Working Finishing

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CHAPTER -1

INTRODUCTION


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INTRODUCTION

Working capital means the part of the total assets of the business that change from one

form to another form in the ordinary course of business operations.

In a perfect world, there would be no necessity for current assets and liabilities

because there would be no uncertainty, no transaction costs, information search costs,

scheduling costs, or production and technology constraints. The unit cost of production would

not vary with the quantity produced. Borrowing and lending rates shall be same. Capital,

labour, and product market shall be perfectly competitive and would reflect all available

information, thus in such an environment, there would be no advantage for investing in short

term assets. However the world we live is not perfect. It is characterized by considerable

amount of uncertainty regarding the demand, market price, quality and availability of own

products and those of suppliers. There are transaction costs for purchasing or selling goods or

securities. Information is costly to obtain and is not equally distributed.

There are spreads between the borrowings and lending rates for investments

and financings of equal risks. Similarly each organization is faced with its own limits on the

production capacity and technologies it can employ there are fixed as well as variable costs

associated with production goods. In other words, the markets in which real firm operated are

not perfectly competitive. These real world circumstances introduce problems which require

the necessity of maintaining working capital. For example,, an organization may be faced

with an uncertainty regarding availability of sufficient quantity of crucial imputes in future at

reasonable price. This may necessitate the holding of inventory, current assets. Similarly an

organization may be faced with an uncertainty regarding the level of its future cash flows and

insufficient amount of cash may incur substantial costs. This may necessitate the holding of

reserve of short term marketable securities, again a short term capital asset. In corporate


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financial management, the term Working capital management (net) represents the excess of

current assets over current liabilities.

Working capital may be regarded as the life blood of business. Working

capital is of major importance to internal and external analysis because of its close

relationship with the current day-to-day operations of a business. Every business needs funds

for two purposes

Long term funds are required to create production facilities through purchase of fixed assetssuch as plants, machineries, lands, buildings & etc

Short term funds are required for the purchase of raw materials, payment of wages, and otherday-to-day expenses. It is otherwise known as revolving or circulating capital

Working Capital = Current AssetCurrent Liability.

The primary objective of working capital management is to ensure that sufficient cash

is available to

Meet day to day cash flow needs. Pay wages and salaries when they fall due Pay creditors to ensure continued supplies of goods and services. Pay government taxation and provider of capitaldividends and Ensure the long term survival of the business entity.

Concept of working capital

Gross Working Capital = Total of Current Asset

Net Working Capital = Excess of Current Asset over Current Liability


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INDUSTRY PROFILE

Solvent Extraction Industry

The solvent industry has achieved a phenomenal progress and at present there are 520

units having overall oil cake or oil seed processing capacity of more than 9.9 million/year.

The solvent extraction plays important role in the oil economy. Solvent extraction in India

was started in 1945. It had to struggle for more than 20 years to establish itself.

Crises of coconut industries in Kerala in 1960s

In the 1960s there was a crisis in coconut oil extraction industry in Kerala. After

conversion from wooden ghanis to rotaries the cost of the production had increased

considerably. By using this new method they were able to extract more oil from the coconut

cake. Earlier 20% of the oil was retained in the coconut cake, now it has reduced to 12%.

Although Kerala produces 80% of copra produced in the country large part of it was

sold to other state as copra itself and they were earning good profit when mills in Kerala

wasnt able to get enough copra for their daily needs. When oil industry in other parts of the

country was thriving in Kerala it was struggling. So they understood the need for

modernization of their mills. At that time Dr. P. S. Lokanathan committee set up to study the

feasibility of starting new industries in Kerala, recommended of establishment of 3 solvent

plants in Kerala and it was also proposed that one should be located in Thrissur itself.

Coconut oil millers co-operative society

Lion share of copra went to mills in Bombay and they were able to generate good

profits. To overcome the situation a co-operative society formed by name Coconut Oil

Millers Co-operative Society and it was decided that this society would act as an agent of

state trading corporation for distribution of copra.


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By seeing the performance of the Bombay group an investigation department was

assigned to investigate it. Then they found out that they were using expeller mills for

extracting oil and was able to reduce the oil content up to 6%. The industries in Kerala later

began to follow it.

Cattle feed Industry

From the beginning KSE Ltd marketed the buy product obtained from its

solvent extraction division in the brand name of Jersey Copra Cake. Most of the progress in

the cattle feed sector has come about in the past 30 years only. There are only few cattle feed

units in the country especially in Kerala. The cattle industry of the state has been utilizing the

indigenous raw material i.e. coconut cake, which is the residue left after the extraction of oil

from copra which is mainly used as cattle feed. Coconut cake contains 4-5% oil is generally

used for industrial purpose and deoiled cakes is used to make mixed cattle feed.

In Kerala the rotary cake was used as a cattle feed and actually this excessive oil

on cakes reduced the keeping quality of the cake and also upset the digestive system of the

cattle e. In foreign countries, the cattle is feed only with de-oiled cakes and according to the

dairy experts, the milk and fact contend of milk depends solely on the protein contend of the

feed. All these factors stress the importance of having a few cattle field industry in the state.

Thus in 1996, KSE Ltd. Entered the cattle field industry, setting up the new plan fir

manufacturing ready mixed cattle feed. The last three decades have been KSE emerging as

the leader in ready mixed cattle feed in the country. Today KSE Ltd. Commands the

recourses, expertise and infrastructure of manufacture a range of livestock feed in high

volumes, driven by a commitment to high standards of quality


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Dairy Industry

Most of the progress in the dairy sector has come about in the past 25 years only. Till

1970, the countrys milk production increased merely by 1% a year. But after the

intensification of cattle improvement programme through artificial insemination, using sasses

of exotic breeds and launch of operation flood, the production started rising rapidly from the

mid 19

The transformation of India from a milk deficit to a milk surplus country is essentially

the result of an intensive campaign launch by the Govt. and semi Govt. bodies to promote

animal husbandry as a means of generating income for the landless poor. The bulk of growth

in the milk output is therefore accounted for by the unorganized section consisting of millions

of small milk producers, feeding their cattle largely on crop residues.

Many of these producers have organized themselves into co-operative under the

umbrella if the National Dairy Development Board (NDDB) which had been running a highly

successful animal husbandry promotion programme named operation flood.

The private sector has now entered into this field in a big way, capitalizing on the

availability of cheap surplus milk to produce various kinds of dairy products for the domestic

and international market. Several dairy products like skimmed milk powder, whole milk

powder, and infant milk foods of western origin are now being produced in India. A variety

of cheeses, milk drinks, ice creams, pasteurized butter etc. which, were very common in this

country till a few decades ago are now available in abundance in department stores of big and

small cities. The main objective of this programme is to build a viable and self sustaining

national dairy industry capable of meeting the domestic demand for fresh liquid milk and

milk products and competing in the international area.


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COMPANY PROFILE

Cattle play a vital role in the economy of India. Cows and bullocks are regarded as the

foundation of agriculture in India. Cattle supplies the motive power for almost all agriculture

operations such as ploughing, lifting water from wells and the transport of produce to the

markets. They provide most of the manure used by farmers in India and often enable them to

earn something during this spare time by carting for hire; their unawareness of farmers about

the proper feeding methods of cows leads to cow milk productivity. Majorities of Indian

cattle are seriously underfed particularly cows in rural areas. Due to these reasons, the

importance of the cattle feed industry has been increased in India.

Kerala Solvent Extractions was registered as a public limited company on 25 th

September, 1963. The company was later renamed as KSE Limited and listed in the stock

exchanges of Mumbai, Chennai and Kochi. KSE, a company having annual turn of Rs. 250

crore, is the largest manufacturer of cattle feed.

It is marketing annually about 2.2 lakh tones of superior quality cattle feed. KSE is in

the oil extraction industry for the past 32 years.

The company has secured the National Productivity Award for the year 2001-2002 for

being first in terms of production efficiency in the animal feed sector. This is the sixth time in

arrow that the company has been selected for the most coveted award.

KSE, with a capital base of Rs. 36 crore embarks on an expansion to double its solvent

extraction capacity and add a most modern eco-friendly vegetable oil refining plant.


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ORIGIN

Copra crushing has been a native industry of Kerala. But inefficient crushing methods

and competition from the modernized oil mills elsewhere shattered coconut oil industry in

Kerala in early 1960s. It was as a part of the package program to revive coconut oil industry

in the state of Kerala that oil millers of Irinjalakuda and surrounding places formed

themselves into a corporate body to start a solvent extraction plant.

HISTORY

In 1963, KSE Ltd was established according to Indian Companies Act 1956. It was

registered as a public limited company on 25 th September, 1963. Its first production was

started in 1972 with a capacity of 40 tones per day. In 1980 the capacity of plant was raised to

60 tones per day. In 1983, a fully automatic cattle feed plant was added with a capacity of

120 tones per day capacity. By 1992 the capacity of solvent extraction plant was further

increased to 100 tones per day. In 1987, the plant capacity was increased to 180 tones over

day.

The companys second production unit with a capacity of 150 tones per day solvent

extraction commenced operation at Swaminathapuram. Dindigul district of Tamil Nadu in

1988 and 1989 respectively. The cattle feed capacity was subsequently increased to 180 tones

per day.

The third cattle feed plant of the company started operation at Vedagiri in Kottayam

district of Kerala in 1995. This plant is now working on three shifts producing around 150

tonnes per day. This plant has a basic installed capacity to go up to 240 tonnes per day. The

plant at Irinjalakuda and Vedagiri are fully automatic and key manufacturing operations are

controlled by microprocessors. Vedagiri project costing around Rs. 6 crore was fully financed


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out of internal sources of company. Company put up a vegetable oil refining plant at

Irinjalakuda at a cost of Rs. 1 crore in 1995. This project was also fully financed from

internal accruals. The company is reaming solvent extracted coconut oil and expeller

sunflower oil in the refinery plant.

Oil millers of Thrissur are the promoters of the company. It was registered in 1956

and incorporated as a public limited company in 1963 as per Indian Companies Act.

Kerala Solvent Extraction Limited was registered as a public limited company on 25 th

September 1963. The company was later renamed as KSE Limited. The company is listed in

three stock exchanges- Mumbai, Chennai, Cochin.

The company started production in1972 with a solvent extraction capacity of 40 MTS

per day. On1976 the company is modernized to cattle feed industry with a capacity of 50 tons

per day.

KSE Limited is a product oriented company. Cattle feed is the main product of the

company. The other products are oil-cake, de-oiled cake (JERSEY), Milk, Ice cream, etc..

De-oiled cake is marketed under the brand name JERSEY. Their Ice cream marketed under

the brand name Vesta, is well accepted in the market. Now they are trying to expand their

milk products.

In the early stages, the company faced financial difficulties, but was assisted by

K.S.I.D.C. (Kerala State Industrial Development Corporation) by subscribing to its twenty

five percent equity capital and I.F.C.I. (Industrial Finance Corporation of India).

KSE had computerized its operations way back. In the year 1999, KSE went

on to upgrade its EDP set up further. A custom made ERP soft ware was developed for its

units and head office through M/s R.R. Software Pvt. Ltd. Cochin and online computerization

was fully implemented at all its plants. Being custom made for KSE this ERP software, with


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SQL RDBMS front end on Visual basic and Windows NT OS , selflessly had integrated all

function of the organization viz FA, inventory, billing payroll ,PPC. MIS, share accounting

etc.

The head office at irinjalakuda has two servers and 40 Nodes running the

application. Other units, in all, have about 8 servers and about 50 Nodes. Their plant at

Vadagiri, Kottayam, has a computerized control room for monitoring, homogenization, size

reduction, batching, pelletisation, pellet cooling and aspiring system.

The manufacturing processes used in the company are

Wooden canes

Oil mill

Expeller mill

Solvent extraction

Now-a-days, the first three processes are out of use. Irinjalakkuda unit of the company

is mainly concentrated on solvent extraction process.

Irinjalakuda unit of the company consists of cattle feed plant and refining plant.

Challenges

Kerala feeds; Milma, Godrej, Prima, etc. are the main competitors to the company.

But the company is the number one producer of cattle feed in private sector. Now the

company is concentrated on producing more milk products. Projects for this purpose are on

consideration.


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SHARE CAPITAL OF THE COMPANY

The authorized share capital of the company is Rs.4 crores and issued and subscribed

capital is Rs. 32 crore. The par at value of one equity share capital is Rs. 10. The company

issued 6000, 135% redeemable cumulative preference shares of Rs. 100 each. The

redemption of these shares is at par after ten years but before fifteen years from the date of

their allotment. The company has made 2 bonus issues and one right issue. The company

went in for public issue of shares in 1994. Company shares are listed at the stock exchanges

at Cochin, Chennai, and Mumbai. The present market value of the companys share is Rs.

160 as on 22nd December, 2006. The reserves and surplus on 31st March, 2005 is Rs. 25

crores. The company declared a dividend of 125% for the year ended 31st March, 2006.


