PROJECT REPORT Submitted for the Degree of B.Com. (Hons.) in Accounting & Finance under the University of Calcutta Submitted by: Name ofthe Candidate: MD WASIM. Name ofthe College: SURENDRANATH EVENING COLLEGE College Roll No. vat CU Registration No + LIT-IL11-0358-19 2 PULLT-21-0149 ‘Supervised by:= Name of the Supervisor: MR. PRIYANKAR MODAK Nanic ofthe College: SURENDRANATI EVENING COLLEGE MAY ,2022 1[ Paged Vee bbe ede CSE Idee Edd E> EL} ANNEXURE-I Supervisor's Certificate ‘This is to certify that MD WASIM a student of B.Com 3*° Year Honours in Accounting & Finance of SURENDRANATH EVENING COLLEGE under the University of Caleutta has worked under my supervision and guidance or his Project Work and prepared a Project Report with the title -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 Place: Kolkata ncan ee yee Date Namie: PRIVANKAR MODAK Designation: SA.C.T Name of the College: SURENDRANATII EVENING COLLEGEANNEXURE-II Student's Declaration Thereby declare that the Project Work with the title “WORKING CAPITAL MANAGEMENT WITIL RESPECT OF TATA MOTORS LIMITED" submitted by ‘me for the partial fulfillment of the degree of B.Com. 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 requiement for any course of study. Valso declare that no chapter of this manuseript in whole or in part has been incorporated in this report from any earlier work done by others or by me. However, extmets of any literature which has been used for this report has been duly acknowledged providing details ofsuch literature in the references. Place: Kolkata signature: M99. L983 Date: refoxfror Name: MD WASIM CU, Registration No: - HI7-1111-0358-19 Roll. No: ~ LI ‘Name of College : SURENDRANATH EVENING COLLEGE ere LT=LELL-O3S819 31Page~~~ wwwewervees eee c ees ACKNOWLEDGEMENT This project on “WORKING CAPITAL MANAGEMENT WITH RESPECT OF TATA MOTORS LIMITED” could not sce the light if had I not received immense help from many Pesons associated directly or indirectly with the title and conduct of the project at 6th Semester, B.Com (Accounting & Finanes) of our esteemed teaming institution, Surendranath Evening College. I am 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 assistanes completion of this project would not have been possible. It is my great pleasure to express my respect and gratitude to all esteemed faculties of Department of Commerce, Surendranath Evening College. Iam especially grateful and thankful ‘te 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 areas of project. | am also indebted to Prof. Barendra Roy, Head of the Department of Commerce, Surendranath Evening College. In this oceasion 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 | do not acknowledge the contributions of different authors and experts in this field. The entire project is the outcome of the idens gained from them. | am ‘grateful to all of them. Last but not the least; [ would like to thank my parents and friends for their inconsistent support for the successful completion of my project.INDEX CHAPTERS | CONTENT | PAGE.NO, | CUAPTER1 | INTRODUCTION 6-8 1.1] Background of the study 6 1.2] Brief review of literature 67 1.3] Objective ofthe study 7 1.4] Research methodology 7 1.5| Limitation of the sudy 8 1.6[ Chapter planning 8 CHAPTER2 | CONCEPTUAL FRAMEWORK 18 | 2.1] Definition of working capital 9 | 2.2| Types of working capital 9-10 2.3| Importance of working capital 10-11 24| Working capital cycle UW Basic concepts of working 2.5] capitalmanagement U-l4 2.6] Factors of working capital requirement 14 2.7 Sources of working capital 1415 2.8| Company profile 15-18 |PRESENTATION OF DATA AND CHAPTER3 —/ANALYSIS OF DATA AND aa FINDINGS 3.1] Working capital analysis 19-23 3.2| Working capital ratio analysis 2331 3.3| Findings 31 CONCLUSION AND en CHAPTERS | RECOMMENDATION ~ Conclusion 32 Recommendations 3253 BIBLIOGRAPHY & REFERENCE 34 pee SlPageCHAPTER 1: INTRODUCTION 1.1 BACKGROUND OF THESTUDY Working capital management is concemed with problems that arise in attempting fo 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 cash, marketable securities, accounts receivable and inventory .The term current linbilities refer to those liabilitics 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 concern. The basie current liabilities 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 ‘overall profitability of the firm .The interaction betwen current assets and current liabilities is, therefore the main theme of Working Capital Management, There are two concepts of Working Capital Management ic. 