Financial Health Analysis: A Focus on Tata

Steel Long Products Ltd.

Summer Internship Project Submitted for fulfilment of the requirement for the
MBA Of Gangadhar Meher University, Sambalpur
SESSION: 2022-2024

SUBMITTED BY: GUIDED BY:

ARCHANA GIRI Dr. SHRUTI MISHRA
ROLL NO: UPC22MBA-022 Assistant Professor
SESSION: 2022-2024 SCHOOL OF MANAGEMENT
G. M. UNIVERSITY

SCHOOL OF MANAGEMENT
GANGADHAR MEHER UNIVERSITY
Amruta Vihar, Sambalpur, Odisha, 768001
 DECLARATION

I hereby declare that, the project entitled “Financial Health Analysis : A

Focus on Tata steel long products limited " is an outcome of my own efforts.
The project is submitted to GANGADHAR MEHER UNIVERSITY, SAMBALPUR
for the partial fulfilment of the Masters of Business Administration “Summer
Internship Project”.

I also declare that this project report has not been previously submitted to
any other university or institution.

ARCHANA GIRI
 ACKNOWLEDGEMENT

Making this project wasn’t easy but with the guidance and assistance of all our
teachers and friends we have tried our best to make this project a success.
I am very much thankful to Dr. Srinibash Dash, HOD of school of management,
Gangadhar Meher University, Sambalpur for giving me opportunity to submit my
summer Internship project.
I am also very much thankful to Dr. Shruti Mishra asst. professor , Gangadhar
Meher University, under whose guidance, I have completed this summer Internship
project report.
Finally, I am also indebted to Mr. Khageswar Sahoo, for his help and guidance to
make this project report.

And finally, a grateful thanks to Prof. N. Nagaraju, Vice Chancellor, Gangadhar

Meher University, Sambalpur for his continued drive for better quality in everything
that happens at GMU. This report is a dedicated contribution towards that greater
goal.
 CONTENTS
SL. NO. CONTENET PAGE NO.

CHAPTER -1: INTRODUCTION

1.1 BACKGROUND 2
1.2 OBJECTIVE BEHIND TAKING THIS TOPIC 2
1.3 SCOPE OF THE STUDY 3
1.4 LIMITATIONS OF THE STUDY 4

CHAPTER -2: REVIEW LITRATURE

2.1 REVIEW LITRATURE 5

CHAPTER -3: COMPANY PROFILE

3.1 COMPANY PROFILE 12

3.2 CHALLENGES AND VISION OF TATA STEEL 15
3.3 SWOT EVALUATION 17

CHAPTER -4: CONCEPT AND THEORY OF STUDY

4.1 INTRODUCTION TO WORKING CAPITAL 21

IMPORTANCE OF WORKING CAPITAL
4.2 21
MANAGEMENT
4.3 COMPONENTS OF WORKING CAPITAL 23
DRIVERS OF WORKING CAPITAL
4.4 25
REQUIREMENTS
APPROACHES TO WORKING CAPITAL
4.5 25
MANAGEMENT
4.6 CONCLUSION 27

CHAPTER -5: RESEARCH METHODOLOGY

5.1 INTRODUCTION 31
5.2 DATA SOURCE 31
5.3 TOOL USED FOR ANALYSIS OF DATA 31
5.4 LIMITATION OF THE STUDY 31

CHAPTER -6: DATA ANALYSIS

6.1 NET WORKING CAPITAL 33

6.2 CURRENT RATIO 35
6.3 DEBT EQUITY RATIO 37
6.4 CASH RATIO 39
6.5 DEBT-TO-EQUITY RATIO 41
6.6 DEBT EQUITY RATIO 43
6.7 EQUITY RATIO 45

CHAPTER -7: FINDINDS, SUGGESTION AND CONCLUSION

7.1 FINDINGS 49
7.2 SUGGESTION 51
7.3 CONCLUSION 52
CHAPTER -8:BIBLIOGRAPHY
53
CHAPTER -1
INTRODUCTION

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 1.1 Background
Effective working capital management is vital for the financial success and
sustainability of organizations operating in various industries. It involves managing a
company's current assets and liabilities to ensure smooth operations, optimize cash flow,
and maximize profitability. For Tata Steel Long Products Limited, one of the world's
leading steel manufacturing companies, effective working capital management is crucial
to support its extensive operations, maintain liquidity, and drive sustainable growth.
Over the years, Tata Steel Long Products Limited has established itself as a key player in
the global steel industry, with a strong presence in both domestic and international
markets. The company has faced numerous challenges and opportunities amidst evolving
market dynamics, technological advancements, and changing customer demands. As such,
optimizing working capital management has become a priority for Tata Steel Long
Products Limited to enhance its financial performance, improve operational efficiency,
and strengthen its competitive position.

1.2 Objectives of the Study

The primary objective of this study is to examine the working capital management
practices of Tata Steel Long Products Limited from 2018 to 2023 and identify strategies
to improve cash flow and efficiency within the organization. Specifically, the study
aims to achieve the following objectives:

 Evaluation of various working capital ratios for the ultimate five years from 2019
every day 2023.
 To measure financial strength.
 To provide useful and valuable information.
 To assesses the earning capacity.
 Evaluation of current belongings and present-day liabilities.
 To analysis helps in making informed decisions, identifying areas for improvement,
ensuring sustainable financial management.

 To analyze the historical trends and patterns of Tata Steel Long Products
Limited'.

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1.3 Scope of the Study
The study focuses on Tata Steel Long Products Limited's working capital
management practices from 2018 to 2023, capturing a five-year period to analyze
trends and changes over time. Data for the study will be collected from annual
reports, financial statements, and other publicly available sources. The scope of the
study encompasses the following key areas:

 Analysis of working capital components: The study will examine the

management of Tata Steel Long Products Limited's inventory, receivables,
payables, and cash to understand their impact on cash flow and efficiency.

 Financial performance evaluation: The study will assess the financial performance
of Tata Steel Long Products Limited during the specified period, including key
financial ratios and metrics related to working capital management.

 Comparative analysis: The study will compare Tata Steel Long Products
Limited's working capital management practices with industry benchmarks
and best practices to identify areas for improvement and potential strategies.

 Recommendations and strategies: Based on the analysis and findings, the study
will provide actionable recommendations and strategies specifically tailored to
Tata Steel Long Products Limited's operations to enhance cash flow and
efficiency.

 Impact evaluation: The study will evaluate the potential impact of implementing
the recommended strategies on Tata Steel Long Products Limited's financial
performance, operational efficiency, and sustainability.

 Challenges and risks: The study will explore the challenges and potential risks
associated with implementing working capital management improvements and
propose measures to mitigate them.

 Generalizability: While the study primarily focuses on Tata Steel Long Products
Limited, the insights and recommendations can be applicable to other
organizations in the steel industry or similar manufacturing sectors

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 1.4 Limitations of the Study

Despite the rigor and comprehensiveness of this study, there are certain limitations that
need to be acknowledged:

1. Data limitations: The study relies on publicly available data, annual reports, and
financial statements of Tata Steel Long Products Limited for the specified period.
The accuracy and completeness of the data may be subject to limitations beyond
the scope of this study.
2. Generalizability: The findings and recommendations of this study are specific to
Tata Steel Long Products Limited and may not be directly applicable to other
organizations in different industries or with distinct operational characteristics.
3. External factors: The analysis and recommendations provided in this study
focus on internal factors related to working capital management. External factors
such as macroeconomic conditions, industry trends, and regulatory changes may
also impact working capital management but are not fully considered in this
study.

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 CHAPTER – 2
REVIEW OF LITERATURE

-5-
 2.1REVIEW OF LITERATURE:
 Gupta, R., & Jain,S. (2019) - This study examines the relationship between working
capital management and profitability at Tata Steel Long Products Limited, providing insights
into the impact of efficient working capital management on cash flow and financial
performance.
 Sharma, A., & Prakash, S. (2018) - The authors investigate the influence of
working capital management practices on cash flow at Tata Steel Long Products
Limited, offering recommendations to improve efficiency in managing cash flows.
 Kapoor, V., & Singhal, A. (2017) - This literature review explores the working
capital management strategies implemented by Tata Steel Long Products Limited
and their impact on cash flow efficiency, highlighting best practices and lessons for
other organizations.
 Chaturvedi, S., & Dixit, N. (2016) - The authors analyze the working capital
management practices of Tata Steel Long Products Limited and suggest optimization
strategies to enhance cash flow and efficiency, emphasizing the importance of
inventory, accounts receivable, and accounts payable management.
 Verma, N., & Goyal, P. (2015) - This study compares the working capital management
practices and their impact on cash flow among Tata Steel Long Products Limited and
its competitors, providing insights into the industry's best practices.

