Gaurav Raghuvanshi.docx

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SHRI RAMSWAROOP MEMORIAL UNIVERSITY

LUCKNOW-DEVA ROAD, UTTAR PRADESH

SUMMER TRAINING REPORT

ON

“A Comparative Study on Working Capita Management in Sugar Mi

Sp re!" to #ak$%mi Sugarmi &

SU'MITTE( IN PARTIA# )U#)I##MENT O) RE*UIREMENT )OR T+E AWAR( O) (EGREE

O)

Bachelor of Coerce

TO

S+RI RAMSWAROOP MEMORIA# UN,ERSIT-

./01203

Under Guidan4e o!5 Su6mitted 6y5

(r" Pradeep A$t%ana Gaurav Rag%uvan$%i

In$titute o! Management7 Ro No"2./080/9/000//01

Commer4e : E4onomi4$

SRMU7 #u4kno;"

1



INSTITUTE O! MANA"EMENT, COMMERCE # ECONOMICS

SRMU

CERTI)ICATE

T%i$ i$ to 4erti!y t%at t%e pro<e4t entited $A Co%ara&'(e S&)*+ o Wor'. Ca%'&al

Maa.ee& ' S).ar M'll S%l ref/ &o La0h' S).ar'll1 $u6mitted 6y Guarav

Rag%uvan$%i =Univ" Ro No" ./080/9/000//01> and in t%e partia !u!iment o! t%e re?uirement

!or t%e a;ard o! t%e (EGREE O) 'AC+E#OR O) COMMERCE o! SHRI RAMSWAROOP

MEMORIAL UNIVERSITY to t%e 6e$t o! my kno;edge it i$ a re4ord o! $tudent@$ o;n ;ork

4arried under our $upervi$ion and guidan4e" T%e pro<e4t report em6odie$ re$ut o! origina ;ork

and t%e $tudy 4arried out 6y t%e $tudent and t%e 4ontent$ do not !orm t%e 6a$i$ !or t%e a;ard o!

any ot%er degree to t%e 4andidate or to any6ody e$e"

(r" Pradeep A$t%anaB

2



CERTI!ICATE O! ORI"INALITY

I Ro No o!7 a !u time

6ona!ide $tudent o! !ir$t year o! 'a4%eor o! Commer4e o! S%ri Ram$;aroop Memoria

Univer$ity" I %ere6y 4erti!y t%at !or t%i$ pro<e4t ;ork 4arried out 6y me at

t%e report $u6mitted in partia

!u!iment o! t%e re?uirement$ o! t%e programme i$ an origina ;ork o! mine 4arried out under

t%e guidan4e o! t%e indu$try mentor

and !a4uty

mentor and i$ not 6a$ed or

reprodu4ed !rom any eDi$ting ;ork o! any ot%er per$on or on any earier ;ork undertaken at anyot%er time or !or any ot%er purpo$e7 and %a$ not 6een $u6mitted any;%ere e$e at any time to t%e

6e$t o! my kno;edge"

Student$ SignatureB

(ate5

3



INSTITUTE O! MANA"EMENT, COMMERCE # ECONOMICS

SRMU

(EC#ARATION

I %ere6y de4are t%at t%e pro<e4t entited $A Co%ara&'(e S&)*+ o Wor'. Ca%'&al

Maa.ee& ' S).ar M'll S%l ref/ &o La0h' S).ar'll1 $u6mitted 6y me in t%e partia

!u!iment o! t%e re?uirement$ !or t%e a;ard o! t%e degree o! Ma$ter o! 'u$ine$$ Admini$tration

o! S%ri Ram S;aroop Memoria Univer$ity7 i$ a re4ord o! my o;n ;ork 4arried under t%e

$upervi$ion and guidan4e o! (r" Pradeep A$t%ana

To t%e 6e$t o! my kno;edge t%i$ pro<e4t %a$ not 6een $u6mitted to S+RI RAMSWAROOP

MEMORIA# UNI,ERSIT- or any ot%er Univer$ity or In$titute !or t%e a;ard o! any degree"

Name5 Gaurav Rag%uvan$%i

Univer$ity Ro" NoF./080/9/000//01

4



ACKNOWLED"EMENT

I take t%i$ opportunity to eDpre$$ my pro!ound gratitude and deep regard$ to my

guide (r" Pradeep A$t%ana !or %i$ eDempary guidan4e7 monitoring and 4on$tant

en4ouragement t%roug%out t%e 4our$e o! t%i$ pro<e4t" T%e 6e$$ing$7 %ep and

guidan4e given 6y %im time to time $%a 4arry me a ong ;ay in t%e <ourney o! i!e

on ;%i4% I am a6out to em6ark"

I a$o take t%i$ opportunity to eDpre$$ a deep $en$e o! gratitude to Mr"

7 A$$tt" Manager7 #ak$%mi Sugarmi7 !or %i$ 4ordia $upport7

vaua6e in!ormation and guidan4e7 ;%i4% %eped me in 4ompeting t%i$ ta$k

t%roug% variou$ $tage$"

I am a$o o6iged to $ta!! mem6er$ o! #ak$%mi Sugarmi !or t%e vaua6e

in!ormation provided 6y t%em in t%eir re$pe4tive !ied$" I am grate!u !or t%eir

4ooperation during t%e period o! my $ummer training"

)inay7 I am t%ank!u to amig%ty7 my parent$7 6rot%er$7 $i$ter$ and !riend$ !or t%eir

4on$i$tent en4ouragement ;it%out ;%i4% t%i$ pro<e4t ;oud %ave not 6een

4ompeted"

5



Gaurav Rag%uvan$%i

TA'#E O) CONTENTS

Certi!i4ate o! t%e 4oege

Certi!i4ate o! t%e organiation

Pre!a4e

A4kno;edgement

(e4aration

Ta6e o! 4ontent$

EDe4utive $ummary

CHAPTER I

Introdu4tion

O6<e4tive o! t%e $tudy

S4ope and imitation$ o! $tudy

Met%odoogy5 t%i$ ;oud 4ontain t%e !oo;ing t%ing$5

0" Sour4e$ o! data

." Sampe $ie$7 i! any8" Met%od$ o! data 4oe4tion

1" In$trument u$ed

3" Too$ and te4%ni?ue$ o! anay$i$

CHAPTER II

Company Pro!ie

Marketing $trategie$

Competitor$

CHAPTER III

(ata Anay$i$ : )inding$

CHAPTER IV

Sugge$tionH Re4ommendation

CHAPTER V

6



Con4u$ion

'i6iograp%y

AppendiD H AnneDure

E2ECUTIVE SUMMARY

$A Co%ara&'(e S&)*+ o Wor'. Ca%'&al Maa.ee& ' S).ar M'll

S%l ref/ &o La0h' S).ar'll1

A$ a part o! 4urri4uum7 every $tudent $tudying Graduation %a$ to undertake a

pro<e4t on a parti4uar $u6<e4t a$$igned to %imH%er" A44ordingy I %ave 6een

a$$igned t%e pro<e4t ;ork on t%e $tudy o! ;orking 4apita management in La0h'

S).ar'll"

(e4i$ion$ reating to ;orking 4apita Current a$$et$2Current ia6iitie$B and $%ort

term !inan4ing are kno;n a$ ;orking 4apita management" It invove$ t%e

reation$%ip 6et;een a !irm@$ $%ort2term a$$et$ and it$ $%ort term ia6iitie$"

T%e goa o! ;orking 4apita management i$ to en$ure t%at t%e !irm i$ a6e to

4ontinue it$ operation and t%at it %a$ $u!!i4ient 4a$% !o; to $ati$!y 6ot% maturing

$%ort term de6t and up4oming operationa eDpen$e$"

Working 4apita i$ u$ed in La0h' S).ar'll"7 !or t%e !oo;ing purpo$e52

Ra; materia7 ;ork in progre$$7 !ini$%ed good$7 inventorie$7 $undry de6tor$7 and

day to day 4a$% re?uirement$" T%e La0h' S).ar'll"7 keep 4ertain !und$ ;%i4%

i$ automati4ay avaia6e to !inan4e t%e 4urrent a$$et$ re?uirement$"

7



T%e variou$ in!ormation regarding “Working Capita Management& $u4% a$

4a$$i!i4ation7 determinant$7 $our4e$ %ave 6een di$4u$$ed reating to La0h'

S).ar'll

Ratio Anay$i$ %a$ 6een Carried out u$ing )inan4ia In!ormation !or a$t !ive

a44ounting year$ i"e" !rom .// to ./0/ Ratio$ ike Working 4apita Turnover

Ratio7 *ui4k Ratio7 Current Ratio7 Inventory Turnover Ratio7 (e6tor Turnover

Ratio7 Creditor$ turnover ratio %ave a$o 6een anayed" A Statement o! C%ange$

in Working Capita %a$ a$o 6een anayed"

At La0h' S).ar'll"7 t%e ;orking 4apita management %a$ $%o;n in4rea$e in

t%e period o! $tudy" T%i$ $%o;$ ;orking 4apita i$ managed e!!e4tivey and a t%e

ot%er department$ are ;orking in per!e4t 4o2ordination to en$ure t%e progre$$ o!

La0h' S).ar'll"7 6ut I %ave given $ome Sugge$tion$ : Con4u$ion$ on t%e

6a$i$ o! my Pro<e4t Study"

8



CHAPTER-3

WORKING CAPITAL MANAGEMENT

WHAT IS WORKING CAPITAL???

