TOPIC

1.1 INTRODUCTION
1.2 OBJECTIVE OF STUDY
2.1 SUDHA AGRO OIL & CHEMICAL LTD.

PAG
E
NO.
2
5
6

2.2 WORKING CAPITAL MANAGEMENT

THEORY
3.1 CHOOSING WORKING CAPITAL

8
23

POLICY
4.1 CALCULATION OF WORKING
CAPITAL FROM 2005 TO 2010

26

4.2 CALCULATION OF CHANGES IN

WORKING CAPITAL

31

4.3 INTERPRETATION
5.1 CONCLUSION

36
37

5.2 BIBLIOGRAPHY

38

INTRODUCTION
Working capital management is significant in financial
management. It plays a vital role in keeping the wheel of
the business running. Every business requires capital, without it
cant be promoted. Investment decisions is concerned with
investment in current assets and fixed assets .working capital
plays a key role in a business enterprise just as the role of heart
in human body . it acts as grease to run the wheels of fixed
assets .its effective provision can ensure the
success of
business while its inefficient management can lead not only
to loss but also to the ultimate downfall of what otherwise
might be considered as a promising concern . Efficiency of a
business enterprise depends largely on its ability to its working
capital .working capital management is one of the important
facts of affirms overall financial management
For increasing shareholders wealth a firm has to
analyze the effect of fixed assets and current assets on its return
and risk. working capital management of current assets . the
management of current
assets on the basis of the following
points:
1. current assets are for short period while fixed assets are for
more than one year
2. The large holding
of current assets ,especially cash,
strengthens liquidity position but also reduce overall
profitability ,and to maintain an optimal level of liquidity and
profitability , risk return trade off is involved holding current
assets
3. Only current assets can be adjusted with sales fluctuating in
the short run. Thus the firm has greater degree of flexibility in
managing current assets. The management of current assets help

affirm in building a good market reputation regarding its business

and economic conditions.

CONCEPT OF WORKING CAPITAL:

The concept of working capital includes current assets and
current liabilities both. There are two of working capital of working
capital they are gross and net working capital.
1.Gross working capital: Gross

working capital refers to the

firms investment in current assets .current assets are the assets,

which can be converted into cash within an accounting year or
operating cycle. It includes cash, short term securities, debtors
(account receivables or book debts),bills receivables and stock
(inventory).
2. Net working capital: net working capital refers to the
difference between current assets and liabilities are those claims
of outsiders, which are expected to mature for payment within an
accounting year. It includes creditors or accounts payables bills
payable and outstanding expenses. Net working copulate can be
positive or negative. A positive working capital will arise when
current assets exceed current liabilities and vice versa.

NATURE OF WORKING CAPITAL

Working capital management is concerned with the
problems that arise in attempting to manage the current assets,
the current liabilities and the inter relationship that exists
between them. The term current refers to those assets which in
the ordinary course of business can be, or will be converted into
cash within one year

without undergoing a diminution in value

and without disrupting the operation of the firm. the major current
assets are cash, marketable securities, accounts receivables and
inventory. Current liabilities are those liabilities, which are
intended at their inception ,to be paid in the ordinary course of
business, within a year out of the current or the earning of the
concern .The basic current liabilities are accounts payable, bills
payable ,bank overdrafts and outstanding expense. The goal of
working management is to manage the firms assets and liabilities
in such a way that a satisfactory level of working capital is
maintain. This is because if the firms cannot maintain a
satisfactory level of working capital, it is likely to become
insolvent and may even be forced into bankruptcy. The current
4

assets should be large enough to cover its current liabilities in

order to ensure a reasonable margin of safety. Each of the short
term source of financing must be continuously managed to ensure
that they are obtained and used in the way. Interaction between
current liabilities is, therefore the main theme of the of
management of working capital.

OBJECTIVES OF THE STUDY

Working capital is the most widely used and powerful technique of financial
analysis .The main objective of the present study is to know the financial
condition of the company.
To know the overall operational efficiently and performance of the sudha
agro oil and chemical industries limited.
To interpret the financial position of company of is appropriate (or) not.
To assess the long term financial viability of company .to know whether the
management is constantly concerned about the overall profitability of the
company (or) not.
To provide reliable financial information about economic resources and
obligation of a business enterprise.
5

 To provide reliable financial information those add ,its in estimating the

potential of the enterprise.
To disclose to the extent possible other information related to the financial
statements users.

