Project Work

A STUDY ON

WORKING CAPITAL MANAGEMENT

With reference to

Supriya spinning Mill private Limited

Boyapalem

A project report submitted to the

JAWAHARLAL NEHRU TECHNOLOGICAL LNIVERSITYKAKINADA

In Partial fulfillment of the requirement for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

By

G.PRASANAJANEYA REDDY(Regd no 09AH1E0038)

Under the guidance of

Mr.V.VENKATA RAO

DEPARTMENT OF MANAGEMENT STUDIESCHIRALA ENGINEERING COLLEG

(AN ISO 9OO1-2OOO CERTIFIED, ACCREDITED BY NBA & AFFILIATED TOJNTU, KAKINADA.)

Declaration

I hereby declare that this project reporl entitled "A Study on Workingcapital Management with respect to Supriya spinning Mills (p) Ltd,,, has been

prepared by me during the year 2009 in the month of January to February inpartial fulfillment of the requirement for the award of degree in " MASTER OF

BIJSINESS ADMINISTRATION" of Jawaharlal Nehru TechnologicalUniversity, Kakinada.

I also declare that this project reporl done of my own efforts and that has

not been submitted to any other university for the award of any degree ordiploma.

Date:Place: (VSP Kumar Mukkamala)

Acknowledgement

The completion of this study makes me recall with gratitude several persons who

have extended their co-operation in one way or the other in preparation of project.

I would like to thank Principal for granting me permission to do this project and I

wish to thank Sri P.Srinivasreddy, Head of the Department for his valuable support.

My Internal guide, Mrs.CH.Hymavathi, Faculty Member, Department of

Management Studies Vignan's Engineering College, Vadlamudi was valuable in her

guidance and constant encouragement, which has enabled me to complete this project.

I humbly acknowledge my profound gratitude to Mr.CV.Apparao sir (Accounts

Manager and External Guide) for extending his kind co-operation and guidance in

preparing the Project report.

I express deep, sense of gratitude and sincere thanks to the entire Departments'

Accounts who extended their whole hearted co-operation in the collection of information

and technical help in completing the project.

(VSP

Kumar Mukkamala)

Certificate

This is to certify that the project report entitled “A Study on Working

Capital Management” with reference to" Supriya Spinning Mills private

Limited, Boyapalem", under my guidance and direction in the partial

Fulfillment for the award of the MASTER OF BUSTNESS ADMINISTRATION

during the period 2007 -09.

P.SRINIVASA REDDY

Project guide M.B.A,M.COM,phD.

CH.Hymavathi Head of the department

MASTER OF BUSINESS ADMINISTRATION

Contents

Chapter 1: Introduction

i. Introduction to Finance Management

ii. Title of the study

iii. Need for the study

iv. Objectives of the study

v. Scope of the study

vi. Methodology of the study

vii. Limitation of the study

Chapter 2: Theoretical Frame work of Working Capital

Chapter 3: Spinning Industry Profile

Chapter 4: Supriya Spinning Mill Profile

Chapter 5: Data Analysis and Interpretation

Chapter 6: Findings

Suggestions

Conclusion

Bibliography

Annexure

CHAPTER -I

FINANCIAL MANAGEMENT Financial Management is an important function in the Organization. Every enterprise

whether big, medium or small needs finance to carry on its operations and to achieve

its targets. Finance is so indispensable today that it is rightly said that it is the lifeblood

of an enterprise. Without adequate finances, no enterprise can possibly accomplish its

objectives.

Capital required for a business can be classified under two main categories

namely Fixed Capital and Working Capital. Fixed Capital stands for that amount of

capital which is required for long term and to create production facilities through

purchase of fixed assets such as plant, machinery, land and buildings working capital

refers to that part of the firm’s capital which is needed for financing short term or current

assets such as cash, marketable securities, debtors and inventories. Working capital in

brief, is the amount of funds necessary to cover the cost of operating the enterprise.

Just as circulation of blood is essential in the human body for maintaining life of a

person, working capital is very essential to maintain the smooth running of a business.

The modern thinking in Financial Management gives greater importance to

management decision making and policy. Today, the Financial Manager is not in a

passive role of a store keeper of the accounting information and arranging funds.

Whenever directed to do so. Rather, he

occupies a key role in solving the complex management problems. He is

now responsible for shaping the fortunes of the enterprise and is involved

in the most vital management decision of allocation of resources.

TITLE OF THE STUDY:

"A study on working capital Management of Supriya spinning Mills (p)

Limited"

.

PROBLEM IDENTIFIED:

The problem selected for the study is to analyze and identify, if the

company is maintaining an appropriate working capital, given its nature of

operations.

NEED FOR THE STUDY

Working capital refers to current assets of the company that are changed in

the ordinary course of business and one firm to another, for instance from

cash to inventories, inventories to receivables into cash. It refers to the

firm's investment in current assets. Current assets are the assets, which

can be converted into cash with the accounting year and include cash,

short-term securities, debtors, bill receivables and stock. When current

assets exceed current liabilities, the working capital is positive. Working

capital is needed for financing current assets. Whenever the requirement of

working capital funds arises due to increasing level of business activity

arrangements should be made quickly to raise the finances. In case some

surplus funds are there in the organization, it should not be allowed to

remain idle but should be invested in short-term securities.

Therefore, the need for working capital requirement cannot be over

emphasized. The need for working capital to run the day-to-day business

activities would be felt essential.

The study gained immense in recent years for financial management of

various companies for ascertaining t he financial viability of the company.

There is every need to know how working capital in SUPRIYA SPINNING

MILL is maintained and how it is being used under accepted principles of

financial administration. It is left desirable to go into all aspects of rising and

using of finances for which capital requirements and how the company

uses financial ratios in knowing about the financial utilization and effective

development of funds for working capital requirements of the company.

1. Maintenance of working capital funds is very essential to every company

for doing day-to-day operations.

2. Working capital needs fluctuate from company to company and

from time to time.

3. To have a practical exposure how working capital is maintained in

Company as it is very essential for day-to-day operations.

4. Being a student of business administration a project work forms, a part

of our curriculum.

5 .To know the extent of application of the theory in practice.

OBJECTIVES OF THE STUDY The study namely working capital management is under taken with the following objectives.

1. To evaluate the working capital requirement of the company.

2. To make comparison between the ratios during different periods.

3. To analyses the efficiency in use of working capital.

4. Effective utilization of current assets in the company.

5.To understand the organization and management of Supriya Spinning Mill ltd.

6. To examine the quantum of working capital.

7. To give a suggestive framework for an effective functioning of

working capital management of Supriya Spinning Mill (p) Ltd.

SCOPE OF THE STUDY

The scope of my study is constitutes to be one of the interesting and

key areas of working capital management.

The study concentrates on the financial status or affairs of the

company and the management of working capital in the company which

involves the study of operating cycle and ratios of different periods and

their comparison over the last three years. It helps to present broader

picture of the financial position of the company.

The required data for the study of the working capital management is

collected from the finance department, cost accounting and store system of

the firm.

The present study is designed to make effort to understand the

management of working capital in SUPRIYA SPINNING MILL with

the help of financial ratios so as to enable to determine the financial

 viability of the company.

This report is compiled result of the information gathered during the

eight-week period at SUPRIYA SPINNING MILL.

The project is mainly based on the study of management of the

working capital. The analysis of the working capital has been done

with the help of financial ratios, which acts as a powerful tool for

making financial analysis.

The performance of the firm is evaluated on a time series basis. That

is Financial ratios over period of time are compared. Based on the

analysis an assessment has been made of how working capital is

being managed in the SUPRIYA SPINNING MILL.

The study aims at appraising the existing working capital condition

and give suggestions if any based on the analysis.

PERIOD OF THE STUDY:-

The study is carried out for a period of 8 weeks i.e. January to

February in 2009.

DATA COLLECTION:

Regarding Working Capital management Of Supriya Spinning Mill Private

Ltd the data which I have collected is about the capital employed, it

includes total equity and total debt , dividends information, earning per

share, net profit, etc. all these information included in annexure part.

TOOL USED IN DATA ANALSIS:

To analyze the data, tools I have used are appropriate Ratios

and Leverages and Working capital statements.

METHODOLOGY OF THE STUDY

COLLECTION OF DATA:

Methodology is a systematic procedure for collecting information in order

to analyze and verify the phenomenon. For the study of all the objectives

the following methodology is adopted. The collection of information is done

through two principle sources.

1. Primary Source:

The information was collected from personal interviews and discussions

with various officials in the firm.

2. Secondary Source

The rest of the information was collected from annual reports of the

company for the relevant period. Annual reports include Profit & loss

statements and Balance sheets. In those reports contains the results of the

past performance have been considered to be the most important reliable

source of financiaI data of the concern.

Limitation of the study

The present study is done with sincerity and earnestness it has its

share of limitations. By calculating various ratios we can know the firm's

position better and can compare with other firms. It is also major constraint.

The study is based on the present situation and only change in the

firms operations may affect the results and finding of the study. Limited

time is a limitation to get the entire information.

The accounts for the current year are not finalized. So the information

during the current period was not collected.

CHAPTER-IITheoretical Frame work of

Working Capital Management

Working Capital Management

Working capital management the management of current assets and

current liabilities in order to maintain liquidity and there by solvency. There

fore the working capital management of the liquidity and solvency. Liquidity

means degree of convertibility; solvency means capacity to accept the

obligation. There fore the main object of working capital management to

maintain adequate level of solvency by managing current assets and

current liabilities.

Second object of working capital management is to maintain low

investment to current assets so has maintained high level of returns.

Optimum Working Capital Policy:

When a company maintain more levels of working capital it was

resulting high degree of cost of capital. As a result profit will decline. When

a company maintains low level of working capital it is likely to become

insolvency because low degree of liquidity and affective working capital

management a trade off between liquidity and profitability this is known as

optimum working capital.

In other words optimum working capital is that level at which liquidity

and profitability are same and maximum. This is present as following diagram

Optimum Working Capital:

When working capital increase liquidity

term increase profitability term decrease

these to be interesting al a point called

optimum level of working capital that is

"OP".

Why Working Capital Require:

A found to have inadequate of working capital due to the following

1. To maintain the require liquidity and solvency and there by run the

business on a smut bases.

2. When there is over liquidity, it will result in under trading under trading

means generating low levels of sales with more amounts of working capital

or liquidity there fore-the profits are less.

