ANALYSIS OF WORKING CAPITAL

UNDER THE GUIDANCE OF PROF. ZOHRA BI

PRESENTED BY
ATISH JAIN
RAMJI SIMHADRI
ABHIJEET KORE
SHIVRAJ KATAGI
ANKIT SHARMA
 RELIANCE INDUSTRIES LIMITED

a. The Reliance Group, founded by Dhirubhai H. Ambani (1932-2002), is India's

largest private sector enterprise, with businesses in the energy and materials
value chain. Group's annual revenues are in excess of US$ 44 billion.
b. Backward vertical integration has been the cornerstone of the evolution and
growth of Reliance.
c. Reliance is the largest polyester yarn and fibre producer in the world and among
the top five to ten producers in the world in major petrochemical products.
d. The value chain of Reliance has following business
I. Exploration and production
II. Petroleum Refining and Marketing
III. Petrochemicals
IV. Textiles
V. Retails
e. The flagship company, Reliance Industries Limited, is a Fortune Global 500
company and is the largest private sector company in India.
Working Capital:

Working capital is how much in liquid assets that a company has on hand.
Working capital is needed to pay for planned and unexpected expenses, meet the
short-term obligations of the business, and to build the business.

A lack of working capital makes it hard to attract investors or to get business

loans or obtain credit.

A measure of both a company's efficiency and its short-term financial health.

The working capital ratio is calculated as:

 
Working Capital = Current Assets – Current Liabilities
Current Assets:
A balance sheet item which equals the sum of cash and cash equivalents,
accounts receivable, inventory, marketable securities, prepaid expenses, and
other assets that could be converted to cash in less than one year.

Current assets in reliance industries:

inventories
sundry debtors
cash and bank
loans and advances

Current Liabilities:
A balance sheet item which equals the sum of all money owed by a
company and due within one year. also called payables or current debt.

Current liabilities in reliance industries:

sundry creditors
provisions
 Current Inventory Debtors Debtors
ratio Turnover Turnover Collection
Ratio Ratio Period
06 to 07 1.61 7.61 29.92 12.19
07 to 08 1.78 7.43 21.48 16.98
08 to 09 1.53 7.97 31.05 11.75

30
20
10
0
06 to 07
atio atio atio ir o
d
tr rr rr pe 07 to 08
rr e
n ve ve n 08 to 09
cu rno rno tio
u u ec
y t
rst co
ll
t or t o s
e n
de
b or
in
v ebt
d
 Inventories:
Mar 07 Mar 08 Mar 09
Raw materials 4464.87 8393.70 6112.85
Work in progress 1888.74 1523.96 2193.89
Finished goods 4,759.88 3,257.50 3,015.13
Stores and spares 1,023.02 1,072.38 3,514.85

9000
8000
7000
6000
5000 06 to 07
4000 07 to 08
3000 08 to 09
2000
1000
0
RM WP FG SS
 Sundry Debtors
Mar 07 Mar 08 Mar 09
Debtors more than Six months 13.02 13.06 13.55
Debtors Others 6,214.52 4,557.83
3719.40

6000
4000
2000
0
06 to 07
07 to 08
08 to 09
 Cash and bank
Mar 07 Mar 08 Mar 09
Balance with Bank 306.55 206.28 488.41
Term Deposit with Banks 1,527.00 4,062.26 21,676.40
Cash in hand / others 1.80 11.51 11.72

25000
20000
15000
10000
5000
06 to 07
0
07 to 08
08 to 09
 Loans and Advances
Mar 07 Mar 08 Mar 09
Loans to Subsidiary 6,181.44 6,038.45 4,534.74
Loans to Group / Associate Companies 0.96 19.00 22.38
Deposits with Government 794.88 1,276.30 1,142.80
Deposits Others 3,751.74 3,981.63 2,263.22
Advance Tax 313.43 375.28 1,167.10
Advances recoverable in cash or kind 1,233.43 6,437.35 4,019.42
Less : Provision for Doubtful Advances 69.88 69.88 69.88
Interest Accrued on Investments 2.90 72.32 47.59

7,000.00
6,000.00
5,000.00
4,000.00 06 to 07
3,000.00 07 to 08
2,000.00 08 to 09
1,000.00
0.00
LS L/ A DG DO AT AC Pn II
Current liabilities:
06 to 07 07 to 08 08 to 09
Sundry Creditors 16462.70 20,560.10 31,492.78
Creditors for Goods 14705.28 18,305.62 14,696.04
Creditors for Capital Goods 1757.42 2,254.48 16,796.74
Due to Subsidiary / Group Companies 4.54 30.35 86.31
Unclaimed Dividend 69.52 70.32 88.98
Interest Accrued But Not Due 314.81 377.18 1,017.45
Other Liabilities 13.96 7.52 4.06
35000
30000
25000
20000 06 to 07
15000 07 to 08
10000 08 to 09
5000
0
SC CG CCG SGC UD IABD OL
Provisions:
Mar 07 Mar 08 Mar 09
Provision for Corporate Dividend Tax 0.00 277.23 322.40
Provision for Gratuity 493.10 620.81 477.78
Provision for Dividend 0.00 1,631.24 1,897.05
Proposed Equity Dividend 0.00 1,631.24 1,897.05
Other Provisions 1,219.77 463.34 313.67

2000
1800
1600
1400
1200 06 to 07
1000
800 07 to 08
600 08 to 09
400
200
0
PCDT PG PD PED OP
WORKING CAPITAL RATIO:

Working Reliance IOCL MRPL INDUSTRY

Capital Ratio Ratio
Mar 07 1.61 1.27 1.42 1.33
Mar 08 1.78 1.53 1.31 1.51
Mar 09 1.53 1.26 1.74 1.34

2
1.8
1.6
1.4
1.2 reliance
1 iocl
0.8 mrpl
industry
0.6
0.4
0.2
0
06 to 07 07 to 08 08 to 09
CONCLUSION
 Working Capital Ratio = Current Asset / Current Liablities
 Indicates if the firm has enough short term assets to cover its immediate
liablity
 Anything below 1 indicates low working capital while anything above 2
means that the company is not utilizing the excess assets.
 A high working capital ratio isn’t always a good thing, it could indicate
that they have too much inventory or they are not investing their excess
cash.
 As the ratio of RIL is between 1.5 to 1.8 so working capital ratio of RIL is
good .
 Calculating the fund flow operation in year 2006-2007 and 2007-2008 we
get net increase in working capital of Rs.7512.8 Crs. And for year 2007-
2008 ad 2008-2009 we get net increase in working capital of Rs.110.02Crs.
THANK YOU