Final fm

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1.1 Introduction to working capital:
Capital is what makes or breaks a business, and no business can run successfully without
enough capital to cover both short- and long-term needs. Maintaining sufficient levels of short-
term capital is a constantly ongoing challenge, and in today’s turbulent financial markets and
uncertain business climate external financing has become both harder and more costly to
obtain. Companies are therefore increasingly shifting away from traditional sources of external
financing and turning their eyes towards their own organizations for ways of improving
liquidity. One efficient but often overlooked way of doing so is to reduce the amount of capital
tied-up in operations, that is, to improve the working capital management of the company.
1.2 Working capital:
The word working capital is made of two words (A) Working and (B) Capital. The word
working means day to day operations of the business and the word capital means monetary
value of all assets of the business. Working capital means the part of the total asset of the
business that change from one form to another form in the ordinary course of business
operations.
Working capital may be regarded as the life blood of a company. Working capital is of major
importance to internal and external analysis because of its close relationship with the current
day-to-day operations of a business. Every business needs funds for two purposes. Long term
funds are required to create production facility through purchase of fixed assets such as plants,
machinery, land and building & etc. short term funds are required for the purpose of raw
materials, payment of wages and other day-to-day expenses. It is nothing but the difference
between current asset and current liabilities.
1.3 Concepts of Working capital:
1) Balance sheet or Traditional concept
2) Operating cycle concept

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1.3.1 Balance sheet or Traditional concept
It shows the position of the firm at certain point of time. It is calculated on the basis of balance
sheet calculated on a specific date. In this method there are two types of working capital:-
1) Gross working capital
2) Net working capital
Gross working capital:- It refers to the firm’s investment in current assets. The sum of
the assets is working capital of the business. The sum of the current assets is a quantitative
aspect of working capital. Which emphasizes more on quantity than its quality, but it fails to
reveal the true financial position of the firm because every increase in current liability will
decrease the gross working capital.
Net working capital:- It is the difference between the current assets and the current
liabilities or the excess of total current assets over the current liabilities.
I.e. Working Capital= Current Assets - Current Liabilities
The above formula includes three important balance sheet accounts which all have a direct
impact on the business, namely accounts receivable (A/R), accounts payable (A/P) and
inventory. These accounts are often referred to as the three areas of working capital.
● Accounts Receivable – Money owed to the company for products/services that have been
delivered to customers but not yet paid for.
● Inventory – The raw materials, work-in-progress goods and finished goods that are ready or
will be ready for sale. Inventory represents a key asset to most businesses as the turnover of
inventory is a primary source of revenue generation and subsequently earnings for the
shareholders/owners of the company.
● Accounts Payable – Money owed to suppliers for goods and services that the company has
purchased on credit.

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List of Current Assets and Current Liabilities:
 Cash in hand / at bank
 Bills Receivable
 Sundry debtors
 Investors / stock
 Temporaryinvestment
 Prepaid Expenses
 Accrued incomes
 Bills payable
 Sundry Creditors
 Outstanding expenses
 Accrued expenses
 Bank Over Draft
 Short term Loans
1.3.2 Operating cycle concept
The duration or time required id completing the sequence of events right from purchase of raw
material for cash to the realization of sales in cash is called the operating cycle or working
capital cycle.
Current Assets
Current Liability

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1.4 Working Capital Cycle or Operating cycle:
All these require working capital. Working capital is thus like the lifeblood of a business. The
business will not be able to carry on day-to-day activities without the availability of adequate
Working capital. The diagram shown under;
Working capital cycle involves conversions and rotation of various constituents/components
of the working capital. Initially ‘cash’ is converted into raw materials. Subsequently, with the
usage of fixed assets resulting in value additions, the raw materials get converted into work in
process and then into finished goods. When sold on credit, the finished goods assume the form
of debtors who give the business cash on due date. Thus ‘cash’ assumes its original form again
at the end of one such working capital cycle but in the course it passes through various other
forms of current assets too. This is how various components of current assets keep on changing
their forms due to value addition. As a result, they rotate and business operations continue.
Thus, the working capital cycle involves rotation of various constituents of the working capital.
1.5 Types of working capital:
The operating cycle creates the need for current assets (working capital). However the need
does not come to an end after the cycle is completed to explain this continuing need of current
assets a destination should be drawn between permanent and temporary working capital.

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Working capital can be put into two categories:
1) Fixed or permanent working capital
2) Fluctuating or temporary working capital
1.5.1 Permanent working capital
The volume of investment in current assets can change over a period of time. But always there
is minimum level of current assets that must be kept in order to carry on the business. This is
the irreducible minimum amount needed for maintaining the operating cycle. It is the
investment in current assets. This is permanently locked up in the business and therefore known
as permanent working capital.
The permanent working capital refers to that part of the working capital which is necessary for
maintaining stock of raw material and finished goods at their normal level and for paying wages
and salaries regularly. It is minimum amount of current assets which is needed for the smooth
running of business. In other words, permanent working capital is that which is permanently
locked up in current assets. Permanent working capital is off two kinds:
Working Capital
Permanent Working
Capital
Variable Working
Capital
Initial
W.C.
Regular
W.C.
Seasonal
W.C.
Special
W.C.

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A. Initial working capital and
B. Regular working capital
Initial working capital
In the initial period of its operation, a company must have enough money to pay certain
expenses. This amount will have to be supplied the owners themselves, because in the initial
years, credit facilities may not be available from creditors, bank do not grant loans or overdrafts
and credit-sales will have to be made.
Regular working capital
It is the working capital required to continue the regular business operations. It is required for
maintaining regular stock of finished goods to meet the customers’ demands, to pay regular
business expenses etc. Regular working capital is the excess of current assets over current
liabilities. This part of the working capital needed for smooth operations of the business.
(Graph no. 1.1)
Temporary W.C.
Permanent W.C.
Time
W.C
.

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1.5.2 Temporary working capital
It is the volume of working capital needed over and above the fixed working capital in order to
meet the unforeseen market changes and contingencies. In other words any amount over and
above the permanent working capital is variable or fluctuating working capital.
It is the part of the working capital which is needed to meet the seasonal demands and special
needs. This is called variable working capital because its amount varies according to the extent
of extra demand. Variable working capital is of two types
Seasonal working capital
Some business enterprises require a larger amount of current assets during a particular season.
For instance sugar mills have to purchase sugarcane and employ more people to process it
during a particular season.
Special working capital
Special working capital is that portion of temporary working capital which is needed for special
purposes. Like for processing a special order received from any particular client.
1.6 Components of working capital:
Cash and equivalents:- This most liquid form of working capital requires constant
supervision. A good cash budgeting and forecasting system provides answers to key questions
such as: Is the cash level adequate to meet current expenses as they come due? What is the
timing relationship between cash inflow and outflow? When will peak cash needs occur? When
and how much bank borrowing will be needed to meet any cash shortfalls? When will
repayment be expected and will the cash flow cover it?
Accounts receivable: - Many businesses extend credit to their customers. If you do, is the
amount of accounts receivable reasonable relative to sales? How rapidly are receivables being
collected? Which customers are slow to pay and what should be done about them?

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Inventory: - Inventory is often as much as 50 percent of a firm's current assets, so naturally it
requires continual scrutiny. Is the inventory level reasonable compared with sales and the
nature of your business? What's the rate of inventory turnover compared with other companies
in your type of business?
Accounts payable: - Financing by suppliers is common in small business; it is one of the major
sources of funds for entrepreneurs. Is the amount of money owed suppliers reasonable relative
to what you purchase? What is your firm's payment policy doing to enhance or detract from
your credit rating?
Accrued expenses and taxes payable: - These are obligations of your company at any given
time and represent a future outflow of cash.
1.7 Need for Working Capital:
Every running business needs working capital. Even a business which is fully equipped with
all types of fixed assets required is bound to collapse without
(i) Adequate supply of raw materials for processing;
(ii) Cash to pay for wages, power and other costs;
(iii) Creating a stock of finished goods to feed the market demand regularly; and,
(iv) The ability to grant credit to its customers.
1.8 Determinants of Working Capital:
The working capital needs of a business are influenced by numerous factors. The important
ones are discussed in brief as given below:
i) Nature of Enterprise
The nature and the working capital requirements of an enterprise are interlinked. While a
manufacturing industry has a long cycle of operation of the working capital, the same would
be short in an enterprise involved in providing services. The amount required also varies as per

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the nature; an enterprise involved in production would require more working capital than a
service sector enterprise.
ii) Manufacturing/Production Policy
Each enterprise in the manufacturing sector has its own production policy, some follow the
policy of uniform production even if the demand varies from time to time, and others may
follow the principle of ‘demand-based production’ in which production is based on the demand
during that particular phase of time. Accordingly, the working capital requirements vary for
both of them.
iii) Volume of business
Generally, the size of the company has a direct relation with the working capital needs. Big
concerns have to keep higher working capital for investment in current assets and for paying
current liabilities.
iv) Terms of Credit
A company purchasing all raw-materials for cash and selling on credit will be requiring more
amount of working capital. Contrary to this, if the enterprise is in a position to buy on credit
and sell it for cash, it will need less amount of working capital. The length of the period of
credit has a direct bearing on working capital. The essence of this is that the period which
elapses between the purchase of materials and sale of finished goods and receipts of sale
proceeds, will determine the requirements of working capital.
v) Seasonal Variations
There are some industries which either produce goods or make sales only seasonally. For
example, the sugar industry produces practically all the sugar between December and April
and the woollen textile industry makes its sales generally during winter.In both these cases the
needs of working capital will be very large, during few months {i.e., season). The working
capital requirements will gradually decrease as and when the sales are made.

