A STUDY ON WORKING CAPITAL MANAGEMENT

IN CHITTOOR CO- OPERATIVE SUGARS LTD,.

CHITTOOR

Summer training report submitted to the SRI KRISHNADEVARAYA

UNIVERSITY ANANTAPUR
For the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

Submitted by

RAGHAVENDRA YADAV.K.M
(Reg. No. 90340042)
Under the Supervision and Guidance of
Mr. V.VEERANANDA .MBA
Lecturer

MASTER OF BUSINESS ADMINISTATION

ANANTAPUR INSTITUTE OF
TECHNOLOGY AND SCIENCE
ANANTAPUR – 515001
JULY 2010

1
 BONAFIDE CERTIFICATE

This is to certify that the summer training report, entitled

‘WORKING CAPITAL MANAGEMENT ON CHITTOOR CO-
OPERATIVE SUGARS LTD,.’, submitted to the Sri
Krishnadevaraya University Anantapur in Partial fulfillment of the
requirements for the award of the Degree of MASTER OF
BUSINESS ADMINISTRATION is a record of original research
work done by ‘RAGHAVENDRA YADAV.K.M’, during the period
MAY 2010 to JUNE 2010 of his/her study in the ‘MASTER OF
BUSINESS ADMINISTATION’ at ‘ANANTAPUR INSTITUTE OF
TECHNOLOGY AND SCIENCE’, ‘ANANTAPUR’, under the
supervision and guidance of ‘Mr. V.VEERANANDA ’ and the
training report has not formed the basis for the award of any
Degree / Diploma / Associate ship / Fellowship or other similar
title to any candidate of any University.

Faculty Guide Director / HOD

Vivavoce examination held on: ______________________.

Internal Examiner External Examiner

Date :
Place :

2
 DECLARATION

I, ‘RAGHAVENDRA YADAV.K.M’ hereby declare that the

summer training report, entitled ‘WORKING CAPITAL
MANAGEMENT ON CHITTOOR CO-OPERATIVE SUGARS
LTD,.’, submitted to the Sri Krishnadevaraya University
Anantapur in Partial fulfillment of the requirements for the award
of the Degree of MASTER OF BUSINESS ADMINISTRATION is
a record of original and independent research work done by me
during July 2008 to August 2008 under the supervision and
guidance of , ‘Mr. V.VEERANANDA’ MBA, ‘MASTER OF
BUSINESS ADMINISTATION’, ‘ANANTAPUR INSTITUTE OF
TECHNOLOGY AND SCIENCE’, ‘ANANTAPUR’ and it has not
formed the basis for the award of any Degree / Diploma /
Associate ship / Fellowship or other similar title to any candidate
of any University.

Date : Signature of the Student

Place: (Name of the Student)

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 ACKNOWLEDGEMENTS

I am thankful to my project guide Mr. V.VEERANANDA

Department of Commerce for his valuable guidance and
patience for helping me bring this training report to its
final form.

I am very much thankful to Mr.G.Babu M.Com,

Project Guide of Chittoor co-operative Sugar Factory for
their support and advice in all the stages of the project.

I acknowledge my heart full gratitude to my parents

who are always behind me in every moment of my life.

Last but not least; I pay thanks to all my friends who

are supporting, inspiring and motivating me.

‘Name of the student’

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INTRODUCTI
ON

5
 INTRODUCTION

“Working capital “is often referred to as “lifeblood” of an organization of its

“the money required for carrying on day today activities of an organization. The

management of current assets is similar to that of fixed assets in the sense that

in both cases a firm analysis their effects on its return and risk.

The management of fixed and current assets, however, differs in three

important ways: first, in managing fixed assets, time is very important factor;

consequently, discounting and compounding techniques play a significant role in

capital budgeting and a minor one in the management of current assets. Second,

the large holding of current assets, especially cash, strengthens the firms liquidity

position (and reduce risk ness), but also reduces the overall profitability. Thus, a

risk-return trade off is involved in holding current assets. Third, levels of fixed as

well as current assets depend upon expected sales fluctuations in the short run.

Thus the firm has a greater degree of flexibility in managing current assets.

Working capital is probable the often used financial management

concepts verbally and misused practically. Independent of the nature of an

organization, its constitution and activity requires working capital. Many

organizations have failed or become sick mainly due to the mismanagement of

this “working capital”.

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 MEANING AND DEFINITION

Working capital management or administration of all aspects of working

capital, which manage the firm’s current assets and current liabilities in such a

way that a satisfactory level of working capital is maintained.

According to “smith” “working capital management is concerned with the

problem that arise in attempting to manage the current assets, current liabilities,

and the inter-relationship that exists between them”

REVIEW :

- Types of working capital

- Concept of working capital
- Need for working capital
- Importance of the working capital
- Planning of working capital needs
- Determination of working capital

The present study In Sugar factory ltd is under taken to evaluate the
working capital strategy in the organization by establishing the following
objectives

1. To determine the length of the operating cycle and working

capital required to Sugar factory ltd.

2. To study the origin and growth of Sugar factory ltd.

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 3. To know the operational efficiency of the firm.

4. To know the financial health of the firm.

5. To analysis the changes in the firm’s working capital position

6. Analysis the changes in the firm’s financial resources

TYPES OF WORKING CAPITAL:-

There are two types of working capital. They are:

I) on the basis of concept

1) Gross working capital.

2) Net working capital.

1. Gross working capital:-

Refers to the firm’s investment in current assets are the assets,

which can be concerned into and with in an accounting year (or operating cycle)

and include cash, short-term securities, debtors (accounts receivables or book

debts) bills receivable and stock (inventory)

Gross working capitals points to the arranging of funds to finance current assets.

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 2. Networking capital:-

Refers to the difference between current assets and current

liabilities. Currents liabilities are those claims of outsiders, which are expected to

nature for payment within accounting years and include creditors (accounts

payable). Bills Payable and outstanding expenses. Networking capital can be

positive or negative. A positive networking capital will arise when current assets,

exceed current liabilities and a negative working capital will arise when current

liabilities are in excess of current assets.

II) On the basis of time

1) Permanent/fixed/fluctuating working capital

2) Temporary working capital

1) Permanent working capital:-

The need for current assets arises because of the operating

cycle. The operating cycle is a continuous process and therefore, the need for

the current assets is felt constantly. But the magnitude of current assets needed

is not always a minimum level of current assets, which is continuously required

by the firm to carry on its business operations. This minimum level of current

assets is referred to as permanent or fixed working capital.

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 EXAMPLE: - Every firm has to maintain a minimum level of raw

materials, work-in-progress, 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 due to the increase in

current assets.

Temporary
Or
Fluctuating
Permanent

2. Temporary working capital:-

Depending upon the changes in production and sales, the need for

working capital over and above permanent working capital, will have in be

maintained to support the peak proceeds of sale and investment in receive may

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 also increase during such periods. On the other hand, investment in raw

material, working in progress and finished goods will fall if the market is slack.

The extra working capital needed to support the changing production and

sales activities is called fluctuating, or variable or temporary working capital. The

firm to meet liquidity measurement that will last only temporarily creates

temporary working capital.

Temporary
Or
Fluctuating
Permanent

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 IMPORTANCE OF WORKING CAPITAL

Working capital is referred to be the lifeblood and never center of

business working capital is a essential to maintain the smooth
functioning of a business as blood circulation in a hymen body. No
business can run successfully without an adequate amount of working
capital. The main advantaging of maintaining adequate amount of
working capital 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 creating and
maintaining goodwill.

3 Easy loans: A concern having adequate working capital,

high solvency and good credit standing can arrange loans from
banks and others on easy and favorable terms.

4 Cash discounts: Adequate working capital also enables a

concern to avail cash discount on the purchases and hence it
reduces cuss’s

5 Regular supply of raw materials: Sufficient working

capital ensures regular supply of raw materials and continuous
production.
Regular payments of salaries, wages and other day-to-day
commitments:

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 A company which has amply working capital can regular
payment of salaries, wages and other day to day commitments
which raises the moral of its employees, increases their efficiency,
reduces wastages and costs and enhances production and profits.

6 Exploitation of favorable market conditions: The

concerns with adequate working capital only can exploit favorable
market conditions such as purchasing its requirements in bulk
when the prices are lower.
7 Ability to face crisis: Adequate working capital enables
a concept to face business crisis in emergencies.

