A STUDY ON WORKING CAPITAL MANAGEMENT

CONTENTS

Chapter 1

INTRODUCTION

3-9

Chapter 2
INDUSTRY & COMPANY PROFILE

10-23

Chapter 3
THEORETICAL FRAME WORK OF WORKING
CAPITAL MANAGEMENT

24-47

Chapter 4

DATA ANALYSIS AND INTERPRETATION

48-58

Chapter5
SUMMARY & SUGGESTIONS

59-65

Chapter1
INTRODUCTION

INTRODUCTION
The process of liberalization unleashed by the Indian Government
in July, 1991 has transformed the Indian economy form a universal
looking and regulated economy to a market oriented one with emphasis
on private sector participation.
Indian economy has been experiencing rapid growth as is evident
by the trend in major sectors and economic indices the growth achieved
by Indian economy since the liberalization drive is note worthy
achievement even by standards Indian economy has emerge as the fifth
largest economy in the world. Indias gross domestic product (GDP) at
factors cost has been rising steadily at about 6-7 Since1990-91. Indias
current GCP at official change rate is US $ 351 billion, where as; its GCP
based on purchasing power party method (PPP method as adopted by
United Nations) is US $ 1,665 billion. The GDP per capita has also
increased sharply in recent years increasing the purchasing power of
Indian population.

Indias per capital growth computed using PPP

method is US $ 1,731.

The current average growth rate of Indian

industry is between 10% - 12.5% Indias current industrial out put is

about US $ 109 billion at official exchange rate. Thus contributing about
31% of AGRICULTURE for 2013-2014.

Need for the study

India is an agrarian country. Where nearly 75% of its population
depends upon Agriculture for their living. Indian soil has been depleted
of the essential required for the healthy growth and desired yield of crops.
These scared nutrients can be substituted by the use of fertilizers. Which
help providing Nitrogen, Phosphorus, calcium and Iron necessary for
healthy growth of the crop. Many industries in the country also depend
on agricultural output. Which serves as raw material for their plants?
Thus in India fertilizer industry has been selected for study. In fertilizer
industry, Coromandal fertilizers in India. As this plant is located in same
city where I reside, I have selected this company and the companys
Soothing ambience and good will has attracted me to select this company.
The company has different departments like ERD, TSD, and Marketing
finance. As I look finance as my specialization. I have done my project in
Finance department of Coromandal. The study carried out by me shows
the companys three years operating cycle. Investment in Ratios and
various operating cycle. The study has great significance and provides
benefits to various parties who directly or indirectly interact with the
company. It is beneficial to top management of company by providing
crystal clear receivables and Inventory management.

The study is

beneficial to employees and other motivation by showing now actively

they are contributing for the companys growth.

Objectives of the study

To examine the relation between various components of
working capital
To evaluate the working capital requirement of the company.
To make comparisons between the ratios during difference
periods.

Significance of the Study:

The nature of study is constitutes to be one of the interesting, and
key areas of working management.

The study concentrates on the

financial states of affairs of the company and the management of the

Working capital in the company, which involves the study of operating
cycle, and Ratios of different periods. And their comparison over the last
three years. It helps to present broader picture of the financial position of
the company. The study appraises the companys success in meeting the
requirements of the country helping the farmers to raise the agricultural
output and meeting the requirement of the countrys population for food
grains. Hence the agriculture actor is not only supported by the use of
chemical fertilizers sector grows only to the extent of the Growth of
agriculture.

The required data for the study of the working capital

management is collected from the finance department. Cost accounting

and store system of the firm.

Methodology of the Study:

The data required for any research study or project can be gathered
through primary or secondary sources. Primary data has been collected
by the following methods.

Observation method
Interview method
Through the questionnaires

The secondary data has been collected from annual report financial
statement and various records and manuals of the company.

Limitations of the Study

The study provident insight into the financial personnel marketing
and other aspects of Coromandel fertilizers limited. Every study will be
bound with certain limitations. The below mentioned are the constraints
under which may study is carried out. One if the factors of the study
were lack of availability of sample information.

Study is based on the

annual reports of company. To the extent that the executives cold spare
their time. They gave us the information by the way of small discussions
for the purpose of data collection. Most of the information has been kept
confidential and as such is not passed on, as part Company.

Presentation of the study

Chapter 1 Deals with the introduction of the study.

Chapter 2 Deals with the Industry & Company profile
Chapter 3 - Deals with the Theoretical frame work of the study
Chapter 4 Data analysis and interpretation
Chapter 5

Summary& Suggestions, Bibliography

Chapter 2
INDUSTRY & COMPANY PROFILE

INDUSTRY & COMPANY PROFILE

Industrial profile
India is vast country and predominantly agricultural and agro based.
While fertilizer manufacturing plants are few, the consumption of fertilizers
spread over a very large number of villagers i.e. .5, 75,000 villages.
Fertilizers manufactured in a few units located at strategic locations are to be
moved and made available in large quotation to the millions of farmers
through a scattered network of about 2.00 lakhs retail out lets at the time of
requirement in an acceptable package and at the minimum possible cost.
The population is likely to increase TO 935 million. Therefore,
production of food grains will have to be increased by production of food
grains will have to be increased by reduction of food grains will have to
be increased by production of food grains will have to be increased by
production of food grains lies only through improving the productivity of
land cultivation
In order to meet the acute shortage of food, government of India
decided to set up a fertilizer plant at SINDRI, which was originally
designed to produce ammonium sulphate in 1951. Between 1960 and
1964 Nagaland, Tomboy, Rourkela units were commissioned.
As per the United Nations conference on environment and
development by the year 2025 A.D the number of months to feed in the
globe will jump by more that 50 % to 8.5 billion resulting population
explosion and land available for growing food is shrinking. In the last 15
years the area of cultivated land per person has dropped to 0.15 hectare
from 0.17 hectare. The logical answer is to stimulate crop growth by
feeding the plants with the needed nutrients i.e. fertilizers.
10

Definition
Fertilizers are chemical substances added to the soil to increase
THE Fertility and there by increase the crop production. In addition to the
conversion of atmospheric nitrogen to assailable nitrogenous compounds,
artificial procures are also used to form Nitrogenous compounds, which
can be used by the plants, along with the nitrogen. Plants also require
other elements such as potassium. Magnesium, manganese, phosphorous,
calcium, iron, Sulphur etc., for healthy growth.

Classification of fertilizers
Natural fertilizers
Artificial fertilizers

Natural fertilizers:
Compost and manure:
The action of soil bacteria in breaking down dead organisms and
the dung of animals into nitrogenous compounds easily assailable by
plants make these dead decaying matter and excreta of animals a very
good source of natural fertilizers.

Artificial fertilizers:

11

When large areas of land are brought under cultivation and when
natural fertilizers are inadequate to compensate and the soil of its rapidly
decreasing nutrients, artificial fertilizers have to bi added to the soil.
Location and plant particulars:
The plant is situated in a 500-acre site at Viskhapatnam, about 5
kilometers from the harbor. The site is leased from Viskhapatnam port
trust for 50 years with renewal options. The company construction
commenced in 1965 and was completed in December 1967. at the
port, Coromandel operates its own bulk cargo raw materials and
unloading fertilizers marketed in the trade name GROMOR Urea
ammonia phosphate 28:28:0, GROMOR NPK 14:35:14 and
ammonium phosphate sulphate

20:20:0 , containing nitrogen ,

phosphorous, and potash nutrients. The plant utilizes naphtha from

neighboring HPCL refinery and imported rock phosphate and sulphur
as raw materials. Plant has 1000 strong work force working round the
clock in various disciplines
1964

EID parry (now in Murugappa Group)chevron chemical

company international minerals and chemicals crop(the Last
two U.S companies have since divested their stake in favor of
E.I.D parry)

1967

Production started 2.5 lakhs MTPA

1985

Capacity enhanced to 3 lakhs MTPA

1997

Production at5 4 lakhs MTPA

12

Plant capacities
The capacities of the plant at Coromandel fertilizer limited
areas under:
Sulphuric acid 3.65.450MT/YR
Phosphoric acid

1.13.059 MT/YR

Complex (28:28:0) 4.00.000

Product Line-Gromor Brand:
14-35-14(NPK COMPLEX)
28-28-0 (UREA AMMONIUM PHOSPHATE SULPHATE)
Gromor 14-35-14:
CONTRAINS NITROGEN PHOSPHATE AND POTASH
HIGHEST TOTAL NUTRIENT CONTENT (63 %)
N&PRATIONS SAME AS DAP BUT 14-36-14
HAS EXTRA 14 % POTASH
BEST FOR COTTON GROUNDNUT CHILLY SOYABEAN,
POTATO ETC.,
NOT SUITABLE FOR TOBACCO, AND GRAPES
The complex fertilizer with highest n & d in 1:1 ratio unique
granulation by coating pilled urea with ammonium phosphate later
13

such granule configuration ensures efficient utilization of nutrients

highly suitable for paddy, wheat
Gromor 20-20-0-15:
Ammonium phosphate sulphate with N & D in 1:1 Ratio its
special feature is 15 % Sulphuric which is not available in most
either fertilizers the response to the sulphur has been very
encouraging in many crops particularly oil seeds abed pulses in
sulphur deficient soil
Our market covers:
ANDHRAPRADESH

64 %

ORISSA

17 %

WEST BENGAL

11 %

MADHYAPRADESH

20 %

CHANDIGARH

4%

OTHERS

2%

Performance (2000-2001):
TURN OVER

Rs 613 CRORES

ROCE

24 %

EVA

POSITIVE

PBT/SALES

11%

PRODUCTION

5.15.000 MT

SALES

5.49.000MT

14

Coromandal Fertilizer Limited

Once a sleepy fishing hamlet, thanks to the vision of
industrial experts Viskhapatnam has attained internal importance
Because of its natural resources. The east coast of the Indian
and the peninsulas was once ruled by the cola dynasty during 9 th to
13th century A.D since then the historians called the east coast as
Coromandel Coast. In due course, this coast has attained its name
as Coromandel Coast or Coromandel Coast and hence the fertilizer
limited. The Coromandel emblem depicts the farmer with a branch
of seven leaves on one hand that the company is strives to serve
providing him the fertilizer to ensure that his crops grow better and
more abundantly. The registered trademark GROMOR is a catch
word depicting the companys intention to grow more good of the
Coromandel farmer appears on all the packages of the Coromandel
products of the company as well as in the media of sales
promotion, apart of these emblem is used on the companys letter
heads, envelopes, pamphlets etc., the color chosen is green
representing the green revolution in agriculture.
Organization chart
Board of Directors manages the organization of Coromandel
fertilizers limited. President and managing Director Act as Chief
Executive of the entire set up stationed at its registered office at
Secunderabad. Andhrapradesh. Vice President manages the plant at
15

Viskhapatnam. The plant at Viskhapatnam is broadly structured on

the basis of functional basis and following is the organization chart.
Objectives
Adhere to ethical norms in all dealings with shareholders
employees. Customers, suppliers, financial institution and
government services.
Provide value for money to customers through quality
products and services.

Threat our people with respect and concern. Provide

opportunities to learn. Contribute and advance recognizes
and reward initiative. Innovativeness and creativity.
Manage environment effectively for healthy opportunities.

To be more customers oriented.

To reduce lead-time.
To stock material closer to customer.
Need for brand promotion and product differentiation.

16

Manufacturing plants
The manufacturing process is carried ort at 5 plants of C.F.L.
Ammonia and urea closed in 1998.
Ammonia plant
The ammonia plant has a capacity to produce a capacity to produce
357 tones per day. This plant was designed and Constructed by M/s.
HINDUSTAN PETROLEUM REFINERY, Viskhapatnam.
Urea plant
C.F.L. plant gas an operating capacity of 400 T.P.D based on the
CPIALLIED process the design and construction of which was done by
M/s VULCACINEINNATI OF U.S.A
Sulphuric acid plant
The plant had been designed by CHEMICAL CONSTRUCTION
COMPANY; U.S.A the plant capacity is 900tones of Sulphuric acid per
day.
Phosphoric and plant:
This plant was designed and constructed by M/s DORR-DVIVER,
U.S.A
The original designed capacity of the plant was 255 tones per day
which was increased to 325 tones per day during revamp in the
Year 1975, with the modifications in the recent years the plant capacity
now is 350 tones of phosphoric acid per day.
Complex plant
This plant was designed and constructed by M/s WELLMANORD
COMPANY, U.S.A. the production of complex fertilizers started in
February 1968. The product material so produced by the above process is
17

bagged in 50 kg bags and dispatched by rail/road to various places in

India.
Strengths of the company
Very long experience in the field of producing and selling fertilizers
Up to date technology and continuous and selling fertilizers
Optimum capacity utilization
Enjoying great brand and corporate image
Dealer and farmer loyalty
Financially strong firm
Niche marketing
Strong promotional activities
Wide spread sales net work
Minimum labor problem
Well trained employees and good work culture

18

Departments:
Finance department:
The finance department here is headed by the DGM (finance) who
has to report to the vice president finance. The deputy manager (finance
& accounting) assistant manager (finance & accounting) looks after cash,
general accounts. Production accounts & excise with the help of assistant
accountant to reduce his work load.
The assistant manager (cost accounting) is concerned with the
preparation of cost accounting records for the ascertainment and control
of costs relating to the activities associated with the manufacture sales
and distribution of goods and services.
The deputy manager (projects) is concerned with warehouse
accounts & project accounts & capitalization accounting. He has an
assistant manager (stores) & an accounts officer. The clerical staff
facilitates the easy accomplishment of the deputy managers job t hand.
ERD (Employee relations department:
The department is headed by the senior manager (IR & P) he is
being subordinated by a team of personnel officers and office clerks who
assist him in achieving the goals of the organization.
PARTICULARS
Total man days available

2011 2012 2013 2014

5758
65458

Man days worked

45235

19

48285

Average no employed

876

Direct labor cost per unit output 74.45

843
83.42

Technical services department:

This department is headed by the senior management (ISD). Who
is responsible or carrying out the functions of the department effectively?
Under him is the manager followed by the deputy manager (TSF) and few
technicians. The function of the department include
i.

Execution of energy conservation scheme

ii.

Designing product specifications

iii.

R & D function

Marketing activities:
The company sells the finished products mainly in the four states:
A.P, Orissa, West Bengal, and Madhya Pradesh. The sales are through
E.I.D (parry) and rallies India limited one of the promoters of the
company belonging to the company. The credit period allowed to its
customers is 45 to 60 days. It is up to 60 days during the off-season.
The price of the fertilizer was fixed by the FICCI. In the past 92
scenarios, the pricing of fertilizers under went a sea change. The fertilizer
industries were allowed to compete in the open market. The study all was
allowed shall be in the proportion to the phosphorous content in
phosphorus peroxide. These is the pricing policy followed today in the
case of phosphates fertilizers
Distribution department:
At the vizag regional office only distributed is carried out. The
department is divided into transportation, ware housing. Accounting and
bagging.
20

Industrial Relations:
Coromandel has an excellent track record in I.R since its inception.
This is largely due to progressive policies pursued by the company with
regard to labor management. The company provides several schemes and
facilities to its employees, medical and accident insurance scheme
Cafeteria. Uniforms, house building loan scheme, sports and recreational
facilities are some of the benefits enjoyed by the employees of the
company. In addition cooperative house building society, co operative
credit society, cooperative consumers stores have been established to
cater to the needs of employees as a welfare measure.
Man power:
The total strength of the employees in the company is 80 %
Welfare activities:
The company also strives to motivate its employees and create a
sense of belongingness so that the employees of the organization are
committed to achieve the objectives of the organization. In addition to the
salary that is provided to the employees, the employees are given several
benefits. To provide for their overall development and in order to keep
them in good shape. Some of the benefits provided to the employees
include LTA/LTC, canteen facility. Accident insurance scheme, gift
coupon etc., in addition to it, the employees are granted credit sales
through the employees at 15 %interest. To keep the employees in good
humor. The company arranges yearly picnic and weekly movie for the
recreation.

21

Environment & pollution control measures:

Coromandal has paid keen concern towards environment and other
pollution control measures and has implemented several measures from
time to time by deploying latest technology viz.., switching over to
DCDA Process Sulphuric acid plant recycling of effluents. Installation of
fillers, installation of Fluorine recovery section in phosphoric acid unit to
convert pollutant gases into a useful by product called Hydro
fluorsiclimice acid
Achievements:
Coromandel has constantly taken up modernization and up
gradation program, which has helped to increase its production volume
with a considerable gain in energy and material usage efficiency over the
years. Coromandel has own many national and international awards in the
area of production safety & environment. During the years 1994 -95.
Coromandel fertilizer limited received an award from the fertilizers other
Indian fertilizer factories. During 1995 -96C.F.L. won two awards
relating to Best performance of phosphate acid plant and Best
environment protection of phosphate fertilizer plant and these were
presented during the annual meeting geld at new Delhi on 6 th December
1996to the then company president & managing director Mr.R.S.NANDA
and the plant General Manager Mr.A.Vesveswararao
In June 1998, Coromandel won a five star rating for their safety
management system, there by becoming eligible to receive the sword of
honor from British safety council. London.

22

Chapter 3
Theoretical Frame Work of Working
Capital Management

23

Theoretical framework of working capital management

Definition:
Working capital is the capital required to meet the day-to-day
obligations of the firm. Working capital, also called net current assets, is
the excess of current assets over current liabilities. All organizations have
to carry working capital in one form or the other the efficient
management of working capital is important from the point of view of
Both liquidity and profitability poor management of working capital
means that funds are unnecessarily tied up in idle assets hence reducing
liquidity and also reducing the ability to invest in productive assets such
as plant and machinery, so effecting the profitability.
The action and its farmers welcomed coromandel
At this juncture the farmers of A.P and the country as wholeheartedly welcomed Coromandel and its operation as Viskhapatnam. The
benefits of Coromandel are increased crop yields from application of
Gromor fertilizers provides food for about 8 million more people.
Coromandel production by establishing Coromandel Rs.48.4 cores plant
at Viskhapatnam
The country has one of the most modern and highly developed
fertilizers operations in the world.

24

The operation 1 utilizing indigenous materials in manufacturing

and packing such as jute bags (Rs.2 cores per year) and naphtha
(currently a surplus commodity) indigenous produced Sulphuric acid
catalyst also are used. Industrial and technical skills are being developed
for

almost

700

Coromandel

employees

in

Viskhapatnam

and

Secunderabad.
Gromor 28-28-0 a product of Coromandel is the most advanced
high analyses fertilizers manufactured in India. Coromandel offers free
agriculture advice to the cultivators as a part of its marketing programme
better crop yields in aggregate provide farmers an additional income of
over Rs.30 cores each year by using Gromor.
Every business needs funds for two purposes:
For its establishment
To carry out day to day expenses
Funds are needed for snort term purposes for the purchase of raw
materials/payments of wages and day expenses. These funds are known
as wording capital thus it means the capital required for financing short
term or current assets such as marketable securities. And the are
converted into cash and again current assets are purchased hence it is
known as circulating capital.

25

Working capital is life of business. The working capital

management refers to management of the working capital. Affirms
working capital consists of its investment in current assets which include
short term assets such as cash and bank balance. Inventories, receivables
(including debtors and bills) so the working capital most refers to the
management of the level of all these individual current assets the need for
working capital management arise from two considerations. First,
existence of working capital is imperative in any firm. The fixed assets,
which usually partake a large chunk of total funds, can be used at an
optimum level only if supported by sufficient working capital and second
the wording capital involves investment of funds of the firm. If the
wording capital level is not properly maintained and managed, then it
may result in unnecessary blocking of scarce resources of the firm. The in
sufficient working capital on the other hand put different hindrances in
smooth wording of the firm. Therefore, the working capital management
needs attention of all the financial managers.
Nature of Working Capital
Working capital refers to current assets those, which are
convertible into cost with in one year. Those, which are required to meet
day-to-day expenses. The fixed assets as well as current assets required
funds. The management of wording capital involves different concepts or
methodology than the techniques used in fixed assets management. The
very basis of fixed Assets decision processes (capital budgeting) and
working capital decision process are different.

26

The fixed assets involve long period prospective and therefore, the
concept of time value of money is applied in order to discount the future
cash inflows where as wording capital time horizon is limited one year
and time value of money concept is not considered. The fixed assets
affect long-term profitability of firm while current assets affect short-term
liquidity position. So in wording capital management financial manager
is faced with a decision involving some of the considerations as follows:
What should be total investment in working capital in the firm?
What should be the level of individual current assets?
What should be the different sources of wording capital?
The wording capital management may be defined as the
management firms
Sources and uses of wording capital in order to maximize the
wealth of share holders.
The proper working capital management requires both medium
term planning (up to 3 years) and also the immediate adaptations to
changes arising due to fluctuations in operating levels of firm.

27

Working capital may be classified in two ways

a) On the bases of concept
b) On the basis of time
On the basis of time concept: wording capital is classified as gross
working capital and net working capital discussed earlier this
classification is important from the point of view of the financial
manager. Permanent or fixed working capital: permanent or fixed
working capital is the minimum current which is required to ensure
effective utilization of fixed facilities and for maintaining the
circulation of current assets which is continuously required by the
enterprise to carry out its normal business operations. For example
every firm has to maintain a minimum level of raw material. Work in
process. Finished goods and cash balance. This minimum level of
current assets is called permanent or fixed working capital as this part
of capital is permanently blocked in current assets. As the business
grows, the requirements of permanent working capital also increase in
current assets. The permanent working capital can further be classified
as
a) Regular working capital and
b) Reserve working capital.
Regular working capital required ensuring circulation of
current assets from cash to inventories. From inventories to receivables
and from receivables to cash and so on Reserve working capital is the
excess amount over the

28

Requirement for regular working capital which may be

provided for contingencies that may arise at unstated periods such as
strikes rise in prices, depression etc.,
Temporary or variable working capital:
Temporary or variable: - working capital is the amount of
working capital which is required to meet the seasonal demands and some
special exigencies: variable wording capital can be further classified as
a) Seasonal working capital
b) Special working capital
Most of the enterprises have to provide additional working capital to meet
the seasonal and special needs. The capital required to meet the seasonal
needs of the enterprise is called seasonal working capital. Special
working capital is that part of the working capital which is required to
meet special exigencies such as launching of extensive marketing
campaigns for conducting research etc.,
Concept of working capital:There are two concepts of wording capital
1. Gross concept and
2. Net concept
Gross working capital:It refers to thee capital invested in total current assets of enterprise
current assets are those, which are converted into Cash with in one year
such as cash, bills receivables, sundry debtors, stock, prepaid expenses.
Net working capital
Net working capital = current assets current liabilities
Current liabilities are those liabilities, which are I intended to be
paid in the ordinary course or business with in one year such as B/P
sundry creditors and O/SExpenses: They are two concepts of both gross

29

and net working capital, which have equal significance from management
view:
Optimum investment in current assets,
Financing of current assets.
The Need or Objectives of Working Capital
The need for working capital to the day-to-day business activities
cannot be over emphasized. Every business needs some amount of
working capital. The need for working capital arises due to the time gap
between production and realization of cash from sales. There is an
operating cycle involved in the sales and realization cash. There are time
gaps in purchase of raw materials and productions; production and sales;
and sale and realization of cash. Thus working capital is needed for the
following purposes for the purchase of raw materials, components and
spares to pay wages and salaries
1. To incur day to day expenses and overhead costs such as fuel,
power and office expenses etc.
2. To meet selling costs as packing, advertising etc.
3. Maintain the inventories of raw materials work in progress stores
and spares are finished stock.
For studying the need of working capital in a business, one has to
study the business under varying circumstances such as a new concern
as a growing concern and as one, which has attained maturity. A new
concern requites a lot of liquid funds to meet initial expenses like
promotion formations etc... These expenses are called preliminary
expenses and are capitalized.

30

The need for working capital needed in different stages of business

as follows

Capital

introduction

growth

High

high

maturity

decline

3
normal

Capital
In introductory stage the amount of working capital is high because
they want to give good publicity to the company. In growth stage they
31

low

require high capital, as they want to expand or develop branches and use
advanced technology. At maturity stage they face bread-even-point stage i.e.,
no loss no profit and it may be hard for the management to develop company
so capital required is normal. At decline stage the capital is low as they may
wind up company due to heavy competition.
Determinants of working capital:
The working capital requirements of a concern depend upon a large
number of factors such as nature and size of business the character of their
operations, the length of production cycles. The rate of stock turnover and
the state of economic situation It is not possible to rank them because all
such factors are of different importance factors generally influencing the
working capital requirements the factors may be external or internal however
the following are the influencing the working capital requirements.
Nature of business:
The working capital requirements of a firm basically depend upon
the nature of its business. Public utility undertakings like electricity, water
supply and railways need very limited working capital because they offer
cash sales only supply services not products and as such no funds are tied
up in inventories and Less investment in fixed assets but have to invest
large amounts in current assets like inventories, receivables and cash as
such they need large amount of working capital.
Size of business scale of operations:
The working capital requirements of a concern or directly influenced
by the size of its business which may be measured in terms of scale of
operations. Grater the size of business unit generally larger will be the
requirement of working capital however, in some cases even a smaller
concern may need more working capital due to high over head chares
32

inefficient use of available resources and other economic disadvantages

of small size.

Working capital cycle:

In a manufacturing concern the working capital cycle starts
with the purchase of raw material and ends with e the realization of cash
from the sale of finished products. The cycle involves purchase of raw
materials and stores as conversion into stocks of finished goods through
work in progress with progressive increment of labor and service costs,
conversion of finished stock into sales. Debtors and receivables and
ultimately realization of cash and this cycle continue again from cash to
purchase of raw material and so on.
WORKING CAPITA L
DEBTORS
RECEIVABLES

CASH

FINISHED
GOODS

WORK IN
PROCESS

RAW MATERIAL

33

Rate of Stock Turnover:

There is a high degree of inverse co-relationship
between the quantum of working capital and the velocity or speed with
which the sales are affected a firm having a high rate of stock turn over
with need cover amount of working capital as compared to a form having
a low rate of turnover. For example in case of precious stone dealers the
turnover is very slow. They have to maintain a large variety of stocks and
the movements of stocks is very slow. Thus, the working capital
requirements of such a dealer shall be higher than that of a provision
store.
Business Cycles:
Business cycle refers to alternate expansion and contraction in
general business activity. In a period of boom i.e... When the business is
pros porous there is a need for larger amount of working capital due to
increase in sales rise in prices Optimistic expansion of business etc., on
the contrary in the times of depression when there is a down swing of the
cycle. The business contracts, sales decline difficulties are faced in
collections from debtors and firms may have a large amount of working
capital lying idle.
Rate of growth of business:
The working capital requirements of a concern
increase with the growth and expansion of its business activities
although it is difficult to determine the relationship between the
34

growth in the volume of business and the growth in the working

capital of a business. Yet it may be concluded that for normal rate of
expansion in the volume of business we may have retained profits to
provide for more working capital but in fast growing concerns, we
shall require larger amount of working capital
Management of working capital:
There are two types of assets in each concern: Current assets
Fixed assets
Both are necessary for profit running of business working
capital is difference of current assets and current liabilities.
Management of working capital is concerned with problems that arise
in attempting to manage current assets. Current liabilities and the inter
relation ship between them. Working capital must adequate in a case
of excess working capital they are idle funds, which are not profits for
business. In case of adequacy of working capital the firm may lead to
insolvency in these context working capital management is three
dimensional in nature.
Objective of working capital management
There are two fold objectives of the management of working capital.
Maintenance of working capital at a appropriate level and
Availability of ample funds as and when they are needed.
In accomplishment of these two objectives the management has
to consider the composition of current assets pool. The working
35

capital position sets the various policies in the business with respect to
general operations purchasing financing expansion and divided etc.

