A Project Report On Working Capital at Banhatti Co-Operative Spinning Mill LTD, Banhatti

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI
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The Banhatti co-operative spinning mill ltd is located at Banhatti in the area of Basavanagar, District Bagalkot. To help the person engaged in weaving profession and who are under clutches of master weavers exploited by vested interest and to bring outlook in the prosperity & working of the farmer. The Government sectioned on lease basic 50 acres of land, out of this Mill has got permission of 18 acres of in forest near Banahatti. The said land is situated on Banhatti Jamkhandi road & state highway at Bijapur to Belgaum. Expected cost of land after necessary development and levelling land lying of internal roads and finance did not exceed Rs.45 lakhs. In 1980-81 the construction of the building was started and it was completed in 1984. Actual production of the Mill started in March 1984. The study was conducted in the prestigious organization, which is basically producing yarn of various counts. The main reason of the study is to fulfill the academic requirement and at the same time inform an individual about the functioning of the organization and also to know the working capital of the organisation. In this study I found out working capital changes and working capital ratio of the organisation based on that I haven given the suggestion to the organisation. The Mill was making very good profit at the beginning; it has been incurring loss previously.
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METHODOLOGY OF THE STUDY

The methodology adopted by me to collect the data can be classified under 2 heads:o Primary data o Secondary data
Primary data: - The data has been collected through questionnaire to all department managers.
Secondary data: - The project report data is collected through the journals of the company, magazines, and reference books.
SCOPE OF THE STUDY

o The training helps in gaining a practical knowledge of the functional department of the organisation. o It helps in knowing the real organisational environment. o It helps to know how they handle or manage the finance. o Training helps the individual to have brief idea of an organisation.
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LIMITATIONS OF THE STUDY

The study will be restricted only to the Banhatti Co-Operative Spinning Mill Ltd therefore the results of the study cannot be generalised.
o The study will be restricted only to the workers of the company.
o Analysis of the data collected from the questions will be made on the assumptions that data provided by the respondents are accurate.
o The study was based on annual report and balance sheet.
o Time period for the study will be restricted only for 60 days.
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OBJECTIVES OF THE STUDY

The purpose of doing this project is to know how distribution helping marketing program.
To know the working capital of the mill, source of capital and how they manage it.
To know the working capital ratios of the mill
To know about wage and salary administration.
To find out debtor collection period and creditor payment period
To know the changes in working capital of the mill.
To know the current obligation of the mill
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TABLE OF CONTENT
Sl. No. PARTICULARS Page No
INTRODUCTION
PROFILES
BACKGROUND
KEY FUNCTIONAL AREAS
WORKING CAPITAL MANAGEMENT
WORKING CAPITAL RATIO
CONCLUSION
BIBLIOGRAPHY
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In the general scenario where you hear at only a failure in the operative sectors. But weavers spinning mill at BNT is an exception. The Mill has been doing so well. The commercial production of cotton yarn of the Banhatti Co-Operative Spinning Mill Ltd is likely to be commenced during the second week of April 1984 and that a souvenir will be brought to mark the occasion. It is needless to say that there is still a need for the creation of such Mill on cooperative basis to help persons engaged in the profession and who are under clutches of master of weavers exploited by their interest. It was established for the need of its 3549 members in JAMKHANDI & MUDHOL Taluk in the district BAGALKOT. These weavers earlier depend upon the Mills of Salem, Inchalkaranji for raw-material like yarn & cotton as the supply was inadequate but now it is Gokak This Banhatti Co-Operative Spinning Mill Ltd has completed its project and it was inaugurated by Sri Ramakrishna Hegde, Honourable Chief Minister Govt of Karnataka. The Agro based Industries are the most famous in order to rise their standard of living. The spinning Mill is one of them which is helping the cotton growers to raise their standard of living & to improve their economic condition from centuries together the cotton growers, one suffering by the middlemen who are purchasing the cotton on throw way price, but now after commencing of this spinning Mill the cotton growers can get reasonable price for their production. Thus was born the idea of starting the spinning Mill of their own. Construction began in1981 & completed in 1984, Commercial production began in the same year from March; the Mill has been undertaken manufacturing of hosiery yarn. The Mill has laboratory & testing equipment to grade cotton yarn. Strict control has earned its reputation not only in India but also in abroad, in Italy, Bangladesh & West Germany except to these countries accounted for Rs. 196.52 lakhs in 1988-89. It also Babasabpatilfrepptmba.com Page 8

exported the yarn to China & Japan. The Mill has drawn up a modernization plan with an outlay of Rs 1.45 crores. The success story of the Mill is further through in relief as the failure of the other two co-operative Mills in the District of Bagalkot. This Spinning Mill should run successfully and to help the cotton growers at the same time weavers who are members of this Mill.
HISTORY
Industrialization plays a major role in all around development of under developed countries like INDIA. Small scale & cottage industries have assumed great importance in India from point of view of employment and contribution to national wealth. Small industry is a big movement in India is handloom sector of textile industry. The Banhatti Cooperative spinning mill limited was set up in the field of cooperative and under the Karnataka State cooperative societies act 1959. The mill was registered in the year 1975 and the actual functioning of the mill was started in the year 1983. The working of the society was extended up to the JAMKHANDI & MUDHOL Taluk of BAGALKOT. The Karnataka Govt has provided 50 acres of land for 30 years period to the society the lease basis. The construction work of the Mill begins in the year 1984. Due to constructors litigation, there was delay in the work. The production of the yarn was initiated with 15080 spindles. The Mill purchases raw material i.e., cotton from local market i.e., JAMKHANDI MUDHOL and GOKAK Taluk. It also purchases cotton of different quality from Saudatti, Bailhongal, Dharwad & Nargund & Hirekerur. Other than these the Mill also purchases cotton from Maharashtra, Gujarat & Tamil Nadu states. The Mill has its marketing centres in Malegoan, Dahlai, Bombay and Inchalkaranji. The Banhatti Co-Operative Spinning Mill Ltd was registered under Registration No. JRBG/3254/785 Dated: 03-02-1975 as Handloom weavers co-operative society. The object of the society was to produce yarn & further process like dyeing, sizing, cloth production & readymade etc. After registration it has taken almost 5 years to get clearance from Karnataka Babasabpatilfrepptmba.com Page 9

state Govt. The share capital collection was started since 1980. The construction of the building started in the year 1982 on 50 acres forest lease land. The construction of the company & installation of the machinery was completed & commercial production started on 25080 spindles during the year 1984. The total project cost was Rs720 lakhs. The Mill was earning profits since its inception & financial position was very good. So the Mill re-paid Share Capital of Rs424.40 lakhs to Karnataka state Govt. The Mill produces cotton yarn from 10 to 140 counts.
OBJECTIVES OF THE ORGANISATION

