Beruflich Dokumente
Kultur Dokumente
OBJECTIVE
To understand the need of working capital in a company. To understand the factors which affect the working capital requirement. To make a detailed comparison of TATA STEELS working capital with various other steel companies. To highlight the reasons for deviations of actual from the target.
STRENGTHS
WEAKNESS
Unscientific mining
OPPORTUNITIES
THREATS
Nippon Steel
Baosteel Group
Posco
35.40mtpa
34.7 mtpa
33.3 mtpa
33.0 mtpa
27.7 mtpa
24.4 mtpa
The worlds10th largest steel company and the worlds 2nd most geographically diversified steel producer. A balanced global presence in over 50 markets and manufacturing operations in 26 countries.
Tata Steel is among the top ten global steel companies with a crude steel production capacity of over 28 million tonnes per annum (mtpa). A Fortune 500 company, the Tata Steel Group is the worlds second most geographically diversified steel producer, employing over 80,000 people across five continents in nearly 50 countries. Tata Steel became the 5th Largest Steel maker after the acquisition of Corus.
STRENGTH
Tata steel has a stong retail and distribution network in India Accelerated growth through mergers and acquisitions
WEAKNESS
content which adversely effects the productivity efficiency High cost of basic inputs and services. Though India has huge labour available but the productivity is not upto the mark. It is characterised by low labour productivity.
OPPORTUNITY
Booming infrastructure The biggest scope of Indian steel sector is that it has
Industries facing greater environmental cost due to increased concern of global warming.
THREATS
Threats to subsitute.
CORUS
Corus is Europes second largest steel maker with operation in the UK and mainland Europe and over 40,000 employees worldwide. On January 31, 2007 Tata Steel limited acquired the Anglo Dutch steel producer Corus for US $ 12.11 billion. This acquisition was the biggest overseas acquisition by an Indian company. Tata Steel emerged as the fifth largest steel producer in the world after the acquisition.
CURRENT ASSET
EASY LOANS
GOODWILL
SOLVENCY OF BUSINESS
ABILITY TO FACE CRISES
HIGH MORALE
CASH DISCOUNTS
SEASONAL VARIATIONS
RATIO ANALYSIS
BUDGETING
RATIO ANALYSIS
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.
Second Method of Lending: Under this method, it was thought that the borrower should provide for a minimum of 25% of total current assets out of long-term funds i.e., owned funds plus term borrowings. Third Method of Lending: Under this method, the borrower's contribution from long term funds will be to the extent of the entire CORE CURRENT ASSETS and a minimum of 25% of the balance current assets should be financed out of the long term funds plus term borrowings.
CURRENT RATIO
Formula: Current asset Current liability
PARTICULARS CURRENT ASSET 2005-06 2006-07 2007-08 2008-09 2009-10 4237.6 13701.9 6636.32 10285.0 9 12246.69
8999.61 1.360802
QUICK ASSET
Formula: Quick Asset Current liability
PARTICULARS (CURRENT ASSET INVENTORY) CURRENT LIABILITY QUICK RATIO 2005-06 2006-07 2007-08 2008-09 2009-10
1783.61
3808.72
0.66
2.18
0.68
0.80
0.28
TURNOVER 6.42428
RECOMMENDATIONS
There should be a proper co-ordination between working capital group and its related department i.e. debtors, creditors, inventory etc. New and advanced concept must be introduced in inventory control management. Adequate planning is required for procurement of store items. Details of working capital should be available at the department level, so that efficiency can be analyzed at departmental level.
Advance payments should be avoided. If at all advance payments are required, it should be against securities like banks guarantee etc. The essence of effective working capital management is proper cash flow forecasting. This should take into account the impact of unforeseen events, market cycles, loss of a prime customer and actions by competitors. So the effect of unforeseen demands of working capital should be factored in. Inventories should be managed on a line-byline basis using the 80/20 rule.