INTERNSHIP

Project Report
on
Project title: Working capital of Mecon Limited

MECON LIMITED,
RANCHI
Government of India Enterprise

A PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF REQUIREMENT

FOR THE AWARD OF THE DEGREE OF

MASTER OF BUSINESS
ADMINISTRATION (2022-2024)

INSTITUTE OF MANAGEMENT STUDIES

Department of MBA
RANCHI UNIVERSITY

Under the Guidance of

AVISHEK KUMAR
(Senior Finance Manager)

PREPARED BY
VIVEK KUMAR GUPTA
MBA (Finance/Marketing)
Roll No: 22MBA9178243
Reg. No: BM0150/22
 ACKNOWLEDGEMENT

I would like to thank Mr. Avishek Kumar, Senior Finance manager for his
constant support, timely advice and guidance during the whole process of
training for completing my project on WORKING CAPITAL OF MECON
LIMITED. It was a great pleasure to complete this project with the support
of his experience and help. I would also like to thank MECON for giving me
opportunities to work on project under the guidance of Mr. Avishek Kumar
and employees of the company.

Secondly, I would like to thanks my friends, families, who

helped me a lot in finalizing this project within limited time frame.

VIVEK KUMAR GUPTA

Signature:
 CERTIFICATE

This is to certify that the project entitled “Working Capital of MECON

Limited” ina partial fulfillment of requirement for the completion of
Master of Business Administration in “Institute of Management Studies,
Ranchi University”.

This project report is the record of authentic work carried out by Vivek Kumar
Gupta under our supervision and guidance during the period starting from
5th June 2023 to 27th July 2023.

Our best wishes for his future prospective.

VIVEK KUMAR GUPTA Mr. AVISHEK KUMAR

( Senior Finance manager)
 TABLE OF CONTENT

SL NO CONTENTS PAGE NO

Introduction 02 - 05
1

Organization Profile
■ Brief On MECON LIMITED
■ Vision And Mission
2 ■ Quality Policy 06 - 15
■ Areas Of Activities
■ Range Of Services
■ ISO Certification

Importance of Working Capital

3 ■ Important things about Working Capital 16 - 18
■ Types of Working Capital

Analysis of Working Capital Management

■ Analysis of Working Capital 19 - 29
4
■ Working Capital Management of MECON
■ Analysis of Short-term Financial Position

5 Conclusions and Recommendations 30 - 32

REFERENCES 33
 EXECUTIVE SUMMARY

The internship report of MECON is based on to practically experience

the Finance practices studied in our course of MBA, on Working Capital of
MECON Ltd., especially to know Working Capital Management and other
Operations followed at MECON Ltd. As, now days there is tough
competition in the different Sectors of India, and it is one of the best
consultancy company, so this forced me to do competitive analysis to
gain complete understanding of concerned Treasury practices.

This project is sequenced as firstly with the Introduction of the

organization and telling the purpose and scope of study including the
hierarchy of company & Finance department. This proceeds with policies,
research and Findings of project, which summarizes the Financial
Management Practices followed in MECON & detailed Elaboration of
Working capital of MECON LIMITED.

1
1. INTRODUCTION

2
 Type PSU

Consulting Project Management, Contracting

Industry

Founded 1959

Vivekanand Path, Ranchi, Jharkhand,India

Headquarters

Shri Sanjay Kumar Verma ( Director Projects &

Key people
Additional Charge Chairman and Managing Director)

Number of
1465
employees

Website www.meconlimited.co.in
3
1. INTRODUCTION

MECON Ltd. is a multi-disciplinary designing, planning, engineering,

consultancy, a contracting organization, an established engineering and
contracting ISO-9001 CERTIFIED BY COMPANY, formerly known as
metallurgical & engineering consultants (India) limited. It is under
the ownership of ministry of steel, government of India. It began in
1959 as the Central Engineering and designing bureau (CEDB) of the
Hindustan steel limited, the first public sector steel company.

MECON Ltd. is basically a technical organization consisting of more than

50 departments technical and non- technical. My study was limited to
Finance department and various sub departments.

MECON limited, (the intellectual backbone of Indian steel industry) is

a government owned engineering consultancy service provider.

