1.1. INTRODUCTION

The project is assigned to me Impact of Current Assets on Working Capital. At Oilgear Towler Polyhydron Private Limited (OTPL). The various information regarding classification, determinants, components, sources, arrangement operating cycle have been also discussed and aspects relating to the perspective of Oilgear Towler Polyhydron Private Limited (OTPL). Ratio Analysis has been carried out using Financial Information for last three accounting years i.e. from 2003 to 2005; Ratios like Current Ratio, Working Capital Turnover Ratio, Inventory Turnover Ratio, Debtors Turnover Ratio have also been analyzed. A Statement of Changes in Working Capital has also been analyzed and attached Turnover & Performance of the Company for last three years has also been analyzed.

Current assetmanagement is the handling of the current assets of a company. Any assets that a company or business has that is the equivalent of cash or can be liquidated into cash in the period of a year is considered a current asset. Typically, current assets are the inventorya company has, as well as the accounts receivables and any short-term investmentsit has in place.The main principle in current asset managementis to keep the proper flow of income and liability in balance. Managing current assets also takes into account the long-term investments of a company, but short-term assets, another name for current assets, is important in determining the liquidity of a company. The measure of liquidity is really the measure of how well and how fast a company can pay off its debts.Calculating the current ratio ration is key in figuring out the proper balance for current asset management. The current ratiois the companys current assets divided by its current liabilities. Current liabilities are defined as what a business needs to pay off in a specific cycle of time, either a financial year or a cycle of time particular to a business, whichever is longer

1.2. INDUSTRY PROFILE Originally, people chewed the cane raw to extract its sweetness. Indians discovered how to crystallize sugar during the Gupta dynasty, around AD 350. Sugarcane was originally from tropical South Asia and Southeast Asia. Different species likely originated in different locations with sugar barberi originating in India and sugar edule and sugar officinarum coming from New Guinea.During the Muslim Agricultural Revolution, Arab entrepreneurs adopted the techniques of sugar production from India and the refined and transformed them into a large-scale industry. Arabs set up the first large scale sugar mills, refineries, factories and plantations.The 1390s saw the development of a better press, which doubled the juice obtained from the cane. This permitted economic expansion of sugar plantations to Andalucia and to the Algarve. The 1420s saw sugar production extended to Canary Islands, Madeira and the Azores.The Portuguese took sugar to Brazil. Hans Staden, published in 1555, writes that by 1540 Santa Catarina Island had 800 sugar mills built before 1550 in the New World created an unprecedented demand for cast iron gears, levers, axles and other implements. Specialist trades in mold-making and iron-casting developed in Europe due to the expansion of sugar production. Sugar mill construction developed technological skills needed for a nascent industrial revolution in the early 17th century.After 1625 the Dutch carried sugarcane from South America to the Caribbean Islands where it became grown from Barbados to the Virgin Islands. The years 1625 to 1750 saw sugar become worth its weight in gold. With the European colonization of the Americas, the Caribbean became the worlds largest source of sugar. These Islands could supply sugarcane using slave labor and produce sugar at prices vastly lower than those of cane sugar imported from the Ease.During the eighteenth century, sugar became enormously popular and the sugar market went through a series of booms. As Europeans established sugar plantations on the larger Caribbean Islands, prices fell, especially in Britain.

By the eighteenth century all levels of society had become common consumers of the former luxury product. At first most sugar in Britain went into tea, but later confectionery and chocolates became extremely popular. Suppliers commonly sold sugar in solid cones and consumers required a sugar nip, a pliers-like tool, to break off pieces.Beginning in the late 18th century, the production of sugar became increasingly mechanized. The steam engine first powered a sugar mill in Jamaica in 1768, and soon after, steam replaced direct firing as the source of process heat. During the same century, Europeans began experimenting with sugar production from other crops. Andreas Marggraf identified sucrose in beet root and his student Franz Achard built a sugar beet processing factory in Silesia. However the beet-sugar industry really took off during the Napoleonic Wars, when France and the continent were cut off from Caribbean sugar. Today 30% of the worlds sugar is produced from beets. Today, a large beet refinery producing around 1,500 tonnes of sugar a day needs a permanent workforce of about 150 for 24-hour production.

TOP TEN SUGAR PRODUCERSBelow are the leading sugar producers for 2009-10. These producers accounted for nearly 80% of the global sugar total of 150 million tons in 2005-06. (The international sugar season runs from September to August.) Brazil 30 million tons (20% of global sugar production) European Union 22 million (14.7%) India 20 million (13.3%) China 10 million (6.6%) United States 7 million (4.6%) Mexico 6 million (4%) South African Development Community (SADC) 5.7 million (3.8%) Australia 5.4 million (3.6%) Thailand 5 million (3.3%) Russia 2.7 million (1.8%)Top producers that also export the highest percentage of their sugar production are Australia (76%), Brazil (59%), Thailand (52%) and the European Union (37%). In contrast, India and Mexico each export just over 5% while China, U.S. and Russia do not sell processed sugar to foreign markets.Brazil and Thailand ship more white sugar onto world trade markets while the WTO forces the European Union to cut it s sugar exports by over 80%.Three quarters of the worlds sugar is made from sugar cane in tropical zones located in the southern hemisphere. Leading sugar cane producers are Brazil, India, China, Thailand, Pakistan and Mexico.The remainder is processed from sugar beets grown in temperate zones of the northern hemisphere. France, Germany, U.S., Russia Ukraine and Turkey produce the most from sugar beets.Not all sugar-producing countries sell their processed sugar on international trade markets. Currently, 70% the worlds sugar is consumed in the country where harvested. Only 30% is traded outside country of origin.Global sugar consumption rises by about 2% per year, and has increased 17% from 128 million tons in year 2000 to 150 million in 2006. The highest sugar consumption per capita is found in Brazil (59 kilograms of sugar per year), Mexico (53) and Australia (50).TOP TEN SUGAR EXPORTERSBelow are the leading sugar exporters for 2009-10. Brazil 17.7 million tons (39% of global sugar exports) European Union 8.1 million (18%) Australia 4.1 million (9%) Thailand 2.6 million (5.8%) SADC 1.6 million (3.6%) Guatemala 1.5 million (3.3%) India 1.4 million (3.1) Persian Gulf 1.3 million (2.9%) South Africa 1.3 million (2.9%) Cuba 1.2 million (2.7%)

INTERNATIONAL SUGAR TRADEBrazil continues to dominate international sugar markets, spurred on by demand for sugar-based ethanol. In 2006-7, Thailand is expected to increase sugar exports by almost 30% due to larger sugar cane crops. Although India has increased its sugar production by 12%, the Indian government banned sugar exports until April 2007 as a way to constrain the rise of domestic sugar prices.The European Union failed to meet its responsibilities under the Uruguay Round Agreement on Agriculture. Consequently, the World Trade Organization now restricts the European Unions subsidized exports of sugar to about 1.4 million tons per year.Despite this dramatic decline in EU sugar exports, increased shipments from Brazil, Thailand and India are expected to mitigate any adverse effects on international sugar markets.Around 160K metric tons of sugar are produced every year, with the largest producers in Brazil, India and the European Union.The primary driver of sugar prices is government regulation. Many governments heavily subsidize their sugar manufacturers, to "dump" cheaply-priced sugar in the market, while the United States government has tried to elevate prices within its borders by imposing import restrictions. Since sugar is a good source for ethanol production, oil prices and the demand for ethanol are also impact the international price of sugar; for example, in the first half of 2008, sugar prices increased by more than 20% in response to rising gasoline prices. Production and UsageMost commercial sugar is produced from two main sources: sugar beets and sugarcane. Other minor commercial sources include the date palm, sorghum and the sugar maple.Currently, 69% of the world's sugar is consumed in its country of origin, while the rest is traded on international markets. Brazil is the world's largest sugar producer, followed by India (which is the world's largest consumer), the EU and China. In the 2007/08 season, Brazil produced 31.3 million tons, India produced 28.8 million tons, the EU produced 17.57 million tons and China produced 14.6 million tons of sugar

The 2009/10 season has been particularly troubled by abnormal weather patterns. Brazil has seen much higher levels of rainfall than average, while India suffered its driest June in 83 years. In the U.S., sugar beets are grown year-round and account for 60% of total sugar production, while sugar canes are grown perennially and account for 40% of US total production. Both production processes yield the same sugar product. Sugar production in the United States generates $10B in economic activity annually, and the sugar/corn sweetener industries generate $21.1B in economic activity. Sugar is used in food products to sweeten and add texture and color. On average, each American consumes 45 pounds of sugar, 45 pounds of high fructose corn syrup (HFCS) and 2 pounds of honey/syrup yearly.] In total, Americans consume 10,000 tons of sugar every year. Sugar end products are raw cane sugar, wholesale and retail refined sugar, cereal, candy, baed goods, and ethanol. Pricing and Volume TrendsFrom 1994 to 2004, sugar prices dropped significantly as a result of increasing supply. While supply depleted from 2004 to 2006, it has resurged since then, which is reflected in the general drop in prices. Within the past year, however, concerns regarding high fuel prices (see below) have pushed prices higher.

The US is the second largest net sugar importer. Other key players in the world sugar market are the European Union (EU), Brazil and India. The EU, like the US, has implemented policies that artificially inflate sugar prices. Brazil, on the other hand, heavily subsidizes its sugar farmers to support its sugar-ethanol program.World Sugar Production (1000 metric tons)

Year 2008 2007 2006

US 7,362 7,614 7,663

EU 16,814 17,740 17,757

Brazil 33,700 32,100 31,450

India 24,830 28,930 30,780

World 161,712 165,384 164,183

Between January 2009 and August 2009, the price of sugar nearly doubled due to poor harvests in India and Brazil. Indian yields were threatened as key sugar growing regions were threatened by dry spells, causing India to become a net sugar importer for the second time in history. Combined with the inability of Brazilian sugar mills to secure financing to expand operations, a particularly wet season in Brazil slowed harvests and reduced outputs. USDA officials have stated that production of sugar beet and cane in the US will negate the drop in foreign supply; however, food manufacturers remain fearful that sugar will remain at elevated levels.

INDIAN SUGAR INDUSTRYIndia is the largest producer of sugar in the world. In terms of sugarcane production, India and Brazil are almost equally placed. In Brazil, out of the total cane available for crushing, 45% goes for sugar production and 55% for the production of ethanol directly from sugarcane juice. This gives the sugar industry in Brazil an additional flexibility to adjust its sugar production keeping in view the sugar price in the international market as nearly 40% of the sugar output is exported. The annual projected growth rate in the area under sugarcane at 1.5% per annum has doubled during the last five years. This is because it is considered to be an assured cash crop with good returns to the farmers vis-a-vis other competing crops. India is currently passing through a glut situation with closing stocks at the end of the year of over 100 lakh tons since 1999-2000. Correspondingly, molasses production has also increased. Of course, there are also other agro routes available to produce ethanol. According to MPNG, 5% ethanol blends on an all-India basis would require 500 million liters. The current availability of molasses and alcohol would be adequate to meet this requirement after fully meeting the requirement of the chemical industry and potable sectors. India is the worlds largest sugar producer and consumer. The Indian sugar industry is highly fragmented as a result of strict government controls on licensing and distribution of sugar mills, and on the pricing of sugar. Earlier, the Indian government had discouraged the setting up of large sugar mills through its licensing policy, administered prices, and high government quota levels on production.Sugar industry in India, which is the world's second largest producer of the sweetner, is headed for a rough patch during the current sugar year ending September 30, 2009. Cane production is projected to decline. As cane farmers shift to growing more lucrative crops, the acreage under cane could drop. Lower cane production would compel millers to hike procurement prices. According to the food ministry, sugar production for the year ending September 30, 2009 may shrink to 20 million tonnes against 26.4 mt in the previous year. As a result, sugar export may fall to 2 mt from 4.6mt. Preliminary estimates by the Indian Sugar Mills Association (ISMA) foresee an import of about 5 million tonnes of sugar, in the worst case scenario. The expected shortage in the supply of cane and its high price, which is determined by each cane producing state government under the state advised price (SAP) regime, are likely to create difficulties for sugar manufacturers. The state governments, in an attempt to please cane farmers, especially at the time of elections, often announce higher SAPs than the minimum support prices (MSP) recommended by the centre.

Higher cane prices generates higher incomes for cane growers (generous voters for the ruling party) and encourage other farmers engaged in growing other crops to switch over to cane. But at the same time, a high cane price directly poses a threat to the profit margins of sugar producers. To overcome this, sugar mills are left with no option but to raise sugar prices.

INDIAN SUGAR INDUSTRY OVERVIEWSugar cane production350 million tonsSugar production23.5 million tons (2008-09)Alcohol production2000 million liters approx.Power production750MW present (potential 5000MW)Total turnover Rs. 410 billionNumber of formers50 millionEmployment0.5 million direct and indirect to many

SUGAR PRODUCTION IN STATESThe following table shows level of sugar production ( In Lakh Tonnes ) in Indian States.State2006-07 2007-08 2008-09

Uttar Pradesh 58.74 46.08 50.32

Maharashtra 61.64 31.99 22.29

Karnataka 17.98 11.57 13

Tamil Nadu 17.04 11.9 9.84

Andhra Pradesh 11.88 8.81 9.75

Gujarat 12.38 10.77 8.32

Haryana 5.99 5.86 4.03

Uttaranchal 4.59 3.93 3.82

Punjab 5.11 3.88 3.37

Bihar 4.21 2.77 2.77

Madhya Pradesh 0.85 0.94 0.85

Other 0.91 1.09 1.58

STATISTICS ON SUGAR PRODUCTION As to the statistics there were a total number of 571 sugar factories in India as on March 31, 2005 compared to 138 during 1950-51. These 571 sugar mills produce a total quantity of 19.2 million tones (MT). Sugar production in India increased from 15.5 MT in 1998-99 to 20.1 MT in 2002-03. Department of Agriculture and Co-operation, sugarcane production in 2004-05 is estimated at 232.3 MT from 237.3 MT in 2003-04. Sugarcane production is expected to reach 257.7 MT in 2005-06.

