A Project Report On WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

“WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING
MILL LTD, BANHATTI”
Babasabpatilfrepptmba.com Page 1
The Banhatti co-operative spinning mill ltd is located at Banhatti in the area of
Basavanagar, District Bagalkot.
To help the person engaged in weaving profession and who are under clutches of
master weavers exploited by vested interest and to bring outlook in the prosperity &
working of the farmer.
The Government sectioned on lease basic 50 acres of land, out of this Mill has got
permission of 18 acres of in forest near Banahatti. The said land is situated on Banhatti
Jamkhandi road & state highway at Bijapur to Belgaum. Expected cost of land after
necessary development and levelling land lying of internal roads and finance did not
exceed Rs.45 lakhs. In 1980-81 the construction of the building was started and it was
completed in 1984. Actual production of the Mill started in March 1984.
The study was conducted in the prestigious organization, which is basically

producing yarn of various counts. The main reason of the study is to fulfill the academic
requirement and at the same time inform an individual about the functioning of the
organization and also to know the working capital of the organisation.
In this study I found out working capital changes and working capital ratio of the
organisation based on that I haven given the suggestion to the organisation. The Mill was
making very good profit at the beginning; it has been incurring loss previously.
METHODOLOGY OF THE STUDY

The methodology adopted by me to collect the data can be classified under 2
heads:-
o Primary data
o Secondary data
Primary data: - The data has been collected through questionnaire to all department
managers.
Secondary data: - The project report data is collected through the journals of the
company, magazines, and reference books.
SCOPE OF THE STUDY

o The training helps in gaining a practical knowledge of the functional department
of the organisation.
o It helps in knowing the real organisational environment.
o It helps to know how they handle or manage the finance.
o Training helps the individual to have brief idea of an organisation.
LIMITATIONS OF THE STUDY

o The study will be restricted only to the Banhatti Co-Operative Spinning Mill Ltd
therefore the results of the study cannot be generalised.
o The study will be restricted only to the workers of the company.
o Analysis of the data collected from the questions will be made on the assumptions
that data provided by the respondents are accurate.
o The study was based on annual report and balance sheet.
o Time period for the study will be restricted only for 60 days.
OBJECTIVES OF THE STUDY
The purpose of doing this project is to know how distribution helping marketing program.
 To know the working capital of the mill, source of capital and how they manage it.
 To know the working capital ratios of the mill
 To know about wage and salary administration.
 To find out debtor collection period and creditor payment period
 To know the changes in working capital of the mill.
 To know the current obligation of the mill
TABLE OF CONTENT
Sl. No. PARTICULARS Page No
1 INTRODUCTION
2 PROFILES
3 BACKGROUND
4 KEY FUNCTIONAL AREAS
5 WORKING CAPITAL MANAGEMENT
6 WORKING CAPITAL RATIO
7 CONCLUSION
8 BIBLIOGRAPHY
In the general scenario where you hear at only a failure in the operative sectors. But
weavers spinning mill at BNT is an exception. The Mill has been doing so well. The
commercial production of cotton yarn of the Banhatti Co-Operative Spinning Mill Ltd is
likely to be commenced during the second week of April 1984 and that a souvenir will be
brought to mark the occasion.
It is needless to say that there is still a need for the creation of such Mill on co-
operative basis to help persons engaged in the profession and who are under clutches of
master of weavers exploited by their interest.
It was established for the need of its 3549 members in JAMKHANDI & MUDHOL
Taluk in the district BAGALKOT. These weavers earlier depend upon the Mills of Salem,
Inchalkaranji for raw-material like yarn & cotton as the supply was inadequate but now it is
Gokak
This Banhatti Co-Operative Spinning Mill Ltd has completed its project and it was
inaugurated by Sri Ramakrishna Hegde, Honourable Chief Minister Govt of Karnataka.
The Agro based Industries are the most famous in order to rise their standard of
living. The spinning Mill is one of them which is helping the cotton growers to raise their
standard of living & to improve their economic condition from centuries together the
cotton growers, one suffering by the middlemen who are purchasing the cotton on throw
way price, but now after commencing of this spinning Mill the cotton growers can get
reasonable price for their production.
Thus was born the idea of starting the spinning Mill of their own. Construction
began in1981 & completed in 1984, Commercial production began in the same year from
March; the Mill has been undertaken manufacturing of hosiery yarn.
The Mill has laboratory & testing equipment to grade cotton yarn. Strict control has
earned its reputation not only in India but also in abroad, in Italy, Bangladesh & West
Germany except to these countries accounted for Rs. 196.52 lakhs in 1988-89. It also
exported the yarn to China & Japan. The Mill has drawn up a modernization plan with an
outlay of Rs 1.45 crores.
The success story of the Mill is further through in relief as the failure of the other
two co-operative Mills in the District of Bagalkot. This Spinning Mill should run
successfully and to help the cotton growers at the same time weavers who are members of
this Mill.
HISTORY
Industrialization plays a major role in all around development of under developed
countries like INDIA. Small scale & cottage industries have assumed great importance in
India from point of view of employment and contribution to national wealth. Small
industry is a big movement in India is handloom sector of textile industry.
The Banhatti Cooperative spinning mill limited was set up in the field of
cooperative and under the Karnataka State cooperative societies act 1959. The mill was
registered in the year 1975 and the actual functioning of the mill was started in the year
1983. The working of the society was extended up to the JAMKHANDI & MUDHOL
Taluk of BAGALKOT.
The Karnataka Govt has provided 50 acres of land for 30 years period to the
society the lease basis. The construction work of the Mill begins in the year 1984. Due to
constructor’s litigation, there was delay in the work. The production of the yarn was
initiated with 15080 spindles.
The Mill purchases raw material i.e., cotton from local market i.e., JAMKHANDI
MUDHOL and GOKAK Taluk. It also purchases cotton of different quality from Saudatti,
Bailhongal, Dharwad & Nargund & Hirekerur. Other than these the Mill also purchases
cotton from Maharashtra, Gujarat & Tamil Nadu states. The Mill has its marketing centres
in Malegoan, Dahlai, Bombay and Inchalkaranji.
The Banhatti Co-Operative Spinning Mill Ltd was registered under Registration
No. JRBG/3254/785 Dated: 03-02-1975 as Handloom weaver’s co-operative society. The
object of the society was to produce yarn & further process like dyeing, sizing, cloth
production & readymade etc. After registration it has taken almost 5 years to get clearance
from Karnataka state Govt. The share capital collection was started since 1980. The
construction of the building started in the year 1982 on 50 acres forest lease land. The
construction of the company & installation of the machinery was completed & commercial
production started on 25080 spindles during the year 1984. The total project cost was
Rs720 lakhs.
The Mill was earning profits since its inception & financial position was very good.
So the Mill re-paid Share Capital of Rs424.40 lakhs to Karnataka state Govt. The Mill
produces cotton yarn from 10 to 140 counts.
OBJECTIVES OF THE
ORGANISATION
The main purposes of the Banahatti Co-operative Spinning Mill Ltd’s are,
o To improve the economic condition of the members in relation to weaving,

colouring, bleaching, mercerizing, & manufacturing of cloths etc, and
providing in reasonable rate to its members.
o The Mill has the objectives of idea for the expansion programs with
increases in number of spindles and replacing the old machines with new
and highly mechanized machines.
o As the main objective of the Mill is to provide labour welfare facilities so it

has set up own credit society, through which daily requirement of the
workers of the Mill at reasonable rate of interest.
o To help the cotton growers to raise their standard of living.
o For the improvement and the well being of the people of the low income
groups the Mill has encouraged women workers by providing work in them.
o Consumer satisfaction; the Mill always satisfied the needs and wants of its
customers in each and every way like by providing quality products, prompt
and timely deliveries.
o Expanding the markets for its products; it has extended their market in
AndraPradesh, Maharashtra, & Tamil Nadu by continuous efforts of the
promoters.
COMPANY PROFILE
Name of the organisation: Banhatti cooperative spinning mill ltd, BANAHATTI
Address of the organisation: Banhatti cooperative spinning mill ltd, BANAHATTI,
Basavanagar, Taluk Jamkhandi, district – Bagalkot.
Name of the chairman: Shri G.D. Bhadrannawar.
Name of managing director: Shri V.B. Kamlapur.
Management control: Board of the director nominated by the government of

