shivank mall 119 (term paper) (1)

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NAME: SHIVANK MALL

ROLL NO: 119

SEMESTER: 6TH

COURSE: BACHELOR OF BUSINESS ADMIISTRATION (HONS.)

SUPERVISOR: MRS. MADHU PARASURAM

TOPIC: IMPACT OF WORKING CAPITAL MANAGEMENT ON FIRM’SPERFORMANCE

DATE: JULY 5TH, 2013

Project Report to Be Submitted In Partial Fulfillment of TheRequirement of Graduate Degree

Bachelor of Business Administration

J. D. Birla Institute

Affiliated: - Jadavpur University

Signature of the Student Signature of Supervisor

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Date: 05.07.2013

To,

The Controller of Examination,

Jadavpur University,

Kolkata.

Respected sir,

This research work has been done by me and is an original work. The references used have been mentioned in the bibliography.

This research is partial fulfillment of the requirement for the BBA degree to be awarded by Jadavpur University.

Yours faithfully,

(SHIVANK MALL)

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DECLARATIONS:

To include plagiarism and ethical issues statements and word count is a formal requirement.

I declare the following:

(1) That the material contained in this dissertation is the end result of my own work and that due acknowledgement has been given in the bibliography and references to ALL sources be they printed, electronic or personal.

(2) The word count of this dissertation is 14,726.

(3) That unless this dissertation has been confirmed as confidential, I agree to an entire electronic copy or sections of the dissertation to being placed on the e-learning portal, if deemed appropriate, to allow future students the opportunity to see examples of past dissertations. I understand that if displayed on the e-learning portal it would be made available for no longer than five years and that student would not be able to print off copies or download. The authorship would remain anonymous.

(4) I agree to my dissertation being submitted to a plagiarism detection services, where it will be stored in a database and compared against work submitted from this or any other school or from other institutions using the service.

In the event of the service detecting a high degree of similarity between content within the service this will be reported back to my supervisor and second marker, who may decide to undertake further investigation that may ultimately lead to disciplinary actions, should instances of plagiarism be detected.

I declare that ethical issues have been considered, evaluated, and appropriately addressed in this research.

SIGNED:

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ACKNOWLEDGEMENT

I would like to take this opportunity to express my gratitude to all those who gave me their support to complete my term paper. Further, I would like to thank the “Director “of our prestigious college, Prof. (Dr) Asit Dutta who gave me an opportunity to make this term paper and enrich my knowledge base further.

However, it could not have been accomplished without the helpful guidance of my mentor – Mrs. Madhu Parasuram and I would like to thank her profusely for the same.

I would like to express my heartfelt thanks to the Coordinators of the Learning Resource Centre of our college, who assisted me to avail the relevant books and allowed me to carry out the necessary research for my term paper.

I would like to thank all my friends and colleagues from college for their great help and valuable hints to complete my term paper.

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ABSTRACT

The study is done on four steel companies namely, Tata Steel Ltd, JSW Steel Ltd, Steel Authority of India Ltd & Visa Steel Ltd. The study was done to know the comparative position of steel companies in working capital management, by using various ratio analyses & by taking data from year 2005 to 2012. The comparative position of the company is found by taking out the liquidity ratio, management efficiency ratio, profitability ratio and debt coverage ratio of each of the company and then comparing it with each other.

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CONTENTS

TABLE OF CONTENTS

SERIAL NO. SUBJECT PAGE NO.

1 INTRODUCTION 7

2 LITERATURE REVIEW 9

3 RESEARCH METHODOLOGY 13

Introduction to Research Methodology

Qualitative and quantitative research data

4 CASE STUDY 24

5 DATA ANALYSIS 25

6 FINDINGS AND CONCLUSION 31

7 RECOMMENDATION 33

8 FUTURE SCOPE OF STUDY 34

ANNEXURE 35

BIBLIOGRAPHY 55

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1. INTRODUCTION

Working capital is a financial metric of operating liquidity which describes the amount of cash tied up in operations and defines the short term condition of a company. A positive working capital position is required for the continuous running of a company’s operations, i.e. to pay short term debt obligations and to cover operational expenses. A company with a negative working capital balance is unable to cover its short-term liabilities with its current assets.

Working capital is calculated with the following formula:

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 the company has purchased on credit. Clearly, the importance of the above components differs between companies and industries, and whereas for example retailers and manufacturers often have large inventories of finished goods, work-in-progress (WIP) and raw materials, banks and insurance companies do not hold any traditional inventory. However, regulation requires both banks and insurance companies to maintain certain reserve levels. In addition to the required reserves, these types of businesses typically hold major positions of liquid assets and large portfolios of interest-bearing investments in which deposits and premiums received from customers are invested. The uncertainty of cash flows also varies significantly between industries, and many retailers have little to worry about when it comes to accounts receivables as the customer pays on site at the time of purchase. On the other hand, banks and insurance companies are privileged by the fact that they receive deposits and premiums before having to make any payments, but are also subject to unpredictable cash outflows when customers decide to withdraw their funds or when insurance claims come in.1

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OBJECTIVE/GOALS

The main object of the present study is to examine the overall efficiency of the working capital management in selected steel companies. More specifically it seeks to dwells upon mainly the following issues:

1. To observe the liquidity position on the basis of financial ratio and area of weaknesses, if any, of the selected companies under the study;

2. To explore the profitability position of the company selected;

3. To make some suggestions and specific recommendations for improvement of the liquidity management.

4. To study the structure of the working capital of selected steel companies.

5. To study the management of working capital components by steel companies

SCOPE

The scope of the project from selected companies’ working capital management includes:

• To evaluate each company’s result from 2005 to 2012.

• To perform comparative analysis between all the four company.

• To make data analysis on the basis of ratio.

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2. LITERATURE REVIEW

Pass C.L., Pike R.H2(1984), studied that over the past 40 years major theoretical developments has occurred in the areas of long-term investment and financial decision making. Many of these new concepts and the related techniques are now being employed successfully in industrial practice. By contrast, far less attention has been paid to areas of short-term finance, in particular that of working capital management. Such neglect might be acceptable were working capital considerations of relatively little importance to the firm, but effective working capital management has a crucial role to play in enhancing the profitability and growth of firm. Indeed, experience shows that inadequate planning and control of working capital is one of the more common cause of behavior failure.

Herzfeld B3 (1990), studied that “Cash is king”—so say the money managers who share the responsibility of running this country’s businesses. And with banks demanding more from their prospective borrowers, greater emphasis has been placed on those accountable for so-called working capital management. Working capital management refers to the management of current or short-term assets and short-term liabilities. In essence, the purpose of that function is to make certain that the company has enough assets to operate its business. Here are things you should know about working capital management.

Appuhami, Ranjith B4 (2008), studied impact of firms’ capital expenditure on their working capital management. The author used the data collected from listed companies in the Thailand Stock Exchange. The study used Schulman and Cox’s (1985) Net Liquidity Balance and Working Capital Requirement as a proxy for working capital measurement and developed multiple regression models. The empirical research found that firms’ capital expenditure has a significant impact on working capital management. The study also found that the firms’ operating cash flow, which was recognized as a control variance, has a significant relationship with working capital management.

Hardcastle J5 (2009), studied that working capital, sometimes called gross working capital, simply refers to the firm’s total current assets (the short-term ones), cash marketable securities, accounts receivable, and inventory. While long-term financial analysis primarily concern strategic planning, working capital management deals with day-to-day operations. By making sure that production lines do not stop due to lack of raw materials, that inventories do not build up because production continues unchanged when sales dip, that customers pay on time and that enough cash is on hand to make payments when they are due. Obviously without good working capital management, no firm can be efficient and profitable.

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Thachappilly G6 (2009), “Working Capital Management Manages Flow of Funds”, (2009) describes that Working capital is the cash needed to carry on operations during the cash conversion cycle, i.e. the days from paying for the raw materials to collecting cash from customers. Raw materials and operating supplies must be bought and stored to ensure uninterrupted productions. Wages, salaries, utility charges and other incidentals must be paid for converting the materials into finished products. Customers must be allowed a credit period that is standard in the business. only at the end of this cycle does cash flow in again.

Dubey R7 (2008), studied the working capital in a firm generally arises out of four basic factors like sales volume, technological changes, seasonal, cyclical changes and policies of the firm. The strength of the firm is dependent on the working capital as discussed earlier but this working capital is itself dependent on the level of sales volume of the firm. The firm requires current assets to support and maintain operational or functional activities. By current assets we mean the assets which can be converted readily into cash say within a year such as receivables, inventories and liquid cash. If the level of sales is stable and towards growth the level of cash, receivables and stock will also be on the high.

McClure B8 (2007), “Working Capital Works’ describes that Cash is the lifeline of a company. If this lifeline deteriorates, so does the company’s ability to fund operations, reinvest and meet capital requirement and payments. Understanding a company’s cash flow health is essential to making investment decisions. A good way to judge a company’s cash flow prospects is to look at its WCM. Cash is king, especially at the time when fund raising is harder than ever. Letting it slip away is an oversight that investors should not forgive. Analyzing a company’s working capital can provide excellent insight into how well a company handles its cash, and whether it is likely to have any on hand to fund growth and contribute to shareholder value.

Gass D9 (2006), studied “Cash is the lifeblood of business” is an often repeated maxim amongst financial managers. Working capital management refers to the management of current or short-term assets and short-term liabilities. Components of short-term assets include inventories, loans and advances, debtors, investment and cash and bank balances. Short-term liabilities include creditors, trade advances borrowings and provisions. The major emphasis is, however on short-term assets, since short-term liabilities arise in the context of short-term assets. It is important that companies minimize risk by prudent working capital management.

Thomas M. Krueger10 (2005), studied distinct levels of WCM measure for different industries, which tends to be stable over time. Many factors help to explain this discovery. The improving economy during the period of study may have resulted in improved turnover in some industries, while slowing turnover may have been a signal

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of troubles ahead. Our results should be interpreted cautiously. Our study takes places over a short time framing during a generally improving market. In addition, the survey suffers from survivorship bias – only the top firms which each industry are ranked each year and the composition of those firms within the industry can change annually.

Kouma Guy11 (2001), in a study on, “Working capital management in healthcare”, Working capital is the required to finance the day to operations of an organization. Working capital may be required to bridge the gap between buying of stocked items to eventual payment for goods sold on account. Working capital also has to fund the gap when products are on hand but being held in stock. Products in stock are at full cost, effectively they are company cash resources which are out of circulation therefore additional working capital is required to meet this gap which can only be reclaimed when the stocks are sold (and only if these stocks are not replaced) and payment for them is received. Working capital requirements have to do with profitability and much more to do with cash flow.

