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Working Capital Concept

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1. 1 WORKING CAPITAL CONCEPTS Business activity Business activity is dynamic in character and subject to wide fluxions. The movement from working capital to income and profits and back to working capital is one of the most important characteristics of business administration. This operation is concerned with the deployment of funds with the hope that they will generate returns, rendering an additional amount called profit. If the operations of an enterprise are to run smoothly, proper relation ship between fixed capital and current capital must be maintained.

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Its main aim is to use business funds in which a manner that earning are maximized. Financial Management provided a framework for selecting a proper course of action and deciding a viable commercial strategy. This objective can be achieved by :- a)Profit maximization b)Wealth maximization Funds are needed for short-term as well long term purposed. In short term we say current operation of the business. For a manufacturing unit payment for raw materials and wages and for meeting routine expenses.

All the goods. Which are manufactured in a given time, may not be sold in the period.

Naturally funds are blocked in inventory. It is also the fact that all goods may not be sold against ready cash. Some of the goods may be sold on credit basis. The capital is closely related to the term funds and has two meaning. It is used to mean current assets minus current liabilities. In simple words it is the investment needed for carrying out day-to-day operations of the business smoothly. It may be clear that objective of working capital management is to maintain a satisfactory level of working capital.

In other words, the current assets should not be sufficient enough to cover the current liabilities but at the same time it should also ensure the reasonable amount of safety margin. This is possible only when the different components of working capital are properly balanced. 1. 1. 1 Working Capital Concepts There are two concepts of working capital (i)Gross concept (ii)Net concept Gross working capital concept The term gross working capital, also refers to as working capital, means the total assets that can be converted into cash within an accounting tear and include short-term securities, cash, bills receivables and stock.

Net working capital concept Net 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 with in an accounting year. Networking capital can be positive or negative. A negative working capital means a negative liquidity and may prove to be harmful for the company. It occurs when current liabilities are in excess of current assets. It may be due to mismanagement of current assets.

In summary it may be emphasized that gross and net concepts of working capital are two facets of working capital management. The data and problems of each firm is different, so it should be analyzed to determine the amount of working capital and timely action should be taken by management to improve the liquidity position of the firm. 1. 2 COMPANY PROFILE THE GLOBAL STEEL INDUSTRY The global steel industry has been going through major shifts in focus. Not only has a new steel making giant emerged the entire geographical focus of steel production has been undergoing major changes.

Such changes have been taking place on a critical scale since the Second World War but have completely taken many by surprise in the last quarter of a century. Steel is a strong material. The strength of steel reflects the strength of nation. It is reflected in two ways, economic and military. The quantum of steel consumed has been the barometer for measuring development & economic progress. Whether it is construction or industrial goods, steel is the basic raw material. Attention has now shifted to the developing regions. In the West, steel referred to as a sunset industry.

In the developing countries, the sun is still rising, for most it is only a dawn. Towards the end of the last century, growth of steel production was in the developing countries such as China, South Korea, Brazil & India. “In 2007 World Crude Steel output at 1342. 1 Million MT was 5. 9% more than the previous year. (Source: IISI). “China remained the world’s largest Crude Steel producer in 2007 also (349. 4 Million MT) followed by Japan (112. 47 Million Metric Tonnes) & USA (93. 89 Million Metric Tonnes). India occupied the 8th position (38. 08 Million Metric Tonnes). (Source: IISI).

The International Iron & Steel Institute (IISI) in its forecast for 2007 has confirmed the trend of recent years of increase in steel use in-line with the economic growth & with the fastest growth occurring in the countries with the highest GDP growth such as India & China. Apparent world-wide Steel Demand is forecast to grow to between 1,040 & 1,053 MT in 2008 from a total of 972 MT in 2006. This is a growth of 4-5% over the two year period. However, according to IISI the cost of raw material & energy would continue to represent a major challenge for the world steel industry.

The healthy world economic growth & demand in emerging market countries, notably in Asia, where major infrastructure projects were under way, acted as the key trigger to the significant production rise. But this trend seems rather transitory. The Organization for Economic Corporation & Development in November opined, while steel prospects for 2007 remained relatively sound, on increase in output capacity especially in Asia, could lead to overproduction & fall in prices. 1. 2. 1 Some important points regarding Global Steel Industry are as follows: •During 2007, the world crude steel production reached a level of 1244 Million Tonnes. It shows a growth of 9. 0% over 2006 crude steel production level at 1142 Million Tonnes. •China retained it’s No. 1 position by producing around 422 Million Tonnes, followed by Japan with production of 116 Million Tonnes & USA with production at around 98 Million Tonnes. • India with production of 44 Million Tonnes ranked 7th amongst world steel producing countries. •China accounted for 34% of world crude steel production where as contributions from rest of the world at EU 16%, NAFT 10. 5%, CIS 9. 6%, JAPAN 9. 3% & other ASIA 10. 5%. •If we look at crude steel equivalent consumption figures during the year 2006 it will be seen hat China accounted for 31%, EU 17%, NAFTA 14. 5%, CIS 4. 7%, JAPAN 6. 7% & other ASIA 14% towards crude steel consumption for the world. •Apparent finished steel consumption during the year 2006 was around 1113 Million Tonnes as against 1026 million Tonnes during 2005. •During the year 2005, total world trade was around 364 Million Tonnes. •During the year 2005, USA ranked No. 1 as net importer country at 20. 8 Million Tonnes followed by Thailand at 10. 8 Million Tonnes & Iran at 6. 9 Million Tonnes. •During the year 2005, Japan leads the world steel trade as a net exporter at 26. Million Tonnes followed closely by Russia at 26. 3 Million Tonnes. •During the year 2007, Crude Steel production till Sept’07 (Jan-Sept’07) has been around 980 Million Tonnes representing an increase of around 7. 7% over same period last year (910 Million Tonnes). •The ocean freight due to high demand for carrying iron ore has increased substantially in the recent period. 1. 2. 2 STEEL AUTHORITY OF INDIA LIMITED (SAIL) HISTORY: Steel Authority of India (SAIL) was established in 1973 to manage the operations of state-owned steel companies Hindustan Steel (established in 1954) and Bokaro Steel (established in 1964).

In 1978, SAIL was restructured as an operating company. The company established Durgapur Steel Plant (DSP) in the late 1950s with an initial annual capacity of one million tons of crude steel. The capacity of DSP was later expanded to 1. 6 million tons during the 1970s. Over the years, SAIL established various steel plants. Bokaro Steel Plant (BSP), which was originally incorporated as a limited company in 1964, was merged with SAIL, first as a subsidiary and then as a business unit. Salem Steel Plant (SSP) was commissioned, in 1981.

The Indian Iron and Steel Company (IISCO), a subsidiary of SAIL, was declared a sick industrial company by the Board for Industrial and Financial Reconstruction (BIFR), in 1994. NTPC SAIL Power Company was established as a joint venture with National Thermal Power Corporation (NTPC), in 2001. In the following year, SAIL established the Bokaro Power Supply Company with Damodar Valley, and the Bhilai Electric Supply Company with the NTPC. In 2005, the Board of Directors of SAIL gave approval for two projects: the revamping of Sinter Plant-2 in Bhilai Steel Plant and the installation of an air turbo ompressor and an oxygen turbo compressor at the Oxygen Plant in Bokaro Steel Plant. Further in August 2007, SAIL, NMDC, and RINL, signed a MOU for jointly setting up a 4 million tonne per annum capacity integrated steel plant in Chhattisgarh, a state in India. In April 2008, the foundation stone for INR110,000 million (approximately $2,732. 4 million)modernization and expansion project of the Bokaro Steel Plant of SAIL was laid. 1. 2. 2. 1 Integrated Steel Plants •Bhilai Steel Plant (BSP) in Chhattisgarh •Durgapur Steel Plant (DSP) in West Bengal •Rourkela Steel Plant (RSP) in Orissa Bokaro Steel Plant (BSL) in Jharkhand •IISCO Steel Plant (ISP) in West Bengal 1. 2. 2. 2 Special Steel Plants •Alloy Steels Plants (ASP) in West Bengal •Salem Steel Plant (SSP) in Tamil Nadu •Visvesvaraya Iron and Steel Plant (VISL) in Karnataka •Maharashtra Elektrosmelt Limited (MEL) in Maharashtra 1. 2. 2. 3 Joint Ventures •SAIL has promoted joint ventures in different areas ranging from power plants to e-commerce. •NTPC SAIL Power Company Pvt. Ltd: A 50:50 joint venture between Steel Authority of India Ltd. (SAIL) and National Thermal Power Corporation Ltd. (NTPC Ltd. , it manages the captive power plants at Rourkela, Durgapur and Bhilai with a combined capacity of 314(MW). •Bokaro Power Supply Company Pvt. Limited: This 50:50 joint venture between SAIL and the Damodar Valley Corporation formed in January 2002 is managing the 302-MW power generation and 1880 tonnes per hour steam generation facilities at Bokaro Steel Plant. •Mjunction Services Limited: A joint venture between SAIL and Tata Steel on 50:50 basis, this company promotes ecommerce activities in steel and related areas. •SAIL-Bansal Service Center Ltd: SAIL has formed a joint venture with BMW industries Ltd. n 40:60 basis to promote a service center at Bokaro with the objective of adding value to steel. •Bhilai JP Cement Ltd: SAIL has also incorporated a joint venture company with M/s Jaiprakash Associates Ltd to set up a 2. 2 MT cement plant at Bhilai. •SAIL has signed an MOU with Manganese Ore India Ltd (MOIL) to set up a joint venture company to produce Ferro-manganese and silico-manganese at Bhilai. •North Bengal Dolomite Limited: A joint venture between SAIL and West Bengal Mineral Development Corporation ltd on 50:50 basis was formed for development of Jayanti Dolomite Deposit, Jalpaiguri for supply of Dolomite to DSP and other plants. Romelt-SAIL (India) Ltd: A joint venture between SAIL, National Mineral Development Corporation (NMDC) and Russian promoters for marketing Romelt Technology developed by Russia for reducing of iron bearing materials, which is carried out with carbon in single stage reactor with the use of oxygen. SAIL today is one of the largest industrial entities in India. Its strength has been the diversified range of quality steel products catering to the domestic, as well as the export markets & a large pool of technical & professional expertise. 1. 2. 2. 4 Ownership and Management

The Government of India owns about 86% of SAIL’s equity and retains voting control of the Company. However, SAIL, by virtue of its ‘Navratna’ status, enjoys significant operational and financial autonomy. 1. 2. 2. 5 OTHER UNITS: •SAIL Consultancy Division. •Center of Engineering & Technology. •Management Training Institute. •Safety Organization. •Environmental Management Division. •Raw Material Division. •Growth Division. •Central Power Training Institute. •Central Marketing Organization. 1. 2. 3 Major Capital Schemes: Bhilai Steel Plant: •Rebuilding of Coke Oven batteries. Modernization of BFs (including Gas Cleaning Plant). •Installation of new Slab Caster, RH Degsser & Ladle Furnace (). •Revamping of existing Slab Casters in phased manner. •New Pipe Plant of 0. 2 million tonnes capacity •New Bar & Rod Mill (1 million tonnes). •AMR (Additions, Modifications & Replacements) & other Schemes including. •Logistics & infrastructure. •Installation of new Steel Melting Shop (SMS) – (3. 9 million tonnes capacity). Durgapur Steel Plant: •Bloom Caster & associated facilities. •New 0. 7 mtpa Bar & Rod Mill & 0. 4 mtpa Medium Structural Mill. Up gradation of BFs & CDI (Coal Dust Injection) in BFs. •Rebuilding of Coke Oven battery. •Installation of a new Billet Caster. Rourkela Steel Plant: •Rebuilding of Coke Oven battery. •New Blast Furnace-2,000 m3. •CDI & Reconstruction of BFs. •Revamping of Sinter Plant including Pollution Control Scheme. •New Plate Mill (0. 7-1. 0 Million Tonnes Capacity – Wide width. Bokaro Steel Plant: •New 2. 5 million tones hot strip mill & 0. 6 million tones cold rolling mill. •Installation of Slab Caster. •Installation of New modern BOFs. •Rebuilding of Coke Oven batteries. •CDI in blast furnace.

IISCO Steel Plant: •Modernization of Steel Making Facility. •New Multi purpose Section mill/ Universal mill. •Development of collieries. 1. 2. 4 BHILAI STEEL PLANT Company vision: India 2020 – a vision for the new Millennium “We still have a number of persons in our country in steel Authority of India Limited (SAIL)…….. They have the will to excel and transform the country, given a long term vision” -Dr. A. P. J. ABDUL KALAM – Bhilai Steel Plant, a unit of Steel Authority of India Limited – a public sector undertaking was conceived under aegis of Indo – USSR Treaty in the 2nd Five year plan.

This was in accordance with erstwhile government policy for strengthening economy and self reliance through development of core sector. Seven – time winner of Prime Minister’s Trophy for best Integrated Steel Plant in the country, Bhilai Steel Plant (BSP) is India’s sole producer of rails and heavy steel plates and major producer of structural. The plant is the sole supplier of the country’s longest rail tracks of 260 meters. With an annual production capacity of 3. 153 MT of saleable steel, the plant also specializes in other products such as wire rods and merchant products.

Since BSP is accredited with ISO 9001:2000 Quality Management System Standard, all saleable products of Bhilai Steel Plant come under the ISO umbrella. At Bhilai IS0: 14001 has been awarded for Environment Management System in the Plant, Township and Dalli Mines and it is the only steel plant to get certification in all these areas. The Plant is accredited with SA: 8000 certification for social accountability and the OHSAS-18001 certification for Occupational health and safety. These internationally recognized certifications add value to Bhilai’s products and helps create a place among the best organizations in the steel industry. . 2. 4. 1 About BSP Bhilai Steel Plant is a flag ship unit of Steel Authority of India Limited. SAIL, a fully integrated iron and steel maker, produces both basic and special steels for domestic construction, engineering, power, railway, automotive and defense industries and for sale in export markets. In terms of annual production SAIL is the 18th largest steel producer in the world. Living up to the description by Jawaharlal Nehru as significant symbol of a new age in India, Bhilai Steel Plant has been performing consistently despite many odds and has achieved profits for the 18th consecutive year.

It broke its own record of highest ever profit of Rs 1932 crore by any steel plant in 2003-04 and registered a profit of Rs 4042 crores in 2004-05. In the year 2005-06 also it earned a handsome profit of Rs. 2781 Crores despite input price escalation. The true testimony to BSP’s status of a world class steel plant is that BSP’s EBITDA margin of 33% is quiet comparable to many International steel players like POSCO (30%), NIPPON (19%), MITTAL STEEL (16%0, ARCELOR (16%), etc. Its Gross Margin to average capital employed at 182% is a Global Benchmark.

Maintaining the track record, BSP continued to operate above the rated capacity in production of the three main items viz. Hot Metal, Crude Steel and Saleable Steel. BSP is the first steel plant in India to have crossed the annual production of 5MT crude steel in the year 2005-06. 1. 2. 4. 2 Major suppliers of Bhilai steel plant 1. Apollo industrial corporation Mumbai. 2. Ashok Leyland Chennai. 3. BHEL Bhopal and Mumbai. 4. Bharat petroleum gas Nagpur. 5. Birla corporation limited kolkotta. 6. Cimmco Birla limited new Delhi. 7. Dunlop India limited kolkotta. . Siemens casting limited Mumbai. 9. Simplex casting limited Raipur. 10. HMT ltd. Ranchi. Major buyers 1. Indian railways. 2. Vizard profiles limited. 3. High pressure boiler plant BHEL trichy. 4. NTPC super thermal power project. 5. Jindal steel and power limited raigarh. 6. NTPC limited New Delhi. 7. Common India limited Delhi. 8. Chandigarh industrial journalism and development corporation chandigarh. 9. Cropro international Italy. 10. Sangyong corporation Japan. Competitors: 1. Ispat industries limited. 2. Alloyds steel limited. 3.

Essar steel limited. 4. Jindal steel and power limited. 5. Jindal strips limited. 6. Uttam steels limited. 7. National steel industries limited. 8. Bhusan steel and strips limited. Environment Management: A conscious corporate citizen, BSP has gone in for ISO-14001 certification for its Environment Management System. ISO 14001 certification •Environment Management System established at Plate Mill, Rail & Structural Mill, Wire Rod Mill, Merchant Mill and Steel Melting Shop-1. •Reduction in noise levels. •Conservation of electricity and lubricants. Environment Management System established at Dalli Mines. Pollution Control Measures: The plant has introduced environment friendly coal dust injection system in the Blast Furnaces, de-dusting system and electrostatic precipitators in other units and has planted lakhs of trees in a concerted afforestation drive that has seen Bhilai transform into one of the ten cleanest industrial townships in the country. Green City: Contrary to the popular perception about industrial townships being dirty and polluted, the city of Bhilai is characterized by blue skies, clean air and green expanses.

A green-fingered population and a management aware of its obligations as a corporate citizen have come together for a massive tree-plantation drive over a period of years that has resulted in the township that stands starkly green in a dry regional backdrop. About 48. 4 lakhs saplings have been planted so far with a survival rate of 90%. The sprawling Maitri Bagh has the biggest musical fountain in the country, a zoo with a variety of quadrupeds and birds, an artificial lake with boating facilities, a toy train etc.

A number of small and large parks in the residential sectors of the steel city are maintained by the Plant’s Town Administration Department which also undertakes the civic amenities such as street lighting, cleaning and maintenance of the tree-lined carpeted roads inside the steel township. The water to the township is supplied from the Maroda water treatment plant having a capacity of 30 million gallons per day. Water is distributed throughout the township through a system of underground reservoirs and overhead tanks. Energy Consumption: Continuous monitoring Apex Committee Inspection by HODs. •Quarter review of Safety activities by ED (W) •Fixing responsibility of line managers. •Contractor workers safety – IPSS procedure enforcement, contractors’ audit, safety exhibitions •Safety workshops Regular inspections •Inspection of gas pipelines Inspection of structures, equipments and installations •Risk Control Grading System implemented in Coke Ovens Battery 9 & 10, Blast Furnace, SMS-1 and extended to BBM, Foundry Shop, and SMS-II. Quality Management System Facilities relating to quality, ISO 9001 SEAL OF QUALITY

All major production units and marketable products in Bhilai Steel Plant are covered under ISO 9001:2000 Quality Management Systems. This includes manufacture of blast furnace coke and coal chemicals, production of hot metal and pig iron, steel making through twin hearth and basic oxygen processes, manufacture of steel slabs and blooms by continuous casting, and production of hot rolled steel blooms, billets and rails, structurals, plates, steel sections and wire rods. The key points of control are : •Chemical analysis of hot metal, liquid steel and final product. Inspection of surface and internal quality of the product by visual and ultrasonic inspection. •Monitoring and control of heating/reheating parameters. •Dimensional and surface check during rolling and on finished product. Human Resource Development: •Training need assessment is a continuing process. •About 19,000 employees are imparted training every year. •The focus is on need-based innovative programmers, such as Action Collaboration. •Multi-Skilling 1. 3 OBJECTIVES . 1. To analyze how decreases the risk. 2. To analyze the position of current asset in BSP 3.

To analyze how company manages its working capital 4. To study the role of operating cycle. 1. 4 HYPOTHESIS:- Hypothesis simply means a mere assumption or some supposition to be proved are disproved. But for a researcher hypothesis is a formal question that he intends to resolve. Thus a hypothesis may be defined as a proposition or a set of proposition set forth as an explanation for the occurrence of some specified group of phenomena either asserted merely as a provisional conjecture to guide some investigation or accepted as highly probable in the light of established facts.

Quite often a research hypotheses is a predictive statement, capable of being tested by scientific methods, that relates an independent variable to some dependent variable. These are hypotheses capable of being objectively verified and tested. Thus ,we may conclude that a hypothesis states what we are looking for and it is a proposition which can be put to a test to determine its validity. Research design used – Descriptive research design Types of hypothesis: 1. Null Hypothesis (Ho) 2.

Alternate Hypothesis (Ha) Ho = The current assets position of BSP is satisfactory as the current ratio is nearly to ideal ratio 2:1. Ha = The current assets position of BSP is not satisfactory as the current ratio is nearly to ideal ratio 2:1. 2. 1 Introduction Finance and accounts department of Bhilai Steel Plant is one of the key department in the total organization . it has two main functions i. e. Finance and Accounts. These functions are carried out by various sections of finance and accounts department.

The objective of finance and accounts department is always to meet the requirement of line department while doing its own line functions such as accounts maintaining, meeting statutory requirements, budgetary control and advising on financial matters etc. This training report is an attempt to consolidate various functions of accounts and finance department of Bhilai Steel Plant , this report is based on the latest practices and system being followed and would we very useful to everyone functioning as finance and accounts executives and for others as well.

This will throw light on the function and importance of finance and accounts department in total organization. This report is prepared with the contribution of all managers of finance and accounts department. The sections of finance and accounts department covered are as follows •Mines coordination •Stores and Raw material section •Freight and claims •Purchase and contract concurrence section •Project finance and accounts •Costing and budgeting section •Operation accounts section •Wages section •Cash section •Sales invoicing and accounting section •Excise and sales tax section •Central accounts and assets SCOPE OF PROJECT 2. . 1 Working Capital Working Capital is the capital available for conducting the day-to-day operations of an organization, normally, the excess of current assets over current liabilities. In accounting terms this is a static balance sheet concept referring to the excess at a particular moment in time of permanent capital plus long-term liabilities over the fixed assets of the business. As such it depends on accounting rules, such as what is capital and what is revenue, what constitutes a retained profit, the cut-off between long term and short term (12 months from the balance sheet date), and when revenue should be recognized.

If working capital thus defined exceeds net current operating assets (stocks plus debtors less creditors) the company has a cash surplus (usually represented by bank deposits and investments); otherwise it has a deficit (usually represented by a bank loan and/or overdraft). On this basis, therefore, the control of working capital can be sub divided into areas dealing with stocks, debtors, creditors and cash. A business must be able to generate sufficient cash to meet its immediate obligations and therefore continue trading.

Unprofitable business can survive for quite some time if they have access to sufficient liquid resources, but even the most profitable business will quickly go under without adequate liquid resources. Working capital is therefore essential to the company’s long-term success and development, and the greater the degree to which current assets cover the current liabilities, the more solvent the company. Efficient managing of working capital is important from the points of view of both liquidity and profitability.

Poor managing of working capital means that the funds are unnecessarily tied up in idle assets, hence reducing liquidity, and also reducing the ability to invest in productive assets as plant and machinery, so affecting the profitability. A company’s working capital policy is a function if two decisions: ~ The appropriate level of investment in, and mix of current assets to be decided upon, for a set level of activity – this is the investment decision. ~ The methods of financing this investment – the financing decision. The Investment Decision

All businesses, to one degree or another need working capital. The actual amount of working capital will depend on many factors like age of the firm, the type of business activity, credit policy and also time of the year. There is no standard fixed requirement. It is essential that an appropriate amount of working Capital is budgeted for to meet anticipated future needs. Failure to budget correctly could result in the business being unable to meet its liabilities as the fall due. If a business finds itself in such a situation, it is said to be technically insolvent.

In conditions of uncertainty firms must hold some minimal level of cash and inventories based on expected sales, plus additional safety stocks. Firms with an aggressive working capital policy hold minimal safety stock. Such a policy would minimize costs, but it could lower sales because a firm may not be able to respond rapidly to changes in demand. Conversely, a conservative working capital policy would call for large safety stocks. Conservative policy has lower returns but lesser risk when compared to an aggressive policy. A moderate policy falls somewhere between the two extreme policies. The Financing Decision

Working capital decisions involve the determination of the mix of long term versus short-term debt. When the yield curve is upward sloping, short-term debt costs less than long term debt. A firm with an aggressive financing policy finances part of its permanent asset base with short-term debt (which generally provides the highest expected return but is very risky) while a firm with a conservative finance policy has permanent financing (long term debt plus equity) more than its permanent base of assets. This has much lower returns but also is much safer. 2. 2 ANAYSIS OF CURRENT ASSETS AND LIABILITIES 2. 2. Current Assets It consists of cash of cash, investments, inventory and receivables and other market securities. Current assets are normally converted into cash within a year. These assets consist of: 1)Cash and bank balances 2)Investments a)Government and other trustee’s securities. b)Fixed deposits of banks, which are not earned, marked for any specific purpose, maturing within one year. 3)Receivables a)Sundry debtors arising out of sales other deferred receivables. b)Bills discounted. c)Investments of deferred receivables due within one year. 4)Inventory a)Raw materials and components include those in transit. )Stock in process including semi finished goods. c)Finished goods including goods in transit. d)Consumable stores and spares. 5)Other current assets a)Advanced payment of tax. b)Advance for the purchase of raw materials, components and stores. 2. 2. 1. 1 Current Assets of B. S. P Total Inventories: (In Rs. Crores) Particulars2004-20052005-20062006-20072007-20082008-09 Inventories: Stores and Spares331. 72417. 62444. 12465. 75575 Raw materials Stock324. 23353. 99342. 95284. 73484. 18 Semi/Finished goods385. 73734. 15769. 9962. 421828. 54 Others—– Total inventories1041. 681505. 761556. 661712. 902887. 72 2. 2. 1. 2Total current assets: (In Rs. Crores) Particulars2004-20052005-20062006-20072007-20082008-2009 Total inventories1041. 681505. 761556. 661712. 902888. 52 Sundry debtors19. 4820. 5318. 8213. 713. 42 Cash and bank balances22. 3533. 8136. 8039. 8643. 14 Other current assets18. 8916. 5513. 8612. 610 Loans to Others194. 82218. 44325. 12480. 73473. 14 Total1297. 221795. 091951. 262259. 793424. 25 2. 2. 1. 3 Analysis of Current Assets

Inventories-They consist of tangible assets held for sale in business, for process of production, or currently consumed in the production of goods or services for sale. Raw materials are basically used in manufacture of the project, finished goods are final goods for sale and semi finished goods are goods in process of production. The constituents of inventory carrying cost are interest, storage, insurance, physical deterioration and obsolescence. Inventory procurement also involves ordering cost consisting of number of deliveries multiplied by the cost of delivery. These two costs make up the total cost of inventory.

The economic order quantity or lot size is to be found where the total inventory cost is minimal. Cash-Cash is the important component of current assets, which is kept to meet running expenses and meet expenses and meet emergencies. It is the most liquid of current assets and its level is determined by the liquidity of other assets. Cash is kept in the bank deposits or readily convertible temporary investments. Receivables-It rises out of delivery of goods or rendering of services on credit. They include book accounts, notes and bills and accrued receivables. It represents claims against others for future receipt of money, goods and services.

They are considered on earning asset because they finance sales. Their values depend upon the volume of the credit sales and policy of collection of credit. Accounts receivables are valued at face value after deduction of market rate of discount. Market Securities-A portion of current earnings may be invested in government securities, bonds, debentures and shares which are readily marketable and may be converted into cash at short notice. 2. 2. 2 Current Liabilities Current liabilities consist of estimated or accrued amounts, which are anticipated to cover expenditure within a year, for known obligation.

Current liabilities include: 1)Borrowings: a)From banks b)From other 2)Others: a)Unsecured loans b)Public deposits maturing within one year. c)Sundry creditors for raw materials and stores. d)Interest and other charges accrued but not due for payment. e)Advance/progress payments from customers f)Deposits from dealers, selling agents etc. 3)Statutory liabilities: a)Provident fund dues b)Provision for tax. c)Sales taxes, excise etc 4)Miscellaneous current liabilities: a)Dividends b)Liabilities for expenses c)Gratuity payable within one year. 2. 2. 2. 1 Current Liabilities of B. S. P (In Rs. Crores)

Particulars2004-20052005-20062006-20072007-20082008-2009 Sundry creditors581. 26518. 08521. 81661. 35737. 95 Security deposits44. 4742. 1335. 0737. 2859. 06 Other liabilities268. 84289. 95353. 20491. 9613. 44 Provisions93. 9829. 36132. 58620. 29919. 01 Total current liabilities988. 55879. 521042. 661810. 882433. 17 2. 2. 2. 2 Analysis of Current Liabilities They comprise of borrowing from banks, trade credits, assessed tax and unpaid dividends. The share of each constituent to total current liabilities partly determines the availability of working capital. There is very little scope of maneuvering current liabilities. 2. Working Capital Management It involves the management the administration of current assets liabilities. It consists of optimizing the levels of current assets in a partial equilibrium context. Investment in current assets should be made in such a manner similar to NVP approach used in making investment decision in fixed assets. Current assets constitute a continuously fluctuating level of liquid assets that is rapidly transformed from one form to another. The normal rule for investment in fixed assets – invest in it if its NPV is positive cannot be applied to current assets because the useful life of current asset cannot be determined.

The level and nature of current assets depend on product types, operating cycle, level of sales, operating expenses, management and pricing. Current assets provide the liquidity necessary to support the realization of the expected returns from long time investment. It is also true that different assets have different type of liquidity. In terms of assets liquidity means the time necessary to covert the asset into money and the degree of certainty associated with such conversions. Working capital is also necessary to synchronize cash flows from long-term assets that are uncertain and irregular. . 3. 1 Amount of Working Capital The amount of working capital it requires varies from unit to unit and between units in different industries current assets are required because the operations do not convert into cash instantaneously there is always an operating cycle which converts cash into raw materials, raw material into goods in process, good in process into finished goods and finished good into debtors through credit sales and finally debtors into cash. Working capital is required because production, sales, cash, payments and realization are not instantaneous.

Cash is required to purchase raw materials and pay for expenses, as there may not e perfect matching between cash inflows and outflows. Each rupee of working capital becomes more efficient if there is smooth and rapid flow of working capital actually the amount of working capital required to produce a given output would be less when the flow of working capital is smooth and rapid. If interruptions occur causing the flow to slow down, the amount of working capital required to produce a given output would go up.

Further, the profitability of an enterprise depends on the relationship that exists between the working capital and fixed capital. Working capital should be continuously supplemented until capacity utilization is full if working capital is inadequate for full capacity utilization the return on fixed assets cannot be maximize 2. 4 Working capital management of BSP The basic goal of working capital management is to ensure that a firm is able to continue its operations and that it has sufficient ability to satisfy both maturing short-term debt and upcoming operational expenses.

The management of working capital involves managing inventories, accounts receivable, accounts payable and cash. 2. 5 CONCEPTS OF WORKING CAPITAL 2. 5. 1 Gross working capital: It refers to the firm’s investment in current assets. Current assets are the assets, which can be converted into cash within an accounting year or within an operating cycle. You can include here cash, short-term securities, debtors (accounts receivable & book debts), and bills receivable and stock. 2. 5. 2 Net working capital: The net working capital refers to the difference between current assets and current liabilities.

Current liabilities are those claims of outsider, which are expected to mature for payment within an accounting year & include creditors, bills payable & the outstanding expenses. In other words we can say that this is the excess of current assets over current liabilities. Table N0. -17 Working capital Current assets Current liabilities Cash Accounts Payable Accounts receivable Notes payable Notes receivable Accrued expenses Marketable securities Taxes payable Inventory Short term loans Prepaid expenses Bank overdraft Total current assets Total current liabilities Net working capital = CA-CL 2. Kinds of Working Capital: 1. Permanent Working Capital: Permanent working capital is the minimum amount of current assets, which is needed to conduct a business even during the dullest season of the year. The minimum level of current assets is called permanent or fixed working capital as this part is permanently blocked in current Assets. This amount varies from year to year, depending upon the growth of the company and the stage of the business cycle in which it operates. 2. Temporary Working Capital: Temporary working capital represents a certain amount of fluctuations in the total current assets during a short period.

These fluctuations are increased or decreased and are generally cyclical in nature. Additional current assets are required at different times during the operating year. Variable working capital is the amount of additional current asset that are required to meet the seasonal needs of a firm, so is also called as the seasonal working capital. For example: additional inventory will be required for meeting the demand during the period of high sales When the peak period is over variable working capital starts decreasing or very little during the normal period. Determinants Working Capital:

We can explain the determinants of working capital as follows: •Nature of business: •Terms of sales and purchases: •Manufacturing cycle: •Rapidity of turnover: •Business cycle: •Changes in technology: •Seasonal variation: •Market conditions: •Seasonality of operation: •Dividend policy: 2. 7 Working capital cycle: Larger the working capital cycle, more is the requirement of working capital. WORKING CAPITAL OF B. S. P (In Rs. Crores) Particulars2004-20052005-20062006-20072007-20082008-2009 Total current assets (F)1297. 221795. 091951. 262259. 793424. 25 Total current liabilities (G)988. 5879. 521042. 661810. 882527. 70 working capital(F-G=H)308. 67915. 57908. 60448. 91896. 55 2. 8 Methods of Analysis of Working Capital Analysis of working capital is significant for both management and short-term creditors. Managements can assess the efficiency of the working capital employed in the business. Such an analysis helps management to detect trends and initiate corrective measures. It helps the shareholders and creditors to determine the prospects of payment of dividend and interest. The analysis of Working Capital helps in determining the ability of the company to repay its urrent debt promptly, assess the effectiveness of management of working capital, adequacy of working capital and to undertake credit ratings. Analysis of working capital relates to an examination of circulation, liquidity, level and structural aspects of working capital. In analysis of working capital the tools used are ratio analysis and funds flow analysis of the company. 2. 8. 1 Ratio Analysis To analyze the current financial position of a company, ratios computed on the basis of the figure appearing in the balance sheet are compared with norms set for the ratios.

Depending upon the purpose, various ratios are used. The ratio discussed here relate to liquidity, circulation level and structure of working capital. 2. 8. 2 Liquidity Ratios 1. Net working capital to total assets: It is the ratio between net working capital and the total assets of a company. 2. Current ratio: It is the ratio between a firm’s current assets and its current liabilities. It is the most frequently used ratio also called working capital ratio. It is considered as an index of solvency of a company. It indicates the ability of a company to meet its current obligations.

Changes in current ratio can be misleading. If a company raises money through commercial paper and invests the amount in marketable securities, net working capital is unaffected but the current ratio changes. 3. Quick (or acid-test) ratio: Another ratio used to measure immediate solvency is the quick ratio. It includes assets, which can be quickly or immediately converted to cash. Such assets only include cash; marketable securities and bills customers have not yet paid (receivables). Inventories are excluded, as they cannot be sold immediately at anything above fire-sale prices.

The liquidity arises because finished goods cannot be sold for more than production cost. Quick ratio is calculated as (Cash + Marketable Securities + Receivables) / Current Liabilities) Sometimes it may be useful to compare current assets to regular cash outgoings of a company. The interval measure is calculated as (Cash + Marketable Securities + Receivables) / Average daily expenditure from operations The interval expressed in number of days measures the ability of the company to finance its daily expenditure with the current assets in its position even if it receives no further cash. . 8. 3 Liquidity Ratios of B. S. P a. Net working capital to assets: 1. For (2004-2005) = 308. 67 / 1297. 22 = 0. 23794 2. For (2005-2006) = 915. 56 / 1795. 09 = 0. 51004 3. For (2006-2007) = 908. 60 / 1951. 26 = 0. 46565 4. For (2007-2008) = 448. 91 / 2259. 79 = 0. 19865 5. For (2008-2009) = 896. 55 / 2000. 00 = 0. 4482 b. Current Ratio: Current Ratio = Current Assets Current Liabilities 1. For (2004-2005) = 1297. 22 / 988. 55 = 1. 31225 2. For (2005-2006) = 1795. 09 / 879. 52 = 2. 04099 3. For (2006-2007) = 1951. 26 / 1042. 66 = 1. 87143 4. For (2007-2008) = 2259. 79 / 1810. 88 = 1. 4789 5. For (2008-2009) = 3424. 25/2527. 70 = 896. 55 c. Quick Ratio: Quick Ratio = (Cash + Marketable Securities + Receivables) / Current Liabilities 1. For (2004-2005) = 255. 54 / 988. 55 = 0. 258450 2. For (2005-2006) = 289. 33 / 879. 52 = 0. 32896 3. For (2006-2007) = 394. 60 / 1042. 66 = 0. 37846 4. For (2007-2008) = 546. 89 / 1810. 88 = 0. 30200 5. For (2008-2009) = 541. 11 / 2527. 70 = 0. 2140 2. 8. 4 Circulation of Working Capital An analysis of circulation aspect throws light on the efficiency with which working capital is being utilized in a firm.

Various turnover ratios covering each component of current assets have been developed to analyze the efficiency in the use of working capital. The higher the turnover of these components, the lower will be the need of working capital. These ratios may be divided into 5 categories as •Inventory turnover ratios •Receivables turnover ratio •Cash turnover ratio •Current assets turnover ratio •Working capital turnover ratio Inventory turnover ratios: Inventory turnover ratios show the extent of use of working funds in different types of inventory.

These ratios include •Turnover of raw materials inventory: this ratio shows the number of times the raw materials were replaced during a year. It is obtained by dividing raw materials issued to the factory by raw materials in ending inventory. A low ratio indicates that excessive raw materials have been procured and a high ratio indicates that more raw materials are required. •Turnover of stores and spares: This ratio shows the utilization of funds in stores and spares inventory. It is obtained by dividing stores and spare consumed in a fiscal year by the value of stock and spares at the end of the year.

A high turnover shows management’s efforts to reduce investment in stores and spares, while a low turnover shows that management has deployed excessive working funds here. •Turnover of goods-in-process: It is obtained by dividing the value of goods produced in a year by the value of goods in process at the end of the fiscal year. A high ratio shows less accumulation of inventory. •Turnover of finished goods inventory: It is obtained by dividing net sales by finished goods inventory. A high turnover indicates that a higher level of sales has been attained with less investment in finished goods inventory. Turnover of aggregate inventory: It is obtained by dividing net sales in a year by the value of aggregate inventory at the end of the year. A high turnover quickens the flow of funds from inventory. Turnover of receivables: The receivables turnover ratio is computed by dividing annual credit sales by total customer receivables. The turnover of receivables indicates the rate at which sales are converted into cash and the average conversion period shows the number of days of sales that are represented by the account receivables.

A declining turnover of account receivables indicates an over investment of funds in receivables which may raise the requirement of working capital of a firm. Turnover of cash: This ratio shows the relationship between cash balance plus other liquid assets and operating costs and expenses. It shows the adequacy of liquid assets to meet current operating needs. A high turnover of cash indicates an insufficiency of cash to provide for emergencies. A low turnover shows that an excess cash balance is lying with the enterprise. Turnover of current assets: This ratio measures the turnover of total current assets used in business operations.

The ratio is obtained by dividing cost of goods sold by total current assets. A lower turnover indicates utilization of working capital. Working capital turnover: This ratio is obtained by dividing net sales by working capital. This ratio indicates the efficiency with which working capital has been used in the company. A higher turnover indicates lower investment in working capital and higher profitability but a very high turnover may indicate efficient usage of working capital in the enterprise. 2. 9 Operating Cycle: There is a difference between current and fixed assets in terms of their liquidity.

A firm requires many years to recover the initial investment in fixed assets such as plant and machinery or land and buildings. On the contrary, investment in current assets in turned over many times in a year. Investment in current assets such as inventories and debtors (accounts receivable) is realized during the firm’s operating cycle, which is usually less than a year. Operating Cycle is the time duration required to convert resources or inventories into sales and then into cash. The operating cycle of a manufacturing company involves three phases: Acquisition of resources: such as raw material, labor, power and fuel etc. •Manufacture of the product: which includes conversion of raw material into work-in-progress into finished goods? •Sales of the product: either for cash or on credit. Credit sales create account receivable for collection. How is the length of an operating cycle determined? The length of the operating cycle of a manufacturing firm is the sum of: (i) Inventory conversion period (ICP) and (ii) Debtors’ conversion period (DCP). Here the inventory conversion period is the total time needed for producing and selling the product.

Typically, it includes: (a) Raw material conversion period (RMCP), (b) Work-in-process conversion period (WIPCP), and (c) Finished goods conversion period (FGCP). Operating Cash Conversion Cycle To measure the timer taken for the initial cash flows for goods and services to be realized as cash inflows from sales, the device of the operating cash conversion cycle is used. Conversion cycle capture the fact that different components of working capital have different life expectancies and are transformed to liquidity flows at different rates.

The imbalance between cash inflows and outflows necessitates investments in current assets. The net cash conversion rate identified with the help of cash converting cycle has to be financed by working capital. COMPUTATION OF OPEARTING CYCLE Formulae: 1. RMCP = (RMI*360) / RMC 2. WIPCP = (WIPI*360) / COP 3. FGCP = (FGI*360) / COGS 4. DCP = (DRS *360) / Cr. Sales 5. PDP = (CRS*360) / Cr. purchases 6. GROSS OP. CYCLE = ICP+DCP 7. ICP = RMCP + WIPCP +FGCP 8. NET OP. CYCLE = GOC-PDP Where: •RMC is the consumption of raw material •RMI is the closing stock of raw material inventory WIPI is the closing stock of work-in process inventory •FGI is the closing stock of finished goods inventory 3. 1 METHODOLOGY Research in common parlance refers to a search for knowledge. One can also define research as a scientific and systematic search for pertinent information on a specific topic. Research methodology is a way to systematically solve the research problem. Research methodology just does not deal research method but also consider the logic behind the method. It facilitates the researcher with reason for evaluating the research problem.

Definition: According to Redman and Mory “Research is systematized effort to gain new knowledge”. According to Clifford Woody “Research comprises defining and redefining problems, formulating hypothesis or suggested solutions, collecting organizing and evaluating data , making deductions and reaching conclusions and at last carefully testing the conclusions to determine whether they fit the formulating hypothesis”. It has also defined as ‘a careful investigation or inquiry especially through search for new fact in any branch of knowledge’.

Research comprises defining research problems, formulates the hypothesis, research design including sample designing, data collection, analysis of data, interpretation, conclusion on the basis of interpretation. Apart from it suggestions and recommendations are also the part of research. The research methodology is through secondary data: •Journals •Plant visit •Personal discussion and interaction 3. 2 RESEARCH DESIGN The formidable problem that follows the task of defining the task of defining the research problem is the design of the research project, popularly known as the ‘research design’.

To define the term research design it can be said “a research design is the arrangement of conditions for collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure”. In fact the research design is the conceptual structure within which research is conducted; it constitute the blueprint for the collection, measurement and analysis of data. As such the design includes an outline of what the researcher will do from writing the hypothesis and its operational implications to the final analysis of data.

It answers some of the questions related with the report like – what is the study about, why the study is being made, where and how the study is to be carried out, what type of data is required and where it can be found, what will be the sample design, what technique is to be adopted while carrying the study etc. 3. 2. 1 Features of a good design: •It must be flexible enough. •Appropriate and efficiency must lie in the report. •It should minimize bias and maximize the reliability of the data collected. •The design must be suitable as per the requirement of the case. . 2. 2 Important concept relating to research design: •Dependent and independent variables. •Extraneous variables. •Control. •Confounded relationship. •Research hypothesis. •Experimental and non- experimental hypothesis- testing research. •Experimental and control groups. •Treatment. •Experiments. 3. 3 Research design used in this report •Literature Research: Analysis with the help of available data. •Experience Survey: Consulting with the experienced officials for a quick summary of the main issue. 3. 4 Test of hypothesis t-test -test is based on t-distribution and is considered an appropriate test for judging the significance of a sample mean or for judging the significance of difference between the means of two samples in case of small sample(s) when population variance is not known(in which case we use variance of the sample as an estimate of the population variance. Ho = The current assets position of BSP is satisfactory as the current ratio is nearly to ideal ratio 2:1. Ha = The current assets position of BSP is not satisfactory as the current ratio is nearly to ideal ratio 2:1. S. NO Xi(Xi- ) 1. 1. 3122-0. 2530. 625 2. 2. 0400. 7480. 2209 3. 1. 87140. 30620. 09 4. 1. 2478-0. 31740. 0961 5. 1. 3546-0. 21060. 0441 ? 1. 0761 =? = = 1. 5652 = = 0. 5186 = = = 2. 44 Degree of freedom = (n-1) = 5-1 = 4 As Ha is one sided, we shall determine the rejection region applying one-tailed test (in the right tail because Ha is of more type at 10% level of significance & it comes to comes to as, under, using table of the distribution for 22 degree of freedom. Observed value 2. 44 > 2. 13 table value The observed value of it is 2. 44 which is in the rejection region & thus Ho is rejected at 10% level of significant. 4. 1 Gross sales to Working Capital ratio

Working Capital=Current Assets-current liabilities YearCurrent assets (C. A. )Current liabilities (C. L. )Working capital=C. A. -C. L. Gross sales to working capital ratio 2004-051297. 22988. 55308. 6737. 2 times 2005-061795. 09879. 52915. 5712. 44 times 2006-071951. 261951. 26908. 615. 26 times 2007-082259. 791698. 32561. 4725. 21 times 2008-093424. 252527. 70820. 6220. 62 times Table No. -19 4. 2 Working capital turnover ratio: YearOpening balanceClosing balanceAverage net working capitalWorking capital turnover ratio 2004-05-93. 14308. 67107. 7792. 75 2005-06308. 67915. 57612. 1215. 63 2006-07915. 57989. 13952. 512. 35 2007-08989. 13561. 47775. 318. 25 2008-09561. 47896. 55729. 0125. 37 Table No. -20 4. 3 Current asset turnover ratio: YearOpening balanceClosing balanceAverage current assetSalesCurrent asset turnover ratio 2004-051223. 501297. 221260. 369995. 574. 72 times 2005-061297. 221795. 091546. 169564. 634. 39 times 2006-071795. 091951. 261873. 1811771. 094 times 2007-081951. 262259. 792105. 5214156. 356. 72 times 2008-092259. 793424. 252842. 0214895. 705. 24 times Table No. -21 4. 4 Inventory holding period: YearOpening balanceClosing balanceAverage inventoryInventory turnover ratioInventory holding period 2004-05942. 41041. 68992. 316 times60 days 2005-061041. 681505. 761273. 725. 33 times68 days 2006-071505. 761556. 661531. 214. 9 times73 days 2007-081556. 661712. 901634. 785. 31times 62 days 2008-091712. 902883. 792298. 3456. 298 times58 days Table No. -22 4. 5 Work in process inventory turnover period: Semi finished/finished goods storage period=cost of goods sold/average inventory of finished/semi finished go: YearAverage inventory of finished /semi finished goodsSemi finished/finished goods storage period (times)Semi finished/finished goods storage period (days) 2004-05416. 6713. 8226 2005-06390. 2515. 2624 2006-07559. 47. 9546 2007-08751. 879. 9736 2008-09Not PublishedNot PublishedNot Published Table No. -23 4. 6 Debtor’s collection period: YearOpening balanceClosing balanceAverage debtorsDebtor turnover ratioDebtor collection period (days) 2004-0516. 1919. 4817. 84560. 291 2005-0619. 4820. 5320478. 231 2006-0720. 5318. 8219. 68598. 121 2007-0818. 8213. 7016. 26882. 67. 40 2008-09Not Publ. Not Publ. Not Publ. Not Publ. Not Publ. Table No. -24 4. 7 Creditor’s payment period: YearOpening balanceClosing balanceAverage trade creditedAverage of trade credit purchased per dayCredit payment period in days 2004-05530. 72581. 6555. 9912. 8844 2005-06581. 26518. 08549. 6716. 4234 2006-07518. 08521. 81519. 9516. 8431 2007-08521. 81661. 35591. 5817. 0134. 77 2008-09661. 35737. 95349. 827511. 8929. 421 Table No. -25 4. 8 Calculation of operating cycle 1. Raw material conversion period = Raw material ? 360 Raw material consumption 20082007200620052004 284. 73*360=21. 72 4718. 58342. 95*360 = 29 4302. 72353. 99*360 = 30 4214. 30324. 23*360 = 38 3085. 07229. 52*360 =34 2448. 01 2. Work in progress conversion period = work in progress inventory ? 60 Cost of production •In BSP the WIPCP is not calculated, as they don’t go for the hot metal cost. 3. Finished goods conversion period = Finished goods conversion period ? 360 Cost of goods sold 20092008200720062005 Not Published962. 42*360 =36 9486. 45769. 59*360 = 34 8065. 22734. 15*360 = 34 7798. 41385. 73*360 = 21 6513. 67 4. Debtors conversion period = Debtors ? 360 Credit sales 5. Creditors deferral period = Creditors ? 60 Credit purchase Note BSP doesn’t go for the calculation of DCP & CDP as both the things are dealt in corporate office, hence due to this reason working capital management is not done at BSP. Financial Detail of Year 2009 some data was not published. FINDINGS The need of working capital or current asset cannot be overemphasized. Directly or indirectly working capital manages the need of day today life . The working capital management links directly with cash operating cycle comprises short term net assets, stocks debtors, cash , less creditors.

The Working Capital Ratio or Current Ratio of B. S. P. shows that there has correlation between changes in current assets with that of current liabilities. It means its showing the favorable trend in BSP. The Current Ratio was low in the year 2008 – 09 which was mainly due to the high inventory and cash blockages. Existence of high level of inventory turnover and non moving stock the higher the ratio, the higher the business level of liquidity, which usually corresponds to its financial health it shows that the Liquid Ratio of B. S. P. is in a favorable trend.

Here in this case it has improved from 0. 21 in the year 2007 – 08 to 0. 30 in the year 2008 – 09, which indicates that the business is capable to pay off its debts quickly, if that becomes necessary. The Gross Sales to Working Capital Ratio which shows the efficiency by which working capital is being used by the business and we can see that it increased to 25. 21 times in the year 2007-08 which again shows working capital is supporting sales. In 2008-09 it is 20. 62 times. Working Capital Turnover is in an increasing trend and we can see a decrease in the year 2008-09 (25. 7 times) as compared to the year 2007-08 (18. 25 times) which is mainly due to the increase in the average net working capital. The current assets turnover ratio is increased from 6. 72times in the year 2007-08 to 5. 24 times in the year 2008-09that shows that there was an increase of 0. 48times, The Creditor Payment Period is showing a decreasing trend from 34 days in the year 2007 -08 to 29 days in the year 2008-09 which shows that the time lag in the bills payables period has came down which indicate a prompt payment of all the payables is taking place, which is a healthy sign for any firm.

CONCLUISSION Bhilai Steel Plant a major unit of sail has been generating continuous profits as compared to previous year with current year. To summaries, working capital at a plant level, this mainly involves forecasting and monitoring of various components, which is done systematically. Whereby major portions of receivables are managed by central marketing organization for all plants level. Other important components of working capital are bill payables and borrowings of funds monitored by corporate level.

The current ratio is the indication of the amount of money that a company has in comparison to what it owes and it is generally considered adequate to have a current ratio of more than 2:1. I found that all most all the ratios calculated above shows a favorable trend which shows that B. S. P. is working efficiently and it is having a sound liquidity, and at the same time the duration of operating cycle has been decreased from year 2002-2003 to 2004-2005 which shows an favorable trend and as a result which indicates that it will require less working capital in the years to come.

Cite this Working Capital Concept

Working Capital Concept. (2018, Mar 07). Retrieved from https://graduateway.com/working-capital-concept/

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