Submitted for the Degree of B.Com.

Honors in
Accounting & Finance from the University of Calcutta.

“Working Capital Management” _A case Study of CEAT

company Ltd.

Submitted by:-
Name of candidate- : Joydip Das
Registration no:- 054-1111-0188-20
Roll No:- 201054-21-0024

Supervised by:-
Name of the college:- K.K. Das College
Name of the Supervisor:- RUBI PAUL
Submitted of the year:- 2023

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 TABLE OF CONTENT

S.L. NO. Particulars Page No.

ACKNOWLEDGEMENT 3
Supervisor's Certificate & Student's Declaration 4

SYNOPSIS 5
1. INTRODUCTION 6-9
1.1 Background of the study 6
1.2 Need of study 6
1.3 Literature review 7-8
1.4 Objective of the study 8
1.5 Limitations of the study 8
1.6 Chapters planning 9
2. CONCEPTUAL FRAMEWORK 10-15
2.1 Concept 10-13
2.2 Working capital cycle 13-14
2.3 History of the company 14-15
3. PRESENTATION of DATA ANALYSIS & 16-26
FINDINGS
3.1Company profile 16
3.2 STATEMENT SHOWING CHANGES IN 17-18
WORKING CAPITAL, FOR 2018-2022
3.3 Components of working capital 18-19
3.4 Current ratio 19-20
3.5 Quick ratio 20-22
3.6 Stock turn over ratio 22-23
3.7 Inventory turn over ratio 24-25
3.8 Findings 25-26
4. CONCLUSION & RECOMMENDATIONS 27-28
4.1 Conclusion 27
4.2 Recommendations 28
5. BIBLIOGRAPHY 29
6. ANNEXURES 30-35

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 ACKNOWLEDGEMENT
I would like to start by thanking my college K.K.DAS
College for providing me with such a wonderful
opportunity to prepare the project by including this as
a part of our study curriculum. I am very thankful to
my project guide cum supervisor Prof. RUBI PAUL
for her valuable and timely guidance throughout the
project. Her feedback, guidance, and overall support
have been very useful. I would thank her for being my
mentor in doing my project report. I would also thank
my friends, who have found the time to help me with
my project as when needed without their help, this
project would not have been a presentable one. Lastly,
I am very much thankful to the University of Calcutta
for introducing this type of Project Task which has
allowed me practical exposure to the corporate field
and a brief introduction to the day-to-day working of
an organization.

Joydip Das
6thsemester
B.COM(Honours)

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Annexure- I
Supervisor's Certificate

This is to certify that Mr. JOYDIP DAS a student of B.Com. Honours in Accounting &
Finance of K.K.DAS COLLEGE under the University of Calcutta has worked under my
supervision and guidance for his Project Work and prepared a Project Report with the title
“WORKING CAPITAL MANAGEMENT AND ITS IMPACT ON
PROFITABILITY”- A CASE STUDY OF CEAT COMPANY LTD. which he is
submitting, is his genuine and original work to the best of my knowledge.

Signature:
Place: Name: Prof. RUBI PAUL
Date: Name of the College: K.K.DAS COLLEGE

Annexure- IB
Student's Declaration

I hereby declare that the Project Work with the title “WORKING CAPITAL
MANAGEMENT AND ITS IMPACT ON PROFITABILITY”- A CASE STUDY OF
CEAT COMPANY LTD. submitted by me for the partial fulfillment of the degree of
B.Com. Honours in Accounting & Finance under the University of Calcutta is my original
work and has not been submitted earlier to any other University /Institution for the
fulfillment of the requirement for any course of study.
I also declare that no chapter of this manuscript in whole or in part has been incorporated
in this report from any earlier work done by others or by me. However, extracts of any
literature which has been used for this report has been duly acknowledged providing details
of such literature in the references.
Signature
Place: Name: JOYDIP DAS
Date: Registration No. :054-1111-0188-20

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 SYNOPSIS

The success of any business depends on its profitability,

liquidity and solvency. Liquidity plays an important role in the
successful running of a business. Many prior studies have been
conducted to measure the relationship between working capital and
profitability. In this project we have studied the performance of
working capital management of CEAT Co. Ltd. we find the
performance of working capital may be measured from two
viewpoints such as:-

(i)Measurement of efficiency of overall management.

