Working Capital

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED CHAPTER-1 INTRODUCTION
1.1An Overview of Working Capital The total capital employed in a business organization can be categorized as fixed capital and working capital. The fixed capital that part of the funds, which is invested in fixed assets where as working capital is that portion of the funds which is invested in current assets. The investment in fixed assets is represented land and building (for factory office go down and stores) equipment such as machinery, Furniture and Fixtures. Intangible assets in the to employ these assets required, current assets progress, receivables, finished cash in form of patents and good will etc... gainfully current assets are consists of raw material, working goods stores and spares accounts hand and at bank and marketable securities. 1.2DEFINITION OF WORKING CAPITAL Like the broader concepts to accepted definition for capital there is no universally Working Capital.
RAMARAJA INSTITUTE OF TECHNOLOGY & SCIENCERAMARAJA INSTITUTE OF TECHNOLOGY & SCIENCERAMARAJA INSTITUTE OF TECHNOLOGY & SCIENCE
CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED
The following are some definitions of this group: Working Capital means Current Assets D, Baker, Malott Any acquisition of funds of which increases the current assets increase Working Capital also, for they are one and the same. -Bonneville
Working Capital refers to a firms investment in short-term assets like cash, short term securities, account receivables and inventories. -Weston Brigham In the sense the working capital is regarded as the Excess of Current Assets over Current Liabilities, this is the definition used by most financial experts and authors rephrasing the accounting phase of finance. The following are some definitions of this group: It has orderly been defined as the excess of current Assets over Current liabilities. -Gerstenberg.
1.3TYPES OF WORKING CAPITAL Working Capital can be classified is as follows.

1. On the basis of Concept. 2. On the basis of Requirement
1. On the basis of Concept: On the basis of concept the working capital may be divided into
a) Gross Working Capital b) Net Working Capital
A) Gross Working Capital: The Gross Working Capital represented by the total current assets and the net working capital in the excess of current assets over current liabilities. B) Net Working Capital: Net working capital can be positive or negative if current liabilities exceed total current assets of is negative net working capital; these two types of working capital have already been explained earlier in the concept of working capital 2. On the basis of Requirements:
On the basis of Time the working capital may be divided in to

a) Permanent or Fixed working capital b) Variable or Temporary working capital (a) Permanent or Fixed Working Capital:
It represents that part of capital which is permanently locked up in the current assets and carrying out business smoothly. It is permanent in nature and will increase as the size of business expands. In other words current assets required on a continuing basis over the entire year are permanent working capital. Permanent working capital can be further divided into: 1. Regular Working Capital 2. Reserve Working Capital 1. Regular Working Capital: It is the minimum amount of liquid capital needed to keep up the circulation of the capital form cash to inventories to receivables and again to cash. This would include sufficient minimum bank balance to discount all bills, maintain adequate supply of raw materials etc...
2. Reserve Working Capital: It is the excess over the needs or regular working capital that should be kept in reserve for contingencies that may arise at any time these contingencies include rising prices business depression strikes special operations such as experiments with new products. Variable or Temporary Working Capital: Variable Working Capital changes with the increase or decrease in the volume of business. It may be sub-divided into
1. Seasonal Working Capital 2. Special Working Capital
The working capital required to meet the seasonal needs of the industry is known as seasonal working capital. Special working capital is that part of the variable working capital with is required to finance the special operations such as extensive marketing campaigns experiments with the products or methods of production carry of special job etc. 1.4 Determinants of working capital
The business understanding should plan its operations in such a way that is should have neither too much not little working capital. The total working capital requirements are determined by a variety of factors, which determine the quantum of working capital in a business undertaking are as follows: 1. General nature of the business: Companies that sell a service and that too for immediate cash require little working capital. But for a manufacturing firm that produces a product and sell it on credit basis, working capital required is high. 2. Production cycle: If the production process is lengthy working capital required is more and vice-versa.
3. Speed of operating cycle: is the speed of operating cycle is slow working capital needed is high. 4. Credit terms: if the company purchases raw materials on credit basis and sells finished goods on cash basis working capital requirements will be low. 5. Growth and expansion: firms will growth prospects demand greater working capital.
6. Dividend policy: Firms pursuing a liberal dividend policy require more working capital. 7. Technology and manufacturing policy: The manufacturing cycle starts with the purchase and use of raw material and completes with production of finished goods. Longer the manufacturing cycle, loonger will be the firms working capital requirements. An extended manufacturing time span means a larger tie-up of funds in inventories. Thus if there are alternative technologies of manufacturing a product the technological process with the shortest manufacturing cycle may be chooses. 8. Firms credit policy: the credit of firm affects the working capital by influencing the level of debtors. The credit term to be granted to customers may depend upon the forms of the industry to which the firm belongs.
9. Business Fluctuations: most firms experience seasonal and cyclical fluctuations in the demand for their products and services. This business variation effects the working capital requirements especially the temporary working capital requirement of the firm. When these is an upward swing in the economy sales will increase and vice-versa.
10. Growth and expansion activities: The working capital needs of firm increases it growth in term of sales of fixed assets. If is difficult to precisely determine the relationship between volume of sales and the working capital needs. The critical fact however that is the need for increased working capital funds does not follow growth in business activities but precedes it. 11. Profit margin and profit appropriation: Firms differ in their capacity to generate profit from business operations. Some firms enjoy a dominant position due to quality product or good marketing management or monopoly power in the market and earn a high profit margin. Some other firms may have to operate in an environment of intense completion and may earn low margin of profits. A high profit margin contributes towards the working capital pool. In the net profit is a source of working capital to the extent. 12. Profit margin and profit appropriation: Firms differ in their capacity to generate profit from business operations. Some firms enjoy or monopoly power in the market and earn a high profit margin. Some other firms may have to operate in an environment of intense competition and may earn low margin profit. A high net profit margin contributes towards the working capital pool. In fact the net profit is a source of working capital to the extent it has earned in cash. 1.5 Need for the working Capital:
The firm needs working capital to carry out the program of production and sale of its products, depending on its production cycle. Funds will normally be required by at for the following purpose.
To carry the necessary quantities of finished goods till they are sold. To carry the receivables if sales are on credit basis, and To make advance payments for goods and services. Thus the firm is required to maintain an adequate amount of working capital.
So as to carry on these productive and distributive activities smoothly.

