Working Capiatal Management-Durgapur Steel Plant

TURNOVER IS VANITY, PROFIT IS SANITY BUT
CASH IS KING
“A COMPARATIVE STUDY ON
WORKING CAPITAL MANAGEMENT
WITH SPECIAL REFERENCE TO
DURGAPUR STEEL PLANT”
Submitted by Rudranil Bag

ROLL NO A-08-38, 2nd SEMESTER
GRADUATE SCHOOL OF BUSINESS AND ADMINISTRATION

GREATER NOIDA,
NATIONAL CAPITAL REGION
SAIL,
Durgapur Steel Plant
CONTENTS
TOPICS
• ACKNOWLEDGEMENT
• EXECUTIVE SUMMARY
• OBJECTIVE OF THE STUDY
• METHODOLOGY
• INDIAN STEEL INDUSTRY-A RETROSPECT

• AN OVERVIEW OF STEEL AUTHORITY OF
INDIA LTD.
• DURGAPUR STEEL PLANT-A PROFILE OF THE
COMPANY
• WORKING CAPITAL MANAGEMENT- AN
OVERVIEW
• COMPARATIVE ANALYISIS OF WORKING

CAPITAL
• MAJOR FINDINGS
• SHORTCOMINGS AND CONCLUSION
• RECOMMENDATIONS
• BIBLIOGRAPHY
SAIL,
ACKNOWLEDGEMENT
It was delightful learning experience to be associated with
STEEL AUTHORITY OF INDIA LIMITED. The six weeks spent at
DURGAPUR STEEL PLANT, one of the integrated production
units of STEEL AUTHORITY OF INDIA LIMITED, taught me many
things which will be with me throughout my life.
It is with greatest pleasure and pride that I present this report

before you. At this moment of triumph it would be unfair to
neglect all those who helped me in the successful completion of
this project.
First of all, I would like to thank the Dean of Graduate School of

Business And Administration Prof. V. N. Rai and my faculty
guide Prof.Rashid Khan for the help and guidance rendered for
the completion of the project.
It is beyond words to express our immense gratitude to our

project guide Mr. S.K. Nayak, Assistant general manager
(finance and accounts) for the guidance and inspiration
throughout this work. I am also very much thankful to senior
managers of all the divisions of finance department for their co-
operation while I visited their respective divisions.
Last but not the least I thank my family members for their
encouragement and support.
SAIL,
RUDRANIL BAG
(Roll No. A-08-38)
EXECUTIVE SUMMARY
LPG or Liberalization, Privatization and Globalization as it is
referred in short today have changed the scenario of corporate
world and management of enterprises in our country. It has
now become more important to not just manage an
organization but to achieve corporate excellence
simultaneously as the future belongs to learning and
performing organizations.
As every business concern irrespective of its size, nature, and
age needs funds to carry out business operations such as
purchase of raw materials, payment of wages and other day-to-
day expenses, working capital becomes an important and
integral part of business. Working capital is the life blood and
nerve centre of a business because no business can run
successfully without an adequate amount of it. Therefore, to
manage working capital in any sector is a challenging job.
The project report titled “A Comparative Study on Working
Capital Management with special reference to Durgapur
Steel Plant” deals with this matter and is based on the in-
house industrial training at Durgapur Steel Plant, pertaining to
the requirement for the Diploma of PGDM from “Graduate
SAIL,
School of Business And Administration.” Unless organization

learn to manage its working capital, success, will be elusive.
Thus, the effectiveness of an organization depends on the
strength of its working capital management as it is core to the
whole system. In the context of India’s Steel Industry working
capital management holds a greater significance because steel
which forms the backbone of any infrastructural facility, in
recent years has become more crucial for achieving rapid
economic growth of our country.
Keeping this background in view, an attempt is made to
examine the working capital practices in SAIL with special
reference to Durgapur Steel Plant. The project contain the basic
postulates of working capital, procedures for the analysis of
working capital, ratios being used to define the working capital
and the impact of shortcomings in the management of it . All
this had been done to get a clear view of the techniques of
working capital management in Durgapur Steel Plant.
OBJECTIVES OF THE STUDY

BROAD OBJECTIVES:
 To find out the efficiency of working capital management

in Durgapur Steel Plant and selected other major plants of
Steel Authority of India.
 To have a first hand experience of the functioning of a

large PSU Steel Plant.
 To have a practical experience of the functioning of the

Finance Department of a steel producing company.
 To study how working capital management practices plays

an important role in supporting other activities of an
integrated steel plant.
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SPECIFIC OBJECTIVES:
 To gain familiarity with the various components of working

capital in Durgapur Steel Plant.
 To judge the success of the management in carrying on

the daily transactions of the company.
 To gain an in-depth knowledge of the tricks of managing

the daily financial activities of DSP.
 To find out the difference between the theoretical and

practical aspect of working capital management.
 To study and come out with any solution for improvement

of working capital management at Durgapur Steel Plant.
SAIL,
METHODOLOGY
The data which I have collected for making this project is
combination of both primary and secondary data.
PRIMARY DATA:
This data had been collected through meetings and interviews
with various managers and employees of the finance
department located in the administrative building (ISPAT
BHAWAN) of Durgapur Steel Plant. At the same time I had
visited various departments for collection of data. The
departments that had been visited are as follows:-
 Main Cash Department
 Billing and Operation Department
 Budget Department
 Pay Section
 Excise Department.
 Welfare & Miscellaneous Bill Section
 Sales Department
 Project Management Department
SECONDARY DATA:
Apart from the primary data certain secondary data were
required for this project. Following are the sources of secondary
data:-
 Annual Reports
 Cost & Budget Reports
 Creditors Reports
 Debtors Reports
 Inventory Reports
 Cash Report
 Raw Materials Report
 Production Reports
SAIL,
 Sales Reports
The project report titled “A Comparative Study on Working

Capital Management with special reference to Durgapur
Steel Plant” required a comparative analysis of working
capital patterns followed in various steel plants of SAIL. The
following integrated steel plants of SAIL have been considered
for comparative analysis of their working capital:-
 Durgapur Steel Plant(DSP)
 Bhilai Steel Plant(BSP)
 Rourkela Steel Plant(RSP)
 Bokaro Steel Plant(BSL)

This study will assist to evaluate the efficiency of working
capital management practices in these plants and Durgapur
Steel Plant in particular. This in-depth analysis will help the
management of the companies to reduce the unnecessary
blockage of funds and make the best possible use of the
available funds. Here in this study, working capitals of the four
plants have been calculated sequentially and an effort has
been made to indentify the trend of working capital in the past
four years by analyzing the components of working capital. In
addition to this, certain ratios have been derived to give a
better picture of the efficiency of the management in dealing
with working capital in these plants. The analysis of plants
other than Durgapur Steel Plant is based only on financial data
provided by balance sheet. But working capital analysis also
needs some non-financial details. So this in-depth analysis is
confined to Durgapur Steel Plant only. Data of four consecutive
years starting from the year 2004-05 of the above steel plants
have been included for comparative study. Financial figures of
SAIL,
the year 2008-09 have not been taken for study because it is
under audit and not available for use.
INDIAN STEEL INDUSTRY-A RETROSPECT

India’s modern iron and steel industry dates back to the first
decade of the present century. The Tata Iron and Steel
Company Ltd (TISCO) was registered in and production at
Jamshedpur commenced in 1911-12.
In the years after independence in 1947, the prerogative for the
development of the steel industry, however, came to be vested
in the Indian State. Indian industry, as discussed earlier had
grown in a highly protected and controlled environment with
massive tariffs, administrative control over prices, distribution
and imports. The centralized planning process allocated
resources for the steel industry. However both TISCO and
Hindustan Steel Ltd (HSL) the precursor of SAIL did well till the
end of 1960s. The Indian Steel industry retained a clear and
substantive manufacturing cost competitive advantage with
respect to overseas producers, the paramount of state and its
apparatus notwithstanding in policy and operational matters.
It is also a matter of record that despite state leadership or
perhaps because of it ,the Indian steel industry over two
decades since the late 1960s steadily lost cost comparative
advantage in the world market. It emerged by international
standards as a relatively high cost and inefficient industry. Also,
the steel consumption in Indian economy was about 5kg in
1950 which increased to a meager 26.2kg in 1991-92, after our
SAIL,
four decades of planned growth. Thus in retrospect all early

projections during the planning years appeared to have been
excessively optimistic. By 1991, the level of apparent steel
consumption in India had reached only 15.85MT (Million
Tonnes) of finished steel or 20.3MT (Million Tonnes) of crude
steel.
In this context, it may be correct to conclude that the early
planners were seriously wrong in their assessment of India’s
ability to industrialize or it may have been the governments’
inability to translate earlier plans. The principle cause for failure
was its inability to mobilize necessary resources for public
investment. In addition the oil shocks of the 1970s also
aggravated the situation. All these factors along with
administered pricing followed a conventional cost plus
approach, cushioning the producers from the consequences of
their relative inefficiency. These factors contributed to
sustenance of the rising trend in domestic cost and price of
Indian steel leading to the inability of the industry to meet
international standards, not only in terms of product quality,
but also of packaging and customer service. All these factors
ultimately contributed to the tapering of growth, in the levels of
steel consumption as well as manufacturing capacities in India.
However, the actual ability of the economy to absorb steel
depends on the public policy regarding the rates and strategy
of investment and overall pace of development. In fact, the new
economic reforms initiated by the government in 1991-92 and
the policies attending them argue that the Indian state should
in principle largely withdraw from investment and production
activities.
The domestic as well as global market forces should thereafter
guide the production and pattern of investment in the
economy. This is necessary in the interest of industry for cost
competitiveness and efficient growth of the economy. Here it
SAIL,
may be worth mentioning that the same steel industry that was
stagnating in the early nineties saw a phenomenal growth in
the succeeding years, when the economic reforms were
introduced by government of India. With this, companies took
a more pro-active step to consolidate their positions in the India
as well as global markets. And finally the industry took the
challenge head along and looked forward to global markets for
future strategies. The result of all this is clearly in front of us
,with companies like SAIL marching again on the road of
profitability and productivity and Tata Steel acquiring global
steel majors like Corus steel to highlight this consolidation
process in recent times.
India is the world's fifth largest producer of steel which
produces 50 MT of crude steel and 52 MT of finished steel. It is
believed that by 2016, India is going to be the second largest
producer of steel and its production is going to be around 137
MT.
SAIL,
AN OVERVIEW OF STEEL AUTHORITY OF INDIA

