INTRODUCTION

Working capital means the part of the total assets of the business that change from one
form to another form in ordinary course of business operations.

Concept of Working Capital:The word working capital is made of two words

1. Working
2. Capital

The word working means day to day operation of the business, whereas the word capital
means monetary value of all assets of the business.

Working Capital: Working capital may be regarded as the life blood of business. Working capital is of
major importance to internal and external analysis because of its close relationship with
the current day today operations of a business. Every business needs funds for two
purposes.
* Long term funds are required to create production facilities through purchase of fixed
assets such as plants, machineries, lands, buildings & etc.
* Short term funds are required for the purchase of raw materials, payment of wages,
and other day-to-day expenses. It is otherwise known as revolving or circulating
capital It is nothing but the difference between current assets and current liabilities. i.e.

Working Capital = Current assets Current Liabilities

Businesses use capital for construction, renovation, furniture, software, equipment, or

machinery. It is also commonly used to purchase inventory, or to make payroll. Capital is
also used often by businesses to put a down payment down on a piece of commercial real
estate. Working capital is essential for any business to succeed. It is becoming
increasingly important to have access to more working capital when we need it.

Concept of Working Capital

Gross Working Capital = Total of Current Asset

Net Working Capital = Excess of Current Asset over Current

Working Capital In Terms Of Five Components:

1. Cash And Equivalents: - This most liquid form of working capital requires
constant supervision. A good cash budgeting and forecasting system provides
answers to key questions such as: Is the cash level adequate to meet current
expenses as they come due? What is the timing relationship between cash inflow
and outflow? When will peak cash needs occur? When and how much bank
borrowing will be needed to meet any cash shortfalls? When will repayment be
expected and will the cash flow cover it?

2. Accounts Receivable: Many businesses extend credit to their customers. If you do, is the amount of accounts
receivable reasonable relative to sales? How rapidly are receivables being
collected? Which customers are slow to pay and what should be done about
them?

3. Inventory: Inventory is often as much as 50 percent of a firm's current assets, so naturally it

requires continual scrutiny. Is the inventory level reasonable compared with sales
and the nature of your business? What's the rate of inventory turnover compared
with other companies in your type of business?

4. Accounts Payable:Financing by suppliers is common in small business; it is one of the major sources
of funds for entrepreneurs. Is the amount of money owed suppliers reasonable
relative to what you purchase? What is your firm's payment policy doing to
enhance or detract from your credit ratings?

5. Accrued Expenses And Taxes Payable: These are obligations of your company at any given time and represent a future
outflow of cash.

OPERATINGCYCLE

RAW
MATERI
A
CASH

WORK
IN
PROGRE
SS

DEBTOR
S AND
RECEVI
ABLE

FINISH
GOODS

SALES

The need of working capital arrived because of time gap between production of goods
and their actual realization after sale. This time gap is called Operating Cycle or
Working Capital Cycle. The operating cycle of a company consist of time period
between procurement of inventory and the collection of cash from receivables. The
operatingcycle is the length of time between the companys outlay on raw materials,
wages and other expanses and inflow of cash from sales of goods. Operating cycle is an
important concept in management of cash and management of cash working capital. The
operating cycle reveals the time that elapses between outlays of cash and inflow of cash.
Quicker the operating cycle less amount of investment in working capital is needed and it
4

improves profitability. The duration of the operating cycle depends on nature of industries
and efficiency in working capital management.

SIGNIFICANCE OF WORKING CAPITAL:Factors requiring consideration while estimating working capital.

EASY
LOAN
FORM
BANK

PAYMENT
TO
SUPPLIER
DIVIDEND
DISTRUBTI
ON

SIGNIFICAN
CE OF
WORKING
CAPITAL
INCREASE
DEBT
CAPACITY

INCREASE
EFFECIENCY

INCREASE
IN FIXED
ASSETS

Factors Requiring Consideration While Estimating Working Capital.

The average credit period expected to be allowed by suppliers.

Total costs incurred on material, wages.

The length of time for which raw material are to remain in stores before they are
issued for .

The length of the production cycle (or) work in process.

The length of sales cycle during which finished goods are to be kept waiting for
sales.

The average period of credit allowed to customers

The amount of cash required to make advance payment

Determinants of Working Capital

The amount of working capital is depends upon following factors:-

1. Nature Of Business
Some businesses are such, due to their very nature, that their requirement of fixed capital
is more rather than working capital. These businesses sell services and not the
commodities and that too on cash basis. As such, no founds are blocked in piling
inventories and also no funds are blocked in receivables. E.g. public utility services like
railways, infrastructure oriented project etc. there requirement of working capital is less.
On the other hand, there are some businesses like trading activity, where requirement of
fixed capital is less but more money is blocked in inventories and debtors.

2. Length Of Production Cycle

In some business like machine tools industry, the time gap between the Acquisition of
raw material till the end of final production of finished products itself is quite high. As
such amount may be blocked either in raw material or work in progress or finished goods
or even in debtors. Naturally there need of working capital is high.

3. Size And Growth Of Business

In very small company the working capital requirement is quit high due to high overhead,
higher buying and selling cost etc. as such medium size business positively has edge over
the small companies. But if the business start growing after certain limit, the working
capital requirements may adversely affect by the increasing size.

4. Business/ Trade Cycle

If the company is the operating in the time of boom, the working capital requirement may
be more as the company may like to buy more raw material, may increase the production
and sales to take the benefit of favorable market, due to increase in the sales, there may
more and more amount of funds blocked in stock and debtors etc. similarly in the case of
8

depressions also, working capital may be high as the sales terms of value and quantity
may be reducing, there may be unnecessary piling up of stack without getting sold, the
receivable may not be recovered in time etc.

5. Terms Of Purchase And Sales

Some time due to competition or custom, it may be necessary for the company to extend
more and more credit to customers, as result which more and more amount is locked up
in debtors or bills receivables which increase the working capital requirement. On the
other hand, in the case of purchase, if the credit is offered by suppliers of goods and
services, a part of working capital requirement may be financed by them, but it is
necessary to purchase on cash basis, the working capital requirement will be higher.

6. Profitability
The profitability of the business may be vary in each and every individual case, which is
in turn its depend on numerous factors, but high profitability will positively reduce the
strain on working capital requirement of the company, because the profits to the extend
that they earned in cash may be used to meet the working capital requirement of the
company.

7. Operating Efficiency
If the business is carried on more efficiently, it can operate in profits which may reduce
the strain on working capital; it may ensure proper utilization of existing resources by
eliminating the waste and improved coordination etc.

NEED OF WORKING CAPITAL MANAGEMENT

The need for working capital gross or current assets cannot be over emphasized. As
already observed, the objective of financial decision making is to maximize the
shareholders wealth. To achieve this, it is necessary to generate sufficient profits can be
earned will naturally depend upon the magnitude of the sales among other things but
sales cannot convert into cash. There is a need for working capital in the form of current
assets to deal with the problem arising out of lack of immediate realization of cash
against goods sold. Therefore sufficient working capital is necessary to sustain sales
activity. Technically this is refers to operating or cash cycle. If the company has certain
amount of cash, it will be required for purchasing the raw material may be available on
credit basis. Then the company has to spend some amount for labour and factory
overhead to convert the raw material in work in progress, and ultimately finished goods.
These finished goods convert in to sales on credit basis in the form of sundry debtors.
Sundry debtors are converting into cash after expiry of credit period. Thus some amount
of cash is blocked in raw materials, WIP, finished goods, and sundry debtors and day to
day cash requirements. However some part of current assets may be financed by the
current liabilities also. The amount required to be invested in this current assets is always
higher than the funds available from current liabilities. This is the precise reason why the
needs for working capital arise

