A Study On Working Capital: Department of Management Studies

A study on WORKING CAPITAL
CONTENTS
CHAPTER I
 Introduction
 Need for the study
 Objectives
 Methodology
 Limitations
 Chapterisation
CHAPTER II
 Industry Profile
 Company Profile
CHAPTER III
 Theoretical frame work
CHAPTER IV
 Data Analysis &Interpretation
CHAPTER V
 Summary
 Suggestions
 Conclusion
 Annexure
 Bibliography
Department of management studies Page 1

CHAPTER-I
 INTRODUCTION TO THE TOPIC
 NEED FOR THE STUDY
 OBJECTIVE OF THE STUDY
 METHODOLOGY
 LIMITATIONS
 CHAPTERIZATION

INTRODUCTION
INTRODUCTION TO THE TOPIC:
Every business needs funds for two purposes for its establishment and to carry out its
day- to-day operations. Long terms funds are required to create production facilities
through purchase of fixed assets such as plant and machinery, land, building, furniture,
etc. Investments in these assets represent that part of firm’s capital which is blocked on
permanent or fixed basis and is called fixed capital. Funds are also needed for short-term
purposes for the purchase of raw material, payment of wages and other day -today
expenses etc. These funds are known as working capital. In simple words, working
capital refers to that part of the firm’s capital which is required for financing short- term
or current assets such as cash, marketable securities, debtors & inventories. Funds, thus,
invested in current assets keep revolving fast and are being constantly converted in to
cash and this cash flows out again in exchange for other current assets. Hence, it is also
known as revolving or circulating capital or short term capital.
Definition:
According to Gretsenberg:
“working capital means current assets of a company that are changed in the ordinary
course of business from one form to another.”

Meaning:
working capital refers to that part of the firm’s capital which is required for financing
short- term or current assets such as cash, marketable securities, debtors & inventories.
Funds, thus, invested in current assets keep revolving fast and are being constantly
converted in to cash and this cash flows out again in exchange for other current assets.
1.1 NEED FOR THE STUDY
The project study focuses mainly on the analysis of financial ratios, working capital,
funds flow statement, cash flow statement inSEIL. The study has various benefits to
various parties directly (or) indirectly and has great significance.
o This study gives a practical insight of the organizational activities and enables to
know the practical problems and solutions in SEIL
o It is beneficial to top Management of the company by providing crystal clear

picture of various aspects (contributing for co.) i.e., Financial position etc.,
o The study is also beneficial to employees and offers motivation by showing

various activities contributing for company growth.
o The investors who are interested in the company’s shares will also get benefits by
going through the study and can easily take a decision whether to invest or not in
the company shares.

o It is helpful in providing the financial information as it focuses on daily cash flows

management and funds flow management in the organization. Finance plans are
central instruments for directing and co-ordination the financial effort.
1.2 OBJECTIVES OF THE STUDY
Working capital is the most widely used and powerful technique of financial analysis
.The main objective of the present study is to know the financialcondition of the
company.
o To understand the concept of working capital and its importance
o To determine the amount of the working capital employed by SEIL
o To know the overall operational efficiently and financial performance of

the company SEIL international limited.
o To study the liquidity position by applying various ratios.
o To check the relationship between profitability and liquidity of the selected

company.
o To asses the long term financial viability of company.
o To know how much the management is constantly concerned about the

overall
profitability of the company.

1.3 METHODOLOGY
The study has been conducted in the organization to examine working capital
management in order to enquire into the issues like liquidity, and material
management. The study has been undertaken in the accounting & finance
departments of the organization.
The data for the present study was obtained from both primary and secondary data
by conducting personal interviews with senior executives to secure the first hand
information and various aspects of working capital management and the
procedures and systems adopted in the company for managing working capital.
The collection of information is done two principle sources, viz
 Primary data.
 Secondary data.
Primary Data:
It is information collected directly without any references. In this study it is

too gathered through interviews with concerned officers and staff, individually or
collectively. Some of the information were verified and supplemented through
personal observation.

The data collection includes conducting personal interviews with the

concerned officer of financial department of STEEL EXHANGE INDIA LTD.
Secondary Data:
This secondary data was collect form already published sources such as
pamphlets of annual reports, returns and internal records that are published in
www.seil.com
The data collection includes collection of required data from annual records of
STEEL EXHANGE INDIA LTD and also Reference from text books and journals
relating to financial management. After the objective has been stated clearly, the
next task was to collect relevant data regarding the research study. The data
regarding the Indian steel industry were collected from the internet. And other
relevant data were also collected from internet. Although there were some data
from newspaper and magazines but the major portion was given by the company
i.e. the assistant manager of the respective departments.
Most of the data and figures were collected from the record of the company.
In fact the above collected data was not enough so there was need of primary
source of data. So the primary data involved data collected from the guide at the
company. Apart from that we had also gone through the record of the company.
1.4 LIMITATIONS
Every study is conducted under some limitations. Some of the limitations of the study are
as follows.
During the project period most of the staff members are busy with auditing and
other works. So they could not afford give full information.
o Some of the information was not available due to the confidential matters.
o Comparison of SEIL’s performance with other organizations was not possible
since the financial statements of other organizations were not available.
o Duration of time is also a limitation
1.5 CHAPTERIZATION:
The following is the complete format of the chapterization of the complete
project:
 First chapter deals with introduction of Ratio analysis regarding the

company details.
 Second chapter deals with industry profile and company profile of steel and
industry with special focus on Ratio analysis.
 Third chapter deals with theoretical frame work of Ratio analysis with their
advantages and limitations.
 Fourth chapter deals with data analysis and interpretation
Regarding the ratio calculated.
 Fifth chapter deals with summary, findings and suggestions.

There ends the complete chapterization of the project.
CHAPTER-II
INDUSTRY PROFILE
&
COMPANY PROFILE
 Industry Profile

 Company Profile
2.1 INDUSTRY PROFILE
Steel is an alloy of iron usually containing less than 1% carbon is a

versatile material with multitude of useful properties used most frequently in the
automotive and construction industries. Steel can be cast into bar strips, sheets,
nails, spikes, wires, rods or pipes as needed by the intended user. The consumption
of steel is regarded as the index of industrialization and the economic maturity any
country has attained.
The development of steel industry in India should be viewed in

conjunction with the type and system of government that had been ruling the
country. The production of steel in significant quantity started after 1990. The
growth of steel industry can be conveniently started by dividing the period of pre-
independence, steel production was 1.5, million tons per year, which was raised o 9
million tones of target. This is the result of the bold steps taken by the government
to develop this sector.
The following information is regarding with the total growth of the steel industry.
The data has been completely data that has been provided by the steel industries
website which give a complete information regarding the growth of steel industry
before and after independence to the country.

GROWTH OF STEEL INDUSTRY:
PRE-INDEPENDENCE:
TABLE 2.1
1830 Josiah Marshall Health constructed the first

manufacturing plant at Port Move in Madras presidency.
1874 James Ersk founded the Bengal iron works.
1899 Jamshedji Tata initiated the scheme for an integrated steel

plant.
1906 Formation if TISCO.
1911 Tata iron and steel company started production.
1916 TISCO was founded

POST-INDEPENDENCE
TABLE-2.2
1951-56-First Five Year Plan  No new steel plant came up. The Hindustan
steel Ltd. Was born on 19th January, 1954
with the decision of setting up three steel
plants each with one million ton input steel
per year in at Rourkela, Bhilai and Durgapur,
TISCO stated expansion program.
1956-66-Second Five Year Plan  A bold decision was taken up to increase the
ingot steel output India to 6 million tons per
year & production at Rourkela, Bhilai and
Durgapur steel plant started.
1961-66-Third Five Year Plan  During the third five year plan the three steel
plants under HSL, TISCO, & HSCO were
expanded as shown. In January 1964 Bokaro
Steel Plant came into existence.
1966-69-Recession Period  The entire expansion programme was
actively executed during this period.
1969-74-Fourth Five Year Plan  Licenses were given for setting up of many
mini steel plants and rerolling mills.
 Government of India accepted setting up two
more steel plants in South. One each at
Visakhapatnam and Hospet (Karnataka).
 SEIL was formed during this period on 24th
January 1973. The total installed capacity

from 6 integrated plants was 106 meters

empty.
1979-Annual Plan  The erstwhile Soviet Union agreed to help in

setting up the Visakhapatnam steel plant.
1980-85-Sixth Five Year Plan  Scheme for modernization of Bhilai steel

plant, Rourkela, Durgapur, TISCO were
initiated.
1985-91-Seventh Five Year Plan  Expansion work of Bhilai and Bokaro steel
plants completed.
 Progress on Visakhapatnam steel plant
picked up and rationalized concept has been
introduced to commission the plant with 3.0
mt liquid steel capacity by1990.
1991-96-Eight Five Year Plan  Visakhapatnam steel plant started its

production.
 Modernization of other steel plants is also
duty envisaged
1997-2002-Ninth Five Year Plan  Visakhapatnam steel plant had foreseen a 7%

growth during the plan period.