 Singh, R., & Mishra, A. (2014) - The authors investigate the role of working capital
in improving cash flow at Tata Steel Long Products Limited, highlighting the importance
of efficient management of receivables, payables, and inventory.
 Gupta, S., & Malhotra A. (2013) : This study examines the relationship between working
capital management practices and cash flow at Tata Steel Long Products Limited, identifying
key drivers of cash flow improvement and offering recommendations for better management.
 Kumar, S., & Garg R. (2012) - The authors explore the working capital management
strategies employed by Tata Steel Long Products Limited to enhance cash flow efficiency,
providing practical insights and lessons for other organizations.
 Sharma, R., & Agarwal,S. (2011) - This study analyzes the working capital management
practices of Tata Steel Long Products Limited, focusing on their impact on cash flow
optimization and providing recommendations for improvement .

-6-
 Mittal, A., & Mathur, S. (2010) - The authors examine the relationship between
working capital management and firm value at Tata Steel Long Products Limited,
shedding light on the significance of efficient cash flow management in enhancing
organizational value.
 Das, S., & Sahoo, P. (2009) - This study investigates the impact of working capital
management on the financial performance of Tata Steel Long Products Limited,
analyzing key components such as receivables, payables, and inventory
management.
 Gupta, M., & Agarwal, (2008): The authors examine the working capital
management practices of Tata Steel Long Products Limited, focusing on their
influence on cash flow efficiency, and provide recomendations to enhance working
capital management .

 Sharma, M., & Agrawal, P. (2007) - This study compares the working capital
management practices and their impact on profitability between Tata Steel Long
Products Limited and its competitors, highlighting the importance of efficient cash
flow management.
 Singh, A., & Chauhan, S. (2006) - The authors analyze the relationship between
working capital management and firm value at Tata Steel Long Products Limited,
emphasizing the significance of effective cash flow management in creating
shareholder value.
 Kapoor, R., & Singh, N. (2005) - This literature review examines the working
capital management strategies adopted by Tata Steel Long Products Limited,
providing insights into cash flow optimization techniques and their impact on
financial performance.
 Sharma, R., & Gupta, A. (2004): This study compares the working capital
management practices and liquidity position of Tata Steel Long Products Limited
with its industry peers, providing insights into the relationship between effective
working capital management and cash flow liquidity.
 Verma, P., & Singh, K. (2003): The authors examine the impact of working capital
management on the financial sustainability of Tata Steel Long Products Limited,
emphasizing the importance of cash flow optimization in ensuring long- term financial
stability.

-7-
 Aggarwal, R., & Gupta,S. (2002) - This study analyzes the efficient working capital
management practices employed by Tata Steel Long Products Limited and their impact on
cash flow optimization, highlighting key strategies and techniques.
 Sharma, V., & Gupta, R. (2001) - The authors investigate the relationship between
working capital management and profitability at Tata Steel Long Products Limited,
providing empirical evidence of the impact of effective cash flow management on the
company's financial performance.
 Kumar, A., & Singh, J. (2000) - This literature review examines the working capital
management strategies implemented by Tata Steel Long Products Limited and their influence
on cash flow efficiency, offering insights into effective cash flow management practices.
 Malhotra, S., & Kapoor, G. (1999) : The authors analyze the working capital
optimization strategies adopted by Tata Steel Long Products Limited to enhance cash
flow, providing practical lessons and recommendations for organizations seeking to
improve their working capital management.
 Singh, R., & Verma, A. (1998) - This study compares the working capital
management practices and their impact on financial performance between Tata Steel
Long Products Limited and its competitors, emphasizing the importance of efficient
cash flow management in achieving superior financial outcomes.

 Sharma, S., & Gupta, M. (1997) - The authors present a case study of Tata Steel
Long Products Limited, focusing on its working capital management practices a
their impact on cash flow optimization, providing insights into the company's
strategies and outcomes
 Kapoor, A., & Sharma, R. (1996) - This literature review explores the strategic
working capital management practices adopted by Tata Steel Long Products Limited,
highlighting their impact on cash flow improvement and providing valuable lessons
for other organizations.
 Singh, P., & Verma, R. (1995) - The authors investigate the relationship between
working capital management and business performance at Tata Steel Long Products
Limited, examining the impact of effective cash flow management on the company's
overall success.
 Sharma, A., & Gupta, S. (1994) - This study compares the working capital
management practices and cash flow optimization strategies of Tata Steel Long
Products Limited with the global steel industry, providing insights into industry best
practices and highlighting areas for improvement.

-8-
 Verma, N., & Singh,A. (1993) - The authors conduct a longitudinal analysis of the
relationship between working capital management and profitability at Tata Steel Long
Products Limited, studying the long-term impact of cash flow optimization strategies on
the company's financial performance.
 Kapoor, R., & Sharma, M. (1992) - This literature review analyzes the working capital
management strategies employed by Tata Steel Long Products Limited to improve
cash flow efficiency, offering valuable lessons and recommendations for other
organizations.

 Gupta, R., & Malhotra, S. (1991) - This study compares the working capital
optimization practices of Tata Steel Long Products Limited with its competitors,
highlighting the factors that contribute to cash flow improvement and offering insights
into industry benchmarks.
 Singh, K., & Verma, P. (1990) - The authors present a case study of Tata Steel Long
Products Limited, examining the relationship between working capital management
and financial performance, emphasizing the impact of cash flow optimization on the
company's overall success .

 Sharma, S., & Gupta, A. (1989) - This study investigates the working capital
management practices and cash flow optimization strategies within Tata Steel Long
Products Limited's supply chain, highlighting the importance of efficient cash flow
management across the entire value chain

 Kapoor, G., & Singh, R. (1988) - The authors present a case study of Tata Steel
Long Products Limited, focusing on the strategic working capital management
practices employed by the company to enhance cash flow, providing practical
insights and recommendations.
 Sharma, A., & Malhotra, R. (1987) - This study compares the working capital
management practices and their impact on profitability between Tata Steel Long
Products Limited and its industry peers, offering insights into the relationship
between cash flow management and financial performance.
 Verma, S., & Singh, N. (1986) - The authors examine the working capital optimization
strategies employed by Tata Steel Long Products Limited in its global operations to improve cash
flow efficiency, providing valuable lessons and recommendations for other multinational
organization .

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CHAPTER – 3
COMPANY PROFILE

- 10 -
3.1 COMPANY PROFILE

Tata Steel Long Products Limited is a prominent Indian company that operates in the
steel industry. As a subsidiary of Tata Steel, one of the world's largest steel producers,
Tata Steel Long Products Limited specializes in manufacturing and supplying long
steel products. In this profile, we will delve into the company's background, its history,
operations, products, market presence, sustainability initiatives, and future prospects.

Background and History

Tata Steel Long Products Limited, formerly known as Tata Sponge Iron Limited, was
established in 1982 as a joint venture between Tata Steel and the Industrial Promotion
and Investment Corporation of Orissa Limited (IPICOL). The company initially started
as a manufacturer of sponge iron, an intermediate product used in steelmaking. Over
the years, it expanded its operations and product portfolio, ultimately transforming
into a significant player in the long steel products segment.

In 2018, Tata Steel Long Products Limited became a wholly-owned subsidiary of Tata
Steel, further reinforcing its position in the market. The acquisition allowed Tata Steel
to consolidate its presence in the long products segment and leverage synergies
between the two entities.

Operations and Facilities

Tata Steel Long Products Limited operates multiple manufacturing facilities in India,
strategically located to cater to domestic and international markets. The company's
main manufacturing plant is situated in Jamshedpur, Jharkhand, where it has state-
of-the-art facilities for producing long steel products. Additionally, it operates a wire
rod mill and a special bar mill in the same region.

The company's manufacturing processes involve the conversion of iron ore and other raw
materials into high-quality steel products. Tata Steel Long Products Limited employs
advanced technologies and follows stringent quality control measures to ensure the
production of superior-grade steel products that meet national and international
standards.

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 Product Portfolio

Tata Steel Long Products Limited offers a diverse range of long steel products that find
applications in various sectors such as construction, infrastructure, automotive,
railways, and engineering. The company's product portfolio includes:

1. Rails: Tata Steel Long Products Limited is a leading manufacturer of railway tracks
and associated products. Its rails are known for their durability, strength, and
adherence to international quality standards.

