“A STUDY ON WORKING CAPITAL MANAGEMNET”

(With Special Reference to AVANTI FEEDS LIMITED, KOVVUR.)

A Project report Submitted to Jawaharlal Nehru University-K, Kakinada

In partial fulfillment for the Requirement of the Award of the Degree

Of
MASTER OF BUSINESS ADMINISTRATION
Submitted by
Y.S.S.A. PRATHYUSHA
Regd no: 19A81E0068

Under the guidance of

K VINAY KUMAR

Assistant professor

DEPARTMENT OF MANAGEMENT STUDIES

SRI VASAVI ENGINEERING COLLEGE
(Affiliated to Jawaharlal Nehru Technology University, Kakinada)
Pedatadepalli, tedepalligudem, west Godavari Dt
2019-21
 SRI VASAVI ENGINEERING COLLEGE

[Affiliated to Jawaharlal Nehru Technology University Kakinada]

DEPARTMENT OF MANAGEMENT STUDIES

Certificate

This is to certify that the project work title “ A STUDY ON WORKING CAPITAL MANAGEMENT “
at AVANTI FEEDS LTD, submitted by Y.S.S.A. Prathyusha has been examined and adjusted
sufficient as in partial fulfillment for the award of the degree of master of business administration, by
Jawaharlal Nehru Technology University-k, Kakinada from SRI VASAVI ENGINEERING COLLEGE,
Tadepalligudem.

INTERNAL GUIDE HEAD

Department of Management Studies

INTERNAL EXAMINER EXTERNAL EXAMINER

 DECLARATION

I, Y.S.S.A. PRATHYUSHA hereby declare that this project report entitled “A STUDY ON WORKING
CAPITAL MANAGEMENT” at Avanti feeds limited, kovvur is submitted by me, to SRI VASAVI
ENGINEERING COLLEGE, TADEPALLIGUDEM (AFFILIATED TO JAWAHARLAL NEHRU
TECHNOLOGICAL UNIVERSITY,KAKINADA), in partial fulfillment for the award of the degree of
MASTER OF BUSINESS ADMINISTRATION.

Place: tadepalligudem

Date: (Y.S.S.A. PRATHYUSHA)

18A81E0068
 ACKNOWLEDGEMENT

The satisfaction that accompanies the successful complication of any task would be incomplete without
mentioning people who made it possible and whose encouragement and constant guidance crowned my
effort it success.

I wish to express my deep sense of gratitude to Dr.G.V.S.N.R Ratnakara rao, principal, Sri Vasari
Engineering College, pedatadepalli for giving us an environment of learning and development in the
Campus.

I am grateful to D. NAVEEN KUMAR, Professor amd Head of the department of management

studies , for permitting me to pursue my project in AVANTI FEEDS LIMITED.

It is an honor for me to do my project work under the guidance of Mr. K. VINAY KUMAR, Assistant
professor, Department of Management Studies, Sri Vasavi Engineering College, Pedatadepalli.`It is a
pleasure to thank him for helping me a lot by giving his valuable guidance and encouragement in each and
every stage of my project work and for his patience in bridging out this report
 INDEX

CHAPTER NO. TITLE PAGE NO.

1 INTRODUCTION 1-2

SCOPE OF THE STUDY 3

NEED FOR THE STUDY 4

OBJECTIVES OF THE STUDY 5

METHODOLOGY OF THE STUDY 6

LIMITATIONS OF THE STUDY 7

2 INDUSTRY PROFILE 8-19

3 COMPANY PROFILE 20-32

4 THEORITICAL FRAME WORK 33-48

5 DATA ANALYSIS INTERPRETATION 49-68

6 FINDINGS 70

SUGGETIONS 71

SUMMARY 72
 LIST OF TABLES

TABLE NO. TABLE NAME PAGE NO.

5.1 STATEMENT OF CHANGES IN WORKING 51

CAPITAL FOR THE YEAR 2015-16

5.2 STATEMENT OF CHANGES IN WORKING 52

CAPITAL FOR THE YEAR 2016-17

5.3 STATEMENT OF CHANGES IN WORKING 53

CAPITAL FOR THE YEAR 2017-18

5.4 STATEMENT OF CHANGES IN WORKING 54

CAPITAL FOR THE YEAR 2018-19

5.5 STATEMENT OF CHANGES IN WORKING 55

CAPITAL FOR THE YEAR 2019-20

5.6 COMPUTATION OF CURRENT RATIO 56

5.7 COMPUTATION OF QUICK RATIO 58

5.8 NET WORKING CAPITAL RATIO 59

5.9 COMPUTATION OF STOCK TURN OVER RATIO 61

5.10 COMPUTATION OF WORKING CAPITAL 62

TURNOVER RATIO
 LIST OF CHARTS

CHART NO. CHART NAME PAGE NO.

1 CURRENT RATIO 57

2 QUICK RATIO 58

3 NET WORKING CAPITAL RATIO 60

4 STOCK TURNOVER RATIO 62

5 WORKING CAPITAL TURNOVER RATIO 63

CHAPTER-1
➢ Introduction
➢ Need for the study
➢ Scope of the study
➢ Objectives of the study
➢ Methodology of the study
➢ Limitations of the study

1
 INTRODUCTION

Working capital is necessary for the business. It indicates that the funds
required for day-to-day operation of the firm. Resolve of suitable level of investment in
current assets in the first and premier responsibility of working capital manager. The
amount of investment in any current asset ordinarily various from day-to- day average
amount over a period of time it can used in determining the fluctuating and investment in
current assets.

Another important feature of working capital is deciding the mix of finance for working
capital which may be a combination of unforced short-term and long-term sources. What
combination of different sources of working capital finance should be employed? The
financing differ the permanent working capital represent the major problems distress
finance manager in the organization.

By study of working capital is a crucial significant to internal and external analysis because
of the close relations with the trend day-to-day operations of the enterprise. According to”
Muller” and “ Ralph Kennedy” inadequacy of misstatement is the leading cause of risk
of the business which related to current activities and represented at time by the operating
cycle of such items like receivables, Raw materials in stores, work- in-progress, finished
goods, bills receivables and cash.

In accounting “working capital is the difference between the current assets and current
liabilities of funds”. Or it “working capital is the difference between the cash inflow and
outflow of funds”.

The ratio analysis is the most powerful tool of financial analysis. It is used a device with
analyze and interpret the financial strengths of venture. As financial accountant analysis
the financial statements with various instruments of analysis before discuss up on the
financial beneficial or weakness of the business.

2
With the help of ratios that the financial statements can be examine more clearly and
decisions made from such analysis. The use of ratios is not restricted to financial managers

Only as discussed earlier, there are different groups interested in the ratio analysis for
knowing the financial position and performance of firm for different purpose like banks,
financial institutions, investors, shareholders, suppliers etc... This all are make the use of
ratio analysis as implement in evaluating the financial position and performance of the
business for allowing of credit, giving loans, of making investments in the firm with the
use of ratio analysis.

It can compute the financial condition of a firm and see the financial quality or condition
is strong, good, or poor. The finish can also been drawn even if the performance of the
business is improving or decline therefore, ratios has wide applications use today.

Ratio analysis is a main knowledge of analysis and interpretation of financial statements.

It is the most important process of the establishing and explains decisions. However, ratio
analysis is not finish in independently. It is only learn of superior understanding the
financial strengths and weaknesses of a business. Calculation of some appropriate ratios
is analyzed and interpreted because they are number of ratios, can be calculated through
the information given in the financial statements.

3
 SCOPE OF THE STUDY

The study includes the quick analysis about the shrimp and fish feed
Industries. It covers the scope of the Avanti feeds Ltd kovvur. It is cause to cover a wider
area to analyze the working capital practices of Avanti feeds industries from their financial
statements, during the last five years (2015-16 to 2019-20) financial ratios connecting to
the working capital was try to understand the several aspects of the working capital
management of the Avanti feeds Ltd

Consequently it is the good deal to cover the entire study, including the course of various
components of working capital so as to find the results of each part of working capital in
the organization.

4
 NEED FOR THE STUDY

The present study carried out is on “working capital management” of Avanti feeds limited. As there
is a need for every company to analysis its liquidity, short term solvency position to maintain its reputation,
goodwill in the market. As a part of MBA course I take the opportunity to analyze the liquidity, short term
solvency position by using working capital management concept at Avanti feeds limited, throughout this
study. Analysis is made in current assets and current liabilities of the firm to get details of how the firm
maintains their working capital position.

5
 OBJECTIVES OF THE STUDY

The present study of Avanti feeds Ltd has been undertaken with the following objectives:

• To study the changes in working capital and its effects over the years 2015-16 to
2019-20 in the Avanti feeds limited.

• To know how successfully the company using its working capital resources.

• To study the liquidity position and solvency position through various working
capital ratios.

6
 RESEARCH METHODOLOGY

The present study covers from its inception to assets and analyze the elements of working capital analysis
in M/s The Avanti Feeds Limited Kovvur. The study is based on the data collected from the secondary
sources.

Secondary Data:

Secondary data has been collected by referring to various annual reports and records
documents of the company. That has previously been collected that is by a person other
than one who collected.

Annual Reports:

These are one of the important sources of information in collecting secondary data. With
referring the previous annual reports, the financial position of the company and its
necessity of funds for ratio analysis have been approach.

Records & Documents:

These consists of

1. Balance sheets

2. Profit /Loss accounts.

7
 LIMITATIONS OF THE STUDY

My present study was completed under some limitations during the project period
underlying the following limitations.
• The study is depends on accounting information.

• The study was conducted with restricted data available and analysis to understand
about working capital management in Avanti feeds Ltd.

• It is difficult to study of the working capital management in detailed for limited

period of five weeks.

• The major part was made only on the basis of secondary data only provided by
the company.

• Hence correctness and reliability is depends on given data only.

8
 CHAPTER -2

PROFILE AQUA FEED INDUSTRY

9
 PROFILE OF AQUA FEED INDUSTRY HISTORY

In India Aqua culture is very good. The climatic conditions are very much suitable to develop Aqua culture
in India. Countries like U.S.A., Japan and other European countries consume more Aqua Foods but they
don’ t have proper climatic conditions to adopt this culture. But this type of culture is suitable in countries
like India, Taiwan and Thailand. So the export of Aqua food is doe from these countries to European
countries, U.S.A. and Japan. Among these countries India is the best in adopting these types of culture. To
adopt this culture proper feed must be available in doing aqua culture. Feed occupies 60% of cost in doing
this type of culture.

In the beginning farmers faced many types of problems to do this culture due to lack of proper feed
that is unavailable in India. The feed is imported from other countries like Taiwan, Thailand and
Philippines. Because these countries are well developed than Itself. But the feed that which is imported
from other countries used to take for about 6 months and during this process the quality of the feed used to
decline slowly.

In 90’ s the feed industries slowly started in India. India started feed industry by collaborating with East
Asian countries the first feed company was set up at Nellore in A.P. named as “ Water Base” is the year
1992 the feed industries started developing very well in India because of high culture. These are 7 major
industries in India producing 1, 50,000 tones of feed with different varieties.

There are mainly 3 varities of feeds.

1. Semi-intensive ------------ high stocking

2. Modified extensive -------- medium stocking
3. Extensive ------------------- low stocking

10
AQUA FEED industries in A.P:
In India the first feed co. was in A.P. at Nellore named as water base. The tropical
conditions are suitable to do this type of culture in A.P and remaining other coastal states in India.

The total requirement of the feed in doing culture is consumed around 80% by A.P there are 2 major
feed companies and also other small units that are located. The major co’ s are water base at Nellore, Avanti
feed at Kovvur. Andhra Pradesh occupies second place in feed production.

(Major Aqua Feed Industries Located in India )

Name Place State

Avanti Kovvur A.P
C.P Chennai Tamilnadu
Water base Nellore A.P
Honaqua Yanam Yanam
Grow best Chennai Tamilnadu
Godrej Chennai Tamilnadu
Higashimaru Cochin Kerala

11
AVANTI FEED PRODUCTION & SALES (2015-16 TO 2019-20):-

Year Production(MT) Sales(MT)

2015-16 10,390.70 10,474.67 the above

2016-17 27,033.37 26,641.73 details

2017-18 59,229.65 59,837.64 given from

annual
2018-19 1,05,422 1,02,988
reports.
2019-20 2,73,706.27 271464.21

Avanti feeds Avanti feeds limited, Kovvur (last five years sales 2016 to 2020,
approximately):

Year Sales

2016 8600

2017 23000

2018 55000

2019 93000

2020 105000

2016 year sales are 8600 mt, and the next year 2017 year sales are increased no to 23000, 2018 year
sales are 55000 mt. so increased 65% sales. In this way is continued. 2019 year sales are 93000, 2020 year
sales are 105000, and so last three years sales are increased double

12
Research & development
The Indian Aqua Industry was collaborated with East Asian countries like Taiwan, Thailand
etc. All machineries & 83% of raw materials are imported from East Asian countries. To produce proper
feed there is lack of technological factors and raw materials to manufacture proper feed. The research and
development aspects are also imported from other countries but in India the Research and Development
departments are still under developed

Basic problems of the Aqua Industry:

Now a day’s Aqua industry is facing various types of problems. The countries consuming sea
food from India are Japan-60%, U.S.A-20% and 20% by European countries Later these countries
consumption slowly started declining conditions, terrorism problem & due to this the export of started
reducing.
The above factors made aqua culture to decline and it is directly proportionate to the Aqua feed industries.

Problems of raw materials:

The company was mainly based upon raw materials. Feed generally contains nearly 40 types
of raw materials. In these 40 types 83% of raw materials are imported from different countries. And among
this 83% of raw material 60% of value is occupied by the feed and 17% of raw materials are developed in
India. In spite of facing many problems in importing they are unable to manufacture in our country

PRESENT PROFILE
At present there are seven major units & some units located in India by private sectors with
installed capacity of 3 lakh tones. The companies are well organized & well equipped .

All the companies are collaborated with East Asian countries. The technology & raw materials are
imported from these countries. In India the industries are located in 3 states like Andhra Pradesh, Kerala,
and Tamilnadu. The feed to some extent is imported from Taiwan, Thailand and East Asian countries.
According to the culture there are 3 verities of feeds they are

1. Semi-intensive.
2. Modified-Extensive.
3. Extensive.

STATE WISE PRODUCTION & CAPACITY:

13
 State Production (in tones) Capacity(in tones)
Andhra Pradesh 65,000 1,20,000
Tamilnadu 70,000 1,50,000
Kerala 8,000 15,000
Imports 7,000

FUTURE PROSPECTS
It is better importing well & good raw materials. The technological factors also must be
increased in order to reach to the optimum level. The research & development department also must be
launched in India rather than importing from other countries in order to quick progress.
Governments also must give proper loan facilities to the farmers in improving their culture
more & more. The government also should reduce the restrictions levied the imports and exports.
The aqua culture also must be given permission by the government in order to develop in all
areas. So automatically the feed consumption is increased.

Consumption of feed state-wise:

State Consumption
Andhra Pradesh 70
Tamilnadu 10
Kerala 7
Other Coastal States 13

14
The Shrimp Feed Production Industry:
As the shrimp Culture is growing many manufacturers have recognized the need for technically
processed shrimp feed. And many manufacturers have started producing shrimp feed. Some of those
companies are foreign companies. The various brands and their product lines is as follows.

Product Line
Brand Name
Avanti Profeed, Titan and Manamei.
C.P Irawan, Star Feed, Nasa, Bintamg, Novo, C.P and Blanka
Grobest Leader, Smart, Grobest and Pacific white.
Ultra, Tigerbay, Supreme, Shakti, Magnum, Shakti Economy and White
Water Base
bay

Gold Mohur Hanaqua Somfeed, Express.

Godrej Kahochi, Hoshu.

Some Other Brands President, Gold Coin, Chargil, Nexus.

Company wise production:

Name Production (in tones)

Avanti 70,000
C.P 90,000
Water Base 18,000
Hanaqua 10,000
Godrej 10,000
Growbest 10,000
Small industries 7,000

15
Aqua Feed – Current trends and future needs:

Aquaculture is the only answer to meet the nutritional demands of the increasing human population
since capture fisheries has its own limitations. India is bestowed with large aquatic resources and water
bodies. Aquaculture offers therefore immense scope to increase aquatic food production.

Feed fall under 2 categories viz. live feed and formulated feed. Formulated feed should be of high quality
providing for proximate composition of protein, liquid fiber and carbohydrates in the diet, besides ensuring
its water stability, palatability and efficient feed conversion. Any cost effective feed formula based on local
ingredients makes a very successful entry into the feed market.
About a million ha are under fresh water aquaculture in India and at a production rate of 2Mt/ha
with an FCR of 1:1.6, the feed requirement is about 3.2million Tones. The feed manufacturing sector for
fresh water aquaculture is unorganized unlike for shrimp. Hardly 25% are factory Made feeds. Most of the
fish farmers depend on their own formulated feeds produced from rice bran, oil cake etc. We have over 4
million ha. Or freshwater resources which could yield on a modest scale about million tons of fish which
would require millions of feed by the middle of this century.

