Harsh Main

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BVDU-I/M/R/D/A, Sangli

Chapter I

Introduction To Study

Introduction Statement of the study Objectives of the study Methodology Scope and significance of the study Limitations


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Chapter I

Introduction to Study

Introduction

Working capital may be regarded as the life blood and controlling nerve

centre of the business. Working capital is very important in every business

because it is the capital required for day to day working in business concern

material, for meeting day to day expenditure on salary, wages, rent, advertisement

etc.

A business cannot invest whole of its capital in long term asset. The ratio of

fixed capital and working capital may differ in the different business depend upon

its nature and volume. But it quite impossible to have no working capital to meet

its day to day obligation.

The finance manager spend most of his time in managing current asset and

current liabilities arranging for short term financing, negotiating for favorablecredit terms, controlling the movement of cash, management of account

receivables and maintaining a satisfactory level of inventory.

Working capital management is a relationship between current assets and

current liabilities. In this study effort are made to study all aspects related to

working capital management in Islampur Dudh Puravatha Sahakari Kendra Ltd.,

Islampur.


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Statement of the study

A study of Working Capital Management with special reference to

Islampur Dudh Puravatha Sahakari Kendra Ltd., Islampur.

Objectives of the study-

1. The major objective of this project report is to study the existing position ofworking capital management in the organization.

2. To study the concept, tool, techniques of working capital management appliedby the organization.

3. To know the financial strength and weakness of the organization throw threeWorking Capitals methods (ratio analysis, cash management & fund flows).

4. To study effectiveness of working capital management by means of ratio.

Research Methodology

Research methodology concerns itself with obtaining information through

empirical observation that can be used to systematically develop logically related

propositions so as to attempt to establish causal relationship among variables.

It completion of project the methods used were mostly situational. The

method, which was sought to be most appropriate and effective, was adopted for

special purposes.


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The project data analysis too was conducted with the help of various methods and

techniques like Working Capital ratio analysis, Funds flow and Working Capital

estimation with graphical presentation and inferences based thereon.

Sources of Data

Data constitutes the subject matter of analysis. The relevance, adequacy and

reliability of data determine the quality of the study.

Data is primarily of two kinds:

1. Primary data2. Secondary data

Primary data-

In this study, the primary data is mainly collected by conducting interview

and discussion with clerks and managers of the organization.

Secondary data-

In this study secondary data is collected from annual report of the company,

reference books.


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Scope and significance of the study-

The scope of the study is related to only working capital management in

Islampur Dudh Puravatha Sahakari Kendra Ltd., situated at Islampur.

The study is significant to researcher because it helps in understanding the

techniques and practices of working capital management in the organization. It is

also important to the organization to know its current financial position and adopt,

if necessary, the policy recommendation suggested by the researcher.

Limitation

1. Working capital management is a wide topic involving numerous techniques;each and every aspect of it cannot be dealt in detail.

2. Due to the secrecy of the organization, confidential matters were not given.3. The duration of project work is not sufficient to understand the complete

mechanism of Working Capital in the company.


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Chapter -II

Company Profile

Islampur Dudh Puravatha Sahakari KendraAn overview Mission Statement Milk Procurement Milk Marketing Board of Directors Organization Chart Milk Collection


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Chapter II

Company Profile

Islampur Dudh Puravatha Sahakari Kendra An overview

Islampur Dairy co-operative milk union was a far sighted dream of Shri

Rajarambapu which turned into reality in the year 1959. It was specifically

designed to have 100% involvement of the farmers, generate best remuneration for

their milk supply, boost milk production and give the region the most wanted

economic development. Till 1985 it turtle at a slow pace, but gathered dynamic

momentum thereafter, when in 1993 open market system came into effect thereby

starting operations in the Islampur city and thus improving the economic status of

the union and in turn returning the same to the farmers, primary milk producers

and members. The milk union today has a turnover of over 1 crore rupees.

Mission Statement

To constantly endeavor in providing the best remuneration to its members

and to consistently strive towards delivering high standard milk products to its

consumer, thereby being a front runner in serving the society through its fortified

co-operative nature.


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Milk Procurement

The milk is produced twice a day from all the farmers and milk producer at

village level from a whopping 50 villages with a fully fledged adherence to clean

milk production program on all the levels. In this program all the milk producer

and staff have been given an in depth training towards hygiene value, purity, safety

and quality assurance system.

Milk Marketing

The procured and hygienically processed nutritious and refreshing milk is

marketed in far of areas of Islampur and region of villages near the Islampur city.

The dairy pays due attention to maintain all its cold chain efficiently performing so

that the customers can cherish the same refreshing, rejuvenating and healthy taste

of all our products at any time.

Milk Collection

The Company collects the milk from around more than 25 villages. There are

more than 700 farmers providing milk to the company. The company procurement

is growing at a rate of 10-15 % per Annum.


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Statement Shownig of Milk Collection

Years Milk Collection (in Ltr.)

2006-07 284242.102007-08 316794.42

2008-09 391276.58

2009-10 1150747.90

Graphical Presentation

0

200000

400000

600000

800000

1000000

1200000

2006-07 2007-08 2008-09 2009-10

Year

Milk Collection(in Ltr.)