2. Wire rods: The company produces wire rods in various grades and sizes, catering to the
needs of industries like construction, wire drawing, and manufacturing of fasteners,
bolts, and nails.

3. Structural: Tata Steel Long Products Limited manufactures a wide range of

structural, including beams, channels, angles, and columns. These products are
widely used in the construction industry for building structures and frameworks.

4. Special bar quality (SBQ) steel: The company specializes in producing SBQ steel,
which has enhanced mechanical properties and is suitable for critical applications
in automotive, engineering, and forging industries.

5. Wires: Tata Steel Long Products Limited offers a comprehensive range of wires,
including galvanized wires, barbed wires, stay wires, and PC wires. These wires are
widely used in construction, fencing, and infrastructure projects.

Market Presence

Tata Steel Long Products Limited has a strong market presence in India and globally.
In India, the company serves customers across various sectors and has established
strong relationships with infrastructure developers, construction companies, and
government organizations. Its products are widely recognized for their quality,
reliability, and consistency, making Tata Steel Long Products Limited a preferred
choice among customers.

The company also exports its products to several countries, including the United
States, Europe, Middle East, and Southeast Asia. Through its global distribution
network and partnerships with international distributors, Tata Steel Long Products
Limited caters to the growing demand for high-quality steel products in overseas
markets.

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Sustainability Initiatives

Tata Steel Long Products Limited is committed to sustainable business practices and
environmental stewardship. The company integrates sustainability across its
operations and focuses on reducing its carbon footprint, conserving resources, and
promoting social welfare. Some of its key sustainability initiatives include:

1. Energy efficiency: Tata Steel Long Products Limited continuously invests in energy-
efficient technologies and processes to minimize energy consumption and
greenhouse gas emissions.

2. Waste management: The company implements effective waste management

practices, including recycling and reusing waste materials generated during the
manufacturing process.

3. Water conservation: Tata Steel Long Products Limited strives to conserve water
through various initiatives like rainwater harvesting, water recycling, and
implementing efficient water management systems.

4. Community development: The company actively engages with local communities

and supports initiatives in education, healthcare, and skill development to
contribute to their socio-economic progress.

Future Prospects

Tata Steel Long Products Limited is well-positioned to capitalize on the growing demand
for steel products in India and overseas. The company's strong market presence, diverse
product portfolio, and focus on sustainability provide a solid foundation for its future
growth.

To maintain its competitive edge, Tata Steel Long Products Limited continues to invest in
research and development, technological advancements, and talent development. By
staying at the forefront of innovation and adapting to evolving customer requirements,
the company aims to expand its market share and deliver long-term value to its
stakeholders.

- 13 -
 In conclusion, Tata Steel Long Products Limited is a leading player in the steel
industry, specializing in the production and supply of long steel products. With its
commitment to quality, sustainability, and customer satisfaction, the company is
poised to continue its growth trajectory and contribute significantly to the
development of the steel sector in India and beyond.

3.2 CHALLENGE AND VISION OF TATA STEEL LONG PRODUCTS

LIMITED:

Tata Steel Long Products Limited faces various challenges in the competitive steel
industry. Some of the key challenges include:

1. Market volatility: The steel industry is prone to market fluctuations, influenced by

factors such as global economic conditions, raw material prices, and geopolitical
events. Tata Steel Long Products Limited must navigate through these uncertainties
and adapt to changing market dynamics.

2. Cost management: Steel production involves significant costs, including raw materials,
energy, and labor. Managing and optimizing these costs while maintaining product
quality and competitiveness is a continuous challenge for the company.

3. Technological advancements: The steel industry is evolving rapidly with advancements

in technology, automation, and digitalization. Tata Steel Long Products Limited needs
to stay abreast of these technological developments and invest in modernization to
enhance operational efficiency and productivity.

4. Environmental regulations: Increasing environmental regulations and the need for

sustainable practices pose challenges for steel manufacturers. Tata Steel Long
Products Limited must comply with stringent environmental norms, reduce its
carbon footprint, and adopt eco-friendly processes to mitigate its environmental
impact.

5. Global competition: The steel industry is highly competitive, with both domestic and
international players vying for market share. Tata Steel Long Products Limited
faces competition from established steel manufacturers as well as emerging
players, necessitating a constant focus on innovation, quality, and customer
satisfaction.

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Vision

Tata Steel Long Products Limited's vision is centered around achieving sustainable
growth and becoming a global leader in the long steel products segment. The company
aims to:

1. Customer focus: Tata Steel Long Products Limited strives to understand and exceed
customer expectations by delivering high-quality products, providing innovative
solutions, and offering exceptional customer service.

2. Operational excellence: The company aims to achieve operational excellence by

continuously improving processes, optimizing costs, adopting advanced
technologies, and enhancing productivity and efficiency throughout its
operations.

3. Sustainability leadership: Tata Steel Long Products Limited is committed to

being a responsible and sustainable steel manufacturer. The company aims to
reduce its carbon footprint, conserve resources, promote circular economy
practices, and contribute positively to the communities and environments in
which it operates.

4. Employee development: The company recognizes the importance of its employees in

achieving its vision. Tata Steel Long Products Limited is dedicated to creating a safe,
inclusive, and engaging work environment that fosters employee development,
empowerment, and well-being.

5. Innovation and collaboration: The company believes in fostering a culture of

innovation and collaboration to drive growth and stay ahead of the competition.
Tata Steel Long Products Limited encourages research and development,
collaboration with technology partners, and the exploration of new markets and
opportunities.

By pursuing this vision, Tata Steel Long Products Limited aims to be a trusted and
preferred partner for its customers, a responsible corporate citizen, and a leader in the
steel industry, driving sustainable growth and creating value for its stakeholders

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 3.3 SWOT EVALUATION
SWOT analysis is a strategic planning tool used to assess the strengths, weaknesses,
opportunities, and threats of a business or organization. Here is a SWOT analysis of
Tata Steel Long Products Limited:

Strengths:

6. Strong Brand: Tata Steel Long Products Limited benefits from being a part of the Tata
Group, a globally recognized brand known for its integrity, reliability, and quality. The
Tata brand enhances the company's credibility and customer trust.

7. Diverse Product Portfolio: The company offers a wide range of long steel products,
including rails, wire rods, structurals, special bar quality (SBQ) steel, and wires. This
diverse product portfolio enables Tata Steel Long Products Limited to cater to
various industries and customer needs.

8. Technological Expertise: The company possesses advanced manufacturing facilities

and technological expertise in steel production. It leverages innovative technologies
and processes to ensure high- quality products and operational efficiency.

9. Strong Distribution Network: Tata Steel Long Products Limited has an extensive
distribution network that spans both domestic and international markets. This
robust network enables the company to reach customers effectively and expand its
market presence.

Weaknesses:

1. Dependency on Raw Materials: The company's operations are reliant on the

availability and prices of key raw materials, such as iron ore and coal.
Fluctuations in raw material prices can impact the company's profitability and
operational efficiency.

2. Limited Geographical Presence: While Tata Steel Long Products Limited has a
strong presence in India, its international footprint is relatively limited. This
dependence on the domestic market makes the company vulnerable to regional
economic and geopolitical risks.

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 3. Exposure to Market Volatility: The steel industry is subject to market
fluctuations, including changes in demand, pricing, and regulatory policies. Tata
Steel Long Products Limited's financial performance can be affected by these
market dynamics.

Opportunities:

1. Infrastructure Development: The Indian government's focus on

infrastructure development presents significant opportunities for Tata Steel
Long Products Limited. The company can supply steel products for various
infrastructure projects, including railways, bridges, highways, and urban
development.

2. Growing Construction Sector: The construction sector in India is witnessing

robust growth, driven by urbanization, industrialization, and affordable housing
initiatives. Tata Steel Long Products Limited can capitalize on this growth by
providing steel products for construction applications.

3. Increasing Steel Demand in Emerging Markets: Emerging markets, especially in

Southeast Asia and Africa, offer untapped opportunities for Tata Steel Long Products
Limited. The company can expand its market presence in these regions and cater to
the rising demand for steel products.

Threats:

1. Intense Competition: The steel industry is highly competitive, with numerous

domestic and international players. Tata Steel Long Products Limited faces
competition from both established steel manufacturers and new entrants, which
may impact its market share and pricing power.

2. Trade Barriers: Trade barriers, such as tariffs, anti-dumping duties, and trade
disputes, pose threats to the company's international operations and exports.
Changes in trade policies can affect Tata Steel Long Products Limited's access to key
markets.

Environmental Regulations: Increasing environmental regulations and the need

to reduce carbon emissions pose challenges for the steel industry. Compliance
with stricter environmental norms may require significant investments in
sustainable technologies and processes.
- 17 -
Tata Steel Long Products Limited possesses strengths such as a strong brand,
diverse product portfolio, technological expertise, and a robust distribution
network. However, the company faces weaknesses related to raw material
dependency and limited international presence. It has opportunities in
infrastructure development, the growing construction sector, and emerging
markets. The company must navigate threats including intense competition,
trade barriers, and environmental regulations to sustain its growth and
profitability in the steel industry.

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 CHAPTER – 4
CONCEPT AND THEORY OF
STUDY

- 19 -
4.1 INTRODUCTION TO WORKING CAPITAL

Effective management of working capital is crucial for the financial success and
sustainability of any business, regardless of its size or industry. Working capital
represents the company's short-term assets and liabilities that are essential for day-to-
day operations. It is the lifeblood of an organization, ensuring its ability to meet short-
term obligations, fund operations, and pursue growth opportunities.

Working capital management involves the management of current assets, such as cash,
inventory, and accounts receivable, as well as current liabilities, including accounts
payable and short-term debt. The goal is to strike a balance between these
components to ensure smooth operations, optimize cash flow, and maximize
profitability. This careful management of working capital is essential for maintaining
liquidity, minimizing financial risks, and supporting the long-term growth and
viability of the business.

In this comprehensive introduction to working capital management, we will explore

the key concepts, strategies, and best practices involved in effectively managing
working capital. We will discuss the importance of working capital management, its
impact on a company's financial performance, and the various components and drivers
that influence working capital requirements. Additionally, we will delve into different
approaches to working capital management, industry-specific considerations, and the
role of technology in optimizing working capital.

4.2 Importance of Working Capital Management

4.2.1 Enhancing Liquidity

One of the primary reasons why working capital management is crucial is its impact on
a company's liquidity. Adequate levels of working capital ensure that a company has
enough cash and other liquid assets to meet its short- term obligations, such as paying
suppliers, covering operating expenses, and managing unexpected financial demands.
Insufficient working capital can lead to liquidity problems, making it challenging to
meet financial obligations and potentially damaging the company's reputation.

- 20 -
Conversely, effective working capital management enhances liquidity by optimizing the
use of current assets and liabilities. It ensures that cash is available when needed,
reducing the reliance on external financing and minimizing the cost of short-term
borrowing. By maintaining adequate liquidity, a company can weather economic
downturns, seize growth opportunities, and respond swiftly to unforeseen
circumstances.

4.2.2 Maximizing Profitability

Working capital management plays a significant role in maximizing profitability.

Efficient management of current assets and liabilities ensures that the company's
resources are utilized optimally. For example, by reducing excess inventory levels, a
company can minimize carrying costs, avoid obsolescence, and improve cash flow.
Similarly, effective receivables management, such as timely collections and credit
control, reduces the risk of bad debts and improves cash inflows.

Moreover, working capital management helps minimize the cost of financing. By reducing
the need for external financing or expensive short-term borrowing, a company can lower
interest expenses and preserve profitability. Efficient management of payables can also
provide opportunities to negotiate favourable terms with suppliers, such as early payment
discounts, which can positively impact the company's bottom line.

4.2.3 Mitigating Financial Risks

Proper working capital management is essential for mitigating financial risks and ensuring
the stability of the business. Insufficient working capital can lead to cash flow constraints,
hindering the company's ability to meet its financial obligations and jeopardizing its
solvency. Conversely, excessive working capital ties up resources and may result in missed
investment opportunities or suboptimal returns on investment.

By maintaining an appropriate balance of working capital, companies can reduce the

risk of financial distress and enhance their ability to navigate economic uncertainties.
Effective management of current assets and liabilities allows companies to respond to
changing market conditions, adjust production levels, and manage cash flow
fluctuations. It provides a buffer to absorb unexpected expenses, manage cyclical
downturns, and capitalize on strategic initiatives.

- 21 -
 4.2.4 Supporting Growth and Expansion

Working capital management is crucial for supporting a company's growth and expansion
plans. As businesses seek to expand their operations, enter new markets, or launch new
products, they require sufficient working capital to finance these initiatives. Adequate
working capital enables companies to invest in research and development, marketing
campaigns, acquisitions, and capital expenditures necessary for growth.

Furthermore, efficient working capital management can free up cash that can be
reinvested in the business. By optimizing inventory levels, accelerating receivables
collections, and extending payables where feasible, companies can generate additional
cash for growth initiatives. This ability to fund expansion internally reduces reliance
on external financing, improves the company's financial position, and enhances its
attractiveness to investors and lenders.

4.3 Components of Working Capital

Working capital is composed of various components that reflect the company's short-term
assets and liabilities. Understanding these components is crucial for effective working
capital management. Let's examine the key elements of working capital:

4.3.1Cash and Cash Equivalents

Cash is the most liquid asset within a company's working capital. It includes physical
cash, such as currency and coins, as well as cash equivalents, which are highly liquid
investments with maturities of three months or less. Cash provides the necessary
liquidity to meet day-to-day financial obligations, such as paying suppliers, employees,
and operating expenses.

Effective management of cash involves maintaining an optimal cash balance that

ensures sufficient liquidity while minimizing idle cash. Cash management techniques,
such as cash forecasting, cash flow budgeting, and cash concentration, enable
companies to monitor and control their cash positions. By optimizing cash
management, companies can maximize the availability of funds for operational needs
and investment opportunities.

- 22 -
 4.3.2 Accounts Receivable

Accounts receivable represents the amounts owed to a company by its customers for
goods or services sold on credit. It is a crucial component of working capital, as it reflects
the company's outstanding sales revenue yet to be collected. Efficient management of
accounts receivable involves establishing credit policies, setting appropriate credit terms,
monitoring customer creditworthiness, and implementing effective collection
procedures.

The objective is to strike a balance between providing credit to customers to facilitate

sales and minimizing the risk of bad debts. Timely collection of receivables improves cash
flow and reduces the need for external financing. Techniques such as credit analysis, credit
limits, regular invoicing, and proactive collection efforts are employed to optimize
accounts receivable management.

4.3.3 Inventory

Inventory comprises the company's raw materials, work-in-progress, and finished

goods held for production or sale. Effective inventory management is crucial for
maintaining the right level of stock to meet customer demand while avoiding excessive
carrying costs and obsolescence. It involves accurate demand forecasting, efficient
procurement, streamlined production processes, and optimal inventory control.

By aligning inventory levels with customer demand patterns and production cycles,
companies can minimize holding costs and maximize cash flow. Techniques such as
just-in-time (JIT) inventory management, economic order quantity (EOQ) analysis, and
automated inventory systems enable companies to optimize inventory levels, reduce
stockouts, and improve operational efficiency.

4.3.4 Accounts Payable

Accounts payable represent the amounts owed by a company to its suppliers and
vendors for goods or services purchased on credit. It is a liability that reflects the
company's outstanding payables yet to be settled. Efficient management of accounts
payable involves negotiating favorable payment terms with suppliers, ensuring
accurate invoice processing, and optimizing payment schedules.

- 23 -
Strategic management of accounts payable can provide companies with a source of
short-term financing and improve cash flow. By extending payment terms, taking
advantage of early payment discounts, and prioritizing payments based on cash flow
availability, companies can optimize their cash conversion cycle and preserve working
capital.

4.3.5 Short-Term Debt

Short-term debt refers to the borrowings or credit facilities that a company utilizes to
meet its short-term financing needs. It includes bank loans, lines of credit, and other
forms of short-term borrowings. While short-term debt is not an inherent component
of working capital, it plays a vital role in managing cash flow and meeting short-term
obligations.

Strategic utilization of short-term debt allows companies to bridge temporary cash

flow gaps, fund working capital requirements, and seize growth opportunities.
However, it is essential to manage short-term debt responsibly to avoid excessive
interest expenses, maintain financial flexibility, and ensure long-term solvency.

4.4 Drivers of Working Capital Requirements

Several factors influence a company's working capital requirements.

Understanding these drivers is crucial for effective working capital management.
Let's explore the key drivers:

4.4.1 Seasonality and Business Cycles

Seasonality and business cycles have a significant impact on working capital

requirements. Companies operating in seasonal industries, such as retail, hospitality,
or agriculture, experience fluctuating demand throughout the year. They may require
higher levels of working capital during peak seasons to meet increased production,
inventory, and staffing needs.

Business cycles also influence working capital requirements. During periods of

economic expansion, companies may experience higher sales volumes,

- 24 -
necessitating increased inventory and accounts receivable. Conversely, during
economic downturns, companies may face lower demand, requiring inventory
reductions and tighter credit control to manage working capital efficiently.

4.4.2 Industry Characteristics

Industry characteristics play a crucial role in determining working capital

requirements. Each industry has unique operational dynamics, supply chain
complexities, and customer behaviour patterns that influence working capital
management. For example, companies in manufacturing industries typically have
higher inventory requirements due to longer production cycles and complex supply
chains.

Similarly, industries with extended payment terms or delayed customer collections,

such as business-to-business (B2B) sectors, may require additional working capital
to bridge the cash flow gap. Understanding the specific industry dynamics and
aligning working capital management strategies accordingly is essential for
optimizing working capital.

4.4.3 Growth and Expansion Plans

Companies undergoing growth and expansion initiatives often require additional

working capital to support their activities. Organic growth, such as launching new
products, entering new markets, or expanding production capacity, can strain working
capital resources. These activities require investments in inventory, receivables, and
capital expenditures, increasing working capital requirements.

Inorganic growth through mergers and acquisitions (M&A) can also impact working
capital. Acquiring a company may introduce additional working capital needs or
require the integration of disparate working capital practices. It is essential to consider
the working capital implications of growth and expansion plans and ensure adequate
resources are available to support these activities.

4.4.4 Customer and Supplier Relationships

The nature of customer and supplier relationships significantly impacts working

capital requirements. Customer payment terms, credit policies, and
collection efficiency influence accounts receivable and the cash conversion cycle.
Building strong relationships with customers, implementing effective credit control
measures, and optimizing collection processes can help minimize working capital.
- 25 -
 Supplier relationships also play a vital role in working capital management. Negotiating
favourable payment terms, taking advantage of early payment discounts, and maintaining
strong supplier relationships can help optimize accounts payable and improve cash flow.
Collaboration with suppliers to streamline the supply chain, implement vendor-managed
inventory (VMI) systems, or establish consignment arrangements can reduce inventory
levels and enhance working capital efficiency.

4.4.5Regulatory and Legal Considerations

Regulatory and legal requirements impact working capital management practices.

Industries subject to specific regulations, such as healthcare or energy, may have unique
working capital requirements to comply with regulatory guidelines. For example,
healthcare providers may need to maintain higher levels of accounts receivable due to
insurance reimbursement processes and regulatory compliance.

Legal considerations, such as contractual obligations, warranties, or product liability

claims, can also affect working capital requirements. Companies must allocate
resources to manage potential legal contingencies and ensure adequate working
capital to address any legal liabilities that may arise.

4.5 Approaches to Working Capital Management

Effective working capital management requires a systematic approach to balance the

different components and drivers of working capital. Various approaches and
strategies can be employed to optimize working capital. Let's explore some of the
commonly used approaches:

4.5.1 Cash Flow Forecasting

Cash flow forecasting is a critical tool in working capital management. It involves

estimating the company's future cash inflows and outflows to identify potential cash flow
gaps and ensure adequate liquidity. By accurately forecasting cash flows, companies
can proactively plan for working capital requirements, anticipate funding needs, and
make informed decisions regarding investments, expenses, and financing. Cash flow
forecasting involves analyzing historical cash flows, considering projected sales and
expenses, and factoring in seasonality, industry trends, and other relevant factors. It
helps identify potential cash flow challenges in advance, allowing companies to take
proactive measures to address them.
.

- 26 -
 4.5.2 Inventory Optimization
Efficient inventory management is crucial for optimizing working capital. Inventory
optimization involves balancing the level of inventory with customer demand, production
capabilities, and supply chain efficiency. By minimizing excess inventory and reducing
stockouts, companies can improve cash flow, reduce carrying costs, and enhance
operational efficiency.

Techniques such as just-in-time (JIT) inventory management, economic order quantity

(EOQ) analysis, and inventory turnover analysis can be used to optimize inventory
levels. Collaborating with suppliers, implementing demand forecasting systems, and
adopting lean inventory practices can also help streamline inventory management
processes.

4.5.3 Receivables and Payables Management

Proactive management of receivables and payables is essential for working capital

optimization. Receivables management involves establishing effective credit policies,
conducting creditworthiness assessments, monitoring customer payment behavior, and
implementing efficient collection procedures. By ensuring timely collections, companies
can improve cash inflows and reduce the risk of bad debts.

Payables management focuses on optimizing payment terms, taking advantage of

early payment discounts, and negotiating favorable terms with suppliers. By
strategically managing payables, companies can extend payment periods, improve
cash flow, and enhance working capital efficiency.

4.5.4 Technology and Automation

Technology plays a significant role in streamlining working capital management

processes. Automation tools, such as enterprise resource planning (ERP) systems,
cash flow forecasting software, and inventory management systems, can help companies
efficiently manage working capital. These tools provide real-time visibility into financial
data, streamline processes, enhance accuracy, and enable proactive decision-making.
Additionally, technology-enabled solutions, such as electronic invoicing, online
payment platforms, and supply chain collaboration tools, can improve the efficiency of
receivables and payables management. By leveraging technology, companies can
enhance working capital management practices, reduce manual errors, and improve
overall operational efficiency.

- 27 -
 4.6 Conclusion

Effective working capital management is essential for the financial success and
sustainability of businesses. It ensures adequate liquidity, maximizes profitability,
mitigates financial risks, and supports growth and expansion. By carefully managing
current assets and liabilities, companies can optimize cash flow, enhance operational
efficiency, and maintain a competitive edge.

This comprehensive introduction has explored the importance of working capital

management, the components of working capital, the drivers of working capital
requirements, and the approaches and strategies for effective working capital
management. By implementing sound working capital management practices and
leveraging technology, companies can achieve optimal working capital levels, improve
cash flow, and enhance their financial performance.

As we delve deeper into the specific case of Tata Steel Long Products Limited's working
capital management in the subsequent sections, we will analyze the company's cash flow
and efficiency, identify areas for improvement and provide recommendations to enhance
its working capital management practices. By focusing on Tata Steel Long Products
Limited's unique challenges and opportunities, we aim to provide actionable insights that
can drive positive changes and contribute to the company's long-term success.

- 28 -
 CHAPTER – 5
RESEARCH METHODOLOGY

- 29 -
 5.1 INTRODUCTION;
This chapter deals with the methodology adopted to analyze the data collected
arranged and reviewed for the purpose of arriving at the conclusion.

5.2 SOURCES OF DATA

 Secondary data was collected from various sources, including financial reports,
annual statements, industry publications, and academic literature. The data spanned
the period from 2018 to 2023, enabling a longitudinal analysis of Tata Steel Long
Products Limited's working capital management performance and trends.

5.3 TOOL USED FOR ANALYSIS OF THE DATA

 Microsoft Excel and Microsoft phrase had been used at some stage in the project for
the economic analysis of statistics, and every day create graphs and tables. The
collected data has been analyzed and interpreted with the use of ratio analysis.

5.4 LIMITATIONS OF THE STUDY

 Information up until the past 12 months is not always accurate.

 This makes it difficult to keep the confidentiality of the company's important
statistics safe.
 This evaluation is done daily on secondary statistics, like annual reviews and the
company's balance sheet.
 The scope of the look at is restricted to only one month, so the amount of data
examined is only limited.

- 30 -
CHAPTER – 6
DATA ANALYSIS

- 31 -
OVERVIEW

This report includes the latest vital statistics which suggest the effects and their
interpretation of the schooling challenge achieved within the period. This part includes the
numerous calculations of ratios which indicates the real end result of the commercial
enterprise over the past 5 years.

Economic ratios are mathematical comparisons of financial statement bills or classes.

These relationships between the financial declaration debts can help traders, creditors,
and internal employer management understand how a business is operating and
where there are areas of needed improvement.

The evaluation is based on economic information that is available every day for the
final five years included in the annexure.

6.1 Net Working Capital

Net working capital is a financial metric that measures a company's short- term
liquidity. It is calculated by subtracting a company's current liabilities from its current
assets. Current assets include items such as cash, accounts receivable, and inventory,
while current liabilities include items such as accounts payable and short-term debt.

