Working Capital Reqiurement

PROJECT REPORT ON

WORKING CAPITAL REQUIREMENT

SUBMITTED BY

MOHAMMED E

ROLL NO 13786

*2013-2015*

UNDER THE GUIDANCE OF

PROF. SHAMSHUDDIN P.hd.,

SUBMITTED TO

THIRUVALLUVAR UNIVERSITY, SERKADU

NIRMALA MEMORIAL FOUNDATION

COLLEGE OF

COMMERCE AND SCIENCE

90 FEET ROAD, ASHA NAGAR, THAKUR

COMPLEX,

KANDIVALI (E), MUMBAI-400 101.

The Krishna Co-operative Sugar Factory Limited, Athani

DECLARATION

I Mr.Mohammed of M.Com (Master of commerce) hereby declare that I have

completed the project on “A STUDY ON WORKING CAPITAL

REQUIRMENT.” In the academic year 2014-2015.

The information submitted is true and original to best of my knowledge.

________________ ________________

Date of Submission. Signature of Student

(Mohammed)

Babasabpatilfreepptmba.com Page 1


CERTIFICATE

This is to certify that the project titled as “ A STUDY ON WORKING

CAPITAL REQUIRMENT ’ has been completed by Mr.Mohammed of

C.A.H.C Arts and Science (Semester-IV) examination in academic year

2013-2014.

The information submitted is true and original to the best of knowledge.

______________________

(Dr. T. P. Madhu Nair) (Prof. Poonam Kakkad)

Principal Program Coordinator

____________________ _____________________

(Prof.Neelam Pareek) External Examiner

Project Guide



CONTECT

SL. NO PARTICUALARS PAGE .NO

1 EXECUTIVE SUMMARY 1-3

2 INTRODUCTION TO THE STUDY 4

3 INDUSTRY PROFILE 5-8

4 ORGANIZATION PROFILE 9-31

5 WORKING CAPITAL MANAGEMENT 32-44

6 OBJECTIVES OF THE STUDY 45

7 ANALYSIS OF THE STUDY 46-65

8 FINDINGS 66

9 SUGGESTIONS 67

10 CONCLUSION 68

11 BIBLIOGRAPHY 69



EXECUTIVE SUMMARY

INDUSTRY PROFILE:

The advent of modern sugar industry began in 1930 with grant of tariff protection to the Indian sugar

industry. The number of sugar mills increased from 30 in the year 1930-31 to 135 in the year 1935

and the production during the same period increased from 1.20 lakh tones to 9.34 lakh tones under

dynamic leadership of the private sector. The era of planning for industrial development began in

1950-51 and government laid down targets of sugar production and consumption licensed and

installed capacity, sugarcane production during each of the five-year plan periods.

Total sugar industries in India are 506 out of which 67 are public sector companies, 157 are

private sector companies and 282 are co-operative societies. Total sugar industries in

Karnataka are 40 out of which two are public sector companies,18 are private sector companies,19

are co-operative societies and one is joint venture.

COMPANY PROFILE:

The Krishna Co-Operative Sugar Factory Limited, Athani, is a co-operative society registered

under Karnataka co-operative societies Act in 1969. The Plant is located at Sankonattii Village of

Athani in Belgaum district. The registration number of the company is DSK/REG/01/80-81 dated 10-

03-1981. The industrial license number of the factory is L.I.667 (1988) dated 02/11/1988.

The founder of this organization was Late Sri. A.B.Jakanur Ex Min.of Karnataka. At present it has

an attractive campus with magnificent buildings over it. There are totally 18,103 shareholders of

TKCSFL and it has paid up share capital of Rs.18.39 Crores. During the year 2007-08, it has earned

a net profit of Rs.18.34 lakh. During the same year it has produced 7.00 lakh Quintals of sugar and it

has crushed 5.60 lakh Tonnes of cane.

There are 610 workers in TKCSFL. It is paying salary of Rs. 1500,000 per month to its workers.

Total Turnover of sugar is Rs.60.03 crores.



NEED FOR THE STUDY:

Whether a manufacturing unit or non-manufacturing one, working capital is is the life-line of every

concern. Without adequate Working Capital there progress in the industry. Inadequate Working

Capital means shortage of raw materials, labour, etc., resulting in partial utilization of available

machine capacity. Moreover, research and development in the industry will be at low ebb and

essential innovations fail to appear. Inadequate Working Capital frustrates the objectives of the

enterprise through lack of funds and contributes towards the failure of a business. On the other hand,

more Working Capital may lead to less control over worker’s performance, inefficient store-keeping,

excessive stocks of raw material and finished goods, delay in the flow of work-in-progress and lack

of coordination in the enterprise. So the amount of Working Capital in every concern should be

neither more nor less than what is required.

OBJECTIVES OF STUDY:

To study the sources and application of fund of TKCSFL

To examine how the working capital requirements is estimated

A study on the interpretation of working capital on the basis of calculations and estimations

To study the system of inventory management, receivables management and cash

management.

To identify weakness and short comings if any as a result of the survey and to offer

suggestions

METHODOLOGY:

DATA COLLECTION METHOD:

1. PRIMARY DATA: The information is collected from the personal interaction

With the Accounts officer & workers of the union

2. SECONDARY DATA: This is collected through

A) .Annual Reports of the TKCSFL

B) Related Information from Internet.



FINDINGS:

The current and quick ratios are satisfactory i.e. 2.09 and 0.267 on an average respectively.

So the firm’s liquidity position is good. It shows that it is able to meet its current obligations.

The cash reserves maintained by the company are good. But as compared to financial status it

is not at remarkable extent. This is serious liquidity crunch to the company. However the

company is much safer side because of their outstanding due to farmers, who have also hold

shares of company. Another point is farmers are not aggressive to recover their dues.

Proportion of cash to sales maintenance of the cash balance is inadequate. As a rule when

sales increase cash also increase, but at a decreasing rate. It shows that inadequate of cash

balance.

SUGGESTIONS:

The inventory turnover ratio of the company was more than 75%. The firm should search for

new customers, and also the firm should focus on it’s foreign exports.

When we analyzed the proportion of cash in sales and current assets, the cash is not sufficient

to meet the current expenses. So the firm should maintain sufficient cash balance and bank

balance through effective credit policies. The major drawback for the insufficient of cash is

that, the inventory has not been selling fast. So the firm should force to think about it.

As it is well known fact that sugarcane grown is not only produces sugar. It can produce

many other products also like molasses, cartons, electricity and beverages therefore company

need to focus in these areas also.

CONCLUSION:

When I analyzed the financial performance, the firm’s commitment to meet short obligations is

good i.e. liquidity position of the company is good. And in respect cash balance, the firm has not

sufficient balance. As a result of that, it may affect the working capital, so totally the firm is

struggling to meet its current expenses. And with regard to resources, the firm is not utilizing the

assets properly. And similarly the firm has a maintained high inventory.

INTRODUCTION TO STUDY



The aim of the present study is to examine the Small Scale Industry practices in Working Capital

management and to evaluate management performance for the same purpose. “Since the efficiency

of the Working Capital management is determined by the efficient administration of its various

components- cash, accounts receivable and inventory, the study attempts to determine the

management of each component”.

“Working Capital in a business enterprise may be compared to the blood in a human body: Blood

gives life and strength to the human body. Similarly Working Capital injects life and strength- profits

and solvency - to the business organization”. Working Capital refers to short term funds required for

the purpose of business operations. The funds used for meeting day to day expenses like, purchase of

raw materials, payment of wages and other expenses, stocking of goods, granting of credit to

customers and maintenance of the minimum balance. It is not necessary that the funds should be in

the form of cash only. It can be in the form of near cash items like, marketable securities, inventories

and account receivable



INDUSTRY PROFILE

INTRODUCTION TO SUGAR INDUSTRY:

The Indian sugar industry is a key driver of rural development, supporting India's economic

growth. The industry is inherently inclusive supporting over 50 million farmers and their families,

along with workers and entrepreneurs of almost 500 mills, apart from a host of wholesalers and

distributors spread across the country.

The industry is at a cross roads today, where it can leverage opportunities created by global

shifts in sugar trade as well as the emergence of sugarcane as a source of renewable energy, through

ethanol and cogeneration. While some of these opportunities have been well researched in the past,

there was a need to assess the potential for India and to develop a comprehensive and actionable

roadmap that could enable the Indian industry to take its rightful place as a food and energy producer

for one of the world's leading economies.

India is second largest producer of sugarcane next to Brazil. As per last year data, about 4

million hectares of land is under sugarcane with an average yield of 70 tones per hectare. India is

largest producer of sugar including traditional sugar sweetener, Khandasari and Gur equivalent to 26

million tones raw value followed by Brazil in the second place at 18.5 million tones. Even in respect

of white crystal sugar, India has ranked No position 7 out of last 10 years.

Traditional Khandasari and Gur are consumed mostly by the rural population in the early

1930’s nearly 2/3rd of sugarcane production was utilized for production of alternate sweetener, Gur &

Khandasari. With better standard of living and high income, the sweetener demand has shifted to

white sugar. About 1/3rd of sugarcane production is utilized by the Gur & Khandasari sectors. Being

in the small scale sector, these two sectors are completely free from controls and taxes, which are

applicable to the sugar sector.

PROFILE OF THE SUGAR INDUSTRY:



Sugar mills with cane crushing capacity and sugar production per unit in various countries

Country No. of Units Avg. cane crushing

per day

Avg. production per

day

Thailand 45 10307 140540

Australia 28 9216 183321

Brazil 213 9168 64018

South Africa 13 6877 137769

Mexico 67 4749 71015

Colombia 10 4590 214900

Cuba 150 4229 45538

Hawaii 9 4111 44111

Mauritius 16 3195 42970

India 506 2527 35000

The advent of modern sugar industry began in 1930 with grant of tariff protection to the Indian sugar

industry. The number of sugar mills increased from 30 in the year 1930-31 to 135 in the year 1935

and the production during the same period increased from 1.20 lakh tones to 9.34 lakh tones under

dynamic leadership of the private sector.

