Hypotheses

A Project Study on Working Capital Management of KAMCO Ltd.

INTRODUCTION

Financial management refers to that part of the management activity which is concerned with the

planning and controlling of firms financial resources .It deals with finding out various sources

for raising funds for the firm .The sources must be suitable and economical for the needs of the

business the most appropriate use of such funds also forms a part of financial management.

Working capital management is concerned with the management of current asset .It is an integral

part of financial management as short term survival is a prerequisite for long term success .One

aspect of working capital management is the tradeoff between profitability and risk .If the firm

doesn’t have adequate working capital ,that is, it doesn’t invest sufficient funds in current assets ;

it may become illiquid and consequently may not have the ability to meet its current

obligation .If the current assets are too large ,profitability is adversely affected . The key

strategies and considerations in ensuring a tradeoff between profitability and liquidity is one

major dimension of working capital management.

The goal of working capital management is to manage the firm`s current assets and liabilities in

such a way that a satisfactory level of working capital is maintained. Working capital, in general

refers to the excess of current assets over current liabilities. Management of working therefore, is

concerned with the problems that arise in attempting to manage the current assets, current

liabilities and the inter-relationship that exist between them.

Nirmala College of Information Technology, Chalakudy 1


OBJECTIVES OF THE STUDY

The main objective of the study is to evaluate the overall analysis of working capital of KAMCO

Ltd. Other specific objectives are

1. To analyze the working capital management of KAMCO

2. To ascertain the growth of KAMCO Ltd in respect of profit

3. To ascertain the liquidity of KAMCO Ltd

4. To ascertain the efficiency of the firm

5. To understand general performance of the KAMCO Ltd

6. To get acquainted with the practical side of business



NATURE OF THE PROBLEM

The problem for which this study has been undertaken is to analysis the financial statement and

to find out the components of working capital.The problem of working capital management

involves the problem of decision making regarding investment in various current assets with an

objective of maintaining the liquidity of funds of the firm to meets its obligation promptly and

efficiently. The study is done to have a general view of the financial management of the

company .Major areas covered in the scope of the study is financing of the company ,capital

employed and profitability.



HYPOTHESIS

Hypothesis means a mere assumption or some supposition to be proved or disproved. But for a

researcher hypothesis is a formal question that he intends to resolve .Thus a hypothesis, may be

defined as a proposition or a set of preposition set forth as an explanation for the occurrence of

some specified group of phenomena either asserted merely as a provisional conjecture to guide

some investigation or as highly probable in the light of established facts. A research hypothesis is

a predictive statement, capable of being tested by scientific methods that relates an independent

variable to some dependent variable.

Characteristics of hypothesis

Hypothesis should be clear and precise.

Hypothesis should be capable of being tested.

Hypothesis should be in limited in scope and must be specific.

Hypothesis should be stated as far as possible in most simple terms so that the same is

easily understandable by all concerned.

Hypothesis should be amenable to testing with a reasonable time.

Hypothesis must explain the facts that gave rise to the need for explanation.

Basic concepts concerning testing of hypothesis There are two types of hypothesis,

1. Null hypothesis: If we are to compare method A with method B about its superiority and if

we proceed on the assumption that both methods are equally good then this assumption is

termed as the null hypothesis. A Null hypothesis is generally symbolized as H0.

2. Alternative Hypothesis: As against this we may think that the method A is superior or the

method B is inferior we are then stating what is termed as alternative hypothesis. Alternative

hypothesis as H1.

Ho is the non effective working capital

H1 is the effective working capital



INTRODUCTION TO THE INDUSTRY

Agriculture is a very important sector of the Indian companies .It contributes sizably to the

domestic product as also to exports .More than two-third of the workforce work in agriculture

and large may depend upon it, being engaged in agricultural products, agro based industries etc.

HISTORY TO THE INDUSTRY

India being an agricultural based economy provides livelihood to more than 75% of the

population .Major portion of our income that is., about 70% is earned from agricultural

activities .In spite of the very dominant place of agriculture, it is a depressed industry because of

low productivity ,in agriculture ,small size of farms ,finance and defective equipments .Once

government believed that only large land holdings were the most efficient and they could use the

latest techniques in cultivation .how ever in recent years the emphasis has been shifted from

large land holdings to small land holdings.

After achieving her independence in 1947,India found herself to be badly lacking the means to

meet the food demands for her vast population .The existing agricultural scenario presented a

dismal picture –traditional farming methods ,low yielding seeds and primitive implements

wholly unsuited to large scale cultivation .The only solution lay in mechanized farming which

could turn around the virtual fortune of India .In order to achieve this objective, indigenous agro-

machinery units were to be set up, without resorting to imports which undoubtedly passed a

heavy burden on the nation’s need.

Agricultural is way of life ,tradition that for centuries has shaped the thought ,the outlook, the

culture and economic life of the people of India, agriculture is considered to be the major activity

of most of the people .Mover over 200million farmers and farm workers have been the backbone

of Indian’s agriculture .In the beginning, then farmers adopted ancient method. The entire

process that is from the sowing the seed till harvesting were all done by the farmers itself .It was

a really time consuming one, which required a lot labor work. The cost of production was very

high and the benefits are not promising



PRESENT STATUS OF THE INDUSTRY

In the view of the spectacular success in the production and productivity achieved in developed

countries through mechanization of agriculture, it was being agreed that India also should fall in

line with these countries. Though India was backward in the use of machines for agricultural

operations, yet in the past few years there has been an increase in the use of modern implements.

The phase of mechanizations of farming in the country was slow during 1950’s.There after,

particularly since the middle of 1960’s with the coming of the new agricultural technology ,this

has increased .An associated effect of the new technology is the change in the agricultural

practices .The preparation of land the sowing of seeds the watering of land ,the control of

seeds ,the use of pesticides ,the quick harvesting of crops etc,are now done more scientifically

than ever before



FUTURE SCOPE OF THE INDUSTRY

Agro-industry is looking proudly ahead into a more promising future .Future will also see

diversification products in the farm mechanization field contributing significantly to the

realization of the Indian dream of self sufficiency in food production and rededicating itself to

the cause of self relevance and social responsiveness in the service of people without respite.



PROFILE OF THE ORGANISATION

The Kerala Agro Machinery Corporation Ltd. Popularly known as ‘KAMCO’ was established in

the year 1973 as a subsidiary of Kerala agro industries corporation Ltd .[KAIC]and subsequently

became a fully owned Govt.of Kerala undertaking at Athani, 25km north of koachi .It all began

in 1958, when Dr.Rajendra Prasad, the president of India was presented with a ‘Kubota power

tiller ‘ by the Japanese [M/S.Kubota Ltd. Japan,the world’s leading manufacturer of power tiller

and other agriculture machinery]. The kerala agro industries corporation Ltd.[KAIC

Ltd.]Trivandrum,[Govt. of kerala company]promoted the establishment of KAMCO .The KAIC

Ltd. Entered in to a technical collaboration agreement with M/S Kubota Ltd.Japan in

February1972.On 15.11.1972 the kerala industrial and technical consultancy organization Ltd.

[KITCO]were entrusted with the worth of Rs.2cores as asubsidiary of M/S. KAIC Ltd. Which

held the entire paid up capital shares in KAMCO .Even though the company was formed as a

subsidiary of KAIC Ltd. Subsiquently the company become a fully owned Govt. company by

transferringthe sheres held by KAIC Ltd.

KAMCO hascompleted its 37 years and is running on profit for the last 26 years continuously

inceasing its production ,turnover and profit year after year .



HISTORY OF THE ORGANISATION

Kerala agro machinery corporation Ltd was established in april 1973 as a subsidiary of the

Kerala Agro Industries Corporation Ltd.specifically for the manufacture of KUBOTA power

tiller in collaboration with M/S Kubota Ltd, Japan under industrial license already granded by

the Govt. the company has its registered office at Athani in Ernakulam Dist. And the first

manufacturing unit was also established there.Initially,the components were being imported from

Japan in CKD condition,which were assembled and tested in the factory at Athani.The Company

started indigenizing the components in a phased manner and the process of indigenization was

completed by the year 1986.By this time,KAMCO became an independent Organization and the

collaboration agreement with M/S Kubota also ceased to exist since full indigenization had been

attained and the product coming out was fully Indian in all respects.The product was also

renamed as KAMCO Power Tiller.At Athani, in addition to the Assembly shop, the Company

also has got machine shop where most functionally critical components of the power tiller are

being processed.Rest of the items is bought out from Small and Medium scale industries located

mainly in South India.

In 1992,KAMCO took over a sick unit of state SIDCO in Kalamassery major industrial estate

and converted the same to a power tiller engine assembly plant.The unit was taken over along

with employees of SIDCO and now the Company produces Engines needed for Power tiller.The

approximate investment in this unit is Rs1.2 Crores.

The company had procured 11acres of land in the industrial development area at

Kanjicode ,Plakked and as per the approval of project report by the Govt. KAMCO’s third unit

was established there during the period 1994-95at a cost of Rs.4.3 crores .This third unit went in

to production in March 1995where power tillers are being produced Kalamassery unit is

supplying engines needed for the power tiller assembled at Palakkad unit.

By 1991thecompany had taken up development of a small harvesting machine which was

completed by 1996 after trial runs .The product was named KAMCO power reaper and initially

regular production commenced in Klamassery unit As the facilities available there had been



merger ,company established its forth unit at Mala in Thrissur Dist. In the year 2000at a cost of

Rs.4.28crores and shifted the production of power reaper from Kalamassery to Mala .Production

of power reaper is now regularly going on in this unit .All the investment had been met from

company’s own resours.

The company has established a dealership arrangement throughout the country consisting of

more than 40 dealers in the Govt. and Pvt. Sector .Tiller is being sold

inKerala,Thamilnadu,Orrisa,WestBangal,Maharashtra,Bihar,Meghalaya,Tripura,

Manipur ,Gujarat ,Karnataka ,Andhrapradesh ,and Pondicherry. In all the places except West

Bengal the product commends 45 to 50%of the market share whereas in West Bengal the product

commends about 85% .Company has procured 9647power tillers during 208-09from all units

together which are sold in the above states .Company is also taking efforts to make its presents

felt in other states also.

Power reaper is now being sold in kerala ,Thamilnadu Andhrapradesh and Orissa and to some in

Maharashtra also .In Andhrapradesh and Orrisa the product is very popular .During the year

2008-09 company produced1293 reapers and sold the entire quantity through the dealers .

Kerala Govt.have invested Rs.161.46 lakhs by way of share capital in the company [161460

shares @Rs100 each ]the company is running on profit since 1984-85and regularly paying

dividend to Govt.Divident at 30%is being sold paid to Govt.from the year 2001-02 onwords .

Sales turn over for the year 2008-09has crossed 120crores of Rupees Reserves and surplus of the

company as on 31.03.2009 is Rs 8112.94 lakhs .from internally generated funds company

invested in shares worth Rs 150 lakhs in Kerala feeds Ltd and Rs 50lakhs in cochin international

airport.

Power tiller now equipped to confirm to CMVR norms of central Govt power tiller manufactured

by the company is also covered under ISO certification from 1998 onwords.



PRESENT STATUS OF THE ORGANISATION

KAMCO is one of the professionally managed companies owned by state Govt.Present status of

KAMCO is synonymous with service to the small and marginal farmers of the country .KAMCO

through their precision and quality is revolutionzing the small and marginal holdings throughout

the country .Today kamco’s products are widely used and demanded all over India ,enjoying

over 50%market share at national level .The company with its four plants at Athani ,Kalamassery

,Kanjicode ,and Mala unit is confidently meeting the demand for KAMCO products in India and

abroad .The main markets for the products are at West Bangal ,Assam ,Tamil

Nadu ,Thripura,kerala ,Megalaya ,Bihar ,Gujarat ,and Manipur presently KAMCO have 45

dealers all over India .

Organisation structure of KAMCO

KAMCO is governed by the board of directors. Board includes Chairman ,Managing Director

and other Directors .The Govt. of kerala nominates the Chairman of the board .The chief

executive officer of the company is the Managing director who shall exercise powers ,subject to

the overall control and supervision of the board.The Managing Diector is the top most official

and the Govt gives deligation of authority to the Managing Director .He may be entrusted and

delegated from time to time by the board . The Managing Director is the operational head of the

company supported by General manager and Deputy general managers for different

sections .Manegers and Deputy managers will assist the General Managers and Deputy General

Managers . Board of Directors

1. V.Chamunni Director &Chairman

2. S.M.Reghunathan Managing Director

3. C.P.Murali Director

4. M.Aboobakar Director

5. K.Ramdas Director

6. Edakulam Hameed Director

7. Sulaiman Khalid Director



8. K.K.Gangadharan Director (Director of Agricultural Dpt. Of Kerala)

9. M.Albertian Director (Deputy Secretary, Agriculture, Govt. of Kerala)

Departments of KAMCO

KAMCO- The Govt. company works with the help and support from the different

department .All departments work uniquely for the attainment of the organizational goal .The

performance of different departments was amazing for the past several years ,which are the

reason why the company’s profit volume is increasing at a higher rate The head of each

department is Deputy General Manager [DGM] assisted by managers and DY.managers add

ASST. managers at different levels .Department heads are directly liable to report to Manageing

Director .

KAMCO haue totally 8 departments .They are as follows

1. Production Department

2. Marketing Department

3. Human Resource Department

4. Finance Department

5. Purchase &Stores Department

6. Quality Assurance Department

7. System Department

8. Engineering and Research &Development Department

Product Profile

All the products of KAMCO have high demand in Indian market.

KAMCO’S products include:-

1. KAMCO Power Tiller Model KMB 200

2. KAMCO Diesel Engine

3. KAMCO Power reaper Model KR 120

1. Power Tiller



Power tiller is the main product of kamco .It is a versatile machine that has radically changed

the old labour intensive method of agriculture ,by making almost all farming operations

faster ,cheaper and easier .The coat on Tiller is around 1.10lakh

Features

A. Simple movement control for easy of handling

B. Perfectly balanced and vibration –free engine to reduce operator fatigue

C. Unique radiator cooling system helps in non stop operation

D. ‘fail safe’safety devices to prevents accidents

E. Automatic fuel control to save precious energy

F. Distinctive radiator control system for continuous operations

G. It is faster

H. Make cleaner windrows for easier collection

I. 6 forward speed ,2 reserve speed ,4 tilling

J. Rotary ,diesel –powered ,water cooled ,with radiater

K. Weight is 485kg

2. Diesel Engine

Features

A. Economical with minimum fuel cost

B. Smooth starting

C. Easier operation

D. Equipped with radiation

E. Less vibration

F. Less noise

G. Travelling speed 15kmph

H. HP-12

3. Power Reaper



Features

A. Power reaper harvests and makes windrows at the rate of 3-4 hours of hectare

B. It is light enough to carry by two persons

C. Smooth chain conveyer action deliver plants gently making clean windrows

D. Weight is 136 kg

E. Engine type is single cylinder ,4stroke CSD RR ,side value air cooled engine

F. Maximum H P 3.6 Ps

Manufacturing

KAMCO’s Power tiller have more than 850 different components, majority of which are

supplied by dedicated small and medium scale industries from near by states .Functionally

critical components (almost 13)are manufactured in kamco’s house itself

Company has got a modern machine shop with special purpose machine ,which ensure

conformity with prescribed quality standards .Inspection at various stages off manufacturing is

carried out ,which help in reducing the process to the minimum.

Other Products

KAMCO also deals with following products:-

1. KAMCO Super DI Power Tiller

2. KAMCO Power Stone Cutter KSC 625

3. KAMCO Agria 602 DE Power Tiller

4. KAMCO Agria Garden Tiller

All the above products are supplied by KAMCO to the needy people by the way Of

manufacturing on a limited edition. KAMCO has a future plan of manufacturing the above items

in a bulk number



Objectives of the company

The main objective of the company is to manufacture or assemble in India ,either in

collaboration or otherwise tractors ,power tillers ,power reapers ,combine harvesters ,tansplanters

.diesel engine s, pump sets, accessories and attachments and spares thereto.

The other objectives are as follows;

1.To organize , conduct or manage engineering workshops or repair shop.

2.To manufacture, import, buy, sell, or deal in workshop machinery machine tools and metals of

all kinds and to undertake repairs.

3.Servicing of agricultural machinery or other equipments,implements and tools

4.Rendering other kinds of services for consideration or otherwise.

Milestones of the Company

KAMCO has three more units:-Kalamassery unit in Ernakulam dist. Kanjikode unit in Palakkad

dist. and Mala unit in Trichur dist. The Kalamassery unit manufactures diesel engines, Kanjikode

unit produces power tiller and the Mala unit manufactures power reaper. A major milestone for

the company was the award of the International Quality Excellence Certificate under ISO 9002

IN October 1996

KAMCO is the second public sector undertaking in Kerala getting this coveted certificate and

the only public sector undertaking who has got ISO 9002 certification justify in the high

standards of the products for their three units .

From 15-03-2002 onwords KAMCO became a ISO 9001 -2000 registered company by KRMG

quality registration

Business environment of KAMCO



As far as KAMCO Ltd. Products having heavy demand in the market , their un able to meet the

requirement of the customers .The company is functioning in a cordial and happy atmosphere .

The officers and staff in the company are very co-operative and friendly moving .The Cochin

Port and Cochin Aerodrome are situated very near to the company and this will also help to

boost the business .The company is running a stabilized canteen for their employees to maintain

a harmonious atmosphere resulting to make maximum output.

Corporate Governance

Being a non-listed GOVT. company, provisions of the company’s Act 1956 with 8regard to

corporate governance is not applicable.

Pollution Controlling System of KAMCO

Athani, Palakkad and Mala units of the company have installed effluent treatment systems

designed by the LBS centre for Science and Technology and approved by State Pollution Control

Board. The all new engines will reduce pollution and it also reduces the fuel consumption than

the ordinary engine.

Present Status of KAMCO

KAMCO is one of the professionally managed companies owned by state government. Present

status of KAMCO is synonymous with service to the small and marginal farmers of the country.

KAMCO through their precision and quality is revolutionizing the small and marginal holdings

throughout the country Today KAMCO’S products are widely used and demanded in all over

India,enjoying over 60% of the market share at national level. The company with its four plants

Athani Kalamassery, Kanjikode and Mala unit is confidently meting the demand for KAMCO

products in India and abroad.The main markets for the products are at West Bengal, Assam,

Tamil Nadu, Tripura Meghalaya, Kerala, Bihar, Gujarat and Manipur presently KAMCO have

45 dealers all over India

ISO 9001-2000 certification

All units of company are working with ISO 9001-2000 certification



Industrial Relations

The industrial relation in the KAMCO is cordial which forms the basis for sustained growth of

the organization .

Quality of products

The company enjoys the position of premier manufacture in the field .The products

manufactured are indigenized and there is no imported contend in any of the times. The

machines have acquired a reputation for quality and reliability .KAMCOis an ISO 9001

organisation with the aim of providing quality products at reasonable price to the satisfaction of

customers .The company enjoys all India market through a network of about 45 dedicated

dealers. Products are sold on premium at several places. They have acquired a brand preference

because of the high quality and reliability associated with machineries.

Quality Policy of KAMCO

Total customer satisfaction through quality products and service with improved technology and

employee participation. We comply with the requirements of the customers and the applicable

statutory regulatory requirements.The effectiveness of the established quality management

system is continually improved to enable achievement of the policy.

Objectives

1. To ensure that quality requirements of the products and service offered are maintained at all

stages.

2. To create a culture among all employees towards total concepts and productivity through total

involvement and commitment of all employee.

3. To create healthy working environment for attainment of quality goals with excellence and to

make quality a way of life.



4. To detect and prevent non-conformance and defects as early as possible and to eliminate them

through appreciate changes to the quality management system.

5. To achieve and maintain quality leadership through continuous technology up-gradation

improvements in techniques system and procedures and to meet customers changing needs.

Expansion and Diversification

As per the decisions of Board of Directors to diversify into production of low HP Tractor and

various kinds of pesticides sprayers, action had been taken to acquire the technology.

Memorandum of Undertaking has been signed with M/s Barbieri Srl, Italy for providing

technology for Tractors 6 Nos of 18 hp Tractors have been imported and they are undergoing

trials at various locations in the country now. As per the plan approved by Board, Company

proposed to bring out the Tractor in Nov. 2010

Capital Structure

The Authorized Capital of the Company remained unaltered at Rs.200 lakhs. Issued and Paid up

Capital remained unaltered at Rs.161.46 lakh divided into 161460 equity shares of Rs 100 each

fully paid up, entirely held by Govt of Kerala.

Future Outlook

Company had decided to manufacture low HP Tractors for which an MOU was signed with an

Italian Company. Company imported samples of low HP Tractors from Italy and the same is

undergoing field trials at various locations across the country to identify its usefulness in Indian

soil conditions. Mean Time Company had approached Govt of Kerala for getting the industrial

land adjacent to Company’s property at Athani for the new tractor project. Project related works

are progressing. Govt of Kerala allotted 10 acres of land to company.



FINANCIAL HIGHLIGHT (Rs in Lakhs)

2004-05 2005-06 2006-07 2007-08 2008-09

A.SALES

REVENUE

Kamco power tiller

Power reaper

Power stone cutter

AGRIA garden tiller

Diesel engine

Spares&Accessories

6661.79

364.77

9.17

10.49

888.17

6599.54

440.30

1.00

2.17

6.54

954.14

7558.47

475.64

2.01

11.28

4.75

1067.2

8300.56

636.59

7.30

1168.73

9930.36

858.21

8.68

4.46

1235.49

Total sales 7934.39 8003.69 9121.74 1121.86 12028.50

B.WORKING

RESULTS

Operating profit

Depreciation&impair

loss

Cash profit

Profit before tax

Provision for tax

Profit available for

appropriation

C.APPROPRIATION

proposed dividend

Tax on dividend

Other services

Surplus transferred to

Balance sheet

726.23

81.30

807.53

730.91

263.08

467.83

48.44

6.92

70.00

342.47

805.69

78.81

884.50

801.82

279.00

522.82

48.44

6.79

70.00

397.59

883.70

67.29

950.99

875.83

303.22

572.61

48.44

8.23

70.00

445.94

950.12

65.85

1015.97

933.16

307.61

625.55

48.44

8.23

70.00

498.88

1177.06

72.96

1250.02

1169.40

44.88

764.52

48.44

8.23

70.00

637.85



PERFORMANCE

During the year 2008-09 the total turnover of the company increased from 101.22 crores to Rs

120.28 crores. During the first half of 2008-09 material costs showed an increasing trend. During

the second half of 2008-09 economic recession all over the world hit the Indian economy also to

a very great extend. In spite of the recessional tendency which adversely affected the production

of engineering&automobile industry, the company could improve the sales mainly because of the

improved quality of the product. The company could also reduce the material cost to some extent

due to the reduction in the price of steel in the open market as an impact of economic

recession .Overall, increase in the volume of production and reduction in the material prices in

the second half of 2008-09 enabled the company to increase operating profit by 23.8% over the

previous years Present trend indicate that sales during the coming years can be future increased

provided there is price compititiveness .



FUTURE SCOPE OF THE ORGANISATION

KAMCO is looking proudly ahead into more promising future . Future will also See KAMCO’s

diversification products in the farm mechanization field contributing significantly in food

production and predicting itself to the cause of self relevance and social responsibility in the

service of people without respite.

Today KAMCO is a multi- product, multi- location company with two production

units at Ernakulam dist., one production unit at Palakkad dist. And one production unit at

Thrissur dist. KAMCO has a number of diversification plans in the anvil. It’s proposed to set up

research development activities which will hopefully help it to develop new products in the

future and live up to its promise, that its products will be “A boom for the farmer and again for

the nation”. The quality policy of KAMCO is “total customer satisfaction through quality

products and service with improved technology and employee participation”.



LITERATURE REVIEW

The current study contributes to the literature by examining impact of working capital

management on the operating performance and growth of new public companies The study also

sheds light on the relationship of working capital with debt level, firm risk , and industry .Using

a sample of initial public offerings (IPO’S) the study finds a significant positive association

between higher levels of accounts receivables and operating performance . The study further

finds that maintaining control (i.e.lower amounts ) over level of cash and securities , inventory,

fixed accounts and accounts payables appears to be associated with higher operating

performance , as well .We find that IPO firms which are experiencing unusually high growth

tend not to perform as well as those with low to moderate growth . Further firms which are

experiencing high growth tend to hold higher levels of cash and securities , inventory, fixed asset

and accounts payables .These findings tend to suggest that firms are willing to sacrifice

performance (accept low or negative operating returns ) to increase their growth levels . The

higher level of growth is also associated with higher operating and financial risk .The findings of

this study suggest that perhaps IPO firms should stay more focused on their operating

performance than on maintaining high growth levels .

Introduction and literature review

Working capital policy refers to the firm’s policies regarding 1) target levels for each category of

current operating assets and liabilities, and 2) how current assets will be financed. Generally

good working capital policy (i.e. under conditions of certainty) is considered to be one in which

holdings of cash, securities, inventories, fixed assets and accounts payables are minimized. The

level of accounts receivables should be used as a means of stimulating sales and other income.

Previous literature on working capital management has found a negative association, overall,

between level of working capital and performance as measured by operating returns and

operating margins (Peterson and Rajan1997). Under conditions of certainty firms have little

reason to hold more working capital than a minimum level. Larger amounts would increase the

level of operating assets, increase the need for external funding, resulting in lower return on

assets and a lower return on equity, without any increase in profit.



However the picture changes when uncertainty (i.e. uncertain growth ) is introduced (Brigham

and Houston 2000). Larger amounts 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 and expected order lead times. Additional holdings may be

needed to enable the firm to deal with departures from the expected value . Further firms will

also attempt to increase their accounts payable balance as a means of financing increased levels

of current operating assets. Firms which are in high growth stages will face the challenge of

maintaining the necessary level of operating assets to support subsequent growth , while at the

same time attempting to maintain adequate performance indicators .

This study focuses on understand how IPO companies manage their working capital and other

balance sheet items to support subsequent growth .This study support the existing literature on

working capital and contributes to the existing literature by examining a sample of firm which

have a wider range of growth levels than non-IPO firms. Our study also examines these

relationships under three categories of growth (i.e. negative growth, moderate growth and high

growth). The study also examines other selected firm characteristics in light of working capital

management: firm operating and financial risk, amount of debt, firm size and industry.

An underlying theme of this study is that high growth certainly does not ensure high operating

performance. Consistent with prior research (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 of the growth rate categories. The study also finds that

maintaining control over levels of cash, securities, inventory, fixed assets and accounts payables

is associated with higher operating performance. We find that firms which are experiencing very

high growth will hold higher levels of cash, securities, inventory, fixed assets and accounts

payable to support the high growth. The study suggests that these firms are sacrificing operating

performance (accepting lower operating returns) 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.



THEORETICAL CONCEPTS

Introduction to financial management

Financial management refers to the part of the management activity ,which is concerned with the

planning and controlling of firm’s financial resources .It deals with finding out various resources

of raising fund for the firm. In other words financial management means the entire management

efforts devoted to the management of finance both in its sources and uses .The most appropriate

use of funds also reforms a part of financial management .

Financial management is applicable to every type of organization irrespective of its size, kind of

nature. It is useful to a small concern as to big unit. A trading concern gets the same utility from

its applications as a manufacturing unit may expert. This subject is important and useful for all

types of ownership organizations. Where there is use of finance management is helpful.

WORKING CAPITAL

Working capital may be regarded as the life blood of a business. Its effective provision can do

much to ensure the success of a business. Its inefficient management can lead not only loss to

profit but also to down fall of a business. A study of working capital is of major importance to

internal and external analysis because of its close relationship with the current day to day

operations of a business. Every business needs funds for two purposes- for its establishment and

to carry out day to day operations. Long term funds are required to create production facilities

through purchase of fixed asset such as plant and machinery, Land and Buildings, Furniture etc.

Investment in these assets represents that part of firm’s capital which is blocked on a permanent

or fixed basis and is called fixed capital. Funds are also needed for short term purposes for the

purchase of raw materials, payment of wages, and other day to day expenses etc these funds are

called working capital. In other words working capital refers that part of firm’s capital which is

required for financing short term or current assets such as cash ,marketable securities, debtors,

inventories, bill receivables etc



CONCEPT OF WORKKING CAPITAL

There are two concepts of working capital

(A) BALANCE SHEET CONCEPT

1. Gross Working Capital

2. Net Working Capital

In the broad sence ,the term working capital refers to the gross working capital and represents the

amount of funds invested in current asset .Thus the gross working capital is the capital invested

in total current asset of the enterprise .

Net working capital is the excess of current over current liability .It’s also the portion of firm’s

current asset ,which is financed by long term funds

Net working capital may be positive or negative .when the current asset exceed the current

liabilities ,the working capital is positive and the negative working capital results when the

current liabilities are more than the current asset

NEED FOR WORKING CAPITAL

The basic objective of financial management is to maximize the share holder’s wealth .This is

possible only when the company earns sufficient profit. The amount of profit largely depends up

on the magnitude of the sale .How ever ;sales do not convert in to cash immediately .There is

always the time gap between sales of goods and the receipt of cash .Working capital is required

for the period in order to sustained the sales activity in case adequate working capital is not

available for this period ,the company will not be in a position to purchase row material ,pay

wages and other expenses required for manufacturing the goods to be sold .

(B) OPERATING CYCLE

Working capital refers to that part of firm’s capital which is required for financing short term or

current assets such as cash, marketable securities,debtors and inventories .Funds thus invested in

current assets keep revolving fast and are being constantly converted in to cash and this cash



flow out again in exchange for other current assets .Hence it is also known as revolving or

circulating capital .The circular flow concept of working capital is based up on this operating or

working capital cycle of a firm .The cycle starts with the purchase of raw material and other

resources and ends with the realization of cash from the sale of finished goods .The speed/time

duration required to complete one cycle determines the requirementsof working capital longer

the period of cycle ,larger the requirement of working capital

Working is required because of the time gap between the sales and their actual realization of cash

.This time gap technically termed as ‘operating cycle of the business .In case of manufacturing

company the operating cycle is the length of the necessary to complete the following cycle of

events:

1. Conversion of cash in to raw material

2. Conversion of raw material in to work in progress

3. Conversion of work in progress to finished goods

4. Conversion of finished goods in to accounts receivables

5. Conversion of account receivables into cash

This cycle will be repeated again and again

TYPES OF WORKING CAPITAL

Working capital may be classified in two ways

1.On the basis of concept

2.Onthe basis of time

On the basis of concept ,working capital is classified as gross working capital and net working

capital

On the basis of time ,working capital may be classified as

a. Permanent or Fixed working capital

b. Temporary or Variable working capital



a. Permanent or Fixed working capital

Permanent or Fixed working capital is the maximum amount of which is required to ensure

effective utilization of fixed facilities and for maintaining the circulation of current assets.There

is always a minimum level of current assets which is continuously required by the enterprise to

carry out its normal business operations.

The following are the characteristics of permanent working capital

(1) Amount of working capital remains in the business in one form or another. This is

particularly from the point of view of financing. The suppliers of such working capital should not

expect its return during the life time of the firm.

(2) It also grows with the size of the business. In other words, greater the size of the business

greater is the amount of such working capital and vice versa

(C ) Temporary Working Capital

The amount of such working capital keeps on fluctuating from time to time on the basis of

business activities. In other words, it represents additional current assets required during the

operating years. Suppliers of temporary working capital can expect its return during off season

when the firm does not require it. Hence temporary working capital generally financed from

short term sources of finance, such as bank credit

FACTORS DETERMINING WORKING CAPITAL

The need for working capital requirement for running day today business activities cannot be

over emphasized .The working capital requirements are affected by a number of factors .Some of

them might be associated with the general economic monetary business environment etc. how

ever some of the important requirements of business enterprise are given below

a) Production policies

b) Nature of the business

c) Length of manufacturing process



d) Credit policy

e) Seasonal fluctuations

f) Fluctuations of supply

g) Type of business organization

h) Type of business industry

i) Growth of business

j) Dividend policy

k) Economic factors

l) Government policy

ADEQUACY OF WORKING CAPITAL

A firm must have adequate working capital i.e.as such needed by the firm .It should neither be

excessive nor inadequate .Both situations are dangerous Excessive working capital means that

company has idle funds which earn no profit on the other hand inadequate working capital means

the firm does not have fund for running its operations which ultimately cause productions

interruptions and lowering down of the profitability There is a relationship between working

capital risk and return. In manufacturing concern it is generally accepted that higher level of

working capital decrease the profitability too while lower levels of working capital increases the

risk and return .In manufacturing concern it is generally accepted that higher level of working

capital decrease the risk and decrease the profitability too while lower levels of working capital

increase the risk but have the potentiality of increasing profitability

SOURCE OF WORKING CAPITAL

The financial manager is always interested in working capital at right time ,at a reasonable cost

and at the best possible favorable terms .In any concern a part of working capital investments are

permanent investment in fixed assets, because there is always a minimum level of current assets

which are continuously, required by the enterprise to carry out the day to day business

operations. The minimum level cannot be expected to reduce at any time. This minimum level of

current assets gives rise to permanent working capital which is permanently blocked in current

assets.



WORKING CAPITAL MANAGEMENT

Working capital, in general refers to the excess of current assets over current liabilities.

Management of working therefore,is concerned with the problems that arise in attempting to

manage the current assets, current liabilities and the inter relationship that exist between them.

The basic goal of working capital management is to manage the current assets and liabilities of a

firm in such a way that a satisfactory level of working capital is maintained i.e. it is neither

inadequate nor excessive. This is so because both inadequate as well as excessive working

capital positions are bad for any business. Inadequacy of working capital may lead the firm to

insolvency and excessive working capital implies idle funds which earn profit for the business .

Working capital management policies of a firm have a great effect on its profitability, liquidity

and structural health of organization . The management of working capital has the following

problems

1. Estimating the working capital requirements

2. To decide optimum level of investment in various assets

3. To decide optimal mix of short term funds in relation to long term capital

4. To locate the appropriate means of short term financing

“We need to know when to look for working capital funds, how to use them and how to

measure, plan and control them”. Thus the finance manager has to perform the following three

basic functions:-

1.Forecasting the working capital requirements

2.Financing of working capital needs

COMPONENTS OF WORKING CAPITAL MANAGEMENT

Working Capital Management has three components

1. Cash Management

2. Receivables Management

3. Inventory Management



CASH MANAGEMENT

Cash is one of the current assets of a business. It s needed at all times to keep the business

going. A business concern should always keep sufficient cash for meeting its obligation. Any

shortage of cash will hamper the operations of a concern and any excess of it will be

unproductive. Cash is the most unproductive of all the assts.

Cash management deals with the following:

(a) Cash inflows and outflows

(b) Cash flows within the firm

(c) Cash balance held by the firm at appoint of time

Motives for holding cash

The firm’s needs for cash may be the following needs

Transaction motive-A firm needs cash for making transactions in the day today operations

such as to make purchases pay expenses ,tax,dividend etc

Precautionary motive –A firm is required to keep cash for meeting various contingencies

Speculative motive-The speculative motives relates to holding of cash for investing in

profitable opportunities

INVENTORY MANAGEMENT

Inventories constitute the most significant part of current assets of a large majority of

companies in India .Inventories are stock of the product a company is manufacturing for

sale and components that make up the product .The various forms in which inventories

exist in a manufacturing company are

a. Raw materials

b. Work in process

c. Finished goods



There are three general motives for holding inventories

a. Transaction motive

b. Precautionary motive

c. Speculative motive

The main objectives of inventory management are operational and financial. The operational

objectives mean that the materials and spares should be available in sufficient quantity so that

work is not disrupted for want of inventory. The financial objectives means that investments

in inventories should not remain idle and minimum working capital should be locked in it.

Effective inventory management requires an effective control system for inventories. A

proper inventory control not only helps in solving the acute problem of liquidity but also

increases profits and causes substantial reduction in the working capital of the concern

Some of the important tools and techniques of inventory management are

a. Determination of stock levels

b. Determination of safety stocks

c. A.B.C Analysis

d. V.E.D Analysis

e. Inventory turnover ratios

f. Classification and codification

g. Preparation of inventory report



RECEIVABLES MANAGEMENT

Receivables represent amount owed to the firm as a result of sale of goods or services in the

ordinary course of business. These are claims of the firm against its customers and from part

of its customers and from part of its current assets. Receivables are also known as account

receivables, trade receivables, customer receivables or book debts. The receivables are carried

for the customers. The period for credit and extend of receivables depend upon the credit

policy followed by them. The purpose of maintaining or investing in receivables is to meet

competition and to increase the sale and profit.

Receivables management is the process of making decision relating to investment in trade

debtors .The objective of receivables management is to take the sound decisions as regard

investment in debtors in the words of Bolton S.E the objective of receivable is “to promote

sales and profit until that point is reached were the return on investment in further funding of

receivables is less than the cost of funds raised to finance that additional credit”

Factors influencing the size of receivables

1. Size of credit sales

2. Credit policies

3. Terms of trade

4. Expansion plants

5. Relation with profit

6. Credit collection efforts

7. Habits of customers

Dimension of receivables management

a. Forming of credit policy

b. Executing the credit policy

c. Formulating and executing collection policy



RESEARCH METHODOLOGY

Research Methodology is science of study how research is done scientifically. Research is an art

of scientific investigation. The Advanced Learners Dictionary of Current English lays down the

meaning of research as “A careful investigation or enquiry specially through search for new facts

in any branch of knowledge”. Redman and Mory defines research as a “Systematized effort to

gain new knowledge”

Research Design – The research design must make enough provision for protection against bias

and must maximize reliability with due concern for the economical completion of the research

study. Descriptive research studies are those study which are concerned with describing the

characteristics of a particular individual or of a group . A research design must focus attention on

the following

a. Formulating the objective of the study

b. Designing the method of data collection

c. Selecting the sample

d. Collecting the data

e. Processing and analysis the data

f. Reporting the findings

Data Collection

1. Internal

Under this the information is collected from the firms internal records .

2. External

External factors are of two types

a. Primary Data

Primary data are those which are original in character .They are collected for the first time



b. Secondary Data

Secondary data are those which are already collected by someone of another purpose

secondary data was collected from the annual reports of the company

Research methodology is a way to systematically solve the research problem . The study was

undertaken by personally visiting the plant at Athani (Ernakulam) and was done during the

period of 45 days . The study plays more emphasize on the finance department of KAMCO Ltd.

Both primary and secondary data are used for the completion of the study

Sources of data

The researcher has studied the existing system through the data collection. The data has been

collected through primary data and secondary data .The data collected was done during the

period of 45 days .

Primary Data

The researcher has collected primary data from the officers of finance account section .Direct

personal interview method was adopted to collect information from the above said officers

Secondary Data

The study is confined to secondary data obtained from the Annual Reports of the company,

Books of accounts, Company web site etc. The source of data for the study was Balance Sheet&

P/L Account of the company. The secondary data was collected from the annual reports of the

company from 25 to 209

Analysis and Interpretation

The Ratio Analysis technique is used to analyze the data. Simple tabulation was used to arrange

data. In order to facilitate comparison, data were expressed through charts.

Limitation of the study

1. A detailed study cannot be made possible due to lack of time

2. Limitations of Ratio Analysis are not considered



RESEARCH PROCESS

1. Formulating the research problem

There are two types of research problems ,viz., those which relate to states of nature and

those which relates to relationships between variables . At the very outset the researcher

must single out the problem he wants to study ,i.e. he must decide the general area of

interest or aspect of a subject matter that he would like to inquire into.

2. Extensive literature survey

Once the problem is formulated ,a brief summery of it should be written down .

3. Development of working hypothesis

After extensive literature survey , researcher should state in clear terms the working

hypothesis or hypotheses. Working hypothesis is tentative assumption made in order to

draw out and test its logical or empirical consequences.

4. Preparing the research design

The research problem having been formulated in clear cut terms, the researcher will be

required to prepare a research design, i.e. he will have to state the conceptual structure

within which research would be conducted.

5. Determining sample design

The researcher must decide the way of selecting a sample or what is popularly known as

the sample design. In other words a sample design is a definite plan determined before

any data are actually collected for obtaining a sample from given population.

6. Collecting the data

In dealing with any real life problem it is often found that data at hand are inadequate and

hence it become necessary to collect data that are appropriate. There are several ways of

collecting the appropriate data which defer considerably in context money costs time and

other resources at the disposal of the research



7. Execution of the project

Execution of the project is a very important step in the research. If the execution of the

project proceeds on current lines, the data to be collected would be adequate and

dependable. The researcher should see that the project is executed in a systematic

manner and in time.

8. Analysis of data

The analysis of data requires a number of closely related operations such as establishment

of categories, the application of these categories to raw data through coding, tabulation

and then drawing statistical inferences.

9. Hypothesis- testing

After analyzing the data as stated above, the researcher is in position to test the

hypotheses, if any, he had formulated earlier

10. Generalizations and interpretation

If a hypothesis is tested and upheld several times, it may be possible for the researcher to

arrive at generalization,i.e. to build a theory.

11. Preparation of the report or the thesis

Finally the researcher has to prepare the report of what has been done by him.



VARIABLES UNDER STUDY

Dependent Variable

Working capital management is the depended variable. The capital requirements of a business

can be divided into two main categories: fixed capital requirements and working capital

requirements. Working capital is the capital required for its day –today operations.

Independent Variable

Cash – Cash is one of the current assets of a business. Cash itself doesn’t produce goods or

service It is used to as a medium to acquired other assets

Receivables – Receivables represent amounts owed to the firm as a result of sale of goods and services in the ordinary course of business.

Inventory – Inventories are goods held for eventual sale by a firm. Inventories are thus one of the

major elements which help the firm in obtaining the desired level of sales.

Inventories can be classified into three categories

a. Raw material: These are goods which have not yet been committed to production in a

manufacturing firm.

b. Work -in – process: This include those materials which have been committed to

production process but have not yet been completed

c. Finished goods: these are completed products awaiting sale.

Holding of inventories helps a firm in separating the process of purchasing, producing and

selling. In case a firm does not hold sufficient stock of raw materials, finished goods, etc. The

purchasing would take place only when the firm receives the order from a customer. It may

result in delay in executing the order because of difficulties in obtaining procuring raw materials,

finished goods, etc. Thus, inventories provide cushion so that the purchasing, production and

sales functions can proceed at optimum speed.



PERIOD OF THE STUDY

The present study analyze the working capital of KAMCO Ltd, over a period of five years

that is from 2005-09

LIMITATIONS

a. The entire study is based on the published financial statements of the company and any

limitation inherent it would reflect in this also

b. The ratio does not provide an indication of future

c. Information disclosed in the financial statement may not be fully true

d. The busy schedule of the department heads restricted collection of detailed information

e. Entire details regarding the organization cannot be revealed due to non disclosure of

certain files , records , information etc.



DATA ANALYSIS AND INTERPRETATION

RATIO ANALYSIS

Ratio analysis is an important tool and useful technique to check upon the

efficiency with which working capital is being used in the enterprise. Some of the ratios indicate

the trend or progress or downfall of the firm. It helps the financial management in evaluating the

financial position and performance of the firm. The object and utility of ratio analysis as a

technique of financial analysis is confined not only to the internal parties but to the trade

creditors, bank and lending institution also. Here Ratio analysis gives the answers to the

problems such as

Whether the enterprise’s financial position is basically sound.

Whether the capital structure of the business is in proper order

Whether the profitability of the enterprise is satisfactory

Whether the credit policy in relation to sales and purchase is sound

Whether the company is credit worthy

Thus, ratio analysis highlights the liquidity, solvency, capital gearing etc.



LIQUIDITY RATIO

CURRENT RATIO

Current Ratio = Current assets Current Liabilities

YEAR CURRENT ASSET

CURRENT LIABILITIES

QUICK RATIO

2004-05 6206.74 1050.56 5.902005-06 6642.32 969.32 6.852006-07 7548.34 1347.69 5.602007-08 7915.02 1122.81 7.042008-09 8825.08 1329.85 6.63

Graph 1

2004-05 2005-06 2006-07 2007-08 2008-090

1

2

3

4

5

6

7

8

CURRENT RATIO

CURRENT RATIOS

Interpretation: The current ratio of firm measures its short term solvency, i.e., its ability to meet

short term obligations. Current Ratio of 2:1 is considered an ideal one. Here Current ratios of

KAMCO show sound solvency position and adequate working capital. In the year 2008-09

current ratio shows high i.e. 7.04



QUICK RATIO

Quick Ratio = Quick assets Current Liabilities

YEAR QUICK ASSETS

CURRENT LIABILITIES

CURRENT RATIO

2004-05 4424.82 1050.56 4.212005-06 4434.54 969.32 4.572006-07 5599.47 1347.69 4.152007-08 5874.11 1122.81 5.232008-09 6573.04 1329.85 4.94

Graph 2

2004-05 2005-06 2006-07 2007-08 2008-090

1

2

3

4

5

6

QUICK RATIO

QUICK RATIO

Interpretation: Quick ratio of 1:1 is considered satisfactory and if the ratio is more than 1:1,

then the financial position of the concern is sound and good. Quick ratio is the true test of

business solvency. Quick ratios of KAMCO Ltd. Shows sound financial position and its ability

to meet all current liabilities.



ABSOLUTE LIQUIDITY RATIO

Absolute liquidity ratio = Cash Current Liabilities

YEAR CASH CURRENT LIABILITIES


2004-05 2771.42 1050.56 2.632005-06 2878.75 696.32 2.962006-07 3922.46 1347.69 2.912007-08 3525.63 1122.81 3.142008-09 3585.66 1329.85 2.69

Graph 3

2004-05 2005-06 2006-07 2007-08 2008-090

1

2

3

4

5

6


Absolute Liquidity Ratio

Interpretation: This ratio indicates the cash position of the concern. A ratio of 0.75:1 is

recommended to ensure liquidity. Cash maintenance is higher in the case of KAMCO Ltd. It

shows the increasing trend year over year. It creates more liquidity to the company. The graph

shows that cash position of KAMCO Ltd. Is very high in the year 2007-08.



LIVERAGE RATIO

DEBT EQUITY RATIO

Debt Equity Ratio = Outsiders Fund Shareholders Fund

YEAR OUTSIDER’S FUND

SHAREHOLDER’S FUND

DEBT EQUITY RATIO

2004-05 1050.56 6014.14 0.172005-06 969.32 6481.73 0.142006-07 1347.69 6997.67 0.192007-08 1122.81 7566.55 0.142008-09 1329.85 8274.39 0.16

Graph 4

2004-05 2005-06 2006-07 2007-08 2008-090

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

0.2

DEBT EQUITY RATIO

DEBT EQUITY RATIO

Interpretation: An acceptable norm for this ratio is considered to be2:1. A very high ratio is

unfavorable from the point of view of the firm. Here debt equity ratios of KAMCO Ltd. Show

that greater claims of owners than creditors. From the point of view of creditors, it represents a

satisfactory capital structure of the business.



