New Report

Executive Summery

I have carried out my research work in Krishak Bharti Cooperative Ltd., which is

ISO 9001, 14001 and OHSAS 18001 organization. Krishak Bharati Co-operative

Limited (KRIBHCO), a premier Co-operative Society for manufacture of fertilizer,

registered under Multi-State Cooperative Societies Act – 1985, was promoted by

the Govt. of India, IFFCO, NCDC and other agricultural cooperative societies

spread all over the country.

KRIBHCO has setup a Fertilizer Complex to manufacture Urea, Ammonia

& Bio-fertilizers at Hazira in the State of Gujarat, on the bank of river

Tapti, 15 Kms from Surat city on Surat – Hazira State Highway.

Project Title

“Study on Working Capital Management of Krishak Bharti Cooperative Ltd”

Research Methodology

TITLE OF THE PROJECT

Study on Working Capital Management of Krishak Bharti Cooperative Ltd.,

Hazira, Surat.

OBJECTIVE OF THE STUDY

To know the liquidity / solvency position of Krishak Bharti Cooperative Ltd.

To know the requirement of working capital in KRIBHCO Ltd.

To know the current asset policy of KRIBHCO Ltd.

Findings

o As per the analysis it was found that the KRIBHCO’s Gross Working Capital

is declining in past three years.

o Same way the Net Working Capital also declining for past three years.

o Net Operating Cycle if KRIBHCO is also decline as compare to past two

years rather it decline year after year.

o Although liquidity ratios are decline but they are still in deal condition.

1

o Inventory turnover ratio is improving year after year. This is very good for the

company the inventories are not kept idle for long.

o Debtors turnover ratio is also improving or increasing. Which indicate as the

year passes the debtors as become more liquid.

o Creditor turnover ratio is also improving year after year which means now the

firm enjoyed more credit period by paying its creditors.

o Working capital turnover ratio also improving it means Net Working Capital

requirement for Sales is decreases.

o Looking at CA/FA ratio it would be said that the company is following

conservative policy but decrease in the ratio year after year it indicate the

company moving towards aggressive policy.

Suggestions

According to the study it would said the although the net working capital of

company decreasing the company is still in good position because the

operating cycle of the company is decrease it means now the cycle become

speedier and early and fast recovery of cash it denote.

Looking At the current ratio it getting decrease year after year but company

still in ideal position means liquidity position of company is still better but they

have to be careful about this declining trend of current ratio if this would

continue then it would be difficult for company to meet its obligation against

current liabilities.

The turnover ratios are showing good progress these means better liquidity

and solvency of the company.

Working capital turnover ratio is improving it means now the company

required less working capital for sale. It denotes that as compare to earlier

now the company required less working capital. It means optimum use of

working capital.

Overall looking at the study it would said that company have very sound

policy to manage its working capital. Current asset of a company are enough

to meet the obligation of paying its current liabilities.

2

CHAPTER 1

INRTODUCTION

3

Board of Directors

Chairman Shri Chandra Pal Singh

Vice-Chairman Shri R.K.Dhami

Directors Shri V R Patel

Shri V Sudhakar Chowdary

Shri Mathew C Kunnumkal

Shri Deepak Singhal

Shri Shiv Narayan Prasad Mishra

Shri S S Jamgod

Shri Ponnam Prabhakar

Managing Director Shri B D Sinha

Finance Director Shri R Kamra

Marketing Director Shri N Sambasiva Rao

4

Krishak Bharati Co-operative Limited (KRIBHCO), a premier Co-operative

Society for manufacture of fertilizer, registered under Multi-State Cooperative

Societies Act – 1985, was promoted by the Govt. of India, IFFCO, NCDC and

other agricultural cooperative societies spread all over the country.

KRIBHCO has setup a Fertilizer Complex to manufacture Urea, Ammonia

& Bio-fertilizers at Hazira in the State of Gujarat, on the bank of river

Tapti, 15 Kms from Surat city on Surat – Hazira State Highway.

Late Smt. Indira Gandhi, former Prime Minister of India laid the Foundation

Stone on February 5, 1982.

Hazira Fertiliser Complex has 2 Streams of Ammonia Plant and 4 Streams of

Urea Plant. Annual re-assessed capacity for Urea and Ammonia is 1.729 million

MT and 1.003 million MT resepctively, the total Project cost was Rs. 890 crores

as against the estimated cost of Rs. 957 crores. This shows a saving of Rs. 67

crores (approximately 7%) in Capital Cost of the Project.

5

The trial production commenced from November, 1985 and within a very short

time of 3 months, the commercial production commenced from March 01,

1986. Since then, it has excelled in performance in all areas of its operations.

Biofertilizer plant of 100 MT per year capacity was commissioned at Hazira in

August, 1995. KRIBHCO has also completed the installation of an expansion of

the Bio-Fertiliser plant with an additional capacity of 150 MT and the same was

commissioned in December, 1998.

Ten Seed Processing Plants are also in operation in various states.

VISION

We want to be a world class organization that represents the farmer

community and maximizes returns to them through specialization in

agricultural inputs and products and other diversified businesses that

maximize stakeholder 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

To Incerese the Urea installation capacity, maintaining its market share.

To ensure the optimum utilization of existing plant & machinery.

6

To diversify into other core sectors like power, LNG terminal/ port,

chemicals etc.

CERTIFICATES

ISO - 9002 QUALITY SYSTEM CERTIFICATION FOR HAZIRA PLANT

ISO - 14001 ENVIRONMENT MANAGEMENT CERTIFICATION FOR

HAZIRA PLANT

ISO - 9001 : 2000 FOR MARKETING

OHSAS-18001 HEALTH AND SAFETY OF AN EMPLOYEE.

MILESTONES

One of the world’s largest and most modern fertilizer plants in co-operative

sector.

First achieve a record capacity utilization in the first year of commercial

production- 93.5% and 97.4% for Ammonia and Urea Plants.

First in the country to achieve highest net profit of Rs. 126.80 Crores in the

year 1987-88 by any fertilizer organisation

Has achieved 30 Million of Urea production on 15.08.2004 milestone

within a short period of 18.7 years from commencement of production.

Has achieved 30 Million tonnes of Ammonia production on 19.03.2006

within a period of 20.3 years from commencement of production.

AWARDS

Environmental Protection

FAI – ‘Environmental Protection Award’ 1989, 1991 & 1993

KRIBHCO has bagged the Gopalakrishna Singhania Memorial

Endowment Award given by Indian Merchants Chamber for Outstanding

7

contribution towards control of Air and Water Pollution in Fertiliser

Industries for the year 1990-91.

Nehru Memorial National Award –1993 for control of pollution and energy.

Award by Council for Ecological Futurology and Environment for Dedication to Environment-2001.

Safety

The Royal Society for the Prevention of Accidents (ROPSA), U.K. Award

for Safety to KRIBHCO's Hazira Complex for the year 1989 and 1990.

National Safety Council, U.S.A, awarded “Award for Honour” in the year,

1989-90, 1990-91, 1993-94 and 1996-97 for nitrogenous fertilizer sectors

for operating more than 22 million man hours without occupational injury

or illness for the period from 20.09.92 to 31.12.95.

