A PROJECT REPORT

ON
WORKING CAPITAL MANAGEMENT
@
SAIL- BSP

Submitted in partial fulfilment of the requirements for the award of the

two-year full time, post-graduate degree of
Masters of Business Administration (MBA)
Finance
By
NEHA YADAV
RASHI KEJRIWAL
S. SHRIYA
(KALINGA UNIVERSITY, NAYA RAIPUR)

Under the guidance of

Mr. Prateek Deshlahra
(Senior Manager)
Finance & Accounts
Bhilai Steel Plant

1
 CERTIFICATE

This is to certify that the project of finance Titled “WORKING

CAPITAL MANAGEMENT” is a work and that this work has not
been submitted anywhere in any form. My indebtedness to
other works/publications has been duly acknowledged at the
relevant places.

Guide
Mr. Prateek Deshlahra
Senior Manager
(F & A Dept.)

2
 DECLARATION

We the undersigned, hereby declare that the project title “Working

capital management” is an original piece of research work carried out
by us under the guidance and supervision of our guide Mr. Prateek
Deshlahra (Senior Manager - Finance and Accounts Department). The
information has been collected from genuine and authentic sources.

Place: Bhilai Neha Yadav

Date: Rashi Kejriwal
S.Shriya

3
 ACKNOWLEDGEMENT

I am grateful towards the management of Bhilai Steel Plant for providing me this
opportunity to carry out analysis of one of its ambitious projects. I would like to
thank the management and the staff of Bhilai Steel Plant for their guidance and
co-operation which they had extended over the entire duration of my project.

I would render my sincere thanks to Mr. Prateek Deshlahra who have been
extremely helpful and co-operative to share with me information and time which
I understand was extremely difficult.

I also pay my deep gratitude and sincere thanks to Mr. S.R. Sinha (Training Co-
coordinator) who provided able guidance and ensured uninterrupted training
throughout the course of the project.

Finally, I would not be able to finish my report without the support of my co-
trainees in BSP. I thank them from the core of my heart.

Neha Yadav

Rashi Kejriwal

S.Shriya

4
 CONTENTS

CHAPTER- ONE
INTRODUCTION ...................................................................................................................... 7
1.1 Introduction....................................................................................................................... 8
1.2 Concept of Working Capital ............................................................................................ 9
1.3 Types of Working Capital................................................................................................. 10
1.4 Determinants of Working Capital..................................................................................... 12
1.5 Working Capital Cycle...................................................................................................... 15

CHAPTER- TWO
INDUSTRY PROFILE.................................................................................................................... 18
2.1 Iron & Steel Industry in India........................................................................................... 19
2.2 Steel Plants........................................................................................................................ 19
2. 3 Major Units of SAIL ....................................................................................................... 21
2.4 Bhilai Steel Plant............................................................................................................... 23
2.5 Finance & Accounts Department of BSP.......................................................................... 24

CHAPTER THREE
RESEARCH METHODOLOGY............................................................................................... 26
3.1 Objective of the Study..................................................................................................... 27
3.2 Limitations of the Study.................................................................................................. 27
3.3 Research Methodology.................................................................................................... 27

CHAPTER FOUR
DATA ANALYSIS AND INTERPRETATION............................................................................ 29
4.1 Working Capital of BSP................................................................................................... 30
4.2 Ratio Analysis
4.2.1 Current Ratio.............................................................................................................. 31
4.2.2 Quick Ratio….............................................................................................................32
4.2.3 Debt to Equity Ratio................................................................................................... 33
4.2.4 Inventory Turnover Ratio........................................................................................... 35

5
 CHAPTER FIVE
CONCLUSION & RECOMMENDATIONS ........................................................................... 37
5.1 Findings & Learnings...................................................................................................... 38
5.2 Conclusion & Recommendations................................................................................................38

BIBLIOGRAPHY …………………………………………………………………………………40

6
CHAPTER - 1

INTRODUCTION

7
1.1 INTRODUCTION
The uses of funds of a concern can be divided into two parts namely long-term
funds and short-term funds. The long –term investment may be termed as ‘fixed
investment.’ A major part of the long-term funds is invested in the fixed assets.
These fixed assets are retained in the business to earn profits during the life of
the fixed assets. To run the business operations short–term assets are also
required.
The term working capital is commonly used for the capital required for day-to-
day working in a business concern, such as for purchasing raw material, for
meeting day-to-day expenditure on salaries, wages, rents rates, advertising etc.
But there are much disagreement among various financial authorities (Financiers,
accountants, businessmen and economists) as to the exact meaning of the term
working capital.
Working capital is defined as “the excess of current assets over current liabilities
and provisions”. But as per accounting terminology, it is difference between the
inflow and outflow of funds. In the Annual Survey of Industries (1961), working
capital is defined to include “Stocks of materials, fuels, semi-finished goods
including work-in-progress and finished goods and byproducts; cash in hand and
bank and the algebraic sum of sundry creditors as represented by
(a) Outstanding factory payments e.g. rent, wages, interest and dividend;
(b) Purchase of goods and services;
(c) Short-term loans and advances and sundry debtors comprising amounts due
to the factory on account of sale of goods and services and advances towards tax
payments”. The term “working capital” is often referred to “circulating capital”
which is frequently used to denote those assets which are changed with relative
speed from one form to another i.e., starting from cash, changing to raw materials,
converting into work-in-progress and finished products, sale of finished products
and ending with realization of cash from debtors. Working capital has been
described as the “life blood of any business which is apt because it constitutes a
cyclically flowing stream through the business”.

8
1.2 CONCEPTS OF WORKING CAPITAL
There are two concepts of working capital viz. quantitative and qualitative. Some
people also define the two concepts as gross concept and net concept. According
to quantitative concept, the amount of working capital refers to ‘total of current
assets.’ Current assets are considered to be gross working capital in this concept.
The qualitative concept gives an idea regarding source of financing capital.
According to qualitative concept the amount of working capital refers to “excess
of current assets over current liabilities.” L.J. Guttmann defined working capital as
“the portion of a firm’s current assets which are financed from long–term funds.”
The excess of current assets over current liabilities is termed as ‘Net working
capital’. In this concept “Net working capital” represents the amount of current
assets which would remain if all current liabilities were paid. Both the concepts of
working capital have their own points of importance. “If the objectives is to
measure the size and extent to which current assets are being used, ‘Gross
concept’ is useful; whereas in evaluating the liquidity position of an undertaking
‘Net concept’ becomes pertinent and preferable.
Current Assets –It is rightly observed that “Current assets have a short life span.
These types of assets are engaged in current operation of a business and normally
used for short– term operations of the firm during an accounting period i.e.
within twelve months. Cash balance may be held idle for a week or two, account
receivable may have a life span of 30 to 60 days, and inventories may be held for
30 to 100 days.” Fitzgerald defined current assets as, “cash and other assets
which are expected to be converted in to cash in the ordinary course of business
within one year or within such longer period as constitutes the normal operating
cycle of a business.”
Current Liabilities – The firm creates a Current Liability towards creditors
(sellers) from whom it has purchased raw materials on credit. This liability is also
known as accounts payable and shown in the balance sheet till the payment has
been made to the creditors. The claims or obligations which are normally
expected to mature for payment within an accounting cycle are known as current
liabilities. These can be defined as “those liabilities where liquidation is
reasonably expected to require the use of existing resources properly classifiable
as current assets, or the creation of other current assets, or the creation of other
current liabilities.”

9
1.3 TYPES OF WORKING CAPITAL

Working Capital may be classified in two ways

a) Concept based working capital
b) Time based working capital

 Concept based working capital

1. Gross Working Capital
2. Net Working Capital
3. Negative Working Capital

1. Gross Working Capital: It refers to the firm’s investment in total

current or circulating assets.

