SUMMER TRAINING REPORT

A STUDY ON
WORKING CAPITAL MANAGEMENT
CASE OF
THE ROPAR DISTT CO-OP MILK PRODUCER UNION
LTD.
(VERKA MILK PLANT), MOHALI

Project cordinator:

Submitted by:

Dr. Aarti Mahendru

Yamuna Dass
MBA 3RD Semester
Roll No 1440676

CHANDIGARH GROUP OF COLLEGE LANDRAN

2014-2016

Certificate of Supervisor

This is certificate that Mr. Yamuna Dass Roll No. 1440676 has complete the research project
titled A study on Working Capital Management case of the Ropar Distt CO-OP Milk
Producer Union ltd. (Verka Milk Plant ) Mohali under my supervision in fulfilment of the
MASTER OF BUSINESS ADMINISTRATION degree of Punjab Technical University.

Supervisors signature:
Supervisors name: Mrs. Arti Mahendru
Date:

PREFACE
The training is practical experience and helps the students to view the real.
In MBA Summer Training in some company is arranged for the students
that are vitally essential.
This type of training help the student to visualize the things practically. I
went two month industrial training in milk plant Mohali (Punjab). The report
represents the detail of work; I have done during the training period. This report
has been drafted by the paying regular visit and carrying out the work in
company. With the assistance of staff, I have been given the opportunity to work
on Working Capital Management
I am grateful to all those who have helped me directly and indirectly in
preparing this project report.
This report has written in very simple way.

ACKNOWLEDGEMENT
NOTHING IS IMPOSSIBLE BECAUSE IMPOSSIBLE SAY I AM POSSIBLE
I am very thankful to the CO-OP MILK PRODUCERS UNION LTD. MILK PLANT,
MOHALI who at most Co-operation for the successful completion of this project report on
The study of WORKING CAPITAL MANAGEMENT OF CO-OP MILK PRODUCERS
UNION LTD. MILK PLANT, MOHALI. And kindly allowing me to do my work in their
organization and providing me necessary information from the time to time.
I must first express my heartiest gratitudes to Mr. P.K. BALLI, Dy Manager, who extended
his maximum Co-operation in granting the permission as well as in guiding me at every stage
to overcome the obstacle while collecting that and gave me the encouragement till
completion of my data collection. I must also thankful to my college guides who have
displayed great lightening me as students on the different aspects of management.

TABALE OF CONTENTS
Sr. No.

Particulars
certificate
Preface
acknowledgement

3
4
5
6

Introduction
1.1 Indian Dairy industry
1.2 History
1.3 Growth rate
1.4 Key players
1.5 Key challenges
Company Profile
2.1 Introduction of the organisation
2.2 Objective of the organisation
2.3 History and present position of the organisation
2.4 Organisation structure
2.5 Organisation network
2.6 Product and packaging
Additional theory
Research Methodology
3.1 Objective of the Research
3.2 Research Design
3.2 Limitation
Data Analysis and Interpretation

Page No.
2-4

6-11

12-26

27-29

Finding and conclusions

30-45
46-48

Recommendations

49-50

Bibliography

51

Chapter -1
Introduction

1.1 INDIAN DAIRY INDUSTRY (Introduction):

India is the worlds largest producer of dairy products by volume, accounting for more than
13% of worlds total milk production, and it also has the worlds largest dairy herd. As the
country consumes almost all of its own milk production, India was neither an active importer
nor an exporter of dairy products prior to year 2000. However, since the implementation of
Operation Flood Programme, the situation changed significantly and imports of dairy
products reduced to very small quantities. From 2001, India has become a net exporter of
dairy products and after 2003 Indias dairy import has dipped while exports have increased at
a fast rate. Yet the countrys share in global dairy trade still remains at minor levels of 0.3 and
0.4 percent for exports and imports respectively. This is due to the direct consumption of
liquid milk by the producer households as well as the demand for processed dairy products
that has increased with the growth of income levels, which have left little dairy surpluses for
export. Nevertheless, India consistently exports specialty products such as casein for food
processing or pharmaceuticals. The Indian dairy sector is also different from other dairy
producing countries as India places its emphasis on both cattle and buffalo milk. In 2010, the
government and the National Dairy Development Board have drawn up a National Dairy Plan
(NDP) that proposes to nearly double Indias milk production by 2020. This plan will
endeavour to increase the countrys milk productivity, improve access to quality feeds and
improve farmer access to the organised market. These goals will be achieved through
activities that focus on increasing cooperative membership and growing the network of milk
collection facilities throughout India.
1.2 HISTORICAL EVOLUTION:
Prior to year 2000, India was not noticed by most international dairy companies, as the
country was neither an active importer nor an exporter of dairy products. Although India has
imported some milk powder and butter oils as aid between 1970 and 1990, exports from India
were insignificantly small and it was not until 2000 onwards, when Indian dairy products
started having more presence in global markets. 3
Milk production in India has developed significantly in the past few decades from a low
volume of 17 million tons in 1951 to 110 million tonnes in 2009. Currently, the Indian dairy
market is growing at an annual rate of 7%. Despite the increase in production, a demand
supply gap has become imminent in the dairy industry due to the changing consumption
habits, dynamic demographic patterns, and the rapid urbanization of rural India. This means
that there is an urgent need for the growth rate of the dairy sector to match the rapidly
growing Indian economy.
India is the worlds largest producer of dairy products by volume and has the worlds largest
dairy herd. The country accounts for more than 13% of worlds total milk production and is
also the worlds largest consumer of dairy products, consuming almost all of its own milk
production. Dairying has been regarded as one of the activities that could contribute to
alleviating the poverty and unemployment especially in the droughtprone and rainfed areas.
In India, about threefourth of the population live in rural areas and about 38% of them are
poor. Therefore among these people, as well as the large vegetarian segment of the countrys
population, dairy products provide a critical source of nutrition and animal protein to millions
of people in India.

