(WITH SPECIAL REFERENCE TO THE SRINIVASA HATCHERIES PVT.

LIMITED, VIJAYAWADA )
A Project report submitted to the ANDHRA UNIVERSITY, VISAKHAPATNAM.

In partial fulfillment for the award of the degree of MASTER OF BUSINESS ADMINISTRATION
By
Y.ARJUN REDDY

Under the guidance of

Smt.K.NEELIMA
M.B.A

D.N.R COLLEGE P.G. DEPARTMENT OF MANAGEMENT STUDIES (Accredited at the A Level by NAAC) (Approved by AICTE,NEWDELHI and affiliated to ANDHRA UNIVERSITY,VISAKHAPATNAM) BHIMAVARAM-534202 (2010-2012)

DECLARATION
I hereby declare that the project titled A STUDY ON WORKING CAPITAL MANAGEMENT WITH REFERENCE TO THE SRINIVASA HATCHERIES PVT.LTD, VIJAYAWADA has been prepared by me during the year 2010-2012, in partial fulfillment of the requirement for the award of POST

GRADUATION DIPLOMA IN BISINESS MANAGEMENT which is affiliated to ANDHRA UNIVERSITY, VISAKHAPATNAM.

Y.ARJUN REDDY (REGD.NO.110274802002)

ACKNOWLEDGEMENT
I would like to convey my respectful thanks to Dr.P.KOTESWARA RAJU, director, K.NEELIMA, faculty P.G. of Business Administration, D.N.R COLLEGE, BHIMAVARAM, for their mortal support during the research work. I am thankful to MR.K.SOMI REDDY (MANAGING DIRECTOR) and MR.MURALI KRISHNA (FINANCE MANAGER) who granted me the project and guided me with their expertise knowledge through out my project work. I would also express my sincere gratitude to MR.B.SATYANARAYANA RAO, MY PARENTS, WELL WISHERS and FRIENDS for their support to complete this project. I deem it a great privilege to express profound respect, deep sense to Gratitude to my lecturer and my project guide K.NEELIMA, Lecturer in M.B.A. DANTULURI NARAYANA RAJU COLLEGE, BHIMAVARAM, of his constant encouragement and valuable guidance.

Y.ARJUN REDDY (Regd. no.110274802002)

CONTENTS
CHAPTER CHAPTER-I PARTICULARS INTRODUCTION NEED FOR THE STUDY OBJECTIVES OF STUDY METHODOLOGY LIMITATIONS OF STUDY INDUSTRY PRIOFILE INTRODUCTION TO INDUSTRY PRODUCT DETAILS PROBLEMS OF THE INDUSTRY COMPANY PROFILE GENERAL PROFILE FUNCTIONAL PROFILE CONCEPTUAL FRAME WORK THEORY OF WORKING CAPITAL FINDINGS AND SUGGESTIONS FINDINGS SUGGESTIONS BIBLOGRAPHY

CHAPTER-II

CHAPTR-III

CHAPTER-IV

CHAPTER-V

INTRODUCTION
Financial management:
Financial management is the life of every business enterprise. A business under taking at a given point time can be viewed as a pool of funds raised from various sources like inventory and the source of internal financing. The funds raised from these sources are utilized for.

Acquiring fixed Assets needs for the production of goods and services. Inventories that facilitate production and sales accountants receivables
owned by customers.

Cash and marketable securities used for liquidity purpose and business
transactions. The modern thinking in financial management accords a far greater importance to management in decision-making and formulation of policy. Financial management occupies key position in top management and plays a dynamic role in solving complex management problems. They are now responsible for shaping the fortunes of the enterprise and are involved in allocation of capital.

DEFINITIONS:

Financial Management is an area of financial division making, harmonizing individual motives and enterprise goals. -Weston and Brigham

Financial Management is the application of the planning and control functions to the finance function. -Howard and Upon

Financial Management is the operational activity of a business that is responsible for obtaining and effectively utilizing the funds necessary for efficient operations. -Joseph and Messie

FINANCIAL ANALYSIS:

The success of a company of a great extent depends on its financial performance. Financial performance involves assessing the financial position and the companys ability to meet the debts utilizing of assets and profitability financial performance is evaluate through financial analysis. Financial analysis is the process of identifying the financial strengths and weakness of the firm by properly establishing relationship between the items of balance sheet and profit and loss account. The information contains in financial statements balance sheet and profit and loss a/c is used to give the judgment about the operating performance and financial position of the firm. Management should interest in knowing the financial strength of the firm to make their best use and to the able to spot out the financial business weakness of the firm to take suitable corrective action. Apart from the management, there are outside parties, outsiders, creditors, investors, etc.., restore confidence in those firms that so steady growth in earnings. As such they concentrate on the analysis of the firms present and future profitability. Financially, management of the firms would be interested in every aspects of the financial analysis. Thus financial analysis is the starting point for making plans before using any sophisticated forecasting budgeting procedure

Steps To Be Taken For Financial Statement Analysis:

Identifying the users purpose Identification of the data sources. (Which part of the annual report or other information is required to be analyzed to suit the purpose?) Selecting the technique to be used for such analysis. Thus financial statement analysis is purposive and not necessarily comprehensive to cover all possible uses. Since it is purposive, analysis may be restricted to any particular portion of the available financial statement, taking care to ensure objectivity and unbiased ness. Financial statement analysis covers study of relationships with a set of financial statements at a point of time and with trends in these relations over time. This means that it may be a study of some comparable firms at a particular time, say a financial year 2003-2004, or it may be a study of particular firm over a period of time says 1994-2004 or it may cover both.

OBJECTIVES OF THE STUDY:

The case study of WORKING CAPITAL MANAGEMENT under taken with the following objectives. To analyze the current assets and current liabilities with a view to point out the liability of the company.

To discuss the pattern of working capital in relation to total net asset and gross fixed asset with a view to highlight whether the company has been operating with high/low amount of working capital.

To

examine

the

pattern

of

financing

the

working

capital

requirements in order to bring out the relative importance of short term/long term sources of funds.

To present the turnover of working capital and its components with a view to analyze the efficiency with which the working capital and its components were used.

To analyze the funds flow to find out the ways and means of corporation. To know the profitability of the funds.

 To find out the financial stability of the firm To manage the extent to which the company has been financed through borrowing

PERIOD OF THE STUDY:

The study is made for a period of five years i.e., from 200506 to 2009-10.

SCOPE OF THE STUDY:

Scope is limited to the extent of analyzing the working capital of the company by calculating various components of working capital through the help of the ratios, trend analysis and funds flow.

SOURCES OF INFORMATION:
The sources of information are divided into two (a) Primary and (b) Secondary. Most of the data is collected through secondary source i.e., printed matter. This data is from the annual reports and original records of ECIL. And the data collected by way of primary source is through the personal interview with the finance manager.

METHODOLOGY:
Working capital analysis is done through the various components by using ratio analysis, trend analysis and funds flows. The techniques used as per the theoretical practice addressing the liquidity position and turnover ratios and their overall trends.

Those are crucial for any informed judgment regarding the financial state of affairs a company. This analysis has been done with the help of the following TOPICS.

