“OPERATING CYCLE “

A
Project REPORT
ON
WORKING CAPITAL MANAGEMENT

SESSION 2008-2010

SUBMITTED TO SUBMITTED BY
PROF.ANISH DAN D.RAVI
3RD SEM
ROLL NO H2 - 23
MARKETING & FINANCE

EASTERN INSTITUTE FOR INTEGRATED LEARNING IN MANAGEMENT

WATERLOO STREET, KOLKATA

Note:

This project is solely for the study purpose and understanding. Results
may vary or not tally with the actual results.
 Acknowledgment
The project of operating cycle is done in the partial fulfillment of post
graduate program in management. This project has been done under
the guidance of Gautama adhikari professor of working capital
management. I am great full to him for his guidance and providing me
an opportunity to understand working capital management and
operating cycle.
 1) INTRODUCTION

Working capital typically means the firm’s holding of current or

short-term assets such as cash, receivables, inventory and
marketable securities. These items are also referred to as
circulating capital. Corporate executives devote a considerable
amount of attention to the management of working capital.

Working capital definition

Working Capital refers to that part of the firm’s capital, which is

required for financing short-term or current assets such a cash
marketable securities, debtors and inventories. Funds thus,
invested in current assets keep revolving fast and are constantly
converted into cash and this cash flow out again in exchange for
other current assets. Working Capital is also known as revolving
or circulating capital or short-term capital.
 2) Types of working capital

Concept of working capital

• There are two possible interpretations of working capital
concept:
1. Balance sheet concept
2. Operating cycle concept
Balance sheet concept
There are two interpretations of working capital under the
balance sheet concept.
a. Excess of current assets over current liabilities
 b.Gross or total current assets.
• Excess of current assets over current liabilities are called the net
working capital or net current assets.
• Working capital is really what a part of long term finance is
locked in and used for supporting current activities.
• The balance sheet definition of working capital is meaningful
only as an indication of the firm’s current solvency in repaying
its creditors.
• When firms speak of shortage of working capital they in fact
possibly imply scarcity of cash resources.
• In fund flow analysis an increase in working capital, as
conventionally defined, represents employment or application of
funds.

OPERATING CYCLE CONCEPT

• A company’s operating cycle typically consists of three primary
activities:
– Purchasing resources,
– Producing the product and
– Distributing (selling) the product.
 These activities create funds flows that are both
unsynchronized and uncertain.
Unsynchronized because cash disbursements (for example,
payments for resource purchases) usually take place before cash
receipts (for example collection of receivables).
They are uncertain because future sales and costs, which generate the
respective receipts and disbursements, cannot be forecasted with
complete accuracy.
• The firm has to maintain cash balance to pay the bills as they
come due.
• In addition, the company must invest in inventories to fill
customer orders promptly.
• And finally, the company invests in accounts receivable to extend
credit to customers.
• Operating cycle is equal to the length of inventory and receivable
conversion periods.
ACCOUNT PAYABLE VALUE ADDITION

OPERATING CYCLE
 3) OBJECTIVE OF WORKING CAPITAL MANAGEMENT

1) Working capital objective is to keep adequate level of short term

assets.
2) It converts an asset from non productive to productive one and
vice-versa.
3) To establishes the relationship between current assets and
current liabilities.

Two MAIN objectives of working capital management are

Determining the size of the working capital

Arranging the sources of working capital
4) Formula for calculation of NET OPERATING CYCLE

Average Raw Material Stock

RMCP = -------------------------------------------------------X 365
Total Raw Material Consumption
Average Work in Progress
WPCP = ----------------------------------------------------- X 365
Total Cost of Production

Average Finished Goods

FGCP = ----------------------------------------------------- X 365
Total Cost of Goods Sold
Average Receivables
RCP = ----------------------------------------------------- X 365
Total Credit Sales
Average Creditors
DP = ----------------------------------------------------------- X 365
Total Credit Purchase

OC = RMCP + WPCP +FGCP +RCP - DP

365
NOC= -------------------
OC
 COST OF SALES
WORKING CAPITAL= -------------------------------------------
NUMBER OF OPERATING CYCLE

