A Summer Training Project Report

On“Working Capital Management

in Bokaro Steel Plant”

INTRODUCTION TO TOPICThe working capital management refers to

management of current assets. A firm is working capital consists of its investment in current assets which include short-term assets such as cash and bank balance, inventories, receivable (including debtors and bills,) and marketable securities. So, the working capital management refers to the management of the level of all these individual current assets.

INTRODUCTION TO COMPANYBokaro Steel Plant - the fourth integrated plant in the

Public Sector - started taking shape in 1965 in collaboration with the Soviet Union. It was originally incorporated as a limited company on 29th January 1964, and was later merged with SAIL, first as a subsidiary and then as a unit, through the Public Sector Iron & Steel Companies (Restructuring & Miscellaneous Provisions) Act 1978. The construction work started on 6th April 1968.

RESEARCH METHODOLOGYData Collection: Data has been collected through

secondary approach. Data Sources The research involved gathering

Secondary data. Lot of data has been pooled from Bokaro Steel Plant to use in the study.

RESEARCH OBJECTIVESTo Calculate comparative statement and

ratio analysis .To calculate the Ratios in working capital

management- Profitability ratio Liquidity ratio

DATA INTERPRETATION

Current RatioYEAR 2007-08 2008-09CURRENT RATIO 1.21 1.15

Quick ratio YEAR 2007-08 2008-09

QUICK RATIO 0.43 0.28

Net Working Capital RatioYEAR 2007-08 2008-09

NET WORKING CAPITAL RATIO 0.11 0.08

Working capital turnover ratio

YEAR 2007-08 2008-09

WORKING CAPITAL TURNOVER RATIO 38.11 39.67

Fixed assets turnover ratio

YEAR 2007-08 2008-09

FIXED TURNOVER RATIO 4.53 3.46

Capital turnover ratioYEAR 2007-08 2008-09

CAPITAL TURNOVER RATIO 4.63 4.66

FINDINGSCurrent ratio is decreasing because of increase in

provisions , security & other deposits and decrease in loans & advances (due to change in policies).

Quick ratio is decreasing because of increase in inventory and provisions.

Net working capital ratio is decreasing because of decrease in working capital (i.e. increase in provisions) and huge investment in fixed assets.

Capital turnover ratio is slightly increased because of decrease in net block and working capital.

Working capital turnover ratio is increasing because of decrease in working capital .

Fixed turnover ratio is decreasing because of huge investment in fixed asset.

LIMITATIONSIn my view my study of the working capital

management has certain limitations. Because I just spent only FOUR WEEKS in the “BOKARO STEEL PLANT”, and whatever information during that short period I could gather, I worked upon that. Thus my study does not present the overall view of the working capital management at “BOKARO STEEL PLANT”.

The present study is limited to Bokaro Steel Plant.The authenticity of the suggestions and

recommendations depend upon the rationality of the data provided to me.

Have to rely upon the data supplied.Executives are not ready to part with the

information beyond a limit. 

SUGGESTIONSIn view of the analysis and with the change

in industrial scenario it is felt that a company must reorient its policies for betterment. BSL produces flat product and now a days there is tough competition in the market of flat product. Hence company needs certain best policies for competition with its competitor in domestic as well as global market.

Company use perpetual inventory, which is

very costly. Hence the company should use both perpetual and periodic inventory.

 

Besides automatic procurement items there is no specific system for calculating reorder level, minimum and maximum level. A proper system for different items should be developed.

Lead time for receipt of stores and spare items is around 6 months, which is very high. The lead time should be brought down by decreasing the time duration in paper work.

As understand from the explanation of the management, there is huge volume of non-moving and obsolete stores and spare items which are yet to be disposed of.

CONCLUSIONSummer internship has given lot of practical experiences from on the job culture to theoretical implications at different levels. There is a great learning in financing to corporate.During 2008–09, profit before tax of Bokaro Steel Plant is Rs. 1286.50 which is less as compared to profit before tax of 2007-08 that is Rs. 2830.43, although production has been increased. It is because of decrease in price of flat product in domestic and global market due to recession. Although the market is dull, BSL is able to make profit which shows the continuous strengthening of the company’s financial fundamentals. This was the outcomes of multi-pronged strategy – including increase in production and sales volume, improvement in product mix, cost reduction major, reduction in borrowing coupled with buoyancy in the steel market.