Nadiya

WORKING CAPITAL MANAGEMENT
SHIVASHAKTHI DAIRY Pvt.Ltd.
CHAPTER-1
INTRODUCTION
Working capital may be regarded as the lifeblood of a business. Its effective
provisions can do much to ensure the success of business, which its inefficient
management can lead not only to loss of projects but also the ultimate downfall of
what otherwise, might be considered as promising concern. Thus, its management is
considered as one of the most important aspects of firm's Financial Management.
The term working capital stands for that part of the capital which is required
for the financial working of the company in simple words, we can say that working
capital is the investment needed for carrying out day to day operations of the business
smoothly.
Working capital refers to a firm's investment in short term assets, viz. Cash
short-term securities, Accounts receivable (debtors) and inventories of raw materials,
work in progress and finished goods.
It can be regarded as that portion of the firm's total capital, which is, employed
in short-term operations. Funds thus invested in current assets keep revolving false
and are being constantly concerted in to cash and this cash flow out again in exchange
for other current assets. Hence, it is also known as revolving or circulating capital.
According to genestenberg, "circulating capital means current assets of a
company that are changed in the ordinary course of business from one form to
another, as for example from cash to inventories, inventories to receivables,
receivables into cash".
Working capital is often referred to as lifeblood of an organization of its
the money required for carrying on day today activities of an organization. The
management of current assets is similar to that of fixed assets in the sense that in both
cases a firm analysis their effects on return and risk.
The management of fixed and current assets, however, differs in there
Important ways.
B.T P.G College, MADANAPALLE
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1. First, in managing fixed assets, time is very important factor; consequently,

discounting and compounding techniques play a significant role in capital
budgeting and a minor one in the management of current assets.
2. Second, the large holding of current assets, especially cash, strengthens the
firms liquidity position (and reduce riskiness), but also reduces the overall
profitability. Thus, a risk-return trade off is involved in holding current assets.
3. Third, levels of fixed as well as current assets depend upon expected sales
fluctuations in the short run. Thus the firm has a greater degree of flexibility
in managing current assets.
Working capital is probable the often used financial management concepts
verbally and misused practically. Independent of the nature of an organization, its
constitution and activity requires working capital. Many organizations have failed or
become sick mainly due to the mismanagement of this working capital
FINANCE
Finance is one the basic foundations of all kinds of economic activities. It is
the master key, which provides access to all the sources for being employed in
manufacturing. Hence it is rightly said that finance is lifeblood of any enterprise,
besides being the scarcest elements, it is also the most indispensable requirement.
Without finance neither any business can be started nor successfully run. Provision of
sufficient funds at the required time is the key to success of concern. As matter of fact
finance may be said to be the circulatory system of economic body, making possible
the needed co-operation among many units of the activity.
FINANCIAL MANAGEMENT
Financial management emerged as a distinct field of study at the turn of this
Century. Many eminent persons defined it in the following ways.
DEFINITIONS
According to GUTHMANN AND DOUGHAL Business finance can
broadly be defined as the activity concerned with planning, rising, controlling and
administering of funds used in the business.
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According to BONNEVILE AND DEWEY Financing consists in the rising,

providing and managing of all the money, capital or funds of any kind to be used in
connection with the business.
According to Prof. EZRA SOLOMAN Financial management is concerned
with the efficient use of any important economic resource, namely capital funds.
1.1 INDUSTRY PROFILE

India with 185 million cows and 154 million buffaloes. Have the largest
population cattle in the world. Total cattle population in the country as on October
2010 stood at 339 million. More then 50% of buffaloes and 20% of cattle in the world
are found in India and most of these are milk cows and milk buffaloes.
Indian dairy sector contributes a large share in agriculture gross domestic products.
Presently there are around 70,000 village dairy cooperatives across the country. The
cooperative societies are federated into 170 district milk producers unions, which in
turn have 22 state cooperative dairy federations. Milk production gives employment
to more leading producer of milk in the world followed by USA. The milk production
in 1999-00 estimated at 78 million metric tons as compared expected to increase to 81
million metric tons by 2000-01. Of this total produce of 78 million cows milk
constitute 6 million metric tones while rest is from other.
While world milk production declined by 2% up last three years, according to FAC
estimates. Indian production has increased by 4%. The milk production in India
accounts for more than 13% of the total world output and 57% of total Asias
production. The top view milk producing nations in the world are idea, USA, Russia,
Germany and France.
Although milk production has grown at a fast pace during the last three decades milk
yield per animal is very low. The main reasons for the low yield are:
1. Lack of use of scientific practices in milking.
2. Inadequate availability of fodder in all seasons.
3. Non-availability of veterinary health services
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INDIA: world largest milk producer

India has become the worlds no.1 milk producing country. United States
where the milk production is anticipated to grow only marginally at 71 million tones,
occupied the slot till 1997. In the year 1997, Indias milk production was on par with
the U.S at 71 million tones.
Indias annual milk production has more than trebled in the last 30 years,
rising from 21 million tones in 1968 to an anticipated 80 million tones in 2001. This
braid growth and modernization is largely credited to contribution of dairy
cooperatives, under the operation flood (of) project, assisted by many multi-lateral
agencies, including the European union the world bank in the Indian context of
poverty and malnutritions, milk has a special role to play for its man notional
advantages as well as providing supplementary income to some 79 melon farmers in
over 500,000 remote villages.
MARKET SIZE AND GROWTH

Market size for milk (sold in loss/packaged from) is estimated to be 36 million
metric tones valued at Rs.470 billion; the market is currently growing at round 4% per
annum in volume terms. The milk surplus states in India are Uttar Pradesh, Punjab,
Haryana, Rajasthan, Gujarat, and Maharashtra, Andhra Pradesh, Karnataka and Tamil
nadu. The manufacturing of milk products is concentrated in these milk surplus states.
The top 6 states viz.
Uttar Pradesh, Punjab, Madhya Pradesh, Rajasthan, Tamil nadu and Gujarat
together account for 58% of national production.
Milk production grew by a mere 1% per annum, between 1947 and 1970.
Since the early 70's under operation flood, production growth increased significantly
averaging over 5% per annum.
About 75% of milk is consumed at the household level, which is not a part of
commercial dairy industry. Loose milk has a larger market in India as it is perceived
to be fresh by most consumers. It poses a higher risk of adulteration and
contamination.
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The production of milk products, that is milk products including infant milk
food, malted food, condensed milk and cheese stood at 3.07 lacks metric tones in
1999. Production of milk powder including infant milk food has risen to 2.25lkh
metric tone in 1999, where as that puff-malted food is at 65,000 metric tones cheese
and condensed milk production stands at 5000 and 11000 metric tone respectively in
the same year.
MAJOR PLAYERS
The packaged milk segment is dominated by the dairy cooperatives. Gujarat
cooperative milk Marketing Federation (GCMMF) is the largest player. All other
local dairy cooperatives have their local brands (for e.g. Gokul, Warana in
Maharashtra, sarasin Rajasthan, verka in Punjab, Vijaya in Andhra Pradesh, Aavin in
Tamil Nadu, etc.)
Other private players include J.K.Dairy, Heritage Foods, Indian Dairy, and
Dairy Specialties etc. Amrut industries, once a leading player in the sector has turned
bankrupt and in facing liquidation.
EXPORT POTENTIAL
India has the potential to become one of the leading players in milk product exports.
LOCATION ADVANTAGE
India is located amidst major milk deficit countries in Asia and Africa. Major
importers of milk and milk products are Bangladesh, China, Hong Kong, Singapore,
Thailand, Malaysia, Philippines, Japan UAD, Oman and other gulf countries, all
located close to India.
CONCERNS IN COMPETITIVENESS ARE

