SUMMER TRAINING REPORT

A STUDY ON

WORKING CAPITAL MANAGEMENT

CASE OFTHE ROPAR DISTT CO-OP MILK PRODUCER UNION LTD.(VERKA MILK PLANT), MOHALI

Project cordinator:

Submitted by:

Dr. Aarti Mahendru

Yamuna Dass

MBA 3RD Semester

Roll No 1440676

CHANDIGARH GROUP OF COLLEGE LANDRAN

2014-2016Certificate of Supervisor

This is certificate that Mr. Yamuna Dass Roll No. 1440676 has complete the research project titled A study on Working Capital Management case of the Ropar Distt CO-OP Milk Producer Union ltd. (Verka Milk Plant ) Mohali under my supervision in fulfilment of the MASTER OF BUSINESS ADMINISTRATION degree of Punjab Technical University.

Supervisors signature:

Supervisors name: Mrs. Arti Mahendru

Date:

PREFACEThe training is practical experience and helps the students to view the real.

In MBA Summer Training in some company is arranged for the students that are vitally essential.

This type of training help the student to visualize the things practically. I went two month industrial training in milk plant Mohali (Punjab). The report represents the detail of work; I have done during the training period. This report has been drafted by the paying regular visit and carrying out the work in company. With the assistance of staff, I have been given the opportunity to work on Working Capital Management I am grateful to all those who have helped me directly and indirectly in preparing this project report.

This report has written in very simple way.

ACKNOWLEDGEMENT

NOTHING IS IMPOSSIBLE BECAUSE IMPOSSIBLE SAY I AM POSSIBLE

I am very thankful to the CO-OP MILK PRODUCERS UNION LTD. MILK PLANT, MOHALI who at most Co-operation for the successful completion of this project report on The study of WORKING CAPITAL MANAGEMENT OF CO-OP MILK PRODUCERS UNION LTD. MILK PLANT, MOHALI. And kindly allowing me to do my work in their organization and providing me necessary information from the time to time.

I must first express my heartiest gratitudes to Mr. P.K. BALLI, Dy Manager, who extended his maximum Co-operation in granting the permission as well as in guiding me at every stage to overcome the obstacle while collecting that and gave me the encouragement till completion of my data collection. I must also thankful to my college guides who have displayed great lightening me as students on the different aspects of management.

TABALE OF CONTENTSSr. No.ParticularsPage No.

certificate

Preface acknowledgement2-4

1Introduction1.1 Indian Dairy industry

1.2 History

1.3 Growth rate

1.4 Key players1.5 Key challenges6-11

2Company Profile2.1 Introduction of the organisation

2.2 Objective of the organisation2.3 History and present position of the organisation

2.4 Organisation structure

2.5 Organisation network

2.6 Product and packaging

Additional theory

12-26

3Research Methodology3.1 Objective of the Research3.2 Research Design3.2 Limitation27-29

4Data Analysis and Interpretation

30-45

5Finding and conclusions46-48

6Recommendations 49-50

Bibliography51

Chapter -1

Introduction

1.1 INDIAN DAIRY INDUSTRY (Introduction): India is the worlds largest producer of dairy products by volume, accounting for more than 13% of worlds total milk production, and it also has the worlds largest dairy herd. As the country consumes almost all of its own milk production, India was neither an active importer nor an exporter of dairy products prior to year 2000. However, since the implementation of Operation Flood Programme, the situation changed significantly and imports of dairy products reduced to very small quantities. From 2001, India has become a net exporter of dairy products and after 2003 Indias dairy import has dipped while exports have increased at a fast rate. Yet the countrys share in global dairy trade still remains at minor levels of 0.3 and 0.4 percent for exports and imports respectively. This is due to the direct consumption of liquid milk by the producer households as well as the demand for processed dairy products that has increased with the growth of income levels, which have left little dairy surpluses for export. Nevertheless, India consistently exports specialty products such as casein for food processing or pharmaceuticals. The Indian dairy sector is also different from other dairy producing countries as India places its emphasis on both cattle and buffalo milk. In 2010, the government and the National Dairy Development Board have drawn up a National Dairy Plan (NDP) that proposes to nearly double Indias milk production by 2020. This plan will endeavour to increase the countrys milk productivity, improve access to quality feeds and improve farmer access to the organised market. These goals will be achieved through activities that focus on increasing cooperative membership and growing the network of milk collection facilities throughout India.

1.2 HISTORICAL EVOLUTION:Prior to year 2000, India was not noticed by most international dairy companies, as the country was neither an active importer nor an exporter of dairy products. Although India has imported some milk powder and butter oils as aid between 1970 and 1990, exports from India were insignificantly small and it was not until 2000 onwards, when Indian dairy products started having more presence in global markets. 3

Milk production in India has developed significantly in the past few decades from a low volume of 17 million tons in 1951 to 110 million tonnes in 2009. Currently, the Indian dairy market is growing at an annual rate of 7%. Despite the increase in production, a demand supply gap has become imminent in the dairy industry due to the changing consumption habits, dynamic demographic patterns, and the rapid urbanization of rural India. This means that there is an urgent need for the growth rate of the dairy sector to match the rapidly growing Indian economy.