2. Net Working Capital: The term “Net Working Capital” has been defined
in two different ways:

i. It is the excess of current assets over current liabilities. This is, as a

matter of fact, the most commonly accepted definition. Some people
define it as only the difference between current assets and current
liabilities. The former seems to be a better definition as compared to
the latter.
ii. It is that portion of a firm’s current assets which is financed by long-
term funds.

3. Negative Working Capital: This situation occurs when the current

liabilities exceed the current assets. It is an indication of crisis to the firm.

 Time Based Working Capital

1. Permanent or Fixed Working Capital
(a) Regular Working Capital
(b) Reserve Working Capital

10
2. Temporary or Variable Working Capital
(a) Seasonal Working Capital
(b) Special Working Capital

1. Permanent Working Capital: This refers to that minimum amount of

investment in all current assets which is required at all times to carry out
minimum level of business activities. In other words, it represents the
current assets required on a continuing basis over the entire year. Tandon
Committee has referred to this type of working capital as “Core current
assets”.
The following are the characteristics of this type of working capital:

i. Amount of permanent working capital remains in the business in one

form or another. This is particularly important from the point of view
of financing. The suppliers of such working capital should not expect
its return during the life-time of the firm.
ii. It also grows with the size of the business. In other words, greater
the size of the business, greater is the amount of such working capital
and vice versa. Permanent working capital is permanently needed for
the business and therefore it should be financed out of long-term
funds.

2. Temporary Working Capital: The amount of such working capital

keeps on fluctuating from time to time on the basis of business activities.
In other words, it represents additional current assets required at
different times during the operating year. For example, extra inventory
has to be maintained to support sales during peak sales period.
Similarly, receivable also increase and must be financed during period of
high sales. On the other hand investment in inventories, receivables,
etc., will decrease in periods of depression.
Suppliers of temporary working capital can expect its return during off
season when it is not required by the firm. Hence, temporary working
capital is generally financed from short- term sources of finance such as
bank credit.

11
1.4 DETERMINANTS OF WORKING CAPITAL
The factors influencing the working capital decisions of a firm may be classified as
two groups, such as internal factors and external factors. The internal factors
includes, nature of business size of business, firm’s product policy, credit policy,
dividend policy, and access to money and capital markets, growth and expansion
of business etc. The external factors include business fluctuations, changes in the
technology, infrastructural facilities, import policy and the taxation policy etc.
These factors are discussed in brief in the following lines:

I. INTERNAL FACTORS

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1. Nature and Size of the Business
The working capital requirements of a firm are basically influenced by the nature
and size of the business. Size may be measured in terms of the scale of
operations. A firm with larger scale of operations will need more working capital
than a small firm. Similarly, the nature of the business - influence the working
capital decisions. Trading and financial firms have less investment in fixed assets.
But require a large sum of money to be invested in working capital. Retail stores,
business units require larger amount of working capital, whereas, public utilities
need less working capital and more funds to invest in fixed assets.

2. Firm’s Production Policy

The firm’s production policy (manufacturing cycle) is an important factor to
decide the working capital requirement of a firm. The production cycle starts
with the purchase and use of raw material and completes with the production of
finished goods. On the other hand production policy is uniform production policy
or seasonal production policy etc., also influences the working capital decisions.
Larger the manufacturing cycle and uniform production policy – larger will be the
requirement of working capital. The working capital requirement will be higher
with varying production schedules in accordance with the changing demand.

3. Firm’s Credit Policy

The credit policy of a firm influences credit policy of working capital. A firm
following liberal credit policy to all customers requires funds. On the other hand,
the firm adopting strict credit policy and grant credit facilities to few potential
customers will require less amount of working capital.

