PART A

1. INDUSTRIAL PROFILE

The Karnataka Handloom Development Corporation was established in 1975 with the
objective of providing support to weavers. KHDC works ceaselessly to encourage and
support hundreds of thousands of weavers. Revive ancient designs and weaves and
integrate them into today's lifestyle yarn is the most important prices.

Handlooms have been known to India right from the historic ages. The use of fabrics,
techniques created to make designer art pieces and expressing ethnicity through them
has been an integral part of Indias base. Its power is such that handloom industry
constitutes around 14% of total preindustrial production and 30% of the total export
business. Well, thats not all; it is also the second largest industry in India with
important segments, such as independent power looms, modern textile mills,
handlooms and garments. This made the handlooms popular in foreign markets also
and raised their demand.

Handlooms are an important craft product and comprise the largest cottage industries
of the country are engaged in weaving cotton, silk and other natural fibers. There is
hardly a village where weavers do not exist, each weaving out the traditional beauty
of Indias own precious heritage.

Handloom sector plays a very important role in the countrys economy. It is one of the
largest economic activities providing direct employment to over 65 lakhs person
engaged in weaving are allied activities. Due to effective government intervention
through financial assistance and implementation of various developmental and
welfare schemes, this sector has been able to withstand competition from the power
looms and mill sectors. As a result of these measures, the production of handloom
fabrics registered more than tenfold increases from a level of 500 million sq.meter in
earlier 50s, to 7352 million sq.meter in 1999-2000. This sector constitutes nearly
19% of the total cloth produced in the country and also contributes substantially to the

1
export earnings. Handloom forms a part of the heritage of India and exemplifies the
richness and diversity of our country and the artisistry of the weavers.

The office of the development commissioner for handlooms gas been implementing
since its inception in the year 1976, various schemes for the promotion and
development of the handloom sector and providing assistance to the handloom
weavers in a variety of ways. Some of the major programs formulated by this office
relate to;

Employment generation programmed

Modernization and up gradation of technology
Input support
Marketing support
Publicity
Infrastructure support
Welfare measure
Composite growth oriented package
Development of exportable products
Research and development.
All these measures aim at meeting the objectives enshrined in the directive
principles of state policy fir the growth of decentralized handlooms sector.
The various schemes implemented by the office of development commissioner
for handlooms address the needs of weavers who constitute the disadvantaged
social strata and occupational groups, which are the bottom of the economic
hierarchy. Concerted efforts are being made through the schemes and
programmers to enhance production, productivity, and efficiency of the
handloom sector and enhance the income and socio-economic status of the
weavers by upgrading their skills and providing infrastructural support and
essential inputs...
Handlooms .com is a platform for innovation programmed to reach global
customers.
Basically we build a strategic market where:
We explore the entire textile market in different combinations
Create a sustainable and formidable market place
Discuss and deliberate the intricacies of industry
Make available the scope of one-to-one market
Leverage your products to reach the end user
Update the market sentiments.
And many more features

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 In Handloom Sector
In the district there are 4546 handlooms, Out of which 1994 Cotton and 2552 woolen looms.
Which generates about 18000 employments? Above looms are covered by co-operative
societies/Karnataka Handlooms Development corporation/Khadi Sector/Private Sector.

Total of 48 Handloom co-operative societies are working in the district. The main produce are
woolen Kambles, Blankets and in cotton, Bed sheets, Towels, Dhothis etc., Other than
Department, Karnataka Handloom Development Corporation is a Apex body. Which looks the
interest of individual weavers, by declutching them from master weavers than supply raw
materials? Design in puts, training etc. Items produced by weavers will be procured by paying
conversion charges. They have one project office at Ramdurg under which 13 sub counters are
functioning.

In Power Loom Sectors

In district there are 13826 power looms working under organized unorganized sector. Total of 32
power loom societies are working. This sector is being supported by power loom Development
Corporation, B'lore by means of market support and other technical information to its members.

2. COMPANY PROFILE

The Karnataka Handloom Development Corporation Limited

Priyadarshini Commercial Complex No. 1
Tank Road, , Next To Me G Centre, Ulsoor
Bangalore
Karnataka

3
 560 042
Tel: 91-80-25575421 / 2557542

PRIYA DARSHINI INTERNATIONAL

Original home of handlooms export division of KHDC
THE KARNATAKA HANDLOOMS DEVELOPMENT CORPORATION
LIMITED (KHDC) Established in the year 1975 to boost the development of
handlooms industries in Karnataka, and to uplift the socio-economic conditions of
13000 handloom weavers of Karnataka
Today KHDC produces the wide range of handloom fabrics cater to various
industries, and lifestyles from high quality linen items for hospitals to fashion
statement in sates, chudidhar material and shirts school uniforms, home furnishings,
rugs, kitchen, table linen and the list is endless .KHDC helps traditional weavers
pursue their vocation fruitfully. Though it has in-house pre and post loom processing
facilities it helps them maintain the highest quality standards and time schedules,
something the way for the creation of an exquisite range of silk, cotton, linen and
synthetic fabrics. And through its network of over 55 outlets countrywide it brings the
masterpieces of the weavers art to the customer. ''Priyadarshini'' the brand under
which KHDC markets the hand woven fabrics is today synonymous with handlooms
of exceptional quality and beauty, not in India alone but in the global market as well
as a result of the seamless blending of an ancient heritage with contemporary fashion
trends.
SILK FURNISHINGS
Let your home experience the splendor of silk with 100% hand-woven pure
silk fabrics from an exquisite range of plain, cheeks and strips in the first Dupionsilk
variety. Perfect for dressing up your curtains, upholstery, cushion covers, quilts etc.

2.1 BACKGROUND AND INCEPTION OF THE COMPANY

Government of Karnataka- Karnataka state handloom Development
Corporation(KHDC) Bangalore.
In 1964, the KHDC started a production center at channapatana where artisans
could work on per piece basis. In 1980-81 this was converted to a rural marketing
service center to impart financial and design assistance, supply raw material and

4
procure finished goods for sale in tourist handlooms showrooms. Around 1983-84
KHDC surveyed 900 artisans families living within a 10 kms radius of channapatana
and identified the poorest and most deserving artisans .KHDC then with common
facility center which included 30 power lathes and housing for 126 artisan families. A
standing committee was established to allot the living quarters. Each crafts persons
family was provided with a house in the complex for a rent of weavers, whether they
live in compound or not, for a fee of rupees 30 per month i.e. rupees 2 per day,
assistance is also provided in arranging credit.
Since 1986, artisans have been living and working at the KHDC center.
KHDC runs a raw material depot at channapatna to supply raw material\s and also to
serve as pa procurement agent.
In 1987, KHDCs total procurement of lacquer ware for Karnataka
government emporiums was worth Rs 642000. This only represents 2.1% of the total
estimated lacquer was production in the channapatna area

2.2 NATURE OF THE BUSINESS CARRIED

The nature of the business carried out by the KHDC is concerned with the following
1. Manufacturer of original silks
2. Design consultancy
3. Manufacturing of traditional and printed silks sarees
4. Designing of sarees and soham shirts
5. Exporter of Cotton Home Furnishing
6. Supply of raw materials like silk, janatha varieties, non janatha varieties and
polyester.

2.3 VISION, MISSION AND QUALITY POLICIES

VISION
To make handloom industry a dynamic, vibrate, value based learning
organization with human resources exceptionally skilled, highly motivated and
committed to meet the current and future challenges. This will be driven by core
values of the company fully embedded in the culture of the organization.
MISSION
The prosperity of the weaver and the prosperity of the corporation
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 Its our aim to improve the economic and social status of the weaver by
achieving and maintaining quality at all levels of production, which will then
ensure the well being of the corporation
Providing employment to the handlooms weavers outside co-operative sector
round the year, which includes supply of raw material, technical guidance,
training facilities and marketing support.
Implementing welfare schemes sponsored by government of Karnataka and
government of India for the benefits of weavers
Repositioning the company from market follower to market leaders

QUALITY POLICY
KHDCL is committed to continues improvement of all activities it supplies
products and services that confirm to the highest standards of design manufactured,
reliability maintainability, and fitness for use as desired by our customer.
Quality policies of the KHDCL
1. To ensure availability of total quality people to meet the original goals and
objectives.
2. Continues improvement in knowledge, skill and competence.
3. Enhance organization learning

2.4 PRODUCT PROFILE

The handloom hall of fame is a beautiful world of exotic INDIANSILKS and
LINEN, expertly hand woven by master weaver with several century of tradition
behind them. Choose from an exciting range of wide width Dupion Silk and cotton
fabrics in plains, checks and strips, in eco friendly color.
This exquisite collection is bought to you by the Karnataka handloom
development corporation, the torch bearer of the Indian handloom revolution. The
corporation works ceaselessly to encourage and support hundred of thousands of
weavers, revive ancient designs and weaves, and integrate them into todays lifestyle.

INDIAN FANTASY IN KHDC

SILK FURNISHINGS:
Add a touch of pure silk to your life.

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 100% hand woven, pure silk fabrics in a rich kaleidoscope of colors, weaves,
patterns, designs and prints. Perfect material for curtains upholstery, cushion covers,
quilts and more.
BED LINEN
Put the romance back into your bedroom
A fantastic collection of hand woven silk bedspreads, quilts and pillow covers,
plain and printed, with exquisite embroidery and patchwork.
CUTTOM DURRIES
Put your foot down elegantly
Add a touch of class to your floor with these traditional cotton rugs woven by
the age-old throw-shuttle, technique. Choose from a wide range of exquisite pastel
shades and eye-catching ethnic designs.
KITCHEN/TABLE LINEN
Make every meal a memorable one.
An exciting collection of aprons, oven gloves, post holders, tablecloths, place
mats, napkins and tea cozies. Made of pure cotton fabrics woven in ridges.
KHDC PREMIER PRODUCTS
Traditional Silk Sarees
We offer a wide spectrum of Traditional Silk Sarees, which is reckoned as a
traditional Indian wear. In our range, we offer Silk Sarees, Kanjeevaram Sarees, Silk
Sarees and Traditional Silk Sarees. Available in different designs, colors and styles,
these are widely demanded by our clients spread across the world. We also meet
customized requirement for our clients benefit.

Printed silk sarees

We offer a wide range of fancy printed silk sarees that are manufactured as per
the clients requirements. These are available in various sizes, colors, designs and
patterns.
So ham shirts
We offer a wide variety of Soham Shirts that is designed from quality cloth
material. These are available in all standard sizes and color combination. Skillfully

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stitched and comfortable to wear our range is in high demand by our clients spread
across the globe. We also meet customized requirement of our clients
Cotton bed linen
The bed linens we manufacture are made of plain 100% cotton percale and
50/50 blended options. Further, we also use latest trends in designing the same with
100% cotton jacquard in stripes, dots, dobby box, and uneven stripes.

Some of the other products are.

Cotton sarees
Poly sarees
Chudidhar set
Silk kurtis/made ups
Designer silk sarees
Silk ties
Jacquard bed sheets
Table linen
Jamkana(carpets)
Pillow cover
Towels
Turkish towels
Woolen blanket

2.5 AREA OF OPERATION

KHDCL has 3 different branches in Karnataka.
Bangalore branch
Hubli branch
Bagalkot

2.6 OWNERSHIP PATTERN

Company is under the control of government of Karnataka. Its day to day activities
and operations is looked after by a group of peoples appointment by the government
of Karnataka has directors and members who are answerable to the government of
Karnataka

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 BOARD OF DIRECTORS
Chairman
SRI M.D.LAKSHMINARAYANA

Managing Directors
DR.H.BASKER, IAS.,
SRI MOHAMMAD MOHSIN, IAS.,
Directors
SMT SANDHYA VENUGOPAL SHARMA, IAS.,
SRI PANDURANGA BOMMAIAH NAYAK, KAS.
SRI INDER DHAMEEJA, IAS.,
SRI SHAMBHU DAYAL MEENA, IAS.,
SRI I.R.PERUMAL, IAS.,
SRI G.KUMAR NAIK, IAS.,
SRI B.A.HARISH GOWDA, IAS.,
SMT. MENU S KUMAR, IC &IES.,
SRI B.S.RAMPRASAD, IAS.,
SRI VIPUL BANSAL, IAS.,
SRI K.R.SHASHIDAR, IAS.,
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SRI P.MANIVANNAN, IAS.,
SRI D.A.VENKATESH, IFS.,
SRI V.A.MACHAKANUR, KAS.,
Financial Controller and Officiating Company Secretary
A.KUMARASWAMY, FCA

2.7.COMPETITORS INFORMATION
Kanchipuram silk sarees
Banaras silk sarees
Designer silk sarees
Dharmavaram silk sarees
Pochampally silk sarees
Upped silk sarees
Arani silk sarees
Gadwall silk sarees
Kura silk sarees

2.8 INFRASTRUCTURAL FACILITIES

Training facilities
To impact training in the modern management and production
techniques dyeing practices, marketing of handloom products etc. The office
of the development commissioner for handlooms has been operating training
programmers for human resources development in the co-operative sector for
the benefits of personnel engaged in handloom sector at different levels
through institution like NCCT, NCUI AND NHDC.
Welfare package
A provision of rs.900 lakhs has been made for welfare schemes i.e.
thrift fund, group insurance and health package scheme
.
Work shed-cum housing
The government of India introduced the centrally sponsored scheme
called Work shed-cum housing scheme for the handloom weaver for the
beginning of 7th 5 year plan i.e. 1985-86. The scheme is implemented
primarily with a view to provide suitable work place to the weavers and their
by achieving better productivity
Health package

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 The government of India introduced the health package scheme for
handloom weavers during the year 1992-93. Under this scheme weavers are
provided financial assistance for the treatment of diseases like asthma, TB,
inflammation of the respiratory system, cost of testing of eyes and spectacles,
supply of drinking water, maternity benefits to women weavers, payment of
additional compensation.

Group insurance
The government of India introduced a group insurance scheme for
handloom wavers throughout the country from the year 1992-1993 in order to
help weaver to meet its socio-economic obligation towards his family and to
act as a support system against the uncertainty of his working capacity in old
age

2.10 WORK FLOW MODEL (End to End)

RAW MATRIALS

CLOTH FILATURE

WEAVING FACTORY

KHDCL SHOWROOMS

CONSUMERS

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10.11 FUTURE GROWTH AND PROSPECTS

To promote, aid and assist the rehabilitation, growth and development of the
handloom industry in general and, in particular, of that sector, of the handloom
industry, which is outside the co-operative sector in the state of Karnataka.
To provide financial assistance to the handloom industry and all or any allied
ancillary, preparatory, processing or finished industries.
Delink the weavers from the clutches of the master weavers.
Product mix and assuring higher conversion charges to weavers.
Liquidating the present high and aged inventory.
Diversification from janatha varieties to non janatha varieties (retail and
wholesale products)
Increase the present turnover of rs.100 corers to rs.150 corers by 2005
Minimize expenditure to economy measures.

3.McKINSEY'S 7SMODEL

The 7-s-Model is better known as McKinsey 7-s. The two persons who developed this
model are Tom Peters and Robert Waterman, have been consultants at McKinsey &
Co at that time. They published their 7-s Model in their articulate Structure is Not
Organization (1980) in their books. The art of Japanese Management (1981) and
In Search of Excellence (1982).

The McKinney's 7s plays a vital role for the success of any organization. There are
hard and soft components. The figure below shows the framework.

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STRUCTURE
DEPARTMENTAL STUDY
FINANCE DEPARTMENTS
Finance is the basic foundation of all kinds of economic activity. Efficient
management of every organization is closely linked with the efficient management of
finance.
The company has a major finance department which is subdivided into sections they
are
1. Bills receivable section
2. Bills payable sections
3. Book keeping
4. Cash section
5. Costing section

FINANCE DEPARTMENT
Finance is one of the major elements which activate the overall economy.
Finance is the life blood of economic activity. All well-knit financial system directly
contributes 40% the growth of economy. An efficient financial system calls for the
effective performance of the financial institution, financial instrument, and financial
market.
OBJECTIVES OF FINANCIAL MARKET.
o Profit maximization
o Wealth maximization

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 o Balanced asset structure
o Liquidity
o Judicious patterning of funds
o Efficiency in the business operation
o Financial discipline

DECISION IN THE FINANCIAL MANAGEMENT.

The functions of finance involve four important decisions namely:-
1. Investment decisions.
2. Financing decisions
3. Dividend decision
4. Decision regarding the working of the capital management.
5. All these decision directly contribute to the corporate goal of wealth maximization.
The subject financial management guides the management to have optimal mix of
these decisions. The joint decisions increase the values of the shares.

1. Investment decision: it is referred to the activity of deciding the pattern of

investment. It covers both short term and long term investment; it is a long
range financial decision and deals with the allocation of capital. It has to show
how the funds can be invested in assets which would yield maximum return to
the business concern.
2. Financing decisions: it is another important decision where a business
concern has to take a maximum care in financing different proposals, the
appropriate mix of finance with the debt to equity, directly contributes to the
profitability of a business unit. The instrument that is to be selected must aim
at maximizing the returns to the investors and to protect the interest of
creditors. One has an alternative of mobilizing the funds through Equity, b)
Equity plus debt, c) Equity plus debt plus reference shares, and d) Equity plus
debt plus preference shares plus public deposits with tem loans,

Each opportunity must be evaluated with its benefits. If a co. acts only
for equity, it loses its leverages benefits. It is opts for debt and equity proper
balance must be maintained between the two to reduce the financial risk.
3. Dividend decision:

The ultimate objective of a business concern is to fulfill the desires of the equity
shares, namely a) high percentage of dividend, b) maxim mum to share holders,

14
 c) how much cash dividend should be paid to the share holders?, d) how much
profit should be flown back by capitalization ?, e) maintenance of stable dividend
rate over the period, one should always keep in view the psychology of investors
who wish to get a better yields on this investment.. Hence a sound decision on the
dividend should be taken.

4. Working capital management:

The finance managers should also manage the current assets to have liquidity in
the business. Involvement of reduction in dividend but the finance mangers should
also equals look after the current financial needs of the firm to maintain optimum
production through which he must achieve efficiency and increase the operating
cycle to meet the short term obligations. It keeps the business operations going
with the proper management of cash, account receivables and inventory. Hence
these are very that have to be taken very carefully through examining every
parameter buyable concern relevant to its various decisions.
As the project is on working capital management, let us study topic in
detail

HUMAN RESOURCE DEPARTMENT

KHDCL has thousand employees working in the organization in this
organization the required people are forecasted through current ongoing project future
work load etc.
Corporate office will carry out human resources functions and development
towards performance appraisal of each employee for better imparting of skills.
MARKETING DEPARTMENT
The main motives of the functioning of the marketing department are as follows.
Customer satisfaction
We are dedicated to building a relationship with our customer where we
become partners in fulfilling their mission. We strive to understand our

15
 customer's needs and to deliver product and services that fulfill and exceed all
there requirement.

Commitment to total quality

The department is committed to supply products and services that
conform to highest standard of design, manufacture, reliability, maintainability
by our customers.

Cost and time consciousness

The department is concerned with continually reducing the cost and
shortens the delivery period of our products and services.
Innovation and creativity
The department has concern for improvement in every activity
involved in our business by pursing and encouraging risk taking, learning at
all levels within the company.

SYSTEM
KHDC has an explicit system. At every basis appraiser will set tasks for the
quarter and evaluation is done regularly and quarterly basis.
Performance of the work assessed through the annual confidential report,
which will be initiated by reporting officer and received by the immediate officer and
department head. The promotion for workmen is considered under career planning
scheme.

STYLE
KHDCL in general democratic style of management, but in some other
confidential areas autocratic management style is followed as it is handloom based
industries.
The company displays in their actions the highest possible dedication both to
employees and production which meet the needs of the company with employees
present themselves to the outside word, to the suppliers.

SKILLS

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 The company has technical and non-technical labor forces, which has enabled
them to deliver quality products and services. The company has developed strategies,
policies and procedures to accomplish long term and short term goals of the company.

The company is backed by high profile, high skilled manpower with an

impressive track record of more than five decades of rich experience in all disciplines
of handlooms.
The organization provides both on the job and off the job training for its officers and
employees.
On the job training
Vestibule training
Demonstration/lectures

WORKERS
The company provides the following training to its workers
In house training programmed for workmen related to work area under the
concerned officer / supervisor.

The workers are periodically sent to the companies training institute to upgrade
themselves of the new technology. Workers will be trained according to the
requirement of the new projects to be undertaken.
OFFICER
The company periodically sent its officers from various departments in batches to
training programs like
Work shops
Seminars
Guest lecture

STARTEGY
The strategies of the company are developed on the basis of analysis of
external and internal environment, consequently the values, preferences, attitude
towards risk have been carefully examined while formulating strategies.
The company is having a long term objectives to develop the entire spectrum
of development, manufacturing and maintenance of handlooms sectors. The strategies
also include exporting the product to several countries in the world and provide
qualitative product.

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STAFF
The employees of the company are appointed from all over Karnataka. It
includes technical employees.
The total number of employees working in KHDCL, is above 1000
On the basis of level of management, they have been characterized as top,
middle and low level management.

SHARED VALUES
Customer satisfaction: we are dedicated to building a relationship with our
customer where we become with partners in fulfilling their mission. We strive
to understand our customers needs and to deliver products that fulfill and
exceed all their requirements.

Commitment to total quality: we are committed to continuous improvement

of all our activities. We will supply products that conform to highest standards
of design, manufacture, reliability, maintainability and fitness for use as
desired by our customer.

Cost and time consciousness : we believe that our success depends on our
ability to continually reduce the cost and shorten the delivery period of our
products we will achieve this by eliminating waste in all activities ad
continuously improving all processes in every area of our work.

Innovation and creativity: we believe in striving for improvement in every

activity involved in our business experimentation and learning at all levels
within the company with a view to achieving goal excellence and
competitiveness

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 5. SWOT ANALYSIS

The overall evaluation of companys strength, weakness, opportunity and threat is

called SWOT ANALYSIS. This analysis helps the firm in realizing their strength and
building upon them in order to overcome its weakness so that it can take advantage of
opportunities to manage the threats.

STRENGTH
With open and participative environment company enjoys free flow of information,
competitive strength, collaborative environment and less or no dispute between
employees. Company equally provides opportunity to employment growth. As per
norm of the company provides all the benefits and services and encourages employees
to take responsibilities and prepare them for challenges the jobs.
stoners with its extended network of strategic business associated and distributers
providing products to customers, highlights it as a vender of a choice of many
organization.
1. KHDC has acquired the art of technology for manufacturing of silk sarees and
some other produces.
2. It is an undertaking of government of Karnataka.
3. It has good experienced weavers for the upliftment of organization
4. It has experience of over 36 years
5. All the heads of the department will be appointees by government only
6. It has customers in other countries like

WEAKNESS
1.KHDC is a public sector undertaking it cannot carry out its business on competitive
lines.
2.Investments made in research and development is in equated..Infrastructure
facilities are inadequate

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3.Inadequate marketing skills.

OPPORTUNITIES
1. It has entered into other countries for selling their products.
2. Now they are undertaken new initiatives in research and development.
3. It has started new products likes soham shirts, carpets etc.

THREATS
1. KHDC is facing tough competition in other countries not in domestic markets.
2. Obsolescence of manufacturing technologies and facilities will lead to further
reduction in competition

5.Analysis of financial statement:

THE KHDC LTD. BALANCE SHEET AS AT 31ST MARCH 2011
AND 2012
Particulars As at 31-3- As at 31-3- As at 31-3-
2012 2011 2010
A. Share holders fund

Capital 51,88,20,700 51,88,20,700 44,38,20,700

Reserves and surplus 40,01,58,685 40,01,58,685 40,01,58,685
Deferred government grant 2,19,19,675 2,33,53,666

B. Loan funds
Secured loans 65,62,06,256 72,90,07,156
Unsecured loans 21,13,35,235 20,88,85,106
TOTAL 180,84,40,551 180,52,25,313
2.APPLICATION OF FUNDS
A .fixed assets

Gross block 169964347 166511719

Less: depreciation 88632233 84817346
Net block 81332114 8169L 4373
CAPITAL WORK IN 12663143 -
PROGRESS
B. investments 626000 626000
C. Current assets, loans
&advances

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 1.Inventories 491386658 361420370

2.sundry debtors 419376873 576694251

3.cash&bank balances 608220088 551945338

4.other current assets 128761260 106782203

5.loans& advances 103998949 95943134

TOTAL 1751743828 1692785296

Less: current liabilities

&provisions 403403933 313153976
Liabilities: 355578098 277927584
Provisions:
Net current assets 992761797 1101703736

E .Profit and loss accounts 721057496 621201204

TOTAL 1808440551 1805225313

PROFIT & LOSS ACCOUNTS FOR THE YEAR ENDED MARCH

31ST 2011,2010,2009,2008

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Particulars 2011 2010 2009 2008

22
 INCOME

Sales 131,31,22,588 93,52,92,956 81,47,19,999 81,47,19,999

Market 49,36,180 55,24,130 97,97,600 97,97,600

assistance under
IHDS
Rebate 4,14,18,000 2,87,59,000 4,39,71,100 4,39,71,100
reimbursement

Reimbursement 30,23,625 30,49,543 27,53,452 27,53,452

Other income 4,78,37,405 5,47,21,334 6,10,13,222 4,32,13,574

Increase in stocks 11,49,93,763 5,24,86,934 - -

Profit on sale of - 43,972 5,42,287 5,42,287

fixed assets
Capital result 14,33,991 14,33,991 14,33,991 14,33,991
withdrawn
EXPENDITURE

Cost of 111,22,00,079 74,93,97,069 56,59,10,721 56,59,10,721

production
To weavers 23,03,381 34,34,628 -76,328 -76,328

Decrease in - - 5,85,96,842 5,85,96,842

stocks
Admn expenses 38,94,35,621 34,20,02,916 22,63,59,245 22,63,59,245

Selling & 2,78,05,656 1,21,87,733 1,24,02,352 1,24,02,532

distribution
expenses
Interest 9,10,91,415 8,10,09,018 5,90,88,198 4,58,24,115

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Depreciation 38,23,727 36,85,096 37,34,225 37,34,225

Loss on sale 1,20,000 1,23,222 1,10,227 1,09,852

Profit/loss(-) -9,98,94,327 - 35,70,604 35,70,604

before tax 11,04,04,650
Fringe benefit - - 5,16,619 -5,16,619
tax
Provision for bad - 1,87,716 - -
& doubtful debts
Prior period 38,034 17,20,177 16,50,201 -16,50,201
adjustment
Profit/loss(-) -998,56,292 - 14,03,784 14,03,784
after tax 11,23,12,543
Balance from 62,12,01,204 50,88,88,621 51,02,92,445 -51,02,92,445
previous year
B/D to B/S -72,10,57,496 - - -50,88,88,661
62,12,01,204 50,88,88,661

ANALYSIS OF FINANCIAL STATEMENT

Ratio Analysis
Table-5.1

Current ratio:
Absolute liquid ratio 1.01 0.93

Proprietary ratio 0.48 0.52

24

Capital turnover ratio 1.83 2.10

In this analysis of financial statement of ratios we should analyze current ratio in this
we can see that in 2009-10 it is 5.4 and in 2010-11 it is decreased to 4.3
Quick ratio:
In this quick ratio we should divide quick asset/quick liabilities. So that in 2009-10
there was 3.06 and in 2010-11 it increased to 4.5
Stock turnover ratio:
In this stock turnover ratio we should know about the inventory of the organization
so in this ratio in 2009-10 it was 5.45 and 2010-11 it is 2.9 , so stock turnover ratio in
2011.
Debtor turnover ratio:
In this ratio we should divide credit sales by average debtors. So in this ratio 2009-
10 it was 1.80 and 2010-11 it increased to 17.06.
Fixed assets turnover ratio:
In this fixed assets turnover ratio we should see about the sales net fixed assets. In
this ratio in 2009-10 it was 12.08 and in 2010-11 it is 17.07, so it is increased when
compared to 2009-10.
Gross profit ratio:
In this ratio of gross profit we can see that how the net sales affected the gross profit
ratio in 2009-10 it was 38.88 and in 2010-11 it is 35.29.
Net profit ratio:
In the net profit ratio we should know that net profit and net sales so that in 2009-10
it was -11.37 and in 2010-11 it is -7.19.
Absolute liquid ratio:
In the absolute liquid ratio cash in hand and at bank how the marketable securities and
current liabilities affected he liquid ratio in 2009-10 it was 1.01 in 2010-11 so it
decreased to 0.93.
Proprietor ratio:
In proprietary ratio we should know the shareholders fund and total assets so that in
2009-10 it was 0.55 when it compared to 2010 -11 it decreased to 0.48.
Capital turnover ratio:
In this ratio we should know about cost of sales and capital employed in 2009-10 it
was 1.83 so in 2010-11 it was 2.1
6.LEARNING EXPERIENCE

25
 I had a great experience at KHDC Ltd, Bangalore. It was great knowledge base
and an excellent training program we had in the company. The staff of KHDC is
so co-operative and friendly in their approach of training.
Whenever we visit to any department the concerned staffs of that department have
allotted their precious time explaining us how that particular department
functions.
In every department may be at lower level or at higher level the concerned people
have given us all the necessary information we required.
The very first day in our project duration I visited various department of the
company and had a brief introduction made by my external guide about the
organization.
My external guide took me to all departments and introduced some staff of every
department who provides me all support and necessary information for my project
work.
In this training period I really learnt many aspects and gain lot of experience in
knowing many things of the production process how raw material undergoes
many stages and finally becomes the finished product and work performance done
in each department.
Highlights of learning experience during the project on issues and challenges in
customer satisfaction of KHDC Limited.
I got detailed information of working capital management.
I observed the good working condition, new ,management process.
There are very strict rules followed by the company and I came to know about the
importance of punctuality and time management.
I came to know the rules, policies, norms, practices and procedure etc of the
company.

Thus project has turned my personal attributes like skills, abilities and attitudes
etc, which would guide me for working efficiently and effectively in organization
which fosters top performance.

PART- B

7. GENERAL INTRODUCTION
Finance:

26
Finance is one of the major elements which activate the overall economy. Finance is
the life blood of economic activity. All well-knit financial system directly contributes
40% the growth of economy. An efficient financial system calls for the effective
performance of the financial institution, financial instrument, and financial market.
Objectives of financial market.
Profit maximization.
Wealth maximization
Balanced asset structure
Liquidity
Judicious patterning of funds
Efficiency in the business operation
Financial discipline
Decision in the financial management
The functions of financial involve four important decision namely
1) Investment decision
2) Financial decision
3) Dividend decision
4) Decision regarding the working of the capital management
All these decision directly contribute to the corporate goal of wealth maximization.
The subject financial management guides the management to have optimal mix of
these decisions. The join decisions increase the values of the shares.

Working capital management :

Introduction
One of the vital aspects of companys financial management is to manage its current
assets and the current liabilities in such a way that a satisfactory level of working
capital is maintained. Working capital management means administration of all
aspects of working capital i.e. Current assets and current liabilities. Firm has to
manage it properly in order to attain its goal of wealth maximization.
Definition :
in according working capital is the difference between the inflow and outflow of
funds, in other words it is the net cash inflow. it is defined as the excess of current
assets over current liabilities and provisions.
MEANING:

27
Working capital is that part of total capital which is used for carrying out routine
business operations. In simple terms, working capital is the capital with which the
business of the company is worked over. Working capital is the lifeblood of business
and it is the controlling system of every business firm.
The working capital management is concerned with the problems that arise in
attempting to manage the current assets and current liabilities and the
interrelationships that exist between them. this tries to evolve how much funds to be
invested in each type of current assets and what should be the proportion of long-term
funds to short-term funds and which are the sources that are ideal for financing
current assets.
Need and importance of working capital
To fulfill its endeavor to maximize the shareholders wealth, firm has
to earn sufficient return from its operations, which needs a successful sales activity.
The firm has to invest sufficient funds in current assets to succeed in sales, as the sales
do not convert into cash instantaneously because of time gap between the sale of
goods and actual receipt in cash. Hence there is a need for working capital in the form
of current assets to sustain sales activity during that period. since cash inflows do not
match, firms have to necessarily keep cash or investment in short term liquid
securities to fulfill its obligations as and when they become due. the adequate stock of
inventory provides a cushion against being out of stock and helps as a guard to meet
the demand for its products. to be competitive, the firm must sell its products to their
customers on credit, which necessities the holding of accounts receivables .therefore
an adequate level of working capital is absolutely necessary for the smooth sales
activities, which in turn enhances the owners wealth.
The working capital need arises for the following purposes :
For purchasing raw material, components and spare parts.
For paying wages and salaries.
To incur day-to-day expenses and overhead costs like fuel, power and office
expenses, etc.
To meet selling costs of packing advertising etc.
To provide credit facilities to customers.
To maintain inventories of raw materials, work-in-progress, spare parts and
finished goods.
Working capital

28
 The working capital literally means capital used for conducting the day to day
operations. It refers to that part of total capital which is used for carrying out the
routine and regular business operations. In short, it is the amount of funds used for
financing the short-term operations. Short term operations include stock of raw
materials, supplies needed to manufacture, semi-finished goods awaiting sale, sundry
debtors constituting the pending collections against sales and short-term investment.
Working capital is also termed as circulating capital. Circulating capital means
current assets of a company that are changed in the ordinary course of business from
one firm to another, as for example from cash to inventories to receivables,
receivables into cash.
Working capital referred to as floating capital consist of funds invested in
current assets. Current assets imply those assets which in the ordinary course of
business can be converted into cash within a short period of time. In the same way
current liabilities are the liabilities payable with in a short-term out of the day today
income. In short working capital in the amount of funds necessary to cover the cost of
operating the enterprise. Working capital in a going concern, it consists of cash
receipts from sales which are used to cover the current operations.
As per Karl Marx the variable capital refers to the outlay for payroll advance to
workers to spend before the goods they work on or finished such.
Variable capital thus implies wage fund which is blocked in the form of work-in-
progress supported with other operating expenses until it is converted into sale of
finished goods.
In the view of an Economist, Working capital means the total values of current assets,
which in the eyes of an accountant; it is the difference between current assets and
current liabilities. In the practice of those two concepts current assets and current
liabilities are expressed as gross working capital and net working capital respectively.

Concepts of Working capital:

There are two concepts of working capital. They are :
1. Gross working capital concept.
2 .Net working concept.

29
Gross working capital concept
Gross working capital refers to firms investment in its current assets. Current assets
are assets, which can be converted into cash within an accounting year. It includes
cash, short term securities, debtors bills receivables and inventories
The gross working capital is a financial concept. It is also called as current capital or
circulating capital and is represented as sum total of current assets of an enterprise.
The gross working capital concept focuses attention on two aspects of current asset
management.
a) Optimum investment in current assets.
b) Financing of current assets

Net working capital concept

Net working capital concept is the difference between current assets and current
liabilities. It may be positive or negative. A positive working capital arises when
current assets exceed current liabilities and a negative working capital occurs when
current liabilities exceed current assets.

Net working capital = Current assets - Current liabilities

Net working capital is a qualities concept and it indicates the;
a) Liquid position of the firm.
b) Suggests the extent to which working capital needs may be financed by
permanent sources of funds.

The current assets of the firm should be sufficiently in excess of current liabilities to
constituting a margin for maturing obligations with in the ordinary operating cycle of
the business. A weak liquidity position poses threat to the solvency position of the
firm and makes it unsafe and unsound. A negative working capital may prove to be
harmful for the companys reputation. On the other hand,)
The net working capital concept also covers the question of judicious mix of long
term funds for financing the current assets. Every firm needs a minimum amount of
net working capital, which is permanent. Hence a portion of working capital should
be financed with the permanent sources of funds such as owners capital, debentures,
long term debts preference capital or earnings. Management must therefore decide
the extent to which current assets should be financed with long-term sources.

30
Current assets
Current assets are those assets, which in the normal courses of business, convertible
into cash within a short period of time i.e. An accounting year or operating cycle.
Components of current assets
a. Stock of material in trade and in transit
b. Stores and spare parts.
c. Sundry debtors.
d. Bills of exchange.
e. Loans and advances.
f. Deposits.
g. Cash and bank balance.
h. Investment in government and other securities.
i. due from subsidiary companies, etc.
j. Prepaid expenses.
k. Outstanding incomes.

Current liabilities
Current liabilities include all the obligations of the concern that are maturing within
an accounting year.

Components of current liabilities

a) Sundry creditors
b) Loans from bank and others
c) Provisions for taxation , dividend
d) Liabilities towards gratuity,
e) Outstanding expenses.
f) Incomes received in advance

Sources of Working Capital Finance

Sources of Working Capital Finance

Long term sources Short term sources Spontaneous sou

31
 External sources

-Shares -Trade credit

-Debentures -Outstanding

-Long-term loans expenses

-Sale of fixed assets Operating cycle or working capital cycle:

In modern business , the concept of working capital has
changed a lot , in the present time a new concept known as
operating cycle has emerged and is gaining popularity ,there
is much difference between current and fixed assets , as far as recovery of is
concerned , every business required many years to recover the investment in the
fixed like plant and machinery and building ,etc But recovered through a firms
operating cycle, when stocks of finished goods are sold and debtors are collected,
usually firms operating is a less than a year.
The term operating cycle implies the period of time required to convert sales into
cash.as per operating Cycle concept working capital is that part of capital which
circulates in different firms such as cash to Raw material, to work in progress, to
finished good to sales, to debtors, to cash .it is also called circulating capital. The
working capital rotates in such way that money will block at different stages in forms
till recovery in the form of cash. The cycle begins with cash and ends with
appreciation or depreciation of cash. This can be called cash conversion cycle.
The operating cycle of any manufacturing firm has to pass through three stages.
1) Assembling of resources like raw materials, labor, power and fuel etc.
2) Manufacturing the goods i.e. conversion of raw material into work-in-progress into
finished goods.
3) sell the goods i.e. cash sale/ credit sale. Credit sale creates book debts or bills
receivables.
Management of working capital :

32
Working capital refers to all aspects of the administration of both current assets and
current liabilities. In other words, working capital management is concerned with the
problems that arise in attempting to manage the current assets, the current liabilities
and the interrelationships that exist between them.
Moreover, different components of working capital are to be properly balanced in
such a way that during one complete production or trade cycle the cash should be
available for purchase of fresh material and for running the business including
operating expenses, after realization of sale proceeds of earlier cycle without any
hurdles.
In the absence of such situation, the financial position in respect of the firms liquidity
may not be satisfactory in spite of satisfactory liquidity ratio
Working capital management policies have a great effect firms profitability , liquidity
and its structural health working capital management policies in respect of each of the
components of Working capital so as to ensure higher profitability, proper liquidity
and sound structural health of the organization .
In order to achieve this objective the finance manager has to perform basically
following two functions.
1) Estimating the amount of Working capital.
2) Sources from which these funds have to be raised.

Estimating Working capital requirements:

In order to determine the amount of Working capital needed by a firm, a number of
factors viz..production policies, nature of business, length of manufacturing process,
rapidity of turnover, seasonal fluctuations, etc. are to be considered by the finance
manager.

Factors influencing Working capital requirements:

The Working capital needs of a firm are influenced by numerous factors.
The important ones are.
1) Nature of business
The Working capital requirement of a firm is closely related to the nature of its
business. A service firm, like an electricity undertaking which has a short cycle
sells predominantly on cash basis, has a modest Working capital requirement.
On the other hand, a manufacturing concern like a machine tools unit, which

33
 has long operating cycle and which sells largely on credit, has a very
substantial Working capital requirement.

2) Seasonality of operations
Firms which have marked seasonality in their operations usually have highly
fluctuating Working capital requirements. To illustrate, consider a firm
manufacturing ceiling fans. The sale of ceiling fans reaches a peak during the
summer months and drops sharply during the winter period.
3) Production policy
A firm marked by pronounced seasonal fluctuation in its sells pursues a
production policy, which may reduce the sharp variations in Working capital
requirements.

4) Market conditions
The degree of competition prevailing in the market place has an
important bearing on Working capital needs. When competition keen, a large
inventory of finished goods is required promptly serve customers who may not
be inclined to wait because other
manufacturers are ready to meet there needs.

5) Conditions of supply
The inventory of raw materials, spares, and stores depends on the conditions
of supply. If the supply is prompt and adequate, the firm can manage with
small inventory.

6) Assessment of Working capital requirement

The following factors are considered for a proper assessment of the

quantum of Working capital requirement.

7) Nature of industry
The composition of assets is a function of the small size of a
business and industry to which it belongs. Small companies have smaller
proportions of cash receivables and inventory than large corporations. This
difference becomes more marked in large corporations.

8) Nature of business
Working capital requirements of a firm are basically influenced by the
nature of its business. Trading and financial firms have a very small
investment in fixed assets, but require a large sum of money to be invested in

34
 Working capital. Manufacturing firms must invest substantially in Working
capital and a nominal amount in fixed assets.

9) Working process

A close attention is to be given to the accumulation of Working process. Unless

the sequence of production process leading to conversion into finished product is
kept under close observation to achieve better production and productivity. More
and more Working capital funds will be tied up in the context, proper production
and control is vital.

10) The production cycle

There is bound to be time span in raw material input in manufacturing
process and the resultant output as finished products. To sustain such
production activities the requirement in the form of working capital obvious.
In this context, the choice of product requiring shorter or grater operating
cycle will have a direct impact on the Working capital requirement.

11) Terms of credit from suppliers

The more the terms of credit are favorable I .e. the more the time allowed by
the creditors to pay them, the lesser will be the requirement of working capital.
In this process, the impact of the requirement of finance is shared by the
creditors for goods and services.

12) Competitive condition

The whole question of cash inflow depends as to the quickness in selling

the products and realization thereof. In this context, the nature of business and
product will be the two important contributory factories as to the policy on the
quantum of working capital requirements.
13) Realization from sundry Debtors

The lessor the time span between selling the product and realization the more
will be the quicker inflow of cash. This in return, will reduce the finance required for

35
working capital purposes. A realistic credit control will reduce looking up of finance
in the form of sundry debtors.

14) Control on Inventories;

The decision to maintain appropriate minimum inventories either in the
form of raw material, stores material, work-in-progress or finished products is
an factor in e l controlling the finance looked up, the vital factors in valued in
inventory management o are to be consider for an effective inventory control,
a) Volume of sales
b) Seasonal variation in sales
c) Selling of shelf
d) Stocking to gain from higher price under inflationary conditions

Liquidity verses profitability

The management dilemma as to the optimal balancing between liquidity and
profitability is another factor of great importance on determination of the level of
working capital requirements.
Inflation and the price level changes;
In an inflationary trend, the impact on the working capital is that more financial
needed for the same volume of activity i.e. one has to pay more prices for the
purchase of same quantity of materials or services to be obtained. All business may
not be in a position to do so due to their nature of product competitive market or
government regulatory price.
Sources of working capital
Long term sources
Sales of shares
Sales of debentures.
Sale of idle fixed assets.

Medium term loans

Depreciation
Reserves and provisions
Intel corporate loans and deposits

Short term loans

Trade credit
Bank credit

36
 Public deposit
Customers advance
Commercial papers

7.1 Statement of the problem

The study is related to working capital management of KARNATAKA
HANDLOOMS AND DEVELOPMENT CORPORATION LTD. BANGLORE,
which is dealing with capital management in recent years.

7.2 Objectives of the study:

The following are the main objectives of the study.
1) To analyses and interpret the efficiency of the working capital at KHDC.
2) To analyses the factors that affecting the working capital.
3) To assess the method of financing working capital.
4) To analyses the structure and growth of working capital for the period of
2007-08 to 2010-11.
5) To compare the concept learnt by us the working of organization.

7.3 Scope of the study:

The study titled Study on working capital management at KHDCL

is aimed at covering all the aspect of working capital, cash management,
debtors management, creditors management and inventory management and
inventory management and to analyze the impact on the firms working capital
needs.

The study is at micro level and examines working capital in KHDCL.

To understands the need and importance of working capital.
This study will be as source of information for further applications of the
company.

7.4 Methodology of the study:

Any research study aims at finding a solution to the problem. Here

in my work I took working capital management as any research problem. It
aims of shortcoming in management of current assets. Since current assets
forms a second largest investment of the fixed assets, the efficient

37
 management of current assets is very important. Since this is financial study
most of the information regarding are collected through barrowing sources.

Sources of data:
There are two types of data-Primary Data and secondary Data.
1. Primary Data
The primary data are collected by telephonic as well as personal
contact with the General Manager, finance and asking them regarding the
doubts that have reason while they were explaining. The study is mainly
the financial aspect of the company, the main sources of information are
taken from internal sources of the company. Opinions and suggestions
from the finance personnel and other related department at KHDCL.

2. Secondary Data:
The secondary data are those, which have collected by someone else and which
have all ready been processed. Generally speaking secondary data are information
which have been previously been collected by some organization to satisfy its own
need but it is being used by the department under reference for an entirely different
reasons. The study depends upon secondary data, since the proposed study is more of
action research.

1. The company provides the data for the study. The main sources of information
are taken from company reports, manuals.
2. Annual reports of the company for the year 2007 to 2011 Balance sheet/ Profit
and Loss Account.
3. Manuals provided by the company, books and articles.

Further, the information complied was updated by a detailed discussion.

With the top finance officials of the company, to get appraised of the various
methodologies practices undertaken in order for the excellent financial
performance of the company.
With the scientific method of collecting term, this denotes the various
processes by the end of which the sciences are built up. With this scientific
method, deep systematic observations, classification and interpretation of data are
done. The scientific thinking is more formal, strict empirical and goal oriented, the
scientific method is a way of collecting, processing and communication
information based on activities designed to increase existing information, the

38
 proposed study on performance of KSPHC has been specifically taken up on view
of the increasing attention being given to profitability of a company. Financial
institutions, banks, nodal agencies and government of India has been playing very
constructive role in redesigning and formulating strategies of policy matters
through effective status and other Machinery.

7.4 Limitations of the study:

This study is exclusively related to the working capital management of a
particular company, that is KHDCL hence the company suffers from following
limitations.
1. The Duration of the study was limited to a specific time period so an
extensive and deep study could not be possible
2. Entire and exclusive range of ratios analysis is not come out reflecting
various facts of the company.
3. Other aspects of financial management such as capital budgeting such as
net present value calculation, internal rate of return, cash of capital, risk
analysis and the like were not done or attempted with.
4. Analysis of data was limited to only five years and it was felt this is
sufficient

8. ANALYSIS AND INTERPRETATION

The basic objectives of working capital management are to realize twin objectives of
profitability of the operations to maintain adequate liquidity to meet the obligations in
time. This chapter makes on analysis of working capital management in KHDC,
engine division it includes.
Statement of working capital.
Inventory management
Receivables management
Cash management

Working capital management

39
 Working capital management is concerned with the problem that arise in
attempting to manage the current assets, current liabilities and inner relationship that
exits between them.

Working capital plays an important role in KHDC. This is important to each and
every organization to carry on carry out their day to day operation it is apply said that
working capital is the life blood of any organization.

Table no.8.1 a
Statement of working capital
current assets

PARTICULARS 2008-09 2009-10 2010-11 2011-2012

56,88,46,071
Inventories 29,60,23,204 36,14,20,370 49,13,86,658

47,94,08,707 57,66,94,251 41,93,76,873 41,67,00,418

Sundry debtors

51,85,99,697 55,19,45,338 60,82,20,088

Cash and bank

balance

10,31,70,724 10,67,82,203 12,87,61,260 8,66,74,083

Other current
assets
10,01,42,888 9,59,43,134 10,39,98,949
Loans and
advances

Total current 149,73,45,220 169,27,85,296 175,17,43,828

assets

40
Table no.8.1 b
Current liabilities
Liabilities 2008-09 2009-10 2010-11 2011-2012

Sundry 13,70,12,308 11,71,81,725 14,83,93,387 16,72,60,944

creditors
Net 74,41,37,372
Deposits 98,81,77,359
5,03,48,367 110,17,03,736
5,16,48,406 106,18,52,641
5,30,55,609 1,10,17,03,736
wc
Advances 3,44,55,323 4,81,49,231 2,68,63,859
(CA-
CL)
Others 3,74,06,847 2,77,96,320 2,98,66,123

Other 6,19,54,522 5,16,48,406 7,61,34,111 Net

liabilities
Provisions 18,79,90,669 27,79,27,584 35,55,78,098

Total current 50,91,67,861 59,10,81,560 68,98,91,187

liabilities

working capital refers to the difference between current assets and current liabilities it
enables a firm to determine the exact amount available requirement this can it there be
positive or negative

Table no 8.2

SL.NO DETERMINATS IMPACT %

41
1 Fluctuations in raw materials 75

2 Nature of business 75

3 Size of business 25

4 Manufacturing cycle 75

5 Credit policy 50

6 Taxes 25

Other factors 50

Graph no 8.2
Factors influencing working capital and their impact

42
Interpretation: From above the table, it can be observe that factors like nature of
business, manufacturing cycle, credit policy, operating efficiency have the highest
impact on working capital at KHDCL whereas the other factors and fluctuations in
raw materials are moderate and remaining as very low impact on working capital at

KHDCL.

TABLE NO 8.3
Percentage of cost of sales and average working capital

43
Particulars 2007-08 2008-09 2009-10 2010-11

Sales 88,87,89,046 81,47,19,999 93,52,92,956 131,31,22,588

Average working 40,81,29,264 37,20,68,686 49,40,88,679.5 60,50,15,860

capital

% of sales average 2.18 2.19 1.89 2.17

working capital

Graph No 8.3
Percentage of cost of sales and average working capital

44
Analysis:
From the above interpretation the percentage of sales and average working
capital is increase in the year 2008-09 and 2009-10 and also decreased in the year
2007-08.
Interpretation
We can comment that, there is fluctuation the percentage of net sales and
average working capital. These leads the net working capital has been utilize in
generating the net sales. Thus the highest rates higher will be the utilization of net
working capital.

Table No 8.4

Percentage of net working capital and current liabilities

45
PARTICULARS 2007-08 2008-09 2009-10 2010-11

74,41,37,372 98,81,77,359 1,10,17,03,736 9,92,76,17,997

Net working capital

535750960 509167861 591081560 758982031

Current liabilities
1.38 1.94 1.86 1.31

%of working capital

and current
liabilities

Graph no 8.4

46
Analysis: From above interpretation is increased during the year 2010-11 and
decreased in the year 2008-09.

Interpretation: The percentage of net working capital and current liabilities is a

measure of the margin of safety to the creditors of the firm. These higher rates the
more secured would be the position of the current creditors.
The net working capital is decreased when compared to previous years. But this of
course does not mean that the company will not able to meet its obligation. It just
indicates that through the company carries sufficient working capital to meet its
current obligation; its margin of safety net working capital is low.

Table N0 8.5
Average number of working days assumed to be 365 days

47
PARTICULARS 2007-08 2008-09 2009-10 2010-11

Average number of 365 365 365 365

working days

Debtors turnover 2.12 4.10 3.18 3.15

ratio

Average collection 172.16 1.38 1.94 1.86

period

Graph No 8.5
Average collection period

48
Average number of working days assumed to be 365 days.

Analysis: The collection period of debtors for the year 2008,2009,2010,2011 is

172.16, 89.02, 95.80 and 115.87 respectively.

Interpretation: We can say that is a frequent increase and decrease in collection of

debts since there is difference in collection of debts it indicates that the company is
providing frequent credit policy to its customers.

Receivables management
Trade credit is the most prominent force of the modern business it is considered as
on essential marketing tool acting as a bridge for the management of goods through
production and distribution stages to customers to buy its products at favorable terms.
When the firms sets its products or services and does not receive cash for it
immediately the firm is said to how granted trade credit to customers. Trade credit this
creates receivables or book debts which the firm is expected to collect in the near
future.

49
The book debts receivable arising out of credit has free characteristics
Firstly, it involve the element of risk, When should be fully analyzed. Cash sales as
totally less but not the credit sales as the cash payments has yet to be received.
Secondly, It is based on economic value to the buyer the economic value goods are
services processes immediately at the of sale while the seller experts an equipment
value to be received later on.
Thirdly, It implies futurity the cash payment for cash goods or services received by
the buyer will be made by him in a future period. The customer from whom
receivables or book debt how to be collected In future are called creditors or simply
debtors represents the firm it claims to asset to asset.
The important direction of a firm credit policy are
Credit standards.
Credit period.
Cash discount.
Collection effect.

These variables are related to have bearing on the level of sales, bad debts loss
discounts taken by customers and collection expenses
Control of Receivables
Firm can control its receivables by
Monitoring and controlling of accounts receivables.
The measure commonly employed for judging whether accounts receivable
are in control are.
Bad debts losses
Average collection period
Average schedule

Evaluation of receivable management

Receivables to net working capital

Table 8.6
Receivable / Net working capital

PARTICULARS 2007-08 2008-09 2009-10 2010-11

50
Receivables 90790184 103170124 106782203 128761260

Net working 744137372 98817359 1101703736 992761797

capital

Receivables to 0.12 0.10 0.09 0.13

net working
capital

Graph no 8.6
Receivables to net working capital

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Analysis:
From the analysis of receivable to net working capital was increased from 0.09
to 0.12 during the year 2007-08 and 2008-09and decreased in 0.10 to 0.90 during the
year2009-10 and 2010-11.

Interpretation
From the above analysis the receivables to net working of the company is
increased.

Table no 8.7
Receivables to current assets

52
PARTICULARS 2007-08 2008-09 2009-10 2010-11

Receivables 90790814 103170124 106782203 128761260

Current assets 1279888332 1497345220 1692785296 1751743828

Receivables to 0.07 0.06 0.06 0.07

current assets

Graph no 8.7

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Analysis
From the above analysis is the companies receivables of current assets was
increased 0.06 to 0.07 in 2007-08 and 2008-09 and was receivables same in 2009-10
to 2010-11.

Interpretation
From this analysis increasing receivables to net working capital in the year 2006-
07 and 2007-08 so the receivables of the company will increased .

Receivables to turn over

Table no 8.8

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Average receivables=( opening receivables + closing receivables)/2
Sales/ average receivables

Average Receivables = open receivables+ closing receivables

2

PARTICULARS 2007-08 2008-09 2009-10 2010-11

Sales 888789046 81479999 935292956 1313122588

Average 45395407 51585062 51585062 64380630

receivables

Receivables to 19.57 15.79 17.51 20.40

sales

55
 Graph 8.8

Analysis
From the above interpretation the company receivables to sales decreased from
20.572 to 19.57 during the year 2007-08 to 2008-09

Interpretation:
This is of low realization of receivables during the year 2008-09 only closing
receivables because the date of opening receivables was not available.

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CASH MANAGEMENT

Cash is the most important current assets for the operations of the business.
Cash is the basic input needed to keep the business running on a continuous basis it is
also the ultimate output expected to be realized by selling the services or product
manufactured by the firm. The firm should keep sufficient cash neither more or less.

Cash shortage will disturb the firm manufacturing operation while excessive cash
will remain idle without contributing anything towards the firm profitability this is
major function of the financial management is to maintain a sound cash position.

Efficiency of cash management

Percentage of cash to current assets.
Percentage of cash to total assets.
Rate of rotation of cash .this is calculated by dividing the annual sales with
average cash balance. This is also called velocity.
Percentage of cash to the net annual sales.
Number of days sales the cash balance represents.

Management of cash flow:

A business firm can improve it cash management efficiency by various collection

and disbursement methods. The management of cash flows through speeding up cash
inflows and delaying cash out flows to the possible maximize the availability of cash
and lesser the permanent in cash.

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Cash management techniques:
1. Controlling the level of cash
Preparing the cash budget
Providing the unpredictable discrepancies
Availability of other sources fund

2. Controlling in flow of cash :

Concentration banking
Lock box system

3. Control over cash out flow

Centralized disbursement
Payment of cash on due dates
Playing float
Tools employed in cash management
Various tools employing in cash management are
Cash budget
Cash flow statement

Cash budget
Cash budget is a comparison of estimated cash inflows and out flows for a particular
period. Such as day, week, month, quarter, etc.
A cash budget is an estimate of the receipts and payments for the each month or
other period forming part of the whole budget period.
The cash budget may be employed by the management in planning its cash needs.
However after the budget has been prepared it may serve as a control device.

Cash flow statement

Cash flow analysis is very useful as it shows the amount of the coming from
operations and shows the balance between various sources of cash under the cash
concept the cash flow statement lists various items, which cause the change in cash

58
balances between two annual periods. All the items that increased decreased cash are
included, but items that have no effect on cash are excluded it summarizes sources of
cash inflow and out flow.
Evaluation of cash management
Percentage of cash and balance to current assets

Table No 8.9
Cash and bank balances/ current assets
PARTICULARS 2007-08 2008-09 2009-10 2010-11

Cash and bank 346212054 518599697 551945338 608220088

balances

Current assets 1279888332 1497345220 1692785296 1751743828

Percentage of 0.27 0.34 0.32 0.35

cash and bank
balance to
current assets

59
Graph No 8.9
Cash and bank balances/current assets

Interpretation

60
 We can see that the percentage has been decreased in the year 2010-11 and
increased in 2009-10 which tells us the proportion of the cash and bank balances that
are held y the company to the total current assets is not satisfactory, which could be
one of the major drawback for the firm to obtain liquidity from various sources.

Table-8.10
Sales/ cash bank balances

Particulars 2007-08 2008-09 2009-10 2010-11

Cash and bank 346212054 518599697 551945338 608220088

balances

Sales 888789046 814719999 935292956 1313122588

Percentage of 0.38 0.63 0.59 0.46

cash and bank
balance

Graph no 8.10

Interpretation:

61
 There is a continuous increase in cash to sales. This indicates that the firm has
maintained an appropriate cash balance in the past.

Inventory Management
Meaning of inventory:
The term inventory refers to the stock of raw materials, spare parts, and
finished products Held by a business firm. It is aggregate quantity of materials
resources s goods that are idle at a given point of time. The resources may be of any
type for eg, Man, materials, money when the resources involved in materials or goods
in any stage of completion, inventory referred to as stock. Hence inventory refers to
the stock that a business firm keeps to meet its future requirement of production and
sales.
Definition of Inventory
Several authors have defined the term inventory. The most popular of
them are the term inventory includes raw materials, work in progress, finished
packaging spares and others stocked in other to meet an unexpected demand or
distribution in the future.
Importance of Inventory:
Inventory constitutes the largest component of current assets in much
organization poor management of inventories therefore results in business failure. A
stock out creates an unpleasant situation for the organization in case of a
manufacturing organization could, in extreme cases bring production process to a half
if a firm carries excessive inventories the added carrying cost is involved efficiency
inventory management and control contributes to the profit position of the
organization.
Objectives of Inventory Management
To maintain investments in inventories at the optimal level as required
by the operational and sales activity.
To keep materials cost under so that they contribute in reducing cost of
production and overall cost.

62
 To eliminate duplicate in ordering of stock, this is possible by
centralizing purchasing.
To ensure perpetual inventory control so that materials shown in stock
ledger should be actually lying in the stores.

Benefits of Inventory Management and Control

The proper management and control of inventories will results in the following
benefits to the organization:
Inventory control ensure an adequate supply if materials, store etc
minimize stock-out and shortage, and avoids costly interruption in
operations.
It keeps down the investment in inventories, inventory carrying costs
and obsolescence loses to minimum.
It facilitates purchasing economics through the measurement of
requirement on the basis of recorded experience.
It eliminates duplication in ordering or in replenishing stocks by
Centralizing the sources from which purchase requisition emanate.
It permits a better utilization of available stocks by facilitating inter
department transfers within the company.
It provides a check against the loss of materials through carelessness of
pilferage
It enables management to make cost and consumption comparisons of
pilferage
It enables management to make cost and consumption comparisons
between operations and periods.

Inventory control techniques:

The inventory control techniques are as fallows.
ABC analysis
HML analysis
VED analysis
SDE analysis
FSN analysis
Economic order quantity
Max- minimum system
Two bin system
Level setting
Just in -time

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Percentage of growth of inventory:
This shows the growth of inventory from 2007 to 2011.
Percentage growth of total inventory =Inventory

Table no 8.11
The growth of inventory

Growth of inventory in
Year Inventory percentage

2007-08 309855652 22.15

2008-09 296023204 21.16

2009-10 361420370 25.84

2010-11 491386658 36.68

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Graph no. 8.11
The growth of inventory

Analysis:
The above table shows the growth of inventory in 2007-08 was 22.15%, in 2008-09
was 21.16%,in 2009-10 25.84%and in 2010-11 was 36.68%.

Interpretation:
The inventory is maintained according to the sales order. Higher growth in the year
2010-11 when compared to other years, this indicates that there was increase in the
demand or customer order.

9. FINDINGS AND SUGGESTIONS

65
 The company follows proper pricing and profitability to generate adequate and
consistent cash.

Excellent Co-ordination with purchase, production, Marketing and finance

department and everyone is aware that any block in the working capital in way
of inventory or debtors will affect the cash flow of the company.

The immediate obligations for cash or met out of cash credit facility the modes
of the payments for creditors are through cheques and drafts.

The company follows net working capital concepts in managing its working
capital it relies on the internal accurse to minimize and faster the working
capital cycle.

The respondent unit investments are made with the expectations of quick pay
back areas.

The sources of cash inflows of the company are collection from debtors,
rental receipts, retained earnings, internal accruals and miscellaneous income.

10.CONCLUSIONS AND RECOMMENDATIONS

66
 Prioritizing the payments to ensure creditors good will

There should be proper cash managements system to periodically review and

maintain minimum cash requirements and the surplus cash must be profitably
invest in short-term or long term investments based on requirements.

In order to have better inventory management the company can follow

Comprehensive maintenance contract in order to reduce the level of stocking
spares.

It is recommended that the company must have dynamic review of working

capital needs on a periodical basis and take appropriate action to ensure that
only minimum capital needs are met and surplus funds are invested or reduce
the level of inventory and an effective management of accounts payable and
receivables.

It is suggested that the company can introduce cost control and cost reduction
techniques in order to compete with global standards

The company can also think of vendor managed inventory in order to

decreased its investment on raw material inventory

It is suggested to the company to improve its sales

It would be very helpful for the company if the company had to make
optimum utilization of its production capacity and improve labour
productivity.

KHDC is striving hard to create a niche in the global industry by adopting the
latest technology and manufacturing techniques.

A company whatever may be its present status is always to achieve a higher

place and share in the global industry.

67
 With the retirement of many workers who were traditional minded with the
reference to the work in the company a new blood is infused by recruiting
young workers who are more inclined towards the new manufacturing
technology and techniques.

There is some sort of dissatisfaction among the workers towards the

discriminations in providing the basic needs to the employees and the
executive.

The employees and executives are being trained both internally and externally
by different training both inside as per the needs.

The company is increasing its savings by cutting down its expenditure

effectively with the help of new technology and methods for examples for
recruiting to various posts it gives only a small box in the news papers to its
website for complete details there by saving the cost of advertising in more
space.

The company is providing training to many students coming from various

institutes from different courses. The company co-ordinates and provides the
training as per the recruitment of the students.

There are many kinds of boards and posters displayed in the company related
to the company mission, values, quality, safety, signboards, company
procedures and other.

BIBLOGRAPHY
BOOKS

68
 M.Y KHAN And P.K JAIN Financial Management, Second edition, Tata
M.C Graw- Hill Publishing company limited
New Delhi 1997
M.R AGARWAL Management Accounting, First edition, RBSA Publications
1985
PRASHANNA CHANDRA- Financial management, theory practice, third
edition, Tata M.C Graw- Hill Publishing company limited,
New Delhi.

REPORTS/MANUALS
Annual reports for the period 2007 to 2011 of Karnataka handlooms and
Development Corporation limited.
Manuals and brochures of Karnataka handlooms and Development
Corporation limited.
Libraries and magazines.

WEBSITES
www.khdcltd.com

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