QUALITY
Significant investment has to be made in milk procurement equipment,
chilling and refrigeration facilities. Also, training has to be imparted to improve the
quality to bring it up to international standards.
PRODUCTIVITY
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To have an exportable surplus in the long term and also to maintain cost
competitiveness, it is imperative to improve productivity of Indian cattle.
FOREIGN COLLABORATION IN INDIA

The liberalization of the Indian economy in 1991 has attracted multinational
dairy enterprises in hundreds. Specialty dairy products like cheese; casein, lactose
and multinational corporations are now manufacturing whey proteins in India. The
advent of foreign brands produced in India is changing the profile in the national dairy
industry.
PACKAGING TECHNOLOGY
The local milkman initially sold milk door to door.
When the diary
cooperatives initially started marketing branded milk, it was sold in glass bottles
sealed with foil. Over the years several developments in packaging media have taken
place. In the early 80s plastic pouches replaced the bottles. Plastic pouches made
transportation and storage very convenient, besides reducing costs. Mild packed in
plastic pouches/bottles have a shelf life of just 1-2 days, that too only if refrigerated.
FUTURE PROSPECTS
Indias dairy sector is expected to triple its production in the next 10 years in
view of expanding potential for export to Europe and the West. Moreover with WTO
regulations expected to come into force in coming years all the developed countries
which are among big exporters today would are the withdraw the support and subsidy
to their domestic milk products sector.
1.2 COMPANY PROFILE

SHIVASHAKTHI DAIRY PVT.LTD. Was started in the year 1990 by
Dr.P.RAMCHANDRA REDDY M.L.A. The managing director of the Shivashakthi
Dairy pvt.ltd was P.MIDHUN REDDY M.B.A. SHIVA SHAKTHI DAIRY PVT.
LTD. Was situated in Sadum Mendel, Chittoor (D.t), Andhra Pradesh. An area
where basic raw material milk is available in plenty. The main function of the
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company is to procure the milk (raw) in and around Sadum taluk and process the milk
at factory, pack the processed milk and supply in to the Chennai and Bangalore cities.
The product range of the company is
1. Milk (toned, full cream milk)

Toned Milk which is having 3% fat and have 8.55 of SNF (solid not fat) which is
available at 18 Rs. Per.ltr.
Full cream milk which is having 6.5% fat and have 9% of SNF (solid not fat)
which is available at 22 Rs. Per.ltr.
2. Cream
3. Ghee
SHIVASHAKTHI DAIRY PVT. LTD. enjoys excellent reputation as a fair and
reliable of raw milk from dairy farmers.
QUALLITY CONTROL
The most significant aspect of S.S dairy is its quality products reflecting its
sound quality functions. It has well equipped laboratory with the sound work culture.
Recognizing quality as they key to prosperity the dairy has laid specific emphasis on
quality control operates with major functions like assessing commercial quality,
minimizing spoilages ensuring quality conformity milk and milk products, exercising
process controls, assessing sanitation, status of equipment, inspection of additives
formulation of standards and inspections of packaging materials, developing test
methods, stability and accelerated tests for quality guarantee of the products and
review of market complaints for improving the production practices.
Procurement
Production
ShivaShakthi
Dairy
promotion
Pvt.Ltd.
Processing
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SHIVASHAKTHI DAIRY PVT LTD FOUR PS OF PROFITABLE DAIRY:
Procurement
Production
Processing
Promotion
Procurement
Procurement covers collection of milk from rural producers or contractors,
including setting up of chilling centers. Provisions of laboratory equipment and
supplies milk vending machines, cattle welfare including feeding and fodder and
transportation.
Production
Promotion includes activities of producing various types of liquid milk. The
conventional whole toned and standardized as well as innovative like extra, nutrition
for school children, pregnant mothers, the aged and infirm, low fat for the calorie
conscious.
Processing
Processing products includes that the collected milk is stored and after storing
the milk is converted in to toned milk and full cream milk, ghee and cream is made
from the milk in the dairy.
Promotion
Promotion covers activities like brand promotion setting by dairy parlors,
buying milk in bulk and repacking to self, distribution, which will result in building
and image either nationally and regionally.
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1.3 PRODUCT PROFILE

The milk sold in the market as buffaloes milk is often mixed with cows milk,
buffaloes milk has portion of total solid and fats and then cows milk and admits of
large dilution with water. So highly rich in fat contents.
TYPES OF MILK
According to quality (fat) we can divide in to thee types of milk they are.
1. Toned milk ,which is having 3%fat and have 8.5% of SNF(solid not fat) which
is available at Rs;18 per.ltr.
2. Full cream milk which is having 6.5% fat and have 9% of SNF which is
available at Rs;22 per. lit.
3. Skim milk which is having 05 fat and have 6% of SNF which is available at
Rs;12 per.ltr.
THE SHIVASHAKTHI DAIRY LTD HAS THREE PRODUCTS
1. Milk (toned full cream, skim)
2. Cream
3. Ghee
Competitors for shiva shakthi dairy pvt.ltd.
1. Nandini
2. Heritage
3. Dodla
4. Sangam
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5. Tirumala.
CHAPTER-2
LITERATURE REVIEW
2.1 MEANING OF THE WORKING CAPITAL
Working capital management or administration of all aspects of working
capital, which manage the firms current assets and current liabilities in such a way
that a satisfactory level of working capital is maintained.
According to smith working capital management is concerned with the
problem that arise in attempting to manage the current assets, current liabilities, and
the interrelationship that exists between them
SCOPE OF THE STUDY

Highlighting the necessity of current assets and current liabilities.
Explain the principles of current assets, investment and financing.
Focus on the proper mix of short term financing for current assets.
Emphasis the need and goal of establishing a sound credit policy.
Suggest the need of monitoring the receivables.
Highlight the need for holding cash.
Discuss the techniques of preparing cash budget.
Focus on the management of cash collection and disbursement.
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OBJECTIVES OF THE STUDY

To evaluate the performance of Shiva Shakthi Dairy Pvt.ltd by analyzing the
profitability and liquidity position of the company.
To study changes in working capital position at the organization from 20072011
To examine the turnover of the company.
To identify and analyze relationship between working capital, sales, fixed asset
to sales etc.
To suggest measures if any for improving financial performance of company.
LIMITATIONS OF THE STUDY

It is based on the data supplied by the company personnel.
It is based on consultation, decisions of all concerned officials.
Time is the major limitation for the study i.e., study conducted based on the 4
years financial reports. We cant determine the over all financial position of
the company.
Due to limitation of time, it was unable to go far a depth study in to the
subject.
TYPES OF WORKING CAPITAL

There are two types of working capital.
KINDS OF WORKING CAPITAL
ON THE BASIS OF CONCEPT
GROSS WORKING NET WORKING

CAPITAL
CAPITAL
ON THE BASIS OF TIME
PERMANENT OR
TEMPORARY OR
FIXED WORKING
VARIABLE
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CAPITAL
REGULAR
WORKING
CAPITAL
WORKING CAPITAL
RESERVE
WORKING
CAPITAL
SEASONAL
WORKING
CAPITAL
SPECIAL
WORKING
CAPITAL
1). ON THE BASIS OF CONCEPT

A). Gross working capital.
B). Net working capital.
A. Gross working capital

Refers to the firms investment in current assets are the assets, which can be
concerned into and with in an accounting year (or ) operating cycle and include cash,
Short-term securities, debtors (accounts receivables or book debts) bills receivable
and stock (inventory) Gross working capitals points to the arranging of funds to
finance current assets.
B. Net working capital

Refers to the difference between current assets and current liabilities. Current
liabilities are those claims of outsiders, which are expected to nature for payment
within accounting years and include creditors (accounts payable). Bills payable and
outstanding expenses. Net working capital can be positive. A Positive net working
capital will arise when current assets, exceed current liabilities and a Negative
working capital will arise when current liabilities are in excess of current assets.
2). ON THE BAIS OF TIME

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A. permanent/fixed/fluctuating working capital.

