Edit Working Capital

INTRODUCTION
Working, capital is needed to support day to day operations and sales

activities of a business; working capital management involves all aspects of the administration of
current assets and current liabilities. It absorbs a substantial part of the time of financial
managers and their staffs. Today increasing attention is being placed to both theory and the
practice of working capital management because firm’s profitability and liquidity are determined
in part by the way it working finance is managed.
There are two general concepts of working capital such as
1) Gross working capital
2) Net working capital
Gross working capital focuses attention on two aspects of current assets management as
optimum investment in current assets on the other hand net working capital is the difference
between Current Assets & Current Liabilities. In other words net working capital in that portion
of firms current assets which is financed with long term funds rinse assent current liabilities
represents sources of short term funds as long as current assets exceeds must be financed with
long-term source
Sugar Industry :
Sugar industry is one of the largest agro based industry in India. Next to sugar industry
holds the pride of place as an instrument of rural development.The extension of sugar industry
cultivation and setting up new factories since independence have greatly contributed to the socio-
economic development of some rural tracts in the country auth an investment of about 2000
cores the sugar industry provides employment to nearly 4 lakes workers about 80 million farmers
and engaged in sugar cane cultivation in India
In the beginning of sugar industry there was no progress, in the sugar industry. Sugar
industry protection was granted since 1932 efforts were made to establish a modern industry.
Sugar cane is grown nearly in all parts of India.
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Sugar cane growing area in the country may be broadly divided in two tropical belts. In
the sub tropical and tropical, the sub tropical belt mainly comprises the state of Punjab, Uttar
Pradesh, Bihar, Madhya Pradesh and West Bengal. The tropical belt covers Maharashtra,
Gujarat, A.P., Tamil Nadu and Kerala. The two belts are categorized and by marked difference in
climate and agriculture conditions
Thandava Co-operative Sugar Limited

It is a public sector organization involved in the manufacturing of sugar. In this
organization situated on the outside of the town and easily acquirable by public transport.
Thandava Co-operative sugar was one of the oldest industry in India, situated the Thandava
River at Payakaraopeta in Vizag dist.
The main activity of the organization is manufacturing of sugar and its by products from
the raw material i.e. sugarcane which produced from fields in the surrounding villages.
Through it is the one if oldest industry in India due to bad utilization of resources and odd idea
of working capital management the firm is suffering from losse
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NEED FOR THE STUDY
 TO Present an overview on working capital analysis management
 To study the short term financial position of employ
 To examine and the working capital management of the firm and find out. The effective
utilization of working capital
 To study the components of working capital during the seven years period under study
 To offer suggestions for the improvement of working capital management in the

organization
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OBJECTIVES OF THE STUDY
The present study is intended to analyze the practice in working capital management in
Thandava co-operative sugar industry.
The objectives of the study are:
 To know the working capital position in THANDAVA Co-operative Sugar industry.
 To study the changes in the working capital management in the organization.
 To study the liquidity position of Thandava co-operative sugar HD considering

liquidity ratio.
 To study the overall operating efficiency in performance.
 To study the efficiency with which the firm is utilizing its various assets in generating
sales.
 To suggest guidelines to the company for improving its financial position.
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METHODOLOGY
The methodology plays an important role in preparation or study of the project. It

includes the collection of data. It is the root cause of the project.
PRIMARY DATA
Primary data comprises information obtained by the candidate by the candidate

during discussions with n heads of dept and from the meetings with the officials and staff.
Primary data are collected from the accounts office regarding the management of working
capital, by way of personal interview & discussions
Primary data includes.
 Having a discussion with finance manager.

 Guidelines are taken from manager of F&A
SECONDARY DATA
Secondary data comprises information obtained from annual reports balance

sheets and other financial statements files and other important documents, maintained by the
organization in the study one fourth of total information has obtained from primary data and the
rest from secondary data. Secondary data are taken from the annual reports for the calculation of
the working capital requirements.
For the proposed project, most of the data will be collected from secondary data. The
secondary data is proposed to collected from annual reports to the Thandava co-operative sugars
limited, and other records maintained by the company
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LIMITATIONS
Although every effort has been made to study the “working capital management “ in
details, in the Thandava co-operative sugars at Payakaraopeta.
 For the accounting year 2004 accounts have not been finalized. Due to this,
information relating to this period is not gathered.
 By observing financial performance of Thandava Co-Operative Sugars Ltd. The

whole sugar industry performance can’t be judged.
 Apart from the above constraints, one serious limitation of the study is, that it is not
possible to reveal of the financial data owing to the policies and procedures laid
down by the Thandava Co-Operative Sugars Ltd. At Payakaraopeta.
 Limited time is given to study these aspects.
 However the available data is analyzed with great effort to get and insight into
working capital management in Thandava Co-Operative Sugars Ltd. At
Payakaraopeta.
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INDUSTRY PROFILE
INDIAN SUGAR INDUSTRY
HISTORY
India has been known as the original home of sugar and sugarcane. Indian methodology
supports the above fact as it contains legends showing the origin of sugar cane. India is the
second largest producer of sugar cane next to Brazil. Presently, above 4 million hectares of land
is under sugarcane with an average yield of 70 tons per hectare.
India is the largest single producer of sugar including traditional sugarcane sweeteners,
khan sari and Gur equivalent to 26 million tons raw value followed by Brazil in the second place
at 18.5 million tones. Out of 7 States in last 10 years. India has ranked No.1 position in 7 out of
last 10 years. During 1998-99 India produced 17.0 million tons (155 lakh tones white sugar)
while Brazil had produced 18.5 million tones.
Traditional sweeteners Gur & Khandhasari are consumed mostly by the rural population in
India. In the production of alternate sweeteners, Gur & Khandsari were produced where better
standard of living and higher income groups were there. The sweeteners demand has shifted to
white sugar currently; about 1/3rd sugar cane production is utilized by the Gaur and Khandhasari
sectors.Being in the small-scale sector, these two sectors are completely free from controls and
taxes, which are applicable to the sugar sector.
SUGAR INDUSTRY IN ANDHRA PRADESH
Sugar industry is mostly situated in the regions where the land is fertile and suitable for
growing in A.P. It is one among such fertile regions of India and has been a sugar cane
cultivating state for a long time. It is one of the major sugar productions of Khandasari and Gur
till recent past although sugar factories existed in India since 1920.It was only in 1950, that A.P.
had a chance of establishing these factories in A.P.
A.P. Govt. announced a proposal for establishment of 5 more sugar units in co-operative
sector in April 1982.178 thousand acres are under sugar cultivation which constructs 7% of the
total acreage in India.
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During the recent years, this was decreasing and this figure has come down to the thousand
hectors during 1980-91 which was around 5% of the average figure of India. The figure for A.P.
was 76 tons in 1965-66 when it was 43.7 tons per hector for India almost 80% higher. The yield
per hector in A.P. is compared to that of mass-producing state like U.P. where then exit 38.2
tones per hectors in 1978-79 and Bihar where 27-12% per hector in 1978-79 was prese
The total sugarcane produced in the state is just 8% of the total production in India is 1950-
51. The total production is 49.10 thousand tones out of 69.22 thousand tones for 1978-79 this
figure has gone up to 9,482 thousand tones which is 36.2% of the total production. This
production for all India in 1978-79 is 38.2%. The total sugar cane produced in the year 1986-87
season of A.P. was Rs 8,800 thousand tones. So the contribution of A.P. in the total production is
5.52%.
India has been divided into three areas in the sugar recovery attained by factories of Andhra
Pradesh fell into medium recovery for the date during the year 1986-87 was 9.6%.
Andhra Pradesh is the major lead regarding sugar production. The sugar recovery is more
then compared to average sugar crushing season and the average recovery of India crushing
season is low due to more production of average recovery of india.Crushing season if low due to
more production of Gur and Khandasari. The farmers are supplying to that of sugar factories and
transport facilities.
There, the farmers are making for the nearby fields. The cane price also is not favorable that
is price of sugar cane fixed by the factories is low. That is not commercial therefore the seasonal
is short in A.P. so the sugar production in A.P. is unfavorable.
A.P. produced more than 310 lakhs tones out of a total production in the year 1987-88. In
1979-80 the production was 34 thousand tones out of which 1,017 thousands tones of sugar
production which was 5.15% of total production in A.P has increased sugar production in India.
The total sugar consumed by A.P. excluding Khandasari sugar was 292 thousand tones,
where as in India it was 5,105 thousand tons in 1987. A.P always has been a surplus state as far
as sugar is consumed till 1977-78 during which years the total production was 5,405 thousand
tones yearning a surplus production of more than 150 thousand tones.
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SUGAR FACTORIES IN INDIA
CO-
STATE PUBLIC PRIVATE TOTAL
OPERATIVE
Andhra Pradesh 05 16 14 35
Assam 01 03 02 06
Bihar 15 15 - 30
Gujarat - - 18 18
Haryana - 01 10 11
Kerala - 01 04 05
Madhya Pradesh 01 04 03 08
Maharashtra - 06 10 109
Orissa - 01 04 05
Nagaland 01 - - 01
Pondicherry - 01 01 02
Punjab 03 03 03 09
Rajasthan 01 01 01 03
TamilNadu 03 12 12 27
Uttar Pradesh 35 14 31 110
West Bengal 01 02 02 05
Others 02 02 02 06
Total 71 114 238 433

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Increase in the sugar factories
YEAR NUMBER OF SUGAR FACTORIES
1930-1931 148
1940-1951 158
1950-1961 173
1970-1981 314
1989-1990 377
2001-2002 475
2002-2003 370
2003-2004 348
2004-2005 556
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COMPANY PROFILE
INTRODUCTION
The Thandava Co-Operative Sugars is registered as a Co-operative Society under the

A.P. Co-operative Society Act of 1957 for this society the land was choose with low cost and
beside the highway and by the river bank of river Thandava which gives water to the plant.
Managing director is Sri T.P. Siva ram Prasad.
Date of registration of Thandava Co-operative Sugars was done on 9th Feb 1957. Date of
starting the plant from 21st August, 1957. The cost of the land with registration of Rs.57.92. The
plant started production in 1964, with a capacity of 350 tcd (tones crushing per day) later in
1971. It was increased to 1250 tcd. After 10 years the new plant was constructed just by the side
of old plant with a capacity of 1750 tcd. Still now plant is running smoothly with profits with
this plant 649 numbers employees are recruited and around 1500 families are indirectly
benefited.
OBJECTIVES OF THANDAVA CO-OPERATIVE SUGARS LIMITED

To establish a factory for the manufacture of sugar, jiggery and other subsidiary by-
products and allied industries and for the purpose.
1) To raise the share capital and to borrow funds either on this security of the property of
the society of otherwise from co-operative societies of Govt. industrial finance
corporation, life insurance, corporation and other sources.
2) To purchase to take on base or otherwise acquire land houses and other buildings or
railway siding that may be necessary or expenditure for the above purpose.
3) To purchase and install the machinery.
4) To purchase sugar cane and other raw material from members or non members and also
to undertake cultivation of sugarcane.
5) To own land or hire transport vehicles in the business of the society
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Growth & Development
Thandava co-operative sugar plant is take more care to growth and development of the
organization the capacity of the plant is 1750 tcd. In that 12% of power will be used for plant
auxiliary consumption. So around 1800 units consumed per day for auxiliary total export of A.P.
Transco will pay tone per unit. But since 4 months they are paying 2.84 poise per unit as per
regulation commission rules.
Growth of sugar industry- past 1950 to 2003
Year Number of factories Production lakh in Tones
1950-51 139 11.00
1960-61 174 30.21
1970-71 210 37.40
1980-81 315 51.50
1990-91 385 127.47
1995-96 416 164.52
1998-99 480 154.52
1999-00 493 181.93
2000-01 506 184.93
2001-03 529(30-2-02) 180.00(estimate)
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SHARE CAPITAL POSITION
The authorized share capital of the society under by law no. 6 of the bylaws
of the society has paid up share capital of Rs. 179.19. The Govt. of Andhra
Pradesh has contributed on amount if 1159.14 lakhs towards their share in the
capital structure of the society.
MEMBERSHIP
Including Govt. of Andhra Pradesh as on date there are 11,581 share
holders in the society out of the above share holders 500(approx.) are female
members. As the factory situated in the backward area of Visakhapatnam and East
Godavari District most of the members are small and marginal farmers belonging
to the backward community out of 11,581 members excluding govt. About 7000
cane grower members are growing cane and supply to the factory only from 1990-
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91 season. The cane plantation agreements and supply have been increased
considerably on account of various cane development activities taken up by the
management in the factory zone. Which includes issue of the free fertilizers
pesticides etc?
CANE PRICE PAYMENTS
For the year 2003-04 the Govt. of India has fixed minimum cane price or
Rs. 815.00 per million tones. Linked to 9.241 recoveries. Accordingly the cane
price for the years payable for the year works out of Rs. 875(including Tax). The
company has paid the cane price initially @550 per million tones. On all the cane
supplied during the year 2001-02. Thus the company has to pay the balance cane
price Rs. 153.90 per million tone for which action is being taken to start the
payment with in a period of 10 days.
Comparative statement of the TCS efficiency with the last 3 seasons
S.No. Particular 2000-01 2001-02 2002-03
1. Date of start 01-12-01 02-12-01 14-12-02
2. Date of closing 20-04-01 30-04-02 20-04-03
3. Cane crushing(M.T.) 2,37,870.531 2,17,080.993 2,01,625.797
4. Sugar bagged 2,43,094.00 2,08,380.00 1,84,275.00
5. Recovery% cane 10.25% 9.74% 9.24%
DUES TO CENTRAL FINACIAL INSTITUTIONS
The society borrowed funds amounting to Rs. 3334.17 lakhs from the
central financial institutions.
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State co-op. Bank Ltd, Hyderabad. 500.00
A.P. Govt.(without Interest) 150.00
Cane Development central Bank, Vizag 2,034.47
VisakhaCo-operativeBank 295.00
___________
3334.47
Purchase Tax
The Govt has increased purchase tax Rs.32% to Rs. 60% per million tone
as from 1997 to 2004 company has paid Rs.
2001-02 1,36,64,988
2002-03 1,13,00,955
2003-04 1,72,57,471
FUNDS OF THANDAVA CO-OPERATIVE SUGARS:

Funds may be raised by the society by
1) Entrance Fee
2) Issue of share
3) Deposits
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4) Loans & over drafts
5) Debentures
6) Donation & grants
Shares: Authorized capiyal of the society Rs. 8,00, 000%
EXPORTS AND IMPORTS
Export The difference in crushing period in India and other major producers
exporters like Brazil and Australia can be utilized to top the export market in a
big way for the purpose of comparison the crushing season for different. Sugar
cane producing countries like India
Country Crushing Season

Europe March-Sept.
Mexico Nov.-July
USA Oct.-June
Brazil June-May
Africa April-Nov.
China Jan-Dec.
Pakistan Nov-May
India Oct.-June
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Imports:
The govt. Controls import of sugar through import policy and custom duties
based on a demand-supply mismatch in the country..
EXPORTS
The substantial increase in the volume of free international trade in sugar
present on excellent opportunity to the Indian sugar industry to embark on regular
plan for sugar exports.
AUDITING
Thandava Co-operative Sugars Ltd. has been auditing by Sri Brahmayya &
co, charted accountant, Vizag
ORGANIZATION SET –UP OF THANDAVA CO-

OPERATIVE SUGERS.
Chairman
He shall organize overall meetings of the board and general body. He shall
be responsible for bringing all policy matter before the board and general body and
shall see the effective implementation of the resolution posses by the set of bodies
in his absence vice-chairman will preside over the board and general body.
Managing Director
Managing director is a chief executive of the sugar factory. He is the key of

the organization. His responsibilities are tremendous. Million of rupees may be
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made are lost by his directions. The managing director formulates the factory’s
operation purchased and sales for the consideration of board of directors and when
approved and ensures their executives through direction of departmental heads for
guidance of board of directors. He hall be fully informed about the factory overall
active ties. And must instruct and guide departmental heads in their works. He is
accountable to chairman and board of directors
Departments
The organization has 5 departments. The departmental heads are accountable

to managing director. Managing Director Co-ordinates all the activities of the
organization are as follows.
1) Administrative
2) Accounts Department
3) Agriculture Department
4) Engineering
5) Manufacturing
ADMINISTRATIVE DEPARTMENT
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The administrative department officer and chief personal office are the
heads of these departments. He is the next to managing director. He shall be
exercise such powers and performs such duties as may be entrusted to him from
time to time by the M.D. under the administrative officer. There are 7
departments, which are directly responsible to him.
They are secretarial department, general administration, sales purchase

stores. God owns, time office and security department in addition to the above
activities, he also looks after welfare and medical care of the employees. The
department also develops good relations between management and trade union.
The department is the backbone of the whole organization. In the absence

of both the M.D. and administrative office the board makes necessary
arrangements in the approval of the register for the conduct of the society during
their absence.
ACCOUNTS
Accounts department headed by chief account officer. He is responsible

for his department. The department is divided in to area i.e.
General Accounts
Store Accounts
Cane Account
His duty involves preparation of balance sheet and correspondence with

their inventories merchant banks financial institutions etc. he has to maintain up to
date all accounts of the factory and prepare balance sheet cost reports. Financial
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statements, share reports, periodical budgets, cash flow statements and all income
tax returns and all formalities. He has obtained all work relating to money
transactions, advice management through the M.D. the financial implication of any
schemes of expenditure.
ENGINEERING DEPARTMENT
The chief engineer heads this department. The plant and machinery of the
factory are under control of chief engineer. He formulates the techniques of
current and economic crushing of sugar cane shutting to the machinery and
equipment responsible for keeping in day today check on milling boiler and power
house performance and stem steam and power consumption at various section of
the factory.
He personally directs repair over handling and creation of major equipment.

He periodically review engineering stores stock position and furnishes indents for
purchase for his decrements civil season turbines, boilers mill house electrical, the
main parts of the engineering section such as revalidation modernization layout
and replacement labour and staff policy to management and ensures that all factory
regulations and scrupulously contend and completed with all the concerned.
Chief Chemist heads this department side of the factory from juice to final
bagging of sugar. The department is to see the good quality of the sugar
production. He has to co-ordinate the work of manufacturing department with that
of the engineering and department.
AGRICULTURE DEPARTMENT
Chief agriculture officer heads this department- The duties of the chief
agriculture officer can be divided in two distinct spheres.
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Cane Development
Cane Procurement
There are 5 agriculture officers. The duties and responsibilities of the field
officers and agriculture officers. The duties and responsibilities of the and
agriculture officer to develop sugar cane plants registered and also to meet the cane
growers and issue proper instruction to them.
WORKING CAPITAL MANAGEMENT
INTRODUCTION
Funds are required for two basic reasons in any organization. First, funds are
needed for the creation of productive, Capacities, and Purchases fixed assets,
secondary, to finance a post for the day to day running of business which in other
words is the working capital.
Working capital management takes care of the problem that arises during the
management of current assets, current liabilities and inter relationship that exit
between them, thus it is also known as current asset management and current
liabilities from an integral from an integral part in the balance sheet of the firm
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Working capital is an integral of overall corporate management the finance
manager has to carry out the finance function is the face of risk cannot be
predicated with certainty.
Definitions
In the broad sense the term working capital is used to denote the total
current assets. The following are some definition of this group.
Working capital means current assets - (Meard Baker Malott)
Any acquisition of funds which increase the current assets increase working
capital also for they are one and - (Bonneville)
In the narrow sense working capital is regarded as the excess of current assets
over current liabilities. This is the definition used by the most financial experts
and authors emphasizing the accounting phase of finance
CONCEPT OF WORKING CAPITAL
Working capital is generally classified as follows
 Gross concept
 Net concept
Gross working capital is the total of the current assets.
“Net working cap ital is the difference between the total current asset and
total current liabilities” but generally, Net working capital is referred as
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working capital. Net working capital can be defined as current assets, which
are finance with LONG-TERM funds
COMPONENTS
 Current assets
 Current liabilities
CURRENT ASSETS
Current have short life span one are subject to swift transformation into
other assets forms.
The different constitutes of current assets are
 Stock (raw material , stores & spaces , work in progress and finished
goods)
 Sundry debtors (less provision for bad and doubtful debts)
 Loans and advances.
 Cash and bank balance
CURRENT LIBILITIES
 Sundry creditors
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 Short term barrowing
 Bank and overdrafts and loans
 Advances and deposits.
Two important issues in formulation working capital politely are:
1 what should be the ratio of current assets to sales?
2 what should be the ration of short term financing to long term financing
FACTORS DETERMINING WORKING CAPITAL
There are number of factors influencing the working capital needs of the firm.
 Nature and size of the firm.

 Manufacturing cycle.
 Cash requirements.
 Demand of creditors.
 General nature of industry
 Business cycle
 Credit policy
 Growth and expansion
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 Availability of raw material
 Profit level
 Levels of taxes
 Operating efficiency
The need for working capital to run to day to day business activities cannot
be over emphasized.
TYPES OF WORKING CAPITAL
Working capital can be broadly classified into two types.
1. Permanent working capital

2. Temporary variable working capital
1.PERMANENT WORKING CAPITAL
It represents the assets required on continuing basis over the inter year.
Tendon committee has reserved to this type of working capital as core current
assets
CHARACTERSTICS
1. Amount of permanent working capital remains in the business in are or firm

of another.
2. It also grows with the size of business
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2.TEMPORARY WORIKING CAPITAL
It represents addional assets required of different times during the

operation year. The amount of working capital over permanent working capital is
known as variable working capital.
OBJECTIVES OF THE WORKING CAPITAL MANAGEMENT
The objects of working capital management are two fold
1. Maintenance of working capital

2. Availability of sample funds at the time of needs
The basic goal of working capital management is to manage each of the

firm’s current assets and current liabilities in such a way that an acceptable level of
networking capital in always maintains the business. Each current assets must be
managed efficiently in order to maintain the firm’s liquidity while not keeping too
high level of any one of them it ultimately assist in increasing the profitability of
the concern. Hence the problem of efficient management of working capital is to
establish a trade of between liquidity and profitability.
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Goals of working capital management
POLICY
EXCESS
CASH
DEFICIE
NCY
Credit management
Minimize time BANK MGT
Minimize cost
POLICY
EXCESS
ACCELERATIVE INFLOWS A ACCELERATIVE OUTFLOWS
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DEFICIENCY
Accounts receivable Accounts payable
Management minimize management
Time optimize time
Variable working capital
The amount of working capital over permanent working capital. It may again
be submitted into seasonal and special working.
Seasonal working capital is required to meet the seasonal demands of busy

periods occurring at stated levels. On the hand special working capital is required
to meet extraordinary needs for contingencies. Events like strikes, fire unexpected
competition rising price tendencies or initiating a big advertisement campaign
require such capital.
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Sources of working capital:
Prudent financial manager is always interested in obtaining the correct

amount of the working capital at the right time at a reasonable cost and at the best
possible favorable terms. To adopt the right it sources it is very necessary for him
to have a thorough understanding of the firm short-term funds need market for
short-term funds required level of liquidity in funds and risk assumption. A firm
interested to obtain short-term funds has a choice of securing finance from
alternative sources internal as well as external. In making any final choice as
regards to sources of working capital. The relative cost of financing dependability
upon the source and flexibility in financial planning must be given due weight age
Sources of working capital
The following chart gives a various sources of working capital.
WORKING CAPITAL SOURCES
Long-term sources Short-term sources
Internal External
Depreciation Trade Credit
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Funds Credit Papers
Sales of shares Provision for taxation Bank Credit
Sale of debentures
Ploughing back of Accrued expenses Public Deposits
Profits Customer’s Credit
Sale of idle fixed assets Govt. Assistance
Long-term loan Loans form Directors

Security of
employers
Factoring
WORKING CAPITAL TOOLS:

The analysis of working capital is primarily a test of short-time solvency
on the other hand. It may also be said to be a test of the effectiveness with which
the business is being conducted. Unfortunately like the broader concept of capital
there is no universally accepted definition of working capital.
Mr. Gilbert Harold mentioned that problem there is much disagreement

between financier’s accountant’s businessman and economists as to the exact
meaning of the term working capital.
There are several tools of analyzing the working capital of concern. The
important they are as follows.
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a) Static Tools
b) Dynamic Tools
A)Static Tools
1) Schedule of change in working capital: The preparation of schedule changes

in working capital is an important but simple tool of working capital
analysis. This analysis presents a picture of current assets and current
liabilities.
Working capital ratios:
The ratio analysis of working capital can be used by management as a means

of checking upon the efficiency with which working capital is being used in the
enterprise.
Movement of Working capital statement: In this method a statement of the

movement of working capital is prepared which depicts the over variation in the
working capital
B)Dynamic Tools
Cash flow computation
Calculating the net capacity in cash to generating of the enterprise is also an

important tool of working capital analysis.
Funds flow analysis of working capital: Funds flow analysis is also an effective
management tool to study funds how have been procured for business and how
they have been employed.
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Working capital budget
The working capital budget is an important aspect of over-all financial

budgeting. It forecast the future requirements of working capital and the
formulation of plans for meeting them has relatively limited access to the long-
term capital markets. Therefore it must necessarily relay heavily on trade credit
and short-term bank loans, which are current liabilities.
WORKING CAPITAL REPORTS
A prudent financial management is always vigilant for avoiding the

financial embarrassment likely to be caused to the firm due to inadequacy of
working capital.
1. Inventory Report
This report can be prepared weekly, monthly or quarterly to be given in

details a comparative analysis of the composition of closing stores of raw material
and finished product. This report brings into light the fact whether working capital
is unnecessary blocked up in inventory.
2. Cash Report
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It reflects the net liquid position of the concern. Usually cash reporting is
done on daily basis. Cash reports show the summary of daily cash receipts and
cash distribushment x the cash balance.
Working capital ratio analysis
The finance manager always tries to maintain an adequate working

capital at every time. So as to carry on the operations successfully and maximize
the return of investment.
Ratio analysis of working capital can be used by financial executive to

check upon the efficiency with which working capital is being used in the
enterprise.
Following ratio’s are of much help is diagnosing the working capital

position of the firm.
Net working capital
Net working capital is the excess of current assets over current liabilities.
These assets includes
1. CASH
It is the most liquid current assets. It is the current purchasing power in

the hands of a firm and can be used for the purpose of acquiring resources or
paying obligations cash includes actual money in hand and cash deposits in bank
account.
2. Marketable Securities
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They are the temporary or short term investments in shares, debentures,
bonds and other securities. These are readily marketable and can be converted in
to cash within the accounting period. A firm usually invests in them when it has
temporary surplus cash.
STOCK OR INVENTORY
This includes raw materials, work-in progress and finished in case of

manufacturing firms. This is maintained for smooth production and serving
customer on a continuing basis. They are carried in the balance sheet at the
original or market cost whichever is loss. They are the last liquid current assets.
PREPAID EXPENSES AND ACCRUED INCOMES
They are the expenses of future period paid in advance. Example of these
is prepaid insurance prepaid rent or taxes paid advances.
1. Inventory to working capital
The closing stock figure is divided by the working capital, which depicts the
proportion of working capital represented by the inventories.
2. Stock turnover ratio
34
It measures the operating efficiency of the enterprise. It shows the number
of times the goods are turned over during a particular period. It may be expressed
in reference to cost or selling price.
Annual Net sales

Stock turnover =
Closing a stock at cost
3. Account payable turnover ratio
The ratio is calculated with reference to average monthly net sales. It shows the
time that will be taken to pay the short-term obligations from the business
operation.
CURRENT ASSETS AND CURRENT LIABILITIES
1. Current Assets
Current assets sometimes called liquid assets are those resources of a

firm which are either had in the form of cash or are expected to be converted in
cash within the accounting period or the operating cycle of the business. The
accounting period is one of year duration.
General a ratio of 1:1 is considered satisfactory.
2. Cash ratio:
35
It is the ratio of cash x cash equivalents assets to current liabilities.
Cash ratio = Cash + Cash equivalents: Current Liabilities
There does not seen to be any standard ratio for measuring cash position.
However, some authorities favor that the cash ordinarily should not be less than
10% to 15% of current liabilities. We can calculate cash velocity. High velocity
of suggests effective utilization of cash reserves.
Net Sales
Cash Velocity = ------------------
Cash
3. Receivable turnover ratio

It is a ratio of credit sale to sundry debtors and bills receivable. This ratio
signifies the average collection period. The total sundry debtors and bills
receivable are divided by the net credit sales for one year and multiplied by 360 to
calculate this ratio figure.
4. Working capital turnover ratios
Sometimes working capital turnover ratio is also calculated. It is the ratio of

net working capital to net sales.
Net Sales
Working capital turnover ratio’s= ----------------------------
Net Working Capital
It gives over all position of the liquidity. Solvency position of the
firm. It is not measurement to working capital position.
36
5. Current assets turnover
This ratio gives the sales revenue to total current assets measures how
effective management is in controlling the liquid assets.
Higher the value of this ratio better is the position. It shows over under
trading position in relation to the quantum or working capital Sales revenue
6. Current Ratio:
Current ratio is the most particular and conventional ratio to analyse

working capital position of the firm. It is important ratio that some financial
experts have called working capital ratio. It also shows the working short-term
obligation is empty covered by the liquid assets.
Current ratio= Current Assets: Current liabilities
7. Quick ratio
It also known as acid-test ratio or liquidity ratio. It is the ratio between

quick assets of the firm and current liabilities. It despites the immediate liquid
position of the concern as per
Quick ratio = Quick Assets: Current liabilities
They are current assets because their benefits will be received with in firms
has earned but not yet received. They include accrued dividends accrued interest
8. Loans and advances
37
They include dues from employees or associates advances, advance
for current supplies and advances against acquisition of capital assets. Except for
the advances payment for current supplies it is not proper to include loans and
advances in current assets.
CURRENT LIABILITIES
They are debts payable with in an accounting period current assets are
converted to cash to pay current liabilities sometimes new current liabilities.
Sometimes new current liabilities may be incurred to liquidate the existing ones.
These are mainly classified as
1. Sundry creditors
They represent the current liabilities towards suppliers whom the firm has
purchased raw material on credit.
2. Bills payable
They are the promises made in writing by the firm to make payment of a
specified sum to creditors over the firm to become bills payable ones the firm
accepts them. They have a life of less than a year.
3. Bank borrowings
Commercial banks advance short-term credit to firms for purchasing

their current assets they may also provide for financing fixed assets. Such loans
will be grouped under long-term liabilities. In India both long and short-term
borrowings are included under loan funds.
38
4. Provisions
They include provision for taxes or provision for dividends. Every

business has to pay taxes on its income usually it takes some time to finalize the
amount of tax with the authorities. Therefore the amount of tax eliminated and
Shown as provision for taxes.
5. Outstanding expenses
The firm may owe payments to its employees and others at the end
of the accounting period for the services received in the current year. These are
payable within a year short period. Examples are wages payable, rent payable.
6. Income received in advance
A firm can sometimes receive income for goods and services to be

supplied in future. As good or services have to be provided with in the accounting
period, they are treated under current liabilities.
7. Deposited from public
These are raised by a firm for financing its current assets. These are
raised for duration of one year through three years
FACTORS IN WORKING CAPITAL REQUIREMENTS
Working capital need of a firm influenced by numerous factors. The

important ones are
Nature of Business
39
Seasonality of operations
Production policy
Market conditions
Condition of supply
Nature of Business
The working capital requirements of a firm is closely related to the

nature of its business trading and financial firms have a very small investment in
fixed assets, but require a large sum of money to be invested in working capital.
For instance retail sources must carry large stock of a variety of goods
to satisfy various and continuous demand of their customers. On working capital
needs working capital needs tend to be high balance of greater investment in
finished goods inventory and accounts receivable.
Conditions of supply
The inventory of raw material spares and stores depends on the

conditions of supply. If the supply is prompt and adequate the firm can manage
with small inventory. If the supply were unpredictable and scant the firm to ensure
continuously of production would be have a acquire stocks as and when they are
available and carry larger inventory on an average.
Seasonality of operations
Firms which have marked seasonality in their operations usually have

highly fluctuating working capital requirements.
40
For instance the sale of widing fans reaches peak during the summer
months and drops sharply during the winter period.
Production policy
A firm marked by pronounced seasonal fluctuations in its sales may

pursue a production policy. This may reduce the sharp variation in working capital
requirements
For instance a manufacturing of may maintain a steady production

throughout the year rather than intensity the production activity during the peak
business season.
Market conditions
The degree of competition preparing in the market place has an important

bearing.
GOALS OF WORKING CAPITAL POLICIES
The firm’s policies for managing its working capital should be designed to
achieve three goals.
Adequate liquidity
If a firm lakhs sufficient cash to pay its bill when due;it will experience continuing
problems. The most important goal is to achieve adequate liquidity for the conduct
of day-to-day operations.
41
Cash inventories
Receivable
Minimization of risk
In selecting its source of financing. Payables and other short-term liabilities
may involve relatively low cost. The firm must ensure that near-term obligations
do not become excessive compared to the current assets on hand to pay them.
Contribute to maximizing firm’s value:
The firm holds working capital for the same purpose as it holds any other
assets that are to maximize the present value of common stock and value of the
firm. It should not hold idle assets current assets more than it should have idle the
investment of excess cash, minimizing of inventories speedy collection of
receivables and elimination of unnecessary and costly short-term financing an
contribute to maximize the value of the firm.
OPERATING CYCLE APPROACH TO WORKING CAPITAL

MANAGEMENT
The normal business operations of a manufacturing and trading company

start with cash go through the successive segments of the operating cycle namely,
raw material storage period and average collection period before getting back cash
along with profit . The total duration of all the segments mentioned above is known
as “Gross operating cycle period “. This can also be shown in diagrammatic form.
42
The operating cycle management shows the inter –dependence among the
components of working capital .For this purpose the company has to make
payments towards wages, salaries and other manufacturing costs. Payments to
suppliers have to be made on purchase in the case of cash purchases and on the
expiry of credit period in the case of credit purchases. Further, the company has to
meet other operating costs such as selling and distribution costs, general
administrative costs and non-operating costs described as financial costs

(interest on borrowed capital).In case the company sells its finished goods on a
cash basis it will receive cash along with profit with least delay. When it sells
goods on credit basis, it will pass through one more stage namely, accounts
receivable and gets back cash along with profit on the expiry of credit period. Once
again the cash will be used for the purchase of materials and /or payment to
suppliers and the whole cycle termed as working capital or operating cycle repeats
itself. This process indicates the dependence of each stage or component of
working capital on its previous stage or component.
In case the company is placed in an advantageous position of being able to

sell its products for cash then the segment of average collection period will
disappear from the gross operating cycle period and to that extent the total duration
of the cycle gets reduced. In case advance payments are to be made for procuring
materials, the operating cycle period increases. The purchase of raw material.
components etc. are usually made on a credit basis , thereby giving rise to the
spontaneous current liability namely, accounts payable. When the average payment
period of the company to its suppliers is deducted from the gross operating cycle
period the resultant period is called net operating cycle period or simply
43
DATA ANALYSIS & INTERPRETATION
This chapter deals with the calculation statement of changes in working
capital and the ratios related to working capital management
TOOLS IN WORKING CAPTIAL ANAYLSIS
A study of the cause of changes in working capital in necessary to

observe whether working capital is serving the pupose for which it has been
created (or) not. The following are the tools mainly used in organization for
analysis of working capital.
 Ratio analysis
44
 Statements of changes in working capital
STATEMENT OF SCHEDULE CHANGES IN WORKING CAPITAL:
Working capital means the excess of current assets over current liabilities.
Statement of changes in working capital is prepared to show the changes in

working capital between the two balance sheets. This statement is prepared with
the help of current assets and current liabilities.
As working capital = Current assets – Current liabilities
1) An increase in current assets increases the working capital.

2) A decrease in current liabilities decreases the working capital.
3) An increase in current assets decreases the working capital.
4) A decrease in current liability increases the working capital.
The changes in the amount of any current asset or current liabilities in the
current balance sheet as compared to that of the previous period, the effect is an
increase in working capital and it is recorded in the increase column
45
COMPARITIVE BALANCE SHEET OF THANDAVA CO- OPERATIVE
SUGERS, FOR THE YEAR 2006-2007.
PARTICULARS 2007 2006 2008 2007 CHANGES IN WORKING

CAPITAL
INCREASE DECREASE
CURRENT ASSETS:
closing stock 29,91,92,835 33,48,92,289 6,39,51,821
Postage 1,768 1,990 41
saving bank a/c 1,91,725 1,23,305 9,423
current account with bank 15,50,936 1,15,08,645 47,98,494
cash in hand 21,29,237 21,62,083 16,95,015
members loan 74,41,664 58,18,093 30,43,890
interest due 26,523 4,89,467 48,97,936
adjusted due 7,40,37,241 6,98,58,091 21,73,860
total current asset 38,45,71,929 42,48,53,963
CURRENT LIABILITIES
cash credit from CCB 24,13,65,169 25,83,53,430
sundry creditors 52,69,025 52,69,025
Establishment contingent
charges 6,43,57,512 7,00,36,979 23,29,509
Interest due and payable 92,35,782 96,09,183 5,71,627
reserve of interest 18,17,78,871 19,19,09,196 29,52,300
other liabilities 14,32,97,957 11,41,74,869 7,05,97,728
total current liabilities 64,53,04,316 64,93,52,682
NET WORKING
CAPITAL:(A-B) -26,07,32,387 -22,44,98,719
increase in working capital 4,73,59,289
46
12,23,82,29
GRAND TOTAL 12,23,82,296 6
INTERPRETATION
From the above table it is clear that the working capital of the Thandava Co-
operative Sugars ltd year 2006 current liabilities more than current assets net
working capital position was not satisfactory during the year 2007
47
SUGERS .FOR THE YEARS 2007-2008
PARTICULARS 20072007 20082008 CHANGES IN WORKING

CAPITAL
INCREASE DECREASE
CURRENT ASSETS:
closing stock 31,14,74,675 32,43,72,061 1,28,97,386
Postage 2,452 6,27 1,825
saving bank a/c 1,26,079 1,31,815 5,736
current account with bank 4,26,04,048 2,05,88,656 2,20,15,392
cash in hand 42,67,809 23,81,722 18,86,087
members loan 84,43,740 1,27,43,145 42,99,405
interest due 11,56,658 17,74,331 6,17,673
adjusted due 6,53,29,111 6,70,11,384 16,82,273
CURRENT LIABILITIES
Sugar pledged A/c APCOB 0 20,13,45,825 20,13,45,825
cash credit from CCB 26,98,99,729 -64,57,391
Establishment contingent
charges 6,98,75,739 7,24,43,626 25,67,887
Interest due and payable 99,83,594 1,03,58,065 3,74,471
other liabilities 8,36,94,202 7,65,85,574 71,08,628
TOTAL CURRENT
LIABILITIES 63,85,95,638 56,37,82,887
NET WORKING
CAPITAL:(A-B) -20,51,91,066 -13,47,79,146
net decrease in net working

capital 20,59,45,200
GRAND TOTAL 23,25,56,301 23,25,56,301

48
INTERPRETATION:
For the year 2007 current liabilities are more than current Assets. There is
change in Current Assets and current liabilities. Net working capital has shown the
table. In the year 2007 net working capital is 20,59,45,200 Net working capital
position was not satisfactory during the year 2007
49
PARTICULARS 2007 2008 2008 2009 CHANGES IN WORKING

CAPITAL
INCREASE DECREASE
CURRENT ASSETS:
closing stock 32,43,72,061 24,86,24,696 7,57,47,365
Postage 627 537 90
saving bank a/c 1,31,815 2,860 1,28,955
current account with bank 2,05,88,656 28,28,135 1,77,60,521
cash in hand 23,81,722 14,24,473 9,57,249
Members loan 1,27,43,145 1,40,38,468 12,95,323
interest due 17,74,331 19,56,460 1,82,129
adjusted due 6,70,11,384 8,25,12,511 1,55,01,127
CURRENT LIABILITIES:
Sugar pledged A/c APCOB 20,13,45,825 15,61,27,804 4,52,18,021
cash credit from CCB -64,57,391 -1,36,588
Establishment contingent charges 7,24,43,626 7,97,40,437 72,96,811

Interest due and payable 1,03,58,065 1,09,57,663 5,99,598
NET WORKING CAPITAL:(A-B) -13,47,79,146 -20,36,29,426
net decrease in net working capital 6,25,29,477
GRAND TOTAL 12,47,26,077 12,47,26,077

50
NTERPRETATION:
change in Current Assets and current liabilities. In the year 2008 net working
capital is 6, 25, 29,477 Net working capital position was not satisfactory during the
year 2009.
51
PARTICULARS 2009 2010 CHANGES IN WORKING

CAPITAL
INCREASE DECREASE
CURRENT ASSETS:
closing stock 24,86,24,676 31,61,58,077 6,75,33,381
Postage 537 621 84
saving bank a/c 2,860 2,926 66
current account with bank 28,28,135 17,94,585 10,33,550
cash in hand 14,24,473 9,33,910 4,90,563
members loan 1,40,38,468 1,09,85,987 30,52,481
interest due 19,56,460 17,44,346 2,12,114
adjusted due 8,25,12,511 7,44,12,654 80,99,857
CURRENT LIABILITIES:

other liabilities 9,49,23,435 9,43,48,215 5,75,220
NET WORKING CAPITAL:(A-

B) -21,23,94,747 -21,16,75,701
net decrease in net working capital 80,46,275
GRAND TOTAL 8,40,16,577 8,40,16,577

52
INTERPRETATION
For the year 2009current liabilities are more than current Assets. There is
change in Current Assets and current liabilities In the year 2009 net working
capital is 80, 46, 275, Net working capital position was not satisfactory during the
year 2010
53
PARTICULARS 2010 2007 2011 CHANGES IN WORKING

CAPITAL
INCREASE DECREASE
CURRENT ASSETS:
closing stock 31,61,58,077 25,22,06,256 6,39,51,821
Postage 621 662 41
saving bank a/c 2,926 12,349 9,423
current account with bank 17,94,585 65,93,079 47,98,494
cash in hand 9,33,910 26,28,925 16,95,015
members loan 1,09,85,987 79,42,097 30,43,890
interest due 17,44,346 66,42,282 48,97,936
adjusted due 7,44,12,654 7,22,38,794 21,73,860
CURRENT LIABILITIES

NET WORKING CAPITAL:(A-B) -21,16,75,701 -16,43,16,412
net increase in net working capital 4,73,59,289
GRAND TOTAL 12,23,82,296 12,23,82,296

54
INTERPRETATION
change in Current Assets and current liabilities. In the year 2010 net working
capital is4, 73, 59,289, Net working capital position was not satisfactory during the
year 2011.
55
RATIO ANALYIS
The finance manager always tries to maintain an adequate working capital at every
time. So as to carry on the operation successfully and maximize the return of
investment.
Ratio analysis of working capital can be used by financial executives to

check upon the efficiency with which working capital is being used in the
enterprise.
These ratios are much help to the firm. To know the working capital position
of the firm.
The most important rations for determining the trend in the business over a period
of year are as follows.
 Working capital turnover ratio

 Stock turnover ratio
 Current ratio
 Liquidity ratio
 Quick ratio
 Debtors turnover ratio
 Stock conversion period
56
WORKING CAPITAL TURNOVER RATIO
This is computed by the net sales dividing by networking capital. The term
net working capital represents the excess of current assets over current liabilities.
This ratio shows the number of times working capital is turned over in a state
period.
Cost of Goods sold

Working Capital turnover = ------------------------
Net Working capital
WORKING CAPITAL TURNOVER RATIO OF THE THANDAVA CO-

OPERATIVE SUGARS LIMITED
WORKING
NETWORKING CAPITAL
YEAR NET SALES
CAPITAL(INCRORES) TURNOVER
RATIO
2007 19,88,15,440 -22,44,98,719 -0.89
2008 35,37,04,971 -20,51,91,065 -1.72
2009 34,93,84,354 6,65,70,678 5.25
2010 37,44,59,938 -4,75,01,622 -7.88
2011 21,28,01,224 3,29,59,170 6.46
57
WORKING CAPITAL TURNOVER RATIO
Ratio
2007 2008 2009 2010 2011
6.46
5.25
-0.89
-1.72
-7.88
INTERPRETATION
The working capital turnover ratio of the Thandava co-operative sugar Ltd.,
was satisfactory compare to the past years. it indicates the efficient utilization of
working capital by the management of the company. In the year 2011 the company
has recorded a high ratio which is good for the firm. As it may lead to financial
position. But overall working capital turnover ratio of the company has been
satisfactory
58
STOCK TURNOVER RATIO
This ratio also knows a inventory turnover ratio establishes relationship between
cost of goods during a given period and the average amount f inventory held
during that period. This ratio reveals that number of times of finished stock is
turned over during a given accounting period. Higher the better it is because it
shows that finished stock is rapidly turned over.
On the other hand a low stock turnover ratio is not desirable because it reveals that
accumulation of obsolete stock or the carrying of too much stock.
Stock turnover ratio= cost of goods sold
Average stock held during the year.
STOCK TURNOVER RATION OF THE THANDAVA CO-OPERATIVE

SUGARS LIMITED
COSTOF AVERAGE STOCK

GOODS STOCK HELD TURNOVER
YEAR
SOLD(IN DURING THE RATIO
CRORES) YEAR(IN
CRORES)
2007 16,80,03,261 30,12,53,503 0.56
2008 24,79,75,110 30,87,23,812 0.80
2009 25,59,89,105 29,76,43,555 0.86
2010 37,37,35,095 26,29,71,416 1.42
2011 21,11,75,818 26,40,38,924 0.80
59
STOCK TURNOVER RATIO:
Ratio
2007 2008 2009 2010 2011
1.42
0.86
0.8 0.8
0.56
INTERPRETATION
The above table shows that in the year 2007 inventory turnover ratio is
higher i.e. 0.56, comparing to the other years but in the year 2008 the company has
recorded ratio I 1.42, but in the year 2011 indicates its turnover is decreases to
0.80. The inventory turnover ratio indicates the no. of tires during the year the cost
of goods sold with the stock in the track this ratio indicates the efficiency in
inventory management.
60
CURRENT RATIO
The ratio measures the solvency of the co. in the short term. Current assets are
those assets, which can reconverted in to cash within a year current liabilities and
provisions are those liabilities that are payable with a year. A current ratio 2:1
indicated a highly solvency positions
It is the ratio of current asset to current liabilities. it shows the firm’s ability to
cover its current liabilities with its current assets.
Current ratio = Current assets
Current liabilities
CRRENT RATIO OF THE THANDAVA CO-OPERATIVE SUGARS

LIMITED
YEAR Current assets Current Current ratio

liabilities
(In cores)
(in cores)
2007 42,28,53,963 64,93,52,682 0.65
2008 43,34,04,573 63,85,95,638 0.68
2009 42,90,07,740 36,24,37,062 1.18
2010 35,13,88,140 39,88,89,762 0.88
2011 43,16,65,251 39,87,06,081 1.08
61
CURRENT RATIO
Ratio
2007 2008 2009 2010 2011
1.18
1.08
0.88
0.68
0.65
INTERPRETATION
For the year 2009, statement of changes in the net working

capital has shown net increase of rs. 1.18 cores (Approx) in the net working
capital. Increase in net working capital has come down from 1.08 cores
62
LIQUIDITY RATIO
This is the ratio of liquid asset to liquid liabilities. it shows firm’s liability
To meet current liabilities with its most liquid assets 1:1 ratio is considered ideal
ratio for a concern because it is wise to keep the liquid assets at least equal to the
liquid liabilities at all times. liquid assets are those assets which are readily
converted into cash and will include cash balance, receivables sundry debtors and
not includes in liquid assets because the emphasis is on the ready availability of
cash in case of liquid assets. Liquid liabilities include all items of current liabilities
except bank over draft. This ratio also called the acid-test of a concern’s financial
soundness.
Liquid ratio = Liquid assets
Liquid liabilities
LIQUID RATIO OF THE THANDAVA CO-OPERATIVE SUGARS

LIMITED
YEAR Liquid asset(in Current liabilities Liquid ratio
Cores) (in cores)
2007 8,99,61,674 64,93,52,682 0.14
2008 12,19,29,898 63,85,95,638 0.19
2009 10,44,99,864 36,24,37,062 0.29
2010 10,27,63,444 39,88,89,762 0.26
2011 10,24,59,836 39,87,06,081 0.26

63
LIQUIDITY RATIO
Ratio
2007 2008 2009 2010 2011
0.29
0.26 0.26
0.19
0.14
ratio
INTERPRETATION
The liquid ratio provides in a sense a check on the liquidity position of a

firm as shown by its current ratio. The liquid ratio is more rigorous and penetrating
test of the liquidity position of a firm, yet it is not a conclusive test. Both the
current liquid ratios should be considered in relation to the industry average to
infer whether the firm short-term financial position is satisfactory or not. A
conventional rule the liquid ratio should be 1:1 as the firm can easily meet all its
current obligations. The liquid ratio of the company for all the 5 years was much
below the standard norm which reveals the situation of liquidity crunch.
64
QUICK RATIO
It is very important ratio with the comparing of other ratios. Quick ratio is also
called acid test ratio or Liquid ratio this ratio is calculated by considering quick
assets (current assets-inventories) the numerator and current liabilities in the
denominator
Current Assets – (Stock prepaid expenses)

Quick Ratio = ---------------------------------------------------
Current Liabilities
Quick Assets
= -------------------
Current Liabilities
LIQUID RATIO OF THE THANDAVA CO-OPERATIVE SUGARS

LIMITED
YEAR Quick assets(in Current liabilities Liquid ratio
Cores) (in cores)
2007 8,99,61,674 64,93,52,682 0.14
2008 12,19,29,898 63,85,95,638 0.19
2009 10,44,99,864 36,24,37,062 0.29
2010 10,27,63,444 39,88,89,762 0.26
2011 10,24,59,836 39,87,06,081 0.26
65
QUICK RATIO
Ratio
2007 2008 2009 2010 2011
0.29
0.26 0.26
0.19
0.14
ratio
INTERPRETATION
Above table shows the Quick Ratio of The Thandava Co-operative Sugars Limited
Ltd. The quick ratio of The Thandava Co-operative Sugars Limited ltd is
fluctuating from the year 2007-2011. But in all years the company maintained ideal
quick ratio 1:1
66
DEBTORS TURNOVER RATIO
Debtor’s ratio or accounts receivable turnover ratio indicates the velocity of debt
collection of a firm. In simple words turnover it indicates the number of times
average debtors (receivable) are turned over during a year
Debtors Turnover Ratio
Debtors Turnover Ratio = Net Credit Sales / average Trade Debtors
Or
Debtors Turnover Ratio =sales /Average debtors
AVERAGE DEBTORS =(OPENING DEBTORS+CLOSING DEBTORS) / 2
The table showing the calculation of debtor’s turnover ratio
Opening Closing Average

Year Sales Ratio
Debtors Debtors Debtors
2007-2008 16664141 4104571 4685950 4395261 3.79
2008-2009 14073886 4685950 5032756 4859353 20.89
2009-2010 20489369 5032756 7497234 6264995 3.27
2010-2011 19160000 7497234 7558542 7527888 2.54
67
DEBTORS TURNOVER RATIO
Ratio
25000000
20000000
15000000 2007-2008
2008-2009
10000000
2009-2010
5000000 2010-2011
0
Sales Opening Closing Average Ratio
INTERPRETATION
The table shows the debtors turnover ratio position for the years 2007-
2011 of The Thandava Co-operative Sugars Limited Ltd the debtor’s turnover
ratio of The Thandava Co-operative Sugars Limited Ltd is fluctuating from the
year 2007-2011 but over ally the debtor turnover ratio of The Thandava Co-
operative Sugars Limited Ltd decreased from the year 2007-2011
68
STOCK CONVERSION PERIOD
Stock conversion period shows the average time taken for

clearing the sock through sales. The formula is to divide the number of the days in
year with the stock turnover ratio
The formula for stock conversion period is
Stock conversion period =365 days / stock turnover ratio
Table showing the calculation of stock conversion period
Year Period Stock turnover Ratio

Ratio
2006-2007 365 0.56 651.78
2007-2008 365 0.80 456.25
2008-2009 365 0..86 424.41
2009-2010 365 1.42 257.04
2010-2011 365 0.80 456.25
69
STOCK CONVERSION PERIOD
Chart Title
2007 2008 2009 2010 2011
651.8
456.3 456.3
424.4
257.4
INTERPRETATION
The above graph shows the stock conversion period of The Thandava Co-
operative Sugars Limited Ltd the stock conversion period of The Thandava Co-
operative Sugars Limited Ltd in increasing trend from the year 2007-2011 the ratio
is decreasing 2 times in the year 2011 when compared to the year 2006-2007
because of increasing stock turnover ratio
70
SUMMARY
The THANDAVA CO-OPERATIVE SUGARS LIMITED (NOC.181) was

registered in 1957 under Andhra Pradesh Co-operative society registration Act. Sri
S.R.V.V. KRISHNAMRAJA (laid) the foundation stone of this sugar factory in
1957
The Thandava Co-operative Sugars Limited is established with 50 acres. The

machinery was supplied and elected by ISGEC JOHN THOMPSON, NIZAM
SUGARS & KCP LTD. The crushing of the factory is 1250 tons per day
The Thandava Co-operative Sugars Limited located at Payakaraopeta,

Yellamanchili Taluka, Visakhapatnam District in Andhra Pradesh, National
Highway 5 (Chennai to Kolkata) about 100 km away. Administrative office
located in the factory premises.
Co-operative Society should be organized on the principles of voluntary

services and it should provide maximize participation to its members in decision
making benefits and in evaluation of the performance.
A popular definition of the term co-operative is that is an association of

persons, or households usually of a limited means we have agreed to work together
on a continuous basis to pursue one or more common interest and for that purpose
it had formed as organization
71
In our country there are 213 co-operative sugar factories and in our state 18
co-operative factories are running. Among them there are only four factories
running with profits and remaining 14 running in losses.
Thandava Co-operative Sugars Limited agro based seasonal factory has been
providing employment to the surrounding village’s people to the factory. The
factory has been supplying different loans to the member’s sugar cane growers at
the rate of subsidies less interest to by measures factors modern appliance an
denying bore wells for increase sugar cane production
In these way sugar cane growers raising this living standards. The looks after
each and every that is going on in the factory. His co-ordinate all the five
department’s activities.
The administrative department is the back bone of this factory. Under this
department many things in the factory security office, time office, stores, sugar god
owns, marketing etc.
The administrative office also looks after the welfare of the employees.
Chief account officer has to attend all works relating to the many transaction of the
factory.
72
FINDINGS
 The Thandava co-operative Sugars and Industries Corporation

Ltd has maintaining the material like bolts, machine spare parts
etc in general stores for long time, it causes the wastage of
funds.
 There is a rapid decrease in working capital Turnover Ratio in

2008-09 as compared to the year 2010-11.
 The company has not maintains the conventional liquid assets.
 The company’s absolute liquidity ratio is lower than the

conventional rule in all years of the study period.
 The current ratio and quick ratios of The Thandava co-operative

Sugars Ltd were above the standard norm i.e.,2:1and1:1
respectively
 Debtors turnover ratio decreasing year by year from 2008-09 to
2010-11
 One important general finding is the company did not follow nay
promotional activities when compared to competitors in order to

improve sales
73
SUGGESTIONS
 A Efforts should be made to mobilize working capital in order

to meet working capital requirements.
 Capital restructuring proposals are to be made on a big scale.
 The delivery dates are delayed too, which should be checked.
 The pricing policy should be revised and it should be in such a

way that it covers at least the cost of production.
 It can be suggested that the company has to maintain ideal

current and quick ratio in order maintain better liquidity position
 Maximum utilization of capacity should be done
 It can be suggested that the company has to utilize its working

capital correctly and concentrate an improvement of sales
 It can be suggested that the company has to reduce over

investment in investors and improve quality of goods. This will
improve stock turnover ratio and sales of the company
74
CONCLUSION
In short time I have done vocational training in Thandava sugar factory. It is

very difficult to elaborate all the work of working capital management. But I
have tried my level best to cover all the work done by it.
This project was undertaken in order to know the effectiveness of working

capital section of finance department of the company. I would like to
conclude my project with these points:
 The company is able to reduce its working capital from, 1647722 lacks
to 3208281 lacks in a span of five years without affecting the sales of
the company which means that company is sincerely utilizing its funds
and has reduced the locking of funds.
 The current liabilities of the company have increased which means that
company has adopted a good realization policy.
 The increased current liability is about 460378 lacks in just a span of

five years.
 The current ratio of the company in last five years has increased from
2.6 to 2.78 which reveal that company is moving from conservative
working capital strategy to aggressive working capital strategy.
 The quick ratio of the company has inclined from 1.66 to 2.10 in the
span of five years.
75
BIBLIOGRAPHY
Financial management - I.M.Pandey
Financial management - Shashi k Gupta
Financial management - Prasanna Chandra
Financial management - M.Y.Khan & Jain
Financial service & market - Natarajan
WEB SITES
www.nse.com
www.google.com
www.mba.blogspot,com
www.citefinance.com
76

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INTRODUCTION

Working, capital is needed to support day to day operations and sales

There are two general concepts of working capital such as

1) Gross working capital

2) Net working capital

Thandava Co-operative Sugar Limited

 TO Present an overview on working capital analysis management

 To study the short term financial position of employ

 To offer suggestions for the improvement of working capital management in the

The objectives of the study are:

 To know the working capital position in THANDAVA Co-operative Sugar industry.

 To study the changes in the working capital management in the organization.

 To study the liquidity position of Thandava co-operative sugar HD considering

 To study the overall operating efficiency in performance.

 To suggest guidelines to the company for improving its financial position.

The methodology plays an important role in preparation or study of the project. It

Primary data comprises information obtained by the candidate by the candidate

Primary data includes.

 Having a discussion with finance manager.

Secondary data comprises information obtained from annual reports balance

 By observing financial performance of Thandava Co-Operative Sugars Ltd. The

INDIAN SUGAR INDUSTRY

SUGAR INDUSTRY IN ANDHRA PRADESH

Uttar Pradesh 35 14 31 110

Total 71 114 238 433

YEAR NUMBER OF SUGAR FACTORIES

The Thandava Co-Operative Sugars is registered as a Co-operative Society under the

OBJECTIVES OF THANDAVA CO-OPERATIVE SUGARS LIMITED

5) To own land or hire transport vehicles in the business of the society

Growth of sugar industry- past 1950 to 2003

Year Number of factories Production lakh in Tones

1950-51 139 11.00

1960-61 174 30.21

1970-71 210 37.40

1980-81 315 51.50

1990-91 385 127.47

1995-96 416 164.52

1998-99 480 154.52

1999-00 493 181.93

2000-01 506 184.93

2001-03 529(30-2-02) 180.00(estimate)

CANE PRICE PAYMENTS

Comparative statement of the TCS efficiency with the last 3 seasons

S.No. Particular 2000-01 2001-02 2002-03

1. Date of start 01-12-01 02-12-01 14-12-02

2. Date of closing 20-04-01 30-04-02 20-04-03

3. Cane crushing(M.T.) 2,37,870.531 2,17,080.993 2,01,625.797

4. Sugar bagged 2,43,094.00 2,08,380.00 1,84,275.00

5. Recovery% cane 10.25% 9.74% 9.24%

DUES TO CENTRAL FINACIAL INSTITUTIONS

A.P. Govt.(without Interest) 150.00

Cane Development central Bank, Vizag 2,034.47

FUNDS OF THANDAVA CO-OPERATIVE SUGARS:

Shares: Authorized capiyal of the society Rs. 8,00, 000%

EXPORTS AND IMPORTS

Country Crushing Season

ORGANIZATION SET –UP OF THANDAVA CO-

Managing director is a chief executive of the sugar factory. He is the key of

The organization has 5 departments. The departmental heads are accountable

They are secretarial department, general administration, sales purchase

The department is the backbone of the whole organization. In the absence

Accounts department headed by chief account officer. He is responsible

His duty involves preparation of balance sheet and correspondence with