1.3 GROWTH RATE:

Despite its huge production volume, India nevertheless faces a milk supply gap due to
increasing demand from a growing middle class population. Estimation suggests that Indian
dairy production is growing at a rate of about four percent per year, yet consumer demand is
growing at approximately double that rate. In response to increasingly strong demand for
milk products, the Indian dairy industry is growing its milk production in several ways. For
example, dairy farmers have responded to increasing dairy prices by increasing herd sizes. In
addition, those farmers working directly with buyers from the organised sector generally have
access to modern extension services, which provide support for the dairy farmers to improve
management, feeding, fertility and veterinary care. Many of these extension service providers
offer artificial insemination services that aim to further improving milk yields with new dairy
cattle genetics. Artificial insemination services are expected to grow in the future, as the
government of India continues to develop protocols for imported genetics products. Finally,
commercial dairies are also continuing with strengthening their presence in India.
Table.1
PRODUCT
Fluid Milk
Ghee
Butter
Yogurt
Khoa
Milk powder
Paneer
Other including Ice Cream

PERCENTAGE
46.0%
27.5%
6.5%
7.0%
6.5%
3.5%
2.0%
1.0%

India dairy product mix 2009

1.4 PLAYERS IN INDUSTRY:

Gujarat Co-operative Milk Marketing Federation (GCMMF) is the largest player.

(Gokul, Warana in Maharashtra, Saras in Rajasthan, Verka in Punjab, Vijaya in

Andhra Pradesh, Aavin in Tamil Nadu
J K Dairy, Heritage Foods, Indiana Dairy, Dairy Specialties
Production Policy and Regulation of Dairy Products
Dairy production in India runs on a low inputlow output system, in which individual
producers typically own less than five cattle or buffalo and use locally available feeds. This
has resulted in yield levels that are below international averages but also the worlds lowest
production costs. As dairy product prices and income from milk collection continue to
increase, farmers are slowly growing herd sizes and increasing their specialisation. In
addition, interests from private sector investors have also facilitated construction of larger
dairies through partnering with dairy processors.
Through implementing various incentive schemes, Indian policy makers are aiming to
increase the countrys dairy output. Examples of these schemes include the Ministry of
Agricultures research programs, imports of bovine semen and embryos, the National Project
for Cattle and Buffalo Breeding, which focuses on improving Indian indigenous breeds with
an allocation of USD 255 million. On the other hand, support is also offered by the private
sector through activities such as artificial insemination services, training for veterinary care
and other livestock management skills.
In 2010, the government and the National Dairy Development Board have drawn up a
National Dairy Plan (NDP) that proposed an expenditure of around USD 378 million to
nearly double Indias milk production by 2020. This plan will endeavour to increase the
countrys milk productivity, improve access to quality feeds and improve farmer access to the
organised market. These goals will be achieved through activities that focus on increasing
cooperative membership and growing the network of milk collection facilities throughout
India.
Cooperative Movement in Dairying
Immediately after India gained independence in 1947, the Milk Control Board was
established to control the dairy supply and distribution chains. However, a number of issues
emerged. First, the middlemen got hold of the sales profit and the share of producers in the
sales declined. Second, as processing units were set up in cities, it became difficult for the
milk to be procured and transported the production centres in the rural areas. Consequently,
the yield of milk declined and imports of milk powder went up.
Operation Flood Era
Indias dairy sector witnessed a spectacular growth between 1971 and 1996; the period was
known as the Operation Flood era. An integrated cooperative programme aimed at
developing the dairy industry was implemented in three phases, with The National Dairy
Development Board designated by the Government of India as the implementing agency. The
major objective was to provide an assured market round the year to the rural milk producers
and to establish linkage between rural milk production and urban market through modern
technology and professional management. The Operation Flood was one of the worlds
largest rural development programmes which ran for 26 years and eventually helped India to
emerge as the worlds largest milk producer. As part of the programme, around ten million
farmers were enrolled as members of about 73000 milk cooperative societies. Since the
implementation of this programme, milk production increased from 21 million tonnes in 1970

to nearly 69 million tonnes in 1996, at the compound growth rate of 4.5 per cent. By 1996,
milk cooperatives attained a dominating share of the Indian dairy market butter 96%,
pasteurized liquid milk over 90%, milk powder 59% and processed cheese 85%. India was
reckoned as a major threat in the dairying world. In retrospect, it was by no means an easy
task.

