Summer Training Report

on
Working Capital mgmt.
IN
GOOD YEAR
Submitted in partial fulfillment of the requirement of degree in
Bachelor of Business Administration
(Computer aided management)

Of

MAHARSHI DAYANAND UNIVERSITY, ROHTAK

Session 2010-11

UNDER THE GUIDANCE OF: SUBMITTED BY:

Ms.Surbhi mangla Name : Mohan singh rawat

Class : BBA(CAM)V sem
Class roll no: 52806

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 DAV Centenary College
NH-3, N.I.T., Faridabad (Haryana)

CONTENTS

DECLARATION

ACKNOWLEDGEMENT

COMPANY PROFILE

SYNOPSIS OF STUDY

• Introduction

• Need for the study

• Scope of the study

• Objectives of the study

• Methodology of the study

• Limitations of the study

• REVIEW OF LITREATURE

DATA ANALYSIS & INTERPRETAION

FINDINGS OF THE STUDY

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RECOMMENDATION AND SUGGESTIONS

CONCLUSION

BIBILIOGRAPHY

ANNEXURE -1 & II

DECLARATION

I here by declare that this project work titled “ A PROJECT REPORT ON

WORKING CAPITAL MANAGEMENT” with special reference to GOODYEAR
INDIA PVT. LIMITED, BALLABGARH, (FARIDABAD) is original in has
been carried out by me as a student of BBA(CAM)-Vth Sem., of D.A.V.
Centenary college, Faridabad During 1st June to 15th July 2010. And has not
been submitted elsewhere for the Award of any degree of diploma either in part
time or in full time to other university.

Date:
Place: Mohan singh rawat

3
.

ACKNOWLEDGEMENT

I am highly thankful to Principal and Faculty of D.A.V. Centenary college, Faridabad

for giving me this opportunity to under take my project work in the GOODYEAR INDIA PVT.
LIMITED, BALLABGARH, (FARIDABAD).

I am grateful to P.P. Jagtap (Asstt. Manager Training) for giving me permission to do

the project in GOODYEAR INDIA PVT. LIMITED, BALLABGARH, (FARIDABAD). I
would express my sincere thanks to Mr. Harish Naswa (Manager factory accounting) for
helping me a lot in gathering information for my project.

I also express my gratitude to Ms.surbhi mangla who had been a constant source of
encouragement and provided me the necessary help during the period of my project.

4
 Last but not least, I express my sincere thanks to the God Almighty for showering his
blessings upon me and also all those who helped me directly or indirectly throughout my
project work.

(MOHAN SINGH RAWAT)

Place
Date:

5
6
At a Glance

Goodyear Financials

In 2009, Goodyear posted net sales of $16.3 billion.

Goodyear Shareholder's

More than 21,000 investors directly own Goodyear common stock, which is traded on
the New York Stock Exchange (symbol GT).
Visit Investor Relations

Goodyear's Leadership

Goodyear is one of the world's leading tire companies.

Goodyear is the No. 1 tiremaker in North America and Latin America.
Goodyear is Europe's second largest tiremaker.

Goodyear's Associates

Goodyear employs approximately 69,000 people around the world.

A Global Footprint

Goodyear is one of the world's largest tire companies, with operations in most regions
of the world. Together with its subsidiaries and joint ventures, Goodyear develops,
markets and sells tires for most applications.

Goodyear operates more than 57 plants in 23 countries.

7
Vision

Become a market-focused tire company providing superior products and services to

end-users and to our channel partners, leading to superior returns for our shareholders.

Our Values

For the better part of a century, Goodyear's corporate values have been centered on
the phrase, "Protect Our Good Name."

Today, this is brought to life through developing culture in which a committed and
competitive team of associates can excel.

7 Strategic Drivers of Goodyear's Business

 Leadership
 A focus on cash
 A lower cost structure
 Leverage distribution
 Building brand strength
 Product leadership
 Advantaged supply chain

8
Our Blimps

Aerial ambassadors of our company since 1925, Goodyear operates three blimps in
North America.

In the United States, they are based in Akron, Ohio; Carson, California, and Pompano
Beach, Florida.
Visit the Goodyear Blimp site.

Our Beginnings

The Goodyear Tire & Rubber Company was founded in 1898 by 38-year-old Frank
Seiberling.

He purchased our first plant with a $3,500 down payment using money he borrowed
from a brother-in-law.

The timing couldn't have been better. The bicycle craze of the 1890s was booming.
The horseless carriage was a wide-open challenge.

On Aug. 29, 1898, Goodyear was incorporated with a capital stock of $100,000.

Goodyear's Logo

Our winged-foot trademark was inspired by a newel-post statuette of the Roman god
Mercury in the home of Goodyear founder Frank Seiberling.

Seiberling felt Mercury embodied many of the characteristics for which Goodyear
products were known.

9
Goodyear’s Leaders

David E. Hill 1898-1899, President

Raymond C. Penfield 1899-1903, President

Lucius C. Miles 1903-1906, President

Frank A. Seiberling 1906-1921, President

Edward G. Wilmer 1921-1923, President

1923-1930, Chairman, Board of Directors

George M. Stadelman 1923-1926, President

Paul W. Litchfield 1926-1940, President

1930-1956, Chief Executive Officer
1930-1958, Chairman, Board of Directors

Edwin J. Thomas 1940-1958, President

1956-1964, Chief Executive Officer
1958-1964, Chairman, Board of Directors

Russell DeYoung 1958-1964, President

1964-1974, Chief Executive Officer

10
 1964-1974, Chairman, Board of Directors

Victor Holt Jr. 1964-1972, President

Charles J. Pilliod 1972-1974, President

1974-1983, Chief Executive Officer
1974-1983, Chairman, Board of Directors

John H. Gerstenmaier 1974-1978, President

Robert E. Mercer 1978-1983, President

1983-1989, Chief Executive Officer
1983-1989, Chairman, Board of Directors

Tom H. Barrett 1983-1991, President

1989-1991, Chief Executive Officer
1989-1991, Chairman

Hoyt M. Wells 1991-1995, President

Stanley C. Gault 1991-1995, Chief Executive Officer

1991-1996, Chairman, Board of Directors

Samir G. Gibara 1995-2000, President

1996-2003, Chief Executive Officer
1996-2003, Chairman, Board of Directors

11
Robert J. Keegan 2003-2010, President
2003-2010, Chief Executive Officer
2003-present, Chairman, Board of Directors

Richard J. Kramer 2010-present, President

2010-present, Chief Executive Officer

Why Goodyear?
It's easy enough to look back into history for stories that describe Goodyear. The
company has been in existence since 1898 and survived World Wars, depressions,
recessions, surges, losses and every conceivable stock market fluctuation. But the real
question is, "What's in store for the people working there today? What lies ahead for
those who choose to make the company their own today in the years ahead?"