1. Study of various components and its analysis. 2. Ratio analysis and trend analysis. 3. Conclusions and suggestions.

LIMITATIONS OF THE STUDY

The study has been conducted is a systematic and comprehensive way so as to make the project work an enviable one. However the topic under my study may not be free form limitations due to the factors listed below.

Non-availability of complete information. Limitation in information about

cash sales and credit sales out of total sales is not available.

In the list of the above, it is not possible for the analyst to calculate the exact
working capital ratios.

The study covers a period of five years form 2006-2010.The information is

mostly depends upon the secondary data. As it is not possible to cover all the supervisors, so the student trainee selected the supervisors of working capital analysis.

Time constraint is another limitation for the study because the project trainee
has to study the whole work with in a 2 months.A study of risk coverage could not make as no records are available in organization to the student trainee.

INDUSTRIAL PROFILE

Srinivasa Hatcheries was incorporated as a private limited company on May 8, 1978, converted into a public limited company on October 26, 1994, and came out with a public issue on February 10, 1995. The layer and broiler breeding activities are located in the Krishna and Vizianagaram districts of Andhra Pradesh with a total installed capacity of 70,162,200 chicks. The company procures genetic packages under a franchise from the Venkateshwara Hatcheries group and caters mainly to the needs of poultry farms located in the eight coastal districts of Andhra Pradesh. In financial year 2007, the company joined as a 10% partner in SHL Ventures, a partnership firm engaged in real estate, construction and property development. It has committed to contribute an amount of Rs 5 crore towards the capital of the firm. The registered office of the company is situated at Plot No 1028, Srinivasa House, Road No. 45, Jubilee Hills, Hyderabad-500033, Andhra Pradesh.

Business area of the company:

The company is engaged in the breeding of layers and broilers, rearing of commercial broilers, and trading in poultry and poultry related products.

Associate companies:

Srinivasa Foods and Feeds private limited Varuna Hatcheries private limited Corporate Leasing private limited Srinivasa Agri Tech private limited Sri Srinivasa Aqua Feeds private limited Kansas Feeds private limited Jagapati Finance private limited Sri Chitturi Agencies private limited Sri krishnadevaraya Hatcheries private limited Jagapati Investments private limited Harsha Hospitalities private limited Rhapsody Foods and Beverages private limited

TECHNICAL SERVICES

SHL has 9 Senior Veterinarians, located one in each district, to provide

services to the farmers like giving computerized project reports, helping farmers in locating and designing poultry sheds, computerized feed formulations, disease diagnosis, feed analysis, advise on prevention and treatment of diseases, liaison between egg traders and poultry farmers etc.

SHL takes help from PDRC for advanced diagnostic facilities like viral

isolation and differential diagnosis, etc.

SHL has one central laboratory at Vijayawada headed by a very senior

veterinarian and assisted by a microbiologist and chemist. It has 4 satellite labs for disease diagnosis in different districts.

SHL also has one central feed analytical laboratory and 4 separate SHL is equipped with advanced facilities like ELISA equipment for SHL is proud to be closely associated with farmer welfare organizations The company area is divided into 4 NECC zones for egg rate declaration. There are about 43 big egg traders in these 4 zones. The Executive Chairman Sri C. Jagapati Rao and Joint Managing Director

satellite feed laboratories in its area of operations.

microbiological work and NIR equipment for quick feed analysis.

like NECC and BEPA.

Dr. K. Somi Reddy spends a couple of hours every day in coordinating egg marketing and price declaration work among NECC officials, farmers and traders in all the company Zones.

Approximately 30% of the eggs produced in SHL area are consumed

locally and balance 70% eggs are sent to other markets within India like Bihar, Bengal and North Eastern States.

Average egg price realized by the farmers for the year 2010 is Rs. 2.287.

TRAINING:

One of the policies of the company is to offer consultancy services and training support to all poultry related agencies such as poultry farmers, breeders and marketers. As part of the company CSR policy this training is usually provided free to all the company customer farmers. From the inception, Srinivasa Hatcheries has been actively involved into this concept and has created a strong and well trained community of poultry farmers which keeps growing each day. The trust that the company has gained from the farmers through this concept is unique and gratifying and has substantially enhanced the company profile.

The potential of poultry breeding is truly immense and it is the earnest intent of the company is ensure that agriculturists comprehend the scope of this business and actively venture into it and profit adequately as the market for chicken and poultry products grows bigger each year. The company believes that it is essential that even illiterate poultry farmers are kept updated with the latest trends in the business and understand constantly changing threats and prepare themselves accordingly.
Following are some of the activities that the group undertakes as part of the Farmer Training Program :

Identifying potential individuals and agencies desirous of establishing Evaluating space, infrastructure and financial requirements of the farmers. Preparing area specific project reports for establishing poultry farms. Educating all poultry agencies about the need to be abreast of current

farms.

trends in the industry and work accordingly for their own success.
BV300 - THE FIRST CHOICE OF LAYER FARMERS:

BV300 is the result of 30 years of R&D efforts of the scientists of Venkateshwara Hatcheries Group. Over eighty percent of table eggs produced in India are laid by BV300. This breed has been dominating the Indian layer market since its introduction over four decades ago in the Indian market by the Father of Indian Poultry Industry, Late Padmashree, Dr.B.V.Rao. The ability of its performance viz., early maturity, high & sustained peak over exceptionally long periods, excellent livability, disease resistance, ideal eggshell strength and egg weight, with an extra advantage of less feed consumption per egg has endeared BV300 as the poultry farmers first choice. Todays BV300 is a product of continuous research and development. It enjoys over 85% market share in India, and over 95% market share in Coastal Andhra Pradesh, due to its consistent performance.

COBB 400 BROILER :

The consumption of poultry meat has been steadily on the rise across homes and hospitality. Factors governing the consistent growth in poultry meat consumption include easy availability of the product as well as social acceptance as a protein rich item in culinary tradition. Vencobb chicken is the most sought in India after considering its high quality and superior characteristics. The breed is the first choice of independent poultry farmers, and has achieved a market share over 80% among independent broiler farmers. Price affordability of poultry meat by a large section of people and absence of religious taboos (unlike in the case of beef and pork) contributed to the rise in chicken consumption. Not surprisingly, today poultry meat is preferred to other meat forms considering the advantages of its price, nutritional values high protein and low fat and adaptability of the meat to fit into various culinary preferences in all segments of social, cultural and economic activities. Though there is a good demand for processed chicken meat, freshly dressed chicken rules the current poultry meat markets in India. The soaring popularity of poultry meat across the homes both in urban and rural areas resulted in the poultry industry treading a sustained and promising growth path. Vencobb broilers fulfil the needs of poultry farmers through its superior genetics and other attributes like fast growth, low feed consumption, disease resistance, high survival rate and excellent adaptability
INFRASTRUCTURE:

Srinivasa Hatcheries has some of the finest poultry infrastructure in place, located in strategic areas. Sheds are designed to ensure the highest productivity and health of breeder birds. The company core operations are based in and around Hyderabad, Visakhapatnam and Vijayawada in Andhra Pradesh.

The company infrastructure facilities include separate brooding, growing and laying sheds, cold storage rooms for hatching eggs, separate farms and hatcheries for layer and broiler breeders, feed and disease testing laboratories with modern analytical and diagnostic facilities like NIR, Elisa equipment etc. Throughout the production cycle, from arrival of parent chicks to dispatch of commercial chicks to customers, and from arrival of raw material in the feed plant to dispatch of finished feed, every step is controlled under strict supervision and biosecurity measures are followed. Parent Bird Housing:

All the company parent birds are segregated and categorized age wise and breed wise, and housed separately in well structured independent sheds. All birds are housed in cages for better productivity and disease control. Cages ensure savings in housing, labor and power costs. All the sheds are equipped with feeding and watering facilities ensuring minimum wastage, and, fans and foggers to reduce the shed temperature in summer. All birds are monitored by experienced veterinarians. All the company hatchery units follow international standards of hazard control and sanitation. Most of the sheds are Environment Controlled and are equipped with advanced climate control systems which help in superior feed conversion ratio, better quality bird meat, increased productivity and health of the chicken, and reduced mortality.

Company profile
Srinivasa Hatcheries Limited (SHL) was incorporated in 1978 with the main objective of carrying on the business of poultry breeding and production of layer chicks to carrying mainly to the needs of the poultry farms located in eight coastal districts of Andhra Pradesh. The company had a modest beginning of 6,000 layer parents in 1979 and has grown to a stage of 3, 00,000 layer parents and 2, 00,000 broiler parents at present. Srinivasa hatcheries limited is the flagship company of srinivasa hatcheries group which has in its fold, companies engaged in poultry breeding manufacturing, real estate, hospitality services etc. The company is mainly engaged in poultry breeding activity i.e. production and sale of day old commercial layer and broiler chicks. The farms and hatcheries are strategically located at several locations in coastal districts of Andhra Pradesh. The company is a franchisee of venkateswara hatcheries group ,market leaders in the poultry industry , for the eight coastal districts of Andhra Pradesh , i.e Krishna,Guntur, praksam,eastgodavari,westgodavari,visakhapatnam,vizianagaram,and srikakulam.

PROMOTERS AND MANAGEMENT

The company was promoted by Sri C. Jagapati Rao and Dr.K.Somi reddy. Sri C.Jagapati Rao, Executive Chairman has about 30 years experience in poultry industry. His pioneering dynamism and stewardship have resulted in steady increase in the groups turn over and profitability. He is also a member of the International Egg Commission based in U.K. SriC.Suresh Rayudu, Vice-chairman and managing director of the company is a graduate in computer engineering and also he has done MBA from Emory University, Atlanta, USA. Dr.Somi Reddy is a gold medalist in poultry science from Andhra Pradesh Agricultural University. He is the Joint Managing Director of the company and is a actively involved in the day-to-day operations of the company. A professional director such as Dr.T.Krishna Reddy.who is director of the company. Sri.K.Ashok Reddy, whole time Director.Sri srikanth, director, is a practicing chartered accountant.

CAPACITIES AND MARKET SHARE

The company has a capacity of 3, 00,000 layer parents and 2, 00,000 broiler parents at present. The companys market share of layer chicks at present is 99.50% in its area of operations and 42% in broiler chicks. The success of the group can be gauged from the fact that every 7th egg consumed in India comes from the chicks produced by the SH Group and this represents 3 eggs per capita per annum for the company bears eloquent testimony to the foresight and missionary zeal of the promoters.

FUTURE PLANS
During the next three years, the company proposes to consolidate its position with improved productivity and also increase its market share both in the layer chick segment and broiler chick segment. The company also proposes to offer integrated services to the farmers to enable them to achieve production in an ever expanding market.

CONCEPTUAL FRAME WORK

WORKING CAPITAL MANAGEMENT THEORY:
Capital required for a business can be classifies under two main categories: Fixed Capital Working Capital Every business needs funds for two purposes for its establishments and to carry out day to day operations. Long term funds are required to create production facilities through purchase of fixed assets such as plant and machinery, land and building, furniture etc. Investments in these assets are representing that part of firms capital which is blocked on a permanent or fixed basis and is called fixed capital. Funds are also needed for short term purposes for the purchasing of raw materials, payments of wages and other day to day expenses etc. These funds are known as working capital. In simple words, Working capital refers to that part of the firms capital which is required for financing short term or current assets such as cash, marketable securities, debtors and inventories.

CONCEPTS OF WORKING CAPITAL:

There are two concepts of working capital: Balance Sheet concepts Operating Cycle or circular flow concept

BALANCE SHEET CONCEPT:

There are two interpretation of working capital under the balance sheet concept: Gross Working Capital Net Working Capital

The term working capital refers 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 enterprises. Current assets are those assets which are converted into cash within short periods of normally one accounting year. Example of current assets is:

Constituents of Current Assets:

Cash in hand and Bank balance Bills Receivable Sundry Debtors Short term Loans and Advances

 Inventories of Stock as: Raw Materials Work in Process Stores and Spaces Finished Goods Temporary Investments of Surplus Funds Prepaid Expenses Accrued Incomes

The term working capital refers to the net working capital. Net working capital is the excess of current assets over current liabilities or say:

Net Working Capital = Current Assets Current Liabilities.

NET WORKING POSITIVE:

CAPITAL

MAY

BE

NEGATIVE

OR

When the current assets exceed the current liabilities, the working capital is positive and the negative working capital results when the current liabilities are more than the current assets. Current liabilities are those liabilities which are intended to be paid in the ordinary course of business within a short period of normally one accounting year of the current assets or the income of the business. Examples of current liabilities are:

CONSTITUENTS OF CURRENT LIBILITIES:

Bills Payable Sundry Creditors or Account Payable Accrued or Outstanding Expenses Short term Loans, Advances and Deposits Dividends Payable Bank Overdraft Provision for Taxation, If does not amount to appropriation of profits The gross working capital concept is financial or going concern concept whereas net working capital is an accounting concept of working capital.

OPERATING CYCLE OR CIRCULATING CASH FORMAT:

Working Capital refers to that part of firms capital which is required for financing short term or current assets such as cash, marketable securities, debtors and inventories. Funds thus invested in current assets keep revolving fast and being constantly converted into cash and these cash flows out again in exchange for other current assets. Hence it is also known as revolving or circulating capital. The circular flow concept of working capital is based upon this operating or working capital cycle of a firm. The cycle starts with the purchase of raw material and other resources. And ends with the realization of cash from the sales of finished goods. It involves purchase of raw material

and stores, its conversion into stocks of finished goods through work in progress with progressive increment of labor and service cost, conversion of finished stocks into sales, debtors and receivables and ultimately realization of cash and this cycle continuous again from cash to purchase of raw materials and so on. The speed/ time of duration required to complete one cycle determines the requirements of working capital longer the period of cycle, larger is the requirement of working capital.

CAS H Debtors Raw Materia lll

Finishe d Goods

WORKING CAPITAL CYCLE WIP

The gross operating cycle of a firm is equal to the length of the inventories and receivables conversion periods. Thus,

Gross Operating Cycle = RMCP + WIPCP + FGCP + RCP

Where, RMCP = Raw Material Conversion Period WIPCP = Work in- Process Conversion Period FGCP = Finished Goods Conversion Period RCP = Receivables Conversion Period However, a firm may acquire some resources on credit and thus defer payments for certain period. In that case, net operating cycle period can be calculated as below:

Net Operating Cycle Period = Gross Operating Cycle Period Payable Deferral period
Further, following formula can be used to determine the conversion periods.;
Raw Material Conversion Period =

Average Stock of Raw Material. Raw Material Consumption per day Work in process Conversion Period = Average Stock of Work-in-Progress Total Cost of Production per day

Finished Goods Conversion Period = Average Stock of Finished Goods Total Cost of Goods sold per day

Receivables Conversion Period =

Average Accounts Receivables Net Credit Sales per day Payable Deferral Period = Average Payable Net Credit Purchase per day

CLASSIFICATION OR KIND OF WORKING CAPITAL:

Working capital may be classified in two ways: On the basis of concept On the basis of time Om the basis of concept, working capital is classified as gross working capital and net working capital. The classification is important from the point of view of the financial manager. On the basis of time, working capital may be classified as: Permanent or Fixed working capital Temporary or Variable working capital.

1. PERMANENT OR FIXED WORKING CAPITAL:

Permanent or fixed working capital is the minimum amount which is required to ensure effective utilization of fixed facilities and for maintaining the circulation of current assets. There is always a minimum level of current assets which is continuously required by the enterprises to carry out its normal business operations.

2. TEMPRORAY OR VARIABLE WORKING CAPITAL:

Temporary or variable working capital is the amount of working capital which is required to meet the seasonal demands and some special exigencies. Variables working capital can be further classified as second working capital and special working capital. The capital required to meet the seasonal needs of the enterprises is called the seasonal working capital. Temporary working capital differs from permanent working capital in the sense that is required for short periods and cannot be permanently employed gainfully in the business

IMPORATNCE OR WORKING CAPITAL:

ADVANTAGE

OF

ADEQUATE

Working capital is the life blood and nerve centre of a business . just a circulation of a blood is essential in the human body for maintaining life, working capital is very essential to maintain the smooth running of a business. No business can run successfully without an adequate amount of working capital. The main advantages of maintaining adequate amount of working capital are as follows: Solvency of the Business Goodwill Easy Loans Cash discounts Regular supply of Raw Materials Regular payments of salaries, wages & other day to day commitments. Exploitation of favorable market conditions Ability of crisis Quick and regular return on investments High morals

THE NEED OR OBJECTS OF WORKING CAPITAL:

The need for working capital cannot be emphasized. Every business needs some amount of working capital. The need of working capital arises due to the time gap between production and realization of cash from sales. There is an operating cycle involved in the sales and realization of cash. There are time gaps

in purchase of raw materials and production, production and sales, And sales, and realization of cash, thus , working capital is needed for the following purposes: For the purchase of raw materials , components and spaces To pay wages and salaries To incur day to day expenses and overhead costs such as fuel, power and office expenses etc. To meet the selling costs as packing, advertising etc. To provide credit facilities to the customers. To maintain the inventories of raw materials, work inprogress, stores and spares and finished stock.

FACTORS DETERMING THE WORKING CAPITAL REQUIRMENT:

The working capital requirements of a concern depend upon a large number of factors such as nature and size of the business, the characteristics of their operations, the length of production cycle , the rate of stock turnover and the state of economic situation. However the following are the important factors generally influencing the working capital requirements.

NATURE OR CHARACTERSTICS OF A BUSINESS:

The nature and the working capital requirement of enterprises are interlinked. While a manufacturing industry has a long cycle of operation of the working capital, the same would be short in an enterprises involve in providing services. The amount required also varies as per the nature,

an enterprises involved in production would required more working capital then a service sector enterprise.

MANAFACTURE PRODUCTION POLICY:

Each enterprises in the manufacturing sector has its own production policy, some follow the policy of uniform production even if the demand varies from time to time and other may follow the principles of demand based production in which production is based on the demand during the particular phase of time. Accordingly the working capital requirements vary for both of them.

OPERATIONS:
The requirement of working capital fluctuates for seasonal business. The working capital needs of such business may increase considerably during the busy season and decrease during the

MARKET CONDITION:
If there is a high competition in the chosen project category then one shall need to offer sops like credit, immediate delivery of goods etc for which the working capital requirement will be high. Otherwise if there is no competition or less competition in the market then the working capital requirements will be low.

AVABILITY OF RAW MATERIAL:

If raw material is readily available then one need not maintain a large stock of the same thereby reducing the working capital investment in the raw material stock . On

other hand if raw material is not readily available then a large inventory stocks need to be maintained, there by calling for substantial investment in the same.

GROWTH AND EXAPNSION:

Growth and Expansions in the volume of business result in enhancement of the working capital requirements. As business growth and expands it needs a larger amount of the working capital. Normally the needs for increased working activities. capital funds processed growth in business

PRICE LEVEL CHANGES :

Generally raising price level requires a higher investment in the working capital. With increasing prices, the same levels of current assets needs enhanced investments.

MANAFACTURING CYCLE:
The manufacturing cycle starts with the purchase of raw material and is completed with the production of finished goods. If the manufacturing cycle involves a longer period the need for working capital would be more. At time business needs to estimate the requirement of working capital in advance for proper control and management. The factors discussed above influence the quantum of working capital in the business. The assessment of the working capital requirement is made keeping this factor in view. Each constituents of the working capital retains it form for a certain period and that holding period is determined by the

factors discussed above. So for correct assessment of the working capital requirement the duration at various stages of the working capital cycle is estimated. Thereafter proper value is assigned to the respective current assets, depending on its level of completion. The basis for assigning value to each component is given below:

COMPONENTS OF WORKING CAPITAL

BASIS OF VALUATION

Stock of Raw Material Stock Of Work-in-progress Stock of Finished Goods Debtors Cash

Purchase of Raw Material At cost of Market value which is lower Cost of Production Cost of Sales or Sales value Working Expenses

Each constituent of the working capital is valued on the basis of valuation Enumerated above for the holding period estimated. The total of all such valuation becomes the total estimated working capital requirement. The assessment of the working capital should be accurate even in the case

of small and micro enterprises where business operation is not very large. We know that working capital has a very close relationship with day-to-day operations of a business. Negligence in proper assessment of the working capital, therefore, can affect the day-to-day operations severely. It may lead to cash crisis and ultimately to liquidation. An inaccurate assessment of the working capital may cause either under-assessment or overassessment of the working capital and both of them are dangerous.

PRINCIPLES POLICY:

OF

WORKING

CAPITAL

MANAGEMENT

The following are the general principles of a sound working capital management policy:

PRINCIPLES OF WORKING CAPITAL MANAGEMENT POLICY

PRINCIPLES OF RISK

PRINCIPLES OF COST OF CAPITAL

PRINCIPLE S OF EQUITY

PRINCIPLES OF MATURITY OF PAYMENTS

1. PRINCIPLE OF RISK VARAITAION (CURRENT ASSETS POLICY):

Risk here refers to the inability of a firm to meet its obligations as and when they become due for payment. Larger investment in current Assets with less dependence on short term borrowings, increase liquidity, reduces risk and thereby decreases the opportunity for gain or loss. On the other hand less investments in current assets with greater dependence on short term borrowings, reduces liquidity and increase profitability. In other words there is a definite inverse relationship between the degree of risk and profitability. In other words, there is a definite inverse relationship between the risk and profitability. A conservative management prefers to minimize risk by maintaining a higher level of current assets or working capital while a liberal management assumes greater risk by reducing working capital. However, the goal of management should be to establish a suitable tradeoff between profitability and risk.
2. PRINCIPLES OF COST OF CAPITAL:

The various source of raising working capital finance have different cost of capital and the degree of risk involved. Generally, higher and risk however the risk lower is the cost and lower the risk higher is the cost. A sound working capital management should always try to achieve a proper balance between these two.

3.PRINCIPLE OF EQUITY POSITION:

The principle is concerned with planning the total investments in current assets. According to this principle, the amount of working capital invested in each component should be adequately justified by a firms equity position. Every rupee invested in

current assets should contribute to the net worth of the firm. The level of current assets may be measured with the help of two ratios: 1. Current assets as a percentage of total assets and 2. Current assets as a percentage of total sales While deciding about the composition of current assets, the financial manager may consider the relevant industrial averages.
1.

PRINCIPLES OF MATURITY OF PAYMENT:

The principle is concerned with planning the source of finance for working capital. According to the principles, a firm should make every effort to relate maturities of payment to its flow of internally generated funds. Maturity pattern of various current obligations is an important factor in risk assumptions and risk assessments. Generally shorter the maturity schedule of current liabilities in relation to expected cash inflows, the greater the inability to meet its obligations in time.

CONSEQUENCES OF UNDER ASSESMENT OF WORKING CAPITAL:

Growth may be stunted. It may become difficult for the enterprises to undertake profitable projects due to non availability of working capital. Implementations of operating plans may brome difficult and consequently the profit goals may not be achieved. Cash crisis may emerge due to paucity of working funds.

 Optimum capacity utilization of fixed assets may not be achieved due to non availability of the working capital. The business may fail to honor its commitment in time thereby adversely affecting its creditability. This situation may lead to business closure. The business may be compelled to by raw materials on credit and sell finished goods on cash. In the process it may end up with increasing cost of purchase and reducing selling price by offering discounts both the situation would affect profitable adversely. Now availability of stocks due to non availability of funds may result in production stoppage. While underassessment of working capital has disastrous implications on business over assessments of working capital also has its own dangerous.

CONSEQUENCES OF OUR OWN ASSESMNET OF WORKING CAPITAL:

Excess of working capital may result in un necessary accumulation of inventories. It may lead to offer too liberal credit terms to buyers and very poor recovery system & cash management. It may make management complacent leading to its inefficiency. Over investment in working capital makes capital less productive and may reduce return on investment. Working Capital is very essential for success of business & therefore needs efficient management and control. Each of the

components of working capital needs proper management to optimize profit.

INVENTORY MANAGEMNT:
Inventory includes all type of stocks. For effective working capital management, inventory needs to be managed effectively. The level of inventory should be such that the total cost of ordering and holding inventory is the least. Simultaneously stock out costs should be minimized. Business therefore should fix the minimum safety stock level reorder level of ordering quantity so that the inventory costs is reduced and outs management become efficient.

RECEIVABLE MANAGEMENT:
Given a choice, every business would prefer selling its produce on cash basis. However, due to factors like trade policies, prevailing market conditions etc. Business are compelled to sells their goods on credit. In certain circumstances a business may deliberately extend credit as a strategy of increasing sales. Extending credit means creating current assets in the form of debtors or account receivables. Investment in the type of current assets needs proper and effective management as, it gives rise to costs such as : Cost of carrying receivables Cost of bad debts losses Thus the objective of any management policy pertaining to accounts receivables would be to ensure the benefits arising due to the receivables are more than the costs incurred for the receivables and the gap between benefit and costs increased resulting in increase profits. An effective control of receivables

Help a great deal in properly managing it. Each business should therefore try to find out coverage credit extends to its clients using the below given formula:

Average Credit = Total amount of receivable (Extend in days) Average credit sale per day
Each business should project expected sales and expected investments in receivable based on various factor, which influence the working capital requirement. From this it would be possible to find out the average credit days using the above given formula. A business should continuously try to monitor the credit days and see that the average. Credit offer to clients is not crossing the budgeted period otherwise the requirement of investment in the working capital would increase and as a result, activities may get squeezed. This may lead to cash crisis.

Cash Budget: Management Tool

Cash Budget is the most important tool in cash management. It is the statement showing the estimated cash inflows and cash outflows over the planning horizon. The various purposes of cash budgets are : (i) to coordinate the timings of cash needs. (ii) it pinpoints the period when there is likely to be excess cash, (iii) it assists management

in taking cash discounts on its account payables, (iv) it helps to arrange needed funds on the most favorable terms and prevents accumulation of excess funds.

Preparation of Cash Budget :

The principle aim of the cash budget, as a tool is to predict cash flows over a given period of time, and to ascertain whether at any point of time there is likely to be excess or shortage of cash. The first element of cash budget is the selection of the period of time to be covered by the budget. It is referred to as the planning horizon over which the cash flows are to be projected. There is no fixed rule. It varies form firm to firm. The period selected should be neither too long nor too short. If it is too long. It is likely that the estimates will be inaccurate. If, on the other hand, the time span is too small many important events which lie just beyond the period cannot be accounted for and the work associated with the preparation of the budget becomes excessive if the flows are expected sales and dependable, such a firm may prepare a cash budget covering of firms whose flows are uncertain, a quarterly budget, divided into monthly intervals, may be appropriate. If the flows are subjected to extreme fluctuations, even a daily budget may be called for. The idea behind subdividing the budget period into smaller intervals is to highlight the movement of cash from one sub period to another. The second element of the cash budget is the selection of the factors that have a bearing or cash flow. Items included in cash budget are only cash items, non-cash items like depreciation and

amortization are excluded. The cash budgets are broadly divided into two broad categories: (a) operating and (b) financial. The former includes cash generated by the operations of the firms and are known as operating cash flows, the later consists of financial cash flows.

Operating Cash Flow

Operating Cash Flow Items

Inflows/Cash Receipts 1. Cash Sales Outflows/ Disbursements 1.Accounts payable /

2. Collection of Accounts Payable payments Receivables 3. Disposals Assets of 2. Purchase of raw materials Fixed 3.Wages and salaries 4.Facotory Expenses 5.Administrative and selling expenses 6. Maintenance Expenses 7. Purchase of Fixed Assets Among the operating factors affecting cash flows, are the collection of accounts (inflows) and accounts payable (outflows).the terms of credit and the speed with which the customer pay would determine the lag between the creation of accounts receivable and their collection. Also, discounts and allowances for early payments, returns from customers and bad

debts affect cash inflows. Similarly in case of accounts payable relating to credit purchase, cash outflows are affected by the purchase terms.

Financial cash flows: Financial cash flows Cash Inflows/Receipts

1.Loans/borrowings 2.Sales of securities 3.Interest receives 4.Dividend received 5.Rent received 6.Refund of tax 7.Issue of new shares and securities

Cash outflows/Payments
1.income-tax/tax payment 2.Redemption of loan 3.Repurchase of shares 4. Interest paid 5. Dividend paid

Preparation of cash budget:

After the time span of the cash budget decided and the pertinent operating and financial factors have been identified, the final step is the construction of the cash budget, thus the total cash inflows, cash outflows and the net receipt or payment is worked out.

Cash management: Basic strategies

The cash budget, as a management tool, would throw light on the net cash position of the firm. After knowing the cash position, the management should workout the basic strategies to be employed to manage its cash. The broad cash management strategies are essentially related to the cash turnover process. That is the cash cycle together with the cash turnover. The cash cycle refers to the process by which has cash is used to purchase materials from which are produced goods, which are then sold to customers, who later pay the bills. The firm receives cash from customers and the cycle repeats itself. The cash turnover means the number of times the cash is used during each year. The cash cycle involves several steps along the way as fund flows from the firms accounts.

Receivables management: A)Objectives

The term receivables are defined as debt owed to the firm by the customers arising from sale of goods or services in the ordinary course of business. When a firm makes an ordinary sale of goods services and does not receive payment, the firm grants trade credit and creates accounts receivables which could be collected in the future. Receivables management is also called trade credit management. Thus accounts receivable represent an extension of credit to customers, allowing them a reasonable period of time in which to pay for the goods received. The sale of goods on credit is an essential part the modern competitive economic systems. In fact, the credit sale and, therefore, the receivables, are treated as a marketing tool to aid the sale of goods. As a marketing tool, they are intended to

promote sales and obligations through a financial instrument. Management should weigh the benefits as well as cost to determine the goal of receivables management. The objective of receivable management is to sales and profiles until that point is reached where the return on investment in further funding receivables is less than the cost of funds raised to finance that additional credit. The specific costs and benefits which are relevant to the determination of the objectives of receivables management are examined below.
a) Costs: the major categories of costs associated with the

extension of credit and accounts receivable are

i.

Collection cost:
collection costs are administrative costs incurred in collecting the receivables from the customers to whom credit sales have been made.

ii.

Capital cost:
the increased level of accounts receivable is an investment in assets. They have to be financed thereby involves a cost. It includes the additional funds requires to meet its own obligation while waiting for payment from its customer and also the cost on the use of additional capital to support credits sales, which alternatively could be profitably employed elsewhere.

iii.

Delinquency cost:
this cost arises out of the failure of the customers to

meet obligations where payments on credit sales become due after the expiry of the credit period. Such costs are called delinquency costs.

iv.

Default costs:

finally, the firm may not be able to recover the over dues because of the inability of the customers. Such debts are treated as bad debts and have to be written off as they cannot be realized.

Inventory management:
A)

Objectives :
The basic responsibility of the financial manager is to

make sure the firms cash flows are managed efficiently. Efficient management of inventory should ultimately result in the maximization of the owners wealth. As we know that in order to minimize cash requirements, inventory should be turned over as quickly as possible, avoiding stock-outs that might result in closing down the production line or lead to a loss of sales. Is implies that while the management should try to pursue the financial objective of turning inventory as quickly as possible, it should at the same time ensure sufficient inventories to satisfy

production and sales demands. The objective of inventory management consists of two counter balancing parts. (i) (ii) To minimize investment in inventory, and Meet a demand for the product by efficiently

organizing the production and sales operations. These two conflicting objectives of inventory management can also be expressed in terms of cost and benefit associated minimize with inventory. in That the firm should that investment inventory implies

maintaining inventory involves costs, such that the smaller the inventory, the lower is the cost to the firm. But inventories also provide benefits to the extent that they facilitate the smooth functioning of the firm: the larger the inventory, the better it is from the viewpoint. Obviously, the financial managers should aim at a level of inventory which will reconcile these conflicting elements. That is to say, an optimum level of inventory should be determined on the basis of the trade-off between costs and befits associated with the levels of inventory.
(B) Techniques:

There are many sophisticated mathematical techniques available to handle inventory management problems. We will discuss some of the simple production oriented methods of inventory control to indicate a broad framework for managing inventions efficiently in conformity with the goal of wealth

maximization. The major problem- areas that comprise the heart of inventory control are

(i)Classification problem: A B C system

The A B C system is a widely used classification techniques to classify different types of inventories and to determine the type and degree of control required for each. This technique is based on the assumption that a firm should not exercise the same degree of control on all items of inventory. It should rather keep a more rigorous control on items that are (a) the most costly, and/or b) the slowest turning, while items that are less expensive should be given less control effort. On the basis of the cost involved, the various inventory items are classified into three classes A, Band C. The items included in group A involve largest investment. Inventory control for such items must be most rigorous and intensive and most sophisticated inventory control techniques should be applied to these items. The C group item consists of items of inventory which involve relatively small investments although the number of items is fairly large. These items deserve minimum attention. The B group stands midway. It deserves less attention than A but more than C. it can be controlled by less sophisticated technique.

(ii)

Order quantity problem: economic quantity (EAQ) model:

After determining the type of controls for each categories of items (A B and C), question arises regarding the appropriate quantity to be purchased in each lot to replenish the stock. Busying a large quantity implies a higher average inventory. Level which will assure (a) smooth production/sales operations, and (b) lower ordering or setup costs? But it will involve higher carrying costs. On the other hand, if the order quantity is small then the carrying cost is reduced but it will increase the ordering costs. On the basis of trade-off between. The both the optimum level of order to be places should be determined. The optimum level of inventory is called as economic order quantity (EOQ). The economic order quantity can be defined as that level of inventory order that minimizes that total cost associated with inventory management. Assumptions: assumptions: The firm knows with certainty the annual consumption of a particular item of inventory. The rate at which the firm uses inventory is steady over time. The order placed to replenish inventory stocks are received at exactly that point in time when inventories reach zero. There are two distinguishable costs associated EOQ model is based on following

inventories: cost of ordering and cost of carrying Cost of order is constant regardless of the size of the order.

The cost of carrying is fixed percentage of the average value of inventory.

EOQ formula:

EOQ = I 2FU PC

Where U=Annual sales F=Fixed cost per order P=Purchase price per unit C=Carrying cost

NET WORKING CAPITAL FOR THE YEAR -2006

Current assets
Inventories Sun debtors Cash & bank balances Other current assets Loans & advances Total current assets

Amount (in Rs.)

81,304,949 5,412,868 52,890,308 12,899,241 125,941,612 278,448,978

Current liabilities
Current liabilities Provisions Total current liabilities Net working capital =(CA-CL)

Amount (in RS.)

80,766,830 46,683,501 127,450,331 150,998,647

NET WORKING CAPITAL FOR THE YEAR -2007

Current assets
inventories Sun debtors Cash & bank balances Other current assets Loans & advances Total current assets

Amount (in Rs.)

109,607,481 3,583,565 27,554,332 7,840,780 127,165,533 275,751,691

Current liabilities
Current liabilities provisions Total current liabilities Net working capital =(CA-CL)

Amount (in RS.)

105,861,282 13,021,801 118,883,083 156,868,608

NET WORKING CAPITAL FOR THE YEAR -2008

Current assets
inventories Sun debtors Cash & bank balances Other current assets Loans & advances Total current assets

Amount (in Rs.)

127,137,185 6,006,361 17,416,648 9,646,886 97,522,490 257,730,260

Current liabilities
Current liabilities Provisions Total current liabilities Net working capital =(CA-CL)

Amount (in RS.)

101,042,818 46,858,965 417,901,783 109,828,477

NET WORKING CAPITAL FOR THE YEAR -2009

Current assets
Inventories Sun debtors Cash & bank balances Other current assets Loans & advances Total current assets

Amount (in Rs.)

126,721,943 4,383,347 19,657,285 8,756,703 104,488,910 264,008,188

Current liabilities
Current liabilities Provisions Total current liabilities Net working capital =(CA-CL)

Amount (in RS.)

117,933,092 34,414,399 152,347,491 111,660,697

NET WORKING CAPITAL FOR THE YEAR -2010

Current assets
Inventories Sun debtors Cash & bank balances Other current assets Loans & advances Total current assets

Amount (in Rs.)

169,365,999 2,861,203 37,265,679 9,236,051 59,421,138 278,150,070

Current liabilities
Current liabilities Provisions Total current liabilities Net working capital =(CA-CL)

Amount (in RS.)

208,861,340 46,021,195 254,882,535 23,267,535

NET WORKING CAPITAL DURING 2005-2006

Current assets Inventories Sun debtors

2005

2006

Increase (Rs) 2,460,088

100,915,719 81,304,949 2,952,780 5,412,868 52,890,308 12,899,241 2,957,919

Decrease (Rs) 19,610,770

Cash & bank 58,890,308 balance Other current assets 9,941,322 Loans & advance TOTAL (A) Current liabilities Current liabilities Provisions TOTAL (B) WORKING CAPITAL (A-B) increase total 91,323,047 42,017,818 81,049,655

5,390,763

125,941,612 44,891,957

253,140,547 278,448,978

80,768,830 46,683,501

10,556,217 4,665,683

133,340,865 127,450,331 119,799,682 150,998,647 31,198,965 150,998,647 150,998,647

NET WORKING CAPITAL DURING 2006-2007

Current assets Inventories Sun debtors

2006 81,304,949 5,412,868

2007

Increase (Rs) 109,607,481 28,302,532 3,583,565 27,554,332 17,840,780

Decrease (Rs) 1,829,303 25,335,976 5,058,461

Cash & bank 52,890,308 balance Other current assets 12,899,241 Loans & advance TOTAL (A) Current liabilities Current liabilities Provisions TOTAL (B) WORKING CAPITAL (A-B) increase Total 80,768,830 46,683,501

125,941,612 127,165,533 1,223,921 278,448,978 275,751,691

105,861,282 13,021,801 33,661,700

25,094,452

127,450,331 118,883,083 150,998,647 156,868,608 5,869,961 156,868,608 156,868,608

NET WORKING CAPITAL DURING 2007-2008

Current assets Inventories Sun debtors

2007

Increase (Rs) 109,607,481 127,137,875 17,530,394 3,583,565 6,006,361 17,416,648 9,646,886 1,806,106 2,422,796

2008

Decrease (Rs)

Cash & bank 27,554,332 balance Other current assets 7,840,780 Loans & advance TOTAL (A) Current liabilities Current liabilities Provisions TOTAL (B) WORKING CAPITAL (A-B) decrease Total

10,137,684

127,165,533 97,522,490 275,751,691 257,730,260

29,643,043

105,861,282 101,042,818 4,818,464 13,021,801 46,858,965 33,837,164

118,883,608 147,901,783 156,868,608 109,828,479 47,040,131 156,868,608 156,868,608

NET WORKING CAPITAL DURING 2008-2009

Current assets Inventories Sun debtors

2008

2009

Increase (Rs)

127,137,875 126,721,943 6,006,361 4,383,347 19,657,285 8,756,703 104,488,910 10,210,232 2,240,637

Decrease (Rs) 4,15,932 1,623,014

Cash & bank 17,416,648 balance Other current assets 9,646,886 Loans & advance TOTAL (A) Current liabilities Current liabilities Provisions TOTAL (B) WORKING CAPITAL (A-B) increase Total 94,278,678

8,90,183

254,486,448 264,008,188

101,042,818 117,933,092 46,858,965 34,414,399 12,444,566

16,890,274

147,901,783 152,347,491 106,584,665 111,660,697 5,076,032 111,660,697 111,660,697

NET WORKING CAPITAL DURING 2009-2010

Current assets Inventories Sun debtors

2009

Increase (Rs) 126,721,943 169,365,999 42,644,056 4,383,347 2,861,203 37,265,679 9,236,051 59,421,138 17,608,394 4,79,348

2010

Decrease (Rs) 1,522,144

Cash & bank 19,657,285 balance Other current assets 8,756,703 Loans & advance TOTAL (A) Current liabilities Current liabilities Provisions TOTAL (B) WORKING CAPITAL (A-B) decrease Total 94,469,534

35,048,396

253,988,812 278,150,070

117,933,092 208,861,340 24,395,023 46,021,195 21,626,172

90,928,248

142,328,115 254,882,535 111,660,697 23,267,535 88,393,162 111,660,697 111,660,697

COMMON SIZE DURING 2005-2006

Particulars Current assets Fixed assets Capital work in progress (gross block-depreciation) Total investments

31st march 2006 150,998,647 277,415,998 12,100,635 121.676,324

Total assets

562,191,604

Fixed assets: Tangible:

Free hold land Buildings Plant and machinery Furniture & office equipment Vehicles

COMMON SIZE DURING 2006-2007

Non-tangible: Soft ware license Feed & implementation cost.

Particulars Current assets Fixed assets Capital work in progress (gross block-depreciation) Total investments

31st march 2007 156,868,608 296,370,121 3,570,863 112,220,878

Total assets

569,030,470

Fixed assets: Tangible:

Free hold land Buildings Plant and machinery Furniture & office equipment Vehicles

Non-tangible: Soft ware license

Feed & implementation cost.

COMMON SIZE DURING 2007-2008

Particulars Current assets Fixed assets Capital work in progress (gross block-depreciation) Total investments

31st march 2008 109,828,427 338,290,130 21,590,139 137,236,385

Total assets

606,945,131

Fixed assets: Tangible:

Free hold land Buildings Plant and machinery Furniture & office equipment Vehicles

Non-tangible: Soft ware license Feed & implementation cost.

COMMON SIZE DURING 2008-2009

Particulars Current assets Fixed assets Capital work in progress (gross block-depreciation) Total investments

31st march 2009 111,660,697 351,778,176 23,302,070 115,418,366

Total assets

602,159,309

Fixed assets: Tangible:

Free hold land Buildings Plant and machinery Furniture & office equipment Vehicles

COMMON SIZE DURING 2009-2010

Non-tangible: Soft ware license Feed & implementation cost.

