ProjectReport

Submitted for the Degree of B.Com.Honours in Accounting

&Finance under the University of Calcutta
TITLE OF THE PROJECT

“WorkingCapitalManagement"-ACaseStudyofCEATCompanyLtd.

SUBMITTED BY
NameoftheCandidate: -
HUSSAINRegistrationNumber: -
NameoftheCollege:UMESHCHANDRACOLLEGE
CUexamRoll Number: -

SUPERVISED BY
NameoftheSupervisor:Dr Sudipta Chakraborty
NameoftheCollege:UMESH CHANDRACOLLEGE

MONTH & YEAR OF SUBMISSION:

Date:

1
ANNEXURE-1A

SUPERVISOR'S CERTIFICATE

This is to certify that a student of B.Com. Honours in Accounting &Finance of UMESH

CHANDRA COLLEGE,under the University of Calcutta has
workedundermysupervisionandguidanceforhisProjectWorkandpreparedaProjectReportwith
thetitle“Working Capital Management”- A CaseStudy of CEAT Company
Ltdwhichheissubmitting,ishisgenuineandoriginal worktothebestofmyknowledge.

Place:Kolkata Signature:

Date:Name:DR SUDIPTA CHAKRABORTY

Designation:

NameoftheCollege:UMESH CHANDRACOLLEGE

2
 ANNEXURE-1B
STUDENT'S DECLARATION

IherebydeclarethattheProjectWorkwiththetitle“Working Capital Management”- A

CaseStudy of CEAT Company Ltdsubmitted by me for the partial fulfilment of the degree
of B.Com. Honours in Accounting &Financeunder the University of Calcutta is my original
work and has not been
submittedearliertoanyotherUniversity/Institutionforthefulfilmentoftherequirementforany
courseofstudy.
I also declare that no chapter of this manuscript in whole or in part has been incorporatedin this report
from any earlier work done by others or by me. However, extracts of
anyliteraturewhichhasbeenusedforthisreporthasbeendulyacknowledgedprovidingdetailsofs
uchliteratureinthereferences.

Place:Kolkata Signature:
Date: Name:

C U Registration Number:

C U Roll Number: 0863

3
 Acknowledgement

It is a matter of great pleasure for me in submitting the project report on “Working CapitalManagement”A Case
Study of CEAT Company Ltd. for the fulfillment of the degree ofB.ComHonours in Accounting & Finance
underthe University of Calcutta.

I am thankful to and owe a deep dept gratitude to all those who have helped me in preparing
thisreport.Wordsseemtobeinadequatetoexpressmysincerethankstoourhonorableprincipal Dr Md.
TofazzalHaque, aswellasmy supervisor Dr Sudipta Chakraborty for his valuable guidance, constructive
criticism, untiring effortsand immense encouragement during the entire course of the study due to which my
efforts havebeen rewarded.

Iwanttothankallwhohavesupportedmeandgavetheirtimelyguidance.LastbutnottheleastI am very grateful to all

those who helped me in one-way or the other way at every stage of mywork.

4
 TABLEOFCONTENT
SL.No. Particulars PageNo.
1 Introduction
1.1Background of Study 6
1.2Literaturereview 6-7
1.3ResearchGap 7
1.4Objective ofStudy 7-8
1.5ResearchMethodology 8
1.6Limitationsof Study 8-9
1.7 ChapterPlanning 9
2 ConceptualFramework
2.1Concept 10-11
2.2 CompanyProfile 11-12
2.3Industry Profile 12-13
2.4NationalScenario 13-14
2.5InternationalScenario 14
3 Presentation& Analysisof Data
3.1Current Ratio 15-16
3.2Quick/Liquid/Acid TestRatio 16-17
3.3Inventory Turnover Ratio 17-19
3.4Debtors/Receivables Turnover Ratio 19-20
3.5Creditors/PayablesTurnoverRatio 21-22
3.6Cash/Super QuickRatio 22-23
3.7Working CapitalTurnover Ratio 23-24
4 Findings& Conclusion 25-27
BIBLIOGRAPHY 28
Annexure-1 29-30
Annexure-2 31-32

5
 CHAPTER1:INTRODUCTION
1.1 BackgroundofStudy

In this project we have studies the performance of Working Capital Management of

CEATCompany Ltd. We find that performance of Working Capital may be measured from two
viewpoint, such as- (i) Measurement of efficiency of overall management and (ii) Measurement
ofefficiencyof management of eachcomponentof working capital.
For that, we have prepared different ratios and analysis them to check how
efficientlyworkingcapital has beenused in thebusiness.

1.2 Literaturereview

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
capitaland subjects on. Here, I have included the relevant articles as well research work on the
sametopic.Andthisisapartofmyresearchworkonthesametitletheworkingcapitalmanagementof
selected tyre companies of India. The main aim of this paper is to identify the gaps in currentbodyof
myresearch work whichgives the directiontowards forwardattention to begiven.

(a)NCEAR(1966):-

The National Council of applied Economic Research (NCEAR) in 1966 first time formal studywas
conducted on working capital management in India. The council published a structure ofworking
capital" which was limited analysis of the creation of working capital with specialattention to the
fertilizers, and cement and sugar industries the main objective of this study
wasemphasizedoncomeoutwithfindingsthatworkingcapitalmanagementpracticeswereextremelyun
plannedandhenceneedtodevelopproperaccountingpolicieslikeinventorymanagement,debtorsmana
gementasabove.Andthestudysuggesteddevelopingsuitableworkingcapital policiesrequired inthe
success of business.

6
(b) Kushwah,Mathur&Ball(2009):-

The study undergone to evaluate the working capital management and direction in selected
fivemajor cement companies i.e. ACC, Grasim, Ambuja, Prism and Ultra- Tech. For the
researchpurposesecondarydataareusedlikeauthorscollectedthefinancialstatementofselectedcement s
companies for the years from 2007 to 2009. There is liquidity ratios and activities ratiosare used to
analyse the condition of working capital of the companies. The study revealed thetruth of study is
that, most companies not maintain their working capital in a systematic waywhileoverall
ACCshows appropriate management of working capital.

(c) MadhaviK.(2014):-

She has done research based on empirical study of co relation among liquidity position
anprofitability of the paper mills in Andhra Pradesh. That has been evaluated ineffective
workingcapitalnegatively effecton profitability ofthe paper mills.

1.3 ResearchGap

From the above it is seen that previously no one has reviewed on this topic “Working
CapitalManagement” of my selected company “CEAT Company Ltd.” since last five years(March
2017toMarch 2021).
So, I have choose this above mentioned topic and Company with last five years data to done
myprojectwork.

1.4 Objective ofStudy

Theresearcherhas preparedthis projecttoanalyse somepositions ofthe
company,sothepurposes are-
(a) Tostudythechangesinthedifferentcomponentsintheworkingcapitalofthecompanyover
the studyperiod.
(b) Toanalysethe liquiditypositionof thecompany.
(c) Tostudytheactivityratiosinordertoanalysethemovementofstock,patternofcollectionfro
m debtors& the pattern ofpayment to the creditors.

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1.5 ResearchMethodology

(a) Natureofthestudy-Itis anempirical study.

(b) Sample-WehaveusedCEATCompanyforthisanalysisandweuselast5yearsdata (i.e.from

March 2017 to March2021).

(c) Datasource-Itis secondarydatabased analysis.

(d) Toolsused-The differenttools usedfor analysisare tablescharts &diagrams.

1.6Limitations ofStudy

Followinglimitationswerefacedduringpreparingthisproject-

(a) Limited Data- This project depends on only secondary data. Due to lack of time it
isimpossibleto collect theprimary data.

(b) Limited Period- This project is based on five year annual reports. Conclusions
arebasedon such limited data.

(c) Cost Involved- Due to cost involved is carrying out a project we could not carry
outintensive analysis as well as collection for data this might restrict our study to
sameextent.
1.7 ChapterPlanning

Thisprojectreport hasbeen dividedinfour logical parts-

8
 1. Chapter 1:Introduction
ThischapterincludesBackgroundofStudy,Literaturereview,Researchgap,ObjectiveofStudy,
Research Methodology, Limitations of Study, Chapter Planning.

2. Chapter2:ConceptualFramework
ThischapterincludesConcept,CompanyProfile,IndustryProfile,NationalScenario,Internatio nal
Scenario.

3. Chapter3: Presentation&Analysis of Data

Thischaptershowstheanalysisoffinancial datausingthefollowingratios
Current Ratio, Quick/Liquid/Acid Test Ratio, Inventory Turnover Ratio,
Debtors/ReceivablesTurnover Ratio, Creditors/Payables Turnover Ratio, Cash/Super Quick Ratio,
Working CapitalTurnoverRatio.

4. Chapter4: Findings& Conclusion

Thischapterisdivideintotwoparts.Thefirstpartshowsthefindingsofthestudy&thesecond
part shows the concluding portion ofthe study.

9
 CHAPTER2:CONCEPTUALFRAMEWORK

2.1 Concept

❖ WhatisWorkingCapital?

➢ Workingcapital,alsoknownasnetworkingcapital(NWC),isthedifferencebetween a
company’s current assets, such as cash, accounts receivable (customers’unpaid bills),
and inventories of raw materials and finished goods, and its currentliabilities, such as
accounts payable. NWC isa measure of a company's liquidityand refers to the
difference between operating current assets and operating currentliabilities. In many
cases, these calculations are the same and are derived fromcompany cash plus
accounts receivable plus inventories, less accounts payable, andless accruedexpenses.

❖ WhatisWorkingCapitalManagement?
➢ Working capital management is a business tool that helps companies effectivelymake
use of current assets, helping companies to maintain sufficient cash flow tomeet short
term goals and obligations. By effectively managing working capital,companies can
free up cash that would otherwise be trapped on their balance
sheets.Asaresult,theymaybeabletoreducetheneedforexternalborrowing,expandtheirb
usinesses, fund mergersor acquisitions, orinvest in R&D.

❖ ObjectivesofWorking CapitalManagement:-
➢ Toreviewtheworkingcapitalcontinuouslytomaintainuninterruptedflowofproductionan
d sales.
➢ Toreviewcurrentassetsorcurrentliabilitiesregularlyinordertoverifywhethertheliquidity
position of thefirmis at optimum level or not.
➢ Toforecastworking capitalfor newproject.

10
 ➢ Toforecastadditionalworkingcapital forsatisfyingtheincreaseddemand.
➢ Tomaintainpropercontroloninventories,tradereceivablesandcashbalance.

❖ ImportanceofWorking CapitalManagement:-
➢ Helpsinmaintainingoptimum levelofworkingcapital.
➢ Helpsinmaintainingoptimum levelofliquidity.
➢ Helpsinpropermanagementofcurrentassets.
➢ Co-ordinationbetweenfixedcapitalandworkingcapital.

2.2 CompanyProfile

CEAT Limited (formerly, CaviElettrici e Affini Torino) isan Indian multinational

tyremanufacturing company owned by the RPG Group. It was established in 1924 in Turin, Italy.
Asof date, CEAT is one of India's leading tyre manufacturers and has a presence in global
markets.CEAT produces over 165 million tyres a year and manufactures tyres for passenger cars,
two-wheelers, trucks and buses, light commercial vehicles, earth-movers, forklifts, tractors,
trailers,andauto-rickshaws. The currentcapacityof CEATtyres' plants is over800 tonnes perday.

