You are on page 1of 77

Contents

Chapter No. Description Page No.

Chapter – I Introduction 1-2

Industry profile 3-5

Company profile 6-8

Product Profile 9 - 12

Chapter – II Research Methodology 13 - 14

Need for the study

Objectives of the study

Sources of data

Scope & Limitations of the study

Chapter – III Data Analysis and Interpretation 15 - 55

Findings &
Chapter – IV 56 - 57
Suggestions
Conclusion 58

Annexure 59 - 68

Bibliography 69

1
INTRODUCTI
ON

2
INTRODUCTION

Financial Management is that managerial activity which is concerned with the

planning and controlling of the firm’s finance. Finance is one of the foundations of all

kinds of economic activities. Finance is the life-blood of a business. The financial man-

agement study deals with the process of procuring necessary financial resource and

their judicious use with a view to maximizing the value of the firm and there by the value

of the owners i.e. equity share holders in a company. Practicing managers are interest

in this subject because among the most crucial decisions of the firm are those which re-

late to finance, and an understanding of the theory of financial management provides

them with conceptual and analytical insights to make those decisions skillfully.

FINANCIAL MANAGEMENT

Financial Management emerged as a distinct field of study at the turn of this

century many eminent persons defined it in the following ways.

DEFINITIONS: -

According the BONNEVILE AND DEWEY:” Financing consists in the rising,

providing and managing of all the money, capital or funds of any kind to be used in

connection with the business”.

According to Prof.EZRA SOLOMAN:”Financial Management is concerned with

the efficient use of any important economic resource, namely capital funds”.

3
FINANCE FUNCTIONS: -

It may be difficult to separate the finance functions from production, marketing

and other functions, but the functions themselves can be readily identified. The

functions of raising funds investing them in assets and distributing returns earned from

assets to shareholders are respectively known as.

1. Long – term assets-mix (or) Investment Decision

2. Capital – Mix (or) Financing Decision

3. Profit allocation (or) Dividend Decision

4. Short – term asset –Mix (or) Liquidity Decision

GOALS OF FINANCIAL MANAGEMENT

• Maximize the value of the firm to its equity shareholders.

• Maximization of profit

• Maximization of earnings per share.

• Maximization of return on equity (defined as equity earnings/net worth)

• Maintenance of liquid assets in the firm.

• Ensuring maximum operational efficiency through planning directing and control-

ling of the utilization of the funds.

• Building up of adequate reserves for financing growth and expansion.

4
INDUSTRY PROFILE
Sugar cane is one of the important crops for the Indian farmer. Sugar and
Jiggery are the main products that we get from Sugarcane. Other products such
as Biogases for industrial use, Molasses for distillery, filter cake, Mud as an
organic manure and green leaves with tops for cattle feed are also available as
by products because of it’s multi uses Sugarcane has played crucial role in
Indian economy with rs.20000 cores turnover and width 450 mills providing
assistance to 45 million sugar cane farmers and 2 million Sugarcane farmers and
2 million workmen directly and indirectly.
In A.P. sugar industry is an important Agro-based industry, occupying the
second position next to text tile industry. The annual cultivated area is about
1.99 lack hectares with a yield of 149.45 lacks of tones during 96-97. At present,
there are 36 sugar factories in the state and 50% of them are in co-operative
sector. The co-operative sugar units in the states have been suffering due to
lack of adequate cane irrigation facilities, working capital, by-product utilization,
excessive employment etc.,.
The sugar industries which provide direct employment to about 3 lacks
persons of sugar cane followed by Brazil & Cuba. Sugar cane existed in India
from 3000 B.C. The centre place of origin of sugar cane regarded as
Northeastern Indian, from sugar cane seems to have been to China and other
places by early travelers and no man’s between 1800 and 1700 B.C. later. It was
penetrated to Philippines, Jewa and other places. Actually the word sugar
derived from a Sanskrit word “shakra”.
India was the world’s largest producer of sugar cane occupies a very pride
place in the world. In India, the cultivation of sugar cane is 10,000 miles tones.
The average yield, being 56 tones per acre of total cultivating land is occupied by
sugar cane cultivation. Sugarcane is grown in almost all part of India, except in
colder regions and extreme North Jammu Kashmir, Himachal Pradesh.

5
Area wise distribution of sugar industry in A.P.

S.No Sector No. of Costal Area Rayalaseema Telangana
industries
1 Co-operative 18 12 4 2
2 Public sector 7 1 1 5
3 Private sector 11 8 2 1
Total 36 21 7 8

The list of Co-operative Sugar factories in A.P.

1. The Chittoor Co-operative sugars ltd, Chittoor.
2. The Chodavaram Co-operative sugars ltd, Chodavaram.
3. The Anakapalle Co-operative sugars ltd, Anakapalle.
4. The Etikuppaka Co-operative agricultural of industrial society ltd, Ethikuppaka.
5. Sir Vijayarama Gajapathi Co-operative sugars ltd.
6. The Amadavalasa Co-operative agricultural industrial society ltd, Srikakulam.
7. The West Godavari Co-operative sugars ltd, Eluru.
8. Palakollu Co-operative agricultural & industrial society ltd, Palakollu.
9. The Thandara Co-operative sugars ltd, Visakapatnam.
10. Nizamabad Co-operative sugars ltd, Nizamabad.
11. Sir Venkateswara Cooperative sugars ltd, Renigunta.
12. The Cuddapah Co-operative sugars ltd, Chennur.
13. The Nandyal Co-operative sugars ltd, Ponnapuram.
14. The Kovur Co-operative sugars ltd, Nellore.
15. Nagarjuna Co-operative sugars mills ltd, Gurzala.
16. Nampaneni Venkata Rao Co-operative sugars ltd, Hanuman Junction.
17. Sri Hanuman Co-operative sugars ltd, Hanuman Junction.
18. Palair Co-operative sugars ltd, Ammagudem.

6
SUGAR INDUSTRY NATURE

SEASONALITY

The industry is seasonal with the season starting in Nov and continuing till
April/May, sugar cane is available during these 6-7 months and crushing also
takes place during these months.

LICENSING SYSTEM

To protect sugar – producing units and ensure a sufficient quantity of raw
material (sugar cane), licensing system was introduced. Under this system,
each unit had a command area from where the sugar cane was produced.
The licensing system presently in place is also trying to encourage the
setting up of new units by providing them with sops and other benefits.

7
COMPANY PROFILE

THE CHITTOOR CO-OPERATIVE SUGARS LIMITED is the first agro
based major industry in Rayalaseema area. It was first registered on 22.8.1955
under the APSCS Act. Its area of operation comprises of 192 villages in 21
mandals.factory is located along cudalore-karnool national high way NO18, 3
k.m. towards Karnool from Chittoor. It owns 85.96 Acers of land. It was first
commissioned on 18.1.1963 with a licensed and installed capacity of 1000 tones
cane crushing per a day presently factory is working at an average of 1800-2000
tones a day.
Constitution:
Election was stayed to this factoy during April 2000 From then on Wards:
The official Board nominated by The Government Consists of:
1. Chittoor collector as person-n charge.
2. Managing Director.
The Board of Chittoor Co-operative Sugar Factory Ltd., used
to meet frequently from time to time as and when required.
Annual general body meetings of the members of the society were held on
29-09-2000,29-09-2001,29-04-2002,08-09-2003 and 25-11-2003.
At present the strength of employees at various levels:
a) Permanent (non seasonal) 68
b) Seasonal permanent 94
c) Consolidate wagers (sessonal) 167
d) Daily wagers (NMR) 244
-----------------
Total no.of Employees 573
------------------

8
MANAGEMENT

At present the elected board has assumed a charge on 6-4-2000. The
present
Board of directors as detailed below:-

 President 1

 Board of directors 14

 Employee director 1
There are major departments:-
 Administrative

 Engineering

 Manufacturing

 Agriculture

 Accounts &finance

PRODUCTS

 SUGAR
 MOLASSES
CAPITAL STRUCTURE
Original project cost was RS. 128.50 lakhs. It has been funded from
following sources:

I) Share capital from RS. Lakhs

 a)cane grower members 8.50
 b)state government 25.00
----------------------
33.50
----------------------

9
II) Term loans RS.Lakhs

 a)IFCI New Delhi 75.00
 b)LICI Bombay 20.00
------------
128.50

------------

III)Capital outlay Rs. Lakhs
 Land 2.38
 Buildings 5.90
 Plant & machinery 109.34
 Other assets 5.77
 Per operative expences 4.00
 Vehicles 0.96
-----------
128.35
-----------

10
PRODUCT PROFILE

Sugar Cane

Sugar cane cultivated by the growers or promising varieties in terms of sugar

content and yield. Cultivation techniques maturity of (decided by the cane

personnel) harvested and supplied to the factory in trucks fresh less tops and

roots. Trucks are weighed with cane on Weigh Bridge and unloaded on the

moving cane carrier. Mechanical un-loaders do unloading. Again empty truck is

weighed to assertion in the weight of cane unloaded.

