PROJECT REPORT

ON WORKING CAPITAL

IN PARTIAL FULLFILLMENT OF 3RD YEAR

BBA EXAMINATION 2014

SESSION :- 2011-14
SUBMITTED BY: GUIDED BY:
SUBHADRA BISWAL SRIDHAR DASH
CLASS ROLLNO; 11BB019 (Faculty of Dept of BBA)
EXAM ROLLNO;11BA048 F.M (AUTO) COLLEGE
REGD.NO;02852/11 Balasore
HONOURS;FINANCES
Approval Certificate

This is to certify that the topic entitled “Study undertaken on

Working Capital Of Birla tyres ” has been completed by
SUBHADRA BISWAL bearing enrollment no. 11BA048 as a
partial fulfillment of BBA course.
It embodies data collected and analyzed by the candidate under
the guidance of Mr. Sridhar dash (Faculty) of the Dept. Of Business
Administration and Marketing Management.
It is hereby approved as an indication of the proficiency of the
candidate.

DATE: RABINDRA MOHANTY

PLACE: BALASORE (Course Co-ordinator)
DEPT OF BUSINESS
ADMINISTRATION AND
MARKETING MANAGEMENT
 DECLARATION
I do hereby undertake to state that I, SUBHADRA BISWAL

a student of BBA final year, has prepared this project on

the study of “WORKING CAPITAL” of BIRLA TYRES to

fulfill the partial requirement to complete the course of

BBA taken of in F.M. (Auto) College, Balasore.

I also further state that the project has been prepared on

my own with the primary & secondary data provided by

the company, which are required essential for the

completion of the project. The report presented now to

F.M. (Auto) College, Balasore is purely genuine and it

has not been presented earlier anywhere for any purpose.

SUBHADRA
BISWAL
 Finance (H)
Exam Roll No.
11BA048
F.M.Autonomous
College
Balasore

GUIDE CERTIFICATE
This is to certify that SUBHADRA BISWAL bearing

Examination Roll Number 11BA048 has prepared the

project on Working Capital Analysis of BIRLA TYRES

on the basis of the information and explanations provided

by the company with consideration to fulfill the partial

requirement for course completion of BBA taken up in

F.M. (Autonomous) College, Balasore.

Mr. SRIDHAR DASH

 Faculty of Dept. of
BBA
F.M (Autonomous)
College
Balasore

ACKNOWLEDGEMENT

A study on Working Capital Analysis of BIRLA TYRES

is definitely a good experience to expand the exposure in

the field of finance. This project not only helpful to

complete the partial requirement for BBA syllabus

presented to Fakir Mohan (Auto) College, Balasore but it

helped to get practical experience in the actual work

area.

Last but not the least, I convey my sincere thanks and

gratitude to Mr. SRIDHAR DASH (faculty) Dept. of

BBA, Fakir Mohan (Auto) College, Balasore, who has

given his most valuable time and effort in guiding me to

complete this project in due time, without which it would

not have been possible.

SUBHADRA BISWAL
Finance (H)
Exam Roll No.
11BA048
F.M.Autonomous
College
Balasore

CONTENTS
CHAPTER-1 INTRODUCTION
1.1 INTRODUCTION
1.2 CONCEPT OF WORKING CAPITAL
1.3 METHODS OF ESTIMATING WORKING CAPITAL
1.4 ADEQUACY OF WORKING CAPITAL
1.5 INADIQACI OF WORKING CAPITAL

CHAPTER-2 METHODOLOGY
2.1 COMPANY PERSPECTIVES
2.2 COMPANY BACKGROUND – BIRLA TYRES
2.3 COMPANY HISTORY OF BIRLA TYRES
2.4 SCOPE OF THE STUDY
2.5 OBJECTIVES OF THE STUDY
2.6 DATA SOURCE
2.7 TOOLS OF DATA ANALYSIS

CHAPTER-3 DATA ANALYSIS & INTERPRETATION

3.1 CURRENT RATIO
3.2 LIQUID RATIO
3.3 ABSOLUTE LIQUID RATIO
3.4 STOCK TURNOVER RATIO
3.5 DEBTER TURNOVER RATIO
3.6 WORKING CAPITLTURNOVER RATIO
3.7 PROFIT LOSS ACCOUNT OF BIRLA TYRES
3.8 BALANCE SHEET OF BIRLA TYRES

CHAPTER-4 CONCLUSION & SUGGESTION

4.1 CONCLUSION
4.2. SUGGESTION

BIBLIOGRAPHY
 CHAPTER:1

INTRODUCTION
1.1 INTRODUCTION
Working Capital may be defined as the life blood of a business. Its effective
provision can do much to ensure the success of a business, while its ineffective
management can lead only to loss of profit but also to the ultimate downfall of
what otherwise might be considered as a promising concern. Much has been rightly
made of the long term planning project. But the cost to the industry due to
inadequate planning in the use of working capital is one the major important to
internal and external analysis because of its close relationship with the current day-
to-day operation of a business. So inadequate or mismanagement of working
capital is the leading cause of business failure. Working capital is the leading cause
of the portion of the assets of a business which are used in, or related to current
operation and represented at any one time by the operating cycle of such items as
against receivable, inventories of raw material, stores, work-in-progress and
finished goods.

