WCM Project REport MKS

Report
On
“Working Capital
Management Of
Central Coalfields Ltd.”
INTERNSHIP – FINANCE
Submitted by: MRADUL KUMAR GUPTA
Roll No 0211BBA051
Session: 2021-24
Under Industry Guide: Mr. K. K. Biswas, CCL

WORKING CAPITAL MANAGEMENT OF CENTRAL COALFIELDS
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CERTIFICATE
[ THIS PAGE IS INTENTIONALLY KEPT BLANK FOR CERTIFICATE]
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ACKNOWLEDGEMENT
I have immense pleasure in the successful completion of this report work titled
"Working Capital Management of Central Coalfields Limited." I ’am using this
opportunity to express my gratitude to everyone who supported me throughout this
Internship.
My special thanks to the General Manager of Finance Department for granting me the
opportunity to serve as a finance intern at this very prestigious company. I’ am also
thankful to Mr. K.K. Biswas for his aspiring guidance, invaluably constructive criticism
and friendly advice during the internship. I’ am sincerely grateful to him for sharing his
truthful and illuminating views on a number of issues related to the report.
I acknowledge the continued support, encouragement, motivation, and guidance

extended for this report by various employees of Central Coalfields Limited.
I would also like to thank my friends and family who provided me with the facilities
being required and conductive conditions for this report work.
Thank You.
MRADUL KUMAR GUPTA

Roll No. 0211BBA051
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INDEX TABLE
SERIAL NO. CONTENTS PAGE NO.
I Introduction 5-22
II Industry Profile 23-39
III Operational & Financial 40-47

Statistics
IV Project Objective 48-54
V Data Collection 55-72
VI Analysis & Interpretation 73-100
VII Findings & Conclusion 101-103
VIII Bibliography 104
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PART-I
INTRODUCTION
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CAPITAL
Introduction:
Capital is the keynote of economic development. In this modern age, the level of
economic development is determined by the proportion of capital available.
Meaning:
In the ordinary sense of the word Capital means initial investment invested by
businessman or owner at the time of commencing the business.
Definition:
Capital is a factor of production with a specific, changeable value attached to it that could,
potentially, provide its owner with more wealth. It is an abstract economic concept, and, as
such, has many different definitions and classifications, but the unifying feature of capital is
that it has a certain value, so it in itself is a type of wealth, and it has the potential of
generating more wealth.
Features:
Capital has the following features.
1. Capital is a man made.
2. Capital is a perishable.
3. Capital is a human control possible.
4. Capital is a mobile.
5. Capital is a human sacrifice.
6. Capital is a scarce.
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INTRODUCTION OF WORKING CAPITAL:

Working capital is the life blood and nerve center of a business. Just as circulation of blood is
essential in the human body for maintaining life, working capital is very essential to maintain
the smooth running of a business. No business can run successfully without an adequate
amount of working capital.
There is operative aspects of working capital i.e. current assets which is known as funds also
employed to the business process from the gross working capital Current asset comprises cash
receivables, inventories, marketable securities held as short term investment and other items
nearer to cash or equivalent to cash. Working capital comes into business operation when
actual operation takes place generally the requirement of quantum of working capital is
determined by the level of production which depends upon the management attitude towards
risk and the factors which influence the amount of cash, inventories, receivables and other
current assets required to support given volume of production.
Working capital management as usually concerned with administration of the current assets as
well as current liabilities. The area includes the requirement of funds from various resources
and to utilize them in all result-oriented manner. It can be stated without exaggeration that
effective working capital management is the short requirement of long-term success.
The importance of working capital management is indisputable; Business liability relies on its
ability to effective management of receivables, inventory, and payables. By minimizing the
amount of funds tied up in current assets. Firms are able to reduce financing costs or increase
the funds available for expansion. Many managerial efforts are put into bringing non-optimal
level of current assets and liabilities back towards their optimal levels.
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Meaning:
Working capital means the funds (i.e.; capital) available and used for day-to-day operations
(i.e.; working) of an enterprise. It consists broadly of that portion of assets of a business which
are used in or related to its current operations. It refers to funds which are used during an
accounting period to generate a current income of a type which is consistent with major
purpose of a firm existence.
Definitions:
According to Weston & Brigham
“Working capital refers to a firm’s investment in short-term assets cash, short term
securities, accounts receivables and inventories.
Mead Mallott & Field

“Working capital means current assets”.
Calculation
The key components of working capital are current assets and current liabilities.
Once you have determined the total value of current assets and current liabilities, you can apply
the below formula to calculate working capital
Working Capital = Current Asset -Current Liabilities
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Need:
1. To purchase raw materials, spare parts and other component.

A manufacturing firm needs raw-materials and other components parts for the
purpose of converting them in to final products, for this purpose it requires working
capital. Trading concern requires less working capital.
2. To meet overhead expenses.

Working capital is required to meet recurring overhead expenses such as cost of
fuel, power, office expenses and other manufacturing expenses.
3. To hold finished and spare parts etc.

Stock represents current asset. A firm that can afford to maintain stock of required
finished goods, work in progress & spares in required quantities can operate successfully.
So, for that adequate quantity of working capital is required.
4. To pay selling & distribution expenses.

Working capital is required to pay selling & distribution expenses. It includes cost
of packing, commission etc.
5. Working capital is required for repairs & maintenance both machinery as well as
factory buildings.
6. Working capital is required to pay wages, salaries and other charges.
7. It is helpful in maintain uncertainties involved in business field.
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WORKING CAPITAL MANAGEMENT

Working capital management aims at more efficient use of a company's resources by monitoring
and optimizing the use of current assets and liabilities. The goal is to maintain sufficient cash flow
to meet its short-term operating costs and short-term debt obligations and maximize profitability.
Working capital management is key to the cash conversion cycle (CCC), or the amount of time a
firm uses to convert working capital into usable cash.
Understanding:
The primary purpose of working capital management is to enable the company to maintain
sufficient cash flow to meet its short-term operating costs and short-term debt obligations.
A company's working capital is made up of its current assets minus its current liabilities.
Current assets include anything that can be easily converted into cash within 12 months,
highly liquid assets such as cash, accounts receivable, inventory, and short-term
investments. Current liabilities are any obligations due within the following 12 months.
These include accruals for operating expenses and current portions of long-term debt
payments.
Working capital management commonly involves monitoring cash flow, current assets,
and current liabilities by ratio analysis of the key elements of working capital, including
the working capital ratio, collection ratio, and inventory turnover ratio.
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Requirement:
Working capital management helps maintain the smooth operation of the net operating cycle, also
known as the cash conversion cycle (CCC)—the minimum amount of time required to convert net
current assets and liabilities into cash.
Working capital management can improve a company's cash flow management and earnings
quality through the efficient use of its resources. Management of working capital includes
inventory management as well as management of accounts receivable and accounts payable.
Working capital management also involves the timing of accounts payable (i.e., paying suppliers).
A company can conserve cash by choosing to stretch the payment of suppliers and to make the
most of available credit or may spend cash by purchasing using cash— these choices also affect
working capital management.
Objectives:
Effective management of working capital is means of accomplishing the firm’s goal of
adequate liquidity. It is concerned with the administration of current assets and current
liabilities. It has the main following objectives-
1. To maximize profit of the firm.
2. To help in timely payment of bills.
3. To maintain sufficient current assets.
4. To ensure adequate liquidity of the firms.
5. It protects the solvency of the firm.
6. To discharge current liabilities.
7. To increase the value of the firm.
8. To minimize the risk of business.
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Working Capital Cycle
The Working Capital Cycle for a business is the length of time it takes to convert the
total net working capital (current assets fewer current liabilities) into cash. Businesses
typicality manage this cycle by selling inventory quickly, collecting revenue from
customers quickly, and paying bills slowly to optimize cash flow.
For most companies, the working capital cycle works as follows:
1. The company purchases, on credit, materials to manufacture a product. For

example, they have 90 days to pay for the raw materials (payable days).
2. The company sells its inventory in 85 days, on average (inventory days).
3. The company receives payment from customers for the products sold in 20 days, on
average (receivable days).
Working capital management helps maintain the smooth operation of the net
operating cycle, also known as the cash conversion cycle (CCC)—the
minimum amount of time required to convert net current assets and liabilities
into cash.
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DETERMINANTS OF WORKING CAPITAL REQUIREMENTS
1. Nature of Business:
The Nature of the business effects the working capital requirements to a great extent. For
instance, public utilities like railways, electric companies, etc. need very little working capital
because they need not hold large inventories and their operations are mostly on cash basis, but
in case of manufacturing firms and trading firms, the requirement of working capital is
sufficiently large as they have to invest substantially in inventories and accounts receivables.
2. Production Policy:
The production policies also determine the Working capital requirement. Through the
production schedule i.e., the plan for production, production process etc.
3. Credit Policy:
The credit policy relating to sales and affects the working capital. The credit policy influences
the requirement of working capital in two ways:
a. Through credit terms granted by the firm to its customers/buyers.
b. Credit terms available to the firm from its creditors.
The credit terms granted to customers have a bearing on the Magnitude of Working capital
by determining the level of book debts. The credit sales results are higher book debts and
higher book debt means more Working capital.
On the other hand, if liberal credit terms are available from the suppliers of goods [Trade
creditors], the need for working capital is less.
4. Changes in Technology:
Technology used in manufacturing process is mainly determined need of working capital.
Modernize technology needs low working capital, whereas old and traditional technology
needs greater working capital.
5. Size of the business unit:

The size of the business unit is also important factor in influencing the working capital needs
of a firm. Large Scale Industries requires huge amount of working capital compared to small
scale Industries.
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6. Growth and Expansion:

The growth in volume and growth in working capital go hand in hand, however, the change
may not be proportionate and the increased need for working capital is felt right from the
initial stages of growth.
7. Dividend Policy:
Another appropriation of profits which has a bearing on working capital is dividend payment.
Payment of dividend utilizes cash while retaining profits acts as a source as working capital
Thus working capital gets affected by dividend policies.
8. Supply Conditions:
If supply of raw material and spares is timely and adequate, the firm can get by with a
comparatively low inventory level. If supply is scarce and unpredictable or available during
particular seasons, the firm will have to obtain raw material when it is available. It is essential
to keep larger stocks increasing working capital requirements.
9. Market conditions:
The level of competition existing in the market also influences working capital requirement.
When competition is high, the company should have enough inventories of finished goods to
meet a certain level of demand. Otherwise, customers are highly likely to switch over to
competitor’s products. It thus has greater working capital needs. When competition is low, but
demand for the product is high, the firm can afford to have a smaller inventory and would
consequently require lesser working capital. But this factor has not applied in these
technological and competitive days.
10. Business Cycle:
The working capital requirements are also determined by the nature of the business cycle.
Business fluctuations lead to cyclical and seasonal changes which, in turn, cause a shift in the
working capital position, particularly for temporary workingcapital the variations in the
business conditions may be in two directions:
1. Upward phase when boom condition prevails,
2. Downswing phase when economic activity is marked by a decline.
11. Profit Level:

Profit level also affects the working capital requirements as a concern higher profit
margin results in higher generation of internal funds and more contributing to working capital.
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ESTIMATION OF CURRENT ASSETS

1. Raw Material Inventory:
The Investment in Raw Material can be computed with the help of the following formula: -
Budgeted Cost of Raw Average Inventory
Production x Material(s) x Holding Period
(In units) per unit (months/days)
12 months / 52 weeks / 365days

2. Work-in-progress (W/P) Inventory:
The relevant cost of determine work in process inventory are the proportionate share of cost of
raw material and conversion costs (labours and Manufacturing over Head cost excluding
depreciation) In case, full until of raw material is required in the beginning the unit cost of
work is process would be higher, i.e., cost of full unit + 50% of conversion cost compared to
the raw material requirement. Throughout the production Cycle, working process is normally
equivalent to 50% of total cost of production. Symbolically,
Budgeted Estimated work- Average Time Span
Production x in-progress cost x of work-in-progress
(In units) per unit inventory (months/days)