Meaning of Working Capital Management

The management of current assets, current liabilities and inter-relationship between them is termed as working capital management. “Working capital management is concerned with problems that arise in attempting to manage the current assets, the current liabilities and the inter-relationship that exist between them.” In practice, “There is usually a distinction made between the investment decisions concerning current assets and the financing of working capital.” From the above, the following two aspects of working capital management emerge:

(1) To determine the magnitude of current assets or “level of working capital” and

(2) To determine the mode of financing or “hedging decisions.”

Significance of Working Capital Management

Funds are needed in every business for carrying on day to-day operations. Working capital funds are regarded as the life blood of a business firm. A firm can exist and survive without making profit but cannot survive without working capital funds. If a firm is not earning profit it may be termed as ‘sick’, but, not having working capital may cause its bankruptcy working capital in order to survive. The alternatives are not pleasant. Bankruptcy is one alternative Being acquired on unfavorable term as another. Thus, each firm must decide how to balance the amount of working capital it holds, against the risk of failure.”

Working capital has acquired a great significance and sound position in the recent past for the twin objects of profitability and liquidity. In period of rising capital costs and scare funds, the working capital is one of the most important areas requiring management review. It is rightly observed that,

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“Constant management review is required to maintain appropriate levels in the various working capital accounts.”

Mainly the success of a concern depends upon proper management of working capital so “working capital management has been looked upon as the driving seat of financial manager.”

It consumes a great deal of time to increase profitability as well as to maintain proper liquidity at minimum risk. There are many aspects of working capital management which make it an important function of the finance manager. In fact we need to know when to look for working capital funds, how to use them and how measure, plan and control them.

A study of working capital management is very important foe internal and external experts. Sales expansion, dividend declaration, plants expansion, new product line, increase in salaries and wages, rising price level, etc., put added strain on working capital maintenance. Failure of any enterprise is undoubtedly due to poor management and absence of management skill.

Importance of working capital management stems from two reasons, viz.,

(i) A substantial portion of total investment is invested in current assets, and

(ii) Level of current assets and current liabilities will change quickly with the variation in sales. Though fixed assets investment and long-term borrowing will also response to the changes in sales, but its response will be weak.

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3. RESEARCH METHODOLOGY

A qualitative approach with the emphasis on the working capital method of four companies of same manufacturing line correctly suits for the approach used for studying the working capital management practices. Though we have an input of the financials of the company, we have basically focused on the working capital of each company and along with that all its ratios. In this paper a brief review is made for the approach used for working capital management – internally and externally. Internally, study relates to the value creating characteristics of working capital. Externally, business to business cooperation is assessed. After that, description is on what working capital approaches – internally and externally dairy cooperatives use. Consequently, research sub-divides the design of the study into overall case study, the field research or data collection, data analysis and criteria used to ensure the credibleness of the findings.

Both the qualitative and quantitative data analysis is used. WCM approach requires using the qualitative data analysis, which according to Miles and Huberman (1994), refers to essences of people, objects and situations and is expressed in terms of words based on observations, interviews and documents. Quantitative data analysis refers to the analysis of working capital decisions using financial performance ratios. Out of the sources of data collection for the company and archival records are selected to be used, because of their relevance to the research. As archival records, the audited (as much as it is possible) financial statements of the firms for eight years (2005 to 2012) are collected and are used in this research. Taking audited financial data of eight consecutive years has the advantage of retrievability, unbiased selectivity (by both researcher and provider) and accessibility.

STATISTICAL TOOLS USED

A. Liquidity and Solvency Ratio12

Liquidity ratios are the ratios that measure the ability of a company to meet its short term debt obligations. These ratios measure the ability of a company to pay off its short-term liabilities when they fall due.

The liquidity ratios are a result of dividing cash and other liquid assets by the short term borrowings and current liabilities. They show the number of times the short term debt obligations are covered by the cash and liquid assets. If the value is greater than 1, it means the short term obligations are fully covered.

Generally, the higher the liquidity ratios are, the higher the margin of safety that the company posses to meet its current liabilities. Liquidity ratios greater than 1 indicate that the company is in good financial health and it is less likely fall into financial difficulties.

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Most common examples of liquidity ratios include current ratio, acid test ratio (also known as quick ratio), cash ratio and working capital ratio. Different assets are considered to be relevant by different analysts. Some analysts consider only the cash and cash equivalents as relevant assets because they are most likely to be used to meet short term liabilities in an emergency. Some analysts consider the debtors and trade receivables as relevant assets in addition to cash and cash equivalents. The value of inventory is also considered relevant asset for calculations of liquidity ratios by some analysts.

The concept of cash cycle is also important for better understanding of liquidity ratios. The cash continuously cycles through the operations of a company. A company’s cash is usually tied up in the finished goods, the raw materials, and trade debtors. It is not until the inventory is sold, sales invoices raised, and the debtors’ make payments that the company receives cash. The cash tied up in the cash cycle is known as working capital, and liquidity ratios try to measure the balance between current assets and current liabilities.

A company must possess the ability to release cash from cash cycle to meet its financial obligations when the creditors seek payment. In other words, a company should posses the ability to translate its short term assets into cash. The liquidity ratios attempt to measure this ability of a company.

1. Current Ratio13

The current ratio is balance-sheet financial performance measure of company liquidity.The current ratio indicates a company's ability to meet short-term debt obligations. The current ratio measures whether or not a firm has enough resources to pay its debts over the next 12 months. Potential creditors use this ratio in determining whether or not to make short-term loans. The current ratio can also give a sense of the efficiency of a company's operating cycle or its ability to turn its product into cash. The current ratio is also known as the working capital ratio.

The current ratio is calculated by dividing current assets by current liabilities:The current ratio = Current Assets / Current Liabilities

Both variables are shown on the balance sheet (statement of financial position).

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2. Quick Ratio14

The quick ratio is a measure of a company's ability to meet its short-term obligations using its most liquid assets (near cash or quick assets). Quick assets include those current assets that presumably can be quickly converted to cash at close to their book values. Quick ratio is viewed as a sign of a company's financial strength or weakness; it gives information about a company’s short term liquidity. The ratio tells creditors how much of the company's short term debt can be met by selling all the company's liquid assets at very short notice.The quick ratio is also known as the acid-test ratio or quick assets ratio.The quick ratio is calculated by dividing liquid assets by current liabilities:Quick ratio = (Current Assets - Inventories) / Current LiabilitiesCalculating liquid assets inventories are deducted as less liquid from all current assets (inventories are often difficult to convert to cash). All of those variables are shown on the balance sheet (statement of financial position).

Alternative and more accurate formula for the quick ratio is the following:Quick ratio = (Cash and cash equivalents + Marketable securities + Accounts receivable) / Current Liabilities

The formula's numerator consists of the most liquid assets (cash and cash equivalents) and high liquid assets (liquid securities and current receivables).

3. Debt Equity Ratio15

The debt-to-equity ratio (debt/equity ratio, D/E) is a financial ratio indicating the relative proportion of entity's equity and debt used to finance an entity's assets. This ratio is also known as financial leverage.Debt-to-equity ratio is the key financial ratio and is used as a standard for judging a company's financial standing. It is also a measure of a company's ability to repay its obligations. When examining the health of a company, it is critical to pay attention to the debt/equity ratio. If the ratio is increasing, the company is being financed by creditors rather than from its own financial sources which may be a dangerous trend. Lenders and investors usually prefer low debt-to-equity ratios because their interests are better protected in the event of a business decline. Thus, companies with high debt-to-equity ratios may not be able to attract additional lending capital.

A debt-to-equity ratio is calculated by taking the Long term liabilities and dividing it by the shareholders' equity:

Debt-to-equity ratio = Long Term Liabilities / Share Holders EquityBoth variables are shown on the balance sheet (statement of financial position).

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B. Management Efficiency Ratio16

Asset management (turnover) ratios compare the assets of a company to its sales revenue. Asset management ratios indicate how successfully a company is utilizing its assets to generate revenues. Analysis of asset management ratios tells how efficiently and effectively a company is using its assets in the generation of revenues. They indicate the ability of a company to translate its assets into the sales.

Asset management ratios are also known as asset turnover ratios and asset efficiency ratios.

Asset management ratios are computed for different assets. Common examples of asset turnover ratios include fixed asset turnover, inventory turnover, accounts payable turnover ratio, accounts receivable turnover ratio, and cash conversion cycle. These ratios provide important insights into different financial areas of the company and its highlights its strengths and weaknesses.

High asset turnover ratios are desirable because they mean that the company is utilizing its assets efficiently to produce sales. The higher the asset turnover ratios, the more sales the company is generating from its assets.

Although higher asset turnover ratios are preferable, but what is considered to be high for one industry, may be low for another. Therefore it is not useful to compare asset turnover ratios of different industries. Different industries have different requirements with regard to assets. It would be unwise to compare an ecommerce store which requires little assets to a manufacturing organization which requires large manufacturing facilities, plant and equipment.

Low asset turnover ratios mean inefficient utilization of assets. Low asset turnover ratios mean that the company is not managing its assets wisely. They may also indicate that the assets are obsolete. Companies with low asset turnover ratios are likely to be operating below their full capacity. Financial analyses have highlighted relationship between profit margins and asset turnover ratios. It has often been observed that companies with high profit margins have lower asset turnover ratios. On the other hand, companies with lower profit margins tend to have higher asset turnover ratios.

Asset turnover ratios are not always very useful. Asset turnover ratios will not give useful insights into the asset management of companies which sell highly profitable products but not often.

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4. Inventory Turnover Ratio17

Inventory turnover is a measure of the number of times inventory is sold or used in a given time period such as one year. It is a good indicator of inventory quality (whether the inventory is obsolete or not), efficient buying practices, and inventory management. This ratio is important because gross profit is earned each time inventory is turned over. Also called stock turnover.

Inventory turnover is calculated by dividing the cost of goods sold by the average

Inventory level ((beginning inventory + ending inventory)/2):Inventory turnover = Cost of goods sold / Average Inventory

In the income statement (statement of comprehensive income, IFRS) cost of goods sold (COGS) is named "Cost of sales".

The number of days in the period can then be divided by the inventory turnover formula to calculate the number of days it takes to sell the inventory on hand or "inventory turnover days":

Days inventory outstanding = 365 / Inventory turnover

5. Debtors Turnover Ratio18

The receivable turnover ratio (debtor’s turnover ratio, accounts receivable turnover ratio) indicates the velocity of a company's debt collection, the number of times average receivables are turned over during a year. This ratio determines how quickly a company collects outstanding cash balances from its customers during an accounting period. It is an important indicator of a company's financial and operational performance and can be used to determine if a company is having difficulties collecting sales made on credit.