To buy and stock necessary quantities of raw materials and stores. To meet expenses incidental to production.
1.6 Components of Working capital: 1. Current Assets 2. Current Liabilities
1. Current Assets are:

Deposits Cash in Hand Cash in Bank RAMARAJA INSTITUTE OF TECHNOLOGY & SCIENCERAMARAJA INSTITUTE OF TECHNOLOGY & SCIENCERAMARAJA INSTITUTE OF TECHNOLOGY & SCIENCE
CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED Bills receivables/Management receivables Stock Marketable Securities Prepaid expenses Accrued Incomes Calls in arrears Stock in hand Raw materials Work-in-progress Finished goods
2. Current Liabilities: -Creditors -Bills payable -Provisions -Bank over draft -Outstanding -Provision for bad debts -Bank over cash credit -Deposits -Subsidiaries -Provisions 1.7 Sources of Working Capital:
The business firms has vertical of sources to meet its financial requirement in selecting of particular sources, a financial manager has to consider the merits and the de-merits of the each sources in the context of constraints. The sources of working capital can be classified is as follows
a) Long-Term sources b) Short-Term sources i. ii.
Internal sources External sources Working Capital Sources
Long term sources
Short-term sources
Internal
1. Sale of shares 2. Sale of Debentures 3. Sale of idle fixed assets 4. Long-term loans
External 1.Trade credit 2.Credit papers 3.Bank credit 4.Public Deposits
1. Depreciation funds 2.Provision of Taxation 3.Accrued Expenses
1.8 Estimation of Working capital: Working Capital may be estimated in following 3 categories. They are
Percentage of sales method Regression analysis method Operating cycle method 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.
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.
Operating cycle:-
Operating cycle is the time duration required to convert sales, after the conversion of resources into inventories, into cash.
About Clean Foods:
Sun Sip and Clean Foods are ideally located in the state of Andhra Pradesh with Proximity to sources of fruits & vegetables supply. Sun Sip is situated in Hyderabad and Clean Foods is located at Madanapalli near Bangalore. Among al the fruit growing areas Andhra Pradesh state is producing the maximum quality. Sun Sip and foods both put together from the largest mango processing facility in the world. Apart from Mango products, our product range includes pulp & concentrate of Tomato, Tamarind, Orange, Amla, Pineapple, Papaya, and Guava & Vegetables. Our plants are equipped with most modern facilities for continuous evaporation/concentration, aseptic packing system which can pack from 20 liter to 220 liter bulk pacing. Apart from bulk aseptic packing we have facilities to pack various fruits, vegetables, juices, jams, jekkies, Ketchups, Sauces, Squashes, Drink concentrates in cans & Bottles of Various Sizes.
We are the pointers in the fruit & Vegetable Processing industry and have experienced team of dedicated professionals who are familiar with techniques for processing the tropical fruits & vegetables to ensure natural flavor, color and other characteristics of the fruit.
Our plants are equipped with continuous evaporator with recovery. The retention period of the product in the concentrator under vacuum at low temperature is very brief. Low temperature evaporation under vacuum ensures that there is minimal loss of flavor, co lour & nutritive. He reduced handling, storage and freight costs and increases convenience at the users end. Aseptic processing has gained acceptance world wide as the best method of treating products to ensure sterility without refrigeration. Fruit juices, pulps & concentrates are flash pasteurizes through a closed system where by extended thermal treatment is avoided. The product is cooled and filled at ambient temperature automatically in pre-sterilized aseptic bags which prevents bacteriological activity in the product and also ensure no oxygen is permeated included into the product. The system keeps the product a maximum natural from by retaining color, flavor, taste and nutritive value.
Sun Sip is an ISO 9002 Company and also a member of international quality Network. Israel authorities have KOSHERED both the plants. Our products are marketed under the brand name Sun Sip we are the first company who were authorized by the government of India Ministry of Food Processing to certify our products for quality. Our team has earned many national awards for export, productivity, quality and innovation.
Industry Profile:
The ministry of food processing industry is the agency of the Government of India for processed food and is responsible for developing a strong and vibrant food processing sector. The ministry was set up in the year 1988 with a view to create increase job opportunities in rural area. The scope of the ministry has been much enlarging it includes development of fruit and vegetable processing of daily, poultry, eggs and meat and also promotion of food gain milling. The food-processing sector in India is one of the largest in terms of production, consumption, export and growth prospects.
