A

REPORT ON

WORKING CAPITAL MANAGEMENT IN DAIRY CO-OPERATIVE SUBMITTED IN PARTIAL FULFILLMENT FOR THE DEGREE OF BACHELOR OF BUSINESS ADMINISTRATION (BBA)

UNDER THE GUIDANCE OF: MR.MANISH TIRKEY LECTURER JSBS SHIATS, ALLAHABAD

SUBMITTED BY: RAGVENDRA KUMAR 08BBAH028

SAM HIGGINBOTTOM INSTITUTE OF AGRICULTURE, TECHNOLOGY AND SCIENCES, ALLAHABAD

DECLARATION
I, RAGVENDRA KUMAR, hereby declared that the research work presented in this report entitled WORKING CAPITAL MANAGEMENT IN DAIRY CO-OPERATIVE. for the fulfillment of the award of Bachelor in Business Administration (Hons.). from SAM HIGGINBOTTOM INSTITUTE OF AGRICULTURE, TECHNOLOGY AND SCIENCES, ALLAHABAD is based on my work during the summer training in the LUCKNOW PRODUCERS CO-OPERATIVE MILK UNION LTD. The project embodies the result of original work and studies carried out by me and the contents of the project do not form the basis for the award of any other degree to me or to anybody else.

ACKOWNLEDGEMENT
I am thankful to management to study the WORKING CAPITAL MANAGEMENT IN DAIRY COOPERATIVE for granting the permission,

corporation and valuable information for competition of this project. No words are enough to thank Mr. Tapesh Yadav (Finance Manager) and Mr. Tripathi, LUCKNOW PRODUCERS COOPERATIVE MILK UNION LTD Who not only inspired me to work on this project but also accepted to guide me. In spite of heavy responsibilities and busy schedules, they always managed time to provide Proper guidance. Last but not the least, I would like to say that my parents and friends for giving me their constant support and encouragement in completion of my project.

INTRODUCTION
AN INTODUCTION OF FMCG INDUSTRY
The FMCG sector is a cornerstone of the Indian economy. This sector can drive growth, enhance quality of life, create jobs, and support penetration of technology. A vibrant FMCG sector can boost agricultural product and export. It contributed to the exchequer significantly, disperse technology across the value chain and usher in the product innovation. This innovation can improve Indian Health standards. Fast Moving Consumer Good (FMCG) industry has a long history. However, the Indian FMCG began to take shape only during the last fifty-odd years Today, the Indian FMCG industry continues to suffer from a definitional dilemma. In fact, the industry is yet to Crystallize in terms of definition and market, size, among others. The definitional confusion that has marked the Indian FMCG industry is getting confounded. Some others call it the CPG industry and some even call it the PMCG industry. The Indian FMCG industry has suffered because of the confusion. It is an industry which touches every aspect of human life from looks to hygiene to palate.

Perhaps defining as industry whose scope is so vast is not so easy. The government is at crossroads not knowing how and where to slot the Indian FMCG industry and unsurprisingly, the manner in which it has treated an industry which holds tremendous promise as producer of goods that pervade everyday life has been only callous. The facts that the FMCG industry is a noteworthy employer and a major tax payer are being ignored. The only thing that is cheering the industry are the reforms of the nineties. Post reforms, the industries is excited about a burgeoning rural population whose income are rising and which is a willing to spend on goods designed to improve lifestyle. What is needed now is a change in the mindset of the mandarins, FMCG industry -friendly legislation are the needs of the hour. It does not matter whether changes are being brought about by dawning market realities or the ongoing economic reforms. One thing is certain here: The Indian FMCG industry has a promising future to look forward to. In terms of growth potential, the Indian market is a great horse to bet on. With a little help and understanding from the government, the Indian FMCG can realize its true potential. So far, it has been a checked graph for the MNCs operating in the Indian FMCG industry. Domestic companies are only beginning to make their presence felt in the industry. It has taken tremendous

consumer insight and market savings for the FMCG players to reach where they are today. But, the journey has only begun.

