A PROJECT REPORT

ON

WORKING CAPITAL MANAGEMENT

@
Lamiya Silks, Thrissur, Kerala

Submitted to

Indian Institute of Planning and Management (IIPM),

New Delhi
By

JIBIN BABU
SS 11 / 13
ID- D1113SSIBSEPGP10207 (COC 5 CA 1050)
in partial fulfillment of the requirement for the award of the degree of
MASTER OF BUSINESS ADMINISTRATION
10th April 2012 25th May 2012
Phone- 8860598398

Email- jibin.babu8@gmail.com

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Acknowledgement

It is a matter of great satisfaction and pleasure to present this report on Working Capital
Management of Lamiya Silks. I take this opportunity to owe my thanks to all those involved in
my training.
Firstly I would like to thank LAMIYA SILKS for giving the opportunity to complete my project
in the organization. I put on record my sincere thanks to my college, Indian Institute of
Planning and Management (IIPM), New Delhi, for giving me such an opportunity. I am
extremely grateful to Mr. Mohammed Rashin for the encouragement, discussions and critical
assessment of the project.
It was a good experience for me to work with Lamiya Silks, a pioneer in the textile industry. I am
greatly obliged to Mr. Mohammed Rashin my industry guide, and Mr. Mansoor. P.A, Mr.
Lishad. K.A who have shared their expertise and knowledge with me without which the
completion of project would not have been possible.
I express my gratitude towards staff of Lamiya Silks, those who have helped me directly or
indirectly in completing the training.

TABLE OF CONTENTS
Page 2 of 68

Sl.No.
1.
2.

Contents

3.

Executive Summary
Introduction
2.1 Working Capital
2.2 Operating Cycle
2.3 Working Capital Management
2.4 Concept of Working Capital
Research Methodology

Page No.
12
3 20
48
9
9 18
19 - 20
21 23

4.

Sector Overview

24 30

5.
6.
7.
8.
9.
10.

4.1 Textile Sector

4.2 SWOT of Textile Industry
Company Overview
Internship Activities
Internship Assessment
Conclusion
Illustration
Bibliography

25 27
28 30
31 38
39 57
58 59
60 61
62 65
66 67

LIST OF TABLES
Table No.
1.
2.
3.
4.
5.
6.
7.

Contents
Comparative Profit & Loss Account
Trend analysis (Liability Side)
Trend Analysis (Asset Side)
Cash Flow Analysis
Cash Flow Statement
Profit & Loss Account
Balance Sheet

LIST OF CHARTS
Page 3 of 68

Page No.
49
50
51
52
53
55
56

Chart No
1.
2.

Contents
Main Department Sales
Other Department sales

Page No.
63
64

EXECUTIVE

SUMMARY
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Lamiya Silks is a very well famous textile outlet in Kerala. It has more than 10 branches all over
the state with wide variety of apparels mainly for women. It has broadened its business towards
the gulf as well.
The major purpose of the study is to analyze the working capital management of Lamiya Silks by
considering the annual report of two years. The financial statement explains the trend analyzes
and the ratio analyzes along with the comparative balance statements.
Working capital is one of the most difficult financial concepts to understand for the smallbusiness owner. In fact, the term means a lot of different things to a lot of different people. By
definition, working capital is the amount by which current assets exceed current liabilities. It
involves the relationship between a firms short term assets and its short term liabilities.
Funds needed for short term needs for the purpose like payment of wages and other day to day
expenses are known as working capital. The goal of working capital management is to ensure
that the firm is able to continue its operation and that it has sufficient cash flow to satisfy both
maturing short term debt and upcoming operational expenses. Working capital is primarily
concerned with inventories management, receivable management, cash management and payable
management.
The study involved few personal interviews with the financial heads of the company and through
observation methods. Company annual reports were being evaluated and working capital

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management was being analyzed from it. For the purpose of the study convenience sampling
technique has been used.
The study has shown that the working capital of the company has improved as the current asset
is more than that of the current liabilities.

INTRODUCTION

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Management is an art of anticipating and preparing for risks, uncertainties and overcoming
obstacles. An essential precondition for sound and consistent assets management is establishing
the sound and consistent assets management policies covering fixed as well as current assets. In
modern financial management, efficient allocation of funds has a great scope, in finance and
profit planning, for the most effective utilization of enterprise resources, the fixed and current
assets have to be combined in optimum proportions.
Working capital in simple terms means the amount of funds that a company requires for
financing its day-to-day operations. Finance manager should develop sound techniques of
managing current assets.
WHAT IS WORKING CAPITAL?
Working capital refers to the investment by the company in short terms assets such as cash,
marketable securities. Net current assets or net working capital refers to the current assets less
current liabilities.
Symbolically, it means,
Net Current Assets = Current Assets Current Liabilities.
In accounting, Working capital is the difference between the inflow and outflow of funds. In
other words, it is the net cash inflow. It is defined as the excess of current assets over current
liabilities and provisions. In other words, it is net current assets or net working capital.
Working capital represents the total of all current assets. In other words it is the Gross working
capital , it is also known as Circulating capital or Current capital for current assets are rotating in
their nature.
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A study of working capital is of major importance to internal and external analysis because of its
close relationship with the day-to-day operations of a business. Working Capital is the portion of
the assets of a business which are used on or related to current operations, and represented at any
one time by the operating cycle of such items as against receivables, inventories of raw
materials, stores, work in process and finished goods, merchandise, notes or bill receivables and
cash.
Working capital comprises current assets which are distinct from other assets. In the first
instance,

current

assets

consist

of

these

assets

which

are

of

short

duration.