2002-2007-Tenth Five Year Plan  Steel industry registers the growth 9.9%
Visakhapatnam
 Steel plant high regime targets achieved the
best of them.
2007-12-Eleventh Five Year Plan  Cost of schemes or projects original
approved by government of India is rs.9,
569.18 crores.
THE MAJOR STEEL AND RELATED COMPANIES IN INDIA:
1. Bharat Refectories Ltd.
2. Hindustan Steel Works Construction Ltd.
3. Jindal Steel and Power Ltd.
4. Tata Iron Steel Company Metal Scrap Trade Corporation Ltd.
5. Metallurgical and Engineering Consultants India Ltd.
6. National Mineral Development Corporation Ltd.
7. Rastriya Ispat Nigam Ltd.
8. Sponge Iron India Ltd.
9. Steel Authority India Ltd.
The global steel industry has witnessed several revolutionary changes

during the last century. The changes have been in the realms of both technology &

business strategy. The ultimate object of all these changes is to remain competitive
and global market.
The Indian steel industry is growing rigorously with the major procedures like
SAIL, RINL, TISCO, JVL and many others. Our steel industry has amply
demonstrated its ability of adapt to the changing scenario adopt to the changing
scenario and to survive in possible to a large extent due to the adoption of
innovative operating practices and modern technologies.
Industrial Development in India has reached a high degree of self-

reliance, and the steel industry occupies a primary place in the strategy for future
development of the industry. It is now being proposed that Indian steel industry
should gear up to achieve a production level of about 100 Mt by the year 2000.
Global scenarios:-
As per IISI
 In March’ 2005 world Crude steel output was 928 Mt when compared to march
2004 (872 Mt), the change in percentage was 6.5%.
 China remained the world largest crude steel procedure in 2005 also (275 Mt)
followed by Japan (96 Mt) and USA (81 Mt). India occupied 8” position (42
Mt).
 USA remained the largest importer of semi finished and finished products in
2002 followed by China and Germany.
 Japan remained the largest exporter of semi finished and finished steel products
in 2002 followed by Russia and Ukraine.
 Other significant recent developments in the global steel scenario have been:
Under the auspicious of the OECD (Organization for Economic Co-operation &
Development) the negotiations among the major steel producing countries for a
steel subsidy agreement (SSA) held in 2003 with the objective to agree on a
complete negotiating test for the SSA by the middle of 2004. It also set
subsidies for the steel industry of a ceiling of 0.5% of the value of production to
be used exclusively for Research & Development.
Market Scenarios:-
The year 2004-05 was a remarkable one for the steel industry
with the world crude steel production crossing the one billion mark for the
first time in the history of the steel industry. The world GDP growth about
4% lends supports to the expectations the steel market is all set for strong
revival after prolonged period of depression. The Indian economy also
become robust with annual growth rates of 7-8% this will provide a major
boost the steel industry. With the nations focus on Infrastructure
development coupled with the growth in the manufacturing sector, the
Indian steel industry all set for north ward movement. The draft national
steel police envisage production of 60 Mt by 2012 and 110 Mt by 2020, and
annual growth rate of 6-7%. All this should therefore argue well for the
Indian steel industry.
Production Scenarios:-
 Steel industry was de-licensed and decontrolled in 1991 & 1992 respectively.
 India is the 8” largest producer of steel in the world.
 In 2003-04 finished steel production was 36.193 ML r Pig iron in 2003-04

was 5.221 Mt.
 Sponge iron production was 80.85 Mt during the year 2003-04
 The annual growth rate of crude steel production in 2002-03 was 8% and in
The last first year production performance is as under:-
DEMAND-AVAILABILITY PROJECTION:
 Demand-Availability of iron and steel in the country is projected by ministry

of steel annually.
 Gaps in availability are met mostly through imports.
 Interface with consumers by way of Steel Consumer Councils exists, which
is conducted on regular basis.
 Interface helps in redressing availability problems, complaints related to
quality.
PRICING AND DISTRIBUTION:
 Price regulation of iron & steel was abolished on 16-01-1992.

 Distribution controls on iron & steel removed except 5 priority sectors,
viz.Defense, Railways, Small Scale Industries Corporations, Exporters of
Engineering Goods and North Eastern region.
 Allocation to priority sectors is made by Ministry of steel.
 Government has no control over prices of iron & steel.
 Open market prices are generally on rise.

 Price increases of late have taken place mostly in long products than Flat
Products.
2.2 COMPANY PROFILE
Steel Exchange India Ltd was incorporated in February 1999 as Pyxis

Technology Solutions Ltd. The company promoted by team of technocrats, friends
and relatives.
Promoters were originally into trading of steel and steel related

products under the name of Vizag profiles. In December 1999 the Steel Exchange
India Ltd was incorporated as 100 percent subsidiary of Pyxis Technologies.
As demand for steel started growing from 2000 onwards the promoters
gradually ventured into steel manufacturing by acquiring Simhadri Steels, a
company having rolling mill at Vizag, and setting up an ingot manufacturing unit
at Kothapeta in 2004.
Under a Scheme of Amalgamation approved by the Members of the

Companies, SEIL (subsidiary) and Simhadri Steels were merged with Pyxis
Technologies under the name of Steel Exchange India Ltd.
Over the years company has acquired sick units and turning them into
profitable ventures. The company today has the 0.5 million ton capacity of
producing mts per annum of steel products.

The largest of the units, an integrated steel manufacturing hub consisting of 0.5
million ton sponge iron unit, 0.3million ton billet unit and 220, 00 TPA rolling
mill. The steel manufacturing hub is located on 400 acres of land, 35km from
Visakhapatnam city at Malliveedu Village in Andhra Pradesh. The company has a
land of more than 500 acres.
SEIL has set up a Simhadri Power Limited (SPV) a captive 60MW captive power
plant. The unit generates of about 16MW from waste heat recovery of DRI Kilns
and about 18MW from CHAR and WHRB.
Simhadri Power Ltd was later merged to Steel Exchange India Ltd In the
Year 2014.
Vision:
We aspire to be a growing industry with high quality products and benchmark for
corporate citizenship.
Mission:
To attain one million ton finished steel capacity adopting upgraded technologies
and capacity expansion with state of art technological processes.

Objectives:
 To set up a 600,000 tpa iron ore fines pellet manufacturing unit by 2016.
 The company plans to expand its steel manufacturing to 1million tons per
unit in various phases.
 Blast Furnace of 600 cum capacity supported by suitable coke Oven
Batteries by 2020.
 SMS through BOF route with LRF, Air Separation Plant and Billet Caster
by 2020.
 Heavy, Medium and Light Structural Mill of 0.5 MT Capacity by 2020
Values:
 Exhibiting Entrepreneurship.
 Adopting new technologies for better productivity.
 Empowering team members.
 Following environmental friendly technologies and process.

GROUP COMPANIES
STEEL EXCHANGE INDIA LTD
Steel Exchange India Limited is having an Integrated Steel

Plant with an installed capacity of 0.25 Million Tons per Annum having the
following operations
DRI unit in technical collaboration with world renowned M/s

Mannesmann Demag of Germany (CODIR Process). It is the largest coal based
sponge iron plant having two kilns of 350TPD each in modular design can able to
produce Sponge Iron of 0.225 Million Tons per Annum from Iron Ore.
Steel Melt Shop having a facility of 4Nos 9MW, 25Tons

Induction Furnaces can able to produce the liquid steel of 0.25 Million Tons per
Annum. Induction Furnaces are having the provision for refining the Liquid Steel
for dephosphorization with the help of Neutral Lining, Basic Slag, DRI and Mill
scale RECHERCHES METALLURGIQUES), Belgium Tempcore Technology
(Thermo-Mechanical Treatment) having an Installed Capacity of 0.25 Million
Tons per Annum 60MW Captive Power Plant with 16MW generation from Waste
Heat Recovery of DRI Kilns and balance through Coal Based CFBC Boiler to cater
the in-house power requirements for present facilities and future needs of
expansion.

Plant is connected with AP Transco 132KV Grid for interconnecting

and exporting the surplus power through APPCC having its own Electrified Private
Railway Sliding connected to East Coast Railway on Kothavalasa - Kirondole Line
for transporting Raw Materials and Finished Goods. The factory located just 40Km
away from Vizag Sea Port and hence it is very easy to get the import/export.
Environmental Standards are being followed strictly to maintain the

emission levels well within the specified limits. Green Plantation around the
boundary of the pant and in the free area to make it Environment Friendly.
Power Plant
Power plant was setup to meet present and future

electricity needs of all production units. 2x30 MW turbo generators with air cooled
condensers, 210 T/hr circulating fluidized bed combustion (CFBC) boiler and 2x36
T/hr waste heat recovery boilers (WHRB) in flue gas circuit of DRI kilns were
installed. Auxiliaries include coal & char handling; bed ash & fly ash handling,
DM & aux. cooling water; service & instrument air; 132/11 KV substation &
electrics; instrumentation & automation systems.
ESPs of WHRBs revamped. Particulate emission in flue gas of boiler

chimneys is less than 50 ppm/ NM 3. Provision of air cooled condensers for
turbines and dry ash collection minimized water consumption. Reject coal fines
and char fully consumed in CFBC boiler as part fuel. Ash issued to brick

manufacturers. Apart from meeting captive needs, it exports surplus power to grid,
runs at good PLF and earns revenue.
Wire Drawing
The unit was relocated from Auto Nagar, Visakhapatnam to plant premises. It
manufactures high carbon wire products- stress relieved PC wire 3ply/ 7 ply and 4
mm indented wire, gauge wires, spring steel, shutter wires, binding wire etc. It has
a galvanizing plant 8,000 TPA to manufacture GI wire.
VIZAG PROFILES PVT LTD
Vizag Profiles Ltd (VPL) is incorporated in the year 1997 and within
decade of successful business operations it has emerged as a force to reckon with
in the emerging steel markets in southern India with a special focus on potential
markets in Andhra Pradesh. During this tenure, the company has developed a large
market net work for retailing the steel products of main producers like
RINL/Visakhapatnam Steel Plant, SAIL and TISCO.
The company has created stock yards, and infrastructure supports for a overall
steel handling capacities of more than 4, 00,000 M.tons p.a. The company is
having fleet of vehicles comprising of cranes, tractors and trailers and JCB Loaders
etc in its transportation arm. The company is also into construction field, with

ventures like Vizag Profile Towers, Green City etc.
VPL Projects: VIZAG PROFILES GROUP has been active

for over two decades in the business of steel manufacturing and trading. With a
proven track record in the steel business, the group has also forayed into property
development to show case its capability in handling construction projects. Besides
this they have also ventured recently in power generation.
"Vizag Profiles Group" engaged in Steel handling, trading and

manufacture, over two decades forayed into Property Development & Construction
activity to show case its capability in handling construction Projects. The group
company "Steel Exchange India Ltd.," a listed company has turnover of over
Rs.1100 Crores for the FY 2012-13, manufacturer of "Simhadri TMT", is one of
the largest steel producing integrated steel plants in south India in secondary steel
segment. The Group has recently entered into power generation also with present
capacity of 60 MW.
VPL Integral CFS
VPL Integral CFS is a joint venture between

