PROJECT REPORT Submitted for the Degree of [Link],(Hons.) in Accounting & Finance under the University of Calcutta Submitted by: Name of the Candidate :MD WASIM Name ofthe College SURENDRANATH EVENING COLLEGE, College Roll No. ful CU Registration No: L17-1111-0358-19 CU Roll No, 2 191N17-21-0149 Supervised by:- Name of the Supervisor: MR. PRIYANKAR MODAK Name ofthe College SURENDRANA'TI EVENING COLLEGE MAY, 2022Pee ee Sed dd bbdedd odd bb dddeddd VUGGES ANNEXURE-1 Supervisor's Certificate ‘This is to certify that MD WASIM a student of [Link] 3®° Year Honours in Accounting & Finance of SURENDRANATH EVENING COLLEGE under the University of Caleutta bas worked under my supervision and guidance or his Project Work and prepared a Project Report with the tile -WORKING CAPITAL MANAGEMENT WITH RESPECT OF TATA MOTORS LIMITED", : ‘The project report, which he/she is submitting, is his/her genuine and original work to the best of my knowledge. ye seas seman Yo Mtoe Date: Namie: PRIVANKAR MODAK Designation: $.A.C-T Name of the College: SURENDRANATH EVENING COLLEGE 2|PageANNEXURE-I Student's Declaration Thereby declare that the Project Work with the title “WORKING CAPITAL MANAGEMENT WITH RESPECT OF TATA MOTORS LIMITED" submitted by ‘me for the partial fulfilment of the degree of [Link]. Honors’ in Accounting &Finance under the University of Calcutta is my original work and has not been submitted earlier to any other University/Institution for the fulfillment of the requirement for any course of study, also declare that no chapter ofthis ‘manuscript in whole or im part has been incorporated in this report from any earlier work dane by others or by me. However, extracts of any litersture whieh has been used for this report has been duly acknowledged providing details ofsuch literature in the references. Place: Kolkata signwure: MB LIBIn— Date: refezfroe Name: MD WASIM C.U. Registration No: = [17-111 1-0358-19 Roll. No: = 11 Name of College : SURENDRANATI EVENING COLLEGE Registration Numbers L17-LU11-0388-19 3)Page[TV wrrwerwewewwreevcvee 6 Ce eu ACKNOWLEDGEMENT ‘This Project on “WORKING CAPITAL MANAGEMENT WITH RESPECT OF TATA MOTORS LIMITED" could not sce the light if had [ not received immense help from many Persons associated directly or indirectly with the title and conduct of the project at 6th Semestcr, [Link] (Accounting & Finance) of our esteemed leaming institution, Surendranath Evening College, Tam highly indebted to many persons for the successful completion of my: Project. At the outset I would like to express my heartiest thanks and gratitude to all of them; without whose continuous support and assistance completion of this project would not have ‘been possible. 1 is my great pleasure to express my respect and gratitude to all esteemed faculties of Department of Commerce, Surendranath Evening College. Lam especially gratefl and thankfial to my project guide Mr Priyankar Modak for guiding me in choosing my topic and having the patience to clear the innumerable doubts I had while compiling the arcas of project. | am also indebted to Prof. Barendra Rey, Head of the Department of Commerce, Surendranath Evening College. In this occasion I would also like to thank all the non-teaching staffs of the college for their constant support I would be failing in my duty if I do not acknowledge the contributions of different authors and experts in this field. The entire project is the outcome of the ideas gained fram them. I am grateful to all of them, Last but nat the least; I would like to thank my parents and friends for their inconsistent support forthe successful completion of my projectINDEX CHAPTERS CONTENT PAGE NO. CHAPTER I INTRODUCTION LL} Background ofthe study 1.2| Bricfreview of literature 13] Objective of the study 1.4] Research methodology 7 1.5] Limitation of the study 8 1.6] Chapter planning 8 CHAPTER? | CONCEPTUAL FRAMEWORK ia 2.1| Definition of working capital 9 | 2.2| ‘Types of working capital 9-10 2.3| Importance of working capital 10-11 2.4 Working capital eyele Basic concepts of working capitalmanagement 1-14 Factors of working capital requirement 14 Sources of working capital 1415 ‘Company profile 15-18 PRESENTATION OF DATA AND CHAPTERS |,ANALYSIS OF DATA AND lage FINDINGS: Working capital analysis 19-23 Working capital ratio analysis 231 Findings 31 CONCLUSION AND 30-33 CHAPTER | RECOMMENDATION : 4.1] Conclusion 32 4.2| Recommendations 32.33 BIBLIOGRAPHY & REFERENCE 4 5[ Page1.1 BACKGROUND OF THE STUDY Working capital management is concemed with problems that arise in attempting to manage the current assets, the current liabilities and the interrelationship that exist between them. The term current assets refers to those assets which in ordinary course of business can be, or will be converted into cash within one year without undergoing a diminution in value and without disrupting the operations of the firm .The major current assets are eash, marketable securities, accounts receivable and inventory The term current liabilities refer to these liabilities which are intended. At their inception, to be paid in the ordinary course of business within a year, out of current assets or earnings of the concer. The basic current liabilitics are accounts payable, bills payable , bank overdraft and outstanding expenses. The current assets should be large enough to cover its current liabilities in order to ensure a reasonable margin of safety, nevertheless the level of current assets should not be too high since in that case it will affect the averall profitability of the firm .The interaction between current assets and current liabilities is, therefore the main theme of Working Capital Management, There are two concepts of Working, Capital Management i.e. Gross Working capital management and Net working capital management. The term gross working capital, also refers to working capital, means the total current assets, The term Net working capital management refers to the difference between current assets and current [Link] worl capital con alternatively be defined as that portion of current assets which is financed with long term finds Since current liabilities represent of short term funds, as long as the currents assets exeess the ‘current liabilities, the excess must be financed with om term funds. The liquidity of a business is measured by the firm's ability to satisfy short term obligations as they become due .The three basic measures of iquidity are 1)The current ratio ,2)The acid test ratio and 3)The net working Different researchers have done studies in the ficld of working capital management , out of 6 [Pagewhich three research results are as follows: 1) Vera (1989) examined working capital management in Tata Iron and Steel Company Ltd. (TISCO), Steel Authority of India Ltd. (SAIL) and Indian [ron and Steel Company(IISCO) during the period from 1978-79 to 1985-86 ‘by using the financial tools and statistical techniques, = The study indicates ~ Tota tron and Steel Company Limited had better working capital management in comparison to Steel Authority of India Limited and Indian Iron and Steel Company, Results also revealed that all the three firms under study hod made excessive use of bank borrowings to finance the working capital re2) Majumdar (1992), in order to know the pattern of Financing the corporate working capitalin India, has analyzed balance sheets of 20 companies- 10 from private sector and 10 from public Sector for the period from 1981 to 1990, For the purpose of analysis. researcher has used techniques and financial tools. Study indicates -- Major share of working capital finance is from borrowings and effeet ofcast on the selection af sources of working capital is not at all significant. 3) Vijay Kumar and Venkatachalam (1996) have made efforts to do in depth study of Tamil Nadu Sugar Corporation for the period of 1985-86 to 1993-94. Results indicate—that the corporation has maintained moderate level of working capital, less amount from long term- fands has been used for meeting short term liabilities and due to excess liquidity, profitability ‘was affected during the period of study. 1.3 OBJECTIVE OF THE STUDY 1) To understanc the concept ofthe working capital management, 2) To analyze the present scenario of performing working capital management bythecompany. 3) To studywhether Maintenance of working capital at appropriate level, and 4) To studythe availability ofample funds as and when they are needed. 1.4 RESEARCH METHODOLOGY 1) Area of the study ‘This is an analytical case studyof Tata motors limited’s position af workingeapital, profitability & solvency, 2) Types ofdata used BlPage‘The main source of data collected is from the website of Tata motors lid. The secondary data has been collected from different websites and books. 3) Period of study: Thave taken last 5 years for the study i.e. from 2016-17 to 2020-21. 4) Tools and technique: Tools and techniques of analysis of the project are graphs, charts and ratio a o|Page15 LIMITATIONS OF THESTUDY This study is conducted in partial fulfillment of the requirement for the [Link]. So,it possesses some limitations of its own. One of the limitations of the study is, with regard to tempera coverage of the study to arrive any meaningful conclusions regarding the trend in the pattem and structure of finaneing a time service of fairly a long period are needed .But this project has been covered only in onethe financial year. ‘The other constraints of this studyare as follows: 1.5.1 Though there are many manufteturing companies, but this study: onlydeals with TATA MOTORS Ltd, 1.5.2 Being a student time and resources constraint. 1.5.3 Limited variable has been selected 1.5.4 Simple techniques have been used in analysis. 1.5.5 The analyze is based on annual report of the company. 1.6: - CHAPTER PLANNING ‘CHAPTER 1: INTRODUCTION. CHAPTER2: CONCEPTUAL FRAMEWORK. CHAPTER 3: PRESENTATION OF DATA, ANALYSIS AND FINDINGS, CHAPTER 4: CONCLUSION AND RECOMMENDATIONS olPageLS LIMITATIONS OF THESTUDY. This study is conducted in partial fulfillment of the requirement for the [Link]. So,it possesses some limitations ofits awn, One of the limitations of the study is, with regard to tempera caverage of the study to arrive any meaningful conclusions regarding the trend in the pattern and structure of financing a time service of fairly long period are necded But this project has been covered only in onethe Financial year. ‘The other constraints ofthis study are as follows:- 1.3.1. ‘Though there are many manufacturing companies, but this study onlydeals with TATA MOTORS Ltd. 1.5.2 Beinga student time and resources constraint, 1.5.3. Limited variable has been selected. 1.5.4 Simpletechniques have been used in analysis. 1.5.5 ‘The analyze is based on annual reportof the company. 1,6: - CHAPTER PLANNING CHAPTER |: INTRODUCTION. (CHAPTER2: CONCEPTUAL FRAMEWORK. CHAPTER 3: PRESENTATION OF DATA, ANALYSIS AND FINDINGS, CHAPTER 4; CONCLUSION AND RECOMMENDATIONSCHAPTER 2: CONCEPTUAL FRAMEWORK 21 |. DEFINITION OF WORKING CAPITAL: Working capital means the funds (Le. capital) available and used for day to day operation working capital) of an enterprise. It consists broadly of that portion of assets of a business which are used in or related to its current operations. It refers to fund which are used during an accounting period to generate a current income of a type which is consistent with major purpose of a firm existence. 1. According to Weston & Brigham - “Working capital refers to a firm's investment in short termassets, such as cash amounts receivables, inventories etc. 2. Working capital means current assets, - Mead, Baker and MA Lott 3. “The sum of the current assets is the working capital ofthe business! - J.5, Mill 2.2 :CYPES OF WORKING CAPITAL Classification of working capital (On the Concept basis PERMANENT. ‘TevpoRARY WORKING WORKING CAPITAL CATAL A) CONCEPT: From the concept point of view, working capital can be defined as Gross working capital or Net working capital. uiPage) GROSS WORKING CAPITAL: It refers to the firm's Investment in current assets are those assets, which can be converted into eash within an accounting year. Current assels include stock of raw materials, working-in-progress, finished goods, unde debtors, Prepayments, cash balances, ct (ii) NET WORKING CAPITAL: - It refers to the different between current assets and ‘current liabili Current ies are those claims of outsider which are expected to mature for payment within an aecounting year, Current liabi accrual taxation payable, bill payable, outstans loans. fies includes trade creditors, g expenses, «d payable and short teem B) TIME: From the point of view of time, the wai capital can be divided into two categories namely fixed and temporary @ PERMANENT WORKING CAPITAL:- It refers to hard core working capital, It is that minimum level of investment in the current assets that is carried bythe business at all times to carryout minimum level of its activities. Example: Every firm has to maintain minimum level of raw materials, WIP and finished goods and cash balance. fi) TEMPORARY WORKING CAPITAL: It refers to that part of total working capital, which is required by a business over and above permanent working capital. It is also called variable working capital. Since the volume of temporary working capital keeps on fluctuating from time to time according to the business activities it may be financed from short termsouree, 2.3 : IMPORTANCE OF WORKING CAPITAL: 13 capital is needed fill n firm gets eash an sale of finished products. It depends on 1z| Pagetwo factors: 1. Manufacturing cycle i.e, time required for converting the raw material into finished product; and H. Credit policy i.e. credit period given to Customers and credit period allowed by creditors. Thus, the sum total of these times is called an Operating cyclel and it consists of the following six steps: 4) Conversion of cash into raw materials.b) Conversion of raw materials inte work-in-progress. ©) Conversion of work-in-progress into finished products, 4) Time forsales af finished goods- Cash sales and Credit sales. ¢) Time for realization from debtors and bills receivables into cash. Credit period allowed by creditors for credit purchase of raw materials, inventory and creditors for wages and overheads 24 : WORKING CAPITAL CYCLE: Cash flows in a cycle into, around and out of a business. It is the business's life blood and every manager's primary task is to help keep it flowing and to use the cash flow to generate profits. If a business is operating profitebly, then it should, in theory, generate cash surpluses. If it doesn't generate surpluses, the business will eventually run out of cash and expire. The faster a business expands the more cash it will necd for working capital and investment. The cheapest and best sources of cash exist as working capital right within business, Good management of working eapital will generate cash will help improve profit and reduce risks. Bear in mind that the cost of providing credit to customers and. holding stocks can represent a substantial proportion of a firm's total profits, ‘There are two elements in the business eyele that absorb cash - Inventory (stocks and work= in-progress) and Receivables (debtors owing you money). The main sources of cash are Payables (your creditors) and Equityand Loans. 2,5 :. BASIC CONCEPTS OF WORKING CAPITAL MANAGEMENT; 2.5.1 MANAGEMENT OF WORKING CAPITAL, 1d] PageWorking Capital Management involves management of different components of working capital stich as cash, inventories, accounts receivable, creditors ele, A brief description follows regarding the various issues involved in the management of each of the above components of working capital 2.5.2 INVENTORY MANAGEMENT: Inventory constitutes an important item in the working capital of much business [Link] working capital is the difference between current assets and current Liabilities. Inventory is a major item of current assets. The term inventory refers to the stocks of the product of a firm is offering for sale and the components that make up the product Inventoryis stores of goods and stocks, This includes raw materials,work-in-process and finished goods. Raw materials consist of these units or input which are used to manufactured goods that require further processing to become finished goods. Finished goods are products ready for sale. The classification of inventories and the levels of the components vary from organization to organization depending upon the nature of business. For example steel is a finished product for a stecl industry, but raw material for an automobile manufacturer. Thus, inventory may be defined as -Stock of goods that is held for future usell. Since inventories constitute about 50 to 60 percent of current assets, the management of inventories is crucial to successful working capital management. Working capital requirements are influenced by inventory holding. Hence, the need for effective and efficient management of inventories. A good inventory management is important to the successfisl operations of most organizations, unfortunately the importance of inventory is not always appreciated by top management, “This may be due to a failure to recognize the link between inventories and achicvement of organizational goals or due to ignorance of the impact that inventories can have on costs and profits. Inventory management refers to an optimum investment in inventories. It should neither be too low to effect the production adversely nor too high to block the funds unnecessarily. Excess investment in inventories is unprofitable for the business. Both excess and inadequate investment in inventories is not desirable. The firm should operate within the two danger points. The purpose of inventory management is to determine and maintain the optimum level of inventory investment, 2.5.3_CASH MANAGEMENT: Cash management is one of the key arcas of working capital management. Cash is the most Jiquid current assets. Cash is the common denominator to which all current assets ean be reduced because the other major liquid assets, i.e. receivable and inventory get eventually converted into cash. This underlines the importance of ensh management. The term -Cashl with reference to management of cash is used in two ways. Ina narrow sense cash refers coins, currency, cheques, drafts and deposits in banks. The broader view of ensh includes near cash assets such as marketable securities and time deposits in banks. The reason why these near cash assets are included in cash is that they can readily be converted into cash. Usually, excess cash is invested in marketable Securities as it contributes to profitability, of current assets, Every firm should have adequate cash, neither more nor less. Inadequate cash will lead to production interruptions; while excessive cash remains idle and will impair 16| Pageprofitability, Hence, the need for cash management. 2.54 MANAGING PAYABLES (CREDITORS): Creditors are the businesses or people who provide goods and services in credit terms. That is, they allow us time to payrather than paying in cash. ‘There are good reasons why we allow people to pay on credit even though literally it docsn't make sense! If we allow people time to pay their bills, theyare more likelyo buy I7|Pagefreon your business than from another business that docsn't give credit, The length of credit Period allowed is also a factor that can help a potential customer decide whether to buy from your business or not: the longer the better, of course. ha spite of what we have just said, creditors will need to optimize their credit control polisies in exactly the same way that we did when we were assessing our debtors’ tumover ratio. = after all, if you are my debtor Lam your creditor! Weegive credit but we nced to control how much we give, how often and for how long. The formula for this ratio is: Creditors’ Turnover: = Average ‘Creditors (Cost of Sales/65) Creditors are a vital part of effective cash management and should be managed carefully to enhance the cash position, 2.5.5 HANDLING RECEIVABLES (DEBTORS) cantly enhanced if the amounts owing fo a business are collected Cash flew can be sig faster. Every business needs to know who owes them money, how much is owed, howlong it is owing, for what it is owed Debtors and cost of debtors have direct relation; cost will increase duc to increase in debtors and vice-versa. It depends on the credit sale of concer: and credit periad (collection period) allowed to customer. Debtor management is the process of finding the balance at which company agrees to reecive its payment without hampering or having any adverse effect on its sales and customer agree to payat their economical buying concept. ‘Sundry debtor level depends on two measure issues: +Volumeof Credit sales «Credit period allowed to customers. eiPageFollowing factors may be considered before allowing credit period to the customer:~ 1. Nature of product 2. Credit worthiness of the customer, which varies from customer to customer 19 |Pageweer ew—CCCSCCC ECTS SBeteweeoeaeae cai 3. Quantum of advance received fromeustomers 4. Credit policy of company, say number of days allowed to customer for payment to the customers 5. Cost of debtors 6. Manufacturing cycle time ofthe product etc. 2.6 ;-EACTORS OF WORKING CAPITAL REQUIREMENT: Ee Length of operating cyte: The antount of working capital directly depends on the length of operating cycle. Operating cycle refers to the time period involved in production. If operating cycle is long then more warking capital is required whereas for companies having short operating cyele, the working capital is less. 2. Nature of Business: The type of business, firm is involved in, is the next consideration while deciding the working capital. In case of trading concem or retail shop the requirement of working capital is less. On the other hand the manufacturing company: requires huge amount of working capital. 3. Seale of Operations: The firms operating at large scale need to maintain more inventory, debtors, ctc, so they generally require less working capital. 4. Business eyele Fluctuations: During boom period the market is flourishing so much demand, more production, and more siock which means more amount of working capital is required, Whereas during depression period low demand, low inventories, to be maintained, so less working capital will be required. 5. Operational Efficiency: The firm having high degree of operating efficiency requiresless amount of working capital as compared to firm having low degree of efficiency which requires more working capital. 2.7 SOURCES OF WORKING CAPITAL: 1. LOANS FROM COMMERCIAL BANKS: Small scale enterprises can raise loans from 20| Pagethe commercial banks with or without security. Loan can be paid in lump sum or in parts. Henee,it is generallya cheaper souree of financing working capital requirement of enterprise.2, PUBLICDEPOSITS: Public deposits can be invited by offering a higher rate of interest thanthe interest allowed on bank deposits. However, the companies ean raise funds through public deposits subject to a maximum of 25% of their paid up capitaland free reserves. 3. FACTORING: This is a method of raising short term capital and known as factoring, On theone hand, it helps the supplier companies to secure finance against their book debts and receivables and on the other hand it also helps in savings the effort of collecting the book debts. The disadvantage of fuctoring is that customers who are really in genuine difficulty do not get the opportunity of delaying payments which they might have otherwise got fram the supplier company. 4, ADVANCES FROM CUSTOMER: one wayof raising for short-term requirement is to demand for advance from one's own customers, Thus, advance front customers become ‘one of the cheapest sources of raising funds for meeting working capital requirements of the companies. 5, BANK OVERDRAFT AND CASH CREDIT: Overdraft is a facility extended by the banks to their current account holders for a short period generally a week. A current account holderis allowed to withdraw from its current deposits account up-to a certain limit over the balances with the bank Cash eredit is an arrangement whereby the commercial banks allow borrowing meney up toa specified limit. The cash credit facility is allowed against the security. Amanging overdraft and cash credit ih the commercial banks has become a common method adopted by companies for meeting their short term financial, or say, working eapital requirements. 2.8 COMPANY PROFILE: A) Company profile of Tata motors Ltd, Tata Motors Limited is an automobile company. The Company is engaged in the business of automobile products consisting of all types of commercial and passenger vehicles, including financing of the vehicles sold by the Company. Its operating segments include automotive 22| Pageoperations and all other operations. Its automotive segment operations include all activities relating to the development, design, manuficture, assembly and sale of vehicles, including Vehicle financing, as well as sale of related parts and accessories. Its automotive ‘operations are further subdivided into Tata and other brand vehicles (including vehicle financing) and Jaguar Land Rover, It's all other operations segment includes information technology services, and machine tools and factory automation solutions. Its commercial and passengerEast Asin, South vehicles are marketed in countries in oo ioe, Africa, the Midile Last, sand Russia. Asia, South Americ |. Australia, Commonwealth of Independent B) EXWICAL OMECTIVES + Tata group had never compromised on cthics, it last ycar edited Whistle blower policy for the benefits ofthe company & society +The Company believes in the conduct of the affairs of its Const nis in a fair and tensparent manner by adopting highest Standanis ofprofessionalism, honesty, inlegrityand cthical Behaviour. ©) MARKETSHARE & FUTURE PLANNING + Tata said that the initial target production volume would be 250,000cars per annum on . Consumer focus two shifis, expandable to 350,000 per annum on three si ind will have the: th environmental protection, »Die Welt reports that the car conforms lowest emissions in India D) PRODUCT FOCUS ‘Model versions ! ‘The basic Tata Nano Std priced at 123,000 Rupees has no extras; -~ TT Stew ww weewwewwuwes oud + Thedeluxe Tata Nano CX at 151,000 Rupees has-air conditioning; «The luxury Tata Nano LX at 172,000 Rupees has air conditioning, power Windows , fabric seats and central locking. 1 offer a version of the Nano with these safety-features, “Tata Motors ¥ Including an airbag system in Sheet-metal body made from Japanese and Korean steel, wi features such as crumple zones, intrusion-resistant doors, seat-belts, electric version, The Nano: has an all safety strong seals and anchorages, and the rear tailgate glass bonded to the body. Tires are wbeless, 16 [Pane5) SOCIAL RESPONSIBILITY Green Matters: Tata Motors, a Company that cares about the future... Tala Motors concem is manifested bya dual approach - 1) Reduction ofenvironmental poliution and regular pollution eontrol drives 2) Restoration of ecological balance. F) REDUCING POLLUTION Tata Motors has been at the forefront of the Indion automobile indusiry’s anti-pollution efforts by introducing cleaner engines. It is the first Indian Company to introduce vehicles with Euro norms well ahead of the mandated dates, G) RESTORING ECOLOGICAL BALANCE: ‘Tata Motors has set up effluent treatment facilities in its plants, to avoid release of polluted ‘water into the ecosystem. In Pune, the ireated water is conserved in Inkes attracting various species of binds fromiaround the world thus turning the space into a green belt. Tata Motors is committed in letter and spirit to Corporate Social Responsibility, It is a signatory to the United Nations Global Compact, and is engaged in community and social initiatives on labour and environment standards in compliance with the principles of the Global Compact. H) SOME OTHER SOCIAL RESPONSIBILITIES ARE. Community Development Heath & Sanitation Employment Generation CommunityCentresD OVERCOME CompeTiTioN ‘Tata initially targeted the vehicle as "the least expensive production car in the world aiming for a starting price of 100,000 rupees or approximately USS2000 Rival car makers including Bajaj Auto, Fiat, General Motors, Ford Motor, Hyundai, And Toyota Motor have all expressed interest in building a small car that is affordable to more middle-class consumers 1s|Pagein emerging mark sa = ‘The bulk of demand there is for small cars because people are much © to . fuel prices, Honda and Toyota are leading the way on so called cleaner gasoline. 1g prices down on these roaiotiis wecen and some environmentalists argue g¢ ia Pea te = core should be concentrated. Inexpensive and eco-friendly electric- SEER see en tan (both reportedly even cheaper than Tata Nano) and REVA Janger to Nano. There are also rumours of Maruti Suzuki troducing introducing a lower priced version of Alto to counter Tata Nano. TATA MOTORS4, WORKING CAPITAL TREND ANALYSIS; TABLE 1= SIZE OF WORKING CAPITAL: Particulars | MARGi[MAR20 [MAR | MARIS [MARI [A] Current Assets, Inventories (6,352.04 5,353.01 x 3,862.53 Sundry debtors 3,479.81 [2,128.00 z 1,216.70 Cash& Bank balance [795.42 526.61 226.15 Loans &Advances [140.27 213.96 IT Total of A(gross w.c) [10,767.54 [8,223.58 6,529.18 [BI ‘Curreni Liabilities: and provision Short Term Borrowings 099.87 _fs,1s8.52__ [3,654.72 ___—|7,762.01 artos (7.08293 (3,041.17 {8,852.65 Other Current Liabilities Ee \s62.92 [477.17 450.27 [o13.09 1,892.91 Provisions ‘Total of B 5437895 [24,538.93 |18,701.74 [20,370.63 __|18,797.53 WVorkii Te ea B} iaasta1_}13314.77_|-10,265.38 [11,934.91 _ 12,268.38 10,945.11 fs,s19.71__ [9,455.58 8,142.88. 463.18 20[Pagewaren —manz0 nario aris nari? 2ipPage ee ee ee ee eee eee Eee eeeMART [MARS [ MAR'I7 10,268.38 | -11,934.91 | -12,268.38 116.33 102.72 00 “Working Capital Indices WORKING CAPITAL INDICIES | | ea : | ato [- Yd ; | 10s | by | Niles | |e | 7 ; mann'2a MaR20 of Tata Motors Itd. from MAR'1T to MAR‘21, it © working capital throughout the period which Observation: On observing the working capi is evident that Tata Motors Ltd. had a nega means their current liabilities are more than their current assets. According to the above indices of Tata Motors Lid, was the highest in MAR"I9. information the working capi Particulars MARIO | MARS | MART Tnventorics [Bui7.92 1,802.08 [3,862.53 ‘Sunxiry Debtors 3,479.81 (2,128.00__[2,045.38. rT.316.70 ‘Cash & Bank Balance [795,42 326.61 788.42 Loans & Advances 140.27, 215.96 484.44 1223.77 [Frotat Current Assets [10,767.54 [5223.58 (8,436.36 (6,529.15 aziPage{ 45,000.00 40,000.00 35,0000 30,000.00 + 25,000.00 + 20,000.00 135,000.00, 10,000.00 Particulars MAR'21 MAR'20 MAR‘ MARIS MART Total assests 10,767.54 [5,223.58 3,436.36 (5,435.72 6,529.15 ‘Current Assets Indices 164.91 125.95 123.15. 129.2, 100. Catt aa ema Observation ; The above graph shows the change in the current assets of Tata motors ltd. by MAR‘I7 as base year. The current asset indices was 129.2 in MAR*I8 and then n MARI20 and to 164.91 in making decreased to 123.15 in MAR'L9.{t a MAR‘21, in increased to 125.953,099.87 Short Term Borrowing 9,411.05 MAR'20 MARTY 3,654.72 7,082.95 MAR'IS [8,852.65 MAR'I7 4,769.08 9,672.36 Other Current Liabilities 10,845.11 Provisions Total liabilities 320,000.00 100,000.00, 20,000.00 60,000.00 40,000.00 8,819.71 9,455.58 ATVAT 450.27 21,538.35 | 18,701.74 142.88 613.09 [20,370.63 2,463.18 1,892.91 18,797.53 Man MARE ar. mar | mane Particulars MAR2L MAR20 MAR'IS MARIS MART Total current Liabilities 24218.95 [21,538.33 18,701.74 120,370.00 18,797.53 128.84 114.58 100.5 100.81 100 24 | PageCURRENT LIABILITIES INDICES Observation: Current liabilities indices has been calculated by keeping MAR*17 as base year. The above graph shows that the the current liabilities indices was 100.81 in MAR" 18 and 100.5 in MAR" [Link] it inereased to 114.38 in MAR"20 and then 128.84 in MAR’21. 3.2 : WORKING CAPITAL RATIO ANALYSIS The ratio compounded ‘Working capital ratios means ratios which are related with the working capital management ¢.g. current assets, liquidity, profitability and risk wmoff etc. These ratios are classified as follows: fa] EFFICIENCY RATIO:- ‘The ratio compounded under this group indicate the efficiency of the organization to use the various kinds of assets by converting them the form of sale. The ratio also called as activity ratio or asset management ratio. As the asset basically categorized as fixed asset and current assets and the current assets further classified secording to individual components of current assets viz. investment or receivables or debtors or as-net current assets, the important of efficiency ratios are as follows — . Working capital Turnover ratio . Inventory tumover ratio 3. Receivable tumover ratio 1. Current asset tuniover ratio wlPagefe the short term position of the (B) LIQUIDITY RATIO: under this group indicat organization and also indicate the efficiency with which the working capital is being used » ‘The most important ratio under thisgroup are as follows :- 1. Current ratio 2. Quick ratio Worki : It signifies thot for on amount of sales, a relative amount of working capital is needed. If any s ratio helps increase in sales contemplated, working capital should be adequate and thus thi |. The ratio measures the management to maintain the adequate level of working capital efficiency with which the working capital is being used bya firm. TTT TT wee wwvrewewoces capita by dividing sales by working capital. Working ‘Itmay thus compute network capital turnover =sales/net working capital ‘TABLE 7= WORKING CAPITAL TURNOVER Partieular_| MAR21__[MAR20_| MAR’ MARIS | MARZ, (61 182.29 _fo02s —_fsas02.74 8176.15 [3812114 Sales Net Workin 8 Capital Working ‘Capital Tumover ioe [Link] [3.76 34 2 a.14 13314.77 |10265.38 1934.91 [1268.38 1345141 26|PageObservation : High working capital ratio indicates the capability of the organisation 10 achieve maximum sales with the minimum investment in working capital In the year,2021, the ratio was around 4.55,indicates that the capability of Tata motors Lid. to achieve Maximum sales with the minimum investment in working capital but in the year 2018 the ratio has fallen down , 2. Inventory Turnover Ratio:= Inventory tumover ratio indicates the efficiency af the firm in producing and selling its products. It is calculated bydividing the cost of goods sold [Link] inventory. Cost Of goods sald = sales ‘Average Inventory Note: Gross Profit is not given, So only sales is taken to calculate inventory tumover ratio : " i |AR'I8| MAR'L7) Particulars) MAR21/MAR20 | MARI) MAR'IS| Sales [6118229 [5007925 | 44502.74/38176.1S [38121.14 ANE: 5611.57 [5311.17 [4852.14 [4332.31 [4158.78 Inventory Inventory {10.9 (9.43 917 8.81 (9.17 Tumover Ratio WORKING CAPITAL TURNOVER, az [Page‘Observation; It was observed that inventory turnover ratio indicates maximum sales achieved with the minimum investment in the inventory. As such, the general rule high inventoryratio 2giPage- ideal ‘ is desirable but high inventory tumover ratio may not necessary indicates the profitable situation. Aa tion, ii i i n organization, in order to achieve a large seale volume may sometime sacrifice on entory tumovermntic Profit, inventory ratio may not result into high amount of profit. Inventory tio of Tata Motors Ltd. is fluctuating every year which indicates that inventory tumover is not steady. 3. Receivable turnover ratio. | . jross sales ‘The Derivation of this ratio is made in the fallowing way : Gross sales are inclusive of excise duty and scrap sales because both may enter into receivables by credit sales. Average receivable calculate by opening plus closing balance divided by [Link] volume of receivables without a matching increase in sales is reflected by a low receivable tumover ratio. It is an indication of slowing down of the collection system or an extend line of credit being allowed by the customer organization, The latter may be due to the fact the firm is losing out to competition, A eredit manager engage in ‘a task of granting credit or monitoring receivable should take the hint from a falling receivable turnover ratio use this market intelligence to find out the reason behind such failing wend. “Average collection period =365/Receivable Turnover Ratio 29] Pageeswewervrreweocewewwrueewew ee euwe eee ewe oon ce ’S Observation: In the above graph Debtor's Turnover Ratio of Tata motors Itd fram 2016-17 to 2020-21 was depicted, The Receivables Turnover Ratio indicates the efficieney with which a firm collects on the eredit it issues to customers. It can be seen that the Debtor's Turnover Ratio for Tata motors [Link] been the highest since 2016-17-In the year 2020-21, Receivable ‘Tumover Ratio has fallen down over last year's which indicates that collection policy has ‘worsen. 4, Current Asset Turnover Ratio: ‘Current asset tumover ratia is calculated to know the firms efficiency of utilizing the current asset, Current Asset includes the assets like inventories, sundry debtors, bills receivable, cash in hand, marketable securities , prepaid expenses and short-term loans and advances “The ratio includes the efficiency with which current assets are tum into sales. A higher mtio implies a moreefficient use of funds , thus high tumover ratio indicate to reduce the Fock up of funds in current assets. An analysis of this ratio over a period of time reflects working capital management ofa firm. Currentasset TOR = Sales Current Assets: Particular | MAIe21_| MAR20_[ MaAmeid | MARS [ MAR’ Sales lo1182.29 _|so079.25 _|aaso2.74 _|38176.15 [3812114 ‘Total assets|10,767.54 [8,223.58 [8436.36 |8.435.72__|6,529.15 ‘Current Assets Turove © Ratio OS MARZ! «© MAR20. MARI MARIS MAR‘IT qnicThe current asset tumover ratio indicates 9 fluctuating trend in the analysis over a period of time. Turnover ratio was 548 in MAR'I7 and then decreased to 4.53 in MARtIB from there it again increased to $.28 and {0 6.09 in MAR"I9. and MAR"20 being the highest, but again fell 105,68 in MAR"2T VPageA) LIQUIDITY RATIO 8) 1) Current Ratio ‘The Current ratio is calculated by dividing current asset by eurrent liabilities. CURRENT RATIO = Current assets Current liabilities Current asset include eash and those assets which can be converted into cash within a year + Such marketable securities , debtors and inventories. All obligations within @ year are included in current liabilities. Current Liabilities include creditors , Bills payable, accrued ‘expenses ,short term bank loan ,income tax liabilities and long term debt maturing in the current year, Current ratio indicates the availability of eurrent assets in rupees for every rupee of current liability. TABLE - CURRENT RATIO; Particular, MAR'21_| MAR'20 | MARTI9 | MAR'IS | MAR'LT ‘Current ‘Awects. | 10,767,54|8,223.58_ [8436.36 [5,435.72 _|s, ‘Current = Liabilities 4218.95] 2153835 18,701.74 | 20,370.63 |18, ‘Current Ratio 0 sahse 0.45 41 ([Link]) CHART 8; CURRENT RATIO. 32 Pareo | Q| aa aa c a FA | al | 3 a ee ee ee ee ee ee ee ee ee ee ee oe a)Observation: The current ratio indicates the availability of funds to payment of current liabilities in the form of current assets, A higher ratio indicates that there were sufficient assets available with the organisation which can be converted in cash, without any reduetion in the value. As ideal current ratio is 2:1, where current ratio is more than 2:1, it indicates the unnecessary investment in the current assets in the form of debtors and cash. A) Quick Ratio Quick Ratio establishes the relationship between quick or liquid assets and liabilities. Am asset is liquid if it can be converted into cash immediately or reasonably soon without a loss of value. Cash is the most liquid asset. Other assets which are considered to be relatively liquid and include in quick asset are debtors, bills receivable and marketable securities Inventoriesare considered as less liquid. Inventory normally required some time for realizing inte cash. Their value also is tendency to fluctuate, ‘The quick ratio is found bydividing quick assets by current Current Asset - Inventory quick Current assets-Closing stock- Prepaid RATIO= expenses ————— Currentliabilities - Bank Overdraft 34[ Page[ AR20] ARTIF] MARS] MART? 2670.57 [3318.44 [3633.64 [2666.62 (21,538.35 [18,701.74 |20,370.63 |18,797.53 (0.18 oid 35|PageCHART 9: QUICK RATIO TURNOVER QUICK RATIO TURNOVER eae ee ee: Uae Wi ur erec ur ckeet urls usuas Observation: Quick ratio indicates that the company has sufficient liquidbalance for the payment of current liabilities, The liquid ratio of 1:1 is supposed to be standard or ideal, but here the ratio is not ideal, OE Ee, ae 3.3 : FINDINGS As the project was conducted to analyze the working capital management of Tata motors Ltd. ' for the last five years. . During calculations, analysis and making project report I came to some major finding that are as follows: “Working capital shows a constant decrease every year. ' Company lack current assets to mect its current liabilities as in all the five years the 1 ‘company fails to meet the ideal standard ratio of 2:1. ‘The quick ratio is just above the standard ratio which is 1:1. Cash did not help to incrense in the sales volume, as cash is not eaming asset. Working capital of the company is good enough to meet its current obligations. Inventory tumover ratio of Tata motors Ltd. is fluctuating every year which indicates that inventory tumover is not steady, Company is generating better profit on net working capital employed every. year 36 (PageCHAPTER 4: CONCLUSIONS AND RECOMMENDATION 4.1 CONCLUSION Working capital management is important aspect of financial management. The sudy of ‘working capital management of Tata Motors Ltd. hat revealed that the current industry ‘was as per the standard practice, The study has been conducted on working capital ratio: ‘analysis, working capital components which helped the company to: manage its working ‘sapital efficiency effectively. I have concluded the following points: Working capital of the company “TATA MOTORS LTD.I is not increasing everyyear, instead it is negative due to its bad performance in the last five years. ‘The current ratio of the company is fluctuating in the last five years, which indicates the ‘unnecessary investment in the current asset in the form of debtors and cash, The quick ratio has also increased from MAR'IT to MAR’ abilities to meet its short term financial obligations on time, ‘21, which indicates the firm ‘The debtor's tumover ratio has fallen down over the past 2 years. Therefore, it indicates that collection has policy has worsen Inventory tumover ratio has increased year after year which signifies that the company's inventory is being kept within the company for a longer period. before getting converted into sales. 4.2: RECOMMENDATIONS, Working Capital Management, there are mainly three parts they are CashManagement, Receivables Management and Inventory Management. For optimum use of working capital, these three parts should be managed properly, for that I would like to give suggestions to “TATA MOTORS LTD. I theyare as follows: Considering the cash management the company should maintain a cash flow bua oer Pageyear, considering monthly or quarterly. During the preparation of the eash budgetthe eredit period should be below 30 days allowed to the customer and company shouldhold enough cash that it can mect its creditors any time, ‘Considering the receivables management, certain credit standards and policy shouldbe established, like: 8) Establishment of policy in appointing sales recovery force. 8) Cash discounts policy for cash purchases and early payment of debts balances by customer to be established. ©) Credit rating systems to be establishedConsidering the inventory management, there should be a fast movement of inventory, by taking efforts in increment of the sales and inventories should be maintained considering bulk purchase discount and inflating price of raw matcrial and accordingto market forecast to make saving in cost of raw material. Considering the creditors the management should set a price range for the creditors as company enjoy good credit, ‘The creditors who are paid carly should be given a low price. a9) P ageFor gathering information and details on the TATA MOTORSLTD. U referred websites and some articles to present my project in such manner, Some of myreferences are :- O www [Link] Q oO p “[Link] Articles on Tata motors yew tata 40|P age