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Working Capital KBD SUGARS &DISTILLERIES LTD

INTRODUCTION

Financial Management is that managerial activity which is concerned with

the planning and controlling of the firms finance. Finance is the one of the

foundations of all kinds of economic activities. Finance is the life-blood of a

business. The financial management study deals with the process of procuring

necessary financial resource and their judicious use with a view to maximizing the

value of the firm and there by the value of the owners i.e. equity share holders in a

company. Practicing managers are interest in this subject because among the most

crucial decisions of the those which relate to finance, and an understanding of the

theory of financial management provides hem with conceptual and analyticalinsights to make those decisions skillfully.

FINANCIAL MANAGEMENT

Finance management emerged as a distinct field of study at the turn of this

century many eminent persons defined in the following ways

DEFINITIONSAccording the BONNEVILE AND DEWEY Finance consists in the

rising providing and managing of all the money, capital or funds of any kind to be

used in connection with the business.

According to Prof. EZRA SOLOMAN Financial management is

concerned with the efficient use of any important economic resource, namely

capital funds.

FINANCE FUNCTIONS

It may be difficult to separate the finance functions from production,

marketing and other functions, but the functions themselves can be readily

defined. The functions of raising funds investing them in assets and distributing

returns earned from assets to shareholders are respectively known as.

Long term assets mix (or) Investment Decision

Capital mix (or) Financing Decision

V.C.R.INSTITUTE OF MANAGEMENT STUDIES 1


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Profit allocation (or) Dividend Decision

Short term asset mix (or) Liquidity Decision

GOALS OF FINANCIAL MANAGEMENT

Maximize the value of the firm to its equity shareholders.

Maximization of profit

Maximization of earning per share.

Maximization of return on equity

Maintenance of liquid assets in the firm

Ensuring maximum operational efficiency through planning directing and

controlling of the utilization of the funds.

Building up of adequate reserves for financing growth and expansion



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INDUSTRY PROFILE

ABOUT SUGAR INDUSTRY IN INDIA

Sugar consumption rate is highest in India as shown in the statistical

received from Foreign Agriculture Service. However, as per production is

concerned, India has notched up 2nd position following Brazil, the largest sugar

producer in the world.

The Indian sugar industry uses sugarcane in the production of sugar and

hence maximum number of the companies is likely to be found in the sugarcane

growing states of India including Uttar Pradesh, Maharashtra, Gujarat, Tamil

Nadu, Karnataka, and Andhra Pradesh. Uttar Pradesh alone accounts for 24% of

the overall sugar production in the nation and Maharastras contribution can be

totaled to 20%. There are 453 sugar mills in India. Co-operative sector has 252

mills and private sector has 134 mills. Public sector boasts of around 67 mills.

SUGAR INDUSTRY SET UP ACROSS INDIA

Andhra Pradesh Sugar Industry

Bihar Sugar Industry

Gujarat Sugar Industry

Haryana Sugar Industry

Himachal Pradesh Sugar Industry

Karnataka Sugar Industry

Madhya Pradesh Sugar Industry

Maharastra Sugar Industry

Chhattisgarh Sugar Industry

Manipur Sugar Industry

Orissa Sugar Industry

Punjab Sugar Industry

Tamilnadu Sugar Industry

Uttaranchal Sugar Industry Uttar Pradesh Sugar Industry



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BEGINNING OF SUGAR INDUSTRY IN INDIA

Sugar is made from sugarcane, which was arguably discovered thousands

of years ago in New Guinea. From there, the route was traced to India and

Southeast Asia. It was India which began producing sugar following the process

of pressing sugarcane to It was in 1950-51 the government of India made serious

industrial development plans and set the targets for production and consumption

of sugar. It projected the license and installment capacity for the sugar industry in

its Five Year plans.

TYPES OF SUGAR INDUSTRY IN INDIA

The sugar industry can be divided into two sectors including organized and

unorganized sector, Sugar factories belong to the organized sector and those who

product traditional sweeteners fall into unorganized sector. Gur and khandsari are

the traditional forms of sweeteners.

MANUFACTURING PROCESS FOLLOWED IN SUGAR

INDUSTRY IN INDIA

Several steps are usually followed to produce sugar. These steps can be

mentioned as below:

Extracting juice by pressing sugarcane

Boiling the juice to obtain crystals

Creating raw sugar by spinning crystals in extractors

Taking raw sugar to a refinery for the process of filtering and washing to

discard remaining non-sugar elements and hue

Crystallizing and drying sugar

Packaging the ready sugar

MACHINERY SUPLIERS FOR SUGAR INDUSTRY IN INDIA

Some of the suppliers that offer cutting-edge machines to the companies

involved in sugar industry of India are:

Sakthi sugar Ltd



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Sri Sujay Engineering Products

Sri Vijayalakshmi Industries

Murthy Industries

Parveen Perforaters & Allied Industries

Aeromen Engg Co

Kamla Foundry & workshop

Tinytech Plants

Baba Vishwakarma Engineering Co(p) Limited

ANDHRA PRADESH SUGAR INDUSTRY

About Andhra Pradesh Sugar Industry

Andhra Pradesh (AP) abounds in maximum number of private sector sugar

companies in India along with Tamil Nadu and Karnataka. In the year 1933-34,

vacuum process was adopted for sugar manufacturing in the state. Previously, the

state government was planning to support Cooperative sector as against other

sectors. However with passing time, a consideration change in the policy in the

was noticed. Letters of intent (L.O.I) were given to the deserving entrepreneurs

including 20LOIs to the private sector companies.

This gradually resulted in major benefits for the state government as well

as for India as a whole. Today, Andhra Pradesh sugar industry rank 3 rd in terms of

recovery and 5th in terms of cane crushing. As per production capacity is

concerned. Andhra Pradesh stands at the position 5 in India.

The agriculture laborers who do sugarcane harvest n and cultivation are

employed in the sugar i9ndustry in Andhra Pradesh. Today the unprecedented

growth of this industry in the state has led to the consolidation of village resource

and facilitated communication, employment and transport system here.

TYPES OF SUGAR INDUSTRY IN ANDHRA PRADESH



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Andhra Pradesh sugar industry can be classified into two parts such as

organized sector including sugar mills and unorganized sector including

manufacturing of gur(jaggery)and khan sari. The unorganized sector is often

referred to as the rural industry. The rural industry plays major role the level of

production.

DIRECTORATE OF SUGAR AND COMMISSIONERATE OF

CANE IS ANDHRA PRADESH

Belonging to Industries and Commerce Department, the Directorate of

sugar and Commissioner ate of cane has been vested with the power to guide and

deal with the sugar factories in Andhra Pradesh. It is the responsibility of the

department to encourage sugarcane farmers and to help this developing industry

contribute effectively towards Gross State Domestic product (GSDP). The

department also takes care of the technological advancements of the industry.

SUGAR MILLS IN ANDHRA PRADESH

Some of the major players in the Andhra Pradesh sugar industry are listed below:

Bhagwathi Khandasari Sugar mills

N C S Sugar Ltd

The Kirlampudi Sugar Mills Ltd

Tirumala khandasari Udyog

Sri Sarvaraya sugar Ltd

The KCP Sugar & ?Industries corpn. Ltd

KBD Sugars & Distilleries Ltd

Deccan Sugars Ltd



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KARNATAKA BRAVERIES DISTILLERIES SUGAR

AND INDUSTRIES LIMITED PROFILE

COMPANY PROFILE

The irrigation in Chittoor district mostly depends on open wells. Recharge

of water in the wells depends in ground water level and rainfall. However, rainfall

depends in monsoon which is uncertain. The soils in district are almost suitable

for sugarcane cultivation. The farmers also having good knowledge of growing

sugarcane. In olden days, total quality of sugarcane produce in the district was

converted as jaggery by gangues (bullock crushers)and power crushers. The

jaggery making was very difficult to the small farmers due to lack of crusher and

unfavorable price. The big farmers also faced difficulty to crush the cane for long

period.

The jaggery made in the district was brought to the Chittoor and Pakala

which are the market places with railway transportation. There was list of

exploitation of farmers by the jaggery mundi owners by advancing the money

with high interest rates, commission and also not properly weighment. The price

fluctuation created by the traders was also a reason for poor realization, but there

was no other choice to the farmers.

NAME : K.B.D.SUGARS AND DISTILLERIES LTD

LOCATION AND ADDRESS: MUDIPANAPALLI (VILLAGE)SUGALIMITTA (POST)

PUNGANUR-5117241

CHITTOOR (DT), A.P

BRIEF HISTORY ABOUT THE COMPANY

The company was originally incorporated on 16 th day of October, 1984

under the name of SREE TELUGU SUGARS LIMITED. Subsequently the name



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of the company was changed to SHREE VANI SUGARS AND INDUSTRIES

LIMITED on the 5th day of April, 1990. Again subsequently the name of the

company was changed to KARNATAKA BREVARIES DISTILLLERIES

SUGAR LIMITED ON THE 1ST MARCH, 2005.

The company was initially promoted by Sri. T. Suryachandra Rao,

Managing director and Sri S.Gokul Executive Director commence its Commercial

production from 01st July, 1992.

In the initial years it performance of the company was much below the

break even levels. Due to poor performance the company accumulated substantial

cash loses and also defaulted in meeting the terms loan comities to AIFIs.

In these circumstances, the promoters have inducted Sri D.K.

Audikesavulu as a co-promoter in order to facilitate the company to meet.

The cost over run of the project and also provide for the short fall in the

Margins for working capital. Sri. Gokul has since come out of the board and left

the company.

MAIN OBJECTIVES OF THE COMPANY

To carry on the business as manufacture, producers, processors, sellers,

distributors, stockiest an traders of sugar and its derivatives, molasses,

biases and all materials an substances arising as by products and waste

products out of and in the course of manufacture of sugar.

To carry on the business as manufacturers, producers, brewers, blenders,

dealers, distillers, stockiest and traders of rectified spirit, ethyl alcohol,

gasohol, acetic acid, acetone anhydride, vinyl acetate, polymers, plastics,

polyvinyl chloride, liquors and all products made the from

To carry on the business as manufactures, producers packers, dealers,

stockiest, and traders of furfural bulk drugs, pharmaceutical and medicinal

preparations, made out of by products of sugar or either derivatives



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To carry on the business as manufacturers dealers, distributors stockiest

and trades of business pulp, paper pulp and pulp made out agricultural

residues or other fibrous materials, paper, newsprint, paper boards, mill

boards, strew boards, coated papers of all kinds, paper bags, fibrils boxes,cartons, paper of all kinds, paper bags fibrils boxes, cartons corrugated

containers, wrapping and packing materials.

To carry on the business as planters, growers, cultivators, formers and

producers of sugarcane sugar beet.

PRESENT BOARD OF DIRECTORS

NAME DESTINATION

SRI D.K. AUDIKESAVULU

SRI D.A. SRINIVAS

SRI K.M. SRINIVAS MURTHI

SRI.D.J. INDRAPRAKASH

CHAIRMAN AND MANAGING

DIRECTOR

JR. MANAGING DIRECTOR

DIRECTOR

VICE PRESIDENT



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PRODUCT PROFILE

MANUFACTURING PROCESS

Sugar manufacturing from sugar cane is a continuous process involving

several stages viz., milling, clarification, concentrating and crystallization and

curing.

MILLING

The raw material sugar cane is fibrous plant body with a hard rind

conversing the bulk of the fibrous mass. In outer to extract juice from cane the

practice is to crush the cane in a tandem of 3 rollers mills. Prior to milling the cane

has to be prepared so that maximum numbers of calls in the cane have to be

exposed to the pressure applied in the mills. In cane preparation the whole cane is

reduced to tiny pieces and the hard rind in broken with the help of mincer.

In order to extract as much juice as possible water is added the crushed

mass, which further dilutes whatever left over juice hence making further extract

possible in subsequent mills. This practice of the adding water in milling is known

as inhibition. The

Quantity of water to be adders to achieve the efficiency norms varies with the

quality of cane in terms of fiber % cane and on the pressure applied in the process,

however, on the average, 30% on cane is the imbibitions rate which satisfies the

efficiency norms.

The juice thus extracted in the mills in termed as mixed juice as it

contains juices from all the mills in the tandem both diluted and undiluted. The

mixed juice is weighted scale and sent for further processing.

The fibrous mass coming out of mills Is called BEGASSE which is used

as fuel for the boiler which generates high pressure steam (40kg/cm2) the stem is

fed to turbines to generates power required from the plant. A part of this steam is

also fed to mill turbines.



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Which run the mills?

The stem which is coming out of these prime movers is called Exhaust steam

which is used to boil juices in different stages of sugar manufacturing process.

CLARIFICATION OF JUICE

The weighed mixed juices are heated in juice Heaters in the stages. In the

first stage of heating the juice is heated from about 35 degree C to 70 degree C.

This heated juice is mixed with mils of lime and sulpher-di-oxide gas in a milk of

lime and sulphur-di-oxide and called as Clarifying Agents and their

consumption is 0.24% on cane and 0.06% on cane respectively.

Now the juice is subjected o the second stage of heating in which it is

heated from about 70 degree centigrade to 105 degree centigrade.

These clarifying agents react with the several organic importing and

coloring matters in the juice, which have to be eliminated out before further stage

of concentration of juice the propos of applying heat is to hasten these reaction

and also through co-adulate the colloidal impurities such as proteins. These

clarifying agents combine with various impurities to from precipitation and the

precipitates are allowed to settle down living clear juice at the top. This setting

is carried out in a large vessel known as door clarifier. The juice retention time

is above 3 hours.

FILTRATION

This precipitate is known as Mud and is continuously being with

drawn. This mud contains juice and also to recover this juice, the med in

subjected to filtering filtration is carried cut in Vaccum filters in which the

juice is sucked from the mixed of mud and small biogases particles known as

begascillo, through as suitable arrangement. The quantity of juice recovered from

filtration is estimated to be around 6% on cone. The mud after filtration comes in

the form of cake and is known as Filter Cake or Filter Mud. This filter

contains nutrition elements and used as manure, thus filter mud is on of the by



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products of the process and its quantity is about 3%on tone. The filtered juice is

sent back from processing along with mixed juice.

The clear juice from Door is further boiled in a set of tubular vassels know

as Evaporators. As stated earlier the heating medium is exhaust steam and on an

average about 70% to 76% of evaporation. In order to achieve steam economy.

This evaporation is carried out in vacuum is a system which is called

QUADRAUPLE EFFECT. In this system one pound of stem evaporation for

pound of water.

SULPHITATION

This concentrated juice is now called as Syrup, which contains 60% (on an

average) solids by weight. In contains several coloring matters which have to be

eliminated or neutralized before the final stage of concentration. For this

purpose the syrup is Sulphited again with SO2 gas. Hence this clarification

process is known as Double Sulphitation.

The sulphited syrup is sent to pan floor, where the final stage of boiling

are carried out. This principle is to concentrate the syrup to super saturation

level where crystallization of sucrose starts.

CRYSTALLISATION

It is not possible to crystallize all the sugar content of syrup in a single

stage of boiling due to various factor the details of which are beyond the scope of

this description Hence, the boiling is carried out in 3 stages viz, A-Boiling, B-

Boiling, and C- Boiling.



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NEED FOR THE STUDY

The need for the working capital is in order to know the liquidity position of the

firm. KBD SUGAR AND DISTILLIRIES LTD operating profit is decreases year

to year

Every Industry for the past few years has been finding it difficult to

managing the working capital. Every Business has to use to their available

resources for the improvement and development of the business their earningmore profits.

Effective management of working capital has become a problem for such

organizations The purpose of study is to analyze and evaluate working capital

management in KBD SUGAR AND DISTILLIRIES LTD.



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OBJECTIVE OF THE STUDY

This study is mainly focused to examine the short time financial viability of KBD

Sugar & Distilleries Ltd.

1. To know the working capital requirement of the KBD sugars & Distilleries

Ltd.

2. To analyze the liquidity position of KBD sugars & Distilleries Ltd.

3. To know the efficiency of Account Receivables and Account payable of

KBD sugars & Distilleries.



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SCOPE OF THE STUDY

The scope of the study is spread over for a period of six years i.e. 2007-

2012 for purpose off evaluating the financial position and data for the past Five

years i.e. 2007-2012 has been used in order to understand the overall performance

of SCCL for the past five years. The study has been done for a period of 45 days.



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LIMITATIONS OF THE STUDY

The Study is taken to consider the data only five years.

Since only 5 years data is used for the analysis the out come may not be

generalized.

Due to limitation of time, it was unable to go for a depth study into the

subject.



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RESEARCH METHODOLOGY

SOURCES OF DATA ANALYSIS

The study required both primary and secondary data

PRIMARY DATA

Primary data has been collected by interviewing certain executives who

were chosen on the basis of their in depth knowledge and experience in the

company. The interviews in nature are under to gain as much information as

possible.

SECONDARY DATA;

Secondary data was obtained from the past records file and reports of the

organization also from other financial statements.



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REVIEW OF LITERATURE

TOOLS FOR ANALYSIS OF WORKING CAPITAL:

The quantum of working capital as well as its financing pattern is subject

to constant monitoring and review by the financial manager. There are different

analytical tools which can help a financial manager in monitoring in viewing and

controlling the working capital. The popularly used tools are:

1. Schedule of changing working capital.

2. Working capital ratios.

WORKING CAPITAL MANAGEMENT

One of the most important areas in the day-to-day management of the firm

is the management of working capital. Working capital management is the

functional area of the finance that covers all the current account of the firm. It is

concerned with management of the level of individual current assets as well as the

management of total working capital. Financial management means procurement

of funds and effective utilizations of these procured funds. Procurement of funds

is firstly concerned for financing working capital requirement of the firm and

secondary for financing fixed assets,

MEANING OF WORKING CAPITAL

Ordinarily the term working capital stands for that part if the capital,

which is required for the financing of working or current needs of the company.

Working capital is the life time of every concern. Whether it is manufacturing or

non-manufacturing one with out adequate working capital, there can be no

progress in the industry.

In adequate working capital means shortage of raw materials, labor etc.,

resulting in partial current assets les current liabilities has no economic meaning in

the sense of implying some type of normative behavior. According to this line of



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reasoning, it is largely an accounting artifact. Working capital management then is

a misnomer.

The working capital of the firm is not managed. The term describes a

category of management decisions affects specific type of current assets and

current liabilities. In turn those decisions should be rooted in the overall valuation

of the firm.

DEFINITIONS

According to western and Brigham, Working capital refers to firms

investment in short term assets-cash, short term securities, accounts receivables

and inventories.

According to Hoagland working capital is descriptive of that capital

which is not fixed. But the more common use of the working capital is to consider

it as the difference between the book value of the current assts and current

liabilities.

TYPES OF WORKING CAPITAL

There are two types of working capital. They are:

I. ON THE BASIS OF CONCEPT

1. Gross working capital

2. Net working capital

1. GROSS WORKING CAPITAL

Gross working capital refers to the firms investment in current

assets are the assets, which can be concerned into and with in an accounting year

(or operating cycle) and include cash short-term securities, debtors (accounts

receivables or book debts) bills receivables and stock (inventory) Gross working

capital points to the arranging of funds to finance current assets.



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2. NET WORKING CAPITAL

Net working capital refers to the difference between current assets and

current liabilities. Current liabilities are those claims of outsiders, which are

expected to nature for payment with in accounting year and include creditors

(account payables). Bills payables and outstanding expenses. Networking capital

can be positive or negative. A positive working capital will arise when current

assets exceed current liabilities and negative working capital will arise when

current liabilities excess of current assets.

II.ON THE BASIS OF TIME

1). Permanent/fixed/fluctuating working capital

2). Temporary working capital

PERMANENT WORKING CAPITAL

The need for current assets arises because of the operating cycle the

operating cycle is a continuous process and therefore, the need for the current

assets is felt constantly. But the magnitude of current assets needed is not always a

minimum level of current assets, which is continuously required by the firm to

carry on its business operations. This minimum level of current assets is referred

to as permanent or fixed working capital.

EXAMPLE

Every firm has to maintain a minimum level of raw materials, work-in-

progress, finished goods and cash balance. The minimum level of current assets is

called permanent or fixed working capital as this part of capital is permanently

blocked in current assets. As the business grows, the requirements of permanent

working capital also increase due to the increase due to the increase in current

assets.



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y-axis

x-axis

PERMANENT WORKING CAPITAL CAN BE FURTHER

DIVIDED INTO:

A. Regular working capital

B. reserve working capital

A.REGULAR WORKING CAPITAL

It is the minimum amount of liquid capital needed to keep up the

circulation of the capital from cash to inventories to receivables and again to cash

this would include sufficient minimum bank balance to discount all bills, maintain

adequate supply of raw materials etc.

B.RESERVE WORKING CAPITALIt is the excess over the needs or regular working capital that should be

kept in reserve for contingencies that may arises at any time these contingencies

include rising prices, business depression, strikes and special operations such as

experiments with new products.

2. TEMPORARY WORKING CAPITAL


Temporary

Or

Fluctuating

Permanent

Time


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Temporary

Or

Fluctuating

Permanent


Depending upon the changes in production and sales, the for working

capital over and above permanent working capital, will have in be maintained to

support the peak proceeds of sale and investment in raw material, work in

progress and finished goods will fall if the market is slack.

The extra working capital needed to support the changing production and

sales activities is called fluctuating or variable or temporary working capital. The

Firm to met liquidity measurement that will last only temporary creates temporary

working capital.

y-axis

x-axis

THE NEED OF WORKING CAPITAL

The need for working capital to run day-to-day business activities cannot

be over emphasized we will hardly find business firms which doesnt require any

amount if working capital and firms differ in their requirements f the working

capital we know that a firm should aim at maximizing the wealth of its share

holders. In its endeavor to do so. A firm should earn sufficient return form its

operation. Earning a study amount of profits required successfully sale activity.

The firm to invest enough funds in current assets for cash instantaneously. There

is always an operation cycle involved in the conversion of sale of sales in to cash.



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VARIOUS NEEDS OF WORKING CAPITAL IS AS FOLLOWS

1. To pay wages and salary.2. It helps to the purchase of raw materials, components and spares.

3. It helps to incur day-to-day expenses and overhead costs such as fuel,

power and office expenses etc.

4. It also to meet the selling cost as packing, advertising etc.

5. It provides credit facilities to the customer.

6. It helps to maintain the inventories of raw material, working progess,

stores and spares and finished stock.

ADVANTAGES OF GOOD WORKING CAPITAL

MANAGEMENT

The main advantages of good working capital are as follows:

1. Solvency of the business: adequate working capital helps in maintainingsolvency 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 crating and maintaining goodwill.

3. Easy loans: a concern having adequate working capital, high solvency and

good credit standing can arrange loans from banks on easy and favorable

terms.

4. Cash discount: adequate working capital also enables a concern to avail

cash discounts on the purchases and maintaining goodwill.

5. Regular supply of raw materials: sufficient working capital ensures regular

supply of raw materials and continuous production.

6. Regular payment of salaries, wages and other day-to-day commitments: a

company which has ample working capital can make regular payment

towards it day-to-day commitments which would raise the morale of its

employees, increase their efficiency, reduce wastage cost and enhance

production and profits.



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7. Exploitation of favorable market conditions: only concerns with adequate

working capital exploit favorable market conditions such as purchasing its

requirements in bulk when the prices are lower and holding its inventories

for high prices.

8. Crisis handling ability: adequate working capital enables a concern to face

business crisis such as depression, inflation successfully.

9. Quick and regular return on investments: sufficiency of working capital

enables a concern to pay quick and regular dividends to its inventors, as

there may not be mush pressure to plough back profits.

DISADVANTAGES OF INADEQUATE WORKING

CAPITAL

1. A concern which has inadequate working capital cannot pay its short term

liabilities in time. Thus it will lose its reputation and shall not be able to

obtain good credit facilities.

2. It can not buy its requirement in bulk and cannot avail discounts.

3. It becomes difficult for the firm exploits favorable market conditions and

under take profitable projects

4. The firm cannot pay its day-to-day expenses, which would increase cost

and reduce the profits of the business.

5. It becomes impossible to utilize efficiency the fixed assets due to the non-

availability of liquid funds.

6. The rate of return on investment will also fall with the shortage of working

capital

DETERMIMINATES OF WORKING CAPITAL OR FACTORS

AFECTING

The working capital requirements of a firm affected by number of factors.

The various factors, which affect the working capital requirements of a concern,

are as follows:



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FACTORS OF WORKING CAITAL

Internal factors External factors

Nature of business Business fluctuations

Product cycle Technological

Developments

Business cycle Transport and

Communication

Credit policy Developments

Scale of production Import policy

Growth and Expansion of business Taxation policy

Operating efficiency

INTERNAL FACTORS

NATURE OF BUSINESS:

The working capital requirements of enterprises are basically related to the

conduct of business. Public utilities have certain features which have a bearing on

their working capital needs. They do not maintain big inventories arid have,

therefore, probably the least requirements of working capital. On the other hand

trading and amount of cash inventories and book debts.

PRODUCTION CYCLE

The term production or manufacturing cycle refers to the span between the

procurement of raw materials and completion of the manufacturing process



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leading to the production of finished goods. In other words, there is a some time

gap before raw materials become finished goods. There fore the longer the time

span, the larger will be the working capital needed and vice versa.

BUSINESS CYCLE

The business fluctuations influence the size of working capital mainly

during updated phase when boom conditions prevail, the need for working capital

is likely to cover the lag between increases sales and receipt of cash as well as

invest in plant and machinery to meet the increased demand. The down swing a

opposite effect on the level of working capital requirements.

CREDIT POLICY

The credit policy relating to sales and purchases also affect the working

capital the credit policy in influences the requirements of working capital in two

ways:

Though credit terms granted by the firm to its customers buyers of goods

credit terms available to the firms its creditors. A firm, which more credit sales

and cash purchase required high working capital than a firm having more credit

purchase and cash sales.

SCALE OF PRODUCTION

A concern carrying on activities on a small scale of needs less working capital

on the other hand a concern undertaking activities on large scale need large

amount of working capital.

GROWTH AND EXPANSION OF BUSINESS

The growth and expansion of business also affect the working capital

requirements. When there is growth and expansion in the business of firm the

working capital needs of the firms will also increase

OPERATING EFFECIENCY

The operating efficiency of the management is also important determinantof the level of working capital. A firm enjoying operating efficiency can eliminate



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wastage and use its resources efficiency and there by reduce its working capital

needs considerably.

EXTERNAL FACTORS

BUSINESS FLUCTUATIONS

Business enterprises usually experiences fluctuations in demand for their

products and services because of changes in economic conditions. In view of this,

working capital requirements of these enterprises are affected. Thus, in the event

of economic prosperity, general demand of the good and services tends to shoot

up. To cope with increased demand and consequently increased production the

firm will require additional working capital.

TECHNOLOGICAL DVELOPMENTS

Technological developments in the area of production can have sharp effects

on the need for working capital if a firm switches over to new manufacturing

process and install new equipments with which it is able to cut period involved in

converting raw materials into finished goods, permanent working capital

requirements of the firm will decrease.

TRANSPORT AND COMMUNICATION DEVELOPMENTS

Where the means of transport and communication in a country are not well

developed, industries may need additional funds to maintain big inventory of raw

materials and other accessories which would otherwise not be needed where the

transport and communications system are high developed.

IMPORT POLICY

Import policy of the government may also have its bearing on the levels of

working capital of the enterprises since they have o arrange funds for importing

goods at specified times.

TAXATION POLICY

Working capital needs of business enterprises are affected sharply

by taxation policy of the government. In the event of regressive taxation policy of



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the government as it exits today in India, imposing heavy tax burdens on business

enterprises leaves very little profits for distribution and retention purposes.

SOURCES OF WORKING CAPITALAmong the various sources available for financing working capital

needs finance manager has to select the best suitable source depending on working

capital need of company.

The need of working capital is increased by raising prices of end products

and relative inputs. On the other hand the government and monetary authorities

play their own role to curd the malice in period of inflation. The control measures

often take the firm of dear of money policy and restriction credit. Financing of

additional working capital in such an amusement becomes a problem to finance

manager of a concerned unit. Commercial banks play the most significant role in

providing working capital finance, particularly in Indians context.

In view of mounting inflation, the R.B.I has taken up certain social

measures to check the money supply in the economy. The balancing need has to

be managed either by long-term borrowings or by issuing equity or by earning

sufficient profits and retaining the same of coping with the additional working

capital requirements. The first choice before a finance manager, where banks do

not provide a part of additional working capital is to take the long-term source of

finance.

LONG TERM FINANCING

Loans from financial institutions the option is normally rules out, because

financial institutions do not provide finance for working capital requirements.

Further this facility is not available to all companies this option is not practical.

FLOATING OF DEBENTURES

The profitability of a successful floating of debentures seems to be rather

merging. In Indian capital market, floating of debentures has still to gain popularly

debentures issues of companies in private sector not associated with certain



29/72


reputed groups generally failed to attract investors to invest their funds in

companies. In this context the mode of rising funds by issuing convertible

debenture/ bonds also gaining.

SOURCES OF WORKINGCAPITAL

Long term sources Short term sources

Internal sources External sources

With drawing the Bank

Depreciation fund

Using the renouncement Trade credit

For taxation

Postponement of payment Bill of

Accrued expenses Exchange

Public deposits Government

Assistance



30/72


ACCEPTING PUBLIC DEPOSITS

The issue of tapping deposits is directly to the image of the company

seeking to invite public deposits.

ISSUE OF SHARE

With a view of financing additional capital needs, issue of additional

equity share could be considered. Many Indian company have still to go ahead to

command respect of investors in the context low profit margin as well as lack of

knowledge about company make the success of a capital Issue very dim.

RAISING FUNDS BY INTERNAL FINANCING

Raising funds operational profits poses problems for many companies,

because price of their end products are controlled and do not permit companies to

earn profits sufficient requirements to finance additional working assets, still a

largely feasible solution lies in increase profitability through cost control and cost

reduction measures managing the cash operating cycle, rationalizing inventory

stock and so on.

PROBLEMS ASSOCIATED WITH EXCESS AND IN

ADEQUATE WORKING CAPITAL

DANGERS OF EXCESS WORKING CAPITAL

1) It results in unnecessary accumulation of inventories. Thus the changes of

inventory mishandling, the losses increase.

2) It is an indication of defective credit policy and stock collection period.

3) Excessive working capital makes management compliment, which

degenerates into managerial efficiency.

4) Tendencies of accumulating to make speculative profits grow. This may

trend to make dividend policy liberal and difficult to cope with in future

when the firm is unable to make speculation profits.



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DANGERS INADEQUATE WORKING CAPITAL

1) It strategy growth. It becomes difficult to undertaken profitable project due

to non availability.

2) It becomes difficult to implement to operating plans and achieve the firmprofit target.

3) Operating in efficiencies creep in when it becomes difficult even to meet

day-to-day commitments.

4) Fixed assets are not efficiently utilized for the working capital funds. Thus

the rate of return on investment surplus.

5) Paucity of working capital funds renders the firm unable to avail of

attractive credit opportunities etc. The firm losses it reputation when it is

not in a position to turnover short term obligation.

METHODS FOR ESTIMATING WORKING CAPITAL

REQUIREMENTS

There widely used methods for determining working capital requirements

of a firm are:

Percentage of sale method

Regression analysis method

Operating cycle method

1. PERCENTAGE OF SALE METHOD

In this method level of working capital requirements on the basis of past

experience. The past relationship between sales and working capital is taken as a

base for determining the size of working capital requirements for future. I it

however, presumed that the relation ship between sales and working capital that

has existed in the past has been stable. This may be explained with the help of the

following illustration.



32/72


Percentage of sale method is a simple and easily understood method and

practically used for ascertaining short-term changes in working capital in future.

However this method lacks reliability in as much as its basic assumption of linear

relation ship between sales and working capital does not hold true in all the cases.

As such, this method cannot be recommended for universal application.

2. REGRESSION ANALYSIS METHOD

This is a statistical method of determining working capital requirements by

establishing the average relationship between sales and working capital and its

various components in the past years. In this regard the method of least squares is

employed and the relationship between sales and working capital is expressed by

the equation:

Y=a+bx

The value of a and b is obtained by the solution of simultaneous linear

equations given as under:

Where

a=fixed component

b=variable component

x=sales

y=inventory

n=number of observations

3. OPERATING CYCLE APPROACH

Operating cycle refers to the length of time necessary to complete the

following cycle of events.

o Conversion of cash into inventory

o Conversion of inventory into receivable

o Conversion of receivable into cash

If the operating cycle is length than the working capital requirements will be more

on the other hands, if the operating cycle is short then the working capital

requirement will be less.



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According to this approach size of working capital requirements of a firm

is determining by multiplying the duration of the operating cycle by cost of

operations. The duration of the operating cycle may be found with the help of the

following formula:

O=R+W+F+A-P

WHERE

O=Duration of operating cycle

R=Duration of raw materials

W=Duration of work-in-process

F=Duration of finished goods

A= Duration of accounts receivable

P=Duration of accounts payable

DURATION OF RAW MATERIALS

It reflects the number of days for which raw materials remain in inventory

before they are issued for production. The following formula can be used to

determine duration of raw materials.

Average stock of raw materials

R=----------------------------------------------

Per day consumption of raw materials

DURATION OF THE WORK-IN-PROCESS

It denotes the number of days required in the work-in-process stage. It may

be ascertained with the help of the following formula:

Average work-in-process inventory

W=-----------------------------------------------

Average production per day



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OPERATING CYCLE

DURATION OF FINISHED GOODS

It refers to the number of days for which finished goods remain in

inventory before they are sold. This can be computed by the following formula:

Average finished goods inventory

F=---------------------------------------------

Per day sale of goods

DURATION OF THE ACCOUNTS RECEIVABLE


CASH

BILLSRECEIVABLES

OR DEBTORS

RAW

MATERIALS

CREDIT SALES

FINISHED GOODS

WORK IN

PROGRESS


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It represents the number if days required to collect the accounts

receivables. This may be calculated as under:

Average book debts

A=--------------------------------------

Average credit sales per day

DURATION OF ACCUNTS PAYABLE

It refers to the number of days for which the suppliers of raw materials

offer credit. This may be measured with the help of the following formula:

Average trade creditors

P= --------------------------------------------

Average credit purchases per day

RATIO ANALYSIS

Ratio analysis is the process of determining and interpreting numericalrelationship based on financial statements. A ratio is a statistical yardstick that

provides a measure of the relationship between variables of figures. This

relationship can be expressed as a percentage or as quotient.

TYPES OF RATIOS

Ratios can be grouped into various classes according to financial activity

of function to be evaluated. The parties interested in financial analysis are short

and long term creditor. Owner and management. Short-term creditors main

interest is in the liquidity positions or the short-term solvency o the firm. Long-

term creditors on the other hand are more interested in the long term solvency and

profitability of the firm.

A. Liquidity ratios

B. Leverage ratios

C. Activity ratios/ Turn over ratio



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D. Profitability ratio.

Financial ratio analysis refers to the mathematical expression of

relationship between two accounting figures drawn either from balance sheet or

from profit and loss account or both. In order to apprise, interpret and review

the effectiveness of the company, the following ratios are used in the present

study:

Cash ratio

Liquid ratio

Current ratio

Debtors turnover ratio

Creditors turnover ratio

Stock or inventory turnover ratio

Working capital turnover ratio

Cash related to working capital ratio

Inventory to working capital ratio

Profit to gross working capital ratio

Profit to net working capital ratio

Gross profit ratios

Return on investment ratio

Gross working capital to sales

Net working capital to sales

Ratio analysis takes two forms behavior of ratios over a period of years to

determine trend, comparing ratios for one concern with those of the other

concerns in the same line of business. In making such comparisons allowance

must be made for differences in the character of enterprise and for special

accounting practices and policies pursed by each undertaking.

B. LIQUIDITY RATIOS

Liquidity ratios measure the firms ability to meet current

obligations.

1. CURRENT RATIO



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The current ratio is calculated by dividing current assets by current

liabilities.

Current assets

Current ratio= __________________Current liabilities

CURRENT ASSETS : include cash and bank balances,

marketable

securities debtors and inventories and also prepaid expenses etc.

CURRENT LIABILITIES : include creditors, bills payable,

accruedexpenses, short-term bank loan, income tax liability etc.

2. QUICK RATIO

Quick ratio establishes a relationship between Quick, or liquid assets and current

liabilities.

Current assets-Investments& Loans advances

Quick Ratio =_______________________________________

Current LiabilitiesWhere;

LIQUID ASSETS include cash, debtors, and bills receivables and marketable

securities.

3. ABSOLUTE QUICK (CASH) RATIO

Since cash is the most liquid assets, a financial analyst may examine cash

ratio and its equivalent to current liabilities. Trade investments (or)

Marketable securities are equivalent of cash.

Cash + Marketable Securities

Cash Ratio=________________________________

Current Liabilities

B) LEVERAGE RATIOS



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Leverage ratio may be calculated from the balance sheet items to

determine the proportion of debt in total financing. Leverage ratios are also

computed from the profit and loss items by determining the extent to which

operating profits are sufficient to cover the fixed charges.

1. TOTAL DEBT RATIO

Several debt ratios may be used to analysis the long-term solvency of a firm.

The firm may be interested in knowing the proportion of the interest bearing debt

(also called funded debt) in the capital structure. It may compute debt ratio by

dividing total debt by capital employed (or) net assets.

Total Debt

Total Debt Ratio=_______________________

Total Debt + Net Worth

Where;

Total Debt = Secured + Unsecured loans

Capital Employed=Total Debt + Shareholders Fund

2. DEBT EQUITY RATIO

This relationship describing the lenders contribution for each rupee of the

owners contribution is called debt-equity ratio. Debt equity ratio is directly

computed by dividing total debt by net worth.

Total Debt

Debt Equity Ratio=_____________

Net Worth

Where;

Total Debt = Secured + Unsecured

Net Worth = Share Capital + Reserves and Surplus



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3. INTEREST COVERAGE RATIO

Debt ratios described above are static in nature, and fail to indicate the

firms ability to meet interest (and other fixed charges) obligations. The interestcoverage ratio (or) the times interest coverage ratio is completed by dividing

earnings before interest and taxes by interest charges

EBIT

Interest coverage ratio = _______

Interest

C)ACTIVITY RATIOS

Activity ratios involve a relationship between sales and assets. A proper

balance between sales and assets generally reflects that assets are managed well.

Several activity ratios can be calculated.

1. INVENTORY TURNOVER RATIO

Inventory turnover ratio indicates the efficiency of the firm in producing

and selling its product. It is calculated by dividing the cost of goods sold by the

average inventory.

Cost of goods sold

Inventory Turnover Ratio=_____________________

Average inventory

Where;

Cost of goods sold=raw material, wrapping and packing materials

consumed + purchase of finished goods + manufacturing expenses

2. WORKING CAPITAL TURNOVER RATIO

A firm may also like to relate net current assets (or net working capital

gap) to sales. It may thus compute net working capital turnover by dividing sales

by net working capital.

Sales



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Net current assets turnover=______________________

Net working capital

3. DEBTORS TURNOVER RATIO

A firm sells goods for cash and credit. Credit is used as a marketing tool

by a number of companies. When a firm extends credits to its customers, debtors

(account receivables) are created in the firms accounts. Debtors are expected to

be converted into cash over a short period.

Debtors turnover is found out by dividing credit sales by average debtors.

Credit sales/sales

Debtors turnover=________________

Average debtors

Debtors turnover indicates the number of times debtors turnover each year.

4. CREDITORS TURNOVER RATIO

This ratio gives the average credit period enjoyed from the creditors and is

by dividing credit purchases by average accounts payable (creditors + bills

payable)

Creditors purchases

Creditors turnover=___________________

Average creditors

Where;

Purchases= Raw materials, wrapping and packing materials consumed +

purchase of finished goods.

Note: here, credit purchases are not available. There fore we consider the total

purchases for calculation.



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5. FIXED ASSETS TURNOVER RATIO

Fixed assets are used in the business for producing goods to be sold. The

effective utilization of fixed assets in increased production and reduced cost. It

also ensure whether investment. In the assets have been judicious (or) not.Sales

Fixed assets turnover ratio= ____________

Fixed assets

D). PROFITABILITY RATIOS

The profitability ratios are calculated to measure the operating efficiency

of the company. Besides management of the company, creditors and owners arealso interested in the profitability of the firm. Creditors want to get interest and

payment of principal regularly owners want to get a required rate of return on their

investment.

1) GROSS PROFIT RATIO

The first profitability ratio in relation to sales is the gross profit margin. It

is calculated by dividing the gross profit by sales.

Gross Profit

Gross profit= ______________ X 100

Sales

Where;

Gross profit = sales (Raw material, wrapping and packing material consumed +

purchases of finished goods + manufacturing expenses)

2) NET PROFIT RATIO

Net profit is obtained when operating expenses, interest and taxes are

subtracted from the gross profit. The net profit ratio is measured by dividing

profit after tax by sales.



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Net Profit

Net Profit Ratio=________________ X 100

Sales

Where, Net profit = PBIDT

3) RETURN ON INVESTMENT (ROI)

The term investment may refer to total assets (or) Net assets. The funds

employed in net assets in known as capital employed . Alternatively, capital

employed is equal to net worth plus total debt.

PBIDT

ROI=________________________ x 100

Capital Employed

Where;

Capital Employed = Share Capital + Reserves and Surplus + Secured loans +

Unsecured loans.



43/72


COMPOSITION OF WORKING CAPITAL

CURRENT ASSETS

Inventories Raw materials

Work in progress

Finished goods

Stores and spares

Miscellaneous goods

Receivables Trade debtors

Loans and advances

Other debtors balances

Marketable securities Government securities

Semi Government securities

Shares, debenture, etc.,

Cash and bank balances Cash in hand

Cash at bank

Cash in transit

CURRENT LIABILITIES

Sundry creditors Advances received from customers

Short term loans from banks

Trade dues and other liabilities

Deposits from public etc.,



44/72


STATEMENT OF CHANGES IN WORKING CAPITAL

FOR THE YEAR 2006-2007

PARTICULARS 2006 2007

EFFECT OF WORKING

CAPITAL

INCREASE DECREASE

CURRENT ASSETS

Inventories 175448000 303238111 127790111

Sundry debtors 8069520 8256619 187099

Cash & bank balances 2214515 2907579 693064

Loans & Advances 74538006 89584621 15046615

Total current assets(A) 260270041 403986930

CURRENT

LIABILITIES

Sundry creditors 41152506 91008350 49855844

Bills payable 69153301 265573013 196419712

Provision for tax 71000 68042 2958

Advances 2029250 4407965 2378715

Total current liabilities (B) 112406057 361057370

Net working capital(A-B) 147863984 42929560

Decreased working capital 104934424 104934424

147863984 147863984 248654271 248654271

INTERPRETATION

The above table shows statement of changes in working capital

during the year 2006-200



45/72





EFFECT OF WORKING

CAPITAL

INCREASE DECREASE

CURRENT ASSETS

Inventories 303238111 375676892 72438781

Sundry debtors 8256619 8416762 160143


Loans & advances 89584621 150964503 61379882


CURRENT

LIABILITIESSundry creditors 91008350 118673654 27665304

Bills payable 265573013 344582844 79009831


Advances 4407965 2623395 1784570

Total current liabilities(B) 361057370 465964975


Increased working capital 31230932 31230933

74160493 74160493 137923108 137923108

INTERPRETATION: The above table shows statement of changes in

working capital during the year 2007-2008 it as net increased in working capital

Rs. 31230933





46/72



EFFECT OF WORKING

CAPITAL

INCREASE DECREASE

CURRENT ASSETS

Inventories 375676892 156306246 219370646

Sundry debtors 8416762 7348982 1067780


Loans & advances 150964503 145766518 5197985


CURRENTLIABILITIESSundry creditors 118673654 44215344 74458310

Bills payable 344582844 195998366 148584478


Advances 2623395 16505043 13881648



Decreased working capital 12777688 12777688

74160493 74160493 239518059 239518059

INTERPRETATION

The above table shows statement of changes in working capital during the year

2008-2009 it as net decreased in working capital Rs. 12777688




EFFECT OF WORKING

CAPITAL



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INCREASE DECREASE

CURRENT ASSETS

Inventories 156306246 136429420 19876826

Sundry debtors 7348982 8062874 713892


Loans & advances 145766518 145443323 323195


CURRENT

LIABILITIES

Sundry creditors 44215344 34687285 9528059

Bills payable 195998366 160800195 35198171


Advances 16505043 5760575 10744468




92504690 92504690 56184590 56184590

INTERPRETATION:

The above table shows statement of changes in working capital

during the year 2009-2010 it as net increased in working capital Rs. 31121885.



EFFECT OF WORKING

CAPITAL



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PARTICULARS 2010 2011 INCREASE DECREASE

CURRENT ASSETS

Inventories 136429420 456904598 320475178

Sundry debtors 8062874 16803678 8740804


Loans & Advances 145443323 144280277 1163046


CURRENT

LIABILITIESSundry creditors 34687285 123537482 88850197

Bills payable 160800195 174367576 13567381


Advances 5760575 67154404 61393829

Total current liabilities (B) 201333932 365140461



256318958 256318958 32922086 329220860

INTERPRETATION: The above table shows statement of changes in

working capital during the year 2010-2011 it as net increased in working capital

Rs. 163814268

RATIO ANALYSIS

CURRENT RATIO

CURRENT ASSETSCURRENT RATIO = ---------------------------



49/72


CURRENT LIABILITIES

CURRENT RATIO DURING THE YEAR 2006-2011

YEARCURRENT

ASSETS

CURRENT

LIABILITIESRATIO

2006-2007 403986930 36157370 1.12

2007-2008 540125468 465964976 1.16

2008-2009 318177455 256794650 1.24

2009-2010 293838622 201333932 1.45

2010-2011 621459419 365140461 1.70

Source: Annual published reports of KBD sugars & Distilleries Ltd.

INTERPRETATION

The ideas current ratio that 2:1 it implies that for every one rupee of

current liabilities, 2 rupees of current assets are available to meet them all the

years 2007-2008, 2008-2009,2009-2010,2010-2011,2011-2012 liquidity position

is not satisfactory.



50/72


CURRENT RATIO

0

100000000

200000000

300000000

400000000

500000000

600000000

700000000

2006-

2007

2007-

2008

2008-

2009

2009-

2010

2010-

2011

YEARS

RATIO

CURRENT

ASSETS

CURRENT

LIABILITIES

RATIO



51/72


QUICK RATIO

CASH + SUNDRY DEBTORS

QUICK RATIO = ---------------------------------------------CURRENT LIABILITIES

YEARS

CASH &

BANK

BALANCES

SUNDRY

DEBTORS

CURRENT

LIABILITIE

S

RATIO

2006-2007 2907579 8256619 361057370 0.03

2007-2008 5067311 8416762 465964976 0.02

2008-2009 8755709 7348982 256794650 0.06

2009-2010 3903005 8062874 201333932 0.05

2010-2011 3470866 16803678 365140461 0.05


INTERPRETATION:

Quid Ratio is also known as liquid ratio or Acid test ratio. The

standard liquid ratio is 1:1 for every one rupee. There should be one rupee of

Quick assets. The liquidity ratio for the periods of 2007-08, 2008-2009,2009-

2010, 2010-2011, 2011-2012 are not satisfactory.



52/72


QUICK RATIO

0

50000000

100000000

150000000

200000000

250000000

300000000

350000000

400000000

450000000500000000

2006

-2007

2007

-200

8

2008

-200

9

2009

-201

0

2010

-201

1

YEARS

RATIOS

CASH & BANK

BALANCES

SUNDRY

DEBTORS

CURRENT

LIABILITIES

RATIO



53/72


ABSOLUTE QUICK RATIO

CASH + MARKETABLE SECURITIESABSOLUTE LIQUID RATIO = ------------------------------------------------------

CURRENT LIABILITIES

YEARS CASHCURRENT

LIABILITIESRATIO

2006-2007 2907579 361057370 0.008

2007-2008 5067311 465964975 0.01

2008-2009 8755709 256794650 0.032009-2010 3903005 201333932 0.019

2010-2011 3470866 365140461 0.01


INTERPRETATION:

It is also called cash position ration. The ratio should be one 1:2 it indicate

50% worth of absolute liquid assets are considered adequate to pay the 100%

claim of current liabilities 2009-2010 are satisfied and in the year 2007-

2008,2008-2009, 2010-2011, 2011-2012 are not satisfied.



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ABSOLUTE QUICK RATIO

0

100000000

200000000

300000000

400000000

500000000

2006

-200

7

2007

-200

8

2008

-200

9

2009

-201

0

2010

-201

1

YEARS

RATIOS

CASH

CURRENT

LIABILITIES

RATIO



55/72


WORKING CAPITAL TURNOVER RATIO

SALESWORKING CAPITAL TURNOVER= -----------------------------

WORKING CAPITAL

YEARS SALES

NET

WORKING

CAPITALRATIO

2006-2007 321056780 42929560 7.48

2007-2008 446392044 74160492 6.02

2008-2009 407989582 61382805 6.63

2009-2010 318263738 92504690 3.44

2010-2011 226717032 256318958 0.88

Source: Annual published Reports of KBD Sugars distilleries Ltd.

INTERPRETATION

The higher, the ratio, the lowest is the profiles. The ratio has increased from

the periods of 2007-2008, 2008-2009, 2009-2010 but there has been decreases in

the period of 2010-2011, 2011-2012.



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WORKING CAPITAL RATIO

0

50000000

100000000

150000000

200000000

250000000

300000000

SALES

321056780

446392044

407989582

318263738

226717032

SALES

RATIOS

NET WORKING

CAPITAL

RATIO



57/72


FINDINGS

In the over all evaluation of the working capital management at each and every

aspects the following are the findings.

Working capital ratio of the KBD sugars & Distilleries Ltd is decreasing in

all the years which indicate the poor liquidity positions of the company.

The current ratio represent a margin of safety for creditors the higher the

current ratio the greater the margin of safety the larger amount of current

assets in relation to current liabilities The more firms ability to meet its

current obligations KBD sugars & Distilleries Ltd current ratios shows not

satisfactory in order to all the years i.e. 2007-2008, 2008-2009, 2009-2010,

2010-2011, 2011-2012.

The liquid ratio of the KBD sugars Distillers Ltd is not satisfactory all the

years

Absolute Quick ratio of the KBD Sugars & Distilleries ltd is not

satisfactory all the years every one rupee worth of assets is not sufficient to

pay rupee 2 worth of current liabilities.

The company sales have been decreased in all the years.

Movement of accounts payable shows an increasing trend this indicates

company is able to generate credit liberal terms and generate revenue yet

other cost.



58/72


SUGGESITIONS

The KBD sugars Distillers Ltd should try to maintain an optimum level of

inventory and develop this strategy for investing excess cash balances.

The KBD sugars Distillers Ltd should improve the profits by reducing

the indirect expenses.

The KBD sugars Distillers Ltd should maintain adequate working

capital.

The KBD sugars Distillers Ltd should maintain the high liquidity

position.

The KBD sugars Distillers Ltd should develop an optimum credit

policy.

The KBD sugars Distillers Ltd should determine maximum rate of cash

discount they can give to the customers.

The KBD sugars Distillers Ltd should utilize the reserves and surplus

by either capitalizing or invest the money some where as investment to get

benefits.



59/72


CONCLUSION

From the analysis on the working capital management at KBD Sugars &

Distilleries Ltd. I conclude that the company has to reduce its production cost to

increase profit.

The inventory turn over is good in all the five years. The company should try

to increase their sales. It should maintain the high liquidity position. Hence, the

suggestions given are realistic which will lead to increase in the profitability of the

company. The company should try to tap the market and set in brand value and do

the best.



60/72


KBD SUGARS AND DISTILLERIES LIMITED-SUGAR

DIVISION BALANCESHEET AS AT 31.03.2007



61/72


KBD SUGAS AND DISTILLERIES LIMITED SUGAR DIVISIONPROVISIONAL PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31st MARCH, 2007


DESCRIPTION SCHDULE SUGAR

DIVISION

POWER

DIVISION

TOTAL

I. SHARE CAPITAL A 0 0 0

II. RESERVES AND SURPLUS B -6425313 -14234661 -20659974

III. LOANS & ADVANCES

1. Secured Loans

2. Unsecured Loans

3. Deferred Tax

Liability

C

170318211

98014487

0

83090635

7900000

0

253408846

105914487

0

261907384 76755974 338663359

IV. FIXED ASSETS

1. Gross Block

Less. Depreciation

Net. Block

D

444742528

259907670

118065951

18876529

562808479

278784199

184834858 99189422 28402480

V. CURRENT ASSETS

1. Inventories

2. Sundry debtors

3. Cash and Bank Balances

4. Loans and Advances

Less: Current Liabilities

E

F

G

H

I

302113330

5247667

2858458

89518334

1124781

3008952

49121

66287

303238111

8256619

2907579

89584621

39973789

361221189

4249141

1014854

403986930

36223604338516600 3234287 41750887

VI. MISCELLANEOUS

INCOME

J 367278 0 367278

232111721 106551638 338663359


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DESCRIPTION SCH FOR THE YEAR ENDED 31st March

2007

SUGAR

DIVISION

POWER

DEVISION

TOTAL

INCOME

Sales And Other Income

Increase/(Decrease) In Stocks

EXPENDITURE

Consumption of Raw Material

Manufacturing Expensess Salaries, Wages & Other Benefits

Interest and Financial Charges

Duties & Taxes

Administrative expenses

depreciation

Profit/Loss For The Year

Prior Period Items Net

Profit/Loss For The YearDeferred Tax Asset

Loss Brought Forward From Previous

Year

LOSS CARRIED TO BALANCE SHEET

K

L

M

N

O

P

Q

318251683

1

077010616

2805097

0

321056780

107701016

425952699 2805097 428757796

301448545

4033856523300302

9463676

29444670

9852517

18529737

1716287

2602175531

9862397

0

83991

5275531

303164

832

4036458523375833

19326073

29444670

9936508

23805268

432378012 17039759 449417770

(6

425313)

0

(6425313)0

0

(1

4234661)

0

(14234661)0

0

(20659

974)

0(20659974)

0

0

642513 14234661 20659974

KBD SUGARS AND DISTILLERIES LIMITED-SUGARDIVISION BALANCESHEET AS AT 31.03.2008



63/72


KBD SUGAS AND DISTILLERIES LIMITED SUGAR DIVISION

PROVISIONAL PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31st MARCH, 2008

DESCRIPTION SCH FOR THE YEAR ENDED 31st March2008



DIVISION

POWER

DIVISION

TOTAL




1. Secured Loans

2. Unsecured Loans

3. Deferred Tax

Liability

C

290451741

60389487

0

74691204

7900000

0

365142945

68289487

0

279277584 75513197 354790781

IV. FIXED ASSETS

1. Gross Block

Less. Depreciation

Net. Block

Capital work in progress

D

462430669

279089573

183341096

4196167

118065951

24152123

93313828

113017

580496620

303241696

27254924

4309183

187537262 9406845 281564107

V. CURRENT ASSETS

1. Inventories

2. Sundry debtors




E

F

G

H

I

375140470

3534587

4788074

150933218

536423

4882175

279237

31285

375676892

8416762

5067311

150964503

534396349

466570599

5729120

573049

540125469

467143647

67825751 5156071 72981822

VI. MISCELLANEOUS

INCOME

J 244852 0 244852

255607865 99182916 354790781


64/72


SUGAR

DIVISION

POWER

DEVISION

TOTAL

INCOME

Sales And Other Income


EXPENDITURE

Consumption of Raw Material

Manufacturing Expenses

Salaries, Wages & Other Benefits

Interest And Financial ChargesDuties & Taxes

Administrative Expenses

Depreciation




Deferred Tax Asset

Loss Brought Forward From Previous Year


K

L

M

N

O

P

Q

4389

97392

74444167

7394652

0

446392044

74444167

513441560 7394652 520836212

391

334724

57600161

31543420

28185073

48400517

8759405

19181903

101786

224679

81853

8788747

0

0

5275594

391436

510

57824840

31625273

36373820

48400517

8759405

24457497

585005203 14472659 599477862

(715

63643)

0

(71563643)

0

0

(7

078007)

0

(7078007)

0

0

(786416

50)

0

(78641650)

0

0

71563643 7078007 78641650


DIVISION BALANCESHEET AS AT 31.03.2009DESCRIPTION SCHDULE SUGAR

DIVISION

POWER

DIVISION

TOTAL





65/72



1. Secured Loans

2. Unsecured Loans

3. Deferred Tax

Liability

C

22847433

102348323

0

64357833

7900000

0

253408846

105914487

0

286679102 65281244 351960346

IV. FIXED ASSETS

1. Gross Block

Less. Depreciation

Net. Block


D

497422330

299496627

197925703

4914492

118108912

29428336

88680576

113016

615531243

328924963

286606280

5027507.90

202840195 88793593 291633788

V. CURRENT ASSETS

1. Inventories

2. Sundry debtors

3. Cash and Bank Balances4. Loans and Advances


E

F

G

H

I

155302989

593127

8546034

145739026

1003257

1417155

209675

27492

156306246

7348982

8755709

145766518

315519877

257396433

2657578

576890

318177455

257973323

58123444 2080688 60204132

VI. MISCELLANEOUS

INCOME

J 122426 0 122426

261086065 90874281 351860346




2009

SUGAR

DIVISION

POWER

DEVISION

TOTAL



66/72


INCOME

Sales

Less: Excise Duty

Other Income


EXPENDITURE

Consumption Of Raw Material


Salaries, Wages & Other Benefits

Interest And Financial Charges

Administrative Expenses

Depreciation




Deferred Tax AssetLoss Brought Forward From Previous Year


K

L

M

N

OP

Q

4019

03062

27168636

6086520

0

407989582

27168636

374734427

26118647

-217914213

6086520

0

0

380820947

26118647

-217914213

182938861 6086520 189025381

103

459245

36428063

3056429827376162

8847793

20407054

0

23650

1339017594511

34834

5276213

103459245

3645171

3069819934970673

8882627

25683267

227082615 13063109 240145724

(44143754)

0

(44143754)

0

0

(

6976589)

0

(6976589)

0

0

(511203

43)

0

(51120343)

0

0

44143754 6976589 51120343



67/72



DIVISION BALANCESHEET AS AT 31.03.2010



68/72







DIVISION

POWER

DIVISION

TOTAL




1. Secured Loans

2. Unsecured Loans

3. Deferred Tax

Liability

C

239892160

109948323

0

59536565

7900000

0

299428725

111248323

0

318996272 56884998 375881270

IV. FIXED ASSETS

1. Gross Block

Less. Depreciation

Net. Block


D

498312592

319263909

179048683

21990549

118108912

3470590

83403005

113016

616421505

353969816

262451689

2210356504

201039232 83516022 284555254

V. CURRENT ASSETS

1. Inventories

2. Sundry debtors




E

F

G

H

I

135750568

4601803

3696880

145443323

678852

3461071

206125

0

13642920

8062874

3903005

145443323

289492574

201954289

4346048

558317

293838622

202512606

87538286 3787730 91026016

VI. MISCELLANEOUS

INCOME

J 0 0 0

288577518 87303752 375881270


69/72


2010

SUGAR

DIVISION

POWER

DEVISION

TOTAL

INCOME

Sales

Less: Excise Duty

Other Income


EXPENDITURE

Consumption Of Raw Material


Salaries, W

Documents

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