Study On Working Capital Management

A STUDY ON WORKING CAPITAL MANAGEMENT OF KSE LIMITED
1.1 INTRODUCTION TO THE TOPIC

Capital is the money or wealth needed to produce goods
and services. In the most basic terms, it is called money. Capital is a large
sum of money which a person used to start a business. Capital required for a
business can be classified under two main categories, fixed capital and
working capital. Every business needs funds for two purposes-for its
establishment and to carry out its day-to-day operations. Long term funds
are required to create production facilities through purchase of fixed assets
such as plant and machinery, land and building, furniture, etc. Investment in
these assets represent that part of firm’s capital which is blocked on a
permanent or fixed basis and is called fixed capital.
Funds are also needed for short term purposes for the
purchase of raw materials, payment of wages and other day-to-day expenses,
etc. These funds are known as working capital. In simple words, working
capital refers to that part of the firm’s capital which is required for financing
short term or current assets such as cash, marketable securities, debtors and
inventories. The working capital is also known as Revolving or Circulating
capital or short term capital.
DEFINITION OF WORKING CAPITAL
According to Shubin, “Working capital is the amount of funds

necessary to cover the cost of operating the enterprise.”
According to Gere Stenberg, “Circulating capital means current

assets of a company that are changed in the ordinary course of business from
one form to another, as for example, from cash to inventories, inventories to
receivables, receivables into cash.”
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DEPARTMENT OF MANAGEMENT STUDIES MES COLLEGE ERUMELY
CONCEPT OF WORKING CAPITAL
There are two concepts of working capital:
(A) Balance sheet concept

(B) Operating Cycle or Circular Flow Concept
(A). Balance sheet concept
There are two interpretations of working capital under the balance

sheet concept:
(1). Gross Working Capital - The Gross Working Capital is the

capital invested in total current assets of the enterprise.
(2). Net Working Capital - Net Working Capital is the excess of

current assets over current liabilities.
Net Working Capital =Current Assets –Current Liabilities. Net Working

Capital may be positive or negative.
(B). Operating Cycle or Circular Flow Concept
The circular flow concept of working capital is based upon working

capital cycle of a firm. The cycle starts with the purchase of raw material
and other resources and ends with the realization of cash from the sale of
finished goods.
CLASSIFICATION OF WORKING CAPITAL
Working capital may be classified in two ways;
(1). On the basis of concept
(2). On the basis of time
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(1). On the Basis of Concept
On the basis of concept, working capital is classified as

Gross Working Capital and Net Working Capital.
 Gross Working Capital - The Gross Working Capital is the capital

invested in total current assets of the enterprise.
 Net Working Capital - Net Working Capital is the excess of current

assets over current liabilities.
(2). On the basis of time
On the basis of time, working capital is classified as Permanent or

Fixed working Capital and Temporary or Variable Working Capital
 Permanent or Fixed working Capital

Permanent or fixed working capital is the minimum amount which
is required to ensure effective utilization of fixed facilities and for
maintaining the circulation of current assets. Permanent working capital can
further be classified as;
 Regular working capital
 Reserve working capital
 Temporary or Variable Working Capital
It is the amount of working capital which is required to meet the
seasonal demands and some special emergencies. Variable working capital
can be further classified as;
 Seasonal working capital
 Special working capital
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IMPORTANCE OF ADEQUATE WORKING CAPITAL
Working capital is the life blood and nerve Centre of a business.

Working capital is very essential to maintain the smooth running of a
business. No business can survive without an adequate amount of working
capital. The main advantages are as follows;
 Solvency of business
Adequate working capital helps in maintaining solvency of the
business by providing uninterrupted flow of production.
 Goodwill
Sufficient working capital enables a business concern to make
prompt payments and hence helps in creating and maintaining goodwill.
 Easy loans
A concern having adequate working capital, high solvency and good
credit standing can arrange loans from banks and others on easy and
favorable terms.
 Cash discounts
Adequate working capital also enables a concern to avail cash
discounts on the purchases and hence it reduces costs.
 Regular supply of raw materials
Sufficient working capital ensures regular supply of raw materials
and continuous production.
 Regular payment of salaries, wages and other day-to –day
commitments
A company which has ample working capital can make regular
payment of salaries, wages and other day to day commitments which raises
the morale of its employees, increase their efficiency, reduces wastages
and costs and enhances production and profits.
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 Exploitation of favorable market conditions

Only concerns with adequate working capital can exploit
favorable market conditions such as purchasing its requirements in bulk
when the prices are lower and by holding its inventories for higher prices.
 Ability to face crisis
Adequate working capital enables a concern to face business crisis
in emergencies such as depression because during such periods, generally,
there is much pressure on working capital.
 Quick and regular return on investments
Sufficiency of working capital enables a concern to pay quick and
regular dividends to its investors.
 High morale
Adequacy of working capital creates an environment of security,
confidence, high morale and creates overall efficiency in a business.
FACTORS INFLUENCING THE WORKING CAPITAL

REQUIREMENTS
The working capital requirements of a firm depends on a large
number of factors such as nature and size of business, the character of their
operations, the length of production cycles, the rate of stock turnover and the
state of economic situation. The following are the important factors
generally influencing the working capital requirements;
(1). Nature or Character of Business

Public utility undertakings like electricity, water supply and
railways need very limited working capital because they offer cash sales
only and supply services, not products, and as such no funds are tied up in
inventories and receivables. On the other hand, trading and financial firms
require less investment in fixed assets but have to invest large amounts in
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current assets such as inventories, receivables, and cash, as such they need
large amount of working capital. The manufacturing undertakings require
sizable working capital between these two extremes.
(2). Size of business or scale of operations

Greater the size of a business unit, generally larger will be the
requirements of working capital. However, in some cases even a smaller
concern may need more working capital due to high overhead charges,
inefficient use of available sources and other economic disadvantages of
small size.
(3). Production policy

If the production policy is to keep production steady by
accumulating inventories it will require higher working capital and vice
versa.
(4). Manufacturing process or Length of production cycle

In manufacturing concerns, the requirements of working capital
increase in direct proportion to length of manufacturing process. Longer the
process period of manufacture, larger is the amount of working capital
required.
(5). Seasonal variations

Generally, during the busy season, a firm requires larger
working capital than in the slack season.
(6). Working capital cycle
In manufacturing concern, the working capital cycle starts with

the purchase of raw material and ends with the realization of cash from the
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sale of finished products. Longer the period the cycle, larger is the working
capital.
(7). Rate of stock turn over

A firm having a high rate of stock turn over will need lower
amount of working capital as compared to a firm having a low rate of stock
turn over.
(8). Credit policy

A concern that purchase its requirements on credit and sells its
products or services on cash requires lesser amount of working capital. On
the other hand, a concern buying its requirements for cash and allowing
credit to its customers, shall need larger amount of working capital.
(9). Business cycles

In the period of boom that is when the business is prosperous,
there is a need for larger in working capital due to increase in sales, rise in
prices, optimistic expansion of business.
(10). Rate of growth of business

The working capital requirements of a concern increase with the
growth and expansion of its business activities.
(11). Earning capacity and Dividend policy

