ANALYSIS OF WORKING CAPITAL MANAGEMENT

EXECUTIVE SUMMARY Background of the Company:

This Project is carried out in Dharwad Milk Union, which is a part of Karnataka Milk Federation (KMF). KMF is a co-operative apex body in the state of Karnataka representing dairy farmers organization and also implementing dairy development Karnataka activities to achieve the dairy objective. KMF has 13 milk unions and Dharwad Milk Union is one among 13 unions. The project helps to study the practice in Working Capital in DMU, in the past five years and to calculate finance management performance in the past five years.

TITLE OF THE PROJECT:

ANALYSIS OF WORKING CAPITAL MANAGEMENT at Dharwad Milk Union Ltd, Dharwad

Objectives of the Study

To study the management of inventories, account receivables and cash in the firm. To study the liquidity position of the firm . To Comparison of present and last four years Working capital. To know the current position Conclusion of the company.

Statement of the Problem:

The study has been taken in the organization for the purpose to know the Working Capital Management of the company for five years.

Design of the Study:

The study is conducted at Dharwad Milk Union. The study was about the studying the company profile, Annual Reports of last five years of the firm & operating cycle,

Need for the Study:

This study is undertaken to know the present liquidity position of the Dharwad Milk Union, Dharwad. This project will throw light on firms competitiveness with other firms and it also throw light on the financial position and adequate working capital, which the firm possesses. This study carried out to know whether DMU has properly utilized its resources and assets are not and also ascertain the liquidity position of the firm. Babasabpatilfreepptmba.com 1

ANALYSIS OF WORKING CAPITAL MANAGEMENT

Data Collection:
The present study is carried out working capital position of the Dharwad Milk Union, which attempts to analyze and interpretation by using ratio analysis technique & concepts of working capital. Tabular formats are also used wherever necessary to show the data calculations with necessary theoretical explanations.

Sources of Data:
Sources of data are can be classified into two categories: 1. Primary Data 2. Secondary Data

Primary Data:
The information is collected from the personal interaction with the financial managers of DMU.

Secondary Data:
This is been is collected through DMU Annual Reports of last five years i.e. 2004-05 to 2008-09 & also through; 1. Information form the internet sources 2. Information from the materials provided by the concern magazine, newspapers Brouchers.

Findings:
i ii years. Inventory Turnover Ratio of Dharwad Milk Union is better in the year 2008-09 Creditors Payments Ratio is improving in the recent year compared to last five compared to last five years 18.51.

Suggestions:
i In the recent years, the debt turnover ratio of Dharwad Milk Union is decreases so, it is suggested to increases the debt turnover it help to maintain the debt collection. ii It is suggested that Dharwad Milk Union reduce its operating cycle, so that it can maintain sufficient working capital in the liquid form.

Limitation of the study:

This study covers only a part of Dharwad Milk Union. Babasabpatilfreepptmba.com 2

ANALYSIS OF WORKING CAPITAL MANAGEMENT i )The study is done only on the Balance sheet and profit and Loss A/c ii )Study is based on information provided by the company.

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

INDUSTRIAL PROFILE Dairy Industry in India:

Dairy enterprise is an important occupation of farmer. In India nearly 70% of the people depend on agriculture. It is the backbone of India. Dairy is linked with agriculture industry to a large extent. Animal husbandry in India is an essential part of agriculture. It is mainly a rural occupation closely associated with agriculture.

Development of Dairy Industry in India:

During the Pre-independence year there was no serious stress given to dairy industry. In 1886 the Department of Defense of the British Government established the dairy farms for the supply of milk to the British troops in Allahabad. Later, in 1920 serious steps were taken by Mr. William Smith, an expert in dairy forming to improve the milk production There was discrimination done to the Indians hence this led to the rise of the first milk union in India. In Lucknow in 1937 called the Lucknow milk producers Co-operative union Ltd. In 1946 AMUL (Anand Milk Udyog Ltd) was started in Gujarat to bring up the economic stability of villagers. When the farmer Prime Minister Lal Bahaddur Shastri visited the functioning as it was rendering a social service to the society, which helped the villagers to come in the national economic stream. The dairy and Animal Husbandry received serious attention after the independence. There were lots many of progressive steps taken by the government through five year plans. This led to the formation of National Dairy Development Board in 1965 & thus in 1970 he decided to Bring a White Revolution through out the country, Initially 10 states were selected were for this purpose excluding Karnataka. In Karnataka in 1974 an integrated project was launched to restructure and reorganize the dairy industry on Co-operative principle of AMUL and to lay foundation for new direction in dairy industry.

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

NATIONAL DARIY DEVELOMENT BOARD: History:

The NDDB was founded to replace exploitation with empowerment, tradition with Modernity, Stagnation with growth, transforming dairy into and instrument for the development of Indians rural people. The NDDB was established in 1965; the board is registered under the Societies Registration Act and the public Trust Act, fulfilling the desire of the Prime Minister of India the late Lal Bahaddur Shastri to extend the success of the Kaira Co-operative Milk producers union (AMUL) TO OTHER PARTS OF India. Dr Vergese Kurien was the founder chairman. The success combined the wisdom & energy of farmers with professional management to successful capture liquid milk and milk product markets while supporting farmers investment with inputs and services.

The Growth:
NDDB began its operations with the mission of making dairying a vehicle to a better future for millions of gross roots milk producers. The mission archived helped to launce Operation Flood, a programmed extending over 26 years and with the help of World Bank Loan India become the worlds largest milk producing country. As per March 2001 Indias 96000 Dairy Co-operative are integrated thorough a three Tier Ccoperative structure. The Anand pattern, which is owned by more than 10 million formers, procures an average of 1605 million liters of milk everyday. The milk is processed and marketed by 170 milk producers co-operative unions which, in turn own 15 state co-operative milk marketing federation. Since its establishment the dairy development board has planned and spearheaded Indias Dairy programmer by placing dairy development in the hands of milk producers and the professionals they employ to manage their co-operatives. In addition, NDDB also promotes other commodity based co-operative, allied industries and veterinary biologically on an intensive and nation wide basis.

Objectives of NDDB:

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ANALYSIS OF WORKING CAPITAL MANAGEMENT To sponsor, promote, manage, acquire, construct or control any plant or work, which promote projects of general public utility relation to dairying. To make information available on request to technical services to increase To prepare initial feasibility studies of dairying and other dairy related projects To undertake research and development programmed related to production and To provide assistance for exchange of information to other international production of Milk. and undertake subsequent designing planning and start up those projects. marketing of milk and milk products. agencies.

Services rendered by NDDB:

Planning dairy and rural development projects. Organization of farmer co-operative societies. Setting up of dairy and cattle feed plants. Manpower planning and training. Applied research and development. Implementation of milk production enchantment programmed.

KARNATAKA MILK FEDERATION:

The first dairy in Karnataka was started in Kudige in Kodagu district in 1955, further in June 1974; an integrated project was launched in Karnataka to restructure and reorganize the dairy industry on the co-operative principle and to lay foundation for a new direction in dairy development. In 1975, the World Bank aided dairy development was initiated. The present Karnataka Milk Federation (KMF) came into existence in 1984-as a result of merging of Karnataka Dairy Development Co-operation, small co-operatives and Karnataka Milk Production Development and loose vendors. At the end of the March 1998, the network of 8023 Diary Co-operative Societies (DCS) have been established which are spread over 166 taluks of the total 175 taluks in all 27 districts of Karnataka. There are 13 Milk Unions and Dharwad Milk Union (DMU) is one among them. There are 35 Chilling centers, 3 Farm coolers, 15 Liquid

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ANALYSIS OF WORKING CAPITAL MANAGEMENT milk plants and 2 Product dairies for chilling, processing, conservation and marketing of milk. To supply cattle feed there are 4 cattle feed plants. To ensure supply of quality germ plasma Bull breeding farm and frozen semen bank are also available.

Karnataka co-operative Milk Producers Federation Limited (KMF)

KMF is the apex Body in Karnataka representing Dairy Cooperatives. It is the third largest dairy co-operative amongst the dairy co-operatives in the country. To impart training, institutes at Bangalore and regional training institutes at Dharwad and Gulbarga are functioning. Three nitrogen plants (2 plants of 25 CPM and 1 plant of 5 CPM) are been set-up to supply nitrogen, which is used for Refrigeration purpose. Three diagnostic centers have been set-up for monitoring diseases: three fodder farms at Rajkunte, Kuttanahalli and Kodagu have been set-up to supply good quality of fodder and seed production farm at Shahpur has been set-up. The federation giving details of the latest technology in dairy industry etc is published Ksheer Sagar magazine monthly.

UNITS OF KMF:
KMF has the following Units functioning directly under its control: Mother Dairy, Yelahanka, Bangalore. Nandini Milk Products, KMF Complex, Bangalore. Cattle Feed Plants at Rajanukunte/Gubbi/Dharwad/Hassan. Nandini Sperm Station (formerly known as Bull Breeding Farm & Frozen Semen Bank) at Hessaraghatta. Pouch Film Plant at Munnekolalu, Marathhalli. Central Training Institute at KMF Complex, Bangalore. Quality Control Lab at KMF Complex, Bangalore.

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List of Co-operative Milk Producers Societies Unions:

KMF is a co-operative apex body in the state of Karnataka for representing dairy organizations and also implementing dairy development activities to achieve the following objectives. Providing assured and remunerative market for all the milk produced by Providing hygienic milk to urban consumers. To build village level institutions in co-operative sector to manage the To ensure provision of milk production inputs, processing facilities and

the farmer members.

dairy activities. dissemination of know-how.

To facilitate rural development by providing opportunities for self-employment at village level, preventing migration to urban areas, etc.

FUNCTIONS OF KMF:
Co-ordination of activities between the unions. Developing the markets for the increasing in milk production. To make the brand Nandini as a house hold name.

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ANALYSIS OF WORKING CAPITAL MANAGEMENT Excellence in quality is to be maintained to lay a solid foundation for wide Spread acceptance of Nandini products. To increase the market share of Nandini.

THE GROWTH PROCESS:

The growth over the years and activities undertaken by KMF is summarized briefly hereunder:

1976-77

2008-2009

Dairy Co-operatives Membership Milk Procurement Milk Sales Cattle Feed Consumed Daily Payment to Farmers Turnover

Nos Nos Kgs/day Lts/day Kgs/DCS Rs.Lakhs Rs.Crores

416 37000 50000 95050 220 0.90

11063 1956163 3025940 2129790/curd:1.77LKPD 3010 342 2707.00

SUPPORT TO TRAINING & EMPLOYMENT PROGRAMME (STEP):

Karnataka Milk Federation is implementing a special program for overall development of women folk in rural areas. This program is named as "Support to Training and Employment Program for women" (STEP) launched during 1997 with the financial assistance of Ministry of Human Resource Development, Department of Women and

DHARWAD MILK UNION:

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

Dharwad District Co-operative Milk Producers' Societies' Union Ltd. The Union was established in the year 1986 under the Operation Flood II & III. The Union also later took over in 1988 the Milk Products Factory with a drying capacity of 2.10 Lakh Litres per day, earlier established by the Karnataka Milk Products Limited (GOK Undertaking). The Union covers the districts of Dharwad, Karwar, Haveri & Gadag, and has Chilling Centres at Gadag,Haveri, Sirsi, Ron, Nargund, Hirekerur & Kumta with chilling capacity of 0.80 Lakh Litres Per Day. The Union procures and sells on an average 0.68 Lakh Kgs per Day and 0.59 Lakh Litres Per Day respectively. There are 7 Bulk Milk Coolers in the Union. Apart from selling milk, it sells pure buffalo milk & produces very thick 250 gm Curds in mud pots specially designed for this namely "KUDIKE MOSARU", the famous Dharwad Peda, Butter in bulk as well as in retail packs and in 10 gm chip lets, Ghee, Skimmed Milk Powder and Paneer.

