CHAPTER- 1

Introduction
To
The Topic

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WORKING CAPITAL MANAGEMENT - AN INTRODUCTION

Every business needs adequate liquid resources in order to maintain day-to-day cash flow. It needs enough
cash to pay wages and salaries as they fall due and to pay creditors if it is to keep its workforce and ensure
its supplies. It needs investment to procure fixed assets, which remain in use for a longer period. Money
invested in these assets is called ‘long term funds’ or fixed capital. Fixed capital includes land and building,
plant and machinery, furniture and fittings etc. business also needs funds for short term purposes to finance
current operations. Investment in short term assets like cash, inventories, bettors is called short term funds or
working capital management.

Cash is the lifeline of a company. If this lifeline deteriorates, so does the company's ability to fund
operations, reinvest and meet capital requirements 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 working capital management (WCM). So, working capital managements an important aspect of
financial management. Its main objective is to determine the optimum amount of working capital
management required. It is concerned with the problems that arise in attempting to manage the current
assets, current liabilities and the relationship that exist between them.

Positive working capital means that the company i able to pay off its short-term liabilities. Negative
working capital management means that a company currently is unable to meet its short-term liabilities with
its current assets. A negative working capital management is a sign of managerial inefficiency in a business
with low inventory and accounts receivable. In any other situation, it is a sign of a company may be facing
bankruptcy or serious financial trouble.

Concept of working capital management

There are two concepts of working capital management

Gross working capital management concept

Net working capital management concept

According to this concept, working capital management which is the total of all current assets of a
business.

Net working capital management concept:

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 According to this concept, working capital management means net working capital management which is the
excess of current assets over current liabilities.

Mathematically,

Net working capital management = current assets –current liabilities

According to C.W. Gutenberg “it is ordinarily been defined as the excess of current assets over current
liabilities.”

Current assets:

Those assets which are converted into cash within a short period of time not exceeding one year.
Current assets include:

• Stocks of raw materials

• Work-in-progress

• Finished goods

• Trade debtors

• Prepayments

• Cash balances

• Accrued income

Current liabilities:

Those liabilities which have to be paid within a short period of time in no case exceeding one year.
Current Liabilities includes:
• Trade creditors

• Accruals

• Taxation payable

• Dividends payable
• Outstanding expense

So, working capital management is a financial metric which represents the amount of day-by-day operating
liquidity available to a business.

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 WORKING CAPITAL NEEDS OF A BUSINESS

Different industries have different optimum working capital management profiles, reflecting their methods
of doing business and what they are selling.

1. Businesses with a lot of cash sales and few credit sales should have minimal trade debtors. Supermarkets are
good examples of such businesses;
2. Businesses that exist to trade in completed products will only have finished goods in stock. Compare this
with manufacturers who will also have to maintain stocks of raw materials and work-in-progress.
3. Some finished goods, notably foodstuffs, have to be sold within a limited period because of their perishable
nature.
4. Larger companies may be able to use their bargaining strength as customers to obtain more favour
able, extended credit terms from suppliers. By contrast, smaller companies, particularly those that have
recently started trading may be required to pay their suppliers immediately.
5. Some businesses will receive their money at certain times of the year although they
may incur expenses throughout the year at a fairly consistent level. This is often known as “seasonality” of
cash flow. For example, travel agents have peak sales in the weeks immediately following Christmas.
6. Working capital management also gives investors an idea of the company's underlying operational
efficiency. Money that is tied up in inventory or money that customers still owe to the company cannot be
used to pay off any of the company's obligations. So, if a company is not operating in the most efficient
manner (slow collection), it will show up as an increase in the working capital management.

Working capital management needs also fluctuate during the year the amount of funds tied up in
working capital management would not typically be a constant figure throughout the year. Many businesses
operate in industries that have seasonal changes in demand. This means that sales, stocks, debtors, etc.
would be at higher levels at some predictable times of the year than at others.

The working capital management need can be separated into two parts: A fixed part, and

• A fluctuating part

The fixed part is probably defined in amount as the minimum working capital management requirement for
the year.

The more permanent needs (fixed assets and the fixed element of working capital management) should be
financed from fairly permanent sources (e.g. equity and loan stocks); the fluctuating element should be

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 financed from a short-term source (e.g. a bank overdraft), which can be drawn on and repaid easily and at
short notice. Five most common sources of short-term working capital management financing:

• Equity: If your business is in its first year of operation and has not yet become profitable, then you might
have to rely on equity funds for short-term working capital management needs. These funds might be
injected from your own personal resources or from a family member, friend or third-party investor.

• Trade Creditors: If you have a particularly good relationship established with your
trade creditors, you might be able to solicit their help in providing short-term working capital management.
If you have paid on time in the past, a trade creditor may be willing to extend terms to enable you to meet a
big order. For instance, if you receive a big order that you can full fill, ship out and collect in 60 days, you
could obtain 60-day terms from your supplier if 30-day terms are normally given. The trade creditor will
want proof of the order and may want to file a lien on it as security, but if it you to proceed, that shouldn’t
be a problem.

• Factoring: Factoring is another resource for short-term working capital management financing. Once you
have filled an order, a factoring company buys your account receivable and then handles the collection. This
type of financing is more expensive than conventional bank financing but is often used by new businesses.

• Line of credit: Lines of credit are not often given by banks to new businesses.
However, if your new business is well-capitalized by equity and you have good collateral, your business
might qualify for one. A line of credit allows you to borrow funds for short term needs when they arise. The
funds are repaid once you collect the accounts receivable that resulted from the short-term sales peak. Lines
of credit typically are made for one year at a time and are expected to be paid off for 30 to 60 consecutive
days sometime during the year to ensure that the funds are used for short- term needs only.

• Short-term loan: While your new business may not qualify for a line of credit from a bank, you might
have success in obtaining a one-time short-term loan to your temporary working capital management needs.
If you have established a good banking relationship with a banker, he or she might be willing to provide a
short-term note for one order or for a seasonal inventory and/or accounts receivable buildup.

In addition to analysing the average number of days it takes to make a product (inventory days) and collect
on an account (account receivable days) vs. the number of days financed by accounts payable, the operating
cycle analysis provides one other important analysis.

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 From the operating cycle, a computation can be made of the dollars required to support one day of accounts
receivable and inventory and the dollars provided by a day of accounts payable.
Working capital management has a direct impact on cash flow in a business. Since cash flow is the name of
the game for all business owners, a good understanding of working capital management is imperative to
make any venture successful.

ELEMENTS OF WORKING CAPITAL MANAGEMENT Inventory

Inventory is a list for goods and materials, or those goods and materials themselves, held available in stock
by a business. The raw materials, work-in-process goods and completely finished goods that are considered
to be the portion of a business's assets that are ready or will be ready for sale. Inventory represents one of the
most important assets that most businesses possess, because the turnover of inventory represents one of the
primary sources of revenue generation.
There are three basic reasons for keeping an inventory:

1. Time- The time lags present in the supply chain, from supplier to user at every stage, requires that you
maintain certain amount of inventory to use in this "Leadtime"

2. Uncertainty- Inventories are maintained as buffers to meet uncertainties in demand, supply and
movements of goods.

3. Economies of scale - Ideal condition of "one unit at a time at a place where user needs it, when he needs
it " principle tends to incur lots of costs in terms of logistics.
So Bulk buying, movement and storing bring up in economies of scale, thus inventory.

At Reliance industry limited, the inventory includes raw material, semifinished goods (work-in- progress),
finished goods, bought out ammonia, by products, stores, spare parts & packing material. While evaluating
inventory it is to be seen that what is the composition of any old stock lying in the inventory. Efforts should
be made by the management to ensure that non-moving inventory should be minimized.
Inventory of last five years is tabulated as:

Inventory table

Inventory (Rs. In cr.)

Particulars Years
2016 2015 2014 2013 2012
Raw material 100.44 73.71 37.58 45.47 37.88
Bought out ammonia ----- ----- 11.55 0.19 0.61

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 Finished goods 64.95 62.28 80.39 115.54 265.74
Semi-finished goods 12.17 13.13 16.40 14.51 12.72
By product 0.03 0.02 0.06 ----- -----
Stores, spare parts & packing material 170.58 175.33 216.27 216.79 220.26

Total 348.20 324.49 350.84 392.52 537.24

As it is seen from the table that maximum inventory held in 2012 i.e. 537.24 cr. where as in 2015 it is
minimum and amounted 324.49 lacs.

Composition and Trends in holding inventory

Inventory
Particulars Years
2016 2015 2014 2013 2012
Raw material 28.85% 22.72% 10.71% 11.59% 7.05%
Bought out ammonia 0.00% 0.00% 0.03% 0.05% 0.11%
Finished goods 18.65% 19.19% 22.91% 29.44% 49.46%
Semi-finished goods 3.50% 4.05% 4.68% 3.70% 2.37%
By product 0.01% 0.01% 0.02% 0.00% 0.00%
Stores, spare parts & packing
material 48.99% 54.03% 61.65% 55.23% 41.00%
Total 100.00% 100.00% 100.00% 100.00% 100.00%

From the above table it is seen that in 2016 raw material, stores, spare parts and packing material constitutes
approximately 80% of the total inventory. Rest 20% is covered by finished, semi-finished and byproduct.

Also, from 2012 to 2016 there is a drastic change in the stock of raw material

In 2012 raw material is 7% which raised up to 28.85% in 2016(approx. four times). After consulting with
the management of NFL the main reason for increase in inventory is exorbitant increase in prices of raw
material. Since the raw material mainly constitute of petroleum hydrocarbons, the increase in petroleum
products has led to increase in value of inventory.

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By product

A by-product is a secondary or incidental product deriving from a manufacturing process, a chemical

reaction or a biochemical pathway, and is not the primary product can be useful and marketable, or it can
have severe ecological consequences. There are numerous varieties and sources of by-products and wastes
available as soil amendments in agriculture. These materials come either from industrial plants as by-
products or from human municipal wastes. By- products and wastes may be either organic or inorganic.