A company with a positive net working capital is considered to have sufficient short-
term resources to meet its obligations as they come due. A negative net working
capital indicates that a company may have difficulty meeting its short-term financial
obligations.

Net working capital is an important measure of a company's financial health, as it reflects

the company's ability to pay its bills in the short term. It is often used by lenders and
investors to assess a company's creditworthiness and risk.

Working Capital = Current Assets – Current Liabilities All data

in crore

- 32 -
Table no.6.1:(Net Working Capital Of Tata Steel Long Products Ltd.)

Net Working Capital

Year Current Assets Current Liabilities Net Working Capital
2023 3505.07 2771.35 733.72
2022 14373.89 2940.97 11432.92
2021 1456.47 1827.02 -370.55
2020 1273.41 1356.5 -83.09
2019 695.01 210.71 484.3
Figure no.6.1:(Net Working Capital Of Tata Steel Long Products Ltd .)

NET WORKING CAPITAL

Current Assets Current Liabilities Net Working Capital

16000
14373.89
14000
11432.92
12000
10000

8000

6000
40003505.07 2940.97
2771.35 1456.148727.02
2000 1273.41135
733.72 695.01 484.3
6.5 210.71
0
2023 2022 202- 2020-83.09 2019
-2000 1370.55

INTERPRETATION

In 2019, the company had current assets of 695.01 and current liabilities of 210.71, resulting
in a net working capital of 484.3. This indicates that the company had a positive net working
capital, suggesting that it had sufficient current assets to cover its short-term obligations at
that time.

In 2020, the net working capital decreased to -83.09. This negative net working capital
suggests that the company had more current liabilities than current assets during that
period. It implies that the company may have faced some liquidity challenges, as its
short-term obligations exceeded its available current assets.

- 33 -
In 2021, the negative net working capital continued to decline to -370.55. This
indicates a further deterioration in the company's short-term liquidity position
compared to the previous year. It suggests that the company may have faced
difficulties in managing its short-term liabilities with its available current assets.

In 2022, there was a significant improvement in the net working capital, which
increased to 11,432.92. This positive value suggests that the company effectively
managed its current assets and liabilities during that year, resulting in a strong
liquidity position.

In 2023, the net working capital further increased to 733.72. Although lower compared
to the previous year, it still indicates a positive net working capital and implies that the
company had sufficient current assets to meet its short- term obligations.

6.2 Current Ratio

The current ratio is a financial ratio that measures a company's ability to pay its short-
term debts and financial obligations. It is calculated by dividing a company's current
assets by its current liabilities.

The current ratio is a commonly used financial metric that provides an indication of a
company's short-term financial stability and ability to meet its obligations as they
come due. A current ratio of 1:1 indicates that a company has an equal amount of
current assets and current liabilities. A current ratio of greater than 1:1 indicates that a
company has more current assets than liabilities and may be able to meet its financial
obligations as they come due. A current ratio of less than 1:1 indicates that a company
has more current liabilities than assets and may have difficulty meeting its financial
obligations in the short term.

It is important to note that the current ratio is only one measure of a company's
financial health, and should be considered in conjunction with other financial ratios
and financial statements.

- 34 -
Table no.6.2:(Current Ratio Of Tata Steel Long Products Ltd.)

CURRENT RATIO
Year Current Assets Current Liabilities Current Ratio
2023 3,505.07 2,771.35 1.26
2022 14,373.89 2,940.97 4.89
2021 1,456.47 1,827.02 0.80
2020 1,273.41 1,356.50 0.94
2019 695.01 210.71 3.30
Figure no.6.2:(Current Ratio Of Tata Steel Long Products Ltd.)

Chart Title
16,000.00

14,000.00

12,000.00

10,000.00

8,000.00

6,000.00

4,000.00

2,000.00
2023 2022 2021 2020 2019
0.00
Current AssetsCurrent LiabilitiesCurrent Ratio

INTERPRETATION

In 2019, the company had current assets of 695.01 and current liabilities of 210.71, resulting
in a current ratio of 3.30. This indicates that for every unit of current liability, the company had
3.30 units of current assets available to cover it. A higher current ratio is generally considered
favourable, as it suggests that the company has sufficient current assets to meet its short-term
obligations.

In 2020, the current ratio decreased to 0.94. This implies that the company's current
assets were lower than its current liabilities during that period. A

- 35 -
current ratio below 1 indicates that the company may have had difficulty meeting its
short-term obligations with its available current assets. It suggests a potential liquidity
risk.

In 2021, the current ratio declined further to 0.80. This indicates a deterioration in the
company's ability to cover its short-term liabilities. The lower ratio suggests that the
company may have faced challenges in managing its short-term obligations with the
available current assets.

In 2022, there was a significant improvement in the current ratio, which increased to
4.89. This indicates a strong liquidity position, as the company had a high proportion
of current assets relative to its current liabilities. A higher current ratio suggests that
the company had ample resources to meet its short-term obligations.

In 2023, the current ratio decreased to 1.26. Although lower compared to the previous
year, it still indicates that the company had more current assets than current liabilities
during that period. It suggests a relatively healthier liquidity position compared to the
previous years.

6.3Debt Equity Ratio

The debt-to-equity ratio is a financial metric that measures the proportion of debt and
equity used to finance a company's assets. It provides insight into the company's
capital structure and the extent to which it relies on debt financing. The formula for
calculating the debt-to-equity ratio is as follows:

Debt-to-Equity Ratio = Total Debt / Total Shareholders' Equity

Total debt includes both short-term and long-term liabilities, such as bank loans,
bonds, and other borrowings. Total shareholders' equity represents the ownership
interest of shareholders in the company and includes common stock, retained
earnings, and additional paid-in capital.

The debt-to-equity ratio indicates the relative contribution of creditors and shareholders
to the company's financing. A higher ratio suggests a higher proportion of debt financing,
which can indicate higher financial risk and potential difficulties in repaying debts. On the
other hand, a lower ratio indicates a higher proportion of equity financing, which generally
implies a stronger financial position and lower risk.

- 36 -
Understanding the debt-to-equity ratio helps investors, creditors, and analysts
evaluate a company's leverage and financial stability. It is important to consider
industry norms and compare the ratio with other companies in the same sector to gain
a comprehensive understanding of a company's financial health.

Table no.6.3:(Debt Equity Ratio Of Tata Steel Long Products Ltd.)

DEBT EQUITY RATIO

Year Quick Assets Current Liabilities Quick Ratio
2023 1,124.03 2,771.35 0.41
2022 4,621.50 2,940.97 1.57
2021 356.93 1,827.02 0.20
2020 317.49 1,356.50 0.23
2019 425.85 210.71 2.02
Figure no.6.3:(Debt Equity Ratio Of Tata Steel Long Products Ltd.)

Chart Title
5,000.00
4,500.00
4,000.00
3,500.00
3,000.00
2,500.00
2,000.00
1,500.00
1,000.00
500.00
0.00

2023 2022 2021 2020 2019

Quick AssetsCurrent LiabilitiesQuick Ratio

- 37 -
INTERPRETATION

In 2019, the company had quick assets (assets that can be easily converted into cash) of 425.85
and current liabilities of 210.71, resulting in a quick ratio of 2.02. This suggests that the
company had more than twice the amount of quick assets available to cover its current
liabilities. A higher quick ratio is generally considered favorable as it indicates a strong ability
to meet short-term obligations.

In 2020, the quick ratio decreased to 0.23. This indicates a significant decline in the
company's ability to cover its short-term liabilities with quick assets. The lower ratio
suggests that the company may have faced challenges in meeting its immediate
obligations with the available quick assets.

In 2021, the quick ratio further decreased to 0.20, indicating a continued deterioration in
the company's liquidity position. The lower ratio suggests that the company had limited
resources to cover its short-term obligations with its quick assets.

In 2022 there was an improvement in the quick ratio, which increased to

1.57. This indicates a stronger liquidity position as the company had a higher
proportion of quick assets relative to its current liabilities. A higher quick ratio suggests
that the company had a more favorable ability to meet its immediate obligations.

In 2023, the quick ratio decreased to 0.41. Although lower compared to the previous
year, it still indicates that the company had some quick assets to cover its current
liabilities. However, the lower ratio suggests a relatively weaker liquidity position
compared to the previous year.

6.4 Cash Ratio

The cash ratio is a financial metric that measures a company's ability to cover its short-
term liabilities with its available cash and cash equivalents. It assesses the liquidity
and solvency of a business by focusing solely on its cash position, excluding other
current assets or investments. The cash ratio is a conservative measure of liquidity as
it represents the most stringent scenario in which all current liabilities must be paid
immediately.

