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A Project Report

On

Study of working capital management at

KRISHAK BHARTI COOPERATIVE LIMITED, SURAT

By

Archana Sahu

Submitted to

University ofPune

In partial fulfillment of the requirement for the award of the degree of

Master ofBusiness Administration (MBA)

Through

MBA Department

Matrix Educational Foundations

Matrix School of Management Studies

Pune-41 (2012-2014)


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A CKNOWLED GEMEN T

I am highly indebted to KRISHAK BHARTI COOPERATIVE LIMITED for giving me this

opportunity to do my internship project in their esteemed organization. It has contributed

immensely to my learning.

I would like to thank my external guide Mr. G. P. Rao for giving me the required

support in completing my project.

My profound gratitude towards our Director , Dr. Satish S. Ubale for giving me valuable

guidance, suggestions and advice without which this project could not have been completed.

I would also like to thank my internal guide Prof. Dipak Vakrani for giving me the

necessary insight into my study.

Name of the StudentArchana Sahu


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DECLARATION

I hereby declare that the project titled STUDY OF WORKING CAPITAL MANAGEMENT

AT KRIBCO LTD. is an original piece of research work carried out by me under the guidance

ofProf. Dipak Vakrani . The information has been collected from genuine & authentic sources.

The work has been submitted in partial fulfillment of the requirement of degree of Master of

Business Administration to University of Pune.

Date: 2013

Place: Pune ARCHAN SAHU


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CERTIFICATE FROM THE ORGANIZATION


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INDEX

Acknowledgement

Contents

I

ii

List of Tables

List of Figures

iii

iv

List of abbreviations

Executive Summary

v

Chapter 1 Introduction 1

Chapter 2 Company Profile 5

Chapter 3 Research Methodology 11

Chapter 4 Theoretical Background 16

Chapter 5 Data Analysis and Interpretation 45

Chapter 6

Chapter 7

Findings and Recommendations

Conclusion

59

Bibliography

Appendix I Questionnaire


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List of Tables

Sr. No. Title Pg. No.

1 Current asset and Current liabilities2 Net working Capital


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EXECUTIVE SUMMARY

Title of the study: Study of working capital management

As a part of curriculum, every student studying MBA has to undertake a project on a particular

subject assigned to him/her. Accordingly I have been assigned the project work on the study of

working capital management in Krishak Bharti Cooperative Limited.

Decisions relating to working capital (Current assets-Current liabilities) and short term financing

are known as working capital management. It involves the relationship between a firms short-

term assets and its short term liabilities.

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

operation and that it has sufficient cash flow to satisfy both maturing short term debt and

upcoming operational expenses.

Working capital is used in KRIBHCO Ltd., for the following purpose:-

Raw material, work in progress, finished goods, inventories, sundry debtors, and day to day cash

requirements. The KRIBHCO Ltd., keep certain funds which is automatically available to

finance the current assets requirements.

The various information regarding Working Capital Management such as classification,

determinants, sources have been discussed relating to KRIBHCO Ltd.,

At KRIBHCO Ltd., the working capital management has shown decrease in the period of study.

This shows working capital is managed effectively and all the other departments are working in

perfect co-ordination to ensure the progress of KRIBHCO Ltd., but I have given some

Suggestions & Conclusions on the basis of my Project Study.

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INTRODUCTION

A study of working capital is of major importance to internal and external analysis, because of

its close relationship with current day to day operations of a business.

The nature of working capital is described by the operating cycle of the firm. The process of

cash or operation cycle starts when a firm uses cash to purchase raw material pay for other

manufacturing costs to produce goods. When goods are sold, either cash is received or accounts

receivables are created. Accounts receivables are collected from debtors. This brings cash into

the firm. Thus, the cash cycle is complete and a new process of cash starts over again. These

processes are described as circulating nature of current assets. The speed of circulation of

working capital is an indicator of the degree of the efficiency of the management.

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

liabilities in such a way that a satisfactory level of working capital is mentioned. The

interaction between current assets and current liabilities is the main theme of the theory of

working capital management.

Effective financial management is the outcome, among other things, of proper management of

investment of funds in business. Funds can be invested for permanent or long-term purposes

such as acquisition of fixed assets, diversification and expansion of business, renovation or

modernization of plants & machinery, and research & development.