The answer to that question lies where it always does, in the eyes of our customers.
Goodyear's reach extends around the globe, selling through Dealers, distributors,
original equipment accounts, company-owned stores, mass merchants and sales
offices.

We also are moving more steadily toward selling via the global web. Included in this
mix are customers of every nationality, of every background, of every disposition, with
only one thing in common - they demand the best value we can provide. In every case,

12
the drive is to provide products that meet exceptional high quality standards, that push
the envelope for performance improvement and that are available when and where
they are needed.

So, when we look into the future, we will be looking into the eyes of every consumer
that buys tires and asking ourselves how we can meet and exceed their needs. Your
world, if you choose a career with us, will be the same.

A Global Platform
Experience a global business environment where you can learn cultural values from
across the world. Goodyear’s four different business units – Asia Pacific; Europe,
Middle East and Africa; Latin America; and North America – provide a unique
worldwide perspective for Goodyear’s clients and associates.

13
Goodyear's presence in India is over 80 years old, with two plants, one each in
Ballabgarh and Aurangabad.
A chronology of Goodyear's continued success in India is as follows:

1922:

Goodyear tyre and Rubber company Akron, Ohio entered the Indian Market.

1961:

Goodyear India's own manufacturing facility was inaugurated in Ballabgarh, 32 kms

from India’s capital New Delhi .The plant had an investment of US $12million and was
commissioned within 12 months.

1965:

The Ballabgarh plant was expanded which increased the plant production by 35%

14
1969-70:

The production increased by nearly 100%

1993:

Goodyear formed a 50-50 joint venture with South- Asian Tyres Ltd. (SATL) at
Aurangabad to manufacture state-of-art radial tyres for car and light truck and bias
construction tyres for graders and earthmovers.

1996:

The first tyre GPS2 radial Passenger was rolled out from Aurangabad plant

1998:

SATL becomes a fully owned Goodyear Company

1999:

A significant investment of 9.3 MM USD was made in the farm tyre manufacturing
process.

2002:

Goodyear becomes the first tyre manufacturer to roll out tubeless tyres on Indian roads.

In the passenger car segment, Goodyear supplies tyres to many of the leading Original
Equipment Manufacturers in India. These include Maruti, Telco, Mahindra & Mahindra,
Ford, Fiat and many more.
Goodyear India has been a pioneer in introducing tubeless radial tyres in the
passenger car segment.

In the farm segment, Goodyear tyres are supplied to all the major Tractor
manufacturers like PTL, ITL, TAFE, Eicher and Escorts. Similarly, for buses and trucks,

15
vehicles rolling out of the assembly line of the leading OEMs like TELCO, Ashok
Leyland, and Swaraj Mazda are often seen with Goodyear tyres.
Goodyear commands a major market share in the Off The Road (OTR) segment by
being a major supplier to Coal India Limited, Escorts, L&T, TISCO and major steel
plants of the country.

2004:

A very significant year with three product launches including GT3, Eagle F1 and
Ducaro GA.

ON 14TH December 2005,Hon’ble President of India, Dr. A PJ Abdul Kalam presented the
National Energy Conservation awards to GOODYEAR INDIA LIMITED. “Certificate of
Merit” in “Tyre sector” for Ballabgarh unit, in a function held at Vigyan Bhawan on the
occasion of Energy Conservation day.
In addition to this, GOODYEAR INDIA LIMITED also received many prestigious awards for
their safety, manufacturing, environment & cost management excellence.

Goodyear is a multinational with a universally recognized brand name identified with quality
tyres. Goodyear has annual sales of over US $15bn, has a presence in six continents and
operates from 80 facilities in 28 countries.

Goodyear's presence in India is over 80 years old. GOODYEAR TYRE and Rubber Company
Akron, Ohio entered the Indian Market in1922. With the mounting pace, Goodyear becomes the
first tyre manufacturer to roll out tubeless tyres on Indian roads in 2002. Goodyear India has
been a pioneer in introducing tubeless radial tyres in the passenger car segment.

Goodyear commands a major market share in the Off The Road (OTR) segment by being a
major supplier to Coal India Limited, Escorts, L&T, TISCO and major steel plants of the
country. In the farm segment Goodyear tyres are supplied to all the major Tractor manufacturers
like PTL, ITL, TAFE, Eicher and Escorts. Similarly, for buses and trucks, vehicles rolling out of
the assembly line of the leading OEMs like TELCO, Ashok Leyland, and Swaraj Mazda are
often seen with Goodyear tyres.

16
In the year 1961, Goodyear India's own manufacturing facility was inaugurated in Ballabgarh,
32 kms from India’s capital New Delhi .The plant had an investment of US $12million and was
commissioned within 12 months. With the expansion of the unit in 1965, it increased its
production by 35%. However, production culminated to 100% in 1969-1970.

GOODYEAR INDIA LIMITED, Ballabgarh is engaged in manufacturing of car, truck & tractor
tires. GOODYEAR INDIA LIMITED Company is a subsidiary of Goodyear tire and rubber
co., AKRON, USA is one of the largest tire companies in the world. Unit has a sales
turnover of about Rs.630 crore (as per Annual Report) and employs about 1100 persons.
Cost of utilities is approximately 25 crore/year.

Globally GOODYEAR is driving on top priority and keeps tracking all the plants. GOODYEAR
INDIA is presently the leader in GOODYEAR plants world wide in terms of BTU/Lb.
Company has very high commitment to energy conservation and driven by the manufacturing
director. A high-powered team is formed by manufacturing director under leadership of plant
head-engineering comprising of Electrical Manager, Power House Manager,
instruments/Electronic Engineer that keeps finding opportunities and tries to arrange resources
and capital required and implements those ideas. Energy committee is continuously working on
finding more areas of opportunity and has taken a target of 2%improvement every year.

Energy policy

 We the associates of GOODYEAR INDIA are fully committed to continuous

improvement in energy.
 Conservation efforts and minimizing the specific energy consumption for our
products to international industry standards and Goodyear corporate world.

 The policy is achieved through the following:

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 a) Each drop of oil is precious, look at all small and big energy consuming areas for
improvement. Work with process teams and improve process efficiency.
b) Educating and training to each associate for eliminating wasteful energy practices.
c) Up gradation of technology and equipment to achieve energy efficient process on a
cost effective manner.