The era of planning for industrial development began in 1950-51 and government laid down targets

of sugar production and consumption licensed and installed capacity, sugarcane production during

each of the five year plan periods.

Total sugar industries in India are 506 out of which 67 are public sector companies, 157 are private

sector companies and 282 are co-operative societies. Total sugar industries in Karnataka are 40 out

of which two are public sector companies, 18 are private sector companies, 19 are co-operative

societies and one is joint venture.



Government enacted the Sugar Development Fund Act & Rules, which provides for levy of per

quintal of sugar known as Sugar Development Fund (SDF). The SDF is utilized for granting term

loans to sugar mills modernization and grants for research projects in the sugar besides creation of

buffer stocks as and when required to ensuring price stability. Government de-licensed sugar sector

in August 1998. It is now open to entrepreneurs to set up mills without license but at distance of 15

kms away from the existing factory. Sugar units free to expand their capacity and also put up higher

capacity new units. This should help to consolidate and expand their capacities wherever cane

potential exists.

SUGAR INDUSTRY IN INDIA

Most of the sugar industries are located in U.P, Bihar, Maharashtra, A.P., Karnataka and T.N.

The sugar industry is one of the largest organized industries with total capital investment of more

than Rs.500 crores. It employees more than 2.5 lakhs of workers besides creating extensive indirect

employment over 25 to 30 million cultivators of sugar cane, dealers in sugar and confectioneries.

When sugar industry was granted tariff protection the history of sugar industry started again

before 1932, which gave driving force to growth of industry. Again the government in 1951

provided incentives by fixing minimum prices of cane and maximum prices of sugar. This incentive

scheme increased the production of sugar but discouraged the cane production. We will see later on

how contradictory government. Policies have adversely affected the growth of sugar industry.

Unfortunately, government policy has been that of control and re-control from time to time creating

an environment inimical (hostility, unfriendly) to the growth of sugar industry. Up to 1957-58 both

consumption and production of sugar rose to 20 lakhs tones each. During 1969’s production of sugar

rose to 35lakshs tones and during 1970’s it was in between 40 to 50 lakh tones. And during 2000-01

it was in-between 80 to 90 lakhs tones.

INDIAN SUGAR INDUSTRY AT GLANCE:



No of sugar factories established 574

Total capital employed Rs. 50,000 crores

Total annual turnover Rs. 25,000 crores

Total payment to cane growers Rs. 18,000 crores

Contribution to central & state exchequers Rs. 1700 crores+800 crores

Direct employment : rural educated Rs. 5.00 Lakhs

Farmers/families involved in sugar cane (7.5% of

rural population)

Rs. 45 million

In global economy, the Indian sugar industry has achieved a number of milestones

Largest Sugar Producer in 7 out of 10 years

Second Largest Area under Cane/Cane production

Amongst the cost effective industries with its field cost (Sugar cane) being the second lowest, despite

small land-holding and low productivity

Fourth efficient processor of sugar despite low capacity of its sugar plants as compared very large-

size plants in other parts of the world

GOVERNMENT POLICY:

The present policy of decontrol 10% of production by each unit is supplied for public

distribution system I as levy sugar at Govt. notified prices admittedly bellow 20% of the actual cost

of production. The levy sugar is I to the public irrespective of their economic status. The balance

90% is sold in the free market against monthly/ issued by the Government. This policy has been

continuing since 1967-68 except for brief periods of de-control during the years of surplus

production and accumulated sugar stocks. Government announces the Statutory Minimum price



(SMP) for sugarcane every year based on recommendations of the Commission for Agricultural Cost

& Prices (CACP).

ORGANISATIONAL PROFILE

The Krishna Co-Operative Sugar Factory Limited, Athani (Krishna Sahakari Sakkare

Karkhane Niyamit, Athani.) is a co-operative society registered under Karnataka co-operative

societies Act in 1969. The industrial license number of the factory is L.I.667 (1988) dated

02/11/1988. The Krishna Co-Operative Sugar Factory Limited, Athani is a co-operative unit. It is

situated near Sankonatti village, at a distance of about 6 Km from Athani town. The factory at

present has an attractive campus with magnificent buildings over it.

Agriculture continues to be an extremely important sector in our country. Cooperative system, as one

of its main pillars providing vital support services, is crucial for the transformation of agriculture. It

is how inspired the founder Late Sri. A B Jakanur, an agriculturist and a co-operator, to establish this

factory during 2000-01 with the financial support from cane growers of this area and the State

Government, with an initial crushing capacity 2500 TCD and as a stand-alone sugar industry. This

factory had faced a lot of problems all these years in coming out as a viable unit. Though this

factory had emerged in this area with a meager beginning, it had not only provided a source of

income for forming community but also created a sustainable employment opportunity in this rural

area.

After a lot of dispute on location of plant, near Sankonatti village, the construction work started in

year 1990 and comp elected in the year 2000. The factory was inaugurated by Co-Operative minister

of Karnataka State Sri H Vishwanath on 24/03/2002. The regular production was started from

24/03/2002, and the first season lasts from 24/03/2002 to 09/04/2002.

The factory started on 24/03/2002 with initial Crushing capacity of 2500 TCD with total expenditure

of Rs.46.95 Crore. The area of operation covered 22 villages from Athani Taluka,

At present total sugar cane supplied to this sugar industry is from 15,000 acres with average yield per

acre of 25 MT.



The entire plant and Machinery has been supplied by M/s Triveni Engineering and Industries

Limited New Delhi, Rs. 28.17 Crore long-term loan was borrowed from the Co-operative Banks. The

factory had created a financial set backs due to the lack of professionalism both in technical and

financial managements and not adopted the range of different bi-product activities and had suffered

due to a weak governance on efficiency, effectiveness, adaptability and internal and external

accountability in the management. However this cooperative and rural based industry must succeed

if the poor farmers and the rural unemployed youths have to be prosperous.

AREA OF OPERATION:

The area of operation of the society shall be confined to the villages of Athani, and Raibag Taluka of

Belgaum District and Jamakhandi Taluka of Bagalkot District of Karnataka State.

OWNERSHIP PATTERN:

A. The authorized share capital of the Society shall be Rs.18.37 crores divided in to total

17971 shares of RS.2, 000/-each as under.

i) Rs.3, 00, 29,000/-divided in to 13048 shares of the face value of Rs.2, 000/-each reserved for

the grower members called as “A” Class.

ii) Rs.5, 98,000/-divided in to 89 shares each reserved for Co-operative Institutions called as “B”

Class.

iii) Rs.14, 08, 50,000/- from one Government share issued to Government of Karnataka

called as “C” Class.

iv) Rs.71, 66, 000/- divided in to 4, 309 shares of face value of Rs.2, 000/-each reserved

for non-grower members called as “D” Class



Name of the Company

The Krishna Sahakari Sakkare Karkhane

Niyamit Athani

Date of Incorporation/Registration No. DSK/REG/01/80-81 Date : 10-03-1981

Nature of Constitution Co-operative Sector

Factory code no. 40501

Date of commencement of commercial production of sugar 12/6/2002

Crushing capacity 2500 TCD

Project Cost 48.86 crores

Activity under taker

Production of sugar and its by Products like

Molasses ad Bagasse

Working period 180-210 days

Type unit Large scale Agro based manufacturing unit

Main raw material Sugar cane

Labour employed 61O

Areas of operations 22 villages



BOARD OF DIRECTORS:

1) Shri P.C. Savadi : Chairman

2) Shri M.B. Patil : Vice Chairman

3 Shri A.P. Akiwate : Director

4) Shri C.H. Patil : Director

5) Shri B.M. Patil : Director

6) Shri B.M. Kavatakoppa : Director

7) Shri S.A. Mudakannavar : Director

8) Shri G.K. Butali : Director

9) Shri M.K. Kubasad : Director

10) Shri V.G. Telasang : Nominee Director

11) Smt. P.B.Reddy : Nominee Director

12) Shri V.M.Shinge : Nominee Director

13) Shri P.R.Mahajan : Nominee Director

14) Shri I.M. Maniyar : Managing Director

STAFF: The employees are responsible for the success or failure of company.

There are totally 530 workers in the company.

No. of Workers

1) Permanent worker 320

2) Seasonal workers 290

610



Company is paying salary of Rs. 21, 00, 000 per month in season and 15,00,000 per month in off

Season to its workers.

WORKERS SHIFT SYSTEM:

Sugar manufacturing process is continues process it needs employees to take care of the

operations 24 hours. So company employs its workers in 3 different shifts and also provide weekly

off on routine basis. The shift system of the company is as follows.

Shifts Timings Break

I 4:00 am to 12:00 pm 30 min

II 12:00 pm to 8:00 pm 30 min

III 08:00 pm to 4:00 am 30 min

GENERAL AND ADMINISTRATION

8:00 am to 12:00 pm 60 min

1:00 pm to 5:00 pm

CENTRAL OFFICE

10:00 am to 2:00 pm 30 min

02:30 pm to 5:30 pm

JOB SPECIFICATION IN TKCSFL ATHANI

Every organization is made not made up only machineries but also consists of people.

Hence manpower is very essential and improvement in the production industry .So TKCSFL

ATHANI is having manpower sufficiently.



