Naveen Working Capital of Ks&Dl

WORKING CAPITAL MANAGEMENT OF KS&DL

DECLARATION

I Mr VISHWANATH B HADIMAN,Register Number 1PT10MBA85 student of PEOPLE’S EDUCATION SOCIETY INSTITUTE OF TECHNOLOGY ,Bangalore, hereby declare that this project entitled “Working capital management of ksdl .” has been prepared by me in partial fulfillment for the award of MBA Degree of Vishveshvaraya technological university.

This has not been submitted in part or full towards any other Degree or Diploma toany University or Institution. I also declare that all information, data and input which I haveused and r e f e r r ed t o i n t h i s r epo r t a r e mean t on ly fo r a cademic pu rpose and w i l l no t be parted with or used for any commercial or other purpose.

PEOPLE’S EDUCATION SOCIETY INSTITUTE OF TECHNOLOGY Page 1


INTRODUCTION



Cash the most liquid assets, is of vital importance to the daily operation of business

firm. Concern will always keep sufficient cash for meeting its obligation. Any shortage of

cash will hamper the operation of a concern and any excess of it will be

unproductive ,as it doesn’t contribute any thing to the firms productivity ;cash is referred

as most unproductive of all the assets .while the fixed assets like machinery and plant

etc .and current assets such as inventory will help business in increasing the earning

capacity ,cash in hand will not add anything to the concern ,thus the major function of

financial manager id to maintain a sound cash position .

It is in this context that cash management is assumed to be one of the key areas of

working capital management .apart from the fact that cash is mast liquid asset cash is



major liquid assets that is receivable and inventory get eventually converted into cash.



WHAT IS CASH?

The term cash with reference to cash management is used in two sense. In a narrow

sense it include ,coins, currency notes, cheque , bank draft held by a firm with it and the

demand deposit held by it in bank . In broader sense it also include near cash assets

such as marketable securities and time deposit with banks .such deposit can

immediately be sold or converted into cash if the circumstances so require .the term

cash management is generally used for management of both cash and near current

assts .

FACTS OF CASH MANAGEMENT:

Management of cash is concerned with the managing of

a. cash inflow and outflow of firm

b. cash flows within the firms and

c. Cash balances needed by the firm at a point of time by the financing of deficit or of

investing surplus cash. but it is difficult to predict cash flows accurately .hence ,in

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

synchronization between cash receipts and payments ,the firm should develop

some strategies regarding the following four factor of cash management.

1. CASH PLANNING :

It is a technique to plan and control the use of cash it protects the financial condition of the firm by developing projected cash statement from forecasting of expected cash in flows and out flows for a given period the forecasts may be used on the present operation or the anticipated future operations .Cash planning is very crucial in developing the overall operating plans of the firm.



2. CONTROLING THE LEVEL OF CASH BALANCES:

As one of the basic objectives of cash management is to minimize the level of

cash balance, controlling the level of cash balance does not mean just minimizing the

level of cash balance within the firm .it means neither ensuring that the level of cash

balance is neither excessive nor inadequate .(i.e. .optimum).

a. OPTIMUM CASH LEVEL

Company must decide about the appropriation level of cash balances to be

maintained. Both the cost of excess cash and danger of cash deficiency have to be

matched to arrive at optimum level of cash balance.

b. INVESTMENT SURPLUS CASH

All surplus cash has been properly invested so as to earn profit .The company has to

decide about the division of such cash balance borrowed from bank

deposit ,marketable securities on inter corporate loan.

An idea cash management system depends on the company’s product, organization

structure, culture and option available.

CASH MANAGAMENT STRATEGIES

The strategies that should be the enterprise in managing its cash are as follows

Pay accounts payable as much as possible on time without demanding the firm’s

credit rating but take advantage of any favorable cash discounts.

Turnover the inventory as quickly as possible ,avoiding stock out that might result

in shutting down the production line or result in a loss of sale.

Collect accounts receivables as early as possible without losing future sales

because of high pressure collection techniques .cash discounts if they are

economically justified may be used to accomplish this objective.



MOTIVE FOR HOLDING CASH

Cash is the crucial component of the working of the capital of a firm .as every

transaction results either in an inflow or an outflow of cash .the pivotal point in recent

date of financial management is to maximize cash generation and minimize cash

outflow.

Keynes postulates three motives of holding cash;

The transaction motive

The precautionary motive

The speculative motive

Beside these instrument of cash management forecasting Karnataka soaps

&detergent ltd., is expected to prepare

Monthly operating statements

Bi- annual internal resources& utilization statement

Bi-annual working capital balance.

OBJECTIVES FOR KEEPING CASH BALANCE

The following are the general objectives for keeping cash balance in every firm

For meeting daily obligation

To take benefit of favorable market condition

To meet contingencies

To secure cash discount from suppliers

CASH BUDJECTING



Cash forecasting or budget are the principal tool of cash management .they may be

divided into two categories ;short term forecasting and long term forecasting though this

distinction is somewhat arbitrary.

PREPERATION OF CASH REPORTS

The preparation of cash budget sets the framework for management of cash flows and

cannot be considered as a financial act in cash management process. The operation of

the business enterprise may often deviate from the planned course with immediate

changes in cash requirement.

The preparation of cash budget is relatively smooth exercise for controlling the cash

inflows effectively .the crux of effective cash management lies in synchronizing the cash

flows this can be achieved by preparing periodical cash reports .the cash budget is the

planning or forecasting instrument where as cash reports help in comparing the actual

cash flow with projected cash flow. This helps in financial exercise which determines the

future cash needs and plan financing of these needs and exercise control over cash and

liquidity of the firm.



INTRODUCTION TO WORKING CAPITAL

1.1 WORKING CAPITAL

The management of working capital is an integral part of overall corporate

management. in simple terms ,working capital is the amount of funds which a small

scale industry must have to finance its day-to-day operation .It may also be regarded as

that portion of an industry total capital which is employed in short term

operation ,included in these operation are such items as stock of raw materials and

supplies needed for manufacture stock of finished goods waiting for sale ,semi

processed items and components that will soon will soon emerge as final

product ,sundry debtors representing pending collection against credit sales and short

term investments.

Working capital is commonly defined in accounting and financial analysis as net

current assets consisting of inventories, including goods, net receivables, marketable

securities, Bank balances and cash in hand

Working capital at times called net working capital is represented by the excess

of current assets over liabilities and identifies the relatively liquid portion of total

enterprise’s capital which constitutes a margin of buffers for maturing obligations within

the industry cycle of the business.

CONCEPTS

The concepts of working capital is broadly understood in “Gross” and” Net” concept.

The Gross and Net working capital is represented by the sum total of all the current

assets of the enterprises while the net working capital is the difference between the

current assets and current liabilities. In short the gross and net working capital present

the distinct and important facts of working capital management.



NET WORKING CAPITAL

It represent the excess of total current assets over current liabilities and measured by

current ratio to indicate that current assets have an edge over the current liabilities .viz

current assets>current liabilities .

Net working capital = current assets –current liabilities

= (cash +marketable +accounts +bills +inventories)

Minus (-) accounts +notes &bills +expenses +payables temporary loans)

It is an accepted principle that has a current ratio of 2:1 is considered as solvent, while a

lower ratio indicates insolvency of the units.

GROSS WORKING CAPITAL

It is equal to the total sum of the current assets and may represent both owned capital

&loan capital.

Working capital refers to the firms, investment in current assets which comprises of

cash short term securities, debtors, bills receivables stock which can be converted into

cash within an accounting year.

The process of working capital concept focuses attention on two aspects,

Optimum investment in current assets.

Financing current assets.



OPERATING CYCLES

The basic need of manufacturing units is to procure raw material for the purpose of

production. In the process of production, the business includes costs in the form of

wages for labour , power and fuel, deprecation on machinery and direct expenses.

