ACKNOWLEDGEMENT

I wish to accord my deep sense of gratitude to my guide Miss. Manish Sharma, lecture in
commerce for her valuable guidance and help during the preparation of my project on
“WORKING CAPITA ANALYSIS OF ITC Ltd”.

I receive as the opportunity as a big milestone in my carrier development I will strive to

use gained skill and knowledge in the best possible way, and I will continue to work on their
improvement, in order to attained desire carrier objectives. Hope to continue co-operation with
all of you in the future
I am also great full to all other members of our commerce department from time hwlp
and suggestion.

Swagat Sampad Sahu

Date:-
Place:- Baripada
Department:-+3 3rd year commerce
Class Roll No :-BC16-043
Exam Roll no :-3116130
 CERTIFICATE
This to certify that “Swagat Sampad Sahu” of +3 3rd year commerce exam roll no
3116130 for the session 2018-19 has submitted this project entitle “WORKING CAPITA
ANALYSIS OF ITC Ltd”. This project has not been submitted earlier anywhere for any purpose.
It is forwarded to the controller of examination “MPC AUTONOMOUS COLLEGE”, Baripada
after evaluation.

Miss Manisha Sharma

Dept. of commerce
MPC( auto) College
Baripada
 DECLARATION
I do here by declare that the project entitled “WORKING CAPITAL ANALYSIS OF ITC Ltd”
is prepade under the guidance Miss Manishs Sharma lecture in commerce MPC (auto) college,
Baripada, Mayurbhanj and submitted as a practical fulfillment of the requirement for the degree
of commerce 2018 MPC (auto) college, in the cource curriculum of the 6th semester.

Date:-
Place:-
Swagat Sampad Sahu
Department:-+3 3rd year commerce
Class Roll No :-BC16-043
Exam Roll no :-3116130
 INTRODUCTION

ITC was incorporated on August 24, 1910 under the name Imperial Tobacco Company of India
Ltd. As the company's ownership progressively Indianised the name of the company was
changed from Imperial Tobacco Company of India Ltd to India Tobacco Company Ltd in the
year 1970 and then to I.T.C. Ltd in the year 1974. In recognition of the company's multi-business
portfolio encompassing a wide range of businesses - Cigarettes & Tobacco Hotels Information
Technology Packaging Paperboards & Specialty Papers Agri-business Foods Lifestyle Retailing
Education & Stationery and Personal Care - the full stops in the company's name were removed
effective September 18, 2001.
ITC Ltd is one of India's foremost private sector companies. ITC has a diversified presence in
Cigarettes Hotels Paperboards & Specialty Papers Packaging Agri-Business Packaged Foods &
Confectionery Information Technology Branded Apparel Personal Care Stationery Safety
Matches and other FMCG products. While ITC is an outstanding market leader in its traditional
businesses of Cigarettes Hotels Paperboards Packaging and Agri-Exports it is rapidly gaining
market share even in its nascent businesses of Packaged Foods & Confectionery Branded
Apparel Personal Care and Stationery. ITC's wholly owned Information Technology subsidiary
ITC InfoTech India Ltd provides IT services and solutions to leading global customers. ITC
InfoTech has carved a niche for itself by addressing customer challenges through innovative IT
solutions. ITC's production facilities and hotels have won numerous national and international
awards for quality productivity safety and environment management systems. ITC was the first
company in India to voluntarily seek a corporate governance rating.
Capital structure is a mixture of a company's debts includes debentures, long term loans,
common equity and preferred equity. The most crucial decision of any company is involved in
the formulation of its appropriate capital structure.

ITC was incorporated on August 24, 1910 under the name Imperial Tobacco Company of India
Ltd. As the company's ownership progressively Indianised the name of the company was
changed from Imperial Tobacco Company of India Ltd to India Tobacco Company Ltd in the
year 1970 and then to I.T.C. Ltd in the year 1974.
In recognition of the company's multi-business portfolio encompassing a wide range of
businesses - Cigarettes & Tobacco Hotels Information Technology Packaging Paperboards &
Specialty Papers Agri-business Foods Lifestyle Retailing Education & Stationery and Personal
Care - the full stops in the company's name were removed effective September 18, 2001.
ITC Ltd is one of India's foremost private sector companies. ITC has a diversified presence in
Cigarettes Hotels Paperboards & Specialty Papers Packaging Agri-Business Packaged Foods &
Confectionery Information Technology Branded Apparel Personal Care Stationery Safety
Matches and other FMCG products. While ITC is an outstanding market leader in its traditional
businesses of Cigarettes Hotels Paperboards Packaging and Agri-Exports it is rapidly gaining
market share even in its nascent businesses of Packaged Foods & Confectionery Branded
Apparel Personal Care and Stationery. ITC's wholly owned Information Technology subsidiary
ITC InfoTech India Ltd provides IT services and solutions to leading global customers. ITC
InfoTech has carved a niche for itself by addressing customer challenges through innovative IT
solutions.
ITC's production facilities and hotels have won numerous national and international awards for
quality productivity safety and environment management systems. ITC was the first company in
India to voluntarily seek a corporate governance rating.
Capital structure is a mixture of a company's debts includes debentures, long term loans,
common equity and preferred equity. The most crucial decision of any company is involved in
the formulation of its appropriate capital structure.