DepartmentsOrder Daily Wages Enhancement No Change Total

Engineering

Department121 60 57 09 247

Production

Department88 37 31 09 165

Cane development


Administration


Civil Department0 0 0 28 28

Time Office2 2 0 00 04

Stores

Department 14 29 0 0 43

Vehicle


Total 274 151 119 66 610

COMPETITORS:

Ugar sugars

Hira sugars

Renuka sugars

Datt sugars (Maharashtra)



Panchaganga sugars (Maharashtra)

Athani farmer’s sugar factory

Dkssk chikkodi

INFRASTRUCTURE FACILITIES:

Nearer to raw materials

Good transportation facilities.

Nearer to river place (Krishna River)

Good networking.

Proper accommodation for its employees

ACHIEVEMENTS/AWARDS:

STAI, SISSTA & DSTA in their recent 10th annual convention at Chennai held on 11-08-2007 have

honored this sugar factory with the most prestigious award as the “THE BEST EFFICIENCY &

PERFORMANCE SUGAR FACTORY” in the country for the year 2006-07. Hon’ble Union

Minister gave the award for agricultural, food & Civil Supplies, in presence of Hon’ble Chief

Minister of Tamilnadu. The TKCSFL Athani has also bagged First place for Best Cane Development

Award, SISSTA-2007.

The companies have the Honor of achieving the Highest Sugar Recovery @ 11.68% in

Southern part of India for the year 2008-09.

2.7 VISION & MISSION OF THE ORGANIZATION:

“To continue to remain the best performer among sugar manufacturing companies in India & to

provide more value to the shareholders by means of efficient capacity utilization of its sugar, power

and distillery based facilities.”

VISION:

The vision statement of The Krishna Co-operative Sugar Factory Limited is “We are

dedicated to deliver overall value to our customers by delivering high quality products, exceptional



financial performance to our share holders & complete satisfaction to cane growers, employees &

stakeholders”.

MISSION:

At TKCSFL, Athani, they believe in growth through quality, innovation and Research and

Development in Agriculture. Their mission is to reduce the overheads and increase the profitability

by maximum utility of raw material by way of producing various products.

To encourage agro-based co-operative industry

To develop co-operative movement in rural sector

To encourage the farmers to grow sugarcane for production of sugar and its by-products

OBJECTIVES OF TKCSFL, ATHANI

To give the good market rate to the farmers who supply the sugar cane to their factory.

To keep the good relations with the customers and. farmers and to maximize their

satisfaction.

Maximum utilization of man power and production capacity and proper utilization of raw

material for good recovery.

To promote the economic and social betterment among the members through self-help and

mutual aid in accordance with the co-operative principles specified in the first schedule of the

Act.

To encourage self-help, thrift and co-operation amongst member

To acquire lands either by way of purchase or otherwise for cultivation of sugar cane and

other crops and for erection of buildings, godowns, staff quarters, administrative blocks etc.,

and for installation of machinery.



To manufacture sugar jaggery and their by-products out of sugar-cane grown and supplied by

members of the society and other and to sell the same to the best advantage.

To undertake such other activities as are identical and conducive to the development of the

society.

To acquire and install machinery for the utilization of the by-products and buy raw material

and sell finished product in the course of utilizing and marketing the by-products.

PRODUCT PROFILE:

The main and direct product of the sugarcane is sugar. The factory has byproducts like distillery,

arrack, co-generation, press mud and ethanol etc.

SUGAR:

The factory initially started crushing at the rate of 2500 Tonnes crushing per day (TCD). It is

needless to emphasis here that this factory has its own credibility and enjoys its own sanctity in the

sugar industry.

The TKCSFL Athani produces the sugar which can be classified as shown in the table below. The

sugar is divided in to three types based on the crystal size; they are large, medium, and small. The

production of these is dependent on the crushing capacity of the factory. To produce large sized

crystals it takes more time, which in turn affects the crushing. As the size increases the impurity

increases and colour of the crystals decreases.

TYPE OF SUGAR PRODUCED IN TKCSFL ATHANI:


TYPE OF SUGAR SIZE (IN MICRONS) %AGE PRODUCTION IN

2007

LARGE (L30) 1400 NILL

MEDIUM (M30) 1120 10-15%

SMALL (S30) 600 85-90%


DISTILLATION:

The unit uses molasses, which is waste in the production of sugar, as raw material for distillation.

This molasses has about 40% to 45% of sugar in it. The yeast strain used in fermentation process is

Sacchromyces Uvarum.

BAGASSES:

The fibrous material of sugar cane which after extraction of juice comes out from mill house is called

Bagasse and is used as fuel for Boilers. In TKCSFLthey use the Bagasse for high pressure boilers to

generate steam. Thus generated steam is used to produce electric power by using Extraction Turbo

Generation set. Thus produced power is used to run the factory and excess power is exported through

KEB Grid.

CO-GENERATION:

The factory started producing Power by using Bagasse in the year 2002 with the initial capacity of 6

MW... It installed turbo generator set of capacity 6 MW in the year 2002. As on 2006 the Factory has

the total capacity of 6 MW, out of which 4 MW is used for in-house consumption and the remaining

power is transported.

PRESS MUD:

The press mud is obtained in the process of juice purification process. It is used as manure. In

K S K N, the press mud is sold to the farmers.

PROCUREMENT:

The factory obtains the sugarcane, which is required from more than 1000 farmers and by the

company farms and others raw materials which are required for the operation is taken from the

vendor, here vendors will be evaluated on the basis of price and quality and then the required raw

materials will be taken for the efficient vendors.



The transport of sugar cane from farmers to the factory will be engaged through Lorries, who will be

taken through bidding at the time of harvesting, and also farmers themselves supply by their own

bullock carts or by tractors.

CANE WEIGHMENT:

There are 12 outlaying weigh bridges situated round about Athani for delivering the sugarcane from

the farmers. Double check has been provided over the weighment of cane transported from out

stations.

OPERATIONS:

The sugarcane, which is carried by Lorries or other, will be directly fed to the machine where the

initial process starts. At the starting point there are knives, which cut sugar cane bunches into

individual sugar cane.

After this in the next step there are sharp cutter, which cuts the sugarcane bunches into very small

pieces. Then it will go to trade marbs (a series of rollers used for crushing purpose) for crushing.

Then the juice produced will go for further processing and the Bagasse will be left out there itself.

Then they add flocculent [used for mud setting] milk sanitation etc and then after it will go through

pans and Masscuite for this Masscuite they will add sodium Hydro Sulphite (to bleach the

Masscuite) and it will be separated out and the molasses will be sent to distillery and then white

sugar will be bagged.



ORGANISATION STRUCTURE:


COMPUTER

GEN ACCOUNT CANE ACCOUNT SALES CASH

GODOWN SECTION

CHIEF ENG. CHIEF CHEMIST DIST. CHEMIST CO-GEN

TOOL ROOM & DIESEL PUMP

CANE YARD AGRL DEV

BOARD OF DIRECTORS

CHAIRMAN& VICE CHAIRMAN

MANAGING DIRECTOR

GENMGR(S)

GENMGR

(P)

GENMGR(DS)

CIVIL

ENG.

STOREKEEPER

MEDICAL OFFICER

HEAD TIME

KEEPERCHIEF

C.D.O

CHIEF ACCOUNTS

OFFICER

OFFICESPDT

LWO WATCH WARD

GADSECTION

ESTSECTION

MEETINGSECTION

INWARD &OUTWARDSECTION

SHARESECTION

TYPINGSECTION

GUESTHOUSE

LEGALSECTION

PURCHASESECTION


FUNCTIONAL DEPARTMENTS

Functional heads

1) Managing Director (M.D)

2) Chief Engineer

3) Chief Chemist

4) Chief Accountant

5) Cane Development Officer (C.D.O)

6) Office Superintendent

7) Accountant (Cane)

8) Labour Welfare Officer (L.W.O)

9) Civil Engineer

10) Accountant (General)

11) Store Keeper

12) Sales Officer

13) Purchase Officer

14) Time Keeper

15) Gudown Keeper

16) Cashier

17) Security Head

BRIEF ABOUT FINANCE AND ACCOUNTS DEPARTMENT:

Finance plays a vital role in the functioning of all industrial units. Finance is the lifeblood of the

organization. In sugar Industry Finance and accounts Department has very vital roles. The financial

plan basically deals with raising and proper utilization of funds. The funds can be raised by issue of



shares as well as by raising loans through various sources. The finance manager supported with

accounts manager and an accounts assistant manages finance department.

FUNCTIONS: -

They look after the overall financial requirements of the company.

They see that a proper inflow and outflow of income and expenditure is maintained.

Accounting of sales and sales realization

Receipt of cash, cheque and bank drafts etc and issue of official receipts for the same

Maintenance of journal, expense ledger and general ledger

Costing and accounting is framed and maintained.

Yearly budget is framed so that each department can meet their cash requirements.

Budget prepared is based on sales forecasting, expenses forecasting, cost forecasting, purchase

forecasting etc.

Registration and scrutiny of sale orders pertaining to equipment and spare parts

FINANCE DEPARTMENT CONSISTS OF FOLLOWING SECTIONS: -

General Accounts Section.

Cane Accounts Section.

Sales Section.

Cash Section.

An Accounts Officer is the head of this department. Accountant, sales manager, and head cashier

assist him.



AS FUNCTIONING OF EACH SECTION IS SUMMARIZED FOLLOWS:

GENERAL ACCOUNTS SECTION:

General Accounts are looking after the passing of bills and payments. Management is also done

by General account section and preparation of financial statements i.e., Balance sheet, profit and loss

account is attended by general accounts section.

CANE ACCOUNTS SECTION: -

The Bills and payment concerned to procurement of sugar cane, is attended by cane accounts section.

Payments like cane bills, transport and harvesting bills etc., are prepared and passed in cane accounts

section.

SALES SECTION:

It is looking after sales of sugar and by products molasses, Rectified spirit and other scrap materials.

It is keeping records concerned to all sales section.

CASH SECTION:

It is looking after the payments of all general bills and salary bills apart from cane payment and it is

also looking after receipt of cash and cheque payment. All accounts are maintained in usual manner.

