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<p>A STUDY TO ASSESS THE EFFECTIVENSS OF WORKING CAPITAL MANAGEMENTAT</p> <p>JSW Steel Ltd. Torangallu, Vijaynagar works.</p> <p>Submitted toIn Partial fulfilment of as a requirement towards completion of PGDM in 2010-12</p> <p>Mr. Muralidhar WDGM (Finance &amp; Accounts) JSW steel Ltd.</p> <p>Prof. G.N VenkateshFinance &amp; Control International school of business &amp; media By Sridip Sarkar Roll No. 610030</p> <p>International School of Business &amp; Media. Plot No. 241, Sompura Industrial Area, Nidvanda Village, Sompura Hobli, Nelamangala Taluk, Bengaluru - 562111</p> <p>AcknowledgmentNo work is said to be complete without thanking the people who have helped me in completing the job. So this acknowledgment is for those who have played their role in completion of my project entitles A study of Working Capital Management at JSW Steel Ltd. The project would not have been completed without the kind of cooperation and help of certain individuals to who I owe this heartfelt gratitude. At the very outset, I would like to thank my external guide Mr. Murlidhar Wuntakal, (DGM, Finance) who constantly guided and inspired me in completion of this project. During this project I experienced the real environment, market situation, mannerism etc. that are very much needed in this competitive environment. I expressed my sincere thanks to Mr. Achutha Raghava (HR) and Mr. Mallappa for granting the permission to undergo project in JSW STEEL LTD, Torangallu. I would also like to acknowledge all those respondents who have lend their precious time without which this project work would not have been successful. I expressed my sincere gratitude to the whole of JSW Steel Ltd. Bellary for extending their warm support and guidance in various natures. My sincere thanks to my project Internal guide Prof. G N. Venkatesh for his valuable support and guidance in the completion of this project successfully. Finally I thank my Family, friends and each one who have directly or indirectly helped me in making this project successful and memorial. Last but not the least I express my thanks to all my friends for helping me the project work.</p> <p>DECLARATIONI SRIDIP SARKAR declare that this Project on THE ASSESSMENT OF EFFECTIVENSS OF WORKING CAPITAL MANAGEMENT at JSW STEEL LTD TORNAGALLU, BELLARY is a record of bonified research carried out by me under the guidance of, Mr. Wuntakal Muralidhar (Dy. General Manager, F&amp;A) and under the supervision of Professor G.N. Venkatesh , Department of Finance &amp; Control, ISB&amp;M Bangalore. I further declare that this has not previously formed the basis of the award of any degree, diploma or similar title of recognition.</p> <p>Date: 04/05/11 Place : Bangalore</p> <p>SRIDIP SARKAR Roll No.610030</p> <p>Table of Contents:</p> <p> Executive Summary General Introduction Research Methodology Industry &amp; Company profile Swot Analysis Mc Kinsey 7S Model Data Analysis &amp; Interpretation Findings, Suggestions &amp; Conclusions Annexure Bibliography</p> <p>EXECUTIVE SUMMARYThis is final project a study of working capital in Jindal South West Steel Ltd deals to ascertain the efficiency of working capital management of the company. Working capital may be regarded as lifeblood of business; working capital is needed to meet the day-to-day requirement of the business unit. The exploitation of working capital assets is possible only by efficient working capital management. This study on working capital management is conducted in JSW Ltd. Working capital management not only shows the financial efficiency of business, but also its credit worthiness, which has gained importance in these days of credit squeeze. Therefore, study of the management of working capital is very necessary. Objective of the project was to study the pattern and procedures followed for managing various components of working capital, so as to evaluate the efficiency of working capital management. So, this study intends to comprehensively evaluate the inventory, receivables, creditors and cash management. The study also aims to analyze the alternative sources of working capital financing employed by JSW Ltd. Desk research method is adopted for this study. The required information was collected through secondary sources. Secondary data were collected from various sources including the annual reports of the company for the year 2004-05, 2005-06, 2006-07, 2007-08, and 200809.</p> <p>1. General IntroductionFinance is the life blood of business. It is rightly termed as the science of money. Finance is very essential for the smooth running of the business. Finance controls the policies, activities and decision of every business MEANING AND SIGNIFICANCE OF WORKING CAPITAL One of the vital aspects of companys financial management is to manage its current assets and the current liabilities in such a way that a satisfactory level of working capital is maintained. Working capital management means administration of all aspects or working capital i.e. current assets and current liabilities. Firm has to manage it properly in order to attain its goal of wealth maximization.</p> <p>Meaning:Working capital is that part of total capital which is used for carrying out routine business operations. In simple terms, working capital is the capital with which the business of the company is worked over. Working capital it is the controlling system of every business firm. The working capital management is concerned with the problems that arise in attempting to manage the current assets and current liabilities and the interrelationships that exist between them. This tries to evolve how much funds to be invested in each type of current assets and what should be the proportion of long term funds to short term funds and which are the sources that are ideal for financing current assets.</p> <p>Significance of the working capital:To fulfil its endeavour to maximize the shareholders wealth, firm has to earn sufficient return from its operations, which needs a successful sales activity, the firm has to invest sufficient funds in current assets to succeed in sales, as the sale do not convert into cash instantaneously because of time gap between the sale of goods and actual receipts in cash. Hence there is a need for working capital in the form of current assets to sustain sales activity during that period. Since cash inflows and cash out flow dont match, firms have to necessarily keep cash or investment in short term liquid securities to fulfil its obligations as and when they become due. The adequate stock of inventory provides a cushion against being out of stock and help as a guard to meet the demand for its products. To be competitive, the firm must sell its products to their customers on credit, which necessitates the holding of accounts receivables therefore an adequate level of working capital is absolutely necessary for the smooth sales activities, which in turn enhance the owners wealth. The working capital need arises for the following purpose: </p> <p>For purchasing raw materials, components and spare parts For paying wages and salaries To incur day to day expense and overhead costs like fuel, power and office expense etc.</p> <p>To meet selling costs of packing advertising etc.</p> <p>2. Research Methodology:</p> <p>Statement of the problem:</p> <p>The working capital is the most critical problem in financial management, Importance of working capital management.</p> <p> A substantial portion of total investment is invested in current assets. Level of current assets and current, which can be determined, by the level of current assets and current liability. The composition of current assets and current liabilities.</p> <p>Need and Importance of Study:</p> <p>To fulfil its endeavour to maximize the shareholders wealth, firm has to earn sufficient return from its operation, which needs a successful sales activity. The firm has to invest sufficient funds in current asset to succeed in sales, as the sales do not covert into cash instantaneously because of the time gap between the sales of goods and actual receipts in the cash. Hence there is a need for working capital in the form of current assets to sustain sales activity during that period. Since cash inflow and cash outflow dont match, firms has to keep cash or investment in short term liquid securities to fulfil its obligations as and when they become due. The adequate stock of inventory provides a cushion against being out of stock and help as a guard to meet the demand for its product. To be competitive, the firm must sell</p> <p>its product to their customer on credit, which capital is absolutely necessary for the smooth sales activities, which in turn enhance the owners wealth.</p> <p>The working capital need arises for the following purposes:</p> <p> For purchasing raw material, components and spare parts For paying wages and salaries. To incur day today expenses and overhead costs like fuel, power and office expense etc. To meet selling costs of packing advertising etc, To provide credit facilities to customers.</p> <p>Objective of study:</p> <p> To study the efficiency of working capital management of the company. To analyse the working capital trends in the company to study the efficiency of cash, inventory and receivable management of the company. To understand and analyse the working capital position of JSW Ltd. to measure the overall financial position of the organization with the help of ratio analysis.</p> <p>Scope of the study:</p> <p>Since the decision regarding working capital are of operating nature not one time decision, the scope of the study is geared toward identifying important areas of control and to establish model for better control of the various components of working capital.</p> <p>The study would also attempt to identify the various sources available for financing of working capital.</p> <p>The study gives a fair idea of improvement and efficiency of working capital management and also to have proper control over the components of working capital and managing of efficiency.</p> <p>Methodology:</p> <p>Desk research method is adopted for the study. The required information was collected through secondary sources.</p> <p>Secondary data were collected from various sources including the annual reports of company for the years between 2005 to 2010.</p> <p>Limitation of the study:</p> <p> The study deals with the data made available. Hence the result of this study cannot judge the business of the firm in general. The study has been influenced by the limitation of the ratio analysis. The study extensively uses the data provided is the financial report of the firm which may also have their own limited perspective. The analysis made on the working capital management is for a particular period of time the current assets and current liabilities will change for an analysis made at any order of time.</p> <p>3. INDUSTRY AND COMPANY PROFILE Introduction:Steel has been part of some of the greatest achievement in history. Nearly 15 years ago steel sparked off the industrial revolution, the steel industry has an important role to pay in the development of any industrial nation. It is a critical intermediate for industry, and the strength of construction. Steel is a product of a capital intensive and complex industry that requires national attention for its development. The demand of steel is basically a derived demand; growth in the industry is dependent on the level of activity of the steel consuming industries specifically the construction, automotive, appliances and other consumer durable. India is the 6th largest steel producer of iron-ore, and the 9th largest industry is equipped to meet over 90% of the countrys total requirements of steel, with imports restricted preliminary to a small sophisticated high level addition products. Jindal organization is faster growing group with enviable business trend record and a strong market presence in India today. Jindal was established by OMPRAKASH JINDAL in the year 1952 with a small making steel pipes bends and sockets at Liluah near Kolkata. OMPRAKASH JINDAL has developed into a multifaceted organization and is one of the largest steel producers in India.</p> <p>The steel industry is in the threshold of a new era, the departure from a regime of control of free market, from protection to completion, from public sector to private investment and an inward marketing policy to a global vision has all placed. The industry in a course of development and that has been endless opportunities also at the same time stiff challenges and a terrain of uncertainty to</p> <p>improve its strength and competitive edge to product good quality products at lower prices. The steel industry being a core sector, tracks the overall economic growth in the long term. Also, the growth of the steel industry is dependent on the development of steel consuming industries like automobiles, consumer durable and infrastructure and realty development in the country the past few years have witnessed an increase in steel consumption and in order to match the even the steel industries have geared up with capacity expansions to meet this growing demand.</p> <p>COMPANY PROFILE Background and inception of the companyJindal Vijaynagar Steel Works (JSW) is ranked 4th amongst the top Indian business houses in terms of sales and profit the Rs. 19700 crores. Jindal organization is faster growing group with enviable business trend record and a strong market presence in India today. Jindal has recognized in India and Asia pacific region. It is the 4th largest sales turnover in the private sector after reliance, Tatas and Aditya Birla groups. Jindal was established in 1972 by OMPRAKASH JINDAL. The group has grown from a single unit making steel pipes bends and sockets at Liluar near Calcutta (present day Kolkata) to the present multi location, multi product giant from the mining of iron ore/coal/chrome-ore to the manufacturing of value added steel products it has a preeminent position in the flat steel segment in India and is today more than 20000 people are working in the organization. Jindal Vijaynagar Steel Ltd. This plant is located at Tornagallu in the BellaryHospet area the heart of high grade iron-ore belt; spread over 3700 acres of land. The plant is 340 kms from Bangalore and well connected to Goa and Chennai ports. The steel industry bring them on the threshold of adopting new technology we took a lead in adopting the latest technology of steel making as COREX developed by vest alpine of Austria. The JVSL was the first Greenfield project to save COREX as a mainstream facility. The other who had it as a part of brown field expansion was ISCOR of South Africa and POSCO of South Korea.</p> <p>Mining of iron ore to the manufacturing of value added steel products Jindal has a preeminent position in the flat steel segment in India as is on its way to be a major global player, with its overseas manufacturing and marketing alliances with other world leaders.</p> <p>Where there is a challenge there is Jindal If it is Jindal, it must be first class Nature of the business carried:Indias only fully...</p>