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Project Report
(Submitted for the Degree of B.Com. Honours in Accounting & Finance under the
University of Calcutta)

Title of the Project

WORKING CAPITAL MANAGEMENT- A case study on Reliance Industries Ltd.
for the period of 2017-18 to 2021-22

Submitted by
Name of the Candidate : UNNATI PANDEY
C.U. Registration : 047-1211-0526-19
C.U. Roll No. : 191047-11-0478
Name of the College : SIVANATH SASTRI COLLEGE
College Roll No. : 190867

Supervised by
Name of the Supervisor : MADHUMANTI GHOSH
Name of the College : SIVANATH SASTRI COLLEGE

Month & Year of Submission

JUNE, 2022
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Annexure-I
Supervisor’s Certificate
This is to certify that Ms. Unnati Pandey a student of B. Com Honours in
Accounting & Finance of Sivanath Sastri College under the University of Calcutta has
prepared a Project Report with the title WORKING CAPITAL MANAGEMENT- A case
study on Reliance Industries Ltd.
for the period of 2017-18 to 2021-22
My contribution however, was mainly in the form of general guidance and discussion.

Signature :
Place: Kolkata Name : Madhumanti Ghosh
Date: Designation : Faculty of commerce

Name of the College : SIVANATH SASTRI

COLLEGE
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Annexure-II

Student’s Declaration
I hereby declare that the Project Work with the title (WORKING CAPITAL
MANAGEMENT- A case study on Reliance Industries Ltd. )
submitted by me for the partial fulfilment of the degree of B.Com. Honours in Accounting
& Finance under the University of Calcutta is my original work and has not submitted
earlier to any other University/Institution for the fulfilment of the requirement for any
course of study.
I also declare that no chapter of this manuscript in whole or in part has been incorporated
in this report from any earlier work done by others or by me. However, extracts of any
literature which has been used for this report has been duly acknowledged providing details
of such literature in the references.

Signature :

Name : UNNATI PANDEY

Place: Kolkata ; Address : Dakhin Rania Buria Para,

Basdhroni Kokata ,154
C.U Registration No.
Date: 21 June, 22 : 047-1211-0526-19

C.U. Roll No. : 191047-11-0478

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Acknowledgement

I convey my heartful appreciation to Madhumanti Ghosh without whose cordial and

active support and supervision the project could not have come into light.

Again, I am thankful to Madhumanti Ghosh for reposing confidence in me to write

this dynamic subject and share her vast knowledge for the completion of the subject.

I would also like to thank my family, friends and each and every person for
supporting me mentally and in other possible ways while preparing this project.
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Table OF Content
SERIAL NO. CONTENTS PAGE NO.
1) Chapter-1 (6-8)
Introduction 6
Background of the study 6
Objectives 6
Literature Review 6-7
Research Methodology 7
Limitation 7
Chapter Planning 8

2) Chapter-2 (9-15)
Conceptual Framework 9
Concept of Working Capital 9
Components of Working Capital 10-11
Significance or Importance of Working Capital 12
Factors Determining Working Capital Requirement 12-13
Operating Cycle Method 13-14
Sources of funds for Working Capital 14
Company Profile 14-15

3) Chapter-3 (16-28)
Presentation of Data, Analysis & Findings 16-20
Presentation of Data Analysis 20-28
Findings 28

Chapter-4
4) Conclusion and Recommendation (28-29)
Conclusion 28
Recommendation 28-29

30
Bibliography
(31-32 )
Presentation of Data, Analysis & Findings
5)
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CHAPTER-1

INTRODUCTION
1.1. Background of the Study:
Working Capital Management is the most important area in day-to-day management of any
firm. It is the functional area of finance. It is concerned with the management of current
assets, current liabilities and total working capital. Working capital generates the element
of cost viz., materials, wages and expenses. Funds employed as working capital constantly
changes its form to keep the wheels of the business moving. Working capital is sometimes
termed as Circulating Capital.
Sound working capital management is the sine qua non of sound financial management
and investment decision in allocating funds to various current assets. Working Capital is a
part of total investment.

1.2. Objectives of the Study:

The success and profitability of any firm depend upon the correct determination of its
objectives.
To estimate the working capital requirement.
To ascertain the different components of working capital and profitability of the company.
To ascertain inventories, debtors and cash management.
To compare various ratios of RELIANCE INDUSTRIES relating to working capital
management.
1.3. Literature Review:
Efficient Working Capital Management is an integral component of the overall corporate
strategy to create shareholder value. Working Capital is the result of the time lag between
the expenditure for the purchase of raw materials and the collection for the sale of finished
product. The continuing flow of cash from suppliers to inventory to accounts receivable
and back into cash is usually referred to as the cash conversion cycle.
UYAR, 2009, took a sample of 166 Turkish companies to predict the nature of relationship
of profitability and size of the firms with Cash Conversion Cycle. The results demonstrated
that profitability and size of the firms both are negatively related with Cash Conversion
Cycle.
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VISHNAVI & SHAH, 2007 from their study on Indian Consumer Electronic Industry
discovered that profitability of the overall industry had no recognized relationship with
liquidity, but majority of the companies belonging to this industry showed a positive
association for profitability and liquidity.
S.M. AMIR SHAH & SANA, 2006 took working capital ratio to determine the effort of
working capital management of financial performance. They used correlation analysis and
OSL method to reach the results. Finally, they revealed that gross profit is negatively
associated with all working capital ratios except number of days payable.

