 0.81:1

32
 GRAPH SHOWING CURRENT RATIO

Current Ratio
1.2
1
0.8
0.6
0.4
0.2
0

2017-18 2018-19 2019-20 2020-21 2021-22

INTERPRETATION:
• The current assets of TATA motors were increased except in the year 2018-19.

• The current liabilities of TATA motors were increased except in the year 2018-19 and
2020-21.

• During the study period the current ratio were fluctuating from year to year.

• The liquidity position of the company is not satisfactory.

33
 QUICK RATIO
Quick ratio or acid test ratio ignores liquidity assets like inventory. The term Liquidity' refers to
the ability of a firm to pay its short-term obligations as and when become due. The two
determines of current ratio, as a measure of liquidity or current assets and current liabilities.
Current assets include inventories and prepaid expenses which are not easily convertible into
cash within a short period.

• Quick Ratio [Quick assets/Current Liabilities]

• Quick assets = (Current assets- inventories)

Quick Assets Current Liabilities

Year Ratio
(Rs.) (Rs.)

2017-2018 7,4030.67 10,920 0.68:1

2018-2019 6,031 10,752 0.56:1

2019-2020 9,313.12 22,985.83 0.4:1

2020-2021 10,897.59 18,281.96 0.60:1

2021-2022 11,762.45 19,050.27 0.62:1

GRAPH SHOWING QUICK RATIO

34
 Quick ratio
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0

2017-18 2018-19 2019-20 2020-21 2021-22

Q…

INTERPRETATION:
• The quick assets of TATA motors were increased except in the year 2018-19.

• The current liabilities of TATA motors were increased except in the year 2018-19 and
2020-21.

• During the study period the quick ratio were fluctuating from year to year.

• Hence the liquidity position is not satisfactory.

35
CHAPTER – 4

36
CONCLUSIONS:
1. During the study period, the inventories were fluctuated from year to year.

2. The amount of cash and cash equivalents were fluctuating during the study period.

3. short term borrowings were fluctuating during the study period.

4. Trade receivables were fluctuating from year to year.

5. Short-term deposits & other investments were fluctuating from year to year.

6. The total current assets were fluctuating during the study period.

7. The networking capital the company was fluctuating during the study period.

8. The liquidity position of the company is not satisfactory.

37
SUGGESTIONS:
The following are the suggestions offered:

1. The company should try to maintain an optimum networking capital all the time.

2. The company has to take proper measures to improve short-term solvency position by
employing more funds in current assets.

3. The company has to manage current liabilities properly.

4. The company has to improve its operations by utilizing the resources properly.

5. Proper inventory measures have to be implemented as they are fluctuating year to year.

38
BIBLIOGRAPHY

1. https://r.search.yahoo.com/_ylt=AwrKF1ixdy5kc8wL.Pe7HAx.;_ylu=Y29sb
wNzZzMEcG9zAzEEdnRpZAMEc2VjA3Ny/RV=2/RE=1680795698/RO=
10/RU=https%3a%2f%2fwww.moneycontrol.com%2f/RK=2/RS=UfOd81A
B6wlU8OQeFaMCoHbVQGE-
2. I M PNADY, 2009, Financial Management, Published by Vikas publications
9th edition.
3. https://r.search.yahoo.com/_ylt=Awrx_qwxfy5kkiwNMbq7HAx.;_ylu=Y29s
bwNzZzMEcG9zAzEEdnRpZAMEc2VjA3Ny/RV=2/RE=1680797618/RO
=10/RU=https%3a%2f%2fwww.tatamotors.com%2f/RK=2/RS=d7CgdCJ_e
W0QAiA0g.cB8HwwXYo-

39