Functions of Dharwad Milk Union:

the right price. To educate the villagers about milk and its quality. To make Nandini as a part of daily life. To provide good quality of cattle feed, fodder, veterinary properly The main function of is to procure milk from villagers and pay them

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Objectives of Dharwad Milk Union:

effect on the body. quality of milk. To make villagers self-viable and build self image. To see that every citizen becomes healthy by consuming good Providing hygienic and good quality of milk to the consumers. To build the economic strength of the milk products in villages. To eliminate middlemens in the business so that the milk products To educate the villages about the adulteration of milk and its harmful

receive there appropriate share of bread.

Process at Dharwad Milk Union:

The milk collected at DCSs is brought to the center thought carries trucks etc. the quality and quantity of milk bought is checked at the Reception center by a supervisor. A sample of milk is taken and is tested in a laboratory for fat content, Solid Not fat (SNF) acidity etc. As the milk is at room temperature is to be brought down to 40 c to 50 c. so that it may check the growth of bacteria. To ensure this milk is passed through a chilling chamber where the milk is chilled. Its temperature is bought down and then the milk is stored in a tank called as Raw Milk Tank. From this tank milk is pumped to a pasteurizing cell where the milk is heated up to 720 c and 15seconds, so that all the bacteria and microorganisms may be killed and then the milk is simultaneously cooled to 40 C to 5o C and is store in a Pasteurized Milk Tank From here the milk is separated according to the requirement of production of different types of milk and the remaining milk is used for manufacturing milk products.

Nature of business carried

One of the core functions is procurement of milk, processing it and marketing milk and milk products. Dharwad Milk Union markets its products under the brand name Nandini.

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Mission Statement Dharwad Milk Union:

Dharwad Milk Union is commuted to provide maximum possible price for the milk supplied by its members and provided necessary inputs for the milk production while ensuring economic viability of the union and also committed to provide quality milk products to consumer and image as one of the top most milk union of the cooperative dairy industry in the country.

VISION DHARWAD MILK UNION:

Total quality Honesty Discipline Cleanliness Transparency Sincerity and deduction Co-operative free of politics Sovereignty Respective each other opinion ideas and feelings

PRODUCT PROFILE;
packs. Nandini Toned: Fresh and Pure milk containing

3.0% fat and 8.5% SNF. Available in 500ml and 1litre

Nandini Homogenized Milk: is pure milk which is

homogenized and pasteurized. Consistent right through, it gives you more cups of tea or coffee and is easily digestible.

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ANALYSIS OF WORKING CAPITAL MANAGEMENT Full Cream milk: Containing 6% Fat and 9 % SNF.A rich, creamier and tastier milk, Ideal for preparing home-made sweets & savories. Cow's pure milk: UHT processed bacteria free in a

tamper-proof tetra-fino pack which keeps this milk fresh for 60 days without refrigeration until opened. Available in 500ml Fino and in 200ml Bricks Nandini Ghee: A taste of purity. Nandini Ghee, made

from pure butter. It is fresh and pure with a delicious flavor. Hygienically manufactured and packed in a special pack to retain the goodness of pure ghee. Shelf life of 6 months at ambient temperatures. Available in 200ml, 500ml, 1000ml sachets, 5lts tins and 15.0 kg tins Nandini Curd: made from pure milk. It's thick and

delicious. Giving you all the goodness of homemade curds. Available in 200gms and 500gms sachet.

Nandini Peda: No matter what you are celebrating!

Made from pure milk, Nandini Peda is a delicious treat for the family. Store at room temperature approximately 7 days Available in 250gms pack containing 10 pieces each.

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

Nandini Gulab Jamoon Mix: Great way to those soft

and juicy jamoon treats at home! Nandini Gulab Jamoon Mix is made from Nandini skimmed milk powder, maida, soji and Nandini Special Grade Ghee. Available in 100gms and 200gms standy pouch with a five layer foil lamination. Shelf life of 6 months. Nandini spiced Butter Milk: is a refreshing health

drink. It is made from quality curds and is blended with fresh green chilies, green coriander leaves, asafoetida and fresh ginger. Nandini spiced butter promotes health and easy digestion. It is available in 200 ml packs and is priced at most competitive rates, so that it is affordable to all sections of people. Flavored milk: Sterilized flavored milk, a nutritious and

healthy drink and an all-season wholesome drink available in five different flavors - pineapple, rose, badam, pista.

Nandini Butter: Rich, smooth and delicious. Nandini

Butter is made out of fresh pasteurized cream. Rich taste, smooth texture and the rich purity of cow's milk makes any preparation a delicious treat. Available in 100gms (salted), 200gms and 500gms cartons both salted and unsalted,

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ORGANIZATIONAL STRUCTURE

BOARD BOARD

Directors Directors (8members) (8members)

Ex officers Ex officers (5members) (5members)

Govt nominees Govt nominees

Procurement Procurement Dept Dept

Product president Product president director director

Marketing dept Marketing dept

Administrative Administrative dept dept

Finance dept Finance dept

Security dept Security dept

Transport Transport

Quality control Quality control

F.G.S& stores F.G.S& stores

M.I.S M.I.S

Accounts & Accounts & purchase purchase

DEPARTMENTS OF THE COMPANY:

Production department Administration department Purchase department Procurement & input department Stores department Security department Processing department Quality control department Finance department Marketing department Distribution department

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ANALYSIS OF WORKING CAPITAL MANAGEMENT Human Resource development

DHARWAD MILK UNION PROFILE:

Status Location Share capital Plant capacity A co-operative society registered under the co-operative Act 1959. Lakmanahalli, industrial area, Dharwad 3 crores by members and 2 crores by government of Karnataka 2 lakh liters per day Milk powder Butter Milk chilling centers Ghee Gadag Haveri Hirekerur Naragund Ron Presence value 12tons/day 6tons/day 6tons/day 20,000 ltrs/day 20,000 ltrs/day 20,000 ltrs/day 8,000 ltrs/day 10,000 ltrs/day

Sirsi 20,000 ltrs/day of Collection of Milk 80,000 ltrs/day Sales of Milk 70,000 ltrs/day Dharwad, Haveri, Gadag, Uttar kannada districts Elected members 8 Ex officers 3 5 By govt 393 workers 9 NANDINI Milk:

activity Area of operation Board of directors

Total workers Departments Brand name Products

Toned Milk, full cream milk, standard milk, shubham milk, homogenized milk. Milk products: Butter, ghee, curd, lassi, paneer, milk Babasabpatilfreepptmba.com 16

ANALYSIS OF WORKING CAPITAL MANAGEMENT powder, khova, peda, mysore pack etc Co-operative 460 socities societies at village level

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PURCHASE DEPARTMENT:
It also maintains records of all the suppliers calls for Tenders, quotations etc. Quotations with lowest rate are sanctioned. Purchase up to 50,000, then the approval of Managing Director.

The structure of Purchase Department is as shown:

Purchase officer

Purchase superident

Assistant purchase officer

Helpers

PRODUCTION DEPARTMENT:
Production department is the main department wherein the raw material is converted into finished into products. At DMU production department is well planned & adequately equipped manufacturing set up where the entire necessary infrastructure is available. The quality of the product is also dependant on the production procedure. In DMU the raw milk is processed to form the good quality of milk. During the processing the milk is differentiated depending on the contract of FAT & SNF (Solids Not Fat) The different types of milk different in quality are TYPES OF MILK Full Cream Milk Toned Milk Standardized milk Full Cream Milk Shubham milk . FAT 6% 3% 4.5% 6% 6% SNF 9% 8.5% 8.5% 9% 9%

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ORGANIZATION CHART OF PRODUCTION DEPARTMENT

MANAGER MANAGER Deputy manager Deputy manager

Assistant manager Assistant manager

Office staff Office staff

Assistant (stores) Assistant (stores) Clerk Clerk Assistant(account) Assistant(account) Typist Typist

Technical officer Technical officer

Senior supervisor Senior supervisor Junior supervisor Junior supervisor Dairy operation Dairy operation Dairy technician Dairy technician Dairy worker Dairy worker

PRODUCTION PROCESS
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DCS

Fresh liquid milk

Sample testing

Fat & SNF

Chilling

Storing

Pasteurization

Separation

Homogenization

Storing

Packaging Dispatching

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

THE PRODUCTION PROCEDURE AT DMU IS DONE UNDER DIFFERENT STAGES. THE STAGES ARE AS FOLLOWS: COLLECTION OF MILK:
In this stage the milk is bought from the various district co-operative societies (DSC) to the main dairy in a can of 40 litters capacity in tempos or in any other vehicles. The cans marked with two different colors to differentiate between the cow & the buffalo milk. One the milk is bought to the main dairy it undergoes into following process. UNLOADING: The cans were unloaded is called as dock station. The cans are unloaded from the vans manually.

ORGANOLEPTIC TEST
This test is carried out by a person manually without using any machines but using his sense organs like nose & hence it is called as organoleptic test. This test is conducted before the cans are weighed. In this test various sub-tests are conducted like

SMELLING (ODOUR) TEST:A man at dock station or platform checks the acidic nature of milk by smelling or tasting the raw milk. If the tasted milk has bad odors then the dairy will pay lower rate to such society members than the normal rate.

EXTRANEOUS-MATTER APPERANCES:In this test the raw milk is undergone into the test, which is conducted by the chemist. The chemist checks for two aspects mainly whether the milk is contaminated or not & the milk is in liquid form or curd form. He also checks for any extraneous matters like dust, flies etc. which lead to spoilage of milk.

ACIDIC TEST
As the payment to the suppliers or DSC depends mainly on FAT & SNF content of the raw milk. The supplier may add sugar to the milk so as to increase the FAT & SNF content. Hence to avoid this adulteration sugar test is done. Its procedure is 10ml of milk is shaken in a test tube & 1ml of hydrochloric acid. Few crystals of resorcinol are mixed to it. The solution is shaken well & heated for five minutes. If solution turns organ color it is demanded that sugar is mixed to it.

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STORAGE OF CHILLED MILK:Once all the tests are over, the milk is allowed to store in the SILOS (Storage tank). So as to maintain its cold level of 4 degree calicoes. The unions having 7 storage tanks, 3 tanks are vertical with 30000 litters capacity each and the remaining 4 are horizontal among which 2 are having the capacity of 10000 litters each and other 2 of 15000 litters each. After chilling the milk is passed through pasteurizer for pasteurization.

PASTEURIZATION:This step of production includes heating every partical of milk at 72 degree celcious in 15 seconds and it cold in less then 4 degree celcious. When it is passing through pasteurization the cream is removed depending on the quality of the milk required (standardization).

PACKING:Once the pasteurization closed is conducted the next step is to pack the milk. The packing is done by the machine of fluid goods and were as it is done manually in case of solid goods like pheda. The machine packs the raw milk in two sizes that is 500ml and 1000ml pouches. These machines are automatic with a capacity of packing 10000 to 14000 pouches per hour. The speed can be even altered according to suitability. These machines are used to pack all different types of milk in plastic bags. These plastics are polythene bags required for packing milk is bought from Bangalore.

STORAGE:The last but not the process is the whole of production process is storage. The milk packed in 500ml and 1000ml pouches are arranged in the crates. Each cater contain 10 litters of milk. This caters are stored in cold room which has a temperature of about 5 degree Celsius or below

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ADIMINISTRATIONDEPARTMENT:

FUNCTOINS
Maintenance of attendance. Establishment of billing. Maintenance of service records. Domestic enquiry. To maintain shifts timing. To look after recruitment process. Babasabpatilfreepptmba.com 23

ANALYSIS OF WORKING CAPITAL MANAGEMENT Conducting training to the new employees and also to the existing once.
RESPONSIBILITIES OF ADMINISTRATION DEPARTMENT management. existing once. To look after over recruitment process. To maintain shifts timings. Conducting training to the new employees and also to the To look after the overall administration of time office

Organization chart of procurement and input department

Manager Manager

Procurement wing Procurement wing

Technical input wing Technical input wing

Deputy Manager Deputy Manager

Deputy Manager Deputy Manager

Assistant manager Assistant manager

Assistant manager Assistant manager

Extension officers Extension officers

Clerks Clerks

Clerks Clerks

Helpers Helpers

The union carries procurement by setting up co-operative societies at village level. Later milk is collected in the chilling center, milk collected from the milk center, is first tested, there are milk testing equipments for this purpose. Then a survey on availability of transportation facilitates and productive capacities of villages are conducted. If the marketable surplus is more than 150 litters per day, a society is formed; further 10

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ANALYSIS OF WORKING CAPITAL MANAGEMENT promoters selected from village and are given responsibility of collecting the capital for society selling shares. Procurement is done twice a day and payment is made on the basis of percentage of the content Fat and SNF in the milk After this milk is sent to unions chilling center, whichever is near. At the chilling center, milk is chilled up to 4 degree Celsius. Letter this chilled milk is to sent to union insulated tankers for further processing. The main function of this department is to procure milk from different areas throughout the year

STORES DEPARTMENT:
The stores Department in DMU follows the Codex system (Coded Control System). A card is maintained for each item and a number is allotted. The card attached to each article consists of amount balance, date of issue, purchase etc. this is later recorded in separated ledger book. The inventories are of different types ranging from mechanical, shares, packing items to animal drugs, and stationary and veterinary drugs, there are at least 4000 different inventories. This department has the following services: It tries to maintain maximum and minimum level of inventory so as to avoid blockage of capital and storage. Ordinary and local available commodities are maintained at minimum possible level. Items of urgent and not easily available are stored sufficiently for further demand.
The structure of this department is as shown below:

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FINISHED GOODS STORES:

This Department acts as an interface between production and Marketing Department . it is concerned with maintenance of finishes goods connected records. it received all the finished goods and issues the stock to marketing department as per indents. It ensures that the goods are maintained properly with respect to quality. Accounts are maintained and daily and daily and daily and monthly report is submitted to the production. Marketing finance Departments. As the products. As finishable first infirst out method of inventory is followed.
Times FGS Department has the following Structure:

QUALITY CONTROL DEPARTMENT:

The Quality Control department has the following structure

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In DMU, at every stage, care is taken to ensure that the customer gets the product, which has a very high quality. Hence there is separate department called Quality Department, where the quality testing is done. Quality control is very essential as to maintain the freshness of the milk. All the containers, pipes and other equipments are washed with hot water before starting off with new production. There are many tests conducted here. The packed milk, we get will have undergone 3 quality tests. First test is done on raw milk, which we get from chilling center. Next before standardization and the last test before packing

TEST

REASON

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Temperature Should be below 5 degrees Clot on Boiling If mill curdles soon after

billing milk is rejected Acidity Test Alcohol Test To check the heat stability of Lactometer Fat Test SNF milk To check the density of milk Percentage of fat determined Percentage of SNF determined for pricing SNF=CLR+FAT/4 To test the extent of acidity

FINANCE DEPARTMENT:
This department is responsible for keeping all the inward and outward flow of money of union. It prepares budget every year and financial rules for receipts all payments are framed. The functions of these departments. Are: To prepare monthly accounts (Receipts and payment P & I Account and Balance sheet). To prepare quarterly financial statement To prepare integrated business plan. To prepare year ending financial statements. To get accounts audited from statutory books of accounts.

DMU Follows to types of auditing:

1. Pre-Audit System-done by Finance and Account Department every Year. 2. Statutory System-Done by Private charted accounts every year.

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ANALYSIS OF WORKING CAPITAL MANAGEMENT SECURITY DEPARTMENT: Dharwad Milk occupies 25 acres of land the whole premise is been guarded by the security personnel. The security people work in three shifts. All the vehicles are checked before entering the premise. The departments is also maintains separate registers like store-in Register, Attendance register etc.

Channels of distribution system:

I. DMU ---Transportation Vehicles --- Dealers Door delivery boys -- Consumers II. DMU ----Transportation Vehicles --- Institutions. (institutions :hospitals, hotels , hostels etc.) III. DMU ----Transportation Vehicles --- Parlours -- Consumers. IV. DMU ----Transportation Vehicles---- Day Counters --Consumers.

Price list of milk and milk products.

SL. 1 2 3 4 5 6 7 8 9 Products name Tonned milk/ltr Standard milk/ltr Double tonne milk/ltr Homogenized milk/ltr Curds Butter milk Peda/kg 200ml Ghee 500 ml Ghee Net Amt 16.40 18.00 15.00 Commission 0.60 1.00 1.00 1.00 2.00 1.60 12.00 18.64 18.10 MRP 17.00 19.00 16.00 18.00 20.00 13.00 128.00 205.00 199.00 29

std 17.00 18.00 11.40 116.00 186.36 180.90

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ANALYSIS OF WORKING CAPITAL MANAGEMENT 10 1000ml Ghee 177.27 17.73 11 12 14 15 16 S.F.M/bottle Jamoon 10.48 mix/200gm 27.83 196.40 115.00 151.79 1.52 4.17 23.60 10.00 18.21

195.00 12.00 32.00 220.00 125.00 170.00

pack Mysore pack/kg Paneer Butter 500gm

The structure of finance Department is as shown: Deputy Manager:

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

MARKETING:
A social and managerial process whereby individuals and groups obtain what through creating and exchanging products and value with others. Marketing more than any other business function deals with customers, building customer relationship based on customer value and satisfaction is at the very heart of modern marketing.

MARKETING IN DMU:
Marketing is an important segment of Dharwad Milk Union. Marketing activities are extended to many other districts:

For Example
Dharwad

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ANALYSIS OF WORKING CAPITAL MANAGEMENT Haveri

Gadag

Dharwad Milk Union comprises of two dairies and more No. of Six chilling centres. Its present capacity of production is 2,50,000liters of milk per day.This 2,50,000 litres milk is distributed as detailed below: 80,000 litres is supplied to the local consumers 10,000 litres is supplied to dynamic milk dairy 20,000 litres is supplied to other states Remaining 50,000 litres is utilized for making powdeMARK

THE MARKETING DEPARTMENT HAS THE FOLLOWING STRUCTURE

Marketing Marketing Manager Manager

Deputy Manager Deputy Manager

Technical Officers Technical Officers

Marketing Marketing Superintendent Superintendent

Development Development Officer Officer

Development Development Officer Officer

Vanshroffs Vanshroffs

Vanshroffs Vanshroffs

Marketing Marketing Assistant Assistant Marketing Marketing Assistant Assistant

PRICING STRATERGY
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ANALYSIS OF WORKING CAPITAL MANAGEMENT Pricing decisions are subject to an incredibly complex arry of environmental and competitive forces. A Company sets not a single price but rather a pricing structure that covers different items in its line.this pricing structure changes over time as products move through their life cycle. The company adjusts product prices to reflect changes in costs and demand and to account for variations in buyers and situations. As the competitive environment changes, the company considers when to initiate price changes and when to respond to them.

DMUs PRICING STRATERGY

D.M.U produces different milk products to cater efficiently the variety milk needs of the urban and semi urban consumers of the jurisdiction covering many district Viz., Dharwad, Gadag, Haveri, Dhavanageri etc.
Diferent prices are changed to different types of milk on the basis of content of FAT and SNF (Solid not FAT)
Sl. No. 1 2 TYPE OF MILK Double Toned Milk Toned Milk Standardised 3 Milk FAT &SNF 1.5% FAT SNF 3.0%FAT SNF 4.5% SNF 6.0% 4 Full Cream Milk 9.0%SNF FAT 18 FAT 8.5% 14.5 9.0% 11 8.5% 13 SELLING Rs.) PRICE(in

MILK PRODUCER CO-OPERATIVE SOCIETYs PRICING:

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

Sl. No. 1 TYPE OF MILK Cross Breed Cows FAT &SNF 3.0%FAT 8.5% SNF SELLING PRICE(in Rs.) 8.6

Local Breed Cows

4 to 5% FAT 8.5% SNF

9.5

Local Buffaloes

6% FAT 9%SNF

10 to 10.50

Cross Breed Buffaloes

8 to 10%FAT 9 to 10% SNF

11 to 12.00

MARKETING DEVELOPMENT PROGRAMS BY DMU

Dharwad milk union has been catering efficiency to the quality milk needs of the urban and semi urban Dhavanageri etc. Over the years the union had been taking many steps to meet the charging consumers needs, availability of milk variants and milk products to meet the of the consumers areas for imeplementation during year 2009-10 Priority areas for the development of liquid milk market in the union identified And necessary action plans have been drawn for implementation during the year 200809. the key strategies planned for 2008-09 is given below 1) INCREASING THE AVAILABILITY OF NANDINI MILK IN THE MARKET 2) CONSUMER AWARENESS PROGRAMME 3) MOTIVATING CHANNEL MEMBERS 4) CONSTITUTING EFFECTIVE REPLACEMENT/ LEAKAGE POLICY 5) SYSTEM OF CONSUMERS/RETAILERS GRIEVANCE REDRESSAL 6) STREAMING TEAM CONCEPT FOR MARKET VISIT area are consumers by supplying fresh districts of Dharwad, Gadag, Haveri,

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ANALYSIS OF WORKING CAPITAL MANAGEMENT 7) CONSTITUTING A CORE GROUP CONSISTING QUALITY,

PLANT AND MARKETING STAFF FOR SOLVING DAY TO DAYPROBLEMS Marketing Development programs by DMU Increasing the availability of Nandini milk in the market a) by expanding the retail market in the Union Area 1)Introduction of an adhoc milk distribution route to Dharwad city from morning 8.00 A.M. to 6.00 P.M.at regular intervals to cater to the retailers needs after normal vending hours. 2) Introduction of afternoon milk distribution route to other roots and towns so as to make Nandina milk available throughout the day in many towns. b)Strengthening existing milk parlours, depots and day counters:

Dharwad Gadag Milk Day Conterrs Depots 8 3 6 5 4 7

haveri 7 5 5

total 20 16 18

There are totally 20 milk parlours, 16 day counters and 18 depots operating in he union area. It is decided to strengthen these existing outlets through building up of cold chain facilities and exended hours of c)Introduction of one liter sachet supply of milk. milk to me market

standardized homogenized

during august 2005 during day time . d)Introduction of lassi/flavoured milk during January 2008.

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

CHAPTER III STUDY DESIGN

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

TITLE OF THE STUDY SYSTEM

The stores Department in DMU follow the Codex system (Coded Control system). A card is maintained for each item and a number is allotted. The card is attached to each article consists of amount balance, date of issue, purchase etc. this is later recorded in separate ledger book. The inventories are of different kind ranging from mechanical, spares, packing items to animal drugs etc.