1.4. Research Methodology:

Research methodology is the specific procedure or techniques used to identify, select,
process and analyses information about a topic. I have chosen secondary type of data in
this study.
Types of Data:
The project is based on secondary data which are collected from different websites, books
and articles.
Period of Study:
I have taken 5-year period of study.
Sample Size:
I have taken Reliance Industries Limited as the sample.
Tools and Technique:
In this study I am using various graphs, charts, ratio analysis methods for preparing of the
project.
1.5. Limitations of the Study:
• Time limitations for compelling the project.
• Data is restricted for 5 years.
• The data obtained in some cases may be biased.
• The study is based on reports of the company of past 5 years.

1.6. CHAPTER PLANNING:

CHAPTER 1
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Introduction
Objectives
Literature Review
Research Methodology
Period of Study
Tools & Technology
Limitations
CHAPTER 2
Conceptual Framework Concepts
of Working Capital
Components of the Topic
Significance of the Topic
Factors Determining Working Capital
Operating Cycle Method
Sources of Funds for Working Capital
Company Profile
CHAPTER 3
Presentation of data and Analysis of data and Findings
Balance Sheet and Statement of Profit & Loss Account of
RELIANCE INDUSTRIES Statement of Working Capital Ratio Analysis:
Current Ratio
Quick Ratio
Current Assets Turnover Ratio
Receivable Turnover Ratio
Payable Turnover Ratio
Gross Working Capital Turnover Ratio

CHAPTER 4
CONCLUSIONS AND RECOMMENDATIONS
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CHAPTER-2

CONCEPTUAL FRAMEWORK:
2.1. Concepts of Working Capital:
From the view point of Concept: Working capital may be defined as the excess of current
assets over current liabilities. Current assets are those which can be realized within a short
period, say, twelve months and current liabilities are those which are to be paid within a short
period, say, within one year. Cash, bank, sundry debtors, inventories, receivables, etc. are
current assets while sundry creditors, outstanding expenses, bank overdraft, bills payable, etc.
are current liabilities. Working capital is required for day to-day requirements of the company.
From the view point of Nature: Working capital may be positive and negative. The excess of
current assets over current liabilities is known as positive working capital. (∑CA > ∑CL). It
indicates the extent of long-term funds used to finance current assets. Accumulated profits,
long-term loan or share capital may be used to finance current assets. The excess of current
liabilities over current assets is known as negative working capital. (∑CA < ∑CL).
From the view point of Time: Working capital may be permanent and temporary. Hard core
working capital, i.e., the minimum level of investment in the current assets which should be
maintained to support the minimum volume of operation by the business at all times is known
as permanent working capital and it is financed by long-term sources like equity share capital,
debentures, etc. Temporary working capital which is also known as variable working capital
refers to that part of working capital which is required by a business over and above the
permanent working capital and which varies with seasonal fluctuation. Temporary working
capital is also known as fluctuating working capital. As the volume of temporary working
capital varies or fluctuates from time to time and it is temporarily required, it may be financed
from short-term sources like bank loan, cash credit, bank overdrafts, etc. Permanent working
capital is the minimum amount of investment in all current assets which required permanently
to carry out minimum level of business activities. Permanent working capital is required on
continuing basis over entire year. According to Tandon Committee, permanent working capital
is the “core current assets.”
DEFINITION:
Working capital refers to the funds invested in current assets. Current assets are those assets
which are realizable within one year and they include stock, sundry debtors, cash, bank,
etc.
In simple words, working capital refers to the fund which is needed to support day-today
operations. Such as purchase of raw materials, payment of wages and other expenses.
Working capital is not confined to any specific current assets as they constantly change
their form and circulates their business constantly like the blood circulation in a living
body.
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Net Working Capital = Total Current Assets (∑CA) – Total Current Liabilities(∑CL)

2.2. COMPONENTS OF WORKING CAPITAL:

The components of working capital are the constituents that normally make up the figure
of working capital. So, the components of working capital are current assets and current
liabilities.
CURRENT ASSETS: Current assets are those assets which are generally realized within a
short period of time, say, one year. Current assets comprise of the following:
1. Stock or Inventories: Stock or inventories include the following:
Raw materials
Work-in-progress
Consumable stores and spares
Finished Goods
Sundry Debtors (net of provisions)
Bills Receivables
Short-term loans and advances
Temporary or short-term investments in marketable securities
Prepaid expenses
Accrued income
Cash at Bank
Cash in hand.
CURRENT LIABILITIES: Current liabilities are those liabilities which are payable within
a short period of time, say, one year. These liabilities are to be liquidated within one year
in the ordinary course of business.
Current Liabilities are usually liquidated out of current assets or fund from operations.
Current liabilities include the following:
Sundry Creditors or Trade Creditors
Bills Payable
Outstanding expenses
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Short-term loans, advances, deposits

Bank overdraft
Provision for Tax
Proposed Dividend
Current payable outstanding liabilities, e.g., outstanding wages and salaries, etc.
When total current liabilities are deducted from total currents assets, net working capital
ascertained. Thus, net working capital = ∑CA – ∑CL.

2.3. SIGNIFICANCE OR IMPORTANCE OF WORKING CAPITAL:

Working capital is the life-blood of a business firm: The importance or significance of
working capital in business cannot be over-emphasized. Every business need funds for
day-to-day operations and the efficiency of operation depends on adequacy or inadequacy
of funds. The finance manager is entrusted with the task of working capital management.
The amount of working capital must not be too large or too small for its requirements.
Regularly in supply of Raw Materials: Adequate working capital ensures regular supply of
raw materials because the suppliers get payment in time.
Economy in Purchase: A firm having adequate working capital can make bulk purchase in
cash and avail of discount facility which reduces the cost of production significantly.
Smooth flow of Production: Sufficient working capital helps to maintain uninterrupted
flow of production by supplying raw materials in time and payment of wages.
Efficient use of Fixed Assets: Adequate working capital enables the firm to use its fixed
assets to their optimum level. Fixed assets do not remain idle due to lack of working capital.
So, depreciation on fixed assets, interest on capital invested in fixed assets, etc. can be
reasonably absorbed.
Procurement of Loan: A firm having a sound working capital position can get loan easily
from market due to its high creditworthiness.
Avoidance of Overcapitalization: Careful estimation of the amount of working capital
requirement can avoid overcapitalization. Thus, the possibility of existence of idle capital
can be done away with.
Avoidance of Undercapitalization: Sound working capital structure helps to avoid the
possibility of undercapitalization. As a result, the firm gets rid of the risk of insolvency due
to paucity of liquid resources.
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Goodwill: A firm which maintains a sound working capital position can make payments to
its creditors in time which enhance its reputation or goodwill.

2.4. FACTORS DETERMINING WORKING CAPITAL REQUIREMENT:

The requirement of working capital goes on increasing with the growth and expensing of the
business till its gain’s maturity. At maturity the amount of working capital required is called
normal working capital.
In short, the factors to be considered in determining the requirements of working capital
are:
Nature of the business: Organization engaged in public utility services require relatively
less amount of working capital because they do not generally produce any goods but render
services on cash basis. But in a trading concern and manufacturing organization, the
requirement of working capital is very high because they have to maintain a large stock of
finished goods and raw materials respectively.
Scale of operation: A big concern with a high scale of operation has to maintain larger
amount of working capital than a firm with small scale of operation.
Production cycle: Production cycle starts with raw materials and ends with the completion
of manufacturing of the product. If the production cycle is longer, there is greater need for
working capital because in this case, funds remain blocked for a longer period.
Business cycle: During boom period working capital requirement will be higher than in
slack period because in boom period, volume of production increases.
Inventory policy: If large amount of fund is locked up in inventories, working capital
requirements will be larger. But if small amount of fund is locked in inventories, lesser
amount of working capital will be required.
Seasonality of the business: In case of seasonal business, working capital requirement of
the firm during the production season will be larger.
Operational efficiency: If the firm has high degree of operational efficiency, working
capital requirement will be relatively low and vice versa.
Inflation: If the prices of inputs rise, additional working capital will be required.
Expansion and growth of the firm: If the firm is expanded, additional working capital will
be required. Again, with the normal growth in operation, the amount of working capital
has to be increased suitably.
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Market conditions: If there is high degree of competition in the market, large inventory is
essential to sell goods on liberal credit term. Thus, working capital requirement will be
high.
Supply conditions: If raw materials, spares, stores, etc. are promptly available, JIT (Justin-
Time) inventory principle can be adopted and working capital requirement will be
relatively small.
Level of taxes: The need of working capital depends on the rates of taxes and advance tax
provisions.

2.5. OPERATING CYCLE METHOD:

One of the methods for forecasting working capital requirement is based on operating
cycle concept. Operating cycle is known as working capital cycle or cash cycle which
refers to the length of time between the firm’s outflow of cash for payment for materials
and inflow of cash from sales/debtors. There is a complete cycle from cash to cash. Cash
gets converted into raw materials, working-progress, finished goods, debtors and finally
into cash again. Short-term funds are needed for meeting the operational expenses during
this time period. This time period depends on the length of time within which the original
cash outflow gets converted into cash inflow.
Operating cycle or working capital cycle is depicted below

in
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Operating cycle indicates the time lag and relative importance of its constituent parts. Its
duration depends mainly on the nature of business. Operating cycle helps in the forecasting
of working capital requirement. If the operating cycle period is greater, higher will be the
requirement of working capital and vice versa.
Operating Cycle = R+W+F+D-C
Where, R = Raw material storage period
W = Work-in-progress lag or storage period
F = Finished goods las or storage period
D = Debtors collection period, and
C = Credit period enjoyed from supplier

2.6. SOURCES OF FUNDS FOR WORKING CAPITAL:

Both short-term and long-term sources of funds are to be tapped for meeting the estimated
working capital requirements. It is always desirable that at least 2/3 rds of the permanent
working capital be raised from long-term sources because financing of working capital
from long-term sources enjoys the following benefits- The need to repay loans frequently
is eliminated.
The risk is reduced.
The firm has not to pay the funds involved in working capital in near future.
The liquidity is increased.
Working capital requirement is also financed by short-term sources, such as bank loans,
cash credit, overdrafts, etc. Financing of working capital requirements through shortterm
sources has the following benefits- It lowers the cost.
It establishes close relationship with the banks.
Long-term and short-term sources of funds for working capital have to be mixed in such a
way that the overall working capital cost becomes the lowest and the funds are readily
available as and when needed.

2.7. COMPANY PROFILE:

RELIANCE INDUSTRIES LTD.
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Reliance Industries Ltd. Is India largest private sector company, generating revenues of
$19.97 billion or more than 3 percent of India’s total gross domestic product.
Reliance Industries represents the continuation of India’s greatest corporate success story
since the country’s independence. Founded by Dhirubhai H. Ambani in 1958. Reliance
industries is listed on Mumbai Stock Exchange. Mukesh Ambani is the chairman and
managing director of the company.

Additional Details:
Public Company
Number of Employees: 236560 (2022)
Net Income: 53,223 crores INR (US$7.5 billion, 2022)
Total Assets: ₹1,321,212 crore (US$170 billion) (2022)
Ticker Symbol: RIL
NAIC: 324110 Petroleum Refineries;
221210 Natural Gas Distribution;
313230 Nonwoven Fabric Mills
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Chapter-3

Profit & Loss account of Mar-22 Mar-21 Mar-20 Mar-19 Mar-18

Reliance
12 mths 12 mths 12 mths 12 mths 12 mths
Industries (in Rs. Cr.)
INCOME
Revenue From Operations [Gross] 2,78,940 3,66,177 4,01,583 3,15,357 2,65,041
Less: Excise/Service Tax/Other Levies 33,273 29,224 29,967 25,315 23,016
Revenue From Operations [Net] 2,45,667 3,36,953 3,71,616 2,90,042 2,42,025
Total Operating Revenues 2,45,667 3,36,953 3,71,616 2,90,042 2,42,025
Other Income 14,818 13,566 8,822 8,220 8,709
Total Revenue 2,60,485 3,50,519 3,80,438 2,98,262 2,50,734
EXPENSES
Cost Of Materials Consumed 1,68,262 2,37,342 2,65,288 1,98,029 1,64,250
Purchase Of Stock-In Trade 7,301 7,292 8,289 7,268 5,161
Operating And Direct Expenses 18,375 21,424 24,839 0 0
Changes In Inventories Of FG, WIP
610 77 -3,294 -3,232 -4,839
And Stock-In Trade
Employee Benefit Expenses 5,024 6,067 5,834 4,740 4,434
Finance Costs 16,211 12,105 9,751 4,656 2,723
Depreciation And Amortisation
9,199 9,728 10,558 9,580 8,465
Expenses
Other Expenses 13,565 14,306 14,252 31,496 29,763
Total Expenses 2,37,577 3,05,958 3,33,071 2,52,537 2,09,957
Profit/Loss Before Exceptional,
22,908 44,561 47,367 45,725 40,777
Extraordinary Items and Tax
Exceptional Items 4,304 -4,245 0 0 0
Profit/Loss Before Tax 27,212 40,316 47,367 45,725 40,777
Tax Expenses-Continued Operations
Current Tax 0 7,200 9,440 8,953 8,333
Less: MAT Credit Entitlement 0 0 0 0 0
Deferred Tax -4,732 2,213 2,764 3,160 1,019
Tax For Earlier Years 0 0 0 0 0
Total Tax Expenses -4,732 9,413 12,204 12,113 9,352
Profit/Loss After Tax and Before
31,944 30,903 35,163 33,612 31,425
Extra-Ordinary Items
Profit/Loss from Continuing
31,944 30,903 35,163 33,612 31,425
Operations
Profit/Loss for The Period 31,944 30,903 35,163 33,612 31,425
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OTHER ADDITIONAL
INFORMATION
EARNINGS PER SHARE
Basic EPS (Rs.) 50 48 55 53 97
Diluted EPS (Rs.) 49 49 55 53 97
VALUE OF IMPORTED AND
INDIGENIOUS RAW MATERIALS
STORES, SPARESx AND LOOSE
TOOLS
Imported Raw Materials 0 0 0 0 0
Indigenous Raw Materials 0 0 0 0 0

STORES, SPARES AND LOOSE

TOOLS

Imported Stores and Spares 0 0 0 0 0

Indigenous Stores and Spares 0 0 0 0 0
DIVIDEND AND DIVIDEND
PERCENTAGE
Equity Share Dividend 3,921 3,852 3,554 3,255 0
Tax On Dividend 0 732 728 661 0
Equity Dividend Rate (%) 70 65 65 60 110

(Source: www.moneycontrol.com )

3.1. Presentation of Data and Analysis:

Table – 1

Statement of Working ------------------- in Rs. Cr. -------------------

Capital
Mar-22 Mar-21 Mar-20 Mar-19 Mar-18
Particulars 12 mths 12 mths 12 mths 12 mths 12 mths
A. Current Assets:
Current Investments 94,665.00 70,030.00 59,640.00 53,277.00 51,906.00
inventories 37,437.00 38,802.00 44,144.00 39,568.00 34,018.00
trade Receivables 4,159.00 7,483.00 12,110.00 10,460.00 5,472.00
. Cash And Cash Equivalents 5573 8,485.00 3768 2731 1,754.00
Short Term Loans And Advances 993 15,028.00 4,876.00 3,533.00 4,900.00
Total Current Assets 1,42,827.00 1,39,828.00 1,24,538.00 1,09,569.00 98,050.00
 18 | P a g e

B. Current Liabilities:

a) Short-Term Borrowings 33,152.00 59,899.00 39,097.00 15,239.00 22,580.00

b) Trade Payables 86,999.00 71,048.00 88,241.00 88,675.00 68,161.00
c) Other Current Liabilities 80,735.00 1,98,662.00 73,900.00 85,815.00 60,817.00
d) Short-Term Provision 901 1,073.00 783 918 1,268.00
Total Current Liabilities 2,01,787 3,30,682 2,02,021 1,90,647 1,52,826

WORKING CAPITAL(A-B) -58,960 -1,90,854 -77,483 -81,078 -54,776

Source (http://en.m.wikipedia.org)
Chart - 1

00,000

50,000

00,000

50,000

Interpretation:
This statement shows the downward and upward trends in the amount of working capital.
From the given chart it is understood that working capital of Reliance Industries Limited
is lowest in the year 2021 due to the Global Pandemic Covid-19.
But negative balances of working capital implies that short-term solvency or liquidity
position of company is not satisfactory. The management should take steps regarding
working capital.
19 | P a g e

Table - 2

- ------------------ in Rs. Cr. ------------------

Mar-21 Mar-22 Increase(+) Decrease(-)

PARTICULARS 12 mths 12 mths 12 mths 12 mths

A. CURRENT ASSETS:

A. CURRENT INVESTMENTS 70,030.00 94,665.00 24,635.00

B. INVENTORIES 38,802.00 37,437.00 1365

C.TRADE RECEIVABLES 7,483.00 4,159.00 3324

D.CASH AND CASH EQUIVALENTS 8,485.00 5573. 00 2912

E. SHORT TERM LOANS AND ADVANCES 15,028.00 993 14035

TOTAL CURRENT ASSETS 1,39,828 1,42,827

B. CURRENT LIABILITIES:

A) SHORT-TERM BORROWINGS 59,899.00 33,152.00 26,747.00

B) TRADE PAYABLES 71,048.00 86,999.00 15,951
C) OTHER CURRENT LIABILITIES 1,98,662.00 80,735.00 1,17,927.00
D) SHORT-TERM PROVISION 1,073.00 901 172
TOTAL CURRENT

LIABILITIES 3,30,682 2,01,787

WORKING CAPITAL(A-B) -1,90,854 -58,960

NET INCREASE IN WORKING CAPITAL 131894

STATEMENT SHOWING CHANGES OF WORKING CAPITAL FOR THE

YEAR 2021 & 2022:
Source (http://en.m.wikipedia.org)
 20 | P a g e

March,21 March,22

Interpretation:
This statement depicts that although net working capital is negative for both years but there
is an increment of working capital for the year 2021 comparatively year 2020. This implies
that management is working efficiently regarding working capital management. Negative
net working capital means that not only current assets but also fixed assets are supporting
the current liabilities
RATIO ANALYSIS:
Computation of Current Ratio
Current Ratio = Current Assets / Current Liabilities

Table - 3

------------------- in Rs. Cr. ------------------

Mar-22 Mar-21 Mar-20 Mar-19 Mar-18
Particulars 12 mths 12 mths 12 mths 12 mths 12 mths
A. Current Assets 1,42,827 1,39,828 1,24,538 1,09,569 98,050
B. Current Liabilities 2,01,787 3,30,682 2,02,021 1,90,647 1,52,826
Current Ratio (A / B) 0.7078 0.4228 0.6165 0.5747 0.6416

Source (http://en.m.wikipedia.org)
 21 | P a g e

Chart-3

0.0000
Mar-22 Mar-21 Mar-20 Mar-19 Mar-18

Interpretation:
The current ratio is a liquidity ratio that measures whether or not a firm has enough
resources to meet its short-term obligations. The current ratio is an indication of firm’s
liquidity. From the given chart it is understood that current ratio of Reliance Industries
Limited is highest in the year 2022 in compare with the previous years. It means the
management of Company is working efficiently.

Computation of Quick Ratio

Quick Ratio = Quick Assets / Quick Liabilities

Table - 4

------------------- in Rs. Cr. -------------------

Mar-22 Mar-21 Mar-20 Mar-19 Mar-18

Particulars 12 mths 12 mths 12 mths 12 mths 12 mths
A. Quick Assets 1,05,390 1,01,026 80,394 70,001 64,032
B. Quick Liabilities 1,68,635 2,70,783 1,62,924 1,75,408 1,30,246
Quick Ratio (A / B) 0.625 0.3731 0.4934 0.3991 0.4916

Quick Assets = Total Current Assets - Inventories

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Quick Liabilities = Total Current Liabilities – Short-Term Borrowings

Source (http://en.m.wikipedia.org)

Chart-4

Interpretation:
The Quick Ratio, also known as Acid Test Ratio, shows the ratio of cash and other liquid
resources in comparison to current liabilities. Quick Ratio is considered a more reliable to
test of short-term solvency than current ratio. The quick ratio is a measure of how well a
company can meet its short-term financial liabilities.

Computation of Current Assets Turnover Ratio

Current Assets Turnover Ratio = Current Assets / Net Sales

Table - 5

------------------- in Rs. Cr. -------------------

Mar-22 Mar-21 Mar-20 Mar-19 Mar-20

Particulars 12 mths 12 mths 12 mths 12 mths 12 mths

A. Current Assets 1,42,827 1,39,828 1,24,538 1,09,569 98,050

B. Net Sales 2,45,667 3,36,953 3,71,616 2,90,042 2,42,025
 23 | P a g e

Current Assets Turnover

0.58138 0.41498 0.33513 0.37777 0.40512
Ratio (A / B)

Chart-5

0.2

Interpretation:
Current Assets Turnover Ratio indicates that the current assets are turned over in the form
of sales a greater number of times. A high current assets turnover ratio indicates the
capacity of the organization to achieve maximum sales with the minimum investment in
current assets.
However, it may be concluded that in 2021 and 2022 current assets had been efficiently
utilized as compared to other three years.

COMPUTATION OF DEBTOR TURNOVER RATIO

Debtors Turnover Ratio = Annual Net Credit Sales / Average Trade

Table - 6
------------------- in Rs. Cr. -------------------
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Mar-22 Mar-21 Mar-20 Mar-19 Mar-18

Particulars 12 mths 12 mths 12 mths 12 mths 12 mths
A. Annual Net Credit
Sales
2,45,667 3,36,953 3,71,616 2,90,042 2,42,025
B. Average Trade
Receivable 5821 9796.5 11285 7966 5472
Debtors Turnover
42.2 34.4 32.93 36.41 44.23
Ratio (A / B)

Source (http://en.m.wikipedia.org)
N.B: 1) Since the opening stock of trade receivables for the year 2018, is not known, so,
average trade receivables assumed to be equal to its closing balance. Chart-6

15.00 25.00 30.00 35.00 40.00 50.00

Interpretation:
Debtors or Receivable Turnover Ratio is an activity ratio measuring how efficiently a firm
uses its assets. Receivable turnover ratio can be calculated by dividing the net value of
credit sales during a given period by the average accounts receivable during the same
period.
From the given chart it is understood that debtors’ turnover ratio of Reliance Industries
Limited is higher in the year 2018, then starts decreasing in 2019 and 2020. Then again
starts increasing in 2021 and 2022. It means in middle years the management of company
is not very well but at the end they again came back to the track and worked effectively.
Computation of Creditors Turnover Ratio

Creditors Turnover Ratio= Annual Net Credit Purchase / Average Trade Payable

Table - 7
 25 | P a g e

------------------- in Rs. Cr. ---------------

Mar-22 Mar-21 Mar-20 Mar-19 Mar-18
12
Particulars 12 mths 12 mths 12 mths 12 mths
mths

A. Annual Net Credit 7,268 5,161 4,241 7,134 524

B. Average Trade Payable 79,024 79,645 88,458 78,418 68,161

Creditors Turnover Ratio 0.092 0.092 0.094 0.093 0.076

Source (http://en.m.wikipedia.org)

N.B: 1) Since the opening stock of trade payable for the year 2018 is not known, so, average trade
payable assumed to be equal to its closing balance.
2) Purchase of stock-in-trade assumed to net credit purchase for the sake of convenience in
computation.

0.092 0.092 0.094 0.093 0.076

Interpretation:
Creditors Turnover Ratio is a ratio of net credit purchase to average trade creditors.
Creditors turnover ratio is known as payable turnover ratio. Shorter average payment
period or highest payable turnover ratio may indicate less period of credit enjoyed by the
business it may be due to the fact that either business has better liquidity position.
From the given chart it is understood that creditors turnover of Reliance Industries Limited
is higher in the year 2020 then decreased and remained constant in the year 2021 and 2022.
 26 | P a g e

Which means the company takes more time to pay off its suppliers than in previous years,
which is not a good sign for the worthiness of the company.

Computation of Gross Working Capital Turnover Ratio

Gross Working Capital Turnover Ratio = Gross Working Capital / Net Sales

Table – 8

Mar-22 Mar-21 Mar-20 Mar-19 Mar-18

Particulars 12 mths 12 mths 12 mths 12 mths 12 mths

A. Gross Working Capital 142827 139828 124538 109569 98050

B. Net Sales 2,45,667 3,36,953 3,71,616 2,90,042 2,42,025
Gross Working Capital
0.58 0.41 0.34 0.38 0.41
Turnover Ratio (A / B)

Source (http://en.m.wikipedia.org)

Chart-8

Interpretation:
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The Working Capital Turnover Ratio is also referred to as Net Sales to Working Capital.
It indicates a company effectiveness in using its working capital.
Working capital is defined as the total amount of current assets minus the total amount of
current liabilities. A higher ratio indicates efficient utilization of working capital and low
ratio indicates inefficient utilization. The above graph indicates the Gross Working Capital
Turnover Ratio of Reliance Industries Limited decreasing from the year 2018 to 2020 and
then again increasing in the year 2021 and 2022, which shows efficiency of management
regarding working capital.

3.2. FINDINGS:
• The current ratio is a liquidity ratio that measures whether or not a firm has enough
resources to meet its short-term obligations. The current ratio is an indication of firm's
liquidity.
• The Quick Ratio, also known as Acid Test Ratio, shows the ratio of cash and other
liquid resources in comparison to current liabilities. Quick Ratio is considered a more
reliable to test of short-term solvency than current ratio. The quick ratio is a measure of
how well a company can meet its short-term financial liabilities.
• Current Assets Turnover Ratio indicates that the current assets are turned over in the
form of sales a greater number of times. A high current assets turnover ratio indicates the
capacity of the organization to achieve maximum sales with the minimum investment in
current assets. However, it may be concluded that in 2021 and 2022 current assets had been
efficiently utilized as compared to other three years.
• Debtors or Receivable Turnover Ratio is an activity ratio measuring how efficiently a
firm uses its assets. Receivable turnover ratio can be calculated by dividing the net value
of credit sales during a given period by the average accounts receivable during the same
period. From the given chart it is understood that debtors’ turnover ratio of Reliance
Industries Limited is higher in the year 2018, then starts decreasing in 2019 and 2020. Then
again starts increasing in 2021 and 2022. It means in the middle years the management of
company is not very well but at the end they again came back to the track and worked
effectively.
• Creditors Turnover Ratio is a ratio of net credit purchase to average trade creditors.
Creditors turnover ratio is known as payable turnover ratio. Shorter average payment
period or highest payable turnover ratio may indicate less period of credit enjoyed by the
business it may be due to the fact that either business has better liquidity position. From
the given chart it is understood that creditors turnover ratio of Reliance Industries Limited
is higher in the year 2020 then decreased and remained constant in the year 2021 and 2022.
28 | P a g e

Which means the company takes more time to pay off its suppliers than in previous years
which is not a good sign for the worthiness of the company.
• The Working Capital Turnover Ratio is also referred to as Net Sales to Working
Capital. It indicates a company effectiveness in using its working capital. Working capital
is defined as the total amount of current assets minus the total amount of current liabilities.
A higher ratio indicates efficient utilization of working capital and low ratio indicates
inefficient utilization. The above graph indicates the Gross Working Capital Turnover
Ratio of Reliance Industries Limited decreasing from the year 2018 to 2020 and then again
increasing in the year 2021 and 2022, which shows efficiency of management regarding
working capital.

CHAPTER-4

Conclusion and Recommendation:

4.1. CONCLUSION:
Thus, from the above case study and interpretation, we can conclude that the overall
status of Reliance Industries Ltd. is satisfactory. But the company should focus to
increase its working capital by increasing current assets or by decreasing current
liabilities.

In earlier discussion we have tried to access working capital of Reliance

Industries Ltd. for the years 2017-18, 2018 -19, 2019 -20, 2020 – 21& 2021-2022.

I have taken only one company i.e., Reliance Industries Ltd. as sample and I
have taken help from the published annual reports of the company.
29 | P a g e

This is a very little effort in management of working capital. This study will
provide ample scope to draw the trends of working capital of the corporate sector
and should a good number of companies be taken as sample units.

4.2. RECOMMENDATIONS:
• Working Capital of Reliance Industries Limited is lowest in the year 2021 due to the
Global Pandemic Covid 19, but has increased in the year 2022. Therefore, the negative
balances of working capital implies that the short-term solvency or liquidity position of
the company is not satisfactory. So, the company has to increase its working capital either
by increasing its current assets or by decreasing its current liabilities.
• Current Ratio of Reliance Industries Limited follows the downward and upward trends
which is very inconsistent but it is highest in the year 2022 in compare with the previous
years, which is a good sign for the company.
So, the company should take steps either to
increase in Current Assets by reducing the collection period or to reduce in Current
Liabilities by deferring payment as much as possible in order to increase the short-term
liquidity position of the company.
• Quick Ratio of Reliance Industries Limited is also very inconsistent like the current ratio
and it is also highest in the year 2022 in compare with the previous years. So, the
company should take necessary steps regarding increase in quick ratio by changing their
current policy in order to meet the Short - term obligation fluently.
• Current Assets Turnover Ratio of Reliance Industries Limited is decreased in the year
2017, 2018 & 2019 and in the year 2021 & 2022 it increases. The company should take
care of it to make it consistent.

• Debtors Turnover Ratio of the company is decreased in the year 2018, 2019 & 2020 but
after 2020 it starts increasing. So, to make it consistent the company should take care of
its credit policy and realization from debtors.

• Creditors Turnover Ratio is not very fluctuating and it is quite satisfactory.

• Gross Working Capital Turnover Ratio of Reliance Industries Limited decreased in the
year 2018, 2019 & 2020 and then increasing in the year 2021 and 2022, which shows
efficiency of management regarding working capital.
30 | P a g e

• The company should take necessary and the effective steps to improve its working
capital. So, that the efficiency and the management of the company will improve.

BIBLIOGRAPHY

The information that are required for the preparation of the project has been taken
from:

Websites: www.moneycontrol.com

http://en.m.wikipedia.org

https://www.ril.com

Books: Financial Management (Theory & Practical)

• Sushil Mukherjee
• Pradeep Kumar Chandra
31 | P a g e

Presentation of Data, Analysis & findings

Balance Sheet Of ------------------- in Rs. Cr. -----------------
-
Mar-22 Mar-21 Mar-20 Mar-19 Mar-18
Reliance
Industries

12 mths 12 mths 12 mths 12 mths 12 mths

EQUITIES AND
LIABILITIES
SHAREHOLDER'S
FUNDS
Equity Share Capital 6,445.00 6,339.00 6,339.00 6,335.00 3,251.00
Total Share Capital 6,445.00 6,339.00 6,339.00 6,335.00 3,251.00
Reserves and Surplus 4,68,038.00 3,84,875.00 3,98,983.00 3,08,297.00 2,85,058.00
Total Reserves and 4,68,038.00 3,84,875.00 3,98,983.00 3,08,297.00 2,85,058.00
Surplus
Total Shareholders’ Funds 4,74,483.00 3,91,214.00 4,05,322.00 3,14,632.00 2,88,309.00
NON-CURRENT
LIABILITIES
Long Term Borrowings 1,60,598.00 1,94,402.00 1,18,098.00 81,596.00 78,723.00
Deferred Tax Liabilities 30,788.00 50,556.00 47,317.00 27,926.00 24,766.00
[Net]
Other Long-Term 4,518.00 3,434.00 504 504 0
Liabilities
Long Term Provisions 1,499.00 1,410.00 2,483.00 2,205.00 2,118.00
Total Non-Current 1,97,403.00 2,49,802.00 1,68,402.00 1,12,231.00 1,05,607.00
Liabilities
CURRENT LIABILITIES
Short Term Borrowings 33,152.00 59,899.00 39,097.00 15,239.00 22,580.00
Trade Payables 86,999.00 71,048.00 88,241.00 88,675.00 68,161.00
Other Current Liabilities 80,735.00 1,98,662.00 73,900.00 85,815.00 60,817.00

Short Term Provisions 901 1,073.00 783 918 1,268.00

Total Current Liabilities 2,01,787.00 3,30,682.00 2,02,021.00 1,90,647.00 1,52,826.00
Total Capital and 8,73,673.00 9,71,699.00 7,75,745.00 6,17,525.00 5,46,746.00
Liabilities
ASSETS
NON-CURRENT
ASSETS
Tangible Assets 2,92,092.00 2,97,854.00 1,94,895.00 1,91,879.00 1,45,486.00
Intangible Assets 14,741.00 8,624.00 8,293.00 9,085.00 9,092.00
32 | P a g e

Capital Work-In-Progress 20,765.00 15,638.00 1,05,155.00 92,581.00 1,28,283.00

Other Assets 0 0 0 0 0
Fixed Assets 3,39,668.00 3,34,443.00 3,14,745.00 3,00,447.00 2,87,319.00
Non-Current Investments 2,52,620.00 4,21,793.00 2,72,043.00 1,71,945.00 1,40,544.00
Deferred Tax Assets [Net] 0 0 0 0 0
Long Term Loans and 65,698.00 44,348.00 31,806.00 17,699.00 10,418.00
Advances
Other Non-Current Assets 4,968.00 4,461.00 4,287.00 3,522.00 2,184.00
Total Non-Current Assets 6,62,954.00 8,05,045.00 6,22,881.00 4,93,613.00 4,40,465.00
CURRENT ASSETS
Current Investments 94,665.00 70,030.00 59,640.00 53,277.00 51,906.00
Inventories 37,437.00 38,802.00 44,144.00 39,568.00 34,018.00
Trade Receivables 4,159.00 7,483.00 12,110.00 10,460.00 5,472.00
Cash And Cash 5,573.00 8,485.00 3,768.00 2,731.00 1,754.00
Equivalents
Short Term Loans and 993 15,028.00 4,876.00 3,533.00 4,900.00
Advances
Other Current Assets 67,892.00 26,826.00 28,326.00 14,343.00 8,231.00
Total Current Assets 2,10,719.00 1,66,654.00 1,52,864.00 1,23,912.00 1,06,281.00
Total Assets 8,73,673.00 9,71,699.00 7,75,745.00 6,17,525.00 5,46,746.00
OTHER ADDITIONAL
INFORMATION
CONTINGENT
LIABILITIES,
COMMITMENTS
Contingent Liabilities 25,921.00 45,924.00 1,11,869.00 66,970.00 73,386.00
CIF VALUE OF
IMPORTS
Raw Materials 0 0 0 0 0
Stores, Spares and Loose 0 0 0 0 0
Tools
Trade/Other Goods 0 0 0 0 0
Capital Goods 0 0 0 0 0
EXPENDITURE IN
FOREIGN EXCHANGE
Expenditure In Foreign 1,34,436.00 2,60,280.00 3,07,558.00 2,21,977.00 0
Currency
REMITTANCES IN
FOREIGN CURRENCIES
FOR DIVIDENDS
Dividend Remittance in -- -- -- -- --
Foreign Currency
EARNINGS IN FOREIGN
EXCHANGE
FOB Value of Goods -- -- -- -- --
33 | P a g e

Other Earnings 1,79,929.00 2,84,196.00 2,14,337.00 1,69,763.00 --

BONUS DETAILS
Bonus Equity Share 5,188.89 5,188.89 5,188.89 5,188.89 2,108.56
Capital
NON-CURRENT
INVESTMENTS
Non-Current Investments 21,240.00 27,475.00 12,937.00 12,182.00 15,991.00
Quoted Market Value
Non-Current Investments 2,35,348.00 3,94,521.00 2,59,314.00 1,60,045.00 1,24,851.00
Unquoted Book Value
CURRENT
INVESTMENTS
Current Investments 36,303.00 31,814.00 24,017.00 13,133.00 10,731.00
Quoted Market Value
Current Investments 58,362.00 38,216.00 35,623.00 40,144.00 41,175.00
Unquoted Book Value

(Source: www.moneycontrol.com)