National Safety (runners up) Award-1994 by Govt. of India, Ministry of

Labour.

Gujarat State Safety Award-1995 for lowest disabling injury index by

Gujarat Safety Council.

Energy Conservation

National Energy Conservation Award (second prize) by Ministry of Power,

1994-95 and 2000-01.

Productivity

FAI – 'Best Production Performance' (runners-up) Award : 1988-89.

Golden Jubilee memorial Trust Award 1997-98 for Outstanding

Achievement in Productivity by Southern Gujarat Chamber of Commerce

& Industries.

8

FAI Best Performance Award for performance of Bio-fertilizer Plant from

Fertilizer Association of India for the year 2002. for the third time.

KRIBHCO has received the Certificate of Excellence for the year 2001-

2002 in Process Industry from the Indian Institute of Industrial

Engineering, Mumbai.

KRIBHCO has received "National Productivity Award " for three

consecutive years 1999-2000, 2000-2001 and 2001-2002.

KRIBHCO has received "Excellence in Improving Productivity " conferred

by South Gujarat Chamber of Commerce & Industry for the year 2007-08

Industrial Relation

All India Organization of Employees (AIOE) Award 1990 in the field of

Industrial Relations

Winner of Gujarat State Award for the year 1996 under Group-A Industry

Category-1.

Other Awards

KRIBHCO receives Samarpit Rajabhasha Sevi Samman by Town official

Language Implementation Committee, Noida for the year 2006-07.

KRIBHCO receives Star Industry of Surat-2008 conferred jointly by

leading newspaper Gujarati Mitra and Consumer Forum.

KRIBHCO won Sarvottam Stall Prize in Pusa Krishi Vigyan Mela at New

Delhi.

KRIBHCO receives AMITY HR Excellence Award for the year 2008 by

Amity International Business School.

KRIBHCO receives Gold star award of Excellence from Institute of

Economic Studies for its overall excellent performance.

9

KRIBHCO receives the Rajbhasha Award from Honb'le Minister of

Chemical and Fertilizers for 2002-03, 2003-04, 2004-05.

KRIBHCO was awarded First prize for Production, Promotion, and

marketting of Bio-fertilizers for the year 2004-05 on 1st of December '05

by FAI.

KRIBHCO has won INDIRA GANDHI RAJBHASHA PURUSKAR (2nd) for

2003-04

KRIBHCO -Hazira - Pot Plants exhibition received the 2nd prize in the first

National Horticulture exhibition and flower show for the year 2002.

FAI – Best Video Film Award 1987, 1990, 1991, 1992, 1993, 1994, 1995,

1996 and 1998

FAI Technical Innovation Award: 2001-02 to two KRIBHCO Officers

SHIELD & CERTIFICATE awarded by Rajbhasha Vibhag, Home Ministry,

GOI for PROMOTION OF HINDI AS AN OFFICIAL LANGUAGE for the

year 1993-94

"RAJBHASHA SHIELD" for OUTSTANDING WORK IN OFFICIAL

LANGUAGE for the year 1994-95 by Official Language Implementation

Committee, Surat

'Best House Keeping' Award to KRIBHCO’s Hazira Complex from Baroda

Productivity Council – Awarded 5 times from 1988-89 to 1991-92

10

ORGANIZATIONAL CHART OF KRIBHCO

11

GM (P)

GM(Material)

GM(F&A)

GM (P&A)

GM (Tech)

CM (MIS)

GM(Mai.)

DGM (P)

DGM(Material)

DGM(F&A)

DGM (P&A)

DGM (Tech)

DGM(Maintain)

CM (P)

CM(Material)

CM(F&A)

CM (P&A)

CM (Tech)

CM(Maintain)

Government of India

Ministry of Agriculture

Department of fertilizer & Chemical

Chairman

Board of Directors

Managing Director

Operational Director

Ammonia

Urea

Power

PHP

Transportation

Purchase

Store

Process

Project

Laboratory

F&S

Civil

Instrument

Mechanic

Electrical

MEMBERSHIP AND SHARE CAPITAL

KRIBHCO’s paid up Share Capital is Rs. 390.61 crore as on March 31, 2010.

The membership of KRIBHCO consists of 6546 members including co-operative

societies and Government of India. In their endeavor to increase participation of

Cooperative Societies, the share holding of the cooperatives in KRIBHCO has

gone up from 49.5% to 51.6% during 2009-10. The Government’s Share Capital

in KRIBHCO stands at Rs. 188.90 crores which is 48.4%.

Membership in Share Capital

48% 52% Cooperative Societies

The Government of India

12

TOTAL UREA SALES

28.18

34.63 36.26 37.76 38.47

0

5

10

15

20

25

30

35

40

Qty

.\L

AK

H\M

T

2005-06 2006-07 2007-08 2008-09 2009-10

Years

TOTAL UREA SALES

BIO-FERTILIZERS PRODUCTION AND SALES

755

714

738

784 9

53

957

865

867

953

922

0100200300400500600700800900

1000

QT

Y./

MT

2005-06 2006-07 2007-08 2008-09 2009-10

YEARS

BIO-FERTILIZER PRODUCTION AND SALES

PRODUCTION

SALES

SEED PRODURCTION AND SALES

1.6

1.5

3

1.1

8 1.5

1

1.6

8

1.6

7 1.9

8

1.9

6

2.2

92.2

2

0

0.5

1

1.5

2

2.5

QT

Y./

MT

2005-06 2006-07 2007-08 2008-09 2009-10

YEARS

BIO-FERTILIZER PRODUCTION AND SALES

PRODUCTION

SALES

13

HISTORY AND DEVELOPMENT

PROJECT ZERO DATE 31st MARCH, 1981

FOUNDATION STONE LAID

BY

Late Smt. Indira Gandhi then the Prime

Minister Of India on 5th February 1982

PROJECT COMPLETION 31 st MAY 1985

PLANT CAPACITY & CONSULTANTS

PLANT CAPACITY CONSULTANTS

DAILY ANUUAL

AMMONIA 2 X 1350 MT 8.9 LAKH MT M.W.kellogg, USA, FEDO,

INDIA

UREA 4 X 1100 MT 14.52 LAKH MT SNAMPROGETTI, ITALY,

PDIL, INDIA SENIOR

THERMAL ENGG.U.K

POWER 2 X 15 MWH THERMAL ENGG.U.K.

HAEVY

WATER

2 X 55 MT PER

YEAR

PDIL

HTAS,DENMARK

BIO-

FERTILIZER

250 MT PER

YEAR

DAE

14

Product mix

KRIBHCO, manufacturing nitrogenous fertilizer and allied product viz. urea,

Ammonia, Bio-fertilizer, 30 mega watt power plant operation & maintained of

heavy water plant of department of atomic energy, But KRIBHCO is having urea

as its main product.

They use Ammonia as raw material &main input of urea& sale the excess

production to other non-fertilizer industries.