MECON was established as central engineering & design bureau by the

Govt. of INDIA, with a handful hand of engineers ( just 13), aiming at
the objective of reducing our country’s dependence on foreign
consultants and build indigenous capability for design & consultancy
of integrated steel plants.

4
MECON LIMITED at a Glance

MECON LIMITED {Formerly known as METALLURGICAL AND ENGINEERING

CONSULTANTS (INDIA) LIMITED} is a public sector undertaking under the
ministry of steel, Government of India. Establish in 1959 under the aegis
of Central Engineering and Design Bureau (CEDB), MECON Ltd is India’s
frontline engineering, consultancy and contracting organization offering
full range of service required for setting up the project from concept to
commissioning including turnkey execution.

MECON has a strong work-force of over 1465 experienced & dedicated

engineers, scientists and technologist, having a network of offices spread
all over the country, experienced in handling Consultancy Assignment and
EPC {ERECTION,PRCUREMENT AND CONSULTANCY} project.

5
2. COMPANY PROFILE

6
ORGANISATION PROFILE: MECON LIMITED
2.1 Brief on MECON LIMITED

MECON LIMITED is a Government of India Public Sector undertaking

under Ministry of Steel. MECON LTD, established in 1959 under the aegies
of Central Engineering & Design Bureau (CEDB), Is India’s frontline
engineering, consultancy and contracting organization offering full range
of services required for setting up of projects from Concept to
Commissioning, including turnkey execution. MECON LTD is a multi
disciplinary designing, planning, engineering, consultancy and contracting
organization an established engineering & contracting, ISO 9001
company employs with qualified & experienced engineers, scientists,
technical & supporting staff, possesses offices. Company’s corporate office
at Ranchi is modern and equipped with a large computer network and
laboratories for testing and making models.

MECON has collaboration agreements with leading firms form the USA,
Germany, France, Italy, Russia, etc. in various fields. The organization is
quite familiar in working with collaborators who provide process known
how and basic engineering. MECON is a multi disciplinary firm with

7
1465 experienced and dedicated engineers, scientists and technologists,
having a wide network of offices spread all over the country.
Experienced in handling consultancy assignments and EPC projects.
MECON LTD. Has played a significant role in the development of the
Indian industries. MECON Ltd is an ISO 9001 : 2015 certified company
and is registered with International financial institutions like the World
Bank, Asian Development Bank, African Development Bank and has
technological tie-ups with world’s leading organizations.
MECON played a pivotal role in the development and expansion of the
Iron and Steel Industry of the country. MECON has subsequently
diversified far beyond ferrous metallurgy and consolidated its position in:

• Non ferrous metallurgy

• Defence
• Space
• Environment
• Power
• Petrochemical
• Oil/gas pipelines
• Infrastructure
• Other sectors

AWARDS AND RECOGNITION :

MECON was awarded in 17th National Award on Excellence in Cost Management-

2019. The prestigious award presented by Shri Piyush Goyal, Hon’ble Union
Minister for Commerce & Industry, Textiles, Consumer Affairs and Food & Public
Distribution was received by CMD MECON and Director(F).

MECON received Award in the category of Engineering Services & Consultancy for
demonstrating high order of business excellence during 36th Indian Engineering
Congress.

In recognition of excellence in Cost Management, MECON receives 2nd prize in

17th National Awards for Excellence in Cost Management 2019, under Consulting
category.
8
2.2 VISION AND MISSION OF MECON LIMITED:

VISION

To be an internationally recognized brand in design, engineering,

consultancy, project management and EPC execution.

MISSION

“Developing into an internationally recognized centre of excellence for

providing quality services in technical consultancy, design & engineering,
design & supply of plant, equipment & systems, Project implementation
from concept to commissioning for industrial development and
upgradation ventures, development of infrastructure and other service
sectors.”

• To be a global centre of excellence for providing innovative and cost–

effective engineering and technological solutions in Metals & Mining as well
as diversified sectors like Energy, Infrastructure, Space, Defence etc.

• Leverage deep domain knowledge in the metals and mining sectors to

provide solutions from concept to commissioning.

• Leverage in-house capabilities to provide engineering, technological and

project management services to priority sectors of economy.

• Develop indigenous technological base and promote self reliance.

• Expand geo-strategic presence and export of services.

9
2.3 QUALITY POLICY

MECON has the distinction of being the first engineering consultancy

organization in the country to get ISO- 9001 certification. Recently the
organization has ventured into providing services in ISO- 9000 Quality
Management System and ISO-14000 Environment management to its
clients.

10
2.4 KEY AREAS OF ACTIVITIES :

Mecon provides its services in the following areas:

❖ METALS:

▪ Iron Making
▪ Steel Making
▪ Rolling Mills
▪ Non ferrous
▪ Coke ovens
▪ By-products and Mining
▪ Raw Materials & Mining
▪ Refectories Research & Development
▪ Beach Sand Mining
▪ Mineral beneficiation

❖ POWERS:

• Thermal and Hydel Power Plant

• Transmission and Distribution
• Non-Conventional Energy
Sources
• Energy Management and Audit
• RLA and RMU Studies

11
❖ OIL AND GAS:

• Oil and Gas pipelines

• Petro chemicals andRefineries
• CNG stations and city Gas Distributions
• POL Depots
• LPG Bulk Storage, Bottling
• And Transportation
• Off-Shore Platforms and
• Marine Pipelines
• Retail Outlets

❖ INFRASTRUCTURES:

• Civil and StructuralEngineering

• Architecture and Town Planning
• Ports and material handling
• Road, Bridges, Highways andFly
overs
• Defence sector
• Environmental Planning
• Hydro Engineering
• Information Technology
• Health care sector
• Techno- economics and management
consultancy services

12
BUSINESS

The Core focus of MECON is providing engineering consultancy and

project management services to its client, which are basically industrial.
Mecon has carved out a niche for providing its engineering services for
large scale projects globally. It is serving a large number of clients in the
public and the private sector.
In view of the cyclic demand in the Steel Sector over the past few years.
Mecon has made forays into a number of diversified sectors of the
economy especially Oil and Gas, Power and Infrastructure.
Business procurement in the area of Engineering Consultancy services has
shown an upward trend. The company has thus laid more emphasis on its
operations in this area.

RANGE OF SERVICES:

MECON’s Range of Services includes the entire gamut of works

relating to setting up of Greenfield as well as Brownfield projects from
Concept to Commissioning such as:

• Planning, Analysis and Feasibility Reports

• Market Survey and Product Mix
• Site Selection
• Inspecting & Expediting
• Project Monitoring and Control
• Construction Management
• Commissioning Services
• Civil and Structural Engineering Work
• Demonstration of performance guarantee parameters

13
2.5 RESEARCH & DEVELOPMENT :

To maintain the Organization’s competitive advantage, MECON undertakes

Applied research & experimental development in core areas of business such as
Iron & Steel & focused areas of national importance such as Defence,
Environment. etc.
Most of the programs are funded by external agencies as DRDO, DST, Ministry of
Environment, Ministry of Steel, Tata Steel etc.

Major completed / ongoing projects include :

Development of Continuous NOx Monitoring System, Development of Multigas
Monitoring System, Development of Heating Gloves and socks for Defence
Personnel, Development of Thermo Electrically cooled / heated helmets for
industrial applications, Solid State Microclimate conditioning Unit for MBT ARJUN
and other armoured vehicles, Development and implementation of slag detection
system for converter and caster, Infrared detector based torpedo car / ladle
condition monitoring system, Development of Continuous Ozone Monitoring
System, Design development of 1.2 Mt/yr Pellet Plant, Designe Development of
5.0 m tall coke oven batteries, Extraction of Iron, Aluminium and titanium from
Red-Mud GHARDA Chemicals etc.

R & D FACILITIES :

• Thermoelectrics Laboratory ( TEL )

• Multigas Monitoring Laboratory
• Sensor Laboratory
• LED Opacity Monitor Laboratory
• Machine Laboratory
• Optoelectronics Laboratory
• Induction Heat Treatment Laboratory
• Next Generation High Temperature Material Joining Laboratory

14
2.6 ISO CERTIFICATION:

MECON is the first consultancy organization in the country to be

accredited with ISO Certification. MECON was initially certified in the year
1994. MECON Ltd. Has received the ISO 9001: 2015 certification from TUV
NORD of Germany. ISO stands for International Organization for
Standardization which is the world’s largest developer and publisher of
International Standards. 9001 refers to the series of certification
standards, whereas 2015 refers to the year in which the standards for
certification were revised by the ISO. The certificate is valid for 3 years
from the date of certification. The present certificate of MECON is valid
upto July 2021. The certification necessitates the creation of Quality
Management System (QMS) to maintain the proper quality standards as
per the requirement of ISO. Certain clauses which relate to the ISO
Standards are explained in brief below:
✔ Quality management System
✔ Management Responsibility
✔ Resource Management
✔ Production Realization
✔ Measurement Analysis and Improvement

15
 3. IMPORTANCE OF WORKING CAPITAL

IMPORTANT THINGS ABOUT WORKING CAPITAL:

1. Working Capital can be negative. At that time, we add one word “deficiency"
in the back of working capital. It means if Current Liabilities are more than
current assets, it is known as working capital deficiency or inverse working
capital or negative working capital.
Working capital can be easily adjusted, if Accounts manager knows different
techniques of managing working capital. He can try to get short term
loan or he can increase working capital by proper management of
inventory and outstandingincomes and debtors.

2. Working capital can also change by Changing in Cash Conversion period.

Cash conversion period is a period in which company changes current
assets into cash or bank.

3. Working capital can also positive by increasing growth rate of company. If

company does not invest more money and increase profit, the same amount
will increase in the cash position of company and with cash company can
increase their working capital position.

IMPORTANCE OF WORKING CAPITAL:

1. Some time, if creditors demand their money from company, at this time
company's high working capital saves company from this situation. You know
that selling of current assets is easy in small period of time but Company can
not sell their fixed assets with in small period of time. So, if Company has
sufficient working capital, Company can easily pay off the creditors and create
his reputation in market. But if a company has zero working capital and then
company can not pay creditors in emergency time and either company
becomes bankrupt or takes loan at higher rate of Interest. In both condition, it
is very dangerous and always Company's Account Manager tries to keep some
amount of working capital for creating goodwill in market.
16
 Positive working capital enables also to pay day to day expenses like wages,
salaries, overheads and other operating expenses. Because sufficient working
capital can not only pay maturity liabilities but also outstanding liabilities
without any more delay.

2. One of advantages of positive working capital is that Company can do every

risky work without any tension of self security.

3. The adequate reserve of working capital ensures a steady flow of raw materials
to the production process.

4. The adequate reserve of working capital indicates the good solvency position of
the concern and helps it to get loan from the market at favorable terms.

5. The adequate stock of working capital makes it possible for a concern to

purchase the trading goods in cash and cash purchase always carries the
benefit of getting cash discount.

6. A strong working capital base is probably the only remedy to overcome the odd
situations like dull market conditions, scarcity of raw materials and other
components in case of any emergency, sudden market fluctuations, etc.

7. A business concern can exploit the market opportunities with the help of
adequate working capital.

8. The regular flow of adequate working capital makes possible efficient use of
fixed assets, reduces wastage, ensures quick replying of current assets, and
establish a well- tuned working environment.

9. A quick rotation of working capital cycle and an efficient management of

working capital reduce cost and increases production and sales. The
combined effect of all these favorably add to the profitability of the concern.

10.The adequate amount of working capital and its quick rotation increases profit.
The rate of dividend of the shareholders also increases as a result of such
increase in profit. Sufficient working capital helps in research and development
to face the present era of cut-throat competition.

17
TYPES OF WORKING CAPITAL :

18
 4. ANALYSIS OF WORKING CAPITAL
MANAGEMENT

ANALYSIS OF WORKING CAPITAL

Working-Capital-Analysis is not a technique likely to be used frequently. This

analysis can prove invaluable in cases where credit risk is unusually high, or
the amount of credit requested is very large. Working capital is defined as the
excess of current assets over current liabilities. When similar amounts are
added to or subtracted from both current assets and current liabilities [such
as occurs with the purchase of inventory on open-account terms] the amount
of working capital does not change although the activity does change the
working capital ratio.

The purpose of working-capital-analysis is to identify the factors that cause

changes in the actual amount of a firm's working capital, and these factors are
always to be found below the "current" line on either side of the balance sheet.
Moreover, they can always be listed in one of three basic categories:

1. Changes in net worth. Any net increase in net worth from one
reporting period to the next is a source of funds increasing working capital,
and any net decrease is an application of funds decreasing working capital.

2. Changes in long-term debt. Any increase in long-term debt from one

reporting period to the next is a source of funds increasing working
capital, and any net decrease is an applicationof funds decreasing working
capital.

3. Changes in non-current assets. Any net decrease in non- current assets

from one reporting period to the next is a source of funds for increasing
working capital. Conversely, any net increase is an application of funds
decreasing working capital.
19
MECON – THE WORKING CAPITAL MANAGEMENT

ANALYSIS OF WORKING CAPITAL: By Ratio Analysis

Technique:

As we know working capital is the life blood and the centre of a business.
Adequate amount of working capital is very much essential for the smooth
running of the business. And the most important part is the efficient
management of working capital in right time. The liquidity position of the
firm is totally effected by the management of working capital. So, a study of
changes in the uses and sources of working capital is necessary to evaluate
the efficiency with which the working capital is employed in a business. This
involves the need of working capital analysis.

The analysis of working capital can be conducted through a number of

devices, such as:
1. Ratio analysis
2. Fund flow analysis
3. Budgeting

20
Ratio Analysis:
Ratio Analysis is the most commonly used technique for working capital
analysis which deals practically with each and every aspect of working capital
analysis. In this technique, for each aspect of analysis certain rations are
computed and then results are drawn on the basis of trends shown by
them against thosefixed as guide post
1. Current ratio.
2. Quick ratio
3. Absolute liquid ratio
4. Inventory turnover.
5. Receivables turnover.
6. Payable turnover ratio.
7. Working capital turnover ratio.
8. Working capital leverage
9. Ratio of current liabilities to tangible net worth.

Fund Flow Analysis:

Fund flow analysis is a technical device designated to the study the source
from which additional funds were derived and the use to which these
sources were put. The fund flow analysis consistsof:

a. Preparing schedule of changes of working capital

b. Statement of sources and application of funds.
It is an effective management tool to study the changes in financial position
(working capital) business enterprise between beginning and ending of the
financial dates.
Working Capital Budget:
A budget is a financial and / or quantitative expression of business plans and
polices to be pursued in the future period time. Working capital budget as
a part of the total budgeting process of a business is prepared estimating
future long term and short term working capital needs and sources to
finance them, and then comparing the budgeted figures with actual
performance for calculating the variances, if any, so that corrective actions
may be taken in future. He objective working capital budget is to ensure
21
 availability of funds as and needed, and to ensure effective utilization of
these resources. The successful implementation of working capital budget
involves the preparing of separate budget for each element of working capital,
such as, cash, inventories and receivables etc.

ANALYSIS OF SHORT–TERM FINANCIAL POSITION OR TEST OF

LIQUIDITY
The short –term creditors of a company such as suppliers of goods of credit and
commercial banks short-term loans are primarily interested to know the ability
of a firm to meet its obligations in time. The short term obligations of a firm
can be met in time only when it is having sufficient liquid assets. So to with the
confidence of investors, creditors, the smooth functioning of the firm and the
efficient use of fixed assets the liquid position of the firm must be strong. But a
very high degree of liquidity of the firm being tied – up in current assets.
Therefore, it is important proper balance in regard to the liquidity of the firm.
Two types of ratios can be calculated for measuring short-term financial
position or short- term solvency position of the firm.

✔ Liquidity ratios.
✔ Current assets movements ratios

1. LIQUIDITY RATIOS

Liquidity refers to the ability of a firm to meet its current obligations as and
when these become due. The short-term obligations are met by realizing
amounts from current, floating or circulating assts. The current assets should
either be liquid or near about liquidity. These should be convertible in cash
for paying obligations of short-term nature. The sufficiency or insufficiency of
current assets should be assessed by comparing them with short-term
liabilities. If current assets can pay off the current liabilities then the liquidity
position is satisfactory. On the
other hand, if the current liabilities cannot be met out of the current assets
then the liquidity position is bad. To measure the liquidity of a firm, the
following ratios can be calculated:
• CURRENT RATIO
• QUICK RATIO
• ABSOLUTE LIQUID RATIO

22
 1. CURRENT RATIO :
Current Ratio, also known as working capital ratio is a measure of general
liquidity and its most widely used to make the analysis of short-term financial
position or liquidity of a firm. It is defined as the relation between current
assets and current liabilities. Thus,
CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITES
The two components of this ratio are:
• Current Assets
• Current Liabilities
Current assets include cash, marketable securities, bill receivables, sundry
debtors, inventories and work-in-progresses. Current liabilities include
outstanding expenses, bill payable, dividend payable etc.
A relatively high current ratio is an indication that the firm is liquid and
has the ability to pay its current obligations in time. On the hand a low current
ratio represents that the liquidity position of the firm is not good and the firm
shall not be able to pay its current liabilities in time. A ratio equal or near to the
rule of thumb of 2:1 i.e. current assets double the current liabilities is
considered to be satisfactory.

2. QUICK RATIO:
Quick ratio is a more rigorous test of liquidity than current ratio. Quick ratio
may be defined as the relationship between quick/liquid assets and current or
liquid liabilities. An asset is said to be liquid if it can be converted into cash with
a short period without loss of value. It measures the firms’ capacity to pay off
current obligations immediately.
QUICK RATIO = QUICK ASSET / CURRENT LIABILITES
Where Quick Assets are:

• Marketable Securities
• Cash in hand and Cash at Bank

23
 W0RKING CAPITAL: RATIO ANALYSIS OF MECON
LIMITED
TABLE 1
WORKING CAPITAL: RATIO ANALYSIS OF MECON LIMITED

PARTICULARS 2017-18 2018-19 2019-20 2020-21 2021-22

Turnover 44,572.62 47,017.24 56,117.26 71,800.45 58,667.12

Inventories 148.47 145.91 180.91 204.67 213.53

Account receivables 26,604.25 29,486.34 29,875.89 29,951.90 25,915.99
Cash & Bank 50,976.68 54142.29 39,295.05 20,920.96 69,539.37
Loan & Advances 753.68 758.09 785.60 592.24 586.56
Other financial Assets 1,336.26 8,153.36 6,910.57 5,543.14 5,104.46
Other Current Assets 7633.30 8,269.37 8,596.24 8,998.27 10,413.88

Total Current
Assets 87,452.64 100,955.36 85,644.26 66,211.18 111,773.79

Less: Current
Liabilities 40,894.72 50,275.04 52,107.56 67,377.89 73,190.11
Provisions 18,691.32 8,150.85 6,420.57 8,191.45 9,695.50

Total Current
Liabilities 59,586.04 58,425.89 58,528.13 75,569.34 82,885.61

Net Working Capital 27,866.60 42,529.47 27,116.13 -9,358.16 28,888.18

Total Assets 130,810.53 143,505.46 132,141.80 145,376.71 154,656.23

Quick Assets 87,304.17 100,809.45 85,463.35 108,249.13 111,560.26

Current Assets to 66.85% 70.34% 64.81% 45.54% 72.27%

Total Assets

Current Assets to
Current Liabilities 146.76% 172.79% 146.33% 87.61% 134.85%

Quick Assets to
Current Liabilities 146.51% 172.54% 146.02% 143.24% 134.59%
Working Capital as a
% of Turnover 62.51% 90.45% 48.32% -13.03% 49.24%

Working Capital
Turnover Ratio 1.72 1.12 2.38 -8.03 2.08
24
Current Ratio
The ratio of current assets to current liabilities is known as current or
working capital ratio. It is an index of solvency of the concern or
enterprise. It shows the extent of which the current assets may diminish
in value carrying any losses in respect of payment to short term
creditors. Thus, it is an indication of the ability of an enterprise with
regards to meeting its current liabilities. This ratio shows the number of
times current assets will pay off current liabilities.

TABLE - 2
CURRENT RATIO

FINANCIAL TOTAL CURRENT TOTAL CURRENT CURRENT

YEAR ASSETS LIABILITIES RATIO

2017-18 87,452.64 59,586.04 1.46

2018-19 100,955.36 58,425.89 1.72

2019-20 85,644.26 58,528.13 1.46

2020-21 66,211.18 75,569.34 0.87

2021-22 111,773.79 82,885.61 1.34

INTERPRETATION:

A current ratio of 2:1 is considered generally satisfactory for reference

level and is better to have in between 1 to 2 for manufacturing
organizations. In case of MECON LIMITED, it is more than one which may
be due to effective utilization of working capital. After studying the above
table we find that the current ratio is decreasing every year. A decreasing
current ratio indicating potential financial challenges and may raise some
concerns about the company’s short term liquidity and ability to meet its
current obligations.
25
Quick Ratio or Acid Test:
The current ratio doesn’t throw a light on the liquidity position of a
concern, and therefore, on the solvency position. It is possible that there
may exist a good current ratio but the company maynot have funds for
meeting its immediate obligation leading to a situation of business failure.
It is therefore, the quick or the acid test ratio which is used to tell the
liquid position of an enterprise.
The quick ratio is the ratio of quick assets to current liabilities. The
quick assets are like assets and represent all current assets other than
inventory.

TABLE - 3

QUICK RATIO

YEAR ASSETS
LIABILITIES

2017-18 87,304.17 59,586.04 1.46

2018-19 100,809.45 58,425.89 1.72

2019-20 85,463.35 58,528.13 1.46

2020-21 108,249.13 75,569.34 1.43

2021-22 111,560.26 82,885.61 1.34

INTERPRETATION:
A quick ratio of 1:1 is considered a fair indication of the good current
financial condition of a business enterprise. Quick ratio for MECON
LIMITED has always greater than one which is an indication of better
liquidity position.

26
 Current Assets Turnover Ratio
It reflects efficiency in generating Sales by Current Assets.
Higher the ratio better is the efficiency. The Current Assets Turnover
Ratio of MECON LIMITED is shown in Table-4 as under.

TABLE - 4
CURRENT ASSETS TURNOVER RATIO

2017-18 87,452.64 44,572.62 0.50

2018-19 100,955.36 47,017.24 0.46

2019-20 85,644.26 56,117.26 0.65

2020-21 66,211.18 71,800.45 1.08

2021-22 111,773.79 58,667.12 0.52

INTERPRETATION:
The Current Assets Turnover shows a fluctuating trend from FY
2018-19 to FY 2021-22. The ratio was highest in the FY 2020-21 and
lowest in the year 2018-19. However, this ratio is far from
satisfactory. It needs improvement.

27
Current Assets to Total Assets
In addition to efficiency & liquidity of working capital, the structure health
is also equally important for finding the state of affairs relating to the
administration of working capital. One of these ratios is current asset to
total assets ratio, which is fluctuating trend. This ratio has gone up from
0.66 in 2017-2018to 0.72 in 2021-2022.
TABLE - 5
CURRENT ASSETS TO TOTAL ASSETS

YEAR ASSETS
TOTAL ASSETS

2017-18 87,452.64 130,810.53 0.66

2018-19 100,955.36 143,505.46 0.70

2019-20 85,644.26 132,141.80 0.64

2020-21 66,211.18 145,376.71 0.45

2021-22 111,773.79 154,656.23 0.72

28
 Working Capital
The working capital of MECON LIMITED is the Net of Current Assets and
Current Liabilities. The Current Assets represents, Inventories, Account
receivables, Cash & Bank Balances, Other financial Assets, Other Current
Assets and Loans & Advances. The Current Liabilities represents Current
Liabilities and Provisions. The various components of working capital is
shown in Table-6 as under.

TABLE 6
WORKING CAPITAL: BY RATIO ANALYSIS METHOD

PARTICULARS 2017-18 2018-19 2019-20 2020-21 2021-22

Turnover 44,572.62 47,017.24 56,117.26 71,800.45 58,667.12

Inventories 148.47 145.91 180.91 204.67 213.53

Account receivables 26,604.25 29,486.34 29,875.89 29,951.90 25,915.99
Cash & Bank 50,976.68 54142.29 39,295.05 20,920.96 69,539.37
Loan & Advances 753.68 758.09 785.60 592.24 586.56
Other financial Assets 1,336.26 8,153.36 6,910.57 5,543.14 5,104.46
Other Current Assets 7633.30 8,269.37 8,596.24 8,998.27 10,413.88

Total Current
Assets 87,452.64 100,955.36 85,644.26 66,211.18 111,773.7
9

Less: Current
Liabilities 40,894.72 50,275.04 52,107.56 67,377.89 73,190.11
Provisions 18,691.32 8,150.85 6,420.57 8,191.45 9,695.50

Total Current
Liabilities 59,586.04 58,425.89 58,528.13 75,569.34 82,885.61

Net Working Capital 27,866.60 42,529.47 27,116.13 -9,358.16 28,888.18

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 5. CONCLUSIONS AND

RECOMMENDATIONS

Obligations. The probable reason for not accorded the WCM its due
weight age could be due to inherent difficulties of being in service sector and
may be due to it natural resistance for change. Moreover, since the company
has the ample reserve and the working capital is about one-fourth of the
volume of thebusiness.

Some of the point in the working capital management as follows:

1. The basic problem in working capital management is to synchronize the cash
receipts and payments. Here in MECON, the payments are almost
without delay; however,the receipts are delayed quite for longer period. The
company kept the target of lead time between raising the invoices and receipts
as more than five months. This seems too high and should be reduced
considerably.
2. The component of working capital is having a wide gap. As this observed
that since last few years, the volume of working capital is increasing with
increase in business.

However, the ratio of current assets to current liabilities is increasing. This is a

good sign for any organization.
3. Cash planning in the organization is not been its due as can be seen from
erratic cash flow position. This can only be rectified by a full-fledged cash
planning department.
4. One major are of neglect is sources of funds. It is evident that the company is
using only banks as source of fund as well as to keep the surplus funds.
Company has never tried the other sources of funds paying less interest and
also other financial instrument to keep the surplus funds for better return.
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5. It observed that MECON is still following the traditional structure for handling
its finance and accounts department. This is no longer generating a direction
but only kept the organization moving with flow. This requires proper thrust
better positions towards achieving the goal of organization.

RECOMMENDATIONS
Considering all the above observations and with the change in Indian industrial
scenario, it is felt that the company also must reorient its philosophy for
betterment. Those days are gone when the company used to have a lot of jobs
on cost plus basis with almost a monopoly market in the iron and steel
sector. Nowadays, the company has to compete in the open market with all
other private competitors and with the multinationals. Hence, the company
must also act like business organization, its every action must be business
oriented. Few specific suggestions based on the findings of this study are
mentioned below:

• Lead time and cash flow monitoring

The lead time may be brought down to about 90 days. In addition to this, a
continuous monitoring of collection must be looked after by the project
coordinators to improve the cash inflows.

• Collection of Sundry Debts

To avoid liquidity crisis in near future, the collection of debts must be given
immediate attention. Top management can review the position in this regards
for better collection of debts.

• Realistic Budgeting
Budgeting system should be change to obtain a realistic budget for optimum
control over financial resources. The provision of revision for budget may be
removed to stress the importance on the original budget. The budget
preparation time may also be changed to December-January instead of
present practice of August-September. By this we can have more realistic
estimate of future year.

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• Sources of Funds
In today’s market economy there are many sources of fund, which could be
considered for reducing the interest burdenon company.

• Organization Structure
To attend the financial activities as well as planning in the complex situation,
there is a need for a full time Director, Finance.

SCOPE FOR FURTHER RESEARCH

The review of the past studies and the experience from this present study
made the researcher offer the following areas for further study in this field.
• Study may be conducted among the Strategic Business Units (SBUs) of
MECON LIMITED, and comparison can be made between or among
these SBUs. This will bring out the SBUs, needing effective working
capital management.
• A further study may be helpful for identifying the forces that govern this
chronic nature of inefficiency present in the company in the matter of
working capital management.
• Econometrics can be applied to remove the influence of extraneous
factors on the performance of the company. This will enable accurate
measurement of the impact made on the analysis of working capital.

It is hoped that the present study will be an inspiration forpursuing research in

any of the above areas in the future.

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 REFERENCES

1. Mathur Satish B, Working Capital Management and Control: Principles

and Practice, New Age International Pvt. Ltd., 1st edition, 2003.

2. Gopalakrishnan P, Inventory and Working Capital Management

Handbook, Macmilan Publishers India Ltd.

3. Website of MECON LIMITED - www.meconlimited.co.in

4. Search Engine : www.google.co.in

THANK YOU

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