SUGAR PRICING Government of India fixes Statutory Minimum Price (SMP) for sugarcane according to Clause 3 of the Sugarcane Order. This statutory Minimum Price is designed through the consent of Commission for Agricultural Coast and Prices (CACP) and respective state Governments. For the year 2004-05, the rate was fixed at Rs. 74.50 per quintal with a basic recovery of 8.5%.

INDIAN GOVERNMENT ON SUGAR INDUSTRYThe following policy initiatives are taken to boost the Sugar industry: Government declared the new policy on August 20, 1998 with regards to licenses for new factories, which shows that there will be no sugar factory in a radius of 15 km. Setting up of Indian Institute of Sugar Technology at Kanpur is meant for improving efficiency in the industry. In the year 1982, the sugar development fund was set up with a view to avail loans for modernization of the industry.1.3. COMPANY PROFILE

The Cheyyar Co-operative Sugar Mills Ltd being a Co-operative Society registered on 05.05.1988 under the Tamilnadu Co-operative Societies Act 1983 with the object of manufacture of sugar from sugar cane and sale of sugar along with the by-products to the best advantage of the share holding members. The Cheyyar Co-operative Sugar Mill is located at Anakkavour- Thentandalam village at Cheyyar in Thiruvannamalai District. The Honorable Prime minister Thiru. Rajiv Gandhi opened the mill. The area of operation of the Society shall confined to entire Cheyyar and Vandavasi Taluks in Thiruvannamalai District and Tindivanam Taluk in Villupuram District. The total area of Factory and Quarters is 129.62 acres. The Mill started its business on 15 .02.1991. The capacity of the Mill is 2500 TCD (Tones Can Day).The main product of the Cheyyar Co-operative Society is sugar and the by-products are sugar, Molasses, and power from begasse. This year the sugar mill planned to produce Ethanol. Under non-conventional energy scheme, the Cheyyar Co-operative Sugar Mill has established Co-Generation plant the first of its kind in Asia by using the by using the baggasse as its raw material. The total project cost of the Co-Generation plant is Rs. 625.14 lakhs. The Mill has co-generation unit of 7.5MW capacity. Out of which 2.5MW is being consumed for own use and 5MW is being exported to the Tamilnadu Electricity Board at a cost of Rs.3.15 per unit. The power exported to TNEB grid during 2008-09 is 43.72 lakhs units and revenue earned from this export is Rs.134.96 lakhs. The Cheyyar Co-operative Sugar Mill has been awarded for the best performance of Co-Generation plant at National Level during 1996-97. Since the period of inception of the mill, it has been running successfully for the development of its member and farmers. The mill provides a lot of direct employment opportunities. They select the employees through employment office.

The purchase of items is bases on the indents received from the needy departments and finalizing the purchases through purchase committee meeting headed over by the Chief Executive of the Mill after following all the purchase procedures and transparency in purchasing at lowest price. In general, there is a dual pricing policy for the Sugar cane. They are Statutory Minimum Price (SMP) fixed by Central Government and State Advised Price (SAP) fixed by the State Government. The Cheyyar Co-operative sugar mill is adopting the policy of the S.A.Price of Rs. 1150.40 per MT which is given at a regular interval of 14 days as per the Sugar Cane Control Order of 1966. There are around 9000 members supplying the sugar cane to the Cheyyar co-operative sugar mill.The mill bears the transport cost of the distance exceeding 10 Kms for transporting cane from the fields. The commitment on these transport cost comes around Rs.201.48 lakhs per annum.The Sugar production in the year 2007-08 is 510020 quintal from the Cane crushing of 533437 MT. The total turnover is around Rs.51.94 crores in the year 2007-08.A sale is being executed on receipt of allotment order from the Ministry of Food, Government of India, New Delhi. It is obligatory on the part of the mills to give levy sugar from the production for distribution under Public Distribution system.

The mill is following two type of price for the sale of sugar. They are levy price and free price. The government purchases the sugar at levy price for distribution of sugar under public distribution system. At present the levy price is Rs.1335.40. And the free price in based on tender quoted by the sugar purchasers. At present the free price is approximately Rs.3000.The mill has two sugar godowns with a capacity of stocking 360000 quintals of sugar. And also has three steel tanks for storage of molasses with the total capacity of 12000 MT.In short, the Cheyyar Co-operative Sugar Mill has not only concentrated in commercial activities and also devoting the activities for the upliftment of the society.

OBJECTIVES OF CHEYYAR CO-OPERATIVE SUGAR MILL.

The object of the society shall be manufacture of white sugar from sugarcane and the sale of the sugar so manufactured a long with the by products to the best advantage of the members To raise share capital and deposits from members. To invest monies of the society in such investments or securities as may be through expedient by the committee of the society. To pay for any property or right acquired by the society either in cash or fully or partly paid up shares. To provide for the welfare of the persons employed by the society.

MEMBERS AND SHARE CAPITALThe authorized share capital of the society shall be Rs.10 Crores divided into 5,00,000 shares of Rs.200/- each.The liability of the members for the debts of the society on its liquidation shall be limited to the share capital subscribed by them. TABLE SHOWING THE MEMBER AND SHARE CAPITALS.NONO.OF SHARE HOLDERSSHARE CAPITAL (Rs. In Lakhs)

State Govt.GrowersTotalState Govt.Growers Total

112668326684745.78987.541733.32

PROJECT COST OF THE PLANT Rs. In lakhsLand and site Development 33.97Buildings 622.95Plant and Machinery1912.96Miscellaneous Fixed Assets 116.372686.25

SOURCES OF FINANCE FOR THE PROJECT(Rs. In Lakhs)Loan from ICICI & IDBI 1360.00Government Share 727.00Share Capital 228.60Govt.Share Capital for Godown 18.79NCDC Loan for construction of Godown 37.58Loan from other Co-op Sugar Mills 314.28 2686.25The mill has one primary school started on 31.10.1995 with a view to give quality education to the children of the employees and growers. The school has classes from LKG to 5th standard with a total strength of 287 students along with 9 teaching staff for the benefit of the children of growers and employees. They are charging very minimum fees as compared with the market.There are around ten departments working under the administrative department. They are Establishment, Purchase, Sales, Stores, Sugar godown, Time office, Security, Dispensary, Mills Primary school, Canteen etc., the staffing position are as follows.

STAFFING POSITION Sl.No.NAME OF THE POSTREGULARSEASONAL TOTAL

1ADMINISTRATION53410

2ACCOUNTS1902

3CANE8053

4ENGINEERING6310536

5MANUFACTURING17253

TOTAL232139371

ACHIEVEMENTS

S.NOAwards and PrizesDescription/Remarks

1ISO 9001:2000

Certificate obtained for Quality Management system

2Safety Award-2003-04

1st Place

3Efficiency Award 2003-04

2nd Place for Financial Management in other Recovery

4Safety Award-2004-05

1st Place

1.4. PRODUCT PROFILE

SUGARThe main product of Sugar Industry is raw sugar. A typical raw cane sugar contains sucrose (97.5%) reducing sugar (0.86%) other organic compound (0.46%) ash (0.43%) and water (0.75%). Sugar Cane contains 11 to 15% sucrose out of which only 8 to 11% is crystalizable. The remaining sucrose goes into by product along with other sugars viz. Glucose and Fructose.BAGGASE Baggase is the first by-product of cane sugar production. The fibrous residual matter left out after extraction of sugar cane juice is known as Baggase. It contains about 48.50% moisture, 48.0% fibre and 2.40% sugar and other minor constituents. It has been mainly used as fuel in Boiler to raise steam. Nowadays it can be used for paper production.MOLASSES Molasses is the one of the important by-products, its production depends on the total quantity of cane crushed as well as quality which varies from region to region. The increases in the percentage of sucrose in molasses greatly affect the final quantity of sugar.

Molasses is the final effluent obtained in the preparation of sugar by repeated crystallization. It is the heavy viscous liquid from which no further sugar can be crystallized by the usual methods.

BLACKSTRAP MOLASSES Molasses is called as blackstrap molasses because of its dark brown viscous nature. It must not contain less than 40% of total sugar as invert.

The components of molasses include:1. Major components ( water, sugar ,non-sugars ) 2. Minor components ( Trace elements, vitamins, growth substance)

WATER: Commercial molasses have an average water content of 20%. The original end-products in the factory contain 12-17 % water. The principal sugar present in the molasses is sucrose, glucose and fructose the later two making up the major portion of the reducing sugars. The alkaline degradation of sucrose leads not only to glucose and fructose but also to Psicose and other carbohydrates. Molasses sometimes contain another non-reducing sugars namely the trisaccharide ketose.CO-GENERATION PROJECTCo-generation means sequential production of heat and power by way of producing the steam from Boiler by using bagasse (Sugar Cane Residue) as the fuel. Heat energy is converted into Electrical Energy through turbin for the mills own use and surplus power exported to the Tamil Nadu Electricity Board Grid. Balance heat available is used to produce the sugar at processing/manufacturing area.

1.5. LITERATURE REVIEW

Working Capital management is concerned with the problems that arise in attempting to manage the current assets and current liabilities and the interrelationship that exists between them.The term Current Assets refer to those assets, which in the ordinary course of business can be, or will be converted in to cash within one year without undergoing a diminution in value and without disrupting the operation of the firm. The major current are cash, marketable securities, accounts receivable and inventory.The term Current Liabilities refer to those liabilities, which are intended at their inception, to be paid in the ordinary course of business, within a year out of current assets or earning of the concern. The basic current liabilities are accounts payable, bills payable, banks overdraft and outstanding expenses.The goal of working capital management is to manage the firms current assets and liabilities in such a way that a satisfactory level of working capital is maintained. This is so because, if the firm cannot maintain a satisfactory level of working capital, it is likely to become insolvent and may even be forced into bankruptcy. The current assets should be large enough to cover its current liabilities in order to ensure a reasonable margin of safety. 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. A proper balance between Current Assets and Current Liabilities is, therefore, the main theme of the theory of working capital management.Working Capital refer to that part of total capital which is kept invest in current assets that are required for regular business operation. In accounting, working capital is taken to mean the difference between Current Assets and Current Liabilities.

F. Samiloglu and K. Demirgunes (2008)The aim of this study is to analyze the effect of working capital management on firm profitability. In accordance with this aim, to consider statistically significant relationships between firm profitability and the components of cash conversion cycle at length, a sample consisting of Istanbul Stock Exchange (ISE) listed manufacturing firms for the period of 1998- 2007 has been analyzed under a multiple regression model. Empirical findings of the study show that accounts receivables period, inventory period and leverage affect firm profitability negatively; while growth (in sales) affects firm profitability positively.

According to Genestenberg: -

Working Capital means Current Assets of a company that are changed in the ordinary course of business, from one to another, for ex, from cash to inventories, inventories to receivable, receivable to cash.

Management Problem

The Company wants to study its working capital efficiency where current assets are main constituents of working capital management. The company wants to avoid two dangerous points i.e excessive and inadequate investment in current assets. Investment in Inventories and Debtors should be minimized so that it can maximize its cash and bank balance.

Genestenberg: -

Working Capital means Current Assets of a company that are changed in the ordinary course of business, from one to another, for ex, from cash to inventories, inventories to receivable, receivable to cash.

Gathman & Dug wall: - Working Capital as excess of current assets over current liabilities. Westen & Brigham: -

Working capital refers to a term investment in short term assets cash, short term securities accounts receivables and inventories.

J. Smith: -

The Sum of the current assets is the working capital of the business.

WORKING CAPITAL = CURRENT ASSETS CURRENT LIABILITIES.

RATIO ANALYSIS:Ratios are relationships expressed in mathematical terms between figures which are connected with each other in some manner. Ratio analysis is the process of identifying the financial strength and weaknesses of the firm by properly establishing relationship between the items of the balance sheet and profit and loss account. MERITS AND DEMERITS OF THE RATIO: -Merits of the Ratio: -The following are the some important merits of the ratio1. Ratio Analysis reflects the working efficiency of a concern.2. Since, ratio analysis relates the financial health of a concern, insurance other financial institution relay on them while judging loan application and in taking vital investment decision.3. It helps in establishing trends since the result are preparing plans for the future.4. It is helpful in forecasting likely events in future.Demerits of the Ratio: -The following are the some important demerits of the ratio.1. The striking aspect of ratio analysis is the absence of an explicit theoretical structure; different methods of collection are adopted by different concerns.2. For concert analysis inside information must be known by the analyst since most concern report to portray of easy picture of the financial attachments.3. Change in the basis of accounting may pose difficulty in analysis ratios between one period.CO-RELATION BETWEEN CURRENT ASSETS AND WORKING CAPITAL The working capital is in simple terms is the amount of funds which company must have to finance its day-to-day operations. The interaction between current assets and current liability is main theme of theory of working capital. In general terms working capital means difference between current assets and current liabilities. The current assets are main source of working capital. It refers to those assets, which can be converted into cash within a year. The current assets are inventories, cash and bank balance, sundry debtors, loans and advances etcCurrent asset management is one the most important aspect of the overall financial management. The efficient management of working capital can determine its profitability skill of every financial manager lies in the efficient management requires maintaining proper relationship between current asset and current liability. Therefore, planning and control of current asset is he most important function of finance manager. A study of working of working capital is major part of external and internal analysis. Because, of its close relationship with current day-to-day operations of business. Working capital consists broadly the assets of business that are used at current operations which was represented by raw materials, stores, WIP, and finished goods, merchandise, bills receivable. Etc.Characteristics of Current AssetsWhile managing the working capital bear in mind of two characteristics of Current assets.1. Short life span.2. Swift transformation into other assets forms.Current assets a life span, cash balance may be held idle for a week or two accounts receivable may have life span of 32 to 60 days and inventories may be need for 2 to 60 days. It s depends upon time require in the activities of procurement of, production, sales and collection, and the degree of synchronization among them.