(ii) Measurement of efficiency of management of each component
of working capital.

To study the changes in the different components in the working

capital of the company over the study period, analyze the liquidity
position of the company and study the activity ratios in order to
analyzes the movement of stock, pattern of collection of debtors and
the pattern of payment to the creditors. These are the objectives of
this study.

For analyzing the project I am choosing CEAT co. Ltd. as a sample

of the project. I have collected last 5 years financial statements from
annual report. The study uses primary data. In this project I am using
different types of ratios, tables, charts and diagrams as a tool of my
project to check how efficiently working capital has been used in the
business.

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 CHAPTER 1
INTRODUCTION
1.1 Background of Study :

In this project we have studies the performance of working capital

Management of CEAT Company Ltd. We find the performance of
working capital may be measured from two view point, such as.

(i) Measurement of efficiency of overall management.

(ii)Measurement of efficiency of management of each component
of working capital.
For that, we have prepared different ratios and analysis them to
check how efficiently working capital has been used in the business.

1.2 Need of the Study :

i) The project is helpful in knowing the company’s position of funds
maintenance and setting the standards for working capital inventory
levels, liquidity and operating efficiency level.
ii)This project is helpful to the management for expanding the
dualism and the project viability and present availability of funds.
iiiThis project is also useful as it companies the present year data
with the previous year data and thereby it shows the trend analysis
i.e. increasing funds or decreasing fund.
iv) The project is useful in further expansion decisions to be taken
by Management

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1.3Literature review :
Working capital management plays an important role in financial
management of the industry. Numbers of researcher has been done
the research on different components of working capital and subjects
on. Here, I have included the relevant articles as well research work
on the same topic. And this is a part of my research work on the
same title the working capital management of selected tyre
companies of India. The main aim of this paper is to identify the
gaps in current body of my research work which gives the direction
towards forward attention to be given.
A)Madhavi K.(2014) :
She has done research based on empirical study of co relation
among liquidity position and profitability of the paper mills in
Andhra Pradesh. That has been evaluated ineffective working
capital negatively effect on profitability of the paper mills.

B)Panigrahi (2017) :
In his study, attempted to analyze the connection of WCM with
profitability& the linkage between the different components of WC
and profitability of the thirty selected cement companies listed on
BSE for the period 2005-06 to2014- 15. In this study, statistical tools
like mean, median, standard deviation, etc. and statistical techniques
like simple correlation matrix and ordinary least squares were
applied at appropriate places. The study observed negative
relationship of Profitability with number of days of accounts
payables and the number of days of inventory conversion cycle,
where as a positive relationship between profitability and number of
days of accounts receivables was found during the period
understudy. The study also revealed strong evidence of negative
relationship between WCM efficiency and profitability during the
period under study.

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C) Ajmera (2019):
In his study, analyzed the liquidity of four selected tyre companies in India
for the period 2013-14 to 2017-18. For tackling the issues in the study,
relevant ratios relating to liquidity, statistical tools and techniques were used
at appropriate places. The study revealed that the liquidity was not found to
be satisfactory in any of the four selected companies during the period under
study.

1.4 Objective of Study :

The researcher has prepared this project to analyze soe positions of
the company, so the purposes are-
• To study the changes in the different components in the working
capital of the company over the study period.
• To analyze the liquidity position of the company.
• To study the activity ratios in order to analyze the movement of
stock, pattern of collection from debtors & the pattern of payment
to the creditors.

1.5 Limitations of the study :

This study is conducted in partial fulfillment of the requirement for
the B.Com. So, it possesses some limitations of its own. Following
limitations were faced during preparing this project-

(a) Limited Data : This project is based on annual report as provided

by the company. Therefore, it is impossible to check the authenticity
of data.
(b) Limited Period : This project is based on five year annual
reports. Conclusions are based on such limited data.
(c) Variable Constraints: Variables that are used in this project are
limited.
(d) Difficulties in making industry decision: This project is solely
based on CEAT Co. Ltd. Therefore, based upon this study, industry
decision cannot be made suitably.

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1.6 Chapter Planning :
This project report has been divided in four logical parts-

1. Chapter 1: Introduction
This chapter includes Background of study, Need of the study,
Literature review, Objective of the study, Research Methodology,
Limitations of study, Chapter planning.

