1.

1 INTRODUCTION TO THE STUDY

The importance of working capital in any industry needs no special emphasis. Working capital is considered to be life-giving force to an economic entity. Management of working capital is one of the most important functions of corporate management. Every organization, whether profit oriented or not, irrespective of its size and nature of business, needs requisite amount of working capital.

Working capital management is the process of planning and controlling the level and mix of the current assets of the firm as well as financing theses assets. Specifically working capital management requires financial managers to decide what quantities of cash, other liquid assets, accounts receivables, and inventories the firm will hold at any point in time. In addition, financial managers must decide how there currents assets are to be financed. Financing choices includes the mix of current as well as long term liabilities. The main aim of the study is to find out whether the company is efficiently managing its working capital. The effective working capital necessitates careful handling of assets to ensure short term liquidity and solvency of the business.

Keeping in view the pragmatic importance of working capital management as a gray area of corporate financing function, an attempt has been made to examine working capital management practices and the problems faced by Metal Industries Ltd in working management process. In this study, also analyze the working capital management and profitability position of the Metal Industries Ltd by using financial reports and other documents given by the company.

1.2 EXECUTIVE SUMMARY

The project study gives analysis and interpretation about the short term solvency and to ascertain about the liquidity of Metal Industries Ltd, Shoranur. Utmost care has been taken at all the levels of project work right from the beginning of analyzing accounting information provided by profit and loss account and balance sheet.

The main aim of the study is to find out whether the company is efficiently managing its working capital. Inorer to accomplish the aim, secondary data is used for the preparation. This helps to understand the companys strength and weakness.

This analysis leads me to the conclusion that the working capital of the firm shows a decreasing trend. This shows the improvement in the steps taken by the management.

1.3 STATEMENT OF THE PROBLEM

Each and every decision requires the interpretation and evaluation of information. A problem statement is the discrepancy between some current state of affairs and the desired state. For each and every business organization, it is necessary for them to know the working capital management in the organization, to take decisions for now and the future. The problem of the undergone study states that Metal Industries Ltd, Shoranur is eager to know about their working capital management for the ten years. The finance department recommended that the ratio analysis to conduct the research with the help of balance sheet and profit & loss account for the year 2001-2010.

1.4 OBJECTIVES OF THE STUDY

The study is mainly intended to analyze the working capital position of Metal Industries Ltd, Shoranur. Following are the main objectives of the study:

Primary objectives: To study the position of working capital of Metal Industries Ltd, Shoranur.

Secondary objectives: 1. To ascertain the liquidity position of the firm. 2. To study about the various factors affecting the working capital management of the firm.

1.5 SCOPE OF THE STUDY

The study was conducted over a period of six weeks entitled A study on Working Capital Management of Metal Industries Ltd, Shoranur. In order to accomplish the aim descriptive research has been taken. As the researcher must be able to define clearly what he wants to measure and must find adequate methods for measuring it. It is the research of fact finding.

The management of working capital plays an important role in maintaining the financial health of the firm during the normal course of business. It portrays the flow of resources through the firm. Certain aspects covered in the research are to determine whether the firm is able to carry its operations. To ascertain the liquidity position of the firm, to evaluate the financial performance of the firm and to identify the factor that affecting working capital management. Such an analyis is expected is to show and highlight the streangth and weakness regarding various aspects of its liquidity and working capital management.

1.6 LIMITATIONS OF THE STUDY

In any study or research conducted there would be some limitations associations with it. Hence for the proper understanding of the project it is inevitable to specify the limitatios of the study. The time frame for the project is about six weeks ,had there been sufficient time the study could have been more elaborate. Data taken was for the period of five years as it was available only for those years. Only audited records are considered for analysis. Non monetary factors like human behaviour, their relations etc.are not considered. The study does not take into account the other areas of finance such as capial budgeting, costing and cash management etc.

1.7 THEORITICAL BASIS

WORKING CAPITAL MANAGEMENT

The management of working capital plays an important role in maintaining the financial health of the firm during the normal course of business. Working capital management is the process of planning and controlling the level and mix of the current assets of the firm as well as fianncing these assets. Specifically working capital management requires fiancial managers to decide what quantities of cash, other liquid assets, accounts receivable and inventories of the firm will hold at any point in time. In addition, financial managers must decide how there currents are to ne financed. According to Shubin, working capital is the amount of funds necessary to cover the cost of operating the enterprize.

Working capital is the difference between inflow and outflow of funds. In other words, it is the net cash flow. It is the assets and liabilities required to operate a business on day to day basis.

Financial managers devote a considerable amount of attention to the management of working capital. Net working capital provides a accurate assessment of the

liquidity position of the firm. An examination of the components of working capital is helpful because of the preoccupation of management with the proper combination on assets and liabiliities constitute the portion of funds which have been planned for and raised.

CONCEPT OF WORKING CAPITAL

There are two concepts of working capital a) Gross working capital b) Net working capital Gross working capital refers to the firms investment in current asset. The current asset, which can be converted into cash with in an accounting year. includes cash short-term security, debenture ans stock. It

Net working capital refers difference between current asset and current liability. Current liabilities are those claims out sides which ae expected to mature for payment with in an accounting year and its include creditirs, bills payable and outstanding expenses. Alternatively networking capital is a portion of current asset, which finances with long term funds. Net working capital measures liquidity of the firm.

Net working capital may be a) Positive working capital b) Negative working capital

When curent assets exceeds current liability that will be positive net working capital. When current liability exceeds current assets that will be negative working capital. Gross working capital is a going concept and net working capital is a accounting concept, some time gross working capital is used because,

1. It shows current amount of working capital at right time. 2. Management is more interested in the total asset than source from where its made available. 3. Every increase in the funds of enterprize would increase its working capital as per gross concept. 4. It is more useful in determine rate of return.

Net working capital is also important because:

1. It is qualitative concept. 2. It indicates the excess current assets and current liability. 3. It indicate fiancial soundness. 4. It suggest need for financing as a part of working capital from permanent sources.

On the basis of time working capital is classified in to

Permanent / fixed working capital Temporary / variable working capital

Permanent working capital is the maximum amount required for the effective utilization fixed capacity and for maintain circulation of curretn asset. Always a

maximum level of current asset, which is continously required by the enterprize to carry out normal business operation. For e.g. Raw material,finished goods in work in progree and cash balances. Temporary working capital is the capital required to meet the seasonal demend and special exigencies. Temporary working may be seasonal and special working capital is required for short period and cannot permanently employed. Seasonal working capital may be need where the raw material is seasonal or the business is in seasonal nature.

IMPORTANCE OF ADEQUATE WORKING CAPITAL

A business firm must maintain an adequate level of working capital in order to run its businesss moothly. It is worthy that both excessive and inadequate working capital postions are harmful. However, out of the two, inadequacy of working capital is more dangerous for a firm. Excessive working capital results in idle funds no profit is earned. Similarly inefficiency of working capital results in interruption. This will ,lead to inefficiencies, increase in costs and reduction in profits.

Working capital is just like the heart of business. It it becomes a week, the business can hardly and surv ices. No business can run succesfully without an adequate amount of working capital. The following are a few advantages of adequate working capital in the business:

Advantage of maintain adequate working capital Increases the solvency of business Increase goodwill of the business Get easy loan Firm get cash discount on purchase hence reduce cost Regular supply of raw materials Regular payment of wages and salaries Exploitation of faavourable market conditions Quick and regular return and investment Adequate working capital create an environment of confidence and high morale.

DANGER OF INADEQUATE WORKING CAPITAL

When working capital is inadequate, a firm faces the following problems; It may not be able to take advantage of cash discount. It cannot by its requirements in bulk and unable to utilize the production facilities fully. It may not be able to take advantage of profitable business opportunities. It may fail to pay its dividend because of non availability of funds. Its low liquidity may lead to low profitability. Short term liabilities cannot be paid because of inadequate working capital. Credit-worthiness of the firm may be damaged because of lack of liquidity. Low liqudity position may lead to liquidation of firm.

DANGER OF EXCESSIVE WORKING CAPITAL

When there is too much working capital, it is also dangerous. Excessive working capital raises the following problems: A firm may be tempted to over and loss heavily. The situtation may lead to unnecessary purchases and accumulation of inventories. There arises an imbalance between liquidity and profitability. Excessive working capital means funds are idle. The situation leads to greater production which may not have matching demand. The excess of working capital lead to carelessness about cost of production.

SOURCES OF WORKING CAPITAL

The financial manager is always interested in obtaining the working capital at the right time, at a reasonable cost and the best possible favourable terms. In any concern a part of the working capital investments are permanent investments in fixed assets. Because there is always a minimum level of current assets which are continously required by the enterprise to carry its day to day operations. The minimum level cannot be expected to reduce at any time. The minimum level of current assets gives rise to permanent working capital, which is permanently blocked in current assets.

FINANCING OF LONG TERM WORKING CAPITAL

Long term working capital should be provided in such a manner that the enterprize may have its unintrrupted use for a long time. following sources: It can be conveniently financed by the

1. Issue of shares:
Issue of shares is the most important sources for raising the permanent working capital. Maximum amount of permanent capital should be raised by the issue of shares.

2. Floating of shares:
A debenture is an instrument issued by the company acknowledgement its debt to its holder. It is also important source of long term working capital.

3. Ploughing back of profit:

It means reinvestment by a concern of its surplus earning in its business. That is, a part of the earned profit may be ploughed back by the firm, in meeting their working capital needs.

4. Long term loans:

Financial institution such as commerical banks , Life Insurance Corporation of India etc provide all types of loans long-term, medium term and short term loans.

5. Accepting public deposits:

Public deposits are the fixed deposits accepted by a concern enterprize directly from public.

Financing short-term working capital

The category of funds covers the need of working capital for financing day-to-day business requirements. There are two types- Internal source and External source.

A. Internal sources Depreciation funds: Depreciation reserve provides a source of funds for
working capital.

Provision for taxation: The provision for taxation can also be used by the
concern as a source of working capital during intermittent periods.

Accrued expenses: The firm can postponed the payment of expenses for short
periods.

B. External sources Trade credit Credit papers Bank credit Customers credit Government assistance Loan from directors Security of employees

DETERMINANTS OF WORKING CAPITAL Nature of business:

Working capital requires of the firm basically influence by the nature of its business. Trading and fiancial firms have very small investment in fixed assets but require a large sum of money to be invested in working capital. Manufacturing and construction firms also have to invest substancially in working capital and a nominal amount in fixed assets.

Production cycle:
Production cycle comprises of the purchases and use of raw material and the production of finished goods. Longer the manufacuring cycle, large will be the firms working capital requirement. A study prodution policy will cause inventories to

accumulate during off-season periods and the firm will be exposed to greater inventory cost and risks.

Production policy:
Working capital need of the firm is related to its sales. Sales depend on demand condition. Most firm experience seasonal and cyclical variation in the demand for those product and service. These business variations affect the working capital requirement specially the temporary working capital requirement of the firm.

Growth and expansion:

Growth and expansion of the firm will affect the working capital. Growth and expansion of the business in the future will lead more working capital requirement.

Credit policy of the firm:

Credit policy of the firm affects the working capital by influencing the label of debtors. Credit policy will be affect in two ways. 1). Credit term granted to customers. 2). Credit term available to firm from creditors. The firm should be prompt in making collections high collection period will mean tie up of large funds in book debt. Stock collection procedure can increase chances of bead debt.

Availability of raw materials:

Raw materials availability also affects the working capital requirement. The availability of raw material is an seasonal the temporary working capital is needed high in the season.

Price level changes:

Rise in the price level require a firm to maintain higher amount of working capital and aslo same level of current asset is needed, increased investment when price are increasing. So the company which can immediately revise these product prices with rising price level will not face a serve working capital problem.

Operating efficiency:
Operating efficiency of the firm related to the optimal utilization of resources at minimum cost of the firm will effectively contributing in keeping the working capital investment at a lower level if it is efficient in controlling the operating cost and utilizing current asset. Better utilization of resources improves the profitability and this helps in realizing the pressure on working capital.

INVENTORY MANAGEMENT
Inventory is stock of product a company is manufacturing for sales and component that make up the product. The various forms of inventory are raw material, work in progress and finished goods. Other material consumable stores etc. proper planning of purchasing handling storing and accounting should form a part of inventory management. Efficient system of inventroy management determined a). What to purchase b). How to purchase c). From where to purchase d). Where it store.

Objectives: 1. Determine and maintain optimal level of inventory investment to eliminate duplication
in ordinary or replenishing. 2. Minimize loss through deterioration, wastage and damage. 3. Ensure right quality of goods at reasonable price. 4. Facilitating and finishing of data or short term and term planning and control of inventory. 5. Ensure continous supply of raw materials to facilitate uninterrupted production. 6. Maintain sufficient finished goods inventory for smooth sales operation and efficient customer service.

Mainly cost os managing inventory is two parts: a). Ordering cost b). Carrying cost

ordering cost is entire cost incurred for acquiring raw materia.

These costs

include purchase requisition, purchase ordering, transporting, receiving and storing. Ordering cost increases in proportion to the number of orders placed.

Carrying cost: Costs incurred for maintaining a given level of inventory are called carrying cost. It includes cost of storage, insurance recording inspection. It increases in proportion to the volume of inventory.

IMPORTANT WORKING CAPITAL MANAGEMENT RATIOS

The working capital magnitude of a concern should neither be too inadequate nor too excessive as cpmpared to its requirement. Maintaining adequate working capital ensures the improvement of profitability. The finance managers always tries to maintain the adequate working capital at every time so as to carry on the operations succesfully and maximize the return on investment. The following are the important ratios to

measure the efficiency of working capital management.

1. CURRENT RATIO It is the ratio of current assets to current liabilities. It shows the relationship between total current assets and total current liabilities. It is a measure of firms short term solvency. Current ratio is also called working capital ratio.

Current assets Current ratio = Current liabilities Current assets mean cash or those assets which can be converted into cash within a year. Current asset normally include cash in hand and cash at bank, marketable securities, stock, suntry debtors, bills receivables and prepaid expenses. Current

liabilities are those liabilities which are to be repaid within a year. Current liabilities include suntry creditors, bills payable, bank overdraft, provision for taxation etc.

2. LIQUID RATIO

It is the ratio of liquid assets to liquid liabilities. It established the relationship between quick assets and quick liabilities. It is also known as acid test ratio. It is computed as follows:

Liquid assets Liquid ratio= Liquid liabilities

Liquid or quick assets include cash, bank balances, debtors, bills receivables and short term marketable securities. In other words, they are current assets minus stock and prepaid expenses. Stock cannot be included in quick assets because it is not easily and readily convertible into cash. Perpaid expenses by their nature cannot be used for

payment of quick liabilities. Liquid liabilities are current liabilities minus bank overdraft. The exclusion of bank overdraft is due to the fact that it tends become a permenant mode of financing.

3. DEBTORS TURNOVER RATIO

It is also called receivables turnover ratio. It related net credit sales to suntry debtors. It measures how fast debts are collected. It is calculated as follows:

Total sales Debtors turnover ratio= Average debtors

Average debtors 365 Avarage collection period= Total sales

4. CREDITORS TURNOVER RATIO: It is the ratio between net credit purchases and the amount of suntry creditors. It implies the credit period enjoyed by the firm in paying creditors. It is computed by using the following formula:

Net credit purchases Creditors turnover ratio = Creditors

Accounts payable Avarage payment period = Net credit purchases 365

5. WORKING CAPITAL TURNOVER RATIO: This ratio is computed to test the efficiency with which the net working capital is utilized. In other words, this ratio indicates whether working capital is effectively used in making sales. It is calculated as follows:

Net Sales Working capital turnover ratio = Net working capital

6. INVENTORY TURNOVER RATIO

This ratio is also known as stock turnover ratio. It establishes the relationship between cost of goods sold and avarage inventory. Besides help in determining the liquidity of a business concern, this ratio indicates how many times during the period the firm has turned its inventory. In other words, it shows the rate at which inventories are converted into sales and then into cash. It is computed as follows:

Cost of goods sold Inventory turnover ratio = Average inventory

7. FIXED ASSETS TURNOVER RATIO:

Fixed assets turnover ratio shows the relationship between sales and fixed assets. It shows whether fixed assets are fully utilized. To be more clearly, this ration measures the efficiency with which the firm is utilizing its fixed assets in generating the sales. It is computed as follows: Sales Fixed assets turnover ratio = Fixed assets

8. GROSS PROFIT RATIO:

This ratio is also known as gross margin. This is the ratio of profit to net sales. It is usually expressed as percentage. It is computed as follows: Gross profit Gross profit ratio = Net sales 100

Net sales means total sales minus return. Gross profit means sales minus cost of goods sold. In the case of trading concern, cost of goodssold would be equal to opening stock plus purchases plus all direct expenses charged to Trading Account minus closing stock. In the case of manufacturing concerns, it would be equal to the sum of cost of material consumed, wafes, direct expenses and all factory or manufacturing expenses.

Gross profit ratio indicates the margin of profit on sale.

This ratio

indictes the efficiency of production or trading operations. It is useful to ascertain whether the average percentage of the mark-up on the goods sold is maintained. A high G/P ratio is a sign of good management.

9. NET PROFIT RATIO:

Net profit ratio is the ratio of net profit to sales. It is also known as profit margin. It is usually expressed as percentage. It is calculated as follows:

Net profit Net profit ratio = Net sales Here, net profit is the balance of profit and loss account after adjusting interest and taxes and all non oerating expenses like loss on sale of fixed assets, provisions for contigent liability etc. and all non operating income like profit on sale of assets, interest on investment, dividend received etc. Net profit ratio indicates managements efficiency in manufacturing, 100

administrating and selling of the product. This is a measure of overall profitability. This ratio also indicates the firms capacity to withstand adverse economic conditions. A high N/P rtio would indicated higher overall efficiency of the business, better utilization of limited resources and reasonable return to owners. A low N/P ratio would mean low efficiency and inadequate return to owners.

10. OPERATING RATIO:

This is the ratio of cost of goods sold plus operating expenses to net sales. This ratio shows the percentage of sales absobed by the cost of goods sold and operating expenses. Operating expenses include office and administrative expenses and selling and distribution expenses. A low ratio is favourable because it will leave a large amount of operating income to meet interest, tax and fair return to owners.

(Cost of goods sold + Operating expenses) Operating ratio = Net sales 100

1.8 DEFINITION OF TERMS Profitability

Profitability analysis comprises the study of sales, analysis of cost of goods sold, analysis of gross margin on sales, analysis of operating expenses, analysis of operating profit and analysis of profit in relation to sales and capital. Profit margin ratios reflect the relationship between profit and investments. determined on the basis of either sales or investments. Profitability ratios can be

Liquidity
Liquidity is a business, economics or investment term that refers to an assets ability to be easily converted through an act of buying or selling without causing a significant movement in the price and with minimum loss of value. An act of exchange of a less liquid asset is called liquidation. Liquidity also refers both to that quality asset is called liquidation. Liquidity also refers both to that quality of business which enables it to meet its payment obligations, in terms of processing sufficient liquid assets and to such assets themselves.

Inventory
The raw materials, work-in-progress goods and completely finished goods that are considered to be the portion of a businesss assets that is ready or will be for selling. Inventory represents one of the most important assets that most businesses possess, because the turnover of inventory represents one of the primary sources of revenue generation and subsequent earning for the companys shareholders or owners.

Cash management
Identify the cash balances which allow for the business to meet day to day expenses, but reduces cash holding costs. When liquidity is highly restricted in terms of cash and cash equaivalents, this ratio should be calculated. Liquidity ratio measures the relationship between cash and near cash items at one hand, and immediately maturing obligations on the other.

Debtors
Identify the appropriate credit policy, i.e.credit terms which attract customers, such that any impact on cash flows and the flows and the cash converstion cycle will be offset by increased revenue and hence return on capital (or vice versa).

Creditors
A business firm usually purchases on credit goods, raw materials and services from other firms. The amount of total payable of a concern depends upon the purchase policy of the concern. Longer the period of outstanding payable is, lesser is the problem of working capital of the firm. But when the firm does not pay off its creditors within time, it may have adverse effect on business.

Accounts receivables
Accounts receivable is one of the series of accounting transactions dealing with the billing og customers who owe money to a person, company or organization for goods and services that have been provided to the customer. In most business entities this is typically done by generating an invoice and mailing electronically delivering it to the customer which is to be paid within as established time frame called credit or payment terms.

Accounts payable
Accounts payable is a file or account that contains money that a person or company owes to suppliers, but hasnt paid yet when you receive and invoice you add it to the file, and then you remove it when yopu pay. Thus, A/P is a form of credit that suppliers offer to their purchasers by allowing them to pay for a product or service after it has already been received.

INDUSTRY PROFILE METAL INDUSTRY

The Metal Industry is primarily concerned with metallurgy and metal working. At first the metals are extracted from the metal- ores found in their natural state deep within the earth and then these ores are purified a detailed procedure to obtain the metals in their pure form of the metals in their pure form, these processes comprise metallurgy. Then the pure form of the metal so obtained is used to manufacture structures as well as different machines and parts of machines. The procedures which involve the

manufacturing of machines and other useful items form the so obtained through the metallurgical processes constitute metalworking.

The manufacturing of alloys is also carried out in the Metal Industry through the proportionate homogeneous mixing of two of more metallic elements 9metal in the pure state). The alloys so formed are mainly manufactured in order to enhance the natural properties of the metals by combining together. Steel is one of the most popular as well as useful alloys of iron, formed through the chemical combination of mainly iron and carbon. In addition, it may also contain other metals, as added to the combination in order to attain desired properties form the alloy. Metal industries are indispensable part of an economy; they from the backbone of industrial development of any country.

HISTORY

India ought to be known as the Great Grandfather of the World Metallurgical Industry. However due to the unfortunate Historical circumstances many Indians

themselves remain ignorant of this fact. The art of Bronze Casting had been practiced in India several centuries before the Modern World Discovered Metallurgy. Copper and bronze were perhaps the earliest Non- Ferrous Metals which man shaped into tools. Metal is the part of the Indian mystique as each Metal has its own alchemic and healing

powers as documented in ancient Indian Scriptures written over 5000 years ago. Metal in India has been used as a way of expressing Art in several forms using techniques such as Inlay, Casting, Carving, Appliqu Enameling, Engraving etc. Metal craft has also been and integral part of Indian culture.Indian Metallurgists had perfected the complex process of extracting Zinc from its ores by the Downward Distillation method that required exceptional care in the type of furnace, retorts and a reducing atmosphere as well as temperature management, as evidenced by the archaeological finds at Zawar in Rajasthan as early as the 4th century BC. It may be noted that it was only in the 18th century AD that the same process was re-adopted in Britain, and patented too. In the classical age of India, the metallurgy of Copper also assumed macro-dimensions. In the field of Copper Metallurgy too, the huge 5th century Copper Statue of the Buddha, over two meters in height and one tone in weight, (now in the Safe Custody of Birmingham Museum) is a remarkable product of macro technology.

An equally remarkable micro technology, namely the production of High quality Steel now known as Wootz Steel (an Iron Carbon alloy with 1.3 to 1.6 percent Carbon is also in use). This production was particularly prevalent in South India and emerged as an accomplished Metallurgical technique by about the 6th century, after which India steel was sought after for the production of what was termed the Damascus Sword in West Asia, around the 10th century AD. Metallurgists in the Universities of Stanford and Lowa State (USA0 have investigate Wood Steel with a view to reproducing the ancient India process. The former have even patented a process for the production of Utah- highCarbon Steel (1.3 to 1.6 % carbon that could be used for certain automobile and aero plane components.

CLASSIFICATION OF METAL INDUSTRIES METAL FABRICATION INDUSTRY

The main function of the Metal Fabrication Industry is to produce component metal parts will fit in along with other parts, to form larger machinery. In this way the Metal Industry proves to be an essential section of the entire global metal industry as it produces minute spare parts of larger heavy machinery and equipments, which cannot be manufactured simultaneously with the manufacturing of the heavy machines.The process involved in the manufacture of tools and machine parts in the Metal Fabrication Industry.

The construction of fine and minute machine parts involve several procedures which require a lot of concentration on the part of the person involved in it. They are therefore not carried out by the large scale metal industries are in the fact manufactured in the small scale Metal Fabrication Industry. The production of minute machine parts (most commonly, smaller constituents of a heavy machine) includes the processes as given below: Cutting Molding Finishing

The Metal sheets that used in the Metal Fabrication Industry are at first cut in to finer sections, in order to the fit the size of the parts or the finished products that are to be manufactured in the Metal Fabrication Industry.

METAL CASTING INDUSTRY

The Metal Casting Industry employs the process of pouring molten metals (hot metal in industry parlance into casts (or models), which takes a definite permanent shape after cooling. The industrial casting procedure that is followed in the Metal

Casting Industry is be classified as non-disposable, as it involves processes that retain that cast (or mold) for several applications, in contrast to the use of molds made of sand, plaster or plastics etc, which cannot be used more than once, and are therefore unfit for application in the Metal Casting Industry. procedures are termed as disposable mold casting. These rather domestic mold casting

WORLD METAL INDUSTRY

The World Metal Industries in fact provide an overview of the different metal industries which are making the lives of people easier around the globe through their advanced innovations. In fact, we should not forget that all the industries around the globe are dependent upon metallic elements. Metals are an indispensable part of every industry for all machinery and equipment are made from metallic elements of alloys.

The products of World Metal Industries have now become and almost indispensable part of our lives for everything we use are either directly made of metallic elements or alloys (which are proportionate homogeneous mixtures of alloys), or they ere manufactured through the use of machinery, that is made of metals or alloys.

METAL STAMPING INDUSTRY

The Metal Stamping Industry looks set to replace the machining die casting, fabricating and forging processes which were the traditional methods into definite shapes. The Metal Stamping Industry is more affordable and cost effective in comparison to all the other processes followed to give desired shapes to the metal and alloy sheets that are in vogue. Even the machinery used for pressing the metals into shapes, in the metal stamping industry actually involves the method of bending, clipping and molding metallic and alloy sheets in to definite forms. These procedures of bending, clipping and molding are carries out in the Metal Stamping Industry to actually give definite form to the larger metal and alloy sheets. The major products of the Metal Stamping Industry

consists of finer components of larger machinery, equipments and bigger metal structures, and these smaller items may also be used as spare parts of the same machines.

The metal or alloy sheets are stamped or pressed in to definite fixed shapes and than the shaped metal is plated with nickel, tin, or some other metallic elements to protect it from corrosion. Basically alloys of an iron (steel), zinc, nickel, and aluminum are used in the Metal Stamping Industry as these alloys are strong, durable, do not break easily, portable, non-poisonous, and affordable at same time.The business is classified under metal manufacturing are Metal furniture, shelves, lockers, cabinets and fixtures Primary metal products Fabricated metal products Machinery including electrical and electronic machinery, equipment and supplies. Storage of primary batteries. Motor vehicle parts and accessories Measuring, analyzing, or controlling equipment Other metals items such as clocks and watches, costume and precious metal jewelry, needles, pins, and similar notions, signs and advertising displays, burial caskets,. Silverware or stainless steel flatware.

Metal Industries also include facilities that are involved in metal working activities such as Rolling, drawing, and extruding of non-ferrous metals Heat treating Coating, engraving and allied services.

Metal Industries businesses performs many different processes including Machining Polishing Forming Forging

Enameling Finishing Grinding Welding etc.

METAL INDUSTRIES IN INDIA

Metal Industries are the indispensable part of an economy; they form the backbone of industrial development of any country. In India the industrial development began with the setting up of Tata Iron and Steel Company (TISCO) at Jamshedpur in 1907. it started its production in 1912. then came up Burnpur and Bhadrawathi Steel Plants in 1919 and 1923 respectively. It was, however, only after the independence that the steel industry has been able to find its feet. Barring the Jamshadpur plant of the Tatas, all are in public sector and looked after by the steel Authority of India Ltd.(SAIL). Bhilai and Bokaro plants were set up with the Soviet collaboration. Durgapur and Rourkela came up with British and German technology know-how respectively.

Iron and steel industry is be nature a heavy industry. Proximity to raw materials and access to efficient transportation network are crucial to this industry. The

Chotanagpur plateau boarding West Bengal, Bihar, Orissa and Madhya Pradesh therefore has been the natural core of this industry. Besides iron and steel industry, heavy

engineering and machine tools industries are the main dealers of metals. These industries have witnessed a phenomenal growth and produce a whole range of capital goods and consumer durables. The capital industry required for textile industry, fertilizer plants, mining, construction and agricultural machineries such as equipment for irrigation projects, diesel engines, pumps and tractors, transport vehicles etc. are being produced indigenously.

The heavy Engineering Corporation Limited., set up at Ranchi in 1958 fabricates huge machines required for the iron and steel industry. Locomotives are manufactured

by three units, viz, Locomotive Works, Chitharanjan (West Bengal), Diesel Locomotive Works, Varanasi (Uttar Prdesh), and Tata Engineering and Locomotive Co.Ltd.(TELCO), Jamshadpur. The Hindustan Machine Tools Ltd (HMT) is a major manufacture of a wide range of machines and tools. It has in units in Banglore, Pinjore (Hariyana) Kalamassery (Kerala), and Hyderbad. The HMT also produces a wide range of watches.

The Bhart Heavy Electricals Limited (BHEL) is a public sector undertaking which produces power generation equipments. Its manufacturing plants are located at Bhopal, Thiruchirapally, Hyderbad, Haridwar, Ranipet, Banglore and Jagadishpur (Uttar Pradesh). The Hindustan Aeronautics Ltd., Banglore has acquired capability of

manufacturing aircrafts of different types. It has its manufacturing units are Banglore, Kanpur, Nazik, Koraput, Hyderbad and Lucknow, Vishakhapattanam, Mumbai, Calcutta and Kochi are the major center of ship-building industry.

THREE TOP PLAYERS IN KERALA CHESTER METAL INDUSTRIES

Chester Metal Industries, in their ceaseless pursuit of excellence have made major advances and perfected ferrous& non ferrous casting into a fully proven process for a wide range of precision casting for various engineering, automobile and industrial sectors we are calibrating to deliver moldest products as desired by customers. Crafted from high quality and various metals, they offer line of products in various precise geometrics.

D-TECH ENGINEERING INDUSTRIES LIMITED

D-TECH engineering Ltd is a steel fabrication unit engaged in structural steel roof work, skylights, general steel fabrication work, manufacture of steel door frames, doors,

windows and ventilators, steel furniture, sheet metal work, kitchen cabinets, steel bridges etc their products are widely used in industries, residential and commercial buildings, educational institutions, hospitals and government departments.

STEEL AND INDUSTRIAL FORGINGS LIMITED

Steel and Industrial Forgings Limited (SIFIL) is an ISO 9001:2008 certified Public Sector Undertaking fully owned by Government of Kerala, incorporated in 1983 and started commercial production in 1986, SIFIL rapidly forged ahead to become a name to reckon with. We are master in Titanium and Special alloy forgings. Untiring efforts of two decades as saddled SIFL firmly in the Forgings Industry of India and abroad with best ratings for its products and services. Forgings with exquisite designs and shapes, flawless forms of contours, broad bands and spectra of metals like alloy steel, super alloys, aluminum and titanium. All in wide range of weights and unmatched equality made have SIFL the most sought after forging company in the country for critical components.SIFLs diverse product mix caters to a wide range of sectors. These include complex and high precision aerospace forgings, specialized forgings for defense, Heavy Forgings for Commercial vehicles, railways and other components for automobiles etc.

SWOT ANALYSIS

STRENGTHS: Availability of iron ore and coal Low labour wage rate Abundance of quality manpower Mature production base

WEAKNESSES: Unscientific mining Coking coal import dependence Low R&D investment Inadequate infrastructure

OPPORTUNITIES: Unexplored rural market Growing domestic demand Exports Consolidation

THREATS: China becoming net exporter Protectionism in the west Dumping by competitors Global economic slowdown

RECENT TRENDS

Its been a Luke warm year for manufacturing. Sort of, lets dip the big toe and see how cold the water still is, kind of thing. Its difficult to look at how well the industry is actually doing without looking at the past few years to compare. So based on some research, Im going to point out a few key points of where the industry was, and where its headed for 2011. Rumors of a double dip recession are still being circulated, which would be another blow to the industry, but most economists are keeping the glass half full in this regard against it.Raw materialsPrices have clearly fluctuated with the crash of the market in 2008, and are slowly starting to creep back to pre-recession prices.

COMPANY PROFILE
INTRODUCTION TO THE COMPANY

The Metal Industries Limited, METIND Nagar, Shoranur, Palakkad, India- 679122 is a Kerala state Public Sector Undertaking Unit established in the year 1928 perhaps the one among the first few pioneer industries in pre independent India and the first one in south India. The activities of the company are to manufacture and market various agricultural implements and tools required for agro farming, handicrafts and artisans community. The major clients of the products are Public and Government sectors. The factory is located at Shoranur, a major industrial destination of Malabar Region of Kerala in 24 acres of land. The ownership of the unit as a public sector undertaking owned and promoted by the Government of Kerala. METIND is known for Quality, Durability and Reliability of its products and is still remains on the zenith. A special type of alloy steel used as raw materials of

manufacturing, which undergoes a series of scientific forging and treatment processes to refine the grain structure and thus makes our implements resistance to wear, tear and corrosion. This unique feature of the products has sky rocketed the fame of our company in capturing the local market within the country and now capable to tap the global market in agricultural implements sector.

The development of Indian economy mainly depends on the agricultural income of the country. Being the developing nation, almost all the states from top to bottom even thought some states have advanced to some extend by way of industrialization are utilizing a major portion of their areas for agricultural purpose in Southern States; the agricultural activities have a strong impact because the majority of villages are engaged in agricultural activities. This factor gives an immense scope for the production and marketing of agricultural implements.

HISTORY OF THE COMPANY The Metal Industries Limited, a public company was established in the 6th March 1928 with the main object of manufacturing agricultural implements, state tools, horticulture implements and hand tools etc. the founder of the company was Late Shri C.K Menon. The Metal Industries Ltd is a SSI established in 1928, perhaps one among the first few pioneer industries of pre independent India and the first one of south India to cater all sorts of implements and hand tools needed for agriculture, estate and artisan workers of our country. Due to various reasons, Shoranur was considered as an ideal place for the business of agricultural implements manufactured. Most important is the presence of large number of conventional artisans and blacksmith, who are extended in manufacturing the agricultural implements. There is a 11 KV sub station at Kulappully, which provide uninterested supply of electric which is an indispensable facility to be acquired by the company in order to overcome the power crisis. Company installed a diesel generator, set 125 KVA capabilities. In the beginning, company has good market throughout South India. The company markets its product under the brand name TUSKERS. Generally known as METIND. The main raw materials of the company are rejected rails and billet. The quality and reputation maintained by the company throughout these years were remarkable.

The company uses special type of alloy, steel uses a raw materials for manufacturing implements undergoes a series of scientific heat treatment and gorging process to refine the grain structure and thus to make the implements resistance to wear, tear, corrosion, a rare phenomenon not seen in any alien products. The company has developed certain technologists for advanced solid removing equipment and vehicle suitable for urban area. The company uses simple but economical in design with most technology and quality with robust in structure to isolates its products from others. The company are now in on a fresh move for building and fabricating bodies of passenger buses suitable for private and KSRTC, mini and tourist buses used by KTDC etc.

For about 30 years in corporation METIND was the pioneer in the market of these products in South India and Srilanka. However during 1960s and 1970s the company faced many problems which led to intermittent stoppage of its operation and the company closed down in 1975 for working capital. With a view to revive, the state Government made any discussions with Canara Bank, as a result, the bank agreed to grant financial assistance and needed for rehabilitation. With effect from 18th October 1980, METIND was converted as a Public Sector Unit under the Government of Kerala, with an equity participation of 58.78%; the government of Kerala acquired the majority state in the company. The production was started in the year 1982 with board of

direction nominated by government. Again in 1989 the unit is struggled due to lack of order from government department. Then the company entered into private market. The Government of Kerala instructed to other government concern and local bodies to purchase the required product from this company. Now the company has established itself in the, market and facing unhealthy competition from numerous units in Kerala, Tamil Nadu, Karnataka and Andhra Pradesh. Now the company is facing stiff At

competition from private owned company like SIMCO, MAYIL VAHANAM..

present 95% of the share is held by the Government of Kerala and the balanced by its shareholders. Slowly the company increased the production and achieved their target level.

The major products of the company are double faced sledge hammers of all types, different varieties of mamma ties, pick axes, mammatty forks, wedges, digging forks, rubber taping knifes etc, which are mainly used in agricultural operation, quarry works and industry.

The company has already established reputation of quality. South India is considered as the pioneer manufacture of the agriculture implements. The reputation is mainly because of the quality of the products and workmanship. The two important competitors of the company are MAYILVAHANAM & SIMCO, both these company are situated nearest to the company. The three important products produced by the company are:

Sledge hammer Mammatties axes

COMPANY DETAILS

Name of the company

The Metal Industries Limited (A Government of Kerala undertaking)

Type of company

A PSU of Govt.of Kerala & registered as an SSI unit

Registered Number Date of incorporation Registered office Authorized capital Issued, Subscribed and Paid up capital

1542 06/03/1928 Metind Nagar, Shoranur 679122 2,00,000/1,47,95,686/-

chairman

V.K. Babu, Ex.MLA (Appointed by Govt. Of Kerala)

Managing Director Board of Directors

Sri. T.M Rajan Smt. Suzy Eapan (Director) Sri. K. Babu (Director) Sri. P. Sankaranarayanan (Director) Sri. P. Krishnadas (Director) Sri. P. Sreekumar (Director) (Elected by shareholders)

Bank Statutory Auditor

Canara Bank, Shoranur M/s. Cheeran Varghese & Co. (Chartered

accountant, Thrissur)

Number of office staff Executives Number of workers Product produced

15 3 124 Agricultural implements Estate tools Artisan tools Horticulture implements

Bran name Area of sales

TUSKER brand Kerala, Tamil Nadu, Karnataka and Andhra Pradesh

Previous year turnover Installed capacity

4.01 crores 272 metric tone

The company makes use of the facility of some security personnel to after the security aspects related to it. They are being employed on contract basis. For this, they invite tenders from reputed firm and recognize security service. All the matters relating to employees are in accordance with the standing order issued by the company. This department also deals with handling grievances and finding the solution to conflicts of personnel in their performance of duties.

Trade unions have a strong impact in the company affairs. The major unions are INTUC (Indian National Trade union Congress), CITU (Centre of Indian Trade unions) and BMS (Bharatiya Mazdoor Sangh)

OBJECTIVES OF THE COMPANY

To maximize capacity utilization of existing products. To maintain and improve the existing cordial relationship between employees and management by mutual interaction at various at various levels and to further improve the efficiency of executives, supervisors and workers to meet future challenges.

To increase the sales. To ensure strict quality control on all products competing in the market. To minimize costs. To increase the profit in order to reduce the accumulated losses.

LOCATIONAL FACTORS

After the formation of Metal Industries Ltd, the location the company is known as METIND NAGAR. Several other similar industries are located here. The main reason for locating similar industries at Shoranur is the uninterrupted supply of raw materials. Main raw materials used for the production are rail and billets. These companies are situated near to Shoranur Railway Station. Other reason is the prompt study of power, plenty of labour, transportation facility etc. The peculiarity of this area is that there are a number of conventional artisans and blacksmiths who are expert in manufacturing these types of products. Time has approved that this kind of industries can become a success around this area. All over India the dealers and users of these kinds of products believe that If the products are manufactured at Shoranur, it will be of good quality.

PRODUCT DESCRIPTION A companys product is what it has to sell. It is the main link between company and the consumer public. The Metal Industries Ltd is mainly engaged in the production of the following products: Products in Metal Industries are: Agricultural Implements Artisan tools Horticulture Implements

AGRICULTURAL IMPLEMENTS

Agricultural equipment consists of farm field and farmstead machinery used for the production of crops and agricultural livestock. It includes:

Pickaxe Hoe Wedges Sledge hammer Claw hammer Crowbar Garden rake Chisel hatchet Digging Fork

PICKAXE

A pickaxe or pick is a hand tools with a hard head attached perpendicular to the handle. Some people make the distinction that a pickaxe has a head with a pointed end, and a pick has both ends pointed, or only end; but most people use the words to mean the same thing. The head is usually made of metal, and the commonly wood, metal or fiberglass. A pickaxe handle without the head, is sometimes used, often unofficially, as a baton. A normal pickaxe handle is made of ash or hickory wood and is about three feet long and weights account 2.5 pounds.

HOE

A hoe is an ancient and versatile agricultural tool used to move small amounts of soil. Common goals include weed control, by agitating the surface of the soil around plants, pilling soil around the base of plants (hilling), creating narrow furrows (drills) and shallow trenches for planting seeds and bulbs, to chop weeds, roots and crop residues, and even to dig or move soil, such as when harvesting root crops like potatoes.

WEDGES

A wedge is a triangular shaped tool, a compound and portable inclined plane, and of the six classical simple machines. It can be used to separate two objects or portions of an object, lift an object, or hold an object in place. It functions by converting a force applied to its blunt end into forces perpendicular 9normal) it its inclined surfaces. The

mechanical advantage of the wedge is given by the ratio of the length of its slope to its width. Although a short wedge with a wide angle may do a job faster, it requires more force than long wedge with a narrow angle.

SLEDGE HAMMER

A sledge hammer is a tool consisting of a large, flat head attached to a lever (or handle). The head is typically made of metal. The sledge hammer can apply more impulse than other hammers, due to its large size. Along with the mallet, it shares the ability to distribute force over a wide area. This is in contrast to other types of hammer, which concentrate force in a relatively small area.

CLAWHAMMER

A claw hammer is a tool primarily used for pounding nails into, or extracting nails from, some other object. Generally, a claw hammer is associated with wood working but is not limited to use with wooden products. It is not suitable for heavy hammering on metal surfaces (such as in machining work), as the steel of its head is somewhat brittle; the ball peen hammer is more suitable for such metalwork.

CROWBAR

A crowbar is a tool consisting of a metal bar with a single curved end and flattened points, often with a small fissure on one or both ends for removing nails. It is used as a lever either to force apart two objects or to remove nails. Crowbars are commonly used to open nailed wooden crates. Common uses for larger crowbars are: removing nails, prying apart boards, and generally breaking things. Crowbars can be used as any of the three classes but the curved end is usually used a first- class lever, and the flat end as a second class lever.

DIGGING FORK

A garden fork, digging fork or graip is a gardening implement, with a handle and several (usually four) short, sturdy tines. It is used for loosening, lifting and turning over soil in gardening and farming. It is used similarly to a spade, but in many circumstances it is more appropriate than a spade: the tines allow the implement to be pushed more easing in to the ground, it can take out stones and weeds and break up clods, it is not so easily stopped by stones, and it does not cut through weed roots or root-crops.

GARDEN RAKE OR GARDEN TOOL

A garden tool is any one of many tools made for gardens and gardening and overlaps with the range of tools made for agriculture and horticulture. Garden tools can also apply be hand tools and power tools. The hand tools stills used by gardeners originated with the earliest agricultural implements used by man: the spade, the garden hoe, the pitchfork, the garden fork, the garden rake and the plough. The earliest tools were made of wood. Flint and bone. The development of metal working, first in copper and later in iron and steel, enabled the manufacture of more durable tools. Industrial metal working enables the manufacture of cutting tools, including pruning shears. The first power tools to become popular with gardeners were the lawn mower. This has been followed by a wide range of power tools, including cultivating, string trimmer, irrigation sprinklers, hedge trimmers, lawn aerators, leaf sweepers, leaf blowers, chainsaws and mini-tractors.

HATCHET

A hatchet is single handed striking tool with a sharp blade used to cut and split wood. Hatches may also be used for hewing when making flattened surfaces on logs; when the hatchet head is optimized for this purpose it is called a broad axe.

ORGANIZATIONAL CHART

GOVERNEMNT

CHAIRMAN

MANAGING DIRECTOR

FINANCE MANAGER

PRODUCTION MANGER

PERSONNEL MANAGER

PURCHASE MANAGER

MARKETING MANGER

STAFF

STAFF

STAFF

STAFF

STAFF

WORKERS

WORKERS

WORKERS

WORKERS

WORKERS

ORGANISATIONAL STRUCTURE
The administrative affairs of the company are managed by Board of Directors comprising of seven members headed by the Chairman. One of the board members are elected shareholders and others are nominated by government. Managing directors are responsible for taking decisions regarding framing of policy and its implementation etc. the Board Meeting is held in every 3 months. For the administrative purpose, the company is divided into five departments namely production, purchase, sales and marketing, finance and personnel department.

FUNCTIONAL DEPARTMENTS 1. HUMAN RESOURCE DEPARTMENT

Human resource is the most valuable resource in any organization because it can function only thorough people. The success depends upon the ability of its human resource. Human resource management has been presented as a radical alternative to personnel management consisting of exciting of modern ideas, which would replace the out of data and ineffective thoughts of personnel management. Personnel manager is related with the management of workers or employees of the organization. Personal management is also known as personnel administration. The human resource department is responsible for the organizational structure in the way which will ensure better working environment and quality. They deal with the personnel administration (keeping records, wage agreement etc) in their usual course of operation. Human resource department keeps an overall record and workers. It works in such a manner to create an atmosphere in which free exchange of ideas and information between management and workers is possible.

NUMBER OF EMPOLYEES

There are totally 142 employees in this unit. The employees are divided in to factory and office employees. There are 124 factory employees and 18 staffs belong to office and administration department. skilled and unskilled workers. The factory employees include skilled, semi-

TRAINING

Training is a process of learning a sequence of programmed behaviour. Training of employees is essential because work force is invaluable asset to an organization. It is necessary to provide training for both existing and new employees which increase the skill of the employees. The training facility provided by the company is apprentice training and health and safety training.

INCENTIVES

The company provides both monetary and non monetary benefits to employees. It includes bonus, dearness allowance, provident fund, gratuity, labour welfare, canteen facility, traveling allowance, medical benefits, uniform contribution to labour; HRA, festival allowance, pension etc are provided to employees.The wages are paid on the basis of piece rate and time rate system. They are given incentives for extra production in weekly basis.

INDUSTRIAL SAFETY

Safety means freedom from the occurrence of risks of injury or loss. Industrial safety of employees safety refers to the protection of workers from the danger of industrial accidents. Industrial safety is one of the important responsibilities of the management in the modern industrial set up. The importance of industrial safety was

realized because number of employees is injured while doing job which is caused to partial or total disablement. In Metal Industries Limited, a safety committee is existed. It is the responsibility of the committee to safeguard of each and every employee while doing their job; the employees are strictly advised to take safety measures, such as goggles for protecting eyes, gloves for protecting hand, apron for the whole body, nose mask for inhaling suffocating gases.

INDUSTRIAL RELATIONS

Industrial relation is very essential for rapid industrialization of every nation. The means the relationship between employer and employee in industrial organizations. Good industrial relationship helps to avoid disputes between employers and employees and helps to create co-operation, partnership and mutual understanding. Industrial

relation describes the relationship between management and individual employee. It embraces the relationship between management and trade unions. It includes the relation between employees and the government. The factory maintains a harmonious relation between superiors and subordinates. There exists co-operation among the workers.

2. PRODUCTION DEPARTMENT
This is the main functional department of the organization. Production is the process by which raw materials are converted into finished products. Here the finished products are agricultural implements, estate tools and hand tools. All the decisions regarding the production are taken by Work Manager with necessary consultation with Managing Directors. Production department is sub divided into three sections that is, forging and maintenance. Production department means the creation of utilities and covers all the activities of procurement, equipment and machinery etc. Utilities are goods and service which have want satisfying power.

Production management involving planning, organizing, directing and controlling the production function or production system- a subsystem if its environment.

According to A.W FIElD production management is the process of planning and regulating of the operation of the part of an enterprise which is responsible for actual transformation of materials into finished products.

The company METIND has an installed capacity of production of 218 metric tones per annum of forged agricultural implements ant tools on a single shift basis.

The main raw material of the company are rejected rail, billet

Both these are available at cheaper are art the ancient time. But now, cost of raw material is increased. Other raw materials are steam cool and petroleum coke used as fuel. The raw materials are mainly available form North India.

The company had established three manufacturing section:

Forging division Foundry and Engineering Division A cutlery division

The first two divisions located adjacently is sprawling acre landscape and third division was located in three acres of compounded at Lakkidi.

The various products are manufactures in the company are Double faced sledge hammer Different varieties of mammaties Pick axes Crowbars Axes Bill hooks, mainly used in agricultural operation, quarry works and industries.

The sizes of above products are differing according to geographical area. That means of slight changes in usages of quantity of raw material for producing varieties of products in different geographical area.

PRODUCTION PROCESS

The production products start with cutting of rejected rail. First of all it cuts in to three parts then it will cut in to the basis of proposed products weight. After that will be firing and going different stages of production process.

RAIL CUTTING

POWER FORGING

FLATTENING

HAND FORGING

GRINING

TEMPERING

POLISHING

HANDLE FITTING

PAINTING

FINISHED GOODS STORE.

In production department, there is a long process for converting the rails and billets into end product. The production process adds value to the raw materials and makes it as end products ready for consumption. The heavy materials installed in this department are costly and imported from Beche Company in Germany. In this unit, only raw materials having ferrous content are needed. The steel requited may be carbon steel or alloy steel. Here only carbon steel is used for manufacturing products. There is low carbon steel is used for manufacturing products. There is low carbon steel, medium carbon steel, high carbon steel. In this unit, high carbon steel is used as raw materials for making good products. The reason is that the product is high carbon steel. This is important for the use of end products for long duration. The whole process of production is generally called FORGING.

Agricultural implements are produced in this section. The main raw materials used in this section are rejected rails, billets etc. This section uses machineries such as power

hammers, grinding machines, shaping machines etc. During the review of the production has decreased to 226.3 MT as against the production of 245 MT during the previous year.

3. PURCHASE DEPARTMENT
Purchase department has a vital role in the company. All the purchasing activity of the company is headed by this department. This department is controlled by the Purchase Officer. It has two sections- purchase and store. The purchase officer is assistant by a store keeper who is in charge of store. The store keeper receives, inspects and checks all the materials purchased by the company. The duty of purchase manager in a company is to purchase the raw materials from suppliers in a proper way at reasonable price. Purchasing process starts with purchase manager and send quotation to the supplier of raw materials and select least one by purchase manager and then he sends purchase order. The purchase of raw materials is on the basis of production requirements.

Purchase order includes the following:

Address of the party Units of raw materials Quantity of the raw materials Rate of the raw materials Excise duty Sales tax Mode of dispatch Freight Delivery schedule Payment terms

An efficient purchasing ensures the procurement of materials of the right quality, in the right quantity, at the right time, from the right source at a right place.

Payment terms will be two months, one month or two weeks. The raw materials of the company are rejected rail and billet. Steam coal and petroleum coke used as fuel.

There are two types of purchasing- Centralized and Decentralized. The purchase is entrusted with the important function of purchasing of materials for the entire organization. Centralized purchasing refers to the purchase of materials by a purchase manager. Under centralized purchasing, all purchases are made by the purchase A

department to avoid duplication, overlapping and non-uniform procurements.

company has to follow the centralized purchasing of raw materials for ensuring proper materials control as well as efficient store keeping. Under this system, the purchasing department purchases the required materials for all the departments and branches of the company.

When the purchasing function is entrusted for a single person, it is said to be centralized purchasing. It means all purchasing are made by the purchasing officer. Generally large and medium size organizations accept centralized purchasing.

Decentralized purchasing refers to the purchasing materials by all departments and branches independently to fulfill their needs. Such a purchasing occurs when

departments and branches purchase separately and individually. Under decentralized purchasing, there is no one purchasing manager who has the right to purchase materials for all departments and divisions. The defects of centralized purchasing can be overcome by decentralized purchasing system. Decentralized purchasing helps to purchase the materials immediately in case of an urgent situation

The raw materials used by this company are Rails and Billet. They also purchase steam coal, coke, firewood, charcoal and paint.

4. MARKETING DEPARTMENT
The primary function of a business enterprise is to create and maintain a satisfied customer. No longer is profit operational goal or the sole criterion of effective marketing performance. Marketing management usually represent all managerial efforts and

function to operate the marketing concepts not only in letter but also in spirit. The survival and growth of every business depends up on profitability and growth are duly assured.

The company has a marketing department. The company has no scope for advertising of these products because they produced only agricultural products.

According to Ducker, marketing is the not merely a function of a business enterprise units or view of the entire business as the economic organ to provide goods and services. The marketing of METIND COMPANY is done through some agents. The company recruits agents of agencies. They are working on commission basis. The agents are made a contract with the company. The agents have their own respected area: it may be district or zone wise. The represented district agents collect information from consumers regarding the requirements of the products. The customers include private owned

shoppers and government institutions like Panchayat, Municipality, and Corporation etc. After collecting the information, the agents communicate with the company and the company will send the products to the customers according to their demand. If the products reached to the consumers hand, the agents collect money from consumers and give money to the company and they collect their commission. The company sells their products through cash as well as credit basis. Normally the credit period allowed to consumers is sixty days.

5. FINANCE AND ACCOUNTS DEPARTMENT

All the accounting transactions are maintained under this department. Books and

recording of cash and credit transactions are maintained under this department. Finance manager is the head of the department. Finance manager gives necessary instructions and suggestions for the smooth and proper functioning of the department. The company follows the double entry accounting. The accounts of the company are prepared on account basis under the historical cost conventions. Finance requires proper planning and control to achieve the objectives of the business. This gives birth to financial

management as separate discipline. Financial management simply means management of finance. Financial management may be defined as planning, organizing, directing and controlling of the financial activity in a business enterprise. Financial management is concerned with management of finance and smooth running and successful achievement of the enterprise. The company has a sound finance department under financial manager. The main function of the financial department is to control the day to day receipts and payments of the company. The main source of the company is to generate the finance through selling of its product. Through this, the company captures its working capital and paying its liabilities.

REVIEW OF LITERATURE
Many researchers have studied working capital from different views and in different environments. The following ones are useful for our research:

(Eljelly, 2008) elucidated that efficiency liquidity management involves planning and controlling current assets and current liabilities in such a manner that eliminates the risk of inability to meet due short-term obligations and avoids excessive investment in these assets. The relation between profitability and liquidity was examined, as measures by current ratio and cash gap (cash converstion cycle) on a sample of joint stock companies in India using correlation and regression analysis. The study found that the cash conversion cycle was more importance as a measure of liquidity than the current ratio that affects profitability. The size variable was found to have significant effect on profitability at the industry level. The results were stable and had important implications for liquidity management in various Indian companies. First, it was clear that there was a negative relationship between profitability and liquidity indicators such as current ratio and cash gap in the India samle examined. Second, the study also revealed that there was great variation among industries with respect to the significant measures of liqudity.

(Deloof, 2008) discussed that most firms had a large amount of cash invested in working capital. It can therefore be expected that the way in which working capital is managed will have a significant impact on profitability of those firms. Using correlation and regression tests he found a significant negative relationship between gross operating income and the number of days accounts receivable, inventories and accounts payable etc in Indian companies. On the basis of these results he suggested that managers could create value for their shaeholders by reducing the number of days accounts receivable and inventories to a reasonable minimum. The negative relationship between accounts payable and profitability is consistent with the view that less profitable firms wait longer to pay their bills.

(Ghosh and Maji, 2009) in this paper made an attempt to examine the efficiency of working capital management of the Indian cement companies during 1992-1993 to 2001-2002. For measuring the efficiency of working capital management, performance, utilization, and overall efficiency indices were calculated instead of using some common working capital management ratios. Setting industry norms as target-efficiency levels of the individuals firm during the period of study. Findings of the study indicates that Indian Cement Industry as a whole did not perform remarkably well during this period.

(Shin and Soenen, 1998) highlighted that efficient Working Capital Management (WCM) was very important for creating value for the shareholders. The way working capital was managed had a significant impact on both profitability and liquidity. The relationship between the length of Net Trading Cycle,. Corporate profitability and risk adjusted stock return was examined using correlation and regression analysis, by industry and capital intensity. They found a strong negative relationship between lengths of the firms net trading Cycle and its profitability. In addition, shorter net trade cycles were associated with higher risk adjusted stock returns.

(Smith and Begemann,2009) emphasized that those who promoted working capital theory shared that profitability and liquidity comprised the salient goals of working capital management. The problem arose because the maximisation of the firms return could seriously threaten its liquidity, and the pursuit of liquidity had a tendency to dilute returns. This article evaluated the association between traditional and alternative working capital measures and retur on investment (ROI), specifically in industrial firms listed on the Johannesburg Stock Exchange (JSE). The problem under investigation was to establish whether the more recently developed alternative working capital concepts showed improved association with return on investment to that of traditional working capital ratios or not. Results indicated that there were no significant differences amongst the years with respect to the independent variables. The results of their stepwise

regression corroborated that total current liabilities divided by fund flow accounted for most of the variability in Return on Investment (ROI). The stastistical test results showed

that a traditional working capital leverage ratio, current liabilities divided by funds flow, displayed the greatest associations with return on investment. Well known liquidity concepts such as the current and qucik ratio registered insignificant associations whilst only one of the newer working capital concepts, the comprehensive liquidity index, indicated significant associations with return on investment.

(Santhosh Deoran Watpade,2009) emphasised that working capital management is concerned with the problems in attempting to manage the current assets, the current and the inter relationship that exist between them. The goal of working capital management is to manage the firms current assets and current liabilities in such a way that the satisfactory level of working capital is mentioned. Study of working capital management is managed effectively, monitor efficiently, planned properly and reviewed periodically at regular intervals to remove bottlenecks if any, company cannot earn profits and increase its turnover and to study the liquidity postion through various working capital related ratios. The study of working capital ,managemtn in Jain

Irrigation System Ltd has revealed that the current ratio was as per the standard industrial practice but the liquidity position of the company showed an increasing trend. Overall company has good liquidity position and sufficient funds to repayment more current assets balance. Company is increasing sales volume per year which supported the

company for sustained second position in the world and number one position in India.

(Carole Howorth & Paul Westhead,2003) they mainly focused on the working capital management in small firms in India. Working capital management routines of a large random of small companies in the India are examined. Considerable variability in the take up of 11 working capital management routines was detected. Principal

components analysis and cluster analysis confirm the identification of four distinct types of companies with regard to patterns of working cpaital management. The first three types of companies focused upon cash management, stock or debtors routines respectively, whilist the fourth types were less likely to take up any working capital management routines. Influences on amount and focus of working capital management are discussed. Multinomial logistic regression analysis suggests that he selected

independent variables succesfully discriminated between the four types of companies. The results suggest that the small companies focus only on areas of working capital management where they expect to improve marginal returns. The difficultie of

establishing casuality are highlighted and implications for academics, policy makers and practioners are reported.

(Gbenga Akinwande, 2010), the efficient management of working capital is very vital for a business survival. This is premised on the fact having too much working capital signifies inefficiency, whereas to little cash at hand signifies that the survival of business is shaky. The working capital management in the small and medium scale businesses, using VGC Telecom company as a case study, so as to establish factors influencing working capital performance; examine how cash management, inventory management and trade credit management affects working capital management; company effectiveness in converting working capital to ready money; how working capital management development and to offer recommendations on possible ways of improving working capital management. The collaborate postulation of Weston et al that a companys investment working capital is a substantial percentage of its total investment. In case of VCG telecoms, it is high as 65 percent. An efficient and ineffective

management of this investment will result in slow pace of development and ultimately to the business failure. The performance of the company in the different sphers of working capital management is good.

(Baig Viquir Ali, 2009) empahasized that if a firm has inadequate working cpaital-the money necessary to keep your business running-the firm is doomed to fail. Many firms, that are profitable on paper, are enforced to close their doors due to their helplessness to meet short term debts when they come due. However, by implementing sound working capital management strategies, your enterprize can flourish; in other words, assets are working for the firm. The objective of working capital management is to make certain that the firm is able to carry on its operations and that it has enough cash flow to satisfy both maturing short term debt and upcoming operational expenses. In order to improve the working capital management practices, it is essential for the finance

to adopt a proper appraoch of working capital decisions making to drive their respective firms towards success in order to generate the value for the shareholders. In addition to proper approach, there may be some other factors that may prove to be important ehile dealing with working capital decision making decision making and certainity these factors may include ownership, govt regulation, managerial empowerment and cultural factors. Therefore, the , main purpose of this paper is to report comparative findings of a survey of working capital management practices of selected agribusiness firms from diary co-operatives, private and MNC diary firms as a part of research thesis completed in July 2008. A sample of three state diary co-operatives, three private diary and three MNC diary firms was taken for the study.

( Maxime Abel, 2001) conducted the study in impact of working capital

management on cash holdings. This study examine the impat of working capital management on cash holdings of small and mudium-sized manufacturing enterprizes. The aim of these work is to theoritically derive significant factors related to working capital management which have an influence on the cash level of SMEs and test in a large sample of manufacuring SMEs. The theoritical framework for this consists of a treatise of motives for holding cash, working capital management and cash level. From these theoritical findings, two hypotheses are deducted: H1: Cash holdings are negatively related to the presence of cash substitutes. H2: Cash holdings are positively related to working capital management efficiency. The quantitative investigation consists of the statistical analysis- namely comparison of means and correlation analysis-of key figures which are calculated from the financial statements of a large sample of firms. The data set contains 13,287 Swedish manafacturing SMEs of the legal form Aktieboloag. Both hypotheses are confirmed by the results. Empirical evidences is presented which substantiates the supposition that the presence of cash substitutes-namely inventory and accounts receivable-entails lower cash holdings. Furthermore, it is confirmed that working capital management efficiencymeasured by the cash conversion cycle-is positively related to cash level.

(MICHAELJ. PEEL, 2000) Very little research has been conducted on the capital budgeting and working capital practices of small firms. The purpose is to present the results of a preliminary study on the working capital and financial management practices of small firms located in the north of England. In general, the results of the survey indicated that a relatively high proportion of small firms in the sample claimed to use quantitative capital budgeting and working capital techniques and to review various aspects of their companies working capital. In addition the firms which claimed to use the more sophisticated discounted cash flow capital budgeting techniues, or which had been active in terms of reducing stock levels or the debtors credit period, on average tended to more active in respect of working capital management practices. It is hopped that the issued raised will stimulate further theoritical and empirical contributions on this neglected and important area of small business research.

(Michel j.Peel, Nicholas wilson, 2000): They emphasized that the working capital and financial management practices of a sample of small firms located in the north of England. In general, the results of the survey indicated that a relatively high proportion of small firms in the sample claimed to use quantitative capital budgeting and working capital techniques and to review various aspects of their companies working capital. In addition, the firms which claimed to use the more sophisticated cash flow capital budgeting techniques, or which had acive in terms of reducing stock levels of the debtors credit period, on average tended to be more active in respect of working capital management practicces. It is hoped that the issues raised will stimulate further theoritical and empirical contributions on this neglected and important area of small business research.

(C.R Sathyamoorthy and L.B Wally-Dima, 2002) indicated that the working capital management of retail domestic companies that are listed on the Botswana Stock exchange. Working capital management is very important because a company that neglects its working capital mangement will soon run out of cash way even have to close down. Data was collected from companies that are listed on the Botswana Stock

Exchange. The research for choosing the listed companies is because the financial

statements for these companies are readily available and often more reliable that those of unlisted companies.

(Mohd Ridzuan Darun, 2000) indicates the practice of working capital management (WCM) in the Malaysian context, particualrly in Malaysian listed companies. Even though a number of studies about WCM were undertaken in many countries around the world, especiallyin Western countries, the understanding about how to manage working capital is not explicit. To date there has been no study examining the Malaysian context. Prior research in this area has focused on two approaches 1) Surveys seeking to examine the relatioship between WCM and corporate performance and 2) the development of optimization models to improve WCM performance. In te event of changes in industry context, it is argued that the failure of WCM research to reflect the characteristics and challlenges of contemporary organizational settings had led to a loss of relevance and gives to the need for a conceptual framework explaining current WCM practices. This study is intended to first develop an understanding of determinants of the various WCM practices currently used in organization.

(James,1998), indicate that the financial status of Abbot Laborataries based on an analysis of their liquidity, slovency and profitability and asset management ratios. These financial ratios shows that Abbot has solid financial policies, despiter a significant increase in short term borrowings in 1994; however, this is most likely a short term effect of the companys strategic reorganization to target its core business sectors and of the purchases and acquisitions that have not yet had the time to show their profitability.

(Brigham and Houston 2000) Larger amount of cash, securities, accounts receivables, marketable securities, inventories and fixed assets will be needed to support increased sales required levels will be based on expected sales levels ane expected order lead times. Additional holdings may be needed to enable the firm to deal with departures from the expected values. Further firms will also attempt to increase their accounts payable balances as a means of financing increased levels of operating assets to support

subsequent growth, while at the same time attempting to maintain adequate performance indicators.

(peterson and Rajan, 1997): This study provides further evidence that good working capital management is positively associated with better operating performance. Higher levels of accounts receivables are associated with higher operating performance, in all three growth rate categories. This study also finds that maintaining control over levels of cash, securities, inventory, fixed assets, and accounts payable is associated with higher operating performance. The firms which are experiencing very high growth will hold higher level of cash, securities, inventory and fixed assets and accounts payable to support the high growth. This, in turn, increases financial and operating risk for these firms. Perhaps IPO firms should stay more focused on their operating performance, while maintaining more moderate growth levels.

RESEARCH METHODOLOGY
RESEARCH
Research is a scientific and systematic search for pertinent information on a specific topic. Research considered as an effort to gain new knowledge. Research finds out the new solution for the problem. Research is the process of systematic and in-debth study of any particular topic, subject or area of investigation backed by collection, computation, presentation and interpretation of relevant data. According for Clifford Woody, research comprises defining and redefining problems, formulating hypotheses of suggestion, solution, collection, organizing and evaluating data, at last careful testing the conclusion to determine whether they fit the formulated hypothesis.

RESEARCH METHODOLOGY
Research methodology is a scientific and systematic way to solve research problem. Research methodology deals with research methods and takes into

consideration the logic behind the method. Research methodology is the description, explanation and justification of carious methods of conducting research. It is understood as a science of studying how research is done systematically.

RESEARCH DESIGN
The research design is the conceptual structure within research is conducted. It constitutes the blue print for the collection, measurement and analysis of data. The research design specifies the method of study. Research design is prepared after selecting the topic and formulating the problem.

HISTOCIAL RESEARCH
In this study Historical research is used. It is a research based on historical or past data. It attempts to find what happened in the past and reveal reasons for why and how things happened.

PERIOD OF STUDY

The study covers the period of 6 weeks

METHOD OF DATA COLLECTION

The analysis of financial condition and performance of the enterprize necessitates accurate and reliable data. These for the data for present study are collected with the help of secondary data from the annual report of the firm, it includes Profit and loss account and Balancesheet of the Metal Industry Limited Shoranur.

SECONDARY DATA
Secondary data is the data collected by others to be re-used by the researcher. Secondary data is mainly used for the study purposes. It is taken from published sources of the company like annual reports, magazines, journals, website and other fianancial offical records. Annual reports Books Websites

TOOLS FOR THE STUDY

Ratio Analysis

Ratio Analysis is the systematic use of accounting ratios in order to weigh and evaluate the operating performance of a firm. Accounting ratios are relationship expressed in mathematical terms between two related figures in the financial statements. The following ratios are used for the study Current ratio, quick ratio, inventory turnover ratio, working capital turn over ratio, fixed assts turn over ratio, debtors turn over ratio, creditors turn over ratio, gross profit ratio,net profit ratio, cash to current assts ratio, current assets turnover ratio, average collection period, average payment period etc.

1. CURRENT RATIO

Current assets Current ratio = Current liabilities TABLE NO :1

YEAR

CURRENT ASSET

CURRENT LIABILITY 7259742.39 13615086.15 8700252.63 8210282.88 9079675.99 9777891.36 10583860.51 6282915.95 4322464.05 5571244.08

CURRENT RATIO

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

12018810.63 13297955.66 10778371.36 8853627.61 9637695.62 9474804.52 9339653.78 16272103.19 16925641.09 30807106.08

1.65 0.97 1.23 1.07 1..06 0.96 0.88 2.58 3.91 5.52

Chart No.1

CHART SHOWING CURRENT RATIO

6 5 4 3 2 1 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 1.23 0.97 1.23 1.07 1.06 0.96 2.58 3.91

5.52

0.88

2010

YEAR

INTERPRETATION:

As a conventional rule current ratio of 2:1 is considered to be ideal. Here the current ratio of last 3 years is increasing. The company is maintaining an average of 1.23 which is not satisfactory. The highest ratio is in the year 2010 (5.52) and lowest in the year 2007 (0.88). The firm must try to keep the ratio 2:1 as per the ideal standard..

LIQUID RATIO
Liquid assets Liquid ratio= Liquid liabilities

TABLE NO :2
YEAR LIQUID ASSETS LIQUID LIABILITIES 7259742.39 13615086.15 8700252.63 8210282.88 9079675.99 9777891.36 10512870.510 6282915.95 4322464.05 5571244.08 RATIO

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

6374197.36 8260818.21 5910315.76 3480680.02 5099205.46 6103590.93 6319694.98 12488640.24 13190405.29 25051809.53

0.87 0.60 0.68 0.42 0.56 0.62 0.60 1.98 3.05 4.49

CHART NO :2

CHART SHOWING LIQUID RATIO

5 4.49 4.5 4 3.5 3.05 3 LIQUID RATIO 2.5 1.98 2 1.5 0.87 1 0.6 0.68 0.65 0.59 0.6 0.34 0.5 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
YEAR

INTERPRETATION

As a rule of thumb the quick ratio of 1:1 is satisfactory. The firm has adequate liquid assets to meet liabilities. The above table shows that the companys quick ratio is ranging from 4.49 to 0.87.

CASH RATIO

Cash + marketable securities Cash ratio= Current liability TABLE NO :3

YEAR

CASH AND MARKETABLE SECURITIES 1970571.44 3584812.32 492631.81 615954.67 21883.85 1348967.45 1324682.90 49947721.10 2753462.85 13983251.50

CURRENT LIABILITIES

RATIO

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

7259742.39 13615086.15 8700252.63 8210282.88 9079675.99 9777891.36 10583860.51 6282915.95 4322464.05 5571244.08

0.27 0.26 0.05 .07 .024 0.13 0.11 0.79 0.63 2.5

CHART NO :3

TABLE SHOWING CASH RATIO

3 2.5 2 1.5 CASH RATIO 1 0.5 0.27 0 0.26

2.5

0.79

0.63

0.05

0.07 0.0024 0.13

0.11

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YEAR

INTERPRETATION :

Cash ratio of the firm shows a mixed trend. The ratio is 0.27 in 2001 and decreases to 0.26 in 2002 and in the last 3 years the ratio is increasing on an average. The absolute liquid asset ratio is 0.481. This is because, the cash component of the current asset is at a very low level. Hence, the firm has got more of convertible liquid assets and less of immediately liquid assets, as it carries a small amount of cash.

DEBTORS TURNOVER RATIO

Total sales Debtors turnover ratio= Average debtors

TABLE NO :4 YEAR NET CREDIT SALES 12701348.86 19394190.80 23703318.38 176844394.25 14352306.31 11678612.55 18875520.23 20268925.50 39089885.4O 23148586.70 DEBTORS RATIO

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

3497427.47 3251117.43 4547007.63 3421320.36 4266670.60 3682398.47 3425740.98 5587551.79 8448047.89 8256857.78

3.63 6.00 5.21 5.16 3.36 3.17 5.50 3.62 4.62 2.8

CHART NO :4

CHART SHOWING DEBTORS TURNOVER RATIO

7 6 5 4 3.63 DTR 3 2 1 0 2001

6 5.21 5.16 3.36 3.17

5.5 4.62 3.62 2.8

2002

2003

2004

2005

2006

2007

2008

2009

2010

YEAR

INTERPRETATION :

Debtors turnover ratio shows decreasing trend. It is highest in the year 2002 (6.00) and lowest in the year 2010 (2.8). The higher value of debtors turnover ratio the more efficient of management of debtors. The average debtors turnover ratio is 4.30 which is not good for the company.

AVERAGE COLLECTION PERIOD

No.of days in ayear Avarage collection period= DTR

TABLE NO :5 YEAR NO.OF DAYS IN A YEAR 365 365 365 365 365 365 365 365 365 365 DTR RATIO (in days) 100 61 70 71 109 115 66 101 79 130

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

3.63 6.00 5.21 5.16 3.36 3.17 5.50 3.62 4.62 2.8

CHART NO :5

CHART SHOWING AVERAGE COLLECTION PEROID

140 120 100 80 DTR 60 40 20 0 2001 2002 2003 2004 2005 2006
year

130 100 61 70 71 109 115 101 79 66

2007

2008

2009

2010

INTERPRETATION:

The average collection period shows increasing trend which is bad for the company. The highest collection period is in the year 2010 and the lowest collection period is in the year 2002, which means company is inefficient in collecting its debts.

CREDITORS TURNOVER RATIO

Net credit purchases Creditors turnover ratio = Creditors

TABLE NO:6 YEAR NET CREDIT PURCHASES 2042621.75 10106018.60 8496868.36 3545959.40 2960645.20 1552831.71 4671645.85 4410883.74 7485138.15 4528032.22 CREDITORS RATIO

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

507664.47 7517770.56 624380.44 534170.91 1063084.56 1551010.05 1352929.87 1695451.37 1401997.97 1727372.27

4.02 1.34 13.6 6.6 2.8 1.0 3.5 2.60 5.3 2.62

CHART NO:6

CHART SHOWING CREDITORS TURNOVER RATIO

16 13.6 14 12 10 8 6.6 CTR 6 4.02 2.8 4 1.34 2 0 2001 2002 2003 2004 2005

5.3 3.5 1 2006 2007 2008 2009 2010 2.6 2.62

YEAR

INTERPRETATION:

In 2001, the ratio was 4.02 it decreased to 1.34 in 2002 it again increased to 2003 and finally decrease to 2.62. The CTR is very low which reflects tuff credit terms granted by suppliers. It will affect to back the credit quickly from the creditors.

AVERAGE PAYMENT PERIOD

Accounts payable Avarage payment period = Net credit purchases 365

TABLE NO: 7 YEAR NO.OF DAYS IN A YEAR 365 365 365 365 365 365 365 365 365 365 CTR RATIO (in days) 9 272 27 55 130 365 104 140 69 139

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

4.02 1.34 13.6 6.6 2.8 1.0 3.5 2.60 5.3 2.62

CHART NO:7

CHART SHOWING AVERAGE PAYMENT PERIOD

400 350 300 250 CTR 200 150 100 50 0

365 272

130 9 2001 2002 27 2003 55

140 104 69

139

2004

2005

2006

2007

2008

2009

2010

YEAR

INTERPRETATION:

On an average, the APP is 131 days. A shorter period indicates that creditors are being paid promptly, while a longer period reflects liberal creidt terms granted by suppliers. Last 10 years average collection period shows a longer period. Higher APP increases the cash position of the firm.

WORKING CAPITAL TURNOVER RATIO

Net Sales Working capital turnover ratio = Net working capital

TABLE NO:8

YEAR

NET CREDIT SALES 12701348.86 19394190.80 23703318.38 176844394.25 14352306.31 11678612.55 18875520.23 20268925.50 39089885.4O 23148586.70

NET WORKING CAPITAL 4759068.24 -317130.49 2078118.73 643344.73 558019.63 -303086.84 -1244206.73 9989187.24 12603177.04 22235862

RATIO

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

2.67 -61 11.4 27.4 26 -39 -15.1 2.02 3.10 1.04

CHART NO:8

CHART SHOWING WORKING CAPITAL TURNOVER RATIO

40 27.4 30 20 11.4 10 2.67 0 -10 -6.1 -20 -30 -40 -50

Working capital turnover ratio

26 2.02 3.1 1.04

-15.1 -39
Year

INTERPRETATION:

This ratio indicates the number of times the utilization of working capital in the process doing business. Here the woring capital turnover ratio is decreasing trend.

Lower is the ratio indicates higher is the investment in working capital and there will be lower profits.

INVENTORY TURNOVER RATIO

Cost of goods sold Inventory turnover ratio = Average inventory

TABLE NO: 9 YEAR COST OF GOODS SOLD 10279001.08 14755079.45 14600931.28 10534177.88 7216798.49 5937731.85 9057201.69 7513828.34 13613520.9 8251252.02 AVERAGE STOCK RATIO

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

3589514.52 4473621.85 4045485.915 3228026.82 2474893.05 2163086.95 1619722.25 1881521.3 2641319 349357.38

2.9 3.3 3.6 3.26 2.91 2.74 5.6 4.00 5.15 2.36

CHART NO: 9

CHART SHOWING INVENTORY TURNOVER RATIO

6 5 4
INVENTORY TURNOVER RATIO

5.6 4 3.26

5.15

3 2

2.9

3.3

3.6

2.91 2.74

2.36
RATIO

1
0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
YEAR

INTERPRETATION:

Stock is most important component of working capital. It measures how fast the stock is moving through the firm and generating sales. In 2001, the ratio was 2.9 and it increase in following 3 years and finally decreases in the year 2010, the ratio was 1.04. proper inventory turnover makes business to earn a reasonable margin of profit.

INVENTORY TURNOVER PERIOD

No. of days in a year Inventory turnover period = Inventory turnover ratio

TABLE NO:10

YEAR

NO.OF DAYS IN A YEAR 365 365 365 365 365 365 365 365 365 365

ITR

RATIO (in days) 126 111 101 112 125 133 65 91 71 155

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

2.9 3.3 3.6 3.26 2.91 2.74 5.6 4.00 5.15 2.36

CHART NO: 10

CHART SHOWING INVENTORY TURNOVER PERIOD

180 155 160 133 125 140 126 112 111 120 101 91 100 ITP 71 65 80 60 40 20 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YEAR

RATIO(IN DAYS)

INTERPRETATION:

In the year 2001, the ITP is 126 days and reduces to 111 days in 2002. In the following three years the ratio is increasing. In the year 2010, the ratio is 155 days, i.e., higher. It means the inventories are kept idle for a longer period of time.

FIXED ASSET TURNOVER RATIO

Sales Fixed assets turnover ratio = Fixed assets

TABLE NO: 11

YEAR 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

NET SALES 12701348.86 19394190.80 23703318.38 176844394.25 14352306.31 11678612.55 18875520.23 20268925.50 39089885.40 23148586.70

FIXED ASSETS 22523965.53 22290387.61 22045252.15 21889216.25 21716799.68 21572579.46 21509813.56 22558482.20 24580818.32 26092221.04

RATIO 0.56 0.87 1.0 0.80 0.66 0.54 0.87 0.89 1.5 0.88

CHART NO:11

CHART SHOWING FIXED ASSETS TURNOVER RATIO:

1.5 1.6 1.4 1.2 1 0.88 0.87 0.87 0.89 1 FIXED ASSET 0.8 TURNOVER 0.8 0.66 0.56 0.54 RATIO 0.6 0.4 0.2 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YEAR

INTERPRETATION:

This ratio expresses the number of times the fixed asset is being turned over a stated period. This ratio shows decreasing trend. The lowest ratio in the year 2001 (0.56) and highest in the year 2009 (1.5). Lower ratio shows inefficiency in utilization of capital and it would lead to lower profitability.

CURRENT ASSET TO TOTAL ASSET RATIO

Current assets Current asset to total asset ratio = Total assts

TABLE NO:12

YEAR 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

CURRENT ASSET 12018810.63 13297955.66 10778371.36 8853627.61 9637695.62 9474804.52 9339653.78 16272103.19 16925641.09 30807106.08

TOTAL ASSET 34542776.16 35588343.27 32823623.51 30742843.86 31354495.3 31047383.98 30849467.34 38830585.39 41506459.41 56899327.12

RATIO 34.79 37.36 32.8 28.7 31 31 30.27 50 41 54.14

CHART NO:12

CHART SHOWING CURRENT ASSET TO TOTAL ASSET RATIO

60 50 50 40 34.79 37.36 32.8 CURRENT ASSET 28.7 TO TOTAL 30 ASSET 20 10 0 31 31 30.27 41

54.14

RATIO

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YEAR

INTERPRETATION:

This ratio indicates the proportion of current asset towards total asset. In 2001, the proportion was 34.79 and it decreased to 31 in 2005 and 2006. In the year 2010, it was 54.14. This means company is investing more amounts in current asset.

CASH TO CURRENT ASSET RATIO

Cash Cash to current asset ratio = Current assts 100

TABLE NO:13

YEAR

CASH

CURRENT ASSETS

RATIO

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

1970571.44 3584812.32 492631.81 615954.67 21883.85 1348967.45 1324682.90 49947721.10 2753462.85 13983251.50

12018810.63 13297955.66 10778371.36 8853627.61 9637695.62 9474804.52 9339653.78 16272103.19 16925641.09 30807106.08

16.3 26.95 4.57 6.95 2.2 14.23 14.18 30.69 16.26 45.3

CHART NO: 13

TABLE SHOWING CASH TO CURRENT ASSET RATIO

50 45.3 45 40 35 30.69 26.95 30 CASH ASSET TO 25 CURRENT ASSET 20 16.3 16.26 14.23 14.18 15 6.95 10 4.57 2.2 5 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YEAR

RATIO

INTERPRETATION:

The above graph shows the cash to current asset ratio of the company for the last ten years. In 2001, the ratio was 16.3 and in 2002 ratio increased 26.95 and the following three years declined. Again the ratio is increased. In the year 2010, the ratio is highly increased. This shows that the company holds more amount of cash.

CURRENT ASSET TURNOVER RATIO

Net sales Current asset turnover ratio = current assts

TABLE NO:14

YEAR

NET SALES

CURRENT ASSETS 12018810.63 13297955.66 10778371.36 8853627.61 9637695.62 9474804.52 9339653.78 16272103.19 16925641.09 30807106.08

RATIO

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

12701348.86 19394190.80 23703318.38 176844394.25 14352306.31 11678612.55 18875520.23 20268925.50 39089885.40 23148586.70

1.05 1.45 2.19 1.99 1.48 1.23 2.02 1.24 2.30 0.75

CHART NO:14

CHART SHOWING CURRENT ASSET TURNOVER RATIO

2.5 2 CURRENT ASSET TURNOVER RATIO 1.5 1.05 1 0.5 0 1.45

2.19

2.3 1.99 1.48 1.23 1.24 0.75

RATIO

2.02

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YEAR

INTERPRETATION: The ratio in the year 2001 was 1.05 and it increased to 1.45 in 2002 and it again increased 2003. This ratio shows a mixed trend. Higher ratio indicates that company is utilizing more current assets to generate sales. This trend shows that firm is not able to utilize current assets effectively.

NET WORKING CAPITAL GAP RATIO

CA-CL Net working capital gap ratio = CA

TABLE NO:15

YEAR

NET WORKING CAPITAL

CURRENT ASSETS

RATIO

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

475968.24 -317130.49 2078118.73 643344.73 558019.63 -303086.84 -1244206.73 9989187.24 12603177.04 22235862

12018810.63 13297955.66 10778371.36 8853627.61 9637695.62 9474804.52 9339653.78 16272103.19 16925641.09 30807106.08

0.39 -0.02 0.19 0.07 0.05 -0.03 -0.13 0.61 0.74 0.72

CHART NO:15

CHART SHOWING NET WORKING CAPITAL GAP RATIO:

0.72 0.74 0.8 0.7 0.61 0.6 0.5 0.39 NET WORKING 0.4 CAPITAL GAP 0.3 0.19 RATIO 0.2 0.07 0.05 0.1 0 -0.1 -0.02 -0.03 -0.2 -0.13 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YEAR

INTERPRETATION: In the year 2001, the ratio was 0.39 and it goes to loss stage in the year 2002, 206 and 2007. in the last three years the ratio is increasing, that means the proportion of working capital in current asset is increasing.

GROSS PROFIT RATIO

Gross profit Gross profit ratio = Net sales 100

TABLE NO:16

YEAR 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

GROSS PROFIT 3134912.04 1412212.32 25186441.39 477176.54 -481246.50 3146410.98 1298563.21 2431644.27 2312655.92 2700140.43

NET SALES 120701348.86 19394190.80 23703318.38 176844394.25 14352306.31 1168612.55 18875520.23 20268925.50 39089885.4O 23148586.70

RATIO 24.68 7.28 16.25 2.6 -3.35 26.94 6.87 11.9 5.9 11.6

CHART NO:16

CHART SHOWING GROSS PROFIT RATIO

30 25 20 GROSS PROFIT 15 RATIO 10 5 0 -5

24.68 16.25

26.94

11.9 7.28 2.6 6.87 5.9

11.6
RATIO

-3.35 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YEAR

INTERPRETATION:

In 2001 the ratio was 24.68. This ratio fluctuting from year to year. And in 2005 the ratio is decreasing, ie gross loss occurred. The highest ratio in the year is 2006. in the last three years the ratio is average. It is a bad sign which indicates the inefficiency in mannagement.

NET PROFIT RATIO

Net profit Net profit ratio = Net sales 100

TABLE NO:17

YEAR 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

NET PROFIT 14495685.98 17438955.65 -18361070.27 19871907.13 22737754.54 -24887504.59 -25176354.77 -20092467.11 -16350503.40 -15259113.22

NET SALES 120701348.86 19394190.80 23703318.38 176844394.25 14352306.31 1168612.55 18875520.23 20268925.50 39089885.4O 23148586.70

RATIO 140 90 -77.46 112.36 158 -213 -133 -99.12 -41.8 -66

CHART NO:17

CHART SHOWING NET PROFIT RATIO

200 158 140 112.36 150 90 100 50 0 NET PROFIT 0 RATIO -50 -41.8 -100 -66 -77.46 -99.12 -150 -133 -200 -250 -213 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

RATIO

YEAR

INTERPRETATION:

This ratio shows the negative trend. The ratio is highest in the year 2005 (158). In the last five years the company goes to loss stage. It will affect the profitability of the firm.

5.1 FINDINGS OF THE STUDY

The study shows that working capital management in Metal Inddustries Ltd is satisfactory.

The company is maintaining adequate liquidity level to meet its liability.

The company has maintained an average of 1.23 :1 in the case of current ratio which is not satisfactory because the standard current ratio is 2:1.

The Quick Ratio of the company is considered satisfactory because the company is maintained an average of 1.38:1 and the standard quick ratio is 1:1.

Cash ratio of the company is increasing, that means the availability of cash increasing for meeting the current liablities.

The companys debtors turnover ratio has a decreasing trend which shows inefficiency of the company to collect the cash from the debtors quickly.

The creditors turnoverr ratio shows a mixed trend and this indicates that the firm is not following neither a stringent nor liberal policy and higher APP increases the cash position of the firm.

By analysing the working capital turnover ratio it is found that the company utilizes less amount of working capital for generating sales.

Inventrory turnover ratio is in slightly increasing, that means raw materials are converted into sales slowly and the inventories are over stocked.

The fixed asset turnover ratio is decreasing, which shows the efficiency in utilization of capital and it would lead to lesser profitability.

By looking the current assets to total assets ratio we can see that the proportion of current asset in total asset is very high.

The cash to current asset ratio shows that the company holds more amount of cash.

Lower current asset turnover ratio indicates the company is utilizing less current assets to generate sales.

Working capital gap ratio is decreasing, in 2010 the ratio is 0.72 that means the proposition of working capital in current asset is decreasing.

Gross profit ratio of the company is decreasing, this indicates the inefficiency of the management.

The net profit ratio is decreasing trend, some times it goes to loss stage, which means that it reduces the profitability of the firm.

5.2 SUGGESTIONS

As the current ratio of the company is not satisfactory, the company should improve its short term liquidity position either by increasing current assets or reducing current liabilities.

Net profit of the company can be increased by decreasing the manufacturing cost with the help of an effective cost management system. The company should think of modernization and diversification programmes, otherwise it would not be able to withstand in the competition. When compared to sales the company is maintaining huge investment in fixed asset. So the company should either sell the unnecessary fixed asset or increasing the plant capacity.

Debtors collection period had to be reduced, at least 60 days otherwise the chance of them turning bad would be high. By adopting proper credit policy from time to time for avoding this situation in the company.

The firm should identify the various investment avenues suitable to it. A well planned collection programme should be adopted so as to reduce the amount of receivables. The management of inventory should ensure that no inventories are lying in stock for long time.

5.3 CONCLUSION
Finance is the king-pin of any business enterprise. Every part of an enterprise production, distribution, management, etc requires finance. Working capital

management is the management of the current asset. The study of the working capital will helps to identify the liquidity and overall efficiency of the firm. From this study we can conclude that the working capital management of Metal Industries Ltd is not satisfactory. The company should give some attention to manage the fixed asset, cash and net profit and also control overstocking. When the company manages its

inventory, cash and receivables efficiently we can say that working capital management is efficient.

BIBLOGRAPHY
PRASANNA CHANDRA, fundamentals of Financial Management, New Delhi, Tata McGraw- Hill Publishing Company Ltd., 1998. KHAN & JAIN, Financial Management (Third Edition), New Delhi, Tata McGraw- Hill Publishing Company Ltd., 1999. V.K BHALLA, Working Capital Management (11th revised & enlarged Edition), New Delhi, Anmol Publications Pvt Ltd., 2010. C.R KOTHARI, Research Methodology and Techniques Second Revised Edition), New Delhi, New Age International Publishers, 2004 Annual reports- METIND, Shoranur.

WEBLIOGRAPHY
WWW.FINANCE. INDIAMART.COM WWW. METIND.COM WWW.ANSWERS.COM WWW.WIKIPEDIA.ORG http://www.essays.se/about/working capital+management+thesis/