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GROWTH CHRONICLE

1972

Solvent plant commences operation

1976

Mixed cattle feed production begins

1987

Cattle feed production reaches 180 tonnes & Introduction of computers in the factory and office

1988

A new mixed cattle feed plant starts operation at Swaminathapuram, in Tamil Nadu with a

daily production capacity of 180 tonnes

1989

A solvent unit with a capacity of 120 tonnes per day commences operation at the Tamil Nadu plant

1990

Introduction of KS Supreme Pellets, a bypass protein cattle feed in the market

1991

Opens its Palghat branch

1992

Cattle feed manufacturing begins in third party units

1993

Enters export market

1994

Introduction of feed supplement KS Forte

Public issue and listing of shares

1995

Vegetable oil refining plant commissioned

KS Supreme - Sunflower Refined Oil launched

Calicut branch opens

1996

240 TPD cattle feed commences at Vedagiri, Kottayam Dist., Kerala


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1997

Company renamed as KSE Ltd.

1998

Fourth feed production unit at Palghat

Launches Dairy project

1999

A modern Childrens' Park and Information Center have been completed at Irinjalakuda for the

benefit of the public.

Company introduces KS Deluxe Plus the new pellet feed in HDPE bags for Kerala market.

2000

Company starts production and distribution of milk and milk products from Konikkara and

Thalaysthu Dairy Units

2002

20000 liter capacity Ice-Cream plant at palakkad commenced operation

2003

Started production of cattle feed at edayar leased plant ,kalamasserry

2004

Started a new solvent plant in KIFRA PARK

ISO9001:2000 Accreditation for irijalakkuda plant


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2005

Cattle feed production capacity at the irijalakkuda unit increased to 210 mts/day

2006

The 200 TDP solvent extraction plant at koratty commenced

A branch at coimbatore started for marketing Vesta Ice-Cream

Tenth consecutive productivity award

2007

Cattle feed production increased to 295 MTS

2009

Started a new 500 unit cattle plant at Irijalakkuda Unit

2010

Ice-cream plant at vedagiri, kottayam


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Board of Directors

Board of directors of the company has ten members including the managing director.

They are as follows-

NAME DESIGNATION

Mr. M. C. Paul Chairman and Managing director

Mr. T. O. Paul Executive director

Mr. A. P. George Director and legal advisor

Mr. K. P. John Director

Mr. T. C. Mathew Director

Mr. P. D. Anto Director

Mr. John francis K. Director

Dr. K. C. Vijayaraghavan Director

Mr. T. R. Ragulal Director

Chief General Manager of the company is Mr. Anand Menon. Mr. R.

Sankaranarayanan is the secretary-cum-chief finance manager.


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Bankers

KSE Limited banks with Bank of Baroda, Irinjalakkuda branch.

Units of KSE Limited

Head office

KSE Limited, Irinjalakkuda.

Production units (Kerala):

1. Irinjalakkuda unit;2. Vedagiri unit, Kurumullur;3. Palakkad unit, Palakkad;4. Diary unit, Konikkara;5. Edayar, Cochin;6. NIDA unit, Kanchikkode, Palakkad;7. Parapadi unit, Calicut.

Tamil nadu:

1. Swaminathapuram unit, Dindugal;2. Diary unit, Thalayuthu.

Karnataka:

1. Hinkal, Mysore.


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PRODUCT PROFILE

In the beginning stage of KSE limited had only solvent unit. After some time the

company started to produce jersey copra Cakes, compound cattle feed & refined sunflower

oil. Jersey copra cake, the coconut cake, which comes out of Solvent Extraction process is

made pure by de-solvent sing & named as Jersey Brand Copra Cake. At present it is

marketed in Kerala, Tamil Nadu & Gujarat Company started to produce ready mix compound

cattle feed because it was not able to fulfill the demand of Jersey copra cake . The company

was also producing food supplement for cattle feed

CATTLE FEED DEVISION

Cattle feed in 1976, the company started manufacturing ready mixed compound cattle

under the brand name K.S.Cattle Feed. The balanced ready mix feed manufactured after

due consideration of needs of the cattle in the state is well received all over Kerala, therefore

constituting its share in the milk production of the state.

Fully automatic & sophisticated live stock feed plant at 120 tonne productions per day

was established at Irinjalakuda to meet the increasing demand for cattle & this went into

commercial production in 1983.


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CATTLE FEED SEGMENTATION

Cattle Feed

Pellet Mash

Ordinary

Mash

Super

Mash

Special

Mash

JerseySupreme

Pellet

Deluxe

Plus

Deluxe


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RESEARCH PROBLEM

The problem of that is stated as the increasing the cost of production and highly

increasing the cost of raw materials of KSE Ltd, Iringalakuda

NEED FOR THE STUDY

Working capital management, which is concerned with decisions relating to the

current assets and current liabilities?. The key difference between long term financial

management and short term financial managementis in terms of the timing of cash.

While long term financial decisions like buying capital equipment or issuing

debentures involve cash flows over an extended period of time short terms finanacial decision

typically involve cash flows within a year or within the operating cycle of the firm. working

capital management is concerned with the problem that arise in attempting to manage the

current assets. It is the capital invested in different items of current assets needed for the

business,viz., inventory,debtors,cash and other current assets such has loans and advances to

third parties capital required for purchase of rawmaterial and for meeting day to day

expenditure on salaries, wages, rents, advertising etc., is called working capital.


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OBJECTIVES OF THE STUDY

I. To analyze the sources of working capital.II. To draw meaningful conclusion and put forward suggestion for effective

WORKING CAPITAL management.

III. To study the capital structure.IV. To understand firms working capital position.V. To determine the efficiency in cash, inventory, debtors, creditors.


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RESERCH METHODOLOGY

Research methodology is a way to systematically solve the research problem. It may

be understood as a science of studying how research is done scientifically. In it we study the

various steps that are generally adopted by a researcher in studying his research problem

along with the logic behind them. It is necessary for the researcher to know not only the

research methods/techniques but also the methodology.

METHODOLOGY OF STUDY

TYPE OF RESEARCH

Type of research employed is analytical research

COLLECTION OF DATA

Secondary data is mainly used for this study and the five year data from 2007-08 to

2011-12 pertaining to the study was collected from the company and the remaining from

books, magazines, journals, web sites etc.

TOOLS FOR ANALYSIS

Secondary data were analyzed and interpreted with the help of different tools such as

ratio analysis, graphs, tables, operating cycle, comparative balancesheets, schedule of

changing in working capital etc.

TIME PERIOD

The duration of the study was for a period of 2007 to 2012


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CHAPTER2

REVIEW OF LITERATURE


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REVIEW OF LITERATURE

The available studies on working capital management are briefly reviewed below :

NICOLA A. TARASHEV

This paper uses firm-level data to compare the performance of six structural credit risk

models in terms successfully they predict default. Structural models focus on the changes in

value of a corporate obligor assumes that default occurs when asset values cross some lower

threshold. The paper finds that the modal well but they dont fully capture the effects of the

business and credit cycles- and also could be improper incorporation of macroeconomic

variables. Endogenous default models- and also produce better and quite an estimate of

optimal capital when filtered through the base ii internal rating based approach. The analysis

that the most material borrower characteristics are the firms leverage ratio, default recovery

rate, and of return.