▪ History
TheCompanywasfoundedasCaviElettricieAffiniTorino(ElectricalCablesandAllied
Products of Turin) by VirginioBruniTedeschi in 1924, in Turin, Italy. On 10 March 1958,
thecompanywasincorporatedasCEATTyresofIndia,inMumbai.Initially,thecompanycollaboratedw
iththeTataGroup.In1972,thecompanysetuparesearchanddevelopmentunitat Bhandup. In 1981,
Deccan Fibre Glass Limited was merged with the company. In 1982, RPGGroup acquired the
company, and in 1990, the company was renamed as CEAT. In 1993, thecompany collaborated
with Yokohama Rubber Company, to manufacture radial tyres at theirNashik unit. In 1999, CEAT
formed a joint venture, named as CEAT Kelani, with Asia MotorWorks (AMW) and KelaniTyres,
to manufacture and market CEAT tyresinSri Lanka. in
2006,CEATKelanicommissionedtheirfirstSriLanka-basedradial-
tyremanufacturingunitinKalutara.[13]In2009, AMW exited the joint-venture.

11
▪ Products
CEATmanufacturestyresforvarioustypesofvehicleslikeheavycommercialvehicle,light
Commercial vehicle, off-highwaytryes,passenger cars,tractors, motorcyclesandscooters,
cyclesandSUVs. It exports tocountries acrossthe Africa, Americas, Australia,andAsia.

2.3IndustryProfile

The Indian Tyre Industry is an integral part of the Auto Sector - It contributes to ~3% of
themanufacturing GDP of India and ~0.5% of the total GDP directly. So, let’s understand
thedynamicsof the Tyre Industry inIndia.

Indian tyre industry has almost doubled from ~Rs 30,000 crores in 2010-11 to ~Rs 59,500 croresin
2017-18 of which 90-95% came from the domestic markets. The top three companies -
MRF,Apollo Tyres and JK Tyres have ~60% of the market share in terms of revenue. In terms
ofsegmentationtyres can bedividedintwoways -based on endmarket and basedon product.

Based On End
MarketReplacement,OEMs&E
xports

Indiantyremarketisclearlyskewedtowardsthereplacementsegmentwhichcontributes~70%oftotalrev
enues.Whereasinvolume(tonnage)termsthereplacementsegmentcontributes ~60%
12
indicating realizations in the after-market are clearly higher than OEMs (Original
EquipmentManufacturer)market.

BasedOnProducts
Truck & Bus (T&B), Passenger Vehicle (PV), 2/3-Wheeler, Off-Highway Tyres (OHT)
&Others

T&BtyresinIndiageneratesthemajorrevenuei.e.55%oftotalrevenuewhereasgloballyit’sthe PCR
(Passenger Car Radials) contribute the largest portion of the revenue. This is mainlybecause of
very low penetration of passenger vehicles in India - below 20 per 1,000
peoplewhereasinChinathenumberis~69per1,000peopleand786per1,000peopleinUS.Intermsofvolu
me (tonnage) T&Bcontributes around ~50% ofthetotalvolume.
The demand from OEM’s is widely spread across the segmentwhere T&B contributed ~35%and PVs
& 2/3 Wheeler’s contributed ~25% & ~22% respectively. In term of the replacementsegment the
demand was more skewed towards the T&B tyres which contributed ~61% and PVs&2/3
Wheeler’scontributed ~14%& ~9% respectively.

2.4 NationalScenario

CEATisoneofthemostrespectedandwidelyrenownedbrandsintheIndiantyremarket.InFY20,itreport
edaconsolidatednetrevenuefromoperationsofRs.6,77,883Lacs,degrowth

13
by2.94%Y-o-Y.Revenuecontributionfrom2-Wheeler,PassengerVehiclesandOff-Highway tyre has
increased significantly over the years, from 20% in FY 10 to 52% in FY
20.TheGovernmentannouncedallocationofRs.1,70,000Croresforinvestmentsintransportationinfras
tructureinFY21.Thismoveisexpectedtoimproveroadnetwork,eventuallybenefittingautomobileman
ufacturersandtyresuppliers.

Indian Tyre Demand is expected to grow by 6-8% between FY 20 and FY 24. On the
volumegrowth front, thetyre industryisexpectedtowitnessaCAGRof4.8%between2020and2025, to
attain the level of 245 Million units in 2025. One of the factors backing this growthwould be the
countervailing duty imposed in June 2019 on the import of new pneumatic
radialtyresabove16inchesfromChina,foraperiodoffiveyears.

2.5 InternationalScenario

CEATisoneofthemajorexportersamongIndias’tyremanufacturerswithsalesto100+countriesworldwide.
Therevenuesfromexportshaveincreasedsteadilyoverthepastfewyears.
CEAThasastratifiedexportmarketdividedinsevenclusters.Thisidentificationofclustershas helped
CEAT better understand customer requirements and accordingly invest in R&D todevelopmarket-
specificproducts.CEATcontinuestoconsolidateitspositioninBangladeshandSriLanka through
JointVentures (JVs)with strategicpartners.CEATs corefocus
areasandgrowthdriversaretheTwowheeler,PassengerCarRadialandTBRtyresegments.CEATcontinues
tofocusonEuropeanmarketsto expanditsfootprint.
CurrencyfluctuationdestabilisingInternationalbusinessexistingmarketsinFY20,CEAThasenteredth
emarketsofAustralia,UK,Belgium,Brazil,ChileandNicaraguawithitspassengercarproducts. CEAT
has also entered theUS marketwith the products in TruckRadial segment. CEAT launched its 2-
Wheeler products in Nigeria which is the worlds largestconsumptionmarketfor2-Wheeler.
CEATsproductseriesinthePassengerCar,Winter,Summer,All-Season,UltraHighPerformance (UHP)
and Van categories launched in Europe have met the stringent performancerequirements of European
markets. CEAT is well-placed to maximise available opportunities
tobecomeoneoftheleadingplayersintheglobalmarketwithitshigh-rangeofpremiumproducts.

14
CHAPTER 3:PRESENTATION& ANALYSIS OFDATA

3.1 CurrentRatio

Thecurrentratioisa liquidityratio thatmeasuresacompany'sabilitytopayshort-termobligations or

those due within one year. It tells investors and analysts how a company
canmaximizethecurrentassetsonits balance sheetto satisfyitscurrentdebt and otherpayables.

❖ FormulaofCurrentRatio:-
CurrentRatio= TotalCurrentAssets
TotalCurrent Liabilities

• TotalCurrentAsset=(CurrentInvestments+Inventories+TradeReceivables+Cash&CashEqu
ivalent + ShortTerm LoansAndAdvances + Other Current Assets)

• TotalCurrentLiabilities=(ShortTermBorrowings+TradePayables+OtherCurrentLiabilities
+Short TermProvisions)

Year Mar’2017 Mar’2018 Mar’2019 Mar’2020 Mar’2021

CurrentAssets(Rs.incrore) (A) 1823.57 1748.08 1964.68 1795.42 2184.08
CurrentLiabilities(Rs.incrore) (B) 1337.61 1736.51 2058.95 2151.86 3009.13
CurrentRatio (A/B=C) 1.36 1.01 0.95 0.83 0.73

Mar'17
Mar'18
Mar'19
Mar'20
Mar'21

CurrentRatio
15
 Interpretation:-
Current Ratio indicates Company’s ability to payment short term liability. The Standard
CurrentRatio is2:1.On the basis of company’scurrent ratio fromMarch 2017 to 2021, we see
itdoesnot satisfy the ideal ratio (2:1). We also see it continuouslydecreasing from 2018 -
2021compared to 2017. It indicates company is unable to pay its short-term liability & day to
dayexpenses infuture.

3.2 Quick/Liquid/Acid-TestRatio

Thequickratioalsoknownas liquid ratio is an indicator of a company’s short-term

liquidity position and measures a company’s ability to meet its short-term obligations withits 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 calledthe acid
test ratio. An "acid test" is a slang term for a quick test designed to produce instantresults.
TheidealQuickratiois1:1.

❖ FormulaofQuick Ratio:-
QuickRatio= Quick
AssetsQuickLia
bilities

• QuickAssets= Total CurrentAssets- Inventories - PrepaidExpenses

• QuickLiabilities=TotalCurrent Liabilities -BankOverdraft

Year Mar'2017 Mar'2018 Mar'2019 Mar'2020 Mar'2021

CurrrentAssets(Rs.in crore) (A) 1823.57 1748.08 1964.68 1795.42 2184.08
Inventories(Rs.incrore) (B) 923.44 754.96 965.15 879.5 1112.5
PrepaidExpenses(Rs.incrore) (C) 0 0 0 0 0
QuickAssets(Rs.incrore)(A-B-C=D) 900.13 993.12 999.53 915.92 1071.58
CurrentLiabilities(Rs.incrore) (E) 1337.61 1736.51 2058.95 2151.86 3009.13
BankOverdraft(Rs.incrore) (F) 0 0 0 0 0
QuickLiabilities(Rs.incrore)(E-F=G) 1337.61 1736.51 2058.95 2151.86 3009.13

16
LiquidRatio (D/G=H) 0.67 0.57 0.49 0.43 0.36

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 Mar'2017
Mar'2018
Mar'2019
Mar'2020
Mar'2021

Quick/LiquidRatio
Interpretation:-

Quick ratio indicates company’s ability to pay immediate short term due & capacity for day today
expenses. Here we see that on the basis of company’s quick ratio from March 2017 to March2021,
it does not satisfy the ideal ratio (1:1). We also see it continuously decreasing from 2018 -
2021comparedto2017.Itindicatescompanyisunabletopayitsshorttermliability&daytodayexpenses
in future.

3.3 InventoryTurnoverRatio

Inventory turnover is the rate at which a company replaces inventory in a given period due
tosales.Calculatinginventoryturnoverhelpsbusinessesmakebetterpricing,manufacturing,marketing ,an
dpurchasingdecisions. Well-managedinventory levelsshowthatacompany'ssales are at the desired
level, and costs are controlled. The inventory turnover ratio is a measureofhow wella company
generates sales fromitsinventory.

❖ FormulaofInventoryTurnoverRatio:-
InventoryTurnoverRatio= Cost of Goods
SoldAverageInven
tory
• Costof Goods Sold= Revenue FromOperations (Net)- GrossProfit
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 • GrossProfit=RevenueFromOperations(Net)-CostofMaterialsConsumed-
PurchaseofStock-In-Trade - ChangesIn Inventories ofFG, WIP and Stock-In- Trade.

• AverageInventory=
OpeningInventory+ClosingInventory

Year Mar'2017 Mar'2018 Mar'2019 Mar'2020 Mar'2021

RevenueFromOperations(Net) (A) 5658.25 6075.37 6800.06 6518.57 7572.79
CostOf MaterialsConsumed (B) 3308.88 3650.33 4273.64 3815.97 4173.76
PurchaseOfStock-In Trade (C) 142.55 59.88 60.92 21.2 10.09

Changes In Inventories Of FG,WIP And Stock-

-76.15 93.32 -194.25 14.58 67.43
InTrade (D)

Gross Profit (A-B-C-D=E) 2282.97 2271.84 2659.75 2666.82 3321.51

CostOf GoodsSold (A-E=F) 3375.28 3803.53 4140.31 3851.75 4251.28
OpeningInventory (G) 619.25 923.44 754.96 965.15 879.5
ClosingInventory (H) 923.44 754.96 965.15 879.5 1112.5
AverageInventory (G+H/2=I) 771.345 839.2 860.055 922.325 996
InventoryTurnoverRatio(Times) (F/I=J) 4.38 4.53 4.81 4.18 4.27

Mar'2017
Mar'2018
Mar'2019
Mar'2020
Mar'2021

InventoryTurnoverRatio

19
Interpretation:-

Inventoryturnoverratioindicatesinventoryholdingperiod.Italsoindicateefficiencyininventory
management. If inventory turnover ratio is high, it means inventory holding period isvery low
which is good for a company and vice versa. Here we see that the Inventory TurnoverRatio of the
company is an increasing trend from the year March 2017 to March 2019. But in theyear March
2020 there is a decreasing trend and finally in the year March 2021 there is anincreasingtrend.

