Working Capital Management of Durgapur Steel Plant

7/24/2019 Working Capital Management of Durgapur Steel Plant

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ACKNOWLEDGEMENTS

According to the dictionary, wisdom has three components: Knowledge, Insight and Good Sense,

or Judgment. One can get Management knowledge rom a management course sylla!us, !ut the

insight and good sense that knowledge into wisdom comes only rom e"perience.

I would thank Mr. ################################ my pro$ect guide, or his considerate

and immense help without which this report would not ha%e !een possi!le.

I e"press my gratitude to Mr. S. K. &ayak 'Asst. General Manager ( )urgapur Steel *lant +and

the employees in the company or lending me %alua!le support or the completion o my pro$ect.

inally I would like to thank e%ery one o my amily mem!ers and riends who ha%e directly or

indirectly contri!uted to success ul completion o my pro$ect.

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PREFACE

In this modern world the growing importance of management and various

aspects of communication lead us to serve the world best of our knowledge. In the

competitive economy the quality and the performance of the management

determines the success of an organization. However the art and practices of

management is quite di erent environment. Thus by visiting !urgapur "teel #lant$

I got chance to learn the various aspect of the world outside the books that is so

wide and e%pected.

#ro&ect also enables the management students to see themselves the working

condition under which they have to work in the future. It thus enables the students

to undergone those e%periences' which will help them later when they &oin any

organization.

This pro&ect is about the working capital management. (or an organization to have

e)cient working management policy is basic need for survival. *orking capital

management is life blood of an organization.

I ha%e tried my le%el !est to insert correct - complete in ormation in this report. rue learning is

!orn out o e"perience and o!ser%ation. I ound a great link !etween the theatrical and the

practical knowledge that is help ul to !uild a concrete !ase or the uture %ocational li e.

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TABLE OF CONTENTS

S.No.PARTICULARS PAGE NO.

Executive Summa !

" Com#a$! P o%i&e

I$t o'uctio$ o% Pa e$t Co. ( Sai&

)i*io$ a$' CREDO

P o%i&e o% Du +a#u Stee& P&a$t

Faci&itie*

P o'uct*

, De*i+$ o% t-e *tu'!

I$t o'uctio$ o% t-e *tu'!

O /ective* o% t-e *tu'!

Re*ea c- Met-o'o&o+!

Limitatio$*

0 T-eo etica& Bac1+ ou$' o% Wo 1i$+ Ca#ita&Ma$a+eme$t

Mea$i$+ o% Wo 1i$+ Ca#ita& Ma$a+eme$t

Co$*titue$t* o% Wo 1i$+ Ca#ita&

,


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E&eme$t* o% Wo 1i$+ Ca#ita&

T2o 'i%%e e$t A## oac- o% Wo 1i$+ Ca#ita&

Ki$'* o% Wo 1i$+ Ca#ita&

Im#o ta$ce o% A'e3uate Wo 1i$+ Ca#ita&

Exce** o I$a'e3uate Wo 1i$+ Ca#ita&

Facto * 'ete mi$i$+ Wo 1i$+ Ca#ita& Re3ui eme$t

Ma$a+eme$t o% 2o 1i$+ ca#ita&

Sou ce* o% Wo 1i$+ Ca#ita&

Fi$a$ci$+ o% Pe ma$e$t Wo 1i$+ Ca#ita&

Fi$a$ci$+ o% Tem#o a ! Wo 1i$+ Ca#ita&

4 Wo 1i$+ ca#ita& ma$a+eme$t o% Du +a#u Stee& P&a$t

5 Fi$'i$+*

6 Su++e*tio$*

7 Bi &io+ a#-!

-


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E8ECUTI)E SUMMAR9

/ Wo 1i$+ ca#ita& mea$* t-e #a t o% t-e tota& a**et* o% t-e u*i$e** t-at c-a$+e % om o$e

%o m to a$ot-e %o m i$ t-e o 'i$a ! cou *e o% u*i$e** o#e atio$*.:

In a per ect world, there would !e no necessity or current assets and lia!ilities

!ecause there would !e no uncertainty, no transaction costs, in ormation search costs, scheduling

costs, or production and technology constraints. he unit cost o production would not %ary with

the 0uantity produced. 1orrowing and lending rates shall !e same. 2apital, la!our, and product

market shall !e per ectly competiti%e and would re lect all a%aila!le in ormation, thus in such an

en%ironment, there would !e no ad%antage or in%esting in short term assets. 3owe%er the world

we li%e is not per ect. It is characteri4ed !y considera!le amount o uncertainty regarding the

demand, market price, 0uality and a%aila!ility o own products and those o suppliers. here are

transaction costs or purchasing or selling goods or securities. In ormation is costly to o!tain and

is not e0ually distri!uted.

here are spreads !etween the !orrowings and lending rates or in%estments and

inancings o e0ual risks. Similarly each organi4ation is aced with its own limits on the

production capacity and technologies it can employ there are i"ed as well as %aria!le costs

associated with production goods. In other words, the markets in which real irm operated are not

per ectly competiti%e. hese real world circumstances introduce pro!lem5s which re0uire the

necessity o maintaining working capital. or e"ample,, an organi4ation may !e aced with an

uncertainty regarding a%aila!ility o su icient 0uantity o crucial imputes in uture at reasona!le

price. his may necessitate the holding o in%entory, current assets. Similarly an organi4ation

may !e aced with an uncertainty regarding the le%el o its uture cash lows and insu icient


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amount o cash may incur su!stantial costs. his may necessitate the holding o reser%e o short

term marketa!le securities, again a short term capital asset. In corporate inancial management,

the term 6orking capital management7 'net+ represents the e"cess o current assets o%er current

lia!ilities.

6orking capital may !e regarded as the li e !lood o !usiness. 6orking capital is

o ma$or importance to internal and e"ternal analysis !ecause o its close relationship with the

current day8to8day operations o a !usiness. 9%ery !usiness needs unds or two purposes

ong term unds are re0uired to create production acilities through purchase o i"ed

assets such as plants, machineries, lands, !uildings - etc

Short term unds are re0uired or the purchase o raw materials, payment o wages, and

other day8to8day e"penses. It is otherwise known as re%ol%ing or circulating capital

he pro$ect is /A S ;)< O& 6O=KI&G 2A*I A MA&AG9M9& O );=GA*;=

S 99 * A& .7 he main o!$ecti%e o the study is to ind out the soundness, li0uidity and pro ita!ility o the company.

he study is ormulated !y the research design or analy4ing the pro ita!ility, soundness

and li0uidity o the company.

he research design used or this study is analytical research design. Secondary data is

collected rom $ournals, maga4ines, reports and !ooks.

he statistical tool or the study is ratio analysis. Graphs are also used or thediagrammatic representation o the interpretation. he study was mainly !ased on the annual

reports o )urgapur Steel *lant.

