PROJECT REPORT ON

WORKING CAPITAL ON QCML COMPANY

MASTERS OF COMMERCE DEGREE

SEMESTER- IV

ACADEMIC YEAR: 2016-17

SUBMITTED BY
MISS. MICHEAL AUGUSTINE MARY
ROLL NO: 18

N.E.S. RATNAM COLLEGE OF ARTS, SCIENCE AND

COMMERCE, N.E.S. MARG, BHANDUP (WEST),
MUMBAI-400078.

1
N.E.S. RATNAM COLLEGE OF ARTS, SCIENCE AND
COMMERCE, N.E.S. MARG, BHANDUP (WEST),
MUMBAI- 400078.

CERTIFICATE

This is to certify that the project report on WORKING

CAPITAL ON QCML COMPANY is bonafide record of
project worked done by MISS. MICHEAL AUGUSTINE
MARY submitted in partial fulfillment of the requirement of
the award of the Master of Commerce Degree University of
Mumbai during the period of her study in the academic year
2016-17.
INTERNAL EXAMINER:

EXTERNAL EXAMINER:
Principal
Mrs. Rina Saha

2
 DECLARATION

I hereby declare that this Project Report entitled

WORKING CAPITAL ON QCML COMPANY
submitted by me for the the award of Masters Of Commerce
Degree; University of Mumbai is a record of Project work
done by me during the year 2014-15. This is entirely my own
work.

NAME: MICHEAL AUGUSTINE MARY

Roll No : 18

Signature

Place: Mumbai, Bhandup (W)

Date:

3
 ACKNOWLEDGEMENT

I owe a great many thanks to great many people who

helped and supported me doing the writing of this book.

My deepest thanks to lecturer, MR.RAJIV MISHRA

of the project for guiding and correcting various documents
of mine with attention and care. He has taken pains to go
through my project and make necessary corrections as and
when needed.
I extend my thanks to the principal of NES Ratnam
College of Arts Science and Commerce, Bhandup (w), for
extending her support.

My deep sense of gratitude to Principal Mrs. Rina

Saha of NES Ratnam College of Art, Science and Commerce
for support and guidance. Thanks and appreciation to the
helpful people at NES Ratnam College of Arts, Science and
Commerce , for their support.

I would also thank my institution and faculty

members without whom this project would have been a
distant reality. I also extend my heartfelt thanks to my family
and well-wishers.

Candidate Name: MICHEAL AUGUSTINE MARY

4
CHAPTER- 1

5
 INTRODUCTION ABOUT THE PROJECTABOUT
THE STUDY

MEANING OF WORKING CAPITAL:

Capital require for a business can be classified under

two main categories, (a).fixed capital, (b).working
capital.

Every business needs funds for two purposes for its

establishment and to carry our its day-to-day
operations. Long-term funds are required to create
production facilities through purchase of fixed assets
such as plant and machinery, land, building, furniture
etc.

DEFINITION :
In the words of shubin, working
capital is the amount of funds necessary to cover the
cost of operating the enterprise.

CONCEPT OF WORKING CAPITAL:

There are two concept of working capital:
(A).Balance sheet concept,
(B).Operating cycle or circular flow concept.
(A).Balance Sheet Concept:

6
 There are two interpretations of working
capital under the balance sheet concept:

1. Gross working capital,

2. Net working capital.
In the broad sense, the term working
capital refers to the gross working capital and
represents the amount of funds invested in current
assets. This, the gross working capital is the capital
invested in total current assets of the enterprise.
NET WORKING CAPITAL=CURRENT ASSETS-CURRENT LIABILITIES.

(B).Operating cycle or circular flow concept:

As discussed earlier, working capital
refers to that part of firms capital which is required
for financing short-term or current assets keep
revolving fast and are being constantly converted into
cash and this cash flow. Hence, it is also known as
revolving or circulating capital.

CHART NO. 1

7
 Cash

Debtors Raw materials

(Receivables)

Work in progress
Sales

Finished
goods

(Working capital cycle: circular flow

concept)

CLASSIFICATION OR KINDS OF WORKING

CAPITAL:
Wording capital may be classified in
two ways:
(a)On the basis of concept,
(b)On the basis of time.

