Executive Summery

I have carried out my research work in Krishak Bharti Cooperative Ltd., which is
ISO 9001, 14001 and OHSAS 18001 organization. Krishak Bharati Co-operative
Limited (KRIBHCO), a premier Co-operative Society for manufacture of fertilizer,
registered under Multi-State Cooperative Societies Act – 1985, was promoted by
the Govt. of India, IFFCO, NCDC and other agricultural cooperative societies
spread all over the country.

KRIBHCO has setup a Fertilizer Complex to manufacture Urea, Ammonia

& Bio-fertilizers at Hazira in the State of Gujarat, on the bank of river
Tapti, 15 Kms from Surat city on Surat – Hazira State Highway.

 Project Title
“Study on Working Capital Management of Krishak Bharti Cooperative Ltd”

 Research Methodology
• TITLE OF THE PROJECT
Study on Working Capital Management of Krishak Bharti Cooperative Ltd.,
Hazira, Surat.
• OBJECTIVE OF THE STUDY
 To know the liquidity / solvency position of Krishak Bharti Cooperative
Ltd.
 To know the requirement of working capital in KRIBHCO Ltd.
 To know the current asset policy of KRIBHCO Ltd.

 Findings
o As per the analysis it was found that the KRIBHCO’s Gross
Working Capital is declining in past three years.
o Same way the Net Working Capital also declining for past
three years.

1
o Net Operating Cycle if KRIBHCO is also decline as compare
to past two years rather it decline year after year.
o Although liquidity ratios are decline but they are still in deal
condition.
o Inventory turnover ratio is improving year after year. This is
very good for the company the inventories are not kept idle for long.
o Debtors turnover ratio is also improving or increasing. Which
indicate as the year passes the debtors as become more liquid.
o Creditor turnover ratio is also improving year after year
which means now the firm enjoyed more credit period by paying its creditors.
o Working capital turnover ratio also improving it means Net
Working Capital requirement for Sales is decreases.
o Looking at CA/FA ratio it would be said that the company is
following conservative policy but decrease in the ratio year after year it
indicate the company moving towards aggressive policy.

 Suggestions
• According to the study it would said the
although the net working capital of company decreasing the company is still in
good position because the operating cycle of the company is decrease it
means now the cycle become speedier and early and fast recovery of cash it
denote.
• Looking At the current ratio it getting decrease
year after year but company still in ideal position means liquidity position of
company is still better but they have to be careful about this declining trend of
current ratio if this would continue then it would be difficult for company to
meet its obligation against current liabilities.
• The turnover ratios are showing good progress
these means better liquidity and solvency of the company.

2
• Working capital turnover ratio is improving it
means now the company required less working capital for sale. It denotes that
as compare to earlier now the company required less working capital. It
means optimum use of working capital.
• Overall looking at the study it would said that
company have very sound policy to manage its working capital. Current asset
of a company are enough to meet the obligation of paying its current
liabilities.

CHAPTER 1

INRTODUCTION

3
 Board of Directors

Chairman Shri Chandra Pal Singh

Vice-Chairman Shri R.K.Dhami

Directors Shri V R Patel

Shri V Sudhakar Chowdary

Shri Mathew C Kunnumkal

Shri Deepak Singhal

Shri Shiv Narayan Prasad Mishra

Shri S S Jamgod

Shri Ponnam Prabhakar

Managing Director Shri B D Sinha

Finance Director Shri R Kamra

4
 Marketing Director Shri N Sambasiva Rao

Krishak Bharati Co-operative Limited (KRIBHCO), a premier Co-operative

Society for manufacture of fertilizer, registered under Multi-State Cooperative
Societies Act – 1985, was promoted by the Govt. of India, IFFCO, NCDC and
other agricultural cooperative societies spread all over the country.

KRIBHCO has setup a Fertilizer Complex to manufacture Urea, Ammonia

& Bio-fertilizers at Hazira in the State of Gujarat, on the bank of river
Tapti, 15 Kms from Surat city on Surat – Hazira State Highway.

Late Smt. Indira Gandhi, former Prime Minister of India laid the Foundation
Stone on February 5, 1982.

5
Hazira Fertiliser Complex has 2 Streams of Ammonia Plant and 4 Streams of
Urea Plant. Annual re-assessed capacity for Urea and Ammonia is 1.729 million
MT and 1.003 million MT resepctively, the total Project cost was Rs. 890 crores
as against the estimated cost of Rs. 957 crores. This shows a saving of Rs. 67
crores (approximately 7%) in Capital Cost of the Project.

The trial production commenced from November, 1985 and within a very short
time of 3 months, the commercial production commenced from March 01,
1986. Since then, it has excelled in performance in all areas of its operations.

Biofertilizer plant of 100 MT per year capacity was commissioned at Hazira in

August, 1995. KRIBHCO has also completed the installation of an expansion of
the Bio-Fertiliser plant with an additional capacity of 150 MT and the same was
commissioned in December, 1998.

Ten Seed Processing Plants are also in operation in various states.

VISION

We want to be a world class organization that represents the farmer

community and maximizes returns to them through specialization in
agricultural inputs and products and other diversified businesses that
maximize stakeholder value.

MISSION

To act as a catalyst to agricultural and rural development by selecting, financing

and managing projects that are both socially desirable and commercially
profitable.

6
OBJECTIVES

 To Incerese the Urea installation capacity, maintaining its market share.

 To ensure the optimum utilization of existing plant & machinery.
 To diversify into other core sectors like power, LNG terminal/ port,
chemicals etc.

CERTIFICATES

 ISO - 9002 QUALITY SYSTEM CERTIFICATION FOR HAZIRA PLANT

 ISO - 14001 ENVIRONMENT MANAGEMENT CERTIFICATION FOR
HAZIRA PLANT
 ISO - 9001 : 2000 FOR MARKETING
 OHSAS-18001 HEALTH AND SAFETY OF AN EMPLOYEE.

MILESTONES

 One of the world’s largest and most modern fertilizer plants in co-operative
sector.
 First achieve a record capacity utilization in the first year of commercial
production- 93.5% and 97.4% for Ammonia and Urea Plants.
 First in the country to achieve highest net profit of Rs. 126.80 Crores in the
year 1987-88 by any fertilizer organisation
 Has achieved 30 Million of Urea production on 15.08.2004 milestone
within a short period of 18.7 years from commencement of production.
 Has achieved 30 Million tonnes of Ammonia production on 19.03.2006
within a period of 20.3 years from commencement of production.

7
 AWARDS
Environmental Protection
 FAI – ‘Environmental Protection Award’ 1989, 1991 & 1993
 KRIBHCO has bagged the Gopalakrishna Singhania Memorial
Endowment Award given by Indian Merchants Chamber for Outstanding
contribution towards control of Air and Water Pollution in Fertiliser
Industries for the year 1990-91.
 Nehru Memorial National Award –1993 for control of pollution and energy.
 Award by Council for Ecological Futurology and Environment for
Dedication to Environment-2001.

Safety

 The Royal Society for the Prevention of Accidents (ROPSA), U.K. Award
for Safety to KRIBHCO's Hazira Complex for the year 1989 and 1990.

