assk project-2011 gaurav pawar

A

PROJECT REPORT

ON

“STUDY OF WORKING CAPITAL”

AT

ASHOK SAHAKARI SAKHAR KARKHANA LTD;ASHOKNAGAR

BY

GAURAV PRAKASH PAWAR

MBA (FINANCE)

ROLL NO. 9213320013

SUBMITTED TO

PUNJAB TECHNICAL UNIVERSITY (PTU)

IN PARTIAL FULFILLMENT OF

MASTER IN BUSINESS ADMINISTRATION (MBA)

ROYAL COLLEGE OF MANAGEMENT (RCM)

PUNE2009-11

TABLE OF C O N T E N T SChapter No. Title Page No.

Declaration from student I Certificate from Company/Organization II

Certificate from Guide III Acknowledgement IV

Chapter Scheme V List of Graphs VI List of Tables

VII List of Annexure VIII List of Abbreviations

IX Executive Summary X

I Introduction 1-10

1.1 Background of the study 11.2 Background of the topic 1-21.3 Company profile 21.4 Need of the study 2-31.5 Scope of the study 3-41.6 Objectives of the study 41.7 Concept of the study 51.8 Factors Influencing Working Capital 71.9 Growth trend 71.10 Organization profile 81.11 Location 9

II Research Methodology 11-12

2.1 Primary data 11 2.2 Secondary data 11 2.3 Population 12 2.4 Limitation of the study 12

III Data Processing and Analysis 13 IV Findings 21 V Conclusion 22 VI Recommendations 23

DECLARATION

I, Mr. Gaurav Prakash Pawar hereby declare that this project report is the record of authentic

work carried out by me during the period from April to June 2011 and has not been submitted to

any other University or Institute for the award of any degree /diploma etc

Gaurav Prakash Pawar

Date: - 30thJuly 2011

I

ACKNOWLEDGEMENT

It is a matter of great satisfaction and pleasure to present this report on summer training in Ashok

Co-Operative Sugar Factory Ltd; Ashoknagar. I take this opportunity to my thank to all those

involved in my training

I express my deepest thanks to my faculty guide, Prof. Manesha Dhaawaray for her untiring

energy in always guideline me, also encouraging me for the project. I thank all staff members.

I thanks to Mr. Bhanudas Murkute (Director) for given me opportunity to work at A.S.S.K.Ltd.

As a Management trainee. I am thankful to Mr. Nivrutti Kulkarni (Finance Manager) for his

encouragement and able guidance at every stage of my training work.

IV

Chapter Scheme

Chapter No. Title Page No.

I Introduction 1-10

II Research Methodology 11-12

III Data Processing and Analysis 13

IV Findings 21

V Conclusions 22

VI Recommendations 23

V

List of Tables

Table No. Title Page No

1 Cycle of working capital 6

2 Gross Profit Margin Ration 13

3 Net Profit Margin ratio 14

4 Return On Equity 15

5 Return On Total Cost(ROTA) 16

6 Liquid Ratio 17

7 Capital Employed Turnover Ratio 18

8 Fixed Asset Turnover Ratio 19

9 Inventory Turnover Ratio 20

VI

List of Graphs

Graph No. Title Page No

1 Difference between permanent and temporary working capital 6

2 Gross Profit Margin Ration 13

3 Net Profit Margin ratio 14

4 Return On Equity 15

5 Return On Total Cost (ROTA) 16

6 Liquid Ratio 17

7 Capital Employed Turnover Ratio 18

8 Fixed Asset Turnover Ratio 19

9 Inventory Turnover Ratio 20

VII

List Of Annexure

Anx No. Titel Page No.

1 Profit And Loss Account For The Year 2007 24



4 Balance Sheet As On 31 MARCH 2007 27



VIIIList of Abbreviations

Abbreviation Full form

A.S.S.K. Ltd Ashok Sahakari Sakhar Karkhana Limited

GPM Gross Profit Margin

NPM Net Profit Margin

DTR Debtors Turnover Ratio

CTR Creditors Turnover Ratio

ROCE Return on Capital Employed

ROE Return on Equity

RTA Return on Total Asset

FATR Fixed Asset Turnover Ratio

CETR Capital Employed Turnover Ratio

WCTR Working Capital Turnover Ratio

IX

EXECUTIVE SUMMARY

The main objective of this project is to study the financial health of the organization by

calculating various ratios and working capital.

During the project, they shows various types of ratios and How ratios are important in the view

of organization and how management use analysis of ratio and how management use working

capital figure for future planning and determination of policies. I have properly studied all

financial documents and records and trail balance sheet to calculate the important ratio. Each

ratio focused on the financial strength and weakness of the firm.

Data for this project is collected through two sources. Primary Sources, This data means the first

hand information, which was collected during formal & informal discussions with the General

Manager. Secondary data was generated with the help of Annual Report, Induction manual,

Reference book, Loan agreement and other sources in observation in Finance Department.

X

CHAPTER NO . 1 INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Sugar Industry in India is agro based industry. Occupying a predominate position in the

economy of the country. Sugar Industry is the Biggest industry employing nearly three lacks

workers and sub staining 2.5 to 3 crores of agriculturists and persons are engage in transportation

and harvesting. Total sugar industry in India are 320 out of that 70% are in the co-operative

sector. The production of sugar in India is highest in the world. In India Maharashtra stands first

in production of sugar.

Now in Maharashtra state 78 sugar factories in operating through beginning a few private

entrepreneurs started sugar production in 1930. The real inspiration was derived from the

leadership of late “Dr. PADMASHRI VIKHE PATIL” & “DR.DHANANJAYRAO GADGIL”

when they started the First sugar factory on co-operative basis in 1950.

So now in Maharashtra out of 78 sugar factories 67 are working on operative basis and

remaining 11 are working on joint stock company system Ahmednagar district. We find that out

of 18 sugar factories 13 are working on co-operative basis & only 5 are joint stock companies.

The present study has been undertaken in the area of Ashok co-operative sugar factory ltd.

Ashoknagar, Taluka-Shrirampur, District-Ahmednagar

1.2 BACKGROUND OF THE TOPIC

capital is just like a blood in the human body because capital is significant in financial

management due to the fact that it plays a vital role in keeping the wheel of the business running.

Every business requires capital, without which it cannot be promoted. The capital is required as

fixed capital and working capital. Fixed capital required for establishment of a business, where

as working capital required for day-to-day operations of a business.

Financial statements are prepared for decision-making. They play a dominant role in setting the

framework of managerial decision. But the information provided in financial statement is not an

end in itself as no meaningful conclusion can be drawn from this statement alone. However, the

information provided in financial statement used in decision making through analysis and

interpretation of financial statement.

1

Working capital is refers to short-term funds to meet operating expenses. It refers to the funds,

which a company must possess to finance its day-to-day operations of the business. It is

concerned with the management of the firm‘s current assets and current liabilities. It relates with

the problems that arise in attempting to manage the current assets, current liabilities and their

inter-relationship that exists between them. If a firm can not maintain a satisfactory level of

working capital, it is likely to become insolvent and may even be forced into bankruptcy...

1.3 COMPANY PROFILE

History of Ashok Co-operative Sugar Factory Ltd. Before giving into actual establishment of

this factory. Directly traced on the success of the idea of Pravaranagar in Bombay state during

1948 to 1954. In local farmers around Belapur road in Ahmednagar District were encouraged to

pursue the idea of co-operative sugar factory by the local official held a conference of local

farmers at belapur road on 17th Dec, 1945 under the president ship of DR.Gadgil the veteran

Economist of Pune. The successful working and tremendous progress of “Pravara Co-operative

Sugar Factory Ltd”. Pravaranagar encouraged the farmers. Around the area of cultivated

more sugarcane to meet this problems govt. indicates 12 sits which were considered suitable for

the establishment of sugar factories of Maharashtra subsequently in the year 1954 this Ashok Co-

operative Sugar Factory Ltd; Ashoknagar is granted industrial license registered no.264 dated 1

Dec 1954.

1.4 NEED OF THE STUDY

In every business organization its financial transaction are recorded in the systematic term, which

called ‘Financial Statements’ such as profit and Loss Account and Balance Sheet. Financial

statement shows the financial strength and weakness of the firm, hence, the financial statements

are prepared for the decision making. Management becomes able to take correct decision on the

basis of these financial statements is necessary to be analyzed.

The information provided in Financial Statements is of immense use in making decision through

analysis of and interpretation of Financial Statements. Financial analysis is the process of

identifying financial strength and weakness of the profit and loss A/C and other operative data.

2

There are various methods to techniques used in analyzing Financial Statement, Schedule of

changes in Working Capital, Fund Flow Statement and flow analysis, Cost Volume Profit

Analysis and Ratio Analysis. Working Capital management is one of the powerful tools used for

analyzing Financial Statement. Working Capital interpreted Financial Statement in an effective

manner that made enable to understand to management. It is the statement which shows exact

how much amount is require to run business or for production.

1.5 SCOPE OF THE STUDY

A) Managerial Uses Of Working Capital-

1)Helps in Decision Making- Financial statement are prepared primarily for decision-making.