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Board of directors

Sr. No. Name of director Designation

1. Shri S. D. Kadam Chairman

2. Shri N. C. Holkar Director

3. Shri A. C. Karande Director

4. Shri K. D. Kshirsagar Director

5. Shri S. S. Dhembre Director

6. Shri A. T. Kadam Director

7. Shri V. A. Pawar Director

8. Smt S. N. Kshirsagar Director

9. Shri B. J. Bansode Director

10. Shri K. S. Patil Director

11. Shri. S. V. Jadhav Director


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Organization Chart

Organization Chart

Board of Directors

Chairman

Secretary

Clerk Fat man


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Chapter III

Conceptual Background of the Study

Meaning and definition of Working Capital Concept of Working Capital Working Capital Management Management of Working Capital Importance of Working Capital Factors Affecting Working Capital Ratio Analysis Cash management

Fund Flow Analysis


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Chapter III

Conceptual Background of the Study

Meaning of Working Capital

Working capital (also known as net working capital) is a financial metric,

which represents the amount of day- by- day operating liquidity available to a

business. Along with fixed assets such as plant and equipment, working capital is

considered a part of operating capital. It is calculated as current assets minus

current liabilities.

Working capital is common measures of a companys liquidity, efficiency

and overall health. Because it includes cash, inventory, accounts receivable,

accounts payable, the portion of debt due within one year, and other short-term

accounts, a companys working capital reflects the results of a host of company

activities, including inventory management, debt management, revenue collection,

and payments to suppliers.

Working capital measures how much in liquid assets a company has

available to build its business. The number can be positive or negative; depending

on how much debt the company is carrying. In general, companies that have a lot

of working capital will be more successful since they can expand and improve their

operations. Companies with negative working capital may lack the funds necessary

for growth.


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Defining Working Capital

The term working capital refers to the amount of capital that is readilyavailable to an organization. That is, working capital is the difference between

resources in cash or readily convertible into cash (Current Assets) and

organizational commitments foe which cash will soon be required (Current

Liabilities).

Definition of Working Capital

Working Capital is access of Current assets over Current liability

- GAJHMANN DAUGALIThe sum of the Current assets in the Working Capital of the business

- V.S.MILL

Hence:

WORKING CAPITAL = CURRENT ASSETS CURRENT LIABILITIES

Concepts of Working Capital

There are two concepts of working capital gross and net.

1. Gross Working Capital2. Net Working Capital


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Gross Working Capital:

It means current assets which represent the proportion of investment that

circulates from one form to other in the ordinary conduct of business.

Net Working Capital

It is the difference between current assets and current liabilities or

alternatively the portion of current assets financed with long-term funds.

Net Working Capital = Current Assets - Current Liabilities

Working Capital Management

Meaning

Working Capital Management refers to the procedures and policies required

to manage the working capital. The long-term profitability of a firm depends upon

investments decisions of a firm.

Working capital management is concerned with the problems that arise in

attempting to manage the current assets, the current liabilities and the

interrelationship that exists between them.


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The goal of working capital management is to manage the firms current

assets and liabilities in such a way that a satisfactory level of working capital is

maintained.

Investment decisions have two important implications for working capital

management

1. The sales forecast of goods and services being produced by the firm allow thefinancial manager to estimate the working capital needs.

2. The working capital management helps maximizing the shareholders wealth byproviding and maintaining firms liquidity.

Working capital management involves the relationship between a firms short-

term assets and its short-term liabilities. The goal of working capital management

is to ensure that a firm is able to continue its operations and that it has sufficient

ability to satisfy both maturing short-term and upcoming operational expenses. The

management of working capital involves managing inventories, accounts

receivable and cash.

The goal of working capital management is to ensure that the firm is able to

continue its operations and that it has sufficient cash flow to satisfy both maturing

short-term debt and upcoming operational expenses.


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Management of Working Capital

A company uses a combination of policies and techniques for the management

of working capital. These policies aim at managing the current assets (generally

cash equivalent, inventories and debtors) and the short term financing like

marketable securities, such that cash flow and returns are acceptable.

Cash ManagementCash management identifies the cash balance which allows for the business to

meet day-to-day expenses, but reduces cash holding costs.

Inventory ManagementIt identifies the level of inventory which allows for uninterrupted production but

reduces the investment in raw materials-and minimizes reordering costs-and hence

increases cash flow.

Debtors ManagementDebtors management identifies the appropriate credit policy, i.e. credit

terms which will attract customers, such that any impact on cash flows and the

cash conversion cycle will be offset increased revenue and hence return on capital.


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Short Term Financing (Marketable Securities):The marketable securities are the short term money market instruments that

can easily be converted into cash. As the marketable securities are quickly

convertible into cash, the two are often regarded as substitute and so the

marketable securities are considered as a part of liquid assets. The firm can hold a

minimum level of cash and procure cash as a when required from the sale of

marketable securities.

Importance of Working Capital

Every firm requires adequate working capital to run its business smoothly

and successfully. In fact working capital forms the life blood of any business.

a) Adequate working capital helps a firm in the following ways-b) It is an index of the solvency of the firm.c) At enhance the credit worthiness of the firm.d) At helps the firm to avail of cash discount facilities offered by the suppliers for

prompt payment

e) It improves the morale of the executives and employees out of the firm.


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Factors affecting on working capital requirement

The working capital requirements of concern are affected by a number of

factors. The various factors which affect the working capital, requirement of a

concern are as follow-

Nature of business Scale of operations Growth and expansion of business Production policies Seasonal fluctuations in demand Credit policy Profit level Taxes Depreciation policy


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RATIO ANALISIS

Current RatioCurrent ratio may be show as difference between current assets and current

Liabilities. This ratio is also know as working ratio .This is measure of

general Liquidity and it is most widely used to make the analysis of short

term Financial position of a firm. The standard for current ratio is 2:1

Current Assets

Current assets means those asset which can be converted into cash as

accounting year and it include marketable security, bills receivable, sundry debtors,

inventory, work in progress.

Current Liability

Current liability are those which can be payable within accounting year and

includes bills payable, sundry creditors, accrued expense, short-term advance etc.


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Liquidity RatioIt is also called as acid test ratio or quick ratio. The word liquidity means

conversion of asset into cash during the normal course of business and to have

regular uninterrupted flow of cash to meet outside current liabilities. This ratio will

be an indicative or measure of the extent to which liquid resources are immediately

available to meet a current obligation. It gives better picture of the firm ability to

meet its short term debt out of short term assets.

If the ratio is 1:1, it is considered that all claims will be meet when they

arise. Quick assets included current assets, except stock and prepaid expenses

where as a liquid liability includes all current liabilities, except overdraft andaccrued expenses.

Debtors Turnover RatioDebtor constitutes an important component of current asset. Debtors

turnover ratio indicates the velocity of debt collection of the firm. In the simple

words, this ratio indicates the speed at which the debtors are converted into cash.


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The optimum ratio is depending upon credit policy of a firm and credit

period allowed to a customer.

Average debtor is calculated as under-

Average A/c receivable = Debtors + Bills receivable

Working Capital Turnover Ratio

The working capital turnover ratio studies the velocity and utilization of the

working capital of the firm during the year.

The working capital here refers to the net working capital, which is equal to

the total current assets less current liabilities.

The higher the working capital turnover ratio, the lower is the investment in

the working capital and higher would be profitability. A high ratio reflects the

better utilization of the working capital of the firm. The working capital turnover

ratio is calculated assuming on the basis of net sales.


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Inventory to Working Capital RatioThis ratio indicates the efficiency of the firm in selling its product. It is

calculated by dividing the cost of goods sold by the average inventory or sales by

closing inventory of finished goods. The inventory turnover ratio shows how

rapidly the inventory is turning into receivable through sales. Generally high

inventory is indicative of good inventory management.

Current Asset Turnover Ratio

Current asset turnover ratio is the ratio between current asset & turnover orsales. The ratio indicates the contribution of current asset to sales.

There is no standard or ideal current asset turnover ratio. Normally a high

current asset ratio indicates better utilization of current asset. The low current asset

turnover ratio suggests that the current asset have been utilized effectively.


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Net Profit Ratio

Net profit ratio is the ratio of net profit to sales. This ratio indicates the

quantum of profit earned by concern.

There is not any standard ratio or ideal ratio. Normally, high ratio indicates

that profitability of the concern is good and low ratio indicates danger signal.

Cash & Bank Balance to Working Capital RatioCash and Bank Balance to Working Capital Ratio is calculated under

following formula

There is not any standard ratio or ideal ratio.


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CASH MANAGEMENT

Cash is the important current asset for the operations of the business. Cash is the

basic input needed to keep the business running on a continuous basis it is also the

ultimate output expected to be realized by selling the service or productmanufactured by the firm. The firm should keep sufficient cash, neither more nor

less. Cash shortage will disrupt the firms operations while excessive cash will

simply remain idle, without contributing anything towards the firms profitability.

Thus a major function of the Financial Manager is to maintain a sound cash

position.

Cash is the money which a firm can disburse immediately without any restriction.

The term cash includes currency and cheque held by the firm and balances in its

bank accounts. Sometimes near cash items, such as marketable securities or banktime deposits are also included in cash. The basic characteristics of near cash assets

are that they can readily be converted into cash. Cash management is concerned

with managing of:

i) Cash flows in and out of the firm

ii) Cash flows within the firm

iii) Cash balances held by the firm at a point of time by financing deficit or

inverting surplus cash.

In order to resolve the uncertainty about cash flow prediction and lack of

synchronization between cash receipts and payments, the firm should develop

appropriate strategies regarding the following four facets of cash management.

1. Cash Planning: - Cash inflows and cash outflows should be planned to project

cash surplus or deficit for each period of the planning period. Cash budget

should be prepared for this purpose.


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2. Managing the cash flows: - The flow of cash should be properly managed. The

cash inflows should be accelerated while, as far as possible decelerating the

cash outflows.

3. Optimum cash level: - The firm should decide about the appropriate level ofcash balances. The cost of excess cash and danger of cash deficiency should be

matched to determine the optimum level of cash balances.

4. Investing surplus cash: - The surplus cash balance should be properly invested

to earn profits. The firm should decide about the division of such cash balance

between bank deposits, marketable securities and inter corporate lending.

The ideal Cash Management system will depend on the firms products,organization structure, competition, culture and options available. The task is

complex and decision taken can affect important areas of the firm.

Functions of Cash Management:

Cash Management functions are intimately, interrelated and intertwined Linkage

among different Cash Management functions have led to the adoption of the

following methods for efficient Cash Management:

Use of techniques of cash mobilization to reduce operating requirement ofcash

Major efforts to increase the precision and reliability of cash forecasting. Maximum effort to define and quantify the liquidity reserve needs of the

firm.

Development of explicit alternative sources of liquidity Aggressive search for relatively more productive uses for surplus money

asset.


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CASH MANAGEMENT: OBJECTIVES

The Basic objective of cash management is two fold:

(a) To meet the cash disbursement needs (payment schedule);

(b) To minimize funds committed to cash balances. These are conflicting and

mutually contradictory and the task of cash management is to reconcile them.