1.5 KEY CHALLANGES:

Trade
While the decade of 200010 has seen positive level of dairy exports from India, the next
decade is predicted to be different and signs of change are already visible. Due to low global
dairy prices and high domestic costs, India is finding it difficult to sustain exports of dairy
products. On the other hand, factors such as the reintroduction of subsidies by European
Union, devaluation of currency of New Zealand (a major dairy exporting country), combined
with continuing global economic downturn, have made dairy imports into India attractive. It
is predicted that dairy commodities will be the first largescale imports and will be used by
Indian dairy cooperatives and companies to make reconstituted milk and other branded dairy
products. This may be followed by Imports of branded dairy products.
In the past, India has not been permitting free import of dairy products. As the countrys dairy
sector employs 90 million people, India has advocated that milk and cheese be excluded from
the scope of free trade agreement under negotiations with the European Union. However,
despite Indian governments fear about how small dairy farmers could suffer from import
liberalization, India is now facing strong pressure to open up its market to dairy products
from Europe. There are arguments suggesting that removing such tariff would leave Indias
farmers unable to withstand competition from European imports. Often these imports have
been highly subsidized and can be sold at lower prices than domestically produced goods.
Supply and Demand
A recent survey has revealed that on average, an Indian family allocates 17 per cent of the
household food expenditure on milk and milk products, with rural families allocating 15 per
cent and families in the urban area allocating over 18 per cent. As income continues to
increase, it is predicted that the demand for milk is going to rise faster than seen in the
previous decade. Moreover, the overall demand is growing rapidly compared to milk
production. The higher GDP growth rate, enhanced income of rural households and the farm
debt waiver are influencing the demand for milk both in the rural and urban areas.
Production Cost Reduction: In order to increase the competitiveness of Indian dairy
industry, efforts should be made to reduce cost of production. This can be achieved through
increasing productivity of animals, improve animal health care and breeding facilities and
management of dairy animals. The Government and dairy industry will need to play a vital
role in this direction.
Strategy and Infrastructure Development: Indian dairy industry should further develop
proper dairy production, processing and marketing infrastructure, which is capable of
meeting international quality requirements. A comprehensive strategy for producing quality
and safe dairy products should also be formulated with suitable legal backup.

Focus on Specialty Products: Dairy industry in India is unique with regard to the
availability of buffalo milk. In this case, India can focus on buffalo milk based speciality
products, such as Mozzarella cheese, in order to meet the needs of the target consumers.

CHAPTER 2

COMPANY PROFILE

2.1 INTRODUCTION TO THE ORGANISATION

Verka is a Co-operative Company and is former oriented autonomous or
Organisation based on cooperative pattern. It is the king of Punjab Region as
Milk Procurement is concern. Its daily milk production is around 2.00 lacs liter

per day on an average and that is why huge amount of milk production has
became its core competency. It produces many daily products.
MILKFED is a group of milk union established under operation flood
programme as the implementing agency by the government of Ropar and
potential increasing demands of milk in the metropolis Chandigarh. The ropar
district co-operation milk produces union was established in the year of 1980.

2.2 OBJECTIVE OF ORGANISATION

The main objective of its establishment were:
To create an organized factor to develop and command a major share of
urban milk market of Chandigarh.
To provide year around remuneration price to small rural milk producers
organized into co-operative
The milk plant carries out activities conduct to the economic development
to agriculturist by organizing effective production, process and
marketing of commodities.
To provide quality milk and milk products to the consumers.

2.3HISTORY AND PRESENT POSITION OF VERKA

HISTORY OF VERKA
The company has been well known by brand name verka especially in
Punjab and Haryana. Chandigarh plant set up in year 1961-1962 to meet
the milk initially. But is was not able to fullfilll the growing requirement
of Chandigarh City. Due to this reason another plant setup in September
1980 Mohali (Punjab), which is adjoining to Chandigarh.

MILK PLANT MOHALI

The Ropar Distt. Co-operative Producer Union

It is the one of the MILKFED group located at S.A.S. Nagar, Mohali (Punjab). It is
registered on 05.07.1978 under Punjab Cooperative Socities Act, 1961. It is started its
activities on September1980.

PRESENT POSITION OF VERKA

Presentaly it has 856 Socities and around 46000 member are supplying milk and making their
contribution to the Mohali (Punjab) plant as follow:
1.
2.
3.
4.
5.

In Ropar District 520 villages Societies.

In SAS Nagar, Mohli 164 Societies.
In Fatehgarh District 109 Societies.
In Patiala District 60 Socities.
In UT 3 Socities.

In Ropar District three chilling centers are situated namely

Morinda, Jhinjri and Nurpur.
The plant mainly supply milk to the cities of Chandigarh, Mohali and Panchlula also covering
some adjoining cities of Himachal Pradesh and Haryana.

