PROJECT REPORT

(Submitted for the degree of B .COM. (Honours) in accounting & finance under the
University of Calcutta)

WORKING CAPITAL MANAGEMENT: “A CASE STUDY ON ITC Ltd.”

SUBMITTED BY

Name of the Candidate : AAYUSHI PODDAR

Name of the College : THE BHAWANIPUR EDUCATION SOCIETY COLLEGE

C.U. Roll No. : 171017-11-0013

Registration No. : 017-1211-2022-17

SUPERVISED BY

Name of the Supervisor: PROF.GARGI DAS

Name of the College : THE BHAWANIPUR EDUCATION SOCIETY COLLEGE

MONTH AND YEAR OF SUBMISION:

June 2020

1
 SUPERVISOR'S CERTIFICATE

This is to certify that Miss AayushiPoddar, a student of B. Com. Honours in Accounting &

Finance in Business of THE BHAWANIPUR EDUCATION SOCIETY COLLEGE under

the University of Calcutta has worked under my supervision and guidance for her project

Work and prepared a Project Report with WORKING CAPITAL MANAGEMENT: “A

CASE STUDY ON ITC Ltd.” Title. This project report, which he is submitting, is her

genuine and original work to the best of my knowledge.

Place: KOLKATA

Date: Signature:

2
 STUDENT'S DECLARATION

I hereby declare that the project work with the title WORKING CAPITAL

MANAGEMENT: “A CASE STUDY ON ITC Ltd.” submitted by me for the partial

fulfillment of the degree of B.COM. Honours in Accounting & Finance under the

University of Calcutta is my original work and has not been submitted earlier to any other

University for the fulfillment of the requirement for any course of study.

I also declare that no chapter of this manuscript in whole or in part has been incorporated

in this report from any earlier work done by others or by me. However, extracts of any

literature which has been used for this report has been duly acknowledged providing

details of such literature in this reference.

PLACE: KOLKATA NAME: AayushiPoddar

DATE: SIGNATURE:

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 ACKNOWLEDGEMENT

I would like to express my deepest gratitude to my teacher, ​PROF. Gargi Das​who gave me the

golden opportunity to do my study on ​“WORKING CAPITAL MANAGEMENT: A CASE

STUDY ON ITC Ltd.” I am also grateful to her for her exemplary guidance, monitoring and

constant encouragement throughout the course of my project. Last but not the least, I wish to

avail myself of this opportunity to express a sense of gratitude and love to my friends and my

beloved parents for their moral support, strength, help and encouragement.

CONTENT
S.L. PARTICULARS PAGE NO.
NO.:

4
 1 1.INTRODUCTION 5-10

1.1 Introduction
1.2 Literature Review
1.3 Objective of the study
1.4 Research Methodology
1.5 Limitation

2 2. CONCEPTUAL FRAMEWORK 10-15

2.1Meaning of Working capital

2.2Types of Working Capital
2.3Need for Working Capital
2.4 The importance of Good Working capital Management
2.5 Approaches to Working Capital

3 3. DATA ANALYSIS AND PRESENTATION

3.1 Company Profile

3.2 Data Analysis
3.3 Findings
3.4 A Comparison of Ratios

4 Conclusion and Recommendation 33

1.INTRODUCTION

5
1.1 Introduction

Working capital is the amount of money a business has available to sustain its operations.
It's the ​capital available to purchase inventory, pay employees, keep the lights on, and finance
other short-term expenditures. This makes managing working capital a critical business skill. If
there is no working capital, there is no business.

Many companies fail each year due to poor working capital management practices.
Entrepreneurs often don't account for short term disruptions to cash flow and are forced to close
their operations. Many of these companies have viable business models, and would have
otherwise succeeded had they better managed their working capital.

Working capital management is concerned with the problems that arise in attempting to
manage the current assets, the current liabilities and the inter relationship that exists between
them. The term current refers to those assets which in the ordinary course of business can be, or
will be converted into cash within one year. The major current assets are cash, marketable
securities, accounts receivables and inventory. Current liabilities are those liabilities, which are
intended at their inception, to be paid in the ordinary course of business; within a year out of the
current or the earning of the concern. The basic current liabilities are accounts payable, bills
payable, bank overdrafts and outstanding expense. The goal of working management is to
manage the firm’s assets and liabilities in such a way that a satisfactory level of working capital
is maintained​. This is because if the firms cannot maintain a satisfactory level of working capital,
it is likely to become insolvent and may even be forced into bankruptcy. The current assets
should be large enough to cover its current liabilities in order to ensure a reasonable margin of
safety. Each of the short-term sources of financing must be continuously managed to ensure that
they are obtained and used in the way.

1.2 Review of Literature

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Mishra (1975) studied the problems of working capital with special reference to six selected
public sector undertakings in India over the period 1960-61 to 1967-68. Analysis of financial
ratios and responses to a questionnaire revealed somewhat the same results as those of NCAER
study with respect to composition and utilization of working capital. In all the selected
enterprises, inventory constituted the more important element of working capital. The study
further revealed the overstocking of inventory in regard to its each component, very low
receivables turnover and more cash than warranted by operational requirements and thus total
mismanagement of working capital in public sector undertaking.

Agarwal (1983) also studied working capital management on the basis of sample of 34 large
manufacturing and trading public limited companies in ten industries in private sector for the
period 1966-67 to 1976-77. Applying the same techniques of ratio analysis, responses to
questionnaire and interview, the study concluded the although the working capital per rupee of
sales showed a declining trend over the years but still there appeared a sufficient scope for
reduction in investment in almost all the segments of working capital. An upward trend in cash
to current assets ratio and a downward trend in cash turnover showed the accumulation of idle
cash in these industries. Almost all the industries had overstocking of raw materials shown by
increase in the share of raw material to total inventory while share of semi-finished and finished
goods came down. It also revealed that long-term funds as a percentage of total working capital
registered an upward trend, which was mainly due to restricted flow of bank credit to the
Industries.
Verma (1989) evaluated working capital management in iron and steel industry by taking a
sample of selected units in both private and public sectors over the period 1978-79 to 1985-86.
Sample included Tata Iron and Steel Company Ltd. (TISCO) in private sector and Steel
Authority of India Ltd. (SAIL) and Indian Iron and Steel Company, a wholly owned subsidiary
of SAIL, in public sector. By using the techniques of ratio analysis, growth rates and simple
linear regression analysis, the study revealed that private sector had certainly an edge over public
sector in respect of working capital management. Simple regression results revealed that working
64capital and sales were functionally related concepts. The study further showed that all the
firms in the industry had made excessive use of bank borrowings to meet their working capital
requirement vis-à-vis the norms suggested by Tandon Committee.

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Vijay kumar and Venkatachalam (1995) studied the impact of working capital on profitability in
sugar industry in Tamil Nadu by selecting a sample of 13 companies; 6 companies in
co-operative sector and 7 companies in private sector over the period 1982-83 to 1991-92. They
applied simple correlation and multiple regression analysis on working capital and profitability
ratios. They concluded through correlation and regression analysis that liquid ratio inventory
turnover ratio, receivables turnover ratio and cash turnover ratio influenced the profitability of
sugar industry in Tamil Nadu. They also estimated the demand functions of working capital
components i.e. cash, receivables, inventory, gross working capital and net working capital, by
applying regression analysis. They showed the impact of sales and interest rate on working
capital and its components. When only sales were taken as independent variable, coefficient of
sales was more than unity in all the equations of working capital and its components showing
more than unity sales elasticity and diseconomies of scale. When sales and interest rate were
taken as independent variable, sales elasticity was again more than unity in demand functions of
working capital and its components except cash. So far as capital costs were concerned, these
had negative signs in all the equations but significant only in inventory, gross working capital
and net working capital showing negative impact of interest rates on investment in working
capital and its components. Thus, study showed that demand for working capital and its
components was a function of both sales and carrying costs.

1.3 OBJECTIVES OF THE STUDY:

Study of working capital management of ITC Company is important because unless the working
capital is managed effectively, the company cannot earn profit and increase its turnover. With
these primary objectives of study, the following further objectives are required:
a. To study the working capital of the company.
b. To study the optimum level of current assets and current liabilities of the company.
c. To study the liquidity position through various related working capital ratios.
d. To study the working capital component such as receivable accounts, cash management,
inventory position.

8
 e. To study the way of working capital finance of the company.
f. To know the overall operational efficiency and performance of the company.
g. To interpret the financial position of the company.