PROFILE OF THE COMPANY

Name of the organization LUCKNOW PROODUCERS CO-OPERATIVE MILK UNION LTD Address of the organization 22, Jopling Road, Lucknow Established In year 1938 Registration 23rd March 1938 First Dairy Inspector

N.K. Bhargava Place of Establishment Initialy at Charbagh, Shifted to Ganesh ji, Presently at 22, Jopling Road, Lucknow Founder Raj bahadur Gopal Lal Pandya Board Of Directors Mr. Gopal Pandya Mr. N.C. Chaturvedi Mr. Tej Shanker Mr. Pushkar Nath Bhatt Per Day Production Of Milk Initially 4000Ltr Area of Distribution Initially- Bakshi ka talab, Tewari Ganj At Present- entire District

ABOUT THE COMPANY

The common brand name of the company is PARAG the meaning of PARAG is the pollen of flower the slogan in the logo is: PURE NATURAL & GOOD HEALTH Parag milk shed is situated in the Lucknow, the capital of Uttar Pradesh since independence it has formed part of the traditional supply line of agriculture products from the village to the big cities rich in its milk potential the milk shed has, in the source of last few decades been thoroughly exploited by small traders and powerful contractors and well organized private dairies. Thus, while such intermediaries were retaining large profits the rural milk producers found their position deteriorating day by day.

In 1950-a co-operative milk supply union was organized in Lucknow , which started collecting milk from village and supplied to Lucknow and local markets. This milk union continued function for about a decade, in the mean time Lucknow milk scheme was established by government of India in 1959-60 to ensure cheaper milk to the local pollution of Lucknow. The scheme started operating through 12 chilling centers in Eastern Uttar Pradesh. These chilling centers were mainly coated in thither district of Lucknow , Barabanki, Raebareli , Kanpur, Unnao, Sitapur etc . The milk was mainly collected through contractors. 10 milk unions were also found almost at the same time, around each chilling center. These continued functioning in a rather lop-sided manner till 1977.

DAIRY DEVELOPMENT IN UTTAR PRADESH (AT A GLANCE)

U.P. is the highest milk producing State in India having a share of 18% of the total production of the country. The per capita availability of milk has gone up to 224 grams. Dairy development programme is being implemented in State through the following sectors: Cooperative Sector Private Sector Cooperative Sector:-

In the year1917 saw the advent of the First Co-operative Milk Society at Katra, LUCKNOW. It was unfortunate that no special efforts were made in this direction for the next two decades. It was then in the year 1938 LUCKNOW PRODUCERS COOPERATIVE MILK UNION was established. In the coming years Lucknow, Varanasi, Kanpur, Haldwani, Nainital and Lucknow Milk Unions saw the light of the day. To accelerate the pace of Dairy Development in the State a State Level apex autonomous unit PRADESHIK CO-OPERATIVE DAIRY FEDERATION LIMITED was established in the year 1962. Initially the federation played the role of a Technical Advisor. As years went by PCDF Ltd. became proficient and was given the World Bank assisted Operation Flood Programme in the State. Objectives of the O.F. Programme (1) Capturing a dominant share of the urban milk market, hitherto served by a multitude of small milk vendors. (2) Creating a procurement network to link numerous cooperative producer societies in different milk shed areas to the organized urban dairy industry. (3) Upgrading the milk production capacity of Indian bovine stock through a Programme of crossbreeding, veterinary services and auxiliary activities.

The Operation Flood Programme in the State was being implemented by a three tier. Private sector: Presently 25 registered private dairy are functioning in different districts of the State, with a total handling capacity of 46.64 lacs liter per day.The Dairy Development Department is also running some supportive programmes for dairy development in state of Uttar Pradesh as : IMDP, WDP, RFWP, UPDASP, SCP, Shwet Kranti Yojna. IMDP Intensive Mini Dairy Project: The largest employment generation programme named a IMDP under Deen Dayal Rojgar Yojna was initiated in the year 1991. The programme was launched in 17 districts of the State in the first phase. In due course of time the scheme at the Government level was renamed as Vishes Rojgar Yojna. For the year 19992000 the total number of mini dairy stands at 18, 5000 in 73 districts of the state. WDP Women Dairy Project: In its efforts to remove gender basis the state Government has initiated WDP through Government of India, wherein part of the programme is being funded under the STEP programme of the State Government. The progress as on date reflects 2096 women societies with a membership of 80345. RFWP Rural Family Welfare Programme :

