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SUMMER TRAINING PROJECT REPORT

ON

WORKING CAPITAL MANAGEMENT


AT MARKFED

SUBMITTED FOR THE PARTIAL FULFILLMENT OF THE DEGREE OF


MASTERS IN BUSINESS ADMINISTRATION
SUBMITTED BY: PANKAJ PREET SINGH
MBA 3rd SEMESTER
UNDER THE SUPERVISION OF
Ms. SHEENU GUPTA

CHANDIGARH BUSINESS SCHOOL, GHARUAN, MOHALI

STUDENT DECLARATION

I hereby declare that the project report entitled, WORKING CAPITAL


MANAGEMENT AT MARKFED submitted in partial fulfillment of the
requirements for the degree of management to Chandigarh Business School,
Gharuan, Mohali, is my original work and not submitted for the award of any other
degree, diploma, fellowship, or any other similar title or prizes.

PANKAJ
PREET SINGH
MBA-3rd SEM.
CHANDIGARH BUSINESS SCHOOL

PREFACE
Someone has rightly said that practical experience is far better and closer to the real world than
mere theoretical exposure. The practical experience helps the students to view the real business
world closely, which in turn widely influences their perceptions and arguments their understanding
of the real situation.
The phenomenon of creation is a long process requiring time, energy and dedications well as skill
and experience of those people engaged in the task, ultimately in the outcome as the final form of
embodiment of the creators vision. Research work constitutes the backbone of any management
education program. A management student has to do research work quite frequently during his
entire span.
Master of Business Administration is a two-year programme that inserts management knowledge
in an individual to make that individual completely professional for which practical experience is
must.
To fulfill this aspiration of mine I entitled MARKFED Asias largest Marketing Cooperative.
The cooperation I got from the people at MARKFED is unique. I am thankful and indebted to
them.

ACKNOWLEGEMENT

Success is not a description, but a journey. While I reach towards the end of this journey, I
realized I may not have come this far without the guidance, help and support of the people who
acted as guides, friends and torch bearers along the way.
I take this opportunity to thank Mr. R.C. GUPTA (SAO) without their cooperation I would not
have been able to complete this project.
I express my deepest and most sincere thanks to my organization guide, Mr. SUNIL AGGARWAL
(AAO) from who I had the opportunity to learn a lot, I would like to thank him for giving me
valuable suggestion and guidance with which, my project would have been complete.
It is privilege to record my heart gratitude to my esteemed guide Ms. SHEENU GUPTA. I shall
remain indebted to him for his able and mature guidance and whole hearted co-operation. I wish to
thank him for her consistent moral support and the assistance she regularly provided me.

PANKAJ PREET SINGH

TABLE OF CONTENTS

CHAPTER TOPIC
1.

2.

3.
4.

5.

PAGE NO.

INTRODUCTION
INTRODUCTION TO COOPERATIVES

7-11

MARKFED A SUCCESS STORY

12-13

CORPORATE PROFILE
INTRODUCTION TO MARKFED

15

MARKFEDS MISSION & VISION

16

GENESIS OF A GIANT

17

OBJECTIVES AND MOTTO

18-19

ENVIRONMENT OF MARKFED

19-20

ORGANIZATION STRUCTURE AND

21-24

MANAGEMENT

25-31

FUNCTIONS AND ACTIVITIES OF MARKFED

32

FACTORIES AND UNITS

33

MARKFED AS A TRUE FRIEND OF FARMERS

34

MARKFED AT GLANCE
REVIEW OF LITERATURE
RESEARCH METHODOLOGY

36-40

SCOPE AND OBJECTIVE OF THE STUDY

42

HYPOTHESIS OF THE STUDY

43

TOOLS AND TECHNIQUES USED

44

SOURCES OF DATA COLLECTION


THEORETICAL BACKGROUND OF WORKING

44

CAPITAL
INTRODUCTION

46

TYPES OF WORKING CAPITAL

47

DETERMINANTS AND COMPONENTS OF


WORKING CAPITAL

48-51

SOURCES OF WORKING CAPITAL IN MARKFED

52-53

ESTIMATION AND ASSESSMENT OF WORKING

6.

7.