On the basis of concept, working

capital is classified as gross working capital and net
working capital as discussed earlier. This classification
is important from the point of view of the financial

8
 manager. On the basis of time, wording 1.
Permanent or fixed working capital.

2. Temporary or variable working capital.

CHART NO.2
KINDS OF WORKING CAPITRAL

On the basic of concept On the basic of time

Gross working Net working Permanent or fixed working Temporary or variable

capital capital capital working capital

Regular working Reserve working Seasonal working Special working

capital capital capital capital

1. Permanent or Fixed working capital:

9
 Permanent or fixed working
capital is the minimum amount which is required to
ensure effective utilization of fixed facilities and for
maintaining the circulation of current assets. There is
always a min mum level of current assets which is
continuously required by his enterprise to carry out its
normal business operations. As the business grows, the
requirements of permanent working capital also
increase due to the increase in current assets.

2. Temporary or Variable working capital:

Temporary or variable working
capital is the amount of working capital which is
required to meet the seasonal demands and some
special exigencies. Variable working capital can be
further classified as seasonal working capital and
special working capital. Most of the enterprises have
to provide additional working capital to meet the
seasonal and special needs. The capital required to
meet the seasonal needs of the enterprise is called
seasonal working capital.

IMPORTANCE OR ADVANTAGES OF ADEQUATE

WORKING CAPITAL:
The main advantages of maintaining
adequate amount of working capital are as follows:

10
1. Solvency of the Business:
Adequate working capital helps in
maintaining solvency of the business by providing
uninterrupted flow of production.

2. Goodwill:
Sufficient working capital enables a
business concern to make prompt payments and hence
helps in creating and maintaining goodwill.
3. Easy Discounts:
A concern having adequate working
capital, high solvency and good credit standing can
arrange loans from banks and others on easy and
favorable terms.

4. Cash Discount:
Adequate working capital also enables a concern
to avail cash discounts on the purchases and hence it
reduces costs.

5. Regular supply of Raw Materials:

Sufficient working capital ensures
regular supply of raw materials and continuous
production.

11
6. Regular payment of Salaries, Wages and Other day-
to-day commitments:
A company which has ample
working capital can make regular payment of salaries,
wages and other day-to day commitments which raises
the morale of its employees, increases their efficiency,
reduces wastages and costs and enhances production
and profits.

THE NEED OR OBJECTS OF WORKING CAPITAL:

The need for working capital cannot be

over emphasized. Every business needs some amount
of working capital. The need for working capital arises
due to the time gap between production and realization
of cash from sales. There is an operating cycle
involved in the sales and realization of cash. There are
time gaps in purchaser of raw materials and
production; production and sales; and sales and
realization of cash. Thus, working capital is needed for
the following purposes:
1. For the purchase of raw materials, components and
spares.
2. To pay wages and salaries.
3. To incur day-to-day expenses and overhead costs
such as fuel, power and office expenses, etc.

12
4. To meet the selling costs as packing, advertising,
etc.
5. To provide credit facilities to the customers.
6. To maintain the inventories of raw material, work-
in-progress, stores and spares and finished stock.

FACTORS DETERMINING THE WORKING CAPITAL

REQUIREMENTS:
The working capital requirements of a
concern depend upon a large number of factors such as
nature and size of business, the character of their
operations, the length of production cycles, the rate of
stock turnover and the state of economic situation. It is
not possible to rank them because all such factors are
of different importance and the influence of individual
factors changes for a firm over time. However, the
following are important factors generally influencing
the working capital requirements.

1. Nature or character of Business:

The working capital requirements of a
firm basically depend upon the nature of its business.
Public utility undertakings like electricity, water
supply and railways need very limited working capital

13
because they offer cash sales only and supply services,
not products, and as such no funds are tied up in
inventories and receivables.

2. Size of Business/scale of operations:

The working capital requirements of a
concern are directly influenced by the size of its
business which may be measured in terms of scale of
operations. Greater the size of a business unit,
generally larger will be the requirements of working
capital.