1.4RESEARCHMETHODOLOGY​:
Research methodology is a way to systematically solve the research problem. It may be
understood as a science of studying. It is important for research to know not only the research
method but also know methodology. The procedures by which researchers go about their work of
describing, explaining and predicting phenomenon are called methodology. Method comprises
the procedures used for generating, collecting and evaluating data.
Data collection is important step in any project and success of any project will be largely
depend upon how accurate you will be able to collect and how much time, money required to
collect the necessary data.
There are two types of data collection methods:
a. Primary data collection: The data which is collected fresh or first hand and for first time
which is original in nature. Primary data collection can be collected through personal
interview, questionnaire etc.
b. Secondary data collection: The data which is collected from records, annual reports of
the company books, journal website is Called as secondary data.
c. Tools and methods of study: - The following tools have come effective in course of
preparation of the project: -

● Statement of Changes in Working Capital

● Ratio Analysis

1.5 LIMITATION OF THE STUDY

a. Limited data are available. There were limitations for primary data collection because of
confidentiality.
b. The project is based on last three years annual reports. The trend of last three years may
or may not reflect the real working capital position of the company.

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 c. It was difficult to collect the data regarding the competitions and their financial
information. Industry figures were also difficult to get.
d. This study is based on the historical data and information provided in the annual reports,
therefore it may not be a future indicator.
e. There may be some fractional differences in the calculated ratios.
Due to lack of time other areas could not be well focused.

​CHAPTER – 2

CONCEPTUAL FRAMEWORK

Working capital management is a significant facet of financial management due to the fact
that it plays a pivotal role in keeping the wheels of a business enterprise running. The
requirements of working capital for day to day business activities cannot be overemphasized. It
cannot be denied that a firm invests a part of its permanent capital in fixed assets and keeps a
part of it in working capital i.e. for meeting day to day requirements. We will hardly find a firm
which does not require any amount of working capital for its normal operation. The requirement
of working capital varies from firm to firm depending upon the nature of business, production
policy, market conditions, seasonality of operations, conditions of supply etc.

It is known to us that the aim of a business concern is to maximize the proprietor’s

wealth. To fulfill this objective the firm should earn sufficient and steady return from its
operations. It depends upon the successful sales activity. It will only be possible when a firm
invests sufficient amount of fund in current assets for the production as well as sales activity.
Considering the importance of working capital in any type of business an analysis of working
capital of ITC was made.

2.1MEANING OF WORKING CAPITAL

Working capital means the funds (i.e. capital) available & used for day to day operation (i.e.
working) of an enterprise. It consists broadly of that portion of assets of a business which are
used in or related to its current operations. It refers to fund which are used during an accounting
10
period to generate a current income of a type which is consistent with major purposes of a firm
existence.

2.2 TYPES OF WORKING CAPITAL

The concept of working capital can also be explained through two angles:

A) Concept:
From the concept point of view, working capital can be defined as Gross working capital or Net
working capital.
GROSS WORKING CAPITAL: - It refers to the firm's investment in current assets are those
assets, which can be converted in to cash within an accounting year. Current assets include stock
of raw materials, work-in progress, finished goods, trade debtors, prepayments, cash balances
etc.

NET WORKING CAPITAL: - It refers to the difference between current assets and current
liabilities. Current liabilities are those claims of outsiders which are expected to mature for
payment within an accounting year. Current liabilities include Trade creditors, accruals, taxation
payable, bills payable, outstanding expenses, dividends payable, and short-term loans.

11
 A positive working capital means that the company is able to pay off its short-term
liabilities. A negative working capital means that the company currently is unable to meet its
short-term liabilities.

B) Time:
From, the point of view of time, the working capital can be divided in to two categories namely
Fixed and Temporary.
PERMANENT WORKING CAPITAL: - It refers to the hard-core working capital. It is that
minimum level of investment in the current assets that is carried by the business at all times to
carry out minimum level of its activities.

Example: Every firm has to maintain minimum level of raw materials, WIP and finished goods
and cash balance

TEMPORARY WORKING CAPITAL: - It refers to that part of total working capital, which
is required by a business over and above permanent working capital. It is also called variable
working capital. Since the volume of temporary working capital keeps on fluctuating from time
to time according to the business activities it may be financed from short term sources.

Example: Coca-Cola, capital require for special production.

