Corporate Finance

PROJECT REPORT ON WORKING CAPITAL MANAGEMANT OF TATA STEEL COMPANY Ltd.

INTRODUCTION

Working capital means the part of the total assets of the business that change from one form to another form in ordinary course of business operations.

Concept of Working Capital:-The word working capital is made of two words1. Working 2. Capital

The word working means day to day operation of the business, whereas the word capital means monetary value of all assets of the business.

Working Capital: -Working capital may be regarded as the life blood of business. Working capital is of major importance to internal and external analysis because of its close relationship with the current day today operations of a business. Every business needs funds for two purposes.

* Long term funds are required to create production facilities through purchase of fixed assets such as plants, machineries, lands, buildings & etc.

* Short term funds are required for the purchase of raw materials, payment of wages, and other day-to-day expenses. It is otherwise known as revolving or circulating capital It is nothing but the difference between current assets and current liabilities. i.e.

Working Capital = Current assets Current Liabilities Working Capital = Current Asset Current Liability.Working Capital = Current Asset Current Liability.Working Capital = Current Asset Current Liability.

Businesses use capital for construction, renovation, furniture, software, equipment, or machinery. It is also commonly used to purchase inventory, or to make payroll. Capital is also used often by businesses to put a down payment down on a piece of commercial real estate. Working capital is essential for any business to succeed. It is becoming increasingly important to have access to more working capital when we need it.

Concept of Working Capital

Gross Working Capital = Total of Current Asset

Net Working Capital = Excess of Current Asset over Current Liability

Working Capital In Terms Of Five Components:

1. Cash And Equivalents: - This most liquid form of working capital requires constant supervision. A good cash budgeting and forecasting system provides answers to key questions such as: Is the cash level adequate to meet current expenses as they come due? What is the timing relationship between cash inflow and outflow? When will peak cash needs occur? When and how much bank borrowing will be needed to meet any cash shortfalls? When will repayment be expected and will the cash flow cover it?

2. Accounts Receivable: - Many businesses extend credit to their customers. If you do, is the amount of accounts receivable reasonable relative to sales? How rapidly are receivables being collected? Which customers are slow to pay and what should be done about them?

3. Inventory: - Inventory is often as much as 50 percent of a firm's current assets, so naturally it requires continual scrutiny. Is the inventory level reasonable compared with sales and the nature of your business? What's the rate of inventory turnover compared with other companies in your type of business?

4. Accounts Payable:- Financing by suppliers is common in small business; it is one of the major sources of funds for entrepreneurs. Is the amount of money owed suppliers reasonable relative to what you purchase? What is your firm's payment policy doing to enhance or detract from your credit ratings?

5. Accrued Expenses And Taxes Payable: - These are obligations of your company at any given time and represent a future outflow of cash.

OPERATINGCYCLE

The need of working capital arrived because of time gap between production of goods and their actual realization after sale. This time gap is called Operating Cycle or Working Capital Cycle. The operating cycle of a company consist of time period between procurement of inventory and the collection of cash from receivables. The operatingcycle is the length of time between the companys outlay on raw materials, wages and other expanses and inflow of cash from sales of goods. Operating cycle is an important concept in management of cash and management of cash working capital. The operating cycle reveals the time that elapses between outlays of cash and inflow of cash. Quicker the operating cycle less amount of investment in working capital is needed and it improves profitability. The duration of the operating cycle depends on nature of industries and efficiency in working capital management.

SIGNIFICANCE OF WORKING CAPITAL:-Factors requiring consideration while estimating working capital.

Factors Requiring Consideration While Estimating Working Capital.

The average credit period expected to be allowed by suppliers. Total costs incurred on material, wages. The length of time for which raw material are to remain in stores before they are issued for production. The length of the production cycle (or) work in process. The length of sales cycle during which finished goods are to be kept waiting for sales. The average period of credit allowed to customers The amount of cash required to make advance payment

Determinants of Working CapitalThe amount of working capital is depends upon following factors:-

1. Nature Of BusinessSome businesses are such, due to their very nature, that their requirement of fixed capital is more rather than working capital. These businesses sell services and not the commodities and that too on cash basis. As such, no founds are blocked in piling inventories and also no funds are blocked in receivables. E.g. public utility services like railways, infrastructure oriented project etc. there requirement of working capital is less. On the other hand, there are some businesses like trading activity, where requirement of fixed capital is less but more money is blocked in inventories and debtors.

2. Length Of Production CycleIn some business like machine tools industry, the time gap between the Acquisition of raw material till the end of final production of finished products itself is quite high. As such amount may be blocked either in raw material or work in progress or finished goods or even in debtors. Naturally there need of working capital is high.

3. Size And Growth Of BusinessIn very small company the working capital requirement is quit high due to high overhead, higher buying and selling cost etc. as such medium size business positively has edge over the small companies. But if the business start growing after certain limit, the working capital requirements may adversely affect by the increasing size.

4. Business/ Trade CycleIf the company is the operating in the time of boom, the working capital requirement may be more as the company may like to buy more raw material, may increase the production and sales to take the benefit of favorable market, due to increase in the sales, there may more and more amount of funds blocked in stock and debtors etc. similarly in the case of depressions also, working capital may be high as the sales terms of value and quantity may be reducing, there may be unnecessary piling up of stack without getting sold, the receivable may not be recovered in time etc.

5. Terms Of Purchase And SalesSome time due to competition or custom, it may be necessary for the company to extend more and more credit to customers, as result which more and more amount is locked up in debtors or bills receivables which increase the working capital requirement. On the other hand, in the case of purchase, if the credit is offered by suppliers of goods and services, a part of working capital requirement may be financed by them, but it is necessary to purchase on cash basis, the working capital requirement will be higher.

6. ProfitabilityThe profitability of the business may be vary in each and every individual case, which is in turn its depend on numerous factors, but high profitability will positively reduce the strain on working capital requirement of the company, because the profits to the extend that they earned in cash may be used to meet the working capital requirement of the company.

7. Operating EfficiencyIf the business is carried on more efficiently, it can operate in profits which may reduce the strain on working capital; it may ensure proper utilization of existing resources by eliminating the waste and improved coordination etc.

NEED OF WORKING CAPITAL MANAGEMENTThe need for working capital gross or current assets cannot be over emphasized. As already observed, the objective of financial decision making is to maximize the shareholders wealth. To achieve this, it is necessary to generate sufficient profits can be earned will naturally depend upon the magnitude of the sales among other things but sales cannot convert into cash. There is a need for working capital in the form of current assets to deal with the problem arising out of lack of immediate realization of cash against goods sold. Therefore sufficient working capital is necessary to sustain sales activity. Technically this is refers to operating or cash cycle. If the company has certain amount of cash, it will be required for purchasing the raw material may be available on credit basis. Then the company has to spend some amount for labour and factory overhead to convert the raw material in work in progress, and ultimately finished goods. These finished goods convert in to sales on credit basis in the form of sundry debtors. Sundry debtors are converting into cash after expiry of credit period. Thus some amount of cash is blocked in raw materials, WIP, finished goods, and sundry debtors and day to day cash requirements. However some part of current assets may be financed by the current liabilities also. The amount required to be invested in this current assets is always higher than the funds available from current liabilities. This is the precise reason why the needs for working capital arise

GROSS WORKING CAPITAL AND NET WORKING CAPITALThere are two concepts of working capital management1. Gross Working CapitalGross working capital refers to the firms investment I current assets. Current assets are the assets which can be convert in to cash within year includes cash, short term securities, debtors, bills receivable and inventory

2. Net Working CapitalNet working capital refers to the difference between current assets and current liabilities. Current liabilities are those claims of outsiders which are expected to mature for payment within an accounting year and include creditors, bills payable and outstanding expenses. Net working capital can be positive or negative Efficient working capital management requires that firms should operate with some amount of net working capital, the exact amount varying from firm to firm and depending, among other things; on the nature of industries.net working capital is necessary because the cash outflows and inflows do not coincide. The cash outflows resulting from payment of current liabilities are relatively predictable. The cash inflow are however difficult to predict. The more predictable the cash inflows are, the less net working capital will be required. The concept of working capital was, first evolved by Karl Marx. Marx used the term variable capital means outlays for payrolls advanced to workers before the completion of work. He compared this with constant capital which according to him is nothing but dead labour. This variable capital is nothing wage fund which remains blocked in terms of financial management, in working-process along with other operating expenses until it is released through sale of finished goods. Although Marx did not mentioned that workers also gave credit to the firm by accepting periodical payment of wages which funded a portioned of W.I.P, the concept of working capital, as we understand today was embedded in his variable capital

COMPANYPROFILE

COMPANYPROFILE

TATA STEELPVT.LTD.

TYPE - PRIVATEINDUSTRY - STEELTRADED AS - NSE:TATA STEEL BSE:500470 BSE SENSEX CONSTITUENT CNX NIFTY CONSTITUENTFOUNDED - August 25, 1907FOUNDER(S) - JAMSHEDJI TATAHEADQUARTERS - MUMBAI,MAHARASHTRA,INDIAKEY PEOPLE - CYRUS PALLONJI MISTRY (Chairman) T. V. Narendran (Managing Director)PRODUCTS - STEEL, FLAT STEEL PRODUCTS, LONG STEEL PRODUCT , WIREPRODUCT , PLATES.PARENTS - TATA GROUPSUBSIDIARIES - TATA STEEL EUROPEWEBSITE - www.tatasteel.com

HISTORY

Tata Steel Limited(formerly Tata Iron and Steel Company Limited (TISCO) is anIndian multinationalsteel-making company headquartered inMumbai, Maharashtra, India, and a subsidiary of theTata Group. It was theworld in 2012, with an annualcrude steelcapacity of 28 million tonnes, and the largest private-sector steel company in India measured by domestic production ltd.Tata Steel has manufacturing operations in 26 countries, including Australia, China, India, the Netherlands, Singapore, Thailand and the United Kingdom, and employs around 80,500 people. Its largest plant is located inJamshedpur,Jharkhand. In 2007 Tata Steel acquired the UK-based steel maker Corus which was the largest international acquisition by an Indian company till that date.It was ranked471st in the 2013Fortune Global 500ranking of the world's biggest corporations. It was the seventh most valuable Indian brand of 2013 as perBrand Finance.

ACQUISITION BY TATA STEEL:

NatSteelin 2004: In August 2004, Tata Steel agreed to acquire the steel making operations of the Singapore based NatSteel for S$486.4 million in cash.Millennium Steelin 2005: Tata Steel acquired a majority stake in the Thailand-based steelmaker Millennium Steel for a total cost of $130 million. It paid US$ 73 million to Siam Cement for a 40% stake and offered to pay 1.13 baht per share for another 25% of the shares of other shareholders.Millennium Steel has now been renamed to Tata Steel Thailand and is headquartered inBangkok.On March 31, 2013, it held approx. 68% shares in the acquired company.Corus in 2007:On 20 October 2006, Tata Steel signed a deal with Anglo-Dutch company, Corus to buy 100% stake at 4.3bn ($8.1 billion) at 455 pence per share.On 19 November 2006, the Brazilian steel companyCompanhia Siderrgica Nacional(CSN) launched a counter offer for Corus at 475 pence per share, valuing it at 4.5 billion. On 11 December 2006, Tata preemptively upped its offer to 500 pence per share, which was within hours trumped by CSN's offer of 515 pence per share, valuing the deal at 4.9 billion. The Corus board promptly recommended both the revised offers to its shareholders. On 31 January 2007, Tata Steel won their bid for Corus after offering 608 pence per share, valuing Corus at 6.7 billion ($12 billion).

Rolling Mill Companies In Vietnamin 2007: Tata Steel through its wholly owned Singapore subsidiary, NatSteel Asia Pte Ltd, acquired controlling stake in two rolling mill companies located in Vietnam: Structure Steel Engineering Pte Ltd (100% stake) and Vinausteel Ltd (70% stake). The enterprise value for the acquisition was $41 million. With this acquisition, Tata Steel got hold of two rolling mills, a 250k tonnes per year bar/wire rod mill operated by SSE Steel Ltd and a 180k tonnes per year reinforcing bar mill operated by Vinausteel Ltd

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.

7. 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.

WORKING CAPITAL FINANCING AND SOURCE OF WORKING CAPITALACCRUALSThe major accrual items are wages and taxes. These are simply what the firm owes to itsemployees and to the government.TRADE CREDITTrade credit represents the credit extended by the supplier of goods and services. It is aspontaneous source of finance in the sense that it arises in the normal transactions of the firm without specific negotiations, provided the firm is considered creditworthy by its supplier. It is an important source of finance representing 25% to 50% of short-term financing.WORKING CAPITAL ADVANCE BY COMMERCIAL BANKSWorking capital advance by commercial banks represents the most important source forfinancing current assets.Forms of Bank Finance: Working capital advance is provided by commercial banks in threeprimary ways: (i) cash credits / overdrafts, (ii) loans, and (iii) purchase / discount of bills. In addition to these forms of direct finance, commercials banks help their customers in obtaining credit from other sources through the letter of credit arrangement.i. Cash Credit / Overdrafts: Under a cash credit or overdraft arrangement, a pre-determined limit for borrowing is specified by the bank. The borrower can draw as often as required provided the out standings do not exceed the cash credit / overdraft limit.ii. Loans: These are advances of fixed amounts which are credited to the current account of the borrower or released to him in cash. The borrower is charged with interest on the entire loan amount, irrespective of how much he draws.iii. Purchase / Discount of Bills: A bill arises out of a trade transaction. The seller of goods draws the bill on the purchaser. The bill may be either clean or documentary (adocumentary bill is supported by a document of title to gods like a railway receipt or a bill of lading) and may be payable on demand or after a usance period which does not exceed 90 days. On acceptance of the bill by the purchaser, the seller offers it to the bank for discount / purchase. When the bank discounts / purchases the bill it releases the funds to the seller.The bank presents the bill to the purchaser (the acceptor of the bill) on the due date and gets its paymentiv. Letter of Credit: A letter of credit is an arrangement whereby a bank helps its customer to obtain credit from its (customers) suppliers. When a bank opens a letter of credit in favour of its customer for some specific purchases, the bank undertakes the responsibility to honour the obligation of its customer, should the customer fail to do so.REGULATION OF BANK FINANCEConcerned about such a distortion in credit allocation, the Reserve Bank of India (RBI) has been trying, particularly from the mid 1960s onwards, to bring a measure of discipline among industrial borrowers and to redirect credit to the priority sectors of the economy. From time to time, the RBI issues guidelines and directives relating to matters like the norms for inventory and receivables, the maximum permissible bank finance, the form of assistance, the information and reporting system, and the credit monitoring mechanism. The important guidelines and directives have stemmed from the recommendations of various committees such as the Dehejia Committee,the Tandon Committee, the Chore Committee, and the Marathe Committee.However, in recent years, in the wake of financial liberalisation, the RBI has given freedom to the boards of individual banks in all matters relating to working capital financing.From the mid-eighties onwards, special committees were set up by the RBI to prescribenorms for several other industries and revise norms for some industries covered by the Tandon Committee.Maximum Permissible Bank Finance: The Tandon Committee had suggested three methods for determining the maximum permissible bank finance (MPBF).LENDING NORMSThe recommendation of the Tandon Committee regarding the Lending norms has far -reaching implications. The lending norms have been suggested in view of the realization that the bankers role as a lender in only to supplement the borrowers resources and not to meet his entire working capitals needs. In the context of this approach, the committee has suggested three alternative methods for working out the maximum permissible level of bank borrowings. Each successive method reduces the involvement of short-term bank credit to finance the current assets.First Method: According to this method, the borrower will have to contribute a minimum of 25% of the working capital gap from long-term funds, i.e., owned funds and term borrowings. This will give a current ratio of 1.17:1.The term working capital gap refers to the total of current assets less current liabilities other than bank borrowings. This can be understood with the help of following example:Example 1Rs.Total Current assets required by the borrower as per norms 20,000Current liabilities 5,000Amount of maximum permissible bank borrowings as per thefirst method can be ascertained as follows: -Working Capital gap (Rs. 20,000 Rs. 5,000) 15,000Less: 25% from long-term sources 3,750Maximum permissible bank borrowings 11,250Second Method: Under this method the borrower has to provide the minimum of 25% of the total current assets that will give a current ratio of 1.33:1.Example 2: On the basis of the data given in Example 1, the maximum permissible bankborrowings as per second method can be ascertained as follows:Rs.Current assets as per norms 20,000Less: 25% to be provided from long term funds 5,00015,000Less: Current liabilities other than bank borrowings 5,000Maximum permissible bank borrowings 10,000Third Method: In this method, the borrowers contribution from long term funds will be to the extent of the entire core current assets and a minimum of 25% of the balance of the current assets.The term core current assets refers to the absolute minimum level of investment in all current assets which is required at all times to carry out minimum level of business activities.Example 3 : On the basis of the information given in Example 1, the amount of maximumpermissible bank finance can be arrived at the follows if the core current assets are Rs. 2,000Rs.Current assets as per norms 20,000Less: Core Current Assets 2,00018,000Less: 25% to be provided from long-term funds 4,50013,500Less: Current Liabilities 5,000Maximum permissible bank borrowings 8,500It will thus be seen that in the third method current ratio has further improved.Reserve Banks directive : The Reserve Bank of India accepted the recommendations of the Tandon Committee. It instructed the commercial banks in 1976 to put all the borrowers having aggregate credit limits from banking system in excess of Rs. 10 lakhs, under the first method of lending.PUBLIC DEPOSITSMany firms, large and small, have solicited unsecured deposits from the public in recentyears, mainly to finance their working capital requirements.INTER-CORPORATE DEPOSITSA deposit made by one company with another, normally for a period up to six months, isreferred to as an inter-corporate deposit. Such deposits are usually of three types.a. Call Deposits : In theory, a call deposit is withdrawable by the lender on giving a daysnotice. In practice, however, the lender has to wait for at least three days. The interest rate on such deposits may be around 10 percent per annum.b. Three-months Deposits : More popular in practice, these deposits are taken by borrowers to tide over a short-term cash inadequacy that may be caused by one or more of the followingfactors: disruption in production, excessive imports of raw material, tax payment, delay in collection, dividend payment, and unplanned capital expenditure. The interest rate on such deposits is around 12 percent per annum.c. Six-months Deposits: Normally, lending companies do not extend deposits beyond this time frame. Such deposits, usually made with first-class borrowers, and carry interest rate of around 15 percent per annum.SHORT-TERM LOANS FROM FINANCIAL INSTITUTIONSThe Life Insurance Corporation of India and the General Insurance Corporation of India provide short-term loans to manufacturing companies with an excellent track record.RIGHTS DEBENTURES FOR WORKING CAPITALPublic limited companies can issue Rights debentures to their shareholders with the object of augmenting the long-term resources of the company for working capital requirements. The key guidelines applicable to such debentures are as follows:i. The amount of the debenture issue should not exceed (a) 20% of the gross current assets, loans, and advances minus the long-term funds presently available for financing working capital, or (b) 20% of the paid-up share capital, including preference capital and free reserves, whichever is the lower of the two.ii. The debt. -equity ratio, including the proposed debenture issue, should not exceed 1:1.iii. The debentures shall first be offered to the existing Indian resident shareholders of thecompany on a pro rata basis.COMMERCIAL PAPERCommercial paper represents short-term unsecured promissory notes issued by firms which enjoy a fairly high credit rating. Generally, large firms with considerable financial strength are able to issue commercial paper. The important features of commercial paper are as follows:i. The maturity period of commercial paper usually ranges from 90 days to 360 days.ii. Commercial paper is sold at a discount from its face value and redeemed at its face value.Hence the implicit interest rate is a function of the size of the discount and the period ofmaturity.iii. Commercial paper is directly placed with investors who intend holding it till its maturity.Hence there is no well developed secondary market for commercial paper.FACTORINGFactoring, as a fund based financial service, provides resources to finance receivables aswell as facilitates the collection of receivables. It is another method of raising short-term finance through account receivable credit offered by commercial banks and factors. A commercial bank may provide finance by discounting the bills or invoices of its customers. Thus, a firm getsimmediate payment for sales made on credit. A factor is a financial institution which offers services relating to management and financing of debts arising out of credit sales. Factoring is becoming popular all over the world on account of various services offered by the institutionsengaged in it. Factors render services varying from bill discounting facilities offered by commercial banks to a total take over of administration of credit sales including maintenance of sales ledger, collection of accounts receivables, credit control and protection from bad debts, provision of finance and rendering of advisory services to their clients. Factoring, may be on a recourse basis, where the risk of bad debts is borne by the client, or on a non-recourse basis, where the risk of credit is borne by the factor.At present, factoring in India is rendered by only a few financial institutions on a recoursebasis. However, the Report of the Working Group on Money Market (Vaghul Committee) constituted by the Reserve Bank of India has recommended that banks should be encouraged to set up factoring divisions to provide speedy finance to the corporate entities.Inspite of many services offered by factoring, it suffers from certain limitations. The mostcritical fall outs of factoring include (i) the high cost of factoring as compared to other sources of short-term finance, (ii) the perception of financial weakness about the firm availing factoring services, and (iii) adverse impact of tough stance taken by factor, against a defaulting buyer, upon the borrower resulting into reduced future sales.

OBJECTIVES OF THE STUDY

Study of the working capital management is important because unless the working capital is managed effectively, monitored efficiently planed properly and reviewed periodically at regular intervals to remove bottlenecks if any the company can not earn profits and increase its turnover. the following objectives are framed for a depth analysis.

1. To study the working capital management of TATA STEEL Pvt. Ltd.2. To study the optimum level of current assets and current liabilities of the company. 3. To study the liquidity position through various working capital related ratios.4. To study the working capital components such as receivables accounts, cash management, Inventory position.5. To study the way and means of working capital finance of the of TATA STEEL Pvt. Ltd.6. To estimate the working capital requirement of TATA STEEL Pvt. Ltd.8. To study the operating cycle of the company.9. To study the recommendations of p.l tendon committee.

Statement Showing Changes in Working CapitalStatement 2010 - 2011

Particular

Mar 31st 2010(in crore)Mar 31st 2011(in crore)Working Capital

INC DEC

A) Current Asset:Sundry DebtorsCash & Bank BalanceInterest Accrued On InvestmentStores & Spare PartsStock in trade

11512.446815.117.631715.1116971.53

14816.2810892.669.831847.5822213.66

3303.844077.55 2.2132.475242.13

-----

TOTAL CURRENT ASSET37021.8249780.0112758.19-

B) Current Liability:Current LiabilityProvisions

23392.496594.16

26671.067089.92

3278.57495.76

--

TOTAL CURRENT LIABILITY29956.6533760.98

C) Working Capital7065.1716019.038953.86

D) Increase In Working Capital8953.868953.86

TOTAL16019.0316019.038953.86

Statement Showing Changes in Working Capital

Particular

Mar 31st 2011(in crore)Mar 31st 2012(in crore)Working Capital

INC DEC

A) Current Asset:Current investmentsCash & Bank BalanceTrade receviable Short term Loan & AdvancesInventoriesOther current assets

3159.2810859.0514811.923547.1810591.3056.29

1398.3710801.5814878.483868.738538.0832.74

--66.56321.55-

1760.9157.47--2053.2223.55

TOTAL CURRENT ASSET43025.0239517.98

B) Current Liability:Current LiabilityProvisionsShort term borrowingsTrade payable

15001.223395.253794.4418547.48

18860.993370.054699.0820617.86

3859.77-904.642070.38

-25.2--

TOTAL CURRENT LIABILITY40738.4

47547.98

C) Working Capital2286.638030

5743.37

D) Increse In Working Capital5743.37

TOTAL80308030

5743.37

Statement 2011 - 12

Statement Showing Changes in Working Capital Statement 2012-13

Particular

Mar 31st 2012(in crore)Mar 31st 2013(crore)Working Capital

INC DEC

A) Current Asset:Current investmentCash & Bank BalanceOther current assetsLoan & AdvancesInventoriesTrade receivable

1398.379859.67417.253717.4225598.0014878.48

760.2910798..811478.504060.5424091.1913993.96

-939.141061.25343.12-

638.08---15068.81880.52

TOTAL CURRENT ASSET55869.1955183.29

B) Current Liability:Current LiabilityProvisionsShort term borrowingsTrade payable

18779.013476.194699.0820528.55

19942.362943.298114.5621778.84

1163.35-3415.481250.28

-532.9--

TOTAL CURRENT LIABILITY47482.8352779.05

C) Working Capital8386.36

2404.24

D) Decrease In Working Capital

5982.12

5982.12

-

TOTAL8386.36

8386.36

5982.12

COMPARISON OF WORKING CAPITAL FOR THE YEAR 2011 - 2013

201120122013

W.C.INC/DECW.C.INC/DEC%W.C.INC/DEC%

16019.03-80305743.371.398386.36

5982.12

1.39

InterpretationThe working capital of the company is positive this is because the current assets of the company are more than the current liabilities of the company.It was observed that in the year 2011 working capital was 16019.03, in 2012 it was 8030.00& in 2013 it was 8386.36.

Particulars201120122013

CURRENT ASSET

Inventories8538.0824091.19

Stock in trade22213.66

Sundry Debtors14816.28

Cash & Bank10892.6610801.5810798..81

OtherCurrent Assets14878.481478.50

Stores & Spare Parts

1847.58

Current Investment760.29

Loan & Advances3868.734060.54

Interest Accrued On Investment9.83

Trade Receivable14878.4813993.96

Total Current Assets 49780.0139517.9855183.29

Current Liability

Current Liability26671.0618860.9919942.36

Provisions7089.923370.052943.29

Short term borrowing8114.568114.56

Trade Payable21778.8421778.84

Total Current Liability33760.9847547.9852779.05

Working Capital16019.03-47547.9812872.30

ConclusionWorking capital management is important aspect of financial management. The study of working capital management of TATA STEEL Pvt. Ltd. has revealed that the current ratio was as per the standard industrial practice but the liquidity position of the company showed an increasing trend. The study has been conducted on working capital ratio analysis, working capital leverage, working capital components which helped the company to manage its working capital efficiency and affectively.1. Working capital of the company was increasing and showing positive Working capital per year. It shows good liquidity position.2. Positive working capital indicates that company has the ability of payments of short terms liabilities.3. Working capital increased because of increment in the current assets is more than increase in the current liabilities.4. Companys current assets were always more than requirement it affect on profitability of the company.5. Current assets are more than current liabilities indicate that company used long term funds for short term requirement, where long term funds are most costly then short term funds.6. Current assets components shows sundry debtors were the major part in current assets it shows that the inefficient receivables collection management.7. In the year 2010-11 working capital increased because decreased the expenses as manufacturing expenses and decrease the price of raw material as increased in the inflation rate.

Suggestion Suggestion can be use by the firm for the betterment increased of the firm after study and analysis of project report on study and analysis of working capital. I would like to recommend.

1. Company should raise funds through short term sources for short term requirement of funds, which comparatively economical as compare to long term funds.2. Company should take control on debtors collection period which is major part of current assets.3. Company has to take control on cash balance because cash is non earning assets and increasing cost of funds.

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