CASH MANAGEMENT TECHNIQUES & PROCESSES

Speedy cash collection Prompt payment by customer Early conversion of payment into cash Concentration Banking Lock-Box System Avoidance of early payments

EVALUATION OF CASH MANAGEMENT PERFORMANCES

To assess the cash management performance this phase is divided as follows:

a) Size of Cash

b) Liquidity and Adequacy of cash


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FUNDS FLOW ANALYSIS

Fund flow analysis is the analysis of cash of funds. The terms is refers to

movement & includes both inflow & outflow thus, Flow of fund, means the

transfer of economic values from one assets of equity to another. Therefore it is

very effective tool for managing financial resources & utilization.

The funds flow statement clearly shows the working capital & how

effectively use cash. Thus it is technique of analyzing financial statement for

decision making of investment.

FUND FLOW STATEMENT:

This is the most useful statement which indicates changes in working capital. It is

a financial operational statement which revels the method by which a business has

been financed & the use to which it has applied its fund over period of time. It tells

management of the source from which a company has been taken & whether there

are any weaknesses due to lack of internal capitalization

ADVANTAGES OF FUND FLOW STATEMENT:

It provides information about now funds are obtained & how they are putto actual use.

It registers is the flow of funds during a given period of time. It is supplementary to the conventional financial statement. It is an important too in the hands of the financial manager in process of

decision making.

It evaluates the urgency of operational matters & makes it easier for acorporation to set a time limit within which is operating problems may

come to a critical stage. In other words. It may enable it to find out when

its resource are likely to be exhausted.


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LIMITATIONS- OF FUND FLOW ANALYSIS:

1.Not Fool Proof:The financial statement tools proof as it depends upon conventional financial

statement viz. balance sheet income statement etc.

2.No introduction of new items:It does not introduce any new or original items which can enhance or reduce

the financial states of the business. Its function is simply rearranging the financial

data appearing elsewhere that is in conventional financial statement &supplementary schedule & focus attention to those facts which are significantly for

any investigation.

3. Historical:The statement of changes like other financial statements its essentially

historical in nature. It does not estimate source & application of funds for the near

future.


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Chapter IV

Data Analysis and Interpretation


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Chapter IV

Data Analysis and Interpretations

Balance sheet of Islampur Dudh Puravatha Sahakari Kendra Ltd.,

Islampur

Liabilities 2006-07

(Amt.in. Rs)

2007-08

(Amt.in. Rs)

2008-09

(Amt.in. Rs)

2009-10

(Amt.in. Rs)

Paid up

capital

Member

shares

1,740.00 1,740.00 1,740.00 1,740.00

Reserves

and other

fund

Reserve fund 22,14,276.62 22,38,540.62 22,63,495.62 23,05,275.62

Building

fund

23,35,508.89 23,49,926.89 23,64,858.89 23,89,884.89

Dead stock

depreciation

fund

1,56,935.55 1,56,198.55 2,50,556.55 3,55,415.55

Doubtful

debts

3,54,177.00 3,57,781.00 3,61,514.00 3,86,540.00


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Employee

welfare fund

39,200.00 39,200.00 39,200.00 39,200.00

Charity 1,07,260.00 1,10,864.00 1,14,597.00 1,20,853.00

Cattle feed

development

fund

1,96,988.28 2,04,197.28 2,11,663.28 2,24,176.28

Creditors 18,47,333.42 21,91,210.82 33,51,393.75 41,37,879.61

Other

liabilities

9,278.00 - - -

Net profit 96,397.00 99,823.93 1,67,120.86 1,68,905.22

Total 73,59,094.76 77,49,483.09 91,26,139.95 1,01,29,870.17


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Assets 2006-07

(Amt.in. Rs)

2007-08

(Amt.in. Rs)

2008-09

(Amt.in. Rs)

2009-10

(Amt.in. Rs)

Cash in hand

and at bank

31,68,130.89 28,06,655.22 36,23,240.50 24,25,818.17

Investment 14,97,370.00 23,11,997.00 24,28,140.00 24,47,009.00

Fixed Assets

Shade 14,726.00 13,253.00 13,253.00 13,253.00

Furniture 25,152.00 24,257.00 24,257.00 26,015.00

Building 5,89,520.00 5,89,520.00 5,89,520.00 21,30,345.00

Vehicle 174023.00 1,30,517.00 1,30,517.00 1,30,517.00

Boar well - - 11,300.00 17,700.00

Loans &

advances

14,43,436.00 13,52,053.00 15,35,125.00 21,47,870.00

Debtors 1,10,017.07 1,80,048.07 3,81,738.65 3,23,718.00

Stock 3,36,719.80 3,41,182.80 3,89,048.80 4,67,624.00

Total 73,59,094.76 77,49,483.09 91,26,139.95 1,01,29,870.17


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Trading account

Particulars 2006-07

(Amt.in. Rs)

2007-08

(Amt.in. Rs)

2008-09

(Amt.in. Rs)

2009-10

(Amt.in. Rs)

Purchase A/c

centre 1

68,30,239.80 76,66,771.40 77,77,211.66 93,10,753.50

Purchase A/c

centre 2

- - 20,74,191.53 27,01,066.00

Subsidy 1,00,000.00 50,000.00 50,000.00 30,000.00

Traveling

expense

1,18,696.00 15,000.00 50,000.00 50,000.00

Dairy

equipment

1582.00 4418.00 5759.00 5727.00

Electricity bill 30,600.00 21,520.00 34,140.00 39,860.00

Milko

maintenance

135.00 5140.00 2468.70 11,762.00

Dead stock

maintenance

645.00 414.00 6228.00 6672.00

Water supply

bill

3840.00 4800.00 4800.00 4800.00

Petrol expense 13,426.65 10,600.00 17,606.30 17,403.00

Pharmaceuticals - - - 9,809.00


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Purchase A/c

Building

maintenance

expense

5708.00 2628.00 - -

Insurance A/c 1,14,000.00 50,000.00 1,00,000.00 50000.00

Traveling

subsidy

70,000.00 15,000.00 50,000.00 30,000.00

vehicle

maintenance

1,859.00 - - -

Weight scale

inspection

passing

3100.00 - 2450.00 1100.00

Milk rate

difference

centre 1

4,00,000.00 6,50,000.00 6,60,092.00 6,80,000.00

Milk rate

difference

centre 2

- - 1,50,000.00 2,00,000.00

Cattle feeds A/c 675.00 68,890.00 19,520.00 7,778.00

Waste milk - - - 5,736.00

Gross profit 2,64,272.45 3,98,898.93 8,38,159.13 9,04,905.40


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Total 79,58,778.90 89,64,080.33 1,18,42,626.32 1,40,67,371.90

Particulars 2006-07 2007-08 2008-09 2009-10

Sales centre 1 43,39,440.80 51,71,323.90 68,81,200.10 77,95,053.90

Sales centre 2 - - 5,74,367.10 8,20,611.00

Sale to

Rajarambapu

patil dairy

35,75,252.00 36,41,087.00 42,47,097.00 52,86,083.00

Ratib sales 43,485.10 57,833.00 35,633.30 -

Milk rate

difference

501.00 - - 76.00

Cattle feed sales - 61,690.00 14,640.00 17,587.00

Sale of cattle

feed toRajarambapu

patil dairy

- 1,500.00 4880.00 -

Sample sale - 30,646.43 25,047.82 26,164.00

Bonus - - 59,761.00 1,21,797.00

Total 79,58,778.90 89,64,080.33 1,18,42,626.32 1,40,67,371.90


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Profit & Loss account

Particulars of

payment

2006-07

(Amt.in. Rs)

2007-08

(Amt.in. Rs)

2008-09

(Amt.in. Rs)

2009-10

(Amt.in. Rs)

Stationary 7,119.50 5964.50 8,736.50 9,515.00

Traveling

expense

5,322.00 392.00 2,789.00 3,230.00

Meeting

expense

6,671.00 8,097.00 9,391.00 6,735.00

Livestock 6,073.00 3,840.00 5,768.00 8,060.00

Saadil 5,921.50 2,456.50 3,071.00 1,757.00

Municipal tax 1,824.00 1,812.00 1,864.00 1,864.00

Employee

salary

92,300.00 1,00,800.00 1,20,800.00 1,52,400.00

Employee

bonus

25,000.00 23,460.00 18,000.00 20,000.00

Employee

reward

5,000.00 6803.00 5,000.00 -

Employees

dress

10,000.00 5000.00 5,000.00 7,000.00

Audit fee 25,000.00 35,000.00 30,000.00 25,000.00


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Education fund 100.00 100.00 200.00 200.00

Building

maintenance

expense

- - 4,664.00 2,722.00

Advertisement

expense

- 4,690.00 - 675.00

Pharmaceuticals 784.00 50,000.00 22,453.00 25,000.00

Tax 4,200.00 2,500.00 2,500.00 750.00

Miscellaneous

expense

304.00 374.00 1,50,000.00 302.00

Weight scale

inspection

passing

- 950.00 - 350.00

Bank

commission

3,334.25 1098.00 380.00 209.00

Weight scale

maintenance

7,655.00 2620.00 2,950.00 -

Postage &

telephone

3,053.00 3,300.00 3,280.00 2,900.00

Profit & loss a/c 10,230.20 - - -

Other expense 50,000.00 64,055.00 2,00,000.00 1,50,000.00


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Guest expense 1,179.00 1812.00 1,098.00 2,957.00

Vehicle

insurance

- - 6,298.00 -

Tax audit fee 5,000.00 7000.00 10,000.00 5,000.00

License fee 900.00 2500.00 - 900.00

Education trip 10,000.00 17,500.00 25,000.00 12,000.00

Depreciation 1,14,644.00 1,08,675.00 98,716.00 1,17,433.00

Fringe benefit

tax

831.00 400.00 2,546.00 419.00

Machinery - - 3,00,000.00 3,00,000.00

Office rent 2,600.00 4200.00 4,200.00 4,800.00

Internal

inspection

- - 20,000.00 10,000.00

Vehicle

maintenance

- 1820.00 8,612.00 7,328.00

Net profit 96,397.00 99,823.93 1,67,120.86 1,68,905.22

Total 5,01,442.45 5,67,042.93 12,40,437.36 10,48,411.22


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Particulars

of receipt

2006-07

(Amt.in. Rs)

2007-08

(Amt.in. Rs)

2008-09

(Amt.in. Rs)

2009-10

(Amt.in. Rs)

Gross profit 2,64,272.45 3,98,898.93 8,38,159.13 9,04,905.40

Livestock

loan interest

31,232.00 8,888.00 2,177.00 -

Bank interest 1,53,383.00 1,07,765.00 2,24,351.55 65,112.82

Bonus 50,555.00 44,291.00 3,000.00 -

Cattle feedsubsidy

2,000.00 7,200.00 - -

Other interest - - 1,72,743.68 78,393.00

Total 5,01,442.45 5,67,042.93 12,40,437.36 10,48,411.22


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Statement showing of the working capital requirements

Particulars 2006-07

(Amt.in. Rs)

2007-08

(Amt.in. Rs)

