A project on analysis of working capital management

ANALYSIS OF WORKING CAPITAL MANAGEMENT

EXECUTIVE SUMMARY

Background of the Company:

This Project is carried out in Dharwad Milk Union, which is a part of Karnataka

Milk Federation (KMF). KMF is a co-operative apex body in the state of Karnataka

representing dairy farmer’s organization and also implementing dairy development

Karnataka activities to achieve the dairy objective. KMF has 13 milk unions and

Dharwad Milk Union is one among 13 unions. The project helps to study the practice in

Working Capital in DMU, in the past five years and to calculate finance management

performance in the past five years.

TITLE OF THE PROJECT:

“ANALYSIS OF WORKING CAPITAL MANAGEMENT” at Dharwad

Milk Union Ltd, Dharwad

Objectives of the Study

To study the management of inventories, account receivables and cash in the

firm.

To study the liquidity position of the firm .

To Comparison of present and last four years Working capital.

To know the current position Conclusion of the company.

Statement of the Problem:

The study has been taken in the organization for the purpose to know the

“Working Capital Management” of the company for five years.

Design of the Study:

The study is conducted at Dharwad Milk Union. The study was about the studying

the company profile, Annual Reports of last five years of the firm & operating cycle,

Need for the Study:

This study is undertaken to know the present liquidity position of the Dharwad

Milk Union, Dharwad. This project will throw light on firms competitiveness with other

firms and it also throw light on the financial position and adequate working capital,

which the firm possesses. This study carried out to know whether DMU has properly

Babasabpatilfreepptmba.com 1

ANALYSIS OF WORKING CAPITAL MANAGEMENT utilized its resources and assets are not and also ascertain the liquidity position of the

firm.

Data Collection:

The present study is carried out working capital position of the Dharwad Milk

Union, which attempts to analyze and interpretation by using ratio analysis technique &

concepts of working capital. Tabular formats are also used wherever necessary to show

the data calculations with necessary theoretical explanations.

Sources of Data:

Sources of data are can be classified into two categories:

1. Primary Data

2. Secondary Data

Primary Data:

The information is collected from the personal interaction with the

financial managers of DMU.

Secondary Data:

This is been is collected through DMU Annual Reports of last five

years i.e. 2004-05 to 2008-09 & also through;

1. Information form the internet sources

2. Information from the materials provided by the concern magazine,

newspapers Brouchers.

Findings:

i Inventory Turnover Ratio of Dharwad Milk Union is better in the year 2008-

09 compared to last five years 18.51.

ii Creditors Payments Ratio is improving in the recent year compared to last

five years.

Suggestions:

i In the recent years, the debt turnover ratio of Dharwad Milk Union is decreases so,

it is suggested to increases the debt turnover it help to maintain the debt collection.

ii It is suggested that Dharwad Milk Union reduce its operating cycle, so that it can

maintain sufficient working capital in the liquid form.


ANALYSIS OF WORKING CAPITAL MANAGEMENT Limitation of the study:

This study covers only a part of Dharwad Milk Union.

i )The study is done only on the Balance sheet and profit and Loss A/c

ii )Study is based on information provided by the company.



INDUSTRIAL PROFILE

Dairy Industry in India:

Dairy enterprise is an important occupation of farmer. In India nearly 70% of the people

depend on agriculture. It is the backbone of India. Dairy is linked with agriculture

industry to a large extent.

Animal husbandry in India is an essential part of agriculture. It is mainly a rural

occupation closely associated with agriculture.

Development of Dairy Industry in India:

During the Pre-independence year there was no serious stress given to dairy

industry. In 1886 the Department of Defense of the British Government established

the dairy farms for the supply of milk to the British troops in Allahabad.

Later, in 1920 serious steps were taken by Mr. William Smith, an expert in

dairy forming to improve the milk production There was discrimination done to the

Indians hence this led to the rise of the first milk union in India. In Lucknow in 1937

called the Lucknow milk producer’s Co-operative union Ltd.

In 1946 AMUL (Anand Milk Udyog Ltd) was started in Gujarat to bring up the

economic stability of villagers. When the farmer Prime Minister Lal Bahaddur Shastri

visited the functioning as it was rendering a social service to the society, which helped

the villagers to come in the national economic stream.

The dairy and Animal Husbandry received serious attention after the

independence. There were lots many of progressive steps taken by the government

through five year plans. This led to the formation of National Dairy Development

Board in 1965 & thus in 1970 he decided to Bring a “ White Revolution” through out

the country, Initially 10 states were selected were for this purpose excluding

Karnataka.


ANALYSIS OF WORKING CAPITAL MANAGEMENT In Karnataka in 1974 an integrated project was launched to restructure and

reorganize the dairy industry on Co-operative principle of AMUL and to lay

foundation for new direction in dairy industry.

NATIONAL DARIY DEVELOMENT BOARD:

History:

The NDDB was founded to replace exploitation with empowerment, tradition

with Modernity, Stagnation with growth, transforming dairy into and instrument for

the development of Indian’s rural people.

The NDDB was established in 1965; the board is registered under the Societies

Registration Act and the public Trust Act, fulfilling the desire of the Prime Minister of

India – the late Lal Bahaddur Shastri to extend the success of the Kaira Co-operative

Milk producers union (AMUL) TO OTHER PARTS OF India. Dr Vergese Kurien

was the founder chairman. The success combined the wisdom & energy of farmers

with professional management to successful capture liquid milk and milk product

markets while supporting farmer’s investment with inputs and services.

The Growth:

NDDB began its operations with the mission of making dairying a vehicle to a

better future for millions of gross roots milk producers. The mission archived helped

to launce ‘’Operation Flood’’, a programmed extending over 26 years and with the

help of World Bank Loan India become the world’s largest milk producing country.

As per March 2001 India’s 96000 Dairy Co-operative are integrated thorough a three

Tier Cc-operative structure. The Anand pattern, which is owned by more than 10

million formers, procures an average of 1605 million liters of milk everyday. The milk

is processed and marketed by 170 milk producers’ co-operative unions which, in turn

own 15 state co-operative milk marketing federation. Since its establishment the dairy

development board has planned and spearheaded India’s Dairy programmer by placing

dairy development in the hands of milk producers and the professionals they employ


ANALYSIS OF WORKING CAPITAL MANAGEMENT to manage their co-operatives. In addition, NDDB also promotes other commodity

based co-operative, allied industries and veterinary biologically on an intensive and

nation wide basis.

Objectives of NDDB:

To sponsor, promote, manage, acquire, construct or control any plant or work,

which promote projects of general public utility relation to dairying.

To make information available on request to technical services to increase

production of Milk.

To prepare initial feasibility studies of dairying and other dairy related projects

and undertake subsequent designing planning and start up those projects.

To undertake research and development programmed related to production and

marketing of milk and milk products.

To provide assistance for exchange of information to other international

agencies.

Services rendered by NDDB:

Planning dairy and rural development projects.

Organization of farmer co-operative societies.

Setting up of dairy and cattle feed plants.

Manpower planning and training.

Applied research and development.

Implementation of milk production enchantment programmed.

KARNATAKA MILK FEDERATION:

The first dairy in Karnataka was started in Kudige in Kodagu district in 1955,

further in June 1974; an integrated project was launched in Karnataka to restructure

and reorganize the dairy industry on the co-operative principle and to lay foundation

for a new direction in dairy development.

In 1975, the World Bank aided dairy development was initiated. The present

Karnataka Milk Federation (KMF) came into existence in 1984-as a result of merging

of Karnataka Dairy Development Co-operation, small co-operatives and Karnataka

Milk Production Development and loose vendors.


ANALYSIS OF WORKING CAPITAL MANAGEMENT At the end of the March 1998, the network of 8023 Diary Co-operative

Societies (DCS) have been established which are spread over 166 taluks of the total

175 taluks in all 27 districts of Karnataka. There are 13 Milk Unions and Dharwad

Milk Union (DMU) is one among them. There are 35 Chilling centers, 3 Farm coolers,

15 Liquid milk plants and 2 Product dairies for chilling, processing, conservation and

marketing of milk. To supply cattle feed there are 4 cattle feed plants.

To ensure supply of quality germ plasma Bull breeding farm and frozen semen

bank are also available.

Karnataka co-operative Milk Producers’ Federation Limited (KMF)

KMF is the apex Body in Karnataka representing Dairy Cooperatives. It is the

third largest dairy co-operative amongst the dairy co-operatives in the country.

To impart training, institutes at Bangalore and regional training institutes at

Dharwad and Gulbarga are functioning. Three nitrogen plants (2 plants of 25 CPM

and 1 plant of 5 CPM) are been set-up to supply nitrogen, which is used for

Refrigeration purpose. Three diagnostic centers have been set-up for monitoring

diseases: three fodder farms at Rajkunte, Kuttanahalli and Kodagu have been set-up to

supply good quality of fodder and seed production farm at Shahpur has been set-up.

The federation giving details of the latest technology in dairy industry etc is published

‘’Ksheer Sagar’’ magazine monthly.

UNITS OF KMF:

KMF has the following Units functioning directly under its control:

Mother Dairy, Yelahanka, Bangalore.

Nandini Milk Products, KMF Complex, Bangalore.

Cattle Feed Plants at Rajanukunte/Gubbi/Dharwad/Hassan.

Nandini Sperm Station (formerly known as Bull Breeding Farm & Frozen Semen

Bank) at Hessaraghatta.

Pouch Film Plant at Munnekolalu, Marathhalli.

Central Training Institute at KMF Complex, Bangalore.

Quality Control Lab at KMF Complex, Bangalore.



List of Co-operative Milk Producers’ Societies Unions:

KMF is a co-operative apex body in the state of Karnataka for representing dairy

organizations and also implementing dairy development activities to achieve the

following objectives.


ANALYSIS OF WORKING CAPITAL MANAGEMENT Providing assured and remunerative market for all the milk produced

by the farmer members.

Providing hygienic milk to urban consumers.

To build village level institutions in co-operative sector to manage the

dairy activities.

To ensure provision of milk production inputs, processing facilities and

dissemination of know-how.

To facilitate rural development by providing opportunities for self-

employment at village level, preventing migration to urban areas, etc.

FUNCTIONS OF KMF:

Co-ordination of activities between the unions.

Developing the markets for the increasing in milk production.

To make the brand ‘’Nandini’’ as a house hold name.

Excellence in quality is to be maintained to lay a solid foundation for

wide Spread acceptance of ‘’Nandini’’ products.

To increase the market share of ‘’Nandini’’.

THE GROWTH PROCESS:

The growth over the years and activities undertaken by KMF is summarized

briefly hereunder:

1976-77 2008-2009

Dairy Co-operatives Nos 416 11063

Membership Nos 37000 1956163

Milk Procurement Kgs/day 50000 3025940

Milk Sales Lts/day 95050 2129790/curd:1.77LKPD

Cattle Feed Consumed Kgs/DCS 220 3010

Daily Payment to Farmers Rs.Lakhs 0.90 342

Turnover Rs.Crores 2707.00


ANALYSIS OF WORKING CAPITAL MANAGEMENT SUPPORT TO TRAINING & EMPLOYMENT PROGRAMME

(STEP):

Karnataka Milk Federation is implementing a special program for overall

development of women folk in rural areas. This program is named as "Support to

Training and Employment Program for women" (STEP) launched during 1997 with

the financial assistance of Ministry of Human Resource Development, Department of

Women and

DHARWAD MILK UNION:

Dharwad District Co-operative Milk Producers' Societies' Union Ltd.

The Union was established in the year 1986 under the Operation Flood II & III.

The Union also later took over in 1988 the Milk Products Factory with a drying

capacity of 2.10 Lakh Litres per day, earlier established by the Karnataka Milk

Products Limited (GOK Undertaking).

The Union covers the districts of Dharwad, Karwar, Haveri & Gadag, and has

Chilling Centres at Gadag,Haveri, Sirsi, Ron, Nargund, Hirekerur & Kumta with

chilling capacity of 0.80 Lakh Litres Per Day.


ANALYSIS OF WORKING CAPITAL MANAGEMENT The Union procures and sells on an average 0.68 Lakh Kgs per Day and 0.59

Lakh Litres Per Day respectively. There are 7 Bulk Milk Coolers in the Union.

Apart from selling milk, it sells pure buffalo milk & produces very thick 250

gm Curds in mud pots specially designed for this namely "KUDIKE MOSARU", the

famous Dharwad Peda, Butter in bulk as well as in retail packs and in 10 gm chip lets,

Ghee, Skimmed Milk Powder and Paneer.

Functions of Dharwad Milk Union:

The main function of is to procure milk from villagers and pay

them the right price.

To educate the villagers about milk and its quality.

To make ’Nandini’ as a part of daily life.

To provide good quality of cattle feed, fodder, veterinary properly

and in an efficient manner.

Objectives of Dharwad Milk Union:

Providing hygienic and good quality of milk to the consumers.

To build the economic strength of the milk products in villages.

To eliminate middlemen’s in the business so that the milk products

receive there appropriate share of bread.

To educate the villages about the adulteration of milk and its

harmful effect on the body.

To see that every citizen becomes healthy by consuming good

quality of milk.

To make villagers self-viable and build self image.

Process at Dharwad Milk Union:

The milk collected at DCS’s is brought to the center thought carries trucks etc.

the quality and quantity of milk bought is checked at the Reception center by a

supervisor. A sample of milk is taken and is tested in a laboratory for fat content, Solid

Not fat (SNF) acidity etc.

As the milk is at room temperature is to be brought down to 40 c to 50 c. so that

it may check the growth of bacteria. To ensure this milk is passed through a chilling

chamber where the milk is chilled. Its temperature is bought down and then the milk is

stored in a tank called as Raw Milk Tank.


ANALYSIS OF WORKING CAPITAL MANAGEMENT From this tank milk is pumped to a pasteurizing cell where the milk is heated

up to 720 c and 15seconds, so that all the bacteria and microorganisms may be killed

and then the milk is simultaneously cooled to 40 C to 5o C and is store in a

‘Pasteurized Milk Tank’ From here the milk is separated according to the requirement

of production of different types of milk and the remaining milk is used for

manufacturing milk products.

Nature of business carried

One of the core functions is procurement of milk, processing it and marketing

milk and milk products. Dharwad Milk Union markets its products under the brand

name Nandini.

Mission Statement Dharwad Milk Union:

Dharwad Milk Union is commuted to provide maximum possible price for the

milk supplied by its members and provided necessary inputs for the milk production

while ensuring economic viability of the union and also committed to provide quality

milk products to consumer and image as one of the top most milk union of the co-

operative dairy industry in the country.

VISION DHARWAD MILK UNION:

Total quality

Honesty

Discipline

Cleanliness

Transparency

Sincerity and deduction

Co-operative free of politics

Sovereignty

Respective each other opinion ideas and feelings

PRODUCT PROFILE;



Nandini Toned: Fresh and Pure milk containing

3.0% fat and 8.5% SNF. Available in 500ml and

1litre packs.

Nandini Homogenized Milk: is pure milk which is

homogenized and pasteurized. Consistent right

through, it gives you more cups of tea or coffee and

is easily digestible.

Full Cream milk: Containing 6% Fat and 9 %

SNF.A rich, creamier and tastier milk, Ideal for

preparing home-made sweets & savories.

Cow's pure milk: UHT processed bacteria free in a

tamper-proof tetra-fino pack which keeps this milk

fresh for 60 days without refrigeration until opened.

Available in 500ml Fino and in 200ml Bricks

Nandini Ghee: A taste of purity. Nandini Ghee,

made from pure butter. It is fresh and pure with a

delicious flavor. Hygienically manufactured and

packed in a special pack to retain the goodness of

pure ghee. Shelf life of 6 months at ambient

temperatures. Available in 200ml, 500ml, 1000ml

sachets, 5lts tins and 15.0 kg tins

Nandini Curd: made from pure milk. It's thick and

delicious. Giving you all the goodness of homemade

curds. Available in 200gms and 500gms sachet.



Nandini Peda: No matter what you are celebrating!

Made from pure milk, Nandini Peda is a delicious treat

for the family. Store at room temperature approximately

7 days Available in 250gms pack containing 10 pieces

each.

Nandini Gulab Jamoon Mix: Great way to those soft

and juicy jamoon treats at home! Nandini Gulab

Jamoon Mix is made from Nandini skimmed milk

powder, maida, soji and Nandini Special Grade Ghee.

Available in 100gms and 200gms standy pouch with a

five layer foil lamination. Shelf life of 6 months.

Nandini spiced Butter Milk: is a refreshing health

drink. It is made from quality curds and is blended with

fresh green chilies, green coriander leaves, asafoetida

and fresh ginger. Nandini spiced butter promotes health

and easy digestion. It is available in 200 ml packs and is

priced at most competitive rates, so that it is affordable to all sections of

people.


ANALYSIS OF WORKING CAPITAL MANAGEMENT Flavored milk: Sterilized flavored milk, a nutritious and healthy drink and an

all-season wholesome drink available in five different flavors - pineapple, rose,

badam, pista.

Nandini Butter: Rich, smooth and delicious. Nandini

Butter is made out of fresh pasteurized cream. Rich taste,

smooth texture and the rich purity of cow's milk makes

any preparation a delicious treat. Available in 100gms

(salted), 200gms and 500gms cartons both salted and

unsalted,

ORGANIZATIONAL STRUCTURE

DEPARTMENTS OF THE COMPANY:


BOARDBOARD

Directors(8members)Directors

(8members)

Ex officers(5members)

Ex officers(5members)

Govt nomineesGovt nominees

ProcurementDept

ProcurementDept

Product president director

Product president director

Marketing deptMarketing deptAdministrative

dept Administrative

dept Finance deptFinance dept Security deptSecurity dept

Transport Transport Quality controlQuality control F.G.S& storesF.G.S& stores M.I.SM.I.SAccounts &

purchaseAccounts &

purchase

ANALYSIS OF WORKING CAPITAL MANAGEMENT Production department

Administration department

Purchase department

Procurement & input department

Stores department

Security department

Processing department

Quality control department

Finance department

Marketing department

Distribution department

Human Resource development

DHARWAD MILK UNION PROFILE:

Status A co-operative society registered under the

co-operative Act 1959.

Location Lakmanahalli, industrial area, Dharwad

Share capital 3 crores by members and 2 crores by

government of Karnataka

Plant capacity 2 lakh liters per day

Milk powder 12tons/day

Butter 6tons/day

Ghee 6tons/day

Milk chilling centers Gadag 20,000 ltrs/day

Haveri 20,000 ltrs/day

Hirekerur 20,000 ltrs/day

Naragund 8,000 ltrs/day

Ron 10,000 ltrs/day

Sirsi 20,000 ltrs/day

Presence value of Collection of Milk 80,000 ltrs/day


ANALYSIS OF WORKING CAPITAL MANAGEMENT activity Sales of Milk 70,000 ltrs/day

Area of operation Dharwad, Haveri, Gadag, Uttar kannada

districts

Board of directors Elected members 8

Ex officers 3

By govt 5

Total workers 393 workers

Departments 9

Brand name NANDINI

Products Milk:

Toned Milk, full cream milk, standard

milk, shubham milk, homogenized milk.

Milk products:

Butter, ghee, curd, lassi, paneer, milk

powder, khova, peda, mysore pack etc……

Co-operative

societies at village

level

460 socities


ANALYSIS OF WORKING CAPITAL MANAGEMENT PURCHASE DEPARTMENT:

It also maintains records of all the suppliers calls for Tenders, quotations etc.

Quotations with lowest rate are sanctioned. Purchase up to 50,000, then the approval of

Managing Director.

The structure of Purchase Department is as shown:

PRODUCTION DEPARTMENT:

Production department is the main department wherein the raw material is

converted into finished into products. At DMU production department is well planned &

adequately equipped manufacturing set up where the entire necessary infrastructure is

available. The quality of the product is also dependant on the production procedure.

In DMU the raw milk is processed to form the good quality of milk. During the

processing the milk is differentiated depending on the contract of FAT & SNF (Solids Not

Fat)

The different types of milk different in quality are

TYPES OF MILK FAT SNF

Full Cream Milk 6% 9%

Toned Milk 3% 8.5%

Standardized milk 4.5% 8.5%

Full Cream Milk 6% 9%

Shubham milk 6% 9%

.


Purchase officer

Purchase superident

Assistant purchase officer

Helpers

ANALYSIS OF WORKING CAPITAL MANAGEMENT ORGANIZATION CHART OF PRODUCTION DEPARTMENT

PRODUCTION PROCESS


MANAGERMANAGER

Deputy managerDeputy manager Office staffOffice staff

Assistant managerAssistant manager

Technical officerTechnical officer

Senior supervisorSenior supervisor

Junior supervisorJunior supervisor

Dairy operationDairy operation

Dairy technicianDairy technician

Dairy workerDairy worker

Assistant (stores)Assistant (stores) Assistant(account)Assistant(account)

ClerkClerk TypistTypist



DCS

Fresh liquid milk Sample testing Fat & SNF

Chilling

Storing

Pasteurization

Separation

Homogenization

Storing

Packaging

Dispatching

ANALYSIS OF WORKING CAPITAL MANAGEMENT THE PRODUCTION PROCEDURE AT DMU IS DONE UNDER

DIFFERENT STAGES. THE STAGES ARE AS FOLLOWS:

COLLECTION OF MILK:

In this stage the milk is bought from the various district co-operative societies

(DSC) to the main dairy in a can of 40 litters capacity in tempo’s or in any other

vehicles. The cans marked with two different colors to differentiate between the cow

& the buffalo milk. One the milk is bought to the main dairy it undergoes into

following process.

UNLOADING:

The cans were unloaded is called as dock station. The cans are unloaded from

the vans manually.

ORGANOLEPTIC TEST

This test is carried out by a person manually without using any machines but

using his sense organs like nose & hence it is called as organoleptic test. This test is

conducted before the cans are weighed. In this test various sub-tests are conducted like

SMELLING (ODOUR) TEST:-

A man at dock station or platform checks the acidic nature of milk by smelling

or tasting the raw milk. If the tasted milk has bad odors then the dairy will pay lower

rate to such society members than the normal rate.

EXTRANEOUS-MATTER APPERANCES:-

In this test the raw milk is undergone into the test, which is conducted by the

chemist. The chemist checks for two aspects mainly whether the milk is contaminated

or not & the milk is in liquid form or curd form. He also checks for any extraneous

matters like dust, flies etc. which lead to spoilage of milk.

ACIDIC TEST

As the payment to the suppliers or DSC depends mainly on FAT & SNF

content of the raw milk. The supplier may add sugar to the milk so as to increase the

FAT & SNF content. Hence to avoid this adulteration sugar test is done.