Receivable turnover ratio indicates how many times, on average, account receivables are collected during a year (sales divided by the average of accounts receivables). A popular variant of the receivables turnover ratio is to convert it into an Average collection period in terms of days. The average collection period (also called Days Sales Outstanding (DSO)) is the number of days, on average, that it takes a company to collect its accounts receivables, i.e. the average number of days required to convert receivables into cash.

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An accounting measure used to quantify a firm's effectiveness in extending credit as well as collecting debts.

Receivables turnover ratio = Net receivable sales/ Average accounts receivablesAccounts Receivable outstanding in days:Average collection period (Days sales outstanding) = 365 / Receivables Turnover Ratio

6. Fixed Asset Turnover Ratio19

Fixed asset turnover ratio compares the sales revenue a company to its fixed assets. This ratio tells us how effectively and efficiently a company is using its fixed assets to generate revenues. This ratio indicates the productivity of fixed assets in generating revenues. If a company has a high fixed asset turnover ratio, it shows that the company is efficient at managing its fixed assets. Fixed assets are important because they usually represent the largest component of total assets. There is no standard guideline about the best level of asset turnover ratio. Therefore, it is important to compare the asset turnover ratio over the years for the same company.

This comparison will tell whether the company’s performance is improving or deteriorating over the years. It is also important to compare the asset turnover ratio of other companies in the same industry. This comparison will indicate whether the company is performing better or worse than others.An increasing trend in fixed assets turnover ratio is desirable because it means that the company has less money tied up in fixed assets for each unit of sales. A declining trend in fixed asset turnover may mean that the company is over investing in the property, plant and equipment.

This ratio is usually used in capital-intensive industries where major purchases are for fixed assets. This ratio should be used in subsequent years to see how effective the investment in fixed assets has been.The formula for calculation of fixed asset turnover ratio is given below

Fixed Asset Turnover Ratio = Sales Revenue / Total Fixed Assets

The fixed assets usually include property, plant and equipment. The value of goodwill, long-term deferred tax and other fixed assets that do not belong to property, plant and equipment is usually subtracted from the total fixed assets to present a more meaningful fixed asset turnover ratio.

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C. Profitability Ratio20

Profitability ratios measure a company’s ability to generate earnings relative to sales, assets and equity. These ratios assess the ability of a company to generate earnings, profits and cash flows relative to relative to some metric, often the amount of money invested. They highlight how effectively the profitability of a company is being managed.

Common examples of profitability ratios include gross profit margin, net profit margin, return on equity, return on capital employed (ROCE) and return on net assets (RONA).

All of these ratios indicate how well a company is performing at generating profits or revenues relative to a certain metric.

Different profitability ratios provide different useful insights into the financial health and performance of a company. For example, gross profit and net profit ratios tell how well the company is managing its expenses. Return on capital employed (ROCE) tells how well the company is using capital employed to generate returns. Return on investment tells whether the company is generating enough profits for its shareholders.

For most of these ratios, a higher value is desirable. A higher value means that the company is doing well and it is good at generating profits, revenues and cash flows.

Profitability ratios are of little value in isolation. They give meaningful information only when they are analyzed in comparison to competitors or compared to the ratios in previous periods. Therefore, trend analysis and industry analysis is required to draw meaningful conclusions about the profitability of a company.

7. Gross Profit Margin21

Gross profit margin (gross margin) is the ratio of gross profit (gross sales less cost of sales) to sales revenue. It is the percentage by which gross profits exceed production costs. Gross margins reveal how much a company earns taking into consideration the costs that it incurs for producing its products or services. Gross margin is a good indication of how profitable a company is at the most fundamental level, how efficiently a company uses its resources, materials, and labour. It is usually expressed as a percentage, and indicates the profitability of a business before overhead costs; it is a measure of how well a company controls its costs.

Gross margin measures a company's manufacturing and distribution efficiency during the production process. The higher the percentage, the more the company retains on

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each dollar of sales to service its other costs and obligations, the better the company is thought to control costs. Investors use the gross profit margin to compare companies in the same industry and also in different industries to determine what are the most profitable. A company that boasts a higher gross margin than its competitors and industry is more efficient.

Gross margin is calculated as gross profit divided by total sales (revenue).Gross profit margin = Gross profit / Revenue

Both variables are shown on the income statement or statement of comprehensive income.

8. Net Profit Margin22

Net profit margin (or profit margin, net margin, return on revenue) is a ratio of profitability calculated as after-tax net income (net profits) divided by sales (revenue).

Net profit margin is displayed as a percentage. It shows the amount of each sales dollar left over after all expenses have been paid.

Net profit margin is a key ratio of profitability. It is very useful when comparing companies in similar industries. A higher net profit margin means that a company is more efficient at converting sales into actual profit.

Net profit margin = Profit (after tax) / Revenue

Both variables are shown on the income statement or statement of comprehensive income.

9. Return on Capital Employed23

Return on capital employed (ROCE) is a measure of the returns that a business is achieving from the capital employed, usually expressed in percentage terms. Capital employed equals a company's Equity plus Non-current liabilities (or Total Assets − Current Liabilities), in other words all the long-term funds used by the company. ROCE indicates the efficiency and profitability of a company's capital investments.

ROCE should always be higher than the rate at which the company borrows otherwise any increase in borrowing will reduce shareholders' earnings, and vice versa; a good

ROCE is one that is greater than the rate at which the company borrows.

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ROCE = EBIT / Capital Employed = EBIT / (Equity + Non-current Liabilities) = EBIT / (Total Assets - Current Liabilities)

A more accurate variation of this ratio is return on average capital employed (ROACE), which takes the average of opening and closing capital employed for the time period.

One limitation of ROCE is the fact that it does not account for the depreciation and amortization of the capital employed. Because capital employed is in the denominator, a company with depreciated assets may find its ROCE increases without an actual increase in profit.

10. Return on Net Asset24

The return on net assets (RONA) is a comparison of net income with the net assets. This is a metric of financial performance of a company that takes into account earnings of a company with regard to fixed assets and net working capital.

The return on net assets (RONA) helps the investors to determine the percentage net income the company is generating from the assets. This ratio tells how effectively and efficiently the company is using its assets to generate earnings. This is an important ratio because in many companies the fixed assets are a single largest component of the investment. Although there are no fixed standards or benchmarks for RONA but the higher this ratio is the better it is. Higher RONA means that the company is using its assets and working capital efficiently and effectively. An increasing RONA is an indicator of improving profitability and improving financial performance of a company.

This ratio should usually be used in capital-intensive industries where major purchases are for fixed assets. It should be used in subsequent years to see how effective the investment in new fixed assets has been.

The return on net assets (RONA) is calculated by dividing the net income of a company by the sum of its fixed assets and net working capital. This can be expressed in the following formula.

Return on Net Assets = Net Income / (Fixed Assets + Net Working Capital)

The figure for net income can be found in the income statement. Net income is also known as profit after tax. The figure for fixed assets can be found in the balance sheet. Fixed assets include property, plant and equipment, long term investments, and other non-current assets. The net working capital is defined as current assets minus current liabilities.

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D. Debt Coverage Ratio25

Financial leverage ratios (debt ratios) measure the ability of a company to meet its financial obligations when they fall due. Financial leverage ratios (debt ratios) indicate the ability of a company to repay principal amount of its debts, pay interest on its borrowings, and to meet its other financial obligations. They also give insights into the mix of equity and debt a company is using.

Financial leverage ratios usually compare the debts of a company to its assets. The common examples of financial leverage ratios include debt ratio, interest coverage ratio, capitalization ratio, debt-to-equity ratio, and fixed assets to net worth ratio.

Financial leverage ratios indicate the short-term and long-term solvency of a company. They give indications about the financial health of a company. These ratios give indications whether the company has got enough financial resources to cover its financial obligations when the creditors and lenders seek their payments.

A company with adverse financial leverages ratios may not be able to cover its debts and therefore may go bankrupt. These ratios can give warnings to the shareholders and directors of potential financial difficulties. The shareholders and directors can take actions to prevent the company from going bankrupt.

Financial leverage ratios help to determine the overall level of financial risk faced by a company and its shareholders. Generally speaking, the greater the amount of debt of a company the greater the financial risk is. A company with greater amount of debts and financial obligations is more likely to fail to repay its debts.

Financial leverage ratios are of little use in isolation. To draw meaningful conclusions about the financial health of a company, trend analysis and industry analysis needs to be done. Trend and industry analysis will tell how well the financial position is being managed. Trend analysis will indicate whether the financial position of a company is improving or deteriorating over time. Industry analysis will indicate how well the company is performing as compared to other companies in the same industry.

Companies need to carefully manage their financial leverage ratios to keep their financial risk at acceptable level. Careful management of financial leverage ratios is also important when seeking loans from banks and financial institutions. Favourable ratios can help the company to negotiate a favourable interest rate.

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11. Interest Coverage Ratio26

The interest coverage ratio (ICR) is a measure of a company's ability to meet its interest payments. Interest coverage ratio is equal to earnings before interest and taxes (EBIT) for a time period, often one year, divided by interest expenses for the same time period. The interest coverage ratio is a measure of the number of times a company could make the interest payments on its debt with its EBIT. It determines how easily a company can pay interest expenses on outstanding debt.

Interest coverage ratio is also known as interest coverage, debt service ratio or debt service coverage ratio.

The interest coverage ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) by the company's interest expenses for the same period.

Interest coverage ratio = EBIT / Interest expenses

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4. CASE STUDY

Analysis of the Working Capital Management of Tata Steel, JSW Steel, Steel Authority of India and Visa Steel.