2008-09

(Amt.in. Rs)

2009-10

(Amt.in. Rs)

Current assets

Cash in hand

and at bank

31,68,130.89 28,06,655.22 36,23,240.50 24,25,818.00

Loans & adv. 14,43,436.00 13,52,053.00 15,35,125.00 21,47,870.00

Debtors 1,10,017.07 1,80,048.07 3,81,738.65 3,23,718.00

Stock 3,36,719.80 3,41,182.80 3,89,048.80 4,67,624.00

a) Total

Current

Assets

50,58,303.76 46,79,939.09 59,29,152.95 53,65,030.00

Current

liabilities

Creditors 18,47,333.42 21,91,210.82 33,51,393.75 41,37,879.61

Other

liabilities

9,278.00 - - -

b) Total

current

Liabilities

18,56,611.42 21,91,210.82 33,51,393.75 41,37,879.61

Working

Capital (A-B)

32,01,692.34 24,88,728.27 25,77,759.20 12,27,150.39


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1.Statement Showing of Current Ratio

Year Current Assets

(in. Rs)

Current Liability

(in. Rs)

Ratio

2006-07 50,58,303.76 18,56,611.42 2.72:1

2007-08 46,79,939.09 21,91,210.82 2.13:1

2008-09 59,29,152.95 33,51,393.75 1.76:1

2009-10 53,65,030.00 41,37,879.61 1.29:1


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Interpretation -

The above table reveals that the current ratio of a company was 2.72:1,

2.13:1, 1.76:1, and 1.29:1 in 2006-07 to 2009-10 respectively. Company not able

to balance in currant ration during last two yrs. The standard ratio is 2:1; it

indicates that current ratio of company is decreasing continuously.

0

0.5

1

1.5

2

2.5

3

2006-07 2007-08 2008-09 2009-10

Ratio

Year

Current Ratio


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2.Statement Showing of Liquidity Ratio

Year Quick Assts (in.

Rs)

Quick Liability

(in. Rs)

Ratio

2006-07 47,21,583.96 18,56,611.42 2.54:1

2007-08 43,38,756.29 22,00,488.82 1.97:1

2008-09 55,39,549.15 33,51,393.75 1.65:1

2009-10 48,82,406.00 41,37,879.61 1.17:1


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Interpretation

The liquidity ratio of the firm is 2.54, 1.98, 1.65, and 1.18 in year 2006-07,

2007-08, 2008-09, and 2009-10 respectively. This indicates that the ratio was

above the standard ratio. The organization is able to meet its current obligation.

0

0.5

1

1.5

2

2.5

3

2006-07 2007-08 2008-09 2009-10

Ratio

Year

Liquidity Ratio


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3.Statement Showing of Debtors Turnover Ratio

Year Sales (in. Rs) Average A/c

receivable (in.

Rs)

Ratio ( in

time )

Debtors

collection

period(Days)

2006-07 79,58,277.90 1,10,017.07 72.33 5.04

2007-08 89,64,080.33 1,80,048.07 49.78 7.33

2008-09 1,17,82,865.32 3,81,738.65 30.86 11.82

2009-10 1,39,45,498.90 3,23,718.00 43.07 8.47


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Interpretation

The above table shows that in 2006-07 the debtor turnover ratio was 72.33 time

which decreased to 49.78, 30.86, 43.07 times in 2007-08, 2008-09, 2009-10

respectively. It implies that the speed of converting debtors into cash has declined

over the years. Its good sign to Company maintain debtors collection period.

0

10

20

30

40

50

60

70

80

2006-07 2007-08 2008-09 2009-10

Ratio

Year

Debtors Turnover Ratio


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4.Statement Showing of Working Capital Turnover Ratio

Year Net Sales

(in. Rs)

Working

Capital (in. Rs)

Ratio in time

2006-07 79,58,177.90 32,01,692.34 2.48

2007-08 89,64,080.33 24,88,728.27 3.60

2008-09 1,17,82,865.32 25,77,759.20 4.57

2009-10 1,39,45,498.90 12,27,150.39 11.36


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Graphical presentation

Interpretation

From the above tabulation it reveals that working capital turnover ratio was

2.48 times in year 2006-07 which is 3.61 times, 4.57 times and 11.50 times in year

2007-08, 2008-09 and 2009-10 respectively. It is increasing continuously every

year. It indicates that utilization of working capital is satisfactory.

0

2

4

6

8

10

12

2006-07 2007-08 2008-09 2009-10

Ra

tio

Year

Working capital Turnover ratio


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5.Statement Showing of Inventory to Working Capital Ratio

Year Closing stock

(in. Rs)

Working capital

(in. Rs)

Ratio

2006-07 3,36,719.80 32,01,692.34 0.105:1

2007-08 3,41,182.80 24,88,728.27 0.137:1

2008-09 3,89,048.80 25,77,759.20 0.150:1

2009-10 4,67,624.00 12,27,150.39 0.381:1


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Interpretation

The above table shows that the inventory ratio of the firm i.e. 0.105, 0.137,

0.150 and 0.385 times for the year 2006-07 to 2009-10 respectively.

A high inventory ratio is indicative of good inventory management. The inventory

to working capital ratio is in increasing trend.

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

2006-07 2007-08 2008-09 2009-10

Ratio

Year

Inventory to Working Capital

Ratio


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6.Statement Showing Current Asset Turnover Ratio

Year Net Sales (in.

Rs)

Current Asset

(in. Rs)

Ratio in time

2006-07 79,58,277.90 50,58,303.76 1.57

2007-08 89,64,080.33 46,79,939.09 1.91

2008-09 1,17,82,865.32 59,29,152.95 1.98

2009-10 1,39,45,498.90 53,65,030.00 2.59


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Interpretation

The above table shows that the current asset turnover ratio was 1.57 times in

the year 2006-07 which is increased at 1.91 times, 1.98 times and 2.59 times in

year 2007-08, 2008-09, 2009-10 respectively.

0

0.5

1

1.5

2

2.5

3

2006-07 2007-08 2008-09 2009-10

Ratio

Year

Current Asset Turnover Ratio


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7.Statement Showing of Net Profit Ratio

Year Net Profit(in.

Rs)

Sales (in. Rs) Ratio ( % )

2006-07 96,397.00 79,58,177.90 1.211

2007-08 99,823.93 89,64,080.33 1.113

2008-09 1,67,120.86 1,17,82,865.32 1.418

2009-10 1,68,905.22 1,39,45,498.90 1.211


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Interpretation

The net profit ratio of firm was 1.211 % in 2006-07 which decreased at

1.113% in year 2007-08, again increased at 1.418 % in year 2008-09 and decreased

at 1.211% in 2009-10. The firm has to improve, however the ratio proves worse

condition of the firm.

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

2006-07 2007-08 2008-09 2009-10

Ratio

Year

Net Profit Ratio


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Cash & Bank Balance to Working Capital Ratio

Year Cash & Bank

Balance (in. Rs)

Working capital

(in. Rs)

Ratio (in %)

2006-07 31,68,130.89 32,01,692.34 98.95

2007-08 28,06,655.22 24,88,728.27 112.77

2008-09 36,23,240.50 25,77,759.20 140.55

2009-10 24,25,818.00 12,27,150.39 197.67


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Interpretation

Cash and Bank Balance to Working Capital ratio was 98.95% in 2006-

2007.It was 112.77%, 140.55% and 197.67 % in the year 2007-08, 2008-09 and

2009-10 respectively. It is seen from the ratio that huge funds are blocked in the

Cash and Bank component of working capital.

0

50

100

150

200

2006-07 2007-08 2008-09 2009-10

Ratio

Year

Cash & Bank Balance to Working Capital

Ratio

Cash & Bank Balance to

Working Capital Ratio


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CASH MANAGEMENT PERFORMANCES

A)Size of cash:The quantum of cash held by Islampur Dudh Puravatha

Sahakari Kendra during the study period is presented in the table. The trend

percentage also calculated and shown in the table

Statement Showing Size of cash balance (Rs. in Lacs)

Year Cash (In Lacs) Trend2006-07 31.68 100

2007-08 28.06 88.57

2008-09 36.23 114.36

2009-10 24.25 76.54


0

20

40

60

80

100

120

2006-07 2007-08 2008-09 2009-10

Year

Cash(in Lacs.)

Trend


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Statement Showing of Size of sales (Rs. in Lacs)

Year Sales(Rs. In Lacs) Trend2006-07 79.58 100

2007-08 89.64 112.722008-09 118.42 148.80

2009-10 140.67 176.77

Graphical presentation

0

20

40

60

80

100

120

140

160

180

2006-07 2007-08 2008-09 2009-10

Series 1

Series 2


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B) Liquidity and Adequacy of Cash:

One of the most important jobs of the Finance Manager is to maintain sufficient

liquidity to enable the firm to pay off its obligations when they fall due. To test a

firms liquidity and solvency we commonly use current and quick ratios.Traditionally 2:1 current ratio and 1:1 quick ratio are taken as satisfactory

standards for the purpose. The former indicates the extent of the soundness of the

current financial position of a firm and the degree of safety provided to the

creditors, the later signifies the ability of a firm to settle all its current obligations

on a particular date.

Current ratio and quick ratio

Year Current ratio Quick ratio

2006-07 2.72 2.24

2007-08 2.13 1.98

2008-09 1.76 1.65

2009-10 1.29 1.18


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Graphical presentatio

Interpretation:

Overall analysis of financial data reveals that the company has very sound positionregarding liquidity and solvency as shown by the current and quick ratios .It is

good sign for company increasing its sales & Company able to maintain the Cash

Balance.

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

2006-07 2007-08 2008-09 2009-10

Ratio

Year

Quick ratio

Current ratio


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FUND FLOW STATEMENT

STATEMENT SHOWING CHANGE IN WORKING CAPITAL

As on: 2006-07&2007-08

Particulars

Previous

Year

Current

Year

Changes In Working

Capital

2006-07 2007-08 Increase Decrease

A. Current Assets

Cash in hand 31,68,130.89 28,06,655.22 3,61,475.67

Loan & adv. 14,43,436.00 13,52,053.00 91,383.00

Debtors 1,10,017.07 1,80,048.07 70,031.00

Closing stock 3,36,719.80 3,41,182.80 4,463.00

Total A 50,58,303.76 46,79,939.09

A. Current Liabilities

Sundry Creditors 18,47,333.42 21,91,210.82 3,43,877.40

Other liabilities 9,278.00 9,278.00

Total B 18,56,611.42 21,91,210.82 83,772.00 7,96,736.07

Working Capital (A-B) 32,01,692.34 24,88,728.27

7,12,964.07 7,12,964.07


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FUND FLOW STATEMENT

2006-07&2007-08

Source Of Fund(Inflow)

Rs. Application Of Fund(Outflow)

Rs.

Funds from

Operation

57265.93

Purchase of

Investment 8,14,627.00

Dep. &

Sales Fixed Asset

44397.00

Decrees In working

Capital

7,12,964.07

Share Capital -Nil-

Loan -Nil-

Total 8,14,627.00 Total 8,14,627.00

Interpretation

Above the Statement In Year of 2006-07&2007-08 the company not taking any

loan.In this year working capital decrees by Rs.7,22,242.07 & investment Rs.

8,14,627.00 .


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STATEMENT SHOWING CHANGE IN WORKING CAPITAL

As on: 2008-09&2009-10

Particulars

Previous

Year

Current

Year

Changes In Working

Capital

2008-09 2009-10 Increase Decrease

A. Current Assets

Cash in hand 36,23,240.50 24,25,818.00 11,97,422.5

Loan & adv. 15,35,125.00 21,47,870.00 6,12,745.00

Debtors 3,81,738.65 3,23,718.00 58,020.65

Closing stock 3,89,048.80 4,67,624.00 78,575.20

Total A 59,29,152.95 53,65,030.00

A. Current Liabilities

Sundry Creditors 33,51,393.75 41,37,879.61 7,86,485.86

Other liabilities - -

Total B 33,51,393.75 41,37,879.61 6,76,875.20 20,41,929.01

Working Capital (A-

B)

25,77,759.20 12,27,150.39

13,50,608.81 13,50,608.81


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FUND FLOW STATEMENT

2008-09&2009-10

Source Of Fund(Inflow)

Rs. Application Of Fund(Outflow)

Rs.

Funds from

Operation

2,17,243.19 Purchase of

Investment

18,869.00

Decrees In working

Capital

13,50,608.81 Purchase Fixed Asset 15,48,983.00

Share Capital -Nil-

Loan -Nil-

Total 15,67,852.00 Total 15,67,852.00

Interpretation

Above the Statement In the year of 2008-09&2009-10 Company purchase Fixed

Assets for Rs. 15,42,583.00 .


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Chapter V

Findings and Suggestions

Findings

Suggestions


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FindingsOn the basis of data presentation analysis and interpretation the major

findings of the study are as follows

1. Current ratioThe standard current ratio of the company is showing fluctuation trend.

Throughout the study period the current ratio of the company is decreasing

continuously. However the company was able to meet its current obligations

2. Liquidity ratioThe liquidity ratio of the company during more than standard ratio that is

1:1. this ratio also more than standard ratio. So it is a good sign for company.

3. Debtors Turnover ratioThe company is maintained his Debtors collection period .this is good for

company.

4. Working Capital Turnover ratioWorking capital turnover ratio is increasing continuously every year. It

shows that utilization of working capital is satisfactory.

5. Inventory to Working Capital ratioA high inventory turnover ratio is indicative of good inventory management.

The inventory to working capital ratios are in increasing trend. It means that the

last year the firm is selling its inventory rapidly.


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6. Current Asset Turnover ratioCurrent asset turnover ratio indicates contribution of current asset to sales.

Current asset turnover ratio was 1.57 times in year 2006-07 which is continuously

increased. The current assets are utilized effectively.

7. Net Profit ratioThe net profit of the firms was 1.211% in 2006-07 which decreased to

1.113% in the year 2007-08, again increased to 1.418% in 2008-09 and in 2009-10

i.e. last year it is 1.211%.

8. Cash & Bank Balance to Working Capital RatioThis ratio indicates that the huge amount of cash and bank balance of the

society is remaining every year. This indicates that the society has good future plan

for the better cash management and influencing the sale in coming years.

9. Cash ManagementThe Company is maintained Cash Balance. Cash and bank balance of the

Company is remaining every year. This indicates that the society has good

future plan for the better cash management also Company increasing in sale of

product.

10.Fund Flow StatementThe Company Fund flow statement show that the Working Capital is

decreasing & Purchasing Fixed Assets in 2009-10 in large quantity for opening

new sales center.


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Suggestions

On the basis of the findings we are suggesting here some of the

recommendation for the improvement of Working Capital Management by the

organization.

1. The current ratio of the company is more than standard ratio. But the ratio isdecreasing continuously every year. Therefore, it is suggested that the company

should emphasis on increasing current asset and reducing current liabilities in

order to fulfill its current obligation.

2. Working capital was utilized very fast in the year 2006-07 to 2009-10. Whenworking capital increases it is not good for the organization as burden of

interest increases, which reduce down the profit.

3. Debtors turnover ratio of a company showing decreasing trend. In the dairyindustry generally goods are sold against cash as such society should try to keep

debtors at minimum level.

4. Inventory turnover ratio of company showing increasing trend. But, it isrecommended that the company should use ABC analysis and EOQ technique

for improving inventory turnover ratio.


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5. Current asset turnover ratio shown increasing trend, which increased from 1.57times in 2006-07 to 2.59 times in year 2009-10. It indicates those current assets

are effectively used by the firm.

6. Net profit ratio of a company is very low, which decreased from 1.211% to1.113% during the period. In 2008-09 it is again increased to 1.418% and in

2009-10 the ratio is again decreased to 1.211%. So, there is need of a careful

and analysis of factor responsible for it. Also it is suggested to the company to

improve its profitability position by maximizing sales and controlling its costs.

Company expects to maintain growth and profitability in entire year.

7. Company should be maintain the Cash & Bank balance and also continues tomaintain the trend of Sale.


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BIBLIOGRAPHY

Financial Management Mr I.M. Pandey.

Management Accounting Mr M.G. Patkar.

Cash Management Mr Banerjee

Annual Reports of the Islampur Dudh Puravtha SahakariKendra Ltd., Islampur

Harsh Main

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