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vi) Operations
The requirement of working capital fluctuates for seasonal business. The working capital needs
of such businesses may increase considerably during the busy season and decrease during the
slack season. Ice creams and cold drinks have a great demand during summers, while in winters
the sales are negligible.
vii) Market Condition
If there is high competition in the chosen product category, then one shall need to offer sops
like credit, immediate delivery of goods etc. for which the working capital requirement will be
high. Otherwise, if there is no competition or less competition in the market then the working
capital requirements will be low.
viii) Availability of Raw Material
If raw material is readily available then one need not maintain a large stock of the same, thereby
reducing the working capital investment in raw material stock. On the other hand, if raw
material is not readily available then a large inventory/stock needs to be maintained, thereby
calling for substantial investment in the same.
ix) Growth and Expansion
Growth and expansion in the volume of business results in enhancement of the working capital
requirement. As business grows and expands, it needs a larger amount of working capital.
Normally, the need for increased working capital funds precedes growth in business activities.
x) Price Level Changes
Generally, rising price level requires a higher investment in the working capital. With
increasing prices, the same level of current assets needs enhanced investment.

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xi) Manufacturing Cycle
The manufacturing cycle starts with the purchase of raw material and is completed with the
production of finished goods. If the manufacturing cycle involves a longer period, the need for
working capital would be more.
xii) Other Factors
In addition to the above mentioned considerations there are also a number of other factors
which affect the requirements of working capital. Some of them are given below.
 Operating efficiency.
 Management ability
 Irregularities of supply.
 Import policy.
 Asset structure.
1.9 Sources of working capital:
The company can choose to finance its current assets by (a) Long term sources (b) Short term
sources.
Issue of shares:
It is the primary and most important sources of regular or permanent working capital. Issuing
equity shares as it does not create and burden on the income of the concern.

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Retained earnings:
Retained earnings accumulated profits are a permanent sources of regular working capital. It
creates not charge on future profits of the enterprises.
Issue of debentures:
It creates a fixed charge on future earnings of the company. Company is obliged to pay interest.
Long term debt:
Company can raise fund from accepting public deposits, debts from financial institutions like
banks, corporations etc. the cost is higher than the other financial tools. Other sources sale of
idle fixed assets, securities received from employees and customers are examples of other
sources of finance.
Short term sources of temporary working capital:
Temporary working capital is required to meet the day to day business expenditures. The
variable working capital would finance from short term sources of funds. And only the period
needed.
Some sources of temporary working capital are given below;
Commercial bank:
A commercial bank constitutes significant sources for short term or temporary working capital
this will be in the form of short term loans, cash credit, and overdraft and though discounting
the bills of exchanges.
Public deposits:
Most of the companies in recent years depend on these sources to meet their short term working
capital requirements ranging from six month to three years.
Various credits:
Trade credit, business credit papers and customer credit are other sources of short term working
capital. Credit from suppliers, advances from customers, bills of exchanges, promissory notes,
etc. helps to raise temporary working capital.

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Reserves and other funds;
Various funds of the company like depreciation fund. Provision for tax and other provisions
kept with the company can be used as temporary working capital. The company should meet
its working capital needs through both long term and short term funds. It will be appropriate to
meet at least 2/3 of the permanent working capital equipment form long term sources, whereas
the variables working capital should be financed from short term sources.
1.10 Management of working capital:
Management of working capital is concerned with the problem that arises in attempting to
manage the current assets, current liabilities. The basic goal of working capital management is
to manage the current assets and current liabilities of a firm in such a way that a satisfactory
level of working capital is maintained, i.e. it is neither adequate nor excessive as both the
situations are bad for any firm. There should be no shortage of funds and also no working
capital should be ideal. WORKING CAPITAL MANAGEMENT POLICES of a firm has a
great on its probability, liquidity and structural health of the organization. So working capital
management is three dimensional in nature as
1. It concerned with the formulation of policies with regard to profitability, liquidity and
risk.
2. It is concerned with the decision about the composition and level of current assets.
3. It is concerned with the decision about the composition and level of current liabilities.

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1.11 WORKING CAPITAL ANALYSIS:
As we know working capital is the life blood and the centre of a business. Adequate amount of
working capital is very much essential for the smooth running of the business. And the most
important part is the efficient management of working capital in right time. The liquidity
position of the firm is totally effected by the management of working capital. So, a study of
changes in the uses and sources of working capital is necessary to evaluate the efficiency with
which the working capital is employed in a business. This involves the need of working capital
analysis.
The analysis of working capital can be conducted through a number of devices, such as:
1. Ratio analysis. 2. Fund flow analysis. 3. Budgeting.
1.11.1 RATIO ANALYSIS:
A ratio is a simple arithmetical expression one number to another. The technique of ratio
analysis can be employed for measuring short-term liquidity or working capital position of a
firm. The following ratios can be calculated for these purposes:
 Current ratio
 Quick ratio
 Absolute liquid ratio
 Inventory turnover
 Receivables turnover
 Payable turnover ratio
 Working capital turnover ratio
 Working capital leverage
 Ratio of current liabilities to tangible net worth

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1.11.2 FUND FLOW ANALYSIS:
Fund flow analysis is a technical device designated to the study the source from which
additional funds were derived and the use to which these sources were put. The fund flow
analysis consists of:
 Preparing schedule of changes of working capital
 Statement of sources and application of funds.
It is an effective management tool to study the changes in financial position (working capital)
business enterprise between beginning and ending of the financial dates.
1.11.3 Working capital budget:
A budget is a financial and / or quantitative expression of business plans and polices to be
pursued in the future period time. Working capital budget as a part of the total budge ting
process of a business is prepared estimating future long term and short term working capital
needs and sources to finance them, and then comparing the budgeted figures with actual
performance for calculating the variances, if any, so that corrective actions may be taken in
future. He objective working capital budget is to ensure availability of funds as and needed,
and to ensure effective utilization of these resources. The successful implementation of
working capital budget involves the preparing of separate budget for each element of working
capital, such as, cash, inventories and receivables etc.
1.12 Disadvantages of excessive Working Capital:
Every business concern should have adequate working capital to run itsbusiness operations. It
should have neither redundant or excessive working capital nor inadequate nor shortage
of working capital. Both excessive as well as short working capital positions are bad for any
business.

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1. Excessive working capital means idle funds which earn no profits for the business and hence
the business cannot earn a proper rate of return on its investments.
2. When there is redundant working capital, it may lead to unnecessary purchasing and
accumulation of inventories causing more chances of theft waste and losses.
3. Excessive working capital implies excessive debtors and defective credit Policy which may
cause higher incidence of bad debts.
4. It may result into overall inefficiency in the organization.
5. When there is an excessive working capital relation with the banks and other financial
institutions may not be maintained.
6. Due to low rate of return on investments the value of shares may also fall
1.13 Disadvantages of inadequate Working Capital:
1) A concern, which has inadequate working capital, cannot pay its short-term liabilities
in time. Thus it will loose its reputation and shall not be able to get good credit facilities.
2) The firm cannot pay day-to-day expenses of its operations and it creates inefficiencies,
increases costs and reduces the profits of the business.
3) It becomes impossible to utilize efficiently the fixed assets due to non-availability of liquid
funds.
4) The rate of return on investments also falls with the shortage of working capital.

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1.14 Objective of the study:
The key objectives of undertaking the study of working capital at RIL are listed below:
1. To study and analyse working capital management at Reliance Industries Ltd. which
includes
 Inventory management
 Receivable management
 Cash management
by using the tools such as Ratio Analysis, Cash flow statement, Tables and graphs.
2. The aim is to learn how to manage working capital needs of the organization and to
learn the different ways through which theoretical learning is applied practically in the
organization.
3. And to give a commentary on the efficiency of the working capital management of the
company.

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1.15 Need of the study:
Today financial soundness and profitability of business enterprises largely depend upon the
working capital management by the firm. If there is shortage of working capital it affects the
day to day operations of the business firm, if there is excess of working capital, fund become
idle it also affects the financial soundness of the firm. In this perspective there is need to
manage the working capital effectively in any business.
The management of working capital helps us to maintain the working capital at a satisfactory
level by managing the working the current assets and current liabilities. It also helps to maintain
proper balance between profitability, risk and liquidity of the business significantly.
The question which strike the mind during reviewing various literatures is how RIL managing
its working capital. Hence study is undertaken to answer the above mentioned question.
1.16 Scope of the study:
The scope of the study is identified after and during the study is conducted. For this particular
project the study of working capital is based on tools like:
 Ratio analysis
 Cash flow analysis
 Graphs
 And Tables
Further the study is based on last 3years Annual Reports of RIL.
1.17 Research Methodology:
The process used to collect information and data for the purpose of making business decisions.
The methodology may include publication research, interviews, surveys and other
research techniques, and could include both present and historical information.
Types of research methodology,

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1. Descriptive
2. Exclusive
DESCRIPTIVE
Descriptive research does not fit neatly into the definition of either quantitative or qualitative
research methodologies, but instead it can utilize elements of both, often within the same
study. The term descriptive research refers to the type of research question, design, and data
analysis that will be applied to a given topic. Descriptive statistics tell what is, while
inferential statistics try to determine cause and effect.
EXCLUSIVE
Exclusive research enables to solve local and global aims of the company.
-To estimate the company share in the market (in terms of broadcasting volume and number
of projects in general and in various types and genres);
- To summarize the results of the company’s activities in the certain time period, to make
annual/semiannual/quarterly report;
RESEARCHON WORKING CAPITAL:
The study will be based on the QUANTATIVE and QUALITATIVEapproach of the working capital
management model at RIL needs a thorough study. With the help of RATIO ANALYSIS & TREND
ANALYSIS the result of the control mechanism can be summarized which will help in identifying the
effectiveness of the system under the preview. The data for the companies under analysis has been
taken from their respective websites of the companies. MICROSOFT EXCEL has been used as a tool
for different calculation purposes and developing the charts.
COLLECTION OF DATA
The data has been collected from the primary and secondary sources:
Primary data
 Department visit- discussion with the concerned person and interviewing officers in
accounts and finance sector.

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 Observation method.
Secondary data
 Annual reports
 Journals and magazines
 Study of files and office documents Websites of RIL and other steel companies.
Tools for study
 Ratio Analysis
1. Current ratio
2. Quick ratio
3. Working capital turnover ratio
4. Debtor turnover ratio
5. Creditor turnover ratio
6. Inventory turnover ratio
7. Liquidity ratio
8. Absolute liquidity ratio
 Graph and chart interpretation
 Cash flow Statement
1.18 Limitations of the study:
Various limitations of this particular project study are:
1. Factors like competitors analysis are not considered.
2. Industry analysis has also not performed in this particular study. However an industry
overview has been given in the study.
3. The information are mainly taken from the Final Accounts of the company and no other
source has been taken care of.
4. No data has been collected from primary source.
5. The study is however limited to 3years.