Product mix of KRIBHCO

1. Urea

2. Bio-fertilizer

3. Pulses

Wheat

Paddy

Oil seeds

Subsidiary and Joint ventures

Subsidiary company

(1) KRIBHCO Infrastructure Ltd (KRIL)

Joint Ventures

(1) Oman India Fertilizer Co. SOAC (OMIFCO)

(2) KRIBHCO Shyam Fertilizers Ltd (KFSL)

(3) Urvarak Videsh Ltd (UVL)

(4) Kribhco Reliance Kisan Ltd.

(5) Gujarat State Energy Generation Ltd.

Associates

(1) Gramin Vikas Trust (GVT)

SWOT ANALYSIS

15

Strength

Kribhco is having Sound financial position.

The Management of Kribhco is very professional.

Kribhco has larger proportion of reserves and surplus and further it has

no debt capital.

Kribhco has long standing reputation in the Indian Fertilizer Market.

Staff of Kribhco is very co-operative and hard working.

Kribhco is having skilled employees staff.

Good cooperation between employees.

Kribhco is having own Training Centre for training of employees as well

as apprentice students of different discipline.

It is having a full support of the Government of India.

Kribhco having strong and wide marketing network towards country.

High Production capacity of Kribhco leads to low production cost.

Savings in Production cost because Kribhco is having own Nitrogen

and Ammonia Plant.

Capacity Utilization more than 100%.

Still the starting of production, Kribhco plant has no major break down

in Plant.

Kribhco has extra land and fully developed infrastructure facilities so it

can be further developed.

Thus, we can say that the position of Kribhco in the Fertilizer Market is

Satisfactory.

16

Weaknesses

Government interference in the management is more comparatively

private units.

Due to Government’s interference it takes longer time in decision

making. So the decisions delayed and thus sometimes bias decision

are also taken.

Kribhco is having overstaffing.

Kribhco is having no debt capital so the advantage leverage can not be

taken.

Opportunities

Investment in Oman Project will raise the profit of Kribhco.

Expansion of existing plant at Hazira.

Look for newer Market with diversified product.

Diversifying the business.

Threats

The price of the Row material, i.e. Natural Gas, is increasing

continuously.

There is a chance of sharp reduction in Government subsidy in near

future.

Kribhco is having very little market share.

In the era of Free Trade, the import of fertilizers may affect the business

of the Kribhco.

17

FINANCE & ACCOUNTING DEPARTMENTFINANCE & ACCOUNTING DEPARTMENT

18

Finance & Administration Department

Introduction

Finance is the blood of the business. “Finance Management is that managerial

activity which is concerned with the planning and controlling of the firms financial

resources.” Finance management is the most important activity of the firm and it

means that the firm secures capital, if needs and employees it.

Finance management is mainly concerned with raising fund in the suitable

manner using the funds as profitably as possible, planning future operations and

controlling current performances and future developments through financial

accounting, cost accounting, budgeting and other functions.

The Finance and Accounts Department of KRIBHCO plant is located in the

Administration Building, which is situated outside the Plant factory gate. The

Finance & Accounts (F & A) Department is a service department and its name

function is to co-ordinate the financial activities at Plant Site. The F & A

department maintain the records as required under various statute and get the

same audited by Statutory Auditors under the functional supervision and

guidance of KRIBHCO CO-OPERATE OFFICE at NOIDA.

19

Various Sections

The F & A department have various Sections as detailed below.

SEC.

CODESEC. NAME DESCRIPTION

1701 INSURANCE & EXCISE To review the insurance policies of the

societies in terms of adequacy of insurance

cover and premium paid, renewals of policies

in time, loading of claims and following-up for

their settlement with underwriter.

To maintain constant liaison with the excise

authorities and with societies consultant

regarding day to day matters related to the

central excise and hearing of ammonia tank

wagons to outsides parties.

1702 L/C SECTION To maintain all letters of credit open by the

society for importing of materials and services,

realising payments as per the terms of the L/C,

Liaison with banks and parties regarding

matters relating to L/C and maintaining proper

accounting records.

1703 PRODUCT HANDLING

DEPARTMENT

Payments to bill of urea bagging and handling

contractor and other small value contractor

pertaining to urea and bio-fertilizer

transportation after certification by production

department and maintenance of necessary

accounting records.

1704 EMPTY UREA BAGS

SUPPLIES

Payment for supplier of the empty bags and to

maintain all related accounting transactions.

20

1705 BUDGET Preparation of annual capital and revenue

budgets and monitoring of commitments and

expenditure and generation of periodical

reports.

1706 CONTRACT PAYMENT

SECTION

Payments to contractor for various work orders

issued other then product handling and

transportation contractors and to keep all

accounting records.

1707 MISC. PAYMENTS Payments towards misc. Works of petty nature

1708 TOWNSHIP LICENCE

FEE RECEIPTS

Recovery of licence fee, electricity charges,

water charges etc.

1709 PURCHASE BILL

SECTION

Payments towards various PO issued by

materials department and to keep all relevant

accounting records

1710 TRANSPORTATION Payments towards transportation of urea by

road and, matters related with railway for

railway siding, to maintain all related records

and transfer of all the transportation charges

including.

1711 SALE OF AMMONIA

INDUSTRIAL UREA &

NITROGEN

Accounting for sale of ammonia, industrial

urea, nitrogen to keep relevant accounting

reports.

1712 SALES TAX Submission of returns as prescribed by GST

act, 1969 and CST act, payment to wards

sales tax on transfer of sales/stock of urea

sales, ammonia, scrap sales, follow-up of

pending matters and assessment etc.

1713 ESTABLISHMENT Release payment towards all employees

21

related matters like salary/wages, loans and

advances etc., payments to out sides

hospital /doctors, security of HBL &

conveyance loans etc., and to maintain

personal records.

1714 INVENTORY Raw Materials, stores, spares and packing

material are valued at lower of monthly

weighted average cost.

1715 BOOKS Maintenance of books of accounts like general

ledger, journal, cash book and bank book,

preparation of trial balance on monthly basis,

quarterly annual reports, and coordination of

internal audit / statutory audit. To release

payments to GAIL, GEB, HPCL, ONGC, etc.

1716 O & M OF HAEP PLANT To deal with operation & maintenance contract

for running and maintenance of HAEP plant

and to keep all relevant accounting records.

1717 SCRAP SALES Receipt of payment towards sale of scrap and

to maintain related accounting records.

1718 PO CONCURRENCE Scrutiny of proposals received from material

department for procurement of material and to

accord finance concurrence.

1719 WO CONCURRENCE Scrutiny of proposals received from various

departments for procurement of services for

running, maintenance and up gradation of the

plant.

22

Research Project

23

INTRODUCTION OF STUDY

Every business firm requires certain amount of working capital to carry out its day to day activities. Indeed each firm differs in its requirement of working capital.

We know that each firm aims at maximizing the wealth of shareholders and to maximize shareholder’s wealth a firm should be earn sufficient return from its operations. Earning a steady amount of profit requires successful sales actively. And there is always an operation cycle involved in the conversion of sales in to cash.

The return on investment is the product of earning as a percentage of sales and turnover of an asset that produced these sales the two tire approach concentrate attention on the separable forces contributing to profile.

Thus, profitability is determined by administration of funds by any other factors. In fact one of the central tasks of financial management is to control and accelerate funds availability and generate higher sales per unit of assets. Given the number of times average investments is turned over, it is evident that higher the velocity, the larger is the return on capital employed and more efficient the firm is in utilizing its resources.

Thus, most of the companies aim at managing its day to day financial requirements. This emphasis significant of working capital.

24

CHAPTER3

LITERATURE REVIEW

25

International Management Review,

Vol. 4 No. 1

June 2008

By B. A Ranjith Appuhami

The Impact of Firms' Capital Expenditure on Working Capital Management

The purpose of this research is to investigate the impact of firms' capital

expenditure on their working capital management. The author used the data

colleted from listed companies in the Thailand Stock Exchange. The study used

Shulman and Cox's (1985) Net Liquidity Balance and Working Capital

Requirement as a proxy for working capital measurement and developed multiple

regression models. The empirical research found that firms' capital expenditure

has a significant impact on working capital management. The study also found

that the firms' operating cash flow, which was recognized as a control variable,

has a significant relationship with working capital management, which is

consistent with findings of previous similar researches. The findings enhance the

knowledge base of working capital management and will help companies

manage working capital efficiently in growing situations associated with capital

expenditure.

The impact of working capital investment on the value of a company. (Accounting Issues).

Publication The RMA Journal

Publication Date: 01-APR-03:

26

Here in this article it is stated that company’s Net Working Capital is the only

parameter that the banker would judge while issuing short term loan to the

company. From a banker's perspective, NWC represents the owner's equity in

these working assets, and up to a point, that is a good thing.

NWC and sales growth. One way to gauge the appropriateness of NWC is to

relate it to sales. After all, working capital investment is a prerequisite to growing

sales. Increasing the inventory depth and breadth creates more customer appeal.

Extending more liberal credit terms helps the company sell to more customers.

Thus, sales growth usually requires more working capital.

ICRA Rating Feature Rating Methodology for Fertilizer Industryhttp://www.icra.in/Files/PDF/ArticleFiles/2009-October-Rating-Methodology-Fert.pdfICRA Rating Services Page 6 of 8

Working capital intensity: The analysis here evaluates the trends in the issuer’s key

working capital indicators like Receivables, Inventory and Creditors, again with respect

to industry peers. Timely availability of subsidy can influence the liquidity position of the

fertilizer manufacturers. As the subsidy as a percentage of the normative cost of sales

has been rising in the recent past because of rise in feedstock prices and lack of

commensurate rise in the FGP, any delays in the receipt of subsidy can squeeze the

liquidity position of the companies in this sector. In the recent past there have been

delays by GOI with regard to payment of subsidy, on account of inadequate provision in

the Union Budget for subsidy, which has had to be subsequently revised upwards with a

time lag. GOI has also resorted to part payment of subsidy through fertilizer bonds, and

fertilizer manufacturers have had difficulties in liquidating the same in the market in the

absence of SLR status. Changes in the interest rates in the market have also influenced

the current value of these bonds, requiring provisioning in an era of rising interest rate.

In such a scenario, high financial flexibility in the form of ability to raise resources to the

extent warranted by the delays in release of subsidy can help the liquidity position of the

companies.

27

http://www.icra.in/Files/PDF/ArticleFiles/2009-October-Rating-Methodology-Fert.pdf

http://www.icra.in/Files/PDF/ArticleFiles/2009-October-Rating-Methodology-Fert.pdf

Chapter

4

Identification of Study

28

TITLE OF THE PROJECT

Study on Working Capital Management of Krishak Bharti Cooperative Ltd.,

Hazira, Surat.

STATEMENT OF THE PROJECT

“To know the policy and feasibility of working capital management of

Krishak Bharti Cooperative Ltd.”

SCOPE OF THE STUDY

This study would be useful for the company to know weather their

working capital is functioning properly.

This study would be useful to the company to know what are changes

required in their current assets and current liabilities.

OBJECTIVE OF THE STUDY

To know the liquidity / solvency position of Krishak Bharti Cooperative

Ltd.

To know the requirement of working capital in KRIBHCO Ltd.

To know the current asset policy of KRIBHCO Ltd.

29

LIMITATION OF STUDY

Time constrain is the major limitation.

Dependency and reliability of secondary data sources.

Lack of professionalism in the research area

CHAPTER5

30

Research Methodolo

gy

(1) Research Design

For fact finding investigation with adequate interpretation I had considered

exploratory research design.

(2) Data Collection Method

31

This study is conducted on the basis of secondary data i.e. through

company’s past few years annual reports and from books.

(3) Sources of data

Secondary Data Material given by the company

(4) Data Collection Tools

Material given by the company

Books

Internet

(5) Reference period

This study would cover the time period of 8 weeks starting from 7 th June to

24th July 2010.

32

CHAPTER

6

THEORITICAL

BACKGROUND

33

Working capital, also known as "WC", is a financial metric which represents

operating liquidity available to a business. Along with fixed assets such as plant

and equipment, working capital is considered a part of operating capital. It is

calculated as current assets minus current liabilities. If current assets are less

than current liabilities, an entity has a working capital deficiency, also called a

working capital deficit. Net working capital is working capital minus cash (which

is a current asset) and minus interest bearing liabilities (i.e. short term debt). It is

a derivation of working capital, that is commonly used in valuation techniques

such as DCFs (Discounted cash flows).

Working Capital = Current Assets − Current Liabilities

A company can be endowed with assets and profitability but short of liquidity if its

assets cannot readily be converted into cash. Positive working capital is required

to ensure that a firm is able to continue its operations and that it has sufficient

funds to satisfy both maturing short-term debt and upcoming operational

expenses. The management of working capital involves managing inventories,

accounts receivable and payable and cash.

Decisions relating to working capital and short term financing are referred to as

working capital management. These involve managing the relationship between a

firm's 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 operations and that it

has sufficient cash flow to satisfy both maturing short-term debt and upcoming

operational expenses.

Management of working capital

Guided by the above criteria, management will use a combination of policies and

techniques for the management of working capital. These policies aim at

34

managing the current assets (generally cash and cash equivalents, inventories

and debtors) and the short term financing, such that cash flows and returns are

acceptable.

Cash management. Identify the cash balance which allows for the business

to meet day to day expenses, but reduces cash holding costs.

Inventory management. Identify the level of inventory which allows for

uninterrupted production but reduces the investment in raw materials - and

minimizes reordering costs - and hence increases cash flow; see Supply

chain management; Just In Time (JIT); Economic order quantity (EOQ);

Economic production quantity

Debtors management. Identify the appropriate credit policy, i.e. credit terms

which will attract customers, such that any impact on cash flows and the cash

conversion cycle will be offset by increased revenue and hence Return on

Capital (or vice versa); see Discounts and allowances.

Short term financing. Identify the appropriate source of financing, given the

cash conversion cycle: the inventory is ideally financed by credit granted by

the supplier; however, it may be necessary to utilize a bank loan (or

overdraft), or to "convert debtors to cash" through "factoring".

35

CHAPTER

7

DATA

ANALYSIS

36

WORKING CAPITAL MANAGEMENT

There are two concept of working capital – Gross and Net working capital.

Gross working capital refers to the firm’s investment in current assets.

Current assets are the assets which can be converted in cash within an

accounting year and include cash, short-term securities, debtors, bills

receivable, and stock (inventory).

Net working capital refers to the difference between current assets and

current liabilities. Current liabilities are those claims of outsiders which are

expected to mature for payment within an accounting year and include

creditors, bills payables and outstanding expenses. Net working capital can

be positive or negative. Positive net working capital will arise when current

assets exceeds current liabilities. A negative net working capital will arise

when current liabilities excess of current assets.

KRIBHCO’s Net working capital and gross working capital

Year 2009-10 2008-09 2007-08 2006-07 2005-06

Current Assets

(A)

1355.14 1567.97 1851.78 1577.00 1421.00

Current

Liabilities (B)

546.05 507.76 498.58 342.35 297.24

Net Working

Capital (A - B)

808.09 1060.21 1353.20 1234.65 1123.76

37

Gross Working Capital

1355

.1

1568

1851

.8

1577

1421

0

500

1000

1500

2000

Rupees in Crore

2009-10 2008-09 2007-08 2006-07 2005-06

Currnet assets

Gross working capital

Net working Capital

809.

09

1060

.2

1353

.2

1234

.7

1123

.8

0

200

400

600

800

1000

1200

1400

2009-10 2008-09 2007-08 2006-07 2005-06

Net Working Capital

38

Operating Cycle

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

resources into inventories, into cash. The operating cycle of manufacturing

company involves three phases:

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

Manufacturing of the product which includes conversion of raw material into

work in-progress into finished goods.

Sale of product either for cash or on credit. Credit sales create account

receivable for collection.

How length of operating cycle is determined?

The length of operating cycle of manufacturing firm is the sum of :

I. Inventory conversion period (ICP).

II. Debtors (receivable) conversion period (DCP).

The Inventory conversion period (ICP) is the total time needed for producing

and selling the product. Typically, it includes: (A) Raw Material Conversion

Period (RMCP), (B) Work-in-progress conversion period (WIPCP), and (C)

Finished goods conversion period (FGCP).

The Debtors conversion period (DCP) is the time required to collect the

outstanding amount from the customers.

The total of inventory conversion period and debtors conversion period is referred

to as Gross Operating Cycle.

39

The Creditors (Payable) deferral period (CDP) is the length of time the firm is

able to defer the payments on various resource purchases.

The difference between Gross operating cycle and Creditors deferral period is the

Net Operating Cycle.

GOC = ICP + DCP

ICP = RMCP + WIPCP + FGCP

NOC = GOC – CDP

RMCP = Raw material Inventory .

[Raw material consumption] / 360

WIPCP = Work-in-progress inventory

[Cost of Production] / 360

FGCP = Finished goods inventory

[Cost of Goods sold] / 360

DCP = Debtors * 360

Credit sales

CDP = Creditors * 360

Credit purchases

40

KRIBHCO’s Operating Cycle Calculation

(Rupees in Lakh)

No. Items 2009-10 2008-09 2007-08

1 Raw Material Conversion

Period

(A) Raw Material

Consumption

1,92,094.42 2,08,771.95 1,60,243.05

(B) Raw Material

Consumption per day

526.29 571.98 439.02

(C) Raw Material Inventory 1310.33 5129.91 11,020.20

(D) Raw Material inventory

holding days

2.48 days 8.96 days 25.10 days

2 Work-in-Progress

conversion period

(A) Cost of production 2,10,763.57 2,19,848.06 1,73,906.48

(B) Cost of production per

day

577.43 602.32 476.46

(C) Work-in-Process

inventory

55.14 33.97 61.77

(D) Work-in process

inventory holding days


3 Finished Goods

Conversion Period

(A) Cost of Good sold 2,61,110.66 2,64,057.79 2,18,878.13

(B) Cost of Good sold per 715.37 723.45 599.67

41

days

(C) Finished goods

inventory

1252.76 5095.94 10,958.76

(D) Finished goods

inventory holding days


4 Collection Period

(A) Credit sales 1,64,708.58 1,53,219.90 1,40,076.09

(B) Sales per day 451.26 419.78 383.77

(C) Debtors 26,482.58 40,752.96 61,285.95

(D) Debtors Outstanding

days

58.68 days 97.08 days 159.69 days

5 Creditors Deferral Period

(A) Credit Purchases 1,88,274.84 2,02,881.66 1,56,566.27

(B) Purchases per day 515.82 555.84 428.95

(C) Creditors 10,726.98 10,915.32 15,122.52

(D) Creditors outstanding

days

20.70 days 19.64 days 35.25 days

Summary of Operating Cycle calculations (Number of days)

2009-10 2008-09 2007-08

Gross Operating Cycle

1 Inventory

Conversion Period

I. Raw material 2.48 8.96 25.10

II. Work in process 0.09 0.05 0.13

III. Finished goods 1.75 4.23 7.04 16.05 18.27 43.50

2 Debtors Conversion

Period

58.68 97.08 159.69

3 Gross Operating

Cycle (1+2)

63 113 203

4 Creditors Deferral 21 20 35

42

Period

5 Net Operating Cycle

(3 - 4)

42 93 168

1. RATIO ANALYSIS

A ratio is a simple arithmetical expression one number to another. The

technique of ratio analysis can be employed for measuring short-term

liquidity or working capital position of a firm. The following ratios can be

calculated for these purposes:

1. Current ratio.

2. Quick ratio

3. Absolute liquid ratio

4. Inventory turnover.

5. Receivables turnover.

6. Payable turnover ratio.

7. Working capital turnover ratio.

8. Working capital leverage

43

1. CURRENT RATIO

Current Ratio, also known as working capital ratio is a measure of general

liquidity and its most widely used to make the analysis of short-term financial

position or liquidity of a firm. It is defined as the relation between current

assets and current liabilities. Thus,

Current Ratio = Current assets

Current Liabilities

The two components of this ratio are:

1) CURRENT ASSETS

2) CURRENT LIABILITES

Current assets include cash, marketable securities, bill receivables, sundry

debtors, inventories and work-in-progresses. Current liabilities include

outstanding expenses, bill payable, dividend payable etc.

A relatively high current ratio is an indication that the firm is liquid and has the

ability to pay its current obligations in time. On the hand a low current ratio

represents that the liquidity position of the firm is not good and the firm shall

not be able to pay its current liabilities in time. A ratio equal or near to the rule

of thumb of 2:1 i.e. current assets double the current liabilities is considered to

be satisfactory.

CALCULATION OF CURRENT RATIO OF KRIBHCO

(Rupees in Crore)

No Particulars 2009-10 2008-09 2007-08

1 Current Assets 1355.14 1567.97 1851.78

44

2 Current Liabilities 546.05 507.76 498.58

3 Current Ratio 2.48 3.61 3.71

Current Ratio

3.71 3.61

2.48

0

0.5

1

1.5

2

2.5

3

3.5

4

2007-08 2008-09 2009-10

Interpretation

This shows that the current ratio of KRIBHCO is shrinking as the compare to

previous years. But still the ratio is on ideal position.

2. QUICK RATIO

Quick ratio is a more rigorous test of liquidity than current ratio. Quick ratio may

be defined as the relationship between quick/liquid assets and current or liquid

liabilities. An asset is said to be liquid if it can be converted into cash with a short

period without loss of value. It measures the firms’ capacity to pay off current

obligations immediately.

Quick Ratio = Quick assets

Current Liabilities

Where quick assets are

Current assets – Stock (Inventory)

45

A high ratio is an indication that the firm is liquid and has the ability to meet its

current liabilities in time and on the other hand a low quick ratio represents that

the firms’ liquidity position is not good.

As a rule of thumb ratio of 1:1 is considered satisfactory. It is generally thought

that if quick assets are equal to the current liabilities then the concern may be

able to meet its short-term obligations. However, a firm having high quick ratio

may not have a satisfactory liquidity position if it has slow paying debtors. On the

other hand, a firm having a low liquidity position if it has fast moving inventories.

(Rupees in Lakh)

Particulars 2009-10 2008-09 2007-08

Quick Assets 1,23,722.14 1,38,246.14 1,63,773.48

Current Liabilities 54,605.03 50776.12 49,858.31

Quick Ratio 2.27 2.72 3.28

Quick Ratio

3.28

2.72

2.27

0

0.5

1

1.5

2

2.5

3

3.5

2007-08 2008-09 2009-10

Interpretation

This shows that the Quick ratio of KRIBHCO is decreasing as the compare to

previous years. But still the ratio is over and above the satisfactory level.

46

B) Current assets movement ratios

Funds are invested in various assets in business to make sales and earn

profits. The efficiency with which assets are managed directly affects the volume

of sales. The better the management of assets, large is the amount of sales and

profits. Current assets movement ratios measure the efficiency with which a firm

manages its resources. These ratios are called turnover ratios because they

indicate the speed with which assets are converted or turned over into sales.

Depending upon the purpose, a number of turnover ratios can be calculated.

These are :

1. Inventory Turnover Ratio

2. Debtors Turnover Ratio

3. Creditors Turnover Ratio

4. Working Capital Turnover Ratio

The current ratio and quick ratio give misleading results if current assets include

high amount of debtors due to slow credit collections and moreover if the assets

include high amount of slow moving inventories. As both the ratios ignore the

movement of current assets, it is important to calculate the turnover ratio.

47

1. INVENTORY TURNOVER OR STOCK TURNOVER RATIO :

Every firm has to maintain a certain amount of inventory of finished goods so as

to meet the requirements of the business. But the level of inventory should

neither be too high nor too low. Because it is harmful to hold more inventory as

some amount of capital is blocked in it and some cost is involved in it. It will

therefore be advisable to dispose the inventory as soon as possible.

INVENTORY TURNOVER RATIO = COST OF GOOD SOLD

AVERAGE INVENTORY

Inventory turnover ratio measures the speed with which the stock is converted

into sales. Usually a high inventory ratio indicates an efficient management of

inventory because more frequently the stocks are sold ; the lesser amount of

money is required to finance the inventory. Where as low inventory turnover ratio

indicates the inefficient management of inventory. A low inventory turnover

implies over investment in inventories, dull business, poor quality of goods, stock

accumulations and slow moving goods and low profits as compared to total

investment.

AVERAGE STOCK = OPENING STOCK + CLOSING STOCK

2

(Rupees in Lakh)

Particulars 2009-10 2008-09 2007-08

COGS 2,61,110.66 2,64,057.13 1,95,527.99

Ave. Inventory 15,171.33 19,977.73 23,247.73

Inventory

Turnover ratios

17.21 times 13.22 times 8.41 times

48

Inventory turnover Ratio

8.41

13.22

17.21

02

46

810

1214

1618

20

2007-08 2008-09 2009-10

Tim

es

Interpretation

This ratio measures the speed with which the stock is converted into sales. As we

can see the ratio is increase year after year and it is very good for the company.

2. INVENTORY CONVERSION PERIOD:

Inventory conversion period shows that how many days inventories takes to

convert from raw material to finished goods.

INVENTORY CONVERSION PERIOD = 365 (net working days)

INVENTORY TURNOVER RATIO

(Rupees in Lakh)

Particulars 2009-10 2008-09 2007-08

Days 365 365 365

Inventory

Turnover Ratios


ICP 21.20 days 27.61 days 43.40 days

49

3. DEBTORS TURNOVER RATIO :

A concern may sell its goods on cash as well as on credit to increase its sales

and a liberal credit policy may result in tying up substantial funds of a firm in the

form of trade debtors. Trade debtors are expected to be converted into cash

within a short period and are included in current assets. So liquidity position of a

concern also depends upon the quality of trade debtors. Two types of ratio can

be calculated to evaluate the quality of debtors.

a) Debtors Turnover Ratio

b) Average Collection Period

DEBTORS TURNOVER RATIO = TOTAL SALES (CREDIT)

AVERAGE DEBTORS

Debtor’s velocity indicates the number of times the debtors are turned over during

a year. Generally higher the value of debtor’s turnover ratio the more efficient is

the management of debtors/sales or more liquid are the debtors. Whereas a low

debtors turnover ratio indicates poor management of debtors/sales and less liquid

debtors. This ratio should be compared with ratios of other firms doing the same

business and a trend may be found to make a better interpretation of the ratio.

AVERAGE DEBTORS= OPENING DEBTOR+CLOSING DEBTOR

2

(Rupees in Lakh)

Particulars 2009-10 2008-09 2007-08

Total Credit Sales 1,64,708.58 1,53,219.90 1,40,076.09

Ave. Debtors 33,617.85 51,019.47 48,511.41

Debtors Turnover Ratio 4.90 times 3.00 times 2.88 times

50

Debtors turnover Ratio

2.88 3

4.9

0

1

2

3

4

5

6

2007-08 2008-09 2009-10

Tim

es

Interpretation

Debtor’s velocity indicates the number of times the debtors are turned over during

a year. It means time taken to convert debtors into cash. Here higher ratio

indicates more liquid are the debtors.

4. AVERAGE COLLECTION PERIOD :

Average Collection Period = No. of Working Days

Debtors Turnover Ratio

The average collection period ratio represents the average number of days for

which a firm has to wait before its receivables are converted into cash. It

measures the quality of debtors. Generally, shorter the average collection period

the better is the quality of debtors as a short collection period implies quick

payment by debtors and vice-versa.

Average Collection Period = 365 (Net Working Days)

Debtors Turnover Ratio

51

(Rupees in Lakh)

Year 2009-10 2008-09 2007-08

Days 365 365 365

Debtors Turnover

Ratio


Ave. Collection

Period

74.48 days 121.67 days 126.74 days

5. Creditors Turnover Ratio

It signifies the credit period enjoyed by the firm in paying creditors. Accounts

payable include both sundry creditors and bills payable. Same as debtors

turnover ratio, creditors turnover ratio can be calculated in two forms, creditors

turnover ratio and average payment period.

Creditors Turnover ratio = Credit Purchases

Ave. Creditors

(Rupees in Lakh)

Particulars 2009-10 2008-09 2007-08

Credit Purchases 1,88,274.84 2,00,437.76 1,56,566.27

Ave. Creditors 10,821.15 13,018.32 13,433.06

Creditors

turnover Ratio


52

Creditors turnover Ratio

11.66

15.4

17.4

02

46

810

1214

1618

20

2007-08 2008-09 2009-10

Tim

es

Interpretation

It signifies the credit period enjoyed by the firm in paying creditors. Here the ratio

is increase year after year which is good for the company and company has to

enjoy keeping money more time with itself.

6. Average Payment Period:

Average payment period ratio gives the average credit period enjoyed from the

creditors.

Average Payment Period = Trade Creditors / Average Daily Credit Purchase]

[Average Daily Credit Purchase= Credit Purchase / No. of working days in a

year]

The average payment period ratio represents the number of days by the firm to

pay its creditors. A high creditors turnover ratio or a lower credit period ratio

signifies that the creditors are being paid promptly. This situation enhances the

credit worthiness of the company. However a very favorable ratio to this effect

also shows that the business is not taking the full advantage of credit facilities

allowed by the creditors.

(Rupees in Lakh)

53

Particulars 2009-10 2008-07 2007-08

Trade Creditors 10,726.98 10,915.32 15,122.52

Ave. Daily

Purchases

515.82 549.14 428.95

Ave. Payment

Period

20.91 days 19.88 days 35.25 days

7. WORKING CAPITAL TURNOVER RATIO:

A measurement comparing the depletion of working capital to the generation of

sales over a given period. This provides some useful information as to how

effectively a company is using its working capital to generate sales.

Working capital turnover ratio indicates the velocity of utilization of net working

capital. This ratio indicates the number of times the working capital is turned over

in the course of the year. This ratio measures the efficiency with which the

working capital is used by the firm. A higher ratio indicates efficient utilization of

working capital and a low ratio indicates otherwise. But a very high working

capital turnover is not a good situation for any firm.

WORKING CAPITAL TURNOVER RATIO = Sales

Net working capital

(Rupees in Crore)

Particular 2009-10 2008-09 2007-08

Sales 1637.39 1512.40 1385.62

Net working capital 809.09 1060.21 1325.21

Working Capital Turnover ratio 2.02 1.43 1.05

54

Working Capital turnover Ratio

1.05

1.43

2.02

0

0.5

1

1.5

2

2.5

2007-08 2008-09 2009-10

Interpretation

This ratio indicates low much net working capital requires for sales. In 2009-10,

the reciprocal of this ratio (1/2.02 = .50) shows that for sales of Rs. 1 the

company requires 50 paisa as working capital. In 2008-09 for sale of Rs. 1 the

company requires 70 paisa as working capital. In 2007-08 for sale of Rs. 1 the

company requires 95 paisa as working capital. Thus this ratio is helpful to

forecast the working capital requirement on the basis of sale.

55

Current Assets Policy

The level of current assets can be measured by relating current assets to fixed

assets. Dividing Current assets by fixed assets gives CA/FA ratio. Assuming a

constant level of fixed assets, a higher the CA/FA ratio indicates a conservative

current assets policy, a lower the CA/FA ratio indicates aggressive current assets

policy assuming other factors to be constant. A conservative policy implies

greater liquidity and lower risk while aggressive current assets policy implies

higher risk and poor liquidity. Moderate current assets policy fall in middle of

conservative and aggressive policies.

Current Assets policy = Current Assets

Fixed Assets

(Rupees in Lakh)

Current Asset

policy

2009-10 2009 -08 2007-08

Current Assets 1,35,514.16 1,56,796.77 1,85,178.30

Fixed Assets 39386.91 35943.60 36802.52

CA/FA ratio 3.44 4.36 5.03

Interpretation

Looking at CA/FA ratio it would be said that the company is following


company moving towards aggressive policy.

56

CHAPTER

8

FINDINGS

57

Findings

As per the analysis it was found that the KRIBHCO’s Gross Working Capital is

declining in past three years. In 2009-10 as compare to previous year i.e.

2008-09 it is declining about 15 percent. And 37 percent decline as compare

to 2007-08.

Same way the Net Working Capital also declining for past three years. At

present in 2009-10 the Net Working Capital is decline about 24 percent as

compare to previous year 2008-09. And 40 percent as compare to 2007-08.

Current Liabilities increase as compare to past two years. At present in 2009-

10 the current liabilities increase by 7 percent as compare to previous year

2008-09. And 13 percent increase as compare to 2007-08.

Gross Operating Cycle of the KRIBHCO is declining as compare to past two

years i.e. in 2007-08 it was 203 days; in 2008-09 it was 113 days and in

2009-10 it is 63 days.

Net Operating Cycle if KRIBHCO is also decline as compare to past two years

rather it decline year after year i.e. in 2007-08 it was 168 days; in 2008-09 it

was 93 days and in 2009-10 it is 42 days.

Current ratio of a company is shrinking as compare to previous two years i.e.

3.71 in 2007-08 to 3.61 in 2008-09 to 2.48 in 2009-10. But it is still on its ideal

condition.

58

Same way quick ratio is also decline year after year i.e. in 2007-08 it was 3.28

and in 2008-09 it was 2.72 and in 2009-10 it is 2.27. But it is still over and

above the ideal and satisfactory level so no need to worry about.

Inventory turnover ratio is improving year after year i.e. in 2007-08 it was 8.41

times and in 2008-09 it was 13.22 times and in 2009-10 it is 17.21 times.

This is very good for the company the inventories are not kept idle for long.

The conversion period of an inventory also decline i.e. in 2007-08 it is 43.40

days, and in 2008-09 it is 27.61 days, and in 2009-10 it is 21.20 days. So we

can say that conversion of raw material to finished goods is become speedier

as the turnover ratio increase.

Debtors turnover ratio is also improving or increasing as we can see that in

2007-08 ratio is 2.88 times and in2008-09 ratio is 3 times and in 2009-10

ratio is 4.9 times. Which indicate as the year passes the debtors as become

more liquid.

Same way the average collection period is also decreases mean in 2007-08 it

was 126.74 days and in 2008-09 it was 121.67 days and in 2009-10 it move

drastically i.e. 74.48 days. So we can say that improvement over pervious

year is remarkable.

Creditor turnover ratio is also improving year after year which means now the

firm enjoyed more credit period by paying its creditors. In 2007-08 it was

11.66 times and in 2008-09 it was 15.40 times and in 2009-10 it is 17.40

times.

Working capital turnover ratio also improving it means Net Working Capital

requirement for Sales is decreases. In 2007-08 it was 1.05 and in 2008-09 it

was 1.43 and in 2009-10 it is 2.02; which means for sale of Rs. 1, The

company require in 2007-08 it was 95 paisa and in 2008-09 it was 70 paisa

and in 2009-10 it was 50 paisa, which is quite less then the previous two

years.

59

Looking at CA/FA ratio it would be said that the company is following


company moving towards aggressive policy. As it is seen in 2007-08 ratio is

5.03, in 2008-09 ratio is 4.36 and in 2009-10 ratio is 3.44

Chapter9

Suggestion

60

Suggestions

According to the study it would said the although the net working capital of

company decreasing the company is still in good position because the

operating cycle of the company is decrease it means now the cycle become

speedier and early and fast recovery of cash it denote.

Looking At the current ratio it getting decrease year after year but company

still in ideal position means liquidity position of company is still better but they

have to be careful about this declining trend of current ratio if this would

continue then it would be difficult for company to meet its obligation against

current liabilities.

The turnover ratios are showing good progress these means better liquidity

and solvency of the company.

61

Working capital turnover ratio is improving it means now the company

required less working capital for sale. It denotes that as compare to earlier

now the company required less working capital. It means optimum use of

working capital.

Overall looking at the study it would said that company have very sound policy

to manage its working capital. Current asset of a company are enough to

meet the obligation of paying its current liabilities.

CHAPTER10

62

CONCLUSION

63

CONCLUSION

Overall it was nice experience with Krishak Bharti Cooperative Ltd., lot of things

to learn during this two month training period. I had conducted study on Working

capital management, I would say that the company having very sound working

capital management, company having very good liquidity and solvency position.

Overall company showing progress in their working capital management. Also

very good cooperation from the employees side who had helped me in my study.

BIBLIOGRAPHY

Annual Reports

64

27th Annual Report

28th Annual Report

29th Annual Report

30th Annual Report

Books

Pandey I.M., Financial Management, Ninth Edition – Vikas Publishing House Pvt.

Ltd. Noida, New Delhi.

Website

www.kribhco.net

www.kribhco.com

65

http://www.kribhco.net/

Annexure

BALANCE SHEET AS ON 31 ST MARCH

(Rs. in lakhs)Particular Year

66

2009-10 2008-09 2007-08 2006-07 2005-06Share Holders’ Fund:Share Capital 39066.58 39073.33 39609.93 39610.68 39467.38Reserve & Surplus 230646.26 215867.72 198243.15 189141.73 177901.81Share Application Money 0.00 1.00 0.00 0.00 0.00Secured Loans from Bank

22.81 23.00 75.63 40.69 0.00

Unsecured Loans From bank

0.00 9191.00 22396.87 0.00 0.00

Deferred tax liability 1663.31 502.89 0.00 2461.18 3031.70Total 271398,96 264658.61 260323.58 231254.28 220400.89

Application of Fund:Fix Assets:Gross Block 129077.77 124060.19 122432.34 111509.51 105369.44Less: Depreciation 89690.86 88116.59 85629.82 84476.54 82911.78Net Block 39386.91 35943.60 36802.52 27032.97 22457.66Capital Work-in-process(at cost)

10457.69 2352.56 726.23 0.00 0.00

Investment 140645.23 120341.80 87056.46 80756.46 85567.28

A) Current Assets:Inventory 11792.02 18550.63 21404.82 25090.64 15289.98Sundry Debtors(Unsecure)

26482.74 40752.96 61285.98 14079.60 15252.95

Cash & Bank balance 82227.13 83456.18 90504.27 80241.37 93558.64Loans & Advances 15012.27 14037.00 11983.23 38288.06 17998.69

135514.16 156796.77 185178.30 157699.67 142100.26Less: B) Current LiabilitiesCurrent Liabilities 30685.19 29808.48 27506.06 18542.55 15104.14Provisions 23919.84 20967.64 22352.25 15692.27 14620.17

54605.03 50776.12 49858.31 34234.82 29724.31Net Current Assets (A-B) 80909.13 106020.65 135319.99 123464.85 112375.95

Total 271398.96 264658.61 260323.58 231254.28 220400.89

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH

(Rs in lakh)Particular Year

67

2009-10 2008-09 2007-08 2006-07 2005-06Income from Operations/other revenue:Sales (Net of discount/rebates)

164708.58 153219.90 140076.09 135383.39 126887.14

Less: Excise Duty (970.19) (1979.77) (1514.47) (986.29) (1157.40)Concession/Remuneration from Govt. Of India

95968.98 104672.55 84479.12 22463.25 14027.97

Freight Subsidiary 0.00 0.00 0.00 11232.91 11049.97Other Revenue 30478.17 40974.77 26656.83 42274.31 25533.48Accretion/Discretion in stocks

(3819.58) (5890.29) (3676.78) 8320.78 856.29

286365.96 290997.16 246020.79 218688.35 177197.45

LESS: Cost of Operations/ Other outgoingsConsumption of Raw Material & Stores, etc : Row Materials 59846.65 78759.09 65404.97 47310.96 47231.80Packing Materials 7013.08 4425.19 4138.33 3933.34 3808.34Chemicals & Catalysts 1122.68 846.43 724.75 505.57 368.83Power, Fuel & Water 28663.58 63699.59 40848.15 30793.20 21344.66Purchases of Products for resale:Seeds & Chemicals 3390.20 2943.11 2180.02 1403.93 1690.84Urea, DAP & Other Fertilizers

88238.65 49764.35 43270.05 61303.10 31658.09

Employees’ Remuneration & Benefits

22488.73 16966.40 17340.21 12149.55 11742.63

Other Expenses on Manufacturing, Administration & Distribution

46766.67 42863.27 42160.46 36220.55 29400.58

Interest 518.31 1037.52 531.99 147.25 230.13Depreciation/Amortization 3062.11 2752.84 2279.20 1762.54 1709.84

261110.66 264057.79 218878.13 195527.99 149185.74Net Profit of the year 25255.30 26939.37 27142.66 23160.36 28011.71Prior Period Income/(Expenditure) (Net)

21.82 (5.40) 70.88 (6.92) 8.65

Profit Before Tax 25277.12 26933.97 27213.54 23153.44 28020.36Provision for Taxation 2460.42 1921.27 6293.54 3829.48 8774.94Profit After Tax 22816.70 25012.70 20920.00 19323.96 19245.42

Continued…..

(Rs. in lakh)

Profit Transferred to:Capital Repatriation Fund 14.00 300.22 13.00 13.00 15.00

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Dividend Equalization Fund 0.00 0.00 2500.00 1500.00 2500.00Contribution to Prime Minister’s Relief Fund

0.00 1.00

Net Profit As Per the Malty State Co-operative Societies Act (MSCS Act)

22802.70 24712.48 18407.00 17810.96 16729.42

Less: Proposed Appropriations :Reserve Fund as per Bye-Law 58(i) of the Society

5700.68 6178.12 4601.75 4452.74 4182.36

Provision for Contribution to Co-operative Education Fund

228.03 247.12 184.07 178.11 167.29

Reserve Fund for Contingency as per Bye-Law 58(iii) of the Society

2280.27 2471.25 1840.70 1781.10 1672.94

Reserve for Donations 40.00 40.00 40.00 25.00 25.00Proposed Dividend 7767.40 7127.63 7920.50 7891.44 7846.69General Reserve 6786.32 8648.36 3819.98 3482.57 2835.14

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