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5. DATA ANALYSIS (Refer Table 3) Tata Steel1. The Current Ratio of the company has faced a major change in last 8 years. It has raised more than 50% at times and has even fallen less than 50% at times. It is due to the changes in the cash position as well as the changes in debtors of the company, whereas liability has been majorly changed due to the creditors of the company.For example: - Current Ratio has changed from 0.71 to 1.69 in the year 2006 to 2007 and has changed from 1.69 to 3.81 in the year 2007 to 2008, whereas it has fallen from 3.81 to 0.91 in the year 2008 to 2009.2. The Quick Ratio of the company has even faced a major change in last 8 years. It has raised more than 50% at times and has even fallen less than 50% at times. It is due to the changes in the cash position as well as the changes in debtors of the company, whereas liability has been majorly changed due to the creditors of the company.For example: - Quick Ratio has changed from 0.3 to 1.37 in the year 2006 to 2007 and has changed from 1.37 to 3.52 in the year 2007 to 2008, whereas it has fallen from 3.52 to 0.57 in the year 2008 to 2009.3. The Debt Equity Ratio of the company has changed due to the changes in debt, whereas equity share capital has remained unchanged throughout these 8 years.For example: - Debt Equity Ratio has changed from 0.69 to 1.08 in the year 2007 to 2008 and has decreased from 1.34 to 0.68 in the year 2009 to 2010.4. Inventory Turnover Ratio has remained almost same from 2005 to 2007 and after that it has increased and then again remained almost around the same band.For example: - Inventory Turnover has increased from the year 2008 to 2009 from 7.69 to 10.84.5. Debtors Turnover Ratio has gradually increased throughout the year from 2005 to

2011 from 23.5 to 67.93, but in the last year it has fallen from 67.93 to 50.80

6. Gross Profit Margin has decreased from 2005 to 2012 from 40.17% to 32.09%, such a situation is faced by the company because there is a decline in profit each year and the company’s cost of producing the good is also increasing.7. Net Profit Margin of the company has even decreased due to the decrease in the net profit of the company gradually. It was 23.72 in 2005 and has now become 19.47 in 2012.8. Company’s return on the capital which they have employed for the production has even decreased gradually each year. It is because the capital employed is increasing whereas the income is decreasing. From 56.06 in 2005 it has come up to 15.03 in 2012.9. Company’s return on the net asset has even decreased gradually each year. It is because the income is decreasing whereas the working capital is increasing and fixed asset remains the same. From 49.21 in 2005 it has come up to 12.82 in 2012.10. Interest Coverage Ratio has even fallen due to a rise in interest expenses and a fall in earnings before interest and tax of the company. It has fallen 31.86 in 2006 to 5.93 in 2012.

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(Refer Table 6)JSW Steel1. The Current Ratio of the company has not faced a major change in last 8 years. It has remained around a closed ranged band. It is due to the changes in the cash position as well as the changes in debtors of the company, whereas creditors of the company have changed proportionately.For example: - Current Ratio has changed from 0.64 to 0.51 in the year 2007 to 2008 and has changed from 0.51 to 0.44 in the year 2008 to 2009, whereas it has raised from 0.58 to 0.78 in the year 2010 to 2011.2. The Quick Ratio of the company has not faced a major change in last 8 years. It has remained around a closed ranged band. It is due to the changes in the cash position as well as the changes in debtors of the company, whereas creditors of the company have changed proportionately.For example: - Quick Ratio has changed from 0.43 to 0.28 in the year 2007 to 2008 and has remained unchanged from 0.28 to 0.28 in the year 2008 to 2009, whereas it has raised from 0.31 to 0.49 in the year 2010 to 2011.3. The Debt Equity Ratio of the company has changed due to the changes in debt, whereas equity share capital has remained unchanged throughout these 8 years.For example: - Debt Equity Ratio has changed from 0.84 to 1.06 in the year 2007 to 2008 and has decreased from 1.26 to 0.74 in the year 2010 to 2011.4. Inventory Turnover Ratio has remained almost same from 2005 to 2010 and after that it has decreased and then again remained almost around the same band.For example: - Inventory Turnover has decreased from the year 2008 to 2009 from 9.26 to 8.75.5. Debtors Turnover Ratio has gradually increased throughout the year from 2005 to

2008 from 19.83 to 39.11, but in the last few years it has fallen from 39.11 to

29.12.

6. Gross Profit Margin has decreased from 2005 to 2012 from 28.26% to 12.09%, such a situation is faced by the company because there is a decline in gross profit each year and the company’s revenue is also decreasing.7. Net Profit Margin of the company has even decreased due to the decrease in the net profit of the company gradually. It was 13% in 2005 and has now become 5.04% in 2012.8. Company’s return on the capital which they have employed for the production has both decreased and increased from time to time. From 27.46 in 2005 it has come up to 13.22 in 2012, whereas in 2006 it was 14.68 and increased to 22.89.9. Company’s return on the net asset has even decreased gradually each year. It is because the income is decreasing whereas the working capital is increasing and fixed asset remains the same. From 27.63 in 2005 it has come up to 18.77 in 2012.10. Interest Coverage Ratio has remained around the same range. It raised from 4.28 in 2005 to 6.13 in 2008 and again decreased to 3.43 in 2012.

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(Refer Table 9)Steel Authority of India1. The Current Ratio of the company has not faced a major change in last 8 years. It has remained around a closed ranged band. It is due to the changes in the cash position as well as the changes in debtors of the company, whereas creditors of the company have changed proportionately.For example: - Current Ratio has changed from 1.13 to 1.68 in the year 2005 to 2008 whereas it has decreased from 1.68 to 1.22 in the year 2008 to 2012.2. The Quick Ratio of the company has not faced a major change in last 8 years. It has remained around a closed ranged band. It is due to the changes in the cash position as well as the changes in debtors of the company, whereas creditors of the company have changed proportionately.For example: - Quick Ratio has changed from 0.77 to 1.53 in the year 2005 to 2010 whereas it has decreased from 1.53 to 0.82 in the year 2010 to 2012.3. The Debt Equity Ratio of the company has changed due to the changes in debt, whereas equity share capital has remained unchanged throughout these 8 years.For example: - Debt Equity Ratio has changed from 0.56 to 0.13 in the year 2005 to 2008 and has increased from 0.13 to 0.4 in the year 2008 to 2012.4. Inventory Turnover Ratio has remained almost same from 2005 to 2011 only in 2008 it has increased to 8.62, whereas it has fallen in the latest year in 2012 to 3.71.For example: - Inventory Turnover has increased from the year 2005 to 2008 from 6.96 to 8.62 and then decreased from 8.62 to 3.71 from 2008 to 2012.5. Debtors Turnover Ratio has gradually decreased throughout the year from 2005

to 2012 from 16.61 to 10.3.

6. Gross Profit Margin has decreased gradually from 2005 to 2012 from 36.09% to 9.74%, such a situation is faced by the company because there is a decline in profit each year and the company’s cost of producing the good is also increasing.7. Net Profit Margin of the company has even decreased gradually due to the decrease in the net profit of the company. It was 23.19% in 2005 and has now become 7.44% in 2012.8. Company’s return on the capital which they have employed for the production has even decreased gradually each year. It is because the capital employed is increasing whereas the income is decreasing. From 61.29 in 2005 it has come up to 10.91 in 2012.9. Company’s return on the net asset has even decreased gradually each year. It is because the income is decreasing whereas the working capital is increasing and fixed asset remains the same. From 66.14 in 2005 it has come up to 8.89 in 2012.10. Interest Coverage Ratio has both increased and decreased, due to various changes in both interest expenses and in earnings before interest and tax of the company. It has increased from 17.86 in 2005 to 40.02 in 2009 and the decreased to 9 in 2012.

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(Refer Table 12)Visa Steel 1. The Current Ratio of the company has faced a major change in last 8 years. It has not remained around a closed ranged band. It is due to the changes in the cash position as well as the changes in debtors of the company, whereas creditors of the company have changed.For example: - Current Ratio has changed from 1.22 to 1.55 in the year 2005 to 2006 whereas it has decreased from 1.55 to 0.29 in the year 2006 to 2012.2. The Quick Ratio of the company has faced a major change in last 8 years. It has not remained around a closed ranged band. It is due to the changes in the cash position as well as the changes in debtors of the company, whereas creditors of the company have changed inversely proportionately.For example: - Quick Ratio has changed from 0.85 to 1.45 in the year 2005 to 2006 whereas it has decreased from 1.45 to 0.19 in the year 2006 to 2012.3. The Debt Equity Ratio of the company has changed due to the changes in debt, whereas equity share capital has remained unchanged throughout these 8 years.For example: - Debt Equity Ratio has changed from 0.88 to 5.13 in the year 2005 to 2012 and has gradually increased each year.4. Inventory Turnover Ratio has remained almost same from 2005 to 2011 only in 2008 it has decreased to 2.62, whereas it has increased in the latest year in 2012 to 4.1.For example: - Inventory Turnover has increased from the year 2005 to 2007 from 3.72 to 4.63 and then decreased from 4.63 to 2.62 from 2007 to 2008.5. Debtors Turnover Ratio has gradually increased throughout the year from 2005

to 2012 from 9.37 to 27.54.

6. Gross Profit Margin has increased gradually from 2005 to 2008 from 6.02% to 12.75%, such a situation is faced by the company because there is an increase in profit each year and the company’s cost of producing the good is also decreasing and decreased from 13.2% to 2.1% from 2010 to 20127. Net Profit Margin of the company has even decreased gradually due to the decrease in the net profit of the company. It was 2.57% in 2005 and has now become -8.5% in 2012.8. Company’s return on the capital which they have employed for the production has even decreased and increased. It is because the capital employed is increasing whereas the income is decreasing and increasing both. From 11.2 in 2005 it has come up to 6.29 in 2009 and from 2009 it has increased to 11.72 in 2010, whereas in 2012 it has come up to 3.81.9. Company’s return on the net asset has even increased and decreased It is because the income is increasing and decreasing whereas the working capital is increasing and fixed asset remains the same. From 7.8 in 2005 it has come up to 12.72 in 2008 and from 12.72 it has decreased to -50.69 in 2012.10. Interest Coverage Ratio has decreased, due to increase in interest expenses and in earnings before interest and tax of the company. It has increased from 6.21 in 2005 to 0.29 in 2012.

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COMPARATIVE ANALYSIS

1. The Current Ratio of Steel authority of India is most stable out of all the four company since it does not fluctuate much and it stays around a particular range from the year 2005 to 2012.Whereas, the current ratio of Visa steel keeps on depreciating from 2006 to 2012. Another company which has kept a stable current ratio is Jsw steel but Sail has a higher current ratio compared to Jsw steel for all the year. Tata Steel has the most fluctuating current ratio since it doubles at times and it even reduces to more than half from the previous year at times. It doubled in 2008 from 1.69 to 3.81 and then decreased in 2009 from 3.81 to 0.91.

2. The Quick Ratio of Steel authority of India is most stable out of all the four company since it does not fluctuate much it appreciates at first from 2005 to 2010 and then it depreciate in 2011 and 2012.Whereas, the quick ratio of Visa steel keeps on depreciating from 2006 to 2012. Another company which has kept a stable quick ratio is Jsw steel but Sail has a higher current ratio compared to Jsw steel for all the year. Tata Steel has the most fluctuating current ratio since it doubles at times and it even reduces to more than half from the previous year at times. It doubled in 2008 from 1.37 to 3.52 and then decreased in 2009 from 3.52 to 0.57.

3. The Debt Equity Ratio of Steel authority of India has decreased at first from 2005 to 2008 from 0.56 to 0.13 and then it has increased from 2008 onwards from 0.13 to 0.54. Whereas, the debt equity ratio of Visa steel keeps on appreciating from 2005 to 2012 it increases 0.88 to 5.13. Jsw steel company has to stable debt equity ratio from 2005 to 2010 but it depreciates from 1.26 to 0.69 by 2012. Tata Steel has the most fluctuating debt equity ratio since it doubles at times and it even reduces to more than half from the previous year at times. It doubled in 2007 from 0.26 to 0.69 and then decreased in 2010 from 1.26 to 0.74.

4. The Inventory Turnover Ratio of Tata Steel is highest out of all the company but during 2005 and 2007 Jsw steel has a higher inventory turnover ratio whereas, Visa steel has the lowest inventory turnover out off all the shares it ranges around 2.62 to 4.1. And Sail has an average inventory turnover ratio which moves around 3.71 to 8.62.Tata Steel ranges around 7.08 to 10.9, whereas jsw steel ranges around 6.61 to 9.

5. The Debtors Turnover Ratio of Tata Steel is highest out of all the company but during 2007 and 2008 Jsw steel has a higher debtors turnover ratio whereas, Visa steel has the lowest debtors turnover out off all the shares it ranges around 8.25 to 27.54. And Sail has a stable debtors turnover ratio which moves around 10.3 to 16.61. Its ratio is declining every year. Tata Steel ranges around 67.93 to 23.5, whereas jsw steel ranges around 19.83 to 39.11.

6. The Gross Profit Margin of Tata Steel is highest out of all the company throughout all the year from 2005 to 2012. It ranges from 32.09 to 40.17 whereas, Jsw steel

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and sail has quite a competitive turnover. Jsw steel ranges from 12.09 to 28.26 and Sail ranges from 9.74 to 36.09. sail has a wider range of gross profit but its profit has continuously declined. Visa Steel has the lowest gross profit margin among all the shares, it ranges from 2.1 to 13.2.

7. The Net Profit Margin of Tata Steel is highest out of all the company throughout all the year from 2005 to 2012. It ranges from 19.47 to 23.72 whereas, Jsw steel and sail has quite a competitive turnover. Jsw steel ranges from 5.04 to 14.98 and Sail ranges from 7.44 to 23.19. Sail has a wider range of gross profit but its profit has continuously declined. Visa Steel has the lowest gross profit margin among all the shares, it ranges from -8.5 to 6.17 recently it has posted a negative net profit margin.

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6. FINDINGS AND CONCLUSIONTata Steel

The latest result shows that the company’s current ratio has fallen from 1.78 to 0.79

Quick ratio has even declined from 1.45 to 0.52 Debt Equity Ratio has decline as company has paid off some of it debt or has

increased its equity. Inventory Turnover Ratio is constant from previous year. Debtors Turnover Ratio has declined from 67.93 to 50.8 Gross Profit has also declined a bit, whereas net profit has declined

severely Return on Net Asset has become 12.82 from 14.22.

JSW Steel The latest result shows that the company’s current ratio has been constant from

the previous year. Quick ratio has even improved from 0.49 to 0.54 Debt Equity Ratio has decline as company has paid off some of it debt or

has increased its equity. Inventory Turnover Ratio is more or less around a particular range. Debtors Turnover Ratio has declined from 29.12 to 32.95 Gross Profit has also declined a bit, whereas net profit has declined

severely Return on Net Asset has become 8.77 from 12.07.

Steel Authority Of India The latest result shows that the company’s current ratio has almost remain

the same Quick ratio has even declined from 1.35 to 0.82 Debt Equity Ratio has decline as company has paid off some of it debt or

has increased its equity. Inventory Turnover Ratio has declined severely from 5.13 to 3.71 Debtors Turnover Ratio has declined from 11.11 to 10.3 Gross Profit has also declined a bit, whereas net profit has declined

severely Return on Net Asset has become 8.89 from 13.23

Visa Steel The latest result shows that the company’s current ratio has become almost

declined 50% from 0.47 to 0.29 Quick ratio has even declined less compared to current ratio. Debt Equity Ratio has raised as company has paid off some of it equity or has

increased its debt. Inventory Turnover Ratio has increased severely from 3.57 to 4.1

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Debtors Turnover Ratio has increased from 23 to 27.54 Gross Profit has also declined severely, whereas net profit has declined and

become negative. Return on Net Asset has also become from 14.54 to -50.69

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CONCLUSION

Working Capital Management is an integral part of the financial management of the company because many short-term activities have effect on long-term financial decisions. Having an effective short-term financial strategy, for example, allows a company to plan ahead with the confidence that its short-term concerns are being handled properly. Perhaps unlike other areas of financing, short-term finance have more quantitative features, making each company’s case somewhat different from another’s. This unique nature combined with the short term frame associated with this aspect of finance, makes short-term finance a dynamic, challenging activity.

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7. RECOMMENDATIONSTata Steel

The company’s current ratio has fallen more than 50% thus the company should focus more on current assets and current liabilities

Quick ratio has even declined more than 3 time the previous which shows that either current liabilities is way more, or else liquid assets are way less.

Company shall continue to pay of its debt as they are doing so. Since it has decreased from previous year.

Inventory management is maintained by the company. Company has paid a part of its debtor which is good for the company. Return on Net Asset of the company should be well maintained and should not

decline.

JSW Steel The company’s current ratio is well maintained and not much fluctuation is

seen in it. Quick ratio has even improved from previous year stating that liquid asset

has increased. Thus company should try to improve more of it Company shall continue to pay of its debt as they are doing so. Since it

has decreased from previous year. Net Profit Margin per consumption should be increased by the company Return on Net Asset has declined which is not good for the company so

they shall try to bring it up.

Steel Authority Of India Company liquid asset has declined whereas the current asset has remained the

same. Inventory turnover has even declined as the company is reducing its inventory

by producing less. Company shall have fewer debtors, since the company is liable to pay to them. Company’s profit margin is reduced due to competition which at the end results

in decline of company’s net and gross profit.

Visa Steel The company’s current ratio has fallen more than 50% thus the company should

focus more on current assets and current liabilities. Company should prefer to raise equity for redeeming debt compared to raising

debt for equity. Company shall not keep excess inventory. They should produce as per the

demand. Company shall not set strategies which will affect the net profit of the

company. since it affects net profit margin. Company’s net asset has become negative, thus company shall not raise

money from debt, if required.

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8. FUTURE SCOPE OF STUDY

This study is the foundation stone for carrying out further research in the field of working capital management. Further research can also be carried out for the study of working capital management. This one of such preliminary research work and further review of this research work can open up many dimensions for researchers. Although the objective taken in research study is diverse, yet a trend can be observed from the finding for future research work.

One of the major drawbacks of the study is the lack of time. Working capital management is a very vast topic and hence in a limited time it is impossible to know every aspects of working capital management. And also it was study that depended on 8 years of data. There is future scope for studying these things.

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ANNEXURE:Table 1Working Capital Management of Tata Steel

Profit and Loss of Tata Steel------------------- in Rs. Cr. -------------------

Mar '12 Mar '11 Mar '10 Mar '09 Mar '08 Mar '07 Mar '06 Mar '0512mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths

IncomeSales Turnover 37,005.71 31,901.94 26,757.60 26,843.53 22,191.43 19,756.84 17,136.92 15,867.62Excise Duty 3,167.20 2,594.59 1,816.95 2,495.21 2,537.02 2,304.18 2,004.83 1,377.92Net Sales 33,838.51 29,307.35 24,940.65 24,348.32 19,654.41 17,452.66 15,132.09 14,489.70Other Income 923.42 1,435.80 1,241.08 603.07 586.41 362.12 252.58 108.75Stock Adjustments 220.72 173.65 -134.97 289.27 38.73 82.47 104.91 289.55Total Income 34,982.65 30,916.80 26,046.76 25,240.66 20,279.55 17,897.25 15,489.58 14,888.00ExpenditureRaw Materials 9,917.37 9,395.92 8,356.45 8,568.71 6,063.53 5,762.42 4,766.44 4,578.43Power & Fuel Cost 1,990.16 1,558.49 1,383.44 1,222.48 1,038.77 1,027.84 897.57 778.3Employee Cost 3,047.26 2,618.27 2,361.48 2,305.81 1,589.77 1,454.83 1,351.51 1,291.00Other Manufacturing Expenses 3,618.22 2,905.16 2,419.89 2,127.48 1,654.96 1,561.40 1,466.83 1,440.72Selling and Admin Expenses 2,383.34 574.86 417.9 400.24 247.77 244.92 255.93 259.74Miscellaneous Expenses 1,568.62 1,456.83 1,287.04 1,180.08 1,029.30 805.99 727.12 679.86Preoperative Exp Capitalized -478.23 -198.78 -326.11 -343.65 -175.5 -236.02 -112.62 -204.82Total Expenses 22,046.74 18,310.75 15,900.09 15,461.15 11,448.60 10,621.38 9,352.78 8,823.23

Mar '12 Mar '11 Mar '10 Mar '09 Mar '08 Mar '07 Mar '06 Mar '05

12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mthsOperating Profit 12,012.49 11,170.25 8,905.59 9,176.44 8,244.54 6,913.75 5,884.22 5,956.02PBDIT 12,935.91 12,606.05 10,146.67 9,779.51 8,830.95 7,275.87 6,136.80 6,064.77Interest 1,925.42 1,686.27 1,848.19 1,489.50 929.03 251.25 168.44 228.8PBDT 11,010.49 10,919.78 8,298.48 8,290.01 7,901.92 7,024.62 5,968.36 5,835.97Depreciation 1,151.44 1,146.19 1,083.18 973.4 834.61 819.29 775.1 618.78Other Written Off 0 0 0 0 0 0 0 0Profit Before Tax 9,859.05 9,773.59 7,215.30 7,316.61 7,067.31 6,205.33 5,193.26 5,217.19Extra-ordinary items 0 0 0 0 0 57.29 47.5 80.79PBT (Post Extra-ordinary Items) 9,859.05 9,773.59 7,215.30 7,316.61 7,067.31 6,262.62 5,240.76 5,297.98Tax 3,162.63 2,912.44 2,168.50 2,114.87 2,380.28 2,040.47 1,734.38 1,823.82Reported Net Profit 6,696.42 6,865.69 5,046.80 5,201.74 4,687.03 4,222.15 3,506.38 3,474.16Total Value Addition 12,129.37 8,914.83 7,543.64 6,892.44 5,385.07 4,858.96 4,586.34 4,244.80Preference Dividend 0 0 45.88 109.45 22.19 0 0 0Equity Dividend 1,165.46 1,151.06 709.77 1,168.95 1,168.93 943.91 719.51 719.51Corporate 181.57 156.71 122.8 214.1 202.43 160.42 100.92 101.86

