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Working Capital DISTILLERIES LTD
KBD SUGARS &
INTRODUCTION
Financial Management is that managerial activity which is concerned with the planning and controlling of the firms finance. Finance is the one of the foundations of all kinds of economic activities. Finance is the life-blood of a business. The financial management study deals with the process of procuring necessary financial resource and their judicious use with a view to maximizing the value of the firm and there by the value of the owners i.e. equity share holders in a company. Practicing managers are interest in this subject because among the most crucial decisions of the those which relate to finance, and an understanding of the theory of financial management provides hem with conceptual and analytical insights to make those decisions skillfully.
FINANCIAL MANAGEMENT
Finance management emerged as a distinct field of study at the turn of this century many eminent persons defined in the following ways
DEFINITIONS
According the BONNEVILE AND DEWEY Finance consists in the rising providing and managing of all the money, capital or funds of any kind to be used in connection with the business. According to Prof. EZRA SOLOMAN Financial management is concerned with the efficient use of any important economic resource, namely capital funds.
FINANCE FUNCTIONS
It may be difficult to separate the finance functions from production, marketing and other functions, but the functions themselves can be readily defined. The functions of raising funds investing them in assets and distributing returns earned from assets to shareholders are respectively known as. Long term assets mix (or) Investment Decision Capital mix (or) Financing Decision
V.C.R.INSTITUTE OF MANAGEMENT STUDIES
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Profit allocation (or) Dividend Decision Short term asset mix (or) Liquidity Decision
GOALS OF FINANCIAL MANAGEMENT

Maximize the value of the firm to its equity shareholders. Maximization of profit Maximization of earning per share. Maximization of return on equity Maintenance of liquid assets in the firm Ensuring maximum operational efficiency through planning directing and controlling of the utilization of the funds. Building up of adequate reserves for financing growth and expansion
KBD SUGARS &
INDUSTRY PROFILE
ABOUT SUGAR INDUSTRY IN INDIA
Sugar consumption rate is highest in India as shown in the statistical received from Foreign Agriculture Service. However, as per production is concerned, India has notched up 2nd position following Brazil, the largest sugar producer in the world. The Indian sugar industry uses sugarcane in the production of sugar and hence maximum number of the companies is likely to be found in the sugarcane growing states of India including Uttar Pradesh, Maharashtra, Gujarat, Tamil Nadu, Karnataka, and Andhra Pradesh. Uttar Pradesh alone accounts for 24% of the overall sugar production in the nation and Maharastras contribution can be totaled to 20%. There are 453 sugar mills in India. Co-operative sector has 252 mills and private sector has 134 mills. Public sector boasts of around 67 mills.
SUGAR INDUSTRY SET UP ACROSS INDIA

Andhra Pradesh Sugar Industry Bihar Sugar Industry Gujarat Sugar Industry Haryana Sugar Industry Himachal Pradesh Sugar Industry Karnataka Sugar Industry Madhya Pradesh Sugar Industry Maharastra Sugar Industry Chhattisgarh Sugar Industry Manipur Sugar Industry Orissa Sugar Industry Punjab Sugar Industry Tamilnadu Sugar Industry Uttaranchal Sugar Industry Uttar Pradesh Sugar Industry 3
KBD SUGARS &
BEGINNING OF SUGAR INDUSTRY IN INDIA

Sugar is made from sugarcane, which was arguably discovered thousands of years ago in New Guinea. From there, the route was traced to India and Southeast Asia. It was India which began producing sugar following the process of pressing sugarcane to It was in 1950-51 the government of India made serious industrial development plans and set the targets for production and consumption of sugar. It projected the license and installment capacity for the sugar industry in its Five Year plans.
TYPES OF SUGAR INDUSTRY IN INDIA

The sugar industry can be divided into two sectors including organized and unorganized sector, Sugar factories belong to the organized sector and those who product traditional sweeteners fall into unorganized sector. Gur and khandsari are the traditional forms of sweeteners.
MANUFACTURING INDUSTRY IN INDIA
PROCESS
FOLLOWED
IN
SUGAR
Several steps are usually followed to produce sugar. These steps can be mentioned as below: Extracting juice by pressing sugarcane Boiling the juice to obtain crystals Creating raw sugar by spinning crystals in extractors Taking raw sugar to a refinery for the process of filtering and washing to discard remaining non-sugar elements and hue Crystallizing and drying sugar Packaging the ready sugar
MACHINERY SUPLIERS FOR SUGAR INDUSTRY IN INDIA

Some of the suppliers that offer cutting-edge machines to the companies involved in sugar industry of India are: Sakthi sugar Ltd 4
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Sri Sujay Engineering Products Sri Vijayalakshmi Industries Murthy Industries Parveen Perforaters & Allied Industries Aeromen Engg Co Kamla Foundry & workshop Tinytech Plants Baba Vishwakarma Engineering Co(p) Limited
ANDHRA PRADESH SUGAR INDUSTRY About Andhra Pradesh Sugar Industry

Andhra Pradesh (AP) abounds in maximum number of private sector sugar companies in India along with Tamil Nadu and Karnataka. In the year 1933-34, vacuum process was adopted for sugar manufacturing in the state. Previously, the state government was planning to support Cooperative sector as against other sectors. However with passing time, a consideration change in the policy in the was noticed. Letters of intent (L.O.I) were given to the deserving entrepreneurs including 20LOIs to the private sector companies. This gradually resulted in major benefits for the state government as well as for India as a whole. Today, Andhra Pradesh sugar industry rank 3 rd in terms of recovery and 5th in terms of cane crushing. As per production capacity is concerned. Andhra Pradesh stands at the position 5 in India. The agriculture laborers who do sugarcane harvest n and cultivation are employed in the sugar i9ndustry in Andhra Pradesh. Today the unprecedented growth of this industry in the state has led to the consolidation of village resource and facilitated communication, employment and transport system here.
TYPES OF SUGAR INDUSTRY IN ANDHRA PRADESH

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Andhra Pradesh sugar industry can be classified into two parts such as organized sector including sugar mills and unorganized sector including manufacturing of gur(jaggery)and khan sari. The unorganized sector is often referred to as the rural industry. The rural industry plays major role the level of production.
DIRECTORATE OF SUGAR AND COMMISSIONERATE OF CANE IS ANDHRA PRADESH

Belonging to Industries and Commerce Department, the Directorate of sugar and Commissioner ate of cane has been vested with the power to guide and deal with the sugar factories in Andhra Pradesh. It is the responsibility of the department to encourage sugarcane farmers and to help this developing industry contribute effectively towards Gross State Domestic product (GSDP). The department also takes care of the technological advancements of the industry.
SUGAR MILLS IN ANDHRA PRADESH

Some of the major players in the Andhra Pradesh sugar industry are listed below: Bhagwathi Khandasari Sugar mills N C S Sugar Ltd The Kirlampudi Sugar Mills Ltd Tirumala khandasari Udyog Sri Sarvaraya sugar Ltd The KCP Sugar & ?Industries corpn. Ltd KBD Sugars & Distilleries Ltd Deccan Sugars Ltd
KBD SUGARS &
KARNATAKA BRAVERIES DISTILLERIES SUGAR AND INDUSTRIES LIMITED PROFILE COMPANY PROFILE
The irrigation in Chittoor district mostly depends on open wells. Recharge of water in the wells depends in ground water level and rainfall. However, rainfall depends in monsoon which is uncertain. The soils in district are almost suitable for sugarcane cultivation. The farmers also having good knowledge of growing sugarcane. In olden days, total quality of sugarcane produce in the district was converted as jaggery by gangues (bullock crushers)and power crushers. The jaggery making was very difficult to the small farmers due to lack of crusher and unfavorable price. The big farmers also faced difficulty to crush the cane for long period. The jaggery made in the district was brought to the Chittoor and Pakala which are the market places with railway transportation. There was list of exploitation of farmers by the jaggery mundi owners by advancing the money with high interest rates, commission and also not properly weighment. The price fluctuation created by the traders was also a reason for poor realization, but there was no other choice to the farmers. NAME : K.B.D.SUGARS AND DISTILLERIES LTD SUGALIMITTA (POST) PUNGANUR-5117241 CHITTOOR (DT), A.P
LOCATION AND ADDRESS: MUDIPANAPALLI (VILLAGE)
BRIEF HISTORY ABOUT THE COMPANY

The company was originally incorporated on 16 th day of October, 1984 under the name of SREE TELUGU SUGARS LIMITED. Subsequently the name
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of the company was changed to SHREE VANI SUGARS AND INDUSTRIES LIMITED on the 5th day of April, 1990. Again subsequently the name of the company was changed to KARNATAKA BREVARIES DISTILLLERIES SUGAR LIMITED ON THE 1ST MARCH, 2005. The company was initially promoted by Sri. T. Suryachandra Rao, Managing director and Sri S.Gokul Executive Director commence its Commercial production from 01st July, 1992. In the initial years it performance of the company was much below the break even levels. Due to poor performance the company accumulated substantial cash loses and also defaulted in meeting the terms loan comities to AIFIs. In these circumstances, the promoters have inducted Sri D.K. Audikesavulu as a co-promoter in order to facilitate the company to meet. The cost over run of the project and also provide for the short fall in the Margins for working capital. Sri. Gokul has since come out of the board and left the company.
MAIN OBJECTIVES OF THE COMPANY

To carry on the business as manufacture, producers, processors, sellers, distributors, stockiest an traders of sugar and its derivatives, molasses, biases and all materials an substances arising as by products and waste products out of and in the course of manufacture of sugar. To carry on the business as manufacturers, producers, brewers, blenders, dealers, distillers, stockiest and traders of rectified spirit, ethyl alcohol, gasohol, acetic acid, acetone anhydride, vinyl acetate, polymers, plastics, polyvinyl chloride, liquors and all products made the from To carry on the business as manufactures, producers packers, dealers, stockiest, and traders of furfural bulk drugs, pharmaceutical and medicinal preparations, made out of by products of sugar or either derivatives
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To carry on the business as manufacturers dealers, distributors stockiest and trades of business pulp, paper pulp and pulp made out agricultural residues or other fibrous materials, paper, newsprint, paper boards, mill boards, strew boards, coated papers of all kinds, paper bags, fibrils boxes, cartons, paper of all kinds, paper bags fibrils boxes, cartons corrugated containers, wrapping and packing materials. To carry on the business as planters, growers, cultivators, formers and producers of sugarcane sugar beet.
PRESENT BOARD OF DIRECTORS NAME

SRI D.K. AUDIKESAVULU
DESTINATION
CHAIRMAN DIRECTOR AND MANAGING
SRI D.A. SRINIVAS SRI K.M. SRINIVAS MURTHI SRI.D.J. INDRAPRAKASH
JR. MANAGING DIRECTOR DIRECTOR VICE PRESIDENT
KBD SUGARS &
PRODUCT PROFILE
MANUFACTURING PROCESS
Sugar manufacturing from sugar cane is a continuous process involving several stages viz., milling, clarification, concentrating and crystallization and curing.
MILLING
The raw material sugar cane is fibrous plant body with a hard rind conversing the bulk of the fibrous mass. In outer to extract juice from cane the practice is to crush the cane in a tandem of 3 rollers mills. Prior to milling the cane has to be prepared so that maximum numbers of calls in the cane have to be exposed to the pressure applied in the mills. In cane preparation the whole cane is reduced to tiny pieces and the hard rind in broken with the help of mincer. In order to extract as much juice as possible water is added the crushed mass, which further dilutes whatever left over juice hence making further extract possible in subsequent mills. This practice of the adding water in milling is known as inhibition. The Quantity of water to be adders to achieve the efficiency norms varies with the quality of cane in terms of fiber % cane and on the pressure applied in the process, however, on the average, 30% on cane is the imbibitions rate which satisfies the efficiency norms. The juice thus extracted in the mills in termed as mixed juice as it contains juices from all the mills in the tandem both diluted and undiluted. The mixed juice is weighted scale and sent for further processing. The fibrous mass coming out of mills Is called BEGASSE which is used as fuel for the boiler which generates high pressure steam (40kg/cm2) the stem is fed to turbines to generates power required from the plant. A part of this steam is also fed to mill turbines.
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Which run the mills? The stem which is coming out of these prime movers is called Exhaust steam which is used to boil juices in different stages of sugar manufacturing process.
CLARIFICATION OF JUICE
The weighed mixed juices are heated in juice Heaters in the stages. In the first stage of heating the juice is heated from about 35 degree C to 70 degree C. This heated juice is mixed with mils of lime and sulpher-di-oxide gas in a milk of lime and sulphur-di-oxide and called as Clarifying Agents and their consumption is 0.24% on cane and 0.06% on cane respectively. Now the juice is subjected o the second stage of heating in which it is heated from about 70 degree centigrade to 105 degree centigrade. These clarifying agents react with the several organic importing and coloring matters in the juice, which have to be eliminated out before further stage of concentration of juice the propos of applying heat is to hasten these reaction and also through co-adulate the colloidal impurities such as proteins. These clarifying agents combine with various impurities to from precipitation and the precipitates are allowed to settle down living clear juice at the top. This setting is carried out in a large vessel known as door clarifier. The juice retention time is above 3 hours.
FILTRATION
This precipitate is known as Mud and is continuously being with drawn. This mud contains juice and also to recover this juice, the med in subjected to filtering filtration is carried cut in Vaccum filters in which the juice is sucked from the mixed of mud and small biogases particles known as begascillo, through as suitable arrangement. The quantity of juice recovered from filtration is estimated to be around 6% on cone. The mud after filtration comes in the form of cake and is known as Filter Cake or Filter Mud. This filter contains nutrition elements and used as manure, thus filter mud is on of the by
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products of the process and its quantity is about 3%on tone. The filtered juice is sent back from processing along with mixed juice. The clear juice from Door is further boiled in a set of tubular vassels know as Evaporators. As stated earlier the heating medium is exhaust steam and on an average about 70% to 76% of evaporation. In order to achieve steam economy. This evaporation is carried out in vacuum is a system which is called QUADRAUPLE EFFECT. In this system one pound of stem evaporation for pound of water.
SULPHITATION
This concentrated juice is now called as Syrup, which contains 60% (on an average) solids by weight. In contains several coloring matters which have to be eliminated or neutralized before the final stage of concentration. For this purpose the syrup is Sulphited again with SO2 gas. Hence this clarification process is known as Double Sulphitation. The sulphited syrup is sent to pan floor, where the final stage of boiling are carried out. This principle is to concentrate the syrup to super saturation level where crystallization of sucrose starts.
CRYSTALLISATION
It is not possible to crystallize all the sugar content of syrup in a single stage of boiling due to various factor the details of which are beyond the scope of this description Hence, the boiling is carried out in 3 stages viz, A-Boiling, BBoiling, and C- Boiling.
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NEED FOR THE STUDY
The need for the working capital is in order to know the liquidity position of the firm. KBD SUGAR AND DISTILLIRIES LTD operating profit is decreases year to year Every Industry for the past few years has been finding it difficult to managing the working capital. Every Business has to use to their available resources for the improvement and development of the business their earning more profits. Effective management of working capital has become a problem for such organizations The purpose of study is to analyze and evaluate working capital management in KBD SUGAR AND DISTILLIRIES LTD.
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OBJECTIVE OF THE STUDY

This study is mainly focused to examine the short time financial viability of KBD Sugar & Distilleries Ltd.
1. To know the working capital requirement of the KBD sugars & Distilleries Ltd. 2. To analyze the liquidity position of KBD sugars & Distilleries Ltd. 3. To know the efficiency of Account Receivables and Account payable of KBD sugars & Distilleries.
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SCOPE OF THE STUDY

The scope of the study is spread over for a period of six years i.e. 20072012 for purpose off evaluating the financial position and data for the past Five years i.e. 2007-2012 has been used in order to understand the overall performance of SCCL for the past five years. The study has been done for a period of 45 days.
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LIMITATIONS OF THE STUDY
The Study is taken to consider the data only five years. Since only 5 years data is used for the analysis the out come may not be generalized. Due to limitation of time, it was unable to go for a depth study into the subject.
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RESEARCH METHODOLOGY
SOURCES OF DATA ANALYSIS
The study required both primary and secondary data
PRIMARY DATA
Primary data has been collected by interviewing certain executives who were chosen on the basis of their in depth knowledge and experience in the company. The interviews in nature are under to gain as much information as possible.
SECONDARY DATA;
Secondary data was obtained from the past records file and reports of the organization also from other financial statements.
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REVIEW OF LITERATURE
TOOLS FOR ANALYSIS OF WORKING CAPITAL:
The quantum of working capital as well as its financing pattern is subject to constant monitoring and review by the financial manager. There are different analytical tools which can help a financial manager in monitoring in viewing and controlling the working capital. The popularly used tools are: 1. Schedule of changing working capital. 2. Working capital ratios.
WORKING CAPITAL MANAGEMENT

One of the most important areas in the day-to-day management of the firm is the management of working capital. Working capital management is the functional area of the finance that covers all the current account of the firm. It is concerned with management of the level of individual current assets as well as the management of total working capital. Financial management means procurement of funds and effective utilizations of these procured funds. Procurement of funds is firstly concerned for financing working capital requirement of the firm and secondary for financing fixed assets,
MEANING OF WORKING CAPITAL

Ordinarily the term working capital stands for that part if the capital, which is required for the financing of working or current needs of the company. Working capital is the life time of every concern. Whether it is manufacturing or non-manufacturing one with out adequate working capital, there can be no progress in the industry. In adequate working capital means shortage of raw materials, labor etc., resulting in partial current assets les current liabilities has no economic meaning in the sense of implying some type of normative behavior. According to this line of
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reasoning, it is largely an accounting artifact. Working capital management then is a misnomer. The working capital of the firm is not managed. The term describes a category of management decisions affects specific type of current assets and current liabilities. In turn those decisions should be rooted in the overall valuation of the firm.
DEFINITIONS
According to western and Brigham, Working capital refers to firms investment in short term assets-cash, short term securities, accounts receivables and inventories. According to Hoagland working capital is descriptive of that capital which is not fixed. But the more common use of the working capital is to consider it as the difference between the book value of the current assts and current liabilities.
TYPES OF WORKING CAPITAL

There are two types of working capital. They are:
I. ON THE BASIS OF CONCEPT

1. Gross working capital 2. Net working capital
1. GROSS WORKING CAPITAL

Gross working capital refers to the firms investment in current assets are the assets, which can be concerned into and with in an accounting year (or operating cycle) and include cash short-term securities, debtors (accounts receivables or book debts) bills receivables and stock (inventory) Gross working capital points to the arranging of funds to finance current assets.
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2. NET WORKING CAPITAL

Net working capital refers to the difference between current assets and current liabilities. Current liabilities are those claims of outsiders, which are expected to nature for payment with in accounting year and include creditors (account payables). Bills payables and outstanding expenses. Networking capital can be positive or negative. A positive working capital will arise when current assets exceed current liabilities and negative working capital will arise when current liabilities excess of current assets.
II.ON THE BASIS OF TIME

1). Permanent/fixed/fluctuating working capital 2). Temporary working capital
PERMANENT WORKING CAPITAL

The need for current assets arises because of the operating cycle the operating cycle is a continuous process and therefore, the need for the current assets is felt constantly. But the magnitude of current assets needed is not always a minimum level of current assets, which is continuously required by the firm to carry on its business operations. This minimum level of current assets is referred to as permanent or fixed working capital.
EXAMPLE
Every firm has to maintain a minimum level of raw materials, work-inprogress, finished goods and cash balance. The minimum level of current assets is called permanent or fixed working capital as this part of capital is permanently blocked in current assets. As the business grows, the requirements of permanent working capital also increase due to the increase due to the increase in current assets.
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y-axis
Temporary Or Fluctuating Permanent
Time
x-axis PERMANENT WORKING CAPITAL CAN BE FURTHER DIVIDED INTO:

A. Regular working capital B. reserve working capital
A.REGULAR WORKING CAPITAL

It is the minimum amount of liquid capital needed to keep up the circulation of the capital from cash to inventories to receivables and again to cash this would include sufficient minimum bank balance to discount all bills, maintain adequate supply of raw materials etc.
B.RESERVE WORKING CAPITAL

It is the excess over the needs or regular working capital that should be kept in reserve for contingencies that may arises at any time these contingencies include rising prices, business depression, strikes and special operations such as experiments with new products.
2. TEMPORARY WORKING CAPITAL
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Depending upon the changes in production and sales, the for working capital over and above permanent working capital, will have in be maintained to support the peak proceeds of sale and investment in raw material, work in progress and finished goods will fall if the market is slack. The extra working capital needed to support the changing production and sales activities is called fluctuating or variable or temporary working capital. The Firm to met liquidity measurement that will last only temporary creates temporary working capital. y-axis
Temporary Or Fluctuating Permanent
x-axis THE NEED OF WORKING CAPITAL

The need for working capital to run day-to-day business activities cannot be over emphasized we will hardly find business firms which doesnt require any amount if working capital and firms differ in their requirements f the working capital we know that a firm should aim at maximizing the wealth of its share holders. In its endeavor to do so. A firm should earn sufficient return form its operation. Earning a study amount of profits required successfully sale activity. The firm to invest enough funds in current assets for cash instantaneously. There is always an operation cycle involved in the conversion of sale of sales in to cash.
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VARIOUS NEEDS OF WORKING CAPITAL IS AS FOLLOWS

1. To pay wages and salary. 2. It helps to the purchase of raw materials, components and spares. 3. It helps to incur day-to-day expenses and overhead costs such as fuel, power and office expenses etc. 4. It also to meet the selling cost as packing, advertising etc. 5. It provides credit facilities to the customer. 6. It helps to maintain the inventories of raw material, working progess, stores and spares and finished stock.
ADVANTAGES MANAGEMENT
OF
GOOD
WORKING
CAPITAL
The main advantages of good working capital are as follows: 1. Solvency of the business: adequate working capital helps in maintaining solvency of the business by providing uninterrupted flow of production. 2. Goodwill: sufficient working capital enables a business concern to make prompt payments and hence helps in crating and maintaining goodwill. 3. Easy loans: a concern having adequate working capital, high solvency and good credit standing can arrange loans from banks on easy and favorable terms. 4. Cash discount: adequate working capital also enables a concern to avail cash discounts on the purchases and maintaining goodwill. 5. Regular supply of raw materials: sufficient working capital ensures regular supply of raw materials and continuous production. 6. Regular payment of salaries, wages and other day-to-day commitments: a company which has ample working capital can make regular payment towards it day-to-day commitments which would raise the morale of its employees, increase their efficiency, reduce wastage cost and enhance production and profits.
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7. Exploitation of favorable market conditions: only concerns with adequate working capital exploit favorable market conditions such as purchasing its requirements in bulk when the prices are lower and holding its inventories for high prices. 8. Crisis handling ability: adequate working capital enables a concern to face business crisis such as depression, inflation successfully. 9. Quick and regular return on investments: sufficiency of working capital enables a concern to pay quick and regular dividends to its inventors, as there may not be mush pressure to plough back profits.
DISADVANTAGES CAPITAL
OF
INADEQUATE
WORKING
1. A concern which has inadequate working capital cannot pay its short term liabilities in time. Thus it will lose its reputation and shall not be able to obtain good credit facilities. 2. It can not buy its requirement in bulk and cannot avail discounts. 3. It becomes difficult for the firm exploits favorable market conditions and under take profitable projects 4. The firm cannot pay its day-to-day expenses, which would increase cost and reduce the profits of the business. 5. It becomes impossible to utilize efficiency the fixed assets due to the nonavailability of liquid funds. 6. The rate of return on investment will also fall with the shortage of working capital
DETERMIMINATES OF WORKING CAPITAL OR FACTORS AFECTING

The working capital requirements of a firm affected by number of factors. The various factors, which affect the working capital requirements of a concern, are as follows:
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FACTORS OF WORKING CAITAL
Internal factors Nature of business Product cycle
External factors Business fluctuations Technological Developments
Business cycle Credit policy
Transport and Communication Developments
Scale of production Growth and Expansion of business Operating efficiency
Import policy Taxation policy
INTERNAL FACTORS
NATURE OF BUSINESS:
The working capital requirements of enterprises are basically related to the conduct of business. Public utilities have certain features which have a bearing on their working capital needs. They do not maintain big inventories arid have, therefore, probably the least requirements of working capital. On the other hand trading and amount of cash inventories and book debts.
PRODUCTION CYCLE
The term production or manufacturing cycle refers to the span between the procurement of raw materials and completion of the manufacturing process
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leading to the production of finished goods. In other words, there is a some time gap before raw materials become finished goods. There fore the longer the time span, the larger will be the working capital needed and vice versa.
BUSINESS CYCLE
The business fluctuations influence the size of working capital mainly during updated phase when boom conditions prevail, the need for working capital is likely to cover the lag between increases sales and receipt of cash as well as invest in plant and machinery to meet the increased demand. The down swing a opposite effect on the level of working capital requirements.
CREDIT POLICY
The credit policy relating to sales and purchases also affect the working capital the credit policy in influences the requirements of working capital in two ways: Though credit terms granted by the firm to its customers buyers of goods credit terms available to the firms its creditors. A firm, which more credit sales and cash purchase required high working capital than a firm having more credit purchase and cash sales.
SCALE OF PRODUCTION
A concern carrying on activities on a small scale of needs less working capital on the other hand a concern undertaking activities on large scale need large amount of working capital.
GROWTH AND EXPANSION OF BUSINESS

The growth and expansion of business also affect the working capital requirements. When there is growth and expansion in the business of firm the working capital needs of the firms will also increase
OPERATING EFFECIENCY
The operating efficiency of the management is also important determinant of the level of working capital. A firm enjoying operating efficiency can eliminate
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wastage and use its resources efficiency and there by reduce its working capital needs considerably.
EXTERNAL FACTORS BUSINESS FLUCTUATIONS

Business enterprises usually experiences fluctuations in demand for their products and services because of changes in economic conditions. In view of this, working capital requirements of these enterprises are affected. Thus, in the event of economic prosperity, general demand of the good and services tends to shoot up. To cope with increased demand and consequently increased production the firm will require additional working capital.
TECHNOLOGICAL DVELOPMENTS
Technological developments in the area of production can have sharp effects on the need for working capital if a firm switches over to new manufacturing process and install new equipments with which it is able to cut period involved in converting raw materials into finished goods, permanent working capital requirements of the firm will decrease.
TRANSPORT AND COMMUNICATION DEVELOPMENTS

Where the means of transport and communication in a country are not well developed, industries may need additional funds to maintain big inventory of raw materials and other accessories which would otherwise not be needed where the transport and communications system are high developed.
IMPORT POLICY
Import policy of the government may also have its bearing on the levels of working capital of the enterprises since they have o arrange funds for importing goods at specified times.
TAXATION POLICY
Working capital needs of business enterprises are affected sharply by taxation policy of the government. In the event of regressive taxation policy of
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the government as it exits today in India, imposing heavy tax burdens on business enterprises leaves very little profits for distribution and retention purposes.
SOURCES OF WORKING CAPITAL

Among the various sources available for financing working capital needs finance manager has to select the best suitable source depending on working capital need of company. The need of working capital is increased by raising prices of end products and relative inputs. On the other hand the government and monetary authorities play their own role to curd the malice in period of inflation. The control measures often take the firm of dear of money policy and restriction credit. Financing of additional working capital in such an amusement becomes a problem to finance manager of a concerned unit. Commercial banks play the most significant role in providing working capital finance, particularly in Indians context. In view of mounting inflation, the R.B.I has taken up certain social measures to check the money supply in the economy. The balancing need has to be managed either by long-term borrowings or by issuing equity or by earning sufficient profits and retaining the same of coping with the additional working capital requirements. The first choice before a finance manager, where banks do not provide a part of additional working capital is to take the long-term source of finance.
LONG TERM FINANCING

Loans from financial institutions the option is normally rules out, because financial institutions do not provide finance for working capital requirements. Further this facility is not available to all companies this option is not practical.
FLOATING OF DEBENTURES
The profitability of a successful floating of debentures seems to be rather merging. In Indian capital market, floating of debentures has still to gain popularly debentures issues of companies in private sector not associated with certain
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reputed groups generally failed to attract investors to invest their funds in companies. In this context the mode of rising funds by issuing convertible debenture/ bonds also gaining.
SOURCES OF WORKING CAPITAL
Long term sources
Short term sources
Internal sources With drawing the Depreciation fund Using the renouncement For taxation
External sources Bank
Trade credit
Postponement of payment Accrued expenses Public deposits
Bill of Exchange Government Assistance
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ACCEPTING PUBLIC DEPOSITS

The issue of tapping deposits is directly to the image of the company seeking to invite public deposits.
ISSUE OF SHARE
With a view of financing additional capital needs, issue of additional equity share could be considered. Many Indian company have still to go ahead to command respect of investors in the context low profit margin as well as lack of knowledge about company make the success of a capital Issue very dim.
RAISING FUNDS BY INTERNAL FINANCING

Raising funds operational profits poses problems for many companies, because price of their end products are controlled and do not permit companies to earn profits sufficient requirements to finance additional working assets, still a largely feasible solution lies in increase profitability through cost control and cost reduction measures managing the cash operating cycle, rationalizing inventory stock and so on.
PROBLEMS
ASSOCIATED
WITH
EXCESS
AND
IN
ADEQUATE WORKING CAPITAL DANGERS OF EXCESS WORKING CAPITAL

1) It results in unnecessary accumulation of inventories. Thus the changes of inventory mishandling, the losses increase. 2) It is an indication of defective credit policy and stock collection period. 3) Excessive working capital makes management compliment, which degenerates into managerial efficiency. 4) Tendencies of accumulating to make speculative profits grow. This may trend to make dividend policy liberal and difficult to cope with in future when the firm is unable to make speculation profits.
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KBD SUGARS &
DANGERS INADEQUATE WORKING CAPITAL

1) It strategy growth. It becomes difficult to undertaken profitable project due to non availability. 2) It becomes difficult to implement to operating plans and achieve the firm profit target. 3) Operating in efficiencies creep in when it becomes difficult even to meet day-to-day commitments. 4) Fixed assets are not efficiently utilized for the working capital funds. Thus the rate of return on investment surplus. 5) Paucity of working capital funds renders the firm unable to avail of attractive credit opportunities etc. The firm losses it reputation when it is not in a position to turnover short term obligation.
METHODS
FOR
ESTIMATING
WORKING
CAPITAL
REQUIREMENTS
There widely used methods for determining working capital requirements of a firm are: Percentage of sale method Regression analysis method Operating cycle method
1. PERCENTAGE OF SALE METHOD

In this method level of working capital requirements on the basis of past experience. The past relationship between sales and working capital is taken as a base for determining the size of working capital requirements for future. I it however, presumed that the relation ship between sales and working capital that has existed in the past has been stable. This may be explained with the help of the following illustration.
31
KBD SUGARS &
Percentage of sale method is a simple and easily understood method and practically used for ascertaining short-term changes in working capital in future. However this method lacks reliability in as much as its basic assumption of linear relation ship between sales and working capital does not hold true in all the cases. As such, this method cannot be recommended for universal application.
2. REGRESSION ANALYSIS METHOD

This is a statistical method of determining working capital requirements by establishing the average relationship between sales and working capital and its various components in the past years. In this regard the method of least squares is employed and the relationship between sales and working capital is expressed by the equation: Y=a+bx The value of a and b is obtained by the solution of simultaneous linear equations given as under: Where a=fixed component b=variable component x=sales y=inventory n=number of observations
3. OPERATING CYCLE APPROACH

Operating cycle refers to the length of time necessary to complete the following cycle of events. o Conversion of cash into inventory o Conversion of inventory into receivable o Conversion of receivable into cash If the operating cycle is length than the working capital requirements will be more on the other hands, if the operating cycle is short then the working capital requirement will be less.
32
KBD SUGARS &
According to this approach size of working capital requirements of a firm is determining by multiplying the duration of the operating cycle by cost of operations. The duration of the operating cycle may be found with the help of the following formula: O=R+W+F+A-P WHERE O=Duration of operating cycle R=Duration of raw materials W=Duration of work-in-process F=Duration of finished goods A= Duration of accounts receivable P=Duration of accounts payable
DURATION OF RAW MATERIALS

It reflects the number of days for which raw materials remain in inventory before they are issued for production. The following formula can be used to determine duration of raw materials. Average stock of raw materials R=---------------------------------------------Per day consumption of raw materials
DURATION OF THE WORK-IN-PROCESS

It denotes the number of days required in the work-in-process stage. It may be ascertained with the help of the following formula: Average work-in-process inventory W=----------------------------------------------Average production per day
33
KBD SUGARS &
OPERATING CYCLE
CASH
BILLS RECEIVABLES OR DEBTORS
RAW MATERIALS
WORK IN PROGRESS
CREDIT SALES
FINISHED GOODS
DURATION OF FINISHED GOODS

It refers to the number of days for which finished goods remain in inventory before they are sold. This can be computed by the following formula: Average finished goods inventory F=--------------------------------------------Per day sale of goods
DURATION OF THE ACCOUNTS RECEIVABLE

34
KBD SUGARS &
It represents the number if days required to collect the accounts receivables. This may be calculated as under: Average book debts A=-------------------------------------Average credit sales per day
DURATION OF ACCUNTS PAYABLE

It refers to the number of days for which the suppliers of raw materials offer credit. This may be measured with the help of the following formula: Average trade creditors P= -------------------------------------------Average credit purchases per day
RATIO ANALYSIS
Ratio analysis is the process of determining and interpreting numerical relationship based on financial statements. A ratio is a statistical yardstick that This provides a measure of the relationship between variables of figures. relationship can be expressed as a percentage or as quotient.
TYPES OF RATIOS
Ratios can be grouped into various classes according to financial activity of function to be evaluated. The parties interested in financial analysis are short and long term creditor. Owner and management. Short-term creditors main interest is in the liquidity positions or the short-term solvency o the firm. Longterm creditors on the other hand are more interested in the long term solvency and profitability of the firm. A. Liquidity ratios B. Leverage ratios C. Activity ratios/ Turn over ratio 35
KBD SUGARS &
D. Profitability ratio. Financial ratio analysis refers to the mathematical expression of relationship between two accounting figures drawn either from balance sheet or from profit and loss account or both. In order to apprise, interpret and review the effectiveness of the company, the following ratios are used in the present study: Cash ratio Liquid ratio Current ratio Debtors turnover ratio Creditors turnover ratio Stock or inventory turnover ratio Working capital turnover ratio Cash related to working capital ratio Inventory to working capital ratio Profit to gross working capital ratio Profit to net working capital ratio Gross profit ratios Return on investment ratio Gross working capital to sales Net working capital to sales
Ratio analysis takes two forms behavior of ratios over a period of years to determine trend, comparing ratios for one concern with those of the other concerns in the same line of business. In making such comparisons allowance must be made for differences in the character of enterprise and for special accounting practices and policies pursed by each undertaking.
B.
LIQUIDITY RATIOS
Liquidity ratios measure the firms obligations. ability to meet current
1. CURRENT RATIO
36
KBD SUGARS &
The current ratio is calculated by dividing current assets by current liabilities. Current assets Current ratio= __________________ Current liabilities
CURRENT ASSETS :
marketable
include cash and bank balances,
securities debtors and inventories and also prepaid expenses etc. CURRENT LIABILITIES : accrued expenses, short-term bank loan, income tax liability etc. include creditors, bills payable,
2. QUICK RATIO
Quick ratio establishes a relationship between Quick, or liquid assets and current liabilities. Current assets-Investments& Loans advances Quick Ratio =_______________________________________ Current Liabilities Where; LIQUID ASSETS include cash, securities. debtors, and bills receivables and marketable
3. ABSOLUTE QUICK (CASH) RATIO

Since cash is the most liquid assets, a financial analyst may examine cash ratio and its equivalent to current liabilities. Marketable securities are equivalent of cash. Cash + Marketable Securities Cash Ratio=________________________________ Current Liabilities Trade investments (or)
B) LEVERAGE RATIOS
37
KBD SUGARS &
Leverage ratio may be calculated from the balance sheet items to determine the proportion of debt in total financing. Leverage ratios are also computed from the profit and loss items by determining the extent to which operating profits are sufficient to cover the fixed charges.
1.
TOTAL DEBT RATIO

Several debt ratios may be used to analysis the long-term solvency of a firm.
The firm may be interested in knowing the proportion of the interest bearing debt (also called funded debt) in the capital structure. It may compute debt ratio by dividing total debt by capital employed (or) net assets. Total Debt Total Debt Ratio=_______________________ Total Debt + Net Worth Where; Total Debt = Secured + Unsecured loans Capital Employed=Total Debt + Shareholders Fund
2.
DEBT EQUITY RATIO

This relationship describing the lenders contribution for each rupee of the
owners contribution is called debt-equity ratio. Debt equity ratio is directly computed by dividing total debt by net worth. Total Debt Debt Equity Ratio=_____________ Net Worth Where; Total Debt = Secured + Unsecured Net Worth = Share Capital + Reserves and Surplus
38
KBD SUGARS &
3. INTEREST COVERAGE RATIO

Debt ratios described above are static in nature, and fail to indicate the firms ability to meet interest (and other fixed charges) obligations. The interest coverage ratio (or) the times interest coverage ratio is completed by dividing earnings before interest and taxes by interest charges EBIT Interest coverage ratio = _______ Interest C) ACTIVITY RATIOS Activity ratios involve a relationship between sales and assets. A proper balance between sales and assets generally reflects that assets are managed well. Several activity ratios can be calculated.
1. INVENTORY TURNOVER RATIO

Inventory turnover ratio indicates the efficiency of the firm in producing and selling its product. It is calculated by dividing the cost of goods sold by the average inventory. Cost of goods sold Inventory Turnover Ratio=_____________________ Average inventory Where; Cost of goods sold=raw material, wrapping and packing materials consumed + purchase of finished goods + manufacturing expenses
2. WORKING CAPITAL TURNOVER RATIO

A firm may also like to relate net current assets (or net working capital gap) to sales. It may thus compute net working capital turnover by dividing sales by net working capital. Sales
39
KBD SUGARS &
Net current assets turnover=______________________ Net working capital
3. DEBTORS TURNOVER RATIO

A firm sells goods for cash and credit. Credit is used as a marketing tool by a number of companies. When a firm extends credits to its customers, debtors (account receivables) are created in the firms accounts. Debtors are expected to be converted into cash over a short period. Debtors turnover is found out by dividing credit sales by average debtors. Credit sales/sales Debtors turnover=________________ Average debtors Debtors turnover indicates the number of times debtors turnover each year.
4. CREDITORS TURNOVER RATIO

This ratio gives the average credit period enjoyed from the creditors and is by dividing credit purchases by average accounts payable (creditors + bills payable) Creditors purchases Creditors turnover=___________________ Average creditors Where; Purchases= Raw materials, wrapping and packing purchase of finished goods. materials consumed +
Note: here, credit purchases are not available. There fore we consider the total
purchases for calculation.
40
KBD SUGARS &
5. FIXED ASSETS TURNOVER RATIO

Fixed assets are used in the business for producing goods to be sold. The effective utilization of fixed assets in increased production and reduced cost. It also ensure whether investment. In the assets have been judicious (or) not. Sales Fixed assets turnover ratio= ____________ Fixed assets
D). PROFITABILITY RATIOS

The profitability ratios are calculated to measure the operating efficiency of the company. Besides management of the company, creditors and owners are also interested in the profitability of the firm. Creditors want to get interest and payment of principal regularly owners want to get a required rate of return on their investment.
1) GROSS PROFIT RATIO

The first profitability ratio in relation to sales is the gross profit margin. It is calculated by dividing the gross profit by sales. Gross Profit Gross profit= ______________ X 100 Sales Where; Gross profit = sales (Raw material, wrapping and packing material consumed + purchases of finished goods + manufacturing expenses)
2) NET PROFIT RATIO

Net profit is obtained when operating expenses, interest and taxes are subtracted from the gross profit. The net profit ratio is measured by dividing profit after tax by sales.
41
KBD SUGARS &
Net Profit Net Profit Ratio=________________ X 100 Sales Where, Net profit = PBIDT
3) RETURN ON INVESTMENT (ROI)

The term investment may refer to total assets (or) Net assets. The funds employed in net assets in known as capital employed . Alternatively, capital employed is equal to net worth plus total debt. PBIDT ROI=________________________ x 100 Capital Employed Where; Capital Employed = Share Capital + Reserves and Surplus + Secured loans + Unsecured loans.
42
KBD SUGARS &
COMPOSITION OF WORKING CAPITAL CURRENT ASSETS

Inventories Raw materials Work in progress Finished goods Stores and spares Miscellaneous goods Receivables Trade debtors Loans and advances Other debtors balances
Marketable securities
Government securities Semi Government securities Shares, debenture, etc.,
Cash and bank balances
Cash in hand Cash at bank Cash in transit
CURRENT LIABILITIES
Sundry creditors Advances received from customers Short term loans from banks Trade dues and other liabilities Deposits from public etc.,
43
KBD SUGARS &
STATEMENT OF CHANGES IN WORKING CAPITAL FOR THE YEAR 2006-2007

EFFECT OF WORKING PARTICULARS CURRENT ASSETS
Inventories Sundry debtors Cash & bank balances Loans & Advances Total current assets(A)
2006
2007
CAPITAL INCREASE
127790111 187099 693064 15046615
DECREASE
175448000 303238111 8069520 2214515 74538006 260270041 8256619 2907579 89584621 403986930
CURRENT LIABILITIES
Sundry creditors Bills payable Provision for tax Advances Total current liabilities (B) Net working capital(A-B) Decreased working capital 147863984 41152506 69153301 71000 2029250 112406057 147863984 91008350 265573013 68042 4407965 361057370 42929560 104934424 147863984 104934424 248654271 248654271 2958 2378715 49855844 196419712
INTERPRETATION
The above table shows statement of changes in working capital during the year 2006-200
44
KBD SUGARS &

EFFECT PARTICULARS CURRENT ASSETS
Inventories Sundry debtors Cash & bank balances Loans & advances Total current assets(A) 303238111 8256619 2907579 89584621 403986930 375676892 8416762 5067311 150964503 540125468 72438781 160143 2159732 61379882
OF
WORKING
2007
2008
CAPITAL INCREASE
DECREASE
CURRENT LIABILITIES
Sundry creditors Bills payable Provision for tax Advances Total current liabilities(B) Net working capital(A-B) Increased working capital 91008350 265573013 68042 4407965 361057370 42929560 31230932 74160493 118673654 344582844 85082 2623395 465964975 74160493 74160493 137923108 31230933 137923108 1784570 27665304 79009831 17040
INTERPRETATION:
Rs. 31230933
The above table shows statement of changes in
working capital during the year 2007-2008 it as net increased in working capital

45
KBD SUGARS &
EFFECT OF WORKING PARTICULARS CURRENT ASSETS

Inventories Sundry debtors Cash & bank balances Loans & advances Total current assets(A) 375676892 8416762 5067311 150964503 540125468 156306246 7348982 8755709 145766518 318177455 3688398 5197985 219370646 1067780
2008
2009
CAPITAL INCREASE
DECREASE
CURRENT LIABILITIES
Sundry creditors Bills payable Provision for tax Advances Total current liabilities(B) Net working capital(A-B) Decreased working capital 74160493 118673654 344582844 85082 2623395 465964975 74160493 44215344 195998366 75897 16505043 256794650 61382805 12777688 74160493 12777688 239518059 239518059 74458310 148584478 9185 13881648
INTERPRETATION
The above table shows statement of changes in working capital during the year 2008-2009 it as net decreased in working capital Rs. 12777688

EFFECT PARTICULARS 2009 2010 CAPITAL
46
OF
WORKING
KBD SUGARS &
INCREASE CURRENT ASSETS

Inventories Sundry debtors Cash & bank balances Loans & advances Total current assets(A) CURRENT LIABILITIES Sundry creditors Bills payable Provision for tax Advances Total current liabilities(B) Net working capital(A-B) Increased working capital 44215344 195998366 75897 16505043 256794650 61382805 31121885 92504690 92504690 56184590 34687285 160800195 85877 5760575 201333932 92504690 10744468 9528059 35198171 156306246 7348982 8755709 145766518 318177455 136429420 8062874 3903005 145443323 293838622 713892
DECREASE
19876826
4852704 323195
9980
31121885 56184590
INTERPRETATION:
The above table shows statement of changes in working capital during the year 2009-2010 it as net increased in working capital Rs. 31121885.

EFFECT OF WORKING CAPITAL
47
KBD SUGARS &
PARTICULARS CURRENT ASSETS

Inventories Sundry debtors Cash & bank balances Loans & Advances Total current assets(A)
2010
2011
INCREASE
DECREASE
136429420 8062874 3903005 145443323 293838622
456904598 16803678 3470866 144280277 621459419
320475178 8740804 432139 1163046
CURRENT LIABILITIES
Sundry creditors Bills payable Provision for tax Advances Total current liabilities (B) Net working capital(A-B) Increased working capital 34687285 160800195 85877 5760575 201333932 92504690 163814268 256318958 256318958 32922086 123537482 174367576 80999 67154404 365140461 256318958 163814268 329220860 4878 61393829 88850197 13567381
INTERPRETATION:
Rs. 163814268
The above table shows statement of changes in
working capital during the year 2010-2011 it as net increased in working capital
RATIO ANALYSIS
CURRENT RATIO
CURRENT ASSETS --------------------------48
CURRENT RATIO =
KBD SUGARS &
CURRENT LIABILITIES
CURRENT RATIO DURING THE YEAR 2006-2011 CURRENT ASSETS

403986930 540125468 318177455 293838622 621459419
YEAR
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
CURRENT LIABILITIES
36157370 465964976 256794650 201333932 365140461
RATIO
1.12 1.16 1.24 1.45 1.70
Source: Annual published reports of KBD sugars & Distilleries Ltd.
INTERPRETATION
The ideas current ratio that 2:1 it implies that for every one rupee of current liabilities, 2 rupees of current assets are available to meet them all the years 2007-2008, 2008-2009,2009-2010,2010-2011,2011-2012 liquidity position is not satisfactory.
49
KBD SUGARS &
CURRENT RATIO
700000000 600000000 500000000 RATIO 400000000 300000000 200000000 100000000 0 2006- 2007- 2008- 2009- 20102007 2008 2009 2010 2011 YEARS CURRENT ASSETS CURRENT LIABILITIES RATIO
50
KBD SUGARS &
QUICK RATIO
CASH + SUNDRY DEBTORS QUICK RATIO = --------------------------------------------CURRENT LIABILITIES
CASH & YEARS

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
BANK BALANCES
2907579 5067311 8755709 3903005 3470866
SUNDRY DEBTORS
8256619 8416762 7348982 8062874 16803678
CURRENT LIABILITIE S
361057370 465964976 256794650 201333932 365140461 0.03 0.02 0.06 0.05 0.05
RATIO
INTERPRETATION:
Quid Ratio is also known as liquid ratio or Acid test ratio. The standard liquid ratio is 1:1 for every one rupee. There should be one rupee of Quick assets. The liquidity ratio for the periods of 2007-08, 2008-2009,20092010, 2010-2011, 2011-2012 are not satisfactory.
51
KBD SUGARS &
QUICK RATIO
500000000 450000000 400000000 350000000 300000000 250000000 200000000 150000000 100000000 50000000 0
-2 00 07 7 -2 20 008 08 -2 20 009 09 -2 20 010 10 -2 01 1
CASH & BANK BALANCES SUNDRY DEBTORS CURRENT LIABILITIES RATIO
RATIOS
20
06
20
YEARS
52
KBD SUGARS &
ABSOLUTE QUICK RATIO
CASH + MARKETABLE SECURITIES ABSOLUTE LIQUID RATIO = -----------------------------------------------------CURRENT LIABILITIES
YEARS
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
CASH
2907579 5067311 8755709 3903005 3470866
CURRENT LIABILITIES
361057370 465964975 256794650 201333932 365140461
RATIO
0.008 0.01 0.03 0.019 0.01
INTERPRETATION:
It is also called cash position ration. The ratio should be one 1:2 it indicate 50% worth of absolute liquid assets are considered adequate to pay the 100% claim of current liabilities 2009-2010 are satisfied and in the year 20072008,2008-2009, 2010-2011, 2011-2012 are not satisfied.
53
KBD SUGARS &
ABSOLUTE QUICK RATIO

500000000 400000000 RATIOS 300000000 200000000 100000000 0
20 06 -2 20 007 07 -2 20 008 08 -2 20 009 09 -2 20 010 10 -2 01 1
CASH CURRENT LIABILITIES RATIO
YEARS
54
KBD SUGARS &
WORKING CAPITAL TURNOVER RATIO
SALES WORKING CAPITAL TURNOVER= ----------------------------WORKING CAPITAL
NET WORKING YEARS

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
SALES
321056780 446392044 407989582 318263738 226717032
CAPITAL
42929560 74160492 61382805 92504690 256318958
RATIO
7.48 6.02 6.63 3.44 0.88
Source: Annual published Reports of KBD Sugars distilleries Ltd. INTERPRETATION

The higher, the ratio, the lowest is the profiles. The ratio has increased from the periods of 2007-2008, 2008-2009, 2009-2010 but there has been decreases in the period of 2010-2011, 2011-2012.
55
KBD SUGARS &
WORKING CAPITAL RATIO

300000000 250000000 200000000 150000000 100000000 50000000 0 SALES 321056780 446392044 407989582 318263738 226717032 SALES
RATIOS
NET WORKING CAPITAL RATIO
56
KBD SUGARS &
FINDINGS
In the over all evaluation of the working capital management at each and every aspects the following are the findings. Working capital ratio of the KBD sugars & Distilleries Ltd is decreasing in all the years which indicate the poor liquidity positions of the company. The current ratio represent a margin of safety for creditors the higher the current ratio the greater the margin of safety the larger amount of current assets in relation to current liabilities The more firms ability to meet its current obligations KBD sugars & Distilleries Ltd current ratios shows not satisfactory in order to all the years i.e. 2007-2008, 2008-2009, 2009-2010, 2010-2011, 2011-2012. The liquid ratio of the KBD sugars Distillers Ltd is not satisfactory all the years Absolute Quick ratio of the KBD Sugars & Distilleries ltd is not satisfactory all the years every one rupee worth of assets is not sufficient to pay rupee 2 worth of current liabilities. The company sales have been decreased in all the years. Movement of accounts payable shows an increasing trend this indicates company is able to generate credit liberal terms and generate revenue yet other cost.
57
KBD SUGARS &
SUGGESITIONS
The KBD sugars Distillers Ltd should try to maintain an optimum level of inventory and develop this strategy for investing excess cash balances. The KBD sugars Distillers Ltd should improve the profits by reducing the indirect expenses. The KBD sugars Distillers Ltd should maintain adequate working capital. The KBD sugars Distillers Ltd should maintain the high liquidity position. The KBD sugars Distillers Ltd should develop an optimum credit policy. The KBD sugars Distillers Ltd should determine maximum rate of cash discount they can give to the customers. The KBD sugars Distillers Ltd should utilize the reserves and surplus by either capitalizing or invest the money some where as investment to get benefits.
58
KBD SUGARS &
CONCLUSION
From the analysis on the working capital management at KBD Sugars & Distilleries Ltd. I conclude that the company has to reduce its production cost to increase profit. The inventory turn over is good in all the five years. The company should try to increase their sales. It should maintain the high liquidity position. Hence, the suggestions given are realistic which will lead to increase in the profitability of the company. The company should try to tap the market and set in brand value and do the best.
59
KBD SUGARS &
KBD SUGARS AND DISTILLERIES LIMITED-SUGAR DIVISION BALANCESHEET AS AT 31.03.2007
60
KBD SUGARS &
DESCRIPTION I. SHARE CAPITAL II. RESERVES AND SURPLUS III. LOANS & ADVANCES 1. Secured Loans 2. Unsecured Loans 3. Deferred Tax Liability
SCHDULE A B C
SUGAR DIVISION 0 -6425313
POWER DIVISION 0 -14234661
TOTAL 0 -20659974
170318211 98014487 0
83090635 7900000 0
253408846 105914487 0
261907384 IV. FIXED ASSETS 1. Gross Block Less. Depreciation Net. Block 184834858 V. CURRENT ASSETS 1. Inventories 2. Sundry debtors 3. Cash and Bank Balances 4. Loans and Advances H I Less: Current Liabilities VI. MISCELLANEOUS INCOME 232111721 J 39973789 361221189 38516600 367278 E F G 302113330 5247667 2858458 89518334 D 444742528 259907670
76755974
338663359
118065951 18876529 99189422 1124781 3008952 49121
562808479 278784199 28402480 303238111 8256619 2907579
66287 4249141 1014854 3234287 0 106551638
89584621 403986930 362236043 41750887 367278 338663359
KBD SUGAS AND DISTILLERIES LIMITED SUGAR DIVISION PROVISIONAL PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31st MARCH, 2007 V.C.R.INSTITUTE OF MANAGEMENT STUDIES
61
KBD SUGARS &
DESCRIPTION
SCH
FOR THE YEAR ENDED 31st March 2007 SUGAR POWER TOTAL DIVISION DEVISION 318 251683 1 077010616 425952699 2805097 0 2805097 321056780 107701016 428757796 303164 832 40364585 23375833 19326073 29444670 9936508 23805268 449417770 (20659 974) 0 (20659974) 0 0 20659974
INCOME Sales And Other Income Increase/(Decrease) In Stocks K L
EXPENDITURE Consumption of Raw Material Manufacturing Expenses s Salaries, Wages & Other Benefits Interest and Financial Charges Duties & Taxes Administrative expenses depreciation 301448545 40338565 23300302 9463676 29444670 9852517 18529737 432378012 (6 425313) 0 (6425313) 0 0 1716287 26021 75531 9862397 0 83991 5275531 17039759 (1 4234661) 0 (14234661) 0 0
M N O P Q
Profit/Loss For The Year Prior Period Items Net Profit/Loss For The Year Deferred Tax Asset Loss Brought Forward From Previous Year LOSS CARRIED TO BALANCE SHEET
642513
14234661

62
KBD SUGARS &
SCHDULE A B C
TOTAL 0 -78641650
290451741 60389487 0
74691204 7900000 0
365142945 68289487 0
279277584 IV. FIXED ASSETS 1. Gross Block Less. Depreciation Net. Block Capital work in progress V. CURRENT ASSETS 1. Inventories 2. Sundry debtors 3. Cash and Bank Balances 4. Loans and Advances E F G H 375140470 3534587 4788074 150933218 534396349 Less: Current Liabilities I VI. MISCELLANEOUS INCOME 255607865 J 466570599 67825751 244852 D 462430669 279089573 183341096 4196167 187537262
75513197
354790781
118065951 24152123 93313828 113017 9406845
580496620 303241696 27254924 4309183 281564107
536423 4882175 279237 31285 5729120 573049 5156071 0 99182916
375676892 8416762 5067311 150964503 540125469 467143647 72981822 244852 354790781
KBD SUGAS AND DISTILLERIES LIMITED SUGAR DIVISION PROVISIONAL PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31st MARCH, 2008
DESCRIPTION
SCH
FOR THE YEAR ENDED 31st March 2008 63
KBD SUGARS &
SUGAR DIVISION INCOME Sales And Other Income Increase/(Decrease) In Stocks K L 4389 97392 7 4444167 513441560 391 334724 57600161 31543420 28185073 48400517 8759405 19181903 585005203 (715 63643) 0 (71563643) 0 0
POWER DEVISION 7394652 0 7394652
TOTAL
446392044 74444167 520836212 391436 510 57824840 31625273 36373820 48400517 8759405 24457497 599477862 (786416 50) 0 (78641650) 0 0
EXPENDITURE Consumption of Raw Material Manufacturing Expenses Salaries, Wages & Other Benefits Interest And Financial Charges Duties & Taxes Administrative Expenses Depreciation M N O P Q
101786 224679 81853 8788747 0 0 5275594 14472659 (7 078007) 0 (7078007) 0 0
71563643
7078007
78641650

DESCRIPTION I. SHARE CAPITAL II. RESERVES AND SURPLUS SCHDULE A B SUGAR DIVISION 0 -44143754 POWER DIVISION 0 -6976589 TOTAL 0 -51120343 64
KBD SUGARS &
III. LOANS & ADVANCES 1. Secured Loans 2. Unsecured Loans 3. Deferred Tax Liability
C 22847433 102348323 0 64357833 7900000 0 253408846 105914487 0
286679102 IV. FIXED ASSETS 1. Gross Block Less. Depreciation Net. Block Capital work in progress V. CURRENT ASSETS 1. Inventories 2. Sundry debtors 3. Cash and Bank Balances 4. Loans and Advances Less: Current Liabilities I VI. MISCELLANEOUS INCOME 261086065 J E F G H 155302989 593127 8546034 145739026 315519877 257396433 58123444 122426 D 497422330 299496627 197925703 4914492 202840195
65281244
351960346
118108912 29428336 88680576 113016 88793593
615531243 328924963 286606280 5027507.90 291633788
1003257 1417155 209675 27492 2657578 576890 2080688 0 90874281
156306246 7348982 8755709 145766518 318177455 257973323 60204132 122426 351860346
DESCRIPTION
SCH
FOR THE YEAR ENDED 31st March 2009 SUGAR POWER TOTAL DIVISION DEVISION
65
KBD SUGARS &
INCOME Sales Less: Excise Duty Other Income Increase/(Decrease) In Stocks L K 4019 03062 27168636 374734427 26 118647 -217914213 182938861 6086520 0 6086520 0 0 6086520 407989582 27168636 380820947 26118647 -217914213 189025381
EXPENDITURE Consumption Of Raw Material Manufacturing Expenses Salaries, Wages & Other Benefits Interest And Financial Charges Administrative Expenses Depreciation M N O P Q
103 459245 36428063 30564298 27376162 8847793 20407054 227082615 (44143754) 0 (44143754) 0 0 44143754
0 23650 133901 7594511 34834 5276213 13063109 ( 6976589) 0 (6976589) 0 0 6976589
103459245 3645171 30698199 34970673 8882627 25683267 240145724 (511203 43) 0 (51120343) 0 0 51120343
66
KBD SUGARS &
67
KBD SUGARS &
SCHDULE A B C
TOTAL 0 -34795778
239892160 109948323 0
59536565 7900000 0
299428725 111248323 0
318996272 IV. FIXED ASSETS 1. Gross Block Less. Depreciation Net. Block Capital work in progress V. CURRENT ASSETS 1. Inventories 2. Sundry debtors 3. Cash and Bank Balances 4. Loans and Advances Less: Current Liabilities I VI. MISCELLANEOUS INCOME 288577518 J E F G H 135750568 4601803 3696880 145443323 289492574 201954289 87538286 0 D 498312592 319263909 179048683 21990549 201039232
56884998
375881270
118108912 3470590 83403005 113016 83516022
616421505 353969816 262451689 2210356504 284555254
678852 3461071 206125 0 4346048 558317 3787730 0 87303752
13642920 8062874 3903005 145443323 293838622 202512606 91026016 0 375881270
DESCRIPTION
SCH
FOR THE YEAR ENDED 31st March 68
KBD SUGARS &
SUGAR DIVISION INCOME Sales Less: Excise Duty Other Income Increase/(Decrease) In Stocks K 3153 57242 13435104 301922138 3845530 -17942981 287824687
2010 POWER DEVISION
TOTAL
2906496 0 2906496 2906 496 0 0
318263738 13455104 304828634 3845 530 -17942981 290731183
EXPENDITURE Consumption Of Raw Material Manufacturing Expenses Salaries, Wages & Other Benefits Interest And Financial Charges Duties & Taxes Administrative Expenses Depreciation Profit/Loss For The Year Prior Period Items Net Profit/Loss For The Year Deferred Tax Asset Loss Brought Forward From Previous Year LOSS CARRIED TO BALANCE SHEET M N O P Q 210010065 20478478 31131574 19860121 9259666 21328994 312068898 (242 44211) 0 (24244211) 0 0 24244211 0 1273481 123325 6756687 27000 5277571 13458064 (1 0551568) 0 (10551568) 0 0 10551568 210010 065 21751958 31254899 26616808 9286666 26606565 325526961 (347957 78) 0 (34795778) 0 0 34795778

DESCRIPTION SCHDULE SUGAR POWER 69 TOTAL
KBD SUGARS &
I. SHARE CAPITAL II. RESERVES AND SURPLUS III. LOANS & ADVANCES 1. Secured Loans 2. Unsecured Loans 3. Deferred Tax Liability
A B C
DIVISION 0 -4063145
DIVISION 0 -4089706
0 -8152851
269825677 136799180 0
42146697 7900000 0
811972374 144699180 0
402561713 IV. FIXED ASSETS 1. Gross Block Less. Depreciation Net. Block Capital work in progress V. CURRENT ASSETS 1. Inventories 2. Sundry debtors 3. Cash and Bank Balances 4. Loans and Advances Less: Current Liabilities I J E F G H 456225746 9271152 3199869 144280277 612977045 432192839 180784205 0 362361293 D 517739293 340358371 177380922 4196167 181577088
45956991
448518704
118108912 39983478 78125434 113017 78238451
635848205 380341849 255560356 430918340 259815589
678852 7532526 270997 0 8482375 563416 7918958 0 86157410
456904598 16803678 3470866 1444280277 621459419 432756256 188703164 0 448518703
VI. MISCELLANEOUS INCOME
DESCRIPTION
SCH
FOR THE YEAR ENDED 31st March 2011 SUGAR POWER TOTAL DIVISION DEVISION 70
KBD SUGARS &
INCOME Sales Less: Excise Duty K 221 0565058 11784348 209271710 Other Income Increase/(Decrease) In Stocks -11202898 316241197 L 514310008 EXPENDITURE Consumption Of Raw Material Manufacturing Expenses Salaries, Wages & Other Benefits Interest And Financial Charges Duties & Taxes Administrative Expenses Depreciation M N O P Q 380905 340 44502841 38109855 26184870 7076712 21593534 518373153 (40631 45) 0 (4063145) 0 0 -4063145 0 0 220176 4237695 15238 5277571 9750680 (4 089706) 0 (4089706) 0 0 -4089706 38090534 0 44502841 38330031 30422565 7091950 26871105 528123833 5660974 519970982 5660974 0 5660974 0 0 446392044 11784348 214932684 -11202898 316241197
(8152851) 0 (8152851) 0 0 -8152851
BIBLIOGRAPHY
The following books have referred during the preparation of this project :-
71
KBD SUGARS &
I.M. pandey Financial Management Vikas Publishing House Pvt, Ltd, New Delhi-110014, 2003 Prasanna Chandra Financial Management Tata MCGrawhill hill publications company limited, New Delhi, 2002. R.K. Sharma and Shashi K. Guptha Management Accounting Kalayani publishers, New Delhi -2003. Advanced Financial Management Publishers by Director of Studies ICWAI Kolkata 70016.
72

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Working Capital DISTILLERIES LTD

KBD SUGARS &

Working Capital DISTILLERIES LTD

KBD SUGARS &

GOALS OF FINANCIAL MANAGEMENT

V.C.R.INSTITUTE OF MANAGEMENT STUDIES

Working Capital DISTILLERIES LTD

KBD SUGARS &

SUGAR INDUSTRY SET UP ACROSS INDIA

V.C.R.INSTITUTE OF MANAGEMENT STUDIES

Working Capital DISTILLERIES LTD

KBD SUGARS &

BEGINNING OF SUGAR INDUSTRY IN INDIA

TYPES OF SUGAR INDUSTRY IN INDIA

MANUFACTURING INDUSTRY IN INDIA

MACHINERY SUPLIERS FOR SUGAR INDUSTRY IN INDIA

V.C.R.INSTITUTE OF MANAGEMENT STUDIES

Working Capital DISTILLERIES LTD

KBD SUGARS &

ANDHRA PRADESH SUGAR INDUSTRY About Andhra Pradesh Sugar Industry

TYPES OF SUGAR INDUSTRY IN ANDHRA PRADESH

Working Capital DISTILLERIES LTD

KBD SUGARS &

DIRECTORATE OF SUGAR AND COMMISSIONERATE OF CANE IS ANDHRA PRADESH

SUGAR MILLS IN ANDHRA PRADESH

V.C.R.INSTITUTE OF MANAGEMENT STUDIES

Working Capital DISTILLERIES LTD

KBD SUGARS &

LOCATION AND ADDRESS: MUDIPANAPALLI (VILLAGE)

BRIEF HISTORY ABOUT THE COMPANY

Working Capital DISTILLERIES LTD

KBD SUGARS &

MAIN OBJECTIVES OF THE COMPANY

Working Capital DISTILLERIES LTD

KBD SUGARS &

PRESENT BOARD OF DIRECTORS NAME

SRI D.A. SRINIVAS SRI K.M. SRINIVAS MURTHI SRI.D.J. INDRAPRAKASH

JR. MANAGING DIRECTOR DIRECTOR VICE PRESIDENT

V.C.R.INSTITUTE OF MANAGEMENT STUDIES

Working Capital DISTILLERIES LTD

KBD SUGARS &

Working Capital DISTILLERIES LTD

KBD SUGARS &

Working Capital DISTILLERIES LTD

KBD SUGARS &

V.C.R.INSTITUTE OF MANAGEMENT STUDIES

Working Capital DISTILLERIES LTD

KBD SUGARS &

NEED FOR THE STUDY

V.C.R.INSTITUTE OF MANAGEMENT STUDIES

Working Capital DISTILLERIES LTD

KBD SUGARS &

OBJECTIVE OF THE STUDY

V.C.R.INSTITUTE OF MANAGEMENT STUDIES

Working Capital DISTILLERIES LTD

KBD SUGARS &

SCOPE OF THE STUDY

V.C.R.INSTITUTE OF MANAGEMENT STUDIES

Working Capital DISTILLERIES LTD

KBD SUGARS &

LIMITATIONS OF THE STUDY

V.C.R.INSTITUTE OF MANAGEMENT STUDIES

Working Capital DISTILLERIES LTD