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6. As it is a study of financial report, it suffers from the basic limitations of accounting.
1.19 Time period of the study:
This particular project study is constrained to last three years that is FY 2104, FY 2013, FY
2012. However for the calculation of Cash Flow Statement figures of FY 2011 are also taken
into consideration.

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2.1 Literature Review:
Many researchers have studied working capital from different views and in different
environments. The following ones were very interesting and useful for our research. Dong and
Su (2010) examined working capital management effects on firms’ profitability of listed
Vietnamese firms from 2006-2008. The authors find that, a significantly negative relationship
exists between profitability, measured as gross operating profit and the components of cash
conversion cycle (inventory days, and receivable days). Furthermore, the study also observes
a statistically significant positive association between profitability and accounts payable days.
These findings imply that increasing firms’ inventory and receivable days lead to a decreasing
profit while significant financial success can be attained with increased payable days. Gill et
al. (2010) also studied the relationship between working capital management and profitability
of 88 US firms listed on the New York Stock Exchange. Using data from 2005-2007, the
authors find no statistically significant relationship between average payable days and
profitability and also between average inventory days and firm profitability. Similarly, they
also observe no significant relationship between firm size and profitability but notice a negative
association between accounts receivable and profitability. This suggests that managers can
enhance the profitability of their firms by reducing the number of days for their account
receivables. In a related study, Karaduman (2010) investigated the impact of working capital
management practices on the profitability of 140 randomly selected companies listed on the
Istanbul Stock Exchange. Using data from 2005-2008, their findings indicate a statistically
significant negative association between firm profitability, measured as return on assets on one
hand and accounts receivable and inventory days on the other hand. The study further reveals
a significantly positive relationship between accounts payable days and firm profitability. Thus,
the study has reiterated the importance of effective and efficient working capital management
in ensuring firms’ profitability. Afza and Nazir (2009) investigated the traditional relationship
between working capital management policies and a firm’s profitability for a sample of 204
nonfinancial firms listed on the Karachi Stock Exchange (KSE). Using regression analysis
technique and data from 1998-2005, the study relates a significantly negative relationship
between the profitability of firms and degree of aggressiveness of working capital investment
and financing policies. The study further indicates a significant difference among the working

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capital requirements and financing policies across different industries. The authors suggest that
managers can create value if they adopt a conservative approach towards working capital
investment and working capital financing policies
In addition to the above, Falope and Ajilore (2009) examined the effects of working capital
management on the profitability of 50 quoted non-financial Nigerian firms. Using panel data
methodology and data from 1996-2005, the authors observe a significantly negative
relationship between net operating profit and working capital management variables, namely:
average collection Akoto 375 period, inventory days, and cash conversion cycle. However, the
study notices no significant variations in the effects of working capital management between
large and small firms. An important lesson therefore is that, prudent working capital
management is critical for the profitability of firms of all sizes. Mathuva (2009) examined the
influence of working capital management components on corporate profitability of 30 Kenyan
listed firms. Using panel data methodology and data covering the period from 1993- 2008, the
study finds a significantly negative relationship between accounts collection days and
profitability, a significantly positive association between inventory conversion period and
profitability and a significantly positive relationship between average payment days and
profitability. The findings of this study therefore confirm the traditional view of efficient
working capital management and its effects on profitability
(Eljelly, 2004) elucidated that efficient liquidity management involves planning and
controlling current assets and current liabilities in such a manner that eliminates the risk of
inability to meet due short-term obligations and avoids excessive investment in these assets.
The relation between profitability and liquidity was examined, as measured by current ratio
and cash gap (cash conversion cycle) on a sample of joint stock companies in Saudi Arabia
using correlation and regression analysis. The study found that the cash conversion cycle was
of more importance as a measure of liquidity than the current ratio that affects profitability.
The size variable was found to have significant effect on profitability at the industry level. The
results were stable and had important implications for liquidity management in various Saudi
companies. First, it was clear that there was a negative relationship between profitability and
liquidity indicators such as current ratio and cash gap in the Saudi sample examined. Second,

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the study also revealed that there was great variation among industries with respect to the
significant measure of liquidity. (Deloof, 2003) discussed that most firms had a large amount
of cash invested in working capital. It can therefore be expected that the way in which working
capital is managed will have a significant impact on profitability of those firms.
Using correlation and regression tests he found a significant negative relationship between
gross operating income and the number of days accounts receivable, inventories and accounts
payable of Belgian firms. On basis of these results he suggested that managers could create
value for their shareholders by reducing the number of days’ accounts receivable and
inventories to a reasonable minimum. The negative relationship between accounts payable and
profitability is consistent with the view that less profitable firms wait longer to pay their bills.
(Ghosh and Maji, 2003) in this paper made an attempt to examine the efficiency of working
capital management of the Indian cement companies during 1992 – 1993 to 2001 – 2002. For
measuring the efficiency of working capital management, performance, utilization, and overall
efficiency indices were calculated instead of using some common working capital management
ratios. Setting industry norms as target-efficiency levels of the individual firms, this paper also
tested the speed of achieving that target level of efficiency by an individual firm during the
period of study. Findings of the study indicated that the Indian Cement Industry as a whole did
not perform remarkably well during this period.
(Shin and Soenen, 1998) highlighted that efficient Working Capital Management (WCM)
was very important for creating value for the shareholders. The way working capital was
managed had a significant impact on both profitability and liquidity. The relationship between
the length of Net Trading Cycle, corporate profitability and risk adjusted stock return was
examined using correlation and regression analysis, by industry and capital intensity. They
found a strong negative relationship between lengths of the firm’s net trading.
Cycle and its profitability. In addition, shorter net trade cycles were associated with higher risk
adjusted stock returns. (Smith and Begemann 1997) emphasized that those who promoted
working capital theory shared that profitability and liquidity comprised the salient goals of
working capital management. The problem arose because the maximization of the firm's
returns could seriously threaten its liquidity, and the pursuit of liquidity had a tendency to dilute

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returns. This article evaluated the association between traditional and alternative working
capital measures and return on investment (ROI), specifically in industrial firms listed on the
Johannesburg Stock Exchange (JSE). The problem under investigation was to establish
whether the more recently developed alternative working capital concepts showed improved
association with return on investment to that of traditional working capital ratios or not. Results
indicated that there were no significant differences amongst the years with respect to the
independent variables. The results of their stepwise regression corroborated that total current
liabilities divided by funds flow accounted for most of the variability in Return on Investment
(ROI). The statistical test results showed that a traditional working capital leverage ratio,
current liabilities divided by funds flow, displayed the greatest associations with return on
investment. Well known liquidity concepts such as the current and quick ratios registered
insignificant associations whilst only one of the newer working capital concepts, the
comprehensive liquidity index, indicated significant associations with return on investment.
All the above studies provide us a solid base and give us idea regarding working capital
management and its components. They also give us the results and conclusions of those
researches already conducted on the same area for different countries and environment from
different aspects. On basis of these researches done in different countries, we have developed
our own methodology for research.

26
3.1 Industry overview:
Reliance industry deals in many types of industries. The profile of all these industries are given
below.
3.1.1 Media and Entertainment industry:
The television industry continued to have a dynamic operating environment in 2015. Despite
the ongoing cable digitisation, increase in much awaited addressability and resultant
improvement in economics for multi system operators and broad casters continued to ivied the
industry in 2014, while subscription revenue from DTH continued at a fast clip. In 2016 the
key things to watch will be the ability of MSOs to enforce channel packaging in Phase I and
Phase II cities and rollout of set-top-box in phase three areas.
Television advertising bounced back significantly on account of Bihar Election and improved
macroeconomic environment leading to companies increasing their add expenditure. E-
commerce emerged as a key sector driving growth, followed by mobile hand set companies,
while some of the traditional large advertisers such as FMCG and auto mobile also showed
renewed growth. The eco system for TV and advertisement expected to remain strong in 2016
on account of rebound in the India’s growth story.
The television industry in India estimated at INR475 in 2014 and is expected to grow at a
CAGR of 15.5% to reach INR975 billion in 2019. Subscription revenue growth at an
annualised growth rate of 16% is expected to outpace the advertising revenue growth at an
annualised growth rate of 14%, on account of improving monetisation due to improving
digitisation.
Table no. 3.1
Year Subscription
Revenue
Advertisement
Revenue
2008 158 82

27
2009 165 88
2010 187 103
2011 213 116
2012 245 125
2013 281 136
2014E 320 155
2015P 369 175
2016P 433 196
2017P 513 226
2018P 595 260
2019P 676 299
(Graph no. 3.1)
0
200
400
600
800
1000
1200
2008 2009 2010 2011 2012 2013 2014E 2015P 2016P 2017P 2018P 2019P
Chart Title
Subscription Revenue Advertisement Revenue

28
From the above data it could be clearly estimated that the Television, Media and Advertisement
industry is going to do well in the coming years. And RIL as amongst the major player in India
in this segment can take a clear advantage.
3.1.2 Textile Industry:
Textile and Clothing Industry in Indian economy:
 Textile and Clothing (T&C) Industry constitutes 4% of India’s GDP, 12% of Industrial
Production and 10.5% of total exports of goods.
 Second largest employer after agriculture: Provides direct employment to over 35
Million people and indirect employment to 45 Million.
 T&C production estimated at US $85 Billion in 2012: US $ 51 billion worth goods for
domestic market and US $ 34 billion for exports.
Potential for future growth:
 Strong and diverse raw material base.
 Strong presence in entire textile value chain - vertically and horizontally integrated –
from fibres to fashion.
 Unique blend of tradition and technology.
 Globally competitive spinning industry.
 Flexible production systems and strong entrepreneurial skills in finished products.
 Diverse design base.
Table no. 3.2
Units 2012 2017 2020
Yarn Production
(Million Metric Tons)
4.8 7.2 9

29
Fabric Production
(Billion Square Meters)
61 112 150
Garment Production
(Billion Pieces)
10 17 20
(Graph no. 3.2)
Being a major player in this segment RIL with its both domestic and international brands can
take the advantage.
3.1.3 Retail Industry:
Introduction
The Indian retail industry has emerged as one of the most dynamic and fast-paced industries
due to the entry of several new players. It accounts for over 10 per cent of the country’s Gross
Domestic Product (GDP) and around 8 per cent of the employment. India is the world’s fifth-
largest global destination in the retail space.
0
50
100
150
1 2 3
Chart Title
Yarn Production (Million Metric Tons)
Fabric Production (Billion Square Meters)
Garment Production (Billion Pieces)

30
Market Size
The Boston Consulting Group and Retailers Association of India published a report titled,
‘Retail 2020: Retrospect, Reinvent, Rewrite’, highlighting that India’s retail market is expected
to nearly double to US$ 1 trillion by 2020 from US$ 600 billion in 2015, driven by income
growth, urbanisation and attitudinal shifts.
The report adds that while the overall retail market is expected to grow at 12 per cent per
annum, modern trade would expand twice as fast at 20 per cent per annum and traditional trade
at 10 per cent.
Retail spending in the top seven Indian cities amounted to Rs 3.58 trillion (US$ 53.7 billion),
with organised retail penetration at 19 per cent as of 2014. Online retail is expected to be at par
with the physical stores in the next five years.
India is expected to become the world’s fastest growing e-commerce market, driven by robust
investment in the sector and rapid increase in the number of internet users. Various agencies
have high expectations about growth of Indian e-commerce markets. Indian e-commerce sales
are expected to reach US$ 55 billion by FY2018 from US$ 14 billion in FY2015. Further,
India's e-commerce market is expected to reach US$ 220 billion in terms of gross merchandise
value (GMV) and 530 million shoppers by 2025, led by faster speeds on reliable telecom
networks, faster adoption of online services and better variety as well as convenience.
India’s direct selling industry increased 6.5 per cent in FY2014-15 to Rs 7,958 crore (US$ 1.19
billion) and is expected to reach a size of Rs 23,654 crore (US$ 3.55 billion) by FY2019-20,
as per a joint report by India Direct Selling Association (IDSA) and PHD.
(Graph no. 3.3)

31
RIL with its wide spread retail chain possess the ability to explore the retail market in a broad
way.
3.1.4 Oil and Gas Exploration and Production Industry:
Introduction
The oil and gas sector is among the six core industries in India and plays a major role in
influencing decision making for all the other important sections of the economy.
In 1997–98, the New Exploration Licensing Policy (NELP) was envisaged to fill the ever-
increasing gap between India’s gas demand and supply. A recent report points out that the
Indian oil and gas industry is anticipated to be worth US$ 139.8 billion by 2015. India’s
economic growth is closely related to energy demand; therefore the need for oil and gas is
projected to grow more, thereby making the sector quite conducive for investment.
The Government of India has adopted several policies to fulfil the increasing demand. The
government has allowed 100 per cent foreign direct investment (FDI) in many segments of the
sector, including natural gas, petroleum products, and refineries, among others. Today, it
attracts both domestic and foreign investment, as attested by the presence of Reliance Industries
Ltd (RIL) and Cairn India.
Market Size
Backed by new oil fields, domestic oil output is anticipated to grow to 1 MBPD by FY16. With
India developing gas-fired power stations, consumption is up more than 160 per cent since
1995. Gas consumption is likely to expand at a CAGR of 21 per cent during FY08–17.
Presently, domestic production accounts for more than three-quarters of the country’s total gas
consumption.
India increasingly relies on imported LNG; the country was the fifth-largest LNG importer in
2013, accounting for 5.5 per cent of global imports. India’s LNG imports are forecasted to
increase at a CAGR of 33 per cent during 2012–17. However, net imports of Natural Gas fell
from 13.14 BCM in 2012-13 to 13.03 BCM in 2013-14.
State-owned Oil and Natural Gas Corporation (ONGC) dominates the upstream segment
(exploration and production), accounting for approximately 68 per cent of the country’s total
oil output (FY14).
Indian Oil Corporation Limited (IOCL) operates 11,214 km network of crude, gas and product
pipelines, with a capacity of 1.6 MBPD of oil and 10 million metric standard cubic metre per

32
day (MMSCMD) of gas. This is around 30 per cent of the nation’s total pipeline network. IOCL
is the largest company, operating 10 out of 22 Indian refineries, with a combined capacity of
1.3 MBPD.
(Graph no. 3.4)
With increasing demand for Oil and Gas in India, RIL has the opportunity to grow at a higher
rate.
3.1.5 Petrochemical Industry:
"Petrochemicals sector is one of the fastest growing segments with a growth rate of 13%, which
is more than twice of growth of India's gross domestic product (GDP), and also the global
growth rate in petrochemical space which is stagnant at 6%."
The petrochemicals industry covers a wide range of products, including olefins, ethane and
propane, aromatic compounds such as benzene, toluene, intermediate petrochemicals, end
products, polymers, synthetic fibres, and synthetic rubber.
India consumes around 6.2 million tonnes of polymers, which represents approximately 3% of
global consumption of 200 million tonnes. To meet the surging demand, the domestic
petrochemical industry is preparing to spend more than $25bn.
ASSOCHAM secretary general D S Rawat said: "Huge investments made in the petrochemical
space bode well for the growth of this segment, there is a steadfast growth in the production
activity of the main petrochemicals.”

33
The Indian petrochemicals industry is estimated to reach $100bn by the end of this decade,
according to a study by the Associated Chambers of Commerce and Industry of India
(ASSOCHAM).Valued at around $40bn, the petrochemicals segment in the country is
currently growing at a compounded annual growth rate (CAGR) of around 14%.
In its study 'Indian Petrochemical Industry: An overview', the industry body said:
"Petrochemicals currently contribute about 30% to India's $120bn worth chemical industry,
which is likely to grow at a CAGR of 11% over next few years and touch $250bn by 2020.
With its diversified product category in petrochemical, RIL is the market leader in India.
3.1.6 Refining and Marketing:
Introduction
The oil and gas sector is among the six core industries in India and plays a major role in
influencing decision making for all the other important sections of the economy.
In 1997–98, the New Exploration Licensing Policy (NELP) was envisaged to fill the ever-
increasing gap between India’s gas demand and supply. A recent report points out that the
Indian oil and gas industry is anticipated to be worth US$ 139.8 billion by 2015. India’s
economic growth is closely related to energy demand; therefore the need for oil and gas is
projected to grow more, thereby making the sector quite conducive for investment.
Market Size
Backed by new oil fields, domestic oil output is anticipated to grow to 1 MBPD by FY16. With
India developing gas-fired power stations, consumption is up more than 160 per cent since
1995. Gas consumption is likely to expand at a CAGR of 21 per cent during FY08–17.
Presently, domestic production accounts for more than three-quarters of the country’s total gas
consumption.
India increasingly relies on imported LNG; the country was the fifth-largest LNG importer in
2013, accounting for 5.5 per cent of global imports. India’s LNG imports are forecasted to
increase at a CAGR of 33 per cent during 2012–17. However, net imports of Natural Gas fell
from 13.14 BCM in 2012-13 to 13.03 BCM in 2013-14.

34
State-owned Oil and Natural Gas Corporation (ONGC) dominates the upstream segment
(exploration and production), accounting for approximately 68 per cent of the country’s total
oil output (FY14).
Indian Oil Corporation Limited (IOCL) operates 11,214 km network of crude, gas and product
pipelines, with a capacity of 1.6 MBPD of oil and 10 million metric standard cubic metre per
day (MMSCMD) of gas. This is around 30 per cent of the nation’s total pipeline network. IOCL
is the largest company, operating 10 out of 22 Indian refineries, with a combined capacity of
1.3 MBPD.
Reliance being the world’s largest Oil and Gas refining company has a brighter outlook in this
developing economy.
3.1.7 Telecom Industry:
Introduction
India is currently the world’s second-largest telecommunications market and has registered
strong growth in the past decade and half. The Indian mobile economy is growing rapidly and
will contribute substantially to India’s gross domestic product (GDP), according to report
prepared by GSM Association (GSMA) in collaboration with the Boston Consulting Group
(BCG).
The liberal and reformist policies of the Government of India have been instrumental along
with strong consumer demand in the rapid growth in the Indian telecom sector. The government
has enabled easy market access to telecom equipment and a fair and proactive regulatory
framework that has ensured availability of telecom services to consumer at affordable prices.
The deregulation of foreign direct investment (FDI) norms has made the sector one of the
fastest growing and a top five employment opportunity generator in the country.
Market Size
Driven by strong adoption of data consumption on handheld devices, the total mobile services
market revenue in India is expected to touch US$ 37 billion in 2017, registering a Compound
Annual Growth Rate (CAGR) of 5.2 per cent between 2014 and 2017, according to research
firm IDC.
 India's mobile subscriber base is expected to cross 500 million Subscribers by the end
of FY2015 from 453 million subscribers at the end of FY2014.

35
 According to a study by GSMA, smartphones are expected to account for two out of
every three mobile connections globally by 2020 making India the fourth largest
smartphone market.
 The broadband services user-base in India is expected to grow to 250 million
connections by 2017, according to GSMA.
 India added the highest number of net mobile phone subscriptions of 13 million during
the third quarter of 2015.
 International Data Corporation (IDC) predicts India to overtake US as the second-
largest smartphone market globally by 2017 and to maintain high growth rate over the
next few years as people switch to smartphones and gradually upgrade to 4G.
 In spite of only 5 per cent increase in mobile connections in 2015, overall expenditure
on mobile services in India is expected to increase to US$ 21.4 billion in 2015, led by
15 per cent growth in data services expenditure, as per research firm Gartner.
With all these developments ahead RIL especially its JIO has got ample scope to grab the
telecom market, especially on the field of 4G services.

36
3.2 Company overview:
RIL is India’s largest private sector Company on key financial parameters. It is a significant
global player in the integrated energy value chain, and has a growing presence in retail and
digital services in India. Built on strong values, RIL is steadfastly rooted in the culture of safety,
integrity and commitment. RIL is dedicated to its vision of partnering India’s economic growth
and social wellbeing. RIL strives to be a product and service leader across its industries, a great
work-place and above all, to create value for its stakeholders and society.
Businesses at a glance:
1. Refining and Marketing
Owns and operates two of the world’s largest and most complex refineries with crude
processing capacity of 1.24 MBPD. The world’s largest refinery complex at Jamnagar
continued to operate at 110% operating rate processing 67.9 MMT of crude oil during
the year.
2. Petrochemical
Integrated petrochemicals player with Top 10 rankings in key products globally. The
operations of the new Polyester Filament Yarn (PFY) facility at Silvassa were stabilized
and this strengthened our position as the global leader in production of polyester fibre
and yarn.
3. Oil & Gas
Interests in onshore and offshore exploration and production in India and significant
Presence in US shale.
4. Retail
Retail market leader in several segments with over 12.5 million sq. ft. of retail space
and having presence over 200 cities.
5. JIO Infocomm
Building a countrywide broadband next generation infrastructure to deliver digital
content, applications and services.
6. Media and Entertainment
Interests in television, digital content, filmed entertainment, digital commerce,
magazines, mobile content and allied businesses.
7. Textile
Spreading the brand across country and globe.

37
Key achievements:
 India’s first private sector company to feature in Fortune Global 500 list of ‘World’s
Largest Corporations’, currently ranking 114th in terms of revenue and 155th in terms
of profit, and continues to be featured for the 11th consecutive year.
 Ranks 194th in the Financial Times’ FT Global 500 2014 list of the world’s largest
companies.
 RIL is India’s greenest and most environment-friendly company, ranking 185th among
the world’s largest 500 companies, according to Newsweek’s Green Rankings 2014.
 2nd Largest Producer of polyester fibre/yarn, globally 5th Largest Producer of PTA,
globally 6th Largest Producer of PP, globally 7th Largest Producer of PX, globally.
The list of Board of Directors:
1. Shri Mukesh D. Ambani - Chairman and Managing Director, Chairman: Finance
Committee
2. Smt. Nita M. Ambani - Non Executive, Non Independent Director
3. Shri P. M. S. Prasad - Executive Director, Member: Health, Safety and Environment
Committee, Risk Management Committee
4. Prof. Dipak C. Jain - Independent Director
5. Dr. Dharam Vir Kapur - Independent Director
6. Shri Mansingh L. Bhakta - Independent Director
7. Shri Nikhil R. Meswani - Executive Director
8. Shri Yogendra P. Trivedi - Independent Director Chairman: Audit Committee,
Stakeholders’ Relationship Committee, Corporate Social Responsibility and
Governance Committee
9. Shri Hital R. Meswani - Executive Director Chairman: Health, Safety and
Environment Committee
10. Prof. Ashok Misra - Independent Director
11. Dr. Raghunath A. Mashelkar - Independent Director, Independent Director
Chairman: Human Resources, Nomination and Remuneration Committee, Risk
Management Committee
12. Dr. Raghunath A. Mashelkar - Independent Director
13. Shri Pawan Kumar Kapil - Executive Director

38
3.2.1 Details about company Businesses:
Exploration and Production
RIL’s upstream business comprises the complete chain of activity starting from exploration,
appraisal, development and production. Reliance entered the Exploration and Production
(E&P) business by becoming a 30% partner in an unincorporated joint venture with British Gas
and ONGC in the Panna Mukta and Mid and South Tapti blocks. Besides Panna Mukta and
Tapti (PMT) blocks, our domestic portfolio comprises of five conventional oil and gas blocks
in Krishna Godavari, Mahanadi, Cauvery Palar, Gujarat Saurashtra & Cambay Basin and two
Coal Bed Methane (CBM) blocks in Sohagpur East and West in Madhya Pradesh.
On the international front, Reliance has acquired two offshore blocks in Myanmar. In
the year 2010, Reliance entered into three Joint Ventures in the Marcellus and Eagle Ford plays
in the fast-growing US shale gas industry. Oil and gas is currently being produced from our
PMT blocks and KG D6 blocks in India and shale gas JVs in the US.
Operations
 Conventional
In 2002, Reliance struck gas in the D1-D3 field of KG D6 block. RIL is producing natural gas
from the gas fields D1-D3 since April 1, 2009, and light crude oil from the D26 oil field in KG
D6 block, since September 17, 2008. Both projects have been commissioned in a record time
– the D1-D3 fields in about six and half years, and the D26 field in just a little over two years
- from discovery.
These fields rank amongst one of the largest green-field deep-water oil and gas production
facilities in the world. D1-D3 fields are the first and only deep-water producing fields in India
and remains among the most complex reservoirs in the world. Efforts are underway for
augmentation of production from existing KG D6 producing fields.

39
 Coal Bed Methane
Development activities are underway in 2 CBM blocks (Sohagpur East and West) with first
gas being targeted in the current year. As part of CBM development program, Reliance is
drilling more than 200 wells and setting up two Gas Gathering Stations and 8 Water Gathering
Stations in Phase-I.
Reliance Gas Pipeline Limited (RGPL), one of the subsidiary of RIL is laying around 300 KM
of natural gas pipeline from Shahdol in Madhya Pradesh to Phulpur in Uttar Pradesh to
transport gas from RIL’s CBM blocks.
 US Shale Gas
Reliance’s upstream joint ventures in US Shale gas include a 45% working interest (WI)
partnership with Pioneer Natural Resources in the Eagle Ford shale play, a 40% WI partnership
with Chevron and a 60% WI partnership with Carrizo Oil & Gas in the Marcellus Shale play.
These JVs have positioned Reliance as one of the leading players in the Marcellus and Eagle
Ford plays. Eagle Ford shale remains one of the most competitive liquid shale plays in the US
and Marcellus is among the most competitive gas play in US.
Refining and Marketing:
The Jamnagar manufacturing division is the world's largest refining hub. The entire refining
complex was built in a record time at globally competitive capital costs – in fact, at costs much
lower than comparable refineries around the world. Its scale, design, flexibility, level of
automation and degree of integration heralded the way refineries of the future would be built.
The speedy growth of the complex lies at the heart of India's transformation. It has transformed
India from being a net importer of petroleum products to a net exporter, thereby ensuring the
nation's energy security.
With crude processing capacity of 1.24 million Barrels per Stream Day (BPSD), the Jamnagar
refinery is a trendsetter and has won several awards, including the prestigious 'International
Refiner Of The Year' award. It also enjoys the distinction of housing some of the world's largest

40
units, such as the Fluidised Catalytic Cracker (FCC), Coker, Alkylation, Par xylene and
Polypropylene plants.
Products
Our refinery at Jamnagar processes a wide variety of crude oils and produces a range of
petroleum products for exports as well as supply in the Indian market.
Table no. 3.3
Products Applications
Liquefied Petroleum Gas (LPG) Domestic and industrial fuel
Propylene Feedstock for polypropylene
Naphtha Feedstock for petrochemicals
Gasoline Transport fuel
Jet /Aviation Turbine Fuel Aviation fuel
Superior Kerosene Oil Domestic fuel
High-Speed Diesel Transport fuel
Sulphur Feedstock for fertilizers and pharmaceuticals
Petroleum Coke Fuel for power plants and cement plants
Petrochemicals:
 Polymers
RIL offers a wide range of grades for diverse applications across sectors such as
packaging, agriculture, automotive, housing, healthcare, water and gas transportation,

41
and consumer durables. Products are also exported to more than 60 countries. Driving
their growth is the Polymer Research and Technology Centre (PRTC), which addresses
the diverse needs of RIL customers and facilitates value-added performance.
 Polyesters
RIL is the largest producer of polyester fibre and yarn in the world, with a capacity of
2.5 million tonnes per annum. Having invested significant amounts on R&D in the
polyester sector, our Reliance Technology Centre, Reliance Testing Centre and
Reliance Fibre Application Centre constantly develop and introduce innovative
products for the textile industry.
 Fibre Intermediates
The Fibre Intermediates Sector at Reliance consists of the Purified Terephthalic Acid
(PTA), Ethylene Glycols (EG) & Ethylene Oxide (EO) businesses. RIL is amongst the
largest global producers of these products – 5th largest in PTA & 8th largest in EG. RIL
have the largest volume share in the domestic market for PTA and EG, and are the only
merchant supplier of EO in India. With their world scale plants and best-in-class
technology, we are the supplier of choice for our Indian customers.
 Aromatics
Aromatics are cyclic unsaturated hydrocarbons containing one or more rings.
Aromatics is one of the major Petrochemical Sectors at Reliance Industries Ltd. with a
combined production capacity of 3.6 million metric tons.
 Elastomers

42
Reliance produces synthetic rubber under the brand names Relflex and Reliance Sibur
Elastomers Pvt Ltd. Our elastomers are used across a variety of applications, including
tyres, footwear, sports goods, rollers and mechanical fenders etc.
Textiles:
RIL manufacturing division at Naroda houses one of the largest and most modern textile
complexes in the world, an achievement recognised by The World Bank. Through Vimal, RIL
brought in a new era in fabrics. Vimal became not only a flagship brand of Reliance, but also
one of the most trusted in brands the country. It is also the first major retail chain in the country.
RIL supply premium finished fabrics to prestigious brands and export to over 58 countries. RIL
is also a major player in global automotive furnishing business.
Products
RIL’s textile division continues to maintain its technological edge in catering to the
requirements of the ever-evolving fashion industry. Their automotive furnishing consisting of
jacquard weaving, knitting and finishing line is one of the most sought after by auto
manufacturers. Various products of RIL are:
 Fabrics
 Apparel
 Auto furnishing

43
Retail:
Reliance Retail is the retail initiative of the group and an epicentre of RIL consumer facing
businesses. It has in a short time forged strong and enduring bonds with millions of consumers
by providing them unlimited choice, outstanding value proposition, superior quality and
unmatched experience across all its retail stores.
Since its inception in 2006, Reliance Retail has grown to cater to millions of customers, and
thousands of farmers and vendors. Reliance Retail serves over 2.5 million customers every
week, and its loyalty programme, Reliance One, has the patronage of more than 6.75 million
customers. Their nationwide network of retail outlets delivers a world-class shopping
environment and unmatched customer experience powered by our state-of-the-art technology
and seamless supply-chain infrastructure.
Reliance Retail has adopted a multi-format strategy and operates convenience stores,
supermarkets, hypermarkets, wholesale cash & carry stores, and specialty stores and has
democratized access to all types of products and services across all segments for all Indian
consumers.
Reliance Retail has achieved the distinction of being the largest retailer in the country with core
format sectors attaining market leadership in their respective categories. Reliance Retail’s
commitment to bettering lives has been embodied in its pursuit to make a difference on social
socio-economic issues in India. The initiative has brought millions of farmers and small
producers to the forefront of the retail revolution by partnering with them for growth.

44
Business houses
 Value
Reliance Fresh
Reliance Super
Reliance Mart
Reliance Market
 Speciality
Reliance digital
Digital Express
I store (for Apple products)
Reliance Trends
Reliance Jewels
Reliance Foot print
Reliance Living
Vimal Gifting
 Joint ventures
Diesel
Quick silver
Roxy
Steve Madden
Pink
Super dry
Brooks Brothers
Dune London

45
Jio:
Home to the world’s second largest population of 1.2 billion, India is a young nation with 63%
of its population under the age of 35 years. It has a fast growing digital audience with 800
million mobile connections and over 200 million internet users. Reliance thoroughly believes
in India’s potential to lead the world with its capabilities in innovation. Towards that end,
Reliance envisages creation of a digital revolution in India.
Reliance Jio aims to enable this transformation by creating not just a cutting-edge voice and
broadband network, but also a powerful ecosystem on which a range of rich digital services
will be enabled – a unique green-field opportunity.
3.2.2 SWOT Analysis of RIL:
Table no. 3.4
SWOT
Strengths
1. India's one of the biggest players
2. Strong brand name
3. Excellent financial position
4. One of the few Indian companies to be featured in Forbes
5. Employs over 25,000 people
Weaknesses
1. Long term debt
2. Legal issues
3. KG D6 gas controversy
4. Accusations of being favored by the government
Opportunities
1. Growing demand for petroleum products
2. Buyout of competition

46
3. Improving standard of living of people (Retail sector)
4. Fast growing Telecom sector
Threats
1. Government regulations
2. High Competition
3. Environmental laws
4. Economic instability
Competition
Competitors
1. Bharat Petroleum
2. Hindustan Petroleum
3. IOCL
4. ONGC
5. Airtel
6. TATA telecom
7. Idea and other tele service providers
8. Future Group and other Retail chains

48
4.1 Data Analysis and Interpretation:
Data analysis and interpretation is the process of assigning meaning to the collected
information and determining the conclusions, significance, and implications of the findings.
The steps involved in data analysis are a function of the type of information collected,
however, returning to the purpose of the assessment and the assessment questions will
provide a structure for the organization of the data and a focus for the analysis.
There are two types of Data analysis i.e.
 Quantitative analysis
 Qualitative analysis
Here for the study of working capital position of RIL mainly I have done Qualitative analysis
by using various statistical tools such as Ratios.
4.2 Financial Ratios:
Financial ratios are one of the most common tools of managerial decision making. A ratio is a
comparison of one number to another—mathematically, a simple division problem. Financial
ratios involve the comparison of various figures from the financial statements in order to gain
information about a company's performance. It is the interpretation, rather than the
calculation, that makes financial ratios a useful tool for business managers. Ratios may serve
as indicators, clues, or red flags regarding noteworthy relationships between variables used to
measure the firm's performance in terms of profitability, asset utilization, liquidity, leverage,
or market valuation.
There are many kinds of financial Ratios. Such as:
1. Profitability Ratio
2. Asset Utilization Ratio
3. Leverage Ratio
4. Liquidity Ratios
5. Market value Ratios

49
In this particular project our concentration is on Short term liquidity Ratio.
4.3 Use and Users of Ratio analysis:
There are basically two uses of financial ratio analysis:
 To track individual firm performance over time,
 And to make comparative judgments regarding firm performance.
Firm performance is evaluated using trend analysis—calculating individual ratios on a per-
period basis, and tracking their values over time. This analysis can be used to spot trends that
may be cause for concern, such as an increasing average collection period for outstanding
receivables or a decline in the firm's liquidity status. In this role, ratios serve as red flags for
troublesome issues, or as benchmarks for performance measurement.
Another common usage of ratios is to make relative performance comparisons. For example,
comparing a firm's profitability to that of a major competitor or observing how the firm stacks
up versus industry averages enables the user to form judgments concerning key areas such as
profitability or management effectiveness.
Users of financial ratios include parties both internal and external to the firm.
 External users include security analysts, current and potential investors, creditors,
competitors, and other industry observers.
 Internally, managers use ratio analysis to monitor performance and pinpoint strengths
and weaknesses from which specific goals, objectives, and policy initiatives may be
formed.
4.4 Calculation of various Ratios of RIL:
For this particular project study I have taken all the Working capital ratios and Short term
liquidity ratios. Those are calculated as follows:

50
4.4.1 Current Ratio:
The current ratio is a liquidity and efficiency that measures a firm's ability to pay off its short-
term liabilities with its current assets. The current ratio is an important measure of liquidity
because short-term liabilities are due within the next year.
The current ratio is calculated by dividing current assets by current liabilities. This ratio is
stated in numeric format rather than in decimal format. Here is the calculation:
Current assets include cash and those assets that can be converted into cash within a year, such
as marketable securities, debtors, inventories, loans and advances. All the obligations maturing
within a year are included in current liabilities.
Current liabilities include creditors, bills payable, accrued expenses, short term bank loan,
income tax liability and long-term debt maturing in the current year.
Significance
 It indicates the availability of current assets in rupees for every one rupee of current
liability. A ratio of greater than one means that the firm has more current assets than
current claims against them. In India, the conventional rule is to have a ratio of
1.33(internationally it is 2).
 The current ratio represents the margin of safety for the creditors. The higher the current
ratio, the greater the margin of safety; the larger the amount of current assets in relation
to current liabilities, the more the firm’s ability to meet its current obligations.

51
4.1 Table showing list of Current assets of RIL (In crore)
Current Assets 2014-15 2013-14 2012-13
Current Investment 50155 33370 28366
Inventories 36551 42932 42729
Trade Receivables 4661 10664 11880
Cash and Bank Balances 11571 36624 49547
Short Term Loan and Advances 12307 11277 10974
Other Current Assets 547 466 480
TOTAL 115792 135333 143976
4.2 Table showing list of Current liability of RIL (In crore)
Current Liability 2014-15 2013-14 2012-13
Short Term Borrowings 12914 22770 11511
Trade Payables 54470 57862 45787
Other Current Liabilities 19063 10767 21640
Short Term Provisions 4854 4167 4348
TOTAL 91301 95566 83286
4.3 Table showing Current Ratio of RIL
Particulars 2014-15 2013-14 2012-13
Current Assets 115792 135333 143976
Current Liability 91301 95566 83286
Current Ratio 1.268245 1.416121 1.728694
Net Working Capital 24491 39767 60690

52
(Graph no. 4.1)
(Graph no.4.2)
(Graph no.4.3)
1.268244598
1.416120796
1.728693898
2 0 1 4-15 2 0 1 3-14 2 0 1 2-13
GRAPH SHOWING CHANGE
IN CURRENT RATIO
24491
39767
60690
2 0 1 4-15 2 0 1 3- 14 2 0 1 2-13
GRAPH SHOWING CHANGE IN
NET WORKING CAPITAL
115792
135333
143976
91301
95566
83286
2 0 1 4-15 2 0 1 3-14 2 0 1 2-13
GRAPH SHOWING COMPARISION
BETWEEN CA & CL(IN CRORE)
Current Assets Current Liability

53
Interpretation:
From the above Charts and Tables the following interpretation can be made:
1. The amount of Current assets is reducing year to year.
2. The amount of Current liability has increased in the year 2013-14 as compare to 2012-
13, and Current liability has reduced from 95566 to 91301 in the year 2014-15.
3. Hence showing an overall effect of decrease in amount of Net working Capital. Net
Working Capital in the year 2104-15 has reduced from 39767 to 24491.
4. That is why the Current Ratio has reduced from year to year.
5. The current ratio in the year 2014-15 which is 1.2682 is much lower than the key rule
of 2.
4.4.2 Acid test Ratio (Liquid/Quick Ratio):
This ratio establishes the relationship between quick or liquid assets and current liabilities.
The quick ratio or acid test ratio is a liquidity that measures the ability of a company to pay
its current liabilities when they come due with only quick assets. Quick assets are current
assets that can be converted to cash within 90 days or in the short-term. Cash, cash
equivalents, short-term investments or marketable securities, and current accounts receivable
are considered quick assets.
The quick ratio is often called the acid test ratio in reference to the historical use of acid to
test metals for gold by the early miners. If the metal passed the acid test, it was pure gold. If
metal failed the acid test by corroding from the acid, it was a base metal and of no value.
Formula
The quick ratio is calculated by adding cash, cash equivalents, short-term investments, and
current receivables together then dividing them by current liabilities.

54
Significance
 Generally a quick ratio of 1:1 is considered to represent a satisfactory current financial
condition.
 This test is more significant as compare to current ratio to fulfil the firm’s obligations.
 This is a more critical evaluation of firm’s liquidity position.
4.4 Table showing calculation of Quick assets (in crore)
4.5 Table showing calculation of Quick Ratio of RIL (in crore)
Current Assets 2014-15 2013-14 2012-13
Current Investment 50155 33370 28366
Trade Receivables 4661 10664 11880
Short Term Loan and
Advances
12307 11277 10974
Other Current Assets 547 466 480
Quick assets (TOTAL) 79241 92401 101247
Particulars 2014-15 2013-14 2012-13
Quick Assets 79241 92401 101247
Current Liability 91301 95566 83286
Quick Ratio 0.867909 0.966882 1.215654

55
(Graph no.4.4)
Interpretation:
The above table and graph shows the following:
 The amount of quick assets has shown continues downfall from the year 2012-13 to
2014-15.
 Thus effecting on the quick Ratio. The Quick Ratio has been reduced from 1.2156 to
0.9668 in the year 2013-14 and from 0.9668 to 0.8679 in the year 2014-15.
 As the company’s Quick Ratio has gone below the standard norm which is 1:1, the
company should stay cautious.
4.4.3 Cash Ratio (Absolute liquid):
It shows the relationship between absolute liquid or super quick current assets and liabilities.
Absolute liquid assets include cash, bank balances, and marketable securities. Since cash is
the most liquid asset, a financial analyst may examine cash ratio and its equivalent to current
liabilities. Trade investments or marketable securities are equivalent of cash; therefore, they
may be included in the computation of cash ratio.
The cash ratio or cash coverage ratio is a liquidity ratio that measures a firm's ability to pay off
its current liabilities with only cash and cash equivalents. The cash ratio is much more
restrictive than the current ratio or quick ratio because no other current assets can be used to
pay off current debt--only cash.
0
0.5
1
1.5
2014-15 2013-14 2012-13
Graph showing change in
Quick Ratio of RIL

56
Formula
The cash coverage ratio is calculated by adding cash and cash equivalents and dividing by the
total current liabilities of a company.
4.6 Table showing list of Absolute liquid Assets (in crore)
(Graph no. 4.5)
79241
92401
101247
2 0 1 4-15 2 0 1 3-14 2 0 1 2-13
GRAPH SHOWING CHANGE IN QUICK
ASSETS OF RIL
Current Assets 2014-15 2013-14 2012-13
Short Term Loan and
Advances
12307 11277 10974
Absolute Liquid Assets 23878 47901 60521

57
4.7 Table showing calculation of Absolute Liquid Ratio (in crore)
(Graph no. 4.6)
Interpretation:
From the above graph and table the followings can be found out:
1. The amount of Absolute Liqiued Assets has been reduced drastically over the years
and in the year 2014-15 it stands at 23878 crore.
2. Similarly the Absolute Liquid Ratio has been reduced from 0.7266 in the year 2012-
13 to 0.2615 in the year 2014-15.
Note: For the above calculation it has been assumed that Short term loans and
Advances are equal to Short term SecuritiesDeposits.
4.4.4 Inventory Turnover Ratio:
The inventory turnover ratio is an efficiency ratio that shows how effectively inventory is
managed by comparing cost of goods sold with average inventory for a period. This measures
how many times average inventory is "turned" or sold during a period. In other words, it
measures how many times a company sold its total average inventory dollar amount during the
year.
0.261530542
0.501234749
0.726664746
2 0 1 4-15 2 0 1 3-14 2 0 1 2-13
GRAPH SHOWING CHANGE IN ABSOLUTE
LIQUID RATIO OF RIL
Particulars 2014-15 2013-14 2012-13
Absolute Liquid Assets 23878 47901 60521
Current Liabilities 91301 95566 83286
Absolute Liquid Ratio 0.261531 0.501235 0.726665

58
Inventory turnover is calculated by dividing the cost of goods sold by the average inventory.
This ratio indicates the efficiency of the firm in producing and selling its product, by indicating
the number of times the inventory has been converted into sales during the period.
Formula
The inventory turnover ratio is calculated by dividing the cost of goods sold for a period by the
average inventory for that period.
4.8 Table showing calculation of ITR of RIL (in crore)
Particulars 2014-15 2013-14 2012-13
Net sales 340727 401200 212923
Opening Inventory 42932 42729 35955
Closing Inventory 36551 42932 42729
Average Inventory 39741.5 42830.5 39342
Inventory Turnover Ratio 8.573582 9.367157 5.412104

59
(Graph no. 4.7)
Interpretation:
1. As compare to 2012-13, the ITR in 2013-14 has increased and as compare to 2013-14,
the ITR in the year 2014-15 has been marginally lowered. This shows the companies
action for improving the Inventory Turnover over the years.
2. This comes out as a good sign of the efficiency of the management in converting its
assets into sales. The ratio also implies continuous improvement in the operations of
the company.
4.4.5 Debtor Turnover Ratio:
A Firm sells goods for cash and credit. Credit is used as a marketing tool by a no. of companies.
When the firm extends credits to its customers, debtors (accounts receivables) are created.
Debtors are convertible into cash over a short period of time, therefore included in the current
assets. Accounts receivable turnover is an efficiency ratio or activity ratio that measures how
many times a business can turn its accounts receivable into cash during a period. In other words,
the accounts receivable turnover ratio measures how many times a business can collect its
average accounts receivable during the year.
Debtor’s turnover is found by dividing credit sales by average debtors. Average debtors are
nothing but the average of the opening and closing balances of debtors.
8.573581772
9.367156582
5.412104113
2 0 1 4-15 2 0 1 3-14 2 0 1 2-13
GRAPH SHOWING CHANGES
ININVENTORY TURNOVER RATIO

60
Formula
Accounts receivable turnover is calculated by dividing net credit sales by the average accounts
receivable for that period.
4.9 Table showing calculation of DTR of RIL (in crore)
Particulars 2014-15 2013-14 2012-13
Net sales 340727 401200 212923
Opening Accounts
Receivables
10664 11880 18424
Closing Accounts
Receivables
4661 10664 11880
Average Accounts
Receivables
7662.5 11272 15152
Debtor Turnover Ratio 44.46682 35.5926 14.0524
(Graph no. 4.8)
44.46681892
35.59261888
14.05246832
2 0 1 4- 15 2 0 1 3-14 2 0 1 2-13
DEBTOR TURNOVER RATIO

61
Interpretation
1. As stated earlier, the higher the value of debtors turnover, the more efficient the
management of the company. And here as it is evident from the graph that the ratio is
rising with each successive year, it serves as a good sign for the management to look
after.
2. Also, this ratio must be seen in conjunction with the creditor’s turnover ratio. Being a
capital intensive company, to find out the true liquidity position.
4.4.6 Creditor Turnover Ratio:
Creditor’s turnover ratio indicates the number of times sundry creditors have been paid
during a year. It is calculated to judge the requirements of cash for paying sundry creditors. It
is calculated by dividing the net credit purchases by average creditors.
Net credit purchases consist of gross credit purchases minus purchase return.
When the information about credit purchases, opening and closing balances of trade creditors
is not available then the ratio is calculated by dividing total purchases by the closing balance
of trade creditors.
Formula
Accounts receivable turnover is calculated by dividing net credit sales by the average
accounts receivable for that period.
Significance:
A high creditor’s turnover ratio or a lower credit period ratio signifies that the creditors are
being paid promptly. This situation enhances the credit worthiness of the company. However
a very favourable ratio to this effect also shows that the business is not taking the full advantage

62
of the credit facilities allowed by the creditors. We can interpret this ratio in exactly the same
way as the Debtors Turnover Ratio.
4.10 Table showing calculation of CTR of RIL (in crore)
Particulars 2014-15 2013-14 2012-13
Net sales 340727 401200 212923
Opening Trade Payables 57862 45787 40324
Closing Trade Payables 54470 57862 45787
Average trade Payables 56166 51824.5 43055.5
Creditor Turnover Ratio 6.066428 7.741512 4.945315
(Graph no. 4.9)
Interpretation
1. As is evident, the company has tried to maintain a moderate creditors ratio so as to avail
the full advantage of the credit facility as well as to maintain its rapport with its
creditors. The ratio at the end of FY2014 stands at 6.0664 as compared to the debtors‟
turnover ratio of 44.4668 in the same financial year.
2. This can be considered as a good match up so as to maintain continues flow of raw
material at the same to not losing a good customer.
6.066428088
7.741512219
4.945314768
2 0 1 4-15 2 0 1 3-14 2 0 1 2-13
CREDITOR TURNOVER RATIO

63
4.4.7 Working Capital Turnover Ratio:
Working capital turnover ratio is an activity ratio that measures dollars of revenue generated
per dollar of investment in working capital. Working capital is defined as the amount by which
current assets exceed current liabilities.
A higher working capital turnover ratio is better. It means that the company is utilizing its
working capital more efficiently i.e. generating more revenue using less investment.
Formula
Working Capital Turnover Ratio
=
Total Sales
Average Working Capital
Working Capital = Current Assets − Current Liabilities
Average Working Capital
=
Opening Working Capital + Closing Working Capital
2

64
4.11 Table showing calculation of Working capital turnover Ratio
(in crore)
(Graph no. 4.10)
Interpretation:
1. The above graph and table is showing a positive trend for the company. Working capital
Ratio is showing continues growth year on year.
2. It’s a positive trend for the company.
4.4.8 Current Asset to Total Assets:
This ratio depicts the relationship between the current assets and the total assets. The total
assets of a company comprises of both net fixed assets and current assets.
Total Asset = Current Asset + Fixed Asset
10.60497
7.987497
3.430203
2 0 1 4-15 2 0 1 3-14 2 0 1 2- 13
GRAPH SHOWING CHANGE
INWORKING CAPITAL TURNOVER
RATIO
Particulars 2014-15 2013-14 2012-13
Opening Net Working Capital 39767 60690 63456
Closing Net Working Capital 24491 39767 60690
Average Net Working Capital 32129 50228.5 62073
Total Sales 340727 401200 212923
Working Capital Turnover Ratio 10.60497 7.987497 3.430203

65
Significance:
As the working capital management of a company depends upon its current assets, it is of great
significance to know how much of the total assets are current. The level of current assets helps
us to keep our business afloat.
4.12 Table Showing Calculation of CA to TA of RIL (in crore)
(Graph no. 4.11)
Interpretation:
1. The more the portion of Current asset in Total asset the better the short term liquidity
position.
2. Here the portion of Current asset is consistently reducing, hence the management
should be cautious about it.
3. And the portion of 0.2910 in the FY2014 is not depicting a good position of Total
assets.
0.291091922
0.36816991
0.452028344
2 0 1 4-15 2 0 1 3-14 2 0 1 2- 13
CURRENT ASSETS TO TOTAL
ASSETS
Particulars 2014-15 2013-14 2012-13
Current Assets 115792 135333 143976
Total Assets 397785 367583 318511
Current Assets to Total
Assets
0.291092 0.36817 0.452028

66
4.4.9 Working capital to Net worth ratio:
This ratio shows the relationship between Net Working Capital to Net Worth. This represents
the portion of working capital funded by Shareholders fund.
Working capital to Net worth ratio = Net working capital/Net worth
4.13 Table showing calculation of WC to Net worth of RIL (in crore)
(Graph no. 4.12)
Interpretation
Similar to the previous ratio, WC to Net Worth ratio is used to represent the relationship
between the shareholder’s money and the Net Working capital. Similar to previous ratio, for
0.113300857
0.201787146
0.337176033
2 0 1 4-15 2 0 1 3-14 2 0 1 2-13
GRAPH SHOWING WC TO NET
WORTH OF RIL
Particulars 2014-15 2013-14 2012-13
Net Working Capital 24491 39767 60690
Net Worth/Shareholders fund 216159 197074 179995
WC to Net worth 0.113301 0.201787 0.337176

67
FY14 the ratio of 0.1133 shows that for each rupee of net worth, the company needs Re. 0.1133
of working capital. This gap will be met from bank borrowings and long term sources of funds.
4.4.10 Cash flow statement of RIL:
RELIANCE INDUSTRIES LIMITED CASH FLOW
STATEMENT ( in crore)
Particulars 2014-15 2014-13 2013-12
A: CASH FLOW FROM OPERATING
ACTIVITIES:
Net Profit Before Tax as per Profit and
Loss Statement
29468 27818 26284
Adjusted for:
Net Prior Year Adjustments - - 3
Write off of Investment ( 26,96,800) - 25
Loss on Sale / Discard of Assets (Net) 31 44 34
Depreciation / Amortisation and
Depletion Expense
8488 8789 9465
Effect of Exchange Rate Change 1408 2739 1039
Net Gain on Sale of Investments (3046) (2348) (1658)
Dividend Income (250) (91) (77)
Interest Income (5414) (6472) (6245)
Finance Costs 2367 3206 3036
3584 5892 5597
Operating Profit before Working Capital
Changes
33052 33710 31881
Adjusted for:
Trade and Other Receivables 5462 413 5594
Inventories 6381 (203) (6086)
Trade and Other Payables (3528) 14305 6274
8315 14515 5782
Cash Generated from Operations 41367 48225 37663
Net prior period Adjustment - - (3)
Taxes Paid (Net) (6082) (6065) (4665)
Net Cash from Operating Activities 35285 42160 32995
B: CASH FLOW FROM INVESTING
ACTIVITIES
Purchase of Fixed Assets (42720) (32456) (15994)
Sale of Fixed Assets 86 57 33

68
Purchase of Investments in Subsidiaries /
Trusts
(11506) (22621) -
Redemption of Investments in
Subsidiaries
169 7182 -
Purchase of Other Investments (655591) (755722) (479071)
Sale / Redemption of Other Investments 643525 739929 481203
Movement in Loans and Advances (133) (3911) (7546)
Maturity of / (Investment in) Fixed
Deposits
3400 (3400) -
Interest Income 6584 6838 6451
Dividend Income 188 91 77
Net Cash (Used in) Investing Activities 55998 64013 14797
C: CASH FLOW FROM FINANCING
ACTIVITIES
Proceeds from Issue of Share Capital 226 183 12
Share Application Money 17 17 25
Buy back of equity share - - (3087)
Proceeds from Long Term Borrowings 20310 20500 10262
Repayment of Long Term Borrowings (4555) (19672) (10306)
Short Term Borrowings (Net) (10302) 11648 1274
Dividends Paid (including Dividend
Distribution Tax)
(3268) (3093) (2924)
Interest Paid (3368) (4053) (3505)
Net Cash (Used in) / Generated from
Financing Activities
(940) 5530 8249
Net (Decrease) in Cash and Cash
Equivalents
(21653) (16323) 9949
Opening Balance of Cash and Cash
Equivalents
33224 49547 39598
Closing Balance of Cash and Cash
Equivalents
11571 33224 49547
Interpretation:
From the above Cash flow statement of RIL involving the FY 2014, 2013 and 2012 we can
find out the following things:
1. Most importantly the closing cash balance is reducing continuously.
2. The major reason that can be attributed to this is because the amount spent on investing
activities, particularly investment in subsidiaries is increasing.
3. The positive thing for the company is along with spending on long term investment, the
net proceed from operating activities, particularly sales receipt is increasing.

69
5.1 Summary of Findings:
1. THE TABLE NO.4.1
Shows the amount of Current Asset of RIL for the financial year 2012-13, 2013-
2014&2014-15. From that it is clear that the amount of Current asset is decreasing over
the years.
2. THE TABLE NO.4.2
Using this table we can find out the current liabilities of RIL for the financial year 2012-
13, 2013-2014&2014-15. It shows that the Current liability has been marginally
reduced in the year 2014-15.
3. THE TABLE NO.4.3
From this table we can find the current ratio of RIL for the financial year 2014-15,
2013-14&2012-13.The current ratio is 1.268245, 1.416121 and 1.728694 respectively.
It is showing a constant decrease over the years.
4. THE TABLE NO.4.4
Using this table we can find the quick assets of RIL for the financial year 2014-15,
2013-14&2012-13 which is reducing constantly.
5. THE TABLE NO.4.5
This shows the quick assets ratio of the RIL for the financial year 2014-15, 2013-
14&2012-13. The quick assets ratio is 0.867909, 0.966882, and 1.215654 respectively.
It shows that the absolute liquid ratio is lowest for the FY 2014-15. It is unfavourable
for the company.
6. THE TABLE NO.4.6
It shows the list of absolute liquid ratio of the RIL for the financial year 2014-15, 2013-
14&2012-13, which is reducing at an increasing rate.
7. THE TABLE NO.4.7
It shows the Debtor turnover ratio of RIL for the financial year 2014-15, 2013-
14&2012-13. The debtor turnover ratio is 0.261531, 0.501235, and 0.726665
respectively.

70
8. THE TABLE NO.4.8
From here we can find the Inventory turnover ratio of the co. for the financial year
2014-15, 2013-14&2012-13. The creditor turnover ratio is 8.573582, 9.367157 and
5.412104 respectively. It shows the high creditor turnover ratio is favourable for the
company.
9. THE TABLE NO.4.9
It shows the Debtor turnover ratio of the co. for the financial year 2014-15, 2013-
14&2012-13. The Debtor turnover ratio is 44.46682, 35.5926 and 14.0524
respectively. It shows the high debtor turnover ratio 44.046682 in the year 2014-15
which is favourable for the company.
10. THE TABLE NO.4.10
Here we find that, the CTR of the company for the financial year 2012-13, 2013-2014
&2014-15 which is 4.945315,7.741512 and 6.066428 is showing an increasing trend over
the years.
From this we can locate the Working capital turnover ratio which is 10.60497,7.987497
and 3.430203 respectively for the year 2014-15, 2013-14 and 2012-13. The higher WC ratio
shows that the higher sales volume and lower WC has made the ratio look even more attractive.
It depicts the portion of CA to TA which is 0.291092,0.36817 and 0.452028 respectively
for the year 2014-15, 2013-14 and 2012-13. It shows that the portion of CA to TA has been
reducing over the years, showing a negative trend for the company.
Here can see the number of times working capital can be turned over by the net worth
of the firm. It is also showing decreasing trend from the FY 2012 to FY 2014.

71
5.2 Suggestion and recommendation:
The management of working capital plays a vital role in running of a successful business. So,
things should go with a proper understanding for managing cash, receivables. RIL is not
managing its working capital in a good manner, but still with undertaking some steps, the
short term liquidity position can be made good by its management.
1. The utilization of Current assets for acquiring net business ventures may be a good
strategic decision but it is not a good decision with regard to Short term liquidity
position.
2. Such kind of strategic investments should always be made by issuing of capital or
raising of debt unless there is sufficient cash available in the Balance sheet.
3. The amount of Current assets should be increased to ensure all the ratios are at
statutory requirement level.
4. However a good thing for the company is its Cash flow i.e. Net sales proceeds are
increasing over the years, making the turnover ratios look attractive.
5. Though the present collection system is near perfect, the company as due to the
increasing sales should adopt more effective measures so as to counter the threat of
bad debts.
6. The over purchasing function should be avoided as it could lead to liquidity problems.
7. As abetter option for making proper utilization of idle cashlying on the Balancesheet,
the investment of cash in marketable securities should be increased, as it is very
profitable for the company.
8. The company’s attempt to reduce Current liability is a well come step but again it
should be seen that these Current liabilities are not being paid off by using company’s
Short term assets.

72
5.3 Conclusion
After completing my research on working capital management in RIL, I can say that now I
understand working capital much better and in a practical way. This project helps me in
understanding the daily requirement in a manufacturing firm.
During my training period in RIL. I am able to know the importance of working capital in any
company especially if the concern is a big one. It enable the company to have regular supply
of raw material, regular payment of salary and wages, exploit the favourable market conditions,
have ability to face crisis and also make the good image of the company. In RIL the working
capital requirements are very high as production is continuous in the concern.
Working capital is also a major external source of capital for especially small and medium
sized firms. These firms have relatively limited access to capital markets and tend to overcome
this complication by short-term borrowing. Working capital position of such firms is not only
an internal firm-specific matter, but also an important indicator of risk for creditors. Higher
amount of working capital enables a firm to meet its short-term obligations easier. This results
increase in borrowing capability and decrease in default risk (and consequential decrease in
cost of capital and increase in firm value). So, it is possible to state that efficiency in working
capital management affects not only short-term financial performance (profitability), but also
long-term financial performance (firm value maximization).
From the discussion in this research we can say that RIL manage its working capital
requirement in an effective and efficient manner. Its current assets are approx. twice of its
current liabilities which is the standard for any company and it means that the company always
have the sufficient amount of cash to meet any type of liability at any time.

73
6.1 Bibliography:
Websites
www.moneycontrol,com
www.INVSTOPEDIA.COM
www.ACCOUNTING EXPLANATION.COM
www.ACCOUNTING MANAGEMENT.COM
www.MY ACCOUNTING COURSE.COM
www.WIKIPIDIA.COM
www.rbi.org,gov
www.Scribe.com
Reference
Annual report 2013.14 and 2015

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