India Produces variety and vegetables tropical, sub tropical or temperate. This includes Mango, Banana, Apple, Orange, Chico, Beer, Pomegranates etc... And vegetables like Potato, Tomato, Onion,
Cauliflower, Cabbage etc the total area under fruits and vegetables cultivation is estimated to be at 5.63 and 5.6 million hectares. Nutritive values of India foods: Three decades after its land mark contribution in fixing the nutritive values of nearly 600 different foods Indian consume the Hyderabad based national institute of nutrition (NIN), has decided to update the data available.
The issues are how much protein does the rice you eat contain or the fibred content essential acids and other and other nutrients present in the stable foods, vegetable, oils and fruits we eat. But the task is quite imposing to analyze about 600 varies of foods and determines the precise nutritive values all over again. This world give a good ides to people to make their choices for a balanced diet and get the required nutrition says Dr.Bhattipoli Siva Kumar, the newly appointed of NIN.
We feel the nutritive values of various foods we consume have undergone a change for example a recent analysis showed that protein content in rice has gone up Hence the relevance of the initiative which will be launched early 2005 D.Siva Kumar said.
The government to determine people below also uses the intake levels recommended by the expert committee. Future prospects & revival plans: Revival Plans: Due to intense completion in the liberalized economy it has become imperative that the company is made competitive to achieve this. The company operating parameters such is machine and labor productivity, product quantity, wage power and other input costs should be at or better that the plant and machinery to be obtain higher productivity better quality products and profitability. Various sets are being considered by the directors among them are restricting to get company operation parameters to industry standers capital structuring improved labor utilization and productivity selective modernized selling in to better and more lucrative markets etc
Company Profile: Clean Foods Corporation was in corporation in the year 1973. Sri Vasantha Kumar originally promoted the project as a proprietary concern in 1969 for setting up a cold storage, meat processing and canning unit at Bangalore. In 1974 the processing facilities were taken over by poverty line,
quantum of ratio to people etc... In short for planning national food agricultural strategies. Pepsi co in India:
1.
Pepsi co investment in India since 1988,$700 million. production. Pepsi maintained the same high standards across the world for all the
2. Has 37 bottling plants in the country, 17 company owned accounting for 55% of
total
2.
products. During the recent visit to India the CEO of Pepsi co Mr.Stewe S.Reinemund Highlighted the Indian market potential, especially in the sank food beverage categories.
According to him the company has over the last 15 years, invested $ 700 million in the country and hopes, to repeat this history. Clean Foods Corporation (C.F.C). in 1975 the company entered an agreement with WIMCO LTD for financial and marketing support for processing of fruit and vegetable commenced in 1979, simultaneously C.F.C also made arrangement with Andhra Pradesh industrial envelopment corporation for setting up an Argus baled industrial complex at Madanapalli(A.P) How ever due to financial constraints the project could not make much head way.
In 1981 WIMCO acquired a large portion of share held Sri Vasantha Kumar and implemented the project. The Madanapalli unit started production of Tomato paste in 1982; later on C.F.C acquired aseptic packing system in 1983 and juice concentration plant in 1984 from ITALY partly financed by foreign currency loan of IDBL. Clean Foods Corporation is engaged in the manufacture of unit and Vegetable, pulp concentrates and juices at its plant at Bangalore and Madanapalli. In 1988 on account of various reasons viz. non availability of adequate quantity of raw materials due to drought conditions in 1986-88, lack of exports from USSR/middle EAST, severe power cuts shortages of coal and water labor
problems, is performance was unsatisfactory and it has become sick and made reference to the Board of Industrial and financial reconstruction(BIFR). At the hearing of the case hold on March 1989, BIFR appointed IDBI as the operating agency for preparing a scheme for rehabilitation of the company. According to the scheme and due to repeated over heads in the both places the co, suspended its Bangalore operations during 1990 and concentrated operation at one i.e. at Madanapalli. Clean foods corporation in engaged in the manufacture of fruit and vegetables plump concentrates and juices at its plant at Bangalore and Madanapalli. Different Types of Fruits:
1. Mango 2. Guava 3. Orange 4. Tomato 5. Papaya 6. Banana 7. Pineapple 8. Custard Apple 9. Chico(Sputa) RAMARAJA INSTITUTE OF TECHNOLOGY & SCIENCERAMARAJA INSTITUTE OF TECHNOLOGY & SCIENCERAMARAJA INSTITUTE OF TECHNOLOGY & SCIENCE
Setting up a T.B sanatorium decades back Y.Brutishness due to these natural conditions, considering being the best in this subcontinent in south, East Asia. Thus it has come to stay as a natural health Place besides stalwarts like Jiddu Krishnamurthy world renewed philosopher was from