Millings
Provided with a tandem of four mills land each mill is provided with three

rollers. On the cane carried for cane preparation cane knives driven by motor

and followed by a Fibrizer driven steam turbine are provided to chop the cane

into small pieces and fiber to make the milling move efficient and to extract

maximum juice from the cane. To make this process more effective assured

quantity of water is added to Mills. After extraction of juices the waste materials

is called bagasse.

Boilers

Provided with 2 nos. of boilers of each water evaporation capacity of 25 Mts.

Per hour steam at 300 p sig (21 Kgs). Steam is used for driving the Fibrizer,

mills by turbines and generator power, by steam turbine alternator. For boilers

main fuel is bagasse. Surplus bagasse is sold to paper industries.

11
Clarification

Juice extracted form sugar cane in mills is weighted in automatic weighing

scale. It is preheated in juice heater to 50-750. Then it is limited and sulphieted

simultaneously. Juices will be coagulated form and will not settle. To induce

settings cheaply and abundantly available positive is to be added i.e. namely

time in slurry form, also called milk of lime, by using addition of such alkaline

medium is again brought down to natural pH medium by bubo ling of sulphur

dioxide gas. This gas is produced in sulphur burners and bubbled in preheated

juices. By the aid of compressed air passing through sulphur burners. As such

a juice is kept at slightly alkaline medium say 701 to 7.2. Then this treated juice

is heated again in other row of juices heaters to 102 C and to send to graver.

Graver is a big tank where settling is taking place. Continuously, such juices is

sent and drawn from it with the detention time of juices of about 330 hours, in ‘u’

tube principles.

Evaporation
In graver juices will be well settled and will have a golden yellow color of

7.0pH (Neutral). This clear juice will contain more than 85% of water and the

remaining soiled (Sugar Maximum + a little sugar). In evaporators about 75% of

water is removed and made syrup. This consists of one vapor cell and is

followed by four bodies. Boiling is done under vacuum using exhaust stream

from turbines tubes emerging out through tube plates and above this calandria

vapor space or shell. Steam circulated through calandreia and heating the outer

12
point of huices is brought well below its origin boiling point. In the vapor cell

alone exhaust steam is admitted into the calandria produced vapor to its

subsequent body and soon. Vacuum is helping is drawing vapor from the

preceding body and this boiling is called multi effect boiling and maximum fuel

economy. Thus when juices is emerges out from last body it will be a syrup,

losing about 75% of water.

Vacuum filter

Mud settled in graver is taken in rotary filters to extract juices from it and

waste is called filter cake sent out and used as manure. Extracted juices is again

mixed juices from mills after weighment tank and takes the path of process along

with mills juices in acyclic form.

Sulphitation and syrup

The syrup from evaporator last body is again sulphited to beach to get white

sugar and sent to pan supply tanks.

Pans
Pan bodies are similar to evaporators in construction with different design.
Materials are invidiously boiled in four numbers under vacuum. When the syrup
is further boil in pans. When the super saturation point reaches crystals come
out its is again boiled up by addition kept in pan and the rest 2 portions sent to
receivers. Then again pan is boiled. This process will help growth or crystal as
desired by us.
Three boiling are bone A, B, C. These are called massecuites. All these
mass cuties (sugar + molasses) are purged in centrifugals respectively sugar and
molasses are separated. Pans are boiler on vapor produced form vapor cell.

13
Centrifugals

Such made massecuties are dropped in crystallizers (a storage tank with

stirring mechanism). From crystallizes taken into centrifugal machines and sugar

and molasses separator. Centrifugal machines contain a basket fitted with mesh

and screen of small opening and will not allow sugar crystals to pass through but

only molasses. When one machine changed with massecuities and spun at 150

RPM molasses gets out and collects in a tank. Sugar remains in basket washed

and dried by steam. Then dropped on hopper (to and or) shaking medium sugar

will get dry when flowing and galls on sugar grader (fitted with meshes) screened

and bagged. Bags weighed on P.O scales of 100kgs. And sent to go down.

Molasses got from a massecuites; sugar and molasses form B massescuties

and sugar form c massecuites (final) are again boiled in pans in cyclic manner.

Molasses got fro c massecuites called final molasses is a waste and sent to

storage tanks (Raw material for alcohol industries). Sugar is graded in

accordance and large i.e., S-29, S-30. As the demand in the market is for S-30 it

is made in the fact.

14
RESEARCH
METHODOLO
GY

15
RESEARCH METHODOLOGY
NEED FOR THE STUDY

In carrying the study both primary and secondary data collected in aphased
manner as follows:

A. Initially preliminary discussions with G.M. sales manager and accounts
officer carried on.
B. The information about profit and loss reports
C. The ratios are calculated by studying balance sheet and the necessary
information required for the study was being obtained from fruitful
interaction of the researched with the employees of the organization.
D. And some information gathered from secondary data and some of the
financial books.

OBJECTIVE OF THE STUDY

This study is mainly focused to examine the short-time financial

viability of chittor co-operative sugars as stated below:

 To study how best the working capital is utilized in the company.

 To study the effectiveness of credit management of the company.

 To study the short-term liquidity positions of company.

 To understand working capital management of a company.

 To study the changes in working capital position of the company.

 To suggest necessary methods by which future improvement may be made in

its management of working capital.

16
SOURCES OF DATA ANALYSIS

The study required both primary and secondary data.

PRIMARY DATA:-

Primary data has been collected by interviewing certain executives who

were chosen on the basis of their in depth knowledge and experience in the

company. The interviews in nature are under to gain as much information as

possible.

SECONDARY DATA:-

Secondary data was obtained from the past records file and reports of the

organization also from other financial statements.

TOOLS FOR ANALYSIS OF WORKING CAPITAL:-

The quantum of working capital as well as its financing pattern is subject

to constant monitoring and reviews by the financial manager. There are different

analytical tools which can help a financial manager in monitoring in viewing and

controlling the working capital. The popularly used tools are:

1. Schedule of changes in working capital.

2. Working capital ratios.

LIMITATION OF THE STUDY:-

 It is based on the data supplied by the factory personnel.

 It is based on consultation, decisions of all concerned officials.

 Since only 5 years data is used for the analysis the out come may

Not be generalized.

17
 Due to limitations of time, it was unable to go far a depth study into

The subject.

DATA
ANALYSIS

18
INTRODUCTION TO WORKING CAPITAL

“Working capital “is often referred to as “lifeblood” of an organization of its

“the money required for carrying on day today activities of an organization. The

management of current assets is similar to that of fixed assets in the sense that

in both cases a firm analysis their effects on its return and risk.

The management of fixed and current assets, however, differs in three

important ways: first, in managing fixed assets, time is very important factor;

consequently, discounting and compounding techniques play a significant role in

capital budgeting and a minor one in the management of current assets. Second,

the large holding of current assets, especially cash, strengthens the firms liquidity

position (and reduce risk ness), but also reduces the overall profitability. Thus, a

risk-return trade off is involved in holding current assets. Third, levels of fixed as

well as current assets depend upon expected sales fluctuations in the short run.

Thus the firm has a greater degree of flexibility in managing current assets.

Working capital is probable the often used financial management

concepts verbally and misused practically. Independent of the nature of an

organization, its constitution and activity requires working capital. Many

organizations have failed or become sick mainly due to the mismanagement of

this “working capital”.

19
MEANING AND DEFINITION

Working capital management or administration of all aspects of working

capital, which manage the firm’s current assets and current liabilities in such a

way that a satisfactory level of working capital is maintained.

According to smith “working capital management is concerned with the

problem that arise in attempting to manage the current assets, current liabilities,

and the inter-relationship that exists between them”

TYPES OF WORKING CAPITAL:-

There are two types of working capital. They are:

I) on the basis of concept

1) Gross working capital.

2) Net working capital.

1. Gross working capital:-

Refers to the firm’s investment in current assets are the assets,

which can be concerned into and with in an accounting year (or operating cycle)

and include cash, short-term securities, debtors (accounts receivables or book

debts) bills receivable and stock (inventory)

20
Gross working capitals points to the arranging of funds to finance current

assets.

2. Networking capital:-

Refers to the difference between current assets and current

liabilities. Currents liabilities are those claims of outsiders, which are expected to

nature for payment within accounting years and include creditors (accounts

payable). Bills Payable and outstanding expenses. Networking capital can be

positive or negative. A positive networking capital will arise when current assets,

exceed current liabilities and a negative working capital will arise when current

liabilities are in excess of current assets.

II) On the basis of time

1) Permanent/fixed/fluctuating working capital

2) Temporary working capital

1) Permanent working capital:-

The need for current assets arises because of the operating

cycle. The operating cycle is a continuous process and therefore, the need for

the current assets is felt constantly. But the magnitude of current assets needed

is not always a minimum level of current assets, which is continuously required

by the firm to carry on its business operations. This minimum level of current

assets is referred to as permanent or fixed working capital.

EXAMPLE: - Every firm has to maintain a minimum level of raw materials, work-

in-progress, finished goods and cash balance. This minimum level of current

21
assets is called permanent or fixed working capital as this part of capital is

permanently blocked in current assets. As the business grows, the requirements

of permanent working capital also increase due to the increase in current assets.

Temporary
Or
Fluctuating
Permanent

Time

2. Temporary working capital:-

Depending upon the changes in production and sales, the need for

working capital over and above permanent working capital, will have in be

maintained to support the peak proceeds of sale and investment in receive may

also increase during such periods. On the other hand, investment in raw

material, working in progress and finished goods will fall if the market is slack.

The extra working capital needed to support the changing production and

sales activities is called fluctuating, or variable or temporary working capital. The

22
firm to meet liquidity measurement that will last only temporarily creates

temporary working capital.

Temporary
Or
Fluctuating
Permanent

THE NEED OR OBJECTIVES OF WORKING CAPITAL

The need for working capital to run day -to -day business activities

cannot be over emphasized, we will hardly find business firm, which doesn’t

require any amount if working capital indeed, and firms differ in their

requirements of the working capital. We know that a firm should aim at

maximizing the wealth of its share holders. In its endeavor to do so. A firm

should earn sufficient return from its operations. Earning a study amount of profit

23
required successfully sale activity. The firm has to invest enough funds in current

assets for cash instantaneously. There is always an operation cycle involved in

the conversion of sales in to cash.

VARIOUS NEEDS OF WORKING CAPITAL IS AS FOLLOWS:-
1. To pay wages and salary.
2. It helps to the purchase of raw materials, components and spares.
3. It helps to incur day-to-day- expenses and overhead costs such as
fuel, power, and office expenses etc.
4. It also to meet the selling cost as packing, advertising etc.
5. It provides credit facilities to the customer.
6. It helps to maintain the inventories of raw material, working progress,
stores and spares and finished stock.

DETERMINATES OF WORKING CAPITAL OR FACTORS AFECTING
The working capital requirement of a firm affected by a number of factors.
The various factors, which affect the working capital requirement of a concern,
are as follows:

Internal factors External factors
Nature of business
Business
fluctuations
Product cycle Technological
Developments
Business cycle
Transport and
Credit policy Communication
Development
Scale of production Import Policy

24
Growth and Expansion of business Taxation policy
Operating efficiency

INTERNAL FACTORS

1. NATURE OF BUSINESS:-
The working capital requirements of enterprises are basically

related to the conduct of business. Public utilities have certain features which

have a bearing on their working capital needs. They do not maintain big

inventories arid have, therefore, probably the least requirement of working

capital. On the other hand trading and manufacturing concern required large

amount of working capital to maintain a sufficient amount of cash inventories and

book debts.

2. PRODUCTION CYCLE: -

The term production or manufacturing cycle refers to the span

between the procurement of raw materials and completion of the manufacturing

process leading to the production of finished goods. In other words, there is a

some time gap before raw materials become finished goods. Therefore the

longer the time span, the larger will be the working capital needed and vice

versa.

3.BUSINESS CYCLE:-

25
The business fluctuations influence the size of working capital mainly

during updated phase when boom conditions prevail, the need for working capital

is likely to cover the lag between increases sales and receipt of cash as well as

invest in plant and machinery to meet the increased demand. The down swing an

opposite effect on the level of working capital requirement.

4.CREDIT POLICY:-

The credit policy relating to sales and purchases also affects the working

capital. The credit policy in influences the requirements of working capital in two

ways:

Though credit terms granted by the firm to its customers/buyers of goods

credit terms available to the firm from its creditors. A firm, which more credit

sales and cash purchase required high working capital than a firm having more

credit purchase and cash sales.

5.SCALE OF PRODUCTION:-

A concern carrying on activities on a small scale of needs less working

capital. On the other hand a concern undertaking activities on large scale

Needs large amount of working capital.

6. GROWTH AND EXPANSION OF BUSINESS:-

The growth and expansion of business also affect the working capital

requirement. When there is growth and expansion in the business of a firm the

working capital needs of the firm will also increase.

26
7.OPERTAING EFFICIENCY:-

The operating efficiency of the management is also important determinant

of the level of working capital. A firm enjoying operating efficiency can eliminate

wastage and use its resources efficiently and thereby reduce its working capital

needs considerably.

EXTERNAL FACTORS

1. BUSINESS FLUCTUATIONS:-

Business enterprises usually experiences fluctuations in

demand for their products and services because of changes in economic

conditions. In view of this, working capital requirements of these enterprises are

affected. Thus, in the event of economic prosperity, general demand of the

goods and services tends to shoot up. To cope with increased demand and

consequently increased production, the firm will require additional working

capital.

2. TECHNOLOGICAL DEVELOPMENTS:-

Technological developments in the area of production can

have sharp effects on the need for working capital. If a firm switches over to new

manufacturing process and installs new equipments with which it is able to cut

period involved in converting raw materials into finished goods, permanent

working capital requirements of the firm will decrease.

3. TRANSPORT AND COMMUNICATION DEVELOPMENTS:-

27
Where the means of transport and communication in a

country are not well developed, industries may need additional funds to maintain

big inventory of raw materials and other accessories which would otherwise not

be needed where the transport and communications systems are highly

developed.

4. IMPORT POLICY:-

Import policy of the government may also have its bearing

on the levels of working capital of the enterprises since they have to arrange

funds for importing goods at specified times.

5. TAXATION POLICY:-

Working capital needs of business enterprises are affected

sharply by taxation policy of the government. In the event of regressive taxation

policy of the government, as it exists today in India, imposing heavy tax burdens

on business enterprises leaves very little profits for distribution and retention

purposes.

28
SOURCES OF WORKING CAPITAL:-

Among the various sources available for financing working capital needs

finance manager has to select the best suitable source depending on working

capital need of company.

SOURCES OF WORKING CAPITAL

Long term sources Short term sources

Internal sources External sources
Bank
With drawing the
Depreciation fund Trade credit

Using the renouncement Bills of
For taxation exchange

29
Postponement of payment Govt.
Accrued expenses assistance
Public deposits

The need of working capital is increased by raising prices of end

products and relative inputs. On the other hand the government and monetary

authorities play their own role to curd the malice in periods of inflation. The

control measures often take the firm of dear money policy and restriction credit.

Financing of additional working capital in such an amusement becomes a real

problem to finance manager of a concerned unit. Commercial banks play the

most significant role in providing working capital finance, particularly in Indians

context. In view of mounting inflation, the R.B.I has taken up certain social

measures to check the money supply in the economy. The balancing need has

to be managed either by long-term borrowings or by issuing equity or by earning

sufficient profits and retaining the same of coping with the additional working

capital requirements. The first choice before a finance manager, where banks do

not provide a part of additional working capital, is to take the long-term sources of

fiancé.

LONG TERM FINANCING:-

30
Loans from financial institution the option is normally rules out, because

financial institutions do not provide finance for working capital requirements.

Further this facility is not available to all companies this option is not practical.

FLOATING OF DEBENTURES:-

The profitability of a successful floating of debentures seems to be rather

merging. In Indian capital market, floating of debentures has still to gain

popularly debentures issues of companies in private sector not associated with

certain reputed groups generally failed to attract investors to invest their funds in

companies. In this context the mode of raising funds by issuing convertible

debenture/bonds is also gaining.

ACCEPTING PUBLIC DEPOSITS:-

The issue of tapping deposits is directly to the image of the company

seeking to invite public deposits.

ISSUE OF SHARES:-

With a view of financing additional capital needs, issue of additional equity

share could be considered. Many Indian company have still to go ahead to

command respect of investors in the context low profit margin as well as lack o

knowledge about company make the success of a capital

Issue very dim.

RAISING FUNDS BY INTERNAL FINANCING:-

31
Raising funds from operational profit poses problems for many companies,

because price of their end products are controlled and do not permit companies

to earn profit sufficient requirements to finance additional working assets, still a

largely feasible solution lies in increase profitability through cost control and cost

reduction measures managing the cash operating cycle, rationalizing inventory

stock and so on.

PROBLEMS ASSOCIATED WITH EXCESS & IN ADEQUATE WORKING

CAPITAL:-

DANGERS OF EXCESS WORKING CAPITAL:-

1) It results in unnecessary accumulation of inventories. Thus the

changes of inventory mishandling, the losses increase.

2) It is an indication of defective credit policy and stock collection period.

3) Excessive working capital makes management Compliment, which

degenerates into managerial efficiency.

4) Tendencies of accumulating to make speculative profits grow. This may tend

to make dividend policy liberal and difficult to cope with in future when the firm is

unable to make speculation profits.

DANGERS INADEQUATE WORKING CAPITAL:-

1) It Strategies growth. It becomes difficult to undertake profitable project due to

non-availability of the working capital funds.

2) It becomes difficult to implement t operating plans and achieve the firms profit

target.

32
3) Operating inefficiencies creep in when it becomes difficult even to meet day-

to-day commitments.

4) Fixed assets are not efficiently utilized for the working capital funds. Thus, the

rate of return on, investment slumps.

5) Paucity of working capital funds renders the firm unable to avail of attractive

credit opportunities etc.The firm losses it reputation when it is not in a position to

turnover short-term obligation.

METHODS FOR ESTIMATING WORKING CAPITAL REQUIRMENTS

Three widely used methods for determining working capital requirements
of a firm are:
 Percentage of sales method
 Regression analysis method
 Operating cycle method

1. PERCENTAGE OF SALES METHOD:-

In this method, level of working capital requirements is decided on the

basis of past experience. The past relationship between sales and working

capital is taken as a base for determining the size of working capital

requirements for future. It is, however, presumed that the relationship between

sales and working capital that has existed in the past has been stable. This may

be explained with the help of the following illustration.

Percentage of sales method is a simple and easily understood method

and practically used for ascertaining short-term changes in working capital in

33
future. However this method lacks reliability inasmuch as its basic assumption of

linear relationship between sales and working capital does not hold true in all the

cases. As such, this method cannot be recommended for universal application.

2. REGRESSION ANALYSIS METHOD:-

This is a statistical method of determining working capital requirements by

establishing the average relationship between sales and working capital and its

various components in the past years. In this regard the method of least squares

is employed and the relationship between sales and working capital is expressed

by the equation:

Y=a+bx

The values of ‘a’ and ‘b’ is obtained by the solution of simultaneous linear

equations given as under:

Where a=fixed component

b=variable component

x=sales

y=inventory

n=number of observation

34
3. OPERATING CYCLE APPROACH:-

Operating cycle refers to the length of time necessary to complete the

following cycle of events.

Conversion of cash into inventory.

Conversion of inventory into receivable

Conversion of receivable into cash

If the operating cycle is length than the working capital requirement will be

more on the other hands, if the operating cycle is shorter than the working capital

requirement will be less.

According to this approach, size of working capital requirements of a firm

is determined by multiplying the duration of the operating cycle by cost of

operations. The duration of the operating cycle may be found with the help of the

following formula:

O=R + W + F + A – P

Where, O=Duration of operating cycle

R=Duration of raw materials

W=Duration of work-in-process

F=Duration of finished goods

A=Duration of accounts receivable

P=Duration of accounts payable

Duration of raw materials:-

35
It reflects the number of days for which raw materials remain in

inventory before they are issued for production. The following formula can be

used to determine duration of raw materials.

Average stock of raw materials

R = ----------------------------------------------------

Per day consumption of raw materials

Duration of the work-in-process:-

It denotes the number of days required in the work-in-process

stage. It may be ascertained with the help of the following formula:

Average work-in-process inventory

W = --------------------------------------------------

Average production per day

Duration of finished goods:-

It refers to the number of days for which finished goods remain in

inventory before they are sold. This can be computed by the following formula:

Average finished goods inventory

F = ----------------------------------------------

Per day sale of goods

Duration of the accounts receivable:-

36
It represents the number of days required to collect the accounts

receivable. This may be calculated as under:

Average book debts

A = ---------------------------------------------

Average credit sales per day

Duration of accounts payable:-

It refers to the number of days for which the suppliers of raw

materials offer credit. This may be measured with the help of the following

formula:

Average trade creditors

P = -----------------------------------------------

Average credit purchases per day

OPERATING CYCLES:-

MANUFACTURER

CASH

DEBTORS

RAWMATERIALS
FINISHED GOODS

37
WORK IN PROGRESS

TRADER

CASH

DEBTORS
FINISHING GOODS

FINANCIAL INSTITUTIONS

CASH

38
DEBTORS

TANDON COMMITTEE REPORT

Reserve Bank of India set up a committee under the chairmanship of shri

P.L. Tandon in July 1974. The terms of reference of the committee were:

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

credit from the point of view of ensuring proper end use of funds and keeping a

watch on the safety of advances.

 To suggest the type of operational data and other information that may

be obtained by banks periodically from the borrowers and by the reserve bank of

India from the leading banks.

 To make suggestions for prescribing inventory norms for the different

industries, both in the private and public sectors and indicate the broad criteria

for deviating from these norms.

 To make recommendations regarding resources for financing the

minimum working capital requirements.

39
 To suggest criteria regarding satisfactory capital structure and sound

financial basis in relation to borrowings.

 To make recommendations as to whether the existing pattern of

financing working capital requirements by cash credit/overdraft system etc.,

requires to be modified, if so, to suggest suitable modifications.

CRETERIA FOR JUDGING THE EFFICIENCY OF WORKING CAPITAL

MANAGEMENT:-

The efficiency of working capital management can be judged through

accounting ratios. The important accounting ratio’s that could be used for

judging the efficiency of working capital management are:

 Current ratio

 Quick ratio

 Inventory turnover ratio

 Current assets turnover ratio

 Cash position ratio

 Working capital turnover ratio.

40
SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR 2002-03

Effect of working capital

PARTICULARS 2002 2003 Increase Decrease
CURRENT ASSETS:

Cash on hand 42159.91 1283980.24 1241820.33 -------------
Balances with bank 494953.16 4095239.26 3600286.10 -------------
Interest Receivable 1826488.57 1826488.57 ------------ ------------
Closing stock 292692156.20 219662803.70 ------------ 73029352.50
Total current assets -A 295055757.80 226868511.70
LIABILITIES:
Out standing Interest 4429829.45 6094477.90 ------------ 1664648.45
Total current liabilities -B 4429829.45 6094477.90
Working Capital (A-B) 290625928.30 220774033.80
Net decrease in working 69851894.50 69851894.50

Capital
290625928.30 290625928.30 74694000.95 74694000.95

INTERPRETATION:

The net working capital requirement of the company during the year 2002

has been increased in 2003, and the net working capital of the company was

41
recorded RS. 22,07,74,033.80 and it was been increased to Rs. 29,06, 25,928.30

in the year 2002.

SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR 2003-04

Effect of working capital

PARTICULARS 2003 2004 Increase Decrease
CURRENT ASSETS:

Cash on hand 1283980.24 22575.20 ------------ 1261405.04
Balances with bank 4095239.26 15881189.48 11785950.22 ------------
Interest Receivable 1826488.57 1826488.57 ------------ ------------
Closing stock 219662803.70 96849740.27 ------------ 122813063.40
Total current assets -A 226868511.70 114579993.50
LIABILITIES:
Out standing Interest 6094477.90 27190688.40 ------------ 21096210.50
Total current liabilities -B 6094477.90 27190688.40
Working Capital (A-B) 220774033.80 87389305.10
Net decrease in working 133384728.70 133384728.70

Capital
220774033.80 220774033.80 145170678.90 145170678.90

INTERPRETATION:

The net working capital requirement of the company during the year 2003

has been increased in 2004, and the net working capital of the company was

recorded RS. 8,73,89,305.10 and it was been increased to Rs. 22,07,74,033.80

in the year 2003.

42
SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR 2004-05

Effect of working capital

PARTICULARS 2004 2005 Increase Decrease
CURRENT ASSETS:

Cash on hand 22575.20 1878931.06 1856355.86 -------------
Balances with bank 15881189.48 18140037.49 2258848.01 -------------
Interest Receivable 1826488.57 1826488.57 ------------ -------------
Closing stock 96849740.27 110043159.00 13193418.73 -------------
Total current assets -A 114579993.50 131888616.10
LIABILITIES:
Out standing Interest 27190688.40 40525798.40 ------------ 13335110.00
Total current liabilities -B 27190688.40 40525798.40
Working Capital (A-B) 87389305.10 91362817.70
Net Increase in working 3973512.60 3973512.60

Capital
91362817.70 91362817.70 17308622.60 17308622.60

INTERPRETATION:

The net working capital requirement of the company during the year 2005

has been increased in 2004, and the net working capital of the company was

recorded RS. 8,73,89,305.10 and it was been increased to Rs. 9,13,62,817.70 in

the year 2005.

SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR 2005-06

43
Effect of working capital

PARTICULARS 2005 2006 Increase Decrease
CURRENT ASSETS:

Cash on hand 1878931.06 141218.80 -------------- 1737712.20
Balances with bank 18140037.49 7254943.14 -------------- 10885094.35
Interest Receivable 1826488.57 1826488.57 -------------- --------------
Closing stock 110043159.00 304641449.50 194598290.50 --------------
Total current assets -A 131888616.10 313864100.00
LIABILITIES:
Out standing Interest 40525798.40 49024988.90 -------------- 8499190.50
Total current liabilities -B 40525798.40 49024988.90
Working Capital (A-B) 91362817.70 264839111.10
Net increase in working

Capital 173476293.40 173476293.40
264839111.10 264839111.10 194598290.50 194598290.50

INTERPRETATION:

The net working capital requirement of the company during the year 2006

has been increased in 2005, and the net working capital of the company was

recorded RS. 9,13,62,817.70 and it was been increased to Rs. 26,48,39,111.10

in the year 2006.

SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR 2006-07

44
Effect of working capital

PARTICULARS 2006 2007 Increase Decrease
CURRENT ASSETS:

Cash on hand 141218.80 95082.92 ------------ 46135.88
Balances with bank 7254943.14 17849583.41 10594640.27 ------------
Interest Receivable 1826488.57 1826488.57 ------------ ------------
Closing stock 304641449.50 281582198.30 ------------ 23059251.20
Total current assets -A 313864100.00 301353353.20
LIABILITIES:
Out standing Interest 49024988.90 46928301.64 2096687.26 ------------
Total current liabilities -B 49024988.90 46928301.64
Working Capital (A-B) 264839111.10 254425051.50
Net Decrease in working

Capital 10414059.60 10414059.60
264839111.10 264839111.10 23105387.08 23105387.08

INTERPRETATION:

The net working capital requirement of the company during the year 2006

has been increased in 2007, and the net working capital of the company was

recorded RS. 25,44,25,051.50 and it was been increased to Rs. 26,48,39,111.10

in the year 2006.

RATIO ANALYSIS

Over several years scientific tools have been evolved for determine

optimum level of working capital online assessment of each of the components of

current assets for selective application of management control. Undisputedly the

ratio analysis occupies place of prime importance. Ratio’ are complied and

studied for profitability’ assessment of financial position sufficiency of working

45
capital strategies perused by the organization short term and long term solvency

liquidity etc. I would deal with some of the predominant rations more relevantly

applicable net working capital management studies.

CURRENT RATIO

Current ratio indicates ability of the company to meet the current obligation
i.e., the current assets must be sufficient to pay as and when the latter matrices.
The standard ratio is 2:1, the current ratio is calculated by using the formula:

Current assets
Current ratio = ----------------------
Current liabilities

YEAR CURRENT ASSETS CURRENT RATIO
LIABILITIES
2002-2003 23,33,30,395.13 18,90,06,552.17 1.234
2003-2004 12,09,66,623.21 14,22,10,762.18 0.850
2004-2005 14,13,26,040.41 14,78,60,117.24 0.955
2005-2006 32,30,19,288.99 20,38,85,067.19 1.584
2006-2007 31,32,95,829.13 21,93,27,902.79 1.428

46
1.8
1.6
1.4
2006-07
1.2
RATIOS

2005-06
1
2004-05
0.8
2003-04
0.6
2002-03
0.4
0.2
0
2003 2004 2005 2006 2007
YEARS

INTERPRETATION
The current ratio is below satisfactory level of 1:58 during the year 2002-
2003 and the year 2003-2004 above the satisfactory level. However there is a
decrease during the years 2004-2005 to 2006-2007 the decrease in the current
ratio indicates bad trend of company.

47
QUICK RATIO

Quick ratio are acid test ratio ignores less liquidity assets like
inventory. This takes account readily available cash and other assets
which are quickly converted into cash. The standard is ratio is1:1. The general
principle of quick ratio is as follows:

Liquid Assets
Quick ratio = --------------------------------
Current liabilities

YEAR QUICK ASSETS CURRENT RATIO
LIABILITIES
2002-2003 1,36,67,591.83 18,90,06,552.17 0.072
2003-2004 2,44,16,882.94 14,22,10,762.18 0.169
2004-2005 2,83,90,812.06 14,78,60,117.24 0.192
2005-2006 1,86,38,461.57 20,38,85,067.19 0.091
2006-2007 3,39,59,496.91 21,93,27,902.79 0.154

48
0.2
0.18
0.16
0.14 2006-07
RATIOS

0.12
2005-06
0.1
2004-05
0.08
2003-04
0.06
2002-03
0.04
0.02
0
2003 2004 2005 2006 2007
YEARS
INTERPRETATION

The Quick ratio is below satisfactory level of 0:072 during the year 2002-
2003 and the year 2003-2004 above the satisfactory level. However there is a
increase during the years 2004-2005 this year position is 2005-2006to 2006-
2007 the increase in the Quick ratio indicates satisfy trend of company.

INVENTORY TURNOVER RATIO

49
Turnover ratio is also known as stock velocity. This ratio is calculated to
consider the adequacy of the quantum of capital and its institution for investing in
inventory.
A firm must have reasonable stock in caparison to sales. It is the ratio of
cost of sales and average inventory of. This ratio helps the financial managers to
calculate inventory policy. This ratio reveals the number of times finished stock is
turned over during a given accounting period. The ratio is used for measuring the
profitability. These are the various ways in which stock turnover ratio may be cal-
culated.

Net sales
Inventory turnover ratio = --------------------------------
Average Inventory

YEAR NETSALES AVERAGE RATIO
INVENTORY
2002-2003 20,14,86,573.36 23,41,47,889.610 0.860
2003-2004 13,05,17,436.90 13,75,97,979.610 0.948
2004-2005 9,66,54,360.90 8,31,65,010.425 1.162
2005-2006 12,37,19,616.75 10,30,03,384.815 1.201
2006-2007 36,88,53,566.89 18,47,71,625.020 1.996

50
1.6
1.4
1.2
2006-07
RATIOS

1 2005-06
0.8 2004-05
0.6 2003-04
0.4 2002-03

0.2
0
2003 2004 2005 2006 2007

YEARS

INTERPRETATION
The inventories are decreased in 2002-2003,2003-2004 and 2004-2005,
the ratio is increases 2005-2006 and if decreases in2006-2007.

CURRENT ASSETS TURNOVER RATIO

51
Current assets turnover ratio indicates the extent to which the investments
in current assets contribute towards sales. It comported with a previous period. It
indicates whether the investment is fixed assets has been judicious or not.

Net Sales
Current assets turnover ratio= ----------------------
Current Assets

YEAR NET SALES CURRENT RATIO
ASSETS
2002-2003 20,14,86,573.36 23,37,61,514.16 0.861
2003-2004 13,05,17,436.81 12,09,66,623.21 1.078
2004-2005 9,66,54,360.90 14,13,26,040.41 0.683
2005-2006 12,37,19,616.75 32,30,19,288.99 0.383
2006-2007 36,88,53,566.89 31,32,95,829.13 1.177

52
1.4
1.2
1 2006-07
RATIOS

0.8 2005-06
2004-05
0.6
2003-04
0.4 2002-03
0.2
0
2003 2004 2005 2006 2007

YEARS

INTERPRETATION
The ratio is increasing continuously from 2002-2003 to 2003-2004 and
after year2004-2005 to 2006-2007 it increased. It indicates that the current
assets were used.

CASH POSITION RATIO

53
Cash in the most liquid asset, a financial analyst may examine the ration
of cash and its equivalent to current liabilities. Trade investment or marketable
securities are equivalent of cash, therefore, they may be included in the
computation of cash position ratio.

Cash+ marketable securities
Cash Position Ratio= ---------------------------------------------
Current liabilities

YEAR CASH+MARKETA-BLE CURRENT RATIO
SECURITIES LIABILITIES
2002-2003 53,79,219.50 18,90,06,552.17 0.028
2003-2004 1,59,03,764.68 14,22,10,762.18 0.111
2004-2005 2,00,18,991.55 14,78,60,117.24 0.135
2005-2006 79,51,888.86 20,38,85,067.19 0.039
2006-2007 4,56,44,654.96 21,93,27,902.79 0.208

54
0.25

0.2
2006-07
0.15 2005-06
RATIOS

2004-05
0.1 2003-04
2002-03
0.05

0
2003 2004 2005 2006 2007
YEARS

INTERPRETATION
The cash position ratio is inadequate as there are ups and downs during
the year. The above ratio indicates that the company is unable to quickly realize
its current liabilities it is not good enough.

WORKING CAPITAL TURNOVER RATIO

55
Working capital of a concern is directly related to sales. The current assets
like debtors, bills receivable, cash, and stock etc., change with the increase or
decrease in sales. The working capital is taken as:

Working capital =current assets-current liabilities

This ratio indicates the velocity of the utilization of net working capital. This
ratio indicates the number of times the working capital is turned over in the
course of a year. The ratio measures the efficiency with which the working capital
is being used by a firm. A higher ratio indicates the efficient utilization of working
capital and the low ratio indicates inefficient utilization of working capital.
SALES
WORKING CAPITAL TURNOVER RATIO = -------------------------------
NET WORKING
CAPITAL

Year NETSALES NET WORKING RATIO
CAPITAL
2002-2003 20,14,86,573.36 4,43,23,842.96 4.545
2003-2004 13,05,17,436.81 2,12,44,138.97 6.143
2004-2005 9,66,54,360.90 1,35,34,076.83 7.141
2005-2006 12,37,19,616.75 11,91,34,221.80 1.038
2006-2007 36,88,53,566.89 9,39,67,926.34 3.925

56
8
7
6
2006-07
5 2005-06
RATIOS

4 2004-05
3 2003-04
2002-03
2
1
0
2003 2004 2005 2006 2007

YEARS

INTERPRETATION

This ratio indicates the number of times the net sales met with the working
capital for the year. The turnover of the working capital has highly increasing
from 2000-2001 to2005-2006.

TOTAL ASSET TURNOVER RATIO

57
This ratio indicates the sales generated per rupee of investment in total assets.
Althought fixed assets are directly concerned with the generation of sales. But
other assets also contribute to the production and sales activities of the firm. The
firm must manage its total assets efficiency and should generate maximum sales
through their proper utilization.
The total assets turnover is used know how many times the total assets
are being converted into sales. If sales are not available cost of goods is to be
considered. It shows in how many times the total sales are being concerted into
total assets. The ratio is calculated by dividing the cost of goods sold as sales by
total assets. The general principle for the calculation of this as follows
Sales
Total assets turnover ratio = ------------------
Total assets

YEAR NETSALES TOTALASSETS RATIO
2002-2003 20,14,86,573.36 23,33,30,395.13 0.863
2003-2004 13,05,17,436.81 12,09,66,623.21 1.078
2004-2005 9,66,54,360.90 14,13,26,040.41 0.683
2005-2006 12,37,19,616.75 32,30,19,288.99 0.383
2006-2007 36,88,53,566.89 31,32,95,829.13 1.177

58
1.4
1.2
1 2006-07
RATIOS

0.8 2005-06
2004-05
0.6
2003-04
0.4 2002-03
0.2
0
2003 2004 2005 2006 2007

YEARS

INTERPRETATION
The total asset turnover ratio increase in 2002-2003 and 2003-2004
after it decreased in 2004-2006 and after the increase turnover ratio 2006-2007.

59
FINDINGS
&
SUGGESTIONS

60
FINDINGS

In the over all evaluation of the Working Capital Management at each and

every aspect, the following are the findings.

1. Working Capital ratio of the chittoor Co-operative Sugar Ltd is decreasing

in all the years which indicate poor liquidity position of the company.

2. Inventory turn over ratio of the Chittoor Co-operative Sugar Ltd is good in

all the 5 years of study, which indicates the efficient management of

inventory.

3. Fixed Assets to Net worth Ratio of the Chittoor Co-operative Sugars Ltd is

greater than 1% which indicates the Owner’s funds are sufficient to

Finance Fixed Assets.

4. Fixed Assets Turn over Ratio of the Chittoor Co-operative Sugar Ltd is

highest 2.4 in the year 2002-03, which the management is efficient in

utilizing the Fixed Assets.

5. Current ratio of Chittoor Co-operative Sugars Ltd is highest 6.19 in the

year 2002-03, which is the management of effective and efficient

utilization

6. The company sales have been decreased in all the year.

7. The reserves and surplus is always accumulating every year. The

company can capitalize the reserves and Surplus.

61
SUGGESTIONS

• The company should utilize the reserves and surplus by either capitaliz-

ing or invest the money some where as investment to get benefits.

• The company should maintain adequate working capital

• The company should maintain the high liquidity position

• The company is under loss zone, so it needs some subsidy by

government to develop its position.

• By merging the company with other profitable company, the firm may

Improve its performance.

• By selling molasses to other plant the company can earn additional

profit.

• By using the sugar can scrap the firm can generate it’s electrically

supply.

• By selling the scrap to bio-plants it can generate funds.

62
CONCLUSI
ON

63
CONCLUSION

From the analysis on the working capital management at Chittoor Co-

operative Sugar Ltd, conclude in spite of all suggestions, the company has to

reduce its production cost to increase profit.

The inventory turn over is good in all the five years. The company should

try to increase their sales. It should maintain the high liquidity position. Hence,

the suggestions given are realistic which will lead to increase in the profitability of

the company. The company should try to tap the market and set in brand value

and do the best.

64
ANNEXUR
E

65
THE CHITTOOR CO-OPERATIVE SUGARS LIMITED:: CHITTOOR

TRADING ACCOUNT FOR THE YEAR 2003

PARTICULARS AMOUNT PARTICULARS AMOUNT
Rs. Ps. Rs. Ps.
1.OPENING STOCK: 1. OPENING STOCK:
a) Sugar 26,11,39,024.38 a) Sugar 19,19,96,947.80

b) Molasses 82,52,332.24 b) Molasses 69,07,474.80

2. PURCHASES: 2. sales 20,14,86,573.36
a) Fertilisers & 15,120.00
pesticides 3. Misc. income
Creditable to 1,72,00,316.54
3. Expenditure 1,75,86,673.28 Trading a/c
debitable to trading a/c
4. Gross loss 3,76,45,558.10
4. Cost of production
Transferred from 16,82,44,220.70
Manufacturing a/c

--------------------- ----------------------
45,52,37,370.60 45,52,37,370.60
--------------------- ----------------------

66
THE CHITTOOR CO-OPERATIVE SUGARS LIMITED :: CHITTOOR

BALANCE SHEET AS ON 2003

LIABILITIES Rs. ASSETS Rs.
1. Share capital 14,09,58,700.00 1. Cash on hand 12,83,980.24
2.DEPOSITS & 2. BALANCE WITH
BORROWINGS: BANKS:
a) Deposits 2,88,36,536.05 a) current account 17,15,099.27
b) Borrowings 23,56,16,210.28 b) savings account 23,80,139.99
3. Out standing 3. Shares in other
Interest payable 60,94,477.90 Co-op. institutions 2,28,550.00
4. Adjusting heads 4. Deposits with
“ Due by” 18,29,12,074.27 Various agencies 12,54,825.77
5. Reserves 21,93,57,187.86 5. F.D’s with banks 2,50,000.00
6. U.D.P 64,226.88 6. Loans & advances
7. Audit fund 9,695.57 To members 64,61,883.31
8. Reserve fund yet 7. Loans to other
To be invested 24,702.69 Co-op. sugar 30,00,000.00
9. Vysya bank balance --- Factories
10. Bank of India --- 8. ADJ. heads
11. Canara bank --- “due to” 5,44,12,361.15
12. Indian bank --- 9. Interest receivable 18,26,488.57
13. Indian overseas 10. Value of assets 12,62,06,460.22
Bank --- 11. Rvaluation of
14. S.V. Grameena Assets 9,59,30,271.73
Bank --- 12. VALUE OF
15. State bank of CLOSING STOCK:
India --- a) Stores stocks 2,02,69,708.93
16. Union bank of b) Packing material 1,78,240.45
India --- c) Stationary 26,375.50
17. CDCC bank, d) Sugar 19,19,96,947.80
Chittoor --- e) Sugar in process 2,54,382.07
18. Corporation bank --- f) Molasses 69,07,474.80
g) Molasses in
process 9,290.00
h) FMP raw
material & feed 20,474.20
13. Deficits 47,943.52

-----------------------
81,38,73,811.50

LESS:
Difference between
Assets & liabilites 29,92,13,003.98
----------------------- ----------------------
Total 51,46,60,807.52 Total 51,46,60,807.52
----------------------- ----------------------

67
THE CHITTOOR CO-OPERATIVE SUGARS LIMITED:: CHITTOOR

TRADING ACCOUNT FOR THE YEAR 2004

PARTICULARS AMOUNT PARTICULARS AMOUNT
Rs. Ps. Rs. Ps.
1.OPENING STOCK: 1. OPENING STOCK:
a) Sugar 19,19,96,947.80 a) Sugar 7,60,05,445.10

b) Molasses 69,07,474.80 b) Molasses 2,86,092.00

2. Expenditure 2. sales 13,05,17,436.81
debitable to trading a/c 1,18,46,077.
46 3. Misc. income
3. Cost of production Creditable to 1,15,01,190.42
Transferred from Trading a/c
Manufacturing a/c
3,26,16,707.00 4. Gross loss 2,50,57,642.73

--------------------- ----------------------
24,33,67,207.06 24,33,67,207.06
---------------------- -----------------------

68
THE CHITTOOR CO-OPERATIVE SUGARS LIMITED :: CHITTOOR

BALANCE SHEET AS ON 2004

LIABILITIES Rs. ASSETS Rs.
1. Share capital 14,09,60,300.00 1. Cash on hand 22,575.20
2.DEPOSITS & 2. BALANCE WITH
BORROWINGS: BANKS:
a) Deposits 2,88,12,456.68 a) current account 13,49,421.74
b) Borrowings 22,38,22,462.57 b) savings account 1,45,31,767.74
3. Out standing 3. Shares in other
Interest payable 2,71,90,688.40 Co-op. institutions 2,28,550.00
4. Adjusting heads 4. Deposits with
“ Due by” 11,50,20,073.78 Various agencies 12,61,225.77
5. Reserves 22,87,27,884.01 5. F.D’s with banks 22,50,000.00
6. U.D.P 64,226.88 6. Loans & advances
7. Audit fund 9,695.57 To members 63,86,629.69
8. Reserve fund yet 7. Loans to other
To be invested 24,702.69 Co-op. sugar 10,00,000.00
Factories
8. ADJ. heads
“due to” 5,48,94,708.08
9. Interest receivable 18,26,488.57
10. Value of assets 12,62,06,460.22
----------------------- 11. Rvaluation of
76,46,32,490.58 Assets 9,59,30,271.73
12. VALUE OF
CLOSING STOCK:
a) Stores stocks 2,01,00,264.62
b) Packing material 1,78,240.45
c) Stationary 18,671.00
d) Sugar 7,60,05,445.10
e) Sugar in process 2,34,802.90
f) Molasses 2,86,092.00
g) Molasses in
process 5,750.00
h) FMP raw
material & feed 20,474.20
13. Deficits 47,943.52

LESS:
Difference between
Assets & liabilites 36,18,46,708.05
----------------------- ----------------------
Total 40,27,85,782.53 Total 40,27,85,782.53
----------------------- ----------------------

69
THE CHITTOOR CO-OPERATIVE SUGARS LIMITED:: CHITTOOR

TRADING ACCOUNT FOR THE YEAR 2005

PARTICULARS AMOUNT PARTICULARS AMOUNT
Rs. Ps. Rs. Ps.
1.OPENING STOCK: 1. OPENING STOCK:
a) Sugar 7,60,05,445.10 a) Sugar 7,88,16,404.20

b) Molasses 2,86,092.00 b) Molasses 1,06,60,683.35
c) Pesticides 3,62,250.00
2. PURCHASES:
a) Fertilisers & 5,04,000.00 2. sales 9,69,20,394.30
pesticides
3. Misc. income
3. Expenditure 69,45,366.83 Creditable to 69,04,064.85
debitable to trading a/c Trading a/c

4. Cost of production 4. Gross loss 5323482.37
Transferred from 11,52,46,375.14
Manufacturing a/c ----------------------
19,89,87,279.07
--------------------- ----------------------
19,89,87,279.07
---------------------

70
THE CHITTOOR CO-OPERATIVE SUGARS LIMITED :: CHITTOOR

BALANCE SHEET AS ON 2005

LIABILITIES Rs. ASSETS Rs.
1. Share capital 14,09,61,400.00 1. Cash on hand 18,78,931.06
2.DEPOSITS & 2. BALANCE WITH
BORROWINGS: BANKS:
a) Deposits 2,91,54,179.61 a) current account 91,72,861.36
b) Borrowings 26,60,73,587.95 b) savings account 89,67,176.13
3. Out standing 3. Shares in other
Interest payable 4,05,25,798.40 Co-op. institutions 2,28,550.00
4. Adjusting heads 4. Deposits with
“ Due by” 10,81,07,592.19 Various agencies 12,71,225.77
5. Reserves 24,80,88,004.02 5. F.D’s with banks 27,50,000.00
6. U.D.P 64,226.88 6. Loans & advances
7. Audit fund 9,695.57 To members 90,85,235.94
8. Reserve fund yet 7. Loans to other
To be invested 24,702.69 Co-op. sugar 10,00,000.00
Factories
8. ADJ. heads
“due to” 6,70,56,511.94
9. Interest receivable 18,26,488.57
10. Value of assets 12,66,47,509.22
----------------------- 11. Rvaluation of
83,30,09,187.31 Assets 9,59,30,271.73
12. VALUE OF
CLOSING STOCK:
a) Stores stocks 2,00,46,520.64
b) Packing material 93,100.00
c) Stationary 43,726.65
d) Sugar 7,88,16,404.20
e) Sugar in process --------
f) Molasses 1,06,60,683.35
g) Molasses in
process ---------
h) Pesticides 3,62,250.00
h) FMP raw
material & feed 20,474.20
13. Deficits 47,943.52

LESS:
Difference between
Assets & liabilites 39,71,03,323.03

----------------------- ----------------------
Total 43,59,05,864.28 Total 43,59,05,864.28
----------------------- ----------------------

71
THE CHITTOOR CO-OPERATIVE SUGARS LIMITED:: CHITTOOR

TRADING ACCOUNT FOR THE YEAR 2006

PARTICULARS AMOUNT PARTICULARS AMOUNT
Rs. Ps. Rs. Ps.
1.OPENING STOCK: 1. OPENING STOCK:
a) Sugar 7,88,16,404.20 a) Sugar 26,74,59,792.80

b) Molasses b) Molasses 75,14,240.77
c) Pesticides 1,06,60,688.85 c) Pesticides 1,16,480.00
3,62,250.00
2. PURCHASES: 2. sales
a) Fertilisers & 12,46,29,656.78
pesticides 11,20,000.00 3. Misc. income
Creditable to
3. Expenditure Trading a/c 1,20,12,750.35
debitable to trading a/c 1,14,74,796.84

4. Cost of production
Transferred from 25,75,46,899.47
Manufacturing a/c

5. Gross Profit 5,17,51,887.40

----------------------- ----------------------
41,17,32,920.70 41,17,32,920.
----------------------- ----------------------

72
THE CHITTOOR CO-OPERATIVE SUGARS LIMITED:: CHITTOOR

BALANCE SHEET AS ON 2006

LIABILITIES Rs. ASSETS Rs.
1. Share capital 14,11,40,700.00 1. Cash on hand 1,41,218.80
2.DEPOSITS & 2. BALANCE WITH
BORROWINGS: BANKS:
a) Deposits 3,10,24,046.10 a) current account 1,66,827.11
b) Borrowings 40,43,40,806.12 b) savings account 70,83,116.03
3. Out standing 3. Shares in other
Interest payable 4,90,24,988.90 Co-op. institutions 2,28,550.90
4. Adjusting heads 4. Deposits with
“ Due by” 14,09,80,325.36 Various agencies 12,67,225.77
5. Reserves 26,43,09,028.13 5. F.D’s with banks 2,50,000.00
6. U.D.P 64,226.88 6. Loans & advances
7. Audit fund 9,695.57 To members 1,06,24,987.20
8. Reserve fund yet 7. Loans to other
To be invested 24,702.69 Co-op. sugar 10,00,000.00
Factories
8. ADJ. heads
“due to” 7,32,09,660.39
9. Interest receivable 18,26,488.57
10. Value of assets 12,91,97,586.22
11. Rvaluation of
Assets 9,59,30,271.73
12. VALUE OF
CLOSING STOCK:
a) Stores stocks 2,06,58,101.84
b) Packing material 5,87,128.50
c) Stationary 28,089.00
d) Sugar 26,74,59,792.80
e) Sugar in process 78,41,426.47
f) Molasses 75,14,240.11
g) Molasses in 4,15,715.92
process
h) Pesticides 1,16,480.00
h) FMP raw
material & feed 20,474.20
13. Deficits 47,943.52

-----------------------
LESS: 1,03,09,18,519.75
Difference between 40,53,03,194.91
Assets & liabilites
----------------------- ----------------------
Total 62,56,15,324.84 Total 62,56,15,324.84
----------------------- ----------------------

73
THE CHITTOOR CO-OPERATIVE SUGARS LIMITED:: CHITTOOR

TRADING ACCOUNT FOR THE YEAR 2007

PARTICULARS AMOUNT PARTICULARS AMOUNT
Rs. Ps. Rs. Ps.
1.OPENING STOCK: 1. OPENING STOCK:
a) Sugar 26,74,59,792.80 a) Sugar 24,67,11,289.11

b) Molasses 75,14,240.77 b) Molasses 66,19,002.89
c) Pesticides 1,16,480.00
2. sales 2,05,940.00
2. Expenditure
debitable to trading a/c 2,66,76,030.20 3. Misc. income
Creditable to 2,60,98,795.50
3.. Cost of production Trading a/c
Transferred from 38,10,97,458.30
Manufacturing a/c 4. Gross loss 3,76,82,757.68
4. Pesticides Purchase
33,07,360.00

---------------------- ----------------------
68,61,71,362.07 68,61,71,362.07
---------------------- ----------------------

74
THE CHITTOOR CO-OPERATIVE SUGARS LIMITED:: CHITTOOR

BALANCE SHEET AS ON 2007

LIABILITIES Rs. ASSETS Rs.
1. Share capital 14,25,53,600.00 1. Cash on hand 95,082.98
2.DEPOSITS & 2. BALANCE WITH
BORROWINGS: BANKS:
a) Deposits 3,52,01,887.01 a) current account 33,80,265.98
b) Borrowings 40,57,02,422.76 b) savings account 14,46,93,17.43
3. Out standing 3. Shares in other
Interest payable 4,69,28,301.64 Co-op. institutions 2,28,550.00
4. Adjusting heads 4. Deposits with
“ Due by” 22,91,72,904.82 Various agencies 12,70,225.77
5. Reserves 26,80,06,835.01 5. F.D’s with banks 2,50,000.00
6. U.D.P 64,226.88 6. Loans & advances
7. Audit fund 9,695.57 To members 18,17,48,73.00
8. Reserve fund yet 7. Loans to other
To be invested 24,702.69 Co-op. sugar 10,00,000.00
Factories
8. ADJ. heads 7,55,41,003.33
“due to”
9. Interest receivable 18,26,488.57
10. Value of assets 13,99,27,312.64
11. Rvaluation of
Assets 9,59,30,271.73
12. VALUE OF
CLOSING STOCK:
a) Stores stocks 1,94,14,206.14
b) Packing material 14,70,696.50
c) Stationary 40,532.00
d) Sugar 24,67,11,289.11
e) Sugar in process 62,98,460.92
f) Molasses 66,19,002.89
g) Molasses in
process 8,01,596.61
h) Pesticides 2,05,940.00
h) FMP raw 20,474.20
material & feed
13. Deficits 47,943.52

LESS: 11,27,66,45,76.38
Difference between 49,89,41,043.06
Assets & liabilites
------------------------ ----------------------
Total 62,87,23,533.32 Total 62,87,23,533.32
------------------------ ----------------------

75
BIBLIOGRAP
HY

76
BIBLOGRAPHY

 THE following books have reffered during the prepararion of this project:-
 I.M.pandey - Financial management- Vikas publishing house PVT LTD, New
Delhi-110014, 2003.
 Prasanna Chandra- Financial management-Tata MCGrawhill-hill publications
company ltd, New Delhi, 2002.
 R.K.Sharma and Shashi K.Gupta -Management accounting Kalyani
publishers, NewDelhi-2003.
 Advanced financial management - Publishes by director of studies- ICWAI. –
KOLKATA 70016.

77