4. Availability of Credit
The working capital requirements of a firm are also affected by credit terms
granted by its suppliers – i.e. creditors. A firm will need less working capital if
liberal credit terms are available to it. Similarly, the availability of credit from
banks also influences the working capital needs of the firm. A firm, which can get
bank credit easily on favourable conditions, will be operated with less working
capital than a firm without such a facility.

13
5. Operating Efficiency of the Firm
Operating efficiency means the optimum utilisation of a firm’s resources at
minimum cost. If a firm successfully controls operating cost, it will be able to
improve net profit margin which, will, in turn, release greater funds for working
capital purposes.

II. EXTERNAL FACTORS

1. Business Fluctuations
Most firms experience fluctuations in demand for their products and services. These
business variations affect the working capital requirements. When there is an upward
swing in the economy, sales will increase, correspondingly, the firm’s investment in
inventories and book debts will also increase. Under boom, additional investment in
fixed assets may be made by some firms to increase their productive capacity. This act
of the firm will require additional funds. On the other hand when, there is a decline in
economy, sales will come down and consequently the conditions, the firm try to reduce
their short-term borrowings. Similarly, the seasonal fluctuations may also affect the
requirement of working capital of a firm.

2. Changes in the Technology

The technological changes and developments in the area of production can have
immediate effects on the need for working capital. If the firm wish to install a new
machine in the place of old system, the new system can utilise less expensive raw
materials, the inventory needs may be reduced there by working capital needs.
3. Import Policy
Import policy of the Government may also effect the levels of working capital of a
firm since they have to arrange funds for importing goods at specified times.

4. Infrastructural Facilities
The firms may require additional funds to maintain the levels of inventory and other
current assets, when there is a good infrastructural facility in the company like
transportation and communications.
14
5. Taxation Policy
The tax policies of the Government will influence the working capital decisions. If the
Government follows regressive taxation policy, i.e. imposing heavy tax burdens on
business firms, they are left with very little profits for distribution and retention
purpose. Consequently the firm has to borrow additional funds to meet their increased
working capital needs. When there is a liberalized tax policy, the pressure on working
capital requirement is minimized.

Thus the working capital requirements of a firm are influenced by the internal
and external factors.

1.5 WORKING CAPITAL CYCLE

Working Capital Cycle is also known as Operating cycle. Operating cycle is the
total time gap between the purchase of raw material and the receipt from
Debtors. The working capital estimation as per the method of operating cycle, is
the most systematic and logical approach. In this case, the working capital
estimation is made on the basis of analysis of each and every component of the
working capital individually. As already discussed the working capital, required
to sustain the level of planned operations, is determined by calculating all the
individual components of current assets and current liabilities.
Working capital is needed till a firm gets cash on sale of finished products. It
depends on two factors:
i. Manufacturing cycle i.e. time required for converting the raw material into
finished product; and
ii. Credit policy i.e. credit period given to Customers and credit period allowed by
creditors. Thus, the sum total of these times is called an “Operating cycle” and it
consists of the following six steps:
i. Conversion of cash into raw materials.
15
ii. Conversion of raw materials into work-in-process.
iii. Conversion of work-in-process into finished products.
iv. Time for sale of finished goods—cash sales and credit sales.
v. Time for realization from debtors and Bills receivables into cash.
vi. Credit period allowed by creditors for credit purchase of raw materials,
inventory and creditors for wages and overheads.

WORKING CAPITAL CYCLE.

CASH

Raw
material,
DEBTORS
Labour,
Overhead

STOCK WIP

‘Working Capital Cycle’ makes it clear that the amount of cash funds are used to
purchase, raw materials and used to pay to creditors. The raw materials are
processed; wages and overhead expenses are paid which in result produce
finished goods for sale.
The sale of goods may be for cash or credit. In the former case, cash is directly
received while in later case cash is collected from debtors. This cycle continues
throughout the life of the business firm.