Itindicatescompany’smovement of thestockisquite satisfying.

3.4 Debtors/ReceivablesTurnover Ratio:-

The debtors turnover ratio also known asreceivables turnover ratio is an accounting measureused
to quantify a company's effectiveness in collecting its accounts receivable, or the moneyowed by
customers or clients. This ratio measures how well a company uses and manages thecredit it
extends to customers and how quickly that short-term debt is collected or is paid. A firmthat is
efficient at collecting on its payments due will have a higher accounts receivable turnoverratio. It
is useful to compare a firm's ratio with that of its peers in the same industry to
gaugewhetheritisonparwithitscompetitors.Ahighdebtorsturnoverratiomayindicateanimprovementi
nbusinessconditions,atighteningofcreditpolicies,orimprovedcollectionprocedures. A low ratio
may be an indication of long credit period or slow realisation fromdebtors.

❖ FormulaofDebtors/ReceivablesTurnoverRatio:-
Net Credit
Debtors/ReceivablesTurnoverRatio=
SalesAverageTradeReceiva
bles

• Itis assumethat allsalesaremade oncredit basis.

•
AverageTradeReceivables=OpeningTradeReceivables+ClosingTradeReceivables
2

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 Year Mar'2017 Mar'2018 Mar'2019 Mar'2020 Mar'2021
RevenueFromOperations (Net) (A) 5658.25 6075.37 6800.06 6518.57 7572.79
OpeningTradeReceivables(B) 577.94 592.05 712.15 726.46 704.66
ClosingTradeReceivables (C) 592.05 712.15 726.46 704.66 922.26
AverageTradeReceivables (B+C/2=D) 585.00 652.10 719.31 715.56 813.46
Debtors/ReceivablesTurnoverRatio(Times)(A/D=E) 9.67 9.32 9.45 9.11 9.31

Mar'2017
Mar'2018
Mar'2019
Mar'2020
Mar'2021

Debtors/ReceivablesTurnoverRatio

Interpretation:-
Debtors Turnover Ratio indicates the number of times per year that the average balance
ofdebtorsarecollected.HereweseethattheDebtors/ReceivablesTurnoverRatioofthecompanyis a
decreasing trend in the year March 2018 compared to the year March 2017 and after that avery
low increasing trend in the year March 2019 compared to the year March 2018 and again
itdecreased in the next year and finally it again increasing trend it the year March 2021
comparedtotheyearMarch2020.Itindicatescompany’scollectionperiodfromdebtorsarequitesatisfyi
ng.

21
 3.5 Creditors/PayablesTurnover Ratio:-
The Creditors Turnover Ratio also known as accounts payable turnover ratio is a short-
termliquidity measure used to quantify the rate at which a company pays off its suppliers.
Accountspayable turnover shows how many times a company pays off its accounts payable during
aperiod. Accounts payable are short-term debt that a company owes to its suppliers and
creditors.The accounts payable turnover ratio shows how efficient a company is at paying its
suppliers andshort-term debts. A high creditors turnover ratio may indicate strict credit terms
granted by thesuppliers.A low ratiomay be anindication of liberalcredit terms grantedby the
suppliers.

❖ Formulaof Creditors/PayablesTurnoverRatio:-
NetCreditPurchase
Creditors/PayablesTurnoverRatio=
AverageTradePayables

• Itis assumethatall purchase are madeon creditbasis.

Opening Trade Payables + Closing Trade

AverageTradePayables=
Payables2

Year Mar'2017 Mar'2018 Mar'2019 Mar'2020 Mar'2021

PurchaseOfStock-In-Trade (A) 142.55 59.88 60.92 21.2 10.09
OpeningTradePayables (B) 630.04 749.58 848.54 1033.93 1171.37
ClosingTradePayables (C) 749.58 848.54 1033.93 1171.37 1943.6
AverageTradePayables(B+C/2=D) 689.81 799.06 941.24 1102.65 1557.49
Creditors/PayablesTurnoverRatio(Times)(A/D=E) 0.21 0.07 0.06 0.02 0.01

22
 Mar'2017
Mar'2018
Mar'2019
Mar'2020
Mar'2021

Creditors/PayablesTurnoverRatio

23
 Interpretation:-
This ratio indicates the number of times per year that the average balance of creditors are paid.Here we
see that the Creditors Turnover ratio of five consecutive year is very low (i.e., below 1).Not only
that we also see that it continuously decreasing trend in every year. As the ratio is verylow,so itis clear
that liberalcredit terms grantedby the supplierstothecompany.

3.6 Cash/SuperQuickRatio:-

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. Themetriccalculatesacompany'sabilitytorepayitsshort-termdebtwithcashornear-
cashresources, such as easily marketable securities. This information is useful to creditors when
theydecide how much money, if any, they would be willing to loan a company. The cash ratio
isalmostlikeanindicatorofafirm’svalueundertheworst-casescenario—
say,wherethecompanyisabouttogooutofbusiness.Ittellscreditorsandanalyststhevalueofcurrentasset s
that could quickly be turned into cash, and what percentage of the company’s currentliabilities these
cashandnear-cash assets could cover.