Opening raw material + closing raw material

Average raw material stock =--------------------------------------------
2

Op stock of raw + purchase of raw material – closing stock

Total raw material consumption = -----------------------------------------
365

Opening wip + closing wip

Average work in progress = ----------------------------------
2

opening wip + raw material consumption +

manufacturing expenses-closing wip
Total cost of production =---------------------------------------------------------
365

opening finish goods + closing finish goods

Average finish goods = -----------------------------------------------------
2

op finish goods + selling, administrative &

financing cost – cl finish goods
Cost of sales= -----------------------------------------------------------------
 365

opening + closing
Average receivable = ----------------------
2
opening + closing
Average payable = ------------------------
2
credit
Credit sales = ---------------
365
purchase
Credit purchase = ---------------
365

Efficiency ratio

sales
Working capital turnover ratio =-----------------------
Net working capital

Gross sales
Receivable turnover =--------------------------
Average account receivable

365
Debtor turnover = -------------------
Receivable turnover
 sales
Current assets turnover =-----------------------
Current assets

Liquidity ratio

Current assets
Current ratio= -----------------------
Current liabilities

Current assets - inventory

Quick ratio = ----------------------------------
Current liabilities
5) Mahindra and Mahindra

Kesub Mahindra : chairman

Head office:
Gateway building
Apollo bunder
Mumbai
400001
Financial information for year 2009.

Mahindra & mahindra

Financial chart

Particulars Opening Closing

Raw material 351.95 391.01

Work in progress 335.42 498.36

Finish goods 579.43 471.81

Recieveable(debtors) 3767.88 3407.79

Payable(creditors) 2296.55 3520.2

Raw material purchase 8756

Manufacturing expenses 5786

Selling and administrative 3214.33

charge

Sales 12,649.06
Inventory 1060.67

Current assets 5062.93

Current liabilities 3520.2

Gross sales 14268.41

Calculation

1) Average raw material stock = Rs 371.48 cr

2) Daily consumption of raw material = Rs 23.882 cr
3) Average holding of work in progress = Rs 416.89 cr
4) Daily cost of production = Rs 39.287 cr
5) Average holding of finished goods = Rs 48.388 cr
6) Daily cost of sales = Rs 50.2449 cr
7) Average receivable = Rs 3587.835 cr
8) Daily credit sales = Rs 34.654 cr
9) Average payable =Rs 2908.375 cr
10) Average daily credit purchase = Rs 23.989 cr

Calculation for operating cycle

11) Raw material conversion period (RMCP) = 15.554 days
12) Work in progress conversion period (WIPCP) = 10.611 days
 13) Finish good conversion period (FGCP) = 10.862 days
14) Debtors conversion period (DCP) =103.530 days
15) Creditors deferral period (CDP) =121.377 days

Main calculation for operating cycle

16) Operating cycle= RMCP+WIPCP+FGCP+DCP-CDP

=20 DAYS
17) No of operating cycle = 365/57
=18.632
18) Working capital= Rs 947.9056 cr
 6) TATA MOTORS

INTRODUCTION OF COMPANY

Rattan tata chairman

Ravi kant vice chairman

Registered office
Bombay house
24,homi mody street
Mumbai 400001

Tata motors is known as tata motors limited.

Products of tata motors are Land rover, cars , commercial vechile,
passenger vechile
Financial information for year 2009.

Tata motors
Financial chart

Particulars Opening (Rs crore) Closing (Rs crore)

