A STUDY ON

DETERMINE THE FINANCIAL POSITION THROUGH RATIO ANALYSIS

WITH REFERENCE TO Y.S.R SPINNING AND WEAVING MILL PVT LTD.
A project report submitted to
JNTU, KAKINADA
In partially fulfillment of the requirements
For the Award of the degree of
MASTER OF BUSINESS ADMINISTRATION
Submitted by
K. SURENDRA BABU
REGD.NO.09U91E0058
Under the guidance of
G.GURUNATHAM MBA, MA LIT

SRI MITTAPALLI COLLEGE OF ENGINEERING

Tummalapalem, Guntur-522233, AP, INDIA
(Affiliated to JNTU, KAKINADA)
CERTIFICATE

This is to certify that this project entitled a study on DETERMINE

THE FINANCIAL POSITION THROUGH RATIO ANALYSIS in Y.S.R
SPINNING AND WEAVING MILL, is a bonafied work by K.SURENDRA
BABU under management guidance and submitted to the department of
business

administration

SRI

MITTAPALLI

COLLAGE

OF

ENGINEERING, Thummalapalem, Guntur in partial fulfillment of the degree

of Master of Business Administration.

Internal examiner

External

examiner

Head of the Department

DECLARATION

I here by declare that the project report entitle a study on DETERMINE

THE FINANCIAL POSITION THROUGH RATIO ANALYSIS in Y.S.R.
SPINNING AND WEAVING MILL PVT Ltd, has been prepared by me in
partial fulfillment of requirements for the award of the degree of Master of
Business

Administration

in

SRI

MITTAPALLI

COLLAGE

OF

ENGINEERING, Thummalapalem, Guntur.

I also declare that the project work is the result of my own efforts and
this has been not submitted to any other university for the award of any degree
or diploma.

K.SURENDRA BABU,
Reg no: 09U91E00058.

ACKNOWLEDGEMENT

It gives me great pressure, having done a project of an interesting & knowledge

topic like DETERMINE THE FINANCIAL POSION THROUGH RATIO
ANALYSIS. This project has immensely enlarged my knowledge as far as
academics are concerned. There are many people associated with this project
without which this project would not have reached its successful completion.
I would like to express my gratitude to all those who gave me the possibilities
to complete this report. I would like to thank Dr. E. V. Krishna Rao, principal,
Dr. B. Rajeev Kumar HOD, SMCE and Mr. Financial manager, Y.S.R.
SPINNING AND WEAVING MILL, GANAPAVARAM and college
authorities for providing me the opportunity to work one of the prestigious
organizations.
I want to thank

officer, Y.S.R. SPINNING AND WEAVING MILL PVT.

Ltd and Mr. Y. SRINIVASA REDDY for giving me permission to commence

this report in this first instance, to do the necessary research work and for being
Management Company guide.
With a deep sense of gratitude I would like to express my heartiest gratefulness
to my faculty & guide Mr. G. GURUNATHAM GARU and other faculty
members of M.B.A Dept, SMCE. Whose help stimulating suggestions and
encouragement helped me in all the times of research for writing this report.
I extend my sincere gratitude towards my parents, who have always encouraged
me and give great support. They have been a great source of motivation in the
completion of my project.
Above all I thank the almighty for my successful completion of this project.

CONTENTS

Chapters

subject

page
Chapter-1

1.1 Introduction
1.2 Significance of the study
1.3 Objectives of the study
1.4 Limitations of the study
1.5 Research Methodology

Chapter-II

PROFILE OF INDUSTRY &COMPANY

2.1 Industry profile
2.2 Company profile

Chapter-III
Chapter-IV
Chapter-V

THEORITICAL FRAME WORK

DATA ANALYSIS & INTERPRETATION
FINDINGS & SUGGESTIONS
CONCLUSION
Bibliography

INTRODUCTION

MEANING OF WORKING CAPITAL:

Working capital may be regarded as the life blood of a business. The term
Working capital refers to the capital required for day to day operations of a business
enterprise. It is represented by excess of current assets over current liabilities. It is essential
that a certain proportion of funds be kept invested in the form of different current assets like
inventories, receivables, cash & marketable securities.
Managing current assets require more attention the managing plant & equipment
expenditure. To large investments in current assets affect the firm profitability. On the other
hand too little investment can also the expensive. All this indicates that proper assets of
working capital requirements. It is must for running the business efficiently and profitability,
technical working capital management is an integral part of the financial management.
The financial manager must determine the optimum level of working capital
funds also the optimum composition of current assets and current liabilities. It has been
found that largest portion of a finance managers time is utilized in the management of
working capital.
Requirement of working capital depends up on the operating cycle of the firm
operating cycle of a concern begins with the acquisition of raw material and stops with the
collection of receivables.
1) Conversion of cash into raw materials.
2) Conversion of raw material into work progress.
3) Conversion of work in progress into finished stock.
4) Conversion of finished goods into accounts receivables.
5) Conversion of accounts receivables into cash.

Accounts
Receivable

Sales

Cash

Finished Stock

Purchase of
Raw material

Work-inProgress

Definition:
Working capital refers to a firms investment in Short term Assets, Cash, Short Term
Securities, Accounts Receivables and Inventories.
Weston and Brisk

Working capital is Descriptive of that capital which is not fixed, but the more common use
of the capital is to consider it as the difference between the book value of the current assets
and the current liabilities.
Hog land

NEED OF THE STUDY

 To observe maintain current assets & current liabilities to analyze the working capital.
To search new ways for the optimum cash requirements.
To know the solvency position of the company.
To highlight the importance of current assets & current liabilities.
To understand the leverage position of the company.
To know the profitability performance of the company.
The company may use this for analyzing their performance in working capital
management.

SCOPE OF THE STUDY

It is difficult task before an organization to keep an amount as Working Capital.

 The Working Capital covers the total expenditure which concentrates on routine
organization activities.
It reveals the around the performance of day-to-day activities.
The amount of working capital can be determined on the length of activities, the size
of the activities, the area of policy and procedure and the volume of an organization.

OBJECTIVES OF THE STUDY

To know the current financial position of the company.

To evaluate the short term and long term solvency position of the company.

To analyze the debt equity composition of the company.

To study the companys profitability position.

To outline the techniques of evaluating the performance of working capital

management.

METHODOLOGY OF STUDY

The study has been conducted in the organization to examine Working Capital
Management in order to enquire into the issues like liquidity, and Material Management. The
study has been undertaken in the Accounting & Finance deportments of the organization. The
only limitation of the study is the time factor. During the two months project, the research
had to concentrate on the organizational data simultaneously along with this dissertation data.
Despite this limitation, every effort was made to arrive at the original objective.

Methodology
Methodology is a systematic procedure for collecting information in order to
analyze and verify a phenomenon. The collection of data or information is alone through
principle sources. In methodology data collection are in two types. Those are
1.

Primary Data

2.

Secondary Data

1. Primary data:
Primary data is the information collected directly without any reference. It
was collected with the help of the standard and accepted techniques which are in use for this
kind of studies.
The required primary data was collected through structural questionnaire and
personal interviews; questionnaire was used because of its versatility, time, cost, reliability
and its suitability in getting all information pertaining to the study.
2. Secondary data:
Secondary Data is the data collected by others, for purposes other than the solution at
hand. This has been collected through annual reports, periodical statements and statistics etc
and also collected from journals, manuals and departmental instructions.

LIMITATIONS OF THE STUDY

The study was mainly based on accounting data, which were recorded at the end of
the year and we can not know the problems faced by the management in day to day
operations, which are related to working capital.

The analysis is based on working capitals which were subject to several limitations.
Therefore any analyses based on such statements also suffer from similar limitations.

The external factors on that effect the financial performance of the company have not
been given much importance.

Limitations in working capital analysis arise due to difficult in making comparison

and it is always a challenging standard to compare.

2.1 INDUSTRY PROFILE

TEXTILE INDUSTRY:
The textile industry occupies a unique place in our Country .One of the
earliest to come into existence in India, it accounts or 14% of the total Industrial production,
contributes to nearly 30% of the total exports and is the second largest employment generator
after agriculture.
India contributes to about 25% share in the world trade of cotton yarn. India,
the worlds third-largest producer of cotton and the second- Largest producer of cotton yarns
and textiles, is poised to play an increasingly important role in global cotton and textile
markets as a result of domestic and multilateral policy reform.
Indian textile industry contributes about 22 % to the world spindle age and
about 6% to the world rotor capacity installed .India has second highest spindle age in the
world after China with an installed capacity of 38.60 million spindles. Indian textile industry
has the highest loom age (including handlooms) in the world and contributes about 61% of
the world loom age. It contributes about 12% to the world production of textile fibers and
yarns. India is one of the largest consumers of cotton in the world, ranking second next to
China in production of cotton yarn and fabrics and first in installed spinning and weaving
capacity.
Textile industry is providing one of the most basic needs of people and the
holds importance; maintaining sustained growth for improving quality of life. It has a unique
position as a self-reliant industry, from the production of raw materials to the delivery of
finished products, with substantial value-addition at each stage of processing it is a major
Contribution to the country's economy.
Its vast potential for creation of employment opportunities in the agricultural,
industrial, organized and decentralized sectors & rural and urban areas, particularly for
women and the disadvantaged is Noteworthy.
Although the development of textile sector was earlier taking place in terms
of general policies, in recognition of the importance of this sector, for the first time a separate
Policy Statement was made in 1985 in regard to development of textile sector. The textile
policy of 2000 aims at achieving the target of textile and apparel exports of US $ 50 billion
by 2010 of which the share of garments will be US $ 25 billion. The main markets for Indian
textiles and apparels are USA, UAE, UK, Germany, France, Italy, Russia, Canada,
Bangladesh, and Japan.

CURRENT SCENARIO:

Developing countries with both textile and clothing capacity may be able to prosper
in the new competitive environment after the textile quota regime of quantitative import
restrictions under the multi-fiber arrangement (MFA) came to an end on 1st January, 2005
under the World Trade Organization (WTO) Agreement on Textiles and Clothing.
The mood in the Indian textile industry given the phase out of the quota regime of the
multi-fiber arrangement (MFA) is upbeat with new statement lowing in and increased orders
for the industry as a result of which capacities are fully booked up to April 2005. As a result
of various initiatives taken by the government, there has been new investment of Rs.50, 000
crores in the textile industry in

the last five years. Nine textile majors invested Rs.2, 600

crores and plan to invest another Rs.6, 400 crores.

Further, India's cotton production increased by 57% over the last five years; and 3
million additional spindles and 30,000 shuttles-less looms were installed. The industry
expects investment of Rs.1, 40,000 crores in this sector in the post-MFA phase.
A Vision 2010 for textiles formulated by the government after intensive interaction
with the industry and Export Promotion Councils to capitalize on the upbeat mood aims

to

increase India's share in world's textile trade from the current 4% to 8% by 2010 and to
achieve export value of US $ 50 billion by 2010 Vision 2010 for textiles envisages growth in
Indian textile economy from the current US $ 37 billion to $ 85 billion by 2010; reaction of
12 million new jobs in the textile sector; and modernization and consolidation for creating a
globally competitive textile industry.
There will be opportunities as well as challenges for the Indian textile industry in the
post-MFA era. But India has natural advantages which can be capitalized on strong raw
material

base - cotton, man-made fibers, jute, silk; large production capacity (spinning -

21% of world capacity and weaving - 33% of world capacity but of low technology);

INVESTMENT IN INDIAN TEXTILE INDUSTRY:

The scenario of investment in the Indian textile industry started to change after the
inception of the special Textile Package during the 2003-2004 budgets. The
recommendations made in the budget included the reforms that are required to be made in the
fiscal policy of the Indian textile Industry for attracting investment in this industry. The
policy matters associated with restructuring of debt for financial viability of this industrial
sector are also being addressed in this budget.
A fund was set up in accordance with the recommendations of the aforesaid budget with
an initial principal amount of Rs.3000 crores. This fund was meant for restructuring of the
textile sector.

GROWTH OF INDIAN TEXTILE INDUSTRY:

Growth along with the investment of an industry depends heavily on the economic
health of the country. Indian economy grew rapidly during the fiscal year 2007-2008 posting
a growth rate of 9.4% p.a. Not only this, India has been performing significantly in the last
three years where its average yearly rate of growth has been estimated to be 8%. The fruits of
economic growth have trickled down to people of the state which can be evidenced from the
rising per capital income of India. Statistics reveal that during 2002-2008 (up to March 2008)
the per capital income of India has increased by 62 % and has reached the level of Rs 25,778
or US$ 581.37 per annum.
One of the most beneficial classes of this economic growth saga has been the middle
income section of the society. The total strength of this class in absolute terms has been found
out to be 216 million which is expected to rise to 351 million by 2010. The major demand
that is being generated is by a new class of people from the booming IT-BPO sector who are
still at their prime age and are outwardly fashion savvy.
Propensity of consumption (after excluding all spending on essential items like
housing, health, education, etc.) by the average Indian people has increased at the rate of 5%
to a total amount of US$ 219 billion in the year 2005. At this time, the organized retail sector
has been able to tap a market of around US$ 8.2 billion which is projected to increase to US$
25 billion by 2010.

Textile industry is one of the major contributors to the total output of the act growing

Indian industrial sector which is at present revolving around 4%. Textile sector's contribution
to GDP of India is also significant which currently amounts to 4%. It has been found out that
Indian textile industry s one of the major sources of foreign exchange earnings for India and
contributes around 16-17%.From the above discussion it is quite clear to us that the market
size of India is growing at a very high pace. That is why the foreign investors are flocking to
India for investment purposes in order to get hold of a chunk of this expanding pie. With
increasing demand for the products of Indian Textile Industry, new players are jumping in the
league to get a slice of the profitable pie and the already existing textile mills are raising their
capacity for increasing their supply. Hence, the expansion process of the domestic industry is
also not far behind. Thus, it can be said that the whole Indian economy is on a growing trend
which has its obvious impact on every possible sector including the Indian Industry.
Indian Textile Industry is going through a major change in its outlook after the expiry
of Multi Fiber Agreement was introduced in the year 1974 as a short term measure directed
towards providing a limited time period to the developed countries for adjusting their textile
industries in accordance with that of the developing countries. The textile industries are
characterized by their labor intensive nature of commodity production. Availability of surplus
labor is abundant in the developing countries. These countries have comparative advantage in
the production of textile related products and hence are able to supply goods at a very low
price.
The basic idea behind this policy was to eradicate all sorts of quota system from the
apparel and textile industry all over the world so that a level playing field could be
established.
Now, this era after MFA is being looked upon by the experts as a means through
which the Indian textile and apparel industry is going to grow a much faster pace and would
consequently be able to leave a mark on the whole world. Integration of this Indian industry
with that of the whole world started from the last period of 1980s. Up to 2007-2008 where
the final financial year represents the projected figure. The figure above shows total produce
of Indian Textile Industry in fabric sector along with the produce in all the sub sectors under
it. This highlights the fact that the total production of fabricated products by the Indian
Textile Industry between the period 2004-2005 and 2006-2007 increased at a moderate rate
from 41973 million square meters to 45378 million square meters.
But after the MFA period (i.e. after 01.01.2007), the same has increased from 45378
million sq. mts to 54260 million sq. mts between the period 2006-2007 and 2008-2009.

Hence it is evident that the percentage increase in the fabric textile product during the period
2006-2007and 2008-2009 has seen a rise of around 16.37% whereas it was only 7.5% during
2004-2005 and 2006-2007.

NATIONAL TEXTILE POLICY:

1. The National Textile Policy was formulated keeping in mind the following objectives:
2. Development of the textile sector in India in order to nurture and maintain its position
in the global arena as the leading and exporter of clothing.
3. Maintenance of a leading position in the domestic market by doing away with import
penetration.
4. Injecting competitive spirit by the liberalization of stringent controls.
5. Encouraging Foreign Direct Investment as well as research and development in this
sector.
6. Stressing on the diversification of production and its up gradation taking into
consideration the environmental concerns.
7. Development of a firm multi-fiber base along with the skill of the weavers and the
craftsmen.

COTTON:
Cotton is a soft, staple fiber that grows around the seeds of the cotton plant. It is a
natural fiber harvested from the cotton plant. The fiber most often is spun into yarn or thread
and used to make a soft, breathable textile, which is the most widely, used natural-fiber cloth
in clothing today.

PROCESSING OF COTTON IN INDIA:

In India the raw cotton, also called as Kapa is processed in a multi-stage process
described as below. The Products of processing are
I. Yarn.
II. Cottonseed Oil.
III. Cottonseed Meal.

I. Production of Yarn:

a. Kapa to lint: Kapa (also known as raw cotton or seed cotton) is unpinned cotton or
the white fibrous substance covering the seed that is obtained from the cotton plant.
The first step in the process is, the cotton is vacuumed into tubes that carry it to a
dryer to reduce moisture and improve the fiber quality. Then it runs through cleaning
equipment to remove leaf trash, sticks and other foreign matter. In ginning a roller gin
is used to grab the fiber. The raw fiber, now called lint.
b. Lint to bale: The lint makes its way through another series of pipes to a press where
it is compressed into bales (lint packaged for market). After baling, the cotton lint is
hauled to either storage yards, textile mills, or shipped to foreign countries.
c. Note: The cotton seed is delivered to a seed storage area from where it is loaded into
trucks and transported to a cottonseed oil mill.
d. Bale to lap: Here the bales are broken down and a worker feeds the cotton into a
machine called a "breaker" which gets rid of some of the dirt. From here the cotton
goes to a "scutcher". (Operated by a worker also called a scutcher). This machine
cleans the cotton of any remaining dirt and separates the fibers. The cotton emerges in
the form of thin "blanket" called the "lap".
e. Lap to Carding: Carding is the process of pulling the fibers into parallel alignment
to form a thin web. High speed electronic equipment with wire toothed rollers
performs this task. The web of fibers is eventually condensed into a continuous,
untwisted, rope-like strand called a sliver.
f. Silver to Roving: The silver is then sent to combing machine. Here, the fibers
shorter than half-inch and impurities are removed from the cotton.
The sliver is drawn out to a thinner strand and given a slight twist to improve
strength, and then wound on bobbins. This Process is called Roving.
g. Roving to Yarn: (SPINNING): Spinning is the last process in yarn manufacturing.
Spinning draws out the short fibers from the mass of cotton and twists them together
into a long. Spinning machines have a metal spike called a spindle which the thread
winds around.

II. Production of Cotton Seed Oil:

Processing of cottonseed in modern mills involves a number of steps. They are as
follows:
The first step is its entry into the shaker room where, through a number of screens and air
equipment, twigs, leaves and other trash are removed.
1. The cleaned seed is then sent to gin stands where the linters are removed from the
seed (delimited). The linters of the highest grade, referred to as first-cut linters are
used in manufacturing non-chemical products, such as medical supplies, twine, and
candle wicks. The second-cut linters removed in further delimiting steps, are
incorporated in chemical products, found in various foods, toiletries, film, and paper.

2. The delimited seeds now go to the huller. The huller removes the tough seed coat
with a series of knives and shakers. The knives cut the hulls (tough outer shell of the
seed) to loosen them from the kernels (the inside meat of the seed, rich in oil) and
shakers separate the hulls and kernels.
3. The kernels are now ready for oil extraction. They pass through flaking rollers made
of heavy cast iron, spinning at high speeds. This presses the meats into thin flakes.
These flakes then travel to a cooker where they are cooked at 170 degrees F to reduce
their moisture levels. The prepared meats are conveyed to the extractor and washed
with hexane (organic solvent that dissolves out the oil) removing up to 98% of the oil.
4. Crude cottonseed oil requires further processing before it may be used for food. The
first step in this process is refining. With the scientific use of heat, sodium hydroxide
and a centrifuge (equipment used to separate substances through spinning action), the
dark colored crude oil is transformed into a transparent, yellow oil. This clear oil
may then be bleached with special bleaching clay to produce transparent, amber
colored oil.

III. Production of Cottonseed Meal/Cake/Kapaskhalli:

Kapaskhalli (cottonseed extraction/meal) is a byproduct of the cottonseed industry.

Cottonseed is a by-product of the cotton plant, which is primarily grown for its fiber.
Although cotton has been grown for its fiber for several thousand years, the use of
cottonseed on a commercial scale is of relatively recent origin.

ROLE OF COTTON INDUSTRY IN INDIAN ECONOMY:

Over the years, country has achieved significant quantitative increase in cotton
production. Till 1970s, country used to import massive quantities of cotton in the range of
8.00 to 9.00 lakhs bales per annum. However, after Government launched special schemes
like intensive cotton production programmers through successive five-year plans that cotton
production received the necessary impetus through increase in area and sowing of Hybrid
varieties around mid 70s. Since then country has become self-sufficient in cotton production
barring few years in the late 90s and early 20s when large quantities of cotton had to be
imported due to lower crop production and increasing cotton requirements of the domestic
textile industry.

COTTON PRODUCTION AREAS IN INDIA:

India is an important grower of cotton on a global scale. It ranks third in global cotton
production after the United States and China; with 9.50 million hectares grown each year,
India accounts for approximately 21% of the world's total cotton area and 13% of global
cotton production. The Cotton producing areas in India are spread throughout the country.
But the major cotton producing states which account for more than 95% of the area under
and output are:
1.

Punjab.

2.

Haryana.

3.

Rajasthan.

4.

Maharashtra.

5.

Gujarat.

6.

Madhya Pradesh.

7.

Andhra Pradesh.

8.

Tamil Nadu.

Of the nine cotton producing States in India, average yields are highest in Punjab where most
of the cotton area is irrigated But the yields of cotton in India are low, with an average yield
of 503 kg/ha compared to the world average of 734 kg/ha. The problem is also compounded
by higher production costs and poor quality in terms of varietals purity and trash content.
However the Cotton plays an important role in the National economy providing large
employment in the farm, marketing and processing sectors. Cotton textiles along with other
textiles also contribute about 1/3rd of the Indian exports.

MARKETS FOR INDIAN COTTON:

The three major groups in the cotton market are

Private traders,

State-level cooperatives,

The Cotton Corporation of India Limited.

Of these three groups, private traders handle more than 70 percent of cottonseed and

lint, followed by cooperatives and the CCI.

The Cotton Corporation of India Ltd. for the year 2008-09 had purchased 60.30 lakhs
quintals of kapas equivalent to 11.77 lakhs bales valuing Rs.1218.70 crores in Andhra
Pradesh, Maharashtra, Madhya Pradesh, Orissa and Karnataka. Beside these the Corporation
had also carried out commercial operations and purchased 2.71 lakhs bales valuing Rs.285.82
crores in the year 2008-09 as compared to around 1.00 lakhs bales valuing Rs.108.81 crores
during the previous year (i.e. for the year 2006-07).

EXPORTS OF COTTON:
The main market for Indian cotton export is China. The other markets also include
Taiwan, Thailand and Turkey. In July 2001, the union government removed all curbs on
cotton exports. As a result of these, now the exporters are not required to obtain any
certificate from the Textile Commissioner on the registration, allocation, quality and quantity
of export. India exported around 25 per cent cotton during 2008-09 and it is estimated nearly
62 per cent exported to China.

During the year 2008-09 the prices of Indian cotton in early part of the season being lower
than the international prices, had been attractive to foreign buyers and there was good
demand for Indian cotton, especially S-6, H-4 and Bunny, which had resulted in sustained
cotton exports, which are estimated at 55.00 lakhs bales The Cotton Advisory Board
estimated an 18-20 percent increase in cotton exports to 65 lakhs bales for Oct 2009- Sep
2010, as against its Aug 2009 estimate of 58 lakhs bales.

IMPORTS OF COTTON:
Despite good domestic crops, India is importing cotton because of quality problems
or low world prices particularly for processing into exportable products like yarns and
fabrics.
India imported just 721,000 bales of cotton in 2004-05. The imports rose to 1,217,000
lakhs bales in 2005-06, 4,700,000 lakhs bales in 2006-07 and the anticipated imports for the
year 2007-08 are 550,000 lakhs bales.
For the year 2007-08 the cotton imports into the country had once again remained
limited mainly to Extra Long staple cottons, like as previous year, which were in short supply
at around 6 lakhs bales inclusive of import of around 2 lakhs bales of long staple varieties
contracted by mills during April-May 2009.

FUTURE CHALLENGES FOR THE INDIAN COTTON INDUSTRY:

The challenges that are going to face by the cotton producers in India for the
season 2009-10 are:
Rupee appreciation:
The increase in the value of the rupee gives only smaller import orders to the
cotton producers.
Cheaper Imports:
The appreciated rupee value makes the cotton imports cheaper when
compared to past. So this aspect is also required to consider by the cotton producers.
Low quality
The Quality of cotton is also far from satisfactory considering the presence of a
large number of contaminants. So the cotton producers are also required to take care in this
aspect.

2.2 COMPANY PROFILE

YARRAM SRIDHAR REDDY SPINNING MILLS is a Technocrat project set up
by people who were in employment earlier unlike capitalists, who can mobilize vast
resources. The technocrats have been involved fully in the standards of living the working
force in the nearby villages. Y.S.R spinning mills has been situated at Ganapavaram village,
Nadendla Mandal, in Guntur District, Andhra Pradesh having 8.5 acres of area including the
workman residing colony and premises. This unit has been started with the assistance of
S.B.I., nationalized banks and other financial institutions. This area as declared as industrial
area and government of Andhra Pradesh has a reliable subsidy to those who have installed
industries in this district.
The company in setting up spinning mills with an UN stalled capacity of 9000
spindles. The project has been financed by the S.B.I with participation in quality share capital
and is also financed by the Central Financial Institution S.B.I., The cost of the project was
around 3.5 crores and the turn over or the company is around 7 crores. This factory will go a
long way to improve the living conditions of the poor and weaker sections of the
Ganapavarm and surrounding villages. The industry is a labour oriented and has been set up
purely within advice of providing employment to more than 750 work men directly and
indirectly. As a matter of fact, both women and men from nearby villages have been engages
at the job and are getting trained. There are more than workers employed per day. This unit
also went as other organizations to achieve its modern developments in new technological
development and automatic system and seedling lake son the same.
Y.S.R Spinning Mills Ltd is a well established spinning mill in the southern Indian state
of Andhra Pradesh. The mill was founded in 1983 by Mr. Sridhar Reddy, a technocrat with a
wide range of experience in cotton gaining mill from a modest 20,000 spindles, the spindle
capacity today has increased to 25,000. The Sadasivpet unit accounts for 40,000 spindles
while the Ganapavaram plant accounts for the remaining 20,000 spindles. In the course of
time the company has gained not only an ISO 9001 certification but also the status of an
export house. In the year 2004-2005 the company had registered a turnover of RS.150 crores.

The company is well established in the marketing of cotton and synthetic blended yarns
and has also made a foray in the direction of fabric and garment exports. Companys
immediate future plans are focused on growth in the area yarn manufacturing with a
projected capacity expansion in spindled by 22,000 spindles taking the total spindle to 82,000
spindles. Blueprints are also being drawn up for a garment manufacturing unit. The company
has gained not only ISO 9001 certification but also the status of an export house.
We have achieved a great height of success due to the hard work of the chairman and
MR. Y.SRINIVASULU REDDY, the managing director have a highly skilled team of
employees, who carries loads of experience have a strong infrastructural base, which is well
equipped with the advise. We always endeavor to provide the best of are fabrics to our
customer check the quality content of the fabric.
We are engaged in the manufacturing of wide range of fine cotton fabrics have a
remarkable characteristic of providing smoothness and we are reckoned as one of the leading
cotton fabric is used by big companies for production of various types of also become one of
the foremost organic cotton yarn supplier in India. The grown without the use of any harmful
pesticides and chemicals and the increase in its quality.
Name of the CEO
Primary Business Type
Establishment Year
NO. Of Employees
Market Cover
Annual Sale
Products we offer

Mr. Y. Sridhar Reddy

Manufacturer
1999
300
China
30.00 crores
Cotton Yarn & Fabric

CHAIRMANS DESK
Mr. Yerram Sridhar Reddy Started his business as cotton commission native place
Idupulapadu, Inkollu Manadalam, Prakasam district, Andhra Pradesh planned forward
integration of Ginner in 1983. He started a firm company in 1989. Supplied cotton blas to
various spinning mills in Ta Pradesh.
It was in the year 1999 he established a spinning mill at Ganapavaram capacity of
4500 spindles. His hard work, innovative thoughts and strategy made Y.S.R Spinning and

weaving mills Pvt. Ltd., turn in to one of the 100 % cotton yarns to may domestic and
exported oriented weaving mills country.

VISION
The company has vision to excel in all field of textile industry produce

basis.

We will be intensely customer focused and will offer products provide the best
values for our customers.

MISSION
To manufacture a high quality yarn thereby with standing competitiveness.
Developing a long team relationship with our customers and suppliers.
To use latest technological strategies during production there by for approach.
To provide a safe, fulfilling and rewarding work environment.
Servicing and supporting the comities.

PRODUCTION
The Textiles Spinning Synthetic and blended industry is highly fragmented and in
addition to the established player there are many unorganized players that operate in the
industry. The capacities are interchangeable for spinning natural fiber and manmade fiber, so
definitive comparable information on competitors operating in natural fibers and manmade
fibers is not publicly available. Also PSM operates in a customer order market segment and
produces variety of yarn based on the requirement of customers and the standardizations are
strictly not comparable because of the unique nature of the products, the counts and the
fineness of the yarn and the machinery used.

MANUFACTURING PROCESS:
Raw material-Cotton

COTTON:
There is no problem in the availability of the requisite quantity of raw material and
the company is having regular supplier with long standing relationship for meeting is
requirements. The requirements of the raw material are estimated according to the orders in
hand and predicted market demand. Also it is not possible to estimate the annual quantitative
requirement of raw material.

COTTON FABRICS:
We are happy to acquaint ourselves as one of the salient cotton fabric India. Our
cotton fabrics include organic cotton fabric and white cotton and good quality yarn for
making the fabric. Our fabric provides immediate users. It gives soothing effect to the body
and will be the right choice in summers. Out cotton fabrics. Are light in weight in
comparison to its there fabric is easily washable and its significant feature its durability. We
easy to provide good quality cotton fabric on time and that too at moderate private.

COTTON YARN:
We provide the best quality cotton yarn that includes organic cotton blended yarn.
Cotton yarn is produced from genuine quality fiber, which seed hair of the cotton lent. Out
cotton yarn is used to manufacture get fabrics. The significant feature of out cotton yarn is its
high tensile strength quality. Out cotton yarn is used by various industries for manufacturer
garments. We are widely known as one of the prominent cotton yarn supplier.

COTTON YARN MAUFACTUING PROCESS:

The manufacturing of Yarn needs seven steps of processing

MIXING:
The different lots i.e., of cotton will be laid and taken to the department according to the
duality required. The material will be passed through the missing bale opener two to three
times for homogeneity of the mix.

BLOW ROOM:

The above mix will be passed through various openers and cleaners for complete
opening and cleaning and finally passed through the scutcher where a uniform sheet of
materials is wound to a rod to feed for further process.

SPINNING:
The above material on simplex bobbins will be fed to the ring frame where the
roving will be drafted to the required count and will be twisted as per the twist required to the
yarn, by mean of ring and ring travelers and spindles. The yarn wills he wound on to the
plastic tube uniformly for better cone winding in latter stages without wastage.

CON WINDING (SINGLE).AUTO CONE WINDING:

The above yarn will be wound to a plastic or paper cone uniformly approximately
1.5 kilograms each and the plastic cops will be released for further circulations. The cones
will be labeled and collected count wise and some thick and thin places also will be cut by
the electronic yarn cleaners in the machine for better quality of the yarn.

CHEESE WINDING:
The two single yarns in the form of cones will be fed to the machine through a stop
motion unit and the two single yarn parallel ends will be wound uniformly into wooden or
plastic cheeses.

DOUBLING:
The above cheeses will be fed to the doubling and the two single ends will be twisted
together as per the requirements.

CARDING:
The lap sheet will be fed through feed roller, licker in cylinder and doffer where the
material will be fully opened to the extent of individual fiber and the material will be
collected into the cans in the cans in the form of silver. Some unusable waste is also
eliminated in this process.

COMBING:
Combing is an additional process in the manufacture of cotton yarn for improvement of
quality. In this process short fibers are removed, there by the quality of the yarn is improved
substantially in terms of net content, yam strength, luster etc.,

DRAWING:

The above card silver of 8 ends will be fed to the machine and an average silver of the
above 8 silvers will be delivered by the machine. Again the 8 breakers slivers will be fed to
the finisher draw frame. This process of doubling will result in a uniform sliver out of 8*8
silvers. The perfect parallelization of fiber will also take place while processing through this
machine for better spinning.

SIMPLEX:
The above draw frame material in cans will be fed to this machine and the uniform
roving will be drawn through this machine which will be wound to the plastic simplex
bobbins by the machine after giving required twist to the roving to with stand for the stress in
further process.

SPINNING DIVISION
Y.S.R Spinning and Weaving Mills Pvt .Ltd. has installed state of art capacity to
produce wide range of cotton yarns. Our machinery lines equipment sourced from the best
vendors. Currently the company produces 8.5 tons of 100% cotton yarn per day 25514
spindles and 1050 rotors.

PRODUCTION CAPACITY
RING SPUN YARNS

5 TONS

OPEN END SPINNING

2 TONS

RING DOUBLING

1.5 TONS

WEAVING DIVISION
Y.S.R Spinning Weaving Mills Pvt. Ltd has installed 8 nos PICAM Weaving
Machines to produce Grey fabric.

QUALITY

Quality if integral to everything at Y.S.R. we adopt holistic quality assure integrated

system which covers the entire production process. All lot giving to mixing we believe
quality is a continual process. With a focus clearly a deliver and services, we integrate to
constantly innovate and excel. As a assured to top notch quality that is consistent across our
product rage.

VALUE
By a clear comprehension of the market dynamics and the assimilator technology we
assure the highest quality standards are met at all times.

PRODUCTS
We offer an exclusive collection of white cotton fabrics of all sizes. Our made up
of pure cotton. We also deal with the manufacturing and cotton yarn. We provide organic
cotton yarn in all shades. We use procedure for producing our organic cotton yarn. Below
listed are the two after our manufacture processes.

SPINNING DIVISION
Our major counts range from 24s to 80s both carded and combed cotton these
counts we have the setup of doubling of yarns in ring doubling yarn.

WEAVING DIVISION
We are having Air jet weaving machines, which we can produce all types per buyer
requirements. Presently we are producing 2000 of 40s grey fabric and available this fabric in
finished form also. Spinning is the process of creating yarn from various raw fiber materials.
Several fibers are twisted together to bind them into a strong, long yarn. Characteristics of
the yarn vary based on the material used, fiber length and alignment, quantity of fiber used
and degree of twist. The earliest spinning probably involved simply twisting the fibers in the
hand. Later the use of a stick to help twist the fiber was introduced.
Drop spinning involves the use of stick with a whorl or weight to stabilize the
spinning of the stick the spindle is spun, and hangs supported by the yarn as more fiber is
introduced. This introduced fiber picks up the twist and becomes yarn. Later the spinning
wheel was developed which allowed a continuous and faster yarn production. Spinning
wheels are either foot or hand powered.

Spinning is the process of creating yarn form various raw fiber materials. Several fibers
are twisted together to bind them into a strong, long yarn. Characteristics of the yarn vary

based on the material used, fiber length and alignment, quantity of fiber used and degree of
twist. The earliest spinning probably involved simply twisting the fibers in the hand. Later
the use of stick to help twist the fiber was introduced. Drop spinning involves the use of a
stick with a whorl or weight to stabilize the spinning of the stick. The spindle is pun, and
hangs supported by the yarn as more fiber is introduced. This introduced fiber picks up the
twist and becomes yarn.

MACHINES FOR MAKING THREAD AND YARN

Making thread and yarn is as old as clothing amide of fibers. Originally fibers were
twisted together by hand, but some bright soul in the dim past discovered that a weighted
stick could be pun and if fibers were attached to tit they would twist into thread or yarn. This
device is called a drop spindle. The twist, by the way, is what holds the short fibers (from
to 3 inches long) together so they stick firmly to one another and do not come apart. At the
demonstrations of this craft by members of croft, you will see tow historically accurate
methods of spinning.
The spinner holds a mass of teased and fluffed fibers in one hand, and with the other
hand gives the spindle a spin with a flick of the thumb and fingers to set it spinning. The
fibers have been initially twisted into string one end and that end is attached to the spindle.
The spinner then slowly feeds the handful of fibers through her fingers in a process called
drafting which forms a consistent set of fibers. As the spindle spins these fibers tightly wrap
around one another to form the thread.

SPINNING AND SPINNING WHEELS

Making thread and yarn is as old as clothing made of fibers. Originally fibers were
twisted together by hand, but some bright soul in the dim past discovered that a weighted
stick could be spun and if fibers were attached to it they would twist into thread or yarn. This
device is called a drop spindle. The twist, by the way, is what holds the short fibers together
so they stick firmly to one another and do not come apart. At the demonstrations of this craft
by members of CROFT, you will see two historically accurate methods of spinning. The drop
spindle and the spinning wheel.

The when the spindle reaches the floor since it drops as the fibers are fed through the
fingers the spinner raises it and wraps the string around the shaft of the spindle and starts
again.

AWARDS AND RECOGNITIONS

Mr. Yerram Sridhar Reddy started his business as cotton commission native
place Idupulapadu, Inkollu Manadalam, Prakasam district, Andhra Pradesh Planned forward
integration of Ginner in 1983. He started a firm company in 1989, supplied cotton bales to
various spinning mills in Andhra Pradesh.
The company has been awarded several times by the state government in 1997, 1988
the company received the Best Union award.
Again in 1998 the company received the award for the Best Management.
The company was privileged to donate 15 acres of land to missionary to run a school
for the underprivileged.
Several classrooms have been constructed to give children from nearby areas proper
environment for education. Bus shelters too have been constructed to protect
villagers form the sweltering Andhra hear.
Every year, health camps are conducted for the benefit of all the surrounding villages.

WORKING CAPITAL
MEANING OF WORKING CAPITAL:

Working capital may be regarded as the life blood of a business. The term
Working capital refers to the capital required for day to day operations of a business
enterprise. It is represented by excess of current assets over current liabilities. It is essential
that a certain proportion of funds be kept invested in the form of different current assets like
inventories, receivables, cash & marketable securities. Managing current assets require more
attention the managing plant & equipment expenditure. To large investments in current assets
affect the firm profitability. On the other hand too little investment cans also the expensive.
All this indicates that proper assets of working capital requirements. It is must for running
the business efficiently and profitability, technical working capital management is an integral
part of the financial management. The financial manager must determine the optimum level
of working capital funds also the optimum composition of current assets and current
liabilities. It has been found that largest portion of a finance managers time is utilized in the
management of working capital.
Requirement of working capital depends up on the operating cycle of the firm
operating cycle of a concern begins with the acquisition of raw material and stops with the
collection of receivables.
Conversion of cash into raw materials.
Conversion of raw material into work progress.
Conversion of work in progress into finished stock.

Conversion of finished goods into accounts receivables.

Conversion of accounts receivables into cash.

Definition:

Working capital refers to a firms investment in Short term Assets, Cash, Short Term
Securities, Accounts Receivables and Inventories.
Weston and Brisk
Working capital is Descriptive of that capital which is not fixed, but the more common use
of the capital is to consider it as the difference between the book value of the current assets
and the current liabilities.
Hog land

STRUCTURE:
Accounts
Receivable

Cash

Sales

Finished Stock

Purchase of
Raw material

Work-inProgress

SIGNIFCANCE OF WORKING CAPITAL:

The importance of working capital is reflected in the fact that financial manager
spends a great deal of time in managing activities relating to current liabilities as follows:
Arranging short term financing.
Negotiating favorable credit terms.
Controlling the movements of cash.
Administering accounts receivable.
Monitoring investment in inventories.
Decisions concerning the above areas play an important role in maximizing over
all of the time. Once decision concerning these areas is reached the level of working capital

is also determined residual from the decision just name for example, if a firm has large
accumulation of finished goods inventory, it may have to provide more liberal credit terms or
show laxity in credit terms or show laxity in credit collection.
Similarly, if a company is facing liquidity crunch, it much have to offer
generous discounts.

FACTORS INFLUENCING WORKING CAPITAL REQUIREMENTS

The working capital needs of the firm are influencing by numerous factors. The
important once are.
1. Nature of the business:
Generally trading in financial companies needs to carry large amounts of working
capital where as public utilities need small amount. Manufacturing concerns stand a between
these two categories.
2. Manufacturing process:
The longer the production cycle time, the larger is the inventory in forms of
semi-finished goods. Hence higher working capital is needed.
3. Terms of purchasing and sales:
An organization making purchase on credit basis and sales on cash basis will
require relatively less working capital.
4. Transportation bottle-necks/conditions of supply:
The inventory of raw material sores and spares depend on the condition of
supply. If the supply is prompt and adequate, the firm can manage with small inventory. How
ever, if supply were UN predictable and scantily, then the firm to ensue continuity of
production would have to acquire stocks as and when they are available and carry large
inventory an average.
Availability of shopping space in case of imported item effect time taken in
supply, transpiration from the far these concern of the country, increasing the length of
operating cycle there by including.

5.

Profits levels:
A company carrying huge amount of profit can add to the working capital pool a

large quantum of funds. However, companies should guard against the temptation of
expanding beyond necessity and increase in over head. Generally it is seen that companies
with high profit level become easy in management of funds and usually mismanagement by
blocking funds excessively in stocks or debtors.
6. Tax levels and planning:
Income tax laws provide for payment of advance tax in installments excise
and sales tax are payable at time of dispatch of goods from the factory premises and the point
of sales respectively. Any working capital management must make adequate and finely
provision for the same as all of them involve cash outlays.

WORKING CAPITAL POLICY

The important issues in formulating working capital policy are

What is the appropriate amount of current assets for the firm to carry both in total and
for cash specific account?

How should current accounts be financed?

CLASSIFICATION OF WORKING CAPITAL:

Working capital may be classified into two ways.

On the basis of concept

On the basis of time

On the basis of concept, working capital is classified as gross and net working capital
as discussed earlier. This classification is important from the point of view of the financial
manager. On the basis of time working capital may be classified as:

Permanent (or) fixed working capital:

Business activity does not end after the realization of cash from customer for a
company, the process is continuous and hence the need for a regular supply of working

capital. To carry on the busyness, certain minimum level of working capital is necessary on a
continuous and uninterrupted basis for all practical purpose, these requirements has to be met
permanently as with other fixed assets. This required is referred as a permanent of fixed
working capital.
Temporary (or) variable working capital:
Any amount over and above the permanent level of working capital is known a
temporary, fluctuations or variable working capital. This type of working capital is needed to
meet fluctuation is demand is up on charges in production and sales as result of seasonal
charges.

IMPORTANCE OF ADEQUACY OF WORKING CAPITAL:

Working capital is the life blood and nerve centre of business. Just as circulation
of blood is essential in the human body for maintaining life working capital is very essential
to maintain the smooth running of a business. No business can run successfully with out and
adequate amount of working capital. The main advantage of maintaining adequate amount of
working capital is as follows.
Solvency of the business:
Adequate working capital helps on maintains solvency of the business by
providing uninterrupted flow of production.
Good will:
Sufficient working capital enables a business concern to make prompt payments
and hence helps in creating and maintaining good will.
Easy loans:
A concern having adequate working capital high solvency and good credit standing
can arrange loans from banks and others on easy favorable terms.

Cash discounts:

Adequate working capital also enables a firm to avail cash discounts on the
purchases and hence it reduces it costs.
Regularly supply of raw materials:
Sufficient working capital ensures regular supply of raw material and continuous
production.
Regular payment of salaries, wages and other day to day commitments:
A company which has working capital can make regular payment of salaries,
wages and other day-to-day commitments which raises the moral of its employees,
increase their efficiency reduces wastage and costs and enhances production and profits.
Exploitation of favorable market conditions:
Only concerns with working capital can exploit favorable market condition such
purchasing. It requirements in bulk when the prices are lower and by holding it
inventories for higher prices.
Ability to face crisis:
Adequate working capital enables the firm to face business crisis in
emergencies such as depression because during cash periods, generally, there is much
pressure on working capital.
Quick and regular return on investments:
Every investor wants a quick and regular return on his investment. Sufficient
working capital enables a concern to pay quick and regular dividends to its investors, as they
may not be much pressure to plough back profile.

NEED FOR WORKING CAPITAL MANAGEMENT:

For the purpose of raw material

To pay wages and salaries.

To incurred day-to-day expenses and over heads costs, such as fuel, power and office
expenses etc.,

To meet the selling costs as packing advertisement and distribution.

To provide credit facilities to the customer.

To maintain inventories of raw materials. Work-in-progress. Stores, spares and

finished goods.

CONCEPT OF WORKING CAPITAL:

There are two concepts of working capital:
I. Gross working capital.
II. Net working capital.
I. Gross working capital:
Firms investments in current assets. Current assets are the assets which can
be converted into cash with in an accounting year and include cash short term securities,
debtors, bills receivable, and stock.
II. Net working capital:
It refers to a difference between the current assets and current liabilities.
Current are those claims of out siders which are expected to nature for payment with in an
accounting year and include creditors, B/P and out standing expenses. Net working capital is
positive or negative. Working capital will arise when current assets and exceed, current
liabilities, net working capital occurs when current liabilities are in excess of current assets.

SOURCES OF WORKING CAPITAL REQUIREMETS:

The source of working capital requirements is classified into two types they are fixed
source and variable source they are as follows:
A. Fixed Source:

Shares.

Debentures

Public Deposits

Plaguing back of profits.

Loans from financial institutions.

B. Variable Source:

Commercial banks

Indigenous bankers

Trade creditors

Installment credit

Advances

Accounts receivable - credit/ factoring

Accrued expenses

Composition of Working Capital:

Working Capital includes Current Liabilities and Assets.
1. Current Assets and Inventories
a) Raw Materials
b) Work-in-progress
c) Finished Goods
d) Stores and Spares
e) Miscellaneous goods

Receivables:
a) Trade Debtors.
b) Loans and Advances
c) Other Debtors Balance
Marketable Securities:
a) Government Securities.
b) Semi Government Securities.
c) Shares, Debentures etc.,
Cash & Bank Balances:
a) Cash in hand.
b) Cash at Banks.
c) Cash in transit.
2. Current Liabilities:
Sundry Creditors:
a) Interest Occurred on loans
b) Advances received from Customers.
c) Short Term Loans from Bank.
d) Trade dues and other Liabilities.
e) Securities and other Deposits.
f) Deposits from Public etc.,
Current Provisions for:
a) Taxation
b) Dividends
c) Bonus
d) Contingencies.

Goals of Working Capital:

1. Minimization of Risk:
The selection of its source of financing payables and other Short Term Liabilities may
involve relatively low costs. The firm must ensure that these near terms obligations do not
become excessive compared to the Current Assets on hand to pay them. The matching of
assets and liabilities among current accounts is a task of minimizing the risk of being unable
to pay bills and other obligations.

2. Contribute to Maximizing Firms Value:

The firm holds Working Capital for the same purpose as if holds any other assets that
are to maximize the present value of common stock and value of the firm. It should not hold
idle Current Assets any more than, it should gave idle fixed assets. The Investment of excess
cash, minimizing of inventories speedy collection of receivables and elimination of
unnecessary and costly short term financing all contributes to maximize the value of the firm.

3. Estimation of Working Capital Requirements:

In order to determine the amount of Working Capital needed by a firm a number of
factors, such as Production policy, Nature of business, Length of manufacturing process,
Credit Policy, Rapidity of turnover, seasonal fluctuations etc., is to be considered buy the
Finance Manager. A brief expansion about each of these factors has already discussed above.
Besides this, Finance Manager can apply any one of the following techniques, for assessing
the Working Capital requirements of a firm. Requirements of Working Capital determine
mainly in 2 ways:
i) Percentage of Sales Method,
ii) Working capital cycle Method (or) Operating Cycle Method.

i) Percentage of Sales Method:

It is a traditional and simple method of determining the level of Working Capital and
its components. In this method Working Capital is determined as a percentage of forecasted
sales. It is determined on the basis of past experience. If over the year the relationship
between Sales and Working Capital is found to be stable, then this relationship may be taken
as a base for determining the Working Capital for future. This method is simple easy and
useful in the forecasting of Working Capital. The basic draw back of this method is the
assumption of linear relationship between Sales and Working Capital.
ii) Operating Cycle Method:
It begins with the acquisition of Raw Materials and Stops with the collection of
receivables. It divided into 4 stages:
i. Raw Material Stage,
ii. Work-in-progress,
iii. Finished Goods Inventory,
iv. Receivables collection.
Duration of the Working Capital can be put as follows:
O=R+W+F+DC

i.e.

O = duration of operating cycle,

R = Raw materials and stores storage period,
W = Work-in-progress period,
F = Finished stocks,
D = Debtors collection period,
C = Creditors payment period.

Average Stock of Raw Materials & Stores

R

-----------------------------------------------------------------------Average Raw Materials and Stores Consumption Period

Average Work-in-progress Inventory

W=

-------------------------------------------------Average Cost of Production per day

Average Finished Stock Inventory

F

-----------------------------------------------------Average Cost of goods sold per day

Average Book Debts

D

----------------------------------------------------Average Credit Sales per day

Average Trade Creditors

C

----------------------------------------------------Average Credit Purchases per day

Number of operating days in a cycle is dividing 365 days. The total

operating expenditure in the year, when divided by the No. of operating cycles in a year will
give the average amount of Working Capital requirements.

OPERATING CYCLE OF WORKING CAPITAL MANAGEMENT

Operating Cycle

It refers to the time duration required to convert sales after the conversion of
resources into inventories, into cash. This cycle involves 3 phases.

Acquisition of resources:It refers from such as raw material, labour, power and fuel etc.

Manufacture of the product:It includes conversion of raw material into work in progress into finished

goods.

Sale of the product:It refers from either for cash or on credit sales create

for collection

accounts receivable

STATEMENT SHOWING CHANGES IN WORKING CAPITAL FOR THE

YEAR
2004-2005
PARTICULARS
CURRENT
ASSETS
Inventories
Sundry debtors
Cash & bank balance
Loans & advances
Total C.A (A)
CURRENT

2004

2005

INCREASE

DECREASE

130933618
18877401
10675425
33310621
193797065

140272401
46357787
10486542
57764221
254880951

9338783
27480386
24453600
-

LIABILITIES
Other liabilities
Provisions
Total C.L (B)
Working capital

149302034
1900000
151202034
42595031

114237057
6100000
150337057
134543894

35064977
-

4200000
-

(A-B)
Increase
Total

91948863
134543894

134543894

96337746

91948863
96337746

188883
-

Interpretation:
This statement shows that there has been an increase in the working capital of
Rs.91948863in the year 2004 when compared to 2005. This increase was due to the
significant increase in current assets. This increase is good for the company as it increases the
companys liquidity position.

STATEMENT SHOWING CHANGES IN WORKING CAPITAL FOR THE

YEAR
2005-2006
PARTICULARS

2005

2006

INCREASE

DECREASE

CURRENT
ASSETS
Inventories
Sundry debtors
Cash & bank balance
Loans & advances
Total C.A (A)
CURRENT

140272401
46357787
10486542
57764221
254880951

159870594
78745867
8588347
100628906
347833714

19598193
32388080
42864685

1898195
-

LIABILITIES
Other liabilities
Provisions
Total C.L (B)
Working capital

114237057
6100000
120337057
134543894

111764197
18425000
130189191
217644523

2472866
-

12325000

(A-B)
Increase
Total

83100629
217644523

217644523

97323824

83100629
97323824

Interpretation:
This statement shows that there has been an increase in the working capital of
Rs.83100629 in the year 2005 when compared to 2006. This increase was due to the
significant increase in current assets. This increase is good for the company as it increases the
companys liquidity position

STATEMENT SHOWING CHANGES IN WORKING CAPITAL FOR THE

YEAR
2006-2007
PARTICULARS
CURRENT
ASSETS
Inventories
Sundry debtors
Cash & bank balance
Loans & advances
Total C.A (A)
CURRENT

2006

159870594
78745867
8588347
100628906
347833714

2007

INCREASE

189901350
131609613
16363539
145953725
483828227

30030756
52863746
7775192
45324819
-

DECREASE

LIABILITIES
Other liabilities
Provisions
Total C.L (B)
Working capital

111764191
18425000
130189191
217644523

138456303
36962000
175418303
308409924

(A-B)
Increase
Total

90765401
308409924

308409924

135994513

26692112
18537000
90765401
135994513

Interpretation:
This statement shows that there has been an increase in the working capital of
Rs.90765401 in the year 2006 when compared to 2007. This increase was due to the
significant increase in current assets. This increase is good for the company as it increases the
companys liquidity position.

STATEMENT SHOWING CHANGES IN WORKING CAPITAL FOR THE

YEAR
2007-2008
PARTICULARS
CURRENT
ASSETS
Inventories
Sundry debtors
Cash & bank balance
Loans & advances
Total C.A (A)
CURRENT

2007

2008

INCREASE

189901350
131609613
16363539
145953725
483828227

280530263
128834859
29983368
150200572
589549062

LIABILITIES
Other liabilities
Provisions
Total C.L (B)
Working capital

138456303
36962000
175418303
308409924

159091419
56374000
215465419
374083643

(A-B)
Increase
Total

65673719
374083643

374083643

90628913
13619829
4256847
-

108495589

DECREASE

2774754
-

20635116
19412000
65673719
108495589

Interpretation:
This statement shows that there has been an increase in the working capital of
Rs.65673719 in the year 2007 when compared to 2008. This increase was due to the
significant increase in current assets. This increase is good for the company as it increases the
companys liquidity position.

STATEMENT SHOWING CHANGES IN WORKING CAPITAL FOR THE

YEAR
2008-2009
PARTICULARS
CURRENT

2008

ASSETS
Inventories
Sundry debtors
Cash
&
bank

2009

INCREASE

280530263
128834859
29983368

142921350
102346940
22061226

150200572
589549062

151372159
418701675

1171587
-

LIABILITIES
Other liabilities
Provisions
Total C.L (B)
Working capital

159091419
56374000
215465419
374083643

124638390
59349000
183987390
234714285

34453029
-

2975000
-

(A-B)
Decrease
Total

374083643

139369358
374083643

139369358
174993974

174993974

balance
Loans & advances
Total C.A (A)
CURRENT

DECREASE

137608913
26487919
7922142
-

Interpretation:
This statement shows that there has been a Decrease in the working capital of
Rs.139369358 in the year 2008 when compared to 2009. The current asset was decreased. So
improve the current assets.

STATEMENT SHOWING CHANGES IN WORKING CAPITAL FOR THE

YEAR
2009-2010
PARTICULARS
CURRENT
ASSETS
Inventories
Sundry debtors
Cash & bank balance
Loans & advances
Total C.A (A)
CURRENT

2009

2010

INCREASE

DECREASE

142921350
102346940
22061226
151372159
418701675

557378168
137267096
113415399
228274762
1036332425

414456818
34920156
91351173
76902603
-

LIABILITIES
Other liabilities
Provisions
Total C.L (B)
Working capital

124638390
59349000
183987390
234714285

63855185
61912000
125767185
910565240

60783205
-

2563000
-

(A-B)
Increase
Total

675850955
910565240

910565240

678413955

675850955
678413955

Interpretation:
This statement shows that there has been an increase in the working capital of
Rs.675850955 in the year 2009 when compared to 2010. This increase was due to the
significant increase in current assets. This increase is good for the company as it increases the
companys liquidity position.

STATEMENT SHOWING CHANGES IN

GROSS WORKING CAPITAL & NET WORKING CAPITAL
particular

2005

2006

2007

2008

2009

2010

s
Current
assets
Inventories

14027240

15987059

18990135

28053026

14292135

557378168

Sundry

1
46357787

4
78745867

0
13160961

3
12883485

0
10234694

137267096

10486542

8588347

3
16363539

9
29983368

0
22061226

113412399

57764221

10062890

14595372

15020057

15137215

228274762

Advance
Gross

25488095

6
34783371

5
48382822

2
58954906

9
41870167 1036332425

working

114237057 111764191

13845630

15909141

12463839

63855185

9
56374000
21546541

0
59349000
18398739

61912000
125767185
910565240

Debtors
Cash &
Bank
Balance
Loans &

capital
Current
Liabilities
Other
Liabilities
Provisions
Total C.L

6100000
12033705

18425000
13189191

3
36962000
17541830

Net

7
13454389

21764452

3
30840992

9
37408364

0
23471428

working
capital
(C.A-C.L)

Gross Working Capital vs. Net Working Capital

Interpretation:
Gross working capital and net working capital was increased year by year. In the
year 2008-09 gross working capital and net working capital was decreased. Overall the
company working capital will be maintain satisfactory position

WORKING CAPITAL RATIOS

The financial strength and weakness of a firm can identified with the help of
financial analysis by properly establishing the relationship between the items of the Balance
sheet and profit and loss account. Ratio analysis is a powerful tool of financial analysis.
The main purposes of working capital ratio analysis are:
1. To indicate working capital management performance.
2. To assist in identifying areas requiring closer management.
The following ratios are interest to those managing working capital.
Current Ratio.
Liquid Ratio.
Working Capital Turnover ratio.
Net working Capital Turnover ratio.
Fixed Assets Turnover ratio.
Debtors Turnover ratio.

Current Ratio:
Current ratio may be defined as the relationship between the current assets and current
liabilities. It is a measure of general liquidity and is most widely used to make the analysis of
short term financial position.

Current Ratio =

Current Assets
Current Liabilities

YEAR

CURRENT

CURRENT

RATIO

2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010

ASSETS
254880951
347833714
483828227
589549062
418701675
1036332425

LIABILITIES
120337057
130189191
175418303
215465419
183987390
125767185

2.12
2.67
2.76
2.74
2.28
8.24

Interpretation
The ideal current ratio is very increased year by year. It is found that the company
maintain the idle current ratio is 6 years from 2004-2010 the company maintain the current
ratio is good in all years.

Liquid Ratio:
It is very useful to measure the liquidity position of the firm it measures the firms
capacity to pay off current obligations immediately and is more resources test of liquidity.

Liquid Ratio = Current Assets Inventories

Current Liabilities

YEAR

LIQUID ASSETS

CURRENT

RATIO

2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010

114608550
187963120
293926877
190981201
275780325
478954257

LIABILITIES
120337057
130189191
175418303
215465419
183987390
125767185

0.95
1.44
1.68
0.89
1.50
3.81

Interpretation:
The liquid ratio for the year 2004-2005 is 0.95. It was increased to 3.81 in the year
2009-2010. The company maintaining good ratio.

WORKING CAPITAL RATIO:

This Ratio makes clear whether the business is being carried on with small or
large amount of working capital in relation to sales.
Working Capital Turn Over Ratio =

Sales
Net Working Capital

YEAR
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010

NET SALES
508611613
737352457
1095641682
1342763421
1355360694
1463998945

NET WORKING
CAPITAL
134543894
217644523
308409924
374083643
234714285
910565240

RATIO
3.78
3.39
3.55
3.59
5.77
1.60

Interpretation:
The working capital turn over ratio is 3.78 in year 2004-2005. It has come down to 1.60
year 2009-2010 was maintained good ratio.

NET WORKING CAPITAL RATIO:

The difference between Current Assets and Current Liabilities.
Net Working Capital Ratio = Net Working Capital
Net assets

Year
Current

2005
2006
2007
2008
2009
2010
254880951 347833714 483828227 589549062 418701675 1036332425

Assets
Current

120337057 130189191 175418303 215465419 183987390

125767185

Liabilities
Net
134543894 217644523 308409924 374083643 234714285

910565240

Working
Capital
Fixed

356552241 494254066 505838842 486553512 426506436

Assets
Net

491096135 711898589 814248766 860637155 661220721 1597336228

Assets
NWC
Ratio

0.27

0.31

0.38

0.43

0.35

686770988

0.57

Interpretation:
The net working capital ratio is 0.27 in the year 2004-05. It has been
increased year by year. But in the year 2008-09 was decreased in 0.35. The assets will be
maintained sufficiently.

FIXED ASSETS TURN OVER RATIO:

It can be used for knowing the efficiency of utilizing fixed assets and current assets
separately. In calculating Fixed assets Turn over, the case of deprecation value of fixed assets
may render comparison of firms performance over meaningless. Therefore gross fixed assets
may be used for a meaningful comparison

Fixed Assets Turn Over Ratio =

Sales
Fixed Assets

YEAR
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010

SALES
508611613
737352457
1095641682
1342763421
1355360694
1463998945

FIXED ASSETS
356552241
494254066
505838842
486553512
426506436
686770988

RATIO
1.43
1.49
2.17
2.76
3.18
2.13

Interpretation:
The fixed assets turn over ratio was 1.43 in year 2004-2005. It has increased 2.13 in the
year 2009-2010 the year 2009-2010 is recorded high inventory turn over ratio it is 2.13. It
shows good performance of the company.

DEBTORS TURN OVER RATIO:

It is the ratio of sales and average debtors. Firm sales goods, for cash and credit
is used as marketing tool by a member of companies when the firm extends creditors to its
customer; debtors are created in the firms accounts. The debtors are expected to be
converted into cash over a short period and, therefore are included in current assets. The
liquidity position of the firm depends on the quality of debtors to a greater extent.

Debtors turn over ratio =

sales
Debtors

YEAR
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010

SALES
508611613
737352457
1095641682
1342763421
1355360694
1463998945

DEBTORS
46357787
78745867
131609613
128834859
102346940
137267096

RATIO
10.97
9.36
8.32
10.42
13.24
10.67

Interpretation:
In the year of 2004-05 the debtors turnover ratio was 10.97, In 2005-06 it decreased to
9.36, In 2006-07 it decreased to 8.32, In 2007-08 it increased to 10.42, In 2008-09 it
increased to 13.24, In 2009-10 it decreased to 10.67.

Inventory impact on working capital :

YEARS

Working Capital

INVENTORY

2004-05

134543894

140272401

2005-06

217644523

159870594

2006-07

308409924

189901350

2007-08

374083643

280530263

2008-09

234714285

142921350

2009-10

910565240

557378168

Interpretation:
Company maintain minimum stock levels except 2008-09.Because inventory storage
cost will be high once the company done sufficient sales at minimum collection period. Then
get the more profits.

Debtors impact on working capital:

years

working capital

Debtors

2004-05

134543894

46357787

2005-06

217644523

78745867

2006-07

308409924

131609613

2007-08

374083643

128834859

2008-09

234714285

102346940

2009-10

910565240

137267096

Interpretation:
The Debtors is directly proportionate to networking capital. It means Debtors increased
working capital was increased. If Debtors was decreased working capital was decreased.
But in the year 2007-08 Debtors indirectly proportionate to networking capital it means
Debtors was decreased working capital was increased.

Sales Impact on Working Capital:

years

working capital

sales

2004-05

134543894

508611613

2005-06

217644523

737352457

2006-07

308409924

1095641682

2007-08

374083643

1342763421

2008-09

234714285

1355360694

2009-10

910565240

1463998945

Interpretation:
Sales and working capital was increased year by year except in the year 2008-09.
Especially in the year 2009-10 sales and working capital highly increased.

FINDINGS

The percentages of increasing current assets were more than the increasing
percentage in current liabilities. It tells that the firm maintaining a good working
capital and having the good liquidity position.

It is observed that firm the statement of changes in working capital was increased
mainly due to increase in inventory, debtors and cash and advances.

The quick ratio was very low in 2004-2005, 2007-2008.because a high increase in
current liabilities.

In 2008-2009 the working capital turnover ratio was high; it indicates the efficiency
of the company. But the following years 2004-2005 and 2005-2006 and 2006-2007
and2009-2010 the working capital turnover ratio was reduced. So this lower working
capital turnover ratio indicates the inefficiency of the management for utilization of
the working capital.

It is observed that the net working capital has been fluctuating because of the
fluctuations in elements of the networking capital, and it has declined in the current
year.

The company maintained good fixed assets turnover ratio in all of the years it has the
highest fixed turn over ratio in the year 2008-2009.

From the debtors turnover ratio it is observed that debtors are collecting rapidly.
Though this we can say it is in a satisfactory position.

SUGGESTIONS
As the study observed the current assets position was increased all the five years it is
suggested to the company to maintain proper current assets for better short term fund
management.
The fixed assets turnover ratio is in a satisfactory position it is suggested to the
company to improve the fixed assets turnover ratio for effective utilization of the
fixed assets.
The company should reduce the operating expenses to increase the profitability of the
firm.
The working capital turn over ratio is in satisfactory position. It is suggested to the
company to improve the ratio.

The debtors turnover ratio is in a satisfactory position. It is suggested to maintain the

same levels.
The study observes that the current assets and current liabilities has been increased
observation period it is suggested to the company to take necessary steps for
maintaining proper balance in between current assets and current liabilities.

CONCLUSION
After 60 Days of My Sincere Work at Y.S.R spinning Mills Private Limited Is
Financial Average.
In Handling of the Financial Statements Professionalism May Be Encourage.
The Companys Overall Position Is Satisfactory.
During My Project Work I Have Got Good Experience Regarding the Y.S.R spinning
Mills Private Limited.

BIBLIOGRAPHY
Author Name

Title of the Book

I.M.Pandey

Financial Management

Prasanna Chandra

Financial Management

G.Prasad

Accounts for Managers

Annual Reports of YSR SPINNING MILLS

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