In shrimp farming the feed sector is better organized in the early phase of seed. Production, the
larvae depend on live feed such as phytoplankton organisms. Later they are fed on Artemia. Because of the
high cost and reliance on imported brine shrimp cysts, effective alternative organisms such as rotifers, free
living nematodes, moina spp, Acete spp are also used in fro zed from. However, their performance is
relatively poor compared artemia cysts.

There are about 260 shrimp hatcheries in India with a production of shrimp seeds is expected to rise
to 13 billion seeds by the end of 2019 from about 300 hatcheries which means that our dependence on
import of artemia cyst also. Will go up. Post larvae of shrimps are fed on formulated feed scramble feed as
starter feed and palletized feed in the grower phase. The protein component of this feed ranges from 35% -
45% which comes primarily from imported fish meal. Therefore, in shrimp culture feed constitutes 50-60%
of the cost of production. Hence it is very important that feed given as diet is not wasted.

16
 Higher feeding frequency is found to contribute to less feed waste, improved waste quality and
better growth performance, tray feeding with more number of trays appears to give better performance than
broadcasting as well as reduce wastage of feed. At an FCR 1:1.5, the current shrimp feed requirement is
about 1.5 lakh tones which is met from 33 feed mills most of which are located in Andhra Pradesh.

In order to ensure that aqua culture is conducted in an eco-friendly and sustainable manner, it is
very essential that only good quality in foods are used.
The lack of feed quality is one of the prime factors which is contributing to weakening of the animal and
the consequent susceptibility to even illuctacuations to the pond conditions and disease causing agents, the
issues related to it are

. Supply of low quality feed with high price

. Lack of quality / price control
. No labeling / certification of ingredients
. Lack of standardized feed
. High FCR feed
. Sales without bills
. Supply of expired feeds
. Non-tallying of % of ingredients in feed composition with that of printed on Label bag.

Some remedies suggested countering the above are:

. Establish of quality control wings in fisheries department in all coastal districts.
. Establishment of feed testing laboratories
. Labeling on bags with ingredients and their billing and sales
. Awareness building among farmers
. Explore low cost / indigenous feed.

17
Plant locations:
1. Shrimp feed plant I & wheat flour plant:

Door No.15-11-24
Kovvur-534350,
West Godavari District,
A.P. India.

2. Shrimp feed plant II:

Vemuluru, Kovvur-534350,
West Godavari District,
A.P. India.

3. Shrimp processing plant.

Gopalapuram 533274,
Ravulapalem Mandal
E.G. Dist., A.P., India

4. Wind mill
Lakkihalli Village,
Hiriyur Taluk,
Chitradurga District,
Karnataka.

18
Demand of shrimp feed:

Shrimp feed has good demand in local market as in foreign market. The cultivators who purchase the
shrimp feed they have demand in foreign countries for their prawns. The cultivators supply prawns to
Srilanka, Iraq and Gulf countries. Aqua cultivators mainly export feed to the above countries and other
major countries. Total foreign exchange for selling of prawns is 4500 crores. Each prawn is Rs 150 in
foreign market.

Shrimp feed producers have demand in market because they produce international quality feed from
best quality imported raw – material. Its ideals water stability in water is minimum 2 to 4 hours. And the
feed is nutritionally well balanced with less residual and excellent palatability and early digest by prawn.
And the most important things is that the fresh feed with good attraction readily available to the door step
of aqua cultivator.

Avanti feeds is a prawn feed based industry .Just like the human body needs vitamins and minerals
other living organisms in the world also need protein based food to grow. So Avanti feeds are one such
industry producing and exporting the feeds for prawns.

A prawn feed based industry was born with the motive of providing the qualitative feeds to prawns and
fish etc... The industry is growing rapidly today. The feed industry plays a vital role in the survival of the sea based
living organisms.

The oilseed scenario in the country has undergone a substantial change during the past few years.
World production forecasts for oilseed oils and oil meals are encouraging.

When the Blue revolution characterized by proliferation of aqua farms needed support for their growth,
Mr.Alluri Venkateswara Rao took lead with a vision to take the aqua industry into new heights, established Avanti
Feeds Limited in Kovvur, the central coastal belt, West Godavari District, Andhra Pradesh, India, in the year 1994
with a technology tie-up with Pingtai Enterprises, Taiwan and introduced international quality shrimp feeds for
shrimp farming in India. Thus the Aqua Industry had seen light in India.

19
 He had further taken it to the heights creating sustainable markets for the shrimps produced by the
farmers in India by establishing “ Aqua Products Processing & Export Division (APED) meeting
International standards with state-of-art infrastructure facilities in 1998 near Ravulapalem, East Godavari
District, and Andhra Pradesh, India. APED offers complete hygienic

And value added aqua products for exports to USA, Japan, Australia and UK. Thus the Aqua
Industry further developed in India creating its charisma globally.

Feeds has, to its credit pioneering effort and service for over two decades in development of prawn
culture, processing and exports with its state-of-art shrimp and fish feeds and processing plants.

20
 CHAPTER- 3
Profile of the Avanti feeds limited

21
PROFILE OF THE AVANTI FEEDS LIMITED
HISTORY:
Avanti feeds limited was originally incorporated as AVANTI INDUSTRIES PRIVATE LIMITED on
06-02-1993. The name of the company was changed to AVANTI FEEDS LIMITED in terms of special
resolution dated 21-10-1993. The registered office of the company is situated at g-2, CONCORD
APPARTMENTS, 6-3-65, SOMAJI GUDA, HYDERABAD - 500482.

LATE Sri. A. Venkateswara rao (Chief promoter of the company. Managing director of srinivasa
cystine Limited), Sri A. Indra Kumar, Sri N. ram Prasad and associates later on M/s srinivasa Cystine
Limited also joined in the company for the implementation of the project in technical collaboration with
PINGTAI ENTERPRISES CO. LTD., TAIWAN and is setting up unit for manufacture 1000 tones of
shrimp feed per annum at Kovvur, West Godavari District, Andhra Pradesh and later enhanced to 30,000
tones.

Main Objectives Of The Company:

The main objectives of the company as set out in the memorandum of association are as follows:
1. To give the best product to the farmers.
2. To reach no.1 position in India.
3. Get good name and popular brand in the market.
1. Good benefits provided to the farmers.
AVANTI – PINGTAI “ SHRIP FEED” is the best because manufactured in technical
collaboration with world know shrimp feed manufacturer M/s PINGTAI ENTERPRISE Co. LTD,
TAIWAN.

➢ International quality feed manufactured with fully computerized,. Sophisticated, imported from I D A
H machinery co ltd, Taiwan.
➢ International quality feed from best quality imported raw materials.
➢ Adherence to stick standards of quality control.
➢ Ideal for semi-standards of quality control.
➢ Ideal water stability of 3 hours minimum.
➢ Good feed conversion ratio (F.C.R 1:1:2 to 1.4)
➢ Nutritionally well balanced with less residual effect
➢ Excellent palatability and easy digestibility.

22
➢ Faster growth with high survival rate resulting in maximum profitability.
➢ No antibiotics and hormones added to the feed.
➢ Backed by well-experienced staff.
➢ Good dealer network.
➢ Mainly produces the following varieties of foods, they are
a. Composition (semi-intensive) Avanti pigtai.
b. Composition (modified-extensive) Avanti pigtai
c. Composition (extensive) Avanti pigtai.
d. Classic shrimp feed, Avanti.
e. Avanti-victor.
f. Profeed.

THE BLUE REVOLUTION - THE BEGINNING

Over the past few years coastal areas of Indian have become home to proliferation
of base industries.
Shrimp farming also known as “ blue revolution” is one of the most important
developments in this industry. Shrimp farming now requires all the supporting activity to
supplement is growth technology requires to manufacture international quality feed for the
blue revolution is complex and not available in the country.

Advanced process engineering is need to ensure that the 40 essential dietary inputs
are used in required proportions to meet the demand for international quality shrimp feed.
Since 60% of the cost of production is feed, cost efficiency without the sacrifice of
nutritional properties of the feed is imperative shrimp farming project success.

The Triumph of Technology:

Avanti Industrial is a high tech shrimp feed manufacture entering this industry
collaboration with one of the leading shrimp feed manufacture M/s PINGTAI
ENTERPRISES Co. LTD., TAIWAN.

23
PROCESS DESCRIPTION:

The main materials such as fish meal shrimp meal Soya bean meal etc., are feed through the hopped
and then mixed thoroughly. The mixed raw materials are then pulverized to obtain a homogeneous mixture
of the required size. The material is then conditioned with steaming, which leads to gelatinization of the
starchy materials & better water stability. The conditioned mixture is then palletized. The pellets are
dehydrated, cooled and then crumbled into small particle seizes by passing them through rollers. Finally
they are subjected to screening for maintenance of physical appearance.

