A PROJECT REPORT On On The Working Capital Management in Karnataka State Finance Corporation

ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION
CHAPTER-I
EXCUTIVE SUMMARY
This is finance project specially focused on the working capital management in Karnataka State Finance Corporation. The objective of the study is to know the working capital management provided by the Bank. The procedure followed is the assistance and the help of the Bank & the Manager. Karnataka State Finance Corporation is well known for its personalized service & has made rapid strides in the real of customer service in tune with changing banking scenario. The objective of bank was primarily to extend financial assistance to the local weavers who were crippled by a crisis in the handloom industry through mobilizing small savings from the community. Methodology: This is an analytical study based on secondary data collected from the published annual reports (i.e. 2001-02 to 2006-07) of the KSFC. In addition, the primary data required is collected from the bank officials through personal interaction. 1. The data required for the purpose of this study is of two types: 1) Primary data 2) Secondary data Data collection: The data collected for this study is from annual reports i.e.2002-03 to 2006-07.
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Data presentation: The data have been presented in Tables as well as Graphs in order to enable as to understand them in accordance with the objectives of study. Data analysis:
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION The data have analyzed with the help of trend rations 2001-02 is considered be base year whose value is equal to 100.then. The values for subsequent years i.e.2001-02 to 200607 are calculated and compared with the base year value on year to year basis. The overall increase/decrease in the values of working capital during the study period has been calculated for each item of deposits by applying the following formula. 2. Scope of the study: The study brings out the pattern of working capital in Karnataka State Finance Corporation. This study also covers the working capital management in the corporation. 3. Objectives of the study: The following are the objectives set for the present study. To understand the behavior and culture of the organization. and To study the different components of working capital of the corporation. 4. Limitations of the Study: The study focuses on working capital management. and The period covered in the present study is 6 years i.e., from 2001-2002 to 2006-2007.
CHAPTER-II
ORGANISATIONAL PROFILE
Origin of State Financial Corporation:
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION Indian government has passed state financial corporation legislation in 28th September 1951. This legislation empowers the state government to set up the state financial corporations in their respective states. First state financial corporation came to existence in Panjab in 1953. Now there are 18 state corporations in India. State financial corporation grant the assistance to medium, small and cottage industries. The maximum capital allowed for a corporation is Rs. 15 crores. State government concerned IDBI, commercial banks, insurance companies, co-operative banks, investment trusts and the general public contribute the capital of state financial corporation. Salient features of state financial corporation: Some of the salient features of the State Financial Corporation Act, 1959 governing the S F Cs are as followed 1. The authorized capital of SFCs will be fixed by the respective state governments. However it will not be less than Rs. 50 lakhs or exceed Rs. 50 crores. 2. The authorized capital will be divided into equal number of shares and issued to the state government. The Reserve Bank, Scheduled Banks, Insurance Companies, other Financial Institutions and the public. However the issue of the shares to public will be limited to 25% of the authorized share capital. 3. The General Superintendence, direction and management of the affairs and business of the corporation is vested in a Board of Directors which is assisted by an executive committee day today affairs of the corporation will be looked by the managing Director.
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION 4. The Director of the Board are nominated by the state government the Reserve Bank 7 the industrial finance corporation of India. 5. A State Financial Corporation is authorized to, i. Guarantee Loans raised by industrial concerns which are repayable within a
period not exceeding 20 years. ii. Under write the issue of stocks, shares, bonds and debentures of industrial
concerns. iii. Grant Loan or Advance to industrial concerns repayable within a period not
exceeding 20 years. iv. Subscribe to debentures floated by industrial concerns.
The main objective of KSFC is to bring orderly and balanced growth of industrials in the state. Towards this end KSFC is giving special attention to the backward districts to come under the industrial map. The main function of KSFC is long term lending for small tiny 7 medium industries and even for expansion and modernization of existing industries.
History of KSFC (Karnataka State Financial Corporation)

Karnataka State Financial Corporation (KSFC) is one among the 18 state financial corporations (SFCs) in India. KSFC was established by Government of Karnataka in
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION March 1915 under the SFCs Act 1951 for extending financial assistance for setting up of tiny, small, medium and large scale industrial units in the state. KSFC is sanctioned loan to industrial units under different schemes. KSFC is also providing services like hire purchase, leasing and merchant banking activities. KSFC is recognized as best merchant banker by SEBI. KSFC is an ISO certified organization and striving to provide better services to its customers through professional management and team work. The management is taking effective reasons to transform the organization to a customer centric institution. KSFC mission is to nurture, develop and service the SME sector through need based product and services, the small and medium scale sectors in India lacks capital market and starving for funds. SFCs are started to provide funds to SME sector and encouraged first generation entrepreneurs to start business especially in back word areas. Since the capital is scarce resource it should allocated carefully for the development of industrial units. KSFC has been acting as Regional Development Bank by providing assistance to needy entrepreneurs. Before giving loan to any projects the corporation should check the viability of projects. KSFC appraises projects to test the viability from the marketing, financial, technical, economic and managerial angels.
Achievements of KSFC: KSFC has completed its 39 years of operation. it has contributed Significantly for the growth of small scale industry and development of backward areas in the Babasabpatilfreepptmba.com
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state. It has extended financial assistance to rural, cottage industries, articians, SC/ST entrepreneurs and other economically weaker sections of the society under special loan scheme. The proud of achievement of KARANATAKA STATE FINANCIAL CORPORATION are given below:
1.Sanction of loan aggregating to Rs .4508 crores to 1, 33,735 project.
2. Loan assistance of rs.970.34 crores to 46,252 SSI units proposed in backward district of the state. 3. Sanction of loan aggregating to Rs .2233.45 crores to 78,835SSI units. 4. Establishment of 7 zonal offices .36 branch offices and 2field offices in the state and higher delegation of powers to zonal and branch offices to sanction and disburse loans up to Rs .25 lakh . as a consequences of same, today 95% of loans are sanctioned at branch offices. 5. Introduction of loan assistance schemes for getting ISO 9000 certification for export oriented and units proposing export of their products 6. Commendation from IDBI as one of the best SFC of the country
KSFC Main Activities / Function: 1 Long term lending

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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION 2 Lease financial assistance or hire purchase assistance for acquisition of machinery equipment and transport vehicles. 3 4 Merchant Banking. Fund based activities like bill discounting, investment in schemes and subscription to non-convertible debentures factor services, etc.,
Mission statement: `KSFC is committed to nature develop and service the SME sector through need based product and services.
Quality policy: Karnataka State Financial Corporations endeavors create satisfied customer through adequate and timely financial assistance and guidance. This shall be achieved through professional management and team work.
Quality objectives: 1 To provide good quality of service on continuous basis to the satisfaction of customers. 2 To extend effective guidance to the entrepreneurs for successful accomplishment of their business ventures.
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION 3 To motivate and involve everyone organizational growth through
implementations the documented quality management system. 4 To encourage everyone in the organization to upgrade and enhance their skills and knowledge with appropriate training for improving quality of service to entrepreneurs. 5 To ensure customer satisfaction through team work and professional management and 6 To attend specified levels of performance every year and to ensure compliance with statutory and regulatory requirements.
Types of assistance: KSFC offers long and medium term financial assistance in the following forms. 1. Loan and advances, with a liberal repayment period (normally not exceeds 8 years) including moratorium. 2. Loans in collaboration with other financial institution. 3. Subscription to share capital of companies promoted by small entrepreneur (special capital scheme) by way of soft loan. KSFC gives preference to the projects which are as follows; a) b) c) Promoted by technician entrepreneur In the small sector Located in growth centers and developing area of the state
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION d) Promoted by entrepreneur belonging to schedule cast and schedule tribe, backward class entrepreneurs and other weaker section of society. e) f) g) Projects which having high employment potent ional Capable of utilization of local resources In tune with the declared national priorities.
Purpose of assistance: The corporation provides assistance for the acquisition of capital assets in the form of land, building, plant and machinery only, working capital assistance against raw materials, stock in trade and semi finished products can by had from the commercial and industrial co-operative banks. Assistance available: KSFC extends term loans to new or existing units up to Rs. 240 lakhs for corporate bodies and registered co-operative societies. Term loans up to maximum of Rs. 90 lakhs are sanctioned to proprietary, partnership and Joint Hindu Family concerns. KSFC give Term Loan jointly with K S I I D C and commercial banks for projects up to Rs. 10 crores. Area of operation: Industrial concerns established or to be established in Karnataka are eligible for assistance from KSFC. An industrial concern incorporated outside the state is also eligible provided the place of business is in Karnataka and they agree to shift their registered office to the state of Karnataka.
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION Network of KSFC:
KSFC has 7 zonal offices spread over the entire state viz, Bangalore Urban, Bangalore Rural, Mysore, Mangalore, Dharwad, Belgum and Gulbarga. The head office of KSFC is located at 1/1 Thimmaiah Road, Bangalore-560052. There are totally 36 branches of KSFC in the entire state. According to business availability and seeing there should limits, these branches have been categorized into A Grade, B Grade and field offices. Accordingly, KSFC has at present 7 Zonal Offices and 16 A Grade branches, 18 B Grade branches and 4 Field offices.
Working of KSFC: KSFC has decentralized the system of working. Term Loan up to Rs. 25 lakhs are sanctioned at the branch office level 7 Loans over Rs. 25 lakhs are processed and sanctioned at the head office. In B Grade branches, Branch Manager can sanction loans upto Rs. 5 lakhs where as in A Grade branches the Branch Manager can sanction loans up to Rs. 8 lakhs over and above Rs. 25 lakhs the concerned Deputy General manager (or Zonal Manager) will sanction the loan. Management of KSFC: The management of the KSFC is carried out by the Board of Directors consisted as per the SFC act 1951, assisted by a Managing Director and Executive committees. The
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION Chairman is appointed by the state government is not a full time Director. Where as the Managing Director appointed by the state government is a full time Director. Composition of the directors: The Board has 12 Directors out of them 4 Directors are nominated by the state Government, 1 by the RBI, 2 by the IDBI and 4 as per the SFCs act 1951. Apart from this the state government in consultation with IDBI and the board appoints the Managing Director.
About Bijapur KSFC branch:

It started in 1983. The members of employees were 26 and loan sanctioning up to Rs. 10,000/- for small scale sectors. In the year 2006 the number of employees have been decreased to 20 members due to introduction of system of computerization and the loan sanctioning limit also extended up to Rs. 5,00.000/- to an enterpenurers. At present the KSFC giving more preference to Term Loan Schemes especially to SSC (Soft Seed Capital) under National Equity Fund Schemes.
Functional departments of KSFC:

1. Entrepreneur Guidance Cell: It provides guidelines to the prospective
entrepreneurs in setting up the new projects, issues loan application forms to entrepreneurs and conducts screening committee meetings.
2. Credit Department: The main functions of the credit departments are apprising the
projects, disbursement of funds and monitoring progress during the implementation
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION of the project and to keep check on cost overruns and to ensure that funds are utilized for the purpose intended.
3. Treasury Department: Treasury department is responsible for procurement of
funds from the various sources as and when the need arise.
4. Internal Audit Department: Auditing of books of accounts, verifying title deeds
of properties offered as securities business adhered to follow up for compliance of observations / recommendations made in report of statutory authority and IDBIs inspection report will be verified by this department.
5. Legal Department: This department attends all legal matters affecting the interest
of the corporation.
6.
Recovery Department: Recovery of loans sanctioned by the corporation and all other related functions like rescheduling of loan, effective changes in management of assisted companies effective take over of defaulting units and insisting recovery proceedings are the main functions of recovery departments.
7. Business Department and Credit Research Department: This department looks
after the market appraisal of products for which loan applications are received. Special report on various industries and products, identification of industries development, promotional activities, preparation of annual reports, brochures, leaflets on various scheme and other public materials, advertisements, printing and publication of bimonthly KSFC news bulletin.
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8. Personal Department: This department is in charge of recruiting, promotion, job
rotation, transfers, employee discipline, welfare and industrial relation and payrolls. In additions the department has a HRD cell, which carries out training and development activities apart from carrying out performance appraisal and manpower planning.
9. Hire Purchase and Financial Service Department: This department is in charge
of hire purchase and financial services provided by KSFC.

10. Management Information System Department: This department is solely
responsible for providing up to date information of all the branches, all the departments etc., required by the management.
11. Information Technology
Department: This department was formed to
computerize all the records and documents of KSFC. With large scale computerization the corporation aims to function as a paperless office.
12. Public Grievance: This department is formed to solve the problems of KSFC
customers. These receives complaints from the customers and effectively sorts out. Employee grievance redressed committee has also been constituted.
13. Sick Units Monitoring Department: The department which has been formed for
rehabilitation of potentially viable sick units conducts in-depth study regarding cases referred and assess the eligibility for rehabilitation assistance
14. Asset Reconstruction Department: The asset Reconstruction department at the
head office is formed to review the chronic Sec. 29 cases, DC cases and suit field
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION cases. This department verifies all the cases under review and occupies defaulting units and takes steps to recover the loan by selling the units.
15. Women Entrepreneur Guidelines Cell: This department is started to encourage
women entrepreneurs to establish the industries by providing them necessary guidelines.

16. Account Department: This department is formed to maintain accounts of the
office
Karnataka State Financial Corporation citizens charter:

The Corporation aims at customer satisfaction through Professional Management and Team Work.
1.The corporation offers:
Financial assistance for acquiring fixed assets like land, building, plant & Machinery and other miscellaneous assets. Sanction of Term Loans to new Tiny, Small and Medium enterprises and Services Sector. Sanction of Term Loans to existing industrial concerns and services sector units For expansion / modernization / diversification. Sanction of Working Capital Term Loans to meet working capital requirements of industrial / service enterprises under special schemes. Operating of Foreign Letter of Credit for import of capital goods. Rental Discounting and other fee based services. Provides insurance coverage for assets and other non life insurance products.
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION Accepts Fixed Deposits for a term of one year and above.
2. Financial assistance - limits of accommodation:
I. Proprietary / partnership Rs.200.00 lakh II. Corporate bodies (both private & public limited), registered Co-operative societies Rs.500.00 lakh In respect of existing units operating successfully, maximum limit can be Extended upto Rs.800.00 lakh for category (I) and Rs.2000.00 lakh for category In respect of category (II) the financial assistance can be sanctioned provided the Paid up capital and free reserves do not exceed Rs.2000.00 lakh. If the requirements of the funds for a project are substantial and cannot be extended by the Corporation alone, then the requirement of loan of such projects can be met in consortium with other financial institutions. Minimum loan size is Rs.5.00 lakh.
3. Activities financed by the corporation:
1. General Loans for setting up new tiny, small and medium scale enterprises and Service sector units. 2. Hotels / Restaurants. 3. Tourism related facilities (Amusement parks, Convention centers, Restaurants, Travel & Transport, Tourist service agencies, Mobile canteen / catering). 4. Hospitals / Nursing Homes. 5. Acquiring Electro Medical Equipment, setting up of Medical Stores.
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION 6. Transport Loans (SRTOs & acquisition of private vehicles). 7. Industrial Estates, IT Parks, ready built office space, Training Institutions, Godowns and Warehouses. 8. Group Housing Sector. 9. Construction and purchase of commercial complex. 10. Development / maintenance and construction of roads. 11. Qualified Professionals (Management, Accounting, Medical Professionals, Architects & Engineers, Veterinary clinics). 12. Rehabilitation of sick units.
4. Area of operation:
The Corporation extends financial assistance for an enterprise in the State of Karnataka With its network of 29 branches covering all the districts of the State.
5. Application forms for loan:
Loan application forms are issued after the proposal is cleared in the Project Clearance Committee (PCC) meeting. For loans proposals upto Rs.50.00 lakh Branch Offices will issue the application forms. For the loans proposals above Rs.50.00 lakh, loan applications are issued at Head Office
6. Time frame for processing sanctions:
New loans up to Rs.35.00 lakh 21 days Branch office New loans up to Rs.60.00 lakh 30 days Branch office New loans up to Rs.75.00 lakh 45 days Branch office
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION New loans up to Rs.500.00 lakh 60 days Head Offices
7. a) Primary security: The primary security for loan will be the assets financed i.e., land, building & machinery .If working capital loan is provided, the inventories in the form of rawmaterials, work in process, finished goods besides bills & book debts are to be pledged / hypothecated. b) Collateral security: All loans are to be backed by collaterals in the form of commercial or residential Properties located in the State of Karnataka or Fixed Deposits or NSC Residential Properties of third parties as collateral are discouraged. Assets free of encumbrance charged to the Corporation will be further charged. In case of corporate loan, in the absence of adequate security in the form of primary assets, collateral security to the extent of 100% of the loan amount is insisted in respect of existing units assisted by the Corporation and in respect of other units collateral security will be 150% of the loan amount. Note: The primary & collateral are to be by way of simple mortgage at jurisdictional SRO.
8. Disbursement of loan:
Loans are disbursed after the promoter brings in stipulated equity / contribution from his side as stipulated in the terms of sanction & after properties are mortgaged / hypothecated as per terms of loan & guarantee deeds executed. The extent of disbursement
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION will be in proportion to the investment made on land, building & machinery. The release towards machinery will be either after issuing a commitment letter to machinery supplier & after inspecting machinery & factory site of entrepreneur. Up-front fee is payable at 0.5% of loan + applicable service tax, before disbursement.
9. Loan repayment:
The loans are normally repayable in 5 to 7 years with a moratorium of 1 to 2 years depending on DSCR. The repayment will be in monthly / quarterly installments.
10. Public grievance redressal:
To redress the grievances of the entrepreneurs, Public Grievance Readdressal Committees have been set up under the chairmanship of Executive Directors. All grievances will be heard in 30 days. Acknowledgments however, will be given within 7 days of receipt of the grievance.
11. Helpline:
The Corporation has brought out 'Products & Services' brochure. The brochure gives details of the activities of KSFC, financial services available, various schemes of the Corporation and procedures for availing the financial assistance. For further information
12. Welcomes suggestions:
The Corporation welcomes suggestions from the customer / stakeholders / public and the same can be sent directly to the Managing Director, at email address
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Procedure for Availing Loan Assistance from KSFC:

The Entrepreneurs requiring the financial assistance have to the following procedures. a. Call on assistance general manager (E.G) cell, KSFC, HOD or the branch manager and discuss about their project. The entrepreneurs are require to carry with them a brief project report, details on proposed for the unit extent for term loan required etc., at the time of visit. b. The entrepreneurs are required to attend screening committee on advice from EG department or branch manager at the head office or branch office as the case may be to get prima-face clearance for their project and to obtain the loan application forms and check list. c. The filled in loan application forms have to be submitted in triplicate along with enclosures as per checklist and handed over to AGM (EG) at head office or branch manager as the case may be and to obtain acknowledgement the entrepreneurs are required to pay loan application processing fee by cash or D.D. and obtain receipt as per schedule given below.
Application processing fee: Loan Amount Up to Rs. 10,000/Fee Nil

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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION Between Rs. 40,000 to 2, 00,000/Above Rs. 2, 00,000/1/4
% of Loan
/2% of Loan
Sanction limit of loans

Limits of Assistance Category Proprietary Concerns /Partnership Firms Maximum loan Rs. 200.00 lakh
Private And Public Limited Companies Rs. 500.00 lakh And Co-Operative Societies
Debt Equity Ratio For Loans Up To Rs. 10.00 Lakh For Loans Above Rs. 10.00 Lakh RSR Scheme Modernization Scheme (Overall) Promoters Contribution Particulars Backward District /Regions Non- Backward District Regions RSR DG Set Loan Minimum percentage on Project Cost 20% 22.5% Flexible 10%
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3:1 2:1 Flexible 2:1
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Interest rates on loans

Revised Interest Rates (%) Sl No Category of Borrowers/Loans Gross Rebate Net
Term loans above Rs.50,000/ and up to 15.0 Rs.2,00,000/-
1.5
13.5
All Term Loans (including WCT L) over Rs.2,00,000/- other than loans indicated at Sl.No. 3 & 4
15.5
1.5
14.0
Commercial Complexes, Construction activities like Residential Apartments, Shopping Complexes etc., Corporate loans, AMARA scheme, Bridge loans , Finance to Existing Assets, Entertainment Industry( including Films) etc
15.5
1.0
14.5
Privileged Entrepreneurs Scheme
14.5
14.5
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CHAPTER-III
METHODOLAGY
This study is analytical study, which is primarily based on the secondary data. The primary data was also used for this study. 1. The data required for the purpose of this study is of two types: 1) Primary data 2) Secondary data Data collection Primary data: The required primary data was collected orally from the concerned officers of Karnataka State Finance Corporation Bijapur Branch through interaction. Secondary data: The secondary data was obtained from the annual reports of the corporation for the period between 2001-2002 and 2006-2007. Data presentation: The data collected have been presented in the form of tables and graphs. Data analysis and interpretation: The data collected are used to calculate working capital by applying the following formula Working capital = Current Assets Current Liabilities
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION The data have analyzed with the help of trend rations 2001-02 is considered be base year whose value is equal to 100.then. The values for subsequent years i.e.2001-02 to 200607 are calculated and compared with the base year value on year to year basis. The overall increase/decrease in the values of working capital during the study period has been calculated for each item of deposits by applying the following formula. Overall increase/decrease in value = Sixth year value (2006-07) X100
Base year value (2001-02)
2. Scope of the study: The study brings out the pattern of working capital in Karnataka State Finance Corporation. This study also covers the working capital management in the corporation. 3. Objectives of the study: The following are the objectives set for the present study. To understand the behavior and culture of the organization. To study the different components of working capital of the corporation. and. To study the working capital management. 4. Limitations of the Study: The study focuses on working capital management. The period covered in the present study is 6 years i.e., from 2001-2002 to 2006-2007. The suggestions and conclusion made are based on the data collected. And analyzed.
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CHAPTER-IV
THEORETICAL FRAME WORK: AN INTRODUCTION
The most profitable function of an organization is to make the working capital. Sanctioning credit to customers and others out of current assets and current liabilities at its disposal is one of the principal services of an organization. It is the Current assets and current liabilities, which bring most of the earnings for an organization and establish valuable ties with the community. An effective Current assets and Current liabilities policy provides funds to the vital sectors of the economy in appropriate amounts and appropriate time, and there by promoter economic development.
Working capital
Meaning: Working capital management can be defined as that aspect of financial management which is concerned with the safeguarding and controlling of the firms current assets, and planning for sufficient funds to pay current bills. Working capital management is concerned with all decisions and acts that influence the size and effectiveness of working capital. The goal of working capital management is to manage each of the firms current assets and current liabilities in such a way that an acceptable level of networking capital is maintained.
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The important aspects of working capital are: a) b) c) Determining the requirements of working capital Financing the requirements and Efficient utilization of requirement of working capital
Working capital management involves taking decisions regarding: i. ii. The need to invest funds in current assets The amount of funds to be invested in each type of
current assets and their relative proportion. iii. finance the current assets and iv. sources of funds. The term working capital management means managing the firms current assets and current liabilities in such a way that, it will help to reach the organizational goals. Current assets: Its refer to those refer to those assets which in the ordinary course of business can be, converted into cash within one year without undergoing a diminution in value and without disrupting the operations of the firm. The major current assets are cash, marketing securities, accounts receivable and inventory. To finance these current assets through appropriate The proportion of long term and short term funds to
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION Current liabilities: These are those which are intended, at their inception to be paid in the ordinary course of business, within a year, out of the current assets or earnings of the concern. The basic current liabilities are accounts payable, bills payable, bank overdraft and outstanding expenses. The interaction between current assets and current liabilities is the main them of the working capital management. Because if the firm cannot maintain a satisfactory level of working capital, it is likely to because insolvent and may even be forced into bankruptcy. The current assets should be managed efficiently in order to maintain the liquidity of the firm.
Concepts of Working Capital Management

1. Gross working capital :
The term gross working capital refers to the firms investment in assets. This includes cash, short term securities, debtors (accounts book debts bills receivable and stock (inventory). 2. Net working capital :
current
receivable
The term net working capital refers to the difference between current assets and current liabilities. A positive net working capital will arise when assets exceeds current liabilities and a negative working capital will occurs when liabilities are in excess of current assets.
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION Net working capital is a qualitative concept. It indicates the liquidity position of the firm and suggests the extent to which working capital needs may be financed by permanent sources of funds.
Need for working capital: The need for working capital to run the day to day business activities be over emphasized. Every firm should aim at maximizing the wealth of its shareholders. In this case a firm should earn sufficient return from its operations. Earning a steady amount of profit requires successful sales do not convert into cash instantaneously.
Working Capital Categorized into: 1. Fixed or permanent working capital: The need for current assets arises because of the operating cycle. Operating cycle is a continues process and, therefore the need for current asset is felt constantly. There is always a minimum level of current asset, which is continuously required by the firm to carry on its business operations. This minimum level of current asset is referred to as permanent or fixed working capital. 2. Fluctuating or temporary working capital: The changes in production and sale, leads change in working capital.
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION For example: Extra inventory of finished goods will have to be maintained to support the peak periods. On the hand investment in raw material work in progress and finished goods will fall if the market is slack. The extra working capital needed to support the changing production and sales activities called fluctuating or temporary working capital. Permanent and temporary working capitals are necessary to facilitate production and sale through the operating cycle, but temporary working capital is created by the firm to meet liquidity requirements. The permanent working capital line need not be horizontal if the firms requirement for permanent capital is decreasing over a period. Objectives of working capital management: i. ii. iii. To ensure adequate liquidity of a firm To minimize the risk and The contribution to the maximization of firms value.
Principles of working capital management: i. ii. iii. iv. Principles of risk assumption. Net worth position. Maturity of payment and Cost of capital.
Importance of working capital management
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0
Adequate working capital creates certainty, security and confidence in the minds of
the persons in the management as well as in the minds of creditors and workers.
1
It creates a good credit standing for the firm because credit standing depends upon
the ability to pay promptly. A Company with adequate working capital is always able to meet current liabilities.
2
It ensures solvency and stability of the enterprises It also ensures continuity in
production and sales. It enables the company to take advantage of cash discount offered by the suppliers of raw materials or merchandise. It enhances the prestige of the company and moral of its workers because a company with adequate working capital is always able to pay wages and salaries promptly and regularly.
3
It enables the company to procure loans from banks on easy and competitive terms.
In times of boom, it enables the company to meet increasing demands for its products. In times of depression the company to overcome the crisis successfully. It enables the company to hold carry on its business successfully and active continued progress and prospective. It enables the company to carry on its business successfully and active continued progress and prosperity.
Determinants of working capital:

1. Nature of business: The working capital requirements of an enterprise are basically related to the conduct of business. Enterprises fall into some broad categories depending on the
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION nature of their business. Public utilities have two features which have a bearing on working capital needs are, i. ii. The cash nature of business i.e. cash sale and Sale of services rather than commodities. In case of trading and financial enterprises, they have to maintain a sufficient amount of cash, book debts and inventories. They have to invest the large amount in working capital. The manufacturing concerns require fairly large amounts of working capital through it varies from industry to industry depending on their asset structure. The proportion of current assets to total assets measures the relative requirement of working capital of various industries the relative requirements of working capital of various industries. 1. Production cycle: This is another factor which has a bearing on the quantum of working capital. The term production or manufacturing cycle refers to the time involved in the manufacturing of goods. It covers the time span between the procurement of raw materials and the completion of the manufacturing process leading to the production of finished goods. There is some time gap before raw materials become finished goods. To sustain such activities the need for working capital is obvious.
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION The longer the time spans (i.e. the production cycle), the larger will be the tide up funds and, therefore the larger is the working capital needed and vice versa. 2. Business cycle: The working capital requirements are also determined by the nature of the business cycle. Business fluctuations lead to cyclical and seasonal changes, which, in turn, cause a shift in the working capital position. The variations in business conditions may be in two directions: 1. Upward phase when boom conditions prevail, and 2. Downswing phase when economic activity is marked by a decline. 3. Production policy: The quantum of working capital is also determined by production policy. The demand for products is seasonal, i.e. they are purchased during certain months of the year. There are two opinions for production policy to enterprises, either they confine their production only to periods when goods are purchases or they follow a steady production policy throughout the year and produce goods at a level to meet the peak demand. During the slack season the firms have to maintain their working force and physical facilities without adequate production and sale. When the peak period arrives, the firms have to operate at full capacity to meet the demand. Thus serious difficulties will be encountered in trying to match production to the ebb and flow of the seasonal demand pattern. The better alternative is large accumulation of finished goods (inventories) during the off-season and their abrupt sale
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION during the peak season. The progressive accumulation of stock naturally requires an increasing amount of working capital, which remains tied up for some months. Working capital planning has to incorporate this pattern of requirement of funds when production and seasonal sales are steady. Production policies have to be formulated on the basis of individual setting of each enterprise and the magnitude and dimension of the working capital problems will accordingly vary. 4. Credit Policy: The credit policy relating to sales and purchases also affects the working capital. The credit policy influences the requirement of working capital in two ways, (i) Through credit terms granted by the firm to its customers/buyers of goods (ii) Credit terms available to the from its credits. The credit terms granted to customers have a bearing on the supplies of goods (trade creditors), the need for working capital is less. The working capital
requirements of the business are affected by the terms of purchase and sale, and the role given to credit by a company in its dealing with creditors and debtors. If there is a keen competition then there is a wide scope for managerial discretion in working out a suitable credit policy relevant to each customer based on the merits of each case. Liberal credit facilities can be extended on the basis of credit rating. This will avoid the problem of having excess working capital. Adoption of rationalized credit facilities can be significant factor in determining the working capital
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION needs of an enterprise. To win and retain customers, it may be forced, among other things, to offer generics credit terms to them. The investment in book debits will consequently be of a higher order, necessitating large working capital. To be able to enjoy consumer patronage on a continuous basis, a firm will have to offer a variety of products quite unlike a firm which has a hold on the market, hence does not need special efforts to satisfy customer requirements. The consequence of a higher level of inventories would be an additional need for working capital. The degree of competition is, therefore an important factor influencing working capital requirements. 5. Growth and expansion: As a company grows, the amount of working capital requirements also grows. It is difficult to determine precisely the relationship between the growth in the volume of business of a company and the increase in its working capital. The composition of working capital in a growing company also shifts with economic circumstances and corporate practices other thing being equal, growth industries require more working capital than those that are static. The need for increased working capital funds does not follow the growth in business activities but precedes it. Advance planning of working capital is, therefore a continuing Necessity for growing concern. 6. Availability of raw material:
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION The availability of certain raw material on a continues basis without interruption would sometimes effects the requirements of working capital. There may be some materials, which cannot be procured easily either because of their sources, are few or they are irregular. To sustain smooth production, therefore, the firm might be compaelled.To purchase and stock them for in access of genuine production needs. This will result in an excusive inventory of such materials. The procurement of some essential raw materials is difficult because of their sporadic supply. This happens very often with raw materials, which are in short supply, and are controlled to ensure equitable distribution. The element of uncertainly would lead to relatively high level of working capital. Some raw materials may be available only during certain seasons. They would have to be necessarily obtained, when available, to provide for a period when supplies are lean. This will cause seasonal fluctuations in working capital requirements. 7. Profit level: The level of profits earned differs from organization to organization. The nature of the product, hold on the market, quality of management and monopoly power would by and large determine the profit earned by a firm. It can generalized that, a firm dealing in a quality product, have a good marketing arrangements and enjoying monopoly power in the market, is likely to earn high profits and vice versa.
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION High profit margin would improve the prospects of generating more internal funds thereby contributing to the working capital pool. The net profit is a source of working to the extent that is has been earned in cash. The cash profit can be found by adjusting non-cash such as depreciation, outstanding expenses and losses written off, in the net profit but in practice the net cash inflows from operations cannot be considered as cash available for use at the end of cash cycle. As companies operations in progress, cash is used for augmenting stock, book debts and inflows on a day-to-day, basis assume importance because steps can then be taken to deal with surplus and defect cash. 8. Level of taxes: The first appropriation out of profits is payment or provision for tax. The amount of taxes to be paid is determined by the prevailing tax regulations. The management has in this respect. Very often, taxes have to be paid in advance on the basis of the preceding year. Tax liability is, in a sense, short-term liability payable in cash. An adequate provision for tax payment is, therefore an important aspect of working capital planning. If tax liability increases, it leads to an increase in the requirement of working capital and vice versa. Management has to discretion in regard to the payment to taxes; in some cases non-payment may invite penal action there is, however wide scope to reduce the tax liability through proper tax planning.
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION The service of tax experts can be availed of to take advantage of the various concession and incentives through avoidance as opposed to evasion of taxes. Tax planning can, therefore, be said to be an integral part of working capital planning. 9. Dividend policy: Appropriation of profits, which has a bearing on working capital, is dividend payment. The payment of dividend consumes cash resource and thereby, affects working capital to that extent. In another case if the firm does not pay dividend but retains the profits working capital increases. So it is important for the firm to decide whether profit is to be distributed or retained while calculate or planning for working capital. There are wide variations in industry practices as regards the relationship between working capital requirements and divided payment. In some cases shortage of working capital has been a powerful reason for reducing or even skipping dividends in cash. When dividend payments are continued in spite of inadequate earning in a particular year because of sound liquidity. Sometimes, the dilemma is resolved by the payment of bonus shares. This enables the payment of dividend without draining away the cash resources and, thus without reducing working capital. Dividend policy is thus, a significant element in determining the level of working capital in an organization. 10. Depreciation policy: Depreciation policy also exerts an influence on the quantum of working capital. Depreciation changes do not involve any cash outflows. The effect of depreciation
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION policy on working capital is, therefore indirect. Depreciation affects the tax liability and retention of depreciation also means lower disposable profits and, therefore, a smaller dividend payment thus, more profits. Higher depreciation also means lower disposable profits, and therefore a smaller dividend payment thus cash is preserved. In the second case the method of depreciation has important financial implications. If current capital provision is strengthened and there may be no need for short-term borrowing. If the current capital expenditure exceeds the depreciation provision, either outside borrowing will have to be resorted to or a restriction on dividend payment coupled with retention of profits will have to be adopted to prevent the working capital position from being adversely affected. It is in these ways that depreciation policy is relevant to the planning to working capital. 11. Price level changes: Changes in the price level also affect the requirements of working capital. Rising prices necessitate the use of more funds for maintaining an existing level of activity. For the same level of current assets, higher amount of working capital. The price rise does not have a uniform effect on all commodities. Some firms may not be affected at all. The implications of changing price levels on working capital operations, its operations; its standing in the market and other relevant considerations. 12. Operating efficiency: The operating efficiency of the management is also an important determine of the level working capital position through operating efficiency. Management cannot control
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION the rise in prices; it can ensure the efficient utilization of resources by eliminating waste, improving coordination and a fuller utilization of existing resources. Efficiency of operations and a fuller utilization existing resources. By eliminating waste, improving co-ordination of resources the pace of cash cycle and improve s the working capital turnover. It releases the pressure on working capital by improving profitability and improving the internal generation of funds. The level of working capital is determined by a wide variety of factors which are partly internal to the firm and party external (environmental) to it. Effective working capital management requires effective planning and a constant review of the needs for an appropriate working capital strategy. Estimation of working capital requirements:
1.
Expenses on raw materials, labors and overhead. Length of time the raw materials to be held in stock.
2.
3. Length of time the raw materials remain in manufacturing process in semi finished form. 4. Length of time, finished goods are held in go down waiting sales. 5. Credit period granted to the sundry debtors. 6. Credit period granted by the sundry creditors and 7. Time gap in the payment of wages, salaries and other operating expenses. Operating cycle:
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION Operating cycle is time duration required to convert sales, after the conversion of resources into inventories into cash. Investment in current assets such as inventories and debtors is realized during the firms operating cycle which is usually less than a year. Figure-1 Operating cycle of manufacturing company
Sale of product
Finished goods
Sundry debtors Bills received
working in progress
Cash
Raw materials
Figure-2 Operating cycle of non-manufacturing company Cash
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION Sundry debtors Bills receivable Stock of finished goods
Sales Balanced working capital: The firm should maintain a sound working capital position. It should have adequate working capital to run its operations. Both excessive as well as inadequate working capital positions are dangerous for the firm. Excessive working capital means idle funds which earn no profits for firm. Inadequate working capital not only impairs the firms profitability but also results in production interruptions and infancies.
Formula of Working Capital: Working Capital = Current Assets Current Liabilities
CHAPTER V
ANALYSIS AND INTERPRETATION
This chapter analyses the working capital which is the part of financial analysis. The working capital is calculated for a period of six years i.e., 2001-02 to 2006-07. They are presented in the form of tables and graphs. This is divided into three sections. Section-I
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION presents the analysis and interpretation of over all current assets and current liabilities. Section-II presents the analysis interpretation of individual items of current assets while section-III presents the analysis and interpretation on of individual items of current liabilities. The following current assets and current liabilities: A. Current Assets: 1. Seed Capital Assistance 2. Deposits With Banks 3. Subsidy Bonds Sinking Fund Deposits 4. Advances to Staff 5. Deposits and Other Advances 6. Other Assets 7. Advances to Suppliers 8. Hire Purchase Installment Due
9. Assets Acquired in satisfaction of Loans and 10. Dividend Deficit Account.
B. Current Liabilities 1. Amount Receivable from Gok 2. Earnest Money Deposits 3. Sundry Deposits 4. Dividend Subvention from Gok
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION 5. Seed Capital Assistance 6. Other Liabilities 7. Sundry Liabilities and 8. Margin Money Assistance.
Section-I
1. Current assets and current liabilities 2001-02, the following information is
relating to different current assets and current liabilities during the year 2001-02 presented in table-1 Table-1
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION Current Assets 2001-02 (Rs,in lakhs)
Sl. No 1 2 3 4 5 6 7 8 9 10 Particulars Seed capital assistance Deposits with banks Subsidy bonds sinking fund deposit Advances to staff Deposits and other advances Other assets Advances to suppliers Hire purchase installment due Assets acquired in satisfaction of loans Dividend deficit account Total Amount Percentage 4649.2 25.09 1000 5.40 7141.82 38.54 2878.89 15.54 445.38 2.40 5.73 0.03 1004.12 5.42 779.69 4.21 0 0.00 624.1 3.37 18528.93 100.00
Table -1 A Current Liabilities 2001-02

Sl. No 1 2 3 4 5 6 7 8 Particulars Unclaimed dividends Earnest money deposit Sundry deposits Dividend subvention from GoK Seed capital assistance Other liabilities Sundry liabilities Margin money assistance Total Amount 0.36 5.31 1643.44 958.88 4672.39 284.52 9016.35 1586.19 18167.44 (Rs, in lakh) Percentage 0.00 0.03 9.05 5.28 25.72 1.57 49.63 8.73 100.00
Working Capital = Current assets Current liabilities = Rs. 18528.93- Rs. 18167.44 = Rs 316.49 lakhs Information relating to various current assets and current liabilities included in the year 2001-02 Graph-1 Current Assets 2001-02
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Se c paa ssa c ed ai l s i t ne t 00 .0 54 .2 00 .3 24 .0 1. 4 55 54 .0 42 .1 33 .7 2. 9 50 Dp s i sw h a k e o st i b ns t Ssd b n ssni gfu dd p st ui y od i k n n eoi A v n e t sa d a c s o t ff Dp st a do e a v c s e o is n t r d a e h O e as t t r s es h A v n e t s p les dac s o up r i Hep r h s i sam t d e i r uc a en t l e u l n 3. 4 85 A s t a q i e i s ts ci no s es c u dn ai fa to f r l as on D i e dd fi i a c u t i d n e ct c o n v
Graph 1A Current liabilities 2001-02