B. Temporary working capital.
A. Permanent working capital

The need for current assets arises because of the operating cycle. The operating
cycle is a continuous process and therefore, the need for the current assets is felt
constantly. But the magnitude of current assets needed is not always a minimum level
of current assets, which is continuously required by the firm to carry on its business
operations. This minimum level of current assets is referred to as permanent or fixed
working capital.
Example: - every firm has to maintain a minimum level of raw materials, wok-inprogress, finished goods and cash balance. This minimum level of current assets is
called permanently blocked in current assets. As the business grows, the requirements
of permanent working capital also increase due to the increase in current assets.
Temporary
Or
Fluctuating
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Permanent
Time
B.Temporary working capital

Depending upon the changes in production and sales, the need for working
capital over and above permanent working capital, will have in be maintained to
support the peak proceeds of sale and investment in receive may also increase during
such periods. On the other hand, investment in raw material, working in progress and
finished goods will fall if the market is slack.
The extra working capital needed to support the changing production and sales
activities is called fluctuating, or variable or temporary working capital. The firm to
meet liquidity measurement that will last only temporarily creates temporary working
capital.
Temporary
Or
Fluctuating
Time
2.2NEEDS AND IMPORTANCE OF WORKING CAPITAL

The need for working capital to run day-to-day business activities cannot be
over emphasized, we will hardly find business firm, which doesnt require any
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amount if working capital indeed, and firms differ in their requirements of the
working capital. We know that a firm should aim at maximizing the wealth of its
share holders. In its endeavor to do so. A firm should earn sufficient return from its
operations. Earning a study amount of profit required successfully sale activity. The
firm bas to invest enough funds in current assets for cash instantaneously. There is
always an operation cycle involved in the conversion of sales in to cash.
VARIOUS NEEDS OF WORKING CAPITAL IS AS FOLLOWS

1. To pay wages and salary.
2. It helps to the purchase of raw materials, components and spares.
3. It helps to incur day-to-day expenses and overhead costs such as fuel, Power
and office expenses etc.
4. It also to meet the selling cost as packing, advertising etc.
5. It helps to maintain the inventories of raw material, working progress, Stores
and spares and finished stock.
DETERMINANTES OF WORKING CAPITAL OR FACTORS

AFECTING
The working capital requirement of a firm affected by a number of factors.
The various factors, which affect the working capital requirement of a concern, are as
Follows.
FACTORS OF WORKING CAPITAL
Internal factors
Nature of business
external factor
Business fluctuation
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Product cycle
Technological
Business cycle
Developments
Credit policy
Transport and
Scale of production
Communication
Development
Growth and Expansion of business
Import Policy
Operating efficiency
Taxation policy
INTERNAL FACTORS
1. NATURE OF BUSINESS
The working capital requirements of enterprises are basically related to the
conduct of business. Public utilities have certain features which have a bearing on
their working capital needs. They do not maintain big inventories arid have, therefore,
probably the least requirement of working capital to maintain a sufficient amount of
cash inventories and book debts.
2. PRODUCTION CYCLE
The term production or manufacturing cycle refers to the span between the
procurement of raw materials and completion of the manufacturing process leading to
the production of finished goods. In other words, there is a sometime gap before will
be the working capital needed and vice versa.
3. BUSINESS CYCLE
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The business fluctuations influence the size of working capital mainly during
updated phase when boom conditions prevail, the need for working capital is likely to
cover the lag between increases sales and receipt of cash as well as invest in plant and
machinery to meet the increased demand. The down swing an opposite effect on the
level of working capital requirement.
4. CREDIT POLICY
The credit policy relating to sales and purchases also affects the working
capital. The credit policy in influences the requirements of working capital in two
ways: Though credit terms granted by the firm to its customers/buyers of goods credit
terms available to the firm from its creditors. A firm, which more credit sales and cash
purchase required high working capital then a firm having more credit purchase and
cash sales.
5. SCALE OF PRODUCTIION
A concern carrying on activities on a small scale of needs less working capital.
On the other hand a concern undertaking activities on large scale needs large amount
of working capital.
6. GROWTH AND EXPANSION OF BUSINESS

The growth and expansion of business also affect the working capital
requirement. When there is growth and expansion in the business of a firm the
working capital needs of the firm will also increase.
7. OPERATING EFFICIENCY
The operating efficient of the management is also important determinant of the
level of working capital. A firm enjoying operating efficiency can eliminate wastage
and use its resources efficiently and there by reduce its working capital needs
considerably.
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EXTERNAL FACTORS
1. BUSINESS FLUCTUATION
Business enterprises usually experiences fluctuations in demand for their
products and services because of changes in economic conditions. In view of this,
working capital requirements of these enterprises are affected. Thus, in the event of
economic prosperity, general demand of the goods and service tend to shoot up. To
cope with increased demand and consequently increased production, the firm will
require additional working capital.
2. TECHNOLOGICAL DEVELOPMENTS
Technological developments in the area of production can have sharp effects
on the need for working capital. If a firm switches over to new manufacturing process
and installs new requirements with it is able to cut period involved in converting raw
materials into finished goods, permanent working capital requirements of the firm will
decrease.
3. TRANSPORT AND COMMUNICATION DEVELOPMENTS

Where the means of transports and communication in a country are not well
developed, industries may need additional funds to maintain big inventory of raw
materials and other accessories which would otherwise not be needed where the
transport and communications systems are highly developed.
4. IMPORT POLICY
Import policy of the government may also have its bearing on the levels of
working capital of the enterprises since they have to arrange funds for importing
goods at specified times.
5. TAXATION POLICY
Working capital needs of business enterprises are affected sharply by taxation
policy of the government. In the event of regressive taxation policy of the
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government, as it exists today in India, imposing heavy tax burdens on business

enterprises leaves very little profits for distribution and retention purposes.
SOURCES OF WORKING CAPITAL

Among the various sources available for financing working capital needs finance
manager has to select the best suitable source depending on working capital need of
company.
SOURCES OF WORKING CAPITAL
Long term sources
Internal sources
short term sources
External sources
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With drawing the
Bank
Depreciation fund
Trade redit
Using the renouncement
Bills of
For taxation
exchange
Postponement of payment
Accrued expenses
Govt.
assistance
Public deposits
The need of working capital is increased by raising prices of end products and
relative inputs. On the other hand the government and monetary authorities play their
own role to caurd the malice in periods of inflation. The control measures often take
the firm of dear money policy and restriction credit. Financing of additional working
capital in such an amusement becomes a real problem to finance manager of a
concerned unit. Commercial banks play the most significant role in providing working
capital finance, particularly in Indians context. In view of mounting inflation, the
R.B.I has taken up certain social measures to check the money supply in the economy.
The balancing need bas to be managed either by long-term borrowings of by issuing
equity or by earning sufficient profits and retaining the same of coping with the
additional working capital requirements. The first choice before a finance manager,
where banks do not provide a part of additional working capital, is to take the longterm sources of finance.
LONG TERM FINANCING

Loans from financial institution the option is normally rules out, because
financial institution don not provide finance for working capital requirements. Further
this facility is not available to all companies this option is not practical.
FLOATING OF DEBENTURES:
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The profitability of a successful floating of dentures seems to be rather

merging. In Indian capital market, floating of debentures has still to gain popularly
debentures issues of companies in private sector not associated with certain reputed
groups generally failed to attract investors to invest their funds in companies. In this
context the mode of raising funds by issuing convertible debentures/bonds is also
gaining.
ACCEPTING PUBLIC DEPOSITS

The issue of tapping deposits is directly to the image of the company seeking
to invite public deposits.
ISSUE OF SHARES
With a view of financing additional capital needs, issue of additional equity
share could be considered. Many Indian company have still to go ahead to command
respect of investoin the context low profit margin as well as lack of knowledge about
company make the success of a capital issue very dim.
RAISING FUNDS BY INTERNAL FINANCING

Raising funds from operational profit poses problems for many companies,
because price of their end products are controlled and do not permit companies to
earn profit sufficient requirements to finance additional working assets, still a largely
feasible solution lies in increase profitability through cost control and cost reduction
measures managing the cash operating cycle, rationalizing inventory stock and so on
PROBLEMS ASSOCIATED WITH EXCESS & IN ADEQUATE

WORKING CAPITAL
DANGERS OF EXCESS WORKING CAPITA
1. It results in unnecessary accumulation of inventories. Thus the changes of
inventory mishandling, the losses increase.
2. It is an indication of defective credit policy and stock collection period.
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3. Excessive working capital makes management compliment, which degenerates

into managerial efficiency.
4. Tendencies of accumulating to make speculative profits grow. This may
tend to make dividend policy liberal and difficult to cope with in future when
the firm is unable to make speculation profits.
DANGERS IN INDADEQUATE WORING CAPITA

1. It strategies growth. It becomes difficult to undertake profitable project due to
non-availability of the working capital funds.
2. It becomes difficult to implement operating plans and achieve the firms profit
target.
3. Operating inefficiencies creep in when it becomes difficult even to meet dayto-day commitments.
4. Fixed assets are not efficiently utilized for the working capital funds. Thus, the
rate of return on, investment slumps.
5. Paucity of working capital funds renders the firm unable to avail of attractive
credit opportunities etc.
6. The firm losses it reputation when it is not in a position to turnover short-term
obligation.
2.3 METHODS OF WORKINGCAPITEL

Three widely used methods for determining working capital requirements of a firm
are:
Percentage of sales method
Regression analysis method
Operating cycle method
1. PERCENTAGE OF SALES METHOD

In this method, level of working capital requirements is decided on the basis of
past experience. The past relationship between sales and working capital is taken as a
base for determining the size of working capital requirements for future. It is,
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however, presumed that that the relationship between sales and working capital that
has existed in the past has been stable.
Percentage of sales method is a simple and easily understood method and
practically used for ascertaining short-term changes in working capital in future.
However this method lacks reliability inasmuch as its basic assumption of linear
relationship between sales and working capital does not hold true in all the cases. As
such, this method cannot be recommended for universal application.
2. REGRESSION ANALYSIS METHOD

This is a statistical method of determining working capital requirements by
establishing the average relationship between sales and working capital and its
various components in the past years. In this regard the method of least squares is
employed and the relationship between sales and working capital is expressed by the
equation.
Y=Na+bx
XY=ax+bx2
Y=a+bx
The values of a and b is obtained by the solution of simultaneous linear equations
given as under:
Where a = fixed component
B = variable component
X = sales
Y = inventory
N = number of observation
3. OPERATING CYCLE AND CASH CYCLE

Investment in working capital is influenced by four key events in the
production and sales cycle of the firm:
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Purchase of raw materials
Payment of raw materials
Sale of finished goods
Collection of cash for sales
The firm begins with the purchase of raw material, which are paid for after a
delay, which represents the account payable period. The firm converts the raw
materials into finished goods and then sells the same. The time lag between the
purchase of raw materials and sale of finished goods is the Inventory period.
The period that comes between the date of sales and the date of collection of
receivable
is the accounts payable period (debt period). The time that comes
between the purchase of raw materials and the collection of cash for sales is referred
to as the operating cycle, whereas, the time length between the payment of raw
material purchases and the collection of cash for sales is referred to as the cash cycle.
The operating cycle is the sum of the inventory period and the account
receivable period where as the cash cycle is equal to the operating cycle less the
account payable period.
From the financial statements of the firm, we can estimate the inventory
period, the account receivable and the account payable period.
According to this approach, size of working capital requirements of a firm is
determined by multiplying the duration of the operating cycle by cost of operations.
The duration of the operating cycle may be found with the help of the following
formula:
O=R+W+F+A-P
Where, O = Duration of operating cycle
R = Duration of raw materials
W = Duration of work-in-progress
F = Duration of finished goods
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A = Duration of accounts receivable

P = Duration of accounts payable
Duration of raw materials

It reflects the number of days for which raw materials remain in inventory
before they are issued for production. The following formula can be used to determine
duration of raw materials.
Average stock of raw material
Raw material storage period(R) =
Average daily consumption of raw material
Duration of the work-in-progress

In denotes the number of days required in the work-in-process stage. It may be
ascertained with the help of the following formula:
Average stock of work- in- progress
Work-in-progress period (or) conversion period (W) =
Average daily cost of production
Duration of finished goods

It refers to the number of days for which finished goods remain in inventory
before they are sold. This can be computed by the following formula:
Average stock of finished goods
Finished goods storage period (F) =
Average daily cost of sales
Duration of the accounts receivable
Page 25

It represents the number of days required to collect the accounts receivable.

This may be calculated as under:
Average accounts receivables
Average collection period (A) =
Average daily credit sales
Duration of accounts payable

It refers to the number of days for which the suppliers of raw materials offer
credit. This may be measured with the help of the following formula:
Average trade creditors
Average payment period (P) =
Average daily credit purchases
OPERATING CYCLES
TRADER
CASH
DEBTORS
FINISHING GOODS
Page 26

FINANCIAL
INSTITUTIONS
CASH
DEBTORS
MANUFACTURER
CASH
DEBTORS
FINISHED GOODS
RAWMATERIALS
WORK IN PROGRESS
2.4 OTHERS
TANDON COMMITTEE REPORT
Reserve Bank of India set up a committee under the chairmanship of shri P.L.
Tendon in July 1974. The terms of reference of the committee were:
Page 27

To suggest guidelines for commercial banks to follow up and supervise credit

from the point of view of ensuring proper end use of funds and keeping a
watch on the safety of advances.
To suggest the type of operational data and other information that may be
obtained by banks periodically from the borrowers and by the reserve bank of
India from the leading banks.
To make suggestions for prescribing inventory norms for the different
industries, both in the private and public sectors and indicate the broad criteria
for deviating from these norms.
To make recommendations regarding resources for financing the minimum
working capital requirements.
To suggest criteria regarding satisfactory capital structure and sound financial
basis in relation to borrowings.
To make recommendations as to whether the existing pattern of financing
working capital requirements by cash credit/overdraft system etc., requires to
be modified, if so, to suggest suitable modifications.
RECEIVABLES MANAGEMENT
Finished goods sold on credit get converted (from the point of view of the
selling firm) into receivables (book debts) which realized generate cash. The average
balance in the receivable account would approximately be average daily credit sales
multiplied by average collection period.
OBJECTIVES OF RECEIVABLE MANAGEMENT

The main objectives of receivable management are:
To obtain the optimum value of sales.
To control the cost of credit and keep it at minimum.
To reduce the average collection period.
ASPECTS OF RECEIVABLE MANAGEMENT
Page 28

Determining the credit policy.