Raw materials ultimately converted into finished goods remains in the form of stock

waiting for being sold in the market as per the trend in the market, the receivables

/debtors. Receivables are ultimately paid in cash; the time span within which the

business activity rotates is called an operating cycle. Constituents of an operating cycle,

cash, raw materials, work in progress, finished goods and receivables represent a

portion of total current assets .Thus investment in operating cycle represents a part of

working capital finance.

Operating cycle refers to the time of duration required the sales after the conversation of

resources into inventories into cash. In other words it refers to time required or taken in

the process of conversion of cash into raw material ;raw materials into receivables and

finallyrom receivable into cash.


INVESTMENTS

CASH FUND

RECEVIVABLES OPERATIONS

Service & production

Operating Expense

Credt sales production

Cash collections production

CASH


1.2 COMPONENTS OF WORKING CAPITAL

Working capital can be categorized into two;

a. permanent or fixed working capital

b. temporary or variable working capital

PERMENT OR FIXED WORKING CAPITAL:

The need for current working assets arises because of the operating cycle. The

operating cycle is a continuous process, and therefore the need for current assets felt

constantly, but the magnitude of current assets needed is not always the same; it

increases or decreases over a time

There is always a minimum level of current assets, which is continuously required by

the firm to carry on its business operation. This minimum level of current assets is

preferred to as permanent or fixed working capital.



Depending upon the changes in production and sales the needed for current assets

over and above the permanent current assets , will fluctuate ,for extra inventory of

finished goods will have to be maintained to support the peak periods of sales and

investment in receivables may also increase during such periods. The extra capital

needed to support the changing production and sales activates is called the fluctuating

or variable or temporary working capital.

PERMANENT AND TEMPORARY WORKING CAPITAL:

The above figure illustrates the difference between permanent t and temporary working

capital. Here the permanent working capital is stable over time, while temporary working

capital is fluctuating sometimes increasing and sometime decreasing.

However, the permanent working capital line needs not to be horizontal if the firm’s

requirement for permanent capital is increasing (or decreasing) over period in



accordance with seasonal demands. For a growing firm the difference between

permanent and temporary working capital can be depicted through the below diagram.



THE FINANCING DECISION OF WORKING CAPITAL;

The reason for the variation in the amount invested in current assets may be such as

nonpayment of debt owing to financial stringency of some important customer ,security

of raw material ,like in raw material prices ,lockout ,etc , the need of such changes in

working capital are of short term in nature which should be meet by short term

funds .The minimum working capital needed are however ,met out of long term

sources of funds .For a growing concern the working capital requirement are of much

longer duration than the requirement of fixed assets .

The letter can be ultimately met by cash inflow but the working capital can’t be realized

unless the business is closed; in this sense it is wrong to consider working capital

requirement as temporary

1.3 NEED FOR WORKING CAPITAL MANAGEMENT

The need for working capital (gross) or current assets cant be overemphasized .the

main objective of financial decision –making is to maximize the share holders wealth .to

achieve this it is necessary to generate sufficient profit. The extent of which profits can

be earned will naturally depend upon the magnitude of sales, among the other things .A

successful sales programmed is in other words necessary in earning profit by any

business enterprise. however sales do not convert into cash instantly there is

invariability a time lag between the sales of goods and the receipt of cash .there is

therefore, a need for different form of current assets to deal with the problem arising out

of the lack of immediate realization of cash against goods sold .therefore sufficient

working capital is necessary to keep the containing flow for the length of time necessary

to complete the following events

conversion of cash into inventory

conversion of inventory into receivables

Conversion of receivable to cash.



If it were possible to complete the sequence instantaneously, there would no need for

current assets .but since it is not possible the firm is forced to have current assets; since

cash inflow and cash out flow do not match, firms have to necessarily keep cash or

invest in short time liquid securities so that they will be in a position to meet obligation

when they become due. similarly firms must have adequate inventory to against the

possibility of not being able to meet demand for their products .adequate inventory,

therefore, provides a cushion against being out of stock .if firms to be competitive, they

must sell goods to their customers on credit which is necessitates the holding of

accounts receivable .it is in these ways that an adequate level of working capital is

absolutely necessary for smooth sales activity in turn enhance the owners wealth.

DETERMINENTS OF WORKING CAPITAL

There are no set rules or formula to determine working capital requirement of a

company .a large number of factors influence the working capital needs of

companies .all the factors are of different significance .the important of these factors

change over a period of time .following are factors ,which generally influence the

working requirement of companies

1. Nature and size of business

2. Manufacturing cycle

3. Business function

4. Production policy

5. Firms credit policy

6. Availability of credit

7. Growth and expansion activates

8. Profit margin and profit appropriation

9. Operating efficiency

10.Price level changes



1.4 SOURCES OF WORKING CAPITAL

Among the various available for financing working capital needs, a finance manager has

to select the best suitable source depending on the working capital needs of the

company.

Long –term sources are;

1. Issue of shares

2. Issue of debenture

3. Pouching back of profit

4. Sale of fixed assets

5. Long term loans

The short term sources for financing working capital requirement can be classified into

internal and external sources.

INTERNAL SOURCES

1. Withdrawing the deprecation funds

2. Using the resources meant for taxation

3. Postponement of payment of accrued expenses

EXTERNAL SOURCES

1. Bank credit

2. Trade credit

3. Bills of exchange and other promissory notes

4. Public deposit (short term)

5. Customer deposit

6. Government assistance

7. Loans from directors

Security deposit from employees



ADVANTAGES OF WORKING CAPITAL

1. Solvency of the business : Adequate working capital helps in

maintaining solvency of the business by providing uninterrupted

flow of production.

2. Goodwill: Sufficient working capital enables a business concern to

make prompt payments and helps in creating and maintaining

goodwill.

3. Easy loans : Concern having adequate working capitals, high

solvency and good credit standing can arrange from loans from

bank and others easy and favorable terms.

4. Cash Discounts : Adequate working capital also enables a

concern to avail cash discounts on the purchase and hence it

reduces cost.

5. Regular supply of raw materials : Sufficient working capital

ensures regular supply of raw materials and continuous

production.

6. Ability to face crisis : Adequate working capital enables a

concern to face business crisis in emergency such as depression

because during such periods, generally, there is much pressure

on working capitals.

7. High morale : Adequacy of working capitals creates an

environment of security, confidence, high morale and creates

overall efficiency in a business.

CHAPTER -2

RESEARCH DESIGN



2.1 STATEMENT OF PROBLEM

Working capital management is a significant aspect in the management of finance of

any organization .Checking the level of working capital can help easily identify and

profitability position of the firm; and the decisions regarding

a. The level of working capital ,which can be determined ,by the level of current

assts and liabilities

b. The composition of current assts and liabilities

c. Financing of current assets and liabilities are most important and significance in

the financial efficiency of business and also its credit worthiness, which has

gained importance in these days of credit squeeze .This fact has been justified

by many industries, which have failed frequently due t faulty management of

working capital especially with regard to effect of views and suggestions and

regulation laid by tankan, chore and mar the committee is very important.

It is with this view that case study has been made on working capital management in

Karnataka soaps and detergent ltd

2.2 OBJECTIVES IF THE STUDY

a. To study the pattern and products procedure followed regarding working capital

management in Karnataka soaps and detergents ltd .With special reference to

ratio analysis.

b. To study the working capital needs of Karnataka soaps and detergent ltd. To

offer suggestions for improving the working capital management in Karnataka

soaps and detergents ltd

c. To study the system of

1. management of cash

2. management of accounts receivables and

3. Management of inventories in KS&DL.



2.3 SCOPE OF THE STUDY

Working capital management includes management of both current assets and

current liabilities .As the time available is limited and the subject is very vital the study is

confined to only the management of current assets.

METHODOLGY OF STUDY

The methodology that has been adopted while collecting the information and

interpretation in a meaningful way has been to collect information both from primary and

secondary sources viz.,

Through the verbal discussions which were held with finance and other department

Through the various books of various authors on the subject of financial

management

Through the calculations of various ratio and its comparison with previous year.

2.4 TOOLS FOR THE COLLECTION OF DATA

Data had been collected from two sources one from report published by KS&DL and

information has been collected from the executives &library of KS&DL.

FIELD WORK

Several visits were made to collect the required data from KS&DL and they extended

their full cooperation in getting information required.

PLAN OF ANALYSIS

Ratio analysis, percentage analyses were for analyzing the data.

2.5 LIMITATION OF THE STUDY



The study is concerned only on one particular topic

The study is purely conducted upon the data which is available as per financial

statement of the company and references drawn and theoretical conclusions arrived at

are based on the basis of information provided by the company.

The period of study was very less as the company could provide the information up to

the year 2007-08 and not for 2008-09 which is in process.

The study contains the data up to the year 2007-08



CHAPTER-3

INDUSTRY PROFILE

INTRODUCTION

3.1 INTRODUCTION TO SOAP INDUSTRY:-

Soap is the one of the oldest chemical substances known to the humans. In

ancient time, Soap was unknown even to Greeks. Who had a deep culture .at first in the

16th century manufacturing of the soap took place in Germany using tallow and wood

ash. Later in 17th & 18th centuries improvements were made by addition of organic

substance like alkali, oils etc, and gave different varieties of soap by slight change in

their chemical combination and ingredients.

Soap is one of the commodities, which has become an indispensable part of life

of the modern fantasy world. Since it is non-durable consumer goods, there is a large

market for it. The whole soap industry is experiencing changes due to innumerable

reasons such as Government relations, environment, toxicological allergy problems,

increase in cost of raw material etc.

The changing technology and even existing desire by the individuals and the

organization to produce a better product at a mere economical rate has also acted as

Catalyst for the dynamic process of change. More and more Soap manufactures are

trying to capture a commanding market share by introducing and maintaining

acceptable products. The soap industry in India faces a cutthroat Competition, while

multinational companies dominate the market.

Indian Soap industry has seen several ups and downs in the last 30 to 40 years.

In the year 1964, during the China war India faced severe shortage of fats due to

foreign exchange Crisis.

Following Swadeshi movement in 1905, few more factories were set up and they

were:

1. Mysore Government Soap factory at Bangalore.



2. Godrej Soaps at Bombay.

SOAP INDUSTRY IN INDIA:

In India since ancient period soap nuts, shikakai etc., were used. Soap was an

unknown product for India up to 18th century. Soap was imported to India in 1884. Soap

in its modern from was introduced in the country from the western countries. The factory

in India to manufacture soap was started at Meerut in 1887 by English people. Soap

industry setting up their manufacturing unit during 1918 in Bombay & M/s, government

soap factory at Bangalore. During the year 1930 m/s Tata oil mills setup their unit in

Bombay. M/s. Hindustan lever ltd, at Bombay and Calcutta followed them during the

year 1934.

MARKET FOR SOAP PRODUCT:

Toilet soap is a fast moving consumer product, which is purchased frequently and

available easily. The use of soap is so popular that the concept of cleanliness is

attributed to the use of soap. Therefore a wide range of soap is flooding in market.

The market of soap products is reckoned to grow 10-15% a year while MNC’s

like HLL and P&G dominate the market particularly in the premium segment in the

organized sector. Nirma, Godrej soap and Colgate Palmolive too are in the race.



THE INDIAN SOAP INDUSTRY SCENARIO: -

The Indian soap industry has been dominated by handful of companies such as

1. Hindustan Levers Limited.

2. Tata Oil Mills (Taken over by HLL )

3. Godrej Soaps Private Limited.

The Indian Soaps industry continued to flourish very well until 1967-68, but began to

stagnate. Soon it started to recover and experienced a short upswing in 1974. This

increase in demand can be attributed to:-

1. Growth of population.

2. Income and consumption increase.

3. Increase in urbanization

4. Growth in degree of personal hygiene.

A soap manufacturer has 2 Classifications, Organized and unorganized sector.

KSDL is under organized Sector.

PRESENT STATUS: -

MARKET SCENARIO

India is the ideal market for cleansing products. The country’s Per capita

consumption of detergent powders and bars stands at 1.6 Kg and soap at 543gms.

Hindustan Lever, which towers over the cleaning business, sells in all over the cleaning

business but the tiniest of Indian settlements.



PROBLEMS OF SOAPS & DETERGENTS INDUSTRY:

Industry faces some problems due to increase in the cost of raw materials. The

major ingredients like soda ash, linear alkyl benzene and Sodium Tripoli phosphate

poses number of serious problems in terms of availability. The demand and supply gap

of vegetables oil is 1.5 to 2 Lakh tons and is met through imports.

COMPANY PROFILE OF KS & DL

HISTORY :-

India is a rich land of forest; ivory, silk, sandal, precious gems are magical

charms of centuries. The most enchanting perfumes of the world got their exotic spell

with a twist of sandal. The world’s richest sandalwood resource is from one isolated

stretch of forests land in South India that is Karnataka.

The origin of sandalwood and its oil in Karnataka, which is used in making of

Mysore sandal soaps is well known as Fragrant Ambassador of India & Sandalwood oil

is in fact known as “Liquid Gold”.

By the Inspiration of His Highness Maharaja of Mysore late Jayachamarajendra

Wodeyar, the trading of sandalwood logs started which was exported to Europe and

New destinations, but with commencement of First world War India faced Severe Crisis

on the business of sandalwood.

This situation gave rise to start of an industry, which produces value added

products i.e., of Sandalwood oil. His Highness Maharaja of Mysore created this situation

as an opportunity by sowing the seed of the Government Sandalwood Oil Factory,

which is the present KS&DL. The project was shaped with the engineering skills and

expertise of the top level. Late Sir M. Visvesvaraya, the great Engineer

was the man behind the project.

Today’s famous Mysore sandal soaps credit goes to late Sri .Sosale Garalapuri

Shastri who incorporated the process of soap making using Sandalwood oil. He was an



eminent scientist in the field working at the Tata Institute, Bangalore. He was sent to

England to master the fine aspects of soap manufacturing.

The Maharaja of Mysore & Diwan Sir. M.Visvesvaraya established the

Government Soap factory during the year 1918. The factory was started as a very

small unit near K.R.Circle, Bangalore with the capacity of 100 tons P.A. In November

1918 the Mysore sandal soap was put into the market after sincere effort and

experiments were undertaken to evolve a soap perfume blend using sandalwood oil as

the main base to manufacture toilet soap. The factory shifted its operation to

Rajajinagar industrial area, Bangalore in July 1957, where the present plant is located.

The plant occupies an area of 39 acres (covering Soaps, Detergents and Fatty Acid

divisions), on the Bangalore – Pune Highway, easily accessible by transport services

and communication. Another sandal wood oil division was established during the year

1944 at Shimoga, which stopped its operations in the year 2000 for want of Natural

Sandalwood.

This factory started at a moderate scale in year 1916. The first product was

washing soap in addition to the toilet soap in the year 1918. The toilet soap of the

company was made up of sandal wood oil.

In 1950 Government decided to expand the factory in two stages. The first stage

of expansion was done to increase the output to 700 tons per year and was completed

in the year 1952 in the old premises.

The next stage of expansion was implemented in 1954 to meet growing demand for

Mysore sandal soap and for this purpose Government of India sanctioned license to

manufacture 1500 tons of Soaps and 75 tons of glycerin per year. The expansion

project worth of Rs.21 lakhs includes the shifting of the factory to a newly laid industrial

suburban of Bangalore.



The factory started functioning in this new premise [i.e., present one] from 1st July 1957.

From this year onwards till date the factory had never looked back, it has achieved

growth and development in production scales and profits.

The industry has 2 more divisions one at Shimoga and another at Mysore where sandal

wood oil is extracted. The Mysore division functioning from 1970 and only during 1984

manufacturing of perfumed and premiere quality Agarbathies at Mysore division were

started. Right from the first log of sandalwood that rolled into the boiler room in 1916,

the company has been single – minded pursuit of excellence. The project took shape

with the engineering skills and expertise of top-level team under the leadership of Sir.

M.Visvesvaraya, Prof. Waterson and Dr.Subrough. Like this soap factory was started as

a small unit and now it has grown up to a giant size.

RENAMING: -

On 1st October 1980, the Government Soap Factory was renamed as “Karnataka

Soaps and Detergent Limited”. The Company was registered as a public limited

company. Today Company produces varieties of products in the toilet soaps, detergent,

Agarbathies and Cosmetics.



3.2 OBJECTIVES OF KS & DL: -

To serve the national economy

To attain self – reliance

To promote and uphold its image as symbol of traditional products

To promote purity and quality products and thus enhance age old – charm of

Sandalwood Oil

To build upon the reputation of Mysore Sandal soap based on pure sandal oil.

To maintain the brand loyalty of its customer.

To supply the products mentioned above at most reasonable and competitive

rate.

VISION STATEMENT:-

Keeping pace with globalization, global trends and the state’s policy for

using technology in every aspect of governance.

Ensuring global presence of Mysore Sandal products while leveraging its

unique strengths to take advantage of the current technology scenario by

intelligent and selective diversification.

Secure all assistance and prime status from Government of India, all

technology alliances.

Further, ensure Karnataka’s pre-eminent status as a proponent and

provider of technology services to the world, nation, other states public

and private sectors.

Making available technology product and services at the most affordable

price to the people at large, in keeping with the policy of a welfare state.

Making all out efforts to achieve unimaginable profits.

Most importantly to earn the invaluable foreign exchange, both to the state

and to the country.

3.3 COMPETITORS OF KS&DL PRODUCTS AND SERVICES:-

KS&DL is facing cut-throat competition in national and international market. Some of

its main competitors are:-



M/S. Hindustan Uni Lever Ltd.,

M/S. Godrej Soaps Private Ltd.,

M/S. Proctor& Gamble

M/S. Wipro

M/S. Nirma Soaps Private Ltd.,

M/S. Jyothi Laboratories

KS&DL has the following departments:-

1) Finance and Accounts

2) Human Resources Development & Administration

3) Research and Development

4) Quality Assurance

5) Materials & Stores

6) Production & Maintenance

7) Marketing & Business Group

8) Projects & Management Information Services

HRD DEPARTMENT:-

Importance of HRD Department:

1) Management of human resources.

2) Co-operation

3) Assisting the management in HR matters

4) Development of work force.

5) Work together to achieve organizational goals and

6) Profit and growth.

KEY FUNCTIONS OF THE HRD:-

1) Recruitment and Selection

2) Training and Development

3) Promotion and Transfer

4) Wages and salary administration



5) Performance Appraisal

6) Industrial Relations

7) Disciplinary Action and

8) Welfare Measures

TRADEMARK OF KS & DL:-

The “SHARABHA”

The carving on the cover is the sharabha, the trademark of KS & DL.

The sharabha is a mythological creation from the “puranas” which has a body of

a lion and head of elephant, which embodies the combined virtues of wisdom and

strength. It is adopted as an official emblem of KS& DL to symbolize the philosophy of

the company.

The sharabha thus symbolized a power that removes imperfections and

impurities. The maharaja of Mysore as his official emblem adopted it. And soon took its

pride of place as the symbol of the Government Soap Factory of quality that reflects a

standard of excellence of Karnataka Soaps and Detergent Limited.

SLOGAN:-

“NATURAL PRODUCTS WITH EXOTIC FRAGRANCES”

KS & DL has a long tradition of maintaining the highest quality standard, right from

the selection of raw materials to processing and packing of the end product. The

reasons why its products are much in demand globally and are exported regularly to



UAE, Beharen, Saudi-Arabia, Kuwait, Qatar, South America. The entire toilet soaps of

KS & DL are made from raw materials of vegetable origin and are totally free from

animal fats.

POLICY OF KS&DL :-

Seek purchase of goods and services from environment responsible suppliers.

Communicate its environment policy and best practices to all its employees implications.

Set targets and monitor progress through internal and external audits.

Strive to design and develop products, which have friendly environmental impact during manufacturing.



3.4 BIRDS EYE VIEW OF KS&DL :-

1918 – Government Soap Factory was started by Maharaja of Mysore

and the Mysore Sandal Soap was introduced into the market

for the first time.

1950 - The factory output raised to 500 M.Tons with the following

modifications.

1. Renovating the whole premises.

2. Installing new boiler soap building plant and drying chamber.

1954 – Received license from Government to manufacture 1500 tons

of soap and 75 tons of glycerine per year.

1957 – Factory shifted its operation to Rajajinagar industrial area.

1974 – Mysore sales international limited was appointed as the sole

selling agent, for marketing its products.

1975 – Rs.4 Crores synthetic detergent plant was installed

based on Italian technology by Ballestra SPA.

1980 - On 1st October 1980 the Government Soap Factory was

converted into a public sector enterprise and renamed as

“Karnataka Soaps & Detergents Limited”.

1981 – a) Production capacity increased to 6000 tons,

b) Rs.5 Crores Fatty Acid Plant was installed.

1984 – Manufacturing of premium quality of Agarbathies at Mysore

division.

1985 – Production capacity was raised to 26,000 M.tons Per Annum.

A large variety of toilet soaps at attractive shapes, colors and

fragrances introduced to meet the varieties & tastes of

consumers.

1992 – The company was registered with the Board for Industries

and Financial Reconstruction (BIFR), New Delhi in December

for rehabilitation, as the company suffered losses



continuously since 1980 at its net worth fully eroded.

1996 – The BIFR approved the rehabilitation scheme in September &

the Company stated making Profits.

1999 – ISO-9002 Certificate for quality assurance in production,

installation and Servicing.

2000 – ISO-14001 certificate pertaining to environmental

management system.

2003 – The entire carried forward loss of Rs.98 Crores wiped out

and in May BIFR, declared the company to be out of its

Purview. The Company is making profit continuously,

It is only State Public Sector unit has come out of BIFR.

2004 – The ISO-9002 was upgraded to ISO-9001-2004, Quality

Certificate.

3.5 PRESENT STATUS OF THE COMPANY

The company is mainly dependent on southern market. The product availability in

retail outlets particularly for Mysore sandal soap is almost comparable to any other

similar industries products in the premium segment in the south. Whereas in other parts

like Eastern & Northern markets penetration of our product is relatively poor, which

depends on the company’s distribution structure, stockist and field personnel strength.

With increased trust on distribution, the company does not foresee any problems

to achieve the projected sales through the redistribution package.

Further, the policy of Indian Government also sees the public sector enterprises

enter the industry in a large way there by making the products available to the

consumers at reasonable prices.

Being located in the centre of southern part of India the Government Soap

Factory claims preferential treatment for expansion programme availability of exotic

natural Sandalwood oil.



AN ISO-9002 COMPANY: -

KS & DL with a tradition of excellence of over eight decades is committed customer

delight, through total quality management and continuous improvement through the

involvement of all employees. KS&DL has got ISO 9002 certificate.

To improve the quality management system and to facilitate TQM in the process

of soap and detergent, the management took decision to obtain ISO-9002 by end of

March 1999. Accordingly action play was drawn and a committee was set up for the

purpose during October 1998 with a mission statement.

According to the company constitution, officers go for the formation in all the

areas of the company’s operation. Particularly production, procurement, quality

assurance, store maintenance. The company gives initial training including conducting

employee’s awareness programme, document quality manual and quality system

procurement.

In this direction company obtained the guidance from gulag Consultancies,

Bangalore and Bureau of Indian Standards, Bangalore. Accordingly, company

standards registered for ISO 9002 by the end of March to the Bureau of Indian

Standards. Obtained the certificate by the end of March 1999 itself.

This is to project in the national and international market and also to improve

quality of products offered to the consumers with the assurance of quality in the

message.

The Company got itself upgraded to ISO-9001-2004, Quality Systems in the

year 2004-05.

ISO-14001:-

The company is located in the heart of the Bangalore city. The management of

the company took a decision to get the ISO-14001 and become model to other public

sector for the techniques used and also to other Government units to spread the

message of maintenance.



ISO-14001 and ISO-9001 will facilitate to improve the corporate brands in the

global market and it will help the company to improve the profits, year after year on

long-term basis. The environment management system adopted in the company

through this motive as follows:

Conservation of energy

Conservation of Surrounding

Conservation of resources.

Equipped with latest technology and backed by full-fledged control and R&D

support, KS&DL is marching confidentially ahead in the new millennium. The Company

is developing new products to meet the changing preferences of its customers.



KS&DL AT GLANCE:-

Incorporated Name - Karnataka Soaps and Detergents Limited.

Address - Karnataka Soaps and Detergents Limited

Bangalore Pune High Way

Post Box No.5531, Rajajinagar,

Bangalore – 560 055

Ph: 080-3377691/3370469/23371103 to 06

22376922 to 24

Email : Mysorsandal @ vsnl.com, Website : www.mysoresandal.com

Year of Establishment - 1918

Constitution - Wholly owned by Govt. of Karnataka

Management - Govt. of Karnataka nominates/appoints

Board of Directors. Chairman & MD

Renamed - 1980

Trademark - The trademark is SHARABHA. It is the

Body of lion with the head of an

elephant means blending the majesty

of lion with strength of an elephant.

Production range - Toilet soaps, bar soaps, Detergent Cakes,

Powder, Agarbathies, Cosmetics,

Baby products, Sandalwood Oil

Process know how - The facility is a pioneer in the

Manufactures of various soaps and

technology Imported from Italy.


http://www.mysoresandal.com/


Capacity of the Unit - Licensed capacity is 26,000metric tons of Soaps & 10,000 M Tons

of Detergents Per annum

Plants - At Bangalore Soap Plant ,Detergent Plant, Fatty Acid Plant

- At Mysore Sandal wood Oil Agarbathies

- At shimoga Duty Paid Godown

THE BIRTH OF A LEGEND :-

The early year of the 20th century witnessed the birth of a magical formula,

created from the finest and purest sandalwood oil, better known as “liquid gold”, distilled

exclusively at our divisions in Karnataka-Mysore. A fragrant gift to the world from the

first Government Soap Factory of India. Nurtured by the Maharaja of Mysore. Enriched

with all the goodness of natural sandal wood oil, this unique soap captured hearts and

markets at home, as well as right across the globe creating a fragrant legacy for the

state of Karnataka. Soaps and Detergents limited (KS&DL) is the true inheritor of this

golden legacy of India. Continuing the tradition of excellence for over eight decades,

using only the best Grade sandal wood oil in its product range. KS&DL today in one of

the largest producers of Sandal wood oil and sandal wood soaps in the world.



3.6 PRODUCT MANUFACTURED BY KS&DL:-

TOILET SOAPS

NAME OF THE PRODUCT UNITS OF GRAMS

Mysore Sandal Soap 75

Mysore Sandal Classic Soap 75

Mysore Sandal Gold Soap 125

Mysore Sandal Baby Soap 75

Mysore Special Sandal Soap 75

Mysore Rose Soap 100

Mysore Sandal Herbal Care Soap 100

Mysore Jasmine Soap 100 & 75

Mysore lavender Soap 150

Mysore Sandal bath tablet 150

Mysore Sandal classic bath tablet 150

Mysore Jasmine bath tablet 150

Mysore Special Sandal tablet 150

Mysore Sandal rose tablet 150

Mysore Sandal Guest tablet 17



DETERGENTS

NAME OF THE PRODUCT UNITS IN GRAMS

Mysore detergent powder 1000

Mysore detergent powder 500

Mysore detergent Cake 125

Mysore detergent cake 250

TALCUM POWDERS

NAME OF THE PRODUCT UNITS IN GRAMSMysore Sandal Talc 20, 50, 100, 300

Mysore Sandal Baby Talc 100, 200, 400

AGARBATHIES

NAME OF THE PRODUCT

Mysore Sandal Premium

Mysore Sandal Regular

Mysore Rose

Nagachampa

Suprabhatha

Mysore Jasmine

Parijatha

Sir M.V.100

Bodhisathva

Venkateshwara

Durga

Ayyappa

Alif Laila

Meditation



PRODUCT RANGE FROM THE HOUSE OF MYSORE SANDAL SOAP

Mysore Sandal Soap (75gm,125gm & 150gm)

Mysore Sandal Special shop (75gm)

c. Mysore Sandal Baby Soap (75gm)

d. Three-In-One Gift Pack –(SJR) 3Tabs (150gm Each)



e. Mysore Sandal Gold Soap (125gm)

f. Mysore Rose Soap (100gm)

Six-In-One Gift Pack- 6Tabs (150gm Each)



Mysore Sandal Gold Sixer 6 Tabs (125gm Each)

Mysore Sandal Soap Bath Tablet Trio 3nos. (150gm Each)

Mysore Sandal Classic Soap (75gm)



DETERGENTS

KS&DL also manufactures high quality detergents applying the latest spray drying

technology with well balanced formulation of active matters & other builders; they

provide the ultimate washing powder.

1. Sensor Detergent Powder (1kg/2kg)

2. Mysore Detergent Powder (1kg/500gms)

3. Mysore Detergent bar (250gms)

4. Mysore Detergent Cake (125gms/250gms)

AGARBATHIS

Mysore Sandal premium

Mysore Rose

Suprabath

Parijata

Venkateshwar

Ayyappa



Chandhana

Mysore sandal

Nagachampa

Mysore Jasmine

Bodhisattva

Durga

Alif Laila

SANDALWOOD OIL

In 5ml, 10ml,20ml, 100ml,500ml,2kg,5kg,20kg,and 25kg packing.

POWDERS

Mysore Sandal Talk: Cooling & Healing, Fragrant freshness, Net. Wt 20gm, 60gm,

300gm and 1kg.

Mysore Sandal Baby Powder: Tender loving care for baby…& Mummy. Net wt 100-

400gms.







SWOT ANALYSIS OF KS&DL: -

STRENGTHS:

Only soap in India that contains pure sandal and almond oil.

Certified by ISO

World’s largest production of sandal wood oil.

Brand name from decades in soap market.

It has very good dealership network in South which ensures that

the products reach every customer.

Diversified product range helps the company to maintain

stability.

WEAKNESSES:

Distribution network weak in north and east.

Absence of television advertisement

Neglecting freshness aspect.

High oriented cost due to excessive labour force.

Low turnover resulting in low profit.

OPPORTUNITIES:

Traditional benefits that sandal is good for skin

Skin care is just gaining importance among consumers

Government support and large production capacity.

Advantages of being in the industry for a long time.

Existence of vast market and huge demand.

THREATS:

Other competitors such as Rexona, Moti, Santoor etc.



There is a need for renovation of plant and machinery.

Government Policy may reduce growth potential.

Other sandal soaps in the market

CLASSIFICATION OF EMPLOYEES AT KS&DL

1. Permanent Employee: One who has been engaged for work on a permanent

basis.

2. Temporary Employee: One who has been engaged for work, which is essentially

of temporary nature and likely to be finished within a limited period.

3. Probationary Employee: One who is provisionally employed to fill a permanent

vacancy.

4. Casual Workmen: One who is engaged on day to day basis, for casual or non

recurring work.

5. Trainee: Trainee is a learner who may or may not be paid stipend during the

period of training.



3.7 ORGANISATION CHART OF KARNATAKA SOAPS AND DETERGENT

LIMITED

ORGANISATION STRUCTURE

CHAIRMAN MANAGING DIRECTOR EXECUTIVE GM GM AGM DIRECTOR (MKTG) (FINANCE) (HRD)

GM DGM GM AGM DGM AGM (PRODN) (SOD) (R&D/ (STORES) (MTL) (E&S) QAD) DGM (DM)

GM AGM(P&M) (U&E)

WORKING CAPITAL MANAGAEMENT IN KARNATAKA SOAPS AND DETERGENTS LTD.

The working capital in Karnataka Soaps and Detergents Ltd. is efficiently operated by

the Finance Department. The finance Department headed by Assistant General

Manager is actively involved in preparing, monitoring and reviewing the requirements of

working capital. It prepares cash flow statement and cash budgets monthly; prepares

sales budget; production budget; manpower material budget and other financial

statements to estimate the working capital need and compares the actual with the



forecast. It also takes effective steps to correct variations if any arises. The normal and

peak periods of collection and payments are analyzed and cash requirement is planned

accordingly. It works out important financial ratios regularly to make sure that the

financial position of the industry is sound. Quarterly cash flow statement and budget

are reviewed and are put up to the board of directors .the finance department has been

successful in adhering to the needs and recommendations the Tandon/Chore

committee. They are therefore, able to obtain additional amount of borrowing from

banks for working capital requirements if so needed.

INTRODUCTION

Working capital indicates circular flow of cash i.e., a sort of revolving fund starting with

cash used to pay raw material, labor and operating expenses and when finished goods

are ready for sale, the cash is recovered through sales of the finished goods/semi-

finished goods, either on cash or on credit. Thus we have a circular cash flow from

cash to inventories to receivable and back to cash.

Working capital refers to the flow of ready funds necessary to work. Ordinarily

speaking working capital is understood to imply the liquid funds representing the excess

of current assets over current liabilities or the difference between current assets and

current liabilities.

WORKING CAPITAL CYCLE

In case of working capital there are cyclical changes.. The company purchases the raw

material which means the cash is converted into raw material. When finished goods are

produced raw materials are converted into finished stock. Then finished goods are sold

on credit to t5he customer4s when stock is cycle begins with cash and ends with cash.

So it is called as working capital cycle.

INVENTORIES



All raw materials except preference material will be at 2 months stock level. The

purchases are done in bulk depending on the availability and demand for finished

goods. The company normally kept 3 months stock of uninterrupted production.

STOCK

Refers to the stock of chemicals. Perfumery material and packing material.

WORK-IN-PROGRESS

The period allowed as per the norms in 2 weeks.

FINISHED GOODS

Finished goods are kept in stock for one month generally by the company.

DEBTORS

The time period allowed by the company for debtors is 1.5 months.



CASH-IN-HAND

The company generally maintains liquid cash of Rs. 1-2 lakhs at any point of time.

SUNDRY CREDITORS

The creditors for the company are the suppliers of raw materials, stores, materials, etc,

for which the company is generally allowed a credit of one month

MANAGING CASH FLOWSince KS&DL is dealing with very few customers and that to with the government

entities, it does not adopt any techniques for accelerating cash collections and

controlling cash disbursements.

INTRODUCTION

ACCOUNT RECEIVABLES

Account receivables or trade credit is the most prominent force of the modern

business. Sit is considered as an essential marketing tool, acting as abridge for the

movement of goods through production and distribution stages to customers finally. AS

firm grants credit to protect its sales from the competitor and to attract potential

customer trade credit thus creates receivable or book debts, which the firm is expected

to collect in future. It also involves an element of risk as the cash payment has to be

received; hence they have to be carefully analyzed.

Receivable constitute a substantial portion of current assets of several firms.

They form about 1/3 part of current assets in India As substantial amount are tied up in

trade debtors, it needs careful analysis and proper management, for proper

management of receivable a concern must adopt an optimum credit policy.



OPTIMUM CREADIT POLICY

The optimum investment in receivables will be at a level where there is trade off

between costs and pr4ofitability.When the firm resorts to a liberal credit policy the

profitability of firm increase in account of higher sales. However, such a policy

collection cost. The total investment in receivable increase and thus the problem of

liquidity is created. On the other hand a stringent credit policy reduces profitability off

between the profit and sales that bring in receivables.

VARIABLES OF CREDIT POLICY

A firm should establish receivable policies after carefully considering both benefit

and cost of different policies. These policies relate to:

1. Credit standards

2. Credit terms and

3. Collection procedures.

ACCOUNT RECEIVABLES MANAGEMENT IN KS&DL

The accounts receivables of Karnataka Soaps and Detergents Limited., is an

important component of working capital, if constitutes around 40% of the total amount.

CREDCIT ANALYSIS

The company does not call for any credit analysis as it is dealing with public

sector undertaking and Govt. Department etc. However a few private customers are

provided with credit after scrutinizing there past performance.

CREDIT TERMS

Karnataka soaps and detergents limited. Provides credit to customers. The

period of which range from 30 to 45 days. In current assets of private customers. The

sales and services are rendered against an advance of full amount or 90% of the

amount along with the order.

CASH DISCOUNT

The KS&DL does not provide any cash discount to the customers.

COLLECTION POLICY



Monthly customers wise schedules/reporters are prepared by all the units the

KS&DL to know the age of receivable accounts, amount due etc. And necessary follow-

up actions are taken by the representative unit of KS&DL.

CONTROL OF ACCOUNTS RECEIVABLES IN KARNATAKA SOAPS AND

DETERGENTS LIMITED

Various reports which serve as a control device for accounts receivable are

prepared by all the units of Karnataka Soaps and Detergents Limited., and are

submitted to control office they include.

Monthly sundry debtors report.

Report on age of accounts and

Weekly debtors report.

Different units KS&DL prepares monthly reports indicating the credit sales to

customers and provide the opening balance at the beginning of the year, total

dispatches done during the month, realization figures and balance of bills not submitted

and outstanding.

One-month report is also prepared to analyze the age of each h account

receivable. The accounts due for more than one year and less than one year are

analyzed. Customer wise, to know why the amounts are outstanding. There is one

more weekly debtor’s report, which is prepared by finance department of each unit for

the purpose of internal control.

All these reports mentioned above, prepared by KS&DL units and are sent to the

company’s corporate office at Bangalore on the basis of their reports. The finance

department in corporate office advises the different units in taking actions to reduce

investments in receivable. If any problems arise, the corporate office solves it. The

KS&DL also makes provisions for bad and doubtful debts on the basis of the period for

which debts have been outstanding.



INVENTORIES

INTRODUCTION

The preceding two chapter’s basis consideration in managing current assets

namely, cash and receivable are analyzed. The third major current assets is inventory,

inventory are stocks of product a company is manufacturing for slaw and components

that makes up the product. Inventory like receivable are also a sufficient ratio if most

firm’s assets and according to the required substantial investment, to keep these

investment from becoming unnecessary large, inventories must be managed efficiently.

NATURE OF INVENTORIES

The various forms in which inventories exist in a manufacturing company are;

a. RAW MATAERIAL

Raw materials are those basic inputs that are converted into finished product through

the manufacturing process. Raw materials are those units, which have been purchased

and stored for future productions.

b. WORK IN PROGRESS

The work-in-progress is that stage of stocks, which are in between raw materials and

finished goods. They are se3mi/finiashed products that need more work the time takes

in the manufacturing process. The greater the time taken in manufacturing, the more

will be the amount of work in progress.



c. FINISHED GOODS

Finished goods inventories area those completely manufactured products, which are

ready for sale. Stocks of raw materials and work in progress facilitate production, while

stock of finished goods is required for smooth marketing operations.

The level of three kinds of inventories for a firm depends on the nature of its business.

A manufacturing firm will have substantially high level of all three kinds of inventories.

Supplies include office and plant cleaning material oil, fuel, light, bulbs, etc. There

materials do not directly enter into production but are necessary for production process.

Usually, there supplies are small part of inventory and do not involve significant

investment. Therefore a sophisticated system of inventory control may not be

maintained for them.

NEED TO HOLD INVENTORIES

There are generally three major motives for holding inventories.

1. The transactions motive, which emphasizes the need to maintain inventories to

facilitate smooth production and sales operation.

2. The precautionary motive, which necessitates holding of inventories to guard

against the risk of unpredictable changes in demand and supplies forces and

other factors.

3. The speculative motive, which influence the decision to increase or reduce

inventory level to take advantage of price fluctuations.

A company should maintain adequate stock of material as it is not possible f0or a

company to produce raw material whenever it is needed and also for a continuous and

smooth and uninterrupted production process.



When materials are manufactured in a concern there cost will be known as set up costs.

Their costs will include cost of setting up machinery for manufacturing materials, time

taken in setting costs of tool etc.

INVENTORY MANAGEMENT TECHNIQUES

In managing inventories the firm should determine the optimum level of inventory

efficiently controlled make the firm flexible. Inefficient inventory control results in

unbalanced and inventory and inflexibility; the firm may be sometimes out of stock and

sometimes may pile up unnecessary stocks this increase the level of investment and

makes the firm unprofitable.

ECONOMIC ORDER QSUALITY (EOQ)

One of major inventory management to be resorted is how many inventories should be

added when inventory is replenished. To decide this, economic order quality model is

helpful. Determining optimum or economic order quantities involve two types of costs.

a) Ordering costs.

b) Carrying costs.

The economic order quantity in that inventory level which minimize the total of ordering

and carrying costs.



SELECTIVE INVENTORY CONTROL

Usually a manufacturing company has to maintain several types of inventories it is not

desirable to keep same degree of control on all the items i.e. a company has to pay

maximum attention to those items whose value is the highest. This can be achieved

through an approach called the ABC analysis. Where in the high value items are

classified as “A” items, “C” items represents relatively the least value, while the “B” falls

in between the two categories.

A item requires the higher control; C items require low control while B item requires

reasonable attention of the management. ABC analysis is also known as control by

importance and exception (CIA).



CHAPTER-4

ANALYSIS AND INTERPRETATION

ANALYSIS OF CHANGES IN WORKING CAPITAL STATEMENTS

According to working capital management rules, an increase in a current assets, results

in increase in working capita, decrease in a current assets, results in decreasing in

working capita, increase in current liability results in decrease in working capital and

decrease in a current liability increase in working capital.

From the above statement for the year ending 31 03 2005, it is clear that there is

decrease in working capital of Rs. 22546398 due to increase in current assets .

From the above statements for the year ending 31 03 2005, it is clear that there is

decrease in working capital of Rs. 74118473. It is due to decrease in current liability.

Comparing these two year statements it is evident there is proper utilization of current

assets and current liabilities in the year 31 03 2005. Thus it shows the improvement in

the utilization of current assets and current liabilities.

From the statements of 31 03 2004, 31 03 2005, 31 03 2008 it is clear that there is

decrease in working capital. We find that there is effective utilization of current assets

and current liabilities.

COST OF LIQUIDITY OF COST ILLIQUIDITY

As we knew cost of liquidity increases in WCP because of excessive funds in current

assets. The cost of liquidity is the cost of holding insufficient current and it increases

with the decrease in WCP. One has to minimize the total cost of both the costs of

liquidity and liquidity in order to determine the optimum level of working capital.



AGGRESSIVE MODERATE CONSERVATIVE LEVAEL OF WORKING CAPITAL

Observing the above, WCP, there is an excessive fund investing in current

assets, which increase the cost of liquidity. Therefore, it is better for the company to

adopt moderate working capital policy thereby reducing the total cost.



1. RATIO RELATING TO LIQUIDITY OF WORKING CAPITAL.

Liquidity ratio used to measure the ability of a firm to pay its maturing obligation on

time .The first concern of the financial analysis of the liquidity of working capital is used

for both short –term creditors and internal management of the firm.

1.CURRENT RATIO

The net working capital position of firm is indicated by the relationship of its current

assts and current liabilities .It measures the ability of a firm to pay off its short term

obligation .higher the obligation .Higher the current ratio greater the short term solvency

and vice – versa

CURRENT ASSETS

CURRENT RATIO =

CURRENT LIABiLITES

CURRENT

RATIO

Year Current Assets Current Labilities Current Ratio

2007-2008 911689555 475523005 1.917235434

2008-2009 1091372587 451607354 2.416640423

2009-2010 1239560593 561527841 2.207478423

2010-2011 1201140120 563447217 2.131770437

Table-1



2007-2008 2008-

2009 2009-2010 2010-

2011

0

200000000

400000000

600000000

800000000

1000000000

1200000000

1400000000

Current AssetsCurrent Labilities

Current Ratio

Current AssetsCurrent LabilitiesCurrent Ratio

ANALIYSIS The current ratio of KSDL for the year 2007-2008, 2008-2009,2009-2010,2010-

2011 are 1.92, 2.42, 2.21, 2.13 times respectively. The ideal current ratio is 2times.

Hence it is inferred that the short term solvency of the company is very good. But in the year 2008-2009, the company had maintained a high current ratio indicating that the company had engaged itself in under trading.



2. LIQUID OR QUICK OR ACID RATIO

The quick ratio emphasizes the relationship of liquid assets to current liabilities.

The term liquid assets refers to current assets, which can be converted into cash

immediately or at a short nature.

LIQUID ASSETS

QUICK RATIO =

CURRENT LIABILITES

LIQUID ASSTS = CURRENT ASSETS – INVENTORY

TABLE -2

QUICK RATIO

YEAR

Quick Assets Current Labilities Quick Ratio2007-2008

615676733 475523005 1.2947359572008-2009

683920100 451607354 1.5144131162009-2010

721954754 561527841 1.2856971662010-2011

675905562 563447217 1.199589849

INFERENCE

The quick ratio of KSDL for the year 2007-2008, 2008-2009,2009-2010,2010-2011 are 1.29, 1.51, 1.29, 1.20 times respectively. The ideal quick ratio is 1:1.

Hence it is inferred that the financial liquidity of the organization is very good. It also indicates that the firm is indulged in efficient inventory management by not maintaining huge inventory, hence by cutting the inventory cost.



2007-2008 2008-

2009 2009-2010 2010-

2011

0

100000000

200000000

300000000

400000000

500000000

600000000

700000000

800000000

Quick AssetsCurrent Labilities

Quick Ratio

Quick AssetsCurrent LabilitiesQuick Ratio

TABLE 5



DEBTORS TURNOVER RATIO

It is a ratio between net sales and average debtors indicate the efficiency of credit

management .Higher the debtors turnover ratio higher will be the efficiency.

NET SALES

DEBTORS TURN OVER RATIO =

AVERAGE DEBTORS

Year Net Sales Debtors DTR Debtor Collection

Period

2007-2008 1286462008 210059025 6.124288199 58.78234144

2008-2009 1533703531 204756347 7.490383343 48.06162562

2009-2010 1789059796 214700867 8.332801916 43.20275504

2010-2011 1810681627 208190152 8.697249172 41.39239809



DEBTORS TURNOVER RATIO

Net Sales

2007-20082008-20092009-20102010-2011

ANALYSIS: The debtors turnover ratio is 6.12 in the year 2007-2008 and

7.49,8.33,8.69 upto 2010-2011

INFERENCE:

The debtor turnover ratio of KSDL for the year 2007-2008, 2008-2009,2009-2010,2010-2011 are 6.12, 7.49, 8.33, 8.70 times respectively & the Debt Collection Period are 59, 48, 43, 41 days respectively The ideal Debt Payment Period is 30days. The organization has allowed the credit period more than the ideal Debt Collection Period & the actual Debt Payment Period of the organization which indicates that the organization’s credit collection period is inefficient & is in alarming situation.



TABLE 6

CREDIT TURNOVER RATIO (CTR)

CTR ratio indicates credit facility enjoying by the firm. It is calculated taking into account

net purchases and average conditions, calculated as fallows.

NET PURCHASES

CREDIT TURNOVER RATIO =

AVERAGE CREDITORS

YEAR

Material Purchases Creditors CTR2004-2005 518909473 82909923 6.8112889092005-2006 847238335 56632624 16.420872392006-2007 958986877 72289374 13.753555382007-2008 969031446 61739288 16.35695588



CREDITORS TURNOVER RATIO

2004-2005 2005-2006 2006-2007 2007-20080%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CTRCreditorsMaterial Purchases

ANALYSIS: CREDITORS turnover ratio is 6.81 in the year 2007-2008, and

16.42,13.75,16.35 upto 2010-2011

INFERENCE:

The creditor turnover ratio of KSDL for the year 2007-2008, 2008-2009,2009-2010,2010-2011 are 6.81, 16.42, 13.75, 16.36 times respectively & the Debt Payment Period are 54, 22, 26, 22 days respectively.

The ideal Debt Payment Period is 30days. The organization has received the credit period

lesser than the ideal Debt Payment Period, hence it can be inferred that the organization has not

received sufficient period of credit from its creditors









TABLE 10

WORKING CAPITAL TURNOVER RATIO (WTC)

It is a ratio between net sales and net working capital. It shows efficiency of working

capital to generate sales. It is expressed as fallows.

NET SALES

WORKING CAPITAL TURNOVER RATIO (WTC) =

NET WORKING CAPITAL

Year Net Sales Net

Working Capital

WCTR

2007-2008 1286462008 436166550 2.94947425

2008-2009 1533703531 639765233 2.39729115

2009-2010 1789059796 678032752 2.6386038

2010-2011 1810681627 637692903 2.839425715

WORKING CAPITAL TURNOVER RATIO



2007-2008

2008-2009

2009-2010

2010-2011

0

200000000

400000000

600000000

800000000

1000000000

1200000000

1400000000

1600000000

1800000000

2000000000

Net SalesNet Working CapitalWCTR

ANALYSIS: The working capital turnover ratio is 2.94 in the year 2007-2008 and

2.39,and 2.68, 2.83 upto 2010-2011

INFERENCE:

The Working Capital Turnover ratio of KSDL for the year 2007-2008, 2008-2009, 2009-2010, 2010-2011 are 2.95, 2.40, 2.64, 2.84 times respectively. The organization is consistent & efficient in the effective utilization of the working capital of an enterprise.



CHAPTER-5FINDINGS AND SUGGESTIONS



ORGANISATION STUDY InKarnataka Soaps and Detergents. Ltd.Project submitted in partial fulfillment of the requirements for the award of the degree of MASTER OF BUSINESS ADMINISTRATIONBANGALORE UNIVERSITYSubmitted by:UMANANDA.HReg. No: 09JQCMA077Under the Guidance of Prof. H.S.MURTHYJAYANAGAR, 7THBLOCK, BANGALORE.2009-2011.1



FINDINGS

1. It seems that the company has invested lesser amount in outside investment. If

the interest rate is more than the alternate channels of funds needed that

company must think about investment in outside organization.

2. The company has been able to improve it’s performance year and year by

effective utilization of resources supported by sound technical back ground will

knit management team and strong brand equity of KS&DL.

3. The company has high liquidity towards working capital management which

is very effective for the management of inventories.

4. The finance department has been successful in adhering to the needs and

recommendations of the tender/chore committee.

5. All the payments to creditors are made through cheque, even other expenses are

paid through cheque; wages, salary excise duty are paid monthly.

6. The company has sufficient quick assets like book debts and cash to

cover its short term obligation and the observed ratios is more than normal

standard of 1:1 are far above the safety margin.



SUGGESTIONS

IN THE light of finding of the study of following suggestions are made for the

improvement of the working capital management in KS&DL.

1. KS&DL should check it is financial performance every 3 months. It will be better to

know the current positions of the company and also helpful at active the goods.

2. Commencement of effective forecasting of the working capital.

3. It will be better if KS&DL diverts a little portion of its funds to find assets which will

help the enterprise in undertaking expansion activities and ultimately enhancing its

sales and profitability.

4. The requirements of working capital should be properly assessed by considering

various aspects such as production schedule, labour cost and net sales.

CONCLUSION

Despite difficult economic conditions and an overall slowdown of industrial growth in our

country, KS&DL has a good demand for products; its market is steadily increasing.



KS&DL has a very good quality system. It is known for its quality products in the

market, It manufactures 80% of good quality sandalwood products and 20% non-

sandalwood which is famous world wide for its brand and quality. It has been

awarded ISO 9002 certificate. It is a major achievement.

A company has good name in the market because it provides competition. KS&DL has

been able to increase its presence prices of product diversification by effective

utilization of manpower and resources supported by sound technological background,

efficient management team and strong brand equity of KS&DL.

The process of reforms and liberalization result higher industrial growth adopted group

technology. KS&DL markets after excellent opportunity to Global Markets.



BIBLIOGRAPHY

LIST OF BOOKS

1. PRASSANA CHANDRA FINANCIAL MANAGEMENT

2. I. M PANDEY FINANCIAL MANAGEMENT

3. M.Y. KHAN AND JAIN .P.K FINANCIAL MANAGEMENT

E-MAIL; [email protected]

Website; www.mysoresandal.com


http://www.mysoresandal.com/

mailto:[email protected]


BALANCE SHEET AS 31 ST MARCH 2007

PARTICULARS 2006-2007

Amount AmountSOURCES OF FUNDS

1. Share Holders Fund a. share capitalb. Reserve and surplus.

2. Loan funds a. secured loans b. unsecured loans. TOTALAPPLICATION OF FUNDS 1. Fixed assts a. Gross block (less) : deprecation b. Net Block

2. Investments 3.current assets loans &advances

a. inventoryb. sundry debtorsc. cash and bank Balancesd loans and advances(Less) ;- current liabilities and provisionsa. liabilitiesb. provisionsNet Current Assets

4. Miscellaneous Expenditure Profit and loss account

TOTAL

16629120129995436

292406486233475517

31822100015070293

146624556479915849

58930969 100

816621470

408567751

3508557238087364131234558172546525

280039861128527890

40805371912931061 -

479915849






1. Share Holders Fund a. share capitalb. Reserve and surplus.


2. Investments3. Deffered Tax Assets

3.current assets loans &advancesa. inventoryb. sundry debtorsc. cash and bank Balancesd loans and advances(Less) ;- current liabilities and provisionsa. liabilitiesb. provisionsNet Current Assets 4. Miscellaneous Expenditure Profit and loss account

TOTAL

1036553689995436

296106154237050829

318221000136826041

100360972555408013

590553253000010032146548

881689555

475523005

296012822146346670334385423104944640

308752365166770640

40616655028039490 -

555408013






1. Share Holders Fund a. share capitalb. Reserve and surplus.c. Exchange Fluctuation Reserve


2. Investments3. Deffered Tax Assets

3.current assets loans &advancesa. inventoryb. sundry debtorsc. cash and bank Balancesd. loans and advancese. Investment in gratuity trust(Less) ;- current liabilities and provisionsa. liabilitiesb. provisions

Net Current Assets 4. Miscellaneous Expenditure Profit and loss account

TOTAL

1070460883506504

309623620239847860

3182210002677191291769358

190711112778420599

69775760 10052504866

1091372587

451607354

40745248716352961825513291021525757250000000

246650794204956560

63976523316374640 -

778420599



YEAR AT A GLANCE (Rs In Lakhs)










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Naveen Working Capital of Ks&Dl

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