00 .0 00 .3 87 .3 90 .5 52 .8
u c imdd id n s n la e iv e d Ern s mn y d p s a e t o e e o it S n ryd p s u d e o its d id n s b e tio fro g k iv e d u v n n m o S e c p l a s ta c e d a ita s is n e
4. 3 96
2. 2 57
O e lia ilitie th r b s S n rylia ilitie ud b s
17 . 5
Mrg mn ya s ta c a in o e s is n e
Table-1 reveals that in the overall composition of current assets, subsidy bonds sinking fund deposits are the highest (38.54%) where as the other assets are the least (0.03%). Table 1 A show that in the overall current liabilities the sundry liabilities are the highest (49.63) where as the earnest money deposits are the least (0.03%)
2. Current assets and current liabilities 2002-03, the following information is relating to different current assets and current liabilities during the year 2002-03 presented in table2 Table-2 Current Assets -2002-03 (Rs,in lakh)
Sl.no Particulars Amount Percentage Page 46

1 2 3 4 5 6 7 8 9 10 Seed capital assistance Deposits with banks Subsidy bonds sinking fund deposit Advances to staff Deposits and other advances Other assets Advances to suppliers Hire purchase installment due Assets acquired in satisfaction of loans Dividend deficit account Total Table-2A 5663.48 310.01 2778 1731.9 518.7 7.72 926.74 853.12 2.76 773.23 13565.66 41.75 2.29 20.48 12.77 3.82 0.06 6.83 6.29 0.02 5.70 100.00
Current liabilities-2002-03 (Rs, in lakh)

Sl.no 1 2 3 4 5 6 7 8 Particulars Unclaimed dividends Earnest money deposit Sundry deposits Dividend subvention from gok Seed capital assistance Other liabilities Sundry liabilities Margin money assistance Total Amount 0.36 5.36 1304.38 1596.88 5553.94 278.75 6085.92 1451.33 16276.92 Percentage 0.00 0.03 8.01 9.81 34.12 1.71 37.39 8.92 100.00
Working Capital = Current assets Current liabilities = Rs. 13565.66- Rs. 16276.92 = Rs - 2711.26. lakhs.
Information relating to various current assets and current liabilities included in the year 2002-03 Graph-2 Current Assets-2002-03
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0 2 .0 6 9 .2 6 3 .8 0 6 .0 3 2 .8 5 0 .7 4 .7 1 5 S e c p l a s ta c e d a ita s is n e Dp s itsw b n s eos ith a k S s yb n ss k gfu dd p s u id o d in in n e o it A v n e tos ff dac s ta Dp s a do e a v c s e o its n th r d a e O e a s ts th r s e 1 .7 2 7 A v n e tos p lie dac s u p rs H p rc a ein ta e t d e ire u h s s llmn u 2 .4 0 8 2 9 .2 A s tsa q ire ins tis c no s e c u d a fa tio f lo n as D id n d fic a c u t iv e d e it c o n
Graph-2A Current Liabilities 2002-03

u cla e d e d n im d ivid n s
00 . 3 8 2 .9 00 . 0 8 1 .0 9 1 .8
E rn st m n y d p sit a e oe eo S n ry d p sits ud eo d e d su ve tio fro g k ivid n b n n m o
3. 9 73 3 .1 42
S e ca ita a e d p l ssista ce n O e lia ilitie th r b s S n ry lia ilitie ud b s

11 .7
M rg m n y a a in o e ssista ce n
Table-2 inferred that in the composition of overall current assets, seed capital assistance are the highest (41.47%) wheras the assets acquired in satisfaction of loans are the least (0.02%). Table-2A shows that in the composition of overall current liabilities, sundry liabilities are the highest (37.39%) wheras the earnest money deposits are the least (0.03%). 3 .Current assets and current liabilities 2003-04, the following information is relating to different current assets and current liabilities during the year 2003-04 presented in table3 Table-3 Current Assets 2003-04
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION (Rs in lakh)
Sl no
1 2 3 4 5 6 7 8 9
Particulars Seed capital assistance Deposits with banks Advances to staff Deposits and other advances Other assets Advances to suppliers Assets acquired in satisfaction of loans Dividend deficit account Amount receivable from gok Total
Amount 6475.86 1450 3459.23 243.48 11.77 365 1.23 773.22 109.71 12889.5
Percentage 50.24 11.25 26.84 1.89 0.09 2.83 0.01 6.00 0.85 100.00
Table-3A Current Liabilities 2003-04 (Rs in lakh)

Sl.no 1 2 3 4 5 6 7 8 Particulars Unclaimed dividends Earnest money deposit Sundry deposits Dividend subvention from gok Seed capital assistance Other liabilities Sundry liabilities Margin money assistance Total Amount 0.36 5.36 903.41 1596.88 6025.92 306.4 843.79 1357.39 11039.51 Percentage 0.00 0.05 8.18 14.47 54.59 2.78 7.64 12.30 100.00
Working Capital = Current assets Current liabilities = Rs 12889.50- Rs 11039.51. = Rs 1849.99 lakhs
Information relating to various current assets and current liabilities included in the year 2003-04 Graph-3 Current Assets 2003-04
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0 1 .0 2 3 .8 0 9 .0 1 9 .8 6 0 .0 S e c p l a s ta c e d a ita s is n e Dp s i w b n s e o sts ith a k 0 5 .8 A v n e tos ff dac s ta Dp s a do e a v c s e o its n th r d a e O e a s ts th r s e 2 .8 6 4 5 .2 0 4 A v n e tos p lie dac s u p rs A s tsa q ir di s tis cio s e c u e n a fa t n o lo n f as D i e dd fi i a c u t i d n e ct c o n v 1 .2 1 5 A o n r c iv b fr m o mu t e e a lr o g k
Graph-3A Current liabilities 2003-04

u c imdd id n s n la e iv e d
00 . 0 1. 0 2 3 05 . 0 88 . 1 74 . 6 1. 7 4 4
Ern s mn yd p s a e t o e e o it S n ryd p s u d e o its d id n s b e tio fro g k iv e d u v n n m o S e c p l a s ta c e d a ita s is n e
28 . 7
O e lia ilit s th r b ie S n ryl b e u d ia iliti s

5. 9 4 5
Mrg mn ya s t n e a in o e s isa c
Table-3 shows that in the composition of overall current assets, seed capital assistance are the highest (50.247%) wheras the assets acquired in satisfaction of loans are the least (0.01%). Table-3A shows that in the composition of overall current liabilities, seed capital assistance are the highest (54.59%) wheras the earnest money deposits are the least (0.05%). 4. Current assets and current liabilities 2004-05, the following information is relating to different current assets and current liabilities during the year 2004-05 presented in table-4 Table-4 Current Assets 2004-05 (Rs in lakh)
Page 50

Sl.No 1 2 3 4 5 6 7 8 9 Particulars Seed capital assistance Deposits with banks Advances to staff Deposits and other advances Other assets Advances to suppliers Assets acquired in satisfaction of loans Dividend deficit account Amount receivable from gok Total Amount 6835.57 950 1114.44 173.45 11.3 0.93 20.26 773.22 1228.57 11107.74 Percentage 61.54 8.55 10.03 1.56 0.10 0.01 0.18 6.96 11.06 100.00
Table-4A Current liabilities 2004-05 (Rs in lakh)

Sl.no 1 2 3 4 5 6 7 8 Particulars Unclaimed dividends Earnest money deposit Sundry deposits Dividend subvention from gok Seed capital assistance Other liabilities Sundry liabilities Margin money assistance Total Amount 0.36 5 7357.52 1596.88 6778.87 149.27 1243.26 1289.99 18416.15 Percentage 0.00 0.03 39.95 8.67 36.81 0.81 6.75 7.00 100.00
Working Capital = Current assets Current liabilities

= Rs 11107.74-Rs 18416.15 = Rs -7308.41 lakhs.
Information relating to various current assets and current liabilities included in the year 2004-05 Graph-4 Current assets 2004-05
Page 51

S e c p l a s ta c e d a ita s is n e
00 .1 01 .8 01 .0 16 . 5 69 .6 1. 6 1 0
Dp s itsw b n s eos ith a k A v n e tos ff dac s ta Dp s a do e e o its n th r av c s dae O e a s ts th r s e A v n e tos p lie dac s u p rs
1. 3 00
85 .5 6. 4 1 5
A s tsa q ire in se cu d s tis c no lo n a fa tio f a s D id n d fic a c u t iv e d e it c o n A o n re e a lr fro mu t c iv b m gk o
Graph-4A Current liabilities-2004-05

0.03 6.75 0.81 7.00 0.00 39.95 unclaim dividends ed E arnest m oney deposit S undry deposits dividend subvention fromgok S eed capital assistance O ther liabilities 36.81 8.67 S undry liabilities M argin m oney assistance
Table-4 reveals that in the composition of overall current assets, seed capital assistance are the highest (61.54%) wheras the advances to suppliers are the least (0.01%). Table-4A shows that in the composition of overall current liabilities, sundry deposits are the highest (39.95%) wheras the earnest money deposits are the least (0.03%). 5. Current assets and current liabilities 2005-06, the following information is relating to different current assets and current liabilities during the year 2005-06 presented in table-5 Table-5 Current Assets 2005-06 (Rs, in lakh)
Sl.no 1 2 Particulars Seed capital assistance Deposits with banks Amount 1820.26 16500 Percentage 7.92 71.83 Page 52

3 4 5 6 7 8 9 10 Advances to staff Deposits and other advances Other assets Advances to suppliers Assets acquired in satisfaction of loans Amount receivable from gok Assets acquired in satisfaction of loans Dividend deficit account Total 3112.65 243 3.84 0.93 18.7 35.08 988.64 247.05 22970.15 13.55 1.06 0.02 0.00 0.08 0.15 4.30 1.08 100.00
Table-5A Current liabilities-2005-06 (Rs, in lakh)

Sl.no 1 2 3 4 5 6 7 Particulars Unclaimed dividends Earnest money deposit Sundry deposits Dividend subvention from gok Other liabilities Sundry liabilities Margin money assistance Total Amount 0.36 5 8336.35 1596.88 150.2 2039.66 11.86 12140.31 Percentage 0.00 0.04 68.67 13.15 1.24 16.80 0.10 100.00
Working Capital = Current assets Current liabilities = Rs 22970.15- Rs 12140.31 = Rs 10829.84 lakhs. Information relating to various current assets and current liabilities included in the year 2005-06. Graph-5 Current Assets-2005-06
Page 53

00 .8 01 .5 00 .2 10 .6 1. 5 35 00 .0 43 .0 S d a i lass ne e c pta si ta c e 79 .2 D ostswhbn s e si i a k p t A a cstos f d ne v taf D oi sa d thravcs e st n o e dae p O e as ts t r se h A a cstos p les d ne v upi r Ae aqi e i s ts cu dn s r s ti f c o o l a s a sati n f on A on r ci al f o gk m t eevb r mo u e 7. 3 18 Ae aqi e i s ts cu dn s r s ti f c o o l a s a sati n f on D i e d ei i ac ut i dn dfct con v
10 .8
Graph-5A Current Liabilities-2005-06

0 0 .1 1 .8 6 0 1 4 .2 0 4 .0 Sn ryd p s u d e o its d id n s b e tio fro g k iv e d u v n n m o 1 .1 3 5 O e lia ilitie th r b s 6 .6 8 7 Sn rylia ilitie ud b s Mrg m n ya s ta c a in o e s is n e E rn s m n yd p s a e t o e e o it
Table-5, shows that in the composition of overall current assets, deposits with banks are the highest (71.83%) wheras the other assets are the least (0.02%). Table-5A shows that in the composition of overall current liabilities, sundry deposits are the highest (68.67%) wheras the earnest money deposits are the least (0.03%).
6. Current assets and current liabilities 2006-07: the following information is relating to different current assets and current liabilities during the year 2006-07 presented in table6 Table-6
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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION Current Assets 2006-07 (Rs, in lakh)
Sl.no 1 2 3 4 5 6 7 8 Particulars Seed capital assistance Deposits with banks Advances to staff Deposits and other advances Other assets Assets acquired in satisfaction of loans Amount receivable from gok Assets acquired in satisfaction of loans Total Amount 956.56 9435.2 2933.87 287.04 7.85 18.72 83.19 988.64 14711.07 Percentage 6.50 64.14 19.94 1.95 0.05 0.13 0.57 6.72 100.00
Current Liabilities 2006-07

Sl.No 1 2 3 4 5 6 7 Particulars Unclaimed dividends Earnest money deposit Sundry deposits Dividend subvention from gok Other liabilities Sundry liabilities Margin money assistance Total Amount 0.36 5 2450.78 1596.88 281.05 2307.64 13.53 6374.19 Percentage 0.01 0.08 38.45 25.05 4.41 36.20 0.21 100.00
Working Capital = Current assets Current liabilities = Rs 14711.07- Rs 6374.19 = Rs 8336.88 lakhs.
Information relating to various current assets and current liabilities included in the year 2006-07. Graph-6 Current Assets 2006-07
Page 55

Se c pa a ssa c ed ai l s i t ne t 00 .5 19 .5 05 .7 1. 4 99 01 .3 67 .2 65 .0 Dp s i swt b ns e o st ih a k A v n e t sa d a c s o t ff Dp st a doh r e o is n t e av c s dae O e as t t r s es h As t aqi e i s es c u dn r s ts ci no l a s ai fa to f o n A o n r c i a l fr m m t ee b o u v e gk o As t aqi e i s es c u dn r s ts ci no l a s ai fa to f o n
6. 4 41
Graph-6A Current Liabilities 2006-07

0 1 .0 0 1 .2 0 8 .0 3 .4 8 5 3 .2 6 0 d id n s b e t nfro iv e d u v nio m gk o O e lia ilitie th r b s 4 1 .4 S n rylia ilitie ud b s 2 .0 5 5 Mrg mn ya s ta c a in o e s is n e u c imdd id n s n la e iv e d Ern s mn yd p s a e t o e e o it S n ryd p s u d e o its
Table-6, revels that in the composition of overall current assets, deposits with banks are the highest (64.14%) wheras the other assets are the least (0.05%). Table-5A shows that in the composition of overall current liabilities, sundry deposits are the highest (38.45%) wheras the unclaimed dividend are the least (0.01%).
Section-II
1. Seed Capital Assistances the information relating to seed capital assistances is presented in Table-1
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Table-1
Seed capital assistances from 2001-02 to 2006-07 (Rs.in lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 Amount 4649.2 5663.48 6475.86 6835.57 1820.26 986.56 Difference 1014.28 812.38 359.71 -5015.31 -833.7 % Change 21.816 14.344 5.555 -73.371 -45.801
Graph-1 Seed capital assistances from 2001-02 to 2006-07

4 0 2 0 percentage 0 2 0 -0 01 2 -2 0 -4 0 -4 .8 1 5 0 -6 0 -8 0 y ear -7 .3 1 3 7 2 0 -0 02 3 2 0 -0 03 4 2 0 -0 04 5 2 0 -0 05 6 2 0 -0 06 7 2 .8 6 1 1 1 .3 4 4 4 5 5 .5 5
It may be inferred from Table-1 that the seed capital assistance has increased to 21.81% (2002-03) over the figures of 2001-02 and again it increased by 14.34% (20032004) when compared to figures of 2002-03. Further it increased to 5.55% (2004-05) over the figures of 2003-04. However they have declined to -73.37% (2005-06) over the figures of 2005-06 and again it declined to-45.80% (2006-07) if compared with figures of 2005-06. The overall decrease in the total seed capital assistance from others is -78.78%. 2. Deposits With Bank: The information relating to deposits with bank is presented in Table-2 Table-2
Page 57
ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION Deposits with bank
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 Amount 1000 310.01 1450 950 16500 9435 Difference -689.99 1139.99 -500 15550 -7065
(Rs.in lakhs)
% Change -69.00 367.73 -34.48 1636.84 -42.82
Graph-2 Deposits with bank

1800.00 1600.00 1400.00 percentage 1200.00 1000.00 800.00 600.00 400.00 200.00 0.00 -200.00 0.00 2001-02 -69.00 2002-03 2003-04 year -34.48 2004-05 2005-06 -42.82 2006-07 367.73 1636.84
It may be found from Table -2 that the deposit with bank has decreased to -69% (2002-03) over the figures of 2001-02. It increased to 367.73% (2003-04) over the figures of 2002-03. It has decreased to -34.48% (2004-05) over the figure of 2003-04 and further it increased to 1636.84% (2005-06) over the figures of 2004-05. Again they declined -42.82% (2006-07) if compared with the figures of 2005-06. The overall increase in the total deposits with bank from others is 943.50%. 3) Subsidy bonds sinking fund deposits: The information relating to subsidy bonds sinking fund deposits is presented in Table -3
Page 58
ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION Table-3 Subsidy bonds sinking fund deposits from 2001-02 to 2006-07 (Rs.in lakhs) Year
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
Amount
7147.82 2728 0 0 0 0
Difference
-4419.82 -2728 0 0 0
% Change -61.83 -100.00 0 0 0
Graph-3 Subsidy bonds sinking fund deposits from 2001-02 to 2007

0 -20 percentage -40 -60 -80 -100 -120 year 0 2001-02 2002-03 2003-04 0 2004-05 0 2005-06 0 2006-07
-61.83
-100.00
Table-3 reveals that the subsidy bonds sinking fund deposits have declined to -61.83% (2002-03) over the figures of 2001-02 and again it declined to -100% (2003-
04) over the figures of 2002-03. The overall increase in the total subsidy bonds sinking fund deposits from others is 162%. 4. Advance to staff: The information relating to advance to staff is presented in Table -4 Table-4
Page 59
ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION Advance to staff from 2001-02 to 2006-07 Year
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
(Rs.in lakhs)
% Change -39.84 99.74 -67.78 179.30 -5.74
Amount
2878.89 1731.9 3459.23 1114.44 3112.65 2933.87
Difference
-1146.99 1727.33 -2344.79 1998.21 -178.78
Graph -4 Advance to staff from 2001-02 to 2006-07

200 150 percentage 100 50 0 -50 -100 y ear 0 2001-02 2002-03 -39.84 2003-04 2004-05 -67.78 2005-06 -5.74 2006-07 99.74 179.3
Table: 4 shows that the advance to staff has decreased to -39.48% (2002-03) over the figures of 2001-02. It increased to 99.74% (2003-04) when compared to the figures of 2002-03 and again it declined to -67.78% (2004-05) over the figures of 2003-04. It increased to 179.3% (2005-06) over the figures of 2004-05 and again it declined -5.74% (2006-07) if compared to the figures of 2005-06. The overall increase in the total advance to staff from others is 101.90%.
Page 60
ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION 5. Deposits and Other Advance: The information relating to deposits and other advances is presented in Table -5 Table-5 Deposits and other advances from 2001-02 to 2006-07
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 Amount 445.38 518.7 242.89 173.45 243 287.04 Difference 73.32 -275.81 -69.44 69.55 44.04
(Rs.in lakhs)
% Change 16.46 -53.17 -28.59 40.10 18.12
Graph-5 Deposits and other advances from 2001-02 to 2006-07

60.00 40.00 percentage 20.00 0.00 2001-02 -20.00 -40.00 -60.00 -53.17 year -28.59 2002-03 2003-04 2004-05 2005-06 2006-07 16.46 40.10 18.12
Table -5 reveals that the deposits and other advance have increased to 16.46% (200203) over the figures of 2001-02. It declined to -53.17% (2003-04) over the figures of 200203 and again it declined to -28.59% (2004-05) over the figures of 2003-04. Further it increased to 40.10% (2005-06) if compared to the figures of 2004-05 and again it increased
Page 61
ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION by 18.12% (2006-07) if compared to the figures of 2005-06. The overall decrease in the total deposits and other advances from others is -35.56%. 6. Other Assets: The information relating to other assets is presented in Table -6 Table-6 Other assets from 2001-02 to 2006-07 (Rs.in lakhs) Year
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
Amount
5.73 7.72 11.77 11.3 3.84 7.85
Difference
1.99 4.05 -0.47 -7.46 4.01
% Change 34.73 52.46 -3.99 -66.02 104.43
Graph-6 Other assets - from 2001-02 to 2006-07

10 2 10 0 8 0 percentage 6 0 4 0 2 0 0 -2 0 -4 0 -6 0 -8 0 y ear -6 .0 6 2 2 0 -0 01 2 2 0 -0 02 3 2 0 -0 03 4 3 .7 4 3 5 .4 2 6 14 3 0 .4
-3 9 .9 2 0 -0 04 5 2 0 -0 05 6 2 0 -0 06 7
Table-6 depicts that the other assets has increased to 34.73% (2002-03) over the figures of 2001-02 and again it increased to 52.46% (2003-04) over the figures of 2002-03. It
declined to -3.99% (2004-05) over the figures of 2003-04 and again it decreased to
Page 62
ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION -66.02% (2005-06) if compared to the figures of 2004-05 and again it increased by 104.43% (2006-07) if compared to the figures of 2005-06. The overall increase in the total other assets from others is 136.99%. 7. Advance to Suppliers: The information relating to advance to suppliers is presented in Table-7 Table-7 Advance to suppliers from 2001-02 to 2006-07 (Rs.in lakhs) Year
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
Amount
1004.12 926.74 365 0.93 0.93 0
Difference
-77.38 -561.74 -364.07 0 -0.93
% Change -7.71 -60.61 -99.75 0.00 -100.00
Graph-7 Advances to suppliers from 2001-02 to 2006-07

0.00 2001-02 -20.00 percentage -40.00 -60.00 -60.61 -80.00 -100.00 -120.00 year -7.71 2002-03 2003-04 2004-05 0.00 2005-06
2006-07
-99.75
-100.00
Page 63
ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION From Table-7, it may be observed that the advance to suppliers has decreased to -7.71% (2002-03) over the figures of 2001-02 and again it decreased to -60.61% (2003-04) over the figures of 2002-03. It further declined to -99.75% (2004-05) over the figures of 2003-04. It increased to -100% (2006-07) if compared to the figures of 2005-06. The overall decrease in the total advance to suppliers from others is -99.90%. 8. Hire Purchases Installment Due: The information relating to hire purchases installment is presented in Table-8 Table 8 Hire purchase installment from 2001-02 to 2006-07 (Rs.in lakhs) Year
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
Amount
779.69 853.12 0 0 0 0
Difference
73.43 -853.12 0 0 0
% Change 0.09 -1.00 0.00 0.00 0.00
Graph-8 Hire purchase installment from 2001-02 to 2006-07
Page 64

0.20 0.00 percentage -0.20 -0.40 -0.60 -0.80 -1.00 -1.20 year -1.00 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
0.09
0.00
0.00
0.00
From Table 8, it may be inferred that the hire purchase installment has increased to 0.09% (2002-03) over the figures of 2001-02.However it declined to -1.00% (2003-04) over the figures of 2002-03. The overall increase in the total hire purchases installment due from others is 109.41%. 9. Assets Acquired in Satisfaction of Loan: The information relating to assets acquired satisfaction of loan is presented in Table-9 Table 9 Assets acquired in satisfaction of loan from 2001-02 to 2006-07 (Rs.in lakhs) Year
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
Amount
0 2.76 1.23 20.26 18.7 18.72
Difference
2.76 -1.53 19.03 -1.56 0.02
% Change 0 -55.43 1547.15 -7.70 0.11
Graph-9
Page 65
ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION Assets acquired in satisfaction of loan from 2001-02 to 2006-07
1800.00 1600.00 1400.00 percentage 1200.00 1000.00 800.00 600.00 400.00 200.00 0.00 -200.00 2001-02 2002-03 2003-04 year 2004-05 2005-06 2006-07 -55.43 -7.70 0.11 1547.15
From Table 9, it may be seeing that the asset acquired in satisfaction of loan has declined to -55.43 (2003-04) over the figures of 2002-03. However it increased to 1547.15% (2004-05) over the figures of 2003-04. The overall increase in the total assets acquired in satisfaction of loan from others is 678.26%. 10. Dividend Deficit Account: The information relating to dividend deficit account is presented in Table -10 Table 10 Dividend Deficit Account from 2001-02 to 2006-07
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 Amount 624.1 773.23 773.22 773.22 247.05 0 Difference 149.13 -0.01 0 -526.17 -247.05
(Rs.in lakhs)
% Change 23.90 -0.0013 0 -68.05 -100.00
Graph-10 Dividend Deficit Account from 2001-02 to 2006-07
Page 66
40.00 20.00 percentage 0.00 -20.00 -40.00 -60.00 -80.00 -100.00 -120.00 2001-02
23.90 0.00 2002-03 2003-04 0.00 2004-05 2005-06 2006-07
-68.05 -100.00 year
From Table 10, it may be inferred that the dividend deficit account has increased to 23.90% (2002-03) over the figures of 2001-02. However it declined to -68.05% (2005-
06) over the figures of 2004-05 and again it declined by -100% (2006-07) if compared with the figures of 2005-06. The overall decrease in the total dividend deficit account from others is -60.41%. 11. Amount receivable from Gok: The information relating to Account receivable from gok is presented in Table -11 Table 11 Amount receivable from gok from 2001-02 to 2006-07 Year
2001-02 2002-03 2003-04 2004-05 2005-06
(Rs.in lakhs)
% Change
Amount
0 0 109.71 1228.57 988.64
Difference
0 0 1118.86 -239.93
0 0 1019.83 -19.53 Page 67

2006-07 988.64 0 0.00
Graph-11 Amount receivable from gok from 2006-07

1,200.00 1,019.83 1,000.00 800.00 percentage 600.00 400.00 200.00 0.00 0.00 2001-02 -200.00 year 0.00 2002-03 2003-04 2004-05 -19.53 2005-06 0.00 2006-07
Table.11 shows that the amount receivable from gok has increased to 1019.83% (2004-05) over the figures of 2003-04. However it declined to -19.53% (2005-06) over the figures of 2004-05. The overall increase in the total amount receivable from Gok from others is 901.13%. Section-III 1. Earnest money deposits: The information relating to earnest money deposits is presented in Table -12 Table 1 Earnest money deposits from 2001-02 to 2006-07
Year 2001-02 2002-03 Amount 5.31 5.36 Difference 0.05
(Rs.in lakhs)
% Change 0.94 Page 68

2003-04 2004-05 2005-06 2006-07 5.36 5 5 5 0 -0.36 0 0 0.00 -6.72 0.00 0.00
Graph-1 Earnest money deposits from 2001-02 to 2006-07

2.00 1.00 0.00 percentage -1.00 -2.00 -3.00 -4.00 -5.00 -6.00 -7.00 -8.00 year -6.72 c 2001-02 2002-03 0.00 0.94 0.00 2003-04 2004-05 0.00 2005-06 0.00 2006-07
Table-1 reveals that the Earnest money deposits has increased to 0.94%
(2002-
03) over the figures of 2001-02. However it declined to -6.72% (2004-05) over the figures of 2003-04. The overall decrease in the total earnest money deposit from others is -5.84%. 2: Sundry Deposit: The information relating to sundry deposits is presented in Table -2. Table 2 Sundry Deposits from 2001-02 to 2006-07
Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 Amount 1643.44 1304.38 903.41 7357.52 8336.35 2450.78 Difference -339.06 -400.97 6454.11 978.83 -5885.57
(Rs.in lakhs)
% Change -20.63 -30.74 714.42 13.30 -70.60
Graph2
Page 69
ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION Sundry Deposits from 2001-02 to 2006-07
80 0 0 .0 70 0 0 .0 60 0 0 .0 percentage 50 0 0 .0 40 0 0 .0 30 0 0 .0 20 0 0 .0 10 0 0 .0 0 0 .0 -1 0 0 0 .0 -2 0 0 0 .0 y ear 2 0 -0 01 2 2 0 -0 02 3 2 0 -0 03 4 2 0 -0 04 5 2 0 -0 05 6 -2 .6 0 3 -3 .7 0 4 1 .3 3 0 -7 .6 0 0 2 0 -0 06 7 74 2 1 .4
It may be inferred from Table- 2 that the sundry deposit has decreased to -20.63% (200203) over the figures of 2001-02 and again it declined to -30.74% (2003-04) when compared to the figures of 2002-03. However, it increased to 714.42% (2004-05) over the figures of 2003-04 and again it increased to 13.30% (2005-06) over the figures of 2004-05. Further it decreased by -70.60% (2006-07) if compared to the figures of 2005-06. The overall increase in the total sundry deposits from others is 149.12%.
3. Dividend subvention from Gok: The information relating to dividend subvention from gok is presented in Table -14 Table 3 Dividend subvention from Gok from 2001-02 to 2006-07
Year 2001-02 2002-03 2003-04 2004-05 Amount 958.88 1596.88 1596.88 1596.88 Difference 638 0 0
(Rs.in lakhs)
% Change 66.54 0.00 0.00 Page 70

2005-06 2006-07 1596.88 1596.88 0 0 0.00 0.00
Graph3 Dividend subvention from Gok from 2001-02 to 2006-07

70.00 60.00 percentage 50.00 40.00 30.00 20.00 10.00 0.00 0.00 2001-02 2002-03 2003-04 year 2004-05 2005-06 2006-07 0.00 0.00 0.00 0.00 66.54
From Table-3 shows that the dividend subvention from gok has increased to 66.54% (2002-03) over the figures of 2001-02. The overall increase in the total dividend subvention from gok from others is 166.55%.
4: Seed Capital Assistance: The information relating to seed capital assistance is presented in Table -15 Table 4 Seed capital assistance from Gok from 2001-02 to 2006-07 (Rs.in lakhs)
Year 2001-02 2002-03 Amount 4672.39 5563.94 Difference 891.55 % Change 19.08 Page 71

2003-04 2004-05 2005-06 2006-07 6025.92 6778.87 0 0 461.98 752.95 -6778.87 0 8.30 12.50 -100.00
Graph4 Seed capital assistance from Gok from 2001-02 to 2006-07

40.00 20.00 0.00 percentage -20.00 -40.00 -60.00 -80.00 -100.00 -120.00 year -100.00 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 19.08 0.00 8.30 12.50 0.00
Table- 4 reveals that the capital assistance has increased to 19.08% (2002-03) over the figures of 2001-02 and again it increased to 8.30% (2003-04) over the figures of 2002-03. It further increased to 12.50% (2004-05) over the figures of 2003-04. However it declined by -100% (2005-06) if compared to the figures of 2004-05. The overall increase in the total seed capital assistance from others is 145.08%. 5. Other Liabilities: The information relating to other liability is presented in Table -16 Table 5 Other liabilities from 2001-02 to 2006-07 Year
2001-02 2002-03 2003-04 2004-05
(Rs.in lakhs)
% Change -2.03 9.92 -51.28 Page 72
Amount
284.52 278.75 306.4 149.27
Difference
-5.77 27.65 -157.13

2005-06 2006-07 150.2 281.05 0.93 130.85 0.62 87.12
Graph5 Other liabilities from 2001-02 to 2006-07

100.00 80.00 60.00 percentage 40.00 20.00 0.00 -20.00 -40.00 -60.00 year -51.28 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 -2.03 9.92 0.62 87.12
From Table-5 it may be observed that the other liabilities has decreased to -2.03% (2002-03) over the figures of 2001-02. However it increased to 9.62% (2003-04) over the figures of 2002-03. It has decreased to -51.28% (2004-05) over the figure of 2003-04 and further it increased to 0.62% (2005-06) over the figures of 2004-05 and again it increased by 87.12% (2006-07) if compared with the figures of 2005-06. The overall decrease in the total other liabilities from others is -1.22%. 6. Sundry Liabilities: The information relating to sundry liability is presented in Table -17 Table 6 Other liabilities from 2001-02 to 2006-07 Year Amount Difference (Rs.in lakhs)
% Change Page 73

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 9016.35 6085.95 843.79 1243.26 2039.66 2307.64 -2930.4 -5242.16 399.47 796.4 267.98 -32.50 -86.14 47.34 64.06 13.14
Graph6 Sundry liabilities from 2001-02 to 2006-07

80.00 60.00 40.00 percentage 20.00 0.00 -20.00 -40.00 -60.00 -80.00 -100.00 -86.14 year 2001-02 2002-03 -32.50 2003-04 2004-05 2005-06 2006-07 13.14 47.34 64.06
Table: 6 depicts that the sundry liabilities has decreased to -32.50% (2002-03) over the figures of 2001-02 and again it declined to -86.14% (2003-04) when compared to the figures of 2002-03. However, it increased to 47.34% (2004-05) over the figures of 2003-04 and again it increased to 64.06% (2005-06) over the figures of 2004-05. Further it increased by 13.14% (2006-07) if compared to the figures of 2005-06. The overall decrease in the total sundry liabilities from others is -74.41%. 7. Margin Money Assistance: The information relating to margin money assistance is presented in Table -7 Table 7 Margin money assistance from 2001-02 to 2006-07 Year Amount Difference (Rs.in lakhs)
% Change Page 74

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 1586.19 1451.33 1357.39 1289.99 266.56 268.23 -134.86 -93.94 -67.4 -1023.43 1.67 -8.50 -6.47 -4.97 -79.34 0.63
Table 7 Margin money assistance from 2001-02 to 2006-07

10 0 -10 percentage -20 -30 -40 -50 -60 -70 -80 -90 year -79.34 0 2001-02 -8.50 2002-03 -6.47 2003-04 -4.97 2004-05 2005-06 0.63 2006-07
Table: 7 show that the margin money assistance has decreased to -8.50% (2002-03) over the figures of 2001-02 and again it declined to -6.47% (2003-04) when compared to the figures of 2002-03 and again it declined to -4.97% (2004-05) over the figures of 200304 and further it decreased to -79.34% (2005-06) over the figures of 2004-05. Further it increased by 0.63% (2006-07) if compared to the figures of 2005-06. The overall decrease in the total margin money assistance from others is -83.09%.
CHAPTER-VI
FINDINGS SUGGESTIONS AND CONCLUSIONS
Page 75
FINDINGS: The following are the major findings of the present study. 1. During the year 20001-02 the working capital was Rs 316.49 lakhs. During the year 2002-03 the working capital was negative Rs - 2711.26 lakhs. During the year 2003-04 the working capital was Rs 1849.99 lakhs. During the year 2004-05 the working capital was negative Rs -7308.41lakhs. During the year 2005-06 the working capital was Rs.10, 829.84 lakhs. During the year 2006-07 the working capital was Rs 8336.88 lakhs.
7. The overall increase in the working capital during the study period is Rs 8020.44. (i.e. Rs 8336.88-Rs 316.49)
8. The overall decrease in the total seed capital assistance from others is -78.78%
9.
The overall increase in the total deposits with bank from others is 943.50
10. The overall increase in the total subsidy bonds sinking fund deposits from others is
162%.
11. The overall decrease in the total deposits and other advances from others is
-35.56%.
12. The overall decrease in the total deposits and other advances from others is
-35.56%.
13. The overall increase in the total other assets from others is 136.997%. 14. The overall decrease in the total advance to suppliers from others is -99.90%.
Page 76

15. The overall increase in the total hire purchases installment due from others is
109.41%.
16. The overall increase in the total assets acquired in satisfaction of loan from others
is 78.26%
17. The overall decrease in total dividend deficit account from others is -60.41%. 18. The overall increase in the total amount receivable from Gok from others is
901.13%.
19. The overall decrease in the total earnest money deposit from others is -5.84%. 20. The overall increase in the total sundry deposits from others is 149.12%. 21. The overall increase in the total dividend subvention from gok from others is
166.55%.
22. The overall increase in the total seed capital assistance from others is 145.08%. 23. The overall decrease in the total other liabilities from others is -1.22%. 24. The overall decrease in the total sundry liabilities from others is -74.41%. 25. The overall decrease in the total margin money assistance from others is -83.09%.
Page 77
SUGGESTIONS
1. The KSFC may go for advertisement of various loan schemes through different
media.
2. It is suggested that the KSFC may offer minimum rate of interest to attract more
borrowers.
3. Better infrastructure facilities along with loans may be offered to SSIs.
4. Easy repayment facilities may be offered to the entrepreneurs and 5. Loan facilities may be extended to backward areas also.
Page 78
CONCLUSION
The preceding discussion shows that the working capital has increased about Rs. 8020.39 lakhs. The deposits have been increasing over the years. KSFC is required to invest more funds lucrative avenues of investments rather than marinating huge liquid funds.
Page 79
BIBLIOGRAPHY
1. Financial Management
By Maheshwari
2. Financial Management
By Khan and Jain
3. Human Resource Management

4. Annual Reports on KSFC. 5. Websites a. www.ksfc.in. b. www.ksfc..net
P. S .Subba Rao
Page 80

A PROJECT REPORT On On The Working Capital Management in Karnataka State Finance Corporation

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ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION

ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION

exceeding 20 years. iv. Subscribe to debentures floated by industrial concerns.

History of KSFC (Karnataka State Financial Corporation)

ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION

KSFC Main Activities / Function: 1 Long term lending

About Bijapur KSFC branch:

Functional departments of KSFC:

projects, disbursement of funds and monitoring progress during the implementation

7. Business Department and Credit Research Department: This department looks

ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION

of hire purchase and financial services provided by KSFC.

Department: This department was formed to

women entrepreneurs to establish the industries by providing them necessary guidelines.

Karnataka State Financial Corporation citizens charter:

ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION

Procedure for Availing Loan Assistance from KSFC:

Application processing fee: Loan Amount Up to Rs. 10,000/Fee Nil

Sanction limit of loans

3:1 2:1 Flexible 2:1

ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION

ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION

Interest rates on loans

Term loans above Rs.50,000/ and up to 15.0 Rs.2,00,000/-

Privileged Entrepreneurs Scheme

ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION

ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION

ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION

Concepts of Working Capital Management

Importance of working capital management

ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION

It ensures solvency and stability of the enterprises It also ensures continuity in

Determinants of working capital:

Sundry debtors Bills received

Figure-2 Operating cycle of non-manufacturing company Cash

Formula of Working Capital: Working Capital = Current Assets Current Liabilities

Table -1 A Current Liabilities 2001-02

ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION

Graph 1A Current liabilities 2001-02

u c imdd id n s n la e iv e d Ern s mn y d p s a e t o e e o it S n ryd p s u d e o its d id n s b e tio fro g k iv e d u v n n m o S e c p l a s ta c e d a ita s is n e

O e lia ilitie th r b s S n rylia ilitie ud b s

ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION

Current liabilities-2002-03 (Rs, in lakh)

ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION

Graph-2A Current Liabilities 2002-03

E rn st m n y d p sit a e oe eo S n ry d p sits ud eo d e d su ve tio fro g k ivid n b n n m o

S e ca ita a e d p l ssista ce n O e lia ilitie th r b s S n ry lia ilitie ud b s

Table-3A Current Liabilities 2003-04 (Rs in lakh)

ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION

Graph-3A Current liabilities 2003-04

Ern s mn yd p s a e t o e e o it S n ryd p s u d e o its d id n s b e tio fro g k iv e d u v n n m o S e c p l a s ta c e d a ita s is n e

O e lia ilit s th r b ie S n ryl b e u d ia iliti s

ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION

Table-4A Current liabilities 2004-05 (Rs in lakh)

Working Capital = Current assets Current liabilities

ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION

A s tsa q ire in se cu d s tis c no lo n a fa tio f a s D id n d fic a c u t iv e d e it c o n A o n re e a lr fro mu t c iv b m gk o

Graph-4A Current liabilities-2004-05

ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION

Table-5A Current liabilities-2005-06 (Rs, in lakh)

ON THE WORKING CAPITAL MANAGEMENT IN KARNATAKA STATE FINANCE CORPORATION

Graph-5A Current Liabilities-2005-06

Current Liabilities 2006-07