M/s Vizag Profile Group and M/s Integral Trading & Logistics. A special purpose
vehicle floated as M/s. VPL INTEGRAL CFS Pvt. Ltd to operate and manage the
Container Freight Station established in a area of 10 acres land, located near
Gangavaram Port and adjacent to RINl, Visakhapatnam.
Covered warehouse facility has a capacity 25,000

square feet as well as a designated area for examination and verification of

containers stuffed with general, Bulk and Project cargoes.
Wire Drawing PRODUCTS
MS Products :
· Binding wire 20 G
· Gauge wire 8 G to 20 G
· Cold ribbed wire Dia 4 mm to 6 mm in customized lengths
High Carbon wires:
· Spring steel (to IS 4454) and umbrella rib wires
· PC wires Dia 3.00 mm
· Stress relieved indented wire to IS 6003, size Dia 4.00 mm
· Cold heading quality wires
· HB wires for wire screens and wire mesh etc
CORPORAE SOCIAL RESPONSIBILITY POLICY

Corporate Social Responsibility (CSR) has been a strong-standing

commitment at STEEL EXCHANGE INDIA LIMITED and forms an integral part
of our activities. Accordingly, Corporate Social Responsibility (“CSR”) Policy is
rooted in the Company’s core values of quality, reliability and trust guided by best
practices, and driven by our aspiration for excellence in the overall performance of
our business. Through its various initiatives, the Company endeavors to play a
relevant role by serving society and programmes that address gaps in basic societal
requirements
Applicability:
This CSR Policy is applicable to the Company, which is mandated with

the CSR expenditure obligations as per Section 135 of the Companies Act, 2013
read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, as
amended from time to time.
Constitution of Corporate Social Responsibility Committee:
The Board of Directors of STEEL EXCHANGE INDIA LIMITED has

formed a Corporate Social Responsibility Committee (the “CSR Committee”) in
line with section 135 of the Companies Act, 2013 read with the Companies
(Corporate Social Responsibility Policy) Rules, 2014.
Composition of CSR Committee is as under:
Mr. Chivukula Siva Prasad - Independent Director - Chairman
Mr. Kodali Krishna Rao - Independent Director – Member
Mr. Ramineni Ramachandra Rao – Independent Director - Member

The CSR Committee will carry out the following functions:
1. To formulate and recommend to the Board, a CSR Policy indicating activities to

be
Under taken as specified in Schedule VII of the Act;
2. To recommend the amount of expenditure to be incurred on the activities

referred to in sub- paragraph (i) above; and
3. To monitor the CSR Policy from time to time. Core Focus Areas
STEEL EXCHANGE INDIA LIMITED Corporate Social Responsibilities areas
had targeted inclusive growth of all stakeholders and adopted the following core
areas for its CSR
Initiatives, all of which are culled from the activities spelt out under Schedule VII
of the Companies Act 2013:
 Promoting Healthcare
 Promoting Education
 Promoting gender equality and socio-economic empowerment
 Promotion of Sports activities

Contribution to Central Government welfare Funds (as admissible under the Act)
-
Rural development projects.
CSR budget the total budget for the CSR projects will be decided by the
CSR Committee in accordance with applicable provisions of the Act and the CSR
Rules.
Treatment of Surpluses
Any surplus generated from CSR projects undertaken by us will be

tracked and channelized into our CSR corpus. These funds will be further used in
development of the CSR projects and
will not be added to the normal business profits.
Reporting of CSR Initiatives
CSR Committee of the Board will periodically consider the progress

report on the various CSR initiatives taken up by the Company. Details of the CSR
activities undertaken by the company and amounts spent along with reasons for
spends below budgeted levels, if any, shall also be reported in STEEL
EXCHANGE INDIA LIMITED Annual Report under Directors’ Report and
displayed on the website of the Company.

PUBLIC AMENETIES PROVIDED BY SEIL
Following public amenities are provided for the benefit of villagers.
1. A battery vehicle transporting the people to Sree Rampuram, RG Peta, Kotta

Peta.
2. Girls are given a cheque of Rs.10000/-at the time of their marriage.
3. Students studying in the private schools are being given sports equipments.
4. To maintain pollution free atmosphere, highly sophisticated sprinkle system has

been introduced to wet the ground.
5. Drinking water is being provided through tankers at the request of public for any
functions free of cost.
6. Free medical camps are organized under a Specialist Doctor on every week in
each village and medicines are supplied to needy patients.
7. For any emergency, Ambulance is being provided round the clock.

Towards this we have initiated the following in the last two years:
1. Provided solar street lights to the surrounding villages and play equipments to
the schools in the nearby vicinity
2. Set up a centre with 24 hours availability of a qualified doctor with sufficient

staff. We are also providing free medicines to the needy patients and frequently
conduct medical camps in the nearby villages.
3. made available a 24 x7 ambulance vehicle of the company for the people of

nearby villages also
4. Providing free drinking water up to 9 hours per day to the surrounding villages
by setting underground pipeline from our site and by water tankers
5. Conducted cleanliness drive
6. Providing free transport service by way of eco-friendly -rickshaws which ply

between main roads to nearby villages easing their movements
7. Provided tricycles and artificial limbs to physically handicapped.

CHAPTER-III
THEORITICAL FRAMEWORK

INTRODUCTION
Working capital to a company is like the blood to the body. It is the most vital ingredient
of a business. Working capital management is carried out effectively, efficiently and
consistently,
will ensure the health of the organization. A company invest it funds for long-term purpose and
for short-term operations. That portion of company’s capital, invested in short-term or current
assets to carry on its day to day operations smoothly, is called the ‘working capital’.
Working capital refers to a firm’s investment in short-term assets like cash, short-term
securities amounts to all aspects of current assets and current liabilities. The efficient working
capital management is necessary to maintain a balance of liquidity and profitability. If the funds
are tied-up idle current assets represent poor and inefficient working capital management which
affects the firm’s liquidity as well as profitability.
The management of current assets is similar to that of fixed assets in the sense that in
both cases a firm analyses their effects on its return and risk. The management of fixed and
current assets, however, differs in three important ways: First, in managing fixed assets, time is a
very important factor: consequently, discounting and compounding techniques play a significant
role in capital budgeting and a minor one in the management of current assets, Second, the
holding of current assets, especially cash, strengthens the firm’s liquidity position (and reduces
riskiness), but also reduces the overall profitability. Thus, a risk- return trade off is involved in
holding current assets. Third, levels of fixed as well as current assets depend upon expected
sales, but it is only current assets which can be adjusted with sales fluctuations, in the short run.
Thus, the firm has a greater degree of flexibility in managing current asset.
The key difference between long-term financial management and working capital
management is in terms of the timing of cash. While long-term financial decisions like buying
capital equipment or issuing debentures involve cash flows over a extended period of time (5 to

15 years or even more,) short-term financial decisions typically involve cash flows within a year
or within the operating cycle.
MEANING & DEFINITION
A part from investment in fixed assets, every enterprise has to arrange for adequate funds
for meeting day (operations) expenses to kept it a concern. So originally speaking working
capital refers to the flow funds , necessary for working of enterprise however these is no
agreement among the financial experts regarding the meaning of working capital. They define
working capital in the following ways.
ACCORDING TO MEAD MALLOT:

“Working capital means current assets”.
ACCORDING TO WESTON AND BRIGHAM:

“working capital refers to a firm investment in short term assets, cash, short term
securities, accounts receivable and inventories”.
OBJECTIVES OF WORKING CAPITAL MANAGEMENT
The primary objective of working capital management is to ensure smooth operating

cycle of the business. Secondary objectives are to optimize the level of working capital and
minimize the cost of such funds.
The superior objective of financial management is wealth maximization and that can be
gained by profit maximization accompanied with sustainable growth and development. For
sustainable growth and development, the objectives of all the stakeholders including customers,
suppliers, employees, etc should be aligned to the growth of the organization.
In the light of above statement, the objectives of working capital management are described as
below:

o Smooth Working Capital Operating Cycle: This implies that the operating cycle i.e.
the cycle starting from acquisition of raw material to its conversion to cash should be
smooth. It is not easy; it is as good as circulating 5 balls with two hands without dropping
a single one. If following 6 points can be managed, this operating cycle can be
management well.
1. It means raw material should be present on requirement and it should not be a cause to
stoppageof production.
2. All other requirements of production should be in place before time.
3. The finished goods should be sold as early as possible once they are produced and
inventoried.
4. The accounts receivable should be collected on time.
5. Accounts payable should be paid when due without any delay.
6. Cash should be available as and when required along with some cushion.
o Lowest Working Capital: Working capital here refers to the current assets less current
liabilities (net working capital). It should be optimized because higher working capital
means higher interest cost and lower working capital means risk of disturbance of
operating cycle.
o Minimize Rate of Interest or Cost of Capital: The cost of capital utilized on working
capital should be minimized so as to achieve higher profitability. If the investment in
working capital involves bank finance, interest rates should be negotiated with bank. Cost
can be minimized by utilizing long term funds but in a proper mix. While deciding the
mix of working capital, the fundamental principal of financial management should be
kept in mind that fixed assets and permanent assets should be financed by long term
sources of finance of approximately same maturity and short term or temporary assets
should be financed by short term sources of finance.
o Optimal Return on Current Asset Investment: The return on the investment made in
current assets should be more than the weighted average cost of capital so as to ensure
wealth maximization of the owners. In other words, the rate of return earned due to
investment in current assets should be more than the rate of interest or cost of capital used
for financing the current ass
NEED FOR WORKING CAPITAL
Working capital is the life blood and nerve center of business. Working capital is very
essential to maintain smooth running of a business. No business can run successfully without an
adequate amount of working capital. The main advantages or importance of working capital are
as follows:
1. Strengthen The Solvency

Working capital helps to operate the business smoothly without any financial problem for
making the payment of short-term liabilities. Purchase of raw materials and payment of salary,
wages and overhead can be made without any delay. Adequate working capital helps in
maintaining solvency of the business by providing uninterrupted flow of production.
2. Enhance Goodwill

Sufficient working capital enables a business concern to make prompt payments and hence helps
in creating and maintaining goodwill. Goodwill is enhanced because all current liabilities and
operating expenses are paid on time.
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3. Easy Obtaining Loan

A firm having adequate working capital, high solvency and good credit rating can arrange loans
from banks and financial institutions in easy and favorable terms.
4. Regular Supply Of Raw Material

Quick payment of credit purchase of raw materials ensures the regular supply of raw
materials fro suppliers. Suppliers are satisfied by the payment on time. It ensures regular supply
of raw materialsand continuous production.
5. Smooth Business Operation

Working capital is really a life blood of any business organization which maintains the firm in
well condition. Any day to day financial requirement can be met without any shortage of fund.
All expenses and current liabilities are paid on time.

6. Ability To Face Crisis

Adequate working capital enables a firm to face business crisis in emergencies such as
depression.
CONCEPT OF WORKING CAPITAL:
There are two concepts of working capital.
a) Gross working capital

b) Net working capital
a) Gross working capital refers to the firm’s investment in current assets. Current assets
are the assets which can be converted into cash within an accounting year.
Current Assets:
1) Cash in/at hand /bank

2) Bills receivable
3) Sunday debtors
4) Stock
5) Prepaid Expenses
6) Accured Income
7) Short term Investment.
b) Net working capital refers to the difference between current assets and current liabilities
current liabilities are these claims of outsiders which are expected to manure for payment
with in an accounting year.
Current Liabilities:

1) Bills payable
2) Sundry creditors
3) Accured Expenses
4) Short term loans
5) Dividends payable
6) Bank overdraft
7) Provision for Taxation
PROFORMA OF GROSS AND NET WORKING CAPITAL
PARTICULARS AMOUNT AMOUNT

CURRENT ASSETS.
XXX
1) Raw materials stock XXX
2) Work-in-process stock XXX
3) Finished goods stock XXX
4) Sundry debtors XXX
5) Bills receivable XXX
6) Short – terms investments XXX
7) Cash and Bank balance
GROSS WORKING CAPITAL

XXX
LESS : CURRENT XXX
LIABILITIES. XXX
XXX
1) Creditors for materials XXX
2) Creditors for expenses XXX
3) Bills payable
4) Tax liability
5) Short-term loans XXX
NET WORKING CAPITAL. XXX

THE OPERTING CYCLE AND THE WORKING CAPITAL NEEDS:-

The working capital requirement of a firm depends, to a great extent up on the operating
cycle of the firm. The operating cycle may defined as the duration from the procurement of
goods or raw materials and ending with sales realization. The length and nature of the operating
cycle may differ from one firm to another depending up or the size and nature of the firm.
In a treading concern there is a serious of activities starting from procurement of goods

ending with realization of sales revenue. Similarly in case manufacturing concern . This serious
start form procurement of raw material and ending with the sales realization of finished foods. In
both the cases however there is a time gap between the happening of the first event and the
happening of last event . this time gap is called operating cycle. Thus the operating cycle of a
firm consists of time required for the completion of chronological sequence of some or all of the
following.
1. Procurement of raw material and services
2. Conversion of raw material in the work in progress.
3. Conversion of work in progress in to finished goods.
4. Sales of finished goods. (cash or credit).
5. Conversion of receivable into cash.
The firm is after required to extend credit facilities to customers. The finished goods must
be kept in store to take care of the orders and minimum cash balance must be maintained. It must
also have minimum of raw material to have smooth and uninterrupted production process. So in
order to have a proper and smooth running of the business activities, the firm must make
investment in all these current assets. This requirement of funds depend up on the operating
cycle period of the firm and also denoted as the working capital needs of the firm.
OPERATING CYCLE PERIOD:-

The length or time duration of the operating cycle of any firm can be defined as the sum
of it’s inventory conversion period and the receivable conversion period.

INVENTORY CONVERSION PERIOD:-

It is the time required for the conversion of raw material in to finished goods sales. In a
manufacturing concern the ICP is consisting of raw materials conversion period(RMCP), work in
progress conversion period (WPCP), and the finished goods conversion period (FGCP). The
RMCP refers to the period for which the raw material is generally kept in store before is issued
to the production department. The WPCP refers to the period for which the raw material remain
in the production process before it is taken out as a finished unit. The FGCP refers to the period
for which finished units remain in stores before being sold to the customers.
RECEIVABLES CONVERSION PERIOD: (RCP)

It is the time required to convert the credit sales in to cash realization. It refers to the period
between the occurrence of credit sales and collection of debtors.
The total of ICP and RCP is also known as total operating cycle period (TOCP). The firm
might be getting some credit facilities from the supplier of raw material wag earners etc. this
period for which the payment it these parties are deferred or delayed is known as deferral period.
The net operating cycle of a firm is arrived at by deducting the deferral period from total
operating cycle period. Thus
NOC = TOCP-DP = ICP+RCP- DP
NOC – Net operating cycle

TOCP – Total operating cycle period
DP – Deferral period
ICP – Inventory convertion period
RCP – Receviable convertion period
OPERATING CYCLE:
The duration of time required for completing the following sequencies of events in case of
manufacturing firm s called the operating cycle.
1. Conversion of cash into raw material.
2. Convertion of raw material into work in progress.
3. Conversion of work inprogress into finished goods.

4. Conversion of finished goods into debtors & bills receivable through sale.
5. Conversion of debtors & bills receivable into cash.
DIAGRAM OF OPERATING CYCLE
Fig: 1.7
The duration of the operating cycle for the purpose of estimating working capital requirement is
equalant to the sum of duration of each of these tables less the credit period allowed by the
suppliers of the firm.
Sources of working capital:

A large scale manufacturing company may procure funds from various sources to meet
its working capital and they may be classified under two heads.
1) Sources of long term or regular working capital

2) Sources of short term or seasonal working capital
Sources of working capital

Long term Sources short term sources
a) Issue of shares
b) Issue of debentures
c) Sale of fixed asset Internal External
a) Depreciation fund a) Normal trade
b) Provision of taxation b) Credit papers
c) Accured expenses c) Bank credit
Factors of working capital:

 Nature of business
 Manufacturing cycle
 Seasonality of operations
 Production policy
 Market conditions
 Conditions of supply
 Credit policy
Nature of business:
The working capital requirement of a firm is closely needed to the nature of a business a
service firm, like an electricity undertaking transport, like an electricity undertaking transport
corporation, which has a short operating cycle and which sells predominantly on cash basis, has
a modest working requirement on the other hand a manufacturing concern like a machine tools
unit, which has a long operating cycle and which sales largely on credit, has a very substantial
working capital requirement.
Manufacturing cycle:
Time span required for conversion of raw material into finished goods is a block
period. This period, in reality, extends a little before and after the WIP. This cycle determines the
need of working capital. In case of industries with long manufacturing process or production
cycle, more funds are required for working capital.
Seasonality of operations:

Firms which have marked seasonality in their operations usually have highly
fluctuating working capital requirements.
To illustrate, consider a firm manufacturing ceiling fans reaches a peak during the summer
months drops sharply during the winter period. The working capital requirements of such a firm
are likely to increase considerably in summer months and decrease significantly the winter
period. On the other hand, a firm manufacturing a product like lamps, which have fairly even
sales round the year, tends to have stable working capital requirements.
Production policy:
A firm marked by pronounced seasonal fluctuations in its sales may pursue a
production policy which may reduce the sharp variations in working capital requirements. For
example, A manufacturer of ceiling fans may maintain a steady production throughout the year,
rather than intensify the production activity during the peak business season. Such a production
policy may dampen the fluctuations in working capital requirements.
Market Conditions:
The degree of competition prevailing in the market place has an important bearing
on working capital needs. When competition is keen, a larger inventory of finished goods is
required to promptly serve customers who may not be inclined to wait because other
manufacturers are ready to meet their needs. Further, generous credit terms may have to be
offered to attract customers in a highly competitive market.
If the market is strong and competition weak, a firm can manage with a small inventory of
finished goods because customers can be served with some delay. Further, in such a situation the
firm can insist on cash payment and avoid lock-up funds in accounts receivable-it can even ask
for advance payment, partial or total.
Conditions for supply:

The inventory of raw material, spares and stores depends on the conditions of
supply. If the supply is prompt and adequate, the firm can manage with small inventory.
However, if the supply is unpredictable and scant, then the firm, to ensure continuity of
production, would have to acquire stocks as and when they are available and carry large

inventory, on an average. A similar policy may have to be followed when the raw material is
available only seasonally and production operation are carried out round the year.
Credit policy:
The credit policy of the firm affects the working capital by influencing the level of debtors. The
credit terms to granted to customers may depend upon the norms of the industry to which the
firm belongs. A high collection period will mean tie-up of large funds in debtors. Slack
collection procedures can increase the chance of bad debts.
In order to ensure that unnecessary funds are not tied up in debtors, the firm should follow a
rationalized credit policy based on the credit standing of customers and other relevant factors.
The firm should evaluate the credit standing of new customers and periodically review the credit-
worthiness of the existing customers. The case of delay payments should be thoroughly
investigated.
CHANGES IN WORKING CAPITAL
The working capital of a concern is subject to changes due to several reasons. As we know
that the gross working capital is equal to current assets. But net working capital we mean the
excess of current assets over current liabilities. The net working capital is therefore, affected by
the following transactions.
1. Which increase the current but not the current liabilities.
2. Which decrease the current assets and current liabilities both increase in the same direction
by a transaction it does not bring any change in the net working capital of the concern.
Only the total of current assets and current liabilities increase and decrease.
REASONS FOR CHANGES IN WORKING CAPITAL:-

1. Changes in the level of sales and\ or operating expenses.
2. Policy changes.
3. Changes in the technology.
STATEMENT OF CHANGES IN WORKING CAPITAL:-

Until now any increase decrease in any individual item of current assets and current liabilities
was shown in the funds flow statement. But now a statement is prepared to deficit the changes in
working capital. The net increase or decrease is then carried forward to the funds flow statement.
The statement of working capital is prepared with the help of current assets and current
liabilities of the two periods the figures of 2 periods are compared. If there is an increase in the
amount of any current liabilities in the current year in comparison to that in that in the previous
year, it will result to an increase in the working capital. Similarly, a decrease in the amount of
any current assets or an increase in amount of current liabilities in the current year in comparison
to that in the previous year and total decrease in the end is compared and the different of total
increase and total decrease shows net increase or decrease in the working capital.
Net increase in working capital is an application of funds and net decrease in working
capital in the source of funds.
WORKING CAPITAL INCLUDES THE FOLLOWING
1. Cash Management
2. Receivables Management
3. Inventory Management.
1. CASH MANAGEMENT:
INTRODUCTION:
Cash is the important current assets for the operations of the business. Cash is the basic
input need to keep the business running on a continuous basis: it is also the ultimate output
expected to be realized by selling the service or product manufactured by the firm. The firm
should keep sufficient cash, neither more nor less. Cash shortage will disrupt the firm’s
manufacturing operations while excessive cash will simply remain idle, without contributing
anything towards the firm’s profitability. Thus, a major function of the financial manager is to
maintain a sound cash position.
FACTS OF CASH MANAGEMENT:

The firm should evolve strategies regarding the following four aspects of cash
management.
 Cash planning: Cash flows & outflows should be planned to project cash surplus or
deficit for each period of the planning period. Cash budget should be prepared for this
purpose.
 Managing of cash flow: The flow of cash should be properly managed. The cash inflows
should be accelerated while, as far as possible, the cash out lays should be decelerated.
 Optimum level of cash flow: The firm should decide about the appropriate level of cash
balances. The cost of excess cash and danger of cash deficiency should be matched to
determine the optimum level of cash.
 Investing surplus cash: The surplus cash balances should be properly invested to earn
profits. The firm should decide about the division of such cash balance between
alternative short-term investment opportunities such as bank deposits, marketable
securities, or inter corporate lending.
MOTIVES FOR HOLDING CASH:
The firm’s needs to hold cash may be attributed to following three motives:
1. The transactions motive

2. The precautionary motive
3. The speculative motive
Transaction Motive:
The transaction motive requires a firm to hold cash to conduct its business in the
ordinary course. The firm needs cash primarily to make payments for purchases, wages, and
salaries, other operating expenses, taxes dividends etc. the need to hold cash would not arise if
there were perfect synchronization between cash receipts and cash payments i.e. enough cash is
received when then payment has to be made. But cash receipts and payments are not perfectly
synchronized. For those periods, when cash payments exceed cash receipts, the firm should
maintain some cash balance to be able to make required payments.
Precautionary Motive:

There may be some uncertainty about the magnitude and timing of cash inflows form
sale of goods and service, sale of assets, and sale of securities. Likewise, there may be
uncertainty about cash outflows on account of purchases and other obligations. To itself against
such uncertainties, a firm may require some cash balance.
Speculative Motive:
The speculative motive relates to the holding of cash for investing in profit –making
opportunities as and when they arise. The opportunity to make profit may arise when the security
prices change. The firm will hold cash, when it is expected that interest rates will rise and
securities will fall. Securities can be purchased when the interest rate is expected to fall: the firm
will benefit by the subsequent fall in the interest rates and increase in securities prices. The firm
may also speculate on materials’ prices. If it is expected that materials’ prices will fall, the firm
can postpone materials’ purchasing and make purchases in future when price actually falls.
CASH PLANNING:
Cash planning is a technique to plan and control the use of cash. It helps to anticipate the
further cash flows and needs the firm to reduces the possibility of idle cash balances (which
lowers firm’s profitability) and cash benefits (which can causes the firm’s failure).
CASH FORECASTING:
To overcome the cash problems we should have the proper cash forecast. Cash forecast can be
done on short-term or long-term basis. Generally forecast covering periods of one year or less
are consider short-term: those extending beyond one year are consider as long-term.
The important functions of carefully developed short-term Cash forecast are:
 To determine operating cash requirements

 To anticipate short-term financing
 To manage investment on surplus cash
The important functions of carefully developed long-term cash forecast are:

 It indicates as company’s future financial needs, especially for its working capital
requirements.
 It helps to evaluate proposed capital projects. It pinpoints the cash required to finance
these projects as well the cash to be generated by the company to support them.
 It helps to improve the corporate planning. Long-term cash forecast compel each division
to plan for future and to formulate projects carefully.
Long-term cash forecast may be done fore two, three, or five years. As with the short-term
forecast, company’s practices may differ on the duration of long-term forecast to suit their
particular needs.
2. RECEIVABLES MANAGEMENT:
INTRODUCTION:
Trade credit arises when a firm sells its products or services on credit and does not
receive cash immediately. It is an essential marketing tool, acting as a bridge for the movement
of goods through production and distribution stages to customers. A firm grants trade credit to
protect its sales from the competitors and to attract the potential customers to buy its products at
favorable terms. Trade credit creates accounts receivable or trade debtors that the firm is
expected to collect in the near future. The customers from whom receivables or book debts have
to be collected in the future are called trade debtors.
A credit sale has three characteristics: First, it involves an element of risk that should be
carefully analyzed. Cash sales are totally riskless, but not the credit sales as the cash payment are
yet to received. Second, it is based on economic value. To the buyer, the economic value in
goods or services passes immediately at the time of sale, while the seller expects an equivalent
value to received later on Third, it implies futurity. The buyer will make cash payment for goods
or services received by him in a future period.
CREDIT POLICY VARIABLES:

In establish an optimum credit policy, the financial manager must consider the important
decisions variables which influence the level of receivables. The major controllable decision
variables include the following:
 Credit standards and analysis
 Credit terms
 Credit policy and procedures
Financial manager or the credit manager may administer the credit policy of tshould,
however, be appreciated that the credit policy has important implications for the firm’s
production marketing and finance functions.
Credit standards and analysis:

Credit standards are the criteria which a firm follows in selecting customers for the
purpose of credit extension. The firm may have tight credit standards; that is, it may sell mostly
on cash basis, and may extend credit only to the most reliable and financially strong customers.
Such standards will result on bad-debt losses, and less cost on credit administration.
Credit analysis:
Credit standards influence the quality of the firm’s customers. There are two aspects fo
the quality of customers: (i) the time taken by the customers to repay credit obligations and (ii)
the default rate. The Average Collection Period (ACP) determines the speed of payment by
customers. Default rate can be measured in terms of bad-debt losses ratio-the proportion of
uncollected receivable.
Credit terms:
The stipulations under which the firm sells on credit to customers are called credit terms.
These stipulations include: (a) the credit period, and (b) the cash discount.
Credit period:
The length of timer for which credit is extended to customers is called credit period. A firm’s
credit policy can be governed by the industry norms but depending on the objective, the firm can
lengthen the credit period. On the other hand, the firm may tighten its credit period if customers
are defaulting too frequently and bad-debts losses are building up.

Credit discounts:
A cash discount is a reduction in payment offered to customers to induce them to repay credit
obligations within a specified period of time, which will be less then the normal credit period. It
is usually expressed as percentage of sales. Cash discount terms include t6he rat6e of discount
and the period for which it is available. If the customers does not avail the offer, he must make
payment within the normal credit period. The firm uses discount as a tool to increase sales and
accelerate collections from customers.
Collection policy and procedures:
A collection policy is needed because all customers do not pay the firm’s bills in time.
Some customers are slow payers while some are non-payers. A collection policy should ensure
prompt and regular collections. Prompt collection is needed for turnover of working capital,
keeping collection costs and bad-debts within limits and maintaining collection efficiency.
Regularity in collection keeps debtors alert, and they tend to pay their dues properly. The
accounting department maintains the credit records and information. Similarly, the sales
department must obtain past information about as customers from the accounting department
before granting credit to him.
3. INVENTORY MANAGEMENT:
INTRODUCTION:
Inventories constitute the most significant part of current assets of a large majority of
companies in India. On an average, inventories are approximately 60 percent of current assets in
public limited companies in India. Because of the large size of inventories maintained by firms, a
considerable amount of funds is required to be committed to them.
It is possible for a company to reduce its levels of inventories to a considerable degree,
e.g., 10 to 20 percent, without any adverse effect of production and sales, by using simple
inventory planning and control techniques. The reduction in ‘excessive’ inventories carries a
favorable impact on a company’s profitability.

NATURE OF INVENTORIES:
The various forms in which inventories exist in a manufacturing company are: raw
materials, work-in- process and finished goods.
 Raw material: are those basic inputs that are converted into finished product through the
manufacturing process. Raw materials inventories are those units which have been
Purchased and stored for future productions.
 Work-in-progress: inventories are semi-manufactured products. They represent products
that need more work before they become finished products for sale.
 Finished goods: inventories are those completely manufactured products which are ready
for sale. Stocks of raw materials and work-in-process facilitate production, while stock of
finished goods is required for smooth marketing operations. Thus, inventories serve as a
link between the production and consumption of goods.
The levels of three kinds of inventories for a firm depend on the nature of its business
OBJECTIVES OF INVENTORY MANAGEMENT:

In the context of inventory management, the firm is faced with the problem of meeting two
conflicting needs.
 To maintain a large size of inventories of raw materials and work-in-process for efficient
and smooth production and of finished goods for uninterrupted sales operations
 To maintain a minimum investments in inventories to maximize profitability.
The aim of inventory management, thus, should be to avoid excessive and inadequate levels of
inventories and to maintain sufficient inventory for the smooth production and sales operations.
Efforts should be made to place an order at the right time with the right source to acquire the
right quantity at the right price and quality. An effective inventory management should.
 Ensure a continuous supply of raw materials to facilitate uninterrupted production.
 Maintain sufficient stock of raw materials in periods of shot supply and anticipate price
changes.
 Maintain sufficient finished goods inventory for smooth sales operation, and efficient
customers service.

