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A STUDY ON WORKING CAPITAL MANAGEMENT IN KSE LTD, IRINJALAKUDA
PROJECT REPORT

Submitted by

JITHIN C.U
Register No: 098001608020

In partial fulfilment for the award of the degree Of

MASTER OF BUSINESS ADMINISTRATION MAHENDRA ENGINEERING COLLEGE
DEPARTMENT OF MANAGEMENT STUDIES NAMAKKAL – 637 503 MAY-2011

MAHENDRA ENGINEERING COLLEGE

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DEPARTMENT OF MANAGEMENT STUDIES
PROJECT WORK MAY-2011

This is to certify that the project entitled A STUDY ON WORKING CAPITAL MANAGEMENT IN KSE LTD, IRINJALAKUDA

JITHIN C.U Register No: 098001608020 of MBA during the year 2010-2011 Project guide S.P. SREEKALA Submitted for the project viva-voce examination held on-----------------------------Internal examiner ------------------External examiner Head of the department

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Com.U Register No: 098001608020 I certify that the declaration made above by the candidate is true S. IRINJALAKUDA being submitted in partial fulfillment for the award of MASTER OF BUSINESS ADMINISTRATION is the original work carried out by me.A..D).4 DECLARATION I affirm that the project work titled A STUDY ON WORKING CAPITAL MANAGEMENT IN KSE LTD.Phil.P.SREEKALA M.. . M.. JITHIN C.. M. either in this or any other University. It has not formed the part of any other project work submitted for award of any degree or diploma.B. (Ph.

for his valuable guidance and for the pain and strains taken in making this project report as a grand success.S.I. I have great pleasure in extending my sincere gratitude to my beloved guide Mrs.Phil H.. M. F. IRINJALAKUDA who kindly provided their helping hand for doing the project work. B. M com.D (Bio-Engg).U .D). S.Mahendra Engineering College. IRINJALAKUDA and other staff members at KSE LTD.Com. Irinjalakuda. Lecturer Department of Management Studies.E. R.. Mahendirapuri. M.E.D (Solar Energy). Ph.. M. Mahendra Engineering College.S. M.P. JITHIN C.. KSE LTD. (Ph. SAMSON RAVINDRAN.ANIL.. R ARIVALAGAN. for providing me the needed facilities to do my project report in working capital management in KSE Ltd.D in charge.E.5 ACKNOWLEDGEMENT I wish to express my sincere thanks to the Management. Ph. for his encouragement given to me in carrying on the project report.B. Mahendra Engineering College. I remember with love the blessings and inspiration given by my parents.D..M. family members and friends for the successful completion of the work.E. Namakkal Dt .Phil. MBA. M. I take immense pleasure to thank Mr. for his valuable guidance during each stage of project report.A.A. I express my sincere thanks to our Principal Dr. SREEKALA..I.B.. Finance Manager.. M.(India) M.O.. I express my thanks to Mr. Department of Management Studies.T. . C.

1 CONCLUSION 6 APPENDICES 6.2 SCOPE OF THE STUDY 2. LIST OF TABLES LIST OF CHARTS 1 INTRODUCTION 1. SUGGESTIONS 4.2 COMPANY PROFILE 2 DESIGN OF STUDY 2.1 INDUSTRY PROFILE 1.1 FINDINGS 4.6 RESEARCH METHODOLOGY 3 4 ANALYSIS AND INTERPRETATION FINDINGS.1 OBJECTIVES OF THE STUDY 2.3 LIMITATIONS OF THE STUDY 2.2 SUGGESTIONS 5 CONCLUSION & FUTURE ENHANCEMENT 5.6 CONTENTS CHAPTER NO.4 STATEMENT OF THE PROBLEM 2.5 REVIEW OF LITERATURE 2.1 SOURCE 7 REFERENCE PARTICULARS PAGE NO. 8 9 10 13 17 29 30 30 31 32 33 35 36 69 69 70 71 71 72 72 72 ABSTRACT .

LIST OF TABLES TABLE Particulars PAGE . liquidity and profitability of the company. The study is formulated by the research design for analyzing the profitability. IRINJALAKUDA”. Graphs are also used for the diagrammatic representation of the interpretation.The main objective of the study is to find out the soundness. magazines. soundness and liquidity of the company. reports and books. The statistical tools for the study are common size statement. comparative statement.7 The project is “A STUDY ON WORKING CAPITAL MANAGEMENT WITH SPECIAL REFERENCE TO KSE LTD. Secondary data is collected from journals. The study was mainly based on the annual reports of KSE Ltd. The research design used for this study is analytical research design. trend analysis and ratio analysis.

11 COMPARATIVE STATEMENT FOR THE YEAR 2008-09 TO 2009-10 3.5 3.9 COMPARATIVE STATEMENT FOR THE YEAR 2006-07 TO 2007-08 3.4 3.12 3.1 3.8 No 3.7 3.13 INVENTORY CONVERSION PERIODS WORKING CAPIATAL TREND No 38 41 43 47 48 51 53 54 56 58 60 64 66 LIST OF CHARTS TABLE Particulars No 3.6 3.3 3.1 CHART SHOWING CURRENT RATIO No 40 PAGE .10 COMPARATIVE STATEMENT FOR THE YEAR 2007-08 TO 2008-09 3.2 3.8 TABLE SHOWING CURRENT RATIO TABLE SHOWING LIQUIDITY RATIO CREDITORS TURN OVER RATIO AVERAGE PAYMENT PERIOD STOCK TURN OVER RATIO WORKING CAPITAL TURN OVER RATIO STATEMENT OF WORKING CAPITAL COMPARATIVE STATEMENT FOR THE YEAR 2005-06 TO 2006-07 3.

information search .3 3.5 CHART SHOWING LIQUIDITY RATIO CREDITORS TURN OVER RATIO AVERAGE PAYMENT PERIOD TREND CHART 43 46 48 68 1.9 3.2 3. INTRODUCTION “Working capital means the part of the total assets of the business that change from one form to another form in the ordinary course of business operations.” In a perfect world. there would be no necessity for current assets and liabilities because there would be no uncertainty.4 3. no transaction costs.