COMPANY PROFILE
HISTORY OF THE COMPANY:SUDHA AGRO OIL AND CHEMICAL LIMITED , Sri E .Rajarao,
who has vast experience in the same line ,prompted an existing
profit making company. The company was incorporated on 7 th
December 1981 as a private limited company and became limited
company on 13th august 1988. Initially the promoters brought
Rs53.55lakhs as equity capital out of 750lakhs were subscribed
by apde subsequently 5000 shares in the yaer 1987 and 2500
shares in the year 1992 were brought back by promoters.
In the year 1993-94 the company issued a bonus shares of
42,840 shares of rs.100 paid up at the ratio of 5:4 out of reserves
of Rs 104-58 lakhs available with the company .the equity capital
was increased to Rs 177.61 lakhs by subscribing 26,775 shares at
per and 54.445 shares at premium of Rs 50 per share of Rs 500
paid up.

In the year 1996-97 the equity capital was further

increased to 225 lakhs by subscribing 47,390 shares at per by the
existing promoters .thus the equity capital of the company stood
at Rs 11.361lakhs as on 31st march ,1997.
The company paid 10% dividend on equity in the first
year itself and is continuously paying dividend for the eight years.

PRODUCTION FACILITIES:The company initially started with 150 TPD rice bran solvent extraction plant in
1982 and subsequently expended its acids ,glycerin and oxygen . The particulars of
the various plants installed in the companys existing premises given below.
NAME OF THE INSTALL
PLANT
ED TPD

CAPACITY
TPA

Solvent extraction 150

plant
Hydrogenation
50
plant
Chemical refinery 40

45,000

DATE
OF
COMMENCEMEN
T
OF
PRODUCTION
May 1983

15,000

May 1986

12,000

Feb 1994

Fatty acids plant

40

12,000

Sep 1994

Glycerin

600

April 1996

Physical refinery

20

6,000

June 1996

Oxygen booting

1667

5,00,000

Feb 1997

Power plant

1,800

Dec 2000

The company had started the solvent the extraction plant on its own fill in
1989-90 and it ran this on job work basis with minimum quality guarantee to ITC
limited and EssarGujarath limited from September 1990 .due to shifting of job
work processing the operating capacity of the plant of the plant came down from
84%to 66% . now this plants running on its own.
The company has entered a processing agreement for its hydrogenation
plan with Colgate Pamolive (1)ltd. the process a minimum quality of 2,400 Mt. per
year and the agreement is renewable every year. Colgate Palmolive (1) ltd also
supplied electrolysis equipment on hire purchase basis for the period of three years
commencing from year 1995 november.

WORKING CAPITAL MANAGEMANT THEORY

MEANING AND DEFINATION:
A part from investment in fixed assets , every enterprise has
to arrange for adequate funds for meeting day (operations)
expenses to kept it a concern. So originally speaking working
capital refers to the flow funds , necessary for working of
enterprise however these is no agreement among the financial
experts regarding the meaning of working capital. They define
working capital in the following ways.

ACCORDING TO MEAD MALLOT:

Working capital means current assets.
8

ACCORDING TO WESTON AND BRIGHAM:

working capital refers to a firm investment in short term assets,
cash, short term securities, accounts receivable and inventories.

CONCEPT OF WORKING CAPITAL:There are 2 concepts of working capital : gross and net.
The term gross working capital also referred to as a
working capital, means the total current assets.
The term net working capital can be defined in 2 ways.
1. The most common definition of net working capital is the
different between current assets and current liabilities
2. Alternate definition of net working capital is that portion of
current assets which is financed with long term funds.
The task of the financial manager in managing working
capital efficiency is to ensure sufficient liquidity in the
operation of the enterprise. The liquidity of a business firm is
9

measured by its ability to satisfy short term obligations as

they become due. The three basics measure of a firms
overall liquidity are
1. The acid test ratio
2. The net working capital
3. The current ratio
In brief , they are useful in inter firm comparison of liquidity . net
working capital as a measure of liquidity, is not very useful for
comparing the performance of different firms, but it is quite useful
for internal control. The net working capital helps in comparing
the same firm over time.

NEED FOR WORKING CAPITAL:In order earn sufficient profits, a firm has to depend on its sales
activities apart from others. We know that sales are not analysis
converted into cash immediately. i.e, there is a time lack between
the sale of a product and the realization of cash so, an adequate
amount of working capital is required by a firm in the form of
different current assets for its activities to continue un interrupted
and to tackle the problem that may arise because of the time lay.
Practically this happens simply owing to the operating cycle(or)
cash cycle, involves the following steps.
(a)
(b)

Conversion of cash into inventory.