Various records and books kept are: -

General ledger

Sub ledger

Subsidiary

Cash book

Bank book

Vouchers



Each branch prepares trading and profits and loss account and Balance Sheet as on 31 st March every

year. And the government Auditor audits the accounts.

BANKS (TO PAY BILLS OF THE SUGARCANE SUPPLIERS)

PURCHASE DEPARTMENT


SLNO NAME OF THE BANK

1 THE BDCC Bank Ltd, Athani

2 THE BDCC Bank Ltd, Satti

3 THE BDCC Bank Ltd, Halyal

4 THE BDCC Bank Ltd, Konnur

5 THE BDCC Bank Ltd, Kulgod

6 THE BDCC Bank Ltd, Gokak

7 THE BDCC Bank Ltd, Ankali

8 THE BDCC Bank Ltd, Kalloli

9 THE BDCC Bank Ltd, Kabbur

10 THE BDCC Bank Ltd, Gudas

11 THE BDCC Bank Ltd, Harugeri

12 THE BDCC Bank Ltd, Mudalagi

13 THE BDCC Bank Ltd, Ghataprabha

14 THE BDCC Bank Ltd, Shiraguppi

15 THE BDCC Bank Ltd, Yaragatti


Purchase officer heads Purchase Department. He is responsible for purchasing the spare parts

required for the industry. The storekeeper is responsible for stacking; maintaining and issuing

required materials to the concerned section.

The important functions of this department are: - Purchasing materials

Calling quotations

Preparing C.S.Q (comparative statement quotation)

Placing before meeting for decision

Placing orders for supply of materials.

Passing bills to Accounts section for payment.

Purchase department hierarchyProcedure of purchasing

1. Determination of purchase budget

In the beginning of the year the purchase manager, with the help of production planning

department, prepares a purchase budget. This budget guides him in knowing what and when he has

to buy and also quantity.

2. Determination of quantity


PURCHASE MANAGER

GODOWN SUPERVISORS

STORE KEEPERS

ASSISTANTS


The stock availability in each location is determined and compared with the actual

requirements. After receiving the sales order, raw materials needed are scheduled according to these

order level.

3. Purchase order: After satisfy with the quality of materials and reputation of the supplier, purchase order is

sent to the supplier. Purchase order includes the date of order, description of materials to be

supplied. The copies of this order are sent to the Administrative office, Accounts departments and to

the Storekeeper.

4. Receiving and issuing raw materials: -

The department heads and the storekeeper check the quality and quantity of raw materials

received respectively. The storekeeper enters the details of purchased materials in the store receipt

book. Then the general manager passes the amount for payment.

PRODUCTION DEPARTMENT Production management refers to the application of management principles to the

production function in a factory. In other words production management involves application of

planning, organizing, directing and controlling the production process.

A well-organized production function can offer competitive advantage to a firm in the

following areas.

Higher quality

More inventory turns

Shorter new product lead time

Greater flexibility

Shorter manufacturing lead time

Better customer satisfaction

Reduced wastage

Laboratory

The factory is having well equipped lab, and the main activity of the lab is to check the

content of sugar cane & fixing the correct shape & size of sugar. The lab prepares hourly reports

which advice on the addition of the other chemicals in production



CHEMICAL SECTION

Structure:

CHIEF CHEMIST

MANUFACTURING CHEMIST

DEPUTY CHEMIST

LAB IN CHARGE

LAB BOY

PRODUCTION PROCESS:

The main Raw material in the production of sugar is

SUGAR CANE

The raw materials has to go through following stages before it become finished product. The process

in each stage is as under:

STAGE:1 SUGAR CANE SUPPLY:

The harvested and transported sugar can received is weighed on the weigh Bridge. It is unloaded and

kept on the feeder tables. It is fed to the cane carrier as per the requirement.

Note: 4500 tons received, 1000 tons stocked and 3500 tons crushing per day.

STAGE:-2 MILLING OF CANE/ EXTRACTION OF JUICE:

This cane is passed through leveler and fibrizor by making the fine making the fine chips. It is

crushed through series of mills. Imbibitions hot water is added prior to the last mill to extract more



possible sugar. The Bagasse from the last will is carried through Bagasse conveyor and required

quantity of Bagasse is fed to the boilers and excess quality is sent for storage.

STAGE:-3 CLARIFICATION AND EVAPORATIONS:

The juice from all the mills is pumped to juice weighting scale. It is heated to about 70-77’o c in the

juice heaters. It is taken to continuous juice sulphitor in which milk of lime and sulphur di-oxide gas

are adjusted to maintain ph 7.0. It is again heated in juice heaters to about 100 to 105’oc and sent to

continuous clarifier. Clear juice is taken to multiple effect evaporators to concentrate up to 60oc

Brix.

The settled mud from the bottom of the clarifier is taken to mud mixer to mix with beguile and taken

to continuous vacuum filer. The filtrate is transferred to raw juice receiving tank for treatment. The

adhered mud on the screens is scraped and sent out as filter cake, which will be used for composting

the manure.

STAGE:-4 SUGAR MANUFACTURE AND CRYSTALLIZATION PURING:

The concentrated syrup from evaporator is taken to syrup sulpthitor to adjust Ph 4.8 to 5.2. This is

stored in the supply tanks and fed to “A” masscult boiling by taking B-seed as a footing. It is

concentrated to 92o Brix and dropped to the crystallizer. This masscult is purged in the centrifugal

machines. The adhered crystals are scraped to hopper and treated with hot air and cold air blower. It

is sent to grader the size for gradation. This graded sugar is stored in SILOS. Weighed and bagged

sugar bags are transferred to respective godowns for stacking.

STAGE 5:- FURTHER PROCESS:

While purging A- massecuite the A-light molasses received is sent to supply tanks and fed to ‘B’-

masscult boiling with b-grain as footing. This is purged in the centrifugals. This sugar is used as B-

seed and excess is melted and fed to ‘A’- masscult’s. White purging low purity B- Heavy molasses

obtained is used for boiling C- massecuite with C- grain as footing.

This C- massecuite is taken for purging in Centrifugal machines. The final molasses is separated,

weighed and sent to storage tanks. C.F.Magma is sent to melt supply tanks and fed to ‘A’

massecuite boiling. C-light molasses obtained is tired in supply tanks and used for C- massecuite

boiling and C- graining also 0.



STORES DEPARTMENT

This department is headed by storekeeper. To keep the stores and required materials for the

factory section wise in a proper way and to maintain their registers and big cards of indents (order

goods)

Functions:

1) To make the materials requisition for the purpose of knowing the quantity materials.

2) To make purchase order or in simple terms the tenders.

3) To make approval memo for verification of materials.

4) The main function of store department is to prepare a Bin Card.

5) The store Department issues material with reference with store requisitions.

6) To make classification & codification of materials.

7) Receipts of materials.

8) Inspect it with ordered quantity, quality and if any other specifications.

9) Some of the materials like chemicals are to be sent to laboratory for inspection and testing.

10) Getting indents from departmental head and issuing it.

11) To make purchase returns if the materials are rejected.

12) To maintain minimum level of materials.

13) Informing purchase department when materials require.

In stores there are two sections

1) Transport Entry table.

2) Store Receipt Table

1) Transport Entry Table

They maintain records the receipt of materials at what data, at what time, vehicle number,

and quantity in kg. Acknowledgement from vehicles etc

2) Store receipt Table

The store keeper maintain the records of receipt of materials, serial no made of transport,

purchase order reference, bill no, the name of the supplier etc. the store keeper has given

proper conditions to the materials to identify the materials.



MARKETING AND SALES DEPARTMENT

The American Marketing Association offers the following formal definition: Marketing is an

organizational function and a set of processes for creating, communicating, and delivering value to

customers and for managing customer relationships in the ways that benefit the organization and its

stake holders.

It can be viewed Marketing Management as, an art and science of choosing target markets

and getting, keeping, and growing customers through creating, delivering, and communicating

superior customer value.

Channel of distribution

Most producers do not sell their goods directly to the final users. Between them stands set of

intermediaries performing a variety of function Those intermediaries constitute a marketing channel.

Marketing channels are sets of interdependent organizations involved in the process of

making a product or service available for use or consumption.

Marketing channel decisions are among the most critical decisions facing management. The

channel chosen intimately affects all the other marketing decision. The company’s pricing depends

on whether it uses mass merchandisers or high quality boutiques. The firm’s sales force and

advertising decisions depends upon how much training and motivation dealers need. In addition, the

company's channel decisions involve relatively long term commitments to other firms.

Role of marketing manager

1) To collect information for sale forecasting.

2) Pricing the products as per the demand.

3) To appoint new dealers and distributors

4) .To have full and perfect knowledge of marketing conditions and policies

5) Marketing department also looks after dispatching goods to the vendors

Functions of sales department

1. Sales officer is responsible for selling the products.

2. To look after dispatch of the ordered products.

3. Suggestion, ideas, complaints, feedback from the market to the company.

4. Stocking planning, godown maintenance.



Release mechanism of sugar

The sale of sugar is controlled by the Chief Director of sugar, New Delhi through release

mechanism.

Sugar industry is basically a seasonal industry. Hence the sugar will be produced during the season and the sugar thus produced will have to be marketed throughout the year by the sugar mills.

The Directorate of sugar will release monthly sugar sale quota for the sugar factories in India

and the sugar thus released for the specific month will have to be sold and dispatched before the end

of the month.

In case any factory not able to sell the entire quantity of the sugar released for the particular

month, the remaining quantity will be treated as lapsed. So every factory tries to sell their sugar

quote of the month within the validity period.