. an organization may be faced with an uncertainty regarding availability of sufficient quantity of crucial imputes in future at reasonable price. again a short term capital asset. there would be no advantage for investing in short term assets. It is characterized by considerable amount of uncertainty regarding the demand. the term Working capital management” (net) represents the excess of current assets over current liabilities. labour. However the world we live is not perfect. There are spreads between the borrowings and lending rates for investments and financings of equal risks. thus in such an environment. Borrowing and lending rates shall be same. This may necessitate the holding of reserve of short term marketable securities. market price. There are transaction costs for purchasing or selling goods or securities. This may necessitate the holding of inventory. Information is costly to obtain and is not equally distributed. scheduling costs. the markets in which real firm operated are not perfectly competitive.. In corporate financial management. These real world circumstances introduce problem’s which require the necessity of maintaining working capital. or production and technology constraints. Capital. Similarly each organization is faced with its own limits on the production capacity and technologies it can employ there are fixed as well as variable costs associated with production goods. and product market shall be perfectly competitive and would reflect all available information. For example.10 costs. In other words. quality and availability of own products and those of suppliers. Similarly an organization may be faced with an uncertainty regarding the level of its future cash flows and insufficient amount of cash may incur substantial costs. The unit cost of production would not vary with the quantity produced. current assets.

Concept of working capital • Gross Working Capital = Total of Current Asset • Net Working Capital = Excess of Current Asset over Current Liability . Working capital is of major importance to internal and external analysis because of its close relationship with the current day-to-day operations of a business.11 Working capital may be regarded as the life blood of business. and other day-to-day expenses. The primary objective of working capital management is to ensure that sufficient cash is available to • • • • • Meet day to day cash flow needs. Every business needs funds for two purposes  Long term funds are required to create production facilities through purchase of fixed assets such as plants. Pay wages and salaries when they fall due Pay creditors to ensure continued supplies of goods and services. lands. buildings & etc  Short term funds are required for the purchase of raw materials. payment of wages. Pay government taxation and provider of capital – dividends and Ensure the long term survival of the business entity. machineries. It is otherwise known as revolving or circulating capital Working Capital = Current Asset – Current Liability.

1 Solvent Extraction Industry 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 9.1.12 1. .9 million/year.1 INDUSTRY PROFILE 1. The solvent extraction plays 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 itself.

When oil industry in other parts of the country was thriving in Kerala it was struggling. now it has reduced to 12%.1. Earlier 20% of the oil was retained in the coconut cake. After conversion from wooden ghani’s to rotaries the cost of the production had increased considerably. P. 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 act as an agent of state trading corporation for distribution of copra.2 Crises of coconut industries in Kerala in 1960’s In the 1960’s there was a crisis in coconut oil extraction industry in Kerala.1. At that time Dr. So they understood the need for modernization of their mills. By using this new method they were able to extract more oil from the coconut cake. S.3 Coconut oil miller’s co-operative society Lion share of copra went to mills in Bombay and they were able to generate good profits. Although Kerala produces 80% of copra produced in the country large part of it was sold to other state as copra itself and they were earning good profit when mills in Kerala wasn’t able to get enough copra for their daily needs.13 1. 1. Then they found out that they were using expeller mills for . recommended of establishment of 3 solvent plants in Kerala and it was also proposed that one should be located in Thrissur itself. By seeing the performance of the Bombay group an investigation department was assigned to investigate it. Lokanathan committee set up to study the feasibility of starting new industries in Kerala.

Today KSE Ltd. Coconut cake contains 4-5% oil is generally used for industrial purpose and deoiled cakes is used to make mixed cattle feed. which is the residue left after the extraction of oil from copra which is mainly used as 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 e. Thus in 1996. driven by a commitment to high standards of quality . The industries in Kerala later began to follow it. expertise and infrastructure of manufacture a range of livestock feed in high volumes. the cattle is feed only with de-oiled cakes and according to the dairy experts. Most of the progress in the cattle feed sector has come about in the past 30 years only. Commands the recourses. The last three decades have been KSE emerging as the leader in ready mixed cattle feed in the country. All these factors stress the importance of having a few cattle field industry in the state. The cattle industry of the state has been utilizing the indigenous raw material i. There are only few cattle feed units in the country especially in Kerala. In foreign countries.1. the milk and fact contend of milk depends solely on the protein contend of the feed. 1.4 Cattle feed Industry From the beginning KSE Ltd marketed the buy product obtained from its solvent extraction division in the brand name of Jersey Copra Cake.e. coconut cake. Entered the cattle field industry.14 extracting oil and was able to reduce the oil content up to 6%. setting up the new plan fir manufacturing ready mixed cattle feed. KSE Ltd.

and infant milk foods of western origin are now being produced in India. Many of these producers have organized themselves into co-operative under the umbrella if the National Dairy Development Board (NDDB) which had been running a highly successful animal husbandry promotion programme named operation flood. feeding their cattle largely on crop residues.5 Dairy Industry Most of the progress in the dairy sector has come about in the past 25 years only. But after the intensification of cattle improvement programme through artificial insemination. which. ice creams. Till 1970. the country’s milk production increased merely by 1% a year.1. using sasses of exotic breeds and launch of operation flood.15 1. and semi Govt. pasteurized butter etc. milk drinks. capitalizing on the availability of cheap surplus milk to produce various kinds of dairy products for the domestic and international market. Several dairy products like skimmed milk powder. The private sector has now entered into this field in a big way. were very common in this country till a few decades ago are now available in abundance in department stores of big and small cities. The main objective of this programme is to . the production started rising rapidly from the mid 19 The transformation of India from a milk deficit to a milk surplus country is essentially the result of an intensive campaign launch by the Govt. bodies to promote animal husbandry as a means of generating income for the landless poor. A variety of cheeses. whole milk powder. The bulk of growth in the milk output is therefore accounted for by the unorganized section consisting of millions of small milk producers.

Cows and bullocks are regarded as the foundation of agriculture in India. 1. Due to these reasons. . Cattle supplies the motive power for almost all agriculture operations such as ploughing. Majorities of Indian cattle are seriously underfed particularly cows in rural areas. They provide most of the manure used by farmers in India and often enable them to earn something during this spare time by carting for hire. the importance of the cattle feed industry has been increased in India. lifting water from wells and the transport of produce to the markets.2 COMPANY PROFILE Cattle play a vital role in the economy of India. their unawareness of farmers about the proper feeding methods of cows leads to cow milk productivity.16 build a viable and self sustaining national dairy industry capable of meeting the domestic demand for fresh liquid milk and milk products and competing in the international area.

2 lakh tones of superior quality cattle feed. It is marketing annually about 2.2. This is the sixth time in arrow that the company has been selected for the most coveted award. The company has secured the National Productivity Award for the year 2001-2002 for being first in terms of production efficiency in the animal feed sector.17 Kerala Solvent Extractions was registered as a public limited company on 25 th September. Its first production .2. 250 crore. KSE is in the oil extraction industry for the past 32 years. Chennai and Kochi. It was registered as a public limited company on 25th September. KSE Ltd was established according to Indian Companies Act 1956. with a capital base of Rs. 1963. 1.2 HISTORY In 1963. a company having annual turn of Rs. 1963. The company was later renamed as KSE Limited and listed in the stock exchanges of Mumbai. KSE. 36 crore embarks on an expansion to double its solvent extraction capacity and add a most modern eco-friendly vegetable oil refining plant. 1. is the largest manufacturer of cattle feed. KSE. It was as a part of the package program to revive coconut oil industry in the state of Kerala that oil millers of Irinjalakuda and surrounding places formed themselves into a corporate body to start a solvent extraction plant. But inefficient crushing methods and competition from the modernized oil mills elsewhere shattered coconut oil industry in Kerala in early 1960’s.1 ORIGIN Copra crushing has been a native industry of Kerala.

