Food and Inns Project

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

Ordinarily, the term “working capital” stands for that part of the capital, which is
required for the financing of working or current needs of the company. Working capital is
the lifetime of every concern. Whether it is manufacturing or non-manufacturing one
without adequate working capital, there can be no progress in the industry.
Inadequate working capital means shortage of raw materials, labor etc., resulting in
partial current assets less current liabilities-has no economic meaning in the sense of
implying some type of normative behavior. According to this line of reasoning, it is largely
an accounting artifact. Working capital management, then, is a misnomer.
The working capital of the firm is not managed. The term describes a category of
management decisions affects specific types of current assets and current liabilities. In
turn, those decisions should be rooted in the overall Valuation of the firm.
DEFINITIONS
“Working capital refers to manage the firm current assets and current liabilities in
such a way that a satisfactory level of working capital is maintained.
- M Y Khan and PK. Jain
“Working capital is an amount of fund is necessary to cover the cost of operating
the enterprise”.
– Cubing
“Working capital means a sum of current assets only". – Field, Backer and Malott
VCR Degree and PG College Page 1

ADVANTAGES OF GOOD WORKING CAPITAL MANAGEMENT
The main advantages of sound working capital are as follows;
1. Solvency of the business adequate working capital helps in maintaining solvency of

the business by providing uninterrupted flow of production.
2. Goodwill sufficient working capital enables a business concern to make prompt

payments and hence helps in creating and maintaining goodwill.
3. Easy loans a concern having adequate working capital, high solvency and good
Credit standing can arrange loans from banks on easy and favorable terms.
4. Cash discount adequate working capital also enables a concern to avail cash
discounts on the purchases and maintaining goodwill.
5. Regular supply of raw materials sufficient working capital ensures regular supply
of raw materials and continuous production.
6. Regular payment of salaries, wages and other day-to-day commitments a company

which has ample working capital can make regular payment towards it day-today
commitments which would raise the morale of its employees, increase their
efficiency, reduce wastage cost and enhance production and profits.
7. Exploitation of favorable market conditions only concerns with adequate working

capital exploit favorable market conditions such as purchasing its requirements in
bulk when the prices are lower and holding its inventories for higher prices.
8. Crisis handling ability adequate working capital enables a concern to face business
crisis, such as depression, inflation successfully.
9. Quick and regular return on investments sufficiency of working capital enables a

concern to pay quick and regular dividends to its investors, as there may not be
much pressure to plough back profits.
10. High morale adequacy of working capital creates an environment of security,

confidence and high morale and improves the overall efficiency of a business.
DISADVANTAGES OF INADEQUATE WORKING CAPITAL

1. A concern which has inadequate working capital cannot pay its short-term
liabilities in time. Thus, it will lose its reputation and shall not be able to obtain
good credit facilities.
2. It cannot buy its requirements in bulk and cannot avail discounts.
3. It becomes difficult for the firm exploits favorable market conditions and
undertakes profitable projects.
4. The firm cannot pay its day-to-day expenses, which would increase cost and reduce
the profit of the business.
5. It becomes impossible to utilize efficiently the fixed assets due to the non-
availability of liquid funds.
6. The rate of return on investments will also fall with the shortage of working capital.

INDUSTRY PROFILE
Absence of a market strategy, inadequate export infrastructure and unstable supply
base are giving Indian mango growers a run for their money, more Soils, Nutrition, and
Fertilizer in the international markets where the Indian king of fruits is still to take its
place. While India produces over 11m metric tons of mangoes annually around 63% of
world produce, its export share is just 0.11%. However, APEDA has identified UK,
Germany, the Holland, France, Italy and Belgium for mango exports and plans aggressive
marketing strategies there. APEDA is making all efforts to make available latest packaging
and processing technology for our produce.
India is one of the largest producers of Tropical fruits in the world and has
established the image in the international market. Due to its own advantages in climatic
conditions, India can produce wide variety of fruits and vegetables. Unfortunately, the
processing technologies and storage facilities, available are still primitive and enough
importance has not been accorded for this industry, which has tremendous growth
potential. Only recently, both the central and state governments have realized the
importance and taken steps through wide variety of measures for the growth of the
industry. Andhra Pradesh, where the plant is coming up, is known for variety of quality
fruits particularly for Mango, Papaya, Guava, etc.
With the support of Govt. bodies, many small-scale industries (overall capacity of
up to 1000M.Tons of fruit pulp by canning process) have been established since 1970 by
leading formers and fruit traders for processing the tropical fruits. In the early 1970’s India
started exporting this tropical fruit products to Gulf countries. However, could not able to
meet advanced international market requirements to enter into Europe and American
countries due to inferior product quality. Even the response in the GULF countries has not
seen the potential growth year by year due to quality related issues. From the year 1995,
Indian manufacturers realized on the technological gap in meeting the international
standards when compared with competitive producers of same products from North
America, Peru, Brazil and Egypt. Necessary steps were then initiated in establishing the
new technologies called “Aseptic Fruit Pulp” to compete in international markets.
Nevertheless, today there are many small scale industries producing low quality fruit pulps
(canned pulp) and struggling to approach advanced international markets. Though, the

successful organizations like Foods and Inns, Clean food, etc. could establish Aseptic
process with latest technologies at that point of time, the plants have not been designed
completely to meet international standards.
Mango, the most important fruit of India, is grown in an area of 1.23 million ha
with an annual production of 10.99 million tons, which accounts for 57.18 per cent of the
total world production. This paper presents information on area and production, cultivars,
hybrids and clone, agro techniques, disorders, insect pests and diseases, harvest and
postharvest management, export, problems and prospects of growing mango in India.
Top producers of Mangoes, Mango grafts,

Guavas, 2017-18-11
Production in
Country
millions of tons
India ~ 13.6
People's Republic of China 4.2
Thailand 2.5
Indonesia 2.2
Mexico ~ 1.9
Pakistan ~ 1.8
Brazil ~ 1.2
World total 34.9

Key ~ 2018-19 data

India ranks second, next only to China, with a production of 47 million tons from
an area of 4.13 million ha during the year 2018-19 and accounting for 8.04 per cent of the
total area under fruits in the world (51.36 mill ha) and 9.34 per cent of the total world fruit
production (503.28 million tons). However, Banana, orange grapes and apple were the
major fruits of the world accounting for 14.45, 13.23, 13.01, and 12.36 per cent of total
world fruit production. Mango accounted for only 3.11 of the total area under the fruits and
2.15 per cent of the total world fruit production.
The total production of mango in the word was 26.11 million tons out of which
India alone produced 10.02 million tons, accounting for 38.38 per cent and ranked first.
The total area production of mango in the world was 26.574 million tons from an area of
3.69 million ha out of which India alone accounted for 40.64 per cent in terms of
production and 43.36 per cent in terms of occupied area, making it the largest producer of
mangoes in the world. China, Thailand, Mexico, Pakistan, Indonesia, Philippines and
Brazil were other important mango producers accounting for 13.48, 6.40, 5.65, 4.10, 3.79,
3.64 and 3.20 per cent of the total world mango production, respectively. Amongst the
commercial producers of mango, the highest productivity of mango was found to be in
Brazil, followed by Pakistan, Mexico and China.
Highest productivity of mango was observed in Cape Verde Is. (45.00 MT/ha),
followed by Samoa (40.00 MT/ha), Guatemala (26.75 MT/ha), Palestine (25.00 MT/ha),
Peru (22.76 MT/ha) and Israel (20.00 Mt/ha). However, the productivity was lower in the
countries producing mangoes commercially. Amongst the commercial producers of
mangoes, the Brazil had highest productivity viz. 12.50 Mt/ha followed by Pakistan (10.37
MT/ha), Mexico (8.65 Mt/ha) and China (8.56 Mt/ha). The productivity in India was only
6.75 MT/ha, which was considerably lower vise-a-vise other countries of the world.
Concerted efforts are to be made to increase the productivity of mango to meet national
standards and increase its availability for the domestic as well as export market.

INTERNATIONAL MARKETS FOR INDIAN MANGO
Asian producers find it easier to expand sales to the European Union. Europe’s
acceptance of different varieties is greater, because of a large demand from Asian
immigrant groups. Phytosanitary restrictions are less stringent. Transportation costs are
not as big a factor in exporting mangoes to the European Union as in exporting to the
United States market for example, India and Pakistan are able to compete with non-Asian
suppliers to the European Union, whereas proximity gives Mexico and Haiti a clear
advantage in supplying to the United States market.
Area, Production and productivity of mango in major mango producing countries of

the world during 2018-19
Area Production Productivity

Sl. No. Countries
Mill. ha Prop. (%) (Mill. tons) Prop. (%) MT/ha
1 India 1.6 43.36 10.8 40.64 6.75
2 China 0.419 11.35 3.582 13.48 8.56
Fifty-four percent of European Union imports enter during the periods May to July
and November to December, with peak imports in June. French imports reach peak in April
and May, whereas United Kingdom imports are concentrated during the May to July.
German imports are spread more evenly throughout the year. Of the top suppliers, Brazil
provided chiefly during the period November to December, the United States during June
to October, South Africa during January to April and Venezuela during April to July.
Pakistan supplies the majority of its exports to the European Union during June and July
Indian exports take place mainly during the month of May. Although a lion’s share of
Indian mango goes to the Gulf countries, efforts are being made to exploit European,
American and Asian markets. About 13,000 Million Tons of Alphonso varieties are
exported to Middle East, UK and Netherlands every year.
The different products of mango which are exported include mango chutney,
pickles, jam, squash, pulp, juice, nectar and slices. These are being exported to U.K.,

U.S.A., Kuwait and Russia. Besides these, the fresh mangoes are being exported to
Bangladesh, Bahrain, France, Kuwait, Malaysia, Nepal, Singapore and U.K.
Hyderabad, March 31 Despite an expected low production of mangoes this year,

the total exports of mangos from Andhra Pradesh is likely to see a 100 per cent jump over
last year. Unlike last year, due to adoption of better pest management techniques and
awareness of qualitative produce, the mango growers from the state are hoping for better
price realization from other countries during this season.
"Last year, the total production of mangoes was about 32 lakh tons with instances
of three times of flowering during the season. This led to good production but this year the
output is expected to fall by about one-third over last year’s production," according to
sources. "But low volume in production will not reflect on the exports," said APEDA
officials. However, it is too early to predict on exports. The production is based on the rate
of flowering and climatic conditions during harvest period.

