1. A STUDY ON WORKING CAPITAL MANAGEMENT OF
TATA STEEL LTD
Abstract: Efficient management of Working Capital is very important for the success of
an enterprise. In present time greater importance is given to Working Capital. So, here an
attempt is made by me to study the working capital management of the selected unit i.e.
TATA STEEL LTD. From the financial management point of view, capital in broader sense can
be divided into two main categories- fixed capital and working capital. Here I am going to
study the concept of working capital. After this study the research finds that the working
capital position of the Tata Steel Ltd. is not satisfactory.
Keywords: Tata Steel Ltd., Working Capital Management, Current Assets
INTRODUCTION
Efficient management of Working Capital is very important for the success of an enterprise.
In present time greater importance is given to Working Capital. So, here an attempt is made
by me to study the working capital management of the selected unit i.e. TATA STEEL LTD.
Concept of Working Capital Analysis
From the financial management point of view, capital in broader sense can be divided into
two main categories- fixed capital and working capital. Here I am going to study the concept
of working capital. The term working capital generally is used in two senses – ‘Gross working
capital’ which denotes total current asset and ‘Net working Capital’ which denotes the
excess of current assets over current liabilities. Both the concepts have their own
significance and relevance. In common parlance, working capital is that part of capital,
which is in working or which is used to meet day-to-day expenses. To understand the exact
meaning of the term ‘Working Capital’, it will be appropriate to understand its two
components – current assets and current liabilities. The current assets are those assets,
which can be converted into cash within a short period of time, say not more than one year
during the operating cycle of business or without affecting normal business operations.
Current liabilities are such liabilities as are to be paid within the normalbusiness cycle a
within the course of an accounting year out of current assets.

2. Gross working Capital Concept
According to the gross concept, working capAccording to the gross concept, working capital
means total of all the current assets of a business. It is also called gross working capital.
Gross working Capital = Total Current Assets
Net Working Capital Concepts
The concepts of Net Working Capital refer to the excess of current assets over current
liabilities. It indicates the surplus value of current assets. Since, all the current liabilities are
met out of current assets and after meeting the current liabilities what remains in the
enterprise is called net working capital. Net working capital will exist only in that case when
long-term funds, to some extent, are invested in current assets and comparatively less
amount of short term funds are involved in current assets.According to the gross concept,
working capital means total of all the current assets of a business. It is also called gross
working capital. Gross working Capital = Total Current Assets
SCOPE OF THE STUDY:
The present study is confined to the one leading unit in steel industry namely TATA STEEL
LTD. The study covers a period of five years from 2008-09 to 2012-13. This period is enough
to cover both the short and medium terms fluctuations and to set reliability.
CURRENT ASSETS OF THE COMPANY
TATA STEEL LTD. FY 2012-
2013
FY 2011-
2012
CURRENT ASSETS
Current investments 434 1,204.17
Inventories 5,257.94 4,858.99
Trade receivables 796.92 904.08
Cash and bank balances 2,218.11 3,946.99
Short-term loans and
advances
2,207.83 1,829.25
Other current assets 615.8 76.09
11,530.60 12,819.57

3. CURRENT LIABLITIES OF THE COMPANY
CURRENT LIABLITIES
Short-term borrowings 70.94 65.62
Trade payables 6,369.91 5,883.92
Other current liabilities 8,503.54 8,716.57
Short-term provisions 1,544.26 2,172.38
16,488.65 16,838.49
ESTIMATION OF WORKING CAPITAL
TATA STEEL LTD. FY 2012-
2013
FY 2011-
2012
A CURRENT ASSETS
Current investments 434 1,204.17
Inventories 5,257.94 4,858.99
Trade receivables 796.92 904.08
Cash and bank balances 2,218.11 3,946.99
Short-term loans and advances 2,207.83 1,829.25
Other current assets 615.8 76.09
11,530.60 12,819.57
B CURRENT LIABLITIES
Short-term borrowings 70.94 65.62
Trade payables 6,369.91 5,883.92
Other current liabilities 8,503.54 8,716.57
Short-term provisions 1,544.26 2,172.38
16,488.65 16,838.49
C WORKING CAPITAL(A-B) -4,958.05 -4,018.92
AVERAGE COLLECTION PERIOD
FY 2012-
2013
FY 2011-
2012
Trade receivables 811.26 915.42
ANNUAL SALES 39,101.47 34,819.89

4. AVERAGE DEBTORS 863.34
AVERAGE DAILY SALES 108.6152 96.72191667
AVERAGE COLLECTION PERIOD 7.948612 8.926001777
AVERAGE PAYMENT PERIOD
FY 2012-2013 FY 2011-2012
TRADE PAYABLES 6,369.91 5,883.92
ANNUAL PURCHASES 453.34 209.52
COST OF GOODS SOLD
Raw materials consumed 9,877.40 8,014.37
Changes in inventories of finished goods,
work-in-progress
-404.6 -220.72
9,926.14 8,003.17
AVRAGE C.O.G.S 8964.655
AVERAGE CREDITORS 6126.915
AVERAGE DAILY C.O.G.S 24.90181944
AVERAGE PAYABLE DAYS 255.8009873 236.2847427
RAW MATERIALS STORAGE PERIOD
FY 2012-2013
OPENING STOCK 2,704.36
CLOSING STOCK 1,992.41
AVERAGE STOCK 996.205
TOTAL PURCHASES 9,472.80
ANNUAL CONSUMPTION OF R.M 10,184.75
AVERAGE DAILY CONSUMED R.M 28.29097222

5. R.MATERIALS STORAGE PERIOD 35.21282309
AVERAGE CONVERSION PERIOD
OPENING WIP 65.88
CLOSING WIP 53.83
AVERAGE STOCK OF W.I.P 59.855
COST OF PRODUCTION 1657.02
AVERAGE DAILY C.O.PRODUCTION 4.590056
AVERAGE CONVERSION PERIOD 13.04015
CASH CONVERSION CYCLE
Cash Conversion Cycle :
INVENTORY TURNOVER + AVERAGE COLLECTION +
PAYMENT DEFERRED PERIOD
=