3. Production policy:
In certain industries the demand is
subject to wide fluctuations due to seasonal variations.
The requirements of working capital, in such cases,
depend upon the production policy.

4. Manufacturing process/Length of production cycle:

In manufacturing business, the
requirements of working capital increase in direct
proportion to length of manufacturing process. Longer
the process period of manufacture, larger is the amount
of working capital required.

5. Seasonal Variations:

14
 In certain industries raw material is
not available throughout the year. They have to buy
raw materials in bulk during the season to ensure an
uninterrupted flow and process them during the entire
year.

6. 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 having a high rate of stock turnover
will need lower amount of working capital as
compared to a firm having a low rate of turnover.
7. Credit Policy:
The credit policy of a concern in its
dealings with debtors and creditors influence
considerably the requirements of working capital. A
concern that purchases its requirements on credit and
sells its products/services on cash requires lesser
amount of working capital.

OBJECTIVES OF THE STUDY

1. To study about the effect of working capital

management of Quilon Co-operative Spinning Mills
Ltd.

15
2. To analyze the liquidity position and current asset
movement of the company.

3. To find out the gross and net working capital of the

company.

4. To know about the changing position of working

capital by comparing current asset and current
liability of two years.

5. To suggest suitable measures for the improvement

of working capital.

16
 1.2 INTRODUCTION ABOUT THE INDUSTRY

TEXTILE INDUSTRY

The textile industry is a group of related

industries, which uses a variety of natural (cotton,
wool, etc.) and/or synthetic fibres to produce fabric. It
is a significant contributor to many national
economies, encompassing both small and large-scale
operations worldwide. The sequence of the
manufacture of textiles is illustrated in the flow
diagram in Figure 1 (see process description).
Subdivision of the textile industry into its various
components can be approached from several angles.
According to reference, the classical method of
categorizing the industry involves grouping the
manufacturing plants according to the fibre being
processed that is, cotton, wool, or synthetics. The
modern approach to textile industry categorization,
however, involves grouping the manufacturing plants
according to their particular operation.
Wool Scouring
Wool Finishing
Dry Processing
Woven Fabric Finishing

17
 Knit Fabric Finishing
Carpet Manufacture
Stock and Yarn Dyeing and Finishing
.
Traditionally, the textile industry is very energy,
water, and chemical-intensive. About 60% of the
energy is used by dyeing and finishing operations.
Environmental problems associated with the textile
industry are typically those associated with water
pollution. Natural impurities extracted from the fibre
being processed along with the chemicals used for
processing are the two main sources of pollution.
Effluents are generally hot, alkaline, strong smelling
and colored by chemicals used in dyeing processes.
Some of the chemicals discharged are toxic. Other
environmental issues now considered equally
important and relevant to the textile industry include
air emissions, notably Volatile Organic Compounds
(VOC).

CHAPTER- 2
INTRODUCTION ABOUT THE COMPANY
COMPANY PROFILE

Textile industry in Kerala plays an important role.

The handloom industry is one of the traditional

18
industries of Kerala and products of it are part of
Kerala culture. This is a sector which had employed
lacks of Kerelates. The weavers were faced with the
problem of non availability of cotton yarn. The
situation is such that the weavers were almost the
verge of facing unemployment. The unemployment is
a universal issue, which every country in the world is
facing. In a developing country like India the problem
of unemployment is sever.

In order to cater the needs of weavers and also to

provide employment opportunity to backward areas,
the Government of Kerala took decision to start five
spinning mills in the co-operative sector with this
object a society named Quilon Co-operative Spinning
Mills Limited was registered on February 13, 1976
having capacity of 2500 spindles to manufacture
cotton and manmade fiber. The area of operation of the
society spread allover Kerala. Initial capital required
for Mill was collected through various sources. The
estimated cost of project was 636 lacks. The total cost
of the project when it is completed on

Distribution of venture capital

19
 Components Amounts (in lacks)
Share capital 254.96
Investment subsidy 15.00
Terms loans from IDBI 145.00
Term loans from ICICI 75.00
Term loans from IFCI 70.00
Term loans from KSCB 28.00
Loans from Govt. of 10.19
Kerala
Interest areas 118.85

Total 717.00
The capital required for the company were mobilized
from the sources like issue of shares, subsidy from
government and other financial institutions like IDBI,
ICICI, IFCI,KSCB and other interest areas of the
funds. The venture capital incurred for this project can
be analyzed in the above table.