Feed varies in size and protein content depending on the growth stage of the shrimp. The
stages being starter, grower and finisher. As the process in BATCH PROCESS the different feeds are made
as per requirement, the different being only in the mix of ingredients and size of the pellets.

The product is then bagging machines. The Taiwan P>E fix grades generally the grade 67-70% sometimes
the grade might be lower so analysis will be done in QUALITY CONTROL DEPARTMENT and in case
lower the material is end back to productions.

THE PROCESS CONTAINS 7 STAGES:

1. Raw material intake: it involves intake of raw materials such as Fish Meal, Soya bean Meal, Shrimp
Shell Meal, Squid Meal, Vitamin Premixes, Mineral Premixes, and Maida etc which conform to the
quality standards laid down.

2. Weighing & mixing: it involves weighing of the various raw materials and mixing them according to
their percentage.

3. Grinding: it involves reducing the size of dry ingredients into suitable fine powder.

4. Pelletizing: the process of pelletizing consists of forcing the soft feed through holes in a die to form
compacted pellets which are then cut into a predetermined size.

5. Steam conditioning : It involves proper cooking of the feed, which improves the digestibility of prawn.
It also helps gelatinization of starch, which in turn leads to improved water stability.

6. Cooling: Here the pellets will be cooled dried.

7. Weighing & Bagging: the finished pellets are then weighed and bagged for storage in godowns.

24
FLOW CHART FOR THE MANUFACTURING OF SHRIMP FEE

INTAKE OF RAW MATERIALS INTO BINS

WEIGHING & MIXING

GRINDING

COOCKING & PELLETING

STEAM CONDITIONING

COOLING

BAGGING

STORAGE

MARKET

25
PRODUCT PROFILE:
There are 3 types of shrimp feed:
A. Extensive.
B. Semi-intensive.
C. Modified-Extensive

Extensive type has low protein content 33% and is used for smaller ponds. It’ s cost is low.

Semi-intensive has more density, more protein content 41.2% and is used for large prawn size and
is expensive than Extensive type. In semi-intensive culture 1, 20,000 pieces can be survived in acre of
pound. Now a days this feed has more demand.

Modified extensive is suitable for Indian climatically conditions. December and January are the less
period as the temperature is around 20c which is suitable for prawn culture. Prawn crossed weight of 18
grams is set to be very ideal, where he can get more return on this investment

AVANTI INDUSTRIES - A STRONG BEGINNING

Avanti Industries were promoted by SRINIVASA CYSTINE LIMITED, an existing profit making,
dividend paying 100% Export Oriented Unit (EOU) and Late Sri. Alluri Venkateswara Rao, Chief
Promoter and managing director of Srinivasa Cystine Ltd. It is highly successful exporter of Amino Acids
manufacture from human hair.

The company has good track record of adapting the best technologies in the world of Indian conditions and
as witnessed quality growth in past 17 years. Equity participation comes from Marine Products Export
Development Authority (MPEDA) and Andhra Pradesh Industries Development Corporation (APIDC).

LOCATION OF THE PROJECT:-

The Company setup two Shrimp feed manufacturing units ideally located at Kovvur, near
Rajahmundry, West Godavari District (A.P) in a site measuring 7.60 and 3.16 acres. The installed
capacity of the plant is 40000 metric tons per annum. The required infrastructure facilities and utilities
are available at site and because of Central location, all the markets in the entire east and west is easily
accessible by rail or road.

26
 The project is set to meet the demands of the Coastal districts of Andhra Pradesh which are active
in shrimp farming i.e., Godavari, Krishna, Visakhapatnam, and Nellore and the neighboring states of
West Bengal, Orissa, and Tamilnadu & Gujarat.

TECHNICAL ARRANGEMENTS:-

The Process know-how for the manufacture of Shrimp feed is being

provided by PINGTAI ENTERPRISES COMPANY LIMITED (PE) TAIWAN.

AND THAI UNION FEEDS MILL CO.LTD, THAILAND

• Formula for feed with economic cost keeping in view of efficiency and quality of produced feeds.

• Process know-how with material efficiency and quality.

• The necessary helps for training the sales force of the company to handle the market efforts.

• Training to the opsserating staff in all aspects of production and Quality.

• Quality Control measures.

RAW MATERIALS:-The raw materials are

❖ Fish meal

❖ Defeat Soya flakes

❖ Maida

❖ Defeat Soya powder

These three raw materials are obtaining through indigenous. The other raw materials imported are:-

• SQUID LEVER from JAPAN

• YEAST from BRAZIL

• FISH MEAL from CHILE and SOUTH AMERI

27
And other raw materials:

The remaining 20 raw materials like Dilcium Phosphate, Mono Potassium Phosphate, Oyster lime,
liquid Soya lecithin, squid soluble paste, liquid fish meal, squid meal etc are also imported from different
countries.

PROCESS DESCRIPTION:-

The main raw materials such as Fish Meal, Shrimp Meal, Soya Bean Meal etc. are fed through the
hopped and then mixed thoroughly.

The mixed material is then prevailed to obtain a homogenous mixture of the particles of the required
size. The material is then prevailed to obtain a homogenous mixture of the particulars of the required size.
The materials then conditioned with steaming, which leads to gentrification of study materials and better
water stability. The conditioned mixture is then palletized. The pellets are dehydrated in dyers cooled and
then crumbled into small particle size by passing them through crublers. Finally they are subjected to
screening them through rollers. Finally they are subjected to screening for maintenance of physical
standards and appearance. Feed varies in size and protein content depending on the growth stage of the
shrimp the stages being starter, grower and finisher. As the process is batch process the different feeds are
made as per requirement, the different being only in the mix of ingredients and size of the pellets.

PRODUCTION RANGE:-

There are three types of Shrimp feed

(1) Extensive

(2) Semi-intensive

(3) Modified-extensive

Extensive type has low protein content of 33% and is used for smaller ponds.

28
 Semi-Intensive has more density, more potential content, of 112% and is used for large prawn size and is
expensive than extensive type. In semi-intensive culture 1, 20,000 pieces can be survived in 1 acre of pond.

MANPOWER:-

Total manpower is 75 comprising of 14 managerial staff, 5 supervisory staff, 15 skilled labour,

15 semi-skilled labour and 26 administrative and other staff.

Few technical and administrative personnel have already been appointed and the rest
will be appointed in the near future.

There are three shifts working A, B&C of 8 hours each.

POWER:-

Power Consumption is estimated abou30 700 KVA for which APSEDD has already sanctioned.
The company has two generators sets 350KV. It is estimated that per day production are 100 tones.

WATER:-

The daily requirements of water are 2000 gallons, which can be met from available ground water
sources. A water softener plant of 2000 per hour capacity is also being installed.

PACKAGING:-

Processing, packaging & exporting are done at AVANTI AQUA EXPORTS DIVISION (AAED) at
Ravulapalem which was acquired from RAMA SEA FOODS IN 1996.

Grade-1 AVANTI TIGER

Grade-2 AVANTI QUEEN

Grade-1 is premium to Grade-2 "Headless-BT' Black Tiger Prawns are exported from here which are
the expensive ones in the world.

29
 The plant has storage capacity of 2000 tones. Finished product can be preserved for 3 months. Feed
packaging can be done at KOVVUR bags are sold in range of 25kg, 10kg. The standard is 25kg, 10kg and
15kg. Bags are used for shrimps, which are in growing stage for which the pellet size would be very small.

Sri A. Indra Kumar is the Managing Director of the company and having registered office at
Hyderabad.

For packaging, processing and exporting shrimp, the factory is having its AVANTI AQUA EXPORTS
DIVISION (AAED) at Gopalapuram near Ravulapalem.

The company is maintaining very good harmonious relation with the employees with direct
participation thus enabling good industrial relations.

Provision stipulated under the factories act is being implemented towards labour welfare. Norms of
minimum wages act is being followed in payment of wages and salaries.

Compensation is paid according to the stipulations of workmen compensation Act.

Even today, for the most part, Indian Shrimp Cultivators largely rely on imported feeds, which involve
storage, transportation and most importantly lack of freshness in feed.

By providing international quality shrimp feed in the country Avanti Feed's present a fresh,
cost-effective alternative, without and compromise in quality. In addition, the feed is ideally suited to local
conditions.

30
 The other feature of "AVANTI PINGTAI"

• Good dealer network

• Backed by well-experienced technical staff

• Excellent palatability and easy digestibility

• No antibiotics or growth hormones added to the feed

• Faster growth with high survival rate reuniting in maximum profitability.

• Good appearance, smells and taste.

• Nutritional well balanced witness residual effect

• Ideal water stability of 2 to 3 hours minimum

International quality feed manufactured with fully computerized, sophisticated, imported raw materials
and imported machinery.

CREDIT TERMS MAY BE:-

(1) Bank guarantee

(2) Letter of Credit (60days)

(3) Post-dated cheques for exporters

(4) Guarantee against land, collateral securities etc

(5) Cash and Carry.

Appointing genuine dealer and sub dealers may be more or less motivated there he is
concentrating more and appointing more sub dealers.

Maintaining the same proportion of sales by not letting down and any products having defects are
immediately replaced.

Conducting technical seminars, paper media, hoarding, wall paints, leaflets, aqua meal stalls, and
farmer meeting, sales incentives including foreign trips, vehicles like cars and motor cycles.

31
 Avanti’ s Strengths and Weaknesses:
STRENGTHS:

Manufacturing in technical collaboration with world renewed shrimp feed manufacturing M/s
P1NGTAI ENTERPRISES COMPANY LTD., TAIWAN. THAI UNION FEED MILL CO.LTD,

International quality feed manufacturing with fully computerized

Imported machinery from IDAH, TAIWAN.

Made high quality IMPORTED RAWMATERIALS.

Ideal water stability for 2 to 3 hours minimum

Good appearance, smell and taste.

• Good technical service.

• Good after sales and service.
• Fresh speedily supplied at the consumer doorstep. This avoid virus.
• Reasonable price structure
• Nutritionally well balanced with less residual effect.

WEAKNESSES:-

• Demand is not able to meet the support product has to be increased considerably.
• Delays in payments are the structure in more emphasized on credits.

32
Profit And Loss Account for the Year Ended 31st March 2020 of the Avanti
Feeds Limited
Particulars Amount

.
INCOME
Operating Income 411,529.15
Other Income 7,023.47

418,552.62

EXPENDITURE
329,936.68
Material cost
11,351.49
Personnel cost
28,370.17
Manufacturing & other Expenses
198.79
Finance Charges
Depreciation 3,770.67

1,045,012,871
22,753,712
10,801,602
Profit /(loss) before Tax
-
Deferred Tax (release)
11,952,110
Fringe Benefit Tax
180,225,485
Profit after Tax
168,273,375
Profit brought forward from Previous Year
Profit available for appropriation

168,273,375
APPROPRIATIONS
Surplus carried to Balance Sheet 168,273,375

Total

33
34
 Chapter – 4
Theoretical Frame Work

35
WORKING CAPITAL MANAGEMENT

Working capital management is the process of planning and controlling the level and mix of current assets
of the firm as well as financing these assets. A firm’ s working capital consists of short term assets such as
cash and bank balance, inventories, receivables (Including debtors and bills) and marketable securities. The
working capital management refers to the management of the level of all these individual current assets,
the current liabilities and the interrelationships that exist between them. Thus, it is also known as current
asset management.

Existence of working capital is imperative to any firm. The fixed assets which usually
require a large clunk of the total funds can be used at an optimum level only if supported by a proper
working capital. Working capital also involves investment of funds of the firm. If the working capital level
is not properly maintained and managed then it may result in unnecessary blocking of scare resources of
the firm. The working capital management includes the management of the level of current assets as well
as the management of the total working capital. However each individual current asset has unique
characteristics which the financial manager must consider in deciding how much money should be invested
in each of the current assets.

Sales realization, turnover, return on investment net worth of capital, efficient management of financial
resources and deliberate analysis of financial results are prerequisite for the success of an enterprise. In that
working capital management is a capital for day business transactions.

36
CLASSIFICATION OF WORKING CAPITAL:
Working capital management is mainly classified in two ways.

CONCEPTS OF WORKING CAPITAL:

On this basis there are two types of Working capital.

GROSS WORKING CAPITAL:

It is simply called as working capital and refers to the firm’ s investment in current assets.
Current assets are the assets that can be converted into cash within an accounting year or operating cycle
and include cash short term securities, debtors, bills Receivable and stock gross working capital concept
focuses attention on two aspects of current assets management.
1. Optimum investment in current assets.
2. Financing of current assets.

Another aspect of gross working capital points to the need of arranging funds to finance current assets. Whenever a
need for working capital funds arises due to an increasing level of business activity, arrangement should be made
quickly.

NET WORKING CAPITAL:

Net working capital refers to the difference between the current assets and current liabilities Current
liabilities are those claims of outsiders which are expected to mature for payment with in an accounting
year and include creditors, bills payable and outstanding expenses
Net working capital can be positive or negative. Positive working Capital will arise if the current
assets are more than current liabilities Negative working capital will arise if current liabilities exceed the
current assets

37
TIME BASED:
PERMANENT/ 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, which is continuously
required by the enterprise to carry out of its normal business operations

For example every firm has maintained a minimum level of raw material, work in progress, finished
goods and cash balance. The minimum level of current assets is called permanent or fixed working capital;
as this part of capital is permanently blocked in current assets As the business grows the required amount
of permanent working capital also increase due to the increase in current assets

The permanent working capital can be further classified into:

regular working capital: regular working capital is required to ensure the circulation of current assets
from cash to inventories, from inventories to receivable and from receivables to cash and so on.

Reserve working capital: It is the excess amount over the requirement for regular working capital which
may be provided for contingencies that may arise at unstated periods such as strikes, rise in prices,
depression

TEMPORARY OR VARIABLE WORKING CAPIAL:

Temporary or variable working capital is the amount of working capital, which is required to meet
the seasonal demand and some special needs. Variable working capital can be further classified as

1. Seasonal Working Capital: Most of the enterprises have to provide additional working capital
to meet the seasonable and special needs. The capital required to meet seasonal needs of the
enterprise is called seasonal working capital.

2. Special working capital: Special working capital is a part of working capital which is required
to meet special needs like launching of extensive marketing campaigns for conducting research.

38
NEED FOR WORKING CAPITAL:

The need and importance of adequate working capital for daily requirements can be hardly
underestimated. Every firm must maintain a sound working capital position. Otherwise its business
activities may be adversely affected. The financial manager must see that the firm has sufficient Working
capital as and when required so that the fixed assets of the firm are optimally used. The objective of financial
management to maximize the share holder’ s wealth can’ t be attained if the operations of the firm are not
optimized. Thus, every firm must have adequate working capital.

DISADVANTAGES OF EXCESSIVE WORKING CAPITAL:

1. Excessive working capital means the idle funds, which earn no profit for the business, and hence
the business cannot earn a proper rate of return on its investments.
2. When there is a redundant working capital it may leads to unnecessary purchases and
accumulation of inventories causing more chances of theft, waste and losses.
3. Exercise working capital implies excessive debtors and infective credit policy which may cause
higher incidence of bad debts.
4. It may result into overall inefficiency in the organization.
5. When there is excessive working capital, relationship with banks and other financial institutions
may not be maintained.
6. Due to low rate of return on investment, the value of shares may also fall.
7. The redundant working capital gibes rise to speculative transactions.

39
 DANGERS OF INADEQUATE WORKING CAPITAL:

Every business concern should have adequate working capital to run it business operations. It should
have neither excess working capital nor inadequate. Both are bad for the business. However inadequate can
be more dangerous because:
1. A concern that has inadequate working capital can’ t pay it short-term liabilities in time. Thus, it
will lose its reputation and shall not be able to get good credit facilities
2. It can’ t buy its requirements in bulk and can’ t avail discounts etc.,
3. It becomes difficult for the firm to exploits favorable market conditions and undertakes profitable
projects due to lack of working capital.
4. The firm can’ t pay day to day expenses of its operations and it creates inefficiency because of
increasing costs and reducing the profits.
5. It becomes impossible to utilize efficiency the fixed assets due to non-available of liquid funds.
6. The rate of return on investment also falls with the shortage of working capital.

NETWORKING CAPITAL AS A QUALITATIVE CONCEPT:

➢ It indicates the liquidity position of the firm.

➢ Suggests the extent to which working capital needs may be financed by the permanent sources.
A negative working capital position poses threat to the solvency of the firm.

Excessive liquidity is also bad for the company as it may lead to mismanagement of current assets.

Net working capital also covers the question of judicious mix of long term and short term funds of
financing current assets. Therefore, working capital should be financed by permanent sources of funds such
as owner’ s capital debentures, long-term debt and preference capital.

In summary, it is emphasized that both gross and net concepts of working capital are equally important for
effective management of working capital. The date and problems of each company should be analyzed to
determine the amount of working capital. It is not fusible in practice to finance current assets. Since the
current assets involve coast of funds they should be put to productive use.

40
SOURCES OF WORKING CAPITAL:
The working capital requirement should be met from both short term as well as long term sources
of funds. It will be appropriate to meet at least two thirds if not all of the permanent working capital
requirements from long term sources. The financing of working capital through short term sources of funds
has the benefits of low cost establishing close relationships with banks. For the convenience of the study
the sources of working capital may be classifies under two heads.

A) Sources of long term of regular working capital.

B) Sources of short term of seasonal working capital.

FINANCING OF LONG TERM WORKING CAPITAL:

The long term W.C requirements include the initial W.C and the regular W.C along with it the minimum
level of investment in various current assets also determines the Requirements of long term working capital.
This capital can be conveniently financed by the following sources.
1. Issues of shares or share capital:
A part of long term working capital can be financed with spare capital.
2. Issues of debentures:
Debentures are also an important source of long term working capital because they are
fixed cost sources. Right debentures have also been popular In India since 1978.

3. Retained profits:
A part of the earned profits may be back by the firm in meeting their working capital
requirements. It is regular and cheapest source of working capital as it does not involve any exploits lost of
capital.
4. Idle fixed assets can be sold out and sale proceeds can be utilized for financing the working capital.
5. Long term loans:

Midterm and long term loans for period above 3 years provide imports sources of working capital such
term loans can be borrowed from the special financial institutions such as IDBI, IFCI, and LIC etc

41
FINANACING OF SHORT TERM WORKING CAPITAL:
The category of funds covers the need of working capital for financing day to day business
requirements normally the duration of such requirements does not exceed beyond a year.
Internal sources:
Depreciation funds:
The depreciation funds constitute import sources of working capital some others of business finance
do not accept them as a source of funds but it is not reasonable.
Provision for taxation:
The provision for taxation can also be used by the companies as a source of funds but it is not
reasonable.
Accrued expenses:
The firm can possible the payment of expenses for short periods. Hence those accrued expenses also
constitute an important source of working capital.

External sources:
1. Trade credit:
One of the most important forms of short term finance is trade credit extended by one of
business enterprise to another on the purchase and sale of goods and equipments. The use of trade credit
has increased in recent years due mainly perhaps to the credit squeeze.

2. Bank credit:

Commercial bankers are also principal source of working capital. They provide working
capital in a number of ways such as over drafts, the cash credit, line of credit, sort term loans etc, compare
with others methods of borrowing this is the most flexible source because when debt is no longer require it
can be quickly reduced.

3. Credit papers:
In the category of credit papers, bills of exchange, promissory notes of shorter duration
varying between a month and six months are used. These papers are discounted with a bank and capital can
be arranged. Accommodation bill is an important method of such finance.

4. Public Deposits:

Public deposits are also an important source of short term and medium term finance.
Due to shortage of bank credit in recent past the importance of public deposits has increased. They
have been very popular among Indian companies during last three years.
42
5. Customers Credit:
Advance may also be obtained on contracts entered into by the enterprise. The
customers are after asked to make some advance payment in cash in lieu of a Contract to purchase
such advance can be utilized in purchasing raw material paying wages and so on.

6. Government Assistance:
Sometimes, central and state government also provides short term finance
on easy terms.
7. Loans from Directors:
An enterprise can also obtain loans from its officers, directors, M.D’ s etc.
These loans are often obtained at almost negligible rates of interest. Sometimes, no interest is charged
on them other fellow companies working capital with the same group.

8. Security of employees:
Its employees are required to make deposits with their employer; companies
such companies can utilize those amounts in meeting working capital needs.

9. Factoring: Factoring involves raising funds on the security of the company’ s debts, so that cash
is received easier.

43
APPROCHES FOR DETERMINING THE FINANACING MIX:

There are three basic approaches for determining the working capital financing mix.

• THE HEADING APPROACH:

• According to this approach the maturity of the source of fund should much the nature of assets to
be financed. The Approach is therefore also termed as “ Matching approach” it divides the requirements of
working capital funds into two categories.

• Permanent working capital funds required for the purchases of core current asset such do
not vary over time.

• Temporary or seasonal working capital funds which fluctuate over time.

The permanent working capital requirements should be financed by long term funds while
seasonal working capital requirements should be financed by short term funds.

THE CONSERVATIVE APPROACH:

According to this approach all requirements to working capital should be met from long- term
sources. The short-term sources should be used only for emergencies. The conservative approach is less
risky but more costly as compared to the heading approach. In other results in high profit, high risk and low
cost, low net working capital.

TRADE OF BETWEEN HEADING AND CONSERVATIVE APPROACH:

The heading and conservative approach both can give satisfactory results. The level of such trade off will
different from case depending upon perception of the risk by persons involved in financial decision making.
However, one way of determining the level of trade off is by finding the average of the minimum and
maximum requirements of the working capital during a period. The average working capital so obtained
may be filled again either by long term funds or short-term funds

44
FACTORS INFLUENCING WORKING CAPITAL REQUIREMENTS:

The working capital needs of a firm are influenced by numerous factors. The important ones are:
• Nature of business
• Seasonally of Operations
• Production Policy
• Market Conditions
• Conditions of supply

1. Nature of Business:
The working capital requirements of a firm are closely related to the nature of its
business. A service firm, like an electricity undertaking or a transport corporation, which has a short
operating cycle and which sells predominantly on cash basis, has a modest working capital requirement.
On the other hand, a manufacturing concern like a machine tools unit, which has a long operating cycle and
which sells largely on credit, has a very substantial working capital requirement.

2. Seasonality of operations:

Firms which have marked seasonally in their operations usually have high fluctuating working capital
requirements. To illustrate consider a firm manufacturing ceiling fans. The sale of ceiling fans reaches a
peak during the summer months and drops sharply during the winter period. The working capital need of
such a firm is likely to increase considerably in summer months and decrease significantly during the winter
period.

1. Production policy:
A firm marked by pronounced seasonal fluctuation in its sales may pursue a production policy which
may reduce the sharp variations in working capital requirements. For example, the manufacturer of ceiling
fans may maintain a steady production throughout the year rather than intensify the production activity
during the peak business season. Such a production policy may dampen the fluctuations in working capital
requirements.

45
 2. Market conditions:
The degree of competition prevailing in the market place has an important bearing on working capital
needs. When competition is keen, a larger inventory of finished goods is required to promptly serve
customers who may not be inclined to wait because other manufactures are ready to meet their needs.
Further, generous credit terms may have to be offered to attract customers in highly competitive market.
Thus working capital needs tend to be high because of greater investment in finished goods inventory
accounts receivables.

3. Conditions of supply:

The inventory of raw materials spares and stores depends on the conditions of supply. If the supply
is prompt and adequate, the firm can manage with small inventory. However, if the supply is
unpredictable and scant then the firm to ensure continuity of production would have to acquire stocks
as and when they are available and carry larger inventory on an average. A similar policy may have to
be followed when the raw material is available only seasonally and production operations are carried
out round the year.

OPERATING CYCLE:
Working capital is required because of the some gap between the sales and their actual realization in
cash. This time gap is technically terms as upsetting cycle of the business.
In case of manufacturing company, the operating cycle is the length of time necessary to
complete the following cycle of event.
• Conversion of cash into raw materials.
• Conversion of raw materials into works in progress.
• Conversion of progress into finished goods.
• Conversion of account receivables into cash.

This cash is continues phenomena. In case of “ Trading firm” the operating cycle will include the
length of time required to:
a) Cash into inventories.
b) Inventories into Accounts receivables.
c) Accounts receivables into cash

In case of “ Financing firm” , the operating cycle includes he length to time for 1 Year
46
a. Conversion of cash debtors and
b. Conversion of debtors into cash

COMPOSITION OF WORKING CAPITAL

The individual combination items of working capital consist of current asset and
current liabilities.

CURRENT ASSETS
Current assets are those, which can be change into cash within one year without
achieve/accomplish activities of the firm.

List of current assets

1) Cash in hand & bank balance

2) Bills receivables

3) Sundry debtors

4) Short term loans and advances

5) Investment

a) Government other trustee securities

b) Fixed deposits with the banks

6) Inventories of stock

a) Raw materials

b) Work in Progress

c) Stores and spares

d) Accrued income

47
CURRENT LIABILITIES

Current liabilities are those, which are calculated to be paid in the

normal course of business within a short period of ordinarily one year out of
the current assets or the income of the business.

LIST OF CURRENT LIABILITIES:

1) Bills payable

2) Sundry creditors

3) Short term borrowings

a) Banks

b) Others

a. Unsecured loans

b. Public deposits maturing one year

c. Deposits from dealers, selling again.

4) Dividends payable

5) Bank overdraft

5) Accrued or outstanding expenses

6) Provision for taxation

7) Sales tax and excise tax.

48
 cash Raw materials

Receivables
Working
process

Credit sales Finished goods

49
 Working Capital Management

Year Working capital

Particulars
Previous Current Increase Decrease

1. Inventories xxx xxx

2. Sundry debtors xxx xxx
3. Cash/bank balances xxx xxx
4. Other current assets xxx xxx
5. Loans and advances xxx xxx
Xxx Xxx
(a) Total current assets

Current liabilities
1. Liabilities xxx xxx
2. Provisions xxx xxx
Xxx Xxx
(b) Total current liabilities

xxx xxx
Net Working Capital (a-b)
xxx xxx
Decrease/increase in Working Capital

Xxx Xxx

50
 CHAPTER-5
DATA ANALYSIS & INTERPRETATIONS

51
 STATEMENT OF CHANGES IN WORKING CAPITAL FOR
THE YEAR 2015-2016
TABLE 5.1 Rs in Lakh……

WORKING CAPITAL

Years working capital

Particulars
2015 2016 Increase Decrease
Current assets:

Inventories 2669.71 2038.32 --------- 631.39

Sundry debtors 1353.64 1542.11 188.47 --------

Cash & bank balances 397.50 899.41 501.90 ---------

Interest accrued 21.09 5.79 -------- 15.29

Loans & advances 1372.50 1399.64 27.14 -------
Total c.a: 5814.46 5885.28
Current liabilities:
Liabilities &
Provisions 826.55 1196.15 -------- 369.60
Total current
Liabilities 826.55 1196.15
Net Working capital 4987.91 4689.12
Net Decrease in
working capital 298.78 298.78

TOTAL 4987.91 4987.91 1016.29 1016.29

INTERPRETATION : Table 5.1 shows the changes in net working capital for the year 2015-
2016.The net decrease in working capital during the year 2015-16 is Rs 298.78 lakhs. The
interest accrued Inventories are, decreased. Sundry debtors, cash & bank balances, and loans
& advances increased In this year Liabilities & Provisions has been decreased, therefore by
this reasons net working capital is Rs 298.78 lakhs
52
 STATEMENT OF CHANGES IN WORKING CAPITAL FOR
THE YEAR 2016-17
Table 5.2 Rs in Lakh.

WORKING CAPITAL

Years working capital

Particulars
2016 2017 Increase Decrease

Current assets:

Inventories 2038.32 2727.48 689.16 ------

Sundry debtors 1542.11 893.27 ----- 648.84

Cash & bank balances 899.41 340.77 ----- 558.64

Interest accrued 5.79 12.88 7.09 -----

Loans & advances 1399.64 1339.46 ------ 60.18

Total c.a: 5885.28 5313.87

Current liabilities:

Liabilities & Provisions 1196.15 1360.76 -------- 164.60

Total current Liabilities 1196.15 1360.76

Net Working capital 4689.12 3953.10

Net Decrease in working
capital 736.01 736.01

TOTAL 4689.12 4689.12 1432.26 1432.26

INTERPRETATION:
Table 5.2 shows the changes in net working capital for the year 2016-17.The net decrease in
working capital during the year 2016-17 is Rs 736.01 lakhs. The interest accrued Inventories
are, decreased. Sundry debtors, cash & bank balances, and loans & advances increased In this
year Liabilities & Provisions has been decreased, sphere fore by this reasons net working
capital is Rs 736.01 lakhs

53
 STATEMENT OF CHANGES IN WORKING CAPITAL FOR
THE YEAR 2017-18
Table 5.3 Rs in Lakh.

WORKING CAPITAL

Years working capital

Particulars
2017 2018 increase Decrease

Current assets:

Inventories 2727.48 3905.00 1177.52 ------

Sundry debtors 893.27 2300.77 1407.50 ------

Cash & bank balances 340.77 410.00 69.23

Interest accrued 12.88 18.02 5.13 -----

Loans & advances 1399.46 1122.50 ------ 216.95

Total c.a: 5313.87 7756.31

Current liabilities:

Liabilities & Provisions 1360.76 2184.94 -------- 824.18

Total current Liabilities 1360.76 2184.94

Net Working capital 3953.11 5571.36

Net increase in working
capital 1618.25 ----- ----- 1618.25

TOTAL 5571.36 5571.36 2659.39 2659.39

INTERPRETATION: Table 5.3 shows the changes in net working capital for the year
2017-18.The net increase in working capital during the year 2017-18is Rs 1618.25 lakhs.
The interest accrued Inventories are, decreased. Sundry debtors, cash & bank balances, and
loans & advances increase. In this year Liabilities & Provisions has been decreased, therefore
by this reasons net working capital is Rs 1618.25 lakhs.

54
 STATEMENT OF CHANGES IN WORKING CAPITAL FOR
THE YEAR 2018-2019
Table 5.4 Rs in Lakh..

WORKING CAPITAL

Years working capital

Particulars
2018 2019 Increase Decrease

Current assets:

Inventories 3905.01 4215.26 310.25 --

Current inventers 700.28 1727.62 1027.34 ---

Cash & bank balances 410.01 2204.23 1794.5

Trade receivers 2280.77 1550.51 730.27

Loans & advances 170.08 522.20 352.12 -

Other current assets 547.12 553.22 6.1

Total c.a: 8013.27 10773.04

Current liabilities:

Liabilities & Provisions 18350.25 14261.40 4088.85

Total current Liabilities 18350.25 14261.40

Net Working capital 10336.98 3488.36

Net increase in working
capital ----- 6848.62 ----- 6848.62

TOTAL 10336.98 10336.98 7579.16 7579.16

INTERPRETATION: Table 5.4 shows the changes in net working capital for the year
2018-2019. The net increase in working capital during the year 2018-2019 is Rs 6848.62 lakhs.
The interest accrued Inventories are, decreased. Sundry debtors, cash & bank balances, and
loans & advances increased In this year Liabilities & Provisions has been decreased, therefore
by this reasons net working capital is Rs 6848.62 lakhs.

55
 STATEMENT OF CHANGES IN WORKING CAPITAL FOR
THE YEAR 2019-2020
Table 5.5 Rs in Lakh..

WORKING CAPITAL

Years working capital

Particulars
2019 2020 Increase Decrease

Current assets:

Inventories ---------
22483.05 32879.02 10081.51
Current inventers 51898.1 54538.73 2640.63 ---------

Cash & bank balances

14228.07 14708.83 480.76 ---------
Trade receivers 1609.41 3172.94 1563.53 ---------

Loans & advances --------

88.27 107.15 18.88
Other current assets ---------
558.02 1203.82 645.8
Total c.a:
90864.92 106610.5
Current liabilities:

Liabilities & Provisions ---------

18882.78 19040.01 157.23
Total current Liabilities 18882.78 19040.01
Net Working capital
71982.14 87570.48
Net increase in working
capital 15588.34 --------- ---------- 15588.34

TOTAL 87570.48 87570.48 15588.34 15588.34

INTERPRETATION: Table 5.5 shows the changes in net working capital for the year
2019-2020.The net increase in working capital during the year 2019-2020 is Rs 15588.34
lakhs. The interest accrued Inventories are, decreased. Sundry debtors, cash & bank balances,
and loans & advances increased In this year Liabilities & Provisions has been decreased,
therefore by this reasons net working capital is Rs 15588.34 lakhs.

56
 FINANCIAL ANALYSIS THROUGHT RATIOS:

CURRENT RATIO:
The Current Ratio is calculated to measure the liquidity position of the company.
The standard norm of this ratio is 2:1 that is for two rupees of current Assets there should be
one rupee of Current Liabilities.

Computation Formula = Current Assets

Current Liabilities

Current Ratio
Table 5.6 Rs in Lakhs…
YEAR CURRENT CURRENT RATIO
ASSETS LIABILITIES

2015-16 5885.31 1196.21 4.91

2016-17 5313.91 1360.81 3.9

2017-18 7756.31 2184.41 3.55

2018-19 10773.21 14261.12 0.75

2019-20 106610.5 19040.01 5.59

57
 120000

100000

80000
CURRENT ASSETS
60000
CURRENT LIABILITIES

40000 RATIO

20000

0
2015-16 2016-17 2017-18 2018-19 2019-20

INTERPRETATION:

Table 5.6 shows the current ratio position of the company on the past
five years from 2015-2020. Here the current ratio Avanti Feeds LTD is 4.91 in 2015-16, 3.9 in
2016-17, and 3.55 in 2017-18 0.75 in 2018-2019, 5.59 in 2019-2020
In the year 2015-16 the current ratio is decreased 4.91. to 3.9 in the year 2016-17, the
current ratio again decreased 3.9 to 3.55, In the year 2017-18 the current ratio is again
decreasing 3.55 to 0.75. In the year 2019-20 the current ratio increased. So the firm can meet
its obligation without any difficulty.

58
 QUICK RATIO:
The Quick Ratio is a measure the firm’s short-term solvency. The standard norm of
this ratio is 1:1 that is for one rupee of current Asset’ s there should be one rupee of Current Liabilities.

Computation Formula = Current Assets-Stock

Current Liabilities

Quick Ratio
Table 5.7 Rs in lakhs…..
YEAR CURRENT CURRENT RATIO
ASSETS-STOCK LIABILITIES
2015-16 3846.96 1196.15 3.21
2016-17 2586.39 1360.76 1.90
2017-18 3851.31 2184.94 1.76
2018-19 6557.78 14261.40 0.45
2019-20 73731.47 19040.01 3.87

80000

70000

60000

50000
CURRENT ASSETS-STOCK
40000
CURRENT LIABILITIES
30000 RATIO
20000

10000

0
2015-162016-172017-182018-192019-20

59
 INTERPRETATION:

Table 5.7 shows the current ratio position of the company on the past
five years from 2015-2020.

The Quick Ratio of Avanti Feed LTD is 3.21In the year 2015-16and 1.90 in 2016-17,
1.76 in 2017-18 and 0.45 in 2018-19, 3.28 in 2019-20. The Quick Ratio in all the five years
is changing in the financial positions.

NET WORKING CAPITAL RATIO:

The Net working capital Ratio is a measure the
firm’s liquidity. A high working capital Ratio has greater ability to meet its current obligations.
Net assets means net current assets + net fixed assets

Computation Formula = Net working capital

Net Assets

Net Working Capital Ratio

Table 5.8 Rs in Lakhs….
YEAR NET WORKING NET ASSETS RATIO
CAPITAL
2015-16 4689.12 8890.73 0.52
2016-17 3953.11 8099.38 0.48
2017-18 5571.36 10418.63 0.53
2018-19 3488.36 18350.25 0.19

60
 2019-20 87570.48 121183.97 0.72

140000

120000

100000

80000
NET WORKING CAPITAL
60000 NET ASSETS

40000 RATIO

20000

0
2015- 2016- 2017- 2018- 2019-
16 17 18 19 20

INTERPRETATION:
Table 5.8 shows the current ratio position of the company on the past
five years from 2015-2020.

The Net working capital Ratio of the Avanti Feeds LTD is 0.52 in the year
2015-16. And it was decreased to 0.48 in the year 2016-17, it further increased to 0.53 in the
year 2017-18, it further decreased to 0.19 in the year 2018-19 and is increased in 2019-20
,the ratio is 0.72. Here the ratio is fluctuating because of changing nature of the net working
capital accomplished by increase. In the net assets the highest ratio is recorded in the year
2019-20 and the lowest is recorded in the year 2018-19

61
INVENTORY TURNOVER RATIO:
The Inventory Turnover Ratio indicates the efficiency of the
firm’s inventory management.

Computation Formula = sales

Inventory

Inventory Turnover Ratio

Table 5.9 Rs in Lakhs…..
YEAR SALES INVENTORY RATIO

2015-16 7299.59 2038.32 3.58

2016-17 9616.10 2727.48 3.52
2017-18 20774.88 3905.00 5.32
2018-19 39341.48 4215.26 9.33

2019-20 72455.48 32879.02 3.22

62
 80000

70000

60000

50000
SALES
40000
INVENTORY
30000 RATIO

20000

10000

0
2015-16 2016-17 2017-18 2018-19 2019-20

INTERPRETATION:
Table 5.9 shows the current ratio position of the company on the past five years from 2014-
19.
The Inventory turnover ratio of Avanti Feeds LTD is 3.58 in 2015-16, and it declined to
3.52 in 2016-17 and it further increased to 5.32 in 2017-18. Also, it increased to 9.33 in 2018-
19 and it is again decreased to 3.22 in 2019-20 comparison with other years the ratio is low in
2019-2020 and 2018-2019 is the highest ratio.

WORKING CAPITAL TURNOVER RATIO:

The Ratio highlights the effective utilization of

working capital with regard to sales this ratio represent the firm’s liquidity Position. It
establishments relationships between cost of sales and networking capital.

Computation Formula = Sales

Working capital

63
 Working Capital Turnover Ratio

Table 5.10 Rs in lakhs.

YEAR SALES WORKING RATIO
CAPITAL
2015-16 7299.59 4689.12 1.55
2016-17 9616.10 3953.11 2.43
2017-18 20774.88 5571.36 3.72
2018-19 39341.48 3488.36 11.27
2019-20 72455.48 87570.48 0.82

100000

90000

80000

70000

60000
SALES
50000
WORKING
40000 RATIO
30000

20000

10000

0
2015-16 2016-17 2017-18 2018-19 2019-20

64
 INTERPRETATION:

Table 5.10 shows the current ratio position of the company on the past five
years from 2015-2020
The working capital Turnover Ratio of Avanti Feeds LTD is 1.55 in the year 2015- 2016.
The ratio is increased to 2.44 in the year 2016-17, and it further increased to 3.72 in the year
2017-18. And the ratio is increased to 11.27 in the year 2018-2019, it declined to 0.82 in the
year 2019-2020. The ratio is recorded highest in the year 2018-2019 and the lowest is recorded
in the year 2019-20.

65
CHAPTER - 6
➢ Findings
➢ Suggestions
➢ Conclusion
➢ Bibliography

66
FINDINGS

➢ It is observed that, the net working capital of the organization is positive

through the study period
➢ Through the net working capital is positive, it should be maintained at
satisfactory level for all the years.
➢ Current assets are increased year by year liabilities are also increased year by
year from 2015- 2016 to 2019 -2020.
➢ Quick ratio is 1:1 is satisfactory but comparative with 2015-16 to 2019-19 is
very low.
➢ Therefore the quick ratio is very low at the beginning of the year but later it is
register at higher rate in this organization.
➢ Stock increased throughout from 2015-20 and sales also increased from 2015-
20 so company financially good in position.
➢ Working capital shows current assets and current liabilities from 2015-20
working capital ratio increases throughout so as per working capital ratio
company business is well in position.

67
SUGGESTIONS:

• It is suggested that the fluctuations existed in the net working capital

must be controlled by properly maintaining the ratio of current assets
and current liabilities
• Then automatically changes identified during the period can be
minimized.
• Even in future also if it is maintained the proper ratio, the company can
effectively run without such deficiencies.
• It is advised that, the yardstick for the quick ratio 1:1 various it is very
low in the organization therefore, the company should need to raise its
quick assets first to overcome the existing problem in order to meet the
requirements
• It is suggested that, properly maintaining the inventory turnover ratio is
also very good symbol for the organization. The advised to shows the
sound position of the company they maintain the same and it should try
to increase the same year by year ratio shows the inner strength and
capability of the company
• Hence, the receivable turnover ratio is high in the company. Therefore,
it shows the good for the sales position of the company.

68
CONCLUSION;

❖ Avanti feeds Ltd was the company of west Godavari district. It is one of
the top most companies in Andhra Pradesh.
❖ Avanti feeds Ltd is in kovvur to the West Godavari district
❖ Avanti was growing day by day increasing their sales. It is running
successful towards it goals and objectives
❖ Beside from purchase of feeds it provides them number of services which
are appreciable unbelievable.
❖ the company gross profit is satisfactory but the net profit its very less until
current year it shows that the company operating expenses to increase the
profit
❖ Working capital shows the company liquidity position. The Avanti feeds
is maintaining a satisfactory a amount of working capital which makes
the company liquid.
❖ Even through, there is a good gross profit margin the gap between gross
profit and net profit percentage is very high.

69
 BIBLIOGRAPHY

BOOKS:
❖ Financial management - KHAN&JAIN (KALYANI PUBLISHERS)

❖ Financial management - I.M.PANDY (TATA MCGRAW HILL)

❖ Financial management - PRASANNA CHANDRA ( TATA MCGRAW HILL)

❖ Financial Accounting - S.P.JAIN&K.L.NARANG ( KALYANI PUBLISHERS)

❖ Financial management - R.K.SHARMA,SAASHI GUPTA

(KALYANI PUBLISHERS)

JOURNALS:
Annual Audit Reports of Avanti feeds

WEBSITES:
www.avanthifeeds.co.in
www.avanthifeeds/r&d.in

70