A Study on Working Capital In

A STUDY ON WORKING CAPITAL IN“SRI VENKATESWARA COOPERATIVE

SUGARFACTORLTD” TIRUPATI AT

GAJULAMANDYAM

CHAPTERS TABLE OF CONTENTS

PAGE NOS

CHAPTER 1 INTRODUCTION

2

CHAPTER 2 AN OVER VIEW OF THE INDUSTRY ANDORGAZANIZATION 4

CHAPTR 3 DATA ANALYSIS AND IMTERPRETATION

46

CHAPTE R 4 SCHDULE OF CHANGES IN WORKING CAPITAL 57

CHAPTER 5 FINDINGS

75

CHAPTER 6

SUGGESTIONS

76

CHAPTER 7 BIBLIOGRAPHY 77

INTRODUCTION

INTRODUCTION

A study on working capital in sri venketeswara cooperative sugar factory ltd tirupati

The objective of this study is to analysis the working capital in the organization..The literature part of the study gives the clear understanding of working capital

The next part of the dissertation furnishes the industry profile and organization profile

The data required for this dissertation was collected through primary and secondary sources.

INDUSTRY PROFILE

The sugar industry is the second largest agro-based industry next to textiles in India In India, sugar cane is the key raw material for production of sugar .The sugar is extracted from two different raw materials sugar cane and beet both produce identical refined sugar Sugar cane is grown in sem-tropical region and accounts for around two-third of world sugar production. Beet is grown in temperate climate and accounts for the balance one third of world production.

Most of sugar cane produced in India is a 10-12 month crop planted during January to march. In northern Maharashtra and parts of Andhra Pradesh and Karnataka, there is also an 18 to 20 month crop. In most areas, 12 month crop is followed by just one ration crop that is new

crop grown from the stubble of harvested crop .At present ,sugar cane is being cultivated throughout the country except in certain hilly tracts in Kashmir,himachal Pradesh , etc .the sugar cane growing areas may be broadly classified two agro-climatic regions.

1. Tropical region.

2. Sub-Tropical region.

The major sugar cane producing states in tropical states in the tropical areas of India includes Maharashtra, Andhra Pradesh, Tamil nadu and Gujarat in last five years sugar cane yield in these states are almost in the range of 70 to 100 thousand tonnes per hector. except in Maharashtra in the year 2004 and 2005 because fungal attack on sugar cane crop called “white wholly aphid “in 2004 and flood in 2005 otherwise sugar cane yields are substantially higher in the tropical states as compared to subtropical regions.

Sub-tropical regions include U.P, Bihar, Punjab and Haryana where yield is 40 to 70 thousand tonnes per ha.this region faces very extreme of weather.

India has been known original home of sugar and sugar caneindian mythology supports the above fact as it contains legends showing the origin of India India is the second largest producer of sugar cane next to Brazil. Presently about 4milllion hectares of land is under sugar cane with an average yield of 70 tonnes per hectare.India is the largest single producer of sugar including tradional cane sugar sweeteners, khandsari and equivalent to 26 millions tonnes raw value followed by brazil in the second palace at 18.5 millions tonnes..Even in respect of white crystal sugar, India has ranked no 1position 7 out of 10 years.

Traditaional sweetness gur and khandsari are consumed mostly by rural population in india.in the early 1930’s nearly 2/3 rd of sugar cane production was utilized for production of alternate

sweeteners gur and khandsari . with better standard of living and higher incomes, the sweetener has shifted to white sugar.currentlu about 1/3rd sugar cane production is utilized by sweeteners gur and khandsar sectors

.being small sectors these two sectors are completely free from controls taxes which are applicable to sugar sector.

The advent of modern sugar processing industry in India began in 1930with grant of tariff protection to the Indian sugar industry. the number of sugar mills increased from 30 in the year 1930-31 to 135 in the year 1935-36 and the production during same period increased from1.20 lakh tonnes to 9.34 lakh tonnes under the dynamic leadership of private sector.

The era of planning for industrial development began in 1950-51 and government lay down targets of sugar production and consumption. Licensed and installed capacity ,sugar cane production during of each of five year plan periods.

Types of sugars

Granulated sugar Regular sugar extra fine sugar or fine sugar Fruit sugar Bakers special Super fine ultra fine or bar sugar Confectioners(powered) sugar Coarse sugar Granulated sugar:

There are many different types of Granulated sugar .most of these used only by food processors and professional bakers and are not available in super market. The types of granulated sugar differ in crystal size. Each crystal provides unique characteristics that make sugar appropriate for food processors special need.

Regular sugar extra sugar or fine sugar

Regular sugar is known to consumers is the sugar found in every home’s sugar bowl and mostly used in home food preparation. It is the white sugar called for in most cook book recipes. The food processing industry describes regular sugar as extra or fine sugar

Fruit sugar

Fruit sugar is used in dry mixes such as gelatin dessarts, puddingmixes, and drink mixes

Bakers sugar

Bakers sugar as it name suggests it was developed specially for bakery industry. Bakers special used for sugaring doughnuts and cookies as well as the some commercial cakes to produce fine crumb texture

Super fine, ultra fine or bar sugar

This sugar’s crystal size is the finest of all the types of granulated sugar.It is ideal for extra fine textured cakes and meringues as well as for sweetening fruits and iced drinks since it dissolves easily.

Confectioners(powered) sugar

This sugar is granulated sugar ground to a smooth powder and then sifted. It contains about 3% corn starch to prevent cooking. Confectioners sugar availbalable in there grades ground to different degrees of finess.confectioners sugar available in super markets is the finest of the three and is used in icings ,confections and whipping cream. The other two types of powdered sugar are used by the industrial bakers

Coarse sugar

The coarse sugar crystal size is larger than that of regular sugar. Coarse sugar is normally processed from the purest sugar liquor. This processing method makes coarse sugar highly resistant to colour change. Or inversion at high temperatures. These characteristics are important in making fondants and confections, liquor.

Key factors determines the economies of sugar sector

1. Sugar cane pricing

Sugar cane is the raw material for sugar industry and accounts for 70% of sugar production cost. It is also major source of income of millions of formers. The central government fixes a statutory minimum price in terms of clause of sugar cane order 1966 in respect of each sugar season by considering following factors

1. Cost of production of sugar cane

2. Return to the growers from alternative crops and general trends of prices of agricultural commodities .

3. Availbility of sugar to consumers at a fair price

4. Sugar producers sell at which sugar produced frpm sugar cane.

5. Recovery of sugar cane from sugar cane.

Government of India controls and regulates rates of sugarcane supplied to the mils by farmers.ratesare fixed based on recommendations by bhargava committee. Statutory minimum price announced by government of India every year. Is used as benchmark by the state governments to fix their state advised price.

2. Highly regulated

Sugar industry is one of the few industries that still remain under government control. Due to the politically sensitive nature of the industry the government still continues to regulate sugar release,

Sugar cane procurement area and pricing of sugar cane.

The centre also regulates release mechanism of sugar .release can be classified as levy sugar and free sugar. Free sale sugars refer to the quantity that mills are permitted to sell in open market.

Levy sugar refers to the quantum of sugar that mills have to give to government for sale through government distribution system.

3. Variation in the supply of sugar cane due to dwindle in payment paid to farmers.

Indian sugar industry follows apridctble cycle of at least 4-5 years. Shortage of sugars leads to sugar price increases.millspay higher prices for cane which tempts to farmers switch to sugar cane .this results in glut in both in cane and sugar this depresses sugar prices. Cane payments to farmers get dwindled and delayed as inventory build up, farmers switch to other crops which leads to fall in sugar cane and sugar production.

Social issues.

Sugar industry has been a focal point for socio-economic development in the rural areas by way of mobilishingrural resources generating employment, providing higher income oppourntity

And transport and communities facilities. The industry generates its own replensible biomass uses it as fuel without depending on fissile fuel.

Low prices and developments outcomes:

Sugar production plays a key role in the economies and employment of least developed countries.

Poor working conditionWorking in sugar cane plantation can be back breaking work with very poor wages.

Impact on the ground water

This is associated particularly with the growing of crane and also in the processing of both crane and beet. Sugar cane is deep rooted crop uses lot of water it is very sensitive to water deficits.

Change in the cropping pattern

It is essential to follow proper crop pattern according to agro climatic condition to improve the bio physical properties of soil and reduction in pest incidence

Health impact due to burning of biogases:

Biogases are used as fuel. in boiler the burned particles come out of the stack contains a silica which is very harmful it may create a serious health related problems

Employment generation problem

Sugar industries located in rural areas support huge economic activity in the rural areas about 45 million sugar cane farmers. Their dependent a and large group of agricultural labour involved in sugar cane cultivation harvesting and ancillary activities

Environmental issues

1. Water pollution

2. Air pollution

3. Water scarcity.

4. degraded soils.

Solid waste management:

Sugar milling generates bgasses (fibrous wastage producing during milling of crane) as fuel in boilers, which produces particulate mater. Nitrozen oxide and sulpher.

If control equipment is not used fly escape to atmosphere and can affect population with irritation in eyes, lunges.nose throat diseases

Policy issues

Sugar acts and orders can influence economies of sugar

PAGE NO 8

SWOT ANALYSIS OF SUGAR INDUSTRY

STRENGHTS:

1. Indian sugar industry is second largest producer of sugar in the world after brazil. The sector has potential to make the country to be self reliant in this highly sensitive essential commodity of mas consumption.

2. The sugar industry paid over rs122.69 billion to the sugar cane growers in the financial year 2006.

Annual tax contribution to exchequer rs17billion annually.

4. Providing direct employment including ancillary activities to near .5 billion workers.

5. It also support down stream industries by providing raw materials.

6. Sugar cane forming is more profitable than any other crop in India

7. This sector has been focal point of socioeconomic development of the rural India.

8. Strong government policies as it comes under essential commodity of mass production

WEAKNESSES.

1. Most of the cooperative sugar industries in indiaeg.in Maharashtra find difficult to pay sugar cane supplied by the farmers

2. Most of the sugar industries are moiré than 30 years old technology low installed production capacity leads to decrease in production and losses.

3. Lack of professionalism.

OPPOURNITIES

High value of by products for down stream industries.

Huge potential to increase productivity of crane and sugar recovery rate

Technology up gradation new advanced technology available for the byproduct utilization.

THREATS

Sugar sector is vulnerable to political interests.

Ground water availability for irrigation.

Quality of soil deteriorates due to over use of fertilizer and presides to increase sugar crane yield.

Unhealthy competition between members of the society

RESEARCH INSTITUTION AND ASSOCIATIONS

INSTITUTIONS.

Vasantdada sugar institute manjri pune

National sugar institute kalayanpur

Sugar technology mission, department of science and technology(govt. of India).

ASSSOCIATIONS.

Indian sugar mills association (ISMA)

National federation of cooperatives of sugar factories ltd new Delhi.

National cooperative development corporation ,new Delhi

All India distillers association new Delhi.

The sugar technologist association of India

CO-GEN association of India (COGEN INDIA)

Department of food and public distribution, (sugar)

Commissioner of sugar.

ANDHRA PRADESH SUGAR INDUSTRY

Andhra Pradesh abounds in maximum number of private sectors sugar companies in indiaalong with tamilnadu and Karnataka. In the year 193-34 vacuum process adopted for sugar manufacturing in the state. previously the state government was planning to support to

cooperative sector as against other sectors. however with pasing time considerable change in the policy wasnoticed.letters of intent given to deserving enternprentuners including 20locs to the private sector companies this gradually resulted in major benefits for the state government as well as India as awholetoday Andhra Pradesh sugar industry ranks 3rd in terms of recovery and 5th in terms of crane crushing as per production capacity is considered Andhra Pradesh stands at the position 5th in India

The agricultural laborers who do sugar cane harvesting and cultivation are employed in the sugar industry in Andhra Pradesh today the unprecedented growth of this industry in the state has lead to the consolidation of village resources and has facilitated communication employment and transportation system here.

Types of sugar industry in Andhra Pradesh

Andhra Pradesh sugar industry can be classified into twp parts such as

Organized sector including sugar mills and unorganized sector including manufacturers of gur(jaggery) and khandsari.the unorganized sector is often referred to as the rural industry. The rural industry plays a major role in the level of sugar production.

Directorate of sugar and commissionerate of cane in Andhra Pradesh

Belonging to the industries and commerce department,the directorate of sugar and commissionerate of cane has been vested with the power to guide and deal with the sugar factories in the Andhra Pradesh. It is the responsibility of the department to encourage sugar cane farmers and help to developing this industry contribute effectively towards gross state domestic product(GSDP) this department also takes care of the technological advancements of the industry.

SUGAR MILLS IN ANDHRA PRADESH

1. The Anakapalli cooperative sugars Ltd.,anakapalli.

2. The Etikoppaka cooperative Agricultural of industrial society Ltd.,Etiloppaka.

3. Sri Vijayarama Gajapathji cooperative sugars Ltd.,spok,vVenkonda.

4. The chodavaram cooperative sugars Ltd.,Chodavaram.

5. The West Godavari cooperative sugars Ltd.,Eloure.

6. Palakol cooperative agricultural and industrial society Ltd.,Palakol.

7The Amadavalasa cooperative agricultural industrial society Ltd.,Srikakulum.

8 Nizamabad cooperative Sugars Ltd.,Nizamabad.

9.The Chittoor cooperative sugars Ltd.,Chittor.

9.Srivenkateswara cooperative sugars Ltd.,Renigunta

10.The Thanbdra cooperative sugars Ltd.,Viskhapatanam.

11.Nandyal cooprastive sugars Ltd.,Ponnapuram.

12.The Kadapa cooperative sugars Ltd., Channur.

13.Sri Hanuman cooperative sugars Ltd.,Hanuman Junction.

14.Palar cooperative sugars Ltd.Dmmugudem.

15.Narjuna cooperative sugars Ltd.,Gurzala.

16.Nannapaneni Venkatrao cooperative sugars Ltd.,Hanuman junction.

17.The Kovur cooperative sugars Ltd.,Nellore.

Company profile

Sri Venkataswara cooperative sugar factory ltd. Was registered in 6-4-1972 under the cooperative societies Act7, 1964 Gajulamanyam Village near renigunta of chittoor dist in Andhra Pradesh.

.its organization in srikalahasti sathyavedu Thaluka, Panakam Revenue divisions

1. Munagalipatu 2.Ithepalli3.sheshapuram4.Chinnarapuram65.kotala.6.Pullaiahgaripalli.7.agaral 8.Kondreddicondiga 9.Bheemavaram.10.Mammandoor like Ten Revenues villages and in putur, nagari under these revenue divisions.

It is stated cane crushing during 1977-1978. The licensed and installed capacity of the factory was 1250 T.C.D. which was constant during the period of Study .The Authoriz1d Share capatial of the company was rs.21800 shares rs200/- each the government contributed rs10900 cooperative societies contributed rs 124 in 1985-86.

BACK GROUND

Sri Venkateswara cooperative sugars ltd .tirupati was registered in the year 1974 the plant was commissioned on 22-03-1978. The original cost was no over run in the cost.

The installed capacity of the plant was 1250TCD .subsequent that so city has taken up modernization programs wit the Addition of balancing equipment in the year 1994-95 and the plant is poised to crush about 1500TCD.

The objective of svcooperative sugar factory ltd. Is to protect economic interest of members by encouraging proper development of agricultural industries on cooperative lines and through cooperative principles with a special attrentatioon to small and marginal farmers accordingly the sugar factory was established in 1978.

the sugar cane zone of factory is consisting of 22 madras and spread over in 507 vilage4s. there are about 11126 members and about 4000 farmers supplying sugar cane during the crushing season 2002-03 the crane area was 3783 hectors .for the season 2002-03 the factory entered into agreement with the crane grower for supply of 2019350’s out of which the sugar factory crushed only 1736140mts about 45000 metes of crane was diverted to neighboring private factories .

the svcoperative sugars factory is located at a distance of 6 km from renigunta and about 17kms from tirupati town abutting national high way 27 from Mumbai to Chennai.

ORGANISATION CHART

PRODUCT PROFILE

SUGAR MANUFACTURING PROCESS

1. growing and harvesting the crane

2. cane preparation for miling.

3. Miling.

4. Clarification.

5. Evaroporation

6. Crystallization

7. Centrifugation

8. Drying.

10. Refing.

SUGAR MANUFACTURING PROCESS

CANE WEIGHING

The cane is generally weighed on large platform scale in the transport unit in which it is received at the mill rail way car tailor cart o like where direct weighing is impracticable.

CANE CLEANING EQIPMENT

As apart of the cane carrier or auxiliary to it is a process of cleaning the cane by the water from the associated water. Resulting due to harvesting

PREPARATIONS OF CANE FOR MILLING

The milling process may be separated into two steps the preparation of cane by break down the hard structure and purring the cell and the actual grinding the cane

The preparation cane is accomplished in several ways

1.by revolving cane the knifes that cut the cane into chips but extracted no juice.

2. Bt shredders that tear the cane into shreds but extract no juice 3. By crushers that break and crush the cane structure of the cane extracting a large proption of the juice

4. by combination of any or above all steps.

MILLING MACHINERY

Miling machinery is composed of three rollers arranged in triangular form.

A set of three to seven machines

Each mill unit is commonly driven by separate motor power steam engine electric motor or steam turbine.

The three rolls are known respectively as the top roll the cane roll(entering) or feed roll the biogases roll or discharge roll .

Adding water or thin juice to the biogases after each mill dilutes the content juice and increase the extraction as this juice is expressed

CLARIFICTION

the primary objective of the clarification is to remove from the juice the maximum quantity of impurities.

The degree of clarification has great bearing on the subsequent stations of the factory, affrecting the pan boiling the centrifuging, the quality of the products and the most important of all the yield of raw sugar

In clarification added chemicals as follows

1. Soluble phosphates (p2o5)

.clearer juice

.fewer lime salts in the clarified juice

.more rapid settling

Faster mud filtration.

Better sugar 2. Polymer flocculants

Increases the settling rate

Reduces mud volume

Decreases the poly in the cake

And the most important increases the clarity of the clarified juice

3. Lime (as milk) in order to raise ph to 7

Result of clarification

The clarification process divides the whole juice into two porptions

The clarification that comprises 80to 90% of the original juice, almost invariable, goes to the evaporators without further treatment

2.the precipitated settling the scrums or mud waters which are filterd after various methods of treatment

FILTRATION

In filtration process the rotary type vacuum filter in common use.

The filter consists of rotating drum covered with perforated plate of copper or other metal which dips into a bath containing the mud water

The filter divided into four parts

Hot water and bagacillo are added to the mud to increase the filtration effiency

Filtration result

Clarified juice sent directly to the evaporators.

Filter cake

EVAPORATION : Removes about 90% Of the water from the clarified juice

The multiple effect is usually extended to three to four and more effects.

Evaroporation increasing the juice solids from about 15 brix to about 65-70 brix which is the syrup .

EVAPO CRYSTALLIZERS

The function of the evapo-crystallizers is to produce satisfactory sugar crystals from syrup(seed grain ) to serve as the nuclei for the sugar syrup

When brix reaches 78-80 ,crystals begin to appear and the nature of the material changes it’s then called as “massecuite”

CENTRIFUGAL MACHINES

The basic function of the centrifugal machines is to crystals in the masseuite from the surrounding molasses or syrup by centrifugal force

The raw sugar is then sent to dryers or refining unit according to type of desired final product

Molasses is by product which is used as a raw material for other products

DRYERS

The wet raw sugar from centrifuges goes to rotary drier to remove the water from the wet sugar to reduce moisture content to 0.5-2% using hot air at 110degree Celsius which flow counter currently with sugar

INTRODUCTION TO WORKING CAPITAL:

Financial management does performs major viz, necessary procurement at minimum cost of capital and effective and judicious utilization of the funds so procured in the process of execution of economic activities of a firm .more specially procured fund is utilized for financing working capital and fixed assets.

The principle objective of the write up is to portray various issues relating to the process of working capital management of a business firm

WORKING CAPITAL

Working capital refers to the investment in the current assets such as investment in raw materials, stock of finished goods etc. cash, bank balance, advance given to employees, in the form of festival, scooter advaces, house building loans etc

Working capital is used to meet the day to day requirements of a business.

Current assets are required for effective and efficient use of fixed assets

For investment in procurement of raw materials, funds are locked up in debtors cash, baks,prepaid expenditures etc is recognized as working capital

Working capital also gives investors an idea of the company’s underlying operating efficiency

Working capital is a financial metric which represents operating liquidity available to business, organization other entity including government entity along with fixed assets such as

Plant equipment Working capital is considered a part of operating capital

Working capital is just like a heart of industry if it is weak the business cannot prosper and survive although there is a large body (investment) of fixed assets

Adequacy of the working capital is the life blood and controlling nerve centre of business

In adequate as well as redundant working capital is dangerous for the health of the industry

It is said “inadequate working capital is disastrous

“Where as redundant working capital is a criminal waste

Both situations are not warranted in a sound organization

Working capital measures the liquidity if firm

The goal of the working capital management is to ensure that the firm is able to continue its operations and that it has sufficient cash flows to satisfy both maturing short term debt and upcoming operational expenses

CONCETS OF WORKING CAPITAL

There are two concepts of working capital they are

1. Gross working capital

2. Net working capital

GROSS WORKING CAPITAL

Gross working capital refers to firms investment in current assets

CURENT ASSETS:

Current assets are the assets that are convertible into cash with in an accounting year or operating cycle.

Current assets are

Short tem securities

Debtors (account receibles or book debts)

Bills receibles

Inventory (stock).

The concept of gross working capital focuses attention on two assepts of current assets

Management .they are

1.way of optimizing investment in current assets

2.way of financing current assets.

WAY OF OPTIMIZING INVESTMENT IN CURENT ASSETS

Investments in current assets should be just adequate i.e. neither in excess or deficient because excess investment increases the liquidity but reduces profitability as idle investment earns nothing but inadequate working capital can threaten the solvency of affirm because of its inability to meets current obligations

WAY OF FINANCING CURRENT ASSTS

This aspect points to the need of arranging funds to finance current assets.

It says when ever need for working capital arises financing arrangement should be made quickly.

The financial manager should be knowledge of sources of working capital funds aswell as investment avenues where idle funds can be temporally invested.

NET WORKING CAPITAL

Net working capital refers to difference between current assets and current liabilities.

Current liabilities are those claims of outsiders which are expected to mature for payment within accounting year.

CURRENT LIABILITIES

Creditors(accounts payables)

Bills payablesOutstanding expenses.

Net working capital can be positive or negative

A positive net working capital will arises when current assts exceeds current liabilities

A negative net working capital will arises when current liabilities exceeds current assets.

Net working capital is a qualitative concept.

It indicates liquidity position of and suggests extent to which working capital may be finacied by the permeant sources of funds.

Current assts should be optimally more than current liabilities

It also covers right combination of log term and short term funds for financing current assets.

For every firm a particular amount of net working capital is permanent that is it is financed with the long term funds.

Two above concepts are equally important for efficient management of working capital.

WORKING CAPITAL ACCORDING TO TIME

1 permanent working capital

2. Temporary working capital.

PERMANENT WORKING CAPITAL

Investment in permanent working capital refers to that minimum level of investment in current assets. That is carried by the business at all times in order to carry on minimum levels of economic and commercial levels of economic and commercial activities.

It is also known as hard core working capital or core current assets.

TEMPORARY WORKING CAPITAL

Temporary working capital refers to that which is required by a business entity over and above permanent working capital

Most of the accounts prefer to call it as variable working capital.

Both permanent and temporary working capital is necessary for smoothen production and sale throughout the operating cycle.

CONCEPT OF WORKING CAPITAL

Working capital determines liquidity position

The working capital flow or fund arises when the net effect of a transaction is to increase or decrease the amount of working capital

Net working capital increases or decreases when a transaction involves a current account and a non current account.

Working capital remains unaffected when a transaction involves only current account.

Working capital remains unaffected when a transaction involves only non current accounts.

USES OF WORKING CAPITAL

1. Adjusted net loss from operations2. Purchase of non current assets

Purchase of long term investments like shares, bods,or debentures.Purchase of tangible assets like land, building, machinery, equipment.Purchase of intangible assets like good will copy rights, etc.3. Repayment of long term debt (bonds/debentures) and short term debt (bank borrowings).4. Redemption of redeemable priority shares.5. Payment of cash in dividend.

NEED FOR WORKING CAPITAL

Working capital is necessary for earning profit and continues production activity the firm has to invest enough funds in current asset sin generating sales.

Currents are needed because sometimes sales donot convert into cash instantaneously and it includes an operating cycle.

OPERATING CYCLE.

Operating cycle is the time duration required to convert sales after the conversion of resources into inventories. into cash. Investment in current assets such as inventories and debtors realized during the firms operating cycle. which is usually less than a year.

The operating cycle of a manufacturing company involves following three stages.

1.acquisition of resources such as raw materials,labour ,power fuel etc.

2. manafacture of product which includes conversiioninto work-in process into finished goods.

3.sale of product either cash or on credit

These phases affects cash flows. because sometimes sale is done on credit and it takes sometime to realize

DURATION OF OPERATING CYCLE

The duration of operating cycle of manufacturing company shown below

1.inventory conversion period

2,debtors conversion period.

The total of debtors conversion period and inventory conversion period is referred to as gross operating cycle.

INVENTORY CONVERSION PERIOD

Inventory conversion period is the total time needed for producing and selling the product.

1.raw material conversion period.

2.work in progress period.

3finished goods conversion period.

DEBTORS CONVERSION PERIOD

It is the time required to collect the outstanding amount from the customers.

NET OPERATING CYCLE

The difference between gross operating cycle and payable deferral period is called net operating cycle.

The length of time in which the firm is able to defer payments on various resource purchases is called payable deferred period

SOURCES OF WORKING CAPITAL

1. Funds from business operations.2. Other incomes.3. Sale of non current assets.4. Long term borrowings.5. Issue of additional equity capital.or preference capital6. Injection of funds by stock holders.7. Net income8. Long term loans.

FACTORS DETERMINING WORKING CAPITAL

1. Nature of business

2.size of business unit

3.time consumed manufacture.

4.need to stock pile raw materials.

5.need to store finished goods.

6.cost and time involved in manufacturing process.

7.turnover of circulating capital.

8. terms and conditions of purchase and sale.

9. conversion of current assets into cash

10. Impact of cyclic and seasonal variation

11.other factor’s.

NATURE OF BUSINESS

The nature and volume of business is an important factor needed in deciding working capital. public utility services like railways as compared to manufacturing concerns requires les amount of working capital.

A large amount of working capital is needed for trading or merchandising institutions.

Similarly basic and key industries or those engaged in manufactures of producers goods

Usually have less proportion of working capital to fixed capital than industries producing consumers goods.

SIZE OF BUSINESS UNIT

It is an important factor for determining the proportion of working capital.

The general principle in this connection is the bigger size of the unit the will be the amount of working capital. Required. but it is quite likely that the bigger sized business unit that is a consumers goods industry may require a large fixed capital than the working capital.

TIME CONSUMED MANUFACTURE

The longer the period of manufacture the larger inventory required.

However if flow of product is quite steady, although the value of goods in process is large. the working capital will not vary much from time to time

NEED TO STOCK PILE RAW MATERIALS

Those concerns where there is need to stock pile raw materials requires large amount of working capital. the necessity for pile stock increases the extent of funds tied up in inventories

NEED TO STORE FINISHED GOODS

In business units like retail stores where unit is required to store finished goods (because of in the absence of adequate stocks ,the customer may return disappointed ) naturally require more working capital.

COST AND TIME INVOLVED IN MANUFACTURING PROCESS

If the manufacturing process in an industry entails high cost because of its complex nature , more working capital will be required to finance that process and also for other expense which vary with the cost of production. More ever the longer the period of manufacture ,higher the amount of cash needed.

TURN OVER OF CIRCULATING CAPITAL

Turn over of circulating capital plays an important and decisive role in judging the adequacy of working capital . the speed with which the circulating capital completes its round that is conversion of cash into book debts or bills receivables and book debts or bills receivables into cash again plays an important role

TERMS AND CONDITIONS OF PURCHASE AND SALE

The place given to credit by concern in its dealings with debtors and creditors may also be considered to access the adequacy of working capital .a business unit making purchase on credit basis and selling its finished products on cash basis will require lower amount of working capital than a concern having no credit facilities. and which may further be forced to grant credit to its customers.

CONVERSION OF CURRENT ASSETS INTO CASH

A company having ample stock of liquid current assts will require lesser amount of working capital because adequate funds can easily be procured by disposed of current assets are much more than the current liabilities.

IMPACT OF CYCLICAL AND SEASONAL VARIATION

In periods of boom and depression more working capital is needed than during other stages of cyclical fluctuations.

For arriving at a satisfactory working position in time of prosperity the firm should conserve current capital by avoiding wasteful expenditure. when inflationary pressure created during a

period of emergency like a war unnecessary boarding should be avoided because such periods of rising prices are temporary.

During a period of recession production is disturbed due to scarcity of materials. Current assts should be converted into cash without creating new obligations by borrowing at a higher rate of interest .during periods of long lasting depression excessive stocks are accumulated and fund of companies are locked up. As a result any addition to working capital by way of borrowing undesirable. attempts should be directed to convert current assent into cash

During period of recovery the fixed capital and working capital requirements of a firm will increase. during period of recovery when the concern starts earning of the company should be earmarked for meeting additional requirements.

When the business of company has expended and the concern has substantially good baking connections and enjoys prestige commercial banks with it may rely on financing temporary expansion of current assets with the help of banks.

OTHER FACTORS.

There are number of factors affecting the adequacy of working capital. In the absence of coordination of working capital may be neede3d.an expanding business will require increase in working capital proportionate to the rate of expansion.

THE ADVANTAGES OF WORKING CAPITAL OR ADEQUATE WORKING CAPITAL

CASH DISCOUNT

If a proper cash balance is maintained the business can avail the advantage of cash discount by paying cash for purchase of raw materials and merchandised .it will result in reduce cost of production.

. IT CREATES A FEELING OF SECURITY AND CONFIDENCE

The proprietor or officials or management of concern are quite care free, if they have proper working capital arrangements because they don’t worry for the payment of business expenditures

or creditors. Adequate working capital creates a sense of security and confidence and loyality not only through the business itself but also among its customer’s creditors and business associates.

MUST FOR MAINTAINING SOLVENCY AND CONTINUING PRODUCTION

In order to maintain the solvency of business it is but essential that the sufficient amount of fund is available to make all the payments in time as and when they are due .without ample working capital,the production will suffer, particularly in the era if cut throat competition and a business can never flourish in the absence of adequate working capital.

SOUND GOOD WIL AND DEBT CAPACITY

It is common experience of al prudent business men that promptness of payment in business creates good will and increases the debt of the capacity of the business . a firm can raise the funds from the market ,purchase goods on credit and borrow short funds from banks etc .if the investors and borrowers are confident that they will get their due interest payment of principle in time

EASY LOANS FROM THE BANKS

An adequate working capital that is excess of current asset sover current liabilities helps the company to borrow unsecured loans from banks .banks favor in granting seasonal loans if business has a good credit standing and trade reputation

DISTRIBUTION OF DIVIDENDS

If company is short of working capital it cannot distribute good dividends to share holders inspite of sufficient profits .profits are to be retained in the business to make up the deficiency of working capital .on the other contrary if working capital is sufficient ample dividend can be declared and distributed . it increases the market valve of the shares.

EXPLOTITATION OF GOD OPPORTUNITY

In case of adequacy of capital in a concern good opportunities can be exploited eg; company may make off season purchases resulting in substantial savings or it can fetch big supply orders resulting in god profits.

MEETING UNSEEN CONTINGENCY

Depression shoots the demand of working capital because sock piling of finished goods become necessary .certain other unseen contingencies e.g.; financial crisis due to heavy losses ,business oscillations etc can easily be overcome if company maintains adequate working capital .

HIGH MORALE

The provision of adequate working capital improves the morale of the executive because they have an environment of certainty, security and confidence which is a great psychological factor in improving the overall efficiency of the business and of the person who is at the hell of fairs in the company .

INCREASED PRODUCTION EFFICIENCY

A continuous supply of raw materials, research programme, innovations and technical development, and expansion programmers can successfully be carried out if adequate working capital is maintained in the business . it will increases the production efficiency ,which will in turn increases the efficiency and morale of the employees and lower costs and create image among the community

IMPACT OR HARM OF REDUNDANT OR EXCESSIVE WORKING CAPITAL

1. Excessive working capital means idle funds ,which earns no profit for the business cannot earn proper rate of return on its investments.

2.when there is a redundant working capital it may lead to unnecessary purchasing and accumulations of inventories causes more chances if theft , waste and losses.3.excessive working capital means excessive debtors and defective credit policy, which cause higher incidences of bad debts.4.it may result into overall inefficiency in the organizations.5.when there is excessive working capital in relation with banks and other financial institutions may not be maintained.6.the redundant working capital gives rise to speculative transaction.

7.due to lower rate of return on investments the valve of shares may also fall.

8.in case of redundant working capital there is always chance of financing long terms assts from short terms funds , which is very harmful in long run for any organization.

DANGERS OF SHORT OR INADQUATE WORKING CAPITAL

A concern which had adequate working capital cannot pay its short term liabilities In time .hence it will lose its reputation and should be not be able to get good credit facilities.

1.it cannot buy its requirements in bulk and cannot avil of discounts.2.it becomes difficult for the firms to exploit favorable market conditions. And under take profitable projects due to non availability of working capital funds.3. the firm cannot pay its day to day expenses of its operations and its credit inefficiencies increase cost and reduces profits of business.4.it becomes impossible to utilize the fixed assets efficiently due to non availability of liquid finds thus firms profitability would deteriote.5.the rate of return on investments also falls with the shortage of working capital.6. operating inefficiency creeps in and it becomes difficult to implement operating plans and achive the firms profit targets.

WORKING CAPITAL MANAGEMENT

Decisions relating to working capital and short term financing are referred to as working capital management.

This involves the relation ship between a firms short term assets and its short term liabilities.

The goal of the working capital management is to ensure that the firm is able to continue to its operations and that it has sufficient cash flow to satisfy both maturing short term debt and upcoming operational expenses.

By definition working capital management entails short term decisions generally relating to next one year which are reversible.

These decisions are based on cash flow and probility

One measure of cash flow is provided by the cash conversion cycle

Cash conversion cycle is the number of days from the out lay of cash for raw materials to receiving payment from customer. as a management tool this metric makes explicit inert relatedness of decision s

Relating to inventories , accounts receibles and payables cash

In this context most useful measure of profitability is return on capital.(roc)

Roc measures are useful as management tool in that they link short term policy with long term decisions making.

Credit policy

Credit policy of firm is another factor affecting working capital management

It includes buying raw materials and selling of finished goods either in cash or on credit .this affect the cash conversion cycle.

Guided by the above criteria management will uses combinations of policies and techniques for the management of working capital.

These policies aiming at managing the current assets and the short term financing such that cash flows and returns are acceptable.

COMPONRNTS OF WORKING CAPITAL MANAGEMENT.

1. Cash management.

2. Inventory management.

3. Recivble management.

CASH MANAGEMENT

Cash management identify the cash balance which allows for business to carry out day to day expenses but reducing cash holding costs.

Cash management is concerned with the managing of following

1.cash flows into and out of the firm.

Cash flows with in the firm.

3.cash balance hold by the firm at appoint of tme by financing deficit or investing surplus cash

Need for holding cash

1.the transactions motive.

2.the precautionary motive.

3. the speculative motive.

THE TRANSACTIONS MOTIVE

The transactions motive requires a firm to hold the cash to conduct its business in the ordinary course.

The firm needs cash primarily to make payments for purchases ,wages and salaries, other operating expenses taxes, dividends.

The need to hold cash would not arise if there are perfect synchronization between cash receipts and cash payments

THE PRECAUTIONERY MOTIVE

Precautionary motive is to need to hold cash to meet contingencies in the future .

It provides a cushion or buffer to with stand some unexpected emergency

The precautionary amount of cash depends upon the predictability of cash flows

If cash flows can be predicted with some accuracy less cash will be maintained for an emergency.

The amount of precautionary of cash is also effected by firms ability to borrow at short notice when the need arises .

THE SPECULATIVE MOTIVE.

The speculative motive relates to the holding of cash for investing in profit making opportunity as and when they arises. The opportunity to make profit may arise when the security prices change. The firm will hold cash when it is expected that interest rates will arise and security prices will fall.

INVETORY MANAGEMENT

Inventory management identify the level of inventory which allws for uninterrupted production but reduces the investment in raw materials and minimizing reordering costs.

And increase cash flows

OBJECTIVES OF INVENTORY MANAGEMENT

The following are the objectives if inventory management

1.to ensure the adequate stock

2.to minimize inventories on hand.

3.to maintain continuity in production

4.minimise the cost of purchasing and storage.

5.to minimize the wastage and loss.

6.to reduce the risk of deterioration.

7.effective use of available capital.

8.to help ful in efficient purchasing.

9.to give maximum satisfaction to customers.

To minimize loss due to price decline

11.maximum use of storage capacity

12.proper storage of materials.

DEBTORS MANAGEMENT

Debtors management identify the appropriate credit policy that is credit terms which will attract customers such that any impact on cash flows and the cash conversion cycle will be off set by increased revenue and hence return on capital.

SHORT TERM FINANCING

Short term financing identify the appropriate source of financing. Given the cash conversion cycle,

The inventory is ideally financed by credit guaranteed by the supplier. However it may be necessary to utilize a bank loan or to convert debtors to cash through factoring.

RECEIVEBLES MANAGEMENT

Successful companies realized that improving their accounts receivable process can lead to better cash flow. Fewer bad debt write-offs , and enhanced profitability.

Accounts recible are among largest and most liquid assets of most companies.

The efficiency of accounts receible function had a direct correlation to a company’s cash position.

Accounts receivable efficiency plays a vital role in the financial health of a company.

Improved accounts receivable management can boost cash flow and increasing working capital.

Successful company’s are constantly seeking new ways to to improve their accounts receivable function.

the following are the main objectives of receivable management.

1.to optimize the amount of sales.

2.to minimize cost of credit.

3.to optimize investment in receivables.

4.esablish and communicate credit policies.

5.evaluation of customers and setting credit limits.

6.acieve growth in sales and profit.

7.ensure prompt and accurate billing.

8.initate collection procures on overdue accounts. http://www.authorstream.com/Presentation/ras147-357423-receivable-management-business-finance-ppt-powerpoint/

TECHINQUES FOR ESIMATING WORKING CAPITAL REQUIREMENTS.

There are three widely methods for estimating working capital requirements.

1.operating cycle method.

Regression analysis method.

3percentage of sales method.

OPERATING CYCLE METHOD

Operating cycle refers to the duration of time needed to complete the

Conversion of receivable into cash

Conversion of inventory into receivable’s.

Conversion of cash into inventory.

Working capital requirements depends upon the the duration of operating cycle.

If operating cycle is large then the working capital requirements are more

And vice versa.

Under this approach working capital requirements are deter mined by multiplying duration of operating cycle with cost of operations.

REGRESSION ANALUSIS METHOD.

This is a statical approach of estimating working capital requirements by establishing the relation ship between sales and working capital of past data.

PERCENTAGE OF SALES METHOD.

This is a simple method of estimating working capital requirements.

This method is easy to understand.

Working capital requirements are estimated based on previous years dat a sales and working capital under this approach.

Working capital requirements for are determined based on relation ship between sale and working capital of past data.

PRINCIPLES OF WORKING CAPITAL.

There are four principles of working capital management. They are.

1.priciple of risk variation.

2.pricipal of cost capital.

3.pricipal of equity position.

4.principle of maturity payment.

PRINCIPLE OF RISK VARIATIOPN.

The goal of working capital management is to establish suitable trade relation ship between profitability and risk.

Risk here refers to firms ability to honour too meet its obligations,. A and when thy become for due payments.

Lagege investment in current assets lead to dependence.

Shortem borrowings increases liquidity. And reduces risk that is decreases the opportunity for loss or gain.

In other hand the reserve situation will increase risk. And profitability and reduces liquidity

PRICIPLE OF COST CAPITAL.

The various sources of raising working capital finance have different cost of capital and degree of risk involved.

Generally higher the cost lower the risk.

PRICIPAL OF EQUITY POSITION.

This principle is considered with planning the total investment in current assets.

As per this principle the amount of working capital investment in each component should be adequately justified bt firms equity position.

PRINCIPLE OF MATURITY PAYMENTS.

This principle is concerned with planning the source if working capital finance.

As per this principle a firm should make every effort to relate maturities if its flow of internally generated in other words it should plan its cash inflow in such a way that it could easily cover its cash flows or else it will fail to meet its obligation in time.

ANALY SIS OF WORKING CAPITAL

RATIO ANALYSIS

It is a simple arithmetical expression of one number to another.

The technique of ratio analysis can be employed fo r measuring shore term liquidity or working capital position of the firm

The following ratios may be calculated for this purpose.

1.current ratio.

2. acidtest ratio.

3.absolute liquid ratio.

4.inventory turnover ratio.

5.recevble turn over ratio.

6.paybles turn over ratio.

7.working capital turn over ratio .

8.working capital leverage.

FUNSDS FLOW ANALYSIS

Finds flow analysis is techinquical device designated to study the sources from which additional funds were deliver and the use to which these sources were put

It can effective management tool l to study changes the financial position (wc) of a business enterprise between beginning and ending financial statements

Funds flow analysis consists of

Preparing of schedule of changes in working capital.

Statement of sources and application of funds.

WORKING CAPITAL BUDGET

Budget is a financial or quantitative expression of business plans and policies to be pursued

In the future period of time

Working capital budget as apart of 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 budget figures wit h the actual performance for calculating variances .

The successful implantation of working capital budgets’ for various elements of working capital such as cash inventories and receivables etc .

The objectives of working capital budget is to ensure availability of funds as and when needed and to ensure effective utilization of those sources.

METHODOLOGY RESEARCH

DATA COLLECTION

There are two ways used for collection of data

1.primary data

2.secondary data.

Primary data sources are sources by which we are collecting data directly

Secondary data sources are sources already created through which we are collecting data.

The various secondary data sources are internet ,annual reports, books , etc.

TOOLS USED FOR ANALYSIS OF WORKING CAPITAL IN THIS PROJECT

The tools used for analysis of working capital in this projects are

1.schdule of changes in working capital.

2.ratios.

SCHDULE OF CHANGES IN WORKING CAPITAL

Schedule of changes in working capital refers to compare the current assets and current liabilities of two consecutive financial years and also all of the current assets and current liabilities.

RATIOS

We are determine the following ratios for analysis of working capital of a firm .they are

1.current ratio.

2.acid test ratio.

3.cash to networking capital

.4.inventory turn over ratio.

5.working capital turn over ratio.

CURRENT RATIO

Current ratio expresses the relation between current assets and current liabilities.

Current assets consists of cash, debtors, marketable securities, inventories, prepaid expenses, etc which are converting into cash with in accounting year.

Current liabilities consists of bills payable,creditors,accured expenses, short term bank loans, and long term loans that are mature in current account period.

Current ratio = current assets

--------------------------

Current liabilities

Current ratio is a measure of firms short term solvency.

Normally satisfactory valve of current ratio is 2to 1

Current ratio represents margin of safety for creditors.

Current ratio represents test of quantity.

ACID TEST RATIO

Acid test ratio is also called as quick ratio.

Acid test ratio shows the relation between quick assets and current liabilities.

Acid test ratio = current assets-----------inventories

Current liabilities

Satisfactory valve of acid test ratio is 1 to 1

TURNOVER RATIOS

Turn over ratios are also called as activity ratios

Activity ratios are employed to calculate the efficiency wqith which the firm manages and utilizes the assets.

A proper balance between sales and assets generally reflects that assets are managed well

INVENTORY TURN OVER RATIO

Inventory turn over indicates efficiency of the firm in producing and selling its product.

Inventory turn over represents the relation between sales and inventories.

Sales

Inventory turn over ratio === ---------------------

Inventories.

CASH TO CURRENT ASSETS.RATIO

Cash to current assets represents the relation between cash and current assets

Cash to net working capital == cash

-------------------------

CURRENT ASSETS

WORKING CAPITAL TURN OVER RATIO

Working capital turn over ratio represents how efficiently the firm uses working capital in assets

To turn out sales.

Working capital turn over ratio == sales

-------------------------------

Net working capital

DATA ANALYSIS AND INTERPRETATIONS

RATIOS ANALYSIS AND INTERPRETATION

1.CURRENT RATIO

CURRENT RATIO === current assets

--------------------------

Current liabilities.

CURRENT RATIOS TABLE

YEAR CURRENT ASSETS CURRENT LIABILITIES

CURRENT RATIO

2006-07 278116576.8 265366812.8 1.042007-08 377243822.4 221654354.9 1.702008-09 465803256.4 143699447.5 3.242009-10 299308399.1 133811248.9 2.23

GRAPH NO 1.

INTERFERENCE :

The fig (1) shows the current ratios of sri venkateswara co operative sugar factory ltd

For four years. It is seen clearly from table that the current ratio values are from 1.04 to 2.23 respectively during four years from 2006-07 to 2009-2010.

The average ratio of four years current ratio is 2.0

The current ratios of four years are below standard ratio of 2 to 1 except in two years

That means solvency position is not good of the sri venketeswara cooperative sugar factory ltd.

QUICK RATIO :

QUICK RATIO === currents ----inventories

-------------------------------------

Current liabilities

QUICK RATIOS TABLE

YEAR QUICK ASSETS CURRENT LIABILITIES

QUICK RATIO

2006-07 116356926.3 265366812.8 0.432007-08 116755790.4 221654354.9 0.522008-09 146749951.4 143699447.5 1.022009-10 138421591.5 13811248.9 1.03

GRAPH NO 2

INTERPRETATION :

The fig(2) shows the quick ratios of sri venkateswara co operative sugar factory ltd

For four years. It is seen clearly from table that the current ratio values are from 0.43 to

1.03 Respectively during four years from 2006-07 to 2009-2010.

The average ratio of four years current ratio is 0.75

The quick ratios of four years are below standard ratio of 1 to 1 except in two years

That means liquidity position is not good of the sri venketeswara cooperative sugar factory ltd

INVENTORY TURN OVER RATIO:

INVENTORY TURN OVER RATIO = sales

------------------------

Inventories

INVENTORY TURN OVER TATIOS TABLE

YEAR SALES AVERAGE INVENTORY

INVENTORY TURNOVER RATIO

2006-07 288247771.6 169852532.4 1.692007-08 195339446.4 207780895.5 0.942008-09 333675978.5 315691266.2 1.052009-2010 550499789.3 23903509.8 2.3

GRAPH NO 3

INTERPRETATION

The fig(3) shows the inventory turn over ratios of sri venkateswara co operative sugar factory ltd

For four years. It is seen clearly from table that the inventory turn over ratio values are from 1.69to 2.3 respectively during four years from 2006-07 to 2009-2010 that means they are fluctuating

In other words inventory management is not good in sri venketaswara cooperative sugar factory ltd.

CASH TO CURRENT ASSETS RATIO.

CASH TO CURRENT ASSETS RATIO = cash

--------------------------

Net working capital

CASH TO CURRENT ASSETS RATIOS TABLE

YEAR CASH CURRENT ASSETS CASH TO CURRENT ASSETS RATIO

2006-07 30078719.41 278116576.8 0.12007-08 22697751.22 377243822.4 0.062008-09 33719773.4 465803256.4 0.072009-10 14027059.2 299308399.1 0.04

GRAPH NO 4

INTERPRETATION

The fig(4) shows the cash to current assets ratios of sri venkateswara co operative sugar factory ltd

For four years. It is seen clearly from table that the cash to current assets ratio values are from 0.1to 0.04 respectively during four years from 2006-07 to 2009-2010 that means they are fluctuating

WORKING CAPITAL TURN OVER RATIO.

WORKING CAPITAL TURN OVER RATIO.==== SALES

-------------------------------------

NET WORKING CAPITAL

WORKING CAPITAL TURN OVER RATIOS TABLE

YEAR SALES NET WORKING CAPITAL

WORKING CAPITAL TURN OVER RATIO.

2006-07 28247771.6 12749764.1 2.26

2007-08 195339446.4 155589467.5 1.252008-09 333675978.5 322103808.9 1.032009-10 550499789.3 165497150.2 3.32

GRAPH NO 5

INTERPRETATION

The fig(5) shows the networking capital turn over ratios of sri venkateswara co operative sugar factory ltd

For four years. It is seen clearly from table that the working capital turn over ratio values are from 2.26to 3.32 respectively during four years from 2006-07 to 2009-2010 that means they are fluctuating

SCHDULE OF CHANGES IN WORKING CAPITAL

SCHDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR 2006-07

PARICULARS 2006 2007 EFFECT OF WORKING CAPITAL

INCREASE DECREASE

CURRENT ASSETS :

Cash & bank balance 21,79,9740.79 3,00,78,719.47

82,78,978.62

Investments 43,300 43,300 ------------- ------------

Receivables 2,42,79,070.06 2,25,47,064.87 17,32,005.19

Loans and advances 4,82,08,735.19 5,12,87,646.57 3,078,911.38

Stores stock 1,11,39,507.08 1,21,48,408.67 1,008,901.59

Closing stock 15,87,44,656.8 18,74,16,611.7 2,86,71,954.33

Work in process 3,66,550.34 3,66550.34 33,000,00

Prepaid expences -44,808.32 2,51,782.75 2,96,591.07

Total current assets 293298423.1 27,81,16,576.8

LIABILITIES

Payables as per schedule

17,28,85,234.72 24,81,79,819.92 75294585.2

Subdry creditors 1,38,50,959.98 1,71,87,792.92 3336832.94

Total current liabilities 186736194.7 26,53,66,812.8 78630618.1

Working capital 106562228.4 12,74,97,64.1 93812464.3

Net decrease in working capital

93812464.3

SCHDULE CHANGES IN WORKING CAPITAL FOR 2007-2008


INCREASE DECREASE

CURRENT ASSETS :

Cash & bank balance 30078719.47 22697751.22 27380968.19

Investments 43300 43300 -------------- ------------------

Receivbles 22547064.87 22247366.62 299698.25

Loans and advances 51287646.57 53626415.42 2338768.85

Stores stock 12148408.67 16747043.84 4598635.17

Closing stock 158744656.8 260488031.1 101743374.3

Work in process 366550.34 366550.34

Prepaid expences 251782.75 1027363 775580.25

Total current assets 278116576.8 377243822.4

LIABILITIES

Payables as per schedule 248179819.92 203856321.86 44323498.1

Subdry creditors 17187792.93 17798033.07 610240.15

Total current liabilities 265366812.8 221654354.9 43712457.9

Working capital 12749764.1 155589467.5 2808703.4

Net Increase in working capital

2808703.4



INCREASE DECREASE

CURRENT ASSETS :


Investments 43300 30300 13000

Receivbles 22247366.62 21234265.41 1013101.21


Stores stock 16747043.84 17268902.98 521859.14

Closing stock 260488031.1 319053305 58565273.9

Work in process 366550.34 366550.34 ----------- ------------------

Prepaid expences 1027363.00 392141.42 635221.58


LIABILITIES

Payables as per schedule 203856321.86 119992838.52 83863483.3

Subdry creditors 17798033.07 23706608.97 5908575.9

Total current liabilities 221654354.9 143699447.5 77954907.4

Working capital 155589467.5 322103808.9 166514341.4

Net increase in working capital

166514341.4



INCREASE DECREASE

CURRENT ASSETS :


Investments 30300 43300 13000

Receivbles 21234265.41 26695808.15 5461542.74


Stores stock 17268902.98 21570798.35 4301895.37

Closing stock 319053305 160886807.6 158166497.4

Work in process 366550.34 366550.34 ----------- ----------------

Prepaid expences 392141.42 -21213.15 413354.57


LIABILITIES

Payables as per schedule 11,99,92,838.52 12,41,48,469.82

Subdry creditors 2,37,06,608.97 96,62,779.08

Total current liabilities 143699447.5 133811248.9

Working capital 322103808.9 165497150.2 156606658.7

Net decrease in working capital

156606658.7

TRADING ACCOUNT FOR THE YEAR 31-03-2007

SLNO PARTICULARS AMOUNT SLNO PARTICULARS AMOUNT

1

2

3

4

OPENING STOCK

(a)LEVY SUGAR

(b)FREE SUGAR

(c) MOLASSES

Cost of production from mfg.a/c

Trade expenses as per schdulde

Gross profit c/d

TOTAL

TOTAL

1,27,80,819.87

16,15,60,711.18

69,54,624.60

28,46,26,173.84

14,31.685.11

-20,69,7333.91

1

2

SALES

(a)LEVY SUGAR

(b)FREE SUGAR

(c)MOLASSES

CLOSING STOCK

(a)LEVY SUGAR

(b)FREE SUGAR

(c)MOLASSES

TOTAL

4,04,20,875.41

21,99,44,728.20

1,98,80,167.95

0.00

14,74,40,000.00

1,09,60,109.13

44,66,56,680.89 44,66,56,680.69

SRI VENKATESWARA COOPERATIVE SUGAR FACTORT LTD TIRUPATI

BALANCE SHEET AS ON 31-03-2007

SNO LIABILITIES AMOUNT S.NO ASSETS AMOUNT

1

2

3

4

5

6.

7

SHARE CAPITAL

1)From government

b)From members

c)From Institutions

Deposits Borrowings

Cash credit pledge(sugar)


Sundry creditors as per schedule

RESERVES

a)Depreciation reserve

b)Gratuity reserve

c)Investment allowances

d) Molasses storage fund

e) Reserve for bad debts

f)reserve for objected items

g)Reserve for overdue interest

h) Rerve for cane development

i)General reserve

10,24,05,000.00

82,29,200.00

1,05,000.00

16,74,37,81,446

12,20,59,477.4

24,81,79,819.92

1,71,87,792.92

10,99,67,557.12

0.00

0.00

0.00

0.00

85,06,880.62

4,72,744.93

0.00

0.00

1

2

3

4

5

6

7.

8.

CASH &BANK BALANCE

a)Cash on hand

b)Bank balance as per schedule

c)postage on hand

d) adhesive stamps

e)Stock of revenue stamps

Share investments as per schedule

Investments as per schedule

Receivables as per schedule

Loans advances as per schedule

FIXED ASSETS:

a)Land as per schedule

b)Roads &fencing as per schedule

c)Factory buildings as per schedule

d)Non factory buildings as per schedule

e)Plant &machinery as per schedule

f)Misc assets as per schedule

Furniture

57,658.99

3,00,21,060.42

1961.00

0.00

0.00

43,300

13,59,223.23

2,25,47,064.87

5,12,87,646.57

3,56,861.21

29,94,938.21

54,028,81.15

30,96,084.74

9,31,36,046.72

64,36,657.50

6,43,415.82

Central subsidy

Total

15,0,000.00

79,60,49,204.43

9.

10.

11

12

13

Other assets as per schedule

Stores stock as per schedule

CLOSING STOCK

a)Levy sugar

b)Free sugar

2006-07

1,13,416 qts@1300/-

c)sugar in process

3,682.140 qts@910/-

d)Molasses.

Steel tanks

5,865,299 mts

@1870/-

Work in progress as per schedule.

Prepaid expences as per schedule

Loss

Total

24,45,283.81

1,21,48,408.67

0.00

14,74,40,800.00

33,50,747.40

1,09,68,109.13

3,66,550.34

2,51,782.75

40,16,92,171.98

79,60,49,204.43



1

2

3

4

OPENING STOCK

(a)LEVY SUGAR

(b)FREE SUGAR

(c) MOLASSES


Trade expenses as per schdulde

Gross profit c/d

TOTAL

0.00

14,74,40,800.00

1,09,60,109.13

35,04,90,108.75

18,95,177.48

-5,83,01,863.93

1

2

SALES

(a)LEVY SUGAR

(b)FREE SUGAR

(c)MOLASSES

CLOSING STOCK

(a)LEVY SUGAR

(b)FREE SUGAR

(c)MOLASSES

TOTAL

3,22,84,648.74

14,18,86,571.00

2,11,68,276.65

0.00

24,67,67,400.96

1,03,85,481.06

45,24,92,328.43

45,24,92,328.43




1

2

3

4

5

6.

7

SHARE CAPITAL

1)From government

b)From members

c)From Institutions

Deposits&Borrowings

Cash creditpledge(sugar)


Sundry creditors as perschedule

RESERVES


b)Gratutity reserve







27,27,04,949.71

82,63,400.00

1,05,000.00

17,02,04,703.75

21,41,12,460.48

20,38,56,321.86

1,77,98,033.07

11,05,98,632.47

0.00

0.00

0.00

0.00

1,85,06,800.62

4,70,741.93

0.00

1

2

3

4

5

6

CASH &BANK BALANCE

a)Cash on hand


c)postage on hand

d) adhesive stamps





Loans&advances as per schedule

FIXED ASSETS:






f)Misc assets as per

11,22,612.37

2,15,75,138.85

0.00

0.00

0.00

43,300.00

31,24,052.23

2,22,47,366.62

5,36,26,415.42

3,56,861.21

29,94,938.15

54,02,081.15

30,96,464.74

9,31,35,016.70

64,38,657.50

i)General reserve

Central subsidy

Total

0.00

15,00,000.00

1,00,81,21,043.89

7.

8.

9.

10.

11

12

13

schedule

Furniture



CLOSING STOCK

a)Free sugar 2007-08 2,01,792 qts @1222.8 ps

b)sugar in process

3665 qts @910.00 /-

d)Molasses.

Steel tanks 5166.906 mts @2010 /

-Work in progress as per schedule.


Loss

Total

6,43,415.82

24,45,283.81

1,67,47,043.84

24,67,67,400.96

33,35,150.00

1,03,85,481.06

3,66,550.34

10,27,363.00

51,32,40,450.12

1,00,81,21,043.89



1

2

3

4

OPENING STOCK

(a)LEVY SUGAR

(b)FREE SUGAR

(c) MOLASSES


Trade expenses as per schedule

Gross profit c/d

TOTAL

1,88,72,778.47

27,31,27,675.00

2,06,67,624.00

25,56,26,593.20

15,20,514.00

8,25,75,248.85

1

2

SALES

(a)LEVY SUGAR

(b)FREE SUGAR

(c)MOLASSES

CLOSING STOCK

(a)LEVY SUGAR

(b)FREE SUGAR

(c)MOLASSES

TOTAL

1,25,63,673.15

29,41,91,533.38

2,69,20,772.00

0.00

29,11,05,000.00

2,76,09,455.00

65,23,90,433.53

65,23,90,433.53




1

2

3

4

5

6.

7

SHARE CAPITAL

1)From government

b)From members

c)From Institutions

Deposits Borrowings




RESERVES


b)Gratuity reserve






h) Reserve for cane development

i)General reserve

26,27,04,949.71

82,70,400.00

1,05,000.00

21,53,42,221.40

21,68,07,000.13

11,99,92,838.52

2,37,06,608.97

11,14,46,902.17

0.00

0.00

0.00

0.00

1,85,06,800.62

4,55,403.77

0.00

0.00

1

2

3

4

5

6

7.

8.

CASH &BANK BALANCE

a)Cash on hand


c)postage on hand

d) adhesive stamps






FIXED ASSETS:







Furniture

4,17,492.02

3,33,02,281.38

-745.00

0.00

0.00

30,300.00

39,31,517.58

2,12,34,265.41

7,37,38,017.89

3,57,362.21

29,94,938.15

54,02,081.15

30,96,464.74

9,31,35,016.70

64,38,657.50

6,57,631.88

Central subsidy

Total

15,00,000.00

97,88,38,125.29

9.

10.

11

12

13



CLOSING STOCK

a)Levy sugar

b)Free sugar

2008-09 11,55,256 qts @Rs 1875/-

c)sugar in process

251 qts @Rs 1350/-

d)Molasses Steel tanks

5521.891 Mts @5000



Loss

Total

25,01,756.81

1,72,68,902.98

0.00

29,11,05,000.00

3,38,850.00

2,76,09,455.00

3,66,550.34

3,92,141.42

39,45,20,187,.13

97,88,38,125.29



1

2

3

4

OPENING STOCK

(a)LEVY SUGAR

(b)FREE SUGAR

(c) MOLASSES


Trade expenses as per schedule

Gross profit c/d

TOTAL

74,17,211.52

28,09,35,000.00

3,03,70,400.50

33,97,58,353.49

6,22,941.56

5,07,43,690.04

1

2

SALES

(a)LEVY SUGAR

(b)FREE SUGAR

(c)MOLASSES

CLOSING STOCK

(a)LEVY SUGAR

(b)FREE SUGAR

(c)MOLASSES

TOTAL

2,46,10,460.59

49,61,79,829.00

2,97,09,500.00

1,19,26,043.12

13,11,12,132.00

1,63,09,332.50

70,98,47,597.21 70,98,47,597.21




1

2

3

4

5

6.

7

SHARE CAPITAL

1)From government

b)From members

c)From Institutions

Deposits Borrowings




RESERVES


b)Gratuity reserve







i)General reserve

26,27,04,949.71

82,95,800.00

1,05,000.00

18,91,08,204.44

13,76,00,070.53

12,41,48,469.82

96,62,779.08

11,17,45,923.77

0.00

0.00

0.00

0.00

1,85,06,800.62

4,70,741.93

0.00

0.00

15,00,000.00

1

2

3

4

5

6

7.

8.

CASH &BANK BALANCE

a)Cash on hand


c)postage on hand

d) adhesive stamps






FIXED ASSETS:







Furniture

1,79,190.65

1,38,47,868.55

2708.00

0.00

0.00

43,300.00

30,52,545.23

2,66,95,808.15

7,56,96,862.29

3,56,861.21

29,94,938.15

54,02,081.15

30,96,464.74

9,36,66,977.70

64,38,657.50

Central subsidy

Total 86,38,48,739.90

9.

10.

11

12

13



CLOSING STOCK

a)Levy sugar 2009-10

6,[email protected]

b)Free sugar 2009-10

50490 [email protected]

c)sugar in process

1140 Qts@Rs1350/-

d)Molasses.stel tanks

6523 Mts @Rs 2500/-


Prepaid expenses as per schedule

Loss

Total

6,43,415.82

26,26,856.81

2,15,70,798.35

1,19,26,043.12

13,11,12,432.00

15,39,000.00

1,63,09,332.50

3,66,550.34

-21,213.15

44,63,01,260.79

86,38,48,739.90

OBJECTIVES

1.To study the working capital analysis in sri venketaswara cooperative sugar factory ltd

2. To analysis the financial ratios in the organization.

FINDINGS

1. During study in analysis of working capital changes we seen that working capital increases during periods 2007-08 and 2008-09. And working capital decreases during periods 2006-07 and 2009-2010

1. During analysis of ratios we find that Current ratios during the period 2006-07 and 2007-08 are below the standard ratio of 2 to 1

And are above the standard ratio during periods 2008-09 and 2009-10. That means it shows the solvency position of the organization is not good

Inventory turn over ratios are fluctuating during four years from 2006to 2010 analysis that means it shows that the inefficiency of inventory management of organization

Quick ratios during the periods 2006-07 and 2007-08 are below standard ratio of 1to1 And are above standard ratio during periods 2008-09 and 2009-10 from this we can say that Liquidity position of Sri Venkesteswara sugar factory ltd is not good

Cash to current assets ratios during four years from 2006 to 2010 are fluctuating this shows that management of current assets is not good.

Working capital turn over ratios during periods from 2006 to 2010. this shows that management of

Working capital is not good.

SUGGESTIONS

1. Efficient management of current assets are necessary to meet current obligations

2. Efficient management of liquid is necessary.

3. Efficient inventory management is necessary to turn out into sales.

4. Efficient management of working capital is necessary to increase the efficiency of the orgnazation.

5. Efficient management of all resources in the organization is necessary to increase the turn over of the organization.

BIBLIO GRAPHY

FINANCIAL MANAGEMENT I.M. PANDEY

ANNUAL REPORTS

INTERNET

A Study on Working Capital In

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