Karnataka.
Constitute: Wholly owned by the board of directors
Process know how: This mill is a pioneer in the manufacturing of various

yarn products and there is no need of import any
process know how it is not collaborated with other
company
Proposed products: Cotton yarn in the form of hank and cone, carded
yarn and combed yarn
E-mail: bcsm21@sancharnet.in
Fax: 08353- 230316
Phone: 08353-230013, 230362, 230237
AWARDS
The Mill has been awarded by “All India Co-operative Spinning Society” for the
production of good quality yarn in the year 1986-87.
The all India federation of co-operative spinning mill ltd (aifcospin) for profitability
Net profit (1991-92)
For earning net profit on each spindle it received award from “All India Federation
Bombay”.
In the year 1992-1993 it received the Best Performance Award from “Karnataka
State”.
The Small and Medium size Export Council of India; Delhi awarded the society by
“Niryat Ratna” by presenting a gold medal in the year 1995.
Karnataka government for best performance in a co-operative sector spinning mill

(2000-2001)
Karnataka government for best performance in a co-operative sector spinning mill

(2001-2002)
PRODUCT PROFILES
The Mill is producing cotton yarn in the form of Hank & Cone. Hanks are packed
in the bales and cones are packed in the cone bags for the marketing purpose, there are two
types of cone.
1) Kg Cone 2) Baby Cone
Hanks & Cones are further divided in the carded & combed yarn. Carded yarn is
less superior compared to combed yarn. Carded yarn is used for weft combed yarn is used
for warp, the yarn is further divided on the basis of counts one count is equal to 840 yards
of yarn.
There are different types of yarn,
1. Carded Yarn --------------- K
2. Combed Yarn --------------- C
3. Carded Hosiery --------------- KHY
4. Combed Hosiery --------------- CHY
5. High twist Yarn ---------------- HT
6. Export Yarn ---------------- EXP
7. Doubled Yarn ---------------- 2/
8. Open end Yarn ---------------- OE.
DEPARTMENTS OF THE ORGANISATION
 Material Department
 Store Department
 Production Department
 Cotton Department
 Marketing Department
 Human Resource Department
 Finance Department
 Purchase Department
MATERIAL DEPARTMENT
Proper buying of material, merchandise and procurement of material at the right

time is of great importance in any business. Therefore, keeping views prominence for the
purchase of material in setting up a separate department known as Material Department
While considering Material Department, in this mill material department is held by

three executives who look after the day to day activities and transaction. It is the main duty
of the material executive to forecast the overall material required by the organisation for
the particular year, month and season.
This department at BCSM LTD ensures that material are obtained at right time
with right quantity of right quality , at right place, from right source and at right cost.
The material department at BCSM LTD has been divided into four sections,
 Purchasing of raw material
 Inventory management
 Material handling
 Material storing.
It is the responsibility of the material department to ensure the purchasing of

material at right time. Managing Director is directly appointing material in-charge person
in the material department to control the wastage of raw material.
STORE DEPARTMENT
Goods should be stored properly so as to protect them from damages, deterioration,
theft, etc. Hence care should be taken to safeguard the material and maintain up to stores
record.
Functions of Store Department
 Receipt of goods in to store department
 Production and prevention of material
 Issue of material to required department
 Maintain proper record
 Checking the purchase order in respect of quality of material received
Stores department at BCSM
 Raw material stores
 Finished goods stores
 Fuel stores
 Packing material stores
 Damages goods stores
 Stationery stores.
They maintain different method to control the raw material
1. FIFO (first in first out)
2. Simple moving average.
Here store ledger account can be maintained to receive the goods on FIFO basis. The
stores department will request the material department to place an order when there is no
stock of raw material asked by the user department. The material department sends the
copy of purchase order to the stores department and they meet according to the user
specification, and prepare the goods received report.
DOCUMENTS OF STORES DEPARTMENT AT BCSM
 Bin card.
 Stores ledger.
 Goods received report.
 GRN (goods received note).
 SRIN (stores requisition issue note).
 Delivery note.
 Purchase indent.
 Purchase order
Production department
The production department is the nerves centre of the entire organisation, and the
main objectives of the production department are as follows:
 To follow up the daily production schedules as per the plan
 To cover up the deviation from the set standard if any.
 To maintain close and coordinate relationship with all other key department
 To upgrade technical efficiency of the production.
PRODUCTION PROCESS OF THE BCSM

Mixing
Blow room
Carding Bale operator
Draw frame Maxi flow
Combing section Multi Mixer
Speed frame Asta
Ring frame CVT 1
Reeling CVT 2
Winding Dust tex
Cone winding TV 425
Doubling
Packing
Production process
Mixing:
In this process different quality of cotton is mixed in order to reduce the cost of
production and maintaining good quality control. Here mixing can be done as
95% and only 5% of mixed or low quality cotton.
Blow room:
This is the second process of production in which the raw material i.e. cotton is
opened, cleaned and lap is formed. Each lap is of 60 meter length, 17 kg weight.
It is the purification section.
In blow room there are various steps in cleaning the cotton:
Bale opener
Maxi flow
Multi mixer
Asta
CVT 1
CVT 2
Dust Tex
TV 425
Carding:
In this stage the lap is more cleaned and the cleaned cotton is converted in to
slivers look, here also there is 5% waste, so to remove that waste the cotton is
taken to carding department.
Draw Frame:
In draw frame “4” slivers makes it to 1 sliver, 8 slivers is converted into 1 sliver
by which the length of the sliver increases and diameter decreases.
Combing:
Under this stage of combing, 38 slivers are converted to one ribbon roll further
the ribbon are combed to remove the dust. While combing the short fibers are
separated from the ribbon roll and are given less count. The ribbon roll takes the
forms of slivers.
Speed frame:
In this speed frame the slivers are converted into rolling in speed frame there are
3 processes. Those are as follows – Drafting, Twisting and Winding.
Ring Frame:
Here the finished product is yarn that is obtained from rolling, the yarn is
drafted, twisted and winded.
Reeling:
It is the process of reeling the yarn which is further converted in to Hank
HANK=8.333 LENGTH IN YARN
WEIGHT IN GRAMS
Winding:
Here in winding there are two processes.
Hank yarn:
The yarn is winded in hank in three types
Plain hank winding
Cross hank winding
Diamond shaped winding.
Cone winding: In cone winding also the yarn is twisted and winded in clockwise and anti-
clockwise so that yarn will be thick. Each cone will be of 1 kg in weight.
Doubling:
Here the two thin yarns makes one single thin yarn twisted and winded.
Packing:
This is the last process of the production. Here the Hank yarn is packed through
a machine where as long winding is packed in a casual manner.
COTTON DEPARTMENT
This is yet another department of BCSM & it is very specific department which is
leaded by the three important executive who look after all the day to day transaction & also
has the responsibility of providing of cotton bales according to their requirement of the
production.
Purchasing of cotton:
In case of BCSM purchasing of cotton is done with a requirement of production

department. The process is as follows:
 Testing of samples
 Identifying results of different parameters
 Ordering to partier
 Testing the raw material and also weighing with compare to first one
Types of purchase:
1. spot purchase
2. Mill purchase.
 Spot payments get 1.5% discounts
 Mill payment get 70% for 10 days
30% for 30 days
And payments for transportation are done by telegraphic transfer and demand draft.
The purchase of cotton is done by the purchase committee also where committees organises
once in a week % discuss about bales minimum stock presence and exhausting.
Laboratory
Cotton investigator controller tests the quality of the cotton in the laboratory. It is
one of the departments in the spinning mill, which is used for achieving some objectives in
the yarn.
Marketing department
Marking department is headed by marketing in-charge, who sets the programmes

required for the marketing and executes in accordingly to the orders. Marketing manager
receives advice and orders from the designer who sets long term programmes of marketing
Marketing system
1. Local sales
Cotton yarn is sold to local handloom co-operative society’s weaver member

through co-operative society and the payment is collected by cheque.
2. Marketing agent
Through marketing agent, cotton yarn are sold X-mill delivery basis against
payment by cash/ DD/ Contract cannot be cancelled because contract is
binding on both side i.e. Seller and buyer. Marketing agent is in the area of
INCHALAKARA NJI, SOLAPUR.
3. Consignment
Mill appoints consignment agent. Goods are transferred or dispatch to the

consignment agent with prior intimation by raising stock transfer provision
invoice and on receipt of the goods by consignment agent there after goods
will be sold by agent.
4. Through Mill sales Depots
Sales depots agents are appointed by the mill in Calcutta, Bombay &
mavanathbhanan, goods are dispatched to the sales depot with consultation
of depot agent on the receipt of the goods.
5. Production planning
At present mill is manufacturing 40,s count to 100,s count in single / double

yarn carded/ combed / and hank/ cone yarn mercer iced yarn also.
Production planning is decided on the basis of the demands of the all
marketing centres.
6. Price fixation
Selling price is fixed by the executive committee in the first week of every
month. Sales department collects all the information of the markets and
suggests the rates to the committee; the committee will discuss and fix the
selling price.
7. Major competitors
 Gadag Co-Operative Textiles Mill Ltd.
 South Indian Popular Mills.
 Laxmi Mill.
 Premier Mill.
 Precaut Mill.
HUMAN
RESOURCE DEPARTMENT
The Human Department is primarily concerned with human constitution of an

organisation. It is concerned with the manpower recruitment, training, placement,
remuneration, promotion, retirement, transfer etc, all relating to the human resource or
labour.
The Human resource management or department refers to the systematic

approach to the problem of selecting, training, motivating and retaining human resource in
an organisation.
Human resource management is considered with the planning, organising, directing

and controlling the personnel functions of the organisation.
The Human resource department consist of a deputy manager with deputy

officer who deal regularly with matters of recruitment, training, placement, the two other
officials with guide to the direction of the deputy General Manager who will take planning
and scope of job, description of job, duties, responsibility of each jobs each employed.
HUMAN RESOURCE DEPARTMENT FURTHER AS PROGRAMMES OF:-
o Sponsoring and conducting social activities for the ladies.
o Conducting medical camps for the employees and their departments.
o Conducting seminars sports even for the children of the employee, which is oe of
the appreciable element.
OBJECTIVES OF THE HUMAN RESOURCES DEPARTMENT
o Individual development.
o Desirable working relationship between the employer & employee.
o Effective moulding of human resource as contrasted with physical

resources.
o Proper orientation & introduction of new employee.
o Effective co-ordination of the welfare department & safety department,

which come under human resource department.
MAN POWER PLANNING / MAN POWER AT BCSM
Human resource planning
According to Beach “Man power / HRP is the process for determining and assuring
the organisation will have an adequate number of qualified persons, available at the proper
time, performing jobs which meet the need of the enterprise and which provide satisfaction
to the individual involved”.
According to the Elippo “ a manpower planning can be defined as an appraisal of an

organisation’s ability to perpetuate itself with respect to its management as determined
necessary to provide the executive talent”.
This manpower planning is the process without resources like machines, materials and
motive power etc cannot be put to use.
MANPOWER Present at BCSM
Permanent employees [skilled] --------- 14
Casual employees [semi-skilled] -------- 450
Apprentives / Trainees [unskilled] ------ 136
Need of Manpower at BCSM
o Manpower is needed to expand the business i.e. large numbers of workers are required to
be recruited in expansion of the plant.
o Manpower planning is necessary to the organisation in producing the skilled and qualified
workers & trains them very effectively.
o Manpower planning is necessary for taking steps to mould, change and develop the
strength of existing employees in the organisation.
o Manpower planning is necessary by effective use of manpower & thus reducing the
wastage.
STRENGTH OF THE EMPLOYEES
EXECUTIVES 5
STAFF MEMBERS 55
SUPERVISORS 8 68
WORKERS 600
PERMANENT[skilled] 14
CASUAL[semi-skilled] 450
TRAINEES[unskilled] 136
TOTAL 668
DUTIES OF HR MANAGER
o Conduct the following aptitude test for each worker.
a) Finger dexterity
b) Manual dexterity
c) Eye sight
d) Height & weight
e) Stamina test
o Labour officer should examine a trainee. If it is reported that the workers efficiency
is less in giving production.
o SITRA norms should to apply to the work.
o Organising of the training cell.
o He will supervise the part time teacher’s job.
o Solving the employees family / personnel problem by councelling
o Record of the trainees along with exercise books & the exams results should be
maintained.
o Maintaining good relation with the other departments
o Labour officer should hold the meeting of spinning master, managing director &
training officer at periodical internal to review the training.
o Submission of periodic information of labourers to Managing Director.
RECRUITMENT & SELECTION AT BCSM
Recruitment aims at developing and maintaining adequate supply of the labour

force according to the needs of the organisation.
Recruitment at BCSM, job seekers with need base qualification with experience is
recruited. Here direct recruitment will be adopted. Recruitment can usual be “Contract
Appointment” contract base is adopted even for workers / labourers based on efficiency.
SOURCES OF RECRUITMENT AT BCSM
After the man specification is prepared the job contract confirmed the job rate is
fixed and the recruitment salary range determined it becomes necessary to consider the
sources from where such employees will be forth coming. Basically these resources can be
divided into two.
Internal Sources
Present Permanent Employees
Present Temporary Employees
Retired Employees
Dependents of deceased, disabled, retired & present employees
External Sources
Campus recruitment
Reference to employee exchange
Contract with present employees
Here in BCSM Ltd mainly recruitment & selection are made on the sources that in
internal only by motivating the employees & in the external sources they only go for Door-
to-Door selection & recruitment.
SELECTION PROCESS IN BCSM LTD
1) ASEMBLING PROCESS
2) INTERVIEVING CANDIDATES
3) PLACEMENT
1) ASSEMBLING PROCESS
Assembling the vacancies arise only when the workers are shortage in the
factory. Then the labour officer inform to the Board of Directors on the
request of the labour officer the Board of Directors give right to labour
officer to appoint the needed workers.
2) INTERVIEWING THE CANDIDATES
On the bases of the qualification and experience candidates are called for
interview. In the interview process candidates are asked questions regarding
family background and general questions.
3) PLACEMENT
The selected candidates list will be provided to the Board of Directors for
the signature on their form. And the selected candidates list will be
presented on the Notice Board.
TRAINING
It is the process of imparting the employees’ technical and operating skill and
knowledge. The BCSM has been conducted training programmes by inviting the training
officers from the SITRA [South Indian Textile Research Association] & also it has
appointed managers and officers.
Selected candidates who do not have the required experience shall be given
requisite training in the organisation for a period of one year. This appointment in the
regular scale attached to the post will be made after satisfactory completion of the training.
Especially the SITRA’s training is required for those who directly contact with the
machines for producing good quality of product (Yarn).
TRAINING METHODS USED IN THE BCSM LTD
1) On the job training --- Practical training
2) Off the job training --- Theory training
1) ON THE JOB TRAINING
This on the job training is conducted for those workers who are quite
educated / uneducated and who are directly engaged in the production process. Here
uneducated workers can have practical training or practical work done.
a) Method of work to be adopted by machines
Here in this type of training consist of the one on which method of work can be
adopted for each particular machine i.e. Ring frame machine, cordial machine, reeling
machine, speed frame , cone winding, Autoscore on these machine what are the method
should be adopted about this training will be given for the employee working in the Mill.
b) Work practices to be carried out in the department
In this system the worker should be trained about what type of the work
practices is required in carryout in each department.
2) OFF THE JOB TRAINING
In this type training is given mainly for those who are quite educated i.e.
a) Work method in the department
It consists of the worker trained about using the correct method in each
working process in the different department like production, Material handling, packing,
etc.
b) Importance of productivity, production, quality, waste level
Here work should be trained with the knowing about the importance of
productivity; production, quality and waste level by maintain the right of work.
c) Handling of material: Here workers trained about the careful handling of material.
d) Housekeeping and its importance
e) Do’s and don’ts in department
f) Duties and responsibilities of workers
g) Accidents and safety procedures
h) Identification and their importance
i) Machine knowledge
j) Team work and importance of team work
k) Communication and its importance
WELFARE FACILITIES AT BCSM

