A

PROJECT REPORT
ON

“A STUDY OF WORKING CAPITAL MANAGEMENT

OF
ITC LTD. & CUSTOMER PREFERENCE TOWARDS
ITC PRODUCT”

SUBMITTED FOR

THE PARTIAL FULFILLMENT OF

MASTER OF BUSINESS ADMINISTRATION

GUIDED BY: SUBMITTED BY:

Dr. PAWAN MISHRA SACHIN PATEL

HOD MBA IV Sem.

RAJEEV GANDHI PROUDYOGIKI MAHAVIDYALAYA,

BARKATULLAH UNIVERSITY, BHOPAL
 YEAR 2010
A
PROJECT REPORT
ON

“A STUDY OF WORKING CAPITAL MANAGEMENT

OF
ITC LTD. & CUSTOMER PREFERENCE TOWARDS
ITC PRODUCT”

SUBMITTED FOR

THE PARTIAL FULFILLMENT OF

MASTER OF BUSINESS ADMINISTRATION

GUIDED BY:
SUBMITTED BY:

Dr. PAWAN MISHRA SACHIN PATEL

HOD MBA IV Sem.

RAJEEV GANDHI PROUDYOGIKI MAHAVIDYALAYA

 BARKATULLAH UNIVERSITY, BHOPAL
YEAR 2010
A
PROJECT REPORT

ON

“WORKING CAPITAL MANAGEMENT OF ITC LIMITED

& CUSTOMER PREFERENCE TOWARDS ITC
PRODUCTS”

SUBMITTED FOR

THE PARTIAL FULFILLMENT OF

MASTER OF BUSINESS ADMINISTRATION

SUBMITTED BY:

SACHIN PATEL
M.B.A. (IV Semester)

Under the Guidance Of :

PROF. (DR.) PAWAN MISHRA

H.O.D.

RAJEEV GANDHI PROUDYOGIKI MAHAVIDYALAYA

BARKATULLAH UNIVERSITY , BHOPAL
 YEAR 2010

ACKNOWLEDGEMENT

i take this opportunity to place on record my grateful thanks and gratitude to

all those who gave me valuable advice and inputs for my study. My study
could not have been completed if I had not been able to get the reference
materials from the company.

I express my sincere regards to my guide prof. (Dr.) Pawan Mishra,

H.O.D. for support and guidance.

Last but not least, I would also like to express my thanks to my family
members who inspired me to put in my best efforts for the research / project
report.

SACHIN PATEL

MBA 4th sem.

 PREFACE

The research provides an opportunity to a student to demonstrate application

of his/her knowledge. Skill and competencies required during the technical
session. Research also helps the student to devote his /her skill to analyze the
problem to suggest alternative solution, to evaluate them and to provide
feasible recommendations on the provided data.

Although I have tried my level best to prepare this report an error free report
every effort has been made to offer the most authenticate position with
accuracy.

Sachin patel
 DECLARATION

I SACHIN PATEL student M.B.A. (IV Semester) here by declare that the
project report entitled “A STUDY OF WORKING CAPITAL
MANAGEMENT OF ITC LIMITED & CUSTOMER
PREFERENCE TOWARDS ITC PRODUCTS. ” is my own
original work based on the survey undertaken by me.

I also declared that this report has not been submitted to any university/
institute for the aware if any professional.

DATE
SACHIN PATEL
MBA (IV Semester)
 CERTIFICATE

This is to certify that the SACHIN PATEL has completed project on “ A

STUDY OF WORKING CAPITAL MANAGEMENT OF ITC
LIMITED & CUSTOMER PREFERENCE TOWARDS ITC
PRODUCTS” which is based on data collected by researcher.

This report is completed under my supervision. It is only for academic

purpose and is a bonafide work done by research

Signature of Guide

…………………..

Prof. (Dr.) Pawan Mishra

H.O.D.
 Plot No. 13, 1st Floor, Zone – II, M.P. Nagar, Bhopal – 462011
Tel. :0755-5279775 /5233776, E-mail :support.india@itcportal.com

TO WHOM SO EVER IT MAY CONCERN

CERTIFICATE

This is to certify that Mr. sachin patel a student of MBA has

undertaken training in our organization from 7th may to 5th June 2010.

His work was good during the project. We wish him all the best in
his future.

For ITC LIMITED

 Authorized Sign

INDEX

S.NO. TITLE PAGE NO.

1. INTODUCTION

2. COMPANY PROFILE

3. OBJECTIVE OF STUDY

4. RESEARCH METHODOLOGY

5. DATA ANALYSIS & INTERPRETATION

6. OBSERVATION & FINDINGS

7. CONCLUSION

8. SUGGESTIONS

9. LIMITATION

10. BIBLIOGRAPHY

11. ANNEXURE
INTRODUCTIO
N
Introduction Working capital management
Working capital refers to that part of the firm’s capital which is required for
financing short- term or current assets such as cash, marketable securities,
debtors & inventories. Funds, thus, invested in current assts keep revolving
fast and are being constantly converted in to cash and this cash flows out
again in exchange for other current assets. Hence, it is also known as
revolving or circulating capital or short term capital.

Working capital management is concerned with the problems arise in

attempting to manage the current assets, the current liabilities and the inter
relationship that exist between them.

The term current assets refers to those assets which in ordinary course of
business can be, or, will be, turned in to cash within one year without
undergoing a diminution in value and without disrupting the operation of the
firm. The major current assets are cash, marketable securities, account
receivable and inventory.
Current liabilities ware those liabilities which intended at there inception to
be paid in ordinary course of business, within a year, out of the current
assets or earnings of the concern. The basic current liabilities are account
payable, bill payable, bank over-draft, and outstanding expenses.

The goal of working capital management is to manage the firm’s current

assets and current liabilities in such way that the satisfactory level of
working capital is mentioned.

Definition:-
According to Guttmann & Dougall-

“Excess of current assets over current liabilities”.

According to Park & Gladson-

“The excess of current assets of a business (i.e. cash, accounts receivables,

inventories) over current items owned to employees and others (such as
salaries & wages payable, accounts payable, taxes owned to Government)”.
Capital required for a business can be classified under two main
categories via,

1) Fixed Capital

2) Working Capital

Every business needs funds for two purposes for its establishment and
to carry out its day- to-day operations. Long terms funds are required to
create production facilities through purchase of fixed assets such as p&m,
land, building, furniture, etc. Investments in these assets represent that part
of firm’s capital which is blocked on permanent or fixed basis and is called
fixed capital. Funds are also needed for short-term purposes for the purchase
of raw material, payment of wages and other day – to- day expenses etc.

CONCEPT OF WORKING CAPITAL

There are two concepts of working capital:

1. Gross working capital

2. Net working capital

The gross working capital is the capital invested in the total current assets of
the enterprises current assets are those assets which can convert in to cash
within a short period normally one accounting year.

CONSTITUENTS OF CURRENT ASSETS

1) Cash in hand and cash at bank

2) Bills receivables

3) Sundry debtors

4) Short term loans and advances

5) Inventories of stock as:

a. Raw material

b. Work in process

c. Stores and spares

 d. Finished goods

6. Temporary investment of surplus funds.

7. Prepaid expenses

8. Accrued incomes.

9. Marketable securities.

In a narrow sense, the term working capital refers to the net

working. Net working capital is the excess of current assets over
current liability, or, say:

NET WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES.

Net working capital can be positive or negative. When the current

assets exceeds the current liabilities are more than the current assets.
Current liabilities are those liabilities, which are intended to be paid
in the ordinary course of business within a short period of normally
one accounting year out of the current assts or the income business.

CONSTITUENTS OF CURRENT LIABILITIES

1. Accrued or outstanding expenses.

2. Short term loans, advances and deposits.

3. Dividends payable.

4. Bank overdraft.
5. Provision for taxation, if it does not amt. to app. of profit.

6. Bills payable.

7. Sundry creditors.
 CLASSIFICATION OF WORKING CAPITAL

Working capital may be classified in to ways:

o On the basis of concept.

o On the basis of time.

On the basis of concept working capital can be classified as gross

working capital and net working capital. On the basis of time,
working capital may be classified as:

 Permanent or fixed working capital.

 Temporary or variable working capital

Amount of Working
Capital
Temporary capital

Permanent Capital

Time
PERMANENT OR FIXED WORKING CAPITAL

Permanent or fixed working capital is minimum amount which is required to

ensure effective utilization of fixed facilities and for maintaining the
circulation of current assets. Every firm has to maintain a minimum level of
raw material, work- in-process, finished goods and cash balance. This
minimum level of current assts is called permanent or fixed working capital
as this part of working is permanently blocked in current assets. As the
business grow the requirements of working capital also increases due to
increase in current assets.

TEMPORARY OR VARIABLE WORKING CAPITAL

Temporary or variable working capital is the amount of working capital

which is required to meet the seasonal demands and some special
exigencies. Variable working capital can further be classified as seasonal
working capital and special working capital. The capital required to meet the
seasonal need of the enterprise is called seasonal working capital. Special
working capital is that part of working capital which is required to meet
special exigencies such as launching of extensive marketing for conducting
research, etc.

Temporary working capital differs from permanent working capital in the

sense that is required for short periods and cannot be permanently employed
gainfully in the business.
IMPORTANCE OR ADVANTAGE OF ADEQUATE WORKING
CAPITAL

 SOLVENCY OF THE BUSINESS:

Adequate working capital helps in maintaining the solvency of the

business by providing uninterrupted of production.

 Goodwill:

Sufficient amount of working capital enables a firm to make prompt

payments and makes and maintain the goodwill.

 Easy loans:

Adequate working capital leads to high solvency and credit standing can
arrange loans from banks and other on easy and favorable terms.

 Cash Discounts:

Adequate working capital also enables a concern to avail cash discounts

on the purchases and hence reduces cost.

 Regular Supply of Raw Material:

Sufficient working capital ensures regular supply of raw material and

continuous production.
  Regular Payment Of Salaries, Wages And Other Day TO Day
Commitments:

It leads to the satisfaction of the employees and raises the morale of its
employees, increases their efficiency, reduces wastage and costs and
enhances production and profits.

 Ability to Face Crises:

A concern can face the situation during the depression.

.
FACTORS DETERMINING THE WORKING CAPITAL
REQUIREMENTS

1. NATURE OF BUSINESS:

The requirements of working is very limited in public utility

undertakings such as electricity, water supply and railways because
they offer cash sale only and supply services not products, and no
funds are tied up in inventories and receivables. On the other hand the
trading and financial firms requires less investment in fixed assets but
have to invest large amt. of working capital along with fixed
investments.

2. SIZE OF THE BUSINESS:

Greater the size of the business, greater is the requirement of working

capital.

3. PRODUCTION POLICY:

If the policy is to keep production steady by accumulating inventories

it will require higher working capital.

4. LENTH OF PRDUCTION CYCLE:

The longer the manufacturing time the raw material and other supplies
have to be carried for a longer in the process with progressive
increment of labor and service costs before the final product is
obtained. So working capital is directly proportional to the length of
the manufacturing process.
Sources of working capital

The company can choose to finance its current assets by

1. Long term sources
2. Short term sources
3. A combination of them.

Long term sources of permanent working capital include equity and

preference shares, retained earning, debentures and other long term debts
from public deposits and financial institution. The long term working capital
needs should meet through long term means of financing. Financing through
long term means provides stability, reduces risk or payment and increases
liquidity of the business concern. Various types of long term sources of
working capital are summarized as follow:

1. Issue of shares:

It is the primary and most important sources of regular or permanent

working capital. Issuing equity shares as it does not create and burden on the
income of the concern. Nor the concern is obliged to refund capital should
preferably raise permanent working capital.

2. Retained earnings:

Retain earning accumulated profits are a permanent sources of regular

working capital. It is regular and cheapest. It creates not charge on future
profits of the enterprises.

3. Issue of debentures:

It crates a fixed charge on future earnings of the company. Company is

obliged to pay interest. Management should make wise choice in procuring
funds by issue of debentures.

Short term sources of temporary working capital

Temporary working capital is required to meet the day to day business

expenditures. The variable working capital would finance from short term
sources of funds. And only the period needed. It has the benefits of, low cost
and establishes closer relationships with banker.
Some sources of temporary working capital are given below:

1. Commercial bank:

A commercial bank constitutes significant sources for short term or

temporary working capital. This will be in the form of short term loans, cash
credit, and overdraft and though discounting the bills of exchanges.

2. Public deposits:

Most of the companies in recent years depend on this source to meet their
short term working capital requirements ranging fro six month to three
years.

3. Various credits:

Trade credit, business credit papers and customer credit are other sources of
short term working capital. Credit from suppliers, advances from customers,
bills of exchanges, etc helps to raise temporary working capital

4. Reserves and other funds:

Various funds of the company like depreciation fund. Provision for tax and
other provisions kept with the company can be used as temporary working
capital.The company should meet its working capital needs through both
long term and short term funds. It will be appropriate to meet at least 2/3 of
the permanent working capital equipments form long term sources, whereas
the variables working capital should be financed from short term sources.
The working capital financing mix should be designed in such a way that the
overall cost of working capital is the lowest, and the funds are available on
time and for the period they are really required.
SOURCES OF ADDITIONAL WORKING CAPITAL

Sources of additional working capital include the following-

1. Existing cash reserves
2. Profits (when you secure it as cash)
3. Payables (credit from suppliers)
4. New equity or loans from shareholder
5. Bank overdrafts line of credit
6. Long term loans

If we have insufficient working capital and try to increase sales, we can

easily over stretch the financial resources of the business. This is called
overtrading. Early warning signs include

1. Pressure on existing cash

2. Exceptional cash generating activities. Offering high discounts for clear
cash payment
3. Bank overdraft exceeds authorized limit
4. Seeking greater overdrafts or lines of credit
5. Part paying suppliers or there creditor.
6. Management pre occupation with surviving rather than managing.

Different Aspects of Working Capital Management

 Management of Inventory
Management of Receivables/Debtors
Management of Cash
Management of Payables/Creditors

MANAGEMENT OF INVENTORY

Inventories constitute the most significant part of current assets of a large

majority of companies. On an average, inventories are approximately 60%
of current assets. Because of large size, it requires a considerable amount of
fund. The inventory means and includes the goods and services being sold
by the firm and the raw material or other components being used in the
manufacturing of such goods and services.
Nature of Inventory:

The common type of inventories for most of the business firms may be
classified as raw-material, work-in-progress, finished goods.