ROHAN CHURM and NIKOLAOS PANIGIRTZOGLOU

This paper uses a structural model of credit risk to try to decompose into their main

component expected default, uncertainty about the rate default , liquidity, regulation and tax,

it looks at how well it fits historical default frequencies to calculate an average historical

compensation for credit risk that could be compared to the average observed credit spread.

The results show, among other things, that a large part of credit spread investment grade debt

is due to non-credit risks factors, while the reverse is true.

Pass C.L., Pike R.H(1984), studied that over the past 40 years major theoretical

developments have occurred in the areas of longer-term investment and financial decision

making. Many of these new concepts and the related techniques are now being employed

successfully in industrial practice. By contrast, far less attention has been paid to the area of

short-term finance, in particular that of working capital management. Such neglect might be

acceptable were working capital considerations of relatively little importance to the firm, but

effective working capital management has a crucial role to play in enhancing the profitability

and growth of the firm. Indeed, experience shows that inadequate planning and control of

working capital is one of the more common causes of business failure.


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Herzfeld B (1990), studied that Cash is king--so say the money managers who share the

responsibility of running this country's businesses. And with banks demanding more from

their prospective borrowers, greater emphasis has been placed on those accountable for so-

called working capital management. Working capital management refers to the managementof current or short-term assets and short-term liabilities. In essence, the purpose of that

function is to make certain that the company has enough assets to operate its business. Here

are things you should know about working capital management.

Samiloglu F.and Demirgunes K (2008), studied that the effect of working capital

management on firm profitability. In accordance with this aim, to consider statistically

significant relationships between firm profitability and the components of cash conversion

cycle at length, a sample consisting of Istanbul Stock Exchange (ISE) listed

Appuhami, Ranjith B (2008), studied impactof firms' capital expenditure on their

working capital management. The author used the data collected from listed companies in the

Thailand Stock Exchange. The study used Schulman 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 foundthat the firms' operating cash flow, which was recognized as a control variable, has a

significant relationship with working capital management.

Hardcastle J(2009)., studied that Working capital, sometimes called gross working

capital, simply refers to the firm's total current assets (the short-term ones), cash, marketable

securities, accounts receivable, and inventory. While long-term financial analysis primarily

concerns strategic planning, working capital management deals with day-to-day operations.

By making sure that production lines do not stop due to lack of raw materials, that inventories

do not build up because production continues unchanged when sales dip, that customers pay

on time and that enough cash is on hand to make payments when they are due. Obviously

without good working capital management, no firm can be efficient and profitable.

Thachappilly G (2009)., Working Capital Management Manages Flow of

Funds,(2009) describes that Working capital is the cash needed to carry on operations

during the cash conversion cycle, i.e. the days from paying for raw materials to collecting

cash from customers. Raw materials and operating supplies must be bought and stored to


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ensure uninterrupted production. Wages, salaries, utility charges and other incidentals must

be paid for converting the materials into finished products. Customers must be allowed a

credit period that is standard in the business. Only at the end of this cycle does cash flow in

again

Beneda, Nancy; Zhang, Yilei (2008), studied impact of working capital management

on the operating performance and growth of new public companies. The study also sheds

light on the relationship of working capital with debt level, firm risk, and industry. Using a

sample of initial public offerings (IPO's), the study finds a significant positive association

between higher levels of accounts receivable and operating performance. The study further

finds that maintaining control (i.e. lower amounts) over levels of cash and securities,

inventory, fixed assets, and accounts.

Dubey R(2008)studied The working capital in a firm generally arises out of four basic

factors like sales volume, technological changes, seasonal , cyclical changes and policies of

the firm. The strength of the firm is dependent on the working capital as discussed earlier but

this working capital is itself dependent on the level of sales volume of the firm. The firm

requires current assets to support and maintain operational or functional activities. By current

assets we mean the assets which can be converted readily into cash say within a year such as

receivables, inventories and liquid cash. If the level of sales is stable and towards growth the

level of cash, receivables and stock will also be on the high.

McClure B (2007)., Working Capital Works describes that Cash is the lifeline of a

company. If this lifeline deteriorates, so does the company's ability to fund operations,

reinvest and meet capital requirements and payments. Understanding a company's cash flow

health is essential to making investment decisions. A good way to judge a company's cash

flow prospects is to look at its working capital management (WCM).Cash is king, especially

at a time when fund raising is harder than ever. Letting it slip away is an oversight that

investors should not forgive. Analyzing a company's working capital can provide excellent

insight into how well a company handles its cash, and whether it is likely to have any on hand

to fund growth and contribute to shareholder value.


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Gass D (2006) studied "Cash is the lifeblood of business" is an often repeated maxim

amongst financial managers. Working capital management refers to the management of

current or short-term assets and short-term liabilities. Components of short-term assets

include inventories, loans and advances, debtors, investments and cash and bank balances.Short-term liabilities include creditors, trade advances, borrowings and provisions. The major

emphasis is, however, on short-term assets, since short-term liabilities arise in the context of

short-term assets. It is important that companies minimize risk by prudent working capital

management.

Maynard E. Refuse(1996)

,Argued that attempts to improve working capital by

delaying payment to creditors is counter-productive to individuals and to the economy as a

whole. Claims that altering debtor and creditor levels for individual tiers within a value

system will rarely produce any net benefit. Proposes that stock reduction generates system-

wide financial improvements and other important benefits. Urges those organizations seeking

concentrated working capital reduction strategies to focus on stock management strategies

based on lean supply-chain techniques.

Thomas M. Krueger (2005), studied distinct levels of WCM measures for different

industries, which tend to be stable over time. Many factors help to explain this discovery. The

improving economy during the period of the study may have resulted in improved turnover in

some industries, while slowing turnover may have been a signal of troubles ahead. Our

results should be interpreted cautiously. Our study takes places over a short time frame

during a generally improving market. In addition, the survey suffers from survivorship bias

only the top firms within each industry are ranked each year and the composition of those

firms within the industry can change annually.

Eljelly(2002) empirically examined the relationship between profitability and liquidity, as

measured by current ratio and cash gap (cash conversion cycle) on a sample of 929 joint

stock companies in Saudi Arabia. Using correlation and regression analysis, Eljelly [9]found

significant negative relationship between the firm's profitability and its liquidity level, as


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measured by current ratio. This relationship is more pronounced for firms with high current

ratios and long cash conversion cycles. At the industry level, however,he found that the cash

conversion cycle or the cash gap is of more importance as a measure of liquidity than current

ratio thataffects profitability. The firm size variable was also found to have significant effect

on profitability at the industry level.

Lazaridis and Tryfonidis (2004), conducted a cross sectional study by using a sample

of 131 firms listed on the Athens Stock Exchange for the period of 2001 - 2004 and found

statistically significant relationship between profitability, measured through gross operating

profit, and the cash conversion cycle and its components (accounts receivables, accounts

payables, and inventory). Based on the results analysis of annual data by using correlation

and regression tests, they suggest that managers can create profits for their companies by

correctly handling the cash conversion cycle and by keeping each component of the

conversion cycle (accounts receivables, accounts payables, and inventory) at an optimal level.

Raheman and Nasr (2004), studied the effect of different variables of working capital

management including average collection period, inventory turnover in days, average

payment period, cash conversion cycle, and current ratio on the net operating profitability of

Pakistani firms. They selected a sample of 94 Pakistani firms listed on Karachi Stock

Exchange for a period of six years from 1999 - 2004 and found a strong negative relationship

between variables of working capital management and profitability of the firm. They found

that as the cash conversion cycle increases, it leads to decreasing profitability of the firm and

managers can create positive value for the shareholders by reducing the cash conversion

cycle to a possible minimum level.

Garcia-Teruel and Martinez-Solano (1996) collected a panel of 8,872 small to

medium-sized enterprises (SMEs) from Spain covering the period 1996 - 2002. They tested

the effects of working capital management on SME profitability using the panel data

methodology. The results, which are robust to the presence of endogeneity, demonstrated that

managers could create value by reducing their inventories and the number of days for which

their accounts are outstanding. Moreover, shortening the cash conversion cycle also improves

the firm's profitability.


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Falope and Ajilore(2003), used a sample of 50 Nigerian quoted non-financial firms for

the period 1996 -2005. Their study utilized panel data econometrics in a pooled regression,

where time-series and cross-sectional observations were combined and estimated. They found

a significant negative relationship between net operating profitability and the averagecollection period, inventory turnover in days, average payment period and cash conversion

cycle for a sample of fifty Nigerian firms listed on the Nigerian Stock Exchange.

Furthermore, they found no significant variations in the effects of working capital

management between large and small firms.

Kouma Guy, (2001) in a study on, Working capital management in healthcare,

Working capital is the required to finance the day to day operations of an organization.

Working capital may be require to bridge the gap between buying of stocked items to

eventual payment for goods sold on account. Working capital also has to fund the gap when

products are on hand but being held in stock. Products in stock are at full cost, effectively

they are company cash resources which are out of circulation therefore additional working

capital is required to meet this gap which can only be reclaimed when the stocks are sold (and

only if these stocks are not replaced) and payment for them is received. Working capital

requirements have to do with profitability and much more to do with cash flow.

Mehmet SEN, Eda ORUC (2005) in the study Relationship between the efficiency

of working capital management and company size, As it is known, one of the reasons

which cause change in working capital from one period to another is the change in

management efficiency. The change in management efficiency will affect the change in

working capital in a way as increaser or reducer from on period to another. In this study, the

effect of change in management efficiency in working capital management in to the change in

working capital is compared by company size and sectors. The data of this study covers sixty

periods as the total of quarterly financial statement of 55 manufacturing companies which

were in operation in Istanbul Stock exchange (ISE) between the years 1993 and 2007. In

every period we studied, for inventories short term commercial receivables and short term

commercial liabilities, and calculated the effect of change in management efficiency on to the

effect of working capital change. In all sectors considered, in the change in working capital,


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and observed the effect of reducing of efficiency in inventory management. It is also

observed that efficiency change in the management of the short term commercial receivables

and the short term commercial liabilities by the company sizes and sectors make a positive

effect in to the change in working capital

Brealey, R., (1997)in a study on, Working Capital management concepts work sheet

university of phoenix. Concept application of concept in the Simulation reference to

concept in reading cash conversion cycle cash conversions is the process of managing a

companys cash inflows and outflows. In the simulation, the finance manager was responsible

for balancing sales with collections or accounts receivables (cash inflows) and purchases with

payments or accounts payables (cash outflows). This delicate balance maintains the

companys balance sheet keeping the cash and loans in a situation of financial stability and

keeping the money from being tied up. Principles of corporate finance. Working capital

management. New York: McGraw-Hill.


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CHAPTER3 ,4

DATA ANALYSIS AND INTERPRETATION


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DATA ANALYSIS AND INTERPRETATION

Data anlysis and interpretation is the core factor of any project. This chapter data

analysis and interpretation consist of analytic part based upon empirical study. In this project

the researcher used annual report for data collection. The study is based on primary and

secondary data. Primary data is collected by means of interview. Secondary data is collected

by annual reports. In project, I have used various tools such as

Ratio analysis

Operating cycle

Trend analysis Schedule of changes in working capital


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RATIO ANAYSIS

Ratio analysis is the process of determining and presenting in arithmetical terms the

relation between figures and group of figures drawn from satements. The ratio analysis is one

of the tools in the hands of those who want to know something more from the finanacial

satements. Ratio is basis of this analysis.

Ratio can be expressed in any of three ways.

Rate, which is the ratio between the numerical facts over a period of time. Pure ratios or propotions, which are arrived at by the simple division of one number by

another.

Percentage, which is a special type of rate expressing the relationship in hundred.Ratio analysis is based on different ratios which are calculated from the accounting data

contained in the financial satements. Different ratios are used for different purpose. These

ratios can be grouped into various classes according to the financial activity function to be

evaluated.


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CURRENT RATIO

Current assets normally mean assets convertible and meant to be converted into cash

within a year time. Current assets usually include cash in hand and at bank, debtors, bills

receivable, prepaid expenses, inventories, ratio materials, work in progress and finished

goods, marketable securities and other short term high quality investments. Current liability

represent the liablities at which fall due for payment within year.

Current ratio establishes the relation between the current assets and current liabilities.

Conventional rule, idle current ratio should be 2:1

The ability of a company to meets its short term commitment is normally assessed by

comparing current assets with current liabilities.

CURRENT RATIO

CURRENT RATIO= CURRENT ASSETS

CURRENT LIABILITIES


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Table No : 1

Table showing current ratio

Source :- Collected from secondary data

INTERPRETATION

As a conventional rule, idle current ratio should be 2:1. The actual current ratio is 2:1

it can be reasonably being taken as a sign of liquidity or the short term solvency of concern.

The company has maintained the current ratio favorable from 2007-2008 to 2011-2012, but

the year 2009-2010 the ratio was highly increased to 3.64.

The main reason for increasing current ratio in the year 2009-2010 is dipping the sail

in that year, it is because of increased price of the products. So the stock increased. To

recover this problem the sales have to increase.

YEAR CURRENT

ASSETS( lakhs)

CURRENT

LIABILITIES( lakhs)

CURRENT RATIO

2007-08 3137.42 1195.60 2.62

2008-09 4590.76 1632.56 2.81

2009-10 3063.73 840.48 3.64

2010-11 2870.67 1016.37 2.82

2011-12 3270.91 1142.61 2.86


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Diagram No : 1

CURRENT RATIO

0

0.5

1

1.5

2

2.5

3

3.5

4

2007-08 2008-09 2009-10 2010-11 2011-12

CURRENT RATIO

CURRENT RATIO


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LIQUDITY RATIO

It is the ability of a firm to meet its obligation in the short run, usually based on

current assets and current liability. These are the ratios which measure the short term

solvency or financial position of the firm.Liqudity refers to the ability of concern to meet its

current obligation as and when they become due.

CURRENT ASSETSCLOSING STOCK

LIQUDITY RATIO =

CURRENT LIABILITIES

Table No : 2

Table showing liquidity ratio

YEAR CURRENT ASSETS-CLOSING

STOCK(laks)

CURRENT

LIABILITES(laks)

LIQUDITY RATIO

2007-08 1152.71 1195.60 0.9641

2008-09 2535.94 1632.56 1.5534

2009-10 1210.17 840.48 1.4398

2010-11 1328.96 1016.37 1.2865

2011-12 1255.03 1142.61 1.0984



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INTERPRETATION

Quick ratio is expressed as quick asset:quick liability.quick ratio of 1:1 is considered

to represent a satisfactory financial position. If actual quick ratio is equal or more than the

standard quick ratio of 1:1,the conclusion can be the concern is liquid and so it can pay of its

short-term liability out of its quickly The company has maintained quick ratio favorable

from 2007-08 to 2010-11. In year 2007-08 the company shows lower quick ratio because of

the company had highest stock in the year.

LIQIDITY RATIO

0 0.5 1 1.5 2

2007-08

2008-09

2009-10

2010-11

2011-12

LIQUDITY RATIO

LIQUDITY RATIO


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CREDITORS TURNOVER RATIO

It constitutes an important source to provide spontaneous working capital of the firms.

Creditors turnover ratio expresses the number times the accounts payable are converted into

purchase by management during the year. Normally higher turnover ratio is preferred.

ANNUAL PURCHASE

CREDITORS TURNOVER RATIO =

AVERAGE PAYABLE

Table No : 3

TABLE SHOWING CREDITORS TURN OVER RATIO

YEAR ANNUAL

PURCHASE

AVERAGE

PAYABLE

CREDITORS

TURNOVER RATIO

2007-08 16867.45 322.68 52.27

2008-09 17987.75 787.61 22.84

2009-10 21910.96 418.80 52.32

2010-11 23071.44 491.29 46.96

2011-12 29308.93 557.82 52.54



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INTERPRETATION

This ratio reflects whether terms of terms of credit allowed by supliers are liberal or

stringent. High creditors turnover ratio shows that creditors are being paid promptly, while a

low turnover ratio reflects liberal credit terms granted by suppliers.

The company has been maintaining a better creditors turnover ratio but the year 2008-09 the

ratio was highly decreased. Now the company recover this problem.

Diagram No : 3

CREDITORS TURN OVER RATIO

0

10

20

30

40

50

60

2007-08 2008-09 2009-10 2010-11 2011-12




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AVERAGE PAYMENT PERIOD

Average payment period related to the average number of days within which

payment to the creditors are being made. If the number of days is large, it shows the inability

of the firm to pay the creditors prompty, which will definitely affect the credit worthiness

NUMBER OF DAYS

AVERAGE PAYMENT PERIOD =


Table No : 4

TABLE SHOWING AVERAGE PAYMENT PERIOD

YEAR DAYS IN YEAR CREDITORS TURN

OVER RATIO

AVERAGE

PAYMENT PERIOD

2007-08 365 52.27 7

2008-09 365 22.84 16

2009-10 365 52.32 7

2010-11 365 46.96 8

2011-12 365 52.54 7



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INVENTORY (STOCK) TURNOVER RATIO

Inventory turnover ratio reflect the efficency of inventoy management. This ratio

indicates the number of times the inventory is replaced the during the year. Higher ratio

shows greater efficiency in management and vice versa.

COST OF GOODS SOLD

INVENTORY (STOCK) TURNOVER RATIO=

AVERAGE INVENTORY

Table No : 5

TABLE SHOWING STOCK TURN OVER RATIO

YEAR COST OF GOOD

SOLD

AVERAGE

INVENTORY

STOCK TURNOVER

RATIO

2007-08 19917.38 1094.26 18.20

2008-09 22829.10 1659.51 13.76

2009-10 27199.67 1628.34 16.69

2010-11 28947.48 1340.48 21.60

2011-12 33971.91 1394.56 24.36



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INTERPRETATION

The above table shows the inventory conversion period of k s e ltd. From the part of

the company ideal period is 20 days. Company is not achieve the inventory conversion

period as ideal in last two years,that is ,22 and 25 days have taken to convert the stock into

cash in 2010-11 and 2011-12 respectively. The reason of taking this much dates, company

purchased rawmaterial in bulk quantity with discount.

WORKING CAPITAL TURNOVER RATIO

The different use of overall working capital in a firm can be measured with the help of

working capital turnover ratio. The ratio indiactes the ratio of working capital utilization in

the firm. A higher ratio indicates the efficient utilization of working capital and vice versa.

NET SALES

WORKING CAPITAL TURN OVER RATIO=

AVERAGENETWORKING CAPITAL


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Table No : 6

Table showing working capital turn over ratio

YEAR NET SALES NET WORKING

CAPITAL

WORKING

CAPITAL

TUREOVER RATIO

2007-08 21301.58 1941.82 10.96

2008-09 24076.42 2958.21 8.13

2009-10 27551.91 2223.25 10.63

2010-11 28947.49 1854.30 15.61

2011-12 35007.87 2128.30 16.64


INTERPRETATION

The higher ratio indicated efficient utilization of working capital and a low ratio indicates

inefficient utilization. The above table shows the working capital and high ratio is due to high

net working capital. In the year 2008-09 shows the working capital is 8 times but after that

year the company getting good working capital utilization.


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STATEMENT OF WORKING CAPITAL

A statement of working capital is working capital is working capital is prepared to

depict the changes in working capital. Working capital represents the excess of current Assets

over current liabilities. Since, several times, i.e., all current assets and current liabilities are

the components of working capital, it is necessary to measure the increase or decrease

therein, by preparing a statement or schedule of changes in Working Capital. This statement

is prepared with current assets and current liabilities as appearing in the Balance Sheets under

consideration.

Working capital is defined as the difference between current asset and current liabilities.

Working capital of FRONTLINE EXPORTING is analyzed to find out the nature of source

of fund and how they are utilized for financing current assets.


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TABLE NO :7

Table showing statement of working capital from the year 2005-2009

Current Assets 2007-08 2008-09 2009-10 2010-11 2011-12

a) Inventories 15,34,87,658 24,65,78,960 23,54,67,432 23,98,76,543 27,65,42,765

b)Sundry Debtors 90,67,543 91,23,654 1,09,87,654 43,25,672 34,23,567

c)Cash&Bank

Balances

9,03,35,432 3,67,85,432 13,24,56,876 43,56,87,980 56,76,54,329

Total assets (A) 31,32,65,323 45,32,76,865 31,24,44,125 28,65,00,114 31,24,01,442

Current

Liabilities

a) Liabilities 6,65,23,432 6,56,43,212 1,04,57,654 8,75,44,332 8,76,53,434

b) Provisions 4,77,67,003 9,67,24,252 7,54,26,778 2,47,90,111 3,65,97,908

Total liability (B) 11,42,90,435 16,23,67,464 858,84,432 11,23,34,443 12,42,51,342

Net working

capital (A-B)

19,89,74,888 29,09,09,401 22,65,59,693 17,41,65,671 18,81,50,100



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Table No : 8

Table showing

COMPARITIVE STATEMENT FOR THE YEAR 2007-2008 to2008-09

(Rs in lakhs)


PARTICULARS 2007-2008 2008-2009 CHANGE

LIABILILTIES :

a) Liabilities6,65,23,432 6,56,43,212 8,80,220

b) Provisions4,77,67,003 9,67,24,252 (-)4,89,57,249

TOTAL 11,42,90,435 16,23,67,464 (-) 48077029

ASSETS:

a) Inventories15,34,87,658 24,65,78,960 9,30,91,302

b)Sundry Debtors90,67,543 91,23,654 56,111

c)Cash&Bank Balances9,03,35,432

3,67,85,4325,35,50,000

TOTAL 31,32,65,323 45,32,76,865 14,66,97,413

Working capital= 19,89,74,888 29,09,09,401

Current assetcurrent liability


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INTERPRETARTION:

The comparative balance sheet for the financial year 2007-08 to 2008-09 shows that

there has been increase in the current assets as well as the current liabilities of the company.

It says company has increased its capacity of current assets in the year .working capital has

been increased than the previous years working capital,increase in working capital means

increase in the cost of day to day expenses


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Table No : 9

Table showing

COMPARITIVE BALANCE SHEET FOR THE YEAR 2008-09 to 2009-10

(Rs in lakhs)


PARTICULARS 2008-092009-10

CHANGE

LIABILILTIES :

a) Liabilities6,56,43,212 1,04,57,654 5,51,85,558

b) Provisions9,67,24,252 7,54,26,778 2,12,97,474

TOTAL 16,23,67,464 8,58,84,432 7,64,83,032

ASSETS:

a) Inventories24,65,78,960 23,54,67,432 1,11,11,528

b)Sundry Debtors91,23,654 1,09,87,654 (-)18,64,000

c)Cash&Bank Balances 3,67,85,432 13,24,56,876(-)14,08,32,740

TOTAL 45,32,76,865 36,90,23,072 (-)13,15,85,212

Working capital= 29,09,09,441 28,31,38,640

Current assetcurrent liabilities


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INTERPRETARTION:

This comparative balance sheet for the financial year 2008-09 to 2009-10 shows that there

has been decrease in the current assets as well as the current liabilities of the company. It

says company has decreased its capacity of raw materials at the same time company has

increased its cash and bank balances it may be through collecting the amount of creditors.in

this table we can see that working capital has been decreased in a short range .it may be

because of in the previous year may be the boom situation of the company , there may be a

chance of rice of a competitor


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Table No : 10

Table showing


(Rs in lakhs)

PARTICULARS 2009-102010-2011

CHANGE

LIABILILTIES :

a) Liabilities1,04,57,654 8,75,44,332 7,70,86,678

b) Provisions7,54,26,778 2,47,90,111 5,06,36,667

TOTAL 8,58,84,432 11,23,34,443 7,64,83,032

ASSETS:

a) Inventories23,54,67,432 23,98,76,543 (-)44,09,111

b)Sundry Debtors1,09,87,654 43,25,672 66,61,982

c)Cash&Bank Balances 13,24,56,876 43,56,87,980(-)30,32,31,104

TOTAL 36,90,23,072 28,65,00,114 (-)30,09,78,233

Working capital= 28,31,38,640 17,41,65,671

Current asset-current liability


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INTERPRETARTION:

By analyzing the current assets and current liabilities of the company for the year

2009-10 to 2010-11, it is clear that there has been an increase in the sundry debtors position

of the firm. There is an increase of Rs. 66,61,982 (in lakhs) in the year 2008-0 as compared to

that of 2009-10. In this comparative analysis we can see that working capital has again

reduced , it says that company reduced its productivity , it may be the stage of depresion


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Table No : 11

Table showing


(Rs in lakhs)


PARTICULARS 2010-20112011-12

CHANGE

LIABILILTIES :

a) Liabilities8,75,44,332 8,76,53,434 (-)1,09,102

b) Provisions2,47,90,111

3,65,97,908(-)1,18,07,797

TOTAL 11,23,34,443 12,42,51,342 (-)11916899

ASSETS:

a) Inventories23,98,76,543 27,65,42,765 36666222

b)Sundry Debtors43,25,672 34,23,567 (-)9,02,195

c)Cash&Bank Balances 43,56,87,980 56,76,54,32913,19,66,349

TOTAL 28,65,00,114 31,24,01,442 16,77,30,376

Working capital= 8,36,84,429 18,81,50,100

Current asset-current liability


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INTERPRETARTION:

The comparative balance sheet of 2010-11 to 2011-12 shows that there has

been an increase in the current liability position of the firm while that of the current assts has

also been increased with that of the previous year. Current assets have been increased to

31,24,01,442 in 2012 as compared to that of 2011.working capital also increased in this year

so this is a positive trend.


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OPERATING CYCLE

The operating cycle deals with the cycle of how a firm takes cash and converts it into

incventory and how inventory converted into sales, account receivables, and ultimately back

into cash. An investment in the working capital is influenced by 4 key events in production

of sales cycle of the firm.

Purchase of raw material Payment of raw material Sales of finished goods Collection of cash sales

Length of operating cycle is to be determined by the spots with inventory conversion period

For call calculating the operating cycle we have to calculate the three accounting period

ratios they are inventory conversion period, receivable period and payable deferral period

a) INVENTORY CONVERSION PERIOD:INVENTORY

INVENTORY CONVERSION PERIOD = X 365

COST OF GOOD SOLD

(OPENING STOCK+CLOSING STOCK)

INVENTORY = X365

SALES


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b) Receivable collection period (Debtors cycle):

ACCOUNT RECEIVABLE

RECEIVABLE COLLECTION PERIOD = X365

SALES

C)PAYABLE DEFERRAL PERIOD

ACCOUNT PAYABLE

PAYABLE DEFERRAL PERIOD = X 365

COST OF GOOD SOLD


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TABLE NO :12

TABLE SHOWING CONVERSION PERIODS

Accounting

period ratio

2007-08 2008-09 2009-10 2010-11 2011-12

Inventory

conversion

period

96 91 79 88 116

Receivable

collection

period

115 109 37 53 66

Payable

deferral

period

95 103 114 76 80


INTERPREATION

The above table and chart depicts that the inventory conversion period shows an

increasing trend from 2002 to 2004 from 92 days and then it starts to decrease up to 79 days

in the year 2007. The standard norm of the company is 100 days. Only in 2006 and 2009 the

inventory conversion period is higher than the standard norms in that period company is took

more days inventory conversion. The inventory is converted rapidly in other years with

920days.91 days, 79 dys & 88 days in 2002, 2004,2006 and 2008 respectively.


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TREND ANALYSIS

In working capital analysis the direction at changes over a period of time is of crucial

importance. Working capital is one of the important fields of management. It is therefore very

essential for an annalist to make a study about the trend and direction of working capital over

a period of time. Such analysis enables as to study the upward and downward trend in current

assets and current liabilities and its effect on the working capital position.

In the words of S.P. Gupta The term trend is very commonly used in day-today

conversion trend, also called secular or long term need is the basic tendency of population,

sales, income, current assets, and current liabilities to grow or decline over a period of time

According to R.C.galeziem The trend is defined as smooth irreversible movement in

the series. It can be increasing or decreasing. Emphasizing the importance of working

capital trends, Man Mohan and Goyal have pointed out that analysis of working capital

trends provide as base to judge whether the practice and privilege policy of the management

with regard to working capital is good enough or an important is to be made in managing the

working capital funds.

Further, any one trend by it self is not very informative and therefore comparison with

Illustrated their ideas in these words, An upwards trends coupled with downward trend or

sells, accompanied by marked increase in plant investment especially if the increase in

planning investment by fixed interest obligation


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TABLENO:13

TABLE SHOWING

TREND OF WORKING CAPITAL FROM 2007-2012

YEARS WORKING CAPITAL TREND

2007-08 100

2008-09 05

2009-10 62

2010-11 51

2011-12 49


GRAPHICAL REPRESENTATION OF TREND SINCE 2007-2012

In the words of S.P. Gupta The term trend is very commonly used in day-today

conversion trend, also called secular or long term need is the basic tendency of population,

sales, income, current assets, and current liabilities to grow or decline over a period of time

According to R.C.galeziem The trend is defined as smooth irreversible movement in

the series. It can be increasing or decreasing. Emphasizing the importance of working

capital trends, Man Mohan and Goyal have pointed out that analysis of working capital

trends provide as base to judge whether the practice and privilege policy of the management

with regard to working capital is good enough or an important is to be made in managing the

working capital funds.


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WORKINGCAPITALTREND

0

20

40

60

80

100

120

2007-08 2008-09 2009-10 2010-11

WORKING CAPITAL TREND


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CHAPTER5

FINDINGS , SUGGESTIONS


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FINDINGS

1. In the year 2009-2010 the ratio was highly increased to 3.64.

2. In the year 2007-08 the company shows lower quick ratio.

3. In the year 2008-09 the ratio was highly decreased.

4. In the year 2008-09 the company took 16 days to make the payment.

5. Company is not achieve the inventory conversion period as ideal in last two years.

6. In the year 2008-09 shows the working capital is 8 times.

8. In the year 2007-08 to 2008-09 shows that there has been increase in the current assets

as well as the current liabilities.

9. In the year 2008-09 to 2009-10 shows that there has been decrease in the current assets

as well as the current liabilities.

10. In the year 2009-10 to 2010-11, it is clear that there has been an increase in the sundry

debtors position of the firm.

11. In the year 2010-11 to 2011-12 shows that there has been an increase in the current

liability position of the firm.

12. Only in 2006 and 2009 the inventory conversion period is higher than the standard

norms.


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SUGGESTIONS

1 . The management should pay attention towards increasing working capital turnover by

minimizing the investment in inventories and receivables.

2 . The management should try to increase the liquidity position of the company by proper by

proper investment in current assets.

3 . the management is never think credit sales in their policies. But trade debtors in balance

sheet so it must think to eliminate it so as to reduce working capital requirements.

5 . The company mainly depends on cash sales if credit sales to maximum extend.

6 . Better consistency should be maintained in relation with working capital.

7 . Advanced and new technology of production should be incorporated.

8 . Unnecessary operational expenses should be reduced.

9 . special attention should be made by management in management of short term funds.


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CONCLUSION

From the study it is concluded that KSE LTD has good working capital management

.however it is also revealed that current ratio is least minimum and quick ratio is not up to

peak , even though the company is maintaining a good track record . It means that efficient

utilization of working capital especially in the areas of inventory and cash management.

Profitability is the key to success in business customer centric thinking is extremely essential

for survival in todays business environment. Searching and developing the strategic control

points in an industry simultaneously with business design process can go along way. Every

good business design should have at least one strategic control point.


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BIBLIOGRAPHY


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BIBLIOGRAPHY

Companys annual reports and records

Website

1) www.kselimited.com2) http://en.wikipedia.org/wiki/Working_capital3) www.studyfinance.com/lessons/workcap/

REFERENCE

Books

a. Arora M.N., Management Accounting, Himalaya Publishing House, Mumbai, 2008.b. Jain S.P. & Narang K.L., Cost and Financial Analysis, Kalyani Publishers, New

Delhi, 2008.

c. Kothari C.R., Research Methodology, 2nd Revised Edition, New Age InternationalPvt. Ltd., 2009.

d. Shashi K. Gupta & Sharma R.K., Financial Management Theory & Practice, 3rdEdition, Kalyani Publishers, New Delhi, 2000.

D K G Ch d kh N i d D J k CORPORATE
http://www.kselimited.com/http://www.kselimited.com/http://en.wikipedia.org/wiki/Working_capitalhttp://en.wikipedia.org/wiki/Working_capitalhttp://www.studyfinance.com/lessons/workcap/http://www.studyfinance.com/lessons/workcap/http://www.studyfinance.com/lessons/workcap/http://en.wikipedia.org/wiki/Working_capitalhttp://www.kselimited.com/

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