2.4 ORGANISATION STRUCTURE

For the smooth running of plant , various section are managed by the management . each and
every activity is delegated to particular section. It is impossible for top management to take

decision on every problem, so various tasks are delegated to various section. The following
are the section in the Verka OrganisatioN:
1. Procurement Section
2. Production Section
3. Quality Control Section
4. Marketing Section
5. Account Section
6. Administrative Section
7. Engineering Section
8. Purchase Section
9. Store Section
10. MIS Section
11. Security Section

2.5.ORGANISATION NETWORK
Verka is having apex body at the state land known as MILKFED Punjab,
Chandigarh. To start with fuc tion in various fields of different union in different
district and operate with Dairying and Dairy fields that is the operation flood

with assistance of National Dairy Coopration (NDC) Delhi and later on is

launached to operate second who is affiliated to Punjab Milk Fed. It helps to its
affiliated district milk co-oprations in 11 districts. These districts union are
following:
1. ROPAR
2. PATIALA
3. LUDHIANA
4. FARIDKOT
5. FIROZPUR
6. SANGRUR
7. BATHINDA
8. GURDASPUR
9. HOSHIARPUR
10. JALANDHAR
11. AMRITSAR
These union is eleven district of the state carry out smooth functioning of
marketing , procurement , cattle breeding programme through district
cooperative union.

PLANT AT A GALANCE
Established 1980

The Ropar District Co-operative

Milk Producer Union Milk Plant Mohali

Brand Name

Verka

Installed Capacity

100000 liter of milk per day

Productin of Milk

2.0 lacs liter per day

Status

Co-operative Society

Head Office

Milkfed Punjab , Sector 34 Chd.

Plant

The Ropar District Co-operative

Milk Producer Union Ltd. Milk
Plant , SAS Nagar Mohali

Product and packing

Product

packing

GHEE POLY PACK

500MS.& 1LTR

GHEE TIN PACK

500GMS, 1LTR, 2LTR, 5LTR,&15KG

TABLE BUTTER

10GMS, 100GMS, &500GMS

CHEES

100/200/400GMS, 400GMS TIN

PIZZA CHEESE

200GMS.&1KG PACK

VERKA VIGOUR

500GMS. JAR, 500GMS REFILL

DAIRY WHITNER

500GMS. PKT & 10KG TIN

SKIMMED MILKED POWDER

1KG. PKT &25KG. BAG

WHOLE MILK POWDER

500GMS. TIN, 1KG TIN, 10KG TIN

SWEETEND FLAVORED MILK

TETRAPACK

200 ML.BOTTLE,200 ML.

SWEET LASSI

200ML. TETRAPACK

MANGO RASEELA

200ML. TETRAPAK

PINE APPLE RASILA

200ML. TETRAPACK

MILK CAKE/PEDA

200GMS.PKT.

KAJU PINNI

50GMS.PKT.

MILK POUCHES

FULL CREAM,STANDARDISED,
TONED, DOUBLE TONED

U.H.T. MILK
TONED

1LT.TETRAPAK STANDARDISED &

PLAIN LASSI

1 LTR.PAK.

NAMKEEN LASSI

250 GM, 1KG

CURD

200GM, 400GM, 500GM

KHEER

125 GM, 200GM

BIO-YOGHURT

250 GM

ICE CREAM
ORANG BAR

MALAI CULFI, MANGO DUET,

PANEER

200 GM.PKT

Additional Theoretical Framework:

Working Capital Concepts
Net Working Capital
Gross working Capital

Current Assets Current Liabilities

The firm investment in current assets.

Working Capital Management : The administration of the firms current assets

and the financial needed to support current assets

2.5 TYPES OF WORKING CAPITAL

2.5.1 ON THE BASIS OF CONCEPT

1. Gross Working Capital :The gross working capital refer to the firm investment
in all the assets taken together. The total of investment in all the individual current
asset is the gross working capital.
For example if a firm has a cash balance of Rs. 50,000, debtor of Rs. 70,000 and
inventory of raw material and dinish goods has been assessed at Rs. 1,00,000, then the
gross working capital of the firm is Rs. 2,20,000 (i.e.,Rs. 50,000+Rs. 70,000+Rs.
1,00,000).
2. Net Working Capital :The term net working capital may be defined as the excess
of total current assets over total current liabilities. Current liabilities refers to those
liabilities which are payable within a period of 1 year.

NET WORKING CAPITAL = TOTAL CURRENT ASSETS TOTAL CURRENT

LIABILITIES

A financial management must considered both gross and working capital because they
provide different interpretation. The gross working capital denotes the total working
capital or the total investment in current assets. This will help avoiding 1.the
unnecessarily stoppage of work or chance of liquidation due to insufficient working
capital and 2. Effects on profitability.The gross working capital also given an idea of total
funds required for maintaining current assets.

2.5.2 On the basis of time

1) Permanent / Fixed Working Capital : permanent working capital may be
define as the minimum level of current assets which is required by a firm to carry on
its business operation. Every firm has to maintain a minimum level of raw material,
work in progress , finish goods, and cash balances.
For example extra inventory of finish goods will have to be maintained to the support
the peak period of sale. Permanent working capital is permanent needed for the
business and therefore ; it should be finance out of long term funds.
2) Fluctuating /Variable Working Capital :It is the extra working capital
needed to support the changing production and sales activities of the firm. The
amount of temporary working capital keeps on fluctuation on time to time on the basis
of business activity.

2.6 OPERATING CYCLE

The investment is working capital is influenced by Four key Event in the production and
sales Cycle of the Firm:1.
2.
3.
4.

Purchase of Raw Material

Payment of Raw Material
Sale of Finished Goods
Collection of Cash of Sales

OPERATING CYCLE

The firm begins the purchase of raw material which are paid for after delay which represents
the account payable period. The firm convert the raw material into finished goods and then
sells the same. The tine lag between the purchase of raw material and sale of finished goods
is the inventory period. Customer pay their bills some time after the sale. The elapses
between the date of sales and date of collection of receivables is the accounts receivab le
period.

2.7 Customer satisfaction surveys help to:

Improved satisfaction surveys help to

React quickly to changes in the market
Identify and capitalize on opportunities
Beat the competition
Retain or gain market share
Increase revenue
Reduce costs

, the tern working capital refer to the gross working capital and represents the amount of
funds invested in current assets. Thus the Gross Working Capital is the capital Invested in
total current assets of the enterprise.
In narrow sense, the term Working capital refers to the net working capital. Net working
capital is the excess of current assets over current liabilities.

Net Working Capital = Current Assets Current Liabilities

2.8 Importance of Working Capital

Working capital is a life blood and nerve centre of a business. Just as circulation of blood id
essential in human body for maintaining life, working capital is very essential to maintain the
smooth running of a business. No business can run without adequate working capital .
The main advantages of maintaining the adequate working capital ate as follow:

Solvency of the business :Adequate

working capital helps in maintaining the

solvency of the business.

Goodwill :Sufficient working capital enables the concern to make promt payments and
hence it helps in creating goodwill.

Easy loan : A concern having adequate working capital, high solvency caneasily arrange
the loans.

Regular supply of raw materials : Sufficient working capital enables the regular
supply of raw material from supplies.

Regular day to day payment :

A company which has adequate working capital

can male regular payment of salaries , wages and other day to day expenses . It the adversely
affects the moral of employees and increase their efficiency, reduces wastages and cost and
enhance production of profits.

Ability to face crises : Adequate working capital enables a concern to face business
crisis in emergencies such as depression.

Quick and regular return on investment : Every investor wants a quick and
regular return on its investment. Sufficient of the working capital enables a concern to pay
quick and regular dividends to its investor.

2.9 Factor determine the Working Capital Requirment

The working capital requirement of a concern depends upon a large number of factor. The
important ones are as follows:

Nature of the business : the working capital requirement of the business is

closely related to the nature of the business. A company which has a small operating
cycle, require less working capital for example a company produce day to day use
product like milk etc. in the other hand a company which has a long operating cycle
require a more working capital than previous one.
Seasonality of operation : Firms which have marked seasonality in their
operation usually have highly fluctuating working capital. For example the firm
manufacturing ceiling fans. The sale of ceiling fans is seasonal because in summer
season the demands in up but in winter the demands in decrease.
Production policy : production policy of concern is highly effects the working
capital requirement because where the work has been done through the year the need
of working capital is more.
Market condition : The degree of competition prevailing is the market place
has an important bearing on working capital needs. When a competition is keep a
large inventory of finish goods in required to promptly serves the customers who may
not inclined to wait because others manufacturers are ready to meet their needs.

Current assets

: There is any cash assets that can be quickly turned into cash.

Current assets are assets, which can be converted into cash within an accounting year. Their
following current assets are:

Cash in hand and bank balance

Bills receivables
Sundry debtor
Short term loan and advance
Inventories of stock
Raw material
Work in progress
Stores and spares
Finishes goods
Prepaid expenses
Accrual incomes etc.

Current liabilities

: Current liabilities are those claims of outsiders, which are

expected to mature for payment within an accounting year. There are following current
liabilities are:

Bills payable

Sundry creditors or account payable

Short term borrowing
Dividend payable
Bank over draft
Provision
Outstanding expenses
Unaccrued income

Steps involved in working capital:

1. Forecast the amout of working capital
2. Determine the working capital

2.10 Estimation of working capital management required

factor to be considered:

Total cost incurred on material , wages or overhead.

The average period of credit allow to customer.
The amount of cash require to pay day to day expenses of the business.
The amount of cash require for advance payment if any.
The average period of credit to be allowed by suppliers.
Time lag in the payment of wages and other overhead.

2.11 SOURCE OF WORKING CAPITAL

The company can choose to finance its current assets by
1. Long term sources
2. Short term sources
3. A combination of them

2.11.1 Long term sources of Finance include

equity and preference shares,

retain earning, debenture and other long term debt from public deposit and financial
institution. The long term working capital needs should meet through long term means of
financing. Financing through long term means provides stability, reduce risk or payment. And
increase liquidity of the business concern. Various types of long term sources of working
capital are summarized as follow:
1. Issue of share: It is the primary and most important sources of regular or
permanent working capital. Issuing equity shares as it does not create and burden on
the income of the concern. Nor the concern is obliged to refund capital should
preferably raise permanent working capital.

2. Retain earning: Retain earning accumulated profits are a permanent sources of

regular working capital. It is regular and cheapest. It creates not charge on future
profits of the enterprises.
3. Issue of debenture: it create a fixed charges on future earning of the company.
Company is obliged to pay interest. Management make should wise choice in
producing funds by issue of debentures.
4. Long term debt: company cm raised fund from accepting public deposits, debts
from financial institution like banks, corporations etc. the cost is higher than the other
financial tools.
5. Other sources: sale of idle fixed assets, security received from employees and
customers are example of other sources of finance.

2.11.2 Short term source of temprory working capital

temporary
working capital is required to meet the day to day business expenditure. The variable working
capital would finance from short term sources of funds. And only the period needed. It has
the benefit of low cost and establishes closer relationship with banker. Some sources of
temporary working capital are given below:
1. Commercial bank: The commercial bank constitute significant sources for short
term of temporary working capital. This will be in the form of short term loans, cash
credit, and overdraft and though discounting the bills of exchange.
2. Public deposit: Most of the company in recent years depend on this source their
short term working capital requirements ranging six month to three year.
3. Various credits: trade credits and business credit papers and customer credit are
other sources of short term working capital. Credit from suppliers, advances from
customers. bills of exchanges etc. helps to raise temporary working capital.
4. Reserve and other fund: various fund of company like depreciation fund.
Provision of tax and other provision kept with the company can be used as temporary
working capital. The company should meet to its working capital needs through both
long term and short term funds.

It will be appropriate to meet at list 2/3 of the permanent working capital equipment form
long term sources, whereas the variables working capital should be financed from short term
sources, the working capital financing mix should be designed in such a way that the overall
cost of working capital in the lowest, and the funds are available on time and for the period
they are really required.

CHAPTER 3

Research Methodology

RESEARCH METHODOLOGY
In order to achieve the above set of objective two types of data was needed.
Primary data and secondary data were collected for this purpose.

3.1 OBJECTIVE

To find out the operating cycle of the business.

To understand the working capital
To find out the Ratio analysis

3.2 Research Design

A) POPULATION :
All the milk plants in Punjab constitute the population of the study.
A group of objective constitute are Population.

B)

SAMPLE:
Milk plant of verka is chosen as a sample unit to anlayse the working
capital of verka plant through my own reasons of project report.

C)SAMPLING UNIT:
A unit in a statistical analysis refers to one member of a set of entities being studied. It
is the material source for the mathematical abstraction of a random variable. We have
to use the sample unit from the verka financial reports. The sampling unit provide the
Common example of a unit would be a single person, animal , plant or manufactured
item that belongs to larger collection of such entities being studied.

F)DATA COLLECTION:
In order to achieve the above set of objective two types of data was needed. Secondary
data were collected for this purpose.Secondary data is the data which already exit and
has been collected By someone else for some other purpose but is useful for the
present study. The secondary data is collected by referring personal records of the
company referring to the Financial Statement (Balance Sheet and Profit and Loss
Account) of the company.

G)SCOPE OF THE STUDY:

Scope define the parameter of these can be an objective, or a theory process.
Activity.Describing either future, current or a past knowledge or statement of
descriptive activity, experience etc. Scope always the unless of the unlimited nature
will define specific boundaries a knowledge the definitions of scope are the borders
where the objective, knowledge instruction or outcome of the activity is found.

H) TECHNIQUE OF ANALYSIS:
This project consist of two parts.
The first source is a study of the working capital in The Ropar Distt. Co- operation
Verka Plant S.A.S. Nagar ( Mohali )
The secondary source of information has been sourced from the internet and from
business related magazines and newspapers.
I have to use the ratio and percentage used to analysis the data.
The second part of the study has been done using an exploratory research process for
this purpose. For the collection of primary data this was the only method used. The
reason I used this method is because a need was felt for the free influx of information
about the products. Also this method allow the use of skills gained in class.

3.3 LIMITATION OF THE STUDY:

Though the Summer Training in some Company is beneficial for the students. But the real
benefit is dependents upon a number of factors.
These factors are called the limitation of the project

Time Limit:-To have

complete study of Working Capital Management of the

CO-OPERATIVE MILK PRODUCERS UNION LTD. MILK PLANT MOHALI

the time duration spent for training was not sufficient.
Feedback: I will take feedback for some project manager , not for all.

CHAPTER 4

DATA ANALYSIS
AND
INTERPRETATION

4.1 Data AnalysisThe time that elapses between the purchase of raw materials and collection
of cash for sales is referred to as the operating cycle, whereas the time length between the
payment for raw material purchases and collection of cash for sales is referred to as the cash
cycle.
So we can show the operating cycle as follows

Operating cycle

=
Inventory period + Account receivables period
account payable period

Inventory period
RMCP

=
=

RMCP + WIPCP + FGCP

Raw material conversion period

WIPCP

Work-in-progress conversion period

FGCP

Finished goods conversion period

RMCP

Average raw material 365

Total raw material consumption

WPCP

Average work in progress 365

FGCP

Average finished goods 365

Total cost of goods sold

RCP

Average receivable 365

Total credit sale

DP

Average creditor365
Total credit purchase

AVERAGE RAW MATERIAL\RAW MATERIAL CONVERSION PERIOD

2009
Average raw material = Opening stock of raw material + closing stock of raw
material\2
=14,317 + 10,226.30\2
=12272.12
Raw material consumption = 63198.04\365 = 173