Funds are also needed for short-term purposes, that is, for current operations of the business. For

example, if you are managing a manufacturing unit you will have to arrange for procurement of

raw material, payment of wages to your workmen and for meeting routine expenses. All the

goods, which are manufactured in a given time period may not be sold in that period. Hence,

some goods remain in stock, e.g., raw material, semi-finished (manufacturing -in-process) goods

and finished marketable goods. Funds are thus blocked in different types of inventory. Again, the

whole of the stock of finished goods may not be sold against ready cash; some of it may be soldon credit. The credit sales also involve blocking of funds with debtors till cash is received or the

bills are cleared.

Working capital refers to that part of the firms capital which is required for financing short-

term or current assets such as cash, marketable securities, debtors & inventories. Funds, thus,

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invested in current assets keep revolving fast and are being constantly converted in to cash and

this cash flows out again in exchange for other current assets. Hence, it is also known as

revolving or circulating capital or short term capital. Working capital management is concerned

with the problems arise in attempting to manage the current assets, the current liabilities and the

inter relationship that exist between them. The term current assets refers to those assets which in

ordinary course of business can be, or, will be, turned in to cash within one year without

undergoing a diminution in value and without disrupting the operation of the firm. The major

current assets are cash, marketable securities, account receivable and inventory. Current

liabilities ware those liabilities which intended at there inception to be paid in ordinary course of

business, within a year, out of the current assets or earnings of the concern. The basic current

liabilities are account payable, bill payable, bank over-draft, and outstanding expenses. The goal

of working capital management is to manage the firms current assets and current liabilities in

such way that the satisfactory level of working capital is mentioned.

Working capital refers to the capital required for day to day operations of business enterprises.

It is represented by excess of current assets over current liabilities. It is necessary for any

organization to run successfully its affairs, to provide for adequate working capital. Moreover,

the management should also pay due attention in exercising proper control over working

capital. It has been observed by Scull and Haley that managing current assets require more

attention than managing plant and equipment expenditure. Mismanagement of current assets

can be costly. Too large an investment in current assets means tying up capital that can be used

productively large elsewhere. On other hand, too little investment can also be expensive.

Hence working capital management has become a key factor in the KRIBCO ltd. In this regard a

study ofImpact of Working Capital Management on Profitability is undertaken by me as

a researcher

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COMPANY PROFILE

Krishak Bharati Cooperative Ltd. (KRIBHCO) is a Multi-state Cooperative Society

registered under the Multi-State Cooperative Societies (MSCS) Act, 2002 (39 of 2002) and is a

fertilizer production unit in the Cooperative Sector and as per item 5 of Schedule II to Rule 3 of

the Government of India (Allocation of Business) Rules is under the administrative responsibility

of the Department of Fertilizers. KRIBHCO is primarily a fertilizer production cooperative

having production unit at Hazira (Surat) in the state of Gujarat. The capacity of the plant is being

revamped to produce additional 4.65 Lakh MT of Urea.The total Urea production capacity shall

be 21.65 Lakh MT of Urea after revamp.

KRIBHCO had also entered into Logistics Business, Oman India Fertilizer Complex (OMIFCO),

Diversification into Power Sector, Insurance Sector etc. OMIFCO is the first overseas JV project

of the company in which KRIBHCO holds 25 % equity. Besides, KRIBHCO has also made

realignment in its corporate strategy and internal operations revamping to meet the challenges in

the liberalized/globalized economy. Illustration for this is turn-around of loss making Krishak

Bharati Seva Kendra (KBSKs) and Seed Processing Units (SPUs) into profit centers.

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Marketing Division of the society, besides marketing about 18.00 Lakhs MT of urea produced

annually at our plant in HAZIRA since commencement of production in 1986, is also handling

and marketing about 10.00 Lakhs MT of Urea produced by OMIFCO ( KRIBHCO is one of the

promoter of the company) annually since 2005-06. In 2006, KRIBHCO also acquired Sahajanpur

Fertiliser Complex through its joint venture company KSFL (KRIBHCO holds 85% of the sharein the JV), and about 10.00 Lakhs MT of urea produced annually by this plant is being marketed

by KRIBHCO since 2006. At present KRIBHCO is marketing about 38.00 Lakhs MT of urea

annually which is about 14% of the total urea consumption of the country. The marketing

division of the society is fully geared up to market the likely additional quantities of about 5.00

Lakhs MT of urea from next year after revamp of our plant at HAZIRA.