Conversion of inventory into receivables.
10

(c)

Conversion of receivables into cash.

NATURE OF WORKING CAPITAL:The term working capital refers to current assets which may be
defined as
(1) Those which are convertible in to cash or equivalents with in
a period of one year and
(2) Those which are required to meet day operations.
This fixed assets as well as current assets, both required
investment of funds. So, the management of working capital and
of fixed assets, appearently seen to involve same type of
consideration but it is not so. The management of capital involves
different concepts and methodology than the techniques used in
fixed assets management. The reason for this different is obvious.
The very basics of fixed assets decision process (i.e the capital
budgeting ) and the working capital decision process are different.
The fixed assets involve long period perspective and therefore,
the concept of time value of money is applied where as in working
capital the time horizon is limited, in general, to one year only
and the time value of money concept is not considered. The fixed
assets the long term profitability of the while the current assets
affect the short term liquidity position. Managing current assets
may require more attention than managing fixed assets. The
financial manager must.

11

Therefore continuously monitor the assets to ensure that

the desire levels are being maintained. Since the amount of
money invested in current assets can change rapidly. So does the
financing required. Mis management of current assets can be
costly. Too large an investment in current means tying up funds
that can be productively used else where (or it means added
interest cost if the firm has borrowed funds to finance the
investment in current assets). Excess investment may also
expose the firm to undue risk eg. In case, the inventory cannot be
sold or the receivable cannot be collected.
On the other hand, too little investment also can be expensive
for ex:- insufficient inventory may mean that sales are lost as the
goods which a customer wants are not available. The results is
that financial managers spend a large chunk of their time
managing the current assets because level of these assets
changes quickly and a lack of attention paid to them may result in
appreciably lower profits for firm. So, in the working capital
management, a financial manager is faced with a decisions
involving some consideration as follows:

1. what should be the total investment in working capital of

the firm?
2. What should be the level of individual current assets?
3. What should be the relative proportion of different sources
to financial the working capital requirements?
12

Thus the working capital management may be defined as the

management of firms sources and uses of working capital in
order to maximize the wealth of the share holders. The proper
working capital management requires both the medium term
planning (say up to 3 years) and the immediate to changes
arising due to fluctuation in operating levels of the firm.

THE OPERTING CYCLE AND THE WORKING CAPITAL NEEDS:The working capital requirement of a firm depends, to a
great extent up on the operating cycle of the firm. The operating
cycle may defined as the duration from the procurement of goods
or raw materials and ending with sales realization. The length and
nature of the operating cycle may differ from one firm to another
depending up or the size and nature of the firm.
In a treading concern there is a serious of activities starting
from procurement of goods ending with realization of sales
revenue. Similarly in case manufacturing concern . This serious
start form procurement of raw material and ending with the sales
realization of finished foods. In both the cases however there is a
time gap between the happening of the first event and the
happening of last event .this time gap is called operating cycle.
Thus the operating cycle of a firm consists of time required for the
completion of chronological sequence of some or all of the
following.
13

1. Procurement of raw material and services

2. Conversion of raw material in the work in progress.
3. Conversion of work in progress in to finished goods.
4. Sales of finished goods. (cash or credit).
5. Conversion of receivable into cash.
The firm is after required to extend credit facilities to
customers. The finished goods must be kept in store to take care
of the orders and minimum cash balance must be maintained. It
must also have minimum of raw material to have smooth and
uninterrupted production process. So in order to have a proper
and smooth running of the business activities, the firm must make
investment in all these current assets. This requirement of funds
depend up on the operating cycle period of the fiem and also
denoted as the working capital needs of the firm.

OPERATING CYCLE PERIOD:The length or time duration of the operating cycle of any
firm can be defined as the sum of its inventory conversion period
and the receivable conversion period.
(1)INVENTORY CONVERSION PERIOD:-

14

It is the time required for the conversion of raw material in

to finished goods sales. In a manufacturing concern the ICP is
consisting of raw materials conversion period(RMCP), work in
progress conversion period (WPCP), and the finished goods
conversion period (FGCP). The RMCP refers to the period for which
the raw material is generally kept in store before is issued to the
production department. The WPCP refers to the period for which
the raw material remain in the production process before it is
taken out as a finished unit. The FGCP refers to the period for
which finished units remain in stores before being sold to the
customers.
(2) RECEIVABLES CONVERSION PERIOD: (RCP)
It is the time required to convert the credit sales in to cash
realization. It refers to the period between the occurrence of
credit sales and collection of debtors.
The total of ICP and RCP is also known as total operating
cycle period (TOCP). The firm might be getting some credit
facilities from the supplier of raw material wag earners etc. this
period for which the payment it these parties are deferred or
delayed is known as deferral period. The net operating cycle of a
firm is arrived at by deducting the deferral period from total
operating cycle period. Thus
NOC =

TOCP-D

OPERATING CYCLE

15

= ICP+RCP- DP.

The duration of time required for completing the following

sequencies of events in case of manufacturing firm s called the
operating cycle.
1.
2.
3.
4.

Conversion of
Conversion of
Conversion of
Conversion of
through sale.
5. Conversion of

cash into raw material.

raw material into work in progress.
work in progress into finished goods.
finished goods into debtors & bills receivable
debtors & bills receivable into cash.

CASH

ACCOUNTS
RECIEVABLE

RAW MATERIAL

FINISHED GOODS

WORK IN
PROGRESS

The duration of the operating cycle for the purpose of estimating

working capital requirement is equalant to the sum of duration of
each of these tables less the credit period allowed by the
suppliers of the firm.

16

TYPES OF WORKING CAPITAL

1. NET WORKING CAPITAL:
The net working capital is the different between current
assets and current liabilities. The concept of net working capital
enables a firm to determine how much amount is left for
operational requirements.
2. GROSS WORKING CAPITAL:
Gross working capital is the amount of funds invested in the
various components of current assets.
3. PERMANENT WORKING CAPITAL:
Permanent working capital is the minimum amount of current
assets which is needed to conduct a business even during the
dullest season of the year. The amount varies from year to year
depending up on the growth of the company and stage of
business cycle in which it operates. It is the amount of funds
required to produce goods and services which are necessary to
satisfy demand at a particular point.
4. TEMPORARY OR VARIABLE WORKING CAPITAL:
It is represents the additional assets which are required at
different times during the operating year additional inventory,
extra cash etc., seasonal working capital is the additional amount
of current assets particularly cash, receivables and inventory
17

which is required during the more active business seasons of the

year.

5. BALANCE SHEET WORKING CAPITAL:

The balance sheet working capital is one which calculated
from the items appearing in the balance sheet. Gross working
capital which is represented by the excess of current assets, and
net working capital which is represented by the excess of current
assets over current liabilities are examples of balance sheet
working capital.

6. CASH WORKING CAPITAl:

Cash working capital is one which is calculated from the
appearing in the profit and loss account. It shows the real flow of
money or value at a particular time and is considered to be the
most realistic approach in working capital management. It is the
basis of the operating cycle concept which has assumed a great
importance in financial management in recent years. The reason
is the working capital indicates the adequacy of the cash flow.
Which is an essential pre-requisite of a business.
7. NEGATIVE WORKING capital:

18

Numbers working capital emerges when current liabilities exceed

current assets. Such a situation is not absolutely theoretical, and
occurs when a firm is nearing a crisis of some magnitude.

DETERMINANTS OF WORKING CAPITAL:Numbers of rules are formulated to determine the working

capital requirement of the firm. a large number of factors
influence the working capital needs of the firm. All these factors
have different importance, also the importance of the factor
change for a firm over time. Therefore analysis of the relevant
factor should be made in order to determine the total investment
in working capital requirements of the firm.
1.
2.
3.
4.
5.
6.
7.
8.
9.

Nature and size of business

Seasonality of operation
Production policy
Marketing conditions
Business cycle fluctuation
Credit policy
Conditions of supply
Working capital policy
Current assets in relation to sales

NATURE OF BUSINESS:-

19

The working capital requirement of a firm is closing related to the

nature of its business. A service firm like an electricity. A service
firm like an electricity undertaking of a transport corporation,
which has short operating cycle and sells on cash basis, has
modest working capital requirement. On the other hand
manufacturing concern like machine tools units which has long
operating cycle and which sells largely on credit had varied
substantial working capital management.

SEASONALITY OF OPERATION:Firms which have market seasonally in their operation usually

have highly function working capital requirement. For a sugar
industry the raw material i.e., sugar cane is available in particular
season only. So sugar industry mainly depends upon seasonality
of operations.

PRODUCTION POLICY
A firm marked by pronounced seasonal fluctuations in its
sales many pursue a production policy which many reduce the
shape variation is working capital requirement.

MARKETING CONDITIONS:

20

In view of competitive conditions prevailing in the firm may

have to offer liberal credit terms, to customs resulting in higher
debtors, even large inventories many be maintain to serve an
order as and when received. Thus the working capital tends to be
high as a result of investors in inventions & receivable.

BUSINESS CYCLE FLUCTUATIONS:Different phases of business cycle i.e boom, recession,

recovery etc, also effect working capital requirement. In case of
born

conditions

inflationary

pressure

appear

and

business

activities expand. As a result the overall need for cash ,

inventories etc., increase resulting more and more funds blocked
in these current assets. In case of recession period.How ever,
there is usually dullness in business activities and there will be
opposite effect on the level of working capital.
CREDIT POLICY:The credit policy means the totality of terms and conditions
on which goods are sold and purchased. At firm has interact with
2 types of credit policies at a time one, the credit policy of the
21

supplier of raw material, goods etc, and two the credit policy
relating to credit which it octends to its customer. In both the
cases, however ,the firm while deciding its credit policy has to
take care of credit policy of the market for example affirm might
be purchasing goods and services on credit but selling foods only
for cash the working capital requirement of this firm will be lower
than that of a firm which is purchasing cash, but has to sell on
credit basis.
CONDITIONS OF SUPPLY:If the supply is prompt and adequate the firm can manage
with small inventory, if the supply is unpredicted and service then
the firm has to ensure continuity of production.

WORKING CAPITAL POLICY:Two important issue in formulation the working capital

policy are:
1. What should be the ratio of current assets to sales.
2. What should be the ratio of short term financing to long-term
financing.
CURRENT ASSETS IN RELATION TO SALES:
It usually does the investment in current assets cannot
be specified unequally. In sales of uncertainty the outlook on
22

current assets would consist of base component meant to meet

normal requirement and safety component mean to copy with
unusual demands and requirements. The safety assets policy of
the firm .
1. If the firm pursues a very conservation current assets policy
is should carry a high level of current assets in relation to
sales.
2. If the adopts a moderate current assets policy it would carry
a moderate level of current assets in relation to assets.
3. If the term follows highly aggressive current assets policy. It
would carry a low level of current assets in relation of sales.
A conservative current assets policy trends to reduce risk.
The surplus current assets under the policy enable firm to copy
rather

easily

with

variations

in

sales.

54&55 An aggressive current assets policy seeking to

minimize the investment in current assets exposes the firm to
greater risk.

RATIO

OF

SHORT

TERM

FINANCING

TO

LONG

TERM

FINANCING:What would be the relative proportions of short-term bank

financing on one hand and long-term sources of finance and the
other hand. The board policy alternatives in the respect are:
1. A conservative current assets financing policy.

23

2. An aggressive current assets financing policy. A conservative

current assets financing policy refills less on short-term bank
financing and more long on term sources like debentures. An
aggressive current financing policy relies heavily on shortterm bank finance and seek to reduce dependants on long
term financing.

THE WORKING CAPITAL POLICY

The overall working capital policy adopted by the firm may
broadly:1. Conservative
24

2. Moderate
3. Aggressive
CONSERVATIVE:
A conservative overall working capital policy means that
the firm chooses conservative current assets policy along with
conservative current assets financing policy.
MODERATE:
A moderate overall working capital policy reflects a
combination of a conservative current assets policy and
aggressive current assets financing policy or a combination of an
aggressive current assets policy and conservative current assets
financing policy.
AGGRESSIVE:
An aggressive overall working capital consists of an
aggressive current assets policy and aggressive current assets
financing policy.
FINANCING OF WORKING CAPITAL:Normally, financing arrangements are planned for a
combination of needs including capital expenditure and working
capital investment the assessment of sources of funds from a
package and rarely will be possible to concept upto a particular
shows to a specific application or use at the same time financing
manager does make an assessment of the investment needs as
well as current assets and decider an a proper mix of long and
short term funds. Taking note of the internal generation of funds
for 56 &57 the period in question be decisions on the extent to
which the firm would resort to issue of share or long short-term
borrowing to mobile the required sources.

25

Typically the current assets of a firm are supported by the

combination of long term and short term sources of financing long
term sources of finance are equity, preference term loans and
debentures which primarily are fixed assets and secondarily
provide working capital margin.

Where the commitments are certain but cash flows are

not clearly predictable, it would wise to cut down drastically the
number and extent of short term debts to manageable levels and
prefer longer maturity schedules for debts.
Short term debts can take care of the seasonal needs of the
organization even here to take care of vagaries in cash flow, a
past of the funds required may be obtained from sources with
longer maturity schedules of the debts. Thus usually permanent
and long-term finance is used to finance the permanent
requirements or fixed assets and the net permanent current
assets and a apart of the reasonable short term needs.
The important sources of finance which more or less
exclusively support current assets are:
1.
2.
3.
4.
5.
6.
7.

Trade credit
Working capital advances by commercial bank.
Public corporate deposits
Inter corporate deposits
Short term loans from financial institutions .
Rights debentures for working capital.
Emerging sources commercial paper and factoring.

Of all the above the most significant sources of working

capital finance are trade credit and bank borrowings, after trade
credit bank borrowing are the next important sources of financing
working capital requirements of firms in India. Tanton committee
has suggested guidelines for the ratio allocation and optimum use
of the bank credit for the working capital requirement.
26

CHANGES IN WORKING CAPITAL:The working capital of a concern is subject to changes due to

several reasons. As we know that the gross working capital is
equal to current assets. But net working capital we mean the
excess of current assets over current liabilities. The net working
capital is therefore, affected by the following transactions.
1. Which increase the current but not the current liabilities.
2. Which decrease the current assets and current liabilities both
increase in the same direction by a transaction it does not
bring any change in the net working capital of the concern.
Only the total of current assets and current liabilities increase
and decrease.
REASONS FOR CHANGES IN WORKING CAPITAL:1. Changes in the level of sales and\ or operating expenses.
2. Policy changes.
3. Changes in the technology.
STATEMENT OF CHANGES IN WORKING CAPITAL:Until now any increase decrease in any individual item of current assets and
current liabilities was shown in the funds flow statement. But now a statement is
prepared to deficit the changes in working capital. The net increase or decrease
is then carried forward to the funds flow statement.
The statement of working capital is prepared with the help of current assets
and current liabilities of the two periods the figures of 2 periods are compared. If
there is an increase in the amount of any current liabilities in the current year in
comparison to that in that in the previous year, it will result to an increase in the
working capital. Similarly, a decrease in the amount of any current assets or an
increase in amount of current liabilities in the current year in comparison to that in
the previous year and total decrease in the end is compared and the different of
total increase and total decrease shows net increase or decrease in the working
27

capital. Net increase in working capital is an application of funds and net decrease
in working capital in the source of funds. A form of statement is shown below.
STATEMENTS OF SUDHA AGRO OIL
LIMITED FOR THE YEAR

PARTICULARS

& CHEMICAL INDUSTRIES

2005-06
2005-06

PERCENTAGE

623.39

42.51

52829

36.02

105.58

7.19

5837

3.38

150.77

10.30

1466.40

100.00

411.21

87.06

61.90

12.94

472.03

100.00

CURRENT

ASSETS ,
LOANS AND
ADVANCES

Inventory
Sundry Debtors
Cash & Bank
Balance
Other current assets
Loans and advances
Gross working
capital (A)
CURRENT LIABILITIES
&PROVISION
Current liabilities
Provision
Total current
liabilities and
provisions(B)
Net working
capital(A-B)

994.10

28

STATEMENTS OF SUDHA AGRO OIL &CHEMICAL

INDUSTRIES LIMITED FOR THE YEAR 2006-07
PARTICULARS

2006-07

PERCENTAGE

706.99

46.14

543.83

35.44

154.90

10.12

Cash & Bank

Balance

54.77

3.54

Other current assets

71.63

4.67

1532.14

100.00

423.43

82.68

88.65

17.32

512.08

100.00

CURRENT

ASSETS ,
LOANS AND
ADVANCES

Inventory
Sundry Debtors

Loans and advances

Gross working
capital (A)
CURRENT LIABILITIES
&PROVISION
Current liabilities
Provision
Total current
liabilities and
provisions(B)

29

Net working
capital(A-B)

1020.06

STATEMENTS OF SUDHA AGRO OIL &CHEMICAL

INDUSTRIES LIMITED FOR THE YEAR 2007-08
PARTICULARS

2007-08

PERCENTAGE

Inventory

991.05

49.68

Sundry Debtors

630.62

Cash & Bank

Balance

217.39

10.89

90.43

4.53

65.32

3.27

CURRENT

ASSETS ,
LOANS AND ADVANCE

31.61

Other current assets

Loans and advances
Gross working
capital (A)

1994.81

100.00

CURRENT LIABILITIES
&PROVISION
Current liabilities

534.43

Provision

154.94

Total current

689.37
30

77.52
22.47
100.00

liabilities and
provisions(B)
Net working
capital(A-B)

1305.44

STATEMENTS OF SUDHA AGRO OIL &CHEMICAL

INDUSTRIES LIMITED FOR THE YEAR 2008-09
PARTICULARS

2008-09

PERCENTAGE

1411.41

59.06

CURRENT

ASSETS ,
LOANS AND
ADVANCES

Inventory
521.80

21.83

Sundry Debtors
Cash & Bank
Balance
Other current assets

105.58

12.05

104.65

4.37

63.62

2.66

Loans and advances

Gross working
capital (A)
CURRENT LIABILITIES
&PROVISION

2389.59

Current liabilities

661.73

Provision

216.50

31

100.00

75.34
24.65

Total current
liabilities and
provisions(B)
Net working
capital(A-B)

878.23

100.00

1511.36

STATEMENTS OF SUDHA AGRO OIL &CHEMICAL

INDUSTRIES LIMITED FOR THE YEAR 2009-10
PARTICULARS

2009-10

PERCENTAGE

1164.56

58.40

CURRENT

ASSETS ,
LOANS AND
ADVANCES

Inventory
482.37

24.18

Sundry Debtors
Cash & Bank
Balance
Other current assets

162.31

8.14

91.93

4.60

93.23

4.68

1994.4

100.00

Loans and advances

Gross working
capital (A)
CURRENT LIABILITIES
&PROVISION
Current liabilities

567.43

32

83.73

STATEMENT OF CHANGES IN WORKING CAPITAL OF SUDHA AGRO

OIL &CHEMICAL INDUSTRIES LIMITED FOR THE YEAR 2005-06
PARTICULERS

BALANCE

CHANGES IN
WORKING CAPITAL
INCREAS DECREASE
E

2005

2006

658.25

623.39

--

34.85

709.36

528.29

--

181.06

147.95

105.87

--

42.08

26.30

58.37

226.37

150.77

1768.25

1466.71

CURRENT ASSETS
inventories
Sundry Debtors
Cash & Bank Balance
Other current assets
Loans and advances
TOTAL (A)

33

32.06
--

-75.59

CURRENT
LIABILITIES
515.25

411.21

12.00

61.09

527.25

472.31

1241.00

104.04

--

Current liabilities
Provision
TOTAL (B)

---

49.09
--

994.40

--

--

246.60

246.60

--

1241.00

382.70

Working capital
(A-B)

Increasing in
working capital
TOTAL

-1241.00

382.70

STATEMENT OF CHANGES IN WORKING CAPITAL OF SUDHA AGRO

OIL &CHEMICAL INDUSTRIES LIMITED FOR THE YEAR 2006-07
PARTICULERS

BALANCE

CHANGES IN
WORKING CAPITAL
INCREAS DECREASE
E

2006

2007

623.39

706.99

83.60

--

528.29

543.83

15.53

--

105.87

154.90

49.03

--

58.37

54.77

150.77

71.63

CURRENT ASSETS
inventories
Sundry Debtors
Cash & Bank Balance
Other current assets
Loans and advances
34

---

3.59
79.14

TOTAL (A)

1466.71

1532.14

411.21

423.23

--

12.21

61.09

88.65

---

27.55
--

472.31

512.08

994.40

1020.05

--

--

25.65

--

--

25.65

CURRENT
LIABILITIES
Current liabilities
Provision
TOTAL (B)
Working capital
(A-B)

Increasing in
working capital
TOTAL

1020.05

102.05

148.16

148.16

STATEMENT OF CHANGES IN WORKING CAPITAL OF SUDHA AGRO

OIL &CHEMICAL INDUSTRIES LIMITED FOR THE YEAR 2007-08
PARTICULERS

BALANCE

CHANGES IN
WORKING CAPITAL
INCREAS DECREASE
E

2007

2008

706.99

901.05

284.06

--

543.83

630.62

86.79

--

154.90

217.39

62.48

--

54.77

90.43

71.63

65.32

CURRENT ASSETS
inventories
Sundry Debtors
Cash & Bank Balance
Other current assets

35

35.66

-6.31

Loans and advances

TOTAL (A)

-1532.14

1994.82

423.43

575.62

--

152.19

88.65

154.94

---

66.29
--

512.08

730.57

1020.05

1264.25

--

--

--

244.19

468.99

468.99

CURRENT
LIABILITIES
Current liabilities
provision
TOTAL (B)
Working capital
(A-B)

Increasing in
working capital
TOTAL

244.19

--

1264.25

1264.25.00

STATEMENT OF CHANGES IN WORKING CAPITAL OF SUDHA AGRO

OIL &CHEMICAL INDUSTRIES LIMITED FOR THE YEAR 2008-09
PARTICULERS

BALANCE

CHANGES IN
WORKING CAPITAL
INCREAS DECREASE
E

2008

2009

991.05

1411.41

420.36

--

630.62

521.80

--

108.82

217.39

288.11

70.72

90.43

104.65

CURRENT ASSETS
inventories
Sundry Debtors
Cash & Bank Balance

36

---

Other current assets

14.22
65.32

65.32

Loans and advances

TOTAL (A)

1.7
--

1994.82

2389.59

575.62

661.73

--

86.11

154.94

216.50

---

61.56
--

730.57

878.23

1264.25

1511.36

--

--

--

247.11

CURRENT
LIABILITIES
Current liabilities
Provision
TOTAL (B)
Working capital
(A-B)

Increasing in
working capital
TOTAL

247.11
1511.36

-1511.36

505.30

505.30

STATEMENT OF CHANGES IN WORKING CAPITAL OF SUDHA AGRO

OIL &CHEMICAL INDUSTRIES LIMITED FOR THE YEAR 2009-10
PARTICULERS

BALANCE

CHANGES IN
WORKING CAPITAL
INCREAS DECREASE
E

2009

2010

1411.41

1164.54

--

246.85

521.80

482.38

--

39.42

288.12

162.32

CURRENT ASSETS
inventories
Sundry Debtors

37

Cash & Bank Balance

104.65
Other current assets

63.62

125.80

--

12.71

91.94
93.23

Loans and advances

TOTAL (A)

--

29.61
2389.61

1994.44

661.73

567.44

216.51

110.30

878.24

677.74

1511.37

--

CURRENT
LIABILITIES
94.29

--

Current liabilities
Provision
TOTAL (B)

106.21
--

---

1316.70

--

--

194.67

194.67

--

Working capital
(A-B)

Increasing in
working capital
TOTAL

-1511.37

1511.37

424.78

424.78

INTERPRETATION
Sudha agro chemical industries pvt. ltd has a current ratio
in the year 2005-06 it was 3.11 and in the year 2006-07it was
2.99 after 2007-08 it was decreasing trend but in the year
2009-10 the ratio is 2.94 which is above the standard ratio .
The company in the years of 2005-06 and 2006-07 as
1.61 , where as in the year of 2007-08 ,it was in decreased to
1.37 and in the year 2008-09it was decreased. At last the
companys overall liquidity position is not in good
38

The absolute liquidity ratio of the company was not up to

the mark during all the years. From the year 2005-06,it shows an
increasing trend up to next year . In the year 2007-08 is same
.During the year 2007-08 it was declined that means it has
never reached the standard of 0.5 . The situation is due to very
small balance of cash maintain by the firm for its working capital
requirements. In the year 2000-10 the firm shows an increasing
trend .
For the company efficiency is decreasing .In the year
2006-07 it is 7.29, which is highest recorded. After that it went on
decreasing to lowest of 1.64 in 2009-10. It shows that there is no
proper control over 72the inventory by the management
The company showed a holding period return of nearly 37
days in the year 2005-06 which is very better compare to other
years .Then it is gradually increased to 98days in 2009-10which
means liquidity of inventory is not better.
The above statement showing about the details of stock
at the opening of the year and at the closing. in the year of 200809 there is decrease in the stock at the end of the year.

CONCLUSION
Working capital management analysis is an in depth analysis
.,overages the entire financial management the with refers to
integrated. The SUDHA AGRO OIL AND CHEMICALS is company,
which give preference to the common mans privilege. Hence ,it is
39

on integrated approach and constant measure may be adopted

for better managerial performance. working capital analysis its
criteria is distinctive work while and commendable technique in
postulating the financial behaviour of business enterprise.

Thus,

working

capital

management

which

integrated,

internal, intermediate, and organization based financial and

analytical

measurement

the

study

always

strategic

measurement with reference in performance, growth expansion

and modernization of the business

Bibliography
Working capital from Wikipedia
Annual report of imperial SUDHA AGRO OIL AND
CHEMICALS ltd from 2005 to 2010

40