Company put up a vegetable oil refining plant at Irinjalakuda at a cost of Rs. Vedagiri project costing around Rs. This project was also fully financed from internal accruals. In 1983. Oil millers of Thrissur are the promoters of the company. In 1980 the capacity of plant was raised to 60 tones per day. By 1992 the capacity of solvent extraction plant was further increased to 100 tones per day. 1 crore in 1995. This plant is now working on three shifts producing around 150 tonnes per day. It was registered in 1956 and incorporated as a public limited company in 1963 as per Indian Companies Act. a fully automatic cattle feed plant was added with a capacity of 120 tones per day capacity. the plant capacity was increased to 180 tones over day. The plant at Irinjalakuda and Vedagiri are fully automatic and key manufacturing operations are controlled by microprocessors. In 1987. Dindigul district of Tamil Nadu in 1988 and 1989 respectively. 6 crore was fully financed out of internal sources of company. This plant has a basic installed capacity to go up to 240 tonnes per day. The cattle feed capacity was subsequently increased to 180 tones per day.18 was started in 1972 with a capacity of 40 tones per day. The third cattle feed plant of the company started operation at Vedagiri in Kottayam district of Kerala in 1995. The company’s second production unit with a capacity of 150 tones per day solvent extraction commenced operation at Swaminathapuram. . The company is reaming solvent extracted coconut oil and expeller sunflower oil in the refinery plant.

billing payroll . share accounting etc. The company started production in1972 with a solvent extraction capacity of 40 MTS per day. selflessly had integrated all function of the organization viz FA.D. KSE went on to upgrade its EDP set up further. In the early stages. Milk.19 Kerala Solvent Extraction Limited was registered as a public limited company on 25th September 1963. Software Pvt. Now they are trying to expand their milk products. Their plant at . inventory. Cochin. have about 8 servers and about 50 Nodes. MIS.PPC. but was assisted by K. De-oiled cake is marketed under the brand name “JERSEY”. Ltd.C. The head office at irinjalakuda has two servers and 40 Nodes running the application.C. etc. in all. The other products are oil-cake. Ice cream. with SQL RDBMS front end on Visual basic and Windows NT OS . the company faced financial difficulties. Chennai. The company was later renamed as KSE Limited. In the year 1999. Cochin and online computerization was fully implemented at all its plants. Cattle feed is the main product of the company. KSE had computerized its operations way back.. On1976 the company is modernized to cattle feed industry with a capacity of 50 tons per day. Being custom made for KSE this ERP software. (Kerala State Industrial Development Corporation) by subscribing to it’s twenty five percent equity capital and I. Other units. KSE Limited is a product oriented company. de-oiled cake (JERSEY).I.F.I. A custom made ERP soft ware was developed for its units and head office through M/s R.Mumbai. Their Ice cream marketed under the brand name “Vesta”.S.R. The company is listed in three stock exchanges. (Industrial Finance Corporation of India). is well accepted in the market.

has a computerized control room for monitoring. The redemption of these shares is at par after ten years but before fifteen years from the date of their allotment. Prima. Projects for this purpose are on consideration. batching. But the company is the number one producer of cattle feed in private sector. the first three processes are out of use.4 SHARE CAPITAL OF THE COMPANY The authorized share capital of the company is Rs.2. 10.2. The company issued 6000.20 Vadagiri. Kottayam. etc. Irinjalakuda unit of the company consists of cattle feed plant and refining plant. 135% redeemable cumulative preference shares of Rs. 1. Now the company is concentrated on producing more milk products. Godrej. pellet cooling and aspiring system. The company has made 2 bonus issues and one right issue. 32 crore. The manufacturing processes used in the company are • • • • Wooden canes Oil mill Expeller mill Solvent extraction Now-a-days. 100 each. size reduction. Irinjalakkuda unit of the company is mainly concentrated on solvent extraction process. pelletisation. 1. The par at value of one equity share capital is Rs.4 crores and issued and subscribed capital is Rs. Milma.3 Challenges Kerala feeds. homogenization. . are the main competitors to the company.

Cattle feed manufacturing capacity of Swaminathapuram unit increased to 180 MTS per day . the new feed supplement for cattle introduced.5 Milestone Year 1976 1979 1983 1984 1987 1988 1989 1990 1991 1993 Events A new plant was set up to produce 50 MTS of ready mixed cattle feed Production capacity of cattle feed plant is increased to 60 MTS per day A fully automatic cattle feed plant started operation. 25 crores. 1. 2006. and Mumbai. Capacity 100 MTS per day The capacity of solvent extraction plant of Tamil nadu unit is expanded to 100 MTS per day Cattle feed production capacity of Tamil nadu increased to 150 MTS per day Palakkad branch started The company enters export market Keyes forte. The present market value of the company’s share is Rs. Chennai. The reserves and surplus on 31st March. 160 as on 22nd December. 2006. The company declared a dividend of 125% for the year ended 31st March. 2005 is Rs. Capacity 120 MTS Per day The solvent extraction plant capacity increased to 80 MTS per day Cattle feed plant capacity increased to 180 MTS per day Cattle feed plant in Tamil nadu went in to operation.2. Company shares are listed at the stock exchanges at Cochin.21 The company went in for public issue of shares in 1994.

Feeds and extractions. Tamil nadu. A modern children’s park and information centre has been completed for the benefit of the public. Cattle feed production capacity of the Irinjalakuda plant increased to 199 MTS per day. and Thalayuthu diary. Calicut branch opened 240 TPD cattle feed plant at Vedagiri in Kottayam district started operation. 2003 Ice cream ‘Vesta’ launched Started produced cattle feed at a leased plant at Edayar. the new pelleted feed in HDPE bags for Kerala market. 2000 Company started production and marketing of pasteurized milk and milk products from Konikkara diary.22 1995 1996 1998 Cattle feed production is started in Mysore in Karnataka state. Thrissur. Kerala. 2002 Started operating a solvent extraction plant and oil refineryon lease at Kanchikkode for processing coconut cake. Company renamed to KSE Limited Company acquired its fourth manufacturing unit at Palakkad and decided to manufacture and market poultry feed from this unit. Company celebrated the silver jubilee of the Irinjalakuda unit on completion of 25th year of commencement of production. Kalamassery. Cattle feed capacity of Swaminathapuram unit increased to 195 MTS per day. ‘Vesta’ haven ice cream parlours at Irinjalakuda an Marathakkara started . Swaminathapuram( a 1999 unit of KSE Limited) was renamed as KSE Limited Swaminathapuram. The company introduced ‘KS Deluxe plus’.