The main purposes of the Banahatti Co-operative Spinning Mill Ltds are,
o To improve the economic condition of the members in relation to weaving, colouring, bleaching, mercerizing, & manufacturing of cloths etc, and providing in reasonable rate to its members. o The Mill has the objectives of idea for the expansion programs with increases in number of spindles and replacing the old machines with new and highly mechanized machines. o As the main objective of the Mill is to provide labour welfare facilities so it has set up own credit society, through which daily requirement of the workers of the Mill at reasonable rate of interest. o To help the cotton growers to raise their standard of living. o For the improvement and the well being of the people of the low income groups the Mill has encouraged women workers by providing work in them.
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o Consumer satisfaction; the Mill always satisfied the needs and wants of its customers in each and every way like by providing quality products, prompt and timely deliveries. o Expanding the markets for its products; it has extended their market in AndraPradesh, Maharashtra, & Tamil Nadu by continuous efforts of the promoters.
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COMPANY PROFILE
Name of the organisation: Address of the organisation: Banhatti cooperative spinning mill ltd, BANAHATTI Banhatti cooperative spinning mill ltd, BANAHATTI, Basavanagar, Taluk Jamkhandi, district Bagalkot. Name of the chairman: Name of managing director: Management control: Shri G.D. Bhadrannawar. Shri V.B. Kamlapur. Board of the director nominated by the government of Karnataka. Constitute: Process know how: Wholly owned by the board of directors This mill is a pioneer in the manufacturing of various yarn products and there is no need of import any process know how it is not collaborated with other company Proposed products: Cotton yarn in the form of hank and cone, carded yarn and combed yarn E-mail: Fax: Phone: bcsm21@sancharnet.in 08353- 230316 08353-230013, 230362, 230237
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AWARDS
The Mill has been awarded by All India Co-operative Spinning Society for the production of good quality yarn in the year 1986-87. The all India federation of co-operative spinning mill ltd (aifcospin) for profitability Net profit (1991-92) For earning net profit on each spindle it received award from All India Federation Bombay.
In the year 1992-1993 it received the Best Performance Award from Karnataka State.
The Small and Medium size Export Council of India; Delhi awarded the society by Niryat Ratna by presenting a gold medal in the year 1995.
Karnataka government for best performance in a co-operative sector spinning mill (2000-2001) Karnataka government for best performance in a co-operative sector spinning mill (2001-2002)
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PRODUCT PROFILES
The Mill is producing cotton yarn in the form of Hank & Cone. Hanks are packed in the bales and cones are packed in the cone bags for the marketing purpose, there are two types of cone. 1) Kg Cone 2) Baby Cone
Hanks & Cones are further divided in the carded & combed yarn. Carded yarn is less superior compared to combed yarn. Carded yarn is used for weft combed yarn is used for warp, the yarn is further divided on the basis of counts one count is equal to 840 yards of yarn. There are different types of yarn, 1. Carded Yarn --------------K
2. Combed Yarn
--------------- C
3. Carded Hosiery
--------------- KHY
4. Combed Hosiery --------------- CHY
5. High twist Yarn ---------------- HT
6. Export Yarn
---------------- EXP
7. Doubled Yarn
----------------
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8. Open end Yarn
----------------
OE.
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DEPARTMENTS OF THE ORGANISATION

Material Department
Store Department
Production Department Cotton Department
Marketing Department
Human Resource Department
Finance Department
Purchase Department
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MATERIAL DEPARTMENT
Proper buying of material, merchandise and procurement of material at the right time is of great importance in any business. Therefore, keeping views prominence for the purchase of material in setting up a separate department known as Material Department
While considering Material Department, in this mill material department is held by three executives who look after the day to day activities and transaction. It is the main duty of the material executive to forecast the overall material required by the organisation for the particular year, month and season.
This department at BCSM LTD ensures that material are obtained at right time with right quantity of right quality , at right place, from right source and at right cost.
The material department at BCSM LTD has been divided into four sections,
Purchasing of raw material Inventory management Material handling Material storing.
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It is the responsibility of the material department to ensure the purchasing of material at right time. Managing Director is directly appointing material in-charge person in the material department to control the wastage of raw material.
STORE DEPARTMENT
Goods should be stored properly so as to protect them from damages, deterioration, theft, etc. Hence care should be taken to safeguard the material and maintain up to stores record.
Functions of Store Department
Receipt of goods in to store department Production and prevention of material Issue of material to required department Maintain proper record Checking the purchase order in respect of quality of material received
Stores department at BCSM

Raw material stores Finished goods stores Fuel stores Packing material stores Damages goods stores Stationery stores. Page 21
They maintain different method to control the raw material
1. FIFO (first in first out) 2. Simple moving average.
Here store ledger account can be maintained to receive the goods on FIFO basis. The stores department will request the material department to place an order when there is no stock of raw material asked by the user department. The material department sends the copy of purchase order to the stores department and they meet according to the user specification, and prepare the goods received report.
DOCUMENTS OF STORES DEPARTMENT AT BCSM
Bin card. Stores ledger. Goods received report. GRN (goods received note). SRIN (stores requisition issue note). Delivery note. Purchase indent. Page 22

Purchase order
Production department
The production department is the nerves centre of the entire organisation, and the main objectives of the production department are as follows:
To follow up the daily production schedules as per the plan
To cover up the deviation from the set standard if any.
To maintain close and coordinate relationship with all other key department
To upgrade technical efficiency of the production.
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PRODUCTION PROCESS OF THE BCSM

Mixing Blow room Carding Draw frame Combing section Speed frame Ring frame Reeling Winding Bale operator Maxi flow Multi Mixer Asta CVT 1 CVT 2 Dust tex
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Cone winding Doubling Packing
TV 425
Production process
Mixing:
In this process different quality of cotton is mixed in order to reduce the cost of production and maintaining good quality control. Here mixing can be done as 95% and only 5% of mixed or low quality cotton.
Blow room:
This is the second process of production in which the raw material i.e. cotton is opened, cleaned and lap is formed. Each lap is of 60 meter length, 17 kg weight. It is the purification section.
In blow room there are various steps in cleaning the cotton: Bale opener Maxi flow Multi mixer Asta CVT 1 CVT 2 Babasabpatilfrepptmba.com Page 25

Dust Tex TV 425
Carding:
In this stage the lap is more cleaned and the cleaned cotton is converted in to slivers look, here also there is 5% waste, so to remove that waste the cotton is taken to carding department.
Draw Frame:
In draw frame 4 slivers makes it to 1 sliver, 8 slivers is converted into 1 sliver by which the length of the sliver increases and diameter decreases.
Combing:
Under this stage of combing, 38 slivers are converted to one ribbon roll further the ribbon are combed to remove the dust. While combing the short fibers are separated from the ribbon roll and are given less count. The ribbon roll takes the forms of slivers.
Speed frame:
In this speed frame the slivers are converted into rolling in speed frame there are 3 processes. Those are as follows Drafting, Twisting and Winding.
Ring Frame:

Here the finished product is yarn that is obtained from rolling, the yarn is drafted, twisted and winded.
Reeling:
It is the process of reeling the yarn which is further converted in to Hank
HANK=8.333 LENGTH IN YARN WEIGHT IN GRAMS
Winding:
Here in winding there are two processes.
Hank yarn: The yarn is winded in hank in three types
Plain hank winding Cross hank winding Diamond shaped winding.
Cone winding: In cone winding also the yarn is twisted and winded in clockwise and anticlockwise so that yarn will be thick. Each cone will be of 1 kg in weight.
Doubling:
Here the two thin yarns makes one single thin yarn twisted and winded. Babasabpatilfrepptmba.com Page 27
WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI Packing:

This is the last process of the production. Here the Hank yarn is packed through a machine where as long winding is packed in a casual manner.
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COTTON DEPARTMENT
This is yet another department of BCSM & it is very specific department which is leaded by the three important executive who look after all the day to day transaction & also has the responsibility of providing of cotton bales according to their requirement of the production.
Purchasing of cotton:
In case of BCSM purchasing of cotton is done with a requirement of production department. The process is as follows:
Testing of samples Identifying results of different parameters Ordering to partier Testing the raw material and also weighing with compare to first one
Types of purchase:
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1. spot purchase 2. Mill purchase.
Spot payments get 1.5% discounts Mill payment get 70% for 10 days 30% for 30 days
And payments for transportation are done by telegraphic transfer and demand draft. The purchase of cotton is done by the purchase committee also where committees organises once in a week % discuss about bales minimum stock presence and exhausting.
Laboratory
Cotton investigator controller tests the quality of the cotton in the laboratory. It is one of the departments in the spinning mill, which is used for achieving some objectives in the yarn.
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Marketing department
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Marking department is headed by marketing in-charge, who sets the programmes required for the marketing and executes in accordingly to the orders. Marketing manager receives advice and orders from the designer who sets long term programmes of marketing
Marketing system
1. Local sales Cotton yarn is sold to local handloom co-operative societys weaver member through co-operative society and the payment is collected by cheque.
2. Marketing agent Through marketing agent, cotton yarn are sold X-mill delivery basis against payment by cash/ DD/ Contract cannot be cancelled because contract is binding on both side i.e. Seller and buyer. Marketing agent is in the area of INCHALAKARA NJI, SOLAPUR.
3. Consignment Mill appoints consignment agent. Goods are transferred or dispatch to the consignment agent with prior intimation by raising stock transfer provision invoice and on receipt of the goods by consignment agent there after goods will be sold by agent.
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4. Through Mill sales Depots Sales depots agents are appointed by the mill in Calcutta, Bombay & mavanathbhanan, goods are dispatched to the sales depot with consultation of depot agent on the receipt of the goods.
5. Production planning At present mill is manufacturing 40,s count to 100,s count in single / double yarn carded/ combed / and hank/ cone yarn mercer iced yarn also. Production planning is decided on the basis of the demands of the all marketing centres.
6. Price fixation Selling price is fixed by the executive committee in the first week of every month. Sales department collects all the information of the markets and suggests the rates to the committee; the committee will discuss and fix the selling price.
7. Major competitors Gadag Co-Operative Textiles Mill Ltd. South Indian Popular Mills. Laxmi Mill. Premier Mill. Precaut Mill. Page 33
HUMAN RESOURCE DEPARTMENT
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The Human Department is primarily concerned with human constitution of an organisation. It is concerned with the manpower recruitment, training, placement, remuneration, promotion, retirement, transfer etc, all relating to the human resource or labour. The Human resource management or department refers to the systematic approach to the problem of selecting, training, motivating and retaining human resource in an organisation. Human resource management is considered with the planning, organising, directing and controlling the personnel functions of the organisation. The Human resource department consist of a deputy manager with deputy officer who deal regularly with matters of recruitment, training, placement, the two other officials with guide to the direction of the deputy General Manager who will take planning and scope of job, description of job, duties, responsibility of each jobs each employed.
HUMAN RESOURCE DEPARTMENT FURTHER AS PROGRAMMES OF:-
o Sponsoring and conducting social activities for the ladies. o Conducting medical camps for the employees and their departments. o Conducting seminars sports even for the children of the employee, which is oe of the appreciable element.
OBJECTIVES OF THE HUMAN RESOURCES DEPARTMENT
o o
Individual development. Desirable working relationship between the employer & employee.
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o o o Effective moulding of human resource as contrasted with physical resources. Proper orientation & introduction of new employee. Effective co-ordination of the welfare department & safety department, which
come under human resource department.
MAN POWER PLANNING / MAN POWER AT BCSM Human resource planning

According to Beach Man power / HRP is the process for determining and assuring the organisation will have an adequate number of qualified persons, available at the proper time, performing jobs which meet the need of the enterprise and which provide satisfaction to the individual involved. According to the Elippo a manpower planning can be defined as an appraisal of an organisations ability to perpetuate itself with respect to its management as determined necessary to provide the executive talent. This manpower planning is the process without resources like machines, materials and motive power etc cannot be put to use.
MANPOWER Present at BCSM

Permanent employees [skilled] --------- 14 Casual employees [semi-skilled] -------- 450 Apprentives / Trainees [unskilled] ------ 136 Babasabpatilfrepptmba.com Page 36
Need of Manpower at BCSM

o Manpower is needed to expand the business i.e. large numbers of workers are required to be recruited in expansion of the plant. o Manpower planning is necessary to the organisation in producing the skilled and qualified workers & trains them very effectively. o Manpower planning is necessary for taking steps to mould, change and develop the strength of existing employees in the organisation. o Manpower planning is necessary by effective use of manpower & thus reducing the wastage.
STRENGTH OF THE EMPLOYEES

EXECUTIVES STAFF MEMBERS SUPERVISORS WORKERS PERMANENT[skilled] CASUAL[semi-skilled] TRAINEES[unskilled] 14 450 136 5 55 8 68 600
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TOTAL
668
DUTIES OF HR MANAGER
o Conduct the following aptitude test for each worker. a) Finger dexterity b) Manual dexterity c) Eye sight d) Height & weight e) Stamina test
o Labour officer should examine a trainee. If it is reported that the workers efficiency is less in giving production. o SITRA norms should to apply to the work. o Organising of the training cell. o He will supervise the part time teachers job. o Solving the employees family / personnel problem by councelling o Record of the trainees along with exercise books & the exams results should be maintained. o Maintaining good relation with the other departments o Labour officer should hold the meeting of spinning master, managing director & training officer at periodical internal to review the training. o Submission of periodic information of labourers to Managing Director.
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RECRUITMENT & SELECTION AT BCSM

Recruitment aims at developing and maintaining adequate supply of the labour force according to the needs of the organisation. Recruitment at BCSM, job seekers with need base qualification with experience is recruited. Here direct recruitment will be adopted. Recruitment can usual be Contract Appointment contract base is adopted even for workers / labourers based on efficiency.
SOURCES OF RECRUITMENT AT BCSM

After the man specification is prepared the job contract confirmed the job rate is fixed and the recruitment salary range determined it becomes necessary to consider the sources from where such employees will be forth coming. Basically these resources can be divided into two.
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Internal Sources Present Permanent Employees Present Temporary Employees Retired Employees Dependents of deceased, disabled, retired & present employees
External Sources Campus recruitment Reference to employee exchange Contract with present employees Here in BCSM Ltd mainly recruitment & selection are made on the sources that in internal only by motivating the employees & in the external sources they only go for Doorto-Door selection & recruitment.
SELECTION PROCESS IN BCSM LTD

1) ASEMBLING PROCESS 2) INTERVIEVING CANDIDATES 3) PLACEMENT
1) ASSEMBLING PROCESS Assembling the vacancies arise only when the workers are shortage in the factory. Then the labour officer inform to the Board of Directors on the request of the labour officer the Board of Directors give right to labour officer to appoint the needed workers. 2) INTERVIEWING THE CANDIDATES Babasabpatilfrepptmba.com Page 40

On the bases of the qualification and experience candidates are called for interview. In the interview process candidates are asked questions regarding family background and general questions. 3) PLACEMENT The selected candidates list will be provided to the Board of Directors for the signature on their form. And the selected candidates list will be presented on the Notice Board.
TRAINING
It is the process of imparting the employees technical and operating skill and knowledge. The BCSM has been conducted training programmes by inviting the training officers from the SITRA [South Indian Textile Research Association] & also it has appointed managers and officers. Selected candidates who do not have the required experience shall be given requisite training in the organisation for a period of one year. This appointment in the regular scale attached to the post will be made after satisfactory completion of the training. Especially the SITRAs training is required for those who directly contact with the machines for producing good quality of product (Yarn).
TRAINING METHODS USED IN THE BCSM LTD

1) On the job training --- Practical training 2) Off the job training --- Theory training 1) ON THE JOB TRAINING
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This on the job training is conducted for those workers who are quite educated / uneducated and who are directly engaged in the production process. Here uneducated workers can have practical training or practical work done. a) Method of work to be adopted by machines Here in this type of training consist of the one on which method of work can be adopted for each machine, speed particular machine i.e. Ring frame machine, cordial machine, reeling frame , cone winding, Autoscore on these machine what are the method
should be adopted about this training will be given for the employee working in the Mill. b) Work practices to be carried out in the department In this system the worker should be trained about what type of the work practices is required in carryout in each department.
2) OFF THE JOB TRAINING In this type training is given mainly for those who are quite educated i.e. a) Work method in the department It consists of the worker trained about using the correct method in each working process in the different department like production, Material handling, packing, etc. b) Importance of productivity, production, quality, waste level Here work should be trained with the knowing about the importance of productivity; production, quality and waste level by maintain the right of work. c) d) e) f) Handling of material: Here workers trained about the careful handling of material. Housekeeping and its importance Dos and donts in department Duties and responsibilities of workers
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g) h) i) j) k) Accidents and safety procedures Identification and their importance Machine knowledge Team work and importance of team work Communication and its importance
WELFARE FACILITIES AT BCSM

The welfare facilities are provided by the Mill is as follows: 1) Quarters for seniors, jobbers, clerks, senior supervisors & officers. 2) Employees Co-operative credit societies. 3) Celebration of workers May Day, Ganesh festivals, Conducting sports, & cultural activities on these occasions. 4) Rest house for workers. 5) Canteen facilities for workers. 6) First aid & Employment State Insurance [ESI] Dispensary. o For the 3rd shift (night shift) ring frame workers free facility is given i.e. one tiffin and one tea.
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o Incentives:- BCSM provide production incentives & attendance on the basis of his attendance i.e. For 22 days of attendance Rs5 incentives For 24 days of attendance Rs7 incentives For 26 days of attendance Rs 10 incentives
FINANCE DEPARTMENT
As regarding finance department at Banhatti co-operative spinning mill the account department is headed by Chief Accountant who is directly below manager heads the account department. Finance executives and accounts executives who maintains the accounts of expenditure procurement and expenditure of finance, he prepare annual financial report and submit to Chief Accountant and who look after day to day financial needs final accounts of the company. Chief Accountant also heads Finance department. Below him are executives. Finance is the corner stone of business every businessman needs accountants attends all financial transaction of Banhatti co-operative spinning mill ltd. Finance requirement is mainly due toBabasabpatilfrepptmba.com Page 44

1. Purchase of Raw material[ cotton] 2. Purchase of chemicals 3. Purchase of stationary 4. Traveling expenses & dearness allowance 5. Allotment of salary 6. Repairs & Maintenance 7. Installation of machines & equipments 8. Miscellaneous
Maintenance of Balance on double entry system or Merchandise system

Here all the transactions accrued in the Banhatti co-operative spinning mill with respective above all financial requirements & other financial item they are maintaining through Merchandise system or Double entry system they are also prepared. 1. Manufacturing accounts 2. Trading accounts 3. Profit & loss accounts 4. Balance sheet Accounting system In accounting system, accounting process can be made by recording of transaction i.e., transaction are recorded directly in double entry system books or Merchandise system. After the first phase of accounting work is viz, the analysis & classification & consolidation of transaction works begin. In the third phase, Trial balance is extracted position of the business at the end of the accounting period. Cost Audit has been made for Banhatti co-operative spinning mill. Cost Audit report should be sent to the Company Law Board before 30th September every year. Here product wise cost sheets are prepared to arrived at the pricing decision, export decision etc. The costing department will allocate the product wise expenses in regard to raw material, Babasabpatilfrepptmba.com Page 45

chemical & packing material. The overheads are apportioned in the cost center wise and later cost unit wise. The margins for products will be ascertained by costing department & reported to management periodically. Cost A/c will later on be recorded with final accounts. Costing system In the process of costing system for the product manufactured like different types of yarns on count wise i.e. From 14s counts to 100s counts in single / double yarn, carded / combed & Hank / Cone yarn & Mercerised yarns also. Material Costing The Raw material is used for the production of the different types of yarn are oils, fats, chemicals which enable proper determination of value of material consumption. Stores ledger is maintained in respect of each head of material & material is drawn from stores through authorized Material Indents / Indent slip for the consumption of the raw material like oil fats 7 chemicals the stores department has maintained BIN CARD
Labour Accounting The total salaries and wages as per the final accounts for the company as a whole were identifiable with respect to production department in respect of service department these are appropriately apportioned among production department in accordance with the services rendered by these employees & given standard production efficiency. Over Head Costing
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The productions of different types of yarns especially 20s yarn are exported & to sell in the market the company [Banhatti co-operative spinning mill] has appointed different marketing agents. They are in Inchalkaranji, Solapur, Coimbatore & through different branch / mills sales depots in Bombay, Calcutta, & Mavanathbhavan( UP) . The Mill appointed same branch in these area that is m/s LNGS Pvt Ltd Combutor as depot agents to look after day to day affairs. The expenses relating to branches have been allocated among the products requirements / product covered. These expenses have been taken under the Selling Overheads & the same has been apportioned on technical estimate among production cost center. While arriving at the conversion cost, salaries & wages, commission to the agents, taxes, sales tax, traveling expenses, administration O/H & depreciation has been treated as reducing balance.
DEPRECIATION
Depreciation in relation to plant and machinery, vehicles and miscellaneous fixed assets are calculated on reducing Balance method.
Assets
%Depreciation
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Machinery Vehicles Buildings Others
25% 20% 10% 10%
Financial Sources for the Banhatti co-operative spinning mill 1. Cash credit loan from DCC Bank 2. Deposits from members 3. Own fund 4. Members share capital of 3431 members & Rs 500 for each share 5. Term loan from IDBI
TYPES OF SHARE HOLDERS
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Class A Class B Class C Class E Class F Class G Class Name Weavers Weavers co-op Societies Agriculture co-op Society Farmers Individual Members Businessmens & Job Holders Government Co-op Society Total 3430 No of members 2492 11 72 381 474
The shares are collected by dividing in 6 categories. The Mill started with authorized capital of 7 crores in the year 1983-84. In the first year the issued & paid up capital of the Mill was Rs 379.22lakhs. This amount increased gradually in the year 1992-93 the paid up capital of the Mill was Rs 411.25 lakhs. The numbers of shareholders were decreased from 1986-87 because the Mill has restricted the issue of share to non members (non share holder).
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PURCHASE DEPARTMENT
While purchasing cotton first they take for sample and test in laboratory. To purchase cotton and to make decision every Tuesday, there will be a meeting at least twice in a month. The cotton which is selected for production the related members of that cotton will be called for meeting. They purchase the only which is necessary for production. There are different varieties of cotton they are : DCH-32 MCH-4 S-4 BUNNY S-6 LRA MLCH-1 AK-235 DH-11 BHARMA They purchase cotton from different states like KARNATAKA ANDHRA PRADESH MAHARASTRA Babasabpatilfrepptmba.com Page 50

MADHYA PRADESH GUJARATH TAMIL NADU RAJASTHAN The rates are depended on the candy, 1 candy=356kg the candy is converted into quintal on its related ratio. If the delivery is made on the spot than the Insurance, transportation charges, and all other expense is paid by them. If the quality is not as per the sample than per candy will be decreased or the cotton will be sent back to the related parties.
SOME OF THE NAMES OF THE PARTIES [SUPPLIERS]
M /S Sherya cotton industrysenhva(M.P) M /S Kissan lal motilal--- Bijapur(Karnataka) Swastik indurtries--- warangal(A.P) H.D mallur --- Sangli(Maharastra) The Maharastra state co-operative cotton growers marketing tradition- Mumbai East India cotton companyMumbai M/S Mahalingeshwar cotton company Gokak M/S Mahalakshmi cotton co Gokak M/S M.S.Kollar- Gokak Maheshwary trading companyRatlum(M.P) Ramkaran Shrikisan bansar Harsud(M.P) Gordwarn jinning udyogKiyta(M.P) M/S Ravi enterpriseWarangal (A.P) M/S V.S.Bedri pessing factory Gokak Panchmukhi tradersSangli (Maharastra) Page 51

Keerti co-operation- Ahmedabad Ramray RamnarayanBeawar(Rajasthan) Cotton seeds co-operation Hubli Cotton seeds enterprise- Sumarpur (Rajasthan) M/S Mahalingeshwar cotton co. Adoni(A.P)
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Working Capital Meaning

Working Capital is defined as the excess of current assets over current liabilities. Current assets are those assets, which will be converted into cash within the current accounting period or within the next near as a result of the ordinary operations of the business. They are cash or near cash resources. These include: Cash and Bank balances Receivables Inventory Raw materials stores and Work in- progress Finished goods Prepaid expenses Page 53

Short- term advances Temporary investments The value represented by these assets circulates among several items. Cash is used to buy raw- materials, to pay wages and to meet other manufacturing expenses. Finished goods are produced. These are held as inventories. When these are sold, accounts receivables are created. The collection of accounts receivable brings cash into the firm. The cycle starts again.
Current liabilities are the debts of the firms that have to be paid during the current accounting period or within a year. These include. Creditors for goods purchased Outstanding expenses i.e., expenses due but not paid Short term borrowings Advances received against sales Taxes and dividends payable Other liabilities maturing within a year.
Working capital is also known as circulating capital, fluctuating capital and revolving capital. The magnitude and composition keep on changing continuously in the course of business.
Cash
Inventories Circulation of current assets
Receivables
Objectives of Working Capital Management
The basic objectives of working capital management are as follows

By optimizing the investment in current assets and by reducing the level of current liabilities, the company can reduce the locking up of funds in working capital thereby; it can improve the return on capital employed in the business. The second important objective of working capital management is that the company should always be in a position to meet its current obligations, which should properly be supported by the current assets available with the firm. But maintaining excess funds in working capital means locking of funds without return. The firm should manage its current assets in such a way that the marginal return on investment in these assets is not less than the cost of capital employed to finance the current assets.
Gross and Net Working Capital

Generally the working capital has its significance in two perspectives Gross working capital and Net working capital the term Gross working capital refers to the firms Babasabpatilfrepptmba.com Page 55

investment in current assets. The term Net working capital refers to the excess of current assets over current liability. These gross working capital and net working capital are called Balance sheet approach of working capital.
Permanent and Temporary Capital

Considering time as the basis of classification, there are two types of working capital viz. Permanent and Temporary permanent working capital represents the assets required on continuing basis over the entire year, whereas temporary working capital represent additional assets required at different items during the operation of the year. A firm will finance its seasonal and current fluctuations in business operations through short term debt financing. For example, in peak seasons, more raw materials to be purchased, more manufacturing expenses to be incurred, more fund will be locked in debtors balances etc. In such times excess requirement of working capital would be financed from short-term financing sources.
Sources of working capital

1) Trade credit 2) Bank credit Trade credit Trade credit refers to credit extended to the supplier of the goods and service in the normal course of transaction /business/sales of the firm. According to the trade practices the cash is not paid immediately for purchases but after an agreed period of time. Thus, deferral of payment (trade credit) represents a source of finance for credit purchase.
Bank credit The firm gets working capital finance from bank by five ways. 1) cash credit Babasabpatilfrepptmba.com Page 56

2) loans 3) purchase /discount bills 4) letter of credit 5) Working capital term loans.
Disadvantages of Insufficient Working Capital

The disadvantages suffered by a company with insufficient working capital are as follows: The company is unable to take advantage of new opportunities or adapt to changes. Trade discounts are lost. A company with ample working capital is able to
finance large stocks and can therefore place large orders. Cash discounts are lost. Some companies will try to customers are foregone. The advantages of being able to offer a credit line to customers are foregone.
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Financial reputation is lost result in non-cooperation from trade creditors in times
of difficulty. up. There may be concerted action by creditors and will apply to court for winding
Operating cycle Concept

A new concept which is gaining more and more importance in recent years is the operating Cycle concept of working capital. The operating cycle refers to the average time elapses between the acquisition of raw materials and the final cash realization.
- The finished goods inventory stage - The receivable stage
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Operating cycle
How to reduce Operating Cycle?

The aim of every management should be to reduce the length of operating cycle or the number of operating cycles in a year. Only then the need for working capital decreases. The following a few remedies may become handy in contrasting the length of operation cycle period. Purchase Management: The purchase manager ows a responsibility in insuring
availability of right type of materials in right quantity of right quality at right price on right Babasabpatilfrepptmba.com Page 59

time and at right place. These six Rs contribute greatly in the improvement of length of operating cycle. Further, streamlining of credit from supplier and inventory polity also help the management. Production Management: The Production Manager affects the length of
operating cycle by managing and controlling manufacturing cycle, which is a part of operating cycle and influences directly. Longer the manufacturing cycle, longer will be the operating cycle and higher will be the firms working capital requirements. The following measures may be taken: Proper maintenance of plant, machinery and other infrastructural facilities. Proper planning and coordination at all levels of activity. Up gradation of manufacturing system, technology. Selection of the shortest manufacturing cycle out of various alternatives etc. Marketing Management: The sale and production policies should be
synchronized as far as possible. Lack of matching increases the operating cycle period. Production of Qualitative products at lower costs enhances sales of the firm and reduces finished goods storage period. Effective advertisement, sales promotion activities, efficient salesmanship, used of appropriate distribution channel etc. reduce the storage period of the finished products.
Sound Credit and Collection Policies: Sound credit and collection policies
enable the Finance Manager in minimizing investment in working capital in the form of book debts. The firm should be discretionary in granting credit terms to its customers. In order to see that the receivable conversion period is not increased, the firm should follow a rationalized credit policy based on the credit standing of customers and other relevant facts. The firm should be prompt in making collections. Slack collection policies will tie up funds for long period, increasing length of operating cycle. Babasabpatilfrepptmba.com Page 60
Proper Monitoring of External Environment: The length of operating cycle is
equally influenced by external environment. Abrupt changes in basic conditions would affect the length of operating cycle. Fluctuations is demand, competitors, production and sales policies, Government fiscal and monetary policies, changes on import and export front, price fluctuations, etc., should be evaluated carefully by the management to minimize their impact their adverse impact on the length of operating cycle. Other Suggestions: The personnel manager by framing sound recruitment,
section, training placement, promotion, transfer, wages incentives and appraisal policies can contrast the length of operating cycle. Use of Human Resources Development technique in the organization, enhance the morale and zeal of employees thereby reduces the length of operating cycle. Proper maintenance of plant, machinery infrastructural facilities, timely replacement, renewals, overhauling etc. will contribute towards the control of operating cycle. These measures, if adhered properly, would go a long way in minimizing not only the length of operating cycle period but also the firms working capital requirements.
Factors determining Working Capital Requirement

There is no set of universally applicable rules to ascertain working capital needs of business organization. The factors which influence the need level are discussed below:
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1) Nature of Business: If we look at the balance sheet of any trading organization, we find major parts of the resources are deployed on current assets, particularly stock-intrade. Whereas in case of a transport organization major part of funds would be locked up fixed assets like motor vehicles, spares and work shed etc. and the working capital component would be negligible. The service organizations or public utilities need lesser working capital than trading and financial organizations. Therefore, the requirement of working capital depends upon the nature of business carried by the organization. 2) Manufacturing Cycle: Time span required for conversion of raw materials into finished goods is a block period. The period in reality extends a little before and after the work-in progress. This cycle determines the need of working capital. 3) Business Cycle Fluctuations: This is another factor which factor which determines the need level. Barring exceptional cases, there are the variations in the demand for goods/services handled by any organization. Economic boom or recession etc., have their influence on the transactions and consequently on the quantum of working capital required. 4) Scale of operation: Operational level determines working capital demand during a given period. Higher the scale, higher will be the need for working capital. However, pace of sales turnover (Quick or slow) is another factor. Quick turnover calls for lesser investment in inventory while low turnover rate necessitates larger investment.
5) Credit Policy: Credit Policy of the business organization includes to whom, when and to what extent credit may be allowed. Amount of money locked up in account receivable has its impact on working capital. In good many cases, account receivables are sterile and sticky and thereby they have forfeited the right to be classified as current assets. In view of such situation in ascertaining quick ratio instead of deducting stock-in-trade we find it worthwhile to deduct sundry debtors. The other component is credit policy of the suppliers, their terms and conditions of credit. Trade credit has its historical presence in the trading Babasabpatilfrepptmba.com Page 62

world. Availability of normal credit suppliers as well as trade credit facility working capital supply and reduce the need for bank finance. 6) Accessibility to Credit: Credit worthiness is the precondition for assured accessibility to credit. Accessibility in banks depends on the flow of credit i.e. the level of working capital. 7) Growth and Diversifications of business: Growth and diversification of business call for larger volume of working fund. The need for increased working capital does not follow the growth of business operations but precedes it. Working capital need is in fact assessed in advance in reference to the business plan. 8) Supply Situation: In easy stable supply situation, no contingency plan is necessary and precautionary steps in inventory investment can be avoided. But in case of supply uncertainties, lead-time may be longer necessitating larger basic inventory, higher carrying cost and working capital need for the purpose. No aggressive approach can gain foothold in such situation. 9) Environment Factors: Political stability in its wake brings in money market and trading world. Things mostly go smooth. Risk ventures are possible with enhanced need for working capital finance, similarly, availability of local infrastructural facilities, road, transport, storage and market etc., influence business and working capital need as well.
Working Capital Ratios

Working capital ratios indicate the ability of a business concern in meeting its current obligations as well as its efficiency in managing the current assets for generation of sales. These rations are applied to evaluate the efficiency with which the firm manages and utilizes Babasabpatilfrepptmba.com Page 63

its current assets. The following three categories of ratios are used for efficient management of working capital: (I) Efficiency ratios (2) Liquidity ratios (3) Structural health ratios
Efficiency ratio
Sales Workingcap ital
a) Net Working Capital turnover ratio =
This ratio is computed by dividing sales by working capital. This ratio helps to measure the efficiency of the utilization of net working capital. It signifies that for an amount of sales, a relative amount of working capital is needed. If any increase in sales is contemplated, working capital should be adequate and thus, this ratio helps management to maintain the adequate level of working capital.
b) Inventory Turnover Ratio =
Sales Inventory
This ratio indicates the effectiveness and efficiency of the inventory management. The ration shows how speedily the inventory is turned into accounts receivable through sales. The higher the ratio, the more efficiently the inventory is said to be managed vice versa.
c) Current Assets Turnover Ratio =
Sales CurrentAssets
This ratio indicates the efficiency with which current assets turn over into sales. A higher ratio implies by and large a more efficient use of fund. Thus, a high turnover rate indicates reduced lock-up of funds in current assets. An analysis of this ratio over a period of life time reflects working capital management of a firm. Babasabpatilfrepptmba.com Page 64
Liquidity Ratios
Currentass ets, loans & advances Currentlia bilities & provisions
i) Current Ratio=
This ratio indicates the extent of the soundness of the current financial position of an undertaking and the degree of safety provided to the creditors. The higher the current ratio the larger amount of rupee available per rupee of current liability, the more the firms ability to meet current obligations and the greater safety of funds of short-term creditors. Current assets are those assets, which can be converted into cash within a year. Current liabilities and provisions are those liabilities that are payable within a year. Current liabilities and provisions are those liabilities that are payable within a year. A current ratio of 2:1 indicates a highly solvent position. A current ratio of 1.33: 1 is considered by banks as minimum acceptable level for providing working capital finance. The constituents of the current assets are as important as the current assets themselves for evaluation of companys solvency position.
ii) Quick ratio
Currentass ets, loansandad vances Inventories Currentltl iabilities & provisions Bankoverdraft
Quick ratio is a more refined tool to measure the liquidity of an organization. It is a better test of financial strength than the current ratio, because it excludes very slow moving inventories and the items of current assets which cannot be converted into cash easily. This ratio shows the extent of cushion of protection provided from the quick assets to the current Babasabpatilfrepptmba.com Page 65

creditors. A quick ratio of 1:1 is usually considered satisfactory though it is again a rule of thumb only.
Structural Health Ratios i) Current Assets to Total Net Assets =

Total Netassets Currentass etst
This ratio explains the relationship between current and total investment in assets. A business enterprise should use its current assets effectively and economically because it is out of the management of these assets that profits accrue. A business will end up in losses if there is any lacuna in managing the assets to the advantage of business. Investment in fixed assets being inelastic in nature, there is no elbowroom to make amends in this sphere and its impact on profitability remains minimal.
ii) Composition of Current Assets An analysis of current assets component enable one to examine in which component the working capital funds are locked up. A large tie-up of funds in inventories effects profitability of the business adversely owning to carry over costs. In addition losses are likely to occur by way of depreciation decay, obsolescence, evaporation and so on. Receivables constitute another component of current assets. If the major portions of current assets are made up of cash alone, the profitability will be decreased because cash is a non earning asset. If the portion of cash balance is excessive, then it can be said that management is not efficient to employ the surplus cash iii) Debtors Turnover Ratio =
sales Debtors
This ratio shows the extent of trade credit granted and the efficiency in the collection of debts. Thus, it is an indicative of efficiency of trade credit management. The lower the debtors to sales ratio, the better the trade credit management and better the quality (liquidity) of debtors. The lower debtors mean prompt payment by customers. An excessively long
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collection period, on the other hand, indicates a very liberal, ineffective and inefficient credit and collection policy.
Debtors X 365 Sales
iv) Debtor collection Period (in days) =
Debtor collection period, which measures how long it takes to collect amounts from Debtors. The actual collection period can be compared with the stated credit terms of the company. If it longer than those terms, then this indicates some insufficiency in the procedures for collecting debts.
v) Bad debts to Sales
Baddebts sales
This ration indicates the efficiency in the collection procedures of the company. The actual ratio is compared with the target or norm to decide whether or not it is acceptable.
vi) Creditor payment Period (in days) =
Creditors X 365 Purchases
The measurement of the creditor payment period shows the average time taken to pay for goods and services purchased by the company. In general the longer the credit period achieved the better, because delays in payment mean that the operations of the company are being financed interest free by suppliers funds. But there will be a point beyond which, if they are operating in a sellers market, may harm the company. If too long a period is taken to pay creditors, the credit rating of the company may suffer, thereby making it more difficult to obtain suppliers in the future.
CALCULATION OF WORKING CAPITAL

Statement showing working capital for the year 2003-04
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Particulars Current Assets Cash Bank Debtors Receivables Closing stocks Loans and advances Other Assets
Amount(Rs) Amount(Rs) 70,941 1,01,29,880 27,19,803 30,68,347 6,96,73,288 1,23,577 22,66,506
Total current assets(a) Current liabilities Creditors Tax Provision
8,80,52,342
1,77,75,103 2,94,852 12,00,000
Total current liabilities(b) Working capital (a-b)
1,92,69,955 6,87,82,387

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Amount(Rs) Amount(Rs) 68,903 2,41,75,972 1,24,56,152 28,53,527 4,83,08,375 11,29,216 14,94,158
9,04,86,303
92,88,624 2,97,927 12,00,000
1,07,86,551 7,96,99,752
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Amount(Rs) Amount(Rs) 34,244 51,74,124 61,04,540 28,57,527 4,11,43,901 6,05,385 15,50,828
5,74,70,549
1,53,53,299 182 10,00,000
1,63,53,481 4,11,17,068
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Amount(Rs) Amount(Rs) 44,733 1,15,85,033 65,78,000 28,57,527 3,72,97,944 34,84,000 14,60,000
6,33,07,237
2,13,72,930 1366 10.00,000
2,23,74,296 4,09,32,941
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Statement showing Changes in working capital

Amount(Rs) Amount(Rs) (03-04) (04-05) 70,941 68,903 1,01,29,880 2,41,75,972 27,19,803 1,24,56,152 30,68,347 28,53,527 6,96,73,288 4,83,08,375 1,23,577 11,29,216 22,66,506 14,94,158
Total current assets
8,80,52,342 9,04,86,303
Current liabilities Creditors Tax Provision Total current liabilities Working capital Increase capital in
1,77,75,103 2,94,852 12,00,000
92,88,624 2,97,927 12,00,000
1,92,69,955 1,07,86,551 6,87,82,387 7,96,99,752
working 1,09,17,365
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Statement showing Changes in working