16
Operating Cycle
The duration of time required to complete the following sequence of events, in
case of manufacturing firm, is called the operating cycle:
1. Conversion of cash into raw materials.
2. Conversion of raw materials into work-in- progress.
3. Conversion of work in process into finished goods.
4. Conversion of finished goods into debtors and bills receivables through sales.
5. Conversion of debtors and bills receivables into cash.
The length of cycle will depend on the nature of business. Non-manufacturing
concerns, service concerns and financial concerns will not have raw material and
work-in-process so their cycle will be shorter. Financial Concerns have a shortest
operating cycle.

17
CHAPTER - 2

INDUSTRY
PROFILE

18
2.1 Iron & Steel Industry in India

The iron and steel industry is one of the most important industries in India.
During 2014 through 2015, India was the third largest producer of raw steel and
the largest producer of sponge iron in the world. The industry produced 91.46
million tons of total finished steel and 9.7 million tons of pig iron. Most iron and
steel in India is produced from iron ore. The Indian Ministry of Steel is concerned
with: the coordination and planning of the growth and development of the iron
and steel industry in the country, both in the public and private sectors;
formulation of policies with respect to production, pricing, distribution, import
and export of iron and steel, Ferro alloys and refractories; and the development of
input industries relating to iron ore, manganese ore, chrome ore and refractories
etc., required mainly by the steel industry.

Most of the public sector undertakings market their steel through the Steel
Authority of India (SAIL).

2.2 Steel Plants

There are two types of steel plants - mini steel plants and integrated steel plants.
Mini steel plants are smaller, have electric furnaces, use steel scrap and sponge
iron. They have re-rollers that use steel ingots as well. They produce and
introduce mild and alloy steel of certain specifications. There are around 650 mini
steel plants in India.
Integrated steel plants are large, handle everything in one complex - from putting
together raw material to steel making, rolling and shaping. Iron ore, coke, and flux
are fed into the blast furnace and heated. The coke reduces the iron oxide in the
ore to metallic iron, and the molten mass separates into slag and iron. Some of the
iron from the blast furnace is cooled, and marketed as pig iron; the rest flows into
basic oxygen furnaces, where it is converted into steel. Iron and steel scrap may
be added to both to the blast furnace and to the basic iron furnace. There are
about five integrated SAIL plants in India.

19
Steel Authority of India Limited (SAIL) is the leading steel-making company in
India. It is fully integrated iron and steel maker, producing both basic and special
steels for domestic construction, engineering, power, railway, automotive and
defense industries and for sale in export markets.

Ranked amongst the top ten public sector companies in India in terms of
turnover, SAIL manufacturers and sells a broad range of steel products, including
hot and cold rolled sheets and coils, galvanized sheets, electrical sheets,
structural, railway products, plates, bars and rods, stainless steel and other alloy
steels.

SAIL produces iron and steel at five integrated plants and three special steel
plants, located principally in the eastern and central regions of India and situated
close to domestic sources of raw materials, including the Company’s iron ore,
limestone and dolomite mines.

The company has the distinction of being India’s largest producer of iron ore and
of having the country’s second largest mines network. This gives SAIL a
competitive edge in terms of captive availability of iron ore, limestone, and
dolomite, which are inputs for steel making.

20
2.3 Major Units of SAIL
 Integrated Steel Plants

 Bhilai Steel Plant

 Durgapur Steel Plant
 Bokaro Steel Plant
 IISCO Steel Plant

 Special Steel Plants

 Alloy Steel plant (ASP)

 Salem Steel Plant (SSP)
 Visvesvaraya Iron and Steel Limited (VISL)

 Ferro Alloy Plants

 Chandrapur Ferro Alloy Plant (CFP)

 Refractory Plants – SAIL Refractory Unit (SRU)

 SAIL Refractory Unit, Bhandaridah in Jharkhand

 SAIL Refractory Unit, Bhilai in Chhattisgarh
 SAIL Refractory Unit, IFICO, Ramgarh in Jharkhand
 SAIL Refractory Unit, Ranchi Road in Jharkhand