The operation of fertilizer industry particularly indigenous manufacturers changed significantly

on implementation of NPS-stage III policy and implementation of NBS (from 01-04-2010). In

Light of conducive and stable policy frame work, KRIBHCO is perusing import and marketing

of other fertiliser material like DAP and MOP. The Society plans to import and market about

4.00 Lakhs MT of DAP during 2010-11. Society is planning to increase import of DAP and

MOP to about 9.00 Lakhs MT annually in next 3 years.

Keeping in view importance of the Quality Seeds in enhancing the agricultural production,

KRIBHCO initiated Seed Multiplication Programme in the year 1990-91 to provide quality seeds

of the crops and varieties of Public Hybrid (Public Varieties) to the farmers through KBSKs in

the State of UP, Punjab and Haryana. Encouraging response of farmers towards KRIBHCO Seed

has prompted the Society to expand its activities in 6 States and have 14 production units. The

Society stepped up production programme from 2926 Qtls. in 1991-92 to 2.29 lakh Qtls. in 2009-

10. KRIBHCO has plan to almost double the certified seed production and marketing in next 3-5

years.

To promote the organic agriculture in the country, Government has initiated several initiatives

like promotion of use of bio-fertilisers, bio-compost etc. KRIBHCO has been promoting the use

of bio-fertilisers since many years. The society has three units to manufacture bio-fertilisers at

Hazira (Gujarat), Varanasi (Uttar Pradesh) and Lanjha (Maharashtra). All four popular bio-

fertilisers i.e Rhizobium, Azotobactor, Azossprillium and Phosphate Soluable are produced and

marketed by KRIBHCO. The Society has plans to sell around 1000 MT of bio-fertilisers during

2010-2011, which is likely to increase to about 1200 MT in next 3-5 years.Organic Agriculture has emerged as a feasible option to concern relating to land degradations.

As per the GOI directives, all fertiliser suppliers are expected to promote the use of Bio-Compost

by involving actively in the marketing of the product. KRIBHCO has sufficient human resources

and credible brand image to market Bio-compost. This will also help the society to generate

additional margins. During the year 2010-2011 we plans to market about 19,000 MT of bio-

compost which is expected to increase to about 50,000 MT in next 3 years.

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In a nut shell KRIBHCO, worlds premier fertilizer producing cooperative has an outstanding

track record to its credit in all spheres of its activities. KRIBHCO has fully imbibed the

cooperative philosophy and has made sustained efforts towards promoting the cause of modern

agriculture and cooperatives in the country. Kribhco stands for commitment sincerity and high

standards of excellence. In our endeavor towards achieving our goals we are impelled by theideals set by our predecessors and the devotion and dedication of our employees.

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Vision

To become a world class organization that represents the farmer community and maximizes their

returns through specialization in agricultural inputs, rural need based products and other

diversified businesses that maximize stakeholders value.

Mission

To act as a catalyst to agricultural and rural development by selecting, financing and managing

projects that are both socially desirable and commercially profitable.

Objectives

1. To strengthen cooperative system

2. To enhance the urea installed capacity and increasing its market share

3. To ensure optimum utilization of existing plant and machinery

4. To diversify into other core sectors like Power, Port, Infrastructure, Rural Retail, etc

5. Transfer of technology for modern farming and improving farmers'livelihood

6. To educate and train farmers, provide free testing facilities for soil nutrients and irrigation

water

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Organization Structure

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OBJECTIVES OF THE STUDY

Working capital is the most widely used and powerful technique of financial analysis. The

main objective of the present study is to know the financial condition of the company

To study the working capital management of the concern so as to analyze and interpret

the inventory position of the KRIBCO Limited.

To assess the impact of working capital on profitability.

To Decide Optimal Mix of Short Term and Long Term Capital.

To assess the strength and weakness of the concern in various areas.

To assess the over all efficiency and performance of the company.

To determine the optimal level of Cash Balance.

To determine optimum short term sources of finance.

To determine the effect of working capital on business profitability which has to do

with:- Maintenance of working capital at appropriate level, and availability of ample

funds as and when they are needed

.