Raw material 1122.65 1834.66

Work in progress 370.08 1094.02

Finish goods 1332.15 5444.34

Debtors(Receivable) 4409.52 4764.75

Creditors(Payable) 3738.51 3859.14

Raw material purchase 19386.03

Manufacturing expenses 12887.48

Selling and administrative 3886.35

charge

Sales 26586.76
Inventory 2229.81

Current assets 9691.69

Current liabilities 8958.25

Gross sales 28599.27

Calculation

1) Average raw material stock = Rs 1478.655 cr

2) Daily consumption of raw material =Rs 51.1617 cr
3) Average holding of work in progress = Rs 732.05 cr
4) Daily cost of production = Rs 84.4864 cr
5) Average holding of finished goods = Rs 3388.245 cr
6) Daily cost of sales = Rs 83.8677 cr
7) Average receivable = Rs 4587.135 cr
8) Daily credit sales = Rs 72.8404 cr
9) Average payable =Rs 4228.885 cr
10) Average daily credit purchase = Rs 53.112 cr
Calculation for operating cycle
11) Raw material conversion period (RMCP) = 28.906 days
12) Work in progress conversion period (WIPCP) = 8.664 days
13) Finish good conversion period (FGCP) = 40.399 days
14) Debtors conversion period (DCP) =62.975 days
15) Creditors deferral period (CDP) =79.621 days

Main calculation for operating cycle

16) Operating cycle= RMCP+WIPCP+FGCP+DCP-CDP

=61 DAYS
17) No of operating cycle = 365/57
=5.87
18) Working capital = Rs 5214.186 cr
 7) Analysis

Efficiency ratio

Particulars Mahindra & Tata motors

Mahindra

Working capital 13.3442 5.0989

Turnover ratio

Receivable 3.97688 6.2346

turnover
Ratio

Debtor turnover 91.78036 58.5436

ratio

Current assets 1.4382 2.7432

turnover ratio
Liquidity ratio

Particulars Mahindra &Mahindra Tata motors

Current ratio 1.4382 1.0818

Quick ratio 1.1369 0.8329

Analysis

1) Mahindra & Mahindra has higher working capital turnover

indicates that it has achieved maximum sale with low investment.
Mahindra & Mahindra has efficiently used its working capital.

2) Receivable turnover of Mahindra & Mahindra is lower than Tata

motors, it means it provide higher credit period to its customer
than Tata motors.

3) Current assets turnover of Tata motors is higher, implies that it

uses efficiently its fund.

4) Both firms have nearly same current ratio, which shows that both
have assets which can be turned into cash.

5) Quick ratio of Mahindra & Mahindra is higher than Tata motors; it

means it has higher liquid funds to pay out the liabilities.
Bibliography

1) www.scribd.com

2) www.tatamotors.com

3) www.mahindra&mahindra.com

4) www.google.com

5 ) financial statement for both the companies

 **Financial statement for MAHINDRA AND MAHINDRA**
Ballance Sheet as at 31
st
March, 2009
Rupees crores
Schedule 2009 2008
I. SOURCES OF FUNDS :
SHAREHOLDERS’ FUNDS :
Capital ................................................................................. I 272.62 239.07
Employee Stock Options Outstanding ................................. 6.55 4.00
Reserves and Surplus ........................................................... II 4,982.91 4,107.00
5,262.08 4,350.07
LOAN FUNDS :
(a) Secured Loans .............................................................. III A 981.00 617.26
(b) Unsecured Loans .......................................................... III B 3,071.76 1,969.80
4,052.76 2,587.06
DEFERRED TAX LIABILITY (Net) ............................................ — 56.72
Total .......... 9,314.84 6,993.85
II. APPLICATION OF FUNDS :
FIXED ASSETS :
Gross Block .......................................................................... 4,893.89 3,656.13
Less : Depreciation .............................................................. 2,326.29 1,841.68
Net Block ............................................................................. IV 2,567.60 1,814.45
CAPITAL WORK-IN-PROGRESS (INCLUDING CAPITAL
ADVANCES) ......................................................................... 646.73 546.45
3,214.33 2,360.90
INVESTMENTS ...................................................................... V 5,786.41 4,215.06
DEFERRED TAX ASSET (Net) ................................................ 18.27 —
FOREIGN CURRENCY MONETARY ITEM TRANSLATION
DIFFERENCE ACCOUNT [NOTE 3(d)] .................................... 18.11 —
CURRENT ASSETS, LOANS AND ADVANCES :
(a) Inventories .................................................................... VI A 1,060.67 1,084.11
(b) Sundry Debtors ............................................................ VI B 1,043.65 1,004.88
(c) Cash and Bank Balances ............................................... VI C 1,574.43 861.23
(d) Other Current Assets .................................................... VI D 1.56 2.27
(e) Loans and Advances ..................................................... VI E 1,382.62 691.88
5,062.93 3,644.37
CURRENT LIABILITIES AND PROVISIONS :
(a) Current Liabilities .......................................................... VII A 3,520.20 2,296.55
(b) Provisions ..................................................................... VII B 1,277.56 943.46
4,797.76 3,240.01
NET CURRENT ASSETS ......................................................... 265.17 404.36
MISCELLANEOUS EXPENDITURE (TO THE EXTENT NOT
WRITTEN OFF OR ADJUSTED) .............................................. VIII 12.55 13.53
Total .......... 9,314.84 6,993.85