MANGO PRODUCING STATES IN INDIA
STATE/UT'S MANGO
Area (ha) Prod.(Mt)
ANDAMAN NICOBAR 0.30 2.60
ANDHRA PRADESH 480.40 4058.30
ASSAM 4.60 46.50
BIHAR 146.00 995.90
CHANDIGARH 0.00 0.40
CHHATISHGARH 43.30 191.80
D and N HAVELI 1.20 12.50
GOA 4.60 7.60
GUJARAT 121.50 856.70
HARYANA 9.10 64.60
HIMACHAL PRADESH 38.70 24.00
JAMMU and KASHMIR 10.70 12.10
JHARKHAND 15.10 254.30
KARNATAKA 153.80 1694.00
KERALA 63.80 373.20
MADHYA PRADESH 14.20 127.80
MAHARASHTRA 474.50 597.00
NAGALAND 0.30 0.40
ORRISA 177.60 577.50
PONDICHERRY 0.40 6.80
PUNJAB 6.40 93.50
RAJASTHAN 5.90 93.00
TAMIL NADU 132.70 636.30
TRIPURA 4.30 13.20
UTTAR PRADESH 276.40 3588.00
UTTRANCHAL 38.40 120.80
WEST BENGAL 88.10 578.00
TOTAL 2312.30 15026.80
COMPANY PROFILE
HISTORY OF FOOD AND INNS (P) LTD
The division combines people with vast experience in agric-trading with the
FOODS AND INNS (P) Ltd Group’s credibility to justify its premier standing in the
trading arena. The division was set up in 1967 and since then has handled a wide range
of products - such as Sesame Seeds, Processed Fruits, Food grains, Aqua etc.

FOODS AND INNS (P) Ltd began its fruit processing operations in early
70s.However fruit processing operations have been given a special thrust since the last
season with an emphasis on developing strategic partnerships across the value chain
especially fruit procurement and processing. FOODS AND INNS (P) Ltd has
established its presence as a reliable and competitive exporter to Coca Cola, USA,
Western Europe, Far East, Middle East etc.
BACKGROUND OF FOOD AND INNS (P) LTD

Situated at Chittoor in Andhra Pradesh, the mango belt in India, FOOD AND
INNS (P) Ltd (FIL) is a 100% Export Oriented Unit (EOU) processing Tropical Fruit
Purees, Concentrates and Fresh Fruits FOOD AND INNS Ltd was started keeping in
mind the local farming community wealth. The farming community is an integral part
and forms the backbone of the organization. In its effort to be a forerunner in the chosen
areas of business in terms of best practices in quality and technology, FIL plans to
benefit armors, the industry and the nation in a phased manner.
FOODS AND INNS Ltd believes in empowering farmers by providing technical

assistance from research institutes in the food industry to support the farmers in achieving
better quality and higher yields by developing the gardening and harvesting techniques.
Further to educating farmers with latest horticultural techniques, FOODS AND INNS
LTD is encouraging farmers to mobilize the fruits directly to the factory, thereby
minimizing the fruit handling damages and high value realizations. The first phase has
been completed, by setting up of state-of-the-art fruit processing plant to produce natural
tropical fruit puree and concentrates.
BOARD OF DIRECTORS
S. No Name of the Director
1 Field Marshal Sam Manekshaw - M.C. Chairman
2 Mr.Utsav Dhupelia Director
3 Mr. D.B. Engineer Solicitor
4 Mr.Raymond Simkins Foreign Director
5 Mr.C.M.Maniar Solicitor

6 Mr. D.D. Trivedi Ex. IIM Professor

7 Mr. M. B. Dalal Director
Mr. Utsav Dhupelia, a Chartered Accountant from U.K., looking after the routine
affairs of the company, is the brain and brawl for taking the company’s turnover from
Rs.5Crores (USD1.1 MIO) to Rs.70Crores (USD 16 MIO) giving the status of
government recognized EXPORT HOUSE.
With the backup of technical and managerial support staff, the state of art
technology implementation, innovative Research and Development and Lab facilities, the
doyen guidance of Mr. Utsav coupled with the contribution of other directors, the
company is poised for a steady and continuous growth graph moving upwards in all Para
meters.

MARKET PRESENCE
European Union
United States of America
Canada
Australia
Middle East including Iran and North Africa
Japan and South Korea
SHARE OF COUNTRIES MARKET

FACILITY
FOODS AND INNS (P) Ltd processing facility is located in Chittoor, spread over
an area of 15 acres. This place has been earmarked to host Integrated Food Complex of
International standards. The facility currently has a tropical fruit Puree or Concentrate
processing plant and the pack house for preparing the Fresh Fruits and Vegetables.
CUTTING EDGE TECHNOLOGY

FOODS AND INNS (P) Ltd plant is equipped with state-of-the-art fruit puree
processing aseptic filling line of SIG- Mizzen, Italy to produce natural fruit pulps and
concentrates. The plant has one of the India's single largest fruit processing lines -10
TPH ripen fruit processing with Aseptic Packaging.
INITIATIVES SPAN THE FOLLOWING DISCIPLINES

PLC operated equipments for better control over monitoring and operations
with supervisory units.
Two stage washing of fruits to ensure HACCP quality requirement.
Two-stage sterilization to retain the natural flavor and aroma.
High speed advanced Mono block aseptic filling machine supplied by SIG
Mizzen.
Integrated Enterprise Resources Planning system is in place to automate
business processes and provide data for analysis and reporting, allowing a
closer control on quality and operations.

EFFICIENT PLANT LAYOUT

Minimal drop in power and steam transfer.
Straight-line process flow design to maintain the hygiene• and control in
respective areas.
Special food grade self-leveling epoxy flooring to maintain optimum hygienic
conditions.
Curved corners and food grade epoxy painted walls to avoid dust
accumulation and to facilitate easy washing.
Advanced high raise insulated roofing with double layer GI Sheeting with air
extractors to maintain temperature inside the plant.
Utility lines are routed outside the plant to keep the interiors free from dust
accumulation.

VALUABLE INDUSTRIAL EXPERTISE
FOOD AND INNS (P) Ltd is backed with strong support and service from its
team of highly qualified technical personnel and domain experts with perceptive
knowledge and skill. Powered by priceless hands-on experience these professionals are
upgrading themselves continuously to identify and introduce improved and innovative
product offerings that would delight customers worldwide and comply with the leading
global quality standards.
PURE AND CONCENTRATE FACILITY

The fruit processing aseptic line is from SIG-Mazzini of Italy. The line has a
capacity to process 10 metric tons per hour ripened fruits. The processing line is fully
integrated and controlled by PLC.
PACK HOUSE
FOODS AND INNS (P) Ltd has a set up a Fresh fruit and Vegetable processing
facility from Grief, Spain. Fresh fruits including mangoes, bananas are processed along
with tropical vegetables like Okra, Egg plant, Lemon, Bitter gourd etc. The facility also
holds ripening chambers, pre cooling chambers and cold storage to handle fresh fruits
and vegetables.
VAPOR HEAT TREATMENT

To enable Fresh Mango exports to countries like Japan and Korea, FOOD AND
INNS (P) Ltd has commissioned the VHT facility. This ensures irradiation of the fruit
flies in the fresh fruit. FOOD AND INNS (P) Ltd is the first private organization to set up
this facility in the country.

WATER MANAGEMENT
Water is an essential and precious natural resource. It is a nature’s gift. Without
water there is no life on the earth. It is as important to the fruit processing industry as to the
living being. But, water is becoming scarce year by year due to increase n its consumption
in industries and agriculture sectors and indiscriminate use or wastage by human beings,
therefore, it needs a integrated and scientific approach for its management to use it so that
undesirable wastage is avoided which helps us to save water for right utilization.
STAGE OF USE OF WATER TO THE BEST EFFECT IN OUR

FACTORY
Our main source of water is bore wells. The water is potable. Water from all bore
wells is collected in a sump. From there it is pumped to over head tank to supply to various
locations of use. To manage appropriately and conserve the water, we are taking following
steps at various locations of its use;
 Fruit Washing
The water is re-circulated after filtration up to it becomes dirty. This water is
chlorinated to control the contamination by continuous dosing of chlorine in the washing
tub.
 Steam Generation
Water for boiler feeding is treated in water softener to reduce the hardness. The
steam condensate of evaporator is recycled to boiler to save water and energy as
condensate will have high temperature.

THE BEST EFFECT IN OUR FACTORY

Steam condensate from other heating equipments and Vapour condensate from pulp
concentration is collected in a tank to use in crate and floor cleaning.
Floor and equipments are cleaned by compressed water jet to conserve the water.
Treated effluent is used for civil construction and gardening.
Flow meters are installed at location of major use to have control over water
utilization.
UV sterilizer is installed on main line of water, which feed to processing to sanitize
the water.
The water to be used for blending in product is treated in r o plant.
Drinking water is passed through zero-b filter.
WASTE MANAGEMENT
Our factory is equipped with aerobic effluent treatment plant of 250kl capacity.
Effluent from all locations of water use is collected through inter connected drains in ET
plant. It is aerated here and transferred to settlement tank for sedimentation of solid
particles. The treated effluent is sent to oxidation pond. From pond, water is used for
gardening and civil construction. The sludge is transferred to drying bed. The dried sludge
is used as manure in our garden. The main feature of our company is that no effluent
treated or untreated is released in public drains and therefore, does not pose any danger to
surrounding environment and public.
SOLID WASTE MANAGEMENT
Seeds of fruits
Stem ends and skin/peel of fruits and vegetables
Pumice-consists of fibbers and embedded pulp.
Spoiled fruits and vegetables
The seeds and peels of good fruits are passed second time through a pulped to
remove the remaining pulpy portion. The pulp extracted so and pumice are mixed and
given an enzymatic treatment and centrifuge to remove the extraneous materials so that
pulp can be used for making concentrate. This helps in improving the recovery out of
fruits.

CERTIFICATIONS OF INTERNATIONAL QUALITY STANDARDS

FIL's quality and business objectives are designed to challenge the organization
through continual improvement and a zeal for results. At FIL quality determines not only
the end product but processes and operations at all levels. The company's laboratory is
equipped with the latest testing facilities to perform all necessary tests. Frequent and
stringent quality checks are carried out for Physical, Chemical, Organoleptic and
Microbial parameters and immediate corrective measures are carried out on detection of
variance in parameters, assuring a high quality end product. As a mandatory procedure,
all finished products are analyzed with extreme care before clearance by FIL's quality
assurance staff.
OUR CERTIFICATIONS INCLUDE
HACCP (Food Safety Certification) by TUV, Germany
ISO 90012000 (Quality Management System) by TUV, Germany
Kosher by Star-K, USA
Sure Global Fair (SGF)
Halal Certification
MANGO PULP INDUSTRY HOPES
Mango pulp production to reach 75,000 tones by 2017-18

Mango is raised in 36,000 hectares in Krishnagiri district
Mango pulp processed annually is 50,000 tones
Farmers have to go to Bangalore, as there is no testing facility in Krishnagiri
Farmers are not getting fair price, even if there is a rise in prices in global
market
CUSTOMER FOCUS
Loyalty and a strong relationship in business are built out of years of experience
in a particular industry. FOODS AND INNS (P) Ltd expertise in the business and its
contacts with Agents\Brokers, Blender-bottlers, End User, Off-shore logistical service
providers has made the supply chain process extremely competitive.

Given our renewed emphasis on this product line we are strengthening

relationships in key markets across the buyer spectrum, understanding unique
requirements and delivering value to select global customers.
PRODUCTS
Fruit Products
Alphonso Totapuri Guava Papaya
Products of Vegetables
Fruit Seasons
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec
Mango
Papaya
Guava


NEED OF THE STUDY
In order to maintain flows of revenue from operations every firm need certain
amount of current assets. For example cash is required to pay expenses or to meet
obligations for service received etc., by a firm on the identical plan inventories are required
to provide the line between production and sales. Similarly accounts receivables generate
when goods are sold on credit.
Needless to maintain cash, bank, debtors, bills receivables, closing stock including
raw materials, working progress, finished goods repayment and certain other deposits and
investments which are temporary in nature represents current assets of a firm.

SCOPE OF THE STUDY
The present study is confined to FOODS AND INNS (P) LTD only. The time study
considered for performing the study is from 2015-16-2019-20. Various components of
working capital i.e., cash, receivables, inventory management has been analyzing taking
into consideration the information both the post and present with respect to the
performance of the company.

OBJECTIVES OF THE STUDY
The study is being undertaken with the following objectives are

1. To study various sources of working capital and evaluate the financial
strength of Foods and Inns Ltd.,
2. The study of working capital management with reference to
a. Management of cash.
b. Management of Inventory.
c. Management of Accounts receivables.
3. The analysis of the profitability – liquidity position of the company
4. To achieved the short-term and long-term objectives
5. To study the firm has met its Current Assets obligations
6. To identify problem regarding working capital management and to give
possible suggestions for better management.

LIMITATIONS OF THE STUDY
The study on working capital has the following limitations.

 The analysis is carried out on the basis of the figures present in the internal records
only.
 The study is based on the data given by the Finance Department only, which has its
own limitations.
 Detailed analysis could not be carried for the project work because of limited time
span.

REVIEW OF LITERATURE
MEANING OF WORKING CAPITAL
Ordinarily, the term “working capital” stands for that part of the capital, which is
required for the financing of working or current needs of the company. Working capital is
the lifetime of every concern. Whether it is manufacturing or non-manufacturing one
without adequate working capital, there can be no progress in the industry.
Inadequate working capital means shortage of raw materials, labor etc., resulting in
partial current assets less current liabilities-has no economic meaning in the sense of
implying some type of normative behavior. According to this line of reasoning, it is largely
an accounting artifact. Working capital management, then, is a misnomer.
The working capital of the firm is not managed. The term describes a category of
management decisions affects specific types of current assets and current liabilities. In
turn, those decisions should be rooted in the overall Valuation of the firm.
CONCEPTS OF WORKING CAPITAL
The term working capital can be used in two different ways. They are
1. GROSS WORKING CAPITAL
The gross working capital refers to investment in all the current assets taken
together. The total of investments in all current assets is known as gross working capital.
2. NET WORKING CAPITAL
The term net working capital refers excess of total current assets over total current
liabilities. It may be noted that the current assets refers to these liabilities which are
payable with in a period of one year.

METHODS
Types of Working Capital

From the point of view of time, the term working capital can be divided into two
categories.
1. PERMANENT WORKING CAPITAL

It is also refers to the hard core working capital. it is the minimum level of
investment in the current assets that is carried by the business at all times to carries our
minimum level of its activities.
2. TEMPORARY WORKING CAPITAL

It refers to the part of total working capital which is required by a business over and
about permanent working capital. It is also called variable working capital. Since the
volume of the temporary working capital keeps on fluctuating from time to time according
to the business activities it may be financed from short term resources.
Permanent working capital can be further divided into
1. Regular Working Capital
2. Reserve Working Capital
1. REGULAR WORKING CAPITAL

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

It is the excess over the needs or regular working capital that should be kept in
reserve for contingencies that may arise at any time these contingencies include rising
prices, business depression, strikes and special operations such as experiments with new
products.

COMPOSITION OF WORKING CAPITAL
1.Current Assets
a. Inventories Raw Materials
Work in progress
Finished goods
Stores and spares
Miscellaneous Goods
b. Receivables Trade debtors
Loans and advances
Other debtor balances

c. Marketable securities Government securities
Semi-Government securities
Shares, Debenture, etc.,

d. Cash and bank balance Cash in Hand
Cash At Bank
Cash in Transit
2.Current Liabilities
a. Sundry creditors Interest accused on loan
Advances received from customs
Short term loans from banks
Trade dues and other liabilities
Deposits from public, etc.,

SOURCES OF WORKING CAPITAL
Working Capital Sources
Short-term Sources Long-term Sources
Internal External
1. Sale of shares 1. Depreciation funds 1. Trade credit
2. Sale of Debentures 2. Provision of Taxation 2. Credit papers
3. Sale of idle fixed assets 3. Accrued Expenses 3. Bank credit
4. Long-term loans 4. Public Deposits
5. Customers credit
6. Loans from directors
7. Security of employee
8. Factoring

GENERAL FACTORS DETERMINING WORKING CAPITAL

REQUIREMENTS
The working capital needs of a firm are determined and influenced by various
factors. A wide variety of considerations may affect the quantum of working capital
required and these considerations may vary from time to time. The working capital needed
at one point of time may not be good enough for some other situation. The determination
of working capital requirements is a continuous process and must be undertaken on a
regular basis in the light of the changing situations. Following are some of the factors
which are relevant in determining the working capital need of the firms;
1. Production policy
2. Nature of the business
3. Credit policy
4. Inventory policy
5. Abnormal factors
6. Market conditions
7. Conditions of supply
8. Business cycle
9. Growth and expansion
10. Level of taxes
11. Dividend policy
12. Price level changes
13. Operating efficiency
1. PRODUCTION POLICY
The production schedule i.e., the plan for production, has great influence on the
level of the inventories. In some cases raw materials can be produced only in a particular
season and have to be stocked for the production of the whole year. In many others the
production cycle is limited to a part of the year and raw materials have to be accumulated
throughout the year. Thus, it need for working capital will be vary according to the
production plans.

2. NATURE OF THE BUSINESS

The size of business also has an important impact on its working capital needs. Size
may be measured in terms of the scale of operations. A firm with large scale of operation
will need working capital than small term. The working capital requirements of a firm are
basically influenced by the nature of the business trading and financial firm has a very less
investment in fixed assets, but require a large sum of money to be invested in working
capital.
3. CREDIT POLICY
A company, which allows liberal credit to its customers, may have higher sales but
consequently will have large amount of funds tied up in sundry debtors. Credit terms, Debt
collection system also influences the level of working capital.
4. INVENTORY POLICY
Large amount of funds is normally locked up in inventory. An efficient firm may
stock raw material for a smaller period and may therefore require lesser amount of working
capital.
5. ABNORMAL FACTORS
Abnormal factors like strikes, lockouts also require additional working capital.
Recessionary conditions necessitate a higher amount of stock of finished goods.
6. MARKET CONDITIONS
Market conditions like competition large inventory are essential as delivery has to
be off the self or credit has to be extended on liberal terms when market competition is
fierce.
7. CONDITIONS OF SUPPLY
If prompt and adequate supply of raw materials will requires small investment in
inventory. If supply is scant, seasonal canalized, it is essential to keep longer stocks
increasing working capital requirements.
8. BUSINESS CYCLE
Business fluctuations lead to cyclical and seasonal changes in production, sales and
effect the working capital requirements.

9. GROWTH AND EXPANSION

The working capital needs of firm increases in growth in terms sales of fixed
assets. If is difficult to precisely determine the relationship between volume of sales and
the working capital needs. The critical fact however that is the need for increased working
capital funds does not fallow growth in business activities but precedes it.
10. LEVEL OF TAXES
Taxation is a short term liability payable in cash. Advance payment of cash may
have to be paid on the basis of anticipated profits. Tax is first appropriation out of profits.
Higher the tax, greater is the stain on the working capital of the company. Working capital
varies with tax rate and advanced tax provisions.
11. DIVIDEND POLICY

Payment of dividend utilizes cash while retaining profits acts as a source of
working capital.
12. PRICE LEVEL CHANGES

Inflationary trends in the economy necessitate more working capital maintain the
same level of activity.
13. OPERATING EFFICIENCY

The operating efficiency of the firm relates to the optimum utilization of resources
at minimum costs. The firm will be effectively contributing in keeping the working capital
investment at a lower level if it is efficient to controlling operating costs and utilizing
current assets. The use of working capital is improved and pace of a cash conversion cycle
is accelerated with operating efficiency.