Raw
 material:
it is basic inputs that are converted into finished products
through the manufacturing process. Raw materials inventories
are those units which have been purchased and stored for future
productions.

Work–in–process:

Work-in-process is semi-manufactured products.
They represent products that need more work before them
become finished products for sale.

Finished
 goods:
These are completely manufactured products which are
ready for sale. Stocks of raw materials and work-in-process
facilitate production, while stock of finished goods is required
for smooth marketing operations. Thus inventories serve as a
link between the production and consumption of goods.The
levels of three kinds of inventories for a firm depend on the
nature of business. A manufacturing firm will have
substantially high levels of all the three kinds of inventories.
While retail or wholesale firm will have a very high level of
finished goods inventories and no raw material and work-in-
process inventories.
So operating cycle can be known as following:-

Raw Material

Work in
Progress

Cash Collection
from
Debtors Sales
Finished Goods

Credit Cash Sales

Sales
Need to hold inventories

Maintaining inventories involves trying up of the company’s funds and

incurrence
of storage and holding costs. There are three general motives for holding
inventories:

Transactions Motive: IT emphasizes the need to maintain inventories to

facilitate smooth production and sales operation.

Precautionary Motive: It necessitates holding of inventories to guard

against the risk of unpredictable changes in demand
and supply forces and other factors.

Speculative Motive: It influences the decision to increase or reduce

inventory levels to take advantage of price
fluctuations.

Management of Receivables/Debtors

The Receivables (including the debtors and the bills) constitute a significant
portion of the working capital. The receivables emerge whenever goods are
sold on credit and payments are deferred by customers. A promise is made
by the customer to pay cash within a specified period. The customers from
whom receivable or book debts have to be collected in the future are called
trade debtors and represents the firm’s claim or assets. Thus, receivable is s
type of loan extended by the seller to the buyer to facilitate the purchase
process. Receivable Management may be defined as collection of steps and
procedure required to properly weight the costs and benefits attached with
the credit policy. The Receivable Management consist of matching the cost
of increasing sales (particularly credit sales) with the benefits arising out of
increased sales with the objective of maximizing the return on investment of
the firm.
Nature

The term credit policy is used to refer to the combination of three decision
variables:

1. Credit standards: It is the criteria to decide the type of customers to

whom goods could be sold on credit. If a firm has more
slow –paying customers, its investment in accounts
receivable will increase. The firm will also be exposed to
higher risk of default.

2. Credit terms: It specifies duration of credit and terms of payment by

Customer Investment in accounts receivable will be high
if customers are allowed extended time period for
making payments.

3. Collection efforts: It determine the actual collection period. The lower

the collection period, the lower the investment in
accounts receivable and vice versa.

Management of Cash

Cash management refers to management of cash balance and the bank

balance and also includes the short terms deposits. Cash is the important
current asset for the operations of the business. Cash is the basic input
needed to keep the business running on a continuous basis. It is also the
ultimate output expected to be realized by selling the service or product
manufactured by the firm. The term cash includes coins, currency, and
cheque held by the firm and balance in the bank accounts.

Factors of Cash Management:

Cash management is concerned with the managing of

1. Cash flows into and out of the firm
2. Cash flows within the firm and
3. Cash balance held by the firm at a point of time by financing deficit or
investing surplus cash. Sales generate cash which has to be disbursed out.
The surplus cash has to be invested while deficit has to borrow. Cash
management seeks to accomplish this cycle at a minimum cost and it also
seeks to achieve liquidity and control.

Motives of holding cash

A distinguishing feature of cash as an asset is that it does not earn any

substantial return for the business. Even though firm hold cash for following
motives:

Transaction motive:
Precautionary motive
Speculative motives
Compensatory motive

Transaction motive: This refers to the holding of cash to meet routine cash
requirement to finance. The transactions, which a
firm carries on in the ordinary course of business.

1.Precautionary motive: This implies the needs to hold cash to meet

unpredictable contingencies such as strike, sharp increase
in raw materials prices. If a firm can borrow at short
notice to pay them unforeseen contingency, it will need
to maintain relatively small balances and vice-versa.

2. Speculative motives: It refers to the desire of the firm to take advantage

of opportunities which present themselves at unexpected
movements and which are typically outside the normal
course of business.

3. Compensatory motive: Bank provides certain services to their client free

of cost. They therefore, usually require client to keep
minimum cash balance with them to earn interest and
thus compensate them for the free service so provided.
Management of Payables/Creditors

Creditors are a vital part of effective cash management and should be

managed carefully to enhance the cash position. Purchasing initiates cash
outflows and an over-zealous purchasing function can create liquidity
problems. Consider the
Following:

 Who authorizes purchasing in our company-is it tightly managed or

spread among a number of people?
Are purchase quantities geared to demand forecasts?
Do we use order quantities which take account of stock-holding and
purchasing costs?
Do we know the cost to the company of carrying stock?
Do we have alternative source of supply?
How many of ours suppliers have a returns policy?
Are we in a position to pass on cost increases quickly through price
increase?

MANAGEMENT OF WORKING CAPITAL

Management of working capital is concerned with the problem that

arises in attempting to manage the current assets, current liabilities.
The basic goal of working capital management is to manage the
current assets and current liabilities of a firm in such a way that a
satisfactory level of working capital is maintained, i.e. it is neither
adequate nor excessive as both the situations are bad for any firm.
There should be no shortage of funds and also no working capital
should be ideal. WORKING CAPITAL MANAGEMENT POLICES
of a firm has a great on its probability, liquidity and structural health
of the organization. So working capital management is three
dimensional in nature as
1. It concerned with the formulation of policies with regard to
profitability, liquidity and risk.

2. It is concerned with the decision about the composition and level

of current assets.

3. It is concerned with the decision about the composition and level

of current liabilities.

WORKING CAPITAL ANALYSIS

As we know working capital is the life blood and the centre of a

business. Adequate amount of working capital is very much essential
for the smooth running of the business. And the most important part is
the efficient management of working capital in right time. The
liquidity position of the firm is totally effected by the management of
working capital. So, a study of changes in the uses and sources of
working capital is necessary to evaluate the efficiency with which the
working capital is employed in a business. This involves the need of
working capital analysis.

The analysis of working capital can be conducted through a number of

devices, such as:

1. Ratio analysis.

2. Fund flow analysis.

3. Budgeting.
METHODS OF WORKING CAPITAL ANALYSIS

There are so many methods for analysis of financial statements but ITC
LTD. used the following techniques:-

 Comparative size statements

 Trend analysis
 Cash flow statement
 Ratio analysis
A detail description of these methods is as follows:-

COMPARATIVE SIZE STATEMENTS:-

When two or more than two years figures are compared to each other than
we called comparative size statements in order to estimate the future
progress of the business, it is necessary to look the past performance of the
company. These statements show the absolute figures and also show the
change from one year to another.

TREND ANALYSIS:-
To analyze many years financial statements ITC LTD. uses this method.
This indicates the direction on movement over the long time and help in the
financial statements.

Procedure for calculating trends:-

1. Previous year is taken as a base year.
2. Figures of the base year are taken 100.
 3. Trend % are calculated in relation to base year.
CASH FLOW STATEMENT:-

Cash flow statements are the statements of changes in the financial position
prepared on the basis of funds defined in cash or cash equivalents. In short
cash flow statement summaries the cash inflows and outflows of the firm
during a particular period of time.

Benefits for the ITC LTD.:-

 To prepare the cash budget.
 To compare the cash budgets .
 To show the position of the cash and cash equivalents.

RATIO ANALYSIS:-

Ratio analysis is the process of the determining and presenting the

relationship of the items and group of items in the statements.

Benefits of ratio analysis to ITC LTD.:-

1. Helpful in analysis of financial statements.

2. Helpful in comparative study.
3. Helpful in locating the weak spots of the ITC LTD.

4. Helpful in forecasting.
5. Estimate about the trend of the business.
6. Fixation of ideal standards.
7. Effective control.
8. Study of financial soundness.
Types of ratio:-

 Liquidity ratio: They indicate the firms’ ability to meet its current

obligation out of current resources.

• Current ratio:- Current assets / Current liabilities

• Quick ratio:- Liquid assets / Current liabilities
Liquid assets =Current assets – Stock -Prepaid expenses

 Leverage or Capital structure ratio: This ratio discloses the firms

ability to meet the interest costs regularly and long term solvency
of the firm.
• Debt equity ratio:- Long term loans / Shareholders funds
or net Worth
• Debt to total fund ratio:- Long terms loans/ share holder
funds +long term loan
• Proprietary ratio:- Shareholders fund/ shareholders
fund+long term loan

 Activity ratio or Turnover ratio:- They indicate the rapidity with

which the resources available to the concern are being used to

produce sales.

• Stock turnover ratio:- Cost of good sold/Average stock

(Cost of good sold= Net sales/ Gross profit,
Average stock=Opening stock+closing stock/2)
• Debtors turnover ratio:- Net credit sales/ Average debtors
 +Average B/R
• Average collection period:- Debtors+B/R /Credit sales per

(Credit sales per day=Net credit sales of the year/365)

• Creditors Turnover Ratio:- Net credit purchases/ Average

Creditors + Average B/P
• Average Payment Period: - Creditors + B/P/ Credit
purchase per day.

• Fixed Assets Turnover ratio:- Cost of goods sold/Net

fixed Assets
(Net Fixed Assets = Fixed Assets – depreciation)
• Working Capital Turnover Ratio:- Cost of goods sold/
Working Capital
(Working capital= current assets – current liability)

 Profitability Ratios or Income ratios:- The main objective of

every business concern is to earn profits. A business must be able
to earn adequate profit in relation to the risk and capital invested in
it.

• Gross profit ratio:- Gross profit / Net Sales * 100

 (Net sales= Sales – Sales return)

• Net profit Ratio:- Net profit / Net sales * 100

(Operating Net Profit= operating net profit/ Net Sales *100
or operating Net profit= gross profit – operating expenses)

• Operating Ratio :- Cost of goods sold + Operating

expenses/Net Sales * 100
(Cost of goods sold = Net Sales – Gross profit, Operating
expenses = office & administration expenses + Selling &
distribution expenses + discount + bad debts + interest on
short term loans)

• Earning per share(E.P.S.) :- Net Profit – dividend on

preference share / No. of equity shares

• Dividend per share (D.P.S.):- Dividend paid to equity

share Holders / No. of equity shares *100.

• Dividend Payout ratio(D.P.) :- D.P.S. / E.P.S. *100

COMPANY
PROFILE
ITC is one of India's foremost private sector companies with a market capitalisation of over US $
22 billion and a turnover of over US $ 5 billion.* ITC is rated among the World's Best Big
Companies, Asia's 'Fab 50' and the World's Most Reputable Companies by Forbes magazine,
among India's Most Respected Companies by BusinessWorld and among India's Most Valuable
Companies by Business Today. ITC ranks among India's `10 Most Valuable (Company) Brands',
in a study conducted by Brand Finance and published by the Economic Times. ITC also ranks
among Asia's 50 best performing companies compiled by Business Week.

ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers,
Packaging, Agri-Business, Packaged Foods & Confectionery, Information Technology, Branded
Apparel, Personal Care, Stationery, Safety Matches and other FMCG products. While ITC is an
outstanding market leader in its traditional businesses of Cigarettes, Hotels, Paperboards,
Packaging and Agri-Exports, it is rapidly gaining market share even in its nascent businesses of
Packaged Foods & Confectionery, Branded Apparel, Personal Care and Stationery.

As one of India's most valuable and respected corporations, ITC is widely perceived to be
dedicatedly nation-oriented. Chairman Y C Deveshwar calls this source of inspiration "a
commitment beyond the market". In his own words: "ITC believes that its aspiration to create
enduring value for the nation provides the motive force to sustain growing shareholder value. ITC
practices this philosophy by not only driving each of its businesses towards international
competitiveness but by also consciously contributing to enhancing the competitiveness of the
larger value chain of which it is a part."

ITC's diversified status originates from its corporate strategy aimed at creating multiple drivers of
growth anchored on its time-tested core competencies: unmatched distribution reach, superior
brand-building capabilities, effective supply chain management and acknowledged service skills
in hoteliering. Over time, the strategic forays into new businesses are expected to garner a
significant share of these emerging high-growth markets in India.

ITC's Agri-Business is one of India's largest exporters of agricultural products. ITC is one of the
country's biggest foreign exchange earners (US $ 3.2 billion in the last decade). The Company's
'e-Choupal' initiative is enabling Indian agriculture significantly enhance its competitiveness by
empowering Indian farmers through the power of the Internet. This transformational strategy,
which has already become the subject matter of a case study at Harvard Business School, is
expected to progressively create for ITC a huge rural distribution infrastructure, significantly
enhancing the Company's marketing reach.

ITC's wholly owned Information Technology subsidiary, ITC Infotech India Ltd, provides IT
services and solutions to leading global customers. ITC Infotech has carved a niche for itself by
addressing customer challenges through innovative IT solutions.
ITC's production facilities and hotels have won numerous national and international awards for
quality, productivity, safety and environment management systems. ITC was the first company in
India to voluntarily seek a corporate governance rating.

ITC employs over 26,000 people at more than 60 locations across India. The Company
continuously endeavors to enhance its wealth generating capabilities in a globalising environment
to consistently reward more than 3,44,000 shareholders, fulfill the aspirations of its stakeholders
and meet societal expectations. This over-arching vision of the company is expressively captured
in its corporate positioning statement: "Enduring Value. For the nation. For the Shareholder."

Vision
Sustain ITC's position as one of India's most valuable corporations through
world class performance, creating growing value for the Indian economy and
the

Mission
To enhance the wealth generating capability of the enterprise in a globalizing
environment, delivering superior and sustainable stakeholder value

BOARD OF DIRECTOR
The Board of Directors at the apex, as trustee of shareholders, carries the responsibility
for strategic supervision of the Company. The strategic management of the Company
rests with the Corporate Management Committee comprising the wholetime Directors
and members drawn from senior management. The executive management of each
business division is vested with the Divisional Management Committee (DMC), headed
by the Chief Executive. Each DMC is responsible for and totally focused on the
management of its assigned business. This three-tiered interlinked leadership process
creates a wholesome balance between the need for focus and executive freedom, and the
need for supervision and control.

B O A R D O F D I R E C T O R S
 C H A I R M A N

Y C Deveshwar

E X E C U T I V E D I R E C T O R S

Anup Singh K Vaidyanath K N Grant

N O N - E X E C U T I V E D I R E C T O R S

A Baijal S Banerjee AV Girija Kumar

S H Khan S B Mathur D K Mehrotra

H G Powell P B Ramanujam Anthony Ruys

Basudeb Sen B Vijayaraghavan

D I V I S I O N A L
M A N A G E M E N T
C O M M I T T E E S

Expand all | Collapse all

India Tobacco Division

Sanjiv Puri Divisional Chief Executive

H Malik Member
A K Mukerji Member

Foods Division

C Dar Divisional Chief Executive

M Ganesan Member & Secretary

Paritosh Wali Member

M S Gadhok Member

V L Rajesh Member

S Ganeshkumar Member

Lifestyle Retailing Business Division

A Chand Divisional Chief Executive

Riaz Ahmed Member & Secretary

S Roy Member

K Bose Member

M Rastogi Member

R Kaicker Member

Education & Stationery Products Strategic Business Unit

C S Das SBU Chief Executive

B K Pramanick Member

Sanjeev Seksaria Member

N Thakur Member

Safety Matches Strategic Business Unit

R Gopal SBU Chief Executive

R Ramamurthy Member & Secretary

B K Pramanick Member
 Agarbattis Strategic Business Unit

V M Rajasekharan SBU Chief Executive

Senthil Kumaran Member & Secretary

B K Pramanick Member
 NAME OF ITC PRODUCT

Take an abiding commitment to world-class quality. Add deep market insight; cutting-
edge technology; a pervasive culture of innovation. And you have ITC brands that
do India proud across a range of products and services: Aashirvaad, Sunfeast,
Kitchens of India, mint-o, Candyman, Bingo!, Wills Lifestyle, John Players,
Essenza Di Wills, Fiama Di Wills, Vivel Portfolio, Superia, ITC-Welcomgroup,
Classmate, Paperkraft, AIM, Mangaldeep.

 Cigaretes

 Foods

 Lifestyle

 Personal care

 Education & stationary

 Safety Matches

 Agarbattis
 Cigarettes

ITC is the market leader in cigarettes in India. With its wide range of invaluable brands, it has a
leadership position in every segment of the market. It's highly popular portfolio of brands
includes Insignia, India Kings, Classic, Gold Flake, Silk Cut, Navy Cut, Scissors, Capstan,
Berkeley, Bristol and Flake.

The Company has been able to build on its leadership position because of its single minded focus
on value creation for the consumer through significant investments in product design, innovation,
manufacturing technology, quality, marketing and distribution.

All initiatives are therefore worked upon with the intent to fortify market standing in the long term.
This in turns aids in designing products which are contemporary and relevant to the changing
attitudes and evolving socio economic profile of the country. This strategic focus on the consumer
has paid ITC handsome dividends.

ITC's pursuit of international competitiveness is reflected in its initiatives in the overseas markets.
In the extremely competitive US market, ITC offers high-quality, value-priced cigarettes and Roll-
your-own solutions. In West Asia, ITC has become a key player in the GCC markets through
growing volumes of its brands.

ITC's cigarettes are produced in its state-of-the-art factories at Bengaluru, Munger,

Saharanpur and Kolkata. These factories are known for their high levels of quality,
contemporary technology and work environment.

ITC has launched its much awaited handrolled cigar, Armenteros, in the Indian market in March 2010.
Armenteros cigars have been developed to suit the discerning taste of the Indian cigar connoisseur. The
perfect balance of flavour, aroma and taste, Armenteros handrolled cigars are the perfect option for the
cigar connoisseur.

Armenteros cigars are being sourced from the Dominican Republic, the largest producer of handrolled
cigars in the world. The cigars are being manufactured at La Aurora, which is one of the oldest cigar
companies in the world and is run by the reputed Leon Jimenes family. The products and the packaging are
custom-made to ITC specifications and stringent quality parameters. Armenteros is a trademark owned by
ITC Limited.

Armenteros Handrolled Cigars have a unique blend comprising tobacco from the best growing regions of
the world. The exquisite wrapper leaf comes from Cuban seed tobaccos grown in the mountains of Ecuador.
This full bodied and aromatic wrapper leaf has a smoothness of texture considered among best in the world.

The Sumatra seed, grown in Brazil, is used as the binder. These tobaccos take a great deal of care to
mature, but once the leaf reaches its peak maturity, it offers a rich wisp of spicy and sweet flavour to the
cigar. The exceptional filler is a masterful blend of tobaccos. The strength and earthiness of the Nicaraguan
and Brazilian tobaccos are balanced with the mild yet rich taste of tobaccos from the Dominican Republic
and Peru. Expert cigar rollers and robust quality control measures ensure that Armenteros is a truly world
class cigar. Armenteros Handrolled Cigars are packed with utmost care. They are placed inside a specially
designed wooden box, created with a unique hand crafted inverted curves design and polished till it radiates
perfection. The box also carries a Certificate of Authenticity signed by the Master Blender & the Production
Director as a pledge to deliver the best products. The Cedar inlayer inside the box compliments the woody
and earthy aromas of the cigars. The entire packaging design and graphics portray the rich and exclusive
Armenteros lineage.

Available in the most popular cigar sizes (Churchill, Torpedo, Corona, Petit Corona and Robusto), The
Armenteros portfolio consists of 8 pack sizes comprising 3, 5 and 10 cigars. Armenteros
cigarswavailableexclusively at tobacco selling outlets in select hotels, fine dining restaurants and exclusive
clubs.

ITC entered the branded Atta market with the launch of Aashirvaad Atta in Jaipur and
Chandigarh on 26th May 2002. The product is now available all over India. Aashirvaad atta has
further built on its leadership position among the National Branded Players with a market share of
56%.
‘Aashirvaad’ promises the Indian housewife the joy of providing her family with the most delightful
home-made rotis, made from the finest quality atta. ITC uses the sourcing strength of its e-
Choupals to buy wheat directly from the farmers to deliver happiness to the Indian consumer –
Khushiyaan Chun Chun ke (Happiness handpicked). ‘Aashirvaad’ is made from finest quality
wheat that ITC has the unique capability to source through its e-Choupal network. Premium
quality atta, made from 100% MP 'sharbati' wheat is also available as Aashirvaad Select Atta .
The wheat for Aashirvaad Superior MP Wheat Atta comes from the plush, fertile soil of Madhya
Pradesh and then blended using the traditional 'chakki-grinding' method to give the superior,
discerning taste

ITC Foods also aims to delight the consumer through superior and innovative packaging. The
Aashirvaad package is PET Poly, with the design showcasing the farming process undertaken in
the rural heartland of India in the form of a Madhubani painting. ‘Aashirvaad Select’ Atta (5 kg
pack) was awarded the World Star Award for Excellence in Packaging in the Consumer Pack
Category. This is one of the most prestigious awards in the world for Packaging.

The latest offering is Aashirvaad Atta with Multigrains. This new and improved variant is
designed to provide nourishment for people of all ages and is an integrated mix of six different
grains – wheat, soya, channa, oat, maize & psyllium husk – which gives a better and healthier
option for the consumers. Aashirvaad Atta with Multigrains is an excellent source of vitamins
which is vital in strengthening immunity and extra protein content improves body strength. The
extra fibre makes food easier to digest and low content of saturated fat keeps the heart smiling all
through the day and above all, still retaining the same great taste. This product is available in
select cities.

Sunfeast

In July 2003, ITC forayed into the Biscuits market with the Sunfeast range of Glucose, Marie and Cream

Biscuits. Sunfeast’s brand essence, "Spread the Smile" connotes happiness, contentment, satisfaction and

pleasure. The mascot Sunny reinforces the emotional aspects of the brand. In a span of 6 years Sunfeast

has launched many new varieties and has its presence in almost all types of biscuit categories.
Sunfeast Milky Magic

Packed with goodness of milk these deliciously nutritious crisp

and crunchy biscuits are a favorite among mothers and kids.

Milky Magic has the ‘Magic of 2’ - A perfect balance of energy

that aids physical strength and mental ability. These biscuits

strike the right balance of milk and wheat which helps in an all

round development and nurturing of the child.

Sunfeast Marie Light

Sunfeast Marie Light Original :

This ideal teatime biscuit is made from the finest quality wheat high

in fibre and keeps one light and healthy through the day.

Sunfeast Marie Light Orange :

It has the distinction of being one of the most successful innovative

Marie biscuits and is liked by one and all.

Bingo!

The launch of Bingo! in March 2007 marked ITC's foray into the fast growing branded snack
foods segment. Bingo’s portfolio includes an array of products in both Potato Chips & Finger
Snacks segment.

Bingo! is positioned as a youthful and innovative snack, offering the consumers a choice of
flavours that are fast becoming
 OBJECTIVES OF
THE STUDY

OBJECTIVES OF THE STUDY

• To study the working capital management of the concern so as to

analyze and interpret the inventory position of the ITC Limited.

• To assess the strength and weakness of the concern in various areas.

• To assess the over all efficiency and performance of the company.

 RESEARCH
METHODOLOGY
 RESEARCH METHODOLOGY

This type of analysis helps the management of the company to plan its
future polices according to the external environment. Any sound research
must have an proper design to achieve the required result, this study id
constructed on the basis of descriptive design.

The methodology, I have adopted for my study is the various tools, which basically
analyze critically financial position of to the organization:

I. COMMON-SIZE P/L A/C

COMMON-SIZE BALANCE SHEET
COMPARTIVE P/L A/C
COMPARTIVE BALANCE SHEET
TREND ANALYSIS
RATIO ANALYSIS
The above parameters are used for critical analysis of financial position. With the
evaluation of each component, the financial position from different angles is tried to be
presented in well and systematic manner. By critical analysis with the help of different
tools, it becomes clear how the financial manager handles the finance matters in
profitable manner in the critical challenging atmosphere, the recommendation are made
which would suggest the organization in formulation of a healthy and strong position
financially with proper management system.

I sincerely hope, through the evaluation of various percentage, ratios and

comparative analysis, the organization would be able to conquer its in efficiencies
and makes the desired changes.

ANALYSIS OF FINANCIAL STATEMENTS

FINANCIAL STATEMENTS:

Financial statement is a collection of data organized according to logical and consistent

accounting procedure to convey an under-standing of some financial aspects of a business
firm. It may show position at a moment in time, as in the case of balance sheet or may
reveal a series of activities over a given period of time, as in the case of an income
statement. Thus, the term ‘financial statements’ generally refers to the two statements

(1) The position statement or Balance sheet.

(2) The income statement or the profit and loss Account.

OBJECTIVES OF FINANCIAL STATEMENTS:

According to accounting Principal Board of America (APB) states

The following objectives of financial statements: -

1. To provide reliable financial information about economic resources and obligation of a

business firm.
2. To provide other needed information about charges in such economic resources and
obligation.

3. To provide reliable information about change in net resources (recourses less

obligations) missing out of business activities.

4. To provide financial information that assets in estimating the learning potential of the
business.

LIMITATIONS OF FINANCIAL STATEMENTS:

Though financial statements are relevant and useful for a concern, still they do not
present a final picture a final picture of a concern. The utility of these statements is
dependent upon a number of factors. The analysis and interpretation of these statements
must be done carefully otherwise misleading conclusion may be drawn.

Financial statements suffer from the following limitations: -

1. Financial statements do not given a final picture of the concern. The data given in these
statements is only approximate. The actual value can only be determined when the
business is sold or liquidated.

2. Financial statements have been prepared for different accounting periods, generally
one year, during the life of a concern. The costs and incomes are apportioned to different
periods with a view to determine profits etc. The allocation of expenses and income
depends upon the personal judgment of the accountant. The existence of contingent assets
and liabilities also make the statements imprecise. So financial statement are at the most
interim reports rather than the final picture of the firm.

3. The financial statements are expressed in monetary value, so they appear to give final
and accurate position. The value of fixed assets in the balance sheet neither represent the
value for which fixed assets can be sold nor the amount which will be required to replace
these assets. The balance sheet is prepared on the presumption of a going concern. The
concern is expected to continue in future. So fixed assets are shown at cost less
accumulated deprecation. Moreover, there are certain assets in the balance sheet which
will realize nothing at the time of liquidation but they are shown in the balance sheets.

4. The financial statements are prepared on the basis of historical costs Or original costs.
The value of assets decreases with the passage of time current price changes are not taken
into account. The statement are not prepared with the keeping in view the economic
conditions. the balance sheet loses the significance of being an index of current
economics realities. Similarly, the profitability shown by the income statements may be
represent the earning capacity of the concern.
5. There are certain factors which have a bearing on the financial position and operating
result of the business but they do not become a part of these statements because they
cannot be measured in monetary terms. The basic limitation of the traditional financial
statements comprising the balance sheet, profit & loss A/c is that they do not give all the
information regarding the financial operation of the firm. Nevertheless, they provide
some extremely useful information to the extent the balance sheet mirrors the financial
position on a particular data in lines of the structure of assets, liabilities etc. and the profit
& loss A/c shows the result of operation during a certain period in terms revenue
obtained and cost incurred during the year. Thus, the financial position and operation of
the firm.

FINANCIAL STATEMENT ANALYSIS

It is the process of identifying the financial strength and weakness of a firm from the
available accounting data and financial statements. The analysis is done

CALCULATIONS OF RATIOS

Ratios are relationship expressed in mathematical terms between figures, which are
connected with each other in some manner.

CLASSIFICATION OF RATIOS

Ratios can be classified in to different categories depending upon the basis of

classification

The traditional classification has been on the basis of the financial statement to which the
determination of ratios belongs.

These are:-

• Profit & Loss account ratios

• Balance Sheet ratios

 • Composite ratios

RESEARCH DESIGN

For the proper analysis of data simple statistical techniques such as

percentage were use. It helped in making more accurate generalization from
the data available.

TOOLS OF ANALYSIS

It is essential to use a systematic research methodology for the assessment of

a project because without the use of a research methodology analysis of any
company or organization will not be possible.

In the present analysis mostly secondary data have been used. Its is worth a
white to mention that I have used the following types of published data:

 Balance sheet
 Profit & Loss A/c
 Schedules
 LIMITATIONS OF THE STUDY

Non monetary aspects are not considered making the results unreliable.

Different accounting procedures may make results misleading.

In spite of precautions taken there are certain procedural and technical

limitations.

Accounting concepts and conventions cause serious limitation to financial

analysis.

Lack of sufficient time to exhaust the detail study of the above topic became
a hindering factor in my research.
 Data analysis
&
Interpretation
 Data analysis & interpretation:

CURRENT RATIO

CURRENT RATIO = CURRENT ASSETS

CURRENT LIABILITES

(Rupees in crore)

Year 2006 2007 2008

Current Assets 81.29 83.12 13,6.57
Current Liabilities 27.42 20.58 33.48
Current Ratio 2.96 4.03 4.08

90
80
70
60
50 Current Assets
40 Current Liabilities
30 Current Ratio
20
10
0
2006 2007 2008
Interpretation:-

As we know that ideal current ratio for any firm is 2:1. If we see the current
ratio of the company for last three years it has increased from 2006 to 2008. The
current ratio of company is more than the ideal ratio. This depicts that
company’s liquidity position is sound. Its current assets are more than its current
liabilities.

QUICK RATIO

QUICK RATIO = QUICK ASSETS

CURRENT LIABILITES

(Rupees in Crore)

Year 2006 2007 2008

Quick Assets 44.14 47.43 61.55
Current Liabilities 27.42 20.58 33.48
Quick Ratio 1.6 2.3 1.8

70
60
50
40 Quick Assets
30 Current Liabilities
20 Quick Ratio

10
0
2006 2007 2008
 Interpretation :

A quick ratio is an indication that the firm is liquid and has the ability to
meet its current liabilities in time. The ideal quick ratio is 1:1. Company’s
quick ratio is more than ideal ratio. This shows company has no liquidity
problem.

ABSOLUTE LIQUID RATIO

ABSOLUTE LIQUID RATIO = ABSOLUTE LIQUID ASSETS

CURRENT LIABILITES

ABSOLUTE LIQUID ASSETS = CASH & BANK BALANCES.

(Rupees in Crore)

Year 2006 2007 2008

Absolute Liquid Assets 4.69 1.79 5.06
Current Liabilities 27.42 20.58 33.48
Absolute Liquid Ratio .17 .09 .15

35
30
25
20 Absolute Liquid Assets
15 Current Liabilities
Absolute Liquid Ratio
10
5
0
2006 2007 2008
 Interpretation :

These ratio shows that company carries a small amount of cash. But there is
nothing to be worried about the lack of cash because company has reserve,
borrowing power & long term investment. In India, firms have credit limits
sanctioned from banks and can easily draw cash.

: INVENTORY TURNOVER OR STOCK TURNOVER

RATIO:

INVENTORY TURNOVER RATIO = COST OF GOOD SOLD

AVERAGE INVENTORY

AVERAGE STOCK = OPENING STOCK + CLOSING STOCK

(Rupees in Crore)

Year 2007 2008 2009

Cost of Goods sold 110.6 103.2 96.8
Average Stock 73.59 36.42 55.35
Inventory Turnover Ratio 1.5 times 2.8 times 1.75 times

120

100

80
Cost of Goods sold
60
Average Stock
40 Inventory Turnover Ratio
20

0
2007 2008 2009
 Interpretation : These ratio shows how rapidly the inventory is turning into
receivable through sales. In 2007 the company has high inventory turnover ratio
but in 2008 it has reduced to 1.75 times. This shows that the company’s
inventory management technique is less efficient as compare to last year.

INVENTORY CONVERSION PERIOD:

INVENTORY CONVERSION PERIOD = 365 (net working days)

INVENTORY TURNOVER RATIO

Year 2007 2008 2009

Days 365 365 365
Inventory Turnover Ratio 1.5 2.8 1.8
Inventory Conversion Period 243 days 130 days 202 days

400
350
300
250
Days
200
Inventory Turnover Ratio
150
Inventory Conversion Period
100
50
0
2007 2008 2009

Interpretation :

Inventory conversion period shows that how many days inventories takes to convert
from raw material to finished goods. In the company inventory conversion period is
decreasing. This shows the efficiency of management to convert the inventory into cash.
 DEBTORS TURNOVER RATIO:

DEBTORS TURNOVER RATIO = TOTAL SALES (CREDIT)

AVERAGE DEBTORS

AVERAGE DEBTORS= OPENING DEBTOR+CLOSING DEBTOR

Year 2007 2008 2009

Sales 166.0 151.5 169.5
Average Debtors 17.33 18.19 22.50
Debtor Turnover Ratio 9.6 times 8.3 times 7.5 times

200

150

Sales
100
Average Debtors
Debtor Turnover Ratio
50

0
2007 2008 2009

Interpretation :
 This ratio indicates the speed with which debtors are being converted or
turnover into sales. The higher the values or turnover into sales. The higher the
values of debtors turnover, the more efficient is the management of credit. But
in the company the debtor turnover ratio is decreasing year to year. This shows
that company is not utilizing its debtors efficiency. Now their credit policy
become liberal as compare to previous year.

AVERAGE COLLECTION PERIOD:

Average Collection Period = No. of Working Days

Debtors Turnover Ratio

Average Collection Period = 365 (Net Working Days)

Debtors Turnover Ratio

Year 2007 2008 2009

Days 365 365 365
Debtor Turnover Ratio 9.6 8.3 7.5
Average Collection Period 38 days 44 days 49 days

400
350
300 Days
250
200 Debtor Turnover Ratio
150
100 Average Collection
Period
50
0
2007 2008 2009

Interpretation :
 The average collection period measures the quality of debtors and it
helps in analyzing the efficiency of collection efforts. It also helps to analysis
the credit policy adopted by company. In the firm average collection period
increasing year to year. It shows that the firm has Liberal Credit policy. These
changes in policy are due to competitor’s credit policy.

WORKING CAPITAL TURNOVER RATIO:

Working Capital Turnover Ratio = ___Cost of Sales____

Net Working Capital

Working Capital Turnover = _______Sales

Networking Capital

Year 2007 2008 2009

Sales 166.0 151.5 169.5
Networking Capital 53.87 62.52 103.09
Working Capital Turnover 3.08 2.4 1.64

180
160
140
120
100 Sales
80 Networking Capital
60 Working Capital Turnover
40
20
0
2007 2008 2009

Interpretation :
 This ratio indicates low much net working capital requires for sales.
In 2008, the reciprocal of this ratio (1/1.64 = .609) shows that for sales of Rs. 1
the company requires 60 paisa as working capital. Thus this ratio is helpful to
forecast the working capital requirement on the basis of sale.

INVENTORIES

(Rs. in Crores)

Year 2005-2006 2006-2007 2007-2008

Inventories 37.15 35.69 75.01

80
70
60
50
40
Inventories
30
20
10
0
2005-2006 2006-2007 2007-2008

Interpretation :

Inventories is a major part of current assets. If any company wants to

manage its working capital efficiency, it has to manage its inventories
efficiently. The graph shows that inventory in 2005-2006 is 45%, in 2006-2007
is 43% and in 2007-2008 is 54% of their current assets. The company should try
to reduce the inventory upto 10% or 20% of current assets.
 CASH BNAK BALANCE:

(Rs. in Crores)

Year 2005-2006 2006-2007 2007-2008

Cash Bank Balance 4.69 1.79 5.05

6
5
4
3
Cash Bank Balance
2
1
0
2005-2006 2006-2007 2007-2008

Interpretation :

Cash is basic input or component of working capital. Cash is needed to

keep the business running on a continuous basis. So the organization should
have sufficient cash to meet various requirements. The above graph is indicate
that in 2006 the cash is 4.69 crores but in 2007 it has decrease to 1.79. The
result of that it disturb the firms manufacturing operations. In 2008, it is
increased upto approx. 5.1% cash balance. So in 2008, the company has no
problem for meeting its requirement as compare to 2007.
 DEBTORS:

(Rs. in Crores)

Year 2005-2006 2006-2007 2007-2008

Debtors 17.33 19.05 25.94

30

25
20

15
Debtors
10

5
0
2005-2006 2006-2007 2007-2008

Interpretation :

Debtors constitute a substantial portion of total current assets. In India it

constitute one third of current assets. The above graph is depict that there is
increase in debtors. It represents an extension of credit to customers. The reason
for increasing credit is competition and company liberal credit policy.
 CURRENT ASSETS :

(Rs. in Crores)

Year 2005-2006 2006-2007 2007-2008

Current Assets 81.29 83.15 136.57

140
120
100
80
60 Current Assets
40
20
0
2005-2006 2006-2007 2007-2008

Interpretation :

This graph shows that there is 64% increase in current assets in 2008. This
increase is arise because there is approx. 50% increase in inventories. Increase
in current assets shows the liquidity soundness of company.
 CURRENT LIABILITY:

(Rs. in Crores)

Year 2005-2006 2006-2007 2007-2008

Current Liability 27.42 20.58 33.48

35
30
25
20
15 Current Liability
10
5
0
2005-2006 2006-2007 2007-2008

Interpretation :

Current liabilities shows company short term debts pay to outsiders. In

2008 the current liabilities of the company increased. But still increase in
current assets are more than its current liabilities.
 NET WOKRING CAPITAL:

(Rs. in Crores)

Year 2005-2006 2006-2007 2007-2008

Net Working Capital 53.87 62.53 103.09

120
100
80
60
Net Working Capital
40
20
0
2005-2006 2006-2007 2007-2008

Interpretation :

Working capital is required to finance day to day operations of a firm.

There should be an optimum level of working capital. It should not be too less
or not too excess. In the company there is increase in working capital. The
increase in working capital arises because the company has expanded its
business.
OBSERVATIONS
&
FINDINGS
 OBSERVATIONS & FINDINGS

 As we know that ideal current ratio for any firm is 2:1. If we see the current ratio
of the company for last three years it has increased from 2006 to 2008.. This
depicts that company’s liquidity position is sound. Its current assets are more than
its current liabilities.

 A quick ratio is an indication that the firm is liquid and has the ability to meet its
current liabilities in time. The ideal quick ratio is 1:1. Company’s quick ratio is
more than ideal ratio. This shows company has no liquidity problem.

 Inventory conversion period shows that how many days inventories takes to
convert from raw material to finished goods. In the company inventory
conversion period is decreasing. This shows the efficiency of management to
convert the inventory into cash.

 This graph shows that there is 64% increase in current assets in 2008. This
increase is arise because there is approx. 50% increase in inventories. Increase in
current assets shows the liquidity soundness of company.

 Current liabilities shows company short term debts pay to outsiders. In 2008 the
current liabilities of the company increased. But still increase in current assets are
more than its current liabilities.

 Working capital is required to finance day to day operations of a firm. There

should be an optimum level of working capital. It should not be too less or not too
excess. In the company there is increase in working capital. The increase in
working capital arises because the company has expanded its business.
 CONCLUSION

In the present study I have analyzed the working management of ITC

Limited.

I found that inventory is increasing which shows that company has sufficient
stocks to meet up out production of the company.

Inventory Turnover Ratio measures the velocity of conversion of stock into

sales. Usually, a high inventory turnover indicates efficient management of
inventory because more frequently the stocks are sold, the lesser amount of
money is required to finance the inventory. The Inventory Turnover Ratio is
decreasing which is not a good sign for the company.

The business firm has adequate internal control procedure commensurate

with the size of the firm and nature of its business for the purchase of stores,
machinery, equipment and other assets and with regards to sale of goods.
From the comparative study of inventory turnover it is clear that stock
velocity indicates inefficient management of inventory during the year 2009.

So the company’s performance outlook continues to be positive and

optimistic. The company remains confident of delivering of strong operating
and financial performance. Efficient stock velocity indicates efficient
management of inventory of the firm and no slow movement of the stock
due to damaged goods.
 SUGGESTIONS

After interpretation and analysis, I am giving certain suggestions to the

company which I hope may be helpful for the company.

 The company should utilize its stock more efficiently.

 The company should pay attention towards the proper and efficient
utilization of working capital.

 The company can reduce the time for purchase order. The buffer
should be maintained incase of emergency. Insurance should be
covered especially fire in case of transit journey also.
BIBLIOGRAPHY
 BIBLIOGRAPHY

Books:

Sharma R.K & Gupta shashi K; “Management accounting principles and

practice.” Eight edition, kalyani publisher’s New Delhi.

Bhalla V.K “financial management and policy”, first edition, annual

publication, New Delhi.

Maheshwari S.N ; “Management accounting and financial control”, thirteen

edition, sultan chand & sons, New Delhi.

Kothari C.R;”Research methodology methods & techniques”, second

edition, vishwa prakashan Delhi(1990).

Gupta Sunita, management of working capital, first edition , New century

publications, New Delhi(2003).

Chandra Prasana Financial Management, TMH, 4th edition, 1997, New

Delhi.
ANNEXURE
QUESTIONNAIRE

I am SACHIN PATEL, a student of RAJEEV GANDHI

PROUDYOGIKY MAHAVIDYALAYA, Bhopal and this
questionnaire is a part of my research on “A STUDY OF
WORKING CAPITAL MANAGEMENT OF ITC ltd &
CUSTOMER PREFERENCE TOWARDS ITC PRODUCTS”. I
would therefore request you to give your response to the
questionnaire.

• Name :

• Sex :
Male Female

• Age :
Upto 20 yrs 21-30 yrs
31-40 yrs 40 yrs. and above

• Marital Status :
Married Unmarried
 Q1. What is the qualification Educational Qualification?
Up to HSC Graduation
Professional
Others _____________________________________

Q2. What is your occupation ?

Business Professional
Employee Student
Home maker others

Q3. what is your Family income (Per/month)

Less than Rs.5, 000/-

Rs. 5,000/- to 10,000/-
Rs. 10,000/- to 15,000/-
Above Rs. 15, 000/-

Q4.) Which Company’s products do you use?

HLL ITC
OTHER
Q5.) Who influenced you to buy the particular products?

Family Member Neighbors Relations

Friends Advertisement

Dealers

Q6.) Why do you buy the ITC’S products?

For business for personal

Q7) Which type of discount is most preferable by you?

Cash discount trade discount

Q8.) What are the reasons of difficulty you face in you ITC’S Products

Quality
Service

Price
Guaranty

Q9. Which company provides long term services?

• ITC
• HLL
• OTHER
THANKING YOU