Semi-finished goods

A good only partially completed during the manufacturing process is called semi- finished goods or work in
process or materials and components that have begun their transformation to finished goods.

Stores, spare parts and packing material

This portion of inventory deals with ware house facility, spare parts and packing material. A warehouse is a
large building where goods are stored, and where they may be catalogued, shipped, or received, depending
upon the type.
Packing material includes parcels, packages, consignments and all other material coming by any mode of
transportation

Cash & bank balance

Cash includes cash in hand and cash at banks. Cash equivalents might include short- term deposits with non-
banks with original maturities of three months or less and that are not subject to any risk of change in value.

Provisions

A provision is recognized when, and only when, the enterprise has a present obligation as a result of a past
event and it is probable that an outflow of resources embodying economic benefits will be required to settle
the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed
at each balance sheet date and adjusted to reflect the current best estimate. Where the effect of the time value
of money is material, the amount of a provision is the present value of the expenditures expected to be
required to settle the obligation.

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Debtors

Debtors are people or other firms who owe money to the firm. This will happen where the firm has sold
goods with a period of credit. The firm sells the good

period of credit to pay - usually a month. During this month the purchaser owes the firm the money and is
therefore a debtor. If the firm has debts these are considered an asset, because when the debtors pay the firm
will have converted the debt into cash in the bank.
Because most debts are relatively short-term, they are considered current assets.

Creditors

A creditor is a party (e. g. person, organization, company, or government) that has a claim to the services of
a second party. The first party, in general, has provided some property or service to the second party under
the assumption usually enforced by contract that the second party will return an equivalent property or
service. The second party is frequently called a debtor or borrower. The term creditor is frequently used in
the financial world, especially in reference to short term loans, long term bonds, and mortgages Debtor
creditor law governs situations where one party is unable to pay a monetary debt to another.

Generally, creditors are of three types: -

First- are those who have a lien against a particular piece of property. This property must be used to satisfy
the debt to the lien-creditor before it can be used to satisfy debts to other creditors. A lien may arise through
statute, agreement between the parties, or judicial proceedings. E.g. Transactions and .

Secondly- a creditor may have a priority interest. A priority arises through statutory law. If a creditor has a
priority his debt must be paid when the debtor becomes insolvent before other debts.

Third- and final type of creditor is one who has neither a lien against the debtor's property nor is the
subject of a statutory priority.

Deposits

A deposit held at a financial institution that has a fixed term. These are generally shortterm with maturities
ranging anywhere from a month to a few years. When a term deposit is purchased, the lender understands
that the money can only be withdrawn after the term has ended or by giving a predetermined number of
days’ notice. Term Deposits allow you to lock your funds away and receive a guaranteed return.
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Liabilities

These are the obligations measurable in monetary terms that represent amounts owed to creditors,
governments, employees, and other parties. In other words it is an obligation of an entity arising from past
transactions or events, the settlement of which may result in the transfer or use of assets, provision of
services or other yielding of economic benefits in the future.

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 CHAPTER-2
INDUSTRY AND COMPANY
PROFILE

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CONSTRUCTION INDUSTRY OF INDIA

The Construction industry of India is an important indicator of the development as it creates investment
opportunities across various related sectors. With a share of around
8.2%, the construction industry has contributed an estimated ₹670,778 crores (US$ 131 billion) to the
national GDP at factor cost in 2011–12. The industry is fragmented, with a handful of major companies
involved in the construction activities across all segments; medium-sized companies specializing in niche
activities; and small and medium contractors who work on the subcontractor basis and carry out the work in
the field. In 2011, there were slightly over 500 construction equipment manufacturing companies in all of
India. The sector is labour - intensive and, including indirect jobs, provides employment to more than 49.5
million people. The construction sector is visualized to play a powerful role in economic growth, in addition
to producing structures that adds to productivity and quality of life. economic development is a term that
economics politician and other have used frequently in the 20th century, modernization westernization and
specially industrialisation are other terms people have used while discussing economic development.
economic development has a direct relationship with the environment. government undertaking to meet go
abroad economic objectives such as price stability, high employment and sustainable growth, such efforts
include financial and economic policies, regulations of financial industry trade and tax policies. History

The period from 1970 to mid60's witnessed the government playing an active role in the development of
these services and most of construction activities during this period were carried out by state owned
enterprises and supported by government departments. In the first five-year plan, construction of civil works
was allotted nearly 50 per cent of the total capital outlay.

The first professional consultancy company, National Industrial Development Corporation (NIDC), was set
up in the public sector in 1954. Subsequently, many architectural, design engineering and construction
companies were set up in the public sector (Indian Railways Construction Limited (IRCON), National
Buildings Construction Corporation (NBCC), Rail India Transportation and Engineering Services (RITES),
Engineers India Limited (EIL), etc.) and private sector (M N Dastur and Co., Hindustan Construction
Company (HCC), Analysis, etc.).

In India Construction has accounted for around 40 per cent of the development investment during the past 50
years. Around 16 per cent of the nation's working population depends on construction for its livelihood. The
Indian construction industry employs over 30 million people and creates assets worth over ₹ 200 billion.

It contributes more than 5 per cent to the nation's GDP and 78 per cent to the gross capital formation. Total
capital expenditure of state and central govt. will be touching ₹ 8,021 billion in 2011-12 from ₹ 1,436 billion
(1999-2000).

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The share of the Indian construction sector in total gross capital formation (GCF) came down from 60 per
cent in 1970–71 to 34 per cent in 1990–91. Thereafter, it increased to 48 per cent in 1993-94 and stood at 44
per cent in 1999–2000. In the 21 st century, there has been an increase in the share of the construction sector
in GDP and capital formation.

GDP from Construction at factor cost (at current prices) increased to ₹ 1.745 billion (12.02% of the total
GDP ) in 2004-05 from ₹ 1,162.38 billion (10.39% of the total GDP) in 2000–01.

The main reason for this is the increasing emphasis on involving the private sector infrastructure
development through public-private partnerships and mechanisms like build-operate-transfer (BOT), private
sector investment has not reached the expected levels.

The Indian construction industry comprises 200 firms in the corporate sector. In addition to these firms,
there are about 120,000 class A contractors registered with various government construction bodies. There
are thousands of small contractors, which compete for small jobs or work as sub-contractors of prime or
other contractors. Total sales of construction industry have reached ₹ 428854 million in 2004 05 from ₹
214519 million in 2000–01, almost 20% of which is a large contract for Benson & Hedges.

Challenge
The Indian economy has witnessed considerable progress in the past few decades. Most of the infrastructure
development sectors moved forward, but not to the required extent of increasing growth rate up to the tune
of 8 to 10 per cent. The Union Government has underlined the requirements of the construction industry.

With the present emphasis on creating physical infrastructure, massive investment is planned in this sector.
The Planning Commission has estimated that investment requirement in infrastructure to the tune of about ₹
14,500 billion or US$320 billion during the 11th Five Year Plan period.

This is a requirement of an immense magnitude. Budgetary sources cannot raise this much resources. Public
Private Partnerships (PPP) approach is best suited for finding the resources. Better construction management
is required for optimizing resources and maximizing productivity and efficiency.

Heavy Equipment

Heavy equipment or heavy machinery refers to heavy-duty vehicles, specially designed for executing
construction tasks, most frequently ones involving earthwork operations or other large construction tasks.
Heavy equipment usually comprises five equipment systems: implementation, traction, structure, power
train, control and information.

Heavy equipment has been used since at least the 1st century BCE when the ancient Roman engineer
Vitruvius described a crane in an architectura when it was powered via human or animal labour.
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Heavy equipment functions through the mechanical advantage of a simple machine, the ratio between input
force applied and force exerted is multiplied, making tasks which could take hundreds of people and weeks
of labour without heavy equipment far less intensive in nature. Some equipment uses hydraulic drives as a
primary source of motion.

History

From horses, through steam and diesel, to electric and robotic Until the 19th century and into the early 20th
century heavy machines were drawn under human or animal power. With the advent of portable steam-
powered engines the drawn machine precursors were reconfigured with the new engines, such as the
combine harvester. The design of a core tractor evolved around the new steam power source into a new
machine core traction engine, that can be configured as the steam tractor and the steamroller. During the
20th century, internal-combustion engines became the major power source of heavy equipment. Kerosene
and ethanol engines were used, but today diesel engines are dominant. Mechanical transmission was in
many cases replaced by hydraulic machinery. The early 20th century also saw new electric-powered
machines such as the forklift. Caterpillar Inc. is a present-day brand from these days, starting out as the Holt
Manufacturing Company. The first mass-produced heavy machine was the Fordson tractor in 1917.

The first commercial continuous track vehicle was the 1901 Lombard Steam Log Hauler. The use of tracks
became popular for tanks during World War I, and later for civilian machinery like the bulldozer. The
largest engineering vehicles and mobile land machines are bucket-wheel excavators, built since the 1920s.

"Until almost the twentieth century, one simple tool constituted the primary earthmoving machine: the hand
shovel – moved with animal and human powered, sleds, barges, and wagons. This tool was the principal
method by which material was either side cast or elevated to load a conveyance, usually a wheelbarrow, or a
cart or wagon drawn by a draft animal. In antiquity, an equivalent of the hand shovel or hoe and head
basket—and masses of men—were used to move earth to build civil works. Builders have long used the
inclined plane, levers, and pulleys to place solid building materials, but these labour saving devices did not
lend themselves to earthmoving, which required digging, raising, moving, and placing loose materials. The
two elements required for mechanized earthmoving, then as now, were an independent power source and
off-road mobility, neither of which could be provided by the technology of that time."

Container cranes were used from the 1950s and onwards, and made containerization possible.

Nowadays such is the importance of this machinery, some transport companies have developed specific
equipment to transport heavy construction equipment to and from sites.