OTHERS
WORKING CAPITAL CYCLE (THE OPERATING CYCLE)
The working capital cycle refers to the length of time between the firm’s paying
cash for materials, etc., entering in to the production process/ stock and the inflow of cash
from debtors. Suppose a company has a certain amount of cash it will need raw materials.
Some raw materials will be available on credit but, cash will be paid out for the other part
immediately. Then it has to pay labour cost and incurs factory overheads. These three
combined together will constitute work-in-progress. After the production cycle is
complete, work-in-progress will get converted into sundry debtors.
Sundry debtors will be realized in cash after the expiry of credit period. this cash
can again be used for financing of raw materials, work-in-progress, etc. thus there is a
complete cycle from cash to cash where in cash gets converted into raw materials, work-
in-progress, finished goods, debtors and finally into cash again. Short term funds are
required to meet the requirements of funds during this period. This time period is
dependent upon the length of time within which the original cash gets converted into cash
again. This cycle is also known as operating cycle or cash cycle.
OPERATING CYCLE
Cash
Bills Raw Materials

Receivables
Or Debtors
Working in
Credit Sales progress
Finished goods

Working capital cycle indicates the length of time between companies paying for
materials, entering into stock and receiving the cash from sales of finished goods. It can be
determined by adding the number of days required for each stage in the cycle. For e.g., a
company holds raw materials on an average for 60 days, it gets credit from the supplier for
15 days, production process needs 15 days, finished goods are held for 30 days and 30
days credit is extended to debtors. The total of all these 120 days, i.e., 60-15+15+30+30
days is the total working capital cycle.
The determination of working capital cycle helps in the forecast, control and
management of working capital. It indicates the total time lag and the relative significance
of its constituting parts. The duration of working capital cycle may vary depending on the
nature of the business.
The Operating Cycle consists of the following events which continues through the
life of business
 conversion of cash into raw materials

 conversion of raw materials into work in progress
 conversion of WIP into finished stock
 conversion sales
 conversion of account receivable into cash
COMPONENTS OF WORKING CAPITAL
Working Capital management involves different components such as
1. Management of cash
2. Management of Inventory
3. Management of Receivables
1. MANAGEMENT OF CASH
Cash is the important current asset for the operation of the business. Cash is the
basic input needed to keep the business running on continuous basis it is also the ultimate
output expected to be realized by selling the services of product manufactures by the firm.
The firm should keep sufficient cash, neither more nor less. Cash shortage will disrupt the
firm’s manufacturing operations while excessive cash will simply remain idle, without

contributing anything towards the firm’s profitability. Thus, major functions of the
financial manager to maintain a sound cash position.
Cash is the money, which a firm can disburse immediately without any restriction.
The term cash includes coins, currency and cheques held by the firm, and balance in its
bank accounts. Sometimes near cash items, such as marketable securities or bank times
deposits, are also includes in cash. The basic characteristic of near cash assets is that they
can readily be converted to cash. Generally when a firm has excess of near cash, it invests
it in marketable securities. This kind of investment contributes some profit to the firm.
I. FACTORS OF CASH MANAGEMENT

Cash management is concerned with the managing of
1. Cash flows into and out of the firm

2. Cash flows within the firm and
3. Cash balance held by the firm a points of time by financing deficit
or investing surplus cash.
It can be represented by a cash management cycle as showing fig1.sales generates

cash, which has to be disbursed out. The surplus cash has to be invested while deficit has
to be borrowed. Cash management seeks to accomplish this cycle at a minimum cost. At
the same time, it also seeks to achieve liquidity and control.
Cash management assumes more importance than other current assets because it is
the most significant and the least productive asset that a firm holds. It is a significant
because it is used to pay the firm’s obligations. However, cash is unproductive. Unlike
fixed assets or inventories, it does not produce goods for sales. Therefore, the aim of cash
management is to maintain adequate control over cash position to keep the firm
sufficiently liquid and to be use excess cash in some profitable way.
II. CASH PLANNING

Cash inflows and outflows should be planned to project cash surplus or deficit for
each period of the planning period. Cash budget should be prepared for this purpose.
III. MANAGING THE CASH FLOWS

The flow of cash should be properly managed. The cash should be accelerated
while, as far as possible, the cash outflows should be decelerated.

IV. OPTIMUM CASH LEVEL

The firm should decide about the appropriate level of cash balances. The cost of
excess cash and danger of deficiency should be matched to determine the optimum level of
cash balances.
V. INVESTING SURPLUS CASH

The surplus balance should be properly invested to earn profits. The firm should
decide about the division of cash balances between alternative short-term investment
opportunities such as bank deposits, marketable securities, or inter corporation lending.
The ideal cash management system will depends on the firm’s products,
organization structure, competition, culture and option available. The task is complex, and
decisions taken can affect important areas of the firm. For example, to improve collection
if the credit period is reduced, it may affect sales. However, in certain cases, even without
fundamental changes, it possible to significantly reduce cost of cash management system
by choosing a right bank and controlling the collections properly.
VI. MOTIVES FOR HOLDING CASH
The firm’s needs for cash may be attributed to the following needs
i. Transaction motive
ii. Precautionary motive
iii. Speculation motive
iv. Translation motive
VII. TRANSACTION MOTIVE
The transaction motive requires a firm to hold cash to conduct its business in the
ordinary cost. The firm needs cash primarily to make payments for purchases, wages and
salaries, other operating expenses, taxes, dividends etc. the need to hold cash would not
arise if there were perfect synchronization between cash receipts and cash payments, i.e.,
enough cash is received when the payment has to be made. But cash receipts and payments
are not perfectly synchronized.
For those periods, when cash payments exceed cash receipts, the firm should
maintain some cash balance to be able to make required payments. For transaction

purpose, a firm may invest its cash in marketable securities usually the firm will purchase
securities whose maturity corresponds with some anticipated payments such as dividends
or taxes in the future. Notice that the transactions motive mainly refers to holding cash to
met anticipated payments whose timing is not perfectly matched with receipts.
VIII. PRECAUTIONARY MOTIVE

A firm also keeps cash balances to meet unexpected cash needs arising out of
unexpected contingencies such as floods, strikes, presentment of bills for payment earlier
than expected date, sharp increase in raw materials price etc,. The more is the possibility of
such contingencies, the more is the amount of cash kept by the firm for meeting them.
IX. SPECULATIVE MOTIVE
A firm also keeps cash balance to take advantage of unexpected opportunities
typically outside the normal course of business, such motive is therefore a purely
speculative for example a firm may like to take advantage of an opportunity to purchase
raw material at reduced prices in anticipation of decline prices, similarly, it may like to
keep some c ash balance to make profit by buying securities at times when their prices fall
due to tight money conditions etc,.
X. CASH PLANNING
Cash planning is a technique to plan and control the use of cash. It protects the
financial condition of the firm by developing a projected cash statement from a forecast of
expected cash inflows and outflows for a given period. The forecast may be used on the
present operations or anticipated future operations. Cash plans are very crucial in
developing the overall operating plans of the firm.
XI. CASH FORECASTING AND BUDGETING

Cash budget is the most significant device to plan for and control cash receipts and
payments. A cash budget is a summary of the firm’s expected cash inflows over a projected
period. It gives information on the timing and magnitude of expected cash flows and cash
balances over the projected period. This information helps the financial manager to
determine the future cash needs of the firm, plan for the financing of these needs and
exercise control over the cash and liquidity of the firm.
The time horizon of a cash budget may differ from firm to firm. A firm whose
business is affected by seasonal variations may prepare monthly cash budgets. Daily or

weekly budgets should be prepared for determine cash requirements if cash flows extreme
fluctuations. Cash budgets for a longer interval may be prepared if cash flows are
relatively stable.
2. MANAGEMENT OF INVENTORY
The preceding two chapter’s basic strategies and consideration in managing current
assets namely, cash and receivables are stocks of product a company is manufacturing for
sale and components that make up a product. Inventories like receivables are also a
significant portion of most firms’ assets and accordingly require substantial investment. To
keep these investments from becoming unnecessarily large, inventories must be managed
efficiently.
The various forms in which inventories exist in a manufacturing company are
a) Raw Materials
Raw materials are those basic inputs that are converted into finished products
through the manufacturing process. Raw material inventories are those units, which have
been purchased and stored for future productions.
b) Work-in-progress
The work-in-progress is that stage of stock, which is in between raw materials and
finished goods. They are semi-finished products that need more work before they
become finished products for sale. The quantum of WIP depends on the time taken in the
manufacturing process. The greater the time taken in manufacturing, the more will be the
amount of work-in-progress.
c) Finished goods
Finished goods inventories are those completely manufactured products, which are
ready for sale. Stocks of raw material and work-in-process facilitate production while
stock of finished goods is required for smooth marketing operations.
The level of three kinds of inventories for a firm depends on the nature of its
business. A manufacturing firm will have substantially high level of all three kinds of
inventories.
A fourth kind of inventory Firm also maintains suppliers. Suppliers include office
and plant cleaning material oil, fuel, light bulbs etc. these materials do not directly enter

into production, but are necessary for production process, usually these supplies are small
part of inventory and do not involve significant investment. Therefore a sophisticated
system of inventory control may not be maintained for them.
2.1. NEED FOR HOLDING INVENTORY
There are generally three major motives for holding inventories.
There transactions motive which emphasis the need to maintain inventories to

facilitate smooth production and sale operations.
The precautionary motive, which necessitates will hold inventories to guard against
the risk of unpredictable changes in demand and supply forces and other factors.
The speculative motive which includes the decision to increase or reduce inventory
levels to take advantage of price fluctuations.
A company should maintain adequate stock of material, as it is not possible for a

company to procure raw material whenever it is needed and also for a continuous and
smooth and uninterrupted production process.
2.2. INVENTORY MANAGEMENT TECHNIQUES
In managing inventories the firm should determine the optimum level of inventory.
Efficiently controlled inventories make the firm flexible. Inefficient inventory control
results in unbalanced inventory and inflexibility, the firm may be sometimes out of stock
and sometimes may pile up unnecessary stocks. This increases the level of investment and
makes the firm unprofitable.
To manage inventories efficiently and effectively answers should to the following

two questions? How much should be ordered? When should it be ordered?
The first question, how much to order, related in the problem of determining
economic order quantity (EOQ) and is answered with an analysis of costs of maintaining
certain level of inventories. The second question when to order arises because of
uncertainty and is a problem of determining the re-order point.

3. MANAGEMENT OF RECEIVABLES
Accounts receivable or trade credit is the most prominent force of the modern
business. It is considered as an essential marketable tool, acting as a bridge for the
movement of goods through production and distribution stages to customers finally. A firm
grants credit to protect its sales from the competitor and to attract potential customers.
Trade credit, thus credit receivable or book debts, which the firm is expected to, collect in
future. It also involved an element of risk as the cash payment has get to be received,
hence they has to be carefully analyzed.
Receivables constitute a substantial portion of current assets of several firms. They

form about 1/3 part of current assets in India. As substantial amounts are tied up in trade
debtors, it needs careful analysis and proper management, for proper management of
receivable a concern must adopt an optimum credit policy.
NATURE OF BUSINESS
Working capital requirements of a firm are basically influenced by the nature of its
business. Trading and financial firms have a very small amount in fixed assets, but require
a large sum of money to be invested in working capital. Some manufacturing firms,
construction industries, also have to invest substantially in working capital and a nominal
amount in fixed assets. On the other hand, a service firm, like an electricity undertaking or
a transport organization, which has a short operating cycle and which sells predominantly
on cash basis, has a modest working capital requirement. Thus no funds will be tied up in
debtors and stock.
SIZE OF BUSINESS
Size may be measured in terms of scale of operation. A firm with larger scale of
operation will need more working capital than a small firm. Based on size of operation,
business firms may be classified into
 Stable firm
 Growing firm
A growing firm may need to invest funds in fixed assets in order to sustain its
growing production and sales. This will, in turn, increase investment in current assets to
support enlarged scale of operations.

SEASONAL VARIATIONS OR BUSINESS CYCLES

Sales of a firm depend on demand conditions. Most firms experience seasonal and
cyclical fluctuations in the demand for their products and services. These business
variations affect the working capital requirement, especially the temporary working capital
requirement of the firm. When there is an upward swing in the economy, sales will
increase, correspondingly, the firm's investment in inventories and debtors will also
increase. Under boom, additional investment in fixed assets may be made by some firms to
increase their productive capacity. This act of firms will require further additions of
working capital. To meet their requirements of funds for fixed assets and current assets
under boom period, firms generally resort to substantial borrowing.
During the periods of peak demand, increasing production may be expensive of the
firm. Similarly, it will be more expensive during slack periods when the firm has to sustain
its working force and physical facilities without adequate production and sales. Thus, a
firm may follow a policy of steady production, irrespective of seasonal changes in order to
utilize its resources to the fullest extent. Such a policy will mean accumulation of
inventories during off season and their quick disposal during the peak season.
TECHNOLOGY AND MANUFACTURING POLICY

The manufacturing cycle (Inventory conversion period) comprises of the purchase
and use of raw materials and the production of finished goods. Longer the manufacturing
cycle, larger will be the firm’s working capital requirements.
For Example the manufacturing cycle in the case of a boiler, may range
between six to twenty four- months, On the other hand the manufacturing cycle of
chocolate may be a few hours.
CREDIT POLICY
The credit policy of the firm affects the working capital by influencing the level of
debtors. The credit terms to be granted to customers may depend upon the industry to
which the firm belongs. Generally business firms must have flexibility of shaping credit
policies within the constraints of industry norms and practices. If credit allowed to
creditors on the basis of their credit worthiness, then the recovery will be possible very
easy. A liberal credit policy, without rating the credit worthiness of customers, will create
a problem of collecting funds in future.

In order to ensure that unnecessary funds are not tied up in debtors, the firm should
follow a rationalized credit policy based on credit standing of customers and other relevant
factors.
AVAILABILITY OF CREDIT
A firm will needs less working capital if liberal credit terms are available to it.
Similarly, the availability of credit from banks also influence the working capital needs of
the firm. A firm, which can get bank credit easily on favorable conditions, will operate
with less working capital than a firm without such a facility.
OPERATING EFFICIENCY
The operating efficiency of the firm relates to the optimum utilization of resources
at minimum costs. The firm will be effectively contributing in keeping the working capital
investment at a lower level if it is efficient in controlling operating costs and utilizing
current assets. Better utilization of resources improves profitability and, thus, helps in
releasing the pressure on working capital. Although it may not be possible for a firm to
control prices of materials or wage of labor, it can certainly ensure efficient and effective
use of its materials, labour and other resources.
PRICE LEVEL CHANGES

The increasing shifts in price levels make functions of financial manager difficult.
He should anticipate the effect of price level changes on working capital requirements of
the firm. Generally, rising price levels will require a firm to maintain higher amount of
working capital. The same levels of current assets will need increased investment when
prices are increasing. However, the company which can immediately revise their product
prices with rising price levels will not face a severe working capital problem. Further, the
effects of increasing general price level will be felt differently by the firms as individual
prices may move differently.

BALANCED WORKING CAPITAL POSITION

The firm should maintain a sound working capital position. It should have adequate
working capital to run its business operations. Both excessive as well as inadequate
working capital positions are dangerous from the firm's point of view. Excessive working
capital means idle funds, which earn no profits for the firm.
The Dangers of Excessive Working Capital are as follows

1. It results in unnecessary accumulation of inventories. Thus, chances of inventory
mishandling, wastage, theft and losses increase.
2. It is an indication of defective credit policy and slack credit collection period.
Consequently higher incidence of bad debts results, which adversely affects profits.
3. It makes management complacent, which degenerates into managerial inefficiency.
4. Tendencies of accumulating inventories tend to make speculative profits grow.
This may tend to make dividend policy liberal and difficult to cope with future
when firm is unable to make speculative profits.
Inadequate Working Capital is also bad and Causes following

It becomes difficult for the firm to undertake profitable projects due to inadequacy
of funds.
1. It becomes difficult to implement operating plans and achieve the firms profit
target.
2. Operating inefficiencies creep in and it becomes difficult even to meet day-to-day
commitments.
3. Fixed assets are not efficiently utilized for the lack of working capital funds. Thus,
the firms profit would deteriorate.
4. Paucity of working capital funds render the firm unable to available attractive
credit opportunities.
5. The firm losses it reputations when it is not in a position to honour its short-term
obligations. As a result, the firm faces tight credit terms.
An enlightened management should therefore maintain the right amount of working
capital on a continuous basis, only then a proper functioning of operations will be ensured.

FINANCIAL RATIO ANALYSIS
Financial Analysis is the process of identifying the financial strengths and

weaknesses of the firm by properly establishing relationships between the items of the
Balance Sheet and the Profit and Loss Account. Financial Analysis can be undertaken by
management of the firm, or by parties outside the firm, viz. owners, creditors, investors
and others.
The different types of ratios that are used in estimating the financial position of the
firm are as follows
 Liquidity Ratios
 Leverage Ratios
 Activity Ratios
 Ratio of Liquid Funds to Current Assets and Inventory to Current Assets
 Ratio of Net Working Capital to Current Assets
LIQUIDITY RATIOS
These ratios measure the ability of the firm to meet its current obligations. Analysis of
liquidity needs the preparation of cash budgets and cash and funds flow statements,
but liquidity by establishing a relationship between cash and other current assets to
current obligations. Provide a quick measure of liquidity.
1. Current Ratio
The current ratio is calculated by dividing Current Assets by Current Liabilities
Current Ratio = Current Assets / Current Liabilities
The Current Ratio is a measure of the firm’s short-term solvency. It indicates the
availability of Current Assets in rupees for every one rupee of Current Liability.
A ratio of greater than one means that the firm has more Current Assets than
current claims against them

2. Quick Ratio
It establishes a relationship between quick or liquid assets and current liabilities.

An assets is liquid if it can be converted into cash immediately soon without of loss of
value. Other assets which are considered to be relatively liquid and included in quick
assets. Inventories require some time for realizing into cash, their value also has a tendency
to fluctuate. The quick ratio can be calculated as follows
Quick ratio = current assets – inventories / current liabilities
3. Cash Ratio
Since cash is the most Liquid Asset, a financial analyst may examine cash ratio and
its equivalent to Current Liabilities. Trade investment or marketable securities are
equivalent of cash and can be calculated as follows
Cash Ratio = Cash + Marketable / Current Liabilities
4. Net Working Capital Ratio
Net working capital is sometimes used as a measure of a firm’s liquidity. It

measures the firm’s potential reservoir of funds. It can be related to net assets (or capital
employed). Net working capital ratio is calculated as follows
Net Working Capital Ratio = Net Working Capital / Net Assets

LEVERAGE RATIOS
To judge the long-term financial position of the firm, financial leverage or capital
structure ratios are calculated. These ratios indicate the mix of funds provided by
owners and lenders. As a general rule, there should be an appropriate mix of debt and
owner’s equity in financing the firm’s assets.
1. Debt Ratio
The ratio is used to analyze the long-term solvency of a firm. It can be find out by
dividing total debt by capital employed.
Debt Ratio = Total Debt / Capital Employed
2. Debt Equity Ratio
The relationship describing the lenders contribution for each rupee of the owner’s
contribution is called “Debt Equity Ratio”. It can be calculated as follows
Debt Equity Ratio = Total Debt / Net Worth
3. Equity Ratio
This ratio is calculated to know how much of funds are being contributed together
by lenders and owners for each rupee of the owners contribution. Equity Ratio and Net
Assets to Net worth Ratios are can be calculated as follows
Equity Ratio = Capital Employed / Net Worth (or)
Net Assets to Net Worth Ratio = Net Assets / Net Worth

ACTIVITY RATIOS
These ratios are employed to evaluate the efficiency with which the firm manages and
utilizes its assets. These ratios are also called turnover ratios. Because they indicate
the speed with which assets are being converted into sales.
1. Inventory Turnover
It indicates the efficiency of the firm in producing and selling its products. It can be
calculated as follows
Inventory Turnover = Cost of Goods Sold / Average Inventory
2. Debtors Turnover
It indicates the number of times debtors turnover each year. The higher the value of
debtor’s turnover, the more efficient is the management of credit. It can be calculated
as follows
Debtors Turnover = Sales / Debtors
3. Average Collection Period
The average number of days for which debtors remain outstanding is called the
average collection period and can be computed as follows
Average Collection Period = 360 / Debtors Turnover Ratio

RESEARCH METHODOLOGY
MEANING OF RESEARCH
Research methods are intensive powerful research for the discovering of true levels
in scientific way.
RESEARCH DESIGN
To analyze the Working Capital, Trends and for the purpose of Ratio Analysis,
Financial Analysis has to be carried out. Financial Analysis is the analysis and
interpretation of financial statements and a proper financial analysis can give the users
better insight about financial strengths and weakness of the firm. Financial analysis is the
starting point for making plans, before using any sophisticated forecasting and planning
procedure.
For the purpose first the required information has to be collected like for Ratio
Analysis and owing Capital Management Analysis, Income Statements, Trading and Profit
and Loss Account, Balance Sheet, Funds Flow Statement, etc, are to be collected, the data
in the statements is to be properly organized and arranged and then relationship is
established between financial statements and finally conclusions are drawn from the
interpreted information and presented in the form of reports.
RESEARCH METHODOLOGY
Research involves getting tools, ideas from texts, journals, books, records, Websites.
The collection of data is an important aspect of Research.
The sources of information fall under two categories.
Internal Sources
Every company keeps certain records such as accounts, records, reports, etc. these
records provide sample information for research.

External Sources
When Internal Records are insufficient and required information is not available the
organization depends on External Sources.
The External Sources of data are

 Primary Data
 Secondary Data
1. Primary Data
The data collected for a purpose in original and for the first time is known as
“Primary Data”. The data collected by the researcher himself to study a particular
problem. The Primary Data of the study is collected through interaction and discussion
with the officials and the staff at FOODS AND INNS (P) LTD, CHITTOOR.
2. Secondary Data
The data which is collected from the published sources that is for the first time is
called “Secondary Data”.
The Secondary Data for the study is collected from the Annual Reports of FOODS
AND INNS (P) LTD from 2015-16 to 2019-20.
DATA ANALYSIS
Data Analysis is done by implementing various tools like Ratio Analysis, Trend
Analysis, etc.

DATA ANALYSIS AND INTERPRETATION
Table – 1
SIZE OF GROWTH OF CURRENT ASSETS, CURRENT

LIABILITIES AND NET WORKING CAPITAL (Rs. in Lakhs)
Net Working
Year Current Assets Current liabilities
Capital
2015-16 4408.31 2828.57 1579.74
2016-17 10855.47 5052.57 1802.9
2017-18 18321.76 9202.11 9119.65
2018-19 26196.83 10188.34 16008.49
2019-20 26616.98 9319.38 17297.06

Chart – 1
Interpretation
This table shows the size and growth of Current Assets, Current Liabilities and
Working Capital of the firm the year 2015-16 to 2019-20. The Current Assets of the firm
have been decreased till 2015-16 to 2019-20. The same is the situation with the Current
Liabilities. Working capital has been gradual decrease from year to year. The graph also
has been depicted showing the variations between the Current Assets, Current Liabilities
and Working Capital.

RATIO OF CURRENT ASSETS TO TOTAL ASSETS
Table – 2
RATIO OF CURRENT ASSETS TO TOTAL ASSETS AND CURRENT ASSETS TO FIXED

ASSETS (Rs. in Lakhs)
Current Total Net Net Fixed C.A to T.A C.A to F.A

Year
Assets Assets Assets (In %) (In %)
2015-16 4408.31 9908.68 4350.62 44.49 101.32

2016-17 10855.47 22264.36 13236.37 48.76 82.07
2017-18 18321.76 32901.40 18525.70 55.69 98.91
2018-19 26196.83 40386.36 24158.08 64.87 108.44
2019-20 26616.98 43836.66 26388.35 60.72 100.86

Chart - 2
Interpretation
This table shows the ratio of current assets to total assets and current assets to fixed
assets. There are approximately 50% of current assets to total assets in all the years. Also
there are approximately 90% to 110% of current assets to fixed assets in all the years. The
graphs also have been displayed showing the ratio of current assets to total assets and
current assets to fixed assets.

INVESTMENT IN WORKING CAPITAL
Table – 3
INVESTMENT IN WORKING CAPITAL IN TERMS OF NUMBER OF DAYS OF

SALES LIQUIDITY ANALYSIS (Rs. in Lakhs)
Working Capital
Sales per day
Year In terms of
(In Lakhs)
number of days of Sales
2015-16 25.57 306.03
2016-17 65.37 296.28
2017-18 86.55 163.19
2018-19 112.45 172.93
2019-20 135.54 186.47
Interpretation
This table shows the investment in Working Capital in terms of number of days of
sales of the firm. The sales per day have been calculated and Working Capital in terms of
number of days of sales is calculated by dividing the Gross Working Capital by sales per
day.

LIQUIDITY ANALYSIS
Table – 4
LIQUIDITY ANALYSIS (Rs. in Lakhs)
Net Working
Year Current Ratio Quick Ratio
Capital Ratio
2015-16 1.558 1.14 0.36

2016-17 2.15 1.10 0.14
2017-18 1.99 0.99 0.49
2018-19 1.89 1.53 0.66
2019-20 2.002 1.56 0.65

Chart – 3
Interpretation
In this table, different Liquidity Ratios have been calculated like Current Ratio,
Quick Ratio and Net Working Capital Ratio. The Current Ratio increased during the year
2015-16 to 2019-20 and then gradually decreased in the next 5 years. The Quick Ratio
shows that the performance of the firm was good indicating that it has sufficient funds to
meet its obligations. By cash management ratio, it is proved that the firm’s carries small
amount of cash. Also the Graph has been displayed showing the variations between the
Current Ratio, Quick Ratio and Net Working Capital Ratios.

RATIO OF INVENTORY TO CURRENT ASSETS
Table – 5
RATIO OF INVENTORY TO CURRENT ASSETS AND NET WORKING CAPITAL TO

CURRENT ASSETS (Rs. in Lakhs)
Year Inventory to Current Assets Net Working Capital Assets
2015-16 27.06 35.83

2016-17 48.77 16.61
2017-18 50.18 49.77
2018-19 40.60 61.11
2019-20 45.43 64.98
Interpretation
This table is presented to show the ratio’s like Inventory to Current Assets and Net
Working Capital to Current Assets. The inventory has been approximately 27 % to 50% in
all the years and it is more in the year 2017-18 with 50% which shows that the company is
using more inventories. Another ratio, which measures the liquidity of the firm, is the ratio
of Net Working Capital to Current Assets. It has been calculated as 35.83 in the year 2015-
16, 64.98% in the year 2019-20. Higher ratio indicates that there is greater liquidity, lower
risk and lower profitability because it is financed through long-term sources. The Graph
also presented showing the ratio of Inventory to Current Assets and Net Working Capital to
Current Assets.

WORKING CAPITAL TURNOVER RATIO
Table – 6
WORKING CAPITAL TURNOVER RATIO FROM 2015-16 TO 2019-20 (Rs. in

Lakhs)
Year Working Capital Sales Volume Turnover
2015-16 1579.74 9333.97 5.90
2016-17 1802.90 23858.36 13.23
2017-18 9119.65 31587.33 3.46
2018-19 16008.49 41045.08 2.56
2019-20 17297.06 49472.02 2.86
Interpretation
This table shows the Working Capital Turnover Ratio. This efficiency utilization of
Working Capital can be measured with the help of Working Capital Turnover Ratio. This
ratio explains how much sales are made for every rupee of investment in Working Capital.
Higher ratio and increasing trend over a period indicates the effective utilization of
Working Capital. Lower ratio and decreasing trend over period indicates ineffective
utilization of Working Capital. Working Capital of the firm shows the increasing trend.

STRUCTURE OF WORKING CAPITAL TO CURRENT ASSETS
Table – 7
STRUCTURE OF WORKING CAPITAL TO CURRENT ASSETS (Rs. in Lakhs)
Component 2015-16 2016-17 2017-18 2018-19 2019-20
1193.26 5294.05 9194.08 10636.86 12092.91

Inventories
(28.59) (48.77) (50.18) (40.60) (45.43)
2017-18.67 4098.66 6706.59 7667.92 8814.31

Sundry Debtors
(48.21) (37.76) (36.60) (29.27) (33.17)
Cash and Bank 629.03 350.67 2650.37 420.10

-
Balance (15.07) (1.91) (10.12) (1.58)
Loans and 338.81 1462.76 2070.42 5241.68 5289.66

Advances (8.12) (13.47) (11.30) (20.01) (19.87)
4172.77 10855.47 18321.76 26196.83 26616.07

Total
(100) (100) (100) (100) (100)

Pie Chart – 1
Pie Chart – 2

Pie Chart – 3
Pie Chart – 4

Pie Chart – 5
Interpretation
This table is helpful in analyzing the structure of Working Capital as its shows the
percentage of different items of Current Assets. Each and every item of Current Asset has
been shown in the form of percentage of Total Current Assets in that particular year. The
Pie Graphs also have been shown presenting the percentage of the item in that particular
year. The Graphs are shown for every year i.e., from 2015-16 to 2019-20.

CURRENT LIABILITIES
Table – 8
CURRENT LIABILITIES (Rs. in Lakhs)
Component 2015-16 2016-17 2017-18 2018-19 2019-20
Current 2828.57 5052.57 9290.11 10188.34 9319.38

Liabilities (97.70) (89.82) (96.29) (94.98) (92.91)
572.72 354.42 538.25 711.30

Provisions 66.55 (2.30)
(10.18) (3.71) (5.02) (7.09)
Total 2895.12 5625.29 9556.53 10726.59 10030.68
Interpretation
This table shows the various items of Current Liabilities of the firm from the
Financial Year 2015-16 to 2019-20. The percentage of each item of Current Liabilities has
been shown which describes the part of Current Liabilities to the Total Current Liability.
Different graphs also have been shown for the Financial Year 2015-16 to 2019-20 showing
the percentage of every item to the Current Liabilities.

WORKING CAPITAL
Table – 9
WORKING CAPITAL (Rs. in Lakhs)
Year Total Current Assets Total Current Liabilities Net Working Capital
2015-16 4408.31 2828.57 1579.74

2016-17 10855.47 5052.57 1802.9
2017-18 18321.76 9202.11 9119.65
2018-19 26196.83 10188.34 16008.49
2019-20 26616.98 9319.38 17297.06
OPERATING CYCLE
Operating Cycle = RMCP + WIPCP + FGCP + SDCP – SCPP
Where,
RWCP = Raw Material Conversion Period
WIPCP= Work – in – progress Conversion Period
FGCP = Finished Goods Conversion Period
SDCP = Sundry Debtors Conversion Period
SCCP = Sundry Creditors Conversion Period
Interpretation
This table shows the Net Working Capital of the firm from the Financial Year 2015-
16 to 2019-20. The Net Working Capital of the firm can be obtained by the difference
between the Total Current Assets and the Total Current Liabilities.

RAW MATERIAL CONVERSION PERIOD
Table – 10
RAW MATERIAL CONVERSION PERIOD (Rs. in Lakhs)
Component 2015-16 2016-17 2017-18 2018-19 2019-20

Raw Material
5600.68 9148.72 15484.93 19232.45 24779.93
Consumption
Raw Materials per
15.34 25.06 42.42 52.69 67.89
Day
Raw Material
4.69 1.73 1.68 1.81 2.05
Inventory
Raw Material
0.31 (d) 0.07 (d) 0.04 (d) 0.03 (d) 0.03 (d)
Holding Day
Interpretation
This table is used to calculate the operating cycle of the firm. In that processes of
Raw Material Conversion Period has been calculated by dividing the Raw Material
Inventory by Raw Material used per day.

FINISHED GOODS CONVERSION PERIOD
Table – 11
FINISHED GOODS CONVERSION PERIOD (Rs. in Lakhs)
Components 2015-16 2016-17 2017-18 2018-19 2019-20

Cost of Goods Sold 6.48 13.65 - 644.45 659.16
Cost of Goods Sold per

0.02 0.37 - 1.77 1.81
Day
Finished Goods
15.34 25.06 42.42 52.69 67.89
Inventory
Finished Goods
4.69 1.73 1.68 1.81 2.05
Inventory Holding Days
Interpretation
This table shows the Finished Goods, Inventory Holding Days which is calculated
by dividing Finished Goods Inventory by Cost of Goods Sold per Day.

SUNDRY DEBTORS COLLECTION PERIOD
Book Debts
Sundry Debtor’s Collection Period = ----------------------------------
Credit Sales Per Day
Table – 12
SUNDRY DEBTORS COLLECTION PERIOD (Rs. in Lakhs)
Components 2015-16 2016-17 2017-18 2018-19 2019-20

Credit Sales 9333.97 23855.36 31587.33 41045.08 49472.02
Credit Sales Per Day 25.51 65.37 86.54 112.45 135.54
Book Debts 2017-18.67 4098.66 6706.59 7667.92 8814.31
Book Debts Outstanding

78.67 62.70 77.50 68.19 65.03
Days
Interpretation
The Sunday Debtor’s Collection Period has been calculated by dividing Book
Debts by Credit Sales per day.

SUNDRY CREDITORS COLLECTION PERIOD
Creditors
Sundry Creditor’s Outstanding Days = ----------------------------------
Purchases Per Day
Table – 13
SUNDRY CREDITORS COLLECTION PERIOD (Rs. in Lakhs)
Components 2015-16 2016-17 2017-18 2018-19 2019-20

Credit Purchases 2828.57 5052.57 9202.11 10188.34 9319.38
Credit Purchases Per

7.75 13.84 25.21 27.91 25.53
Day
Creditors 2828.57 5052.57 9202.11 10188.34 9319.38
Creditors Outstanding
365.98 (d) 365.02 (d) 365.02 (d) 365.04(d) 365.04(d)
Days
Interpretation
The Sunday Creditor’s Outstanding Days has been calculated by dividing Creditors
by Purchases per day.

OPERATING CYCLE
Table – 14
OPERATING CYCLE (Rs. in Lakhs)
Components 2015-16 2016-17 2017-18 2018-19 2019-20

1. Inventory Conversion
Period
A. Raw Material 0.31 (d) 0.07 (d) 0.04 (d) 0.03 (d) 0.03 (d)
B. Work – in – Progress 19.26 34.36 41.55 206.37 232.72
C. Finished Goods 1.06 (d) 1.13 (d) 45 (d) 1 (d) 0.09 (d)
2. Sundry Debtor’s
78.67 62.70 77.50 68.19 65.03
Collection Period
3. Gross Operating
99.3 98.26 164.09 275.59 297.87
Cycle (1+2)
4. Sunday Creditor’s
36.98 (d) 36.02 (d) 36.02 (d) 36.04(d) 36.04(d)
Collection Period
5. Net Operating Cycle

62.32 62.24 128.07 239.55 261.83
(3 – 4)
Interpretation
This table shows the Gross Operating Cycle of the firm. Gross Operating Cycle is
calculated by adding Raw Material Inventory Holding Days, Sunday Debtor’s Collection
Period and Finished Goods Inventory Holding Days.

DEBTORS TURNOVER RATIOS
Table – 15
DEBTORS TURNOVER RATIOS (Rs. in Lakhs)
Year Sales Debtors Debtors Turnover Ratio
2015-16 9333.97 2017-18.67 4,64

2016-17 23858.36 4098.66 5.82
2017-18 31587.33 6706.59 4.71
2018-19 41045.08 7667.92 5.35
2019-20 49472.02 8814.31 5.61
Interpretation
This table shows the Debtor’s Turnover Ratio. This is calculated for five years
2015-16 to 2019-20. This has been shown in the above table.
Statement or Schedule of changes in Working Capital

Working Capital means the excess of Current Assets over Current Liabilities.
Statement of changes in Working Capital is proposed to show the changes in the Working
Capital between two Balance Sheets data. This statement is prepared with the help of
Current Assets and Current Liabilities derived from two Balance Sheets.
Working Capital = Current Assets – Current Liabilities
While preparing a schedule of changes in Working Capital, it should be noting that

a. Increase in Current Assets, Increases the Working Capital
b. Decrease in Current Assets, Decreases the Working capital
c. Increase in Current Liabilities, Decreases the Working Capital
d. Decrease in Current Liabilities, Increases the Working Capital

PROFORMA OF STATEMENT OF CHANGES IN WORKING CAPITAL

Changes in Working
1-4-2015- 31-3-2016- Capital
Particulars Increase Decrease
16 Rs. 17 Rs.
(Rs.) (Rs.)
Current Assets (CA) ***
Inventories …….. ……..
Raw Material …….. ……..
Consumable stores …….. ……..
Finished Goods …….. ……..
Sundry Debtors …….. ……..
Cash in Hand …….. ……..
Balance with Bank …….. ……..
Other Current Assets …….. ……..
Deposits …….. ……..
Income Tax (Advance Tax) …….. ……..
Sales Tax …….. ……..
Total Current Assets …….. ……..
Current Liabilities (CL)
Trade Creditors *** ……..
Dealers Deposits *** ……..
Expenses Payables *** ……..
Total Current Liabilities …….. ……..
Working Capital (CA – CL) ……..

Net Increase / Decrease *** ……..
Working Capital
********* ********* ********* *********

Table 16 – STATEMENT OF CHANGES IN WORKING CAPTIAL

(Rs. in Lakhs)
Particulars 2015-16 2016-17 Increase Decrease
Current Assets (CA)
Inventories 1193.26 5294.05 4100.79 -
Sundry Debtors 2017-
4098.66 2086.99 -
18.67
Cash and Bank balances 629.03 - - 629.03
Investments 235.54 - - 235.54
Loans and Advances 338.81 1462.76 1123.95 -
Total Current Assets (A) 4408.31 10855.47
Total Current Liabilities (B) 2828.57 5052.57 2224
Working Capital (A – B) 1579.74 5802.90

Net Increase in Working Capital 4223.16 4223.16
5802.90 5802.90 7076.19 7076.19

Table 17 – STATEMENT OF CHANGES IN WORKING CAPITAL

(Rs. in Lakhs)

Current Assets (CA)
Inventories 5294.05 9194.08 3900.03 -
Sundry Debtors 4098.66 6706.59 2607.93 -
Cash and Bank Balance - 350.67 350.67 -
Investment - - - -
Total Current Assets (A) 10855.47 18321.76 - -
Current Liabilities (B) 5052.57 9209.11 - 4149.54
Working Capital (A – B) 5802.90 9119.65 - -
Net Increase in Working 3316.75 - - 3316.75

Capital
9119.65 9119.65 7466.29 7466.29

Table 18 – STATEMENT OF CHANGES IN WORKING CAPITAL

(Rs in Lakhs)

Current Assets (CA)
Inventories 9194.08 10636.86 1442.78 -
Sundry Debtors 6706.59 7667.92 961.33 -
Cash and Bank Balance 350.67 2650.37 2299.70 -
Investment - - - -
Current Liabilities (B) 9202.11 10188.34 - 986.23

Capital
16008.49 16008.49 7875.03 7875.03

Table 19 – STATEMENT OF CHANGES IN WORKING CAPITTAL

(Rs. in Lakhs)

Current Assets (CA)
Inventories 10636.86 12092.91 1456.05 -
Sundry Debtors 7667.92 8814.31 1146.39 -
Cash and Bank Balance 2650.37 420.10 - 2230.27
Investment - - - -
Current Liabilities (B) 10188.34 9319.38 868.96

Capital
17297.60 17297.60 3519.38 3519.38

Table 20 – STATEMENT OF CHANGES IN WORKING CAPITTAL

(Rs.In.Lakhs)
Year Increase Decrease

2015-16 – 10 4223.16 -
2016-17 – 11 3316.75 -
2017-18 – 12 6888.84 -
2018-19 – 13 1289.11 -
Chart – 4
Interpretation
The data about the Changes in Working Capital over the study period says that
there was an increase in working capital in all the year except in 2016-17-11 and 2018-19-
13. Therefore, working capital performance of the company may be viewed as
satisfactory.

FINDINGS
1 In this chapter some of the conclusions drawn from the study of Working Capital
Performance Analysis of FOODS AND INNS (P) LTD are summed up. Further
some viable and appropriate measures, which can be adopted by the company, are
also suggested to equip itself for a better performance.
2 The Current Assets of the firm have been decreased till 2015-16 to 2019-20. The
same is the situation with the Current Liabilities. Working capital has been gradual
decrease from year to year.
3 There are approximately 50% of current assets to total assets in all the years. Also
there are approximately 90% to 110% of current assets to fixed assets in all the
years. The graphs also have been displayed showing the ratio of current assets to
total assets and current assets to fixed assets.
4 The sales per day have been calculated and Working Capital in terms of number of
days of sales is calculated by dividing the Gross Working Capital by sales per day.
5 The Current Ratio increased during the year 2015-16 to 2019-20 and then gradually
decreased in the next 5 years. The Quick Ratio shows that the performance of the
firm was good indicating that it has sufficient funds to meet its obligations. By cash
management ratio, it is proved that the firm’s carries small amount of cash.
6 The inventory has been approximately 27 % to 50% in all the years and it is more
in the year 2017-18 with 50% which shows that the company is using more
inventories. Another ratio, which measures the liquidity of the firm, is the ratio of
Net Working Capital to Current Assets. It has been calculated as 35.83 in the year
2015-16, 64.98% in the year 2019-20. Higher ratio indicates that there is greater
liquidity, lower risk and lower profitability because it is financed through long-term
sources.
7 This efficiency utilization of Working Capital can be measured with the help of
Working Capital Turnover Ratio. This ratio explains how much sales are made for
every rupee of investment in Working Capital.
8 Higher ratio and increasing trend over a period indicates the effective utilization of
Working Capital. Lower ratio and decreasing trend over period indicates ineffective

utilization of Working Capital. Working Capital of the firm shows the increasing
trend.
9 Gross Operating Cycle is calculated by adding Raw Material Inventory Holding

Days, Sunday Debtor’s Collection Period and Finished Goods Inventory Holding
Days.
10 In that processes of Raw Material Conversion Period has been calculated by

dividing the Raw Material Inventory by Raw Material used per day.

SUGGESTIONS
 The Company is targeting its sales by just aiming to achieve some target rather than
finding the actual demand for their varieties.
 The Company is supposed to forecast the demand for their products. It will help
the company to maintain better working capital which will in turn help the
company to have a good liquidity and strengthen the company’s credibility and
reduce short – term borrowings.
 It is a good indication that fixed assets are bought in for mechanization of work
faster and qualitative to meet the customer demand and to face global market. But
the application of funds towards the purchase of machinery without out proper
demand forecasting cannot make optimum usage of machine efficiency thereby
causing the management to face the consequences of unnecessary investment in
fixed assets.
 Generally on ideal company will try to maintain an average working capital policy,
rather too conservative (or) too aggressive. But the company is highly followed the
conservative approach. It can be suggested that the company should develop an
optimum working capital policy keeping in view of the availability of funds for
daily operations to get more profits.
 Cash balances should be improved there by liquidity will be improved and such
will can good solvency of the company.
 The slow-payers and bad debts creators should be taken to task, the company
should identify the steps to be taken to make them pay promptly and disqualify all
those debtors who have failed to pay the debt amount.
 At most care should be taken while giving credit to customers and assess in
advance, their credibility and capacity of paying the amount.
 Since the overall performance of the company will depends upon the performance
form liquidity, solvency and turnover. Therefore, it is suggested that the company
should evolve the appropriate strategies in all such direction which will certainly
drives the organization into the new heights.

CONCLUSION
Over all financial position of the company is very good. It has utilized its assets
optimally to reach more profits. Sales have been on the increasing trend. The profits have
increased considerably in 2019-20 compared to the Previous Years. As the company
produces made to order products, it has to focus more on the marketing department to
secure orders and has to try increasing their exports also. So also for its various new
products such as Mango Pulp, Guava Pulp, Tomato Juice etc, it has to commercialize so
that the profits can be maximized. There has been an improvements of Debtor’s Collection
over the year but still has not reached the 90 days mark. Hence, they have to try to find the
causes for this and remedial measures.

BIBLIOGRAPHY
1. S.P.Jain and K.L.Narang : Advanced Accountancy Volume – II

Kalyani Publishers
2. I M Pandey : Financial Management, 9 – Edition,

Vikas Publishing House Pvt.Ltd.
3. S.P.Jain and K.L.Narang : Cost and Management Accounting,

Kalyani Publishers
4. Prasanna Chandra : Fundamentals of Financial

Management

Balance sheet
For the Financial Year ended 31st March, 2015-16, 2016-17, 2017-18, 2018-19 and
2019-20
Particulars 2015-16 2016-17 2017-18 2018-19 2019-20
Source of Funds
1. Share Holders
Funds
a. Share Capital 5191.24 3976.36 3976.36 3976.36 3976.36
b. Reserves and Surplus 385.97 2160.18 3993.06 5108.64 71790.70
2. Loan Funds - - 9244.81 16382.92 -
a. Secured Loans 2855.27 10723.23 15069.11 13733.65 17832.33
b. Unsecured Loans 1826.19 5404.59 618.06 1184.79 12271.32
Total 9908.68 22264.36 32901.40 40386.36 43836.66
Application of Funds
1. Fixed Assets
a. Gross Block 7069.47 17884.47 25035.99 31824.32 35516.23
b. Less: Depreciation 2718.85 4648.10 6510.29 7666.24 9127.88
c. Net Block 4350.62 13236.37 18525.70 74158.08 26388.35
d. Capital Work – in –
719.09 2652.95 5604.02 754.45 862.01
Progress
2. Investments 235.54 - - - -
a. Inventories 1193.26 5294.05 9194.08 10636.86 12092.91
b. Sundry Debtors 2017-18.67 4098.66 6706.59 7667.92 8814.31
c. Cash and Bank
629.03 - 350.67 2650.37 420.10
Balances
d. Loans and Advances 338.81 1462.76 2070.42 5241.68 5289.66
Less:
Current Liabilities and
4172.77 11302.96 18321.76 26196.83 -
Provisions
a. Current Liabilities 2828.57 5052.57 9202.11 10188.34 9319.38
b. Provisions 66.55 572.72 354.42 538.25 711.30
Net Current Assets 1277.65 5667.67 9556.53 10726.59 10030.68
(Deferred Tax Assets) - 683.48 - - -
Miscellaneous Expenses 11.15 13.89 8765.23 3.59 -
Profit and Loss Account 3314.63 2252.8 2698.38 858.92 1242.48
Total 9908.68 22264.36 32901.40 40386.36 43836.66

Profit and Loss Account for the Financial Year ended 31st March, 2015-16 to 2019-20
Particulars 2015-16 2016-17 2017-18 2018-19 2019-20
Income
Sales (Gross) 933.97 23858.36 31587.33 41045.08 49472.02
Less: Excise Duty - 2834.21 2979.54 4108.43 3106.39
Sales (Net) - 21024.15 28607.79 36936.65 46365.63
Other Income
21.88 102.15 62.34 33.59 93.21
Increase/Decrease
In Stock 383.84 197.41 897.63 471.24 14.16
Total Expenditure 8972.01 21323.17 27772.5 37441.48 46473
Raw Material Consumed 5600.68 9148.72 15484.93 19232.45 24779.93
Manufacturing Expenses 1272.92 4050.96 4481.62 8629.04 8874.8
(Excise Duty Paid) -1309.1 - - - -
Cost of Material Sold 6.48 13.65 - 644.45 659.16
Salaries, Wages and
353.78 872.5 954.95 8629.04 1862.53
Allowances
Other Expenses 697.86 1881.65 1534.57 2331.7 2479.56
Financial Charges 314.83 1331.15 989.59 1832.36 2302.59
Depreciation 349.42 807.04 852.59 1156.89 1512.99
Total 9905.08 18105.67 24298.25 35276.74 42471.56
Profit Before Tax 933.08 3218.04 3474.25 2164.74 4001.44
Provision for Tax -
- 164.17 272.42 242.93 453.41
Current
Less: MAT Credit

- - - 52.78 453.41
Entitlement
Provision for Defamed

- 449.26 1107.66 566.73 1392.16
Tax
Profit After Tax 933.08 2604.61 2094.17 1580.80 2591.74

Balance Brought
Forward from Previous 2731.55 51.81 604.21 837.09 858.92
Year
Profit Available for
- 2552.8 2698.38 93.75 187.5
Appropriation
Transfer to General
350 1500 1500 1000 1500
Reserves
Proposed Dividend - 397.64 397.64 397.64 397.64
Tax on Dividend - 15.95 51.97 67.58 67.58
Balance Carried to
3314.63 2552.8 2698.38 858.92 1242.48
Balance Sheet
Basic and Diluted esp.
- 6.55 5.27 3.98 6.55
(Rs.)
Number of Shares used

in computing basic and - 39763595 39763595 39763595 39763595
diluted esp.

Food and Inns Project

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Working Capital Management

MEANING OF WORKING CAPITAL

VCR Degree and PG College Page 1

ADVANTAGES OF GOOD WORKING CAPITAL MANAGEMENT

The main advantages of sound working capital are as follows;

1. Solvency of the business adequate working capital helps in maintaining solvency of

2. Goodwill sufficient working capital enables a business concern to make prompt

6. Regular payment of salaries, wages and other day-to-day commitments a company

7. Exploitation of favorable market conditions only concerns with adequate working

9. Quick and regular return on investments sufficiency of working capital enables a

10. High morale adequacy of working capital creates an environment of security,

DISADVANTAGES OF INADEQUATE WORKING CAPITAL

VCR Degree and PG College Page 2

2. It cannot buy its requirements in bulk and cannot avail discounts.

VCR Degree and PG College Page 3

VCR Degree and PG College Page 4

Top producers of Mangoes, Mango grafts,

People's Republic of China 4.2

World total 34.9

VCR Degree and PG College Page 5

VCR Degree and PG College Page 6

INTERNATIONAL MARKETS FOR INDIAN MANGO

Area, Production and productivity of mango in major mango producing countries of

Area Production Productivity

1 India 1.6 43.36 10.8 40.64 6.75

2 China 0.419 11.35 3.582 13.48 8.56

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Hyderabad, March 31 Despite an expected low production of mangoes this year,

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MANGO PRODUCING STATES IN INDIA

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BACKGROUND OF FOOD AND INNS (P) LTD

FOODS AND INNS Ltd believes in empowering farmers by providing technical

VCR Degree and PG College Page 10

6 Mr. D.D. Trivedi Ex. IIM Professor

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SHARE OF COUNTRIES MARKET

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CUTTING EDGE TECHNOLOGY

INITIATIVES SPAN THE FOLLOWING DISCIPLINES

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EFFICIENT PLANT LAYOUT

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VALUABLE INDUSTRIAL EXPERTISE

PURE AND CONCENTRATE FACILITY

VAPOR HEAT TREATMENT

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STAGE OF USE OF WATER TO THE BEST EFFECT IN OUR

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THE BEST EFFECT IN OUR FACTORY

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CERTIFICATIONS OF INTERNATIONAL QUALITY STANDARDS

Mango pulp production to reach 75,000 tones by 2017-18

Mango pulp processed annually is 50,000 tones

Farmers have to go to Bangalore, as there is no testing facility in Krishnagiri

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Given our renewed emphasis on this product line we are strengthening

Alphonso Totapuri Guava Papaya

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NEED OF THE STUDY

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SCOPE OF THE STUDY