3. Finished Goods Inventory:
Working capital required to finance the finished goods inventory is given by factors
summed up as follows: -
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Budgeted Cost of Goods Produced Finished Goods
Production x per unit (excluding x Holding Period
(in units) depreciation) (months/days)
12 months/ 52 weeks / 365days
4. Debtors:
The working capital tied up in debtor should be estimated in relation to total cost
price (excluding depreciation) symbolically,
Budgeted Cost of Sales per Average Debt

Production x unit excluding x Collection Period
(In units) depreciation (months/days)
1. Cash and Bank Balances:

Apart from Working Capital needs for Financing Inventories and Debtors, Firms also
find it useful to have such minimum cash Balances with them. It is difficult to lay down the
exact procedure of determining such an amount. This would primarily be based on the
motives of holding cash balances of the business firm, attitude of management towards risk,
the access to the borrowing sources in times of need and past experience.
ESTIMATION OF CURRENT LIABILITIES
The Working Capital needs of business firms are lower to the extent that such needs are
met through the Current Liabilities (other than Bank Credit) arising in the ordinary course of
business. The Important Current Liabilities in this context are Trade-Creditors, Wages and
Overheads: -
1. Trade Creditors:
The Funding of Working Capital from Trade Creditors can be computed with the help
of the following formula: -
Budgeted Yearly Raw Material Credit Period
Production x Cost x Allowed by creditors
(In units ) per unit (months/days)
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Note: - Proportional adjustment should be made to cash purchases of Raw Materials.

2. Direct Wages:
The Funding of Working Capital from Direct Wages can be computed with the help of
the following formula: -
Budgeted Yearly Direct Labour Average Time-lag in

Production x Cost x Payment of wages
(In units ) per unit (months/days)
12 months / 52 weeks / 365dayss
3. Overheads (other than Depreciation and Amortization):

The Funding of Working Capital from Overheads can be computed with the help of the
following formula: -
Budgeted Yearly Overhead Average Time-lag in

Production x Cost x Payment of overheads
(In units) per unit (months/days)
Note: - The number of Overheads may be separately calculated for different types of
Overheads. In the case of Selling Overheads, the relevant item would be sales volume instead
of Production Volume.
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FORMAT FOR DETERMINATION OF WORKING

CAPITAL:
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RATIOS TO WORKING CAPITAL

MANAGEMENT
I. CURRENT RATIO (Working Capital Ratio)
The working capital ratio or current ratio is calculated as:
Current Ratio= Current Assets/ Current Liabilities
It is a key indicator of a company's financial health as it demonstrates its ability to meet its
short-term financial obligations. Although numbers vary by industry, a working capital ratio
below 1.0 generally indicates that a company is having trouble meeting its short-term
obligations. That is, the company's debts due in the upcoming year would not be covered by
its liquid assets. In this case, the company may have to resort to selling off assets, securing
long-term debt, or using other financing options to cover its short-term debt obligations.
Working capital ratios of 1.2 to 2.0 are considered desirable, but a ratio higher than 2.0 may
suggest that the company is not effectively using its assets to increase revenues. A high ratio
may indicate that the company is not managing its working capital efficiently.
II. SOLVENCY RATIO:

A solvency ratio is a key metric used to measure an enterprise’s ability to meet its long-term
debt obligations and is used often by prospective business lenders. A solvency ratio indicates
whether a company’s cash flow is sufficient to meet its long- term liabilities and thus is a
measure of its financial health. An unfavorable ratio can indicate some likelihood that a
company will default on its debt obligations.
1. Interest Coverage Ratio- The interest coverage ratio measures how many times a
company can cover its current interest payments with its available earnings. In other words,
it measures the margin of safety a company has for paying interest on its debt during a
given period. The interest coverage ratio is calculated as follows:
Interest Coverage Ratio=Interest Expenses EBIT where:
EBIT = Earnings before interest and taxes
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2. Debt-to-Assets Ratio- The debt-to-assets ratio measures a company's total debt to

its total assets. It measures a company's leverage and indicates how much of the company
is funded by debt versus assets, and therefore, its ability to pay off its debt with its
available assets. A higher ratio, especially above 1.0, indicates that a company is
significantly funded by debt and may have difficulty meetings its obligations. The debt-to-
assets ratio is calculated as follows:
Debt-to-Assets Ratio= Debt/Assets
3. Equity Ratio- The equity ratio, or equity-to-assets, shows how much of a company is
funded by equity as opposed to debt. The higher the number, the healthier a company is.
The lower the number, the more debt a company has on its books relative to equity. The
shareholder equity ratio is calculated as follows:
Shareholder Equity Ratio= Total Shareholder Equity/ Total Assets

4. Debt-to-Equity (D/E) Ratio- The D/E ratio is similar to the debt-to-assets ratio, in
that it indicates how a company is funded, in this case, by debt. The higher the ratio, the
more debt a company has on its books, meaning the likelihood of default is higher. The
ratio looks at how much of the debt can be covered by equity if the company needed to
liquidate. The debt-to-equity (D/E) ratio is calculated as follows:
Debt to Equity Ratio= Debt Outstanding/ Equity
III. INVENTORY TURNOVER RATIO

Another important element of working capital management is inventory management. To
operate with maximum efficiency and maintain a comfortably high level of working capital, a
company must keep sufficient inventory on hand to meet customers' needs while avoiding
unnecessary inventory that ties up working capital.
Inventory Turnover Ratio = Cost of goods sold / Average inventory
Companies typically measure how efficiently that balance is maintained by monitoring the
inventory turnover ratio. The inventory turnover ratio, calculated as cost of goods sold divided by
average balance sheet inventory, reveals how rapidly a company's inventory is being used in sales
and replaced. A relatively low ratio compared to industry peers indicates a risk that inventory
levels are excessively high, while a relatively high ratio may indicate inadequate inventory
levels.
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IV. PROFITABILITY RATIO

Profitability ratios are a type of accounting ratio that helps in determining the financial
performance of business at the end of an accounting period. Profitability ratios show how well
a company is able to make profits from its operations. Some of the ratios are discussed below:
1. Gross Profit Ratio- Gross Profit Ratio is a profitability ratio that measures the
relationship between the gross profit and net sales revenue. When it is expressed as a
percentage, it is also known as the Gross Profit Margin.
Gross Profit Ratio = Gross Profit/Net Revenue of Operations × 100
2. Net Profit Ratio- Net profit ratio is an important profitability ratio that shows the
relationship between net sales and net profit after tax. When expressed as percentage, it is
known as net profit margin.
Net Profit Ratio = Net Profit after tax ÷ Net sales Or
Net Profit Ratio = Net profit/Revenue from Operations × 100
3. Operating Ratio- Operating ratio is calculated to determine the cost of operation in

relation to the revenue earned from the operations.
Operating Ratio = (Cost of Revenue from Operations + Operating Expenses)/ Net Revenue
from Operations ×100
4. Operating Profit Ratio- Operating profit ratio is a type of profitability ratio that
is used for determining the operating profit and net revenue generated from the operations.
It is expressed as a percentage.
Operating Profit Ratio = Operating Profit/ Revenue from Operations × 100
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KEY TAKEAWAYS
 Working capital management requires monitoring a
company's assets and liabilities to maintain sufficient
cash flow to meet its short-term operating costs and
short-term debt obligations.
 Working capital management involves tracking various
ratios, including the working capital ratio, the collection
ratio, and the inventory ratio.
 Working capital management can improve a company's
cash flow management and earnings quality by using its
resources efficiently.
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PART-II
Industry Profile
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(A)
COAL INDUSTRY
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COAL INDUSTRY IN INDIA

EVOLUTION OF COAL INDUSTRY IN INDIA
Introduction:
Coal mining in India has a long history of commercial exploitation covering nearly 240 years
at places close to coal regions in the eastern part of the country.
In 1774, Summer & Heatley applied to the East India Company to raise coal in Raniganj
coalfield along the Western bank of river Damodar. However, coal mined did not receive
adequate attention due to its inferior quality as compared to British coal.
Pre-Independence Era:
The abolition of monopoly of East India Company in 1813 paved the way for rapid
development of private commercial enterprises. The first joint stock coal company, Bengal
Coal Company Limited, was registered in 1843.
From a level of output of only about 400 tonnes per annum during the period 1815- 1823, it
reached a level of 91,000 tonnes during 1846. By this time demand of coal was picking up due
to introduction of steam engines. Coal mining activities received a renewed thrust with the
setting up of a rail link between Howrah and Raniganj in 1853.
After 1774, for about a century the growth of Indian coal mining remained sluggish for want
of demand but the introduction of steam locomotives in 1853 gave a boost to it. Within a short
span, production rose to an annual average of 1 million tonne and India was producing about 6
million tonnes of coal per year by 1900 and 18 million tonnes per year by 1920.The
production got a sudden boost from the First World War but went through a slump in the early
thirties. The production reached a level of 29 million tonnes by 1942 and 30 million
tonnes by 1946.
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Since 1920, a number of commissions and committees made observations on the question of
conservation of coal, safety of mines, etc. which led to introduction of regulations and control
of the coal industry in India.
An Overview
India ranks third amongst the coal producing countries of the world in terms of annual coal
production. However, in respect of coal resources, it is endowed with less than one percent of
world coal resources. Of the 303 billion tonnes of Indian coal resources up to a depth of 1200
metres, about 123.2 billion tonnes fall under proved or confirmed category. This constitutes
about five percent of the world proved coal resources.
When India gained its independence in 1947, the coal production was nearly 30 million tonnes
per year and the coal mining operation was primarily in the private sector. Till 1971-73 the
coal mining operation remained primarily in the private sector and the production had come
up to a level of nearly 72 million tonnes per year only. The entire coal industry in India was
nationalised during 1972-73 and then on massive investments were made by the Government
of India in this basic infrastructure sector. India now ranks as the third largest coal producer of
the World next only to China and USA.
Mining depths in Indian coalfields are quite shallow, barring a few mines in Jharia and
Raniganj coalfields. Major share of coal resources lies at a depth of less than 300 metres.
About 87 percent of coal resources lie within the depth range of 600 metres. However, in most
of the coalfields, exploration work beyond 600 metres depth is yet to be taken up. It is
expected that the resource figures will improve considerably, with increased depth of
exploration.
Deposit characteristics vary widely from coalfield to coalfield. In some areas like Jharia and
Raniganj coalfields, high concentration of super imposed seams (as much as 40 in number)
poses great challenge to mining operations.
Geological inconsistencies like faults, folds, washouts etc, common in most of the coalfields,
tend to reduce the mining potential of deposits. Intrusions such as dykes and sills often lead to
operational problems and quality deterioration. Nearly all Indian Coal seams are prone to
spontaneous heating. The incubation period varies widely from 2 to 12 months. However,
compared to gas emission in other parts of the world, the coal seams in India are less gassy.
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Formation of SCCL
In 1945, the Singareni Collieries Company Limited (SCCL) became the first Government
owned coal company in India. In that year Government of Nizam of Hyderabad bought all the
shares the company and brought the company under India Trust Fund of the Nizam
Government.
The company actually started production in 1889 at Yellandu area of present Andhra Pradesh
and sixty thousand tonnes of coal was produced in that year.
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History of Coal Sector (Before Nationalization)
Summer & Heatley applied to EIC to mine

1774 coal
Bengal Coal Company Limited Registered

1843
Introduction of steamlocomotives
1853
Coal Production at 6 MTPA

1900
Formation of SCCL
1945
NCDC came into existence

1956
Post-Independence Era
After Independence, the country embarked upon the five-year development plans to improve
economic condition of the people. At the beginning of the first Plan, annual production went
up to 33 million tonnes.
During the first Plan period itself, the need to increasing coal production efficiently by
systematic and scientific development of the coal industry was being felt.
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Formation of NCDC
In 1956, National Coal Development Corporation (NCDC) came into existence in the public
sector as Government-owned Company in pursuance of the Industrial Policy Resolutions of
1948 and 1956 of the Government of India. It was started with a nucleus of 11 old state
collieries (owned by the Railways) with total annual production of 2.9 million tonnes of coal.
This was the first major step towards planned development of Indian coal sector.
From its very beginning, NCDC addressed itself to the task of increasing coal production and
developing new coal resources, besides introducing modern and scientific techniques of coal
mining.
Along with the Singareni Collieries Company Limited (SCCL) which was already in
operation since 1945 and which became a government company under the control of
Government of Andhra Pradesh in 1956, India had two Government coal companies at that
time.
History of Coal Sector (After Nationalization)
Formation of BCCL
1971
Nationalisation of coal mines

1973
BCCL, NCDC and CMAL merged to CIL

1975
NCL and SECL from CCL and WCL

1985
Creation of MCL from SECL

1992
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Formation of Coal India Limited
With dawn of the Indian independence a greater need for coal production was felt in the First
Five Year Plan. In 1951 the Working Party for the coal Industry was set up which included
representatives of coal industry, labour unions and government which suggested the
amalgamation of small and fragmented producing units. Thus, the idea for a nationalized
unified coal sector was born. Integrated overall planning in coal mining is a post-
independence phenomenon. National Coal Development Corporation was formed with 11
collieries with the task of exploring new coalfields and expediting development of new coal
mines.
Factors which led up to Nationalization

of Coal Industry in India
Nationalization of coal industry in India in the early seventies was a fall out of two related
events. In the first instance it was the oil price shock, which led the country to take up a close
scrutiny of its energy options. A Fuel Policy Committee set up for this purpose identified coal
as the primary source of commercial energy. Secondly, the much-needed investment needed
for growth of this sector was not forthcoming with coal mining largely in the hands of private
sector. The objectives of Nationalization as conceived by late Mohan Kumaramangalam were;
Conservation of the scarce coal resource, particularly coking coal, of the country by
 Halting wasteful, selective and slaughter mining.
 Planned development of available coal resources.
 Improvement in safety standards.
 Ensuring adequate investment for optimal utilization consistent with growth needs.
 Improving the quality of life of the work force.
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PRODUCTS & SERVICES OF COAL

INDUSTRY
COKING COAL:
These coals, when heated in the absence of air, form coherent beads, free from volatiles, with
strong and porous mass, called coke.
 These have coking properties
 Mainly used in steel making and metallurgical industries
 Also used for hard coke manufacturing
SEMI-COKING COAL:
These coals, when heated in the absence of air, form coherent beads not strong enough to be
directly fed into the blast furnace. Such coals are blended with coking coal in adequate
proportion to make coke.
 These have comparatively fewer coking properties than coking coal
 Mainly used as blend-able coal in steel making, merchant coke manufacturing and
other metallurgical industries
NON-COKING COAL:
These are coals without coking properties.
 Mainly used as thermal grade coal for power generation
 Also used for cement, fertilizer, glass, ceramic, paper, chemical and brick
manufacturing, and for other heating purposes
WASHED AND BENEFICIATED COAL:

These coals have undergone the process of coal washing or coal beneficiation, resulting in
value addition of coal due to reduction in ash percentage.
 Used in manufacturing of hard coke for steel making
 Beneficiated and washed non-coking coal is used mainly for power
generation
 Beneficiated non-coking coal is used by cement, sponge iron and other
industrial plants
MIDDLINGS:
Middlings are by-products of the three-stage coal washing / beneficiation process, as a fraction
of feed raw coal.
 Used for power generation
 Also used by domestic fuel plants, brick manufacturing units, cement plants,
industrial plants, etc.
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REJECTS:
Rejects are the products of coal beneficiation process after separation of cleans and
/ or middlings, as a fraction of feed raw coal.
 Used for Fluidized Bed Combustion (FBC) Boilers for power generation, road
repairs, briquette (domestic fuel) making, land filling, etc.
CIL COKE / LTC COKE:

CIL Coke / LTC Coke is a smokeless, environment friendly product of the Dankuni Coal
Complex, obtained through low temperature carbonisation.
 Used in furnaces and kilns of industrial units
 Also used as domestic fuel by halwais, hotels, etc.
COAL FINES / COKE FINES:

These are the screened fractions of feed raw coal and LTC coke / CIL Coke respectively,
obtained from the Dankuni Coal Complex and other coke oven plants.
 Used in industrial furnaces as well as for domestic purposes
TAR / HEAVY OIL / LIGHT OIL / SOFT PITCH:

These are products from Dankuni Coal Complex using low temperature carbonisation of non-
coking coal in vertical retorts.
 Used in furnaces and boilers of industrial plants as well as power houses, oil, dye,
pharmaceutical industries, etc.
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Formation of Coal
Coal is composed of carbon, hydrogen, oxygen, nitrogen, sulphur, moisture, and

incombustible mineral matter (i.e., ash). Fluorinated gases are not formed by coal combustion.
Coals are formed from the accumulation of vegetable debris in specialized environments.
Obtaining coal from the mines is a difficult job. First, the dirt above the coal deposit is
removed. When the coal is exposed, explosives are used to break it into smaller pieces. The
coal thus collected is loaded into wagons and lifted to the surface. The mines enter and leave
the mine by an elevator through a vertical space called the shaft. Coal mines can easily catch
fire and it is very difficult to bring the fire under control.
Coal takes millions of years to form. Millions of years ago, there were places on earth with
dense forests in wetlands due to natural disasters such as floods, tsunami, landslides, etc. Over
the years, over these forests more and more soil were compiling. These trees were protected
by oxidation from biodegradation, usually via mud or acidic water. This traps the carbon in
the sediments that were buried. Carbonization happens, carbonization is a phase in which
vegetation becomes carbon. It is a slow process.
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Uses of Coal
 Coal is a very widely used natural resource because of its unique characteristics.
 Because of its affordability, it is used in several countries for electricity and power
generation.
 Generally, powdered coal is used to create steam, which in turn generates electricity
with high pressure.
 Coal also serves as a raw material in the making of several things like steel and iron,
which we use in our everyday lives.
 Coal is available easily in countries like India and China and is used by many
households, especially in rural areas, for activities like cooking.
 The growing need for energy in the transport sector is being addressed by coal-
based electricity and other coal-derived fuels. Apart from fuels, coal is also an
important raw material for manufacturing transport infrastructure such as
aluminium, cement, and steel.
 Electricity Production: Coal is commonly used in thermal power generation, which
aids in the generation of energy. Powdered coal is burned at a high temperature, turning
water into steam in the process. In a strong magnetic field, this steam is used to turn
turbines at high speeds. Then, and only then, is electricity generated.
 Steel Manufacturing: Coal is used indirectly to create steel in the steel industry.
Coal is baked in furnaces to produce coal coke in this process. Manufacturers utilise
coal coke to smelt iron ore into iron and make steel after this is generated. In the
meantime, ammonia gas is recovered from coke ovens and utilised to make nitric acid,
ammonia salts, and fertilisers.
 Industries: Coal is used in a variety of sectors to make a variety of products. Cement,
paper and aluminium manufacturing, chemical and pharmaceutical manufacturing are
just a few of the industries that use coal. Chemical businesses rely on coal for a variety
of raw materials such as benzol, coal tar, sulphate of ammonia, creosote, and so on. The
majority of industries rely on coal as a source of energy.
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(B)
COMPANY PROFILE
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CENTRAL COALFIELDS LIMITED

( CCL )
Central Coalfields Limited (CCL) is a subsidiary of Coal India Limited (CIL), an
undertaking of the Government of India. CCL was established in 1956 as National Coal
Development Corporation Limited and is a Category-I Mini Ratna company since
October 2007.[4][5] CCL manages the nationalized coal mines of the Coal Mines Authority,
Central division. CCL is headquartered at Darbhanga House, Ranchi, Jharkhand.
Presently CCL has:

Number of Mines 43 Operative Mines (5 Underground & 38
Opencast Mines)
Washeries 5 Washeries
4 Coking Coal Washeries (Kathara, Rajrappa,
Kedla & Sawang)
1 Non-Coking Coal Washeries (Piparwar)
Repair/Workshops 1 Central Workshop (ISO 9001) at Barkakana 5

Regional Repair/Workshops (3 w/s are ISO
9001) at Jarandih, Tapin North, Dakra, Giridih &
Bhurkunda
Operating Coalfields 7 Coalfields (East Bokaro, West Bokaro, North

Karanpura, South Karanpura, Ramgarh, Giridih
& Hutar)
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Type Public
Founded 1 November 1975
Headquarters Ranchi, Jharkhand
Key people PM Prasad, Chairman & Managing Director
Products Coal
Net income
o ₹1,221.28 crore (US$150 million)

(2020-21)[1]
(2019-20)[2]
(2018-19)[3]
Owner Government Of India
Number of employees 39,222 (2019)
Parent Coal India Limited
centralcoalfields.in
Website
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VISSION
To emerge as a National player in the Primary Energy Sector, committed to
provide energy security to the Country, by attaining environmentally and Socially
Sustainable Growth, through best practices from Mine to Market.
MISSION
The Mission of Central Coalfields Limited (CCL) is to produce and market the
planned quantity of Coal and Coal products efficiently and economically in Eco-
Friendly manner, with due regard to Safety, Conservation and Quality.
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OBJECTIVES
 To optimize generation of internal resources by improving productivity of resources,

prevent wastage and to mobilize adequate external resources to meet investment need.
 To maintain high standards of Safety and strive for an accident-free mining of Coal.
 To lay emphasis on afforestation, protection of Environment and control of

Pollution.
 To undertake detailed exploration and plan for new Projects to meet the future Coal
demand.
 To modernize existing Mines.
 To Develop technical know-how and organizational capability of Coal mining as well

as Coal beneficiation and undertake, wherever necessary, applied research and
development work related to Scientific exploration for greater extraction of Coal.
 To improve the quality of life of employees and to discharge the corporate obligations
to Society at large and the community around the Coalfields in particular.
 To provide adequate number of skilled manpower to run the operations and impart
technical and managerial training for up gradation of skill.
 To improve consumer satisfaction.
 To enhance the CSR activities specifically in the field of Health, Sanitation and
Drinking Water in the Surrounding villages.
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PART-III
COMPANY
OPERATIONAL
&
FINANCIAL
STATISTICS
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PART-IV
PROJECT
OBJECTIVE
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Objectives:
1) To identify the financial strength and weakness of the company.
2) Through the net profit ratio and other profitability ratio, understand the
profitability of the company.
3) Evaluating the company’s performance relating to financial statement analysis.
4) To know the liquidity position of the company by using the current ratios.
5) To find out the utility of financial ratio in credit analysis & determining the
financial capabilities of the firm.
Scope of the Study:

The scope of the study is identified after and during the study is conducted. The main
scope of the study was to put into practical the theoretical aspect of the study into real
life work experience. The study of working capital is based on tools like Ratio
Analysis, Statement of changes in working capital. Further the study is based on last 5
years Annual Reports of Central Coalfield Limited. Different elements of working
capital such as bills receivable, cash, inventory etc need to be taken care of in order to
manage working capital of a business.
Strategies to Manage Working Capital

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1. Inventory Management
Inventory is one of the important components of working capital of many businesses. The
term inventory includes:
 Finished goods that a business offers for sale

 Components that form part of finished goods (raw materials, work – in –
progress etc)
Raw materials are the inputs used to manufacture goods that turn into finished products after
some processing. On the other hand, finished goods are the products that are ready for sale.
Management of inventories refer to investing an optimum amount of working capital in

inventories. This means that the investment is neither too low nor too high. Low amount of
investment in inventories stalls the production process. Whereas excessive investment in
inventories lead to blockage of funds. Thus, the investment in inventories should neither
inadequate nor excessive. This means a business needs to determine and maintain an
optimum level of inventory.
Various techniques are used by a business to determine optimum level of inventory. These
include:
 Economic Order Quantity

 ABC Analysis
 Just in Time
 Inventory Turnover Ratio
2. Cash Management
Cash is the most liquid of all current assets. All the current assets like receivables and
inventory get converted into cash eventually. Hence, cash management is of utmost
importance. Furthermore, cash management is an important component of working capital
management.
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Cash includes coins, currency, drafts, cheques and bank deposits. Furthermore, it also includes
marketable securities as these get easily converted into cash. So, cash is an important
component of current assets. Therefore, a business should have an adequate amount of current
assets at all times. It means that cash should neither be inadequate nor in excess. This is
because inadequate cash would hold production. Whereas excessive cash will remain idle and
impact the profitability of the business.
Thus, a business needs to manage cash in order to manage its working capital. Now, the basic
objectives behind cash management are:
 to make payments when they become due

 to minimize idle cash
Hence, a business can follow the following strategies in order to manage cash efficiently:
 Business can prepare cash budgets in order to project cash flows. Cash budgets can help
a business to plan and control the use of cash.
 A business needs to determine an optimum level of cash balance by comparing risk
with profitability. Various methods are used to determine optimum level of cash.
 The business can plan for the utilization of the available cash resources. Thus, a
business can focus on either increasing cash inflows or reducing cash outflows.
3. Accounts Receivable Management
Accounts receivable refers to the debtors arising on account of selling goods on credit to
customers. A business needs to sell goods on credit in order to expand its sales and attract
customers. However, there is an element of risk involved in undertaking credit sales. This
risk refers to the risk of bad debts. Hence, a business needs to manage its accounts
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receivable in order to improve its overall return on such receivables.
Thus, excessive investment in accounts receivable increases sales. But leads to high risk of
bad debts. Whereas, inadequate amount of investment in accounts receivable reduces sales
as well as the risk of bad debts. Hence, a business must compare costs with benefits of
maintaining accounts receivable in order to manage receivables effectively. There are
certain practices that a business can follow to manage its accounts receivable:
 laying out credit policy clearly to extend credit to customers. This includes setting
credit standards, credit terms, offering discounts and analysing credit risk of
customers.
 following a credit collection policy that helps a business to collect payments that
become due.
 monitoring the accounts receivable on a constant basis to determine whether the
customers are paying according to the credit terms.
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PART-V
DATA
COLLECTION
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Data Collection
In Statistics, data collection is a process of gathering information from all the

relevant sources to find a solution to the research problem. It helps to evaluate the
outcome of the problem. The data collection methods allow a person to conclude an
answer to the relevant question. Most of the organizations use data collection methods
to make assumptions about future probabilities and trends. Once the data is collected,
it is necessary to undergo the data organization process.
The main sources of the data collections methods are “Data”. Data can be classified
into two types, namely primary data and secondary data. The primary importance of
data collection in any research or business process is that it helps to determine many
important things about the company, particularly the performance. So, the data
collection process plays an important role in all the streams. Depending on the type of
data, the data collection method is divided into two categories namely,
 Primary Data Collection methods

 Secondary Data Collection methods
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Mode of Data Used:
S ECONDARY DATA:
The secondary data are those which have already collected and stored. Secondary data easily
get those secondary data from records, annual reports of the company etc. It will save the
time, money and efforts to collect the data.
The major source of data for this project was collected through annual reports, profit and loss
account of 5-year period from 2006-2010 & some more information collected from internet
and text sources.
DATA REFERENCE:
CCL Annual Report 2021-22
In this report of Working Capital Management of

Central Coalfields Limited, the data used is
Secondary Data which is taken mainly from the
company’s Annual Report 2021-22 and other
available sources.
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PART-VI
DATA ANALYSIS
&
INTERPRETATION
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A. INVENTORY DATA
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A.1 ANALYSIS OF INVENTORY OF CCL
A company’s working capital includes inventory and increases in inventory make working
capital increase. Working capital is calculated as the difference between company’s
current assets and current liabilities. Inventory is classified as part of the current assets
since there is an expectation that this asset is going to be consumed and produce economic
benefits within a year. From the above figure, we can see that in year 2018 and 2020 there
is a fall in inventory. Whereas there is a rise in inventory in 2019 and 2021. The %
decrease in inventories is around 35.64% and 8.89% in 2018 and 2020 respectively.
However, the above analysis is not sufficient to evaluate the qualitative efficiency of
inventory management.
This is a shortcoming of the above analysis. In order to avoid this bottleneck, the
following ratios are computed and studied during the study period.
 Inventory Turnover
This ratio indicates the number of times the inventory is replaced during the
financial year. It reflects the degree of liquidity of the firm and it shows how
effectively the executive in charge of maintaining the inventory level
performs the task. Generally, a high inventory turnover ratio is indicative of
good inventory management, whereas a low inventory turnover ratio signifies
over investment in inventory or excessive inventory levels warranted by
production and sales activities, or slow moving or obsolete inventory.
1. Inventory Turnover Ratio = COGS or Net Sales/Average value of Inventory
2. COGS = Opening Stock + Purchases - Closing Stocks
3. Net Sales = Total Sales - Sales return
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Inference
According to the above table, it is observed that there had been a stable trend from
2018-2021 but in year 2017 the Inventory Turnover Ratio decreased to 4.97. Inventory
Turnover Ratio increased from 4.79 times to 8.36 times.
 Inventory Holding Ratio

This ratio indicates the length of time required for the conversation of
investment in inventories to cash of a firm. Lower the ratio, better the
inventory management and vice-versa. High ratio indicates that the
management is taking more time in making the funds idle and it involves
more carrying cost for holding such inventories.
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Inventory Holding Ratio (in days) = 365/Inventory Turnover Ratio
Inference
The Inventory Holding Ratio of year 2019-20 (38.7 days) is the lowest and it indicates
the reduction of carrying cost which proves the effectiveness of a good system of
inventory management. But in year 2020- 21 it increased again to 43.66 days. The
management of the company needs to continue with the policy that they have followed
in 2019-20 in future to maintain a good system of inventory.
 Inventory to Total Current Assets Ratio

This ratio indicates the proportion of inventories invested out of total current
assets of the company. Sincethe inventory is less liquid compared to other
current assets of a company, a high ratio indicates less liquidity position of the
company and vice-versa.
Inventory to Total Current Assets= Inventory/Total Current Assets
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Inference
From the above table it can be said that this Inventory to Total Current Assets Ratio was
0.28 in 2016-17 and then decreases to 0.14 in year 2020-21 which shows a better control
of the inventory by the management of CCL.
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PART-VII
FINDINGS &
CONCLUSION
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IMPROVE INVENTORY INVESTMENT
1. Analyze inventory data: Inventory management can be optimised by analyzing

inventory information. Specifically, how much inventory need to be carrying at a
certain time and when should order more. By calculating daily cost of goods sold by
dividing the annual or quarterly cost of goods sold by the number of days during
that time. Then, divide current inventory value by this amount. The result is average
inventory investment period.
2. Optimize your inventory levels: Inventory levels must be managed effectively and
kept at the correct level in order to maximize profit and reduce loss. Holding too
much inventory increases the risk of obsolescence, damage, and spoilage while not
keeping enough means lost sales opportunities. To optimize inventory, start with
sales projections based on previous periods. Then, adjust for trends and seasonality.
3. Implement inventory management software: While using an inventory spreadsheet
might work for a small business, any sort of large or high-volume enterprise will
need a dedicated inventory management software. These programs allow to manage
inventory, orders, and other data while providing useful analytic and tracking.
Ideally, system can integrate with other business software to create a unified system
and automate some of operations.
4. Make efforts to reduce loss: Inventory shrinkage is typically small but can end up
accounting for a substantial loss if not systematically reduced. Work to prevent theft
by upping the security around your warehouse or storage areas. Reduce theft in your
store by installing a camera system and keeping an eye on suspicious customers. Set
up an alarm system that responds to the labels or RFID tags on your items.
 Reduce potential theft by employees by restricting access to product areas to those who
absolutely need to be there.
 Reduce spoilage losses by staying on top of inventory count practices. To cycle older
stock forward when shelving inventory.
Disclaimer
In this report only one aspect of Working Capital Management i.e. Inventory
Management has been taken up due to shortage of time and the other two aspect viz,
debtor’s management & cash Management kept out of the project analysis domain.
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PART-
VIII
BIBLIOGRAPHY
 TEXT BOOKS
M.Y. Khan / P.K Jain, Financial Management Text, Problem’s Cases, 5TH Edition, Tata McGraw –Hill Publishing Company Limited, New Delhi, 2007.
 Annual Report of Central Coalfields Limited (2021-22).

 WEB SITE VISITED
 www.google.com
 www.wikipedia.org
 www.transtutors.com
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PART-
IX
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Report

Under Industry Guide: Mr. K. K. Biswas, CCL

[ THIS PAGE IS INTENTIONALLY KEPT BLANK FOR CERTIFICATE]

I acknowledge the continued support, encouragement, motivation, and guidance

MRADUL KUMAR GUPTA

SERIAL NO. CONTENTS PAGE NO.

II Industry Profile 23-39

III Operational & Financial 40-47

IV Project Objective 48-54

V Data Collection 55-72

VI Analysis & Interpretation 73-100

VII Findings & Conclusion 101-103

VIII Bibliography 104

3. Capital is a human control possible.

5. Capital is a human sacrifice.

INTRODUCTION OF WORKING CAPITAL:

Mead Mallott & Field

Working Capital = Current Asset -Current Liabilities

1. To purchase raw materials, spare parts and other component.

2. To meet overhead expenses.

3. To hold finished and spare parts etc.

4. To pay selling & distribution expenses.

6. Working capital is required to pay wages, salaries and other charges.

7. It is helpful in maintain uncertainties involved in business field.

WORKING CAPITAL MANAGEMENT

1. To maximize profit of the firm.

2. To help in timely payment of bills.

3. To maintain sufficient current assets.

4. To ensure adequate liquidity of the firms.

5. It protects the solvency of the firm.

6. To discharge current liabilities.

7. To increase the value of the firm.

8. To minimize the risk of business.

Working Capital Cycle

For most companies, the working capital cycle works as follows:

1. The company purchases, on credit, materials to manufacture a product. For

DETERMINANTS OF WORKING CAPITAL REQUIREMENTS

5. Size of the business unit:

6. Growth and Expansion:

11. Profit Level:

ESTIMATION OF CURRENT ASSETS

Budgeted Cost of Raw Average Inventory

Production x Material(s) x Holding Period

(In units) per unit (months/days)

12 months / 52 weeks / 365days

Budgeted Estimated work- Average Time Span

Production x in-progress cost x of work-in-progress

(In units) per unit inventory (months/days)

3. Finished Goods Inventory:

Budgeted Cost of Sales per Average Debt

1. Cash and Bank Balances:

ESTIMATION OF CURRENT LIABILITIES

Note: - Proportional adjustment should be made to cash purchases of Raw Materials.

Budgeted Yearly Direct Labour Average Time-lag in

3. Overheads (other than Depreciation and Amortization):

Budgeted Yearly Overhead Average Time-lag in

FORMAT FOR DETERMINATION OF WORKING

RATIOS TO WORKING CAPITAL

The working capital ratio or current ratio is calculated as: