THEORY OF WORKING CAPITAL

WORKING CAPITAL MANAGEMENT

Working Capital is the amount of capital that a business has available to meet the day to day cash
requirements of its operations. It is concerned with the problem arise in attempting to manage the current
assets, the current liabilities and the inter relationship that exist between them. Working Capital is the
difference between resources in cash or readily convertible into cash and organizational commitments for
which cash will soon be required or within one year without undergoing a diminution in value and without
disrupting the operation of the firm. It also refers to the amount of current Assets that exceeds current
Liabilities.
Working Capital refers to that part of the firm capital, which is required for financing Short-Term or Current
Assets such as Cash, Marketable Securities, Debtors and Inventories. Working Capital is also known as
Revolving or Circulating Capital or Short Term Capital.

The goal of working capital management is to manage the firms current assets and current liabilities in such
way that the satisfactory level of working capital is mentioned. The current should be large enough to cover
its current liabilities in order to ensure a reasonable margin of the safety.

Capital required for a business can be classifies under two main categories:
Fixed Capital
Working Capital

Every business needs funds for two purposes for its establishments and to carry out day to day operations.
Long term funds are required to create production facilities through purchase of fixed assets such as plant
and machinery, land and building, furniture etc. Investments in these assets are representing that part of
firms capital which is blocked on a permanent or fixed basis and is called fixed capital.

Funds are also needed for short term purposes for the purchasing of raw materials, payments of wages and
other day to day expenses etc. These funds are known as working capital. In simple words, Working capital
refers to that part of the firms capital which is required for financing short term or current assets such as
cash, marketable securities, debtors and inventories.
CONCEPTS OF WORKING CAPITAL:

There are two concepts of working capital:

Page 1 of 18
 Balance Sheet concepts
Operating Cycle or circular flow concept

BALANCE SHEET CONCEPT:

There are two interpretation of working capital under the balance sheet concept:
Gross Working Capital
Net Working Capital

The term working capital refers to the Gross working capital and represents the amount of funds invested in
current assets. Thus, the gross working capital is the capital invested in total current assets of the enterprises.
Current assets are those assets which are converted into cash within short periods of normally one
accounting year. Example of current assets is:

Constituents of Current Assets:

Cash in hand and Bank balance

Bills Receivable
Sundry Debtors
Short term Loans and Advances
Inventories of Stock as:
Raw Materials
Work in Process
Stores and Spaces

Finished Goods
Temporary Investments of Surplus Funds
Prepaid Expenses
Accrued Incomes

The term working capital refers to the net working capital. Net working capital is the excess of current assets
over current liabilities or say
The term working capital refers to the net working capital. Net working capital is the excess of current
assets over current liabilities or say:

Net Working Capital = Current Assets Current Liabilities.

NET WORKING CAPITAL MAY BE NEGATIVE OR POSITIVE:

Page 2 of 18
When the current assets exceed the current liabilities, the working capital is positive and the negative

working capital results when the current liabilities are more than the current assets. Current liabilities are

those liabilities which are intended to be paid in the ordinary course of business within a short period of

normally one accounting year of the current assets or the income of the business. Examples of current

liabilities are:

CONSTITUENTS OF CURRENT LIBILITIES:

Bills Payable
Sundry Creditors or Account Payable
Accrued or Outstanding Expenses
Short term Loans, Advances and Deposits
Dividends Payable
Bank Overdraft
Provision for Taxation, If does not amount to appropriation of profits.

The gross working capital concept is financial or going concern concept whereas net working capital is an
accounting concept of working capital.
OPERATING CYCLE OR CIRCULATING CASH FORMAT:

Working Capital refers to that part of firms capital which is required for financing short term or current

assets such as cash, marketable securities, debtors and inventories. Funds thus invested in current assets keep

revolving fast and being constantly converted into cash and these cash flows out again in exchange for other

current assets. Hence it is also known as revolving or circulating capital. The circular flow concept of

working capital is based upon this operating or working capital cycle of a firm. The cycle starts with the

purchase of raw material and other resources

And ends with the realization of cash from the sales of finished goods. It involves purchase of raw material

and stores, its conversion into stocks of finished goods through work in progress with progressive increment

of labor and service cost, conversion of finished stocks into sales, debtors and receivables and ultimately

realization of cash and this cycle continuous again from cash to purchase of raw materials and so on. The

speed/ time of duration required to complete one cycle determines the requirements of working capital
Page 3 of 18
longer the period of cycle, larger is the requirement of working capital.

The gross operating cycle of a firm is equal to the length of the inventories and receivables
conversion periods. Thus,

Gross Operating Cycle = RMCP + WIPCP + FGCP + RCP

Where,

RMCP = Raw Material Conversion Period WIPCP = Work

in- Process Conversion Period FGCP = Finished Goods

Conversion Period RCP = Receivables Conversion Period

However, a firm may acquire some resources on credit and thus defer payments for certain period.

In that case, net operating cycle period can be calculated as below:

Net Operating Cycle Period = Gross Operating Cycle Period Payable Deferral period

Further, following formula can be used to determine the conversion periods.

Raw Material Conversion Period = Average Stock of Raw Material.

Raw Material Consumption per day

Page 4 of 18
 Work in process Conversion Period= Average Stock of Work-in-Progress

Total Cost of Production per day

Finished Goods Conversion Period= Average Stock of Finished Goods

Total Cost of Goods sold per day

Receivables Conversion Period = Average Accounts Receivables

Net Credit Sales per day

Payable Deferral Period = Average Payable

Net Credit Purchase per day

CLASSIFICATION OR KIND OF WORKING CAPITAL:

Working capital may be classified in two ways:

On the basis of concept

On the basis of time

On the basis of concept, working capital is classified as gross working capital and

net working capital. The classification is important from the point of view of the

financial manager.

On the basis of time, working capital may be classified as:

Permanent or Fixed working capital

Temporary or Variable working capital

1. PERMANENT OR FIXED WORKING CAPITAL:

Permanent or fixed working capital is the minimum amount which is required to ensure effective
utilization of fixed facilities and for maintaining the circulation of current assets. There is always a
minimum level of current assets which is continuously required by the enterprises to carry out its
normal business operations.

2. TEMPRORAY OR VARIABLE WORKING CAPITAL:

Temporary or variable working capital is the amount of working capital which is required to meet the
seasonal demands and some special exigencies.Varibles working capital can be further classified as
Page 5 of 18
 second working capital and special working capital. The capital required to meet the seasonal needs
of the enterprises is called the seasonal working capital.
Temporary working capital differs from permanent working capital in the sense that is required for
short periods and cannot be permanently employed gainfully in the business.

IMPORATNCE OR ADVANTAGE OF ADEQUATE WORKING CAPITAL:

Working capital is the life blood and nerve centre of a business. Just a circulation of a blood is essential in
the human body for maintaining life, working capital is very essential to maintain the smooth running of a
business. No business can run successfully without an adequate amount of working capital. The main
advantages of maintaining adequate amount of working capital are as follows:

Solvency of the Business

Goodwill
Easy Loans
Cash discounts
Regular supply of Raw Materials
Regular payments of salaries, wages & other day to day commitments.

Exploitation of favorable market conditions

Ability of crisis
Quick and regular return on investments
High morals

THE NEED OR OBJECTS OF WORKING CAPITAL:

The need for working capital cannot be emphasized. Every business needs some amount of working capital.
The need of working capital arises due to the time gap between production and realization of cash from
sales. There is an operating cycle involved in the sales and realization of cash. There are time gaps in
purchase of raw materials and production, production and sales,

And sales, and realization of cash, thus, working capital is needed for the following purposes:

For the purchase of raw materials , components and spaces.

To pay wages and salaries.

To incur day to day expenses and overhead costs such as fuel, power and office expenses etc.

To meet the selling costs as packing, advertising etc.

To provide credit facilities to the customers.

To maintain the inventories of raw materials, work in- progress, stores and spares and finished stock

FACTORS DETERMING THE WORKING CAPITAL REQUIRMENT :

Page 6 of 18
The working capital requirements of a concern depend upon a large number of factors such as nature and
size of the business, the characteristics of their operations, the length of production cycle, the rate of stock
turnover and the state of economic situation. However the following are the important factors generally
influencing the working capital requirements.
NATURE OR CHARACTERSTICS OF A BUSINESS :
The nature and the working capital requirement of enterprises are interlinked. While a manufacturing
industry has a long cycle of operation of the working capital, the same would be short in an enterprises
involve in providing services. The amount required also varies as per the nature, an enterprises involved in
production would required more working capital then a service sector enterprise.

MANAFACTURE PRODUCTION POLICY:

Each enterprises in the manufacturing sector has its own production policy, some follow the policy of
uniform production even if the demand varies from time to time and other may follow the principles of
demand based production in which production is based on the demand during the particular phase of time.
Accordingly the working capital requirements vary for both of them.

OPERATIONS:
The requirement of working capital fluctuates for seasonal business. The working capital needs of such

business may increase considerably during the busy.

MARKET CONDITION:

If there is a high competition in the chosen project category then one shall need to offer sops like credit,
immediate delivery of goods etc for which the working capital requirement will be high. Otherwise if there
is no competition or less competition in the market then the working capital requirements will be low.

AVABILITY OF RAW MATERIAL:

If raw material is readily available then one need not maintain a large stock of the same thereby reducing the
working capital investment in the raw material stock . On other hand if raw material is not readily available
then a large inventory stocks need to be maintained, there by calling for substantial investment in the same.

GROWTH AND EXAPNSION:

Growth and Expansions in the volume of business result in enhancement of the working capital
requirements. As business growth and expands it needs a larger amount of the working capital. Normally the
needs for increased working capital funds processed growth in business activities.
Page 7 of 18
PRICE LEVEL CHANGES :

Generally raising price level requires a higher investment in the working capital. With increasing prices, the

same levels of current assets needs enhanced investments.

MANAFACTURING CYCLE:

The manufacturing cycle starts with the purchase of raw material and is completed with the production of
finished goods. If the manufacturing cycle involves a longer period the need for working capital would be
more. At time business needs to estimate the requirement of working capital in advance for proper control
and management. The factors discussed above influence the quantum of working capital in the business. The
assessment of the working capital requirement is made keeping this factor in view. Each constituents of the
working capital retains it form for a certain period and that holding period is determined by the factors
discussed above. So for correct assessment of the working capital requirement the duration at various stages
of the working capital cycle is estimated. Thereafter proper value is assigned to the respective current assets,
depending on its level of completion. The basis for assigning value to each component is given below

COMPONENTS OF WORKING
CAPITAL
Stock of Raw Material
Stock of Work -in- Process
Stock of finished Goods
Debtors
Cash
BASIS OF VALUATION
Purchase of Raw Material
At cost of Market value which is lower
Cost of Production
Cost of Sales or Sales Value
Working Expenses

Each constituent of the working capital is valued on the basis of valuation Enumerated
above for the holding period estimated. The total of all such valuation becomes the total
estimated working capital requirement. The assessment of the working capital should be
accurate even in the case of small and micro enterprises where business operation is not
very large. We know that working capital has a very close relationship with day-to-day
operations of a business. Negligence in proper assessment of the working capital,
therefore, can affect the day-to-day operations severely. It may lead to cash crisis and
ultimately to liquidation. An inaccurate assessment of the working capital may cause
either under-assessment or over-assessment of the working capital and both of them are
dangerous.
Page 8 of 18
 PRINCIPLES OF WORKING CAPITAL MANAGEMENT POLICY:

The following are the general principles of a sound working capital management

policy:

PRINCIPLES OF WORKING CAPITAL MANAGEMNT POLICY

PRINCIPLES OF PRINCIPLES OF PRINCIPLES OF PRINCIPLES OF

RISK COST OF EQUITY MATURITY OF
VARIATIONS CAPITAL PRINCIPLES PAYMENTS

1.PRINCIPLE OF RISK VARAITAION (CURRENT ASSETS POLICY):

Risk here refers to the inability of a firm to meet its obligations as and when they become due for payment.
Larger investment in current Assets with less dependence on short term borrowings, increase liquidity,
reduces risk and thereby decreases the opportunity for gain or loss. On the other hand less investments in
current assets with greater dependence on short term borrowings, reduces liquidity and increase profitability.
In other words there is a definite inverse relationship between the degree of risk and profitability. In other
words, there is a definite inverse relationship between the risk and profitability. A conservative management
prefers to minimize risk by maintaining a higher level of current assets or working capital while a liberal
management assumes greater risk by reducing working capital. However, the goal of management should be
to establish a suitable tradeoff between profitability and risk.

2. PRINCIPLES OF COST OF CAPITAL:

The various source of raising working capital finance have different cost of capital and the degree of risk
involved. Generally, higher and risk however the risk lower is the cost and lower the risk higher is the cost.
A sound working capital management should always try to achieve a proper balance between these two.
3. PRINCIPLE OF EQUITY POSITION:
The principle is concerned with planning the total investments in current assets. According to this principle,
the amount of working capital invested in each component should be adequately justified by a firms equity
position. Every rupee invested in current assets should contribute to the net worth of the firm. The level of
current assets may be measured with the help of two ratios:
Page 9 of 18
1. Current assets as a percentage of total assets and
2. Current assets as a percentage of total sales

While deciding about the composition of current assets, the financial manager may consider the relevant
industrial averages.

4. PRINCIPLES OF MATURITY OF PAYMENT:

The principle is concerned with planning the source of finance for working capital. According to the
principles, a firm should make every effort to relate maturities of payment to its flow of internally generated
funds. Maturity pattern of various current obligations is an important factor in risk assumptions and risk
assessments. Generally shorter the maturity schedule of current liabilities in relation to expected cash
inflows, the greater the inability to meet its obligations in time.

CONSEQUENCES OF UNDER ASSESMENT OF WORKING CAPITAL:

Growth may be stunted. It may become difficult for the enterprises to undertake profitable

projects due to non-availability of working capital.

Implementations of operating plans may brome difficult and consequently the profit goals

may not be achieved.

Cash crisis may emerge due to paucity of working funds.

Optimum capacity utilization of fixed assets may not be achieved due to non availability of

the working capital.

The business may fail to honour its commitment in time thereby adversely affecting its creditability.
This situation may lead to business closure.
The business may be compelled to by raw materials on credit and sell finished goods on cash. In the
process it may end up with increasing cost of purchase and reducing selling price by offering
discounts. Both the situation would affect profitable adversely.

Now avaibility of stocks due to non availability of funds may result in production stoppage. While
underassessment of working capital has disastrous implications on business overassesments of
working capital also has its own dangerous.

Page 10 of 18
CONSEQUENCES OF OUR OWN ASSESMNET OF WORKING CAPITAL:

Excess of working capital may result in un necessary accumulation ofinventories.

It may lead to offer too liberal credit terms to buyers and very poor recovery system & cash
management.
It may make management complacent leading to its inefficiency.
Over investment in working capital makes capital less productive and may reduce return on
investment.

Working Capital is very essential for success of business & therefore needs efficient management and
control. Each of the components of working capital needs proper management to optimize profit.

ABOUT LARSEN AND TOUBRO

Larsen & Toubro Limited, commonly known as L&T, is an Indian multi-national conglomerate
headquartered in Mumbai, Maharashtra. It was founded by two Danish engineers taking refuge in India.]The
company has diversified business interests in engineering, construction, manufacturing goods, information
technology, and financial services(mutual funds also), and has offices worldwide.

It is premiere Engineering company in India and is known for iconic buildings and World-class
Infrastructure.

Larsen & Toubro originated from a company founded in 1938 in Bombay (now Mumbai), British India by
two Danish engineers, Henning Holck-Larsen and Sren Kristian Toubro. The company began as a
representative of Danish manufacturers of dairy equipment. However, with the start of the Second World
War in 1939 and the resulting restriction on imports, the partners started a small workshop to undertake jobs
and provide service facilities. Germany's invasion of Denmark in 1940 stopped supplies of Danish products.
The war-time need to repair and refit ships offered L&T an opportunity, and led to the formation of a new
company, Hilda Ltd, to handle these operations. L&T also started to repair and fabricate ships signalling the
expansion of the company. The sudden internment of German engineers in British India (due to suspicions
caused by the Second World War), who were to put up a soda ash plant for the Tata's, gave L&T a chance to
enter the field of installation.

It is listed on Bombay Stock Exchanges Sensex and National Stock Exchange(NSE) Nifty 50 .It is the 15th
largest company by market capitalisation in India.

Page 11 of 18
The data in this project is enabling in secondary in nature. Financial reports, company records were referred
for data analysis. The study has been undertaken by collecting relevant data from the balance sheet, profit
and loss a/c, annul report & Audit report of the BALIC the company is used financial tools for the analyzing
and interpretation data.

However primary data is also collected by observation discussing with company officials. This primary data
is used to fill in the gaps while preparing this report and to know the latest procedures adopted by the
company. This has helped to draw inferences and conclusions.

Research Methodology
Sources of data

This study is based on Secondary data:-

The secondary data are those, which have been collected by some other and which have been
processed. Generally speaking secondary data are information, which have been previously collected by
some organization to satisfy his own need. But the department under reference for an entirely different
reason is using it.

For this project secondary sources used are:

1. Annual reports of the company.

2. Company website

3. Books

4. Other company documents

SAMPLING DESIGN

Sampling unit : Financial Statements & Audit Reports

Sampling Size :Last four years financial statements

Page 12 of 18
 Balance Sheet of Larsen &
Toubro
Standalone Balance Sheet ------------------- in Rs. Cr. -------------------
Mar 16 Mar 15 Mar 15 Mar 14 Mar 14

12 mths 12 mths 12 mths 12 mths 12 mths

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS
Equity Share Capital 186.30 185.91 185.91 185.38 185.38
Total Share Capital 186.30 185.91 185.91 185.38 185.38
Revaluation Reserves 15.18 15.57 15.57 19.25 19.25
Reserves and Surplus 40,516.85 36,883.10 36,883.10 33,457.20 33,457.20
Total Reserves and Surplus 40,532.03 36,898.67 36,898.67 33,476.45 33,476.45
Total Shareholders Funds 40,718.33 37,084.58 37,084.58 33,661.83 33,661.83
NON-CURRENT LIABILITIES
Long Term Borrowings 8,339.27 8,508.60 8,508.60 5,478.14 5,478.14
Deferred Tax Liabilities [Net] 203.36 362.99 362.99 409.92 409.92
Other Long Term Liabilities 152.54 119.62 119.62 93.57 93.57
Long Term Provisions 370.23 350.45 350.45 299.61 299.61
Total Non-Current Liabilities 9,065.40 9,341.66 9,341.66 6,281.24 6,281.24
CURRENT LIABILITIES
Short Term Borrowings 3,881.87 3,791.08 3,791.08 5,980.78 3,876.04
Trade Payables 22,118.80 18,844.77 18,844.77 16,345.45 16,345.45
Other Current Liabilities 18,591.69 15,340.79 15,340.79 13,921.76 16,026.50
Short Term Provisions 2,693.62 2,500.88 2,500.88 2,113.52 2,113.52
Total Current Liabilities 47,285.98 40,477.52 40,477.52 38,361.51 38,361.51
Total Capital And Liabilities 97,069.71 86,903.76 86,903.76 78,304.58 78,304.58

Page 13 of 18
ASSETS
NON-CURRENT ASSETS
Tangible Assets 7,120.59 7,402.20 7,402.20 7,560.81 7,560.81
Intangible Assets 138.40 85.16 85.16 113.99 113.99
Capital Work-In-Progress 250.69 304.54 304.54 411.86 411.86
Intangible Assets Under Development 158.91 189.50 189.50 150.55 150.55
Fixed Assets 7,668.59 7,981.40 7,981.40 8,237.21 8,237.21
Non-Current Investments 19,897.94 17,672.82 17,672.82 15,168.41 15,168.41
Long Term Loans And Advances 3,031.73 2,720.83 2,720.83 3,721.57 3,721.57
Other Non-Current Assets 187.89 127.86 127.86 62.78 62.78
Total Non-Current Assets 30,786.15 28,502.91 28,502.91 27,189.97 27,189.97
CURRENT ASSETS
Current Investments 4,670.98 5,380.08 5,380.08 4,046.23 4,046.23
Inventories 1,888.00 2,207.79 2,207.79 1,982.53 1,982.53
Trade Receivables 26,309.19 23,051.11 23,051.11 21,538.76 21,538.76
Cash And Cash Equivalents 1,680.91 1,515.80 1,515.80 1,782.86 1,782.86
Short Term Loans And Advances 10,205.15 7,812.35 7,812.35 6,345.65 6,345.66
Other CurrentAssets 21,529.33 18,433.72 18,433.72 15,418.58 15,418.57
Total Current Assets 66,283.56 58,400.85 58,400.85 51,114.61 51,114.61
Total Assets 97,069.71 86,903.76 86,903.76 78,304.58 78,304.58
OTHER ADDITIONAL INFORMATION
CONTINGENT LIABILITIES,
COMMITMENTS
Contingent Liabilities 19,427.25 22,896.78 22,896.78 15,044.54 14,905.54
CIF VALUE OF IMPORTS
Raw Materials 1,736.06 1,412.86 1,412.86 1,954.36 1,954.36
Stores, Spares And Loose Tools 1,178.96 1,074.52 1,074.52 1,701.93 1,701.93
Capital Goods 120.88 219.69 219.69 205.37 205.37
EXPENDITURE IN FOREIGN EXCHANGE
Expenditure In Foreign Currency 8,212.48 6,936.27 6,936.27 6,003.34 6,003.34
REMITTANCES IN FOREIGN CURRENCIES
FOR DIVIDENDS
Dividend Remittance In Foreign
35.72 29.97 29.97 36.27 36.27
Currency
EARNINGS IN FOREIGN EXCHANGE
FOB Value Of Goods 878.06 687.45 687.45 1,006.72 1,006.72
Other Earnings 10,210.97 8,753.27 8,753.27 8,403.03 8,403.03
BONUS DETAILS
Bonus Equity Share Capital 151.59 151.59 151.59 151.59 151.59
NON-CURRENT INVESTMENTS
Non-Current Investments Quoted
7,468.59 8,060.92 8,060.92 9,740.38 9,740.38
Market Value
Non-Current Investments Unquoted
18,429.76 16,058.34 16,058.34 13,476.54 13,476.54
Book Value
CURRENT INVESTMENTS
Page 14 of 18
Current Investments Quoted Market
2,092.35 2,342.93 2,342.93 1,798.22 1,798.22
Value
Current Investments Unquoted Book
2,661.88 3,124.14 3,124.14 2,291.84 2,291.84
Value

Profit & Loss A/c (in new

Standalone Profit & Loss account ------------------- in Rs. Cr. -------------------
format) of Larsen &
Mar 16 Mar 15 Mar 15 Mar 14 Mar 14
Toubro
12 mths 12 mths 12 mths 12 mths 12 mths

INCOME
Revenue From Operations [Gross] 59,517.13 57,558.07 56,791.13 57,163.85 56,567.18
Less: Excise/Sevice Tax/Other Levies 635.39 540.66 540.66 564.93 564.93
Revenue From Operations [Net] 58,881.74 57,017.41 56,250.47 56,598.92 56,002.25
Other Operating Revenues 897.87 0.00 766.94 0.00 596.67
Total Operating Revenues 59,779.61 57,017.41 57,017.41 56,598.92 56,598.92
Other Income 2,405.97 2,283.37 2,283.37 1,880.89 1,880.89
Total Revenue 62,185.58 59,300.78 59,300.78 58,479.81 58,479.81
EXPENSES
Cost Of Materials Consumed 7,396.35 5,224.66 5,224.66 6,002.80 6,002.80
Purchase Of Stock-In Trade 1,129.18 1,296.75 1,296.75 1,922.16 1,922.16
Operating And Direct Expenses 37,988.58 38,153.67 38,153.67 35,311.46 35,316.52
Changes In Inventories Of FG,WIP And
114.98 -278.53 -278.53 110.03 110.03
Stock-In Trade
Employee Benefit Expenses 4,480.20 4,150.84 4,150.84 4,662.37 4,656.90
Finance Costs 1,449.04 1,419.03 1,419.03 1,076.08 1,076.08
Depreciation And Amortisation 998.88 1,008.15 1,008.15 792.42 792.42

Page 15 of 18
Expenses
Other Expenses 2,505.07 1,997.11 1,997.11 1,932.03 1,932.44
Less: Amounts Transfer To Capital
5.53 14.96 14.96 8.95 8.95
Accounts
Total Expenses 56,056.75 52,956.72 52,956.72 51,800.40 51,800.40
Mar 16 Mar 15 Mar 15 Mar 14 Mar 14

12 mths 12 mths 12 mths 12 mths 12 mths

Profit/Loss Before Exceptional,

6,128.83 6,344.06 6,344.06 6,679.41 6,679.41
ExtraOrdinary Items And Tax
Exceptional Items 560.28 357.16 357.16 588.50 588.50
Profit/Loss Before Tax 6,689.11 6,701.22 6,701.22 7,267.91 7,267.91
Tax Expenses-Continued Operations
Current Tax 1,551.19 1,628.74 1,628.74 1,686.53 1,686.53
Deferred Tax -173.54 16.30 16.30 88.25 88.25
Total Tax Expenses 1,377.65 1,645.04 1,645.04 1,774.78 1,774.78
Profit/Loss After Tax And Before
5,311.46 5,056.18 5,056.18 5,493.13 5,493.13
ExtraOrdinary Items
Profit/Loss From Continuing
5,311.46 5,056.18 5,056.18 5,493.13 5,493.13
Operations
Profit/Loss For The Period 5,311.46 5,056.18 5,056.18 5,493.13 5,493.13
Mar 16 Mar 15 Mar 15 Mar 14 Mar 14

12 mths 12 mths 12 mths 12 mths 12 mths

OTHER ADDITIONAL INFORMATION

EARNINGS PER SHARE
Basic EPS (Rs.) 57.07 54.00 54.46 59.00 59.36
Diluted EPS (Rs.) 56.80 54.00 54.10 59.00 59.00
VALUE OF IMPORTED AND INDIGENIOUS
RAW MATERIALS
Imported Raw Materials 1,422.32 1,390.20 1,390.20 2,200.97 2,200.97
Indigenous Raw Materials 5,974.03 3,834.46 3,834.46 3,801.83 3,801.83
STORES, SPARES AND LOOSE TOOLS
Imported Stores And Spares 189.12 258.16 258.16 0.00 193.07
Indigenous Stores And Spares 987.01 1,190.00 1,190.00 0.00 1,294.69
DIVIDEND AND DIVIDEND PERCENTAGE
Equity Share Dividend 1,699.95 1,510.54 1,510.54 1,320.85 1,320.85
Tax On Dividend 140.88 134.33 134.33 77.80 77.80
Equity Dividend Rate (%) 913.00 813.00 813.00 713.00 713.00

CASH FLOW STATEMENTLarsen &

Cash Flow ------------------- in Rs. Cr. -------------------
Toubro
Mar 16 Mar 15 Mar 15 Mar 14 Mar 14

Page 16 of 18
 12 mths 12 mths 12 mths 12 mths 12 mths

Net Profit/Loss Before

6,128.83 6,344.06 6,344.06 6,679.41 6,679.41
Extraordinary Items And Tax
Net Cash Flow From Operating
3,255.72 3,143.13 3,143.13 1,047.24 1,047.24
Activities
Net Cash Used In Investing Activities -522.06 -1,909.24 -1,909.24 -1,214.32 -1,214.32
Net Cash Used From Financing
-2,567.21 -1,436.55 -1,436.55 504.05 504.05
Activities
Net Inc/Dec In Cash And Cash
166.45 -202.66 -202.66 336.97 336.97
Equivalents
Cash And Cash Equivalents Begin of
1,591.46 1,794.12 1,794.12 1,457.15 1,457.15
Year
Cash And Cash Equivalents End Of
1,757.91 1,591.46 1,591.46 1,794.12 1,794.1
Year

RATIOS

Current Ratio 1.35 1.34 -- 1.27 1.31

Quick Ratio 1.43 1.43 -- 1.38 1.29

1)1 WORKING CAPITAL OF L&T for the Year 2014

WORKING CAPITAL= CURRENT ASSETS CURRENT LIABILITIES

=51,114.61-38,361.51

Therefore, Working Capital for the year 2014-15 is Rs. 12753.1 crores.

2) WORKING CAPITAL OF L&T for the Year 2015

WORKING CAPITAL= CURRENT ASSETS CURRENT LIABILITIES

=58,400.85-40,477.52

Therefore, Working Capital for the year 2015-16 is Rs. 17923.33 crores.

WORKING CAPITAL OF L&T for the Year 2016

WORKING CAPITAL= CURRENT ASSETS CURRENT LIABILITIES

=66,283.56-47,285.98
Page 17 of 18
Therefore, Working Capital for the year 2016-17 is Rs. 18997.53 crores.

CONCLUSION

In a Infrastructure development and Engineering Company like L&T whose scale is

unmatched until now with a legacy of spanning about 80 years. Being a Engineering
company, Working Capital is an inevitable and most required need. Labor is an integral part
and wages are required on a very regular basis upon which has a direct effect on the income
and turnover of the company..

1) Working Capital is increasing year on year from past three years and in excess of
increased working capital requirement that happens year-on-year and inflation
2) The positive and >1 positive quick ratio by more than 30-45 basis point in past
three years, which indicates the ability of the company to pay off short term
liabilities.
3) The increase in working capital has taken place by increase in current assets in
comparison to the increase in Current Liabilities.
4) Companys Current Assets were always more than requirement on account of
Profitability of the company.
5) Current Assets are more than current liabilities, which indicate that the company
used long term funds for short term requirement, where long term funds are most
costly then short term funds.
6) Current assets components show sundry debtors and other current assets forming.
There is also a inefficient in trade reciveable collections and a good chunk of other
current assets.
7) Cash as part of Current Assets is just around 2% of the current assets. Liquidity
pose a problem here.
8) There is good current ratio indicating that they would still be positive after paying
off current liabilities from current assets.
9) Positive Ratios reflect the companys Financial Position

Page 18 of 18