Firms with high earning capacity may generate cash profits from
operations and contribute to their working capital. A firm that maintains a
steady high rate of cash dividend irrespective of its generation of profits
needs more working capital than the firm that retains larger part of its profits
and does not pay so high rate of cash dividend.
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WORKING CAPITAL MANAGEMENT
Working capital, in general practice, refers to the excess of

current assets over current liabilities. Working capital management is a form
of investment decision. Short-term investment decision is referred to as
working capital management. Working capital management refers to the
administration of all aspects of current assets (namely cash, marketable
securities, debtors and stock) and current liabilities.
The basic goal of working capital management is to manage

the current assets and current liabilities of a firm in such a way that a
satisfactory level of working capital is maintained that is it is neither
inadequate nor excessive. Inadequacy of working capital may lead the firm
to insolvency and excessive working capital implies idle funds which earn
no profits for the business.
A sound short-term investment decision or working capital

management policy is one which ensures higher profitability, proper
liquidity and sound structural health of the organization. Working capital
management is three dimensional in nature;
 Dimension 1 is concerned with the formulation of policies with regard

to profitability, risk and liquidity.
 Dimension 2 is concerned with the decisions about the composition and
level of current assets.
 Dimension 3 is concerned with the decisions about the composition and
level of current liabilities.
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1.2 INDUSTRY PROFILE

Growth in milk sector has occurred mainly through co-operative
efforts. The milk collection centers started through co-operative effort and
collected milk from villagers in quantities as small as liter and gradually
started to provide other services to farmers, including education, artificial
insemination veterinary health support and feeding. Small farmers became
prosperous, loan facilities were made available through banks, and member
farmers started to share the profits from co-operatives. Co-operative society
also set up their own computerized feed plant. They began to own modern
computerized as well equipped milk processing plants from which they
produce and market pasteurized milk, butter oil, chocolate, ice cream from
milk, sweets, which are very popular with Indian consumers. Today the feed
production capacity of the co-operative society is about 0.7 million tons per
year.
The solvent industry has achieved a phenomenal progress and at present

there are 520 units having overall oil cake or oil seed processing capacity of
more than 25.6 million tons per year, which included rice bran processing
capacity of more than 9.9 million per year. The solvent extraction plays the
important role in the oil economy. Solvent extraction in India was started in
1945. It had to struggle for more than 20 years to establish it.
Coconut Oil Miller’s Co-operative Society

Lion share of copra went to mills in Bombay and they were able to
generate good profits. To overcome the situation, a co-operative society
formed by name Coconut Oil Miller’s Co-operative Society and it was
decided that this society would acts as an agent of state trading corporation
for distribution of copra. By seeing the performance of the Bombay group an
investigation department was assigned to investigate it.
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CATTLE FEED INDUSTRY
From the beginning, KSE Limited marketed the buy products obtained
from its solvent extraction division in the brand name of Jersey Copra Cake.
Most of the progress in the cattle feed sector has come about in the past 30
years only. There are only two cattle feed units in the country especially in
Kerala. The cattle feed industry of the state has been utilizing the indigenous
raw material that is coconut cake, which is mainly used as cattle feed.
Coconut cake contains four to five per cent oil is generally used for
industrial purpose and de oiled cakes is used to make mixed cattle feed.
In Kerala the rotary cake was used as a cattle feed and actually this
excessive oil on cakes reduced the keeping quality of the cake and also upset
the digestive system of the cattle. In foreign countries, the cattle feed is only
with de-oiled cakes and according to the dairy experts, the milk and fact
contend of milk depends solely on the protein contend of the feed. All these
factors stress the importance of having a few cattle feed industry in the state.
Thus in 1976, KSE Ltd entered the cattle feed industry by setting up the
new plant for manufacturing ready mixed cattle feed. During the last 3
decades KSE has been acting as a leader in ready mixed cattle feed industry
of the country. Today, KSE Ltd commands the resources, manufacture a
range of livestock feed in high volumes, driven by the commitment to high
standards of quality.
THE FUTURE OF INDIAN FEED INDUSTRY

At the beginning of the twenty-first century, India has a
population of 1 billion people. Although the annual growth rate has slowed
from 2 to 1.8 percent, the base is so broad that changes in population
dynamics are not perceptible. The population may stabilize by sometime
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between 2030 and 2040 if all sections of society support family planning
whole heartedly. The purchasing power of the middle class is growing and
food habits are also changing.
The Indian economy is growing at the rate of 6 to 8 percent

per annum. The livestock industry in India is the second largest contributor
to Gross Domestic Product (GDP), after agriculture, and accounts for 9
percent of the total. Consumption is likely to increase as follows: per capita
milk from 240 to 450 gm per year, per capita eggs from 40 to 100 per year,
and per capita broiler meat from 1000 to 2000 gm per year.
A major change is occurring in India on the economic front.

The country has adopted a model that lies midway between liberal and
public sector production, but growth has been affected by the poor
performance of most of the public sector units, rising government costs and
fiscal deficit, and the economy has suffered. A process of liberalization was
set in motion by the government and has been implemented for the last eight
to ten years. This has caused India to open up and invite investment from
multinationals, liberalize imports, reduce government expenditure and
remove public sector businesses. It also means that the days of
nationalization, unnecessary government controls and restrictions will soon
be over thanks to progress in the country’s economy.
India has entered into an agreement with its trade partners

under the World Trade Organization (WTO). The changes brought about by
the liberalization process will be slow but certain. The government is
opening up imports in a phased manner, and it is expected that this process
will be completed by April 2003. In the meantime, about 930 items,
including agricultural products, will be open for import dressed chicken,
milk and milk products.
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Various livestock industry associations have taken issue

with such imports in an attempt to protect their members. If the livestock
industry is affected, the feed industry will also be affected. The government
of India has raised the tariff on all poultry and poultry products from 35
percent to the WTO boundary level of 100 percent. It therefore appears that
there will be a level playing field.
In view of the expected rise in per capita consumption of

chicken meat, eggs and milk, livestock production and productivity will
grow. The dairy industry, which is co-operative based, is growing with the
increased capacities of milk processing units. The population of cross-bred
cattle and buffaloes is also growing. Milk is very popular in India. The
poultry industry is developing towards vertical integration and a few
multinational companies have already entered the Indian poultry business.
Although the live bird market currently accounts for about 90 percent of the
total market, it is expected that the consumption of dressed chicken will
grow in the next five years, from the existing 10 percent to 25 percent or
more. This would mean establishing very hygienic and scientific processing
units. Cold chains, branded chicken, chicken cuts, etc. will be introduced
and, depending on the success and consistent quality, consumer preference
for dressed meat will grow.
The next decade will see significant changes in

restructuring, merges, acquisitions, amalgamations, joint ventures,
diversification, integration and efficient service chains, e-commerce and use
of the latest information technology in global tenders, trading, export or
import and other commercial activities. At the root of all these developments
will be the scientific development of feed manufacturing technology. The
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Indian feed industry will increasingly use bio-technology, more scientific

formulations,
new molecules and natural and herbal products to improve animal

productivity. Indian agriculture will also use bio-technology and genetically
modified organisms (GMOs) to support the feed industry, which is entering
a very exciting phase of growth for the next decade.
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1.3 COMPANY PROFILE

