Professional Documents
Culture Documents
CHAPTER 1
INTRODUCTION
2
1.INTRODUCTION
1.2.INDUSTRY PROFILE
The private sector has now entered into this field in a big way, capitalizing on the
availability of cheap surplus milk to produce various kinds of dairy products for the
domestic and international market. Several dairy products like skimmed milk powder,
whole milk powder, and infant milk foods of western origin are now being produced in
India. A variety of cheeses, milk drinks, ice creams, pasteurized butter etc. which, were
very common in this country till a few decades ago are now available in abundance in
department stores of big and small cities.
The main objective of this programme is to build a viable and self sustaining
national dairy industry capable of meeting the domestic demand for fresh liquid milk and
milk products and competing in the international area.
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1.3.3 HISTORY
In 1963, KSE Ltd was established according to Indian Companies Act 1956. It
was registered as a public limited company on 25 th September, 1963. Its first production
was started in 1972 with a capacity of 40 tones per day. In 1980 the capacity of plant was
raised to 60 tonnes per day. In 1983, a fully automatic cattle feed plant was added with a
capacity of 120 tonnes per day capacity. By 1992 the capacity of solvent extraction plant
was further increased to 100 tonnes per day. In 1987, the plant capacity was increased to
180 tonnes over day.
The company’s second production unit with a capacity of 150 tonnes per day
solvent extraction commenced operation at Swaminathapuram. Dildigul district of Tamil
Nadu in 1988 and 1989 respectively. The cattle feed capacity was subsequently increased
to 180 tonnes per day.
The third cattle feed plant of the company started operation at Vedagiri in
Kottayam district of Kerala in 1995. This plant is now working on three shifts producing
around 150 tonnes per day. This plant has a basic installed capacity to go up to 240
tonnes per day. The plant at Irinjalakuda and Vedagiri are fully automatic and key
manufacturing operations are controlled by microprocessors. Vedagiri project costing
around Rs. 6 crore was fully financed out of internal sources of company. Company put
up a vegetable oil refining plant at Irinjalakuda at a cost of Rs. 1 crore in 1995. This
project was also fully financed from internal accruals. The company is reaming solvent
extracted coconut oil and expeller sunflower oil in the refinery plant.
Oil millers of Thrissur are the promoters of the company. It was registered in 1956
and incorporated as a public limited company in 1963 as per Indian Companies
Act.Kerala Solvent Extraction Limited was registered as a public limited company on 25 th
September 1963. The company was later renamed as KSE Limited. The company is listed
in three stock exchanges- Mumbai, Chennai, Cochin.The company started production
in1972 with a solvent extraction capacity of 40 MTS per day. On1976 the company is
modernized to cattle feed industry with a capacity of 50 tons per day.
8
KSE Limited is a product oriented company. Cattle feed is the main product of the
company. The other products are oil-cake, de-oiled cake (JERSEY), Milk, Ice cream, etc..
De-oiled cake is marketed under the brand name “JERSEY”. Their Ice cream marketed
under the brand name “Vesta”, is well accepted in the market. Now they are trying to
expand their milk products.
In the early stages, the company faced financial difficulties, but was assisted by
K.S.I.D.C. (Kerala State Industrial Development Corporation) by subscribing to it’s
twenty five percent equity capital and I.F.C.I. (Industrial Finance Corporation of India).
KSE had computerized its operations way back. In the year 1999, KSE went on to
upgrade its EDP set up further. A custom made ERP soft ware was developed for its units
and head office through M/s R.R. Software Pvt. Ltd. Cochin and online computerization
was fully implemented at all its plants. Being custom made for KSE this ERP software,
with SQL RDBMS front end on Visual basic and Windows NT OS , selflessly had
integrated all function of the organization viz FA, inventory, billing payroll ,PPC. MIS,
share accounting etc.
The head office at irinjalakuda has two servers and 40 Nodes running the
application. Other units, in all, have about 8 servers and about 50 Nodes. Their plant at
Vadagiri, Kottayam, has a computerized control room for monitoring, homogenization,
size reduction, batching, pelletisation , pellet cooling and aspiring system.
Now-a-days, the first three processes are out of use. Irinjalakkuda unit of the
company is mainly concentrated on solvent extraction process. Irinjalakuda unit of the
company consists of cattle feed plant and refining plant.
9
1.3.4 COMPETITORS
Kerala feeds; Milma, Godrej, Prima, etc. are the main competitors to the
company. But the company is the number one producer of cattle feed in private sector.
Now the company is concentrated on producing more milk products. Projects for this
purpose are on consideration.
Quality control, feed analytical lab is located inside the Kerala feeds ltd campus.
This department was starting functioning from. The department lab equipped with latest
and most modern analytical instrument for analyzing moisture, crude protein, crude
fiber, other extract, sand and silica and aflatoxin for the coded samples of raw materials
in process product and finished product.
VISION
KSE is committed to provide quality livestock feed and service to farmers at a
reasonable cost.
MISSION
Increase the production of balanced compounded cattle feed in pellet form 240
metric tons to 500 metric tons per day
To produce 240 metric tons per day of other livestock feed (goats, buffaloes,
elephants, laboratory animals & pets)
To manufacture appropriate type of feed and feed supplement for different stages
of livestock
To become a market driving company to a market driven company
Educate and train the livestock farmers to practice scientific feed to optimize
livestock productivity
To support the development of knowledge based network on feed related
activities if
To offer consultancy services for the procurement of feeds ingredients, logistics
solution, feed manufacturing, setting up of feed if analytical labs
To achieve the turnover of RS 250 cores
To be active partner in community development programs.
1. Irinjalakkuda unit;
2. Vedagiri unit, Kurumullur;
3. Palakkad unit, Palakkad;
4. Diary unit, Konikkara;
5. Edayar, Cochin;
6. NIDA unit, Kanchikkode, Palakkad;
7. Parapadi unit, Calicut.
III. Karnataka:
1. Hinkal, Mysore.
1983 A fully automatic cattle feed plant started operation. Capacity 120 MTS Per
day
1984 The solvent extraction plant capacity increased to 80 MTS per day
1987 Cattle feed plant capacity increased to 180 MTS per day
1988 Cattle feed plant in Tamil nadu went in to operation. Capacity 100 MTS per
day
1989 The capacity of solvent extraction plant of Tamil nadu unit is expanded to
100 MTS per day
1990 Cattle feed production capacity of Tamil nadu increased to 150 MTS per day
1991 Palakkad branch started
1993 The company enters export market. Keyes forte, the new feed supplement for
cattle introduced. Cattle feed manufacturing capacity of Swaminathapuram
unit increased to 180 MTS per day
1995 Cattle feed production is started in Mysore in Karnataka state. Calicut branch
opened
1996 240 TPD cattle feed plant at Vedagiri in Kottayam district started operation.
Company renamed to KSE Limited
1998 Company acquired its fourth manufacturing unit at Palakkad and decided to
manufacture and market poultry feed from this unit.
Company celebrated the silver jubilee of the Irinjalakuda unit on completion
of 25th year of commencement of production.
Feeds and extractions, Swaminathapuram( a unit of KSE Limited) was
renamed as KSE Limited Swaminathapuram.
1999 A modern children’s park and information centre has been completed for the
benefit of the public. The company introduced ‘KS Deluxe plus’, the new
pelleted feed in HDPE bags for Kerala market.
2000 Company started production and marketing of pasteurized milk and milk
products from Konikkara diary, Thrissur, Kerala, and Thalayuthu diary, Tamil
nadu.
2002 Started operating a solvent extraction plant and oil refineryon lease at
Kanchikkode for processing coconut cake. Cattle feed production capacity of
the Irinjalakuda plant increased to 199 MTS per day. Ice cream ‘Vesta’
launched
2003 Started produced cattle feed at a leased plant at Edayar, Kalamassery.
14
Cattle feed capacity of Swaminathapuram unit increased to 195 MTS per day.
‘Vesta’ haven ice cream parlours at Irinjalakuda an Marathakkara started
2004 New project of 200 TPD solvent plant and 100 TPD oil physical refining
plant started. Acquires hand from KINFRA for starting a new project at
Kinfra park, koratty.
2005 Cattle feed production capacity at irinjalakuda unit increased to 210 MTS
per day,
Started producing cattle feed in a leased unit at Erode.
Company acquired its 5th cattle feed manufacturing unit at Mysore.
ISO 9001-2000 accreditation for Vadagiri and Swaminathapuram units.
2006 The 200 TPD solvent extraction plant at Koratty commissioned.
100 TPD physical refining plant at Koratty commissioned.
A branch at Nilamel, Kollam district started.
A branch at coimbatore started for marketing Vesta ice cream.
NAME DESIGNATION
Mr. M. C. Paul Chairman and Managing director
Mr.P.K. Varghese Executive director
Mr. A. P. George Director and legal advisor
Mr. K. P. John Director
Mr.Joseph Xavier Director
Mr. P. D. Anto Director
Mr. John francis K. Director
Dr. K. C. Vijayaraghavan Director
Mr. T. R. Ragulal Director
Dr.Jose Paul Thaliyath Director
15
BANKERS
Cattle Feed
Pellet Mash
Figure 1.4.2.1
CHAPTER 2
OBJECTIVE, SCOPE, METHODOLOGY,LIMITATIONS
AND REVIEW LITERATURE
18
“The scope of the study is confined to analyze and study the management of
working capital for a period of five financial years from 2005-06 to 2009-10”.
2.3 METHODOLOGY
Collection of data
The data is collected from annual reports of the ‘KSE Ltd., IRINJALAKUDA’.
Source of data
Source of data is mainly collected through the secondary data’s of the company.
Balance sheet of last 5 years
Profit & loss a/c of last 5 years
Cash flow statement of last 5 years
Secondary data
Secondary data’s were collected from various books, annual reports, company’s
documents and from company’s website.
Tools used for analysis of data
Analysis of liquidity posission
1) Current Ratio
2) Quick Ratio or Acid test Ratio or Liquidity Ratio
3) Absolute Liquidity Ratio
Analysing the efficiency of components of working capital
1) Cash to current assets ratio
21
techniques such as DCFs (Discounted cash flows). If current assets are le ss than
current liabilities, an entity has a working capital
deficiency, also called a working capital deficit.
Working Capital = Current Assets
Net Working Capital = Current Assets − Current Liabilities
Net Operating Working Capital = Current Assets − Non Interest-bearing
Current Liabilities
Equity Working Capital = Current Assets − Current Liabilities − Long-term
Debt
23
A company can be endowed with assets and profitability but short of liquidity if
its assets cannot readily be converted into cash. Positive working capital is required to
ensure that a firm is able to continue its operations and that it has sufficient funds to
satisfy both maturing short-term debt and upcoming operational expenses. The
management of working capital involves managing inventories, accounts receivable and
payable, and cash.
Current assets and current liabilities include three accounts which are of special
importance. These accounts represent the areas of the business where managers have the
most direct impact:
In the USA and Canada the term has developed from a list of goods and materials
to the goods and materials themselves, especially those held available in stock by a
business; and this has become the primary meaning of the term in North American
24
An increase in working capital indicates that the business has either increased
current assets (that is has increased its receivables, or other current assets) or has
decreased current liabilities, for example has paid off some short-term
creditors.Implications on M&A: The common commercial definition of working capital
for the purpose of a working capital adjustment in an M&A transaction (i.e. for a working
capital adjustment mechanism in a sale and purchase agreement) is equal to:
Decisions relating to working capital and short term financing are referred to as
working capital management. These involve managing the relationship between a firm's
short-term assets and its short-term liabilities. The goal of working capital management is
to ensure that the firm is able to continue its operations and that it has sufficient cash flow
to satisfy both maturing short-term debt and upcoming operational expenses.
DECISION CRITERIA
One measure of cash flow is provided by the cash conversion cycle - the net number
of days from the outlay of cash for raw material to receiving payment from the
26
Guided by the above criteria, management will use a combination of policies and
techniques for the management of working capital. These policies aim at managing the
current assets (generally cash and cash equivalents, inventories and debtors) and the short
term financing, such that cash flows and returns are acceptable.
Cash management.
Identify the cash balance which allows for the business to meet day to day
expenses, but reduces cash holding costs.
Inventory management.
Identify the level of inventory which allows for uninterrupted production but
reduces the investment in raw materials - and minimizes reordering costs - and hence
increases cash flow. Besides this, the lead times in production should be lowered to
reduce Work in Progress (WIP) and similarly, the Finished Goods should be kept on as
low level as possible to avoid over production - see Supply chain management; Just In
Time (JIT); Economic order quantity (EOQ); Economic quantity.
Debtors management.
Identify the appropriate credit policy, i.e. credit terms which will attract
customers, such that any impact on cash flows and the cash conversion cycle will be
offset by increased revenue and hence Return on Capital (or vice versa); see Discounts
and allowances.
Identify the appropriate source of financing, given the cash conversion cycle: the
inventory is ideally financed by credit granted by the supplier; however, it may be
necessary to utilize a bank loan (or overdraft), or to "convert debtors to cash" through
"factoring".
28
1. Nature of business
Need for working capital is highly depends on what type of business, the firm in.
there are trading firms, which needs to invest a lot in stocks, ills receivables, liquid cash
etc. public utilities like railways, electricity, etc., need much less inventories and cash.
Manufacturing concerns stands in between these two extends. Working capital
requirement for manufacturing concerns depends on various factors like the products,
technologies, marketing policies.
29
2. Production policies
Production policies of the organization effects working capital requirements very
highly.Seasonal industries, which produces only in specific season requires more working
capital . some industries which produces round the year but sale mainly done in some
special seasons are also need to keep more working capital.
3. Size of business
Size of business is another factor to determines the need for working capital
4. Length of operating cycle.
Operating cycle of the firm also influence the working capital . longer the orating
cycle, the higher will be the working capital requirement of the organization.
5. Credit policy
Companies; follows liberal credit policy needs to keep more working capital with
them.Efficiency of debt collecting machinery is also relevant in this matter. Credit
availability form suppliers also effects the company’s working capital requirements. A
company doesn’t enjoy a liberal credit from its suppliers will have to keep more working
capital.
6. Business fluctuation
Cyclical changes in the economy also influence the level of working capital.
During boom period, the tendency of management is to pile up inventories of raw
materials and finished goods to avail the advantage of rising prove. This creates demand
for more capital. Similarly, during depression when the prices and demand for
manufactured goods. Constantly reduce the industrial and trading activities show a
downward termed. Hence the demand for working capital is low.
7. Current asset policies.
The quantum of working capital of a company is significantly determined by its
current assets. Policies. A company with conservative assets policy may operate with
relatively high level of working capital than its sales volume. A company pursuing an
aggressive amount assets policy operates with a relatively lower level of working capital.
8. Fluctuations of supply and seasonal variations
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Some companies need to keep large amount of working capital due to their
irregular sales and intermittent supply. Similarly companies using bulky materials also
maintain large reserves’ of raw material inventories. This increase the need of working
capital . some companies manufacture and sell goods only during certain seasons.
Working capital requirements of such industries will be higher during certain season of
such industries period.
9. Other factors
Effective co ordination between production and distribution can reduce the need
for working capital . transportation and communication means. If developed helps to
reduce the working capital requirement.
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CHAPTER 3
ANALYSIS AND INTERPRETATION
These ratio’s indicate the capacity of the business to meet it’s short term
application. Liquidity is the ability of the firm to meet it’s current liabilities as they fall
due. It is extremely essential for a firm to be able to meet it’s obligations as they become
due. Liquidity ratios measure the ability of a firm to meet it’s short-term financial
strength or solvency.
Theses ratios are much helpful not only to creditors,bankers and other shor-term
lenders ,but also to long-term lenders, employees, management, and the shareholders.
The trade creditors, bankers, and other short –term lenders are very much interested in
obligation out of it’s short-term resourses. The long term lenders are interested in these
32
ratio’s ,as they would like to know whether the concern would be able to pay the interest
on loans on the due date. The employees of the concern are interested in these ratio’s in
the sense that they would like to know the ability of the concern to pay the remuneration
of the staff in time. The management is interested in it for judging the efficiency with
which the working capital is employed in the business. The shareholders are interested in
these ratio’s in the sense that they would be able to pay the dividend. Following are the
important liquidity ratio’s:
1) Current Ratio
1) Quick Ratio or Acid test Ratio or Liquidity Ratio
2) Absolute Liquidity Ratio
1) CURRENT RATIO
Current ratio is the most common ratio for measuring liquidity. It represents the
ratio of current assets to current liabilities. It is also called working capital ratio. It is
calculated by dividing current assets by current liabilities.
CURRENT ASSETS
CURRENT RATIO =
CURRENT LIABILITIES
The current ratio of firm measures it’s short-term solvency. In a sound business a
current ratio of 2:1 is considered as ideal one. A high ratio indicates sound solvency
posission and low ratio indicate inadequate working capital.
CURRENT RATIO
(Rs in lakhs)
Year Current assets Current liabilities Current ratio
33
INTERPRETATION
As a conventional rule, idle current ratio should be 2:1. The actual current ratio is
2:1 it can be reasonably being taken as a sign of liquidity or the short term solvency of
concern. The company has maintained the current ratio favorable from 2005-06 to 2009-
10, but the year 2006-2007 the ratio was highly increased to 3.6452.
The main reason for increasing current ratio in the year 2006-2007 is
dipping the sail in that year, it is because of increased price of the products. So the stock
increased. To recover this problem the sales have to increase.
Figure 3.1.2
INFERENCES
From the above diagram current ratio of the company is favorable in the study
period 2005-06 to 2009-10 and in the year 2006-07 it is high because of the increase in
various current assets like rawmaterials and inventory.
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QUICK ASSETS
QUICK RATIO =
CURRENT LIABILITIES
The term quick assets refers to current assets ,which can be converted in to cash
immediately. It consist of all current assets except stock and prepaid expenses. Quick
liabilities compraise current liabilities excluding bank overdraft.
Quick ratio of 1:1 is considered satisfactory as a firm can easily meet all it’s
current liabilities. If the ratio is less than 1:1 then the financial position of the concern is
sound and good.
QUICK RATIO
(Rs in lakhs)
35
Figure 3.1.3
INFERENCES
From the above diagram quick ratio of the company has favorable in the study
period 2005-06 to 2009-10. In year 2008-09 the company shows lower quick ratio
because of the company had highest stock in the year.
.
36
The ideal absolute liquidity ratio is 0.75:1. It is fixed at 0.75:1 because for the
payment of quick liabilities besides the 100% cash from the absolute liquid assets, a good
amount of cash may also result from other curret assets like receivables and sundry
debtors. If the absolute liquid ratio is equal to or more than the standard ratio of 0.75:1,
the concern can be taken as liquid. On the other hand , if the actual absolute liquid ratio
is less than 0.75:1, the concern is considered as not liquid.
The absolute liquid ratio of KSE Ltd.is shown in the following table:
37
Figure 3.1.4
INFERENCES
From the above diagram shows absolute liquidity ratio of the company has
favorable in the study period 2005-06 to 2009-10 except in the year 2005-06, the
company shows 1.1111 as absolute liquidity ratio. which is less than the ideal ratio 0.75:
1, because of the company’s poor cash position.
.
38
Figure 3.2.5
INFERENCES
From the above diagram shows variability in the cash to current assets ratio of the
company ,the 2005-06 shows39.51% , but after that itn will decrease. In the year 2009-10
indicates better increase in cash position.
2) INVENTORY TO CURRENT ASSETS
Inventory includes stock of raw materials, spares and stores including goods-in-
transit, goods- in-process, finished goods and others. Every enterprise needs inventory for
smooth functioning of it’s activities. It serves as a link between production and
distribution process.
INVENTORY
INVENTORY TO CURRENT ASSETS =
CURRENT ASSETS
Table 3.2.5
INTERPRETATION
The tamle shows that the inventory is the largest component of the company’s
current assets. During the period of study the inventory is varied from 52.93% to 75.51%.
This shows the large portion of current assets stands the inventory. As far as a
manufacturing concern is keep such level of investment is justifiable.
However , suspicious investment in inventory should affect the company’s
working capital.
Figure 3.2.6
INFERENCES
From the above diagram shows variability in the inventory to current assets ratio
of the company ,in 2008-09 shows 75.51% of inventory as the part of current assets.
Increased level of inventory will badly affect the working capital of the company. In
2009-10 it has reduced 10% than the last year.
42
It is also decided to analyse the inventory conversion period which represents the
number of days taken to convert inventory in to cash. A high conversion period indicates
the inefficiency of management.
43
Figure 3.2.7
INFERENCES
The diagram shows the inventory turnover ratio , the high ratio shows the delay in
conversion of rawmaterials in to finished goods and finished goods in to cash. The last
three year shows the more than 20 days for the conversion. Because of purchasing raw
materials in bulk for discount.
4) WORKING CAPITAL TURNOVER RATIO
This ratio reflects the turnover of the firms net working capital in the course of the
year. It is a good measure of over trading and under trading .The different use of overall
working capital in a firm can be measured with the help of working capital turnover ratio.
The ratio indiactes the ratio of working capital utilization in the firm. A higher ratio
indicates the efficient utilization of working capital and vice versa
NET SALES
WORKING CAPITAL TURNOVER RATIO =
NET WORKING CAPITAL
The higher ratio indicated efficient utilization of working capital and a low ratio
indicates inefficient utilization. The above table shows the working capital and high ratio
45
is due to high net working capital. In the year 2005-06 shows the working capital is 8
times but after that year the company getting good working capital utilization.
Figure 3.2.8
INFERENCES
From the above diagram shows the working capital turnover ratio is gradually in
creased during the study period 2005-2006. In the year 2009-10 has show 18.38 times. It
shows the efficient utilization of the working capital.
46
Figure 3.2.9
INFERENCES
The above diagram shows debtors turnover ratio of the company. The increased
ratio shows the chances to increase bad debt. Here the ratio is increased in every
year.1151.63 times in the year 2009-10.
Figure 3.2.10
INFERENCES
The above diagram shows average debt collection period of the company. The low
collection period shows power of the company to collect the amount from it’s debtors.
The collection period of the year 2009-10 is 0.32 days. The company has win to keep
their collection period as low in past five years. Which help the company to get enough
working capital assistance.
49
Both the creditors turnover ratio and average debt payment period indicate about
the promptness in making payment for credit purchases.
50
Figure 3.2.11
INFERENCES
The above diagram shows average debt payment period of the company. This
shows the considerable increase in debt payment period during the study period. In the
year 2005-06 turnover ratio is 22.84 times , but it is increased in last year 2009-10,it is
65.92 times. Increase in turnover affect the company’s working capital.
51
Figure 3.2.12
INFERENCES
The above diagram shows the average debt payment period of the company. The
payment period was decreased in to 5.54 day’s in the year 2009-10. The decrease in
payment period reduce company’s time for paying credit amount.
52
CHAPTER – 4
FINDINGS, SUGGESSIONS
AND
CONCLUSION
53
FINDINGS
The current ratio of the company is faire during the study period. It shows more than
2 as ratio.
The quick ratio of the company is satisfactory. In the study period it shows more than
1:1.
The ratio of cash to the current liabilities of the company is very poor during the
study period except in the year 2005-06.
The ratio of cash to current assets is very poor. In the year 2005-06 it shows 39.51%.
The low percentage shows the liquidity position of the company is very low.
The major portion of the current assets is inventory. This will reduce the company’s
working capital availability. Only reason is bulky purchase of rawmaterials.
The working capital turnover ratio of the company is icreased from 8.12 to 18.38
during study period.
Debtors turnover ratio and average debt collection period shows working capital
efficiency of the company.
Creditors turnover ratio and average payment period shows working capital
availability and better management of the company.
The management of working capital in the company is satisfied. They have to reduce
cost of the rawmaterials through bulky purchase. But it shows rduction in quick cash
liquidity.
The company’s liquidity position is sound , when we analyse the liquidity ratio’s.
The debtors turnover and collection period shows better management of the working
capital of the company.
The changes in the schedule of working capital is increased over the years. The
company try to utilize maximam sources of working capital.
SUGGESSIONS
54
The liquidity position of the company is better, but working capital is fluctuating over
the years. So, the company try to maintain a stable working capital position by giving
better attention and diligence to the working capital management.
The major part of the company’s current assets is inventory. This will rduce
company’s liquidity position. So ,company should place timely order for raw materials and
ensure it’s availability on time. The following factors will consider when determining the
optimum level of stock:-
the average level of daily sales (adjusted for seasonal variations);
the lead time between ordering goods and their delivery;
the reliability of suppliers;
the type of good and the danger of their perishing or becoming obsolete;
the cost of re-ordering stock;
storage and security costs;
other factors such as rumours of a shortage or an increase in price.
The companies debt collection period is more than 30 days . So,with this in mind an
effective credit control policy is necessary. This should include the following:
Before allowing credit, an organisation should check the credit rating of potential
customers, where necessary seeking references from a third party. Often this will involve
using the services of a credit agency such as Dunn and Bradstreet.
Based upon the results of a credit check, credit limits can be set. Once the credit limit
is reached it cannot be exceeded without the authorisation of senior management.
Credit customers should be informed in writing of the normal credit period (for
example 30 days after the invoice date).
A small cash discount is often used as an incentive to encourage early payment by
debtors. For example, many firms offer a discount of 2.5% of the invoice value for
payment within seven working days of the invoice date.
It is essential that an organisation maintains accurate records detailing all transactions
with customers and the amounts owing. An aged debtors' list detailing the length of time
55
that a debt has been owing is useful since it highlights those debts which management
needs to concentrate on.
An organisation should issue regular statements (normally monthly), and where
necessary these should be followed up with reminders and phone calls/letters.
CONCLUSION
56
KSE Ltd. ,IRINJALAKUDA was established in the year 1963. Now KSE Ltd.
have different units in south India and also they have farm and ice cream factory. Mainly
they have concentrated on cattle feed industry. Now it has the largest private sector cattle
feed company in an India.
During the course of this project we have looked at the items which make up
working capital and considered how organisations can improve their management of
working capital. We have seen that the ideal level of working capital is difficult to
calculate and will vary from one organisation to another depending upon the industry in
which they operate. What is essential is that a business avoids both the situation of too
little or too much working capital.
The project entitled “A STUDY ON WORKING CAPITAL MANAGEMENT
IN KSE Ltd. ” was undertaken with the object of creating an idea about the management
of the working capital of the business firm. The study in KSE Ltd. helped me to attain a
good knowledge about practices inworking capital management and I conclude that the
study was a successful and a memorable one.
BIBLIOGRAPHY
57
REFERENCES
Books
Websites
1) www.kselimited.com
2) http://en.wikipedia.org/wiki/Working_capital
3) www.studyfinance.com/lessons/workcap/
58
APPENDICES
Appendix-1
59
Mar '06 Mar '07 Mar '08 Mar '09 Mar '10
12 mths 12 mths 12 mths 12 mths 12 mths
Application Of Funds
Gross Block 47.20 52.65 52.86 54.53 68.60
Less: Accum. Depreciation 19.77 22.38 24.48 26.13 29.63
Net Block 27.43 30.27 28.38 28.40 38.97
Capital Work in Progress 3.78 0.51 1.00 9.98 0.97
Investments 0.02 0.03 0.03 0.08 4.08
Inventories 24.30 22.18 19.30 24.70 20.83
Sundry Debtors 0.97 0.47 0.39 0.32 0.32
Cash and Bank Balance 2.62 4.39 5.00 3.47 6.77
Total Current Assets 27.89 27.04 24.69 28.49 27.92
Loans and Advances 2.84 4.31 4.07 3.46 3.21
Fixed Deposits 15.52 0.21 0.31 0.92 1.83
Total CA, Loans & Advances 46.25 31.56 29.07 32.87 32.96
Deffered Credit 0.00 0.00 0.00 0.00 0.00
Current Liabilities 12.21 8.89 10.37 11.24 11.21
Provisions 5.51 0.87 1.62 2.05 3.96
Total CL & Provisions 17.72 9.76 11.99 13.29 15.17
Net Current Assets 28.53 21.80 17.08 19.58 17.79
Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00
Total Assets 59.76 52.61 46.49 58.04 61.81
Mar '06 Mar '07 Mar '08 Mar '09 Mar '10
12 mths 12 mths 12 mths 12 mths 12 mths