GOODYEAR SAFETY SYSTEMS

The Principle of accident occurrence is “ACCIDENTS ARE CAUSED THEY DONOT

HAPPEN”. Therefore, accident prevention becomes easier as they are caused. The most
successful ACCIDENT PREVENTION PROGRAM adopted by GOODYEAR’s
implementation of 5 Es;

 Engineering
 Enforcement
 Engineering
 Evolution
 Enthusiasm

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Spreading its wings outside the geographical boundaries of the country Goodyear India exports
tyres to other countries such as Pakistan, Nepal, Bangladesh, Srilanka, Bhutan, Australia, Dubai,
Hongkong, and Phillipines.

All this is achieved with a team of 85,000 people dedicated to make Goodyear a company in the
service of the esteemed customers and consumers.

GOODYEAR INDIA LIMITED is committed to continuously improve energy conservation in

all its activities for its substantial growth for future generation and is an example to the other
industrial sector.

Our efforts should create an environment that would spur industries in achieving excellence in
efficient use of energy conservation and motivating the other energy consumers in joining and
promotion of a nation wide energy conservation movement doing commendable work on
attaining better standards of energy efficiency and its conservation in their respective fields.

2006:
Launch of branded retail “shop-in-shop” concept – a part of the company’s strategic
initiative in organized tyre retailing, aimed at strengthening its presence in the large tyre
replacement market in the country. These outlets will offer customers an unmatched
tyre purchase experience.

Goodyear India rolls out the Excellence series – a new collection of luxury passenger
car tyres. Designed with the ultimate '3 -Zone Technology', and ECO-Sil Silica Tread
Compound Technology, the tyre provides superior comfort and precise handling on
both wet and dry conditions for premium car drivers.

19
20
SYNOPSIS OF THE STUDY

21
 INTRODUCTION

WORKING CAPITAL MANAGEMENT

The success of business, among other things depends upon the manner in which its
capital is managed in the dynamic business setting, the composition of working capital
mismanaged, in the dynamic business setting, the difference between the current assets and
current liabilities. Constantly changes in relation to the level of activity of the business concern
and rates at which the current assets of current liabilities keep changing in relation to each other
and other things are significant factors also continuous review and direction of the financial
manager.

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 It is the task of the financial maintain an appropriate level of working capital that is
enough current assets to pay off current liabilities neither excess nor less because excessive
working capital leads to interruption in the smooth functioning of the business concern.

There are numerous instances in the history of business world where inadequacy of
working capital has led to business failures when a firm finds it difficult to meetings day to day.

Operating expenses essential out lays may have to be postponed for want of funds,
operating plans will go out of gear & enterprise objectives on investment slumps the suppliers &
creditors of the firm may have to wait longer to raise their dues & will hesitate to extend further
credit to the firm.

Thus efficient management of working capital in an important prerequisite for successful

working of a business concern it reduces the chances of business failure generates a felling of
security and confidence in the minds of personnel in the organization it assurance solvency of
steady of the organization.

NEED AND IMPORTANCE OF THE STUDY:

1.Their projects is helpful in knowing the companies position of funds maintenance and setting
the standards for working capital inventory levels, current ratio level, quick ratio, current
amount turnover level & web torn turnover levels.

2. This project is helpful to the managements for expanding the dualism & the project viability
& present availability of funds.

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3. This project is also useful as it companies the present year data with the previous year data
and there by it show the trend analysis, i.e. increasing fund or decreasing fund.

4. The project is done entirely as a whole entirely. It will give overall view of the organization
and it is useful in further expansion decision to be taken by management.

OBJECTIVE OF THE STUDY:

1. To examine the effectiveness of working capita management polices with

the help of accounting ratio.
2. To study liquidity position of the company by taking various measurements.
3. To evaluation the financial performance of the company.
4. To make suggestions for policy makers for effective management of
working capital.

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METHODOLOGY

Primary Data
DEF: The first handed information/Fresh data collected through various methods is known as
primary data.

25
 In respect of primary data which the researchers is directly collects data that have not
been previously collected.

The primary data was gathered through personal interaction with various functional
heads and other technical personnel. Some information was also collected by observation.

Secondary Data :
DEF: The data which have been already collected & comprised for another purpose.
Secondary data was collected various reports / annual reports, documents charts, management
information systems, etc in GOODYEAR. And also collected various magazines, books,
newspapers and internet.

The analysis of the information gathered has been made on the basis of the clarifications
sought during the personal discussions with the concerned people and perception during the
personal visits to the important areas o services.

In marking observations identifying problems and suggesting certain remedies such

emphasis was given on the basis of opinions gathered during the personal discussions and with
the personal experience gained during the academic study of M.B.A course.

SCOPE OF THE STUDY

1. The scope is limited to operations of GOODYEAR INDIA PVT. LIMITED,

BALLABGARH, (FARIDABAD).
2. The period consider 6 Weeks.
3. The scope of the study is limited to collecting the financial data published in the annual
reports of the company with reference to the objectives stated above and an analysis of

26
 the data with a view to suggest favorable solution to various problems related to
financial performance.

LIMITATION OF THE STUDY:

1. The following are the various aspects involved in the analysis of the study.

2. The study in limited 3 years (2007 to 2009) performance of the company.

3. The data used in this study have been taken from published annual report only.

27
4. This study in conducted within a short period. During the limited period the study may not be
retailed, full fledged and utilization in all aspects.

5. Financial accounting does not take into account the price level changes.

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 REVIEW

OF

LITRETAURE

Capital required for a business can be classified under two main categories via,

1) Fixed Capital

2) Working Capital

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 p&m, land, building, furniture, etc. Investments in these assets represent

29
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 – to- day 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 assts 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.

CONCEPT OF WORKING CAPITAL

There are two concepts of working capital:

1. Gross working capital

2. Net working capital

The gross working capital is the capital invested in the total current assets of the enterprises
current assets are those

Assets which can convert in to cash within a short period normally one accounting year.

CONSTITUENTS OF CURRENT ASSETS

1) Cash in hand and cash at bank

2) Bills receivables

3) Sundry debtors

4) Short term loans and advances.

30
 5) Inventories of stock as:

a. Raw material

b. Work in process

c. Stores and spares

d. Finished goods

6. Temporary investment of surplus funds.

7. Prepaid expenses

8. Accrued incomes.

9. Marketable securities.

In a narrow sense, the term working capital refers to the net working. Net working
capital is the excess of current assets over current liability, or, say:

NET WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES.

Net working capital can be positive or negative. When the current assets exceeds the
current liabilities are more than the current assets. Current liabilities are those
liabilities, which are intended to be paid in the ordinary course of business within a
short period of normally one accounting year out of the current assts or the income
business.