The present research seeks to study in depth the Working Capital Management
of selected paper companies in India, with special emphasis on an examination of the
management performance in regard to financial management. It hardly needs
mentioning that inventory, accounts receivables and cash and its alert administration
can go a long way in solving the problem of the efficient working capital
management. In fact, the present research of working capital management needs
special attention for the efficient working and the business. It has been often observed
that the shortage of working capital leads to the failure of a business. The proper
management of working capital may bring about the success of a business firm. The
management of working capital includes the management of current assets and
current liabilities.
The present research undertakes to deal with the net concept of
working capital: excess of current assets over current liabilities.
A number of companies for the past few years have been finding it difficult to
solve the increasing problems of adopting seriously the management of working
capital. Business concerns intent on developing their business have to use to the
utmost, their available resources for the improvement and development of the
business there by enabling them to increase their profits. Working Capital and change
in working capital, especially in inventories, which is one of the components of
working capital form a very important part of the total gross-capital formation in the
paper companies. Efficient and the optimal utilization of fixed assets is very closely
related to the proper management of working capital. The present research attempts to
recognize initially the importance of working capital as a part of the total capital. It
further goals to recognize the factors influencing the working capital, its volume, and
in the process try to suggest remedial measures which might help in optimizing the
use of working capital. It also considers as to how precisely “financing working
capital” and further more what should be mix of different components of working
capital.
Some important questions to which the research attempts to seek answer as
follows:-
1. Whether paper companies have planted their working capital requirement
properly.
2. Have the paper companies utilized the investment in current assets?
3. Have the paper companies controlled and utilized cash resources
effectively and profitably?
4. Whether paper companies resort to high build up of inventory.
5. How far have the paper companies been successful in collecting their
`different administration of its various components: like as inventory,
account receivable, cash, and accounts payables.
Working Capital is the life blood of every business concern. Business firm
cannot make progress without adequate working capital.
Inadequate working capitalmeans shortage of inputs, whereas excess of it leads to extra cost. So
the quantum ofworking capital in every business firm should be neither more nor less than what
isactually required. The management has to see that funds invested as working capital
in their organization earn return at least as much as they would have earned return if it
invested anywhere else. At the time of increasing capital costs and scare funds, the
area of working capital management assumes added importance as it deeply
influences a firm's liquidity and profitability. A notable feature of utilization of funds
is that they are of recurring nature. Therefore, efficient working capital management
requires a proper balance between generation and utilization of these funds without
which either shortage of funds will cause obstruction in the smoother functioning of
the organization or excess funds will prevent the firm from conducting its business
efficiently. So the main objective of working capital management is to arrange the
needed funds on the right time from the right source and for the right period, so that a
tradeoff between liquidity and profitability may be achieved.
A firm may exist without making profits but cannot survive without liquidity.
The function of working capital management organization is similar that of heart in a
human body. Also it is an important function of financial management. The financial
manager must determine the satisfactory level of working capital funds and also the
optimum mix of current assets and current liabilities. He must ensure that the
appropriate sources of funds are used to finance working capital and should also see
that short term obligation of the business are met well in time.
 OBJECTIVES OF THE STUDY

Describe the nature of working capital and identify its elements.

1.2 Identify the objectives of working capital management in terms of liquidity and profitability, and
discuss the conflict between them.

1.3 Explain the cash operating cycle and the role of accounts payable and accounts receivable.

1.4 Explain and apply relevant accounting ratios.

1.5 Explain the concept of overtrading and its application.

Working
Capital
Management

Elements Objectives Cash Working Overtrading

of of Operating Capital
WC WC Cycle Ratios
Management

Liquidity Profitability

Trade-off

2. The Elements of Working Capital

2.1 Working capital is the capital available for conducting the day-to-day operations of an
organization; normally the excess of current assets over current liabilities.

2.2 Working Capital Management

Working capital management is the management of all aspects of both current

assets and current liabilities, to minimize the risk of insolvency while
maximizing the return on assets.
2.3 Investing in working capital has a cost, which can be expressed either as:

(a) the cost of funding it, or

(b) the opportunity cost of lost investment opportunities because cash is tied up and
unavailable for other uses.

2.4 Working capital is an investment which affects cash flows.

(a) When inventory is purchased, cash is paid to acquire it.

(b) Receivables represent the cost of selling goods or services to customers, including the
costs of the materials and the labour incurred.

(c) The cash tied up in working capital is reduced to the extent that inventory is financed by
trade payables. If suppliers give a firm time to pay, the firm’s cash flows are improved
and working capital is reduced.

3.1 Current assets are a major balance sheet item and especially significant to smaller firms.

3.2 Mismanagement of working capital is a common cause of business failure, e.g.:

(a) inability to meet bills as they fall due

(b) overtrading during periods of growth

 (c) overstocking.

3.3 Objectives of Working Capital Management (Dec 17, Jun 18)

(a) The two main objectives of working capital management are to ensure:

(i) it has sufficient liquid resources to continue in business and to

increase its probability.

(ii) the objective of profitability supports the primary financial

management objective, which is shareholder wealth maximization.

(iii) the objective of liquidity ensures that liabilities can be met as they
fall due.

(b) Conflict between two objectives:

(i) liquid assets such as bank accounts earn very little return or no
return, so liquid assets decrease profitability.

(ii) profitability is met by investing over the longer term in order to

achieve higher returns.

(c) Trade-off between two objectives:

(i) it depends on the particular circumstances of an organization.

(ii) liquidity may be more important objective when short-term

finance is hard to find.

(iii) profitability may become a more important objective when cash

management has become too conservative.

(iv) both objectives are important and neither can be neglected.

3.5 Liquidity in the context of working capital management means having enough cash or ready
access to cash to meet all payment obligations when these fall due. The main sources of liquidity
are usually:

(a) cash in the bank

(b) short-term investments that can be cashed in easily and quickly

(c) cash inflows from normal trading operations (cash sales and payments by receivables for
credit sales)

(d) an overdraft facility or other ready source of extra borrowing.

3.6 A firm choosing to have a lower level of working capital than rivals is said to have an
‘aggressive’ approach, whereas a firm with a higher level of working capital has a ‘defensive’
approach.
3.7 Cash flow is the lifeblood of the thriving business. Effective and efficient management of the
working capital investment is essential to maintaining control of business cash flow. Management
must have full awareness of the profitability versus liquidity trade-off. For example, healthy
trading growth typically produces:

(a) increased profitability

(b) the need to increase investment in non-current assets and working capital.

3.8 Here there is a trade-off under which trading growth and increased profitability squeeze cash.
Ultimately, if not properly managed, increased trading can carry with it the spectre of overtrading
and inability to pay the business creditors.

3.9 It is worth while stressing the difference between cash flow and profits. Cash flow is as important
as profit. Unprofitable companies can survive if they have liquidity. Profitable companies can fail
if they run out of cash to pay their liabilities (wages, amounts due to suppliers, overdraft interest,
etc.).

3.10 Some examples of transactions that have this ‘trade-off’ effect on cash flows and on profits are as
follows:

(a) Purchase of non-current assets for cash. The cash will be paid in full to the supplier
when the asset is delivered; however profits will be charged gradually over the life of
the asset in the form of depreciation.

(b) Sale of goods on credit. Profits will be credited in full once the sale has been confirmed;
however the cash may not be received for some considerable period afterwards.

(c) With some payments such as tax there may be a significant timing difference between
the impact on reported profit and the cash flow.

3.11 Clearly, cash balances and cash flows need to be monitored just as closely as trading profits. The
need for adequate cash flow information is vital to enable management to fulfil this responsibility.

3.12 Test your understanding 1

Fill in the blanks in the table to identify the advantages of having more or less
working capital.
 REVIEW OF LITERATURE

As stated earlier, there has been very little research on corporate governance particularly in India
prior to 2000. Some researchers in their individual capacities tried to explore the subject and did
some findings; they did not apply it to large organizations. Most of the earlier advancements
were made in countries with developed corporate culture like USA, UK, Germany and Japan etc.
The researchers initially were keen to see whether there is any relation between good corporate
governance and profitability or their research focused on issues related to protection of the
interest of minority shareholders. Some agree that even competition is the best mechanism for
achieving economic efficiency through minimization of the cost, the importance of corporate
governance cannot be overlooked.

1. Chatterjee Debabrata (2010) did a comparative study on Corporate Governance and

Corporate Social Responsibility – The case of Three Indian Companies ITC Ltd., Reliance
Industries Ltd., and Infosys Technologies Ltd. He concluded that though the corporate
governance practices are exemplary, there exist differences in the way the companies adopt the
corporate governance practices. He rated Infosys better than the other two companies.

2. Mohamad Wan Adilah Wan Izyani , Sulong Zunaidab (2010) did a comprehensive study
on Corporate Governance Mechanisms and Extent of Disclosure: Evidence from listed
companies in Malaysia has revealed that companies with a higher percentage of family members,
on the board, significantly have lower level of disclosure in annual report. It has been suggested
that regulators like Bussa Malaysia and Securities Commission should review and impose a
minimum level of family members on the board and Malaysian regulators should implement the
same guidelines.

3. Thrikawala Sujani, et. al (2011) in their research Corporate Governance – performance

relationship in Microfinance Institutions suggested that it is important to determine those
corporate governance practices that have great impact on MFI performance. It has also made an
advanced contribution to the understanding of corporate governance practices in MFI,
identifying and developing an appropriate governance structure. It has also provided guidance
for selecting directors for MFI Boards based on their academic and professional qualifications.
4. Klai Nedsine & Omri Abdeluabed (2011) in the investigation conducted in Tunisia titled
Corporate Governance and Financial Reporting Quality: The case of Tunisian Firms, the
observation was that the Tunisian firms are featured by the lack of board independence and high
level of ownership concentration. It has also concluded in it that corporate governance affects the
accounting quality in the Tunisian context. It was observed that there is a link between corporate
governance and accounting quality in corporate firms in Tunisia.

5. Kajanathan Rajendran (2012) did a study in Sri Lanka titled Effect of corporate Governance
on Capital Structure. Investigation was made on the impact of corporate governance on capital
structure of Sri Lankan manufacturing firms. It was concluded that corporate governance has
important implications on the financing decisions of Sri Lankan manufacturing firms.

6. Bihari Suresh Chandra (2012) conducted the study Corporate Governance is key to Better
Corporate Image: A study in the Banking Sector in India. It has been concluded that there is a
need for a strong culture of compliance at the top of the organization and necessary to consider
how management can respond to ethical or reputation concerns. The biggest challenge in India is
to implement the rules of corporate governance at the ground level. It is required to extend the
principles of good corporate governance practices to co-operatives, Non-banking Private
Companies and other financial institutions.

7. Feizizadeh Ahmed (2012), Faculty Member Of Azad Islamic University, North Branch
Tehran, Iran in his study “Corporate governance: Frameworks “concluded that corporate social
ethical and environmental performances are being viewed increasingly by investors as indicators
of management quality and proxies for performance in other areas of the business. A good
company must have good environmental management system. The extent to which companies
satisfy the needs of a divergent group of stakeholders can also lead to the satisfaction of ultimate
objective of shareholder’s wealth maximization.

8. Mulyadi Martin Surya, Anwar Yunita and Ikbal Muhammood observed that good
corporate governance is based on the pillars of accountability, fairness, transparency and
independence in his study the importance of corporate governance in public sector (2012) and
concluded that community and citizens perceive that public sector corporate governance is
essential in determining its service quality. Accountability, transparency and efficiency help in
measuring performance of public sector.

9. Hussin Norazian Othman Radiab (2012) in Code of Corporate Governance and Firm
Performance concluded that most of the good governance m to be insignificant in relation to firm
performance which is measured by return on assets and return on equity. It has provided
evidence that an independent board chair is an effective internal monitoring mechanism to
promote better performance.

10. Meenu (2012) in her paper titled Need of Effective Corporate Governance and its challenges
in India acknowledged that corporate governance has been proving a very efficient and effective
system for our economy and to save the interest of shareholders. But it requires more efficient
monitoring and transparent internal audit system which can lead to effective corporate
governance.

11. Pavel Kral, Stanislav Tripes, Petr Pirozek and Pavel Pudit (2012) conducted a mixed
method research titled corporate governance against recommendations: The case of the strong
executive and the strong ownership concluded that strong ownership is usually effective in small
organizations while in larger organizations it can lead to over exertion of owners and low
performance. The result of their study revealed that a majority of joint stock companies, (5 out of
7) are able to produce above average Return on Assets when they have a strong executive.

12. Ramana Y. Venkata (2012), did A study on Corporate Governance issue & development In
this study he has concluded that there is still lack of awareness about various issues regarding
corporate governance like quality frequency of financial and managerial disclosure, compliance
with code of best practices, roles and responsibilities of board of directors, shareholders’ rights
etc. There have been many scams in companies due to collusion between companies and
accounting firms, ineffective internal audits and lack of required skills by the managers. With the
integration of Indian economy with global economy, companies are being asked to adopt better
and transparent corporate practices. The degree to which companies observe basic principle of
good corporate governance is an important factor for taking investment decisions.
13. Sharma Aparna (2012), in the paper titled Legal Framework and corporate governance: An
Indian perspective found that significant efforts have been made by Indian regulators and the
industry to overhaul corporate governance since 1990. The current corporate governance regime
in India straddles both voluntary and mandatory requirements. For listed companies,
requirements of clause 49 are mandatory. However the non-listed companies do not come under
its preview.

14. Aggarwal Krishna Gopal and Medury Yajulu (2013) in their work “Good Governance –
A tool to prevent corporate frauds” gave various suggestive measures like ensuring appointment
of independent auditor, role of professionals reviewed and regulated by respective professional
bodies, effective implementation of several legislations, setting up of rating agencies would
definitely take care to enhance the chances of good corporate governance and by strengthening
the fraud preventive measures. Good governance process would require restructuring at political,
bureaucratic and corporate level because of corruption and malpractices involved in the
governance process.

15. Dharmastuti Christiana and Wahyudi Sugeng (2013) studied The Effectivity of Internal
and External Corporate Governance Mechanisms towards Corporate Performance. They
concluded that concentration of institutional ownership and debt holders are more effective in
influencing the corporate financial performance than internal corporate governance. The internal
corporate governance is not showing a significant influence towards corporate performance
which means that the independent commissioners are not really independent and they cannot act
to synchronize principal and management’s interests.

16. Khiari Wided and Karaa Adel (2013), conducted a study under the title name Corporate
Governance and Disclosure Quality: Taxonomy of Tunisian Listed Firms Using the Decision
Tree Method based Approach for all businesses. They concluded that the overall score of
disclosure may not reflect the actual strategy of disclosure of the company. It also enables to
identify corporate governance factors of its quality of disclosure. Their study also revealed that
the characteristics of corporate governance to achieve the high quality of disclosure are not
unique.
17. Kosulya P.R. Revathi D. Mohan.T (2013) studied Corporate Governance Models around
the World. They opined that corporate governance provides the guidelines as to how the
company can be directed or controlled such that it can fulfill its goals and objectives in a manner
that adds to the value of the company and is also beneficial for all stakeholders in the long term.
It is the technique by which companies are directed and managed i.e. carrying the business as per
stake holder’s desires. Corporate governance encourages a trust worthy, moral as well as ethical
environment.

18. Ngozi ljeoma and Raymond Ezejiofor A. (2013) in ‘An appraisal of corporate governance
issues in Enhancing Transparency and Accountability in small and medium enterprises’
concluded that Corporate Governance has contributed significantly in ensuring accountability
and transparency in order to improve the performance of an enterprise as well as it facilitates in
achieving its social responsibilities towards the environment. It has also assisted in providing
structure through which the objectives are set and means for attaining these objectives.

19. Bansal Aishvarya and Bansal Bhavya (2014) were of the view that better governance leads
to better management in their paper Corporate Governance and Risk Management in Insurance
Sector: A review of Literature. They were of the opinion that corporate governance also includes
risk management for the insurance companies. Risk cannot be diversified and therefore the
insurance business is always at a risky stage. The study revealed that the corporate governance
practices differ according to the nature of the insurance industry, composition of board of
directors, independent directors, risk taking characteristics and other such features. The study
acknowledged the ever-growing importance of corporate governance and risk management in the
insurance sector.

20. Bhardwaj Neelam, Dr. Roao Ragharendra Batani (2014) title Corporate Governance
Practices in India- A case study, In most of the cases it is felt that corporate governance is
followed by most of the companies on paper only. In India, it has been observed that majority of
the companies are following the mandatory provisions and disclosing the required information as
per t The study also indicates the high importance of transparency of the company in the
emerging European concern. Ownership structure analysis proves that the type of major
shareholder does not matter when one selects the stock for the equity portfolio.
21. Bistrova Julija and Tear Onavicience Manuela (2014) in their research work titled
Corporate Governance as a Crucial Factor in Achieving Suitable Corporate Performance
concluded that corporate governance discrepancies between the good and bad companies, in
terms of performance, consist of three parts: General Evaluation of Governance, Quality of
earnings assessment, Research on the ownership influence.

22. Chadha Shruti (2014) Corporate Governance and Research and Development: Evidence
from India asserted that boards play a crucial role in the company decision making, which is
supported by the positive relationship between R&D, intensity and percentage of inside directors.
He has concluded that a negative relationship of sales with R&D as companies might be
investing in diversification rather than R&D.

23. Chowdhary Priyanka (2014) in her research titled: Corporate Governance in Insurance
Sector, observed that adoption of good corporate governance practices enhances transparency of
insurance companies operations, ensures accountability and improves firm’s profitability. It also
helps to protect the interest of the shareholders by aligning their interest with that of the
administrators.

24. Kaur Kulbeer (2014) did an investigative comparison in her study Corporate Governance: A
comparison between India & China and remarked that Indian companies have an edge over the
Chinese in reaching international standards of governance. There is less political interference in
Indian Boards at least in the private sector. However most of the corporate sector companies in
China are state owned enterprises or state sponsored enterprises, hence there is a lot of political
influence.

25. Machado Michele et. al (2014) in their research investigated after the occurrence of
corporate fraud in Brazilian Banks from January 2001 to December 2012, seven test hypotheses
were constructed from the agency theory in their research work, The Agency Theory and the
Identification of Corporate Fraud: A study applied to Brazilian Banks. It was concluded that
larger the size of the bank greater the corporate fraud. It is seen that low indicators of corporate
governance and provision for loan losses increase the possibility of a corporate fraud.

26. Maheshwari Meenu & Meena Sapna (2014) -Corporate Governance Standards & Practice
in State Bank of India: An Empirical Study has concluded that SBI is showing maximum
compliance towards corporate governance norms. There are certain positive aspects like board
corporate governance philosophy, sufficient number of board members with large number of
non-executive directors which are shown in annual report of SBI. But certain aspects like
dematerialization of shares, review of various committees and directors seeking appoints are not
given in annual reports.

27. Nasieku Tabitha et. al (2014) researched on the topic Corporate Governance & Firm’s
Earnings Quality. They concluded that good governance practices have the way for companies to
grow or attract additional investors for raising capital through borrowings from bank. Sound
corporate governance practices lead to improved internal central system, less probability of
frauds, high profitability & helps in reducing conflicts between owners and management.

28. Opara C. Leonard and Adale Ayodele John (2014), did a study in Nigeria titled The Legal
Regime of Corporate Governance in Nigeria: A critical analysis. Even here, the conclusion was
that Good corporate governance is essential in corporate administration as a result of its huge
benefits to companies, its shareholders. The main challenge is to ensure that the system is
constantly monitored & updated to ensure that the codes are relevant and reliable.

29. Ponduri S.B et. al (2014) in their research titled corporate governance- Emerging
Economics Fraud & Fraud Prevention, suggested that management should pay special attention
to computer incidents where fraud is suspected and in those cases should take extra care in
damage evaluation, collection of evidence and in documentation of evidence collection etc. It
was concluded that government should update the governing policies and see that every
organization should strictly follow this rather put into paper alone. The methodology should be
extended to private companies but it can be expensive to comply with the provisions of corporate
governance.

30. Sharma Anju (2014) in her study Conceptual Corporate Governance in India- A case study
of Tata Group Concluded that concept of corporate governance depends on transparency,
integrity and accountability of management and board of directors.
 COMPANY PROFILE

ITC Ltd

ITC is one of India's foremost multi-business enterprises with a market capitalisation of US $ 50

billion and Gross Sales Value^ of US $ 10 billion. ITC is rated among the World's Best Big
Companies, Asia's 'Fab 50' and the World's Most Reputable Companies by Forbes magazine and
as 'India's Most Admired Company' in a survey conducted by Fortune India magazine and Hay
Group. ITC also features as one of world's largest sustainable value creator in the consumer
goods industry in a study by the Boston Consulting Group. ITC has been listed among India's
Most Valuable Companies by Business Today magazine. The Company is among India's '10
Most Valuable (Company) Brands', according to a study conducted by Brand Finance and
published by the Economic Times. ITC also ranks among Asia's 50 best performing companies
compiled by Business Week.

Multiple Drivers of Growth

ITC’s aspiration to create enduring value for the nation and its stakeholders is manifest in its
robust portfolio of traditional and greenfield businesses encompassing Fast Moving Consumer
Goods (FMCG), Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business, and
Information Technology. This diversified presence in the businesses of tomorrow is powered
by a strategy to pursue multiple drivers of growth based on its proven competencies, enterprise
strengths and strong synergies between its businesses.

The competitiveness of ITC’s diverse businesses rest on the strong foundations of institutional
strengths derived from its deep consumer insights, cutting-edge Research & Development,
differentiated product development capacity, brand-building capability, world-class
manufacturing infrastructure, extensive rural linkages, efficient trade marketing and
distribution network and dedicated human resources. ITC’s ability to leverage internal
synergies residing across its diverse businesses lends a unique source of competitive advantage
to its products and services.
Within a relatively short span of time, ITC has established vital brands like Aashirvaad,
Sunfeast, Fabelle, Sunbean, Dark Fantasy, Mom's Magic Bingo!, Yippee!, Candyman, mint-o,
Kitchens of India, Farmland, B Natural, ITC MasterChef in the Branded Foods space; Essenza
Di Wills, Fiama, Vivel, Engage, Savlon, Charmis, Shower to Shower and Superia in the Personal
Care products segment; Classmate and Paperkraft in Education & Stationery products; Wills
Lifestyle and John Players in the Lifestyle Apparel business; Mangaldeep in Agarbattis and Aim
in the Safety Matches segment. This growth has been rated by a Nielsen Report to be the fastest
among the consumer goods companies operating in India.

Creating Enduring Value

Today, ITC is India's leading Fast Moving Consumer Goods company, the clear market leader in
the Indian Paperboard and Packaging industry, a globally acknowledged pioneer in farmer
empowerment through its wide-reaching Agri Business and a trailblazer in green hoteliering.
ITC Infotech, a wholly-owned subsidiary, is one of India's fast-growing IT companies in the
mid-tier segment. This portfolio of rapidly growing businesses considerably enhances ITC's
capacity to generate growing value for the Indian economy.

ITC's Agri-Business is one of India's largest exporters of agricultural products. The ITC Group’s
contribution to foreign exchange earnings over the last ten years amounted to nearly US$ 6.8
billion, of which agri exports constituted 57%. The Company's 'e-Choupal' initiative has enabled
Indian agriculture significantly enhance its competitiveness by empowering Indian farmers
through the power of the Internet. This transformational strategy has already become the subject
matter of a case study at Harvard Business School apart from receiving widespread global
acclaim.

As one of India's most valuable and respected corporations, ITC is widely perceived to be
dedicatedly nation-oriented. Chairman Y C Deveshwar calls this source of inspiration "a
commitment beyond the market". In his own words: "ITC believes that its aspiration to create
enduring value for the nation provides the motive force to sustain growing shareholder
value. ITC practices this philosophy by not only driving each of its businesses towards
international competitiveness but by also consciously contributing to enhancing the
competitiveness of the larger value chain of which it is a part." ITC group directly employs
more than 32,000 people and the Company's Businesses and value-chains generate around 6
million sustainable livelihoods many of whom live at the margin in rural India.

Global Exemplar in Sustainability

Acknowledged as a global exemplar in sustainability, ITC is the only enterprise in the world,
of comparable dimensions to be carbon-positive, water-positive, and solid waste recycling
positive. A testimony to its commitment to a low carbon growth path - over 43% of the total
energy requirements of ITC is met from renewable sources. All ITC's premium luxury hotels are
LEED (Leadership in Energy and Environmental Design) Platinum certified making it the
"greenest luxury hotel chain" in the world. ITC's Paperboards and Paper business is an icon of
environmental stewardship.

ITC's production facilities and hotels have won numerous national and international awards for
quality, productivity, safety and environment management systems. ITC was the first company
in India to voluntarily seek a corporate governance rating.

The Company continuously endeavours to enhance its wealth generating capabilities in a

globalising environment to consistently reward more than 8,78,000 shareholders, fulfill the
aspirations of its stakeholders and meet societal expectations.
 LIMITATION OF THE STUDY

The study is based on secondary data.

The results of the study may not be applicable to other business of similar nature.
To determine the capital structure practices followed by ITC ltd.
To know the various financial instruments or borrowed capital of the ITC ltd.

Capital structure helps to find the proportion of debt and equity and in which way it affects the
shareholder’s wealth. Capital structure leads to maximise the value of the firm and minimise the
cost of capital. Leverage analysis is used to know how capital is raised by ITC Ltd. Ratio
analysis is used to evaluate various aspects of ITC company’s operating and International
Journal of Advanced Research and Developmentfinancial performance during the study period.
This study depicts the problem faced by the company in choosing the optimal capital structure.
The scope of the study is identified after and during the study is conducted. The main scope of
the study is to check the management of working capital (current assets and current liabilities) of
only FMCG sector. The study analysed the liquidity position and working capital management of
a limited sample consisting of only five companies i.e. Nestle, HUL, Britannia, ITC and Dabur.
The study of working capital is based on only one tool i.e. Ratio Analysis. Further the study is
based on last 10 years Annual Reports of the five companies taken into consideration. As only
FMCG sector was studied so the findings could only be generalized to this sector’s firms. 3.2
Limitations of the Study
1. The study duration is limited to 10 years.
2. The findings of the study are based on the information retrieved by the annual reports of the
companies.
3. The study is limited to the analysis of the working capital management of the companies.
4. The study is focused on the analysis of FMCG sector only.
5. The study has picked up only five companies in the FMCG sector.
The scope of the study is very wide. All units registered under the companies Act-1956 can be
census for the study. However, the researcher has selected 10(Ten) corporate units.
 RESEARCH METHODOLOGY

Research is composed of two words „RE‟ & „SEARCH‟ which means to search again or to
scroll for new fact or to modify older once in any brand of knowledge. “A careful critical inquiry
or examination in seeking facts or principles diligent investigation in order to uncertain
something.”1 - The Wooster‟s International Dictionary ”Research is a more systematic activity
directed towards an organized body of knowledge.” - John Best “Research is a careful inquiry or
examination in seeking facts or principles a delight investigation to ascertain something.” -
Clifford Woody “A careful investigation or inquiry specially through search for new facts in any
branch of knowledge.” 2 - The Advanced Loaner‟s Dictionary Research Methodology is the root
of any research process steps as follows:
1) Formatting the research problem.
2) Extensive literature survey.
3) Developing the Hypothesis.
4) Preparing the research design.
5) Determining samples design.
6) Collecting the Data.
7) Executive of the project.
8) Analysis of Data.
9) Hypothesis testing.
10) Generalizations and interpretation.
11) Preparation of the report or Presentation of the results.

Problem identification too broadly defined cannot be addressed adequately in single study.
Formulation of problem is often more essential than its solution because when the problem is
formulated, an appropriate technique can be applied to generate alternative solution. In essence, a
proper formulation of the research problem starting with objective would enable a researcher to
go ahead in the proper direction. Finally, it may be noted that problem formulation would have
focus on what sort of decision issue are tackled. India is growing fast country, value added
reporting is recently developing concept in India.
Value added concept is comparatively new but is gaining considerable importance those days,
particularly for taxation and managerial performance purposes.
A growing number of companies in India have started including a value added statement (VAS)
on the lines of the companies in western countries, as a part of their published annual reports and
accounts. The concept of value added or wealth creation is a performance measure and it reports
the wealth generated by a business undertaking over a period of time. In now days, not only
financial information including in annual report but also includes social information in annual
report. Social measurement tools as belows.
1. Value Added Reporting
2. Market Value Added
3. Economic Value Added
There are three important measurement tools include in annual report that give us social
performance describe towards shareholders, government, lenders, and employee. After reviewing
many research study and articles researcher comes to know what the important role play social
measurement tools in India and also seen that which factors influence to measure social
performance between private sector corporate units and public sector corporate units in India.
Most of the research study shows that an empirical study and a comparative two countries‟
company to measure social performance and in recent years, there has been a tremendous
exchange of business and management ideas and techniques amongst companies in different
countries. Listed companies in U.K., U.S.A., Japan, South Africa, and other foreign countries use
value added reporting in annual reporting. This empirical research study narrates the vital role of
social performance through value added reporting in India. Research defines various existing
literatures related with the study and problems of the title, various objective frames by the
researcher, which leads to research phenomena. There were used many literature of review for
this research study and formulated appropriate methodology for accomplish objectives of the
study. By referring the different past research studies, researcher selected this topic for the
purpose of the study the relationship between sale turnover to gross value added and net value
added. A comparative study between public sector corporate units and private sector corporate
units in India. However most of the prior researcher studies have been based on empirical and
they have covered different time duration and methodologies. Consequently, researcher
recognition of variables, statistical tools and techniques for the suitable findings.
Researcher has framed for the purpose of the study entitled “Social Performance through Value
Added Reporting – The Empirical Study of Selected Corporate Units”.

1) There would be no significant relationship between Gross Value Added to Total Sale
Turnover in Wipro tech. ltd.
2) There would be no significant relationship between Net Value Added to Total Sale Turnover
in Wipro tech. ltd.
3) There would be no significant relationship between Gross Value Added to Total Sale
Turnover in Cipla ltd.
4) There would be no significant relationship between Net Value Added to Total Sale Turnover
in Cipla ltd.
5) There would be no significant relationship between Gross Value Added to Total Sale
Turnover in Reliance Industries ltd.
6) There would be no significant relationship between Net Value Added to Total Sale Turnover
in Reliance Industries ltd.
7) There would be no significant relationship between Gross Value Added to Total Sale
Turnover in TCS ltd.
8) There would be no significant relationship between Net Value Added to Total Sale Turnover
inTCS ltd.
9) There would be no significant relationship between Gross Value Added to Total Sale
Turnover in Tata Motors ltd.
10) There would be no significant relationship between Net Value Added to Total Sale
Turnoverin Tata Motors ltd.
11) There would be no significant relationship between Gross Value Added to Total Sale
Turnover in Bharat Heavy Electricals ltd.
12) There would be no significant relationship between Net Value Added to Total Sale Turnover
in Bharat Heavy Electricals ltd.
13) There would be no significant relationship between Gross Value Added to Total Sale
Turnover inIndian Oil Corporation Ltd.
14) There would be no significant relationship between Net Value Added to Total Sale Turnover
inIndian Oil Corporation Ltd.
15) There would be no significant relationship between Gross Value Added to Total Sale
Turnover inInfosys Ltd.
16) There would be no significant relationship between Net Value Added to Total Sale Turnover
inInfosys Ltd.
17) There would be no significant relationship between Gross Value Added to Total Sale
Turnover in Steel Authority of India Ltd.
18) There would be no significant relationship between Net Value Added to Total Sale Turnover
in Steel Authority of India Ltd.
19) There would be no significant relationship between Gross Value Added to Total Sale
Turnover in Oil & Natural Gas Corporation Ltd.
20) There would be no significant relationship between Net Value Added to Total Sale Turnover
in Oil & Natural Gas Corporation Ltd.

There are many the well-known ratios and most widely used tools for measuring performance.
Ratios can be defined as, “Ratio are simply a means of highlight in arithmetical terms the
relationship between figures drawn from financial statements.”4 Following Ratios are used in
this study:
1.Gross Margin Raito.
2.Fixed Assets Turnover Ratio.
3.Capital Productivity Ratio.
4.Gross Value Added to Total Revenue Ratio.
5.Net Value Added to Total Revenue Ratio.
6.Employee‟s benefit to Net Value Added Ratio.
7.Government share to Net Value Added Ratio.
8.Payment to Shareholders to Net Value Added Ratio.
9. Payment to Lenders to Net Value Added Ratio.
10. Retained Earnings to Net Value Added Ratio.
Value Added Reporting is new concept and method in Indian corporate environment to evaluate
the performance of corporate sector. Its significance not only for external purpose it is equally
important for internal purpose also. Significance of value added reporting is explained with
following views:
1) Comparison of Performance: Value Added is an alternative performance measure to profit.
Value Added is superior performance measure because it bounces attention on inputs
controllable by the management changes in material prices are usually not controllable by the
management and Value added by doubting material costs allows attention to be directed at more
comparable items.
2) Productivity Measurement: For the measurement of productivity value added provides better
information e.g. Value Added per rupees of performance of capital employed, Value Added for
rupees of employee: etc. to measure various type of ratio analysis denote productivity
measurement.
3) Resources Allocation: Recourses allocation decisions are normally based on the concept of
maximum appropriate criterion because it incorporates the rewards to the employees as well as to
providers of capital fund. For profit maximization ranking insure the allocation are based in
contribution per units of the limiting factors and for value added maximization ranking would be
a value added per units limiting factors.
4) Incentive schemes for the employee: The value added reporting is found useful by many
companies for explaining related corporate units results to employees the value added concept of
profit is often an motivating and employees may well find the concept of creating wealth or
adding value more acceptable one of the significant uses of the value concept is its incorporates
in companies incentives schemes or bonus schemes. The schemes work by establishing a have
ratio of value added to the pay roll and thereby creating a base index of favorable in later period
a bonus is payable to share members.
ANALYSIS AND INTERPRETATION OF THE STUDY