1A STUDY ON WORKING CAPITAL MANAGEMENT IN KSE LTD, IRINJALAKUDA PROJECT REPORT Submitted by JITHIN C.U Register No: 098001608020 In partial fulfilment for the award of the degree Of MASTER OF BUSINESS ADMINISTRATION MAHENDRA ENGINEERING COLLEGE DEPARTMENT OF MANAGEMENT STUDIES NAMAKKAL – 637 503 MAY-2011 MAHENDRA ENGINEERING COLLEGE 2 DEPARTMENT OF MANAGEMENT STUDIES PROJECT WORK MAY-2011 This is to certify that the project entitled A STUDY ON WORKING CAPITAL MANAGEMENT IN KSE LTD, IRINJALAKUDA JITHIN C.U Register No: 098001608020 of MBA during the year 2010-2011 Project guide S.P. SREEKALA Submitted for the project viva-voce examination held on-----------------------------Internal examiner ------------------External examiner Head of the department 3 Com. JITHIN C..Phil. M. M. (Ph. IRINJALAKUDA being submitted in partial fulfillment for the award of MASTER OF BUSINESS ADMINISTRATION is the original work carried out by me. It has not formed the part of any other project work submitted for award of any degree or diploma.B.D).P...4 DECLARATION I affirm that the project work titled A STUDY ON WORKING CAPITAL MANAGEMENT IN KSE LTD.. .A.U Register No: 098001608020 I certify that the declaration made above by the candidate is true S. either in this or any other University.SREEKALA M. KSE LTD.D (Solar Energy).M.O.. I have great pleasure in extending my sincere gratitude to my beloved guide Mrs. IRINJALAKUDA who kindly provided their helping hand for doing the project work. I take immense pleasure to thank Mr. Namakkal Dt . M.E.D.. M. JITHIN C. SAMSON RAVINDRAN.D).E. Department of Management Studies. Lecturer Department of Management Studies. R ARIVALAGAN. SREEKALA. M. M.5 ACKNOWLEDGEMENT I wish to express my sincere thanks to the Management. S. Irinjalakuda.I. M com.U .. for his valuable guidance and for the pain and strains taken in making this project report as a grand success. for providing me the needed facilities to do my project report in working capital management in KSE Ltd. B. .(India) M.Phil H..ANIL.D (Bio-Engg).I. I express my thanks to Mr.A.A..E. Ph.S.S.B. (Ph. Mahendra Engineering College. Finance Manager. for his encouragement given to me in carrying on the project report.. Ph.E. for his valuable guidance during each stage of project report. F.B.Com. MBA. Mahendra Engineering College.D in charge.. I remember with love the blessings and inspiration given by my parents.T.. I express my sincere thanks to our Principal Dr. M. R. Mahendirapuri.. C. family members and friends for the successful completion of the work.. M. IRINJALAKUDA and other staff members at KSE LTD.Phil.P.Mahendra Engineering College. 1 SOURCE 7 REFERENCE PARTICULARS PAGE NO.2 COMPANY PROFILE 2 DESIGN OF STUDY 2. LIST OF TABLES LIST OF CHARTS 1 INTRODUCTION 1. SUGGESTIONS 4.1 INDUSTRY PROFILE 1.1 OBJECTIVES OF THE STUDY 2.3 LIMITATIONS OF THE STUDY 2.6 CONTENTS CHAPTER NO.5 REVIEW OF LITERATURE 2.2 SCOPE OF THE STUDY 2.1 CONCLUSION 6 APPENDICES 6.6 RESEARCH METHODOLOGY 3 4 ANALYSIS AND INTERPRETATION FINDINGS.2 SUGGESTIONS 5 CONCLUSION & FUTURE ENHANCEMENT 5.4 STATEMENT OF THE PROBLEM 2.1 FINDINGS 4. 8 9 10 13 17 29 30 30 31 32 33 35 36 69 69 70 71 71 72 72 72 ABSTRACT . The study was mainly based on the annual reports of KSE Ltd. comparative statement.The main objective of the study is to find out the soundness. IRINJALAKUDA”. liquidity and profitability of the company. The study is formulated by the research design for analyzing the profitability. magazines. Secondary data is collected from journals. The statistical tools for the study are common size statement.7 The project is “A STUDY ON WORKING CAPITAL MANAGEMENT WITH SPECIAL REFERENCE TO KSE LTD. LIST OF TABLES TABLE Particulars PAGE . soundness and liquidity of the company. trend analysis and ratio analysis. reports and books. The research design used for this study is analytical research design. Graphs are also used for the diagrammatic representation of the interpretation. 11 COMPARATIVE STATEMENT FOR THE YEAR 2008-09 TO 2009-10 3.8 No 3.1 CHART SHOWING CURRENT RATIO No 40 PAGE .8 TABLE SHOWING CURRENT RATIO TABLE SHOWING LIQUIDITY RATIO CREDITORS TURN OVER RATIO AVERAGE PAYMENT PERIOD STOCK TURN OVER RATIO WORKING CAPITAL TURN OVER RATIO STATEMENT OF WORKING CAPITAL COMPARATIVE STATEMENT FOR THE YEAR 2005-06 TO 2006-07 3.3 3.6 3.12 3.10 COMPARATIVE STATEMENT FOR THE YEAR 2007-08 TO 2008-09 3.2 3.13 INVENTORY CONVERSION PERIODS WORKING CAPIATAL TREND No 38 41 43 47 48 51 53 54 56 58 60 64 66 LIST OF CHARTS TABLE Particulars No 3.7 3.5 3.9 COMPARATIVE STATEMENT FOR THE YEAR 2006-07 TO 2007-08 3.1 3.4 3. 4 3.9 3.5 CHART SHOWING LIQUIDITY RATIO CREDITORS TURN OVER RATIO AVERAGE PAYMENT PERIOD TREND CHART 43 46 48 68 1. INTRODUCTION “Working capital means the part of the total assets of the business that change from one form to another form in the ordinary course of business operations. no transaction costs.” In a perfect world. there would be no necessity for current assets and liabilities because there would be no uncertainty.2 3. information search .3 3. There are spreads between the borrowings and lending rates for investments and financings of equal risks.10 costs. However the world we live is not perfect. Similarly each organization is faced with its own limits on the production capacity and technologies it can employ there are fixed as well as variable costs associated with production goods. Capital. Borrowing and lending rates shall be same. the term Working capital management” (net) represents the excess of current assets over current liabilities. scheduling costs. there would be no advantage for investing in short term assets. In other words. This may necessitate the holding of inventory. an organization may be faced with an uncertainty regarding availability of sufficient quantity of crucial imputes in future at reasonable price. labour. . the markets in which real firm operated are not perfectly competitive. and product market shall be perfectly competitive and would reflect all available information. current assets. or production and technology constraints. In corporate financial management.. These real world circumstances introduce problem’s which require the necessity of maintaining working capital. quality and availability of own products and those of suppliers. It is characterized by considerable amount of uncertainty regarding the demand. again a short term capital asset. For example. thus in such an environment. Similarly an organization may be faced with an uncertainty regarding the level of its future cash flows and insufficient amount of cash may incur substantial costs. Information is costly to obtain and is not equally distributed. market price. There are transaction costs for purchasing or selling goods or securities. This may necessitate the holding of reserve of short term marketable securities. The unit cost of production would not vary with the quantity produced. payment of wages.11 Working capital may be regarded as the life blood of business. Working capital is of major importance to internal and external analysis because of its close relationship with the current day-to-day operations of a business. buildings & etc Short term funds are required for the purchase of raw materials. and other day-to-day expenses. The primary objective of working capital management is to ensure that sufficient cash is available to • • • • • Meet day to day cash flow needs. Every business needs funds for two purposes Long term funds are required to create production facilities through purchase of fixed assets such as plants. machineries. It is otherwise known as revolving or circulating capital Working Capital = Current Asset – Current Liability. Concept of working capital • Gross Working Capital = Total of Current Asset • Net Working Capital = Excess of Current Asset over Current Liability . Pay government taxation and provider of capital – dividends and Ensure the long term survival of the business entity. Pay wages and salaries when they fall due Pay creditors to ensure continued supplies of goods and services. lands. 1 INDUSTRY PROFILE 1.1.1 Solvent Extraction Industry The solvent industry has achieved a phenomenal progress and at present there are 520 units having overall oil cake or oil seed processing capacity of more than 9.12 1.9 million/year. The solvent extraction plays important role in the oil economy. It had to struggle for more than 20 years to establish itself. Solvent extraction in India was started in 1945. . P. now it has reduced to 12%.2 Crises of coconut industries in Kerala in 1960’s In the 1960’s there was a crisis in coconut oil extraction industry in Kerala. Earlier 20% of the oil was retained in the coconut cake. 1. When oil industry in other parts of the country was thriving in Kerala it was struggling. S.3 Coconut oil miller’s co-operative society Lion share of copra went to mills in Bombay and they were able to generate good profits. To overcome the situation a co-operative society formed by name Coconut Oil Miller’s Co-operative Society and it was decided that this society would act as an agent of state trading corporation for distribution of copra. Then they found out that they were using expeller mills for .1. At that time Dr.1. recommended of establishment of 3 solvent plants in Kerala and it was also proposed that one should be located in Thrissur itself. Although Kerala produces 80% of copra produced in the country large part of it was sold to other state as copra itself and they were earning good profit when mills in Kerala wasn’t able to get enough copra for their daily needs. By using this new method they were able to extract more oil from the coconut cake. After conversion from wooden ghani’s to rotaries the cost of the production had increased considerably. By seeing the performance of the Bombay group an investigation department was assigned to investigate it.13 1. So they understood the need for modernization of their mills. Lokanathan committee set up to study the feasibility of starting new industries in Kerala. the cattle is feed only with de-oiled cakes and according to the dairy experts.e.14 extracting oil and was able to reduce the oil content up to 6%. Commands the recourses. There are only few cattle feed units in the country especially in Kerala.4 Cattle feed Industry From the beginning KSE Ltd marketed the buy product obtained from its solvent extraction division in the brand name of Jersey Copra Cake.1. which is the residue left after the extraction of oil from copra which is mainly used as cattle feed. Thus in 1996. expertise and infrastructure of manufacture a range of livestock feed in high volumes. The last three decades have been KSE emerging as the leader in ready mixed cattle feed in the country. The cattle industry of the state has been utilizing the indigenous raw material i. In foreign countries. Today KSE Ltd. the milk and fact contend of milk depends solely on the protein contend of the feed. coconut cake. Most of the progress in the cattle feed sector has come about in the past 30 years only. All these factors stress the importance of having a few cattle field industry in the state. KSE Ltd. setting up the new plan fir manufacturing ready mixed cattle feed. Coconut cake contains 4-5% oil is generally used for industrial purpose and deoiled cakes is used to make mixed cattle feed. In Kerala the rotary cake was used as a cattle feed and actually this excessive oil on cakes reduced the keeping quality of the cake and also upset the digestive system of the cattle e. driven by a commitment to high standards of quality . The industries in Kerala later began to follow it. Entered the cattle field industry. 1. 1. Till 1970. pasteurized butter etc. milk drinks. ice creams.15 1. and semi Govt. The bulk of growth in the milk output is therefore accounted for by the unorganized section consisting of millions of small milk producers. whole milk powder. and infant milk foods of western origin are now being produced in India. feeding their cattle largely on crop residues. The main objective of this programme is to . using sasses of exotic breeds and launch of operation flood. which.5 Dairy Industry Most of the progress in the dairy sector has come about in the past 25 years only. A variety of cheeses. capitalizing on the availability of cheap surplus milk to produce various kinds of dairy products for the domestic and international market. the country’s milk production increased merely by 1% a year. Many of these producers have organized themselves into co-operative under the umbrella if the National Dairy Development Board (NDDB) which had been running a highly successful animal husbandry promotion programme named operation flood. were very common in this country till a few decades ago are now available in abundance in department stores of big and small cities. The private sector has now entered into this field in a big way. bodies to promote animal husbandry as a means of generating income for the landless poor. Several dairy products like skimmed milk powder. the production started rising rapidly from the mid 19 The transformation of India from a milk deficit to a milk surplus country is essentially the result of an intensive campaign launch by the Govt. But after the intensification of cattle improvement programme through artificial insemination. 1. their unawareness of farmers about the proper feeding methods of cows leads to cow milk productivity. the importance of the cattle feed industry has been increased in India. Cows and bullocks are regarded as the foundation of agriculture in India. Due to these reasons. Cattle supplies the motive power for almost all agriculture operations such as ploughing.16 build a viable and self sustaining national dairy industry capable of meeting the domestic demand for fresh liquid milk and milk products and competing in the international area. . lifting water from wells and the transport of produce to the markets. They provide most of the manure used by farmers in India and often enable them to earn something during this spare time by carting for hire. Majorities of Indian cattle are seriously underfed particularly cows in rural areas.2 COMPANY PROFILE Cattle play a vital role in the economy of India. KSE is in the oil extraction industry for the past 32 years. It was registered as a public limited company on 25th September.2. It is marketing annually about 2. a company having annual turn of Rs.2. 1. 