The welfare facilities are provided by the Mill is as follows:
1) Quarters for seniors, jobbers, clerks, senior supervisors & officers.
2) Employee’s Co-operative credit societies.
3) Celebration of workers May Day, Ganesh festivals, Conducting sports, & cultural
activities on these occasions.
4) Rest house for workers.
5) Canteen facilities for workers.
6) First aid & Employment State Insurance [ESI] Dispensary.
o For the 3rd shift (night shift) ring frame workers free facility is given i.e. one
tiffin and one tea.
o Incentives:- BCSM provide production incentives & attendance on the basis

of his attendance i.e.
For 22 days of attendance  Rs5 incentives
For 24 days of attendance  Rs7 incentives
For 26 days of attendance  Rs 10 incentives
FINANCE DEPARTMENT
As regarding finance department at Banhatti co-operative spinning mill the account
department is headed by Chief Accountant who is directly below manager heads the
account department. Finance executives and accounts executives who maintains the
accounts of expenditure procurement and expenditure of finance, he prepare annual
financial report and submit to Chief Accountant and who look after day to day financial
needs final accounts of the company.
Chief Accountant also heads Finance department. Below him are executives.
Finance is the corner stone of business every businessman needs accountants attends all
financial transaction of Banhatti co-operative spinning mill ltd.
Finance requirement is mainly due to-

1. Purchase of Raw material[ cotton]
2. Purchase of chemicals
3. Purchase of stationary
4. Traveling expenses & dearness allowance
5. Allotment of salary
6. Repairs & Maintenance
7. Installation of machines & equipments
8. Miscellaneous
Maintenance of Balance on double entry system or Merchandise system
Here all the transactions accrued in the Banhatti co-operative spinning mill with
respective above all financial requirements & other financial item they are maintaining
through Merchandise system or Double entry system they are also prepared.
1. Manufacturing accounts
2. Trading accounts
3. Profit & loss accounts
4. Balance sheet
Accounting system
In accounting system, accounting process can be made by recording of transaction

i.e., transaction are recorded directly in double entry system books or Merchandise system.
After the first phase of accounting work is viz, the analysis & classification &
consolidation of transaction works begin. In the third phase, Trial balance is extracted
position of the business at the end of the accounting period.
Cost Audit has been made for Banhatti co-operative spinning mill. Cost Audit report
should be sent to the Company Law Board before 30th September every year. Here product
wise cost sheets are prepared to arrived at the pricing decision, export decision etc. The
costing department will allocate the product wise expenses in regard to raw material,
chemical & packing material. The overheads are apportioned in the cost center wise and
later cost unit wise. The margins for products will be ascertained by costing department &
reported to management periodically. “Cost A/c will later on be recorded with final
accounts”.
Costing system
In the process of costing system for the product manufactured like different types of
yarns on count wise i.e. From 14’s counts to 100’s counts in single / double yarn, carded /
combed & Hank / Cone yarn & Mercerised yarns also.
Material Costing
The Raw material is used for the production of the different types of yarn are oils,
fats, chemicals which enable proper determination of value of material consumption. Stores
ledger is maintained in respect of each head of material & material is drawn from stores
through authorized “Material Indents / Indent slip” for the consumption of the raw material
like oil fats 7 chemicals the stores department has maintained “ BIN CARD”
Labour Accounting
The total salaries and wages as per the final accounts for the company as a whole
were identifiable with respect to production department in respect of service department
these are appropriately apportioned among production department in accordance with the
services rendered by these employees & given standard production efficiency.
Over Head Costing
The productions of different types of yarns especially 20’s yarn are exported & to
sell in the market the company [Banhatti co-operative spinning mill] has appointed
different marketing agents. They are in Inchalkaranji, Solapur, Coimbatore & through
different branch / mills sales depots in Bombay, Calcutta, & Mavanathbhavan( UP) . The
Mill appointed same branch in these area that is “m/s LNGS Pvt Ltd Combutor” as depot
agents to look after day to day affairs. The expenses relating to branches have been
allocated among the products requirements / product covered. These expenses have been
taken under the “Selling Overheads” & the same has been apportioned on technical
estimate among production cost center. While arriving at the conversion cost, salaries &
wages, commission to the agents, taxes, sales tax, traveling expenses, administration O/H
& depreciation has been treated as reducing balance.
DEPRECIATION
Depreciation in relation to plant and machinery, vehicles and miscellaneous
fixed assets are calculated on reducing Balance method.
Assets %Depreciation
Machinery 25%
Vehicles 20%
Buildings 10%
Others 10%
Financial Sources for the Banhatti co-operative spinning mill

1. Cash credit loan from DCC Bank
2. Deposits from members
3. Own fund
4. Members share capital of 3431 members & Rs 500 for each share
5. Term loan from IDBI
TYPES OF SHARE HOLDERS
Class Name No of members

A Class Weavers 2492
B Class Weaver’s co-op Societies 11
C Class Agriculture co-op Society 72
E Class Farmers Individual Members 381
F Class Businessmen’s & Job Holders 474
G Class Government Co-op Society
Total 3430
The shares are collected by dividing in 6 categories. The Mill started with
authorized capital of 7 crores in the year 1983-84. In the first year the issued & paid up
capital of the Mill was Rs 379.22lakhs. This amount increased gradually in the year 1992-
93 the paid up capital of the Mill was Rs 411.25 lakhs.
The numbers of shareholders were decreased from 1986-87 because the Mill has
restricted the issue of share to non members (non share holder).
PURCHASE DEPARTMENT
While purchasing cotton first they take for sample and test in laboratory. To purchase
cotton and to make decision every Tuesday, there will be a meeting at least twice in a
month. The cotton which is selected for production the related members of that cotton will
be called for meeting. They purchase the only which is necessary for production.
There are different varieties of cotton they are :-
 DCH-32
 MCH-4
 S-4
 BUNNY
 S-6
 LRA
 MLCH-1
 AK-235
 DH-11
 BHARMA
They purchase cotton from different states like
 KARNATAKA
 ANDHRA PRADESH
 MAHARASTRA
 MADHYA PRADESH
 GUJARATH
 TAMIL NADU
 RAJASTHAN
The rates are depended on the candy, 1 candy=356kg the candy is converted into
quintal on its related ratio.
If the delivery is made on the spot than the Insurance, transportation charges, and all
other expense is paid by them. If the quality is not as per the sample than per candy will be
decreased or the cotton will be sent back to the related parties.
SOME OF THE NAMES OF THE PARTIES [SUPPLIERS]
 M /S Sherya cotton industry—senhva(M.P)

 M /S Kissan lal motilal--- Bijapur(Karnataka)
 Swastik indurtries--- warangal(A.P)
 H.D mallur --- Sangli(Maharastra)
 The Maharastra state co-operative cotton growers marketing tradition- Mumbai
 East India cotton company—Mumbai
 M/S Mahalingeshwar cotton company – Gokak
 M/S Mahalakshmi cotton co – Gokak
 M/S M.S.Kollar- Gokak
 Maheshwary trading company—Ratlum(M.P)
 Ramkaran Shrikisan bansar – Harsud(M.P)
 Gordwarn jinning udyog—Kiyta(M.P)
 M/S Ravi enterprise—Warangal (A.P)
 M/S V.S.Bedri pessing factory – Gokak

 Panchmukhi traders—Sangli (Maharastra)
 Keerti co-operation- Ahmedabad
 Ramray Ramnarayan—Beawar(Rajasthan)
 Cotton seeds co-operation – Hubli
 Cotton seeds enterprise- Sumarpur (Rajasthan)
 M/S Mahalingeshwar cotton co. – Adoni(A.P)
Working Capital Meaning
Working Capital is defined as the excess of current assets over current liabilities.
Current assets are those assets, which will be converted into cash within the
current accounting period or within the next near as a result of the ordinary operations of
the business. They are cash or near cash resources. These include:
 Cash and Bank balances

 Receivables
 Inventory
 Raw materials stores and
 Work – in- progress
 Finished goods
 Prepaid expenses
 Short- term advances
 Temporary investments
The value represented by these assets circulates among several items. Cash is used
to buy raw- materials, to pay wages and to meet other manufacturing expenses. Finished
goods are produced. These are held as inventories. When these are sold, accounts
receivables are created. The collection of accounts receivable brings cash into the firm.
The cycle starts again.
Current liabilities are the debts of the firms that have to be paid during the current
accounting period or within a year. These include.
- Creditors for goods purchased
- Outstanding expenses i.e., expenses due but not paid
- Short – term borrowings
- Advances received against sales
- Taxes and dividends payable
- Other liabilities maturing within a year.
Working capital is also known as circulating capital, fluctuating capital and

revolving capital. The magnitude and composition keep on changing continuously in the
course of business.
Cash
Inventories
Circulation of current assets
Receivables
Objectives of Working Capital Management
The basic objectives of working capital management are as follows
 By optimizing the investment in current assets and by reducing the level of current
liabilities, the company can reduce the locking up of funds in working capital
thereby; it can improve the return on capital employed in the business.
 The second important objective of working capital management is that the company
should always be in a position to meet its current obligations, which should
properly be supported by the current assets available with the firm. But maintaining
excess funds in working capital means locking of funds without return.
 The firm should manage its current assets in such a way that the marginal return on
investment in these assets is not less than the cost of capital employed to finance the
current assets.
Gross and Net Working Capital
Generally the working capital has its significance in two perspectives – Gross
working capital and Net working capital’ the term ‘Gross working capital refers to the
firm’s investment in current assets. The term ‘Net working capital’ refers to the excess of
current assets over current liability. These gross working capital and net working capital are
called Balance sheet approach of working capital.
Permanent and Temporary Capital
Considering time as the basis of classification, there are two types of working
capital viz. ‘Permanent’ and ‘Temporary’ permanent working capital represents the assets
required on continuing basis over the entire year, whereas temporary working capital
represent additional assets required at different items during the operation of the year. A
firm will finance its seasonal and current fluctuations in business operations through short
term debt financing. For example, in peak seasons, more raw materials to be purchased,
more manufacturing expenses to be incurred, more fund will be locked in debtor’s balances
etc. In such times excess requirement of working capital would be financed from short-
term financing sources.
Sources of working capital
1) Trade credit
2) Bank credit
Trade credit
Trade credit refers to credit extended to the supplier of the goods and service in the
normal course of transaction /business/sales of the firm. According to the trade practices
the cash is not paid immediately for purchases but after an agreed period of time. Thus,
deferral of payment (trade credit) represents a source of finance for credit purchase.
Bank credit
The firm gets working capital finance from bank by five ways.
1) cash credit
2) loans
3) purchase /discount bills
4) letter of credit
5) Working capital term loans.
Disadvantages of Insufficient Working Capital
The disadvantages suffered by a company with insufficient working capital are as

follows:
 The company is unable to take advantage of new opportunities or adapt to
changes.
 Trade discounts are lost. A company with ample working capital is able to
finance large stocks and can therefore place large orders.
 Cash discounts are lost. Some companies will try to customers are foregone.
 The advantages of being able to offer a credit line to customers are foregone.
 Financial reputation is lost result in non-cooperation from trade creditors in

times of difficulty.
 There may be concerted action by creditors and will apply to court for winding
up.
Operating cycle Concept
A new concept which is gaining more and more importance in recent years is the
‘operating Cycle concept’ of working capital. The operating cycle refers to the average
time elapses between the acquisition of raw materials and the final cash realization.
- The finished goods inventory stage

- The receivable stage
Operating cycle
How to reduce Operating Cycle?
The aim of every management should be to reduce the length of operating cycle or
the number of operating cycles in a year. Only then the need for working capital decreases.
The following a few remedies may become handy in contrasting the length of operation
cycle period.
 Purchase Management: The purchase manager ows a responsibility in insuring

availability of right type of materials in right quantity of right quality at right price on right
time and at right place. These six R’s contribute greatly in the improvement of length of
operating cycle. Further, streamlining of credit from supplier and inventory polity also help
the management.
 Production Management: The Production Manager affects the length of

operating cycle by managing and controlling manufacturing cycle, which is a part of
operating cycle and influences directly. Longer the manufacturing cycle, longer will be the
operating cycle and higher will be the firm’s working capital requirements.
The following measures may be taken:

- Proper maintenance of plant, machinery and other infrastructural facilities.
- Proper planning and coordination at all levels of activity.
- Up – gradation of manufacturing system, technology.
- Selection of the shortest manufacturing cycle out of various alternatives etc.
 Marketing Management: The sale and production policies should be

synchronized as far as possible. Lack of matching increases the operating cycle period.
Production of Qualitative products at lower costs enhances sales of the firm and reduces
finished goods storage period. Effective advertisement, sales promotion activities, efficient
salesmanship, used of appropriate distribution channel etc. reduce the storage period of the
finished products.
 Sound Credit and Collection Policies: Sound credit and collection policies
enable the Finance Manager in minimizing investment in working capital in the form of
book debts. The firm should be discretionary in granting credit terms to its customers. In
order to see that the receivable conversion period is not increased, the firm should follow a
rationalized credit policy based on the credit standing of customers and other relevant facts.
The firm should be prompt in making collections. Slack collection policies will tie up funds
for long period, increasing length of operating cycle.
 Proper Monitoring of External Environment: The length of operating cycle

is equally influenced by external environment. Abrupt changes in basic conditions would
affect the length of operating cycle. Fluctuations is demand, competitors, production and
sales policies, Government fiscal and monetary policies, changes on import and export
front, price fluctuations, etc., should be evaluated carefully by the management to minimize
their impact their adverse impact on the length of operating cycle.
 Other Suggestions: The personnel manager by framing sound recruitment,

section, training placement, promotion, transfer, wages incentives and appraisal policies
can contrast the length of operating cycle. Use of Human Resources Development
technique in the organization, enhance the morale and zeal of employees thereby reduces
the length of operating cycle. Proper maintenance of plant, machinery infrastructural
facilities, timely replacement, renewals, overhauling etc. will contribute towards the control
of operating cycle.
These measures, if adhered properly, would go a long way in minimizing not only
the length of operating cycle period but also the firm’s working capital requirements.
Factor’s determining Working Capital Requirement
There is no set of universally applicable rules to ascertain working capital needs of

business organization. The factors which influence the need level are discussed below:
1) Nature of Business: If we look at the balance sheet of any trading organization,

we find major parts of the resources are deployed on current assets, particularly stock-in-
trade. Whereas in case of a transport organization major part of funds would be locked up
fixed assets like motor vehicles, spares and work shed etc. and the working capital
component would be negligible. The service organizations or public utilities need lesser
working capital than trading and financial organizations. Therefore, the requirement of
working capital depends upon the nature of business carried by the organization.
2) Manufacturing Cycle: Time span required for conversion of raw materials into
finished goods is a block period. The period in reality extends a little before and after the
work-in progress. This cycle determines the need of working capital.
3) Business Cycle Fluctuations: This is another factor which factor which

determines the need level. Barring exceptional cases, there are the variations in the demand
for goods/services handled by any organization. Economic boom or recession etc., have
their influence on the transactions and consequently on the quantum of working capital
required.
4) Scale of operation: Operational level determines working capital demand during

a given period. Higher the scale, higher will be the need for working capital. However,
pace of sales turnover (Quick or slow) is another factor. Quick turnover calls for lesser
investment in inventory while low turnover rate necessitates larger investment.
5) Credit Policy: Credit Policy of the business organization includes to whom,

when and to what extent credit may be allowed. Amount of money locked up in account
receivable has its impact on working capital. In good many cases, account receivables are
sterile and sticky and thereby they have forfeited the right to be classified as current assets.
In view of such situation in ascertaining quick ratio instead of deducting stock-in-trade we
find it worthwhile to deduct sundry debtors. The other component is credit policy of the
suppliers, their terms and conditions of credit. Trade credit has its historical presence in the
trading world. Availability of normal credit suppliers as well as trade credit facility working
capital supply and reduce the need for bank finance.
6) Accessibility to Credit: Credit worthiness is the precondition for assured

accessibility to credit. Accessibility in banks depends on the flow of credit i.e. the level of
working capital.
7) Growth and Diversifications of business: Growth and diversification of

business call for larger volume of working fund. The need for increased working capital
does not follow the growth of business operations but precedes it. Working capital need is
in fact assessed in advance in reference to the business plan.
8) Supply Situation: In easy stable supply situation, no contingency plan is

necessary and precautionary steps in inventory investment can be avoided. But in case of
supply uncertainties, lead-time may be longer necessitating larger basic inventory, higher
carrying cost and working capital need for the purpose. No aggressive approach can gain
foothold in such situation.
9) Environment Factors: Political stability in its wake brings in money market and
trading world. Things mostly go smooth. Risk ventures are possible with enhanced need for
working capital finance, similarly, availability of local infrastructural facilities, road,
transport, storage and market etc., influence business and working capital need as well.
Working Capital Ratios
Working capital ratios indicate the ability of a business concern in meeting its
current obligations as well as its efficiency in managing the current assets for generation of
sales. These rations are applied to evaluate the efficiency with which the firm manages and
utilizes its current assets. The following three categories of ratios are used for efficient
management of working capital: (I) Efficiency ratios (2) Liquidity ratios (3) Structural
health ratios
Efficiency ratio
Sales
a) Net Working Capital turnover ratio = Workingcap ital
This ratio is computed by dividing sales by working capital. This ratio helps to
measure the efficiency of the utilization of net working capital. It signifies that for an
amount of sales, a relative amount of working capital is needed. If any increase in sales is
contemplated, working capital should be adequate and thus, this ratio helps management to
maintain the adequate level of working capital.
Sales
b) Inventory Turnover Ratio = Inventory
This ratio indicates the effectiveness and efficiency of the inventory management.
The ration shows how speedily the inventory is turned into accounts receivable through
sales. The higher the ratio, the more efficiently the inventory is said to be managed vice
versa.
Sales
c) Current Assets Turnover Ratio =
CurrentAss ets
This ratio indicates the efficiency with which current assets turn over into sales. A
higher ratio implies by and large a more efficient use of fund. Thus, a high turnover rate
indicates reduced lock-up of funds in current assets. An analysis of this ratio over a period
of life time reflects working capital management of a firm.
Liquidity Ratios
Currentass ets, loans & advances

i) Current Ratio= Currentlia bilities & provisions
This ratio indicates the extent of the soundness of the current financial position of
an undertaking and the degree of safety provided to the creditors. The higher the current
ratio the larger amount of rupee available per rupee of current liability, the more the firm’s
ability to meet current obligations and the greater safety of funds of short-term creditors.
Current assets are those assets, which can be converted into cash within a year. Current
liabilities and provisions are those liabilities that are payable within a year. Current
liabilities and provisions are those liabilities that are payable within a year. A current ratio
of 2:1 indicates a highly solvent position. A current ratio of 1.33: 1 is considered by banks
as minimum acceptable level for providing working capital finance. The constituents of
the current assets are as important as the current assets themselves for evaluation of
company’s solvency position.
Currentassets, loansandadvances  Inventories

ii) Quick ratio = Currentltliabilities & provisions  Bankoverdraft
Quick ratio is a more refined tool to measure the liquidity of an organization. It is a

better test of financial strength than the current ratio, because it excludes very slow –
moving inventories and the items of current assets which cannot be converted into cash
easily. This ratio shows the extent of cushion of protection provided from the quick assets
to the current creditors. A quick ratio of 1:1 is usually considered satisfactory though it is
again a rule of thumb only.
Structural Health Ratios

Total Netassets
i) Current Assets to Total Net Assets =
Currentass etst
This ratio explains the relationship between current and total investment in assets. A
business enterprise should use its current assets effectively and economically because it is
out of the management of these assets that profits accrue. A business will end – up in losses
if there is any lacuna in managing the assets to the advantage of business. Investment in
fixed assets being inelastic in nature, there is no elbowroom to make amends in this sphere
and its impact on profitability remains minimal.
ii) Composition of Current Assets
An analysis of current assets component enable one to examine in which

component the working capital funds are locked up. A large tie-up of funds in inventories
effects profitability of the business adversely owning to carry over costs. In addition losses
are likely to occur by way of depreciation decay, obsolescence, evaporation and so on.
Receivables constitute another component of current assets. If the major portions of current
assets are made up of cash alone, the profitability will be decreased because cash is a non –
earning asset. If the portion of cash balance is excessive, then it can be said that
management is not efficient to employ the surplus cash
sales
iii) Debtors Turnover Ratio =
Debtors
This ratio shows the extent of trade credit granted and the efficiency in the
collection of debts. Thus, it is an indicative of efficiency of trade credit management. The
lower the debtors to sales ratio, the better the trade credit management and better the
quality (liquidity) of debtors. The lower debtors mean prompt payment by customers. An
excessively long collection period, on the other hand, indicates a very liberal, ineffective
and inefficient credit and collection policy.
Debtors
iv) Debtor collection Period (in days) = X 365
Sales
Debtor collection period, which measures how long it takes to collect amounts from
Debtors. The actual collection period can be compared with the stated credit terms of the
company. If it longer than those terms, then this indicates some insufficiency in the
procedures for collecting debts.
Baddebts
v) Bad debts to Sales =
sales
This ration indicates the efficiency in the collection procedures of the company. The
actual ratio is compared with the target or norm to decide whether or not it is acceptable.
Creditors
vi) Creditor payment Period (in days) = X 365
Purchases
The measurement of the creditor payment period shows the average time taken to
pay for goods and services purchased by the company. In general the longer the credit
period achieved the better, because delays in payment mean that the operations of the
company are being financed interest free by supplier’s funds. But there will be a point
beyond which, if they are operating in a seller’s market, may harm the company. If too long
a period is taken to pay creditors, the credit rating of the company may suffer, thereby
making it more difficult to obtain suppliers in the future.
CALCULATION OF WORKING CAPITAL

Statement showing working capital for the year 2003-04
Particulars Amount(Rs) Amount(Rs)
Current Assets
Cash 70,941
Bank 1,01,29,880
Debtors 27,19,803
Receivables 30,68,347
Closing stocks 6,96,73,288
Loans and advances 1,23,577
Other Assets 22,66,506
Total current assets(a) 8,80,52,342
Current liabilities
Creditors 1,77,75,103
Tax 2,94,852
Provision 12,00,000
Total current liabilities(b) 1,92,69,955
Working capital (a-b) 6,87,82,387


Current Assets
Cash 68,903
Bank 2,41,75,972
Debtors 1,24,56,152
Current liabilities
Creditors 92,88,624
Tax 2,97,927
Provision 12,00,000

Current Assets
Cash 34,244
Bank 51,74,124
Debtors 61,04,540
Current liabilities
Tax 182
Provision 10,00,000


Current Assets
Cash 44,733
Bank 1,15,85,033
Debtors 65,78,000
Current liabilities
Tax 1366
Provision 10.00,000

(03-04) (04-05)
Current Assets
Cash 70,941 68,903
Bank 1,01,29,880 2,41,75,972
Debtors 27,19,803 1,24,56,152
Receivables 30,68,347 28,53,527
Closing stocks 6,96,73,288 4,83,08,375
Loans and advances 1,23,577 11,29,216
Other Assets 22,66,506 14,94,158
Total current assets 8,80,52,342 9,04,86,303
Current liabilities
Creditors 1,77,75,103 92,88,624
Tax 2,94,852 2,97,927
Provision 12,00,000 12,00,000
Total current liabilities 1,92,69,955 1,07,86,551

Working capital 6,87,82,387 7,96,99,752
Increase in working capital 1,09,17,365
Statement showing Changes in working capital

(04-05) (05-06)
Current Assets
Cash 68,903 34,244
Bank 2,41,75,972 51,74,124
Debtors 1,24,56,152 61,04,540
Receivables 28,53,527 28,57,527
Closing stocks 4,83,08,375 4,11,43,901
Loans and advances 11,29,216 6,05,385
Other Assets 14,94,158 15,50,828
Current liabilities
Creditors 92,88,624 1,53,53,299
Tax 2,97,927 182
Provision 12,00,000 10,00,000

Working capital 7,96,99,752 4,11,17,068
Decrease in working capital 3,85,82,684

(05-06) (06-07)
Current Assets
Cash 34,244 44,733
Bank 51,74,124 1,15,85,033
Debtors 61,04,540 65,78,000
Receivables 28,57,527 28,57,527
Closing stocks 4,11,43,901 3,72,97,944
34,84,000
14,60,000
Current liabilities
Creditors 1,53,53,299 2,13,72,930
Tax 182 1366
Provision 10,00,000 10.00,000
Working capital 4,11,17,068 4,09,32,941
Decrease in working capital 1,84,127
Working capital ratio
Ratio Analysis and Interpretation
Sales
I. Net Working Capital turnover ratio = Workingcap ital
23,79,61,388
(2003-04) = 6,87,82,382 =3.45
25,31,62,924
(2004-05) = 7,96,99,752 =3.17
18,94,13,902
(2005-06)= 4,11,17,068 =4.60
19,30,70,239
(2006-07) = 4,47,78,898 =4.31
Particular 2003-04 2004-5 2005-06 2006-07
Sales 23,79,61,388 25,31,62,924 18,94,13,902 19,30,70,239
Net working capital 6,87,82,382 7,96,99,752 4,11,17,068 4,47,78,898
Ratio 3.45 3.17 4.60 4.31
Net working capital turnover ratio
This ratio is computed by dividing sales by working capital. This ratio helps to
measure the efficiency of the utilization of net working capital. It signifies that for an
amount of sales, a relative amount of working capital is needed. If any increase in sales is
contemplated, working capital should be adequate and thus, this ratio helps management to
maintain the adequate level of working capital.
From the financial year 2003-04 to financial year 2005-06 the ratio is showing
increase in trend which means that they utilized their working capital for making sales
In the financial year 2006-07 the ratio is showing a slight decrease from the
financial year 2005-06. The ratio of 0.29 has been decreased. So the efficiency of
utilization of working capital is coming down.
Sales
Inventory Turnover Ratio = Inventory
23,79,61,388
(2003-04) = 6,96,73,288 =3.41
25,31,62,924
(2004-05) = 4,83,08,375 =5.24
18,94,13,902
(2005-06)= 4,11,43,901 =4.60
19,30,70,239
(2006-07) = 3,72,97,944 =5.17
Particular 2003-04 2004-5 2005-06 2006-07
Sales 23,79,61,388 25,31,62,924 18,94,13,902 19,30,70,239
Inventory 6,96,73,288 4,83,08,375 4,11,43,901 3,72,97,944
Ratio 3.41 5.24 4.60 5.17
Inventory Turnover ratio
In case of the inventory turnover ratio the higher the ratio the more efficiently the
inventory is said to be managed and vice versa.
By looking at inventory turnover ratio it is increasing yearly that is in year 2003-

04 it was 3.41 and the next three years ratio are 5.24 , 4.60 and 5.17 that are obtained for
the financial year 2004-05, 2005-06 and 2006-07 respectively. A substantial increase is
observed and goes on to show a healthy ratio.
Sales
Current Assets Turnover Ratio =
CurrentAss ets
23,79,61,388
(2003-04) = 8,80,52,342 =2-70
25,31,62,924
(2004-05) = 9,04,86,303 =2.79
18,94,13,902
(2005-06)= 5,74,70,549 =3.30
19,30,70,239
(2006-07) = 6,33,07,237 =3.05
Particular 2003-04 2004-5 2005-06 2006-07
Sales 23,79,61,388 25,31,62,924 18,94,13,902 19,30,70,239
Current assts 8,80,52,342 9,04,86,303 5,74,70,549 6,33,07,237
Ratio 2.70 2.79 3.30 3.05
Current Assets Turnover Ratio
By and large this ratio indicates the efficiency and effectiveness with which current
assets are turned into sales. The higher turnover rate gives the picture of an efficient ratio
indicating reduced blockage of funds in current assets.
In case, financial year 2003-04, 2004-05, 2005-06 and 2006-07 the ratios were
found to be 2.70, 2.79, 3.30 and 3.05 respectively. A slight decrease has been found in the
ratio of the comparative years. In previous year it was found that a slight decrease in ratio
compared to 2005-06. Hence the current assets are utilized efficiently and effectively by the
mill.
Currentass ets, loans & advances

Current Ratio= Currentlia bilities & provisions
8,80,52,342
(2003-04) = 1,92,69,955 =4.57
9,04,86,303
(2004-05) = 1,07,86,551 =8.40
5,74,70,549
(2005-06)= 1,63,53,481 =3.51
6,33,07,237
(2006-07) = 2,23,74,296 =2.83
Particular 2003-04 2004-5 2005-06 2006-07
Current assts 8,80,52,342 9,04,86,303 5,74,70,549 6,33,07,237

Current liability 1,92,69,955 1,07,86,551 1,63,53,481 2,23,74,296
Ratio 4.57 8.40 3.51 2.83
Current Ratio
In case of current ratio, a ratio of 2:1 is considered as an ideal one. In this case the
current ratio for the financial year 2003-04, 2004-05, 2005-06 and 2006-07 are 4.57, 8.40,
3.51 and 2.30 respectively.
It implies that in 2003-04 for every one rupee of current liabilities, current asset of
Rs 4.57 is available. And for year 2004-05, for every one rupee of current liabilities,
current assets worth Rs 8.40 are available and so on. The standard of 2:1 is met for the four
year in consideration. So it can meet its current liabilities through its current assets
Currentassets, loansandadvances  Inventories

ii) Quick ratio = Currentltliabilities & provisions  Bankoverdraft
1,83,79,054
(2003-04) = 1,92,69,955 =0.95
4,21,77,928
(2004-05) = 1,07,86,551 =3.91
1,63,26,648
(2005-06)= 1,63,53,481 =1.
2,21,63,336
(2006-07) = 2,23,74,296 =1.
Particular 2003-04 2004-05 2005-06 2006-07
Quick asset 1,83,79,054 4,21,77,928 1,63,26,648 2,21,63,336
Ratio 0.5 3.91 1 1
Quick Ratio.
A quick ratio of 1:1 is usually considered as a standard, and represents a satisfactory

position. A low quick ratio may be an index of bed liquid position, but not always and vice
versa.
The ratio in the financial year 2003-04, 2004-05, 2005-06 and 2006-07 are 0.95,
3.91, 1 and 1 respectively.
Hence in this case it is found that the company meets the above the sets standards
with reference to quick ratio. But in the financial year 2003-04 the ratio was 0.95 which is
almost nearer to “1” so it doesn’t make much difference to the mill.
sales
Debtors Turnover Ratio =
Debtors
23,79,61,388
(2003-04) = 27,19,803
=87.5
25,31,62,924
(2004-05) = 1,24,56,152 =20.32
18,94,13,902
(2005-06)= =31.03
61.04.540
19,30,70,239
(2006-07) = 65,78,000 =29.35
Particular 2003-04 2004-5 2005-06 2006-07
Sales 23,79,61,388 25,31,62,924 18,94,13,902 19,30,70,239
Debtor 27,19,803 1,24,56,152 6,10,4540 65,78,000
Ratio 87.5 20.32 31.03 29.35
Debtor Turnover Ratio
Generally, the debtor turnover ratio is an indication of the performance of the

company in terms of recovery of the debt and hence in this purview a higher the ratio or
increase goes on to show a positive development.
Here, in the financial year 2003-04, 2004-05, 2005-06 and 2006-07 the ratio are
87.5, 20.32, 31.03 and 29.35 respectively.
In the financial year 2003-04 the ratio was 87.5, and slowly coming down by this
we can say that company is not doing well over the year. So company has to take some
serious action to increase this ratio
Debtors
Debtors collection Period (in days) = X 365
Sales
27,19,803
(2003-04) = 23,79,61,388 X 365 = 4 days
1,24,56,152
(2004-05) = 25,31,62,924 X 365 =18 days
61.04.540
(2005-06)= 18,94,13,902 X 365 =12 days
65,78,000
(2006-07) = 19,30,70,239 X 365 =12days
Particular 2003-04 2004-5 2005-06 2006-07
Debtor 27,19,803 1,24,56,152 6,10,4540 65,78,000
Sales 23,79,61,388 25,31,62,924 18,94,13,902 19,30,70,239
Days 4 18 12 12
Debtor Collection Period
The debtor collection period goes on to show how long it takes for a company to
recover the debt. And hence a decrease or lesser debtor collection period shows a better
performance on the part of company.
In the financial year2003-04, 2004-05, 2005-06 and 2006-07 the debtor collection
period is 4, 18, 12, and 12 days respectively.
It shows that the company needs to re-look and revamp in this area.
Creditors
Creditors payment Period (in days) = X 365
Purchases
84,14,684
(2003-04) = 19,34,29,524 X 365 = 16 days
92,88,624
(2004-05) = 16,33,13,613 X 365 =21 days
76,85,069
(2005-06)= 11,49,61,812 X 365 = 24 days
2,13,72,930
(2006-07) = 11,01,57,194 X 365 =71 days
Particular 2003-04 2004-5 2005-06 2006-07
Debtor 84,14,684 92,88,624 76,85,069 2,13,72,930
Sales 19,34,29,524 16,33,13,613 11,49,61,812 11,01,57,194
Days 16 21 24 71
Creditor Payment Period
The creditor payment period indicates how long the company or the firm has taken
to repay the creditor; a shorter creditor s payment period indicates better paying power and
performance on the part of the company.
In the financial year2003-04, 2004-05, 2005-06 and 2006-07 the creditor payment
period is 16, 21, 24 days and 71 days. So by looking at this the payment policy of mill is
not good, so mill has to pay to its creditors on time.
Cash Ratio
Cash & Bank

Cash Ratio=
Currentlia bilities
1,02,00,821
2003-04) = 1,92,69,955 =0.529
2,42,44,875
(2004-05) = 1,07,86,551 =2.24
52,08,368
(2005-06)= 1,63,53,481 =0.31
1,16,29,766
(2006-07) = 2,23,74,296 =0.519
Particular 2003-04 2004-5 2005-06 2006-07
Current assts 1,02,00,821 2,42,44,875 52,08,368 1,16,29,766
Ratio 0.529 2.24 0.31 0.519
Cash Ratio:
The standard of 0.5:1 is considered as norms for calculating the cash ratio. This
ratio also indicates liquidity position and company and firms commitment to meet its short
-term liabilities.
The mill is having absolute current asset are sufficient to meet is day to day
requirement. The mill has good cash ratio i.e. in the financial year 2003-04 and financial
year 2004-05 the ratio were 0.529 and 2.24 respectively which satisfies the set norms. In
the financial year 2005-06 the ratio came down to 0.31 which is not good for mill. And in
the year 2006-07 the ratio again increased to 0.519 which shows that mill has made
improvement
Findings:
1) The cash of the mill is near to 0.5, so it has to look after this so that it won’t
come below the set norms.
2) Working capital turnover ratio of the mill is coming down. This means that
mill’s efficiency of utilising its working capital is coming down.
3) It was found that the current ratio of mill is more than the set norms, which
is more than “2”. It means that mill has utilised its current assets efficiently
and effectively.
4) Mills debtor turnover ratio is decreasing which signifies that mill is not
collecting its debt properly
5) The inventory turnover ratio is increasing. It means that the inventory is

moving quicker and faster.
SUGGESTIONS:-
1) Try to gain more orders from the outside countries by exporting required quality of
product.
2) The current ratio of BCSM is quite healthy and we can say that it is a sound
concern as its liquidity or short term solvency is satisfactory.
3) Generally a quick ratio of 1:1 is considered ideal and represents a satisfactory
position. Here it shows that BCSM has maintained 1:1 ratio. It can easily handle or
meet its liabilities without any delay.
4) Inventory turnover ratio of BCSM is quite satisfactory because in the financial year
2005-06 and 2006-07 the inventory turnover is 4. 60 and 5.17
5) If too long period is taken to pay creditors, the credit rating of the company suffers,
thereby making it more difficult to obtain suppliers in the future. But the company’s
creditor payment period is more. In the financial year 2005-06 it is24 days and in
year 2006-07 its 71 days. So it has to pay its creditor in time to maintain its good
will
6) Company has to pay to their suppliers on time.
7) Sales of the mill are coming down, so it has to increase its sales by using
promotional activities and can invest more in working capital.
Conclusion
Lastly I conclude that this mill has good opportunity to expand its business
because there are no competitors. BCSM is the only player in Bagalkot district. Initially
there were three mills in Bagalkot district and both of the mills have closed down, so it has
great opportunity to develop.
1) The company should recruit well trained persons.
2) Reduced blockage of fund
3) Companies’ inventory turnover ratio is increasing; it means that company has

managed its inventory properly.
4) For growth & expansion of the market promotional scheme must be adopted.
5) Staff & Employee is to be trained in technical course / refresher course more as

the industry is technical oriented.
6) Modern technology should be adopted.
7) The company can try to gain more and more orders to improve financial
position.
8) Training program should be organised more in numbers.
BIBLIOGRAPHY
ANNUAL GENERAL REPORT OF BCSM LTD BANHATTI
FINANCIAL MANAGEMENT BY: RAVI. M. KISHORE
JOURNAL & MAGAZINES OF SPNNING MILL

A Project Report On WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

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“WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING

MILL LTD, BANHATTI”

The study was conducted in the prestigious organization, which is basically

METHODOLOGY OF THE STUDY

SCOPE OF THE STUDY

o It helps in knowing the real organisational environment.

o It helps to know how they handle or manage the finance.

o Training helps the individual to have brief idea of an organisation.

LIMITATIONS OF THE STUDY

o The study will be restricted only to the workers of the company.

o The study was based on annual report and balance sheet.

OBJECTIVES OF THE STUDY

 To know the working capital ratios of the mill

 To know about wage and salary administration.

 To find out debtor collection period and creditor payment period

 To know the changes in working capital of the mill.

 To know the current obligation of the mill

Sl. No. PARTICULARS Page No

4 KEY FUNCTIONAL AREAS

5 WORKING CAPITAL MANAGEMENT

6 WORKING CAPITAL RATIO

o To improve the economic condition of the members in relation to weaving,

o As the main objective of the Mill is to provide labour welfare facilities so it

o To help the cotton growers to raise their standard of living.

Address of the organisation: Banhatti cooperative spinning mill ltd, BANAHATTI,

Basavanagar, Taluk Jamkhandi, district – Bagalkot.

Name of the chairman: Shri G.D. Bhadrannawar.

Name of managing director: Shri V.B. Kamlapur.

Management control: Board of the director nominated by the government of

Constitute: Wholly owned by the board of directors

Process know how: This mill is a pioneer in the manufacturing of various

Fax: 08353- 230316

Phone: 08353-230013, 230362, 230237

Karnataka government for best performance in a co-operative sector spinning mill

Karnataka government for best performance in a co-operative sector spinning mill

1) Kg Cone 2) Baby Cone

There are different types of yarn,

1. Carded Yarn --------------- K

2. Combed Yarn --------------- C

3. Carded Hosiery --------------- KHY

4. Combed Hosiery --------------- CHY

5. High twist Yarn ---------------- HT

6. Export Yarn ---------------- EXP

7. Doubled Yarn ---------------- 2/

8. Open end Yarn ---------------- OE.

DEPARTMENTS OF THE ORGANISATION

 Human Resource Department

Proper buying of material, merchandise and procurement of material at the right

While considering Material Department, in this mill material department is held by

 Purchasing of raw material

It is the responsibility of the material department to ensure the purchasing of

Functions of Store Department

 Receipt of goods in to store department

 Production and prevention of material

 Issue of material to required department

 Maintain proper record

 Checking the purchase order in respect of quality of material received

Stores department at BCSM

 Raw material stores

 Finished goods stores

 Packing material stores

 Damages goods stores

They maintain different method to control the raw material