CONSTITUENTS OF CURRENT LIABILITIES

1. Accrued or outstanding expenses.

2. Short term loans, advances and deposits.

3. Dividends payable.

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 4. Bank overdraft.

5. Provision for taxation , if it does not amt. to app. Of profit.

6. Bills payable.

7. Sundry creditors.

The gross working capital concept is financial or going concern concept whereas net working
capital is an accounting concept of working capital. Both the concepts have their own merits.

The gross concept is sometimes preferred to the concept of working capital for the following
reasons:

1. It enables the enterprise to provide correct amount of working capital at correct time.

2. Every management is more interested in total current assets with which it has to operate
then the source from where it is made available.

3. It take into consideration of the fact every increase in the funds of the enterprise would
increase its working capital.

4. This concept is also useful in determining the rate of return on investments in working
capital. The net working capital concept, however, is also important for following
reasons:

• It is qualitative concept, which indicates the firm’s ability to meet to its

operating expenses and short-term liabilities.

• It indicates the margin of protection available to the short term creditors.

• It is an indicator of the financial soundness of enterprises.

• It suggests the need of financing a part of working capital requirement out of

the permanent sources of funds.

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 CLASSIFICATION OF WORKING CAPITAL

Working capital may be classified in to ways:

• On the basis of concept.

• On the basis of time.

On the basis of concept working capital can be classified as gross working capital and
net working capital. On the basis of time, working capital may be classified as:

• Permanent or fixed working capital.

• Temporary or variable working capital

PERMANENT OR FIXED WORKING CAPITAL

Permanent or fixed working capital is minimum amount which is required to ensure effective
utilization of fixed facilities and for maintaining the circulation of current assets. Every firm has
to maintain a minimum level of raw material, work- in-process, finished goods and cash
balance. This minimum level of current assts is called permanent or fixed working capital as this
part of working is permanently blocked in current assets. As the business grow the requirements
of working capital also increases due to increase in current assets.

TEMPORARY OR VARIABLE WORKING CAPITAL

Temporary or variable working capital is the amount of working capital which is required to
meet the seasonal demands and some special exigencies. Variable working capital can further be
classified as seasonal working capital and special working capital. The capital required to meet
the seasonal need of the enterprise is called seasonal working capital. Special working capital is
that part of working capital which is required to meet special exigencies such as launching of
extensive marketing for conducting research, etc.

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Temporary working capital differs from permanent working capital in the sense that is required
for short periods and cannot be permanently employed gainfully in the business.

IMPORTANCE OR ADVANTAGE OF ADEQUATE WORKING CAPITAL

 SOLVENCY OF THE BUSINESS: Adequate working capital helps in

maintaining the solvency of the business by providing uninterrupted of production.

 Goodwill: Sufficient amount of working capital enables a firm to make prompt

payments and makes and maintain the goodwill.

 Easy loans: Adequate working capital leads to high solvency and credit standing
can arrange loans from banks and other on easy and favorable terms.

 Cash Discounts: Adequate working capital also enables a concern to avail cash
discounts on the purchases and hence reduces cost.

 Regular Supply of Raw Material: Sufficient working capital ensures regular

supply of raw material and continuous production.

 Regular Payment Of Salaries, Wages And Other Day TO Day

Commitments: It leads to the satisfaction of the employees and raises the morale of
its employees, increases their efficiency, reduces wastage and costs and enhances
production and profits.

 Exploitation Of Favorable Market Conditions: If a firm is having

adequate working capital then it can exploit the favorable market conditions such as
purchasing its requirements in bulk when the prices are lower and holdings its
inventories for higher prices.

 Ability To Face Crises: A concern can face the situation during the depression.

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 Quick And Regular Return On Investments: Sufficient working capital
enables a concern to pay quick and regular of dividends to its investors and gains confidence
of the investors and can raise more funds in future.

 High Morale: Adequate working capital brings an environment of securities,

confidence, high morale which results in overall efficiency in a business.

EXCESS OR INADEQUATE WORKING CAPITAL

Every business concern should have adequate amount of working capital to run its business
operations. It should have neither redundant or excess working capital nor inadequate nor
shortages of working capital. Both excess as well as short working capital positions are bad
for any business. However, it is the inadequate working capital which is more dangerous
from the point of view of the firm.

DISADVANTAGES OF REDUNDANT OR EXCESSIVE WORKING

CAPITAL

1. Excessive working capital means ideal funds which earn no profit for the firm and
business cannot earn the required rate of return on its investments.

2. Redundant working capital leads to unnecessary purchasing and accumulation of

inventories.

3. Excessive working capital implies excessive debtors and defective credit policy
which causes higher incidence of bad debts.

4. It may reduce the overall efficiency of the business.

5. If a firm is having excessive working capital then the relations with banks and other
financial institution may not be maintained.

6. Due to lower rate of return n investments, the values of shares may also fall.

35
 7. The redundant working capital gives rise to speculative transactions

DISADVANTAGES OF INADEQUATE WORKING CAPITAL

Every business needs some amounts of working capital. The need for working capital arises due
to the time gap between production and realization of cash from sales. There is an operating
cycle involved in sales and realization of cash. There are time gaps in purchase of raw material
and production; production and sales; and realization of cash.

Thus working capital is needed for the following purposes:

• For the purpose of raw material, components and spares.

• To pay wages and salaries

• To incur day-to-day expenses and overload costs such as office expenses.

• To meet the selling costs as packing, advertising, etc.

• To provide credit facilities to the customer.

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

For studying the need of working capital in a business, one has to study the business under
varying circumstances such as a new concern requires a lot of funds to meet its initial
requirements such as promotion and formation etc. These expenses are called preliminary
expenses and are capitalized. The amount needed for working capital depends upon the size
of the company and ambitions of its promoters. Greater the size of the business unit,
generally larger will be the requirements of the working capital.

The requirement of the working capital goes on increasing with the growth and expensing of
the business till it gains maturity. At maturity the amount of working capital required is
called normal working capital.

36
There are others factors also influence the need of working capital in a business.

FACTORS DETERMINING THE WORKING CAPITAL REQUIREMENTS

1. NATURE OF BUSINESS: The requirements of working is very limited in

public utility undertakings such as electricity, water supply and railways because
they offer cash sale only and supply services not products, and no funds are tied up
in inventories and receivables. On the other hand the trading and financial firms
requires less investment in fixed assets but have to invest large amt. of working
capital along with fixed investments.