8 Quick and regular return on investments: Every

investor wants a quick and regular return on his investments.
Sufficiency of working capital enables a concern to pay quick and
regular dividends to its investors and there may not be much
pressure to plough back profits. This gains the confidence of its
investors and creates a favorable market to raise additional funds in
the future.

9 High morale: Adequacy of working capital creates an

environment of security, confidence and high morale and creates
overall efficiency in a business. Every business concern should have
adequate working capital to run its business operations. It should
have neither redundant excess working capital nor inadequate
shortage of working capital. Both, excess as well as short working
capital positions are bad for any business. However, our of the two, it
is the inadequacy of working capital, which is more dangerous from
the point of view of the firm.

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PLANNING OF WORKING CAPITAL NEEDS

When we plan the needs of working capital, we have to consider the

factors which cause for changes in the positions of working capital. Such
factors are:

1 Changes in the level of sales and/or operating expenses.

2 Policy changes and
3 Technological changes
All the above mentioned actors will result in the requirements and
also determination of working capital.

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VARIOUS NEEDS OF WORKING CAPITAL IS AS FOLLOWS:-
1. To pay wages and salary.
2. It helps to the purchase of raw materials, components and spares.
3. It helps to incur day-to-day- expenses and overhead costs such as
fuel, power, and office expenses etc.
4. It also to meet the selling cost as packing, advertising etc.
5. It provides credit facilities to the customer.
6. It helps to maintain the inventories of raw material, working progress,
stores and spares and finished stock.

DETERMINATES OF WORKING CAPITAL OR FACTORS AFECTING

The working capital requirement of a firm affected by a number of factors.
The various factors, which affect the working capital requirement of a concern,
are as follows:

Internal factors External factors

Nature of business
Business
fluctuations
Product cycle Technological
Developments
Business cycle
Transport and
Credit policy Communication
Development
Scale of production Import Policy

Growth and Expansion of business Taxation policy

Operating efficiency

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 INTERNAL FACTORS
1. NATURE OF BUSINESS:-
The working capital requirements of enterprises are basically

related to the conduct of business. Public utilities have certain features which

have a bearing on their working capital needs. They do not maintain big

inventories arid have, therefore, probably the least requirement of working

capital. On the other hand trading and manufacturing concern required large

amount of working capital to maintain a sufficient amount of cash inventories and

book debts.

2. PRODUCTION CYCLE: -

The term production or manufacturing cycle refers to the span

between the procurement of raw materials and completion of the manufacturing

process leading to the production of finished goods. In other words, there is a

some time gap before raw materials become finished goods. Therefore the

longer the time span, the larger will be the working capital needed and vice

versa.

3.BUSINESS CYCLE:-
The business fluctuations influence the size of working capital mainly

during updated phase when boom conditions prevail, the need for working capital

is likely to cover the lag between increases sales and receipt of cash as well as

invest in plant and machinery to meet the increased demand. The down swing an

opposite effect on the level of working capital requirement.

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 4.CREDIT POLICY:-

The credit policy relating to sales and purchases also affects the working

capital. The credit policy in influences the requirements of working capital in two

ways:

Though credit terms granted by the firm to its customers/buyers of goods

credit terms available to the firm from its creditors. A firm, which more credit

sales and cash purchase required high working capital than a firm having more

credit purchase and cash sales.

5.SCALE OF PRODUCTION:-

A concern carrying on activities on a small scale of needs less working

capital. On the other hand a concern undertaking activities on large scale

Needs large amount of working capital.6. GROWTH AND EXPANSION OF

BUSINESS:-

The growth and expansion of business also affect the working capital

requirement. When there is growth and expansion in the business of a firm the

working capital needs of the firm will also increase.

7.OPERTAING EFFICIENCY:-

The operating efficiency of the management is also important determinant

of the level of working capital. A firm enjoying operating efficiency can eliminate

wastage and use its resources efficiently and thereby reduce its working capital

needs considerably.

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 EXTERNAL FACTORS

1. BUSINESS FLUCTUATIONS:-

Business enterprises usually experiences fluctuations in

demand for their products and services because of changes in economic

conditions. In view of this, working capital requirements of these enterprises are

affected. Thus, in the event of economic prosperity, general demand of the

goods and services tends to shoot up. To cope with increased demand and

consequently increased production, the firm will require additional working

capital.

2. TECHNOLOGICAL DEVELOPMENTS:-

Technological developments in the area of production can

have sharp effects on the need for working capital. If a firm switches over to new

manufacturing process and installs new equipments with which it is able to cut

period involved in converting raw materials into finished goods, permanent

working capital requirements of the firm will decrease.

3. TRANSPORT AND COMMUNICATION DEVELOPMENTS:-

Where the means of transport and communication in a

country are not well developed, industries may need additional funds to maintain

big inventory of raw materials and other accessories which would otherwise not

be needed where the transport and communications systems are highly

developed.

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 4. IMPORT POLICY:-

Import policy of the government may also have its bearing

on the levels of working capital of the enterprises since they have to arrange

funds for importing goods at specified times.

5. TAXATION POLICY:-

Working capital needs of business enterprises are affected

sharply by taxation policy of the government. In the event of regressive taxation

policy of the government, as it exists today in India, imposing heavy tax burdens

on business enterprises leaves very little profits for distribution and retention

purposes.

SOURCES OF WORKING CAPITAL:-

Among the various sources available for financing working capital needs finance

manager has to select the best suitable source depending on working capital

need of company

SOURCES OF DATA ANALYSIS

The study required for two ways:

 Primary data

 secondary data

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PRIMARY DATA:-

Primary data has been collected by interviewing certain executives who were

chosen on the basis of their in depth knowledge and experience in the company.

The interviews in nature are under to gain as much information as possible.

SECONDARY DATA:-

Secondary data was obtained from the past records file and reports of the

organization also from other financial statements.

TOOLS FOR ANALYSIS OF WORKING CAPITAL:-

The quantum of working capital as well as its financing pattern is subject

to constant monitoring and reviews by the financial manager. There are different

analytical tools which can help a financial manager in monitoring in viewing and

controlling the working capital. The popularly used tools are:

1. Schedule of changes in working capital.

2. Working capital ratios.

LIMITATION OF THE STUDY:-

 It is based on the data supplied by the factory personnel.

 It is based on consultation, decisions of all concerned officials.

 Since only 5 years data is used for the analysis the out come may

Not be generalized.

 Due to limitations of time, it was unable to go far a depth study into

The subject.

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 SOURCES OF WORKING CAPITAL

Long term sources Short term sources

Internal sources External sources

Bank
With drawing the
Depreciation fund Trade credit

Using the renouncement Bills of

For taxation exchange

Postponement of payment Govt.

Accrued expenses assistance
Public deposits

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 OBJECTIVE OF THE STUDY

• To analysis the solvency position of “The Chittoor Co-

operative sugars” By using Ratio analysis
• To know whether the firm has meet its obligations or not.
• To identify the problems regarding to working capital
management in Chittoor co-operative sugars Ltd and give possible
suggestion for better management.

This study maianly focused to examine the short-time financial viability of

chittoor co-operative sugars as stated below:

 To study how best the working capital is utilized in the company.

 To study the effectiveness of credit management of the company.

 To study the short-term liquidity positions of company.

 To understand working capital management of a company.

 To study the changes in working capital position of the company.

 To suggest necessary methods by which future improvement may be made in

its management of working capital.

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 NEED FOR WORKING CAPITAL

In carrying the study both primary and secondary data collected in a phased
manner as follows:

A. Initially preliminary discussions with G.M. sales manager and accounts

officer carried on.
B. The information about profit and loss reports
C. The ratios are calculated by studying balance sheet and the necessary
information required for the study was being obtained from fruitful
interaction of the researched with the employees of the organization.
D. And some information gathered from secondary data and some of the
financial books.

Different industries have different optimum working capital

profiles, reflecting their methods of doing business and what they are
selling.

• Businesses with a lot of cash sales and few credit sales should
have minimum trade debtors. Supermarkets are good examples of
such businesses;
• Businesses that exist to trade in completed products will only
have to maintain stocks of raw materials and work-in-progress.
• Some finished goods, notably foodstuffs, have to be sold with in a
limited period because of their perishable nature.

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 • Larger companies may be able to use their bargaining strength as
customers to obtain more favorable, extended credit terms from
suppliers. By contrast smaller companies particularly those that
have recently started trading (and do not have a track record of
credit worthiness) may be required to their suppliers immediately.
• Some businesses will receive their monies at certain of the year,
although they may insure expenses throughout the year at the
firefly consistent level. This is often known as “Seasonality” of
cash flow. For example travel agents have peak sales in the
weeks immediately following Christmas. Working capital needs
also fluctuate during the year.

The amount of funds tied up in working capital would not

typically be a constant figure through out the year.

Only in the most unusual of businesses would their be a

constant need for working capital funding. For most businesses there
would be weekly fluctuations.
Many businesses operate in industries that have seasonal
changes in demand. This means that sales, stock, debtors, etc. would
be at higher levels at some predictable times of the year then at others.
In principle, the working capital need can be separated into two parts:

• A fixed part, and

• A fluctuating part

The fixed part is probably defined in amount as the

minimum working capital requirement for the year. It is widely

24
advocated that the firm should be founded in the way show in the
diagram below.

The more permanent needs (fixed assets and the fixed

element of working capital) should be financed from fairly permanent
sources (e.g. equity and loan stocks) the fluctuating element should be
financed from a short- term source (e.g. a bank overdraft). Which can
be drawn on and repaid easily and at short notice.

, debtors are increased. They will eventually pay, so that cash will be
injected into the firm.

Each of the areas- stocks (raw materials, work-in-progress

and finished goods), tread debtors, cash (positive or negative) and
tread creditors- can is viewed as tanks into and from which funds flow.
Working capital is clearly not the only aspect of business that affects the
amount of cash.

• The business will have to make payments to government for

taxation.
• Fixed assets will be purchased and sold.
• Lesser of fixed assets will be paid their rent
• Share holders (existing of new) may provide new funds in the form
of cash
• Some shares may be redeemed for cash
• Dividends may be paid
• Long term loan creditors (existing or new) may provide loan finance,
loan will need to be from time to time, and
• Interest obligations will have to be met by the business

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 RESEARCH DESIGN AND METHODOLOGY

The main aim of this study is to know the working

capital Management with respect to Chittoor co-operatives Sugars Ltd.,
Research is a careful investigation or enquiry through
search for new facts in any branch of knowledge.

Data Collection
The required data for this study has been collected from
secondary sources of information. This information has been gathered
from “Co-operative Sugars Ltd.,” through personal interview and
personal verification of the company reports and financial statements.

Play of Analysis

The entire working capital management in “ Co-

Operative Sugars Limited” has been analyzed in detail and the
information gathered and analyzed by using the appropriate tools such
as ratio analysis and graphs. It is a quantitative analysis of the Working
Capital Management. The study has been used to generate some of the
recommendations to the company at times of crisis.

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 SCOPE OF THE STUDY

The current study undertaken for the purpose of analyzing working

capital management of the Chittoor Co-operative sugars Limited, which

is situated at Chittoor, Andhra Pradesh.

The study concentrates on various techniques involved in maintaining

an optimum level of working capital.

GOALS OF FINANCIAL MANAGEMENT

• Maximize the value of the firm to its equity shareholders.

• Maximization of profit

• Maximization of earnings per share.

• Maximization of return on equity (defined as equity earnings/net worth)

• Maintenance of liquid assets in the firm.

• Ensuring maximum operational efficiency through planning directing and

controlling of the utilization of the funds.

• Building up of adequate reserves for financing growth

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 LIMITATION OF THE STUDY

1. Ratio analysis is one of the tools used in analyzing the

company’s performance. The limitations of ratio analysis apply
to this study.
2. The result of the study depend upon the information furnished
by the secondary source
3. The government and economic policies affecting the industry are
not taken into consideration.
4. The working capital management of “the Chittoor Co-operative
Sugars ltd” is studied only for a period of 5 years, from 2002 –
03 to 2006 –07.

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 COMPANY PROFILE

THE CHITTOOR CO-OPERATIVE SUGARS LIMITED is the first agro

based major industry in Rayalaseema area. It was first registered on 22.8.1955
under the APSCS Act. Its area of operation comprises of 192 villages in 21
mandals.factory is located along cudalore-karnool national high way NO18, 3
k.m. towards Karnool from Chittoor. It owns 85.96 Acers of land. It was first
commissioned on 18.1.1963 with a licensed and installed capacity of 1000 tones
cane crushing per a day presently factory is working at an average of 1800-2000
tones a day.
Constitution:
Election was stayed to this factoy during April 2000 From then on Wards:
The official Board nominated by The Government Consists of:
1. Chittoor collector as person-n charge.
2. Managing Director.
The Board of Chittoor Co-operative Sugar Factory Ltd., used
to meet frequently from time to time as and when required.
Annual general body meetings of the members of the society were held on
29-09-2000,29-09-2001,29-04-2002,08-09-2003 and 25-11-2003.
At present the strength of employees at various levels:
a) Permanent (non seasonal) 68
b) Seasonal permanent 94
c) Consolidate wagers (sessonal) 167
d) Daily wagers (NMR) 244
-----------------
Total no.of Employees 573

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MANAGEMENT

At present the elected board has assumed a charge on 6-4-2000. The

present
Board of directors as detailed below:-

 President 1

 Board of directors 14

 Employee director 1

There are major departments:-

 Administrative

 Engineering

 Manufacturing

 Agriculture

 Accounts &finance

PRODUCTS

 SUGAR
 MOLASSES

CAPITAL STRUCTURE

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 Original project cost was RS. 128.50 lakhs. It has been funded from

following sources:

I) Share capital from RS. Lakhs

 a)cane grower members 8.50

 b)state government 25.00
----------------------
33.50
----------------------

II) Term loans RS.Lakhs

 a)IFCI New Delhi 75.00

 b)LICI Bombay 20.00
------------
128.50

------------

III)Capital outlay
Rs. Lakhs
 Land 2.38
 Buildings 5.90
 Plant & machinery 109.34
 Other assets 5.77
 Per operative expences 4.00
 Vehicles 0.96
-----------
128.35

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 PRODUCT PROFILE

Sugar Cane

Sugar cane cultivated by the growers or promising varieties in terms of sugar

content and yield. Cultivation techniques maturity of (decided by the cane

personnel) harvested and supplied to the factory in trucks fresh less tops and

roots. Trucks are weighed with cane on Weigh Bridge and unloaded on the

moving cane carrier. Mechanical un-loaders do unloading. Again empty truck is

weighed to assertion in the weight of cane unloaded.

Millings
Provided with a tandem of four mills land each mill is provided with three

rollers. On the cane carried for cane preparation cane knives driven by motor

and followed by a Fibrizer driven steam turbine are provided to chop the cane

into small pieces and fiber to make the milling move efficient and to extract

maximum juice from the cane. To make this process more effective assured

quantity of water is added to Mills. After extraction of juices the waste materials

is called bagasse.

Boilers

Provided with 2 nos. of boilers of each water evaporation capacity of 25 Mts.

Per hour steam at 300 p sig (21 Kgs). Steam is used for driving the Fibrizer,

32
mills by turbines and generator power, by steam turbine alternator. For boilers

main fuel is bagasse. Surplus bagasse is sold to paper industries.

Clarification

Juice extracted form sugar cane in mills is weighted in automatic weighing

scale. It is preheated in juice heater to 50-750. Then it is limited and sulphieted

simultaneously. Juices will be coagulated form and will not settle. To induce

settings cheaply and abundantly available positive is to be added i.e. namely

time in slurry form, also called milk of lime, by using addition of such alkaline

medium is again brought down to natural pH medium by bubo ling of sulphur

dioxide gas. This gas is produced in sulphur burners and bubbled in preheated

juices. By the aid of compressed air passing through sulphur burners. As such

a juice is kept at slightly alkaline medium say 701 to 7.2. Then this treated juice

is heated again in other row of juices heaters to 102 C and to send to graver.

Graver is a big tank where settling is taking place. Continuously, such juices is

sent and drawn from it with the detention time of juices of about 330 hours, in ‘u’

tube principles.

Evaporation
In graver juices will be well settled and will have a golden yellow color of

7.0pH (Neutral). This clear juice will contain more than 85% of water and the

remaining soiled (Sugar Maximum + a little sugar). In evaporators about 75% of

water is removed and made syrup. This consists of one vapor cell and is

33
followed by four bodies. Boiling is done under vacuum using exhaust stream

from turbines tubes emerging out through tube plates and above this calandria

vapor space or shell. Steam circulated through calandreia and heating the outer

point of huices is brought well below its origin boiling point. In the vapor cell

alone exhaust steam is admitted into the calandria produced vapor to its

subsequent body and soon. Vacuum is helping is drawing vapor from the

preceding body and this boiling is called multi effect boiling and maximum fuel

economy. Thus when juices is emerges out from last body it will be a syrup,

losing about 75% of water.

Vacuum filter

Mud settled in graver is taken in rotary filters to extract juices from it and

waste is called filter cake sent out and used as manure. Extracted juices is again

mixed juices from mills after weighment tank and takes the path of process along

with mills juices in acyclic form.

Sulphitation and syrup

The syrup from evaporator last body is again sulphited to beach to get white

sugar and sent to pan supply tanks.

Pans
Pan bodies are similar to evaporators in construction with different design.
Materials are invidiously boiled in four numbers under vacuum. When the syrup
is further boil in pans. When the super saturation point reaches crystals come
out its is again boiled up by addition kept in pan and the rest 2 portions sent to

34
receivers. Then again pan is boiled. This process will help growth or crystal as
desired by us.
Three boiling are bone A, B, C. These are called massecuites. All these
mass cuties (sugar + molasses) are purged in centrifugals respectively sugar and
molasses are separated. Pans are boiler on vapor produced form vapor cell.

Centrifugals

Such made massecuties are dropped in crystallizers (a storage tank with

stirring mechanism). From crystallizes taken into centrifugal machines and sugar

and molasses separator. Centrifugal machines contain a basket fitted with mesh

and screen of small opening and will not allow sugar crystals to pass through but

only molasses. When one machine changed with massecuities and spun at 150

RPM molasses gets out and collects in a tank. Sugar remains in basket washed

and dried by steam. Then dropped on hopper (to and or) shaking medium sugar

will get dry when flowing and galls on sugar grader (fitted with meshes) screened

and bagged. Bags weighed on P.O scales of 100kgs. And sent to go down.

Molasses got from a massecuites; sugar and molasses form B massescuties

and sugar form c massecuites (final) are again boiled in pans in cyclic manner.

Molasses got fro c massecuites called final molasses is a waste and sent to

storage tanks (Raw material for alcohol industries). Sugar is graded in

accordance and large i.e., S-29, S-30. As the demand in the market is for S-30 it

is made in the fact.

35
 INDUSTRY PROFILE

Sugar cane is one of the important crops for the Indian farmer. Sugar and
Jiggery are the main products that we get from Sugarcane. Other products such
as Biogases for industrial use, Molasses for distillery, filter cake, Mud as an
organic manure and green leaves with tops for cattle feed are also available as
by products because of it’s multi uses Sugarcane has played crucial role in
Indian economy with rs.20000 cores turnover and width 450 mills providing
assistance to 45 million sugar cane farmers and 2 million Sugarcane farmers and
2 million workmen directly and indirectly.
In A.P. sugar industry is an important Agro-based industry, occupying the
second position next to text tile industry. The annual cultivated area is about
1.99 lack hectares with a yield of 149.45 lacks of tones during 96-97. At present,
there are 36 sugar factories in the state and 50% of them are in co-operative
sector. The co-operative sugar units in the states have been suffering due to
lack of adequate cane irrigation facilities, working capital, by-product utilization,
excessive employment etc.,.
The sugar industries which provide direct employment to about 3 lacks
persons of sugar cane followed by Brazil & Cuba. Sugar cane existed in India
from 3000 B.C. The centre place of origin of sugar cane regarded as
Northeastern Indian, from sugar cane seems to have been to China and other
places by early travelers and no man’s between 1800 and 1700 B.C. later. It was
penetrated to Philippines, Jewa and other places. Actually the word sugar
derived from a Sanskrit word “shakra”.
India was the world’s largest producer of sugar cane occupies a very pride
place in the world. In India, the cultivation of sugar cane is 10,000 miles tones.
The average yield, being 56 tones per acre of total cultivating land is occupied by

36
sugar cane cultivation. Sugarcane is grown in almost all part of India, except in
colder regions and extreme North Jammu Kashmir, Himachal Pradesh.

Area wise distribution of sugar industry in A.P.

S.No Sector No. of Costal Area Rayalaseema Telangana

industries
1 Co-operative 18 12 4 2
2 Public sector 7 1 1 5
3 Private sector 11 8 2 1
Total 36 21 7 8

The list of Co-operative Sugar factories in A.P.

1. The Chittoor Co-operative sugars ltd, Chittoor.

2. The Chodavaram Co-operative sugars ltd, Chodavaram.
3. The Anakapalle Co-operative sugars ltd, Anakapalle.
4. The Etikuppaka Co-operative agricultural of industrial society ltd, Ethikuppaka.
5. Sir Vijayarama Gajapathi Co-operative sugars ltd.
6. The Amadavalasa Co-operative agricultural industrial society ltd, Srikakulam.
7. The West Godavari Co-operative sugars ltd, Eluru.
8. Palakollu Co-operative agricultural & industrial society ltd, Palakollu.
9. The Thandara Co-operative sugars ltd, Visakapatnam.
10. Nizamabad Co-operative sugars ltd, Nizamabad.
11. Sir Venkateswara Cooperative sugars ltd, Renigunta.
12. The Cuddapah Co-operative sugars ltd, Chennur.
13. The Nandyal Co-operative sugars ltd, Ponnapuram.
14. The Kovur Co-operative sugars ltd, Nellore.
15. Nagarjuna Co-operative sugars mills ltd, Gurzala.
Nampaneni Venkata Rao Co-operative sugars ltd, Hanuman Junction

37
 ANALYSIS AND INTERPRETATION

This is an attempt to analyze and interpret the data gathered from

the respondents. The analysis has been made to identify the
effectiveness of the financial position of the CCSL - The Chittoor
Cooperative Sugars ltd. Each aspect has been supplemented with a
table, which has been analyzed in order to make the interpretation more
clear.

From the collected data, the researcher tabulates the data and
develops frequency distribution to analyze the data to make findings
related to the data. The researcher also applied some statistical
techniques. At last, the researcher presents the findings to the relevant
party’s. He should present major findings that are useful to the
executives in making final decision.

In this research, the researcher has identified various percentages

and these percentages are represented in the form of pictorial form by
away of Bar Diagrams in order to have a better Quality.

DETERMINANTS OF WORKING CAPITAL

38
 A firm should plan its operations in such a way that it should have
neither too much nor too little working capital. The total working capital
requirement is determined by a wide variety of factors. It should be
however, noted that these genera, the following factors are involved in
a proper assessment of the quantum of working capital required.

1 Nature and size of business

2 Manufacturing cycle
3 Sales growths
4 Demand conditions
5 Production policies
6 Price level changes

Methods:

1. PERCENTAGE OF SALES METHOD:-

In this method, level of working capital requirements is decided on the

basis of past experience. The past relationship between sales and working

capital is taken as a base for determining the size of working capital

requirements for future. It is, however, presumed that the relationship between

sales and working capital that has existed in the past has been stable. This may

be explained with the help of the following illustration.

Percentage of sales method is a simple and easily understood method

and practically used for ascertaining short-term changes in working capital in

39
future. However this method lacks reliability inasmuch as its basic assumption of

linear relationship between sales and working capital does not hold true in all the

cases. As such, this method cannot be recommended for universal application.

2. REGRESSION ANALYSIS METHOD:-

This is a statistical method of determining working capital requirements by

establishing the average relationship between sales and working capital and its

various components in the past years. In this regard the method of least squares

is employed and the relationship between sales and working capital is expressed

by the equation:

Y=a+bx

The values of ‘a’ and ‘b’ is obtained by the solution of simultaneous linear

equations given as under:

Where a=fixed component

b=variable component

x=sales

y=inventory

n=number of observation

3. OPERATING CYCLE APPROACH:-

40
 Operating cycle refers to the length of time necessary to complete the

following cycle of events.

Conversion of cash into inventory.

Conversion of inventory into receivable

Conversion of receivable into cash

If the operating cycle is length than the working capital requirement will be

more on the other hands, if the operating cycle is shorter than the working capital

requirement will be less.

According to this approach, size of working capital requirements of a firm

is determined by multiplying the duration of the operating cycle by cost of

operations. The duration of the operating cycle may be found with the help of the

following formula:

O=R + W + F + A – P

Where, O=Duration of operating cycle

R=Duration of raw materials

W=Duration of work-in-process

F=Duration of finished goods

A=Duration of accounts receivable

P=Duration of accounts payable

41
Duration of raw materials:-

It reflects the number of days for which

raw materials remain in inventory before they are issued for production. The

following formula can be used to determine duration of raw materials.

Average stock of raw materials

R = ----------------------------------------------------

Per day consumption of raw materials

Duration of the work-in-process:-

It denotes the number of days required in the work-in-process

stage. It may be ascertained with the help of the following formula:

Average work-in-process

W = ------------------------------------

Average production per day

Duration of finished goods:-

It refers to the number of days for which finished goods remain in

inventory before they are sold. This can be computed by the following formula:

Average finished goods inventory

F = ----------------------------------------------

Per day sale of goods

Duration of the accounts receivable:-

42
 It represents the number of days required to collect the accounts

receivable. This may be calculated as under:

Average book debts

A = ---------------------------------------------

Average credit sales per day

Duration of accounts payable:-

It refers to the number of days for which the suppliers of raw

materials offer credit. This may be measured with the help of the following

formula:

43
OPERATINGCYCLES:-

Sundry
Cash
Debtors

Finished Raw materials

Goods Labour Overhead

Work-in-
Progress

44
 CRETERIA FOR JUDGING THE EFFICIENCY OF

WORKING CAPITAL

MANAGEMENT:-

The efficiency of working capital management can be judged through accounting

ratios. The important accounting ratio’s that could be used for judging the

efficiency of working capital management are:

 Current ratio

 Quick ratio

 Inventory turnover ratio

 Current assets turnover ratio

 Cash position ratio

 Working capital turnover ratio.

45
 SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR 2002-03

Effect of working capital

PARTICULARS 2002 2003 Increase Decrease

CURRENT ASSETS:

Cash on hand 42159.91 1283980.24 1241820.33 -------------

Balances with bank 494953.16 4095239.26 3600286.10 -------------
Interest Receivable 1826488.57 1826488.57 ------------ ------------
Closing stock 292692156.20 219662803.70 ------------ 73029352.50
Total current assets -A 295055757.80 226868511.70
LIABILITIES:
Out standing Interest 4429829.45 6094477.90 ------------ 1664648.45
Total current liabilities -B 4429829.45 6094477.90
Working Capital (A-B) 290625928.30 220774033.80
Net decrease in working 69851894.50 69851894.50

Capital
290625928.30 290625928.30 74694000.95 74694000.95

INTERPRETATION:

The net working capital requirement of the company during the year 2002

has been increased in 2003, and the net working capital of the company was

recorded RS. 22,07,74,033.80 and it was been increased to Rs. 29,06, 25,928.30

in the year 2002.

SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR 2003-04

46
 Effect of working capital

PARTICULARS 2003 2004 Increase Decrease

CURREMNT ASSETS:

Cash on hand 1283980.24 22575.20 ……… 1261405.04

Balances with bank 4095239.26 15881189.48 11785950.22 ------------

Interest Receivable 1826488.57 1826488.57 ------------ ------------

Closing stock 219662803.70 96849740.27 ------------ 122813063.40

Total current assets -A 226868511.70 114579993.50

LIABILITIES:

Out standing Interest 6094477.90 27190688.40 ------------ 21096210.50

Total current liabilities -B 6094477.90 27190688.40

Working Capital (A-B) 220774033.80 87389305.10

Net decrease in working 133384728.70 133384728.70

Capital

220774033.80 220774033.80 145170678.90 145170678.90

INTERPRETATION:

The net working capital requirement of the company during the year 2003

has been increased in 2004, and the net working capital of the company was

recorded RS. 8,73,89,305.10 and it was been increased to Rs. 22,07,74,033.80

in the year 2003.

SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR 2004-05

47
 Effect of working capital

PARTICULARS 2004 2005 Increase Decrease

CURRENT ASSETS:

Cash on hand 22575.20 1878931.06 1856355.86 -------------

Balances with bank 15881189.48 18140037.49 2258848.01 -------------
Interest Receivable 1826488.57 1826488.57 ------------ -------------
Closing stock 96849740.27 110043159.00 13193418.73 -------------
Total current assets -A 114579993.50 131888616.10
LIABILITIES:
Out standing Interest 27190688.40 40525798.40 ------------ 13335110.00
Total current liabilities -B 27190688.40 40525798.40
Working Capital (A-B) 87389305.10 91362817.70
Net Increase in working 3973512.60 3973512.60

Capital
91362817.70 91362817.70 17308622.60 17308622.60

INTERPRETATION:

The net working capital requirement of the company during the year 2005

has been increased in 2004, and the net working capital of the company was

recorded RS. 8,73,89,305.10 and it was been increased to Rs. 9,13,62,817.70 in

the year 2005.

SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR 2005-06

48
 Effect of working capital

PARTICULARS 2005 2006 Increase Decrease

CURRENT ASSETS:

Cash on hand 1878931.06 141218.80 -------------- 1737712.20

Balances with bank 18140037.49 7254943.14 -------------- 10885094.35
Interest Receivable 1826488.57 1826488.57 -------------- --------------
Closing stock 110043159.00 304641449.50 194598290.50 --------------
Total current assets -A 131888616.10 313864100.00
LIABILITIES:
Out standing Interest 40525798.40 49024988.90 -------------- 8499190.50
Total current liabilities -B 40525798.40 49024988.90
Working Capital (A-B) 91362817.70 264839111.10
Net increase in working

Capital 173476293.40 173476293.40

264839111.10 264839111.10 194598290.50 194598290.50

INTERPRETATION:

The net working capital requirement of the company during the year 2006

has been increased in 2005, and the net working capital of the company was

recorded RS. 9,13,62,817.70 and it was been increased to Rs. 26,48,39,111.10

in the year 2006.

SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR 2006-07

49
 Effect of working capital

PARTICULARS 2006 2007 Increase Decrease

CURRENT ASSETS:

Cash on hand 141218.80 95082.92 ------------ 46135.88

Balances with bank 7254943.14 17849583.41 10594640.27 ------------
Interest Receivable 1826488.57 1826488.57 ------------ ------------
Closing stock 304641449.50 281582198.30 ------------ 23059251.20
Total current assets -A 313864100.00 301353353.20
LIABILITIES:
Out standing Interest 49024988.90 46928301.64 2096687.26 ------------
Total current liabilities -B 49024988.90 46928301.64
Working Capital (A-B) 264839111.10 254425051.50
Net Decrease in working

Capital 10414059.60 10414059.60

264839111.10 264839111.10 23105387.08 23105387.08

INTERPRETATION:

The net working capital requirement of the company during the year 2006

has been increased in 2007, and the net working capital of the company was

recorded RS. 25,44,25,051.50 and it was been increased to Rs. 26,48,39,111.10

in the year 2006

RATIO ANALYSIS

Over several years scientific tools have been evolved for determine

optimum level of working capital online assessment of each of the components of

current assets for selective application of management control. Undisputedly the

ratio analysis occupies place of prime importance. Ratio’ are complied and

studied for profitability’ assessment of financial position sufficiency of working

50
capital strategies perused by the organization short term and long term solvency

liquidity etc. I would deal with some of the predominant rations more relevantly

applicable net working capital management studies.

CURRENT RATIO

Current ratio indicates ability of the company to meet the current obligation
i.e., the current assets must be sufficient to pay as and when the latter matrices.
The standard ratio is 2:1, the current ratio is calculated by using the formula:

Current assets
Current ratio = ----------------------
Current liabilities

YEAR CURRENT ASSETS CURRENT RATIO

LIABILITIES
2002-2003 23,33,30,395.13 18,90,06,552.17 1.234
2003-2004 12,09,66,623.21 14,22,10,762.18 0.850
2004-2005 14,13,26,040.41 14,78,60,117.24 0.955
2005-2006 32,30,19,288.99 20,38,85,067.19 1.584
2006-2007 31,32,95,829.13 21,93,27,902.79 1.428

51
 1.8
1.6
1.4
2006-07
1.2
RATIOS

2005-06
1
2004-05
0.8
2003-04
0.6
2002-03
0.4
0.2
0
2003 2004 2005 2006 2007
YEARS

INTERPRETATION
The current ratio is below satisfactory level of 1:58 during the
year 2002-2003 and the year 2003-2004 above the satisfactory level.
However there is a decrease during the years 2004-2005 to 2006-
2007 the decrease in the current ratio indicates bad trend of
company.

52
 QUICK RATIO

Quick ratio are acid test ratio ignores less liquidity assets like
inventory. This takes account readily available cash and other assets
which are quickly converted into cash. The standard is ratio is1:1. The general
principle of quick ratio is as follows:

Liquid Assets
Quick ratio = --------------------------------
Current liabilities

YEAR QUICK ASSETS CURRENT RATIO

LIABILITIES

2002-2003 1,36,67,591.83 18,90,06,552.17 0.072

2003-2004 2,44,16,882.94 14,22,10,762.18 0.169

2004-2005 2,83,90,812.06 14,78,60,117.24 0.192

2005-2006 1,86,38,461.57 20,38,85,067.19 0.091

2006-2007 3,39,59,496.91 21,93,27,902.79 0.154

53
 0.2
0.18
0.16
0.14 2006-07
RATIOS

0.12
2005-06
0.1
2004-05
0.08
2003-04
0.06
2002-03
0.04
0.02
0
2003 2004 2005 2006 2007
YEARS
INTERPRETATION

The Quick ratio is below satisfactory level of 0:072 during the

year 2002-2003 and the year 2003-2004 above the satisfactory level.
However there is a increase during the years 2004-2005 this year
position is 2005-2006to 2006-2007 the increase in the Quick ratio
indicates satisfy trend of company.

INVENTORY TURNOVER RATIO

54
 Turnover ratio is also known as stock velocity. This ratio is
calculated to consider the adequacy of the quantum of capital and its
institution for investing in inventory.
A firm must have reasonable stock in caparison to sales. It is
the ratio of cost of sales and average inventory of. This ratio helps
the financial managers to calculate inventory policy. This ratio reveals
the number of times finished stock is turned over during a given
accounting period. The ratio is used for measuring the profitability.
These are the various ways in which stock turnover ratio may be
calculated.

Net sales
Inventory turnover ratio = --------------------------------
Average Inventory

YEAR NETSALES AVERAGE RATIO

INVENTORY

2002-2003 20,14,86,573.36 23,41,47,889.610 0.860

2003-2004 13,05,17,436.90 13,75,97,979.610 0.948

2004-2005 9,66,54,360.90 8,31,65,010.425 1.162

2005-2006 12,37,19,616.75 10,30,03,384.815 1.201

2006-2007 36,88,53,566.89 18,47,71,625.020 1.996

55
 1.6
1.4
1.2
2006-07
RATIOS

1 2005-06
0.8 2004-05
0.6 2003-04
0.4 2002-03

0.2
0
2003 2004 2005 2006 2007

YEARS

INTERPRETATION
The inventories are decreased in 2002-2003,2003-2004 and 2004-2005,
the ratio is increases 2005-2006 and if decreases in2006-2007.

CURRENT ASSETS TURNOVER RATIO

56
 Current assets turnover ratio indicates the extent to which the investments
in current assets contribute towards sales. It comported with a previous period. It
indicates whether the investment is fixed assets has been judicious or not.

Net Sales
Current assets turnover ratio= ----------------------
Current Assets

YEAR NET SALES CURRENT RATIO

ASSETS

2002-2003 20,14,86,573.36 23,37,61,514.16 0.861

2003-2004 13,05,17,436.81 12,09,66,623.21 1.078

2004-2005 9,66,54,360.90 14,13,26,040.41 0.683

2005-2006 12,37,19,616.75 32,30,19,288.99 0.383

2006-2007 36,88,53,566.89 31,32,95,829.13 1.177

57
 1.4
1.2
1 2006-07
RATIOS

0.8 2005-06
2004-05
0.6
2003-04
0.4 2002-03
0.2
0
2003 2004 2005 2006 2007

YEARS

INTERPRETATION
The ratio is increasing continuously from 2002-2003 to 2003-2004 and
after year2004-2005 to 2006-2007 it increased. It indicates that the current
assets were used.

CASH POSITION RATIO

58
 Cash in the most liquid asset, a financial analyst may examine the ration
of cash and its equivalent to current liabilities. Trade investment or marketable
securities are equivalent of cash, therefore, they may be included in the
computation of cash position ratio.

Cash+ marketable securities

Cash Position Ratio= ---------------------------------------------
Current liabilities

YEAR CASH+MARKETA-BLE CURRENT RATIO

SECURITIES LIABILITIES

2002-2003 53,79,219.50 18,90,06,552.17 0.028

2003-2004 1,59,03,764.68 14,22,10,762.18 0.111

2004-2005 2,00,18,991.55 14,78,60,117.24 0.135

2005-2006 79,51,888.86 20,38,85,067.19 0.039

2006-2007 4,56,44,654.96 21,93,27,902.79 0.208

59
 0.25

0.2
2006-07
0.15 2005-06
RATIOS

2004-05
0.1 2003-04
2002-03
0.05

0
2003 2004 2005 2006 2007
YEARS

INTERPRETATION
The cash position ratio is inadequate as there are ups and downs during

the year. The above ratio indicates that the company is unable to quickly realize

its current liabilities it is not good enough.

WORKING CAPITAL TURNOVER RATIO

60
 Working capital of a concern is directly related to sales. The current assets
like debtors, bills receivable, cash, and stock etc., change with the increase or
decrease in sales. The working capital is taken as:

Working capital =current assets-current liabilities

This ratio indicates the velocity of the utilization of net working capital. This
ratio indicates the number of times the working capital is turned over in the
course of a year. The ratio measures the efficiency with which the working capital
is being used by a firm. A higher ratio indicates the efficient utilization of working
capital and the low ratio indicates inefficient utilization of working capital.
SALES
WORKING CAPITAL TURNOVER RATIO = -------------------------------
NET WORKING
CAPITAL

Year NETSALES NET WORKING RATIO

CAPITAL

2002-2003 20,14,86,573.36 4,43,23,842.96 4.545

2003-2004 13,05,17,436.81 2,12,44,138.97 6.143

2004-2005 9,66,54,360.90 1,35,34,076.83 7.141
2005-2006 12,37,19,616.75 11,91,34,221.80 1.038

2006-2007 36,88,53,566.89 9,39,67,926.34 3.925

61
 8
7
6
2006-07
5 2005-06
RATIOS

4 2004-05
3 2003-04
2002-03
2
1
0
2003 2004 2005 2006 2007

YEARS

INTERPRETATION

This ratio indicates the number of times the net sales met with the working
capital for the year. The turnover of the working capital has highly increasing
from 2000-2001 to2005-2006.

TOTAL ASSET TURNOVER RATIO

62
This ratio indicates the sales generated per rupee of investment in total assets.
Althought fixed assets are directly concerned with the generation of sales. But
other assets also contribute to the production and sales activities of the firm. The
firm must manage its total assets efficiency and should generate maximum sales
through their proper utilization.
The total assets turnover is used know how many times the total assets
are being converted into sales. If sales are not available cost of goods is to be
considered. It shows in how many times the total sales are being concerted into
total assets. The ratio is calculated by dividing the cost of goods sold as sales by
total assets. The general principle for the calculation of this as follows
Sales
Total assets turnover ratio = ------------------
Total assets

YEAR NETSALES TOTALASSETS RATIO

2002-2003 20,14,86,573.36 23,33,30,395.13 0.863

2003-2004 13,05,17,436.81 12,09,66,623.21 1.078

2004-2005 9,66,54,360.90 14,13,26,040.41 0.683

2005-2006 12,37,19,616.75 32,30,19,288.99 0.383

2006-2007 36,88,53,566.89 31,32,95,829.13 1.177

63
 1.4
1.2
1 2006-07
RATIOS

0.8 2005-06
2004-05
0.6
2003-04
0.4 2002-03
0.2
0
2003 2004 2005 2006 2007

YEARS

INTERPRETATION
The total asset turnover ratio increase in 2002-2003 and 2003-2004
after it decreased in 2004-2006 and after the increase turnover ratio 2006-2007.

THE CHITTOOR CO-OPERATIVE SUGARS LIMITED:: CHITTOOR

TRADING ACCOUNT FOR THE YEAR 2003

64
 PARTICULARS AMOUNT PARTICULARS AMOUNT
Rs. Ps. Rs. Ps.
1.OPENING STOCK: 1. OPENING STOCK:
a) Sugar 26,11,39,024.38 a) Sugar 19,19,96,947.80

b) Molasses 82,52,332.24 b) Molasses 69,07,474.80

2. PURCHASES: 2. sales 20,14,86,573.36

a) Fertilisers & 15,120.00
pesticides 3. Misc. income
Creditable to 1,72,00,316.54
3. Expenditure 1,75,86,673.28 Trading a/c
debitable to trading a/c
4. Gross loss 3,76,45,558.10
4. Cost of production
Transferred from 16,82,44,220.70
Manufacturing a/c

--------------------- ----------------------
45,52,37,370.60 45,52,37,370.60
--------------------- ----------------------

THE CHITTOOR CO-OPERATIVE SUGARS LIMITED :: CHITTOOR

BALANCE SHEET AS ON 2003

LIABILITIES Rs. ASSETS Rs.

1. Share capital 14,09,58,700.00 1. Cash on hand 12,83,980.24
2.DEPOSITS & 2. BALANCE WITH
BORROWINGS: BANKS:

65
 a) Deposits 2,88,36,536.05 a) current account 17,15,099.27
b) Borrowings 23,56,16,210.28 b) savings account 23,80,139.99
3. Out standing 3. Shares in other
Interest payable 60,94,477.90 Co-op. institutions 2,28,550.00
4. Adjusting heads 4. Deposits with
“ Due by” 18,29,12,074.27 Various agencies 12,54,825.77
5. Reserves 21,93,57,187.86 5. F.D’s with banks 2,50,000.00
6. U.D.P 64,226.88 6. Loans & advances
7. Audit fund 9,695.57 To members 64,61,883.31
8. Reserve fund yet 7. Loans to other
To be invested 24,702.69 Co-op. sugar 30,00,000.00
9. Vysya bank balance --- Factories
10. Bank of India --- 8. ADJ. heads
11. Canara bank --- “due to” 5,44,12,361.15
12. Indian bank --- 9. Interest receivable 18,26,488.57
13. Indian overseas 10. Value of assets 12,62,06,460.22
Bank --- 11. Rvaluation of
14. S.V. Grameena Assets 9,59,30,271.73
Bank --- 12. VALUE OF
15. State bank of CLOSING STOCK:
India --- a) Stores stocks 2,02,69,708.93
16. Union bank of b) Packing material 1,78,240.45
India --- c) Stationary 26,375.50
17. CDCC bank, d) Sugar 19,19,96,947.80
Chittoor --- e) Sugar in process 2,54,382.07
18. Corporation bank --- f) Molasses 69,07,474.80
g) Molasses in
process 9,290.00
h) FMP raw
material & feed 20,474.20
13. Deficits 47,943.52

-----------------------
81,38,73,811.50

LESS:
Difference between
Assets & liabilites 29,92,13,003.98
----------------------- ----------------------
Total 51,46,60,807.52 Total 51,46,60,807.52
----------------------- ----------------------

THE CHITTOOR CO-OPERATIVE SUGARS LIMITED:: CHITTOOR

TRADING ACCOUNT FOR THE YEAR 2004

PARTICULARS AMOUNT PARTICULARS AMOUNT

66
 Rs. Ps. Rs. Ps.
1.OPENING STOCK: 1. OPENING STOCK:
a) Sugar 19,19,96,947.80 a) Sugar 7,60,05,445.10

b) Molasses 69,07,474.80 b) Molasses 2,86,092.00

2. Expenditure 2. sales 13,05,17,436.81

debitable to trading a/c 1,18,46,077.
46 3. Misc. income
3. Cost of production Creditable to 1,15,01,190.42
Transferred from Trading a/c
Manufacturing a/c
3,26,16,707.00 4. Gross loss 2,50,57,642.73

--------------------- ----------------------
24,33,67,207.06 24,33,67,207.06
---------------------- -----------------------

THE CHITTOOR CO-OPERATIVE SUGARS LIMITED :: CHITTOOR

BALANCE SHEET AS ON 2004

LIABILITIES Rs. ASSETS Rs.

67
1. Share capital 14,09,60,300.00 1. Cash on hand 22,575.20
2.DEPOSITS & 2. BALANCE WITH
BORROWINGS: BANKS:
a) Deposits 2,88,12,456.68 a) current account 13,49,421.74
b) Borrowings 22,38,22,462.57 b) savings account 1,45,31,767.74
3. Out standing 3. Shares in other
Interest payable 2,71,90,688.40 Co-op. institutions 2,28,550.00
4. Adjusting heads 4. Deposits with
“ Due by” 11,50,20,073.78 Various agencies 12,61,225.77
5. Reserves 22,87,27,884.01 5. F.D’s with banks 22,50,000.00
6. U.D.P 64,226.88 6. Loans & advances
7. Audit fund 9,695.57 To members 63,86,629.69
8. Reserve fund yet 7. Loans to other
To be invested 24,702.69 Co-op. sugar 10,00,000.00
Factories
8. ADJ. heads
“due to” 5,48,94,708.08
9. Interest receivable 18,26,488.57
10. Value of assets 12,62,06,460.22
----------------------- 11. Rvaluation of
76,46,32,490.58 Assets 9,59,30,271.73
12. VALUE OF
CLOSING STOCK:
a) Stores stocks 2,01,00,264.62
b) Packing material 1,78,240.45
c) Stationary 18,671.00
d) Sugar 7,60,05,445.10
e) Sugar in process 2,34,802.90
f) Molasses 2,86,092.00
g) Molasses in
process 5,750.00
h) FMP raw
material & feed 20,474.20
13. Deficits 47,943.52

LESS:
Difference between
Assets & liabilites 36,18,46,708.05
----------------------- ----------------------
Total 40,27,85,782.53 Total 40,27,85,782.53
----------------------- ----------------------

THE CHITTOOR CO-OPERATIVE SUGARS LIMITED:: CHITTOOR

TRADING ACCOUNT FOR THE YEAR 2005

PARTICULARS AMOUNT PARTICULARS AMOUNT

68
 Rs. Ps. Rs. Ps.
1.OPENING STOCK: 1. OPENING STOCK:
a) Sugar 7,60,05,445.10 a) Sugar 7,88,16,404.20

b) Molasses 2,86,092.00 b) Molasses 1,06,60,683.35

c) Pesticides 3,62,250.00
2. PURCHASES:
a) Fertilisers & 5,04,000.00 2. sales 9,69,20,394.30
pesticides
3. Misc. income
3. Expenditure 69,45,366.83 Creditable to 69,04,064.85
debitable to trading a/c Trading a/c

4. Cost of production 4. Gross loss 5323482.37

Transferred from 11,52,46,375.14
Manufacturing a/c ----------------------
19,89,87,279.07
--------------------- ----------------------
19,89,87,279.07
---------------------

THE CHITTOOR CO-OPERATIVE SUGARS LIMITED :: CHITTOOR

BALANCE SHEET AS ON 2005

LIABILITIES Rs. ASSETS Rs.

69
1. Share capital 14,09,61,400.00 1. Cash on hand 18,78,931.06
2.DEPOSITS & 2. BALANCE WITH
BORROWINGS: BANKS:
a) Deposits 2,91,54,179.61 a) current account 91,72,861.36
b) Borrowings 26,60,73,587.95 b) savings account 89,67,176.13
3. Out standing 3. Shares in other
Interest payable 4,05,25,798.40 Co-op. institutions 2,28,550.00
4. Adjusting heads 4. Deposits with
“ Due by” 10,81,07,592.19 Various agencies 12,71,225.77
5. Reserves 24,80,88,004.02 5. F.D’s with banks 27,50,000.00
6. U.D.P 64,226.88 6. Loans & advances
7. Audit fund 9,695.57 To members 90,85,235.94
8. Reserve fund yet 7. Loans to other
To be invested 24,702.69 Co-op. sugar 10,00,000.00
Factories
8. ADJ. heads
“due to” 6,70,56,511.94
9. Interest receivable 18,26,488.57
10. Value of assets 12,66,47,509.22
----------------------- 11. Rvaluation of
83,30,09,187.31 Assets 9,59,30,271.73
12. VALUE OF
CLOSING STOCK:
a) Stores stocks 2,00,46,520.64
b) Packing material 93,100.00
c) Stationary 43,726.65
d) Sugar 7,88,16,404.20
e) Sugar in process --------
f) Molasses 1,06,60,683.35
g) Molasses in
process ---------
h) Pesticides 3,62,250.00
h) FMP raw
material & feed 20,474.20
13. Deficits 47,943.52

LESS:
Difference between
Assets & liabilites 39,71,03,323.03

----------------------- ----------------------
Total 43,59,05,864.28 Total 43,59,05,864.28
----------------------- ----------------------

70
THE CHITTOOR CO-OPERATIVE SUGARS LIMITED:: CHITTOOR

TRADING ACCOUNT FOR THE YEAR 2006

PARTICULARS AMOUNT PARTICULARS AMOUNT

Rs. Ps. Rs. Ps.
1.OPENING STOCK: 1. OPENING STOCK:
a) Sugar 7,88,16,404.20 a) Sugar 26,74,59,792.80

b) Molasses b) Molasses 75,14,240.77

c) Pesticides 1,06,60,688.85 c) Pesticides 1,16,480.00
3,62,250.00
2. PURCHASES: 2. sales
a) Fertilisers & 12,46,29,656.78
pesticides 11,20,000.00 3. Misc. income
Creditable to
3. Expenditure Trading a/c 1,20,12,750.35
debitable to trading a/c 1,14,74,796.84

4. Cost of production
Transferred from 25,75,46,899.47
Manufacturing a/c

5. Gross Profit 5,17,51,887.40

----------------------- ----------------------
41,17,32,920.70 41,17,32,920.
----------------------- ----------------------

THE CHITTOOR CO-OPERATIVE SUGARS LIMITED:: CHITTOOR

BALANCE SHEET AS ON 2006

71
 LIABILITIES Rs. ASSETS Rs.
1. Share capital 14,11,40,700.00 1. Cash on hand 1,41,218.80
2.DEPOSITS & 2. BALANCE WITH
BORROWINGS: BANKS:
a) Deposits 3,10,24,046.10 a) current account 1,66,827.11
b) Borrowings 40,43,40,806.12 b) savings account 70,83,116.03
3. Out standing 3. Shares in other
Interest payable 4,90,24,988.90 Co-op. institutions 2,28,550.90
4. Adjusting heads 4. Deposits with
“ Due by” 14,09,80,325.36 Various agencies 12,67,225.77
5. Reserves 26,43,09,028.13 5. F.D’s with banks 2,50,000.00
6. U.D.P 64,226.88 6. Loans & advances
7. Audit fund 9,695.57 To members 1,06,24,987.20
8. Reserve fund yet 7. Loans to other
To be invested 24,702.69 Co-op. sugar 10,00,000.00
Factories
8. ADJ. heads
“due to” 7,32,09,660.39
9. Interest receivable 18,26,488.57
10. Value of assets 12,91,97,586.22
11. Rvaluation of
Assets 9,59,30,271.73
12. VALUE OF
CLOSING STOCK:
a) Stores stocks 2,06,58,101.84
b) Packing material 5,87,128.50
c) Stationary 28,089.00
d) Sugar 26,74,59,792.80
e) Sugar in process 78,41,426.47
f) Molasses 75,14,240.11
g) Molasses in 4,15,715.92
process
h) Pesticides 1,16,480.00
h) FMP raw
material & feed 20,474.20
13. Deficits 47,943.52

-----------------------
LESS: 1,03,09,18,519.75
Difference between 40,53,03,194.91
Assets & liabilites
----------------------- ----------------------
Total 62,56,15,324.84 Total 62,56,15,324.84
----------------------- ----------------------

72
THE CHITTOOR CO-OPERATIVE SUGARS LIMITED:: CHITTOOR

TRADING ACCOUNT FOR THE YEAR 2007

PARTICULARS AMOUNT PARTICULARS AMOUNT

Rs. Ps. Rs. Ps.
1.OPENING STOCK: 1. OPENING STOCK:
a) Sugar 26,74,59,792.80 a) Sugar 24,67,11,289.11

b) Molasses 75,14,240.77 b) Molasses 66,19,002.89

c) Pesticides 1,16,480.00
2. sales 2,05,940.00
2. Expenditure
debitable to trading a/c 2,66,76,030.20 3. Misc. income
Creditable to 2,60,98,795.50
3.. Cost of production Trading a/c
Transferred from 38,10,97,458.30
Manufacturing a/c 4. Gross loss 3,76,82,757.68
4. Pesticides Purchase
33,07,360.00

---------------------- ----------------------
68,61,71,362.07 68,61,71,362.07
---------------------- ----------------------

73
 THE CHITTOOR CO-OPERATIVE SUGARS LIMITED:: CHITTOOR

BALANCE SHEET AS ON 2007

LIABILITIES Rs. ASSETS Rs.

74
1. Share capital 14,25,53,600.00 1. Cash on hand 95,082.98
2.DEPOSITS & 2. BALANCE WITH
BORROWINGS: BANKS:
a) Deposits 3,52,01,887.01 a) current account 33,80,265.98
b) Borrowings 40,57,02,422.76 b) savings account 14,46,93,17.43
3. Out standing 3. Shares in other
Interest payable 4,69,28,301.64 Co-op. institutions 2,28,550.00
4. Adjusting heads 4. Deposits with
“ Due by” 22,91,72,904.82 Various agencies 12,70,225.77
5. Reserves 26,80,06,835.01 5. F.D’s with banks 2,50,000.00
6. U.D.P 64,226.88 6. Loans & advances
7. Audit fund 9,695.57 To members 18,17,48,73.00
8. Reserve fund yet 7. Loans to other
To be invested 24,702.69 Co-op. sugar 10,00,000.00
Factories
8. ADJ. heads 7,55,41,003.33
“due to”
9. Interest receivable 18,26,488.57
10. Value of assets 13,99,27,312.64
11. Rvaluation of
Assets 9,59,30,271.73
12. VALUE OF
CLOSING STOCK:
a) Stores stocks 1,94,14,206.14
b) Packing material 14,70,696.50
c) Stationary 40,532.00
d) Sugar 24,67,11,289.11
e) Sugar in process 62,98,460.92
f) Molasses 66,19,002.89
g) Molasses in
process 8,01,596.61
h) Pesticides 2,05,940.00
h) FMP raw 20,474.20
material & feed
13. Deficits 47,943.52

LESS: 11,27,66,45,76.38
Difference between 49,89,41,043.06
Assets & liabilites
------------------------ ----------------------
Total 62,87,23,533.32 Total 62,87,23,533.32
------------------------ ----------------------

FINDINGS

In the over all evaluation of the Working Capital Management at each and

every aspect, the following are the findings.

75
1. Working Capital ratio of the chittoor Co-operative Sugar Ltd is decreasing

in all the years which indicate poor liquidity position of the company.

2. Inventory turn over ratio of the Chittoor Co-operative Sugar Ltd is good in

all the 5 years of study, which indicates the efficient management of

inventory.

3. Fixed Assets to Net worth Ratio of the Chittoor Co-operative Sugars Ltd is

greater than 1% which indicates the Owner’s funds are sufficient to

Finance Fixed Assets.

4. Fixed Assets Turn over Ratio of the Chittoor Co-operative Sugar Ltd is

highest 2.4 in the year 2002-03, which the management is efficient in

utilizing the Fixed Assets.

5. Current ratio of Chittoor Co-operative Sugars Ltd is highest 6.19 in the

year 2002-03, which is the management of effective and efficient

utilization

6. The company sales have been decreased in all the year.

7. The reserves and surplus is always accumulating every year. The

company can capitalize the reserves and Surplus.

SUGGESTIONS

76
• The company should utilize the reserves and surplus by either

capitalizing or invest the money some where as investment to get

benefits.

• The company should maintain adequate working capital

• The company should maintain the high liquidity position

• The company is under loss zone, so it needs some subsidy by

government to develop its position.

• By merging the company with other profitable company, the firm may

Improve its performance.

• By selling molasses to other plant the company can earn additional

profit.

• By using the sugar can scrap the firm can generate it’s electrically

supply.

• By selling the scrap to bio-plants it can generate funds.

77
 CONCLUSION

From the analysis on the working capital management at Chittoor Co-

operative Sugar Ltd, conclude in spite of all suggestions, the company has to

reduce its production cost to increase profit.

The inventory turn over is good in all the five years. The company should

try to increase their sales. It should maintain the high liquidity position. Hence,

the suggestions given are realistic which will lead to increase in the profitability of

the company. The company should try to tap the market and set in brand value

and do the best.

78
 BIBLOGRAPHY

 THE following books have reffered during the prepararion of this project:-
 I.M.pandey - Financial management- Vikas publishing house PVT LTD, New
Delhi-110014, 2003.
 Prasanna Chandra- Financial management-Tata MCGrawhill-hill publications
company ltd, New Delhi, 2002.
 R.K.Sharma and Shashi K.Gupta -Management accounting Kalyani
publishers, NewDelhi-2003.
 Advanced financial management - Publishes by director of studies- ICWAI. –
KOLKATA 70016.

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