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 2.3 NEED FOR WORKING CAPITAL

The need for working capital to run day to day business activities cannot be overemphasis. We
will hardly find a business firm which does not require any amount of working capitalWe know
that the firm aims at maximizing the wealth of the shareholder. In its endeavor to maximize
shareholder wealth the firm should earn sufficient return from its operation earning a steady
amount of profit requires successful sales activity. The firm has invested enough funds in current
assets for the success of sales activity. Current assets are needed because sales do not convert
into cash instantaneously. There is always operating cycle involved in the conversion of cash

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.​2.4 THE IMPORTANCE OF GOOD WORKING CAPITAL
MANAGEMENT

❖ Solvency of the business

❖ To Maintain good will

❖ Easy Loans

❖ Cash Discount

❖ Regular Supply of Raw Material

❖ Regular Payment of Salary, Wages, Other day-to-day expenses

❖ Exploitation of favorable market conditions

2.5 APPROACHES TO WORKING CAPITAL

❖ HEDGING OR MATCHING

❖ CONSERVATIVE

❖ AGGRESSIVE

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 ● HEDGING OR MATCHING: -

This requires that financing of each asset would be offset with a financing instrument of
approximately the same maturity. Short term or seasonal variations in current assets would
be financed with short term debt. The fixed assets and the permanent component of current
assets would be financed with long term debt or equity. And the firm can adopt a financial
plan which matches the expected life of source of funds raised to finance assets.

● CONSERVATIVE: -

A firm can adopt a conservative approach in financing its current and fixed assets. A
financial policy of the firm is said to be conservative when it depends more on long term
funds for financing needs under a conservative plan, the firm finances its permanent assets
and also a part of temporary current assets, with long term financing. \

● AGGRESSIVE: -

A firm may be aggressive in financing its assets. An aggressive policy is said to be

followed by the firm when it uses more short-term financing than warranted by matching
plan. Under an aggressive policy, the firm finance a part of permanent current assets with
short term financing​.

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 ​CHAPTER- 3 
​DATA ANALYSIS AND FINDINGS  
3.1 ​COMPANY PROFILE
ITC is India's top cigarette maker but has diversified into a range of businesses. Its four primary
interests are fast moving consumer goods (cigarettes and cigars, food, and personal care
products); luxury hotels; paperboard, paper, and packaging; and agri business (leaf tobacco,
commodities, spices). Its major brands include India Kings, Insignia, Navy Cut, Scissors, and
Gold Flake (cigarettes); Wills Lifestyle; Kitchens of India and Bingo! (prepackaged food,
candy); and Essenza Di Wills and Fiama (personal care). It's also parent to one of India's biggest
technology businesses, ITC Infotech. British American Tobacco owns about a 30% stake in ITC.

ITC's wholly owned Information Technology subsidiary, ITC Infotech India Ltd, provides IT
services and solutions to leading global customers. ITC Infotech has carved a niche for itself by
addressing customer challenges through innovative IT solutions. ITC's production facilities and
hotels have won numerous national and international awards for quality, productivity, safety and
environment management systems. ITC was the first company in India to voluntarily seek a
corporate governance rating.

ITC was incorporated on August 24, 1910 under the name Imperial Tobacco Company of India
Ltd. As the company's ownership progressively Indianised, the name of the company was
changed from Imperial Tobacco Company of India Ltd to India Tobacco Company Ltd in the
year 1970 and then to I.T.C. Ltd in the year 1974. In recognition of the company's multi-business
portfolio encompassing a wide range of businesses - Cigarettes & Tobacco, Hotels, Information

16
Technology, Packaging, Paperboards & Specialty Papers, Agri-business, Foods, Lifestyle
Retailing, Education & Stationery and Personal Care - the full stops in the company's name were
removed effective September 18, 2001. The company now stands rechristened ITC Ltd.

During the year first six decades of the company's existence were primarily devoted to the
growth and consolidation of the Cigarettes and Leaf Tobacco businesses, the seventies witnessed
the beginnings of a corporate transformation that would usher in momentous changes in the life
of the company. In the year 1925, the company set up Packaging & Printing business as a
strategic backward integration for ITC's Cigarettes business. It is today India's most sophisticated
packaging house.