Sales procedure

Procedure adopted for sale of sugar and power

1. Sugar

Domestic Sale of Sugar

The sugar is sold in the domestic market through tender system. Sugar tenders will be called

periodically from the various sugar traders. The traders are intimated well in advance about the

grade and quality being offered in tender over telephone. The sugar tender is some times conducted

at Karnataka Sugar Institute, Belgaum and also at factory site. The officer of KSI will be present at

the time of tenders. The rates will be collected over telephone from the various parties along with

grade and quantity of sugar required by them. The parties who have offered higher price will be

allotted the sugar and they will be instructed to take the sugar delivery within the stipulated period.

The sugar will be sold against 100% payment. The rate of domestic price of sugar in the state and

the rate of neighboring sugar factories will be compared while selling the sugar in tenders.

Export of Sugar

When the international price of sugar is remunerative compared to domestic price of sugar,

the company exports some of the stock of sugar. The sugar export is mainly undertaken through the

mercantile exports or through EXIM Corporation New Delhi. The price for export sugar is

negotiated taking into account, the prevailing international sugar price and the price being offered by

various sugar factories for export of sugar. Once the rates are finalized, the company will enter into

agreement with the party. Then the party will obtain a release orders from chief Director of sugar,



New Delhi and necessary excise bond from the concerned authority. After completing all the

necessary formalities, sugar will be delivered to the party for export against full payment of the

consignment. After the export shipment is completed necessary documents in proof of export of

consignment will be collected from the parties. The same will be submitted to the excise department.

2. Export of Power to the KPTCL Grid

In addition to the above company is also receiving its revenue from its power plant. Company

is having a power plant of 6.0 MW capacities. It is using about 4.0MW for its own/captive

consumption; the excess power of about 2.0MW is being exported to the KPTCL.

WORKING CAPITAL MANAGEMENT:

The aim of the present study is to examine the Small Scale Industry practices in Working Capital

management and to evaluate management performance for the same purpose. “Since the efficiency

of the Working Capital management is determined by the efficient administration of its various

components- cash, accounts receivable and inventory, the study attempts to determine the

management of each component”.

“Working Capital in a business enterprise may be compared to the blood in a human body: Blood

gives life and strength to the human body. Similarly Working Capital injects life and strength- profits

and solvency - to the business organization”. Working Capital refers to short term funds required for

the purpose of business operations. The funds used for meeting day to day expenses like, purchase of

raw materials, payment of wages and other expenses, stocking of goods, granting of credit to

customers and maintenance of the minimum balance. It is not necessary that the funds should be in

the form of cash only. It can be in the form of near cash items like, marketable securities, inventories

and account receivable

CONCEPT OF WORKING CAPITAL:

Like most other financial concepts, the concept of ‘Working Capital’ is used in different

connotations by different writers. Obviously, it is understood either as the total current assets or as

the excess of current assets over current liabilities. The former is referred to the gross working

Capital and the latter the net Working Capital.

So there are two concepts in Working Capital:



Gross Working Capital.

Net Working Capital

Gross Working Capital is the total of all current assets, viz. cash, marketable securities account

receivable and inventory Net Working Capita refers to excess of current assets over current

liabilities. Both of these concepts have their own importance. “The gross concept is a going concern

concept in which management is particularly interested because for the productive utilization of

fixed assets all the currents are necessary.

The net concept is useful to gauge the financial soundness of a form and is of special interest to

sundry creditors and suppliers of short-term loans and advances. It creates confidence among the

creditors about the security of their amounts”.

No special distinction is made between the terms ‘total current assets’ and ‘Working Capital’ by

some authors “ Working Capital is nothing but total of current assets. It is a substitute for Working

Capital, though not a perfect one”

“Working Capital is the capital circulating into cash over an operating cycle. Working Capital is

equated with all the current assets”.

“Working Capital and current assets are interchangeable”.

The precise meaning of current assets and current liabilities

CURRENT ASSETS:

Current assets are those assets which are used in the current operation of a business such as

inventories, receivables, cash and bank balances and easily convertible securities. These assets

generally change their form within an accounting period. “Current assets have a short life span. Cash

balance may be held idle for a week or two, accounts receivable may have a life span or 30 to 60

days, and inventories may be held for 30 days 100 days”.

CURRENT LIABILITIES:

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

accounting year and include creditors, bill payable, bank-overdraft, outstanding expenses,



outstanding tax and income received in advance. “Current liabilities are those liabilities where

liquidation is reasonably expected to require the use of existing resources properly classifiable as

current assets, or the creation of other current assets, or the creation of other current assets, or the

creation of other current liabilities”.

FACTORS AFFECTING WORKING CAPITAL NEEDS:

The Working Capital requirements of a form depend on many factors. It is a common proposition

that the size of Working Capital is a function of sales. Sales alone do not determine the size of

Working Capital. But it is constantly affected by the crisis- crossing economic currents flowing in a

business. The nature of the firm’s activities, the industrial health of the country, the availability of

materials, the ease or tightness of the money market are all parts of these shifting forces.

Realizing the complication involved in Working Capital estimates, Gerstenberg observes, “Although

no definite rule can be established for determining Working Capital requirements, we can arrive at

some general principles. Certain influences, some inherent in the nature of the business and the

others arising out of business management policies, affect each of the items of current capital.

The following factors affect not only the requirements of Working Capital but also influence to a

great extent the composition or structure of Working Capital. It is believed that any attempt at

Working Capital management could be improved upon with greater understanding of the underlying

factors.

THE FOLLOWING FACTORS ARE IMPORTANT:

Nature of business

Period of manufacture and cost of production,

Volume and terms of purchase,



Size of business unit,

Capacity utilization,

Degree of specialization,

Seasonal variations,

h) Coordination between production and distribution,

i) Business cycles,

j) Management policy,

k) Miscellaneous factors such as government policies, transport and communication system and

economic and political environment.

FINANCING OF WORKING CAPITAL:

In that GFEL, it was financing the working capital from the following five common sources.

They are:

1. SHARES: The TKCSFL has issued the equity shares for raising the funds. The Equity Shares

do not have any fixed commitment charges and the dividend on these shares is to be paid subject to

the availability of sufficient funds. These funds have been injected from the company’s own

personal resources, from the members and from the third party investors.

2. TRADE CREDITORS: The trade creditors refer to the credit extended by the suppliers of milk

in the normal course of business. The firm has a good relationship with the trade creditors. So that

suppliers send the milk to the firm for the payment to be received in future as per the agreement or

sales invoice. In this way, the firm generates the short-term finances from the trade creditors. It is

an easy and convenient method to finance and it is informal and spontaneous source of finance for

the firm.

3. FACTORING OR ACCOUNTS RECIEVABLE CREDIT: Another method of raising short-

term finance in The Krishna Co-Operative Sugar Factory Limited, Athani, is through accounts

receivables credit offered by the commercial banks. A commercial bank has provided finance by



discounting the bills or invoices of its customers. Thus, a firm gets immediate payment for sales

made on credit. The factor is also a financial institution, which offers services relating to

management and financing of debts arising out of credit sales. Factors render services varying from

bill discounting facilities provide commercial banks to the total take over of administration of credit

sales including maintenance of sales ledger, collection of accounts receivables, credit control, and

protection from bad debts, provision of finance and rendering of advisory services to the firm’s

clients.

4. LINE-OF-CREDIT: The business is well capitalized by equity and is has a very good collateral,

the business (the firm) might quality fore one. A line-of-credit allows firm to borrow funds for short-

term needs when they arise. The funds are rapid once the collections of accounts receivables that

result from the short-term sales peak. Lines-of-credit typically are made for one year at a time and

expected to be paid it for 30 to 60 consecutive days some times during the year to ensure funds are

used for short-term needs only.

5. SHORT-TERM LOAN: The firm has borrowed the funds from the commercial banks to

finance for the working capital needs. The short-term loans duration is less than one year. They

provide a wide verity of loans to meet the specific requirements of a concern. The different forms in

which the banks normally provide loan and advances are

Loans

Cash credits

Overdraft

COMPONENTS OF WORKING CAPITAL:

The components of working capital are:

Cash management

Receivables management

Inventory management

CASH MANAGEMENT:



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:

Transaction motive: The firm must and should keep the funds for transactions like purchase, sales

etc. These activities, which are not known in advance, are not considered while preparing a cash

budget.

Precautionary motive: The firm also keeps funds for the safeguard against uncertainties, which are

an integral part of business operations.

Speculative Motive: To tap profits from opportunities arising from fluctuations in commodity

prices, security prices, interest rates etc. The company with surplus cash is in a better position to

exploit such situations.

Cash Flows: The flow of cash into and out of the business over a period refers to cash flow. Cash

inflow can be in the form of cash received from customers, lenders and investors. Cash outflow can

arise because of payments made to employees (salaries), suppliers and creditors.

Positives Cash flow: When cash inflow exceeds outflow it results in positive cash flows. Positive

cash flow is beneficial to the business, the only thing to be cautious about is the opportunity cost,

incurred as a result of idle money.

Negative Cash flows: Negative cash flows arise when cash outflow exceeds inflows. This can be

due to various reasons.

A good cash management has a major impact on the overall working capital management. It is

required to meet the business obligations in the firm. The benefits of good cash Management are:

Control of financial risk

Opportunity for profit

Increased customer, supplier, and shareholder confidence

The cash management is commonly deals with the following aspects.

Cash planning or identifying sources of cash flows



Managing the cash flows

Optimum cash level

Identifying various avenues to invest surplus cash

TYPES OF WORKING CAPITAL:

While planning for the Working Capital one has to keep in mind different classification of Working

Capital. They are:

Permanent of fixed Working Capital: Permanent Working Capital is the minimum amount of

current assets, which is needed to conduct a business even during the dullest season of the year. This

amount varies from year to year, depending upon the growth of a company and the stage of the

business cycle in which it operates. It is the amount of funds required to produce the goods and

services, which are necessary to satisfy demand at a particular point. It represents the current assets,

which are required on a continuing basis over the entire year. It is maintained as the medium to carry

on operations at any time.