Its procedure is 10ml of milk is shaken in a test tube & 1ml of hydrochloric

acid. Few crystals of resorcinol are mixed to it. The solution is shaken well & heated

for five minutes. If solution turns organ color it is demanded that sugar is mixed to it.



STORAGE OF CHILLED MILK:-

Once all the tests are over, the milk is allowed to store in the SILOS (Storage

tank). So as to maintain its cold level of 4 degree calicoes. The unions having 7 storage

tanks, 3 tanks are vertical with 30000 litters’ capacity each and the remaining 4 are

horizontal among which 2 are having the capacity of 10000 litters each and other 2 of

15000 litters each. After chilling the milk is passed through pasteurizer for pasteurization.

PASTEURIZATION:-

This step of production includes heating every partical of milk at 72 degree

celcious in 15 seconds and it cold in less then 4 degree celcious. When it is passing

through pasteurization the cream is removed depending on the quality of the milk

required (standardization).

PACKING:-

Once the pasteurization closed is conducted the next step is to pack the milk.

The packing is done by the machine of fluid goods and were as it is done manually in

case of solid goods like pheda. The machine packs the raw milk in two sizes that is

500ml and 1000ml pouches. These machines are automatic with a capacity of packing

10000 to 14000 pouches per hour. The speed can be even altered according to

suitability. These machines are used to pack all different types of milk in plastic bags.

These plastics are polythene bags required for packing milk is bought from Bangalore.

STORAGE:-

The last but not the process is the whole of production process is storage. The

milk packed in 500ml and 1000ml pouches are arranged in the crates. Each cater contain

10 litters of milk. This caters are stored in cold room which has a temperature of about 5

degree Celsius or below


ANALYSIS OF WORKING CAPITAL MANAGEMENT ADIMINISTRATIONDEPARTMENT:

FUNCTOINS

Maintenance of attendance.

Establishment of billing.

Maintenance of service records.

Domestic enquiry.

To maintain shifts timing.

To look after recruitment process.

Conducting training to the new employees and also to

the existing once.

RESPONSIBILITIES OF ADMINISTRATION DEPARTMENT

To look after the overall administration of time office

management.

Conducting training to the new employees and also to the

existing once.

To look after over recruitment process.

To maintain shifts timings.


ANALYSIS OF WORKING CAPITAL MANAGEMENT Organization chart of procurement and input department

The union carries procurement by setting up co-operative societies at village

level. Later milk is collected in the chilling center, milk collected from the milk center, is

first tested, there are milk testing equipments for this purpose. Then a survey on

availability of transportation facilitates and productive capacities of villages are

conducted. If the marketable surplus is more than 150 litters per day, a society is formed;

further 10 promoters selected from village and are given responsibility of collecting the

capital for society selling shares. Procurement is done twice a day and payment is made

on the basis of percentage of the content Fat and SNF in the milk

After this milk is sent to unions chilling center, whichever is near. At the chilling

center, milk is chilled up to 4 degree Celsius. Letter this chilled milk is to sent to union

insulated tankers for further processing. The main function of this department is to

procure milk from different areas throughout the year


ManagerManager

Procurement wingProcurement wing Technical input wingTechnical input wing

Deputy Manager Deputy Manager


Extension officers Extension officers

ClerksClerks

HelpersHelpers

Deputy ManagerDeputy Manager


ClerksClerks


STORES DEPARTMENT:

The stores Department in DMU follows the Codex system (Coded Control

System). A card is maintained for each item and a number is allotted. The card attached

to each article consists of amount balance, date of issue, purchase etc. this is later

recorded in separated ledger book. The inventories are of different types ranging from

mechanical, shares, packing items to animal drugs, and stationary and veterinary drugs,

there are at least 4000 different inventories.

This department has the following services:

It tries to maintain maximum and minimum level of inventory so as to avoid

blockage of capital and storage.

Ordinary and local available commodities are maintained at minimum possible

level.

Items of urgent and not easily available are stored sufficiently for further

demand.

The structure of this department is as shown below:



FINISHED GOODS STORES:

This Department acts as an interface between production and Marketing

Department . it is concerned with maintenance of finishes goods connected records. it

received all the finished goods and issues the stock to marketing department as per

indents. It ensures that the goods are maintained properly with respect to quality.

Accounts are maintained and daily and daily and daily and monthly report is

submitted to the production. Marketing finance Departments. As the products. As

finishable first in-first out method of inventory is followed.

Times FGS Department has the following Structure:

QUALITY CONTROL DEPARTMENT:

The Quality Control department has the following structure



In DMU, at every stage, care is taken to ensure that the customer gets the product,

which has a very high quality. Hence there is separate department called Quality

Department, where the quality testing is done. Quality control is very essential as to

maintain the freshness of the milk. All the containers, pipes and other equipments are

washed with hot water before starting off with new production. There are many tests

conducted here. The packed milk, we get will have undergone 3 quality tests. First test

is done on raw milk, which we get from chilling center. Next before standardization and

the last test before packing

TEST

REASON

Temperature

Should be below 5 degrees

Clot on Boiling If mill curdles soon after

billing milk is rejected

Acidity Test To test the extent of acidity

Alcohol Test

To check the heat stability of

milk

Lactometer To check the density of milk

Fat Test Percentage of fat determined

SNF Percentage of SNF

determined for pricing

SNF=CLR+FAT/4



FINANCE DEPARTMENT:

This department is responsible for keeping all the inward and outward flow of money

of union. It prepares budget every year and financial rules for receipts all payments are

framed. The functions of these departments. Are:

To prepare monthly accounts (Receipts and payment P & I Account and Balance

sheet).

To prepare quarterly financial statement

To prepare integrated business plan.

To prepare year ending financial statements.

To get accounts audited from statutory books of accounts.

DMU Follows to types of auditing:

1. Pre-Audit System-done by Finance and Account Department every Year.

2. Statutory System-Done by Private charted accounts every year.

SECURITY DEPARTMENT:

Dharwad Milk occupies 25 acres of land the whole premise is been guarded by

the security personnel. The security people work in three shifts. All the vehicles are

checked before entering the premise. The departments is also maintains separate

registers like store-in Register, Attendance register etc.

Channels of distribution system:

I. DMU --- Transportation Vehicles --- Dealers

Door delivery boys -- Consumers

II. DMU ----Transportation Vehicles --- Institutions.

(institutions :hospitals, hotels , hostels etc.)

III. DMU ----Transportation Vehicles --- Parlours -- Consumers.

IV. DMU ----Transportation Vehicles---- Day Counters --Consumers.



Price list of milk and milk products.

SL. Products’ name Net Amt Commission MRP

1 Tonned milk/ltr 16.40 0.60 17.00

2 Standard milk/ltr 18.00 1.00 19.00

3 Double tonne milk/ltr 15.00 1.00 16.00

4 Homogenized std

milk/ltr

17.00 1.00 18.00

5 Curds 18.00 2.00 20.00

6 Butter milk 11.40 1.60 13.00

7 Peda/kg 116.00 12.00 128.00

8 200ml Ghee 186.36 18.64 205.00

9 500 ml Ghee 180.90 18.10 199.00

10 1000ml Ghee 177.27 17.73 195.00

11 S.F.M/bottle 10.48 1.52 12.00

12 Jamoon mix/200gm

pack

27.83 4.17 32.00

14 Mysore pack/kg 196.40 23.60 220.00

15 Paneer 115.00 10.00 125.00

16 Butter 500gm 151.79 18.21 170.00



The structure of finance Department is as shown:

Deputy Manager:

MARKETING:

A social and managerial process whereby individuals and groups obtain

what through creating and exchanging products and value with others.

Marketing more than any other business function deals with customers, building

customer relationship based on customer value and satisfaction is at the very heart

of modern marketing.

MARKETING IN DMU:


ANALYSIS OF WORKING CAPITAL MANAGEMENT Marketing is an important segment of Dharwad Milk Union. Marketing

activities are extended to many other districts:

For Example

Dharwad

Haveri

Gadag

Dharwad Milk Union comprises of two dairies and more No. of Six chilling centres.

Its present capacity of production is 2,50,000liters of milk per day.This 2,50,000

litres milk is distributed as detailed below:

80,000 litres is supplied to the local consumers

10,000 litres is supplied to dynamic milk dairy

20,000 litres is supplied to other states

Remaining 50,000 litres is utilized for making powdeMARK

THE MARKETING DEPARTMENT HAS THE FOLLOWING

STRUCTURE


Marketing Manager

Marketing Manager

Deputy Manager Deputy Manager Technical OfficersTechnical Officers

Marketing Superintendent

Marketing Superintendent

Development Officer

Development Officer

VanshroffsVanshroffs

Marketing Assistant

Marketing Assistant

Development Officer

Development Officer

VanshroffsVanshroffs

Marketing Assistant

Marketing Assistant


PRICING STRATERGY

Pricing decisions are subject to an incredibly complex arry of environmental

and competitive forces. A Company sets not a single price but rather a pricing

structure that covers different items in its line.this pricing structure changes over

time as products move through their life cycle. The company adjusts product prices

to reflect changes in costs and demand and to account for variations in buyers and

situations. As the competitive environment changes, the company considers when to

initiate price changes and when to respond to them.

DMU’s PRICING STRATERGY

D.M.U produces different milk products to cater efficiently the variety milk

needs of the urban and semi urban consumers of the jurisdiction covering many

district Viz., Dharwad, Gadag, Haveri, Dhavanageri etc.

Diferent prices are changed to different types of milk on the basis of content of

FAT and SNF (Solid not FAT)

Sl.

No. TYPE OF MILK FAT &SNF

SELLING PRICE(in

Rs.)

1

Double Toned

Milk

1.5% FAT 9.0%

SNF 11

2 Toned Milk

3.0%FAT 8.5%

SNF 13

3

Standardised

Milk

4.5% FAT 8.5%

SNF 14.5

4 Full Cream Milk

6.0% FAT

9.0%SNF 18



MILK PRODUCER CO-OPERATIVE SOCIETY’s

PRICING:

Sl.

No. TYPE OF MILK FAT &SNF SELLING PRICE(in Rs.)

1 Cross Breed Cows 3.0%FAT 8.5% SNF 8.6

2 Local Breed Cows 4 to 5% FAT 8.5% SNF 9.5

3 Local Buffaloes 6% FAT 9%SNF 10 to 10.50

4 Cross Breed Buffaloes 8 to 10%FAT 9 to 10% SNF 11 to 12.00

MARKETING DEVELOPMENT PROGRAMS BY DMU

Dharwad milk union has been catering efficiency to the quality milk needs of the

urban and semi urban consumers by supplying fresh districts of Dharwad, Gadag, Haveri,

Dhavanageri etc.

Over the years the union had been taking many steps to meet the charging consumers

needs, availability of milk variants and milk products to meet the of the consumers areas for

imeplementation during year 2009-10

Priority areas for the development of liquid milk market in the union area are

identified

And necessary action plans have been drawn for implementation during the year 2008-

09. the key strategies planned for 2008-09 is given below



1) INCREASING THE AVAILABILITY OF NANDINI MILK IN THE MARKET

2) CONSUMER AWARENESS PROGRAMME

3) MOTIVATING CHANNEL MEMBERS

4) CONSTITUTING EFFECTIVE REPLACEMENT/ LEAKAGE POLICY

5) SYSTEM OF CONSUMERS/RETAILERS GRIEVANCE REDRESSAL

6) STREAMING TEAM CONCEPT FOR MARKET VISIT

7) CONSTITUTING A CORE GROUP CONSISTING QUALITY,

PLANT AND MARKETING STAFF FOR SOLVING DAY TO

DAYPROBLEMS

Marketing Development programs by DMU

Increasing the availability of Nandini milk in the market

a) by expanding the retail market in the Union Area

1)Introduction of an adhoc milk distribution route to Dharwad city from morning 8.00

A.M. to 6.00 P.M.at regular intervals to cater to

the retailers needs after normal vending hours.

2) Introduction of afternoon milk distribution route to other roots and towns so as

to make Nandina milk available throughout the day in many towns.

b)Strengthening existing milk parlours, depots and day counters:

Dharwa

d Gadag haveri total

Milk 8 5 7 20

Day Conterrs 3 4 5 16

Depots 6 7 5 18


ANALYSIS OF WORKING CAPITAL MANAGEMENT There are totally 20 milk parlours, 16 day counters and 18 depots

operating in he union area. It is decided to strengthen these existing outlets

through building up of cold chain facilities ‘and exended hours of supply of milk.

c)Introduction of one liter sachet standardized homogenized milk to me market

during august 2005 during day time .

d)Introduction of lassi/flavoured milk during January 2008.

CHAPTER III

STUDY DESIGN



TITLE OF THE STUDY

SYSTEM

The stores Department in DMU follow the Codex system (Coded Control system).

A card is maintained for each item and a number is allotted. The card is attached to each

article consists of amount balance, date of issue, purchase etc. this is later recorded in

separate ledger book. The inventories are of different kind ranging from mechanical,

spares, packing items to animal drugs etc.

THIS DEPARTMENT HAS THE FOLLOWING SERVICES:

1. It tries to maintain maximum and minimum level of inventory

2. Ordinary and locally available commodities are maintained at minimum

possible level.

STAFFING

The staff deals with the various personnel policies followed by the organization.

Below are given the personnel policies followed by the organization.

Personnel policies:

There are around 240 employees working. There are various policies followed.

The Administrative department forms the policies.

RECRUITMENT AND SELECTION:

Due to registration, termination, retirement and transfers the concerned

department head will give the manpower requirements along with the job description.

The manpower sourcing is done through advertisement, manpower consultant, and

employment exchanges and personnel reference.

PROMOTION:

Promotion is on the basis of seniority


ANALYSIS OF WORKING CAPITAL MANAGEMENT INTRDUCTION:

After an employee is employed in DMU, he\ she has to make familiar to the union

and also to know the objective, value, functions and the operations. This helps the

employees to interact with senior staff members from various departments.

SALARIES AND EMPLOYEE BENEFITS:GROSS SALARY:

A regular staff member in the union will have a gross salary consisting of basic

salary, dearness allowance, cca, house rent allowance and conveyance allowance.

Other facilities:

Shift allowance

Canteen facility

SKILLS

These are the distinctive competencies that are present in the organization it is the

design and development of products quality and service or viability of product. The

employees in this organization also have all the distinctive skills that are required for the

undertakings of research and development activities. The DMU is improving the

employee’s skills and techniques through motivating them and giving proper training to

them also through giving proper working condition.

STYLE

DMU has top to bottom or top down style system.The style of organization is

authoritarian. It means management cadre follows authoritative.

The indicators of the style are:

Follows rules and orders

Reliable and dependable

DECISION MAKING PARAMETER FOR DAY-TO-DAY

OPERATION:

Top manager will tell marketing manager to collect information regarding daily

requi9rementsw of the sale of milk and milk products based on demand. Then this

information will provided to production department indicating production activities

SHARED VALUES


ANALYSIS OF WORKING CAPITAL MANAGEMENT The core or fundamental values that are widely share in the organization and serve

as guidelines that are important, these values have great meaning because they focus

attention and provide broader since of purpose.

The values of the organizations are

1) Customer Satisfaction

2) Commitment to total quality

3) Cost and time consciousness

4) Innovative and creative

5) Trust and team spirit

6) Respect for individually



WORKING CAPITAL MANAGEMENT

INTRODUCTION:

Management of the working capital is nothing but the management of current assets.

The management of the current assets includes Inventory, Received, Debtors, Book debts,

Short-term assets cash and bank balances. The management of fixed and current assets,

however differs in three important ways.

1. In managing fixed assets time is a very important factor, consequently, discounting and

compounding techniques play a significant role in capital budgeting and minor one in the

management of current assets.

2. The large holding of current assets, especially cash, strengthens, the firm’s liquidity

position (reduces riskiness), but also reduces the overall profitability. Thus a risk returns

trade off is involved in holding current assets,

3. Level of fixed as well as current assets depends upon expected sales, but it is only current

assets, which can be adjusted with sales fluctuations in the short run. Thus the firm has a

greater degree of flexibility in managing current assets.

Working Capital refers to the amount of capital which is readily available to an

organization that is, working capital is the difference between resources in cash and readily

convertible into cash (current assets) and organizational commitments for which cash will

soon be required (current liabilities).

Thus, working capital involves activities such as arranging the short-term finance,

negotiating favorable credit terms, controlling the movement of cash, administrating accounts

receivables and monitoring the investments also a great deal of time.

TYPES OF WORKING CAPITAL:


ANALYSIS OF WORKING CAPITAL MANAGEMENT A) On the Bases of Concepts:

There are two concepts of working capital –

1. Gross Working Capital:

It refers to the firm’s investment in current assets. Current assets are the assets which

can be converted into cash within an accounting year and include cash, short-term securities,

debtors, bills receivables and stock (inventory).

2. Net Working Capital:

It refers to the difference between current assets and current liabilities. Current

liabilities are those claims of outsiders which are expected to mature for payment within an

accounting year and include creditors, bills payable, and outstanding expenses.

Net working capital can be positive or negative. A positive net working capital will

arise when current assets exceed current liabilities. A negative net working capital occurs

when current liabilities are in excess of current assets.

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

management:

(a) How to optimum investment in current assets.

(b) How should be current assets financed.

The level of investment in current assets should avoid two danger points-

excessive and inadequate investment in current assets. Investment in current assets should

be just adequate, not more, not less, to the needs of the business firm. Excessive

investment in current assets should be avoided because it impairs firm’s profitability, as

idle investment earns nothing. On the other hand, inadequate amount of working capital

can threaten solvency of the firm because of its inability to meet its current obligations.

The working capital needs of the firm may be fluctuating with changing business activity.

B) On the Basis of Time:

1. Permanent Working Capital:

Permanent Working Capital is permanently locked up in the circulation of current

assets.


ANALYSIS OF WORKING CAPITAL MANAGEMENT It covers the minimum amount requested for maintaining the circulation of current assets.

(a) Initial Working Capital:

At its inception and during the formative period of its operations a company must have

enough cash fund to meet its obligations. The need for initial working capital is for every

company to consolidate its position.

(b) Regular Working Capital:

It refers to the minimum amount of liquid capital required to keep up the circulation

of the capital from the cash inventories to account receivable and from account receivables to

back again cash. It consists of adequate cash balance on hand and at bank, adequate stock of

raw materials and finished goods and amount of receivables.

2. Variable Working Capital:

It refers to the past of the Working Capital that changes with the volume of

business, it may be divided into two classes.

(a) Seasonal Working Capital:

There is many line of business where the volumes of operations are different and

hence the amount of working capital varies with seasons. The capital required to meet the

seasonal needs of the enterprise knows as Seasonal Working Capital.

(b) Special Working Capital:

The capital required to meet any special operations such as experiments

with new products or new techniques of production and making interior advertising

campaign etc, is also know as Special Working Capital.

Needs of Working Capital:

The need for working capital to run the day-to-day business activities cannot be

overemphasized. We will hardly find a business firm which does not required any amount

of working capital. Indeed, firms differ in their requirements of the working capital.

The firm’s aim is that maximizing the wealth of shareholders. Earning a steady

amount of profit requires successful sales activity. The firm has to invest enough funds in

current assets for generating of sales activity. Current assets are needed because sales do not

convert into cash instantaneously. There is always an operating cycle involved in the

conversion of sales into cash. Therefore Working Capital required for:


ANALYSIS OF WORKING CAPITAL MANAGEMENT 1) To meet the cost of inventories including total of raw materials purchased parts,

operating

Supplies, work in progress, finished goods.

2) To pay wages, salaries, for indirect labor, clerical staff, managerial and supervision

staff.

3) To meet overhead costs, including those of maintenance services activities, fuel, power

charges, taxes and general expense administration.

4) To bear the expansion (with regard to promotion of sales) e.g. expenses on packing,

advertisement, salesmanship, Sales Servicing, After requires, Credit Facilities, Delivery

Services, etc.

IMPORTANCE OF WORKING CAPITAL MANAGEMENT:

Adequate working capital created certainty, security and confidence in the minds of

the persons in the management as well as in the minds of creditors and workers.

1) It creates a good credit standing for the firm because credit standing depends upon the

ability to pay promptly. A Company with adequate working capital is always able to

meet current liabilities.

2) It ensures solvency and stability of the enterprises. It also ensures continuity in

production and sales.

3) It enables the company to take advantage of cash discount offered by the suppliers of

raw materials or merchandise.

4) It enhances the prestige of the company and moral of its workers because a company

with adequate working capital is always able to pay wages and salaries promptly and

regularly.

5) It enables the company to procure loans from banks on easy and competitive terms.

OBJECTIVES OF WORKING CAPITAL MANAGEMENT:

The objectives of Working Capital Management are as follows:

1) It is in terms of profitability and risk, the aggressive financing strategy and the

conservative financing strategy for total-permanent and seasonal-fund requirements.


ANALYSIS OF WORKING CAPITAL MANAGEMENT 2) The need for working capital as related to operating/cash cycle, permanent and

temporary working capital.

3) In general terms the factors having a bearing on the total quantum of working capital

required.

4) The computation of working capital, using both the cash cost approach and the

operating cycle approach.

Components of Working Capital

There are two components of Working Capital

A. Current Assets

B. Current Liabilities

A) Current Assets:

Components of Current Assets are as follows:

1. Cash & Bank Balance

2. Stock of Raw Material at cost- work in process and Finished Goods.

3. Advanced Recoverable in Cash or kind or kind or for value to be received.

4. Deposits under the company scheme.

5. Advanced payment of income takes credit certificates..

6. Outstanding debts for a period exceeding six months.

7. Balance with central excise authorities.

B) Current Liabilities:

Components of Current Liabilities are as follows:

1. Sundry Creditors for the goods and expenses.

2. Income tax deducted at sources from contractors.

3. Expenses Payable.

4. Unclaimed Dividend.

5. Security Deposits.

6. Liabilities for bills discounted.

7. Bank Overdraft Acceptance.

OPERATING CYCLE:


ANALYSIS OF WORKING CAPITAL MANAGEMENT Operating Cycle or Working Capital Cycle indicates the length of time between affirms

paying for raw materials entering into finished stock and receiving cash on the sales of such

Finished Stock.

This operating cycle differs from firm to firm. Longer the operating cycle greater will be

the amount of Working Capital required and vice versa. Thus it plays an important role in

determining the Working Capital needs of a firm.

Operating Cycle is the time duration required to convert sales, after the conversion of

resources into inventories, into cash. The operating cycle of a DMU involves three phases.

1. Acquisition of resources such as raw material, labour, power and fuel etc.

2. Manufacture of the product which includes conversion of raw material into work-

In- progress into finished goods.

3. Sales of the product either for cash or on credit. Credit sales creates book Debts for

collection.

In the Dharwad Milk Union (manufacturing concern), the working capital operating

cycle starts with the purchase of raw materials and ends with the realization of cash from the

sale of finished products. It is also called as cash conversion cycle, production cycle etc. It


Cash Raw Materials

Work In Process

Milk & Milk Products

Sales

Debtors

ANALYSIS OF WORKING CAPITAL MANAGEMENT involves the purchase of raw materials and stores, its into stocks of finished goods through

the work-in-Progress with the progressive increment of labor and service costs, conversion of

finished goods (Milk & Milk Products) into sales, Debtors and receivables and ultimately

realization of cash and this cycle continuous again from cash to purchases of raw material

and so on.

DETERMINANTS OF WORKING CAPITAL:

The following is the description of factors which generally influence the working

capital requirements of Dharwad Milk Union –

1. Nature of Business:

This is one of the primary factors influencing the working capital requirements of a

firm. The DMU is a manufacturing firm, has a longer operating cycle for manufacturing the

products, and investing more funds in its current assets. Therefore, it requires much more

working capital.

2. Manufacturing Cycle:

It comprises of the purchase and use of raw materials and the production of

finished goods. Longer the manufacturing cycle, large will be the firm’s working capital

requirements.

3. Credit Policy:

The credit policy relating to sales and purchases also affects the working capital.

The credit policy influences the requirement of working capital in two ways:

i Credit terms generated by the firm to its customers.

ii Credit terms available to the firm from its creditors.

4. Growth & Expansion:

As a firm grows, it is logical to expect that a large amount of working capital is

required. The growth in volume of the business effects the requirements of working capital. If

the firm goes on diversifying its activities, the working capital is also increases.

5. Price Level Changes:


ANALYSIS OF WORKING CAPITAL MANAGEMENT Changes in the price level also affect the requirements of working capital. The rising

price levels will require a firm to maintain higher amount of working capital. Same level of

current assets will need increased investment when price are increasing.

6. Operating Efficiency & Performance:

The operating efficiency of the firm relates to the optimum utilization of resources at

minimum costs. The firm will be effectively contributing to its working capital if it is

efficient in controlling operating costs. The use of working capital is improved and pace of

cash cycle is accelerated with operating efficiency.

7. Level of Taxes:

Tax liability is the short-term liability day able in cash. The amount of taxes to be

paid in advance creates the need for working capital. If the tax liability increases, it leads to

an increase in the requirement of working capital and vice versa. The need for working

capital varies with the tax rates and advance tax provisions.

8. Sales Growth:

The working capital needs of the firm increase as it sales grow. The growing firm may

need to invest funds in fixed assets in order to sustain its growing production and sales. This

will in turn, increase investment in current assets to support enlarged scale of operations.

WORKING CAPITAL MANAGEMENT CONCERNED WITH THE

FOLLOWING ASPECTS:

1. Cash Management:

Cash is the important current asset for the operation of the business. cash is the

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

output expected to be realized by selling the service or product manufactured by the firm.

The firm should keep sufficient cash, neither more nor less.

Cash is the liquid form of an asset. It is the ready money available in the firm or

with the business, essential for its operations. A firm needs the cash for the following three

purposes:

(a) The Transaction Motive:

(b) The Precautionary Motive:


ANALYSIS OF WORKING CAPITAL MANAGEMENT (c) The Speculative Motive:

2. Receivables Management:

Receivable represents amounts owed to the firm as a result of sale of goods

or services on the ordinary course of business. These are claims of the firm against its

customers and form part of its current assets. These receivables are carried for the

customers. The period of credit and extent of receivables depends upon the credit

policy followed by the firm. The main purpose of maintaining or investing in

receivables is to meet competitors, to increase sales, and to maintain a cordial

relationship with the clients.

3. Inventory management:

Every enterprise needs inventory for smooth running of its activities. It serves

as a link between production and distribution process. There is, generally a time lag

between the recognition of a need and its fulfillment. The greater the time lag, the higher

the requirements for inventory. The unforeseen fluctuations in demand and supply of

goods necessitate the need for inventory. Moreover, it provides a cushion for future price

fluctuations.

.





ANALYSIS AND INTERPRETATION

D.M.U is one of the most reputed companies in the Karnataka. D.M.U, leading milk

& milk products co-operative society, aims at providing health and toned milk to its

consumer at a better and reasonable price. D.M.U is facing competition from various

manufactures of milk & milk products.

The study is conducted in D.M.U to measure the working capital

management of the company. The working capital management is the most important tool of

measure the liquidity position of the company. Every company as to maintain good

management of working capital, so the working capital of a D.M.U since its establishment is

cause of worry, as it has fails to produce desired results. The D.M.U, instead of generating

trading surplus for economic uplift of milk producers has become a loosing venture. So, this

study is undertaken to observe the management of Working Capital through Ratio Analysis

Technique, because ratio analysis is the important tool to measure the working capital

management. So I had taken the five years annual reports to measure the working capital

management.

Note: we have used the ratio analysis in this project in order to substantiate the managing of

working capital. For this, we used some of the ratios to get the required output.

The present study ascertained with the help of following ratios:

1. Current Ratio

2. Quick Ratio


ANALYSIS OF WORKING CAPITAL MANAGEMENT 3. Inventory Turnover Ratio

4. Debtors Turnover Ratio

5. Creditors Turnover Ratio

6. Working Capital Turnover Ratio

7. Current Assets Turnover Ratio

8. Working Capital to Sales Ratio

Current Ratio:

The current ratio of a unit measures firm’s short-term solvency, that is, its ability to

meet short-term obligations. It is the ratio of total current assets to total current liabilities.

The current ratio measures the ability of the firm to meet its current liabilities-

current assets get converted into cash in the operating cycle of the firm and provide the funds

needed to pay current liabilities.

It is calculated by dividing total current assets by total current liabilities:

Current Ratio = Current Assets

Current Liabilities

Current Assets include – Closing Stock, Deposits (asset), Loans & Advances, Sundry

Debtors, Cash-in-hand, and Bank Accounts.

Current Liabilities include – GRANTS, O.S.L, Other Liabilities, Salary Recoveres, Security

Deposit A/C, Unpaid Salary/ Wages A/C, Duties & Taxes, Sundry Creditors.



Table:-01

The Table Showing Current Ratio

Year Current Assets Current Liabilities Current Ratio

2004-05 6,07,17,987 3,26,52,240 1.85

2005-06 7,11,81,059 4,35,76,692 1.63

2006-07 6,36,58,413 3,59,78,861 1.76

2007-08 9,25,79,781 5,15,95,821 1.79

2008-09 7,21,28,952.41 5,07,41,016.54 1.42

Chart:-1

The Chart Showing Current Ratio



Interpretation:

The Table 1 revels that the Liquidity position of Dharwad Milk Union is Satisfactory

even though the ratio of all five years less than the conventional norm i.e 2.because the

Dharwad Milk Union is a Public Utility firm, as for the conventional rule concerned the

Public Utility firm’s liquidity position is satisfactory even though the current ratio is less than

the conventional norm. There for the liquidity position of Dharwad Milk Union is

Satisfactory.

Quick Ratio / Liquidity Ratio:

This ratio is also termed as Acid-test ratio. A Quick ratio is concerned with, the

relationship between quick assets and current liabilities.

It is a measure of liquidity calculated dividing current assets minus inventory and prepaid

expenses by current liabilities.

The Quick Ratio is the ratio between quick current assets and current liabilities.

It is calculated by dividing the Quick Current Assets by the Current Liabilities.

Quick Ratio = Quick Current Assets

Current Liabilities


ANALYSIS OF WORKING CAPITAL MANAGEMENT Quick Current Assets = Current Assets – Inventory

Table:-02

The Table Showing Quick Ratio

Year Quick Assets Current Liabilities Quick Ratio

2004-05 3,09,21,237 3,26,52,240 0.95

2005-06 4,94,41,661 4,35,76,692 1.13

2006-07 3,94,99,292 3,59,78,861 1.09

2007-08 6,24,35,658 5,15,95,821 1.21

2008-09 48710020.15 50741016.64 0.96

Chart:-02

The Chart Showing Quick Ratio



Interpretation:

It may be inferred from Table 2 the liquidity ratio of Dharwad Milk Union is good in the

three years i.e. 2005-06, 2006-07& 2007-08 respectively but in the years 2003-04, 2004-05

& 2008-09 the liquidity ratio is less than standard norm i.e 0.71, 0.95& 0.96 respectively. It

indicates that liquidity ratio of D.M.U is not good. But in 2005-06 to 2007-08 the liquidity

ratio is more than the standard norm. There for it indicates that company is able to pay its

current liabilities with quick assets. The D.M.U is able to utilize its current assets properly &

the Inventory movement is quicker and debt payment is also faster.

Inventory Turnover Ratio:

Every firm has to maintain certain level of Inventory of finished goods, so as to be

meeting the requirements of the business. The Inventory Turnover reflects the efficiency of

inventory management. The higher the ratio reflects the more efficient the management of

inventories & vice versa.

This ratio establishes relationship between cost of goods sold during a given period

of time and average amount of inventory held during that period.

It can be ascertained by following formula:



Inventory Turnover Ratio = Cost of Goods Sold

Average Inventory

Cost of Goods Sold = Sales – Gross Profit

Average Inventory = Opening Stock + Closing Stock / 2

Table:-03

The Table Showing Inventory Turnover Ratio

Year Cost of Goods Sold Average Inventory Ratio

2004-05 346684070 57588517 6.02

2005-06 446321775 51536148 8.66

2006-07 397561561 45898519 8.66

2007-08 440936818 54303244 8.11

2008-09 49,5708694.15 26788827.39 18.51

Chart:-03


ANALYSIS OF WORKING CAPITAL MANAGEMENT The Chart Showing Inventory Turnover Ratio

Interpretation:

It may be found from Table 3 the Inventory turnover of Dharwad Milk Union is

increasing & decreasing trend. The D.M.U is increases its efficiency of selling the products.

In 2004-05 decreases its inventory turnover i.e 7.19 to 6.02.But in 2005-06 to 2008-09 years

the firm performance is better to selling its products. The D.M.U is maintain this way he sells

the Inventory very fast & the efficiency of the firm in selling its product is better.

Inventory Conversion Period:

Inventory period is the time lag between the purchase of raw materials & sale of finished

goods.

It includes:

Raw Materials Conversion Period

W-I-P Conversion Period

Finished Goods Conversion Period

The Inventory Conversion Period can be ascertained by following formula:



Inventory Conversion Period = No. of Days in a Year

Inventory Turnover Ratio

No. of Days in a Year – 365 days

Table:-04

The Table Showing Inventory Conversion Period

Year No. of Days in a Year I.T.R I.C.P

2004-05 365 6.02 61

2005-06 365 8.66 42

2006-07 365 8.66 42

2007-08 365 8.11 45

2008-09 365 18.51 20


ANALYSIS OF WORKING CAPITAL MANAGEMENT Chart:-04

The Chart Showing Inventory Conversion Period

Interpretation:

The Table 4 depicts that the Dharwad Milk Union is taking how many days to convert

the Raw Materials into finished products. In last five years the company is improved its

conversion period yearly. In the year 2003-04 & 2004-05 the D.M.U has taken more days to

convert inventory. But in 2005-06 to 2008-09 the D.M.U is taken less days to convert

inventory. It indicates that fast to conversion of inventory & sells the goods fast. There for

the D.M.U is maintain better Inventory conversion period.

Debtors Turnover Ratio:

Debtors Turnover Ratio is an important part of current assets; it is determined by

dividing the net credit sales by average debtors outstanding during the year.

The analysis of the debtor’s turnover ratio supplements the information regarding the

liquidity of one item of current assets of the firm. The ratio measures how rapidly receivables

are collected. A high ratio is indicative of shorter time-lag between credit sales and cash

collection. A low ratio shows that debts are not being collected rapidly.




Debtors Turnover Ratio = Total Sales

Debtors

Total Sales includes – Sale-cattle feed, Sale of Milk, Sale of Milk Products, Sale of P & I,

Other Sales.

Debtors – Sundry Debtors

Table:-05

The Table Showing Debtors Turnover Ratio

Year Total Sales Debtors Ratio

2004-05 39,05,65,568 1,25,55,600 31.10

2005-06 48,90,14,708 1,85,99,457 26.29

2006-07 46,82,83,461 1,09,67,229 42.69

2007-08 51,18,17,364 2,05,58,529 24.89

2008-09 573720167.78 21607761.25 26.55



Chart:-05

The Chart Showing Debtors Turnover Ratio

Interpretation:

The Table 5 shows that the in last five years Debtors turnover ratio of Dharwad Milk

Union. In 2003-04 to 2005-06 the debts are not collected rapidly. But in the year 2006-07 the

debts are collected rapidly i.e 42.69. In 2007-08 again the debts turnover ratio is decreases

42.69 to 24.89.in 2008-09 the debts turnover Ratio is in increases 24.89 to 26.55. There for

the D.M.U is maintaining better sales but managing its debts collection is not efficiently.

Debtors Collection Period:

Debtors Collection Period is the time required to collect the outstanding amount from

the customers. It means the quality of debtors, since it indicates the speed of their collection.




Debtors Collection Period = No. of Days in a Year

Debtors Turnover Ratio

Table:-06

The Table Showing Debtors Collection Period

Year No. of Days in a Year D.T.R D.C.P

2004-05 365 31.10 12

2005-06 365 26.29 14

2006-07 365 42.69 9

2007-08 365 24.89 15

2008-09 365 26.55 14


ANALYSIS OF WORKING CAPITAL MANAGEMENT Chart:-06

The Chart Showing Debtors Collection Period

Interpretation:

The Table 1 revels that the debts collection period of Dharwad Milk Union. In 2003-

04 to 2005-06 the debts collection period increasing trend. It indicates that the customers are

not made payment promptly. but in the year 2006-07 the debts collection period decreased to

9 days. It indicates that the customers had made the payment in time in the year. But in the

year 2007-08 again the collection period is increasing 9 to 15 days.but in the year 2008-09

the debts collection period decreased 15 days to 13 days. This continues it is effects to

liquidity position of the company.

Creditor’s Turnover Ratio:

This ratio shows the velocity of debt payment by the firm. It expresses the relationship

between creditors and purchase.

A low turnover ratio reflects liberal credit terms granted by suppliers, while a high ratio

shows that accounts are to be settled rapidly. The creditor’s turnover ratio is an important tool

of analysis as a firm can reduce its requirement of current assets by relying of supplier’s

credit.



It is ratio between net credit purchase & the average amount of creditors outstanding

during the year.

It is calculated by following formula:

Creditors Turnover Ratio = Net Purchase

Average Creditors

Table:-07

The Table Showing Creditors Turnover Ratio

Year Net Purchase Average Creditors Ratio

2004-05 30,37,70,823 84,52,411 35.93

2005-06 37,12,88,997 1,19,87,131 30.97

2006-07 34,09,07,386 1,25,74,396 27.11

2007-08 38,39,44,340 87,28,998 43.98

2008-09 422383354.32 5624981.38 75.09



Chart:-07

The Chart Showing Creditors Turnover Ratio

Interpretation:

It may be inferred from Table 7 there is ups & downs in the ratio of credit turnover. The

ratio is low in 2003-04 it indicates that the Dharwad Milk Union credit payment is not good

i.e 22.19. It is not good to point of liquidity position but in 2007-08 & 2008-09 the credit

payment of D.M.U is increasing i.e 43.98 & 75.09 respectively. it indicates that D.M.U has

paying credit properly.

Creditor’s Payment Period:

The Creditors Payment Period Ratio represents the average number of days taken by

the firm to pay the creditors.




Creditors Payment Period = No. of Days in a Year

Creditors Turnover Ratio

Table:-08

The Table Showing Creditors Payment Period

Year No. of Days in a Year C.T.R C.P.P

2004-05 365 35.93 10

2005-06 365 30.97 12

2006-07 365 27.11 13

2007-08 365 43.98 8


ANALYSIS OF WORKING CAPITAL MANAGEMENT 2008-09 365 75.09 5

Chart:-08

The Chart Showing Creditors Payment Period

Interpretation:

It may be found from Table 8 there is ups & downs in a credit payment period of

Dharwad Milk Union. In the year 2003-04 the credit payment period of D.M.U is high i.e 16

days. It indicates the company is not maintaining credit payment properly. But in the year

2007-08 & 2008-09 the credit payment period is low ie 8 days & 5 days. It indicates that the

D.M.U has taken less credit facility & paying the credit in time. It is good sign of company to

utilizing the credit facility properly.

Working Capital Turnover Ratio:

This ratio indicates whether the working capital has been properly utilized in making

sales or not. This ratio measures the efficiency with the working capital.


ANALYSIS OF WORKING CAPITAL MANAGEMENT It is taken as one of the primary indicators of the short-term solvency of the business.

It establishes the relationship with the net sales. This ratio represents the number of times the

working capital is turned over in course of a year i.e. it measures the efficiency with which

the working capital is being used by the firm.


Working Capital Turnover Ratio = Cost of Goods Sold

Net Working Capital

Cost of Goods Sold = Sales – Gross Profit

Net Working Capital = Current Assets – Current Liabilities

Table:-09

The Table Showing Working Capital Turnover Ratio

Year Cost of Goods Sold Net Working Capital Ratio

2004-05 34,66,84,070 2,80,65,747 12.35


ANALYSIS OF WORKING CAPITAL MANAGEMENT 2005-06 44,63,21,775 2,76,04,367 16.16

2006-07 39,75,61,561 2,76,79,552 14.36

2007-08 44,09,36,818 4,09,83,960 10.75

2008-09 495708694.15 21387935.87 23.18

Chart:-09

The Chart Showing Working Capital Turnover Ratio

Interpretatio

The Table 9 depicts of Working capital turnover ratio is decreasing trend. In the

year 2003-04 & 2005-06 the ratio is high i.e 18.38 & 16.16 it shows the D.M.U is properly

utilized the working capital for making the sales. It reflects the working capital management

is efficient. But in the year 2007-08 the working capital turnover ratio is low compared the

first four years i.e 10.75. It indicates the D.M.U is not properly utilized the working capital. It

is not good to company; it affects the sales of the company.but in the year 2008-09 again

increased i.e 23.18.

Current Assets Turnover Ratio:


ANALYSIS OF WORKING CAPITAL MANAGEMENT This ratio reveals the relationship between cost of goods sold and current assets. The

higher ratio, the better is the condition of a firm in utilizing its current assets.

The higher the ratio, the better is the firm in utilizing its current assets. The lower the

ratio indicates that investment in current assets has not brought commensurate gain to the

firm.


Current Assets Turnover Ratio = Total Sales

Current Assets

Table:-10

The Table Showing Current Assets Turnover Ratio


ANALYSIS OF WORKING CAPITAL MANAGEMENT Year Total Sales Current Assets Ratio

2004-05 39,05,65,568 6,07,17,987 6.43

2005-06 48,90,14,708 7,11,81,059 6.87

2006-07 46,82,83,461 6,36,58,413 7.36

2007-08 51,18,17,364 9,25,79,781 5.53

2008-09 573720167.78 72128952.41 7.95

Chart:-10

The Chart Showing Current Assets Turnover Ratio

Interpretation:

The Table 10 shows that how the Dharwad Milk Union is utilized its Current Assets.

In the year 2003-04 to 2006-07 the ratio is increasing 6.05 to 7.36 it indicates that D.M.U is

utilizing its current assets more efficiently. It reflects the good current assets management.

But in the year 2007-08 the ratio is decreases 7.36 to 5.53. it indicates that the D.M.U is

decreasing its current assets utilization. There for the D.M.U is inefficiently manage its

current assets. But in the year 2008-09 the ratio is increases 5.53 to 7.95. it reflects the good

current assets management.

Gross Operating Cycle:



The time lag between the Purchase of Raw Materials & Collection of cash for sale is

Gross Operating Cycle. It refers to the sum of inventory period and debtor’s collection

period.


Gross Operating Cycle = Inventory Conversion Period + Debtors Collection Period


ANALYSIS OF WORKING CAPITAL MANAGEMENT Table:-11

The Table Showing Gross Operating Cycle

Year I.C.P D.C.P G.O.C

2004-05 61 12 73

2005-06 42 14 56

2006-07 42 9 51

2007-08 45 15 60

2008-09 19.72 13.75 33

Chart:-11

The Chart Showing Gross Operating Cycle

Interpretation:

The Table 11 revels that the Dharwad Milk Union is taking more days in 2004-05 i.e 73

days comparing to five years to convert the raw materials into finished products & the

collection of debts. In 2006-07 the D.M.U has taken less day’s i.e 51 days to inventory

conversion & debts collection. For seeing last five years the gross operating cycle of D.M.U

is not good because it takes more time to conversion of inventory & also not effective in

collection of debts. There for the D.M.U is not maintaining the efficient gross operating

cycle.in 2008-09 the DMU has taken less days I,e 33.47 days to inventory conversion and

debt collection.


ANALYSIS OF WORKING CAPITAL MANAGEMENT Net Operating Cycle:

Net Operating Cycle is the time length between the payment for Raw Material

purchases & the Collection of cash for sale. It is difference between Gross operating cycle &

Creditors conversion period.


Net Operating Cycle = Gross Operating Cycle – Creditors Payment Period



Table:-12

The Table Showing Net Operating Cycle

Year G.O.C C.P.P N.O.C

2004-05 73 10 63

2005-06 56 12 44

2006-07 51 13 38

2007-08 60 8 52

2008-09 33.47 4.86 29

Chart:-12

The Chart Showing Net Operating Cycle

Interpretation:

It may be inferred from Table 12 the Net operating cycle of the Dharwad Milk Union.

there is ups & downs in the working capital period. In 2004-05 & 2007-08 the D.M.U is

taking more days to complete the working capital operating cycle i.e 63 & 52 days comparing

last five years. But in the remaining three years it takes lesser days to complete the working

capital.



STATEMENT OF CHANGES IN WORKING CAPITAL

Particulars As At

31st March 2004

As At

31st March

2005

Effect on W.C

Increase Decrease

Current Assets:

Closing Stock

Deposits (Assets)

Loans & Advances (Assets)

Sundry Debtors

Cash-in-hand

Bank Accounts

TOTAL

Current Liabilities

GRANTS

O.S.L

Other Liabilities

Salary Recoveries

Security Deposit A/C

Unpaid Salary/ Wages A/C

Duties & Taxes

Sundry Creditors

TOTAL

Net Working Capital(CACL)

Increase in Working Capital

2,77,91,767

53,12,844

45,55,448

97,48,574

4,74,436

85,60,907

2,97,96,750

51,16,181

61,98,910

1,25,55,600

12,76,078

57,74,468

20,04,983

16,43,462

28,07,026

8,01,642

3,06,950

44,35,631

1,70,284

6,94,765

38,22,691

1,96,663

27,86,439

2,82,435

9,65,667

9,06,418

1,15,46,812

5,64,43,976 6,07,17,987

26,74,867

91,22,834

82,20,464

17,30,010

54,95,509

9,64,236

(-)5,57,980

1,22,75,102

23,67,917

46,87,203

85,02,899

15,59,726

64,64,176

2,69,471

3,48,437

84,52,411

3,99,25,041 3,26,52,240

1,65,18,935

1,15,46,812

2,80,65,747

2,80,65,747 2,80,65,747 1,66,87,434 1,66,87,434



Interpretation:

In the above statement shows that changes in working capital in the year 2003-04 &

2004-05. It revels how the current assets & current liabilities are changes in the two years.

The difference between current assets & current liabilities i.e. Net working capital of the two

years is 2003-04 & 2004-05, Rs 1,65,18,935 & Rs 2,80,65,747 respectively. It shows the

working capital increase Rs 1, 15, 46,812 in the year 2004-05 compare to 2003-04.

In the current assets—

a) The closing stock increase Rs 20, 04,983 it indicates working capital is increased.

b) The D.M.U is reducing its Deposits Rs 1, 96,663 in the year 2004-05.

c) The loans & advances are increasing Rs 16, 43,462.

d) The Sundry debtors increasing Rs 28, 07,026.

e) Cash-in-hand increasing Rs 8, 01,642.

f) Bank Accounts are reduces Rs 27, 86,439.

In the current liabilities—

a) The D.M.U is reducing GRANTS Rs 3, 06,950.

b) O.S.L reduces Rs 44, 35,631.

c) Other liabilities increase Rs 2, 82,435.

d) Salary Recoveries decreases Rs 1, 70,284.

e) The security deposit A/C increases Rs 9, 65,667.

f) The Unpaid salary A/C decreases Rs 6, 94,765.

g) Duties & taxes increase Rs 9, 06,418.

h) Sundry creditors decrease Rs 38, 22,691.




Particulars As At

31st March 2005

As At

31st March 2006

Effect on W.C

Increase Decrease

Current Assets:

Closing Stock

Deposits (Assets)


Sundry Debtors

Cash-in-hand

Bank Accounts

TOTAL

Current Liabilities

GRANTS

O.S.L

Other Liabilities

Salary Recoveries



Duties & Taxes

Sundry Creditors

TOTAL


Decrease in Working Capital

2,97,96,750

51,16,181

61,98,910

1,25,55,600

12,76,078

57,74,468

2,17,39,398

54,56,195

97,43,275

1,85,99,457

6,70,180

1,49,72,554

3,40,014

35,44,365

60,43,857

91,98,086

2,14,191

89,658

4,61,380

80,57,352

6,05,898

18,332

36,82,699

32,69,614

6,76,545

46,391

35,34,720

6,07,17,987 7,11,81,059

23,67,917

46,87,203

85,02,899

15,59,726

64,64,176

2,69,471

3,48,437

84,52,411

23,86,249

83,69,902

1,17,72,513

13,45,535

71,40,721

3,15,862

2,58,779

1,19,87,131

3,26,52,240 4,35,76,692

2,80,65,747 2,76,04,367

4,61,380

2,80,65,747 2,80,65,747 1,98,91,551 1,98,91,551



Interpretation:





working capital decreases Rs 4, 61,380 in the year 2005-06 compare to 2004-05.


g) The closing stock decrease Rs 80, 57,352 it indicates working capital is decreased.

h) The D.M.U is increasing its Deposits Rs 3, 40,014 in the year 2005-06.

i) The loans & advances are increasing Rs 35, 44,365.

j) The Sundry debtors increasing Rs 60, 43,857.

k) Cash-in-hand decreasing Rs 6, 05,898.

l) Bank Accounts are increases Rs 91, 98,086.


i) The D.M.U is increasing GRANTS Rs 18,332.

j) O.S.L increasing Rs 36, 82,699.

k) Other liabilities increases Rs 32, 69, 614,

l) Salary Recoveries decreases Rs 2, 14,191.

m) The security deposit A/C increases Rs 6, 76,545.

n) The Unpaid salary A/C increases Rs 46,391.

o) Duties & taxes decrease Rs 89,658.

p) Sundry creditors increase Rs 35, 34,720.




Particulars As At

31st March 2006

As At

31st March 2007

Effect on W.C

Increase Decrease

Current Assets:

Closing Stock

Deposits (Assets)


Sundry Debtors

Cash-in-hand

Bank Accounts

TOTAL

Current Liabilities

GRANTS

O.S.L

Other Liabilities

Salary Recoveries



Duties & Taxes

Sundry Creditors

TOTAL



2,17,39,398

54,56,195

97,43,275

1,85,99,457

6,70,180

1,49,72,554

2,41,59,121

53,43,330

83,61,565

1,09,67,229

14,18,252

1,34,08,917

24,19,723

7,48,072

11,76,232

41,34,792

53,87,428

1,12,865

13,81,710

76,32,228

15,63,637

1,82,761

3,44,275

17,24,588

2,61,731

5,87,265

75,185

7,11,81,059 6,36,58,413

23,86,249

83,69,902

1,17,72,513

13,45,535

71,40,721

3,15,862

2,58,779

1,19,87,131

12,10,017

42,35,110

63,85,085

15,28,296

74,84,996

20,40,450

5,20,510

1,25,74,396

4,35,76,692 3,59,78,861

2,76,04,367

75,185

2,76,79,552

2,76,79,552 2,76,79,552 1,38,66,247 1,38,66,247



Interpretation:





working capital increases Rs 75,185 in the year 2006-07 compare to 2005-06.


m) The closing stock increase Rs 24, 19,723 it indicates working capital is increased.

n) The D.M.U is decreasing its Deposits Rs 1, 12,865 in the year 2006-07.

o) The loans & advances are decreasing Rs 13, 81,710.

p) The Sundry debtors decreasing Rs 76, 32,228.

q) Cash-in-hand increases Rs 7, 48,072.

r) Bank Accounts are decreases Rs 15, 63,637.


q) The D.M.U is decreasing GRANTS Rs 11, 76,232.

r) O.S.L decreasing Rs 41, 34,792.

s) Other liabilities decreases Rs 53, 87, 428,.

t) Salary Recoveries increases Rs 1, 82,761.

u) The security deposit A/C increases Rs 3, 44,275.

v) The Unpaid salary A/C increases Rs 17, 24,588.

w) Duties & taxes increase Rs 2, 61,731.

x) Sundry creditors increase Rs 5, 87,265.




Particulars As At

31st March 2007

As At

31st March 2008

Effect on W.C

Increase Decrease

Current Assets:

Closing Stock

Deposits (Assets)


Sundry Debtors

Cash-in-hand

Bank Accounts

TOTAL

Current Liabilities

GRANTS

O.S.L

Other Liabilities

Salary Recoveries



Duties & Taxes

Sundry Creditors

TOTAL



2,41,59,121

53,43,330

83,61,565

1,09,67,229

14,18,252

1,34,08,917

3,01,44,123

54,70,306

1,23,61,237

2,05,58,529

6,14,520

2,34,31,066

59,85,002

1,26,976

39,99,672

95,91,300

1,00,22,149

6,87,446

20,18,915

4,43,084

38,45,398

8,03,732

38,55,361

7,91,849

1,66,73,874

12,90,721

1,33.04,408

6,36,58,413 9,25,79,781

12,10,017

42,35,110

63,85,085

15,28,296

74,84,996

20,40,450

5,20,510

1,25,74,396

50,65,378

50,26,959

2,30,58,959

8,40,850

87,75,717

21,535

77,426

87,28,998

3,59,78,861 5,15,95,821

2,76,79,552

1,33,04,408

4,09,83,960

4,09,83,960 4,09,83,960 3,67,19,942 3,67,19,942



Interpretation:

In the above statement shows that changes in working capital in the year 2006-07

& 2007-08. It revels how the current assets & current liabilities are changes in the two years.



working capital increases Rs 1, 33, 04,408 in the year 2007-08 compare to 2006-07.


s) The closing stock increase Rs 59, 85,002 it indicates working capital is increased.

t) The D.M.U is increasing its Deposits Rs 1, 26,976 in the year 2007-08.

u) The loans & advances are increasing Rs 39, 99,672.

v) The Sundry debtors increasing Rs 95, 91,300.

w) Cash-in-hand decreases Rs 8, 03,732.

x) Bank Accounts are increases Rs 1, 00, 22,149.


y) The D.M.U is increasing GRANTS Rs 38, 55,361.

z) O.S.L increasing Rs 7, 91,849.

aa) Other liabilities increases Rs 1, 66, 73, 874,.

bb) Salary Recoveries decreases Rs 6, 87,446.

cc) The security deposit A/C increases Rs 12, 90,721.

dd) The Unpaid salary A/C decreases Rs 20, 18,915.

ee) Duties & taxes decrease Rs 4, 43,084.

ff) Sundry creditors decrease Rs 38, 45,398.




Particulars As At

31st March 2008

As At

31st March 2009

Effect on W.C

Increase Decrease

Current Assets:

Closing Stock

Deposits (Assets)


Sundry Debtors

Cash-in-hand

Bank Accounts

TOTAL

Current Liabilities

GRANTS

O.S.L

Other Liabilities

Salary Recoveries



Duties & Taxes

Sundry Creditors

TOTAL



3,01,44,123

54,70,306

1,23,61,237

2,05,58,529

6,14,520

2,34,31,066

23418932

5004655

11526293

21607761

717927

9853383

1049232

103407

4510959

10089372

682713

5514

3104017

14087931

6725191

465651

834944

13577683

11161434

721201

147040

9,25,79,781 72128951

50,65,378

50,26,959

2,30,58,959

8,40,850

87,75,717

21,535

77,426

87,28,998

16226812

516000

12969587

158137

9496918

16021

224466

5624981

5,15,95,821 45232922

40983960 26896029

14087931

40983960 40983960 33633144 33633144



Interpretation:

In the above statement shows that changes in working capital in the year 2007-08

& 2008-09. It revels how the current assets & current liabilities are changes in the two years.


years is 2007-08 & 2008-09, Rs 40983960& Rs 26896029 respectively. It shows the working

capital increases Rs 14087931 in the year 2008-09 compare to 2007-08.


The closing stock decrease Rs 6725191 it indicates working capital is decreased.

The D.M.U is decreasing its Deposits Rs 465651 in the year 2008-09.

The loans & advances are decreasing Rs . 834944

The Sundry debtors increasing Rs 1049232.

Cash-in-hand decreases Rs103407

Bank Accounts are decreases Rs 13577683.


gg) The D.M.U is decreasing GRANTS Rs11161434.

hh) O.S.L increasing Rs 4510959.

ii) Other liabilities increases Rs 10089372,.

jj) Salary Recoveries increases Rs 682713.

kk) The security deposit A/C decreases Rs 721201.

ll) The Unpaid salary A/C increases Rs 5514.

mm) Duties & taxes decrease Rs 147040.

nn) Sundry creditors increase Rs 3104017.





FINDINGS

1) In the Current Ratio shows that in the year 2008-09 the Liquidity position of the Dharwad

Milk Union is less i.e 1.47 compare to all five years.

2) Quick ratio of the Dharwad Milk Union is increasing in the year 2008-09 to 0.96 compare

with 2004-05 (0.95.).

3) The Inventory Turnover Ratio of the Dharwad Milk Union is decreased by 6.02 in the

year 2004-05 compare to 2008-09 ratio i.e 18.51. & in 2007-08 again decreasing i.e 8.11

compared 2005-06 & 2006-07 i.e 8.66.

4) The Dharwad Milk Union has taken more days to convert the raw materials into finished

products i.e 61 days in the year 2004-05.

5) Debtor’s turnover ratio of Dharwad Mlk Union is decreases i.e 26.55 in the year 2008-09

compared to 2006-07 i.e 42.69 & 2004-05 i,e. 31.10

6) The Debtors collection period of Dharwad Milk Union is increasing i.e 14 days in the

year 2008-09 compare to the year 2004-05 i.e 12 days.

7) The Creditors Turnover Ratio of the Dharwad Milk Union is increasing to 75.09. in the

year 2007-08 compare to 2004-05 ratio i.e 35.93.

8) Credit Payment Period of Dharwad Milk Union is also decreasing to 5 days in the recent

year compare to 2004-05 i.e 10 days.

9) Working Capital Turnover Ratio of the Dharwad Milk Union is increasing in the recent

year i.e 23.18 compare to 2004-05 the ratio is 12.35.

10) The Current Assets Turnover Ratio of Dharwad Milk Union is high in the recent year i.e

7.95 compare to last four years.

11) The Dharwad Milk Union has taken more days to complete the Net Operating Cycle i.e

63 days in the year 2004-05.

.

12) In the statement of changes in Working capital for the year 2004-05 & 2005-06. The

working capital decreasing Rs 4, 61,380 in the year 2005-06.


ANALYSIS OF WORKING CAPITAL MANAGEMENT 13) In the statement of changes in Working capital for the year 2005-06 & 2006-07. The

working capital is increasing Rs 75,185 in the year 2006-07.


working capital is increasing Rs 1, 33, 04,408 in the year 2007-08.


working capital is increasing Rs 1, 40,87,931 in the year 2008-09.

16) The study is shows that the Dharwad Milk Union has not using latest technology & also

there is excess work force on some departments than required.

17) The Dharwad Milk Union is not having any Freedom in Marketing & Promotional

activities, because most of the decisions are taken by K.M.F.

SUGGESTION

1) It is suggested that the D.M.U has to reduce Inventory and increases investment in the

form of quick assets, so that it can maintain good liquidity position.

2) In the recent years, the debt turnover ratio of D.M.U is decreases so, it is suggested to

increases the debt turnover it help to maintain the debt collection.

3) In the recent years, the debts collection period of D.M.U is increasing, So it is advised

to D.M.U to reduce the collection period, so that it can maintain sufficient liquid

working capital.

4) The study of Inventory utilization ratio of D.M.U not properly utilized their inventory.

It is advised to adopt scientific inventory management to improve “working capital”.

5) The working capital turnover ratio in decreasing trend in the recent year, it is suggested

to D.M.U to increase working capital turnover ratio, so that it can maintain a sufficient

working capital.

6) It is suggested that D.M.U reduce its operating cycle, so that it can maintain sufficient

working capital in the liquid form.

7) The current assets turnover ratio is in the recent year, it is suggested to D.M.U increase

current assets turnover, so that it can generate more revenue by investing in the current

assets.


ANALYSIS OF WORKING CAPITAL MANAGEMENT 8) It is suggested that D.M.U should reduce the time length of Net operating cycle by

taking appropriate measures.

9) D.M.U should have to appoint skilled and qualified employees and also new technology

in machineries. It increases efficiency and quality of the firm.

10) D.M.U should have to computerize all the departments in order to increase efficiency

and productivity of employees.

11) D.M.U should have take sales promotion measures like free home delivery to urban

consumers. This help to increase the market share through increase sales.

CONCLUSION

The study of “Working Capital Management” in the D.M.U is satisfactory. I got more

information on working capital management of the D.M.U, it is more helpful to my study.

The study of last five years liquidity position of the company is better. In last five years

company is facing several problems in finance & Marketing promotional activities. D.M.U

has suffered losses due to financial problems & less quantity of milk supply in the previous

years but in the recent year it is better position. It shows that D.M.U is improving its financial

conditions & also utilizing its assets & resources properly. If D.M.U continues the same

performance as in the current financial year, it can earn more profits.





BIBLIOGRAPHY

I.M. Pandey – Financial Management. Vikas Publishing House Pvt. Ltd.

M.Y. Khan and P. K. Jain – Financial Management. Tata Mcgraw –Hill

publishing company Ltd. New Delhi.

Prasanna Chandra – Fundamentals of Financial Management. Tata Mcgraw

Hill Publishing Company Ltd. New Delhi.

Web Site:. www.KMF Nandini.com


http://www.KMF/




BALANCESHEET FOR THE YEAR ENDING

(2004-05)

Liabilities Amount Amount Assets Amount Amount

Capital Accounts

Reserves & Surplus

Share Capital-A Class

Share Capital-B Class

Share Suspense

Loans (Liability)

Secured Loans

Current Liabilities

GRANTS

O.S.L

Other Liabilities

Salary Recoveries


Unpaid Salary/Wages

A/C

Duties & Taxes

Sundry Creditors

4,90,07,356

1,41,82,384

2,00,00,000

3,18,240

11,27,19,511

23,67,917

46,87,203

85,02,899

15,59,726

64,64,176

2,69,471

3,48,437

84,52,411

8,35,07,980

11,27,19,511

3,26,52,240

Fixed Assets

FIXED ASSETS

Investments

INVESTMENTS

Current Assets

Closing Stock

Deposits (Asset)

Loans & Advances

( Asset)

Sundry Debtors

Cash-in-hand

Bank Accounts

Profit & Loss A/C

Opening Balance

Current Period

Less: Transferred

9,05,71,545

73,10,520

297,96,750

51,16,181

61,98,910

1,25,55,600

12,76,079

57,74,468

7,80,49,726

(-)76,24,062

1,45,985

9,05,71,545

73,10,520

6,07,17,987

7,02,79,678

22,88,79,731 22,88,79,731




(2005-06)


Capital Accounts

Reserves & Surplus



Share Suspense

Loans (Liability)

Secured Loans

Current Liabilities

GRANTS

O.S.L

Other Liabilities

Salary Recoveries


Unpaid Salary/Wages

A/C

Duties & Taxes

Sundry Creditors

4,90,26,583

1,71,70,800

2,00,00,000

2,76,153

10,60,42,793

23,86,249

83,69,902

1,17,72,513

13,45,535

71,40,721

3,15,862

2,58,779

1,19,87,131

8,64,73,536

10,60,42,793

4,35,76,692

Fixed Assets

FIXED ASSETS

Investments

INVESTMENTS

Current Assets

Closing Stock

Deposits (Asset)

Loans & Advances

( Asset)

Sundry Debtors

Cash-in-hand

Bank Accounts

Profit & Loss A/C

Opening Balance

Current Period

8,88,54,612

44,24,600

2,17,39,398

54,56,195

97,43,275

1,85,99,457

6,70,179.72

1,49,72,554

7,02,79,678

13,53,072

8,88,54,612

44,24,600

7,11,81,059

7,16,32,750

23,60,93,021 23,60,93,021




(2006-07)


Capital Accounts

Reserves & Surplus



Share Suspense

Loans (Liability)

Secured Loans

Current Liabilities

GRANTS

O.S.L

Other Liabilities

Salary Recoveries


Unpaid Salary/Wages

A/C

Duties & Taxes

Sundry Creditors

45,89,82,280

1,98,53,156

2,00,00,000

2,76,153

9,83,44,158

12,10,017

42,35,110

63,85,085

15,28,296

74,84,996

20,40,450

5,20,510

1,25,74,396

9,91,11,588

9,83,44,158

3,59,78,861

Fixed Assets

FIXED ASSETS

Investments

INVESTMENTS

Current Assets

Closing Stock

Deposits (Asset)

Loans & Advances

( Asset)

Sundry Debtors

Cash-in-hand

Bank Accounts

Profit & Loss A/C

Opening Balance

Current Period

9,51,47,041

45,08,600

2,41,59,121

54,43,330

83,61,565

1,09,67,229

14,18,252

1,34,08,917

7,16,32,750

(-)15,12,197

9,51,47,041

45,08,600

6,36,58,413

7,01,20,553

23,34,34,608 23,34,34,608




(2007-08)


Capital Accounts

Reserves & Surplus



Share Suspense

Loans (Liability)

Secured Loans

Current Liabilities

GRANTS

O.S.L

Other Liabilities

Salary Recoveries


Unpaid Salary/Wages

A/C

Duties & Taxes

Sundry Creditors

5,86,28,480

1,98,53,156

2,00,00,000

27,76,181

8,87,10,194

50,65,378

50,26,959

2,30,58,959

8,40,850

87,75,717

21,535

77,426

87,28,998

10,12,62,817

8,87,10,194

5,15,95,821

Fixed Assets

FIXED ASSETS

Investments

INVESTMENTS

Current Assets

Closing Stock

Deposits (Asset)

Loans & Advances

( Asset)

Sundry Debtors

Cash-in-hand

Bank Accounts

Profit & Loss A/C

Opening Balance

Current Period

9,45,61,804.12

45,35,600

3,01,44,123

54,70,306

1,23,61,237

2,05,58,529

6,14,520

2,34,31,066

7,01,20,553

(-)2,02,28,905

9,45,61,804

45,35,600

9,25,79,781

4,98,91,648

24,15,68,833 24,15,68,833




(2008-09)


Capital Accounts

Reserves & Surplus

GOVT LOAN



Share Suspense

Loans (Liability)

Secured Loans

Current Liabilities

GRANTS

O.S.L

Other Liabilities

Salary Recoveries


Unpaid Salary/Wages A/C

Duties & Taxes

Sundry Creditors

Amrut yojane

AYDCS contribution

NDDB loan suspence

3,98,37,180.33

9,60,480,00

2,23,59,800.00

2,00,00,000.00

29,05,700.00

8,23,63,231.00

1,62,26,812.26

5,16,000.00

1,29,69,587.32

1,58,137.58

94,96,918.12

16,021.00

2,24,465.88

56,24,981.88

-6,27,746.00

63,15,409.00

-1,79,570.00

8,60,63,160.54

8,23,63,231.00

5,07,41,016.54

Fixed Assets

FIXED ASSETS

Investments

INVESTMENTS

Current Assets

Closing Stock

Deposits (Asset)

Loans &

Advances

( Asset)

Sundry Debtors

Cash-in-hand

Bank Accounts

Profit & Loss

A/C

Opening Balance

Current Period

Less;transferred

10,12,78,755.23

2,20,57,600.00

2,34,18,932.26

50,04655.50

1,15,26,292.78

2,16,07,761.25

7,17,926.95

98,53,383.67

4,97,39,737.83

-70,14,282.39

1,90,23,355.00

10,12,78,755.23

2,20,57,600.00

7,21,28,952.41

2,37,02,100.44

21,91,67,408.08 21,91,67,408.08


Date post:	20-Jan-2015
Category:	Business
Upload:	mba-corner-by-babasab-patil-karrisatte
View:	9,414 times
Download:	2 times