Study of Working Capital Management:

The management of working capital has been studied under the
three following headings:
Management of cash balance
Management of account receivables and
Management of inventory
The management of working capital encompassed the following
problems:
1) To decide upon the optimal level of investment in the various
current assets i.e., determine the size of the working capital.
2) To decide upon the optimal mix of short term funds in relation to
long term capital and
3) To locate the appropriate means of short term financing.
The study of working capital management is incomplete unless we
have an over all loud on the management of current liabilities of level of
working capital involves fundamental decisions regarding firms
liquidities and the composition of firms debt.

36

Inventory management
The terms inventory has been referred to as the stock pile
of the other product a firm is offering for sales the components that make
up the product every enterprise needs inventory for smooth running of its
activities it serves as a link between production and distribution process.
The greater the like lag the higher the requirements for inventory it also
provides a cushion for future price fluctuations the investment in
inventories constitutes the most significant part of current assets working
capital in most of the undertakings this, it is very essential to have proper
control and management of inventories the purpose of inventory
management is to ensure availability of materials in sufficient quantity as
and when required and also to minimize investment in inventories the
investment in inventory is very high in most of the undertakings engaged
in manufacturing wholesale and retail trade the amount of investment is
sometimes more in inventory than in other assets in India a study of 29
major industries has revealed that the average cost of material s is 64
paisa and the cost of labor and over head is 36 paisa in a rupee about 90
% of working capital is invested in inventories an efficient system of
inventory management will determine.
a) What to purchase
b) How to purchase
c) From where to purchase
d) Where to store etc.

37

The purpose of inventory management is to keep the stocks in such

a way that neither there is over stocking nor under stocking the over
stocking will mean a reduction of liquidity and starving of other
production processes: under stocking, on the other hand will result in
stoppage of work. The investments in inventory should be kept in
reasonable limits.
Meaning and nature of inventory:
The dictionary meaning of inventory is stock of goods or list of
goods the word inventory is under stood differently by various authors in
accounting language it may mean stock of finished goods only.
a) Raw materials inventory: it consists of those items of inputs such
as basic raw materials and other materials, which are converted
into finished goods through the manufacturing process.
b) Work- in progress inventory: it consists of those material inputs,
which are in partially finished of semi-finished stage under the
production process.
c) Finished goods inventory: it consists of completed products which
are ready for but are laying in stock the stock of finished goods
provide a buffer between production and market.

38

OBJECTIVES OF INVENTORY MANAGEMENT:

The main objectives of inventory management are operational and
financial the operational objectives mean that the materials and spares
should be available in sufficient quantities so that work is not disrupted
for want of inventory. The financial objectives means that investment in
inventories should not remain idle and minimum working capital should
be locked in it.
1) To ensure continuous supply of mate4rials spares and finished
goods so that production should not suffer at any time and the
customers demand should also be met.
2) To avoid both overstocking and under stocking of inventory
3) To maintain investments in inventories at the optimum level and
required by the operational and sales activities
4) To keep material cost under control so that they contribute in
reducing cost of production and overall costs.
5) To eliminate duplication in ordering or replenishing stocks this is
possible with the help of centralizing
6) Purchases to design proper organization for inventory management
a clear accountability should Fixed at various levels of the
organization
Tools and techniques of inventory management

39

The following are the important tools and techniques of inventory

management and control
Determination of stock levels
Determination of EOQ
A-B-C analysis
V-E-D analysis
Inventory turn over ratios.
Operating cycle:
Operating cycle is the duration period to convert sales, after the
conversion of resources into inventories; into cash the operating cycle of
a manufacturing co. involves three phases:
1) Acquisition of resources, such as raw material, labor, power and
fueled
2) Manufactured of the product, which includes conversion of raw
material into work in progress into finished goods.
3) Sales of the product either for cash or on credit. Credit sale creates
book debts for collection.
The operating cycle begins with the acquisition of the raw
materials and ends with the collection of the receivables it may be
broadly classified into the following groups.
1) Raw material conversion period. (RMCP)
2) Work in progress conversion period. (WIPCP)
3) Finished goods conversion period. (FGCP)
4) Book debts or receivables conversion period. (BDCP)
The length of the operating of the operating cycle of a manufacturing
firm is the sum of
1) Inventory conversion period (ICP)
40

2) Book debts or receivables conversion period (BDCP)

The duration of the cycle for the purpose of the estimating the
working capital requirements is equivalent to the sum of the durations of
each of these stages less the credit period allowed by the suppliers of the
firm i.e., payables deferral period (PDP). The difference between GOC
and PDP is net operating cycle (NOC)
Operating cycle = ICP + BDCP
ICP = RMCP + WIPCP + FBCP
Operating cycle = RMCP + WIPCP + FBCP + BDCP PDP
Each of the components of the operating cycle can be calculated as
follows:
A) Raw material conversion period (RMCP) =
Average stock Of Raw Materials And Stores
____________________________________________
Average raw material and stores per day

B) Finished goods conversion period (FGCP) =

Average finished stock inventory
_______________________________________
Average cost of goods sold per day
B) Books debts conversion period (BDCP) =
Average book debts
__________________________________________
Average credit sales per day

41

C) Payable deferral period (PDP) =

Average trade creditors
Average trade credit purchases per day
After competing the period of the operating cycle the total numbers
of operating cycle that can be completed during a year can be computed
by dividing 365 days with the number of operating days in a cycle the
total operating expenditure in a year when divided by the number of
operating cycles in a year will give the average amount of working cycle
requirement
Sources of Working Capital for Coromandal Fertilizers Limited
The major source of working capital finance for Coromandal
fertilizer limited is the bank. The banks that provide the working capital
requirements of the company are the State Bank of India (S.B.I) City
Bank State Bank of Travancore (S.B.T) ANZ Grin lays Bank. This is a
consortium arrangement between these four banks and the lead bank of
the consortium is State Bank of India Under this consortium approach all
the bank finance the working capital need of C.F, L is enables banks to
spread risk of lending.
a) Enable banks to share experience and expertise
b) Enables banks to pool their resources and
c) Checks multiple financing of the same accounts.
Each consortium has a lead bank. Which has the largest share in
the consortium. It processes the loan proposal. Calls the meetings of the
42

consortium for sanction of limits and review of accounts, obtains RBI

permissions for credit limits, and conducts joints inspection of the
borrowers activities. The borrower executes a single set of documents
with the lead bank. It obtains the letter of authority from member banks
and releases the initial requirements of the borrowers; thereafter it obtains
reimbursement from the member banks to the extent of their shares in
advance.
The working capital requirements can be classified into fund-based
limits and Non-fund based limits. The funds based limits include cash
credit and bill discounting the non-fund based limits include letters of
credit and bank guarantee. The other Sources of working capital finance
are short-term loans, inter deposits, and trade advances.
Fund based limits:
Cash Credit:
This is one of the most important sources of working capital
finance for C.F.L. The working capital requirements are assessed and the
Limits are fixed. This limit is sanctioned by the bank and known as the
cash credit Hypothecation. Account is opened with the sanctioned limit.
The company can draw as and when the need rose. Any amount received
from the marketers is credited to this Account. The cash credit limits are
assets of the company by way of hypothecation or pledge. The limit is
valid for one year and has to be renewed every year. The

margin

requirement in the case of cash credit facility is 25%. The banks finance
the Remaining 75% of the net current assets. This is known as the
drawing power of the company. In order to obtain the cash credit facility
the company should submit monthly Stock statement to the bank. On the
bases of the stock statement the bank decides the credit limit.

The

company should also prepare the quarterly imitation system (QIS) forms.
43

Which are to be given to the banks. These forms provide information

regarding production operating profile estimates etc.
Adhoc Cash Credit:
The company may some times require adhoc or Temporary
accommodation in excess of the sanctioned credit limit to meet
unforeseen Contingencies. The excess amount is known as adhoc cash
credit.
Bill Discounting:
In the case the company obtains credit from bank against its bills.
The bank discounts the borrows bill.

The borrowers are paid the

Discounted amount of the bill. The bill will be payable after not exceed
90 days, Only bill which are discounted during since period will be
discounted. The bill discounting limits interchanging with cash credit
limits for a particular period. At the discretion of the bank subject to
terms and conditions in the sanctioned letter. The bill discounting facility
is provided by the bank against the security of all Current assets of the
company by the way of hypothecation or pledge.
Credit Monitoring Arrangement:
The Reserve Bank of India Regulates the overall credit granted by
the commercial banks to firms.

The credit Monitoring arrangement

(CMA) was introduced in October 1988, which the addition of the credit
authorization scheme. Under CMA RBI will over see the sanction of
term loans and working capital limits beyond the level as post sanction
scrutiny.
Non-Fund Based Limits:
Letter Of Credit:
A letter of credit is an arrangement where by a bank help its
customers to obtain credit from its supplier. Letter or credit can be
classified into height or emend Letters of credit and Acceptance credit.
44

Sight (Or) Demand:

Beneficiary gets immediate payment upon presentation of correct
documents as per letter of credit.

Cost Accounting System of Coromandal Fertilizers Limited:

Expenses are identified at Source Document level to the nature
expenses as well as the cost center to which it pertains, These accounting
documents are processed by the computer to accumulate Cost center wise
and expenses head wise.
General :
The system of costing is process-costing system and all plant
expenses including overhead and depreciation are charged to each
process and thus the cost of production reflects the total cost including all
corporate administration. Distribution selling overheads besides interest
and other financing cost. Cost of material transferred from one process
to the other is on total cost basis. The cost system is integrated with the
financial accounting system. The fertilizers operation is divided into
various cost centers each representing a production for service units. The
major heads are:
Operations:
Split up into process units utilities, bagging and material handling.
Maintenance:
Split up into individual fashion as above.
Plant Administration:
Covering all services functions at plant such as purchases,
Accounting, Personnel etc.
45

Secured and Unsecured Loans

Secured Loans :- S.B.I
GE Capital Services India
Unsecured loans :- Fixed deposit
Short term loans from banks
Buyers credit
Commercial paper
Other
Other short term loans from HDFCL
BRANCHES
Andhra Pradesh

Kurnool, Vizag.

West Bengal

Calcutta.

Chattisgarh

Raipur

Madhya praddesh

Bhopal

Orrissa

Bhuvaneswar

46

Chapter 4
Data analysis and interpretation

47

OPERATING CYCLE

DEBTORS CONVERSION
PERIOD

CASH
RAW
MATERIAL

DEBTORS

RAWMATERIAL

CREDIT
SALES

CONVERSION
PERIOD
WORK - IN
PROCESS
PERIOD

WORK IN
PROGRESS

48

FINISHED
GOODS

FINANCIAL HIGHLIGHTS

PARTICULARS
1). Raw material conversion period
1. Raw-material consumption
2. Raw-material consumption per
day
3. Raw material Inventory
4. Raw material holding days
2) Work-in-progress conversion period
1. Cost of production
2. Cost of production per day
3. Work in progress inventory
average
4. Work in progress holding days
3) Finished goods conversion period
1. Cost of goods sold
2. Cost of goods sold per day
3. Finished goods inventory
4. Finished goods holding days
4) Collection Period
1. Credit Sales
2. Credit sales per day
3. Book Debts
4. Book Debts o/s days
5) Payment different period
1. Credit purchases
2. Purchases per day

2011

2012

2013

2014

22369.59 28098.16
61.28
76.98

34943.95
95.73

2633.55
43 days

2888.19
30 days

3478.01
37 days

26924.17 31984.92
73.76
87.62
361.22
346.33

39949.95
109.45
238.63

47914.65
131.27
135.96

5 days

4 days

2 days

38344.55
104.77
6551.37
63 days

49977.62
136.92
5697.20
42 days

49230.24
134.87
6412.42
48 days

57669.11
158
5912.65
37 days

47910.55
131.26
1333.68
10 days

60358.62
165.36
2056.39
13 days

59879.24
164.05
4613.37
28 days

65060.20
178
7353.00
43 days

23159.48 27616.34
63.45
76.66

35626.97
97.60

34695
95

49

2787.59
36 days

34198.49
93.69

1 days

3. Creditors (Average)
4. Creditors o/s days

5681.84
90 days

6756.13
89 days

9224.56
95 days

INTERPRETATION
The above shows that the daily raw material consumptions is
61.28, 76, 98, 95.73.The 93.69 done the years 2011 2012 2013 2014
respectively. The highest being in 2011 and the least being in 2012. The
company has an average inventory of 2633.55 2787.59 2888.19 and
3478.01

for the year 2011, 2012, 2013and 2014 the highest being in

2011 and lowest being in 99. The companys raw material holding days
are 43, 36, 30 and 37 days respectively, the highest in 99 and the lowest
being in 2013. The companys raw material holding days has been
decreasing from the past three years. This shows the effective raw
material management efforts of the company. The cost of production per
day of the company is 73.76, 87.62, 109.45 and 131.27 respectively, the
highest being in 2014 and least being in 99.

The work in process

inventory holding days is 5, 4, 2 and 1 days for the years 2011, 2012,
2013 and 2014 respectively. There is an increase in the holding days in
the year 99 and decrease in days in 2010.

The decrease in due to

increased in cost of production per day and decrease in average work in

process inventory. The decline in the year 2010 is due to the decline in
average work in process inventory. There is a decrease in inventory
holding and carrying cost when compared to previous 2 years since there
is a reduction in work in process inventory holding days and finished
goods holding days.

This really shows a better sign off process

50

7648
80 days

implement and market. The cost of goods sold per days are Rs.101.77,
136.92, and 158 for the years 2011 2012, 2013-2014.respectively.

GROSS OPERATING CYCLE (IN DAYS)

Particulars
1. Inventory conversion period
a) Raw material
b) Work in progress
c) Finished goods
2) Receivable Conversion period
3) Gross operating cycle (1+2)
Net operating cycle
4) Payment differed period
5) Net operating cycle (3-4)

2011
Days
43
3
57
10
113

2012
Days
36
4
42
13
95

2013
Days
30
2
48
28
108

2014
Days
37
1
35
44
117

90
23

89
6

95
13

80
37

INTERPRETATION
The table shows that the inventory conversion period is highest in
the year 2011 and least in the year 2012. The receivables conversion
period is 10, 13, 28 and 44 days for the year 2011, 2012, 2013 and 2014.

51

Ratio analysis from 2011 to 2014

Current ratio
Current ratio = Current Assets
--------------------Current Liabilities
Current Assets

2011

2012

2013

2014

9879.71

10767.50

11166.29

10183.45

1775.54

2337.50

6889.09

7856.45

Sundry debtors
Cash & Bank Balance
Other Current assets
Loans & Advance
Total

690.77
0.31
12892.29
25238.67

627.58
0.32
10095.81
23828.86

508.47

642.06

11299.87
29935.72

606983
24751.76

Current Liabilities
Provision

9981.78
2041.33

8918.73
2513.24

9842.33
1642.91

094.01
2964.65

Total

12023.11

11431.97

11486.24

10058.66

Current Ratio

2.09:1

2.08:1

2.60:1

2.46:1

Inventories

52

RATIO ANALYSIS FROM 2011 TO 2014:QUICK RATIO / ACID TEST RATIO:QUICK RATIO = QUICK ASSETS / CURRENT LIABILITIES
QUICK ASSETS = CURRENT ASSETS INVENTORY

Particulars

2011

2012

2013

2014

Quick assets

15358.91

13061.36

18769.43

14568.31

Current liabilities

12023.11

11431.97

11486.24

10058.66

Quick ratio

1.27:1

1.14:1

1.63:1

1.48:1

Interpretation
The companies quick ratio was sound enough since 2011 but
latter in the year 2012 it was decreased to 1.14:1 and in 2011 it was
further increased and again reduced in 2012 it means that companies
liquidity position was good in comparison to 2010 .the standard ratios is
1:1, the present ratio is 2012is 1.45:1 it is ideal, if it is too high the crash
balance may be idle and if it low there will be no purchase. The quick
ratio in 2012 was further increased when it is compared with 2011. This is

53

because of the change in inventory in 2011-12 which has decreased by

398.79 lakhs but as compared to 2011-2012increase in too less and
increase in all other assets and current liabilities is high. When compared
to assets made quick ratio to increase further. The ratio has decreased in
2012 due to decrease in inventories.

Creditors Turn over Ratio

Particulars
Raw material consumed
(+) Closing stock
(-) Opening stock
Credit purchases
Average creditors
Creditors turnover ratio
Collection period (days)

2011
22369.59
3028.50
2238.61
23159.48
5681.89
4.07 times
90 days

2012
28098.16
2546.68
3028.50
27616.34
6756.13
4.08 times
89 days

2013
34943.95
3229.70
2546.68
35620.97
9224.56
3.86 times
95 days

2014
34198.49
3726.32
3229.70
34695.11
7648.87
4.54 times
80 days

Working Notes
Creditor turnover ratio = Net worth credit purchases/Average creditors
Collection period

= 365 days/Creditors turnover ratio

Interpretation
Due to better bargaining raw material purchases and tamely cash
flows has led to decrease in creditors out standing days. Efficiency in
purchasing by availing cash discounts due to proper planning of
54

purchases with respect tot the funds flows. As a result there is a reduction
in credit collection period, which in turn reduces the cost of production
by purchasing raw materials at competitive prices.

Ratio analysis from 2011 to 2014

Inventory/stock turnover ratio

Particulars
Sales
Government Subsidies
Net sales
(-)Gross sales
Cost of goods sold
Average Inventory
Inventory Turnover ratio
Inventory collection ratio

2011
34533.83
13376.74
47910.55
9666.00
38244.55
9296.11
4.11:1
89 days

2012
41359.72
18998.90
60358.62
10381.00
4997.62
10323.60
4.84:1
75 days

2013
42746.07
17133.17
5987.24
10649.00
49230.24
10966.89
4.48:1
81 days

2014
47752.20
17307.97
65060.17
7391.06
57669.11
5912.65
9.75:1
37 days

Working Notes
Inventory Turnover ratio = Cash of goods sold / Average Inventory
Inventory collection period = 365 days / Inventory Turnover ratio
INTERPRETATION
The ratio of the company is in 2012 was better when compared
to 2011, the reason behind this being the increase in cost oaf goods sold
as well as average inventory. Again in 2013 the ratio declined due to
decrease in cost of goods sold. There is an increase in ratio due to
increase in raw material holding days.

55

Ratio analysis from 2011 to 2014

Debtors turnover ratio
PARTICULARS
Sales
Govt. Subsidies
Net sales
Average debtors
Debtor turnover Ratio
Debtor collection period

2011
34533.53
13376.72
47910.55
1333.68
35.92 times
10 days

2012
41359.72
18998.90
60358.62
2056.59
29.34 times
12 days

2013
42746.07
1733.17
59879.24
4013.37
12.97 times
28 days

2014
47752.20
17307.97
65060.17
7353.02
8.4 times
43 days

Working Notes
Debtors Turn over ratio = Net credit sales / Average debtors
Debtors collection period = 365 days/ Debtors turnover ratio
INTERPRETATION
The company initially maintained an ideal ratio of (35.92 in the
year 2012bet coming to late periods the ratio was decreased more then the
standard ratio.

In the year 2013 the average collection period is

considered as bad in next four years he collection period was really good
in 2011 followed by 2014 Since there is a request peruse of pushing
product into the market the debtors are increased compared to the last
year. Fertilizers are basically of two types one organic and the other is
chemical. The 3 types of nutrients required for proper growth of plant are
N.P. and K. It is estimated that India at present needs a minimum of
6,000,000 tones of N per year

2,340,000 tones of P2O5 Per and

1,310,000 tones about 50% of out requirement and the reminder is being
imported from the countries. Fertilizers are classified.

56

Straight Fertilizers
Complex or compound Fertilizers
Mixed Fertilizers
The humble beginning of the India Fertilizer Industry could

be

traced to 1906. When E.I.D. parry limited entered the scene of the first
fertilizer factory in India at Ranipet TamilNadu the next to enter the scene
was Dharmasi Morarji Chemical Company. This established a factory in
1924 at Ambernath in 1946 At Delhi. Coromandel fertilizer limited was
established in the year 1964 at Visakhapatnam near Sriharipuram. It is a
private sector company jointly promoted by M/s international Minerals
and chemical corporations. U.S.A and Madras based Murugappa Group.
The company scared with an initial capital investment of Rs.50 Cores.
The financial Assistance to the company was provided by EXIM bank of
Washington U.S. and Industrial Development Bank of India. The plant
started is production from December 1967. The plant is situated in an
area at a distance of 5km. From the harbor. The site is leased from
Visakhapatnam port t rust for 50 years with renewal options

57

Chapter-5
Summary and suggestions
Bibliography

\
SUMMARY :
Fertilizers are of immense value to mankind. They help the growth
of agricultural produce. India is primarily an agricultural or an agro
based country. Fertilizers may be defined as any material organic or
inorganic material or natural or Synthetic which supplies one or more of
58

the chemical required for plant growth. Fertilizers are basically of two
types one organic and the other is chemical. The 3 types of nutrients
required for proper growth of plant are N, P, and K. It is estimated that
India at present needs a minimum of 6,000,000 tones of N per year,
2,340,000 tones of P2O5
out

per year and 1,310,0000 tones about 50% of

requirements and the reminder is being imported from other

countries.
Fertilizers are Classified
1. Straight Fertilizers
2. Complex or Compound Fertilizers
3. Mixed Fertilizers
The humble beginning of the Indian Fertilizer Industry could be traced
to 1906. When E.I.D. Party Limited

entered the scene of the first

fertilizer factory in India at Ranipet Tamil Nadu The next to enter the
scene was Dhamasi Morarji chemical company which established a
factory in 1924 at Ambarnath in Maharastra followed by Delhi cloth Mill
which put a factory in 1946 at Delhi.
Coromandel Fertilizers Limited was established in the year 1964 at
Visakhapatnam near Shriharipuram.
jointly

promoted

by

M/s

It has a private sector company

international

minerals

and

chemical

corporations. U.S.A. and Madras based Murugappa group. The company

started with an initial capital investment of Rs.50 Cores. EXIM Bank of
Washington provided the financial assistance to the company. U.S. and
industrial Development Bank of India. The plant started its production
from December 1967.
The plant is situated in an area of 500 area at a distance of 5 km
from the harbors. The site is leased from Visakhapatnam port trust for 50
years with renewal options. Coromandel has paid keen concern towards
environment and other pollution control measures. Coromandel has won
59

many national and international wards in the area of productio9n. Safety

& environment. There are two concept of working capital. They are
Gross concept and Net concept The Gross working capital concept
focuses attention on two aspects of current assets management.
a) Optimum investment in current assets and
b) Financing of current assets
The net concept focuses attention on two aspects of current assets
and current liabilities management. It indicated the liquidity position of
the firm and Suggests the extent to which working capital needs may be
finished by permanent sources of funds. Coromandel is maintaining good
working capital turnover usually any firm tries to decrease Length of its
operating cycle. Even Coromandel Fertilizer Limited has made successful
attempting to reduce its operating cycle. It was successful in the year
2012 and 2014 But failed in the year 2011and 2012. The increase in
operating cycle in the year 2011 by 17 and 14 days increased in raw
material consumption period.

SUGGESTIONS:

60

1. It is found that expenditure on major assets is showing increasing

trends. It is there fore suggested to introduce cost control system.
And this is possible by purchasing bank material from supplier.
2. The company should try to reduce its finished goods conversion
period. This is possible if there is co-ordination between chains of
operating cycle.
3. The debtors credit period has to be reduced in order to reduce your
working capital requirement.

Thereby reducing the working

capital cost. The company credit period is 45 to 60 days. If it

reduces the period the credit will be reduced.
4. Since the company has a very good brand name, and its has wide
infrastructure in importing raw materials, it should encase these
strength s in doing more in trading activities.
5. The overall performance of the company is in a better position.
The company should maintain this level to stand in competition by
efficient managerial performance.
6. The company needs to improve current ratio of the firm in order to
acquire standards norm of current ratio 2:1.
7. The company needs to reduce the cost of production by reducing
carrying costs and other costs associated with inventory.
8. The company has experienced manpower in technical and I.T
fields. Undertaking technical consultancy jobs outside can use the
services of these experienced people. These by increasing the
sources of income for the company

FINDINGS:

61

 Some of the factors, which are affecting Working Capital like

fluctuation in Business, Credit policy, business nature, availability
of price etc., are affecting the companys Working capital.
Coromandel is maintaining an ideal current ratio from the last four
years.
Companys Inventory Turnover ratio is increased when compared
to the past years.
Company is maintaining good proportion of inventories in Gross
Working Capital.
Coromandel Fertilizers Limited using First in First out (FIFO)
method for Raw material.

CONCLUSION:

62

In this study I try to evaluate the working capital and Inventory,

Management

practices

of

Coromandel

Fertilizers

Limited,

In

Visakhapatnam I issued two approaches in this study. They are:

Observing recording and critical examination of the exist in
inventory Management practices.
Calculation of financial ratios.
The observed Inventory management practices are found to be
satisfactory in Coromandel Fertilizers Limited.

In ratio analysis the

inventory turnover ratio is sturdily Incurring from the year 2011-2014

assets proportion to award the liquidity problem. The working capital
turnover and proportion is good in the Coromandel Fertilizers Limited,
Visakhapatnam.

BIBLIOGRAPHY
63

BOOKS:
HAND BOOKOFINANCIAL MANAGEMENT: Alexander
Hamilton Institute, U.S.A. Indian Reprint 1998.
VAN HOME

: Financial Management and policy, prentice

Hall

of Indian Private Limited, New Delhi,1998.

SHASHI.K.GUPTA, R.K.SHARMA
Theory and practice,

: Financial Management,

prentice Hall of Indian Private Limited,

New Delhi 2000.

BHALLA .V.K

: working capital management, prentice Hall of

Indian Private Limited, New Delhi, 1998.

GUPTA.S.P: Management Accounting: prentice Hall of Indian
Private Limited, New Delhi 1998.
JOURNALS AND PERIODICALS:
Finance Index. Quarterly Journal of Indian Institute of
Delhi.
India Today (Magazine)
The Hindu (News Paper)
The Economic Times (News paper)
Business Line (News Paper)

64

Finance.