2. Chapter 2: Conceptual Framework

This chapter includes concept of working capital management,
Working capital cycle, History of the Company.

3. Chapter 3: Presentation of data, Analysis & Findings

This chapter shows the Company profile, changes of working
capital and analysis of financial data using the following ratios –
Current ratio, Quick ratio, Super quick ratio, Inventory turnover
Ratio.
Then we show the findings of the study.

4. Chapter 4 : Conclusion & Recommendations

This chapter shows the concluding observations based on the main
findings and suggestion.

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 CHAPTER -2
CONCEPTUAL FRAMEWORK

2.1 Concept:
• What is Working capital? 
Working capital means the funds (i.e. Capital) available and used
for day-to-day operation (i.e. working capital) of an enterprise. It
consists broadly of that portion of assets of a business which are
used in or related to its current operations. It refers to fund which
are used during an accounting period to generate a current income
of a type which is consistent with major purpose of a firm existence.
• According to Weston &Brigham –“Working capital refers to a
firm’s investment is short-term assets, such as cash amounts
receivables, inventories etc”.
• “Working capital means current assets”.- Mead, Baker and MA
Lott • “The sum of the current assets is the working capital of the
business”- J.S. Mil.

TYPES OF WORKING CAPITAL : From the concept point of

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

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ii. NET WORKING CAPITAL : It refers to the different between
current assets and current liabilities. Current liabilities are those
claims of outsider which are expected to mature for payment with in
an accounting year
Current liabilities includes trade creditors, accrual taxation payable,
bill payable, outstanding expenses, dividend payable and short term
loans.

IMPORTANCE OF WORKING CAPITAL : Working capital is

needed till a firm gets cash on sale of finished products. It depends
on factors:

i. Conversion of cash into raw materials.

ii. Conversion of raw materials into work-in-progress.
iii. Conversion of work-in-progress into finished products.
iv. Time for sales of finished goods- Cash sales and Credit sales.
v. Time for realization from debtors and bills receivables into cash.
vi. Credit period allowed by creditors for credit purchase of raw
materials, inventory and creditors for wages and overheads.

What is Working Capital Management? 

Working capital management is a business tool that helps companies
effectively make use of current assets, helping companies to
maintain sufficient cash flow to meet short term goals and
obligations. By effectively managing working capital,companies
can free up cash that would otherwise be trapped on their balance
sheets. As a result, they may be able to reduce the need for external
borrowing, expand their businesses, fund mergers or acquisitions, or
invest in R&D

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Importance of Working Capital Management :
i)Helps in maintaining optimum level of working capital.
ii)Helps in maintaining optimum level of liquidity.
iii)Helps in proper management of current assets.
iv)Co-ordination between fixed capital and working capital.

Advantages of working capital management :-

i)LIQUIDITY:- Businesses often get in trouble due to lack of cash needed

for operations and to repay short-term debts. It happens because of an
ineffective or no working capital management policy in the enterprise. 
ii)ENHANCE PROFITABILITY:- Proper application of working capital
management strategy would enhance the company’s profitability in the long
run.
iii)IMPROVES FINANCIAL HEALTH:- Working capital management
basically deals with the management of cash in an enterprise. It assesses the
sources of cash inflows and determines the out flow of cash in best possible
manner.
iv)VALUE ADDITION:- As explained earlier, working capital enhances
company’s financial health and operational success. It makes the company a
stand out amongst its peers.
v)EVADES INTERRUPTIONS IN OPERATIONS:- Working capital
management involves the use of ratio analysis. Ratios like working capital
ratio, quick ratio, accounts receivables turnover ratio, etc. are calculated and
interpreted so as to provide information to management.

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Disadvantages of Working Capital Management:
i)MONETARY FACTORS:- This strategy takes only monetary factors into
account. Monetary items like the value of debts receivables, the value of
finished goods etc. are the basic determinants while implementing the
strategy.
ii)NON-SITUATIONAL:- Another disadvantage of working capital
management policy is that it’s not situational in nature. The strategy does not
acknowledge sudden changes in the market conditions as it is based on past
events and figures
iii)BASED ON DATA:- Working capital management operates around data.
It is the key soul of any working capital management strategy.
iWorking capital management involves techniques of ratio analysis. Ratios are
just a number that allows a user to interpret the result.

2.2 WORKING CAPITAL CYCLE :

Definition of Working Capital Cycle (WCC):- The working capital cycle
(WCC) is the amount of time it takes to turn the net current assets and current
liabilities into cash. The longer the cycle is, the longer a business is tying up
capital in its working capital without earning a return on it.
The working capital cycle for the company can be calculated as given below:
{Working Capital Cycle = Inventory turnover in days + debtors turnover
in days– creditors turnover.}

• Main Components of Working Capital Cycle:- Inventory Management:

Inventory constitutes a major part of total working capital. Efficient inventory
management consists of managing two conflicting objectives: Minimization
of investment in inventories on the one hand and maintenance of the smooth
flow of raw materials for production and sales on the other.

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 1. Cash Management: Cash is one of the important components of
current assets. It is needed for performing all the activities of a firm, i.e.
from acquisition of raw materials to marketing of finished goods.

2. Receivables Management: The term receivable is defined as any claim

for money owed to the firm from customers arising from sale of goods
or services in normal course of business.
3. Inventory Management: Inventory constitutes a major part of total
working capital. Efficient inventory management consists of managing
two conflicting objectives: Minimization of investment in inventories
on the one hand and maintenance of the smooth flow of raw materials
for production and sales on the other.

4. Accounts Payable Management: Payables or creditors are one of the

important components of working capital. Payables provide a
spontaneous source of financing of working capital.

2.3 HISTORY OF THE COMPANY:

The company was founded as Cavi Elettricie Affini Torino(Electrical Cables
and Allied Products of Turin) by Virginio Bruni Tedeschi in 1924, in Turin,
Italy. On 10 March 1958,the company was incorporated as CEAT Tyres of
India, in Mumbai. Initially, the company collaborated with the Tata Group. In
1972, the company set up a research and development unit at Bhandup. In
1981, Deccan Fibre Glass Limited was merged with the company.
In 1980, Alberto, son of Virginio, sold the Cavi Elettrici eAffini Torino to
investment firm SOFIT, which went on to cut jobs. Owing to it, in 1981, the
company failed in Italy and Pirelli purchased the right to the CEAT name,
which it sold to RPG Group in 1983.
In 1982, RPG Group acquired the company, and in 1990, the company was
renamed as CEAT. In 1993, the company collaborated with Yokohama Rubber
Company, to manufacture radial tyres at their Nashik unit. In 1999, CEAT
formed a joint-venture, named as CEAT Kelani, with Asia Motor Works
(AMW) and Kelani Tyres, to manufacture and market CEAT tyres in Sri
Lanka. in 2006, CEAT Kelani commissioned their first Sri Lanka-based
radial-tyre manufacturing unit in Kalutara. In 2009, AMW exited the joint-
venture.
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PRODUCTS :-
CEAT manufactures tyres for various types of vehicles like heavy
commercial vehicles, light commercial vehicle, off-highway tyres, passenger
cars, tractors, motorcycles and scooters, cycles and SUVs. It exports to
countries across the Africa, Americas, Australia, and Asia.

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 CHAPTER-3
PRESENTATION of DATA
ANALYSIS
& FINDINGS
3.1 Company Profile
CEAT Limited (formerly, Cavi Electricity eAffini Torino) is an Indian
multinational tyres manufacturing company owned by the RPG Group. It was
established in 1924in Turin, Italy. It has a presence in global markets. CEAT
produces over 165 million tyre’s a year and manufactures tyres for passenger
cars, two-wheelers, trucks and buses, light commercial vehicles, earthmovers,
forklifts, tractors, trailers, and auto-rickshaws. The current capacity of CEAT
tyre’s plants is over 800 tones per day.

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3.2 STATEMENT SHOWING CHANGES IN WORKING CAPITAL, FOR 2018-2022

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Interpretation:-The above statement shows the changes in the working
capital
form 2018-2022.

➢ In 2019 working capital is decreasing by 10584 which lead to negative

WC as compared to 2018. All the Current Assets are increased except
current investment and cash & cash equivalent.
➢ In 2020 Working Capital is decreased by 26217 as compared to 2019.
Here all the Current Assets are decreased except bank balance other than
cash and cash equivalent.
➢ Working capital is decreased by 46861 in 2021 as compared to 2020. In
this year all Current Assets are increased except cash & cash equivalent,
bank balance other than cash & cash equivalent, loan & other current
assets.
➢ Working capital is decreased by 25151 in 2022 as compared to 2021. In
this year all current Assets are increased except cash & cash equivalent,
bank balance other than cash & cash equivalent & other current assets.
*There is negative Working Capital in financial year 2022, 2021, 2020,
and 2019.
It is a bad signal for a company. It means the company does not have
enough resources in the short term to pay off its debts.