2006 ISO 9001-2000 accreditation for Vadagiri and Swaminathapuram units. The 200 TPD solvent extraction plant at Koratty commissioned. 2005 Cattle feed production capacity at irinjalakuda unit increased to 210 MTS per day.2.23 2004 New project of 200 TPD solvent plant and 100 TPD oil physical refining plant started.6Board of Directors . Started producing cattle feed in a leased unit at Erode. A branch at Nilamel. 1. Company acquired its 5th cattle feed manufacturing unit at Mysore. 100 TPD physical refining plant at Koratty commissioned. Kollam district started. orate. A branch at coimbatore started for marketing Vesta ice cream. Acquires hand from KINFRA for starting a new project at Kinfra park.

They are as followsNAME Mr. John Mr. John francis K. Irinjalakkuda. Vijayaraghavan Mr. Mathew Mr. P. Paul Mr. P. C. 1. D.2. Irinjalakkuda branch. Ragulal DESIGNATION Chairman and Managing director Executive director Director and legal advisor Director Director Director Director Director Director Chief General Manager of the company is Mr.24 Board of directors of the company has ten members including the managing director. Vedagiri unit. 2. C. Mr. T. Sankaranarayanan is the secretary-cum-chief finance manager. Anand Menon. T. K. . T. O.7 Bankers KSE Limited banks with Bank of Baroda. R. Production units (Kerala): 1. Paul Mr. A. 1. K. Dr. Anto Mr. C. M.2. George Mr. Irinjalakkuda unit. Kurumullur.8 Units of KSE Limited Head office KSE Limited. P. R.

Parapadi unit. Dindugal. After some time the company started to produce jersey copra Cakes. Tamil nadu: Palakkad unit.25 3. Cochin. At present it is marketed in Kerala. 2. 5. Palakkad. Tamil Nadu & Gujarat Company started to . Hinkal. Kanchikkode. Mysore. Calicut. Swaminathapuram unit. 4. compound cattle feed & refined sunflower oil. Diary unit. Konikkara. Karnataka: 1. 7. 6. Diary unit. the coconut cake. Edayar.9 PRODUCT PROFILE In the beginning stage of KSE limited had only solvent unit. which comes out of Solvent Extraction process is made pure by de-solvent sing & named as ‘Jersey Brand Copra Cake’. NIDA unit. 1.2. Jersey copra cake. Palakkad. 1. Thalayuthu.

the company started manufacturing ready mixed compound cattle under the brand name “K. Fully automatic & sophisticated live stock feed plant at 120 tonne productions per day was established at Irinjalakuda to meet the increasing demand for cattle & this went Delu Special Super Deluxe Supreme Ordinary into commercial production in 1983.Cattle Feed 26 produce ready mix compound cattle feed because it was not able to fulfill the demand of ‘Jersey copra cake’.S. therefore constituting its share in the milk production of the state. The balanced ready mix feed manufactured after due consideration of needs of the cattle in the state is well received all over Kerala.2. Jersey xe Cattle Pellet Mash Mash Plus Mash Pellet Feed CATTLE FEED SEGMENTATION Pellet Mash Deluxe Plus Delux e Supreme Pellet Jersey Ordinary Mash Super Mash Special Mash .Cattle Feed”.10 CATTLE FEED DEVISION Pellet Mash Cattle feed in 1976. The company was also producing food supplement for cattle feed 1.

27 2. Every business needs funds for two purpose There are spreads between the borrowings and lending rates for investments and financings of equal risks. DESIGN OF THE STUDY Working capital may be regarded as the life blood of business. Working capital is of major importance to internal and external analysis because of its close relationship with the current day-to-day operations of a business. Similarly each organization is faced with its own limits on the production capacity and technologies it can employ there are fixed as well as variable .

This may necessitate the holding of inventory. To analyze the sources of working capital. In other words. creditors. To draw meaningful conclusion and put forward suggestion for effective WORKING CAPITAL management. inventory..1 OBJECTIVES OF THE STUDY I. debtors. IV. . II. the markets in which real firm operated are not perfectly competitive. again a short term capital asset. For example. the term Working capital management” (net) represents the excess of current assets over current liabilities. an organization may be faced with an uncertainty regarding availability of sufficient quantity of crucial imputes in future at reasonable price. In corporate financial management. 2. Similarly an organization may be faced with an uncertainty regarding the level of its future cash flows and insufficient amount of cash may incur substantial costs. current assets.28 costs associated with production goods. To understand firms working capital position. This may necessitate the holding of reserve of short term marketable securities. V. To study the capital structure. To determine the efficiency in cash. III. These real world circumstances introduce problem’s which require the necessity of maintaining working capital.

Bills Payable. Marketable Securities. The term Current Assets refers to those Assets which in the ordinary course of business can be. Each of the current assets must be managed efficiently in order to maintain the liquidity of the firm while not keeping too high a level of any one of them. the Current Liabilities and the inter-relationship that exists between them. the main theme of the theory of management of working capital. Accounts Receivables and Inventory. Each of the short term sources of financing must be continuously managed to ensure that they are obtained and used in the best possible way.29 2. Current Liabilities are those Liabilities. therefore. within a year out of the current assets or the earnings of the concern . Bank Overdraft and outstanding expense. The interaction between current assets and current liabilities is. . This is so because if the firm cannot maintain a satisfactory level of working capital. or will be.The basic Current Liabilities are Accounts Payable. to be paid in the ordinary course of business. The Current Assets should be large enough to cover its current liabilities in order to ensure a reasonable margin of safety. it is likely to become insolvent and may even be forced into bankruptcy.2 SCOPE OF THE STUDY Working Capital Management is concerned with the problems that arise in attempting to manage the Current Assets. The goal of Working Capital Management is to manage the firm's Assets and Liabilities in such a way that a satisfactory level of working capital is maintained. which are intended at their inception. converted into Cash within one year without undergoing a diminution in value and without disrupting the operations of the firm. The Major Current Assets are Cash.

3 LIMITATIONS OF THE STUDY 1. 6. 2.30 2. Iringalakuda . This is a major constraint.The limitations of the ratio analysis are also the major constrains of the study. 4. company’s published financial statement. 2.Data about inventory is not available for further analysis 5.e.The duration of the study is limited to one month.The period of the study of the analysis is limited to 5 years from 2005 to 2009 3.4 STATEMENT OF THE PROBLEM The problem of that is stated as “the increasing the cost of production and highly increasing the cost of raw materials of KSE Ltd.The study is based on the secondary data i.Data for inter firm comparison is not available.

wages. While long term financial decisions like buying capital equipment or issuing debentures involve cash flows over an extended period of time short terms finanacial decision typically involve cash flows within a year or within the operating cycle of the firm. 179. July 2005 .viz.debtors. working capital management is concerned with the problem that arise in attempting to manage the current assets. which is concerned with decisions relating to the current assets and current liabilities?.5 REVIEW OF LITERATURE 2.. It is the capital invested in different items of current assets needed for the business.1 NICOLA A. inventory.cash and other current assets such has loans and advances to third parties capital required for purchase of rawmaterial and for meeting day to day expenditure on salaries. is called working capital. 2. TARASHEV1 1 BIS working papers no.5. advertising etc. rents.31 NEED FOR THE STUDY Working capital management.. The key difference between long term financial management and short term financial management is in terms of the timing of cash.

and also could be improper incorporation of macroeconomic variables.and also produce better and quite an estimate of optimal capital when filtered through the base ii internal rating based approach.3 MARCO SORGE3 Are longer maturity loans in project financing necessarily riskier than shorter maturity loans? This paper show some key characteristics of project finance. 2005 3 BIS Quarterly Review. the paper finds that the particular characteristics of credit risk in project suggest a “hump-shaped” term structure of loan spreads. among other things. 2.5. and ex ante spread finance lending to argue that longterm project financing is not necessarily perceived by lenders as risk in term project finance lending. and of return.2ROHAN CHURM and NIKOLAOS PANIGIRTZOGLOU2 This paper uses a structural model of credit risk to try to decompose into their main component expected default. 253. Instead. where credit risk increases with maturity.32 This paper uses firm-level data to compare the performance of six structural credit risk models in terms successfully they predict default. Structural models focus on the changes in value of a corporate obligor assumes that default occurs when asset values cross some lower threshold. that a large part of credit spread investment grade debt is due to non-credit risks factors. while the reverse is true. political risk. 6 December 2004 . 2 Bank of England working paper no. it looks at how well it fits historical default frequencies to calculate an average historical compensation for credit risk that could be compared to the average observed credit spread. The paper finds that the modal well but they don’t fully capture the effects of the business and credit cycles. The analysis that the most material borrower characteristics are the firms leverage ratio. The findings contrast with most other forms of lending. Endogenous default models. The results show. uncertainty about the rate default . 2. liquidity. such as non-recourse debt. default recovery rate.5. regulation and tax.

5. rating based trigger clauses in 2. RESERCH METHODOLOGY Research methodology is a way to systematically solve the research problem.33 2. 17 august 2004 European Central Bank. It concludes variability in the spread of high-grade A.4 MARK MANNING4 It is tempting to assume that the difference in price between a credit-risk-free bond and a credit risky but it is strongly related to the expectation of default. .5 FERNANDO GONZALEZ . This paper looks at the many ways that the market and regulators have put on agency ratings.g.5.g. It says that ratings have become hardwired financial system in various ways (e. as this paper explains.rated credits is not strongly related to default probability. rating based trigger clauses in lending covenants) that can have effect on market dynamics. Yet. the truth is more complex.. It says that ratings have become hard-wired financial system in various ways (e.. It also summarizes rating methodology and takes a look at the problem of credit and default time horizons. In it we study the various steps that are generally adopted by a researcher in studying his research 4 Bank of England working paper. In this case of lower quality BBB-rated bonds. This applies a structural credit model to explore the problem using data from Sterling bond markets. 2. depending on the modeling technique that is implemented.6. June 2004 5 . Instead the spread is determined by other factors such as liquidity.5 Agency credit ratings are an important feature of the financial markets and they play an increasingly important in bank credit risk management and regulatory capital calculations. It may be understood as a science of studying how research is done scientifically. debentures seem to explain about a third to a half of spread variation.

magazines. 2. journals. This chapter “data analysis and interpretation consist of analytic part based upon empirical study. It is necessary for the researcher to know not only the research methods/techniques but also the methodology. 2.3 TOOLS FOR ANALYSIS Secondary data were analyzed and interpreted with the help of different tools such as ratio analysis.6.2 COLLECTION OF DATA Secondary data is mainly used for this study and the five year data from 2005-06 to 2009-10 pertaining to the study was collected from the company and the remaining from books.1 METHODOLOGY OF STUDY TYPE OF RESEARCH Type of research employed is analytical research 2. web sites etc. schedule of changing in working capital etc. In this project the researcher used annual report for data collection.6.DATA ANALYSIS AND INTERPRETATION Data anlysis and interpretation is the core factor of any project.6.34 problem along with the logic behind them. TIME PERIOD The duration of the study was for a period of 2005 to 2010 3. operating cycle. tables. comparative balancesheets. The study is based on . graphs.

which is a special type of rate expressing the relationship in hundred. • Percentage. . Ratio can be expressed in any of three ways. which is the ratio between the numerical facts over a period of time. • • Rate.1. In project. Pure ratios or propotions. Ratio is basis of this analysis. Ratio analysis is based on different ratios which are calculated from the accounting data contained in the financial satements. Different ratios are used for different purpose. Primary data is collected by means of interview. The ratio analysis is one of the tools in the hands of those who want to know something more from the finanacial satements. RATIO ANAYSIS Ratio analysis is the process of determining and presenting in arithmetical terms the relation between figures and group of figures drawn from satements. Secondary data is collected by annual reports. which are arrived at by the simple division of one number by another. I have used various tools such as  Ratio analysis  Operating cycle  Trend analysis  Schedule of changes in working capital 3.35 primary and secondary data.

ratio materials. idle current ratio should be 2:1 The ability of a company to meets its short term commitment is normally assessed by comparing current assets with current liabilities. bills receivable. debtors.1 CURRENT RATIO Current assets normally mean assets convertible and meant to be converted into cash within a year time. prepaid expenses. Current liability represent the liablities at which fall due for payment within year. CURRENT RATIO . marketable securities and other short term high quality investments. Current assets usually include cash in hand and at bank. work in progress and finished goods. inventories. 3.1.36 These ratios can be grouped into various classes according to the financial activity function to be evaluated. Current ratio establishes the relation between the current assets and current liabilities. Conventional rule.

42 4590.62 2.64 2.37 CURRENT RATIO= CURRENT ASSETS CURRENT LIABILITIES TABLE 3.73 2870.82 2.60 1632.61 CURRENT RATIO 2. The actual current ratio is 2:1 it can be reasonably being taken as a sign of liquidity or the short term solvency of .91 CURRENT LIABILITIES( lakhs) 1195. idle current ratio should be 2:1.37 1142.76 3063.56 840.1 CURRENT RATIO YEAR 2005-06 2006-07 2007-08 2008-09 2009-10 CURRENT ASSETS( lakhs) 3137.67 3270.48 1016.86 INTERPRETATION As a conventional rule.81 3.