GROSS WORKING CAPITAL AND NET WORKING CAPITAL

There are two concepts of working capital management

1. Gross Working Capital

Gross working capital refers to the firms investment I current assets. Current assets are
the assets which can be convert in to cash
within year includes cash, short term securities, debtors, bills receivable and inventory

10

2. Net Working Capital

Net working capital refers to the difference between current assets and current liabilities.
Current liabilities are those claims of outsiders which are expected to mature for payment
within an accounting year and include creditors, bills payable and outstanding expenses.
Net working capital can be positive or negative Efficient working capital management
requires that firms should operate with some amount of net working capital, the exact
amount varying from firm to firm and depending, among other things; on the nature of
industries.net working capital is necessary because the cash outflows and inflows do not
coincide. The cash outflows resulting from payment of current liabilities are relatively
predictable. The cash inflow are however difficult to predict. The more predictable the
cash inflows are, the less net working capital will be required. The concept of working
capital was, first evolved by Karl Marx. Marx used the term variable capital means
outlays for payrolls advanced to workers before the completion of work. He compared
this with constant capital which according to him is nothing but dead labour. This
variable capital is nothing wage fund which remains blocked in terms of financial
management, in working-process along with other operating expenses until it is released
through sale of finished goods. Although Marx did not mentioned that workers also gave
credit to the firm by accepting periodical payment of wages which funded a portioned of
W.I.P, the concept of working capital, as we understand today was embedded in his
variable capital

11

12

COMPANY
PROFILE

13

COMPANYPROFILE

TATA STEELPVT.LTD.
TYPE

PRIVATE

INDUSTRY

STEEL

TRADED AS

NSE: TATA STEEL

BSE: 500470
BSE SENSEX CONSTITUENT
CNX NIFTY CONSTITUENT

FOUNDED

August 25, 1907

FOUNDER(S)

JAMSHEDJI TATA

HEADQUARTERS

MUMBAI, MAHARASHTRA, INDIA

KEY PEOPLE

CYRUS PALLONJI MISTRY

(Chairman)
T. V. Narendran
(Managing Director)

PRODUCTS

STEEL, FLAT STEEL PRODUCTS,

LONG STEEL PRODUCT , WIRE
PRODUCT , PLATES.

PARENTS

TATA GROUP

SUBSIDIARIES

WEBSITE

TATA STEEL EUROPE

www.tatasteel.com

14

HISTORY
Tata Steel Limited (formerly Tata Iron and Steel Company Limited (TISCO) is
an Indian multinational steel-making company headquartered in Mumbai, Maharashtra,
India, and a subsidiary of the Tata Group. It was the world in 2012, with an annual crude
steel capacity of 28 million tonnes, and the largest private-sector steel company in India
measured by domestic production ltd.Tata Steel has manufacturing operations in 26
countries, including Australia, China, India, the Netherlands, Singapore, Thailand and the
United Kingdom, and employs around 80,500 people. Its largest plant is located
in Jamshedpur, Jharkhand. In 2007 Tata Steel acquired the UK-based steel maker Corus
which was the largest international acquisition by an Indian company till that date.
It was ranked471st in the 2013 Fortune Global 500 ranking of the world's biggest
corporations. It was the seventh most valuable Indian brand of 2013 as per Brand
Finance.

ACQUISITION BY TATA STEEL:

NatSteel in 2004: In August 2004, Tata Steel agreed to acquire the steel making
operations of the Singapore based NatSteel for S$486.4 million in cash.

Millennium Steel in 2005: Tata Steel acquired a majority stake in the Thailand-based
steelmaker Millennium Steel for a total cost of $130 million. It paid US$ 73 million to
Siam Cement for a 40% stake and offered to pay 1.13 baht per share for another 25% of
the shares of other shareholders. Millennium Steel has now been renamed to Tata Steel
Thailand and is headquartered in Bangkok.On March 31, 2013, it held approx. 68%
shares in the acquired company.

Corus in 2007:On 20 October 2006, Tata Steel signed a deal with Anglo-Dutch
company, Corus to buy 100% stake at 4.3bn ($8.1 billion) at 455 pence per share. On 19
November 2006, the Brazilian steel company Companhia Siderrgica Nacional (CSN)
15

launched a counter offer for Corus at 475 pence per share, valuing it at 4.5 billion. On 11
December 2006, Tata preemptively upped its offer to 500 pence per share, which was
within hours trumped by CSN's offer of 515 pence per share, valuing the deal at 4.9
billion. The Corus board promptly recommended both the revised offers to its
shareholders. On 31 January 2007, Tata Steel won their bid for Corus after offering 608
pence per share, valuing Corus at 6.7 billion ($12 billion).

Rolling Mill Companies In Vietnam in 2007: Tata Steel through its wholly
owned Singapore subsidiary, NatSteel Asia Pte Ltd, acquired controlling stake in two
rolling mill companies located in Vietnam: Structure Steel Engineering Pte Ltd (100%
stake) and Vinausteel Ltd (70% stake). The enterprise value for the acquisition was $41
million. With this acquisition, Tata Steel got hold of two rolling mills, a 250k tonnes per
year bar/wire rod mill operated by SSE Steel Ltd and a 180k tonnes per year reinforcing
bar mill operated by Vinausteel Ltd

FACTORS

DETERMINING

THE

WORKING

CAPITAL

REQUIREMENTS
1.

NATURE OF BUSINESS: The requirements of working is very

limited in public utility undertakings such as electricity, water supply

and railways because they offer cash sale only and supply services not
products, and no funds are tied up in inventories and receivables. On
the other hand the trading and financial firms requires less investment
16

in fixed assets but have to invest large amt. of working capital along
with fixed investments.
2. SIZE OF THE BUSINESS: Greater the size of the business, greater is
the requirement of working capital.
3. PRODUCTION POLICY: If the policy is to keep production steady
by accumulating inventories it will require higher working capital.
4. LENTH OF PRDUCTION CYCLE: The longer the manufacturing
time the raw material and other supplies have to be carried for a longer
in the process with progressive increment of labor and service costs
before the final product is obtained. So working capital is directly
proportional to the length of the manufacturing process.
5. SEASONALS VARIATIONS: Generally, during the busy season, a
firm requires larger working capital than in slack season.
7. WORKING CAPITAL CYCLE: The speed with which the working
cycle completes one cycle determines the requirements of working
capital. Longer the cycle larger is the requirement of working capital.

17

WORKING CAPITAL FINANCING AND SOURCE OF WORKING CAPITAL

ACCRUALS
The major accrual items are wages and taxes. These are simply what the firm owes to its
employees and to the government.
TRADE CREDIT
Trade credit represents the credit extended by the supplier of goods and services. It is a
spontaneous source of finance in the sense that it arises in the normal transactions of the
firm without specific negotiations, provided the firm is considered creditworthy by its
supplier. It is an important source of finance representing 25% to 50% of short-term
financing.
WORKING CAPITAL ADVANCE BY COMMERCIAL BANKS
Working capital advance by commercial banks represents the most important source for
financing current assets.
Forms of Bank Finance: Working capital advance is provided by commercial banks in
three
primary ways: (i) cash credits / overdrafts, (ii) loans, and (iii) purchase / discount of bills.
In addition to these forms of direct finance, commercials banks help their customers in
obtaining credit from other sources through the letter of credit arrangement.
i. Cash Credit / Overdrafts: Under a cash credit or overdraft arrangement, a predetermined limit for borrowing is specified by the bank. The borrower can draw as often
as required provided the out standings do not exceed the cash credit / overdraft limit.
ii. Loans: These are advances of fixed amounts which are credited to the current account
of the borrower or released to him in cash. The borrower is charged with interest on the
entire loan amount, irrespective of how much he draws.
iii. Purchase / Discount of Bills: A bill arises out of a trade transaction. The seller of
goods draws the bill on the purchaser. The bill may be either clean or documentary (a
documentary bill is supported by a document of title to gods like a railway receipt or a
bill of lading) and may be payable on demand or after a usance period which does not
18

exceed 90 days. On acceptance of the bill by the purchaser, the seller offers it to the bank
for discount / purchase. When the bank discounts / purchases the bill it releases the funds
to the seller.
The bank presents the bill to the purchaser (the acceptor of the bill) on the due date and
gets its payment
iv. Letter of Credit: A letter of credit is an arrangement whereby a bank helps its customer
to obtain credit from its (customers) suppliers. When a bank opens a letter of credit in
favour of its customer for some specific purchases, the bank undertakes the responsibility
to honour the obligation of its customer, should the customer fail to do so.
REGULATION OF BANK FINANCE
Concerned about such a distortion in credit allocation, the Reserve Bank of India (RBI)
has been trying, particularly from the mid 1960s onwards, to bring a measure of
discipline among industrial borrowers and to redirect credit to the priority sectors of the
economy. From time to time, the RBI issues guidelines and directives relating to matters
like the norms for inventory and receivables, the maximum permissible bank finance, the
form of assistance, the information and reporting system, and the credit monitoring
mechanism. The important guidelines and directives have stemmed from the
recommendations of various committees such as the Dehejia Committee,
the Tandon Committee, the Chore Committee, and the Marathe Committee.
However, in recent years, in the wake of financial liberalisation, the RBI has given
freedom to the boards of individual banks in all matters relating to working capital
financing.
From the mid-eighties onwards, special committees were set up by the RBI to prescribe
norms for several other industries and revise norms for some industries covered by the
Tandon Committee.
Maximum Permissible Bank Finance: The Tandon Committee had suggested three
methods for determining the maximum permissible bank finance (MPBF).
LENDING NORMS
The recommendation of the Tandon Committee regarding the Lending norms has far reaching implications. The lending norms have been suggested in view of the realization
that the bankers role as a lender in only to supplement the borrowers resources and not
19

to meet his entire working capitals needs. In the context of this approach, the committee
has suggested three alternative methods for working out the maximum permissible level
of bank borrowings. Each successive method reduces the involvement of short-term bank
credit to finance the current assets.
First Method: According to this method, the borrower will have to contribute a minimum
of 25% of the working capital gap from long-term funds, i.e., owned funds and term
borrowings. This will give a current ratio of 1.17:1.
The term working capital gap refers to the total of current assets less current liabilities
other than bank borrowings. This can be understood with the help of following example:
Example 1
Rs.
Total Current assets required by the borrower as per norms 20,000
Current liabilities 5,000
Amount of maximum permissible bank borrowings as per the
first method can be ascertained as follows: Working Capital gap (Rs. 20,000 Rs. 5,000) 15,000
Less: 25% from long-term sources 3,750
Maximum permissible bank borrowings 11,250
Second Method: Under this method the borrower has to provide the minimum of 25% of
the total current assets that will give a current ratio of 1.33:1.
Example 2: On the basis of the data given in Example 1, the maximum permissible bank
borrowings as per second method can be ascertained as follows:
Rs.
Current assets as per norms 20,000
Less: 25% to be provided from long term funds 5,000
15,000
Less: Current liabilities other than bank borrowings 5,000
Maximum permissible bank borrowings 10,000
Third Method: In this method, the borrowers contribution from long term funds will be
to the extent of the entire core current assets and a minimum of 25% of the balance of the
current assets.

20

The term core current assets refers to the absolute minimum level of investment in all
current assets which is required at all times to carry out minimum level of business
activities.
Example 3 : On the basis of the information given in Example 1, the amount of maximum
permissible bank finance can be arrived at the follows if the core current assets are Rs.
2,000
Rs.
Current assets as per norms 20,000
Less: Core Current Assets 2,000
18,000
Less: 25% to be provided from long-term funds 4,500
13,500
Less: Current Liabilities 5,000
Maximum permissible bank borrowings 8,500
It will thus be seen that in the third method current ratio has further improved.
Reserve Banks directive : The Reserve Bank of India accepted the recommendations of
the Tandon Committee. It instructed the commercial banks in 1976 to put all the
borrowers having aggregate credit limits from banking system in excess of Rs. 10 lakhs,
under the first method of lending.
PUBLIC DEPOSITS
Many firms, large and small, have solicited unsecured deposits from the public in recent
years, mainly to finance their working capital requirements.
INTER-CORPORATE DEPOSITS
A deposit made by one company with another, normally for a period up to six months, is
referred to as an inter-corporate deposit. Such deposits are usually of three types.
a. Call Deposits : In theory, a call deposit is withdrawable by the lender on giving a days
notice. In practice, however, the lender has to wait for at least three days. The interest rate
on such deposits may be around 10 percent per annum.
b. Three-months Deposits : More popular in practice, these deposits are taken by
borrowers to tide over a short-term cash inadequacy that may be caused by one or more
of the following

21

factors: disruption in production, excessive imports of raw material, tax payment, delay
in collection, dividend payment, and unplanned capital expenditure. The interest rate on
such deposits is around 12 percent per annum.
c. Six-months Deposits: Normally, lending companies do not extend deposits beyond this
time frame. Such deposits, usually made with first-class borrowers, and carry interest rate
of around 15 percent per annum.
SHORT-TERM LOANS FROM FINANCIAL INSTITUTIONS
The Life Insurance Corporation of India and the General Insurance Corporation of India
provide short-term loans to manufacturing companies with an excellent track record.
RIGHTS DEBENTURES FOR WORKING CAPITAL
Public limited companies can issue Rights debentures to their shareholders with the
object of augmenting the long-term resources of the company for working capital
requirements. The key guidelines applicable to such debentures are as follows:
i. The amount of the debenture issue should not exceed (a) 20% of the gross current
assets, loans, and advances minus the long-term funds presently available for financing
working capital, or (b) 20% of the paid-up share capital, including preference capital and
free reserves, whichever is the lower of the two.
ii. The debt. -equity ratio, including the proposed debenture issue, should not exceed 1:1.
iii. The debentures shall first be offered to the existing Indian resident shareholders of the
company on a pro rata basis.
COMMERCIAL PAPER
Commercial paper represents short-term unsecured promissory notes issued by firms
which enjoy a fairly high credit rating. Generally, large firms with considerable financial
strength are able to issue commercial paper. The important features of commercial paper
are as follows:
i. The maturity period of commercial paper usually ranges from 90 days to 360 days.
ii. Commercial paper is sold at a discount from its face value and redeemed at its face
value.
Hence the implicit interest rate is a function of the size of the discount and the period of
maturity.
22