 National Safety Council, U.S.A, awarded “Award for Honour” in the year,
1989-90, 1990-91, 1993-94 and 1996-97 for nitrogenous fertilizer sectors
for operating more than 22 million man hours without occupational injury
or illness for the period from 20.09.92 to 31.12.95.

 National Safety (runners up) Award-1994 by Govt. of India, Ministry of

Labour.

 Gujarat State Safety Award-1995 for lowest disabling injury index by

Gujarat Safety Council.

Energy Conservation

8
  National Energy Conservation Award (second prize) by Ministry of Power,
1994-95 and 2000-01.

Productivity

 FAI – 'Best Production Performance' (runners-up) Award : 1988-89.

 Golden Jubilee memorial Trust Award 1997-98 for Outstanding
Achievement in Productivity by Southern Gujarat Chamber of Commerce
& Industries.
 FAI Best Performance Award for performance of Bio-fertilizer Plant from
Fertilizer Association of India for the year 2002. for the third time.
 KRIBHCO has received the Certificate of Excellence for the year 2001-
2002 in Process Industry from the Indian Institute of Industrial
Engineering, Mumbai.
 KRIBHCO has received "National Productivity Award " for three
consecutive years 1999-2000, 2000-2001 and 2001-2002.
 KRIBHCO has received "Excellence in Improving Productivity " conferred
by South Gujarat Chamber of Commerce & Industry for the year 2007-08

Industrial Relation

 All India Organization of Employees (AIOE) Award 1990 in the field of

Industrial Relations
 Winner of Gujarat State Award for the year 1996 under Group-A Industry
Category-1.
Other Awards

 KRIBHCO receives Samarpit Rajabhasha Sevi Samman by Town official

Language Implementation Committee, Noida for the year 2006-07.

9
 KRIBHCO receives Star Industry of Surat-2008 conferred jointly by

leading newspaper Gujarati Mitra and Consumer Forum.

 KRIBHCO won Sarvottam Stall Prize in Pusa Krishi Vigyan Mela at New

Delhi.

 KRIBHCO receives AMITY HR Excellence Award for the year 2008 by

Amity International Business School.

 KRIBHCO receives Gold star award of Excellence from Institute of

Economic Studies for its overall excellent performance.

 KRIBHCO receives the Rajbhasha Award from Honb'le Minister of

Chemical and Fertilizers for 2002-03, 2003-04, 2004-05.

 KRIBHCO was awarded First prize for Production, Promotion, and

marketting of Bio-fertilizers for the year 2004-05 on 1st of December '05
by FAI.

 KRIBHCO has won INDIRA GANDHI RAJBHASHA PURUSKAR (2nd) for

2003-04
 KRIBHCO -Hazira - Pot Plants exhibition received the 2nd prize in the first

National Horticulture exhibition and flower show for the year 2002.

 FAI – Best Video Film Award 1987, 1990, 1991, 1992, 1993, 1994, 1995,

1996 and 1998

 FAI Technical Innovation Award: 2001-02 to two KRIBHCO Officers

 SHIELD & CERTIFICATE awarded by Rajbhasha Vibhag, Home Ministry,
GOI for PROMOTION OF HINDI AS AN OFFICIAL LANGUAGE for the
year 1993-94

10
  "RAJBHASHA SHIELD" for OUTSTANDING WORK IN OFFICIAL
LANGUAGE for the year 1994-95 by Official Language Implementation
Committee, Surat
 'Best House Keeping' Award to KRIBHCO’s Hazira Complex from Baroda
Productivity Council – Awarded 5 times from 1988-89 to 1991-92

 ORGANIZATIONAL CHART OF KRIBHCO

Government of India

Ministry of Agriculture

Department of fertilizer
& Chemical

Chairman

Board of Directors

Managing Director

Operational Director

CM
GM GM GM GM GM GM (MIS)
(P) (Material) (F&A) (P&A) (Tech) (Mai.)

DGM DGM DGM DGM DGM DGM

(P) (Material) (F&A) (P&A) 11 (Tech) (Maintain)
CM CM CM CM CM CM
Power
PHP
Transportation
(P) Purchase(F&A) (P&A) (Tech) F&S Civil
Mechanic
Electrical
Instrument
Urea
Ammonia(Material)
Store Project(Maintain)
Process
Laboratory
  MEMBERSHIP AND SHARE CAPITAL

KRIBHCO’s paid up Share Capital is Rs. 390.61 crore as on March 31, 2010.
The membership of KRIBHCO consists of 6546 members including co-operative
societies and Government of India. In their endeavor to increase participation of
Cooperative Societies, the share holding of the cooperatives in KRIBHCO has
gone up from 49.5% to 51.6% during 2009-10. The Government’s Share Capital
in KRIBHCO stands at Rs. 188.90 crores which is 48.4%.

12
 M e m b e rs h ip in S h a re C a p ita l

48% 52% C o o p e ra t ive S o c ie t ie s

T h e G o ve rn m e n t o f In d ia

 TOTAL UREA SALES

TOTALUREASALES

37.76 38.47
Qty.\LAKH\MT

40 34.63 36.26
35 28.18
30
25
20
15
10
5
0
2005-06 2006-07 2007-08 2008-09 2009-10
Years

13
  BIO-FERTILIZERS PRODUCTION AND SALES
BIO-FERTILIZER PRODUCTION AND SALES

1000
900

957
953

922
953
800

867
865
700 PRODUCTION

755

784
738
QTY./MT

714
600
500 SALES
400
300
200
100
0
2005-06 2006-07 2007-08 2008-09 2009-10
YEARS

 SEED PRODURCTION AND SALES

BIO-FERTILIZER PRODUCTION AND SALES

2.5

2.22
2.29
1.96
1.98

PRODUCTION
QTY./MT

1.5
1.53

1.67
1.6

1.68
1.51

SALES
1.18

0.5

0
2005-06 2006-07 2007-08 2008-09 2009-10
YEARS

 HISTORY AND DEVELOPMENT

PROJECT ZERO DATE 31st MARCH, 1981

FOUNDATION STONE LAID Late Smt. Indira Gandhi then the Prime
BY Minister Of India on 5th February 1982

PROJECT COMPLETION 31 st MAY 1985

 PLANT CAPACITY & CONSULTANTS

14
 PLANT CAPACITY CONSULTANTS

DAILY ANUUAL

AMMONIA 2 X 1350 MT 8.9 LAKH MT M.W.kellogg, USA, FEDO,

INDIA

UREA 4 X 1100 MT 14.52 LAKH MT SNAMPROGETTI, ITALY,

PDIL, INDIA SENIOR
THERMAL ENGG.U.K

POWER 2 X 15 MWH THERMAL ENGG.U.K.

HAEVY 2 X 55 MT PER PDIL

WATER YEAR HTAS,DENMARK

BIO- 250 MT PER DAE

FERTILIZER YEAR

Product mix

KRIBHCO, manufacturing nitrogenous fertilizer and allied product viz. urea,

Ammonia, Bio-fertilizer, 30 mega watt power plant operation & maintained of
heavy water plant of department of atomic energy, But KRIBHCO is having urea
as its main product.
They use Ammonia as raw material &main input of urea& sale the excess
production to other non-fertilizer industries.

Product mix of KRIBHCO

1. Urea
2. Bio-fertilizer

15
 3. Pulses
 Wheat
 Paddy
 Oil seeds

Subsidiary and Joint ventures

• Subsidiary company
(1) KRIBHCO Infrastructure Ltd (KRIL)

• Joint Ventures
(1) Oman India Fertilizer Co. SOAC (OMIFCO)
(2) KRIBHCO Shyam Fertilizers Ltd (KFSL)
(3) Urvarak Videsh Ltd (UVL)
(4) Kribhco Reliance Kisan Ltd.
(5) Gujarat State Energy Generation Ltd.
• Associates
(1) Gramin Vikas Trust (GVT)

 SWOT ANALYSIS

Strength

• Kribhco is having Sound financial position.

• The Management of Kribhco is very professional.

• Kribhco has larger proportion of reserves and surplus and further it has
no debt capital.

• Kribhco has long standing reputation in the Indian Fertilizer Market.

• Staff of Kribhco is very co-operative and hard working.

• Kribhco is having skilled employees staff.

16
• Good cooperation between employees.

• Kribhco is having own Training Centre for training of employees as well

as apprentice students of different discipline.

• It is having a full support of the Government of India.

• Kribhco having strong and wide marketing network towards country.

• High Production capacity of Kribhco leads to low production cost.

• Savings in Production cost because Kribhco is having own Nitrogen

and Ammonia Plant.

• Capacity Utilization more than 100%.

• Still the starting of production, Kribhco plant has no major break down
in Plant.

• Kribhco has extra land and fully developed infrastructure facilities so it

can be further developed.

• Thus, we can say that the position of Kribhco in the Fertilizer Market is
Satisfactory.

17
Weaknesses

• Government interference in the management is more comparatively

private units.

• Due to Government’s interference it takes longer time in decision

making. So the decisions delayed and thus sometimes bias decision
are also taken.

• Kribhco is having overstaffing.

• Kribhco is having no debt capital so the advantage leverage can not be

taken.

Opportunities

• Investment in Oman Project will raise the profit of Kribhco.

• Expansion of existing plant at Hazira.

• Look for newer Market with diversified product.

• Diversifying the business.

Threats

• The price of the Row material, i.e. Natural Gas, is increasing

continuously.

• There is a chance of sharp reduction in Government subsidy in near

future.

• Kribhco is having very little market share.

• In the era of Free Trade, the import of fertilizers may affect the business
of the Kribhco.

18
FINANCE & ACCOUNTING DEPARTMENT

19
 Finance & Administration Department
Introduction

Finance is the blood of the business. “Finance Management is that managerial

activity which is concerned with the planning and controlling of the firms financial
resources.” Finance management is the most important activity of the firm and it
means that the firm secures capital, if needs and employees it.

Finance management is mainly concerned with raising fund in the suitable

manner using the funds as profitably as possible, planning future operations and
controlling current performances and future developments through financial
accounting, cost accounting, budgeting and other functions.

The Finance and Accounts Department of KRIBHCO plant is located in the

Administration Building, which is situated outside the Plant factory gate. The
Finance & Accounts (F & A) Department is a service department and its name
function is to co-ordinate the financial activities at Plant Site. The F & A
department maintain the records as required under various statute and get the
same audited by Statutory Auditors under the functional supervision and
guidance of KRIBHCO CO-OPERATE OFFICE at NOIDA.

20
  Various Sections

The F & A department have various Sections as detailed below.

SEC.
SEC. NAME DESCRIPTION
CODE

1701 INSURANCE & EXCISE To review the insurance policies of the

societies in terms of adequacy of insurance
cover and premium paid, renewals of policies
in time, loading of claims and following-up for
their settlement with underwriter.

To maintain constant liaison with the excise

authorities and with societies consultant
regarding day to day matters related to the
central excise and hearing of ammonia tank
wagons to outsides parties.

1702 L/C SECTION To maintain all letters of credit open by the

society for importing of materials and services,
realising payments as per the terms of the L/C,
Liaison with banks and parties regarding
matters relating to L/C and maintaining proper
accounting records.

1703 PRODUCT HANDLING Payments to bill of urea bagging and handling

DEPARTMENT contractor and other small value contractor
pertaining to urea and bio-fertilizer
transportation after certification by production
department and maintenance of necessary
accounting records.

1704 EMPTY UREA BAGS Payment for supplier of the empty bags and to
SUPPLIES maintain all related accounting transactions.

1705 BUDGET Preparation of annual capital and revenue

budgets and monitoring of commitments and

21
 expenditure and generation of periodical
reports.

1706 CONTRACT PAYMENT Payments to contractor for various work orders

SECTION issued other then product handling and
transportation contractors and to keep all
accounting records.

1707 MISC. PAYMENTS Payments towards misc. Works of petty nature

1708 TOWNSHIP LICENCE Recovery of licence fee, electricity charges,

FEE RECEIPTS water charges etc.

1709 PURCHASE BILL Payments towards various PO issued by

SECTION materials department and to keep all relevant
accounting records

1710 TRANSPORTATION Payments towards transportation of urea by

road and, matters related with railway for
railway siding, to maintain all related records
and transfer of all the transportation charges
including.

1711 SALE OF AMMONIA Accounting for sale of ammonia, industrial

urea, nitrogen to keep relevant accounting
INDUSTRIAL UREA &
reports.
NITROGEN

1712 SALES TAX Submission of returns as prescribed by GST

act, 1969 and CST act, payment to wards
sales tax on transfer of sales/stock of urea
sales, ammonia, scrap sales, follow-up of
pending matters and assessment etc.

1713 ESTABLISHMENT Release payment towards all employees

related matters like salary/wages, loans and
advances etc., payments to out sides
hospital /doctors, security of HBL &
conveyance loans etc., and to maintain

22
 personal records.

1714 INVENTORY Raw Materials, stores, spares and packing

material are valued at lower of monthly
weighted average cost.

1715 BOOKS Maintenance of books of accounts like general

ledger, journal, cash book and bank book,
preparation of trial balance on monthly basis,
quarterly annual reports, and coordination of
internal audit / statutory audit. To release
payments to GAIL, GEB, HPCL, ONGC, etc.

1716 O & M OF HAEP PLANT To deal with operation & maintenance contract
for running and maintenance of HAEP plant
and to keep all relevant accounting records.

1717 SCRAP SALES Receipt of payment towards sale of scrap and

to maintain related accounting records.

1718 PO CONCURRENCE Scrutiny of proposals received from material

department for procurement of material and to
accord finance concurrence.

1719 WO CONCURRENCE Scrutiny of proposals received from various

departments for procurement of services for
running, maintenance and up gradation of the
plant.

23
 Research Project

INTRODUCTION OF STUDY

Every business firm requires certain amount of working capital to carry out its
day to day activities. Indeed each firm differs in its requirement of working
capital.

24
We know that each firm aims at maximizing the wealth of shareholders and to
maximize shareholder’s wealth a firm should be earn sufficient return from its
operations. Earning a steady amount of profit requires successful sales actively.
And there is always an operation cycle involved in the conversion of sales in to
cash.

The return on investment is the product of earning as a percentage of sales and

turnover of an asset that produced these sales the two tire approach
concentrate attention on the separable forces contributing to profile.

Thus, profitability is determined by administration of funds by any other factors.

In fact one of the central tasks of financial management is to control and
accelerate funds availability and generate higher sales per unit of assets. Given
the number of times average investments is turned over, it is evident that higher
the velocity, the larger is the return on capital employed and more efficient the
firm is in utilizing its resources.

Thus, most of the companies aim at managing its day to day financial
requirements. This emphasis significant of working capital.

25
 CHAPTER
3
LITERATUR
E REVIEW

 International Management Review,

Vol. 4 No. 1

26
June 2008
By B. A Ranjith Appuhami

The Impact of Firms' Capital Expenditure on Working Capital Management

The purpose of this research is to investigate the impact of firms' capital

expenditure on their working capital management. The author used the data
colleted from listed companies in the Thailand Stock Exchange. The study used
Shulman and Cox's (1985) Net Liquidity Balance and Working Capital
Requirement as a proxy for working capital measurement and developed multiple
regression models. The empirical research found that firms' capital expenditure
has a significant impact on working capital management. The study also found
that the firms' operating cash flow, which was recognized as a control variable,
has a significant relationship with working capital management, which is
consistent with findings of previous similar researches. The findings enhance the
knowledge base of working capital management and will help companies
manage working capital efficiently in growing situations associated with capital
expenditure.

The impact of working capital investment on the value of a

company. (Accounting Issues).

Publication The RMA Journal

Publication Date: 01-APR-03:

Here in this article it is stated that company’s Net Working Capital is the only
parameter that the banker would judge while issuing short term loan to the
company. From a banker's perspective, NWC represents the owner's equity in
these working assets, and up to a point, that is a good thing.

NWC and sales growth. One way to gauge the appropriateness of NWC is to
relate it to sales. After all, working capital investment is a prerequisite to growing
sales. Increasing the inventory depth and breadth creates more customer appeal.

27
Extending more liberal credit terms helps the company sell to more customers.
Thus, sales growth usually requires more working capital.

 ICRA Rating Feature Rating Methodology for Fertilizer

Industry
http://www.icra.in/Files/PDF/ArticleFiles/2009-October-Rating-
Methodology-Fert.pdf
ICRA Rating Services Page 6 of 8

Working capital intensity: The analysis here evaluates the trends in the
issuer’s key working capital indicators like Receivables, Inventory and
Creditors, again with respect to industry peers. Timely availability of
subsidy can influence the liquidity position of the fertilizer
manufacturers. As the subsidy as a percentage of the normative cost of
sales has been rising in the recent past because of rise in feedstock
prices and lack of commensurate rise in the FGP, any delays in the
receipt of subsidy can squeeze the liquidity position of the companies
in this sector. In the recent past there have been delays by GOI with
regard to payment of subsidy, on account of inadequate provision in
the Union Budget for subsidy, which has had to be subsequently
revised upwards with a time lag. GOI has also resorted to part payment
of subsidy through fertilizer bonds, and fertilizer manufacturers have
had difficulties in liquidating the same in the market in the absence of
SLR status. Changes in the interest rates in the market have also
influenced the current value of these bonds, requiring provisioning in
an era of rising interest rate. In such a scenario, high financial flexibility
in the form of ability to raise resources to the extent warranted by the
delays in release of subsidy can help the liquidity position of the
companies.

28
 Chapter

Identification of
Study

29
• TITLE OF THE PROJECT
Study on Working Capital Management of Krishak Bharti Cooperative Ltd.,
Hazira, Surat.

• STATEMENT OF THE PROJECT

“To know the policy and feasibility of working capital management of
Krishak Bharti Cooperative Ltd.”

• SCOPE OF THE STUDY

 This study would be useful for the company to know weather their
working capital is functioning properly.
 This study would be useful to the company to know what are
changes required in their current assets and current liabilities.

• OBJECTIVE OF THE STUDY

 To know the liquidity / solvency position of Krishak Bharti Cooperative
Ltd.
 To know the requirement of working capital in KRIBHCO Ltd.
 To know the current asset policy of KRIBHCO Ltd.

• LIMITATION OF STUDY
 Time constrain is the major limitation.

30
 Dependency and reliability of secondary data sources.
 Lack of professionalism in the research area

CHAPTER
5

31
 Research
Methodol
ogy

(1) Research Design

For fact finding investigation with adequate interpretation I had considered
exploratory research design.

(2) Data Collection Method

This study is conducted on the basis of secondary data i.e. through
company’s past few years annual reports and from books.

(3) Sources of data

32
 Secondary Data Material given by the company

(4) Data Collection Tools

• Material given by the company
• Books
• Internet

(5) Reference period

This study would cover the time period of 8 weeks starting from 7th June to
24th July 2010.

CHAPTER
33
 6

THEORITICA
L
BACKGROU
ND

34
Working capital, also known as "WC", is a financial metric which represents
operating liquidity available to a business. Along with fixed assets such as plant
and equipment, working capital is considered a part of operating capital. It is
calculated as current assets minus current liabilities. If current assets are less
than current liabilities, an entity has a working capital deficiency, also called a
working capital deficit. Net working capital is working capital minus cash (which
is a current asset) and minus interest bearing liabilities (i.e. short term debt). It is
a derivation of working capital, that is commonly used in valuation techniques
such as DCFs (Discounted cash flows).

Working Capital = Current Assets − Current Liabilities

A company can be endowed with assets and profitability but short of liquidity if its
assets cannot readily be converted into cash. Positive working capital is required
to ensure that a firm is able to continue its operations and that it has sufficient
funds to satisfy both maturing short-term debt and upcoming operational
expenses. The management of working capital involves managing inventories,
accounts receivable and payable and cash.

Decisions relating to working capital and short term financing are referred to as
working capital management. These involve managing the relationship between a
firm's short-term assets and its short-term liabilities. The goal of working capital
management is to ensure that the firm is able to continue its operations and that it
has sufficient cash flow to satisfy both maturing short-term debt and upcoming
operational expenses.

Management of working capital

Guided by the above criteria, management will use a combination of policies and
techniques for the management of working capital. These policies aim at
managing the current assets (generally cash and cash equivalents, inventories
and debtors) and the short term financing, such that cash flows and returns are
acceptable.

35
• Cash management. Identify the cash balance which allows for the
business to meet day to day expenses, but reduces cash holding costs.
• Inventory management. Identify the level of inventory which allows for
uninterrupted production but reduces the investment in raw materials - and
minimizes reordering costs - and hence increases cash flow; see Supply
chain management; Just In Time (JIT); Economic order quantity (EOQ);
Economic production quantity
• Debtors management. Identify the appropriate credit policy, i.e. credit
terms which will attract customers, such that any impact on cash flows and
the cash conversion cycle will be offset by increased revenue and hence
Return on Capital (or vice versa); see Discounts and allowances.
• Short term financing. Identify the appropriate source of financing, given
the cash conversion cycle: the inventory is ideally financed by credit granted
by the supplier; however, it may be necessary to utilize a bank loan (or
overdraft), or to "convert debtors to cash" through "factoring".

36
CHAPTER
7
DATA
ANALYSIS

37
 WORKING CAPITAL MANAGEMENT

There are two concept of working capital – Gross and Net working capital.

 Gross working capital refers to the firm’s investment in current assets.

Current assets are the assets which can be converted in cash within an
accounting year and include cash, short-term securities, debtors, bills
receivable, and stock (inventory).

 Net working capital 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 payables and outstanding expenses. Net working capital can
be positive or negative. Positive net working capital will arise when current
assets exceeds current liabilities. A negative net working capital will arise
when current liabilities excess of current assets.

 KRIBHCO’s Net working capital and gross working

capital

Year 2009-10 2008-09 2007-08 2006-07 2005-06

Current Assets 1355.14 1567.97 1851.78 1577.00 1421.00
(A)
Current 546.05 507.76 498.58 342.35 297.24
Liabilities (B)
Net Working 808.09 1060.21 1353.20 1234.65 1123.76
Capital (A - B)

38
  Gross Working Capital

G ross working capital

2000

Rupe e s in Crore
1500

1851.8
1568
1000
1355.1

1577

1421
500

0
2 0 0 9 -1 0 2 0 0 8 -0 9 2 0 0 7 -0 8 2 0 0 6 -0 7 2 0 0 5 -0 6
Currne t a s s e ts

 Net working Capital

N e t Working C apital

1400
1200
e
or

1000
1353.2
Cr

1234.7
n

1123.8
si

800
1060.2
e
pe

809.09
Ru

600
400
200
0
2 0 0 9 -1 0 2 0 0 8 -0 9 2 0 0 7 -0 8 2 0 0 6 -0 7 2 0 0 5 -0 6

39
 Operating Cycle

Operating cycle is the time duration required to convert sales, after conversion of
resources into inventories, into cash. The operating cycle of manufacturing
company involves three phases:
 Acquisition of resources such as raw material, labour, power, and fuel
etc.
 Manufacturing of the product which includes conversion of raw material
into work in-progress into finished goods.
 Sale of product either for cash or on credit. Credit sales create account
receivable for collection.

 How length of operating cycle is determined?

The length of operating cycle of manufacturing firm is the sum of :
. Inventory conversion period (ICP).
. Debtors (receivable) conversion period (DCP).

The Inventory conversion period (ICP) is the total time needed for producing
and selling the product. Typically, it includes: (A) Raw Material Conversion
Period (RMCP), (B) Work-in-progress conversion period (WIPCP), and (C)
Finished goods conversion period (FGCP).

The Debtors conversion period (DCP) is the time required to collect the
outstanding amount from the customers.

The total of inventory conversion period and debtors conversion period is referred
to as Gross Operating Cycle.

The Creditors (Payable) deferral period (CDP) is the length of time the firm is
able to defer the payments on various resource purchases.

40
The difference between Gross operating cycle and Creditors deferral period is the
Net Operating Cycle.

GOC = ICP + DCP

ICP = RMCP + WIPCP + FGCP
NOC = GOC – CDP

RMCP = Raw material Inventory .

[Raw material consumption] / 360

WIPCP = Work-in-progress inventory

[Cost of Production] / 360

FGCP = Finished goods inventory

[Cost of Goods sold] / 360

DCP = Debtors * 360

Credit sales

CDP = Creditors * 360

Credit purchases

41
  KRIBHCO’s Operating Cycle Calculation

(Rupees in Lakh)
No. Items 2009-10 2008-09 2007-08
1 Raw Material Conversion
Period
(A) Raw Material 1,92,094.42 2,08,771.95 1,60,243.05
Consumption
(B) Raw Material 526.29 571.98 439.02
Consumption per day
(C) Raw Material Inventory 1310.33 5129.91 11,020.20
(D) Raw Material inventory 2.48 days 8.96 days 25.10 days
holding days
2 Work-in-Progress
conversion period
(A) Cost of production 2,10,763.57 2,19,848.06 1,73,906.48
(B) Cost of production per 577.43 602.32 476.46
day
(C) Work-in-Process 55.14 33.97 61.77
inventory
(D) Work-in process 0.09 days 0.05 days 0.13 days
inventory holding days
3 Finished Goods
Conversion Period
(A) Cost of Good sold 2,61,110.66 2,64,057.79 2,18,878.13
(B) Cost of Good sold per 715.37 723.45 599.67
days
(C) Finished goods 1252.76 5095.94 10,958.76
inventory
(D) Finished goods 1.75 days 7.04 days 18.27 days
inventory holding days
4 Collection Period
(A) Credit sales 1,64,708.58 1,53,219.90 1,40,076.09
(B) Sales per day 451.26 419.78 383.77
(C) Debtors 26,482.58 40,752.96 61,285.95

42
 (D) Debtors Outstanding 58.68 days 97.08 days 159.69 days
days
5 Creditors Deferral Period
(A) Credit Purchases 1,88,274.84 2,02,881.66 1,56,566.27
(B) Purchases per day 515.82 555.84 428.95
(C) Creditors 10,726.98 10,915.32 15,122.52
(D) Creditors outstanding 20.70 days 19.64 days 35.25 days
days

 Summary of Operating Cycle calculations (Number of days)

2009-10 2008-09 2007-08

Gross Operating Cycle
1 Inventory
Conversion Period
I. Raw material 2.48 8.96 25.10
II. Work in process 0.09 0.05 0.13
III. Finished goods 1.75 4.23 7.04 16.05 18.27 43.50
2 Debtors Conversion 58.68 97.08 159.69
Period
3 Gross Operating 63 113 203
Cycle (1+2)
4 Creditors Deferral 21 20 35
Period
5 Net Operating Cycle 42 93 168
(3 - 4)

1. RATIO ANALYSIS

A ratio is a simple arithmetical expression one number to another. The

technique of ratio analysis can be employed for measuring short-term
liquidity or working capital position of a firm. The following ratios can be
calculated for these purposes:

1. Current ratio.

2. Quick ratio

43
 3. Absolute liquid ratio

4. Inventory turnover.

5. Receivables turnover.

6. Payable turnover ratio.

7. Working capital turnover ratio.

8. Working capital leverage

1. CURRENT RATIO

Current Ratio, also known as working capital ratio is a measure of general

liquidity and its most widely used to make the analysis of short-term financial
position or liquidity of a firm. It is defined as the relation between current
assets and current liabilities. Thus,

Current Ratio = Current assets

Current Liabilities

The two components of this ratio are:

44
1) CURRENT ASSETS

2) CURRENT LIABILITES

Current assets include cash, marketable securities, bill receivables, sundry

debtors, inventories and work-in-progresses. Current liabilities include
outstanding expenses, bill payable, dividend payable etc.

A relatively high current ratio is an indication that the firm is liquid and has the
ability to pay its current obligations in time. On the hand a low current ratio
represents that the liquidity position of the firm is not good and the firm shall
not be able to pay its current liabilities in time. A ratio equal or near to the rule
of thumb of 2:1 i.e. current assets double the current liabilities is considered to
be satisfactory.

CALCULATION OF CURRENT RATIO OF KRIBHCO

(Rupees in Crore)

No Particulars 2009-10 2008-09 2007-08

1 Current Assets 1355.14 1567.97 1851.78
2 Current Liabilities 546.05 507.76 498.58
3 Current Ratio 2.48 3.61 3.71

Current Ratio

4 3.71 3.61
3.5
3
2.48
2.5
2
1.5
1
0.5
0
2007-08 2008-09 2009-10

Interpretation

45
This shows that the current ratio of KRIBHCO is shrinking as the compare to
previous years. But still the ratio is on ideal position.

2. QUICK RATIO

Quick ratio is a more rigorous test of liquidity than current ratio. Quick ratio may
be defined as the relationship between quick/liquid assets and current or liquid
liabilities. An asset is said to be liquid if it can be converted into cash with a short
period without loss of value. It measures the firms’ capacity to pay off current
obligations immediately.

Quick Ratio = Quick assets

Current Liabilities
Where quick assets are
• Current assets – Stock (Inventory)

A high ratio is an indication that the firm is liquid and has the ability to meet its
current liabilities in time and on the other hand a low quick ratio represents that
the firms’ liquidity position is not good.

As a rule of thumb ratio of 1:1 is considered satisfactory. It is generally thought

that if quick assets are equal to the current liabilities then the concern may be
able to meet its short-term obligations. However, a firm having high quick ratio
may not have a satisfactory liquidity position if it has slow paying debtors. On the
other hand, a firm having a low liquidity position if it has fast moving inventories.

(Rupees in Lakh)

Particulars 2009-10 2008-09 2007-08

Quick Assets 1,23,722.14 1,38,246.14 1,63,773.48
Current Liabilities 54,605.03 50776.12 49,858.31
Quick Ratio 2.27 2.72 3.28

46
 Quick Ratio

3.5 3.28

3 2.72

2.5 2.27

1.5

0.5

0
2007-08 2008-09 2009-10

Interpretation

This shows that the Quick ratio of KRIBHCO is decreasing as the compare to
previous years. But still the ratio is over and above the satisfactory level.

B) Current assets movement ratios

Funds are invested in various assets in business to make sales and earn
profits. The efficiency with which assets are managed directly affects the volume
of sales. The better the management of assets, large is the amount of sales and
profits. Current assets movement ratios measure the efficiency with which a firm
manages its resources. These ratios are called turnover ratios because they
indicate the speed with which assets are converted or turned over into sales.
Depending upon the purpose, a number of turnover ratios can be calculated.
These are :

1. Inventory Turnover Ratio

47
2. Debtors Turnover Ratio

3. Creditors Turnover Ratio

4. Working Capital Turnover Ratio

The current ratio and quick ratio give misleading results if current assets include
high amount of debtors due to slow credit collections and moreover if the assets
include high amount of slow moving inventories. As both the ratios ignore the
movement of current assets, it is important to calculate the turnover ratio.

1. INVENTORY TURNOVER OR STOCK TURNOVER RATIO :

Every firm has to maintain a certain amount of inventory of finished goods so as

to meet the requirements of the business. But the level of inventory should
neither be too high nor too low. Because it is harmful to hold more inventory as
some amount of capital is blocked in it and some cost is involved in it. It will
therefore be advisable to dispose the inventory as soon as possible.

INVENTORY TURNOVER RATIO = COST OF GOOD SOLD

AVERAGE INVENTORY

48
Inventory turnover ratio measures the speed with which the stock is converted
into sales. Usually a high inventory ratio indicates an efficient management of
inventory because more frequently the stocks are sold ; the lesser amount of
money is required to finance the inventory. Where as low inventory turnover ratio
indicates the inefficient management of inventory. A low inventory turnover
implies over investment in inventories, dull business, poor quality of goods, stock
accumulations and slow moving goods and low profits as compared to total
investment.

AVERAGE STOCK = OPENING STOCK + CLOSING STOCK

(Rupees in Lakh)

Particulars 2009-10 2008-09 2007-08

COGS 2,61,110.66 2,64,057.13 1,95,527.99
Ave. Inventory 15,171.33 19,977.73 23,247.73
Inventory 17.21 times 13.22 times 8.41 times
Turnover ratios

Inventory turnover Ratio

20
17.21
18
16
13.22
14
12
Times

10 8.41
8
6
4
2
0
2007-08 2008-09 2009-10

Interpretation

This ratio measures the speed with which the stock is converted into sales. As we
can see the ratio is increase year after year and it is very good for the company.

49
 2. INVENTORY CONVERSION PERIOD:

Inventory conversion period shows that how many days inventories takes to
convert from raw material to finished goods.

INVENTORY CONVERSION PERIOD = 365 (net working days)

INVENTORY TURNOVER RATIO

(Rupees in Lakh)

Particulars 2009-10 2008-09 2007-08

Days 365 365 365
Inventory 17.21 times 13.22 times 8.41 times
Turnover Ratios
ICP 21.20 days 27.61 days 43.40 days

3. DEBTORS TURNOVER RATIO :

A concern may sell its goods on cash as well as on credit to increase its sales
and a liberal credit policy may result in tying up substantial funds of a firm in the
form of trade debtors. Trade debtors are expected to be converted into cash
within a short period and are included in current assets. So liquidity position of a
concern also depends upon the quality of trade debtors. Two types of ratio can
be calculated to evaluate the quality of debtors.

a) Debtors Turnover Ratio

b) Average Collection Period

DEBTORS TURNOVER RATIO = TOTAL SALES (CREDIT)

AVERAGE DEBTORS

Debtor’s velocity indicates the number of times the debtors are turned over during
a year. Generally higher the value of debtor’s turnover ratio the more efficient is

50
the management of debtors/sales or more liquid are the debtors. Whereas a low
debtors turnover ratio indicates poor management of debtors/sales and less liquid
debtors. This ratio should be compared with ratios of other firms doing the same
business and a trend may be found to make a better interpretation of the ratio.

AVERAGE DEBTORS= OPENING DEBTOR+CLOSING DEBTOR

(Rupees in Lakh)

Particulars 2009-10 2008-09 2007-08

Total Credit Sales 1,64,708.58 1,53,219.90 1,40,076.09
Ave. Debtors 33,617.85 51,019.47 48,511.41
Debtors Turnover Ratio 4.90 times 3.00 times 2.88 times

Debtors turnover Ratio

6
4.9
5

4
3
Times

2.88
3

0
2007-08 2008-09 2009-10

Interpretation

Debtor’s velocity indicates the number of times the debtors are turned over during
a year. It means time taken to convert debtors into cash. Here higher ratio
indicates more liquid are the debtors.

4. AVERAGE COLLECTION PERIOD :

Average Collection Period = No. of Working Days

Debtors Turnover Ratio

51
The average collection period ratio represents the average number of days for
which a firm has to wait before its receivables are converted into cash. It
measures the quality of debtors. Generally, shorter the average collection period
the better is the quality of debtors as a short collection period implies quick
payment by debtors and vice-versa.

Average Collection Period = 365 (Net Working Days)

Debtors Turnover Ratio

(Rupees in Lakh)

Year 2009-10 2008-09 2007-08

Days 365 365 365
Debtors Turnover 4.90 times 3.00 times 2.88 times
Ratio
Ave. Collection 74.48 days 121.67 days 126.74 days
Period

5. Creditors Turnover Ratio

It signifies the credit period enjoyed by the firm in paying creditors. Accounts
payable include both sundry creditors and bills payable. Same as debtors
turnover ratio, creditors turnover ratio can be calculated in two forms, creditors
turnover ratio and average payment period.

Creditors Turnover ratio = Credit Purchases

Ave. Creditors

(Rupees in Lakh)

Particulars 2009-10 2008-09 2007-08

Credit Purchases 1,88,274.84 2,00,437.76 1,56,566.27
Ave. Creditors 10,821.15 13,018.32 13,433.06
Creditors 17.40 times 15.40 times 11.66 times
turnover Ratio

52
 Creditors turnover Ratio

20
17.4
18
15.4
16
14
11.66
12
Times

10
8
6
4
2
0
2007-08 2008-09 2009-10

Interpretation

It signifies the credit period enjoyed by the firm in paying creditors. Here the ratio
is increase year after year which is good for the company and company has
to enjoy keeping money more time with itself.

6. Average Payment Period:

Average payment period ratio gives the average credit period enjoyed from the
creditors.

Average Payment Period = Trade Creditors / Average Daily Credit Purchase]

[Average Daily Credit Purchase= Credit Purchase / No. of working days in a

year]

The average payment period ratio represents the number of days by the firm to
pay its creditors. A high creditors turnover ratio or a lower credit period ratio
signifies that the creditors are being paid promptly. This situation enhances the
credit worthiness of the company. However a very favorable ratio to this effect
also shows that the business is not taking the full advantage of credit facilities
allowed by the creditors.

(Rupees in Lakh)

53
 Particulars 2009-10 2008-07 2007-08
Trade Creditors 10,726.98 10,915.32 15,122.52
Ave. Daily 515.82 549.14 428.95
Purchases
Ave. Payment 20.91 days 19.88 days 35.25 days
Period

7. WORKING CAPITAL TURNOVER RATIO:

A measurement comparing the depletion of working capital to the generation of

sales over a given period. This provides some useful information as to how
effectively a company is using its working capital to generate sales.

Working capital turnover ratio indicates the velocity of utilization of net working
capital. This ratio indicates the number of times the working capital is turned over
in the course of the year. This ratio measures the efficiency with which the
working capital is used by the firm. A higher ratio indicates efficient utilization of
working capital and a low ratio indicates otherwise. But a very high working
capital turnover is not a good situation for any firm.

WORKING CAPITAL TURNOVER RATIO = Sales

Net working capital
(Rupees in Crore)

Particular 2009-10 2008-09 2007-08

Sales 1637.39 1512.40 1385.62
Net working capital 809.09 1060.21 1325.21
Working Capital Turnover ratio 2.02 1.43 1.05

Working Capital turnover Ratio

2.5
2.02
2

1.43
1.5
1.05
1

0.5

0
2007-08 2008-09 2009-10

54
Interpretation

This ratio indicates low much net working capital requires for sales. In 2009-10,
the reciprocal of this ratio (1/2.02 = .50) shows that for sales of Rs. 1 the
company requires 50 paisa as working capital. In 2008-09 for sale of Rs. 1 the
company requires 70 paisa as working capital. In 2007-08 for sale of Rs. 1 the
company requires 95 paisa as working capital. Thus this ratio is helpful to
forecast the working capital requirement on the basis of sale.

Current Assets Policy

The level of current assets can be measured by relating current assets to fixed
assets. Dividing Current assets by fixed assets gives CA/FA ratio. Assuming a
constant level of fixed assets, a higher the CA/FA ratio indicates a conservative
current assets policy, a lower the CA/FA ratio indicates aggressive current assets
policy assuming other factors to be constant. A conservative policy implies
greater liquidity and lower risk while aggressive current assets policy implies
higher risk and poor liquidity. Moderate current assets policy fall in middle of
conservative and aggressive policies.

55
Current Assets policy = Current Assets
Fixed Assets
(Rupees in Lakh)

Current Asset 2009-10 2009 -08 2007-08

policy
Current Assets 1,35,514.16 1,56,796.77 1,85,178.30
Fixed Assets 39386.91 35943.60 36802.52
CA/FA ratio 3.44 4.36 5.03

Interpretation
Looking at CA/FA ratio it would be said that the company is following
conservative policy but decrease in the ratio year after year it indicate the
company moving towards aggressive policy.

CHAPTER
56
 8
FINDINGS

 Findings

 As per the analysis it was found that the KRIBHCO’s Gross

Working Capital is declining in past three years. In 2009-10 as compare to
previous year i.e. 2008-09 it is declining about 15 percent. And 37 percent
decline as compare to 2007-08.

 Same way the Net Working Capital also declining for past three
years. At present in 2009-10 the Net Working Capital is decline about 24
percent as compare to previous year 2008-09. And 40 percent as compare
to 2007-08.

57
 Current Liabilities increase as compare to past two years. At
present in 2009-10 the current liabilities increase by 7 percent as compare to
previous year 2008-09. And 13 percent increase as compare to 2007-08.

 Gross Operating Cycle of the KRIBHCO is declining as compare to

past two years i.e. in 2007-08 it was 203 days; in 2008-09 it was 113 days
and in 2009-10 it is 63 days.

 Net Operating Cycle if KRIBHCO is also decline as compare to past

two years rather it decline year after year i.e. in 2007-08 it was 168 days; in
2008-09 it was 93 days and in 2009-10 it is 42 days.

 Current ratio of a company is shrinking as compare to previous two

years i.e. 3.71 in 2007-08 to 3.61 in 2008-09 to 2.48 in 2009-10. But it is still
on its ideal condition.

 Same way quick ratio is also decline year after year i.e. in 2007-08
it was 3.28 and in 2008-09 it was 2.72 and in 2009-10 it is 2.27. But it is still
over and above the ideal and satisfactory level so no need to worry about.

 Inventory turnover ratio is improving year after year i.e. in 2007-08 it

was 8.41 times and in 2008-09 it was 13.22 times and in 2009-10 it is 17.21
times. This is very good for the company the inventories are not kept idle for
long.

 The conversion period of an inventory also decline i.e. in 2007-08 it

is 43.40 days, and in 2008-09 it is 27.61 days, and in 2009-10 it is 21.20
days. So we can say that conversion of raw material to finished goods is
become speedier as the turnover ratio increase.

 Debtors turnover ratio is also improving or increasing as we can see

that in 2007-08 ratio is 2.88 times and in2008-09 ratio is 3 times and in 2009-
10 ratio is 4.9 times. Which indicate as the year passes the debtors as
become more liquid.

58
 Same way the average collection period is also decreases mean in
2007-08 it was 126.74 days and in 2008-09 it was 121.67 days and in 2009-
10 it move drastically i.e. 74.48 days. So we can say that improvement over
pervious year is remarkable.

 Creditor turnover ratio is also improving year after year which

means now the firm enjoyed more credit period by paying its creditors. In
2007-08 it was 11.66 times and in 2008-09 it was 15.40 times and in 2009-10
it is 17.40 times.

 Working capital turnover ratio also improving it means Net Working

Capital requirement for Sales is decreases. In 2007-08 it was 1.05 and in
2008-09 it was 1.43 and in 2009-10 it is 2.02; which means for sale of Rs. 1,
The company require in 2007-08 it was 95 paisa and in 2008-09 it was 70
paisa and in 2009-10 it was 50 paisa, which is quite less then the previous
two years.

 Looking at CA/FA ratio it would be said that the company is

following conservative policy but decrease in the ratio year after year it
indicate the company moving towards aggressive policy. As it is seen in 2007-
08 ratio is 5.03, in 2008-09 ratio is 4.36 and in 2009-10 ratio is 3.44

59
 Chapter
9
Suggestio
n

 Suggestions

• According to the study it would said the although the

net working capital of company decreasing the company is still in good

60
position because the operating cycle of the company is decrease it means
now the cycle become speedier and early and fast recovery of cash it denote.

• Looking At the current ratio it getting decrease year

after year but company still in ideal position means liquidity position of
company is still better but they have to be careful about this declining trend of
current ratio if this would continue then it would be difficult for company to
meet its obligation against current liabilities.

• The turnover ratios are showing good progress these

means better liquidity and solvency of the company.

• Working capital turnover ratio is improving it means

now the company required less working capital for sale. It denotes that as
compare to earlier now the company required less working capital. It means
optimum use of working capital.

• Overall looking at the study it would said that

company have very sound policy to manage its working capital. Current asset
of a company are enough to meet the obligation of paying its current liabilities.

61
 CHAPTER
10
CONCLUSIO
N

62
 CONCLUSION

Overall it was nice experience with Krishak Bharti Cooperative Ltd., lot of things
to learn during this two month training period. I had conducted study on Working
capital management, I would say that the company having very sound working
capital management, company having very good liquidity and solvency position.
Overall company showing progress in their working capital management. Also
very good cooperation from the employees side who had helped me in my study.

63
 BIBLIOGRAPHY

 Annual Reports
27th Annual Report
28th Annual Report
29th Annual Report
30th Annual Report

 Books
Pandey I.M., Financial Management, Ninth Edition – Vikas Publishing House Pvt.
Ltd. Noida, New Delhi.
 Website
www.kribhco.net
www.kribhco.com

64
Annexure

65
 BALANCE SHEET AS ON 31ST MARCH
(Rs. in lakhs)
Particular Year
2009-10 2008-09 2007-08 2006-07 2005-06
Share Holders’
Fund:
Share Capital 39066.58 39073.33 39609.93 39610.68 39467.38
Reserve & Surplus 230646.26 215867.72 198243.15 189141.73 177901.81
Share Application Money 0.00 1.00 0.00 0.00 0.00
Secured Loans from 22.81 23.00 75.63 40.69 0.00
Bank
Unsecured Loans From 0.00 9191.00 22396.87 0.00 0.00
bank
Deferred tax liability 1663.31 502.89 0.00 2461.18 3031.70
Total 271398,96 264658.61 260323.58 231254.28 220400.89

Application of
Fund:
Fix Assets:
Gross Block 129077.77 124060.19 122432.34 111509.51 105369.44
Less: Depreciation 89690.86 88116.59 85629.82 84476.54 82911.78
Net Block 39386.91 35943.60 36802.52 27032.97 22457.66
Capital Work-in- 10457.69 2352.56 726.23 0.00 0.00
process(at cost)
Investment 140645.23 120341.80 87056.46 80756.46 85567.28

A) Current Assets:
Inventory 11792.02 18550.63 21404.82 25090.64 15289.98
Sundry 26482.74 40752.96 61285.98 14079.60 15252.95
Debtors(Unsecure)
Cash & Bank balance 82227.13 83456.18 90504.27 80241.37 93558.64
Loans & Advances 15012.27 14037.00 11983.23 38288.06 17998.69
135514.16 156796.77 185178.30 157699.67 142100.26
Less: B) Current
Liabilities
Current Liabilities 30685.19 29808.48 27506.06 18542.55 15104.14
Provisions 23919.84 20967.64 22352.25 15692.27 14620.17
54605.03 50776.12 49858.31 34234.82 29724.31
Net Current Assets (A-B) 80909.13 106020.65 135319.99 123464.85 112375.95

Total 271398.96 264658.61 260323.58 231254.28 220400.89

66
 PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH

(Rs in lakh)
Particular Year
2009-10 2008-09 2007-08 2006-07 2005-06
Income from
Operations/other revenue:
Sales (Net of 164708.58 153219.90 140076.09 135383.39 126887.14
discount/rebates)
Less: Excise Duty (970.19) (1979.77) (1514.47) (986.29) (1157.40)
Concession/Remuneration 95968.98 104672.55 84479.12 22463.25 14027.97
from Govt. Of India
Freight Subsidiary 0.00 0.00 0.00 11232.91 11049.97
Other Revenue 30478.17 40974.77 26656.83 42274.31 25533.48
Accretion/Discretion in (3819.58) (5890.29) (3676.78) 8320.78 856.29
stocks
286365.96 290997.16 246020.79 218688.35 177197.45

LESS: Cost of Operations/

Other outgoings
Consumption of Raw
Material & Stores, etc :
Row Materials 59846.65 78759.09 65404.97 47310.96 47231.80
Packing Materials 7013.08 4425.19 4138.33 3933.34 3808.34
Chemicals & Catalysts 1122.68 846.43 724.75 505.57 368.83
Power, Fuel & Water 28663.58 63699.59 40848.15 30793.20 21344.66
Purchases of Products for
resale:
Seeds & Chemicals 3390.20 2943.11 2180.02 1403.93 1690.84
Urea, DAP & Other 88238.65 49764.35 43270.05 61303.10 31658.09
Fertilizers
Employees’ Remuneration & 22488.73 16966.40 17340.21 12149.55 11742.63
Benefits
Other Expenses on 46766.67 42863.27 42160.46 36220.55 29400.58
Manufacturing,
Administration & Distribution
Interest 518.31 1037.52 531.99 147.25 230.13
Depreciation/Amortization 3062.11 2752.84 2279.20 1762.54 1709.84
261110.66 264057.79 218878.13 195527.99 149185.74
Net Profit of the year 25255.30 26939.37 27142.66 23160.36 28011.71
Prior Period Income/ 21.82 (5.40) 70.88 (6.92) 8.65
(Expenditure) (Net)
Profit Before Tax 25277.12 26933.97 27213.54 23153.44 28020.36
Provision for Taxation 2460.42 1921.27 6293.54 3829.48 8774.94
Profit After Tax 22816.70 25012.70 20920.00 19323.96 19245.42

Continued…..

(Rs. in lakh)

67
Profit Transferred to:
Capital Repatriation Fund 14.00 300.22 13.00 13.00 15.00
Dividend Equalization Fund 0.00 0.00 2500.00 1500.00 2500.00
Contribution to Prime 0.00 1.00
Minister’s Relief Fund
Net Profit As Per the 22802.70 24712.48 18407.00 17810.96 16729.42
Malty State Co-operative
Societies Act (MSCS Act)
Less: Proposed
Appropriations :
Reserve Fund as per Bye- 5700.68 6178.12 4601.75 4452.74 4182.36
Law 58(i) of the Society
Provision for Contribution to 228.03 247.12 184.07 178.11 167.29
Co-operative Education
Fund
Reserve Fund for 2280.27 2471.25 1840.70 1781.10 1672.94
Contingency as per Bye-
Law 58(iii) of the Society
Reserve for Donations 40.00 40.00 40.00 25.00 25.00
Proposed Dividend 7767.40 7127.63 7920.50 7891.44 7846.69
General Reserve 6786.32 8648.36 3819.98 3482.57 2835.14

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