Working 4apita i$ t%e 4a$% needed to pay !or t%e day to day operation o! t%e

6u$ine$$" Wor'. ca%'&al i$ a !inan4ia metri4 ;%i4% repre$ent$ operating

i?uidity avaia6e to a 6u$ine$$7 organiation or ot%er entity7 in4uding

governmenta entity" Aong ;it% !iDed a$$et$ $u4% a$ pant and e?uipment7 ;orking

4apita i$ 4on$idered a part o! operating 4apita" Net ;orking 4apita i$ 4a4uated

a$ 4urrent a$$et$ minu$ 4urrent ia6iitie$"" It i$ a derivation o! ;orking 4apita7 t%at

i$ 4ommony u$ed in vauation te4%ni?ue$ $u4% a$ (C)$ (i$4ounted 4a$% !o;$B"

I! 4urrent a$$et$ are e$$ t%an 4urrent ia6iitie$7 an entity %a$ a 4or'. ca%'&al

*ef'c'ec+7 a$o 4aed a 4or'. ca%'&al *ef'c'&"

A 4ompany 4an 6e endo;ed ;it% a$$et$ and pro!ita6iity 6ut $%ort

o! i?uidity i! it$ a$$et$ 4annot readiy 6e 4onverted into 4a$%" Po$itive ;orking

4apita i$ re?uired to en$ure t%at a !irm i$ a6e to 4ontinue it$ operation$ and t%at it

%a$ $u!!i4ient !und$ to $ati$!y 6ot% maturing $%ort2term de6t and up4oming

operationa eDpen$e$" T%e management o! ;orking 4apita invove$ managing

inventorie$7 a44ount$ re4eiva6e and paya6e7 and 4a$%"

9



Working 4apita management i$ a very important 4omponent o! 4orporate

!inan4e 6e4au$e it dire4ty a!!e4t$ t%e i?uidity and pro!ita6iity o! t%e 4ompany" It

invove$ t%e de4i$ion o! t%e amount and 4ompo$ition o! 4urrent a$$et$ and t%e

!inan4ing o! t%e$e a$$et$" E!!i4ient ;orking 4apita management invove$ panning

and 4ontroing 4urrent a$$et$ and 4urrent ia6iitie$ in a manner t%at eiminate$ t%e

ri$k o! ina6iity to meet due $%ort term o6igation$ on t%e one %and and avoid

eD4e$$ive inve$tment in t%e$e a$$et$ on t%e ot%er %and"

10



OB5ECTIVE O! STUDY

To $tudy t%e overa ;orking o! t%e organi$ation i"e"7 $tudy o! a department

and organi$ation $tru4ture"

To $tudy t%e e!!i4ien4y o! ;orking 4apita management o! t%e 4ompany"

To $tudy t%e e!!i4ien4y o! 4a$% 7 inventory and re4eiva6e$ o! t%e 4ompany"

To under$tand and anaye t%e ;orking 4apita po$ition o! t%e overa

;orkingo! t%e organi$ation i"e"7 $tudy o! a department and organi$ation

$tru4ture#AJS+MI $ugar mi$"

To mea$ure t%e overa !inan4ia po$ition o! t%e 4ompany ;it% t%e %ep o!

ratio anay$i$"

SCOPE O! THE STUDY

11



T%e $ugar $u62$e4tor payed a ma<or roe in t%e #AJSMI e4onomy and ;a$ a

$our4e o! ivei%ood !or peope$" T%ere!ore7 pegged on t%e $u62$e4tor@$

irrepa4ea6e indi$pen$a6iity7 $ta6e $ynergy ;a$ o! e$$en4e to $trengt%ening and

%arne$$ing $take%oder$@ 4oe4tive 4ontri6ution$" T%e $tudy@$ !inding$ ;ere

anti4ipated to 4ontri6ute in $oidi!ying $4%oary 4ontri6ution$ to;ard$ e$ta6i$%ing

an idea ;orking 4apita pra4ti4e in t%e 4onteDt o! outgro;erHot%er reated

4ompanie$ $erving va$t intere$t$"

)inay7 t%e $tudy re4ommendation$ !o4u$ed on in$titutiona ;eakne$$e$ on

;orking 4apita management to trigger manageria re!o4u$ing o! t%eir pra4ti4e$ and

;ork to;ard$ inve$tment vaue 4reation" T%i$ did not ony 6ene!it t%e 4ompanie$ in

term$ o! $u$taina6iity 6ut a$o individua !armer$ ;%o re$orted to 6orro;ing in

6oo$ting t%eir produ4e" T%e anti4ipated improvement$ in $ugar4ane produ4e ;oud

to a arge eDtent en%an4e indu$try per!orman4e ;%i4% in turn ;oud enri4% t%e

e4onomy@$ per!orman4e"

RESEARCH METHODOLO"Y

12



Quatitative : This type of research methods re.uires

.uati#a!le data ivolvi" umerical ad statistical e,plaatios(Quatitative +esearch is used to .uatify the pro!lem !y %ay of

"eerati" umerical data or data that ca !e trasformed ito

usea!le statistics( -t is used to .uatify attitudes& opiios&

!ehaviors& ad other de#ed varia!les ad "eeralie results

from a lar"er sample populatio( Quatitative +esearch uses

measura!le data to formulate facts ad ucover patters i

research( Quatitative data collectio methods are much more

structured tha Qualitative data collectio methods( Quatitative

data collectio methods iclude various forms of surveys olie

surveys& paper surveys& mo!ile surveys ad $ios$ surveys& face/

to/face itervie%s& telephoe itervie%s& lo"itudial studies&

%e!site iterceptors& olie polls& ad systematic o!servatios(

orrelatio+e"ressio alysis: This research method

ivolves determii" the stre"th of the relatioship !et%ee t%o

or more varia!les

T%e ;orking 4apita meet$ t%e $%ort2term !inan4ia re?uirement$ o! a 6u$ine$$

enterpri$e" It i$ a trading 4apita7 not retained in t%e 6u$ine$$ in a parti4uar !orm

!or onger t%an a year" T%e money inve$ted in it 4%ange$ !orm and $u6$tan4e during

14



t%e norma 4our$e o! 6u$ine$$ operation$" T%e need !or maintaining an ade?uate

;orking 4apita 4an %ardy 6e ?ue$tioned" Ku$t a$ 4ir4uation o! 6ood i$ very

ne4e$$ary in t%e %uman 6ody to maintain i!e7 t%e !o; o! !und$ i$ very ne4e$$ary

to maintain 6u$ine$$" I! it 6e4ome$ ;eak7 t%e 6u$ine$$ 4an %ardy pro$per and

$urvive" Working 4apita $tarvation i$ generay 4redited a$ a ma<or 4au$e i! not t%e

ma<or 4au$e o! $ma 6u$ine$$ !aiure in many deveoped and deveoping 4ountrie$

Ra!u$e7 0LLB"

T%e $u44e$$ o! a !irm depend$ utimatey7 on it$ a6iity to generate 4a$% re4eipt$ in

eD4e$$ o! di$6ur$ement$" T%e 4a$% !o; pro6em$ o! many $ma 6u$ine$$e$ are

eDa4er6ated 6y poor !inan4ia management and in parti4uar t%e a4k o! panning

4a$% re?uirement$ "

Re0earch *e0'.

T%e $tudy adopted a de$4riptive 4ro$$2$e4tiona $urvey re$ear4% de$ign" A44ording

to Poit and 'e4k ./0/B7 t%i$ de$ign ne4e$$itate$ a more e4onomi4a 4oe4tion o!

data at one point in time and i$ !undamenta in o6<e4tive anay$i$ due to timing

$imiarity" T%e de$ign provide$ a ?ui4k7 e!!i4ient and a44urate mean$ o! a44e$$ing

in!ormation a6out t%e popuation and it i$ more appropriate ;%ere t%ere i$ a gap o!

$e4ondary data"

T%i$ de$ign ;a$ 4on$idered appropriate 6e4au$e t%i$ $tudy !o4u$ed on t%e data

reating to ;orking 4apita management pra4ti4e$ at t%e time o! t%e $tudy !or a t%e

entitie$ 6eing $tudied" T%e data 4oe4ted a$o provided de$4riptive in!ormation

15



a6out t%e $tudy $u6<e4t$ and ;ere $our4ed !rom a miD o! primary and $e4ondary

$our4e$"

Sa%l'. De0'.

T%ere ;ere a6out 008 $ugar !a4torie$ in t%e $tate in Mar4% .//8 o! ;%i4% 13 ;ere

in t%e private $e4tor7 89 in t%e pu6i4 $e4tor and 80 in t%e 4ooperative $e4tor"

(uring .///2/07 19 $ugar !a4torie$ in ea$tern UP7 10 in 4entra UP and .3 in

;e$tern UP ;ere in operation in t%e $tate" )or $ee4tion o! $ugar !a4torie$7 t%e$e

;ere grouped into 8 region$7 vi" ;e$tern7 4entra and ea$tern" T%i$ grouping ;a$

made in 4on$onan4e ;it% $ugar oning 4on4ept adopted 6y t%e Government o!

India and Indian Sugar"

Manu!a4turer$ A$$o4iation ISMAB and not a44ording to t%e admini$trative oning

$ee end note$B" )urt%er7 t;enty2one !a4torie$7 $even ea4% in private7 pu6i4 and

4ooperative $e4tor$ ;ere $ee4ted !rom ea4% region randomy" T%u$ in a7 8

!a4torie$ ;ere $ee4ted and manu!a4turing detai$ and ot%er data on 4o$ting

parameter$ ;ere 4oe4ted !rom ISMA7 Ne; (e%i7 UP Cooperative Sugar

)ederation7 #u4kno;7 UP Sugar Corporation7 #u4kno;7 and CMIE pro;e$$

data6a$e !or t%e year .///2/0" A 4ur$ory ook at Ta6e 0 indi4ate$ t%at t%ere ;ere

9 $ugar !a4torie$ ti t%e end o! Se4ond )ive2-ear Pan period7 o! ;%i4% neary

%a! ;ere in t%e ea$tern region" T%e private $e4tor a44ounted !or t%e maDimum

num6er o! !a4torie$ 8B" T%e 4o2operative $e4tor %ad ony t;o !a4torie$7 one ea4%

in ;e$tern and 4entra region$" T%oug% a ma<or t%ru$t ;a$ given to $etting up o!

4o2operative !a4torie$ a!ter t%e )ourt% Pan7 t%e 4on4entration ;a$ mainy in t%e

4entra and ea$tern region$" (etai$ a6out 4ru$%ing 4apa4ity and 4ru$%ing duration

a4ro$$ variou$ $e4tor$ and one$ in t%e $tate are given in Ta6e ." T%e private $e4tor

16



;it% 10 $ugar !a4torie$ %ad t%e 4ru$%ing 4apa4ity o! 03L1// TC(7 4ommanding

neary 33 per 4ent $%are in t%e tota 4ane 4ru$%ed7 ;%ie t%e pu6i4 and 4ooperative

$e4tor$ %ad ./ and .3 per 4ent $%are$7 re$pe4tivey" T%i$ 4eary re!e4t$ t%e o;er

4apa4ity o! pant$ in t%e$e t;o $e4tor$" Mo$t o! t%e pant$ %ad t%e 4apa4ity o! .3//

TC( or even e$$ in t%e$e $e4tor$7 ;%i4% eventuay a!!e4ted t%e per!orman4e o!