CAPITAL

54-56

OPERATING CYCLE CONCEPT

57-58

RATIO ANALYSIS
DATA ANALYSIS AND INTERPRETATION

59-62

BALANCE SHEET

64

ANALYSIS OF FINANCIAL DATA


FINDINGS AND RECOMMENDATION
6

65-74

FINDINGS

76

RECOMMENDATIONS

77

INTRODUCTION

CO-OPERATIVES IN INDIA

A BRIEF INTRODUCTION TO CO-OPERATIVES


The socialistic system as enshrined in the Constitution of India is based on the ideals of democracy
and socialism. Only a movement of co-operative can fulfill the need of such an economic and
social fabric. The Government of India started this movement in India in 1904 with purpose of
freeing the farmers from the group of money lenders and this movement proved to be a boom for
the social and economic development of entire country.
The co-operative movement in Punjab contributed heavily to the agricultural development as the
first step and this resulted in the Green Revolution due to which Punjab was crowned as the grain
bowl of the country. The co-operative movement has enhanced every aspect of human beings and
is directed towards welfare of mankind.
During the last three years of co-operative movement in Punjab has made rapid strides towards
strengthening of co-operative societies which have elected Managing Committees/BOD and an
elected Chairman. There have been efforts to strengthened the capital base of the society with a
view of ensuring that its members develop a sense of belonging and have a greater say in the
decision making process. There have been various amendments in the Punjab Co-operative
Societies Act, according to which the terms of the elected office bearers has been increased from
8

three to five years. The maximum period for which administrator can be appointed in a society has
been reduced from four to one year to ensure that the society remains in the hands of the elected
people.
Punjab today leads the entire country in the recovery of co-operative banking loans. After years of
restlessness and turmoil all the central co-operative banks including those in border districts, have
become eligible to avail themselves of the refinance facility from the National Bank For
Agricultural and Rural Development (NABARD), under the non farm sector scheme of NABARD
all central co-operative banks and primary co-operative agricultural development banks have
floated new schemes for advancement of loans to the unemployed youth, this has given a boost in
providing employment in rural areas and has helped people to raise their standard of living.
Nonfarm loaning is likely to be enhanced from Rs.62500 per head to Rs.100000 per head in the
near future. Also this state co-operative bank is likely to start giving housing loans to professional
students up to Rs.50000.

THE MAIN CO-OPERATIVE SOCITIES IN PUNJAB


Markfed
Sugar Mill Co-operative Society
Spinfed
Milkfed
Industrial Co-operative Society
Weavco
Housefed

PUNCOFED
Classification of main co-operatives in Punjab is as follows:1) MARKFED
Markfed is Asias biggest co-operative venture, which helps the farmers in the marketing of their
product through primary co-operative societies. Markfed has 120 branches, 19 agro service
centres and 2500 PACs.
Through which it provides quality fertilizers, pesticides and insecticides to farmers. It also works
as government procurement agency and ensures minimum support price for the farmers produce
especially, wheat and paddy during the procurement seasons.

2) SUGAR MILL CO-OPERATIVE SOCIETY


Till 1985 there were only four sugar mills in co-operative sectors of Bhogpur, Batala, Morinda and
Nawan Shahar with crushing capacity of 5500 tonnes. In 1985-86 sugar revolution look place in
Punjab, when steps were taken for setting up of two more sugar mills in cooperatives sectors.
Today there are 15 sugar mills in the state that have the crushing capacity of 28,350 tonnes. The
co-operative sugar mills in Punjab have the proud privilege to show their best performance through
the country.

3) SPINFED
Keeping in view the cotton production in Punjab 7 co-operative spinning mills are operating in the
cotton belt of Malwa region for processing of Narma cotton. Another cotton ginning unit is ready
at Abohar in co-operative sector. Spinfed which is state apex body of the co-operative spinning
mills assist its members mills, in co-ordination of technical knowhow and availability of finances.

4) MILKFED
Co-operative movement in Punjab has also played a formal role in
the white revolution. State level Punjab state co-operative Milkfed,
district level milk union and primary milk producers, co-operative
societies at the village level are progressively working towards
10

enhancing the income of co-operative societies and their member producers. Milkfed has pledged
to procure good milk yielding animals producing fresh and germless milk for the co-operatives.
The business turnover for the year 2009-10 of Milkfed is Rs.18,025 crores.

5) INDUSTRIAL CO-OPERATIVE SOCIETY


The industrial co-operative societies have also made unique contribution in the co-operative
movement and have helped to provide employment to the unemployed youth and production of
necessary goods.

6) WEAVCO
The co-operative society for handloom weaver exists in two
levels, Weavco at the state level and co-operative societies at
village level.

Nearly 630 primary handloom weaver

societies are members of it. Weavco has 25 showrooms throughout the country.

7) HOUSEFED
Housefed initiated steps for meeting primary needs of housing of man and provides financial
assistance to solve the housing problems through its primary societies in urban and rural areas.
Housefed has advanced credit of Rs.1276.06 lakh upto 31-03-94. Housefed also undertakes
construction of co-operative housing complexes in various cities.

8) PUNCOFED
Puncofed has been playing the role in promoting and popularizing co-operative culture through
training, publicity and research work. This organization has conducted conferences and seminars
in the whole state and also publishes and distributed special booklets and charted out business
development plans and new schemes.
The co-operative organizations have contributed to the economic development of Punjab by
actively working in various fields on one hand and towards the development of mental, social and

11

cultural aspects of the masses on the other. Lakhs of people in Punjab have gained employment
during the co-operative undertakings, which in itself is a development.

MARKFED A SUCCESS STORY

The Punjab farmer, under the banner of the cooperative movement organized himself to form
federal credit structure with primary societies at village level, control cooperative bank at district
level and an apex bank at the state level to coordinate their functions. The village credit societies
were reorganized to become service cooperatives. A cooperative marketing society was set up in
each regulated market in the state with distinct market society at each district head quarters. In the
chain of this set up the apex institution, The Punjab State Cooperative Supply and Marketing
Federation came into being in the September of 1954 with 13 members, a share capital Rs.54000
and three employees, popularly known as Markfed. It is an important milestone in the history of
the Indian cooperatives; which is serving millions and is partner in their progress and prosperity.
The ingredients of Markfeds success story are
12

Its cooperative structure,


Govt. support,
Progressive policies,
Innovative plans and
Dedicated personnel at managerial and field level.
The usage of state of the art technology/methodology and cooperative philosophy has further
helped in its progress.
Markfed continuously motivates the farmers to adopt innovative strategies in production and
marketing, which in turn, has resulted in creating a substantial base for production and marketing
of value added agro food products, both for domestic and foreign markets while meeting the
highest standards of quality and safety. Markfed is not a totally commercial organization. It
considers its social responsibilities also. Free service rendered to the farmers to help them obtain
optimum from chemical fertilizers and quantity/quality of water used.
Markfed has suffered losses in the past, but with proper financial management, inventory control,
project planning and with improved system of management and modernization of marketing of
manufactured items, Markfed started generating profits since 1985-86 that has amply improved its
dwelling financial position.
Markfed cooperative philosophy which involves development based on mutual help, justice and
equality, service above profit, democratic set up and shared prosperity makes it a true friend of
Punjabs farmers. Employing this principle of brotherhood, Markfed has emerged as a significant
contributor to various socio economic development programs.
Markfeds success is the true reflection of the spirit and dynamism of the people it represents: the
people of Punjab.

13

14

CORPORATE
PROFILE

COMPANY PROFILE
INTRODUCTION TO MARKFED
Markfed came into existence in the month of September 1954, with 13 members, a share capital of
Rs.54000, 3 employees & 1 bicycle has today has become Asias largest marketing co-operative
society.

15

Today, this organization employs more than 3000 person, has a network of manufacturing units,
service centers & offices crises crossing Punjab &its operations spread around the world.
Markfed is a federation of 3068 members cooperative societies is representing directly the interest
of over one million farmers.
The factors that have made this Rs.10000 crores giant a magnificent success is its cooperative
structure, enlightened management, progressive plants & policies, path breaking innovations,
highly dedicated workforce and supreme commitment to the objectives of the cooperative.
Markfeds success is the true reflections of the spirit & dynamism of the people it represents the
people of Punjab.

MARKFED MISSION & VISION


MISSION:Promote substantial development of Punjab agriculture communities through supply of reliable
high quality agricultural inputs and services as well as efficient procurement and marketing of
Agri-produce.
16

VISION:Markfeds vision can be seen in two terms:


SHORT TERM
Diversification / implementation of AEZS.
Further bulk handling project and start execution.
State of art and laboratories chemical analysis.
LONG TERM

Diversification of at least 5 lakhs acres of land from Wheat, Paddy


rotation.