LTD.
AN INTRODUCTION:
Steel Authority of India Limited (SAIL) is one of the leading
Steel manufacturing companies in India. It is fully integrated
iron and steel maker, producing both basic and special steel for
domestic consumption, engineering, power, railway,
automotive and defense industries and for sale in export
market.
Ranked in top ten public sector companies in India in terms of
turnover, SAIL manufactures a broad range of steel products,
including hot and cold rolled sheets and coils, galvanized
sheets, electrical sheets, railway products, structural, plates,
bars and rods, stainless steel and other alloy steel. SAIL
produces iron and steel at five integrated plants, and three
special steel plants, located principally in eastern and central
region of India and situated close to domestic sources of raw
material, including the company’s iron ore, limestone and
dolomite mines. The company has distinction of being India’s
largest producer of iron ore and of having the country’s second
largest mines network. This gives SAIL a competitive edge in
term of captive availability of iron ore, dolomite, and limestone
which are major inputs for steel making.
SAIL’s wide range of long and flat steel products is much in
demand in domestic as well as International market. This vital
responsibility is carried out by SAIL’s own Central Marketing
Organization (CMO) and the International Trade Division. CMO
encompasses a wide network of 34 branch offices and 54
stockyards located in major cities and towns throughout India.
With technical and managerial expertise and know-how in steel
making gained over four decades, SAIL’s Consultancy Division
SAIL,
(SAILCON) at New Delhi offers services and consultancy to

clients world-wide.
SAIL has a well equipped Research and Development Centre for
Iron and Steel (RDCIS) at Ranchi which helps to produce quality
steel and develop new technologies for the steel Industry.
Besides SAIL has its own in house Centre for Engineering and
Technology (CET), Management Training Institute (MTI) and
safety Organization at Ranchi. Its captive mines are under the
control of the Raw Material Division in Kolkata. The
Environment Management Division and Growth Division of SAIL
operate from their head Office in Kolkata. Besides SAIL has a
capacity for 700MW of captive power generation. The steel
plants of SAIL also produce fertilizers and chemicals.
A BRIEF HISTORY OF SAIL:

SAIL was established as a holding company at New Delhi on
24thJanuary 1973 with authorized share capital of Rs.2000
crores. This holding company was formed with four public
sector steel plants and the input industries in iron ore, coking
coal and scrap. The companies were Hindustan Steel Ltd,
Hindustan Steelworks Construction Ltd, Bokaro steel Limited,
Salem Steel Ltd, Bharat Coking Coal Ltd, National Mineral
Development Corporation. The shares of these companies were
held by the President of India and were transferred in March
1973 to SAIL. The paid up capital as on 31st March 1974 was
Rs.1326 crores.
It was converted into a into a unitary company in 1978 and is
now responsible for the management of the five integrated
steel plants at Bhilai in Chattisgarh, Bokaro in Jharkhand,
Durgapur and Burnpur in West Bengal and Rourkela in Orissa. It
is also responsible for the management of four alloy steel
plants at Salem in Tamil Nadu, Durgapur in West Bengal,
Bhadravati in Karnataka and Chandrapur in Maharastra.
SAIL,
VISION OF SAIL:
The vision of SAIL is to achieve market leadership and
prosper in business through satisfaction of customer needs by
continual improvement in quality, cost, delivery of products and
services.
OBJECTIVES OF SAIL:
 To help in rapid economic growth and industrialization of
the country.
 To create the necessary infrastructure for economic
development.
 To generate different employment avenues in the country.
 To promote balanced regional development.
 To assist the development of small scale and ancillary
industries.
SAIL,
DURGAPUR STEEL PLANT-A PROFILE OF THE

COMPANY
Durgapur Steel
Plant was set up in
the late 50s with an
initial annual
capacity of one
million tonnes of
ingot steel, which
was subsequently
expanded to 1.6
million tonnes per
year. The Colombo
Plan mission
headed by Sir Geric
Coates visited India in 1955 and recommended Durgapur as the
choice for setting up the integrated steel plant, to be built with
British Collaboration. The location was considered highly
desirable because of its proximity to nearby Coal-mines, Grand
Trunk Road, Railways lines connecting Calcutta and New Delhi,
Calcutta port, power from Damodar Valley Corporation (DVC)
and water from Durgapur Barrage. The first Chief Minister of
West Bengal Dr B.C.Roy along with India’s first Prime Minister
Pandit Jawaharlal Nehru had played a great role in establishing
this plant.
Durgapur Steel Plant was the third integrated steel plant of the
then Hindustan Steel Limited, the predecessor of today’s Steel
Authority of India (SAIL) under the public sector in India. The
first two were Rourkela Steel Plant at Rourkela in Orissa and
Bhilai Steel Plant at Bhilai in Madhya Pradesh and today
Chattisgarh in that order. Hindustan Steel Limited was later
merged into Steel Authority of India Limited. Durgapur Steel
SAIL,
Plant was incorporated into SAIL on 1st May 1978.It produced its
first Steel ingot on 25th April 1960
TECHNOLOGICAL STATUS OF DURGAPUR STEEL PLANT:

The Modernized DSP now has state-of-the-art technology for
quality steel making. The modernized units have brought about
improved productivity, substantial improvement in energy
conservation and better quality products. DSP’S steel making
complex and the entire mills zone, comprising its blooming and
billet mill, merchant mill, skelp mill, section mill and axle plant,
are covered under ISI :9002 Quality Assurance Certification.
PRODUCTION ACTIVITY OF THE COMPANY:

DSP has seven departments and all the departments are
making finished goods individually. The departments and
products are shown in the table:-
SL DEPARTMENT PRODUCT
NO.
1 Wheel & Axle Plant Wheels, Axle and Wheel sets

2 Skelp Mills Skelps and Strips
3 Blooming & Billet Blooms, Billets and Slabs
Mills
4 Merchant Mills Plain rounds and TMT Bars
5 Section Mills Angles, Channels and Joists
6 Continuous casting Billets
plant
7 Blast Furnace Pig Iron
SAIL,
SAIL,
SAIL,
WORKING CAPITAL MANAGEMENT-AN OVERVIEW

INTRODUCTION:
Working capital means the funds which are required to meet
the daily transactions of the business .In other words it refers to
that part of the firm’s capital which is required for financing
current assets such as cash, marketable securities, debtors and
inventories. Thus working capital is very significant facet of
financial management. Every business concern should have
adequate working capital to run its operations smoothly. It
should have neither excess working capital nor inadequate
working capital because both of these have adverse effects on
firm’s profitability and liquidity positions. Therefore, business
concerns should maintain adequate working capital. The basic
objective of working capital is to manage the firm’s current
assets and current liabilities in such a way that that a
satisfactory level of working capital is maintained.
Working capital policies have a great effect on a firm’s liquidity
and profitability. Therefore, the working capital should be
managed in such a way which will ensure higher profitability
and proper liquidity to the business concern.
The significance of working capital management is to ensure
that the organization maintains a ‘good fit’ with the changing
environment and strives to build the capability to cope with
challenges.
SAIL,
CONCEPTS OF WORKING CAPITAL
There are two concepts of working capital:

 Balance sheet concept or traditional concept.
 Operating cycle concept.
BALANCE SHEET CONCEPT OR TRADITIONAL CONCEPT
It shows the position of the firm at a certain point of time. It is

calculated on the basis of balance sheet prepared at a specific
date. In this method there are two types of working capital.
 Gross working capital
 Net working capital
GROSS WORKING CAPITAL

It refers to a firm’s investment in current assets. The sum of the
current assets is the working capital of the business. The sum
of the current is quantitative aspect of working capital which
emphasizes more on quantity than on its quality, but it fails to
reveal the true picture of the financial position of the business
because every increase in current liabilities will decrease the
gross working capital.
NET WORKING CAPITAL

It is difference between the current assets and current liabilities
or the excess of total current assets over total current
liabilities. It can also be defined as that part of a firm’s current
asset which is financed with long term funds. It may be either
negative or positive. When the current assets exceed the
current liabilities, the working capital is positive and vice-versa.
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OPERATING CYCYE CONCEPT
The duration or time required to complete the sequence of

events right from the purchase of raw materials for cash to the
realization of sales in cash is called operating cycle or working
capital cycle. The operating cycle consists of three phases:
In phase 1, cash gets converted into inventory. This would
include purchase of raw materials, conversion of raw materials
into work-in-progress, finished goods and terminate in the
transfer of goods to stock at the end of the manufacturing
process. In the case of trading organization, this phase would
be shorter as there would be no manufacturing activity and
cash will be converted into inventory directly. The phase will, of
course, be totally absent in case of service organizations.
In phase 2 of the cycle, the inventory is converted into
receivables as credit sales are made to customers. Firms which
do not sell on credit will obviously not have phase 2 of the
operating cycle.
The last phase, phase 3, represents the stage when receivables
are collected. This phase completes the operating cycle. Thus,
the firm has moved from cash to inventory, to receivables and
to cash again.
SAIL,
FIXED/PERMANENT WORKING CAPITAL

To carry on business, a certain level of working capital is
necessary on a continuous and uninterrupted basis, for all
practical purpose, the requirement has to be met as with other
fixed assets. Permanent working capital represents the
minimum level of raw materials, work-in-progress, finished
goods, stores, accounts receivables and cash which are in
circulation to ensure continuity of production.
Permanent working capital is again divided into two parts:
regular working capital and reserve working capital. The portion
of fixed working capital which is utilized to carry out the cyclical
operation of current assets in the form of conversion of liquid
cash into raw materials, raw materials into finished goods,
finished goods into debtors and debtors into liquid cash in a
continuous manner is known as regular working capital. On the
other hand, the portion of fixed working capital, which is
preserved for meeting uncertain and emergent working needs
SAIL,
(like sudden price hike, abnormal scarcity in times of war,

natural calamity, etc) is known as reserve working capital.
VARIABLE/TEMPORARY WORKING CAPITAL

Besides fixed working capital, a business may need additional
working capital to meet the growing demands of busy seasons
at stated intervals. If the demand for the products of the
business goes up at any time it needs additional funds to pay
for more materials, labour and other expenses and to meet the
requirement of cash balance to be maintained in the changed
situation. This additional working capital needed to feed the
operating cycle in busy business periods is known as variable or
temporary working capital. It is called variable or temporary
because the business does not need it always but it is required
according to the need of the situation.
Generally the importance of variable working capital is more
acute in business concern having seasonal market demands.
Variable or temporary working capital may be further sub-
divided into (a) seasonal working capital and (b) special
working capital.
The additional working capital required by a concern to carry
out its operating activities in busy seasons of high market
demands is known as seasonal working capital. Businesses
which mostly have seasonal demands of their products like ice-
cream, cold drinks, wool and likely products manufacturing
concern may need huge amount of seasonal working capital. In
other business concerns too the market may rise to the peak in
some particular time period. So in all types of business a
portion of working capital may be preserved for meeting
seasonal needs. On the other hand, the portion of working
capital that is needed by a concern to meet the extraordinary
requirements of special situations is known as special working
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capital. This is called special working capital because it is

needed in special situations and not in normal circumstances.
Diagrammatic representation of the concept of working capital
IMPORTANCE OF WORKING CAPITAL
 The adequate reserve of working capital ensures a steady

flow of raw materials to the production process.
 The adequate reserve of working capital indicates the
good solvency position of the concern and helps it to get
loan from the market at favorable terms.
 The adequate stock of working capital makes it possible

for a concern to purchase the trading goods in cash and
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cash purchase always carries the benefit of getting cash

discount.
 A strong working capital base is probably the only remedy

to overcome the odd situations like dull market conditions,
scarcity of raw materials and other components in case of
any emergency, sudden market fluctuations, etc.
 A business concern can exploit the market opportunities

with the help of adequate working capital.
 The regular flow of adequate working capital makes

possible efficient use of fixed assets, reduces wastage,
ensures quick replying of current assets, and establish a
well- tuned working environment.
 A quick rotation of working capital cycle and an efficient

management of working capital reduce cost and increases
production and sales. The combined effect of all these
favorably add to the profitability of the concern.
 The adequate amount of working capital and its quick

rotation increases profit. The rate of dividend of the
shareholders also increases as a result of such increase in
profit.
 Sufficient working capital helps in research and

development to face the present era of cut throat
competition and quick technological advancement.
DETERMINANTS OF WORKING CAPITAL

SAIL,
The total working capital requirement is determined by a wide

variety of factors. It should be, however, noted that these
factors affect different enterprises differently. They also vary
from time to time. In general, the following factors are involved
in a proper assessment of the quantum of working capital
required:-
GENERAL NATURE OF BUSINESS:
The working capital requirements of an enterprise are basically
related to the conduct of the business. According to the nature
of business they have to maintain a sufficient amount of cash,
inventories and book debts. The industrial concerns require
fairly large amounts of working capital though it varies from
industry to industry depending on their assets structure.
PRODUCTION CYCLE:
Another factor which has a bearing on the quantum of working
capital is the production cycle. The term “production or
manufacturing cycle” refers to the time involved in the
manufacture of goods. It covers the time-span between the
procurement of raw materials and the completion of the
manufacturing process leading to the production of finished
goods. To sustain such activities the need of working capital is
obvious.
BUSINESS CYCLE:
The working capital requirements are also determined by the
nature of the business cycle. The variations in business
conditions may be in two directions: (i) upward phase when
boom conditions prevail, and (ii) downward phase when
economic activity is marked by a decline. During the upswing of
the business activity the need of working capital is more as
opposed to the downward phase of the business.
PRODUCTION POLICY:
The requirement of working capital also depends on the
production policy of the firm. In manufacturing concerns having
SAIL,
mostly seasonal demand for the product the production policy

is a significant determinant of working capital.
CHANGES IN PRICE LEVEL:

General increase in price level increases working capital need
of a firm because the firm has to pay more for maintaining the
previous level on working capital
GROWTH AND EXPANTION:
As a company grows, it is logical to expect that a larger amount
of working capital will be required. The critical fact is however,
is that the need for increased working capital funds does not
follow the growth in business activities but precedes it.
AVAILABILITY OF RAW MATERIALS:
In case raw materials are easily available on soft terms the firm
does not require maintaining a huge inventory of raw materials.
Such a firm does not require blocking up huge amount of
working capital for this purpose. On the contrary if raw
materials are scarce and its supply is irregular and seasonal in
nature the firm needs to store a reasonable quantity of raw
materials in hand. The working capital need of such a firm is
significantly high.
DIVIDEND POLICY:
The payment of dividend consumes cash resources and,
thereby, affects working capital to that extent. Conversely, if
the firm does not pay dividend but retains the profits, working
capital will increase.
DEPRECIATION POLICY:
Depreciation policy also exerts an influence on the quantum of
working capital. Depreciation charges do not involve any cash
outflow. The effect of depreciation policy on working capital is,
therefore indirect.
SAIL,
At DSP depreciation is provided on straight line method at the

rates specified in schedule- XIV to the companies act, 1956.
However where the historical cost of the depreciable asset
undergoes a change, the depreciation on the revised amortized
depreciable amount is provided prospectively over the residual
useful life of the asset based on the rates specified in schedule-
XIV to the companies act, 1956. Depreciation on assets
installed/ disposed off during the year is provided with respect
to the month of addition/ disposal thereof.
STRUCTURE OF WORKING CAPITAL
The structure of working capital includes a study of the

components of current assets and current liabilities.
CURRENT ASSETS:
The list of current assets comprises inventories (including raw
materials, work-in-progress and finished goods and spares),
sundry debtors including receivables, readily realizable
securities and tax reserve certificates, short-term investments,
accrued incomes, prepaid expenses (not in the nature of
deferred charge), cash at bank, and cash in hand.
In Durgapur Steel Plant current assets are:
 Inventories (stores & spares, raw materials, semi-finished
products)
 Sundry debtors
 Cash & bank balances
 Interest receivable/accrued
 Loans & advances etc.
CURRENT LIABILITIES:
SAIL,
The list of liabilities includes trade creditors, accounts payable,

outstanding or accrued expenses, bank overdraft, outstanding
liabilities, short-term loans and borrowings and certain
obligations including different provisions, i.e., provision for
taxation, proposed dividend etc.
In Durgapur Steel Plant current liabilities are:
 Sundry creditors
 Advances from customers
 Security deposit
 Other liabilities etc.
FACTORS TO BE CONSIDERED WHILE ESTIMATING

WORKING CAPITAL REQUIREMENT
 Total costs incurred on materials, wages and overheads.

 The length of time for which raw materials remain in
stores before they are issued to production.
 The length of the production cycle or work-in-progress,

i.e., the time taken for conversion of raw materials into
finished goods.
 The length of the Sales Cycle during which finished goods

are to be kept waiting for sales.
 The average period of credit allowed to customers.
 The amount of cash required to pay day-to-day expenses

of the business.
SAIL,
 The amount of cash required for advance payments if any.
 The average period of credit to be allowed by suppliers.
 Time-lag in the payment of wages and other overheads.
SOURCE OF WORKING CAPITAL FOR DURGAPUR STEEL

PLANT
The allocated amount by the registered office of SAIL in New

Delhi gets transferred into the cash credit account of Durgapur
Steel Plant in State Bank of India, Durgapur. This cash credit
account is the source of working capital for DSP. The plant uses
this amount to meet its daily expenditure. At the end of the day
the balance of this account is transferred back into account of
SAIL, New Delhi. This practice is done on a daily basis.
IMPORTANCE OF WORKING CAPITAL RATIOS
Ratio analysis can be used by financial executives to check

upon the efficiency with which working capital is being used in
the enterprise. The following are the important ratios to
measure the efficiency of the working capital. The following,
easily calculated, ratios are important measures of working
capital utilization.
RATIOS Formulae Resu Interpretation
SAIL,
lt
Current Ratio Total Current =X It is the relationship between
Assets/Total times the amount of current assets
Current and the amount of current
Liabilities liabilities. It measures the short-
term liquidity position of the
firm.
Acid-Test Total Current =X Similar to the Current Ratio but

Ratio Assets- times takes account of the fact that it
Inventories/ may take time to convert
inventory into cash.
Total Current
Liabilities
Working Sales/Working =X A Higher Working Capital Ratio

Capital Capital times means lower investment in
Turnover working capital and better
Ratio profitability.
Stock Sales/Inventor =X On average, you turn over the

Turnover y days value of your entire stock every
Ratio(in x days. You may need to break
days) this down into product groups
for effective stock management.
Current Sales/Current =X It reflects the efficiency in

Assets Assets times generating sales by Current
Turnover assets.
Ratio
COMPARATIVE ANALYSIS OF WORKING CAPITAL

CALULATION OF WORKING CAPITAL FOR
DURGAPUR STEEL
SAIL,
PLANT
(In
crores)
YEA 2004- 2005- 2006- 2007-
R 05 06 07 08
CURRENT ASSETS:
INVENTORIES 473.07 539.23 691.51 761.97
SUNDRY DEBTORS 39.09 8.78 10.88 17.43
CASH & BANK 11.36 12.28 13.58 15.64
INTEREST RECEVIABLE 1.46 1.07 0.74 0.57
LOANS & ADVANCES 56.34 77.73 91.54 119.34
TOTAL CURRENT
ASSETS 581.32 639.09 808.25 914.95
CURRENT
LIABILITIES:
CURRENT LIABILITIES 323.36 298.76 358.46 402.99
PROVISIONS 27.41 24.65 27.75 24.97
TOTAL CURRENT
LIABILITIES 350.77 323.41 386.21 427.96
NET WORKING
CAPITAL 230.55 315.68 422.04 486.99
CHART SHOWING WC OF DSP:

500 486.99
422.04
400
315.68
300
230.55
200
100
0
2004-05 2005-06 2006-07 2007-08
NETWORKINGCAPITALOFDURGAPURSTEELPLANT
SAIL,
CALCULATION OF WORKING CAPITAL FOR BHILAI

STEEL
PLANT
(In
crores)
YEA 2005- 2006- 2007-
R 2004-05 06 07 08
CURRENT ASSETS:
1556.6
INVENTORIES 1041.68 1505.76 6 1712.9
SUNDRY DEBTORS 19.48 20.53 18.82 13.7
CASH & BANK 22.35 33.81 36.8 39.86
LOANS & ADVANCES 194.82 218.44 325.12 480.72
TOTAL CURRENT 1795.0 1951. 2259.7

ASSETS 1297.22 9 26 8
CURRENT
LIABILITIES:
PROVISIONS 93.98 103.46 79.37 82.42
TOTAL CURRENT 989.4 1273.0

LIABILITIES 988.55 953.62 5 1
NET WORKING 961.8
CAPITAL 308.67 841.47 1 986.77
1000 961.81 986.77
841.47
CHART SHOWING
800 WC OF BSP:
600
400 308.67
200
0
2004-05 2005-06 2006-07 2007-08
NETWORKINGCAPITALOFBHILAI STEELPLANT
SAIL,
CALCULATION OF WORKING CAPITAL FOR

ROURKELA
STEEL PLANT
(In
crores)
YEA 2004- 2005- 2006- 2007-
R 05 06 07 08
CURRENT ASSETS:
INVENTORIES 500.44 718.11 877.56 870.13
SUNDRY DEBTORS 12.44 14.6 12.96 11.66
CASH & BANK 15.75 17.22 18.79 20.66
LOANS & ADVANCES 195.93 212.72 230.94 243.15
TOTAL CURRENT 1142.0 1147.1

ASSETS 727.1 965.12 8 8
CURRENT
LIABILITIES:
PROVISIONS 50.52 49.57 50.78 48.35
TOTAL CURRENT
LIABILITIES 451.34 472.53 536.87 588.14
NET WORKING
CAPITAL 275.76 492.59 605.21 559.04
SAIL,
CHART SHOWING WC OF RSP:
700
600 605.21
559.04
500 492.59
400
300 275.76
200
100
0
2004-05 2005-06 2006-07 2007-08
NETWORKINGCAPITALOFROURKELA STEELPLANT
CALCULATION OF WORKING CAPITAL FOR
BOKARO STEEL
(In
crores)
YEA 2005- 2006- 2007-
R 2004-05 06 07 08
CURRENT ASSETS:
1365.5 1407.4
INVENTORIES 953.87 6 9 1185.74
SUNDRY DEBTORS 11.13 12.51 8.95 7.74
CASH & BANK 35.77 37.9 41.08 44
LOANS & ADVANCES 255.87 391.18 390.9 587.45
TOTAL CURRENT 1826.1 1862. 1835.8

ASSETS 1279.78 1 44 8
CURRENT
LIABILITIES:
SAIL,
PROVISIONS 99.22 94.82 53.99 48.27
TOTAL CURRENT 854.4

LIABILITIES 755.29 855.96 6 965.74
NET WORKING 1007.
CAPITAL 524.49 970.15 98 870.14
CHART SHOWING WC OF BSL:
1200
1000 970.15 1007.98
870.14
800
600 524.49
400
200
0
2004-05 2005-06 2006-07 2007-08
NETWORKINGCAPITALOFBOKARO STEELPLANT
ANALYSIS OF VARIOUS COMPONENTS OF
WORKING CAPITAL
INVENTORY ANALYSIS:
Inventory in SAIL is composed of the following three things:
Raw Materials
Stores and Spares
Finished and Semi-finished products
POSITION OF RAW MATERIALS IN DURGAPUR

STEEL PLANT
(In
crores)
SAIL,
YEA 2004- 2005- 2006- 2007-

R 05 06 07 08
RAW MATERIALS 1462.1 1532.4 1668.7 1856.6
CONSUMED 5 1 5 1
RAW MATERIALS
INVENTORY 79.83 126.18 123.41 74.67
DAILY
CONSUMPTION* 4 4.17 4.57 5.07
HOLDIND PERIOD(in
days)* 20 30 27 15
ANALYSIS THROUGH CHART:
30 30
27
25
20 20
15 15
10
5
0
2004-05 2005-06 2006-07 2007-08
RAW MATERIALHOLDING PERIOD IN DURGAPURSTEEL

PLANT
*Daily consumption=Raw materials
consumed/No. of days in a year
*Holding period=Raw materials inventory/
Daily consumption
INTERPRETATION:
The holding period shows an uneven trend. The holding period
in 2005-06 went up by 50% even though there was an increase
in consumption. From the year 2006-07 the holding period
came down significantly primarily due to the increase in
SAIL,
consumption. This is a good sign for the plant as it means

lesser amount of funds blocked. It reflects the initiatives of the
management in reducing the holding period. The year 2007-08
has been the best in terms of holding period where the
consumption is maximum among the four years and the
holding period is the least.
POSITION OF RAW MATERIALS IN BHILAI STEEL

PLANT
SAIL,
(In
crores)
YEA 2004- 2005- 2006- 2007-
R 05 06 07 08
RAW MATERIALS 3085.0 4302. 4718.5
CONSUMED 7 4214.3 72 8
RAW MATERIALS 342.9
INVENTORY 324.23 353.99 5 284.73
DAILY
CONSUMPTION* 8.45 11.55 11.79 12.9
HOLDIND PERIOD(in
days)* 38 31 29 22
40 38
31
30 29
22
20
10
0
2004-05 2005-06 2006-07 2007-08
RAWMATERIALHOLDINGPERIODIN BHILAI STEELPLANT

Daily consumption
INTERPRETATION:
The holding period in BSP shows a decreasing pattern. This
decreasing pattern Is a good sign, showing the efficiency of
the management in raw materials management. The plant
needs to carry on this trend.
SAIL,
POSITION OF RAW MATERIALS IN ROURKELA

STEEL PLANT
(In
crores)
YEA 2004- 2005- 2006- 2007-
R 05 06 07 08
RAW MATERIALS 1680.5 2144. 2311.8
CONSUMED 1277.3 9 68 1
RAW MATERIALS 174.5
INVENTORY 122.32 122.61 6 173.31
DAILY
CONSUMPTION* 3.5 4.6 5.87 6.32
HOLDIND PERIOD(in
days)* 35 27 30 27
40
35
30 30
27 27
20
10
0
2004-05 2005-06 2006-07 2007-08
RAWMATERIALHOLDINGPERIODIN ROURKELASTEEL
PLANT
SAIL,

Daily consumption
INTERPRETATION:
The analysis of the above table and chart shows that Rourkela
Steel Plant has an uneven trend in holding period of raw
materials. While the year 2007-08 is the most favorable among
the four years, year 2004-05 shows the highest holding period.
Such kind of trend is not desirable for a plant and can be
avoided by effective planning and implementation.
POSITION OF RAW MATERIALS IN BOKARO

STEEL PLANT
(In
crores)
YEA 2004- 2005- 2006- 2007-
R 05 06 07 08
RAW MATERIALS 2539.4 3548. 3765. 3672.8
CONSUMED 9 09 56 2
RAW MATERIALS 256.2 251.1
INVENTORY 253.48 1 3 168.28
DAILY
CONSUMPTION* 6.96 9.72 10.32 10.03
HOLDIND PERIOD(in
days)* 36 26 24 17
40
36
35
30
26
25 24
20 17
15
10
5
0
2004-05 2005-06 2006-07 2007-08
RAWMATERIAL HOLDINGPERIODIN BOKARO STEEL PLANT

SAIL,

Daily consumption
INTERPRETATION:
The holding period in Bokaro Steel Plant is decreasing year
after year with the increase in consumption. It is the lowest in
the year 2007-08 though the consumption has dipped as
compared to the previous year. Decreasing trend will help
Bokaro Steel Plant in having a good liquidity position.
POSITION OF STORES AND SPARES IN

DURGAPUR STEEL
PLANT
(In
crores)
YEA 2004- 2005- 2006- 2007-
R 05 06 07 08
STORES AND SPARES 358.5 382.4
CONSUMED 264.08 323.62 2 4
STORES AND SPARES 138.7
INVENTORY 93.47 115.97 1 151.2
DAILY
CONSUMPTION* 0.72 0.89 0.98 1.04
HOLDING PERIOD(in
days)* 130 130 142 145
SAIL,
145 145
142
140
135
130 130 130
125
120
2004-05 2005-06 2006-07 2007-08
STORESANDSPARESHOLDING PERIODIN DURGAPUR

STEELPLANT *Daily consumption=Raw materials
Daily consumption
INTERPRETATION:
The year 2005-06 is the best in terms of holding period of
stores and spares. Higher holding period means blockage of
funds which can be used by the company for other business
activities. In the year 2006-07 and 2007-08 the consumption
has gone up and at the same time the holding period has also
risen which reflects poor efficiency of the management.
Durgapur Steel Plant should frame plans to reduce the holding
period of stores and spares for the coming period.
POSITION OF STORES AND SPARES IN BHILAI
STEEL PLANT
(In
crores)
YEA 2004- 2005- 2006- 2007-
R 05 06 07 08
STORES AND SPARES
CONSUMED 782.15 896.48 991.24 1141.6
SAIL,
STORES AND SPARES

INVENTORY 331.72 417.62 444.12 465.75
DAILY CONSUMPTION* 2.14 2.46 2.71 3.12
HOLDING PERIOD(in
days)* 155 170 164 149
170 170
165 164
160
155 155
150 149
145
140
135
2004-05 2005-06 2006-07 2007-08
STORESANDSPARESHOLDINGPERIODIN BHILAI STEEL

PLANT *Daily consumption=Raw materials
Daily consumption
INTERPRETATION:
Bhilai Steal Plant displays a decreasing trend in holding period
of stores and spares from the year 2006-07. The year 2005-06
marks the highest holding period though there has been an
increasing in consumption which was reduced in the
subsequent years reflecting the fact that the management took
proper measures. Bhilai Steel Plant should try to reduce its
holding period more in future.
SAIL,
POSITION OF STORES AND SPARES IN ROURKELA

STEEL
PLANT
(In
crores)
YEA 2004- 2005- 2006- 2007-
R 05 06 07 08
STORES AND SPARES
CONSUMED 299.14 370.88 438 438.23
STORES AND SPARES
INVENTORY 166.56 202.08 283.95 300.64
HOLDING PERIOD(in
days)* 203 198 237 228
ANAYSIS THROUGH CHART:
240 237
230 228
220
210
203
200 198
190
180
170
2004-05 2005-06 2006-07 2007-08
STORESANDSPARESHOLDINGPERIODIN ROURKELA STEEL

PLANT *Daily consumption=Raw materials
Daily consumption
INTERPRETATION:
SAIL,
The analysis shows an uneven trend in Rourkela Steel Plant.

Though the consumption of stores and spares in Rourkela Steel
Plant has been increasing, the holding period has shown
fluctuations over the four years. The company should adopt
measures to control such a situation because the uneven trend
can be harmful for a company in managing the working capital.
POSITION OF STORES AND SPARES IN BOKARO

STEEL
PLANT
(In
crores)
2004- 2005- 2006- 2007-
YEAR 05 06 07 08
STORES AND SPARES
CONSUMED 614.88 682.57 814.8 845.37
STORES AND SPARES
INVENTORY 245.97 341.29 378.46 467.96
HOLDING PERIOD(in
days)* 146 182 170 202
250
202
200 182 170
150 146
100
50
0
2004-05 2005-06 2006-07 2007-08
STORESANDSPARESHOLDING PERIODIN BOKARO STEEL

PLANT
SAIL,

Daily consumption
INTERPRETATION:
Bokaro Steel Plant shows a similar situation as displayed by
Rourkela Steel Plant. While the management was able to bring
down the holding period in the year 2006-07 as compared to
the previous year but it couldn’t bring it further down in the
year 2007-08 when it again rose though the consumption had
gone up. Immediate control steps are required to be taken by
the company.
POSITION OF FINISHED AND SEMI-FINISHED

PRODUCT IN
DURGAPUR STEEL PLANT
(In
crores)
YEA 2004- 2005- 2006- 2007-
R 05 06 07 08
4029. 3760.4 4287.6 5274.7
TURNOVER 21 9 8 4
SEMI/FINISHED PRODUCT 299.7
INVENTORY 7 297.08 429.39 536.08
DAILY
CONSUMPTION* 11.04 10.3 11.75 14.41
HOLDING PERIOD(in days)* 27 29 37 37

40 37 37
30 29
27
20
10
0
2004-05 2005-06 2006-07 2007-08
FINISHED& SEMI-FINISHEDPRODUCT HOLDINGPERIODIN

DURGAPURSTEELPLANT
SAIL,
*Daily consumption= Turnover/No. of days in a

year
*Holding period=Semi & finished product
inventory/Daily consumption
INTERPRETATION:
The holding period has increased in the year 2005-06. Reason
for the increase has been the turnover which has gone down as
compared to the previous year. It reflects the inefficiency of the
management. At the same time, the holding period in the year
2007-08 has remained the same as compared to the year
2006-07 though, the turnover has increased and hence shows
better performance of the management. Holding huge amount
of finished and semi-finished product in stock is not desirable
for the plant. It means unnecessary blockage of capital.
PRODUCT IN
BHILAI STEEL PLANT
(In
crores)
YEA 2004- 2005- 2006- 2007-
R 05 06 07 08
TURNOVE 11389. 11217. 13526
R 2 3 .3 16518
SEMI/FINISHED PRODUCT 769.5 962.4
INVENTORY 385.73 734.15 9 2
SAIL,
25 24
21 21
20
15
12
10
5
0
2004-05 2005-06 2006-07 2007-08
FINISHED&SEMI-FINISHEDPRODUCTHOLDINGPERIODIN
BHILAI STEELPLANT *Daily consumption= Turnover/No. of days in a
year
INTERPRETATION:
BSP reflects the same pattern in holding of finished and semi-
finished product as displayed by Durgapur Steel Plant. The
company should take serious note of the situation and try to
reduce the holding period. Holding stock of finished and semi-
finished product is not always bad because it meets the
demand in the market even when there is a shortage of raw
materials but at the same time it means blockage of funds. So,
the company should try to have an adequate stock of
finished/semi-finished product which does not block a huge
amount of cash.
PRODUCT IN
ROURKELA STEEL PLANT
(In
crores)
SAIL,
YEA 2004- 2005- 2006- 2007-

R 05 06 07 08
4674. 4586.6 6335. 7231.6
TURNOVER 19 5 9 6
SEMI/FINISHED PRODUCT 211.5 424.3
INVENTORY 6 393.42 3 396.18
35
31
30
25 24
20 20
17
15
10
5
0
2004-05 2005-06 2006-07 2007-08
ROURKELA STEELPLANT
year
INTERPRETATION:
The table above shows that there has been a decreasing trend
in the last year. The year 2005-06 displays a high holding
period among the four years mainly due to the decrease in
sales. But it is good to see that the year 2007-08 has shown
lower holding period than the previous year which indicates
that the capital blocked in inventory is reducing.
SAIL,

PRODUCT IN
BOKARO STEEL PLANT
(In
crores)
YEA 2004- 2005- 2006- 2007-
R 05 06 07 08
9732.8 9537. 11004 12037.
TURNOVER 4 37 .7 6
SEMI/FINISHED PRODUCT 768.0
INVENTORY 454.42 6 777.9 549.48
DAILY
CONSUMPTION* 26.66 26.13 30.15 32.88
30 29
26
25
20 17 17
15
10
5
0
2004-05 2005-06 2006-07 2007-08
BOKARO STEELPLANT
year
INTERPRETATION:
SAIL,
After studying the above table and chart we find that in each
year the holding period has decreased than the previous year
except in the year 2005-06 where the turnover has gone down
resulting in the increase of holding period. The poor
performance of the company and the market demand are both
the reasons for lower turnover and thereby higher holding
period. The year 2007-08 where the turnover is the highest,
had the least holding period.
SUNDRY DEBTORS ANALYSIS:

POSITION OF SUNDRY DEBTORS IN DURGAPUR
STEEL
PLANT
(In
crores)
YEA 2004- 2005- 2006- 2007-
R 05 06 07 08
DEBTS OVER SIX
MONTHS 4.45 5.08 6.37 6.6
OTHER
DEBTS 37.76 7.28 8.27 17.16
42.21 12.36 14.64 23.76

LESS:PROVISIONS FOR
DOUBTFUL
DEBTS 3.12 3.58 3.76 6.33
TOT
AL 39.09 8.78 10.88 17.43
…
CHANGE IN AMOUNT … -30.31 2.1 6.55
SAIL,
40 39.09
30
20 17.43
10.88
10 8.78
0
2004-05 2005-06 2006-07 2007-08
SUNDRYDEBTORSIN DURGAPURSTEELPLANT
INTERPRETATION:
After studying the above table we find that the amount of
sundry debtors has been the highest in the year 2004-05 which
came down in the subsequent years due to lower amount of
other debts. The year 2005-06 reflects a negative change in
debtors which means cash recovered from debtors which can
be used for investment plans.
SAIL,
POSITION OF SUNDRY DEBTORS IN BHILAI STEEL

PLANT
(In
crores)
YEA 2005- 2006- 2007-
R 2004-05 06 07 08
DEBTS OVER SIX
MONTHS 27.22 29.03 28.35 30.79
OTHER
DEBTS 6.57 7.65 7.74 12.96
33.79 36.68 36.09 43.75

LESS:PROVISIONS
FOR
DOUBTFUL
DEBTS 14.13 16.15 17.27 30.05
SAIL,
TOT
AL 19.48 20.53 18.82 13.7
CHANGE IN ……
AMOUNT . 1.05 -1.71 -5.12
25
19.48 20.53
20 18.82
15 13.7
10
0
2004-05 2005-06 2006-07 2007-08
INTERPRETATION: SUNDRYDEBTORSIN BHILAI STEEL PLANT

The study of the above table shows that the amount of sundry
debtors had been minimum in the year 2007-08 mainly due to
huge amount of provision for doubtful debts. The provision for
doubtful debts had been minimum in the year 2004-05. The
year 2006-07 and 2007-08 shows a negative change in debtors
which indicates that cash had been recovered from sundry
debtors.
POSITION OF SUNDRY DEBTORS IN ROURKELA
STEEL PLANT
(In
crores)
YEA 2005- 2006- 2007-
R 2004-05 06 07 08
DEBTS OVER SIX
MONTHS 9.34 11.25 12.08 14.78
SAIL,
OTHER
DEBTS 6.39 6.56 5.06 3.74
15.73 17.81 17.14 18.52

LESS:PROVISIONS
FOR
DOUBTFUL
DEBTS 3.29 3.21 4.18 6.86
TOT
AL 12.44 14.6 12.96 11.66
CHANGE IN ……
AMOUNT . 2.16 -1.64 -1.3

15 14.6
12.44 12.96
11.66
10
0
2004-05 2005-06 2006-07 2007-08
INTERPRETATION:SUNDRYDEBTORSIN ROURKELA STEELPLANT

The analysis of the table shows that from the year 2006-07 the
amount of debtors have declined which is an excellent sign for
the plant as it reduces the risk of bad debts for the plant. The
marginal reduction in the amount of other debts had been one
of the reasons for the decline in sundry debtors from the year
2006-07.
SAIL,
POSITION OF SUNDRY DEBTORS IN BOKARO

STEEL PLANT
(In
crores)
YEA 2005- 2006- 2007-
R 2004-05 06 07 08
DEBTS OVER SIX
MONTHS 37.59 36.38 35.44 36.64
OTHER
DEBTS 4.92 7.01 6.32 7.03
42.51 43.39 41.76 43.67

LESS:PROVISIONS
FOR
DOUBTFUL
DEBTS 31.38 30.88 32.81 35.93
TOT
AL 11.13 12.51 8.95 7.74
CHANGE IN ……
AMOUNT . 1.38 -3.56 -1.21
14
12.51
12 11.13
10 8.95
8 7.74
6
4
2
0
2004-05 2005-06 2006-07 2007-08
SUNDRY DEBTORSIN BOKARO STEELPLANT

SAIL,
INTERPRETATION:
There has been a marginal increase in sundry debtors in the
year 2005-06 due to increase in other debts after which there
has been a continuous decline in sundry debtors which reflects
lesser amount of blockage of cash. The plant should try to
maintain the same situation in future. The year 2006-07 and
2007-08 shows recovery from debtors and this is quite positive
for the plant.
CASH AND BANK ANALYSIS:
POSITION OF CASH AND BANK BALANCE IN
DURGAPUR
STEEL PLANT
(In
crores)
YEA 2006- 2007-
R 2004-05 2005-06 07 08
CASH AND STAMP IN
HAND 0.1 0.12 0.14 0.14
CHEQUES 0N
HAND 0 0.02 0 0.98
WITH SCHEDULED BANK:
TERM
DEPOSIT 11.26 12.14 13.44 14.52
TOT
AL 11.36 12.28 13.58 15.64
CHANGE IN …
AMOUNT ….. 0.92 1.3 2.06
16THROUGH CHART:
ANALYSIS 15.64
14 13.58
12.28
12 11.36
10
8
6
4
2
0
2004-05 2005-06 2006-07 2007-08
CASHANDBANKBALANCEIN DURGAPURSTEELPLANT
SAIL,
INTERPRETATION:
The analysis of the table and chart shows that there has been
an increasing trend. The main reason for this increasing trend
is the increase in term deposit. Cash and bank is the most
liquid asset for any company and it should be maintained at a
balanced level.
BHILAI STEEL
PLANT
(In
crores)
YEA 2005- 2006- 2007-
R 2004-05 06 07 08
CASH AND STAMP IN
HAND 0.23 0.29 0.33 0.34
CHEQUES ON
HAND 0.18 1.08 0.01 0
WITH SCHEDULED
BANK:
TERM
DEPOSIT 21.94 32.44 36.46 39.52
TOT
AL 22.35 33.81 36.8 39.86
CHANGE IN .... 11.46 2.99 3.06
SAIL,
AMOUNT
40 39.86
36.8
33.81
30
22.35
20
10
0
2004-05 2005-06 2006-07 2007-08
CASHANDBANKBALANCEIN BHILAI STEELPLANT

INTERPRETATION:
The amount of cash and bank balance is the highest in the year
2007-08 which is primarily due to higher amount of fixed
deposits. It reflects a healthy liquidity position of the plant.
More utilization of cash and bank balance is desirable for the
plant.

ROURKELA
STEEL PLANT
(In
crores)
2004- 2005- 2006- 2007-
YEAR 05 06 07 08
CASH AND STAMP IN
HAND 0.08 0.17 0.15 0.23
CHEQUES ON
HAND 0 0 0 0
SAIL,

TERM
DEPOSIT 15.59 16.99 18.58 20.36
CURRENT
ACCOUNT 0.08 0.06 0.06 0.07
TOTA
L 15.75 17.22 18.79 20.66
CHANGE IN ..
AMOUNT .. 1.47 1.57 1.87
25
20.66
20 18.79
17.22
15.75
15
10
5
0
2004-05 2005-06 2006-07 2007-08
CASHANDBANKBALANCEIN ROURKELA STEELPLANT

INTERPRETATION:
Detailed study of the above figures shows that the plant enjoys
a healthy liquidity position. The plant should take measures to
utilize the unnecessary cash so that the production level can be
improved.

BOKARO STEEL
PLANT
SAIL,
(In
crores)
YEA 2004- 2005- 2006-
R 05 06 07 2007-08
CASH AND STAMP IN
HAND 0.19 0.21 0.19 0.25
CHEQUES ON
HAND 0 0 0 0.03
TERM
DEPOSIT 35.58 37.69 40.89 43.72
TOT
AL 35.77 37.9 41.08 44
CHANGE IN ...
AMOUNT . 2.13 3.18 2.92

50
44
41.08
40 35.77 37.9
30
20
10
0
2004-05 2005-06 2006-07 2007-08
INTERPRETATION:CASHANDBANKBALANCE IN BOKARO STEELPLANT

The table shows that the position of cash and bank balance in
BSL is similar to the position of previous three years of the
plant. The liquidity position shows an improvement year after
year. It is both positive as well as negative. Positive because it
means good liquidity position and negative because it means
SAIL,
unnecessary cash lying with the company. Thus, a balanced

level of cash and bank balance should be maintained.
INTEREST RECEIVABLE ANALYSIS:

POSITION OF INTEREST RECEIVABLE IN
DURGAPUR STEEL
PLANT
(In
crores)
YEA 2004- 2005- 2006- 2007-
R 05 06 07 08
INTEREST RECEIVABLE 0R
ACCURED:
EMPLOYEES 1.46 1.07 0.74 0.57
OTHERS 0 0 0 0
1.46 1.07 0.74 0.57

LESS:PROVISION FOR
DOUBTFUL
INTE
REST 0 0 0 0
TOT
AL 1.46 1.07 0.74 0.57
CHANGE IN
AMOUNT …… -0.39 -0.33 -0.17
SAIL,
1.6
1.46
1.4
1.2 1.07
1
0.8 0.74
0.6 0.57
0.4
0.2
0
2004-05 2005-06 2006-07 2007-08
INTERESTRECEIVABLEIN DURGAPURSTEELPLANT
INTERPRETATION:
Interest receivable refers to the interest that is due to be
received. Durgapur Steel Plant gives short term loan to its
employees, suppliers, customers etc. The study shows that
there is a decreasing trend in interest receivable in Durgapur
Steel Plant. It is a great sign for the plant because it indicates
timely collection of interest from the concerned parties. The
plant should look forward to keep this kind of trend in future as
well.
SAIL,
POSITION OF INTEREST RECIVABLE IN BHILAI

STEEL PLANT
(In
crores)
YEA 2004- 2005- 2006- 2007-
R 05 06 07 08
ACCURED:
EMPLOYEES 18.89 15.34 13.67 10.88
OTHERS 0 1.21 0.19 1.72
18.89 16.55 13.86 12.6

LESS:PROVISION FOR
DOUBTFUL
INTE
REST 0 0 0 0
TOT
AL 18.89 16.55 13.86 12.6
CHANGE IN …
AMOUNT .. -2.34 -2.69 -1.26
SAIL,
20 18.89
16.55
15 13.86
12.6
10
0
2004-05 2005-06 2006-07 2007-08
INTERESTRECEIVABLE IN BHILAI STEEL PLANT

INTERPRETATION:
After studying four year’s data of interest receivable in BSP we
find that there is a decreasing trend which is an indicator of
good health for the plant. But there is still further scope of
improvement for the plant.
POSITION OF INTEREST RECEIVABLE IN

ROURKELA STEEL
PLANT
(In
crores)
2005- 2006- 2007-
YEAR 2004-05 60 07 08
INTEREST RECEIVABLE 0R ACCURED:
EMPLOYEES 2.54 1.92 1.44 1.06
OTHE
RS 0.08 0.63 0.47 0.52
2.62 2.55 1.91 1.58

LESS:PROVISION FOR
DOUBTFUL
SAIL,
INTERE
ST 0.08 0.08 0.08 0
TOTA
L 2.54 2.47 1.83 1.58
CHANGE IN
AMOUNT …… -0.07 -0.64 -0.25

3
2.54 2.47
2.5
2 1.83
1.58
1.5
1
0.5
0
2004-05 2005-06 2006-07 2007-08
INTEREST RECEIVABLE IN ROURKELA STEELPLANT

INTERPRETATION:
The year 2007-08 marks the lowest amount of interest
receivable. The reason for this has been a lower interest
receivable from employees and others. There has been a
negative change in interest receivable from the year 2005-06
which means interest recovered by the plant.
POSITION OF INTEREST RECEIVABLE IN BOKARO
STEEL
PLANT
(In
crores)
YEA 2004- 2005- 2006- 2007-
R 05 06 07 08
SAIL,
ACCURED:
EMPLOYEES 22.72 17.89 13.48 10.41
OTHERS 0.42 1.07 0.54 0.54
23.14 18.96 14.02 10.95

LESS:PROVISION FOR
DOUBTFUL
INTE
REST 0 0 0 0
TOT
AL 23.14 18.96 14.02 10.95
CHANGE IN
AMOUNT …… -4.18 -4.94 -3.07

25 23.14
20 18.96
15 14.02
10.95
10
0
2004-05 2005-06 2006-07 2007-08
INTERESTRECEIVABLEIN BOKARO STEELPLANT
INTERPRETATION:
SAIL,
By analyzing the above table we find that there is a decreasing

trend in interest receivable. It displays the fact that the
management of the company has been quite effective in
lowering the amount of interest receivable. It can be said that
the amount of interest receivable would come down more in
future which will mean reduction in the blockage of funds.
SAIL,
LOANS AND ADVANCES ANALYSIS:

POSITION OF LOAN AND ADVANCES IN
DURGAPUR STEEL
PLANT
(In
crores)
YEA 2004- 2005- 2006- 2007-
R 05 06 07 08
LOANS:
EMPLOYEES 3.42 10 15.49 19.3
STORES
ISSUED 0.03 0 0 0
OTHERS 0.21 0.21 0.21 0.2
ADVANCE RECEIVABLE IN CASH OR IN
KIND OR VALUE TO BE
RECEIVED:
CLAIMS
RECOVERABLE 28.16 37.38 40.59 46.08
CONTRACTORS AND
SUPPLIERS 11.41 11.29 8.44 7.59
EMPLOYEES 0.89 1.11 9.49 8.97
INCOME TAX RECEVORABLE 0 0.26 0.36 0.8
OTHERS 10.61 10.54 11.59 17.85
DEPOSITS:
PORT TRUST, EXCISE
DEPT,RAILWAYS ETC 9.01 13.99 11.93 26.4
OTHERS 0.08 0.11 0.13 0.11
63.82 84.88 98.23 127.3

LESS: PROVISION FOR DOUBTFUL
LOAN AND 7.48 7.16 6.69 7.96
SAIL,
ADVANCES
TOT 119.3
AL 56.34 77.73 91.54 4
CHANGE IN
AMOUNT ……. 21.39 13.81 27.8
120 119.34
100 91.54
80 77.73
60 56.34
40
20
0
2004-05 2005-06 2006-07 2007-80
LOAN ANDADVANCESIN DURGAPURSTEELPLANT

INTERPRETATION:
The position of loan and advances in Durgapur Steel Plant has
an increasing trend. This may be considered as a good signal
for the plant. The increasing pattern shows that the company is
giving advances for the expansion of plant and machinery
which is very important for the better production of steel
although company’s cash is blocked.
SAIL,
POSITION OF LOAN AND ADVANCES IN BHILAI

STEEL PLANT
(In
crores)
2004- 2005- 2006- 2007-
YEAR 05 06 07 08
LOANS
:
EMPLOYEES 35.91 58.74 83.59 116.71
STORES
ISSUED 0 0 0 0
OTHER
S 1.65 0 0 0
KIND OR VALUE TO BE
RECEIVED:
CLAIMS 101.9 152.3
RECOVERABLE 98.89 1 5 176.59
CONTRACTORS AND
SUPPLIERS 21.13 12.24 12.76 36.53
EXPORT INCENTIVE 2.8 1.26 1.04 2.22
OTHER INCOME TAX
RECEVORABLE 0 0 0 0
OTHER 2.72 3.58 0.75 1.63
SAIL,
S
DEPOSITS:
PORT TRUST, EXCISE DEPT,
RAILWAYS ETC 22.68 22.41 33.57 83.93
OTHER
S 71.75 73.24 97.01 119.79
273.3 381.0
257.53 8 7 537.4
LESS: PROVISION FOR
DOUBTFUL
LOANS AND
ADVANCES 62.71 54.94 55.95 56.67
TOTA 218.4 325.1 480.7

L 194.82 4 2 3
CHANGE IN 106.6 155.6
AMOUNT ……. 23.62 8 1
500 480.73
400
325.12
300
194.82 218.44
200
100
0
2004-05 2005-06 2006-07 2007-08
LOAN ANDADVANCESIN BHILAI STEELPLANT

SAIL,
INTERPRETATION:
After analyzing it is found that the loan and advances has been
increasing mainly due to the increase in loans to the
employees and increase in claims recoverable. It is maximum
in the year 2007-08. There has been a significant decrease in
provision for doubtful loans and advances in the year 2005-06
which is good for the plant.
POSITION OF LOAN AND ADVANCES IN

ROURKELA STEEL
PLANT
(In
crores)
YEA 2004- 2005- 2006- 2007-
R 05 06 07 08
LOANS:
SAIL,
EMPLOYEES 10.69 17.02 25.27 31.31

STORES
ISSUED 0 0 0 0
OTHERS 0.93 0.93 0.93 0.93
KIND OR VALUE TO BE
RECEIVED:
CLAIMS
RECOVERABLE 58.87 65.9 68.7 75.9
CONTRACTORS AND SUPPLIERS 16.27 5.5 13.14 12.89
EMPLOYEES 0.05 0.12 0.32 0.11
INCOME TAX RECEVORABLE 0 0 0 0
128.8 128.4
OTHERS 119.5 7 123.74 8
DEPOSITS:
RAILWAYS ETC 6.89 7.22 13.9 10.58
OTHERS 16.8 6.95 6.94 10.02
232.5 252.9 270.2

230 1 4 2
LESS: PROVISION FOR
DOUBTFUL
LOAN AND
ADVANCES 34.07 19.79 22 27.07
TOT 195.9 212.7 230.9 243.1

AL 3 2 4 5
CHANGE IN …
AMOUNT … 16.79 18.22 12.21
SAIL,
250 243.15
230.94
212.72
200 195.93
150
100
50
0
2004-05 2005-06 2006-07 2007-08
LOAN ANDADVANCESIN ROURKELA STEELPLANT

INTERPRETATION:
A detailed study of loan and advances in Rourkela Steel Plant
reveals that the increase in loans to the employees, claims
recoverable and deposit in port trust, excise department,
railways etc has been the prime reason for the increase in the
amount of loan and advances over the four years. The
increasing trend is a testimony to the fact that the plant is
trying to modernize its production resources.
SAIL,
POSITION OF LOAN AND ADVANCES IN BOKARO

STEEL
PLANT
(In
crores)
YEA 2004- 2005- 2006- 2007-
R 05 06 07 08
LOANS:
EMPLOYEES 39.56 59.09 80.94 95.26
STORES
ISSUED 0 0 0 0
OTHERS 7.81 5.96 5.23 5.15
ADVANCE RECEIVABLE IN CASH
OR IN
KIND OR VALUE TO BE
RECEIVED:
CLAIMS 143.7
RECOVERABLE 74.79 98.64 142.02 1
CONTRACTORS AND SUPPLIERS 39.62 57.93 42.02 62.91
EMPLOYEES 3.35 7.35 1.99 3.15
INCOME TAX RECEVORABLE 0 0 0 0.62
121.0
OTHERS 53.09 82.97 77.34 1
DEPOSITS:
RAILWAYS 41.99 77.41 37.92 80.43
105.2
OTHERS 32.75 35.48 39.4 5
292.9 426.8
6 425 6 617.4
LESS: PROVISION FOR
DOUBTFUL
SAIL,
LOAN AND
ADVANCES 37.09 33.82 35.96 29.95
TOT 255.8 391.1 587.4

AL 7 8 390.9 5
CHANGE IN … 135.3 196.5
AMOUNT … 1 -0.28 5
600 587.45
500
400 391.18 390.9
300 255.87
200
100
0
2004-05 2005-06 2006-07 2007-08
LOAN ANDADVANCESIN BOKARO STEELPLANT

INTERPRETATION:
Bokaro Steel Plant has an uneven trend in loan and advances.
There has been a negative change in the amount of loan and
advances in the year 2006-07 and this means recovery of loan
and advances which can be useful for the company in other
business activities. The continuous decrease in provision for
doubtful debt and advances is a positive sign for the plant.
SAIL,
CURRENT LIABILITIES ANALYSIS:

POSITION OF CURRENT LIABILITIES IN
DURGAPUR STEEL
PLANT
(In
crores)
2004- 2005- 2006- 2007-
YEAR 05 06 07 08
SUNDRY
CREDITORS:
MICRO AND SMALL
ENTERPRISES 0 0 0 0.87
SMALL SCALE INDUSTRIAL
UNITS 0.35 0.62 0.54 0
SUBSIDIARY
COMPANY 1.53 0 7.17 0.93
OTHERS 155.3 118.91 158.91 156.06
ADVANCES FROM:
CUSTOMER 22.8 21.03 20.45 23.16
OTHERS 3.62 5.14 2.82 4.52
SECURITY 22.25 22.8 25.42 30.75
SAIL,
DEPOSITS
STORES RECEIVED ON LOAN 0 0 0 0
LESS: INVESTMENT
RECEIVED AS
SECURITY DEPOSIT: 0 0 0 0
OTHER LIABILITIES 117.51 130.26 143.15 186.7
TOTA 298.7 358.4 402.9

L 323.36 6 3 9
CHANGE IN
AMOUNT …… -24.6 59.7 44.53
500
400 402.99
358.43
323.36
300 298.76
200
100
0
2004-05 2005-06 2006-07 2007-08
CURRENTLIABILITIESIN DURGAPURSTEELPLANT
SAIL,
INTERPRETATION:
If we analyze the above table then we can see that it follows an
uneven trend. The important component of current liabilities
here are sundry creditors and other liabilities. In the year 2005-
06 it decreased by 8% and then it increased in the next two
years. High current liabilities indicate that the company is using
credit facilities by creditors.
POSITION OF CURRENT LIABILITIES IN BHILAI

STEEL PLANT
(In
crores)
YEA 2004- 2005- 2006- 2007-
R 05 06 07 08
SUNDRY
CREDITORS:
MICRO AND SMALL
ENTERPRISES 0 0 2.34 2.22
UNITS 0.06 0.91 0 0
SAIL,
SUBSIDIARY COMPANY 11.08 0.49 2.83 7.16

OTHERS 570.12 516.68 516.64 651.97
ADVANCES FROM:
CUSTOM
ER 10.7 16.89 18.88 31.9
OTHERS 0 1.75 0.2 1.75
SECURITY
DEPOSITS 44.47 42.13 35.07 37.28
STORES RECEIVED ON LOAN 2.98 0.05 4.64 11.6
LESS:INVESTMENT
RECEIVED AS
SECURITY DEPOSIT 0 0 0 0
TOT 894.5 850.1 1190.5

AL 7 6 910.08 9
CHANGE IN … -
AMOUNT ….. 44.41 59.92 280.51
ANALYSIS1200
THROUGH CHART: 1190.59
1000 910.08
894.57 850.16
800
600
400
200
0
2004-05 2005-06 2006-07 2007-08
CURRENTLIABILITIESIN BHILAI STEELPLANT

SAIL,
INTERPRETATION:
The status of current liabilities in Bhilai Steel Plant reveals a
similar kind of trend as reflected by Durgapur Steel Plant. The
company was successful in decreasing its current liabilities in
the year 2005-06 as shown by the table. But its current
liabilities increased by 31% in the year 2007-08. Clearly, the
company failed to continue its good efforts of keeping its
current liabilities down.
POSITION OF CURRENT LIABILITIES IN

ROURKELA STEEL
SAIL,
PLANT
(In
crores)
2005- 2006- 2007-
YEAR 2004-05 06 07 08
SUNDRY
CREDITORS:
MICRO AND SMALL
ENTERPRISES 0 0 0 0.25
UNITS 4.35 3.96 5.11 0
SUBSIDIARY
COMPANY 0.08 2.07 1.56 0.01
287.1
OTHER 234.54 229.08 2 307.69
ADVANCES FROM:
CUSTOME
R 7.75 7.1 7.54 12.37
OTHERS 3.74 2.8 5.72 3.17
SECURITY
DEPOSITS 25.01 27.11 32.75 33.26
STORES RECEIVED ON LOAN 0 0 0 0
LESS: INVESTMENT
RECEIVED AS
SECURITY DEPOSIT 0.35 0.03 0.03 0.01
146.3
OTHER LIABILITIES 125.7 150.87 2 183.05
TOTA 422.9 486.0 539.7

L 400.82 6 9 9
CHANGE IN …
AMOUNT …… 22.14 63.13 53.7
SAIL,
600
539.79
500 486.09
400.82 422.96
400
300
200
100
0
2004-05 2005-06 2006-07 2007-08
CURRENTLIABILITIESIN ROURKELA STEELPLANT
INTERPRETATION:
From the above table it is evident that current liabilities in
Rourkela Steel Plant follow an increasing trend. This increasing
trend is not a good sign for the plant. The company should take
steps to bring it down in the coming years. When the
companies have minimum liabilities, it creates a better
goodwill in the market and hence it is always desirable to
maintain a lower level of current liabilities.
SAIL,
POSITION OF CURRENT LIABILITIES IN BOKARO

STEEL
PLANT
(In
crores)
2005- 2006- 2007-
YEAR 2004-05 06 07 08
SUNDRY
CREDITORS:
MICRO AND SMALL
ENTERPRISES 0 0 0 0
UNITS 6.95 1.95 0 0
SUBSIDIARY COMPANY 7.83 0 0.5 0
OTHE
R 328.39 303.77 324.57 432.68
ADVANCES FROM:
CUSTOMER 35.35 24.16 25.57 30.2
OTHERS 0.04 0.11 0.11 73.84
SECURITY
DEPOSITS 29.45 42.91 67.68 23.69
STORES RECEIVED ON
LOAN 0 0 0 0
LESS: INVESTMENT
RECEIVED AS
SECURITY DEPOSIT 0 0 0 0
SAIL,
761.1 917.4
TOTAL 656.07 4 800.47 7
CHANGE IN 105.0
AMOUNT …….. 7 39.33 117
1000 917.47
800 761.14 800.47
656.07
600
400
200
0
2004-05 2005-06 2006-07 2007-08
CURRENTLIABILITIESIN BOKARO STEELPLANT

INTERPRETATION:
SAIL,
After a detained analysis of the above table, we can find that

the current liabilities in Bokaro Steel Plant also follow an
increasing trend. Its current liabilities increased by 16% in
2005-06, 5% in 2006-07 and 15% in 2007-08 mainly due to the
growth in other liabilities. Its sundry creditors showed a
significant decline in the year 2005-06, after which it started
rising in the next two years.
PROVISIONS ANALYSIS:
POSITION OF PROVISIONS IN DURGAPUR STEEL
PLANT
(In
crores)
2004- 2005- 2006- 2007-
YEAR 05 06 07 08
VOLUNTARY RETIREMENT
SCHEME 13.01 8.88 5.82 3.67
EMPLOYEE FAMILY BENEFIT
SCHEME 11.17 12.42 12.83 13.37
OTHE
RS 3.23 3.35 9.1 7.93
SAIL,
TOTA
L 27.41 24.65 27.75 24.97
CHANGE IN ….
AMOUNT . -2.76 3.1 -2.78
28 27.75
27.41
27
26
25 24.97
24.65
24
23
2004-05 2005-06 2006-07 2007-08
PROVISIONSIN DURGAPURSTEELPLANT
INTERPRETATION:
If we analyze the above table we can find that it follows an
uneven trend. The decrease in provisions for voluntary
retirement scheme and others lead to a 10% decline in
provisions in the year 2005-06 which in the subsequent year
2006-07 rose by 13%.
POSITION OF PROVISIONS IN BHILAI STEEL PLANT

(In
crores)
YEA 2004- 2005- 2006- 2007-
R 05 06 07 08
VOLUNTARY RETIREMENT 12.45 8.92 5.14 3.31
SAIL,
SCHEME
SCHEME 69.13 74.1 74.05 78.94
OTHERS 12.4 20.44 0.18 0.17
TOT 103.4
AL 93.98 6 79.37 82.42
CHANGE IN -
AMOUNT ….. 9.48 24.09 3.05
120
103.46
100 93.98
79.37 82.42
80
60
40
20
0
2004-05 2005-06 2006-07 2007-08
INTERPRETATION:PROVISIONSIN BHILAI STEELPLANT

If we study the above table in a detailed manner it can be
concluded that the amount of provisions had increased in
almost all years except in 2006-07 when it declined by 23%.
While the amount of provisions had been the lowest in the year
2006-07, it had been the highest in the year 2005-06. Failure to
follow a standard policy to keep the provisions at a minimum
level is probably the reason for such an uneven trend.
POSITION OF PROVISIONS IN ROURKELA STEEL
PLANT
SAIL,
(In
crores)
YEA 2004- 2005- 2006- 2007-
R 05 06 07 08
SCHEME 18.05 12.85 8.88 5.73
SCHEME 32.47 34.97 36.03 39.72
OTHERS 0 1.75 5.87 2.9
TOT
AL 50.52 49.57 50.78 48.35
CHANGE IN
AMOUNT ….. -0.95 1.21 -2.43
51 50.78
50.5 50.52
50
49.57
49.5
49
48.5 48.35
48
47.5
47
2004-05 2005-06 2006-07 2007-08
INTERPRETATION: PROVISIONSIN ROURKELA STEELPLANT

The fluctuations in provisions for voluntary retirement scheme
and others are responsible for the uneven trend in provisions in
Rourkela Steel Plant. The company had increased its provisions
for employees family benefit scheme over the four years which
is important for the benefit of the employees and their families.
SAIL,
The year 2005-06 and 2007-08 shows a negative change in

amount of provisions.
POSITION OF PROVISIONS IN BOKARO STEEL

PLANT
(In
crores)
YEA 2004- 2005- 2006- 2007-
R 05 06 07 08
SCHEME 25.28 19.27 14.63 10.12
SCHEME 23.65 24.28 25.3 24.66
OTHERS 50.29 51.27 14.06 13.49
TOT
AL 99.22 94.82 53.99 48.27
CHANGE IN
AMOUNT ….. -4.4 -40.83 -5.72
100 99.22
94.82
80
60 53.99
48.27
40
20
0
2004-05 2005-06 2006-07 2007-08
PROVISIONSIN BOKARO STEELPLANT

SAIL,
INTERPRETATION:
The provisions in Bokaro Steel Plant show a consistent
decrease over the four years. More amount of provisions
means blockage of funds. So, a lower amount of provisions is
always a good sign for the plant. At the same time a balanced
level of provisions should be made for the employees and other
parties.
WORKING CAPITAL RATIOS

CURRENT RATIO:
This ratio reflects the firm’s ability to pay its current liabilities
and the strength of its working capital. The standard of the
normal ratio is 2:1 but in most of the companies, standard is
taken according to Tandon Committee which is 1.33:1.
Current Ratio= Current Assets/Current Liabilities.
YEAR 2004-05 2005-06 2006-07 2007-08
Durgapur 1.66:1 1.98:1 2.09:1 2.14:1

Steel
Plant
Bhilai 1.31:1 1.88:1 1.97:1 1.78:1
Steel
Plant
Rourkela 1.61:1 2.04:1 2.13:1 1.95:1
Steel
Plant
Bokaro 1.69:1 2.13:1 2.18:1 1.90:1
Steel
Plant
SAIL,
INTERPRETATION:
If we analyze the four’s data it can be said that Durgapur Steel
Plant has shown an increasing trend. Its financial position has
improved in every year and is better than the other plants of
SAIL being considered here.
Bhilai Steel Plant, Rourkela Steel Plant and Bokaro
Steel Plant hold a good position as reflected by the ratios
except in the year 2007-08 where the ratio has gone down but
is greater than the standard ratio of 1.33:1.
ACID-TEST RATIO:
Acid test ratio is a refinement of current ratio. As it excludes
inventory from current assets, it can more effectively measure
the short term debt paying ability. The conventional ratio is 1:1
(i.e. every rupee of short term liabilities must be backed by
equivalent liquid assets.
Acid-Test Ratio= Total Current Assets-Inventories/Total
Current Liabilities
YEAR 2004-05 2005-06 2006-07 2007-08
Durgapur 0.31:1 0.31:1 0.30:1 0.30:1

Steel
Plant
Bhilai 0.26:1 0.30:1 0.40:1 0.43:1
Steel
Plant
SAIL,
Rourkela 0.50:1 0.52:1 0.49:1 0.47:1

Steel
Plant
Bokaro 0.43:1 0.54:1 0.53:1 0.67:1
Steel
Plant
INTERPRETATION:
From the above table it is clear that Durgapur Steel Plant does
not meet with the standard ratio but it can be said that its
liquidity position on an average is stable and the company is
required to improve the current position.
The liquidity position of Bhilai Steel Plant, Rourkela
Steel Plant and Bokaro Steel Plant is sound as well and is on an
increasing trend except for the year 2006-07 and 2007-08
when there is a slight fall in the liquidity position of Rourkela
Steel Plant.
WORKING CAPITAL TURNOVER RATIO:

This ratio indicates the relationship between sales and working
capital. Higher the ratio lower is the investment in working
capital and higher is the profitability. On the other hand, a low
working capital ratio indicates that the working capital is not
efficiently utilized.
Working Capital Turnover Ratio= Sales/Net Working
Capital
SAIL,
YEAR 2004-05 2005-06 2006-07 2007-08
Durgapur 17.48 11.91 10.16 10.83

Steel
Plant
Bhilai 36.90 13.33 14.06 16.74
Steel
Plant
Rourkela 16.95 9.31 10.47 12.94
Steel
Plant
Bokaro 18.56 9.83 10.92 13.83
Steel
Plant
(Note:-Figures are in times)
INTERPRETATION:
A detailed analysis of above table reveals that Durgapur Steel
Plant follows an uneven trend in these four years of study.
Working capital ratio has been the highest in the year 2004-05
which came down in later years. The company needs to make
better use of its working capital.
On the other hand Bhilai, Rourkela and Bokaro Steel
Plants show an increasing trend after 2005-06 which means
that their investment in working capital is lower and these
companies are utilizing more of its profits.
INVENTORY TURNOVER RATIO:

SAIL,
This ratio tells the story by which stock is converted into sales.
Usually, a high inventory turnover ratio reveals the liquidity of
the inventory, i.e., how many times on an average, inventory is
sold during the year. Needless to say that if a firm maintains
minimum stock level in order to maximize sales by quick
rotation of inventory, no doubt, the profit will be maximized
since the holding cost of inventory will be minimal.
Inventory Turnover Ratio= Sales/Average Inventory
YEAR 2004-05 2005-06 2006-07 2007-08
Durgapur 9.41 7.42 6.96 7.25

Steel
Plant
Bhilai 11.50 8.80 8.83 10.10
Steel
Plant
Rourkela 9.66 7.52 7.94 8.37
Steel
Plant
Bokaro 11.68 8.22 7.93 9.28
Steel
Plant
INTERPRETATION:
From the above table it is clear that Durgapur Steel Plant has a
very inconsistent inventory turnover ratio. While in the year
2004-05 it was the highest, 2006-07 shows the lowest ratio.
But in the year 2007-08 the ratio increased by 4% and reached
7.25 times. As there is no standard inventory turnover ratio, it
SAIL,
can be concluded that Durgapur Steel Plant on an average is

efficient in converting its stock into sales.
Bhilai Steel plant, Rourkela Steel Plant and Bokaro
Steel Plant also displays a similar inconsistency in their ratios.
The management of these plants needs to take steps to
establish a better efficiency in managing their inventories.
CURRENT ASSETS TURNOVER RATIO:

This ratio measures the degree of efficiency in utilizing the
current assets. Higher the ratio, the better is the utilization of
current assets. In other words, it indicates how much rupee of
investment in current assets generates sales. Hence, a lower
ratio is not desirable.
Current Assets Turnover Ratio=Sales/Current Assets
YEAR 2004-05 2005-06 2006-07 2007-08
Durgapur 6.93 5.88 5.30 5.77

Steel
Plant
Bhilai 8.78 6.25 6.93 7.31
Steel
Plant
Rourkela 6.43 4.75 5.55 6.30
Steel
Plant
Bokaro 7.61 5.22 5.91 6.56
Steel
Plant

SAIL,
INTERPRETATION:
After analyzing the figures of the four years, it can be said that
Durgapur Steel Plant has made a much better utilization of
current assets than the other three plants of SAIL. Durgapur
Steel Plant had a very much stable ratio as compared to Bhilai
Steel Plant, Rourkela Steel Plant and Bokaro Steel Plant which
had fluctuations in the current assets turnover ratio over the
four years. Its ratio of 6.93 was the highest in the year 2004-
05.
MAJOR FINDINGS
YEAR 2004-05 2005-06 2006-07 2007-08
NET 230.55 315.58 422.04 486.99

WORKING
By 447% By 37% By 34% By 15%
CAPITAL
INVENTORI 473.07 539.23 691.51 761.97
ES
By 24% By 14% By 28% By 10%
SUNDRY 39.09 8.78 10.88 17.43
DEBTORS
By 9% By 78% By 24% By 60%
CASH & 11.36 12.28 13.58 15.64
BANK
By 109% By 8% By 11% By 15%
BALANCE
LOANS 56.34 77.73 91.54 119.34
AND
By 5% By 38% By 18% By 30%
ADVANCES
CURRENT 323.36 298.76 358.46 402.99
LIABILITIE
By 30% By 8% By 20% BY 12%
SAIL,
PROVISIO 27.41 24.65 27.75 24.97

NS
By 86% By 10% By 13% BY 10%
(Figures are in crores)
Note:-The above table showing major findings is in respect of Durgapur

Steel Plant.
SHORTCOMINGS AND CONCLUSION

 The profitability of the plant is getting affected due to the
holding of cash as idle which is increasing year after year.
 Durgapur Steel Plant follows a good credit policy of

debtors but a risk of bad debts is always present in high
debtors.
 The company has an excellent short-term liquidity

position and it should look forward to improve it in the future.
 Uneven trend in holding period of raw materials is a

problem in Durgapur Steel Plant and this is affecting the
liquidity of the company.
 DSP has increased its loans and advances over the four
years which shows that the plant is engaged in modernization
of machinery. It is very essential because it helps the company
to compete with other competitors in the market. The Plant
should carry on such modernization plans in future as well.
SAIL,
 The working capital ratio in Durgapur Steel Plant is low

and measures should be adopted to increase it in future.
 The management of the plant had been successful in

timely recovery of accrued interest from the concerned parties.
 The holding period of finished and semi-finished product

in Durgapur Steel Plant has increased over the four years
though the turnover has gone up. Having such kind of situation
of situation further can cause a major impact on the liquidity of
the company.
 On the whole after this detailed study of the working

capital management practices in Durgapur Steel Plant, it can
be said that DSP is managing its working capital quite
efficiently and its techniques are in sync with the latest
practices of the Indian steel industry.
RECOMMENDATIONS
 Durgapur Steel Plant should concentrate on JIT (Just-in-
time) technique of manufacturing. This will help in minimizing
the blockage of funds.
 The company should search for more source of raw

materials as it will reduce the cost of production and improve
the profitability of the plant.
 The management of the plant should incorporate TQM

(Total quality management), particularly in all departments of
production to ensure better sales and reduce the inventory of
finished products.
SAIL,
 Durgapur Steel Plant should try to fix a standard in

respect of holding period of raw materials. This will help DSP to
reduce the blockage of funds in raw materials and improve the
liquidity of the company. The company should take into
account the irregularities in the supply of raw materials while
making such standards because fluctuations in supply of raw
materials affect the production process.
 The company should review its credit policy at frequent

intervals which will help it to reduce debtors so that the money
can be used for other investment plans.
 DSP should try to invest the excess cash balance after

keeping the required amount because holding of cash as idle is
unproductive for the plant.
 The plant must make efforts to follow a decreasing trend

in current liabilities keeping the turnover in mind. Since it is a
liability, lower the better.
 At the same time Durgapur Steel Plant must adopt other

initiatives to maximize its sales so that the inventory lying with
the company at the end of the year can be reduced which will
result more funds being generated by the working capital
cycle.
BIBLIOGRAPHY
 Annual Report of Durgapur Steel Plant( 2004-05, 2005-06,

2006-07, 2007-08)
 Financial Report-Steel Authority of India(2004-05, 2005-

06, 2006-07,2007-08)
SAIL,
 Annual Statistics-Steel Authority of India(2004-05, 2005-

06, 2006-07, 2007-08)
 Financial Management by M.Y.Khan and P.K.Jain
 Financial Management by S.Kr.Paul
 Financial Statement Analysis by S.Kr.Paul
 The Management Accountant, Volume 32, No.11
 The Management Accountant, Volume 31, NO.9
 www.SAIL.co.in

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TURNOVER IS VANITY, PROFIT IS SANITY BUT

Submitted by Rudranil Bag

GRADUATE SCHOOL OF BUSINESS AND ADMINISTRATION

• OBJECTIVE OF THE STUDY

• INDIAN STEEL INDUSTRY-A RETROSPECT

• COMPARATIVE ANALYISIS OF WORKING

• SHORTCOMINGS AND CONCLUSION

It is with greatest pleasure and pride that I present this report

First of all, I would like to thank the Dean of Graduate School of

It is beyond words to express our immense gratitude to our

(Roll No. A-08-38)

School of Business And Administration.” Unless organization

OBJECTIVES OF THE STUDY

 To find out the efficiency of working capital management

 To have a first hand experience of the functioning of a

 To have a practical experience of the functioning of the

 To study how working capital management practices plays

 To gain familiarity with the various components of working

 To judge the success of the management in carrying on

 To gain an in-depth knowledge of the tricks of managing

 To find out the difference between the theoretical and

 To study and come out with any solution for improvement

The project report titled “A Comparative Study on Working

 Bhilai Steel Plant(BSP)

 Rourkela Steel Plant(RSP)

 Bokaro Steel Plant(BSL)

INDIAN STEEL INDUSTRY-A RETROSPECT

four decades of planned growth. Thus in retrospect all early

AN OVERVIEW OF STEEL AUTHORITY OF INDIA

(SAILCON) at New Delhi offers services and consultancy to

A BRIEF HISTORY OF SAIL:

DURGAPUR STEEL PLANT-A PROFILE OF THE

TECHNOLOGICAL STATUS OF DURGAPUR STEEL PLANT:

PRODUCTION ACTIVITY OF THE COMPANY:

1 Wheel & Axle Plant Wheels, Axle and Wheel sets

WORKING CAPITAL MANAGEMENT-AN OVERVIEW

CONCEPTS OF WORKING CAPITAL

There are two concepts of working capital:

BALANCE SHEET CONCEPT OR TRADITIONAL CONCEPT

It shows the position of the firm at a certain point of time. It is

GROSS WORKING CAPITAL

NET WORKING CAPITAL

OPERATING CYCYE CONCEPT

The duration or time required to complete the sequence of

FIXED/PERMANENT WORKING CAPITAL

(like sudden price hike, abnormal scarcity in times of war,

VARIABLE/TEMPORARY WORKING CAPITAL

capital. This is called special working capital because it is

Diagrammatic representation of the concept of working capital

IMPORTANCE OF WORKING CAPITAL

 The adequate reserve of working capital ensures a steady

 The adequate stock of working capital makes it possible

cash purchase always carries the benefit of getting cash

 A strong working capital base is probably the only remedy

 A business concern can exploit the market opportunities

 The regular flow of adequate working capital makes

 A quick rotation of working capital cycle and an efficient

 The adequate amount of working capital and its quick

 Sufficient working capital helps in research and

DETERMINANTS OF WORKING CAPITAL

The total working capital requirement is determined by a wide

mostly seasonal demand for the product the production policy

CHANGES IN PRICE LEVEL: