PROJECT REPORT

ON
“A STUDY OF WORKING CAPITAL MANAGEMENT
OF
BATA LIMITED”
Submitted in partial fulfillment of the requirements
for the award of degree of

MASTER OF BUSINESS ADMINISTRATION

(Finance)
Submitted By
ADARSH SRIVASTAVA
Registration Number: 322100928

Submitted to

Centre for Distance and Online Education

LOVELY PROFESSIONAL UNIVERSITY

PHAGWARA, PUNJAB
Year 2022-2024

1
 Declaration by the Student

To whom-so-ever it may concern

I, ADARSH SRIVASTAVA, Reg. No. 322100928 hereby declare that the work done by

me on “A STUDY OF WORKING CAPITAL MANAGEMENT OF BATA

LIMITED”, is a record of original work for the partial fulfilment of the requirements for

the award of the degree, MBA (Finance).

Adarsh Srivastava (322100928)

Date:17/08/2024

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 Date:16/08/2024

CERTIFICATE

This is to certify that Adarsh Srivastava (Reg. No. 322100928) student of MBA 4th

semester from Lovely Professional University, Phagwara, Punjab has been successfully

completed his internship report entitled “A STUDY OF WORKING CAPITAL

MANAGEMENT OF BATA LIMITED”. During him project tenure in the company,

we found him hard working, sincere and diligent person and his behaviour and conduct

was good. We wish him all the best for his future endeavors.

Authorized Signatory

Aditya P Karan
Manager

Address: A-h2, Acharya Narendra dev Marg, Karamat Market, Balmiki nagar, Lucknow, Uttar Pradesh- 226001
3
 ACKNOWLEDGEMENT

Every work constitutes great deal of assistance and guidance from the people concerned and this

particular project is of no exception.

A project of the nature is surely a result of tremendous support, guidance, encouragement and help.

Wish to place on record my sincere gratitude to Centre for Distance and Online Education, Lovely

Professional University, Punjab, for giving me opportunity to complete my project.

Also, wish to acknowledge enthusiastic encouragement and support extended to me by my family

members. At last, I would like to thank all the faculty of business management to help me

completing this project.

I’m also thankful to my friends who provided me their constant support and assistance.

Place: Lucknow
Adarsh Srivastava (322100928)
Date:17/08/2024

4
 EXECUTIVE SUMMARY

While working in the organization I was trained as a relationship personnel being

engaged into various jobs such as dealing with clients, answering customer queries
through telephonic conversations and providing them knowledge about new schemes
and converting them into our customers.

As my research project I was given the topic on “A STUDY OF WORKING

CAPITAL MANAGEMENT OF BATA LIMITED”. The project work was for
this research was conducted in Chandigarh to study the customer satisfaction level.

The research has been conducted to gather information from 100 respondents & a
structured questionnaire will be used to collect the information from the respondents.
The data which was collected from them will be analyzed and classified.

5
 ABSTRACT
Working capital management is a critical aspect of financial management for any company,
directly impacting its liquidity, operational efficiency, and overall financial health. This
study focuses on the working capital management practices at Bata Limited, one of the
leading footwear manufacturers globally. The objective is to analyze how Bata Limited
manages its short-term assets and liabilities to ensure smooth operations, maintain
profitability, and mitigate risks associated with liquidity constraints.

The research explores the components of working capital, including inventory management,
receivables, payables, and cash management, and their impact on Bata's financial
performance. By evaluating key financial ratios, such as the current ratio, quick ratio,
inventory turnover, and receivables turnover, the study provides insights into Bata's
effectiveness in managing its working capital.

Moreover, the study examines the strategies employed by Bata Limited to optimize its
working capital, particularly in the context of market fluctuations and economic challenges.
The findings of this study will shed light on the importance of efficient working capital
management in sustaining business operations, reducing costs, and enhancing profitability
in the competitive footwear industry.

6
 Table of Contents

S. No. Title Page no

1 Declaration by Student 2

2 Certificate 3

3 Acknowledgement 4
4 Executive Summary 5
5 Abstract 6
6 List of Figures 8

7 List of Tables 9

8 List of Schemes 10

9 List of Abbreviations 11
10 Chapter-1 Introduction 12-28

11 Chapter-2 Review of Literature 29-41

a) Company Profile
b) Objective of Study
c) Scope of Study
12 Chapter-3 Implementation of project 42-53
a) Research Methodology
b) Data Analysis and Interpretation
13 Chapter-4 Results and Discussions 54-55
14 Finding 56
15 Final Chapter- Conclusion and Future Scope 57-58
16 Suggestion 59

17 Annexures 60-63
 References
 Questionnaire

7
 LIST OF FIGURES

Sr. Particulars Page No.

No.
1 Working Capital Model of business 13
2 Classification of Working Capital 14
3 Temporary Working Capital 15
4 Operating Cycle of business 18
5 Adequate working capital 19
6 Operating Cycle of finished goods 23
7 India's Leather & Leather Products Export Basket 35

8
 LIST OF TABLES
Table Particulars Page No.
No.
1 Current Ratio 45-46
2 Acid-Test Ratio 47
3 Debtors’ turnover ratio 48
4 Creditor’s turnover ratio: 49
5 Inventory turnover ratio 50
6 Net working capital turnover ratio 51
7 Debtor collection period 52
8 Net profit ratio 53

9
 LIST OF SCHEMES

Bata Limited, like many other companies, may utilize a variety of schemes and strategies
for working capital management to ensure smooth operations and financial stability.
While specific details on schemes used by Bata Limited might not be publicly available,
here are some general approaches and strategies that companies like Bata typically use
for working capital management:

 Inventory Management: Analyze how Bata manages its inventory levels,

including strategies for minimizing holding costs while ensuring sufficient
stock levels to meet demand.
 Cash Conversion Cycle: Study the time taken by Bata to convert its
investments in inventory and other resources into cash flows from sales. This
includes analyzing receivables, payables, and inventory turnover.
 Receivables Management: Examine how Bata manages its accounts receivable,
including credit policies, collection processes, and the impact on cash flow.
 Payables Management: Explore Bata's approach to managing its accounts
payable, including payment terms with suppliers, discounts for early payments,
and its effect on working capital.
 Cash Management: Investigate how Bata optimizes its cash balances, including
strategies for maintaining liquidity while maximizing returns on idle cash.
 Short-term Financing: Study the sources and costs of short-term financing
used by Bata to manage working capital needs, such as bank overdrafts, trade
credit, and commercial paper.
 Working Capital Ratio Analysis: Analyze key ratios such as the current ratio,
quick ratio, and working capital turnover to assess Bata's efficiency in managing
working capital.
 Impact of Economic Conditions: Assess how economic factors, such as
inflation, interest rates, and currency fluctuations, impact Bata's working capital
management.

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 LIST OF ABBREVIATIONS

Here is a list of commonly used abbreviations related to working capital management in

the context of a large company like BATA Limited:

1. WCM - Working Capital Management

2. WCC - Working Capital Cycle
3. CCC - Cash Conversion Cycle
4. DSO - Days Sales Outstanding
5. DPO - Days Payable Outstanding
6. DIO - Days Inventory Outstanding
7. CA - Current Assets
8. CL - Current Liabilities
9. NWC - Net Working Capital
10. AP - Accounts Payable
11. AR - Accounts Receivable
12. ICR - Inventory Conversion Ratio
13. OCR - Operating Cycle Ratio
14. CR - Current Ratio
15. QR - Quick Ratio
16. WCR - Working Capital Ratio
17. ECL - Excess Cash Liquidity
18. FA - Fixed Assets
19. ROCE - Return on Capital Employed
20. EBITDA - Earnings Before Interest, Taxes, Depreciation, and Amortization
21. ROI - Return on Investment
22. FMCG - Fast-Moving Consumer Goods
23. FTE - Full-Time Equivalent

11
 INTRODUCTION

Working capital refers to that part of the firm’s capital which is required for financing short-
term or current assets such as cash, marketable securities, debtors & inventories. Funds, thus,
invested in current assts keep revolving fast and are being constantly converted in to cash
and this cash flows out again in exchange for other current assets. Hence, it is also known as
revolving or circulating capital or short-term capital.
Working capital management is concerned with the problems arise in attempting to manage
the current assets, the current liabilities and the inter relationship that exist between them.
The term current assets refer to those assets which in ordinary course of business can be, or,
will be, turned in to cash within one year without undergoing a diminution in value and
without disrupting the operation of the firm. The major current assets are cash, marketable
securities, account receivable and inventory.
Current liabilities ware those liabilities which intended at their inception to be paid in
ordinary course of business, within a year, out of the current assets or earnings of the concern.
The basic current liabilities are account payable, bill payable, bank over-draft, and
outstanding expenses.
The goal of working capital management is to manage the firm’s current assets and current
liabilities in such way that the satisfactory level of working capital is mentioned.

Definition: -
According to Guttmann & Dougall-

“Excess of current assets over current liabilities”.