Particulars Current assets Fixed assets Capital work in progress (gross block-depreciation) Total investments

31st march 2010 23,267,535 408,395,531 30,463,124 230,992,086

Total assets

693,118,276

Fixed assets: Tangible:

Free hold land Buildings Plant and machinery Furniture & office equipment Vehicles

Non-tangible: Soft ware license Feed & implementation cost

CLOSING STOCK FOR THE YEAR 2005-06

PARTICULARS OF CLOSING STOCK A) manufacturing items a)work in progress Hatching eggs Commercial broiler b) by products Commercial eggs B) trading goods culls Commercial eggs vaccines Total(rupees) No.s No.s Doses 2,437 10,000 2,696,900 58,303 2,800 599,679 11,480,266 No.s 290,029 170,206 No.s No.s 3,133,522 50,262 9,782,670 866,608 No.s quantity rupees

OPENING STOCK FOR THE YEAR 200506

PARTICULARS OF OPENING STOCK A) manufacturing items a)work in progress Hatching eggs Commercial broiler b) by products Commercial eggs B) trading goods culls Commercial eggs vaccines Total(rupees)

No.s

quantity

rupees

No.s No.s

6,629,157 62,803

24,657,712 1,612,408

No.s

24,896

8,530

No.s No.s Doses

636 325 0

32,120 315 0 26,311,085

CLOSING STOCK FOR THE YEAR 2006-07

PARTICULARS OF CLOSING STOCK A) manufacturing items a)work in progress Hatching eggs Commercial broiler b) by products Commercial eggs B) trading goods culls Commercial eggs vaccines Total(rupees)

No.s

quantity

rupees

No.s No.s

6,462,281 77,045

30,868,546 2,271,661

No.s

18,920

8,112

No.s No.s Doses

466 762 2,773,500

30,811 1,243 618,338 33,778,711

CLOSING STOCK FOR THE YEAR 2007-08

PARTICULARS OF CLOSING STOCK A) manufacturing items a)work in progress Hatching eggs Commercial broiler b) by products Commercial eggs B) trading goods culls Commercial eggs vaccines Total(rupees)

No.s

quantity

rupees

No.s No.s

4,404,079 68,483

22,498,788 2,790,860

No.s

35,774

13,100

No.s No.s Doses

1,235 35,774 1,273,500

104,487 13,100 392,136 25,799,371

CLOSING STOCK FOR THE YEAR 2008-09

PARTICULARS OF CLOSING STOCK A) manufacturing items a)work in progress Hatching eggs Commercial broiler b) by products Commercial eggs B) trading goods culls Commercial eggs vaccines Total(rupees)

No.s

quantity

rupees

No.s No.s

3,857,469 0

23,845,053 0

No.s

24,797

10,160

No.s No.s Doses

139 24,797 1,479,500

13,772 10,160 228,646 24,097,631

CLOSING STOCK FOR THE YEAR 2009-10

PARTICULARS OF CLOSING STOCK A) manufacturing items a)work in progress Hatching eggs Commercial broiler b) by products Commercial eggs B) trading goods culls Commercial eggs vaccines Total(rupees)

No.s

quantity

Rupees

No.s No.s

6,236,488 0

41,269,022 0

No.s

20,820

4,498

No.s No.s Doses

395 20,820 36,000

44,747 4,498 10,858 41,329,125

RATIO ANALYSIS

CURRENT RATIO

YEAR

CURRENT ASSETS CURRENT LIABILITIES 278,448,978 127,450,331

RATIO

2005-06

2.18

2006-07

275,751,691

118,883,083

2.32

2007-08

257,730,260

147,901783

1.74

2008-09

264,008,188

152,347,491

1.73

2009-10

278,150,070

254,882,535

1.09

RATIO= CURRENT ASSETS CURRENT LIABILITIES

GRAPH:

CURRENT ASSETS TO FIXED ASSETES RATIO

YEAR 2005-06

CURRENT ASSETS 278,448,978

FIXED ASSETS 277,415,998

RATIO 1.00

2006-07 2007-08 2008-09

275,751,691 257,730,260 264,008,188

296,415,998 338,290,130 351,778,176

0.93 0.76 0.75

2009-10

278,150,070

408,395,531

0.68

RATIO=

CURRENT ASSETS

FIXED ASSETS

GRAPH:

QUICK RATIO

YEAR

QUICK ASSETS

CURRENT LIABILITIES

RATIO

2005-06 2006-07

266,968,712 241,952,980

127,450,331 118,883,083

2.09 2.04

2007-08 2008-09 2009-10

231,930,889 239,910,557 236,820,945

147,901,783 152,347,491 254,882,535

1.57 1.57 0.93

QUICK RATIO = CURRENT ASSETS- CLOSING STOCK

GRAPH:

CASH MANAGEMENT

YEAR

CASH

CURRENT ASSETS

PERCENTAGE

2005-06 2006-07

52,890,308 27,554,332

278,448,978 275,751,691

18.9 9.9

2007-08 2008-09 2009-10

17,416,648 19,657,285 37,265,679

257,730,260 264,008,188 278,150,070

6.76 7.45 13.4

PERCENTAGE = CASH *100 CURRENT ASSETS

GRAPH:

PERCENTAGE OF CASH TO CURRENT LIABILITIES

YEAR CASH CURRENT LIABILITIES PERCENT

2005-06 2006-07

52,890,308 27,554,332

127,450,331 118,883,083

41 23

2007-08 2008-09 2009-10

17,416,648 19,657,285 37,265,679

147,901,783 152,347,491 254,882,535

12 13 15

PERCENTAGE = CASH *100 CURRENT LIABILITIES

GRAPH:

THE COMPANYS FINANCIAL PERFORMANCE IN THE LAST FIVE YEARS

(Rs. In lakhs) particulars Paid up share (face value of Rs10/ per

share)

2005-06 2006-07 2007-08 2008-09 2009-10 485.35 485.35 4891.93 5377.27 6405.24 428.06 6833.31 245.31 0 186.07 106.60 175.41 25 110.92 3.62 485.35 5259.58. 5744.93 8427.00 429.31 8856.31 234.80 3.12 704.22 186.52 517.70 25 118.50 10.68 485.35 5255.79 5741.14 8383.38 146.91 8530.29 254.21 0 153.77 61.96 91.81 20 120.77 1.89 485.35 6212.22 6697.57 12336.74 160.60 12497.34 331.29 1.12 1877.69 640.56 1237.13 25 143.99 25.52

Reserves and surplus 4815.28 Net worth Operating income Other income Total income Depreciation Interest P.B.T Provision for tax P.A.T Dividend (%) Book value (in Rs ) EPS(in Rs) 5300.65 6945.45 450.64 7396.07 170.53 61.03 736.78 213.30 523.48 25 109.34 10.80

CONCLUSIONS

FINDINGS
Working capital is the sum of the money invested in short term assets and used in the daily operations of a firm. Current assets are mainly composed of inventory, debtors and cash.

The concepts of working capital are gross and net. The gross working capital refers to the total amount of working capital; whereas net working capital is the difference between current assets and current liabilities. During the period under study, the unit was operating with relatively large proportions of current assets investments to total assets and this trend was on decreasing path.

The unit has financed 100 percent of its current assets requirements through advances from cash. The share of bank borrowings in financing the inventory in spite of retaining nominal profits. The study of working capital composition has revealed that inventory formed a major portion of current assets, while cash and bank balances accounted for minor portion. The reasons for high proportion of inventory are the nature of long term project and accumulation of inventory resulting in lower rates of inventory turnover.

The working turnover ratio tells us the efficiency of its usage. The efficiency of working capital usage has marginally improved in the SHL during the period under study. The current liabilities are increasing from 2007 to 2010.

SUGGESTIONS
1. Working capital turnover into ratio decreasing during the time period 2005-2006 to 2009-2010 so the company has to increasing the current assets. 2. Management information system relating to financial may be further refined by correlating variances to the assets on product which is turn help in decision making. 3. Month to month production working capital levels should be shown. 4.It is suggested that ratio analysis should be attempted based on the average of inventory & other components of working capital rather than the year ending balance sheet figures. 5. Control on current assets so that further working capital may be increasing.