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 1 ing capital can alternatively be defined as that portion of current assets which is financed with long term funds .Since current liabilities represent of short term funds, as long as the currents assets excess the current liabilities, the excess must be financed with on 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 a firm's overall liquidity are 1)The current ratio ,2)The acid test ratio and 3)The net working capital, 1.2. BRIEF REVIEW OF LITERATURE ferent rescarchers have done studies in the field of working capital management , out of 6] Pagewhich three research results areas fallo’ 1) Vera (1989) examined working capi | management in Tata [ron and Steel Company Ltd. (TISCO), Steel Authority of India Lid. (SAIL) and Indian Iron and Steel Company(IISCO) during the period from 1978-79 to 1985-86 by using the financial tools and statistical techniques. :- ‘The study indicates -- Tata Iron and Steel Company Limited had better working ca 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 had made excessive use of bank borrowings to finance the working capital requirements.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 scctor and 10 from public sector for the period from 1981 to 1990, For the purpose of analysis researcher has used statistical techniques and financial tools. Study indicates -- Major share of working capital finance is from borrowings and effect ofcost on the selection of 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 understand 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 of ample funds as and when they are needed. 1.4 RESEARCH METHODOLOGY 1) Area of the study This is an analytical case study of Tata motors limited's position of workingeapital, profitability & solvency. 2) Types ofdata usedThe main source of data collected is from the website of Tata motors Itd. The secondarydata has been collected from different websites and books. 3) Period of study: Uhave 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 analysis. 91Page1.5 LIMITATIONS OF THESTUDY This study is conducted in partial fulfillment of the requirement for the B.Com. 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 financing a time service of fairly long period are needed -But this project has been covered only in one the financial year. ‘The other constraints of this studyare as follows:= 1.5.1 Though there are many manufacturing 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 |: INTRODUCTION. CHAPTER2: CONCEPTUAL FRAMEWORK. CHAPTER 3: PRESENTATION OF DATA, ANALYSIS AND FINDINGS. CHAPTER 4: CONCLUSION AND RECOMMENDATIONS 1o|Page1.5 LIMITATIONS OF THESTUDY This study is conducted in partial fulfillment of the requirement for the B.Com. 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 financing a time service of fairlya long period are needed .But this project has been covered only in one the financial year, ‘The other constraints of this studyare as follows: 1.5.1 Though there are many manufacturing companies, but this study onlydeals with TATA MOTORS Lid. 1.5.2. Being asindent timeand 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 report of the company. 1.6: - CHAPTER PLANNING CHAPTER |: INTRODUCTION. CHAPTER2: CONCEPTUAL FRAMEWORK. CHAPTER 3: PRESENTATION OF DATA, ANALYSIS AND FINDINGS. (CHAPTER 4; CONCLUSION AND RECOMMENDATIONS 10|Page(Le. 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 ofa firm existence. 1. According to Weston & Brigham - Working capital refers to a firm's investment in short termassets, such as cashameunts receivables, inventories cte, 2. Warking capital means current assets, - Mead, Baker and MA Lott 3. “The sum ofthe current assets is the working capital of the business! - J.S. Mill 22 :/LYPES OF WORKING CAPITAL Classification of working On the Concept basis PERMANENT WORKING. coma ‘TEMPORARY ‘WORKING CAPITAL A) CONCEPT: From the concept point of view, working capital can be defined as Gross working capital or Net working capital. [Page) GROSS WORKING CAPITAL: It refers to the firm's Investment in current assels are those assets, which ean be converted into cash within an accounting year, Current assets include stock of raw materials, working-in-progress, finished goods, trade debtors, Prepayments, cash balances, ete. (i) NET WORKING CAPITAL: - It refers to the different between current assets and current linbilitics. Current linbilities are those claims of outsider which are expected to mature for payment wit in an accounting year, Current liabilities includes trade creditors, ‘acerual taxation payable, bill payable, outstanding expenses, dividend payable and short term loans. B) TIME: Fromithe point of view of time, the working capital can be divided into two categories namely fixed and temporary () PERMANENT WORKING CAPITAL:- It refers to hard core working capital. [t is that minimum level of investment in the current assets that is carried by the business at