India is the worlds largest producer of dairy products by volume and has the worlds largest dairy herd. The country accounts for more than 13% of worlds total milk production and is also the worlds largest consumer of dairy products, consuming almost all of its own milk production. Dairying has been regarded as one of the activities that could contribute to alleviating the poverty and unemployment especially in the droughtprone and rainfed areas. In India, about threefourth of the population live in rural areas and about 38% of them are poor. Therefore among these people, as well as the large vegetarian segment of the countrys population, dairy products provide a critical source of nutrition and animal protein to millions of people in India.1.3 GROWTH RATE:Despite its huge production volume, India nevertheless faces a milk supply gap due to increasing demand from a growing middle class population. Estimation suggests that Indian dairy production is growing at a rate of about four percent per year, yet consumer demand is growing at approximately double that rate. In response to increasingly strong demand for milk products, the Indian dairy industry is growing its milk production in several ways. For example, dairy farmers have responded to increasing dairy prices by increasing herd sizes. In addition, those farmers working directly with buyers from the organised sector generally have access to modern extension services, which provide support for the dairy farmers to improve management, feeding, fertility and veterinary care. Many of these extension service providers offer artificial insemination services that aim to further improving milk yields with new dairy cattle genetics. Artificial insemination services are expected to grow in the future, as the government of India continues to develop protocols for imported genetics products. Finally, commercial dairies are also continuing with strengthening their presence in India.

Table.1PRODUCTPERCENTAGE

Fluid Milk46.0%

Ghee27.5%

Butter6.5%

Yogurt7.0%

Khoa6.5%

Milk powder3.5%

Paneer2.0%

Other including Ice Cream1.0%

India dairy product mix 20091.4 PLAYERS IN INDUSTRY:Gujarat Co-operative Milk Marketing Federation (GCMMF) is the largest player.

(Gokul, Warana in Maharashtra, Saras in Rajasthan, Verka in Punjab, Vijaya in Andhra Pradesh, Aavin in Tamil NaduJ K Dairy, Heritage Foods, Indiana Dairy, Dairy SpecialtiesProduction Policy and Regulation of Dairy ProductsDairy production in India runs on a low inputlow output system, in which individual producers typically own less than five cattle or buffalo and use locally available feeds. This has resulted in yield levels that are below international averages but also the worlds lowest production costs. As dairy product prices and income from milk collection continue to increase, farmers are slowly growing herd sizes and increasing their specialisation. In addition, interests from private sector investors have also facilitated construction of larger dairies through partnering with dairy processors.

Through implementing various incentive schemes, Indian policy makers are aiming to increase the countrys dairy output. Examples of these schemes include the Ministry of Agricultures research programs, imports of bovine semen and embryos, the National Project for Cattle and Buffalo Breeding, which focuses on improving Indian indigenous breeds with an allocation of USD 255 million. On the other hand, support is also offered by the private sector through activities such as artificial insemination services, training for veterinary care and other livestock management skills.

In 2010, the government and the National Dairy Development Board have drawn up a National Dairy Plan (NDP) that proposed an expenditure of around USD 378 million to nearly double Indias milk production by 2020. This plan will endeavour to increase the countrys milk productivity, improve access to quality feeds and improve farmer access to the organised market. These goals will be achieved through activities that focus on increasing cooperative membership and growing the network of milk collection facilities throughout India.

Cooperative Movement in Dairying Immediately after India gained independence in 1947, the Milk Control Board was established to control the dairy supply and distribution chains. However, a number of issues emerged. First, the middlemen got hold of the sales profit and the share of producers in the sales declined. Second, as processing units were set up in cities, it became difficult for the milk to be procured and transported the production centres in the rural areas. Consequently, the yield of milk declined and imports of milk powder went up.

Operation Flood EraIndias dairy sector witnessed a spectacular growth between 1971 and 1996; the period was known as the Operation Flood era. An integrated cooperative programme aimed at developing the dairy industry was implemented in three phases, with The National Dairy Development Board designated by the Government of India as the implementing agency. The major objective was to provide an assured market round the year to the rural milk producers and to establish linkage between rural milk production and urban market through modern technology and professional management. The Operation Flood was one of the worlds largest rural development programmes which ran for 26 years and eventually helped India to emerge as the worlds largest milk producer. As part of the programme, around ten million farmers were enrolled as members of about 73000 milk cooperative societies. Since the implementation of this programme, milk production increased from 21 million tonnes in 1970 to nearly 69 million tonnes in 1996, at the compound growth rate of 4.5 per cent. By 1996, milk cooperatives attained a dominating share of the Indian dairy market butter 96%, pasteurized liquid milk over 90%, milk powder 59% and processed cheese 85%. India was reckoned as a major threat in the dairying world. In retrospect, it was by no means an easy task.

1.5 KEY CHALLANGES:

TradeWhile the decade of 200010 has seen positive level of dairy exports from India, the next decade is predicted to be different and signs of change are already visible. Due to low global dairy prices and high domestic costs, India is finding it difficult to sustain exports of dairy products. On the other hand, factors such as the reintroduction of subsidies by European Union, devaluation of currency of New Zealand (a major dairy exporting country), combined with continuing global economic downturn, have made dairy imports into India attractive. It is predicted that dairy commodities will be the first largescale imports and will be used by Indian dairy cooperatives and companies to make reconstituted milk and other branded dairy products. This may be followed by Imports of branded dairy products.

In the past, India has not been permitting free import of dairy products. As the countrys dairy sector employs 90 million people, India has advocated that milk and cheese be excluded from the scope of free trade agreement under negotiations with the European Union. However, despite Indian governments fear about how small dairy farmers could suffer from import liberalization, India is now facing strong pressure to open up its market to dairy products from Europe. There are arguments suggesting that removing such tariff would leave Indias farmers unable to withstand competition from European imports. Often these imports have been highly subsidized and can be sold at lower prices than domestically produced goods.

Supply and Demand A recent survey has revealed that on average, an Indian family allocates 17 per cent of the household food expenditure on milk and milk products, with rural families allocating 15 per cent and families in the urban area allocating over 18 per cent. As income continues to increase, it is predicted that the demand for milk is going to rise faster than seen in the previous decade. Moreover, the overall demand is growing rapidly compared to milk production. The higher GDP growth rate, enhanced income of rural households and the farm debt waiver are influencing the demand for milk both in the rural and urban areas.

Production Cost Reduction: In order to increase the competitiveness of Indian dairy industry, efforts should be made to reduce cost of production. This can be achieved through increasing productivity of animals, improve animal health care and breeding facilities and management of dairy animals. The Government and dairy industry will need to play a vital role in this direction.

Strategy and Infrastructure Development: Indian dairy industry should further develop proper dairy production, processing and marketing infrastructure, which is capable of meeting international quality requirements. A comprehensive strategy for producing quality and safe dairy products should also be formulated with suitable legal backup.

Focus on Specialty Products: Dairy industry in India is unique with regard to the availability of buffalo milk. In this case, India can focus on buffalo milk based speciality products, such as Mozzarella cheese, in order to meet the needs of the target consumers.

CHAPTER 2COMPANY PROFILE2.1 INTRODUCTION TO THE ORGANISATIONVerka is a Co-operative Company and is former oriented autonomous or Organisation based on cooperative pattern. It is the king of Punjab Region as Milk Procurement is concern. Its daily milk production is around 2.00 lacs liter per day on an average and that is why huge amount of milk production has became its core competency. It produces many daily products.

MILKFED is a group of milk union established under operation flood programme as the implementing agency by the government of Ropar and potential increasing demands of milk in the metropolis Chandigarh. The ropar district co-operation milk produces union was established in the year of 1980.2.2 OBJECTIVE OF ORGANISATION

The main objective of its establishment were:

To create an organized factor to develop and command a major share of urban milk market of Chandigarh.

To provide year around remuneration price to small rural milk producers organized into co-operative The milk plant carries out activities conduct to the economic development to agriculturist by organizing effective production, process and marketing of commodities. To provide quality milk and milk products to the consumers.2.3HISTORY AND PRESENT POSITION OF VERKA

HISTORY OF VERKA

The company has been well known by brand name verka especially in Punjab and Haryana. Chandigarh plant set up in year 1961-1962 to meet the milk initially. But is was not able to fullfilll the growing requirement of Chandigarh City. Due to this reason another plant setup in September 1980 Mohali (Punjab), which is adjoining to Chandigarh.MILK PLANT MOHALI

The Ropar Distt. Co-operative Producer Union

It is the one of the MILKFED group located at S.A.S. Nagar, Mohali (Punjab). It is registered on 05.07.1978 under Punjab Cooperative Socities Act, 1961. It is started its activities on September1980.PRESENT POSITION OF VERKA

Presentaly it has 856 Socities and around 46000 member are supplying milk and making their contribution to the Mohali (Punjab) plant as follow:

1. In Ropar District 520 villages Societies.2. In SAS Nagar, Mohli 164 Societies.

3. In Fatehgarh District 109 Societies.

4. In Patiala District 60 Socities.

5. In UT 3 Socities.

In Ropar District three chilling centers are situated namely Morinda, Jhinjri and Nurpur.

The plant mainly supply milk to the cities of Chandigarh, Mohali and Panchlula also covering some adjoining cities of Himachal Pradesh and Haryana.

2.4 ORGANISATION STRUCTURE

For the smooth running of plant , various section are managed by the management . each and every activity is delegated to particular section. It is impossible for top management to take decision on every problem, so various tasks are delegated to various section. The following are the section in the Verka OrganisatioN:1. Procurement Section

2. Production Section

3. Quality Control Section

4. Marketing Section

5. Account Section

6. Administrative Section

7. Engineering Section

8. Purchase Section

9. Store Section

10. MIS Section

11. Security Section2.5.ORGANISATION NETWORKVerka is having apex body at the state land known as MILKFED Punjab, Chandigarh. To start with fuc tion in various fields of different union in different district and operate with Dairying and Dairy fields that is the operation flood with assistance of National Dairy Coopration (NDC) Delhi and later on is launached to operate second who is affiliated to Punjab Milk Fed. It helps to its affiliated district milk co-oprations in 11 districts. These districts union are following:1. ROPAR

2. PATIALA

3. LUDHIANA

4. FARIDKOT

5. FIROZPUR

6. SANGRUR

7. BATHINDA

8. GURDASPUR

9. HOSHIARPUR

10. JALANDHAR

11. AMRITSAR

These union is eleven district of the state carry out smooth functioning of marketing , procurement , cattle breeding programme through district cooperative union.

PLANT AT A GALANCE

Established 1980

:The Ropar District Co-operative

Milk Producer Union Milk Plant MohaliBrand Name

:Verka

Installed Capacity

:100000 liter of milk per day

Productin of Milk

:2.0 lacs liter per day

Status

:Co-operative Society

Head Office

:Milkfed Punjab , Sector 34 Chd.

Plant

:The Ropar District Co-operative

Milk Producer Union Ltd. Milk

Plant , SAS Nagar Mohali

Product and packingProduct

packing

GHEE POLY PACK

500MS.& 1LTR

GHEE TIN PACK

500GMS, 1LTR, 2LTR, 5LTR,&15KG

TABLE BUTTER

10GMS, 100GMS, &500GMS

CHEES

100/200/400GMS, 400GMS TIN PIZZA CHEESE

200GMS.&1KG PACK

VERKA VIGOUR

500GMS. JAR, 500GMS REFILL

DAIRY WHITNER

500GMS. PKT & 10KG TIN

SKIMMED MILKED POWDER

1KG. PKT &25KG. BAG

WHOLE MILK POWDER

500GMS. TIN, 1KG TIN, 10KG TIN

SWEETEND FLAVORED MILK

200 ML.BOTTLE,200 ML. TETRAPACK

SWEET LASSI

200ML. TETRAPACK

MANGO RASEELA

200ML. TETRAPAK

PINE APPLE RASILA

200ML. TETRAPACK

MILK CAKE/PEDA

200GMS.PKT.

KAJU PINNI

50GMS.PKT.

MILK POUCHES

FULL CREAM,STANDARDISED,

TONED, DOUBLE TONED

U.H.T. MILK

1LT.TETRAPAK STANDARDISED & TONED

PLAIN LASSI

1 LTR.PAK.

NAMKEEN LASSI

250 GM, 1KG

CURD

200GM, 400GM, 500GM

KHEER

125 GM, 200GM

BIO-YOGHURT

250 GM

ICE CREAM

MALAI CULFI, MANGO DUET, ORANG BAR

PANEER

200 GM.PKTAdditional Theoretical Framework:Working Capital Concepts

Net Working Capital

:Current Assets Current Liabilities

Gross working Capital

:The firm investment in current assets.

Working Capital Management : The administration of the firms current assets and the financial needed to support current assets

2.5 TYPES OF WORKING CAPITAL

2.5.1 ON THE BASIS OF CONCEPT

1. Gross Working Capital :The gross working capital refer to the firm investment in all the assets taken together. The total of investment in all the individual current asset is the gross working capital.For example if a firm has a cash balance of Rs. 50,000, debtor of Rs. 70,000 and inventory of raw material and dinish goods has been assessed at Rs. 1,00,000, then the gross working capital of the firm is Rs. 2,20,000 (i.e.,Rs. 50,000+Rs. 70,000+Rs. 1,00,000).2. Net Working Capital :The term net working capital may be defined as the excess of total current assets over total current liabilities. Current liabilities refers to those liabilities which are payable within a period of 1 year.NET WORKING CAPITAL = TOTAL CURRENT ASSETS TOTAL CURRENT LIABILITIES

A financial management must considered both gross and working capital because they provide different interpretation. The gross working capital denotes the total working capital or the total investment in current assets. This will help avoiding 1.the unnecessarily stoppage of work or chance of liquidation due to insufficient working capital and 2. Effects on profitability.The gross working capital also given an idea of total funds required for maintaining current assets.

2.5.2 On the basis of time

1) Permanent / Fixed Working Capital: permanent working capital may be define as the minimum level of current assets which is required by a firm to carry on its business operation. Every firm has to maintain a minimum level of raw material, work in progress , finish goods, and cash balances.For example extra inventory of finish goods will have to be maintained to the support the peak period of sale. Permanent working capital is permanent needed for the business and therefore ; it should be finance out of long term funds.

2) Fluctuating /Variable Working Capital :It is the extra working capital needed to support the changing production and sales activities of the firm. The amount of temporary working capital keeps on fluctuation on time to time on the basis of business activity.2.6 OPERATING CYCLEThe investment is working capital is influenced by Four key Event in the production and sales Cycle of the Firm:-

1. Purchase of Raw Material

2. Payment of Raw Material

3. Sale of Finished Goods

4. Collection of Cash of Sales

OPERATING CYCLE

The firm begins the purchase of raw material which are paid for after delay which represents the account payable period. The firm convert the raw material into finished goods and then sells the same. The tine lag between the purchase of raw material and sale of finished goods is the inventory period. Customer pay their bills some time after the sale. The elapses between the date of sales and date of collection of receivables is the accounts receivab le period. 2.7 Customer satisfaction surveys help to:

Improved satisfaction surveys help to

React quickly to changes in the market

Identify and capitalize on opportunities

Beat the competition

Retain or gain market share

Increase revenue

Reduce costs

, the tern working capital refer to the gross working capital and represents the amount of funds invested in current assets. Thus the Gross Working Capital is the capital Invested in total current assets of the enterprise.

In narrow sense, the term Working capital refers to the net working capital. Net working capital is the excess of current assets over current liabilities.

Net Working Capital = Current Assets Current Liabilities

2.8 Importance of Working CapitalWorking capital is a life blood and nerve centre of a business. Just as circulation of blood id essential in human body for maintaining life, working capital is very essential to maintain the smooth running of a business. No business can run without adequate working capital .

The main advantages of maintaining the adequate working capital ate as follow:

Solvency of the business :Adequate working capital helps in maintaining the solvency of the business.

Goodwill :Sufficient working capital enables the concern to make promt payments and hence it helps in creating goodwill.

Easy loan : A concern having adequate working capital, high solvency caneasily arrange the loans.

Regular supply of raw materials : Sufficient working capital enables the regular supply of raw material from supplies.

Regular day to day payment : A company which has adequate working capital can male regular payment of salaries , wages and other day to day expenses . It the adversely affects the moral of employees and increase their efficiency, reduces wastages and cost and enhance production of profits.

Ability to face crises : Adequate working capital enables a concern to face business crisis in emergencies such as depression.

Quick and regular return on investment : Every investor wants a quick and regular return on its investment. Sufficient of the working capital enables a concern to pay quick and regular dividends to its investor.

2.9 Factor determine the Working Capital Requirment

The working capital requirement of a concern depends upon a large number of factor. The important ones are as follows:

Nature of the business : the working capital requirement of the business is closely related to the nature of the business. A company which has a small operating cycle, require less working capital for example a company produce day to day use product like milk etc. in the other hand a company which has a long operating cycle require a more working capital than previous one.

Seasonality of operation : Firms which have marked seasonality in their operation usually have highly fluctuating working capital. For example the firm manufacturing ceiling fans. The sale of ceiling fans is seasonal because in summer season the demands in up but in winter the demands in decrease.

Production policy : production policy of concern is highly effects the working capital requirement because where the work has been done through the year the need of working capital is more.

Market condition : The degree of competition prevailing is the market place has an important bearing on working capital needs. When a competition is keep a large inventory of finish goods in required to promptly serves the customers who may not inclined to wait because others manufacturers are ready to meet their needs.

Current assets : There is any cash assets that can be quickly turned into cash. Current assets are assets, which can be converted into cash within an accounting year. Their following current assets are:

Cash in hand and bank balance

Bills receivables

Sundry debtor

Short term loan and advance

Inventories of stock

Raw material

Work in progress

Stores and spares

Finishes goods

Prepaid expenses

Accrual incomes etc.Current liabilities : Current liabilities are those claims of outsiders, which are expected to mature for payment within an accounting year. There are following current liabilities are:

Bills payable

Sundry creditors or account payable

Short term borrowing

Dividend payable

Bank over draft

Provision

Outstanding expenses

Unaccrued income

Steps involved in working capital:1. Forecast the amout of working capital

2. Determine the working capital

2.10 Estimation of working capital management required factor to be considered:

Total cost incurred on material , wages or overhead.

The average period of credit allow to customer.

The amount of cash require to pay day to day expenses of the business.

The amount of cash require for advance payment if any.

The average period of credit to be allowed by suppliers.

Time lag in the payment of wages and other overhead.

2.11 SOURCE OF WORKING CAPITALThe company can choose to finance its current assets by

1. Long term sources

2. Short term sources3. A combination of them

2.11.1 Long term sources of Finance include equity and preference shares, retain earning, debenture and other long term debt from public deposit and financial institution. The long term working capital needs should meet through long term means of financing. Financing through long term means provides stability, reduce risk or payment. And increase liquidity of the business concern. Various types of long term sources of working capital are summarized as follow:

1. Issue of share: It is the primary and most important sources of regular or permanent working capital. Issuing equity shares as it does not create and burden on the income of the concern. Nor the concern is obliged to refund capital should preferably raise permanent working capital.

2. Retain earning: Retain earning accumulated profits are a permanent sources of regular working capital. It is regular and cheapest. It creates not charge on future profits of the enterprises.

3. Issue of debenture: it create a fixed charges on future earning of the company. Company is obliged to pay interest. Management make should wise choice in producing funds by issue of debentures.

4. Long term debt: company cm raised fund from accepting public deposits, debts from financial institution like banks, corporations etc. the cost is higher than the other financial tools.

5. Other sources: sale of idle fixed assets, security received from employees and customers are example of other sources of finance.

2.11.2 Short term source of temprory working capital temporary working capital is required to meet the day to day business expenditure. The variable working capital would finance from short term sources of funds. And only the period needed. It has the benefit of low cost and establishes closer relationship with banker. Some sources of temporary working capital are given below:

1. Commercial bank: The commercial bank constitute significant sources for short term of temporary working capital. This will be in the form of short term loans, cash credit, and overdraft and though discounting the bills of exchange.2. Public deposit: Most of the company in recent years depend on this source their short term working capital requirements ranging six month to three year.3. Various credits: trade credits and business credit papers and customer credit are other sources of short term working capital. Credit from suppliers, advances from customers. bills of exchanges etc. helps to raise temporary working capital.4. Reserve and other fund: various fund of company like depreciation fund. Provision of tax and other provision kept with the company can be used as temporary working capital. The company should meet to its working capital needs through both long term and short term funds.It will be appropriate to meet at list 2/3 of the permanent working capital equipment form long term sources, whereas the variables working capital should be financed from short term sources, the working capital financing mix should be designed in such a way that the overall cost of working capital in the lowest, and the funds are available on time and for the period they are really required.

CHAPTER 3

Research Methodology

RESEARCH METHODOLOGYIn order to achieve the above set of objective two types of data was needed.

Primary data and secondary data were collected for this purpose.3.1 OBJECTIVE To find out the operating cycle of the business.

To understand the working capital

To find out the Ratio analysis3.2 Research DesignA) POPULATION :All the milk plants in Punjab constitute the population of the study.A group of objective constitute are Population.B) SAMPLE:Milk plant of verka is chosen as a sample unit to anlayse the working capital of verka plant through my own reasons of project report.C)SAMPLING UNIT: A unit in a statistical analysis refers to one member of a set of entities being studied. It is the material source for the mathematical abstraction of a random variable. We have to use the sample unit from the verka financial reports. The sampling unit provide the Common example of a unit would be a single person, animal , plant or manufactured item that belongs to larger collection of such entities being studied.F)DATA COLLECTION:

In order to achieve the above set of objective two types of data was needed. Secondary data were collected for this purpose.Secondary data is the data which already exit and has been collected By someone else for some other purpose but is useful for the present study. The secondary data is collected by referring personal records of the company referring to the Financial Statement (Balance Sheet and Profit and Loss Account) of the company.G)SCOPE OF THE STUDY:

Scope define the parameter of these can be an objective, or a theory process. Activity.Describing either future, current or a past knowledge or statement of descriptive activity, experience etc. Scope always the unless of the unlimited nature will define specific boundaries a knowledge the definitions of scope are the borders where the objective, knowledge instruction or outcome of the activity is found.

H) TECHNIQUE OF ANALYSIS:This project consist of two parts.

The first source is a study of the working capital in The Ropar Distt. Co- operation Verka Plant S.A.S. Nagar ( Mohali )The secondary source of information has been sourced from the internet and from business related magazines and newspapers.I have to use the ratio and percentage used to analysis the data.The second part of the study has been done using an exploratory research process for this purpose. For the collection of primary data this was the only method used. The reason I used this method is because a need was felt for the free influx of information about the products. Also this method allow the use of skills gained in class.

3.3 LIMITATION OF THE STUDY:

Though the Summer Training in some Company is beneficial for the students. But the real benefit is dependents upon a number of factors.

These factors are called the limitation of the project Time Limit:-To have complete study of Working Capital Management of the CO-OPERATIVE MILK PRODUCERS UNION LTD. MILK PLANT MOHALI the time duration spent for training was not sufficient. Feedback: I will take feedback for some project manager , not for all.CHAPTER 4DATA ANALYSIS

AND

INTERPRETATION

4.1 Data AnalysisThe time that elapses between the purchase of raw materials and collection of cash for sales is referred to as the operating cycle, whereas the time length between the payment for raw material purchases and collection of cash for sales is referred to as the cash cycle.So we can show the operating cycle as follows

Operating cycle

= Inventory period + Account receivables period account payable period

Inventory period

= RMCP + WIPCP + FGCP

RMCP

= Raw material conversion period

WIPCP= Work-in-progress conversion period

FGCP

= Finished goods conversion period

RMCP

=Average raw material 365

Total raw material consumption

WPCP

=Average work in progress 365

FGCP

=Average finished goods 365

Total cost of goods sold

RCP

=Average receivable 365

Total credit sale

DP

=Average creditor365

Total credit purchase

AVERAGE RAW MATERIAL\RAW MATERIAL CONVERSION PERIOD2009

Average raw material = Opening stock of raw material + closing stock of raw material\2

=14,317 + 10,226.30\2

=12272.12

Raw material consumption = 63198.04\365 = 173

RMCP= 12272.12\173

=70 day

2008

Average raw material = Opening stock of raw material + closing stock of raw material\2

=10226.30 + 6784.72\2

=8505.5

Raw material consumption = 55196.12\365 = 151

RMCP

=8505.5\151

=56 day

AVERAGE WORK IN PROGRESS\COST OF PRODUCTION PER DAY

2009

Average work in progress = opening stock of work in progress + closing stock of work in progress\2

=12282.45 + 21378.85\2

=16830.65

Cost of production per day = sale transaction cost

=86538.48 158.40 = 86380.08

WICP

=16830.65\86380.08 365

=71 days

2008

Average work in progress = opening stock of work in progress + closing stock of work in progress\2

=8136.52 + 12282.45\2

=10209.48

Cost of production per day = sale transaction cost

83209.29 174.04 = 83035.25

WICP

=10206.48\83035.25 365

=45 Days

AVERAGE FINISH GOOD INVENTORY\COST OF GOOD SOLD 2009

Average finished goods inventory = opening stock of finished stock + closing stock of finish stock\2

=2758.11 + 1304.87\2

=2031.41

Cost of goods sold =57981.11

FGCP

=2031.47\57981.11 * 365

=13 Days

2008

Average finished goods inventory = opening stock of finished stock + closing stock of finish stock\2

=1304.87 + 740.80\2

=1022.84

Cost of goods sold = 69995.33FGCP

=1022.87\66995.33 * 365

= 6 days

AVERAGE DEBTOR\CREDITOR SALE2009

Average debtor = 47173.58 + 49231.61\2

=48202.59

Creditor sale = 78961.32

BDCP

=48202.59\78961.32 * 365

=222 Days

2008

Average debtor = 49231.61 + 38198.60\2

=43715.10

Creditor sale = 73067.57

BDCP

=43715.10\73067 * 365

=218 days

AVERAGE CREDITOR\CREDIT PURCHASE2009

Average creditor = 28167.81 + 27526.23\2

=27847.02

Credit purchase = 73747.68

CCP

=27847.02\73747.68 * 365

=135 days

2008

Average creditor = 27526.23 + 20395\2

=23960.88

Credit purchase = 59906.12

CCP

=23960.88\59906.12 * 365

=145 Days

4.2 Working capital of the company for last five year are as follow:

Financial year2002-032003-042004-052005-062006-07

Current Assets192318162307209647217083977288148129272065988

Current liabilities112791427208908973103801879126939619137924468

Working capital795267359830067411328209912128510134141520

Interpretation:

From the above information we conclude that the working capital of the company is increase every year it means the company has a sufficient working capital maintained. It is the highest in the last year i.e. 2006-07. It is show that the company working capital is increasing every year.Milk union wise stock & store position and available of Working Capital

(Rs. In Crore)

Sr no. UNION2005-062006-072007-20082008-09

1Milk union stocks69.2286.53105.56116,75

2Milkfed stocks9.578.6510.7810.81

3Total current asset78.7995.18116.34127.56

4WC from banks78.1985.08103.0386.82

5Own margin0.6010.1013.3140.74

Interpretation:

It is the milk union wise stock and store position and available of working capital which show that milk union stocks is increasing every year. The last year 2008-09 in increase by 116.75 crore. Its milk stock, total current asset, WC from banks and own margin also increasing year to year. This table show all the figure of year to year increasing of stocks. Its own margin in 2008-09 increasing in 40.74 Crore.4.3STATEMENT OF WORKING CAPITAL

PARTICULAR2007-082008-092009-10

(A) CURRENT ASSETS LOAN AND ADVANCES

(I) Inventories994123241443091410731382

(II) Debtor65345321059967112508666

(III) Loan and advanced637430408779577646054982

(IV) Stock of raw milk299697426022434606562

(V) Stock of milk product129007472141409710159543257

(VI) Cash in hand1186016378673309

(VII) Cash at bank9886767991224286162457956

TOTAL (A)400680622348126386395976114

(B)CURRENT LIABILITIES

(I) Current liabilities162318926187581717229107072

(II) Provision14425219112048419913434

TOTAL (B)176744145198786558239020506

WORKING CAPITAL (A-B)223936477149339828156955608

RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS

STOCK TURNOVER RATIO (in times):

Particular 2005-062006-072007-082008-092009-10

Cost of goods sold11978580471419432256178646415121786530513089282771

Opening stock

Raw material21722981878940236937829969744606562

Milk product4668361578208544122647164129007472159543257

Closing stock

Raw material18789402369378299697426022432602243

Milk product78208544122647164129007472141409710141409710

Total stock124943397134716332257020988276016399308161772

Average stock6447189867358163128510494138008200154080886

Stock turnover ratio18.5821.0913.9015.7020.00

ANALYSIS OR INTERPRETATION:

In 2005-06: The stock turnover ratio is 18.58 times more than average stock. It has been increase from both the previous years. This shows that company s more properly utilizing its stock into sales and selling quickly to earn profits.In 2006-07: The stock turnover ratio is 21.09 times more than average stock. This years it has been increased from all the previous years and further it is increasing yearly and the company is utilizing its stock more efficiently.In 2007-08: The stock turnover ratio is 13.90 times it has been decreased from the last year due to increase in average stock from last year. Now the company has to search ways to overcome this problem and for full utilization of stocks and to go for more sales.In 2008-08: The stock turnover ratio is 15.07 times it has been increasing from the last year due to increase in average stock from last year company have to work up to how increase sales.

In 2009-10: The stock turnover ratio is 20.00 times it has been increasing from the last year. This shows that company is utilizing their stock into sales & it is a good indicator for the company because it is more than average stock.

RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS:

DEBT-EQUITY RATIO (in times)

Particulars2005-062006-072007-082008-092009-10

Current liabilities(outsiders)12693961813792446814021855198786558.19913434

Share capital2582712026427245268196552749375538364500

Reserve and surplus1478896526526376204449286208475082.78251300481

Depreciation reserve Fund81971713856695559105038597321702103720892

Shareholderss Funds91745059106021456140218557138647135185944089

Debt-Equity Ratio1.41.31.261.430.53

ANALYSIS OR INTERPRETATION:

In 2005-06: The Debt-Equity Ratio is 1.4 times. It has increase from the last years but it is quite satisfactory as the company is maintaining their Debts.In 2006-07: The Debt-Equity Ratio is 1.3 times. It is also same like previous years as it is decreased little bit as the company is maintaining Debts.

In 2007-08: The Debt-Equity Ratio is 1.26 times. It is also almost same from last previous years also favourable to both Lenders and company.

In 2008-09: The Debt-Equity Ratio is 1.43 times. Which is increase from the last year. It is a good sign for company increase of Debt-Equity ratio shows risky financial position.

In 2009-10:The Debt-Equity Ratio is 0.53 times. It decrease from last year because the company pay add more quite then debt.

Debt-Equity Ratio

CURRENT RATIO:

Current Ratio = Current Assets/ Current Liabilities

Annexure:

Financial year2002-20032003-042004-052005-20062006-07

Current Assets19238162307209647217083977248148129272065988

Current Liabilities112791472208908973103801879126936619131924468

Current Ratio1.711.472.091.951.97

CURRENT RATIO CHARTCHAPTER 5

FINDING

AND

CONCLUSIONS

FINDINGS:

The company short term financial position is found and satisfactory because its current as well as quick ratio is double than its current liabilities of the company each year, which mean company creditors secured each year.

From the point of view of long term financial position of the company Debt-Equity Ratio, debt are always less than equity in five year. It means company is less dependent on outside loans.

Company working capital are increasing each year. It is a good sign for the company. And it is very useful for company gaining profit and customer satisfaction.At the end we can say that the financial position of the company is sound.

CONCLUSION:

The study reveals that the working of the organization is excellent. The working capital management of the company is satisfactory as per the opinion of the executives of the Verka milk plant.

The operating cycle indicates that the working of the company is on right track and performance of the company is very well. The current ratio, inventory turnover ratio. Debt collection period and working capital turnover ratio of the company is satisfactory. This type f working has increased the profitability of the concern as well as performance of the company. This would help for smooth functioning, progress and survival of the organization.

Chapter-6

Recommendations

SUGGESTIONS:1. The company capital turnover ratio has been decreasing each year. It must be improved. If the capital turnover ratio is low, it will indicate that capital is lying ideal. Now this time it is decreasing otherwise company will suffer.

2. The company working capital turnover is also low. It has been decreasing since last four years. It means stock is not readily converted into sales. It must be increased otherwise sales can suffer.

3. Company should adopt workers participation in management scheme for increasing its productivity, involvement and participation of employees.

4. For better results the full computerization is necessary in the organization, so it inversely increase the efficiency of the workers as well as organization.5. The staff of the company is working very well and they provide all the necessary information whenever necessary, excellent working of the department is an asset to the organization and I suggest that is has to be maintained in future also.

6. Working condition can be changed so took necessary steps form it because it inversely affects the morale of the employees.

Bibliography: Business Magazines:

Economics times

Business standard

http://www.verkaplant.org.comhttp://www.slideshare.comhttp://www.verka.coop/network.comhttp://www.verkafoods.com/download.htmhttp://www.scrib.com/Other sources Annual report on Verka Milk Plant