In accounting, “Working Capital is the difference between the inflow and outflow
of funds”. In other words it is the net cash inflow. Every business needs capital for
its investment and survival. The capital needed is classified under two categories.
 Fixed Capital (permanent capital)
 Working capital (circulating capital)
FIXED CAPITAL :
Long term funds required to create production facilities, though purchase of fixed
assets such as plants and machineries, land and building, furniture and fixture etc
are known as fixed capital or permanent capital.

WORKING CAPITAL :
Short term funds required for carry out its day to day operation like purchase of
raw material, payment of wages and other day to day expenses. In other words
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
and inventories. Working capital is necessary to cover the cost of operating the
enterprise. According to Gerestenberg “ Circulating Capital means current assets of
a company that changed in the ordinary course of business from cash to
inventories, inventories to receivable, receivable into cash”.
1.2 CONCEPT OF WORKING CAPITAL
Working capital represents the total of all current assets. In other words, it is
“GROSS WORKING CAPITAL”. It is also known as circulating capital or current
capital, for current assets are rotating in the nature. The use of the term circulating
capital instead of working capital indicates that its flow is circular in nature.
Beginning of a business venture cash is provided by others and lenders. A part of
this capital is invested in tools, furniture, equipments, building and other firms
fixed assets, which are not to be sold throughout the year during the normal course
of business. The remaining cash is used as working capital to meet the current
requirement of a business enterprise. The term circulating capital is frequently used
to denote those assets, which are changed with relative rapidity from one form to
another.
There are 7 concepts of working capital
1. Gross Working Capital
2. Net Working Capital
3. Permanent Working Capital
4. Variable or temporary Working Capital
4.Balance Sheet Working Capital
5. Cash Working Capital
 6. Negative Working Capital
1. GROSS WORKING CAPITAL :

Gross working capital is the amount or funds invested in the various components
of current assets. This concept has the following advantages:-
1) Financial managers are profoundly concerned with current assets.
2) It enables a form to plan and control funds and to maximize the return on
investment.
3) It helps in the fixation of various areas of financial responsibilities.

2. NET WORKING CAPITAL :

The net working capital is the difference between current assets and current
liabilities. The concept of net working capital enables a firm to determine a firm
how much as left for operational requirement.

3. PERMANENT WORKING CAPITAL :

Permanent working capital is the minimum amount of current assets which is

needed to conduct a business even during the dullest season of the year. This
amount varies from year to year depending upon the growth of the company and
the stages of the business cycle in which it operates. It is maintained as the medium
to carry on operation at any time.
4.VARIABLE WORKING CAPITAL :

It represents the additional assets which are required at different time during the
operating year like additional inventory, extra cash, etc. seasonal working capital is
the basic of the operation cycle concept, which assumed a great importance in the
financial management in recent year. The reason is that the cash working capital
indicates the adequacy of the cash flow which as essential prerequisites of the
business.
5. BALANCE SHEET WORKING CAPITAL :

The balance sheet working capital is one, which is calculated from the items
appearing in the balance sheet. Working capital which is representing by the excess
of current assets over current liabilities is the example of the balance sheet working
capital.

6. CASH WORKING CAPITAL :

Cash working capital is one which is calculated from the items appearing in the
profit and loss account. It shows the real flow of money or value at a particular
time and is considered to be the most realistic approach in working management.

7. NEGATIVE WORKING CAPITAL :

Negative working capital emerges when current liabilities exceed current assets.
Such a situation is not absolutely theorical and occurs when a firm is nearing a
crisis of some magnitude.
FACTORS DETERMINING WORKING CAPITAL
The working capital requirement of a concern depend upon a large number of
factors such as nature and size of the business , the character of their operations,
the length of production cycles, the rate of stock turnover and state of economic
situation. Rails, roads, etc with their large fixed investment appear to have the
lowest requirement for current assets. This does not means that the problem of
working capital may be minimized in this field of enterprise, since ready funds are
still essential to cover disbursement of wages, interest founded debts, purchase of
raw materials and suppliers etc. Indeed under such condition of working capital
position may become even more strategic in character because of its relation to and
control of large amount of fixed assets. Additional amount, current assets,
particularly cash, receivable and inventory which is required during the more
active business of the year.
It has the following characteristics
1) It is not always gainfully employed through it may charge from one
assets to another.
2) It is particularly suited to business of a seasonal or cyclical nature.

1.3 METHODS OF ESTIMATING WORKING CAPITAL

There are 2 methods, which are usually followed in determining working capital
requirement. These are:-
1. CONVERTIONAL METHOD :

According to the conventional methods, cash inflow and cash outflow are in
attached with each other. Greater importance is attached to current ratio, liquidity
of the business.
2. OPERATIONAL CYCLE METHOD :

In order to what gives rise to difference in the amount of timing of cash flow, we
should first know the length of time which is required to convert cash into
resources, resources into final product, the final product into receivables and
receivables back into cash. We should know, in other words, the operating cycle is
a function of the nature of the business.
There are 4 major components of the operating cycle of a manufacturing company.
These are:
1) The cycle starts with free capital in the form of cash and credit followed by
investment in materials, man power and other services
2) Production phase
 3) Storage of the finished product terminating of the time finished product is so

1.4 ADEQUACY OF WORKING CAPITAL

Working capital is essential to maintain the smooth running of a business. No

business can run successfully without an adequate amount of working capital. The
main advantages of maintaining adequate amount of working capital are as
follows:

1) It is possible to pay all the current obligations promptly and to take

advantages of cash discounts.
2) It permits the carrying of inventories at a level that would enable a business
to serve satisfactorily the need of its customers.
3) It protects a business from the adverse effect of shrinkages in the values of
current assets.
4) It enables a company to operate its business more efficiently because there is
no delay in obtaining materials etc. because of credit difficulties.
5) It enables a business to face business crisis in emergencies like depression
6) Sufficient working capital enables a business concern to make prompt
payment and hence helps in creating and maintaining goodwill.
7) There may be an unwise dividend policy.
8) It enables a company to make regular payment of salaries, wages and other
day-to-day commitment which raise the morale of its employees.
9) It enables a company to extend favorable credit terms to customers.
10) It creates an environment of securities, confidence, high morale and creates
overall efficiency in a business.
1.5 INADEQUACY OF WORKING CAPITAL
1) A company may not be able to take advantage of profitable business
opportunities.
2) A company will not be able to pay its dividends because of the non-
availability of funds.
3) A company may have to borrow funds at exorbitant rates of interest.
4) It is not possible for it to utilize production facilities fully for want of
working capital.
5) A credit working capital of a company is likely to be jeopardized because
of lack of liquidity.
6) A modernization of equipment and even routine repair and maintenance
facility may be difficult to administrator.
7) A company may invest heavily in its fixed equipments which may not be
justified by actual sales or production. This may provide a fertile ground
for later over-capitalization.
CHAPTER:2
2.1 COMPANY PERSPECTIVES:

Our perception of space is dominated by perspective, in the sense of a reduction of

the projected size of objects with distance. One of the key jobs of the visual brain
is to decode this size diminution as distance in the third dimension, or egocentric
distance. If the eye were a pinhole camera, the projection of the world onto the
back plane would be in perfect linear perspective (and in perfect focus). The
succession of images projects on the curved retina within the eye in what Leonardo
da Vinci termed natural perspective, a series of distorted projections that need to
be integrated over time in a representation in the brain as the eye moves around the
scene. resolved. Incorporating lens optics into the projection system introduces
the potential for curvature in the projected image. Such internal curvature may
consequently be a property of human perception at the extremes of the field, but
this curvature would apply equally to the original scene and to its projection from
the picture plane to the eye, so does not affect the external projection rules of
geometric perspective. The key simplification in perspective construction is that
the pictorial image is governed by linear projection through the point where the
pupil is located, regardless of any optical distortions beyond that point

Principle of prospective:
1. In geometric perspective, all straight lines in space project to straight lines (or
points, if end on) in the picture plane. Rotating the line within the plane of
projection will not introduce any curvature, just a change in its extent within the
line of projection. In the limit when the line is viewed head on, the projected line
will contract to a point in the picture plane.
Humans actually view scenes with two eyes, but the straight-line projections for
each eye are both straight lines (Fig. 2a left and right). The average, or binocularly
fused, projection is the combination of two straight lines and is therefore also a
straight line (see Fig. 2b). No curvature is introduced by the geometry of binocular
combination.
2. The projections of all lines that are parallel in space either remain parallel in the
picture plane or intersect at a single vanishing point (see Fig. 1). Although the lines
run to infinity in space, their projection to a picture plane has a vanishing point at a
specific location. Each different set of parallel lines intersects at a different
vanishing point. Thus, the first job in perspective projection is to identify all the
lines in the scene that are parallel to each other, then make sure that they are drawn
so as to project to a common vanishing point.
2.2 Company Background – Birla Tyres
Industry Name Diversified
House Name Birlas (BK) Group
Collaborative Country Name N.A.
Joint Sector Name N.A.
Year Of Incorporation 1919
Year Of Commercial Production N.A.

Regd. Office
Address Birla Building,, 8th Floor,
District Kolkata
State West Bengal
Pin Code 700001
033-22435453 22429454 22130441 2248,
Tel. No.
033-22486607
Fax No. 033-22109455
Email : Kesocorp@cal3.vsnl.net.in Internet : http://www.kesocorp.com

Auditors Company Status

Price Waterhouse N.A.

Registrars
Name M C S Ltd.
Address 77/2A, Hazra Road, 3rd & 5th Floor, Calcutta - 700029, West Bengal

Tel. No. : 24767350, 24767354,

Fax No. : 24747674
24541892, 24541893

Email : mcscal@cal2.vsnl.net.in,
Internet : N.A.
mcscal@rediffmail.com
 2.3 Company History of Birla Tyres
1919 - The company was incorporated at Calcutta. The main objects of the
Company is to manufacture textiles, rayon yarn, cement, spun pipes and fire bricks.

1948 - 16,00,000 No. of equity shares issued in prop. 2:1 in March.

1951 - 8,00,000 bonus equity shares of Rs 2.50 each issued in prop. 1:1 in July.
Shares consolidated into Rs 15 each.

1954 - In March, 8 lakh bonus shares issued in prop. 1:1. Shares then
consolidated into Rs 10 each.

1956 - 1 lakh right 2nd pref. shares offered at par. Only 10,000 shares take up.
Balance offered to public.

1961 - The name of the company was changed to Birla Tyre Industries & Cotton
Mills Limited on August 30, and the same has further changed to Birla Tyre
Industries Limited on the 9th July, 1986. The plant for manufacture of transparent
paper was set up at the same location at Tribeni in June. It has the capacity to
manufacture 3,600 tpa of transparent paper.

1965 - The Company took on long lease one refractory unit at Kulti, West Bengal,
for a period of five years.

1969 - The Company established its, first cement plant known as Birla Tyre
Cement at Besantnagar, District Karimnagar, Andhra Pradesh. Two more cement
plants were put up at the same site and the aggregate capacity of all the three
cement plants is 8,26,000 tpa.

1980 - There was a loss of production of 37 days in Cement Division due to break-
down in one of the kilns. Cyclones with heavy rains and power crisis affected
production.

1982 - The Company had to declare a lock-out because of labour unrest. The lock-
out was lifted on 20th May, but the workmen did not return to duty as the
suggestions made were not acceptable too them. After making fresh suggestions
with modifications, the strike was withdrawn from 29th June. Normal working was
resumed by the end of July.

The Company secured MRTP clearance to set up another cement unit at Sedam in
Karnataka State with an annual capacity of 5 lakh tonnes.
A new plant and equipment were being installed to improve the quality of
production.

In December, the Company issued 21,00,000-13.5% secured convertible

debentures of Rs 100 each at par to the equity shareholders in the proportion 1 D:
5E. Rs 50 was payable on application and the balance by 30th June 1983.

The debentureholders would be entitled to receive one equity share of the Company
at par for each debenture held on 30th September, 1983. The balance of Rs 90 per
debenture would be redeemed at par in four equal instalments on the expiry of the
9th, 10th, 11th and 12th year from the date of allotment.

Out of the 21,00,000 debentures, 13,50,000 debentures were allotted to the

shareholders and 3,15,000 debentures to directors, etc., employees and associates.
The remaining 4,35,000 debentures were offered for public subscription.

To augment the long term resources the company issued 6,00,000 15% non-
convertible debentures of Rs 100 each.

1983 - The Company has two wholly owned subsidiaries, namely Bharat
General & Textile Industries Limited (BGTI) and KCIM Investment Ltd.

Due to competition from cheaper substitutes, the offtake of transparent paper was
adversely affected. The labour trouble was amicably settled.

KCIM Investment Ltd. with an issued capital of 3,50,350 shares of Rs 10 each and
100-13% preference shares of Rs 100 each.

21,00,000 shares of Rs 10 each allotted to convertible debenture holders at par on

1st October, 1983.

1984 - Erratic and inadequate availability of wagons adversely affected cement

despatches and consequently production had to be curtailed.

1985 - The Company made a further issue of 15% non-convertible debentures for a
total value of Rs 65 crores. These debentures are redeemable on the expiry of 7
years from the date of allotment of the debentures, at a premium of 5%.

On 16th February, the workmen went on strike. The Management of Textile

Section declared a partial lock-out on 17th February, and a total lock-out on 24th
February. After lifting of the lock-out the Textile section resumed operations on
16th May.
The prolonged lock-out coupled with rise in the cost of inputs, power and wages
adversely affected working of Textile Division.

The working of refractory factory suffered due to labour problems which resulted in
a lock-out from 18th October. The operations could be restored only from 15th
April, 1986.

The Government agreed to derate the installed capacity of the plant from 9 lakh
tonnes to 8.26 lakhs tonnes per annum until 31st March. This approval was further
extended until 3rd June.

1986 - Another cement plant known as Vasavadatta Cement was commissioned

by the Company at Sedam, District Gulbarga, Karnataka with annual capacity to
produce 5,00,000 tonnes of cement.

The workers of the winding division went on a strike which resulted in lock-out in
certain section of the mills with effect from 15th February, 1987.

The labour problem coupled with frequent power cuts and stiff competition
adversely affected the working of the textile division during the year. The workers
strike which commenced on 15th February, 1987 continued during 1987-88.

1987 - The shaft kiln for calcination was commissioned and the balancing
equipments were installed.

During June/July, two D.G. sets of 4 MW each were commissioned and the company
proposed to import one DG set of 5.4 MW.

1988 - No Production activities were undertaken due to the continued strike and
lock-out. The lock-out was lifted on 15th November

1989 after reaching an amicable settlement with the workers' union. Substantial
maintenance efforts were required for re-starting the machines that had remained
idle for nearly 33 months.

The working of Rayon Plant suffered due to a strike by workmen followed by a

lockout for about 22 days.

The working of spun-pipe unit was adversely affected due to unprecedented

shortage of pig iron since August. The Company was forced to suspend production
for nearly 78 days during the year.

Due to steep rise in power tariff for H.T. consumers who were not taking power at
prescribed voltage, the Company during the year installed and commissioned
machinery and equipment for change over from 66 KV to 132 KV.
Production was adversely affected due to closure of the plant for about 38 days for
major repairs and modifications and a strike by a section of workmen of the unit
during March 1989.

1989 - The Lock-out in the Rayon plant was lifted after reaching an agreement with
the workers' union.

In order to finance the tyres and tubes project, the company offered during
February, 22,72,727-12.5% secured fully convertible debentures of Rs 110 each for
a total value of Rs 25 crores.

Out of the total issue, 1,13,636 debentures were offered for the employees
(including Indian working directors)/workers of the Company on an equitable basis
and 12,64,180 debentures were offered to the equity shareholders of the Company
as rights in the proportion of debenture for every 8 equity shares held (all
were taken up).

The balance of 8,94,911 debentures together with the unsubscribed 1,04,721

debentures of the employees' quota were offered for public subscription.
Additional 1,89,627 debentures to the equity shareholders and additional 1,51,282
debentures to the Indian public allotted to retain oversubscription.

Conversion of the debentures were to take place in 3 stages as (i) a portion of Rs

35 of each debenture into 1 equity shares of Rs 10 at a premium of Rs 25 on the
expiry of 6 months from the date of allotment of the debentures; (ii) a portion of Rs
35 of each debenture into 1 equity share of Rs 10 at a premium of Rs 25 on the
expiry of 12 months from the date of allotment of the debentures and (iii) the
remaining portion of Rs 40 into 1 equity share of Rs 10 each at a premium of Rs 30
per share between 1st April, 1991 and 1st April, 1992.

1990 - Go-slow tactics of loading labourers culminating in a strike for11 days,

power shortage, inadequate wagons supply and inferior quality of coal hindered
further growth in production.

Unprecedented hike in input costs accompanied by several bandhs in Calcutta

affected production adversely and led to financial losses.

Though productions showed marginal improvement, overall working was affected

by hike in input costs and imposition of surcharge on petroleum products and on
other items.

The Company proposed to take up the expansion programme only after

commencement of production at the Birla tyre project.

The Company undertook to set up a project for the manufacture of 10 lakhs nos.
per annum of each of tyres and tubes at Balasore in Orissa.
A technical collaboration agreement was signed with M/s. Pirelli, Ltd. of U.K. a tyre
manufacturing firm of Pirelli group.

99,844-11% pref. shares were redeemed by the issue and allotment of 99,844-
14% pref. shares (redeemable on 31.3.1999). 26,12,360 No. equity shares allotted
in part conversion of 12.5% debentures. 3,00,000-14% pref. CR allotted privately
to financial institutions (redeemable after 9 years from 25.1.1991).

1991 - The Company proposed to manufacture basic bricks and necessary

technology for the same was being arranged.

A letter of intent was received for doubling the capacity of Vasavadatta Cement
from 5 lakh tonnes to 10 lakh tonnes per annum. 26,06,420 No. of equity shares
allotted in part conversion of 12.5% debs.

1992 - The second fluidised bed boiler was installed. A lock-out was declared in the
Rayon section effective 13th April, and the same was lifted on 2nd July.

The Company undertook a programme of gradual conversion of its existing

conventional spinning machines to lube spinning, superior production process etc.
to improve productivity and quality.

Production was affected by poor quality of coal and inadequate wagon supply,
severe power cuts etc.

During November-December, the Company issued 16,68,004-16% secured partly

convertible debentures of Rs 280 each on rights basis in the proportion of 1
debenture: 10 equity shares held (all were taken up).

Another 83,400 secured partly convertible debentures were issued to the

employees of the Company (only 1,750 debentures taken up). Unsubscribed portion
allowed to lapse.

Part `A' of Rs 120 of each debenture was to be converted into two equity shares of
Rs 10 each at a premium of Rs 50 per share at the end of six months from the date
of allotment of debentures.

Part `B' of Rs 160 of each debenture was to be redeemed at par on the expiry of
eight years from the date of allotment of the debentures.

1,132 No. of equity shares allotted on part conversion of 12.5% debentures.

1993 - Both clinker and cement production were affected by major overhauling
undertaken to one of the kilns and due to sluggish demand, inadequate wagon
supply, severe power cuts etc.
In consultation with ICICI and other financial institutions, the tyre unit was given on
lease for 3 years a consortium of companies in the form of partnership which has 4
companies including Birla Tyre. The business was being run under the name
and style of `Birla Tyres'.

1994 - During the year steps were taken for expansion of the Vasavadatta
Cement unit by 6.86 lakhs p.a. and orders for plant and machinery were placed.

During January-February, the Company offered 50,05,171-17% secured

redeemable non-convertible debentures (NCDs) of Rs 100 each with a detachable
warrants on rights basis in proportion 1 deb.: 4 equity share held (all were taken
up).

Another 1,25,000 - 17% NCDs issued to UTI (all were taken up).
Also 25,000-17% NCD issued to ICICI (all were taken up).
Each debenture of Rs 100 was to be redeemed at par in three instalments of Rs 33,
Rs 33 and Rs 74 each on 31.12.1999, 31.12.2000 and 31.12.2001 respectively.
1995 - 5,00,000 Pref. shares issued paid up Rs 59.
1996 - The Textile Unit has received ISO 9002 Certificate from Messrs. D.N.V.
Netherlands. The Company proposed to modernise its spinning section. 187,50,000
No. of equity shares issued through Global Depository Receipts.

1997 - Clinker production in Unit-I suffered due to fire in MCC panels. A letter of
intent was also obtained for establishment of a sponge iron plant with a capacity of
1,50,000 tonnes per annum in Orissa. Kesoram Industries is highly diversified
company, with business interest in cement, rayon yarn, refractories, textiles, tyres
pipes etc. However, cement is the largest contributor to the turnover of the
company with over 55 per cent share.

1998 - The lockout declared in the refractory unit in Kulti, Burdwan on March 29,
due to persistent industrial relations problems and was lifted on August 27, 1998.
- The B K Birla-controlled Birla Tyre Industries Ltd proposes to take up restructuring
of various divisions.

1999 - The management of Birla Tyre Industries Ltd, controlled by the B.K.
Birla group, today declared temporary suspension of work at its textile division in
the city. The workers had resorted to an illegal strike on January 4, rendering the
operations of the textile division to a grinding halt. Birla Tyre Industries Ltd (KIL),
have set up a joint action committee (JAC) to close in ranks and jointly tackle the
situation following suspension of work at the company's textile factory from January
5. The company undertook a modernisation and capital expenditure scheme at its
rayon yarn, cotton textile and cement plants. In1995-96, it increased the capacity
of carbon-di-sulphide to 3600 tpa, sodium sulphide to 187 tpa, sulphuric acid to
36,500 tpa, viscose filament rayon yarn to 6,500 tpa. The British Standards
Institution (BSI) has awarded an ISO 9002 quality management system certificate
exclusively to the corporate office of Birla Tyre Ltd, a B. K. Birla group outfit.
The manufacturing units of Birla Tyre Industries, which include cement, tyre, rayon,
spun pipe and foundries and refractories, have received the ISO certification.

The management of Birla Tyre Industries Ltd. (KIL) - a B K Birla group company -
has declared suspension of work at its textile unit located in Garden Reach Road,
Calcutta, January 5 onwards. The British Standards Institution (BSI) has awarded
an ISO 9002 quality management system certificate exclusively to the
corporate office of Birla Tyre Industries Ltd, a B. K. Birla group outfit.

2000 - Birla Tyre Ltd. of the B.K. Birla group has proposed to delist its shares from
the Delhi Stock Exchange. The company has proposed to transfer two properties, to
its wholly-owned subsidiaries - Akhileshwar Properties Ltd. and Softshree
Estates Ltd. for real estate development. Birla Tyre Textile Mills Ltd, created last
year by spinning off Birla Tyre ' textile operations, feels that it can resume
operations only if workers agree to higher workloads, production-linked wages and
reduction in waste. 2001 - The Company has proposed to merge its wholly-owned
subsidiary Bharat General & Textiles Ltd. with itself to enhance the net worth by
around Rs 37 crore. 2002 Raises 42 lakh shares from open market under the
buyback scheme.

FITCH gives 'Ind D1+' rating for Rs.40cr commercial paper programme of the
company. Buys 64.36 lakh shares from retail investors through buyback. Birla
increases the stake in the company by 0.91% to 23.68 % as on sept 2002- 2003

Appoints M/s AXC Computers Pvt Ltd as the share and Transfer agents for both
physical and electronic securities.

Discontinues the scheme of buyback of its fully paid-up equity shares of Rs.10 each
from open market through trading mechanism of the exchange. Kolkota High Court
approves for the scheme of amalgamation of KICM Investments Ltd. Promoters
increase their stake in the company by 0.10%. Holdings of Private Corporate Bodies
in the company edges down by 12% during the last two years. 2004 Birla Tyre Ltd
has entered into an agreement on April 3, 2004 to hive off the refractory Division of
the company on a hire purchase basis.
METHODOLOGY
2.4 SCOPE OF THE STUDY
The study is concerned with the working capital analysis of the company. The
study covers a period of 4 years i.e. 2004-05 to 2007-08.
2.5 OBJECTIVES OF THE STUDY
The following are the basic objectives of the study

1. To find out gross and net working capital of the sample company.
2. To analysis the increase and decrease of working capital for the period.
3. To analysis the various ratios of working capital.
4. To evaluate various factors responsible for the sources of working capital.
5. To study the various applications of working capital.
6. To evaluate the causes of changes in working capital.
7. To suggest remedial measures for improvement of working capital.

2.6 DATA SOURCE

The study is completely based on secondary data. The Annual Report of the
sample company for the year 2006-07 and 2007-08 has been used as the only
source of data. Various other applications like the report of Chairman’s Letter,
Financial Highlights of the company, Directors Report, Auditor Report has been
used in the analysis of the working capital.

2.7 TOOLS OF DATA ANALYSIS

In the present study, it is endeavored to analysis the working capital with the
help of various accounts and statistical techniques. In the following paragraph a
brief discussion about the financial ratios are discussed.
1. CURRENT RATIO :
 Current Ratio may be defined as the relationship between current assets and
current liabilities. This ratio also known as working capital ratio, is a measure
of general liquidity and is most widely used to make the analysis of a short term
financial position or liquidity of a firm.
CURRENT ASSETS
CURRENT RATIO = ------------------------------------------
CURRENT LIABILITIES

2. LIQUID RATIO OR ACID TEST RATIO :

Quick ratio is also known as Acid Test or liquid Ratio is a more rigorous test of
liquidity than the current ratio. The term ‘liquidity’ refers to the ability of a firm
to pay its short-them obligations as and when they become due. Liquid Ratio
may be defined as the relationship between quick/ liquid Assets and Current or
liquid liabilities.
LIQUID ASSETS
LIQUID RATIO = --------------------------------------------
CURRENT LIABILITIES

3.ABSOLUTE LIQUID RATIO :

Although receivable, debtors and bill receivable are generally more liquid than
inventories, yet there may be doubts regarding their realization into cash
immediately or in time. Hence, some authorities are of the option that the
absolute liquid ratio should be calculated together with current ratio and acid
test ratio.
ABSOLUTE LIQUID ASSETS
ABSOLUTE LIQUID RATIO = -----------------------------------------------
CURRENT LIABILITIES
4. INVENTORY TURNOVER / STOCK TURNOVER RATIO :
 Inventory turnover ratio is also known as stock velocity is normally calculated
as Sales/ average inventory or cost of goods sold/ average inventory. It would
indicate whether inventory has been efficiently used or not. The purpose is to
see whether only the required minimum funds have been locked up in
inventory. Inventory turnover ratio indicates the number of times the stock has
been turned up in inventory.
COST OF GOODS SOLD
INVENTORY TURNOVER RATIO = --------------------------------------------
AVERAGE INVENTORY AT COST

5. RECEIVABLE / DEBTORS TURNOVER RATIO :

Receivable Turnover Ratio is also known as debtor turnover ratio. Debtor

turnover ratio indicates the velocity of debt collection of firm. In other words, it
indicates the number of times average debtors are turned over during a year.
Generally, the higher the value of debtor turnover the more efficient is the
management of debtors/sales or more liquid are the debtors.
NET CREDIT ANNUAL SALES
DEBTORS TURNOVER RATIO = -----------------------------------------------
AVERAGE TRADE DEBTORS

6. PAYABLES / CREDITORS TURNOVER RATIO :

Payables turnover ratio is also known as creditors turnover ratio. Creditors

turnover ratio indicates the velocity with which the creditors are turned over in
relation to purchase. Generally, higher the creditors velocity better it is or
otherwise lower the creditors velocity, less favorable are the result.
NET CREDIT ANNUAL PURCHASE
CREDITORS TURNOVER RATIO = ------------------------------------------------
AVERAGE TRADE CREDITOR
7. WORKING CAPITAL TURNOVER RATIO :
 Working capital turnover ratio indicates the velocity of the utilisation of net
working capital. This ratio indicates the number of times the working capital is
turned over in the course of a year. This ratio measures the efficiency with
which the working capital is being used by a firm. A higher ratio indicates
efficient utilisation of working capital and low ratio indicates otherwise.

COST OF SALES
WORKING CAPITAL TURNOVER RATIO = -----------------------------------
VERAGE WORKING CAPITAL
 CHAPTER:3

3. DATA ANALYSIS AND INTERPRETATION

3.1 CURRENT RATIO :
(Rs. In Crores)
2009-10 2010-11 2011-12 2012-13
Current Assets 8240.72 11230.14 15812.49 19267.35
Current Liabilities 7227.00 7992.36 8865.40 13644.56

Current Ratio 1.14 1.40 1.78 1.41

(Source: Annual Report of BIRLA TYRES, 2012-13)

INTERPRETATION :
This indicates that as far as current ratio is considered, the standard ratio of 2:1
should be maintained. The current ration in the year 04-05 was 0.48, which later
improved to 1.14 in 05-06. But, in the year 06-07, the current ratio is 1.36.
However, in the current year 07-08 there is deterioration of current ratio as the
current assets reduced from last year 06-07 by Re.0.97 against every Re.1 of
current liabilities. It shows the poor solvency in the short term.
3.2 LIQUID RATIO :
(Rs. in Crores)
2009-10 2010-11 2011-12 2012-13
Liquid Assets 6999.32 9876.48 14110.27 17206.84
Current Liabilities 7227.00 7992.36 8865.40 13644.56

Liquid Ratio 0.96 1.23 1.59 1.26

(Source: Annual Report of BIRLA TYRES, 2012-13)

INTERPRETATION:

As far as liquid ratio is concerned, the standard of 1: 1 should be maintained,

but we find that the ratio stood at .96 in the year of 09-10 which improved to 1.23
in the year 10-11. But it again stood at 1.59 in the year 11-12which is good and
1.26 in the year 12-13 which is quite good in case of short term solvency. In the
year 12-13, the position was quite satisfactory as the ratio was 1.59: 1 which is
much above the standard norm 1:1. The situation in 07-08 is also quite satisfactory.
3.3 ABSOLUTE LIQUID RATIO :
(Rs. In Crores)
2009-10 2010-11 2011-12 2012-13
A. Absolute Liquid
Cash and Bank Balance 2097.32 1386.44 1154.27 3833.17

B. Current Liabilities 7227.00 7992.36 8865.40 13644.56

Absolute Liquid Ratio 0.29 0.17 0.13 0.28

(Source: Annual Report of Tata motors, 2004-13)

INTERPRETATION:

Absolute liquid ratios of the four years are not accepted as the ideal ratio
should be 0.5: 1. But in all the cases the Ratios are much less than the standard
norms. This ratio shows the cash availability to pay the creditors and hence this is
called cash ratio. For every Re.1 of current liability, there should be at least Re.0.5
cash available. The actual cash position is .29 against Re.1 of current liabilities in
2004-05 and it is 0.17 in 2005-06 while it is .13 and .28 in the year 11-12 and 12-
13 respectively. Therefore, the situation is not satisfactory from the point of view
of short term creditors.
3.4 STOCK TURNOVER RATIO :
(Rs. In Crores)
A. SALES 2009-10 2010-11 2011-12 2012-13
Net Sales 19666.78 23961.72 32426.41 35651.48
B. INVENTORY
Inventory 2074.36 2496.92 3166.90 3294.64

INVENTORY TURNOVER RATIO

Net Sales 9.48 9.59 10.23 10.82
Inventory

(Source: Annual Report of BIRLA TYRES, 2009-13)

INTERPRETATION:

The ratio in the year 2009-10, 2010-11, 2011-12 and 2012-2013 are not
satisfactory. In the year 04-05, it was 9.48 while in the year 05-06 it was 9.59 & in
the year 06-07, the stock is converted in to sales in 10.23 times and it is also 10.82
times in the year 2007-08. It is therefore observed that the stocks are slow moving
which will tend to lower down the availability of cash. Lower the ratio, faster
would be the stock moving.
 3.5 DEBTOR TURNOVER RATIO :
(Rs. In Crores)
2009-10 2010-11 2011-12 2012-13
A. NET SALES 19666.78 23961.72 32426.41 35651.48
B. AVERAGE DEBTOR
Opening Debtor 1011.97 1241.40 1354.48 1702.22
Closing Debtor 1241.40 1353.66 1702.22 2060.51
Average Debtor 1126.68 1297.53 1528.35 1881.36
C. DEBTOR TURNOVER RATIO
Net Sales 17.45 18.46 21.21 18.94
Average Debtor

(Source: Annual Report of BIRLA TYRES, 2009-13)

INTERPRETATION:

The ratio shows that for every rupee one of trade debtor, there is Rs. 17.45
credit sales in the year 2009-10while it is 18.46 in the year 2010-11. It is Rs. 21.21
credit sales in the year 2011-12, and 18.94 in the year of 12-13. It implies that in
the year 09-10 only Rs.17.45 is collected where as in the year 12-13 Rs. 18.94 is
collected against Re. 1 of trade debtor. Therefore, it is evident that the credit policy
of the business is satisfactory.
 3.6 WORKING CAPITAL TURNOVER RATIO :
(Rs. In
Crores)
2009-10 2010-11 2011-12 2012-13
A. SALES
Sales 19666.78 23961.72 32426.41 35651.48

B. NET WORKING CPITAL

Current Assets – Current Liabilities 1013.72 3237.78 6947.09 5622.79

C. WORKING CAPITAL
Sales 19.40 7.40 4.66 6.34
Net Working Capital
(Source: Annual Report of BIRLA TYRES, 2009-13)

INTERPRETATION:

The ratio shows that the position of working capital is not satisfactory in the
business. In the year 09-10, when there is Re. 19.40 sales, only Re. 1 working
capital remain available. In the year 10-11, it is 7.40 while it is 4.66 in the year 11-
12. In the year 12-13, Re. 1 working capital remains available in every Re. 6.34
sales. It shows that the management is so cautious in case of utilization of working
capital for the smooth and uninterrupted production process.
CHAPTER:4
CONCLUSION

After having a detailed, thorough and intensive study on Working Capital

analysis of Tata Motors for four years i.e. 2009-10, 2010-11, 2011-12 & 2012-
13, we can draw an overall performance of last four years. This study reflects
the financial stability & the ability to meet its current obligations.
SUGGESTION
The Liquid Ratio and Debtors Turnover Ratio are much more than the
standard norms. In all the four years the performance of this two ratios are
very good and it as a good sign for the company.

Since, in both the project year they have insufficient current ratio so the
company has to think on that section to increase the stability. If the company
thinks on that section it will help them for the smooth functioning in the
business

The Company has done much better performance in the previous year as
compared to current year. If the company will give proper emphasis on
Inventory Turnover Ratio & Working Capital Ratio, it will have a better &
brighter future in the coming years.
BIBLIOGRAPHY

Annual Report of Tata Motors

Management Accounting:

Shashi k Gupta & R.K Sharma

Cost Accounting:

S.P. Jain & K.L. Narang

Management Accounting:

M.Y. Khan & P.K. Jain

Financial Management:

Van Horne J.C