1 CURRENT RATIO . The company has maintained the current ratio favorable from 2005-2006 to 2009-2010. To recover this problem the sales have to increase.64. So the stock increased. CHART NO: 3.38 concern. it is because of increased price of the products. The main reason for increasing current ratio in the year 2007-2008 is dipping the sail in that year. but the year 2007-2008 the ratio was highly increased to 3.

usually based on current assets and current liability.39 3.1. These are the ratios which measure the short term .2 LIQUDITY RATIO It is the ability of a firm to meet its obligation in the short run.

37 1142.0984 LIQUDITY RATIO CURRENT ASSETS-CLOSING STOCK(laks) 2005-06 2006-07 2007-08 2008-09 2009-10 1152.94 1210.the conclusion can be the concern is liquid and so it can pay of its short-term liability out of its quickly The company has maintained .48 1016.03 INTERPRETATION Quick ratio is expressed as quick asset:quick liability.96 1255.2865 1.71 2535. If actual quick ratio is equal or more than the standard quick ratio of 1:1.40 solvency or financial position of the firm.17 1328.2 YEAR LIQIDITY RATIO CURRENT LIABILITES(laks ) 1195.60 1632. CURRENT ASSETS – CLOSING STOCK LIQUDITY RATIO = CURRENT LIABILITIES TABLE NO 3.quick ratio of 1:1 is considered to represent a satisfactory financial position.56 840.9641 1.5534 1.4398 1.Liqudity refers to the ability of concern to meet its current obligation as and when they become due.61 0.

CHART NO 3. In year 2005-06 the company shows lower quick ratio because of the company had highest stock in the year.2 LIQUIDITY RATIO .41 quick ratio favorable from 2005-06 to 2008-09.

42 3.3 CREDITORS TURNOVER RATIO .1.

32 46. Normally higher turnover ratio is preferred.84 52. Creditors turnover ratio expresses the number times the accounts payable are converted into purchase by management during the year. ANNUAL PURCHASE CREDITORS TURNOVER RATIO = AVERAGE PAYABLE TABLE3.45 17987.68 787.82 52.75 21910.27 22.29 557.61 418.3 YEAR CREDITORS TURN OVER RATIO ANNUAL PURCHASE AVERAGE PAYABLE CREDITORS TURNOVER RATIO 2005-06 2006-07 2007-08 2008-09 2009-10 16867.80 491.44 29308.54 INTERPRETATION .93 322.43 It constitutes an important source to provide spontaneous working capital of the firms.96 23071.96 52.

44 This ratio reflects whether terms of terms of credit allowed by supliers are liberal or stringent. Now the company recover this problem. High creditors turnover ratio shows that creditors are being paid promptly. CHART3. The company has been maintaining a better creditors turnover ratio but the year 2006-07 the ratio was highly decreased.3 CREDITORS TURNOVER RATIO . while a low turnover ratio reflects liberal credit terms granted by suppliers.

45 3. it shows the .4 AVERAGE PAYMENT PERIOD Average payment period related to the average number of days within which payment to the creditors are being made. If the number of days is large.1.

46 inability of the firm to pay the creditors prompty. But the year 2006-07 the company took 16 days to make the payment. which will definitely affect the credit worthiness NUMBER OF DAYS AVERAGE PAYMENT PERIOD = CREDITORS TURN OVER RATIO TABLE 3. .96 52. Company getting 6-8 days to make payment to the supplier. This help the company to get discount from suppliers.84 52.27 22.32 46.4 YEAR 2005-06 2006-07 2007-08 2008-09 2009-10 AVERAGE PAYMENT PERIOD DAYS IN YEAR 365 365 365 365 365 CREDITORS TURN OVER RATIO 52.54 AVERAGE PAYMENT PERIOD 7 16 7 8 7 INTERPRETATION Above table shows average payment period of K S E pvt ltd.

5 INVENTORY (STOCK) TURNOVER RATIO Inventory turnover ratio reflect the efficency of inventoy management. Higher ratio shows greater efficiency in management and vice versa. COST OF GOODS SOLD .1.4 AVERAGE PAYMENT PERIOD 3. This ratio indicates the number of times the inventory is replaced the during the year.47 CHART 3.

5 SHOWING STOCK TURN OVER RATIO YEAR COST OF GOOD SOLD AVERAGE INVENTORY 1094.48 33971.67 28947.10 27199.76 16.51 1628.22 and 25 days have taken to convert the stock into cash in 2008-09 and 2009-10 respectively.38 22829. company purchased rawmaterial in bulk quantity with discount.34 1340.48 1394.36 2005-06 2006-07 2007-08 2008-09 2009-10 19917. . Company is not achieve the inventory conversion period as ideal in last two years.that is .91 INTERPRETATION The above table shows the inventory conversion period of k s e ltd.20 13.69 21. The reason of taking this much dates.60 24.26 1659. From the part of the company ideal period is 20 days.48 INVENTORY (STOCK) TURNOVER RATIO= AVERAGE INVENTORY TABLE 3.56 STOCK TURNOVER RATIO 18.

49

3.1.6 WORKING CAPITAL TURNOVER RATIO The different use of overall working capital in a firm can be measured with the help of working capital turnover ratio. The ratio indiactes the ratio of working capital utilization in the firm. A higher ratio indicates the efficient utilization of working capital and vice versa.

NET SALES WORKING CAPITAL TURN OVER RATIO= AVERAGE NET WORKING CAPITAL

TABLE 3.6 WORKING CAPITAL TURN OVER RATIO
YEAR NET SALES NET WORKING CAPITAL 2005-06 2006-07 2007-08 21301.58 24076.42 27551.91 1941.82 2958.21 2223.25 WORKING CAPITAL TUREOVER RATIO 10.96 8.13 10.63

50

2008-09 2009-10

28947.49 35007.87

1854.30 2128.30

15.61 16.64

INTERPRETATION The higher ratio indicated efficient utilization of working capital and a low ratio indicates inefficient utilization. The above table shows the working capital and high ratio is due to high net working capital. In the year 2006-07 shows the working capital is 8 times but after that year the company getting good working capital utilization.

3.2 STATEMENT OF WORKING CAPITAL: A statement of working capital is working capital is working capital is prepared to depict the changes in working capital. Working capital represents the excess of current Assets over current liabilities. Since, several times, i.e., all current assets and current liabilities are the components of working capital, it is necessary to measure the increase or decrease therein, by preparing a statement or schedule of changes in Working Capital. This statement is prepared with current assets and current liabilities as appearing in the Balance Sheets under consideration.

51

Working capital is defined as the difference between current asset and current liabilities. Working capital of FRONTLINE EXPORTING is analyzed to find out the nature of source of fund and how they are utilized for financing current assets.

TABLE3.7 STATEMENT OF WORKING CAPITAL FROM THE YEAR 2005-2009 Current Assets a) Inventories 2005-06 15,34,87,65 8 b)Sundry Debtors c)Cash&Bank Balances Total assets (A) 31,32,65,32 3 45,32,76,86 5 90,67,543 9,03,35,432 2006-07 24,65,78,96 0 91,23,654 3,67,85,432 2007-08 23,54,67,43 2 1,09,87,654 13,24,56,87 6 31,24,44,12 5 28,65,00,114 31,24,01,442 43,25,672 34,23,567 2008-09 2009-10

23,98,76,543 27,65,42,765

43,56,87,980 56,76,54,329

09.46 4 29.90.81.41.74.42.908 11.54.76.43.89.09.69 3 17.23.23.100 1.47.67.52 Current Liabilities a) Liabilities b) Provisions Total liability (B) 6.44.57.332 2.23.111 8.432 4.90.24.443 12.77.04.51.67.434 3.34.65.50.65.88 8 6.003 11.75.342 capital (A-B) TABLE NO 3.40 1 22.67.97.42.56.59.654 7.53.65.778 858.8 COMPARITIVE STATEMENT FOR THE YEAR 2005-2006 to2006-07 (Rs in lakhs) .65.212 9.43 5 Net working 19.84.252 16.26.432 8.671 18.

65.03.432 45.654 3.78.65.67.89.003 6.65 8 b)Sundry Debtors c)Cash&Bank Balances 90.543 9.86 5 14.212 9.30.76.32.57.09.89.24.32 TOTAL 3 24.432 4.87.90.000 Working capital= Current asset – current liability INTERPRETARTION: 19.working capital has been increased than the previous years working capital.increase in working capital means increase in the cost of day to day expenses .32.97.66.50.74.46 4 (-) 48077029 ASSETS: a) Inventories 15.23.23.67.432 31.413 9.67.252 8. It says company has increased its capacity of current assets in the year .77.401 The comparative balance sheet for the financial year 2005-06 to 2006-07 shows that there has been increase in the current assets as well as the current liabilities of the company.302 56.34.111 5.09.249 11.85.35.67.35.43.888 29.42.80.53 PARTICULARS LIABILILTIES : 2005-2006 2006-2007 CHANGE a) Liabilities b) Provisions 6.91.96 0 91.56.220 (-)4.23.67.65.43 TOTAL 5 16.

54 TABLE NO 3.9 COMPARITIVE BALANCE SHEET FOR THE YEAR 2006-07 to 2007-08 (Rs in lakhs) .

31.56.97.43 2 1.85.67.23.04.65.23.90.740 36. It says company has decreased its capacity of raw materials at the same time .64.558 2.09.07 2 28.778 5.32.55 PARTICULARS LIABILILTIES : 2006-2007 2007-08 CHANGE a) Liabilities b) Provisions 6.54.000 (-)14.64.83.474 16.08.78.032 ASSETS: a) Inventories 24.84.24.86 TOTAL Working capital= Current asset – current liabilities 1.46 TOTAL 4 8.58.26.11.252 1.432 7.96 0 b)Sundry Debtors c)Cash&Bank Balances 91.24.43.09.51.87.212 INTERPRETARTION: This comparative balance sheet for the financial year 2006-07 to 2007-08 shows that there has been decrease in the current assets as well as the current liabilities of the company.87 6 45.654 13.212 9.85.09.67.654 7.38.528 (-)18.85.11.67.54.57.67.76.441 (-)13.56.654 3.23.15.32.12.640 5 29.432 23.

56 company has increased its cash and bank balances it may be through collecting the amount of creditors.it may be because of in the previous year may be the boom situation of the company .10 COMPARITIVE BALANCE SHEET FOR THE YEAR 2007-08 to 2008-09 (Rs in lakhs) .in this table we can see that working capital has been decreased in a short range . there may be a chance of rice of a competitor TABLE NO 3.

70.54.09. it is clear that there has been an increase in the sundry debtors position of the firm.982 (in lakhs) in the year 2008-0 as .41.654 7.00.778 8.56.87.34.640 (-)44.23.43 2 b)Sundry Debtors c)Cash&Bank Balances 1.78.76.36.09.23.678 5.233 INTERPRETARTION: By analyzing the current assets and current liabilities of the company for the year 2007-08 to 2008-09.11 4 28.26.654 13.07 TOTAL Working capital= 17.57.31.61.54.47.86.09.432 3 7.98 0 28.672 43.57 PARTICULARS LIABILILTIES : 2007-08 2008-2009 CHANGE a) Liabilities b) Provisions 1.64.44.32.90.83.982 (-)30.06.65.90.84.75.667 11.56. There is an increase of Rs.31.032 ASSETS: a) Inventories 23. 66.87 6 36.04.98.61.58.65.104 2 (-)30.67.54 3 43.332 2.44 TOTAL 8.25.111 66.87.38.24.671 Current asset-current liability 23.111 7.

58 compared to that of 2007-08. it may be the stage of depresion TABLE NO 3. it says that company reduced its productivity . In this comparative analysis we can see that working capital has again reduced .11 COMPARITIVE BALANCE SHEET FOR THE YEAR 2008-09 to 2009-10 (Rs in lakhs) .

908 (-)1.42.34 2 (-)11916899 ASSETS: a) Inventories 23.376 13.100 16.76.18.434 3.11 TOTAL Working capital= Current asset-current liability INTERPRETARTION: The comparative balance sheet of 200-09 to 2009-10 shows that there has been an increase in the current liability position of the firm while that of the current assts has also been increased with that of the previous year.47.75.53.65.76. Current assets have been 4 8.19.09.349 36666222 (-)9.54.567 56.65.98 0 28.36.54 3 b)Sundry Debtors c)Cash&Bank Balances 43.87.59 PARTICULARS LIABILILTIES : 2008-2009 2009-10 CHANGE a) Liabilities b) Provisions 8.98.97.24.25.76.30.102 (-)1.34.797 11.332 2.23.50.23.672 43.07.42.01.77.66.84.111 8.90.44 TOTAL 3 12.02.429 27.56.32 9 31.81.44 2 18.44.195 .76 5 34.51.65.00.

working capital also increased in this year so this is a positive trend.442 in 2010 as compared to that of 2009.01.03 OPERATING CYCLE: The operating cycle deals with the cycle of how a firm takes cash and converts it into incventory and how inventory converted into sales.60 increased to 31.24. 3. account receivables. and ultimately .

• • • • Purchase of raw material Payment of raw material Sales of finished goods Collection of cash sales Length of operating cycle is to be determined by the spots with inventory conversion period For call calculating the operating cycle we have to calculate the three accounting period ratios they are inventory conversion period.61 back into cash. An investment in the working capital is influenced by 4 key events in production of sales cycle of the firm. receivable period and payable deferral period A) INVENTORY CONVERSION PERIOD: INVENTORY INVENTORY CONVERSION PERIOD = COST OF GOOD SOLD X 365 (OPENING STOCK + CLOSING STOCK) INVENTORY = X 365 .

12 CONVERSION PERIODS .62 SALES b) Receivable collection period (Debtors cycle): ACCOUNT RECEIVABLE RECEIVABLE COLLECTION PERIOD = SALES C) X 365 PAYABLE DEFERRAL PERIOD ACCOUNT PAYABLE PAYABLE DEFERRAL PERIOD = X 365 COST OF GOOD SOLD TABLE3.

3. 79 dys & 88 days in 2000. 2004. The standard norm of the company is 100 days.2005 and 2006 respectively.4 TREND ANALYSIS .91 days.63 Accounting period ratio Inventory conversion period Receivable collection period Payable deferral period 2005-06 2006-07 2007-08 2008-09 2009-10 96 91 79 88 116 115 109 37 53 66 95 103 114 76 80 INTERPREATION The above table and chart depicts that the inventory conversion period shows an increasing trend from 2000 to 2002 from 92 days and then it starts to decrease up to 79 days in the year 2005. Only in 2004 and 2007 the inventory conversion period is higher than the standard norms in that period company is took more days inventory conversion. The inventory is converted rapidly in other years with 920days.

64 In working capital analysis the direction at changes over a period of time is of crucial importance. accompanied by marked increase in plant investment especially if the increase in planning investment by fixed interest obligation” TABLE 3. any one trend by it self is not very informative and therefore comparison with Illustrated their ideas in these words. Gupta “The term trend is very commonly used in day-today conversion trend.” Emphasizing the importance of working capital trends.galeziem “The trend is defined as smooth irreversible movement in the series. current assets.C. Further. Working capital is one of the important fields of management. sales. It is therefore very essential for an annalist to make a study about the trend and direction of working capital over a period of time. income. It can be increasing or decreasing. also called secular or long term need is the basic tendency of population. Man Mohan and Goyal have pointed out that “analysis of working capital trends provide as base to judge whether the practice and privilege policy of the management with regard to working capital is good enough or an important is to be made in managing the working capital funds.P. “An upwards trends coupled with downward trend or sells.13 TREND OF WORKING CAPITAL FROM 2005-2010 . Such analysis enables as to study the upward and downward trend in current assets and current liabilities and its effect on the working capital position. and current liabilities to grow or decline over a period of time” According to R. In the words of S.

Gupta “The term trend is very commonly used in day-today conversion trend.5 GRAPHICAL REPRESENTATION OF TREND SINCE 2005-2010 In the words of S.P.65 YEARS WORKING CAPITAL TREND 100 05 62 51 49 2005-06 2006-07 2007-08 2008-09 2009-10 3. also called secular or long term need is the basic tendency of .

CHART3. Man Mohan and Goyal have pointed out that “analysis of working capital trends provide as base to judge whether the practice and privilege policy of the management with regard to working capital is good enough or an important is to be made in managing the working capital funds. and current liabilities to grow or decline over a period of time” According to R.66 population. current assets.galeziem “The trend is defined as smooth irreversible movement in the series.5 WORKING CAPITAL TREND .” Emphasizing the importance of working capital trends. It can be increasing or decreasing. income. sales.C.

67 4. .1FINDINGS 1. . The company has maintained quick ratio favorable from 2005-06 to 2008-09. In year 2009-10 the company shows lower quick ratio because of the company had highest stock in the year.

5.63.2006 and 2007 respectively . 6. 3. Only in 2005 and 2008 the inventory conversion period is higher than the standard norms in that period company is took more days inventory conversion. In the year 2006-07 shows the working capital is 7 times but after that year the company getting good working capital utilization. 79 dys & 88 days in 2001.91 days.22 and 25 days have taken to convert the stock into cash in 2008-09 and 2009-10 respectively. Company is not achieve the inventory conversion period as ideal in last two years. that is . Company getting 6-8 days to make payment to the supplier.68 2. 7. The inventory is converted rapidly in other years with 920days. company purchased raw material in bulk quantity with discount. but the year 2007-2008 the ratio was highly increased to 3. 4. This help the company to get discount from suppliers. The company has maintained the current ratio favorable from 2005-2006 to 2009- 2010. But the year 2006-07 the company took 19 days to make the payment. Now the company recover this problem. The reason of taking this much dates. The company has been maintaining a better creditors turnover ratio but the year 2006-07 the ratio was highly decreased. 2005.

6 . Better consistency should be maintained in relation with working capital. special attention should be made by management in management of short term funds. 9 . 2 . The company mainly depends on cash sales if credit sales to maximum extend. The management should pay attention towards increasing working capital turnover by minimizing the investment in inventories and receivables. Unnecessary operational expenses should be reduced.2 SUGGESTIONS 1 . 3 . Advanced and new technology of production should be incorporated. the management is never think credit sales in their policies. 5 .69 4. But trade debtors in balance sheet so it must think to eliminate it so as to reduce working capital requirements. 8 . . The management should try to increase the liquidity position of the company by proper by proper investment in current assets. 7 .

Profitability is the key to success in business customer centric thinking is extremely essential for survival in today’s business environment. Every good business design should have at least one strategic control point.70 5. even though the company is maintaining a good track record . It means that efficient utilization of working capital especially in the areas of inventory and cash management.however it is also revealed that current ratio is least minimum and quick ratio is not up to peak . . CONCLUSION From the study it is concluded that KSE LTD has good working capital management . Searching and developing the strategic control points in an industry simultaneously with business design process can go along way.

N. c. Mumbai.com 2) http://en.kselimited.page no:8. Jayakumar ‘CORPORATE ACCOUNTING’ Chapter 8. Cost and Financial Analysis. Dr. Kalyani Publishers.’ Ratio analysis’. Research Methodology.com/lessons/workcap/ REFERENCE Books a.1 SOURCE Company’s annual reports and records Website 1) www. b.org/wiki/Working_capital 3) www. d. Management Accounting. 2nd Revised Edition. 2009.1 – 8.R. Financial Management Theory & Practice. e.. Kothari C..46 . New Delhi. Jain S.Chandrasekharan Nair and Dr. Himalaya Publishing House..L. 2008.wikipedia. Arora M. New Age International Pvt. 2008. 3rd Edition. & Narang K.P.. 2000. Shashi K.G. New Delhi.71 6. Kalyani Publishers.K..K. Ltd.studyfinance. Gupta & Sharma R.

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