PROPRIETARY RATIO

Proprietary Ratio = Shareholder’s Fund Total Assets

YEAR SHAREHOLDER’S FUND

TOTAL ASSETS PROPRIETARY RATIO

2004-05 6014.14 7096.63 0.842005-06 6481.73 7481.99 0.862006-07 6997.67 8372.68 0.832007-08 7566.55 8725.84 0.862008-09 8274.39 9646.28 0.85

Graph 5

2004-05 2005-06 2006-07 2007-08 2008-090.815

0.82

0.825

0.83

0.835

0.84

0.845

0.85

0.855

0.86

0.865

PROPRIETARY RATIO

Proprietary Ratio

Interpretation: This ratio shows the financial strength of the company. It indicates the long term

solvency of the firm. The acceptable norm of the ratio is 1:3 i.e. 0.33. Proprietary ratios of

KAMCO Ltd show good financial strength in every year.



FIXED ASSET TO NET WORTH

Fixed Asset to Net Worth = Fixed Assets Net Worth

YEAR FIXED ASSETS NET WORTH FIXED ASSETS TO NET WORTH

2004-05 714.89 6014.14 0.112005-06 664.66 6481.73 0.102006-07 619.34 6997.67 0.082007-08 605.82 7566.55 0.082008-09 616.19 8274.46 0.07

Graph 6

2004-05 2005-06 2006-07 2007-08 2008-090

0.02

0.04

0.06

0.08

0.1

0.12 FIXED ASSET TO NET WORTH RATIO

FIXED ASSET TO NET WORTH RATIO

Interpretation: This ratio shows the relationship between fixed assets and shareholders fund.

The purpose of this ratio is to find out the percentage of the owners fund invested in fixed assets.



ACTIVITY RATIOS

INVENTORY TURNOVER RATIO

Inventory Turnover Ratio = Net Sales Inventory

YEAR NET SALES INVENTORY INVENTORY TURNOVER RATIO

2004-05 7934.39 1781.91 4.452005-06 7998.07 2207.78 3.622006-07 9114.09 1948.86 4.672007-08 10118.62 2040.91 4.952008-09 12027.56 2252.04 5.34

Graph 7

2004-05 2005-06 2006-07 2007-08 2008-090

1

2

3

4

5

6

INVENTORY TURNOVER RATIO

INVENTORY TUNOVER RATIO

Interpretation: It signifies the liquidity of the inventory. This ratio indicates whether investment

in inventory is efficiently used or not. It also measures the effectiveness of the firm’s sales

efforts. Inventory turnover ratio of KAMCO Ltd. Shows fluctuating trend in every year

Inventory turnover ratio is high in the year.



FIXED ASSET TURNOVER RATIO

Fixed Asset Turnover Ratio = Net Sales Fixed Assets

YEAR NET SALES FIXED ASSETS FIXED ASSETS TURNOVER RATIO

2004-05 7934.39 714.89 11.092005-06 7998.07 664.66 12.032006-07 9114.09 619.34 14.712007-08 10118.62 605.82 16.702008-09 12027.56 616.19 19.81

Graph 8

2004-05 2005-06 2006-07 2007-08 2008-090

5

10

15

20

25



Interpretation: This ratio indicates the extent to which the investment in fixed assets contributes

towards sales.



WORKING CAPITAL TURNOVER RATIO

Working Capital Turnover Ratio = Net Sales Net Working Capital

YEAR NET SALES NET WORKING CAPITAL

W/C TURNOVER RATIO

2004-05 7934.39 5156.18 1.532005-06 7998.07 5673.01 1.402006-07 9114.09 6200.64 1.462007-08 10118.62 6792.21 1.482008-09 12027.56 7495.23 1.60

Graph 9

2004-05 2005-06 2006-07 2007-08 2008-091.25

1.3

1.35

1.4

1.45

1.5

1.55

1.6

1.65

W/C TURNOVER RATIO

W/C TURNOVER RATIO

Interpretation: Working Capital turnover ratio of KAMCO Ltd. Showing a fluctuating trend.

Here graph shows that there is an increasing trend in the year 2008-09. It indicates that

maximum utilization of working capital.



DEBTORS TURNOVER RATIO

Debtors Turnover Ratio = Net Sales Debtors

YEAR NET SALES NET WORKING CAPITAL

W/C TURNOVER RATIO

2004-05 7934.39 891.42 8.902005-06 7998.07 1025.97 7.792006-07 9114.09 1220.42 7.462007-08 10118.62 1989.42 5.082008-09 12027.56 2616.75 4.59

Graph 10

2004-05 2005-06 2006-07 2007-08 2008-090

1

2

3

4

5

6

7

8

9

10



Interpretation: Debtors Turnover Ratio indicates the number of times debtors turnover each

year. Higher the value of debtors’ turnover, the more efficient is the management of credit.

Here Debtor’s turnover ratio of KAMCO Ltd. Showing a decreasing trend.



PROFITABILITY RATIO

Net Profit Ratio = Net Profit after tax *100 Net Sales

YEAR NET PROFIT AFTER TAX

NET SALES NET PROFIT RATIO

2004-05 461.83 7934.39 5.822005-06 522.82 7998.07 6.542006-07 572.65 9114.09 6.282007-08 625.55 10118.62 6.182008-09 764.52 12027.56 6.36

Graph 11

2004-05 2005-06 2006-07 2007-08 2008-095.4

5.6

5.8

6

6.2

6.4

6.6


NET PROFIT RATIO

Interpretation: Net profit ratio of KAMCO Ltd. For the period 2004-05, 05-06, 06-07, 07-08,

08-09 were 5.82, 6.54, 6.28, 6.18, 6.36 respectively. The ratio is used to measure the overall

profitability. Here net profit ratio of KAMCO Ltd. Show better operational efficiency of the

concern.



RETURN ON SHAREHOLDERS’ FUND

Return on Shareholder’s fund = (Net Profit after Interest & Tax) Shareholder’s fund


SHARE HOLDER’S FUND

RETURN ON SHAREHOLDER’S FUND

2004-05 461.83 6014.14 7.782005-06 522.82 6481.73 8.072006-07 572.65 6997.67 8.182007-08 625.55 7566.55 8.262008-09 764.52 8274.46 9.24

Graph 12

2004-05 2005-06 2006-07 2007-08 2008-097

7.5

8

8.5

9

9.5

RETURN ON SHAREHOLDER'S FUND

RETURN ON SHAREHOLDER'S FUND

Interpretation: This ratio shows the rate of profit on shareholder’s fund. It relates the profit

available for the shareholders to their total investment. In the year 2008-09 the rate of return on

shareholders’ fund was 9.24.



MARKET TEST RATIO

EARNING PER SHARE

Earning Per Share = Net Profit after Tax No of equity shares


No. OF EQUITY SHARES

EARNING PER SHARE

2004-05 461.83 161.46 2.892005-06 522.82 161.46 3.232006-07 572.65 161.46 3.542007-08 625.55 161.46 3.872008-09 764.52 161.46 4.73

Graph 13

2004-05 2005-06 2006-07 2007-08 2008-090

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

EPS

EPS

Interpretation: The earning per share helps in determining the market price of the equity shares

of the company. It also helps in estimating the company’s capacity to pay dividend on its equity

shareholders. Here we can see that there is an increasing trend in the EPS i.e from 2004-05 to

2008-09.



TREND PERCENTAGES

Trend analysis is a tool, which indicates the direction i.e., upward or downwards

the different values pertaining to different years. For this purpose the percentage relationship that

each item bears to the same item in the base year computed. The information for a number of

years is taken up and one year, generally the first year is taken as the base year. The values for

base year are considered to be 100 and trend for each year is calculated by taking the values of

base year as the basis. An analysis of the ratios over the past five years may well suggest the

trend or direction in which the concern is going upward or downward. The method of trend

percentage is a useful analytical device for the management since by substituting percentages for

large amounts; the brevity and readability are achieved.

YEAR CURRENT ASSETS TREND PERCENTAGES

2004-05 6206.74 1002005-06 6642.32 1072006-07 7548.34 1222007-08 7915.02 1272008-09 8825.08 142

2004-05 2005-06 2006-07 2007-08 2008-090

20

40

60

80

100

120

140

160

Trend analysis of current assets

Trend analysis of current assets

In the trend analysis shows that current assets of KAMCO Ltd., is increasing significantly in every year.



Trend analysis of Current liabilities

YEAR CURRENT ASSETS TREND PERCENTAGES

2004-05 1050.56 1002005-06 969.32 922006-07 1347.69 1282007-08 1122.81 1072008-09 1329.85 126

2004-05 2005-06 2006-07 2007-08 2008-090

20

40

60

80

100

120

140

Trend analysis of current liabilities

Trend analysis of current liabilities

In the trend analysis shows that current liabilities of KAMCO Ltd., is fluctuating significantly in

every year.



CONSTITUENTS OF CURRENT ASSETS

The Current Assets of KAMCO Ltd consists of the following items.

1. Loose tools2. Inventories3. Sundry debtors4. Cash and bank balance5. Other Current Assets

6. Loan and advances (Rs. In Lakhs)

Year Loose tools

Inventories Sundry debtors

Cash & bank balance

Other Current assets

Loans & advances

2004-05 9.86 1781.91 891.42 2771.42 103.60 648.502005-06 7.50 2207.78 1025.97 2878.75 102.87 419.432006-07 5.35 1948.86 1220.42 3922.46 134.62 316.592007-08 3.85 2040.91 1989.42 3525.63 179.39 175.812008-09 4.36 2252.04 2616.75 3585.66 198.52 167.74

2004-05 2005-06 2006-07 2007-08 2008-090

500

1000

1500

2000

2500

3000

3500

4000

4500

Loose toolsInventoriesSundry debtorsCash & bankOther current assetsLoans & advances

Graph shows that cash & bank constitutes highest position of the total current assets. It helps to

keep the firm sufficiently liquid and to use excess cash in some profitable way.



CONSTITUENTS OF CURRENT LIABILITIES

Year Current Liabilities Provisions2004-05 1050.56 325.382005-06 696.32 133.082006-07 1347.69 81.462007-08 1122.81 103.172008-09 1329.85 72.82

2004-05 2005-06 2006-07 2007-08 2008-090

200

400

600

800

1000

1200

1400

1600

Current LiabilitiesProvisions



COMPARISON OF CURRENT ASSETS AND CURRENT LIABILITIES

Year Current Assets Current Liabilities2004-05 6206.74 1050.562005-06 6642.32 696.322006-07 7548.34 1347.692007-08 7915.02 1122.812008-09 8825.08 1329.85

2004-05 2005-06 2006-07 2007-08 2008-090

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

CURRENT ASSETSCURRENT LIABILITIES

The Company is having sufficient current assets to meet its current liabilities. The company’s

current assets are always more than the company’s current liabilities.



COMPUTATION OF WORKING CAPITAL

Working Capital = Current assets-current liabilities

Year Current Assets Current Liabilities Working Capital

2004-05 6206.74 1050.56 5156.182005-06 6642.32 696.32 56732006-07 7548.34 1347.69 6200.652007-08 7915.02 1122.81 6792.212008-09 8825.08 1329.85 7495.23

2004-05 2005-06 2006-07 2007-08 2008-090

1000

2000

3000

4000

5000

6000

7000

8000

Working Capital

Working Capital

Here graph shows that the working capital of KAMCO Ltd. Increasing year by year.



STATEMENT OF CHANGES IN WORKING CAPITAL

Statement of changes in working capital is one of the important tools to analyse the

increase or decrease in working capital over a period of time. The main objective of this

statement preparation is to derive a fairly accurate summary of the events that affected the

amount of working capital. The amount of net working Capital is determined by deducting the

total of current liabilities from the total of current assets.

Statement of changes in working capital is prepared in order to measure the increase of

decrease in the working capital over a period of time. The working capital position at the

beginning of a period is changed to a different position a that end of that period. This statement

is prepared to depict the changes in working capital and it represents the excess of current assets

over current liabilities.

Compare each asset in previous year with that in current year. Similarly, compare each

current liability in the previous year with that in the current year.













Interpretation

An increase in the asset effects the working capital increasing trend. An increase in the liability

shows a decreasing trend of working capital. A decrease in the asset effects the working capital

in a decreasing trend. A decrease in the liability shows an increasing trend. But an increase in the

liability shows a decreasing trend of working capital. For example in the year 2005current asset

like loose tools inventories and debtors shows a decreasing trend. Its percentage of change is also

negative. But in the liabilities like current liability and provision shows a decreasing trend but its

percentage of change is positive.



CASH MANAGEMENT

The main aim of cash management is to maintain adequate control over cash position to

keep the firm sufficiently liquid and to use excess cash in some profitable way. The

management of cash also important because it is difficult to predict cash flows accurately,

particularly the inflows, and there is no perfect coincidence between the inflows and outflows of

cash. During some periods, cash outflows will exceed cash inflows, because payments for taxes,

dividends’ or seasonal inventory buildup. At other times cash inflow will be more than cash

payments because there may be large cash sales and debtors may be realized in large sums

promptly.

The firm should evolve strategies regarding the following four facets of cash management.

1. Cash Planning: Cash inflows and outflows should be planned to project cash surplus or

deficit for each period of the planning period.

2. Managing the cash flows: The flow of cash should be properly managed. The cash

inflows should be accelerated while, as far as possible, the cash outflows should be

decelerated

3. Optimum Cash Level: The firm should decide about the appropriate level of cash

balance. The cost of excess cash and danger of cash deficiency should be matched to

determine the optimum be decelerated.

4. Investing Surplus Cash: The surplus cash balance should be properly invested to earn

profits. The firm should decide about the division of such cash balance between

alternative short term investment opportunities such as bank deposits, marketable

securities or interoperate lending.

The ideal cash management system will depend on the firm’s product, organization structure,

competition, and culture.



Cash maintenance is higher in the case of KAMCO comparing with the industry. It shows

increasing trend and it creates more liquidity to the company.

(Rs. In Lakhs)

Cash & Bank

KAMCO

2005 2006 2007 2008 2009

2771.42 2878.75 3922.46 3525.63 3585.66

2005 2006 2007 2008 20090

500

1000

1500

2000

2500

3000

3500

4000

4500

Cash & Bank

Cash & Bank

Graph shows that cash position is very high in the year 2007 and KAMCO keeps on

maintain a good cash management because cash and bank constitutes the highest position of the

total current assets.



INVENTORY MANAGEMENT

The aim of inventory management should be to avoid excessive and inadequate

levels of inventories and to maintain sufficient inventory for the smooth production and sales

operation. Effort should be made to place an order at the right time with the right source to

acquire the right quantity at the right price and quality.

An effective inventory management should

Ensure a continuous supply of raw materials to facilitate uninterrupted production

Maintain sufficient stocks of raw materials in periods of short supply and anticipate

price changes

Maintain sufficient finished goods inventory for smooth sales operation and efficient

customer service

Minimize carrying cost and time, and

Control investment in inventories and keep it at an optimum level

Maintaining and inadequate level of inventories is also dangerous. The consequences of under

investment in inventories are production hold ups and failure to meet delivery commitments.

Inadequate raw material and work in progress inventories will result in frequent production

interruptions. Similarly, if finished goods inventories are not sufficient to meet the demand of

customers regularly, they may shift to competitors, which will amount to a permanent loss to the

firm



The inventory contribution is higher for the raw materials than the finished goods. Normally the

other players keeping finished goods more than raw materials as inventory. But KAMCO keeps

on maintaining raw materials more than the finished goods.

Inventories are listed of stock-raw materials, work in progress, or finished goods waiting to be

consumed ;in production or to be sold. The total balance of inventory is the sum the value of

each stock line.

(Rs. In Lakhs)

Raw Material & Stores

KAMCO

2005 2006 2007 2008 2009

838.85 856.26 984.91 1274.05 1531.34

2005 2006 2007 2008 20090

200

400

600

800

1000

1200

1400

1600

1800



Raw materials inventories show an increasing trend. It helps to maintain frequent production.



Finished Goods

KAMCO

2005 2006 2007 2008 2009

588.71 944.34 553.60 294.27 109.76

2005 2006 2007 2008 20090

100

200

300

400

500

600

700

800

900

1000

Finished Goods


Work in Progress

KAMCO

2005 2006 2007 2008 2009

298.47 338.99 353.76 425.54 538.84

2005 2006 2007 2008 20090

100

200

300

400

500

600





Effective inventory management requires an effective control system for inventories. A proper

inventory control not only helps in solving the acute problem of liquidity but also increases

profits and causes substantial reduction in the working capital of the concern

Inventory Turnover Ratio

Inventory Turnover Ratios are calculated to indicate whether inventories have been used

efficiently or not. The purpose is to ensure the blocking of only required minimum funds in

inventory.

Inventory Turnover Ratio= Net sales

Inventory

YEAR NET SALES INVENTORY INVENTORY TURNOVER RATIO

2004-05 7934.39 1781.91 4.452005-06 7998.07 2207.78 3.622006-07 9114.09 1948.86 4.672007-08 10118.62 2040.91 4.952008-09 12027.56 2252.04 5.34

2005 2006 2007 2008 20090

1

2

3

4

5

6

inventory Turnover Ratio

inventory Turnover Ratio



Inventory Conversion Period

Inventory conversion period is calculated to find out the average time taken for clearing

the stocks.

Inventory Conversion period = 365

Inventory turnover ratio

YEAR DAYS INVENTORY INVENTORY TURNOVER RATIO

2004-05 365 4.45 822005-06 365 3.62 1002006-07 365 4.67 782007-08 365 4.95 732008-09 365 5.34 68

Classification and Codification of Inventories

The inventories of a manufacturing concern may consist of raw materials; work in process,

finished goods, spares, consumable stock etc. All these categories may have their sub divisions.

For a proper recording and control of inventory, a proper classification of various types of items

is essential. The inventories may be classified either according to their nature or according to

their use. Generally, materials are classified according to their nature such as construction

materials, consumable stock, spares etc. After classification, the materials are given code

numbers. The coding may be done alphabetically or numerically

Inventory Reports

From effective inventory control, the management should be kept informed with the latest stock

position of different items. This is usually done by preparing periodical inventory reports.

These reports should contain all information necessary for managerial action. On the basis of

these reports management takes corrective action wherever necessary.



Stock records are needed

To provide an account to activity within each stock line

As evidence to support the balances used in financial reports

Inventory Management is an important aspect of working capital Management because

inventories themselves do no earn any revenue. Holding either too little or too much inventory

incurs costs.

Costs carrying too much inventory are

Opportunity cost of forgone internal-insurance

Ware housing Costs

Damage and pilferage

Obsolescence

Costs of carrying too little inventories are

Stock out costs

Lost sales

Delayed Service

Ordering Cost

Freight

Order administration

Loss of quantity discounts



Carrying cost can be minimized by making frequent small orders but these increases ordering

cost and the risk of stocks-outs. Risk of stock-outs can be reduced by carrying “safety stock” (at

a cost) and reordering ahead of time. The best ordering strategy requires balancing of various

cost factors to ensure the department incurs minimum inventory costs. The optimum inventory

position is known as the Economic Reorder Quantity (ERQ) Analytical review of the inventories

can help to identify areas where inventory management can be improved. Slow moving items,

continual stock outs, obsolescence, are signals that stock lines need closer analysis and contro



RECEIVABLES MANAGEMENT

A sound managerial control requires proper management of liquid assets and inventory.These

assets are a part of working capital of the business. An efficient use of financial resources is

necessary to avoid financial distress. Receivables result from credit sales . A concern is required

to allow credit sales in order to expand its sales volume.

Receivables constitute a significant portion of current assets of a firm. But for investment in

receivables, a firm has to incur certain costs, Further, there is a risk of bad debts also. It is

therefore very necessary to have a proper control and management of receivables.

The following factors will help in forecasting receivables

Credit period allowed

Effect of cost of goods sold

Forecasting expenses

Forecasting Average Collection period and discounts

Average size of Receivables

The allowing of credit to customers means giving of funds for the customer’s use. The concern

incurs the following costs on maintain receivables:

Cost of financing receivables

Cost of collection

Bad debts



Debtors Turnover Ratio

Debtors turnover ratio = Net sales Debtors YEAR NET SALES DEBTORS


2004-05 7934.39 891.42 8.902005-06 7998.07 1025.97 7.792006-07 9114.09 1220.42 7.462007-08 10118.62 1989.42 5.082008-09 12027.56 2616.75 4.59

2005 2006 2007 2008 2009

0

1

2

3

4

5

6

7

8

9

10



Debtors Turnover Ratio indicates the number of times debtors turnover each year. Higher the

value of debtors turnover, the more efficient is the management of credit.

Average collection period

The average collection period measures the quality of debtors since it indicate the speed of their

collection. The shorter average collection period, the better quality of debtors, since a short

collection period implies the prompt payment by debtors. The average collection period should

be



Compared against the firm’s credit terms and policy to judge its credit and collection efficiency

Average collection period = No. of Working Days


YEAR NO. OF WORKING DAYS


AVERAGE COLLECTION PERIOD

2004-05 365 8.90 412005-06 365 7.79 472006-07 365 7.46 492007-08 365 5.08 722008-09 365 4.59 79

The average collection period so calculated is compared with the firm’s stated credit

period to judge the collection efficiency. An extended collection period delays cash inflows

impairs the firm’s liquidity position and increases the chance of bad debt losses. The average

collection period measures the quality y of receivables since it indicates the speed of their

collectability. An excessively long collection period implies a very liberal and inefficient credit

and collection performance. This certainly delays the collection of cash and impairs the firm’s

liquidity. The chances of bad debt losses are also increased. On the other hand, too low

collection period is not necessarily favorable. Rather, it may indicate a very restrictive credit and

collection period. The firm should consider relaxing its credit and collection policy to enhance

the sales level and improve profitability.

The collection period ratio helps to determine the collectability of debtors and thus, the

efficiency of collection efforts.



FINDINGS

1) There was an increasing trend in the working capital of KAMCO Ltd, the period under

study

2) Inventory , cash and bank balance where the major parts of the current assets during the

period under study . Cash and bank balance constitute highest position of the total current

assets .It helps to keep the firm sufficiently liquid

3) Inventory conversion period shows the average time taken for clearing stokes .Here the

inventory conversion period is decreasing .It is good for the company

4) Inventory turnover ratio of KAMCO Ltd.showing an increasing trend .Its favorable to the

concern because it indicates the efficiency of the firm in producing & selling its product.

5) Trend analysis shows an increasing trend in the case of current assets and fluctuating trend

in the case of current liabilities

6) Raw materials inventories show an increasing trend. It helps to maintain frequent

production.

7) Working Capital turnover ratio indicates efficiency with which the working capital is being

used by a firm . A higher ratio indicates efficient utilization of working capital. Here the

company’s working capital turnover ratio is showing an increasing trend, it indicates that the

company is efficiently utilizing the working capital

8) Quick ratios and Current ratios of KAMCO Ltd show sound financial position and its ability

to meet all current liabilities

9) Current ratios of KAMCO show sound solvency position and adequate working capital. In

the year 2008-09 current ratio shows high i.e.7.04



SUGGESTIONS

1. Debtor’s turnover ratio of KAMCO Ltd shows a decreasing trend. Here lower the value

of debtor’s turnover indicates the inefficient management of credit . so the company

should have to maintain an efficient of credit

2. Debtor’s collection period shows an increasing trend .It indicates the company’s

inefficient credit and collection performance .This certainly delays the collection of cash

and impairs the firm’s liquidity .The changes of bad debt losses are also increased .So the

company should try to form a good credit and collection policy

3. It is advisable to the management to take necessary steps to speed up receivables

collection procedure in order to avoid blocking of funds

4. Finished goods inventories show a decreasing trend. So the company should have to

maintain sufficient finished goods inventories for meeting the demand of customers

regularly

5. Current liabilities of the company showing an increasing trend .So the company should

try to reduce their current liabilities and increase the short term solvency position



CONCLUSION

Working capital is the life blood of an organization so it must be handled carefully. Working

capital is a key operational and financial driver, holding strong business risk and potentially huge

opportunities. Optimal working capital management will guide business along the road to

achieving their strategies while minimizing these risks and realizing the opportunities. In most

markets, competition and innovation are a fact of life that means no firm can afford to stand still

for long

The analytical study of financial statements of KAMCO Ltd, Athani, has provided a lot

of valuable information for critical analysis and interpreting the numerical facts in a systematic

manner. The present study entitled “Working Capital Management of KAMCO Ltd” has thrown

light on the various aspects of the company. There have been certain drawbacks which have been

studied at appropriate places and suggestions have also been made. It can be helped that the

present study may serve the purpose to some extend; it is not to a great extend.



BIBLIOGRAPHY

1. I M PANDEY VIKAS PUBLISHING HOUSE PVT LTD (NINTH EDITION)

2. M Y KHAN& P K JAIN TATA MC GRAW HILL( THIRD EDITION)

3. S K GUPTHA & NEETHI GUPTHA, KALYANI PUBLISHERS

4. PRASANNA CHANDRA TATA MC GRAW HILLS PUBLISHERS CO LTD NEW

DELHI 1997

5. S P JAIN & K L NARANG CORPORATE ACCOUNTING

6. C.R.KOTHARI RESEARCH METHODOLOGY (SECOND REVISED EDITION)

JOURNAL

ANNUAL REPORT OF THE COMPANY

WEBSITE

www.kamcoindia.com



CONTENTS

CHAPTER TITLE PAGE NO

1

1.1 Introduction

1.2 Objectives of the study

1.3 Nature of the problem

1.4 Hypothesis

1

2

3

4

2

2.1 Introduction to the study

History of the company

Present status of the industry

Future scope of the industry

2.2 Profile of the organization

History of the organization

Present status of the organization

Future scope of the organization

5

5

6

7

8

9-10

11-20

21

33.1 Literature review

3.2 Theoretical concept

22-23

24-32

4

4.1Research methodology

4.2Research process

4.3Variables under study

4.4 Period of the study

4.5Limitations

33-34

35-36

37

38

38

55.1Data analysis and interpretation

5.2Findings

39-77

78

66.1Suggestions

6.2Conclusion

79

80

Bibliography

Annexure



LIST OF TABLES

TABLE NO TITLE PAGE NO

1 Financial Highlight 20

2 Current Ratio 40

3 Quick Ratio 41

4 Absolute Liquidity Ratio 42

5 Debt Equity Ratio 43

6 Proprietary Ratio 44

7 Fixed Asset Turnover Ratio 47

8 Working Capital Turnover Ratio 48

9 Debtors Turnover Ratio 49

10 Net Profit Ratio 50

11 Return on Shareholders Fund 51

12 Earning Per Share 52

13 Trend Analysis Current Assets 53

14 Trend Analysis of Current Liabilities 54

15 Constituents of Current Assets 55

16 Constituents of Current Liabilities 56

17 Comparison of Current Assets& Current Liabilities 57

18 Computation of Working Capital 58

19 Statement of Changes in Working Capital as on 31st March 2005 60




23 Statement of Changes in Working Capital as on 31stMarch 2009 64

24 Cash& Bank 67

25 Raw Materials and Spares 69

26 Finished Goods 70



27 Work in Progress 70

28 Inventory Turnover Ratio 71

29 Inventory Conversion Period 72


31 Average Collection Period 77

LIST OF GRAPHS



Graph no . Title Page no.

1 Current Ratio 40

2 Quick Ratio 41

3 Absolute Liquidity Ratio 42

4 Debt Equity Ratio 43

5 Proprietary Ratio 44

6 Fixed Asset Turn Over Ratio 47

7 Working Capital Turn over Ratio 48

8 Debtors Turn Over Ratio 49

9 Net profit Ratio 50

10 Return on Shareholders Fund 51

11 Earning per Share 52

12 Trend Analysis Current Assets 53

13 Trend Analysis of Current Liabilities 54

14 Constituents of Current Assets 55

15 Constituents of Current Liabilities 56

16 Comparison of Current Assets & Current

Liabilities

57

17 Computation of Working Capital 58

18 Cash& Bank 67

19 Raw Materials &Spares 69

20 Fished Goods 70

21 Work in Progress 70

22 Inventory Turn over Ratio 71




CHAPTER 1



CHAPTER 2



CHAPTER 3



CHAPTER 4



CHAPTER 5



BIBLIOGRAPHY



ANNEXURE



CHAPTER 6