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Most of the major equipment manufacturers such as Caterpillar, Volvo, Liebherr, and Bobcat have released
or have been developing fully or partially electric-powered heavy equipment. Commercially-available
models and R&D models were announced in 2019 and 2020.

Robotics and autonomy has been a growing concern for heavy equipment manufacturers with manufacturers
beginning research and technology acquisition. A number of companies are currently developing
(Caterpillar and Bobcat) or have launched (Built Robotics) commercial solutions to the market.

Types
These subdivisions, in this order, are the standard heavy equipment categorization.

Track-type

• Agricultural tractors

• Bulldozer

• Snowcat
• Track skidder

• Track-type tractors (Bulldozer)

• Tractor

• Military engineering vehicles

• Grader

• Grader

• Skid Steer

• Skid steer loader

• Excavator

• Amphibious excavator
• Compact excavator

• Dragline excavator

• Dredging

• Bucket-wheel excavator

• Excavator (digger)

• Long reach excavator

• Power shovel • Reclaimer

• Steam shovel

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• Suction excavator

• Walking Excavator

• Trencher (machine)

• Yarder

• Backhoe

• Backhoe loader, Backhoe

• Timber

• Feller buncher

• Harvester
• Skidder

• Track harvester

• Wheel forwarder

• Wheel skidder

• Pipelayer

• Pipelayer (side boom)

• Scraper
• Fresno scraper

• Scraper

• Wheel tractor-scraper

• Mining

• Construction & mining tractor

• Construction & mining trucks

• Articulated

• Articulated hauler

• Articulated truck

• Compactor
• Wheel dozers – soil compactors

• Soil stabilizer

• Loader

• Loader

• Skip loader (skippy)

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 • Wheel loader (front loader, integrated tool carrier)

• Track loader
• Track loader

Types of Heavy Equipment Used in Construction

1. Excavators
Excavators are important and widely used equipment in construction industry. Their general purpose is to
excavation but other than that they are also used for many purposes like heavy lifting, demolition, river
dredging, cutting of trees etc.

Excavators contains a long arm and a cabinet. At the end of long arm digging bucket is provided and cabinet
is the place provided for machine operator. This whole cabin arrangement can be rotatable up to 360o which
eases the operation. Excavators are available in both wheeled and tracked forms of vehicles.

2. Backhoe
Backhoe is another widely used equipment which is suitable for multiple purposes. The name itself telling
that the hoe arrangement is provided on the back side of vehicle while loading bucket is provided in the
front.

This is well useful for excavating trenches below the machine level and using front bucket loading,
unloading and lifting of materials can be done.

3. Dragline Excavator
Dragline excavator is another heavy equipment used in construction which is generally used for larger depth
excavations. It consists a long length boom and digging bucket is suspended from the top of the boom using
cable.

For the construction of ports, for excavations under water, sediment removal in water bodies etc. can be
done by dragline excavator.

4. Bulldozers
Bulldozers are another type of soil excavating equipment which are used to remove the topsoil layer up to
particular depth. The removal of soil is done by the sharp edged wide metal plate provided at its front. This
plate can be lowered and raised using hydraulic pistons.
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These are widely used for the removal of weak soil or rock strata, lifting of soil etc.

5. Graders
Graders also called as motor graders are another type of equipment used in construction especially for the
construction of roads. It is mainly used to level the soil surface. It contains a horizontal blade in between
front and rear wheels and this blade is lowered in to the ground while working. Operating cabin is provided
on the top of rear axle arrangement.

Motor Graders are also used to remove snow or dirt from the roads, to flatten the surface of soil before
laying asphalt layer, to remove unnecessary soil layer from the ground etc.

6. Wheel Tractor Scrapers

Wheel Tractor Scrapers are earth moving equipment used to provide flatten soil surface through scrapping.
Front part contains wheeled tractor vehicle and rear part contain a scrapping arrangement such as horizontal
front blade, conveyor belt and soil collecting hopper.

When the front blade is lowered onto the ground and vehicle is moved, the blade starts digging the soil
above the blade level and the soil excavated is collected in hopper through conveyor belt. When the hopper
is full, the rear part is raised from the ground and hopper is unloaded at soil dump yard.

7. Trenchers
Trenchers or Trenching machines are used to excavate trenches in soil. These trenches are generally used for
pipeline laying, cable laying, drainage purposes etc. Trenching machines are available in two types namely
chain trenchers and wheeled trenchers.

Chain trenchers contains a fixed long arm around which digging chain is provided. Wheeled trenchers
contains a metal wheel with digging tooth around it. To excavate hard soil layers, wheeled trenchers are
more suitable. Both types of trenchers are available in tracked as well as wheeled vehicle forms.

8. Loaders
Loaders are used in construction site to load the material onto dumpers, trucks etc. The materials may be
excavated soil, demolition waste, raw materials, etc. A loader contain large sized bucket at its front with
shorter moving arm.

Loader may be either tracked or wheeled. Wheeled loaders are widely used in sites while tracked or crawled
loaders are used in sites where wheeled vehicles cannot reach

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9. Tower Cranes
Tower cranes are fixed cranes which are used for hoisting purposes in construction of tall structures. Heavy
materials like pre-stressed concrete blocks, steel trusses, frames etc. can be easily lifted to required height
using this type of equipment.

They consists mast which is the vertical supporting tower, Jib which is operating arm of crane, counter jib
which is the other arm carries counter weight on rear side of crane and an operator cabin from which the
crane can be operated.

10. Paver
Paver or Asphalt paver is pavement laying equipment which is used in road construction. Paver contains a
feeding bucket in which asphalt is continuously loaded by the dump truck and paver distributes the asphalt
evenly on the road surface with slight compaction.
How ever a roller is required after laying asphalt layer for perfect compaction.

11. Compactors
Compactors or Rollers are used to compact the material or earth surface. Different types of compactors are
available for different compacting purposes.

Smooth wheel rollers are used for compacting shallow layers of soil or asphalt etc. sheep foot rollers are
used for deep compaction purposes. Pneumatic tyred rollers are used for compacting fine grained soils,
asphalt layers etc.

12. Telehandlers
Telehandlers are hoisting equipment used in construction to lift heavy materials up to required height or to
provide construction platform for workers at greater heights etc. It contains a long telescopic boom which
can be raised or lowered or forwarded.

Different types of arrangements like forklifts, buckets, cabin, lifting jibs etc. can be attached to the end of
telescopic boom based on the requirement of job.

13. Feller Bunchers

Feller buncher is tree cutting heavy equipment used to remove large trees in the construction field. They cut
the tree and grab it without felling, likewise gathers all the cut down trees at one place which makes job
easier for loaders and dump trucks.
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14. Dump Trucks
Dump trucks are used in construction sites to carry the material in larger quantities from one site to another
site or to the dump yard. Generally, in big construction site, off-road dump trucks are used.

These off-road dump trucks contain large wheels with huge space for materials which enables them to carry
huge quantity of material in any type of ground conditions.

15. Pile Boring Equipment

Pile boring equipment is used to make bore holes in the construction site to install precast piles.

16. Pile Driving Equipment

Another heavy equipment used in construction site is pile driving equipment in case of pile foundation
construction. This equipment lifts the pile and holds it in proper position and drives into the ground up to
required depth.

Different types of pile driving equipment are available namely, piling rigs, piling hammer, hammer guides
etc. in any case the pile is driven into the ground by hammering the pile top which is done hydraulically or
by dropping.

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 COMPANY PROFILE

Introduction

Reliance Industries Limited

From breaking fresh ground for Indian Infrastructure to nurturing the earth with harvest of prosperity -
From mobilizing the economy on the rail-tracks of progress to being its driving

force on the highways of the nation - We at reliance are transforming lives, with the power of

technology and imagination. Committed to engineering a better world, we combine endless possibilities of
human cali bar with innovative engineering solutions. Today, and every day, we help full fill aspirations of
every life we touch.

Our foray into farm mechanization has helped transform the farmland challenges of rural India, into yields
of opportunity. We are helping India strengthen its presence in the agri sector and make this core segment
one of the strongest contributors to the national economy. By customizing our products around specific
farmer needs, we are not only enhancing their productivity, but also bringing happiness and prosperity to
their doorstep.

Committed to engineering a better world, we combine endless possibilities of human caliber with innovative
engineering solutions. Today, and every day, we help fulfill aspirations of every life we touch.

We believe in sustaining our growth curve, both organically and through astute product definitions.
Consequently, with a seamless weave of experience, engineering, and excellence, we stand in the vanguard
of progress, among the industry leaders in our chosen sphere.

Quality Assurance

Being a quality conscious organization at any cost we do not compromise or bargain with the standard of the
product. For our company quality acts as a discipline, which has been inculcated in all the process of
operation and in every equipment. We are an ISO /TS 16949:2002 certified company, as our manufacturing
unit uses the latest and comprehensive range of international quality. The stringent quality material is used

21
in the process of manufacturing these products. Apart from this the products undergo strict vigilance and
speculation procedure to ensure its standard. These tests are conducted to check the endurance, multi-speed
of the absorbers.

Management

The leadership team of Reliance has been instrumental in chartering the growth of the company as a trusted
agricultural and infrastructure solutions brand. Our leaders have played a remarkable role in leveraging
Reliance inherent strengths to navigate unprecedented challenges and grow consistently in capabilities,
influence, technology, and response to customer needs.

Mr. Rajan Nanda is a second-generation entrepreneur with over four decades of experience in the
engineering and manufacturing sector. He took over as the Chairman of Reliance Group in the year 1994
and has been centrally involved in every aspect of the company's management. A visionary and astute
leader, Mr. Nanda has navigated the company in times of unprecedented challenges in the economy. His
focus is on strengthening Reliance foundation by leveraging inherent design and development capabilities,
instituting lean manufacturing practices, and better use of assets to move up the value chain.

