final pro
TRANSCRIPT
DECLARATION
I do hereby declare that this piece of project report entitled “A Study on Working capital
Management practices in THE DOABA COOPERATIVE MILK PRODUCERS UNION LTD.
MILK PLANT, JALANDHAR” for partial fulfillment of the requirements for the award of the
degree of “MASTER OF BUSINESS ADMINISTRATION” is a record of original work done by
me under the supervision and guidance of Ms. Nisha Kurup, CT Institute of Management & IT
This project work is my own and has neither been submitted nor published elsewhere.
SIGNATURE OF THE STUDENT
CERTIFICATRE BY SUPERVISOR
This is to certify that Arpan a student of M.B.A. 3rd Sem. in the year 2011
(7043221394) have carried out a project entitled “COMPARITIVE ANALYSIS OF
ANGEL BROKING AND OTHER STOCK BROKER COMPANIES” Sunder my
supervision. This is to certify that student has complied with all the guidelines designed
for the project report. To the best of my knowledge this report is in authentic record of
work carried out by the student and it is considered fit for being referred to evaluation.
Project Guide:
Prof: Harish Mehta
ACKNOWLEDGEMENT
The accomplishment of this project was not being possible individually without the
encouragement, assistance and valuable support from various sources. Thus my whole hearted
thanks to “Almighty”. Knowledge and Co-operation are essential for success in any project
field.
No creative work can be done in isolation. I got guidance, motivation at every step of our
progress. I would like to add a few heartfelt words for the people who were the part of this
project in numerous ways.
My heartfelt gratitude to Dr. Rajesh Bagga, Director, CT Institute of Management & IT,
Jalandhar who has given me the opportunity to emerge as professionals in the field of
management.
I owe a great debt of gratitude to Er. Varun Nayyar , Assistant Professor in Management and
Training & Placement Officer, my project guide for his support. He guided to bring the project
to its completion. I would also sincerely thank to Mr. Nagendra Joshi (Mgr. Acct. Verka),
Mr. D. P. Sharma, Mr. Chander Mohan Puri, Ms. Rama Parmar, Ms. Kamaljeet Kaur,
Mr. Ashok Kumar Sharma, Ms. Neelam Handa, Sdni. Satwant Kaur, Mr. Dinesh Jain,
Sr. Jaspal Singh, Sd. Palwinder Kaur ( ACCOUNTS DEPTT.) Madame Mathew, Sr.
Gurmeet Singh, Mr. Ram Lubaya.( Computer Department).
In the end I would like to thank my GOD who helped me directly or indirectly in the
completion of this project.
PREFACE
To start any business, First of all we need finance and the success of that business entirely
depends on the proper management of day-to-day finance and the management of this short-
term capital or finance of the business is called working capital management.
Working Capital is the money used to pay for the everyday trading activities carried out by the
business - stationery needs, staff salaries and wages, rent, energy bills, payments for supplies
and so on.
I have tried to put my best effort to complete this task on the basis of skill that I have achieved
during the last one year study in the institute.
I have tried to put my maximum effort to get the accurate statistical data. However I would
appreciate if any mistakes are brought to my by the reader.
INTRODUCTION
WORKING CAPITAL
The life blood of business, as is evident, signified funds required for day-to-day operations of
the firm. The management of working capital assumes great importance because shortage of
working capital funds is perhaps the biggest possible cause of failure of many business units in
recent times. There it is of great importance on the part of management to pay particular
attention to the planning and control for working capital. An attempt has been made to make
critical study of the various dimensions of the working capital management of THE DOABA
COOPERATIVE MILK PRODUCERS UNION LTD. MILK PLANT, JALANDHAR .
Decisions relating to working capital and short term financing are referred to as working
capital management. These involve managing the relationship between a firm's short-term
assets and its short-term liabilities. The goal of Working capital management is to ensure that
the firm is able to continue its operations and that it has sufficient money flow to satisfy both
maturing short-term debt and upcoming operational expenses.
Working capital is a valuation metric that is calculated as current assets mnus current liabilities. Working capital is also known as operating capital.
• Current Assets
This is any cash or assets that can be quickly turned into cash. Current assets are assets,
which can be converted into cash within an accounting year.
Constituents of Current Assets:
▪ Cash in hand and bank balance
bills receivables
Sundry debtors (provision for bad debts)
Short term loans and advances
Inventories of stocks.
Raw material.
Work in progress.
Stores and spares.
Finished goods.
Prepaid expenses.
Accrual incomes.etc
• Current Liabilities
Current liabilities are those claims of outsiders, which are expected to mature for
payment within an accounting year.
Constituents of current Liabilities:
Bills payable
Sundry creditors or account payable
Short term borrowings
Dividend payable
Bank overdraft
Provisions
Outstanding expenses
Unaccrued income
TYPE OF WORKING CAPITAL
On the basis of Concept
1. Gross working capital: the gross working capital refers to the firm’s investment in all
the assets taken together. The total of investment in all the individual current assets is the
gross working capital.
For example: if a firm has a cash balance of Rs. 50,000 ,debtors of Rs.70,000 and
inventory of raw material and finished goods has been assessed at Rs.1,00,000,then the
gross working capital of the firm is Rs.2,20,000 (i.e. ,Rs
50,000+Rs.70,000+Rs.1,00,000).
2. Net working capital: the term net working capital may be defined as the excess of total
current assets over total current liabilities. Current liabilities refer to those liabilities
which are payable within a period of 1 year. The net working capital may either be
positive or negative. If the total current assets are more than total current liabilities, then
the difference is known as positive net working capital, otherwise the difference is
known as negative net working capital. The net working capital measures the firm’s
liquidity. The greater the margin, the better will be the liquidity of the firm.
Net working capital= total current assets – total current liabilities
WORKING CAPITAL
A financial manager must consider both (gross and net working capital) because they provide
different interpretation. The gross working capital denotes the total working capital or the total
investment in current assets. This will help avoiding 1.the unnecessarily stoppage of work or
chance of liquidation due to insufficient working capital, and 2.effects on profitability (over
flowing working capital implies cost).The gross working capital also gives an idea of total
funds required for maintaining current assets.
On the other hand, net working capital refers to the amount of funds that must be
Invested by firm, more or less are regularly in current assets. The net working capital also
denotes the net liquidity being maintained by the firm.
On the basis of time
1. Permanent /fixed working capital: Permanent working capital may be defined as the
minimum level of current assets, which is required by a firm to carry on its business
operations. Every firm has to maintain a minimum level of raw materials, work-in-
progress, finished goods and cash balances.
For example-extra inventory of finished goods will have to be maintained to support the
peak periods of sale. Permanent working capital is permanently needed for the business
and therefore, it should be financed out of long term funds.
2. Fluctuating /variable working capital: It is the extra working capital needed to support
the changing production and sales activities of the firm. The amount of temporary
working capital keeps on fluctuating on time to time on the basis of business activity.
Both kind of working capital – permanent and fluctuating (temporary) are necessary to
facilitate production and sales through the operating cycle. The amount over and above
permanent working capital is temporarily variable or fluctuating.
Determinants of working capital:
Working capital requirements of a concern depends on a number of factors, each of
which should be consider carefully for determining the proper amount of working
capital. It may be however be added that these factors affect differently to the different
units and these keeps varying from time to time.
In general, the determinants of working capital which are common to all organization’s
can be summarized as under:
1. Nature of Business:
Need for working capital is highly depends on what type of business, the firm in. there are
trading firms, which needs to invest a lot in stocks, ills receivables, liquid cash etc. public
utilities like railways, electricity, etc., need much less inventories and cash. Manufacturing
concerns stands in between these two extends. Working capital requirement for manufacturing
concerns depends on various factors like the products, technologies, marketing policies.
2. Production Policies:
Production policies of the organization are effects working capital requirements very highly.
Seasonal industries, which produces only in specific season requires more working capital.
Some industries which produces round the year but sale mainly done in some special seasons
are also need to keep more working capital.
3. Size of Business:
Size of business is another factor to determine the need for working capital.
4. Length of Operating Cycle:
Operating cycle of the firm also influence the working capital. Longer the orating cycle, the
higher will be the working capital requirement of the organization.
5. Credit Policy:
Companies; follows liberal credit policy needs to keep more working capital with them.
Efficiency of debt collecting machinery is also relevant in this matter. Credit availability form
suppliers also effects the company’s working capital requirements. A company doesn’t enjoy a
liberal credit from its suppliers will have to keep more working capital.
6. Business Fluctuation:
Cyclical changes in the economy also influencing the working capital. During boom period, the
tendency of management is to pile up inventories of raw materials and finished goods to avail
the advantage of rising prove. This creates demand for more capital. Similarly during
depression when the prices and demand for manufactured goods. Constantly reduce the
industrial and trading activities show a downward termed. Hence the demand for working
capital is low.
7. Current Asset Policies:
The quantum of working capital of a company is significantly determined by its’ current assets
policies. A company with conservative assets policy may operate with relatively high level of
working capital than its sales volume. A company pursuing an aggressive amount assets policy
operates with a relatively lower level of working capital.
8. Fluctuations of Supply and Seasonal Variations:
Some companies need to keep large amount of working capital due to their irregular sales and
intermittent supply. Similarly companies using bulky materials also maintain large reserves’ of
raw material inventories. This will be increase the need of working capital. Some companies
manufacture and sell goods only during certain seasons. Working capital requirements of such
industries will be higher during certain season of such industries period.
9. Other Factors:
Effective co ordination between production and distribution can reduce the need for working
capital. Transportation and communication means. If developed helps to reduce the working
capital requirement.
SOURCES OF WORKING CAPITAL
The company can choose to finance its current assets by
1. Long term sources
2. Short term souces
Long term sources of permanent working capital include equity and preference shares,
retained earnings, debentures and other long term debts from public deposits and financial
institution. The long term working capital needs should meet through long term means of
financing. Financing through long term means provides stability, reduces risk or payment. And
increases liquidity of the business concern. Various types of long term sources of working
capital are summarized as follow:
1. Issue of shares:
It is the primary and most important sources of regular or permanent working capital.
Issuing equity shares as it does not create and burden on the income of the concern. Nor
the concern is obliged to refund capital should preferably raise permanent working
capital.
2. Retained earnings:
Retain earning accumulated profits are a permanent sources of regular working capital. It
is regular and cheapest. It creates not charge on future profits of the enterprises.
3. Issue of debentures:
It creates a fixed charge on future earnings of the company. Company is obliged to pay
interest. Management should make wise choice in procuring funds by issue of
debentures.
4. Long term debt:
Company can raise fund from accepting public deposits, debts from financial institution
like banks, corporations etc. the cost is higher than the other financial tools.
5. Other sources:
Sale of idle fixed assets, securities received from employees and customers are examples
of other sources of finance.
Short term sources of temporary working capital
Temporary working capital is required to meet the day to day business expenditures. The
variable working capital would finance from short term sources of funds. And only the period
needed. It has the benefits of, low cost and establishes closer relationships with banker. Some
sources of temporary working capital are given below:
1. Commercial bank:
A commercial bank constitutes significant sources for short term or temporary working
capital. This will be in the form of short term loans, cash credit, and overdraft and though
discounting the bills of exchanges.
2. Public deposits:
Most of the companies in recent years depend on this source to meet their short term
working capital requirements ranging from six month to three years.
3. Various credits:
Trade credit, business credit papers and customer credit are other sources of short term
working capital. Credit from suppliers, advances from customers, bills of exchanges, etc
helps to raise temporary working capital.
4. Reserves and other funds:
Various funds of the company like depreciation fund. Provision for tax and other
provisions kept with the company can be used as temporary working capital. The
company should meet its working capital needs through both long term and short term
funds.
EXCESS OR INADEQUATE WRKING CAPITAL
Every business concern should have adequate working capital to run its business operations. It
should not have either redundant / excess working capital or inadequate/ shortage of working
capital. Both excess as well as shortage of working capital situations are bad for any business.
However, out of the two, inadequacy or shortage of working capital is more dangerous from
the point of view of the firm.
Disadvantages of Redundant or Excess Working Capital:
1. Idle funds, non-profitable for business.
2. Unnecessary purchasing & accumulation of inventories over required level.
3. Excessive debtors and defective credit policy, higher incidence of B/D.
4. Overall inefficiency in the organization.
5. When there is excessive working capital, Credit worthiness suffers.
6. Due to low rate of return on investments, the market value of shares may fall.
Disadvantages or Dangers of Inadequate or Short Working Capital:
1. Cannot pay off its short-term liabilities in time.
2. Economies of scale are not possible.
3. Difficult for the firm to exploit favorable market situations.
4. Day-to-day liquidity worsens.
5. Improper utilization the fixed assets and ROA/ROI falls sharply.
Need for working capital
The basic objective of financial management is to maximize shareholder’s wealth. For
this it is necessary to generate sufficient profits.
The extent to it, which the profit can be earned, largely depends on the magnitude of
sales. However sales do not convert into cash instantly.
There is invariable the time gap between the sales of goods and receipts of cash. There is,
therefore, a need for working capital in the form of Current Assets to deal with the
problem arising.
Out of the lack of immediate realization of cash again goods sold. Therefore, sufficient
working capital is necessary to sustain sales activity.
OPERTING CYCLE
The working capital requirement of a firm depends, to a great extent upon the operating cycle
of the firm. The operating cycle may be defined as the time duration starting from the
procurement of goods or raw material and ending with the sales of realization.
The length and nature of the operating cycle may differ from one firm to another depending
upon the size and nature of the firm. In a trading concern, there is a series of activities starting
from procurement of goods (saleable goods) and ending with the realization of sales revenue
(at the time of sale itself in the case of cash sales and at the time of debtors realization in case
of credit sales).similarly in case of manufacturing concern, this series starts from the
procurement of raw materials and ending with the sales realization of finished goods. In both
the cases, however, there is a time gap between the happening of the first event and the
happening of the last event. This time gap is called the operating cycle.
Thus, the operating cycle of a firm consists of the time required for the completion of
the chronological sequences of some or all of the following:
1. Procurement of raw material and services.
2. Conversion of raw material into work-in-progress.
3. Conversion of work-in-progress into finished goods.
4. Sale of finished goods (cash or credit)
5. Conversion of receivable into cash.
OBJECTIVES OF THE STUDY
1. To examine the effectiveness of working capital management polices with the help of
accounting ratio.
2. To evaluation the financial performance of the company.
3. To make suggestions for policy makers for effective management of working capital.
SCOPE OF THE STUDY
1. The scope is limited to operations of Praga tools Ltd, Hyderabad.
2. The period consider 2 months
The scope of the study is limited to collecting the financial data published in the annual
reports of the company with reference to the objectives stated above and an analysis of the
data with a view to suggest favorable solution to various problems related to financial
performance.
RESEARCH METHEDOLOGY
Research methodology is a way to systematically solve the research problem. It may be
understood as a science of studying now research is done systematically. In that various steps,
those are generally adopted by a researcher in studying his problem along with the logic behind
them. It is important for research to know not only the research method but also know
methodology. ”
The procedures by which researchers go about their work of describing, explaining and
predicting phenomenon are called methodology.”
Methods comprise the procedures used for generating, collecting and evaluating data.
All this means that it is necessary for the researcher to design his methodology for his problem
as the same may differ from problem to problem.
Data collection is important step in any project and success of any project will be
largely depend upon now much accurate you will be able to collect and how much time, money
and effort will be required to collect that necessary data, this is also important step. Data
collection plays an important role in research work.
Without proper data available for analysis you cannot do the research work accurately.
TYPE OF DATA COLLECTED
There are two types of data collection methods available.
1. Primary data collection
2. Secondary data collection
1) Primary data
The primary data is that data which is collected fresh or first hand, and for first time
which is original in nature. Primary data can collect through personal interview, questionnaire
etc. to support the secondary data.
2) Secondary data collection method
The secondary data are those which have already collected and stored. Secondary data
easily get those secondary data from records, journals, annual reports of the company etc. It
will save the time, money and efforts to collect the data. Secondary data also made available
through trade magazines, balance sheets, books etc.
This project is based on primary data collected through personal interview of head of
account department and other concerned staff member of finance department. But primary data
collection had limitations such as matter confidential information thus project is based on
secondary information collected through annual report of the company, supported by various
books and internet sites.
COMPANY PROFILE
BRIEF HISTORY OF THE DOABA COOPERATIVE MILK PRODUCERS UNION LTD.
MILK PLANT, JALANDHAR
The Doaba Cooperative Milk Producers Union Ltd., Jalandhar was set up in the year 1972 with
Regd.No.193 dated 4.11.1972 under Cooperative Sector with the financial assistance provided
by State Government and N.C.D.C. The Doaba Milk Plant was established in the year 1976
with a capital cost of Rs. 110 lakhs.
The primary objectives of the Union were to provide ready market to the Milk Producers for
sale of Milk in the villages through Cooperatives on the one hand and to provide wholesome
hygienic good quality processed milk and milk products to the urban consumers at
remunerative price on the other hand. The Milk Union has saved the milk producers from the
unfair trade practices of middlemen, Dodhies and Milk Contractors thereby improving their
economic condition tremendously.
The Milkshed area of Milk Union comprises districts of Jalandhar, Kapurthala and Nawanshar.
It consists of 8 Tehsils namely Jalandhar, Nakodar, Phillaur in Jalandhar Distt., Kapurthala,
Sultanpur Lodhi, Phagwara, Bhulath in Kapurthala District and Nawanshahar in Nawanshahr
District covering 1797 villages in 18 blocks. It Started with 100 Milk Producers Cooperative
Societies in the year 1972 which have grown upto 934 i.e. (701 MPCS + 233 Nominal
Members) having membership of 38014 as on 31.03.11
Milk Union have got three chilling center namely Sultanpur Lodhi in Kapurthala,, Shahkot in
Jalandhar District and Khatkar Kalan in Nawanshahar district with capacity of milk handling
20000 LPD, 20000 LPD and 30000 LPD respectively. Moreover, Khatkarkalan is a very
famous village of Shaheed-E-Ajam S.Bhagat Singh and the name of the Milk Chilling
Centre, .Khatkar has been named in the memory of S.Ajit Singh uncle of Shaheed –E-Ajam
Bhagat Singh.
Milk Plant of the Union was initially set up in the year 1976 with a handling capacity of 50,000
liters. Milk/ day. Subsequently, the Plant was expanded in the year 1985 to 1.00 lakh liters of
milk/ day and Plant was further expanded in year 1991 to 3.00 lakh liters of milk per day
besides facilities to manufacture milk products like Ghee, Butter, Skimmed Milk Powder,
Whole Milk Powder, Dairy Whitener, Paneer, Curd, etc. The Plant is also meeting the
pasteurized liquid milk demand of residents of Jalandhar, Kapurthala, Nawanshahr districts.
CERTIFICATION OF ISO-9001:2000 & IS –15000 (HACCP)
An ISO-9002 and IS-15000 (HACCP) certification has been accredited to Doaba Milk Union
by the Bureau of Indian Standards on dated 16.5.2000. Recently, we have received revised
ISO 9001-2000 Certification from BIS. This endeavour to improve the overall quality of its
product and services on line of Total Quality Management was further recognized by Bureau
of Indian Standards by conferring commendation certificate for the prestigious Rajiv Gandhi
National Quality Award, 2001.
FINANCIAL PERFORMANCE:
Financial performance has considerably been improved during the last nine years. As on
31.03.2002 Cash loss was Rs.13.20.crore. As on 31.03.11 there is no cash loss.
Email : [email protected]
OBJECTIVE OF THE ORGANISATIN
If we keep our customer happy, they will keep us in business. Every organization get success
through giving proper satisfaction to its customer .customer satisfaction is the basis for any
successful organization.
Milk plant has some objective to operate its business:-
1. To carry out the activities to economy development of agriculturists by organizing
effectively production, processing marketing of milk products as per direction of
federation
2. To provide better facilities to milk producer so as easily availability of milk can
become possible and for their development.
3. To purchase commodities from the member and deal with non-members for marketing,
dairy and allied products subject to such conditions as may be decided by the board
from time to time.
4. Constant up gradation of producers and process for better product quality adopting food
safety management system to ensure total safety to customer health .
The company had a following LOGO for consumer satisfaction:-
HIERARCHY OF THEORGANISATION
PRODUCTS
LASSI ICE CFREAM
MILK BUTTER
CHEESE GHEE
CURD
SWEETS