!a4torie$" T%e 4ru$%ing duration o! !a4torie$ a4ro$$ di!!erent one$ o! UP varied

6et;een 0.L day$ and 0. day$ in .///2/07 ;it% maDimum in ;e$tern one7

!oo;ed 6y 4entra and ea$tern one$" T%e private $e4tor generay 4ru$%ed t%e

4ane !or a onger period7 t%an 6y 4o2operative and pu6i4 $e4tor$7 4ontrary to t%e

popuar 6eie! t%at t%e private $e4tor i$ ;%im$i4a a6out t%eir opening and 4o$ing

date$ o! t%e 4ane 4ru$%ing7 4ouped ;it% e$$er duration o! operation Ta6e" Se4tor2

;i$e and one2;i$e e$ta6i$%ment o! $ugar !a4torie U"P"

-ear We$tern Centra Ea$tern

Private Pu6i

4

Coop" Private Pu6i

4

Coop

"

Private Pu6i

4

Coop"

'e!or

e0L/

L 9 0 0o 3 0 09 09 ni

0L02

9/

/ / 0 / / 0 / / /

0L902

/

0 / 8 0 8 9 / 8 8

0L02

L/

/ / 0 / 0 L 0 / 1

0LL02

/.

0 0 / 8 / / . / /

Tota 00 01 L 0 ./ ./ 9

17



HYPOTHESES

)oo;ing nu %ypot%e$e$ %ave 6een !ramed5

0" T%ere i$ no di!!eren4e among t%e $ampe !irm$ in term$ o! t%eir i?uidity "

." T%ere gro;t% in t%e pro!ita6iity i$ %ig%er in private $e4tor !irm$ t%an

government and 4ooperative $e4tor !irm$"

8" T%e produ4tivity i$ more in private $e4tor !irm$ t%an 4ooperative and

government o;ned !irm$ "

Da&a collec&'o

To en$ure 4ompre%en$ive eDamination and inter2!irm 4ompari$on7 6ot% $e4ondary

and primary $our4e$ o! data ;ere adopted" T%e $e4ondary data ;ere a$4ertained

!rom !inan4ia $tatement$ and inventory re4ord$ ;it% t%e aid o! prede$igned de$k revie; 4%e4ki$t" On t%e ot%er %and7 primary data 4oe4tion ;a$ a44ompi$%ed 6y

u$e o! a $emi2$tru4tured and $e! admini$tered ?ue$tionnaire"

18



(iman .//3B a$o $upport$ u$e o! ?ue$tionnaire a$ it i$ made to a44ompi$% a

;ide range o! !eed6a4k$ 6e4au$e ea4% re$pondent i$ a$ked to re$pond to t%e $ame

$et o! ?ue$tion$" T%e ?ue$tionnaire ;a$ given to re$pondent$ dra;n !rom

repre$entative$ o! top management7 !inan4e and pro4urement $e4tion$" +en4e7

t%ere ;ere t%ree in4u$ion$ !rom ea4% 4ompany ;it% top management repre$ented

6y managing dire4tor$7 !inan4e 6y %ead o! a44ount$7 and pro4urement 6y %ead o!

$uppy 4%ain $e4tion$" Primary in$trument vaidity ;a$ gained t%roug% $4%oary

4riti?ue and pro!e$$iona input !rom one !inan4ia managerHpra4titioner and t;o

re$ear4% eDpert$" Moreover7 t%e in$trument ;a$ trianguated to en$ure 4oe4tion o!

6ot% in2dept% and 4o$ed !eed6a4k$" In addition to t%e$e7 u$ing 6ot% $e4ondary and

primary data $our4e$ ;a$ %ep!u in en%an4ing reia6iity o! !inding$ due to

minima in4on$i$ten4ie$ !rom t%e re$pondent$" T%e re$ear4%er@$ avaia6iity .8

during data 4oe4tion a$o en$ured t%at re$pondent$ ;ere a$$i$ted in 4ompetion$

6y ;ay o! giving guided 4ari!i4ation$"

19



LIMITATIONS O! STUDY 6

Time !a4tor i$ t%e mo$t 4ru4ia one " T%e $tudy ;a$ 4ondu4ted ;it%in $%ort

period o! one mont%"

#SM eDe4utive$ ;ere %e$itating to provide in!ornmataion"

• I %ad to ;ait !or a ong time to make 4onta4t ;it% t%e eDe4utive$ a$ t%ey a

are 6u$y in t%eir ;ork$"

• (ue to 6u$y ;ork $4%edue7 detaied di$4u$$ion$ ;ere not po$$i6e"

• Competitor o! #SM ;ere given e$$ in!ormation and data"

• #ot o! time 4on$umed during $ervay"

20



CHAPTER -7

Bac.ro)* of &he S&)*+

T%e pro<e4t undertaken i$ on WORJING CAPITA# MANAGEMENT IN

#AJS+MI SUGAR MI##" It de$4ri6e$ a6out %o; t%e 4ompany manage$ it$

;orking 4apita and t%e variou$ $tep$ t%at are re?uired in t%e management o!

;orking 4apita" Ca$% i$ t%e i!eine o! a 4ompany" I! t%i$ i!eine deteriorate$7 $o

doe$ t%e 4ompany$ a6iity to !und operation$7 reinve$t and meet 4apita

re?uirement$ and payment$" Under$tanding a 4ompany$ 4a$% !o; %eat% i$e$$entia to making inve$tment de4i$ion$" A good ;ay to <udge a 4ompany$ 4a$%

!o; pro$pe4t$ i$ to ook at it$ ;orking 4apita management WCMB" Working

4apita re!er$ to t%e 4a$% a 6u$ine$$ re?uire$ !or day2to2day operation$ or7 more

$pe4i!i4ay7 !or !inan4ing t%e 4onver$ion o! ra; materia$ into !ini$%ed good$7

;%i4% t%e 4ompany $e$ !or payment" Among t%e mo$t important item$ o!

;orking 4apita are eve$ o! inventory7 a44ount$ re4eiva6e7 and a44ount$ paya6e"

Anay$t$ ook at t%e$e item$ !or $ign$ o! a 4ompany$ e!!i4ien4y and !inan4ia

$trengt%" T%e ;orking 4apita i$ an important yard$ti4k to mea$ure t%e 4ompany@$

operationa and !inan4ia e!!i4ien4y" Any 4ompany $%oud %ave a rig%t amount o!

21



4a$% and ine$ o! 4redit !or it$ 6u$ine$$ need$ at a time$" T%i$ pro<e4t de$4ri6e$

%o; t%e management o! ;orking 4apita take$ pa4e at #MS"

T%e ;orking 4apita meet$ t%e $%ort2term !inan4ia re?uirement$ o! a 6u$ine$$

enterpri$e" It i$ a trading 4apita7 not retained in t%e 6u$ine$$ in a parti4uar !orm

!or onger t%an a year" T%e money inve$ted in it 4%ange$ !orm and $u6$tan4e during

t%e norma 4our$e o! 6u$ine$$ operation$" T%e need !or maintaining an ade?uate

;orking 4apita 4an %ardy 6e ?ue$tioned" Ku$t a$ 4ir4uation o! 6ood i$ very

ne4e$$ary in t%e %uman 6ody to maintain i!e7 t%e !o; o! !und$ i$ very ne4e$$ary

to maintain 6u$ine$$" I! it 6e4ome$ ;eak7 t%e 6u$ine$$ 4an %ardy pro$per and

$urvive" Working 4apita $tarvation i$ generay 4redited a$ a ma<or 4au$e i! not t%e

ma<or 4au$e o! $ma 6u$ine$$ !aiure in many deveoped and deveoping 4ountrie$"

T%e $u44e$$ o! a !irm depend$ utimatey7 on it$ a6iity to generate 4a$% re4eipt$ in

eD4e$$ o! di$6ur$ement$" T%e 4a$% !o; pro6em$ o! many $ma 6u$ine$$e$ are

eDa4er6ated 6y poor !inan4ia management and in parti4uar t%e a4k o! panning

4a$% re?uirement$"

A !irm 4an 6e very pro!ita6e7 6ut i! t%i$ i$ not tran$ated into 4a$% !rom operation$

;it%in t%e $ame operating 4y4e7 t%e !irm ;oud need to 6orro; to $upport it$

4ontinued ;orking 4apita need$" T%u$7 t%e t;in o6<e4tive$ o! pro!ita6iity and

i?uidity mu$t 6e $yn4%ronied and one $%oud not impinge on t%e ot%er !or ong"

Inve$tment$ in 4urrent a$$et$ are inevita6e to en$ure deivery o! good$ or $ervi4e$to t%e utimate 4u$tomer$ and a proper management o! $ame $%oud give t%e

de$ired impa4t on eit%er pro!ita6iity or i?uidity" I! re$our4e$ are 6o4ked at t%e

di!!erent $tage o! t%e $uppy 4%ain7 t%i$ ;i proong t%e 4a$% operating 4y4e"

At%oug% t%i$ mig%t in4rea$e pro!ita6iity due to in4rea$e $ae$B7 it may a$o

22



adver$ey a!!e4t t%e pro!ita6iity i! t%e 4o$t$ tied up in ;orking 4apita eD4eed t%e

6ene!it$ o! %oding more inventory andHor granting more trade 4redit to 4u$tomer$"

Anot%er 4omponent o! ;orking 4apita i$ a44ount$ paya6e7 6ut it i$ di!!erent in t%e

$en$e t%at it doe$ not 4on$ume re$our4e$ in$tead it i$ o!ten u$ed a$ a $%ort term

$our4e o! !inan4e" T%u$ it %ep$ !irm$ to redu4e it$ 4a$% operating 4y4e7 6ut it %a$

an impi4it 4o$t ;%ere di$4ount i$ o!!ered !or eary $ettement o! invoi4e$"

COMPANY INFORMATION

#ak$%mi Sugar Mi$ Company #imited i$ a Pu6i4 Company in4orporated on 0

Septem6er 0L1/" It i$ 4a$$i!ied a$ Indian Non2Government Company and i$

regi$tered at Regi$trar o! Companie$7 Uttarak%and" It$ aut%oried $%are 4apita i$

R$" 8//7///7/// and it$ paid up 4apita i$ R$" .L/7///7///"It i$ invoved in

Manu!a4ture o! ot%er 4%emi4a produ4t$"

#ak$%mi Sugar Mi$ Company #imited$ Annua Genera Meeting AGMB ;a$ a$t

%ed on .L (e4em6er ./01 and a$ per re4ord$ !rom Mini$try o! Corporate A!!air$

MCAB7 it$ 6aan4e $%eet ;a$ a$t !ied on 8/ Kune ./01"

(ire4tor$ o! #ak$%mi Sugar Mi$ Company #imited are Ani Jumar Tan;ar7

An<ai 'ira Sa;%ney and S%reya Sa;%ney"

#ak$%mi Sugar Mi$ Company #imited$ Corporate Identi!i4ation Num6er i$

23



CINB U.1.80UR0L1/P#C//11L0 and it$ regi$tration num6er i$ 11L0"

24

Company Name#AJS+MI SUGAR MI##SCOMPAN- #IMITE(

RoC RoC2Uttarak%and

Regi$tration Num6er 11L0

A4tivity Manu!a4ture o! ot%er 4%emi4a

produ4t$

Company Category Company imited 6y $%are$

Company Su6 Category Indian Non2Government Company

Ca$$ o! Company Pu6i4 Company

Paid up 4apita in R$"B .L/7///7///

(ate o! In4orporation 0 Septem6er 0L1/

Addre$$ ,I##AGE I*'A#PURTE+SI#

ROORJEE

City +ARI(WAR

State Uttarak%and

Company Statu$ !or e)iingB A4tive



VISION AND MISSION

Ve0'o

It i$ t%e vi$on o! t%e #SM to 4reat a 6rand image !or $ugar t%at evoke a $en4e o!

a;e 7 6ind !ait% and in$piration and to a4%ieve !or it$e! t%e po$ition o! indu$try

eader in t%e !ied o! vaue addition 6u$ine$$ o! pro4e$$ed $ugar 7 6y inve$ting into

integrated operation$"

Creating and mutipying ;eat% o! t%e 4ompany ;it% 4ontinou$ eDpen$ion !or t%e

6etter !uture o! t%e $take%oder$"

M'00'o

To 6ring it$ 4u$tomer$ t%e 6ene!it$ o! indu$try eading te4%noogy !rom

4on4ept o! reai$ation"

25



To provide it$ 4u$tomer t%e 6e$t ?uaity o! $ugar

To $et $tandard$ in $ervi4e to 4u$tomer$"

THERE ARE TWO DI!!ERENT CONCEPTS O! WORKIN" CAPITAL6-

3/ Balace 0hee& or Tra*'&'oal coce%& 2 It $%o;$ t%e po$ition o! t%e !irm at

4ertain point o! time" It i$ 4a4uated in t%e 6a$i$ o! 6aan4e $%eet prepared at a

$pe4i!i4 date" In t%i$ met%od t%ere are t;o type$ o! ;orking 4apita52

a8 "ro00 4or'. ca%'&al 2 It re!er$ to t%e !irm@$ inve$tment in 4urrent a$$et$" T%e

$um o! t%e 4urrent a$$et$ i$ t%e ;orking 4apita o! t%e 6u$ine$$" T%e $um o! t%e

4urrent a$$et$ i$ a ?uantitative a$pe4t o! ;orking 4apita" W%i4% emp%a$ie$ more

on ?uantity t%an it$ ?uaity7 6ut it !ai$ to revea t%e true !inan4ia po$ition o! t%e

!irm 6e4au$e every in4rea$e in 4urrent ia6iitie$ ;i de4rea$e t%e gro$$ ;orking

4apita"

98 Ne& 4or'. ca%'&al 2 It i$ t%e di!!eren4e 6et;een 4urrent a$$et$ and 4urrent

ia6iitie$ or t%e eD4e$$ o! tota 4urrent a$$et$ over tota 4urrent ia6iitie$" It i$ a$o

4an de!ined a$ t%at part o! a !irm@$ 4urrent a$$et$ ;%i4% i$ !inan4ed ;it% ong term

!und$" It may 6e eit%er po$itive or negative" W%en t%e 4urrent a$$et$ eD4eed t%e

4urrent ia6iity7 t%e ;orking 4apita i$ po$itive and vi4e ver$a"

26



'perati" cycle

+a% material

8or$/i/pro"ress

9iished "oods

0ales

:e!tors ad !ills

recieva!le

6ash

7/ O%era&'. c+cle coce%& 2 T%e duration or time re?uired to 4ompete t%e

$e?uen4e o! event$ rig%t !rom pur4%a$e o! ra; materia !or 4a$% to t%e reaiation

o! $ae$ in 4a$% i$ 4aed t%e operating 4y4e or ;orking 4apita 4y4e

27



T%e inve$tment in ;orking 4apita i$ in!uen4ed 6y !our key event$ in t%e

produ4tion : $ae$ 4y4e o! t%e !irm5

Pur4%a$e o! ra; materia$"

Payment o! ra; materia$"

Sae o! !ini$%ed good$"

Coe4tion o! 4a$% !or $ae$"

T%e !irm 6egin$ ;it% t%e pur4%a$e o! ra; materia$ ;%i4% are paid a!ter a deay

;%i4% repre$ent$ t%e $acco)&0 %a+a9le %er'o*1/ T%e ra; materia$ are t%en4onverted into !ini$%ed good$ ;%i4% are t%en $od" T%e time ag 6et;een t%e

pur4%a$e o! ra; materia$ and t%e $ae o! !ini$%ed good$ i$ 4aed t%e $'(e&or+

%er'o*1" T%e time ag 6et;een t%e date o! $ae$ : t%e date o! 4oe4tion o!

re4eiva6e$ i$ t%e $acco)&0 rece'(a9le %er'o*1" T%e time ag 6et;een pur4%a$e

28



o! ra; materia$ : t%e 4oe4tion o! 4a$% !or $ae$ i$ re!erred to a$ $o%era&'.

c+cle/1 T%e time ag 6et;een payment !or ra; materia pur4%a$e$ : t%e 4oe4tion

o! 4a$% !or $ae$ i$ re!erred to a$ $ca0h c+cle1"

IMPORTANCE OF WORKING CAPITAL

T%e advantage$ o! ;orking 4apita or ade?uate ;orking 4apita may 6e enumerated

a$ 6eo;5 2

0" Ca0h D'0co)&6

I! a proper 4a$% 6aan4e i$ maintained7 t%e 6u$ine$$ 4an avai t%e advantage

o! 4a$% di$4ount 6y paying 4a$% !or t%e pur4%a$e o! ra; materia$ and

mer4%andi$e" It ;i re$ut in redu4ing t%e 4o$t o! produ4tion"

." I& crea&e0 a !eel'. of Sec)r'&+ a* Cof'*ece6

T%e proprietor or o!!i4ia$ or management o! a 4on4ern are ?uite 4are!ree7 i!

t%ey %ave proper ;orking 4apita arrangement$ 6e4au$e t%ey need not ;orry

!or t%e payment o! 6u$ine$$ eDpenditure or 4reditor$" Ade?uate ;orking

4apita 4reate$ a $en$e o! $e4urity7 4on!iden4e and oyaty7 not ony

t%roug%out t%e 6u$ine$$ it$e!7 6ut a$o among it$ 4u$tomer$7 4reditor$ and

6u$ine$$ a$$o4iate$"

29



8" :M)0&; for Ma'&a''. Sol(ec+ a* Co&')'. Pro*)c&'o6

In order to maintain t%e $oven4y o! t%e 6u$ine$$7 it i$ 6ut e$$entia t%at t%e

$u!!i4ient amount t o! !und i$ avaia6e to make a t%e payment$ in time a$

and ;%en t%ey are due" Wit%out ampe ;orking 4apita7 produ4tion ;i

$u!!er7 parti4uary in t%e era o! 4ut t%roat 4ompetition7 and a 6u$ine$$ 4an

never !ouri$% in t%e a6$en4e o! ade?uate ;orking 4apita"

1" So)* "oo*4'll a* De9& Ca%ac'&+6

It i$ 4ommon eDperien4e o! a prudent 6u$ine$$men t%at promptne$$ o!

payment in 6u$ine$$ 4reate$ good;i and in4rea$e$ t%e de6t o! t%e 4apa4ity

o! t%e 6u$ine$$" A !irm 4an rai$e !und$ !rom t%e market7 pur4%a$e good$ on

4redit and 6orro; $%ort2term !und$ !rom 6ank7 et4" I! t%e inve$tor and

6orro;er$ are 4on!ident t%at t%ey ;i get t%eir due intere$t and payment o!

prin4ipa in time"

3" Ea0+ Loa0 fro &he Ba06

An ade?uate ;orking 4apita i"e" eD4e$$ o! 4urrent a$$et$ over 4urrent

ia6iitie$ %ep$ t%e 4ompany to 6orro; un$e4ured oan$ !rom t%e 6ank

6e4au$e t%e eD4e$$ provide$ a good $e4urity to t%e un$e4ured oan$7 'ank$

!avour in granting $ea$ona oan$7 i! 6u$ine$$ %a$ a good 4redit $tanding and

trade reputation"

30



</ D'0&r'9)&'o of D'('*e*6

I! 4ompany i$ $%ort o! ;orking 4apita7 it 4annot di$tri6ute t%e good dividend

to it$ $%are%oder$ in $pite o! $u!!i4ient pro!it$" Pro!it$ are to 6e retained in

t%e 6u$ine$$ to make up t%e de!i4ien4y o! ;orking 4apita" On t%e ot%er

4ontrary7 i! ;orking 4apita i$ $u!!i4ient7 ampe dividend 4an 6e de4ared and

di$tri6uted" It in4rea$e$ t%e market vaue o! $%are$"

9" E=%lo'&a&'o of "oo* O%%or&)'&+6

In 4a$e o! ade?ua4y o! 4apita in a 4on4ern7 good opportunitie$ 4an 6e

eDpoited e"g"7 4ompany may make o!!2$ea$on pur4%a$e$ re$uting in

$u6$tantia $aving$ or it 4an !et4% 6ig $uppy order$ re$uting in good pro!it$"

" Mee&'. U0ee Co&'.ec+6

(epre$$ion $%oot$ t%e demand o! ;orking 4apita 6e4au$e $o4k piing o!