 Central Units

 Centre for Engineering and Technology

 Research and Development Centre for Iron and Steel
 SAIL Consultancy Organization
 Environment Management Division

21
Sail Network: -

22
2.4 Bhilai Steel Plant
Eleven times winner of Prime Minister’s Trophy for Best Integrated Steel Plant in
the country, Bhilai Steel Plant (BSP) is India’s sole producer & supplier of world
class rails for Indian Railways including 260-meter-long rails, and a major
producer of large variety m\of wide and heavy steel plates and structural steel.
With an annual production capacity of 3.153 MT of saleable steel, the plant also
specializes in other products such as wire rods and merchant products.

The entire range of TMT products (Bar & Rods) produced by the plant is of
earthquake-resistant grade and superior quality. The plant also produces heavy
structural including channels and beams.

Since BSP is accredited with ISO 9001:2000 Quality Management System

Standard, all saleable products of Plan 54t come under the ISO umbrella. The
Plant’s HR Dept is also certified with ISO 9001:2000 QMS Standard. ISO :14001
has been awarded for Environment Management System in the plant, Township
and Dalli Mines. The Plant is accredited with SA:8000 certification for social
accountability and the OHSAS-18001 certification for Occupational Health &

Society.

23
Products of Bhilai Steel Plant: -

 Rails

 Heavy Structurals

 Crain Rails

 Crossing Sleepers

 TMT Round

 Wire rods (Plain)

 Wire rods (TMT)

 Plates

 Bloom, NWS Slab & Billets from BBM

 HC Bloom from CCS Slab from CCS

By Products of Bhilai Steel Plant: -

 Coal Chemicals
24
  Processed Slag

2.5 Finance & Accounts Department of BSP

Finance & Accounts department of Bhilai Steel Plant is one of the key
departments in the total organization. It has two main functions i.e. Finance &
Accounts. These functions are carried out by various sections of finance &
accounts department.
The objective of this department is always to meet the requirement of line
department while doing its own line functions such as accounts maintaining,
meeting statutory requirements, budgetary control and advising on financial
matters etc.
This training report is an attempt to consolidate various functions of accounts
and finance department of Bhilai Steel Plant, it is based on the latest practices and
system being followed and would be very useful to everyone functioning as
finance and accounts executives and for others as well.
The sections of finance & accounts dept. covered are as follows:
 Mines coordination
 Stores & Raw material section
 Freight & claims
 Purchase & contract concurrence section
 Project finance & accounts
 Costing & budgeting section
 Operation accounts section
 Wages section
 Cash section
 Sales invoicing and accounting section
25
 Excise & sales tax section.

26
 CHAPTER - 3

RESEARCH
METHODOLOGY

3.1 Objectives of the Study

1. To know the current assets and liabilities of working capital of BSP.

27
 2. To find out different ratios related with working capital.

3. To study the various proportion of working capital of BSP.

3.2 Limitations of the Study

 Longitudinal effects -- unlike our professor, who can literally devote years
[even a lifetime] to studying a single topic, the time available to investigate
a research problem and to measure change or stability over time is pretty
much constrained by the due date of my assignment.

 Lack of accessible data – The data provided for the research project is of
the limited quantity.

3.3 Research Methodology

This project is undertaken on – “Working Capital Management in Bhilai Steel

Plant”. It describes about how the company manages its working capital and the
various steps that are required in the management of working capital.

This project requires detailed understanding of the concept “Working Capital

Management”. Therefore, firstly we need to have a clear idea of what is working
capital, how it is managed in BSP, what are the different ways in which the
financing of working capital is done in the company.

Then comes the financing of working capital requirement i.e. how the working
capital is financed, what are the various sources through which it is done.

28
And, in the end, suggestions and recommendations on ways for better
management and control of working capital are provided.

Research Design : Descriptive research design

Data Collection : Primary & Secondary data sources

Primary Data Sources:

• Personal discussion
• Interaction
• Observation
• Organizational & Plant visit.
Secondary Data Sources:
• Internet
• Literature survey
• Journals & Research papers
Financial Statement & Annual reports of BSP.

29
 CHAPTER - 4

DATA ANALYSIS &

INTERPRETATION

4.1Working Capital of BSP

30
 (in Crores)

Particular / 2020 2019 2018

Year
Total current 9034.73 8191.81 6206.76
assets
Total current 7100.31 6240.63 6069.27
Liabilities
Working Capital 1934.42 1951.18 137.49

Working Capital

2018
137.49

2019 1951.18

2020 1934.42

0 500 1000 1500 2000 2500

Interpretation: Here we can see that the working capital has fluctuated but there was
never a negative working capital. This shows that BSP is managing its working capital
well and also, they have enough liquidity to finance their short-term liabilities.

4.2 Ratio Analysis

31
 4.2.1 Current Ratio

The current ratio is a liquidity ratio that measures a company's ability to

pay short-term and long-term obligations. To gauge this ability, the current
ratio considers the current total assets of a company (both liquid and
illiquid) relative to that company’s current total liabilities.

The formula for calculating a company’s current ratio, then, is:

Current Ratio = Current Assets / Current Liabilities

The current ratio is also known as the working capital ratio.

Particular / 2020 2019 2018

Year
Total current 9034.73 8191.81 6206.76
assets
Total current 7100.31 6240.63 6069.27
Liabilities
Current Ratio 1.272 1.313 1.023

Current Ratio
1.4
1.27 1.31
1.2
1.02
1

0.8

0.6

0.4

0.2

2020 2019 2018

32
Interpretation: The ideal current ratio is 1 and as we can see that the current
ratio of BSP is 1:2. Which shows that the company is financially sound and it has
money to pay its short-term debt.

4.2.2 Quick Ratio

The quick ratio - aka the quick assets ratio or the acid-test ratio - is a liquidity
indicator that further refines the current ratio by measuring the amount of the
most liquid current assets there are to cover current liabilities. The quick ratio is
more conservative than the current ratio because it excludes inventory and other
current assets, which are more difficult to turn into cash. Therefore, a higher ratio
means a more liquid current position.

Formula:

Particular / 2020 2019 2018

Year
Quick assets 6116.35 5336.71 3399.03
Current Liabilities 7100.31 6240.63 6069.27
Quick Ratio 0.861 0.855 0.560

Quick Ratio
1
0.9
0.8 0.86 0.86
0.7
2020
0.6 2019
0.56 2018
0.5
0.4
0.3
0.2
0.1 33

0
Interpretation: It is said that the quick ratio should be more than 1:1 but here, it
has remained between 0.5 to 0.9. It is said that even if one blast furnace has to be
cooled, the BSP suffers losses up to 10 Crores. So, an adequate stock of inventory
is maintained this affects the level of the liquid assets and cash at hand.

4.2.3 Debt to Equity Ratio:

The debt-to-equity (D/E) ratio is calculated by dividing a company’s total

liabilities by its shareholder equity. These numbers are available on the balance
sheet of a company’s financial statements. More specifically it reflects the ability
of shareholder equity to cover all outstanding debts in the events of a business
downturn.

Formula:

D/E Ratio = Total Liability

Total Shareholder Equity

Particular / 2020 2019 2018

Year
Total Liabilities 8724.78 7769.95 7458.76
Equity 49666.82 47968.35 47391.37
Debt to Equity 0.175 0.162 0.157
Ratio
34
 Debt to Equity Ratio
0.18

0.18
0.18
0.17

0.17

0.16 0.16

0.16 0.16

0.15

0.15
2020 2019 2018

Interpretation: As from the above graph we can see that the ratio is around 0.1
which shows that the company is mostly dependent on borrowed funds to meet
their obligations. It is known that some industries use more debt financing than
other and steel industry is an example of that.