Mr. Nikhil Nanda is a third generation entrepreneur and the driving force behind the Group’s diversified
business portfolio. He has played a vital role in monitoring the company’s performance and steering the
operations to greater heights. His overall contribution spanning more than 15 years has been immeasurable,
particularly in the areas of operations, finance and senior management functions such as strategic planning
and investment decisions. Mr. Nanda is an alumnus of Wharton Business School, Philadelphia, with majors
in Management and Marketing.

Mr. Shailendra Agrawal is a mechanical engineer with 35 years of diverse experience in Tata Motors, Hero
Motors, and Reliance Limited. A strong advocate of challenging established benchmarks and driving
transformation, he has led a business transformation at Reliance Limited through Business Process Re-
engineering. As President of Hero Motors, he was instrumental in the successful turnaround of Auto
component business. He played a key role in creating product and technology roadmap through introduction
of world-class “product development process” and forging technology partnerships with leading technology
providers. He is currently leading 2020 Business transformation project titled LEAP and initiative for
achieving TPM special award.

22
Mr. Mandahr has over 25 years of rich experience in leadership positions including the turnaround in Sales
and Marketing, developing new product categories, developing the new business model, etc. in companies
like L&T, Indian Aluminium, and Manitou South Asia Ltd. His last assignment was with Toyota Material
Handling as Director – Operations. Mr. Mandahr is a Mechanical Engineer and MBA (Marketing).

Mr. Dipankar Ghosh has 23 years of rich experience in full lifecycle product development, manufacturing
operations, engineering management, business development, and technology transfer from many Railway
OEMs to India. He is an ex-Indian Railway Service officer and was the Vice President with John Deere
India in his last assignment. Mr. Ghosh is a post graduate in Engineering from BITS Pilani and has done his
management from Indian School of Business, Hyderabad, besides Advanced Global Leadership from
London School of Economics as a British Chevening Scholar.

Mr. Ajay Sharma (Company Secretarie ) .He has played a key role in the integration and consolidation of the
finance function across all business units of the Group

Vision
Reliance’ vision is to be among the top engineering companies in India. We shall achieve this goal by being
the preferred solution provider to the needs of our customers; by practicing respectful and ethical business
practices; by being the employer of choice within the engineering industry, and by providing superior
returns to our investors.

Our Strategic Values: Our Strategic Values define how we will achieve the envisioned future. These must be
embedded in our manner of thinking and ways of work.

Customer Centricity:
Acute sensitivity to the needs and experiences of the customer shall guide all that we do.

Excellence:
We will strive to achieve and surpass world-class standards in all that we do.

Innovation:
We will use the power of technology and imagination to deliver solutions to the customer's needs.

23
Agility:
We will operate in our markets with the ability to change direction and position with nimbleness and speed.

History & Milestones

History. Heritage. Hurrahs. From a small agency house in 1944 to one of the largest engineering
conglomerates in India, the saga of our ascent is entwined in the evolving dynamics of India’s economic
progress. In a journey of seven pioneering decades, we have reshaped, redefined and reinvented, the way
India lives, works and travels. Valued relationships with technology leaders of the world, relentless stress on
innovation and modernization, and sustained adherence to best-in-class manufacturing practices have seen
us emerge as a technologically-evolved engineering organization, at par with the finest in the world.

In 1948- Visionaries Mr. Yudi Nanda & Mr. HP Nanda launch Reliance (Agri In 1949- Machinery Ltd.)

Starts its first industrial venture Goetze (India Ltd.) in collaboration with Goetze Werk of Germany

In 1954- Takes up the franchise of Massey Ferguson tractors for northern India

In 1961- Commences manufacturing of its own brand of tractors in collaboration with URSUS of Poland,
Move into high gear by nurturing the two-wheeler culture with a production of Rajdoot motorcycles .

In 1962- Initiates manufacturing of shock absorbers for passenger coaches with Boge, Germany

In 1966- Pioneers manufacturing of automotive shock absorbers in India

In 1969- Enters into a joint venture with global giant Ford Motor Company for producing Ford tractors,
Establishes Training and Development Centre at Bangalore

In 1971- Starts producing construction equipment and introduces the concept of Pick n Carry cranes

In 1974- Crosses the national boundary and starts exporting tractors for the first time

In 1977- Enters the world of self-developed technology and establishes independent R & D canter

In 1991- Shares listed at NSE & BSE

In 2006- Sets up the new manufacturing facility at Rudra pur. Uttarakhand

In 2010- Becomes the first Indian company to indigenously design Backhoe Loaders

In 2011- Launches India’s first inverter tractor FT45

In 2012- Develops most fuel-efficient tractors Power trac 425. Indigenously develops
Bogie Mounted Brake Systems for Indian Railways
In 2013- Launches Ferrari tractors – the world’s best in specialty tractors – in collaboration with the Italian
tractor brand

In 2014- Launches Farm trac 4X4, introducing high-end car technology for Indian tractors

24
In 2015- Launches Anti-Lift Tractor – India’s first lift-resistant tractors for commercial haulage operations,
Enters into Joint Venture with Amul Group for manufacturing of specialty tractors, Steeltrac, Partners with
Cognizant Technology Solutions to digitally transform businesses and deliver the superior customer
experience

In 2016- Launches Farmtrac 6090 – a global Tractor made in India, Introduces Jungli – the high-power
backhoe loader with brute force for tough operations.

Responsibilities

At Reliance, care, concern and social empowerment lie at the core of our business model. To us, social
empowerment is not an option, but a business imperative. It encompasses our business objectives, our
responsibility to the society and eco-sphere and also, our efforts to enrich the lives of our workforce.

We believe, if we are the guests of our planet, we are also its hosts. We know that our businesses are, but a
microcosm, of the earthly macrocosm. So we gratefully return manifold… of what we receive from this
planet and its inhabitants.

We endorse a view which champions holistic and all-round prosperity. Naturally then, we have interwoven
social consciousness into business responsibility. In recent times, our corporate social responsibility
initiatives were focused on the following areas:

Community Health: Reliance engages with reputed hospitals and medical organizations to increase
health awareness and provide free primary healthcare services

Women Empowerment: Reliance , addresses women’s empowerment issues through multifarious

community outreach initiatives, including the wives and daughters of employees.

Social Welfare / Eco-Responsiveness: Reliance is committed to national progress, upkeep of the

eco-sphere, reflected in the several social and environmental initiatives around its manufacturing units.

Employee Engagement: Reliance is a fellow voyager of its people, evident through various engagement
programs, that reach out to employees’ families to establish a personal connection with them.

25
Achievement
At Reliance, our ambition is spearheaded by a strong customer focus. And our greatest reward is the smile of
satisfaction we bring to our customers’ faces. We understand that when we put those we serve, first, we end
up in the same place ourselves. Yes! We have been recognized and lauded, in our journey of excellence.
But, to us each recognition milestone is a stepping stone, urging us to strive harder, faster, stronger.

BBC Knowledge’s Best Brand Marketing Campaign Award for “Celebrating a Century of Excellence” to
commemorate Reliance’ Founder Chairman, Late Mr. HP Nanda’s birth centenary (2021)

Indo-American Chambers of Commerce’s Lifetime Excellence Honor: for Mr. HP Nanda, Reliance’
Founder Chairman, for his valuable contribution in the setting up of IACC (2016)

Reliance Chairman, Mr. Rajan Nanda, is inducted into The Machinist Hall of Fame for his enormous
contribution to Indian manufacturing industry (2020)

Top 20 CIO Award from Enterprise IT World for Information Technology led the transformation at Reliance
(2022)

The Machinist Super Shopfloor Award to Reliance Agri Machinery’s Amtrak manufacturing unit for
excellence in productivity (2021)

National Safety Awards for Reliance Agri Machinery’s Amtrak and Power trac manufacturing units (2020)

AIOE Award for Outstanding Industrial Relations to Reliance Limited for sustainable IR relations and good
shop floor practices (2020)

The ICONIC IDC Insights Award to Reliance Limited for Enterprise Resource Planning Project (2020)

Rural Marketing Association of India’s Gold Award to Reliance Agri Machinery for excellence in rural
marketing and communications (2018)

Greentech Safety ‘Silver’ Award to Reliance Agri Machinery for achievement in safety management in the
engineering sector (2019)

Siemens Solid Model Award to the Reliance Knowledge Management Centre for creating the 3D model of
‘side gear shifting mechanism’ in Farm trac tractors (2019)

Greentech Environment ‘Gold’ Award to the Reliance Knowledge Management Centre for outstanding
achievement in environmental management in the engineering sector (2019)

Business Leader in Safety Award to Reliance Agri Machinery for encouraging innovation in the field of
safety and quality (Safety Innovation Awards, 2020)

Industry Leadership Award to Reliance for pioneering work in agri-mechanization revolution (Agriculture
Leadership Summit, 2019)

26
Manufacturing Unit
Our approach to manufacturing excellence is custom-tailored to catalyze performance and avoid pitfalls. Do
we focus on the core essentials of the manufacturing discipline - How efficiently and safely are our
processes functioning? What can we do today to optimize today’s production? And how can we transmute
today’s successes into a sustainable business future? We strive to build organizational capabilities by
structuring a solid foundation of technical know-how. So that everyone in the organization is aware of their
responsibilities and accomplishes these to their best potentials.

As an imperative norm, we follow world-class practices to deliver world-class performance. We embrace

TPM as the manufacturing language, business language, and organizational language. Our three-step
approach to transformation is to - follow best practices, develop our own excellence model, and be a
benchmark for others. This includes developing and sustaining systems for “zero accidents, zero defects and
zero failures” in the entire lifecycle of the production system.

We have weaved proven analytical tools for problem-solving and problem prevention. Our business
processes facilitate development or clarification of standard operating procedures, stabilize and standardize
operational efficiencies, and help the management in establishing an empowering environment that leads to
high-performance involvement. Within this seamless fabric, our teams work on quality, uptime, equipment
efficiency, and customer satisfaction... in short, to reinforce our business and brand credentials.

27
 CHAPTER – 3
Review of Literature

28
WORKING CAPITAL MANAGEMENT

Working capital management is the process of planning and controlling the level and mix of the current
assets of the firm as well as financing these assets. Specifically, working capital management requires
deciding what quantities of cash, other liquid assets and accounts receivables, payable and inventories, the
firm will hold at any point of time. In addition, it has to decide how their current assets are to be financed.
Financing choices includes the mix of current as well as long term liabilities

. In working capital management, the firm faces two key questions:

First, give the level of sales and relevant cost consideration, what is the optimal amount of cash assets,
accounts receivables and inventories that firm should choose to maintain?

Second, given these optimal amounts, what is the most economical way to finance this working capital
management investment?

To produce the best possible returns, firms should keep no unproductive asset and should finance with
cheapest available source of funds. Why? In general, it is often advantageous for the firm to invest in the
short-term assets and to finance with short term liabilities.

WORKING CAPITAL MANAGEMENT

A FINANCIAL DILEMMA:

The financial management of business firms includes:

The first of the three functions are the capital budgeting. The second is the management
of capital structure and the final is the working capital management. The management of working capital
management is concerned with the management of assets such as cash, marketable securities and account
receivables, investors prepaid expenses and the current assets. Current liabilities also such as accounts
payable, wages payable and accruals. The finance manager is to analysis decisions such as how much
inventories should a firm keep? How a firm should manage its cash? To whom
should a firm grant credit? What should be the composition of the firm’s current debt etc? it recommends the
most advantageous ways to dressing the problems in the management of working capital management.

29
 TYPES OF
WORKING
CAPITAL

ON THE BASIS OF B/S ON THE BASIS OF

CONCEPT TIME

GROSS REGULAR TEMPORARY

NET WORKING
WORKING WORKING WORKING
CAPITAL
CAPITAL CAPITAL CAPITAL
MANAGEM

SEASONAL
WORKING
CAPITAL

SPECIFIC
WORKING
CAPITAL

SIGNIFICANCE OF WORKING CAPITAL MANAGEMENT: -

PAYMENT
TO
SUPPLIERS

EASY LOAN DIVIDEND

FROM DISTRIBUTI-
BANKS ON

SIGNIFICAN--
CE OF
WORKING
CAPITAL

INCREASE INCREASE
EFFECIENC- DEBT
Y CAPACITY

INCREASE
IN FIX
ASSETS

Factors requiring consideration while estimating working capital management.

• The average credit period expected to be allowed by suppliers.

30
• Total costs incurred on material, wages.

• The length of time for which raw material are to remain in stores before they are issued for production.
• The length of the production cycle (or) work in process.

• The length of sales cycle during which finished goods are to be kept waiting forsakes.

• The average period of credit allowed to customers

• The amount of cash required to make advance payment

Concept of working capital management

1. Gross Working capital management = Total of Current Asset
2. Net Working capital management = Excess of Current Asset over Current Liability

Current Assets Current Liabilities

• Cash in hand / at bank • Bills Payable

• Bills Receivable • Sundry Creditors
• Sundry Debtors • Outstanding expenses
• Short term loans • Accrued expenses
• Investors/stock • Bank Overdraft
• Temporary investment
• Prepaid expenses
• Accrued incomes

Working capital management in terms of five components:

1. Cash and equivalents: - This most liquid form of working capital management requires constant
supervision. A good cash budgeting and forecasting system provides answers to key questions such as: Is the
cash level adequate to meet current expenses as they come due? What is the timing relationship between
cash inflow and outflow? When will peak cash needs occur? When and how much bank borrowing will be
needed to meet any cash shortfalls? When will repayment be expected and will the cash flow covert? 2.

Accounts receivable: -Many businesses extend credit to their customers. If you do, is the amount of
accounts receivable reasonable relative to sales? How rapidly are receivables being collected? Which
customers are slow to pay and what should be done about them?

31
 3. Inventory: - Inventory is often as much as 50 percent of a firm's current assets, so naturally it
requires continual scrutiny. Is the inventory level reasonable compared with sales and the nature of your
business? What's the rate of inventory turnover compared with other companies in your type of business?

4. Accounts payable: -Financing by suppliers is common in small business; it is one of the major
sources of funds for entrepreneurs. Is the amount of money owed suppliers reasonable relative
to what you purchase?
Whatisyourfirm’spaymentpolicydoingtoenhanceordetractfromyourcreditrating? 5. Accrued expenses

and taxes payable: - These are obligations of your company at any given time and represent a future
outflow of cash.

Two different concepts of working capital management are: -

• Balance sheet or Traditional concept

• Operating cycle concept.

BALANCE SHEET OR TRADING CONCEPT: - It shows the position of the firm at certain
point of time. It is calculated in the basis of balance sheet prepared at a specific date. In this method there
are two type of working capital management: -

• GROSS WORKING CAPITAL MANAGEMENT:

Gross Working capital management refers to the firm’s investment in current assets. Current assets are the
assets which can be converted into cash within an accounting year (or operating cycle) and include cash,
short- term securities, debtors (accounts receivable or book debts) bills receivable and stock (inventories)

• NET WORKING CAPITAL MANAGEMENT:

Net Working capital management refers to the difference between current assets & current liabilities.
Current liabilities are those claims of outsiders, which are expected to mature for payment within an
accounting year includes creditors, bills payables, and outstanding expenses.Net working can be positive or
negative. A positive net working capital management will arise when current assets exceed current
liabilities. A negative net working capital management occurs when current liabilities are in excess of
current assets.

6. The two concepts of working capital management-gross & net-are not exclusive,
rather they have equal significance from the management view point. The gross working capital
management concept focuses attention on two aspects of current assets management:

32
(a) How to optimize investment in current assets?
(b) How should current assets be financed?
The consideration of the level of investment in current assets should avoid two danger points – excessive
and inadequate investment in current assets. Investment in current assets should be just adequate, Not more
Not less, to the needs of the business firm. Excessive investment in current assets should be avoided because
it impairs the firm’s profitability, as idle investment earns nothing. On the other hand, inadequate amount of
working capital management can threaten solvency of the firm because of its inability to meets its current
obligation. It should be realized that the working capital management need of the firm may be fluctuating
with changing business activity. This may cause excess or shortage of working capital management
frequently.
The management should be prompt to initiate an action & correct imbalance.

Another aspect of the gross working capital management’s points to the needs of arranging funds to the
finance’s current assets. Whenever a need for working capital management’s fund arises due to the
increasing level of business activity or for any other reason, financing arrangement should be made quickly,
similarly, if suddenly, some surplus funds arise they should not be allowed to remain idle, but should be
invested in short-term securities.

Net working capital management is a qualitative concept. It indicates the liquidity position of the firm and
suggests the extent to which working capital management needs may be financed by permanent sources of
funds. Current assets should be sufficiently in excess of current liabilities to constitute a margin or buffer for
maturing obligations within the operating ordinary cycle of the business. In order to protect their interests,
short term creditors always like a company to maintain current assets at a higher level than current liabilities.
It is a conventional rule to maintain the level of the current assets twice the level of the current liabilities.
However, the quality of the current assets should be considered in determining the level of current assets
via’ current liabilities, a weak liquidity position poses a threat to the solvency of the company makes it
unsafe and unsound. A negative working capital management means a negative liquidity, and may prove to
be harmful for the company’s reputation. Excessive liquidity is also bad. I may be due to mismanagement of
the current assets. Therefore, prompt and timely action should be taken by management to improve and
correct imbalances in the liquidity position of the firm.

Net working capital management concepts also cover the question of judicious mix of long term and short-
term funds for financing current assets. For every firm, there is a minimum amount of net working capital
management, which is permanent. Therefore, a portion of working capital management should be financed

33
with the permanent source of funds such as equity share capital, debentures, long-term debt, and preferences
share capital or retainedearning. Management must therefore, decided the extent to which current assets
should be financed with equity capital or borrowed capital.

In summary it may be emphasized that both gross and net concepts of working capital management are
equally important for the efficient management of working capital management. There is no precise way to
determine the exact amount of gross and net working capital management for any firm. The data problem of
each company current asset should be financed; it is not feasible in practice to finance current assets by short
terms sources only. Keeping in view the constraints of the individual company, a judicious mix of long- and
short-term finances should be invested in current assets. Since current assets involves costs of funds. They
should be put to productive use

Operating cycle concept: -

The duration or time required to completing the sequence of events right from purchase of raw material for
cash to the realization of sales in cash is called the operating cycle or working capital management cycle.

Operation cycle

cash

raw
sales
material

finish
work
good

NEED FOR WORKING CAPITAL MANAGEMENT

Along with the fixed capital almost every business requires working capital management though the extend
of working capital management requirements differs in different businesses. Working capital management is
needed for running to day-to- day business activities. When a business is started, working capital
34
 management is needed for purchasing raw materials. The raw material is then converted into finished goods
by incurring some additional costs on it. Now goods are sold. Sales don’t convert into cash instantly because
there are invariably some credit sales. Thus, there exists a time lag between sales of goods and receipt of
cash. During this period, expenses are to be incurred for continuing the business operations. For this
working capital management is needed. Therefore, sufficient working capital management is needed which
shall be involved from the purchase of raw materials to the realization of cash. The time period that is
required to convert raw materials into finished goods and then into cash is known as operating cycle or cash
cycle. The need for working capital management can also be explained with the help of operating cycle.

OPERATING CYCLE OF A MANUFACTURING CONCERN INVOLVES

FIVEPHASES:
• Conversion of cash into raw material

• Conversion of raw material into work-in-progress

• Conversion of work-in-progress into finished goods

• Conversion of finished goods into debtors by credit sales

• Conversion of debtors into cash by realizing cash from them

Thus, the operating cycle start from cash finishes at cash and then again restarts from cash. Need for
working capital management depends upon period of operating cycle. Greater the period more will be the
need for working capital management. Period of operating cycle in a manufacturing concern is greater the
Period of operating cycle in a reading concern because in trading units’ cash is directly converted into
finished goods.

Because of the time involved in an operating cycle, there is a need of working capital management in the
form of current assets. Firms have to keep adequate stock of raw materials to avoid risk of non-availability
of raw materials. Similarly, concerns must have adequate stock of finished goods to meet the demand in
market on continuous basis and avoid being out of stock. Concerns also have to sell finished goods on credit
due to competition which necessities the money tied up in debtors and bills receivables. In addition to all
these, concerns have to necessarily keep cash to pay the manufacturing expenses etc. and to meet the
contingencies

PERMANENT AND TEMPORARY WORKING CAPITAL MANAGEMENT:

35
 Working capital management in a business is needed because of operating cycle. But the need for working
capital management does not come to an end after the cycle is a continuous process; there remains a need for
continuous supply of working capital management. However, the amount of working capital

management required is not constant throughout the year, but keeps fluctuating. On the basis of this concept,
working capital management is classified into two types:

PERMANENT WORKING CAPITAL MANAGEMENT:

The need for working capital management or current assets fluctuates from time to time; however, to carry
on day-to- day operations of the business without any obstacles, a certain minimum level of raw material,
work-in- progress, finish goods and cash must be maintained on a continuous basis. The amount involved as
permanent working capital management has to be met from long-term sources of finance, e.g. capital,
debentures, long-term etc.

TEMPORARY OR VARIABLE WORKING CAPITAL MANAGEMENT:

Any amount over and above the permanent level of working capital management is called temporary,
fluctuating or variable working capital management. Due to seasonal changes, level of business activities is
higher than normal during some months of the year and therefore, additional working capital management
will be required along with the permanent working capital management. It is so because during peak season,
demand rises and more stock is to be maintained to meet the demand. Similarly, the number of debtors
increases working capital management because once the season is over; the additional demand will be no
more. Need for temporary working capital management should be met from short-term sources of finance,
e.g.-short-term loans etc. so that it can be refunds when it is not required.

DETEMINANTS OF WORKING CAPITAL MANAGEMENT

• NATURE OFBUSINESS:

Working capital management requirements of an enterprise are largely influenced by the nature of its
business. Public utilities have the lowest requirements for the current assets partly because of cash nature of
their business and partly because of cash nature of their business and partly of their selling a service instead
of a commodity and there is no need of maintaining big investors. On the contrary,
• its conversion into finished goods. The longer the production cycle, the larger will be the need for working
capital management because the funds will be tied up for a longer period in work-in-progress. If the
production cycle is small the need for working capital management will also be small.

36
• MANUFACTURING PROCESS:

If the manufacturing process in an industry entails a longer period because of its complex character more
working capital management is required to finance that process. The longer it takes to makes an approach
and the greater its cost, the larger the inventory tied up its manufacture and therefore higher the amount of
working capital management

• GROWTH AND EXPANSION:

As a business enterprise grows, it is logical to expect that a larger amount of working capital management
will be required. Growing industries requires more working capital managements than those that are static
do.

• Production cycle means the time-span between the purchase of raw material and

• BUSINESS FLUCTUATIONS:

Business fluctuations may be in the direction of boom and depression. During boom period the firm will
have to operate at full capacity to meet the increased demand which in turn, leads to increase in the level of
inventories and book debts. Hence, the need for working capital management in boom conditions is bound to
increase. The depression phase of business fluctuations has exactly an opposite effect on the level of
working capital management requirement.

• CREDIT POLICY RELATING TOSALES:

If a firm adopts liberal credit policy in respect of sales, the amount tied up in debtors will also be higher.
Obviously, higher book debts mean more working capital managements. On the other hand, if the firm
follows tight credit policy, the magnitude of working capital management will decrease.

• CREDIT POLICY RELATING TO PURCHASE:

If a firm purchases more goods on credit, the requirement for working capital management will be less. In
other words, if liberal credit terms are available from the supplier of the goods (i.e. creditors) the
requirement of the working capital management will be reduced and vice- versa.

• AVAILABILITY OF RAW MATERIAL:

If the raw material required by the firm is available easily on a continuous basis, there no one will keep large
inventory of such raw material and hence the requirement of working capital management will be less and
vice- versa.
37
 CASH MANAGEMENT:

Cash is the important current asset for the operations of the business. Cash is the basic input needed to keep
the business running on a continuous basis it is also the ultimate output expected to be realized by selling the
service or product manufactured by the firm. The firm should keep sufficient cash, neither more nor less.
Cash shortage will disrupt the firm’s operations while excessive cash will simply remain idle, without
contributing anything towards the firm’s profitability. Thus, a major function of the financial manager is to
maintain a sound cash position.
The basic characteristics of near cash assets are that they can readily be converted into cash. Cash
management is concerned with managing of:

Motives for holding cash:

There are four primary motives for maintaining cash balances:

1. Transaction motive
2. Precautionary motive
3. Speculative motive
4. Compensating motive

1. Transaction motive: - the transaction motive refers to the holding of cash to meet anticipated
obligations whose timing is not perfectly synchronized with cash receipts. if the receipts of cash and its
disbursements could exactly coincide in the normal course of operations, a firm would not need cash for
transaction purpose
2. to hold cash to meet unpredictable obligations and the cash balance held in reserve for such random
and unforeseen fluctuations in cash flows are called as precautionary balances.

Speculative motive: - it refers to the desire of a firm to take advantage of opportunities which present
themselves at unexpected movements and which are typically outside the normal course of business. The
speculative motive represents a positive and aggressive approach.
Firms aim to exploit profitable opportunities and keep cash in reserve to dose.

Precautionary motive: -precautionary motive of holding cash implies the need

38
 3. Compensation motive: - yet another motive to hold cash balances is to compensate banks for
providing certain services and loans. Banks provide a variety of services to business firms, such as
clearances of cheques, supply of credit information, transfer of funds, etc.

Evaluation of cash management performances

To assess the cash management performance this phase is divided as follows: a) Size of cash
b) Liquidity and adequacy of cash
c) Control of cash.
d) Inventory management
e) Debtor turnover

(A) Size of Cash

Common size cash flow statement is a standardized format of the cash flow statement which makes
comparison across time periods and across peers more meaningful. Common size cash flow statement can be
built by stating each item in a cash flow statement as a percentage of revenue. Alternatively, each cash
inflow can be stated as a percentage of total cash inflows and each cash outflow as a percentage of total cash
outflows.

(B) Liquidity and Adequacy of Cash:

One of the most important jobs of the finance manager is to maintain sufficient liquidity to enable the firm to
pay off its obligations when they fall due. To test a firm’s liquidity and solvency we commonly use current
and quick ratios. Traditionally 2:1 current ratio and 1:1 quick ratio is taken as satisfactory standards for the
purpose. The former indicates the extent of the soundness of the current financial position of a firm and the
degree of safety provided to the creditors, the later signifies the ability of a firm to settle all its current
obligations on a particular date.

(c) Control of cash:

One of the major objectives of cash management from the stand point of increasing return on investment is
to economize on the cash holding without impairing the overall liquidity requirements of the firms. This is
possible by effecting tighter controls over cash flows.
The following ratio has been applied to assess the efficiency of cash control: Cash to current assets ratio
cash turnover ratio cash current liabilities

(D) Inventory management

The scope of inventory management concerns the balance between replenishment lead time, carrying costs
of inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future

39
 inventory price forecasting, physical inventory, available physical space, quality management,
replenishment, returns and defective goods, and demand forecasting.

Balancing these competing requirements leads to optimal inventory levels, which is an ongoing process as
the business needs shift and react to the wider environment.

Inventory management involves a retailer seeking to acquire and maintain a proper merchandise assortment
while ordering, shipping, handling and related costs are kept in check. It also involves systems and processes
that identify inventory requirements, set targets, provide replenishment techniques, report actual and
projected inventory status and handle all functions related to the tracking and management of material. This
would include the monitoring of material moved into and out of stockroom locations and the reconciling of
the inventory balances. It also may include ABC analysis, lot tracking, cycle counting support, etc.
Management of the inventories, with the primary objective of determining/controlling stock levels within the
physical distribution system, functions to balance the need for product availability against the need for
minimizing stock holding and handling costs. Reasons for keeping stock

There are five basic reasons for keeping an inventory

1. Time -The time lags present in the supply chain, from supplier to user at every stage, requires that you
maintain certain amounts of inventory to use in this lead time. However, in practice, inventory is to be
maintained for consumption during 'variations in lead time'. Lead time itself can be addressed by ordering
that many days in advance.

2. Seasonal Demand: demands varies periodically, but producer’s capacity is fixed. This can lead to stock
accumulation, consider for example how goods consumed only in holidays can lead to accumulation of large
stocks on the anticipation of future consumption.

3. Uncertainty -Inventories are maintained as buffers to meet uncertainties in demand, supply and
movements of goods.

4. Economies of scale- Ideal condition of "one unit at a time at a place where a user needs it, when he
needs it" principle tends to incur lots of costs in terms of logistics.
So bulk buying, movement and storing brings in economies of scale, thus inventory.

40
5. Appreciation in Value - In some situations, some stock gains the required value when it is kept for some
time to allow it reach the desired standard for consumption, or for production. For example; beer in the
brewing industry

(E) Receivable turnover ratio or debtor's turnover ratio

Receivable Turnover Ratio or Debtor's Turnover Ratio is an accounting measure used to measure how
effective a company is in extending credit as well as collecting debts. The receivables turnover ratio is an
activity ratio, measuring how efficiently a firm uses its assets. A high ratio implies either that a company
operates on a cash basis or that its extension of credit and collection of receivables efficient. While a low
ratio implies the company is not making the timely collection of credit.

Relation ratios

• Days' sales in receivables = 365 / Receivable Turnover Ratio

• Average Collection Period = (Days x AR)/Credit Sales
• Average Debtor collection period: Trade Receivables/Credit Sales x 365 = Average collection period in
days,
• Average Creditor payment period: Trade Payables/Credit Purchases x 365 = Average Payment period in
days,

41
 CHAPTER-4
Research Methodology

42
RESEARCH METHODLOGY

Methodology may be a description of process, or may be expanded to include a philosophically coherent

collection of theories, concepts or ideas as they relate to a particular discipline or field of inquiry. This
project requires a detailed understanding of the concept Working capital management. Therefore, firstly we
need to have a clear idea of, what is working capital management, how it is managed in National Reliance
Industry Limited , what are the different ways in which the financing of working capital management is
done in the organization etc. In order to understand further data was collected from departments.

TYPES OF RESEARCH

Types of research are very important to research something in the company or somewhere else. There are
many researches which suits for different areas to find out the problems in an organization, for e.g.
quantitative research at numerical area. I have been used three types of researches for my project work that
is Descriptive Research, Historical Research and Quantitative Research.

Descriptive Research:

Descriptive research helped me to find out facts and details of the Serial Glass Ltd. have been enquired
directly to senior executives and senior employees about what has happened and what is happening in the
company?

Historical Research:

Through historical research I have been found past details which is affecting current situation of Reliance
company. They sold their float glass manufacturing equipment to Saint Gobang ltd.

Since that day they are spending a lot for raw materials and creditors are more than debtors.

Quantitative Research:

This research has undertaken to measure the quantity or amount of the company. I glanced at company's
balance sheet then I came to know in the last 3-4 years they are in loss.

Company's expenses and current liabilities are more than profit and current assets respectively.

COLLECTION OF DATA :

43
There are two ways of collecting data-

Primary data

Secondary data

Primary Data: -

The first handed information collected through various methods is known as primary data. The primary data
was gathered through personal interaction with various functional and technical personnel of NFL. Some
information was also collected by observation.

Secondary Data: -

Secondary data is data collected by someone other than the user. Common sources of secondary data for
social science include censuses, surveys, organizational records and data collected through qualitative
methodologies or qualitative research. Secondary data was collected from various reports, annual reports,
documents charts, internet etc. The analysis of the information gathered has been made on the basis of the
clarifications sought during the personal discussions with the concerned peoples the personal visits to the
important areas of services. In marking observations identifying problems and suggesting certain remedies
such emphasis was given on the basis of opinions gathered during the personal discussions and with the
personal experience gained during the study. Working capital management occupies a peculiar position in
the capital structure of a company. The decision as to the adequacy of working capital management is a
complicated and yet a very important Decision.

Working capital management is the life-line of all types of enterprises, manufacturing and trading both. It is
constantly required to buy raw materials, for payment of wages and other day-to-day expenses. Without
adequate working capital management, manufacturing operations will be crippled. For trading enterprises,
the capacity to stock a variety of goods for sale depends upon its working capital management.

It is a base on which all the activities of business enterprise depend. Many companies still under estimate the
importance of working capital management. They consider it as a lever for freeing up cash from accounts
payable. By effectively managing these components, companies can sharply reduce their dependence on
outside funding and can use the released cash for further investments or acquisitions. This will not only lead
to more financial flexibility, but also create value and have a strong impact on a company’s enterprise value
by reducing capital employed and thus increasing asset productivity. High working capital management
ratios often mean that too much money is tied up in receivables and inventories. Typically, the knee-jerk
reaction to this problem is to apply the ―big squeeze by aggressively collecting receivables, ruthlessly
delaying payments to suppliers and cutting inventories across the board. But that only attacks the symptoms
of working capital management issues, not the root causes. A more effective approach is to fundamentally

44
rethink and stream line key processes across the value chain. This will not only free up cash but lead to
significant cost reductions at the sometime. etc.

Only those enterprises which have adequate working capital management can survive in times of depression.
The investment in raw materials becomes long- term investments during depression and cash flow declines
due to fall in sale. In such circumstances only enterprises with adequate working capital management can
survive.

Excessive working capital management is equally unprofitable. The extra working capital management is
not utilized in business operations and earns no profit for the firm. It results in unnecessary accumulation of
inventories, leading to inventory mishandling, waste, theft etc. The abundance of working capital
management would lead to waste and inefficiency. Shortage of working capital management funds renders
the firm unable to avail attractive credit opportunities etc. The firm loses its reputation when it is not in a
position to the honor its short-term obligations. As a result, the firm faces tight credit terms. It stagnates
growth.

PERIOD OF STUDY

The study was done the month of August 2020. The organization selected by me to conduct the study is
Reliance Construction Equipment Limited The report comprises of various suggestions, regarding the
proper management of finance, at each & every step of process that are taking place at the company.

Suggestions for improving the overall efficiency of the plant, by maintaining the stock level and records
properly. What is research methodology?

OBJECTIVE OF STUDY

) To study of the working capital management position of the company.

) To study the various components of working capital.

) To know about the cash and bank balance of the company.

) To know about the loans and advance of the company.

) To study the current liabilities of the company.

SCOPE OF THE STUDY

• The area of study is Complete in the financial management and (working capital management) of
company string tools in this study.

45
 • I covered net capital, net working capital management, current assets, current liability and study of
inventory turnover, debit turnover.
• I can use of purchase. Of turn over regarding of working capital management and management case
with the material production to production operation.

LIMITATIONS OF STUDY

I have tried my best to make this report free from any sort of errors however, these were certain things which
could not be avoided. The problems that I had cape with in the course of this project is; There may be
limitations to this study because the study duration

(summer placement) is very short and it’s not possible to observe every aspect of working capital
management practices.

• Time is the Real factor that affects the study i.e., the time duration of eight week for the project work is
very short span of time to conduct effective study.
• Most of the Department id remaining untouched to this exercise. Hence it does not bring the complete
picture of organization’s competence level
• Employee needs expectation and behaviouts vary from one person to another person. During survey
some employee show keen interest in the topic and give their views and on the other hand, some
employee does not interest and help wholeheartedly in my survey.
• Scarcity of needful printed document on the topic.
• All the employees and officers were found very busy in their working hours.
• Many a time my guide and other executive were not available in their seats because they were busy in
their allied work so as researcher, I have to visit many to meet them and discuss on myopic.

46
CHAPTER-5
Data Analysis
&
Interpretation

47
 1. TOTAL CURRENT LIABILITIES

YEAR 2019-20 2020-2021 2021-2022

TOTAL CURRENT 40070.61 (100) 24499.76 (100) 35508.99(100)
LIABILITIES

45000
40000
35000
30000
25000
20000
15000
10000
5000
0
2019-2020 2020-2021 2021-2022

Column1 Series 2 Series 3

INTERPRETATION

The provided data shows the total current liabilities for three different periods: 40,070.61, 24,499.76, and
35,508.99. Each value is expressed as a percentage of the total for its respective period (100%). This data
suggests a fluctuating trend in the company's short-term obligations over these periods. The current
liabilities increased significantly from the second period (24,499.76) to the first period (40,070.61),
indicating a potential rise in financial obligations or operational costs during that time. However, in the third
period (35,508.99), there seems to be a slight decrease compared to the first period, although it remains
higher than the second period. Further context about the nature of these liabilities and the company's overall
financial health would be necessary for a more comprehensive analysis.

48
 2. TOTAL CURRENT ASSETS

YEAR 2019-2020 2020-2021 2021-2022

TOTAL CURRENT 47425.52(100) 36968.50(100) 44127.34(100)
ASSETS

50000

45000

40000

35000

30000

25000

20000

15000

10000

5000

0
2019-2020 2020-2021 2021-2022

Series 1 Series 2 Series 3

INTERPRETATION:

The current assets for 47,425.52, 36,968.50, and 44,127.34. Each value is expressed as a percentage of the
total for its respective period (100%). This data indicates a fluctuating trend in the company's short-term
assets over these periods. There was a decrease in the second period (36,968.50) compared to the first period
(47,425.52), suggesting a potential reduction in liquidity or current assets during that time. However, in the
third period (44,127.34), there appears to be a recovery in current assets, although it is still below the level
of the first period. Analyzing this data alongside the previous information about current liabilities, one could
assess the company's liquidity position, ensuring that it has enough short-term assets to cover its immediate
financial obligations.

49
 3. TOTAL CREDITOR

YEAR 2019-2020 2020-2021 2021-2022

TOTAL CREDITORS 35245.31(87.96) 20436.71(83.42) 29984.65(84.44)

45000

40000

35000

30000

25000

20000

15000

10000

5000

0
2019-2020 2020-2021 2021-2022

Series 1 Series 2 Series 3

INTERPRETATION:

The current liabilities for three different periods: 35,245.31, 20,436.71, and 29,984.65. Each value is
expressed as a percentage of the total for its respective period in parentheses. These figures indicate the
proportion of current liabilities concerning the total liabilities during the specified periods. The data shows a
consistent decrease in the percentage of current liabilities concerning total liabilities over the periods,
suggesting a potential improvement in the company's financial health. This reduction signifies a more stable
financial position, indicating that a smaller portion of the company's total liabilities is short-term, which
could lead to enhanced financial flexibility and reduced short-term risk. However, a comprehensive analysis
would require additional context about the nature of these liabilities and the overall financial
situation of the company.

50
 4. BILLS PAYABLES

YEAR 2019-2020 2020-2021 2021-2022

BILLS PAYABLES 4825.30(12.04) 4063.05(16.58) 5524.34(15.56)

6000

5000

4000

3000

2000

1000

0
2019-2020 2020-2021 2021-2022

Series 1 Series 2 Series 3

INTERPRETATION:

The bills payable for three different periods: 4,825.30, 4,063.05, and 5,524.34. Each value is expressed as a
percentage of the total for its respective period in parentheses. These figures indicate the proportion of bills
payable concerning the total liabilities during the specified periods. The data shows fluctuations in the
percentage of bills payable relative to total liabilities, with a decrease in the second period (16.58%)
compared to the first (12.04%) and a subsequent increase in the third period (15.56%). This variability
suggests changes in the company's short-term debt obligations, potentially reflecting shifts in borrowing
patterns or payment schedules. While the decrease in the second period might indicate efforts to manage
debt, the subsequent increase implies a renewed or additional financial commitment. A more detailed
analysis would require contextual information about the company's financial strategies and market
conditions during these periods to understand the reasons behind these fluctuations effectively.

51
 5. TOTAL DEBTORS

YEARS 2019-2020 2020-2021 2021-2022

TOTAL DEBTORS 23433.33(49.41) 16997.81(45.98) 13184.90(29.90)

25000

20000

15000

10000

5000

0
2019-2020 2020-2021 2021-2022

Series 1 Series 2 Series 3

INTERPRETATION:

Certainly! The provided data represents the debtors' figures for three different periods: 23,433.33, 16,997.81,
and 13,194.90. Each value is expressed as a percentage of the total for its respective period in parentheses.
These percentages indicate the portion of debtors concerning the total assets during the specified periods.
The data shows a consistent decrease in the percentage of debtors relative to total assets over the periods.
This declining trend suggests that the company's reliance on debtors for its assets has decreased, indicating
potentially improved efficiency in collecting outstanding payments or a shift in the company's revenue
streams. A decrease in this percentage often signifies a more robust cash flow and liquidity position, as the
company is relying less on future incoming payments from customers for its total assets. However, further
information about the company's operational strategies and market dynamics would be essential for a
comprehensive analysis of this trend.

52
 6. INVENTORIES

YEAR 2019-2020 2020-2021 2021-2022

INVENTORIES 15939.55(33.61) 11997.18(32.045) 21378.23(48.45)

25000

20000

15000

10000

5000

0
2019-2020 2020-2021 2021-2022

Series 1 Series 2 Series 3

INTERPRETATION:

The inventories for three different periods: 15,939.55, 11,997.18, and 21,378.23. Each value is expressed
concerning the total assets during the specified periods. The data shows fluctuations in the percentage of
inventories relative to total assets. There was a decrease in the second period (32.45%) compared to the first
(33.61%), suggesting potential inventory management improvements or a shift in production strategies.
However, in the third period, there was a significant increase (48.45%), indicating a substantial portion of
the company's total assets were tied up in inventories. While higher inventories can support increased sales,
excessive levels might lead to storage costs and obsolescence risks. This fluctuation might reflect seasonal
demands, market trends, or changes in production volumes. A detailed analysis would require additional
context about the industry, market conditions, and the company's specific inventory management practices
to understand the reasons behind these changes effectively.

53
 7. BILLS RECEIVABLE:

YEAR 2019-2020 2020-2021 2021-2022

BILLAS 5293.47(5.82) 3646.78(9.87) 7093.10(16.07)

RECEIVABLE

Chart Title

5293.47

3646.78

2461.11

4.5 2.8 5

CATEGORY 1 CATEGORY 4

2020 2021 2022

INTERPRETATION:

Certainly, the data provided shows the amount of bills receivable for the years 2019-2020, 2020-2021, and
2021-2022. In 2019-2020, the bills receivable were 5293.47 with a percentage change of -5.82% compared
to the previous year. In the following year, 2020-2021, the amount decreased to 3646.78, reflecting a
percentage change of -9.87%. However, in 2021-2022, there was a significant increase, reaching 7093.10,
showing a percentage change of 16.07% compared to the previous year. This suggests a fluctuating trend in
bills receivable, with a notable drop in 2020-2021 followed by a substantial recovery and growth in 2021-
2022.

54
 8. CASH & BANK:

YEAR 2019-2020 2020-2021 2021-2022

BANK & CASH 2759.17 4326.73(11.70) 2461.11(5.58)

Chart Title
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
Category 4

2020 2021 2022

INTERPRETATION:

The cash and bank balance for the respective years are as follows: 2,759.17 (a decrease of 5.82%), 4,326.73
(a further decrease of 11.70%), and 2,461.11 (a decrease of 5.58%). This data indicates a declining trend in
cash and bank balance over the three years, with significant drops in both 2019-2020 and 2020-2021,
followed by a slight decrease in 2021-2022. The percentage values in parentheses represent the percentage
change in the cash and bank balance compared to the previous year. This trend may raise concerns about the
organization's liquidity and financial stability, prompting a closer examination of its financial
management strategies.

55
 Chapter-6
Conclusion and
Suggestions

56
 CONCLUSION

• In year 2021, there is more total investment than the year 2020 and 2022 in Reliance Industry Limited.

• In year 2021, there is more equity investment than the year 2020 and 2022 in Reliance Industry Limited.

• In year 2022, there is more short-term debt investment than the year 2020 and 2021 in Reliance Industry
Limited.

• In year 2022, there is also more long-term debt investment than the year 2020 and 2021 in Reliance
Industry Limited.

• Short term investment in year 2021 is more than the year 2020 and 2022 in Reliance Industry Limited.

• The year 2021 has greater ratio of total equity and total asset than the year 2020 and 2022 in Reliance
Industry Limited.

• Since the Return on Equity ratio in year 2018 is not satisfactory. So, company should take proper steps
to improve this ratio.

• In the year 2022, company is having huge long term and short-term debt which results in the financial
expenses, so proper strategies and techniques of investing should be used which results in the proper
utilization of debt.
• Short term investment in year 2020 and 2021 is not satisfactory. So, company should take proper steps
to improve this growth.

• In year 2020, the company is having huge equity investment which results in the financial expenses, so
proper strategies and techniques of investing should be used which results in the proper utilization of
equity.

• In year 2022, the company is having low ratio between total equity and total assets, so the company
should take growth in total assets and equity investment.

• In year 20, the company is having lower total investment of organisation than the year 2018, so the
company should take proper steps to make more investments.

57
 Suggestion

• Since the Return on Equity ratio in year 2018 is not satisfactory. So, company should take proper steps
to improve this ratio.

• In the year 2022, company is having huge long term and short-term debt which results in the financial
expenses, so proper strategies and techniques of investing should be used which results in the proper
utilization of debt.
• Short term investment in year 2020 and 2021 is not satisfactory. So, company should take proper steps
to improve this growth.

• In year 2020, the company is having huge equity investment which results in the financial expenses, so
proper strategies and techniques of investing should be used which results in the proper utilization of
equity.

• In year 2022, the company is having low ratio between total equity and total assets, so the company
should take growth in total assets and equity investment.

• In year 20, the company is having lower total investment of organisation than the year 2018, so the
company should take proper steps to make more investments.

58
Chapter -7
Annexure

59
 BIBLIOGRAPHY

The content is taken from:

MY. KHAN/P.K. Jain, “ Finanacial Management and text, problem cases” 5th Edition, Tata McGraw
hill publishing company.Ltd.

Prasanna Chandra, financial management theory and practice” 5th Edition, Tata McGraw- Hill
Publishing Company Limited.

C.B. MAMORIA, S.V. GANKER “Personnel Management” Twenty- fourth Edition, Himalaya
Publishing House.

Annual report of these companies NFCL, MFL, AND RCFL from official websites.

www.google.com

www.wikiped.com.

www.economicstimes.com

www.transtutors.com

60
 Reliance Industry
Limited
PROFIT AND LOSS ACCOUNT

YEAR Dec ‘20 Dec ‘19 Dec ‘18 Dec '17 Dec ' 16

Income March Mar 2017 March March March 2022

2018 2020 2021
Operating income 1,017.98 922.49 891.89 851.26 690.63

Expenses

Material consumed 697.33 708.28 663.85 630.05 516.36

Manufacturing expenses 43.56 47.33 40.59 40.12 35.85

Personnel expenses 50.81 45.48 40.23 36.82 34.02

Selling expenses 68.51 36.27 43.18 53.55 47.75

Administrative expenses 29.75 29.30 30.30 23.03 22.04

Expenses capitalized - - - - -

Cost of sales 889.96 866.66 818.15 783.57 656.02

Operating profit 128.02 55.83 73.73 67.70 34.61

Other recurring income 2.64 3.65 4.17 8.20 4.25

Adjusted PBDIT 130.66 59.48 7 7.90 75.90 38.86

Financial expenses 3.91 3.20 5.21 9.14 9.02

Depreciation 12.61 11.19 11.47 10.77 13.94

Other write offs - - - 1.02 2.95

Adjusted PBT 114.14 45.09 61.22 54.96 12.95

Tax charges 38.32 20.13 24.52 16.64 1.64

Adjusted PAT 75.83 24.97 36.70 38.32 11.31

Nonrecurring items -3.44 0.60 3.01 - 0.38 -4.25

Other non-cash adjust 0.71 6.62 0.52 7.17 1.74

61
 Reported net profit 73.09

Earnings appropriation before 130.20 77.29 66. 30 44.5

Equity dividend 16.15 13.84 13. 84 11.5

Preference dividend - - - -

Dividend tax 2.74 2.35 2.3 5 1.96

Retained earnings 111.30 61.10 50. 10 31.0

Mentz

Reliance Limited
CURRENT LIABILITIES

ITEMS 2020-21 2021-22 2022-23

TOTALCURRENT 40,070.61 (100) 24,499.76 (100) 35,508.99(100)

LIABILITIES

CURRENT LIABILITIES 35,245.31 20,436.71 29,984.65

(87.96) (83.42) (84.44)

PROVISION 4,825.30 (12.04) 4,063.05(16.58) 5,524.34 (15.56)

CURRENT ASSETS

ITEMS 2020-21 2021-22 2022-23

TOTAL CURRENT ASSETS 47,425.52 (100) 36,968.50 (100) 44,127.34 (100)

INVENTORIES 15,939.55 11,997.18 21,378.23

(33.61) (32.45) (48.45)

DEBTORS 23,433.33 16,997.81 13,194.90

(49.41) (45.98) (29.90)

62
CASH & BANK BALANCE 2,759.17 4,326.73 2,461.11 (5.58)
(11.70)
(5.82)

L& ADVANCES 5,293.47 3,646.78 (9.87) 7,093.10

(11.16) (16.07)

63
64