KSE LIMITED
Kerala Solvent Extraction Limited now known as KSE
Limited is an India-based company, that is engaged in the manufacture of
Cattle feed, Oil Cake processing (extraction of oil from copra cake by
solvent extraction process and refining the same to edible grade), and Dairy
products in Irinjalakkuda, Thrissur District, state of Kerala, India. . The
Company was incorporated on 25 September 1963 and began commercial
operations in April, 1972 by setting up Kerala’s first solvent extraction plant
to extract coconut oil from coconut oil cakes. It was established in 1963 by
a handful coconut millers in and around Irinjalakkuda with a vision to
overcome the crisis of the coconut oil industry. Initially started as a solvent
extraction plant, the company now produces 750 to 850 MTs of coconut
cake a day with four cattle feed production units and two solvent extraction
plants. Subsequently, in 1976 the company set up a plant to manufacture
ready mixed cattle feed. In the last three decades, KSE has emerged as a
leader in solvent extraction from coconut oil cakes and also the largest cattle
feed producer and supplier in Kerala. In 2000, KSE entered the business of
procuring, processing and marketing milk and milk products. In 2002, KSE
started producing and marketing ice creams under brand name 'Vesta'. The
Company is also engaged in the extraction of oil from copra cake by solvent
extraction process and refining the same to edible grade and in dairying,
including ice cream. The company has diversified into the area of dairying
by establishing two dairy plants for the production of pasteurized milk and
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milk products. It has obtained ISO recognition for its commitment to quality
and professionalism.
The Company operates through three segments, which include

Animal Feed Division, Oil Cake Processing Division and Dairy Division. Its
Dairy Division consists of milk and milk products, including ice cream. It
offers ice cream under the brand name, VESTA. The Company is engaged in
the field of milk procurement, processing and marketing of liquid milk and
milk products. Its milk products include KS Milk and KS Curd. Its cattle
feed products include K.S Supreme pellet, K.S Delux plus pellet and K.S S
Premium pellet. The Company also offers products, including K.S. Milk and
KS Ghee. The Company's manufacturing units include Swaminathapuram,
Vedagiri, Palakkad, Koratty, Konikkara and Thalayuthu.
ORIGIN OF THE ORGANISATION

It was in 1963 that Kerala Solvent Extractions Limited, now known as
KSE Limited, entered the solvent extraction industry, setting up the very
first solvent extraction plant in Kerala. The solvent extraction plant went on
stream in 1972 and in 1967, a new plant was set up to manufacture ready
mixed cattle feed. KSE Limited is a public limited company with around
4500 shareholders.
The last three decades have seen KSE emerging as a leader in solvent
extraction and ready mixed cattle feed in the country. Today KSE
commands the resources, expertise and infrastructure arrange of livestock
feed in high volumes, coconut oil from coconut cake and refined edible oil.
KSE has also entered in the field of milk procurement and processing.
KS Milk, KS Ghee and Vesta Ice Cream have become popular in many
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districts in Kerala. Driven by a commitment to high standards of quality,

KSE has not only won customer’s confidence but also national recognition
through several awards and accolades. With modern manufacturing facilities
spread over three states, KSE caters vast beet stretching across southern
India and enjoys a significant presence in exports too. Since the early days,
KSE has endeavored to supply products to customers through an extensive
network of dealers and retailers which form a dedicated force behind the
success of KSE. It is a matter of pride that KSE is a house hold today.
With a strong commitment to customers and product quality and

being cost competitive. KSE stands poised to meet new challenges. The
copra crushing industry has been in existence in Kerala for decades and has
been the most important basic industry in state utilizing the indigenous raw
materials viz., coconut. During the 60’s the oil millers in Kerala used
wooden village Ghani’s operated by bullocks which left about 80 per cent
oil in the cake. Later iron rotaries driven by electricity were used but they
left about 12 to 13 per cent oil in the cake.
VISION OF KSE LTD

The company shall endeavor to maintain leadership through quality
products, explore new avenues in product development and marketing,
create a stronger bond between the management, work force, dealers and
customers, contribute to social development and rural upliftment, and
constantly strive for excellence in all spheres of our activities.
MISSION
To provide maximum benefit to the dealers and to give good quality
products to the customers at a fair profit. To increase the turnover and to
widen their markets to all the zones etc.
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OBJECTIVES
The Memorandum of Association of the company list out altogether 38
broader objectives. Out of these, the important objectives for which the
company is established as follows:
1. To produce, manufacture, extract purchase refined, prepare, import,

export, sell and generally to deal in oil from seeds, oil cakes and other oil
bearing materials. To carry on business of the refining and hydrogenation of
oil and the manufacturing of by-products share from and of trades connected
there with.
2. To acquire correct, construct, establish, operate and maintain oil mills,
extraction plants, ghee plants, workshops other works.
3. To purchase for the purpose of the business of the company, oil
neutralizing, in washing, tying, bleaching, filtration and hydrogen plant,
boilers, tanks, engines, electric motor shafting tin plates punch machines and
other machines.
4. To plant, cultivate and purchase all kinds of food stuffs, oil seeds,
vegetable and other produce of land and to sell and deal in them.
5. To make, manufacture and prepare mixtures and fertilizers to install
and run bone mils and to buy, sell or trade in trade in any fertilizers and
manures of kind.
BUSINESS SEGMENTS
The company operates in three business segments:
(1). Cattle Feed Division
(2). Oil Cake Processing Division and
(3). Dairy Division comprising milk and milk products, including ice cream.
(1). Cattle Feed
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KSE’s cattle feed division is engaged in the production and marketing

of cattle feed. KSE’s cattle feed is largely made up of de-oiled rice bran
cake, maize and de-oiled coconut cake. Some quantities of cottonseeds are
added to make a balanced feed mixture. The company produces seven types
of cattle feed, three in mash form and four in pellet form. Today, KSE Ltd is
predominantly a cattle feed producer with about 75% of its revenues in

FY2014-15 coming from the sales of cattle feed. It has five modern cattle-
feed factories and reported a sales volume of 440,000 metric tons in
FY2014-15.
(2). Oil Cake Processing
KSE’s oil cake processing division extracts coconut oil from

coconut oil cakes by using solvent extraction technology. The company
operates two solvent extraction plants with a total capacity to process 90,000
metric tons of coconut oil cake per annum. In the financial year 2014-2015,
the volume of cake processed was 68500 tons that contributed 21% to the
company’s total revenue.
(3). Dairy Division
KSE started operation of its dairy division on 22 January 2000. The idea of
diversification into dairy industry was the outcome of desire for forward
integration of the cattle feed business of KSE Ltd. The company market a
wide range of dairy products in the market, including toned milk, toned
homogenized milk, Ghee, Curd, Sambharam and Ice Cream (under brand
name 'Vesta'). Its main area of operation is Thrissur and also some parts of
Ernakulum and Malappuram.
PRODUCTS OF THE KSE LIMITED
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(A). Cattle Feed Products
 K.S Supreme Pellet
KS Supreme pellet is a bypass protein feed with high percentage

of protein and energy It has Crude protein of 20% and metabolisable energy
of 2450 kcal/kg feed BIS certified feed (IS 2052:2009) No Urea Added
Contains Probiotics, Organic minerals and Herbal supplements to improve

animal health and milk production. Recommended for high yielders It is
6mm pellet and available in 50 kg HDPE laminated bags and 70 kg gunny
bags. Should be given at the rate of 400 g per Liter Per Day Per Animal.
 K.S Delux Plus Pellet
KS Deluxe Plus has Crude protein of 18% and Metabolisable

energy of 2250 kcal/kg feed. No Urea Added Recommended for medium
yielding cows Should be given at the rate of 450 g per liter of milk
production and 1.5- 2 kg for body maintenance per day per animal. It is 8
mm pellet and available in 50 kg HDPE laminated bags as KS Deluxe plus
and in 70 kg gunny bag as KS Delux pellet.
 K.S Premium Pellet
KS Premium has Crude protein of 18% and Metabolisable energy

of 2250 kcal/kg feed. No Urea Added Enriched with Probiotics
recommended for medium yielding cows Should be given at the rate of 450
g per liter of milk production and 1.5- 2 kg for body maintenance per day
per animal. It is 8 mm pellet and available in 50 kg HDPE laminated bags.
(B). Milk Products
 KS Milk
 KS Curd
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(C). Ice Cream Products
Vesta ice cream is offered in a range of tasty flavors: Arabian Delite,

Black Current, Butter Scotch, Cassata, Choco bar, Chocolate, Coconut,
Cone, fig and Honey, Kofi, Mango, Orange, Pine Apple, Pasta Green, Sauce,
Spanish Delite, Strawberry, Sundae, Vanilla.
BUSINESS UNITS
The Company's manufacturing units include Swaminathapuram,
Vedagiri, Palakkad, Koratty, Konikkara and Thalayuthu.
(1). Swaminathapuram Unit

Sale of KS cattle feed in selected markets in Tamilnadu was
started as early as 1984. To enable the company to extend its products and
services to whole of Tamilnadu, a new production unit was set up at
swaminathapuram in Din Digul District of Tamilnadu. A solvent extraction
plant was started the very next year. Spread out on 22 acres of land on the
banks of river Amaravati, this Rs.3.5 crores plant works round the clock.
Keyes Forte is also manufactured at this unit. A MODEL Dairy farm with
high yielding animals is also maintained in the unit for conducting feeding
trials and other experiments.
(2). Vedagiri Unit

The third cattle feed plant of the company with a daily production
capacity of 240 MTs started operation at Vedagiri in Kottayam District, in
March 1996. This Rs.6 crores project, fully financed from internal resources,
was formally inaugurated on 17th August, 1996.
(3). Koratty Unit

Company acquired land from Kinfra Small Industrial Park,
Koratty, Trissur Dist. And installed 200 TPD Solvent Extraction plant and
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100 TPD Physical Refining Plant with a capital outlay of Rs 14 crores for
refining Vegetable oils. Solvent Extracted Coconut oil is refined in the plant
and made edible. Commissioned fractionation Plant in March 2009.
(4). Palakkad Unit

Palakkad feed factory was renovated and new machineries were
installed to produce Cattle feed. The products from this unit are marketed in
the Districts of Palakkad, Malappuram and part of Calicut.
(5). Konikkara Unit-Dairy Division

KSE Limited entered in the field of milk procurement, processing
and marketing of liquid milk and milk products in the year 2000. “K.S.
PAAL, K.S. GHEE, K.S. CURD and BUTTER MILK” have already
become popular in Trissur and Ernakulum, Malappuram and Alleppey
Districts. Ice cream under the brand name “VESTA’ was launched during
August, 2002 and have conquered the Kerala Market.
(5). Thalayuth Unit-Dairy Division
In the year 2000 procurement and processing of milk also started

in Thalayuthu Unit, near Palani. In 2008 Ice Cream production started in to
cater the growing demands in Tamil Nadu.
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1.4 SCOPE OF THE STUDY
The study was conducted to identify the working capital

management of the KSE Limited. The study intends to assess the adequacy
of the working capital of the company during the period of 1 st April 2013 to
31stMarch 2018 and also to identify the effect of working capital on the
changes of current assets and current liabilities.
The study gives the information about the working capital

position of the KSE Limited. This is helpful in completing the project
successfully.
The project work is useful to the company for improving their

efficiency by considering and adopting the suggestions contained in the
project report.
The project work is also useful to future research scholars as a

reference.
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1.5 OBJECTIVES OF STUDY

Primary Objective
To identify the Working Capital Management of the KSE Limited.
Secondary Objectives
 To assess the working capital position of the KSE Limited.

 To evaluate the Liquidity position of the KSE Limited.
 To identify the factors influencing working capital
 To determine the composition of current assets and current
liabilities
 To identify the working capital cycle of KSE Limited.
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2.1 RESEARCH METHODOLOGY

Research means search for knowledge. Research Methodology is a way
to solve the research problem systematically. Research Methodology
provides various steps that can be adopted by the researcher in studying his
or her research problems. Research methodology deals the objectives of a
research study, the type of hypothesis formulated, the type of data collected,
methods used for collecting data and analyzing the data etc.
2.2 RESEARCH DESIGN

According to F N Ker linger, “Research Design is the plan,
structure, and strategy, of investigation conceived so as to obtain answers to
research questions and to control variances.”
DESCRIPTIVE RESEARCH DESIGN
The research design adopted for this study is descriptive research

design. It is concerned with the detailed description of certain functional
variables and characteristics of a problem situation.
2.3 SOURCES OF DATA

The information required is collected through primary sources and
secondary sources.
Primary Data
Data collected first hand by the investigator as original data are called
primary data. In other words, Primary data are those which are collected for
the first time and are original in nature. Primary data has been obtained
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through personal discussions with managers and senior officials of the

organization.
Secondary Data
Data which are not originally collected but obtained from published or
unpublished sources are known as secondary data. Such data already
collected by someone for some purpose and are available for present study.
Secondary data is mainly used for this study and the five years’ data from
2013-2014 to 2017-2018 pertaining to the study was collected from the
company and the remaining from books, magazines, journals, websites etc.
This project is based on secondary data collected through annual reports of
the organization.
Project is based on;
(1). Annual report of KSE Limited, 2013-2014
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2.4 TOOOLS USED FOR ANALYSIS

The tools used for this study are as follows;
 Schedule of changes in working capital.

Statement of changes in working capital is prepared to show the
changes in the working capital between the two balance sheet. The rules
followed while preparing schedule are;
1. An increase in current assets increases working capital.
2. A decrease in current assets decreases working capital.
3. An increase in current liabilities decreases working capital.
4. A decrease in current liabilities increases working capital.
 Ratio Analysis
A ratio is a simple arithmetical expression of the relationship of one
number to another. Ratio analysis is a technique of analysis and
interpretation of financial statements. The steps involved in the ratio analysis
are;
1. Selection of relevant data from the financial statements.
2. Calculation of appropriate ratios.
3. Comparison of the calculated ratios with standards.
4. Interpretation of the ratios.
 Comparative Balance sheet
26
The comparative balance sheet analysis is the study of the trend of

the same items, group of items and computed items in two or more balance
sheets of the same business enterprise on different dates.
 Common-size balance sheet
A statement in which balance sheet items are expressed as the ratio of
each asset to total assets and the ratio of each liability is expressed as a ratio
of total liabilities is called common-size balance sheet.
 Working capital cycle

To identify the length of working capital cycle, some formulas are used;
RMCP= Average stock of raw material / Raw material consumption per
day.
WIPCP= Average stock of work-in-progress / Total cost of production per
day.
FGCP= Average stock of finished goods / Total cost of goods sold per day.
27
2.5 LIMITATIONS OF THE STUDY

 The study is restricted to a period of one month. The topic working
capital management itself a very vast topic. Due to time restraints, it was not
possible to study in depth in get knowledge.
 As the study is mainly based on secondary data, the probability of
the occurrence of the errors might have affected the analysis of study.
 Since the financial matters are sensitive in nature, the same could
not acquire easily.
 The study is restricted to only the five-year data.
28
Table:1
SCHEDULE OF CHANGES IN WORKING CAPITAL

FOR THE YEARS ENDING 31st MARCH
2014 AND 2015
Effect of working
2013-14 2014-15 capital
Particulars ₨ in ₨ in Increase Decreas
lakhs lakhs ₨ in e ₨ in
lakhs lakhs
CURRENT ASSETS:
Inventories 4969.9 6600.66 1630.76
Trade Receivables 16.99 28.71 11.72
Cash and Cash Equivalents 314.41 3777.75 3463.34
Short term Loans &
Advances 483.94 496.29 12.35
Other Current Assets 9.07 14.13 5.06
Total Current
5794.31 10917.54
Assets
CURRENT LIABILITIES:
Short term Borrowings 728.9 831.6 102.7
Trade Payables 865.64 1633.16 767.52
Other Current Liabilities 1475.54 2550.05 1074.51
Short-term Provisions 777.8 1023.6 245.8
Total Current Liabilities 3847.88 6038.41
Working Capital 1946.43 4879.13
29
Net Increase in Working

Capital 2932.7 2932.7
TOTAL 4879.13 4879.13 5123.23 5123.23
Inference:
The working capital is increased by 29,32,70,000. The rate of increase is
151%. Major portion of investment is made in inventories.
Table:2

2015 AND 2016
2014-15 2015-16 Effect of working

Particulars ₨ in ₨ in capital
lakh lakhs Increase Decrease
CURRENT ASSETS:
Inventories 6600.66 7299.72 699.06
Cash & Cash equivalents 3777.75 1043.97 2733.78
Short-term Loans & Advances 496.29 437.76 58.53
Total Current Assets 10917.54 8802.19
Short-term Borrowings 831.6 243.87 587.73
Trade Payables 1633.16 802.1 831.06
Net increase in working capital 197.68 197.68
TOTAL 5076.81 5076.81 3012.09 3012.09
30
INFERENCE:
 The current assets are decreased by 21,15,35,000 that is 19%.

Current liabilities are also decreased by 23,13,03,000 that is 38%.
 The working capital is increased by 1,97,68,000. But the rate of
increase is only 4%.
Table:3
2016 AND 2017
Effect of working
Particulars 2015-16 2016-17 capital
₨ in lakhs ₨ in lakhs Increase Decrease
₨ in lakhs ₨ in lakhs
CURRENT ASSETS:
Inventories 7299.72 7432 132.28
Short-term Loans & Advances 437.76 460.12 22.36
Current Investments 0 3500 3500
12553.6
Total Current Assets 8802.19 7
Trade Payables 802.1 751.39 50.71
Net increase in working capital 1261.02 1261.02
TOTAL 6337.83 6337.83 4463.64 4463.64
31
INFERENCE
The current assets are increased by 37,51,48,000 that is 43%. Current

liabilities are also increased by 24,90,46,000 that is 67%.
The working capital is increased by 12,61,02,000 that is 25%.
Table:4

2017 AND 2018
Effect of working
2016-17 2017-18 capital
Particulars ₨ in lakhs ₨ in lakhs Increase Decrease
₨ in
₨ in lakhs
lakhs
CURRENT ASSETS:
Inventories 7432 9051.89 1619.89
Financial Assets
Short-term Loans &
460.12 139.44 320.68
Advances
Current Investments 3500 8333.13 4833.13
Other financial Assets 0 16.73 16.73
Financial Liabilities
Trade Payables 751.39 1512.23 760.84
Other Financial Liabilities 0 1775.33 1775.33
Other current liabilities 2263.39 686.88 1576.51
Short term Provisions 179.2 0 179.2
Current Tax Liabilities 0 488.98 488.98
Net increase in working 5766.66 5766.66
32
capital
TOTAL 12104.49 12104.49 9552.51 9552.51
INFERENCE:
The current assets are increased by 74,76,12,000 that is 60%. Current

liabilities are also increased by 17,09,46,000 that is 28%.
The working capital is increased by 57,66,66,000 that is 91%.
Table:5
Components of current Assets
Current Assets 2013-14 2014-15 2015-16 2016-17 2017-18

₨ in lakhs ₨ in lakh ₨ in lakhs ₨ in lakhs ₨ in lakhs
Inventories 4969.9 6600.66 7299.72 7432 9051.89
Trade Receivables 16.99 28.71 8.92 10.83 17.2

Cash and Cash
314.41 3777.75 1043.97 1140.11 2073.76
Equivalents
Current Investments 0 0 0 3500 8333.13
Short term Loans &
483.94 496.29 437.76 460.12 156.17
Advances
Other Current Assets 9.07 14.13 11.82 10.61 397.64
10917.5 12553.6 20029.7

4 7 9
INFERENCE:
The current assets include inventories, trade receivables, cash and cash
equivalents, current investments, short-term loans and advances.
The current assets are increasing in the period of 2013-14 – 2014-15. But it
decreased in the year 2015-2016. Then it increases.
33
Graph:1
Components of Current Assets

9051.89
10000
8333.13
9000
7299.72
7432
8000
6600.66
7000
6000
4969.9
5000
3777.75
3500
4000
2073.76
3000
1140.11
1043.97
2000
496.29
483.94
460.12
437.76
397.64
314.41
156.17
1000
28.71
16.99
14.13
11.82
10.61
10.83
17.2
8.92
9.07
0
0
0
0
I nve ntor ie s Tr a de Ca sh a n d Ca sh Cu r r e n t Sh o r t te r m O th e r Cu r r e n t
Re c e iv a b le s Equiva le nts I nve stme nts Loans & A sse ts
Advances
34
Table:6
Components of current Liabilities
2014- 2015- 2016- 2017-

Current Liabilities 2013-14 15 16 17 18
₨ in lakhs ₨ in ₨ in ₨ in ₨ in
lakhs lakhs lakhs lakhs
Short term Borrowings 728.9 831.6 243.87 3021.86 3461.88
Trade Payables 865.64 1633.16 802.1 751.39 1512.23
Other Financial
- - - - 1775.33
Liabilities
Other Current
1475.54 2550.05 1839.97 2263.39 686.88
Liabilities
Short term Provisions 777.8 1023.6 839.44 179.2 488.98
Total Current Liabilities 3847.88 6038.41 3725.38 6215.84 7925.3
INFERENCE:
The current liabilities include short term borrowings, trade payables, short
term provisions etc.
The current liabilities are increased in the year 2014-15. But it reduces in the
year 2015-16. Then it increases in the last two years.
35
Graph:2
3461.88
4000
3021.86
3500
2550.05
3000
2263.39
2500
1839.97
1775.33
1633.16
1512.23
2000
1475.54
1023.6
1500
839.44
751.39
831.6
802.1
686.88
1000 865.64 777.8
488.98
728.9
243.87
179.2
500
0
2013- 14 2014- 15 2015- 16 2016- 17 2017- 18
Short term Borrowings Trade Payables

Other Financial Liabilities Other Current Liabilities
Short term Provisions
Components of Current Liabilities
36
Table:7
Size of working Capital
WORKING CAPITAL
SL NO YEAR
(₨ in lakhs)
1 2013-14 1946.43
2 2014-15 4879.13
3 2015-16 5076.81
4 2016-17 6337.83
5 2017-18 12104.49
INFERENCE:
The working capital increased yearly.
The average rate of increase of working capital is 67.75%.
37
14000
12104.49
12000
10000
8000
6337.83
6000 5076.81
4879.13
4000
1946.43
2000
0
2013-14 2014-15 2015-16 2016-17 2017-18
WORKING CAPITAL
Graph:3
SIZE OF WORKING CAPITAL
38
Table:8
Current Ratio
CURRENT CURRENT
CURRENT
YEAR ASSETS LIABILITIES
RATIO
(₨ in lakhs) (₨ in lakhs)
2013-14 5794.31 3847.88 1.51
2014-15 10917.54 6038.41 1.81
2015-16 8802.19 3725.38 2.36
2016-17 12553.67 6215.84 2.02
39
2017-18 20029.79 7925.3 2.53
INFERENCE:
 The current ratio of the company is not satisfactory in the years
2013-14 and 2014-15 (1.51 and 1.81). It is below the standard norm.
 The current ratio of the company is satisfactory in the years 2015-16,
2016-17 and 2017-18.
 Now the company is able to pay the current liabilities.
Graph:4
Current Ratio
40
2013-14; 1.51
2017-18; 2.53
2014-15; 1.81
2016-17; 2.02
2013-
14
2014-
2015-16; 2.36 15
2015-
16
2016-
17
Table:9
Quick Ratio
41
CURRENT
QUICK ASSETS QUICK
YEAR LIABILITIES
(₨ in lakhs) RATIO
(₨ in lakhs)
2013-14 824.41 3847.88 0.21
2014-15 4316.88 6038.41 0.715
2015-16 1502.47 3725.38 0.403
2016-17 5121.67 6215.84 0.824
2017-18 10977.9 7925.3 1.385
INFERENCE:
 The quick or liquid ratio is below the standard form in the years
(2013-14, 2014-15,2015-16, 2016-17 and 2017-18). It means that
the firm cannot have adequate liquid assets to pay of its current
liabilities immediately.
 In the year 2017-18 the liquid ratio is satisfactory. It is above than
the standard form of 1:1.
Graph:5
QUICK RATIO
42
1.6
1.39
1.4
1.2
1
Liquid Ratio
0.82
0.8 0.72
0.6
0.4
0.4
0.21
0.2
0
2013-14 2014-15 2015-16 2016-17 2017-18
Year
Table:10
Absolute Liquid Ratio
43
CURRENT
ABSOLUTE ABSOLUTE
YEARS LIABILITIES
LIQUID ASSETS LIQUID RATIO
₨ in lakhs
₨ in lakhs
2013-14 314.41 3847.88 0.82
2014-15 3777.75 6038.41 0.625
2015-16 1043.97 3725.38 0.28
2016-17 4640.11 6215.84 0.75
2017-18 10406.89 7925.3 1.313
INFERENCE:
 The absolute liquid ratio of the company is satisfactory in all the

years except 2015-16. The standard form is 0.5:1.
 The firm have sufficient absolute liquid assets to pay off current
liabilities.
Graph:6
44
1.4 1.31
1.2
Absolute Liquid Ratio
1
0.82
0.8 0.75
0.63
0.6
0.4
0.28
0.2
0
2013-14 2014-15 2015-16 2016-17 2017-18
Year
ABSOLUTE LIQUID RATIO
Table:11
Comparative Balance sheet as on 31st March 2014 and 2015
45
2013-14 214-15 Absolute Change

Particulars
₨ in lakhs ₨ in lakhs Change in%
ASSETS
Current Assets:
Inventories 4969.9 6600.66 1630.76 32.81
Trade Receivables 16.99 28.71 11.72 68.98
Cash and Cash Equivalents 314.41 3777.75 3463.34 1101.54
Short term Loans and Advances 483.94 496.29 12.35 2.55
Other Current Assets 9.07 14.13 5.06 55.79
Total Current Assets 5794.31 10917.54 5123.23 88.42
Fixed Assets:
Tangible Assets 3597.32 2718.54 -878.78 -24.43
Intangible Assets 29.64 15.66 -13.98 -47.17
Capital Work-in Progress 26.72 11.11 -15.61 -58.42
Non-Current Investments 7.5 2.5 -5 -66.67
Long term Loans & Advances 94.8 112.37 17.57 18.53
Deferred Tax Assets 0 24.82 24.82 0
Total Fixed Assets 3755.98 2885 -870.98 -23.19
TOTAL ASSETS 9550.29 13802.54 4252.25 44.52
LIABILITIES & CAPITAL
Current Liabilities:
Short term Borrowings 728.9 831.6 102.7 14.09
Trade Payables 865.64 1633.16 767.52 88.67
Short term Provisions 777.8 1023.6 245.8 31.6
Total Current Liabilities 3847.88 6038.41 2190.53 56.93
Non-Current Liabilities:
Long term Borrowings 649.25 528.48 -120.77 -18.6
Deferred Tax Liability 155.32 0 -155.32 -100
Long term Provisions 39.75 54.58 14.83 37.31
Total Non -current Liabilities 844.32 583.06 -261.26 -30.94
Shareholders' Funds
Share Capital 320 320 0 0
Reserves & Surplus 4538.09 6861.07 2322.98 51.19
Shareholders' Funds 4858.09 7181.07 2322.98 47.82
TOTAL LIABILITIES 9550.29 13802.54 4252.25 44.52
Inference:
 The current assets are increased by 51,23,23,000 that is 88.42%.

The increase in current assets increases the working capital.
46
 The current liabilities are increased from ₨. 38,47,88,000 to

₨ 60,48,31,000. The rate of increase is 56.93%. The increase in
current assets decreases the working capital.
 The increase in current assets is more than the increase in current
liabilities. Therefore, the working capital is increased.
Table:12
Comparative Balance sheet as on 31st March 2015 & 2016
47
2014-15 2015-16
Absolute Change in
Particulars ₨ in ₨ in
Change %
lakhs lakhs
ASSETS
Current Assets:
Inventories 6600.66 7299.72 699.06 1.59
Trade Receivables 28.71 8.92 -19.79 -68.93
Cash and Cash Equivalents 3777.75 1043.97 -2733.78 -72.37
Short term Loans and

Advances 496.29 437.76 -58.53 -11.79
Other Current Assets 14.13 11.82 -2.31 -16.35
Total Current Assets 10917.54 8802.19 -2115.35 -19.38
Fixed Assets:
Tangible Assets 2718.54 2497.32 -221.22 -8.14
Capital Work-in Progress 11.11 28.09 16.98 152.84
Non-Current Investments 2.5 2.5 0 0
Deferred Tax Assets 24.82 73.88 49.06 197.66
Total Fixed Assets 2885 2756.6 -128.4 -4.45
TOTAL ASSETS 13802.54 11558.79 -2243.75 -16.26
Short term Borrowings 831.6 243.87 -587.73 -70.67
Trade Payables 1633.16 802.1 -831.06 -50.89
Short term Provisions 1023.6 839.44 -184.16 -17.99
Total Current Liabilities 6038.41 3725.38 -2313.03 -38.31
Long term Borrowings 528.48 617.31 88.83 16.81
Long term Provisions 54.58 47.25 -7.33 -13.43
Total Non -current Liabilities 583.06 664.56 81.5 13.98
Shareholders' Funds
Reserves & Surplus 6861.07 6848.85 -12.22 -0.18
Shareholders' Funds 7181.07 7168.85 -12.22 -0.17
TOTAL LIABILITIES 13802.54 11558.79 -2243.75 -16.26
Inference:
48
 The current assets are decreased by ₨. 21,15,35,000 that is 19.38%.