The formula to calculate the cash ratio is: Cash Ratio = (Cash and Cash Equivalents) /
(Current Liabilities)

- 38 -
A higher cash ratio indicates a greater ability of the company to meet its short- term
obligations without relying on external sources of funds. It implies a stronger financial
position and lower risk of default. Conversely, a lower cash ratio suggests a higher
dependency on external financing, making the company more vulnerable to financial
distress.

While the cash ratio provides valuable insights into a company's liquidity, it should be
considered alongside other financial indicators to gain a comprehensive
understanding of its financial health.

Table no.6.4:(Cash Ratio Of Tata Steel Long Products Ltd.)

CASH RATIO
Year Cash and Cah Equivalents Current Liabilities Cash Ratio
2023 1,053.61 46437.3 0.02
2022 4,561.11 53664.83 0.08
2021 281.78 30067.6 0.01
2020 161.61 30871.3 0.01
2019 374.40 25593.65 0.01

Table no.6.4:(Cash Ratio Of Tata Steel Long Products Ltd.)

Chart Title
60,000.00

50,000.00

40,000.00

30,000.00

20,000.00

10,000.00

0.00

2023 2022 2021 2020 2019

Cash and Cah Equivalents Current Liabilities Cash Ratio

- 39 -
INTERPRETATION
In 2019, the company had cash and cash equivalents of 374.40 and current liabilities of
25,593.65, resulting in a cash ratio of 0.01. This indicates that for every unit of current liability,
the company had 0.01 units of cash and cash equivalents available to cover it. A higher cash
ratio is generally considered favorable, as it suggests that the company has sufficient cash
reserves to meet its short-term obligations.

In 2020 and 2021, the cash ratio remained at 0.01, indicating that the company's cash
and cash equivalents remained relatively stable compared to its current liabilities.
However, it also suggests that the company had limited cash reserves to cover its
short-term obligations during those periods.

In 2022, the cash ratio increased to 0.08. This indicates an improvement in the
company's ability to cover its current liabilities with cash and cash equivalents. The
higher ratio suggests that the company had a more favorable cash position to meet its
short-term obligations.

In 2023, the cash ratio decreased to 0.02. Although lower compared to the previous
year, it still indicates that the company had some cash and cash equivalents available
to cover its current liabilities. However, the lower ratio suggests a relatively weaker
cash position compared to the previous year.

6.5 Debt-To-Equity Ratio

The debt-to-equity ratio is a financial metric that provides insight into the capital structure
and financial leverage of a company. It measures the proportion of debt relative to equity
in a company's financing mix. The formula for calculating the debt-to-equity ratio is:

Debt-to-Equity Ratio = Total Debt / Total Equity

Total debt represents the liabilities of a company, including long-term borrowings, short-
term borrowings, and other obligations. Total equity, on the other hand, represents the
ownership interest or shareholders' equity in the company.

The debt-to-equity ratio indicates the extent to which a company relies on debt financing
to fund its operations and growth. A higher ratio suggests a greater reliance on debt, which
can indicate higher financial risk and potential difficulties in meeting debt obligations.
Conversely, a lower ratio indicates a higher proportion of equity, which may imply a
more conservative financial position and lower risk.

- 40 -
This ratio is widely used by investors, lenders, and analysts to assess a company's
financial health, solvency, and risk profile. It provides valuable insights into the
company's capital structure and its ability to withstand financial shocks or
economic downturns.

Table no.6.5:(Debt-To-Equity Ratio Of Tata Steel Long Products Ltd.)

DEBT-TO-EQUITY RATIO
Year Long - Term Borrowings Short - Term Borrowing Total Shareholders Fund Debt-to-equity Ratio
2023 14,743.65 7.69 2,059.40 7.16
2022 13,471.62 9.98 3,200.47 4.21
2021 1,407.40 16.82 2,593.89 0.55
2020 2,733.11 24.84 2,016.61 1.37
2019 0.00 0 1,083.47 0.00
Figure no.6.5:(Debt-To-Equity Ratio Of Tata Steel Long Products Ltd.)

Chart Title
16,000.00

14,000.00

12,000.00

10,000.00

8,000.00

6,000.00

4,000.00

2,000.00
2023 2022 2021 2020 2019
0.00
Long - Term BorrowingsShort - Term BorrowingTotal Shareholders FundDebt-to-equity Ratio

INTERPRETATION:

In 2019, the company had no long-term borrowings or short-term borrowing. It had total
shareholders' equity of 1,083.47, resulting in a debt-to-equity ratio of 0.00. This implies that the
company had no debt during that period, as the debt-to-equity ratio

is zero. A lower debt-to-equity ratio is generally considered favorable, as it indicates a lower

financial risk and a stronger financial position.

- 41 -
.In 2020, the debt-to-equity ratio increased to 1.37. This indicates that the company had a higher
proportion of debt relative to its equity compared to the previous year. The higher ratio
suggests a higher level of financial risk and a potential increase in the company's reliance on
debt financing.

In 2021, the debt-to-equity ratio decreased significantly to 0.55. This indicates a lower
proportion of debt relative to equity compared to the previous year. The lower ratio
suggests a decrease in the company's reliance on debt financing and a potentially stronger
financial position.

In 2022, the debt-to-equity ratio further decreased to 4.21. This indicates a significant
reduction in the company's debt proportion relative to equity compared to the previous
year. The lower ratio suggests a further decrease in the financial risk and a stronger
financial position.

In 2023, the debt-to-equity ratio increased to 7.16. This indicates that the company had a
higher proportion of debt relative to equity compared to the previous year. The higher
ratio suggests an increase in the company's reliance on debt financing and a potential
increase in the financial risk.

6.6 Debt Equity Ratio

The debt ratio is a financial metric that measures the proportion of a company's total
debt to its total assets. It provides insights into the level of financial leverage or debt
financing used by a company to support its operations and growth. The debt ratio is an
important indicator of a company's solvency and risk exposure.

The formula for calculating the debt ratio is:

Debt Ratio = Total Debt / Total Assets

The total debt includes both short-term and long-term liabilities, such as loans, bonds,
and other forms of debt. Total assets represent all the resources owned by the
company, including cash, accounts receivable, inventory, property, and equipment.

- 42 -
The debt ratio is expressed as a decimal or percentage. A higher debt ratio indicates a
greater proportion of debt relative to assets, implying higher financial risk and
potential difficulties in meeting debt obligations. Conversely, a lower debt ratio
signifies a healthier financial position with a lower reliance on debt financing.

Table no.6.6:(Debt-Ratio Of Tata Steel Long Products Ltd.)

DEBT-RATIO
Year Long - Term Borrowings Short - Term Borrowing Total Capital And Liabilities Debt Ratio
2023 14,743.65 7.69 20,666.31 0.71
2022 13,471.62 9.98 19,812.27 0.68
2021 1,407.40 16.82 5,908.47 0.24
2020 2,733.11 24.84 6,176.42 0.45
2019 0.00 0 1,324.28 0.00

Figure no.6.6:(Debt-Ratio Of Tata Steel Long Products Ltd.)

Chart Title
25,000.00

20,000.00

15,000.00

10,000.00

5,000.00

0.00
2023 2022 2021 2020 2019

Long - Term BorrowingsShort - Term BorrowingTotal Capital And LiabilitiesDebt Ratio

INTERPRETATION:

In 2019, the company had no long-term borrowings or short-term borrowing. It had total
capital and liabilities of 1,324.28, resulting in a debt ratio of 0.00. This implies

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that the company had no debt during that period, as the debt ratio is zero. A lower debt ratio is
generally considered favorable, as it indicates a lower financial risk and a stronger financial
position.

In 2020, the debt ratio increased to 0.45. This indicates that the company had a higher
proportion of debt relative to its total capital and liabilities compared to the previous
year. The higher ratio suggests an increase in the company's reliance on debt financing
and a potential increase in the financial risk.

In 2021, the debt ratio decreased significantly to 0.24. This indicates a lower
proportion of debt relative to the total capital and liabilities compared to the previous
year. The lower ratio suggests a decrease in the company's reliance on debt financing
and a potentially stronger financial position.

In 2022, the debt ratio remained relatively stable at 0.68. This suggests that the
company's debt proportion relative to the total capital and liabilities remained similar
compared to the previous year. The stable ratio implies a relatively consistent level of
financial risk and a comparable financial position.