this place or ANNIBESENT was much impressed and started here the present Be sent Theosophical college the very first on this area. Dr. Rabindranath Tagore Visited this place and is said to have written our national Anthem at this place the famous Rish Valley School founded
By Jiddu Krishnamurthy is here only, Horsley Hills the hills resort and ooty of Andhra Pradesh is located only. Raw Materials: The bulk of raw materials are being procured from Bangalore, Sreenivasapuram, Kolar, Cities in Karnataka and Vijay Wada, Thadapalli gudam in Andhra Pradesh and Dndigal, in Tamilnadu.
Resources Raw Material: The bulk of raw materials are being from Bangalore, Srinivasapuram, Kolar in Karnataka, Vijay Wada, Nugiveedu, Thadepallegudam in Andhra Pradesh and Dindigal, Salem in Thailand. Water Supply: The unit has its own wells in the factory premises. Transportation: Since the factory is 7 Km from town, the companies provided pick up vehicles for regular employees. Electricity: The power supply is from APSEB. The company also provided with own diesel generator sets for their requirements. Information Technology: The company have technology using the to the production section & administration section company have a maintain LAN in computerized in branch wise and company wise. Human Resource:
The employees have providing to the weekly and monthly wage system and creating to the completion for employers through providing gold and money incentives monthly performs. The employees are completely working and satisfying to the compensation for getting work Description of the Plan: The plant is situates at a distance of 7 Km from Madanapalli and 120 Km away from Bangalore. The plant occupied 20 Acers of land. The plant is having various sections, departments to handle day to day activities. The administration side and processing side are handled bye well experienced
and qualified persons. This factory has also other facilities like canteen, restrooms for the employees. The factory is self sufficient for all requirements like workmen, raw material, fuel, power etc.. During peak production around 1500 workers are employed, during this period maximum workers are taken on casual basis and they got sufficient regular technical persons in the permanent roles. There are two big cold storage rooms and go down for the barrels and cans respectively. A boiler house is there for processing. Even day around 500 workmen are employed in raw materials section for the purpose of sorting the ripened fruits and issue for processing, around 600 people are employed in the preparing line in
the production hall. The balances are employees in other places like handling equipment and machinery. Revival Plans of CFC: Due to intense completion in the liberalized economy it has become imperative that the company is made competitive to achieve this, the company operating parameters such as machine and labor, Productivity, Product quality, wage power and other input costs should be at par or better that the industry standards, there is also need to modernize the plant and machinery to higher productivity, better quality products and profitability. Various steps are being considered by the directors, among them are restricting to get the company operation parameters to industry standards capital structuring, improved labor utilization and productivity selective modernized, selling in to better more lucrative markets etc.. Production Capacity: Our licensed capacity is 13600 tins and installed capacity is 12000 tons i.e. manufacturing 9000 tons of Mango concentrate and Tomato tastily at Madanapalli and 3000 tons of fruits pulps juices and jams at Bangalore on the basis of 330 working days in a year. Bangalore factory suspends its operation during 1990 and transferred some of the machinery to SUNSIP Hyderabad and at Madanapalli.
The process facilities and machineries of CFC has been inspected and studies by a team consisting Mr.P.R.Shankar,Dr. In CFC Madanapalli production and the processing details fro, 1982 to till date, year wise is given here with in annexureA-7. Madanapalli of Chittoor District, Andhra Pradesh, occupies an exclusive and pride in A.P and country. A place known for a wide for its salubrious climate, a bound with natural panoramic sights Greenery, cream, Serener, peaceful cand cool climate.
a) Licensed Capacity b) Installed Capacity c) Actual Capacity
13,600 mt 12,000 mt 1 1,320 mt
Manufacturing Process: Clean Foods Corporation, Madanapalli Flow Chart of the Manufacturing Process.
Sorting Dispatching Canning Aseptic Packing Manzini
Structure of the Organization: The organization consists of Board of Directors at the apex under which the Factory Manager other managers work. The top-level Management consists following:
1. Managing Director 2. General Manager a) Asst. Production Manager b) Quality Controller c) Administration Manager d) Manager for Accounts
The middle level management, which assists the top-level management in their work is as follows
1. Manager for purchase and Manager for sales and distribution to assist
manager for commercials.