Temporary or variable Working Capital: Temporary or variable or fluctuating Working Capital is

the amount of Working Capital which is required to meet seasonal in nature, it means the blocking of

Working Capital in stock and it will take time to convert it into cash. In order to meet special

exigencies like, launching of extensive marketing campaign, for conducting research etc., special

Working Capital is required.

OPERATING CYCLE:

The operating cycle can be said to be at the heart of the need for Working Capital. “The continuing

flow from cash as advances to suppliers, to inventory, to accounts receivable and back into cash is

what is called the operating cycle”. In other words, the terms cash cycle refers to the length of time

necessary to complete the following cycle of events. Fuel, power and office expenses to meet selling

costs, such as packing, advertising etc

The aim of such an approach is not only directed towards management of Working Capital fund

inflows and outflows, but also directed to refine the balancing judgment between liquidity and

profitability.



ADEQUACY OF WORKING CAPITAL:

A business enterprise should have enough Working Capital. Without adequate Working Capital it

cannot be run effectively a manufacturing concern is sure to collapse if it is run for longer period

without or with meager amount of Working Capital. Therefore, the enterprise has to maintain

adequate Working Capital can avail following advantages:

It enables the enterprise to enjoy uninterrupted flow of production by obtaining the raw material well

in time.

It enables an enterprise to avail cash discounts on the purchase and hence, it reduces costs,

It enables to make regular payments of salaries, wages and other day to day commitments which

raise the morale of its employees, increases their efficiency, reduce-wastage and costs,

It enables to extend favorable credit terms to customers,

It will help to maintain the good will and credit worthiness which is essential for raising the loans

from banks and others on easy and favorable terms,

It helps to exploit favorable market conditions such as, purchasing its requirements in bulk when the

prices are lower and by holding its inventories for higher prices,

This gains the confidence of its investors and creates a favorable market to raise additional funds in

the future and

It creates an environment of security, confidence, high morale and overall efficiency in a business,

etc.

INADEQUACY OF WORKING CAPITAL:



At the same time inadequacy of Working Capital will affect business prospects adversely. Goodwill

of the firm will be at stake if the Working Capital gap is not bridged. Shortage of Working Capital or

inadequacy of Working Capital will affect profitability. Liquidity and soundness of a business

enterprise, it can cause following damages:

It stagnates growth. It becomes difficult for the enterprise to undertake profitable projects for non-

availability of the Working Capital funds,

It becomes difficult to implement operating plans and achieve an enterprise’s profit target,

An enterprise may not be able to take advantage of cash discount facilities,

An enterprise will not be able to pay its dividends because of the non availability of funds,

An enterprise may have to borrow funds at exorbitant rates of interest,

Operating inefficiencies creep in when it becomes difficult even to meet day-to-day commitments,

An enterprise loses its reputation when it is not in a position to honor its short term obligations. As a

result, an enterprise faces tight credit terms.

SHORT-TERM BANK CREDIT - A SOURCE OF FINANCE:

There are four categories of sources of Working Capital namely;

Trade credit

Bank credit

Current provisions and non-bank short term borrowing, and

Long term source comprising equity capital and long-term borrowings

Trade credit and short-term credit are the primary sources for financing Working Capital, in our

country. According to an estimate, both these sources together finance about three fourth of the

Working Capital requirements of an industry”.

FORMS OF CREDIT:



After getting the overall credit limit sanctioned by the banker, the borrower draws funds periodically.

The following forms of credit are available to him.

Loan arrangement: Under this arrangement, the amount of the loan is credited by the bank to the

borrower’s account and the interest is payable on the balances outstanding.

Overdraft arrangement: The borrower is allowed to overdraw in his current account with the bank

up to a stipulated limit and the interest is payable on the actual loan utilized.

Cash credit arrangement: The borrower can draw to a stipulated limit based on the security

margin. Usually, such credit is allowed against Pledge or hypothecation of goods but the borrower

can provide alternative securities also in conformity with the terms of advance.

Bills purchased and bills discounted: This arrangement is of relatively recent origin in India. With

the introduction of the New Bill Market Scheme in 1970 by the Reserve Bank of India, a bank credit

is made available through discounting of bills by banks. This scheme intends to link credit with the

sale and purchase of goods. To popularize this scheme, the discount rates are fixed lower than those

of cash credit.

Term loans: Bank advance loans for 3 to 7 years payable in yearly or half yearly installments.

PRINCIPLES OF WORKING CAPITAL MANAGEMENT

E. L. Walker’s Capital Propositions and James C. Van Home’s elucidation of the same. These

propositions are also known as the principles dealing with risk factors and serve as the basis of

Working Capital theory.

Principle-1

The first principle is concerned with the relationship between the levels of Working Capital and

sales. Briefly, it may be stated as follows: if Working Capital is varied relative to sales, the amount

of risk that a form assumes is also varied and the chances of gain or loss are increased This principle

implies that a definite relation wrists between the degree of risk and the rate of return. That is the

more the risk that a firm assumes, the greater is the possibility of gain or loss. The opportunity for

gain is enhanced by choosing an appropriate asset and liability structure.



The firm’s return on investment will be comparatively large when there are a low proportion of

current assets to total assets and a high proportion of current liabilities to total liabilities. This

strategy, no doubt, will result in a low level of Working Capital and relatively great profitability but

the firm assumes a risk of technical insolvency, i.e., the inability to meet its cash obligations.

Therefore, the risk involved with various levels of current assets and current liabilities must be

evaluated in relation to the profitability associated with those levels.

Principle -2

As already stated above, the main purpose of management is determining the ideal level of Working

Capital. This principle serves as a basis for determination and is applicable to investments made not

only in various components of Working Capital but also in fixed assets. Stated precisely, it is as

follows: capital should be invested in each component of Working Capital as long as the equity

position of the firm improves.

Principle - 3

The third principle is concerned with the risk resulting from the type of capital used to finance

Working Capital directly affects the amount of risk that a firm assumes as well as the possibility of

gain or loss, and cost of capital

Principle - 4

As stated above, the extent of the of debt depends upon the level of risk a management wishes to

undertake. It should be noted that the risk is not only associated with the amount of debt used relative

to equity but also related to the nature of the contacts negotiated by the borrower. The dates of

maturity and restrictive clauses of the contracts are the most important characteristics of debt

contracts that directly affect the firm’s operations.



The greater the disparity between the maturities of a firm’s short -term debt instruments and its flow

of internally generated funds, the greater the risk and vice versa.

Incidentally, management is not compensated for assuming the risk referred to in this concept;

therefore, under no circumstances should the risk be assumed.

On the whole, a management has to determine the liquidity of the firm on the basis of information

about risk and opportunity. Costs of holding liquidity. The degree of liquidity, desirable is a function

of profitability of insolvency of various levels of liquidity, the opportunity cost of maintaining those

levels and the cost of bankruptcy. Therefore, the behavior of the management should be influenced

not only by the risk and the opportunity costs associated with the various levels of liquidity, but also

by the cost of bankruptcy. Thus the management must behave in a manner consistent with the

maximization of shareholder’s wealth.

FACTORS INFLUENCING WORKING CAPITAL REQUIREMENTS

Nature of business – This is one of the primary factors influencing the working capital requirements

of a firm. The Krishna Co-Operative Sugar Factory Limited, Athani, 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.

Market conditions – The level of competition existing in the market also influences working capital

requirement. When competition is high, the company should have enough inventories of finished

goods to meet a certain level of demand. Otherwise, customers are highly likely to switch over to

competitor’s products. It thus has greater working capital needs. When competition is low, but

demand for the product is high, the firm can afford to have a smaller inventory and would

consequently require lesser working capital. But this factor has not applied in these technological

and competitive days.



ESTIMATION OF WORKING CAPITAL REQIUREMENTS

Managing the working capital is a matter of balance. The firms must have sufficient funds on hand

to meet its immediate needs. The Krishna Co-Operative Sugar Factory Limited, Athani, is

manufacturing oriented organization; the following aspects have to be taken into consideration while

estimating the working capital requirements. They are:

Total costs incurred on material, wages and overheads.

The length of time for which raw material are to remain in stores before

They are issued for production.

The length of the production cycle or work-in-process, i.e., the time taken for conversion of raw

material into finished goods.

The length of sales cycle during which finished goods to be kept waiting for sales.

The average period of credit allowed to customers.

The amount of cash required paying day-today expenses of the business.

The average amount of cash required to make advance payments

The average credit period expected to be allowed by suppliers.

Time lag in the payment of wages and other expenses.



OBJECTIVES OF STUDY

To study the sources and application of fund of TKCSFL

To examine how the working capital requirements is estimated

A study on the interpretation of working capital on the basis of calculations and estimations

To study the system of inventory management, receivables management and cash Manageme

nt.

To identify weakness and short comings if any as a result of the survey and to offer

suggestions



ANALYSIS AND INTERPRETATION OF DATA :

TABLE 1: CALCULATION OF WORKING CAPITAL

Particulars 2005-06 2006-07 2007 – 08

Current Assets

Inventories 193771415 624968314 717284971.5

Sundry debtors 11081938.99 25182025.76 5727392

Cash 72521 325153.45 28456.45

Bank 27143285.9 26566127.5 14554932.44

Other assets 939201052 12356005.85 16419308.96

Loans & advances 37226454.5 4315300.17 4315300.17

Receivables from govt. 1859709 1859709 1859709

1210356376.39 693712926.73 76019007

Current Liabilities

Sundry creditors 1893901.5 18503328 11822912

Term loans

DCC bank 51010105.66 61987719 68212128

Others

Statutory payable 2640680 5336185 8322361

Excise duty 551827 551827 551827



Net Working Capital 1154259862.23 607333867.73 48500689

The Net Working Capital has been increased in 2006 – 2007, when compared to other years. This is

due to huge rise in inventories ………….