3.2​ DATA ANALYSIS

LIQUIDITY RATIO​:-

CURRENT RATIO:

YEARS 2014-15 2015-16 2016-17 2017-18 2018-19

RATIO 2.10:1 3.73:1 3.68:1 2.85:1 3.17:1

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FORMULAE CURRENT ASSETS/ CURRENT CURRENT CURRENT CURRENT ASSETS/
CURRENT ASSETS/ ASSETS/ ASSETS/ CURRENT
LIABILITIES CURRENT CURRENT CURRENT LIABILITIES
LIABILITIES LIABILITIES LIABILITIES
SOLUTIONS CA=25534.54 CA= 24862.5 CA=26269.10 CA=26393.62 CA=317421
CL=12132.4 CL= 6658.46 CL=7121.01 CL=9250.15 CL=1011.99
CR= 25534.54/12132.4 CR= CR= CR= CR=31747.21/
2.10:1 24862.5/6658.46 26269.10/7121.01 26393.62/9250.15 1011.99
3.73:1 =3.68:1 =2.85:1 =3.17:1

INTERPRETATION​:- The ideal current ratio for any business organization is 2:1. Here in this
company in all the five years the current ratio is more than 2:1. Current ratio for year 2014-15 is
2.10:1, 2015-16 is 3.73:1, 2016-17 is 3.68:1, 2017-18 is 2.85:1 and in the year 2018-19 is 3.17:1.
From the above data it is clear that in the year 2015-16, there is an increase in current ratio and
then from 2016-17 current ratio decreases eventually and then increases in the year 2018-19. But
the decline in the current is higher then the ideal ratio 2:1. As the ideal ratio is 2:1 so more than
2:1 is sometimes creates a bead impression in the mind of external user of financial statement.

QUICK RATIO​:-

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YEARS 2014-15 2015-16 2016-17 2017-18 2018-19
RATIO 0.74:1 1.46:1 2.12:1 1.71:1 1.96:1
FORMULAE CA- STOCK- PREPAID CA- STOCK- CA- STOCK- CA- STOCK- CA- STOCK-
EXPENSES/ CL- BANK PREPAID PREPAID PREPAID PREPAID
OVERDRAFT EXPENSES/ CL- EXPENSES/ CL- EXPENSES/ CL- EXPENSES/ CL-
BANK BANK BANK BANK OVERDRAFT
OVERDRAFT OVERDRAFT OVERDRAFT

SOLUTIONS CA= 25534.54 CA= 24862.50 CA=26269.10 CA=26393.62 CA=31747.27

STOCK= 8557.88 STOCK= 9062.10 STOCK=8186.15 STOCK= 7584.53 STOCK=7943.97
PREPAID EXPENSES= PREPAID PREPAID PREPAID PREPAID
7891.54 EXPENSES=6063.30 EXPENSES= EXPENSES= EXPENSES= 4152.03
CL= 12132.40 CL= 6658.46 2967.40 2899.60 CL= 10011.99
= = 24862.50- CL= 7121.01 CL= 9250.15 =31747.27-
25534.54-8557.88-7891.54/1 9062.10-6063.30/665 = 26269.10- = 26393.62- 7943.97-4152.03/1001
2132.40 8.46 8186.15- 7584.53- 1.99
= 0.74:1 = 1.46:1 2967.40/7121.01 2899.60/9250.15 =1.96:1
= 2.12:1 =1.71:1

INTERPRETATION​:- The ideal Quick ratio for any business organizations is 1:1. Liquidity of
any company indicates how effectively the company should manage it as a daily working capital
requirement. Here in this all the four years the current ratio is increase than 1:1 except the year
2014-15. Quick ratio for the year 2014-15 is 0.74:1.In the year 2015-16 is 1.46:1, In the year
2016-17 is 2.12:1 , then for the year 2016-17 is 2.12:1, then in the year 2017-18 is 1.71:1and
then 2018-19 is 1.96:1.

From the above data it is clear that FROM YEAR 2014-15TO 2016-17 we have seen increase in
the Quick ratio and from the year 2017-18 till 2018-19 , the Quick ratio declines and then
increases but it is higher than the ideal ratio as per ratio analysis .As ideal ratio is 1:1so more
than 1:1 is sometimes creates a bad impression in the mind of external user of financial
statement .

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 TURNOVER RATIO:- 

DEBTORS TURNOVER RATIO:-

YEARS 2014-15 2015-16 2016-17 2017-18 2018-19

RATIO 0.09:1 0.03:1 0.25:1 0.08:1 0.40:1
FORMULAE NET CREDIT NET CREDIT NET CREDIT NET CREDIT NET CREDIT
SALES / SALES / SALES / SALES / SALES /
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
DEBTORS+ DEBTORS+ DEBTORS+ DEBTORS+ DEBTORS+
AVERAGE BILLS AVERAGE AVERAGE AVERAGE AVERAGE
RECIEVABLE BILLS BILLS BILLS BILLS
RECIEVABLE RECIEVABLE RECIEVABLE RECIEVABLE
SOLUTIONS NCS= 187.19 NCS= 60.99 NCS= 557.08 NCS=208 NCS= 1352.99
AD= 2071.76 AD=1974.67 AD= 2195.73 AD= 2578.29 AD= 3358.78
= 187.19/ 2071.76 = 60.99/ = 557.08/ = 208/2578.29 =
= 0.09:1 1974.67 2195.73 = 0.08:1 1352.99/3358.78
= 0.03:1 = 0.25:1 = 0.40:1