250 crore.2 HISTORY In 1963. This is the sixth time in arrow that the company has been selected for the most coveted award. with a capital base of Rs. The company was later renamed as KSE Limited and listed in the stock exchanges of Mumbai. KSE. 1963. 1963. But inefficient crushing methods and competition from the modernized oil mills elsewhere shattered coconut oil industry in Kerala in early 1960’s. 1. KSE. It was as a part of the package program to revive coconut oil industry in the state of Kerala that oil millers of Irinjalakuda and surrounding places formed themselves into a corporate body to start a solvent extraction plant.17 Kerala Solvent Extractions was registered as a public limited company on 25 th September.1 ORIGIN Copra crushing has been a native industry of Kerala. Its first production . Chennai and Kochi. The company has secured the National Productivity Award for the year 2001-2002 for being first in terms of production efficiency in the animal feed sector. KSE Ltd was established according to Indian Companies Act 1956.2 lakh tones of superior quality cattle feed. 36 crore embarks on an expansion to double its solvent extraction capacity and add a most modern eco-friendly vegetable oil refining plant. is the largest manufacturer of cattle feed. 1 crore in 1995. 6 crore was fully financed out of internal sources of company. The cattle feed capacity was subsequently increased to 180 tones per day. .18 was started in 1972 with a capacity of 40 tones per day. By 1992 the capacity of solvent extraction plant was further increased to 100 tones per day. This plant has a basic installed capacity to go up to 240 tonnes per day. In 1987. Dindigul district of Tamil Nadu in 1988 and 1989 respectively. the plant capacity was increased to 180 tones over day. The plant at Irinjalakuda and Vedagiri are fully automatic and key manufacturing operations are controlled by microprocessors. Company put up a vegetable oil refining plant at Irinjalakuda at a cost of Rs. In 1983. The third cattle feed plant of the company started operation at Vedagiri in Kottayam district of Kerala in 1995. This project was also fully financed from internal accruals. The company is reaming solvent extracted coconut oil and expeller sunflower oil in the refinery plant. This plant is now working on three shifts producing around 150 tonnes per day. In 1980 the capacity of plant was raised to 60 tones per day. Oil millers of Thrissur are the promoters of the company. It was registered in 1956 and incorporated as a public limited company in 1963 as per Indian Companies Act. The company’s second production unit with a capacity of 150 tones per day solvent extraction commenced operation at Swaminathapuram. a fully automatic cattle feed plant was added with a capacity of 120 tones per day capacity. Vedagiri project costing around Rs. D. Milk. MIS. KSE went on to upgrade its EDP set up further. (Industrial Finance Corporation of India).C. The company started production in1972 with a solvent extraction capacity of 40 MTS per day. (Kerala State Industrial Development Corporation) by subscribing to it’s twenty five percent equity capital and I. In the early stages. de-oiled cake (JERSEY).PPC. have about 8 servers and about 50 Nodes. Being custom made for KSE this ERP software. Software Pvt.S. Chennai. Cattle feed is the main product of the company. with SQL RDBMS front end on Visual basic and Windows NT OS .I. the company faced financial difficulties. A custom made ERP soft ware was developed for its units and head office through M/s R. The head office at irinjalakuda has two servers and 40 Nodes running the application. selflessly had integrated all function of the organization viz FA. Ltd. but was assisted by K.Mumbai.F.C. share accounting etc. Cochin.R. De-oiled cake is marketed under the brand name “JERSEY”. The other products are oil-cake.I. Their plant at . is well accepted in the market. KSE had computerized its operations way back. On1976 the company is modernized to cattle feed industry with a capacity of 50 tons per day. Their Ice cream marketed under the brand name “Vesta”. Other units. The company is listed in three stock exchanges. Cochin and online computerization was fully implemented at all its plants. Ice cream. etc. billing payroll ..19 Kerala Solvent Extraction Limited was registered as a public limited company on 25th September 1963. The company was later renamed as KSE Limited. In the year 1999. in all. inventory. KSE Limited is a product oriented company. Now they are trying to expand their milk products. the first three processes are out of use. . The company has made 2 bonus issues and one right issue. Projects for this purpose are on consideration. Irinjalakkuda unit of the company is mainly concentrated on solvent extraction process. Now the company is concentrated on producing more milk products. homogenization. pellet cooling and aspiring system. 10. has a computerized control room for monitoring.2. 100 each. 1. But the company is the number one producer of cattle feed in private sector.20 Vadagiri. Irinjalakuda unit of the company consists of cattle feed plant and refining plant. The par at value of one equity share capital is Rs. are the main competitors to the company.4 crores and issued and subscribed capital is Rs. pelletisation. size reduction. 1. etc. Kottayam. The redemption of these shares is at par after ten years but before fifteen years from the date of their allotment. Milma. batching. Godrej. 32 crore.3 Challenges Kerala feeds.2. 135% redeemable cumulative preference shares of Rs. The company issued 6000. The manufacturing processes used in the company are • • • • Wooden canes Oil mill Expeller mill Solvent extraction Now-a-days. Prima.4 SHARE CAPITAL OF THE COMPANY The authorized share capital of the company is Rs. 21 The company went in for public issue of shares in 1994. 2006. 1. Capacity 100 MTS per day The capacity of solvent extraction plant of Tamil nadu unit is expanded to 100 MTS per day Cattle feed production capacity of Tamil nadu increased to 150 MTS per day Palakkad branch started The company enters export market Keyes forte. Capacity 120 MTS Per day The solvent extraction plant capacity increased to 80 MTS per day Cattle feed plant capacity increased to 180 MTS per day Cattle feed plant in Tamil nadu went in to operation. and Mumbai. 2005 is Rs. the new feed supplement for cattle introduced. Cattle feed manufacturing capacity of Swaminathapuram unit increased to 180 MTS per day . The company declared a dividend of 125% for the year ended 31st March. The present market value of the company’s share is Rs.5 Milestone Year 1976 1979 1983 1984 1987 1988 1989 1990 1991 1993 Events A new plant was set up to produce 50 MTS of ready mixed cattle feed Production capacity of cattle feed plant is increased to 60 MTS per day A fully automatic cattle feed plant started operation. 2006. 25 crores. Company shares are listed at the stock exchanges at Cochin. Chennai. 160 as on 22nd December.2. The reserves and surplus on 31st March. Kalamassery.22 1995 1996 1998 Cattle feed production is started in Mysore in Karnataka state. Feeds and extractions. Swaminathapuram( a 1999 unit of KSE Limited) was renamed as KSE Limited Swaminathapuram. 2003 Ice cream ‘Vesta’ launched Started produced cattle feed at a leased plant at Edayar. Calicut branch opened 240 TPD cattle feed plant at Vedagiri in Kottayam district started operation. The company introduced ‘KS Deluxe plus’. ‘Vesta’ haven ice cream parlours at Irinjalakuda an Marathakkara started . the new pelleted feed in HDPE bags for Kerala market. Company renamed to KSE Limited Company acquired its fourth manufacturing unit at Palakkad and decided to manufacture and market poultry feed from this unit. Thrissur. 2002 Started operating a solvent extraction plant and oil refineryon lease at Kanchikkode for processing coconut cake. Cattle feed production capacity of the Irinjalakuda plant increased to 199 MTS per day. Company celebrated the silver jubilee of the Irinjalakuda unit on completion of 25th year of commencement of production. Cattle feed capacity of Swaminathapuram unit increased to 195 MTS per day. Tamil nadu. A modern children’s park and information centre has been completed for the benefit of the public. and Thalayuthu diary. 2000 Company started production and marketing of pasteurized milk and milk products from Konikkara diary. Kerala. 1. 2005 Cattle feed production capacity at irinjalakuda unit increased to 210 MTS per day. The 200 TPD solvent extraction plant at Koratty commissioned. Company acquired its 5th cattle feed manufacturing unit at Mysore. A branch at coimbatore started for marketing Vesta ice cream.23 2004 New project of 200 TPD solvent plant and 100 TPD oil physical refining plant started.6Board of Directors . orate. Started producing cattle feed in a leased unit at Erode. 100 TPD physical refining plant at Koratty commissioned. A branch at Nilamel.2. Kollam district started. Acquires hand from KINFRA for starting a new project at Kinfra park. 2006 ISO 9001-2000 accreditation for Vadagiri and Swaminathapuram units. 8 Units of KSE Limited Head office KSE Limited. Irinjalakkuda branch. T. Irinjalakkuda unit. Anto Mr.2. C. 2. P.2. R. K. O. C. K. 1. Ragulal DESIGNATION Chairman and Managing director Executive director Director and legal advisor Director Director Director Director Director Director Chief General Manager of the company is Mr. They are as followsNAME Mr. Sankaranarayanan is the secretary-cum-chief finance manager.24 Board of directors of the company has ten members including the managing director. M.7 Bankers KSE Limited banks with Bank of Baroda. Dr. P. 1. Vedagiri unit. C. Irinjalakkuda. Mathew Mr. T. Paul Mr. R. Production units (Kerala): 1. Mr. John francis K. George Mr. Anand Menon. P. Paul Mr. Kurumullur. John Mr. A. . T. Vijayaraghavan Mr. D. Diary unit. After some time the company started to produce jersey copra Cakes. 2. Tamil Nadu & Gujarat Company started to . Cochin. Hinkal. Edayar. Thalayuthu. Dindugal. compound cattle feed & refined sunflower oil. Parapadi unit. Calicut. 7. Konikkara.25 3. 1. Tamil nadu: Palakkad unit. 1. the coconut cake. Palakkad. Diary unit. 4. Swaminathapuram unit. Mysore. NIDA unit.2. Jersey copra cake. Palakkad. At present it is marketed in Kerala. 6. Karnataka: 1. 5. which comes out of Solvent Extraction process is made pure by de-solvent sing & named as ‘Jersey Brand Copra Cake’. Kanchikkode.9 PRODUCT PROFILE In the beginning stage of KSE limited had only solvent unit. Cattle Feed 26 produce ready mix compound cattle feed because it was not able to fulfill the demand of ‘Jersey copra cake’. the company started manufacturing ready mixed compound cattle under the brand name “K. Fully automatic & sophisticated live stock feed plant at 120 tonne productions per day was established at Irinjalakuda to meet the increasing demand for cattle & this went Delu Special Super Deluxe Supreme Ordinary into commercial production in 1983.10 CATTLE FEED DEVISION Pellet Mash Cattle feed in 1976. The company was also producing food supplement for cattle feed 1.2.Cattle Feed”.S. The balanced ready mix feed manufactured after due consideration of needs of the cattle in the state is well received all over Kerala. therefore constituting its share in the milk production of the state. Jersey xe Cattle Pellet Mash Mash Plus Mash Pellet Feed CATTLE FEED SEGMENTATION Pellet Mash Deluxe Plus Delux e Supreme Pellet Jersey Ordinary Mash Super Mash Special Mash . DESIGN OF THE STUDY Working capital may be regarded as the life blood of business. Working capital is of major importance to internal and external analysis because of its close relationship with the current day-to-day operations of a business. Every business needs funds for two purpose There are spreads between the borrowings and lending rates for investments and financings of equal risks. Similarly each organization is faced with its own limits on the production capacity and technologies it can employ there are fixed as well as variable .27 2. IV. again a short term capital asset. In corporate financial management. debtors. To determine the efficiency in cash. current assets. To understand firms working capital position. . 2. creditors.28 costs associated with production goods. In other words. To analyze the sources of working capital. V. the markets in which real firm operated are not perfectly competitive.1 OBJECTIVES OF THE STUDY I. For example. This may necessitate the holding of inventory. III. These real world circumstances introduce problem’s which require the necessity of maintaining working capital. To study the capital structure. the term Working capital management” (net) represents the excess of current assets over current liabilities. inventory.. an organization may be faced with an uncertainty regarding availability of sufficient quantity of crucial imputes in future at reasonable price. Similarly an organization may be faced with an uncertainty regarding the level of its future cash flows and insufficient amount of cash may incur substantial costs. II. This may necessitate the holding of reserve of short term marketable securities. To draw meaningful conclusion and put forward suggestion for effective WORKING CAPITAL management. The basic Current Liabilities are Accounts Payable. it is likely to become insolvent and may even be forced into bankruptcy. The interaction between current assets and current liabilities is. or will be. which are intended at their inception. therefore. . within a year out of the current assets or the earnings of the concern . Each of the current assets must be managed efficiently in order to maintain the liquidity of the firm while not keeping too high a level of any one of them.29 2. Each of the short term sources of financing must be continuously managed to ensure that they are obtained and used in the best possible way. Bills Payable. The Current Assets should be large enough to cover its current liabilities in order to ensure a reasonable margin of safety. the main theme of the theory of management of working capital. This is so because if the firm cannot maintain a satisfactory level of working capital. Current Liabilities are those Liabilities. Bank Overdraft and outstanding expense. to be paid in the ordinary course of business. The Major Current Assets are Cash. the Current Liabilities and the inter-relationship that exists between them. The term Current Assets refers to those Assets which in the ordinary course of business can be. Marketable Securities. The goal of Working Capital Management is to manage the firm's Assets and Liabilities in such a way that a satisfactory level of working capital is maintained.2 SCOPE OF THE STUDY Working Capital Management is concerned with the problems that arise in attempting to manage the Current Assets. converted into Cash within one year without undergoing a diminution in value and without disrupting the operations of the firm. Accounts Receivables and Inventory. 6.30 2. Iringalakuda .4 STATEMENT OF THE PROBLEM The problem of that is stated as “the increasing the cost of production and highly increasing the cost of raw materials of KSE Ltd. 2.The period of the study of the analysis is limited to 5 years from 2005 to 2009 3.3 LIMITATIONS OF THE STUDY 1.The limitations of the ratio analysis are also the major constrains of the study.Data about inventory is not available for further analysis 5.e. company’s published financial statement.Data for inter firm comparison is not available. 2.The study is based on the secondary data i. This is a major constraint.The duration of the study is limited to one month. 4. 2. inventory.1 NICOLA A.. The key difference between long term financial management and short term financial management is in terms of the timing of cash. TARASHEV1 1 BIS working papers no.5 REVIEW OF LITERATURE 2.5. advertising etc. July 2005 .cash and other current assets such has loans and advances to third parties capital required for purchase of rawmaterial and for meeting day to day expenditure on salaries.31 NEED FOR THE STUDY Working capital management. rents. is called working capital. wages. working capital management is concerned with the problem that arise in attempting to manage the current assets. 179.debtors.viz.. It is the capital invested in different items of current assets needed for the business. While long term financial decisions like buying capital equipment or issuing debentures involve cash flows over an extended period of time short terms finanacial decision typically involve cash flows within a year or within the operating cycle of the firm. which is concerned with decisions relating to the current assets and current liabilities?. 2. where credit risk increases with maturity. and ex ante spread finance lending to argue that longterm project financing is not necessarily perceived by lenders as risk in term project finance lending. 2005 3 BIS Quarterly Review. regulation and tax. 2 Bank of England working paper no. 253. Structural models focus on the changes in value of a corporate obligor assumes that default occurs when asset values cross some lower threshold.and also could be improper incorporation of macroeconomic variables. that a large part of credit spread investment grade debt is due to non-credit risks factors.32 This paper uses firm-level data to compare the performance of six structural credit risk models in terms successfully they predict default. The analysis that the most material borrower characteristics are the firms leverage ratio. 6 December 2004 . the paper finds that the particular characteristics of credit risk in project suggest a “hump-shaped” term structure of loan spreads. Endogenous default models. it looks at how well it fits historical default frequencies to calculate an average historical compensation for credit risk that could be compared to the average observed credit spread. The paper finds that the modal well but they don’t fully capture the effects of the business and credit cycles. The findings contrast with most other forms of lending. Instead. 2. default recovery rate.2ROHAN CHURM and NIKOLAOS PANIGIRTZOGLOU2 This paper uses a structural model of credit risk to try to decompose into their main component expected default. among other things. The results show.5. such as non-recourse debt.and also produce better and quite an estimate of optimal capital when filtered through the base ii internal rating based approach.5. while the reverse is true. and of return. liquidity. political risk. uncertainty about the rate default .3 MARCO SORGE3 Are longer maturity loans in project financing necessarily riskier than shorter maturity loans? This paper show some key characteristics of project finance. In this case of lower quality BBB-rated bonds. It also summarizes rating methodology and takes a look at the problem of credit and default time horizons. . as this paper explains. rating based trigger clauses in 2.g. It says that ratings have become hardwired financial system in various ways (e.33 2. It may be understood as a science of studying how research is done scientifically. This applies a structural credit model to explore the problem using data from Sterling bond markets.5 Agency credit ratings are an important feature of the financial markets and they play an increasingly important in bank credit risk management and regulatory capital calculations..rated credits is not strongly related to default probability. June 2004 5 . depending on the modeling technique that is implemented.5 FERNANDO GONZALEZ . debentures seem to explain about a third to a half of spread variation. Yet. RESERCH METHODOLOGY Research methodology is a way to systematically solve the research problem. It concludes variability in the spread of high-grade A. In it we study the various steps that are generally adopted by a researcher in studying his research 4 Bank of England working paper.5.5.4 MARK MANNING4 It is tempting to assume that the difference in price between a credit-risk-free bond and a credit risky but it is strongly related to the expectation of default.6. rating based trigger clauses in lending covenants) that can have effect on market dynamics. 2. This paper looks at the many ways that the market and regulators have put on agency ratings.. Instead the spread is determined by other factors such as liquidity. the truth is more complex. 17 august 2004 European Central Bank. It says that ratings have become hard-wired financial system in various ways (e.g. 2 COLLECTION OF DATA Secondary data is mainly used for this study and the five year data from 2005-06 to 2009-10 pertaining to the study was collected from the company and the remaining from books. magazines. The study is based on .6.6.3 TOOLS FOR ANALYSIS Secondary data were analyzed and interpreted with the help of different tools such as ratio analysis. graphs.34 problem along with the logic behind them. comparative balancesheets. operating cycle.6. It is necessary for the researcher to know not only the research methods/techniques but also the methodology. tables. web sites etc. 2. 2. This chapter “data analysis and interpretation consist of analytic part based upon empirical study. journals. In this project the researcher used annual report for data collection.1 METHODOLOGY OF STUDY TYPE OF RESEARCH Type of research employed is analytical research 2.DATA ANALYSIS AND INTERPRETATION Data anlysis and interpretation is the core factor of any project. TIME PERIOD The duration of the study was for a period of 2005 to 2010 3. schedule of changing in working capital etc. In project. Different ratios are used for different purpose. RATIO ANAYSIS Ratio analysis is the process of determining and presenting in arithmetical terms the relation between figures and group of figures drawn from satements.35 primary and secondary data. Secondary data is collected by annual reports. Primary data is collected by means of interview. • • Rate. which are arrived at by the simple division of one number by another.1. The ratio analysis is one of the tools in the hands of those who want to know something more from the finanacial satements. Ratio analysis is based on different ratios which are calculated from the accounting data contained in the financial satements. which is the ratio between the numerical facts over a period of time. Pure ratios or propotions. which is a special type of rate expressing the relationship in hundred. I have used various tools such as Ratio analysis Operating cycle Trend analysis Schedule of changes in working capital 3. . Ratio is basis of this analysis. • Percentage. Ratio can be expressed in any of three ways. idle current ratio should be 2:1 The ability of a company to meets its short term commitment is normally assessed by comparing current assets with current liabilities. inventories. 3. bills receivable. Current liability represent the liablities at which fall due for payment within year. prepaid expenses. CURRENT RATIO . debtors. work in progress and finished goods. marketable securities and other short term high quality investments. Current ratio establishes the relation between the current assets and current liabilities. Current assets usually include cash in hand and at bank. ratio materials. Conventional rule.36 These ratios can be grouped into various classes according to the financial activity function to be evaluated.1.1 CURRENT RATIO Current assets normally mean assets convertible and meant to be converted into cash within a year time. 48 1016.42 4590.62 2.64 2.61 CURRENT RATIO 2. idle current ratio should be 2:1.60 1632.37 CURRENT RATIO= CURRENT ASSETS CURRENT LIABILITIES TABLE 3.56 840.91 CURRENT LIABILITIES( lakhs) 1195.86 INTERPRETATION As a conventional rule.67 3270.76 3063.73 2870.1 CURRENT RATIO YEAR 2005-06 2006-07 2007-08 2008-09 2009-10 CURRENT ASSETS( lakhs) 3137.82 2.81 3.37 1142. The actual current ratio is 2:1 it can be reasonably being taken as a sign of liquidity or the short term solvency of . The main reason for increasing current ratio in the year 2007-2008 is dipping the sail in that year. but the year 2007-2008 the ratio was highly increased to 3. The company has maintained the current ratio favorable from 2005-2006 to 2009-2010.1 CURRENT RATIO .38 concern.64. To recover this problem the sales have to increase. So the stock increased. CHART NO: 3. it is because of increased price of the products. usually based on current assets and current liability. These are the ratios which measure the short term .1.39 3.2 LIQUDITY RATIO It is the ability of a firm to meet its obligation in the short run. 40 solvency or financial position of the firm.the conclusion can be the concern is liquid and so it can pay of its short-term liability out of its quickly The company has maintained .5534 1.quick ratio of 1:1 is considered to represent a satisfactory financial position.2 YEAR LIQIDITY RATIO CURRENT LIABILITES(laks ) 1195.Liqudity refers to the ability of concern to meet its current obligation as and when they become due.94 1210.0984 LIQUDITY RATIO CURRENT ASSETS-CLOSING STOCK(laks) 2005-06 2006-07 2007-08 2008-09 2009-10 1152.37 1142. If actual quick ratio is equal or more than the standard quick ratio of 1:1.96 1255.71 2535.03 INTERPRETATION Quick ratio is expressed as quick asset:quick liability. CURRENT ASSETS – CLOSING STOCK LIQUDITY RATIO = CURRENT LIABILITIES TABLE NO 3.56 840.9641 1.61 0.4398 1.60 1632.2865 1.17 1328.48 1016. CHART NO 3.2 LIQUIDITY RATIO .41 quick ratio favorable from 2005-06 to 2008-09. In year 2005-06 the company shows lower quick ratio because of the company had highest stock in the year. 3 CREDITORS TURNOVER RATIO .1.42 3. 96 52. Normally higher turnover ratio is preferred.43 It constitutes an important source to provide spontaneous working capital of the firms.75 21910. Creditors turnover ratio expresses the number times the accounts payable are converted into purchase by management during the year.27 22.68 787.93 322.96 23071.32 46.84 52.82 52.80 491.45 17987.54 INTERPRETATION . ANNUAL PURCHASE CREDITORS TURNOVER RATIO = AVERAGE PAYABLE TABLE3.61 418.44 29308.3 YEAR CREDITORS TURN OVER RATIO ANNUAL PURCHASE AVERAGE PAYABLE CREDITORS TURNOVER RATIO 2005-06 2006-07 2007-08 2008-09 2009-10 16867.29 557. The company has been maintaining a better creditors turnover ratio but the year 2006-07 the ratio was highly decreased. while a low turnover ratio reflects liberal credit terms granted by suppliers.44 This ratio reflects whether terms of terms of credit allowed by supliers are liberal or stringent. High creditors turnover ratio shows that creditors are being paid promptly.3 CREDITORS TURNOVER RATIO . CHART3. Now the company recover this problem. If the number of days is large.4 AVERAGE PAYMENT PERIOD Average payment period related to the average number of days within which payment to the creditors are being made.45 3.1. it shows the . 27 22.84 52.46 inability of the firm to pay the creditors prompty.32 46. which will definitely affect the credit worthiness NUMBER OF DAYS AVERAGE PAYMENT PERIOD = CREDITORS TURN OVER RATIO TABLE 3. This help the company to get discount from suppliers.4 YEAR 2005-06 2006-07 2007-08 2008-09 2009-10 AVERAGE PAYMENT PERIOD DAYS IN YEAR 365 365 365 365 365 CREDITORS TURN OVER RATIO 52. Company getting 6-8 days to make payment to the supplier.96 52. .54 AVERAGE PAYMENT PERIOD 7 16 7 8 7 INTERPRETATION Above table shows average payment period of K S E pvt ltd. But the year 2006-07 the company took 16 days to make the payment. 4 AVERAGE PAYMENT PERIOD 3.5 INVENTORY (STOCK) TURNOVER RATIO Inventory turnover ratio reflect the efficency of inventoy management.1.47 CHART 3. COST OF GOODS SOLD . This ratio indicates the number of times the inventory is replaced the during the year. Higher ratio shows greater efficiency in management and vice versa. The reason of taking this much dates.76 16.26 1659.67 28947.56 STOCK TURNOVER RATIO 18. company purchased rawmaterial in bulk quantity with discount.that is .69 21.60 24.48 INVENTORY (STOCK) TURNOVER RATIO= AVERAGE INVENTORY TABLE 3.38 22829.34 1340.5 SHOWING STOCK TURN OVER RATIO YEAR COST OF GOOD SOLD AVERAGE INVENTORY 1094.22 and 25 days have taken to convert the stock into cash in 2008-09 and 2009-10 respectively.91 INTERPRETATION The above table shows the inventory conversion period of k s e ltd. Company is not achieve the inventory conversion period as ideal in last two years.48 1394.20 13.48 33971. .36 2005-06 2006-07 2007-08 2008-09 2009-10 19917.10 27199. From the part of the company ideal period is 20 days.51 1628. 49 3.1.6 WORKING CAPITAL TURNOVER RATIO The different use of overall working capital in a firm can be measured with the help of working capital turnover ratio. The ratio indiactes the ratio of working capital utilization in the firm. A higher ratio indicates the efficient utilization of working capital and vice versa. NET SALES WORKING CAPITAL TURN OVER RATIO= AVERAGE NET WORKING CAPITAL TABLE 3.6 WORKING CAPITAL TURN OVER RATIO YEAR NET SALES NET WORKING CAPITAL 2005-06 2006-07 2007-08 21301.58 24076.42 27551.91 1941.82 2958.21 2223.25 WORKING CAPITAL TUREOVER RATIO 10.96 8.13 10.63 50 2008-09 2009-10 28947.49 35007.87 1854.30 2128.30 15.61 16.64 INTERPRETATION The higher ratio indicated efficient utilization of working capital and a low ratio indicates inefficient utilization. The above table shows the working capital and high ratio is due to high net working capital. In the year 2006-07 shows the working capital is 8 times but after that year the company getting good working capital utilization. 3.2 STATEMENT OF WORKING CAPITAL: A statement of working capital is working capital is working capital is prepared to depict the changes in working capital. Working capital represents the excess of current Assets over current liabilities. Since, several times, i.e., all current assets and current liabilities are the components of working capital, it is necessary to measure the increase or decrease therein, by preparing a statement or schedule of changes in Working Capital. This statement is prepared with current assets and current liabilities as appearing in the Balance Sheets under consideration. 51 Working capital is defined as the difference between current asset and current liabilities. Working capital of FRONTLINE EXPORTING is analyzed to find out the nature of source of fund and how they are utilized for financing current assets. TABLE3.7 STATEMENT OF WORKING CAPITAL FROM THE YEAR 2005-2009 Current Assets a) Inventories 2005-06 15,34,87,65 8 b)Sundry Debtors c)Cash&Bank Balances Total assets (A) 31,32,65,32 3 45,32,76,86 5 90,67,543 9,03,35,432 2006-07 24,65,78,96 0 91,23,654 3,67,85,432 2007-08 23,54,67,43 2 1,09,87,654 13,24,56,87 6 31,24,44,12 5 28,65,00,114 31,24,01,442 43,25,672 34,23,567 2008-09 2009-10 23,98,76,543 27,65,42,765 43,56,87,980 56,76,54,329 23.67.434 3.89.65.81.432 4.77.43 5 Net working 19.59.111 8.332 2.53.88 8 6.56.69 3 17.44.23.67.100 1.47.57.76.26.24.65.74.54.46 4 29.654 7.42.09.42.90.65.23.75.43.34.52 Current Liabilities a) Liabilities b) Provisions Total liability (B) 6.04.212 9.67.8 COMPARITIVE STATEMENT FOR THE YEAR 2005-2006 to2006-07 (Rs in lakhs) .778 858.252 16.50.908 11.65.432 8.671 18.003 11.84.41.443 12.342 capital (A-B) TABLE NO 3.90.09.97.40 1 22.51. 67.53 PARTICULARS LIABILILTIES : 2005-2006 2006-2007 CHANGE a) Liabilities b) Provisions 6.220 (-)4.35.77.654 3.24.34.76.78.65.23.432 31.working capital has been increased than the previous years working capital.increase in working capital means increase in the cost of day to day expenses .09.74.50.30.212 9.888 29.252 8. It says company has increased its capacity of current assets in the year .42.000 Working capital= Current asset – current liability INTERPRETARTION: 19.401 The comparative balance sheet for the financial year 2005-06 to 2006-07 shows that there has been increase in the current assets as well as the current liabilities of the company.03.67.85.67.43.56.32.413 9.65.46 4 (-) 48077029 ASSETS: a) Inventories 15.86 5 14.90.65 8 b)Sundry Debtors c)Cash&Bank Balances 90.57.96 0 91.43 TOTAL 5 16.66.32.302 56.80.432 45.432 4.09.67.32 TOTAL 3 24.87.65.97.67.003 6.23.543 9.89.35.111 5.89.91.249 11.23. 54 TABLE NO 3.9 COMPARITIVE BALANCE SHEET FOR THE YEAR 2006-07 to 2007-08 (Rs in lakhs) . 31.032 ASSETS: a) Inventories 24.65.558 2.64.55 PARTICULARS LIABILILTIES : 2006-2007 2007-08 CHANGE a) Liabilities b) Provisions 6.56.432 7.51.38.26.85.78.57.04.54.97.09.528 (-)18.84.43 2 1.67.432 23.474 16.252 1.08.56.96 0 b)Sundry Debtors c)Cash&Bank Balances 91.86 TOTAL Working capital= Current asset – current liabilities 1.76.12.46 TOTAL 4 8. It says company has decreased its capacity of raw materials at the same time .09.32.87 6 45.43.54.90.67.67.654 13.23.654 7.740 36.09.212 INTERPRETARTION: This comparative balance sheet for the financial year 2006-07 to 2007-08 shows that there has been decrease in the current assets as well as the current liabilities of the company.11.15.32.58.000 (-)14.212 9.23.11.640 5 29.441 (-)13.778 5.24.24.85.23.87.64.07 2 28.654 3.67.83.85. 10 COMPARITIVE BALANCE SHEET FOR THE YEAR 2007-08 to 2008-09 (Rs in lakhs) .it may be because of in the previous year may be the boom situation of the company .56 company has increased its cash and bank balances it may be through collecting the amount of creditors. there may be a chance of rice of a competitor TABLE NO 3.in this table we can see that working capital has been decreased in a short range . 04.83.58.38.25.44 TOTAL 8.47.98.56.332 2. There is an increase of Rs.87.61.57. it is clear that there has been an increase in the sundry debtors position of the firm.640 (-)44.23.09. 66.54.31.233 INTERPRETARTION: By analyzing the current assets and current liabilities of the company for the year 2007-08 to 2008-09.87.11 4 28.34.67.44.24.65.07 TOTAL Working capital= 17.36.032 ASSETS: a) Inventories 23.672 43.00.54 3 43.23.104 2 (-)30.78.41.90.98 0 28.54.90.43 2 b)Sundry Debtors c)Cash&Bank Balances 1.26.09.61.87 6 36.75.982 (in lakhs) in the year 2008-0 as .64.09.76.56.432 3 7.06.654 13.70.65.667 11.111 66.57 PARTICULARS LIABILILTIES : 2007-08 2008-2009 CHANGE a) Liabilities b) Provisions 1.982 (-)30.86.111 7.84.678 5.32.778 8.654 7.31.671 Current asset-current liability 23. In this comparative analysis we can see that working capital has again reduced . it says that company reduced its productivity . it may be the stage of depresion TABLE NO 3.11 COMPARITIVE BALANCE SHEET FOR THE YEAR 2008-09 to 2009-10 (Rs in lakhs) .58 compared to that of 2007-08. 797 11.100 16.76.19.59 PARTICULARS LIABILILTIES : 2008-2009 2009-10 CHANGE a) Liabilities b) Provisions 8.44.90.65.00.81.18.349 36666222 (-)9.50.76.76.11 TOTAL Working capital= Current asset-current liability INTERPRETARTION: The comparative balance sheet of 200-09 to 2009-10 shows that there has been an increase in the current liability position of the firm while that of the current assts has also been increased with that of the previous year.47.34 2 (-)11916899 ASSETS: a) Inventories 23.376 13.54 3 b)Sundry Debtors c)Cash&Bank Balances 43.429 27.42.98.44 TOTAL 3 12.102 (-)1.87.02.332 2.66.98 0 28.25.195 .75.77.111 8.56.54.434 3.01.51.07.34.567 56. Current assets have been 4 8.76 5 34.908 (-)1.23.97.53.65.24.44 2 18.36.30.672 43.42.65.23.09.32 9 31.84. and ultimately .working capital also increased in this year so this is a positive trend.03 OPERATING CYCLE: The operating cycle deals with the cycle of how a firm takes cash and converts it into incventory and how inventory converted into sales. account receivables.442 in 2010 as compared to that of 2009.60 increased to 31. 3.01.24. An investment in the working capital is influenced by 4 key events in production of sales cycle of the firm. receivable period and payable deferral period A) INVENTORY CONVERSION PERIOD: INVENTORY INVENTORY CONVERSION PERIOD = COST OF GOOD SOLD X 365 (OPENING STOCK + CLOSING STOCK) INVENTORY = X 365 .61 back into cash. • • • • Purchase of raw material Payment of raw material Sales of finished goods Collection of cash sales Length of operating cycle is to be determined by the spots with inventory conversion period For call calculating the operating cycle we have to calculate the three accounting period ratios they are inventory conversion period. 12 CONVERSION PERIODS .62 SALES b) Receivable collection period (Debtors cycle): ACCOUNT RECEIVABLE RECEIVABLE COLLECTION PERIOD = SALES C) X 365 PAYABLE DEFERRAL PERIOD ACCOUNT PAYABLE PAYABLE DEFERRAL PERIOD = X 365 COST OF GOOD SOLD TABLE3. 79 dys & 88 days in 2000.91 days. 2004.2005 and 2006 respectively. Only in 2004 and 2007 the inventory conversion period is higher than the standard norms in that period company is took more days inventory conversion.63 Accounting period ratio Inventory conversion period Receivable collection period Payable deferral period 2005-06 2006-07 2007-08 2008-09 2009-10 96 91 79 88 116 115 109 37 53 66 95 103 114 76 80 INTERPREATION The above table and chart depicts that the inventory conversion period shows an increasing trend from 2000 to 2002 from 92 days and then it starts to decrease up to 79 days in the year 2005. 3. The inventory is converted rapidly in other years with 920days.4 TREND ANALYSIS . The standard norm of the company is 100 days. any one trend by it self is not very informative and therefore comparison with Illustrated their ideas in these words.” Emphasizing the importance of working capital trends. “An upwards trends coupled with downward trend or sells. accompanied by marked increase in plant investment especially if the increase in planning investment by fixed interest obligation” TABLE 3. Further. Gupta “The term trend is very commonly used in day-today conversion trend. Working capital is one of the important fields of management. current assets. and current liabilities to grow or decline over a period of time” According to R. It is therefore very essential for an annalist to make a study about the trend and direction of working capital over a period of time.P.13 TREND OF WORKING CAPITAL FROM 2005-2010 .C. also called secular or long term need is the basic tendency of population. In the words of S.64 In working capital analysis the direction at changes over a period of time is of crucial importance. It can be increasing or decreasing. Man Mohan and Goyal have pointed out that “analysis of working capital trends provide as base to judge whether the practice and privilege policy of the management with regard to working capital is good enough or an important is to be made in managing the working capital funds. Such analysis enables as to study the upward and downward trend in current assets and current liabilities and its effect on the working capital position.galeziem “The trend is defined as smooth irreversible movement in the series. sales. income. P. also called secular or long term need is the basic tendency of .5 GRAPHICAL REPRESENTATION OF TREND SINCE 2005-2010 In the words of S.65 YEARS WORKING CAPITAL TREND 100 05 62 51 49 2005-06 2006-07 2007-08 2008-09 2009-10 3. Gupta “The term trend is very commonly used in day-today conversion trend. 5 WORKING CAPITAL TREND . Man Mohan and Goyal have pointed out that “analysis of working capital trends provide as base to judge whether the practice and privilege policy of the management with regard to working capital is good enough or an important is to be made in managing the working capital funds.galeziem “The trend is defined as smooth irreversible movement in the series. It can be increasing or decreasing.66 population. sales. CHART3. current assets.” Emphasizing the importance of working capital trends.C. and current liabilities to grow or decline over a period of time” According to R. income. The company has maintained quick ratio favorable from 2005-06 to 2008-09. .67 4.1FINDINGS 1. In year 2009-10 the company shows lower quick ratio because of the company had highest stock in the year. . In the year 2006-07 shows the working capital is 7 times but after that year the company getting good working capital utilization. 2005.2006 and 2007 respectively . company purchased raw material in bulk quantity with discount.68 2.91 days. 5.63. The inventory is converted rapidly in other years with 920days. that is . The company has maintained the current ratio favorable from 2005-2006 to 2009- 2010. But the year 2006-07 the company took 19 days to make the payment.22 and 25 days have taken to convert the stock into cash in 2008-09 and 2009-10 respectively. but the year 2007-2008 the ratio was highly increased to 3. Now the company recover this problem. 6. Company getting 6-8 days to make payment to the supplier. 3. 4. The reason of taking this much dates. 7. Company is not achieve the inventory conversion period as ideal in last two years. This help the company to get discount from suppliers. 79 dys & 88 days in 2001. Only in 2005 and 2008 the inventory conversion period is higher than the standard norms in that period company is took more days inventory conversion. The company has been maintaining a better creditors turnover ratio but the year 2006-07 the ratio was highly decreased. Better consistency should be maintained in relation with working capital. The management should try to increase the liquidity position of the company by proper by proper investment in current assets. the management is never think credit sales in their policies. 7 . 3 . The management should pay attention towards increasing working capital turnover by minimizing the investment in inventories and receivables. . Unnecessary operational expenses should be reduced. 9 .2 SUGGESTIONS 1 . 6 . The company mainly depends on cash sales if credit sales to maximum extend. 2 . 5 . But trade debtors in balance sheet so it must think to eliminate it so as to reduce working capital requirements. Advanced and new technology of production should be incorporated.69 4. special attention should be made by management in management of short term funds. 8 . CONCLUSION From the study it is concluded that KSE LTD has good working capital management .70 5.however it is also revealed that current ratio is least minimum and quick ratio is not up to peak . Every good business design should have at least one strategic control point. even though the company is maintaining a good track record . It means that efficient utilization of working capital especially in the areas of inventory and cash management. . Searching and developing the strategic control points in an industry simultaneously with business design process can go along way. Profitability is the key to success in business customer centric thinking is extremely essential for survival in today’s business environment. Kalyani Publishers.R. New Delhi. Mumbai.1 SOURCE Company’s annual reports and records Website 1) www.. Gupta & Sharma R..studyfinance. Cost and Financial Analysis..Chandrasekharan Nair and Dr.L.’ Ratio analysis’. b.46 . c. 2008. Ltd. e. Dr. Management Accounting.N. New Delhi. 2009.1 – 8. 2008.com 2) http://en.71 6.K. Shashi K. Himalaya Publishing House.org/wiki/Working_capital 3) www. d. Jayakumar ‘CORPORATE ACCOUNTING’ Chapter 8. Kalyani Publishers. 2000. Jain S. Arora M.. 3rd Edition.. New Age International Pvt.page no:8. & Narang K. 2nd Revised Edition. Research Methodology.K.com/lessons/workcap/ REFERENCE Books a.wikipedia.G.kselimited. Kothari C. Financial Management Theory & Practice.P.