To examine the combine effect of the ratios relating to working capital management and

profitability

To study the sources and uses of the working capital.

To study the liquidity position through various working capital related ratios

To study the working capital components such as receivables accounts, Cash

management, Inventory management.

To make suggestions based on the finding of the study.

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Need of the Study:

The study has great significance and provides benefits to various parties whom directly or

indirectly interact with the company.

It is beneficial to management of the company by providing crystal clear picture

regarding important aspects like liquidity, inventory and profitability.

The investors who are interested in investing in the company will also get benefited by

going through the study and can easily take a decision whether to invest or not to invest

in the companys shares.

To know whether the short term sources of financing are good and the short term

investments are profitable enough.

The study has been conducted for gaining practical knowledge about Working Capital

Management & activities of KRIBHCO Ltd.,

The study is undertaken as a part of the MBA curriculum from 27 May 2010 to 26 July

2010 in the form of summer in plant training for the fulfillment of the requirement of

MBA degree.

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Scope:

The study is confined to the management of working capital in KRIBCO LTD. The main aim

of the study is to study the working capital management system in KRIBCO LTD but If we

talk about the scope of the study, it has the following scope :-

To provide Analytical study on the current financial scenario and future potential of

KRIBCO ltd.

To examine the financial performance in KRIBCO ltd.

To study the working capital performance in KRIBCO ltd.

To analyze and appraise the financial performance of KRIBCO ltd. during the Period.

To make necessary recommendation on the basic of the findings of the study.

To help in determining the optimum level of liquidity against desired profit.

Data collection:-

Primary data:

The Primary data has been collected from Personal Interaction with Finance manager i.e., Mr. G.

P. Rao and other staff membersand also by observation

Secondary data:

The major source of data for this project was collected through annual reports, profit and loss

account of 5 year period from 2008-2012 & some more information collected from internet and

text sources.

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SAMPLING DESIGN

0 Sampling unit : Financial Statements.

1 Sampling Size : Last five years financial statements.

2 Tools and techniques applied in this study

3

Tools Used: MS-Excel has been used for calculations.

Statement Showing Changes in Working Capital

Statement of working capital management

Research design:-

It is an analytical research. The researcher has to use information already available and analyze

them to make a critical evaluation of financial performance.

Limitations

This analysis is based on secondary data like, published annual reports and statement.

So the scope of the study is limited, only to that extent.

The time with in which, the study is being attempted is too short to carry out a detailed

analysis.

This analysis gives no due about the future.

The analysis is limited to just five years of data study (from year 2008 to year 2012) for

financial analysis.

Limited interaction with the concerned heads due to their busy schedule.

The findings of the study are based on the information retrieved by the selected unit.

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INTRODUCTION TO WORKING CAPITAL

A firm contains input to make a finished product, which is sold to make a profit. These sales

proceed are re-invested to make such products and generate further profits. The problem is,

there is a lag between the time a finished product is ready and the time its sale proceeds arerealized. If a company waited till their products come in, its plant and machinery would lie idle

until this amount accrues to it. So it conjures smooth operations through this time lag, every

business activity make funds. This is its Working Capital that can generate more revenues from

a special amount, Working Capital than others, will eventually be more profitable, better cash

flows.

Concepts of working capital:

There are two concepts of Working Capital

1. Gross Working Capital

2. Net Working Capital

The term Gross Working Capital also refers to as Total of Current assets.

The term Net Working Capital is defined two ways:

1. It is the difference between Current assets and Current liabilities. Alternatives definition

is proportion of firms Current assets which is financed with long-term funds.

2. The task of the financial manager is managing Working Capital efficiently, to ensure

sufficient liquidity in the operations of the enterprise. The liquidity of the business firm

is measured by its ability to satisfy short term obligations as they become due.

Net Working Capital is a measure of liquidity is not very useful to compare, performance of

different firms, but it is useful for internal control.

Net Working Capital can be used to measure the liquidity. A good Working Capital

Management is to manage the Current assets and Current liabilities in such a way that an

acceptable level of Working Capital is maintained.

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Need for working capital:

For effective running of the day-to-day business transactions, the Working Capital is necessary.

There is no such a business for which Working Capital is not needed.