2. There is Administration Manager and manager for store to assist
manager for utilities

3. Statistical quality control department and technical supervisors are
there to help Technical Manager

4. The manager for Finance is assisted by chief accountants and others. RAMARAJA INSTITUTE OF TECHNOLOGY & SCIENCERAMARAJA INSTITUTE OF TECHNOLOGY & SCIENCERAMARAJA INSTITUTE OF TECHNOLOGY & SCIENCE
The low level consists of daily labor who is taken under casual basis.
Methodology of Research Research Design In view of the objective of the study listed above an exploratory research design has been adopted. Exploratory research is one which is already interprets and already available information and it lays particular emphasis on analysis and interpretation of the existing and available information it makes use of secondary data and lays particulars emphasis on analysis and interpretation of the existing and available information. Need and Importance of the Study Financial statements are prepared for the purpose of presenting a periodical review of report by the management in business and result achieved during the period under review. It reflects a combination of recorded facts accounting conventions and personal of the concern. Scope of the study
judgments.
Financial analysis helps in assessing the financial position and profitability
Finance is the lifeblood of any organization. The future of any organization depends on the ability of the organization to make use of its resources in the best way. The information relating to the financial position of the company is of great interest to management, creditors, investors and other to have a judgment about the operating performance and financial position of the stakeholder groups. Objectives of the Study
To study the financial position of the company. To analyze the financial performance of the company using working
capital.
To study the operating cycle of the company To estimate the amount of working capital of the company for a
period from 2002 to 2007

To bring out the result of financial statement through ratio analysis. To analyze the relationship between the different variables in financial
statement through ratios. Sources of Data Primary Data: The primary information and data related to the project has been obtained interviewing the Administrator, Manager, Accounts, Industrial guides and other concerned executives constitute the primary data.
Secondary Data: Secondary Data is collected from the P&L account, Balance Sheet, Books and company Website.
Tools for Analysis To analyze the data acquired from the secondary sources the following tools are used. 1. Statement of changes in Working Capital. 2. Operating Cycle Method. 3. Ratio analysis. Limitations of the Study
Availability of accurate financial information and analytical reports of the
company may limit the analysis of the research to some extent

Time is also a limiting factor after study as the project is restricted to a
period of two months only.

Working capital stands pertain to relevant industry is also limiting factor
for comparative analysis.

The members of financial department are very busy with the audit work,
hence they are not being able to spend more time for me.
CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED The analysis and interpretation of collected data is restricted to necessary
information.
Statement or Schedule of changes in Working Capital Working capital means the excess of current assets over current liabilities. Statement of changes working capital is prepared to show the changes in the working capital between the two balance sheet dates. This statement is prepared with the help of current assets and liabilities derived from the balance sheets. Working Capital = Current assets Current Liabilities
1. 2. 3. 4.
An increase in current assets it increases working capital. A decrease in current assets it decreases working capital An increases in current liabilities decreases working capital A decrease in current liabilities increases working capital The changes in the amount of any current asset or current liability in the
current balance sheet as compared to that of the pervious balance sheet either
results in increase or decrease in working capital. The difference is recorded for each individual current assets and current liabilities. I n case a current asset in the current period is more than in the previous year, the effect is decrease in working capital and it is recorded column vise versa. The total increase and decrease are compared and the different shows the net increases or net decreases in working capital. It is worth noting that schedule of changes in working capital is prepared only from current assets and current liabilities and other information is not of any use for preparing this statement.` SCHEDULE OF CHANGES IN WORKING CAPITAL 2002-2003 Particulars As On 31/3/02 As On 31/3/03 Effect OF Working Capital Increase Decrease 96,358,481 --------2,255,170 --------8,040,429 654,735 ----23,259,643
A. Current Assets Inventories Sundry Debtors Cash & Bank balance Other current assets Loan & Advances A. Total B. Current Liabilities
165,200,01 9 35,523,383 807,076 9,994,840 105,415,07 0 316,940,38 8
261,558,500 27,482,954 152,341 12,250,010 82,155,427 383,599,232
Current Liabilities Provisions B. Total Working Capital (A-B) Increase in Working Capital
48,426,925 15,153,342 63,580,267 253,360,12 1 65,690,864 319,050,98 5
54,703,756 9,844,491 64,548,247 319,050,985 ----319,050,985
----5,308,851
6,276,831 -----
-----
65,690,864
103,922,502 103,922,502
INFERENCE: From the above analysis it can be inferred that there was increase in working capital. The total current liabilities decrease so that it indicates increase in working capital SCHEDULE OF CHANGES IN WORKING CAPITAL 2003-2004 Particulars As on As On Effect OF 31/3/03 31/3/04 Working Capital Increase Decrease a. Current Assets Inventories 261,558,500 315,970,79 54,412,297 ----7 Sundry 27,482,954 37,896,227 10,413,273 ----Debtors Cash & 152,341 3,035,853 2,883,512 ----Bank balance
Other current assets Loan & Advances A. Total b. Current Liabilities Current Liabilities Provisions B. Total Working Capital(AB) Increase in Working Capital
12,250,010 82,155,427 383,599,232
8,496,873 158,538,95 9 523,938,70 9
----76,383,532
3,753,137 -----
54,703,756 9,844,491 64,548,247 319,050,985 66,095,040 385,146,025
122,536,40 1 16,256,283 138,792,68 4 385,146,02 5 ----385,146,02 5
---------
67,832,645 6,411,792
----144,092,61 4
66,095,040 144,092,614
INFERENCE: From the above analysis it can be inferred that there was increase in working capital. The total current liabilities decrease so that it indicates increase in working capital
SCHEDULE OF CHANGES IN WORKING CAPITAL 2004-2005 Particulars As on 31/3/04 As On 31/3/05 Effect OF Working Capital
Increase a. Current Assets Inventories Sundry Debtors Cash & Bank balance Other current assets Loan & Advances A. Total b. Current Liabilities Current Liabilities Provisions B. Total Working Capital(AB) Increase in Working Capital 315,970,797 37,896,227 3,035,853 8,496,873 158,538,959 523,938,709 352,406,30 1 34,469,414 25,053,659 12,903024 274,796,83 3 699,629,23 1 36,435,504 ----22,017,801 4,406,151 116,257,874
Decrease ----3,426,813 -------------
122,536,401 16,256,283 138,792,684
79,313,325 8,601,835 87,915,160
43,223,076 7,654,448
---------
385,146,025 611,714,071 226,568,041 --------229,994,85 226,568,041 229,994,854
611,714,071 611,714,071
4 INFERENCE: From the above analysis it can be inferred that there was increase in working capital. The total current liabilities decrease so that it indicates increase in working capital SCHEDULE OF CHANGES IN WORKING CAPITAL 2005-2006 Particular s As on 31/3/05 As On 31/3/06 Effect OF Working Capital Increase a. Current Assets Inventories 352,406,301 Sundry Debtors Cash & Bank balance Other current assets Loan & Advances A. Total b. Current Liabilities Current Liabilities 34,469,414 25,053,659 12,903024 274,796,833 699,629,231 643,143,20 9 150,220,39 1 4,191,360 257,313 79,993,640 877,805,91 3 290,736,90 8 115,750,977 ------------Decrease --------20,862,299 12,645,711 194,803,193
79,313,325
154,321,53 1
-----
78,072,354
Provisions B. Total
8,601,835 87,915,160
7,930,408 162,251,93 9
671,427
-----
Working 611,714,071 Capital(AB) Increase in 100,775,755 Working Capital 712,489,826
----712,489,82 6
----407,159,31 2
100,775,755 407,159,312
INFERENCE: From the above analysis it can be inferred that there was increase in working capital. The total current liabilities decrease so that it indicates increase in working capital SCHEDULE OF CHANGES IN WORKING CAPITAL 2006-2007 Particulars As on 31/3/06 As On 31/3/07 Effect OF Working Capital Increase Decrease 153,232,613 104,698,855 1,605,388 2,660,832 -------------
a. Current Assets Inventories Sundry Debtors Cash & Bank balance Other current assets
643,143,209 150,220,391 4,191,360 2,592,435
796,375,822 254,919,246 5,796,748 5,253,267
Loan & Advances A. Total b. Current Liabilities Current Liabilities Provisions B. Total Working Capital(AB) Increase in Working Capital
77,658,518 877,805,913
162,093,475 1,224,438,558
84,434,957
----
154,321,531 7,930,408 162,251,939 715,553,974 375,550,221 1,091,104,195
122,543,875 10,790,488 133,334,363 1,091,104,195 ----1,091,104,195
31,777,656 ----
---2,860,080
----378,410,301
375,550,2 21
378,410,3 01 INFERENCE: From the above analysis it can be inferred that there was increase in working capital. The total current liabilities decrease so that it indicates increase in working capital Ratio Analysis Introduction Ratio analysis is widely used tool of financial analysis. It is defined as the systematic use of ratios to interpret the financial statement so that the strength and weakness of firm as well as its historical performance and financial position has determined the term Ratio refers to the numerical or quantitative relation between two variables. The ratio analysis of working capital can be used by the management as a means of checking of a firm is improving or deteriorating over the year. Over the
year the significant trend analysis of ratios lies in the fact that the analysis can known the direction of movement. For example there may be low as compared to the norms standard but trend may be upward.
The most important Ratios of Working Capital Management:

Current Ratio Quick Ratio Cash ratio Debtors Turnover Ratio Average Collection period Average payment Period Net Assets Turn over Ratio Total Assets Turnover Ratio Fixed Assets Turnover Ratio Current assets Turn over ratio Inventory Turn over Ratio Working Capital Turnover Ratio Net working Capital Ratio
Current Ratio: Current ratio is calculated by dividing current assets by current liabilities.
Current assets include those assets, which can be converted in to cash within a year such as marketable securities, debtors, and stock (inventory) and prepaid expenses. Cash at bank, bills receivable. Current liabilities include creditors bills payable, accrued expenses, bank overdraft, income for liability, bank and short- term borrowings and all other obligations matured within a year.
Current Assets Current Ratio =

Current Liabilities
Computation of Current Ratio

Year 2003 2004 2005 2006 2007 Current Assets 383,599,231 523,938,709 699,629,231 877,805,913 1,224,438,558 Current Liabilities 54,703,756 122,536,401 79,313,325 157,385,679 122,543,875 Ratio 7.01 4.27 8.82 5.57 9.99

Current Ratio
10 8 6
Ratio
9.99 8.82 7.01 5.57 4.27
4 2 0 2003
2004
2005
Year
2006
2007
Inferences:
From the above table it is observed that in 2003 the ratio are 7.01. in 2004 to 2006 the ratios are 4.27, 8.82, 5.57, the company maintain proper current assets. And 2007 company maintain over current assets ratio is 9.99. 2007 is liabilities exceed current assets. This indicates that the firm is liquid and has the ability to pay its current obligations in time as and when they are come due. The current ratio is satisfied.
Quick Ratio:
This is the ratio of quick assets to current liabilities. It shows a firms ability to meet current liabilities. The assets is liquid if it can be converted in to cash immediately like cash or bank & short investments & bills receivables generally 1:1 ratio is considered ideal ratio for a concern because it is wise to keep the assets at least equal to the liquid liabilities at all times.
Quick Ratio = Quick Assets / current liabilities
Computation Of Quick Ratio

Year 2003 2004 2005 2006 2007 Quick Assets 293,564,403 474,337,114 653,210,962 650,294,972 1,108,644,483 Current Liabilities 54,703,756 122,536,401 79,313,325 157,385,679 122,543,875 Ratio 5.36 3.87 8.23 4.13 9.04
Quick Ratio 10 8
Ratio
8.23
9.04
6 5.36 4 2 0 2003
3.87
4.13
2004
2005
Years
2006
2007
INFERENCE:
Generally Quick Ratio of 1:1 considered to be satisfactory. From the above table it is observed that in 2003 the ratio is 5.36. It is continuously decreasing and reached to 9.04 in 2007. Which indicates that the company is in favorable position. That is the firm is liquid and it has the ability to pay its current obligations.
Cash Ratio: Since sash is the most liquid asset a financial analyst may examine cash ratio and its equivalent to current liabilities. Trade investors or marketable securities are equivalent of cash, there fore they may be included in the computation of cash ratio.
Cash & Bank + Marketable Securities Cash Ratio = ----------------------------------------------Current Liabilities
Computation Of Cash Ratio

Year 2003 2004 2005 2006 2007 Cash & Bank Balance 152,341 3,035,853 25,053,659 4,191,360 5,796,748 Current Liabilities 54,703,756 122,536,401 79,313,325 157,385,679 122,543,875 Ratio 0.02 0.02 0.31 0.02 0.04

0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2003 2004 2005 2006 2007 East West North
INFERENCE
From the above table it is observed that the company maintain 0.31 times of cash compared with the current liabilities. But in 2006 it is decreased up to 0.02. in 2007 company performance increases.
CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED Current Assets Turnover Ratio:
By calculating this ratio we can that for generating a swale of one rupee we know how much the company invested in current
Sales
Current assets turnover ratio = -----------------------
Net Current Assets
Computation of Current assets Turnover Ratio

Year 20003 2004 2005 2006 2007 Sales 311,131,602 434,027,831 583,564,980 669,137,160 604,362,287 Net Current Assets 319,050,985 385,146,024 611,714,070 712,489,826 1,091,104,195 Ratio 0.97 1.12 0.95 0.93 0.55
Current Assets Turnover Ratio

1.2 1 0.97 0.8 Ratio 0.6 0.4 0.2 0 2003 1.12
0.95
0.93 0.55
2004
2005 Years
2006
2007
INFERENCE
The ratio here indicates that the turnover of its fixed assets is faster than current assets. The reciprocal of this ratio indicates, for generating a sale of one rupee the company has to 0.97, 1.12, 0.95, 0.93, and 0.55 investments in current assets in the respective years.
Inventory Turnover Ratio:
Inventory turnover ratio indicates the efficiency of the firm in producing and selling its product. It is calculated by dividing the cost of goods sold by the average inventory. The average inventory is the average of operating and closing balances of inventory. In a manufacturing company inventory of finished goods is used to calculate inventory turnover.
Sales
Inventory Turnover Ratio = ------------------------------Average Inventory Average Inventory = Opening inventory + Closing inventory ------------------------------------------------2
Computation of Inventory Turnover Ratio Year 2003 2004 2005 2006 2007 Sales 311,131,602 434,027,831 583,564,980 669,137,160 604,362,287 Average Inventory 51,439,189 69,818,211 48,009,932 136,964,605 171,652,508 Ratio 6.04 6.21 12.15 4.88 3.52
Inventory Turn Over Ratio

14 12 10 8 Ratio 6 6.04 4 2 0 2003 12.15
6.21
4.88
3.52 2007
2004
2005
Years
2006
INFERENCE:
From the above table it is observed that the inventory turnover ratio in 2003 is 6.04 that means the company is converting its inventory into sales increase in 2005 is 12.15 times in a year. This ratio is decreases in 2006 and 2007.
Working Capital Turnover Ratio: This ratio measures the relationship between working capital and sales. The ratio shows the number of times the working capital results. In sales working capital as usual is the excess of current assets over the current liabilities. Sales Working Capital Turnover Ratio = ------------------------Working Capital Comment: Higher the ratio the greater are the profit, a low working capital over indicates that working capital is not efficiently utilized.
Computation of Working Capital Turnover Ratio Year

2003 2004 2005 2006 2007
Sales
311,131,602 434,027,831 583,564,980 669,137,160 604,362,287
Working Capital
253,360,121
Ratio
1.22 1.36 1.51 1.09 0.84
319,050,985 385,146,025 611,714,071 715,553,974
CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED Working Capital Turnover Ratio 1.6 1.4 1.2 1.22 1 Ratio 0.8 0.6 0.4 0.2 0 2003 1.51 1.09 0.84
1.36
2004
2005
Years
2006
2007
INFERENCE
From the above table it shows that the high ratio in the year2005 is 1.51 the greater are the profit. A low working capital turnover in the year 2007 is 0.84 it indicates that working capital is not effectively utilized.
Net working capital ratio: Net working capital is sometimes used as a measure of firms liquidity. It is considered that between to firms the one having the larger net working capital has
the greater ability to meet current obligations. NWC however measures firms potential of funds. It can be related to net assets.
Net working capital Net working capital ratio = ----------------------------------------Net Assets
Year
2003 2004 2005 2006 2007
Computation of Net Working Capital Ratio Net working Capital Net Assets
Ratio
253,360,121
319,050,985 385,146,024 611,714,070 712,489,826 1,091,104,195
0.79 0.82 0.62 0.85 0.65
319,050,985 385,146,025 611,714,071 715,553,974
Net Working Capital Ratio
1 0.8 0.79
Ratio
0.82 0.62
0.85 0.65
0.6 0.4 0.2 0 2003 2004
2005
Years
2006
2007
INFERENCE:
From the above table it shows that in the year2003 the ratio is 0.79 and increase in 2004 suddenly it decreases to 0.62 in the year 2005.in the year 2006 it increases to 0.85. The net working capital ratio is satisfied.

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CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED CHAPTER-1 INTRODUCTION

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

1.3TYPES OF WORKING CAPITAL Working Capital can be classified is as follows.

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

On the basis of Time the working capital may be divided in to

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

So as to carry on these productive and distributive activities smoothly.

1.6 Components of Working capital: 1. Current Assets 2. Current Liabilities

1. Current Assets are:

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

Internal sources External sources Working Capital Sources

Long term sources

External 1.Trade credit 2.Credit papers 3.Bank credit 4.Public Deposits

1. Depreciation funds 2.Provision of Taxation 3.Accrued Expenses

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

About Clean Foods:

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

13,600 mt 12,000 mt 1 1,320 mt

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

manager for commercials.

manager for utilities

there to help Technical Manager

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

Financial analysis helps in assessing the financial position and profitability

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

period from 2002 to 2007

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

company may limit the analysis of the research to some extent

period of two months only.

for comparative analysis.

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

165,200,01 9 35,523,383 807,076 9,994,840 105,415,07 0 316,940,38 8

261,558,500 27,482,954 152,341 12,250,010 82,155,427 383,599,232

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

48,426,925 15,153,342 63,580,267 253,360,12 1 65,690,864 319,050,98 5

54,703,756 9,844,491 64,548,247 319,050,985 ----319,050,985

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

12,250,010 82,155,427 383,599,232

8,496,873 158,538,95 9 523,938,70 9

54,703,756 9,844,491 64,548,247 319,050,985 66,095,040 385,146,025

122,536,40 1 16,256,283 138,792,68 4 385,146,02 5 ----385,146,02 5

CLEAN FOODS LIMITED CLEAN FOODS LIMITED CLEAN FOODS LIMITED

Decrease ----3,426,813 -------------

122,536,401 16,256,283 138,792,684

79,313,325 8,601,835 87,915,160