TABLE 2: STATEMENT SHOWING INCREASE & DECREASE IN WORKING

CAPITAL:

Particulars

Increase in Current Assets

Inventories 431196899 92316657.5

Sundry debtors 14100086.77 -

Cash 252632.45 -

Bank - -

Other assets - 4063303.11

Loans & advances -

Receivables from govt. - -

Decrease in Current Liabilities

Sundry creditors - 66804156



Term loans - -

DCC bank

Others

Statutory payable - -

Excise duty - -

Decrease in working capital 546925994.5 -

Total 992475612.72 163184116.61

Particulars

Decrease in Current Assets

Inventories -

Sundry debtors - 19424634

Cash - 296697

Bank 577158.4 12011195.06

Other assets 926845046.15 -

Loans & advances 32911154.33 -

Receivables from govt. - -



Increase in Current Liabilities

Sundry creditors 16609426.5 -

Term loans 10977613.34 6224409

DCC bank 2695505 2986176

Others

Statutory payable - -

Excise duty - -

Increase in working capital - 62534882.96

Total 990615903.72 103477994

TABLE 3: COMPUTATION OF WORKING CAPITAL:

Year Current Assets Current Liabilities Working Capital

2005-06 25,88,44,064 12,83,39,937 13,05,04,127

2006-07 72,30,11,048 32,37,78,891 39,92,32,157

2007-08 81,24,64,742 39,73,58,597 41,51,06,145



Working Capital

130504127

399232157 415106145

050000000

100000000150000000200000000250000000300000000350000000400000000450000000

2005-06 2006-07 2007-08

Year

Wo

rkin

g C

ap

ital

WorkingCapital

Interpretation: It was in positive in the following 3years i.e., from 2005-06 to 2006-07 and in 2007-

08 it has been in comparatively high positive terms i.e., amount of Rs. 41,51,06,145. It indicates that,

in the 2007-08, the working capital has met its current obligations...

CURRENT RATIO: Current ratio is also known as ‘working capital ratio’ which compares the total

current assets of the business unit to its current liabilities. This ratio measures its short-term

solvency, which only reflects its ability to meet short-term obligation. The higher the ratio the greater

the business unit’s ability to meet current obligation and more the safety of funds of the short-term

creditors Thus, a current ratio of 2:1 is considered satisfactory.

Current Assets



Current ratio = ———————

Current liabilities

TABLE 4 : COMPUTATION OF CURRENT RATIO

Year Current Assets Current Liabilities Ratio

2005-06 25,88,44,064 12,83,39,937 2.01

2006-07 72,30,11,048 32,37,78,891 2.23

2007-08 81,24,64,742 39,73,58,597 2.04

Ratio

1.9

1.95

2

2.05

2.1

2.15

2.2

2.25

2005-06 2006-07 2007-08

Year

Rat

io

Ratio

Interpretation: The Current Ratio for the year 2005-06 is below standard ratio. It is increased to

2.01 to 2.23 for 2006-07, which is above standard ratio. For the year 2007-08 it is decreased to 2.23

to 2.04, which below standard ratio. It indicates that, the firm is able to meet its current obligations.

QUICK RATIO:

It establishes a relationship between quick, or liquid assets and current liabilities. An asset is liquid if

it can be converted into cash immediately or reasonably soon without a loss of value. Cash is the

most liquid asset. Inventories are considered to be less liquid.



Quick assets (current assets - Inventory)

Quick ratio = ————————————————

Current liabilities

TABLE 5 : COMPUTATION OF QUICK RATIO:

Year Current Assets Current Liabilities Ratio

2005-06 4,95,54,229 12,83,39,937 0.380

2006-07 7,64,04,609 32,37,78,891 0.235

2007-08 7,04,60,447 39,73,58,597 0.177

Ratio

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

2005-06 2006-07 2007-08

Year

Rati

o

Ratio

Interpretation: The ideal ratio is 1:1. The Quick ratio of current assets & liabilities are below the

standard ratio. It indicates that the firm’s liquidity position is good.

CURRENT ASSET TURNOVER RATIO:



Assets are used to generate sales. Therefore, a firm should manage its assets efficiently to maximize

sales. The relationship between sales & assets is called assets turnover.

Sales

Current asset turnover ratio= ______________

Current assets

TABLE 6 : COMPUTATION OF CURRENT ASSET TURNOVER RATIO:

Year Sales Current Assets Ratio

2005-06 94,06,20,046 25,88,44,064 3.63

2006-07 79,13,32,804 72,30,11,048 1.09

2007-08 40,96,02,092 81,24,64,742 0.50

Ratio

0

0.5

1

1.5

2

2.5

3

3.5

4

2005-06 2006-07 2007-08

Year

Rati

o

Ratio

Interpretation: The above table exhibits how the current assets were efficiently utilized in

generating sales. In the above table the ratio shows that, the firm has utilized the currents assets

properly.



WORKING CAPITAL TURNOVER RATIO:

Net sales

Working capital turnover ratio = ————————

Net working capital

TABLE 7: COMPUTATION OF WORKING CAPITAL TURNOVER RATIO:

Year Net Sales Net working Capital Ratio

2005-06 94,06,20,046 1,15,42,59,862 0.81

2006-07 79,13,32,804 60,73,33,868 1.30

2007-08 40,96,02,092 73,12,59,661 0.56

Ratio

0

0.2

0.4

0.6

0.8

1

1.2

1.4

2005-06 2006-07 2007-08

Year

Rat

io Ratio



Interpretation: The ratio is fluctuating. That was high in 2006-07, 1.30.and it was negative in 2005-

06 i.e. 0.81 and 2007-08 i.e.0.56 it indicates that the working capital has been utilized effectively in

2006-07.

INVENTORY MANAGEMENTS:

Inventory management is one of the components of working capital. This management is concerned

with the effective management of stock or inventory. Inventory consisting of raw material, work-in-

progress and finished goods, represent a significant proportion of total current assets.

In the case of TKCSFL, the inventory consisting only finished goods these finished goods consist of

sugar, molasses& bagasse these inventories are not sold then and there but disposed of as per the

company act guidelines for sugar and it’s by products. The effectiveness of working capital is

depends on this inventory managements effective.

So, effective management of particular in working capital in general can also be evaluated by the

computing inventory related ratios. Inventory turnover ratio reflects the relationship between costs of

goods old during or given period and the average inventory. This ratio helps the average inventory.

This ratio helps in determining the liquidity of a business concern in as a much as it indicates the rate

at which the inventories are converted into sales and then into cash ultimately

This ratio is calculated by the following ratio.

Cost of goods sold

Inventory turnover ratio = ————————

Average inventory

Where,

Cost of goods sold = Sales - Gross profit

Opening stock + Closing stock

And average inventory = ------------------------------

2



365

Inventory holding period = ———————————

Inventory turnover ratio

TABLE 8: COMPUTATION OF INVENTORY TURNOVER RATIO:

Year Sales Average Inventory Ratio

2005-06 26,40,87,564 10,11,41,647 2.61

2006-07 69,74,45,272 67,11,26,643 1.03

2007-08 84,53,40,822 73,42,01,254 1.15

Inventory turnover ratio

0

0.5

1

1.5

2

2.5

3

2005-06 2006-07 2007-08

year

ratio Ratio

Interpretation: A higher rate of inventory turnover ratio reduces investment in inventory and thus

reduces the requirement of working capital. Hence efforts should be made to magnify the ratio to get

the benefits, reduction in investment on stock and reduction in requirement of working capital.



The above table reveals that, the turnover of inventory in 20005-06 was 2.61 were as in 2006-07

there was a increase of 1.03 come up to, in 2007-08 there was a decrease of 1.15, this shows of

finished goods inventory is more in 2006-07which reflects more sales in 2006-07.

TABLE 9: COMPUTATION OF PROPORTION OF INVENTORY TO CURRENT

ASSETS:

Year Inventory Current Assets Percentage

2005-06 19,37,21,415 25,88,44,064 0.74

2006-07 62,49,68,314 72,30,11,048 0.86

2007-08 71,72,84,972 81,24,64,742 0.88

Percentage

0.65

0.7

0.75

0.8

0.85

0.9

2005-06 2006-07 2007-08

Year

Percentage



Interpretation: The above table exhibits how the current assets were efficiently utilized in

generating sales. In the above table the ratio was found near to1. It shows that, the firm has utilized

the currents assets properly.

TABLE 10: COMPUTATION OF PROPORTION OF CURRENT ASSETS AND

FIXED ASSETS:

Year Fixed assets Current Assets Ratio

2005-06 50,68,16,681 25,88,44,064 1.95

2006-07 47,00,50,942 72,30,11,048 0.65

2007-08 45,46,52,642 81,24,64,742 0.56



Ratio

0

0.5

1

1.5

2

2.5

2005-06 2006-07 2007-08

Year

Ratio

Interpretation: The table shows the proportion of current assets and fixed assets undertaken by the

unit. The above table clears that proportion of investment in fixed assets is more than proportion of

investment in current assets. The ratio ranges between 0.56:1 to 0.65

TABLE 11: COMPUTATION OF SIZE OF INVENTORY:

Year Inventory Indices(04-05=100)

2004-05 23,78,03,265 100

2005-06 19,47,71,415 81.90

2006-07 62,49,68,314 262.7



2007-08 71,72,84,972 301.5

Indices(04-05=100)

0

50

100

150

200

250

300

350

2004-05 2005-06 2006-07 2007-08

Year

Indices(04-05=100)

Interpretation: The above table throws light on investment in total inventory and the progressive

base year percentage growth in total inventory. The growth rate in inventory was on a downward

trend in 2005-06 as compared to 2004-05 by 81.90% respectively. In 2006-07 the trend was on a

upward by 262.7% as compared to 2005-06. In 2007-08 the trend was on a upward by 301.5% as

compared to 2006-07. However, the size of inventory had that leads to the increase in output and

sales has a positive impact on its growth in unit.

RECEIVABLE MANAGEMENT:

Trade credit is the most prominent force of modern business. It is considered or an essential

marketing tool, acting as a bridge for the movement of goods through production and distribution

stages to ultimate consumers. The management of amount receivables is an important part of

working capital management part of working capital management is an undertaking, which sell their

goods on credit. Accounts receivables include book debts, and bills receivables. The level of



accounts receivable of an undertaking is determined with reference to the volume of credit sales and

the average period between sales and realization from the customer like inventories.

In the context of dairy union the finished products – sugar and their by products on the basis of cash

and credit system. So the question of credit sales which leads to accounts receivables does not arise

but the factory providing credit facilities to the farmers by way of supplying fertilizers. This credit

given by factory can be recovered by the sugar which is provided by farmers. Therefore the scope of

amounts receivables management in dairy unit is very limited.

RECEIVABLE TURNOVER RATIO:

This ratio is also known as “Debtors turnover ratio” which related credit sales of business unit to

trade debtors. This ratio indicates the rate at which cash is generated by turnover of receivables or

debtors. It measures the liquidity of the business unit.

By and large the amount of trade debtors and bills receivables depends upon the extent of sales,

credit facilities extended and the effectiveness of collection policy in force. The DTR is ascertain

how many days of average sales are locked up in the amounts owning by debtors as depicted in the

balance sheet.

Credit sales Total sales

RTR = ———————— or ————————

Average debtors closing debtors

Ex:

In the year 2006 - 07

Total sales

RTR = ————————

Closing debtors



79, 25, 85,774.00

= ————————

26001540.16

= 30.48

365

Average collection period = -----------------------

RTR

365

= ----------

30.48

= 11.81 days

TABLE 12: COMPUTATION OF RECEIVABLE TURNOVER RATIO:

Year Sales Closing debtors RTR Average

collection

Period

2005-06 40,96,02,092 1,10,81,938 36.96 9.87



2006-07 94,06,20,046 2,51,82,026 37.35 9.77

2007-08 79,13,32,805 57,27,392 138.16 2.64

0

20

40

60

80

100

120

140

160

2005-06 2006-07 2007-08Year

Valu

es

RTR

AveragecollectionPeriod

Interpretation: In the above chart, the Debtor turnover ratio is low in all years i.e. it was 36.96 in

2005-06. As a result of that, the payment period will increase. But a very low is dangerous. Lower

the DTR it affects increases in working capital.

TABLE 13: COMPUTATION OF PROPORTION OF RECEIVABLES TOCURRENT

ASSETS:



Year Total Receivables Current Assets Percentage

2005-06 3,73,02,784 25,88,44,064 14.4

2006-07 6,95,56,533 72,30,11,048 9.61

2007-08 5,73,74,008 81,24,64,742 7.06

Percentage

0

2

4

6

8

10

12

14

16

2005-06 2006-07 2007-08

Year

Percentage

Interpretation:

Total receivables

Percentage of total = ————————— x100

Receivables to total current assets

Total current assets

Total receivable includes the sundry debtors, loan and advances.

The above table indicates that 14.4% of the total current assets were kept in receivables in 2005-06.

This share decreased up to 9.61% during the period of 2006-07. Further the trend was towards

declined to 7.06% during the period of 2007-08.



TABLE 14: COMPUTATION OF SIZE OF TOTAL RECEIVABLES:

Year Total Receivables Indices(04-05=100)

2004-05 2,77,12,355 100

2005-06 3,73,02,784 134.6

2006-07 6,95,56,533 251

2007-08 5,73,74,008 207

Indices(04-05=100)

0

50

100

150

200

250

300

2004-05 2005-06 2006-07 2007-08

Year

Valu

es Indices(04-05=100)

Interpretation: The table throws light on the position of total receivables. It is evident from the

table that, there was an increased in the size of receivables up to 134.6% during 2005-06. In the year

2006-07 the trend was again increased i.e. 251%. Further decreased to 207 for the year 2007-08



CASH MANAGEMENT: Cash is another significant element of working capital it includes cash in

hand and bank balances. Without cash no business unit can survive at any time during its life cycle.

Cash occupies an important place in the structure of working capital in order to maintain good trade

and credit, cash is needed for repayments that must be made on scheduled time. Hence quantum of

cash should be neither more nor less than the requirements. This optimum level depends on various

factors such as manufacturing cycle, the sale and collection cycle, age of the enterprise, the liquidity

of other current assets, debt redemption etc.

CashPercentage of cash to current assets = ———————— x 100

Total current assets

TABLE 15: Computation of Proportion of Cash to Total Current Assets:

Percentage

0

2

4

6

8

10

12

2005-06 2006-07 2007-08

Year

Percentage

Interpretation: From the table it can be derived the fact that the average cash to current assets ratio

is the lowest at 10.51 in 2005-06. However, the ratio has decreased of 5.04% in 2005 – 06. But there

was increased by 1.85 % in the year 2007-08. The proportion of total assets to cash there was high in

the year of 2005-06. In the total, the average cash balance to total current assets is very low. It shows


Year Cash Current Assets Percentage

2005-06 2,72,15,806 25,88,44,064 10.51

2006-07 3,64,67,361 72,30,11,048 5.04

2007-08 1,51,03,607 81,24,64,742 1.85


inadequate cash balance or situation is undesirable from the point of profitability and liquidity of the

unit.

CASH RATIO:

It is the method for measuring the liquidity of the factory by calculating the ratio between cash & all

current liabilities. It is also known as Cash Asset Ratio.

Cash

Cash Ratio = _________________

Current liabilities

TABLE 16: COMPUTATION OF CASH RATIO:

Year Cash Current

Liabilities

Ratio

2005-06 2,72,15,806 12,83,39,937 0.212

2006-07 3,64,67,361 32,37,78,891 0.112

2007-08 1,51,03,607 39,73,58,597 0.038


Ratio

0

0.05

0.1

0.15

0.2

0.25

2005-06 2006-07 2007-08

Year

Rat

io

Ratio


Interpretation:

From the table it can be derived the fact that the average cash to current liabilities ratio is the lowest

at 0.212 in 2005-06. However, the ratio has decreased of 0.112% in 2006 – 07. But there was

decreased by 0.038 % in the year 2007-08.

FINDINGS:

The current and quick ratios are satisfactory i.e. 2.09 and 0.267 on an average respectively.

So the firm’s liquidity position is good. It shows that it is able to meet its current obligations.

The cash reserves maintained by the company are good. But as compared to financial status it

is not at remarkable extent. This is serious liquidity crunch to the company. However the

company is much safer side because of their outstanding due to farmers, who have also hold

shares of company. Another point is farmers are not aggressive to recover their dues.

Proportion of cash to sales maintenance of the cash balance is inadequate. As a rule when

sales increase cash also increase, but at a decreasing rate. It shows that inadequate of cash

balance.

When analyzed the financial performance, the firm’s commitment to meet short term

obligations is good i.e. liquidity position of the company is good. And in respect cash

balance, the firm has not sufficient balance. As a result of that, it may affect the working

capital, so totally the firm is struggling to meet its current expenses. And with regard to

resources, the firm is not utilizing the assets properly. And similarly the firm has a

maintained high inventory.

The current assets turnover ratio of the firm was greater than 1.It was 1.74on an average. It

shows that, the firm has been utilized the current assets properly.

The size of the inventory is more than 75% of the working capital as compared to the last

three year. It shows that the inventory has not been disposed off in those years i.e. goods

might be stably in the warehouse due to may be either decreased in sales or higher purchase

of raw materials.



SUGGESTIONS:

The inventory turnover ratio of the company was more than 75%. The firm should search for

new customers, and also the firm should focus on it’s foreign exports.

When we analyzed the proportion of cash in sales and current assets, the cash is not sufficient

to meet the current expenses. So the firm should maintain sufficient cash balance and bank

balance through effective credit policies. The major drawback for the insufficient of cash is

that, the inventory has not been selling fast. So the firm should force to think about it.

With regard to resources (assets) the firm has not been utilized the assets properly in making

sales. So it is forced to think for proper utilization of that to have sufficient cash balance.

The firm has invested more on fixed assets. By investing in fixed assets is useless because

they cannot be converted into cash. Major problem of the firm is that it does not have

sufficient cash balance, so I personally feel that the firm better to invest in current assets

instead of having high inventory.

As it is well known fact that sugarcane grown is not only produces sugar. It can produce

many other products also like molasses, cartons, electricity and beverages therefore company

need to focus in these areas also.



CONCLUSION:

When I analyzed the financial performance, the firm’s commitment to meet short obligations is

good i.e. liquidity position of the company is good. And in respect cash balance, the firm has not

sufficient balance. As a result of that, it may affect the working capital, so totally the firm is

struggling to meet its current expenses. And with regard to resources, the firm is not utilizing the

assets properly. And similarly the firm has a maintained high inventory.



BIBLIOGRAPHY:

Prasanna Chandra : Financial Management theory and practice,

Tata, McGraw – Hill Publishing Co. Ltd.,

New Delhi, 1998

M. Y. Khan and P. K. Jain : Financial management, Tata McGraw Hill

Publishing Co. ltd. Financial Management,

The Institute of Chartered Accountants of

India, New Delhi.

N. Vinayakam and I.B. Sinha : Management Accounting, Himalaya

Publishing House

N. K. Agarwal : Management of Working Capital,

Sterling Publishers, Pvt. Ltd.

Website : www.google.com

www.msn.com



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