Setting up of infrastructure for export fruits and vegetables like cold chain / cold
storages with participation and support from the government.

Set up a modern processing facility with JV partners in the field of potato


processing and honey processing.

With the reduction in the role of MSP mechanism Markfed would play major role
in the open market trading of food grains.

GENESIS OF A GIANT

MARKFEDS success is the true reflection of the spirit and dynamism of the people it represents:
the people of Punjab.

17

Markfed began its operations in September 1954 with 13 members and a share capital of Rs.
54000. Initially, the major functions of Markfed included production and procurement of
agricultural inputs and market agricultural commodities for Punjabi farmers. And what began with
13 members, a share capital of Rs. 54,000/-, three employees and one bicycle has today become
Asias Largest Marketing Cooperative, Markfed with an annual business turnover of over 2
billion USD. Now, Markfed is a federation of 3021 member cooperative societies, directly
representing the interests of over one million farmers.
Today, this organization, with more than 20 industrial units, employs more than 3286 employees,
has a network of manufacturing units, service centers and office crisscrossing Punjab and its
operations spread around the world.
The factors that have made this Rs. 8700 crores giant a magnificent success is its cooperative
structure, enlightened management, progressive plans & policies, path-breaking innovations, a
highly dedicated workforce and supreme commitment to the objectives of the cooperative
Markfeds success is the true reflection of the spirit and dynamism of the people it represents: the
people of Punjab.

OBJECTIVES OF MARKFED
The objectives of Markfed are as follows:

18

a)

To make arrangements for procuring, marketing/trading, processing /manufacturing of


agricultural products as well as byproducts of its affiliated members & their members to
their best advantage with in the country & outside the country.

b)

To find out & adopt latest technology & supply of goods on co-operative basis & to act
as agent to its constituents & other persons & institutions approved by the registrar, cooperative societies. Punjab.

c)

To raise funds for its own business.

d)

To provide financial assistance to its members in the shape of advances, loans & grants.

e)

To make arrangements for procurement in bulk the requirements of its members in


respect of both producer & consumer goods.

f)

To make arrangements for distribution of agricultural inputs in retail to members &


non-members.

g)

To undertake processing, manufacturing, grading & packaging activities & establish


industrial units.

h)

To arrange for construction of buildings necessary for business of the federation & its
members & also to take up the construction work of other government / institutional
agencies.

i)

To guide, assist & supervise the working of its member societies.

j)

To run warehouses.

k)

To undertake interstate trade, import & export of agricultural produce, farm equipments
& consumer goods.

l)

To carry on publicity & propaganda in respect of co-operative marketing & supply by


publication of suitable literature, arrangements of demonstration by organizing
marketing, processing & supply societies, conferences, participation in exhibitions &
otherwise.

m)

To enter collaboration with other co-operatives in India or in foreign countries in


fulfillment of any of its objects, subjects to the approval of the govt. Under section 7.7
of the act wherever required.

n)

To act as an insurance agent and to guide & to assist its member societies and other etc.
Regarding all insurance matters.

19

MOTTO OF MARKFED
Markfed is not just an agriculture products procurement agency; it walks on the live policy of
national development and provides new opportunities that lead to higher quality and remunerative
price. Markfed, which always share its knowledge, technology, resource and services to keep in
building the country, we now call it MARKFED HOUSE. The cooperative philosophy,
principles of brotherhood, help to farmers, latest modern technical know- how, research and
development have given wide acclaim to Markfed.

ENVIRONMENT OF MARKFED
It involves: EXTERNAL ENVIRONMENT:
Markfed is operating in dual environment. While some operations of Markfed are protected and
supported by the government but also rigidly controlled by the Government rules and regulation,
others face competition from private and multinational cooperation.
GOVERNMENT CONTROLLED ENVIRONMENT:

For Markfed, procurement and distribution of the food grains and inputs are cost- plus
activities driven by government policy and controlled by the government rules and
regulation. Markfed neither faces any pressure on account of customer demand not any
competition in these activities.
All prices support operations of the market i.e. procurement of wheat and paddy are
controlled by the government and conducted on the behalf of Food Cooperation of India.
Within the overall framework of government of India policy, department of food and
supplies, Punjab Government oversees the entire procurement operations and allots the
mandis for procurement and mills for milling in case of paddy.
For distribution of fertilizers and agro chemicals, Markfed has operated as per the policy
stipulated by the Registrar of Cooperative Punjab. For import of DAP, a high level
government committee is constituted for taking purchase decisions. M.D. of Markfed is the

20

member of this committee the distribution of Fertilizers is restricted through only the
cooperatives.
COMPETITIVE ENVIRONMENT:

Markfed faces a highly competitive environment in case of other products such as


(Vanaspati, Refined Oil, Basmati, Canned Products and Agro Chemicals) being
manufactured, processed and marketed in a market environment without any quota or the
government intervention. The profitability of these activities depends upon efficiency in
their production and competitiveness in marketing.
Markfed is also in export business where success depends solely on internal efficiencies
and competitiveness. The customers in international markets demand high quality products
in a competitive environment.
INTERNAL ENVIRONMENT:
In the internal functioning of Markfed the state
government plays a substantial role. Apart from the
nominees from the government on its Board each
and every policy decision that is taken by Markfed
has to be approved by the Registrar of Cooperative
Societies before it can be implemented.
Markfed

also

follows

the

system

of

inter

departmental deputation whereby staff from other government departments work with
Markfed for a specified period of time. Not only the managing directors are on deputation
from different departments, even lower down the administrative hierarchy there are some
positions that have the earmarked for deputation.

ORGANIZATION STRUCTURE
Management is the backbone of organization. Without efficient management no organization can
perform its functions smoothly. Sound organization contributes greatly to the continuity and
21

success of the enterprise. It is the framework of relationship of persons operations at various levels
with vertical and horizontal dimensions. The type of organization in a company depends upon its
size and range of production.
Markfed is divided into 17 Administrative Districts, Two new districts viz Taran Taaran and
Mohali are being added raising the number of Administrative Districts to 19.There are 17
Industrial units and 1 Cotton cell in the state of Punjab with its registered office at Roopnagar and
head office at Chandigarh. It is federation of 3033 Member Cooperative Societies, representing
directly the interests of over one million farmers.
Markfed is governed by an elected Board of directors including Government nominees, which
creates and makes the policies of undertaking business of the Federation. The management of
Markfed vests with the board of Directors which has a term of 5 years. There are 17 members in
the Board of Directors which consists of the following:
a) Twelve representatives are the members of societies, which are elected on zonal basis by
dividing the area of operations of Federation into 12 zones.
b) Five including Managing Director are government nominees.

MANAGEMENT
Managing Director is the Principal Executive of the organization and is assisted by Additional
Managing Directors and other various functional Heads at head offices and General Managers and
Managers in the plant or units and Districts Managers at the district level and Liaisons Officer at
Delhi.
The Chairman and Vice - Chairman of the Board of Directors are elected, from amongst the
members of societies. The Board of Directors shall meet at least once in six months and a clear
notice of the meeting should be given to the directors. 15 days before the meeting is to be held.
There are executive committees and administrative committees of the Federation consisting of 6
directors which are constituted in the following manner:
Chairman of the Board of Directors
22

Vice Chairman of the Board of Directors.


Registrar Cooperative Societies, Punjab or his nominee.
Two Directors to be appointed by the board of Directors out of its remaining elected
members.
Managing Director.

ORGANIZATIONAL STRUCTURE IN THE HEAD OFFICE


The MD is the Chief Executive Officer of Markfed responsible for overall performance under the
control and direction of the Board of Directors. The Board members are appointed for 5 years. At
the head office, Markfed under the MD is organized into various departments and functions that
are as follows:
1. Administrative Branch
2. Accounts
General
Banking
Budget & Marketing
Internal Audit
Legal & Taxation
Salary
Engineering
Recovery

3. Marketing
23

The general section headed by an Additional Managing Director, (General) & plant section is
headed by Additional Managing Director (P), which are further under the charge of respective
Functional Head.
Markfed also has 20 manufacturing and processing plants spread all over the state. The plant heads
report to the particular functional help who is handling that product at the head office.
Marketing section of Markfed is handling the sales of Edible and Non Edible products
manufactured in Markfed plants. Markfed has been marketing edible oils ( Sohna Sunflower,
Cotton seed, groundnut, Kachhi Ghani, Vanaspati being manufactured at Khanna, Kapurthala,
Gidderbaha Plants) Sohna Basmati Rice and various items manufactured at Markfed Canneries,
Jalandhar, such as tomato ketchup, canned foods (Sarson Ka Saag).All the edible products are
marketed under one umbrella brand i.e. Sohna.

DEPOT

DEALERS

CARRYING AND
FORWARDING
AGENTS

JALANDHAR
LUDHIANA
AMBALA
BHATINDA
DELHI
CHANDIGARH

VARIOUS CITIES

24

DAMTAL
MANDI
SOLAN
SIRSA

BOARD OF
DIRECTORS
MANAGING DIRECTOR
AMD(GENERA
L)

AMD (PLANT)

CHIEF MANAGER

CHIEF
ACCOUNT
OFFICER

PERSONNEL,
MARKETING, INPUTS
PADDY,RICE, FOOD
SR.
GRAIN,
MANAGER
MANAGER

OFFICER
DY. CHIEF
ACCOUNT
OFFICER

SUPERITEND
ENT

SR. ACCOUNT
OFFICER
OFFICER
OFFICER

SR.ASSISTA
NT

ASST.ACCTS.
OFFICER

ASSISTAN
T

ACCOUNTANT

CLERK

ASST.ACCOUNT
ANT

25

CHIEF
INTERNAL
AUDIT
DY. CHIEF
ACCOUNT
OFFICER
SR. ACCOUNT
OFFICER
ASST.ACCTS.OFF
ICER
ACCOUNTAN
T
ASST.ACCOUNT
ANT

FUNCTIONS OF MARKFED
I. DOMESTIC OPERATIONS
Punjab produces over 20 million tons of food grain with surplus both in wheat and rice. It has 4.2
million hectares of well irrigated and fertile land. Despite having only 1.5% of the countrys
26

agricultural area, Punjab grows 25% of Indias wheat and accounts for 10% and 30% of Indias
total rice and cotton production respectively. This means that plenty of raw materials in shape of
cotton, sugarcane, fruit and vegetables etc., are available for processing in industries. Markfed
procures and processes these raw materials into finished goods and sells them in the Indian market
through a large network of its own offices, retail outlets, dealers, distributors and marketing agents.

A. PROCURING AND PROCESSING OPERATIONS


Procurement of food grains, seeds, pulses etc.,
The majority of buffer stocks of wheat and rice in India are held are Punjab. Markfed alone stores
around 4.4 million tones of wheat. As one of the major procurement agencies, it also plays an
important role in providing remunerative price to farmers.
The food grains procured for the PDS are distributed through a network of retail outlets. The food
grain policy revolves around the surpluses available for procurement, building a buffer stock,
distribution, trade regulations and price control.
Markfed procures mustard seed and sunflower to process them in its oil complexes at Khanna,
Kapurthala and Gidderbaha.

Cotton Processing
Markfed processes and trades in cotton, the worlds leading fiber and an important cash crop in
Punjab.
Within India, Markfed sells cotton to the processing mills in Orissa, Tamilnadu, UP, Gujrat and
Maharashtra. It also exports cotton bales to far eastern countries as a joint venture with NAFED.
Markfed owns and manages four cotton ginning and processing factories, which are located at
Rampuraphul, Sardulgarh, Raman and Abohar centers in Punjab.

Cottonseed processing
27

Markfeds cottonseed processing plant at Gidderbaha produces cottonseed oil for the cooperative
federations own Vanaspati plant and by products like lint, De-oiled cake and hulls for paper
manufactures and its own cattle feed plant.

B. MANUFACTURING OPERATIONS
The varied natures of Markfeds operations depend a great deal on its infrastructure. Today it takes
pride in its own oil plants, sugar mill, rice mills, ginning and processing plants, research and
development labs etc. at these state o the art manufacturing facilities, Markfed produces world
class products which have carved a niche for themselves in several markets.

Sugar Mill
Markfed has up a new sugar mill at Malout at a total cost of Rs.300 million. With a production
capacity of 1750 TCD and spread over 50.4 acres of land, it provides direct employment to about
300 persons. Markfed has also tied up with the Punjab Agricultural University, Ludhiana, for the
development of better varieties of sugarcane.

Cattle Feed Manufacturing


Markfed manufactures cattle feed at its plant at Gidderbaha and Kapurthala, which have a
combined annual production capacity of 63000 tonnes. The animal feed manufactured here is
popular in Punjab, Haryana, HP, Jammu and Kashmir, Rajasthan and Delhi and is sold through
dealers and cooperative societies.

HDPE Sacks Plant


The HDPE sacks plant of Markfed makes bags for cattle feed, tarpaulins, polythene covers and
HKPE bags for clients like IFFCO, KRIBHCO and nfl for the packing of urea fertilizer. In order to
ensure the use of high quality packaging material, Markfed setup packaging test laboratory at
Mohali in 1973.

28

Soil Testing Laboratories


Markfeds eight well equipped soil testing laboratories at Amritsar, Bathinda, Ropar, Hoshiarpur,
Kapurthala, Sangrur, Malout and a mobile lab manned by specialists with an annual soil and water,
have been rendering free service to farmers in obtaining best results from the use of chemical
fertilizers since 1960.

Vanaspati and refined oils


The oil mill Khanna produces Vanaspati, bakery shortening and refined oils such as cottonseed oil,
soya oil, mustard oil and vegetable oil with a total production capacity of 33000 MT per annum.
The Kapurthala unit produced 33000 MT of cattle feed, whereas Gidderbaha unit produced 15000
MT of oil and rice bran and 33000 MT of cattle feed. Our Kachi ghani brand mustard oil has
already reached the markets of the Middle East and Canada and is a highly sought after brand in
the domestic market as well.

Canneries
Markfed has set up canneries to produce heat and eat food products (especially curries), recipies of
which have been prepared by Mr. Jigs Kalra, a chief of international repute. The products include
delicacies like Sarson ka saag, Daal makhni, Kadhi pakora, Mutter paneer and much more. Besides
this it also produces jams, ketchups, honey etc. these products are being sold all over India and are
being exported to many countries around the world.

C. DISTRIBUTION
Besides procuring agro produce at remunerative prices as well as adding through processing and
marketing them locally and abroad. Markfed also plays a laudable role in supplying quality farm
inputs viz. high quality fertilizers, insecticides, pesticides and fungicides thus earning the epithet: a
true friend of farmers. Through its network, Markfed distributes around 8,00,000 tones of fertilizer
29

to farmers annually, thereby meeting the entire requirement of the chemical fertilizers of the
cooperative sector. Its share of the total sale of fertilizer in Punjab is around 40% through its own
plant at Mohali, Markfed supplies highly effective insecticides, weedicides and fungicides to help
farmers protect their crops.

II.

EXPORTS AND INTERNATIONAL OPERATIONS


A successful trading house and a source of inspiration to numerous cooperatives involved in
similar pursuits, Markfed has been declared as Punjabs nodal agency for the export of fruits,
vegetables and food grains by the govt. of India.
Markfed has carved a distinct identity for itself by setting up a number of export oriented units to
process agricultural produce like basmati rice, cotton, oilseeds, vegetable, fruits etc.
A vast range of products from Markfed have found markets in the UAE, UK, US, Canada,
Germany, Poland, Hungry, Czechoslovakia, Afghanistan etc. annually, Markfed exports 2.5
million MTs of food grains which includes exports to UAE, Sudan, Yemen, Philippines, Vietnam,
Bangladesh, Indonesia, Korea, Oman, Sri Lanka, and Ethiopia through the major food players of
the world like Cargill, Toepfer, Allansons, Noble Grain, Louis Dreyfus and Kotak agri, Tropical
Grains & Feed, Adani Exports etc.

Sarson Ka Saag- A delicacy on foreign shores


About 1.5 million cans containing ready to eat sarson ka saag a Punjab delicacy and other Indian
vegetable curries are exported to many regions which include the USA, Canada, Europe, Middle
East and the South Pacific.

Agri Export Zone for Basmati Rice


This AEZ will facilitate increased production of basmati rice accounting for almost 60% of the
world export. The AEZ will be set up in Punjab covering Gurdaspur, Amritsar, Kapurthala,
Jalandhar, Hoshiarpur and Nawanshahar areas. The main objectives of this AEZ will be:

30

1. Providing remunerative returns to farmers on a sustained basis by improved access to exports.


2. