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“WORKING CAPITAL MANAGEMENT” 2018
Chapter:1
Introduction
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INTRODUCTION OF COMPANY
COMPANY PROFILE
 COMPANY’S NAME: RSB TRASMISSIONS (III) LTD,Jamshedpur jharkhand.

 ESTD IN: 1975 (AS INTERNATIONAL AUTO LTD.)
 HEADED BY: Mr. R.K. Behera (Chairman),Mr.S.K Behra(Vice Chairman &
Managing Director)
 INDUSTRIES: Auto Production

 VISION: “To be amongst most admired organisation with significant global presence”.
 MISSION:-“To be a leader by providing customer delight through world class quality in
progressive, innovate & challenging environment”.
 We strive to exceed the customer expectation in service, quality & cost.

 We endeavour to provide an enriching rewarding & environment friendly work
experience for our employees in an achievement based high performance structure.
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HISTORY OF THE COMPANY
• In 1975, Mr. R. K. Behera, a young mechanical engineer from NIT, Jamshedpur,

hailing from a humble service oriented middle class family, shunned the security of a job and
plunged into the hurly burly of high-risk and high-reward business arena and founded
International Auto in Jamshedpur with 15 people and 500 square feet of workspace.
• Inspired and motivated by the benevolent ideals of the legendry JRD and obsessed
with an incorrigible and irrepressible passion to create a world class industrial edifice, R. K.
Behera along with his brother S. K. Behera set about meticulously crafting the present-day
RSB enterprise brick by brick.
• Toughened by the early trials and tribulations and propelled by nothing-is-impossible

spirit of the Behera brothers, RSB has now blossomed into a pulsating and throbbing global
engineering
Institution in automotive components and systems and construction equipment aggregates.
• RSB now boasts of manufacturing facilities in six different locations in India and one
in the USA with 85,000 square meters of workspace. Latest technologies and human
resources are working together around the world passionately to create an enduring
institution.
• Founder and Chairman Mr. R. K. Behera, Co-Founder and Managing Director Mr. S.
K. Behera and Joint Managing Director Mr. Sailendra Behera now spearhead RSB.
• All RSB manufacturing units are ISO / TS16949, ISO: 14001 and OHSAS: 18001
certified.
• S. K. Behera, who has been co-piloting last four decades in his entrepreneurial
journey, started in a humble way in 1975 with a meagre monetary help of Rs. 15,000/- from
his father and RSB now has grown into multi-product/multi-location global engineering
enterprise with 13 state-of-the-art manufacturing plants spread over 7 locations in India
namely Jamshedpur (Jharkhand), Pune (Maharashtra), Dharwad (Karnataka), Chennai (Tamil
Nadu), Pantnagar (Uttarakhand), Cuttack (Orissa) and Lucknow (Uttar Pradesh); and one
each in Homer (USA), Silao (Mexico) and partnered venture at Brazil, with cumulative
employment base of more than 4,000 persons.
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SCOPE
Study of working capital is discussed under:
 Management of cash and marketable securities
 Management of accounts receivable
 Management of inventory
 Management of current liabilities
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OBJECTIVES
The main objective of working capital management is to maintain a trade of between risk and
return for the purchase of raw material component and spares.
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MANAGEMENT TEAM
 Mr.R. K. Behera
Chairman
Mr.R.K.Behera (RKB) is the founder and chairman of RSB Group. Mr.RKB is a graduate
in Mechanical engineering and has undergone specialized training in several areas of
industrial management.Mr.RKB is a member of several professional and trade
organization such as confederation of indian industry, value engineers association of
india, Indo German Chamber of Commerce, Maharatta Chamber of Commerce. He has
over 30 years of experience in Auto Industry
 Mr.S.K. Behera
Vice Chairman & Managing Director
Mr.S.K. Behera (SKB) is a graduate in Commerce and has undergone specialized training
in production management system. Mr.SKB is an Executive Committee Member and
Regional Chairman (East) of ACMA. He is in the governing council of Indo-Danish Tool
Room, Jamshedpur. Mr.SKB is a committee member of Red Cross Society of India and is
also associated with CII. He has over 28 years of experience in Auto component industry.
 Mr.Sailendra K. Behera
Joint Managing Director
Mr.Sailendra Behera is a Bachelor of Mechanical Engineering and has undergone

advance training in cutting Technology (Israel), Total Production Management (Japan),
QS 9000 training in TUV(USA), and Gear Technology in Italy and turkey.
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RSB GROUP
RSB comprises of four different companies,
 RSB Transmissions (III) Ltd.,
 RSB Transmissions North America Inc. (Formerly known as
 Miller Brothers Manufacturing),
 I-Design Engineering Solutions Ltd. and
 I-vitas Technologies Pvt. Ltd. (Currently known as RSB Industries.)
1. RSB Transmission (III) Ltd.
It was launched in 2000 as the Group Holding Company to bring all the Group
Companies under a common parent and in the wake of globalization, to create a
unified structure for global expansion and diversification and value accretion.
RSB Transmissions (III) Ltd
2. RSB Transmissions North America Inc. (Formerly known as Miller Brothers

Manufacturing Co.)
It enters the 21st century in a facility of 98,000 square feet with more than 150 dedicated
employees and projected sales of over $25 million.
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RSB CLIENT
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PRODUCT
 Propeller Shaft
 Axles
 Transmission Components
 Aluminium Castings
 Ferrous Casting
 Running Gear System
 Construction Equipment Aggregates
 Forgings
Propeller Shaft
RSB is a vertically integrated Propeller Shaft Solution provider, enjoying the largest market
shares in India. To enhance its in-house technical capabilities and overall productivity, RSB
has developed a technical collaboration with Eugene Klein GmbH, Germany for acquiring
technical know-how in designing, processing and testing.
The Propeller Shaft manufacturing program covers more than 65 unique part designations.
RSB is focused on catering to the present & futuristic commercial vehicle power transmission
requirements and meeting the stringent quality norms. The six manufacturing plants set up at
4 locations are functioning to assist Auto OEM’s for Propeller Shaft solutions targeted
towards regular production as well as after market requirements.
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Axles
Axles are one of the most significant products offered by RSB. It has a staggering capacity to
manufacture 2, 00,000 Axles/year. There are plans to enhance the capacity by 30% to cater to
the export market. Well-equipped manufacturing lines have been dedicated to develop a
variety of Axle.
Transmission Components
RSB's Gear Transmission units provide in-depth product support to prospective OEM clients
based on its vast industry experience and expertise. It manufactures an extensive range of
fully finished gears at two of its plants that are strategically located to cater to diversified
industry sectors inclusive of Commercial Vehicles, Passenger Cars, Tractors, Pump OEM's.
RSB is renowned for its customer services such as, fast turn around and individual attention
to complex orders.
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Aluminum Castings
RSB offers precision machined Aluminum castings to domestic as well as export markets.
RSB has been assisting any intricate casting ranging from 0.5 Kg aluminum component to 8.0
Kg aluminum component. RSB has been successfully managing the complete supply chain
program for a reputed US based OEM and supplies around half a million components
annually. The scope includes local warehousing in US and daily online supplies. The existing
export supply agreement has been renewed for the next program that reaffirms the faith of the
customers.
Ferrous Castings
RSB manufactures Ferrous Castings as per customer design & specifications at its
manufacturing plants located at Jamshedpur & Pune. It offers and supplies a wide range of
products to leading OEM’s like Cummins. RSB completely manages the supply-chain from
Castings procurement stage to the supplies and also conducts periodical supplier audits.
An in-house Quality Control has been ensuring high quality standards. The vast experience of
the professionals and the expertise of RSB has been the key to manufacturing cost-effective
and reliable Automobile Parts.
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Running Gear System
RSB manufactures Running Gear Systems like Axle, Fifth Wheel Coupling, King Pin and
Landing Leg, which are designed, developed, tested and validated by its in house R&D
division I-Design. Our Fifth Wheel coupling design is at par with latest European models.
RSB offers organized after sales service network across major cities in India.
Construction Equipment Aggregates
RSB is a forerunner in the Construction Equipment Aggregates industry in India. It has set up
three modern manufacturing facilities at Jamshedpur, Dharwad and Chennai.RSB has reached
significant milestones in the exports market over past few years. The services and the efforts
are being reflected by the faith of our international customers. Today, RSB is serving as a
single source to many overseas customers and manages their supply chain.
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Forging
RSB manufactures forging components with state-of-the art technology and equipment to
cater to the most stringent quality standards of forged components for domestic and export
customers. This facility will be the backbone of the group’s forging requirements, and will
also cater to OEM customers of the country.
(forging)
SWOT ANALYSIS
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Streangths
• Cost competitiveness in terms of labor and raw material.
• Established manufacturing base
• Qualified and skilled man power
• Manufacturing capabilities with international quality standards
• High operational efficiency
Weaknesses
• Low investment in research and development
• Limited knowledge of product liability and offshore warranty Handling
• Limited domestic market for various components inhibiting Capacity creations
• Comparatively poor infrastructure for supply chain and exports
• Lack of experience in system integration
Opportunities
• May serve as sourcing hub for global automobile majors
• Significant export opportunities may be realized through Diversification of
export basket.
• The growing need to outsource
• Leverage on product engineering expertise to improve the Worthiness and exports
of auto component
• Acquisition in foreign markets
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Threats
• The presence of a large counterfeit components market poses
significant threat
• Pressure on price from OEMs continues
• Imports pose price based competition in the replacement
Market
• Further marginalization of smaller players likely
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INTRODUCTION OF THE TOPIC
WHAT IS WORKING CAPITAL?
Working capital refers to the investment by the company in short terms assets such as cash,
marketable securities. Net current assets or net working capital refers to the current assets less
current liabilities. It measures how much in liquid assets a company has available to build its
business. The fundamental principles of working capital management are reducing the capital
employed and improving efficiency in the areas of receivables, inventories, and payables.
The concept of working capital is, perhaps, one of the most misunderstood issues in the
literature of finance. The reason is that it is subject to multiple connotations. Some define it
as excess of current assets over current liabilities. These net concepts are based
on „gone concern‟ approach. A „going concern‟ approach takes a total view of the business
and considers gross current assets as the gross working capital requirement of a business, and
management of working capital as management of current assets and current liabilities to
ensure dynamic stability between generation of current assets and their funding operations.
Gross working capital:-
It refers to the firm’s investment in current assets. The sum of total current assets is called
gross working capital. Current assets are the assets, which can be converted into cash within a
one accounting year or operating cycle, & include cash short-term securities, debtors,
receivable, & stock.
Net working capital:-
It is the difference between the current assets & current liabilities. Current liabilities are those
claim of outside which are expected to mature for payment within one accounting year. Net
working capital is positive & negatives both. If a current asset is more than current liabilities,
it will call positive net working capital & Current liabilities is more than current assets, it will
call negative working capital.
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IMPORTANCE OF WORKING CAPITAL:
 Working capital may be regarded as the lifeblood of the business.
Without sufficient working capital no business organization can run
Smoothly or successfully.
 In the business the Working capital is comparable to the blood of the human body.
Therefore the study of working capital is of major importance to the internal and
external analysis because of its close relationship with the current day to day
operations of a business. The inadequacy or mismanagement of working capital is the
leading cause of business failures.
 To meet the current requirements a business needs working capital to purchase
services, raw materials etc. It is also pointed out that working capital is nothing but
one segment of the capital structure of a business.
• In short, the cash and credit in the business, is comparable to the blood in
the human body like finance’s life and strength i.e. profit of solvency to the business
Enterprise.
• Financial management is called upon to maintain always the right cash balance so that flow
of fund is maintained at a desirable speed not allowing slow down. Thus enterprise can have
a balance between liquidity and profitability. Therefore the management of working capital is
essential in each and every activity.
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TYPE OF WORKING CAPITAL
WORKING CAPITAL
ON THE BASIS OF ON THE BASIS OF

CONCEPT TIME
GROSS NET WORKING PERMANENT VARIABLE

WORKING CAPITAL WORKING WORKING
CAPITAL CAPITAL CAPITAL
REGULAR RESERVE
WORKING WORKING SPECIAL
SEASONAL WORKING
CAPITAL CAPITAL
WORKING CAPITAL
CAPITAL
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Working Capital can be classified in two ways:
1. On the basis of Concepts.

2. On the basis of Time.
1. ON THE BASIS OF CONCEPT:
There are 2 concepts:
 Gross Working Capital.

 Net Working Capital.
Gross Working Capital
 In point of view of an Accountant the Gross Working Capital is the total Current assets
where Current assets are the assets that can be converted into cash within an accounting
year & include cash, debtors etc.
 In “Economics Concept” assets are employed to derive a return.
Net Working Capital
Net Working Capital= Current Assets – Current Liabilities
 In point of view of an Accountant Net Working Capital is the difference between Current
Assets and Current Liabilities and it indicates the liquidity position of a firm & suggests
the extent to which working capital needs may be financed by permanent sources of
funds. It can be positive or negative. When current assets exceed current liabilities, it is
known as ‘positive net working capital’ and if the current liabilities are more than current
assets, it is known as, a working capital deficiency
2. ON THE BASIS OF TIME
 Permanent or Fixed working capital.

 Temporary or Variable working capital.
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Permanent or Fixed working capital
 There is always a minimum level of current assets which is continuously required by a

firm to carry on its business operations.
 Thus, the minimum level of investment in current assets that is required too continues the
business without interruption is referred as permanent working capital.
Temporary or Variable working capital
 This is the amount of investment required to take care of fluctuations in business activity
or needed to meet fluctuations in demand consequent upon changes in production & sales
as a result of seasonal changes.
Distinction between permanent and variable working capital
 Permanent is stable over time where as variable is fluctuating according to seasonal

demands.
 Investment in permanent portion can be predicted with some profitability where as

investment in variable cannot be predicted easily.
 While permanent is minimum investment in various current assets, variable is expected to
take care for peak in business activity.
 While permanent component reflects the need for a certain irreducible level of current
assets on a continuous and uninterrupted basis, the temporary portion is needed to meet
seasonal & other temporary requirements.
 Also permanent capital requirements should be financed from Long Term sources
whereas Short Term funds should be used to finance temporary working capital needs of
a firm.
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REQUIREMENTS OF FUNDS
Every company requires funds for investing in two types of capital i.e. fixed capital, which
requires long-term funds, and working capital, which requires short-term funds.
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Capital Sources of additional working include the following:
 Profits (when you secure it as cash!)

 Payables (credit from suppliers)
 Bank overdrafts or lines of credit
 Short Term loans
If a company have insufficient working capital and try to increase sales, it can easily over-
stretch the financial resources of the business. This is called overtrading. Early warning signs
include:
 Pressure on existing cash

 Exceptional cash generating activities e.g. offering high discounts for early cash
payment.
 Seeking greater overdrafts or lines of credit
 Part-paying suppliers or other creditors
 Paying bills in cash to secure additional supplies
 Management pre-occupation with surviving rather than managing
 Frequent short-term emergency requests to the bank (to help pay wages, pending
receipt of a cheque.
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Operating or Cash Cycle
The working capital cycle refers to the length of time between the firms paying the cash for
materials, etc., entering into production process/stock & the inflow of cash from debtors
(sales), suppose a company has certain amount of cash it will need raw materials. Some raw
materials will be available on credit but, cash will be paid out for the other part immediately.
Then it has to pay lab our costs & incurs factory overheads. These three combined together
will constitute work in progress.
After the production cycle is complete, work in progress will get converted into sundry
debtors. Sundry debtors will be realized in cash after the expiry of the credit period. This cash
can be again used for financing raw material, work in progress etc. thus there is complete
cycle from cash to cash wherein cash gets converted into raw material, work in progress,
finished goods and finally into cash again. Short term funds are required to meet the
requirements of funds during this time period. This time period is dependent upon the length
of time within which the original cash gets converted into cash again. The cycle is also
known as operating cycle or cash cycle.
Working capital cycle can be determined by adding the number of days required for each
stage in the cycle. For example, company holds raw material on average for 60 days, it gets
credit from the
Supplier for 15 days and finished goods are held for 30 days & 30 days credit is extended to
debtors. The total days are 120, i.e., 60 15 + 15 + 15 + 30 + 30 days is the total of working
capital.
Thus the working capital cycle helps in the forecast, control & management of working
capital. It indicates the total time lag & the relative significance of its constituent parts. The
duration may vary depending upon the business policies. In light of the facts discusses above
we can broadly classify the operating cycle of a firm into three phases:-
1. Acquisition of resources.
2. Manufacture of the product and
3. Sales of the product (cash / credit).
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First and second phase of the operating cycle result in cash outflows, and be predicted with
reliability once the production targets and cost of inputs are known. However, the third phase
results in cash inflows which are not certain because sales and collection which give rise to
cash inflows are difficult to forecast accurately.
Operating cycle consists of the following:
 Conversion of cash into raw-materials;

 Conversion of raw-material into work-in-progress;
 Conversion of work-in-progress into finished stock;
 Conversion of finished stock into accounts receivable through sales; and
 Conversion of accounts receivable into cash.
In the form of an equation, the operating cycle process can be expressed as follows:
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The time elapsed between cash outlay and cash realization by the sale of finished goods is the
length of an operating cycle. It consisting of:-
 Procurement of raw material, components, stores and spares for the manufacture of the
product
 Conversion of raw material in to finished goods
 Storage of credit to customers, and
 Collection of cash form customer.
BALANCED WORKING CAPITAL POSITION
The firm should maintain a sound working capital position. It should have adequate working
capital to run its business operations. Both excessive as well as inadequate working capital
positions are dangerous from the firm’s point of view. Excessive working capital not only
impairs the firm’s profitability but also result in production interruptions and inefficiencies.
Operating cycle for manufacturing firm:
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The firm is therefore, required to invest in current assets for smooth and uninterrupted
functioning:
Here, the length of GOC is the sum of ICP and RCP. ICP is the total time needed for
producing and selling the products. Hence it is the sum total of RMCP, WIPCP and FGCP.
On the other hand, RCP is the total time required to collect the outstanding amount from
customer usually, firm acquires resources on credit basis. PDP is the result of
Such an incidence and it represents the length of time the firm is able to defer payments on
various resources purchased.
The difference between GOC and PDP is known as Net Operating Cycle and if Depreciation
is excluded from the expenses in computation of operating cycle, the NOC also represents the
cash collection from sale and cash payments for resources acquired by the firm and during
such time interval between cash collection from sale and cash payments for resources
acquired by the firm and during such time interval over which additional funds called
working capital should be obtained in order to carry out the firms operations. In short, the
working capital position is directly proportional to the Net Operating Cycle.
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CONSTITUENTS OF WORKING CAPITAL:-
 CURRENT ASSETS:
 Inventory
 Sundry Debtors
 Cash and Bank Balances
 Loans and advances
 CURRENT LIABILITIES:
 Sundry creditors
 Short term loans and Provisions
Current Assets:-
Current Assets are assets in the balance sheet which is expected to be realized usually within
one year, or one business cycle – whichever is longer. Current Assets are also called the
GORSS WORKING CAPITAL.
Typical current assets include:
 Cash and Bank balances

 Accounts Receivable
 Inventory
 Short – term – investment,
 Security Deposits, and
 Prepaid accounts which will be used within a year.
Characteristics of Current Assets:
 Short Life Span
Cash balances may be held idle for a week or two, thus a/c may have a life span of 30-60
days etc.
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 Swift Transformation into other Asset forms
Each CA is swiftly transformed into other asset forms like cash is used for acquiring raw
materials , raw materials are transformed into finished goods and these sold on credit are
convertible into A/R & finally into cash.
Current Liability:-
In accounting, current liabilities are often understood as all liabilities of the business that are
to be settled in cash within the fiscal year or the operating cycle of a given firm, whichever
period is longer. A more complete definition is that current liabilities are obligations that will
be settled by current assets or by the creation of new current liabilities.
For example, accounts payable for goods, services or supplies that were purchased for use in
the operation of the business and payable within a normal period of time would be current
liabilities.
Current Assets are controlled by using a scientific tool called the “Ratio Analysis”. In order
to control over the Current Assets, a company calculates the Current Ratio.
Current Ratio:-
Current ratio is calculated by dividing current assets by current liabilities:-Current assets

include cash and those assets that can be converted into cash within a year, such as
marketable securities, debtors, inventories, loans and advances. All the obligations maturing
within a year are included in current liabilities.
Current liabilities include creditors, bills payable, accrued expenses, short term bank loan,
income tax liability and long-term debt maturing in the current year.
CURRENT RATIO = CURRENT ASSETS ÷ CURRENT LIABILITIES.
This ratio varies from industry to industry. In ideal situation the Current Ratio should be 2:1.
But for the company like RSB Transmission (I) the ratio should be 1.33. In order to improve
the Current Ratio one has to keep proper control over both current assets and current
liabilities.
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Chapter:II
Review of literature
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Working Capital Management: a literature review and research agenda
Author(s):
Harsh Pratap Singh:-
Abstract Purpose-The purpose of this paper is to review research on working

capital(WCM)and to identify gaps in the current body of knowledge which justify future
research direction.WCM has attracted serious research attention in the recent past ,especially
after the financial crisis of 2008.the paper will be useful to researchers, finance professionals
and other concerned with WCM to understand the important of WCM.To the best of author
has knowledge, no detailed SLR on this topic has previously been published in academic
journals. Keywords literature review survey methods, operating cycle, working capital
management paper type literature review.
Design/methodology/approach:
Using systematic literature review (SLR) method, the present study reviews 126 articles from
referred journal and international conferences published WCM.
Findings:
Detailed content analysis reveals that most of the research work is empirical and focuses
mainly on to aspect, impact of working capital of profitability of firm and working capital
practice. Major research work has concluded that WCM is essential for corporate
profitability. Major issues with prior literature are lack of survey based approach and lack of
systematic theory development study, which opens all new areas for future research. The
future research directions proposed in this paper may help develop a greater understanding of
determinants and practices of WCM.
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CHAPTER:III
RESEARCH
METHODOLOGY
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RESEARCH METHODOLOGY
Research methodology has multiple dimensions. Research Methodology is a way to

systematically solve the research problems scientifically.
Collection of data:-
Secondary data:-
 Annual reports of the company

 Balance sheets profit and loss Account of the company
 Company website
Research design:-
In view of the objects of the study listed above on descriptions research is one which is
largely interprets and already available information and it lays particular emphasis an analysis
and interpretation of the exiting and available information.
 To know to working capital status of the company.

 To after suggestion based on research finding.
Scope of the study:-
 The scope of the study is limited to collecting working capital annual report of the
company every year.
 The study of working is based on tools like ratio analysis.
 Statement of changes in working capital.
 The study is based on last year (2016-2017) annual reports of RBS Transmission (III)
Auto LTD.
Needs of the study:-
 To express the relationship different between financial reports in such a way that if
allow the user to draw conclusion above the performance strengths and weakness of
the company.
 To diagnose the information contained in financial statements so as to judge in
working capital of the firm.
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 The study helps to know a current ratio and turnover position of the company.
Objective of study
The financial analyzing of the RSB Company and company has been undertaken with the
following objective.
 To identity the financial strengths & weakness of the company.

 To analyses the working capital of the company.
 To analyses and interpret the financial ratio of RSB.
 To analyses and interpret the profitability ratio of RSB.
LIMITATIONS OF THE STUDY:-
Following are the limitations of the study:
1) To study was limited to only two years financial data.

2) The study is purely based on secondary data which were taken primarily from
published annual reports of RSB.
3) Many facts and data are such that they are not to be disclosed because of the
confidential nature of the same.
4) Since the financial matters are sensitive in nature the same could not acquired easily.
5) The ratio is collected from past financial statement and these are not indicated of
future.
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CHAPTER:IV
DATA ANALYSIS
AND
INTERPRETIONS
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CASH MANAGEMENT:-
Cash is one of the important aspects of Current Asset. Cash Management involves control
and analysis of cash flow during a particular period of time.
Holding excessive cash by a company indicates that the company is not investing its idle cash
in the available profitable project. It adds the implicit of Capital. We must note that Cash is
an asset for the company only when it is used effectively. Idle cash is the liability.
However, the requirement of Cash varies from business to business. A firm may hold cash at
times of lower inflow with an object to finance it ongoing project. A Cash Reserve is
essential to tide over the deficit or future contingencies.
In other words firm that have volatile cash flow are more likely to keep more cash balance
then a non-volatile firm. The most important factor that determines the amount of cash that a
company can hold is the “Conversion Cycle”.
Conversion Cycle is the length of time that a company takes to convert its resource i.e. input
to cash flow. It begins from purchasing of raw-material, converting the Raw-material into
Work-in-process, converting the work-in-process to Finished Goods, selling out the finished
goods and ends with collection of money from the Customer.
The Conversion Cycle Diagram:
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Motives for holding Cash:

1. To meet the day-to-day requirement of the business.
2. To meet the future contingencies.

3. for speculative business opportunities.
Cash Flow:
Cash Flow refers to the flow of cash into and out of a business over a period of time. The
outflow of cash is measured by the money we pay every month to salaries, suppliers, and
creditors. The inflows are the cash we receive from customers, lenders, and investors.
The Cash Flow is of two types:-
1. Positive Cash Flow
2. Negative Cash Flow
1. Positive Cash Flow:

If the cash coming into the business is more than the cash going out of the business, the
company has a positive cash flow. A positive cash flow is very good and the only concern
here is managing the excess cash prudently.
2. Negative Cash Flow:

If the cash going out of the business is more than the cash coming into the business, the
company has a negative cash flow.
A negative cash flow can be caused by a number of problems that result in a shortage of cash,
such as too much or obsolete inventory, or poor collections on accounts receivable. If the
company doesn't have money in the bank or can't borrow additional cash at this point, it may
be in serious trouble.
Cash Flow Statement:-

A cash flow statement is prepared to periodically to know the inflow as well as out flow of
cash and whether the company is having a positive cash balance at the end. It is also drawn to
know how much cash is generated by a company from:
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1. Operation Activities.
2. Investment Activities
3. Financing Activities
1. Operating Cash Flow (Internal)

Operating cash flow, often referred to as working capital, is the cash flow generated from
internal operations. It is the cash generated from sales of the product or services of a business.
Because it is generated internally, it is under control of a company.
2. Investing Cash Flow (Internal)

Investing cash flow is generated internally from non-operating activities. This component
would include investments in plant and equipment or other fixed assets, non-recurring gains
or losses, or other sources and uses of cash outside of normal operations.
3. Financing Cash Flow (External)

Financing cash flow is the cash to and from external sources, such as lenders, investors and
shareholders. A new loan, the repayment of a loan, the issuance of stock and the payment of
dividend are some of the activities that would be included in this section of the cash flow
statement.
Good cash management means:
• Knowing when, where, and how cash needs will occur,
• Knowing what the best sources are for meeting additional cash needs; and,
• Being prepared to meet these needs when they occur, by keeping good relationships
with bankers and other creditors.
The starting point for avoiding a cash crisis is to develop a cash flow projection. Smart
business owners know how to develop both short-term (weekly, monthly) cash flow
projections to help them manage
Daily cash, and long-term (annually) cash flow projections to help them develop the
necessary capital strategy to meet their business needs. They also prepare and use historical
cash flow statements to gain an understanding about where all the money went.
37
RSB TRNASMISSIONS (III) LIMITED

Cash Flow Statement
Particular As at 31st March As at 31st March 2016

2017 (amount in (amount in Rs.)
Rs.)
A. Cash flow from Operating Activity
NET PROFIT BEFORE TAX 266,512,974 208,376,444
ADJUSTMENTS FOR:
Depreciation & Amortisation Expenses 372,911,699 378,970,484
Unrealised Foregin Exchange(Gain/Loss) 6,936,061 13,478,481
Loss/Profit on sale of Fixed Assets (94,116) 219,342
Liabilities no longer required written back - -
ITEMS CONSIDERED SEPARATELY:
Interest expenses 478,680,407 426,636,176
Investment income - (150)
Interest income (12,947,457) (36,784,721)
OPERATING PROFIT BEFORE
WORKING CAPITAL 1,111,999,568 990,896,056
CHANGES IN WORKING CAPITAL

Net changes in working capital (179,423,987) 163,800,717
CASH GENERATED FROM
OPERATIONS 932,575,581 1,154,696,772
Taxes paid (including TDS & prior period (81,321,407) (36,632,059)
taxes)
NET CASH FROM OPERATING
ACTIVITIES 851,254,174 1,118,064,713
B. Cash flow from Investing Activities

Purchase of Fixed Assets (142,102,536) (157,564,854)
Purchase of Investments (1,290,515) (345,703,313)
Share application money - -
Interest received 12,947,457 36,784,721
Dividend received from Investment(net) - 150
NET CASH FROM INVESTING
ACTIVITES (130,445,594) (466,483,296)
C. Cash flow Financing Activities

Net Proceeds from borrowing(Term Loan) (250,743,244) (121,128,528)
Net Proceeds from borrowing(Working 40,144,096 (115,778,875)
Capital)
Net Proceeds from borrowing(Unsecured) 12,166,440 8,689,965
Interest paid (478,680,407) (426,636,176)
Preference Dividend Paid(Including dividend (59,785) (59,785)
tax)
38
NET CASH FROM FINANCING

ACTIVITIES (677,172,900) (654,913,400)
NET INCREASE IN CASH AND CASH 43,635,680 (3,331,983)

EQUIVALENT (A+B+C)
CASH AND CASH EQUIVALENT AT 127,565,055 130,897,038
THE BEGINNING
CASH AND CASH EQUIVALENT AT 171,200,735 127,565,055
THE END
39
RSB TRANSMISSIONS (III) LIMITED
Profit and Loss Account

Particular For the year For the year
ended 31st ended 31st 2017
March Amount March 2016
in Rs. Amount in Rs.
Revenue from Operations 8,705,947,054 8,219,048,519
Other Income 13,251,511 37,082,905
Total Revenue 8,719,198,565 8,256,131,424
Expenses 57.44% 57.81%

Cost of materials consumed 5,012,668,658 4,824,343,296
Changes in inventories of finished goods (12,282,724) (73,074,647)
Employee benefits expense 749,304,128 782,502,324
Other Expenses 1,851,403,424 1,708,377,347
Finance cost 478,680,407 426,636,176
Depreciation and Amortization 372,911,699 378,970,484
Total Expenses 8,452,685,591 8,047,754,980
Profit for the year before tax 266,512,974 208,376,444

Tax expenses :
Current tax 99,984,000 68,986,000
MAT credit entitlement - (5,994,825)
Defferred tax (3,284,000) 2,217,000
Total Tax 996,736,000 65,258,175
Profit After Tax 169,776,974 143,118,269

Earning per ordinary share (face value Rs.10
each)
Basis 10.07 9.08
Diluted 6.55 5.91
40
RSB TRANSMISSIONS (III) LIMITED

BALANCE SHEET
As at As at
31stMarch,2017 31stMarch,201
(Amount in Rs.) (Amount in Rs.)
EQUITY AND LIABILITIES
Shareholder’s funds
Share capital 219,688,170 208,671,920
Reserves and surplus 3,103,430,086 2,744,699,361
3,323,118,256 2,953,341,281
Non-current liabilities
Long-term borrowings 1,505,498,754 1,883,802,446
Deferred tax liabilities 366,091,018 369,339,018
Other long term liabilities 254,945,140 198,752,737
Long term provisions 49,914,319 50,114,443
2,176,449,232 2,502,008,644
Current liabilities
Short-term borrowings 838,179,858 826,035,762
Trade payables 780,358,161 698,356,042
Other current liabilities 910,188,747 1,036,244,171
Short-term provisions 55,229,887 36,575,401
2,583,956,652 2,597,211,376
TOTAL 8,083,524,140 8,052,561,302
ASSETS
Non-current assets
Fixed assets
Tangible assets 3,572,922,226 3,787,591,152
Intangible assets 119,158,439 124,433,440
Capital work-in-progress 122,284,228 123,191,862
Intangible assets under development 2,518,600 12,382,086
3,816,883,494 4,047,598,540
Non-current investments 1,468,773,323 1,467,482,809
Long-term loan and advances 242,584,988 219,501,501
1,741,358,311 1,686,984,310
Current assets
Inventories 1,227,652,356 1,143,156,610
Trade receivables 646,771,922 634,305,051
Cash and cash equivalents 171,200,735 127,565,055
Short-term loan and advances 380,122,828 341,125,898
Other current assets 99,534,495 71,825,837
2,525,282,335 2,317,978,451
TOTAL 8,083,524,140 8,052,561,302
41
RATIO ANALYSIS
A. Financial Ratio
1. Current Ratio :-
Current ratio measures the ability of the enterprise to meet its current obligation. It shows
how liquid a firm is to meet its debts in short runs.
It is computed as:
Current Asset
Current Ratio = -------------------------------
Current Liability
Particulars 2016 2017

Current Asset (Rs. In Lacks) 2,317,978,451 2,525,282,335
Current Liabilities (Rs.in lacks) 2,597,211,376 2,583,956,652

Current Ratio 0.8924 0.97729
current ration
1 0.97729
0.95
0.8924
0.9
current ration
0.85
0.8
2016 2017
Interpretation: -
The standard of ideal current ratio is 2:1.we sees here that the RBS current ratio is for above
the ideal current ratio. It indicates that the firm is in a liquid position and has ability to meet it
requirement in the short term source.
42
2. Quick Ratio:-
It expresses the relationship between quick assets and current liabilities. Quick assets are
defined as the assets that can be easily liquidated. It excludes from the current assets
inventories and prepaid Expenses that are the most liquid assets.
It is computed as:
Current Asset – (Inventories +Prepaid Expenses)
Quick Ratio = ---------------------------------------------------------------------
Current Liability
Quick Assets = Current Assets – (Inventory + Prepaid Expenses)

Current Assets (2016) = 2,317,978,451
Inventory (2016) = 1,143,156,610
Quick Assets = (Current Assets-Inventory)= 1,174,821,841
Current Assets (2017) = 2,525,282,335
Inventory (2017) = 1,227,652,356
Quick Assets = (Current Assets-Inventory)= 1,297,629,979
Quick Asset (Rs. In Lacks) 1,174,821,841 1,297,629,979
Current Liabilities (Rs. In lacks) 2,597,211,376 2,583,956,652

Quick Ratio 0.45 0.502
Interpretation: -
The standard of ideal quick ratio is 1:1 which shows that for each unit of short term liability.
There is a highly liquid asset and the company will not face any difficulty to meet any
unforeseen situation. It can be noted here that there has been effort put in by the company to
improve its quick ratio.
43
B. Profitability Ratio:-
3. Net Profit Ratio: -The net profit percentage is the ratio of after-tax profit to net sales.,
It reveals the remaining profit after all costs of production, administration, and financing
have been deduced from sales, and income taxes recognized
Net Profit (After Tax & Interest)
Net Profit Ratio = -------------------------------------------- X 100
Turnover
Net Profit (PAT) (Rs. in Lacs) 143,118,269 169,776,974
Turnover (Rs. in Lacs) 8,705,947,054 8,219,048,519
Net Profit/Loss Ratio (%) 0.0164 0.0206
Interpretation: -
In the Year 2017 Turnover of RSB has increased as compare to year 2016 and also increased
Company’s Net Profit. The increase in Net Profit ratio shows the growth of the Company.
44
Chapter:V
FINDING,SUGGEST
ION AND
CONCLUSION
45
FINDINGS
 RSB Transmissions (III) Ltd. is taking all the efforts to maintain its Working Capital
effectively.
 The standard of ideal current ration 2:1 and ideal quick ratio of 1:1.it indicates that the
firm is in a liquid position and has ability to meet. It requirement in the short term
source.
 In the year 2017 turnover of RSB is increased as compared to year 2016 and also
increased company’s.net profit the increase in net profit ratio show the growth of the
company.
.
SUGGESTION
 Effective computerization:-computer should be used merely for accounting purpose

for the decision making.
 Improve co-ordination:-better co-ordination among different department like
purchase, sale and finance department will help in achieving greater efficiency.
 Disposal of obsolete and surplus inventory:-procedures for disposal must be
simplified.
CONCLUSION
From the above analyses of the company financial statement it’s concluded
that the company financial position is not good because the current ratio and
quick ratio position are not good of the company have to decrease its
liquidity position. It can be efforts put in by the company to improve its
financial ratio and its has liquid asset sufficient to meet its short term
liability.
46
Bibliography
1) website
 www.google.com
 www.rsbglobal.com
 www.investopedia.com
 www.businessworld.in
2) Annual reports of RSB Transmission (III) Ltd.
3) Books
47

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“WORKING CAPITAL MANAGEMENT” 2018

 COMPANY’S NAME: RSB TRASMISSIONS (III) LTD,Jamshedpur jharkhand.

 INDUSTRIES: Auto Production

 We strive to exceed the customer expectation in service, quality & cost.

HISTORY OF THE COMPANY

• In 1975, Mr. R. K. Behera, a young mechanical engineer from NIT, Jamshedpur,

• Toughened by the early trials and tribulations and propelled by nothing-is-impossible

Institution in automotive components and systems and construction equipment aggregates.

Study of working capital is discussed under:

 Management of cash and marketable securities

 Management of accounts receivable

 Management of current liabilities

Mr.Sailendra Behera is a Bachelor of Mechanical Engineering and has undergone

RSB comprises of four different companies,

 RSB Transmissions (III) Ltd.,

 RSB Transmissions North America Inc. (Formerly known as

 Miller Brothers Manufacturing),

 I-Design Engineering Solutions Ltd. and

 I-vitas Technologies Pvt. Ltd. (Currently known as RSB Industries.)

1. RSB Transmission (III) Ltd.

RSB Transmissions (III) Ltd

2. RSB Transmissions North America Inc. (Formerly known as Miller Brothers

Running Gear System

Construction Equipment Aggregates

• Cost competitiveness in terms of labor and raw material.

• Established manufacturing base

• Qualified and skilled man power

• Manufacturing capabilities with international quality standards

• High operational efficiency

• Low investment in research and development

• Limited knowledge of product liability and offshore warranty Handling

• Limited domestic market for various components inhibiting Capacity creations

• Comparatively poor infrastructure for supply chain and exports

• Lack of experience in system integration

• May serve as sourcing hub for global automobile majors

• Significant export opportunities may be realized through Diversification of

• The growing need to outsource

• Leverage on product engineering expertise to improve the Worthiness and exports

• Acquisition in foreign markets

• The presence of a large counterfeit components market poses

• Pressure on price from OEMs continues

• Imports pose price based competition in the replacement

• Further marginalization of smaller players likely

INTRODUCTION OF THE TOPIC

WHAT IS WORKING CAPITAL?

Gross working capital:-

Net working capital:-

IMPORTANCE OF WORKING CAPITAL:

 Working capital may be regarded as the lifeblood of the business.

Without sufficient working capital no business organization can run

TYPE OF WORKING CAPITAL

ON THE BASIS OF ON THE BASIS OF

GROSS NET WORKING PERMANENT VARIABLE

Working Capital can be classified in two ways:

1. On the basis of Concepts.

1. ON THE BASIS OF CONCEPT:

There are 2 concepts:

 Gross Working Capital.

Gross Working Capital

 In “Economics Concept” assets are employed to derive a return.

Net Working Capital

Net Working Capital= Current Assets – Current Liabilities

2. ON THE BASIS OF TIME