Working capital may be regarded as the life blood of a business. Its effective provision can do
much to ensure the success of a business while its inefficient management can lead not only to
loss of profits but also to the ultimate downfall of what otherwise might be considered as a
promising concern.
The funds required and acquired by a business may be invested to two types of assets:
1. Fixed Assets.
2. Current Assets
Fixed assets are those which yield the returns in the due course of time. The various decisions
like in which fixed assets funds should be invested and how much should be invested in the fixed
assets etc. are in the form of capital budgeting decisions. This can be said to be fixed capital
management.
Other types of assets are equally important i.e. Current Assets.
These types of assets are required to ensure smooth and fluent business operations and can be
said to be life blood of the business. There are two concepts of working capital Gross and Net.
Gross working capital refers to gross current assets. Net working capital refers to the difference
between current assets and current liabilities. The term current assets refers to those assets held
by the business which can be converted into cash within a short period of time of say one year,
without reduction in value. The main types of current assets are stock, receivables and cash. The
term current liabilities refer to those liabilities, which are to be paid off during the course of
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business, within a short period of time say one year. They are expected to be paid out of current
assets or earnings of the business. The current liabilities mainly consist of sundry creditors, bill
payable, bank overdraft or cash credit, outstanding expenses etc.
NEED FOR WORKING CAPITAL
Working capital may be regarded as the lifeblood of the business. Without insufficient working
capital, any business organization cannot run smoothly or successfully. In the business the
Working capital is comparable to the blood of the human body. Therefore the study of working
capital is of major importance to the internal and external analysis because of its close
relationship with the current day to day operations of a business. The inadequacy or
mismanagement of working capital is the leading cause of business failures.
The need of gross working capital or current assets cannot be overemphasized. The object of any
business is to earn profits. The main factor affecting the profits is the magnitude of sales of the
business. But the sales cannot be converted into cash immediately. There is a time lag between
the sale of goods and realization of cash. There is a need of working capital in the form of
current assets to fill up this time lag. Technically, this is called as operating cycle or working
capital cycle, which is the heart of need for working capital. This working capital cycle can be
described in the following words. If the company has a certain amount of cash, it will be required
for purchasing the raw material though some raw material may be available on credit basis. Then
the company has to spend some amount for labour and factory overheads to convert the raw
material in work in progress, and ultimately finished goods. These finished goods when sold on
credit basis get converted in the form of sundry debtors. Sundry debtors are converted in cash
only after the expiry of credit period. Thus, there is a cycle in which the originally available cash
is converted in the form of cash again but only after following the stages of raw material, work in
progress, finished goods and sundry debtors. Thus, there is a time gap for the original cash to get
converted in form of cash again. Working Capital needs of company arise to cover the
requirement of funds during this time gap, and the quantum of working capital needs varies as
per the length of this time gap.
Thus, some amount of funds is blocked in raw materials, work in progress, finished goods,
sundry debtors and day-to-day requirements. However some part of these current assets may be
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financed by the current liabilities also. E.g. some raw material may be available on credit basis,
all the expenses need not be paid immediately, workers are also to be paid periodically etc. But
still the amounts required to be invested in these current assets is always higher than the funds
available from current liabilities. This is precise reason why the needs for working capital arise.
From the Financial management point of view, the nature of fixed assets and current assets differ
from each other-1. The fixed assets are required to be retained in the business over a period of time and they yield
the returns over their life, whereas the current assets loose their identity over a short period of
time, say one year.
2. In the case of current assets, it is always necessary to strike a proper balance between the
liquidity and profitability principles, which is not the case with fixed assets. E.g. If the size of
current assets is large, it is always beneficial from the liquidity point of view as it ensures smooth
and fluent business operations. Sufficient raw material is always available to cater to the
production needs, sufficient finished goods are available to cater to any kind of demand of
customers, liberal credit period can be offered to the customers to improve the sales and
sufficient cash is available to pay off the creditors and so on.
However, if the investment in current assets is more than what is ideally required, it affects the
profitability, as it may not be able to yield sufficient rate of return on investment. On the other
hand, if the size of current assets is too small, it always involves the risk of frequent stock out,
inability of the company to pay its dues in time etc. As such, the investment in current assets
should be optimum. Hence, it is necessary to manage the individual components of current assets
in a proper way. Thus, working capital management refers to proper administration of all aspects
of current assets and current liabilities. Working Capital Management is concerned with the
problems arising out of the attempts to manage current assets, current liabilities and interrelationship between them. The intention is not to maximize the investment in working capital
nor is it to minimize the same. The intention is to have optimum investment in working capital.
In other words, it can be said that the aim of working capital management is to have minimum
investment in working capital without affecting the regular and smooth flow of operations. The
level of current assets to be maintained should be sufficient enough to cover its current liabilities
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with a reasonable margin of safety. Moreover, the various sources available for financing
working capital requirements should be properly managed to ensure that they are obtained and
utilized in the best possible manner.
Working Capital Cycle
Working capital cycle indicates the length of time between a firms paying for materials entering
into stock and receiving the cash from sale of finished goods. In a manufacturing firm, the
duration of time required to complete the sequence of events is called operating cycle.
In case of a manufacturing company, the operating cycle is the length of time necessary to
complete the following cycle of events
1. Conversion of cash into raw materials
2. Conversion of raw materials into work-in-progress
3. Conversion of work-in-progress into finished goods
4. Conversion of finished goods into accounts receivables
5. Conversion of accounts receivable into cash
The above operating cycle is repeated again and again over the period depending upon the nature
of the business and type of product etc. the duration of the operating cycle for the purpose of
estimating working capital is equal to the sum of duration allowed by the suppliers.
Working capital cycle can be expressed as
R+W+F+D+C
Where,
R - raw material storage period = avg. stock of raw material / avg. cost of production per day
W work in progress holding period = avg. work in progress inventory / avg. cost of production
per day
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F finished goods storage period = avg. stock of finished goods / avg. cost of goods sold per day
D debtors collection period = avg. book debts / avg. credit sales per day
C credit period availed = avg. trade creditors avg. credit purchases per day.

OPERATING CYCLE OF MANUFACTURING BUSINESS

Realization

Sales
Accounts Receivable

Cash

Finished Goods

Purchases

Production
Production
Raw Materials

Work-in-progress

WORKING CAPITAL MANAGEMENT

To start any business, First of all we need finance and the success of that business entirely
depends on the proper management of day-to-day finance and the management of this short term
capital or finance of the business is called Working Capital Management.

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Working Capital is the key difference between the long term financial management and short
term financial management in terms of the timing of cash. Working capital management is a
short term financial management. Working capital management is concerned with the problems
that arise in attempting to manage the current assets, the current liabilities & the inter
relationship that exists between them. The current assets refer to those assets which can be easily
converted into cash in ordinary course of business, without disrupting the operations of the firm.
Working capital management or short-term financial management is a significant facet of
financial management. It is important due to 2 reasons:

Investment in current assets represents a substantial portion of total investment

Investment in current assets and the level of current liabilities have to be geared quickly
to changes in sales.

Working capital involves activities such as arranging short-term finance, negotiating favorable
credit terms, controlling the movement of cash, administrating accounts receivables, and
monitoring the investment in inventories also take a great deal of time.
Management of working capital is concerned with the problem that arises in attempting to
manage the current assets, current liabilities. The basic goal of working capital management is to
manage the current assets and current liabilities of a firm in such a way that a satisfactory level
of working capital is maintained, i.e. it is neither adequate nor excessive as both the situations
are bad for any firm. There should be no shortage of funds and also no working capital should be
ideal. WORKING CAPITAL MANAGEMENT POLICES of a firm has a great on its probability,
liquidity and structural health of the organization. So working capital management is three
dimensional in nature as
1.

It concerned with the formulation of policies with regard to profitability, liquidity

and risk.

2.

It is concerned with the decision about the composition and level of current assets.

3.

It is concerned with the decision about the composition and level of current
liabilities.

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Composition of working capital- Major Current Assets

1)

Cash in hand and cash at bank

2)

Bills receivables

3)

Sundry debtors

4)

Short term loans and advances.

5)

Inventories of stock as:

a.

Raw material

b.

Work in process

c.

Stores and spares

d.

Finished goods

6)

Temporary investment of surplus funds.

7)

Prepaid expenses

8)

Accrued incomes.

9)

Marketable securities.

Major Current Liabilities

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1)

Accrued or outstanding expenses.

2)

Short term loans, advances and deposits.

3)

Dividends payable.

4)

Bank overdraft.

5)

Provision for taxation , if it does not amt. to app. Of profit.

6)

Bills payable.

7)

Sundry creditors.

The gross working capital concept is financial or going concern concept whereas net working
capital is an accounting concept of working capital. Both the concepts have their own merits.
The gross concept is sometimes preferred to the concept of working capital for the following
reasons:
1.