iii. Commercial paper is directly placed with investors who intend holding it till its
maturity.
Hence there is no well developed secondary market for commercial paper.
FACTORING
Factoring, as a fund based financial service, provides resources to finance receivables as
well as facilitates the collection of receivables. It is another method of raising short-term
finance through account receivable credit offered by commercial banks and factors. A
commercial bank
may provide finance by discounting the bills or invoices of its customers. Thus, a firm
getsimmediate payment for sales made on credit. A factor is a financial institution which
offers services relating to management and financing of debts arising out of credit sales.
Factoring is becoming popular all over the world on account of various services offered
by the institutionsengaged in it. Factors render services varying from bill discounting
facilities offered by commercial banks to a total take over of administration of credit sales
including maintenance of sales ledger, collection of accounts receivables, credit control
and protection from bad debts, provision of finance and rendering of advisory services to
their clients. Factoring, may be on a recourse basis, where the risk of bad debts is borne
by the client, or on a non-recourse basis, where the risk of credit is borne by the factor.
At present, factoring in India is rendered by only a few financial institutions on a recourse
basis. However, the Report of the Working Group on Money Market (Vaghul Committee)
constituted by the Reserve Bank of India has recommended that banks should be
encouraged to set up factoring divisions to provide speedy finance to the corporate
entities.
Inspite of many services offered by factoring, it suffers from certain limitations. The most
critical fall outs of factoring include (i) the high cost of factoring as compared to other
sources of short-term finance, (ii) the perception of financial weakness about the firm
availing factoring services, and (iii) adverse impact of tough stance taken by factor,
against a defaulting buyer, upon the borrower resulting into reduced future sales.

23

OBJECTIVES OF THE STUDY

Study of the working capital management is important because unless the working
capital is managed effectively, monitored efficiently planed properly and reviewed
periodically at regular intervals to remove bottlenecks if any the company can not earn
profits and increase its turnover. the following objectives are framed for a depth analysis.
1. To study the working capital management of TATA STEEL Pvt. Ltd.
2. To study the optimum level of current assets and current liabilities of the company.
3. To study the liquidity position through various working capital related ratios.
4. To study the working capital components such as receivables accounts, cash
management, Inventory position.
5. To study the way and means of working capital finance of the of TATA STEEL Pvt.
Ltd.
6. To estimate the working capital requirement of TATA STEEL
Pvt. Ltd.
8. To study the operating cycle of the company.
9. To study the recommendations of p.l tendon committee.

24

Statement Showing Changes in Working Capital

Statement 2010 - 2011

Particular
A) Current Asset:
Sundry Debtors
Cash & Bank Balance
Interest Accrued On Investment
Stores & Spare Parts
Stock in trade

TOTAL CURRENT ASSET

B) Current Liability:
Current Liability
Provisions

Mar 31st Mar 31st Working Capital

2010
2011
(in crore) (in crore) INC
DEC
11512.44
6815.11
7.63
1715.11
16971.53

37021.82

14816.28
10892.66
9.83
1847.58
22213.66

49780.01 12758.19

23392.49
6594.16

26671.06
7089.92

29956.65

33760.98

C) Working Capital

7065.17

16019.03

D) Increase In Working
Capital

8953.86

TOTAL CURRENT LIABILITY

TOTAL

16019.03

25

3303.84
4077.55
2.2
132.47
5242.13

3278.57
495.76

8953.86
8953.86

16019.03

8953.86

Statement Showing Changes in Working Capital

Particular

Mar 31st Mar 31st Working Capital

2011
2012
(in crore) (in crore) INC
DEC

A) Current Asset:
Current investments
Cash & Bank Balance
Trade receviable
Short term Loan & Advances
Inventories
Other current assets

3159.28
10859.05
14811.92
3547.18
10591.30
56.29

1398.37
10801.58
14878.48
3868.73
8538.08
32.74

TOTAL CURRENT ASSET

43025.02

39517.98

B) Current Liability:
Current Liability
Provisions
Short term borrowings
Trade payable

15001.22
3395.25
3794.44
18547.48

18860.99
3370.05
4699.08
20617.86

TOTAL CURRENT LIABILITY

40738.4

47547.98

C) Working Capital

2286.63 8030

D) Increse In Working Capital

5743.37

TOTAL

8030

Statement 2011 - 12

26

66.56
321.55
-

1760.91
57.47
2053.22
23.55

3859.77
904.64
2070.38

25.2
-

5743.37

8030

5743.37

Statement Showing Changes in Working Capital Statement

2012-13

Mar 31st Mar 31st Working Capital

2012
2013
(in crore) (crore)
INC
DEC

Particular
A) Current Asset:
Current investment
Cash & Bank Balance
Other current assets
Loan & Advances
Inventories
Trade receivable

TOTAL CURRENT ASSET

B) Current Liability:
Current Liability
Provisions
Short term borrowings
Trade payable
TOTAL CURRENT LIABILITY
C) Working Capital

1398.37
9859.67
417.25
3717.42
25598.00
14878.48

760.29
10798..81
1478.50
4060.54
24091.19
13993.96

55869.19

55183.29

18779.01
3476.19
4699.08
20528.55

19942.36
2943.29
8114.56
21778.84

47482.83

52779.05

8386.36

2404.24

D) Decrease In Working Capital

TOTAL

8386.36

27

939.14
1061.25
343.12
-

638.08
15068.81
880.52

1163.35
3415.48
1250.28

532.9
-

5982.12

5982.12

8386.36

5982.12

COMPARISON OF WORKING CAPITAL FOR THE YEAR

2011 - 2013

2011
W.C.

2012

INC/D

W.C.

EC
16019.03

18000
16000
14000
12000
10000
8000
6000
4000
2000
0

2013

INC/

W.C.

DEC

8030

INC

/DEC

5743.37

1.39

8386.36 5982.12

1.39

16019.03

8030

8386.36

2011
2012
2013
Working Capital

Int
erpretation
The working capital of the company is positive this is because the current assets of the
company are more than the current liabilities of the company.
It was observed that in the year 2011 working capital was 16019.03, in 2012 it
was 8030.00& in 2013 it was 8386.36.

28

Particulars

2011

2012

2013

CURRENT ASSET

Inventories
Stock in trade

22213.66

Sundry Debtors

14816.28

Cash & Bank

10892.66

OtherCurrent Assets
Stores & Spare Parts

8538.08

24091.19

10801.58

10798..81

14878.48

1478.50

1847.58

Current Investment

760.29

Loan & Advances

3868.73

Interest Accrued
On Investment

9.83

Trade Receivable

Total Current Assets

4060.54

14878.48

13993.96

49780.01

39517.98

55183.29

26671.06

18860.99

19942.36

7089.92

3370.05
8114.56

2943.29
8114.56

21778.84

21778.84

Current Liability
Current Liability
Provisions
Short term borrowing
Trade Payable
Total Current
Liability
Working Capital

33760.98

47547.98

16019.03

29

-47547.98

52779.05

12872.30

Conclusion
Working capital management is important aspect of financial management. The study of
working capital management of TATA STEEL Pvt. Ltd. has revealed that the current ratio
was as per the standard industrial practice but the liquidity position of the company
showed an increasing trend. The study has been conducted on working capital ratio
analysis, working capital leverage, working capital components which helped the
company to manage its working capital efficiency and affectively.
1.

Working capital of the company was increasing and showing positive Working
capital per year. It shows good liquidity position.

2.

Positive working capital indicates that company has the ability of payments of
short terms liabilities.

3.

Working capital increased because of increment in the current assets is more than
increase in the current liabilities.

4.

Companys current assets were always more than requirement it affect on

profitability of the company.

5.

Current assets are more than current liabilities indicate that company used long
term funds for short term requirement, where long term funds are most costly then
short term funds.

6.

Current assets components shows sundry debtors were the major part in current
assets it shows that the inefficient receivables collection management.

7.

In the year 2010-11 working capital increased because decreased the expenses as
manufacturing expenses and decrease the price of raw material as increased in the
inflation rate.

30

Suggestion
Suggestion can be use by the firm for the betterment increased of the firm after study and
analysis of project report on study and analysis of working capital. I would like to
recommend.
1.

Company should raise funds through short term sources for short term
requirement of funds, which comparatively economical as compare to long term
funds.

2.

Company should take control on debtors collection period which is major part of
current assets.

3.

Company has to take control on cash balance because cash is non earning assets
and increasing cost of funds.

31