The main aim of every firm is to maximize shareholders wealth. Firm must earn sufficient

returns to increase the shareholders wealth. To earn steady amount of profit, a successful sales

activity is necessary. Firm can generate sales is sufficient amount is invested in Current assets.

The need of Current assets is necessary because sales do not convert into cash immediately.

There is always an operating cycle involved in the conversion of sales into cash.

Definition of working capital:

Working Capital is excess of Current assets over Current liabilities

Working Capital refer in a firms investment in short-term assets, cash, short-term securities,

account receivables and inventories

Working Capital is amount of funds necessary to cover the cost of operation of their

enterprise.

In a narrow sense, the term working capital refers to the net working. Net working capital is the

excess of current assets over current liability, or, say:

NET WORKING CAPITAL = CURRENT ASSETS CURRENT LIABILITIES.

Net working capital can be positive or negative. When the current assets exceeds the current

liabilities are more than the current assets. Current liabilities are those liabilities, which are

intended to be paid in the ordinary course of business within a short period of normally one

accounting year out of the current assts or the income business.

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Importance or advantage of adequate working Capital:-

Solvency of the business : Adequate working capital helps in maintaining the solvency of

the business by providing uninterrupted of production.

Goodwill : Sufficient amount of working capital enables a firm to make prompt payments

and makes and maintain the goodwill.

Easy loans : Adequate working capital leads to high solvency and credit standing can

arrange loans from banks and other on easy and favorable terms.

Cash Discounts : Adequate working capital also enables a concern to avail cash discounts

on the purchases and hence reduces cost.

Regular Supply of Raw Material : Sufficient working capital ensures regular supply of

raw material and continuous production.

Regular Payment Of Salaries, Wages And Other Day TO Day Commitments : It leads to

the satisfaction of the employees and raises the morale of its employees, increases their

efficiency, reduces wastage and costs and enhances production and profits.

Ability to Face Crises : A concern can face the situation during the depression.

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Sources of working capital:-

The company can choose to finance its current assets by

1. Long term sources

2. Short term sources

3. A combination of them.

1) Long term sources of permanent working capital include equity and preference

shares, retained earning, debentures and other long term debts from public deposits and

financial institution. The long term working capital needs should meet through long term

means of financing. Financing through long term means provides stability, reduces risk or

payment and increases liquidity of the business concern. Various types of long term

sources of working capital are summarized as follow:

Issue of shares:

Retained earnings:

Issue of debentures:

2) Short term sources of temporary working capital: Temporary working capital is

required to meet the day to day business expenditures. The variable working capital

would finance from short term sources of funds. And only the period needed. It has the

benefits of, low cost and establishes closer relationships with banker. Some sources of

temporary working capital are given below:

Commercial bank:

Public deposits:

Various credits:

Reserves and other funds:

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Operating cycle can be known as following:

Working capital analysis:-

As we know working capital is the life blood and the centre of a business. Adequate amount of

working capital is very much essential for the smooth running of the business. And the most

important part is the efficient management of working capital in right time. The liquidity position

of the firm is totally effected by the management of working capital. So, a study of changes in

the uses and sources of working capital is necessary to evaluate the efficiency with which the

working capital is employed in a business. This involves the need of working capital analysis.

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The analysis of working capital can be conducted through a number of devices, such as:

A) Statement of Changes in working capital

B) Working capital Requirement

1) Statement of changes in working capital :-

Until now any increase decrease in any individual item of current assets and current liabilities

was shown in the funds flow statement. But now a statement is prepared to deficit the changes in

working capital. The net increase or decrease is then carried forward to the funds flow statement.

The statement of working capital is prepared with the help of current assets and current liabilities

of the two periods the figures of 2 periods are compared. If there is an increase in the amount of

any current liabilities in the current year in comparison to that in that in the previous year, it will

result to an increase in the working capital. Similarly, a decrease in the amount of any current

assets or an increase in amount of current liabilities in the current year in comparison to that in

the previous year and total decrease in the end is compared and the different of total increase and

total decrease shows net increase or decrease in the working capital.

Net increase in working capital is an application of funds and net decrease in working capital in

the source of funds.

Changes in working capital:-The working capital of a concern is subject to changes due to

several reasons. As we know that the gross working capital is equal to current assets. But net

working capital we mean the excess of current assets over current liabilities. The net working

capital is therefore, affected by the following transactions.

With increase the current assets but not the current liabilities.

With decrease the current assets and current liabilities both increase in the same direction

by a transaction it does not bring any change in the net working capital of the concern. Only the

total of current assets and current liabilities increase and decrease.

Reasons for changes in working capital:-

1. Changes in the level of sales and\ or operating expenses.

2. Policy changes.

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3. Changes in the technology.

WORKING CAPITAL REQUIREMENT:

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 Krishak Bharti Cooperative Limited is manufacturing

oriented organization.

The following aspects have to be taken into consideration while estimating the working capital

requirements.

They are:

1. Total costs incurred on material, wages and overheads.

2. The length of time for which raw material are to remain in stores before they are issued

for production.

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

conversion of raw material into finished goods.

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

5. The average period of credit allowed to customers.

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

7. The average amount of cash required to make advance payments.

8. The average credit period expected to be allowed by suppliers.

9. Time lag in the payment of wages and other expenses.

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Literature review

1ST.--Herzfeld B1(1990),

Here the author lays a great emphasis on cash. He considers this element as the most important

factor affecting the business in whole. Studying various money managers throughout the country

and their reviews; he concluded that managing working capital is one of the most the sensitive

parameters of the business. Even the external parties or the stake holders are also interested in

WORKING CAPITAL MANAGEMENT.

According to him it refers to the management of short term assets and liabilities for e.g.: sundry

debtors, bills receivables, inventories, cash and cash equivalent; sundry creditors, bills payable,

bank loans and etc. It states the certainty of the firm regarding its operating of assets and

liabilities. Hence it is very important to know the technicalities of the term and how to operate it

efficiently for the betterment of the firm.

2ND--Appuhami, Ranjith B2 (2008),

Here the author studied the impact over the firms capital expenditure on their capital

management. He drew the conclusion from the data collected from listed companies of Thailand

Stock Exchange. He made out the results by examining Schulman and Cox(1985) which is a

good example or can be said as a benchmark for the results of working capital management.

During the research he found that the firms capital expenditure has a very notable effect on the

working capital of the firm. He also found out few other variables such as operating cash flow as

a major part of the WORKING CAPITAL MANAGEMENT. For maintaining working capital in

1

2Herzfeld B; How to Understand Working Capital Management (1990).

Appuhami, Ranjith B A; The Impact of Firms' Capital Expenditure on Working Capital Management: An

Empirical Study across Industries in Thailand, (2008)

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the required state, a significant relationship is to be maintained with the firms operating cash

flow.

3RD--Hardcastle J3(2009).,

Here the author presents a bit new view differing from the above both authors. He directly states

that the gross working capital normally refers to the firms short term assets i.e. cash,

receivables, inventories, etc. He clearly bifurcates between long term financial analysis and short

term finance by including strategic planning as its prime concern. He has given quiet importance

to working capital management as it deals with daily operations.

He gave a broad view by explaining certain conditions inventories built up, maintaining enough

cash on hand, and production lines regarding lack of raw materials. And moreover he has also

stated the term profitability with the working capital management.

4TH--Beneda, Nancy; Zhang, Yilei4 (2008),

Here the author studied a next stage of working capital management. He included operating

performance and growth of new public companies on the dependence of working capital

management by giving priority to short term assets and liabilities. He also involved the minutest

parts like relations with debt level, firm risk, etc. with his research he found notable positive

association between accounts receivables and operating performance.

He further explained the importance of maintaining control over levels of cash and securities,

inventories and other current assets. Hence this drew notice of the current trend of business for

required changes regarding WORKING CAPITAL MANAGEMENT.

3Hardcastle; Working Capital Management,(2009).

Beneda, Nancy; Zhang, Yilei, Working Capital Management, Growth and Performance of New Public

Companies, Credit & Financial Management Review, (2008)

4

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5TH--Dubey R5 (2008).,

Here the author laid greater emphasis over various technical terms effecting working capital. He

stated that working capital generally arises of four basic factors like sales volume, technological

changes, seasonal, cyclical changes and policies of the firm.

As discussed earlier by the above authors Dubey concluded that the strength of the firm is

somehow dependent upon the working capital of the firm. But the working capital is also a

dependent variable on the level of sales volume and related factors.

He gave a firm evidence regarding the dependence of a firm over current assets and its functional

activities; including elements which can be readily converted into cash such as receivables and

inventories. He made us understand the relation between the growth of sales and the level of cash

receivables and stock.

5Dubey R, Working Capital Management-an Effective Tool for Organisational Success (2008)

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Statement Showing Changes in Working capital of KRIBHCO Ltd. for the year 2008 &

2009

In Lac.s

Particulars 2008Amount (RS)

2009Amount (RS)

Increase Decrease

(A)Current Asset

1.Cash 90504.27 83456.18 7048.09

2.Stock 21404.82 18550.63 2854.19

3. Debtors 61285.98 40752.96 20533.02

Total Current Assets 173195.07 142759.77

(B) Current liabilities

1.Creditors 15122.52 10915.32 4207.2

2.Secuirty Deposit 2705.21 3008.22 303.01

3.Other Liablity 9198.05 15031.74 5833.69

4.Advance against

Supplies

480.28 853.20 372.92

5.Provisions 22352.25 20967.64 1384.61

Total Current

Liabilities

49858.31 50776.12

Net working Capital

(A-B)

123336.76 91983.65

Changes in working

capital

31353.11 31353.11

Total 123336.76 123336.76 36944.92 36944.92

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2010

In Lac.s

Particulars 2009Amount

(RS)

2010Amount (RS) Increase Decrease

(A)Current Asset

1.Cash 83456.18 82227.13 1229.05

2.Stock 18550.63 11792.02 6758.61

3. Debtors 40752.96 26482.74 14270.22

Other current assets - 2348.72 2348.72



1.Creditors 10915.32 10726.98 188.34


3.Other Liablity 15031.74 16216.39 1184.65

4.Advance against

Supplies

853.20 727.77 125.43

5.Provisions 20967.64 23919.84 2952.2

Total Current

Liabilities

50776.12 54605.03

Net working Capital

(A-B)

91983.65 68245.58

Changes in working

capital

23738.07 23738.07

Total 91983.65 91983.65 26400.56 26400.56

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2011

In Lac.s

Particulars 2010

Amount (RS)

2011

Amount (RS)

Increase Decrease

(A)Current Asset

1.Cash 79878.32 41261.51 38616.81

2.Stock 11792.02 20623.86 8831.84

3. Debtors 19673.48 43572.33 23898.85

Other current assets 2348.72 506.23 1842.49

Total Current Assets 113692.54 105963.93(B) Current liabilities

1.Creditors 10726.98 26945.33 16218.35


3. Advance against

Supplies

685.16 2266.77 1581.61

4.other liabilities 9412.72 7922.83 1489.89

5.Provisions 22386.36 19931.27 2455.09

6.Intrest accrued but not

due on loans

- 115.35 115.35

7.unpaid dividend 37.02 41.29 4.27

Total Current

Liabilities

46262.29 60486.47

Net working capital 67430.25 45477.46

Changes in working

capital

21952.79 21952.79

Total 67430.25 67430.25 58628.46 58628.46

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2012

In Lac.s

Particulars 2011

Amount

(RS)

2012

Amount (RS)

Increase Decrease

Current Asset

1. Cash 41261.51 35465.41 5796.1

2.Stock 20623.86 23170.20 2546.34

3. Debtors 46568.92 113610.57 67041.65

4.Other current assets 506.23 2584.22 2077.99

5.Short term loans and

advances

8613.79 15635.81 7022.02

6. Current Investments 7827.50 - 7827.50



1.Short-Term

Borrowings

26419.33 65677.33 39258

2.Trade Payables 20627.92 30576.17 9948.25

3.Other Current

Liabilities

18391.90 23702.72 5310.82

4.Short-Term Provisions 9931.72 12459.59 2527.87Total Current

Liabilities

75370.87 132415.81

Net working Capital

(A-B)

50030.94 58050.4

Changes in working

capital

8019.46 8019.46

Total 58050.4 58050.4 78688 78688

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Working capital for the year 2008 to 2012