OBJECTIVES OF THE MILL

The main objectives of the QCSML are;

1. To supply cotton yarn to members.

20
 2. To promote industrial development in rural areas.
3. To provide gainful employment to rural people.
4. To safeguard the weaker section from
exploitation of large sellers.

LOCATION

The QCSML is situated at Karamcodu, Chathannur

about 20 km. away from Kollam town and 53 km.
away from Thiruvananthapuram. The nearest railway
station is at Paravoor, which is about 12km. away from
the mill. The total land area of the mill is 21.74acers.
The main advantage of mills location is.

1. It has facilities of good network of transportation.

2. It is situated beside NH47.
3. It has good working environment.
4. It has an good accessibility for its workers and
officers.
5. the location being industrially backward area
avails the society many benefits from the
government like subsidies, allowance, tax
concession etc,
CAPITAL STRUCTURE

21
 The authorized capital of QCSML at the
beginning was Rs.3 cores, then it increased to 4 cores.
The paid-up capital of QCSML can be summarized in
the following table.
Capital structure

Component of capital Amount % of component

of capital

Co-operative society 1471100 5.39

Individuals 44900 1.65

Govt. of Kerala 249556200 91.49

Others 389100 1.43

Share application 2206 0.008

money

Total 28863506 100

On analyzing the above table, it was found that

the Govt. of Kerala is the major share holder of the
QCSML. They have taken 91.49% share of the
company. Co-operative society and others take the
balance.

22
ORGANIZATIONAL STRUCTURE

QCSML is one of the medium scale industry

registered under the co-operative societies Act and
cones under industrial development. The supreme
authority of QCSML is vested in the hands of board of
directors. The entire management of the firm is
controlled by board of directors and they are appointed
by the Govt. of Kerala. The day-to-day activities of the
mill are vested M.D., state government has the
authority to appoint this M.D. He will be appointed for
five years. Board of directors is the decision making
body and managing director is the implementing
authority.

CHAPTER- 3
RESEARCH METHODOLOGY

Meaning of Research:

23
 Research in common parlance refers to
a search for knowledge. The advanced learners
dictionary of current English lays down the meaning
of research as a careful investigation or inquiry
specially through sear for new facts in any branch of
knowledge.

Definition:
According to Woody, Research
comprises defining and redefining problems
formulating hypothesis or suggested solution
collecting organizing and evaluating, data making
deduction and researching concessions and at last
carefully the concessions to determine whether they fit
the formulating the hypothesis.

CHAPTER- 3
ANALYSIS AND INTERPRETATION

24
SCHEDULE SHOWING CAHNGES IN WORKING
CAPITAL:
Schedule showing changes in working
capital is an important tool to study the changes in
working capital of the concern and can also throw
light on cause for these changes. Working capital
means the excess of current asset over current
liabilities. Statement of changes in working capital is
prepared to show the changes in the working capital
between the two balance sheet dates. This statement is
prepared with the help of current assets and current
liabilities derived from the two balance sheets.

As, WORKING CAPITAL= CURRENT ASSETS-

CURRENT LIABILITIES. So,
An increase in current assets increases working
capital.
An decrease in current assets decreases, working
capital.
An increase in current liabilities decreases
working capital, and
An decrease in current liabilities increase
working capital.

25
 Year Effect on working
capital

Particulars 2003 2004 increase Decrease

26
A. CURRENT
ASSETS
1528831 1534926 6095
Cash and bank 11566693 10072888 --- 149
balance 5839806 3285475 --- 255
Inventories 2161884 5609831 3439947
Sundry 644111 803372 159261
debtors 156255 132299 --- 2
Deposits 1455643 1347866 --- 10
Other current
assets
Advances for
expenses
Advances for
employees

Total 1477
34018
B.CURRENT
LIABILITIES
AND
PROVISIONS

Current
liabilities

27
 42585294 57359663
1409135 1375117

43994429 58734780

20633206 35948123

15314917

35948123 359481 19053567 19053567

23
Table No. 3

Schedule of changes in Working Capital for (2003

2004)

INFERENCE:

28
 The above table shows that schedule of
changes in working capital as on 2003-2004. The
current asset have decreased from 23361231 to
22786657 in the year 2003-2004. Current liability for
the year 2003 was 43994429. It has increased to
58734780 in the year 2004. The net decrease in
working capital is 15314917.

Table No. 4

Schedule of changes in Working Capital for (2004

2005)

Year Effect on working

capital
Particulars
2004 2005 Increase Decrease

29
A. CURRENT
ASSETS
1534926 1862586 327660 ----
Cash and bank 10072888 8709448 --- 1363440
balance 3285475 4389755 1104280 ---
Inventories 5609831 2154884 --- 3454947
Sundry 803372 543125 --- 260247
debtors 132299 125145 --- 7154
Deposits 1347866 443049 --- 904817
Other current
assets 22786657 18227992
Advances for
expenses
Advances for
employees

57359663 55629705
Total 1375117 1412255 1729958
37138
B.CURRENT
LIABILITIES
58734780 57041960

30
AND
PROVISIONS 35948123 38813968

Current 2865845
liabilities
Provisions 2865845

Total

Working
capital (A-B)

Net decrease
in Working
Capital

38813968 38813968 6027743 6027743

INFERENCE:
The above table shows that schedule of
changes in working capital as on 2004-2005. The
current assets have decreased from 22786657 to
18227992 in the year 2004-2005. Current liability for

31
the year 2004 was 58734780. It has decreased to
57041960 in the year 2005. The net decrease in
working capital is 2865845.

Table No. 5

Schedule of changes in Working Capital for (2005

2006)

Year Effect on working

capital
Particulars
2005 2006 increase Decrease

A. CURRENT
ASSETS
1862586 2176290 313704 ---
Cash and bank 8709448 6208849 --- 2500599
balance 4389755 4439950 50195 ---
Inventories 2154884 2184884 30000 ---
Sundry 543125 181967 --- 361158
debtors 125145 115629 --- 9516
Deposits 443049 594222 151173 ---

32
Other current
assets 18227992 15901791
Advances for
expenses
Advances for
employees

55629705 84046249 --- 28416544

Total 1412255 1357654 54601 ---

57041960 85403903

33
B.CURRENT
LIABILITIES 38813968 69502112
AND
PROVISIONS 30688144
30688144
Current
liabilities
Provisions

Total

Working
capital (A-B)

Net decrease
in Working
Capital

69502112 69502112 31287817 31287817

INFERENCE:
The above table shows that schedule of
changes in working capital as on 2005-2006. The

34
current asset have decreased from 18227992 to
15901791 in the year 2005-2006. The net decrease in
working capital is 30688144.
Table No. 6

Schedule of changes in Working Capital for (2006

2007)

Year Effect on working

capital
Particulars
2006 2007 increase Decrease

A. CURRENT
ASSETS
2176290 1767573 --- 408717
Cash and bank 6208849 10450073 4241224 ---
balance 4439950 2762193 --- 1677757
Inventories 2184884 2154884 --- 30000
Sundry 181967 185510 3543 ---
debtors 115629 106123 --- 9506
Deposits 594222 760348 166125 ---
Other current
assets
15901791 18186704

35
Advances for
expenses
Advances for
employees

84046249 110823689
Total 1357654 1273990 --- 26777440
83664 ---

85403903 112097679

36
B.CURRENT
LIABILITIES 69502112 93910975
AND
PROVISIONS 24408863

Current 24408863
liabilities
Provisions

Total

Working
capital (A-B)

Net decrease
in Working
Capital

93910975 93910975 28903420 28903420

INFERENCE:
The above table shows that schedule of
changes in working capital as on 2006-2007. The

37
current asset have increased from 15901791 to
18186704 in the year 2006-2007. Current liability for
the year 2006 was 85403903. It has increased to
112099779 in the year 2007. The net decrease in
working capital is 24408863.

Table No. 7

Schedule of changes in Working Capital for (2007

2008)

Year Effect on working

capital
Particulars
2007 2008 increase Decrease

A. CURRENT
ASSETS
1767573 2171506 403933 ---
Cash and bank 10450073 9263822 --- 1186251
balance 2762193 5133565 2371372 ---
Inventories 2154884 2154884 --- ---
Sundry 185510 1138456 952946 ---
debtors 106123 177503 71380 ---
Deposits 760348 664228 --- 96120

38
Other current
assets 18186704 20703964
Advances for
expenses
Advances for
employees

110823689 118920591
Total 1273990 1429756 --- 8096902
--- 155766
B.CURRENT
LIABILITIES
112097679 120350347

39
AND
PROVISIONS 93910975 99646383

Current 5735408
liabilities
Provisions 5735408

Total

Working
capital (A-B)

Net decrease
in Working
Capital

99646383 99646383 9535039 9535039

INFERENCE:
The above table shows that schedule of
changes in working capital as on 2007-2008. The
current assets have increased from 18186704 to
20703964 in the year 2007-2008. Current liability for

40
the year 2007 was 112099779. It has increased to
120350347 in the year 2008.The net decrease in
working capital is 5735408.

RATIO ANALYSIS

1) CURRENT RATIO:
Current ratio explains the relationship
between current assets and current liabilities. The
general norms are to maintain 2:1 ratio. It can be
calculated by dividing current assets by current
liabilities.

CURRENT ASSETS
CURRENT RATIO =
CURRENT LIABILITIES

Table No. 8

STATEMENT SHOWING CURRENT RATIO

YEAR 2003- 2004- 2005- 2006-2007 2007-2008

2004 2005 2006

CA 22786660 18227994 15901791 18186704 20703963

41
 CL 58734780 57041960 85403903 112097679 120350346

CR 0.38:1 0.32:1 0.19:1 0.16:1 0.17:1

INTERFERENCE:
Current ratio of Quilon Co-operative
Spinning Mills Ltd shows that the company is running
bad position. The companys current ratio is bellow the
arbitrary standard of liquidity. In 2005-2006 the ratio
decreased from 0.32 to .16 because of a high increase
in the current liabilities. The ratio shows the liquidity
position of the company is very bad.

CHART NO: 4
CURRENT RATIO

42
2) QUICK RATIO:
The quick ratio tells about the
relationship between quick assets and current
liabilities. It is calculated by dividing quick assets by
current liabilities. The ideal norm is 1:1. Quick assets
are obtained by subtracting prepaid expenses and
inventories from current assets.

43
 QUICK ASSETS
QUICK RATIO =CURRENT LIABILITIES

QUICK ASSETS = SUNDRY DEBTORS + CASH &

BANK BALANCE + LOANS & ADVANCES

Table No. 9

YEAR 2003- 2004- 2005- 2006-2007 2007-2008

2004 2005 2006

QA 6300566 682535 7326089 5396236 8146800

CL 58734780 57041960 85403903 112097679 120350346

QR .11:1 .12:1 .08:1 .04:1 .06:1

STATEMENT SHOWING QUICK RATIO
INFERENCE:
From the above table reveals that, Quick
ratio of the company is above the unsatisfactory level
that is the concern is not able to meet its short-term
obligations. In the year 2006-2007 the ratio is .04,
where it shows huge decrease in current assets. The
ratios show that the company is in bad liquidity
position.

44
 CHART NO: 5
QUICK RATIO

3) ABSOLUTE LIQUID RATIO:

Absolute liquid ratio shows the
relationship between the sum of cash and marketable
securities to the total current liabilities. The ideal ratio
is 0.5:1.

ABSLOUTE LISQUID ASSETS = CASH & BANK

+MARKETABLE SECURITIES
Table No. 10

45
 YEAR 2003- 2004- 2005- 2006-2007 2007-2008
2004 2005 2006

Absolute 1534926 1862586 2176289 1767573 217150

Asset

CL 58734780 57047960 85403903 112097679 12035034

ALR .026:1 .032:1 .025:1 .015:1 .018:1

STATEMENT SHOWING ABSOLUT LIQUID
RATIO

INFERENCE:
From the above table shows that the
companys absolute liquid ratio is less than the ideal
ratio. In all the year the ratio is below the satisfactory
level. This is because of low cash and bank balance of
the firm.
4) WORKING CAPITAL TURNOVER RATIO:
The ratio is calculated by dividing sales
by working capital. It shows the number of times the
working capital of the company is turned into sales.

46
WORKING CAPITAL NET SALES
TURN OVER RATIO =
NET WORKING CAPITAL
Table No. 11

STATEMENT SHOWING WORKING CAPITAL

TURNOVER RATIO

47
 YEAR 2003- 2004- 2005- 2006- 2007-
2004 2005 2006 2007 2008

Net 77881005 83962637 71752204 55763969 53098257

Sales
Net
Working - - - - -
Capital 35948123 38813968 69502112 93910975 99646383
Working
Capital
turnover -2.17 -2.16 -1.03 -0.59 -0.53
Ratio times times times times times

INFERENCE:
Working capital of a company is directly related to
sales. The above table, it is inferred that the working
capital turnover ratio is in a lower status. This shows
the firm is inefficient to utilize the working capital.

CHART NO: 7
WORKING CAPITAL TURN OVER RATIO

48
 5) INVENTORY TURN OVER RATIO:
It measures the velocity of conversion
of the stock into sales. It is obtained by dividing sales
by average inventories. Usually a higher inventory
turnover indicates efficient management of inventory.

SALES
INVENTORY TURN OVER RATIO =
INVENTORY
Table No. 12

STATEMENT SHOWING INVENTORY

TURNOVER RATIO

49
 YEAR 2003- 2004- 2005- 2006- 2007-
2004 2005 2006 2007 2008

Net sales 77881005 83962637 71752204 55763969 53098257

Average
Inventory 10072888 8709448 6208849 10450073 9263822

Stock
turnover 7.73 9.64 11.56 5.34 5.73
ratio times times times times times

INFERENCE:
The above table shows the inventory turn over
ratio of QCSML is a decreasing trend. This is because
of the firms over investment in inventories. This
analysis shows the inefficiency of management in
managing the inventories.
6) DEBTORS TURNOVER RATIO:
Normally almost all the firms try to
improve sales by giving credit. So the debtors and
receivables are inevitable. It indicates the velocity of
the debt collection of the firms. In simple words it
indicates the number of times average debtors are
turned over during the year. It is calculated as,

NET CREDIT
SALES

50
DEBTORS TURNOVER RATIO =
AVERAGE TRADE DEBTORS
Table No. 13
STATEMENT SHOWING DEBTORS TURNOVER
RATIO

YEAR 2003- 2004- 2005- 2006- 2007-

2004 2005 2006 2007 2008
Net
credit 77881005 83962637 71752204 55763969 53098257
Sales
Average
Trade 4562640 3837615 4414852 3601071 3947879
Debtors
Debtors
turnover 17.07 21.88 16.25 15.48 13.45
ratio times times times times times

INFERENCE:
It indicated the numbers of time debtors are
turned over during a year. Generally higher the value
of debtors turnover ratio, the more efficient in the
management of debt. Here the debtors turnover ratio
of the company shows an increasing trend. But this is

51
not in a satisfied condition. There is a slight increase in
the debtors turnover ratio.

CHART NO: 9
DEBTORS TURNOVER RATI

7) AVERAGE COLLECTION PERIOD:

The average collection period represents
the average number of days for which a firm has to

52
wait before its receivables are converted into cash. It is
calculated by dividing the debtors by credit sales per
day.

DAYS IN AN YEAR
AVERAGE COLLECTION PERIOD =
DEBTORS
TURNOVER RATIO

Table No. 13

STATEMENT SHOWING AVERAGE

COLLECTION PERIOD

YEAR 2003- 2004- 2005- 2006- 2007-

2004 2005 2006 2007 2008
Days in
an year 365 365 365 365 365
Debtors
turnover 17.07 21.88 16.25 15.48 13.45
ratio
Average
Collection 21 17 days 22 days 24 days 27 days
period days

INFERENCE:

53
 The above table reveals that, average collection
period for the year 2004-2005 has been decreased
when compare to previous year. It shows the firm
takes 17 days to convert receivables into cash. Where
as in the year 2006-2007 the firms take longer period
of 23 days to convert into cash and 27 in 2007-2008.
this is not a satisfactory one.

8) CREDITORS TURN OVER RATIO:

The creditors turnover ratio indicates
the velocity, which the creditors are turned over in
relation to purchase. Higher the ratio, better it is
otherwise lower the creditors velocity, the more is the
time taken for payment. Finding out how much time
the firm is likely to take in repaying its made creditors.

NET CREDIT
PURCHASE CREDITORS TURNOVER RATIO
=AVERAGE ACCOUNT PAYABLE
Table No. 14

STATEMENT SHOWING CREDITORS

TURNOVER RATIO

YEAR 2003- 2004- 2005- 2006- 2007-2008

2004 2005 2006 2007

54
 Net
Credit 53305182 57158835 46350827 37279647 37276154
Purchase
Average
a/c 51201027 48070959 73104140 96567480 102773624
payable
Creditors
turnover 1.04 1.19 0.63 0.39 0.36 times
ratio times times times times

INFERENCE:
The above table shows creditors velocity of the
concern is decreased year by year and in 2007-2008 it
reaches its lowest minimum. This lowest credit
velocity is not favorable to the concern.

CHART NO: 11
CREDITORS TURNOVER RATIO

55
 CHAPTER- 4
FINDINGS

1. The net working capital of the mill shows a

decreasing trend, during the study period of 2003-
2004 to 2007-2008. Moreover negative balance
through out these years.

56
2. The current ratio and quick ratio is below the
standard norms in all the years. The company is
inefficient to meet the current obligations in time.

3. Absolute liquid ratio shows that the cash position

of the firm is not good.

4. The working capital turnover ratio reveals that it

is not favorable for the firm.

5. Inventory turnover ratio indicates a decreasing

trend during these years. This is because of the
firms over investment in inventories.

6. The study reveals that the debtors turnover ratio

is not in a satisfactory level. The firm is not
efficient in handling the debt.

7. Creditors turnover ratio reveals that the creditors

velocities are decreased year by year.

8. The average collection period shows a increase in

trend, it is not satisfactory for the firm.

CHAPTER- 5
RECOMMENDATIONS

57
1. The management have improve their efficiency in
collecting the debts.

2. For avoiding the shortage of raw material, the

company have to find more easy available
sources.

3. The firm have to implement modern equipments

in production, it helps to producing quality
products.

4. The firm have to increase their efficiency to

settlement of loans through dear cut plans.

5. The firm should try to reduce the inventory

turnover ratio by keeping standard credit policies.
The company may take effects to collect the debts
promptly. The customers should be sent
periodical reminders if they failed to pay in time.

6. The company can try to reduce the excess of

investment in current assets, especially in the
debtors. The higher investment in current assets
will severally affect the profitability of the firm.

58
CHAPTER- 6
CONCLUSION

Working capital is the life-blood &

controlling nerve centre of a business. No business
can be successfully run without an adequate amount
of working capital. It is very essential to maintain
the smooth running of a business. The concept of
working capital has its own importance in a going
concern. Generally negative balance is generally
offset soon.

This study explains the management of

working capital by the QCSML management. The
net working capital of the concern decrease year by
year. Now it is badly reaches in a negative position.
Because of the high increase in the cost of raw
materials, the current liability reaches its maximum
and this badly affected to the management and they
were failed to settled the loans and other liabilities.
This study shows that the management is failed to
handle the management of working capital and they
facing a big loss.

59
60