❖ Formulaof Cash/SuperQuickRatio:-

‫݁݇ݎ‬
Cash/SuperQuickRatio= Cash & ‫ܽܥ ݏ‬ℎ ‫ ܽܯ ݅ݑ݈݊݁ܽݒ݈ܾ݁ܽݐ‬+ ‫ܧݍ݅ݑݐ݈݊݁ܽݒ݈ܾ݁ܽݐ‬
‫݅ݑ݈݊݁ܽݒ‬ ‫݅ݎ‬
ܵ݁ܿ ‫ݑݏ‬CurrentLiabilities

Year Mar'2017 Mar'2018 Mar'2019 Mar'2020 Mar'2021

Cash&CashEquivalent (A) 17.47 73.01 59.74 26.59 25.51
MarketableSecurities (B) 0 0 0 0 0
CurrentLiabilities (C) 1337.61 1736.51 2058.95 2151.86 3009.13
Cash/SuperQuickRatio(A+B/C=D) 0.01 0.04 0.03 0.01 0.01

24
 Mar'2017
Mar'2018
Mar'2019
Mar'2020
Mar'2021

Cash/SuperQuickRatio

Interpretation:-
Higherthesuperquick/cashratiobettertheliquidityconditionofabusiness.Intheabovecasefor every 1
unit of current liability, the company has on an average only 0.02 units of super quickassets,which is
very bad for the company.

3.7 WorkingCapitalTurnover Ratio:-

Working capital turnover is a ratio that measures how efficiently a company is using its
workingcapital to support sales and growth. Also known as net sales to working capital, working
capitalturnover measures the relationship between the funds used to finance a company's
operations andtherevenues a companygenerates tocontinue operations andturna profit.

A high turnover ratio shows that management is being very efficient in using a company’s shortterm
assets and liabilities for supporting sales. In other words, it is generating a higher
dollaramountof sales for every dollar ofworkingcapital used.

Incontrast,alowratiomayindicatethatabusinessisinvestingintoomany accountsreceivable and

inventory to support its sales, which could lead to an excessive amount of baddebts or
obsoleteinventory.

25
 ❖ Formulaof WorkingCapitalTurnoverRatio:-
‫ܽݎ‬
‫݊݁ݒ݊݋ ܱ݉݋݁݌݊݋‬
ܰ݁ ‫ܨݏ‬ ‫ܴ݁ݐ‬
‫݁ݑ‬
‫ݎܨ‬
‫݊݋ ܱ݉݋݁݌ܴ݁ݐ݊݁ݒ݁ݑ‬
‫݅ݐ‬
WorkingCapitalTurnoverRatio=
Workingcapital

• NetRevenueFromOperations= Gross RevenueFromOperations-Excise/ServiceTax/OtherLevies

• WorkingCapital=TotalCurrentAssets-TotalCurrentLiabilities

Year Mar'2017 Mar'2018 Mar'2019 Mar'2020 Mar'2021

NetRevenueFromOperations(A) 5658.25 6075.37 6800.06 6518.57 7572.79
TotalCurrentAssets (B) 1823.57 1748.08 1964.68 1795.42 2184.08
TotalCurrentLiabilities (C) 1337.61 1736.51 2058.95 2151.86 3009.13
WorkingCapital (B-C=D) 485.96 11.57 -94.27 -356.44 -825.05
WorkingCapitalTurnoverRatio (A/D=E) 11.64 525.10 -72.13 -18.29 -9.18

Mar'2017
Mar'2018
Mar'2019
Mar'2020
Mar'2021

WorkingCapitalTurnoverRatio

Interpretation:-
From the above we can see that the amount of sales gradually increases except in the year
March2020. But the Working Capital of the company was decreasing in a high rate and it goes
tonegative.We also see that the working capital turnover ratio increasing trend in the year
March2018 compared to the year March 2017 and after that there is a huge decreasing trend and it
goesto a negative ratio in the year March 2019 compared to the year March 2018 but in the next
twoyears (i.e.,March 2020 &March 2021)itincreasesbut theratiois negative.

24
 CHAPTER4:FINDINGS&CONCLUSION

4.1 Findings:-

Working Capital is the life line of every Industry, irrespective of whether it’s a
manufacturingindustry or service industry. Working Capital is the prime and most important
requirement forcarrying out the day operations of the business. Working capital gives the much
needed liquidityto the business. Working Capital finance reduces the overall fund requirement,
required to buildupthe current assets, which in turn help you improve your turnover ratio.
In this project we have studied “Working Capital Management”- A Case Study of
CEATCompany Ltd.

Themajorfindingsofthestudyare:-

✓ Theidealcurrentratiois2:1.Buttheratioaremuchbelowthantheidealratioof2:1.Even the
ratio are less than one from the year March 2019 to the year March
2021.Thisisanegativesideofthecompany.Sowecansaythatthecompanydoesnot
havetherequiredabilitytomeetits’short-termobligation.

✓ The ideal quick ratio is 1:1. We find the ratio are less than one in all year. Not
onlythatitisgraduallydecreasingintrend.Butthe higherquick ratioismuchbelowthanthe
ideal ratio of 1:1 understudy. So, we can surely say that the company is not
abletomeetitsshort-termliabilitiesorobligations.

✓ Theinventoryturnoverratio,whichshowsaquitegoodperformanceforthecompany.
From the Inventory Turnover Ratio we can see that the inventory arereplaced on an
average 83 days interval. We can surely say that the
companieshavinggoodinventoriesturnoverratiounderstudy.

25
✓ The debtor’s turnover ratio is used for efficiency of the company. A high
debtorsturnover ratio is good for any company. Here we cansee that the Debtors
Turnoverratioismuchgreaterthan9.Itindicatesthecompanythattheaveragecollection
Periodfromthedebtorsis40daysapprox.