Particular 2008 2009 2010 2011 2012

A. Current

Asset

1.Cash 90504.27 83456.18 82227.13 41261.51 35465.41

2.Stock 21404.82 18550.63 11792.02 20623.86 23170.20

3. Debtors 61285.98 40752.96 26482.74 43572.33 113610.57

4.Other current assets - - 2348.72 506.23 2584.22

5.Short term loans

and advances

- - - - 15635.81

Total Current

Assets

173195.07 142759.77 122850.61 105963.93 190466.21

B. Current

Liabilities

1.Creditors 15122.52 10915.32 10726.98 26945.33 30576.17

2.Secuirty Deposit 2705.21 3008.22 3014.05 3263.63

3. Advance against

Supplies

9198.05 15031.74 16216.39 2266.77

4.other liabilities 480.28 853.20 727.77 7922.83 23702.72

5.Provisions 22352.25 20967.64 23919.84 19931.27 12459.59

6.Intrest accrued but

not due on loans

- - - 115.35 -

7.unpaid dividend - - - 41.29 -

Short-Term

borrowings

65677.33

Total Current

Liabilities

49858.31 50776.12 54605.03 60486.47 132415.81

Net Working Capital 123336.76 91983.65 68245.58 45477.46 58050.4

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0

20000

40000

60000

80000

100000

120000

140000

160000

180000

200000

2008 2009 2010 2011 2012

Current Assets

Current Liabilities

0

20000

40000

60000

80000

100000

120000

140000

2008 2009 2010 2011 2012

Net Working Capital

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FINDINGS

The trend of current asset was showing decreasing trend

The Current Asset of KRIBCO Limited is decreasing from the year 2008 to 2012 but

then also the company having sufficient working capital to meet its short term obligations.

There is increase in both Net Sale and Working capital, which means in KRIBCO ltd

there is efficient usage of current assets.

There is increase in inventory also because of an efficient management of inventory as

there is continuous increase in the turnover of inventory.

Net working capital of the KRIBCO ltd has also increased to 58050.4 in which there is

more increase in inventory and cash. The increase in inventory will affect the sales and increase

in cash will have positive impact on liquidity but may not be positive effect on profitability.

.

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SUGGESTIONS

The company has to take steps to reduce the size of its working capital in relation to its

sales.

The company has to invest its cash equivalents in some other short term securities to

increase the level of profit.

The company should also do better trade off between liquidity and profitability.

The company should spends reasonable amount on inventory so that liquidity can also be

maintained.

To gain good profits company should also improve the sales through inventory

management.

Working capital of the company has increasing every year. Profit also increasing every

year this is good sign for the company. It has to maintain it further, to run the business long term.

The company has sufficient working capital and has better liquidity position. By efficient

utilizing this short-term capital, then it should increase the turnover.

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CONCLUSION

In the present study I have analyzed the Study of working management at KRIBCO Limited .

The study on working capital management conducted in KRIBHCO Ltd. to analyze the financial

position of the company. The companys financial position is analyzed by using the tool of

annual reports from 2007-08 to 20011-12.I found that the company is efficiently managing its

stock because stock has increased which means company is more frequently selling its stock

and the lesser the carrying cost will be So this will reduce the companys expense and finally the

revenue will be generated as well as the profit. The company is also having more cash and cash

equivalents. So the companys liquidity position is good and that cash was invested somewhere

else for shorter period and it is generating more profit So the company can move toward the

Profit making policy rather than relying on liquidity policy.

The companys liquidity position is very good with regard to the investments in current assets

there are adequate funds invested in it. Care should be taken by the company not to make further

investments in current assets, as it would block the funds, which could otherwise be effectively

utilized for some productive purpose. On the whole, the company is moving forward with

excellent management.

So the companys performance outlook continues to be positive and optimistic. The company

remains confident of delivering of strong operating and financial performance. Over all it may be

concluded that the company is efficiently managing its working capital satisfied. The given

suggestions will be helpful to improve the financial performance of the company.

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BIBLIOGRAPHY

Books:

Dr.S.N.Maheshwari, FINANCIAL MANAGEMENT , 13th Edition, Sultan Chand &

Sons.

Chandra Prasana , Financial Management, TMH, 4th edition, 1997, NewDelhi.

Khan P.K (2006);Management Accounting, Tata McGraw Hill;

Internet Sites:

www.Kribcoportal.com/Kribco-business/index.aspx

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ANNEXURE

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