Introduction

The petroleum industry in India is a classic example of the strides made by the country in its march towards economic self-reliance. At the time of Independence in 1947, the industry was controlled by international companies. Today, a little o er !" years later, the industry is lar#ely in the public domain with s$ills and technical $now-how comparable to the hi#hest international standards. The testimony of its success in the past fi e decades is the si#nificant increase in crude oil production from ".%! to && million tons per annum '((T)A*. The consumption of petroleum products has #rown &" times in the last !" years from & million tons durin# 194+-49 to about 91 million tons in 199+-99. A ast networ$ of o er %9,""" dealership and distributors has de eloped and bac$ed by o er 4"" stora#e points o er the years to ser e the people e en in the remote and onceinaccessible areas. In the !" years since independence India has witnessed a si#nificant #rowth in the refinin# facilities and increase in the number of refineries from one to se enteen now. ,urin# the first decade of Independence '1947!7* three coastal refineries were established by multinational oil companies operatin# in India at that time. They were -urma shell, .sso /tan ac and 0altex1 the first two at (umbai and the third at 2isa$hapatnam. The second decade '19!7-37* witnessed the settin# up of Indian 4efineries 5td in 19!+, a wholly-owned public sector 6o ernment company. 7nder its banner three refineries were set up at 6uwahati 'Assam*, -ahraini '-ihar* and 8oyali '6u9arat* essentially to process the

indi#enous crude disco ered in Assam and 6u9arat. Also, one 9oint sector refinery was set up with the participation of an American company at 0ochin based on imported crude. The next ten year period '1937-77* witnessed the establishment of two refineries, one with e:uity participation from American and Iranian companies at 0hennai and another in the public sector at ;alide by Indian <il. Two more refineries in the public sector ha e been commenced in the period 1977-+7. The refinery at -on#ai#on was the first experiment in ha in# an inte#rated petroleum refinery-cum-petrochemicals unit. The other refinery was set up at (atura in 19+%. (a9or expansions of the coastal refineries at (umbai, 0ochin, 0hennai and 2isa$hapatnam were also completed durin# this period. ,urin# the fifth decade '19+7-97*, a small refinery of ".! ((T)A =a#appatinam was built in Tamil=adu. In 1993, at three ((T)A refineries built in the 9oint sector at (an#alore ;)05 and India 4ayon. This decade also saw si#nificant expansions of the capacities of the existin# refineries, thereby the refinin# capacity to about 3% ((T)A.

HISTORY
0hennai )etroleum 0orporation 5imited '0)05*, formerly $nown as (adras 4efineries 5imited '(45* was formed as a 9oint enture in 193! between the 6o ernment of India '6<I*, A(<0< and =ational Iranian <il 0ompany '=I<0* ha in# a share holdin# in the ratio 74>? 1&>? 1&> respecti ely. <ri#inally ,0)05 4efinery was set up with an installed capacity of %.! (illion Tonnes )er Annum '((T)A* in a record time of %7 months at a cost of 4s. 4& crore without any time or cost o er run. In 19+!, A(<0< disin ested in fa our of 6<I and the shareholdin# percenta#e of 6<I and =I<0 stood re ised at +4.3%> and 1!.&+> respecti ely. 5ater 6<I disin ested 13.9%> of the paid up capital in fa or of 7nit Trust of India, (utual @unds, Insurance 0ompanies and -an$s on 19 th (ay 199%, thereby reducin# its holdin# to 37.7 >. The public issue of 0)05 shares at a premium of 4s. 7" '4s. 9" to @IIs* in 1994 was o er subscribed to an extent of &+ times and added a lar#e shareholder base. As a part of the restructurin# steps ta$en up by the 6o ernment of India, Indian<il ac:uired e:uity from 6<I in %"""-"1. In Auly %""&, =I<0 transferred their entire shareholdin# to =aftiran Intertrade 0ompany 5imited, an affiliate, in line with the @ormation A#reement, as part of their or#aniBational restructurin#. 0urrently I<0 holds !1.+9> while =I0< holds 1!.4">. 0)05 has two refineries with a combined refinin# capacity of 1".! (illion Tonnes )er Annum '((T)A*. The (anali 4efinery has a capacity

of 9.! ((T)A and is one of the most complex refineries in India with @uel, 5ube, Cax and )etrochemical feedstoc$s production facilities. 0)05Ds second refinery is located at 0au ery -asin at =a#apattinam. This unit was set up in =a#apattinam with a capacity of ".! ((T)A in 199& and later enhanced to 1." ((T)A. The main products of the company are 5)6, (otor /pirit, /uperior 8erosene, A iation Turbine @uel, ;i#h /peed ,iesel, =aphtha, -itumen, 5ube -ase /toc$s, )araffin Cax, @uel <il, ;exane and )etrochemical feed stoc$s. The Cax )lant at 0)05 has an installed capacity of &",""" tonnes per annum, which is desi#ned to produce paraffin wax for manufacture of candle wax, waterproof formulations and match wax. A )ropylene )lant with a capacity of 17,""" tonnes per annum was commissioned in 19++ to supply petrochemical feedstoc$ to nei#hbourin# downstream industries. The unit was re amped to enhance the propylene production capacity to &",""" tonnes per annum in %""4. 0)05 also supplies 5A-@/ to a downstream unit for manufacture of 5iner Al$yl -enBene. The crude throu#hput for the year %""+-"9 was 1".1% million metric tonnes '((T*. The companyEs turno er for the year %""+-"9 was 4s &34+9.37 crores and the )rofit after Tax was '4s.&97.%+ crores*. The 0ompany has not declared any di idend for the year %""+-"9 in iew of the net loss incurred durin# the financial year.

Introduction Working Capital Management

Cor$in# 0apital (ana#ement is concerned with the problems that arise in attemptin# to mana#e the current Assets, current liabilities and the inter-relationship that exists between them. The aim of wor$in# capital mana#ement is to mana#e the concerns current assets and current liabilities in such a way that an ade:uate wor$in# capital is maintained. An ade:uate le el of wor$in# capital pro ides a business with operational flexibility. .merson has ery ri#htly obser ed that, Fbusiness with an ade:uate le el of wor$in# capital has more option a ailable to it, and can ma$e its own choice as to when wor$in# capital will be used. <n the other hand, if a firm is short of wor$in# capital, it may be forced to limit business operations, extension of credit to customers and the amount that it in ests in in entory. This will ad ersely affect production as well as sales which in turn will affect probability of a concern.G Meaning and definition There is no uni ersally accepted definition of Cor$in# 0apital, but the one most widely acceptable is the obser ation that HCor$in# 0apitalE represents the excess of current assets o er current liabilities. Althou#h the term HCor$in# 0apitalE has been depreciated by the Institute of 0hartered Accountants for use in balance sheets and has preferred the term Hcurrent assets less liabilitiesE ne ertheless, for mana#ement purposes the former is useful phrase to summariBe the factor, which is effecti e lifeblood of much business.

Importance /tudy of wor$in# capital is of ma9or importance to internal and external analysis because of its close relationship to current day-to-day business. Inade:uacy or mismana#ement of wor$in# capital is the leadin# cause of business failure. 0hoyal is of the iew that, FThe wor$in# capital of a firm is the lifeblood which flows throu#h the eins and arteries of the structure, Indeed, it en#a#es e ery part of the structure, #i es coura#e and moral stren#th to brain 'mana#ement* and muscles ')ersonnel*, di#ests to the best de#ree the raw material used by its constant and re#ular flow and returns to the heart '0ash flow* for another 9ourney and so when wor$in# capital is lac$in# or slows down, the financial bodies ha e alue 9ust as much as 9un$.G It is reflected by the fact that @inancial (ana#er spends a #reat deal of time in mana#in# current assets and current liabilities. Arran#in# short term financin#, ne#otiatin# fa orable credit terms, controllin#, administerin# accounts recei ables and monitorin# the in estment in in entories consume a #reat deal of their time. In the words of I.(.)andey? FThe net Cor$in# 0apital indicates The li:uidity position of the firm. /u##ests the extent to which wor$in# capital needs may be financed by permanent sources of funds.G

INDUSTRY PRO I!"

At present, there are se enteen refineries operatin# in the country, fifteen in public sector unit, and one in pri ate sector. <ut of the public sector refineries se en refineries are owned by Indian <il 0orporation, two by ;industan )etroleum 0orporation 5imited, two by 0hennai )etroleum 0orporation 5imited and one each by -harat )etroleum 0orporation 5imited, 8ochi 4efineries 5imited, -on#ai#aon 4efineries and )etrochemical 5imited and =umali#arh 4efineries 5imited. The one 4efinery in 9oint sector (an#alore 4efineries and )etrochemicals 5imited and one by pri ate sector 4eliance )etroleum 5imited. The installed capacity of the Indian refineries is about 117 million tonnes per annum from which the product a ailability may be about 1"+ million tonnes. Ta$in# into account the product a ailability from the fractionators of about 4.! million tonnes, the total products a ailability would be about 11& million tonnes at 1""> capacity utiliBation. Chile this is on o erall basis, product li$e 5)6 is in deficit and other products are in surplus, which would necessitate operatin# refinin# capacity to match demand or export products dependin# on refinery economics and lo#istics. ,urin# the year, as a part of reconstructin# of downstream oil sector, 845 and =45 ha e become the subsidiaries of -)05. 6o ernment of

India has sold its entire shareholdin# in -4)5 and 0)05 to I<05. Thus, -4)5 and 0)05 ha e become subsidiaries of I<05. -y this arran#ement, the refineries ha e to face the challen#e of dere#ulation, for which the 6o ernment of India has already ta$en measures li$e phased dismantlin# of Administered )ricin# mechanism for refinery sector, particularly mar$etin# dere#ulation etc. As per the current pro#ram contemplated by the #o ernment, the mar$etin# of controlled products has been de re#ulated from 1.4.%""%. INDUSTRY STRUCTUR" As part of the dere#ulation of the oil sector as notified by the 6o ernment of India in 1997, the oil sector was dere#ulated in phases. The refinin# sector was dere#ulated in the first phase from 1.4.199+. The oil sector has since been totally dere#ulated from 1.4.%""%. The year %""%-"& was the first year of operation of the oil sector in the dere#ulated scenario and the prices to the customers were fixed by and lar#e on import parity 'I))* basis. In the liberaliBed business scenario, 0)05 has completely switched o er to (ar$et ,ri en )ricin# (echanism '(,)(* from A)(, ie. Administered )ricin# (echanism.

N""D OR TH" STUDY

The study is needed to analyBe the wor$in# capital mana#ement of the company. The study is bein# carried out, as it is necessary to identify the o er utiliBation or under utiliBation of assets to the turno er of the company. It is also necessary to identify the idle assets and non-utiliBation of funds. It is necessary to identify the Hli:uidity dimension of Cor$in# 0apitalE and the H)rofitabilityE.

O#$"CTI%" O TH" STUDY

Primar&
To 8now the @inancial )erformance of -irttania Industry 5td.

Secondar& O'(ecti)e
To $now about the Introduction of -irattania Industry ltd To $now about the ;istory of -irattania Industry ltd To $now about the 0ompany )rofile of -irattania Industry ltd To $now about the @inancial Analysis of -irttania Industry 5td.

To $now about the @inancial )erformance of -irttania Industry 5td

SCOP" O TH" STUDY

The study finds out the operational efficiency of the or#aniBation and su##ests the proper utiliBation and allocation of cash resources, to impro e the efficiency of the or#aniBation. The wor$in# capital of the or#aniBation will be further re ealed throu#h the adoption of arious techni:ues a ailable for analysis. These techni:ues re eal the measures that can adopt to impro e the existin# trend

!IMIT*TION O TH" SYUDY

The study will be carried out mainly based on the information #athered from the /econdary ,ata mainly -alance /heet and )rofit and 5oss Account. The study will be limited to obser ations of the past. The obser ation made will be related to laws operated in the past. /ufficient data will not be made a ailable to study the current operations bein# carried out in the company. The company bein# under the control of Indian <il 0orporation and in the direct administration of the #o ernment, it is not in a position to en9oy the full control of ownership. It is also not in a position to fix prices for ma9or products produced by it.

 The study will not be carried out from the point of national policies, economic crisis and emer#ence of war at the countries from which the crude oil is bein# imported.

Re+earc, De+ign
In the modern business en ironment, finance plays a role in e ery or#aniBation. @inancial (ana#ement is an inte#ral part of the o erall mana#ement and is mainly concerned with fund raisin# operations. At present most of the industrial underta$in#s are faced with the problem of effecti e utiliBation of resources. Cor$in# 0apital is the ma9or importance to internal and external analysis because of its close relationship with the day-today operations of a business. Cor$in# 0apital is the portion of asset of a business, which are used in or related to current operations, and represented at any one time by the operatin# cycle of such items as a#ainst recei ables and cash. The present study is an effort to analyBe the wor$in# capital mana#ement of 0hennai )etroleum 0orporation 5imited o er a

period of time and to pro ide ade:uate support for the smooth functionin# of the normal business operations of the company. ;ence, the analysis of wor$in# capital helps the mana#ement to ha e $nowled#e of current asset re:uired to business concern to ha e continuous production. It also helps the finance mana#er to $now about the type of product, mar$et share, attitude of the mana#ement, cost of funds, inflation the demand and the sta#es of business cycle.
Statement of t,e Pro'lem The present study see$s to collect in depth information of the wor$in# capital mana#ement of 0hennai )etroleum 0orporation 5imited with special emphasis on an examination of the mana#ement performance in re#ard to financial mana#ement. <ne amon# the reason the company could perform well is the efficient mana#ement of the companyEs wor$in# capital, which automatically includes in entory, account recei ables and cash i.e., the proper mana#ement of wor$in# capital has brou#ht access to this company. The present study underta$es to deal with the net concept of wor$in# capital i.e., excess of current assets o er current liabilities.