all times to carryout minimum level of its ac Example: Every firm has to maintain minimums level of raw materials, WIP and finished goods and ash balance, 4) TEMPORARY WORKING CAPITAL: I refers to thot part of total working ‘enpital, which is required by a business ever 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 term source, 2.3 : JMPORTANCE OF WORKING CAPITAL: Working capital is needed (illo firm gets cash on sale of finished products. It depends on [Pagetwo factors: 1. Manufacturing cyele i.e, time required for ‘converting the raw material into finished product; and il. Credit poticy credit period given to Customers and credit period allowed by creditors. Thus, the sum total of these times is called an -Operating cycle and it consists of the following six steps: a) Conversion of cash into raw materials.by Conversion of raw materials into work-in-progress, ©) Conversion of work-in-progress into finished products. 4) Time for sales of finished goods- Cash sales and Credit sales, €) Time for realization fromdebtors and bills receivables into cash. Credit period allowed by creditors for credit purchase of raw materials, inventory and creditors for wages and overheads 2.4 : 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 Mowing and to use the cash flow to generate profits, If a business is operating profitably, 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 need for working capital and investment. The cheapest and best sources of cash exist as working capital right within business. Good management of working capital will generate cash will help improve profits and reduce risks. Bear in mind that the eost 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 cycle that absorb cash - Inventory (stocks and. work= in-progress) and Receivables (debtors owing you money). The main sources of cash are Payables (your ereditors) and Equityand Loans. 2.5 : BASIC CONCEPTS OF WORKING CAPITAL MANAGEMENT: 2.5.1 MANAGEMENT OF WORKING CAPITAL 1s|PageWorking Capital Management involves management of different components of working capital such a5 cash, inventories, accounts receivable, creditors etc. 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 concems.Net working capital is the difference between ‘Surrent 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 Inventory is stores of goods and stocks, This includes raw materials,work-in-process and finished goods, Raw materials consist of those 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 fora steel industry, but raw material for an automobile manufacturer. Thus, inventory may be defined as Stock of goods that is held for future usel. 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. Henec, the need for effective and efficient management of inventories. A good inventory management is important to the success(ul 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 achievement 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 evel of inventory investment. 2.5.3_CASH MANAGEMENT; Cash management is one of the key areas of working copital 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 cash management. The term ~Cash! with reference to management of cash is used in two ways. In a narrow sense cash refers coins, currency, cheques, drafts and deposits in banks, The broader view of cash 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 nar less. Inaulequate cash will lead to production interruptions; while excessive cash remains idle and will impair 16 [Pageprofitability, Hence, the need far 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 pay rather than paying in cash. ‘There are good reasons why we allow people to pay on credit even though literally it doesn't make sense! Ifwe allow people time to pay their bills, theyare more likely te buy I7|Pageé : - iste your business than from another business that doesn'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, ofcourse, In spite of what we have just said, creditors will need to optimize their eredit control policies in exactly the same way that we did when we were assessing our debtors’ tumover ratio - afer all, if you are my debtor Lam your creditor! We give credit but we need to-control how much we give, how often and for haw long. The formula for this ratio is: Creditors’ Turnover: = Average Creditors (Costof Sales/65) Creditors are a vital part of effective cash management and should be managed carefully ta enhance the cash position, 2.5.5 HANDLING RECEIVABLES (DEBTORS) Cash flow can be significantly enhanced if the amounts owing to a business are collected faster. Every business needs to know who owes them money, how much is owed, howlong yed Debtors and cost of debtors have direct relation; cost will it is owing, for what it is increase due to inerease in debtors and vice-versa, It depends on the eredit sale of concer and credit period (collection period) allowed to customer. Debtor management is the process of finding the balance at which company agrees to receive 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: «Volume of Credit sales + Credit period allowed to customers. 