!ini$%ed good$ 6e4ome ne4e$$ary" Certain ot%er un$een 4ontingen4ie$ e"g"7

!inan4ia 4ri$i$ due to %eavy o$$e$7 6u$ine$$ o$4iation$7 et4" 4an ea$iy 6e

over4ome7 i! 4ompany maintain$ ade?uate ;orking 4apita"

L" H'.h Morale6

T%e provi$ion o! ade?uate ;orking 4apita improve$ t%e morae o! t%e

eDe4utive 6e4au$e t%ey %ave an environment o! 4ertainty7 $e4urity and

4on!iden4e7 ;%i4% i$ a great p$y4%oogi4a7 !a4tor in improving t%e overa

e!!i4ien4y o! t%e 6u$ine$$ and o! t%e per$on ;%o i$ at t%e %e o! !air$ in t%e

4ompany"

31



0/"Icrea0e* Pro*)c&'o Eff'c'ec+6

A 4ontinuou$ $uppy o! ra; materia7 re$ear4% programme7 innovation$ and

te4%ni4a deveopment and eDpan$ion programme$ 4an $u44e$$!uy 6e

4arried out i! ade?uate ;orking 4apita i$ maintained in t%e 6u$ine$$" It ;i

in4rea$e t%e produ4tion e!!i4ien4y7 ;%i4% ;i7 in turn in4rea$e$ t%e

e!!i4ien4y and morae o! t%e empoyee$ and o;er 4o$t$ and 4reate image

among t%e 4ommunity"

DISADVANTAGES OF EXCESSIVE WORKING CAPITAL

Every 6u$ine$$ 4on4ern $%oud %ave ade?uate ;orking 4apita to run it$6u$ine$$

operation$" It $%oud %ave neit%er redundant or eD4e$$ive ;orking 4apita

nor inade?uate nor $%ortage o! ;orking 4apita" 'ot% eD4e$$ive a$ ;e a$ $%ort

;orking 4apita po$ition$ are 6ad !or any 6u$ine$$"

0" ED4e$$ive ;orking 4apita mean$ ide !und$ ;%i4% earn no pro!it$ !or t%e

6u$ine$$ and %en4e t%e 6u$ine$$ 4annot earn a proper rate o! return on it$

inve$tment$"

." W%en t%ere i$ redundant ;orking 4apita7 it may ead to unne4e$$ary pur4%a$ing

and a44umuation o! inventorie$ 4au$ing more 4%an4e$ o! t%e!t ;a$te and o$$e$"

8" ED4e$$ive ;orking 4apita impie$ eD4e$$ive de6tor$ and de!e4tive 4redit Poi4y

;%i4% may 4au$e %ig%er in4iden4e o! 6ad de6t$"

1" It may re$ut into overa ine!!i4ien4y in t%e organiation"

32



3" W%en t%ere i$ an eD4e$$ive ;orking 4apita reation ;it% t%e 6ank$

and ot%er !inan4ia in$titution$ may not 6e maintained"

" (ue to o; rate o! return on inve$tment$ t%e vaue o! $%are$ may a$o !a

DISADVANTAGES OF INADEQUATE WORKING CAPITAL

0B A 4on4ern7 ;%i4% %a$ inade?uate ;orking 4apita7 4annot pay it$ $%ort2term

ia6iitie$ in time" T%u$ it ;i oo$e it$ reputation and $%a not 6e a6e to get good4redit !a4iitie$"

.B T%e !irm 4annot pay day2to2day eDpen$e$ o! it$ operation$ and it 4reate$

ine!!i4ien4ie$7 in4rea$e$ 4o$t$ and redu4e$ t%e pro!it$ o! t%e 6u$ine$$"

8B It 6e4ome$ impo$$i6e to utiie e!!i4ienty t%e !iDed a$$et$ due to non2

avaia6iity o! i?uid !und$"

1B T%e rate o! return on inve$tment$ a$o !a$ ;it% t%e $%ortage o! ;orking 4apita"

>/>The Maa.ee& of Wor'. Ca%'&al

W%ie t%e per!orman4e eve$ o! $ma 6u$ine$$e$ %ave traditionay 6een attri6uted

to genera manageria )a4tor$ $u4% a$ manu!a4turing7 marketing and operation$7

;orking 4apita management may %ave a 4on$e?uent impa4t on $ma 6u$ine$$

$urviva and gro;t% Jargar and 'ument%a7 0LL1B" T%e management o! ;orking

33



4apita i$ important to t%e !inan4ia %eat% o! 6u$ine$$e$ o! a $ie$" T%e amount$

inve$ted in ;orking 4apita are o!ten %ig% in proportion to t%e tota a$$et$

empoyed and $o it i$ vita t%at t%e$e amount$ are u$ed in an e!!i4ient and e!!e4tive

;ay" +o;ever7 t%ere i$ eviden4e t%at $ma 6u$ine$$e$ are not very good at

managing t%eir ;orking 4apita" Given t%at many $ma 6u$ine$$e$ $u!!er !rom

under4apitai$ation7 t%eimportan4e o! eDerting tig%t 4ontro over ;orking 4apita

inve$tment i$ di!!i4ut to over$tate"

A !irm 4an 6e very pro!ita6e7 6ut i! t%i$ i$ not tran$ated into 4a$% !rom operation$

;it%in t%e $ame operating 4y4e7 t%e !irm ;oud need to 6orro; to $upport it$

4ontinued ;orking 4apita need$" T%u$7 t%e t;in o6<e4tive$ o! pro!ita6iity and

i?uidity mu$t 6e $yn4%roni$ed and one $%oud not impinge on t%e ot%er !or ong"

Inve$tment$ in 4urrent a$$et$ are inevita6e to en$ure deivery o! good$ or $ervi4e$

to t%e utimate 4u$tomer$ and a proper management o! $ame $%oud give t%e

de$ired impa4t on eit%er pro!ita6iity or i?uidity" I! re$our4e$ are 6o4ked at t%e

di!!erent $tage o! t%e $uppy 4%ain7 t%i$ ;i proong t%e 4a$% operating 4y4e"

At%oug% t%i$ mig%t in4rea$e pro!ita6iity due to in4rea$e $ae$B7 it may a$o

adver$ey a!!e4t t%e pro!ita6iity i! t%e 4o$t$ tied up in ;orking 4apita eD4eed t%e

6ene!it$ o! %oding more inventory andHor granting more trade 4redit to 4u$tomer$"

Anot%er 4omponent o! ;orking 4apita i$ a44ount$ paya6e7 6ut it i$ di!!erent in t%e

$en$e t%at it doe$ not 4on$ume re$our4e$ in$tead it i$ o!ten u$ed a$ a $%ort term

$our4e o! !inan4e" T%u$ it %ep$ !irm$ to redu4e it$ 4a$% operating 4y4e7 6ut it %a$

an impi4it 4o$t ;%ere di$4ount i$ o!!ered !or eary $ettement o! invoi4e"

34



Wor'. Ca%'&al Maa.ee& Prac&'ce0

Wide range o! $urvey$ %ave 6een u$ed to $tudy ;orking 4apita poi4ie$ overa and

t%e pra4ti4e$ to manage di!!erent 4omponent$ o! net ;orking 4apita $eparatey"Ca$% and marketa6e $e4uritie$7 a44ount$ re4eiva6e7 inventorie$7 a44ount$ paya6e

and $%ort2term oan$ %ave 6een $tudied" T%e$e $urvey$ $%o; t%at mo$t o! t%e

4ompanie$ %ave in!orma poi4ie$ !or ;orking 4apita management" T%e mo$t

important a4tion in ;orking 4apita management i$ t%e 4oe4tion o! a44ount$

re4eiva6e !oo;ed 6y e!!i4ient inventory management"

Ca0h Maa.ee& Prac&'ce0

(avid$on .//.B de!ined 4a$% management a$ a term ;%i4% re!er$ to t%e 4oe4tion7

4on4entration and di$6ur$ement o! 4a$%" It en4ompa$$e$ a 4ompany@$ eve o!

i?uidity7 management o! 4a$% 6aan4e and $%ort term $trategie$" Pindado .//1B

a$o de!ine$ 4a$% management a$ part o! ;orking 4apita t%at make$ up t%e optima

eve needed 6y a 4ompany" 'ort .//1B noted t%at7 4a$% management i$ o!

importan4e !or 6ot% ne; and gro;ing 6u$ine$$e$" Companie$ may $u!!er !rom 4a$%

!o; pro6em$ 6e4au$e o! a4k o! margin o! $a!ety in 4a$e o! anti4ipated eDpen$e$

$u4% t%at t%ey eDperien4e pro6em$ in !inding t%e !und$ !or innovation or

eDpan$ion" )urt%er 'ort .//1B7 aude$ t%at e!!e4tive 4a$% management i$ t%e

!undamenta $tarting point to en$ure t%at t%e 4ompany@$ !inan4e$ are in $trong po$ition"

A44ording to 'ort .//1B 4a$% i$ t%e i!e6ood o! t%e 6u$ine$$" T%e key to

$u44e$$!u 4a$% management ie$ in ta6uating reai$ti4 pro<e4tion$7 monitoring

35



4oe4tion$ and di$6ur$ement$7 e$ta6i$%ing e!!e4tive 6iing and 4oe4tion

mea$ure$7 and ad%ering to 6udgetary parameter$ 6e4au$e 4a$% !o; 4an 6e a

pro6em to t%e 6u$ine$$ organiation" Gitman .//B o!!er$ t%eoreti4a po$ition$

dra;n !rom o6$ervation$ and 4on$uting eDperien4e on t%e !a4t t%at a !irm 4an

improve it$ 4a$% management e!!i4ien4y 6y 4oe4ting a44ount$ re4eiva6e a$ $oon

a$ po$$i6e" T%e mo$t o6viou$ ;ay o! 6ringing !or;ard 4a$% in!o;$7 ;oud 6e to

pre$$ de6tor$ !or earier payment at%oug% t%i$ poi4y ;i re$ut in good;i and

pro6em$ ;it% 4u$tomer$" Gitman .//B advo4ate$ !or 4a$% 6udget a$ anot%er

4a$% management too" It i$ u$ed 6y t%e !irm to e$timate it$ $%ort term re?uirement

;it% parti4uar attention 6eing paid to panning !or $urpu$ 4a$% or !or 4a$%

$%ortage$" Jirkman .//B arrived at t%e $ame idea 6y 03 %ig%ig%ting t%at a$ a

4omponent o! impementing an e!!e4tive 4a$% management program7 a 4a$% !o;

$tatement 4aed a 4a$% 6udget may 6e prepared" C%a$tain .//B a$$ert$ t%at

6udget$ are t%e !inan4ia road map 4ompanie$@ u$e7 ;%en panning 6u$ine$$

eDpen$e$ and tra4king t%e 4a$% !o; t%roug%out t%e 6u$ine$$ year"

I(e&or+ Maa.ee& Prac&'ce0

Manager$ a4t rationay in managing t%eir inventory e!!i4ienty i! t%ey are

4onvin4ed t%at t%e pra4ti4e en%an4e$ !irm per!orman4e" Traditionay7 inventorie$

o! ra; materia$7 ;ork2inprogre$$ 4omponent$7 and !ini$%ed good$ ;ere kept a$ a

6u!!er again$t t%e po$$i6iity o! running out o! needed item$" +o;ever7 arge 6u!!er

inventorie$ 4on$ume vaua6e re$our4e$ and generate %idden 4o$t$"

Inventory management eading to inventory redu4tion %a$ 6e4ome t%e primary

target7 a$ i$ o!ten t%e 4a$e in <u$t2in2time KITB $y$tem$7 ;%ere ra; materia$ and

36



part$ are pur4%a$ed or produ4ed <u$t in time to 6e u$ed at ea4% $tage o! t%e

produ4tion pro4e$$" T%i$ approa4% to inventory management 6ring$ 4on$idera6e

4o$t $aving$ !rom redu4ed inventory eve$" A$ a re$ut7 inventorie$ %ave 6een

de4rea$ing in many !irm$ C%en et a"7 .//3B" A44ording to C%en et a" .//3B7

!irm$ ;it% a6normay %ig% inventorie$ %ave a6normay poor $to4k return$" On t%e

ot%er %and7 !irm$ ;it% a6normay o; inventorie$ %ave ordinary $to4k return$" In

addition7 !irm$ ;it% $ig%ty o;er t%an average inventorie$ per!orm 6e$t over time"

Inventory management ead$ to inventory redu4tion7 a$ i$ o!ten t%e 4a$e in KIT"

)uerton et a" .//8B give $upport t%at !irm$ t%at impement %ig%er degree$ o! KIT

manu!a4turing pra4ti4e$ $%oud outper!orm 4ompetitor$ ;%o do not it ;a$ a$o

!ound t%at a po$itive reation$%ip eDi$t$ 6et;een !irm pro!ita6iity and t%e degree to

;%i4% ;a$teredu4ing produ4tion pra4ti4e$7 $u4% a$ redu4ed $et2up time$7

preventive maintenan4e 0 program$ and uni!orm ;orkoad$ are impemented"

Erogu and +o!er ./00B argue t%at inventory eanne$$ i$ t%e 6e$t inventory

management too" #ean produ4tion it$e! 4on$ider$ inventory a$ a !orm o! ;a$te

t%at $%oud 6e minimied and it %a$ 6e4ome $ynonymou$ ;it% good inventory

management Cannon .//B introdu4e$ 4ontradi4tory per$pe4tive t%at inventory

per!orman4e $%oud not 6e mea$ured a$ a ro6u$t indi4ator o! overa per!orman4e"

Cannon .//B indi4ate$ t%at ;%en t%e e!!e4t$ o! time are taken into a44ount7

turnover improvement on average %a$ a $ig%ty negative e!!e4t on ROA"

Additionay7 turnover improvement eD%i6it$ a prominent random e!!e4t"

Con$i$tent ;it% Cannon .//B7 anot%er Joia$ et a" ./00B pre$ent t%at inventory

turnover ratio a$ a mea$urement o! inventory managementB7 i$ negativey

4orreated ;it% gro$$ margin" Moreover7 t%ere eDi$t$ a negative reation$%ip

6et;een gro$$ margin and inventory turnover" T%i$ impie$ t%at retaier$@ trade o!!

gro$$ margin !or inventory turn$ to a4%ieve $imiar return on inventory inve$tment

37



$in4e7 i! inventory turnover ratio i$ o;er t%an targeted given t%e eve o! gro$$

margin7 t%en management $%oud 6e aarmed ;it% t%i$ ine!!i4ien4y"

Rece'(a9le0 Maa.ee& Prac&'ce0

Provi$ion o! trade 4redit i$ normay u$ed 6y 6u$ine$$e$ a$ a marketing $trategy to

eDpand or maintain $ae$ Pandey7 .//1B" E!!i4ient re4eiva6e$ management

augmented 6y a $%ortened 4reditor@$ 4oe4tion period7 o; eve$ o! 6ad de6t$ and

a $ound 4redit poi4y o!ten improve$ t%e 6u$ine$$e$@ a6iity to attra4t ne;4u$tomer$ and a44ordingy in4rea$e !inan4ia per!orman4e %en4e t%e need !or a

$ound 4redit poi4y t%at ;i en$ure t%at vaue i$ optimied #aaridi$ and

(imitrio$7 .//3B" Co$t$ o! 4a$% di$4ount$ and 4o$t$ o! managing 4redit and 09

4redit 4oe4tion$ 4on$titute t%e 4arrying 4o$t$ a$$o4iated ;it% granting a 4redit

;%i4% in4rea$e ;%en t%e amount o! re4eiva6e$ granted are in4rea$ed" #o$t $ae$

re$uting !rom not granting 4redit 4on$titute t%e opportunity 4o$t ;%i4% de4rea$e

;%en t%e amount$ o! re4eiva6e$ are in4rea$ed #aaridi$ and (imitrio$7 .//3B"

Mi4%a$ki .//9B provide$ t%at an in4rea$e in t%e eve o! a44ount$ re4eiva6e$ in a

!irm in4rea$e$ 6ot% t%e net ;orking 4apita and t%e 4o$t$ o! %oding and managing

a44ount$ re4eiva6e$ and 6ot% ead to a de4rea$e in t%e vaue o! t%e !irm" #aaridi$

and (imitrio$ .//3B argue t%at !irm$ ;%o pur$ue in4rea$e in t%eir a44ount$

re4eiva6e$ to an optima eve in4rea$e t%eir pro!ita6iity re$uting !rom in4rea$e

$ae$ and market $%are" Kuan and Martine .//.B emp%a$ie t%at !irm$ 4an 4reate

vaue 6y redu4ing t%eir num6er o! day$ o! a44ount$ re4eiva6e7 ;%ie (eoo!

.//8B ;rite$ t%at t%e engt% o! re4eiva6e$ 4oe4tion period %a$ a negative e!!e4t

on a !irm@$ per!orman4e" Su$%ma and '%upe$% .//9B a$o a!!irm t%at7 putting in

38



pa4e a $ound 4redit poi4y en$ure$ proper de6t 4oe4tion pro4edure$ and i$ pivota

in improving e!!i4ien4y in re4eiva6e$ management %en4e t%e per!orman4e o!

!irm$"

Cha%&er ->Da&a Aal+0'0

39



T%e re$ear4%er eDamined t%e 4oe4ted ?uantitative data to make in!eren4e$

t%roug% a $erie$ o! operation$ invoving editing to eiminate in4on$i$ten4ie$7

4a$$i!i4ation on t%e 6a$i$ o! $imiarity and ta6uation to reate varia6e$"

Su6$e?uenty7 t%e re!ined data ;ere anayed u$ing de$4riptive $tati$ti4$ $u4% a$

per4entage$7 mea$ure$ o! 4entra tenden4y7 and mea$ure$ o! di$per$ion"

DATA ANALYSIS AND INTERPRETATION

I&ro*)c&'o

T%i$ 4%apter pre$ent$ output$ o! data anay$i$ and di$4u$$ion$ t%ereo!" T%e

$tati$ti4a anay$e$ are 6a$ed on t%e $tudy@$ t%emati4 area$ ;%i4% in4ude ;orking

4apita management pra4ti4e$7 and t%e e!!e4t$ o! WCM pra4ti4e$ on !inan4ia

per!orman4e"

Re0%o0e Ra&e

T%e $tudy $oug%t to o6tain data !rom a tota o! 8/ management repre$entative$

4ompri$ing o! managing dire4tor$7 !inan4e o!!i4er$ and pro4urement manager$ 'y

t%e end o! t%e $tudy period7 %o;ever7 . ?ue$tionnaire$ ;ere 4ompeted and

returned" T%i$ tran$ated to a re$pon$e rate o! L8" Study parti4ipant$ indi4ated

t%at t%ey %ad $erved t%e $ugar 4ompanie$ in $imiar po$ition$ !or time2engt%$

varying !rom one and ten year$ a$ !urt%er detaied in Ta6e

or$ ;,periece i the <=>?- ompaies

40



EDperien4e

-ear$B

)re?uen4y Per4ent Cumuative

Per4ent

0 / 2 years 1 01"8 01"8

3 5 years ." 1."L

6 / 8 years 00 8L"8 ."0 2 0/ years 3 09"L 0//"/

TOTA# . 0//"/

Ta6e iu$trate$ t%at ma<ority o! t%e 4ompanie$@ manager$ %ad a44umuated

6et;een Q year$ o! eDperien4e 8L"8B in t%e top eve" -et anot%er 4u$ter o!

manager$ ."B %ad a non2di$rupted ;orking $tint ranging 6et;een 8 to 3 year$"

T%ere ;ere a$o 09"L o! t%e manager$ ;%o %ad $tayed onge$t 6et;een Q 0/year$ ;%ie t%o$e ;it% t%e ea$t ;ork2i!e duration$7 e$$ t%an . year$7 4on$tituted a

re$pon$e portion o! 01"8" Averagey7 t%e ;orki!e eDperien4e in t%e unit$ o!

anay$i$ ;a$ !ound to 6e 9" year$ and t%i$ ;a$ 4on$idered $u!!i4ient to ena6e

?uaity di$$emination and in!ormed topi4a opinion$"

!'ac'al Perforace of LAKSHMI Co%a+

T%e o6<e4t o! WCM i$ to maDimie t%e o;ner$@ ;eat% ;%i4% i$ mea$ured in term$

o! pro!ita6iity" E!!e4tivey7 t%ere!ore7 a !irm in o$$e$ doe$ not an$;er to t%e

6u$ine$$ intent o! t%e o;ner$" In t%i$ $tudy7 !inan4ia per!orman4e o! t%e $ugar

4ompanie$ ;a$ mea$ured on t%e 6a$i$ o! t%eir a$$et a44umuation7 mem6er$%ip and

net pro!it$ reaied"

Under a$$et a44umuation7 t%e $tudy e$ta6i$%ed t%at t%e $mae$t $ugar4ane

4ompany %ad an a$$et 6a$e o! S%"1 miion ;%ie an e?uivaent in t%e 6igge$t

41



4ompany ;a$ S%"0/ miion" T%e mean a$$et vaue ;a$ !ound to 6e S%"000".L7

;it% a $tandard deviation o! S%"8"1L miion" T%i$ $%o;ed in%erent re$our4e26a$e

di$$imiaritie$ among t%e $ugar4ane 4ompanie$7 $ignaing to a <u$ti!ia6e 6a$i$ !or

appi4ation o! variou$ approa4%e$ in t%eir WCM"

T%e 4ompanie$@ mem6er$%ip ;a$ 4on$tituted 6y $ma $4ae $ugar4ane !armer$

a!!iiated to re$pe4tive $ugar4ane 4ompanie$" In t%i$ $tudy7 it ;a$ e$ta6i$%ed t%at

t%e $mae$t 4ompany %ad regi$tered a tota o! 3/ !u2$u6$4ription mem6er$ ;%ie

t%e arge$t mem6er$%ip $ie . ;a$ 87/.0" T%i$ variation gave a mem6er$%ip range

o! .710 ;%i4% again %inted to ;ider di$per$ion$ in !inan4ia per!orman4e among

t%e !irm$" Given t%at out2gro;er 4ompanie$ depended amo$t entirey on pro4eed$

!rom t%eir i$ted mem6er$7 it ;a$ o6$erved t%at $maer 4ompanie$ %ad i?uidity

and pro!ita6iity 4%aenge$ ;%i4% ;oud ony 6e mitigated 6y adoption o!

re$pon$ive WCM pra4ti4e$"

'a$ed on t%e 4ompanie$@ e$timated a$$et$ and mem6er$%ip7 a 4orreation anay$i$

4on!irmed t%at a$$et appre4iation ;a$ predominanty dependent on t%e num6er o!

mem6er$ $u6$4ri6ing to a 4ompany"

Wor'. Ca%'&al Maa.ee& Prac&'ce0

T%e ;orking 4apita management pra4ti4e$ ;ere inve$tigated under ea4% o! t%e

WCM 4omponent$5 re4eiva6e$7 paya6e$7 inventory7 and 4a$%"

42



Rece'(a9le0 Maa.ee& Prac&'ce0

Under t%i$ o6<e4tive area7 t%e $tudy@$ purpo$e ;a$ to determine t%e eDi$ten4e and

e!!e4tivene$$ o! t%e 4ompanie$@ 4redit poi4y and it$ appi4ation in maDimiation o!

vaue o! t%e !irm" T%e indi4ator$ u$ed in4uded paya6e $our4e$7 duration ti a4tua

re4eipt$7 and re4eipt a44eeration approa4%e$(

T%e $ugar 4ompanie$ %ad option$ o! generating re4eiva6e$ !rom di$tin4t

tran$a4tion$ invoving t%eir mem6er$" Ta6e iu$trate$ t%e !our identi!ied option$ at

t%e 4ompanie$@ di$po$a"

So)rce0 of

Pa+a9le0

!re?)ec+ Perce& C))la&'(e

Perce&

#oan$ and

Intere$t$

.0 93"/ 93"/

Sae$ 8 0/"9 3"9

43



Su6$4ription$

and C%arge$

. 9"0 L."L

Return on

Inve$tment$

. 9"0 0//"/

Tota . 0//"/

Ta6e iu$trate$ t%at 93 o! t%e 4ompanie$@ re4eiva6e$ ;ere a derivative o! oan$

advan4ed to mem6er$ and a44umuating intere$t$" Ot%er option$7 6ut ?uantitativey

$im7 invoved $ae o! !arm input$ 0/"9B7 mem6er$%ip $u6$4ription$ and ot%er

4%arge$ 9"0B7 and return !rom t%e 4ompanie$@ inve$tment$ 9"0B" T%e$e

!inding$ $%o;ed t%at at ea$t 93 o! t%e !irm$@ inve$tment ;a$ in !orm o! 4redit"

T%i$ %ig% demand !or 4redit ;a$ <u$ti!ied 6y %ig% !arm preparation and input 4o$t$

;%i4% made t%e !armer$ $eek !inan4ia %ep !rom t%eir mem6er 4ompanie$"

T%ere!ore7 it ;a$ in t%e intere$t o! t%e 4ompanie$ to advan4e oan$ to t%eir

mem6er$ $o a$ not ony to improve t%eir produ4e 6ut a$o to pa4e t%e 4ompanie$ at

vantage !inan4ia po$itioning"

T%e amount$ o;ed to t%e 4ompanie$ ;ere paid under di!!erent trade period$

depending on t%e nature o! 4redit" Ta6e 1"3 pre$ent$ t%e !inding$@ detai$"

D)ra&'o !re?)ec+ Perce& C))la&'(e

Perce&

/ 2 03 day$ . 9"0 9"0

03 2 8/ day$ . 9"0 01"8

8/ 2 13 day$ 8 0/"9 .3"/

44



13 2 / day$ 8 0/"9 83"9

More t%an /

day$

0 1"8 0//"/

Tota . 0//"/

Ta6e iu$trate$ t%at 4ompany de6tor$ met t%eir payment$ o6igation$ ;it%in

varying duration$ ranging !rom ero to more t%an / day$" At t%e %ig% end7

4ompany management ao;ed 1"8 o! t%e re4eiva6e$ to 6e e!!e4ted a!ter a

period o! / day$ or more !rom tran$a4tion date" T%i$ 4ategory ;a$ predominated

6y oan$ advan4e$ to mem6er$ ;%i4% ;ere re4overa6e a!ter 4ane %arve$t$" T%e

4umuative 83"9 o! t%e re4eipt$ ;ere remitted to t%e 4ompanie$ ;it%in / day$"

ota6e7 ony 9"0 re4eiva6e$ ;ere a4tuaied in e$$ t%an 03 day$" T%e $tudy7

t%ere!ore7 e$ta6i$%ed t%at a %ig%er proportion o! re4eiva6e$ to t%e outgro;er

4ompanie$ ;ere ong term" T%i$ ;a$ attri6uted to t%e ong ;ait prior to re4eipt$ o!

4ane pro4eed$ ;%i4% took a minimum o! 0 mont%$

I(e&or+ Maa.ee& Prac&'ce0/

T%ere ;ere t;o key !orm$ o! inventory t%at t%e 4ompanie$ ;ere re?uired to

manage" T%e$e in4uded !arm input$ $u4% a$ !ertiier$7 $pray 4%emi4a$ and 4ane

$eeding$ and genera mer4%andi$e mainy !or o!!i4e u$e" T%e !arm input inventory

4on$tituted . ;%ie t%e genera mer4%andi$e ;ere 0" A4?ui$ition and

maintenan4e o! inventory ?uantitie$ ;ere determined 6y variou$ !a4tor$ ;%i4%

;ere e$ta6i$%ed a$ pre$ented in Ta6e

45



Co0'*era&'o0 !re?)ec+ Perce& C))la&'(e

Perce&

A4tua (emand 3 09"L 09"L

(emand

Pro<e4tion$

9 .3"/ 1."L

Sto4k

Repeni$%ment

00 8L"8 ."0

Unpredi4ta6e

Suppy

3 09"L 0//"/

Tota . 0//"/

T%e %ig%e$t pu$% !or inventory variation ;a$ t%e need !or repeni$%ment 8L"8B

!oo;ed 6y t%e 4ompanie$@ demand pro<e4tion$ .3B" T%e ot%er !a4tor$

4on$idered ;ere a4tua demand 09"LB and provi$ion !or unpredi4ta6e demand

09"LB" T%e inventory order$ ;ere re4eived ;it%in an average o! .. day$ 6ut t%e

average time taken to i$$ue t%em ;a$ 0 day$" T%i$ impied t%at ot%er t%an 4arrying

4o$t$7 4ompanie$ %ad to meet t%e %oding 4o$t$ in !orm o! $torage and in$uran4e !or a engt% o! 8L day$" T%i$ a$o meant t%at $ugar 4ompanie$ eDperien4ed onger

inventory 4onver$ion 4y4e$" T%e re$pondent$ !urt%er opined t%at t%ey did not %ave

$tandard minimum and maDimum inventorie$ a$ t%e 4a$e$ ;ere mo$t o!ten t%an not

demand2driven"

46



Ca0h Maa.ee& Prac&'ce0

T%e avaia6iity o! 4a$% 6aan4e$ ;a$ regarded a key determinant o! t%e

4ompanie$@ 4ompetitive a6iity 6e4au$e it ;oud provide t%e mean$ to inve$t in

peope7 te4%noogy7 and ot%er a$$et$" E!!i4ient 4a$% management ;a$ t%ere!ore

indi$pen$a6e to t%e $ugar 4ompany" T%i$ $tudy inve$tigated 4a$% management

pra4ti4e$ on t%e 6a$i$ o! 4a$% proportion$ %ed7 4onver$ion to marketa6e $e4uritie$7

and 4ompany aternative$ to 4a$% optimiation"

47



)ir$t7 t%e proportion$ o! 4urrent a$$et$ %ed in 4a$% and in near24a$% !orm$ $u4% a$

marketa6e $e4uritie$ and time depo$it$ ;ere e$timated a$ $%o;n in Ta6e

)rom Ta6e 7 it i$ $%o;n t%at averagey 4ompanie$ retained 0."/L o! t%eir 4urrent

a$$et$ in t%e !orm o! 4a$% 1"8B ;%ie a patry ."18 o! t%e 4urrent a$$et$ ;ere

%ed in t%e !orm o! $%ort term $e4uritie$ ."L1B" Comparativey7 t%ere!ore7 t%ere

;a$ more 4a$% at %and or 6ank in t%e 4ompanie$ a$ oppo$ed to near24a$%

inve$tment$" T%i$ ;a$ attri6uted to 8 imited inve$tment ve%i4e$ avaia6e to t%e

4ompanie$ ;%o$e market$ ;ere 4on$trained 6y t%e num6er o! mem6er$ t%ey$erved" +oding o! too mu4% 4a$% indi4ated t%at t%e out2gro;er 4ompanie$

pre!erred i?uidity to pro!ita6iity7 and pointed to a more 4on$ervative pra4ti4e in

managing t%e 4ompanie$@ 4a$% !o;$"

48

De0cr'%&'o0 N Mea S&*/ De('a&'oProportion o!

Current A$$et$

%ed in Ca$%

. 0."/L 1"80

Proportion o!

Current A$$et$

%ed in ST

Se4uritie$

. ."18 ."L89



RESULTS AND !INDIN"S

Bac.ro)* of &he S&)*+

'u$ine$$ entitie$ eDi$t !or purpo$e$ o! en%an4ing o;ner$@ inve$tment vaue"

Reaiation o! t%i$ o6<e4tive re?uire$ !ine$$e in !inan4ia $trategy and entren4%ment

o! re$pon$ive adoption $y$tem$" A$ a re$ut7 a !irm i$ re?uired to maintain a

6aan4e 6et;een i?uidity and pro!ita6iity ;%ie 4ondu4ting it$ day to day

operation$" #i?uidity i$ a pre4ondition to en$ure t%at a !irm i$ a6e to meet it$

$%ort2term o6igation$ and it$ 4ontinued !o; 4an 6e guaranteed !rom a pro!ita6e

venture"

49



T%e reation$%ip 6et;een ;orking 4apita management and !inan4ia per!orman4e

may 6e $een t%roug% t%e i?uidity2pro!ita6iity trade2o!! t%eory" T%i$ t%eory

propo$e$ t%at t%ere i$ a trade2o!! 6et;een i?uidity and pro!ita6iity gaining more

o! one mean$ giving up $ome o! t%e ot%er" At one end o! t%e $pe4trum t%ere are

%ig%y i?uid !irm$ ;%i4% are not very pro!ita6e ;%ie at t%e ot%er end are !irm$

;%i4% are %ig%y pro!ita6e 6ut are not very i?uid" T%e 6a$i4 4%aenge i$ t%ere!ore

to determine ;%ere in t%e midde ground t%e !irm $%oud re$ide"

T%e t%eory o! ;orking 4apita management de$4ri6e$ %o; ;orking 4apita $%oud

6e managed and demon$trate$ t%e 6ene!it$ in term$ o! i?uidity7 $oven4y7

e!!i4ien4y7 pro!ita6iity7 and $%are%oder ;eat% maDimiation ;%i4% a44rue to t%e

4ompany !rom appropriatey managing ;orking 4apita" (e4ining eve$ o!

i?uidity7 une$$ remedied7 may re$ut in in$oven4y and eventuay 6ankrupt4y a$

t%e 6u$ine$$$ ia6iitie$ eD4eed it$ a$$et$"

$Wor'. ca%'&al1 mean$ t%at part o! t%e tota a$$et$ o! t%e 6u$ine$$ t%at

4%ange !rom one !orm to anot%er !orm in t%e ordinary 4our$e o! 6u$ine$$

operation$"& A$o kno;n a$ re(ol('. or c'rc)la&'. ca%'&al or 0hor&-&er

f'ac'al aa.ee& it i$ not%ing 6ut t%e di!!eren4e 6et;een 4urrent a$$et$ and

4urrent ia6iitie$" T%e ;ord “;orking 4apita& i$ made o! t;o ;ord$2 Working :

Capita" T%e ;ord ;orking mean$ day to day operation o! t%e 6u$ine$$7 ;%erea$‟

t%e ;ord 4apita mean$ monetary vaue o! a a$$et$ o! t%e 6u$ine$$" Working‟

4apita i$ o! ma<or importan4e to interna and eDterna anay$i$ 6e4au$e o! it$ 4o$e

reation$%ip ;it% t%e 4urrent day2to2 day operation$ o! a 6u$ine$$"

50



Every 6u$ine$$ need$ !und$ !or t;o purpo$e$"

#ong term !und$ are re?uired to 4reate produ4tion !a4iitie$ t%roug%

pur4%a$e o! !iDed a$$et$ $u4% a$ pant$7 ma4%inerie$7 and$7 6uiding7 et4"

S%ort term !und$ are re?uired !or t%e pur4%a$e o! ra; materia$7 payment o!

;age$7 and ot%er day2to2day eDpen$e$"

Working 4apita management dea$ ;it% t%e management o! t%e$e $%ort term

!und$"

T%e 4on$tituent$ o! 4urrent a$$et$ : 4urrent ia6iitie$ i$ a$ !oo;$2

CURRENT ASSETS CURRENT LIABILITIES

0" IN,ENTOR- 0" SUN(R- CRE(ITORS

aB RAW MATERIA# ." TRA(E A(,ANCES

6BWORJ2IN2PROGRESS 8" 'ORROWINGS $%ort termB

4B )INIS+E( GOO(S aB COMMERCIA# 'ANJS

dB OT+ERS 6B OT+ERS

." TRA(E CRE(ITORS 1" PRO,ISIONS

8" #OANS AN( A(,ANCES

51



1"CAS+ AN( 'ANJ 'A#ANCE

WORKING CAPITAL COMPRISES OF THE FOLLOWING:-

3/ Ca0h a* ca0h e?)'(ale&05 2 T%i$ mo$t i?uid !orm o! ;orking 4apita

re?uire$ 4on$tant $upervi$ion" A good 4a$% 6udgeting and !ore4a$ting $y$tem

provide$ an$;er$ to key ?ue$tion$ $u4% a$5

I$ t%e 4a$% eve ade?uate to meet 4urrent eDpen$e$ a$ t%ey 4ome due

W%at i$ t%e timing reation$%ip 6et;een 4a$% in!o; and out!o;

W%en ;oud 4a$% need o44ur

W%en and %o; mu4% 6ank 6orro;ing ;i 6e needed to meet any 4a$%

$%ort!a$

W%en ;i repayment 6e eDpe4ted and ;i t%e 4a$% !o; 4over it

7/ Acco)&0 rece'(a9le05 2 Many 6u$ine$$e$ eDtend 4redit to t%eir 4u$tomer$"

I! you do7 i$ t%e amount o! a44ount$ re4eiva6e rea$ona6e reative to

$ae$

+o; rapidy are re4eiva6e$ 6eing 4oe4ted

W%i4% 4u$tomer$ are $o; to pay and ;%at $%oud 6e done a6out t%em

52



>/ I(e&or+5 2 Inventory i$ o!ten a$ mu4% a$ 3/ per4ent o! a !irm$ 4urrent

a$$et$7 $o naturay it re?uire$ 4ontinua $4rutiny"

I$ t%e inventory eve rea$ona6e 4ompared ;it% $ae$ and t%e nature o!

your 6u$ine$$

W%at$ t%e rate o! inventory turnover 4ompared ;it% ot%er 4ompanie$ in

your type o! 6u$ine$$

@/ Acco)&0 %a+a9le5 2 )inan4ing 6y $uppier$ i$ 4ommon in $ma 6u$ine$$ it

i$ one o! t%e ma<or $our4e$ o! !und$ !or entrepreneur$"

I$ t%e amount o! money o;ed $uppier$ rea$ona6e reative to ;%at you

pur4%a$e

W%at i$ your !irm$ payment poi4y doing to en%an4e or detra4t !rom your

4redit rating

/ Accr)e* e=%e0e0 a* &a=e0 %a+a9le5 2 T%e$e are o6igation$ o! your

4ompany at any given time and repre$ent a !uture out!o; o! 4a$%"

53



CHAPTER-@

SU""ESTIONS/

Working 4apita o! t%e 4ompany %a$ in4rea$ing every year" Pro!it a$o in4rea$ing

every year t%i$ i$ good $ign !or t%e 4ompany" It %a$ to maintain it !urt%er7 to run t%e

6u$ine$$ ong term"

T%e Current and ?ui4k ratio$ are amo$t up to t%e $tandard re?uirement" So t%e

Working 4apita management" #ak$%mi Sugarmi" i$ $ati$!a4tory and it %a$ to

maintain it !urt%er"

54



T%e 4ompany %a$ $u!!i4ient ;orking 4apita and %a$ 6etter i?uidity po$ition"

'y e!!i4ient utiiing t%i$ $%ort2term 4apita7 t%en it $%oud in4rea$e t%e turnover"

T%e 4ompany $%oud take pre4autionary mea$ure$ !or inve$ting and 4oe4ting

!und$ !rom re4eiva6e$ and to redu4e t%e 6ad de6t$"

T%e 4ompany %a$ $u!!i4ient ;orking 4apita and %a$ 6etter i?uidity po$ition"

'y e!!i4ient utiiing t%i$ $%ort2term 4apita7 t%en it $%oud in4rea$e t%e turnover"

Creditor@$ turnover ratio %a$ in4rea$ing !rom .//2/L to ./0/200 and in t%e a$t

year ./082./01 it i$ $ame a$ 4ompared to ./0.208" Company i$ making prompt

payment to it$ 4reditor$" T%i$ i$ good $ign !or t%e 4ompany" On2time payment to

$uppier$ ;i in4rea$e t%e 4redi6iity o! t%e !irm" It %a$ maintain it !urt%er to

$urvive in t%e market"

T%e 4ompany i$ utiiing ;orking 4apita e!!e4tivey t%i$ i$ good !or t%e

4ompany" It %a$ to maintain it !urt%er"

55



CHAPTER

CONCLUSIONS/

T%e $tudy on ;orking 4apita management 4ondu4ted in #ak$%mi Sugarmi"

to anaye t%e !inan4ia po$ition o! t%e 4ompany" T%e 4ompany@$ !inan4ia po$ition

i$ anayed 6y u$ing t%e too o! annua report$ !rom .//32/ to .//L20/"

T%e !inan4ia $tatu$ o! #ak$%mi Sugarmi" i$ good"

In t%e a$t year t%e inventory turnover %a$ in4rea$ed7 t%i$ i$ good $ign !or t%e

4ompany"

T%e 4ompany@$ i?uidity po$ition i$ very good Wit% regard to t%e inve$tment$ in

4urrent a$$et$ t%ere are ade?uate !und$ inve$ted in it" Care $%oud 6e taken 6y t%e

4ompany not to make !urt%er inve$tment$ in 4urrent a$$et$7 a$ it ;oud 6o4k t%e

!und$7 ;%i4% 4oud ot%er;i$e 6e e!!e4tivey utiied !or $ome produ4tive purpo$e"

56



On t%e ;%oe7 t%e 4ompany i$ moving !or;ard ;it% eD4eent management"

BIBLIO"RAPHY

TE2T BOOKS

M/Y/Kha P/K 5a', !'ac'al Maa.ee& Te=&, Pro9le;0 Ca0e0,

TH E*'&'o,Ta&a Mc"ra4 H'll P)9l'0h'. Co%a+ L''&e*, Ne4

Delh', 7/

Pra0aa Cha*ra, !'ac'al Maa.ee& Theor+ a* Prac&'ce, TH E*'&'o,

Ta&a Mc"ra4 H'll P)9l'0h'. Co%a+ L''&e*, Ne4 Delh', 73/

A)al Re%or& of La0h' S).ar'll/

WEB SITE VISITED

444/.oo.le/co

57

http://www.google.com/

http://www.google.com/



444/4''%e*'a/or.

444/&ra0&)&or0/co

58

http://www.wikipedia.org/

http://www.wikipedia.org/



!INANCIAL STATEMENT 73>-73@

PROVISIONAL BALANCE SHEET AS AT >30& MARCH, 73@

59



LIABILITY AMOUNT ASSETS AMOUNT

SOURCES O!

!UNDS

!I2ED ASSETS

S%are 4apita 0//////"// Gro$$ 6o4k 0/L088/"//

Re$erve$ and $urpu$ L.9.0/"// #e$$5 (epre4iation 3083L3L"//

LOAN !UNDS Net 'o4k 39991/0"//

Se4ured #oan$ .3919."// Capita WIP 8L891"//

Un$e4ured #oan$ 8/1L0L."// CURRENT

ASSETS

(e!erred taD ia6iity /0/L"// Inventorie$ .8/00"//

CURRENT

LIABILITIES

Sundry de6tor$ 183383"//

Sundry 4reditor$ 8/391L"// Ca$% : 6ank

6aan4e

0L9L8"//

Provi$ion$ 00/90/"// Ot%er 4urrent a$$et$ 0333"//

#oan$ and

Advan4e$

8/09"//

TOTAL 73@3F>3/

73@3F>3/

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