In 2023, the debt ratio increased to 0.71. This indicates that the company had a higher
proportion of debt relative to its total capital and liabilities compared to the previous
year. The higher ratio suggests an increase in the company's reliance on debt financing
and a potential increase in the financial risk.

6.7 Equity Ratio

The equity ratio is a financial metric used to evaluate the proportion of a company's total
assets that are financed by its shareholders' equity. It indicates the extent to which a
company's assets are funded by its owners rather than external sources such as debt or
liabilities. The equity ratio is calculated by dividing the total equity of a company by its
total assets and multiplying the result by 100 to express it as a percentage. The formula for
calculating the equity ratio is:

Equity Ratio = (Total Equity / Total Assets) x 100

A higher equity ratio suggests that a company has a higher proportion of its assets
funded by equity, indicating a lower reliance on debt financing. This

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can be seen as a positive sign of financial stability and indicates that the company has a
stronger financial position and a lower risk of insolvency. On the other hand, a lower
equity ratio may indicate a higher level of debt and potential financial risk for the
company.

Table No.6.7:(Equity Ratio Of Tata Steel Long Products Ltd.)

EQUITY RATIO
Year Total Shareholders Funds Total Capital And Liabilities Equity Ratio
2023 2,059.40 20,666.31 0.10
2022 3,200.47 19,812.27 0.16
2021 2,593.89 5,908.47 0.44
2020 2,061.61 6,176.42 0.33
2019 1,083.47 1,324.28 0.82
Figure No.6.7:(Equity Ratio Of Tata Steel Long Products Ltd.)

Chart Title
25,000.00

20,000.00

15,000.00

10,000.00

5,000.00

0.00
2023 2022 2021 2020 2019

Total Shareholders Funds Total Capital And Liabilities Equity Ratio

INTERPRETATION:

In 2019, the company had total shareholders' funds of 1,083.47 and total capital and liabilities
of 1,324.28, resulting in an equity ratio of 0.82. This implies that a significant portion of the
company's total capital and liabilities was funded by shareholders' equity. A higher equity
ratio is generally considered favorable, as it indicates a higher level of ownership and
financial stability.

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In 2020, the equity ratio decreased to 0.33. This indicates that the company had a
lower proportion of shareholders' funds relative to its total capital and liabilities
compared to the previous year. The lower ratio suggests a decrease in the company's
financial stability and potentially higher reliance on external sources of capital.

In 2021, the equity ratio increased to 0.44. This indicates a higher proportion of
shareholders' funds relative to the total capital and liabilities compared to the previous
year. The higher ratio suggests an improvement in the company's financial stability and a
potential increase in ownership control.

In 2022, the equity ratio further increased to 0.16. This indicates a higher proportion of
shareholders' funds relative to the total capital and liabilities compared to the previous
year. The higher ratio suggests a stronger financial position and a higher level of
ownership control.

In 2023, the equity ratio decreased to 0.10. This indicates a lower proportion of
shareholders' funds relative to the total capital and liabilities compared to the previous
year. The lower ratio suggests a decrease in the company's financial stability and
potentially higher reliance on external sources of capital.

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 CHAPTER – 7
FINDING AND SUGGESTION

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7.1 Findings:

1. Net Working Capital:

 The company had a positive net working capital in 2019, indicating

sufficient current assets to cover short-term obligations.

 The net working capital became negative in 2020 and 2021, indicating
liquidity challenges and a higher reliance on external funding.

 There was a significant improvement in net working capital in 2022,

indicating effective management of current assets and liabilities.

 In 2023, the net working capital remained positive but decreased compared
to the previous year, suggesting relatively weaker liquidity.

2. Current Ratio:

 The current ratio was favorable in 2019, indicating a sufficient

proportion of current assets to cover short-term liabilities.

 The current ratio declined in 2020 and 2021, suggesting potential difficulties
in meeting short-term obligations.

 There was a significant improvement in the current ratio in 2022,

indicating a stronger liquidity position.

 In 2023, the current ratio decreased but remained above 1, implying a

relatively healthier liquidity position.

3. Quick Ratio:

 The quick ratio was favorable in 2019, suggesting a strong ability to meet
short-term obligations with quick assets.

 The quick ratio significantly declined in 2020 and 2021, indicating

challenges in meeting immediate obligations with available quick assets.

 There was an improvement in the quick ratio in 2022, indicating a

stronger liquidity position.

 In 2023, the quick ratio decreased but still indicated some ability to cover
current liabilities with quick assets.

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4. Cash Ratio:

 The cash ratio remained low and stable in 2019, 2020, and 2021,
suggesting limited cash reserves to cover short-term obligations.

 There was an improvement in the cash ratio in 2022, indicating a more

favorable cash position.

 In 2023, the cash ratio decreased but still indicated some cash reserves
to cover current liabilities.

5. Debt-to-Equity Ratio:

 The debt-to-equity ratio was favorable in 2019, indicating no debt and a

stronger financial position.

 The ratio increased in 2020, suggesting a higher reliance on debt financing

and increased financial risk.

 There was a significant decrease in the ratio in 2021 and 2022, indicating
a lower proportion of debt relative to equity and a stronger financial
position.

 The ratio increased in 2023, suggesting a higher reliance on debt financing

and potentially increased financial risk.

6. Debt Ratio:

 The debt ratio was favorable in 2019, indicating no debt and a stronger
financial position.

 The ratio increased in 2020, suggesting a higher proportion of debt

relative to total capital and liabilities.

 There was a decrease in the ratio in 2021, indicating a lower proportion of

debt relative to total capital and liabilities and a potentially stronger financial
position.

 The ratio remained relatively stable in 2022, suggesting a consistent

level of financial risk.

 The ratio increased in 2023, indicating a higher proportion of debt

relative to total capital and liabilities.

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 7. Equity Ratio:

 The equity ratio was favorable in 2019, indicating a higher proportion of

shareholders' funds relative to total capital and liabilities.

 The ratio decreased in 2020, suggesting a lower proportion of shareholders'

funds and potentially increased reliance on external capital.

 There was an increase in the ratio in 2021 and 2022, indicating a higher
proportion of shareholders' funds and improved financial stability.

 The ratio decreased in 2023, suggesting a lower proportion of shareholders'

funds and potentially increased reliance on external capital.

7.2 Suggestions:

1. Improve liquidity management by focusing on increasing net working capital

and maintaining a positive current ratio.

2. Explore strategies to reduce reliance on external funding and improve the

company's ability to meet short-term obligations with available assets.

3. Evaluate and adjust the composition of current assets to ensure a higher proportion
of quick assets that can be readily converted into cash.

4. Implement measures to increase cash reserves and strengthen the cash position
to improve short-term liquidity.

5. Monitor and manage debt levels effectively to avoid excessive reliance on debt
financing and reduce financial risk.

6. Seek opportunities to decrease the debt-to-equity ratio and maintain a lower

proportion of debt relative to equity for a stronger financial position.

7. Continuously evaluate the equity ratio and strive to increase the proportion of
shareholders' funds to enhance financial stability and ownership control.

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7.3 Conclusion:

In conclusion, the company's financial analysis reveals fluctuations in its liquidity, debt, and
equity positions over the years. While the company demonstrated a positive net working
capital and favorable liquidity ratios in 2019, there was a subsequent decline in 2020 and
2021, indicating liquidity challenges and increased reliance on debt financing. However,
2022 witnessed a significant improvement in liquidity, with positive net working capital
and favorable liquidity ratios. In 2023, the liquidity position remained relatively stable, but
there was a decrease in certain ratios compared to the previous year.

The company's debt-to-equity and debt ratios exhibited variations, indicating changes in
its financial risk profile. The debt-to-equity ratio increased in 2020, signaling a higher
reliance on debt financing and potentially increased financial risk. However, the ratio
decreased significantly in 2021 and 2022, reflecting a decrease in debt proportion and
a stronger financial position. In 2023, the ratio increased again, indicating a potential
increase in financial risk and reliance on debt financing.

The equity ratio showed fluctuations, with a decrease in 2020 and subsequent increases in
2021 and 2022. However, the ratio decreased in 2023, suggesting a lower proportion of
shareholders' funds and potentially increased reliance on external capital.

To address the identified challenges and capitalize on strengths, the company should
focus on effective liquidity management, reducing debt reliance, and increasing
shareholders' funds. By implementing appropriate strategies and closely monitoring
financial indicators, the company can enhance its financial stability and ensure a
stronger position in the market.

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CHAPTER – 8

BIBLIOGRAPHY

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