THIS DEPARTMENT HAS THE FOLLOWING SERVICES:

1. 2. possible level. It tries to maintain maximum and minimum level of inventory Ordinary and locally available commodities are maintained at minimum

STAFFING
The staff deals with the various personnel policies followed by the organization. Below are given the personnel policies followed by the organization. Personnel policies: There are around 240 employees working. There are various policies followed. The Administrative department forms the policies.

RECRUITMENT AND SELECTION:

Due to registration, termination, retirement and transfers the concerned department head will give the manpower requirements along with the job description. The manpower sourcing is done through advertisement, manpower consultant, and employment exchanges and personnel reference.

PROMOTION:
Promotion is on the basis of seniority

INTRDUCTION:
After an employee is employed in DMU, he\ she has to make familiar to the union and also to know the objective, value, functions and the operations. This helps the employees to interact with senior staff members from various departments.

SALARIES AND EMPLOYEE BENEFITS:GROSS SALARY:

A regular staff member in the union will have a gross salary consisting of basic salary, dearness allowance, cca, house rent allowance and conveyance allowance.

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

Other facilities:
Shift allowance Canteen facility

SKILLS
These are the distinctive competencies that are present in the organization it is the design and development of products quality and service or viability of product. The employees in this organization also have all the distinctive skills that are required for the undertakings of research and development activities. The DMU is improving the employees skills and techniques through motivating them and giving proper training to them also through giving proper working condition.

STYLE
DMU has top to bottom or top down style system.The style of organization is authoritarian. It means management cadre follows authoritative. The indicators of the style are: Follows rules and orders Reliable and dependable

DECISION OPERATION:

MAKING

PARAMETER

FOR

DAY-TO-DAY

Top manager will tell marketing manager to collect information regarding daily requi9rementsw of the sale of milk and milk products based on demand. Then this information will provided to production department indicating production activities

SHARED VALUES
The core or fundamental values that are widely share in the organization and serve as guidelines that are important, these values have great meaning because they focus attention and provide broader since of purpose. The values of the organizations are 1) Customer Satisfaction 2) Commitment to total quality 3) Cost and time consciousness 4) Innovative and creative

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ANALYSIS OF WORKING CAPITAL MANAGEMENT 5) Trust and team spirit

6) Respect for individually

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

WORKING CAPITAL MANAGEMENT INTRODUCTION:

Management of the working capital is nothing but the management of current assets. The management of the current assets includes Inventory, Received, Debtors, Book debts, Short-term assets cash and bank balances. The management of fixed and current assets, however differs in three important ways. 1. In managing fixed assets time is a very important factor, consequently, discounting and compounding techniques play a significant role in capital budgeting and minor one in the management of current assets. 2. The large holding of current assets, especially cash, strengthens, the firms liquidity position (reduces riskiness), but also reduces the overall profitability. Thus a risk returns trade off is involved in holding current assets, 3. Level of fixed as well as current assets depends upon expected sales, but it is only current assets, which can be adjusted with sales fluctuations in the short run. Thus the firm has a greater degree of flexibility in managing current assets. Working Capital refers to the amount of capital which is readily available to an organization that is, working capital is the difference between resources in cash and readily convertible into cash (current assets) and organizational commitments for which cash will soon be required (current liabilities). Thus, working capital involves activities such as arranging the short-term finance, negotiating favorable credit terms, controlling the movement of cash, administrating accounts receivables and monitoring the investments also a great deal of time.

TYPES OF WORKING CAPITAL:

A) On the Bases of Concepts: There are two concepts of working capital 1. Gross Working Capital: It refers to the firms investment in current assets. Current assets are the assets which can be converted into cash within an accounting year and include cash, short-term securities, debtors, bills receivables and stock (inventory).

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

2. Net Working Capital: It refers to the difference between current assets and current liabilities. Current liabilities are those claims of outsiders which are expected to mature for payment within an accounting year and include creditors, bills payable, and outstanding expenses. Net working capital can be positive or negative. A positive net working capital will arise when current assets exceed current liabilities. A negative net working capital occurs when current liabilities are in excess of current assets. The gross working capital concept focuses attention on two aspects of current assets management: (a) How to optimum investment in current assets. (b) How should be current assets financed.

The level of investment in current assets should avoid two danger points- excessive and inadequate investment in current assets. Investment in current assets should be just adequate, not more, not less, to the needs of the business firm. Excessive investment in current assets should be avoided because it impairs firms profitability, as idle investment earns nothing. On the other hand, inadequate amount of working capital can threaten solvency of the firm because of its inability to meet its current obligations. The working capital needs of the firm may be fluctuating with changing business activity.

B) On the Basis of Time:

1. Permanent Working Capital: Permanent Working Capital is permanently locked up in the circulation of current assets. It covers the minimum amount requested for maintaining the circulation of current assets. (a) Initial Working Capital: At its inception and during the formative period of its operations a company must have enough cash fund to meet its obligations. The need for initial working capital is for every company to consolidate its position. (b) Regular Working Capital:

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ANALYSIS OF WORKING CAPITAL MANAGEMENT It refers to the minimum amount of liquid capital required to keep up the circulation of
the capital from the cash inventories to account receivable and from account receivables to back again cash. It consists of adequate cash balance on hand and at bank, adequate stock of raw materials and finished goods and amount of receivables.

2. Variable Working Capital: It refers to the past of the Working Capital that changes with the volume of business, it may be divided into two classes. (a) Seasonal Working Capital: There is many line of business where the volumes of operations are different and hence the amount of working capital varies with seasons. The capital required to meet the seasonal needs of the enterprise knows as Seasonal Working Capital. (b) Special Working Capital:

The capital required to meet any special operations such as experiments with new products or new techniques of production and making interior advertising campaign etc, is also know as Special Working Capital.
Needs of Working Capital:

The need for working capital to run the day-to-day business activities cannot be overemphasized. We will hardly find a business firm which does not required any amount of working capital. Indeed, firms differ in their requirements of the working capital.
The firms aim is that maximizing the wealth of shareholders. Earning a steady amount of profit requires successful sales activity. The firm has to invest enough funds in current assets for generating of sales activity. Current assets are needed because sales do not convert into cash instantaneously. There is always an operating cycle involved in the conversion of sales into cash. Therefore Working Capital required for: 1) To meet the cost of inventories including total of raw materials purchased parts, operating Supplies, work in progress, finished goods. 2) To pay wages, salaries, for indirect labor, clerical staff, managerial and supervision staff. 3) To meet overhead costs, including those of maintenance services activities, fuel, power charges, taxes and general expense administration.

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ANALYSIS OF WORKING CAPITAL MANAGEMENT 4) To bear the expansion (with regard to promotion of sales) e.g. expenses on packing,
advertisement, salesmanship, Sales Servicing, After requires, Credit Facilities, Delivery Services, etc.

IMPORTANCE OF WORKING CAPITAL MANAGEMENT:

Adequate working capital created certainty, security and confidence in the minds of the persons in the management as well as in the minds of creditors and workers. 1) It creates a good credit standing for the firm because credit standing depends upon the ability to pay promptly. A Company with adequate working capital is always able to meet current liabilities. 2) It ensures solvency and stability of the enterprises. production and sales. 3) It enables the company to take advantage of cash discount offered by the suppliers of raw materials or merchandise. 4) It enhances the prestige of the company and moral of its workers because a company with adequate working capital is always able to pay wages and salaries promptly and regularly. 5) It enables the company to procure loans from banks on easy and competitive terms. It also ensures continuity in

OBJECTIVES OF WORKING CAPITAL MANAGEMENT:

The objectives of Working Capital Management are as follows: 1) 2) 3) It is in terms of profitability and risk, the aggressive financing strategy and the conservative financing strategy for total-permanent and seasonal-fund requirements. The need for working capital as related to operating/cash cycle, permanent and temporary working capital. In general terms the factors having a bearing on the total quantum of working capital required. 4) The computation of working capital, using both the cash cost approach and the operating cycle approach.

Components of Working Capital

There are two components of Working Capital

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ANALYSIS OF WORKING CAPITAL MANAGEMENT A. Current Assets

B. Current Liabilities

A) Current Assets: Components of Current Assets are as follows: 1. Cash & Bank Balance 2. Stock of Raw Material at cost- work in process and Finished Goods. 3. Advanced Recoverable in Cash or kind or kind or for value to be received. 4. Deposits under the company scheme. 5. Advanced payment of income takes credit certificates.. 6. Outstanding debts for a period exceeding six months. 7. Balance with central excise authorities. B) Current Liabilities: Components of Current Liabilities are as follows: 1. Sundry Creditors for the goods and expenses. 2. Income tax deducted at sources from contractors. 3. Expenses Payable. 4. Unclaimed Dividend. 5. Security Deposits. 6. Liabilities for bills discounted. 7. Bank Overdraft Acceptance.

OPERATING CYCLE:
Operating Cycle or Working Capital Cycle indicates the length of time between affirms paying for raw materials entering into finished stock and receiving cash on the sales of such Finished Stock.

This operating cycle differs from firm to firm. Longer the operating cycle greater will be the amount of Working Capital required and vice versa. Thus it plays an important role in determining the Working Capital needs of a firm.

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

Cash

Raw Materials

Debtors

Sales

Milk & Milk Products

Work In Process

Operating Cycle is the time duration required to convert sales, after the conversion of resources into inventories, into cash. The operating cycle of a DMU involves three phases.

1. Acquisition of resources such as raw material, labour, power and fuel etc.
2. Manufacture of the product which includes conversion of raw material into workIn- progress into finished goods. 3. Sales of the product either for cash or on credit. Credit sales creates book Debts for collection. In the Dharwad Milk Union (manufacturing concern), the working capital operating cycle starts with the purchase of raw materials and ends with the realization of cash from the sale of finished products. It is also called as cash conversion cycle, production cycle etc. It involves the purchase of raw materials and stores, its into stocks of finished goods through the work-in-Progress with the progressive increment of labor and service costs, conversion of finished goods (Milk & Milk Products) into sales, Debtors and receivables and ultimately realization of cash and this cycle continuous again from cash to purchases of raw material and so on.

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

DETERMINANTS OF WORKING CAPITAL:

The following is the description of factors which generally influence the working capital requirements of Dharwad Milk Union 1. Nature of Business: This is one of the primary factors influencing the working capital requirements of a firm. The DMU is a manufacturing firm, has a longer operating cycle for manufacturing the products, and investing more funds in its current assets. Therefore, it requires much more working capital. 2. Manufacturing Cycle: It comprises of the purchase and use of raw materials and the production of finished goods. Longer the manufacturing cycle, large will be the firms working capital requirements. 3. Credit Policy: The credit policy relating to sales and purchases also affects the working capital. The credit policy influences the requirement of working capital in two ways: i Credit terms generated by the firm to its customers. ii Credit terms available to the firm from its creditors. 4. Growth & Expansion: As a firm grows, it is logical to expect that a large amount of working capital is required. The growth in volume of the business effects the requirements of working capital. If the firm goes on diversifying its activities, the working capital is also increases. 5. Price Level Changes: Changes in the price level also affect the requirements of working capital. The rising price levels will require a firm to maintain higher amount of working capital. Same level of current assets will need increased investment when price are increasing. 6. Operating Efficiency & Performance: The operating efficiency of the firm relates to the optimum utilization of resources at minimum costs. The firm will be effectively contributing to its working capital if it is efficient in controlling operating costs. The use of working capital is improved and pace of cash cycle is accelerated with operating efficiency.

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

7. Level of Taxes: Tax liability is the short-term liability day able in cash. The amount of taxes to be paid in advance creates the need for working capital. If the tax liability increases, it leads to an increase in the requirement of working capital and vice versa. The need for working capital varies with the tax rates and advance tax provisions. 8. Sales Growth: The working capital needs of the firm increase as it sales grow. The growing firm may need to invest funds in fixed assets in order to sustain its growing production and sales. This will in turn, increase investment in current assets to support enlarged scale of operations.

WORKING CAPITAL MANAGEMENT CONCERNED WITH THE FOLLOWING ASPECTS:

1. Cash Management: Cash is the important current asset for the operation of the business. cash is the basic input needed to keep the business running on a continuous basis; it is also the ultimate output expected to be realized by selling the service or product manufactured by the firm. The firm should keep sufficient cash, neither more nor less. Cash is the liquid form of an asset. It is the ready money available in the firm or with the business, essential for its operations. A firm needs the cash for the following three purposes: (a) The Transaction Motive: (b) The Precautionary Motive: (c) The Speculative Motive: 2. Receivables Management: Receivable represents amounts owed to the firm as a result of sale of goods or services on the ordinary course of business. These are claims of the firm against its customers and form part of its current assets. These receivables are carried for the customers. The period of credit and extent of receivables depends upon the credit policy followed by the firm. The main purpose of maintaining or investing in receivables is to meet competitors, to increase sales, and to maintain a cordial relationship with the clients.

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

3. Inventory management: Every enterprise needs inventory for smooth running of its activities. It serves as a link between production and distribution process. There is, generally a time lag between the recognition of a need and its fulfillment. The greater the time lag, the higher the requirements for inventory. The unforeseen fluctuations in demand and supply of goods necessitate the need for inventory. Moreover, it provides a cushion for future price fluctuations. .

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

ANALYSIS AND INTERPRETATION

D.M.U is one of the most reputed companies in the Karnataka. D.M.U, leading milk & milk products co-operative society, aims at providing health and toned milk to its consumer at a better and reasonable price. D.M.U is facing competition from various manufactures of milk & milk products. The study is conducted in D.M.U to measure the working capital management of the company. The working capital management is the most important tool of measure the liquidity position of the company. Every company as to maintain good management of working capital, so the working capital of a D.M.U since its establishment is cause of worry, as it has fails to produce desired results. The D.M.U, instead of generating trading surplus for economic uplift of milk producers has become a loosing venture. So, this study is undertaken to observe the management of Working Capital through Ratio Analysis Technique, because ratio analysis is the important tool to measure the working capital management. So I had taken the five years annual reports to measure the working capital management. Note: we have used the ratio analysis in this project in order to substantiate the managing of working capital. For this, we used some of the ratios to get the required output. The present study ascertained with the help of following ratios: 1. Current Ratio 2. Quick Ratio 3. Inventory Turnover Ratio 4. Debtors Turnover Ratio 5. Creditors Turnover Ratio 6. Working Capital Turnover Ratio 7. Current Assets Turnover Ratio 8. Working Capital to Sales Ratio

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

Current Ratio:
The current ratio of a unit measures firms short-term solvency, that is, its ability to meet short-term obligations. It is the ratio of total current assets to total current liabilities. The current ratio measures the ability of the firm to meet its current liabilitiescurrent assets get converted into cash in the operating cycle of the firm and provide the funds needed to pay current liabilities. It is calculated by dividing total current assets by total current liabilities:

Current Ratio = Current Assets Current Liabilities

Current Assets include Closing Stock, Deposits (asset), Loans & Advances, Sundry Debtors, Cash-in-hand, and Bank Accounts. Current Liabilities include GRANTS, O.S.L, Other Liabilities, Salary Recoveres, Security Deposit A/C, Unpaid Salary/ Wages A/C, Duties & Taxes, Sundry Creditors.

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

Table:-01 The Table Showing Current Ratio Year 2004-05 2005-06 2006-07 2007-08 2008-09 Current Assets 6,07,17,987 7,11,81,059 6,36,58,413 9,25,79,781 7,21,28,952.41 Current Liabilities 3,26,52,240 4,35,76,692 3,59,78,861 5,15,95,821 5,07,41,016.54 Current Ratio 1.85 1.63 1.76 1.79 1.42

Chart:-1 The Chart Showing Current Ratio

2 1.5 1 0.5 0 2004-05 2005-06 2006-07 2007-08 2008-09 current ratio

Interpretation: The Table 1 revels that the Liquidity position of Dharwad Milk Union is Satisfactory even though the ratio of all five years less than the conventional norm i.e 2.because the Dharwad Milk Union is a Public Utility firm, as for the conventional rule concerned the Public Utility firms liquidity position is satisfactory even though the current ratio is less than the conventional norm. There for the liquidity position of Dharwad Milk Union is Satisfactory.

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

Quick Ratio / Liquidity Ratio:

This ratio is also termed as Acid-test ratio. A Quick ratio is concerned with, the relationship between quick assets and current liabilities. It is a measure of liquidity calculated dividing current assets minus inventory and prepaid expenses by current liabilities. The Quick Ratio is the ratio between quick current assets and current liabilities. It is calculated by dividing the Quick Current Assets by the Current Liabilities.

Quick Ratio = Quick Current Assets Current Liabilities

Quick Current Assets = Current Assets Inventory

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Table:-02 The Table Showing Quick Ratio Year 2004-05 2005-06 2006-07 2007-08 2008-09 Chart:-02 The Chart Showing Quick Ratio Quick Assets 3,09,21,237 4,94,41,661 3,94,99,292 6,24,35,658 48710020.15 Current Liabilities 3,26,52,240 4,35,76,692 3,59,78,861 5,15,95,821 50741016.64 Quick Ratio 0.95 1.13 1.09 1.21 0.96

1.5 1 0.5 0 2004-05 2005-06 2006-07 2007-08 2008-09 Queck ratio

Interpretation: It may be inferred from Table 2 the liquidity ratio of Dharwad Milk Union is good in the three years i.e. 2005-06, 2006-07& 2007-08 respectively but in the years 2003-04, 2004-05 & 2008-09 the liquidity ratio is less than standard norm i.e 0.71, 0.95& 0.96 respectively. It indicates that liquidity ratio of D.M.U is not good. But in 2005-06 to 2007-08 the liquidity ratio is more than the standard norm. There for it indicates that company is able to pay its current liabilities with quick assets. The D.M.U is able to utilize its current assets properly & the Inventory movement is quicker and debt payment is also faster.

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

Inventory Turnover Ratio:

Every firm has to maintain certain level of Inventory of finished goods, so as to be meeting the requirements of the business. The Inventory Turnover reflects the efficiency of inventory management. The higher the ratio reflects the more efficient the management of inventories & vice versa. This ratio establishes relationship between cost of goods sold during a given period of time and average amount of inventory held during that period.

It can be ascertained by following formula:

Inventory Turnover Ratio = Cost of Goods Sold Average Inventory

Cost of Goods Sold = Sales Gross Profit Average Inventory = Opening Stock + Closing Stock / 2

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Table:-03 The Table Showing Inventory Turnover Ratio Year 2004-05 2005-06 2006-07 2007-08 2008-09 Cost of Goods Sold 346684070 446321775 397561561 440936818 49,5708694.15 Average Inventory 57588517 51536148 45898519 54303244 26788827.39 Chart:-03 The Chart Showing Inventory Turnover Ratio
20 15 10 5 0 2004-05 2005-06 2006-07 2007-08 2008-09 Inventory Turnover ratio

Ratio 6.02 8.66 8.66 8.11 18.51

Interpretation: It may be found from Table 3 the Inventory turnover of Dharwad Milk Union is increasing & decreasing trend. The D.M.U is increases its efficiency of selling the products. In 2004-05 decreases its inventory turnover i.e 7.19 to 6.02.But in 2005-06 to 2008-09 years the firm performance is better to selling its products. The D.M.U is maintain this way he sells the Inventory very fast & the efficiency of the firm in selling its product is better.

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

Inventory Conversion Period:

Inventory period is the time lag between the purchase of raw materials & sale of finished goods. It includes: Raw Materials Conversion Period W-I-P Conversion Period Finished Goods Conversion Period

The Inventory Conversion Period can be ascertained by following formula:

Inventory Conversion Period = No. of Days in a Year Inventory Turnover Ratio

No. of Days in a Year 365 days

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

Table:-04 The Table Showing Inventory Conversion Period Year 2004-05 2005-06 2006-07 2007-08 2008-09 No. of Days in a Year 365 365 365 365 365 I.T.R 6.02 8.66 8.66 8.11 18.51 I.C.P 61 42 42 45 20

Chart:-04 The Chart Showing Inventory Conversion Period

70 60 50 40 30 20 10 0 2004-05 2005-06 2006-07 2007-08 2008-09

Inventory Conversion ratio

Interpretation: The Table 4 depicts that the Dharwad Milk Union is taking how many days to convert the Raw Materials into finished products. In last five years the company is improved its conversion period yearly. In the year 2003-04 & 2004-05 the D.M.U has taken more days to convert inventory. But in 2005-06 to 2008-09 the D.M.U is taken less days to convert inventory. It indicates that fast to conversion of inventory & sells the goods fast. There for the D.M.U is maintain better Inventory conversion period.

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Debtors Turnover Ratio:

Debtors Turnover Ratio is an important part of current assets; it is determined by dividing the net credit sales by average debtors outstanding during the year. The analysis of the debtors turnover ratio supplements the information regarding the liquidity of one item of current assets of the firm. The ratio measures how rapidly receivables are collected. A high ratio is indicative of shorter time-lag between credit sales and cash collection. A low ratio shows that debts are not being collected rapidly. It can be ascertained by following formula:

Debtors Turnover Ratio = Total Sales Debtors

Total Sales includes Sale-cattle feed, Sale of Milk, Sale of Milk Products, Sale of P & I, Other Sales. Debtors Sundry Debtors

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

Table:-05 The Table Showing Debtors Turnover Ratio Year 2004-05 2005-06 2006-07 2007-08 2008-09 Total Sales 39,05,65,568 48,90,14,708 46,82,83,461 51,18,17,364 573720167.78 Debtors 1,25,55,600 1,85,99,457 1,09,67,229 2,05,58,529 21607761.25 Ratio 31.10 26.29 42.69 24.89 26.55

Chart:-05 The Chart Showing Debtors Turnover Ratio

50 40 30 20 10 0 2004-05 2005-06 2006-07 2007-08 2008-09 Debtors Turnover ratio

Interpretation: The Table 5 shows that the in last five years Debtors turnover ratio of Dharwad Milk Union. In 2003-04 to 2005-06 the debts are not collected rapidly. But in the year 2006-07 the debts are collected rapidly i.e 42.69. In 2007-08 again the debts turnover ratio is decreases 42.69 to 24.89.in 2008-09 the debts turnover Ratio is in increases 24.89 to 26.55. There for the D.M.U is maintaining better sales but managing its debts collection is not efficiently.

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

Debtors Collection Period:

Debtors Collection Period is the time required to collect the outstanding amount from the customers. It means the quality of debtors, since it indicates the speed of their collection.

It can be ascertained by following formula:

Debtors Collection Period = No. of Days in a Year Debtors Turnover Ratio

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

Table:-06 The Table Showing Debtors Collection Period Year 2004-05 2005-06 2006-07 2007-08 2008-09 No. of Days in a Year 365 365 365 365 365 D.T.R 31.10 26.29 42.69 24.89 26.55 D.C.P 12 14 9 15 14

Chart:-06 The Chart Showing Debtors Collection Period

15 10 5 0 2004-05 2005-06 2006-07 2007-08 2008-09 Debtors Collection Period

Interpretation: The Table 1 revels that the debts collection period of Dharwad Milk Union. In 2003-04 to 2005-06 the debts collection period increasing trend. It indicates that the customers are not made payment promptly. but in the year 2006-07 the debts collection period decreased to 9 days. It indicates that the customers had made the payment in time in the year. But in the year 2007-08 again the collection period is increasing 9 to 15 days.but in the year 2008-09 the debts collection period decreased 15 days to 13 days. This continues it is effects to liquidity position of the company.

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

Creditors Turnover Ratio:

This ratio shows the velocity of debt payment by the firm. It expresses the relationship between creditors and purchase. A low turnover ratio reflects liberal credit terms granted by suppliers, while a high ratio shows that accounts are to be settled rapidly. The creditors turnover ratio is an important tool of analysis as a firm can reduce its requirement of current assets by relying of suppliers credit. It is ratio between net credit purchase & the average amount of creditors outstanding during the year. It is calculated by following formula:

Creditors Turnover Ratio = Net Purchase Average Creditors

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ANALYSIS OF WORKING CAPITAL MANAGEMENT Table:-07

The Table Showing Creditors Turnover Ratio Year 2004-05 2005-06 2006-07 2007-08 2008-09 Net Purchase 30,37,70,823 37,12,88,997 34,09,07,386 38,39,44,340 422383354.32 Average Creditors 84,52,411 1,19,87,131 1,25,74,396 87,28,998 5624981.38 Ratio 35.93 30.97 27.11 43.98 75.09

Chart:-07 The Chart Showing Creditors Turnover Ratio

80 70 60 50 40 30 20 10 0 2004-05 2005-06 2006-07 2007-08 2008-09

Creditors Turnover ratio

Interpretation: It may be inferred from Table 7 there is ups & downs in the ratio of credit turnover. The ratio is low in 2003-04 it indicates that the Dharwad Milk Union credit payment is not good i.e 22.19. It is not good to point of liquidity position but in 2007-08 & 2008-09 the credit payment of D.M.U is increasing i.e 43.98 & 75.09 respectively. it indicates that D.M.U has paying credit properly.

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

Creditors Payment Period:

The Creditors Payment Period Ratio represents the average number of days taken by the firm to pay the creditors.

It is calculated by following formula:

Creditors Payment Period = No. of Days in a Year Creditors Turnover Ratio

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ANALYSIS OF WORKING CAPITAL MANAGEMENT Table:-08

The Table Showing Creditors Payment Period Year 2004-05 2005-06 2006-07 2007-08 2008-09 No. of Days in a Year 365 365 365 365 365 C.T.R 35.93 30.97 27.11 43.98 75.09 C.P.P 10 12 13 8 5

Chart:-08 The Chart Showing Creditors Payment Period

15 10 5 0 2004-05 2005-06 2006-07 2007-08 2008-09 Creditors Paym ent Period

Interpretation: It may be found from Table 8 there is ups & downs in a credit payment period of Dharwad Milk Union. In the year 2003-04 the credit payment period of D.M.U is high i.e 16 days. It indicates the company is not maintaining credit payment properly. But in the year 2007-08 & 2008-09 the credit payment period is low ie 8 days & 5 days. It indicates that the D.M.U has taken less credit facility & paying the credit in time. It is good sign of company to utilizing the credit facility properly.

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

Working Capital Turnover Ratio:

This ratio indicates whether the working capital has been properly utilized in making sales or not. This ratio measures the efficiency with the working capital. It is taken as one of the primary indicators of the short-term solvency of the business. It establishes the relationship with the net sales. This ratio represents the number of times the working capital is turned over in course of a year i.e. it measures the efficiency with which the working capital is being used by the firm.

It is calculated by following formula:

Working Capital Turnover Ratio = Cost of Goods Sold Net Working Capital

Cost of Goods Sold = Sales Gross Profit Net Working Capital = Current Assets Current Liabilities

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ANALYSIS OF WORKING CAPITAL MANAGEMENT Table:-09

The Table Showing Working Capital Turnover Ratio Year 2004-05 2005-06 2006-07 2007-08 2008-09 Cost of Goods Sold 34,66,84,070 44,63,21,775 39,75,61,561 44,09,36,818 495708694.15 Net Working Capital 2,80,65,747 2,76,04,367 2,76,79,552 4,09,83,960 21387935.87 Ratio 12.35 16.16 14.36 10.75 23.18

Chart:-09 The Chart Showing Working Capital Turnover Ratio

25 20 15 10 5 0 2004-05 2005-06 2006-07 2007-08 2008-09 Working Capital Turnover ratio

Interpretatio The Table 9 depicts of Working capital turnover ratio is decreasing trend. In the year 2003-04 & 2005-06 the ratio is high i.e 18.38 & 16.16 it shows the D.M.U is properly utilized the working capital for making the sales. It reflects the working capital management is efficient. But in the year 2007-08 the working capital turnover ratio is low compared the first four years i.e 10.75. It indicates the D.M.U is not properly utilized the working capital. It is not good to company; it affects the sales of the company.but in the year 2008-09 again increased i.e 23.18.

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

Current Assets Turnover Ratio:

This ratio reveals the relationship between cost of goods sold and current assets. The higher ratio, the better is the condition of a firm in utilizing its current assets. The higher the ratio, the better is the firm in utilizing its current assets. The lower the ratio indicates that investment in current assets has not brought commensurate gain to the firm. It is calculated by following formula:

Current Assets Turnover Ratio = Total Sales Current Assets

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ANALYSIS OF WORKING CAPITAL MANAGEMENT Table:-10

The Table Showing Current Assets Turnover Ratio Year 2004-05 2005-06 2006-07 2007-08 2008-09 Total Sales 39,05,65,568 48,90,14,708 46,82,83,461 51,18,17,364 573720167.78 Current Assets 6,07,17,987 7,11,81,059 6,36,58,413 9,25,79,781 72128952.41 Ratio 6.43 6.87 7.36 5.53 7.95 Chart:-10 The Chart Showing Current Assets Turnover Ratio
8 6 4 2 0 2004-05 2005-06 2006-07 2007-08 2008-09 Current Assets Turnover ratio

Interpretation: The Table 10 shows that how the Dharwad Milk Union is utilized its Current Assets. In the year 2003-04 to 2006-07 the ratio is increasing 6.05 to 7.36 it indicates that D.M.U is utilizing its current assets more efficiently. It reflects the good current assets management. But in the year 2007-08 the ratio is decreases 7.36 to 5.53. it indicates that the D.M.U is decreasing its current assets utilization. There for the D.M.U is inefficiently manage its current assets. But in the year 2008-09 the ratio is increases 5.53 to 7.95. it reflects the good current assets management.

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

Gross Operating Cycle:

The time lag between the Purchase of Raw Materials & Collection of cash for sale is Gross Operating Cycle. It refers to the sum of inventory period and debtors collection period.

It is calculated by following formula:

Gross Operating Cycle = Inventory Conversion Period + Debtors Collection Period

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ANALYSIS OF WORKING CAPITAL MANAGEMENT Table:-11

The Table Showing Gross Operating Cycle Year 2004-05 2005-06 2006-07 2007-08 2008-09 I.C.P 61 42 42 45 19.72 D.C.P 12 14 9 15 13.75 G.O.C 73 56 51 60 33

Chart:-11 The Chart Showing Gross Operating Cycle

80 60 40 20 0 2004-05 2005-06 2006-07 2007-08 2008-09 Grass Operating Cycle

Interpretation: The Table 11 revels that the Dharwad Milk Union is taking more days in 2004-05 i.e 73 days comparing to five years to convert the raw materials into finished products & the collection of debts. In 2006-07 the D.M.U has taken less days i.e 51 days to inventory conversion & debts collection. For seeing last five years the gross operating cycle of D.M.U is not good because it takes more time to conversion of inventory & also not effective in collection of debts. There for the D.M.U is not maintaining the efficient gross operating cycle.in 2008-09 the DMU has taken less days I,e 33.47 days to inventory conversion and debt collection.

Net Operating Cycle:

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ANALYSIS OF WORKING CAPITAL MANAGEMENT Net Operating Cycle is the time length between the payment for Raw Material purchases
& the Collection of cash for sale. It is difference between Gross operating cycle & Creditors conversion period.

It is calculated by following formula:

Net Operating Cycle = Gross Operating Cycle Creditors Payment Period

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

Table:-12 The Table Showing Net Operating Cycle Year 2004-05 2005-06 2006-07 2007-08 2008-09 G.O.C 73 56 51 60 33.47 C.P.P 10 12 13 8 4.86 N.O.C 63 44 38 52 29 Chart:-12 The Chart Showing Net Operating Cycle
2 1.5 1 0.5 0 2004-05 2005-06 2006-07 2007-08 2008-09 Net Operating Cycle

Interpretation: It may be inferred from Table 12 the Net operating cycle of the Dharwad Milk Union. there is ups & downs in the working capital period. In 2004-05 & 2007-08 the D.M.U is taking more days to complete the working capital operating cycle i.e 63 & 52 days comparing last five years. But in the remaining three years it takes lesser days to complete the working capital.

STATEMENT OF CHANGES IN WORKING CAPITAL

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ANALYSIS OF WORKING CAPITAL MANAGEMENT Particulars As At As At

31st March 2004 31st 2005 Current Assets: Closing Stock Deposits (Assets) Loans & Advances (Assets) Sundry Debtors Cash-in-hand Bank Accounts TOTAL Current Liabilities GRANTS O.S.L Other Liabilities Salary Recoveries Security Deposit A/C Unpaid Salary/ Wages A/C Duties & Taxes Sundry Creditors TOTAL Net Working Capital(CACL) Increase in Working Capital 26,74,867 91,22,834 82,20,464 17,30,010 54,95,509 9,64,236 (-)5,57,980 1,22,75,102 3,99,25,041 1,65,18,935 1,15,46,812 2,80,65,747 2,80,65,747 23,67,917 46,87,203 85,02,899 15,59,726 64,64,176 2,69,471 3,48,437 84,52,411 3,26,52,240 2,80,65,747 2,77,91,767 53,12,844 45,55,448 97,48,574 4,74,436 85,60,907 5,64,43,976 2,97,96,750 51,16,181 61,98,910 1,25,55,600 12,76,078 57,74,468 6,07,17,987 March

Effect on W.C Increase Decrease

20,04,983 1,96,663 16,43,462 28,07,026 8,01,642 27,86,439

3,06,950 44,35,631 2,82,435 1,70,284 9,65,667 6,94,765 9,06,418 38,22,691

1,15,46,812 1,66,87,434 1,66,87,434

Interpretation: In the above statement shows that changes in working capital in the year 2003-04 & 2004-05. It revels how the current assets & current liabilities are changes in the two years. The

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ANALYSIS OF WORKING CAPITAL MANAGEMENT difference between current assets & current liabilities i.e. Net working capital of the two years
is 2003-04 & 2004-05, Rs 1,65,18,935 & Rs 2,80,65,747 respectively. It shows the working capital increase Rs 1, 15, 46,812 in the year 2004-05 compare to 2003-04. In the current assets a) The closing stock increase Rs 20, 04,983 it indicates working capital is increased. b) The D.M.U is reducing its Deposits Rs 1, 96,663 in the year 2004-05. c) The loans & advances are increasing Rs 16, 43,462. d) The Sundry debtors increasing Rs 28, 07,026. e) Cash-in-hand increasing Rs 8, 01,642. f) Bank Accounts are reduces Rs 27, 86,439. In the current liabilities a) The D.M.U is reducing GRANTS Rs 3, 06,950. b) O.S.L reduces Rs 44, 35,631. c) Other liabilities increase Rs 2, 82,435. d) Salary Recoveries decreases Rs 1, 70,284. e) The security deposit A/C increases Rs 9, 65,667. f) The Unpaid salary A/C decreases Rs 6, 94,765. g) Duties & taxes increase Rs 9, 06,418. h) Sundry creditors decrease Rs 38, 22,691.

STATEMENT OF CHANGES IN WORKING CAPITAL

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ANALYSIS OF WORKING CAPITAL MANAGEMENT Particulars As At As At

31st March 2005 31st March 2006

Effect on W.C Increase Decrease

Current Assets: Closing Stock Deposits (Assets) Loans & Advances (Assets) Sundry Debtors Cash-in-hand Bank Accounts TOTAL Current Liabilities GRANTS O.S.L Other Liabilities Salary Recoveries Security Deposit A/C Unpaid Salary/ Wages A/C Duties & Taxes Sundry Creditors TOTAL 2,80,65,747 Net Working Capital(CACL) Decrease in Working Capital 2,80,65,747 2,80,65,747 1,98,91,551 1,98,91,551 2,76,04,367 4,61,380 4,61,380 23,67,917 46,87,203 85,02,899 15,59,726 64,64,176 2,69,471 3,48,437 84,52,411 3,26,52,240 23,86,249 83,69,902 1,17,72,513 13,45,535 71,40,721 3,15,862 2,58,779 1,19,87,131 4,35,76,692 89,658 35,34,720 2,14,191 6,76,545 46,391 18,332 36,82,699 32,69,614 2,97,96,750 51,16,181 61,98,910 1,25,55,600 12,76,078 57,74,468 6,07,17,987 2,17,39,398 54,56,195 97,43,275 1,85,99,457 6,70,180 1,49,72,554 7,11,81,059 91,98,086 3,40,014 35,44,365 60,43,857 6,05,898 80,57,352

Interpretation: In the above statement shows that changes in working capital in the year 2004-05 & 2005-06. It revels how the current assets & current liabilities are changes in the two years. The

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ANALYSIS OF WORKING CAPITAL MANAGEMENT difference between current assets & current liabilities i.e. Net working capital of the two years
is 2004-05 & 2005-06, Rs 2,80,65,747 & Rs 2,76,04,367 respectively. It shows the working capital decreases Rs 4, 61,380 in the year 2005-06 compare to 2004-05. In the current assets g) The closing stock decrease Rs 80, 57,352 it indicates working capital is decreased. h) The D.M.U is increasing its Deposits Rs 3, 40,014 in the year 2005-06. i) The loans & advances are increasing Rs 35, 44,365. j) The Sundry debtors increasing Rs 60, 43,857. k) Cash-in-hand decreasing Rs 6, 05,898. l) Bank Accounts are increases Rs 91, 98,086. In the current liabilities i) The D.M.U is increasing GRANTS Rs 18,332. j) O.S.L increasing Rs 36, 82,699. k) Other liabilities increases Rs 32, 69, 614, l) Salary Recoveries decreases Rs 2, 14,191. m) The security deposit A/C increases Rs 6, 76,545. n) The Unpaid salary A/C increases Rs 46,391. o) Duties & taxes decrease Rs 89,658. p) Sundry creditors increase Rs 35, 34,720.

STATEMENT OF CHANGES IN WORKING CAPITAL

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ANALYSIS OF WORKING CAPITAL MANAGEMENT Particulars As At As At

31st March 2006 31st March 2007

Effect on W.C Increase Decrease

Current Assets: Closing Stock Deposits (Assets) Loans & Advances (Assets) Sundry Debtors Cash-in-hand Bank Accounts TOTAL Current Liabilities GRANTS O.S.L Other Liabilities Salary Recoveries Security Deposit A/C Unpaid Salary/ Wages A/C Duties & Taxes Sundry Creditors TOTAL 2,76,04,367 Net Working Capital(CACL) Increase in Working Capital 75,185 2,76,79,552 75,185 2,17,39,398 54,56,195 97,43,275 1,85,99,457 6,70,180 1,49,72,554 7,11,81,059 2,41,59,121 53,43,330 83,61,565 1,09,67,229 14,18,252 1,34,08,917 6,36,58,413 7,48,072 15,63,637 24,19,723 1,12,865 13,81,710 76,32,228

23,86,249 83,69,902 1,17,72,513 13,45,535 71,40,721 3,15,862 2,58,779 1,19,87,131 4,35,76,692

12,10,017 42,35,110 63,85,085 15,28,296 74,84,996 20,40,450 5,20,510 1,25,74,396 3,59,78,861

11,76,232 41,34,792 53,87,428 1,82,761 3,44,275 17,24,588 2,61,731 5,87,265

2,76,79,552

2,76,79,552

1,38,66,247

1,38,66,247

Interpretation:

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ANALYSIS OF WORKING CAPITAL MANAGEMENT In the above statement shows that changes in working capital in the year 2005-06 &
2006-07. It revels how the current assets & current liabilities are changes in the two years. The difference between current assets & current liabilities i.e. Net working capital of the two years is 2005-06 & 2006-07, Rs 2,76,04,367 & Rs 2,76,79,552 respectively. It shows the working capital increases Rs 75,185 in the year 2006-07 compare to 2005-06. In the current assets m) The closing stock increase Rs 24, 19,723 it indicates working capital is increased. n) The D.M.U is decreasing its Deposits Rs 1, 12,865 in the year 2006-07. o) The loans & advances are decreasing Rs 13, 81,710. p) The Sundry debtors decreasing Rs 76, 32,228. q) Cash-in-hand increases Rs 7, 48,072. r) Bank Accounts are decreases Rs 15, 63,637. In the current liabilities q) The D.M.U is decreasing GRANTS Rs 11, 76,232. r) O.S.L decreasing Rs 41, 34,792. s) Other liabilities decreases Rs 53, 87, 428,. t) Salary Recoveries increases Rs 1, 82,761. u) The security deposit A/C increases Rs 3, 44,275. v) The Unpaid salary A/C increases Rs 17, 24,588. w) Duties & taxes increase Rs 2, 61,731. x) Sundry creditors increase Rs 5, 87,265.

STATEMENT OF CHANGES IN WORKING CAPITAL

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

Particulars As At 31st March 2007 As At 31st March 2008 Effect on W.C Increase Decrease

Current Assets: Closing Stock Deposits (Assets) Loans & Advances (Assets) Sundry Debtors Cash-in-hand Bank Accounts TOTAL Current Liabilities GRANTS O.S.L Other Liabilities Salary Recoveries Security Deposit A/C Unpaid Salary/ Wages A/C Duties & Taxes Sundry Creditors TOTAL Net Working Capital(CACL) Increase in Working Capital 12,10,017 42,35,110 63,85,085 15,28,296 74,84,996 20,40,450 5,20,510 1,25,74,396 3,59,78,861 2,76,79,552 1,33,04,408 4,09,83,960 4,09,83,960 3,67,19,942 50,65,378 50,26,959 2,30,58,959 8,40,850 87,75,717 21,535 77,426 87,28,998 5,15,95,821 4,09,83,960 1,33.04,408 3,67,19,942 20,18,915 4,43,084 38,45,398 6,87,446 12,90,721 38,55,361 7,91,849 1,66,73,874 2,41,59,121 53,43,330 83,61,565 1,09,67,229 14,18,252 1,34,08,917 6,36,58,413 3,01,44,123 54,70,306 1,23,61,237 2,05,58,529 6,14,520 2,34,31,066 9,25,79,781 1,00,22,149 59,85,002 1,26,976 39,99,672 95,91,300 8,03,732

Interpretation:

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ANALYSIS OF WORKING CAPITAL MANAGEMENT In the above statement shows that changes in working capital in the year 2006-07 &
2007-08. It revels how the current assets & current liabilities are changes in the two years. The difference between current assets & current liabilities i.e. Net working capital of the two years is 2006-07 & 2007-08, Rs 2,76,79,552 & Rs 4,09,83,960 respectively. It shows the working capital increases Rs 1, 33, 04,408 in the year 2007-08 compare to 2006-07. In the current assets s) The closing stock increase Rs 59, 85,002 it indicates working capital is increased. t) The D.M.U is increasing its Deposits Rs 1, 26,976 in the year 2007-08. u) The loans & advances are increasing Rs 39, 99,672. v) The Sundry debtors increasing Rs 95, 91,300. w) Cash-in-hand decreases Rs 8, 03,732. x) Bank Accounts are increases Rs 1, 00, 22,149. In the current liabilities y) The D.M.U is increasing GRANTS Rs 38, 55,361. z) O.S.L increasing Rs 7, 91,849. aa) Other liabilities increases Rs 1, 66, 73, 874,. bb) Salary Recoveries decreases Rs 6, 87,446. cc) The security deposit A/C increases Rs 12, 90,721. dd) The Unpaid salary A/C decreases Rs 20, 18,915. ee) Duties & taxes decrease Rs 4, 43,084. ff) Sundry creditors decrease Rs 38, 45,398.

STATEMENT OF CHANGES IN WORKING CAPITAL

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

Particulars As At 31st March 2008 As At 31st March 2009 Effect on W.C Increase Decrease

Current Assets: Closing Stock Deposits (Assets) Loans & Advances (Assets) Sundry Debtors Cash-in-hand Bank Accounts TOTAL Current Liabilities GRANTS O.S.L Other Liabilities Salary Recoveries Security Deposit A/C Unpaid Salary/ Wages A/C Duties & Taxes Sundry Creditors TOTAL Net Working Capital(CACL) Increase in Working Capital 40983960 50,65,378 50,26,959 2,30,58,959 8,40,850 87,75,717 21,535 77,426 87,28,998 5,15,95,821 40983960 16226812 516000 12969587 158137 9496918 16021 224466 5624981 45232922 26896029 14087931 40983960 14087931 33633144 33633144 3104017 5514 147040 4510959 10089372 682713 721201 11161434 3,01,44,123 54,70,306 1,23,61,237 2,05,58,529 6,14,520 2,34,31,066 9,25,79,781 23418932 5004655 11526293 21607761 717927 9853383 72128951 1049232 103407 13577683 6725191 465651 834944

Interpretation:

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ANALYSIS OF WORKING CAPITAL MANAGEMENT In the above statement shows that changes in working capital in the year 2007-08 &
2008-09. It revels how the current assets & current liabilities are changes in the two years. The difference between current assets & current liabilities i.e. Net working capital of the two years is 2007-08 & 2008-09, Rs 40983960& Rs 26896029 respectively. It shows the working capital increases Rs 14087931 in the year 2008-09 compare to 2007-08. In the current assets The closing stock decrease Rs 6725191 it indicates working capital is decreased. The D.M.U is decreasing its Deposits Rs 465651 in the year 2008-09. The loans & advances are decreasing Rs . 834944 The Sundry debtors increasing Rs 1049232. Cash-in-hand decreases Rs103407 Bank Accounts are decreases Rs 13577683. In the current liabilities

gg) The D.M.U is decreasing GRANTS Rs11161434. hh) O.S.L increasing Rs 4510959. ii) Other liabilities increases Rs 10089372,. jj) Salary Recoveries increases Rs 682713. kk) The security deposit A/C decreases Rs 721201. ll) The Unpaid salary A/C increases Rs 5514. mm) Duties & taxes decrease Rs 147040. nn) Sundry creditors increase Rs 3104017.

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ANALYSIS OF WORKING CAPITAL MANAGEMENT

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FINDINGS
1) In the Current Ratio shows that in the year 2008-09 the Liquidity position of the Dharwad
Milk Union is less i.e 1.47 compare to all five years.

2) Quick ratio of the Dharwad Milk Union is increasing in the year 2008-09 to 0.96 compare
with 2004-05 (0.95.).

3) The Inventory Turnover Ratio of the Dharwad Milk Union is decreased by 6.02 in the year
2004-05 compare to 2008-09 ratio i.e 18.51. & in 2007-08 again decreasing i.e 8.11 compared 2005-06 & 2006-07 i.e 8.66. 4) The Dharwad Milk Union has taken more days to convert the raw materials into finished products i.e 61 days in the year 2004-05.

5) Debtors turnover ratio of Dharwad Mlk Union is decreases i.e 26.55 in the year 2008-09
compared to 2006-07 i.e 42.69 & 2004-05 i,e. 31.10

6) The Debtors collection period of Dharwad Milk Union is increasing i.e 14 days in the year
2008-09 compare to the year 2004-05 i.e 12 days.

7) The Creditors Turnover Ratio of the Dharwad Milk Union is increasing to 75.09. in the
year 2007-08 compare to 2004-05 ratio i.e 35.93.

8) Credit Payment Period of Dharwad Milk Union is also decreasing to 5 days in the recent
year compare to 2004-05 i.e 10 days.

9) Working Capital Turnover Ratio of the Dharwad Milk Union is increasing in the recent
year i.e 23.18 compare to 2004-05 the ratio is 12.35.

10) The Current Assets Turnover Ratio of Dharwad Milk Union is high in the recent year i.e
7.95 compare to last four years. 11) The Dharwad Milk Union has taken more days to complete the Net Operating Cycle i.e 63 days in the year 2004-05. . 12) In the statement of changes in Working capital for the year 2004-05 & 2005-06. The working capital decreasing Rs 4, 61,380 in the year 2005-06. 13) In the statement of changes in Working capital for the year 2005-06 & 2006-07. The working capital is increasing Rs 75,185 in the year 2006-07. 14) In the statement of changes in Working capital for the year 2006-07 & 2007-08. The working capital is increasing Rs 1, 33, 04,408 in the year 2007-08.

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ANALYSIS OF WORKING CAPITAL MANAGEMENT 15) In the statement of changes in Working capital for the year 2007-08 & 2008-09. The
working capital is increasing Rs 1, 40,87,931 in the year 2008-09. 16) The study is shows that the Dharwad Milk Union has not using latest technology & also there is excess work force on some departments than required. 17) The Dharwad Milk Union is not having any Freedom in Marketing & Promotional activities, because most of the decisions are taken by K.M.F.

SUGGESTION
1) It is suggested that the D.M.U has to reduce Inventory and increases investment in the form of quick assets, so that it can maintain good liquidity position. 2) In the recent years, the debt turnover ratio of D.M.U is decreases so, it is suggested to increases the debt turnover it help to maintain the debt collection. 3) In the recent years, the debts collection period of D.M.U is increasing, So it is advised to D.M.U to reduce the collection period, so that it can maintain sufficient liquid working capital. 4) The study of Inventory utilization ratio of D.M.U not properly utilized their inventory. It is advised to adopt scientific inventory management to improve working capital.

5) The working capital turnover ratio in decreasing trend in the recent year, it is suggested to
D.M.U to increase working capital turnover ratio, so that it can maintain a sufficient working capital. 6) It is suggested that D.M.U reduce its operating cycle, so that it can maintain sufficient working capital in the liquid form. 7) The current assets turnover ratio is in the recent year, it is suggested to D.M.U increase current assets turnover, so that it can generate more revenue by investing in the current assets. 8) It is suggested that D.M.U should reduce the time length of Net operating cycle by taking appropriate measures.

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ANALYSIS OF WORKING CAPITAL MANAGEMENT 9) D.M.U should have to appoint skilled and qualified employees and also new technology
in machineries. It increases efficiency and quality of the firm. 10) D.M.U should have to computerize all the departments in order to increase efficiency and productivity of employees. 11) D.M.U should have take sales promotion measures like free home delivery to urban consumers. This help to increase the market share through increase sales.

CONCLUSION
The study of Working Capital Management in the D.M.U is satisfactory. I got more information on working capital management of the D.M.U, it is more helpful to my study. The study of last five years liquidity position of the company is better. In last five years company is facing several problems in finance & Marketing promotional activities. D.M.U has suffered losses due to financial problems & less quantity of milk supply in the previous years but in the recent year it is better position. It shows that D.M.U is improving its financial conditions & also utilizing its assets & resources properly. If D.M.U continues the same performance as in the current financial year, it can earn more profits.

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BIBLIOGRAPHY
I.M. Pandey Financial Management. Vikas Publishing House Pvt. Ltd. M.Y. Khan and P. K. Jain Financial Management. Tata Mcgraw Hill
publishing company Ltd. New Delhi.

Prasanna Chandra Fundamentals of Financial Management. Tata Mcgraw Hill

Publishing Company Ltd. New Delhi.

Web Site:. www.KMF Nandini.com

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BALANCESHEET FOR THE YEAR ENDING (2004-05)

Liabilities Capital Accounts Reserves & Surplus Share Capital-A Class Share Capital-B Class Share Suspense Loans (Liability) Secured Loans Current Liabilities GRANTS O.S.L Other Liabilities Salary Recoveries Security Deposit A/C Unpaid A/C Duties & Taxes Sundry Creditors 3,48,437 84,52,411 Salary/Wages 23,67,917 46,87,203 85,02,899 15,59,726 64,64,176 2,69,471 Profit & Loss A/C Opening Balance Current Period Less: Transferred 7,80,49,726 (-)76,24,062 1,45,985 7,02,79,678 11,27,19,511 3,26,52,240 4,90,07,356 1,41,82,384 2,00,00,000 3,18,240 11,27,19,511 Investments INVESTMENTS Current Assets Closing Stock Deposits (Asset) Loans & Advances ( Asset) Sundry Debtors Cash-in-hand Bank Accounts 1,25,55,600 12,76,079 57,74,468 297,96,750 51,16,181 61,98,910 73,10,520 6,07,17,987 73,10,520 Amount Amount 8,35,07,980 Assets Fixed Assets FIXED ASSETS 9,05,71,545 Amount Amount 9,05,71,545

22,88,79,731

22,88,79,731

BALANCESHEET FOR THE YEAR ENDING

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(2005-06)
Liabilities Capital Accounts Reserves & Surplus Share Capital-A Class Share Capital-B Class Share Suspense Loans (Liability) Secured Loans Current Liabilities GRANTS O.S.L Other Liabilities Salary Recoveries Security Deposit A/C Unpaid A/C Duties & Taxes Sundry Creditors 2,58,779 1,19,87,131 Salary/Wages 23,86,249 83,69,902 1,17,72,513 13,45,535 71,40,721 3,15,862 Profit & Loss A/C Opening Balance Current Period 7,02,79,678 13,53,072 7,16,32,750 10,60,42,793 4,35,76,692 4,90,26,583 1,71,70,800 2,00,00,000 2,76,153 10,60,42,793 Investments INVESTMENTS Current Assets Closing Stock Deposits (Asset) Loans & Advances ( Asset) Sundry Debtors Cash-in-hand Bank Accounts 1,85,99,457 6,70,179.72 1,49,72,554 2,17,39,398 54,56,195 97,43,275 44,24,600 7,11,81,059 44,24,600 Amount Amount 8,64,73,536 Assets Fixed Assets FIXED ASSETS 8,88,54,612 Amount Amount 8,88,54,612

23,60,93,021

23,60,93,021

BALANCESHEET FOR THE YEAR ENDING

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(2006-07)
Liabilities Capital Accounts Reserves & Surplus Share Capital-A Class Share Capital-B Class Share Suspense Loans (Liability) Secured Loans Current Liabilities GRANTS O.S.L Other Liabilities Salary Recoveries Security Deposit A/C Unpaid A/C Duties & Taxes Sundry Creditors 5,20,510 1,25,74,396 Salary/Wages 12,10,017 42,35,110 63,85,085 15,28,296 74,84,996 20,40,450 Profit & Loss A/C Opening Balance Current Period 7,16,32,750 (-)15,12,197 7,01,20,553 9,83,44,158 3,59,78,861 45,89,82,280 1,98,53,156 2,00,00,000 2,76,153 9,83,44,158 Investments INVESTMENTS Current Assets Closing Stock Deposits (Asset) Loans & Advances ( Asset) Sundry Debtors Cash-in-hand Bank Accounts 1,09,67,229 14,18,252 1,34,08,917 2,41,59,121 54,43,330 83,61,565 45,08,600 6,36,58,413 45,08,600 Amount Amount 9,91,11,588 Assets Fixed Assets FIXED ASSETS 9,51,47,041 Amount Amount 9,51,47,041

23,34,34,608

23,34,34,608

BALANCESHEET FOR THE YEAR ENDING

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(2007-08)
Liabilities Capital Accounts Reserves & Surplus Share Capital-A Class Share Capital-B Class Share Suspense Loans (Liability) Secured Loans Current Liabilities GRANTS O.S.L Other Liabilities Salary Recoveries Security Deposit A/C Unpaid A/C Duties & Taxes Sundry Creditors 77,426 87,28,998 Salary/Wages 50,65,378 50,26,959 2,30,58,959 8,40,850 87,75,717 21,535 Profit & Loss A/C Opening Balance Current Period 7,01,20,553 (-)2,02,28,905 4,98,91,648 8,87,10,194 5,15,95,821 8,87,10,194 Amount 5,86,28,480 1,98,53,156 2,00,00,000 27,76,181 Investments INVESTMENTS Current Assets Closing Stock Deposits (Asset) Loans & Advances ( Asset) Sundry Debtors Cash-in-hand Bank Accounts 2,05,58,529 6,14,520 2,34,31,066 3,01,44,123 54,70,306 1,23,61,237 45,35,600 9,25,79,781 45,35,600 Amount 10,12,62,817 Assets Fixed Assets FIXED ASSETS 9,45,61,804.12 Amount Amount 9,45,61,804

24,15,68,833

24,15,68,833

BALANCESHEET FOR THE YEAR ENDING (2008-09)

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Liabilities Capital Accounts Reserves & Surplus GOVT LOAN Share Capital-A Class Share Capital-B Class Share Suspense Loans (Liability) Secured Loans Current Liabilities GRANTS O.S.L Other Liabilities Salary Recoveries Security Deposit A/C Unpaid Salary/Wages A/C 16,021.00 Duties & Taxes Sundry Creditors Amrut yojane AYDCS contribution NDDB loan suspence 2,24,465.88 56,24,981.88 -6,27,746.00 63,15,409.00 -1,79,570.00 21,91,67,408.08 21,91,67,408.08 1,62,26,812.26 5,16,000.00 1,29,69,587.32 1,58,137.58 94,96,918.12 Profit A/C Opening Balance Current Period Less;transferred 4,97,39,737.83 -70,14,282.39 1,90,23,355.00 & Loss 2,37,02,100.44 8,23,63,231.00 5,07,41,016.54 3,98,37,180.33 9,60,480,00 2,23,59,800.00 2,00,00,000.00 29,05,700.00 Current Assets 8,23,63,231.00 Closing Stock Deposits (Asset) Loans & Advances ( Asset) Sundry Debtors Cash-in-hand Bank Accounts 2,16,07,761.25 7,17,926.95 98,53,383.67 2,34,18,932.26 50,04655.50 1,15,26,292.78 7,21,28,952.41 Investments INVESTMENTS 2,20,57,600.00 2,20,57,600.00 Amount Amount 8,60,63,160.54 Assets Fixed Assets FIXED ASSETS 10,12,78,755.23 Amount Amount 10,12,78,755.23

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