Determining the credit terms.
Evaluating the credit applications.
Determining collection policies of receivables.
DETERMINING CREDIT POLICY

The first decision area of receivable management is determining credit policy. In
developing an optimum credit policy, the financial manager should compare the
benefits of credit extension with the cost of credit. The major considerations in costs
are liquidity and opportunity cost. The credit policy of a firm provides the frame work
to determine.
Whether or not extent to a customer.
How much credit to extend.
INVENTORY MANAGEMENT
Inventory management involves the control of assets being produced for the
purpose of sale in the normal course of companys operations. Inventories include raw
material inventory, work-in-progress inventory and finished goods inventory. The goal
of effective inventory management is to minimize the total costs direct and indirect
those are associated with holding inventories. However the importance of inventory
depends on the extent or investment inventory.
ROLE IN WORKING CAPITAL

Inventories are components of the firms working capital, as such, represent
current assets. Some characteristics are important in the broad context of working
capital management including.
Current assets
Level of liquidity
Liquidity lags
1) CURRENT ASSETS
Page 29

It is assumed that inventories will be converted to cash in the current

accounting cycle, which is normally, one year.
2) LEVEL OF LIQUIDITY
Inventories are viewed as a source of near cash. At the same time most firms
hold some slow-moving items that may not be sold for a long time. In this case, the
liquidity aspects of inventories become highly important to the manager of working
capital. At a minimum, the analyst must recognize that inventories are least liquid of
current assets. For firms with highly uncertain operating environments, the analyst
must discount the liquidity value of inventories significantly.
3) LIQUIDITY LAGS
Inventories are tied to the firms pool of working capital in a process that
involves three specific lags namely.
Creation lags.
Storage lags.
Sale lags.
Circulating activity.
CASH MANAGEMENT
Cash is the most important factor in financial management. It is also the most
important of all the current assets, for the operations of the business.
Need for and objective of cash management

Larger cash and bank balances indicating high liquidity position of a company
which will result in lower profitability as idle cash fetches
No return, while the same when invested in the assets of the company will
result in profits. The need for holding cash arises from a variety of reason such as:
Transaction motive
Precautionary motive
Speculation motive
Lack of proper synchronization between cash inflows & cash outflows
Page 30

1) TRANSACTION MOTIVE
A company is always entering in to transactions with other entities, which may
cause immediate cash inflows and out flows. So, firms always keep a certain amount
as cash to deal with routine transactions where immediate cash payment is required.
2) PRECAUTIONARY MOTIVE
A company has to be prepared to meet such contingencies like a sudden fire
may break out, accidents, employees strike etc, to minimize its losses. For this
purpose companies generally maintain some amount in the form of cash.
3) SPECULATION MOTIVE
Firms also maintain cash balance in order to take advantage of opportunities
that do not take place in the course of routine business activities.
4) LACK OF PROPER SYNOCHRONIZATION BETWEEN CASH

INFLOWS & CASH OUTFLOWS
Incase of reasonably well managed profitable companies, that total amount of cash in
flows for the year is usually higher than the total amount of cash out flows. However,
the company can have spells of cash deficits and surpluses mainly due to lack of
synchronization between cash inflows and out flows.
CRITERIA FOR JUDGING THE EFFICIENCY OF WORKING

CAPITAL MANAGEMENT
The efficiency of working capital management can be judged through accounting
ratios. The important accounting ratios that could be used for judging the efficiency
of working capital management are.
Current Ratio
Quick Ratio/acid test ratio/liquid ratio
Cash to current assets
Inventory turnover ration
Working capital turnover ratio
Page 31

MEASURES TO BE ADOPTED FOR A SOUND WORKING

CAPITAL MANAGEMENT
For a sound management of working capital, a concern should adopt the following
measure:
Budget its cash flow
Control its debtors
Control its creditors
Control its stock
Avoid over borrowing
Avoid over investment fixed assets
Determine the financing mix
ACCESSING WORKING CAPITAL REQUIREMENT

Working capital management is the life blood and controlling never center of a
business. No business can successfully run without an adequate amount of Working
capital at once, an estimate Working capital requirements should be made in advance
so that arrangements can be made to procure adequate Working capital.
But
estimation of Working capital requirement is not an easy and large factor have to be
taken into consideration while an estimate of Working capital requirements.
1. Total cost incurred on material, wage and overheads.
2. The length of time for which raw material is to remain is store before they are
issued for production.
3. The length of production cycle or work-in-progress is, the time taken for
conversion for production.
4. The length of sale of cycle during which finished goods are to kept waiting for
sale.
5. The average period of credit allowed to customers.
6. The amount of cash required to pay day-to-day expenses for the business.
7. The average amount of each cash required making advance payment if any.
8. The average credit period expected to allow by suppliers.
9. The lag in the payment of wages and other expenses.
Page 32

From the total amount blocked in current assets estimated on the basis of the
first even items given above the total of current liabilities that is the last two items is
deducted to find out the requirement of working capital. In order to provide for
contingencies, some extra amount generally calculated as a fixed percentage of
working capital can be aided as a margin of study.
TOOLS FOR ANALYSIS OF WORKING CAPITAL

The quantum of working capital as well as its financing pattern is subject to
constant monitoring and reviews by the financial manager. There are different
analytical tools which can help a financial manager in monitoring in viewing and
controlling the working capital. The popularly used tools are:
1. Schedule of changes in working capital
2. Working capital ratios.
1. SCHEDULE OF CHANGES IN WORKING CAPITAL

Generally working capital refers to the excess of current assets over current
liabilities. Management of working capital therefore is concerned with the problems
that arise in attempting to manager the current assets, the current liabilities and the
inter relationship that exists between them. It refers to all aspects of administration of
both current assets and current liabilities.
The basic goal of working capital management is to manage the current assets
and current liabilities of a firm in such a way that a Satisfactory level of working
capital is maintained. The policies of working capital of management of a firm have
an impact on its profitability, liquidity and structural health of the organization.
2. WORKING CAPITAL RATIOS

Another analytical tool that can be used for analyses of working capital the
accounting ratios particularly the working capital ratios. Some of the important
working capital ratios are:
Current Ratio
Quick Ratio
Cash to current assets
Sales to cash
Average collection period
Inventory turnover ratio
Page 33

Working capital to sales rat
CHAPTER-3
RESEARCH METHODOLOGY
3.1NEED FOR THE STUDY
Any organization must have to maintain adequate working capital to meet its
day to day operation. In order to maintain flows of revenues from operation, every
firm need certain amount of current assets. For examples; cash is required to meet
obligations for services received etc. By a firm on identical plan in inventories are
required etc. by a firm on identical plan in inventories are required to provide the line
between production and sales. The study is required to understand the working capital
position in S.S.Dairy Pvt. Ltd.
3.2OBJECTIVES OF THE STUDY

To identify and analyze relationship between working capital, sales, fixed asset to
sales etc.
To suggest measures if any for improving financial performance of company To
examine the turnover of the company
To study changes in working capital position at the organization .
To evaluate the performance of Shiva Shakthi Dairy Pvt.ltd by analyzing the
profitability and liquidity position of the company.
3.3 SCOPE OF THE STUDY

Financial management is that the managerial activity is concerned with the
planning and controlling of the firms financial resources. Though it was a branch of
economics till 1890 as a separate activity or discipline, it is of recent origin. Still it
has no unique body of knowledge of its own and heavily on economics for its
theoretical concepts even today.
The subject of financial is of immense interest to both academician and
practicing managers. It is of great interest of academicians because the subject is still
Page 34

developing and there are still certain areas where controlling exists for which no
unanimous solutions have been reaches as yet.
The present study aims at the following

Highlighting the necessity of current assets and current liabilities.
Explain the principles of current assets, investment and financing.
Focus on the proper mix of short term financing for current assets.
Emphasis the need and goal of establishing a sound credit policy.
Suggest the need of monitoring the receivables.
Highlight the need for holding cash.
Discuss the techniques of preparing cash budget.
Focus on the management of cash collection and disbursement.
3.4 METHODOLOGY OF STUDY

3.4.1RESEARCH DESIGN
STATEMENT OF THE PROBLEM
Management of working capital is an important function of finance of finance
department of a corporate organization .While managing current assets two important
factors that are considered is liquidity and profitability. That excess working capital
results in is undertaken to know to what extend the S.V co operative sugars successful
in trade off liquidity and profitability.
3.4.2DATA SOURCES
The study required both primary and secondary data;
Secondary data
Secondary data was obtained from the past records file and reports of the
organization also from other financial statements. These are sources containing data
which have been collected and compiled for another purpose. The secondary sources
Page 35

consists of readily available compendia and already complied statistical statements

and reports whose data may be used by researches for their studies, e.g., census
reports, annual reports and financial statements of companies, statistical statement,
reports of government departments, annual reports on currency and finance published
by the reserve bank of India, statistical statement relating to co-Operatives and
regional rural banks, published by the NABARD.
3.5LIMITATIONS OF THE STUDY

It is based on the data supplied by the company personnel.
It is based on consultation, decisions of all concerned officials.
Time is the major limitation for the study i.e., study conducted based on the 4
years financial reports. We cant determine the overall financial position of the
company.
.
Page 36

CHAPTER-4
DATA ANALYSIS AND INTERPRETAION
TABLE4.1
SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR
2008-09
( In Rs )
PARTICULARS
2008
2009
Cash and bank balance
5512130
Sundry debtors
Effect of working capital

Increase
Decrease
5801648
289518
******
4801648
4512121
******
289527
Short term loans & advances to employee
1091340
1091318
******
00022
TOTAL CURRENT ASSETS
11405118
11405087
289518
289549
Loans & borrowings
4357212
4575212
******
218000
Employees stat liabilities
4522122
4322122
200000
******
Other non stat liabilities
1894615
1894615
******
******
TOTSSAL CURRENT LIABILITIES (B)
10773949
10791949
200000
218000
631169
613138
489518
507549
CAPITAL
******
18031
18031
******
TOTAL
631169
631169
507549
507549
CURRENT ASSETS:
(A)
CURRENT LIABILITIES:
NET WORKING CAPITAL
(A-B)
NET DECREASE IN WORKING
INTERPRETATION
From the above table no 4.1 it is clearly show that the net working capital
requirement of the company during the year 2009 has Decreased than in the year
Page 37

2008, and the net working capital of the company was recorded Rs.631169 and it was
been Decreased to Rs.613138 in the year 2009.
TABLE4.2
2009-10
( In Rs )
PARTICULARS
2009
2010

Increase
Decrease
CURRENT ASSETS:
5801648
8545512
2740564
******
Sundry debtors
4512121
4432211
******
79910
employees
TOTALCURRENTASSETS (A)
1091318
11405087
948009
13922433
******
2740564
143309
223219
Loans & borrowings
4575212
5421984
******
846772
4322122
3654655
667467
******

TOTAL CURRENT LIABILITIES
1894615
10791949
2929042
12005681
*******
667467
1034427
1881199
(B)
NET WORKING CAPITAL (A-B)
NET INCREASE IN WORKING
613138
1916752
3408031
2104418
CAPITAL
TOTAL
1303614
1916752
*******
1916752
******
3408031
1303614
3408031
Short term loans & advances to
INTERPRETATION
requirement of the company during the year 2010 has increased than in the year 2009,
and the net working capital of the company was recorded Rs.613138 and it was been
increased to Rs.1916752 in the year 2010.
Page 38

TABLE4.3
2010-11
( In Rs )
PARTICULARS
2010
2011
8542212
Sundry debtors

Increase
Decrease
9001221
459009
******
4432211
7246521
2814310
******
948009
13922432
1926193
18173935
978184
4251503
******
0000000
Loans & borrowings
5421984
5243554
178430
******
3654655
4724215
*******
1069560
2929042
4197963
*******
1268924
TOTALCURRENT LIABILITIES
12005681
14165732
178430
2338484
1916752
4008203
4429933
2338484
2091452
4008203
******
4008203
*******
4429933
2091449
4429933
CURRENT ASSETS:

employees
(B)
NET WORKING CAPITAL (A-B)
CAPITAL
TOTAL
INTERPRETATION
Page 39

TABLE4.4
2011-12
( In Rs )
PARTICULARS
2011
2012
9001221
Sundry debtors

Increase
Decrease
9189751
188530
******
7246521
7554321
307800
******
1926193
18173935
3896353
20640425
1970160
2466490
******
000000
Loans & borrowings
5243554
3100242
2143312
******
4724215
2383017
2341198
******

TOTAL CURRENT LIABILITIES (B)
4197963
14165732
1665792
7149051
2532171
7016681
******
000000
NET WORKINGCAPITAL
4008203
13491374
9483171
******
CAPITAL
9483171
******
******
9483171
TOTAL
13491374
13491374
9483171
9483171
CURRENT ASSETS:

employees
(A-B)
INTERPRETATION
From the above table no 4.4 it is clearly show that The net working capital
Page 40

TABLE4.5
2012-13
( In Rs )
PARTICULARS
2012
2013
9189751
589295
******
8600456
Sundry debtors
7554321
523686
******
7030635
employees
3896353
345990
******
3550363
TOTALCURRENT ASSETS (A)
20640425
1458971
000000
19181454
Loans & borrowings
3100242
124980
2975262
******
2383017
98745
2284272
******

TOTALCURRENT LIABILITIES (B)
1665792
7149051
58429
282154
1607363
6866897
******
000000
NET WORKINGCAPITAL(A-B)
13491374
1176817
6866897
19181454
******
12314557
12314557
******
13491374
13491374
19181454
19181454
Increase
Decrease
CURRENT ASSETS:
NET DECREASE IN WORKING

CAPITAL
TOTAL
INTERPRETATION
From the above table no 4.5 it is clearly show that the net working capital requirement
of the company during the year 2013 has Decreased than in the year 2012, and the net
working capital of the company was recorded Rs.13491374 and it was been
Decreased to Rs.1176817 in the year 2013.
Page 41

1. CURRENT RATIO
This ratio is a barometer of general measures of liquidity and state of trading
current ratio shows the firms commitment to meet its shot-term liabilities. It
expresses the relationship between current assets and current liabilities.
Current Assets
Current ratio = _______________________
Current liabilities
TABLE 4.6
Year
Current assets
Current liabilities
Ratio
2008-09
11405087
10791949
1.05
2009-10
13922432
12005681
1.15
2010-11
18173935
14165732
1.28
2011-12
20640425
7149051
2.88
2012-13
1458971
282154
5.17
GRAPH 4.6
INTERPRETATION
From the above graph no 4.6it is clearly show that the Current ratio measures
the firms short-term solvency. The standard norm for current ratio is (2:1). It is
evident that in the year 2009-10and2010-11 Current Ratio is satisfactory.
In
remaining years current ratio is less then 2 is not satisfactory. There fore it can be
calculated that the liquidity performance of the company is poor
Page 42

QUICK RATIO
This ratio is also called as acid test ratio. Quick ratio is the real index of the
liquidity or the short-term solvency of a concern. Quick ratio generally expressed as a
pure, i.e.., as a promotion between quick assets and quick liabilities.
Super Quick assets
Quick ratio = _____________________
Current liabilities
TABLE 4.7
Year
Super Quick assets
Current liabilities
Ratio
2008-09
2009-10
2010-11
2011-12
2012-13
5801648
8542212
9001221
9189751
589295
10791949
12005681
14165732
7149051
282154
0.53
0.71
0.63
1.28
2.08
GRAPH 4.7
INTERPRETATION
From the above graph no 4.7it is clearly show that is the more penetrating test
of liquidity than the current ratio. Generally a quick ratio is 1:1 it considered to
represent a satisfactory current financial condition.
The quick ratio has never
exceeded the standard ratio. Empirically the quick ratio in the year 2009-10 to 201011 satisfactory. In remaining years quick ratio is less then 1 is not satisfactory. There
fore it can be calculated that the liquidity performance of the company is poor.
CASH TO CURRENT ASSETS RATIO:

Page 43

Cash is important and sensitive current assets. It is viewed as the most liquid assets.
When the proportion of cash in current assents is more then it is said that the company
had more liquid. High proportion of cash in current assets also indicates the good
stock in receivables. This ratio indicates the cash proportion in current assets.
Cash ratio = _______________________
Current liabilities
TABLE 4.8
Year
2008-09
2009-10
2010-11
2011-12
2012-13

5801648
8545512
9001221
9189751
589295
Current liabilities
10791949
12005681
14165732
7149051
1176817
Ratio
0.53
0.71
0.63
1.28
0.50
GRAPH 4.8
INTERPRETATION
From the above graph no 4.8 it is clearly show that the desirable norm for cash
ratio is 1:2. The cash ratio is very low in 2009-10 year. There after it is increased
slightly on the years 2006-07 to 2007-08 respectively and declined in 2008-09 and
2010-11. Anyway finally the company failed in keeping sufficient cash and bank
balance and marketable securities.
NET WORKING CAPITAL RATIO:

The difference between current assets and current liabilities excluding short
term bank borrowing is called net working capital it is sometimes used as a measure
Page 44

of a firms liquidity. It is considered that between two firms the one have a largest
networking capital bas the greater than liability to meet its current obligations.
Net working capital
Net working capital =
Net assets
TABLE 4.9
Year
Net Working capital
Net assets
Ratio
2008-09
613138
94930352
3.45
2009-10
1916752
8837584
0.21
2010-11
4008203
8845519
0.45
2011-12
13491374
19921649
0.67
2012-13
1176817
21275690
0.05
GRAPH 4.9
INTERPRETATION
From the above graph no 4.9it is clearly show that the inferred from the above table
that the net working capital is decreasing every year which shows the ideal funds are
used for most productive purpose and company continues doing it.
WORKING CAPITAL TURNOVER RATIO:
Page 45

This ratio is also known as Sales to Working Capital. It shows the number of
times working capital is turned-over in a stated period. The higher is the ratio, the
lower is the investment in working capital and the greater are the profits. It is
calculated as follows.
WorkingCapitalTurnover Ratio
Sales
Net WorkingCapital
TABLE 4.10
YEAR
2008-09
2009-10
2010-11
2011-12
2012-13
GRAPH 4.10
SALES
6579980
13776540
8012850
7731472
7496210
NET WORKING CAPITAL

613138
1916752
4008203
13491374
1176817
RATIO
10.73
7.18
1.99
0.57
6.36
INTERPRETATION
From the above graph no 4.10 it is clearly show that the ratio measures the
relationship between sales and net working capital. In the years2007-08, 2009-10 and
2010-11 recorded as the highest working capital turnover ratio respectively. In the
year 2009-10 and 2010-11 recorded as the lowest working capital turnover ratio. The
higher indicates more favorable it is for the company. In S.S.Dairy is highly
fluctuating in the ratios.
INVENTORY TURNOVER RATIO:
Page 46

Inventory turnover ratio indicates the efficiency of the firm in producing and
selling its product. It is calculated by dividing the cost of goods sold by the average
inventory or sales by inventories.
Net Sales
Inventory turnover ratio = ________________________
Average Inventory
TABLE4.11
Year
Net Sales
Average inventory
Ratios
2008-09
6579980
19554635
0.33
2009-10
13776540
2781570
4.92
2010-11
8012850
2141365
3.74
2011-12
7731472
1038709
7.44
2012-13
7496210
855241
8.76
GRAPH 4.11
INTERPRETATION
From the above graph no 4.11it is clearly show that the inventory turnover
ratio indicates the efficiency of the firm in producing and selling its products. A low
inventory turnover implies excessive inventory levels than required for production.
From The company inventory turnover ratio is in decreasing 2008-09 and 2012-13 is
increased.
Page 47

CHAPTER-5
FINDINGS, SUGGESTIONS & CONCLUSION
FINDINGS
The Company is suffering from lack of adequate working capital.
The Company is using Current Assets and Fixed Assets well.
The Company has maintained relationship between Working Capital and Sales.
The desirable norm for cash ratio is 1:2. The cash ratio is very low in 2009-10
year.
The inventory turnover was at fluctuating condition
The net working capital is decreasing every year which shows the ideal funds
are used for most productive purpose and company continues doing it.
Page 48

SUGGESTIONS
Working Capital is decreasing Year by Year so adequate Working capital has
to be maintained.
The Turnover Ratio was fluctuating so the Company must detect the cause for
that and solve it.
The concern must try to generate profits by maintain or combination of
variations of sales prices and costs..
The working capital turnover ratio gradually decreased year by year. So the
company investment in working capital is more.
Company should make efforts to utilize its fixed assets in an optimum manner.
Page 49

CONCLUSION
Finally I conclude saying that the liquidity position is satisfactory,
performance of the company is satisfactory but still needs to cut down or reduce the
expenses to earn more net profits and see that turnover ratios are increased so that it
can enjoy reduce in non operating cost, due to large scale production and results in
increase in profits. Working capital is in fluctuating trend so the company must
maintain adequate working capital.
It must try to maintain its liquidity properly.
The firm must strive to improve its sales.
By following the above steps, he firm will become a more profitable and
reliable business.
Page 50

Annual reports of the company:-
Particulars
amount
Particulars
Amount
To Opening stock
1061067
By Sale of milk
3436700
To Purchase of milk products

To Transport charges
To Packing material
To Processing and conversion
To Shares consumed
To Gross profit
1382998
857491
472920
769820
628297
4257247
9429840
226950
192321
258929
236281
183699
148329
448496
238294
4313521
6246820
By Sale of milk products

By Closing stock
3143280
2849860
By Gross profit
9429840
4257247
1989573
To Salaries & wages

To Depreciation
TO Interest on loan
To Insurance charges
To Travelling and conveyance
To Advertisement
To Milk payments
To Selling and distribution
To Net profit
By Other incomes
6246820
SHIVASHAKTHI DAIRY PVT

TRADING AND PROFIT&LOSS A/C FOR THE YEAR ENDED 31st-03-2009
SHIVA SHAKTI DAIRY PVT.LTD
BALANCE SHEET AS AT 31st MARCH 2009
Particulars
31.03.2009 31.03.2008
Page 51

sources of Funds:
1.share holder funds:
equity share capital
share advance
Add: profit & loss A/c
2.Loan funds:
secured loans
unsecured loans
TOTAL:
application of funds:
3.fixed assets
gross block
Add: additions during the year
Less: accumulated dep.
Net Block
4.current assets:
Sundry debtors
Short term loans & advances to employees
Less: current liabilities:
Loans & borrowings
Other current liabilities
Net current assets
5.miscellaneous
expenditure:
profit & loss A/c
TOTAL
3138642
1794637
4313521
9245800
5892421
4113048
000000
10005469
000000
184552
9430352
282720
194242
10482431
16431124
11783959
19397869
8817214
5801648
4512121
1091318
4575212
4322122
1894615
613138
4559280
2545171
102490
7001961
5512130
4801648
1091340
4357212
4522122
1894615
631169
000000
2849301
94930352
10482431
SHIVASHAKTHI DAIRY PVT.LTD.

TRADING AND PROFIT&LOSS A/C FOR THE YEAR ENDED 31st-03-2010
Page 52

Particulars
Amount
Particulars
Amount
To Opening stock
To Packing material
To Processing and
2849860
2729210
1229211
728500
1098256
957893
6896890
16489820
1595820
629621
789987
598920
942875
791357
5298285
1598285
875992
2246039
8576898
By Sale of milk of milk

By Sale of milk
8298290
5478250
2713280
conversion
To Shares consumed
To Gross profit
To Salaries & wages
To Depreciation
TO Interest on loan
To Other expenses
To Travelling and
conveyance
To Advertisement
To Milk payments
To Net profit
products
By Closing stock
By Gross profit
By Other incomes
16489820
6896890
1680008
8576898

Page 53

Particulars
31.03.2010
31.03.2009
3620300
3138642
share advance
2879461
1794637
2246039
4313521
8745800
9245800
secured loans
00000
00000
unsecured loans
91784
184552
TOTAL
8837584
9430352
gross block
6460087
16431124
2472088
11783959
2011342
19397869
Net Block
6920833
8817214
8542212
5801648
Sundry debtors
4432211
4512121
948009
1091318
Loans & borrowings
5421984
4575212
Employees state liabilities
3654655
4322122
2929042
1894615
Net current assets
1916751
613138
profit & loss A/c
00000
00000
TOTAL
8837584
94930352
sources of Funds:
2.Loan funds:
3.fixed assets
4.current assets:
5.miscellaneous expenditure:

TRADING AND PROFIT&LOSS A/C FOR THE YEAR ENDED 31-12-2011
Page 54

Particulars
Amount
Particulars
Amount
To Opening stock
2713280
4892450

To Packing material
To Shares consumed
To Gross profit
729290
250800
495000
175184
325876
4892870
9582300
1123945
252588
799867
595298
725790
452000
1687260
878970
297292
443780
7256790

By Closing stock
3120400
1569450
By Gross profit
9582300
4892870
2363920
To Salaries & wages

To Depreciation
TO Interest on loan
To Advertisement
To Milk payments
To Other expenses
To Net profit
By Other incomes
7256790

Page 55

Particulars
Source of Funds
share advance
2.Loan funds:
31.03.2011
31.03.2010
3529120
3620300
4772900
2879461
443780
2246039
8745800
8745800
00000
00000
99719
91784
8845519
8837584
18565780
6460087
7394564
2472088
21123028
2011342
4837316
6920833
9001221
8542212
7246521
4432211
1926193
948009
5243554
5421984
4724215
3654655
4197963
2929042
4008203
1916751
00000
00000
8845519
8837584
secured loans
unsecured loans
TOTAL:
3.fixed assets:
gross block
Net Block
4.current assets:
Sundry debtors
Loans & borrowings
Other current liabilities
Net current assets
5.miscellaneous
expenditure:
profit & loss A/c
TOTAL

TRADING AND PROFIT&LOSS A/C FOR THE YEAR ENDED 31-12-2012
Page 56

Particulars
Amount
Particulars
Amount
To Opening stock
1569450
4278900

To Packing material
To Shares consumed
To Gross profit
897480
345210
399895
325602
422403
4279400
8239440
948996
598865
759230
259686
789200
498967
1678560
590872
475622
274502
6874500

By Closing stock
3452572
507968
By Gross profit
8239440
4279400
2595100
To Salaries & wages

To Depreciation
TO Interest on loan
To Communication
To Advertisement
To Milk payments
To Other expenses
To Net profit
By Other incomes
6874500

Page 57

Particulars
31.03.2012
31.03.2011
sources of Funds:
3620300
3529120
share advance
5125500
4772900
274502
443780
2.Loan funds:
9020302
8745800
secured loans
9771572
00000
unsecured loans
1129775
99719
TOTAL:
19921649
8845519
gross block
25516561
18565780
3053897
7394564
22140183
21123028
Net Block
6430275
4837316
9189751
9001221
Sundry debtors
7554321
7246521
3896353
1926193
Loans & borrowings
3100242
5243554
2383017
4724215
Other non stat liability
1665792
4197963
Net current assets
13491374
4008203
profit & loss A/c
00000
00000
TOTAL
19921649
8845519
3.fixed assets
4.current assets:
5.miscellaneous
expenditure:

TRADING AND PROFIT & LOSS A/C FOR THE YEAR ENDED 31st-03-2013
Page 58

Particulars
Amount
Particulars
Amount
To Opening stock
507968
4596330

To Packing material
To Shares consumed
To Utilities
To Gross profit
999470
398740
352020
498060
722110
292076
4928280
8698724
1172440
325742
442580
442820
1685892
272390
490704
2246039
7458450

By Closing stock
2899880
1202514
By Gross profit
8698724
4928280
2530170
To Salaries & wages

To Depreciation
To Selling & distribution
To Milk payments
To Advertisement
To Other expenses
To Net profit
By Other incomes
7458450

Page 59

Particulars
31.03.2012
31.03.2011
sources of Funds:
5684221
3620300
share advance
4001352
5125500
2246039
274502
2.Loan funds:
11931612
9020302
secured loans
6771572
9771572
unsecured loans
2572506
1129775
TOTAL:
21275690
19921649
gross block
46245621
25516561
32456120
3053897
58602868
22140183
Net Block
20098873
6430275
589295
9189751
Sundry debtors
523686
7554321
345990
3896353
Loans & borrowings
124980
3100242
98745
2383017
Other non stat liability
58429
1665792
Net current assets
1176817
13491374
profit & loss A/c
000000
000000
TOTAL
21275690
19921649
3.fixed assets
4.current assets:
5.miscellaneous
expenditure:
BIBLIOGRAPHY
S.No
Title
Name of the author
Publishing & Edition
Page 60

1.
Financial Management
I.M.Pandy
Vikas publishing
7th edition
2.
Financial Management,
Khan M.Y& Jain.
P.K Tata Mcgraw-hill

2nd edition
3.
Research Methodology
Maheswari S.N
Wishwa Prakasham
2nd edition
4.
Financial Management
Prasanna Chandra
Tata McGraw-hill
Publishing 3rd edition
5.
Annual reports of Shivashakthi dairy pvt.ltd.
Websites:
www.sivashakthi dairy.com
www.google .com
Page 61

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WORKING CAPITAL MANAGEMENT

SHIVASHAKTHI DAIRY Pvt.Ltd.

B.T P.G College, MADANAPALLE

WORKING CAPITAL MANAGEMENT

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B.T P.G College, MADANAPALLE

WORKING CAPITAL MANAGEMENT

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B.T P.G College, MADANAPALLE

WORKING CAPITAL MANAGEMENT

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B.T P.G College, MADANAPALLE

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B.T P.G College, MADANAPALLE

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B.T P.G College, MADANAPALLE

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B.T P.G College, MADANAPALLE

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WORKING CAPITAL MANAGEMENT

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WORKING CAPITAL MANAGEMENT

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B. Net working capital

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WORKING CAPITAL MANAGEMENT

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WORKING CAPITAL MANAGEMENT

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2.2NEEDS AND IMPORTANCE OF WORKING CAPITAL

WORKING CAPITAL MANAGEMENT

VARIOUS NEEDS OF WORKING CAPITAL IS AS FOLLOWS

DETERMINANTES OF WORKING CAPITAL OR FACTORS

B.T P.G College, MADANAPALLE

WORKING CAPITAL MANAGEMENT

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WORKING CAPITAL MANAGEMENT

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B.T P.G College, MADANAPALLE

WORKING CAPITAL MANAGEMENT

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