2. SIZE OF THE BUSINESS: Greater the size of the business, greater is the
requirement of working capital.

3. PRODUCTION POLICY: If the policy is to keep production steady by

accumulating inventories it will require higher working capital.

4. LENTH OF PRDUCTION CYCLE: The longer the manufacturing time the

raw material and other supplies have to be carried for a longer in the process with
progressive increment of labor and service costs before the final product is obtained.
So working capital is directly proportional to the length of the manufacturing
process.

5. SEASONALS VARIATIONS: Generally, during the busy season, a firm

requires larger working capital than in slack season.

6. WORKING CAPITAL CYCLE: The speed with which the working cycle
completes one cycle determines the requirements of working capital. Longer the
cycle larger is the requirement of working capital.

37
 Finished Good Cash

Raw Material

7. RATE OF STOCK TURNOVER: There is an inverse co-relationship

between the question of working capital and the velocity or speed with which the
sales are affected. A firm having a high rate of stock turnover wuill needs lower amt.
of working capital as compared to a firm having a low rate of turnover.

38
8. CREDIT POLICY: A concern that purchases its requirements on credit and
sales its product / services on cash requires lesser amt. of working capital and vice-
versa.

9. BUSINESS CYCLE: In period of boom, when the business is prosperous, there

is need for larger amt. of working capital due to rise in sales, rise in prices, optimistic
expansion of business, etc. On the contrary in time of depression, the business
contracts, sales decline, difficulties are faced in collection from debtor and the firm
may have a large amt. of working capital.

10. RATE OF GROWTH OF BUSINESS: In faster growing concern, we shall

require large amt. of working capital.

11. EARNING CAPACITY AND DIVIDEND POLICY: Some firms have more
earning capacity than other due to quality of their products, monopoly conditions,
etc. Such firms may generate cash profits from operations and contribute to their
working capital. The dividend policy also affects the requirement of working capital.
A firm maintaining a steady high rate of cash dividend irrespective of its profits
needs working capital than the firm that retains larger part of its profits and does not
pay so high rate of cash dividend.

12. PRICE LEVEL CHANGES: Changes in the price level also affect the working
capital requirements. Generally rise in prices leads to increase in working capital.

Others FACTORS: These are:

 Operating efficiency.

 Management ability.

 Irregularities of supply.

 Import policy.

39
  Asset structure.

 Importance of labor.

 Banking facilities, etc.

MANAGEMENT OF WORKING CAPITAL

Management of working capital is concerned with the problem that arises in attempting
to manage the current assets, current liabilities. The basic goal of working capital
management is to manage the current assets and current liabilities of a firm in such a
way that a satisfactory level of working capital is maintained, i.e. it is neither adequate
nor excessive as both the situations are bad for any firm. There should be no shortage of
funds and also no working capital should be ideal. WORKING CAPITAL
MANAGEMENT POLICES of a firm has a great on its probability, liquidity and
structural health of the organization. So working capital management is three
dimensional in nature as

1. It concerned with the formulation of policies with regard to profitability, liquidity

and risk.

2. It is concerned with the decision about the composition and level of current assets.

3. It is concerned with the decision about the composition and level of current
liabilities.

40
WORKING CAPITAL ANALYSIS

As we know working capital is the life blood and the centre of a business. Adequate
amount of working capital is very much essential for the smooth running of the business.
And the most important part is the efficient management of working capital in right time.
The liquidity position of the firm is totally effected by the management of working
capital. So, a study of changes in the uses and sources of working capital is necessary to
evaluate the efficiency with which the working capital is employed in a business. This
involves the need of working capital analysis.

The analysis of working capital can be conducted through a number of devices, such as:

1. Ratio analysis.

2. Fund flow analysis.

3. Budgeting.

41
1. RATIO ANALYSIS

A ratio is a simple arithmetical expression one number to another. The technique of ratio
analysis can be employed for measuring short-term liquidity or working capital position
of a firm. The following ratios can be calculated for these purposes:

1. Current ratio.

2. Quick ratio

3. Absolute liquid ratio

4. Inventory turnover.

5. Receivables turnover.

6. Payable turnover ratio.

7. Working capital turnover ratio.

8. Working capital leverage

9. Ratio of current liabilities to tangible net worth.

2. FUND FLOW ANALYSIS

Fund flow analysis is a technical device designated to the study the source from which
additional funds were derived and the use to which these sources were put. The fund
flow analysis consists of:

a. Preparing schedule of changes of working capital

42
 b. Statement of sources and application of funds.

It is an effective management tool to study the changes in financial position (working

capital) business enterprise between beginning and ending of the financial dates.

3. WORKING CAPITAL BUDGET

A budget is a financial and / or quantitative expression of business plans and polices to

be pursued in the future period time. Working capital budget as a part of the total budge
ting process of a business is prepared estimating future long term and short term working
capital needs and sources to finance them, and then comparing the budgeted figures with
actual performance for calculating the variances, if any, so that corrective actions may be
taken in future. He objective working capital budget is to ensure availability of funds as
and needed, and to ensure effective utilization of these resources. The successful
implementation of working capital budget involves the preparing of separate budget for
each element of working capital, such as, cash, inventories and receivables etc.

ANALYSIS OF SHORT – TERM FINANCIAL POSITION OR TEST OF

LIQUIDITY

The short –term creditors of a company such as suppliers of goods of credit and
commercial banks short-term loans are primarily interested to know the ability of a
firm to meet its obligations in time. The short term obligations of a firm can be met in
time only when it is having sufficient liquid assets. So to with the confidence of
investors, creditors, the smooth functioning of the firm and the efficient use of fixed
assets the liquid position of the firm must be strong. But a very high degree of liquidity
of the firm being tied – up in current assets. Therefore, it is important proper balance in
regard to the liquidity of the firm. Two types of ratios can be calculated for measuring
short-term financial position or short-term solvency position of the firm.

43
 1. Liquidity ratios.

2. Current assets movements ‘ratios.

A) LIQUIDITY RATIOS

Liquidity refers to the ability of a firm to meet its current obligations as and when
these become due. The short-term obligations are met by realizing amounts from
current, floating or circulating assts. The current assets should either be liquid or near
about liquidity. These should be convertible in cash for paying obligations of short-
term nature. The sufficiency or insufficiency of current assets should be assessed by
comparing them with short-term liabilities. If current assets can pay off the current
liabilities then the liquidity position is satisfactory. On the other hand, if the current
liabilities cannot be met out of the current assets then the liquidity position is bad. To
measure the liquidity of a firm, the following ratios can be calculated:

1. CURRENT RATIO

2. QUICK RATIO

3. ABSOLUTE LIQUID RATIO

1. CURRENT RATIO

Current Ratio, also known as working capital ratio is a measure of general liquidity
and its most widely used to make the analysis of short-term financial position or

44
liquidity of a firm. It is defined as the relation between current assets and current
liabilities. Thus,

CURRENT RATIO = CURRENT ASSETS

CURRENT LIABILITES

The two components of this ratio are:

1) CURRENT ASSETS

2) CURRENT LIABILITES

Current assets include cash, marketable securities, bill receivables, sundry debtors,
inventories and work-in-progresses. Current liabilities include outstanding expenses,
bill payable, dividend payable etc.

A relatively high current ratio is an indication that the firm is liquid and has the ability
to pay its current obligations in time. On the hand a low current ratio represents that
the liquidity position of the firm is not good and the firm shall not be able to pay its
current liabilities in time. A ratio equal or near to the rule of thumb of 2:1 i.e. current
assets double the current liabilities is considered to be satisfactory.

45
DATA ANALYSIS

&

INTERPRETATION

46
 CALCULATION OF CURRENT RATIO

(Rupees in Millions)

Year 2007 2008 2009

Current Assets 2825.60 2525.74 3618.02
Current Liabilities 2336.25 1960.56 2565.20
Current Ratio 1.21:1 1.29:1 1.41:1

Interpretation:-

As we know that ideal current ratio for any firm is 2:1. If we see the current ratio of the
company for last three years it has increased from 2006 to 2008. The current ratio of company is
more than the ideal ratio. This depicts that company’s liquidity position is sound. Its current
assets are more than its current liabilities.

2. QUICK RATIO

Quick ratio is a more rigorous test of liquidity than current ratio. Quick ratio may be defined as
the relationship between quick/liquid assets and current or liquid liabilities. An asset is said to
be liquid if it can be converted into cash with a short period without loss of value. It measures
the firms’ capacity to pay off current obligations immediately.

QUICK RATIO = QUICK ASSETS

CURRENT LIABILITES

Where Quick Assets are:

1) Marketable Securities

2) Cash in hand and Cash at bank.

47
 3) Debtors.

A high ratio is an indication that the firm is liquid and has the ability to meet its current
liabilities in time and on the other hand a low quick ratio represents that the firms’
liquidity position is not good.

As a rule of thumb ratio of 1:1 is considered satisfactory. It is generally thought that if

quick assets are equal to the current liabilities then the concern may be able to meet its
short-term obligations. However, a firm having high quick ratio may not have a
satisfactory liquidity position if it has slow paying debtors. On the other hand, a firm
having a low liquidity position if it has fast moving inventories.

CALCULATION OF QUICK RATIO

e.g. (Rupees in Crore)

Year 2007 2008 2009

Quick Assets 2718.32 2400.69 3254.85
Current Liabilities 2336.25 1960.56 2565.20
Quick Ratio 1.16:1 1.22:1 1.16:1

Interpretation :

A quick ratio is an indication that the firm is liquid and has the ability to meet its
current liabilities in time. The ideal quick ratio is 1:1. Company’s quick ratio is more
than ideal ratio. This shows company has no liquidity problem.

3. ABSOLUTE LIQUID RATIO

Although receivables, debtors and bills receivable are generally more liquid than
inventories, yet there may be doubts regarding their realization into cash immediately
or in time. So absolute liquid ratio should be calculated together with current ratio and
acid test ratio so as to exclude even receivables from the current assets and find out the
absolute liquid assets. Absolute Liquid Assets includes :

48
ABSOLUTE LIQUID RATIO = ABSOLUTE LIQUID ASSETS
CURRENT LIABILITES

ABSOLUTE LIQUID ASSETS = CASH & BANK BALANCES.

(Rupees in Million)

Year 2007 2008 2009

Absolute Liquid Assets 645.72 552.29 1587.72
Current Liabilities 2336.25 1960.56 2565.20
Absolute Liquid Ratio .28 : 1 .28 : 1 .62 : 1

Interpretation :

These ratio shows that company carries a small amount of cash. But there is
nothing to be worried about the lack of cash because company has reserve, borrowing
power & long term investment. In India, firms have credit limits sanctioned from
banks and can easily draw cash.

B) CURRENT ASSETS MOVEMENT RATIOS

Funds are invested in various assets in business to make sales and earn profits.
The efficiency with which assets are managed directly affects the volume of sales. The
better the management of assets, large is the amount of sales and profits. Current assets
movement ratios measure the efficiency with which a firm manages its resources.
These ratios are called turnover ratios because they indicate the speed with which
assets are converted or turned over into sales. Depending upon the purpose, a number
of turnover ratios can be calculated. These are :

1. Inventory Turnover Ratio

2. Debtors Turnover Ratio

49
 3. Creditors Turnover Ratio

4. Working Capital Turnover Ratio

The current ratio and quick ratio give misleading results if current assets include high
amount of debtors due to slow credit collections and moreover if the assets include high
amount of slow moving inventories. As both the ratios ignore the movement of current
assets, it is important to calculate the turnover ratio.

1. INVENTORY TURNOVER OR STOCK TURNOVER

RATIO :

Every firm has to maintain a certain amount of inventory of finished goods so as

to meet the requirements of the business. But the level of inventory should
neither be too high nor too low. Because it is harmful to hold more inventory as
some amount of capital is blocked in it and some cost is involved in it. It will
therefore be advisable to dispose the inventory as soon as possible.

INVENTORY TURNOVER RATIO = COST OF GOOD SOLD

AVERAGE INVENTORY

Inventory turnover ratio measures the speed with which the stock is converted
into sales. Usually a high inventory ratio indicates an efficient management of
inventory because more frequently the stocks are sold ; the lesser amount of
money is required to finance the inventory. Where as low inventory turnover
ratio indicates the inefficient management of inventory. A low inventory turnover
implies over investment in inventories, dull business, poor quality of goods,
stock accumulations and slow moving goods and low profits as compared to total
investment.

AVERAGE STOCK = OPENING STOCK + CLOSING STOCK

2

50
 (Rupees in Millions)

Year 2007 2008 2009

Cost of Goods sold 8196.95 8673.67 8923.54
Average Stock 644.11 714.05 516.63
Inventory Turnover Ratio 12.7 times 12.2 times 17.3 times

Interpretation :

These ratio shows how rapidly the inventory is turning into receivable through
sales. In 2007 the company has high inventory turnover ratio but in 2008 it has reduced
to 0.5 times and in 2009 it has increased 5.1 times. This shows that the company’s
inventory management technique is most efficient as compare to last year.