✓ The creditors turnover ratio is also used for efficiency of the company. A
highcreditors turnover ratio is good for any company. Here we can see that the
CreditorsTurnover ratio is below 1. Not only that it is gradually decreasing in trend,
which isverybadforthecompany.

✓ Here we can see that the company's cash ratio is less than 1, it means there are
morecurrent liabilities than cash and cash equivalents. It means insufficient cash on
handexists to pay off short-term debt. This may not be bad news if the company
hasconditionsthatskewitsbalancesheets,suchaslengthier-than-normalcreditterms
with its suppliers, efficiently-managed inventory, and very little credit extended toits
customers.

✓ Ahighworkingcapitalturnoverratioshowsthatmanagementisbeingveryefficient in
using a company’s short-term assets and liabilities for supporting sales.In other
words, it is generating a higher dollar amount of sales for every dollar
ofworkingcapitalused.Incontrast,alowratiomayindicatethatabusinessisinvesting in
too many accounts receivable and inventory to support its sales, whichcould lead to
an excessive amount of bad debts or obsolete inventory. From thestudy here we can
see that this ratio is in much good position for the first year (i.e.,March 2017) and in
very good position in the next year (i.e., March 2018) and restyearsin a very bad
position.

26
4.2 Conclusion:-

In this project “Working Capital Management”- A Case Study of CEAT Company Ltd. ,which
is one of the most important aspects of any organization, as it deals in managing the entirecurrent
assets and current liabilities. After analyzing the financial statement and having a in-depth study
of various ratio of the company we conclude that the management of capital
requiresanevaluationofcostandbenefitsassociatedwitheachelements.CEATmaintainssoundposition
of working capital its efficiency in receivable when we considered the company’s current
ratio,quick ratio, debtor’s turnover ratio, creditor’s turnover ratio, cash ratio, inventory turnover
ratio,working capital turnover ratio, they are not showing good situation of the company but
thecompany make profile rigorously and they make profile by using their working capital in a
trickyway, but this procedure are not followed by all kind of company. The company has primarily
benon-cash drawn from the market and reaping full benefits of its brand name. The company
makesfullutilizationofits fundbefore making paymentsto outsiders.Weknowthatthe
CEATCompany is a biggest company and they have a very well goodwill, also we know that
thiscompany is day by day increasing all over the world. So finally, we can easily conclude
thatworking capital management has a great effect on the profitability of the company and
themanagers create value for the shareholders by decreasing receivables accounts and inventory
andthe managers must look for the method that by means of the correct management be effective
ontheprofitability ofthecompanies.

27
 BIBLIOGRAPHY

SL.NO. NAMEOFBOOKS AUTHOR

1 FinancialManagement Bhadra&Satpati

2 FinancialManagement Mr.SushilMukherjee

3 FinancialManagement SubrataKar&NimaiBagchi

4. Financialmanagement M.YKhan& P.K Jain

5. Financialmanagement Ravi. M.Kishore

6. Financialmanagement DebashishMajumdar,Dr.Sk.
Raju Ali&Dr.LutfunNesha

▪ Websitereference:-
1. www.google.com
2. www.moneycontrol.com
3. www.investopedia.com
4. en.wikipedia.org/wiki/CEAT_(company)
5. https://www.indiainfoline.com/company/ceat-ltd-management/management-
discussions/104
6. https://www.alphainvesco.com/blog/understanding-the-indian-tyre-industry/

28
Annexure-1

CEAT
StandaloneBalanceSheet inRs. Cr.
Mar21 Mar-20 Mar-19 Mar-18 Mar-17

12mths 12mths 12mths 12mths 12mths

EQUITIESANDLIABILITIES
SHAREHOLDER'SFUNDS
EquityShareCapital 40.45 40.45 40.45 40.45 40.45
TotalShareCapital 40.45 40.45 40.45 40.45 40.45
ReservesandSurplus 3,124.29 2,886.95 2,710.59 2,506.37 2,265.70
TotalReservesandSurplus 3,124.29 2,886.95 2,710.59 2,506.37 2,265.70
TotalShareholders’Funds 3,164.74 2,927.40 2,751.04 2,546.82 2,306.15
NON-CURRENTLIABILITIES

LongTermBorrowings 1,341.04 1,401.99 1,002.72 272.3 703.51

DeferredTaxLiabilities[Net] 265.6 261.11 207.71 178.15 134.59
OtherLongTerm Liabilities 79.57 164.47 4.61 12.91 27.16
LongTermProvisions 44.94 38.19 36.83 33.8 34.18
TotalNon-CurrentLiabilities 1,731.15 1,865.76 1,251.87 497.16 899.44
CURRENTLIABILITIES
ShortTermBorrowings 0.53 165.59 214.31 143.64 57.99
TradePayables 1,943.60 1,171.37 1,033.93 848.54 749.58
OtherCurrentLiabilities 957.42 693.25 710.86 694.19 475.44
ShortTermProvisions 107.58 121.65 99.85 50.14 54.6
TotalCurrentLiabilities 3,009.13 2,151.86 2,058.95 1,736.51 1,337.61
TotalCapitalAndLiabilities 7,905.02 6,945.02 6,061.86 4,780.49 4,543.20
ASSETS
NON-CURRENTASSETS
TangibleAssets 5,491.06 3,736.88 2,785.74 2,409.81 2,340.62
IntangibleAssets 0 83.59 60.57 65.44 68.25
CapitalWork-In-Progress 0 916.86 718.89 161.86 48.77
IntangibleAssetsUnderDevelopment 0 16.92 30.55 0 0
FixedAssets 5,491.06 4,754.25 3,595.75 2,637.11 2,457.64
Non-CurrentInvestments 118.11 320.22 313.01 279.99 194.39
LongTermLoans AndAdvances 7.57 4.73 4.08 3.04 1.95
OtherNon-CurrentAssets 104.2 70.4 184.34 112.27 65.65
TotalNon-Current Assets 5,720.94 5,149.60 4,097.18 3,032.41 2,719.63

29
CURRENTASSETS
CurrentInvestments
0 0 0 40.06 64.27
Inventories
1,112.50 879.5 965.15 754.96 923.44
TradeReceivables
922.26 704.66 726.46 712.15 592.05
CashAndCashEquivalents
25.51 26.59 59.74 73.01 17.47
ShortTerm LoansAndAdvances
0 50.32 58 49.02 50.02
OtherCurrentAssets
123.81 134.35 155.33 118.88 176.32
TotalCurrentAssets
2,184.08 1,795.42 1,964.68 1,748.08 1,823.57
TotalAssets
7,905.02 6,945.02 6,061.86 4,780.49 4,543.20
OTHERADDITIONALINFORMATION

CONTINGENTLIABILITIES,COMMITMENTS

ContingentLiabilities
0 1,118.98 1,738.22 1,459.67 555.2
CIFVALUE OFIMPORTS

EXPENDITUREINFOREIGNEXCHANGE

ExpenditureInForeignCurrency
0 1,797.45 2,009.43 1,385.56 1,442.52

REMITTANCESINFOREIGNCURRENCIESF
ORDIVIDENDS

DividendRemittance InForeign Currency

- - - - -
EARNINGSINFOREIGNEXCHANGE

FOBValueOfGoods
- 872.4 847.09 760.9 775.89
OtherEarnings
- - - - -
BONUSDETAILS
BonusEquity ShareCapital
- 4.04 4.04 4.04 4.04
NON-CURRENTINVESTMENTS

Non-CurrentInvestmentsQuotedMarketValue
- - - - -
Non-CurrentInvestmentsUnquotedBookValue
- 320.22 313.01 279.99 194.39
CURRENTINVESTMENTS

CurrentInvestmentsQuotedMarketValue
- - - 40.06 64.27
CurrentInvestmentsUnquotedBookValue
- - - - -

Source:DionGlobalSolutionsLimited

30
Annexure-2

CEAT
StandaloneProfit &Lossaccount inRs. Cr.
Mar21 Mar-20 Mar-19 Mar-18 Mar-17

12mths 12mths 12mths 12mths 12 mths

INCOME
RevenueFromOperations[Gross] 7,572.79 6,518.5 6,800.0 6,244.2 6,333.0
7 6 8 4
Less:Excise/ServiceTax/OtherLevies 0 0 0 168.91 674.79
RevenueFromOperations[Net] 7,572.79 6,518.5 6,800.0 6,075.3 5,658.2
7 6 7 5
OtherOperatingRevenues 0 62.54 31.24 85.97 43.48
TotalOperatingRevenues 7,572.79 6,581.1 6,831.3 6,161.3 5,701.7
1 0 4 3
OtherIncome 31.8 41.34 55.3 56.81 41.46
TotalRevenue 7,604.59 6,622.4 6,886.6 6,218.1 5,743.1
5 0 5 9
EXPENSES
CostOfMaterialsConsumed 4,173.76 3,815.9 4,273.6 3,650.3 3,308.8
7 4 3 8
PurchaseOfStock-InTrade 10.09 21.2 60.92 59.88 142.55
ChangesInInventoriesOf FG,WIPAndStock-InTrade 67.43 14.58 -194.25 93.32 -76.15
EmployeeBenefitExpenses 667.13 500.54 491.95 413.11 383.85
FinanceCosts 173.05 122.96 64.52 86.45 79.47
DepreciationAndAmortisation Expenses 339.58 255.4 174.3 161.68 142.01
OtherExpenses 1,680.59 1,523.5 1,561.5 1,317.3 1,282.6
2 1 2 0
TotalExpenses 7,111.63 6,254.1 6,432.5 5,782.0 5,263.2
7 9 9 1
Mar-21 Mar-20 Mar-19 Mar-18 Mar-17

12mths 12mths 12mths 12mths 12 mths

Profit/LossBeforeExceptional,ExtraOrdinaryItemsA
nd Tax 492.96 368.28 454.01 436.06 479.98
ExceptionalItems -34.06 -29.75 -44.24 -26.4 -13.33
Profit/LossBeforeTax 458.9 338.53 409.77 409.66 466.65

TaxExpenses-Continued Operations

CurrentTax 45.26 74.01 90.09 104.08 114.45

DeferredTax 0 -6.24 30.77 26.86 -10.53
31
TotalTaxExpenses 45.26 67.77 120.86 130.94 103.92
Profit/LossAfterTaxAndBeforeExtraOrdinaryItems 413.64 270.76 288.91 278.72 362.73
Profit/LossFromContinuingOperations 413.64 270.76 288.91 278.72 362.73
Profit/LossForThePeriod 413.64 270.76 288.91 278.72 362.73
Mar-21 Mar-20 Mar-19 Mar-18 Mar-17

12mths 12mths 12mths 12mths 12 mths

OTHERADDITIONALINFORMATION

EARNINGSPERSHARE

BasicEPS (Rs.) 102.26 66.94 71.42 68.9 8 .67

DilutedEPS(Rs.) 102.26 66.94 71.42 68.9 8 .67

VALUE OF IMPORTED AND INDIGENIOUS

RAWMATERIALS

STORES,SPARES ANDLOOSETOOLS

DIVIDENDAND DIVIDENDPERCENTAGE

EquityShareDividend 0 97.08 46.52 46.52 0

TaxOnDividend 0 17.87 8.29 5.53 0
EquityDividendRate(%) 180 120 120 115 115

Source:DionGlobalSolutionsLimited

32