Particulars Current Assets Cash Bank Debtors Receivables Closing stocks Loans and advances Other Assets Amount(Rs) Amount(Rs) (04-05) (05-06) 68,903 34,244 2,41,75,972 51,74,124 1,24,56,152 61,04,540 28,53,527 28,57,527 4,83,08,375 4,11,43,901 11,29,216 6,05,385 14,94,158 15,50,828
9,04,86,303 5,74,70,549
Current liabilities Creditors Tax Provision
92,88,624 1,53,53,299 2,97,927 182 12,00,000 10,00,000
Total current liabilities Working capital Decrease capital in working
1,07,86,551 1,63,53,481 7,96,99,752 4,11,17,068 3,85,82,684
capital
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Statement showing Changes in working capital
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Amount(Rs) (05-06) 34,244 51,74,124 61,04,540 28,57,527 4,11,43,901 6,05,385 15,50,828
Amount(Rs) (06-07) 44,733 1,15,85,033 65,78,000 28,57,527 3,72,97,944 34,84,000 14,60,000
5,74,70,549
6,33,07,237
Current liabilities Creditors Tax Provision Total current liabilities Working capital Decrease capital in working
1,53,53,299 182 10,00,000 1,63,53,481 4,11,17,068
2,13,72,930 1366 10.00,000 2,23,74,296 4,09,32,941
1,84,127
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Working capital ratio

Ratio Analysis and Interpretation
Sales Workingcap ital
I.
Net Working Capital turnover ratio = (2003-04) =
23,79,61,388 =3.45 6,87,82,382
(2004-05) =
25,31,62,924 =3.17 7,96,99,752
(2005-06)=
18,94,13,902 =4.60 4,11,17,068
(2006-07) =
19,30,70,239 =4.31 4,47,78,898
Particular Sales Net working capital Ratio
2003-04
2004-5
2005-06
2006-07
23,79,61,38 25,31,62,9 18,94,13,90 19,30,70,23 8 24 2 9 6,87,82,382 7,96,99,75 4,11,17,068 4,47,78,898 2 3.45 3.17 4.60 4.31
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Net working capital turnover ratio This ratio is computed by dividing sales by working capital. This ratio helps to measure the efficiency of the utilization of net working capital. It signifies that for an amount of sales, a relative amount of working capital is needed. If any increase in sales is contemplated, working capital should be adequate and thus, this ratio helps management to maintain the adequate level of working capital. From the financial year 2003-04 to financial year 2005-06 the ratio is showing increase in trend which means that they utilized their working capital for making sales In the financial year 2006-07 the ratio is showing a slight decrease from the financial year 2005-06. The ratio of 0.29 has been decreased. So the efficiency of utilization of working capital is coming down.
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Inventory Turnover Ratio =
Sales Inventory
(2003-04) =
23,79,61,388 =3.41 6,96,73,288
(2004-05) =
25,31,62,924 =5.24 4,83,08,375
(2005-06)=
18,94,13,902 =4.60 4,11,43,901
(2006-07) =
19,30,70,239 =5.17 3,72,97,944
Particular Sales Inventory Ratio
2003-04
2004-5
2005-06 18,94,13,9 02 4,11,43,90 1 4.60
2006-07 19,30,70,2 39 3,72,97,94 4 5.17
23,79,61,3 25,31,62,9 88 24 6,96,73,28 4,83,08,37 8 5 3.41 5.24
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Inventory Turnover ratio
In case of the inventory turnover ratio the higher the ratio the more efficiently the inventory is said to be managed and vice versa. By looking at inventory turnover ratio it is increasing yearly that is in year 2003-04 it was 3.41 and the next three years ratio are 5.24 , 4.60 and 5.17 that are obtained for the financial year 2004-05, 2005-06 and 2006-07 respectively. A substantial increase is observed and goes on to show a healthy ratio.
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Current Assets Turnover Ratio =
Sales CurrentAssets
(2003-04) =
23,79,61,388 =2-70 8,80,52,342
(2004-05) =
25,31,62,924 =2.79 9,04,86,303
(2005-06)=
18,94,13,902 =3.30 5,74,70,549
(2006-07) = Particular Sales Current assts Ratio
19,30,70,239 =3.05 6,33,07,237
2003-04
2004-5
2005-06
2006-07
23,79,61,3 25,31,62,9 88 24 8,80,52,34 9,04,86,30 2 3 2.70 2.79
18,94,13,9 19,30,70,23 02 9 5,74,70,54 6,33,07,237 9 3.30 3.05
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Current Assets Turnover Ratio By and large this ratio indicates the efficiency and effectiveness with which current assets are turned into sales. The higher turnover rate gives the picture of an efficient ratio indicating reduced blockage of funds in current assets. In case, financial year 2003-04, 2004-05, 2005-06 and 2006-07 the ratios were found to be 2.70, 2.79, 3.30 and 3.05 respectively. A slight decrease has been found in the ratio of the comparative years. In previous year it was found that a slight decrease in ratio compared to 2005-06. Hence the current assets are utilized efficiently and effectively by the mill.
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Current Ratio=
Currentass ets, loans & advances Currentlia bilities & provisions
(2003-04) =
8,80,52,342 =4.57 1,92,69,955
(2004-05) =
9,04,86,303 =8.40 1,07,86,551
(2005-06)=
5,74,70,549 =3.51 1,63,53,481
(2006-07) = Particular Current assts Current liability Ratio
6,33,07,237 =2.83 2,23,74,296
2003-04
2004-5
2005-06
2006-07
8,80,52,342 9,04,86,30 5,74,70,549 6,33,07,237 3 1,92,69,955 1,07,86,55 1,63,53,481 2,23,74,296 1 4.57 8.40 3.51 2.83
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Current Ratio In case of current ratio, a ratio of 2:1 is considered as an ideal one. In this case the current ratio for the financial year 2003-04, 2004-05, 2005-06 and 2006-07 are 4.57, 8.40, 3.51 and 2.30 respectively. It implies that in 2003-04 for every one rupee of current liabilities, current asset of Rs 4.57 is available. And for year 2004-05, for every one rupee of current liabilities, current assets worth Rs 8.40 are available and so on. The standard of 2:1 is met for the four year in consideration. So it can meet its current liabilities through its current assets
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ii) Quick ratio =
Currentass ets, loansandad vances Inventories Currentltl iabilities & provisions Bankoverdraft
(2003-04) =
1,83,79,054 =0.95 1,92,69,955
(2004-05) =
4,21,77,928 =3.91 1,07,86,551
(2005-06)=
1,63,26,648 =1. 1,63,53,481
(2006-07) =
2,21,63,336 =1. 2,23,74,296
Particular Quick asset Current liability Ratio
2003-04 1,83,79,054 1,92,69,955 0.5
2004-05 4,21,77,928 1,07,86,551 3.91
2005-06 1,63,26,648 1,63,53,336 1
2006-07 2,21,63,336 2,23,74,296 1
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Quick Ratio. A quick ratio of 1:1 is usually considered as a standard, and represents a satisfactory position. A low quick ratio may be an index of bed liquid position, but not always and vice versa. The ratio in the financial year 2003-04, 2004-05, 2005-06 and 2006-07 are 0.95, 3.91, 1 and 1 respectively. Hence in this case it is found that the company meets the above the sets standards with reference to quick ratio. But in the financial year 2003-04 the ratio was 0.95 which is almost nearer to 1 so it doesnt make much difference to the mill.
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Debtors Turnover Ratio =
sales Debtors 23,79,61,388 =87.5 27,19,803 25,31,62,924 =20.32 1,24,56,152
(2003-04) =
(2004-05) =
(2005-06)=
18,94,13,902 =31.03 61.04.540 19,30,70,239 =29.35 65,78,000
(2006-07) =
Particular Sales Debtor Ratio
2003-04
2004-5
2005-06
2006-07
23,79,61,38 25,31,62,9 18,94,13,90 19,30,70,23 8 24 2 9 27,19,803 1,24,56,15 6,10,4540 65,78,000 2 87.5 20.32 31.03 29.35
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Debtor Turnover Ratio Generally, the debtor turnover ratio is an indication of the performance of the company in terms of recovery of the debt and hence in this purview a higher the ratio or increase goes on to show a positive development. Here, in the financial year 2003-04, 2004-05, 2005-06 and 2006-07 the ratio are 87.5, 20.32, 31.03 and 29.35 respectively. In the financial year 2003-04 the ratio was 87.5, and slowly coming down by this we can say that company is not doing well over the year. So company has to take some serious action to increase this ratio
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Debtors collection Period (in days) =
Debtors X 365 Sales 27,19,803 X 365 = 4 days 23,79,61,388
(2003-04) =
(2004-05) =
1,24,56,152 X 365 =18 days 25,31,62,924
(2005-06)=
61.04.540 X 365 =12 days 18,94,13,902
(2006-07) =
65,78,000 X 365 =12days 19,30,70,239
Particular Debtor Sales Days
2003-04
2004-5
2005-06
2006-07
27,19,803 1,24,56,15 6,10,4540 65,78,000 2 23,79,61,38 25,31,62,9 18,94,13,90 19,30,70,23 8 24 2 9 4 18 12 12
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Debtor Collection Period The debtor collection period goes on to show how long it takes for a company to recover the debt. And hence a decrease or lesser debtor collection period shows a better performance on the part of company. In the financial year2003-04, 2004-05, 2005-06 and 2006-07 the debtor collection period is 4, 18, 12, and 12 days respectively. It shows that the company needs to re-look and revamp in this area.
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Creditors payment Period (in days) =
Creditors X 365 Purchases
(2003-04) =
84,14,684 X 365 = 16 days 19,34,29,524
(2004-05) =
92,88,624 X 365 =21 days 16,33,13,613
(2005-06)=
76,85,069 X 365 = 24 days 11,49,61,812
(2006-07) =
2,13,72,930 X 365 =71 days 11,01,57,194
Particular Debtor Sales Days
2003-04 84,14,684
2004-5 92,88,624
2005-06
2006-07
76,85,069 2,13,72,930
19,34,29,52 16,33,13,6 11,49,61,81 11,01,57,19 4 13 2 4 16 21 24 71
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Creditor Payment Period The creditor payment period indicates how long the company or the firm has taken to repay the creditor; a shorter creditor s payment period indicates better paying power and performance on the part of the company. In the financial year2003-04, 2004-05, 2005-06 and 2006-07 the creditor payment period is 16, 21, 24 days and 71 days. So by looking at this the payment policy of mill is not good, so mill has to pay to its creditors on time.
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Cash Ratio
Cash & Bank Currentlia bilities
Cash Ratio=
2003-04) =
1,02,00,821 =0.529 1,92,69,955
(2004-05) =
2,42,44,875 =2.24 1,07,86,551
(2005-06)=
52,08,368 =0.31 1,63,53,481
(2006-07) =
1,16,29,766 =0.519 2,23,74,296
Particular Current assts Current liability
2003-04 1,02,00,821 1,92,69,955
2004-5 2,42,44,87 5
2005-06 52,08,368
2006-07 1,16,29,766 2,23,74,296
1,07,86,55 1,63,53,481 1 2.24 0.31
Ratio
0.529
0.519
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Cash Ratio: The standard of 0.5:1 is considered as norms for calculating the cash ratio. This ratio also indicates liquidity position and company and firms commitment to meet its short -term liabilities.
The mill is having absolute current asset are sufficient to meet is day to day requirement. The mill has good cash ratio i.e. in the financial year 2003-04 and financial year 2004-05 the ratio were 0.529 and 2.24 respectively which satisfies the set norms. In the financial year 2005-06 the ratio came down to 0.31 which is not good for mill. And in the year 2006-07 the ratio again increased to 0.519 which shows that mill has made improvement
Page 97
Findings:
1) The cash of the mill is near to 0.5, so it has to look after this so that it wont come below the set norms. 2) Working capital turnover ratio of the mill is coming down. This means that mills efficiency of utilising its working capital is coming down. 3) It was found that the current ratio of mill is more than the set norms, which is more than 2. It means that mill has utilised its current assets efficiently and effectively. 4) Mills debtor turnover ratio is decreasing which signifies that mill is not collecting its debt properly 5) The inventory turnover ratio is increasing. It means that the inventory is moving quicker and faster.
SUGGESTIONS:Babasabpatilfrepptmba.com Page 98
1) Try to gain more orders from the outside countries by exporting required quality of product. 2) The current ratio of BCSM is quite healthy and we can say that it is a sound concern as its liquidity or short term solvency is satisfactory. 3) Generally a quick ratio of 1:1 is considered ideal and represents a satisfactory position. Here it shows that BCSM has maintained 1:1 ratio. It can easily handle or meet its liabilities without any delay. 4) Inventory turnover ratio of BCSM is quite satisfactory because in the financial year 2005-06 and 2006-07 the inventory turnover is 4. 60 and 5.17 5) If too long period is taken to pay creditors, the credit rating of the company suffers, thereby making it more difficult to obtain suppliers in the future. But the companys creditor payment period is more. In the financial year 2005-06 it is24 days and in year 2006-07 its 71 days. So it has to pay its creditor in time to maintain its good will 6) Company has to pay to their suppliers on time. 7) Sales of the mill are coming down, so it has to increase its sales by using promotional activities and can invest more in working capital.
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Conclusion