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0H #T23 41

TH2 056# 78 #35(I92

I$t o'uctio$ o% #a e$t Co. ( SAIL

Steel Authority o India imited 'SAI + is the largest steel8making company in India and one o the

se%en Maharatna5s o the country5s 2entral *u!lic Sector 9nterprises. SAI produces iron and steel at

i%e integrated plants and three special steel plants, located principally in the eastern and central

regions o India and situated close to domestic sources o raw materials. SAI manu actures and sells

a !road range o steel products.

I$te+ ate' Stee& P&a$t*

Stee& P&a$t Locatio$ P o'uct*

1hilai Steel *lant 2hattisgarh

=ails '>?@ Bm+, ong =ails, 'BC8 BDm+, 1looms, 1illets,

Sla!s, 2hannels, Joists, Angles, M =e!ars, 6ire =ods,2rane =ails, *lates, *ig iron - 2oal 2hemicals

)urgapur Steel

*lant 6est 1engal1looms, 1illets, Joists, &arrow Sla!s, 2hannels, Angles,

M =e!ars, 6heels - A"les, *ig iron - 2oal 2hemicals

=ourkela Steel

*lant Odisha

*late Mill *lates, 3= *lates, 3= 2oils, Sla!s, 2= Sheet@

2oil, Gal%anised Sheets 'plain - 2orrugated+, 9=6 *ipes,

Spiral 6eld pipes, 2=&O, *ig iron - 2oal 2hemicals

1okaro Steel *lant Jharkhand

3r 2oils, Sla!s, 3= Sheets. *lates, 2= 2oils. Sheets, G*

Sheets. coils, G2 Sheets, Gal%anealed Steel, 3=*O, *ig iron

- 2oal 2hemicals

IIS2O Steel *lant 6est 1engal 6ire rods, 1ars - =e!ars, Joists, 2hannels, Angles, 1looms,

1illets, ;ni%ersal - Special section 'E8!ar, MS Arch+, *ig

:
http://www.sail.co.in/bhilai-steel-plant/about-bhilai-steel-planthttp://www.sail.co.in/durgapur-steel-plant/about-durgapur-steel-planthttp://www.sail.co.in/durgapur-steel-plant/about-durgapur-steel-planthttp://www.sail.co.in/rourkela-steel-plant/about-rourkela-steel-planthttp://www.sail.co.in/rourkela-steel-plant/about-rourkela-steel-planthttp://www.sail.co.in/bokaro-steel-plant/about-bokaro-steel-planthttp://www.sail.co.in/iisco-steel-plant/about-iisco-steel-planthttp://www.sail.co.in/bhilai-steel-plant/about-bhilai-steel-planthttp://www.sail.co.in/durgapur-steel-plant/about-durgapur-steel-planthttp://www.sail.co.in/durgapur-steel-plant/about-durgapur-steel-planthttp://www.sail.co.in/rourkela-steel-plant/about-rourkela-steel-planthttp://www.sail.co.in/rourkela-steel-plant/about-rourkela-steel-planthttp://www.sail.co.in/bokaro-steel-plant/about-bokaro-steel-planthttp://www.sail.co.in/iisco-steel-plant/about-iisco-steel-plant


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iron - 2oal 2hemicals

Salem Steel *lant amil &adu2old =olled Stainless Steel, 3ot =olled 2ar!on - Stainless

Steel *roducts, Micro8Alloyed 2ar!on Steel

Alloy Steel *lant 6est 1engal

Alloy Steel S0uares - =ounds, 6ear =esistant *lates,orgings, 2arne 6heels, orged =olls@ *laets, Special

Fuality Sla!s - Stainless Setel Sla!s 'low &i, ?DD - DD

series+

His%eswaraya Iron

- Steel *lant Karnataka3igh Fuality =olled - orged Alloy - Special Steel

*roducts

2handrapur erro

Alloy *lant Maharashtra

3igh@ Medium@ ow car!on erro8Manganese, Silico8

Manganese

) i*io$

o !e a respected world class corporation and the leader in Indian steel !usiness in 0uality,

producti%ity, pro ita!ility and customer satis action.

CREDO

6e !uild lasting relationships with customers !ased on trust and mutual !ene it.

6e uphold highest ethical standards in conduct o our !usiness.

6e create and nurture a culture that supports le"i!ility, learning and is proacti%e to

change.

6e chart a challenging career or employees with opportunities or ad%ancement and

rewards.

6e %alue the opportunity and responsi!ility to make a meaning ul di erence in people s

li%es.

;
http://www.sail.co.in/special-steel-plants/salem-steel-planthttp://www.sail.co.in/special-steel-plants/alloy-steels-planthttp://www.sail.co.in/special-steel-plants/visvesvaraya-iron-and-steel-planthttp://www.sail.co.in/special-steel-plants/visvesvaraya-iron-and-steel-planthttp://www.sail.co.in/ferro-alloy-plant/chandrapur-ferro-alloy-planthttp://www.sail.co.in/ferro-alloy-plant/chandrapur-ferro-alloy-planthttp://www.sail.co.in/special-steel-plants/salem-steel-planthttp://www.sail.co.in/special-steel-plants/alloy-steels-planthttp://www.sail.co.in/special-steel-plants/visvesvaraya-iron-and-steel-planthttp://www.sail.co.in/special-steel-plants/visvesvaraya-iron-and-steel-planthttp://www.sail.co.in/ferro-alloy-plant/chandrapur-ferro-alloy-planthttp://www.sail.co.in/ferro-alloy-plant/chandrapur-ferro-alloy-plant


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PROFILE OF DURGAPUR STEEL PLANT

Set up in the late CD s with an initial annual capacity o one million tonnes o crude steel per year,

the capacity o )urgapur Steel *lant ')S*+ was later e"panded to >.B million tonnes in the D s.

A massi%e modernisation programme was undertaken in the plant in early D s, which, while

!ringing numerous technological de%elopments in the plant, enhanced the capacity o the plant to

.DLL million tonnes o hot metal, >.L million tonnes crude steel and >.CLB million tonnes

salea!le steel. he entire plant is co%ered under ISO DD>: DDD 0uality management system.

he moderni4ed )S* now has state8o (the8art technology or 0uality steel making. he

moderni4ed units ha%e !rought a!out impro%ed producti%ity, su!stantial impro%ement in energy

conser%ation and !etter 0uality products. )S*5s Steel Making comple" and the entire mills 4one,

comprising its 1looming - 1illet Mill, Merchant Mill, Skelp Mill, Section Mill and 6heel -

A"le *lant, are co%ered under ISO: DD 0uality assurance certi ication.

6ith the success ul commissioning o the moderni4ed units, )S* is all set to produce .DLL

million tones o hot metal, >.L million tones o crude steel and >.CLB million tones o salea!le

steel annually.

Locatio$

Situated at a distance o >CL km rom 2alcutta, its geographical location is de ined as ?D

&orth and LLD 9ast. It is situated on the !anks o the )amodar ri%er. he Grand runk =oad

and the main 2alcutta8)elhi railway line pass through )urgapur.

