A STUDY ON WORKING CAPITAL MANAGEMENT WITH SPECIAL REFERENCE TO COIMBATORE MURUGAN MILLS, COIMBTORE.

PROJECT REPORT Submitted by

R.KOKILA
Register No: 108001140021

In partial fulfillment for the award of the degree Of

MASTER OF BUSINESS ADMINISTRATION In

Department of Management Studies PPG INSTITUTE OF TECHNOLOGY COIMBATORE -641 035. JUNE 2012

PPG INSTITUTE OF TECHNOLOGY COIMBATORE -35 Department of Management Studies

PROJECT WORK JUNE 2012 This is to certify that the project report entitled

A STUDY ON WORKING CAPITAL MANAGEMENT WITH SPECIAL REFERENCE TO COIMBATORE MURUGAN MILLS, COIMBATORE.
Is the bonafide record of project work done by

R.KOKILA Register No: 108001140021

of MBA during the year of 2010-2012.

---------------Project guide

----------------------------Head of the Department

Submitted for the Project Viva-voce examination held on _______

------------------------Internal examiner

--------------------External Examiner

DECLERATION

I affirm that the project work titled A STUDY ON WORKING CAPITAL MANAGEMENT WITH SPECIAL REFERENCE TO COIMBATORE MURUGAN MILLS, COIMBATORE being submitted in practical fulfillment for the award of MASTER OF BUSINESS ADMINISTRATION is the original work carried out by me. It has not formed the part of any other project work submitted for award of any degree or diploma, either in this any other university.

(Signature of the candidate) R.KOKILA Register No: 108001140021

I certify that the declaration made above by the candidate is true.

(Signature of the Guide)

With Name & Designation

ACKNOWLEDGEMENT

My first and foremost acknowledgement is to my beloved Parents who extended all guidance, encouragements and cooperation throughout my education career. I would go to my profound gratitude to our Chariman, Dr.L.P.Thangavelu and Correspondent, Mrs.Shanthi Thangavelu for providing encouragement to undertake this project. I wish to express my warmest appreciation of the courtesy and assistance, freely given by the Head of the Department of Department of Management Studies, PPG Institute of Technology, Mr.T.Devasenathipathi during this period. I wish to place a record my profound feelings of gratitude to my faculty guide Mr.S.Rajkumar for his cooperation, valuable guidance and assistance for completing this project work successfully. I owe my sincere thanks to the management of Coimbatore Murugan Mills, Coimbatore for providing me the opportunity to carry out this project study. I also thank all the members of staff of the organization who cooperated with me for the successful completion of this project. I wish to express my deep gratitude to all other faculty members of the department.

R.KOKILA Register No: 108001140021

Chapter No.

CONTENTS Particulars List of tables List of charts Abstract Working Capital Management Introduction to the study Kinds of working capital Determinants of working capital Advantages of working capital Sources of working capital Industry profile & company profile Industry profile Structure of Indian textile industry Company profile History of Coimbatore Murugan Mills Objectives of the mill Product profile Manufacturing process Research methodology Research design Data collection Analysis of data Tools for analysis Objectives of the study Limitations of the study Review of literature Analysis and interpretation Ratio analysis Trend analysis Comparative balance sheet Motaals comprehensive test Findings and suggestions Findings Suggestions Conclusions Appendices Bibliography

Page No.
I II IV

1.1 1.2 1.3 1.4 1.5 2.1 2.2

1 1 4 5 6

7 9 10 11 12 13 17 17 17 17 18 18 19 22 57 67 74

2.3 2.4 2.5 2.6 3.1 3.2 3.3 3.4 3.5 3.6 3.7 4.1 4.2 4.3 4.4

5.1 5.2 5.3

76 78 79 80

LIST OF TABLES Table no 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Description /Name of the table Current ratio Liquid ratio Absolute Liquid ratio Inventory turnover ratio Debtors turnover ratio Creditors turnover ratio Working capital turnover ratio Fixed assets turnover ratio Total assets turnover ratio Gross profit ratio Net profit ratio Expenses ratio Return on share holders investment ratio Return on equity capital Fixed assets to net worth ratio Current assets to proprietors fund Proprietory ratio Sales percentage Inventory percentage Sundry debtors percentage Bank loans percentage Page No. 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 59 60 61

22 23 24 25 26 27 28 29 30

Fixed assets percentage Loans & advances percentage Cash & bank balance percentage Current liabilities percentage Current assets percentage Comparative balance sheet 2007-2008 Comparative balance sheet 2008-2009 Comparative balance sheet 2009-2010 Motaals comprehensive test

62 63 64 65 66 68 70 72 75

LIST OF CHARTS Chart no. 1 2 3 4 5 6 7 8 9 10 11 Description/name of the chart Current ratio Liquid ratio Absolute liquid ratio Inventory turnover ratio Debtors turnover ratio Creditors turnover ratio Working capital turnover ratio Fixed assets turnover ratio Total assets turnover ratio Gross profit ratio Net profit ratio Page no. 24 26 28 30 32 34 36 38 40 42 44

12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

Expenses ratio Return on share holders investment ratio Return on equity capital Fixed assets to networth Current assets to proprietors fund Proprietory fund ratio Sales percentage Inventory percentage Sundry debtors percentage Bank loans percentage Fixed assets percentage Loans & advances percentage Cash & bank balance percentage Current liabilities percentage Current assets percentage

46 48 50 52 54 56 58 59 60 61 62 63 64 65 66

ABSTRACT

In partial fulfillment of the requirements for Master degree in Business Administration, researcher has undertaken a project work titled A study on working capital management with special reference to Coimbatore Murugan Mills, Coimbatore. The present study deals with to know how efficiently the Working Capital is managed in the company as it is the key and significant part of the every business. The study was designed in analytical in nature. The sources of data for the study are primary data and secondary data. Primary data collected through discussions with the staffs of the Mill and secondary data in the form of annual reports and reports. The data analyses through 1] Ratio Analysis 2] Trend Analysis 3] Comparative balance sheet 4] Motaals comprehensive test The project was focused on making a financial overview of the company by conducting a Working Capital Management analysis of Coimbatore Murugan Mills,for the years 2007 to 2011.The working capital management refers to the management of working capital, or precisely to the management of current assets. A firms working capital consists of its investments in current assets, which includes short-term assets cash and bank balance, inventories, receivable and marketable securities. This project tries to evaluate how the management of working capital is done in Coimbatore Murugan Mills.

CHAPTER-I

INTRODUCTION 1.1 INTRODUCTION TO THE STUDY Finance is an important function of any business, as money is required to meet the various activities of it. It has given birth to Financial Management as a separate subject. The subject is of recent origin. It draws heavily on Economics for its theoretical concepts. In the early half of the 20th century the job of financial management was largely confined to the acquisition of funds. But as business firms continued to expand their markets and became larger and more diversified, greater control of financial operation became highly essential. Thus the scope of financial management is very wide and it is not merely restricted to raising of capital. It also covers other aspects of financing such as assessing the needs of capital, raising sufficient amount of funds, cost of financing, budgeting, maintaining liquidity, lending and borrowing policies, dividend policy, and so on.
WORKING CAPITAL MANAGEMENT

Working capital may be regarded as the lifeblood of business. It inefficient management can lead not only to loss of profit but also to the downfall of business. Every business needs funds for two purposes. Long term funds are required to create production facilities through purchase of fixed assets, such as plant, machinery, land, building etc, funds are also needed for short term purpose for the purchase of raw materials, payment of wages and other day to day expense etc. These funds are also known as working capital. Working capital is also revolving or circulating capital or short-term capital. 1.2 KINDS OF WORKING CAPITAL Working capital may be classified into two ways: On the basis of concepts On the basis of time

GROSS WORKING CAPITAL It represents the amount of funds invested in current assets. Thus, working capital is the capital invested in the total current assets of the gross. Current assets are those assets which in the ordinary course of business can be converted into cash within a short period of normally one accounting year. NET WORKING CAPITAL It is the excess of current assets over current liabilities. Net working capital may be positive or negative. When the current assets exceed the current liabilities the working capital is positive & the negative working capital results when the current liabilities are more than the current assets. Current liabilities are those liabilities which are intended to be paid in the ordinary course of business within the short period of normally one accounting year out of the current assets or the income of the business.

PERMANENT OR FIXED WORKING CAPITAL It is the minimum amount which is required to ensure effective utilization of fixed facilities & for maintaining the circulation of current assets. There is always a minimum level of current assets which is continuously required by the enterprise to carry out its normal business operations. The minimum level of current assets is called fixed or permanent working capital as this part of working capital is permanently blocked in current assets. REGULAR WORKING CAPITAL It is the minimum amount of working capital required to ensure circulation of current assets. RESERVE WORKING CAPITAL It is the excess amount over the requirement for regular working capital, which may be provided for contingencies that may arise at unstated periods such as strikes, rise in price etc. TEMPORARY OR VARIABLE WORKING CAPITAL It is that amount of working capital which is required to meet the seasonal demand & some special exigencies. Variable working capital can further be classified as seasonal working capital & special working capital. SEASONAL WORKING CAPITAL It is the capital required to meet the seasonal needs of the enterprise. SPECIAL WORKING CAPITAL It is required to meet special exigencies such as launching of extensive marketing campaigns for conducting research etc.

1.3 FACTORS DETERMINING THE WORKING CAPITAL Determination of working capital requirements is not so easy because it requires careful analysis of various factors. Some importance factors, which influence working capital, are given below. 1. Nature of Business Working capital requirement is considerably influenced by the nature of business. Trading, manufacturing, publicity service requires more, moderate less working capital respectively. 2. Volume of Business For a small-scale business the working capital requirement is less whereas for large scale operation the working capital requirement is more. 3. Length of Manufacturing Process It is the gap between the input of raw materials and output of finished goods. Longer the length of manufacturing cycle, working capital requirement is more and vice versa. 4. Condition of supply of raw materials Regular supply of raw materials reduces the working capital Requirement and irregular supply increases the working capital requirement. 5. Speed and stock turnover If the inventory or stock turnover is high the working capital requirement is less and vice versa. 6. Market conditions If the degree of competition is more, credit terms are to be extended; the requirement of working capital will be more if the degree competition is less working capital requirement is also less.

1.4 ADVANTAGES OF ADEQUATE WORKING CAPITAL

1. 2.

It helps for continuous supply of raw materials, which leads for uninterrupted production It helps for prompt payment of wages, salaries and other day-to-day expenses and it also increase the goodwill of the firm

3. 4. 5.

It helps to utilize the favorable market conditions i.e., by purchasing in bulk at cheaper price It helps for reduction of cost i.e. ,purchase at cheaper rate reduces the cost of production It helps for maintaining the solvency of business IMPORTANCE OF WORKING CAPITAL MANAGEMENT The importance of working capital management can be judged from the following facts. 1. There is direct and positive correlation between Sales and working capital needs of the firm. An increase in the sale of product requires a corresponding increase in current assets. Hence current assets are to be managed properly and efficiently. 2. Fixed assets can be required on lease but there is no alternative for current assets. Investment in current assets can in no way be avoided. 3. Working capital needs are generally financed through outside sources. So continuous care is necessary to utilize them in the best way.

1.5 SOURCES OF WORKING CAPITAL The financial managers are always interested in obtaining the working capital at the right time, at a reasonable cost and at the best favorable terms. A part of the working capital investment

is permanent investment in fixed asset. The valuable source of working capital available to a firm is:

Source of Working Capital

Long Term Source

Short Term Source

1. Issue of share. 2. Issue of debentures 3. Retained earnings 4. Sale of fixed assets 5. Security from employee and from customers. 6. Term loans.

1. Depreciatio n of funds. 2. Provision for taxation.

1. Trade credit. 2. Credit paper.

3. Accrued expenses. 4. Customer credit.

3. Bank credit. 4. Public deposits.

5. Governmen t assistance .

CHAPTER-II INDUSTRY PROFILE AND COMPANY PROFILE

2.1 INDUSTRY PROFILE A short History of Textile Industry in India 1700- Cotton buying and selling from Mumbai to china 1853- Rail link to Thana 1854- Mumbai gets its first mill referred to as Bombay Spinning Mill famous for Producing cotton textile to be exported to Britain. 1870- There were about 13 mills 1875- Total count of mills in Mumbai was about 70 1915-Total count of mills in Mumbai goes up to 138 1982- About 2.5 lacks mill employees went on work stoppage opposed to Bombay Mill Owner Association demanding wage increase. 1991- State government announced Development Control Rule 58 which Confirmed, mill Lands could be sold to others with some terms and conditions applied 2005- National Textile Corporation (NTC) who owned 25 mills in the city started selling few Mills to private businesses. 2006- NTC made decision to start 3 of the old mills.

Textile mill A textile mill is a factory producing textiles of one or more kinds. Types include:

1. Cotton mill 2. Silk mill 3. Mill for spinning worsted yarn. Textile refers to a flexible material comprising of a network of natural or artificial fibers known as yarn. Textiles are formed after the process of spinning, weaving, knitting, crocheting, knotting and pressing fibers together. Textile mill refers to manufacturing plants for making textile fabric and products. Textile mill industry is one of the largest industries in India textile mill industries went through a process of phenomenal growth for the past four decades. A factory in which woven fabrics are manufactured, many early mills were located near a source of power for operating the machinery; most were of timber construction and in constant danger of being consumed by fire. In 1832, a significant advance in fire safety occurred with the construction of a mill in Rhode Island that was especially designed to resist fire (and to burn slowly if ignited) by using thick floor planking by minimizing the number of timber beams and by maximizing the cross sectional area of each beam. These design criteria, are widely applied and greatly improved in the fire safety of the mills. Few leading Indian textile mills 1. Adarsh textile mill- manufacturer and exporter of good quality woolen and synthetic

Blankets. 2. Amritsar swadeshi woolen mill- pioneer in manufacturing the heavy woolen yarn and Largest manufacture of fabric. 3. Aroon mill- manufacturer of textile auxiliaries 4. Mohan thread mill- manufacturer of high quality embroidery yarn and threads. 2.2 Structure of the Indian textile industry The textile sector in India is one of the worlds largest. The textile industry today is divided into three segments:

1. Cotton textiles 2. Synthetic textiles 3. Other textiles like wool, silk and jute etc. All segments have their own place but today cotton textile continue to dominate with 73% share. The structure of cotton textile industry is very complex with co- existence of oldest technologies of hand spinning and hand weaving with the most sophisticated automatic spindles and looms. The structure of the textile industry is extremely complex with the modern, spinning and hand sophisticated and highly mechanized mill sector on one hand loom sector. Conditions in the Indian textile mills For the past few years the sickness and consequent closure of textile mills has been a matter of great concern in our country. The primary reasons behind this are: 1. The sickness is due to inadequate structural transformation leading to composite units losing ground to specialized units. 2. Power looms in decentralized sector have greater cost effectiveness than the composite units. 3. Low productivity due to lack of adequate modernization. 4. Stagnation in demand for traditional products. Inability to produce newer products as per market requirements 5. Increase in cost of inputs 6. Inadequate working capital. COMPANY PROFILE Coimbatore Murugan Mills,Coimbatore. (A unit of National Textile Corporation Ltd, New Delhi.)

weaving(handloom sector) on the other which in between falls the decentralized small scale power

2.3 History of Coimbatore Murugan Mills, Coimbatore CMM was established in the year 1936 by Angappa chettiyar with a spindle age of 11480. Sakomoto Automatic Looms were added during the 1952. The mill was making good progress until it was caught in the vicious cycle of higher Raw Material Cost, Lower Yarn Prices and higher cost of Production resulting in huge loss. Continuous losses are the main reasons of closure of the mills in the year 1968. The mill remained closed for 3 year from May 1968 and it was taken over by the government of Tamil Nadu with effect from 1971 under Industrial development and regulation Act, 1951. Subsequently, the mill was nationalized under the sick textile undertaking (Nationalization) Act 1974 and became one of the units of National Textile Corporation Limited, New Delhi. This is the only composite mill in Tamil Nadu which is having Spinning and Weaving. The progress of the unit since nationalization in different spheres is enumerated. The mill is running with 3 shift based. The mill provide the economic and facilitating benefits to the employee like Canteen, ESI, PF, Medical benefits, Insurance. The mills have obtained ISO 9001-2000 certification from TUV RHEINLAND (INDIA) Pvt Limited, during the year 2004. The well trained employee alone permitted to operate the machinery. The installed capacity of spindles at the time of Nationalization was 28680 and all these spindles were renovated under the approved modernization scheme. Were during the beginning stage of mill totally 1500employees worked, after Modernization it reduced to 500. The installed capacity of looms machines are import from Japan, Germany, Belgium. The mills have adequate self- generating capacity to the tune of 2720 KVA to meet out power requirement to the extent of 100% and hence achievement of maximum utilization is possible even during 100% power-cut. The mill which was once considered a sick mill has now recovered from the initial sickness and poised for growth. Coimbatore Murugan mill is a composite textile mill situated in Mettupalayam Road Coimbatore. The labor strength of this mill is 674 workers.

2.4 Objectives of the company To provide employment to thousands of workers who were rendered of unemployed due to the closure of the textile mills.

 Reorganize and rehabilitees such undertaking with a view to protect the interest of the general public. Augmentation of production of different varieties of yarn and cloth Distributors of the yarn and cloth at fair prices to consumers power loom manufactures defence personnel and uniform materials to employees of other public sector units. National textile corporation ltd. (NTC) National textile corporation (NTC) is the single largest textile central public sector and enterprise under ministry of textiles managing 52 textile mill through its subsidiary companies spread all over India. The headquarters of the holding company is at New Delhi. The strength of the group is around 22,000 employees. The annual turnover of the company in the year 2004-05 was approximately Rs. 638 crores. NTC is modernizing 22mill with the latest state of art technology on its own. As on 30-09-2007 there are 16,818 employed in 52 textile mill (after closure of 67mills), with 9.55lakh spindles, 577 looms producing 400lakh kgs of yarn and 185lakh meters of cloth annually. So far 55,642 employees have opted for voluntary retirement under the Modified Voluntary Retirement Scheme (MVRS) and Rs.1951.13crores have been paid as VRS compensation to all the employees of closed unviable mill and surplus employees of viable mill. As per the approved Modified Voluntary Retirement Scheme, the total cost of modernization of 22 mills was estimated at Rs. 530crores. Out of these 22 mill modernization Scheme is being implemented in 15 mills.

2.5 PRODUCT PROFILE 100% Cotton Yarn

Cotton is a soft, staple fiber that grows in a form known as a boll around the seeds of the cotton plant, a shrub native to the tropical and subtropical regions of Europe and America. The fiber is not spun into thread and used to make a soft, absorbent and breathable textile used for making clothing, sheets and towel. Each fiber is made up of twenty to thirty layers of cellulose coiled in a neat series of natural springs. This interlocked form is ideal for spinning it into a fine year. Cotton is used to make a number of textile products. These include terrycloth, used to make highly absorbent bath towels and robes; denim, used to make blue jeans; chambray, popularly used in the manufacture of blue work shirts (from which we get the term blue collar); and corduroy, seersucker, and cotton twill. Socks, underwear, and most T-shirts are made from cotton. Bed sheets often as made from cotton. Cotton also is used to make yarn used in crochet and knitting. Count Range: Ne 2/1 to Ne 140/1, in single, double and multiple ply. Grey Fabric Fabric or cloth is a flexible artificial material that is made by a network of natural or artificial fibers. The example is tread or yarn which is formed by weaving or knitting as in textiles. Cloth is mostly used in the manufacturing of clothing and household furnishing etc. Cloth is made in many varying strengths and degrees of durability, from the finest gossamer fabrics to study canvas sail cloths. Fabric has several definitions. Some of them are discussed below. Due to its cost effectiveness, exquisiteness and longevity, grey fabric has been widely used for cloth manufacturing. Uniquely woven grey fabric has become increasingly popular in appreciation of increased market demand. Clothes made out of grey fabric can simply be termed as stunning in each and every aspect. Showcasing immense aesthetics and revealing a tendency of glamour, clothes made using grey fabric are ruling the international market.

100% Polyester It is a type of fabric which is a synthetic, man-made fiber produced. Some of its features crease resistance, ability to dry quickly, shape retention in garments, high strength, abrasion

resistance, and minimum care requirement. It is very important fiber in upholstery fabrics, which is often used in warps due to its strength and inexpensiveness. Polyester is a durable, easy-care synthetic fabric made from petroleum by products. It can be manufactured in variety of weights and textures. Polyester is used for a wide range of applications, including clothing, home furnishings and industrial fabrics. Application: Knitting, weaving and sewing yarns. Count Range: Ne 6/1 to Ne 80/1 in single double and multiple ply. Polyester Cotton Blend For satisfactory was and wear purposes, fabrics for rainwear, tailored clothing, dress shirts, and sport shirts usually have a blended of at least 65 percent polyester with the cotton. Polyester will provide wrinkle resistance and shape retention. Cotton will provide absorbency and consequent comfort. However, unless properly constructed and properly cared for, a fabric of a polyester and cotton blend may pucker and lose its shape if the cotton should shrink or if cotton thread is used in sewing. Polyester and cotton blends are well suited for fabrics to be given a permanent press resin finish. Where greater absorbency and softer hand are desired, a 50/50 blend is preferable, but there will be a corresponding strength loss of as much as 20 percent as well as a slight loss in resilience. A 50/50 blend of polyester and cotton is also satisfactory for effective permanent press finishes. On the other hand, blends of as much as 80/20 of polyester and cotton, respectively, will have a somewhat stiffer, slicker hand. Strength, wrinkle resistance, and shape retention will be increased but absorbency will be reduced.

2.6 Manufacturing Process Spinning process

Mixing Cottons of different varieties in different proportion are hand opened and laid into different layers according to the quality of cotton and depending on the end use ( yarn quality requirement). In best varieties of there will be a lot o differences, in the quality within cotton bale a well as from bale to bale in lot of cotton. Hence it is the practice to mix several bale, before feeding it to the blow room. Blow room The cotton is well opened and cleaned to remove the foreign matter such as seed, its, leaf bits etc., and a thin uniform sheet of 40 width and rolled in length of about 40 meters known as Lap. It is a machine which is used to clean and improve the cotton and it gives the output in the lap form. Carding The laps received from Blow Room is further opened and cleaned and a clean rope like material, known as card Silver is produced and stored in cans. Before the raw stock can be made into yarn, the remaining impurities must be disentangled and they must be straightened. This is necessary for all staple fibers; otherwise it would be impossible to produce fine yarns from what is originally a tangled mass. Combing

It is an optional special process to remove short fibers, neps etc, from the card silver to improve the quality of yarn in order to produce combed yarn. The machine which converts lap form into silver form is known as combing. It is an optional special process to remove short fibers, neps, etc, from the card silver to improve the quality of yarn in order to produce combed yarn. In this operation, fine combs continue straightening the fibers until they are arranged with such a high degree of parallelism that short fibers called noils are combed out and completely separated from the long fiber. Drawing The card silvers or combed silvers (8 to 8 nos) are passed through this machine to make the fibers in the silver parallel and more even, in order to improve the quality of yarn. The combining of several slivers for drawing or drafting, process eliminates irregularities that would cause too much variation if the silvers were put through singly. Simplex The drawing silver is thinned and made to a strand of required size known as ROVE and wound into bobbins of 1 to 1.5 kg weight. The thinning process is known as drafting. These bobbins are placed on the placed on the roving frame, where further drawing out and twisting take places until the cotton stock is about the diameter of a pencil lead. Roving is the final product of several drawing out operations. Spinning The roving bobbins received from the simplex is fed in Ring Spinning frames where the material is further thinned down, twisted and yarn is formed which is wound on small cops of 50 to 60 gms. The roving on bobbins is placed in the spinning frame, where it passes through several sets of rollers running at successively higher rates of speed and is finally drawn out to yarn of the size desired. Spinning machines are of two kinds: ring frame and mule frame. The ring frame is faster process but produces a relatively coarse yarn. For very fine yarns, such as worsted yarn, the mule frame is required because of its slow intermittent operation. The ring spinning frame completes the manufacture of yarn Cone winding

The yarn in small cops is wound into bigger packages known as cones of required weight (1.25kg) after cleaning the impurities from Ring Spinning Yarn. Weaving process

Warping Warping is the initial process of weaving; it helps to improve the cotton quality. Warping contain covert the more than 500 cones into one babin with the help of warping machine. The warping Machines are having the various forms like 450 cones, 500 cones, and 750 cones converter. Sizing Sizing is the process of improve the cotton threat quality with the help of starch and straighten. The starching is helps to improve the threat straightness and it dry. Finally the threats are fold into babin again. Weaving Weaving is the process of weave the threat into cloth from the looms. The loom machines are available at two types there are: automatic looms and hand loom machines. The automatic looms are not having the human need while the looms are broken but in hand loom machines are need the human while broken the looms to rectify the looms broken.

CHAPTER-III

RESEARCH METHODOLOGY 3.1 Research design The research design is a pattern or an outline of research project working. It is a statement of only essential elements of study, those that provide basic guidelines for the details of the project. The present study is being conducted followed by analytical Research Design. 3.2 Data Collection Primary as well as secondary data is used for the project. The research vehicle for primary data collection is unstructured interview with the managers to get information regarding all variables for working capital management. Secondary data is collected from Annual Report, relevant files & records of Coimbatore Murugan Mills,Coimbatore. 3.3 Analysis of Data The information gathered are the policies & practices regarding management of the working capital. Analysis is done in terms of theoretical concepts. Analysis of working capital performance is done with the help of percentages by showing graphs, ratios etc. 3.4 Tools for analysis The main tools and techniques used were: Ratio Analysis, Trend analysis Comparitive balance sheet Motaals comprehensive test It is found that liquidity position and debtors collection of the company was satisfactory and the working capital requirement of the company was increasing which showed the firm is expanding its activities. 3.5 Objectives of the study

Working capital management is very important in modern business. Analysis and interpretation of financial statement and working capital is very useful for short-term management of funds. The following are the main objectives of the study: 1. To analyze and evaluate liquidity position of the company. 2. To analyze the components of working capital of the company. 3. To assess the impact of working capital on profitability. 4. To determine the amount of working capital of the company for another two years. 5. To understand the solvency position of the company. 3.6 Limitations of the study The study is restricted for a period of two months. Due to inadequate time it is not possible to analyze all aspects relevant to the study. The findings of the study cannot be generalized. The analysis is based on annual reports of the company.

3.7 Review Of Literature

Cherian Joseph (1998) conducted A study on Working Capital Management in textile industry in India under taken by Cherian Joseph for a period of ten years from 1978 1988. The objective of the study was to find the structure and utilizations of Working Capital in textile mills around twenty mills were taken for study. The conclusion was it blocked amount of cash in current asset was utilized at right time to purchase the inventory shortage wont affect the day to day production process will increase the profit and reduced risk in 1978 -1987. N.Nandhini (1997) in her study attempted to analyze the working capital management in Siv industries Ltd., Coimbatore. The main objectives of the study were to analyze the liquidity position of the company, to find out the management of each component of working capital in respect of inventories, receivables and cash balance. The major findings of the study were the return on capital of the company was satisfactory. The decreasing Working Capital ratio indicates the effective utilization funds. Santhosh. K (2000) attempted to analyze the Working Capital Management of Hosiery Industries of Tirupur Knitting Units. The major findings of the unit were as follows. They are the current ratio of those companies stood below the standard norm 2:1. The quick ratio was also not satisfying the norm. The cash and bank balance of those companies were very meager. The Working Capital of the two companies was very low and another stands low during his study period. Byju. V.T (2002) made an analysis of Working Capital Management with special reference to Elgi Ltd. for the period of six years from 1995-1996 to 2000-2001 with the following objectives. To evaluate and compare the inventory receivables and cash management performance of the company. The major findings from his analysis say that in the year 1995-1996, the Working Capital was effectively used and overall it is satisfactory. Anisha Lashmy Sam. K.A (2003) made A study on the Working Capital Management with reference to Steel Industries Kerala Ltd. from 1997-1998 to 2001-2002. The objective of the study was to analyze and evaluate the Working Capital Management. The conclusion from his analysis is Working Capital Management was very poor and below average. R.Swaminathan (1998) made A study on Working Capital Management of the Lakshmi Mills Company Limited, Coimbatore for the period of six years from 1990-91 to

1995-96. The main objectives of the study were to examine the impact of Working Capital on liquidity and profitability of the company. It is found that liquidity position, debtors collection of the company was satisfactory, and the working capital requirement of the company was increasing which showed the firm is expanding its activities. B. Uma Maheshwari (1996-1997) made A study on Working Capital Management in Raja Lakshmi Mills for a period of ten years from 1996-1997 to 1999-2000. The tools and techniques of ratio analysis and least square test are used to know the Working Capital forecasting of Raja Lakshmi Mills.. He suggested that the mill have to reduce its investment in receivables as well as inventories. Hema Priya (1998) made A study on Working Capital Management of M/s.Veejay Lakshmi Engineering Company for a period of nine years from 1988-89 to 1996-97 with the objective of examining the solvency position, profitability, to measure the efficiency and performance and to analyze the source and uses of the funds of the company. The study found that the solvency position was better in the year 1992 and during the last three years, the company had enjoyed payment period for creditors and it did not find any difficulty in collecting the debts from the customer. Amit .K. Mallik, Debasish Sur (1999) made a case study on Working Capital Management of Hindustan Lever Limited for the period of ten years from 1987-1996. For the analysis of the data, ratio analysis, simple mathematical tools like percentages, averages etc., and statistical techniques like Pearsons simple correlation analysis, Spearmans rank correlation analysis, and multiple regression analysis were used. The general performance regarding the Working Capital Management in HLL was very much encouraging during the study period. Vijayakumar and A. Venkatachalam (1996) in the study made an attempt to Estimate the demand for working capital in Private Sector Sugar Industries of Tamil Nadu. This study is attempted to measure the performance of Working Capital with reference to Sri Sarada Mills, Coimbatore. The regression results of the study suggested strongly that the demand for working capital and their hiding costs. The coefficients are also highly significant. Kent John Chabotar(1989),Financial Ratio Analysis Comes to Nonprofits. To evaluate their financial health, a growing number of colleges, universities, and other non-profit

organizations are using financial ratio analysis, a technique used in business for many years. Primarily through a review of the literature and a case study, this article assesses the strengths and weaknesses of ratio analysis and suggests how nonprofits can use it most effectively. Marc Orlitzky,Frank L. Schmidt,Sara L. Rynes(2003), Corporate Social And Financial Performance. Most theorizing on the relationship between corporate social/environmental performances (CSP) and corporate financial performance (CFP) assumes that the current evidence is too fractured or too variable to draw any generalizable conclusions. This meta-analysis establishes a greater degree of certainty with respect to the CSP-CFP relationship than is currently assumed to exist by many business scholars. Doron Nissim and Stephen H. Penman (2001), Ratio Analysis and Equity Valuation. Financial statement analysis has traditionally been seen as part of the fundamental analysis required for equity valuation. To provide historical benchmarks for forecasting, typical values for ratios are documented for the period 19631999, along with their cross-sectional variation and correlation.

Michael J. Peel,Nicholas Wilson(1996),Working Capital and Financial Management Practices in the Small Firm Sector . In general, the results of the survey indicated that a relatively high proportion of small firms in the sample claimed to use quantitative capital budgeting and working capital techniques and to review various aspects of their companies' working capital.

Shin H.-H., Soenen L., (1998), Efficiency of Working Capital Management and Corporate Profitability. Investigates the relationship between the firm's efficiency of working capital management and its profitability. Background on efficient working capital; Measures of working capital management efficiency; Association between the net trade cycle and corporate profitability.

CHAPTER-IV ANALYSIS AND INTERPRETATION 4.1 RATIO ANALYSIS Ratio analysis is widely used tool for financial analysis. It is defined as the systematic use of ratio to interpret the financial statements so that the strengths and weakness of a firm as well as its historical performance and current financial condition can be determined. The term ratio refers to the numerical or quantitative relationship between two items. DEFINITION According to Kennedy, ratio may be defined as the indicated quotient of two mathematical expressions and as the relationship between two or more things TYPES OF RATIOS Financial ratios are useful indicators of a firm's performance and financial situation. Financial ratios can be used to analyze trends and to compare the firm's financials to those of other firms. In some cases, ratio analysis can predict future bankruptcy. The following types of ratios frequently are used:

Liquidity ratio Activity ratio Solvency ratio Profitability ratios

LIQUIDITY RATIOS Liquidity ratios provide information about a firm's ability to meet its short-term financial obligations. They are of particular interest to those extending short-term credit to the firm.

Current ratio Quick or Liquid ratio Absolute liquid ratio.

CURRENT RATIO Current ratio may be defined as the relationship between current assets and current liabilities. This ratio is the One of the most universally known ratios, which reflects the Working Capital situation, indicates the ability of a company to pay its short-term creditors from the realization of its current assets and without having to resort to selling its fixed assets to do so. A ratio equal or near to the rule of thumb of 2:1, that is current assets double the current liabilities is considered as satisfactory. Current Assets Current Ratio = ---------------------Current Liabilities

TABLE NO: 1

TABLE SHOWING CURRENT RATIO Year 2007 2008 2009 2010 2011 Current Assets 245912771.4 266774351.9 232646852 313558130.2 446152569.2 Current Liabilities 137200613.1 138652496.2 152522085.8 158368476.4 360867293.6 Arithmetic Mean (Source: Annual Reports) The current ratio of the Murugan Mills in the year 2007,2008,2009,2010 is more than 1.50. It is less than the standard norm of 2:1; this shows that the mills liquidity position is not good. In the year 2011 the current ratio was not satisfactory in the mill because it was too low compare to previous years. CHART NO: 1 CHART SHOWING CURRENT RATIO Ratio 1.79 1.92 1.53 1.98 1.24 1.69

LIQUID RATIO

This ratio indicates the ability of a company to pay its debts as they fall due. It is generally considered a more accurate assessment of a company's financial health than the current ratio as it excludes stock, thus reducing the risk of relying on a ratio that may include slow moving or redundant stock. The liquid assets are bills receivable, sundry debtors, marketable securities and the short term or temporary investments. Liquid or Quick assets Liquid ratio = ------------------------------Current liabilities The rule of thumb for liquid ratio is 1:1, that is Liquid assets equal to the current liabilities is considered as satisfactory.

TABLE NO: 2 TABLE SHOWING LIQUID RATIO Year 2007 2008 2009 2010 2011 Quick Assets 87610322.43 139879453.1 87602892.79 88622542.38 74579547.73 Current Liabilities 137200613.1 138652496.2 152522085.8 158368476.4 360867293.6 Arithmetic Mean (Source: Annual Reports) In the year 2008 the liquid of the company is equal to the rule of thumb that is 1:1, so the liquid ratio was satisfactory in this year. In 2007,2009,2010,2011 the liquid ratio was not satisfactory in the mill because it is less than the standard norm. CHART NO: 2 CHART SHOWING LIQUID RATIO Ratio 0.64 1.01 0.57 0.56 0.21 0.60

ABSOLUTE LIQUID RATIO

Absolute liquid assets exclude sundry debtors from liquid assets it includes cash in hand, cash at bank and short term investments. Absolute liquid assets Absolute liquid ratio = -----------------------------Current liabilities The standard norm of this ratio is 0.5:1 that is double the Current liability than Absolute liquid assets.

TABLE NO: 3 TABLE SHOWING ABSOLUTE LIQUID RATIO Year 2007 2008 2009 2010 2011 Absolute Liquid Assets 5866874.49 35446357.15 3469216.9 6809474.76 1502516.14 Current Liabilities 137200613.1 138652496.2 152522085.8 158368476.4 360867293.6 Arithmetic Mean (Source: Annual Reports) The standard norm of this ratio is 0.5:1, in the year 2008 it was nearer to the standard norm so it was satisfactory. In the other years 2007, 2009, 2010 and in 2011 the ratio was not satisfactory in the mill. CHART NO: 3 CHART SHOWING ABSOLUTE LIQUID RATIO Ratio 0.04 0.26 0.02 0.04 0.00 0.07

ACTIVITY RATIOS OR TURNOVER RATIOS

Activity ratios measure the effectiveness of the firms use of resources or assets. These ratios are also called as turn over ratios because they indicate the speed with assets are converted or turned into sales. The various types of activity ratios are: Inventory/ stock turnover ratio Debtors turnover ratio Creditors turnover ratio Working capital turnover ratio Fixed assets turnover ratio Total assets turnover ratio

INVENTORY TURN OVER RATIO This ratio indicates the number of times stock is turned over during a year. The high ratio indicates quick movement of stock and vice versa. Cost of goods sold Inventory turnover ratio = ------------------------Average inventory Usually high inventory turnover ratio indicates the efficient management of inventory because more frequently the stocks are sold; the lesser amount of money is required to finance the inventory.

TABLE NO: 4 TABLE SHOWING INVENTORY TURN OVER RATIO Year 2007 2008 2009 2010 2011 Cost Of Goods Sold 348790279.5 339755870.2 314931857.5 543137730.1 413379369.1 Average Inventory 118682914.5 110576719.6 118890973.5 125599392.1 200261287.1 Arithmetic Mean (Source: Annual Reports) The inventory turnover ratio was high in the years 2010, 2008 this shows that the sales are great extent than the stock. In the years 2007, 2009 and 2011 the ratio was not satisfactory. CHART NO: 4 CHART SHOWING INVENTORY TURNOVER RATIO Ratio 2.94 3.07 2.65 4.32 2.06 3.01

DEBTORS TURNOVER RATIO Debtors turnover ratio indicates the velocity of debt collection of firm. In simple words, it indicates the number of times average debtors are turned over during a year.

Net annual credit sales Debtors Turnover Ratio = ------------------------------Average trade debtors Accounts receivable turnover ratio or debtors turnover ratio indicates the number of times the debtors are turned over a year. The higher the value of debtors turnover the more efficient is the management of debtors or more liquid the debtors are. Similarly, low debtors turnover ratio implies inefficient management of debtors or less liquid debtors. It is the reliable measure of the time of cash flow from credit sales. There is no rule of thumb which may be used as a norm to interpret the ratio as it may be different from firm to firm.

TABLE NO: 5 TABLE SHOWING DEBTORS TURNOVER RATIO Year 2007 2008 2009 2010 2011 Net Annual Credit Sales 292086224.1 302330088.1 270834342.8 500281853.3 336804641.4 Average Trade Debtors 81743447.94 104433096 84133675.89 81813067.62 73077031.59 Arithmetic Mean (Source: Annual Reports) This table shows the fluctuating trend in debtors turnover ratio. In the year 2010 the debtors turnover ratio was high; in 2011, 2007 and 2009 it was decreased. The ratio was very low in the year 2008. This shows the firm has very less chance for bad debts. CHART NO: 5 CHART SHOWING DEBTORS TURNOVER RATIO Ratio 3.57 2.89 3.22 6.11 4.61 4.08

CREDITORS TURNOVER RATIO Creditors turnover ratio is used to find out how much time the firm is taken to repay its trade creditors. Net Credit Annual Purchases Trade creditors = ----------------------------------------Average Trade Creditors This ratio shows, on an average, the number of times creditors are turned over during a year. A higher ratio indicates quick settlement of dues and lower ratio reflects liberal credit terms granted by suppliers. The average payment period ratio represents the number of days by the firm to pay its creditors. A high creditors turnover ratio or a lower credit period ratio signifies that the creditors are being paid promptly. This situation enhances the credit worthiness of the company. However a very favorable ratio to this effect also shows that the business is not taking the full advantage of credit facilities allowed by the creditors.

TABLE NO: 6 TABLE SHOWING CREDITORS TURNOVER RATIO Net Annual Credit Year 2007 2008 2009 2010 2011 Purchases 67180430.41 158330069.3 83251122.92 238062455.6 249483050.4 Average Trade Creditors 44417051.83 74674704.4 75952393.01 42144862.71 89647582.8 Arithmetic Mean (Source: Annual Reports) The creditor turnover ratio was fluctuating over the years of the study. In the years 2008 and 2010 the firm had utilize the credit period effectively. The ratio has decreased in the remaining years. CHART NO: 6 CHART SHOWING CREDITORS TURNOVER RATIO Ratio 1.51 2.12 1.10 5.65 2.78 13.16

WORKING CAPITAL TURNOVER RATIO Working capital turnover ratio indicates the number of times the working capital is turned over in the course of a year. This ratio measures the efficiency with which the working capital is being used by a firm. A higher ratio indicates efficient utilization of working capital. Sales Working Capital Turnover Ratio = ---------------------------Net Working Capital

Interpretation of this ratio should be done when inter-firm or inter-period comparison is being done. Increasing ratio indicates that working capital is more active; it is supporting, comparatively, higher level of production and sales; it is being used more intensively.

TABLE NO: 7 TABLE SHOWING WORKING CAPITAL TURNOVER RATIO

Year 2007 2008 2009 2010 2011

Sales 292086224.1 302330088.1 270834342.8 500281853.3 336804641.4

Net Working Capital 108712158.4 128121855.7 80124766.22 155189653.8 85285275.51 Arithmetic Mean

Ratio 2.69 2.36 3.38 3.22 3.95 15.6

(Source: Annual Reports) In the years 2007 and 2010 the ratio was very low so there is no better utilization of the working capital. In the year 2011 the working capital turnover ratio was high, there is a better utilization of working capital. CHART NO: 7 CHART SHOWING WORKING CAPITAL TURNOVER RATIO

FIXED ASSETS TURNOVER RATIO This ratio shows how well the fixed assets are being used in the business. This ratio is important in case of manufacturing concern because sales are produced not only by use of current assets but also by amount invested in fixed assets. The higher is the ratio the better is the performance. On the other hand a low ratio indicates that fixed assets are not being efficiently utilized. Net sales Fixed Assets Turnover Ratio = ----------------Fixed assets

TABLE NO: 8 TABLE SHOWING FIXED ASSETS TURNOVER RATIO Year 2007 2008 2009 2010 2011 Net Sales 292086224.1 302330088.1 270834342.8 500281853.3 336804641.4 Fixed Assets 285535710.4 361556752.7 386733705.1 371278680.1 365785416.5 Arithmetic Mean (Source: Annual Reports) In the years 2007 and 2010 the ratio was very high so the company has been more effective in using the investment in fixed assets to generate revenues. In the year 2008, 2009 and 2011 the fixed assets turnover ratio was low, there is no better utilization of investments in fixed assets. CHART NO: 8 CHART SHOWING FIXED ASSETS TURNOVER RATIO Ratio 1.02 0.84 0.70 1.35 0.92 0.97

TOTAL ASSETS TURNOVER RATIO This ratio shows how well the fixed assets are being used in the business. This ratio is important in case of manufacturing concern because sales are produced by the use of current assets and also amount invested in fixed assets i.e total assets. The higher is the ratio the better is the performance. On the other hand a low ratio indicates that assets are not being efficiently utilized. Net sales Total Assets Turnover Ratio = ----------------Total assets

TABLE NO: 9 TABLE SHOWING TOTAL ASSETS TURNOVER RATIO Year 2007 2008 2009 2010 2011 Net Sales 292086224.1 302330088.1 270834342.8 500281853.3 336804641.4 Total Assets 606504698.7 628495626.8 619380557.1 684836810.3 811937985.6 Arithmetic Mean (Source: Annual Reports) In the years 2010 the ratio was very high so the company has been more effective in using the investment in total assets to generate revenues. In the year 2007, 2008, 2009 and 2011 the total assets turnover ratio was low, there is no better utilization of investments in total assets. CHART NO: 9 CHART SHOWING TOTAL ASSETS TURNOVER RATIO Ratio 0.48 0.48 0.44 0.73 0.41 0.51

PROFITABILITY RATIOS Profitability ratios measure the company's use of its assets and control of its expenses to generate an acceptable rate of return. These financial ratios measure the return earned on a companys capital and the financial cushion relative to each dollar of sales. A firm that has high gross profit margins, for instance, is going to be much harder to put out of business when the economy turns down than one that has razor-thin margins. Likewise, a company with high returns on capital, even with smaller margins, is going to have a better chance of survival because it is so much more profitable relative to the shareholders contributed investment. The types are: I. General profitability ratio Gross profit ratio Net profit ratio Expenses ratio

II. Overall profitability ratio Return on share holders investment Return on equity capital

GENERAL PROFITABILITY RATIO GROSS PROFIT RATIO

Gross profit ratio measures the relationship of gross profit to net sales and is usually represented as a percentage. Gross Profit Gross Profit Ratio = ------------------------- 100 Net Sales There is no standard norm of gross profit ratio it differs from the business to business but gross profit should adequate to cover the operating expenses.

TABLE NO: 10 TABLE SHOWING GROSS PROFIT RATIO Year 2007 2008 2009 2010 2011 Gross Profit -56704055.38 -37425782.06 -44097514.81 -42855876.81 -76574727.84 Net Sales 292086224.1 302330088.1 270834342.8 500281853.3 336804641.4 Arithmetic Mean (Source: Annual Reports) From 2007-2011 the gross profit ratio was low and it is not adequate to cover all the operating expenses, the gross profit ratio was not satisfactory in the Coimbatore Murugan Mills. CHART NO: 10 CHART SHOWING GROSS PROFIT RATIO Ratio -0.19 -0.12 -0.16 -0.09 -0.23 -0.31

NET PROFIT RATIO Net profit ratio measures the relationship of net profit to net sales and is usually represented as a percentage. Net Profit Net Profit Ratio = ------------------------- 100 Net Sales Net profit ratio is used to measure the overall profitability and hence it is very useful to proprietors. The ratio is very useful as if the net profit is not sufficient, the firm shall not be able to achieve a satisfactory return on its investment. This ratio also indicates the firm's capacity to face adverse economic conditions such as price competition, low demand, etc. Obviously, higher the ratio the better is the profitability. But while interpreting the ratio it should be kept in minds that the performance of profits also is seen in relation to investments or capital of the firm and not only in relation to sales.

TABLE NO: 11 TABLE SHOWING NET PROFIT RATIO Year 2007 2008 2009 2010 2011 Net Profit After Tax -263581429.1 -28967966.03 -47625854.26 -13503728.18 -78511342.23 Net Sales 292086224.1 302330088.1 270834342.8 500281853.3 336804641.4 Arithmetic Mean (Source: Annual Reports) The mill was suffered by a loss in the years 2007, 2008, 2009, 2010 and 2011. The average of the net profit ratio is -0. 29 still it is negative. CHART NO: 11 CHART SHOWING NET PROFIT RATIO Ratio -0.90 -0.10 -0.18 -0.03 -0.23 -0.29

EXPENSES RATIO Expense ratios indicate the relationship of various expenses to net sales. The operating ratio reveals the average total variations in expenses. But some of the expenses may be increasing while some may be falling. Hence, expense ratios are calculated by dividing each item of expenses or group of expense with the net sales to analyze the cause of variation of the operating ratio. The ratio can be calculated for individual items of expense or a group of items of a particular type of expense like cost of sales ratio, administrative expense ratio, selling expense ratio, materials consumed ratio, etc. The lower the operating ratio, the larger is the profitability and higher the operating ratio, lower is the profitability. Particular expenses Expenses Ratio = -----------------------------100 Net Sales .While interpreting expense ratio, it must be remembered that for a fixed expense like rent, the ratio will fall if the sales increase and for a variable expense, the ratio in proportion to sales shall remain nearly the same.

TABLE NO: 12 TABLE SHOWING EXPENSES RATIO Manufacturing, Administrative, Selling & Year 2007 2008 2009 2010 2011 Distribution Expenses 102172857 112761865 142321447.1 157667806.9 162787806.8 Net Sales 292086224.1 302330088.1 270834342.8 500281853.3 336804641.4 Arithmetic Mean (Source: Annual Reports) In the year 2009 and 2011 the expenses ratio is high. But the sales volume is very low compare to remaining years. It indicates the Mill invest more funds in the manufacturing, administrative, selling & distribution expenses. In the remaining three years the expenses ratio is normal level and the sales volume also in good position. CHART NO: 12 Ratio 0.35 0.37 0.53 0.32 0.48 0.41

CHART SHOWING EXPENSES RATIO

RETURN ON SHARE HOLDERS INVESTMENT RATIO It is the ratio of net profit to share holder's investment. It is the relationship between net profit (after interest and tax) and share holder's/proprietor's fund. This ratio is one of the most important ratios used for measuring the overall efficiency of a firm. As the primary objective of business is to maximize its earnings, this ratio indicates the extent to which this primary objective of businesses being achieved. This ratio is of great importance to the present and prospective shareholders as well as the management of the company. As the ratio reveals how well the resources of the firm are being used, higher the ratio, better are the results. The inter firm comparison of this ratio determines whether the investments in the firm are attractive or not as the investors would like to invest only where the return is higher. Net profit Return on share holders investment ratio = ------------------------------100 Share holders investment

TABLE NO: 13 TABLE SHOWING RETURN ON SHARE HOLDERS INVESTMENT RATIO Net Profit (After Year 2007 2008 2009 2010 2011 Interest &Tax) -263581429.1 -28967966.03 -47625854.26 -13503728.18 -78511342.23 Share Holders Fund 732890964.8 749710396.3 860131233 853220181.7 856507988.1 Arithmetic Mean (Source: Annual Reports) Return on share holders investment was negative in all the years 2007, 2008, 2009, 2010 and 2011. It was negative in all the years because the company is suffered from loss. Still the average returns was negative that is -0.11. CHART NO: 13 CHART SHOWING RETURN ON SHARE HOLDERS INVESTMENT RATIO Ratio -0.36 -0.04 -0.06 -0.02 -0.09 -0.11

RETURN ON EQUITY CAPITAL This ratio is more meaningful to the equity shareholders who are interested to know profits earned by the company and those profits which can be made available to pay dividends to them. Return on equity capital which is the relationship between profits of a company and its equity. Net Profit Return on equity capital = --------------------------------Equity Share Capital

TABLE NO: 14 TABLE SHOWING RETURN ON EQUITY CAPITAL Net Profit (After Year 2007 2008 2009 2010 2011 Interest &Tax) -263581429.1 -28967966.03 -47625854.26 -13503728.18 -78511342.23 Equity Share Capital 305251000 305251000 305251000 305251000 305251000 Arithmetic Mean (Source: Annual Reports) Return on equity capital was negative in the years 2007, 2008, 2009, 2010 and 2011 because the company was suffered from loss. Still the average returns was negative that is -0.28. CHART NO: 14 CHART SHOWING RETURN ON EQUITY CAPITAL RATIO Ratio -0.86 -0.09 -0.16 -0.04 -0.26 -0.28

SOLVENCY RATIO The term solvency refers to the ability of a concern to meet its longterm obligations. This ratio measures if the total liabilities of a business (both secured and unsecured) are too high, indicating a possible over dependency on outside sources for long-term financial support. By comparing shareholders funds to total assets we can produce a confidence factor for unsecured creditors to the business. The long term creditors of a firm are primarily interested in knowing the firms ability to pay regularly interest on long term borrowings, repayment of the principal amount at the maturity and the security of their loans. FIXED ASSETS TO NETWORTH RATIO The ratio is calculated by dividing the total fixed assets by the amount of shareholders fund. Fixed Assets Fixed Assets to net worth ratio = -------------------------Shareholders Fund The ratio of fixed assets to net worth indicates the extent to which shareholder's funds are sunk into the fixed assets. Generally, the purchase of fixed assets should be financed by shareholder's equity including reserves, surpluses and retained earnings. If the ratio is less than

100%, it implies that owners funds are more than fixed assets and a part of the working capital is provide by the shareholders. When the ratio is more than the 100%, it implies that owners funds are not sufficient to finance the fixed assets and the firm has to depend upon outsiders to finance the fixed assets. There is no rule of thumb to interpret this ratio by 60 to 65 percent is considered to be a satisfactory ratio in case of industrial undertakings.

TABLE NO: 15 TABLE SHOWING RATIO OF FIXED ASSETS TO NETWORTH RATIO Fixed Assets(After Year 2007 2008 2009 2010 2011 Depreciation) 285535710.4 361556752.7 386733705.1 371278680.1 365785416.5 Share Holders Fund 732890964.8 749710396.3 860131233 853220181.7 856507988.1 Arithmetic Mean (Source: Annual Reports) From the year 20007-11 the ratio was 0.44, so we can identify the outsiders fund is not properly utilized for fixed assets. CHART NO: 15 CHART SHOWING RATIO OF FIXED ASSETS TO NETWORTH RATIO Ratio 0.39 0.48 0.45 0.44 0.43 0.44

RATIO OF CURRENT ASSETS TO PROPRIETORS FUND The ratio is calculated by dividing the total current assets by the amount of shareholders fund. Current Assets Ratio of Current Assets to Proprietors Fund = --------------------------Shareholders Fund Current Assets to Proprietors' Fund Ratio establish the relationship between current assets and shareholder's funds. The purpose of this ratio is to calculate the percentage of shareholders funds invested in current assets. Different industries have different norms and therefore, this ratio should be studied carefully taking the history of industrial concern into consideration before relying too much on this ratio.

TABLE NO: 16 TABLE SHOWING RATIO OF CURRENT ASSETS TO PROPRIETORS FUND Year 2007 2008 2009 2010 2011 Current Assets 245912771.4 266774351.9 232646852 313558130.2 446152569.2 Share Holders Fund 732890964.8 749710396.3 860131233 853220181.7 856507988.1 Arithmetic Mean (Source: Annual Reports) From the year 20007-11 the ratio was 0.37, so we can identify the outsiders fund is not utilized for current assets. CHART NO: 16 CHART SHOWING RATIO OF CURRENT ASSETS TO PROPRIETORS FUND Ratio 0.34 0.36 0.27 0.37 0.52 0.37

PROPRIETORY RATIO Proprietory ratio establishes the relationship between shareholders fund to total assets of the firm. The ratio of proprietors fund to total assets is an important ratio for determining long term solvency of a firm. Shareholders Fund Proprietory Ratio = -------------------------Total Assets Proprietory ratio indicates the proportion of shareholders funds in total assets. A high proprietary ratio indicates less danger and risk to creditors in the event of winding up.

TABLE NO: 17 TABLE SHOWING PROPRIETORY RATIO Year 2007 2008 2009 2010 2011 Share Holders Fund 732890964.8 749710396.3 860131233 853220181.7 856507988.1 Total Assets 606504698.7 628495626.8 619380557.1 684836810.3 811937985.6 Arithmetic Mean (Source: Annual Reports) In the year 2009 the ratio was high that is the shareholders are contributed for total assets, so the ratio was satisfactory. In the year of 2007, 2008, 2010 and 2011 the ratio was declining so the ratio was not satisfactory. CHART NO: 17 CHART SHOWING PROPRIETORY FUND Ratio 1.21 1.19 1.39 1.25 1.05 1.22

4.2 TREND ANALYSIS Trend percentage which plays significant role in analyzing the financial stature of the enterprise through base years performance ratio computation. This not only reveals the trend movement of the financial performance of the enterprise but also highlights the strengths and weaknesses of the enterprise The following ratio is being used to compute the trend percentage

CurrentYear. = -------------------------- 100. Base Year

TABLE NO: 18 TABLE SHOWING SALES PERCENTAGE Year 2007 2008 2009 2010 2011 (Source: Annual Reports) The trends of sales had consistently increased in the years 2007 to 2008. In 2009 the sales trend was decreased and in the year 2010 the sales trend was increased again. In the year of 2011 the sales trend was again decreased. CHART NO: 18 CHART SHOWING SALES PERCENTAGE Amount 292086224.1 302330088.1 270834342.8 500281853.3 336804641.4 Trend Percentage 100.00 103.51 92.72 171.28 115.31

TABLE NO: 19 TABLE SHOWING INVENTORY PERCENTAGE Year 2007 2008 2009 2010 2011 (Source: Annual Reports) This table shows the increasing trend except in the year 2008. The inventory percentage is very high in the year 2011. It shows the fluctuating trend in inventory trend percentage. CHART NO: 19 CHART SHOWING INVENTORY PERCENTAGE Amount 118682914.5 110576719.6 118890973.5 125599392.1 200261287.1 Trend Percentage 100.00 93.17 100.18 105.83 168.74

TABLE NO: 20 TABLE SHOWING SUNDRY DEBTORS PERCENTAGE Year 2007 2008 2009 2010 2011 (Source: Annual Reports) The above table shows the fluctuating trend in debtors percentage. In the year 2008 the debtors percentage was increased, in 2009, 2010, 2011 it was decreased, it shows the fluctuating trend. CHART NO: 20 CHART SHOWING SUNDRY DEBTORS PERCENTAGE Amount 81743447.94 104433096 84133675.89 81813067.62 73077031.59 Trend Percentage 100.00 127.76 102.92 100.09 89.40

TABLE NO: 21 TABLE SHOWING BANK LOANS PERCENTAGE Year 2007 2008 2009 2010 2011 Amount 186664164.6 203483596.2 313904432.9 241176975.9 248749192.3 Trend Percentage 100.00 109.01 168.17 129.20 133.26

(Source: Annual Reports) This table shows the fluctuating trend in bank loans percentage. It was increased in the year of 2008 and 2009.It was decreased in the year of 2010 and again it was increased in the year of 2011. CHART NO: 21 CHART SHOWING BANK LOANS PERCENTAGE

TABLE NO: 22 TABLE SHOWING FIXED ASSETS PERCENTAGE Year 2007 2008 2009 2010 2011 (Source: Annual Reports) This table shows the fluctuating trend in fixed assets. In the year 2008 and 2009 the fixed assets percentage was increased. In the year 2010 and 2011 the fixed assets percentage was decreased. CHART NO: 22 CHART SHOWING FIXED ASSETS PERCENTAGE Amount 285535710.4 361556752.7 386733705.1 371278680.1 365785416.5 Trend Percentage 100.00 126.62 135.44 130.03 128.10

TABLE NO: 23 TABLE SHOWING LOANS &ADVANCES PERCENTAGE Year 2007 2008 2009 2010 2011 (Source: Annual Reports) The above shown table shows the fluctuating trend in loans and advances. In the year 2008, 2009 and 2010 the trend percentage was too low and in the year 2011 it was increased. CHART NO: 23 CHART SHOWING LOANS AND ADVANCES PERCENTAGE Amount 30768789.84 2197552.38 1995932.56 4270606.87 31202411.8 Trend Percentage 100.00 7.14 6.49 13.88 101.41

TABLE NO: 24 TABLE SHOWING CASH &BANK BALANCE PERCENTAGE Year 2007 2008 2009 2010 2011 (Source: Annual Reports) The above shown table shows the fluctuating trend in cash and bank balances. In the year 2008, the trend percentage was too high. In the year 2009 it was decreased. In the year of 2010 again it was increased. And in the year of 2011 again it was decreased too low. CHART NO: 24 CHART SHOWING CASH AND BANK BALANCE PERCENTAGE Amount 5861424.49 35441007.12 3463866.9 6804124.76 1497166.14 Trend Percentage 100.00 604.65 59.10 116.08 25.54

TABLE NO: 25 TABLE SHOWING CURRENT LIABILITIES PERCENTAGE Year 2007 2008 2009 2010 2011 (Source: Annual Reports) The current liability trend is very high in the year 2011. It was decreased in the year of 2008 and 2010. In the years 2009 to 2011 it was increased. It shows the fluctuating trend in current liabilities. CHART NO: 25 CHART SHOWING CURRENT LIABILITIES PERCENTAGE Amount 81822725.08 77170095.2 78505703.81 46452388.63 91389781.8 Trend Percentage 100.00 94.31 95.95 56.77 111.69

TABLE NO: 26 TABLE SHOWING CURRENT ASSETS PERCENTAGE Year 2007 2008 2009 2010 2011 (Source: Annual Reports) This table shows the fluctuating trend in current assets. In the year 2008, 2010and 2011 the current assets percentage was increased. In the year 2009 the current assets percentage was decreased. CHART NO: 26 CHART SHOWING CURRENT ASSETS PERCENTAGE Amount 245912771.4 266774351.9 232646852 313558130.2 446152569.2 Trend Percentage 100.00 108.48 94.61 127.51 181.43

4.3 COMPARATIVE BALANCE SHEET STATEMENTS The comparative balance sheet analysis is the study of the trend of the same items, group of items and computed items in two or more balance sheets of the same business enterprise on different dates. The changes in the periodic balance sheet items reflect the conduct of a business. The changes can be observed by comparison of the balance sheet at the beginning and at the end of a period and these changes can help in forming an opinion about the progress of an enterprise. Balance sheets as on two or more different dates are used for comparing the assets, liabilities and the net worth of the company. Comparative balance sheet analysis is useful for studying the trends of an undertaking. Advantages

Comparative statements help the analyst to evaluate the performance of the company. Comparative statements can also be used to compare the performance of the firm with the average performance of the industry between different years. It helps in identification of the weakness of the firm and remedial measures can be taken accordingly.

COMPARATIVE BALANCE SHEET (2007-2008)

Particulars Sources of funds 1.share holders funds a. Capital b.Reserves & surplus 2.Loan funds a.Secured loans b.Unsecured loans 3.Deferred tax liability Total Application of funds 1.Fixed Assets A. Gross Block B. Less: Depreciation C. Net Block D. Capital Wip 2007 2008 Absolute change 0.00 0.00 0.00 16819431.53 0.00 16819431.53 Change % 0.00 0.00 0.00 9.01 0.00 2.29

305251000.00 240975800.19 0.00 186664164.62 0.00 732890964.81

305251000.00 240975800.19 0.00 203483596.15 0.00 749710396.34

626677770.41 341142060.00 285535710.41 75056216.94

690948958.05 329392205.38 361556752.67 164522.24

64271187.64 -11749854.62 76021042.26 1129347.56

10.25 -3.44 26.62 -99.8

360591927.35 2. Investments Interest accrued on inv. 3. Cur.Assets,Loan & Adv a. Inventories b.Sundry Debtors c. Cash &Bank Balances d. Other Current Assets e. Loans & Advances f. Inter Sub Office Current A/C Total Current Assets(A) 4.Less Current Liabilities a .Current Liabilities b. Provisions c. Inter Subunit current A/C Total Current liabilities(B) 5.Net CA/CL(A-B) 6. Deffered Rev.Exps. Profit & loss A/C 5450 119225040.28 81743447.94 5861424.49 8314068.89 30768789.84 0.00 245912771.44 818227258.08 55377888.00 0.00 137200613.08 108712158.36 263581429.10

361721274.91 5350 112696857.49 104433095.95 35441007.12 12005838.99 2197552.38 7986370.36 274760722.3 77170095.20 61482401.00 40741656.39 179394152.6 95366569.71 292617201.73

1129347.56 -100 -6528182.79 22689648.01 29579582.63 3691770.1 -28571237.46 7986370.36 28847950.85 4652629.88 61045113 40741656.39 42193539.51 13345588.65 29035772.63

0.31 -1.83 -5.48 27.75 504.64 44.40 -92.85 0.00 11.73 5.686 11.02 0.00 30.75 12.27 11.02

Total

732890964.81

749710396.34

16819431.53

2.29

(Source: Annual Reports) Current Financial Position and Liquidity Position The current assets have increased by Rs.28847950.86 lakhs (11.73%) and sundry debtors have increased by Rs.22689648 lakhs (27.75%). On the other hand there has been a decrease in inventories amounting to Rs.6528182.79 lakhs. Long Term Financial Position There is an increase in fixed assets of Rs.64271187.64 lakhs (10%). There is also an increase in long term loans of Rs.16819431.53 lakhs (2.29%). This depicts that fixed assets are not only financed from long term sources but part of working capital has also been financed from long term sources. This fact depicts that the policy of the company is to purchase fixed assets from the long term sources of finance thereby not affecting the working capital. There is an increase in loaned funds than the share capital so this increases the interest liability for the company.

Profitability of the Concern There is no change in the reserves and surplus of the company.

COMPARATIVE BALANCE SHEET (2008-2009)

Particulars Sources of funds 1.share holders funds a. Capital b.Reserves & surplus 2.Loan funds a.Secured loans b.Unsecured loans 3.Deferred tax liability Total Application of funds 1.Fixed Assets A. Gross Block B. Less: Depreciation C. Net Block D. Capital Wip 2008 2009 Absolute change 0.00 0.00 0.00 110420836.7 0.00 110420836.7 Change % 0.00 0.00 0.00 54.26 0.00 14.72

305251000.00 240975800.19 0.00 203483596.15 0.00 749710396.34

305251000.00 240975800.19 0.00 313904432.85 0.00 860131233.04

690948958.05 329392205.38 361556752.67 164522.24

729913131.48 343179426.38 386733705.10 0.00

38964173.43 13787221 25176952.43 -164522.24

5.63 4.19 6.96 -100

361721274.91 2. Investments Interest accrued on inv. 3. Cur.Assets,Loan & Adv a. Inventories b.Sundry Debtors c. Cash &Bank Balances d. Other Current Assets e. Loans & Advances f. Inter Sub Office Current A/C Total Current Assets(A) 4.Less Current Liabilities a .Current Liabilities b. Provisions c. Inter Subunit current A/C Total Current liabilities(B) 5.Net CA/CL(A-B) 6. Deffered Rev.Exps. Profit & loss A/C 5350 112696857.49 104433095.95 35441007.12 12005838.99 2197552.38 7986370.36 274760722.3 77170095.20 61482401.00 40741656.39 179394152.6 95366569.71 292617201.73 749710396.34

386733705.10 5350 136172993.77 84133675.89 3463866.90 6880382.91 1995932.56 101761935.05 334408787.1 78505703.81 74016382.00 48737579.32 201259665.1 133149122.0 340243055.99 860131233.04

25012430.19 0.00 23476136.28 -20299420.06 -31977140.22 -5125456.08 -201619.82 93775564.69 59648064.8 1335608.61 12533981 7995922.93 21865512.5 37782552.29 47625854.26 110420836.7

6.91 0.00 20.83 -19.43 -90.22 -42.19 -9.17 1174.19 21.70 1.73 20.38 19.62 12.18 39.61 16.27 14.73

Total

(Source: Annual Reports) Current Financial Position and Liquidity Position The current assets have increased by Rs.59648065 lakhs (22%) and sundry debtors have decreased by Rs.20299420 lakhs (19.4%). On the other hand there has been a increase in inventories amounting to Rs.23476136.28 lakhs. The current liabilities have increased by Rs.21865512.5lakhs (12.18%). Long Term Financial Position There is an increase in fixed assets of Rs.38964173.43 lakhs (5.63%). There is also an increase in long term loans of Rs.110420837 lakhs (15%). This depicts that fixed assets are not only financed from long term sources but part of working capital has also been financed from long term sources. This fact depicts that the policy of the company is to purchase fixed assets from the long term sources of finance thereby not affecting the working capital.

There is an increase in loaned funds than the share capital so this increases the interest liability for the company. Profitability of the Concern There is no change in the reserves and surplus of the company.

COMPARATIVE BALANCE SHEET (2009-2010)

Particulars Sources of funds 1.share holders funds a. Capital b.Reserves & surplus 2.Loan funds a.Secured loans b.Unsecured loans 3.Deferred tax liability Total Application of funds 1.Fixed Assets A. Gross Block B. Less: Depreciation 2009 2010 Absolute change 0.00 61531995.62 4284410.00 -72727456.93 0.00 -6911051.31 Change%

305251000.00 240975800.19 0.00 313904432.85 0.00 860131233.04

305251000.00 302507795.81 4284410.00 241176975.22 0.00 853220181.73

0.00 25.53 0.00 -23.16 0.00 -0.80

729913131.48 343179426.38

730773879.98 359495199.88

860748.5 16315773.5

0.11 4.75

C. Net Block D. Capital Wip 2. Investments Interest accrued on inv. 3. Cur.Assets,Loan & Adv a. Inventories b.Sundry Debtors c. Cash &Bank Balances d. Other Current Assets e. Loans & Advances f. Inter Sub Office Current A/C g.Inter Sub Unit Current A/C Total Current Assets(A) 4.Less Current Liabilities a .Current Liabilities b. Provisions c.Inter Sub Office Current A/C d. Inter Subunit current A/C Total Current liabilities(B) 5.Net CA/CL(A-B) 6.Deffered Rev.Exps. Profit & loss A/C Total 386733705.10 0.00 386733705.10 5350 136172993.77 84133675.89 3463866.90 6880382.91 1995932.56 101761935.05 0.00 334408787.1 78505703.81 74016382.00 0.00 48737579.32 201259665.1 133149122.0 340243055.99 860131233.04 371278680.10 0.00 371278680.10 5350 130960645.99 81813067.62 6804124.76 5792763.00 4270606.87 14091009.71 69825912.27 313558130.22 46452388.63 90049122.00 21866965.77 0.00 158368476.40 155189653.82 326746497.81 853220181.73 -15455025.0 0.00 -15455025.0 0.00 -5212347.78 -2320608.28 3340257.8 -1087619.91 2274674.31 -87670925.31 69825912.27 -20850656.88 -32053315.18 16032740.00 -21866965.77 -48737579.32 -42891188.73 22040531.82 -13496558.18 -6911051.31 -3.99 0.00 -3.99 0.00 -3.82 -2.75 96.43 -15.80 113.96 -86.15 0.00 -6.23 -40.82 21.66 0.00 -1.00 -21.31 16.55 -3.96 -0.80

(Source: Annual reports) Current Financial Position and Liquidity Position The current assets have decreased by Rs.208506568 lakhs (6.23%) and sundry debtors have decreased by Rs.232060827 lakhs (2.75%). On the other hand there has been an decrease in inventories amounting to Rs.5212347.78 lakhs. The current liabilities have decreased by Rs.42891188.735lakhs (21.31%). This further confirms that the company has improvement in the liquidity position. Long Term Financial Position There is an increase in fixed assets of Rs.860748.5 lakhs (0.11%). There is a decrease in long term loans of Rs.6911051.31 lakhs (0.80%). This surplus that fixed assets are not only financed from long term sources but part of working capital has also been financed from long term

sources. Also it is clear that there is some addition of fixed assets. There is a decrease in loaned funds. Profitability of the Concern There is an increase in the reserves and surplus of the company of Rs.615319956 lakhs (25.53%). This fact depicts that there is a increase in the profitability of the concern.

4.4 MOTAALS COMPREHENSIVE TEST In order to evaluate the overall liquidity position of Coimbatore Murugan Mills, Coimbatore during the period under study, Motaals Comprehensive Test is applied. In this test, a method of ranking has been applied to reach at a more comprehensive assessment of liquidity in which four different ratios viz., networking capital to current assets ratio, inventory to current assets ratio, liquid assets to current assets ratio and loan and advances to current assets ratio have been computed and combines in a points score. A high value of net working capital to current assets ratio or liquid assets to current assets ratios shows greater liquidity and accordingly ranking has been done in that order. On the other hand, a low inventory to current assets ratio indicates more favorable liquidity position and

therefore, ranking has been done on the basis that the lower the total of individual ranks, the more favorable is the liquidity position of the concern and vice versa.

MOTAALS COMPREHENSIVE TEST TABLE SHOWING LIQUIDITY POSITION OF THE COIMBATORE MURUGAN MILLS Net working Inventory to capital to current asset current asset ratio ratio % 44.21 Rank % 48.26 Rank Liquid asset to current asset ratio % 2.39 Rank Loan & advances to current asset ratio % 12.51 Rank Total of rank Ultimate rank

year

2007

10

2008

48.03

41.45

13.29

0.82

10

2009

34.44

51.10

1.49

0.86

17

2010 2011

49.49 19.12

1 5

40.06 44.89

1 3

2.17 0.34

3 5

1.36 6.99

3 2

8 15

5 2

(Source: Annual Reports) The table furnishes that in Coimbatore Murugan Mills the year 2009 &2011 marked the most sound liquidity position and it was followed by 2007, 2008, and 2010. The liquidity position of the mill has no changes in the year 2008 and 2009. It shows the mill has good liquidity position.

CHAPTER-V FINDINGS AND SUGGESTIONS 5.1 FINDINGS The standard norm for the current ratio is 2:1.from the study it is inferred that the current ratio of the firm is not satisfying the standard norm and from the working capital ratio itself we can find that the companys working capital management is insufficient. From the study it is inferred that the quick ratio of the company is declining over the years. The average quick ratio is 0.60. So the company is not satisfying the standard norm.
The inventory turnover ratio is fluctuating over the year. The average ratio is 3.01. The debtors turnover ratio is varying over the study period. The average ratio is 4.08.

 The creditors turnover ratio indicates that there are fluctuations over the years. The lower ratio indicates that company enjoys a greater credit period to repay the liability. The working capital turnover ratio indicates a fluctuating trend in the study period. In 2007-08 there is a decrease in the same ratio because of the decrease in working capital compared to net sales. Gross working capital ratio is declining over the year. The average gross working capital ratio is -0.31 this shows insufficient usage of current asset for each rupee of sales. The solvency position of the company is declining over the year. This means outside liabilities are increased. Since the company is running under loss from 2007-2011 the ratio also reflects a negative indication to the overall performance. The return on investment ratio is also indicating a negative ratio. This shows return from the investment is negative. The fixed assets of the company from 2007-2011 is fluctuating. The FATR ratio is also indicating a fluctuating tendency. From the study it can be easily identify that performance of the company shows a negative trend year after year. For all the years it shows a negative figure. It is mainly because of the low sales margin compared to high cost of production. It can be inferred from the study that current asset of the company shows a gradual increase in current asset for the two years 2008 and 2010 and remaining three years it shows a decrease in trend. In the year 2008-2009 higher working capital turnover ratio shows that there is low investment in working capital and there is more profits. It is finding by working capital turnover ratio. The Motaals comprehensive test applied in the study shows that the company enjoyed most sound liquidity position in the years 2009, 2011 and 2008. Comparative balance sheet statements is used to analyze the liquidity position, financial position and profitability of the Mill in the years 2007-2008, 2008-2009, and 2009-2010.

 In the year 2007-2008 and 2008-2009 there is an increase in loaned funds than the share capital so this increases the interest liability for the company. There is a decrease in loaned funds in the year of 2009-2010.

5.2 SUGGESTIONS The amount of working capital of the company is increasing since 2008. So the company should keep the current assets by increasing its cash and bank balance. Inventory management of the company is not satisfactory. The raw materials and work-inprogress inventory holding periods are high. Therefore the company should reduce the holding period as much as possible. The debtors of the company is fluctuating over the years, company should adopt a competent credit policy to attract the customers. Increasing debtors is a solution to overcome the liquidity problem. Creditors turnover ratio shows that the payment period enjoyed by the company is high. High creditors payment period will affect the regular supply of raw materials so company can make necessary step to pay its creditors at a reasonable time period.

 There has been decreasing trend in the financial soundness of the company in the all years effective steps should be taken to find the root cause and control it. The Company is not adopting proper inventory systems like A.B.C. analysis, V.E.D. analysis etc. this inventory system can make the inventory management more result oriented. The surplus fund of the unit should be invested in some short marketable securities, rather than providing it to its subsidiary free of cost, to improve profitability along with liquidity. The company can reduce the cost of production and try to improve its profitability.

5.3 CONCLUSION The study was conducted to analyze the working capital management in Coimbatore Murugan Mills, Coimbatore. The financial statements of the company was analyzed and interpreted. The analysis and interpretation of data relating to working capital management of Mill helped to reach a conclusion that working capital management efficiency of Coimbatore Murugan Mills, Coimbatore is not up to the level. So the company must take necessary steps to improve the net working capital. It is right time for Coimbatore Murugan Mills, Coimbatore to formulate certain policies to keep a well monitored working capital for better profitability, reliability, consistency. If all the policies will adopt by a company in a proper way and to utilize the resources

effectively then it will sure that the company will reach its zenith. suitable method to manage the working capital effectively.

The company should adopt a

APPENDICES BIBLIOGRAPHY REPORTS Annual reports of Coimbatore Murugan Mills, Coimbatore for the Year 2007 to 2011. BOOKS
Dr.S.N.Maheswari, Financial Management Principles and Practices, 10th Edition, Sultan

Chand & sons publishers New Delhi. Khan M.Y. and Jain P.K., Financial management, Tata Mc-Graw Hill (P) Limited, New Delhi.
R.K.Sharma and S.K.Gupta, Management Accounting Principles & Practices, 8th Edition

Kalyani Publication. C.R.Kothari, Research Methodology, 2nd Edition, New Age International (P) Ltd.
P.R.Vittal, Business Mathematics and Statistics, 6th Edition, Margham Publications,

Chennai.
Dr.S.N.Maheswari, Dr.S.K.Maheswari and SHARAD K Maheswari,Accounting for

Management, 2nd Edition, Vikas publishing house, New Delhi.

M. Pandey, Financial Management, Ninth Edition, Vikas Publishing House Pvt. Ltd. M.Y. Khan and P.K. Jain, Financial management, Vikas Publishing house ltd., New Delhi. K.V. Smith,Management of Working Capital,Mc-Grow-Hill, New York. Satish Inamdar, Principles of Financial Management,Everest Publishing House.

WEBSITE REFERENCES www.Google.com www.Yahoo.com