Re+earc, Met,odolog&
The pro9ect study mainly focuses on the critical assessment of Cor$in# 0apital (ana#ement of 0hennai )etroleum 0orporation 5imited

and deals with the li:uidity dimension of wor$in# capital and the profitability. Re+earc, De+ign 4esearch is an or#aniBed acti ity focused on specific ob9ecti e with the support of data collection in ol in# tools for analysis deri in# lo#ically sound inferences. 4esearch ,esi#n is purely and simply the framewor$ or plan for a study that #uides the collection and analysis of data. The function of researcher is to ensure that re:uires the data collected or accurate and economically. Primar& Data As a part of stren#thenin# the study, personal contacts are made with the officials and staff members of finance department in the form of discussions and collection of reports. Secondar& Data The /econdary ,ata are collected from Annual 4eports, mainly -alance /heet, Income and .xpenditure and other brouchers of the company. Met,od of Collection The data for the analysis are collected and #athered from the printed reports of 0hennai )etroleum 0orporation 5imited li$e annual reports, official files, records and other a ailable related material.

Period of Stud& The period of study will be carried out from last fi e financial years i.e., from %""" I %""!. Tool+ and tec,ni-ue+ for collection of data 4atio analysis and interpretation /tatement of chan#es in wor$in# capital 0ommon siBe balance sheet analysis 0omparati e balance sheet statement Stati+tical Tool+ Implemented are J-/core analysis 4e#ression analysis

Ratio *nal&+i+
Current Ratio. 0urrent Assets, 5oans K Ad ances 0urrent 4atio L 0urrent 5iabilities K )ro isions This ratio measures the sol ency of the company in the short-term. 0urrent assets are those assets, which can be con erted into cash within a year. 0urrent liabilities and pro isions are those liabilities that are payable within a year. A current ratio of %?1 indicates a hi#hly sol ent position.

/uick Ratio or !i-uid Ratio.

0urrent Assets, 5oans K Ad ances - In entories Muic$ 4atio L 0urrent 5iabilities K )ro isions I -an$ < erdraft Muic$ ratio is used as a measure of the companyEs ability to meet its current obli#ations. /ince ban$ o erdraft is secured by the in entories, the other current assets must be sufficient to meet other current liabilities. A :uic$ ratio of 1?1 indicates hi#hly sol ent position. This ratio is also called the acid test ratio. This ratio ser es as a supplement to the current ratio in analyBin# li:uidity. Comparati)e #alance S,eet Statement+. The comparati e balance sheet analysis is the study of the trend of the same items, #roup of items and computed items in two or more balance sheets of the same business enterprise on different dates. The chan#es in periodic balance sheet items reflect the conduct of a business. The chan#es can be obser ed by comparison of the balance sheet at the be#innin# and at the end of a period and these chan#es can help in formin# an opinion about the pro#ress of an enterprise. -alance sheets as on two or more different dates are used for comparin# the assets, liabilities and the net worth of the company. 0omparati e balance sheet analysis is useful for studyin# the trends of an underta$in#.

*d)antage+ 0omparati e statements help the analyst to e aluate the performance of the company. 0omparati e statements can also be used to compare the performance of the firm with the a era#e performance of the industry between different years. It helps in identification of the wea$nesses of the firm and remedial measures can be ta$en accordin#ly.

Common Si0e #alance S,eet *nal&+i+. A statement in which balance sheet items are expressed as the ratio of each asset to total assets and the ratio of each liability is expressed as a ratio of total liabilities is called common siBe balance sheet. The fi#ures are shown as percenta#es of total assets, total assets and total liabilities. The total assets are ta$en as 1"" and different assets are expressed as a percenta#e of the total. /imilarly, arious liabilities are ta$en as a part of total liabilities. The fi#ures shown in financial statements iB., -alance /heet are con erted to percenta#es so as to establish each element to the total fi#ure of the statement and these statements are called 0ommon /iBe /tatements. These statements are useful in analysis of the

performance of the company by analyBin# each indi idual element to the total fi#ure of the statement. These statements will also assist in analyBin# the performance o er years and also with the fi#ures of the competiti e firm in the industry for ma$in# analysis of relati e efficiency.

Operating C&cle *nal&+i+. A new concept, which is #ainin# more and more importance in recent years, is the H<peratin# 0ycle 0onceptE of Cor$in# 0apital. The operatin# cycle refers to the a era#e time elapses between the ac:uisition of raw materials and the final cash realiBation. <peratin# 0ycle consists of four sta#es?

The raw materials and stores in entory sta#e. The wor$-in-pro#ress in entory sta#e. The finished #oods in entory sta#e. The recei able sta#e. Regre++ion *nal&+i+ . A fundamental and ersatile research techni:ue that see$s to explain an outcome 'dependent* ariable in terms of multiple predictor 'independent* ariables. This analysis re eals the nature and stren#th of the

relationship between each predictor ariable and the outcome, independent of the influence from all other predictors. The term typically refers to <rdinary 5east /:uares '<5/* re#ression, which models a linear relationship amon# ariables. 1 2Score *nal&+i+.

The doBens of financial ratios seem to pro ide different answers to the same simple :uestion of F;ow will a company doG. /o, e eryone is on the loo$out for financial models that summaries one #eneral aspect of o erall company performance. An example is the J score, which re eals the efficiency of wor$in# capital mana#ement.

The ori#inal J score was created by .dward I Altman at =ew Nor$ 7ni ersity in the mid 193"Es and it has stood as the test of time. <ut of a selection of %% financial ratios. Altmann found ! that could be combined to discriminate between the ban$rupt and non-ban$rupt companies in this study. The interestin# thin# about the J score is that is #ood analytical tool no matter what shape the company is in. . en if the company is ery healthy, if the J score to fall sharply, warnin# bells should rin#. The study is needed to identify the current position of the company throu#h J-/core Analysis.

*nal&+i+ 3 Interpretation
Ratio *nal&+i+ and Interpretation
Current Ratio.
4R+5 In !ak,+6 Year 89992899: 899:28998 89982899; Current *++et+ 17%37&.+4 1!7337.&3 %11"7+.%& Current !ia'ilitie+ 3471%.13 719&+.!! 119""".%& C*7C! %.37 %.%" 1.77

899;2899< 899<2899=

%"&!7&.14 &3117".4"

11!9+".%7 %"+9+9.&7

1.7! 1.7&

>rap,ical repre+entation of c,ange of direction of current ratio

3 2.5 2 1.5 1 0.5 0 2000-01 2001-02 2002-03 2003-04 2004-05 CA/CL

Interpretation
The ideal ratio between current assets and current liabilities is %?1. This is insisted because e en if current assets are reduced to half i.e., 1, the creditors will be able to #et their dues in full. ;ere, the ratio is showin# a decreasin# trend, which may be due to rise in production.

/uick Ratio.
4R+5 In !ak,+6 Year /uick *++et+ /uick !ia'ilitie+ /*7/!

89992899: 899:28998 89982899; 899;2899< 899<2899=

+371"."9 +193%.!% 9"77".4% +&%!9.+1 119!!4.3"

3471%.13 719&+.!! 119""".%& 11!9+".%7 %"+9+9.&7

1.4" 1.14 ".73 ".7% ".!7

>rap,ical repre+entation of c,ange of direction of -uick ratio

1.4 1.2 1 0.8 0.6 0.4 0.2 0 2000-01 2001-02 2002-03 2003-04 2004-05 QA/QL

Interpretation
The ideal :uic$ ratio is 1. ;ere, the analysis shown as decrease trend due to increasin# in entory le el which has resulted in increase in current liabilities. Chen there is no correspondin# increase in li:uidity of current asset, where as the current liabilities as #one up. The :uic$ ratio is tend to decrease since the company is in an oli#opolystic mar$et, the company is in an position to li:uidate its current asset and #ain an reco ery of

money within shortest possible time. The downward trend in the :uic$ ratio therefore has no si#nificant and is not representational.

Common +i0e #alance S,eet *nal&+i+

%alue+ in ? Particular+ !ia'ilitie+ a6 Current !ia'ilitie+ 0urrent liab. )ro isions Total '6 S,are,older+ und+ 0apital 4eser es K /urplus Total c6 !oan und+ /ecured 5oans 7nsecured 5oans Total d6 Deferred TaC 1.1 &3.7 ;A5B 959 1." &7.4 ;B5< A5D &.7 &+." <:5A =5B 17.& %!.9 <;5: D5; 1&.4 %".7 ;<5: A5B 4.9 &3.1 <:59 4.! %7.! ;859 &.1 %4.% 8A5< %.7 %3.7 8@5< %.1 %3.& 8B5< 1+.7 %.3 8:58 19.9 %.1 8859 %1.4 &.7 8=5: 19.% 1.9 8:58 %3.4 &.& 8@5A 89992 9: 899:298 899829; 899;2 9< 899<29=

!ia'ilit&

Total !ia'ilitie+ *++et+ a6 Net iCed *++et+ '6 Intangi'le *++et+ c6 In)e+tment+ d6 Current *++et+ In entories /undry ,ebtors 0ash K -an$ -alances <ther 0urrent Assets 5oans K Ad ances Total e6 Mi+c5 "Cpenditure Total *++et+

:99

:99

:99

:99

:99

<85; 959 95D 8B58 A5@ 85@ 95D :A5: =D5A 95= :99

=95; 959 :59 8;5: ::58 =5: 95D B5: <B5: 95D :99

=<5@ 959 95= 8=5< :85@ 958 959 D5: <<5D 959 :99

D85D 959 958 8:5@ @5D 958 959 =5< ;A5: 959 :99

<A5A 95B 95: ;<5; :85A 95: 959 <58 @@5@ 95: :99

Interpretation
In common siBe balance sheet analysis in 0)05, it is found that the total assets and liabilities are ta$en as 1""> total and other components of assets and liabilities are also expressed in terms compared to total asset and total liability. The total capital > shows a decreasin# trend for the last two years.

There is also a decline in reser es K surplus in the last few years due to introduction of A/-%%. The percenta#e of loan funds is increasin# which states the a ailin# of fresh loan from the year "% to "4 for the purpose of expansion of the business. The total net worth has decreased by 1">, which is because of fluctuation in the reser es K surplus. The company adopted re#roupin# of certain loans and ad ances under crude oil loan transaction in line with industryEs practice of representin# the same. This has itiated the trend in current liabilities from the old years. @ixed assets ha e increased in fi#ures durin# all the years of study. It is due to a part of current liability arri es net profit ha e contributed to the increase in fixed assets. The current asset part has considerably decreased since %""" and it is due to decrease in loans and ad ances. There is no decrease in in entory1 it is because the company is doin# mass production, so as to reduce the production cost.

ST*T"M"NT O CH*N>"S IN WOREIN> C*PIT*!

C,ange+ in Working Capital F 489992899:6 Particular+ Current *++et+ 3 *d)5 0ash and -an$ -alance In entories /undry ,ebtors <ther 0urrent Assets 5oans and Ad ances 8999 &47%.49 93&!7."4 %17%9.9+ 13&1.9! !&!%1.3+ 899: +7&7.7% +!+1+.49 %4179.+! 19%%.3& !%"1!.1! Increa+e !%3!.%& 1"!&+.!! %449.+7 %9".3+ 1!"3.!& Decrea+e

Total 4*6

Current

*++et+ :ADA:;5:< :A8DA;5B<

Current lia'ilitie+G Pro)5 0urrent liabilities )ro isions Total Current !ia'ilit& 4#6 Net Working 4*2#6 Capital

3&%14.!+ %!94+."1 B@:D85=@

!3+9!.41 7+13.7! D<A:85:D

3&19.17 1+1&1.%3

BA==95== :9A@D:5DB 89<::5:; :9A@D:5DB :9A@D:5DB ;8<=D58: 89<::5:; ;8<=D58:

Net Increa+e in Working Capital 4#7 6 Total Interpretation

In the year %""1, the in entory le el is reduced because of low production. The sundry debtors increased considerably indicatin# more credit bein# #i en to the customers. The cash and ban$ balance increased because of non-utiliBation of funds. The total current assets decreased because of decrease in in entory le el. The current liabilities decreased because of repayment of loans.

C,ange+ in Working Capital F 4899:289986

Particular+ 899: 8998 Increa+e 7+43.7& 1"11&.34 1%34%.&+ 19"%.74 %&479.%1 Decrea+e

Current *++et+ 3 *d)5 0ash and -an$ -alance +7&7.7% 13!+4.4! In entories +!+1+.49 7!7"4.+! /undry ,ebtors %4179.+! &3+%%.%& <ther 0urrent Assets 19%%.3& 19.+9 5oans and Ad ances !%"1!.1! %+!&!.94 Total Current *++et+ :A8DA;5B< :=ADDA5;D

4*6 Current lia'ilitie+G Pro)5 0urrent liabilities )ro isions Total Current !ia'ilit& 4#6 Net Working 4*2#6 !3+9!.41 7+13.7! D<A:85:D 3!%11.7& 37%3.+% A:@;B5== B=A8B5B: 888;85BA :9A@D:5DB :9A@D:5DB 888;85BA <;B::5@: <;B::5@: +&13.&% 1"+9.9&

Capital :9A@D:5DB

Net Increa+e in Working Capital 4#7 6 Total

Interpretation
In the year %""%, the in entory le el is reduced because of not holdin# up the in entory. The sundry debtors increased considerably indicatin# more credit bein# #i en to the customers. The cash and ban$ balance include a sum of 4s.13% crores in Term deposits that are earmar$ed for certain short term obli#ations maturin# with in %-& days li$e payment towards purchase of crude oil. The loans #i en were reduced because of utiliBation of funds for production purposes.

C,ange+ in Working Capital F 489982899;6

Particular+ Current *++et+ 3 *d)5 0ash and -an$ -alance In entories /undry ,ebtors <ther 0urrent Assets 5oans and Ad ances 8998 13!+4.4! 7!7"4.+! &3+%%.%& 19.+9 %+!&!.94 899; 9"1.%+ 1%"&"7.+1 3"991.4! 1".41 %++37.%+ Increa+e Decrea+e 1!3+&.17 443"%.93 %4139.%% 9.4+ &&1.&4

Total Current *++et+ 4*6 Current lia'ilitie+G Pro)5 0urrent liabilities )ro isions Total Current !ia'ilit& 4#6 Net Working Capital 4*2#6 Net Increa+e in Working Capital 4#7 6 Total

:=ADDA5;D 8::9AB58;

3!%11.7& 37%3.+% A:@;B5== B=A8B5B: D;<@5:@ @89AB599

1"1&+1.+& 1731+.4" ::@99958; @89AB599

&317".1" 1"+91.!+

D;<@5:@ @89AB599 D@:9;5=8 D@:9;5=8

Interpretation
In the year %""&, cash and ban$ balance reduced indicatin# lesser li:uidity position of the company. ;owe er, it shows the best mana#ement of surplus funds. The in entory le el is raised because of increase in production. The sundry debtors are increasin# because of rise in sales le el. 5oans #i en were increased sli#htly. The total current liabilities are increased because of rise in the le el of borrowin#s made by the business.

inding
The profits achie ed by the company shows an increasin# trend because of increase in sales and reduction in interest char#es for funds borrowed by the company. The a era#e collection period of the company is showin# an increasin# rend. This is because of rise in credit #i in# policy made by the company that is limited for up to &" days. The a era#e payment period is also started showin# an increasin# trend indicatin# delayed payment bein# made to the creditors. This indicates more time ta$en by the company to repay the suppliers. ;owe er. The current financial position of the company compared to the last @i e years is decreased sli#htly, which should be ta$en note.

SU>>"STION
The credit policy #i en can also be re iewed so that considerable amount of funds may not and up loc$in# in debtors. This will result in increase of cash balances of the company. .ffecti e 0ostin# Techni:ues may be implemented to control the operatin# expenses incurred by the company. .ffecti e measure ha e to be carried out to resume the export of petroleum products for the current year, which will add further sophistication and low cost techni:ues of production. The company may maintain the same ,ebt-.:uity ratio in the future. /o that I can increase .)/. @or their new products. It is better to choose different debt mix that is cheaper. An alternati e proposal of .xternal 0ommercial borrowin#s will be cheaper for the company based on terms and conditions of the forei#n fluctuations etc.

CONC!USION
To conclude that, 0hennai )etroleum 0orporation 5imited has mobiliBed the funds in the same manner the funds are in ested producti ity in the capital asset as well as wor$in# capital. There is a sudden increased in mar$et price durin# the year %""%-%""& which is because of better control from top-le el mana#ement. The company has a hi#h operational efficiency, the profits for the company has increased o er the past years which pro es that the company has ta$en measure to #enerate profits by impro in# its capacity utiliBation which would maximiBe the #eneration of resources for expansion, #rowth and di ersification. There is a sudden increase in mar$et price durin# the year %""%%""& which is because of better control from top-le el mana#ement. The company may ta$e efforts to increase its efficiency in ta$in# control, since the #o ernment has dismantled the pricin# of he product from 1.4.9+

 To end with, I conclude that if the company ta$es the abo e actions as su##ested, the company would remain no one leader in the Indian )etroleum Industry in future, with its excellent past records.

#I#!IO>R*PHY

T./. 4eddy and N. ;ari )rasad 4eddy, @inancial and (ana#ement Accountin#, (ar#ham )ublications, %""%. I0@AI. @inancial (ana#ement, I0@AI, 199+. 0enter for monitorin# Indian .conomy, Aournal, ,ecember %""4. 0.4 8othari, 4esearch methodolo#y, Carsaw )ublications, %""%. ,r. /.=. (aheswari, )rinciples of (ana#ement Accountin#, 11th edition, /ultan 0hand K /ons, =ew ,elhi, 1993. We'+ite+. HHH5aCi+'ank5com HHH5google5com

Working Capital of CPC!

Cor$in# 0apital (ana#ement is concerned with the problems that arise in attemptin# to mana#e the current Assets, current liabilities and the inter- relationship that exists between them. The aim of wor$in# capital mana#ement is to mana#e the concerns current assets and current liabilities in such a way that an ade:uate wor$in# capital is maintained. An ade:uate le el of wor$in# capital pro ides a business with operational flexibility. .merson has ery ri#htly obser ed that, Fbusiness with an ade:uate le el of wor$in# cap ital has more option a ailable to it, and can ma$e its own choice as to when wor$in# capital will be used. <n the other hand, if a firm is short of wor$in# capital, it may be forced to limit business operations, extension of credit to customers and the amount that it in ests in in entory. This will ad ersely affect production as well as sales which in turn will affect probability of a concern.G ;ence wor$in# capital mana#ement is a mana#erial accountin# strate#y focusin# on maintainin# efficient le els of both components of wor$in# capital, current assets and current liabilities, in respect to each other. Cor$in# capital mana#ement ensures a company has sufficient cash flow in order to meet its short- term debt obli#ations and operatin# expenses. Implementin# an effecti e wor$in# capital mana#ement

system is an excellent way for many companies to impro e their earnin#s. The two main aspects of wor$in# capital mana#ement are ratio analysis and

mana#ement of indi idual components of wor$in# capital. A few $ey performance ratios of a wor$in# capital mana#ement system are the wor$in# capital ratio, in entory turno er ratio, creditors turno er ratio and debtors turno er ratio. 4atio analysis will lead mana#ement to identify areas of focus such as in entory mana#ement, cash mana#ement, accounts recei able and payable mana#ement. The ob9ecti e of the pro9ect hence is to analyBe how the company has been mana#in# its wor$in# capital in the recent years and its sources of finances to meet its financial obli#ations.Cor$in# 0apital can simply be defined as the excess of current assets o er current liabilities./tudy of wor$in# capital is of ma9or import ance to internal and external analysis because of its close relationship to current day to day business. Inade:uacy or mismana#ement of wor$in# capital is the leadin# cause of business failure. 0hoyal is of the iew that, FThe wor$in# capital of a firm is the lifeblood which flows throu#h the eins and arteries of the structure, Indeed, it en#a#es e ery part of the structure, #i es coura#e and International 0onference on Technolo#y and -usiness (ana#ement (arch 1+ moral stren#th to brain 'mana#ement* and muscles ')ersonnel*, di#ests to the best de#ree the raw material used by its constant and re#ular flow and returns to the heart '0ash flow* for another 9ourney and so when wor$in# capital is lac$in# or slows down, the financial bodies ha e alue 9ust as much as 9un$.GIt is reflected by the fact

that @inancial (ana#er spends a #reat deal of time in mana#in# current assets and current liabilities. Arran#in# short term financin#, ne#otiatin# fa ourable credit terms, controllin, administerin# accounts recei ables and monitorin# the in estment in in entories consume a #reat deal of their time. In the words of I.(.)andey? FThe net Cor$in# 0apital indicates The li:uidity position of the firm. /u##ests the extent to which wor$in# capital needs may be financed by permanent sources of funds.G

*cknoHledgement
)reparin# a pro9ect of this nature is an arduous tas$ and I was fortunate enou#h to #et support from lar#e number of person . I wish to express my deep sense of #ratitude to all those who #enerously helped in successful completion of this report by sharin# their in aluable time and $nowled#e It is my proud and pre iled#e to express my deep re#ard to 4espected Dr5 $5P5N 5 Pande& Principal G Dr *nand TiHariG Dr5 Na)in >idion H5O5D5 ,epartment of -usiness (ana#ement, 6o t. 6irls ).6 0olle#e of .xcellence /a#ar, for followin# me to underta$e this pro9ect. I feel extremely exhilarated to ha e completed this pro9ect under the able and inspirin# #uidance rendered me all possible help and manuscript in finalisin# this report . of Mr+5 S,ik,a Urmil E,an5 She #uidance while re iewin# the

I also extend my deep re#ards to my teachers , family members, friends and all those whose encoura#ement has infused coura#e in me to complete the wor$ successfully. ar,een E,an ##* IIIrd Sem

Declaration
I declare that )ro9ect report titled I Working Capital Management in CPC! J is my own wor$s conducted under the super ision of Mr+5 S,ik,a Urmil E,anG Department of #u+ine++ ManagementG >o)t5 *uto >irl+ P5> College of "Ccellence Sagar 4M5P56 To the best of my $nowled#e the report does not contain any wor$, which has been submitted for the award of any ,e#ree any where.

ar,een E,an ##* IIIrd Sem

Certificate
The pro9ect report titled I Working Capital Management in CPC! J is prepared by Mi++5
ar,een E,an #5#5*5

4Hon+56 III+rd /.( under the #uidance and super ision of Mr+5 S,ik,a Urmil E,an G for partial fulfillment of the ,e#ree -.-.A.

Signature of +uper)i+or OOOOOOO Signature of H5O5D5 OOOOOOO

Signature Of "Caminer OOOOOOO

Preface
I am )leased to present the pro9ect report on Working Capital

Management in CPC! before my respected readers. It is a

humble attempt from my part to 9ud#e the Working Capital

Management in CPC!G This study deals with a number of

topics that will help the reader understand and learn about company T,e re+earc, +tart+ Hit, a +,ort Introduction Hi+tor& of

CPC! folloHed '& t,e line of o'(ecti)e and re+earc,

met,odolog& Then comes the findin# su##estions limitations and conclusions of the research reports. 5an#ua#e to report is sample lucid. Attempts ha e been made to arran#e the sub9ect matter in a systematic and well-$nit style. .ffort ha e also been made to deal with all topic precisely and #ently.

ar,een E,an #5#5*5 IIIrd Sem5