According to Park & Gladson-

“The excess of current assets of a business (i.e. cash, accounts receivables, inventories)
over current items owned to employees and others (such as salaries & wages payable,
accounts payable, taxes owned to Government”.
Capital required for a business can be classified under two main categories via: -

1) Fixed Capital
2) Working Capital

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 Every business needs funds for two purposes for its establishment and to carry out its day-
to-day operations. Long terms funds are required to create production facilities through
purchase of fixed assets such as p&m, land, building, furniture, etc. Investments in these
assets represent that part of firm’s capital which is blocked on permanent or fixed basis
and is called fixed capital. Funds are also needed for short-term purposes for the purchase
of raw material, payment of wages and other day – to- day expenses etc.

Figure 1

 TYPES OF WORKING CAPITAL

According to the needs of business, the working capital may be classified as follows: -

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 WORKING
CAPITAL

BASIS OF
CONCEPT BASIS OF TIME

GROSS PERMANENT VARIABLE

NET WORKING
WORKING WORKING WORKING
CAPITAL
CAPITAL CAPITAL CAPITAL

RESERVE REGULAR SEASONAL SPECIAL

MARGIN WORKING WORKING WORKING
CAPITAL CAPITAL CAPITAL CAPITAL

Figure 2 Classification of Working Capital

A. ON THE BASIS OF PERIODICITY: On the basis of periodicity working

capital can be divided under two categories as under:

1) Permanent working capital: This refers to that minimum amount of investment

in all current assets which is required at all times to carry out minimum level of
business activities.

The Tandon Committee has referred to this type of working capital as ―Core current
assets.

Fixed working capital can further be divided into two categories as under:

i) Regular Working capital: Minimum amount of working capital required to

keep the primary circulation. Some amount of cash is necessary for the payment of
wages, salaries etc.

ii) Reserve Margin Working capital: Additional working capital may also be
required for contingencies that may arise any time. The reserve working capital is
the excess of capital over the needs of the regular working capital is kept aside as
reserve for contingencies, such as strike, business depression etc.
2) Variable or Temporary Working Capital: The amount of such working
capital keeps on fluctuating from time to time on the basis of business activities. In
other words, it represents additional current assets required at different times during
the operating year. For example, extra inventory has to be maintained to support
sales during peak sales period. The variable working capital may also be subdivided

14
 into following two sub-groups:

i) Seasonal Variable Working capital: Seasonal working capital is the additional

amount which is required during the active business seasons of the year. Raw
materials like raw-cotton or jute or sugarcane are purchased in particular season.
The industry has to borrow funds for short period. It is particularly suited to a
business of a seasonal nature. In short, seasonal working capital is required to meet
the seasonal liquidity of the business.

ii) Special variable working capital: Additional working capital may also be
needed to provide additional current assets to meet the unexpected events or special
operations such as extensive marketing campaigns or carrying of special job etc.

TEMPORARY
WORKING CAPITAL

PERMANENT WORKING
CAPITAAL

B. ON THE BASIS OF CONCEPT:

On the basis of concept working capital is divided into two categories as under:

1) Gross Working Capital: Gross working capital refers to total investment in

current assets. The current assets employed in business give the idea about the utilization
of working capital and idea about the economic position of the company. Gross working
capital concept is popular and acceptable concept in the field of finance.

2) Net Working Capital: Net working capital means current assets minus current
liabilities. The difference between current assets and current liabilities is called the net
working capital. If the net working capital is positive, business is able to meet its current
liabilities. Net working capital concept provides the measurement.

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 FACTORS DETERMINING WORKING CAPITAL

The following factors determine the requirement of working capital:

1. Nature of Companies: Needs for working capital are determined by the nature
of an enterprise. Small companies have smaller proportions of cash, receivables and
inventory than large corporation. This difference becomes more marked in large
corporations. A public utility, for example, mostly employs fixed assets in its operations,
while a merchandising department depends generally on inventory and receivable.

2. Nature and Size of Business: The working capital requirements of a firm are
basically influenced by the nature of its business. Trading and financial firms have a
very less investment in fixed assets, but require a large sum of money to be invested in
working capital. Retail stores, for example, must carry large stocks of a variety of goods
to satisfy the varied and continues demand of their customers.

3. Time: The level of working capital depends upon the time required to
manufacturing goods. If the time is longer, the size of working capital is great.
Moreover, the amount of working capital depends upon inventory turnover and the unit
cost of the goods that are sold.

4. Volume of Sales: This is the most important factor affecting the size and
components of working capital. The volume of sales and the size of the working capital
are directly related to each other. As the volume of sales increase, there is an increase in
the investment of working capital-in the cost of operations, in inventories and
receivables.

5. Terms of Purchases and Sales: If the credit terms of purchases are more
favorable and those of sales liberal, less cash will be invested in inventory. With more
favorable credit terms, working capital requirements can be reduced.

6. Business Cycle: Business expands during periods of prosperity and declines

during the period of depression. Consequently, more working capital required during
periods of prosperity and less during the periods of depression.

7. Liquidity and Profitability: If it is interested in improving its liquidity, it can

increase the level of its working capital. However, this policy is likely to result in a
reduction of the sales volume, and therefore, profitability. A firm should choose between
liquidity and profitability and decide about its working capital requirements accordingly.

16
 COMPONENTS OF WORKING CAPITAL MANAGEMENT

1. CASH MANAGEMENT

Cash management is one of the most important areas in the day-to-day management of
the firm ‘s deals with the management of working capital, which is defined as all the
short-term assets used in daily operations. This consists prima BATA of cash, marketable
securities, accounts receivable and inventory. The balances in these accounts can be
highly volatile as they respond very quickly to changes in the firm ‘s operating
environment. Healthy circulation of cash in the entire business operation is the basis of
business solvency. Ultimately every transaction in a business result either in an inflow or
an outflow of cash. There should be sufficient cash with a firm all the time to meet the
needs of the business. If the cash balance with a firm at any time is surplus or deficit, it is
obvious that the finances are mismanaged. Cash Management needs strategies to deal
with various facets of cash. Following is some of its facets.

2. INVENTORY MANAGEMENT

Inventory constitutes an important item in the working capital of many business concerns.
Inventory is a major item of current assets. The term inventory refers to the stocks of the
product of a firm is offering for sale and the components that make up the product
Inventory is stores of goods and stocks. This includes raw materials, work-in-process and
finished goods. Raw materials consist of those units or input which are used to
manufactured goods that require further processing to become finished goods. Finished
goods are products ready for sale. The classification of inventories and the levels of the
components vary from organization to organization depending upon the nature of
business.
3. RECEIVABLES MANAGEMENT

Management of Receivables refers to planning and controlling of debt owed to the firm
from customer on account of credit sales. When large amounts of money are tied up in
receivables, there are chances of bad debts. On the contrary, if the investment in
receivables is low, the sales may be low since competitors offer liberal terms. Therefore,
management of receivables require proper policies and their implementation.

17
There are basically three aspects of receivables management:

1. Credit Policy
2. Credit Analysis
3. Control of Receivables

4. PAYABLES MANAGEMENT

A considerable segment of procurement of products and services in a company are on credit

conditions to a certain extent. Account Payables Management refers to the set of policies,
procedures, and practices employed by a company with respect to managing its trade credit
purchases. They consist of seeking trade credit lines, acquiring favorable terms of purchase,
and managing the flow and timing of purchases so as to efficiently control the company’s
working capital.

 WORKING CAPITAL CYCLE

Every business organization needs adequate working capital because the conversion of cash
into finished goods to debtors and back to cash is not instantaneous. The continuing flow
from cash to suppliers, to inventory, to accounts receivable and back into cash is called the
working capital cycle or operating cycle. In other words, the term operating cycle refers to
the length of time which begins with the acquisition of raw materials of a firm and ends
with the final realization of cash from debtors. The amount of working capital depends
upon the length of working capital cycle. Longer the working cycle, higher is the need of
working capital to be maintained. This is because the fund will then remain tied-up in
various items of current assets for a longer period. The length of operating cycle varies
from industry to industry and from business to business.

Figure No.3

18
 IMPORTANCE OR ADVANTAGE OF ADEQUATE WORKING CAPITAL

PAYMENT
TO
SUPPLIERS

EASY LOAN DIVIDEND

FROM DISTRIBUTI-
BANKS ON

SIGNIFIC
AN--CE
OF
WORKING
CAPITAL
INCREASE INCREASE
EFFECIENC- DEBT
Y CAPACITY

INCREASE
IN FIX
ASSETS

Figure no.4

 Solvency of the business:

Adequate working capital helps in maintaining the solvency of the business by providing
uninterrupted of production.

 Goodwill:

Sufficient amount of working capital enables a firm to make prompt payments and makes
and maintain the goodwill.

 Easy loans:

Adequate working capital leads to high solvency and credit standing can arrange loans from
banks and other on easy and favorable terms.

 Cash Discounts:

Adequate working capital also enables a concern to avail cash discounts on the purchases
and hence reduces cost.

19
 Regular Supply of Raw Material:

Sufficient working capital ensures regular supply of raw material and continuous
production.

 Regular Payment of Salaries, Wages and Other Day TO Day Commitments:

It leads to the satisfaction of the employees and raises the morale of its employees, increases
their efficiency, reduces wastage and costs and enhances production and profits.

 Ability to Face Crises:

A concern can face the situation during the depression.

Sources of working capital

The company can choose to finance its current assets by

1. Long term sources
2. Short term sources
3. A combination of them.

Long term sources of permanent working capital include equity and preference shares,
retained earnings, debentures and other long-term debts from public deposits and financial
institution. The long-term working capital needs should meet through long term means of
financing. Financing through long term means provides stability, reduces risk or payment
and increases liquidity of the business concern.
Various types of long-term sources of working capital are summarized as follow:

1. Issue of shares:
It is the primary and most important sources of regular or permanent working capital.
Issuing equity shares as it does not create and burden on the income of the concern. Nor
the concern is obliged to refund capital should preferably raise permanent working capital.

2. Retained earnings:
Retain earning accumulated profits are a permanent sources of regular working capital. It
is regular and cheapest. It creates not charge on future profits of the enterprises.

20
3. Issue of debentures:
It creates a fixed charge on future earnings of the company. Company is obliged to pay
interest. Management should make wise choice in procuring funds by issue of debentures.

Short term sources of temporary working capital

Temporary working capital is required to meet the day-to-day business expenditures. The
variable working capital would finance from short term sources of funds. And only the
period needed. It has the benefits of, low cost and establishes closer relationships with
banker.
Some sources of temporary working capital are given below:

1. Commercial bank:
A commercial bank constitutes significant sources for short term or temporary working
capital. This will be in the form of short-term loans, cash credit, and overdraft and though
discounting the bills of exchanges.

2. Public deposits:
Most of the companies in recent years depend on this source to meet their short-term
working capital requirements ranging for six months to three years.

3. Various credits:
Trade credit, business credit papers and customer credit are other sources of short-term
working capital. Credit from suppliers, advances from customers, bills of exchanges, etc.
helps to raise temporary working capital
4. Reserves and other funds:
Various funds of the company like depreciation fund. Provision for tax and other provisions
kept with the company can be used as temporary working capital. The company should meet
its working capital needs through both long term and short-term funds. It will be appropriate
to meet at least 2/3 of the permanent working capital equipment’s form long term sources,
whereas the variables working capital should be financed from short term sources. The
working capital financing mix should be designed in such a way that the overall cost of
working capital is the lowest, and the funds are available on time and for the period they are
really required.

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SOURCES OF ADDITIONAL WORKING CAPITAL

Sources of additional working capital include the following-

1. Existing cash reserves
2. Profits (when you secure it as cash)
3. Payables (credit from suppliers)
4. New equity or loans from shareholder
5. Bank overdrafts line of credit
6. Long term loans

If we have insufficient working capital and try to increase sales, we can easily over stretch
the financial resources of the business. This is called overtrading. Early warning signs
include:
1. Pressure on existing cash
2. Exceptional cash generating activities. Offering high discounts for clear
3. cash payment
4. Bank overdraft exceeds authorized limit
5. Seeking greater overdrafts or lines of credit
6. Part paying suppliers or their creditor.
7. Management pre occupation with surviving rather than managing.

Different Aspects of Working Capital Management

 Management of Inventory
 Management of Receivables/Debtors
 Management of Cash
 Management of Payables/Creditors

MANAGEMENT OF INVENTORY
Inventories constitute the most significant part of current assets of a large majority of
companies. On an average, inventories are approximately 60% of current assets. Because
of large size, it requires a considerable amount of fund. The inventory means and includes
the goods and services being sold by the firm and the raw material or other components
being used in the manufacturing of such goods and services.

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 Nature of Inventory:
The common type of inventories for most of the business firms may be classified as raw-
material, work-in-progress, finished goods.

 Raw material:
It is basic inputs that are converted into finished products through the manufacturing
process.
Raw materials inventories are those units which have been purchased and stored for future
productions.
 Work–in–process:
Work-in-process is semi-manufactured products They represent products that need more
work before them become finished products for sale.

 Finished goods:
These are completely manufactured products which are ready for sale. Stocks of raw
materials and work-in-process facilitate production, while stock of finished goods is
required for smooth marketing operations. Thus, inventories serve as a link between the
production and consumption of goods. The levels of three kinds of inventories for a firm
depend on the nature of business. A manufacturing firm will have substantially high levels
of all the three kinds of inventories. While retail or wholesale firm will have a very high
level of finished goods inventories and no raw material and work-in-process inventories.
So operating cycle can be known as following: -

Raw Material

Work in Progress

Cash Collection from

Debtors Sales
Finished Goods

Credit Sales Cash Sales

Figure no.5

23
MANAGEMENT OF RECEIVABLES/DEBTORS

The Receivables (including the debtors and the bills) constitute a significant portion of the
working capital. The receivables emerge whenever goods are sold on credit and payments
are deferred by customers. A promise is made by the customer to pay cash within a
specified period. The customers from whom receivable or book debts have to be collected
in the future are called trade debtors and represents the firm’s claim or assets. Thus,
receivable is s type of loan extended by the seller to the buyer to facilitate the purchase
process. Receivable Management may be defined as collection of steps and procedure
required to properly weight the costs and benefits attached with the credit policy. The
Receivable Management consist of matching the cost of increasing sales (particularly credit
sales) with the benefits arising out of increased sales with the objective of maximizing the
return on investment of the firm.

MANAGEMENT OF CASH

Cash management refers to management of cash balance and the bank balance and also
includes the short terms deposits. Cash is the important current asset for the operations of
the business. Cash is the basic input needed to keep the business running on a continuous
basis. It is also the ultimate output expected to be realized by selling the service or product
manufactured by the firm. The term cash includes coins, currency, and cheque held by the
firm and balance in the bank accounts.

MANAGEMENT OF PAYABLES/CREDITORS

Creditors are a vital part of effective cash management and should be managed carefully
to enhance the cash position. Purchasing initiates cash outflows and an over-zealous
purchasing function can create liquidity problems.
Consider the following:
 Who authorizes purchasing in our company-is it tightly managed or spread among a
number of people?
 Are purchase quantities geared to demand forecasts?
 Do we use order quantities which take account of stock-holding and
 Purchasing costs?
 Do we know the cost to the company of carrying stock?
 Do we have alternative source of supply?
 How many of our suppliers have a returns policy?
24
 MANAGEMENT OF WORKING CAPITAL

Management of working capital is concerned with the problem that arises in attempting
to manage the current assets, current liabilities. The basic goal of working capital
management is to manage the current assets and current liabilities of a firm in such a way
that a satisfactory level of working capital is maintained, i.e. it is neither adequate nor
excessive as both the situations are bad for any firm. There should be no shortage of funds
and also no working capital should be ideal.

WORKING CAPITAL MANAGEMENT POLICES of a firm has a great on its

probability, liquidity and structural health of the organization. So, working capital
management is three dimensional in nature as

1. It concerned with the formulation of policies with regard to profitability,

liquidity and risk.
2. It is concerned with the decision about the composition and level of current
assets.
3. It is concerned with the decision about the composition and level of current
liabilities.

METHODS OF WORKING CAPITAL ANALYSIS

There are so many methods for analysis of financial statements but BATA LTD used the
following techniques: -

 Comparative size statements

 Trend analysis
 Cash flow statement
 Ratio analysis
A detail description of these methods is as follows: -

COMPARATIVE SIZE STATEMENTS: -

When two or more than two years figures are compared to each other than we called
comparative size statements in order to estimate the future progress of the business, it is
necessary to look the past performance of the company. These statements show the
absolute figures and also show the change from one year to another.

25
 TREND ANALYSIS: -
To analyze many years financial statements BATA LTD uses this method. This indicates
the direction on movement over the long time and help in the financial statements.

Procedure for calculating trends: -

1. Previous year is taken as a base year.
2. Figures of the base year are taken 100.
3. Trend % are calculated in relation to base year.
CASH FLOW STATEMENT: -
Cash flow statements are the statements of changes in the financial position prepared on the
basis of funds defined in cash or cash equivalents. In short cash flow statement summaries,
the cash inflows and outflows of the firm during a particular period of time.

Benefits for the BATA LTD: -

 To prepare the cash budget.
 To compare the cash budgets.
 To show the position of the cash and cash equivalents.

RATIO ANALYSIS: -
Ratio analysis is the process of the determining and presenting the relationship of the items
and group of items in the statements.

Benefits of ratio analysis to BATA LTD: -

1. Helpful in analysis of financial statements.
2. Helpful in comparative study.
3. Helpful in locating the weak spots of the BATA LTD.
4. Helpful in forecasting.
5. Estimate about the trend of the business.
6. Fixation of ideal standards.
7. Effective control.
8. Study of financial soundness.

26
Types of ratios: -

 Liquidity ratio: They indicate the firms’ ability to meet its current obligation out of
current resources.
 Current ratio: - Current assets / Current liabilities
 Quick ratio: - Liquid assets / Current liabilities
Liquid assets = Current assets – Stock -Prepaid expenses

 Leverage or Capital structure ratio: This ratio discloses the firm’s ability to meet
the interest costs regularly and long-term solvency of the firm.
 Debt equity ratio: - Long term loans / Shareholders funds or net Worth
 Debt to total fund ratio: - Long terms loans/ share holder funds +long term
loan
 Proprietary ratio: - Shareholders fund/ shareholders’ funds+ long term loan

 Activity ratio or Turnover ratio: - They indicate the rapidity with which the resources
available to the concern are being used to produce sales.
 Stock turnover ratio: - Cost of goods sold/Average stock
(Cost of good sold= Net sales/ Gross profit,
Average stock=Opening stock+ closing stock/2)
 Debtors’ turnover ratio: - Net credit sales/ Average debtors
+Average B/R
 Average collection period: - Debtors+ B/R /Credit sales per
(Credit sales per day=Net credit sales of the year/365)
 Creditors Turnover Ratio: - Net credit purchases/ Average
Creditors + Average B/P
 Average Payment Period: - Creditors + B/P/ Credit purchase per day.

 Fixed Assets Turnover ratio: - Cost of goods sold/Net fixed Assets

(Net Fixed Assets = Fixed Assets – depreciation)
 Working Capital Turnover Ratio: - Cost of goods sold/ Working Capital
(Working capital= current assets – current liability)

27
 Profitability Ratios or Income ratios: - The main objective of every business
concern is to earn profits. A business must be able to earn adequate profit in relation
to the risk and capital invested in it.
 Gross profit ratio: - Gross profit / Net Sales * 100
(Net sales= Sales – Sales return)
 Net profit Ratio: - Net profit / Net sales * 100
(Operating Net Profit= operating net profit/ Net Sales *100 or operating Net
profit= gross profit – operating expenses)
 Operating Ratio: - Cost of goods sold + Operating expenses/Net Sales *
100
(Cost of goods sold = Net Sales – Gross profit, Operating expenses = office
& administration expenses + Selling & distribution expenses + discount +
bad debts + interest on short term loans)
 Earnings per share (E.P.S.): - Net Profit – dividend on preference share
/ No. of equity shares
 Dividend per share (D.P.S.): - Dividend paid to equity share Holders / No.
of equity shares *100.
 Dividend Payout ratio (D.P.): - D.P.S. / E.P.S. *100

28
 COMPANY PROFILE

Bata (also known as Bata Shoe Organisation) is a family-owned global footwear and fashion
accessory manufacturer and retailer with acting headquarters located in Lausanne, Switzerland.
Organised into three business units: Bata Europe, based in Italy; Bata Emerging Market (Asia,
Pacific, Africa and Latin America), based in Singapore, and Bata Protective (worldwide B2B
operations), based in the Netherlands, the organisation has a retail presence in over 70 countries
and production facilities in 26 countries.
Bata India is the largest retailer and leading manufacturer of footwear in India and is a part of the
Bata Shoe Organization.
Incorporated as Bata Shoe Company Private Limited in 1931, the company was set up initially as
a small operation in Konnagar (near Calcutta) in 1932. In January 1934, the foundation stone for
the first building of Bata’s operation - now called the Bata. In the years that followed, the overall
site was doubled in area. This township is popularly known as Batanagar. It was also the first
manufacturing facility in the Indian shoe industry to receive the ISO: 9001 certifications.
The Company went public in 1973 when it changed its name to Bata India Limited. Today, Bata
India has established itself as India’s largest footwear retailer. Its retail network of over 1200
stores give it a reach / coverage that no other footwear company can match. The stores are present
in good locations and can be found in all the metros, mini-metros and towns
Bata’s smart looking new stores supported by a range of better- q u a l it y products are aimed
at offering a superior shopping experience to its customers.
The Company also operates a large non retail distribution network through its urban wholesale
division and caters to millions of customers through over 30,000 dealers.

29
 HISTORY OF BATA
 FOUNDATION

The T. & A. Baťa Shoe Company was founded in 1894 in Zlín, Moravia, (then Austro- Hungarian
Empire, today the Czech Republic) by Tomáš Baťa his brother Antonín and his sister Anna,
whose family had been cobblers for generations. The company employed 10 full-time employees
with a fixed work schedule and a regular weekly wage, a rare find in its time.

In the summer of 1895, Tomáš found himself facing financial difficulties, and debts abounded.
To overcome these serious setbacks, Tomáš decided to sew shoes from canvas instead of leather.
This type of shoe became very popular and helped the company grow to 50 employees. Four
years later, Bata installed its first steam-driven machines, beginning a period of rapid
modernization. In 1904 Tomáš Baťa introduced mechanized production techniques that allowed
the Bata Shoe Company to become one of the first mass producers of shoes in Europe. Its first
mass product, the “Batovky,” was a leather and textile shoe for working people that was notable
for its simplicity, style, light weight and affordable price. Its success helped fuel the company’s
growth and, by 1912, Bata was employing 600 full-time workers, plus another several hundred
who worked out of their homes in neighboring villages.

SHOEMAKER TO THE WORLD

Consumer response to the price drop was dramatic. While most competitors were forced to close
due to the crisis in demand between 1923 and 1925, Bata was expanding as demand for the
inexpensive shoes grew rapidly. The Bata Shoe Company increased production and hired more
workers. Zlin became a veritable factory town, a "Bataville" covering several acres. On the site
were grouped tanneries, a brickyard, a chemical factory, a mechanical equipment plant and repair
shop, workshops for the production of rubber, a paper pulp and cardboard factory (for production
of packaging), a fabric factory (for lining for shoes and socks), a shoe-shine factory, a power
plant and a farming activity to cover both food and energy needs... Horizontal and vertical
integration. Workers, "Batamen", and their families had at their disposal all the necessary
everyday life services: housing, shops, schools, hospital, etc.

30
INTERNATIONAL GROWTH

Bata also began to build towns and factories outside of Czechoslovakia (Poland, Latvia,
Romania, Switzerland, France) and to diversify into such industries as tanning (1915), the
energy industry (1917), agriculture (1917), forest farming (1918), newspaper publishing (1918),
brick manufacturing (1918), wood processing (1919), the rubber industry (1923), the
construction industry (1924), railway and air transport (1924), book publishing (1926), the film
industry (1927), food processing (1927), chemical production (1928), tyre manufacturing
(1930), insurance (1930), textile production (1931), motor transport (1930), sea transport
(1932), and coal mining (1932). Airplane manufacturing (1934), synthetic fibre production
(1935), and river transport (1938). In 1923 the company boasted 112 branches.

In 1924 Tomáš Baťa displayed his business acumen by figuring out how much turnover he
needed to make with his annual plan, weekly plans and daily plans. Baťa utilized four types of
wages – fixed rate, individual order-based rate, collective task rate and profit contribution rate.
He also set what became known as Baťa prices – numbers ending with a nine rather than with a
whole number. His business skyrocketed. Soon Baťa found himself the fourth richest person in
Czechoslovakia. From 1926 to 1928 the business blossomed as productivity rose 75 percent and
the number of employees increased by 35 percent. In 1927 production lines were installed, and
the company had its own hospital. By the end of 1928, the company’s head factory was
composed of 30 buildings. Then the entrepreneur created educational organizations such as the
Baťa School of Work and introduced the five-day work week. In 1930 he established a stunning
shoe museum that maps shoe production from the earliest times to the contemporary age
throughout the world. By 1931 there were factories in Germany, England, the Netherlands,
Poland and in other countries.

In 1932, at the age of 56, Tomáš Baťa died in a plane crash during takeoff under bad weather
conditions at Zlín Airport. Control of the company was passed to his half-brother, Jan, and his
son, Thomas John Bata, who would go on to lead the company for much of the twentieth century
guided by their father’s moral testament: the Bata Shoe company was to be treated not as a
source of private wealth, but as a public trust, a means of improving living standards within the
community and providing customers with good value for their money. Promise was made to
pursue the entrepreneurial, social and humanitarian ideals of their father. The Baťa company was
apparently the first big enterprise to systematically utilize aircraft for company purposes.

31
PRESENT

After the global economic changes of the 1990s, the company closed a number of its
manufacturing factories in developed countries and focused on expanding retail business. Bata
moved out of Canada in several steps. In 2000, it closed its Batawa factory. In 2001, it closed
its Bata retail stores, retaining its "Athletes World" retail chain. In 2004, the Bata headquarters
were moved to Lausanne, Switzerland and leadership was transferred to Thomas G. Bata,
grandson of Tomáš Baťa. The Bata headquarters building in Toronto was vacated and eventually
demolished. In 2007, the Athletes World chain was sold, ending Bata retail operations in
Canada. As of 2013, Bata maintains the headquarters for its "Power" brand of footwear in
Toronto. The Bata Shoe Museum, founded by Sonja Bata, and operated by a charitable
foundation, is also located in Toronto.

Although no longer chairman of the company, the elder Mr. Bata remained active in its
operations and carried business cards listing his title as “chief shoe salesman.” In 2008, Thomas
John Bata died at Sunnybrook Health Sciences Centre in Toronto at the age of 93.

Bata estimates that it serves more than 1 million customers per day, employing over 30,000
people, operates more than 5,000 retail stores, manages 27 production facilities and a retail
presence in over 90 countries.

OVERVIEW OF THE INDUSTRY

Indian Footwear Industry Overview
Indian leather industry is the core strength of the Indian footwear industry. It is the engine of
growth for the entire Indian leather industry and India is the second largest global producer of
footwear after China.

Reputed global brands like Florsheim, Nunn Bush, Stacy Adams, Gabor, Clarks, Nike, Reebok,
Ecco, Deichmann, Elefanten, St Michaels, Hasley, Salamander and Colehaan are manufactured
under license in India. Besides, many global retail chains seeking quality products at competitive
prices are actively sourcing footwear from India.

While leather shoes and uppers are produced in medium to large-scale units, the sandals and
chappals are produced in the household and cottage sector. The industry is poised for adopting
the modern and state-of-the-art technology to suit the exacting international requirements and
standards. India produces more of gent’s footwear while the world’s major production is
in ladies’ footwear. In the case of chapels and sandals, use of non-leather material is prevalent
in the domestic market.
32
Leather footwear exported from India are dress shoes, casuals, moccasins, sport shoes,
horrachies, sandals, ballerinas, boots. Non-leather footwear exported from India are Shoes,
Sandals and Chappals made of rubber, plastic, P.V.C. and other materials.

With changing lifestyles and increasing affluence, domestic demand for footwear is projected
to grow at a faster rate than has been seen. There are already many new domestic brands of
footwear and many foreign brands such as Nike, Adidas, Puma, Reebok, Florsheim, Rockport,
etc. have also been able to enter the market.

The footwear sector has matured from the level of manual footwear manufacturing methods to
automated footwear manufacturing systems. Many units are equipped with In-house Design
Studios incorporating state-of-the-art CAD systems having 3D Shoe Design packages that are
intuitive and easy to use. Many Indian footwear factories have also acquired the ISO 9000, ISO
14000 as well as the SA 8000 certifications. Excellent facilities for Physical and Chemical
testing exist with the laboratories having tie-ups with leading international agencies like
SATRA, UK and PFI, Germany.

One of the major factors for success in niche international fashion markets is the ability to cater
them with the latest designs, and in accordance with the latest trends. India, has gained
international prominence in the area of Colours & Leather Texture forecasting through its
outstanding success in MODEUROP. Design and Retail information is regularly made available
to footwear manufacturers to help them suitably address the season's requirement.

Strength of India in the footwear sector originates from its command on reliable supply of
resources in the form of raw hides and skins, quality finished leather, large installed capacities
for production of finished leather & footwear, large human capital with expertise and technology
base, skilled manpower and relatively low-cost labor, proven strength to produce footwear for
global brand leaders and acquired technology competence, particularly for mid and high-
priced footwear segments. Resource strength of India in the form of materials and skilled
manpower is a comparative advantage for the country.

India has emerged in recent years as a relatively sophisticated low to medium cost supplier to
world markets –The leather industry in India has been targeted by the Central Government as
an engine for economic growth. Progressively, the Government has prodded and legislated a
reluctant industry to modernise. India was noted as a supplier of rawhides and skins semi
processed leather and some shoes.

In the 1970’s, the Government initially banned the export of raw hides and skins, followed this
33
by limiting, then stopping the export of semi processed leather and encouraging local tanneries
to manufacture finished leather themselves. Despite protestations from the industrialists, this
has resulted in a marked improvement in the shoe manufacturing industry. India is now a major
supplier of leather footwear to world markets and has the potential to rival China in the future
(60% of Chinese exports are synthetic shoes).

India is often referred to as the sleeping giant in footwear terms. It has an installed capacity of
1,800 million pairs, second only to China. The bulk of production is in men’s leather shoes and
leather uppers for both men and ladies. It has over 100 fully mechanised, modern shoe making
plants, as good as anywhere in the world (including Europe). It makes for some upmarket brands
including Florsheim (US), Lloyd (Germany), Clarks (UK), Marks and Spencer (UK).

India has had mixed fortunes in its recent export performance. In 2000, exports of shoes were
US$ 651 million, in 2001 these increased to 663 million but declined in 2012 to 623 million
dollars.

The main markets for Indian leather shoes are UK and USA, which between them take about
55% of total exports.

India has not yet reached its full potential in terms of a world supplier. This is due mainly
to local cow leather that although plentiful, has a maximum thickness of 1.4 – 1.6mm, and the
socio/ political / infrastructure of the country. However, India is an excellent supplier of
leather uppers. Importation of uppers from India does not infringe FTA with Europe or the USA.

34
 Import Export of Footwear & Leather Products:

 Indian Footwear Industry in a Nutshell: -

 Second largest footwear producer after China

 2.06 billion pairs produced in an year

 16 % of the global production is produced in India

 Contract manufacturers supply to leading global brands

 644 Member produces situated as clusters at Chennai, Ambur, Ranipet, Kanpur, Agra,
Mumbai, Delhi and Karnal.

Major Highlights

 Export of Footwear (leather, footwear components & non-Leather footwear) has

increased from US$1236.91 million in April-March 2006-07 to US$1475.83 million in
April-March 2007-08, registering a growth of 19.32%
 In Dollar terms, Leather footwear has alone grown by 19.45%, footwear components by
21.05% and non-Leather footwear by 7.39%
 Export of Leather Garments has increased by 11.00%, Saddlery & Harness by 28.53%,
and Leather Goods by 11.14%
 Export of Finished Leather has increased by 5.93%.

India's Leather & Leather Products Export Basket



35
Major Production Centers

The major production centers for footwear and leather products are located in:

 Tamil Nadu - Chennai, Ambur, Ranipet, Vaniyambadi, Trichy, Dtndtgul

 West Bengal - Kolkata
 Uttar Pradesh - Kanpur, Agra & Noida
 Punjab - Jallandhar
 Karnataka - Bangalore
 Andhra Pradesh - Hyderabad
 Haryana - Ambala, Gurgaon, Panchkula and Karnal
 Delhi

36
SOURCES OF WORKING CAPITAL OF BATA

Short Term Sources Long Term Sources

Commercial Bank Debentures
 Foreign Currency Loan
 Rupee Loans
Commercial Papers Bonds
Advances from customers & statutory dues Loans from Financial Institutions

Current Assets Components of Bata Industry Includes,

 Investments
 Trade Receivables
 Cash & Cash Equivalents
 Loans
 Other Financial Assets
 Other Current Assets

Current Liabilities Components of Bata Industry Includes:

 Borrowings
 Trade Payables
 Other Financial Liabilities
 Other Current Liabilities
 Provisions

37
 BALANCE SHEET OF BATA LTD.
As On March- 2019, Mar2020, Mar2021, Mar2022, Mar2023. (Rs. In crores)

2023 2022 2021 2020 2019

EQUITIES AND
LIABILITIES
SHAREHOLDER'S FUNDS
Equity ShareCapital 64.26 64.26 64.26 64.26 64.26
TOTAL SHARE 64.26 64.26 64.26 64.26 64.26
CAPITAL
Reserves and Surplus 1,369.64 1,749.96 1,695.51 1,832.32 1,682.27
TOTAL RESERVES AND 1,369.64 1,749.96 1,695.51 1,832.32 1,682.27
SURPLUS
TOTAL SHAREHOLDERS 1,433.90 1,814.23 1,759.77 1,896.58 1,746.53
FUNDS
NON-CURRENT LIABILITIES
Long Term Provisions 0.00 2.03 2.06 2.51 0.00

Other Liabilities and 1,009.81 891.29 859.67 1,035.35 100.24

Provisions
Long Term Provisions 0.00 0.00 0.00 0.00 2.28

Total Non-Current 1,009.81 893.32 861.73 1,037.85 102.52

Liabilities
CURRENT
LIABILITIES
Trade Payables 408.88 456.08 439.57 503.23 515.65

Other Current Liabilities 405.24 352.03 264.32 289.01 98.27

Short Term Provisions 7.59 8.98 8.58 8.26 15.67

Total Current Liabilities 821.71 817.09 712.47 800.51 629.59

Total Capital and 3,265.43 3,524.64 3,333.97 3,734.94 2,478.64

Liabilities

ASSETS:
Tangible Assets 1,374.83 1,207.30 1,110.88 1,360.49 310.78

Intangible Assets 14.22 16.74 6.74 7.04 3.79

Capital Work-In-Progress 1.61 3.72 33.61 19.86 17.25

38
Other Assets 0.00 0.00 0.00 0.00 0.00

Fixed Assets 1,392.82 1,229.22 1,151.24 1,387.39 331.82

Non-Current Investments 4.85 4.85 4.95 4.95 4.95

Deferred Tax Assets [Net] 114.05 104.85 138.40 110.99 109.78

Long Term Loans and 0.00 0.00 116.31 122.94 108.62

Advances
Other Non-Current Assets 148.69 189.78 66.04 109.08 86.00

Total Non-Current Assets 1,660.41 1,528.70 1,476.94 1,735.34 641.17

CURRENT ASSETS
Current Investments 0.00 0.00 0.00 0.00 0.00

Inventories 904.26 870.91 608.28 873.68 839.09

Trade Receivables 82.55 71.72 79.37 61.23 65.30

Cash And Cash Equivalents 523.19 964.82 1,093.56 962.35 839.00

Short Term Loans and 0.00 0.00 12.37 7.18 3.76

Advances
Other Current Assets 95.01 88.50 63.46 95.16 90.33

TOTAL CURRENT ASSETS 1,605.01 1,995.94 1,857.03 1,999.60 1,837.47

TOTAL ASSETS 3,265.43 3,524.64 3,333.97 3,734.94 2,478.64

39
 Key Financial Ratios of Bata India
RATIOS 2023 2022 2021 2020 2019
Basic EPS (Rs.) 24.83 7.85 -7.02 25.44 25.65

Diluted EPS (Rs.) 24.83 7.85 -7.02 25.44 25.65

Cash EPS (Rs.) 47.76 26.67 13.57 48.45 30.63
Book Value [Excl Reval 111.56 141.15 136.92 147.56 135.89
Reserve]/Share (Rs.)
Book Value [Incl Reval 111.56 141.15 136.92 147.56 135.89
Reserve]/Share (Rs.)
Dividend / Share (Rs.) 13.50 54.50 4.00 4.00 6.25

Revenue from 268.55 185.77 132.83 237.57 227.84

Operations/Share (Rs.)
PBDIT/Share (Rs.) 64.44 36.69 19.85 69.91 42.47

PBIT/Share (Rs.) 41.51 17.87 -0.74 46.90 37.49

PBT/Share (Rs.) 33.12 10.65 -9.16 37.74 37.21

Net Profit/Share (Rs.) 24.83 7.85 -7.02 25.44 25.65

Liquidity Ratios
Current Ratio (X) 1.95 2.44 2.61 2.50 2.92

Quick Ratio (X) 0.85 1.38 1.75 1.41 1.59

Inventory Turnover Ratio (X) 0.29 0.34 2.81 3.49 3.49

Dividend Payout Ratio (NP) 219.50 50.95 -56.94 24.57 15.59

(%)
Dividend Payout Ratio (CP) 114.11 14.99 29.47 12.90 13.05
(%)
Earnings Retention Ratio (%) -119.50 49.05 156.94 75.43 84.41

Asset Turnover Ratio (%) 1.02 0.70 51.20 81.75 118.14

40
 OBJECTIVES OF THE STUDY

1. To examine the effectiveness of working capital management polices with the

help of accounting ratio.
2. To study liquidity position of the company by taking various measurements.

3. To evaluation the financial performance of the company.

4. To make suggestions for policy makers for effective management of working capital.

SCOPE OF STUDY

The scope of this study is to provide an insight into concept of working capital management
and illustrate it by actually working capital management of Bata India Ltd. This study also
provides insight of the customer preference of Bata India Ltd and its market share as
competitor.

Working Capital is the money used to make goods and attract sales. The less working capital
used to attract sales, the higher is likely to be the return on investment. Working Capital
Management is about the commercial and financial aspects of Inventory, Credit, Purchasing,
Marketing and royalty and investment policy. The higher the profit margin, the lower is like
to be the level of working capital tied up in creating and selling titles. The importance of
working capital management stems from the two reasons viz,

1. A substantial portion of total investment is invested in current assets

2. Level of current assets will change quickly with the variation in sales.

Hence, an attempt should be made to analyze the size and composition of working capital
and whether such an investment will lead to increase of business ever a period of time. After
determining the requirements of current assets, one of the importance tasks of the financial
manager is to select an assortment of appropriate sources of finance for the current
assets.
The efficient utilization of funds is very important in an organization. The scope of this
project is to analyze the efficiency utilization of working capital. This project document
emphasizes in handling the various techniques in articulating the glass factory’s monetary
strengths and weakness and its growth for the specific period of time. So, this project will
help the organization’s future by suggesting means to metering the optimal level is working
capital.
41
 NEED AND IMPORTANCE OF THE STUDY

1. Their projects are helpful in knowing the company’s position of funds maintenance

and setting the standards for working capital inventory levels, current ratio level,

quick ratio, current amount turnover level & web torn turnover levels.

2. This project is helpful to the managements for expanding the dualism & the project

viability & present availability of funds.

3. This project is also useful as it companies the present year data with the previous year

data and thereby it shows the trend analysis, i.e. increasing fund or decreasing fund.

The project is done entirely as a whole entirely. It will give overall view of the

organization and it is useful in further expansion decision to be taken by management.

42
 RESEARCH METHODOLOGY

For every comprehensive research a proper research methodology is indispensable & it has
to be properly conceived. The methodology adopted by me is as follows: -

RESEARCH PROBLEM
 To know the working capital management of BATA with the help of ratio analysis.

RESEARCH DESIGN
According to Clifford Woody, “research comprises defining and redefining problems,
formulating hypothesis or suggested solutions; collecting, organizing and evaluating
data; making deductions and reaching conclusions; and at last, carefully testing the
conclusions to determine whether they fit the formulating hypothesis.
This research is divided in two parts:
i. Working Capital Management through secondary data based on certain
parameters
ii. An exploratory research based on a survey of the concerning literature. A sample
survey was conducting with the help of Scheduling Method of collecting data i.e.
personally the enumerator visited and got the questionnaires filled from the
respondents. The enumerator in this method helps the respondents in recording
their answers to various questions in the said schedules

SOURCES OF DATA
The secondary data, are those which have already been collected by someone else and
which have already been passed through the statistical process.
For this research report, Secondary data was used for the working capital management
of BATA that is company annual reports, profit and loss account and balance sheet for
the years 2018-19,2019-20,2020-2021,2021-2022 and 2022-2023, magazines and
newspapers.

STATISTICAL TOOLS USED

The various statistical tool used were data distribution tables, graphs and pie charts. Ratio
analysis was used for determining the working capital management of BATA Ltd.

43
 DATA COLLECTION

Types of data collection

There are two types of data collection methods available.

1. Primary data collection
2. Secondary data collection

1) Primary data collection method

The primary data is that data which is collected fresh or first hand, and for first time which
is original in nature. Primary data can collect through personal interview, questionnaire
etc. to support the secondary data.

2) Secondary data collection method

The secondary data are those which have already collected and stored.
Secondary data easily get those secondary data from records, journals, annual reports of
the company etc. It will save the time, money and efforts to collect the data. Secondary
data also made available through trade magazines, balance sheets, books etc.
This project is based on primary data collected through personal interview of head of
account department, head of SQC department and other concerned staff member of
finance department. But primary data collection had limitations such as matter
confidential information thus project is based on secondary information collected through
five years annual report of the company, supported by various books and internet sides.
The data collection was aimed at study of working capital management of the company.

44
 DATA ANALYSIS & INTERPRETATION
 CURRENT RATIO

It is also known as “working capital ratio” .It is a measures of short-term financial strength
of the business and shows whether the business will be able to meet it’ s current liabilities
as when they mature.

Current Assets including assets which can be converted in to cash easily and itself like
market securities debtors, inventory, prepaid expenses etc.
Current Liabilities included creditors, bills payable, accrual expenses, short term bank
loan, income tax liabilities and long-term debt maturity in current year. In short it can be
said as all obligation within a year are included in current liabilities.
Current ratio is a measure of the firm’s short-term solvency. It indicates the availability
of current assets in rupee of current liabilities. As a conventional rule, a current ratio
should be or slightly more. It focuses the strong of weak position of the company.
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝒂𝒔𝒔𝒆𝒔𝒕𝒔
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝒓𝒂𝒕𝒊𝒐 =
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔

YEARS CURRENT RATIO

2019-20 2.50

2020-21 2.61

2021-22 2.45

2022-23 1.96

45
0
Current Ratio

2019-20 2020-21 2021-22 2021-23

INTERPRETATION:

It is generally believed that 2:1 ratio shows a comfortable working capital position. The

tendon committee appointed by RBI had wide recommended a current ratio of 2:1.

Company has maintained this ration and increased it year by year. A current ratio is 1.96.1

in the current year. But in the other year the ratio is nearer to 1:2 so we can say that the

company having comfortable working capital position.

46
 ACID-TEST RATIO

The measure of absolute liquidity may be obtained only cash and bank balance as well as
only ready marketable security with liquid liabilities. This is every existing standard of
liquidity and it is satisfaction if the ratio is 1.50:1.
𝑪. 𝑨 − 𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚
𝑨𝒄𝒊𝒅 − 𝑻𝒆𝒔𝒕 𝑹𝒂𝒕𝒊𝒐 =
𝑪. 𝑳

YEARS ACID-TEST RATIO

2019-20 1.41

2020-21 1.75

2021-22 1.38

2022-23 0.862

Acid Test Ratio

2

1.5 1.75

1.41 1.38
1

0.862
0.5

0
2019-20 2020-21 2021-22 2022-23

Acid Test Ratio

INTERPRETATION:

Acid-test ratio is 0.862 in current year as compare to 1.38 in the previous year. Over all
the acid-test ratio of last four year is very satisfactory so we can conclude that the
absolute liquidity of the Bata Limited is in favor.

47
 DEBTORS TURNOVER RATIO

This ratio shows the proportion of sales to average receivables. It shows the efficiency of the
collection policy of the firm. The higher the ratio, the less satisfactory position of the firm. Higher
ratio indicates weak collection policy of the firm.

𝑪𝒓𝒆𝒅𝒊𝒕 𝑺𝒂𝒍𝒆𝒔
𝑫𝒆𝒃𝒕𝒐𝒓𝒔 𝑻𝒖𝒓𝒏𝒐𝒗𝒆𝒓 𝑹𝒂𝒕𝒊𝒐 =
𝑨𝒄𝒄𝒐𝒖𝒏𝒕 𝑹𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆

YEARS DEBTORS TURNOVER RATIO

2019-20 19.50
2020-21 29.92
2021-22 26.60
2022-23 31.21

DEBTOR TURNOVER RATIO

35

30

25

20

15

10

0
2019-20 2020-21 2021-22 2022-23

DEBTOR TURNOVER RATIO

INTERPRETATION:

We know that the higher Debtor’s turnover ratio is not good for the firm. In the year 2022-23 it is
31.21 but in the previous year it was 22.60 So some improvement is needed.

48
 CREDITOR’S TURNOVER RATIO:

Creditor’s turnover ratio shows the proportion of purchase to account payable number of days

within which we make payment to our creditors for credit purchases estimated the creditors ratio

if this ratio is higher, it means company has to check whether company is making payment within

credit period available. If it is making payment before the due date means the company is not

taking full advantage of it credit period and if company making the payment the period that

indicates that the company is not taking the benefit of discount allowed.

𝑪𝒓𝒆𝒅𝒊𝒕 𝒑𝒖𝒓𝒄𝒉𝒂𝒔𝒆
𝑪𝒓𝒆𝒅𝒊𝒕𝒐𝒓′ 𝒔 𝑻𝒖𝒓𝒏𝒐𝒗𝒆𝒓 𝒓𝒂𝒕𝒊𝒐 =
𝑨𝒄𝒄𝒐𝒖𝒏𝒕 𝒑𝒂𝒚𝒂𝒃𝒍𝒆

YEARS CREDITOR’S TURNOVER RATIO

2019-20 3.96
2020-21 5.49
2021-22 5.47
2022-23 4.62

Credit Turnover Ratio

6

0
2019-20 2020-21 2021-22 2022-23

Credit Turnover Ratio

INTERPRETATION:

Higher Ratio of creditor turnover forces the company to check that payment is made with
in credit period properly or not. The creditors’ turnover ratio is 4.62 in 2022-23 as

49
 compare to 2021-22 the ratio is 5.47 which is higher than the other years.

 INVENTORY TURNOVER RATIO

This ratio is also known as “stock turnover ratio”. The number of times the average stock
is turnover during the year is known as stock turnover. It is computed by deciding the
sales by the inventory. The ratio is important in joining the ability of management which
it can move the stock.

𝑵𝒆𝒕 𝒔𝒂𝒍𝒆𝒔
𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 𝑻𝒖𝒓𝒏𝒐𝒗𝒆𝒓 𝒓𝒂𝒕𝒊𝒐 =
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚

YEARS INVENTORY TURNOVER RATIO

2019-20 3.49 times

2020-21 2.81 times

2021-22 0.34 times

2022-23 0.29 times

Inventory Turnover Ratio

4

3.5

2.5

1.5

0.5

0
2019-20 2020-21 2021-22 2022-23
Inventory Turnover Ratio

INTERPRETATION:

Higher the ratio more profitability the business would be. The ratio is joining the ability
of management with which it can move the stock. Inventory turnover ratio is highest in
the year 2021-22 is 0.34 as compare to the other year but in current year it is 0.29 which
is best.
50
 NET WORKING CAPITAL TURNOVER RATIO

Net working capital turnover ratio is obtained by net working capital joining to sales. The
excess of current assets over current liabilities is called working capital. It is found for
measuring firm liquidity. It also measures the firm potential reserve of funds.

𝑵𝒆𝒕 𝑾𝒐𝒓𝒌𝒊𝒏𝒈 𝑪𝒂𝒑𝒊𝒕𝒂𝒍 𝑻𝒖𝒓𝒏𝒐𝒗𝒆𝒓 𝒓𝒂𝒕𝒊𝒐

𝑺𝒂𝒍𝒆𝒔
=
𝑵𝒆𝒕 𝑾𝒐𝒓𝒌𝒊𝒏𝒈 𝑪𝒂𝒑𝒊𝒕𝒂𝒍
YEARS WORKING CAPITAL TURNOVER RATIO
2019-20 7.60 times
2020-21 5.57 times
2021-22 9.85 times
2022-23 10.00 times

NET WORKING CAPITAL TURNOVER

2022-23

2021-22

2020-21

2019-20

0 2 4 6 8 10 12
NET WORKING CAPITAL TURNOVER

INTERPETATION:

As per the balance sheet data of the creditor the working capital turnover ratio is
different for the different years. The ratio is 7.60 in 2008-09 and 5.57 in 2007-08 but the
best favorable ratio is in 2005-06 which is 10 times. So, it means that higher the ratio
better the working capital condition of the company.

51
 DEBTOR COLLECTION PERIOD

The Debt Collection shows the number of days taken to collect the debts of credit sales. It
shows the efficiency and collection policy of the company. The ratio is computed by
dividing the Debtor’s turnover ratio in to 365 days.

𝟑𝟔𝟓 𝒅𝒂𝒚𝒔
𝑫𝒆𝒃𝒕 𝑪𝒐𝒍𝒍𝒆𝒄𝒕𝒊𝒐𝒏 𝑷𝒆𝒓𝒊𝒐𝒅 =
𝑫𝒆𝒃𝒕𝒐𝒓′ 𝒔 𝑻𝒖𝒓𝒏𝒐𝒗𝒆𝒓 𝑹𝒂𝒕𝒊𝒐

YEARS DEBTORS COLLECTION PERIOD

2019-20 4.8 days
2020-21 3.15 days
2021-22 3.10 days
2022-23 2.90 days

DEBTOR COLLECTION PERIOD

6

0
2019-20 2020-21 2021-22 2022-23
DEBTOR COLLECTION PERIOD

INTERPRETATION:

The collection period is highest in 2022-23 is 2.9 days as compare to very low in 2021-
22 is only 3.10 days. This shows the improvement in collection policy of the Bata Limited.
So, it is very important for any company to collect the debs which this company do very
well.

52
  NET PROFIT RATIO

Net profit margin, or simply net margin, measures how much net income or profit a
company generates as a percentage of its revenue. It is the ratio of net profits
to revenues for a company or business segment.

NET PROFITRATIO=NETPROFIT/NET SALES*100

YEAR NET PROFIT RATIO

2019-20 10.56
2020-21 5.6
2021-22 4.3
2022-23 9.4

Net Profit ratio

12

10

0
2019-20 2020-21 2021-22 2022-23

Net Profit ratio

INTERPRETATION:

Net profits arrived by deducting all non-operating expenses from the operating profit made
by the company. In the above chart, X-Axis denotes the financial years and the Y-Axis
denotes the ratios calculated (in %). The analysis is for the period of four years i.e 2019-
2020 to 2022- 2023. The net profit ratio for the year 2019-2020 is9.5% even though the
net profit and sales for the respective year is at its least when compared to all other
financial years. In the year 2020-21, the net profit ratio is 5.6 %. The year with the highest
sales and net profit is 2019-20 but it didn’t achieve the highest net profit ratio. In the year
2022-23 the net profit ratio is 9.4% which is the least ratio. From the above analysis.

53
 RESULTS AND DISCUSSIONS

1. Analysis of Working Capital Components

 Inventory Management: Bata Limited has maintained an effective inventory turnover ratio,
which indicates that the company efficiently manages its inventory levels. By optimizing
stock levels, Bata reduces the holding cost and minimizes the risk of obsolete stock. This
efficient inventory management has contributed to a steady cash flow and ensured the timely
availability of products to meet consumer demand.
 Receivables Management: The receivables turnover ratio of Bata Limited suggests a
strong collection process. The company has effectively managed its credit policies,
ensuring that the receivables are collected within the stipulated credit period. This
minimizes the risk of bad debts and enhances liquidity, allowing the company to reinvest
in operations and expansion activities.
 Payables Management: Bata has maintained favorable relationships with its suppliers,
allowing it to negotiate better credit terms. By extending the payment period without
incurring penalties or damaging supplier relationships, the company has managed to improve
its cash position. This has provided Bata with the flexibility to manage other financial
obligations more effectively.

2. Liquidity Position
 Current Ratio: The current ratio of Bata Limited has remained within the industry
standards, indicating a healthy liquidity position. The company’s ability to meet its short-
term liabilities is strong, which reduces the risk of financial distress. This ratio reflects Bata's
effective management of current assets and liabilities, ensuring that it can cover short-term
obligations without compromising operational efficiency.
 Quick Ratio: Bata’s quick ratio, which excludes inventory from current assets, has shown a
stable trend, demonstrating the company's capacity to meet its immediate liabilities without
relying heavily on inventory liquidation. This indicates a robust liquidity position, enhancing
investor confidence and ensuring smooth operational continuity.

3. Cash Conversion Cycle (CCC)

 The Cash Conversion Cycle (CCC) of Bata Limited has been optimized over the years. By
reducing the time taken to convert inventory into cash, the company has improved its
working capital efficiency. A shorter CCC implies that Bata is able to quickly turn its
54
 investments in inventory and receivables into cash, which can be used to finance further
operations or reduce debt.

4. Impact on Profitability
 Effective working capital management has had a positive impact on Bata's profitability. By
optimizing inventory levels, managing receivables efficiently, and negotiating better credit
terms with suppliers, the company has reduced its financing costs. This has led to an
improvement in profit margins and overall financial performance.

5. Challenges and Risks

 Despite the strong working capital management practices, Bata Limited faces challenges
such as fluctuating demand, supply chain disruptions, and inflationary pressures, which can
impact inventory levels and receivables. Additionally, the company must continuously
monitor its payables to avoid liquidity issues, especially during periods of economic
uncertainty.

6. Future Outlook
 Bata Limited is expected to continue focusing on optimizing its working capital management
strategies to sustain profitability and growth. The company may explore advanced
technologies such as AI and data analytics to further enhance inventory management and
forecasting accuracy. Additionally, Bata's focus on expanding its e-commerce presence may
require adjustments in working capital strategies to accommodate the dynamics of online
retail.

55
 FINDING

 The company having comfortable working capital position.

 The absolute liquidity of the Bata India Ltd is in favour.
 The collection policy of the company is very good.
 The creditors turnover ratio is 3.33 in 2012-13 as compare to 2011-12 the ratio is 4.62
which is higher than the other years.
 Inventory turnover ratio is highest in the year 2011-12 is 9.20 as compare to the other year
but in current year it is 7.51 which is little bit lower than previous year but it is obvious
that in heavy industries like Bata India Ltd have lower ratio as compared to Others.

 The working capital ratio is 7.60 in 2012-13 and 5.57 in 2011-12 but the best favorable
ratio is in 2010-11 which is 10 times. So, it indicates better working capital condition of
the company.

 This is an improvement in collection policy of the Bata India Ltd.

56
 CONCLUSION

Bata Limited has demonstrated a strategic approach to managing its working capital, which is
critical for maintaining its operational efficiency and financial stability. The company has
focused on optimizing its inventory levels, streamlining receivables, and managing payables
effectively to ensure a healthy cash flow. By doing so, Bata has been able to reduce its working
capital cycle, thereby freeing up resources for other strategic investments and growth
opportunities.

The company's ability to maintain a balanced working capital ratio reflects its strong
financial discipline and adaptability in a competitive market. Effective working capital
management has also enabled Bata to mitigate risks associated with liquidity and ensure that
it can meet its short-term obligations without compromising on operational efficiency.

Going forward, Bata Limited will need to continue monitoring and adjusting its working
capital strategies in response to market fluctuations, changes in consumer demand, and
potential supply chain disruptions. By staying agile and maintaining a focus on efficient
working capital management, Bata can sustain its market leadership and support long-term
growth objectives.

In conclusion, the effective management of working capital has been and will continue to be
a cornerstone of Bata Limited's financial strategy, contributing to its overall success and
resilience in the retail footwear industry.

57
 FUTURE SCOPE

The future scope of working capital management at Bata Limited is shaped by various factors,
including market trends, financial strategies, and industry dynamics. Here are some key
points to consider:

1. Digital Transformation: Bata Limited has been investing in digital transformation,

including e-commerce and supply chain digitalization. Effective working capital
management will need to adapt to these changes, focusing on optimizing cash flow
cycles, managing inventory levels, and ensuring timely receivables and payables.
2. Inventory Management: As a retail company, Bata's working capital is heavily
influenced by its inventory management. Future strategies may involve adopting
advanced inventory management systems that use data analytics and AI to predict
demand more accurately, reduce excess stock, and minimize holding costs.
3. Supply Chain Optimization: With global supply chains facing disruptions, Bata might
focus on improving supply chain resilience. This could include diversifying suppliers,
negotiating better credit terms, and enhancing logistics efficiency to reduce lead times
and optimize working capital.
4. Sustainability Initiatives: Bata's commitment to sustainability could impact its working
capital management. Investing in sustainable materials and practices might require
upfront capital, but could lead to long-term savings and improved brand reputation,
ultimately influencing cash flow and working capital needs.
5. Market Expansion: If Bata continues to expand into new markets, working capital
management will need to address the challenges of different payment terms, currency
risks, and economic conditions in these regions. A tailored approach to working capital
in each market could be crucial.
6. Economic Conditions: Global economic conditions, including inflation, interest rates,
and consumer spending, will influence Bata's working capital strategy. The company will
need to remain agile, adjusting its working capital policies to maintain liquidity and
financial stability during economic fluctuations.
7. Technological Integration: Implementing advanced financial management software
could streamline Bata's working capital processes, improving real-time monitoring of
cash flows, better forecasting, and more efficient allocation of resources.

58
 SUGGESTION

The recommendation & suggestion for effective management of working capital at Bata India
Ltd are given bellow:

1) For inventory, in order to improve the position, Bata India Ltd can reduce the level of stocks
by resorting to phased production i.e. producing according to requirement and disposing off or
recycling the unserviceable inventories.

However, the low turnover of stock may also be due to problems with generation of sales.
Inventory management is a great concern for Bata India Ltd especially stores and spares. The
purchase manager should take proper steps for procurement of inventories.

2.) The company must take certain steps to decrease the working capital cycle. One way can be
better management of inventories.

3.) Bata India Ltd is suggested to maintain a balance in capacities, synchronization of various
inputs availability of some materials or parts which are not easily available.

4.) Short term credit period availed must be reduced and sundry creditors should be paid faster.

5.) It should maintain inventory at an optimum level rather than a very optimistic level.

6.) The procurement for materials requisition processing should be reduced so as to minimize
the lead time.

7.) Freedom should be there in deciding the credit policies, cash discount or credit ratings.

8.) Bata India Ltd can also consider negotiating its creditors for relaxing the debt repayment
period and repaying only on or just before the expiry of the credit period

59
 REFERENCES

 www.BATA.com

 http://www.BATA.com/html/investor/financials.html

 http://www.studyfinance.com/lessons/workcap/

 http://en.wikipedia.org/wiki/Working_capital

 Bhadrappa Haralayya, P.S. Aithal, Performance Affecting Factors Of Indian

Banking Sector: An Empirical Analysis, George Washington International Law
Review, Vol.- 07 Issue -01, April- June 2021, Page No: 607-621, Available At:
Http://Archive-Gwilr.Org/Wp-Content/Uploads/2021/06/Bhadrappa- Aralayya. Pdf
 Bhadrappa Haralayya, P.S. Aithal, Technical Efficiency Affecting Factors In Iinian
Banking Sector: An Empirical Analysis, Turkish Online
 Bhadrappa Haralayya and Aithal, P. S. “Analysis of cost efficiency on scheduled
commercial banks in India”. International Journal of Current Research, Volume
13, Issue 06, June 2021, pp

60
 QUESTIONNAIRE

I am …………………, a student of ……………………………. and this questionnaire is

a part of my research on “A STUDY OF WORKING CAPITAL MANAGEMENT OF
BATA LIMITED”. I would therefore request you to give your response to the
questionnaire.

 Name:

 Sex:
Male Female

 Age:
Upto 20 yrs 21- 30 yrs
31-40 yrs and above

 Marital Status :
Married Unmarried

Q1. What is the qualification Educational Qualification?

Up to HSC Graduation
Professional
Others _____________________________________

Q2. What is your occupation?

Business Professional
Employee Student
Home maker others

61
Q3. what is your Family income (Per/month)

Less than Rs.5, 000/-

Rs. 5,000/- to 10,000/-
Rs. 10,000/- to 15,000/-
Above Rs. 15, 000/-

Q4.) Which cell phone (Service Provider) do you possess?

Bata Communications Airtel

Vodafone Tata Docomo
Idea

Q5.) Who influenced you to by the particular cell phone service

Provider?

Family Member Neighbors Relations

Friends Advertisement
Dealers

Q6.) Why do you buy the cell phones?

For business for personal

Q7) Which type of scheme is most preferable by you?

Prepaid Postpaid

Q8) If you have postpaid / prepaid connection mention scheme Name & Monthly rental
Charges?
________________________________________________

62
Q9) Are you aware of the following details relating in your connection? (Pre / Postpaid
connection)

SCHEME AWARE UNAWARE

Scheme of Initial Purchase

Balance of Talk Charges

Periodical Offers
Call Waiting and Call Diverting Option

Modes of Payment

Q10) What factor influenced you to decide your Cell Phones service?

Deposit amount Brand Image

Availability Credit facility for your connection
Customer care service Service charges

Q11) Are you satisfied with your cell phone service provider?
HIGHLY SATISFACTORY NOT
SATISFACTORY SATISFACTORY
Price
After Sales Service
Periodical Offers

Q12) You consider mobile as a:

Necessity Status Luxury

63