Lastly I conclude that this mill has good opportunity to expand its business because there are no competitors. BCSM is the only player in Bagalkot district. Initially there were three mills in Bagalkot district and both of the mills have closed down, so it has great opportunity to develop. 1) The company should recruit well trained persons. 2) Reduced blockage of fund 3) Companies inventory turnover ratio is increasing; it means that company has managed its inventory properly. 4) For growth & expansion of the market promotional scheme must be adopted. 5) Staff & Employee is to be trained in technical course / refresher course more as the industry is technical oriented. 6) Modern technology should be adopted. 7) The company can try to gain more and more orders to improve financial position. 8) Training program should be organised more in numbers.
Page 101
BIBLIOGRAPHY
ANNUAL GENERAL REPORT OF BCSM LTD BANHATTI
FINANCIAL MANAGEMENT BY: RAVI. M. KISHORE
JOURNAL & MAGAZINES OF SPNNING MILL
Page 102

A Project Report On Working Capital at Banhatti Co-Operative Spinning Mill LTD, Banhatti

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WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

METHODOLOGY OF THE STUDY

SCOPE OF THE STUDY

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

LIMITATIONS OF THE STUDY

o The study will be restricted only to the workers of the company.

o The study was based on annual report and balance sheet.

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

OBJECTIVES OF THE STUDY

To know the working capital ratios of the mill

To know about wage and salary administration.

To find out debtor collection period and creditor payment period

To know the changes in working capital of the mill.

To know the current obligation of the mill

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

KEY FUNCTIONAL AREAS

WORKING CAPITAL MANAGEMENT

WORKING CAPITAL RATIO

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

OBJECTIVES OF THE ORGANISATION

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

4. Combed Hosiery --------------- CHY

5. High twist Yarn ---------------- HT

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

8. Open end Yarn

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

DEPARTMENTS OF THE ORGANISATION

Production Department Cotton Department

Human Resource Department

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

Purchasing of raw material Inventory management Material handling Material storing.

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

Functions of Store Department

Stores department at BCSM

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

They maintain different method to control the raw material

1. FIFO (first in first out) 2. Simple moving average.

DOCUMENTS OF STORES DEPARTMENT AT BCSM

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

To follow up the daily production schedules as per the plan

To cover up the deviation from the set standard if any.

To upgrade technical efficiency of the production.

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

PRODUCTION PROCESS OF THE BCSM

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

Cone winding Doubling Packing

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI

HANK=8.333 LENGTH IN YARN WEIGHT IN GRAMS

Hank yarn: The yarn is winded in hank in three types

Plain hank winding Cross hank winding Diamond shaped winding.

WORKING CAPITAL AT BANHATTI CO-OPERATIVE SPINNING MILL LTD, BANHATTI Packing: