WORKING CAPITAL MANAGEMENT AND RATIO ANALYSIS OF TINPLATE COMPANY OF INDIA LIMITED

SREOSHI BERAIMBA/45018/2011

INTRODUCTION

COMPANY’S OVERVIEW

COMPANY Tinplate Company of India Ltd. (TCIL)

Established 1922

Chairman Mr. Koushik Chatterjee

Managing Director

Mr. Tarun Daga

Industry Mining/Minerals/Metals

Headquarter 4, Bank shall Street, Kolkata

Works Golmuri, Jamshedpur, Jharkhand

Product Range

Oil cans (OC)Non-oil cans (NOC)Open Top Sanitary Cans (OTC)Tin-free Steel

Auditors Price Waterhouse (301112E)

BSE Code 504966

NSE Code TINPLATE

ABOUT WORKING CAPITAL

Working capital is the capital required for maintenance of day-to-day business operations. The present day competitive market environment calls for an efficient management of working capital. The reason for this is attributed to the fact that an ineffective working capital management may force the firm to stop its business operations, may even lead to bankruptcy. Hence the goal of working capital management is not just concerned with the management of current assets & current liabilities but also in maintaining a satisfactory level of working capital.

OBJECTIVE AND SIGNIFICANCE

OBJECTIVE

To analyze factors that Tinplate Company of India Ltd.:

• Consider for their working capital requirement.

• To understand their Working Capital Policies.• To analyze the company’s performance by

studying the financial statement.

SIGNIFICANCEThe various significance of Working Capital Management are as follows:-• Cash Discount: if a proper cash discount is maintained, the business can avail

the advantage of cash discount by paying cash for its purchase of the raw materials and machineries. It will result in reducing the cost of production.

• It creates a feeling of security and confidence: Proper Working Capital arrangement results in less worrying for the payment of business expenses or creditors.

• “MUST” for maintain solvency and continuing production• As it creates a sound goodwill so it results in getting easy loans from the banks.• Therefore, Working Capital management shows that the firm has enough

liquid cash or cash equivalent; therefore it indicates that the firm has good dividend distribution policy. This also helps in accelerating the market value per share of the firm

• The firm with the help of Working Capital management can meet any unforeseen contingencies or situations.

• Working Capital Management helps in increasing the lending power of a firm with efficient Working Capital a firm can borrow more money from the public.

• Effective Working Capital Management ensures smooth production and operation activity. Thus, it increases the image of the firm in the society.

METHODOLOGY

DATA COLLECTION PROCEDURE

Data was collected from following SECONDARY SOURCES like:

Annual reports of the companyJournals and magazines published by the companyAnalysis of files and official documentsSurfing online websites of TCIL and other tinplate

companies.The collected information was edited & tabulated

for the purpose of analysis.

FINDINGS: WORKING CAPITAL AND RATIO ANALYSIS

NET WORKING CAPITAL

YEAR 2008 2009 2010 2011 2012

NET WORKING CAPITAL (36.07) 24.61 3.95 36.07 (33.60)

2008 2009 2010 2011 2012

-40

-30

-20

-10

0

10

20

30

40

-33.07

24.61

3.95

36.07

-33.6

NET WORKING CAPITAL

NET WORKING CAPITAL

INTERPRETATION OF WORKING CAPITAL OF TCIL

Company’s working capital gives us a picture about its position in the market. Though negativity does not mean that the company is in a bad position in the market, many firms have a negative working capital still they are holding a top position in the market. Negative working capital is a situation in which a business is continuing to operate in spite of the fact that the liabilities held by the company are more than the company’s available assets. Essentially, this means that the accounts payable for the period of operation is more than the account receivables for the same period. Generally, these are short-term situations that take place because payments related to sales generated in previous periods have not yet been received and posted to the receivables. At the same time, the expenses found in the payables are posted and awaiting disposition.

In short…• The negative working capitals in 2008 and

2012 are due its mother company’s policies. • As we know that TATA STEEL is the mother

company its decision of buying the Corus company had influenced the money supply of the sister industries.

• Moreover, TCIL has low sales and high stocks in its inventory in those years which indicated less sells.

WORKING CAPITAL

TURNOVER RATIO

2008 2009 2010 2011 2012

-50

0

50

100

150

200

250

FORMULAWORKING CAPITAL TURNOVER RATIO = NET SALES

NET WORKING CAPITAL

CURRENT RATIO

FORMULA CURRENT RATIO = CURRENT ASSETS CURRENT LIABILITIES

2008 2009 2010 2011 20120

0.2

0.4

0.6

0.8

1

1.2

1.4

QUICK RATIO FORMULA QUICK RATIO= CURRENT ASSETS – INVENTORY CURRENT LIABILITIES

2008 2009 2010 2011 20120

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

DEBTORS TURNOVER RATIO

FORMULADEBTORS TURNOVER RATIO= NET CREDIT SALES AVERAGE DEBTORS Where: AVERAGE DEBTORS= (OPENING DEBTORS + CLOSING DEBTORS) / 2

2008 2009 2010 2011 20120

5

10

15

20

25

30

35

RECOMMENDATIONS

• Company’s gross working capital has been growing over the years, as because production of tinplate has been increasing and also due to commission of Cold Rolling Mill 2.

• Provision for tax and dividend is increasing consistently year by year, company should pay out sufficient dividend to stakeholders and remaining should be used as retained earning.

• The company should enhance their marketing strategy and try to penetrate more in both global and domestic tinplate industry.

CONCLUSION

• Tinplate Company of India Ltd. has been able to maintain a good liquidity position throughout. It has been able to pay back its liabilities on time and also has been able to give dividends on time to its shareholders. It has also maintained a moderate level of Earning Per Share.

BIBLIOGRAPHY

• Book:Financial management – I.M. PandeyWorking capital management – Krish RangarajanAnnual report of TCIL• Website:http://www.tatatinplate.com/http://www.investopedia.com/http://www.tatasteel.com/

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