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Dividend TaxPer share data (annualized)Shares in issue (lakhs) 9,712.14 9,592.14 8,872.14 7,305.92 7,305.84 5,804.73 5,534.73 5,534.73Earnings Per Share (Rs) 68.95 71.58 56.37 69.7 63.85 72.74 63.35 62.77Equity Dividend (%) 120 120 80 160 160 155 130 130Book Value (Rs) 537.64 503.19 418.94 331.68 298.78 240.31 176.26 127.56

Source: http://www.moneycontrol.com/financials/tatasteel/profit-loss/TIS#TIShttp://www.moneycontrol.com/financials/tatasteel/profit-loss/TIS

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Table 2Balance Sheet of Tata Steel

------------------- in Rs. Cr. -------------------Mar '12 Mar '11 Mar '10 Mar '09 Mar '08 Mar '07 Mar '06 Mar '05

12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mthsSources Of

FundsTotal Share

Capital971.41 959.41 887.41 6,203.45 6,203.30 580.67 553.67 553.67

Equity Share Capital

971.41 959.41 887.41 730.79 730.78 580.67 553.67 553.67

Share Application

Money0 178.2 0 0 0 147.06 0 0

Preference Share Capital

0 0 0 5,472.66 5,472.52 0 0 0

Reserves 51,245.05 47,307.02 36,281.34 23,501.15 21,097.43 13,368.42 9,201.63 6,506.25Revaluation Reserves

0 0 0 0 0 0 0 0

Networth 52,216.46 48,444.63 37,168.75 29,704.60 27,300.73 14,096.15 9,755.30 7,059.92Secured Loans

1,919.27 2,013.00 2,259.32 3,913.05 3,520.58 3,758.92 2,191.74 2,468.18

Unsecured Loans

21,774.55 26,288.14 22,979.88 23,033.13 14,501.11 5,886.41 324.41 271.52

Total Debt 23,693.82 28,301.14 25,239.20 26,946.18 18,021.69 9,645.33 2,516.15 2,739.70Total

Liabilities75,910.28 76,745.77 62,407.95 56,650.78 45,322.42 23,741.48 12,271.45 9,799.62


12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mthsApplication Of Funds

Gross Block 23,485.63 22,846.26 22,306.07 20,057.01 16,479.59 16,029.49 15,407.17 13,085.07Less: Accum. Depreciation

12,119.37 11,041.16 10,143.63 9,062.47 8,223.48 7,486.37 6,699.85 5,845.49

Net Block 11,366.26 11,805.10 12,162.44 10,994.54 8,256.11 8,543.12 8,707.32 7,239.58Capital Work in Progress

18,506.63 6,969.38 3,843.59 3,487.68 4,367.45 2,497.44 1,157.73 1,872.66

Investments 50,282.52 46,564.94 44,979.67 42,371.78 4,103.19 6,106.18 4,069.96 2,432.65Inventories 4,858.99 3,953.76 3,077.75 3,480.47 2,604.98 2,332.98 2,174.75 1,872.40

Sundry Debtors

904.08 428.03 434.83 635.98 543.48 631.63 539.4 581.82

Cash and Bank Balance

30.82 512.76 500.3 463.58 465 446.51 288.35 246.68

Total Current Assets

5,793.89 4,894.55 4,012.88 4,580.03 3,613.46 3,411.12 3,002.50 2,700.90

Loans and Advances

6,935.20 16,814.04 6,678.55 5,884.61 34,582.84 4,025.95 1,994.46 2,234.96

Fixed Deposits

3,918.93 3,628.78 2,733.84 1,127.02 0.04 7,234.84 0.04 0.04

Total CA, Loans &

Advances16,648.02 25,337.37 13,425.27 11,591.66 38,196.34 14,671.91 4,997.00 4,935.90

Deferred Credit

0 0 0 0 0 0 0 0

Current Liabilities

16,975.61 10,383.04 8,699.34 8,965.76 6,842.26 6,349.24 4,552.39 4,247.43

Provisions 3,917.54 3,547.98 3,303.68 2,934.19 2,913.52 1,930.46 2,361.44 2,648.56Total CL & 20,893.15 13,931.02 12,003.02 11,899.95 9,755.78 8,279.70 6,913.83 6,895.99

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ProvisionsNet Current

Assets-4,245.13 11,406.35 1,422.25 -308.29 28,440.56 6,392.21 -1,916.83 -1,960.09

Miscellaneous Expenses

0 0 0 105.07 155.11 202.53 253.27 214.82

Total Assets 75,910.28 76,745.77 62,407.95 56,650.78 45,322.42 23,741.48 12,271.45 9,799.62

Contingent Liabilities

15,270.84 12,582.24 13,184.61 12,188.55 9,250.08 7,185.93 3,872.34 2,983.05

Book Value (Rs)

537.64 503.19 418.94 331.68 298.78 240.31 176.26127.56

Source: http://www.moneycontrol.com/financials/tatasteel/balance-sheet/TIS#TIShttp://www.moneycontrol.com/financials/tatasteel/balance-sheet/TIS

35

Table 3Year

Ratios 2012 2011 2010 2009 2008 2007 2006 2005Current Ratio

0.79 1.78 1.12 0.91 3.81 1.69 0.71 0.69

Quick Ratio

0.52 1.45 0.76 0.57 3.52 1.37 0.3 0.33

Debt Equity Ratio

0.45 0.59 0.68 1.34 1.08 0.69 0.26 0.39

Inventory Turnover Ratio

9.4 9.85 10.9 9.36 10.84 7.69 7.08 7.82

Debtors Turnover Ratio

50.8 67.93 46.58 41.29 33.45 29.81 26.99 23.5

Fixed Assets Turnover Ratio

1.48 1.29 1.12 1.22 1.2 1.68 1.6 1.71

Gross Profit Margin (%)

32.09 34.2 31.36 33.69 37.7 39.84 38.81 40.17

Net Profit Margin (%)

19.47 23.16 19.96 21.09 23.43 23.53 22.78 23.72

Return on Capital Employed

15.03 13.48 13.06 15.01 17.11 27.71 43.72 56.06

Return on Net Asset

12.82 14.22 13.45 21.1 21.52 29.95 35.94 49.21

Interest Coverage Ratio

5.93 6.14 4.41 5.71 8.35 26.19 31.86 24.01

Source: table 1 and table 2

35

TABLE 4:

Profit and Loss of Jsw Steel------------------- in Rs. Cr. -------------------


IncomeSales Turnover 34,671.85 25,130.76 19,456.64 15,179.29 12,628.91 9,337.34 6,686.82 7,035.90Excise Duty 2,630.90 2,031.91 1,289.18 1,172.70 1,237.86 742.31 594.43 360.76Net Sales 32,040.95 23,098.85 18,167.46 14,006.59 11,391.05 8,595.03 6,092.39 6,675.14Other Income -594.95 199.05 474.25 -608.47 309.91 110.6 360.11 33.03Stock Adjustments

330.7 747.37 64.74 285.22 283.56 -66.54 139.29 43.31

Total Income 31,776.70 24,045.27 18,706.45 13,683.34 11,984.52 8,639.09 6,591.79 6,751.48ExpenditureRaw Materials 22,397.47 15,995.19 11,415.86 9,386.47 6,560.14 4,377.23 3,511.95 3,236.71Power & Fuel Cost

1,683.84 1,181.52 1,014.82 673.07 532.43 393.1 415.76 541.67

Employee Cost 615.59 534.47 365.2 288.75 273.98 175.47 127.04 107.21Other Manufacturing Expenses

690.87 476.58 299.18 194.03 165.58 87.84 72.68 98.98

Selling and Admin Expenses

1,105.58 819.68 724.63 717.74 639.26 572.82 336.71 323.22


294.21 200.4 138.95 170.58 146.99 103.39 74.42 85.31

Preoperative Exp Capitalized

0 0 0 0 0 0 0 0

Total Expenses 26,787.56 19,207.84 13,958.64 11,430.64 8,318.38 5,709.85 4,538.56 4,393.10Mar '12 Mar '11 Mar '10 Mar '09 Mar '08 Mar '07 Mar '06 Mar '05

12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mthsOperating Profit

5,584.09 4,638.38 4,273.56 2,861.17 3,356.23 2,818.64 1,693.12 2,325.35

PBDIT 4,989.14 4,837.43 4,747.81 2,252.70 3,666.14 2,929.24 2,053.23 2,358.38Interest 1,186.41 850.92 900.26 836.82 494.84 406.81 365.01 474.7PBDT 3,802.73 3,986.51 3,847.55 1,415.88 3,171.30 2,522.43 1,688.22 1,883.68Depreciation 1,708.17 1,378.71 1,123.41 827.66 687.18 498.23 405.82 359.54Other Written Off

0 0 0 0 0 109.02 61.79 60.48

Profit Before Tax

2,094.56 2,607.80 2,724.14 588.22 2,484.12 1,915.18 1,220.61 1,463.66

Extra-ordinary items

0 161.89 96.03 176.8 -33.16 16.15 73.52 -10.12

PBT (Post Extra-ordinary Items)

2,094.56 2,769.69 2,820.17 765.02 2,450.96 1,931.33 1,294.13 1,453.54

Tax 468.7 759.02 797.43 306.52 722.77 639.33 437.6 603.02Reported Net Profit

1,625.86 2,010.67 2,022.74 458.5 1,728.19 1,292.00 864.29 870.11

Total Value Addition

4,390.09 3,212.65 2,542.78 2,044.17 1,758.24 1,332.62 1,026.61 1,156.39

Preference Dividend

27.9 27.9 28.92 28.99 29.06 27.9 27.9 27.91

Equity Dividend 167.34 273.32 177.7 18.71 261.87 204.98 125.58 103.23Corporate Dividend Tax

31.68 48.87 34.31 8.11 49.44 33.49 21.53 20.58

Per share data

35

(annualized)Shares in issue (lakhs)

2,231.17 2,231.17 1,870.49 1,870.49 1,870.49 1,639.79 1,569.76 1,290.39

Earnings Per Share (Rs)

71.62 88.87 106.59 22.96 90.84 77.09 53.28 65.27

Equity Dividend (%)

75 122.5 95 10 140 125 80 80

Book Value (Rs)

816.54 735.8 504 410.07 394.99 322.8 259.73 222.47

Source: http://www.moneycontrol.com/financials/jswsteel/profit-loss/JSW#JSWhttp://www.moneycontrol.com/financials/jswsteel/profit-loss/JSW

35

Table 5Balance Sheet of Jsw Steel


12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mthsSources Of FundsTotal Share Capital

563.18 563.18 527.11 537.01 537.01 504.04 497.06 469.13


284.15 284.15 248.08 248.08 248.08 225.01 218.03 190.1

Share Application Money

0 529.38 0 0 0 21.76 0 0


279.03 279.03 279.03 288.93 288.93 279.03 279.03 279.03


0 0 0 0 0 0 0 0


9,495.46 7,675.82 8,987.51 8,214.61 5,497.08 3,632.50 4,058.71 3,568.44

Unsecured Loans

2,806.76 4,275.52 2,597.59 3,058.02 2,049.45 540.53 37.34 267.97

Total Debt 12,302.22 11,951.34 11,585.10 11,272.63 7,546.53 4,173.03 4,096.05 3,836.41Total Liabilities

30,799.71 29,176.61 21,291.44 19,231.88 15,223.78 9,767.08 8,452.27 6,986.13


12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mthsApplication Of FundsGross Block 35,118.06 27,407.35 21,795.58 16,896.75 13,952.32 10,512.76 8,368.43 7,520.30Less: Accum. Depreciation

8,000.44 6,305.20 4,929.44 3,810.31 2,996.83 2,323.66 1,850.45 1,443.91


3,153.51 6,169.05 6,684.27 9,242.06 5,612.43 2,002.93 1,861.90 349.3

Investments 4,413.42 4,098.81 1,768.35 1,250.11 923.53 192.94 85.08 229.57Inventories 5,179.08 4,138.41 2,585.77 2,051.42 1,549.16 1,011.35 924.23 743.41Sundry Debtors

1,362.06 838.65 563.25 398.14 337.39 245.16 229.19 266.6


1,259.47 136.26 117.4 207.91 205.78 165.96 55.77 44.79


7,800.61 5,113.32 3,266.42 2,657.47 2,092.33 1,422.47 1,209.19 1,054.80

Loans and Advances

6,407.82 3,324.43 2,216.05 1,980.02 997.26 1,008.75 1,493.12 761.5

Fixed Deposits

1,698.13 1,750.62 169.71 212.05 133.44 171.84 43.1 77.7

Total CA, Loans & Advances

15,906.56 10,188.37 5,652.18 4,849.54 3,223.03 2,603.06 2,745.41 1,894.00

Deferred Credit

0 0 0 0 0 0 0 0

Current Liabilities

19,531.58 11,984.37 9,415.28 9,115.34 5,054.69 3,340.60 2,668.89 1,681.44

Provisions 259.82 397.4 264.22 80.93 436.01 75.22 393.26 232.31Total CL & 19,791.40 12,381.77 9,679.50 9,196.27 5,490.70 3,415.82 3,062.15 1,913.75

35

ProvisionsNet Current Assets

-3,884.84 -2,193.40 -4,027.32 -4,346.73 -2,267.67 -812.76 -316.74 -19.75


0 0 0 0 0 194.87 304.05 350.62

Total Assets 30,799.71 29,176.61 21,291.44 19,231.88 15,223.78 9767.08 8,452.27 6,986.13


9,374.17 8,870.90 6,990.48 8,170.64 11,145.95 5,362.37 1,835.96 1,432.25

Book Value (Rs)

816.54 735.8 504 410.07 394.99 322.8 259.73 222.47

Source: http://www.moneycontrol.com/financials/jswsteel/balance-sheet/JSW#JSWhttp://www.moneycontrol.com/financials/jswsteel/balance-sheet/JSW

35

Table 6

Working Capital Management of JSW SteelYear


0.76 0.78 0.58 0.44 0.51 0.64 0.68 0.67

Quick Ratio

0.54 0.49 0.31 0.28 0.28 0.43 0.59 0.6

Debt Equity Ratio

0.69 0.74 1.26 1.51 1.06 0.84 1.07 1.43


7.97 7.1 8.95 8.75 9.26 8.52 6.61 9


29.12 32.95 37.79 38.09 39.11 36.24 24.58 19.83


0.91 0.84 0.83 0.83 0.82 0.93 0.82 1.14


12.09 14.11 17.33 14.51 23.43 28.55 22.41 28.26


5.04 8.64 11.09 3.23 14.92 14.98 14.14 13


13.22 11.73 15.08 11.53 18.76 22.89 14.68 27.46

Return on Net Asset

8.77 12.07 21.14 5.59 22.99 23.1 19.84 27.63


3.43 4.44 3.81 3 6.13 5.85 3.65 4.28


35

TABLE 7:

Profit and Loss of Steel Authority of India------------------- in Rs. Cr. -------------------


IncomeSales Turnover 51,036.16 47,156.25 44,059.72 49,331.47 46,175.85 39,722.59 32,805.96 32,169.42Excise Duty 5,077.50 4,621.95 3,463.82 5,532.89 6,217.18 5,393.82 4,605.48 3,455.12Net Sales 45,958.66 42,534.30 40,595.90 43,798.58 39,958.67 34,328.77 28,200.48 28,714.30Other Income 1,341.66 2,038.97 2,557.00 2,002.77 1,701.59 1,408.71 937.94 662.2Stock Adjustments

1,514.37 1,471.69 -1,157.45 1,872.87 436.28 289.15 1,131.31 367.72

Total Income 48,814.69 46,044.96 41,995.45 47,674.22 42,096.54 36,026.63 30,269.73 29,744.22ExpenditureRaw Materials 25,186.22 22,642.47 18,611.12 23,915.45 17,257.67 16,252.28 15,034.54 11,523.05Power & Fuel Cost

4,533.71 3,586.07 3,364.30 3,119.42 2,825.56 2,578.84 2,489.74 2,195.59

Employee Cost 7,932.05 7,530.24 5,417.00 8,401.73 7,919.28 5,087.76 4,156.97 3,811.75Other Manufacturing Expenses

1,615.29 1,310.00 870.35 643.35 492.18 346.59 303.71 231.52


0 1,927.46 1,754.02 1,701.52 1,727.55 1,602.31 1,619.20 1,394.09


2,160.58 45.42 206.62 878.94 737.79 528.71 524.91 358.36


0 0 0 -1,930.40 -1,832.22 -1,423.08 -1,352.05 -921.71

Total Expenses 41,427.85 37,041.66 30,223.41 36,730.01 29,127.81 24,973.41 22,777.02 18,592.65Mar '12 Mar '11 Mar '10 Mar '09 Mar '08 Mar '07 Mar '06 Mar '05


6,045.18 6,964.33 9,215.04 8,941.44 11,267.14 9,644.51 6,554.77 10,489.37

PBDIT 7,386.84 9,003.30 11,772.04 10,944.21 12,968.73 11,053.22 7,492.71 11,151.57Interest 677.7 474.61 402.01 253.24 250.94 332.13 467.76 605.05PBDT 6,709.14 8,528.69 11,370.03 10,690.97 12,717.79 10,721.09 7,024.95 10,546.52Depreciation 1,567.03 1,482.20 1,337.24 1,285.12 1,235.48 1,211.48 1,207.30 1,126.95Other Written Off

0 1.12 10.33 128.02 75.49 128.59 181.44 184.89

Profit Before Tax

5,142.11 7,045.37 10,022.46 9,277.83 11,406.82 9,381.02 5,636.21 9,234.68


6.3 163.71 184.8 181.26 64.61 60.57 71.12 174.66


5,148.41 7,209.08 10,207.26 9,459.09 11,471.43 9,441.59 5,707.33 9,409.34

Tax 1,614.45 2,304.34 3,452.89 3,284.28 3,934.65 3,253.80 1,694.36 2,592.37Reported Net Profit

3,542.72 4,904.74 6,754.37 6,174.81 7,536.78 6,202.29 4,012.97 6,816.97


16,241.63 14,399.19 11,612.29 12,814.56 11,870.14 8,721.13 7,742.48 7,069.60

Preference Dividend

0 0 0 0 0 0 0 0

Equity Dividend 826.13 991.3 1,363.03 1,073.90 1,528.25 1,280.42 826.08 1,363.03Corporate Dividend Tax

134.02 161.15 227.52 181.26 258.91 197.98 115.86 185.24

Per share data

35


41,305.25 41,304.01 41,304.01 41,304.01 41,304.01 41,304.01 41,304.01 41,304.01


8.58 11.87 16.35 14.95 18.25 15.02 9.72 16.5

Equity Dividend (%)

20 24 33 26 37 31 20 33

Book Value (Rs)

96.38 89.75 80.66 67.75 55.84 41.92 30.51 24.95

Source: http://www.moneycontrol.com/financials/steelauthorityindia/profit-loss/SAI#SAIhttp://www.moneycontrol.com/financials/steelauthorityindia/profit-loss/SAI

35

Table 8Balance Sheet of Steel Authority of India



4,130.53 4,130.40 4,130.40 4,130.40 4,130.40 4,130.40 4,130.40 4,130.40


4,130.53 4,130.40 4,130.40 4,130.40 4,130.40 4,130.40 4,130.40 4,130.40


0 0 0 0 0 0 0 0


0 0 0 0 0 0 0 0


0 0 0 0 0 0 0 0


7,481.91 11,813.91 7,755.90 1,473.60 925.31 1,556.39 1,122.16 1,603.98

Unsecured Loans

8,615.30 8,351.58 8,755.35 6,065.19 2,119.93 2,624.13 3,175.46 4,165.81

Total Debt 16,097.21 20,165.49 16,511.25 7,538.79 3,045.24 4,180.52 4,297.62 5,769.79Total Liabilities

55,908.53 57,234.96 49,827.95 35,522.89 26,108.81 21,493.67 16,899.03 16,076.44


12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mthsApplication Of FundsGross Block 41,367.19 38,260.60 35,382.49 32,728.69 30,922.73 29,912.71 29,360.46 28,043.48Less: Accum. Depreciation

24,239.81 23,180.54 21,780.91 20,459.86 19,351.42 18,315.00 17,198.32 15,558.41


28,049.14 22,228.43 15,039.83 6,544.24 2,389.55 1,236.04 757.94 366.48

Investments 684.94 684.14 668.83 652.7 538.2 513.79 292 606.71Inventories 13,742.37 11,302.79 9,027.46 10,121.45 6,857.23 6,651.47 6,210.06 4,220.69Sundry Debtors

4,761.32 4,161.30 3,493.90 3,024.36 3,048.12 2,314.75 1,881.73 1,908.45


6,415.70 143.99 230.76 347.94 470.17 437.36 341.83 356.93


24,919.39 15,608.08 12,752.12 13,493.75 10,375.52 9,403.58 8,433.62 6,486.07

Loans and Advances

5,556.17 6,175.81 5,155.32 4,292.50 3,644.22 3,097.70 4,524.37 3,260.11

Fixed Deposits

0 17,334.87 22,205.61 17,880.59 13,289.27 9,172.47 5,830.81 5,775.19


30,475.56 39,118.76 40,113.05 35,666.84 27,309.01 21,673.75 18,788.80 15,521.37

Deferred Credit

0 0 0 0 0 0 0 0

Current Liabilities

14,606.26 13,994.33 13,383.67 10,201.51 8,960.91 8,105.99 8,081.23 7,810.97

Provisions 5,822.23 5,882.10 6,211.67 9,408.21 6,797.83 5,550.78 7,236.44 5,387.15Total CL & 20,428.49 19,876.43 19,595.34 19,609.72 15,758.74 13,656.77 15,317.67 13,198.12

35


10,047.07 19,242.33 20,517.71 16,057.12 11,550.27 8,016.98 3,471.13 2,323.25


0 0 0 0 59.48 129.15 215.82 294.93

Total Assets 55,908.53 57,234.96 49,827.95 35,522.89 26,108.81 21,493.67 16,899.03 16,076.44


30,600.38 30,519.80 28,382.46 32,193.13 17,143.54 5,605.90 5,541.62 4,566.72

Book Value (Rs)

96.38 89.75 80.66 67.75 55.84 41.92 30.51 24.95

Source: http://www.moneycontrol.com/financials/steelauthorityindia/balance-sheet/SAI#SAI http://www.moneycontrol.com/financials/steelauthorityindia/balance-sheeet/SAI

35

Table 9

Working Capital Management of Steel Authority of IndiaYear


1.22 1.21 1.6 1.61 1.68 1.52 1.17 1.13

Quick Ratio

0.82 1.35 1.53 1.24 1.23 1.01 0.73 0.77

Debt Equity Ratio

0.4 0.54 0.5 0.27 0.13 0.24 0.34 0.56


3.71 5.13 6.02 5.86 8.62 5.36 4.68 6.96


10.3 11.11 12.46 14.43 14.9 16.36 14.88 16.61


1.15 1.16 1.2 1.35 1.31 2.71 2.21 2.19


9.74 12.88 19.4 17.48 25.1 29.94 24.12 36.09


7.44 11.03 15.73 13.4 18.16 17.38 13.79 23.19


10.91 12.88 20.46 27.61 44.03 44.94 35.85 61.29

Return on Net Asset

8.89 13.23 20.27 22.06 32.76 35.82 31.85 66.14


9 15.86 26.26 40.02 48.48 30.64 14.1 17.64


35

TABLE 10:

Profit and Loss account of Visa Steel------------------- in Rs. Cr. -------------------


IncomeSales Turnover 1,443.87 1,340.41 1,198.31 1,057.11 700.22 561.81 414.66 252.05Excise Duty 73.07 42.43 41.2 15.58 26.24 29.11 30.62 0.03Net Sales 1,370.80 1,297.98 1,157.11 1,041.53 673.98 532.7 384.04 252.02Other Income -35.74 35.44 26.26 -102.36 22.25 22.34 1.69 1.07Stock Adjustments

136.15 82.49 17.52 17.19 93.98 -31.63 22.21 11.31

Total Income 1,471.21 1,415.91 1,200.89 956.36 790.21 523.41 407.94 264.4ExpenditureRaw Materials 1,307.55 1,075.09 877.02 853.63 587.79 421.77 325.35 220.92Power & Fuel Cost

2.93 9.1 16.12 32.27 23.37 5.49 5.13 0.16

Employee Cost 38.03 42.87 32.79 20.83 14.02 4.91 4.24 1.92Other Manufacturing Expenses

4.4 5.27 4.27 1.73 1.45 0.37 0.1 0.11


0 36.2 31.49 34.59 14.32 15.93 24.65 21.17


73.97 11.87 13.29 23.54 22.82 5.41 9.14 3.93


0 0 0 0 0 0 0 0

Total Expenses 1,426.88 1,180.40 974.98 966.59 663.77 453.88 368.61 248.21Mar '12 Mar '11 Mar '10 Mar '09 Mar '08 Mar '07 Mar '06 Mar '05


80.07 200.07 199.65 92.13 104.19 47.19 37.64 15.12

PBDIT 44.33 235.51 225.91 -10.23 126.44 69.53 39.33 16.19Interest 189.67 102.95 90.74 56.19 38.37 22.97 14.83 3.84PBDT -145.34 132.56 135.17 -66.42 88.07 46.56 24.5 12.35Depreciation 51.15 48.21 46.82 30.79 18.26 9.77 4.96 0.47Other Written Off

0 2.46 2.68 2.68 2.68 2.7 0.15 0.02

Profit Before Tax

-196.49 81.89 85.67 -99.89 67.13 34.09 19.39 11.86


0 4.55 0 0 0 0.2 0.6 0


-196.49 86.44 85.67 -99.89 67.13 34.29 19.99 11.86

Tax -77.63 35.08 38.26 -33.05 23.99 13.78 7.53 5.3Reported Net Profit

-118.85 51.38 47.42 -66.81 43.15 20.52 12.48 6.56


119.33 105.3 97.95 112.94 75.98 32.1 43.24 27.3

Preference Dividend

0 0 0 0 0 0 0 0

Equity Dividend 0 11 11 0 11 0 0 0Corporate Dividend Tax

0 1.78 1.87 0 1.87 0 0 0

Per share data

35


1,100.00 1,100.00 1,100.00 1,100.00 1,100.00 1,100.00 1,100.00 750


-10.8 4.67 4.31 -6.07 3.92 1.87 1.13 0.87

Equity Dividend (%)

0 10 10 0 10 0 0 0

Book Value (Rs)

21.31 32.12 28.61 25.47 31.54 28.78 26.92 11.22

Source: http://www.moneycontrol.com/financials/visasteel/profit-loss/VS15#VS15 http://www.moneycontrol.com/financials/visasteel/profit-loss/VS15

35

Table 11Balance Sheet of Visa Steel



110 110 110 110 110 110 110 75


110 110 110 110 110 110 110 75


0 0 0 0 0 0 0 0


0 0 0 0 0 0 0 0

Reserves 124.43 243.29 204.69 170.15 236.96 206.62 186.1 9.12Revaluation Reserves

0 0 0 0 0 0 0 0

Networth 234.43 353.29 314.69 280.15 346.96 316.62 296.1 84.12Secured Loans

1,127.59 1,373.24 1,107.70 892.97 698.77 498.59 186.02 74.2

Unsecured Loans

75.64 34.88 35.04 0 0 0 0 0

Total Debt 1,203.23 1,408.12 1,142.74 892.97 698.77 498.59 186.02 74.2Total Liabilities

1,437.66 1,761.41 1,457.43 1,173.12 1,045.73 815.21 482.12 158.32


12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mthsApplication Of FundsGross Block 991.29 931.99 926.56 844.82 427.23 266.31 158.64 88.32Less: Accum. Depreciation

209.45 161.08 112.93 66.69 35.9 17.01 6.67 1.76

Net Block 781.84 770.91 813.63 778.13 391.33 249.3 151.97 86.56Capital Work in Progress

1,777.68 1,390.54 770.07 541.04 604.58 372.65 101.02 18.54

Investments 61.04 61.04 60.04 30.47 0.89 0.89 0.89 0.01Inventories 352.51 395.68 341.71 356.51 278.84 119.51 116.57 68.64Sundry Debtors

51.58 47.99 64.88 82.37 96.34 41.37 43.45 49.67


76.65 2.01 7.57 3.15 29.76 10.35 7.73 2.39


480.74 445.68 414.16 442.03 404.94 171.23 167.75 120.7

Loans and Advances

234.09 180.02 187.7 186.84 99.66 52.43 28.51 21.52

Fixed Deposits

0 86.5 75.77 67.3 55.93 162.48 241.01 13.71


714.83 712.2 677.63 696.17 560.53 386.14 437.27 155.93

Deferred Credit

0 0 0 0 0 0 0 0

Current Liabilities

1,891.28 1,159.16 852.44 877.09 506.01 204.14 220.61 102.75

Provisions 6.45 14.12 13.95 0.73 13.39 0.14 0.11 0Total CL & 1,897.73 1,173.28 866.39 877.82 519.4 204.28 220.72 102.75

35


-1,182.90 -461.08 -188.76 -181.65 41.13 181.86 216.55 53.18


0 0 2.46 5.13 7.81 10.49 11.68 0.03

Total Assets 1,437.66 1,761.41 1,457.44 1,173.12 1,045.74 815.19 482.11 158.32


165.57 166.2 273.18 261.28 97.61 193.05 21.04 9.01

Book Value (Rs)

21.31 32.12 28.61 25.47 31.54 28.78 26.92 11.22

Source: http://www.moneycontrol.com/financials/visasteel/balance-sheet/VS15#VS15http://www.moneycontrol.com/financials/visasteel/balance-sheet/VS15

35

Table 12

Working Capital Management of Visa SteelYear


0.29 0.47 0.69 0.71 1.04 1.43 1.55 1.22

Quick Ratio

0.19 0.25 0.34 0.32 0.54 1.3 1.45 0.85

Debt Equity Ratio

5.13 3.99 3.63 3.19 2.01 1.57 0.63 0.88


4.1 3.57 3.64 3.02 2.62 4.63 3.32 3.72


27.54 23 15.72 11.66 9.79 12.56 8.25 9.37


1.38 1.4 1.25 1.23 1.58 1.22 2.15 4.42


2.1 11.7 13.2 5.89 12.75 9.96 8.16 6.02


-8.5 3.86 4.02 -6.32 6.17 3.71 3.22 2.57


3.81 10.3 11.72 6.29 10.28 6.73 7.39 11.2

Return on Net Asset

-50.69 14.54 15.18 -24.29 12.72 6.48 4.21 7.8


0.29 2.14 2.22 1.72 7.31 4.47 3.89 6.21


35

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13 http://www.readyratios.com/reference/liquidity/current_ratio.html (Pg no: 14)

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24 http://www.readyratios.com/reference/profitability/return_on_net_assets_rona.html (Pg no: 21)

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