The decrease in current assets decreases the working capital.
 The current liabilities are decreased by ₨.23,13,03,000 i.e. 38.31%.
The decrease in current assets increases the working capital.
 The decrease in current assets is less than the decrease in current
Table:13
49
2015-16 2016-17
Absolute Change in
Particulars ₨ in ₨ in
Change %
lakhs lakhs
ASSETS
Current Assets:
Inventories 7299.72 7432 132.28 1.81
Short term Loans and Advances 437.76 460.12 22.36 5.11
Current Investments 0 3500 3500 0
Fixed Assets:
Tangible Assets 2497.32 2889.94 392.62 15.72
Capital Work-in Progress 28.09 5.72 -22.37 -79.64
Deferred Tax Assets 73.88 56.34 -17.54 -23.74
Total Fixed Assets 2756.6 3120.17 363.57 13.19
11558.7
15673.84 4115.05 36.6
TOTAL ASSETS 9
Trade Payables 802.1 751.39 -50.71 -6.32
Short term Provisions 839.44 179.2 -660.24 -78.65
Long term Borrowings 617.31 669.83 52.52 8.51
Long term Provisions 47.25 57.69 10.44 22.1
Total Non -current Liabilities 664.56 727.52 62.96 9.47
Shareholders' Funds
11558.7
15673.84 4115.05 35.6
TOTAL LIABILITIES 9
INFERENCE:
50
 The current assets are increased by ₨. 37,51,48,000 (125,53,67,000-

88,02,19,000) that is 42.62%. The increase in current assets increases
the working capital.
 The current liabilities are increased by ₨.24,90,46,000 i.e. 66.85%.
The increase in current liabilities decreases the working capital.
51
Table:14
2016-17 2017-18 Absolute Change in

Particulars
₨ in lakhs ₨ in lakhs Change %
ASSETS
Current Assets:
Inventories 7432 9051.89 1619.89 21.8
Short term Loans and Advances 460.12 139.44 -320.68 -69.69
Current Investments 3500 8333.13 4833.13 138.09
Other Financial Assets 0 16.73 16.73 0
Fixed Assets:
Tangible Assets 2889.94 2726.1 -163.84 -5.67
Capital Work-in Progress 5.72 17.09 11.37 198.78
Long term Loans & Advances 164.22 139.26 -24.96 -15.2
Deferred Tax Assets 56.34 0 -56.34 -100
Other Financial Assets 0 1.14 1.14 0
Other Non-current Assets 0 47.79 47.79 0
Total Fixed Assets 3120.17 2934.94 -185.23 -5.94
TOTAL ASSETS 15673.84 22964.73 7290.89 46.52
Trade Payables 751.39 1512.23 760.84 101.26
Short term Provisions 179.2 0 -179.2 -100
Current Tax Liabilities 0 488.98 488.98 0
Long term Borrowings 669.83 561.67 -108.16 -16.15
Long term Provisions 57.69 0 -57.69 -100
Deferred Tax Liabilities 0 98.62 98.62 0
Total Non -current Liabilities 727.52 660.29 -67.23 -9.24
Shareholders' Funds
TOTAL LIABILITIES 15673.84 22964.73 7290.89 46.52
52
INFERENCE:
 The current assets are increased by ₨. 74,76,12,000 that is 59.55%.

The increase in current assets increases the working capital.
 The current liabilities are increased by ₨. 17,09,46,000 i.e. 27.5%.
The increase in current liabilities decreases the working capital.
53
Table:15
Composition of Current Assets & Current Liabilities 2013-14
Particulars Amount Percentage

₨ in lakhs
CURRENT ASSETS:
Inventories 4969.9 85.77
Trade Receivables 16.99 0.29
Cash & Cash Equivalents 314.41 5.43
Short term Loans & Advances 483.94 8.35
Other Current Assets 9.07 0.16
TOTAL 5794.31 100
Short term Borrowings 728.9 18.94
Trade Payables 865.64 22.5
Short term Provisions 777.8 20.21
Other Current Liabilities 1475.54 38.35
TOTAL 3847.88 100
Inference:
 Inventories possess major part in the current assets i.e. 85.77%.

 In current liabilities short term provisions are 20.21%.
54
Graph:7
Composition of current assets 2013-2014
Other Current Assets 9.07
Short term Loans and Advances 483.94
Cash and Cash Equivalents 314.41
Trade Receivables 16.99
Inventories 4969.9
Graph:8
55
Composition of Current Liabilities 2013-2014
777.8 728.9
865.64
1475.54
Short term
Borrowings
Trade Payables
Short term
Provisions
Other Current
Liabilities
56
Table:16
Composition of Current Assets & Liabilities2014-15

₨ in lakhs
CURRENT ASSETS:
TOTAL 10917.54 100
TOTAL 6038.41 100
Inference:
 Out of total current assets, 60.46% of the funds are in the form of
inventories. 34.6% of funds are in the form of cash and cash
equivalents.
 Out of total current liabilities, short term provisions are 16.95%.
Trade payables are 27.05%.
57
Graph:9
Composition of current assets 2014-2015
7000
6600.66
6000
5000
3777.75
4000
3000
2000
1000 496.29
28.71 14.13
0
Inventories Trade Cash & Cash Short term Other Current
Receivables Equivalents Loans & Assets
Advances
58
Graph:10
Composition of current liabilities
2550.05
1633.16
1023.6
831.6
Short term Trade Payables Short term Other Current

Borrowings Provisions Liabilities
59
Table:17
Components of Current Assets and Liabilities 2015-2016

₨ in lakhs
CURRENT ASSETS:
TOTAL 8802.19 100
TOTAL 3725.38 100
Inference:
 Out of total current assets, 82.93% of the funds are invested in the
form of inventories. 11.86% are in the form of cash and cash
equivalents.
60
Graph:11
Components of Current Assets 2015-2016
8000
7299.72
7000
6000
5000
4000
3000
2000
1043.97
1000 437.76
8.92 11.82
0
Inventories Trade Cash & Cash Short term Loans Other Current
Receivables Equivalents & Advances Assets
61
Graph:12
Components of Current Liabilities 2015-2016
2000
1839.97
1800
1600
1400
1200
1000
802.1 839.44
800
600
400
243.87
200
0
Short term Trade Payables Short term Other Current
Borrowings Provisions Liabilities
62
Table:18

₨ in lakhs
CURRENT ASSETS:
Current Investment 3500 27.88
Inventories 7432 59.2
TOTAL 12553.67 100
TOTAL 6215.84 100
INFERENCE:
 Out of total current liabilities, 59.2% of the funds are invested in

the form of inventories. 27.88% are in the form of current
investments.
 48% of the total current liabilities is short term borrowings.
63
Graph:13
8000 7432
7000
6000
5000
4000
3500
3000
2000
1140.11
1000 460.12
10.83 10.61
0
Current Inventories Trade Cash & Cash Short term Other Current
Investment Receivables Equivalents Loans & Assets
Advances
64
Graph:14
2263.39
3021.86
179.2 751.39
Short term Borrowings Trade Payables

Short term Provisions Other Current Liabilities
65
Table:19
Amount Percentage
Particulars ₨ in lakh
CURRENT ASSETS:
Financial Assets:
Investments 8333.13 41.6
Other financial assets 16.73 0.08
TOTAL 20029.79 100
Financial Liabilities:
Other financial liabilities 1775.33 22.4
Current Tax Liabilities 488.98 6.17
TOTAL 7925.3 100
INFERENCE:
 Out of total current assets, 45.19% of the funds are invested in the
form of inventories. 41.6% are in the form of current investments.
 43.68% of the total current liabilities is short term borrowings.
66
Graph:15
Other Current Assets 397.64
Other financial 16.73

assets
Short term Loans & Advances

139.44
Cash & Cash Equivalents 2073.76
Trade Receivables
17.2
Investments 8333.13
Inventories 9051.89
0 2000 4000 6000 8000 10000
67
Graph:16

4000
3461.88
3500
3000
2500
2000 1775.33
1512.23
1500
1000
686.88
488.98
500
0
Short term Trade Payables Other financial Other Current Current Tax
Borrowings liabilities Liabilities Liabilities
68
Table:20
Working Capital cycle 2013-14
SL NO Conversion Period Days
1 RMCP 17.5
2 WIPCP 1
3 FGCP 4
4 RCP 0
Gross working capital cycle 22.5
INFERENCE:
 The time duration required to complete one working capital cycle is

22.5 days.
 The receivables conversion period is 0, because the company does
not allow any credit sales.
69
Table:21
1 RMCP 21
2 WIPCP 1
3 FGCP 4
4 RCP 0
Gross working capital cycle 26
INFERENCE:

26 days.
70
Table:22
1 RMCP 24
2 WIPCP 1
3 FGCP 4
4 RCP 0
INFERENCE:

29 days.
71
Table:23
1 RMCP 22
2 WIPCP 1
3 FGCP 5
4 RCP 0
INFERENCE:

28 days.
72
Table:24
1 RMCP 23
2 WIPCP 1
3 FGCP 4
4 RCP 0
INFERENCE:

28 days.
73
4.1 FINDINGS
 The working capital position of the company is good. The working
capital of the company is increasing. But the rate of increase is
sometimes decreasing.
 The average rate of increase of working capital is 67.75%.
 The current assets include inventories, trade receivables, cash and cash
equivalents, current investments, short-term loans and advances.
 The current liabilities include short term borrowings, trade payables,
short term provisions etc.
 The current ratio of the company is not satisfactory in the years
2013-14 and 2014-15 (1.51 and 1.81). It is below the standard norm.
The current ratio of the company is satisfactory in the years 2015-16,
2016-17 and 2017-18.
 The quick or liquid ratio is below the standard form in the years
(2013-14, 2014-15,2015-16, 2016-17 and 2017-18). In the year
2017-18 the liquid ratio is satisfactory. It is above than the standard
form of 1:1.
 The absolute liquid ratio of the company is satisfactory in all the years
except 2015-16.
 Majority of the amount is invested in inventories. This will cause over

stocking.
 The average length of working capital cycle is 27 days. The length of

working capital cycle (28 days) is high in the year 2017-18 as compared
to the year 2013-14(22.5 days).
74
 The length of working capital cycle changes. Increase in the length of

working Capital cycle requires large amount of working capital.
 The increase in current assets and decrease in current liabilities is the

main reason for increasing working capital.
 The company does not allow any credit sales because the Receivables
conversion period is zero.
75
4.2 SUGGESTIONS
 The decreasing rate in working capital adversely affect the company. It
may weak the company.
 The maintenance of adequate liquid assets will help the company to
meet its immediate current liabilities.
 Large investment in inventory causes over stocking. This reduces the
opportunity to invest in productive sources like current investment.
 The investment of money in inventory influence to maintain
inadequate liquid assets.
 The increase in the time period of working capital may increase the
working capital requirements.
 To adopt social responsibility by providing credit sale facilities to the
dealers. This will help to the investment of current assets in debtors.
 Maintenance of adequate assets in the certain or prescribed ratio or
standards increase the efficiency of the company.
 To maintain the working capital in the standard forms, the decrease of
current liabilities will help them.
76

Study On Working Capital Management

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Study On Working Capital Management

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A STUDY ON WORKING CAPITAL MANAGEMENT OF KSE LIMITED

1.1 INTRODUCTION TO THE TOPIC

DEFINITION OF WORKING CAPITAL

According to Shubin, “Working capital is the amount of funds

According to Gere Stenberg, “Circulating capital means current

CONCEPT OF WORKING CAPITAL

There are two concepts of working capital:

(A) Balance sheet concept

(A). Balance sheet concept

There are two interpretations of working capital under the balance

(1). Gross Working Capital - The Gross Working Capital is the

(2). Net Working Capital - Net Working Capital is the excess of

Net Working Capital =Current Assets –Current Liabilities. Net Working

(B). Operating Cycle or Circular Flow Concept

The circular flow concept of working capital is based upon working

CLASSIFICATION OF WORKING CAPITAL

Working capital may be classified in two ways;

(1). On the basis of concept

(2). On the basis of time

(1). On the Basis of Concept

On the basis of concept, working capital is classified as

 Gross Working Capital - The Gross Working Capital is the capital

 Net Working Capital - Net Working Capital is the excess of current

(2). On the basis of time

On the basis of time, working capital is classified as Permanent or

 Permanent or Fixed working Capital

IMPORTANCE OF ADEQUATE WORKING CAPITAL

Working capital is the life blood and nerve Centre of a business.

 Exploitation of favorable market conditions

FACTORS INFLUENCING THE WORKING CAPITAL

(1). Nature or Character of Business

(2). Size of business or scale of operations

(3). Production policy

(4). Manufacturing process or Length of production cycle

(5). Seasonal variations

(6). Working capital cycle

In manufacturing concern, the working capital cycle starts with

(7). Rate of stock turn over

(8). Credit policy

(9). Business cycles

(10). Rate of growth of business

(11). Earning capacity and Dividend policy

WORKING CAPITAL MANAGEMENT

Working capital, in general practice, refers to the excess of

The basic goal of working capital management is to manage

A sound short-term investment decision or working capital

 Dimension 1 is concerned with the formulation of policies with regard

1.2 INDUSTRY PROFILE

The solvent industry has achieved a phenomenal progress and at present

Coconut Oil Miller’s Co-operative Society

CATTLE FEED INDUSTRY

THE FUTURE OF INDIAN FEED INDUSTRY

The Indian economy is growing at the rate of 6 to 8 percent

A major change is occurring in India on the economic front.

India has entered into an agreement with its trade partners

Various livestock industry associations have taken issue

In view of the expected rise in per capita consumption of

The next decade will see significant changes in

Indian feed industry will increasingly use bio-technology, more scientific

new molecules and natural and herbal products to improve animal

1.3 COMPANY PROFILE

The Company operates through three segments, which include

ORIGIN OF THE ORGANISATION