 Minimize the carrying cost and time, and

 Control investment in inventories and keep it at an optimum level
INVENTORY MANAGEMENT TECHNIQUES
In managing inventories, the firm’s objective should be in consonance with the

shareholder wealth maximization principal. To achieve this, the firm determines the optimum
level inventory. Efficient controlled inventories make the firm flexible. Inefficient inventory
control results in unbalanced inventory and inflexibility.
Economic order quantity (EOQ):
One of the major inventory management problems to be solved is how much inventory
should be added when inventory is replenished. If the firm is buying raw materials, it has to
decide lots in which it has to be purchased on replenishment. Determining an optimum inventory
level two type of costs: (a) ordering costs and (b) carrying costs. The economic order quantity is
that inventory level that minimizes the total of ordering and carrying costs.
Ordering costs:
The term ordering costs is used in case of raw materials (or supplies) and includes the
entire costs of acquiring raw materials. They include costs incurred in the following activities:
requisitioning, purchasing order, transporting, receiving, inspecting and storing (store
replacement). Ordering costs increase in proportion to the number of orders placed.
Ordering costs increase with the number or orders: thus the more frequently inventory is
acquired, the higher the firm’s ordering costs. On the other hand, if the firm maintains larges
inventory levels, there will be few orders placed and ordering costs will be relatively small.
Thus, ordering decreases with increasing size of inventory.
Carrying costs:
Cost incurred for maintaining a given level of inventory are called carrying costs.
They include storage, insurance, taxes, deterioration and obsolescence. The carrying costs very
with inventory size. This behavior is contrary to that of ordering costs which decline with

increase in inventory size. The economic size of inventory would thus depend on trade-off
between carrying costs and ordering costs.

CHAPTER-4
DATA ANALYSIS
AND
INTERPRETATION

NET WORKING CAPITAL ANALYSIS
4.1 STATEMENT SHOWING THE WORKING CAPITAL FOR THE YEAR

2012-2013 TO 2013-2014
( Amount in Cr.)
CURRENT ASSETS AND LIABILITIES
CHANGE IN WORKING
PARTICULARS 2012-2013 2013-2014
CAPITAL
CURRENT ASSETS INCREASE DECREASE
INVENTORY 4171 5863 1691
CURRENT INVESTMENTS 0
TRADE RECEIVABLES 2613 2129 4838
CASH AND BANK BALANCES 3704 4826 1122
SHORT TERM LOANS AND
1195 7608 4346
ADVANCES
OTHER CURRENT ASSETS 1186 1413 2269
TOTAL CURRENT ASSETS 8469 9377 9079
CURRENT LIABILITIES 0
SHORT TERM BORROWINGS 2434 2460 2528
SHORT TERM PROVISIONS 17656 1765
TRADE PAYABLES 4172 4966 4549
OTHER CURRENT LIABILITIES 1385 1375 1049
TOTAL CURRENT LIABILITIES 8010 8801 7915
CURRENT ASSETS -CURRENT
NET WORKING CAPITAL
LIABILITIES
4595 5760 1164

CURRENT ASSETS AND

LIABILITIES 2012-2013
CURRENT ASSETS AND
4.1 GRAPHICAL REPRESENTATION
INTERPRETATION 4.1:
 It was observed that there is an increase of 1691cr. of net working capital
from the year2012-2013 to 2013-2014. There is an overall increase in the
current assets of the company when compared to its value in the previous
year
 This is due to increase in the inventory, cash and bank balances and other
current assets and of the company.
 There is an total increase in the current liabilities in the year 2013 -
2014,when compared to its previous year.

4.2 STATEMENT SHOWING THE WORKING CAPITAL FOR THE YEAR

2013-2014 TO 2014-2015
(Amt in cr.)

CHANGE IN WORKING
PARTICULARS 2013-2014
2014-2015 CAPITAL
CURRENT ASSETS INCREASE DECREASE
INVENTORY 5863 6807 9446
CURRENT INVESTMENTS 0
7608 1088
ADVANCES 6519
CURRENT LIABILITIES
SHORT TERM PROVISIONS 0
TOTAL CURRENT LIABILITIES 8801 4334 4473
CURRENT ASSETS -CURRENT
NET WORKING CAPITAL
LIABILITIES
5760 7570 6994

CHANGE IN CURRENT ASSETS

AND LIABILITIES 2013-2014
CHANGE IN CURRENT ASSETS
AND LIABILITIES 2014-2015
INTERPRETATION 4.2:
 From the above working capital calculations for the year 2014-2015 we can
notice the increase of 6994 cr. net working capital compared to previous
financial year.
There is an overall increase in the current assets of the company when compared to
its value in the previous year.
 This is due to increase in the current assets (inventory,trade receivables and
cash and bank balances)of the company.
 There is an total decrease of 4473 cr current liabilities in the year 2014 -

4.3STATETEMENT SHOWING THE WORKING CAPITAL FOR THE

YEAR 2014-2015 TO 2015-2016
(Amt in cr)
CHANGE IN WORKING
PARTICULARS
2014-2015 2015-2016 CAPITAL
DECREAS
CURRENT ASSETS INCREASE
E
INVENTORY 6807 7181 3739
CURRENT INVESTMENTS 25,00,000 2500000
1022
ADVANCES 6519 7542
TOTAL CURRENT
7089
LIABILITIES 4334 1142
CURRENT ASSETS -
NET WORKING CAPITAL
CURRENT LIABILITIES
7570 9857 2287

Series1
Series2
INTERPRETATION 4.3:
 It was observed that from the above working capital calculations for the year
2015-2016 we can notice the increase of 228701 cr compared to previous
financial year.
its value in the previous year
 This is due to increase in the current assets like inventory cash and bank
balances of the company.
 There is an total increase in the current liabilities in the year 2015 -

4.4 STATEMENT SHOWING THE WORKING CAPITAL FOR THE

YEAR2015-2016 TO 2016-2017
(Amt in cr)
CHANGE IN WORKING
PARTICULARS
2015-2016 2016-2017 CAPITAL
INCREAS DECREAS
CURRENT ASSETS
E E
INVENTORY 7181 6364 8171
CURRENT INVESTMENTS 2500000 2500000
118282596
ADVANCES 7542 8725
TOTAL CURRENT
6974
LIABILITIES 1142 1135
CURRENT ASSETS -
NET WORKING CAPITAL
CURRENT LIABILITIES
7087 -1611

CURRENT ASSETS AND

CURRENT ASSETS AND

INTERPRETATION 4.4:
 The net working capital is negative for the financial year 2016-2017 which
indicates the poor working capital management.
There is an overall decrease in the current assets of the company when compared
to its value in the previous year
 This is due to decrease in inventory,cash and bank balances and other
current assets of the company.
 There is an decrease in the current liabilities in the year 2016 -2017,when
compared to its previous year.

4.5 CURRENT RATIO:
Formula:
Current asset
Current ratio =
Current liabilities
TABLE 4.5 (in Crs in Rs)

YEAR CURRENT CURRENT CURRENT
ASSETS LIABILITIES RATIO
2011-2012 801 794 0.106

2012-2013 846 801 1.129
2013-2014 937 880 1.065
2014-2015 119 105 1.057
2015-2016 121 114 1.008
The current ratio for the period of 2012-16:
GRAPH- 4.1.1

Chart Title
CURRENT
RATIO, 2012- CURRENT CURRENT
2013, 1.129 RATIO, 2013- RATIO, 2014- CURRENT
2014, 1.065 2015, 1.057 RATIO, 2015-
2016, 1.008
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
CURRENT
RATIO, 2011-
2012, 0.106
INTERPRETATION 4.1.1 :
As a conventional rule a current ratio of 2:1 or more is considered satisfactory.

The company SEIL shows ranging between 1.008-0.106 during the years of
study. Therefore, it may be interpreted to be insufficiently liquid. The higher
the current ratio the greater the margined of safety. However, an arbitrary
standard must be followed. This is because the current ratio is the test of
quantity not quality. So, the company might be struggling to meet their
obligation in recent years.

GRAPH-4.1.2
Chart Title
QUICK RATIO,
2012-13, 0.568 QUICK RATIO,
2013-14, 0.536
QUICK RATIO,
2015-16, 0.484 2012-13
QUICK RATIO,
QUICK RATIO, 2016-17, 0.434
2013-14
2014-15, 0.399
2014-15
2015-16
2016-17
INTERPRETATION 4.1.2:
Generally, a ratio of 1:1 is considered to represent satisfactory ratio.

Recent financial ratio of SEIL shows a balanced level of output where quick ratio
has always been half of current liabilities. A quick ratio 1:1 are more does not
necessary imply sound liquidity position. Thus if SEIL inventories do not sell and
it should pay all its current assets it may find it difficult to meet its obligation
because its quick assets are o.43 times of current liabilities.
 4.6 ABSOLUTE LIQUIDITY RATIO:

This ratio extends the logic further and eliminates accounts

receivable also.
Formula:
Absolute Liquidity Ratio = Super quick current ratio

Quick liabilities
TABLE-4.6 (amt in Cr.)

YEAR SUPER QUICK QUICK ABSOLUTE
CURRENT LIABILITIES LIQUID RATIO
RATIO
2011-2012 386 794 0.486
2012-2013 118 801 0.148
2013-2014 325 880 0.369
2014-2015 298 105 0.283
2015-2016 362 114 0.317
The following graph shows the Absolute Liquidity Ration during the period 2012-
16:
GRAPH-4.6

Chart Title
ABSOLUTE LIQUID
RATIO, 2011-12,
0.486 2011-12
ABSOLUTE LIQUID 2012-13

RATIO, 2013-14, 2013-14
0.369 ABSOLUTE LIQUID
ABSOLUTE LIQUID RATIO, 2015-16,
2014-15
RATIO, 2014-15, 0.317
2015-16
0.283
ABSOLUTE LIQUID
RATIO, 2012-13,
0.148
INTERPRETATION 4.6:
The acceptable norm of this ratio is 50% or 0.5:1 form the above
graph the SEIL shows an impressive result by maintain the absolute liquidity
which has always been between 0.2 to and 0.4 during the year of study. Thorough
this we can understand SEIL has its ability to pay its liabilities in time as worth of
the absolute liquid assets are considered to be adequate.
4.7 ACTIVITY RATIOS:

4.7.1 INVENTORY TURNOVER RATIO:
Formula:
Cost of goods sold

Inventory turnover ratio= _______________________
Average stock
TABLE-4.7 .1 (amt in Cr.)
YEAR OPENING CLOSING AVERAGE

INVENTORY INVENTORY INVENTORY
2011-2012 367 350 3586137212

2012-2013 350 417 3836369172
2013-2014 417 586 5017433862
2014-2015 586 680 6335575277
2015-2016 680 718 6994876344

TABLE-4.7.2
YEAR COST OF AVERAGE INVENTORY

GOODS SOLD STOCK TURNOVER
RATIO
2011-2012 129 383 3.37
2012-2013 838 558 1.5
2013-2014 106 710 1.5
2014-2015 132 926 1.43
2015-2016 144 103 1.39
The following graph shows the inventory turnover ratio during the period
2012-16:
GRAPH.4.7.1
Chart Title
INVENTORY
TURNOVER 2012-13
RATIO, 2012-13,
3.37 2013-14
2014-15
2015-16
INVENTORY INVENTORY INVENTORY 2016-17
INVENTORY
TURNOVER TURNOVER TURNOVER TURNOVER
RATIO, 2013-14, RATIO, 2014-15, RATIO, 2015-16,
RATIO, 2016-17,
1.5 1.5 1.43 1.39

INTERPRETATION 4.7.1:
The higher is the ratio the greater is the efficiency on

control of merchandise in the company, apparently SEIL does not show a
very impressive ratio which means the company’s inventory is not liquid, it
was good at the beginning of the study but later it is the declining.
 4.8 DEBTORS TURNOVER RATIO:
This ratio indicates the relationship between net credit and trade
debtors. It shows the rate at which cash is generated by the turnover of
debtors.
Formula:
Credit sales
Debtors turnover ratio=
Average debtors

YEAR OPENING CLOSING AVERAGE

DEBTOR DEBTOR DEBTORS
2011-2012 308 262 442
2012-2013 212 391 367
2013-2014 261 412 343
2014-2015 212 428 393
2015-2016 308 266 347
Table 4.7.3
TABLE-4.7.4
(amt in Cr.)
YEAR CREDIT SALES AVERAGE DEBT
DEBTORS TURNOVER
RATIO
2011-2012 170 442 3.85
2012-2013 102 367 2.801
2013-2014 142 343 3.851
2014-2015 161 393 4.116
2015-2016 208 347 5.001

The following is the Debtor’s Turnover ratio of the years 2012-16:
GRAPH-4.7.4
Chart Title
DEBTOR'S
TURNOVER RATIO,
2016-17, 5.18
2012-13
DEBTOR'S
DEBTOR'S DEBTOR'S TURNOVER RATIO, 2013-14
TURNOVER RATIO, TURNOVER RATIO, 2015-16, 4.116
2012-13, 3.85 2014-15, 3.851 2014-15
DEBTOR'S 2015-16
TURNOVER RATIO,
2016-17
2013-14, 2.801
INTERPRETATION:
The ratio of SEIL is observed to be fluctuating around 3 which mean the company
in the period of 5 years collected its receivables 3-4 times in a year. This shows
that the company to meet its obligations by paying its bills sooner.

 TOTAL ASSET TURNOVER RATIO:
This ratio shows the firm’s ability in generating sales from

all financial resources committed to total assets.
Formula:
Sales
Total Asset turnover Ratio=
Total Assets
TABLE-4.7.5
YEAR SALES TOTAL ASSETS TOTAL ASSET

TURNOVER
2011-2012 170 117 1.446

2012-2013 981 846 1.158
2013-2014 125 937 1.338
2014-2015 156 186 0.84
2015-2016 167 186 0.894

The following graph shows the Total Asset Turnover ratio during the period 2012-
16:
GRAPH-4.7.9
Chart Title
TOTAL ASSET
TURNOVER TOTAL ASSET
RATIO, 2012-13, TURNOVER TOTAL ASSET
1.446 RATIO, 2014-15, TURNOVER
TOTAL ASSET
1.338 RATIO, 2012-13
2016-17,
TURNOVER
1.28
RATIO, 2013-14, 2013-14
1.158
TOTAL ASSET 2014-15
TURNOVER 2015-16
RATIO, 2015-16,
2016-17
0.84
INTERPRETATION:
The total assets turnover ratio of SEIL is 1.44 in the year 2012 which
implies that the company generate a sale of rs.1.44 for 1 rupee invested in the fixed
assets and current assets together.

4.8 FIXED ASSET TURNOVER RATIO:
This ratio is used to know its efficiency of utilizing fixed assets
Formula:
Sales
Fixed Asset Turnover Ratio=
Net Fixed Assets
TABLE-4.8.1
YEAR SALES NET FIXED FIXED ASSET
ASSETS TURNOVER
2011-2012 170 329 5.157
2012-2013 981 328 2.989
2013-2014 125 358 3.497
2014-2015 156 660 2.369
2015-2016 167 644 2.59

The following graph shows the Fixed Assets Turnover ratio in the period 2012-16
GRAPH-4.8.2
Chart Title
FIXED ASSET
TURNOVER
RATIO, 2012-13,
5.157 2012-13
2013-14
FIXED ASSET
TURNOVER 2014-15
FIXED ASSET
RATIO, 2014-15, 2015-16
TURNOVER
3.497
RATIO, 2013-14, FIXED ASSET 2016-17
2.989 TURNOVER
RATIO, 2015-16,
FIXED ASSET
2.369
TURNOVER
RATIO, 2016-17,
1.43
INTERPRETATION:
The ratio seems to be increasing all throughout the years of study

indicates that are being utilized efficiently and large amount of sales are being
generated. This is particularly through in a manufacturing company like SEIL
where, companies have large and expensive equipment purchase because the
machinery used in such companies is expensive.

CHAPTER-V
SUMMARY, FINDINGS
AND
SUGGESTIONS

SUMMARY
 FINANCE:
Finance is the elixir that assists on the formation of new businesses, and allows
businesses to take advantage of opportunities to grow, employ local workers
and inturn support other businesses and local, state and federal government
through the remittance of income taxes. The strategic use of financial
instruments, such as loans and investments, is the key to the success of every
business. Financial trends also define the state of the economy on a global level,
so central banks can plan appropriate monetary policies.
 INDUSTRY:
The rate of production of steel in India has been going up at a steady rate in the
last few years. In the recent times, Orissa and Jharkhand have been identified as
the potential steel destinations of India – the ones that would provide the Indian
steel industry with its necessary raw material. There are also several steel
companies in India like Tata and ArcelorMittal that are either coming up or
have established them as prominent forces in the world steel scenario.

The Indian steel industry is among the upcoming industries of the world. It
has a number of iron ores, which means that it has plenty of resources from which
to draw its raw material.
 COMPANY :
Steel Exchange India Ltd is an India-based company. The company

operates in six divisions, namely trading division, steel melting division, rolling
division, pyxis software division and sponge iron division.
Steel Exchange India Ltd was incorporated in the year 1999 as a public
limited company. Steel Exchange India Ltd acquired a well-established steel
specific vertical B2B portal www.steelexchangeindia.om, which had been
promoted and developed by its holding company Pyxis Technology Solutions.
As per the scheme of amalgamation, Steel Exchange India Ltd and Simhadri
Steels Pvt Ltd were amalgamated with the company and the name was changed
to Steel Exchange India Ltd with effect from April 2003.
During the year 2006-07, the company entered a scheme of arrangement

with Vizag Profiles Ltd to the company. Vizag Profiles Ltd merged with the
company with effect from April 1, 2006.

FINDINGS:
 It was observed that there is an increase of 1691649761 of net working capital
from the year2012-2013 to 2013-2014. There is an overall increase in the
current assets of the company when compared to its value in the previous year
 The working capital calculations for the year 2014-2015 we can notice the
increase of 6994721409 net working capital compared to previous financial
year.
 The working capital calculations for the year 2015-2016 we can notice the
increase of2287012296compared to previous financial year.
its value in the previous year
 Net working capital is negative for the financial year 2016-2017 which
indicates the poor working capital management.
There is an overall decrease in the current assets of the company when compared
to its value in the previous year
 This is due to decrease in inventory,cash and bank balances and other
current assets of the company.
 There is an decrease in the current liabilities in the year 2016 -2017,when
compared to its previous year.
 SEIL does not show a very impressive INVENTORY TURN OVER RATIO
which means the company’s inventory is not liquid, it was good at the
beginning of the study but later it is the declining

 SEIL has its ability to pay its liabilities in time as worth of the absolute
liquid assets are considered to be adequate by QUICK and CURRENT
RATIOS
SUGGESTIONS:
The following are the suggestions that are taken based upon the data analysis:
 SEIL should improve its current ratio as it is seen below the accepted rate,1.0
this can be done by increasing its amount of current assets to its current
liabilities.
 According to the study SEIL Can be suggested to start improving the quick
ratio by reducing the amount of inventory it keeps in hold.
 The company whose capital structure is built through funds form debts and this
should be reduced as they are seen to be risky.
 SEIL is promptly colleting from its debtors for every 3 months in a year but on
the other hand it is seen that SEIL is paying its debts only once in a year this
may effects the company in borrowing any further.

 The management should try investing wisely on its fixed and current assets
through which returns will be increased and a greater life span of company can
be assured.
 So,from the above analysis I suggest that SEIL should improve its current assets
inorder to be perfectly solvent.
 Hence, I suggest that the company should improve its current assets adequately
to improve the efficiency of the working capital.
 The overall performance of the company during the period of study is much satisfactory.
 It should continue in the same way so that it will have bright future with increase in sales and
profitability.
 The way it is managing its funds is also good.
 Working capital of the firm
 is in satisfactory position so coromandel fertilizers limited should try to increase its
Current assets and decrease its Current liabilities to continue in same manner.

ANNEXURE
BALANCE SHEET OF STEEL EXCHANGE INDIA LIMITED

STEEL EXCHANGE INDIA LIMITED
Standalone Balance Sheet ------------------- in Rs. Cr. -------------------
Mar 17 Mar 16 Mar 15 Mar 14 Mar 13
12 mths 12 mths 12 mths 12 mths 9 mths
EQUITIES AND
LIABILITIES
SHAREHOLDER'S FUNDS
Equity Share Capital 75.98 75.98 51.95 51.95 51.95
Preference Share Capital 18.61 18.61 0.00 0.00 0.00
Total Share Capital 94.59 94.59 51.95 51.95 51.95
Revaluation Reserves 102.56 102.56 102.56 102.56 102.56
Reserves and Surplus 28.47 185.60 178.21 157.48 121.66
Total Reserves and Surplus 131.03 288.16 280.77 260.04 224.22
Total Shareholders Funds 244.23 382.75 332.72 311.99 276.17
Share Capital Suspense 0.00 0.00 42.64 5.98 5.98
NON-CURRENT LIABILITIES
Long Term Borrowings 182.82 247.12 344.96 92.29 113.20
Deferred Tax Liabilities [Net] 58.41 58.51 52.23 20.26 18.04
Other Long Term Liabilities 3.01 36.86 36.23 31.20 3.00
Total Non-Current Liabilities 244.24 342.49 433.42 143.75 134.24
CURRENT LIABILITIES
Short Term Borrowings 691.05 338.74 313.04 246.00 243.47
Trade Payables 107.98 578.89 588.13 496.65 425.18
Other Current Liabilities 336.33 224.70 152.71 137.51 130.58
Short Term Provisions 0.00 0.00 0.00 0.00 1.77
Total Current Liabilities 1,135.36 1,142.33 1,053.88 880.16 801.00
Total Capital And Liabilities 1,605.22 1,867.57 1,862.66 1,341.88 1,217.40
ASSETS
NON-CURRENT ASSETS
Tangible Assets 568.78 591.22 614.09 349.91 324.73
Capital Work-In-Progress 54.39 52.99 46.49 9.06 3.58
Fixed Assets 623.17 644.21 660.57 358.97 328.31

Non-Current Investments 0.00 0.00 0.00 35.29 35.29

Long Term Loans And Advances 7.89 9.55 11.60 9.86 6.84
Total Non-Current Assets 631.06 653.76 672.17 404.12 370.44
CURRENT ASSETS
Current Investments 0.25 0.25 0.00 0.00 0.00
Inventories 636.47 718.19 680.79 586.33 417.16
Trade Receivables 227.01 266.56 308.82 212.95 261.34
Cash And Cash Equivalents 16.43 89.16 73.47 48.26 37.04
PROFIT AND LOSS ACCOUNT OF STEEL EXCHANGE INDIA LIMITED

PROFIT AND LOSS ACCOUNT OF STEEL EXCHANGE INDIA LIMITED
Standalone Profit & Loss ------------------- in Rs. Cr. -------------------
account
Mar 17 Mar 16 Mar 15 Mar 14 Mar
13
12 mths 12 mths 12 mths 12 mths 9
mth
s
INCOME
Revenue From Operations [Gross] 1,324.10 1,716.26 1,572.82 1,316.90 1,023.25

Less: Excise/Sevice Tax/Other Levies 59.46 68.16 54.49 67.96 47.70
Revenue From Operations [Net] 1,264.64 1,648.10 1,518.33 1,248.95 975.55
Other Operating Revenues 14.75 23.04 47.04 6.52 5.96
Total Operating Revenues 1,279.39 1,671.14 1,565.37 1,255.47 981.51
Other Income 6.93 10.93 12.26 7.28 19.51
Total Revenue 1,286.31 1,682.07 1,577.63 1,262.75 1,001.01
EXPENSES
Cost Of Materials Consumed 367.98 402.64 523.44 430.71 284.44
Purchase Of Stock-In Trade 681.08 948.88 786.47 591.37 492.26
Operating And Direct Expenses 77.55 87.42 63.34 0.00 0.00
Changes In Inventories Of FG,WIP 30.24 26.62 -36.74 -40.67 -16.81
And
Stock-In Trade
Employee Benefit Expenses 23.57 23.61 22.81 17.31 13.30
Finance Costs 157.44 122.73 127.63 80.44 63.09
Depreciation And Amortisation 27.32 26.54 25.02 15.01 11.76
Expenses

Other Expenses 24.83 29.95 30.89 129.48 112.62

Total Expenses 1,390.00 1,668.40 1,542.87 1,223.65 960.67
13
12 mths 12 mths 12 mths 12 mths 9
mth
s
Profit/Loss Before Exceptional, -103.69 13.67 34.76 39.10 40.34
ExtraOrdinary Items And Tax
Exceptional Items -15.12 0.00 0.00 0.00 0.00
Profit/Loss Before Tax -118.81 13.67 34.76 39.10 40.34
Tax Expenses-Continued Operations

Deferred Tax -0.10 6.28 6.42 2.22 3.55
Tax For Earlier Years 0.23 0.00 -0.11 1.05 -16.49
Total Tax Expenses 0.14 6.28 6.31 3.27 -12.94
Profit/Loss After Tax And Before -118.95 7.39 28.46 35.82 53.29
ExtraOrdinary Items
Extraordinary Items -38.18 0.00 0.00 0.00 0.00
Profit/Loss From Continuing -157.13 7.39 28.46 35.82 53.29
Operations
Profit/Loss For The Period -157.13 7.39 28.46 35.82 53.29
13

BIBLIOGRAPHY
BOOKS:
1. Financial Management: Theory & Practice
Author: IM Pandey & Koontz
2. Simplified Approach To Financial Management Theory
Author: Prasanna Chandra
3. Financial Management
Author: M.Y.Khan & Jain
WEBSITES
 http://www.seil.co.in
 http://www.indianfoline.com
 VSP profile
 Company’s Annual Reports

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A study on WORKING CAPITAL

Department of management studies Page 1

 INTRODUCTION TO THE TOPIC

 NEED FOR THE STUDY

 OBJECTIVE OF THE STUDY

Department of management studies Page 2

INTRODUCTION TO THE TOPIC:

Department of management studies Page 3

1.1 NEED FOR THE STUDY

o It is beneficial to top Management of the company by providing crystal clear

o The study is also beneficial to employees and offers motivation by showing

Department of management studies Page 4

o It is helpful in providing the financial information as it focuses on daily cash flows

1.2 OBJECTIVES OF THE STUDY

o To understand the concept of working capital and its importance

o To determine the amount of the working capital employed by SEIL

o To know the overall operational efficiently and financial performance of

o To study the liquidity position by applying various ratios.

o To check the relationship between profitability and liquidity of the selected

o To asses the long term financial viability of company.

o To know how much the management is constantly concerned about the

Department of management studies Page 5

The collection of information is done two principle sources, viz

It is information collected directly without any references. In this study it is

Department of management studies Page 6

The data collection includes conducting personal interviews with the

 First chapter deals with introduction of Ratio analysis regarding the

 Fourth chapter deals with data analysis and interpretation

Regarding the ratio calculated.

 Fifth chapter deals with summary, findings and suggestions.

Department of management studies Page 8

There ends the complete chapterization of the project.

Department of management studies Page 9

2.1 INDUSTRY PROFILE

Steel is an alloy of iron usually containing less than 1% carbon is a

The development of steel industry in India should be viewed in

Department of management studies Page 10

GROWTH OF STEEL INDUSTRY:

1830 Josiah Marshall Health constructed the first

1874 James Ersk founded the Bengal iron works.

1899 Jamshedji Tata initiated the scheme for an integrated steel

1906 Formation if TISCO.

1911 Tata iron and steel company started production.

1916 TISCO was founded

Department of management studies Page 11

Department of management studies Page 12

from 6 integrated plants was 106 meters

1979-Annual Plan  The erstwhile Soviet Union agreed to help in

1980-85-Sixth Five Year Plan  Scheme for modernization of Bhilai steel

1991-96-Eight Five Year Plan  Visakhapatnam steel plant started its

1997-2002-Ninth Five Year Plan  Visakhapatnam steel plant had foreseen a 7%

Department of management studies Page 13

THE MAJOR STEEL AND RELATED COMPANIES IN INDIA:

1. Bharat Refectories Ltd.

2. Hindustan Steel Works Construction Ltd.

3. Jindal Steel and Power Ltd.

4. Tata Iron Steel Company Metal Scrap Trade Corporation Ltd.

5. Metallurgical and Engineering Consultants India Ltd.

6. National Mineral Development Corporation Ltd.

7. Rastriya Ispat Nigam Ltd.

8. Sponge Iron India Ltd.

9. Steel Authority India Ltd.

The global steel industry has witnessed several revolutionary changes