3.3 Components of Working Capital :

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➢ CURRENT ASSETS: Current investment
,Inventories, Trade receivables, Cash & Cash Equivalents,
Bank balance other than cash & cash equivalent, Short
term loan & advance, other current assets etc.

➢ CURRENT LIABILITIES: Short term borrowings,

Lease liabilities, Trade payables, other financial liabilities,
other current liabilities, short term provision etc.

3.4 CURRENT RATIO:

The current ratio is a liquidity ratio that measures a company's ability to
pay short-term obligations or those due within one year. It tells
investors and analysts how a company can maximize the current assets
on its balance sheet to satisfy its current debt and other payables.

❖Formula of Current Ratio:

Current Ratio = Total Current Assets/Total current Liabilities

year Mar’2018 Mar’2019 Mar’2020 Mar’2021 Mar'2022

In lakh

Current Assets 173808 196468 179542 218408 257372

(A)
Current Liabilities 173651 205895 215186 300913 362028
(B)
Current Ratio 1.01 0.95 0.83 0.73 0.71
(A/B=C)

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Interpretation:-
Current Ratio indicates Company’s ability to payment short term liability.
The Standard Current Ratio is 2:1. On the basis of company’s current ratio
from March 2018 to 2022, we see it does not satisfy the ideal ratio (2:1). We
also see it continuously decreasing from 2019–2022 compared to Mar’2018.
It indicates company is unable to pay its short-term liability &day to day
expenses in future.
❖ www.CEAT.com

3.5 QUICK/LIQUID/ACID-TEST RATIO:

The quick ratio also known as liquid ratio is an indicator of a company’s
shorterm liquidity position and measures a company’s ability to meet its
short-term obligations with its most liquid assets. Since it indicates the
company’s ability to instantly use its near-cash assets (assets that can be
converted quickly to cash) to pay down its current liabilities, it is also called
the acid test ratio. An "acid test"is a slang term for a quick test designed to
produce instant results. The ideal Quick ratio is 1:1.

❖ Formula of Quick Ratio:

Quick Ratio = Quick Assets/Quick Liability
• Quick Assets= Total Current Assets – Inventories – Prepaid Expenses
• Quick Liabilities= Total Current Liabilities – Bank Overdraft

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year Mar’2018 Mar’2019 Mar’2020 Mar’2021 Mar’2022
Current Assets(Rs. in 174808 196468 179542 218408 257372
Lacs.)(A)

Inventories(Rs. in 75496 96515 87950 111250 128651

Lacs.)
(B)
Prepaid 0 0 0 0 0
Expenses(Rs. In
Lacs.)
(C)
Quick Assets(Rs. in 99312 99953 91592 107158 128721
Lacs.)(A-B
C=D)
Current Liabilities 173651 205895 215186 300913 362028
(Rs. In Lacs.)
(E)
Bank Overdraft (Rs. 0 0 0 0 0
in Lacs.)(F)
Quick Liabilities (Rs. 173651 205895 215186 300913 362028
In Lacs.)(E
F=G)
Liquid Ratio 0.57 0.49 0.43 0.36 0.36
(D/
G=H)

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 Interpretation:-
Quick ratio indicates company’s ability to pay immediate short term due &
capacity for day to day expenses. Here we see that on the basis of company’s
quick ratio from March 2018 to March 2022, it does not satisfy the ideal ratio
(1:1). We also see it continuously decreasing from 2019-2021 compared to
2018.In Mar’2022 the quick ratio is same as 2021. It indicates company is
unable to pay its short term liability & day to day expenses in future.
❖ www.CEAT.com

3.6 Super Quick Ratio:

The cash ratio also known as Super Quick Ratio is a measurement of a

company's liquidity, specifically the ratio of a company's total cash and cash
equivalents to its current liabilities. The metric calculates a company's ability
to repay its short-term debt with cash or near-cash resources, such as easily
marketable securities. This information is useful to creditors when they decide
how much money, if any, they would be willing to loan a company. The cash
ratio is almost like an indicator of a firm’s value under the worst-case
scenario—say, where the company is about to go out of business. It tells
creditors and analysts the value of current assets that could quickly be turned
into cash, and what percentage of the company’s current liabilities these cash
and near-cash assets could cover.

Formula of Super Quick Ratio:

Super Quick Ratio = Cash +Bank + Marketable Securities/Quick
Liabilities
Year Mar’2018 Mar’2019 Mar’2020 Mar’2021 Mar’2022
In lakhs
Cash & Cash 6964 5426 2017 1956 1300
Equivalent
(A)
Marketable 4006 0 0 0 0
securities
(B)
Quick Liabilities 173651 205895 215186 300913 362028
(C)
Super quick 0.06 0.03 0.01 0.01 0.00
ratio(A+B)/C=D
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Interpretation:
This ratio measures the instant capacity of the firm to meet its quick liabilities.
In this case we can see the super quick ratio of Mar’2019 to 2022 is gradually
decreasing compared to 2018.
It means the ability of repaid quick liabilities of the company is decreasing,
which is very bad. However this ratio has not got much relevance in
manufacturing industry. It is mainly used in bank and other financial
institutions.
❖ www.CEAT.com
3.7 Inventory Turnover Ratio:
Inventory turnover is the rate at which a company replaces inventory in a
given period due to sales. Calculating inventory turnover helps businesses
make better pricing, manufacturing, marketing, and purchasing decisions.
Well-managed inventory levels show that a company's sales are at the desired
level, and costs are controlled. The inventory turnover ratio is a measure of
how well a company generates sales from its inventory.

Formula of Inventory Turnover Ratio:

Inventory Turnover Ratio = Cost of Goods Sold/ Average Stock

• Cost of Goods Sold= Revenue From Operations (Net)–Gross Profit
• Gross Profit = Revenue from Operations (Net)– Cost of Materials
Consumed–Purchase of Stock- In-Trade – Changes in
Inventories of FG, WIP and Stock-In- Trade.
• Average Inventories = (Opening Inventory +Closing Inventory)/2

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YEAR Mar2018 Mar2019 Mar2020 Mar2021 Mar2022

A.REVENUE FORM 633025 683130 658111 757279 931263

OPERATION {(net)(in
lakh)}
Gross Profit (B)(In 40966 40977 33853 45890 7724
lakh)
Cost of Goods Sold 592059 642153 624258 711389 923539
(in lakh)
(A-B=C)
Opening 92344 75496 96515 87950 111250
Inventory(in lakh)
(D)
Closing Inventory 75496 96515 87950 111250 128651
(in lakh)
(E)
Average (in lak 83920 86005.5 92232.5 99600 119950.5
Inventory(D+E)/2=F
Inventory Turnover 7.06 7.47 6.77 7.14 7.70
Ratio (C/F)=E

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Interpretation:
Inventory turnover ratio indicates inventory holding period. It also indicates
efficiency in inventory management. If inventory turnover ratio is high, it
means inventory holding period is very low which is good for a company
and vice versa. Here we see that the Inventory Turnover Ratio of the
company is increasing in Mar’2019 compare to Mar’2018. Then in Mar’
2020 it is decreasing. In Mar’ 2021 it again start increasing and finally in
Mar’2022 it go to the highest value during last five years. It indicates a good
and positive sign for the company.
❖ www.CEAT.com

3.8 FINDINGS :

Working Capital is the life line of every Industry, irrespective of whether it’s
a manufacturing industry or service industry. Working Capital is the prime
and most important requirement for carrying out the day operations of the
business. Working capital gives the much needed liquidity to the business.
Working Capital finance reduces the overall fund requirement, required to
build up the current assets, which in turn help you improve your turnover ratio.
In this project we have studied “WORKING CAPITAL MANAGEMENT
AND ITS IMPACT ON PROFITABILITY”- A Case Study of CEAT
Company Ltd.

As the project was conducted to analyze the working capital management of

CEAT Company Ltd. for the last five years. During calculations, analysis
and making project report I came to some major finding that are as follows:

➢ Current Ratio indicates Company’s ability to payment short term liability.

The Standard Current Ratio is 2:1.On the basis of company’s current ratio
from March 2018 to 2022, we see it does not satisfy the ideal ratio (2:1). We
also see it continuously decreasing from 2019–2022 compared to Mar’2018.
It indicates company is unable to pay its short-term
liability & day to day expenses in future.

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➢ Quick ratio indicates company’s ability to pay immediate short term due &
capacity for day to day expenses. Here we see that on the basis of company’s
quick ratio from March 2018 to March 2022, it does not satisfy the ideal ratio
(1:1). We also see it continuously decreasing from 2019-2021 compared to
2018.In Mar’2022 the quick ratio is same as 2021. It indicates company is
unable to pay its short term liability & day to day expenses in future.

➢ The super quick ratio measures the instant capacity of the firm to meet its
quick liabilities. In this case the super quick ratio of Mar’2019 to 2022 is
gradually decreasing compared to 2018. It means the ability of repaid quick
liabilities of the company is decreasing, which is very bad. However this ratio
has not got much relevance in manufacturing industry. It is mainly used in
bank and other financial institutions.

➢ Inventory turnover ratio indicates inventory holding period. It also indicates

efficiency in inventory management. If inventory turnover ratio is high, it
means inventory holding period is very low which is good for a company and
vice versa. Here we see that the Inventory Turnover Ratio of the company is
increasing in Mar’2019 compare to Mar’2018. Then in Mar’ 2020 it is
decreasing. In Mar’ 2021 it again start increasing and finally in Mar’2022 it
go to the highest value during last five years. It indicates a good and positive
sign for the company.

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 CHAPTER 4

CONCLUSION
&
RECOMMENDATIONS
4.1 CONCLUSION :

In this project “WORKING CAPITAL MANAGEMENT AND ITS

IMPACT ON PROFITABILITY”- A Case Study of CEAT Company
Ltd., which is one of the most important aspects of any organization, as it
deals in managing the entire current assets and current liabilities. After
analyzing the financial statement and having an in-depth study of various ratio
of the company we conclude that the management of capital requires an
evaluation of cost and benefits associated with each element. CEAT maintains
sound position of working capital its efficiency in receivable when we
considered the company’s current ratio, quick ratio, super quick ratio, debtor’s
turnover ratio, creditor’s turnover ratio, inventory turnover ratio, return on
equity shareholders’ fund they are not showing good situation of the company
but the company make profile rigorously and they make profile by using their
working capital in a tricky way, but this procedure are not followed by all kind
of company. The company has primarily be non-cash drawn from the market
and reaping full benefits of its brand name. The company makes full
utilization of its fund before making payments to outsiders. We know that the
CEAT Company is a biggest company and they have a very well goodwill,
also we know that this company is day by day increasing all over the world.
So finally, we can easily conclude that working capital management has a
great effect on the profitability of the company and the managers create value
for the shareholders by decreasing receivables accounts and inventory and the
managers must look for the method that by means of the correct management
is effective on the profitability of the companies.

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4.2 RECOMMENDATION:

Working Capital Management, there are mainly three parts they are Cash
Management, Receivables Management and Inventory Management. For
efficient use of working capital, these three parts should be managed properly;
I would like to give suggestions to “CEAT Ltd.” they are mentioned below:

❖ The current ratio of the company is decreasing after March 2018. It is a

bad sign for the company. The company should maintain the following steps
to improve the current ratio:
• Delaying any capital purchases that would require any cash payment.
• Looking to see if any term loans can be a ream mortised.
• Reducing the personal draw on the business.
• Selling any capital assets that are not generating a return to the business.

❖ The quick ratio of the company is decreasing after Marc, 2018. The
company should maintain the following steps to improve the quick ratio:

• Payoff the current bills and at the same time increase sales so that the cash
in hand or AR increases.
• Improving inventory turnover ratio.
• Discarding unproductive assets.
• Paying off current liabilities.

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 5. Bibliography: The following books, papers and websites have
been used in preparation for the project.
Papers:
❖ Annual Reports of CEAT Co. Ltd. for the year
2018,2019,2020,2021,2022.
Books:
❖ Financial Reporting & Financial Statement Analysis by Dr.
Jayanta Ghosh.
❖ Financial Management by Kar & Bagchi.
❖ Financial Management by Sushil Mukherjee.
❖ Financial Management by Bhadra and Satpati.
Website References:
❖ Wikipedia.Org
❖ www.CEAT.com

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