E$vi o$me$t co$t o&

)urgapur Steel *lant has always made relentless e orts to maintaining a healthy and clean

en%ironment. he units in )S* are pro%ided with necessary pollution control acilities and the

li0uid e luents and chimney emissions rom the plant are well within norms.

)S* has undertaken massi%e a orestation to maintain clean en%ironment. Some ?, BB acres o

land ha%e !een co%ered with > lakh plantations. In order to de%elop healthy awareness a!out the

en%ironment amongst the younger generation, eco8clu!s ha%e !een ormed in )S* schools.


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Ce$t e %o ;uma$ Re*ou ce Deve&o#me$t

)S* has always attached ma"imum importance on proper training and de%elopment o its

employees. Its 2entre or 3uman =esource )e%elopment has all modern acilities including the

state8o 8the8art 9lectrical and 9lectronics la!oratory, 3ydraulics and *neumatics la!oratory and

workshop or e ecti%e training and de%elopment o its employees.

Faci&itie*

". Ra2 Mate ia&*

Iron ore, coal and limestone are the three !asic raw materials or the steel industry. )urgapur

Steel *lant draws its coal rom the ad$acent Jharia8=anigun$ coal !elt. A good amount o prime

coking coal, ha%ing airly low ash content, is also imported. 1ulk o iron ore lumps and inescome rom the mines at 1olani in Orissa. ime stone comes rom a %ariety o sources:

1irmitrapur 'Orissa+, Jaisalmer '=a$asthan+, and Jukehi and &andwara 'Madhya *radesh+.

o impro%e and ensure consistency in raw material 0uality, the acilities, which ha%e !een

installed, are:

1ene iciation@washing acilities, !oth or lump ore and ines at 1olani

Screening o lump iron ore inside the plant,

Selecti%e crushing o coal at 2oal 3andling *lant,

1ase !lending acilities or Sinter *lant,

Silo8cum8 1lending !unkers

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As part o the modernisation programme, new raw material handling storage and !lending

acilities with selecti%e crushing o coal ha%e !een installed in order to ensure consistency in raw

material 0uality.

he !ene iciation@washing acilities, !oth or lump ore and ines at 1olani, ha%e a capacity to

process ?. million tonnes 'wet !asis+ per annum so as to !e capa!le o catering to the entire

re0uirement o the plant a ter modernisation.

)urgapur is the only steel plant in the country to ha%e a coal washery at the plant site.

)urgapur Steel *lant consumes a!out . million tonnes o di erent raw materials annually

which comprises o%er >.L million tonnes o coal and . million tonnes o iron ore lump and

ines. 1esides the two ma$or raw materials, the plant also re0uires limestone, dolomite,

manganese ore, !au"ite, silico manganese, erro manganese, erro silicon, etc.

,. Co1e Ove$* < Coa& C-emica&*

&o o !atteries 8 C

&o. o o%ens per !attery 8 L

he coke o%ens and coal chemicals 4one is di%ided into our !asic sections namely coal

preparation plant, coal car!onisation plant, coke handling plant and coal chemicals. *resently,

)S* is operating only three !atteries.

he 1last urnace grade coke produced in 2oke O%ens is directly used in 1last urnaces while

the undersi4ed coke is used or sinter making.

he %olatile matters, which emanate during the process o coke making su!se0uently produce a

%ariety o !y8products like naphthalene oil, hea%y creosote oil, light oil, crude tar partially

distilled tar, /=a$a7 !rand ertiliser, nitration grade !en4ene, nitration grade toluene, industrial

grade toluene, light sol%ent naphtha etc.

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he coke o%en gas is generally used in com!ination with the 1last urnace gas and 1O gas as

uel and is carried through pipelines to the di erent areas o the plant. he ad$oining Alloy Steels

*lant under SAI is also supplied with this uel gas rom )S*.

0. Si$te P&a$t

In order to enhance the producti%ity o !last urnaces, a high percentage o sinter charge is a

prere0uisite. Sinter is an agglomeration o iron ore ines, coke and limestone in the orm o

cakes. o ensure sinter !urden in the !last urnaces at C per cent, a total o ? million tonnes o

sinter was en%isaged or a production o a!out million tonnes o hot metal. A technologically

modern and uel e icient sintering machine ha%ing > L s0 metres sintering area has !een added

as part o the modernisation scheme to produce >. million tonnes o sinter. he !alance

re0uirement will !e met rom the re%amped old sinter plant.

Sinter mi", a mi"ture o ines o iron ore, limestone, coke, dolomite and lue dust, !lended

proportionally at the =M32, is a prepared material which is sel lu"ing. In ignition strands it is

!urnt under controlled conditions to orm a porous cake type su!stance called sinter, which used

in !last urnaces enhances producti%ity and reduces coke rate.

4. Ra2 Mate ia& ;a$'&i$+ P&a$t

)urgapur Steel *lant re0uires annually o%er . million tonnes o di erent raw materials,

which comprises o%er >.L million tonnes o coal and . million tonnes o iron ore lump and

ines. 1esides the two ma$or raw materials, the plant also re0uires limestone, dolomite,

manganese ore, !au"ite, silico manganese, erro manganese, erro silicon, etc.

5. B&a*t Fu $ace*

1last urnaces are re erred to as the Nmother unit5 o an integrated steel plant. Iron ore as

a%aila!le in nature is !asically an o"ide. It is charged into a !last urnace either as lump ore or in

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the orm o sinter and reduced to molten iron !y the coke at temperatures ranging rom >, DD (

>, DD degrees centigrade. he limestone, acting as lu", a!sor!s the impurities in the molten iron

and goes out as slag. he ma$or portion o li0uid hot metal is trans erred to steel melting shop or

con%ersion to steel and the rest portion is cast into pig iron in pig casting machines. 1last urnace

slag high in lime8content is used or cement making.

here are three num!ers o !last urnaces operating presently at )S*. he use ul %olume o two

urnaces is >, DD cu!ic meters each and that o the other one is >,LDD cu!ic meters. he urnaces

are presently operating at a producti%ity le%el o >.?8>. tonnes@cu!ic meter@day. he urnaces are

e0uipped with sophisticated and modern computerised control system and are operated with high

!last temperatures '>,>DD degree centigrade+ and high top pressure 'D. Kg@ s0. cm+. he cast

houses are pro%ided with acilities like twin tap holes, rocking runners etc. here are also twonum!ers o Slag Granulation *lants, which con%ert molten !last urnace slag into granulated

orms or ready use in the cement industry. here are three pig casting machines, with a total

capacity o ,> ,DDD tonnes@year

No " No ,No 0

= ei$+ mo'e $i*e'>No 4

2apacity 't@day+ >, CD >, L D >, L D , ? D

;se ul %olume 'cum+ >, ? ? >, DD >, DD >, LDD

Sto%es ? ? ? ?

*roducti%ity 't@cu m@day+ >.DDD >.? >.? >.?

6. Stee& Me&ti$+ S-o#

Mi"ers 8 " >, ?DD t

2on%erters 8 ? " >>D t 'nominal heat si4e+

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Molten iron is urther re ined at the Steel Melting Shop 'SMS+ to produce steel, which is hard

and mallea!le.

At )S*, there are ? con%erters '1asic O"ygen urnace+ o >>D8>?D tonnes each. he SMS also

has a Hacuum Arc )egassing 'HA)+ unit or making special grades o steel.

A ma$or portion o the steel is routed through the 2ontinuous 2asting *lant. Another ma$or

portion o the steel is taken to the teeming !ay, where it is top poured into L tonne ingot moulds

or making ingot steel. A portion o highly controlled steel is cast at the Special 2asting 1ay into

luted ingots and special 0uality !looms. luted ingots are !ottom poured and are used or

making wheel steel or )S*5s 6heel - A"le *lant. A portion o the li0uid steel is also !ottom

poured to make a"le ingots.

2ontinuous 2asting *lant

he state o the art 22* has &os machines ha%ing B strands each. he other !asic details are as

ollows: 8

)esign limits8 LD8>CD s0 .mm, casting radius8 B metres

2asting time ( LC minutes, 2ut8o lengths8 B @ @ > metre

&o o ladle treatment stations8

Mould le%el controller 8 Automatic '=adio8acti%e 2o8BD+

he steel ladle rom 1O is taken to the ladle treatment station. At the ladle treatment station,

li0uid steel is rinsed with nitrogen to homogenise its temperature and composition. A ter the

rinsing, the ladle containing li0uid steel is placed on the turret and !rought o%er the tundish. he

tundish acts as a !u er and ena!les the li0uid steel to mo%e homogeneously down through the

si" no44les, pro%ided at the !ottom o the tundish into moulds. he automatic mould le%el

controller controls the steel le%el in the mould. he su!se0uent primary and secondary cooling

trans orms the li0uid steel into !illets o the re0uired dimensions and is drawn out with the help

o a withdrawal and straightener unit and cut into the re0uired length !y the shear pro%ided in

each strand. he continuous casting process is the result o a uni0ue synchronisation !etween

1asic O"ygen urnace and 22*. Once a ladle is emptied, another ladle is !rought into casting

position and the casting continues.

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he !illets are gradually shi ted to the cooling !eds and then stacked orderly at the despatch end

or outside despatch. he details a!out the cast num!er and 0uality o the !illets are marked on

the !illet stack. he Merchant Mill o )urgapur Steel *lant utilises !illets or rolling M !ars

and other merchant rounds, while a si4ea!le portion is sold in the domestic and oreign markets.

7. Ro&&i$+ Mi&&*

Ingots weighing L tonnes each are heated in the soaking pits 'num!ering D+ or a!out to >

hours at around >, DD degrees centigrade and therea ter rolled in the 7 primary and the ? 7

secondary !looming mills. hese are rolled urther into di erent shapes and si4es in di erent

inishing mills.

1looming mill

Installed Mill capacity 8 >. million tonnes@year

Ingot weight 8 L tonnes

Mill:

" >D re%ersi!le 1looming Mill

Output !loom si4e 'min+ 8 ?DD mm " CD mm? Mill:

? " L re%ersi!le Intermediate Mill

Output !loom si4e 'min+ 8 >LD mm " >LD mm

1illet Mill

Installed Mill capacity 8 D. C tonnes @ yr.

ype 8 2ontinuous Morgan design3ori4ontal stands 8 B, Hertical stands 8

*roduct =ange

1illets 8 >DD mm s0uare to > C mm s0uare

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Sleeper !ars 8 ?C mm " > .C mm

Skelp sla!s 8 > D mm " C mm to D mm " D mm

he ingots a ter heating are rolled in the 1looming Mill to make !looms o the si4es mentioned

in the ta!le and then a part o the same are then urther rolled in the 1illet Mill or making rolled

!illets or sla!s as per the a!o%e details.

Section mill

he Section Mill rolls out light and medium structural like $oists, channels and angles.

Mill capacity 8 D. million tonnes @ year

=e8heating urnaces 8 " D t@hr

=oughing Mill 8 high re%ersi!le

Intermediate Mill 8 stands o ? high non8re%ersi!le

inishing Stand 8 high non8re%ersi!le

*roduct range:

Joists 8DD mm " >DD mm, > C mm " LC mm

>CD mm " C mm, >>B mm " >DD mm

2hannels 8DD mm " C mm, > C mm " C mm

>CD mm " C mm, > C mm " BC mm

Angels 8>CD " >CD mm, >?D " >?D mm

>>D " >>D mm, >DD " >DD mm

ish plate !ars or C kg rails

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Merchant Mill

he Merchant Mill produces plain round and hermo8Mechanically reated ' M + !ars in the

range o >Bmm 8 Lmm. he entire product range o M !ars and rods at )S* is !randed and

has !een a!le to create a niche market.

2apacity 8 D. L million tonnes @ year

ype o mill 8 continuous Morgan design

3ori4ontal stands 8 >?, =epeaters 8

*roduct range

*lain rounds 8 > 8 ? mm dia

M !ars 8 > 8 C mm dia

Skelp Mill

he Skelp Mill produces skelp in the range o > B to ?C mm primarily or tu!es and pipes

making industry.

2apacity 8 D. C million tonnes @ year

ype o Mill 8 2ontinuous oewy design

3ori4ontal stands 8 >>

Hertical stands 8 B

*roduct range

Strips - Skelps 8 C8 mm wide to >. 8 .? mm thick

1:


18/67

Rai&2a! P o'uct*

)urgapur Steel *lant is the only ma$or indigenous supplier o wheel sets, loco wheels, carriage

and wagon wheels, and a"les to the Indian =ailways. As per demand o the =ailways, the plant

has de%eloped loco wheels, which were imported earlier. he 6heel - A"le *lant is producing

wheels manu actured as per the latest I=S speci ications, i.e. =8> @ ? or carriage and wagon

wheels, =8? @ or loco wheels and =8>B@ C or a"les.

he wheel plant o the 6heel - A"le *lant is pro%ided with si" * 2 controlled !and saws or

accurate slicing o the > 7 and >B7 luted ingots. A ully computerised B?@> M& oil hydraulic

press is there or orging and punching o the wheel !lanks along with a ully computerised

%ertical wheel mill and other down stream acilities. All the wheels are >DD per cent rim8

0uenched, tempered and tested as per I=S speci ications.

Machining o these orged rolled and heat8treated wheel !lanks are carried out in the >C 2&2

machines. All the wheels are ultrasonically tested and inspected !y =I 9S on !ehal o the

Indian =ailways. A num!er o sophisticated and modern online testing acilities are there to

con orm to the stringent testing re0uirements o the Indian =ailways.

6heel - A"le *lant

Annual production o inished wheels 8 >,DD,DDD nos.

*roduction rate in rolling@ orging 8 C nos.@hr

*roduction rate in machining 8 nos.@hr

?. E$+i$ee i$+ *-o#*

)urgapur Steel *lant has a num!er o capti%e engineering shops or repairs and supply o spare

parts. he 2entral 9ngineering Maintenance has a Machine Shop, Structural Shop, itting and

Assem!ly Shops. he oundry produces Ingot moulds and !ottom plates or the steel melting

shop. here are also Au"iliary =epair Shops such as 9lectrical, 6agon and oco repair.

1;


19/67

@. Re*ea c- a$' Co$t o& &a o ato ie*

he =esearch - 2ontrol la!oratories are entrusted with the responsi!ility o maintaining 0ualityo products and also de%eloping new products. It is well e0uipped or carrying out sophisticated

chemical, metallurgical and other tests.

" . Com#ute i*atio$

An e"tensi%e computerisation has !een undertaken in )S* or personnel, commercial, process

control, production and maintenance applications. he *roduction *lanning and 2ontrol network

is thoroughly used or tracking o customer orders, material, monitoring o 0uality parameters

and ensuring a%aila!ility o accurate, real time data to all agencies needing access to the data.

"". ua&it! A**u a$ce

In order to !e ully competiti%e on the 0uality ront, )urgapur Steel *lant has set out to ac0uire

ISO DDD certi ication or all its units. he Merchant Mill is the irst to secure the prestigious

ISO DD certi icate. Su!se0uently, steel melting shop, !asic o"ygen urnace shop, continuous

casting plant, and wheel and a"le plant were also awarded the ISO DD certi ication and

recently the Skelp Mill has !een awarded the ISO DD certi ication.

PRODUCTS

1


20/67

PRODUCTMI8 TONNES ANNUM

Merchant *roducts ,LD,DDD

Structural ,D ,DDD

Skelp >,LD,DDD

6heels - A"les CLDDD

Semis L,B>,DDD

otal Salea!le steel >C,LB,DDD

23A* 9= 8

)9SIG& O 39 S ;)%ed assets such as plants' machineries' lands' buildings A etc

+,


24/67

+. "hort term funds are required for the purchase of raw materials' payment of

wages' and other day4to4day e%penses.

It is otherwise known as revolving or circulating capital

It is nothing but the di erence between current assets and current liabilities. i.e.

* r,ing Ca-ita! 2 C3rrent Asset ' C3rrent Lia4i!it$0

?usinesses use capital for construction' renovation' furniture' software' equipment'

or machinery. It is also commonly used to purchase inventory' or to make payroll.

0apital is also used often by businesses to put a down payment down on a piece of

commercial real estate. *orking capital is essential for any business to succeed. It is

becoming increasingly important to have access to more working capital when we

need it.

C nstit3ents + * r,ing Ca-ita!%.

C3rrent Assets C3rrent Lia4i!ities 0ash in hand B at bank ?ills 3eceivable "undry !ebtors "hort term loans InvestorsB stock Temporary investment #repaid e%penses

ccrued incomes

?ills #ayable "undry 0reditors 5utstanding e%penses ccrued e%penses ?ank 5ver draft

E!e#ents + * r,ing ca-ita!

+-


25/67

/0 Cash an& e53i6a!ents% . This most liquid form of working capital requires

constant supervision. good cash budgeting and forecasting system provides

answers to key questions such asC Is the cash level adequate to meet current

e%penses as they come dueD *hat is the timing relationship between cash inEow

and outEowD *hen will peak cash needs occurD *hen and how much bankborrowing will be needed to meet any cash shortfallsD *hen will repayment be

e%pected and will the cash Eow cover itD

10 Acc 3nts recei6a4!e% . 6any businesses e%tend credit to their customers. If

you do' is the amount of accounts receivable reasonable relative to salesD How

rapidly are receivables being collectedD *hich customers are slow to pay and what

should be done about themD

(0 In6ent r$% . Inventory is often as much as = percent of a >rmFs current assets'

so naturally it requires continual scrutiny. Is the inventory level reasonable

compared with sales and the nature of your businessD *hatFs the rate of inventory

turnover compared with other companies in your type of businessD

70 Acc 3nts -a$a4!e % . (inancing by suppliers is common in small businessG it is

one of the ma&or sources of funds for entrepreneurs. Is the amount of money owed

suppliers reasonable relative to what you purchaseD *hat is your >rmFs payment

policy doing to enhance or detract from your credit ratingD

80 Accr3e& e9-enses an& ta9es -a$a4!e% . These are obligations of your

company at any given time and represent a future outEow of cash .

T: &i;erent c nce-ts + : r,ing ca-ita! Ba!ance sheet r Tra&iti na! c nce-t

O-erating c$c!e c nce-t0

/0 Ba!ance sheet r Tra&iti na! c nce-t% 4

+


26/67

It shows the position of the >rm at certain point of time. It is calculated in the basis

of balance sheet prepared at a speci>c date. In this method there are two type of

working capitalC4

ross working capital 7et working capital

Gr ss : r,ing ca-ita!% . It refers to the >rm s investment in currentassets. The sum of the current assets is the working capital of the business. The

sum of the current assets is a quantitative aspect of working capital. *hich

emphasizes more on quantity than its quality' but it fails to reveal the true >nancial

position of the >rm because every increase in current liabilities will decrease the

gross working capital.

Net : r,ing ca-ita!% . It is the di erence between current assets andcurrent liabilities or the e%cess of total current assets over total current liabilities.

* r,ing ca-ita!2 c3rrent assets . c3rrent !ia4i!ities

Net : r,ing ca-ita!% 4 It is also can de>ned as that part of a >rm s currentassets which is >nanced with long term funds. It may be either positive or negative.

*hen the current assets e%ceed the current liability' the working capital is positive

and vice versa.

10 O-erating c$c!e c nce-t C 4 The duration or time requiredcompleting the sequence of events right from purchase of raw material for

cash to the realization of sales in cash is called the operating cycle or working

capital cycle.

+/


27/67

)INDS OF *OR)ING CA"ITAL

+:

Ra:

Materia!

De4t rs

%ed working capital is

minimum amount which is required to ensure e ective utilization of >%ed facilitiesand for maintaining the circulation of current assets. 2very >rm has to maintain a

minimum level of raw material' work4 in4process' >nished goods and cash balance.

This minimum level of current assts is called permanent or >%ed working capital as

this part of working is permanently blocked in current assets. s the business grow

the requirements of working capital also increases due to increase in current assets.

Te#- rar$ r Varia4!e * r,ing Ca-ita! % Temporary or variable working

capital is the amount of working capital which is required to meet the seasonaldemands and some special e%igencies. Jariable working capital can further be

classi>ed as seasonal working capital and special working capital. The capital

required to meet the seasonal need of the enterprise is called seasonal working

capital. "pecial working capital is that part of working capital which is required to

meet special e%igencies such as launching of e%tensive marketing for conducting

+;


29/67

research' etc. 0 Temporary working capital di ers from permanent working capital inthe sense that is required for short periods and cannot be permanently employed

gainfully in the business

IM"ORTANCE OF ADE=UATE *OR)ING CA"ITAL

1. S !6enc$ + the B3siness% . dequate working capital helps in maintaining

the solvency of the business by providing uninterrupted of production.

+. G &:i!!% "u)cient amount of working capital enables a >rm to make

prompt payments and makes and maintain the goodwill.

,. Eas$ ! ans% dequate working capital leads to high solvency and credit

standing can arrange loans from banks and other on easy and favorable

terms.

-. Cash Disc 3nts% dequate working capital also enables a concern to avail

cash discounts on the purchases and hence reduces cost.

. Reg3!ar S3--!$ + Ra: Materia!% "u)cient working capital ensures

regular supply of raw material and continuous production.

/. Reg3!ar "a$#ent + Sa!aries> *ages an& Other Da$ t Da$

C ##it#ents% It leads to the satisfaction of the employees and raises the

morale of its employees' increases their e)ciency' reduces wastage and

costs and enhances production and pro>ts.

:. E9-! itati n + Fa6 ra4!e Mar,et C n&iti ns% If a >rm is having

adequate working capital then it can e%ploit the favorable market conditions

such as purchasing its requirements in bulk when the prices are lower and

holdings its inventories for higher prices.

;. A4i!it$ t Face Crises% concern can face the situation during the

depression.

+


30/67


31/67

Si@e + the B3siness% reater the size of the business' greater is the requirement

of working capital.

"r &3cti n " !ic$% If the policy is to keep production steady by accumulating

inventories it will require higher working capital.

Length + "r &3cti n C$c!e% 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 >nal product is obtained. "o working

capital is directly proportional to the length of the manufacturing process.

B3siness C$c!e% In period of boom' when the business is prosperous' there is need

for larger amt. of working capital due to rise in sales' rise in prices' optimistic

e%pansion of business' etc. 5n the contrary in ti#e + &e-ressi n> the 43siness

c ntracts> sa!es &ec!ine> &i c3!ties are +ace& in c !!ecti n +r # debtor and

the >rm may have a large amt. of working capital.

Rate + Gr :th + B3siness% In faster growing concern' we shall require large

amt. of working capital.

MANAGEMENT OF WORKING CAPITAL:

Working capital, in general practice, refers to the excess of current assets

over current liabilities. Management of working capital therefore, is concerned with the problems

that arise in attempting to manage the current assets, the current liabilities and the inter-

relationship that exists between them. In other words it refers to all aspects of administration of

both current assets and current liabilities.

Working capital management is t ree !imensional in nat"re:

,1


32/67

(a) imension I is concerned with the formulation of policies with regard to profitabilit!, risk and

li"uidit!.

(b) imension II is concerned with the decisions about the composition and level of current

assets.

(c) imension III is concerned with the decisions about the composition and level of current

liabilities.

PRINCIPLE# OF WORKING CAPITAL MANAGEMENT$POLIC%:

#he following are the general principles of a sound working capital

management polic!$

&' Principle o( Risk )ariation:

%isk here refers to the inabilit! of a firm to meet its obligations as and when

the! become due for pa!ment. &arger investment in current assets with less dependence on

short-term borrowings increases the opportunit! for gain or loss.

*' Principle o( Cost o( Capital:

#he various sources of raising working capital finance have different cost of

capital and the degree of risk involved. 'enerall!, higher the risk lower is the cost and lower the

risk higher is the cost. sound working capital management should alwa!s tr! to achieve a

proper balance between these two.

,+


33/67

+' Principle o( E,"it- Position:

#his principle is concerned with planning the total investment in current

assets. ccording to this principle, the amount of working capital invested in each component

should be ade"uatel! ustified b! a firm*s e"uit! position.

.' Principle o( Mat"rit- o( Pa-ment:

#his principle is concerned with planning the sources of finance for working

capital. ccording to this principle, a firm should make ever! effort to relate maturities of

pa!ment to its flow of internall! generated funds.

SOURCES OF *OR)ING CA"ITAL

The working capital requirements of a concern can be classi>ed asC

1K #ermanent or (i%ed working capital requirements

+K Temporary or Jariable working capital requirements

The various sources for the >nancing of working capital are as follows

,,

S 3rces +

* r,ing

Ca-ita!


34/67

Financing + "er#anent Fi9e& r L ng.Ter# * r,ing

Ca-ita!

#ermanent working capital should be >nanced in such a manner that the enterprisemay have its uninterrupted use for a su)ciently long period. There are >ve

permanent sources of working capital.

/ Shares% Issue of shares is the most important source for raising the permanent

or long term capital. company can issue various types of shares as equity shares'

preference shares and deferred shares. ccording to companies act a company

cannot issue deferred shares. #reference shares carry preferential rights in respect

of dividend at >%ed rate and in regard to the repayment to the capital at the time of winding up the company. 2quity shares do not have any >%ed commitment charge

and the dividend on these shares is to be paid sub&ect to the availability of su)cient

pro>ts. s far as possible a company should raise the ma%imum amount of

permanent capital by the issue of shares.

,-

"er#anent r Fi9e&

"hares

!ebentures#loughing back of #ro>ts

9oans from (inancialInstitutes

Te#- rar$ r Varia4!e

Indigenous ?ankers

Installment 0redit

dvances

ccrued 2%penses and

!eferred Income

0ommercial #aper

0ommercial ?anksB?ank(inance

#ublic !eposits

Trade 0reditors

(actoring


35/67

1 De4ent3res% debenture is an instrument issued by the company

acknowledging its debt to its holder. It is also an important method of raising long

term or permanent working capital. The debenture holders are the creditors of the

company. The interest on debentures is a charge against pro>t and loss account.

*hen the debentures are secured they are paid on priority to other creditors. Thedebentures may be of various kinds such as naked or unsecured debenturesG

secured or mortgaged debentures' redeemable debentures' irredeemable

debentures' convertible debentures and non4convertible debentures.

( "! 3ghing Bac, + "r ts% #loughing back of pro>ts means the reinvestments

by concern of its surplus earnings in its business. It is an internal source of >nance

and is most suitable for an established >rm for its e%pansion' modernization and

replacement etc. This method of >nance has a number of advantages as it is thecheapest rather cost free source of >nanceG there is no need to keep securitiesG

there is no dilution of controlG it ensures stable dividend policy and gains con>dence

of the public. ?ut e%cessive resort to #loughing back of pro>ts may lead to

monopolies' misuse of funds' A speculation' etc.

Financing + Te#- rar$ Varia4!e r Sh rt.Ter#

* r,ing Ca-ita!/ In&igen 3s Ban,ers% #rivate money lenders and other country bankers used to

be the only source of >nance prior to the establishment of commercial banks.

Inspite of the establishments new >nancial institutions indigenous bankers also

advance >nancial help to a few large4scale industries' particularly during time of

stress both for >%ed capital and working capital but mainly they have provided

>nance to small scale industries. They used to charge a very high rate of interest

and e%ploited the customers to the largest e%tent possible.

1 Insta!!#ent Cre&it% This is another method by which the assets are purchased

and the possession of goods is taken immediately but the payment is made in

installments over a predetermined period of time. enerally' interest is charged on

the unpaid price or it may be ad&usted in the price. ?ut in any case' it provides

,


36/67

funds for sometime and is used as a source of short4term working capital by many

business houses which have di)cult fund position.

( A&6ances% "ome business houses get advances from their customers and

agents against orders and this source is a short term source of >nance of them. It is

a cheap source of >nance in order to minimize their investment in working capital'

some >rms having long production cycle' especially the >rms manufacturing

industrial products prefer to take advances from their customers.

7 Accr3a! E9-enses an& De+erre& inc #e% ccrued e%penses are the e%penses

which have been incurred but not yet due and hence not yet paid also. The ma&or

accruals items are wages and ta%esG these are what a >rm owes to the employeesand to the government ccruals vary with the level of activity of the >rm. *hen the

activity level e%pands the accruals increases' and when activity level contracts

accrual decreases. Therefore accruals are treated as part of spontaneous >nancing.

8 C ##ercia! "a-er% 0ommercial paper is an important money market

instrument in advanced countries like L.". . to raise short term funds. In India 3?I

introduced commercial paper in the Indian money market on the recommendation

of Jaghul *orking roup. 0ommercial paper is a form of unsecured promissory note

issued by the >rms to raise short term funds.

,/


37/67

C;APTER 4

WORKING CAPITAL MANAGEMENT OF DURGAPUR STEEL PLANT

A NET *OR)ING CA"ITAL

n analysis of the net working capital will be very help full for knowing the

operational e)ciency of the company. The following table provides the data relating

to the net working capital of !urgapur "teel #lant.

NET *OR)ING CA"ITAL 2 CURRENT ASSETS.CURRENT LIABILITIS

Rs0 In

8ears 0urrent sset 0urrent

9iabilities

7*0

+=1=411 - /,=


38/67

+=1-41 11


39/67

3atio nalysis is a powerful tool of >nancial analysis. le%ander Hall >rst

presented it in 1rm to meet

its current liabilities.

/0 0urrent ratio

10 cid Test 3atio B Muick 3atio B 9iquidity 3atio

(0 bsolute liquid ratio

10 TURNOVER ACTIVITY RATIOS%

These are the ratios which indicate the speed with which assets are

converted or turned over into sales.

/0 Inventory Turnover 3atio.

10 !ebtorsB ccounts receivables Turnover 3atio.

(0 0reditorsB ccounts #ayables Turnover 3atio.

70 *orking 0apital Turnover 3atio.

/0 CURRENT RATIO%.

,


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It is a ratio' which e%press the relationship between the total current ssets and

current liabilities. It measures the >rm s ability to meet its current liabilities. It

indicates the availability of current assets in rupees for every one rupee of current

liabilities. ratio of greater than one means that the >rm has more current assets

than current liabilities claims against them. standard ratio between them is +C1.

C3rrent Rati % C3rrent Assets

C3rrent Lia4i!ities Rs0 In

8ear 0urrent

ssets

0urrent

9iabilities

0urrent

3atio

+=1=411 - /,=


41/67

was ,.+1. This shows the current ratio increases every year but in the year

+=1,41- the current ratio was dropped to +.;, due to increase in current

liabilities. In the year +=1-41 the current ratio has increases to +.;:. The

current ratio is above the standard ratio i.e.' +C1. Hence it can be said that

there is enough current assets in !L3 #L3 "T229 #9 7T to meet its currentliabilities.

10 ACID TEST RATIO =UIC) RATIO LI=UIDITY RATIO%.

This ratio establishes a relationship between quick liquid assets and current

liabilities. It measures the >rms capacity to pay o current obligations immediately.

n asset is liquid if it can be converted in to cash immediately without a loss of

valueG Inventories are considered to be less liquid because inventories normally

require some time for realizing into cash. This ratio is also known as acid4test

ratio. The standard quick ratio is 1C1. is considered satisfactory.

=3ic, Rati 2 =3ic, Assets c3rrent assets . In6ent r$

C3rrent Lia4i!ities

Rs0 In

8ear 0urrent

ssets

Inventories Muick ssets 0urrent

9iabilities

Muick

3atio

+=1=411 - /,=


42/67

+=1-41 11


43/67

INTER"RETATION%

!uring the year +=1=411 the bsolute liquidity ratio was =.+-' during the year

+=1141+ it was =.,1 and in the year +=1+41, it was =.,/' in the year +=1,41- it was

=.--. This shows that the bsolute liquidity ratio increases every year but it is below

the standard ratio. In the year +=1-41 the bsolute liquidity ratio has increases

=.-:. Hence it shows that the liquidity position of the company is satisfactory.

TURNOVER RATIOS

/0 INVENTORY TURNOVER RATIO%.

Inventory turnover ratio is the ratio' which indicates the number of times the

stock is turned over i.e.' sold during the year. This measures the e)ciency of the

sales and stock levels of a company. high ratio means high sales' fast stockturnover and a low stock level. low stock turnover ratio means the business is

slowing down or with a high stock level.

In6ent r$ T3rn 6er Rati 2 Net Sa!es

-,

8ears 0ash A ?ank

?alance

0urrent

9iabilities

bsolute 9iquidity3atio

+=1=411 -


44/67

C! sing In6ent r$ Rs0 In

INTER"RETATION%

--

8ear 7et "ales 0losing

inventory

Inventory Turnover

ratio+=1=411 1< -+=;1.== 1 ,+- .== 1+.: Times

+=1141+ ,1,+1++


45/67

It is seen from the above chart that !uring the year +=1=411 the Inventory tBo

ratio is 1+.: times' in the year +=1141+ it increased to 1-.-< times' ?ut in the year

+=1+41, it decreased to ;.,/ times . There was a subsequent increase in the year

+=1,41- and +=1-41 to 1-./; times and 1:.


46/67

INTER"RETATION%

Inventory holding period was Euctuating over the years. It was +;./, days in

the year +=1=411. It decreased to + .1< days in the year +=1141+' it increased to

-,.// days in the year +=1+41,. There was a subsequent decrease in the year +=1,4

1- and +=1-41 to +-.;/ days and +=.,- days respectively.

This shows the company is minimizing these inventory4holding days thereby

reduces investment in inventory. This shows company s inventory management is

e)cient.

(0 DEBTORS ACCOUNTS RECEIVABLES TURNOVER RATIO%.

!ebtor s turnover ratio indicates the speed of debt collection of the >rm. This

ratio computes the number of times debtors NreceivablesK has been turned over

during the particular period.

De4t rs T3rn 6er Rati 2 Net Sa!es

A6erage De4t rs

-/


47/67

N te% in !L3 #L3 "T229 #9 7T' we have taken the total net sales instead of the

credit sales' because the credit sales information has not available for the

calculation of !T3.

Rs0 In

8ear 7et "ales verage

!ebtors

!ebtors Turnover

3atio

+=1=411 1< -+=;1.== ++=1,;1.== ;.;; Times

+=1141+ ,1,+1++


48/67

INTER"RETATION%

It is clear that debtor turnover ratio Euctuating over the years. It was ;.;;

times in the year +=1=411. It decreased to /.,+ times in the year +=1141+' It again

increased to 1 .-- times in the year +=1+41, but it decreased to 1=.1/ times and


49/67

INTER"RETATION%

!ebt collection period is changing over the years. It was -1.1= days in the

year +=1=411. It increased to :.: days in the year +=1141+' but in the year +=1+4

1, it decreased to +,./- days. There was a subsequent increase in the year +=1,4

1- and +=1-41 to , .


50/67

N te% In the !L3 #L3 "T229 #9 7T' we have taken the total #urchases instead of

the credit purchases' because the credit purchases information has not available for

the calculations of 0T3.

Rs0 In

8ear 7et

#urchases

verage

0reditors

0reditors Turnover

3atio

+=1=411 11/


51/67

INTER"RETATION%

It is clear that creditor turnover ratio is changing over the years. It was /.rm to pay the creditors and other bills payables.

A6erage "a$#ent "eri & 2 Da$s in a Year

Cre&it rs T3rn 6er Rati

Rs0 In

1

8ear !ays in a

8ear

0reditors Turnover

3atio

verage #ayment

#eriod

+=1=411 ,/ /.


52/67

INTER"RETATION%

verage payment period is changing over the years. It was +.+< days in the

year +=1=411. It increased to :1.:1 days in the year +=1141+' but in the year +=1+4

1, and +=1,41-' it decreased to 1.1< days and -1.1= days respectively. In the year

+=1-41 ' it is same as compared to +=1,41-. It indicates that the company has

taken the steps to prompt payment to the creditors.

0 *OR)ING CA"ITAL TURNOVER RATIO%.

This ratio indicates the number of times the working capital is turned over in the

course of the year. This ratio measures the e)ciency with which the working capital

is used by the >rm. higher ratio indicates e)cient utilization of working capital

and a low ratio indicates otherwise. ?ut a very high working capital turnover is not a

good situation for any >rm.

* r,ing Ca-ita! T3rn 6er Rati 2 Net Sa!es

Net * r,ing Ca-ita!

+


53/67

Rs0 In

8ear 7et "ales 7et *orking

0apital

*0T3

+=1=411 1< -+=;1.==

+ +1 /.== :.: Times

+=1141+ ,1,+1++


54/67

The working capital tBo ratio is Euctuating year to year that was high in the

year +=1=411' :.: timesG there was a subsequent decrease in the year +=1141+

and +=1+41, to .-; times and -.-/ times. ?ut it increases in the year +=1,41- and

+=1-41 to .-1 and .-- times respectively. This shows the company is utilizing

working capital e ectively and working capital is converted into sales very fast.

C FUND FLO* STATEMENTS

#rinciples of working capital for calculation purpose

CURRENT ASSETS

= If the current assets increase as a result of this' working capital also

increases.

1 If the current assets decreases as a result of this working capital decreases.

CURRENT LIABILITIES

If the current liabilities increases as a result of this working capital decreases.

If the current liabilities decreases as a result of this working capital Increase.

Stateme$t o% C-a$+e* i$ Wo 1i$+ Ca#ita&

-


55/67

The purpose of preparing this statement is for >nding out the increase or decrease

in working capital and to make a comparison between two >nancial years.

Ta4!e /% State#ent + Changes in * r,ing Ca-ita! + r the Year

1 / . 1 //

"artic3!ars As n (/.(. 1 K

As n(/.(.1 / Increase Decreas

e

CURRENT ASSETS

Inventories +==1,= .== 1 ,+- .==

OO -/;; =.==

"undry debtors 1-,;;1=.== ++=1,;1.=

=

:/+ :1.== OO

0ash A ?ank balance =,//:.== -


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5ther current assets 1,-,/-.== 1-;;++.== 1-- ;.== OO

9oans and dvances 1


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In the above table' it is seen that during the year +==


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A T ta! C3rrent Assets 78 ( KK0 K8KK 7

0

CURRENT LIABILITIES

"undry creditors 1/:, 1 .== ,-


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1. There is Increase in current assets such as Inventories by 3s /+;/1/.=='

"undry debtors by 3s +: :1-/.==' 0ash A ?ank balance by 3s :11


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CURRENT LIABILITIES

"undry creditors ,-


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+. There is !ecrease in current liabilities such as "undry creditors by 3s

;-+,-/.==' #rovisions by 3s +1/,-=.==.

Ta4!e 7% State#ent + Changes in * r,ing Ca-ita! + r the Year1 /( . 1 /7

"artic3!ars As n (/.(. 1 /(

As n (/.(.1 /7

Increase Decrease

CURRENT ASSETS

Inventories ,,,/-,=.== +/++


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Ca-ita!

Increase in * r,ing

Ca-ita!7KK/0

OO OO 7KK/0

TOTAL //(81K0 //(81K0 1 8/1

0

1 8/10

INTER"RETATION%

In the above table' it is seen that during the year +=1+41, and +=1,41-' there was

also net increase in working capital by 3s ;/-


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CURRENT ASSETS

Inventories +/++


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INTER"RETATION%

In the above table' it is seen that during the year +=1,41- and +=1-41 there was

also net increase in working capital by 3s //:-:;

This is because

1. There is increase in current assets such as "undry debtors by 3s /;=


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0reditor s turnover ratio has increased in the years of +=1+41, and +=1,41-. It is

same in the last year +=1-41 as compared to +=1,41-.

*orking capital turnover ratio is very low in the year +=1+41,. In the year +=1,.41- it has increased by =.< times as compared to +=1+41, and in the last year

+=1-4+=1 it has again increased by =.=, times.

CHA"TER .

SUGGESTIONS

(ollowing are the suggestionsC

*orking capital of the company is increasing every year. #ro>t is also increasing

every year. This is good sign for the company. It has to maintain it further' to run the

business in long term.

The 0urrent and quick ratios are almost up to the standard requirement. "o the

*orking capital management of !L3 #L3 "T229 #9 7T is satisfactory and it has

to maintain it further.

The company has su)cient working capital and has better liquidity position. ?y

e)cient utilizing this short4term capital' then it should increase the turnover.

/


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The company should take precautionary measures for investing and collecting

funds from receivables and to reduce the bad debts.

0reditor s turnover ratio has increasing from +=1+41, to +=1,41- and in the lastyear +=1-4+=1 it is same as compared to +=1,41-. 0ompany is making prompt

payment to its creditors. This is good sign for the company s goodwill. 5n4time

payment to suppliers will increase the credibility of the >rm. It has to maintain it

further to survive in the market.

CHA"TER .

BIBLIOGRA"HY

//


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B ,s0

M.

Documents

Working Capital Management of Durgapur Steel Plant