2. INVENTORY CONVERSION PERIOD:

INVENTORY CONVERSION PERIOD = 365 (Net working days)

INVENTORY TURNOVER RATIO

(Ru

pees in Millions)

Year 2007 2008 2009

Days 365 365 365
Inventory Turnover Ratio 12.7 12.2 17.3
Inventory Conversion Period 29 days 30 days 21 days

51
 Interpretation :

Inventory conversion period shows that how many days inventories takes to
convert from raw material to finished goods. In the company inventory conversion
period is decreasing. This shows the efficiency of management to convert the
inventory into cash.

3. DEBTORS TURNOVER RATIO :

A concern may sell its goods on cash as well as on credit to increase its sales and
a liberal credit policy may result in tying up substantial funds of a firm in the form of
trade debtors. Trade debtors are expected to be converted into cash within a short
period and are included in current assets. So liquidity position of a concern also
depends upon the quality of trade debtors. Two types of ratio can be calculated to
evaluate the quality of debtors.

a) Debtors Turnover Ratio

b) Average Collection Period

DEBTORS TURNOVER RATIO = TOTAL SALES (CREDIT)

AVERAGE DEBTORS

Debtor’s velocity indicates the number of times the debtors are turned over
during a year. Generally higher the value of debtor’s turnover ratio the more efficient
is the management of debtors/sales or more liquid are the debtors. Whereas a low
debtors turnover ratio indicates poor management of debtors/sales and less liquid
debtors. This ratio should be compared with ratios of other firms doing the same
business and a trend may be found to make a better interpretation of the ratio.

AVERAGE DEBTORS= OPENING DEBTOR+CLOSING DEBTOR

2

52
 (Rupees in Millions)

Year 2007 2008 2009

Sales 8904.32 9190.99 10151.04
Average Debtors 1276.66 1018.98 986.67
Debtor Turnover Ratio 6.97 times 9.02 times 10.29 times

Interpretation :

This ratio indicates the speed with which debtors are being converted or turnover
into sales. The higher the values or turnover into sales. The higher the values of
debtors turnover, the more efficient is the management of credit.

4. AVERAGE COLLECTION PERIOD :

Average Collection Period = No. of Working Days

Debtors Turnover Ratio

The average collection period ratio represents the average number of days for
which a firm has to wait before its receivables are converted into cash. It measures the
quality of debtors. Generally, shorter the average collection period the better is the
quality of debtors as a short collection period implies quick payment by debtors and
vice-versa.

Average Collection Period = 365 (Net Working Days)

Debtors Turnover Ratio

53
 (Rupees in Millions)

Year 2007 2008 2009

Days 365 365 365
Debtor Turnover Ratio 6.97 9.02 10.29
Average Collection Period 52 days 40 days 35 days

Interpretation :

The average collection period measures the quality of debtors and it helps in analyzing the
efficiency of collection efforts. It also helps to analysis the credit policy adopted by company. In
the firm average collection period decreasing year to year. It shows that the firm has strong
Credit policy.

5. WORKING CAPITAL TURNOVER RATIO :

Working capital turnover ratio indicates the velocity of utilization of net working capital. This
ratio indicates the number of times the working capital is turned over in the course of the year.
This ratio measures the efficiency with which the working capital is used by the firm. A higher
ratio indicates efficient utilization of working capital and a low ratio indicates otherwise. But a
very high working capital turnover is not a good situation for any firm.

Working Capital Turnover Ratio = Cost of Sales

Net Working Capital

Working Capital Turnover = Sales

Networking Capital

54
 (Rupees in Millions)

Year 2007 2008 2009

Sales 8904.32 9190.99 10151.04
Networking Capital 382.07 440.13 689.65
Working Capital Turnover 23.30 20.88 14.71

Interpretation :

This ratio indicates low much net working capital requires for sales. In
2008, the reciprocal of this ratio (1/14.71 = .068) shows that for sales of Rs. 1 the
company requires 07 paisa as working capital. Thus this ratio is helpful to forecast the
working capital requirement on the basis of sale.

INVENTORIES

(Rs. in Millions)

Year 2007 2008 2009

Inventories 644.11 714.05 516.63

Interpretation :

Inventories is a major part of current assets. If any company wants to manage its
working capital efficiency, it has to manage its inventories efficiently. The graph
shows that inventory in 2005-2006 is 45%, in 2006-2007 is 43% and in 2007-2008 is
54% of their current assets. The company should try to reduce the inventory upto 10%
or 20% of current assets.

CASH BNAK BALANCE :

(Rs. in Millions)

55
Year 2007 2008 2009
Cash Bank Balance 645.72 552.29 1587.72

Interpretation :

Cash is basic input or component of working capital. Cash is needed to keep the
business running on a continuous basis. So the organization should have sufficient
cash to meet various requirements. The above graph is indicate that in 2006 the cash is
4.69 crores but in 2007 it has decrease to 1.79. The result of that it disturb the firms
manufacturing operations. In 2008, it is increased upto approx. 5.1% cash balance. So
in 2008, the company has no problem for meeting its requirement as compare to 2007.

DEBTORS :

(Rs. in Millions)

Year 2007 2008 2009

Debtors 1276.66 1018.98 986.67

Interpretation :

Debtors constitute a substantial portion of total current assets. In India it constitute

one third of current assets. The above graph is depict that there is increase in debtors. It
represents an extension of credit to customers. The reason for increasing credit is
competition and company liberal credit policy.

CURRENT ASSETS :

(Rs. in Millions)

56
 Year 2007 2008 2009
Current Assets 2718.32 2400.69 3254.85

Interpretation :

This graph shows that there is 64% increase in current assets in 2008. This increase is arise
because there is approx. 50% increase in inventories. Increase in current assets shows the
liquidity soundness of company.

CURRENT LIABILITY :

(Rs. in Millions)

Year 2007 2008 2009

Current Liability 2336.25 1960.56 2565.20

Interpretation :

Current liabilities shows company short term debts pay to outsiders. In 2008 the
current liabilities of the company increased. But still increase in current assets are
more than its current liabilities.

NET WOKRING CAPITAL :

(Rs. in Millions)

Year 2007 2008 2009

Net Working Capital 382.07 440.13 689.65

57
Interpretation :

Working capital is required to finance day to day operations of a firm. There

should be an optimum level of working capital. It should not be too less or not too
excess. In the company there is increase in working capital. The increase in working
capital arises because the company has expanded its business.

FINDINGS

OF
58
 THE STUDY

FINDINGS
1. Inventories are decreased by year by year.
2. Loans & advances are decreases by year by year.
3. current liabilities are more than current assets.
4. The Quick Ratio > 1 which shows the sound short-term solvency.
5. The suggested current ratio is 2:1. But it is not fixed as it various from; industry. Here in
this case the current ration is more than 1 and it is enough to meet the current liability.
6. When comparing Working capital is compared with net sales it is in increasing trend
indicating the effective utilization of the net working capital.
7. The debtor’s turnover ration is high and it shows the better trade credit management.
8. Debtor’s collection period is very less which shows the better trade credit management.

59
9. Debtor’s collection is very less it shows the better collection of funds from debtors.
10. Inventory holding period is less; it shows the better management of inventory.
11. It is to be observed that the company’s new worth is decreases considerably.
Through this increase in procurement of secured loans.
12. The decrease in figures of sources and applications from the year 2006 to the year
2008 makes at clear that the company’s activity increasing or standardizing of its
operations.
13. Tax policy effects the purchasing of material and in turn selling also.
14. Since this industry is highly dependent on the raw material the shortage of same
make the prices highly volatile which in turn effect the cost.
15. Due to introduction of VAT company will gain Rs.6 crore p.a. and reduction in
import duty would result in net gain of 3 crore p.a.

RECOMMENDATION

AND

SUGGESTION

60
RECOMMENDATION AND SUGGESTION

1. There are various development taking in the industry to change it the company
should develop a full fledged research and development department for bringing
technological change and improvement in design and process.

2. The sundry debtors should be efficiently managed so that the outstanding are to
be cleared at short intervals. The company should appoint on different areas on a
success fees basis to collect the debtors.

3. The current assets should be managed more effectively so as to avoid unnecessary

blocking of capital that could be used for other purposes.

4. The Working Capital requirement is to be assessed based on the norms circulated

by RBI for the Tyre industry.

61
 5. The company has maintained proper records showing full particulars, quantitative
details and solutions of fixed assets are indicated for major items in the register,
the managements during the year has conducted a random verification in respect
of fixed assets, which in our opinion is reasonable, having regard to the size of the
company and the nature of its assets.

6. The management has physically verified the stock of finished goods and work in
progress at the end of the year.

7. Wastage in the process is quite high which increases the cost as compared to
competitors so reducing the same would mean more efficiency.

8. The imported spares should be replaced/substituted with local development.

Conclusion
The company is performing exceptionally well due to the up wising in the global

market followed by the domestic market. It is an up coming one with good and

innovative ideas and believed in improving all the areas of its operations. The company

has a good liquidity position and does not delay its commitment in case of both its

creditors and debtors. The company being mostly dependent on the working capital

facilities, it is maintaining very good relationship with their banks and their working

capital management is well balanced.

62
 BIBLIOGRAPHY

www.crisil.com

www.indiainfoline.com

www.goodyear.com

www.equitymaster.com

Books and Magazines

Economic times

63
Times of India

Annual reports

P& L A/C

Balance Sheets

Ratio Analysis

Khan and Jain Financial Management.

ANNEXURE-I

BALANCE SHEET OF GOODYEAR INDIA LTD.

Particulars Dec 2009 Dec 2008 Dec 2007

SOURCES OF FUNDS

Share Capital 230.67 230.67 230.67

Share warrants & Outstandings 0.00 0.00 0.00

Total Reserve 1917.67 1376.91 1218.22

Shareholder's Funds 2148.34 1607.57 1448.89

Secured Loans 0 0 0

Unsecured Loans 0 0 0

64
Total Debts 0.00 0.00 0.00

Total Liabilities 2148.34 1607.57 1448.89

APPLICATION OF FUNDS :

Gross Block 2771.65 2641.42 2457.05

Less: Accumulated Depreciation 1568.41 1488.97 1407.01

Less: Impairment of Assets 0 0 0

Net Block 1203.24 1152.46 1050.04

Lease Adjustment A/c 0 0 0

Capital Work in Progress 363.17 125.06 107.27

Pre-operative Expenses pending 0 0 0

Assets in transit 0 0 0

Investments 0 0 0

Current Assets, Loans & Advances

Inventories 516.63 714.05 644.11

Sundry Debtors 986.67 1018.98 1276.66

Cash and Bank 1587.72 552.29 645.72

Other Current Assets 0 0 0

Loans and Advances 163.83 115.36 151.84

Total Current Assets 3254.85 2400.69 2718.32

Less : Current Liabilities and Provisions

Current Liabilities 2121.48 1525.50 1871.19

Provisions 443.73 435.06 465.07

Total Current Liabilities 2565.20 1960.56 2336.25

Net Current Assets 689.65 440.13 382.07

65
Miscellaneous Expenses not written off 0 0 0

ANNEXURE-II

P &L OF GOODYEAR INDIA LTD.

Particulars Dec 2009 Dec 2008 Dec 2007

No of Months 12 12 12

Gross Sales 10685.81 10018.02 9796.12

Less :Inter divisional transfers 0 0 0
Less: Sales Returns 0 0 0
Less: Excise 534.78 827.04 891.80

Net Sales 10151.04 9190.99 8904.32

EXPENDITURE :
Increase/Decrease in Stock 186.06 -111.27 -41.17
Raw Materials Consumed 6757.77 7175.91 6673.28
Power & Fuel Cost 276.46 360.68 284.24
Employee Cost 486.65 420.26 391.63
Other Manufacturing Expenses 258.18 184.66 404.41
General and Administration Expenses 196.68 167.55 166.25
Selling and Distribution Expenses 607.23 362.67 221.42
Miscellaneous Expenses 154.51 113.22 96.91
Expenses Capitalised 0 0 0
Total Expenditure 8923.54 8673.67 8196.95

66
PBIDT (Excl OI) 1227.50 517.31 707.37
Other Income 51.82 149.68 106.91
Operating Profit 1279.32 666.99 814.27
Interest 39.11 31.97 52.12
PBDT 1240.21 635.02 762.16
Depreciation 126.09 111.88 114.69
Profit Before Taxation & Exceptional Items 1114.12 523.14 647.47
Exceptional Income / Expenses 0 0 0
Profit Before Tax 1114.12 523.14 647.47
Provision for Tax 383.18 201.25 245.21
PAT 730.94 321.89 402.26
Adj to Profit After Tax 0 0 0
Profit Balance B/F 571.01 451.04 260.70
Appropriations 1301.95 772.93 662.96
Equity Dividend (%) 70.00 60.00 60.00
Earnings Per Share (Rs.) 31.69 13.95 17.44
Book Value (Rs.) 91.70 68.20 61.26

67