But the information Provided in financial statements is not analysis helps in making decision

from the information provided in these financial statements.

2) Helps In Financial Forecasting And Planning- Working Capital is much help is financial

forecasting and planning. Planning is looking ahead and the ratios calculated for a number of

years work as guide for the future.

3) Helps In Control- Working Capital even helps in making effective control of the business.

Standard ratios can be based upon Proforma Financial statements and variances or deviations, If

any , can be found by comparing the actual with the standard so as to take corrective action at the

right time.

B) Utility Of Employees- The employees are also interested in the financial position of the

concern especially profitability. Their was increase and amount of fringe benefits are related to

the volume of profits earned by the concern. The employees make use of information available in

financial statement. Various profitability ratios relating to gross profit, operating profit, net

profit, etc. enables employees to put forward their view point for the increase of wages and other

benefits.

3

C)Utility Of Government- Government is interested to know the overall strength of the

industry. Various financial statements published by industrial units are used to calculate ratio for

determining short term, long term and overall financial position of the concerns. Government

may basis its future policies on the basis of industrial information available from various units.

D) Tax Audit Requirement- This Finance Act 1984, inserted section 44 AB in the income Tax

Act. Under This Section every assesses engaged in any business and having turnover or gross

receipts exceeding Rs.40 Lacks. Is Required to get the accounts audited by a charted accountant

and submit the tax audit report before the due date for filling the return of income under section

139(1).In case of professional a similar report is required if the gross receipt exceed Rs.10 lacks.

Clause 32 of the Income Tax Act requires that the following accounting ratios should be given:

(1) Gross Profit/ Turnover

(2) Net Profit/ Turnover

(3) Stock in trade/ Turnover

(4) Material consumed/ Finished Goods Produced

1.6 OBJECTIVES OF THE STUDY

In the present era of competition, the companies have huge potentials to grow in the market. Due

to the Globalization, a tremendous change takes place in the financial sector. The research aims

to study the financial strength and weaknesses of the company with special reference to

WORKING CAPITAL MANAGEMENT.

1. To study how the company will manage its current assets to maintain better financial position.

2. To know the reasons of deviations in the working capital position of the company.

3. To study the liquidity management of the company.

4. To study inventory management of the company.

5. To study the receivables management of the company.

6. To study the sales of the company and revenue.

4

1.7 CONCEPT OF THE STUDY

The concept of working capital has been a matter of great controversy, among the financial

wizards and they view it differently. working capital can be classified in to broadly two concepts

of working capital commonly found in the existing literature of finance, such as:

A) Gross working capital concept:-

According to the gross working capital concept, the total current assets are termed as the gross

working capital or circulating capital or operating the capital as rotate continuously as long as the

firm exists. A total current asset includes cash, marketable securities, accounts receivables,

inventory, prepaid expenses, advance payments etc.

This concept also called as quantitative or broader approach. Gross working capital refers to

firm‘s investments in the short-term assets such as cash, short-term securities, accounts

receivables and inventory.

B) Net working capital concept:-

As per this net working capital concept, the excess of current assets over current liabilities

represents net working capital. Net working capital concept represents the amount of the current

assets, which would remain after all the current liabilities were paid. It may be either positive or

negative. It will be positive, if current assets exceed the current liabilities and negative, if the

current liabilities are in excess of current assets.

A net working capital concept indicates or measures the liquidity and also suggests the extent to

which working capital needs may be financed by the payment source of funds

C) Permanent Working Capital

This indicates the amount of minimum Working Capital which is required to be maintained by every business at any point of time, in order to carry on business permanent & uninterrupted basis. It is permanently locked up in current assets.

D) Temporary Working Capital

This indicates that amount of Working Capital required by the business over & above fixed

Working Capital. This need of Working Capital may vary depending upon the fluctuations in

demand as a result of changes in production or sale

5

Amount of Working Capital.

Time

Table.1 Cycle of working capital

Graph 1. Difference between permanent and temporary working capital

6

Permanent Working Capital.

1.8 FACTORS INFLUENCING WORKING CAPITAL

1. General nature of the business companies which sell a service and that too for immediate cash,

require little working capital. But a manufacturing firm which produce a product and sell on

credit basis, working capital required with high.

2. Production cycle if the production process is lengthy working capital needs with high.

3. Speed of operations cycle, if the speed of operational cycle is slow working capital needs high.

4. Credit terms if the company purchases raw-materials on credit basis and sills finished goods

on cash base, working capital requirement will be low.

5. Growth and expansion is firm‘s larger growth prospects demand grater working capital.

6. Dividend policy is firm‘s pursuing liberal dividend policy requires more working capital.

• To analyze the changes in Working capital for the study period of Ashok Sugar Factory Ltd.,

Ashoknagar.

• To analyze the Working capital performance of the firm through ratio analysis.

• To suggest possible solution for better management of Working capital of

Ashok Sugar Factory Ltd., Ashoknagar.

1.9 GROWTH TRENDS-

Before 1932 there were about ten factories producing above 1.6 lacks tons of sugar in 1951-52

sugar production reached a figure of 15.2 lacks tones. In 1951 the government provided

incentives by raising minimum prices of sugarcane and maximum prices of sugar. So these

policies have directly effect on the result in lower production. The government again adopted

the policy of protection and raised minimum sugarcane prices in 1954 as result sugar output rise

to 15 lacks tons in 1954-55 and imports became necessary.During the season 1981-82 the highest

production was recorded. Which were 84.37 lacks tones? The area under sugar cane in

Maharashtra i.e. in 1972-73 was 11, 91,800 tones & 81.6 tones per hector, but in 1981-82 was

2,87,80,000 tones & 96.9 tones per hector per hector. The change in sugarcane production

because the new developed variety gives more crop yield & it depending upon the climatic

condition from year to year.

7

1.10 ORGANIZATION PROFILE

Registered No. G 264 Date 1/12/1954

Sugar Factory License No. 1] No. L8-61-55.L 25-53 Date 15/01/1952

Industrial Growth License No. 1] No. L/25/N209/68 L.C. Date 23/11/1968

Ethanol License No. A.E.M./206 Date 22/01/2002

Sen. Vat No. 27380002261 C Delhi

Vat No. 27380002261 V Mumbai

Service Tax No. 54/S.T./G.T.A./130103?04-05

Excise No. AACCA 3452-B

Tel No. Shrirampur Office- [02422] 223340, 223460Factory Office- [02422] 246491,246492

Fax No. [02422] 246493

E- Mail [email protected]

Employees 1200-1300

8

1.11 LOCATION

mailto:[email protected]

Ashok Sugar Factory Ltd; Ashoknagar is situated at Ashoknagar Tel.Shrirampur Dist.

Ahmednagar for history perspective of the history of Factory Nipani Wadgaon the village where

this factory is situated on pravara left canal the irrigation of pravara left bank. Has thus played a

major part in this change factory is situated near central railway line on daund manmad rute.

Railway station Nipani Wadgaon. This Factory is previously named as karegaon bhag Co-

operative Sugar Factory Ltd. Is registered undered the Co-operative societies act on 1 dec, 1954

with the registration no. 264 dated 1 Dec, 1954

FUTURE PLAN/GOALS OF THE COMPANY/FACTORY COUNTRY WINE

Submitted the project wine to government and it’s started as early as possible

Winning Project

•To produce directly wine from the cane juice

•Graine base distillery project

•To produce the ethanol from the grains like jwar and maze

•To increase the capacity of the Factory

•Co Generation project will start.

9

Picture -1. Ashok Sugar Factory

Picture-2.Ashok Sugar Factory

10

CHAPTER NO.2 RESEARCH METHODOLOGY

SOURCES OF DATA COLLECTION

2.1 PRIMARY DATA

This data generated specifically for the purpose of working out the project. This data mean the

first hand info., which is collected various sources schedules and formally informal information.

1) Information relating to the project was collected during formal & informal discussions with

the General Manager(Finance)

2) Queries arising in due course of the project brought into the notice of concerned Authority and

necessary explanation and solution are adapted.

2.2 SECONDARY DATA

1) Annual Report-

Majority of information gathered from data exhibited in the annual reports of the company.2004-

05,2005-06,2006-07,2007-08,2008-09.

2) Induction Manual-

Information relating to company history and profile gathered from the induction manual of

ASSK Ltd; Ashoknagar.

3) Reference Book-

Theory relating to the subject matter and various concepts taken from financial reference books. Financial Management (M.Y. Khan, P.K. Jain),Financial Management (S.M.Inamdar),FinancialManagement(P.V.Kulkarni), PTU MBA 4th Semister Working Capital Management Book

4) Loan Agreement-

Information relating to various rules and regulation for bank finance taken up from loan

agreement between A.S.S.K. and consortium banks.

11

2.3 POPULATION

Ashok Sahakari Sakhar Karkhana Working area concluded 40 villages.11,000 Share Holders and

1200 workers in this company.

2.4 LIMITATION OF THE STUDY

1). Generally company does not allow outsider to conduct any study or search work in the

organization. Therefore to get the e project done in company it was very difficult.

2) Due to confidentially some important information, which is important for the project, could

not collected.

3) All the financial data is A.S.S.K. have taken from the various statements of the company’s i.e.

Balance Sheet, Profit and Loss Account thus this project report is based on the information

provided by the concern authorities. The Figures incorporated are not the exact ones as available.

12

CHAPTER NO. 3 DATA PROCESSING

1.Gross Profit Margin ratio

Table:2 Gross Profit Margin Ration

Particular 2006-07 2007-08 2008-09Gross Profit 11,66,69,889 -7,26,51,200 71,53,462Net Sales 64,51,84,494 58,41,86,990 82,11,99,350Gross Profit Ratio 18.08% -12.4% 0.87%

Graph:2 Gross Profit Margin Ratio

2006-072007-082008-09

Interpretation

Gross profit margin ratio was 18.08% in the year 2006-07 which shows very good sign . After

that Gross Profit Margin Ratio Was -12.4% in the 2007-08 and 0.87% in the year 2008-09. In the

financial year 2007-08 Gross Profit Margin Ratio is decreased at huge percentage because

company had incurred more on cost of goods sold in this year.

13

2.Net Profit Margin ratio

Table:3 Net Profit Margin Ratio

Particular 2006-07 2007-08 2008-09Net Profit 8,36,94,336 -16,81,39,245 19,03,308Net Sales 64,51,84,494 58,41,86,991 82,83,52,813Net Profit Ratio 12.9% -28.78% 0.23%

Graph:3 Net Profit Margin Ratio

2006-072007-082008-09

Interpretation Net Profit Margin Ratio was 12.9% in the year 2006-07. Net Profit Margin ratio for the year 2007-08 was -28.78% and for the year 2008-09 0.23%. This net Profit ratio indicates the overall performance & efficiency of company. In the above calculation in year 2004-05 the Net Profit ratio was 0.81% but after that it seems to fail in the financial year 2005-06,2006-07,2007-08 & raise very marginally in tear 2008-09 to 0.12%.As the higher Net Profit ratio indicates the good performance & efficiency of the company.

14

3.Return On Equity

Table:4 Return On Equity

Particular 2006-07 2007-08 2008-09Net Profit 8,36,94,336 -16,81,39,245 19,03,308Equity Shareholder Fund 27,90,25,501 29,55,76,552 31,28,21,350Return On Equity 30% -56.88.% 0.60%

Graph:4 Return On Equity

2006-072007-082008-09

Interpretation

In year 2006-07 Ratio on Equity is 30% And year 2007-08 was -56.88% and 2008-09 in the

Financial year Ratio On Equity is 0.60% ratio increased in 2008-09. Return on Equity means the

ratio in which the return is on only owned funds, equity funds. The higher ratio is the good

indicator where as low ratio is poor indicator.

15

4.Return On Total Cost(ROTA)

Table:5 Return On Total Cost(ROTA)

Particular 2006-07 2007-08 2008-09Net Profit (after tax) 8,36,94,336 -16,81,39,245 19,03,308Total Assets 1,16,67,63,954 1,06,29,72,213 1,20,50,99,557Return on Total Asset 7.17% -15.81% 0.157%

Graph:5 Return On Total Cost(ROTA)

2006-072007-082008-09

Interpretation

The ROTA means the ratio of Net Profit after tax to total asset. The higher the ratio good for the

company. The ROTA Figure gives investors an idea of how effectively the company is

converting the money it has to invest into net income.

16

5.Liquid Ratio

Table:6 Liquid Ratio

Particular 2006-07 2007-08 2008-09Liquid Assets 18,75,60,886 15,10,54,419 21,43,48,678Liquid liabilities 19,78,10,469 22,00,97,393 22,53,07,838Liquid Ratio 0.94% 0.68% 0.95%

Graph:6 Liquid Ratio

2006-072007-082008-09

Interpretation

The Quick ratio measures your ability to access cash quickly to support immediate demands., the

quickly to support immediate demands, the quick ratio divides current assets excluding inventory

by current liabilities. In the case A.S.S.K. liquidity of firm is very good because liquidity ratio

from year 2006-07 to year 2008-09.

17

6.Capital Employed Turnover Ratio

Table:7 Capital Employed Turnover Ratio

Particular 2006-07 2007-08 2008-09Net Sales 64,51,84,494 58,41,86,991 82,83,52,813Capital Employed 627,90,25,501 29,55,76,553 31,28,21,351CETO Ratio 2.31 1.97 2.64

Graph:7 Capital Employed Turnover Ratio

2006-072007-082008-09

Interpretation

The capital employed turnover ratio tells us the state of the relationship between the share

holder’s investment in the business & the sales that the management of the business has been

able to generate from it.

The capital employed turnover ratio shows that in financial year 2006-07 is 2.31, 2007-08 is 1.97 & 2008-09 is 2.64

18

7.Fixed Asset Turnover Ratio

Table:8 Fixed Asset Turnover Ratio

Particular 2006-07 2007-08 2008-09Net sales 64,51,84,494 58,41,86,990 82,83,52,813Fixed Assets 32,32,77,954 37,14,82,213 39,75,87,557FATO Ratio 1.99 1.57 2.08

Graph:8 Fixed Asset Turnover Ratio

2006-072007-082008-09

Interpretation

FATR indicates how efficiently the fixed assets have been utilized. The ratio for the last 3 year is

1.99,1.57, & 2.08 for manufacturing concerns, this ratio is very important. The reason is that like

current assets , fixed assets are contributing quite substantially in making sales while low ratio

indicates that fixed assets are not being used efficiently.

19

8.Net Working Capital

Table:9 Net Working Capital

Particular 2006-07 2007-08 2008-09Cost Of Goods Sold 52,85,14,605 51,15,35,791 82,83,52,813Avg. Inventory 61,56,75,898 52,21,27,000 50,00,94,000Inventory Turnover Ratio 1.32 0.97 1.64

Graph:9 Inventory Turnover Ratio

2006-072007-082008-09

Interpretation

The Working capital turnover ratio is ratio in which the number of times working capital is turned around in particular period. The high ratio shows the better utilization of the working capital. In the above example the ratio is getting increase & hence Good indication of better utilization of working capital.

20

CHAPTER NO. 4 FINDING

This study has been taken up with main intention of analyzing the profitability and financial

soundness of A.S.S.K. The finding is result of analyzing the data of three years with respect to

the financial position operational efficiency and profitability of the company. The brief

description of the finding of the study is given below-

1. Gross Profit margin Ratio was very good sign. the comparison of last 3 yers this ratio are

changing. that ratio are not constant

2. The company is failed to maintain the margin of covering the administrative, selling and

distribution expenses.

3. This Net Profit indicates the overall performance & efficiency of company. From the above

calculation it seen that the efficiency & performance of the company is getting dampen.

4. If the Company wants to increase the efficiency & improve their performance then the

companies want to maintain its higher Net Profit rate.

5. ROE ratio indicates the higher ratio is the good indicator where as low ratio is poor indicator.

In the above figure the ratio continually failing down hence shows the poor performance.

6. ROTA ratio indicates the higher the ratio good for the company. In the above figure the ratio is getting reduce i.e. return on total asset is getting reduced and hence weakening the position of the company.

7. Capital employed turnover ratio has shown good result from last 3 years, increasing. ROCE

can be increased by one of the following way- increase profit margin, decrease in capital

employed. ROI can be improved by boosting sales, reducing invested capital or reducing

cost.

21

CHAPTER NO. 5 CONCLUSION

Working capital plays a key role in a business enterprise just as the role of heart in human body.

Working capital is acts as grease to run the wheel of fixed assets. Working capital effective

provision can ensure the success of a business while its inefficient management can lead not only

to loss but also to the ultimate downfall of business funds. Working capital relates in other

words,efficiency of business enterprise depends largely & it‘s ability to manage Working capital.

Working capital management is concerned with the problem that arises in attempting to manage

the current assets, the current liabilities and the inter-relationship that exists between them. The

term current assets refers to those assets which in the ordinary course of business can be

converted into cash with in one year without undergoing a diminution in value and without

disrupting the operations of the firm. Current liabilities are those liabilities which are intended, at

their inception, to be paid in the ordinary course of business, with in a year, out of the assets or

earnings of the concern.

1) Company’s solvency position is not good it shows that company has sufficient liquid assets.

2) Company’s turnover increased tremendously but company has concentrated on its cost of

goods sold because it affect on gross profit of the company.

3) High ratio shows that better utilization of the company its indicates Working Capital.

4) ROE is low, Ratio in Financial Year 2007-08,2008-09, it shows that poor performance of the

company.

5) The company’s liquidity position in terms current ratio & quick ratio has not been maintained at a

comfortable position. The current ratio in the period of 3 years is well below the normally

acceptable ratio 2:1.

6) The analysis of financial data reveals that the company has very sound position regarding

liquidity & solvency as shown by the current and quick ratio. The cash to current assets shows

decreasing trend shows the efficiency in operation

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CHAPTER NO. 6 RECOMMENDATION

This Project is useful to understand the Working Capital of Financial Statement undertaken for

A.S.S.K.LTD. And others companies. This is useful in understanding all theoretical concept,

how they are practically implemented, also I studied the various types of ratios which are used

by the A.S.S.K. for analyzing its financial statements. Besides this I also find out the working

capital company.

1).So this project provided details of Ratio Analysis of financial statements, this project gives me

the practical knowledge of the concept. It gives me the information regarding the working of the

companies. This project is also useful for A.S.S.K. for the effectively implementation of the

working capital.

2).To recommend measures to improve performance and interpret Balance Sheet And Profit &

Loss Account of A.S.S.K. Ashoknagar for the year2008-09,2007-08,2006-07

3).Highlight the utility of financial ratios in determining the financial capability of the Firm.

4) This project is easy to understand and helpful to rectify or useful to make certain changes in

companies working capital

5) This Project analysis is useful to ASSK Ltd. for the decision making.

6) It can be seen from the study of this project that Ashok Sahakari Sakhar Karkhana Ltd; must

try to increase there inventory.

7) The growth in the liquidity ratio is not much than the previous years so management must

look to increase or try to increase their liquidity position

23

EXPENSES Sch. No. 31/03/2007 INCOME Sch. No. 31/03/2007

1.CANE PURCHASED & RELATED EXP.

1.VALUE OF SUGAR PRODUCTION (Exclusive Excise Duty)

5 622523964

A) Sugar cane purchase 333239121

B) Cane development Exps. 7089128.39

2.CANE PURCHASE TAX 9146856 2.VALUE OF BY PRODUCT SALES(Exclusive Excise Duty)

3.CANE HARVESTING &TRANSPORTEXPENSES

1 86725796

4.CANE SUPPLY & RELATED EXPS.

5451160.85

5.SALARY & WAGES 2 60346437 3.OTHER INCOME 25047892.58

6.STORES REPAIRS

A) Machinery Repairs 20561586.83

B) Process & Chemical Exps. 32204.5 4.PROFIT FROM BY PRODUCT UNIT

22110277.06

C) Packing Exps. 15156274.32

D) Other Stores(Chemical) 8196619.06

7.MANUFACTURING &S ELLING EXPX.

3 6707995.53 5.NET LOSS

8) ADMINISTRATIVE EXPS.

4

9) INTREST

A) On Long Term Loans 605969 TRANSFER TO BALANCE SHEET

168139245.4

B) On Working Capital Loans

20454586

C) On Deposits 9763559

10. DEPRECIATION 9213751

11. RECOUPMENT ACCUMULATED LOSSES

83694336.31

TOTAL 692342663.5 TOTAL 692342663.5

Ashok Co-operative Sugar Factory Ltd, Ashoknagar Tal-Shrirampur, Dist- Ahmednagar

PROFIT AND LOSS ACCOUNT FOR THE YEAR 2007 ANNEXURE:1

24


PROFIT AND LOSS ACCOUNT FOR THE YEAR 2008

ANNEXURE:2

EXPENSES Sch. No. 31/03/2008 INCOME Sch. No. 31/03/2008



5 558183446.7

A) Sugar cane purchase 3737288259



26003544.3

3.CANE HARVESTING &TRANSPORTEXPENSES

1 100876843


6141956.84

5.SALARY & WAGES 2 94695772.58 3.OTHER INCOME 38438136.09

6.STORES REPAIRS



30141976.77



7.MANUFACTURING &S ELLING EXPX.

3 9928137.93 5.NET LOSS

8) ADMINISTRATIVE EXPS. 4 26638758.77

9) INTREST


168139245.4

B) On Working Capital Loans 54976613.9


10. DEPRECIATION 13121851

11. RECOUPMENT ACCUMULATED LOSSESTOTAL 820906349.3 TOTAL 820906349.3

25


PROFIT AND LOSS ACCOUNT FOR THE YEAR 2009

ANNEXURE:3

EXPENSES Sch. No. 31/o3/2009 INCOME Sch. No. 31/03/2009



5 786414144.3

A) Sugar cane purchase 460389111.8



41938668.6

3.CANE HARVESTING &TRANSPORT EXPENSES 1

1397660196594453.1


126347240.6

5.SALARY & WAGES 2 3.OTHER INCOME 138312611.3

6.STORES REPAIRS



25243689.03



7.MANUFACTURING &SELLING RELATED EXPENSES

342005087.1423888604.18

5.NET LOSS

8) ADMINISTRATIVE EXPS. 4

9) INTREST


B) On Working Capital Loans 61306134.24


10. DEPRECIATION 14558090.83

11. RECOUPMENT ACCUMULATED LOSSES 1903308TOTAL 99190113.2 TOTAL 991909113.2

26


BALANCE SHEET AS ON 31 MARCH 2007

ANNEXURE:4

CAPITAL & LIABILITIES Sch. No. As on 31/o3/2007

ASSETS & PROPERTIES Sch. No. As on 31/03/2007

Authorised Capital 1 102500000 Cash & Bank Balance

Paid up capital 49887783 Cash in hand 101212.5

Reserve & Surplus 2 229137718.9 Cash at bank 10 11943460

Secured Loans 3 Investment 11 14300185

Capital Terms Loan 138328586 Advances & Other Receivable

Working Capital Loans 414539891.6 Advances 12 357203.83

Unsecured Loans 4 Security deposits 13 7976833.09

By Product Division 29760854.08 Other receivable

Deposits 5 94716276.5 Sugar division 14 123019758.1

Current Liabilities & Provision

By product division 29862232.53

Govt. Liabilities 6 12164540 Current Assets

Recovery from cane bills & others

7 16701480.71 Store stock 15 32164106.23

Other liabilities Sugar & by product stock 16 593761375.3

Sugar division 8 137898222.3 Fixed Assets 17 323277954.6

By product division Preliminary Capital & Other Exps.

Current dues 29862232.53 Ashok Bhandare 12371539.02

Against bills payables 1183993.29 Wage board difference

Provision 9 28463221.73 Profit & Loss Account

Provision For Excise Duty Sales Tax

Accumulated tax 154403958.6

Sugar 21888737.53 Add-Current year loss

Molasses Less-Current year profit 83694336.31

Spirit & Ethanol 4504869.5 70709622.33

Sales Tax 860688

Provision for Interest Payable 9946386.68

Total 1219845483 Total 1219845483

27



ANNEXURE:5





Reserve & Surplus 2 245608754.6 Cash at bank 10 4557696.12

Secured Loans 3 Investment 11 14314185


Working Capital Loans 4478231459.7

Advances 12 300615.2



Deposits 5 96094182.5 Sugar division 14 100705112

Current Liabilities & Provision By product division 19368222.36

Govt. Liabilities 6 9410191 Current Assets


7 24890350.06 Store stock 15 38928693.6

Other liabilities Sugar & by product stock 16 511507185

Sugar division 8 161907162.5 Fixed Assets 17 371482213.2



Against bills payables 4521466.78 Wage board difference




Sugar 21587053 Add-Current year loss 168139245.4

Molasses Less-Current year profit

Spirit & Ethanol 1079411.18 238848867.8

Sales Tax 296532.4


Total 1324192918 Total 1324192918

28



ANNEXURE:6





Reserve & Surplus 2 263748378.9 Cash at bank 10 34221099.55

Secured Loans 3 Investment 11


Working Capital Loans 475158601.2 Advances 12 202884.89



Deposits 5 93171458.5 Sugar division 14 144409220.9

Current Liabilities & Provision By product division 14339589.7

Govt. Liabilities 6 9172138.01 Current Assets


7 31888328.55 Store stock 15 38552547.5

Other liabilities Sugar & by product stock 16 538343352.95

Sugar division 8 169402121 Fixed Assets 17



Against bills payables 505660.39 Wage board difference 16267000




Sugar 33193603 Add-Current year loss 1903308.38

Molasses Less-Current year profit

Spirit & Ethanol 823811.75 236945559.4

Sales Tax 197993


Total 1454416235 Total 1454416235

29

BIBLIOGRAPHY

Financial Management: - M. Y. Khan. , P. K. Jain.

Financial Management: - S. M. Inamdar

Financial Management: - I. M. Pandey.

Financial Management: - P. V. Kulkarni

PTU MBA 4th Semister Working Capital Management Book

FORMULA

Gross Profit= Gross Profit/Sales*100

Net Profit= Net Profit/Sale*100

Return On Equity= Net Profit(After Tax & Dividend)/Equity Shareholders Fund*100

Return On Asset= Net profit (After taxes)/Total Asset*100

Current Asset= Current Liabilities/Current Assets

Inventory Turnover Ratio= Cost Of Goods Sold/ Average Inventory

Creditors Turnover Ratio= Net Credit Purchase/ Average creditors

Debt Equity Ratio= Total debt/ Shareholders Equity

Debt to Total Capital Ratio=Long Term Debt/Permanent capital

Working Capital=Current Assets-Current Liabilities

30

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