18 [Page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Se lee See eeeeew eooooeeeseoewe Oeoee coi 3. Quantum of advance received from custome 4. Credit policy of company, say number of days allowed to customer for payment to the customers 5. Cost of debtors 6, Manufacturing eyele time of the product etc, 2.6 +EACTORS OF WORKING CAPITAL REQUIREMENT: 1, Length of operating cycle: The amount of working copital dircetly depends on the length of operating cycle. Operating cycle refers to the time period involved in production. If operating cycle is long then more working 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, etc. so they generallyrequire less working capital. 4, Business cycle Fluetuations: During boom period the market is flourishing so much demand, more production, and more stock which means more amount of working eapital is required, Whereas during depression period low demand, low inventories, to be maintained, so less working capital will be required. 5. Operational Efficieney: 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 catemprises ean raise loans from 20/P agethe commercial banks with or without security. Loan ean be paid in. lump sum or in parts Hence,it is generallya cheaper source 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 can raise funds through public deposits subject to a maximum of 25% of their paid up capital and 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 factoring is that customers who are really in genuine difficulty do not get the opportunity of delaying payments which they might have otherwise got from 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 from customers become ‘one of the cheapest sources of raising finds for mecting working capital requirements of the companies. 5. BANK OVERDRAFT AND CASII CREDIT: Overdraft iso 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 aver the balances with the bank Cash credit is an arrangement whereby the commercial banks allow bomowing money up toa specified limit. The cash credit facility is allowed against the security. ‘Arranging overdraft and cash credit with the commercial banks has become a common method adopted by companies for meeting their short term financial, or say, working capital requirements. ‘Tota Motors Limited is an automobile company. The Company is engaged in the business of automobile products consisting of all types of commercial and passenger vehieles, 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, manufacture, 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-~T Trew ew wewewewewwewsewue eur Hast Asin, South vehicles are marketed in countries int Europe, Africa, the Middle Bast, S Asia, South America, Australia, Commonwealth of Independent States and Russia D) ETUICAL onEcTivEs +Tata group had never compromised on ethies, it last yenr edited Whistle blower policy for the benefits of the company & society +The Company believes in the conduct of the affairs of its Constit sin a fair and transparent manner by adopting highest Standards ofprofessionalism, honesty, integeityand cthical Behaviour. C) MARKET SHARE & FUTURE PLANNING + Tata said that the initial warget production volume would be 250,000cars per annum on two shifts, expandable to 350,000 per annum of three shifls. Consumer focus ‘Welt reports that the car conforms with environmental protection, and will have the Jowest emissions in India. D) PRODUCT FOCUS ‘Model versions ‘The basic Tata Nano Std priced at 123,000 Rupees has no extras; +The deluxe 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. “Tata Motors will offer a version of the Nano with these safety-features, Including an airbag system in its electric version. The Nano has an al Shect-metal body made from Japanese and Korean steel, safety features such as crumple zones, intrusion-resistant doors, seat-bel strong seats and anchorages, and the tear tailgate glass bonded 10 the ines are tubeless. 16 [Page—) SOCIAL RESPONSIBILITY Green Matters: Tata Motors, a Company that cares about the future. Tata Motors coneem is manifested bya dual approach - 2) Reduction of environmental pollution and regular pollution control drives, 2) Restoration of ecological balance. F) REDUCING POLLUTION Tata Motors has been at the forefront of the Indian automobile industry's anti-pellution efforts by introducing cleaner engines. It is the first Indian Company to introduce vehicles with Euro norms well ahead ofthe 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 treated water is conserved in lakes attracting various species of birds from around the world thus tuming 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 cemmunity and sociat initiatives on labour and environment standards in compliance with the principles of the Global Compact. H) SOME OTHER SOCIAL RESPONSIBILITIES ARE Community Development Health = & Sanitation Employment Generation Community Centres:D OVERCOME compeTirioN ‘Tata initially targeted the vehicle as “the least expensive production car in the world siming for a starting price of 100,000 rupees or approximately US$2000 Rival car makers ineluding Bajaj Auto, Fiat, Gencral Motors, Ford Motor, Hyundai. And Toyota Motor have all ‘expressed interest in building a smallcar that is affordable to more middle-class consumersin emerging markets. The bulk of demand there is for small cars because people are much more sensitive 10 fuel prices, Honda and Toyota are leading the way on so called cleaner gasoline-electric hybrids, and some environmentalists argue getting prices down on these technologies is where efforts should be concentrated. Inexpensive and eco-friendly electric- cars like Tara Tiny, Oreva Super (both reportedly even cheaper than Tata Nano) and REVA Pose even more significant danger to Nano. There are also rumours of Maruti Suzuki introducing a lower priced version of Alto to counter Tata Nano. TATA MOTORS 19[PageParticulars [Marzi [MAR20 MARIS | MARTE | MAR'I7 TA] Current Assets Inventories [6,352.04 15,553.01 [5,117.92 [7,802.08 (3,862.53 Sundry debtors .479.81 [2,128.00 [2,045.58 111448, 1,216.70 Cash& Bank balance [326.61 [788.42 944.73 (226.15 Loans & Advances. [795.42 [215.96 Tasa.aa 1574.41 1,223.77, Total of A(eross Wc) [9,223.58 [8,436.36 (8,435.72 (6,529.15, (BI Curren| Liabit 140.27 10, and provision Short Term Borrowings 3,099.87 [5,158.52 [3,654.72 (7,762.01 [4,769.08 (0,411.05 7,082.95 Ss 1a.17 [s.852.63 19,672.36 Other Current Liabilities 10,845.11 [3,819.71 9,455.58 3,142.88 2,463.18 Short Term 862,92, [477.17 450.27, 613.09 1,892.91 Provisions 24,218.93 21,538.35 13,701.74, 20,370.63 18,797.53 ‘Total of B Net Working Capital(A-B) 13,451.41 13,314.77 10,265.38. 11,934.91 2,268.38 20| Pageeee ee ee ee ant —nan20 —nanis aris ani? aiipagein| MARI MAR'20 MAR'ID MARIS MART. MAR'21 Observation: On observing the working copital of Tata Motors ltd. from MAR"17 to MAR‘21, it is evident that Tata Motors Ltd. had a negative working capital throughout the period which means their current liabilities are more than their current assets. According to the above information the working capital indices of Tata Motors Lid, was the highest in MAR"19. mann'20, WORKING CAPITAL INDICIES. Tala. 90 Mania MaR'i9 Working Capit . 10,265.38 | -11994.91 | -12.268.38 hikes 19.68 ioas3—] ri633 ~~ 102.72_—‘| +100, {oma moneyveontrolcom) 2, CURRENT ASSETS ANALYSIS: Particulars MARTI | MAR20 | MARI) | MARIS | MARIT inventories jess204 (5553.01 (5,107.92 _—(,802.08 (8 ‘Sundry Debtors [3,479.81 045.58 |L11448__[L21 [Cash & Bank Balance [795.42 788. 9. 2 Loans & Advances [140.27 ir A(t 33.77 Total Current Assets [0,767.54 [8223.58 [BAIG36 35.72 (6,829.15 2IPage[ asaoa00 49,900.00 35,000.00 3090000 25,000.00 20,000.00 15,000.00 —~ ia ee 1,000.00 \ MARS ssno0100 = 00 : : Manzo wana arts Tal Particulars MAR'21 MAR'20 MAR'I9 MAR'I8. MAR'I7 ‘otal assests 10,767.54 (8,223.58 (8,436.36 (8,435.72 (6,529.15 ‘Current Assets Indices [164.91 125.95 123.15 129.2 100 Coa em le Pe er ur et Observation : The above graph shows the change in the current assets of Tata motors Itd. by ing MAR’I7 as base year. The current asset indices was 129.2 in MAR'I8 and then decreased to 123.15 in MAR’I9.it again increased to 125.95 in MARI20 and to 164.91 in MAR'2)[Particulars Short Term Borrowings MAR'21 MAR'20 MARIO 3,099.87 5,158.52 3,684.72 L MaAR'I8 17,762.01 MAR'I7 4,769.08 Trade Payables 9,411.05 5,141.17 8,852.65 9,672.36 Other” Current Liabilities Short Term Provisions 10,845.11 862.92 sf 7,082.95 8,819.71 477.17 9,455.58 450.27 142.88, 613.09 2,463.18 1,892.91 Total liabilities 24,218.95 21,538.35 18,701.74 [20,370.63 18,797.53 (a moneycontrol.com) 120,000.00 ;— 100,000.00 80,000.00 } 80,000.00 40,000.00 120,000.00 9.00 —Mae'17 Man's MaRS ano | ane, (7 Particulars MAR20 MARIS MARIS: MART Total current Liabilities Liabilities [21,538.35 18,701.74 120,370.00 18,797.53 114.58 100.5 241 PageCURRENT LIABILITIES INDICES MAR'2L MAR20 MAR'I9. MARIS MART Observation: Current liabilities indices has been calculated by keeping MAR"I7 as base year. The above graph shows that the the current liabilities indices was 100.81 in MAR’ 18 and 100.5 in MAR 19.then it increased to 114.58 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 e.g, current assets, liquidity, profitability and risk turnoff ete, These ratios are classified as follows: 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 acconling to individual components of current assets wiz. investment or receivables or debtors or as net current assets, the important of efficiency ratios are as follows ~ Working eapital Tumover ratio . Inventorytumaver ratio . Receivable tumover ratio. . Current asset tumover ratio 25] Page(8) LIQUIDITY RATIO: under this group indicate the short term position of the organization and also indicate the efficiency with which the working capital is being used , ‘The most important ratio under thisgroup areas follows t= 1. Current ratio 2. Quick ratio Work , It signifies that for an amount of sales, a relative amount of working capital is needed. Ifany hus this ratio helps increase in sales contemplated, working capital should be adequate and pital. The ratio measures the management to maintain the adequate level of working ca} efficiency with which the working capital is being. used bya firm. ~ TTT TT ww eww eweeweces Ttmay thus compute networking capita by dividing sales by working capital, Working capital temnover #sales/net working capital ‘TABLE 7 = WORKING CAPITAL TURNOVER ' Particular a MAR'21 MAR'20_| MAR'ID MAR'I8 | MAR'I7. \ Sales [6118229 $0079.25. Ieascz:34 8176.15 [3812114 Net | Workin g 13451.41 13314.77 |10265.38 1934.91 12268.38 Capital, Working Capital Turmover Ratio 16.55 13.76 [34 3.2 3.14 26|PageObservation = High ‘Working capital ratio indicates the capability of the organisation to achieve maximum sales with the minimum investment in working capital .In the year,2021, the ratio was around 4.35,indicates that the copability af 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 of the firm in producing and selling its products. It is calculated byuividing the cost of goods sold by average inventory. Cost Of goods sold » sales /Awerage Inventory Note: Gross Profit is not given. Soonly sales is taken to calculate inventory tumover ratio. TABLE 8: INVENTORY TURNOVER RATIO: ; J i AR'I8| MAR'IT Particulars | MAR'2I/MAR'20 | MAR'I9) MARIS) Sales (61182.29 [5079.25 | 4450274 |38176.15 [3812.14 Ave. lsou1.s7 [5311.17 |43s214 [4332.31 [4158.78 Inventory Inventory {10.9 [9.43 19.17 8.81 (9.17 Tumover Ratio WORKING CAPITAL TURNOVER MARIS MARIS” MARL a|Page‘Observation * It was observed that inventoryturnover ratio indicates maximum sales achieved with the minimum investment in the inveniory, As such, the general rule high inventoryratio, is desirable but high inveniory tuiover ratio may not necessary indicates the profitable situation. An organiza fon, in order to achieve a large scale volume may sometime sacrifice on profit, inventory ratio may not result into high amount of profit. Inventory tumoverratio of Tala Motors Ltd. steady. 's fluctuating every year which indicates that inventory tumover is not 3, Receivable turnover ratio Grosssales The Derivation of this ratio is made in the following way coat yocalvable Gross sales are inclusive of excise duty and serap sales because both may enter into receivables by credit sales. Average receivable calculate by opening plus closing balance divided by 2.Inereasing volume of receivables without a matching increase in sales is reflected by a low receivable tumaver ratio. It is an indication of slowing down of the collection system or an extend line of eredit 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 fa task of granting credit or monitoring receivable should take the hint from a falling receivable tumover ratio use this market intelligence to find out the reason behind such failing trend ‘Average collection period=365/Receivable Tumover Ratio 2a [Pageeweweevewvrervseweewweueeevenwnnw ee eeu eevee wee cece ce: 2-DEBTOR’S TURNOVER RATIO: Observation: In the above graph Debtor's Tumover Ratio of Tata motors Itd from 2016-17 to 2020-21 was depicted, The Receivables Turnover Ratio indicates the efficiency with which a firm collects on the credit it issues to customers. It can be seen that the Debtor's Tumover Ratio for Tata motors Ltd.has been the highest since 2016-17.In the year 2020-21, Receivable Tumover Ratio has fallen dawn over last year’s which indicates that collection policy has ‘worsen. 4. Current Asset Turnover Ratio: ‘Current asset turnover ratio 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-ierm lonns and advances .The includes the efficieney with which current assets are tum into sales. A higher ratio ral implies a more 30]Pageefficient use of funds , thus high tumover ratio indicate to reduce the lock up of funds in surrent assets. An analysis of this ratio over a period of time reflects working apis! management ofa firm. Current asset TOR = Current Assets Particular | MAR'21 | MAR'20 TAR | MARIS [| MART Sales }61182.29° S0079.25 144502.74 3817615: 381 21.14 ‘Total assets |10,767.54 b2zs.se le.436.36 —|8,485.72 [6529-15 Current: Assets Tumove r 5.68 Ratio MAR2] MAR20 MARI9 MARIS MART | ___srihe current asset tumover ratio indicates @ luetwating trend in the analysis over a period of time. Turnover ratio was 5.48 in MARI and then decreased to 4.53 in MAR 18 from there it again inereased 10 $.28 and to 6.09 in MARTI9 and MAR'20 being the highest, but again fell 105,68 in MAR'21 Mirage4) LIQUIDITY RATIO 5) 1) Current Ratio ‘The current ratio is calculated by d current asset by current liabilities. CURRENT RATIO = Currentassets Current liabilities Current asset include cash and those assets which can be converted into eash within a year « such marketable securities , debtors and inventories. All obligations within a 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 current assets in rupees for every rupee of current liability. TABLE 11- CURRENT RATIO; Particulay MAR'2t | MAR'20 | MAR'I9 | MAR'I8 | MAR'IT Current Assets c it Liabilities 24,218.95 | 21,538.35 | 18,701.74 | 20,370.63 |18,797.53 Current Ratio 0.44 [0.32 os Al 0.35: (www.moneycontro.com) CHART 8: CURRENT RATIO 10,767.54 [8,223.58 [8,436.36 [8,435.72 _|6,529.15 RiPare(a =a = 2. fr ry i e aa | o __ i i ar rl le OOO MB OAR A BEAKER HR ALF OAEObservation: The current ratio clicates 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 eash, without any reduction in the value. As ideal current rovio is 2:1, where current ratio is more than 2:1, it indicates the unnecessary investment in the current assets in the formof debtors and cash. 1) Quick Ratio Quick Ratio establishes the relationship between quick or liquid assets and liabilities. An asset wid 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 into cash. Their value also is tendencyto Muctuate, ‘The quick ratio is found bydividing quick assets by current liabilities Current Asset - Inventory guick Current assets-Closing stock- Prepaid RATIO= expenses Current liabilities - BankOverdraft 34| PageTABLE 12: QUICK RATIO [ Particulal MARI] MARIO] MARTD r Curre nt assets [Current Liabiliti 24,218.95 [21,338.35 18,701.74 |20,370.63 { 18, fo.12 18, (0.18, o.14 MARIS] MAR‘I7 (4155 267057 h318.44 [3633.64 18,797.53 35[Page7 a ae ee eee ee CHART 9: QUICK RATIO TURNOVER QUICK RATIO TURNOVER MAR21 | MAR20 SUbe bc uecienelih ues Observation: Quick ratio indicates that the company has sufficient liquidbalance for ihe payment of current liabilities, The liquid ratio of 1: is supposed to be standard or ideal, but here the ratio is not ideal, 3.3 : EINDINGS 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 meet its current liabilities as in all the five years the company fails to meet the ideal standard ratio of 2:1. % Thequick ratio is just above the standard ratio which is 1; % Cashdid not help to increase in thesales volume, os ash is not enming asset. + Working capital of the company is good enough to meet its current obligations. + Inventory umover ratio of Tata motors Lid. is Quetuating 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 study of ‘working capital management of Tata Motors Ltd. has revealed that the eurrent 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 capital efficiency effectively, I have concluded the following points:- Working capital of the company -TATA MOTORS LTD. is nat increasing everyyenr, 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'I7 to MAR'21, which indicates the finn abilities to meet its short term financial obligations on time. The debtor's turnover 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 thot 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 CashManagernent, 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 eash management the company should maintain a eash flow budget vey 37|Pageyear, considering monthly or quarterly. During the preparation of the cash budgetthe credit period should be below 30 days allowed to the customer and company shouldhold enough cash that it can meet its creditors any time. Considering the receivables management, certain credit standards and policy shouldbe established, like: 2) Establishment of policyin appointing sales recovery force. b) Cash discounts policy for eash 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 material 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 ercdit, ‘The creditors who are paid early should be given a low price. 39] PageFor gathering information and details onthe TATA MOTORSLTD. U referred websites and some articles to present my project in such manner. Some of myreferences are ;- Atticles on Tata motors 40|P ane