Under the aegis of SIFPSA a family welfare project is running at present. It is an ideal programme for family welfare through dairy cooperative society. It is currently operating in 13 districts. Further 3 new districts will be added U.P. UPDASP Uttar Pradesh Diversified Agriculture Support Project: A World Bank assisted Project it is operative through the following components:- PHAP - Public Health Awareness Programme.The programme is operational in 15 districts of the State for a period of MRCB Milk Recording & Conservation of Breed. The programme is operational in 07 districts of the state for a period of Special Achievements/Initiatives the highest ever Milk Procurement in a single day that touched the magical 13.58 Kgs Mark.Efforts are on to bring in our Major Dairies under the ISO 9002 fold, wherein Lucknow Dairy & Parag Dairy have already been awarded the ISO 9002 Certification. To fulfill the vision and the dream of strengthening the Federation of that it is able to meet the ever increasing competition on all fronts an Satat Sudhar Yojna has been initiated. Total NMG supplies 3.20 lac liters/day.

OBJECTIVES OF COMPANY
OBJECTIVES: PCDFS front-end objective was to see that there was enough milk for everyone in town. Marketing is simply the PCDFS tool to achieve their ultimate objective and delivering the pure parag milk to every home. PURPOSE:PCDFS aims to build a system to ensure that individual farmer got a fair price for the milk he sold. MISSION:PCDFS mission is to become the strongest marketing

organization by 2005.PCDFS came into existence in 23rd march 1938,with the simple intension of ensuring a fair return to the producers. Which was implemented in UP is the year 1983-1984 provided the much needed impetus to co-operation. The mission was to develop a product mix that would not only promote sustained growth but also help member union to develop adequate. Production and processing facilities. It also aimed to offer quality products at fair price, and to do so by achieving economies of

scale and costs. And this mission gave birth to brands like parag and Amul. VISION:To increase its number of Parag milk customers and its turnover to 50 crores by 2005 by product diversification.

PRODUCT PROFILE
1.

Butter:It contains less than 80% milk fat and more than 15%

moisture and high acidity. It is prepared exclusively from milk cream of curd of cow or buffalo milk without the addition of salt, color or any preservative and is intended for cooking or for preparation of Ghee.
2.

Ghee:About 43% of total quantity of milk produced in India is

manufactured first into butter and then converted into Ghee. Bulk of Ghee is derived from buffalo milk because it is richer in fat that cow milk. In Parag surplus butter is mutted in steam jacket kettles. Which are equipped with mechanical stirrers and heated with steam till the moisture is removed.
3.

Paneer:In Parag, Paneer is produced by the traditional method in

which citric acid is added to the boiled milk and the milk immediately gets adulterated and water is separated and paneer is obtained. It contains less than 50% frat of more than 60% moisture.
4.

Others :-

Skimmed milk powder, cake and khoya are other products produced by Parag.

5.

Future Products:-

Some new products like coffee powder, ready to make ice-cream powder, baby food and other milk drinks are in the testing stages.

PARAGS MILK PRODUCTS: Butter available in 20 gm., 100 gm., and 500 gm. packs. Pure Ghee available Kg. Paneer - vailable in 100 gm. Skimmed milk powder - in 500 gm. cartons & 200 & 500 gm. plastic bottles.

OBJECTIVE OF THE STUDY

The purpose of this project is to diagnose the information contained in financial statement as to judge the profitability and current financial statement . To estimate the working capital requirement of the firm . just like a doctor examine his patient by recording his body temperature, blood pressure , etc . Before making his conclusion regarding the illness and before giving his treatment ,a financial analyst analysis the with various tools and technique of analysis before commenting upon the financial affairs (positive and negative) & working capital condition of an enterprise . the analysis and interpretation of financial statement is essential to bring out the mystery behind the figures ai financial statement is essential to bring out the mystery behind the figures in financial statements . the main objectives of the study are as related to the topic are as under: To find out the concept of working capital & cash flow analysis. To find out and analyse the group wise composition of working capital in Parag dairy. To study the different mechanism maintain proper working capital in Parag dairy . Estimation of working capital.

 Evaluating working capital requirement in the manufacturing firm. To find various alternatives of working capital . To analyse the financial position of the Parag Dairy.

Scope and limitation of the study

Working capital is considered as central nervous system of firm. The importance of working capital is reflected in fact that financial managers spend most of their time in managing current assets and liabilities. Adequate working needs to be maintained in order to discharge day to day liabilities and protect the business from adverse effects in times of calamities and emergencies. It aims at protecting the power of assets and maximize the return on investment. In other words , goal of working capital management is to minimize the cost of working capital while maximising a firms profits.

Scope

 Determining the total funds required to met the current operations of the firm(i.e. determining the level pf current assets ). To decide the structure of current assets(i.e. the proportion of long term and short term capital to finance current assets). To evolve suitable policies, procedures and reporting systems for controlling the individual components of current assets( mainly cash receivables and inventory ). To determine the various sources of working capital. To ensure optimum investment in current assets. To strike balance between the twin objectives of liquidity and profitability in the use of funds. To ensure adequate flow of funds for of funds for current operations. To speed up the flow of funds or to minimize the stagnation funds.

Limitation of study

 Unnecessary accumulation of inventories which leads to mishandling of inventories, waste theft and loses in increase.. Excessive of working capital is indication of defective credit policy and slack in collection period. These leads to higher bad debt losses that reduce profits. It makes management complacent which degenerates in to managerial inefficiency. Inadequate working capital stagnates growth. It becomes difficult to implement operating plans and achieve the firms target profits. It leads to inefficient utilization of fixed assets.

Management of working capital

1.INVENTORY

It is time to review our inventory level and ensure reduction as number of days of turnover. Sincere effort should be made for liquidation of non / slow moving inventory. The inventory against AMAS need to be received & reduced.

2.BOOK DEBTS
Units and business sector should continued with their vigorous efforts to achieve minimum level of 180 days to turn over at the company level.

The areas to be forced apart from the collectable outstanding from the current bills are dues against differed debts , bills under verification , turn over recognized but not billed due to various reasons etc.

This dispatches, which only add to turn over , without immediate billing and corresponding cash collections are to be reviewed thoroughly and the billing schedule with the customer may be reviewed for changes. The practices of dispatching material which could not be billed

immediately is not be encouraged head of the unit shall personally reviewed goods dispatched but pending billing for more than three on regular basis. A focused presentation on this has to be made to the budget team units must strive hard to control the increase in differed debts and also old and held outstanding.

3.CONTRACT CLOSING ISSUES

Miner supply from units to settle outstanding commercial disputes in respect of project completed in the part of contract were of contract and realisation of large overdue outstanding an amount of Rs. 3.6 cr. Is outstanding against final payment which could be realised by the solving to the contract closing issues. This will also enable to withdraw huge amount of provision created for contractual obligation. Units shall make focused presentation on their action plan to the budget team.

4.CASH FLOWS
Units should ensure positive net flows through the year. Allocation of funds to units with negative balance at any

point of time will be done only with my approval. The units also generate free cash flow from their operations. The free cash flow for R.E- 2006 B.E-2007-08 should be presented to directors.

5.CAPITAL EMPLOYED
In 2007-08, the capital employed has increased to Rs. 451,51 cr. From Rs. 447,49 cr. In 2006-07. Increase in capital employed due to the recent investment in modernization scheme should also give the return commitment in the project report. Better working capital management will help us to reduce the capital employed.

6.DIVERSTMENT OF UNPROFITABLE PRODUCT LINE

As part of budget exercise the unit shall have a retailed review of the market share in the constitution with business sectors and develop strategies.

COST OF PRODUCTION

[1]- Cost of buying milk from cooperative or other sources. [2]- Logistic cost of manufacturing units. [3]- Cost of transportation to carry the milk to manufacturing unit.

[4]- Processing cost-

[a]- Depreciation. [b]- Labour cost. [c]- Electricity/ water. [d]- Maintenance cost. [e]- Managerial cost. [f]- Infrastructural cost. [5]- Storage cost. [6]- Transportation cost .

[7]- Variable cost[a]- Additives. [b]- Power & feul. [c]- Raw material. [d]- conversion changes. [e]- distribution changes. [f]- cash handling changes. [g]- C & C inward

[8]- FIXED COST

(a)- Factory and general administrative cost . (b)- Employees cost. (c)-Consumables. (d) Repair and maintenances.

(e) Telephones. (f) Rent, rates & taxes. (g) Insurances (h) Professional fees (i) Apportionment of QC cost (j) Apportionment of administrative cost (k) General expenses.

PRODUCTION PLANNING AND IMPLEMENTATION

While any dairy project is implemented we look forward in the following pattern for its project implementation.

Various steps of project implementation are:1. Investment Opportunities:- Project planning; Financial Analysis; Project Cost Estimates; Product Yields. 2. Plan for Product Manufacturing:- Technological Aspects; Mass Balance Process Flow Diagrams; Engineering Aspects with Building Plan Layout and Equipment List; Liquid milk Handling products. 3. Development of Plant Layout:- Production Block; Building Plan; Special Features; Hygiene Features; Factory Location; Brief Specifications of Key Equipment. 4. Cleaning and Sanitation:- Cleaning Cycle; CIP; Time and Temperature schedule; Chemical Sanitizers with the growing consumer awareness towards health and nutrition, appropriate packing and nutritional labeling have become important. This trend has been further accelerated by the changing dietary habits and lifestyle of the ever-increasing number of nuclear families. They are demanding convenient, easy to cook, ready to eat foodstuffs in appropriate that retains freshness, flavor and taste, preserves nutrition and has a long shelf life.

This is borne out by marked increase in expenditure on meals away from home as well as on packaged foods, purchased during regular grocery shopping. 5. Packaging:- While packaging any of the dairy product we take care of the following things: Packaging Materials:- Tin Containers, Aluminium foil/Containers, Paper Carton Boards, Glass, Corrugated Board, Plastic Materials specifications. Packaging Techniques:- Vacuum Packaging, modified atmosphere packaging, oxygen absorbers/scavengers, poly clip system, aseptic packaging, computer-aided designing, edible packaging, disposal of packages, recycling, recommended packaging and storage. Packaging Machines:- Tin can filling machine, seaming machine, form-fill seal(FFS) machine, cup thermo-fill and sealing machine, pre-formed cup filling, sealing and cartoning machine, multi-fill machine, vacuum and gas machine, shrink wrapping machine.

FINANCIAL ASPECTS IN RUNNING OF MILK PLANT

To meet the growing demand of milk in pouches, it was envisaged to set up in house poly pack capacity of 6 lack liters at dairy in the adjoining plot of dairy. However initially on experimental basis in the existing premises poly pack operation of 50,000L/day was made operational using existing available services with minimum investment. The packing capacity was further expanded to 1 lack liters. However by further adding 2 no packing machines the total packing facility from existing premises has been increased to 1.5 lack liters per day. Looking into space constraint further expansion in the existing premise is not possible.

Mean while sale of milk in pouches is increasing day by day and average growth per year is more than 15%. There is no surplus packing capacity available with existing co-packers. In view of the above to take care of the next five years requirement of additional milk in pouches, vendor development group has recommended setting up of 6 lack liters per day of milk packaging facility in the adjoining plot and also increasing existing milk processing facility from 6 LLPD to 10 LLPD at dairy. It is also necessary to have some percentage of own packing facility from strategic point of view.

OBJECTIVE:1. The facility can be setup at dairy in minimum time due to availability of required land. 2. The main input for setting up many dairy is availability of good quality fresh water. The water quality and quantity of underground tube wells at dairy is very good due to near the river Gomti. 3. It is necessary to create a production facility to meet the market demand to keep edge over the competitors in the field.

4. To set up and run the facility at dairy will be very cost effective due to availability of infrastructure at dairy, which can be in actually shared, based on need. 5. The proposed packing plant will be a role model for other copackers to adopt in their plants from layout of plant to delivering final milk quality in pouches and dispatch.

Capital budgeting techniques

1-Payback period YEAR 2007 2008 2009 CASH FLOW -13900000 127909 358333.5

2010 2011 2012 2013 2014 2015 2016

558301 558301 549301 549301 549301 549301 549301

PBP= YEAR BEFORE RECOVERY + UNCOVERED COST AT START OF YEAR/ CASH FLOW DURING YEAR = 3 + 2128445/5583010 = 3.381 Yr. Note: (a). Payback period is the period of time required for the
cumulative expected cash flow from an investment project to equal the initial cash flow.

(b). If the payback period calculated is less than sum maximum

expectable payback period, the proposal is expected, if not, it is rejected .

(c). The required payback period were 3 year , our project would
be accepted.

2- Discounted Payback Period

K = Interest Rate 12.75% according to SBI.

( 1+ K)n = 1.12 n = 10 Discount net cash flow = FV ( PVIFi, n) - ICO YEARS(n) 1- 1279090*.88 1131994.65 2- 35333350*.72 805751.30 3- 5583010*.69 3869025.93 4- 5583010*.54 3031574.43 5- 5583010*. 61 3422385.13 6- 5493010*. 48 2636644.80 7- 5493010*. 42 2334529.25 8- 5493010*. 37 2065371.76 9- 5484005*. 33 1826173.66 105484005*.29 2627782.47

3 + 2270842.99/3031574.13 = 3.7496 Note : The discounted payback period which is similar to regular payback excepted cash flow are discounted by the project cost of capital.

3. Net Present Value

CF1/(1+K)1 + CF2/(1+K)2 + ________+ CFn/(1+K)nICO = K = 12.75 YEARS(n)

1- 1279090*.88 1131994.65 2- 35333350*.72 805751.30 3- 5583010*.69 3869025.93 4- 5583010*.54 3031574.43 5- 5583010*. 61 3422385.13 6- 5493010*. 48 2636644.80 7- 5493010*. 42 2334529.25 8- 5493010*. 37 2065371.76 9- 5484005*. 33 1826173.66 105484005*.29 2627782.47

3 + 2270842.99/3031574.13 = 3.7496 TOTAL MINUS (ICO) NET TOTAL 24741232.38 - 13900000.00 10840232.38

3 + 2270842.99/3031574.13 = 3.7496 NOTE:

(a) The present value is the value of an investment projects net cash flow minus the project initial cash outflow. (b) If an investment project NPV is zero or more the project is accepted, if not it is rejected.

RESEARCH METHODOLOGY
Research is an endeavour to discover answers to intellectual and practical problems through the application of scientific method. Research is a systematized effort to gain new knowledge. -Redman and Mory. Research is the systematic process of collecting and analyzing information (data) in order to increase our understanding of the phenomenon about which we are concerned or interested.

OBJECTIVES OF RESEARCH METHODOLOGY

The purpose of research is to discover answers through the application of scientific procedures. The objectives are: To gain familiarity with a phenomenon or to achieve new insights into it Exploratory or Formulative Research.

 To portray accurately the characteristics of a particular individual, situation or a group Descriptive Research. To determine the frequency with which something occurs or with which it is associated with something else Diagnostic Research. To test a hypothesis of a causal relationship between variables Hypothesis-Testing Research.

CHARACTERISTICS OF RESEARCH
Research is directed towards the solution of a problem. Research is based upon observable experience or empirical evidence. Research demands accurate observation and description. Research involves gathering new data from primary sources or using existing data for a new purpose. Research activities are characterized by carefully designed procedures. Research requires expertise i.e., skill necessary to carryout investigation, search the related literature and to understand and analyze the data gathered. Research is objective and logical applying every possible test to validate the data collected and conclusions reached.

 Research involves the quest for answers to unsolved problems. Research requires courage. Research is characterized by patient and unhurried activity. Research is carefully recorded and reported.

METHODOLOGY;
The following information about the PPM plant installation:1- Maximum plant capacity = 6,00,000L/Day 2- Actual production of plant = 1,00,000L/Day (1yrs) 3,00,000L/Day (2yrs) 4,00,000L/Day (3yrs) 6,00,000L/Day (4yrs) 3- Working days = 365 days 4- Total projected investment = 800 lacs

INITIAL INVESTMENT:1yrs- civil investment = 225 lacs Building investment = 255 lacs 2yrs- civil investment = 100 lacs

Building investment = 80 lacs Civil investment = 80 lacs Building investment = 60 lacs Depreciation building = 15% Civil = 10% Cost of capital = 8.5% MRP = 18.5 avg Rs P/L Trade margin = 1%

VARIABLE COST:Raw material = 16 Rs/L Wages = .80paisa/L General expenses = 1 Rs/L Fixed Cost = 100 Lacs

RETURN ON INVESTMENT:= EBIT (1-T)/TOTAL ASSETS Years return on investment 1yrs 2yrs 3yrs 4yrs -.09 .20 .55 1.412

5yrs

1.438

NOTE:1. Return On Investment is negative in first year by -.09. 2. Return On Investment become positive in 2nd and 3rd year and reaches to .55. 3. In fourth year, company has attain full capacity of production, due to which Return On Investment has shut up to 1.412 ( which is near about thrice the before amount ) and reached to 1.438 in fifth year.

DEBT SERVICE COVERAGE RATIO:= total cost + interest + depreciation/ interest + loan repayment/ (1-T) Years Debt Service Coverage Ratio 1yrs 2yrs 3yrs 4yrs 5yrs 60.32 130.98 152.88 300.45 316.66

Note :1. Debt Service Coverage Ratio is 60.32 in first year and reaches to 130.98 in second year and third year. 2. It has just increases 5 fold in fourth year that is 500%. 3. This calculation shows that company can easily meet the uncertain dept repayment requirement in the following years.

BREAK EVEN POINT:B.E.P. is the intersection point of the variable cost and revenue earned. But in this installation case. There is profit earned from 1 yrs itself and hence we are able to cover. VARIABLE COST + FIXED COST + PROFIT MARGIN We can say that BEP = variable cost The variable cost of various years is:YEARS VARIABLES COST

1yrs 2yrs 3yrs 4yrs 5yrs

64, 97, 00,000 1,94,91,00,000 2,59,88,00,000 38, 98, 20,000 38, 98, 20,000

NET PRESENT VALUE:= cash inflow (PVIF n, I) cash outflow =4,80,00,000 1,80,00,000 (PVIF 1, 0.9) 1,40,00,000 (PVIF 2, 0.09) + 6,69,85,50,00 (PVIF 1, 0.09) + 26,22,15,70,63 (PVIF 3, 0.09) + 39,24,32,02,278(PVIF 4, 0.09) + 39,22,72,60,99(PVIF 5, 0.09) = 95,44,22,7875. Note:1. The present value is the present value of an investment projects net cash flow minus the project initial cash out flow. 2. If an investment project NPV is zero or more the project is accepted, if not it is rejected.

PAY BACK PERIOD:Our revenue of first year is 66,83,15,000/- and our 1yrs profit is 66,35,15,000/- so are initial investment will be recovered in 1 year. Pay Back Period Years 2007, 2008, 2009, 2010, 2011 ( PBP = Year before full recovery+ uncovered cost at start of year/cash flow during year)

= 0+ 61,55,15,000/66,35,15,000 =0.93 yr=1 year

Note :1. Pay back period is the period required for the cumulative expected cash flow from an investment project to equal the initial cash flow. 2. If the payback calculated is less than sum maximum expectable payback period, the proposal is expected, if not, it is rejected if. 3. The required payback period were 1 year, our project would be accepted.

PROFITABILITY INDEX:=PV of Cash Inflows/ Initial Cash Outlay =PV (Ct)/Co =sigma Ct/(1+K) t/Co

Note:-

1. Profitability index is the ratio of the present value of the projects future net cash flow to the projects initial cash out flow. 2. As long as PI is 1 or greater, the investment proposal is expectable because our profitability index is greater than one implies that our project PV is greater that its initial cash outflow, which in turn implies that NPV is greater than zero.

SWOT ANALYSIS OF PARAG DAIRY

STRENGTH
The major strength of the traditional dairy product sector is the mass appeal enjoyed by the wide variety of products. The market for these products far exceeds that for western dairy products like milk powder, table butter and cheese. Their operating margins

are also much higher than the western dairy products. The increasing demand for these products presents a great opportunity for the organization.

WEAKNESS
The major weakness of this sector is the practice of inadequate hygiene in the preparation and handling of these products and their relatively short shelf life. The preparation and marketing of these products is generally done by halwais and that limits development in the sector.

OPPURTUNITY
The expanding business prospects provided by these products and their accompanying value addition, call for a thorough study of this sector. It would facilitate an increase in the production and marketing of hygienically prepared and products to the demand of a growing population as has been demonstrated at the NDDBs Sugam dairy.

FINDINGS AND CONCLUSION

There is a need to maintain a balance working capital for maximization profits or minimization of working capital cost or to maintain balance between liquidity and profitability in PARAG DAIRY.

 The dangerous excessive working capital of PARAG are unnecessary accumulation of inventories, indication of defective credit policy and stack collection period, degeneration in to managerial inefficiency and speculative profit grow. The danger of inadequate working capital are- stagnated growth, difficult to implement operating plans, difficult even to meet day to day commitments, inefficient utilization of fixed assets. Working capital management goal is maintain a satisfactory level of working capital. Gross working capital concept of PARAG DAIRY focuses attention on the two aspects of current assets management. These two are- Optimum investment on current assets and financing of current assets. The operating cycle concept pattern to the heart of working capital management in PARAG in a more dynamic form. The time that elapses to convert raw materials into cash is known as operating cycle. Working capital requirement in PARAG DAIRY is determined by a wide variety of factors, they are- size of business, production cycle of process, production policy, credit policy, availability of credit, close co-ordination between production policy, credit policy of RBI and so on.