RMCP

12272.12\173

70 day

2008
Average raw material = Opening stock of raw material + closing stock of raw
material\2
=10226.30 + 6784.72\2
=8505.5
Raw material consumption = 55196.12\365 = 151
RMCP

=
=

8505.5\151

56 day

AVERAGE WORK IN PROGRESS\COST OF PRODUCTION PER DAY

2009
Average work in progress = opening stock of work in progress + closing stock
of work in progress\2
=12282.45 + 21378.85\2
=16830.65
Cost of production per day = sale transaction cost

=86538.48 158.40 = 86380.08

WICP

16830.65\86380.08 365

71 days

2008
Average work in progress = opening stock of work in progress + closing stock
of work in progress\2
=8136.52 + 12282.45\2
=10209.48
Cost of production per day = sale transaction cost
83209.29 174.04 = 83035.25
WICP

10206.48\83035.25 365

45 Days

AVERAGE FINISH GOOD INVENTORY\COST OF GOOD SOLD

2009
Average finished goods inventory = opening stock of finished stock + closing
stock of finish stock\2
=2758.11 + 1304.87\2
=2031.41
Cost of goods sold =57981.11

FGCP

2031.47\57981.11 * 365

13 Days

2008
Average finished goods inventory = opening stock of finished stock + closing
stock of finish stock\2
=1304.87 + 740.80\2
=1022.84
Cost of goods sold = 69995.33
FGCP

1022.87\66995.33 * 365

= 6 days

AVERAGE DEBTOR\CREDITOR SALE

2009

Average debtor = 47173.58 + 49231.61\2

=48202.59
Creditor sale = 78961.32
BDCP

48202.59\78961.32 * 365

222 Days

2008
Average debtor = 49231.61 + 38198.60\2
=43715.10
Creditor sale = 73067.57
BDCP

43715.10\73067 * 365

218 days

AVERAGE CREDITOR\CREDIT PURCHASE

2009
Average creditor = 28167.81 + 27526.23\2
=27847.02
Credit purchase = 73747.68
CCP

=27847.02\73747.68 * 365
=135 days

2008
Average creditor = 27526.23 + 20395\2
=23960.88
Credit purchase = 59906.12
CCP

23960.88\59906.12 * 365

145 Days

4.2 Working capital of the company for last five year

are as follow:
Financial
year
Current
Assets
Current
liabilities
Working
capital

2002-03

2003-04

2004-05

2005-06

2006-07

192318162 307209647 217083977 288148129 272065988

112791427 208908973 103801879 126939619 137924468
79526735

98300674

113282099

12128510

134141520

Interpretation:
From the above information we conclude that the working capital of the
company is increase every year it means the company has a sufficient working
capital maintained. It is the highest in the last year i.e. 2006-07. It is show that
the company working capital is increasing every year.

Milk union wise stock & store position and available of

Working Capital
(Rs. In Crore)
Sr no. UNION

2005-06

2006-07

2007-2008

2008-09

Milk union stocks

69.22

86.53

105.56

116,75

Milkfed stocks

9.57

8.65

10.78

10.81

Total current asset

78.79

95.18

116.34

127.56

WC from banks

78.19

85.08

103.03

86.82

Own margin

0.60

10.10

13.31

40.74

Interpretation:

It is the milk union wise stock and store position and available of working capital which
show that milk union stocks is increasing every year. The last year 2008-09 in increase by
116.75 crore. Its milk stock, total current asset, WC from banks and own margin also
increasing year to year. This table show all the figure of year to year increasing of stocks. Its
own margin in 2008-09 increasing in 40.74 Crore.

4.3STATEMENT OF WORKING CAPITAL

PARTICULAR

2007-08

2008-09

2009-10

99412324
6534532
63743040

14430914
10599671
87795776

10731382
12508666
46054982

2996974

2602243

4606562

129007472

141409710

159543257

118601
98867679

63786
91224286

73309
162457956

TOTAL (A)
(B)CURRENT
LIABILITIES
(I) Current
liabilities
(II) Provision

400680622

348126386

395976114

162318926

187581717

229107072

14425219

11204841

9913434

TOTAL (B)

176744145

198786558

239020506

WORKING CAPITAL 223936477

(A-B)

149339828

156955608

(A)
CURRENT
ASSETS LOAN
AND
ADVANCES
(I) Inventories
(II) Debtor
(III) Loan and
advanced
(IV) Stock of raw
milk
(V) Stock of milk
product
(VI) Cash in hand
(VII) Cash at bank

RATIO ANALYSIS OF VERKA PLANT FOR THE LAST

FIVE YEARS
STOCK TURNOVER RATIO (in times):
Particular
Cost
of
goods sold
Opening
stock
Raw
material
Milk
product
Closing
stock
Raw
material
Milk
product
Total
stock
Average
stock
Stock
turnover
ratio

2005-06
2006-07
2007-08
2008-09
2009-10
1197858047 1419432256 1786464151 2178653051 3089282771

2172298

1878940

2369378

2996974

4606562

46683615

78208544

122647164

129007472

159543257

1878940

2369378

2996974

2602243

2602243

78208544

122647164

129007472

141409710

141409710

124943397

134716332

257020988

276016399

308161772

64471898

67358163

128510494

138008200

154080886

18.58

21.09

13.90

15.70

20.00

ANALYSIS OR INTERPRETATION:

In 2005-06: The stock turnover ratio is 18.58 times more than

average stock. It has been increase from both the previous years. This
shows that company s more properly utilizing its stock into sales and
selling quickly to earn profits.
In 2006-07: The stock turnover ratio is 21.09 times more than
average stock. This years it has been increased from all the previous
years and further it is increasing yearly and the company is utilizing
its stock more efficiently.
In 2007-08: The stock turnover ratio is 13.90 times it has been
decreased from the last year due to increase in average stock from last
year. Now the company has to search ways to overcome this problem
and for full utilization of stocks and to go for more sales.
In 2008-08: The stock turnover ratio is 15.07 times it has been
increasing from the last year due to increase in average stock from last
year company have to work up to how increase sales.
In 2009-10: The stock turnover ratio is 20.00 times it has been
increasing from the last year. This shows that company is utilizing
their stock into sales & it is a good indicator for the company because
it is more than average stock.

RATIO ANALYSIS OF VERKA PLANT FOR THE LAST

FIVE YEARS:
DEBT-EQUITY RATIO (in times)
Particulars
Current
liabilities(outsiders)
Share capital
Reserve
and
surplus
Depreciation
reserve Fund
Shareholderss
Funds
Debt-Equity Ratio

2005-06
2006-07
2007-08
126939618 137924468 14021855

2008-09
198786558.1

2009-10
9913434

25827120 26427245
147889652 6526376

26819655 27493755
38364500
204449286 208475082.78 251300481

81971713

85669555

91050385

91745059

106021456 140218557 138647135

185944089

1.4

1.3

0.53

1.26

97321702

1.43

103720892

ANALYSIS OR INTERPRETATION:
In 2005-06: The Debt-Equity Ratio is 1.4 times. It has increase from the last
years but it is quite satisfactory as the company is maintaining their Debts.

In 2006-07: The Debt-Equity Ratio is 1.3 times. It is also same like previous
years as it is decreased little bit as the company is maintaining Debts.

In 2007-08: The Debt-Equity Ratio is 1.26 times. It is also almost same from
last previous years also favourable to both Lenders and company.

In 2008-09: The Debt-Equity Ratio is 1.43 times. Which is increase from the
last year. It is a good sign for company increase of Debt-Equity ratio shows
risky financial position.

In 2009-10:The Debt-Equity Ratio is 0.53 times. It decrease from last year

because the company pay add more quite then debt.

Debt-Equity Ratio

CURRENT RATIO:

Current Ratio = Current Assets/ Current Liabilities

Annexure:
Financial
year
Current
Assets
Current
Liabilities
Current
Ratio

2002-2003

2003-04

2004-05

2005-2006

2006-07

19238162

307209647

217083977

248148129

272065988

112791472

208908973

103801879

126936619

131924468

1.71

1.47

2.09

1.95

1.97

CURRENT RATIO CHART

CHAPTER 5

FINDING
AND
CONCLUSIONS

FINDINGS:

The company short term financial position is found and satisfactory because its
current as well as quick ratio is double than its current liabilities of the company
each year, which mean company creditors secured each year.

From the point of view of long term financial position of the company DebtEquity Ratio, debt are always less than equity in five year. It means company is
less dependent on outside loans.

Company working capital are increasing each year. It is a good sign for the
company. And it is very useful for company gaining profit and customer
satisfaction.
At the end we can say that the financial position of the company is sound.

CONCLUSION:

The study reveals that the working of the organization is excellent. The working
capital management of the company is satisfactory as per the opinion of the
executives of the Verka milk plant.
The operating cycle indicates that the working of the company is on right track
and performance of the company is very well. The current ratio, inventory
turnover ratio. Debt collection period and working capital turnover ratio of the
company is satisfactory. This type f working has increased the profitability of
the concern as well as performance of the company. This would help for smooth
functioning, progress and survival of the organization.

Chapter-6

Recommendations

SUGGESTIONS:

1. The company capital turnover ratio has been decreasing each year. It must
be improved. If the capital turnover ratio is low, it will indicate that
capital is lying ideal. Now this time it is decreasing otherwise company
will suffer.
2. The company working capital turnover is also low. It has been decreasing
since last four years. It means stock is not readily converted into sales. It
must be increased otherwise sales can suffer.
3. Company should adopt workers participation in management scheme for
increasing its productivity, involvement and participation of employees.
4. For better results the full computerization is necessary in the
organization, so it inversely increase the efficiency of the workers as well
as organization.
5. The staff of the company is working very well and they provide all the
necessary information whenever necessary, excellent working of the
department is an asset to the organization and I suggest that is has to be
maintained in future also.
6. Working condition can be changed so took necessary steps form it
because it inversely affects the morale of the employees.

Bibliography:

 Business Magazines:
Economics times
Business standard
http://www.verkaplant.org.com
http://www.slideshare.com
http://www.verka.coop/network.com
http://www.verkafoods.com/download.htm
http://www.scrib.com/
Other sources Annual report on Verka Milk Plant