4.2.4 Inventory Turnover Ratio

The inventory turnover ratio is an efficiency ratio that shows how effectively
inventory is managed by comparing cost of goods sold with average inventory for
a period. This measures how many times average inventory is "turned" or sold
during a period. In other words, it measures how many times a company sold its
total average inventory dollar amount during the year. A company with Rs10,000
of average inventory and sales of Rs1,00,000 effectively sold its 10 times over.
This ratio is important because total turnover depends on two main components
of performance. The first component is stock purchasing. If larger amounts of
inventory are purchased during the year, the company will have to sell greater
amounts of inventory to improve its turnover. If the company can't sell these
greater amounts of inventory, it will incur storage costs and other holding costs.

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The second component is sales. Sales have to match inventory purchases
otherwise the inventory will not turn effectively. That's why the purchasing and
sales departments must be in tune with each other.
Formula
Inventory turnover ratio = Sales / Average stock

Particular / 2020 2019 2018

Year
Cost of Material 7857.45 9057.32 7439.74
Consumed
Average Inventory 5615.89 4261.325 3499.28
Inventory 1.399 2.125 2.126
Turnover Ratio

Inventory Turnover rATIO

2.5

2020
2
2019
1.5 2018

0.5

1.4 2.13 2.13

0

Interpretation: Ideally the ratio is 2:1, so by the graph above describes that the
business has excellent inventory rolling with respect to stock. The Inventory
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turnover ratio is a measure of the number of times inventory is sold or used in a
time period such as a year.

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 CHAPTER - 5

CONCLUSION AND
RECOMMENDATIO
N

5.1 Findings & Learnings

 In the BSP coordination among the various sections of the Finance & Accounts
department is very nice, it is the work force of the Finance & Accounts
department, which makes it possible.
 Finance & Accounts department in BSP is a big department which consisting of
near about 32 sections.

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 In BSPs their working capital management is very good; They use MMIS & SAP
system to manage the overall activity.
 In the BSPs they not create debtors, they generally deal with first to receive the
cash or cheque, and then they supply the finished material.
 During the study, we find that there is no huge variation in budget decided and
the actual one.
 The taxation policy is to be made flexible because of which bulkiness of the
work is to be removed.
 Monthly return filling is not online process, hence sales and excise department
face problem.
 We have learned to analysis of ratios and how they are helpful in the
organization.

5.2 Conclusion & Recommendations

BSP a major unit of SAIL has been generating continuous profits as compared to
previous year with current year. To summaries, working capital at a plant level,
this mainly involves forecasting and monitoring of various components, which is
done systematically. Where by major portions of receivables are managed by
central marketing organization for all plants level, other important components of
working capital, bill payables and borrowings of funds monitored by corporate
level.

Finance Department of BSP and various individual units decides the amount of
funds requirement during the preparation of operation budget, and then
requirement of fund is intimated to corporate office. Cash inflows and outflows
are estimated in budget.
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Bhilai Steel Plant (BSP) is an enormous unit and hence the evaluation of its
working capital management cannot be done thoroughly but, in our brief, we
have at our best tried to present a general idea of the working capital
management at BSP.

Recommendations:
• Online inventory valuation can be implemented.
• During the analysis I found that the other units of SAIL except the Bhilai
steel plant was able to maintain sufficient profit required to complement its
expansion plans. So it is my suggestion to those units to cut their cost & use
the available resources efficiently.
• I would also like to suggest SAIL to work on those techniques through
which production cost can be reduced. For this I suggest the management
to give more importance to research & development wing.

Bibliography

 https://www.sail.co.in/
 https://www.myaccountingcourse.com/
 https://corporatefinanceinstitute.com/
 Annual reports of SAIL
 Shukla S.M., Financial Accounting, Sahitya Bhawan Publications
 Pandey I.M., Financial Management.
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