Profit and Loss Account for the year ended 31

st
March, 2009
Rupees crores
Schedule 2009 2008
SALES - Traded and Manufactured Goods [Note 11(a)] .......................................... 14,268.41 12,371.03
Less : Excise Duty on Sales (Net) ............................................................................. 1,619.35 1,566.39
Net Sales ................................................................................................................. 12,649.06 10,804.64
Income from Operations ......................................................................................... IX A 444.62 736.63
Other Income .......................................................................................................... IX B 270.34 130.37
Net Income .............................................................................................................. 13,364.02 11,671.64
EXPENDITURE :
Raw Materials, Finished and Semi-finished Products ............................................... X 9,274.23 7,725.91
Excise Duty ............................................................................................................... (32.30) 18.18
Personnel ................................................................................................................. XI 1,024.61 868.14
Interest, Commitment and Finance Charges (Net) ................................................... XII 45.26 24.24
Depreciation/Amortisation [Note 5(c)(i) & (d)] ......................................................... 291.51 238.66
Other Expenses ........................................................................................................ XIII 1,777.34 1,608.96
12,380.65 10,484.09
Less : Cost of Manufactured Products Capitalised .................................................. 42.83 46.49
12,337.82 10,437.60
Profit before exceptional items and taxation ........................................................... 1,026.20 1,234.04
Add : Exceptional Items [Note 23] .......................................................................... 10.27 172.73
Profit before taxation .............................................................................................. 1,036.47 1,406.77
Less : Provision for Tax - Current Tax (including Fringe Benefit Tax) ....................... 58.51 278.75
- Deferred Tax (Net) [Note 24] .......................................... 141.18 24.65
Profit for the year .................................................................................................... 836.78 1,103.37
Add :
Profit of Mahindra Holdings and Finance Limited for the period
1
st
February, 2008 to 31
st
March, 2008 [Note 25(a)] .............................................. 30.73 —
Balance of Profit for the year .................................................................................. 867.51 1,103.37
Balance of Profit for earlier years ............................................................................ 2,775.48 2,125.08
Amount Transferred on Amalgamation of Mahindra Holdings and Finance
Limited [Note 25(a)] ................................................................................................ 159.94 —
Less : Transfer to Debenture Redemption Reserve (Net) .......................................... (29.62) (16.88)
2,905.80 2,108.20
Total of Profit and Loss Account balances shown above ........................................ 3,773.31 3,211.57
Less :
General Reserve ....................................................................................................... 100.00 115.00
Credit of Income-Tax on Proposed Dividend of Previous Year ................................. (4.07) —
Proposed Dividend ................................................................................................... 278.83 282.61
Income-Tax on Proposed Dividend ........................................................................... 33.23 38.48
Balance for 2008-2009 and earlier years carried to Balance Sheet ......................... 3,365.32 2,775.48
EARNINGS PER SHARE [Note 26] :
(Face value Rs.10/- per share) (Rupees)
Basic ........................................................................................................................ 31.83 46.24
Diluted ..................................................................................................................... 30.02 41.52
Cash Flow Statement for the year ended 31
st
March, 2009
Rupees crores
2009 2008
A. CASH FLOW FROM OPERATING ACTIVITIES :
Net Profit before exceptional items and taxation ................................... 1,026.20 1,234.04
Adjustments for :
Net Profit earned by Mahindra Holdings and
Finance Limited from 1
st
February, 2008 to 31
st
March, 2008 ....... 30.73 —
Taxes and other adjustments on above ........................................... 11.01 —
41.74 —
Adjustments for :
Depreciation/Amortisation ............................................................... 291.52 238.66
(Profit)/Loss on Exchange (Net) ....................................................... 6.30 (39.90)
Investment and Interest Income ...................................................... (266.90) (143.60)
Interest, Commitment and Finance charges .................................... 134.12 87.59
Amortisation of Expenses ................................................................ 11.32 10.28
(Profit)/Loss on sale of investments (Net) ........................................ (92.36) (28.94)
(Profit)/Loss on fixed assets sold/scrapped/written off (Net) ............ 1.19 2.82
Excess of cost over fair value of current investments (Net) ............. (1.57) (1.74)
Provision for diminution in the value of long term investments ..... — (5.40)
83.62 119.77
Operating Profit before Working Capital changes.................................. 1,151.56 1,353.81
Changes in :
Trade and other receivables ............................................................. (99.37) (450.40)
Inventories ....................................................................................... 176.01 (205.63)
Trade and other payables ................................................................ 515.13 408.87
591.77 (247.16)
Miscellaneous Expenditure (to the extent not written off or adjusted)
incurred during the year ........................................................................ (11.73) (3.12)
Cash generated from operations ............................................................ 1,731.60 1,103.53
Income Taxes paid (Net of refunds) ........................................................ (100.30) (277.70)
NET CASH FROM OPERATING ACTIVITIES ............................................... 1,631.30 825.83
Cash Flow Statement (Contd.)
Rupees crores
2009 2008
B. CASH FLOW FROM INVESTING ACTIVITIES :
Purchase of fixed assets ......................................................................... (929.74) (729.09)
Sale of fixed assets ................................................................................. 14.58 12.00
Purchase of investments ......................................................................... (17,118.59) (16,091.67)
Sale of investments ................................................................................ 16,195.73 14,487.81
Interest received ..................................................................................... 79.87 68.95
Dividends received .................................................................................. 137.13 65.61
Inter corporate deposits (Net) ................................................................ (319.98) 111.31
NET CASH USED IN INVESTING ACTIVITIES ............................................ (1,941.00) (2,075.08)
C. CASH FLOW FROM FINANCING ACTIVITIES :
Proceeds from borrowings ..................................................................... 2,117.39 2,303.55
Repayments of borrowings (including premium on prepayments) ......... (1,005.05) (1,294.08)
Dividend paid [including income tax on dividend Rs. 38.48 crores
(2008 : Rs. 16.69 crores)] ...................................................................... (320.26) (118.01)
Interest, Commitment and Finance charges paid ................................... (95.17) (80.12)
NET CASH FROM FINANCING ACTIVITIES ............................................... 696.91 811.34
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS ............ 387.21 (437.91)
CASH AND CASH EQUIVALENTS [Note 1] :
Opening Balance .................................................................................... 923.88 1,361.79
Cash and Bank Balance acquired pursuant to the Schemes of
Amalgamation ........................................................................................ 253.76 —
Cash and Bank Balance transferred on transfer of Division ................... (3.02) —
Closing Balance ...................................................................................... 1,561.83 923.88
SCHEDULE VI Rupees crores
2009 2008
Current Assets, Loans and Advances :
(A) Inventories (at cost or net realisable value whichever is lower) :
(i) Finished Products produced and purchased for sale ...................... 471.81 579.43
(ii) Contracts and Work-in-Progress ...................................................... 89.09 53.10
(iii) Manufactured Components ............................................................ 55.71 48.15
(iv) Raw Materials and Bought-out Components .................................. 391.01 351.95
(v) Property Development Activity - Work-in-Progress
[including completed flats and premises Rs. 6.32 crores
(2008 : Rs. 6.32 crores)] [Note 11(b)] ............................................. 6.32 6.32
(vi) Stores and Spares ............................................................................ 23.56 24.76
(vii) Tools ................................................................................................ 23.17 20.40
1,060.67 1,084.11
(B) Sundry Debtors (Unsecured) [Note 6] :
Outstanding over six months : Considered good ................................... 125.74 111.29
: Considered doubtful ............................. 72.12 31.61
197.86 142.90
Other Debts : Considered good ................................... 917.91 893.59
: Considered doubtful ............................. — 1.20
917.91 894.79
1,115.77 1,037.69
Less : Provision for Doubtful Debts ........................................................ 72.12 32.81
1,043.65 1,004.88
(C) Cash and Bank Balances :
Cash, cheques and stamps on hand ...................................................... 354.39 194.27
Balances with Scheduled Banks :
(i) On Current Account ........................................................................ 275.65 109.72
(ii) On Fixed Deposit Account* ............................................................. 938.73 550.59
(iii) On Margin Account ........................................................................ 0.09 0.06
1,214.47 660.37
*[includes balance of unutilised monies raised by issue : Rs. 53.95 cores
(2008 : Rs. 274.03 Crores)]
Balances with Non-Scheduled Banks [Note 7] :
On Current Account ............................................................................... 5.57 6.59
1,574.43 861.23
(D) Other Current Assets :
Interest accrued on Investments ............................................................. 1.42 2.13
Others ..................................................................................................... 0.14 0.14
1.56 2.27
(E) Loans and Advances [Note 8] :
(Unsecured, considered good unless otherwise stated) :
Advances and Loans to subsidiaries :-
Considered good .................................................................................... 402.93 100.73
Considered doubtful ............................................................................... 24.99 5.99
427.92 106.72
Less : Provision for Doubtful Advances and Loans ................................. 24.99 5.99
402.93 100.73
Bills of exchange, considered doubtful .................................................. 1.02 1.02
Less : Provision for Doubtful bills ........................................................... 1.02 1.02
——
Advances recoverable in cash or in kind or for value to be received :
Considered good .................................................................................... 757.11 470.53
Considered doubtful ............................................................................... 48.64 47.80
805.75 518.33
Less : Provision for Doubtful Advances .................................................. 48.64 47.80
757.11 470.53
Payments towards Income-Tax and Surtax [Note 20(d)] ......................... 221.67 119.92
Balances - Customs, Port Trust, Excise, etc. ............................................ 0.91 0.70
1,382.62 691.88
Total..... 5,062.93 3,644.37

SCHEDULE VII Rupees crores

2009 2008
Current Liabilities and Provisions :
(A) Current Liabilities* :
Acceptances ............................................................................................ 106.26 125.79
Sundry Creditors :
(i) Total outstanding dues of micro and small enterprises [Note 9] .... 5.99 4.16
(ii) Total outstanding dues of creditors other than micro and small
enterprises [including Rs. 162.51 crores (2008 : Rs. 112.05 crores)
being advance payments for which value has still to be given] ..... 3,206.19 2,075.43
(iii) Dues to Subsidiaries ........................................................................ 124.62 70.70
3,336.80 2,150.29
Dividend payable .................................................................................... 6.19 4.21
Balances on Directors’ Current Accounts ............................................... 2.21 2.46
Interest accrued but not due on loans ................................................... 68.74 13.80
3,520.20 2,296.55
* There are no amounts due and outstanding to be credited
to the Investor Education and Protection Fund.
(B) Provisions :
Proposed Dividend.................................................................................. 278.83 282.61
Provision for Tax on Proposed Dividend ................................................. 33.23 38.48
Provision for diminution in value of long term investments .................. 201.02 25.17
Provision for premium payable on redemption of convertible bonds .... 269.51 224.97
Provision for compensated absences ...................................................... 245.76 200.76
Provision for taxation ............................................................................. 81.76 37.09
Provision Others [Note 10] ..................................................................... 167.45 134.38
1,277.56 943.46
Total........ 4,797.76 3,240.01
 **Financial statement for TATA MOTORS**

DIRECTORS' REPORT
TO THE MEMBERS OF
TATA MOTORS LIMITED
The Directors present their Sixty-Fourth Annual Report and the Audited Statement of
Accounts for the year
ended March 31, 2009.
1. FINANCIAL RESULTS
Financial Year
(Rs. in Crores)
2008-09 2007-08
(i) Gross Revenue 28599.27 33093.93
(ii) Net Revenue (excluding excise duty) 25660.79 28739.41
(iii) Total Expenditure 23908.35 25807.82
(iv) Operating Profit 1752.44 2931.59
(v) Other Income 925.97 483.18
(vi) Profit before Interest, Depreciation, Exceptional items & Tax 2678.41 3414.77
(vii) Interest and Discounting Charges
(a) Gross Interest and Discounting Charges 1073.10 541.56
(b) Adjustment/Transfer to Capital Account (399.42) (259.19)
(c) Net Interest and Discounting Charges 673.68 282.37
(viii) Product Development Expenses 51.17 64.35
(ix) Depreciation 874.54 652.31
(x) Exceptional item - Notional Exchange (loss) / gain (net)
on Revaluation of Foreign Currency Borrowings,
Deposits and Loan Given (65.26) 160.73
(xi) Profit Before Tax 1013.76 2576.47
(xii) Tax Expenses 12.50 547.55
(xiii) Profit After Tax 1001.26 2028.92
(xiv) Balance Brought Forward from Previous Year 1383.07 1013.83
(xv) Credit taken for Dividend Distribution Tax for previous year 15.29 -
(xvi) Amount Available for Appropriations 2399.62 3042.75
APPROPRIATIONS
(a) Debenture Redemption Reserve 267.80 -
(b) General Reserve 100.13 1000.00
(c) Dividend (including tax) 345.70 659.68
(d) Balance carried to Balance Sheet 1685.99 1383.07
Sixty-fourth annual report 2008-09
Tata Motors Limited
56
Balance Sheet as at March 31, 2009
(Rs. in crores)
As at
Schedule Page March 31,
SOURCES OF FUNDS 2008
1. SHAREHOLDERS’ FUNDS
(a) Share Capital 1 63 514.05 385.54
(b) Reserves and Surplus 2 63 11716.10 7453.96
12230.15 7839.50
2. LOAN FUNDS
(a) Secured 3 64 5251.65 2461.99
(b) Unsecured 4 64 7913.91 3818.53
13165.56 6280.52
3. FOREIGN CURRENCY MONETARY ITEM
TRANSLATION DIFFERENCE ACCOUNT (NET) 164.12 -
[Note A(9), page 82 and Note P(i), Page 75]
4. DEFERRED TAX LIABILITY (NET) 865.81 975.72
[Note A(3)(a), page 77]
5. TOTAL FUNDS EMPLOYED 26425.64 15095.74
APPLICATION OF FUNDS
6. FIXED ASSETS 5 65
(a) Gross Block 13905.17 10830.83
(b) Less - Depreciation 6259.90 5443.52
(c) Net Block 7645.27 5387.31
(d) Capital Work-in-Progress 6954.04 5064.96
14599.31 10452.27
7. INVESTMENTS 6 66 12968.13 4910.27
8. CURRENT ASSETS, LOANS AND ADVANCES
(a) Interest accrued on investments 0.11 0.86
(b) Inventories 7 70 2229.81 2421.83
(c) Sundry Debtors 8 70 1555.20 1130.73
(d) Cash and Bank Balances 9 70 1141.82 2397.31
(e) Loans and Advances 10 71 4764.75 4409.52
9691.69 10360.25
9. CURRENT LIABILITIES AND PROVISIONS
(a) Current Liabilities 11 72 8958.25 8643.67
(b) Provisions 12 72 1877.26 1989.43
10835.51 10633.10
10. NET CURRENT ASSETS [(8) - (9)] (1143.82) (272.85)
11. MISCELLANEOUS EXPENDITURE 13 72 2.02 6.05
(to the extent not written off or adjusted)
12. TOTAL ASSETS (NET) 26425.64 15095.74
13. SIGNIFICANT ACCOUNTING POLICIES

Profit and Loss Account for the year ended March 31, 2009
(Rs. in crores)
Schedule Page 2007-2008
INCOME
1. SALE OF PRODUCTS AND OTHER INCOME
FROM OPERATIONS A (1) 59 28599.27 33093.93
LESS : EXCISE DUTY 2938.48 4354.52
25660.79 28739.41
2. DIVIDEND AND OTHER INCOME A (2) 59 925.97 483.18
26586.76 29222.59
EXPENDITURE
3. MANUFACTURING AND OTHER EXPENSES B 60 24824.37 26552.05
4. EXPENDITURE TRANSFERRED TO CAPITAL
AND OTHER ACCOUNTS (916.02) (744.23)
23908.35 25807.82
PROFIT BEFORE DEPRECIATION, INTEREST,
EXCEPTIONAL ITEMS AND TAX 2678.41 3414.77
5. PRODUCT DEVELOPMENT EXPENDITURE 51.17 64.35
6. DEPRECIATION 5 65 874.54 652.31
7. INTEREST AND DISCOUNTING CHARGES 673.68 282.37
[Note B(4), page 83]
PROFIT BEFORE EXCEPTIONAL ITEMS AND TAX 1079.02 2415.74
8. NOTIONAL EXCHANGE (LOSS) / GAIN (NET)
ON REVALUATION OF FOREIGN CURRENCY
BORROWINGS, DEPOSITS AND LOANS GIVEN (65.26) 160.73
PROFIT BEFORE TAX 1013.76 2576.47
9. TAX EXPENSE [Note A(3)(c), page 77] (12.50) (547.55)
PROFIT AFTER TAX 1001.26 2028.92
10. BALANCE BROUGHT FORWARD FROM PREVIOUS YEAR 1383.07 1013.83
Add : Credit taken for Dividend Distribution Tax for previous year 15.29 -
AMOUNT AVAILABLE FOR APPROPRIATION 2399.62 3042.75
11. APPROPRIATIONS
(a) Proposed Dividend 311.61 578.43
(b) Tax on Proposed Dividend 34.09 81.25
(c) Debenture Redemption Reserve 267.80 -
(d) General Reserve 100.13 1000.00
(e) Balance carried to Balance Sheet 1685.99 1383.07
2399.62 3042.75
12. EARNINGS PER SHARE [Note B (7), page 85]
I. Ordinary Shares
a) Basic Rupees 22.70 52.64
b) Diluted Rupees 20.83 48.04
II. ‘A’ Ordinary Shares
a) Basic Rupees 23.20 -
b) Diluted Rupees 21.33
Sixty-fourth annual report 2008-09
Tata Motors Limited
60
Schedules forming part of the Profit and Loss Account
(Rs. in crores)
“B” [Item no. 3] 2008-2009 2007-2008
MANUFACTURING AND OTHER EXPENSES
1. Purchase of products for sale etc. [Note B(1), page 83] 2180.32 1598.11
2. Consumption of raw materials and components (Schedule 18, page 91) 16218.62
18592.08
3. Processing charges 810.60 851.43
4. Payments to and provisions for employees :
(Refer Note B(5), page 84)
(a) Salaries, wages and bonus 1227.77 1208.22
(b) Contribution to provident and other funds 131.80 171.20
(c) Workmen and staff welfare expenses [Note B(i), page 61] 191.82 165.15
1551.39 1544.57
5. Expenses for manufacture, administration and selling :
(a) Stores, spare parts and tools consumed 402.43 465.40
(b) Freight, transportation, port charges, etc. 479.71 537.52
(c) Repairs to buildings [Note B(ii), page 61] 31.15 25.87
(d) Repairs to plant, machinery, etc. [Note B(iii), page 61] 56.06 53.52
(e) Power and fuel 304.94 325.19
(f) Rent 46.55 41.87
(g) Rates and taxes 16.22 16.64
(h) Insurance 44.14 46.48
(j) Publicity 321.29 286.77
(k) Incentive / Commission to dealers 419.76 347.11
(l) Works operation and other expenses [Note B(iv), page 61] 1764.10 1786.49
3886.35 3932.86
6. Excise Duty on change in Stock-in-trade (60.95) (7.48)
7. Changes in Stock-in-trade and Work-in-progress :
A Opening Stock
(i) Work-in-progress 296.00 301.32
(ii) Stock-in-trade 1067.86 1103.02
1363.86 1404.34
B Closing Stock
(i) Work-in-progress 245.95 296.00
(ii) Stock-in-trade 879.87 1067.86
1125.82 1363.86
238.04 40.48
24824.37 26552.0