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 INTERPRETATION​:- It is accounting ratio which is used to measure how effectively
company is collectively its debt from debtors . Higher the debtors turnover ratio, higher will be
the efficiency of the organization to collect its debt.

From the above data we have seen that the debtors turnover ratio is very fluctuating as it is
0.09:1 in the year 2014-15, then it declines to 0.03:1 in 2015-16, then again increases and
becomes 0.25:1 in year 2016-17, again declines to 0.08:1 in 2017-18 and then increases to
0.40:1 in the year 2018-19. Hence, it proves that ITC LTD should improves its debtors turnover
ratio in the upcoming year to present a better cash inflow from its debtor so that stakeholder of
the company should show more interest to invest its money in the company .

CREDITORS TURNOVER RATIO:-

YEARS 2014-15 2015-16 2016-17 2017-18 2018-19

RATIO 0.01:1 0.14:1 0.12:1 0.02:1 0.003:1

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FORMUALAE NET CREDIT NET CREDIT NET CREDIT NET CREDIT NET CREDIT
PURCHASE PURCHASE PURCHASE PURCHASE PURCHASE
/AVERAGE /AVERAGE /AVERAGE /AVERAGE /AVERAGE
CREDITORS+ CREDITORS+ CREDITORS+ CREDITORS+ CREDITORS+
AVERAGE BILLS AVERAGE AVERAGE AVERAGE AVERAGE
PAYABLE BILLS BILLS BILLS BILLS
PAYABLE PAYABLE PAYABLE PAYABLE
SOLUTIONS NCP= 32.88 NCP= 318.12 NCP= 320.04 NCP= 836.85 NCP= 13.4
AC= 2004.03 AC= 2179.88 AC= 2499.31 AC= 3077.75 AC= 3502.88
= 32.88/2004.03 = = = = 13.4/ 3502.88
= 0.01:1 318.12/2179.88 320.04/2499.31 836.85/3077.75 = 0.003:1
= 0.14:1 = 0.21:1 = 0.02:1

INTERPREATION​:- It measures the number of times, an average account payable are paid
during a period higher than the creditor turnover ratio, higher the image of the organization
because it shows that company are setting its obligation time to time. The creditor turnover ratio
in the first three years were 0.01:1, 0.14:1.0.12:1 are relatively higher than the last two year
which were 0.02:1and 0.003:1 which clearly shows that company is paying , its obligations of its
financial creditor timely.

SOLVENCY RATIO:-

DEBT EQUITY RATIO​:-

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YEARS 2014-15 2015-16 2016-17 2017-18 2018-19
RATIO 0.002:1 0.001:1 0.001:1 0.002:1 0.001:1
FORMULAE LONG TERM DEBT LONG TERM DEBT LONG TERM DEBT LONG TERM DEBT LONG TERM
/ EQUITY / EQUITY / EQUITY / EQUITY DEBT / EQUITY
SHAREHOLDERS SHAREHOLDERS SHAREHOLDERS SHAREHOLDERS SHAREHOLDERS
FUND FUND FUND FUND FUND

SOLUTIONS LTD =82.44 LTD= 77.58 LTD= 77.4 LTD = 121.48 LTD= 88.07
ESF = 31869.25 ESF= 42940.42 ESF= 46707.67 ESF= 528.44 ESF= 57486.40
= 82.44/ 31869.25 = 77.58/ 42940.42 = 77.4/46707.67 = 121.48/ 528.44 =88.07/57486.40
= 0.002:1 = 0.001:1 = 0.001:1 = 0.002:1 = 0.001:1

INTERPREATION​:- The debt equity ratio is a measure to evaluate the company financial
leverage. It is useful to understand whether the company is having a enough fund to pay out its
debt .From the above data the debt equity ratio for the year 2014-15 is 0.002:1, 2015-16 is
0.001:1,2016-17 is 0.001:1, 2017-18 is 0.002:1, 2018-19 is 0.001:1. So it is very clear that the
shareholder fund need to be increase to pay its obligations and it should show the healthy
financial position of the organization.

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GROSS WORKING CAPITAL

YEARS 2014-15 2015-16 2016-17 2017-18 2018-19

FORMULAE Gross Gross Gross Gross Gross
working working working working working
capital = capital = capital = capital = capital =
Total value of Total value of Total value of Total value of Total value of
current assets current assets current assets current assets current assets
SOLUTIONS 31747.27 26393.62 26269.10 24862.50 25534.54

NET WORKING CAPITAL

YEARS 2014-15 2015-16 2016-17 2017-18 2018-19

24
FORMUL CURRENT CURRENT CURRENT CURRENT CURRENT
AE ASSETS ASSETS ASSETS ASSETS ASSETS
–CURREN –CURREN –CURREN –CURREN –CURREN
T T T T T
LIABILITI LIABILITI LIABILITI LIABILITI LIABILITI
ES ES ES ES ES
SOLUTIO 21735.28 17143.47 19148.09 18204.04 13402.14
NS

WORKING CAPITAL RATIO

YEARS 2014-15 2015-16 2016-17 2017-18 2018-19

RATIO 1.46:1 1.53:1 1.37:1 1.36:1 1.90:1

FORMU GROSS GROSS GROSS GROSS GROSS

LAE WORKING WORKING WORKING WORKING WORKING
CAPITAL/ CAPITAL/ NET CAPITAL/ CAPITAL/ CAPITAL/
NET NET NET NET

25
 WORKING WORKING WORKING WORKING WORKING
CAPITAL CAPITAL CAPITAL CAPITAL CAPITAL
SOLUTI 31747.27/21 26393.62/17143.4 26269.10/19 24862.50/18 25534.54/13
ONS 735.28 7=1.53:1 148.09 204.04 402.14
= 1.46:1
= 1.37:1 = 1.36:1 = 1.90:1

CASH TURNOVER RATIO

YEARS 2014-15 2015-16 2016-17 2017-18 2018-19

RATIO 8.848:1 7.392:1 12.181:1 14.984:1 12 .825:1

FORMUL SALES SALES SALES SALES SALES

AE REVENUE/ REVENUE/ REVENUE/ REVENUE/ REVENUE/
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
CASH AND CASH AND CASH AND CASH AND CASH AND
CASH CASH CASH CASH CASH
EQUIVALENT EQUIVALEN EQUIVALE EQUIVALE EQUIVALENT
T NT NT

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SOLUTIO 49464.82/5590. 51582.45/6977 55001.69/45 43956.9/293 45221.41/3525.
NS 455 .42 15.35 3.5 815
= 8.848:1 = 7.392:1 = 12.181:1 = 14.984:1 = 12.825:1

3.3 FINDINGS

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 ● Current Ratio is increasing as compared to the ratios of the last years and it
is not upto this year as per rule of thumb is concerned. This shows that
companie’s liquidity position is not so much good although Current Assets is
more than Curresnt Liabilities.
● Quick Ratio is also not in such a sufficient position than the previous year’s
Quick Ratio.
● Debtor’s Turnover Ratio is fluctuating every year because of the fluctuations
in the sales.
● Higher the Creditor’s Turnover Ratio higher will be the image of the
Organisation and it shows that company is paying its obligations of its
financial creditor timely. But here, it decreases gradually which will affect
the organistion’s image entirely.
● Debt Equity Ratio is measure to evaluate companie’s financial leverage and
to understand that company is having a enough fund to pay out it debt.

3.4 A COMAPRISON OF RATIOS:

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YEARS 2014-15 2015-16 2016-17 2017-18 2018-19
CURRENT 2.10:1 3.73:1 3.68:1 2.85:1 3.17:1
RATIO
QUICK RATIO 0.74:1 1.46:1 2.12:1 1.71:1 1.96:1

DEBTORS 0.09:1 0.03:1 0.25:1 0.08:1 0.40:1

TURNOVER
RATIO
CREDITORS 0.01:1 0.14:1 0.12:1 0.02:1 0.003:1
TURNOVER
RATIO
DEBT EQUITY 0.002:1 0.001:1 0.001:1 0.002:1 0.001:1
RATIO

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 ​Chapter -4
​ CONCLUSION AND RECOMMENDATIONS
4.1 CONCLUSION
On the basis of above discussion I conclude that working capital management is must be
followed by every business of both level large as well as small levels because its help company
to understand their financial position as well working capital position in the market. This
analysis include such kinds of tools which helps whole company and their all employees to
position out their company in the stock market properly.

Working capital management also is a year stick to measure its liquidity position leverage to the
company , profitability, and operational as well as management efficiency.

The acid test ratio shows the short term solvency position of the company. The average debtors
and sales are both in increasing which shows that the cash collection from debtors is good. The
debt equity ratio shows that the company is fairly better position.

The working capital of company is reducing which is considered as positive sign from the point
of view of finance . from the above collected data , I may say that INDIA TOBACCO
COMPANY LIMITED is in good position.

4.2 RECOMMENDATIONS

As per my study, the company has a better financial position in the current year as compared
previous years. The company should manage its Trade receivables account for making better
inflow of cash from its debtor for its day-to-day working requirement. The company also has
higher current ratio as compared to ideal ratio i.e. 2:1 in all the five years.

Company should maintain proper inventory so that company should provide large amount of
stock as an when required. Inventory forms the major part of creating income for any
organisation.

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The company should provide cash discount to its debtor or availing faster recovery of debt.
The company should pay all its obligations and debt on a frequently basis from that company
can create a good public image.

Company should maintain proper amount of Reserve and Surplus to pay off its long term
debt whenever they get mature. Company should provide better earning opportunity in the
form of dividend to its shareholders.

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 ​ANNEXURE
DATA OF INDIAN TOBACCO COMPANY LIMITED:-

Balance sheet of INDIAN TOBACCO COMPANY LIMITED

For the year endings_________________________( Rupees in crores)

SLNO PARTICULARS NT FY-2019 FY-2018 FY- 2017 FY-2016 FY-2015

AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT

1. EQUITY AND LIABILITIES             

Shareholders fund          
  Share capital 1225.86 1220.43 1214.74 804.72 801.55
  Reserve and surplus 55917.07 51289.68 45198.19 41874.80 30842.59
  Minority interest 343.47 334.47 234.74 260.90 225.11
  Non- current liabilities
  Long –term borrowings 8.15 11.50 18.40 26.66 39.77
  Deferred tax liability 2052.06 1923.02 1878.77 1880.00 1641.80
  Other long term liabilities 79.92 109.98 59.00 50.92 42.67
  Long – term provisions 161.95 149.63 158.42 135.42 123.67
  Current liabilities
Short- term borrowings 1.86 17.35 19.11 43.95 184.95
Trade payables 3509.58 3496.18 2659.33 2339.29 2020.47
  Other current liabilities 6449.17 5672.82 4381.41 4203.82 3765.01
Short –term provisions 51.38 63.80 61.16 71.40 6161.97
 
TOTAL  71798.41  64288.86  55943.27  31691.88  45990.79 
     
ASSETS 
 
Non-current Assets
2. Fixed assets
  Tangible assets
  Intangible assets 23308.08 2182976 19420.84 17463.82 17672.79
  Capital work- in – progress 18625.74 15863.68 15262.27 14459.36 14577.31
  Non-current investment 345.92 451.75 428.68 444.74 423.93
  Deferred tax assets 4126.18 5499.60 3684.20 1671.20 2766.37
  Long- term loans and advances 11695.99 11483.79 6693.99 5125.81 807.65
  Other non- current assets 50.37 47.98 44.95 40.54 38.00
Current Assets 8.34 9.69 8.54 12.96 1564.16
Current Investment 4776.83 4321.49 3303.32 3983.72 1.24
Inventories
Trade Receivables 13347.50 10569.07 10887.39 6621.75 6134.90
Cash and cash equivalent 7943.97 7584.53 8186.15 9068.10 1599.88
Short-term loans and advances 4035.28 2682.29 2474.29 1917.18 1978.17
Other current assets 4152.03 2899.60 2967.40 6063.30 7891.54
TOTAL  6.75 5.84 6.78 8.07 566.62
2261.74 2652.29 1747.09 1190.07 905.03
71798.41  64288.86  55943.27  31691.88  45990.79 

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 BIBLIOGRAPHY
INTERNET:
● www.wikipedia.in
● www.slideshare.net
● www.scribed.in
● www.linkedin.com
● www.moneycontrol.com
● www.accountingtools.com

BOOKS:

● R.C. Kothari
● Dhruv Shah, Rupal Jain.
● Michal Vaz, Madhu Nair.
● Prasanna Chandra.

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