It enables the enterprise to provide correct amount of working capital at correct time.

2.

Every management is more interested in total current assets with which it has to operate
then the source from where it is made available.

3.

It take into consideration of the fact every increase in the funds of the enterprise would
increase its working capital.

4.

This concept is also useful in determining the rate of return on investments in working
capital.

The Goal of Capital Management is to manage the firm s current assets & liabilities, so that the
satisfactory level of working capital is maintained. If the firm can not maintain the satisfactory

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level of working capital, it is likely to become insolvent & may be forced into bankruptcy. To
maintain the margin of safety current asset should be large enough to cover its current assets.
Main theme of the theory of working capital management is interaction between the current
assets & current liabilities.
CLASSIFICATION OF WORKING CAPITAL
Working capital may be classified in two ways:
o

On the basis of concept.

On the basis of time.

On the basis of concept working capital can be classified as gross working capital and net
working capital. On the basis of time, working capital may be classified as:

Permanent or fixed working capital.

Temporary or variable working capital

PERMANENT OR FIXED WORKING CAPITAL

Permanent or fixed working capital is minimum amount which is required to ensure effective
utilization of fixed facilities and for maintaining the circulation of current assets. Every firm has
to maintain a minimum level of raw material, work- in-process, finished goods and cash balance.
This minimum level of current assets is called permanent or fixed working capital as this part of
working is permanently blocked in current assets. As the business grow the requirements of
working capital also increases due to increase in current assets.
TEMPORARY OR VARIABLE WORKING CAPITAL
Temporary or variable working capital is the amount of working capital which is required to
meet the seasonal demands and some special exigencies. Variable working capital can further be
classified as seasonal working capital and special working capital. The capital required to meet
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the seasonal need of the enterprise is called seasonal working capital. Special working capital is
that part of working capital which is required to meet special exigencies such as launching of
extensive marketing for conducting research, etc.
The extra working capital needed to support the changing production and sales
activities, is called variable or functioning or temporary working capital.
Temporary working capital differs from permanent working capital in the sense that is required
for short periods and cannot be permanently employed gainfully in the business.
IMPORTANCE OR ADVANTAGE OF ADEQUATE WORKING CAPITAL

Solvency of the business: Adequate working capital helps in maintaining the solvency of
the business by providing uninterrupted of production.

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

payments and makes and maintain the goodwill.

Easy loans: Adequate working capital leads to high solvency and credit standing can
arrange loans from banks and other on easy and favorable terms.

Cash Discounts: Adequate working capital also enables a concern to avail cash
discounts on the purchases and hence reduces cost.

Regular Supply of Raw Material: Sufficient working capital ensures regular supply of
raw material and continuous production.

Regular Payment Of Salaries, Wages And Other Day TO Day Commitments: It leads to
the satisfaction of the employees and raises the morale of its employees, increases their
efficiency, reduces wastage and costs and enhances production and profits.

Exploitation of Favorable Market Conditions: If a firm is having adequate working

capital then it can exploit the favorable market conditions such as purchasing its

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requirements in bulk when the prices are lower and holdings its inventories for higher
prices.

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

Quick And Regular Return On Investments: Sufficient working capital enables a

concern to pay quick and regular of dividends to its investors and gains confidence of the
investors and can raise more funds in future.

High Morale: Adequate working capital brings an environment of securities, confidence,

high morale which results in overall efficiency in a business.

EXCESS OR INADEQUATE WORKING CAPITAL

Every business concern should have adequate amount of working capital to run its business
operations. It should have neither redundant or excess working capital nor inadequate nor
shortages of working capital. Both excess as well as short working capital positions are bad for
any business. However, it is the inadequate working capital which is more dangerous from the
point of view of the firm.
DISADVANTAGES OF INADEQUATE WORKING CAPITAL
Every business needs some amounts of working capital. The need for working capital arises due
to the time gap between production and realization of cash from sales. There is an operating
cycle involved in sales and realization of cash. There are time gaps in purchase of raw material
and production; production and sales; and realization of cash.
Thus working capital is needed for the following purposes:

For the purpose of raw material, components and spares.

To pay wages and salaries

To incur day-to-day expenses and overload costs such as office expenses.

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To meet the selling costs as packing, advertising, etc.

To provide credit facilities to the customer.

To maintain the inventories of the raw material, work-in-progress, stores and spares and
finished stock.

For studying the need of working capital in a business, one has to study the business under
varying circumstances such as a new concern requires a lot of funds to meet its initial
requirements such as promotion and formation etc. These expenses are called preliminary
expenses and are capitalized. The amount needed for working capital depends upon the size of
the company and ambitions of its promoters. Greater the size of the business unit, generally
larger will be the requirements of the working capital.
FACTORS AFFECTING WORKING CAPITAL MANAGEMENT
The amount of working capital required depends upon a number of factors which can be stated as
below
Nature of Business:
Some businesses are such, due to their very nature, that their requirement of fixed capital is more
rather than working capital. These businesses sell services and not the commodities and not the
commodities and that too on cash basis. As such, no funds are blocked in piling inventories and
also no funds are blocked in receivables. E.g. Public utility services like railways, electricity
boards, infrastructure oriented projects etc. Their requirement of working capital is less. On the
other hand, there are some business like trading activity, where the requirement of fixed capital is
less but more money is blocked in inventories and debtors. Their requirement of the working
capital is more.
Length of Production Cycle:
In some business like machine tool industry, the time gap between the acquisitions of raw
material till the end of final production of finished product itself is quite high. As such more
amounts may be blocked either in raw materials, or work in progress or finished goods or even in
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debtors. Naturally, their needs of working capital are higher. On the other hand, if the production
cycle is shorter, the requirement of working capital is also less.
Size and Growth of Business:
In very small companies the working capital requirements are quite high overheads, higher
buying and selling costs etc. As such, the medium sized companies positively have an edge over
the small companies. But if the business starts growing after a certain limit, the working capital
requirements may be adversely affected by the increasing size.
Business I Trade Cycles:
If the company is operating in the period of boom, the working capital requirements may be
more as the company may like to buy more raw material, may increase the production and sales
to take the benefits of favourable markets, due to the increased sales, there may be more and
more amount of funds blocked in stock and debtors etc. Similarly, in case of depression also, the
working capital requirements may be high as the sales in terms of value and quantity may be
reducing, there may be unnecessary piling up of stocks without getting sold, the receivables may
not be recovered in time etc.
Rate of Stock Turnover:
There is an inverse co-relationship between the question of working capital and the velocity or
speed with which the sales are affected. A firm having a high rate of stock turnover wuill needs
lower amt. of working capital as compared to a firm having a low rate of turnover.
Credit Policy:
The firms credit policy directly affects the working capital requirement. If the firm
has liberal credit policy, hence the more credit period will be provided to the debtors so this
will lead to more working capital requirement. With the liberal credit policy
operating cycle length increases and vice versa.
Production Policy:

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If the policy is to keep production steady by accumulating inventories it will require higher
working capital.

Seasonal Variations:
In certain industries like raw material is not available throughout the year. They have to buy raw
material in bulk during the season to ensure an uninterrupted flow and process them during the
year. Generally, during the busy season, a firm requires larger working capital than in slack
season.
Earning Capacity And Dividend Policy:
Some firms have more earning capacity than other due to quality of their products, monopoly
conditions, etc. Such firms may generate cash profits from operations and contribute to their
working capital. The dividend policy also affects the requirement of working capital. A firm
maintaining a steady high rate of cash dividend irrespective of its profits needs working capital
than the firm that retains larger part of its profits and does not pay so high rate of cash dividend.
Price Level Changes:
Changes in the price level also affect the working capital requirements. Generally rise in prices
leads to increase in working capital.
Others FACTORS:

Operating efficiency.
Management ability.
Irregularities of supply.
Import policy.
Asset structure.
Importance of labor.
Banking facilities, etc
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CONCEPT OF WORKING CAPITAL:

There are 2 concepts:
Gross Working Capital
Net Working Capital
Gross working capital: - It is referred as total current assets.
Focuses on,

Optimum investment in current assets:

Excessive investments impairs firm s profitability, as idle investment earns nothing. Inadequate
working capital can threaten solvency of the firm because of its inability to meet its current
obligations. Therefore there should be adequate investment in current assets.

Financing of current assets:

Whenever the need for working capital funds arises, agreement should be made quickly. If
surplus funds are available they should be invested in short term securities.
Net working capital (NWC) defined by 2 ways,
Difference between current assets and current liabilities
Net working capital is that portion of current assets which is financed with long term
funds.
NET WORKING CAPITAL = CURRENT ASSETS CURRENT
LIABILITIES
If the working capital is efficiently managed then liquidity and profitability both will improve.
They are not components of working capital but outcome of working capital. Working capital is
basically related with the question of profitability versus liquidity & related aspects of risk.
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PLANNING OF WORKING CAPITAL:

Working capital is required to run day to day business operations. Firms differ in their
requirement of working capital (WC). Firm s aim is to maximize the wealth of share holders and
to earn sufficient return from its operations. WCM is a significant facet of financial management.
Its importance stems from two reasons:

Investment in current asset represents a substantial portion of total investment.

Investment in current assets and level of current liability has to be geared quickly to
change in sales.

Business undertaking required funds for two purposes:

To create productive capacity through purchase of fixed assets.

To finance current assets required for running of the business.

The importance of WCM is reflected in the fact that financial managers spend a great deal of
time in managing current assets and current liabilities. The extent to which profit can be earned is
dependent upon the magnitude of sales. Sales are necessary for earning profits. However, sales
do not convert into cash instantly; there is invariably a time lag between sale of goods and the
receipt of cash. WC management affect the profitability and liquidity of the firm which are
inversely proportional to each other, hence
proper balance should be maintained between two.
To convert the sale of goods into cash, there is need for WC in the form of current asset to deal
with the problem arising out of immediate realization of cash against good sold. Sufficient WC is
necessary to sustain sales activity. This is referred to as the operating or cash cycle.

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RESEARCH
METHODOLOGY

Page 24 of 68

Objective of the study

To study the various proportions of working capital of Lamiya Silks

To find out different ratios related with working capital
To check the impact of cash flows on working capital of Lamiya Silks
To know the current trend of Assets and Liabilities

Target
Working capital of Lamiya Silks
Sampling Unit
Working capital of Lamiya Silks at Thrissur Store
Sampling Area

Thrissur

Sampling Size

Accounts of 2 years

Sampling Technique

Convenience Sampling

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Limitations of the study

Department heads were busy so time for interaction was less.

The entire financial position of the company cannot be disclosed.
Company provides only secondary data, so certain type of bias is in study.
Majority of the raw materials is purchased by the main head office. So more detailed
information cannot be received about these.

SOURCES OF INFORMATION
Primary Data
The personal interview with senior officials and various members of finance and accounts
department and also with other departments and collected the data.
Secondary Data
Necessary for the study was available within the company itself. Other sources

Website
Textbooks

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SECTOR
OVERVIEW

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Textile sector
The Indian Textile sector plays an exceptionally significant role in shaping the economy of India
notably in terms of employment, foreign exchange earnings and share in value added. This sector
is the second largest sector after agriculture. The industry is rich and varied, embracing the handspun and hand-woven sector at one end and the capital intensive, sophisticated mill sector at the
other. Its association with the ancient culture and tradition of the country lends it a unique
advantage in comparison with textiles industry of other countries, thus giving it an uncommon
edge to cater to a vast variety of products and market segments both domestically, as well as,
globally.
The Indian economy is fundamentally depended upon manufacturing of textiles and its trade.
This sector has been one of the major sources for foreign exchange earnings in India. The
industry registered has ensured value of US dollar 10.1 Billion in 2003 2004 as compared to us
dollar 9.6 billion in the previous year. One of the key strengths of Indian textile industry is the
abundance of raw material with India being one of the major producers of fabric in the world.
Until the economic liberalization of Indian economy, the India Textile Industry was
predominantly unorganized industry. The opening up of Indian economy post 1990s led to a
stupendous growth of this industry. India Textile Industry is one of the largest textile industries in
the world. Today, Indian economy is largely dependent on textile manufacturing and exports. The
industry currently contributes about 14 per cent to industrial production, 4 per cent to GDP, and
17 per cent to the countrys export earnings, according to the Annual Report 2010-11 of the
Ministry of Textiles. The industry accounts for nearly 12 per cent share of the country's total
exports basket. It provides direct employment to more than 35 million people.
There were various stages - from a historical perspective - where the textile industry evolved
from being a domestic small-scale industry, to the status of supremacy it currently holds. The
cottage stage was the first stage in its history where textiles were produced on a domestic basis.
Page 28 of 68

During this period cloth was made from materials including wool, flax and cotton. The material
depended on the area where the cloth was being produced, and the time they were being made.
During the Industrial Revolution, new machines such as spinning wheels and handlooms came
into the picture. Making clothing material quickly became an organized industry - as compared
to the domesticated activity it had been associated with before. A number of new innovations led
to the industrialization of the textile industry in Great Britain. Clothing manufactured during the
Industrial Revolution formed a big part of the exports made by Great Britain. They accounted for
almost 25% of the total exports made at that time, doubling in the period between 1701 and
1770.
In this era, a lot of effort was made to increase the speed of the production through inventions
such as the flying shuttle in 1733, the flyer-and-bobbin system, and the Roller Spinning machine
by John Wyatt and Lewis Paul in 1738.
In the initial phases, textile mills were located in and around the rivers since they were powered
by water wheels. After the steam engine was invented, the dependence on the rivers ceased to a
great extent. In the later phases of the 20th century, shuttles that were used in the textile industry
were developed and became faster and thus more efficient. This led to the replacement of the
older shuttles with the new ones.
Recent Trends
The mood in the Indian textile industry given the phase-out of the quota regime of the MultiFibre Arrangement (MFA) is upbeat with new investment flowing in and increased orders for the
industry as a result of which capacities are fully booked up to April 2005. As a result of various
initiatives taken by the government, there has been new investment of Rs.500 billion in the
textile industry in the last five years. Nine textile majors invested Rs.26 billion and plan to invest
another Rs.64 billion. Further, India's cotton production increased by 57% over the last five
years; and 3 million additional spindles and 30,000 shuttles-less looms were installed. The
industry expects investment of Rs.1,400 billion in this sector in the post-MFA phase.
A Vision 2010 for textiles formulated by the government after intensive interaction with the
industry and Export Promotion Councils to capitalize on the upbeat mood aims to increase
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India's share in world's textile trade from the current 4% to 8% by 2010 and to achieve export
value of US $ 50 billion by 2010 Vision 2010 for textiles envisages growth in Indian textile
economy from the current US $ 37 billion to $ 85 billion by 2010; creation of 12 million new
jobs in the textile sector; and modernization and consolidation for creating a globally competitive
textile industry. The textile industry is undergoing a major reorientation towards non-clothing
applications of textiles, known as technical textiles, which are growing roughly at twice rate of
textiles for clothing applications and now account for more than half of total textile production.
The processes involved in producing technical textiles require expensive equipments and skilled
workers and are, for the moment, concentrated in developed countries. Technical textiles have
many applications including bed sheets; filtration and abrasive materials; furniture and
healthcare upholstery; thermal protection and blood-absorbing materials; seatbelts; adhesive
tape, and multiple other specialized products and applications.
Today, modern techniques, electronics and innovation have led to a competitive, low-priced
textile industry offering almost any type of cloth or design a person could desire.
Industry sub-sectors
The textile industry comprises the following:

Organised Cotton/Man-Made Fibre Textiles Mill Industry

Man-Made Fibre / Filament Yarn Industry

Wool and Woollen Textiles Industry

Sericulture and Silk Textiles Industry

Handlooms, Handicrafts, the Jute and Jute Textiles Industry

Textiles Exports

Anticipating massive growth in medical and automobile sectors, these sectors assures substantial
demand for non woven facilities in India. Albeit, home textiles also will lure higher demand,
there are specific demands for home textile facilities also. The 7th Five Year Plan has huge

Page 30 of 68

consideration on agricultural growth that also includes cotton textile industry, resulting a
prosperous future forecast for the textile industry in India.
Strengths of Indian Textile Industry
1. Indian Textile Industry is an Independent & Self-Reliant industry.
2. Abundant Raw Material availability that helps industry to control costs and reduces the leadtime across the operation.
3. Availability of Low Cost and Skilled Manpower provides competitive advantage to industry.
4. Availability of large varieties of cotton fiber and has a fast growing synthetic fiber industry.
5. India has great advantage in Spinning Sector and has a presence in all process of operation and
value chain.
6. India is one of the largest exporters of Yarn in international market and contributes around
25% share of the global trade in Cotton Yarn.
7. The Apparel Industry is one of largest foreign revenue contributor and holds 12% of the
countrys total export.
8. Industry has large and diversified segments that provide wide variety of products.
9. Growing Economy and Potential Domestic and International Market.
10. Industry has Manufacturing Flexibility that helps to increase the productivity.
11. Entrepreneurial skills
12. Huge export potential
13. Very low import content

Weaknesses of Indian Textile Industry

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1. Indian Textile Industry is highly Fragmented Industry.

2. Industry is highly dependent on Cotton.
3. Lower Productivity in various segments.
4. There is Declining in Mill Segment.
5. Lack of Technological Development that affect the productivity and other activities in whole
value chain.
6. Infrastructural Bottlenecks and Efficiency such as, Transaction Time at Ports and
transportation Time.
7. Unfavorable labor Laws.
8. Lack of Trade Membership, which restrict to tap other potential market.
9. Lacking to generate Economies of Scale.
10. Higher Indirect Taxes, Power and Interest Rates.

Opportunities of Indian Textile Industry:

1. Growth rate of Domestic Textile Industry is 6-8% per annum.
2. Large, Potential Domestic and International Market.
3. Product development and Diversification to cater global needs.
4. Elimination of Quota Restriction leads to greater Market Development.
5. Market is gradually shifting towards Branded Readymade Garment.
6. Increased Disposable Income and Purchasing Power of Indian Customer opens New Market
Development.

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7. Emerging Retail Industry and Malls provide huge opportunities for the Apparel, Handicraft
and other segments of the industry.
8. Greater Investment and FDI opportunities are available.
Threats:
1. Competition from other developing countries, especially China.
2. Continuous Quality Improvement is need of the hour as there are different demand patterns all
over the world.
3. Elimination of Quota system will lead to fluctuations in Export Demand.
4. Threat for Traditional Market for Power loom and Handloom Products and forcing them for
product diversification.
5. Geographical Disadvantages.
6. International labor and Environmental Laws.
7. To balance the demand and supply.
8. To make balance between price and quality

Page 33 of 68

COMPANY
OVERVIEW

Page 34 of 68

Page 35 of 68

COMPANY OVERVIEW
Lamiya Silks, the largest showroom network, has been the most trusted brand in Kerala. Today
Lamiya Silks prides itself in world-class showrooms all over Kerala. Lamiya Silks has its main
branch at Kozhikode, Kerala. It has about 15 branches at various places in Kerala. Thrissur store
is one among them.

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Lamiya Silks product lines are different from other players in the textile industry. So are its
infrastructure facilities. Lamiya Silks has a string of looms in all major centers across the
country. In-house designing centers and manufacturing units help Lamiya Silks bring the latest
trends to its shelves. In addition to all this, Lamiya Silks owns Indias largest wholesale textile
showroom, which powers this heritage brand to control prices and maximize quality right
through the year.
Lamiya Silks is spread across three floors. The ground floor has kids collection and dhotis, the
first floor is dedicated to the womens section and the second floor is exclusively for men.
The ground floor in this apparel store displays has clothes for kids from 5-12 years of age. The
garments are organized size-wise, making it easier to browse through. Ethnic wear like kids
ghaghra cholis, sherwanis for your little ones along with kasavu and cotton dhotis for men
starting at Rs. 250 are all available. Western wear for kids like shirts, trousers and T-shirts are
there too.

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The stairs that lead to the first floor has door mats, curtains, bed sheets, blankets, bedspreads and
some small household items on display.

The floor above has sarees including wedding srees, party wear designer sarees, office wear
cotton sarees and ordinary cotton sarees for Rs. 200 onwards. Salwar kameez material and

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readymade churidars are there too. The wedding collection in this section has a good collection
of sarees, starting from Rs. 1,500.

There is a wide range of designer saree collection. The area allotted for designer saree is
comparatively more than the others.
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The second floor at Lamiya Silks, exclusively for men, has an assortment of branded readymade
shirts and trousers, shirting material, sherwanis and kurtas. The readymade shirts in this section
start at Rs. 200 for the unbranded ones and Rs. 400 for the branded ones. Here you can also find
shirting material, the price of which starts from Rs. 90 for a meter. Also check out the sherwanis
here that cost around Rs. 2,500.

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Lamiya Silks can be easily located since it is on the roadside. Price wise, it seems reasonable
compared to other stores in the vicinity. It accepts cash and credit card for payment. It falls short
of adequate parking space.
Lamiya Silks provides a complete wedding package to its customers. The world of wedding
fashion is witnessing a revolution in Bridal Wear. Revolutions that will alter the way millions of
Indian celebrate their weddings, and Lamiya Silks is at the helm of this revolution. The wedding
centre brings under one roof the finest selection of wedding saris and other accessories. With the
availability of wedding saris, dress material and readymade garments at the centre, marriage
shopping would be a convenient and enjoyable experience. Created by a panel of Indias best
designers, these materials conform to the highest standards of quality with wide range accessible
to all. Lamiya Silks also offers exclusive collection of life style items including perfumes, leather
accessories for men and women and a large collection of premium quality wedding gifts.
Objectives of the Company
Objectives establish the goals and the aims of the business and determine the shape of future
events. Objectives are the way of achieving motives for profit of social service.
Main objectives of Lamiya Silks are Increasing productivity of work force
To introduce new products and create new markets
Page 41 of 68

Customers service and customer satisfaction

Improving work culture among the employees
Capitalizing on company strength and use of corporate assets
Continuous innovation
To improve the advertising effectiveness
To ensure that a large proportion of its sales is directed towards the sectors and urban
sectors.

ORGANISATION CHART

Page 42 of 68

INTERNSHIP
ACTIVITIES

Page 43 of 68

METHODS OF WORKING CAPITAL ANALYSIS

There are so many methods for analysis of financial statements used in companies. Here the
following techniques are being used to analysis the working capital management of Lamiya
Silks

Comparative size statement

Trend analysis
Cash flow statement
Ratio analysis

A detail description of these methods is as followsCOMPARATIVE SIZE STATEMENT

When two or more than two years figures are compared to each other we call them comparative
size statements in order to estimate the future progress of the business, it is necessary to look at
the performance of the company. These statements show the absolute figures and also show the
change from one year to another.
Benefits of this method to the company To indicate the trends, these statements show the change in production, sales and
expenses.
To make the data simple and more understandable

TREND ANALYSIS
To analyse many years financial statements, this method is used. This indicates the direction on
movement over the long time and help in the financial statements.
Procedure for calculating trends1. Previous year is taken as the base year
2. Figures of the base year are taken as 100
3. Trend % are calculated in relation to base year.

Page 44 of 68

Benefits It is beneficial to find out the long run changes

It is helpful in future forecasting.

CASH FLOW STATEMENT

Cash flow statements are the statements of changes in the financial position prepared on the basis
of funds defined in cash or cash equivalents. In short cash flow statement summaries the cash
inflows and outflows of the firm during a particular period of time.
Benefits for the company To prepare the cash budget
To compare the cash budgets
To show the position of the cash and cash equivalents.

RATIO ANALYSIS
Ratio analysis is the process of the determining and presenting the relationship of the items and
group of items in the statements. Ratio can assist management in its basic functions of
forecasting, planning, coordination, control and communication.
Benefits to the company

Helpful in analysis of financial statements

Helpful in comparative study
Helpful in locating the weak spots of the company
Helpful in forecasting
Estimate about the trend of the business
Fixation of ideal standards
Effective control
Study of financial soundness

Types of ratio-

Page 45 of 68

 Liquidity Ratio- they indicate the firms ability to meet its current obligation out of current
resources.
Current ratio = current assets / current liabilities
Quick ratio = liquid assets / current liabilities
Liquid assets = current assets stock prepaid expenses
Leverage or Capital Structure Ratio- this ratio discloses the firms ability to meet the
interest costs regularly and long term solvency of the firm.

Debt equity ratio = long term loans / shareholders funds or net worth
Debt to total fund ratio = long term loans / shareholder funds + long term loan
Proprietary ratio = shareholders fund / shareholders fund + long term loan

Activity ratio or Turnover ratio- they indicate the rapidity with which the resources
available to the concern are being used to produce sales.

Stock turnover ratio = cost of goods sold / average stock

cost of goods sold = net sales / gross profit,
Average stock = opening stock + closing stock / 2
Debtors turnover ratio = net credit sales / average debtors + average B/R
Average collection period = debtors+ B/R Credit sales per day
Credit sales per day = net credit sales of the year /365
Creditors turnover ratio = net credit purchases / average creditors + avg. B/P
Average payment period = creditors + B/P / credit purchase perday
Fixed assets turnover ratio = cost of goods sold / net fixed assets
Net fixed assets = fixed assets depreciation
Working capital turnover ratio = cost of goods sold / working capital
Working capital = current assets current liabilities

Profitability ratios or Income ratios- the main objective of every business concern is to
earn profits. A business must be able to earn adequate profit in relation to the risk and
capital invested in it.

Gross profit ratio = gross profit / net sales *100

Net sales = sales sales return
Net profit ratio = net profit / net sales * 100
Operating net profit = operating net profit / net sales * 100 or gross profit
operating expenses
Operating ratio = cost of goods sold + operating expenses / net sales * 100
Cost of goods sold = net sales gross profit
Page 46 of 68

Operating expenses = office and administration expenses + selling & distribution

expenses + discount + bad debts + interest on short term loans

Earning per share(EPS) = net profit dividend on preference share / no. of equity

shares
Dividend per share (DPS) = dividend paid to equity shareholders / no. of equity

shares * 100
Dividend payout ratio (DP) = DPS /EPS * 100

RATIO ANALYSIS FOR LAMIYA SILKS

Current ratio
2010
C.R = 1321.22 / 969.15 = 1.36
2011
C.R = 1517.69 / 1266.86 = 1.20

CommentAs compared to previous year, current ratio has decreased in current year because of
increase in current liabilities.

Quick ratio
2010
Q.R = 570.49 / 969.15 = 0.59
2011
Q.R = 693.55 / 1266.86 = 0.55

CommentAs compared to previous year, quick ratio has decreased in current year.

Debt equity ratio

2010
DER = 1979.67 / 4982.08 = 0.40
2011
DER = 2951.56 / 6230.04 = 0.47
Interest coverage ratio
Page 47 of 68

2010
I.C.R = 1201.90 / 103.38 = 11.67 times
2011
I.C.R = 2189.26 / 111.84 = 19.57 times
CommentInterest coverage ratio is increasing as compared to previous year. This indicates that the
firm will be able to pay the interest on long term loans regularly.

Fixed assets turnover ratio

2010
F.A.T.R = 5159 / 3004.63 = 1.72 times
2011
F.A.T.R = 6097 / 3390.44 = 1.80 times

CommentThis ratio reveals how efficiently the fixed assets are being utilized. As compared to
previous year, this ratio is increasing which indicates that there is better utilization of fixed
assets.

Debt to total fund ratio

2010
D.T.F.R = 1979.67 / 6961.75 = 0.28 or 28%
2011
D.T.F.R = 2951.56 / 9181.60 = 0.32 or 32%
Proprietary ratio
2010
P.R = 4982.08 / 6961.75 = 0.71 or 71%
2011
P.R = 6230.04 / 9181.60 = 0.67 or 67%
Capital turnover ratio
2010
C.T.R = 5159 / 3356.70 = 1.54 times
2011
C.T.R = 6097 / 3641.27 = 1.67times

CommentThis ratio reveals how efficiently capital employed is being used. As compared to
previous year, this ratio is increasing which indicates that there is better use of capital employed.
Page 48 of 68

Working capital turnover ratio

2010
W.C.T.R = 5159 / 352.07 = 14065 times
2011
W.C.T.R = 6097 / 250.83 = 24.3 times

CommentThis ratio reveals how efficiently working capital has being utilized in making sales. As
compared to previous year, this ratio is increasing which indicates the efficient use of working
capital.

Stock turnover ratio

2010
S.T.R = 5159 / 715 = 7.22 times
2011
S.T.R = 6097 / 784.44 = 7077 times

CommentThis ratio indicates whether stock has been efficiently used or not. As compared to
previous year, there is a slight increase in this ratio.

Gross profit ratio

2010
G.P.R = 1494 / 6621 * 100 = 22.56%
2011
G.P.R = 2507 / 8604 * 100 = 29.14%
Net profit ratio
2010
N.P.R = 1202 / 6621 * 100 = 18.15%
2011
N.P.R = 2189 / 8604 * 100 = 25.44%
Operating net profit ratio
2010
O.N.P.R = 1590.9 / 6621 * 100 = 24.02%
2011
O.N.P.R = 2619 / 8604 * 100 = 30.44%
Earning per share
2010
E.P.S = 8630000000 / 91808510 = 94 Rs
Page 49 of 68

2011

E.P.S = 15360000000 / 91428571 = 168 Rs

Dividend per share
2010
D.P.S = 1836176200 / 91808510 = 20 Rs
2011
D.P.S = 2514285703 / 91428571 = 27.5 Rs
Dividend payout ratio
2010
D.P.R = 20 / 94 * 100 = 22%
2011
D.P.R = 27.5 / 168 * 100 = 17%

Proportion of various sources of working capital in percentage

Current assets, loans and advances

Interest accured on investments

2010
1.46 / 2026.76 * 100 = 0.07%
2011
0.70 / 2342.39 * 100 = 0.02%
Inventories
2010
750.73 / 2026.76 * 100 = 37.04%
2011
824.14 / 2342.39 * 100 = 35.18%
Sundry debtors
2010
413.45 / 2026.76 * 100 = 20.39%
2011
576.48 / 2342.39 * 100 = 24.64%
Cash and bank balances
2010
155.58 / 2026.76 * 100 = 7.67%
2011
116.38 / 2342.39 * 100 = 4.96%
Loans and advances
2010
705.54 / 2026.76 * 100 = 34.83%
2011
824.69 / 2342.39 * 100 = 35.20%
Page 50 of 68

Current liabilities and provisions

Current liabilities
2010
969.15 / 1273.37 * 100 = 76.10%
2011
1266 / 1450.06 * 100 = 87.36%
Provisions
2010
304.22 / 1273.37 * 100 = 23.90%
2011
183.20 / 1450.06 * 100 = 12.63%

TABLE 1
COMPARATIVE P&L ACCOUNT
(For the year 2010-2011)
(Rs. in Crores)
FY 2011

FY 2010

% change

Net turnover

14095.2

10224.0

38

Other income

317.7

267.9

19

Total expenditure

10122.8

8155.3

24

Operating profit (PBIT)

4290.1

2336.6

84

Interest

228.6

218.3

Depreciation

610.0

563.1

Page 51 of 68

Exceptional items

4.1

Profit before tax

3451.5

1559.3

121

Total tax expenses

1092.1

402.7

171

Net profit after total tax

2359.4

1156.6

104

Minority share

391.9

116.0

238

Net profit

1967.5

1040.6

89

TABLE 2
TREND ANALYSIS
(For the liability side of 2010-2011)

Particulars
Current liability
Liability
Provisions
Total (A)

2011

2010

Base Trend %

Current Tend %

1266.86
183.20
1450.06

969.15
304.22
1273.37

100
100
100

130.73
60.21
113.87

Fixed liability
Share capital
Reserves &

91.69
6138.35

91.69
4890.39

100
100

100
125.5

surplus
Loans
Def. tax liability
Total (B)
Total liability

2951.56
582.55
9764.15
11214.21

1979.67
584.38
7546.13
8819.50

100
100
100
100

149.09
99.68
129.39
127.15

(A+B)
Page 52 of 68

TABLE 3
TREND ANALYSIS
(For assets side of 2010-2011)
Particulars

2011

2010

Base trend %

Current trend
%

Fixed assets
Fixed assets
Fixed assets held

4582.79
14.33

3298.27
12.76

100
100

138.94
112.30

for disposable
Investments
Total (A)

4274.70
8871.82

3481.71
6792.74

100
100

122.79
130.60

Current assets
Stock
Interest accrued
Debtors
Cash
Loans
Total (B)
Total assets

824.14
.70
576.48
116.38
824.69
2342.39
11214.21

750.73
1.46
413.45
155.58
705.54
2026.76
8819.50

100
100
100
100
100
100
100

109.77
47.94
139.43
74.80
116.88
115.59
127.15

(A+B)

Page 53 of 68

TABLE 4
CAH FLOW ANALYSIS
(For 2010-2011)
(Rs in Crores)
Particulars
SOURCES OF CASH
Cash from operations
Increase in debts
Non operating cash flow
Decrease in cash and cash equivalent
Decrease in working capital
USES OF CASH
Net increase in investments
Net capital expenditure
Decrease in debts
Interest
Dividend

TABLE 5
Page 54 of 68

FY 2011

FY 2010

1816.0
947.6
114.0
39.2
2916.8

1077.1
67.1
205.2
1349.4

647.1
1598.2
109.4
478.8
2916.8

549.2
399.5
53.3
112.7
165.8
1349.4

CASH FLOW STATEMENT

(For year 2010 2011)
(Rs in Crores)
Cash flow from operating

2011

2010

activities
Net profit before tax
Depreciation
Interest expenses
Interest income
Dividend income
Profit / loss on sale of fixed

2189.26
317.91
111.84
(31.84)
(81.43)
(4.62)

1201.90
291.64
103.38
(29.48)
(38.04)
3.99

assets (Net)
Profit on sale of long term

(2.70)

(62.57)

investments(Net)
Profit on sale of current

(49.41)

(7.27)

investments (Net)
Operating profit before

2449.01

1330.06

working capital changes

Trade and other receivables
Inventories
Assets held for disposal
Trade payables
Cash generated from

(314.56)
(73.41)
(1.57)
306.17
2365.64

(116.66)
(72.41)
0.97
159.70
1668.74

operations
Direct taxes paid(Net)
Net cash from operating

(632.97)
1732.67

(380.42)
1288.32

326.4
(354.13)
(150.11)
(128.19)
(16.77)

410.5
(388.73)
(173.66)
(91.57)
(11.75)

(322.8)

(255.21)

activities
Cash flow from investing
activities
Purchase of fixed assets
Sale of fixed assets
Purchase of investments
Sale of investments
Investments / advances in
joint ventures, subsidiaries &
others
Interest received

Page 55 of 68

Net cash from investing

(301.75)

(231.24)

activities
Cash flow from financing

19.71

5.65

activities
Proceeds from borrowings
Repayments of borrowings
Interest paid
Dividends paid
Corporate dividend tax
Dividend received
Net cash from financing

(75.41)
666.13
(1294.15)
3.37
74.29
39.37
(868.44)

(792.83)
53.64
24.74
1.79
55.28
86.32
(796.65)

activities
Net increase / decrease in

(140.78)

117.37

cash & cash equivalent

At beginning of year
At end of year

227.48
86.7

110.11
227.48

TABLE 6
PROFIT & LOSS A/C
of the year ending 2010-2011
(Rs. in Crores)

INCOME
Gross sales
Less- Excise Duty
Net sales
Interest & dividend income
Other income
Increase / decrease in stock

Page 56 of 68

2011

2010

9607.97

7638.41

986.29
8603.59
113.27
168.49
(16.44)
868.91

985.80
6652.61
67.53
152.41
(43.48)
6829.07

EXPENDITURE
Raw material consumed
Manufacturing expenses
Purchases of finished & other products
Payments to & provisions for employees
Selling, distribution, administration & other expenses
Interest
Depreciation
Profit before tax & exceptional items
Surplus on pre-payment of sales tax loan
Write back of provision for diminution
Profit before tax
Provision for current tax
Deferred tax
Profit after tax
Debenture redemption reserve no longer required
Investment allowance reserve no longer required
Balance brought forward from previous year
Profit available for appropriation
AppropriationsInterim dividend
Proposed dividend
Corporate dividend tax
General reserve
Balance carried to balance sheet

2219.32
1744.33
321.16
459.40
1505.69
111.84
317.91
6679.65
2189.26
37.10
2226.36
(692.38)
1.83
1535.81
38.56
0.05
878.37
2452.79

1822.69
1580.34
240.15
407.64
1181.33
103.38
291.64
5627.17
1201.90
4.13
1206.03
(369.82)
27.00
863.21
8.62
0.25
815.35
1687.43

252.10
35.36
1200.00
965.33
2452.79

183.35
25.41
600.00
878.37
1687.43

TABLE 7
BALANCE SHEET
For the year ended 2011
(Rs in Crores)
SOURCES OF FUNDS

FY(2010-2011)

SHAREHOLDERS FUND

FY(20092010)

Page 57 of 68

Share capital
Reserve & surplus
Loan funds
Secured loans
Unsecured loans
Deferred tax liabilities
TOTAL
APPLICATIONS OF FUNDS
Fixed assets
Gross block
Less depreciation
Net block
Capital work-in-progress
Fixed assets held for disposal
Investments
Current assets, loans & advances
Interest accrued on investments
Inventories
Sundry debtors
Cash and bank balances
Loans and advances

91.69
6138.35

91.69
4890.39

2291.00
660.56
2951.56
582.55
9764.15

1386.12
593.55
1979.67
584.38
7546.13

6770.97
3380.53
3390.44
1192.35
4582.79
14.33
4274.70

6114.12
3109.49
3004.63
293.64
3298.27
12.76
3481.71

0.70
824.14
576.48
116.38
824.69
2342.39

1.46
750.73
413.45
155.58
705.54
2026.76

1266.86
183.20
1450.06
892.33
9764.15

969.15
304.22
1273.37
753.39
7546.13

LessCurrent liabilities & provisions

Liabilities
Provisions
Net current assets
TOTAL

Page 58 of 68

INTERNSHIP
ASSESSMENT

Internship has helped a lot to understand the practical side of job, which is different from
the textbook theories. It has also helped me to improve my communication skills.
Customer handling was one of the important learning that I gained from my internship.
From the customer point of view, it is easy. But not so when in the position of a staff or
employee. Was also able to maintain a good relationship with the employees on and off
the shop floor. I did my internship on working capital management. It helped me to
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know how the analysis is being done by comparing the Balance Sheets of 2subsequet
years.

During the period of internship, I was supposed to thoroughly go through the financial
statements of the company and understand the aspects and concepts involved in it. In the
meanwhile, I also contributed in the sales department and helped in the billing session,
which gave me a very different experience.

Having done my internship in the finance sector my interest for it has increased which
will help me in my coming semesters.

It is very well said that Finance always need a theory backup. One needs to really know
what finance is all about and how much it is important for the companys smooth
functioning.

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CONCLUSION

FINDINGS
In 2011 there is increase in current assets by 24% than 2010 and there is increase in current
liability by 17%, because of greater increase in current assets than in current liabilities, the
position of Working Capital has improved.
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 The % of fixed assets has come down in 2011 from 2010

As per current ratio firm is able to pay its current liability
Quick ratio presents a better test of short term financial position, which shows better
working capital position of the firm
Debt equity ratio and debt to total fund ratio presents protection to long term lenders and
shows sufficient working capital in the firm
Gross profit and net profit have increased from previous year
Cash flow statement indicates outflow of cash in comparison to past year
Due to better long term and short term financial conditions firms working capital is
better than that of previous year.

RECOMMENDATIONS
The company must concentrate on the percentage of fixed assets in the coming years.
The company must keep on maintaining the firms debt and equity and debt to total fund
so as to maintain the working capital.
Apart from the topic recommendations, the billing sector must involve more number of
persons in order to reduce the rush.
The company should try to improve working capital turnover ratio by efficient
utilization of working capital.
The company should try to use more proprietors fund in current assets, so
that they can improve current assets to proprietors fund.
By using proprietors fund properly, the company can increase return on
capital employed.

Page 62 of 68

ILLUSTRATION

The details of sales in different sessions in the store during the month of April June 2012.
CHART 1
MAIN DEPARTMENT SALES

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Department Sales
Designer Saree

Wedding Saree

Kids Wear

Gents Wear

Churidhar

19%
36%
15%

14%

17%

The statistics of the apparels department shows that the customers demand more for designer
sarees. Now-a-days lady customers are increasing and so is such a result. The trend of churidhars
and salwars have come down when compared to the designer sarees. 35% of the department sales
is in the designer saree session.
The different sales percentage of each apparels areDesigner Saree

35%

Gents Wear

19%

Wedding Saree

17%

Kids Wear

15%

Churidhar

14%

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Sales details of other sessions in the store, which includes cosmetics, bed spreads, blankets,
curtains, etc.
CHART 2
SALES OF OTHER DEPARTMENTS

Sales
Cosmetics

Bed Spreads

Blanket

Curtain

Doormat

5%
28%

18%

14%
35%

When conducting a study among the other accessories and materials, we can come to a
conclusion that customers give more preference to cosmetics and then to others. The demand for
blanket is relatively less when compared to bed spreads. This is because of the climate conditions
in Kerala.
The different sales percentage of other materials in the store areBed Spreads

35%

Cosmetics

28%
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Curtains

18%

Blanket

14%

Doormat

5%

Page 66 of 68

BIBLIOGRAPHY

COMPANY REPORTS

Annual reports of Lamiya Silks

2009-10
2010-11

Page 67 of 68

BOOKS REFERRED

Khan, M.Y. and Jain, P.K., 2011, Financial Management, Tata McGraw-Hill, New

Delhi.
Sekaran, U. and Bougie, R., 2010, Research Methods for Business, New Delhi, Wiley-

India Edition, 5th edition.

2. Kothari, C.R., 1985, Research Methodology- Methods and Techniques, New Delhi,
Wiley Eastern Limited.

WEBLIOGRAPHY

http://lamiyasilks.com/
http://en.wikipedia.org/wiki/Textile_industry
http://www.textilehistory.org/
http://en.wikipedia.org/wiki/Working_capital

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