Current assets cycle Finished Goods

WIPA\C Receivable

Wages / Factory overhead

Raw Materials

SuppliersCash

1. Decisions relating to working capital management are repetitive and frequent.2. The difference between profit and present value is insignificant.3. The close interaction among working capital components implies that efficient management one component cannot undertake without simultaneous consideration of other components.Working capital means assets of the company that are changed in the ordinary capital of business term to another. For ex, from another as for as from cash to inventories, inventories to debtors and again debtors in to cash where it is collected.Working capital refers to a term investment in short term assets cash; short-term securities account receivable and inventories. Current asset management that affects a firm liquidity is at another important finance function. In addition to the management of long-term assets, Current assets should be managed efficiently for safe guarding the firm against the dangerous of liquidity and insolvency. Investment in Current Assets affects the firm profitability, liquidity and risk.

Components of working capital:There are two components of Working Capital A. Current AssetsB. Current Liabilities

A. Current AssetsAn asset is termed as current assets when it is acquired either for the purpose of selling or disposing of after taking some required benefit through the process of manufacturing of which constantly changes in form and contributes to transactions take place with the operation of the business although such assets does continue for long in the same form.Components of Current Assets are as follows: Cash & Bank Balance Stock of Raw Material at cost- work in process and Finished Goods. Advanced Recoverable in Cash or kind or kind or for value to be received. Security deposits with electricity board-telephone department balances with customers. Deposits under the company scheme. Prepaid Expenses.

TYPES OF WORKING CAPITAL:1. Permanent Working Capital:As the operating cycle is a continuous process so the need for working capital also arises continuously. But the magnitude of current assets needed is not always same; it increases and decreases over time. However there is always a minimum level of current assets. This level is known as permanent or fixed working capital.2. Temporary Working Capital:The extra working capital needed to support the changing production and sales activities, is called variable or functioning or temporary working capital. This can be shown in the following diagram:-

Amount of WorkingCapital Temporary capital Permanent Capital

TimeNEED FOR WORKING CAPITALThe need for working capital cannot be overemphasized. The need of working capital arises due to the time gap between production and realization of cash from sales. So the working capital or investment in current assets becomes necessary need for working capital. It arises due to following reasons:-

OPERATING CYCLE Operating cycle is the time duration requires for converting sales into cash after the conversion of resources into inventories. First of all a firm purchase Raw Material, then after some processing it is converted into workinprogress and after this further processing is done to convert workinprogress in finished goods. After the raw material is converted into finished goods, sales are made. Sales are no always full cash sales; there are credit sales also. These credit sales after some period are converted into cash. So the whole process takes the time. This time taken is known as the length of operating cycle. So operating cycles includes:- 1. Raw Material conversion period (RMCP)2. Workin progress conversion period (WIPCP) 3. Finished goods conversion period (FCP)4. Debtors Conversion period (DCP)

So operating cycle can be known as following:- Raw Material

Work in Progress

Cash Collection from Debtors

Sales Finished GoodsCredit SalesCash Sales

If the length of the operating cycle has short length period then less working capital is required. So working capital requirement is directly related with operating cycle.

Operating cycle may be of two types 1. Gross Operating cycle2. Net operating cycle

1. Gross Operating cycle Gross Operating cycle is the total time period from the conversion of Raw Material into finished goods and finished goods into sales and then sales into cash.

GOC =RMCP + WIPCP + FCP + DCP2. Net Operating Cycle As we provide period to debtors for the payments, our creditors also provide period to us for payment to them. So this reduces our requirement of working capital. This also affects the operating cycle. Operating cycles length reduces with so many days as provided by the creditors to us. The difference between gross operating cycle and period allowed by the creditors for payment is known as net operating cycle. NOC = GOC CPP

WORKING CAPITAL REQUIREMENT FOR THE ANTICIPATED NEEDS FOR FUTURE:- These needs may be of Raw Material or Finished Goods. Sometimes because of non-availability of Raw Material or due to seasonal availability of Raw Material some advances stock of Raw Material becomes necessary for company. In the similar way due to sudden arise of demand of finished goods in future more finished goods are kept in stock. For both reasons more working capital is required because funds will be involve in these safeties stocks

DETERMINENTS OF WORKING CAPITAL:Followings are the main determinants of working capital. 1. Nature and Size of Business: The working capital of a firm basically depends upon nature of its business for e.g. Public utility undertakings like electricity; water supply needs very less working capital because offer only cash sales whereas trading & financial firms have a very less investment in fixed assets but require a large sum of money invested in working capital.The size of business also determines working capital requirement and it may be measured in terms of scale of operations. Greater the size of operation, larger will be requirement of working capital. 2. Manufacturing Cycle:The manufacturing cycle also creates the need of working capital. Manufacturing cyclele starts with the purchase and use of Raw Material and completes with the production of finished goods. If the manufacturing cycle will be longer more working capital will be required or vice versa.3. Seasonal variation:In certain industries like VTM raw material is not available throughout the year. They have to buy raw material in bulk during the season to ensure an uninterrupted flow and process them during the year. Generally, during the busy season, a firm requires large working capital than in the slack season.4. Production Policy: Production policy also determines the working capital level of a firm. If the firm has steady production policy, it may require need of continuous working capital.

But if the firms adopt a fluctuating production policy means to produce more during the lead demand season then the more working capital may require at that time but not in other period during a financial year. So the different productions policy arises different type of need of working capital.5. Firms Credit Policy:The firms credit policy directly affects the working capital requirement. If the firm has liberal credit policy, hence the more credit period will be provided to the debtors so this will lead to more working capital requirement. With the liberal credit policy operating cycle length increases and vice versa.6. Sales Growth:Working capital requirement is directly related with sales growth. If the sales are growing, more working capital will be needed due to arises need of more Raw Material, finished goods and credit sales.

7. Business Cycle:Business cycle refers to alternate expansion and contraction in general business. In a period of boom, larger amount of working capital is required where as in a period of depression lesser amount of working capital is required.

8. Earning Capacity & Dividend Policy:If the firm has enough earnings and it is not paying dividend then it will not be in need of external borrowings. If firm wants to increase its earning power then more working capital will be required also to pay more dividend more profits are needed which give rise to more working capital. Company is paying 42% dividend to its shareholder.9. Price Level Changes:Changes in the price level also effects the working capital requirements. Generally, the rising prices will require the firm to maintain larger amount of working capital as more funds will be required to maintain the same current assets.10. Other Factors:Certain other factors such as operating efficiency, management ability, irregularities of supply, import policy, asset structure, importance of labour, banking facilities, time lag, etc,. also influence the requirement of working capital. So these are the main determinants of working capital. The importance of influence of these determinants on working capital may differ from firm to firm.

MEANING AND NATURE OF WORKING CAPITAL MANAGEMENT The management of working capital is concerned with two problems that arise in attempting to manage the current assets, current liabilities and the inter relationship that asserts between them. The basic goal of working capital management is to manage current assets and current liabilities of a firm in such a way that a satisfactory of optimum level of working capital is maintained i.e. it is neither inadequate nor excessive. This is so because both inadequate as well as excessive working capital position is bad for businessFactors requiring consideration while estimating working capital. The average credit period expected to be allowed by suppliers. Total costs incurred on material, wages. The average period of credit allowed to customers The amount of cash required to make advance paymentADVANTAGES OF ADEQUATE WORKING CAPITAL. Increase in production inefficiency Exploitation of favorable opportunities Meeting contingencies adverse changes: Available cash discount Solvency and efficiency fixed assets. Attractive dividend to shareholder

DANGERS OF INADEQUATE WORKING CAPITAL Loss of goodwill and creditworthiness Firm cant make use of favorable opportunities Adverse effects of credit opportunities Operational inefficiencies Effects on financial capacity Non achievement of profit targetDANGERS OF REDUNDANT WORKING CAPITAL Low rate of return on capital Decline in capital and efficiency Loss of goodwill and confidence. Evils of over capitalizationCURRENT ASSETS IN RELATION TO SALES:-If the firm can forecast accurately the factors, which effect the working capital, the investment in current assets, can be designed uniquely. In case of uncertainty, the outlay on current assets should consist of base component meant to meet normal requirement and a safety component meant to cope with unusual requirement. The safety component depends upon low conservative or aggressive in the current assets policy of a firm. If the firm purchases a very conservative current asset policy it would carry a high level of current assets in relation to sales. If a firm adopts a moderate current assets policy it would carry moderate level of current assets in relation to sales, finally is a firm follows a highly aggressive current assets policy, it would carry a low level of current assets in relation to sales.

DETERMINING A SHORT TERM AND LONG TERM FINANCING MIX FOR FINANCING OF CURRENT ASSETS:-There are three approaches in this regard, which are discussed below:Hedging approachThis approach is also called matching approach. In this approach there is a proper matching of expected life of asset with the duration of fund. Usually, according to this approach long-term sources are used for financing permanent current assets and fixed assets & short-term sources are used for financing temporary current assets.Short term financingTemporary current assets

ASSETS

Term financingLong term financing

Permanent current assets

Fixed Assets

Time

Conservative approachIn this approach there is more reliance on long-term financing in comparison to short-term financing. Even some part of the temporary current comparison to long-term sources of finance because long-term sources are less risky in comparison to short-term sources.

Temporary Current Assets ASSETS

Short-term financing

Permanent Current AssetsLong-term financing

Fixed Assets Time

Aggressive approachIn this approach there is more reliance on short term financing and even a part of permanent current assets is financed from short-term finance.

Temporary current assets Short term financingASSETS

Permanent current assetsLong term financing

Fixed Assets

Time1.6. OBJECTIVE OF THE STUDYThe following are the some importance objective of the study of working capital management.1. To analyze the working capital of the organization.2. To analyze the effect of current assets on working capital.3. To study financial performance of organization with the help of ratios.4. To study the working capital and recommend the suitable working capital of the year to the organization.

2. DATA COLLECTION METHODS

For this study the data collected from the secondary sources. Secondary data is one which already exists. It includes the following. Annual reports of the company Audit reports Brochures mainly from balance sheet and Profit and loss account

2.1. TOOLS USED FOR DATA ANALYSIS

In order to extract meaningful information from the data collected the data analysis is carried out. The data analysis can be conducted using analytical tools. The tools used for data analysis are as follows: Schedule of changes in working capital

Ratio analysis

3. DATA ANALYSIS AND INTERPRETATION

RATIO ANALYSIS

Meaning: - Ratio Analysis is a widely used tool of financial analysis. It defined as the systematic use of to interpret the financial statement so that the strength and weakness of a firm well as its historical performance and current financial condition can be determined. This relationship can be expressed Types of RatiosRatio can be classified into following categories,1. Current Ratios.2. Net Working Capital Ratios.3. Total Assets Turnover Ratios.4. Inventory Turnover Ratios.5. Fixed Assets Turnover Ratios.6. Creditors Turnover Ratios.7. Creditors Collection Period.8. Debtors Turnover Ratios.9. Debtors Collection Period.

1. Current Ratios: -

It can be calculated as current assets divided by current liabilities. The current ratio measures the relative ability of a company to pay its short-term debts. The ratio is used to reveal how well a company could meet a sudden demand to pay off its short-term creditors.Formulas, Current Ratio = Current Assets

Current LiabilitiesParticulars2010-20112011-20122012-2013

Current Assets50,12,28,15062,39,49,36467,30,08,474

Current Liabilities51,49,88,68829,63,39,92841,41,03,854

Current Ratio0.972.111.62

Interpretation: -As a conventional rule, a current ratio of 2:1 or more considered satisfactory. The Company,has current ratio is 2.11:1; therefore, it may be interpretated to be satisfactory company. The current ratio represents a margin of safety for creditors. The higher the current ratio, the greater the margin of safety, so, there has been increased in the ratio during 2011-2012, when compared with 2010-2011 and 2012-2013. So, larger the amount of current assets in relation to current liabilities, the more the firms ability to meet its current obligation. Firm with less than 2:1, current ratio may be doing well, while firm with 2:1 or even higher current ratio may be struggling to meet their obligations. This is so because, if Rs.2 is your Current Assets and Rs.1 is Your Current Liabilities. Thus Current Ratio shown is 2:1, which is an Ideal Ratio.

2. Quick Ratio

It establishes a relationship between quick or liquid, assets and current liabilities. An asset is liquid if it can be converted in to cash immediately or reasonably soon without a loss of value. Cash is most liquid assets. Other assets, which are considered to be relatively liquid and included in the quick assets, are debtors, and bills receivable and marketable securities. Inventories are considered to be less liquid, inventories normally requires some time for realizing in to cash; their value also has a tendency to fluctuate.FormulaQuick Ratio = Current Assets Inventories Current LiabilitiesParticulars2010-20112011-20122014-2013

Current Assets50,12,28,15062,39,49,36467,30,08,474

(-) Inventory42,78,54,47255,15,58,77860,69,24,415

Total45,84,73,6787,23,90,5866,60,84,059

(/) Current Liabilities51,49,88,68829,63,39,92841,41,03,854

Quick Ratio1.00.250.16

Interpretation: -Generally a quick ratio is 1:1 is considered to represent a satisfactory current financial condition. In the year 2010-11 quick ratio was 1.00 and there has been decreased in the year compared to 2011-12 and 2012-13.The high ratio indicates that all debtors may not be quick and cash may be immediately needed to pay operating expenses. It should be noted that inventories are not absolutely non-liquid to a measurable extent inventories are available to meet current obligations. So the company can suffer from shortage of funds. On the other hand, a company with low ratio in the year 2011-12 and 2012-13, indicates that quick ratio may really be prospering and paying its current obligation in time if it has been turning over its inventories efficiently.

3. Total Assets Turnover Ratio: -The Total assets turnover ratio in addition to, or instead the net current assets, This ratio shows the firms ability in generating sale from all the financial resource committed to total assets Formula,Total Assets Turnover Ratio = Net Sales Total AssetsParticulars2010-20112011-20122012-2013

Net Sales44,49,64,40661,37,35,15697,70,00,747

Total Assets59,69,95,21366,57,15,32266,14,26,987

Total Assets Turnover Ratio0.750.921.45

Interpretation: -There has been increased in the year 2012-13, when compared to 2010-2011 and 2011-2012. And high ratio indicates that in the year 2004-05, that ratio shows the firms ability in generating sales from all financial resources

4. Inventory Turnover Ratio: -

It indicate the efficiently of the firm in producing the selling its product. The ratio indicates how fast inventory is sold. A high ratio is good from viewpoint of liquidity and vice versa. A low ratio would signify that inventory does not sell and stay on the shelf or in warehouse for a long time. Inventory Turnover Ratio = Net Sales InventoryParticulars2010-20112011-20122012-2013

Net Sales44,49,64,40661,37,35,15697,70,00,747

Inventory42,78,54,47255,15,58,77860,69,24,415

Inventory Turnover Ratio1.51.21.6

Interpretation: -There has been increased in the ratio in the year 2012 2013, when compared with 2010-2011 and 2011-2012,. In the year 2012-2013, indicates high ratio, it means, Inventory turnover ratio implies good inventory management and very high ratio calls for a careful analysis. It may indicate under investment in inventory. While a Low ratio indicate in the year 2010-2011, that, it may be result in use of inferior quality of goods and over investment in sales in the 2011-2012.5. Fixed Assets Turnover Ratio: -Fixed Assets Turnover Ratio measures Sales per rupees investment in Fixed Assets. It measures the efficiency of fixed assets employed in the organization. High degree of ratio indicates high efficiency of assets utilization vice-versa.

Fixed Assets Turnover Ratio = Net SalesFixed AssetsParticulars2010-20112011-20122012-2013

Net Sales44,49,64,40661,37,35,15697,70,00,747

Fixed Assets12,47,67,89412,74,90,71313,23,75,799

Fixed Assets Turnover Ratio3.64.97.4

Interpretation: -There has been increased in the ratio during 2010-2011 and 2011-2012, when compared with 2012-2013. A low ratio in the year 2010-2011 indicates in efficiency use of assets, and the next two years (2011-2012 and 2012-2013) shows high ratio, which means that increasing efficiency of fixed assets employed in the organization. One of the cautions to be kept in the mind is when fixed assets are old and substantially depreciated the ratio tenders to be high, because, the denominator of the ratio will be low.

6. Creditors Turnover Ratio: -

It is the ratio between the Sales and Creditors or Net Credit Purchase and average amount of creditors. It is an important tool of analysis as a firm can maintain minimum amount of Current Assets, as credit from suppliers is easily available.Creditor Turnover Ratio = Net Sales Creditors

Particulars2010-20112011-20122012-2013

Net Sales44,49,64,40661,37,35,15697,70,00,747

Creditors51,07,69,76537,61,23,98940,91,68,344

Creditors Turnover Ratio0.91.72.4

Interpretation: -In the year 2012-2013, there was been increased when compared to 2010-2011 and 2011-2012. In the year 2012-2013indicate high ratio means the sales of the year very low as compared to 2010-2011 and 2011-2012 and also creditors are low as compared to 2010-2011 and 2011-2012.

7. Debtors Turnover Ratio: - It indicate the how many times debtors turnover each year. Generally, the higher the ratio of debtors turnover, the more efficient is the management of credit. The ratio measured how will reveal the days of debts to be colleted.Debtors Turnover Ratio= Net Sales Debtors Particulars2010-20112011-20122012-2013

Net Sales44,49,64,40661,37,35,15697,70,00,747

Debtors63,21,7952,37,87,7791,54,93,657

Debtors Turnover Ratio70.325.863.4

Interpretations: -There has been increased debtor in the year 2010-2011 as compared to 2011-2012 and 2012-2013, high ratio indicates of shorter time gap between credit sales and cash collation. A low ratio shows that debts are not being colleted rapidly. So, the standard norms this high ratio reveals that company has quite efficient management of debtors. In the year 2008 & 2010 are showing equal turnover ratio.

8. Debtors Payment Period: -

The debtors payment period is mainly related to how many days debtors have taken to complete a period and how much is debtors turnover ratio.Debtors Payment Period = Days Debtors Turnover RatioParticulars2010-20112011-20122012-2013

Days365365365

Debtors Turnover Ratio70.325.863.4

Debtors Collection Period5.1914.145.75

Interpretation: The shorter the collection period is better quality of debtors. Since, a short collection period implies that prompt payment by debtors. In collection period having some increase and decrease. So, we can find out that there is no uniformity in the debtors collection period of the year.

9. Creditors Collection Period: - This ratio is the difference between Days and Creditors turnover ratios. Formula,Creditors Collection Period = Days Creditors Turnover RatioParticulars2010-20112011-20122012-2013

Days325365365

Creditors Turnover Ratio0.91.72.4

Creditors Collection Period405214152

Interpretation: - In the year 2010-2011, there was increase when compared to 2011-2012 and 2012-2013. The high ratio of 2002-2003 indicates that the sales of the year is very low as compared to 2010-2011 and 2012-2013, and also creditors are low as compared to as compared to 2003-2004 and 2012-2013. While low ratio in the year 2010-2011 indicates that creditors are high as compared to other year.

10. Consolidated ratio analysis

Sl. NoParticulars2010-20112011-20122012-2013

1Current Ratio0.972.111.62

2Quick Ratio0.90.250.16

3Total Assets Turnover Ratio0.750.921.45

4Inventory Turnover Ratio1.51.21.6

5Fixed Assets Turnover Ratio3.64.97.04

6Creditors Turnover Ratio0.91.72.4

7Creditors Collection Period405214152

8Debtors Turnover Ratio70.325.363.4

9Debtors Collection Period5.1914.145.75

Consolidated chart

11. STATEMENT SHOWING CHANGES IN WORKING CAPITAL IN 2011

Particulars20102011IncreaseDecrease

A) Current Assets

1. Inventories.33,24,08,86842,78,54,4729,54,45,6040

2. S. Debtors10,02,12063,21,79553,19,6750

3. Cash & Bank Balance1,19,50,25718,62,00201,00,88,255

4. Loans & Advances.3,25,72,2646,51,89,8803,26,17,6160

TOTAL37,79,33,50950,12,28,14913,33,82,895

B) Current Liabilities

1. Current Liabilities29,19,92,74051,07,69,76521,87,77,025

2.Provision 43,47,18842,18,9231,28,2650

TOTAL29,63,39,92851,49,88,6881,28,265

Working Capital

(A-B)8,15,93,581-1,37,60,53913,35,11,16022,88,65,280

Net Increase in Working Capital9,53,54,1209,53,54,120

GRAND TOTAL8,15,93,5818,15,93,58122,88,65,28022,88,65,280

INTERPRETATION

As we can see in the above year 2011-12, there is an increase in the working capital by Rs. 9,53,54,120. This is because:

1. As we can see that there is a great increase in Current Assets as the company is looking to invest more in the inventory of raw material in this year, because of the shortage of raw material in the market, so overall there is increase in the current assets. But in current assets loans and advance are decreased.2. As we can see there is decrease of Rs. 21,87,77,025 in the liabilities of the company, which is good for the company. But Rs. 1,28,265 increases provisions.

3. So from all the above calculation we can see that there is good increase in the working capital. So we can say that company is more likely to increase there inventory because they thinking it for the long term perspective.

12. STATEMENT SHOWING CHANGES IN WORKING CAPITAL IN 2011

Particulars20112012IncreaseDecrease

A) Current Assets

1. Inventories.42,78,54,47255,15,58,77812,37,04,3060

2. S. Debtors63,21,7952,37,87,7791,74,65,9840

3. Cash & Bank Balance18,62,00215,46,7190315283

4. Loans & Advances.6,51,89,8804,70,56,086018133794

TOTAL50,12,28,14962,39,49,36214,11,70,29018449077

B) Current Liabilities

1. Current Liabilities51,07,69,76537,61,23,9891346457760

2.Provision 42,18,92349,81,6170762694

TOTAL51,49,88,68838,11,05,6061346457767,62,694

Working Capital

(A-B)-1,37,60,53924,28,43,75627,58,16,0661,92,11,771

Net Increase in Working Capital25,66,04,29525,66,04,295

GRAND TOTAL24,28,43,75624,28,43,75627,58,16,06627,58,16,066

INTERPRETATION

In the above table it is seen that, there is an increased in the working capital by Rs. 25,66,04,295 in the year 2011-12, this is because: -1. As we can see of the Current Assets side there is decrease in cash and bank balance and loans and advances. There is an increased in sundry debtors, other current assets2. Current Liabilities side there has been increased in current liabilities of Rs. . 1,34,645,776.

3. So as the have current assets increase this year, so there is increase in working capital.

13. STATEMENT SHOWING CHANGES IN WORKING CAPITAL IN 2013

Particulars20122013IncreaseDecrease

A) Current Assets

1. Inventories.55,15,58,77860,69,24,4155,53,65,8370

2. S. Debtors2,37,87,7791,54,93,65782,94,122

3. Cash & Bank Balance15,46,71915,98,37751,6580

4. Loans & Advances.4,70,56,0864,89,90,02419339380

TOTAL62,39,49,36267,30,06,4735,73,51,43382,94,122

B) Current Liabilities

1. Current Liabilities37,61,23,98940,91,68,34403,30,44,355

2.Provision 49,81,61749,35,51046,1070

TOTAL38,11,05,60641,41,03,854461073,30,44,355

Working Capital

(A-B)24,28,43,75625,89,02,6195,73,97,5404,96,32,599

Net Increase in Working Capital1,60,59,0631,60,59,063

GRAND TOTAL25,89,02,61925,89,02,6195,73,97,5406,56,91,662

INTERPRETATION

In the above table it is seen that, there is an increased in the working capital by Rs. 1,60,59,063 in the year 2012-13, this is because: -

1. As we can see of the Current Assets side there is decrease in Sundrs Debtors, There is an increased in cash and bank balance , loans and advances other current assets.

2. As we can see there is decrease of Rs. 3,30,44,355 in the liabilities of the company, which is good for the company. But Rs. 46,107 increases provisions.

3. So, looking above calculation we see that working capital of the company is increased, because current assets are more than current liability.

4. FINDING AND SUGGESTION4.1. FINDINGS:

1. Current Ratio of Company shows the solvency of the firm ability to repay its liabilities. As ratio is decline to 2.11. It shows that company is in solvency state. Current assets are should always be twice of current liabilities.

2. In a comparative statement of Balance Sheet, debtors were 63,21,795 in the year 2010-2011, and it has increased to 60,69,24,415 and in the last two years. Because increased in credit sales.

3. Total assets turnover ratio shows the ability to convert all its assets incurring fixed assets to sales. As per the ratio calculated in the year 2010-2011 it was 0.75, which was low ratio means firm is able to convert its total assets quickly into funds as per the company ratio the firm is able to convert it assets because the ratio are higher between 1.45 to 0.75, which was low ratio.

4. Inventory Turnover Ratio is increased from 1.20 to 1.60 in the year 2011-2012 and 2012-2013 respectively. It shows company has maintained good inventory policy.

4.2. SUGGESTIONS: -

The working capital including all its related aspects is managed quite well by cheyyar sugar mills. The finance department is carrying out its responsibilities efficiently. The entire departments are collectively working hard for the progress of cheyyar co op sugar mill ltd

The following are the suggestions.

1. In a comparative Balance Sheet Debtors are increased from year to year (63,21,795 to 1,54,93,857). Even though debtors are increased which is favorable enough for the company. But should take care while dealing against the loss due to doubtful and bad debt. 2. The company net sale is very low in the year 2010-2011 Rs 444964406, as compared to 2011-2012 Rs. 613735155. So, the company should manage its current assets, which effects on production and ultimately on sales.

3. The Current Ratio of the company is decreased from 2.11 to 1.62 in the last three-year (2012 to 2013). So, the current ratio should be maintained by the company in such a way that the ratio does not follow below 2:1.

4. Company should give minimum payment time to get prompt payment by debtors.

4.3. CONCLUSION

Here, I conclude that Changes in the financial year is showing increase in the working capital, because company maintains its working capital properly in the year 2011 to 2013. According to my calculation Current Assets main part of, the working capital of the business. According to all Ratios, It shows that company maintains its ratio is very well. So, In the year 2011-2013 company showing better position in the working capital.