3. When there is under liquidity it will result in "over trading" which means

generating more volume of sales the less investment in working capital this

leads to list of risk of insolvency.

4. When there is no inadequate working capital the firm may face operating

problems which may result loosing it repetition of goodwill.

5. Do the low level of working capital fixed assets may not be effectively

utilize, resulting in low level of rate of returns on invest.

6. Poor working capital policies in resulting loosing future opportunities of a

company.

These are the basic concepts of working capital

1. Gross Working Capital

2. Net Working Capital

1. Gross working capital:

This is also know as quantitative approach, gross working capital define the

planning and management of the investment in current asset to run the

business smoothly. Refers to the investment made in cash the investment

made in cash, inventory, debtors.

2. Net working capital:

It is the relationship between current asset and current liabilities N.W.E

refers to the difference between CA-CL. In the other words NETWORKING

CAPITAL is the based on the fixed liability (equity + long term loans) to

finance the current asset when net working capital increase the depend on

fixed liabilities those are and vice versa (when net working capital reduce

the depend on fixed liabilities reduce).

Approach Policy:

Working capital is finance by three sources:

1. Bank credit

2. Trade credit

3. Long term finance (which includes equity)

A firm matches any one of or any combination of above to finance

current asset this is knows working capital financing policy or approach.

There are three important policies follow are adapted in finance current

asset.

1. Conservative approach

2. Aggressive approach

3. Matching approach

1. Conservative Approach:

Under this policy a firm depends more on a long term funds to financing

the current asset. Under this policy liquidity is more and risk is less. As a

result the cost of funds is more. There fore the profit is less.

2. Aggressive Approach:

A company depend more on current liability in financing current asset

liquidity is low solvency low, risk is higher at the result profit is higher.

3. Matching Approach:

It is one where the risk and return traded off (balance) under this policy

company follow an intermediate approach which is popularly knowing

hiding approach.

Under the matching approach the finance manager has to analyze and

Classify the current asset carefully he has to match the repayment period

of loan with the useful time of an asset. One the bases of these analyses all

current asset are classified in to two categories.

1. Permanent current assets

2. Temporary current assets

1. Permanent Current Asset:

Permanent current asset are though which are maintain longer period by

company.

EX: The maintain balance of a bank book.

2. Temporary Current Assets:

These are also known as seasonal or variable current asset this asset will

value change time to time.

Matching process:

Under these process fixed current asset are financed by long term source

of finance, where as temporary current asset are finance current liabilities

by adapting these method a company always maintain working capital

being equal to fixed current asset there fore risk is minimize.

Working capital planning factors:

1. Sales

2. Size

3. Nature

4. Machine cycle

5. Business cycle

6. Credit policy

7.Seasonal of sale

8. Book policy

9. Efficiency

10. Working capital cycle

Working capital gap:

Difference between current assets and current liabilities will exclude bank

credit.

Working Capital Cycle\ Operation Cycle:

It is also know as operating cycle is the primary determine factor of

working capital needs of a company along with sales is also know as cash

cycle is define as "time taken to convert the cash in to cash" it means

once cash invested in operation they are recycle back in to cash after

certain stages all these stages put together is operating cycle period more

investment the working capital is require other wise the investment are

low.

Working capital planning:

It is done with a due to know working capital gap and working capital

margin.

Working capital margin:

The portion of working capital which is expected to finance either by

long term loan or equity capital.

WORKING CAPITAL CYCLE

Raw material

work-in-progress

finshed goodsdebtors

cash

The operating cycle is complete force cash to get converted in to raw

materials work in progress finished good debtors and finally cash. The goal

of the working capital management is to manage the firm. It is used to

maintain the liquidity of the firms and for financing the short-term sources to

use and manage the in a best possible way the excessive investment in the

current investments and the hard the inadequate investment.

working capital is required because of the time gap between the sales

and their actual realization in cash. This time gap is technically terms as

operating cycle of the business. In case manufacturing company, the

operating cycle of time necessary to complete the following cycle of event.

Conversion of cash into raw materials.

Conversion of raw materials into work in progress.

Conversion of work in progress into finished goods.

Conversion of finished goods into accounts receivables.

Conversion of accounts receivable into cash.

This cycle is continuous phenomena. In case of "Trading Firm" the

operating cycle will include the length of time required to:

a) Cash into inventories.

b) Inventories into accounts receivables.

c) Accounts receivables into cash.

In case of "Financing Firm" the operating cycle includes the length

of time taken for 1 year.

a) Conversion of cash debtors, and

b) Conversion of debtors into cash.

Management of Working Capital:

They are two types of assets in each concern.

Current Assets

Fixed Assets

Both are necessary for profit running of business. Working capital is

difference of current assets and current liabilities. Management of working

capital is concerned with problems that arise in attempting to manage

current assets current liabilities and the Inter relationship between them.

Working capital must be adequate. In case of excess working capital they

are idle funds which are not profits for business. In case of inadequacy of

working capital the firm may lead to insolvency. In this context working

capital management is three dimensional in nature.

Objective of Working Capital Management:

There are two fold objectives of the management of working capital.

1. Maintenance of working capital at appropriate level and

2. Availability of ample funds as and when they are needed.

In accomplishment of these two objectives the management has to

consider the composition of current assets pool. The working capital

position sets the various policies in the business with respect to general

operations purchasing, financing expansion and dividend etc.

Rate of Stock Turnover:

There is a high degree of inverse co-relationship between the quantum of

working capital and the velocity or speed with which the sales are affected.

A firm that has a high rate of turnover. For example, in case of precious

stone dealers, the turnover is very slow. They have to maintain a large

variety of stocks and the movement of stocks is very slow. Thus, the

working requirements of such a dealer shall be higher than that of a

provision store.

Business cycles:

Business cycle refers to alternate expansion and contraction in general

business activity. In a period of boom i.e., when the business is

prosperous, there is a need for larger amount of working capital due to

increase in sales, rise in prices, optimistic expansion of business, etc. on

the contrary in the times of depression i.e., when there is a down swing of

the cycle, the business contracts, sales decline, difficulties are faced in

collections from debtors and firms may have a large amount of working

capital lying idle.

Rate of Growth of Business:

The working capital requirements of a concern increase with the growth

and expansion of its business activities. Although, it is difficult to determine

the relationship between the growth In the volume of business and the

growth in the working capital of a business, yet it may be concluded that for

normal rate of expansion in the volume of business. We may have retained

profits to provide for more working capital but in fast growing concerns. We

shall require larger amount of working capital.

Study of Working Capital Management:

The management of working capital has been studied under the three

following headings:

Management of Cash Balances

Management of Account Receivables

Management of Inventory

Importance or Advantages of Adequate working capital:

working capital is the life blood and nerve center of a business. No

business can run successfully without an adequate amount of working

capital. The main advantages of adequate amount of working capital are

as follows:

1. Goodwill: Sufficient working capital enables a business concern to

make prompt payments and hence helps in creating and maintaining

goodwill.

2. Easy Loans: A concern having adequate working capital, high

solvency and good credit standing can arrange loans from banks

and others on easy and favorable terms.

3. cash Discounts: Adequate working capital also enables a

concern to avail cash discounts on the purchases and hence it

reduces costs.

4 . Regular Supply of Raw Materials: Sufficient working capital

ensures regular supply of raw materials and continuous

production.

5 . Regular Payment of salaries, wages and other Day to Day

commitments: A company which has ample working capital can made

regular payment of salaries, wages and other day-today commitments

which raises the morale of its employees, increases their efficiency,

reduces wastages and costs and enhances production and profits.

Disadvantages of Redundant or Excessive Working Capital:

1. Excessive working capital means idle funds which earn no profits for the

business and hence the business cannot earn a proper rate of return on

its investments.

2 . When there is a redundant working capital, it may lead to unnecessary

purchasing and accumulation of inventories causing more chances of

there waste and losses.

3. Excessive working capital implies excessive debtors and defective

credit policy which may cause higher incidence of bad debts.

4. When there is excessive working capital, relations with banks and other

financial institutions may not be maintained.

5. Due to low rate of return on investments, the value of shares may also

fall.

Dangers of Inadequate Working Capital:

It cannot by its requirement and cannot avail of discounts.

The firm cannot pay day-to-day expenses of its operations and it

reduces the profits of the business.

The fixed assets cannot be properly utilized.

Another aspect of gross working capital is the arrangement of funds to

finance current assets. When the business expands the surplus funds are

necessary and they are invested in short-term securities.

Net Working Capital Is a qualitative Concept

It indicates liquidity position of firm.

Suggests the extent to which working capital needs may be

financed by permanent sources.

Always,

Current Assets > Current Liabilities

So there is a ratio called current ratio 2:1 where assets are twice of

liabilities. A negative working capital position posse treats to solvency of

company and me unsound. Excessive liquidity Is also bad as it may lead

to mismanagement of current assets.

Net working capital also covers the question of judicious mix of long term

and short term funds of financing current assets. There fore working capital

should be financed with the permanent sources of funds such as owner's

capital debentures, long term debt and preference capital.

In summary it is emphasized that both gross and net concepts of working

capital are equally important for efficient management of working capital.

The data and problems of each company should be anal analyzed

determine the amount of working capital .it is not feasible in practice to

finance current assets by short term sources only.

Keeping in view the constraints of individual comp any a mix of long term

finances should be invested in current assets. Since current assets involve

cost of fund and should be put to productive use.

Operating Cycle:

Operating cycle is the time duration required to convert sales, after the

conversion of resources into inventories into cash. The operating cycle of a

manufacturing company involves three phases.

1. Acquisition of resources, such as raw material, lab our, power

and fuel, etc.

2 Manufactured of the product which includes conversion of raw

material into work-in-progress into finished goods.

3. sales of the product either for cash or on credit. Credit sale

creates book debts for collection.

The operating cycle begins with the acquisition of the raw materials and

ends with the collection of the receivables. It may be broadly classified in

to the following four groups.

1. Raw Material Conversion period (RMCP).

2. Work in progress Conversion period (WIPCP)

3. Finished Goods Conversion period (GGCP)

4. Book Debts or Receivables conversion period (BDCP)

The length of the operating cycle of manufacturing firm is the seem of.

1. Inventory conversion period (ICP)

2. Book debts or receivables conversion period (BDCP)

The total of inventory conversion period and book debts conversion period

referred to as gross operating cycle (GOC).

The duration of the cycle for the purpose of estimating the working capital

requirement is equivalent to the sum of the durations of each of the stages

less the credit period allowed by the suppliers of the firm i.e., payables

deferral period (PDP).

MANAGEMENT OF RECEIVABLBS

Receivables result from credit sales. A concern is required to allow credit

sales in order to expand its sales volume. It is not always possible to sell

goods on cash basis only.

Meaning of Receivable:

Receivables represent amounts 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 form part of its current assets.

Receivables are also known as accounts receivables, trade receivables,

customer receivables or book debts. The receivables are carried for the

customers. The period of credit and extent of receivables depends upon

the credit policy followed by the firm. The purpose of maintaining or

investing in receivables.

Factors Influencing Size of Receivables:

In most of business enterprise, investments in accounts receivables

form major part of their assets. Accounts receivables are one of the major

components of working capital. The financial manager should pay attention

to management of receivables so that each rupee invested in accounts

receivables may contribute to network of firm.

The problem of receivables is basically a problem of balancing profitability

and liquidity. Soft credit terms are attraction of sales and the longer the

time a company allows to pay to its customers, the greater the sales and

higher the profits. However on the other hand, the longer the period of

credit, the greater the risk, the greater the level of debt and greater the

strain on the liquidity of company.

1. Expansion Plans:

When a concern wants to expand its activities, it will have to enter new markets. To attract customers, it will give incentives in the form of credit facilities. The periods of credit can be reduced when the Firm is able to get permanent customers. In the early stages of expansion more credit becomes essential and size of receivables will be more.

2. Relations with Profits:

The credit policy is followed with a view to increase sales. When sales increase beyond a certain level the additional costs incurred are less than the increase in revenues. It will be beneficial to increase sales beyond a point because it will bring more profits. The increase in profits will be followed by an increase in the size of receivables or vice versa.

3. Credit Collection Efforts: The collection of credit should be streamlined. The customers should be

sent periodical reminders if they fail to pay in time. on the other hand, if

adequate attention is not paid towards credit collection then the concern

can land itself in a serious financial problem. machinery will reduce the size

of receivables .then outstanding amounts will be more.

4.Habits of Customers:

The paying habits of customers also have a bearing on the size of

receivables. The customers may be in the habit of delaying payments even

though they are financially sound. The concerned should remain in touch

with such customers and should make them realized the urgency of their

needs.

Costs of Maintaining Receivables:

The following of credit to customers means giving of funds for the

customer's use. The concern incurs the following costs on maintaining

receivables.

1. Cost of Financing Receivables:

When goods and services are provided on credit then concern's capital

is allowed to be used by the customers. The receivables are financed from

the funds supplied by shareholders for long term financing and through

retained earnings. The concern incurs some cost which finance

receivables.

2. Cost of Collection:

A proper collection of receivables is essential for receivables

management. The customers who do not pay the money during a

stipulated credit period are sent reminders for early payments. Some

persons may have to be sent for collecting these amounts. In some cases

legal recourse may have to be taken for collecting receivables. All these

costs are known as collection costs which a concern is generally required

to incur.

3. Default Costs:some customers may fail to pay the amounts due towards them. The

amounts which the customers fail to pay are known as bad debts through

efficient collection machinery but one cannot altogether rule out this cost.

Policy for Managing Receivables: The credit policy of any firm should be estimated in such a way that the benefits likely to accrue from it, the credit policy should incorporate the following:1. Credit Standards: The term credit standards represent the basic criteria for the extension of

credit to any customer. This is done with the help of factors such as credit

ratings, credit references and various financial ratios. The level of sales and

the amount of account are fairly liberal as compared to sales under the

restructure of tight credit standards.

The credit standards of any customer firm are usually determined by 5C'snamely:Capacity: It refers to ability of the specific customer to manage the

required scales of business.

Character: It refers to integrity of customer i.e., his willingness to pay dues.

Collateral: It refers to the security in form of assets owned by customers,

which can be offered by the customer to secure the amount of credit

extended to him.

Capital: It refers to the financial soundness of customer i.e., his capacity to

raise required funds.

Condition: It refers to the impact of economic environment of the

country on the firm or special circumstances offered by the government

or local agencies which may affect the customer's profitability and his

ability to meet obligations.

2. Credit Terms:This refers to the stipulations under which the goods are sold on credit i.e.,

terms and conditions of trade relating to repayment. The two components

are:

A) Credit Period:It refers to the duration of time for which trade credit is extended. This

period is available to the customer to pay off his dues. Even though it is a

fact that any extension in credit period stimulates the sales but it also

increases the cost on account of more held up of funds. There fore

determination of optimum credit period implies the computation of such

optimum period, where the incremental profits on increased amount of

sales are just equal to the cost of carrying additional amount of receivables

i.e., total amount of profits become maximum.

B) Cash Discount:It refers to that amount of discount which is given to customer on paying off

his debts within the stipulated period. Attractive cash discounts terms help

in reduction of average collection period and in turn reduce amount of

investment in receivables. There fore it has implications on the sales

volume average collection period, bad debts and profit per unit. Optimum

cash discount period is established the point where the cost and benefit are

exactly offsetting.

C) Collection Procedures:The third decision area in the management ofrecce3ivables is the collection policies. The policy must be strict and lenient.

Sending a reminder for payments.

Personal request through telephone.

Personal visits to customers.

Taking help of collecting agencies.

Taking legal action.

Inventory Management:Every enterprise needs inventory for smooth running of its activities. It

serves as a link between production and distribution processes. The

greater the time lag, the higher the requirements for inventory, it also

provides a cushion for future price fluctuations.

The investment in inventories constitutes the most significant part of current assets working capital in most of the undertakings. Thus, it is very essential to have proper control and management of inventories. The purpose of inventory management is to ensure availability materials in sufficient quantity as and when required and also minimize investment in inventories.

The investment in inventory is very high in most of the undertakings

engaged in manufacturing wholesale and retail trade. The amount of

investment is sometimes more in inventory than in other assets. In India a

study of 29 major industries has revealed that the average cost of materials

is 64 price and the cost of lab our and overheads is 36 price in a rupee.

About 90% of working capital is invested in inventories. An efficient system

of inventory management will determine.

(a) What to purchase. (b) How to purchase. (c) From where to purchase. (d) Where to store etc.

The purpose of inventory management is to keep the stocks in such away

that neither there is overstocking nor under socking. The over stocking will

mean a reduction of liquidity and starving of other production processes,

under stocking, on the other hand, will result in stoppage of work. The

investments in inventory should be kept in reasonable limits.

Objectives:The main objectives of inventory management are operational and

financial' The operational objectives mean that the materials and spares

should be available in sufficient quantities so that work is not disrupted for

want of inventory. The financial objective means that investments in

inventories should not remain idle and minimum working capital should be

locked in it. The following are the objectives of inventory

management.

1.To ensure continuous supply of materials, spares and finished goods

so that production should not suffer r at any time and the customers

demand should also be met.

2. To avoid both overstocking and under stocking of inventory.

3 To maintain investment in inventories at the optimum level as required

by the operational and sales activities.

4. To keep material cost under control so that they contribute in

reducing cost of production and overall costs.

5. To eliminate duplication in ordering or replenishing stocks. This is

possible with the help of centralizing.

6. Purchases.

7. To design proper organization for inventory management. A clear- cut

accountability should be fixed at various levers of the organization.

Tools and Techniques of Inventory Management:The following are the important tools and techniques of inventory

management and control.

1. Determination of .stock levels.

2. Determination of economic order quantity.

3. A.B.C Analysis.

4. V.E.D. Analysis.

5. Inventory turnover ratios.

Meaning and Nature to Inventory:

The dictionary meaning of inventory is stock of goods or list of goods. The

work inventory is understood different by various authors. In accounting

language it may mean stock of finished goods only.

A) Raw Material:Raw material form a major input into the organization. They are required to

carry out production activities uninterruptedly. The quantity of raw materials

required will be determined by the rate of consumption and the time

required for replenishing the supplies. The factors like the availability of raw

materials and government regulations, etc,, too affect the stock of raw

materials.

B) Work-in-Progress:The work-in-progress is that stage of stocks which are in between raw

materials and finished goods. The raw materials enter the process of

manufacture but they are yet to attain a final shape of finished goods.

C) Finished Goods:These are the goods which are ready for the consumers. The stock of

finished goods provides a buffer between production and market.

Management of Cash:

Cash management is one of the important functions of finance

management, cash management comprehensive of two functions, i.e.,

planning and controlling of the cash. Cash includes currency, bank

balance, gold, marketable securities.

Need for Cash:There are four major considerations or motives holding cash.

1. Transactions motives

2. Precautionary motives

3. Speculative motives

4. Compensative motives

1. Transactions Motives:This is very important need arising out of business transaction occurring in

level of cash, it should maintain to meet day to day needs or payments

normally occurring in the business. Factors of Cash Management:

1. Cash Planning

2. Optimum Cash Levels

3. Managing Cash Flows

2. Precautionary Motives:Cash may be held to need unexpected events which may occur with may

be uncertainty.

3. Speculative Need:Cash may be held in order to take advantages of profitable opportunity which

other wise may be loss.

4. Compensative Motives:

n order to avoided from basic service from the bank free of cost customer

has to key a minimum balance in wakeup.

Objectives of Cash Management:

There are two objectives for cash management follows; they are

1.Maintaining adequate liquidity and there by                

solvency

2. Minimum ideal cash balance and there by profitability. The finance

manager has to plan the entire motive on the prioritize bases and

accordingly maintain cash balance.

More the cash balance to maintain more would be liquidity and solvency

but less will be profitability and vise versa. There fore ever finance manager

has to plan for optimum cash balance were liquidity profitability same

CASH:Cash Planning:It is process are estimating cash requirements and there by determining

cash deficient or cash surplus for this purpose cash budgets require to be

the effective liquidity management lies in managing the defecate or surplus

of cash. There fore cash budget is an essential tool in the process of cash

plan.

Cash Budget:It is a fore cost of cash inflows and cash out flows and there by project in

cash requirements for a different period of time, usually cash budget is

short term budget prepare for quarterly or half yearly.

Preparation of cash budget we have to require in the following steps: 1. Preparing a schedule of collections from the debtors according to be

norms

2. Surplus of any month which carrying forward to succeeding month.

3. When a company is required to maintain a minimum balance for all the

month it has to make arrangement if its banker.

4. Any surplus amount will be deposited any deficit amount harrowed.

5. Non recording expediter such as purchase of plant dividend paid loan

repayment should correctly place.

Cash Control:

Deficient of surplus of cash as to be managed by employing certain cash

control techniques- The main objective of these techniques is to speed up

collections and to deliver the payments. To speed up the collections the

following techniques are generally fallows by a finance manager.

1. Speed billing:Sending the bill promptly and timely we save the mailing time as well as

production time EX: sport billing followed by transaction.

2. Collection and Deposits:Checks collections should be deposit immediately from time to time to

reduce the time during which payment received by the form remind

uncollected.

3. Concentration BankingInstead of single collection center at the head office a company may

established a number. Of collection center strategically located and

different regions these system reduce the period of time between the times

a customer mail is payment on the time when they sent to bank This

system involves same cost which as to born by company.

4. Lock box system:Another technique to the collection is installing a lock box system in the

princes of a bank. This system is to be eliminating the time between the

result of remittent by the company and deposit in to the bank.

RECEIVABLE MANAGEMENT

Accounts receivables constitute a significance portion of the total current

assets. They are direct consequences of "trade credit" which has become

an essential marketing tool in modern business.

Meaning of receivable:Receivables are asset accounts representing amounts owned to the firm as

a result of sale of goods or services in the ordinary course of business.

The management of receivables is basically a problem of balancing

profitability and liquidity..soft credit terms are attractive for higher sales and

hence longer the time a company allows its customers to pay the higher

are the sales and hence profits. However, on the other hand the longer the

period of credit, the greater the risk, greater the level of debt and greater

the strain on the liquidity of the company.

Cost of receivables:

Capital cost:

It is the cost associated with the blocking of firm's resources in the

receivables because of the time lag between the sale of goods to

customers and realization of sales. The firm therefore has to customers

and realization of sales. The firm therefore has to arrange for additional

funds to meet its current obligations.

Administrative cost:

The firm has to incur additional administration costs for maintaining account

receivable in the form of salaries etc.

Collection cost: The firm has to incur costs for collecting the payments.

Defaulting cost:

Sometimes after making all serious efforts to collect money from defaulting

customers the firm may not able to recover the over debts because of the

inability of the customers. Such debts are treated as bad and have to be

written off since they cannot be realized.

Credit policy variables: The important dimensions of a firm credit policy are,

Credit standards.

Credit period.

Cash discount.

Collection effort.

System for receivable control:The management should consider the following four factors in keeping the

level of investment in receivables within the controllable limits.

1. Deciding acceptable level of risk:

The first point is to decide to whom goods should be supplied bearing in

mind the risk involved. It is therefore essential to assess the credit

worthiness of the customers before advancing any credit to them

2. Terms of credit sales:

The second step in this regard in to decide terms of credit sales and the

level of cash discounts. Cash discount has important bearing on the cost of

capital and on credit sales.

3. Credit collection policy:

The management should provide for bad debts to keep the losses

minimum. (Usually 5Yo to 7% of sundry debtors are provided for bad

debts). A collection procedure should be established and action should be

taken accordingly. The other steps should be record the age of debt to

facilitate the collection of debts.

The age of debt is called as average collection period.

Average collection period : (credit sales in the period)/average

accounts receivables.

Accounts receivables turnover : average accounts receivables

average monthly/daily credit sales.|

An increase in the age of receivables or debt collection period is an

indication of lenient credit of inefficiency collection.

PAYABLE MANAGEMENTManagement of accounts payable is as much important as the

management of accounts receivable. However there is a basic difference

between the approaches adopted by the Finance Manager in both the

cases. The underlying objective in case of accounts receivables is to

maximize the acceleration of collection process while incase of accounts

payable it is to slow down the payments process as much as possible. The

delay in payments of accounts payable may result in saving of some

interests costs but proves very costly to the firm in the form of loss of credit

in the market. The Finance Manager therefore has to ensure that the

payments to the credits are made at the stipulated time period after

obtaining the best credit term possible.

Control of Accounts Payable:computing the average age of payable can be calculated by any of the

following methods.

Months or days in the period / Accounts payable turnover accounts payable

Turnover= credit purchase in the period I Average accounts payable.

Average accounts payable I average month / daily credit purchase.Average

accounts payable /average month I daily credit purchases during the

period.

CHAPTER- III

INDUSTRY PROFILE

HISTORY OF CLOTHING AND TEXTILES

Ladies making silk, early l2th century painting by Emperor Huizong of Song

(a remake of an 8th century original by artist Zhang Xuan), illustrates silk

fabric manufacture in China.

The history of clothing and textiles attempts an objective survey of clothing

and textiles throughout human history, identifying materials ,tools,

techniques, and influences, and the cultural significance of these items to

the people who used them.

Textiles, defined as felt or spun fibers made into yarn and subsequently

netted, looped, knit or woven to make fabrics, appeared in the Middle East

during the late stone age. From ancient times to the present day, methods

of textile production have continually evolved, and the choices of textiles

available have influenced how people carried their possessions, clothed

themselves, and decorated their surroundings.

Sources available for the study of the history of clothing and textiles include

material remains discovered via archaeology; representation of textiles and

their manufacture in art; and documents concerning the manufacture,

acquisition, use, and trade of fabrics, tools, and finished garments.

Scholarship of textile history, especially its earlier stages, is part of material

culture studies.

Ancient textiles and clothing

The first actual textile, as opposed to skins sewn together, was probably

felt. Surviving examples of Nalebinding, another early textile method, date

from6500 BCE. Our knowledge of ancient textiles and clothing has

expanded in the recent past thanks to modern technological developments.

[11] Our knowledge of cultures varies greatly with the climatic conditions to

which archeological deposits are exposed; the Middle East and the arid

fringes of China have provided many very early samples in good condition,

but the early development of textiles in the Indian subcontinent, sub-S

aharan Africa and other moist parts of the world remains unclear. In

northern Eurasia peat bogs can also preserve textiles very well.

Early woven clothing was often made of full loom widths draped, tied, or

pinned in place.

Ancient India

The inhabitants of the Indus Valley Civilization used cotton for clothing as

early as the 5th millennium BCE - 4th millennium BCE.

"Cotton has been spun, woven, and dyed since prehistoric times. It clothed

the people of ancient India, Egypt, and china. Hundreds of years before the

Christian era cotton textiles were woven in India with matchless skill, and

their use spread to the Mediterranean countries. In the 1st cent. Arab

traders brought fine muslin and calico to Italy and Spain. The Moors

introduced the cultivation of cotton into Spain in the 9th cent. Fustians and

dimities were woven there andin the l4th cent. In Venice and Milan, at first

with a linen warp. Little cotton cloth was imported to England before the

l5th cent., although small amounts

were obtained chiefly for candlewicks. By the 17th cent The East India

Company was bringing rare fabrics from India. Native Americans skillfully

spun and wove cotton into fine garments and dyed tapestries. Cotton

fabrics found in Peruvian tombs are said to belong to a pre-Inca culture. In

color and texture the ancient Peruvian and Mexican textiles resemble those

found in Egyptian tombs."

With linen to make rope and other textiles. Evidence for wool production in

Egypt is scanty at this period.

Spinning techniques included the drop spindle, hand-to-hand spinning, and

rolling on the thigh; yarn was also spliced. A horizontal ground loom was

used prior to the New Kingdom, when a vertical two-beam loom was

introduced, probably from Asia.

Linen bandages were used in the burial custom of mummification, and art

depicts Egyptian men wearing linen kilts and women in narrow dresses with

various forms of shirts and jackets, often of sheer pleated fabric.

The textile trade in the ancient world

The exchange of luxury textiles was predominant on the Silk Road, a series

of ancient trade and cultural transmission routes that were central to

cultural interaction through regions of the Asian continent connecting East

and West by linking traders, merchants, pilgrims, monks, soldiers, nomads

and urban dwellers from China to the Mediterranean Sea during various

periods of time. The trade route was initiated around 114 BC by the Han

Dynasty, Fel although earlier trade across the continents had already

existed. Geographically, the Silk Road or Silk Route is an interconnected

series of ancient trade routes between

Chang'an (today's Xi'an) in China, with Asia Minor and the Mediterranean

extending over 8,000 km (5,000 miles) on land and sea. Trade on the Silk

Road was a significant factor in the development of the great civilizations of

China, Egypt, Mesopotamia, Persia, the Indian subcontinent, and Rome,

and helped to lay the foundations for the modern world.

Industrial revolution and modern times

During the industrial revolution, production was mechanised with machines

powered by waterwheels and steam-engines.

Sewing machines emerged in the nineteenth century.

Synthetic fibers such as nylon were invented during the twentieth century.

Clothing and textile manufacture expanded as an industry so that such

unions as the Amalgamated Clothing Workers of America and the Textile

Workers Union of America formed early in the twentieth century. Later in

the twentieth century, the industry had expanded to such a degree that

such educational institutions as UC Davis established a Division of Textiles

and Clothing, The University of Nebraska-Lincoln also created a

Department of Textiles, Clothing and Design that offers a Masters of Arts in

Textile History, and Iowa State University established a Department of

Textiles and Clothing that features a History of costume collection, 1865-

1948. Even high school libraries have collections on the history of clothing

and textiles.

Alongside these developments were changes in the types and style of clothing by humans. During the 1960s, had a major influence on subsequent developments in the industry.

textiles were not only made in factories. Before this that they were made in

local and national markets. Dramatic change in transportation throughout

the nation is one source that encouraged the use of factories. New

advances such as steamboats, canals, and railroads lowered shipping

costs which caused people to buy cheap goods that were produced in other

places instead of more expensive goods that were produced locally.

Between 1g10 and lg40 the development of a national market prompted

manufacturing which tripled the output's worth' This increase in production

created a change in industrial methods' such as the use of factories instead

of hand made woven materials that families usually made.

The vast majority of the people that worked in the factories were women.

Women went to go work in textile factories because of some of the

following reasons' Crowding at home was indeed a cause for them to leave

and be on their own. The need to save for future marriage portions also

motivated these women to decide to work in the millhouses. The work

enabled them to see more of the world, to earn something in anticipation of

marriage, and to ease the crowding within the home. They also did it to

make money for family back home. The money they sent home was to help

out with the trouble some of the farmers were having' They also worked in

the millhouses because they could gain a sense of independence and

growth as a personal goal.

Textiles not made in only

Indian spinning industry

Indian Spinning Industry has gone from strength to strength since a very

long time now as it was the hub of cotton manufacturing. Cotton is not only

consumed to the highest extent in India but it has also become one of the

most profitable textiles in the export industry.

Spinning in India can be classified into 2 categories: medium and long

staple. But there was a shortfall in the 'extra-long' category that continued

for many years' There was a massive downfall in the cotton spinning in

India during 2004-2005. The production rate of cotton was about 4 lakh

bales that was less by 5 lakh bales from the required rate which was 9 lakh

bales. Mr. p. D.Patodia, the Chairman of the Standing Committee on

Cotton, CITI-CDRA said that the manufacturing of cotton will rise to lI-12

lakh bales in 2010.

The present downfall in the cotton production has witnessed a 50%

increase in the price of Indian varieties of ELS, which is detrimental for the

spinning industry in India. Spinning mills require domestic accessibility of

ELS cotton in increased quantity and of better fiber qualities.

To survive this downfall in the cotton trade which is a highly profitable

textile in the India Spinning Industry, CITI-CDRA is conducting a

conference with 'arious research organizations such as GICR (Nagpur),

JNKW (Khandwa),UAS (Dharwad), and Regional Textile Mills'Association

in R&D activities. It conducted a discussion pertaining to the development

of new varieties of seeds and adopting the advanced procedure of

cultivation which will add to the profit in the cotton textile sector of the

spinning industry. The most important and

efficient step towards the resurgence of cotton manufacturing would be to

develop the ELS varieties with lesser duration crops and yield to cost

effectiveness and consistency in cultivation. This will not only motivate the

farmers but will also make them s tick to the desired sector of cotton crop.

The yarn spinning industry covers almost 25 percent of the total industrial

production of one of the world's 10 largest economies. Trends are reviewed

every year in accordance with the need and fashion. An elaborate and

detailed assessment is made on various sectors of the yarn spinning such

as, production, consumption, and materials. The legislative and the political

consequences are also reviewed at the same time. In addition to it, other

areas that are being reviewed in the yarn spinning sector are exports,

imports, prices, advertising, sales promotion patterns.

Some of the popular companies engaged in the India Spinning Industry are

. Bhilwara Spinners Ltd. (LNG Group) - polyester, viscose, wool-blended

fabrics and high-end products like lycra vand linen. BSL Suitings and

Mayur Suitings are the two brands vunder Bhilwara Spinners Ltd.

. Nitin Spinners Ltd. - manufactures single and multi-fold yarns in the

range from Ne 4 to Ne 40 appropriate for various applications such as

Knitted Fabrics, woven Fabrics, Terry Towels, Denims, Furnishing

Fabrics, carpets and other Industrial Fabrics.

. sangam (India) Ltd. (sangam Group of companies) - Largest producer

of dyed yarn in India with a capacity of 64032 spindles in one location.

. Ajay Group of Industries - Manufacturer and seller of polyester viscose,

polyester woolen and uniform fabrics.

The Spinning Industry in India is on set to hit the global market with other

fabrics as well like the cotton textiles with its enthusiasm and consistency in

work. It has already reached a .phenomenal status in Indi a by beating the

obstacles that caused a downfall since past few years and is now on its

way to cover a wider area in the spinning sector.

Among all the sub sectors of the textile industry, spinning is perhaps the

most modernized segment. Production in fiscal 1999-2000 (April-March)

was 3,04g million kg, of which 2,205 million kg was pure cotton yarn and

the rest was synthetics and blends, such as polyester/viscose;

polyester/cotton and Spun acrylics. The industry exported about 540 million

kg of cotton yarn and about 100 million kg of blended yarn, which together

works out to about a fifth of the total output.

The spinning industry grew at a very rapid pace in the first half of the

nineties. Thereafter growth slowed to some extent but through the nineties,

India has installed nearly 15 million spindles. India has been the largest

investor in ring spinning for almost the entire decade. Even in 1999, when

sales of spinning machines hit their lowest level in recent times all over the

world, India was the largest recipient of new ring spindles, according to the

annual survey by the International Textile Manufacturers Federation

(ITMF).

The international cotton trade

The United States, with sales of $4.9 billion, and Africa, with sales of $2.1

billion, are the largest exporters of raw cotton. Total international trade is

$12 billion. Africa's share of the cotton trade has doubled since 19g0.

Neither area has a significant domestic textile industry, textile

manufacturing having moved to developing nations in Eastern and South

Asia such as India and China. In Africa cotton is grown by numerous small

holders. Dunavant Enterprises, based in Memphis, Tennessee, is the

leading cotton broker in Africa with hundreds of purchasing agents. It

operates cotton gins in Uganda, Mozambique, and Zambia.In Zambia it

often offers loans for seed and expenses to the 180,000 small farmers who

grow cotton for it, as well as advice on farming methods. Cargill also

purchases cotton in Africa for export.

The 25,000 cotton growers in the United States are heavily subsidized, at

the rate of $2 billion per year. The future of these subsidies is uncertain and

has led to anticipatory expansion of cotton brokers' operations in Africa.

Dunavant expanded in Africa by buying out local operations. This is only

possible in former British colonies and Mozambique; former French

colonies continue to maintain tight monopolies, inherited from their former

colonialist masters, on cotton purchases at low fixed prices.

Maharashtra (26.63%), Gujarat (r796%) and Andhra pradesh (r3.75%)are

the leading cotton producing states, these states have a predominantly

tropical wet and dry climate.

In the United States, the state of Texas leads in total production while the

state of California has the highest yield per acre in the world.

Fair tradecotton is an enormously important commodity throughout the world.

However, many farmers in developing countries receive a low price for their

produce, or find it difficult to compete with developed countries.

This has led to an international dispute.

On 27 September 2002 Brazil requested consultations with the US

regarding prohibited and actionable subsidies provided to US producers,

users and/or exporters of upland cotton, as well as legislation, regulations,

statutory instruments and amendments thereto providing such subsidies

(including export credits), grants, and any other assistance to the US

producers, users and exporters of upland cotton.

On 8 September 2004, the Panel Report recommended that the United

States "withdraw" export credit guarantees and payments to domestic user

and exporters, and "take appropriate steps to remove the adverse effects

or withdraw" the mandatory price-contingent subsidy measures.

In addition to concerns over subsidies, the cotton industries of some

countries are criticized for employing child labor and damaging workers'

health by exposure to pesticides used in production. The international

production and trade situation has led to 'fair trade' cotton clothing and

footwear, joining a rapidly growing market for organic clothing, fair fashion

or so-called 'ethical fashion'. The fair trade system was initiated in 2005

with producers from Cameroon, Mali and Senegal.

British standard cotton yarn measures

1 thread: 54 inches (about 137 cm)

1 skein or rap: B0 threads (120 yards or about 109 m)

1 hank: 7 skeins (840 yards or about 768 m)

1 spindle: 18 hanks (15,120 yards or about 13.826 km)

Spinning muleThe spinning jenny was developed by James Hargreaves in c.1764, but

patented only in 1770. Like Arkwright, Hargreaves moved from Lancashire

to Nottingham. The jenny was a manually operated machine, which

speeded up spinning, but it was not initially powered by mills. This

produced a softer yarn suitable for the weft, so that the two inventions were

in a sense complementary.

The principles of both were combined by Samuel mule, but water power

was not applied to the mule New Lanark Mills in about 1792.

Cotton being spunThe spinning machines take the roving thins it and twists it, creating yarn.

The roving is pulled off a bobbin and fed through some rollers, which are

feeding at several different speeds. This thins the roving at a consistent

rate. If the roving was not a consistent size, then this step could cause a

break in the yarn, or could jam the machine. The yarn is twisted through the

spinning of the bobbin it is rolled on, exactly like a spinning wheel but just in

a different configuration.

Plying is done by pulling yarn from two or more bobbins and twisting it

together, in the opposite direction that that in which it was spun. Depending

on the weight desired, the cotton may or may not be plied, and the number

of strands twisted together varies.

After being spun and plied, the cotton thread is taken to a warping room

where racks of bobbins are set up to hold the thread while it is rolled onto

the warp barn of a loom. Because the thread is fine, often three of these

would be combined to get the desired thread count When cotton mills first

came into being, the next step would be to manually thread the warp

through the heddles. Later on, a machine was invented for tying the new

warp onto the old warp. This saves time, but means that the cloth will have

the same pattern as the previous warp. If a new pattern is wanted, the warp

still has to be threaded through the heddles.

At this point, the thread is woven. Depending on the era, one person could

manage anywhere from 3 to 100 machines. As time progressed new

mechanisms were added that stopped the loom any time something went

wrong. The mechanisms checked for such things as a broken warp thread,

broken weft thread, the shuttle going straight across, and if the shuttle was

empty.

INVESTMENT IN TEXTILE INDUSTRYInvestment is the key for Indian textiles to make rapid strides. The Vision

Statement prepared by the Indian Cotton Mills federation has projected that

the industry has the potential to reach a size of $85 billion by 2010 from the

current level of $ 36 billion.

Further, the vision statement has estimated that textile exports could touch

$40 billion by 2010 from $ 11 billion in 2002.In the process, India’s share in

the global textile and clothing trade is expected to double from three

percent in 2002 to six percent by 2010.

To reach this ambitious target, it is estimated that new investment to the

tune of Rs'1' 40,000 crores will be needed in the next five years. After

analyzing the capacity and technology levels in various segments of textile

Industry and theneed for modernization, funds required for various

segments have been below.

INDIA'S MAJOR COMPETITIORS IN THE WORLD

To understand India's position among other textile producing the industry

contributes 9%o of GDP and, 35%o of foreign exchange earning, India's

share in global exports is only 3o/o compared to Chinas 13.75% percent. In

addition to China, other developing countries are emerging as serious

competitive threats to India. Looking at export shares, Korea (6%) and

Taiwan (5.5%) are ahead of India, while Turkey (2.9%) has already caught

up and others like Thailand (2.3%) and Indonesia (2%) are not much

further behind. The reason for this development is the fact that India lags

behind these countries in investment levels, technology, quality and

logistics. If India were competitive in some key segments it could serve as

a basis for building a modern industry, but there is no evidence of such

signs, except to some extent rn the spinning industry.

India's competitive Position in stages of Textile Manufacture

SWOT Analysis for Textile IndustryStrengths:

Indian Textile Industry is an Independent & Self-Reliant industry

Abundant Raw Mat e.ial availability that helps industry to control

costs and reduces the lead-time across the operation.

Availability of Low cost and Skilled Manpower provides competitive

advantage to industry.

Availability of large varieties of cotton fiber and has a fast growing

synthetic fiber industry.

India is one of the largest exporters of Yam in international market

and contributes around 25Yo share of the global trade in cotton yam.

India has great advantage in Spinning Sector and has a presence in all

process

of operation and value chain.

Weaknesses:

' Indian Textile Industry is highly Fragmented Industry.

Industry is highly dependent on Cotton

Lack of Technological Development that affect the productivity and

other activities in whole value chain.

Infrastructural Bottlenecks and Efficiency such as, Transaction Time

at Ports and transportation Time.

Unfavorable labor Laws.

Lack of Trade Membership, which restrict to tap other potential

market.

Lacking to generate Economies of Scale.

. Higher Indirect Taxes, power and Interest Rates.

Opportunities: Growth rate of Domestic Textile Industry is 6-8%oper annum.

Large, Potential Domestic and International Market.

Product development and Diversification to cater global needs.

Elimination of Quota Restriction leads to greater Market

Development.

Market is gradually shifting towards Branded Readymade Garment.

Increased Disposable Income and Purchasing Power of Indian

Customer open New Market Development.

Emerging Retail Industry and Malls provide huge opportunities for the

Apparel, Handicraft and other segments of the industry.

Greater Investment and FDI opportunities are available.

Threats: competition from other developing countries, especially china.

continuous Quality Improvement is need of the hour as there are

different demand patterns ail over the world.

Elimination of Quota system will lead to fluctuations in Export

Demand.

Threat for Traditional Market for Power loom and Handloom products

and forcing them for product diversification.

Geographical Disadvantages.

International labor and Environmental Laws.

To balance the demand and supply.

COMPAY PROFILEIntroductionsupriya Spinning Mills Private Ltd was incorporated as a private limited

company on 26-05-2005; with an object to establish spinning mills and

other related industries.

sri K.Anjaneyulu, Sri G.Ramalingeswara Rao and others have promoted

the company. All the promoters are having business experience in Cotton

ginning, cotton trading and Spinning.

he promoters are having good business background and track record for

more than 25 years.

sri Anjaneyulu has taken M/s Sri Kumar Textiles Private Limited, a spinning

mill with a capacity of 14,600 spindles at Madhurai, and run on conversion

basis for 8 cars from 7996 to 2004. Thus gained rich experience in yarn

marketing.

the promoters are supplying quality cotton lint to the export units as per

their standards. They have acquainted good knowledge in the spinning

industry since supplying cotton to all leading spinning mills for the past26

years.

Supriya Spinning Mills Private Limited at a glanceName of the unit Supriya Spinning Mills (P) LtdSpinning Mill B oyap ale m- 5 22 23 3,Guntur(Dt),Ap.Name of the chief promoters Sri K.AnjaneyuluSri G.Ramalingeswara RaoCost of the project Rs 2100.00 lacksPromoters Contribution Rs 630.00 lacksTerm Loans Rs 1470.00 lacksWorking Capitall,oan Rs 300.00 lacksDebt Equity Ratio 2.33:1.00Promoters Contribution 30.00%Estimated Sales Fis2,047.15lacksBreak Even Point 39.96%26.95% (for cash)Internal Rate of Return 2t.99%SUPRIYA SPINNING MILL is an International Trading House andmanufacturing of Cotton High Quality Yarn whose strategic hub is located near Guntur, Agricultural city of Andhra Pradesh, India. The web of our network is oven across the world, connecting Indian and Overseas markets through selective associates who are known for their institutional strength and quality - Conscious efficiency.SUPRIYA's driving force is Mr.K.Anjaneyulu, Managing Director and beingan enterprising businessman with rich Managerial experience of three decadesin COTTON GROWING, GINNING, and TRADING in different part of the*' orld and MANUFACTURNG oF cotton YARN, imbibed in him theDynamism, innate strength of confidence and innovative organizational skill.

A Team of experienced experts in their respective fields is knit together andeach one of them has been made responsible for his area of operations. They are infused with the spirit of Quality - Consciousness and performance Oriented Customer care.Vision& Mission:To produce the highest quality fine and super-fine count cotton yarn in theworld. To provide the best in customer service in the industry. To ensureconsumers rate their yarn as first with regards to loom efficiency, warpingperformance, and fabric appearance.supriya spinning Milts Private Limited., is committed to operating a successful business by developing, manufacturing, marketing and supporting quality yarn products for the world textile industry.They will accomplish this goal by:

Developing long-term relationships with their customers and suppliers

providing superior quality products at competitive prices

Exceeding industry standards with exceptional customer and technical service

Maintaining their competitive position through leading edge technology

Providing a safe, fulfilling, and rewarding work environment for theiremployees, and

serving and supporting the communities in which they operate

Management:They believe in realizing the full potential of their employees, right across the hierarchy. They have a team of extremely dedicated and skilled employees, who are their asset. They share their vision of maintaining the highest standards of Quality. They believe in the all round development of their staff, on a mental, physical as well as spiritual plane. It is for this reason that they have incorporated Yoga as an integral part of their employees development. Everyemployee is enrolled into a Yoga program, which they go through before

the start of each shift. They can further upgrade to higher programs and be

eligible for certificates, if they wish to. They have joined hands with the

world Community Service Centre, for this noble purpose.

Their strength is their team of highly dedicated and competent

professionals, with a shared vision of delivering only the best, every time. It

is their firm belief that every individual's potential should be constantly

upgraded, through a series of well thought out training programs. It is with

this belief that they have every one of their employee trained in Yoga and

Meditation, to uplift them at both the physical and spiritual plane and

importantly, make them better at concentrating towards, total customer

satisfaction.

Managing DirectorDirectorDirectorGeneral ManagerQuality policy:Supriya would aim at delighting its customers by fulfilling their stated andimplied needs. supriya would adapt to up-gradation of technology andmachinery. Supriya would draw upon its resources, such as dedicated workforce and management committed to quality. Supriya adheres to its qualitypolicy to assure the best quality to its customers.

Meticulous care is taken right from the selection of the raw-material, which

is thoroughly hand-cleaned to ensure zero contamination in the yarn.

Equality parameters are strictly maintained and rechecked on quality-

testing equipment like HVI, classimate, while the process is on. Al1 the yam

production capacities are auto-leveled, auto-coned and spliced. Supriya

has the following machines to maintain quality standards.

Packing:Meticulous care is taken right from the selection of the raw-material, which

is thoroughly hand-cleaned to ensure zero contamination in the yarn.

Equality parameters are strictly maintained and rechecked on quality-

testing equipment like HVI, Classimat, while the process is on. All the Yarn

production capacities are auto-leveled, auto-coned and spliced. Supriya

has the following machines to maintain quality standards.

Agro commodities Division:

Apart from natural fruits, the semi-tropical climate in India also supports

various types of agro-commodities like spices, cereals & pulses and rice

etc. Supriya Group has also played a vital role in bringing Indian agro-

commodities on the world map. Due to the growing demand and popularity

of Indian agro_ commodities in the world market, the company had to

develop a dedicated team of expert professionals to focus on the vertical.

This kind of a focused approach not only adds value to their business, but

also extends the same to their clients all over the world. The company’s

presence across the value-chain allows them to understand and advise

their clients on the emerging trends in the market. This in turn helps the

customer in defining his business model so as to maximize his return on

investment.

Exports & Imports:

Supriya Spinning Mills (P) Ltd, the exporter of superior quality cotton yarn

from India. They export yarn and, cotton to Sri Lanka, Bangladesh, Nepal,

Indonesia, Burma, Turkey, Egypt and Hong Kong etc. Through best quality

and good customer servicing, they have gained reputation as a reliable

Indian cotton yarn exporter. They look forward to supply our customers,

high quality fabrics and cotton yarn from India at a competitive price. They

have understood the quality requirements of customers and we have

continuously improved to meet the standards in yarn Exporters.

ffiffi&ffiwffiwrywDATA INTERPRETATION

STATEMENT OF CHANGES IN WORKING CAPITAL OF'Supriya Spinning Mill's (P) Ltd.,From 20005-06 to 2006-07 (Rs.)Particulars 2005-06 2006-07Working capitalIncrease DecreaseCurrent assetsInventories 0.00 4,27,33,974 4,27,33,974Sundry Debtors 0.00 2,34,9I,472 2,34,91,472Cash & Bank Balance r,25,93,950 16,73,967 I,09,lg,gg3Loans & Advances 3,15,75,715 5,97,924 3,09,77,791Total Current assets (a) 4r4l1691565 6,841971137

Current LiabilitiesProvisions 20,000 22,92,694 22,62,694Creditors 26,499 4,r3,53,990 4,13,27,492Total current liabilities(b)46,499 41361361674

Working Capital (a -b)4,41,23,067 2,49,60,463

Increase / Decreaseu.orking Capital1r92,92,604 lrg2rg21604TOTAL 4r41r231067 4141,23,067 8,54,97r950 8r54,97,950Source: SUPRIYA spinning mills audited annualreports

STATEMENT OF CHANGES IN WORKING CAPITAL OFSupriya Spinning Mill,s (p) Ltd.,From 2006-07 to 2007-08 (Rs.)Particulars 2006-07 2007-08Working capitalfncrease DecreaseI Current assetsInventories 4,27,33,974 5,70,25,925 1,42,91,951Sundry Debtors 2,34,9r,472 5,39,93,273 3,03,91,801i Cash & Bank Balance 16,73,867 r,26,49,290 r,09,74,423Loans & Advances 5,97,924 20,73,400 I4,75,476

Total Curent assets ;-.(a)I

6,84,97,137 12156,30,799Current Liabilities

Frovisions 22,92,694 30,42,123 7,59,439Creditors 4,13,53,990 4,57,60,318 44,06,329I Totul current liabilities(b)41361361674 4r8gr02r44l

Working Capital (a -b)2,48,60,463 7,68,29,347

Increase / Decreaservorking Capital5119,67,994 5rlg167rgg4TOTAL 716g12g1347 716g12g1347 517lr33165l 5r7lr33165lSource: SUPRIYA spinning milts audited annual reports

Net Working Capital:2006-07yearsInterpretation:The difference between current assets and current liabilities is known as

n'orking capital. Here in the year 2005-06 working capital of Supriya Spinning

\Iills is 4,41,23,067 and in the year 2006-07 is 2,49,60,463 and in the year1007-08 is 7,68,28,347.In the year 2005-06 there was no production that's whycurrent liabilities were very low. During next years current assets wereincreased by inventory.Year Current assets Current liabilities Net workingCapital200s-06 4,4I,69,565 0,00,46,499 4,41,23,0672A06-076,84,97,137 4,36,36,674 2,49,60,463r007-08 12,56,30,7994,88,02,441 7,68,29,347200s-06Current RatioThe current ratio is a measure of firm's liquidity. It indicates thecurrent assets in rupees for everyone rupee of current liability.availability ofCurrent ratio =

Current Assets

Current Liabilities

Current Assets: - Inventory/stock in trade +sundV debtors *cash &bank

balances *receivables *ssenrals *lea6 & advances *short term investments.

Current Liabilities:-creditors for goods and services *short term loans +bank

OD+ cash credit *operating expenses* provision for taxation *proposed

dividend * unclaimed dividend.Year Current assets Current liabilities Ratio2006-07 6,9r,94,754 4,36,36,674 1.582007-08 72,62,02,799 4,88,02,441 2.5832.521.1

0.50

Interpretation:As a conventional rule, a ratio of 2 to I more is considered satisfactory. Itrepresents a margin of safety of creditors. The higher the ratio, the greater the

safety. How ever, an arbitrary standard of 2:I should not be blindly followed.

This is so because the current ratio is a test of quantity not quality. It firm'scurrent asset consists of doubtful and slow paying debtors and obsolete stock,then its short-term solvency is threatened.This firm is maintaining good standards of current ratio. In the second year

of production only it reached the standard ratio. The ratio also increased morethan 50o/o from first year to second year.Quick RatioQuick ratio establishes a relation ship between quick or liquid assets and

current liabilities .An asset is liquid if it can be converted into cash immediatelyor reasonably soon without a loss of value. Cash is the most liquid asset.

Quick AssetsQuick Ratio:Current LiabilitiesOuick Assets:- Current assets - stock - prepaid expenses.

Cunent Liabilities:- Creditors for goods and services

OD+ cash credit *operating expenses* provisiondividend * unclaimed dividend.*short term loans +bank

for taxation *proposedYear Quick assets Current liabilities Ratio2006-07 6,94,97,137 4,36,36,674 1.562007-08 12,56,30,788 4,88,02,44I 2.5732.52Ratio 1.51

0.5

lnterpretation:

Generally a quick ratio of 1:1 is considered to represent a satisfactorycurrent financial condition. At though quick ratio is a more penetrating test ofliquidity than the current ratio. Yet it should be used cautiously. A quick ratioof 1:1 or more does not necessarily imply sound liquidity position.The firm's quick ratio is more than the required norrn. so the firm ismaintained good liquidity position.L1 t

calculate this ratio.

Stock Turnover Ratio :Stock Turnover RatioThis ratio indicates the efficiency of the firm in producing and selling itsproduct .the average inventory is the average of opening and closing balances ofinr-entory. In a manufacturing company, inventory of finished goods is used toCost of goods soldAverage InventoryCost of goods sold: - opening stock *purchases-closing stock.Ar,erage inventory: -opening inventory *closing inventoryYear Cost of GoodssoldOpeningstockClosingStockAverageStockRatio2006-07 6,57,19,179 4,04,8r,874 2,02,40,937 3.242007-08 27,83,51,095 4,04,81,874 5,6r,85,825 4,83,33,949 5.75Ratio

Interpretation:Inventory turnover ratio indicates the efficiency of the firm in producing

and selling its production. It shows how rapidly the inventory is turning intoreceivable through sales. Generally a high ratio is indicative of good inventory

management. A low inventory ratio implies excessive inventory levels than$'arranted by production and sales activities are obsolete inventory. The firm'sinventory turnover ratio is gradually increasing i.e. from 3.24 to 5.75.Stock Conversion PeriodStock conversion period shows the average time taken for clearing the

stock through sales. The formula is to divide the No. of days in year with thestock turnover Ratio.Stock Conversion Period =365 daysSfock Ttrrnover

Avg Days

Interpretation:This ratio is to know the sales position whether the conversion period isincrease or decrease. Here in the year 2007-08 conversion periods is decreased

from Il2 to 63.That means sales are increasing.

Year Time period(days)Stockratioturnover Avg time(days)2006-07 36s 3.24 t12:007-08 365 5.75 63 Interpretation:This ratio is to know the sales position whether the conversion period isincrease or decrease. Here in the year 2007-08 conversion periods is decreased

from Il2 to 63.That means sales are increasing.

Year Time period(days)Stockratioturnover Avg time(days)2006-07 36s 3.24 t12:007-08 365 5.75 63

Absolute Liquid Ratio:This ratio is to judge the immediate ability of the company to pay off its currentliabilities. It obtained by subtracting both the debtors and inventory fromcurrent assets. A ratio of 0.5:1 is usually considered as the idle ratio.

Absolute Liquid Ratio = Cash * Bank balancesCurrent LiabilitiesYear Quick assets

(cash & bank)Current liabilities Ratio2006-07 16,73,967 4,36,36,674 0.0382007-08 r,26,49,290 4,88,02,441 0.259Interpretation:Generally accepted norms of the absolute liquid assets are 0.5 to 1.It is measure

to know the organization's ability to meet its immediate payments. Byobserving the above calculation, we can say that firm's cash and bank balances

are not adequate to meet its immediate obligations. So firm has to increase theeash and bank balances.

':d,

\\'orking capital turnover RatioA firm may also like to relate net current assets to sales.Net current assets

is nothing but the difference between current assets and current liabilities .The

result of this indicates how many times the working capital has rotated forgenerating the sales.

\\-orking capital turnover Ratio =Net SalesNet Current Assets

\et Sales: - Sales - Sales returns.

\et Current Assets: - Current assets - Current liabilities.lnterpretation:Generally working capital is used for operating daily transactions. So it is very

important to maintain the highest working capital ratio. Here firm ismaintaining good ratio. Le. 4.27 to 4.95. So the firm can operate dailytransactions very well.

Year Sales Net CurrentAssetsRatio1006-07 r0,62,0r,053 2,49,60,463 4.271007-08 38,04,99,329 7,68,28,347 4.9s

Fired Assets turnover ratio:The fixed assets turnover ratio measures the efficiency with which the firm has

been using its fixed assets to generate sales. The higher the ratio, the better,

because a high ratio indicates your business has less money tied up in fixed

assets for each rupee of sales revenue. A declining ratio may indicate thatvou'\,e over-invested in plant, equipment, or other fixed assets.Sales

Fired Assets Turnover ratio :2't.51

0.

lnterpretation:The firm may wish to know its efficiency of utilizing fixed assets in generatingsales. Higher the ratio better utilization of assets and vice-versa. By observing

the above data there was a lot of increase from 2006-07 to 2007-08. Eventhough the firm has not that much experience it is trying to increase fixed assets

gradually. That why Fixed Assets Turnover Ratio increased from 0.55 to 2,02Fixed AssetsYear Sales Fixed Assets Ratio

1006-07 10,62,0r,053 19,07,97,868 0.55:007-08 38,04,99,329 18,75,76,332 2.02

€?Total Assets turnover Ratio:This ratio indicates the efficiency or inefficiency in the use of total resources orassets of a concern. The standard ratio is that the sales should be at least twotimes the value of the assets. A total assets turnover ratio of 2 times or moreindicates that the assets of a concern have been utilized effectively. This ratio isa good index of the utilization of the owner's funds. It is also indicates, whetherthere is over trading or under trading.

Again it indicates whether there is over capitalizati,on or under capitalization. Ifthe volume of sales in relation to net worth is reasonable, the indication is theowner's funds have been effectively utihzed.SalesTotal Assets Tumover RatioTotal AssetsYear Sales Total Assets Ratio2006-07 r0,62,01,053 23,44,34,542 0.4532007-08 38,04,99,329 31,37,79,r20 1.2t21.41.21

0.80.60.40.20

lnterpretation:The total assets turnover ratio is increasing. This implies that the growth of the

company is sufficient. The company can able to convert its total assets intosales efficiently and effectively.

The ratio was increased from 0.453 to I.2I2.Even though it was not the

required ratio. Sales must be two times to assets. So company has to increasesales very much.Ratio

Gross Profit Ratio:It is the ratio, which expresses the relationship between gross profit and sales.

The actual gross profit ratio is compared with the gross pqofit ratio of the

previous year and those are concern carrying on similar business, if it is highthen it is an indication good results and vice versa. This ratio indicates the gross

results of trading or the overall margin within which a business undertakingmost limit its operation expenses to earn sufficient profit.Gross Profit

Gross profit Ratio : * 100

SalesYear Gross Profit Sales Ratioaffi6-07 16221457 106201053 15.272007-08 48972750 380489329 12.871614121086Ratio

Interpretation:The Gross profit margin reflects the efficiency with which management

producers each unit of product. This ratio indicates the average spread betweenthe cost of goods sold and the sales revenue.

The firm's gross profit ratio was decreasing from 15.27 to 12.87. Even though

there was increase in the sales but the gross profit ratio not increased. The

reason for the decreased gross profit is increased cost of goods sold. So theremust be more expenses than income. That why Company has to maintain costefficiency in order to increase Gross profit.Net Profit RatioIt is calculated by dividing net profit to sales. This-ratio provides good insightinto the overall efficiency to the business and better utilization of the totalresources. This ratio indicates the quantum of profit earned by a concern. A lownet profit ratio indicates that the profitability of the concern is good. A low netprofit ratio indicates that the profitability of the enterprise is poor.

Net profitNet Profit ratio: * 100

Net SalesYear Net Profit Sales Ratio2006-07 -53350 106201053 -0.0s2007-08 3000606 380489329 0.790.80.60.40.20-0.2

Interpretation:Net profit margin establishes a relationship between net profit and sales. It isover all measure of firm's ability to turn each rupee sales into net profit. This

ratio also indicates the firm's capacrty to with stand adverse economic

conditions. It would really be difficult for a low net margin firm to with stand

these adversities.The firm gained net profit 0.79 rn the financial year 2007-08. To increase the

net profit the firm should decrease its costs and increase the sales. Then the

profitabilify of the company will increase. If the firm controls administrativeand other expenses Net profit will increase.

DEBTORS TURNOVER RATIOOne of the major activity ratios is the debtors turnover ratio.This ratio is a test of the liquidity of the debtors of a firm. Debtors turnoverratio can be derived by dividing credit sales with average debtors.Debtors turnover ratio Credit salesAverage debtorslnterpretation:In Supriya Spinning Mill the liquidity of the debtors is increasing from1.36 to 2.09 in the financial years 2006-07 and2007-08. It maintains debtors insatisfactory level.

\TAR Credit sales Average debtors Ratio2006-07 3 1956300 23491472 1.363007-08 106201053 53883273 2.09cTir

CREDITORS TURNOVER RATIOCreditors tumover ratio is a best ratio to know the liquidity of the creditors ofa firm. The creditors turnover ratio is find out by dividing credit purchases withaverage creditors.Credit purchases

Creditors turnover ratio : Average creditors

lnterpretation:In SUPRIYA SPINNG MILLS the liquidity position of thecreditors increasing when compared to the first financial year2006-07.In 2006-07 financial year creditors turnover ratio is 2.57 and it increased with the valueof 5.43 in the financial year 2007-08.Credit purchases of the firm are exceedingthe credit sales of the firm.Year Credit purchases Average creditors Ratio2006-07 10620r0s3 4t353990 2.572007-08 2940ss046 45760318 6.43

FNDINGDS AND SI]GGESITIONSFindings:It is found that Working capital is decreased in the year 2006-07 andincreased in the year 2007-08. The firm maintains sufficient cash balance

for day-to-day transactions. It is helpful for the maintenance of good

working capital in the firm.We can find that in two years of the production Current Assets are morethan the current liabilities.3. The Quick ratio of Supriya Spinning Mill is satisfactory because in twoyears quick assets are more than current liabilities.

In two years Inventory Turnover Ratio is satisfactory because it is

increased from 3.24 to 5.75

In the year 2007-08 Stock conversion period decreased from II2 to 63.

Really that's a good sign for business growth.Absolute liquid assets ratio increased from 0.038 to 0.259 even though itis not reached the standard ratio i.e. 0.5:1.1.1

4.f6.

7. Working capital turnover ratio is in stable condition. So the firm canmaintain good liquidity position.8. Fixed Assets Turnover Ratio is tremendously increased from 0.55 to2.02. So the firm efficiently using its fixed assets.

9. Total Assets Turnover ratio increased from 0.453 to I.272. But sales arenot up to the mark.

10.It is found that Gross profit ratio decreased from 15.27 to 12.87 .

1 1 .It is found that Net profit also increased from -0.05 to 0.79.Suggestions:

i. It is suggested that company has to concentrate

Current Assets and Working Capital. In futurecompany has to maintain good liquidity position.more on increasing

to avoid the crisis2. Current Assets are more than Current Liabilities but the ratio is not up tothe mark of 2:1. So company has to maintain standard current ratio.Company is maintaining sound quick ratio. So it's better to continue thesame ratio in the future also.

4. Stock conversion period decreases that means company is converting rawmaterial into sales. So it can improve sales within short period. It is one

of the sign for increasing business.

5' Absolute liquid ratio is not maintaining the standard ratio. So company

has to increase its cash and bank balances. Then only it can able to payimmediate payments.

6' Total assets turnover ratio is increased from 0.453 to 1.212 but sales are

not in the good position. For every organization sales must be two timesto the fixed assets.

?-r7. It is found that in the 2006-07 selling and distribution expenses increased

that's why net proht was turned into negative. So the company has toincrease net profit by reducing expenses like selling and distribution,material consumption etc.

Gross profit ratio is decreased from 15.27 to 12.61. Lack of experience intheir early stage every company may get more expenditure. So companyhas to reduce the expenses like wages and factory over heads etc.Net profit ratio is also decreased from 6.4 to 5.5. So has to reduce Selling& Distribution expenses and Administrative expenses etc.

10. From Creditors Turnovers Ratio we can observe that credit sales are

increasing than credit purchases. So it's better to concentrate on cash

sales it will help to maintain stable liquidify position.8.9.

ConclusionIndian Spinning Industry has gone from strength to strength since a very long

time now as it was the hub of cotton manufacturing. Cotton is not onlyconsumed to the highest extent in India but it has also become one of the mostprofitable textiles in the export industry.

. The Vision Statement prepared by the Indian Cotton Mills federation has

projected that the industry has the potential to reach a size of $85 billion by2010 from the current level of $ 36 billion. Further, the vision statement has

estimated that textile exports could touch $40 billionby 2010 from $ 11 billionin 2002. In the process, India's share in the global textile and clothing trade isexpected to double from three percent in2002 to six percent by 2010.

To understand India's position among other textile producing the industrycontributes 9Yo of GDP and 35o/o of foreign exchange earning, India's share in

global exports is only 3Yo compared to Chinas 13.75% percent, Korea (6%)and Taiwan (5.5%) are ahead of India, while Turkey (2.9%) has already caught

up and others like Thailand (2.3%) and Indonesia (2%) are not much furtherbehind. The reason for this development is the factthat India lags behind these

countries in investment levels, technology, quality and logistics. So if our

companies are improving these levels the participation of our country alsoincreases. For that we need advanced technology.Coming to Supriya spinning mill (P) Ltd, it gets ISO 9001-2000 for the good

quality. It has the good experienced managing directors and also has locationaladr-antages. With in short span of time it is increasing sales. So it will becomemarket leader within short span of time.

BibliographyF Annual reports of Supriya Spinning Mill (P) Ltd.

F Financial Management by I.M.Panday.

F Financial Management by Prasanna Chandra.

F Theory and problems of Finance Management by M.y. Khan &P.K. Jain.

AnnexureSL?RIYA SPINNING MILLS PRMTE LIMITED Balance Sheets as on 3l-03-2006; of Fundsolder's Funds:rnds:d Tax Liabilityssetsd Tax AssetAssetslrrent Liabilities

rent Assets

ary expenses:en off31-o3-2006 (Rs)43,000,000.00Reserves & surplus -52,327.A0 42,947,673.00Secured Loans r95,r3O,477.00Unsecured loans 2,180,000.00t97,3L0,47L.OO318,058.002O7,3OB,O75.OOLess: Depreciation 16,510,201.00190,510,207,00Capital work in Progress 190,797,868.003,I7O,587.OO42,733,874.O0L2,r34,697.00597,924.OO30,69I,47LOOPrepaid Expenses 697,617.O0Cash & bank balances r,673,867.O088,529,450.00Current Liabilities 41,353,990.002,282,684.OO44,892,776.OO

L,774,97L.0024O,576,2O2.OO', ,..') j , r.."ri

SL?RIYA SPINNING MILLS PRMTE LIMITED Balance Sheets as on 3I-03-2007; of Fundsolder's Funds:lnds:d Tax LiabilityLion of Fundsd Tax AssetAssets, Loans and Advancesurrent Liabilitiesrrent Assets

Etry expenses

ten off31-o3-2Oo7 (Rs)499,500.0028,834,909.0029,334,409.OOSecured Loans 38,649,2I2.00Unsecured loans38,649,212.0067t983t62t.OoL,137,457.OOLess: Depreciationt,I37,457.OOCapital work in Progress 19,806,77t.O0 20,944,228.O0InventoriesReceivables31,575,715.00Sundry DebtorsPrepaid ExpensesCash & bank balances 13,443,851.0045,019,566.00Current Liabilities 26,498.00Provisions44,973,068.OO1,905,523.0067,983t621.OOL?RIYA SPINNING MILLS PRIVATE LIMITED Balance Sheets as on 31-03-2008Schedule 31-O3-2OO8 Rsof Fundslder-s Funds:Capital 1 43,000,000.00Reserves & surplus 2 2,948,279.O045,948,279.00rds:Secured Loans 3 226,498,085.OOUnsecured loans 4 9,746,57O.AO236,244,655.OOTax Liability 433,935.00

282,626,869.OOsets 6Gross Block 233,533,268.00Less: Depreciation 45,956,936.00Net Block tB7,576,332.0OCapital work in Progress 0.00 L87,576,332.003nts 7 3,683,O77.OOTax Asset 15 0.00Assets, loans and advancesls6ets Inventories B 57,O25,825.OOReceivables 9 12,442,694.OOAdvances 10 2,O73,4OO.O0Sundry Debtors 11 53,883,273.00Prepaid Expenses L2 572,000,00Cash & bank balances 13 12,648,29O.00r38,645,482.O0rrent LiabilitiesCurrent Liabilities 5 45,760,318.00Provisions 5 3,O42,123.00ent Assets 89,843,041.00

rry expenses

en offI4 L,524,419.OO282,626$69.OO/#fJSUPRIYA SPINNING MILLS PRIVATE LIMITEDProfit & Loss Account for the year ended 31't March, 2006.dome

s: Excise DutyI Turnoverter incomebal Incomependiturelerials Consumednufacturing Expensesnpensation to Employeesance chargesninistrative Expensesrationreciationliminary Expenses

h! Expenditure

lfit/Loss taken to BalanceletAs at 31-03-2006319,563.00319,563,00 3 19,563,00t2,26t.OO

287,624.0033,L77.OO4,000.0033O,8O1.OO

)d]SUPRIYA SPINNING MILLS PRIVATE LIMITEDProfit & Loss Account for the year ended 3l't March, 2007.ss: Excise Dutyt Turnoverher income

tal fncomependitureterials Consumednufacturing Expensesmpensation to Employeesance chargesministrative ExpensespreciationNiminary Expenseslal Expenditure

fit/Loss takenB€T

to BalanceAs at 31-O3-2OO7106,201,053.00106,201,053.00 106,201,053.0042,375.OO65,600,283.00It,7OI,B22.OO2,708,289.004,879,723.0O3,558,335.00t,I47,567.OOt6,sLO,2O7.O0190,552.00106,296,779.OO-53,350.OOt \r"iSUPRIYA SPINNING MILLS PRIVATE LIMITEDProfit & Loss Account for the year ended 31't March, 200g.Dmenovers: Excise DutyTurnoverer tncomeal fncome,enditure:riaJs Consumed

ufacturing Expensestpensation to Employeesrrce chargesin'listrative Expensesrhoneclationmtnary Expensesrl Expenditure

ity'Loss taken to Balance

fAs at 31-03-2{)06-380,489,329.00380,489,329.00 380,489,329.006,434,205.o0386,923,534.OO278,351,095.0037,694,933.0O10,225,8L2.O016,186,857.0010,1 16,169.00r,7LO,7Br.Oo29,446,729.00190,552.003g3,g22,g2g.oo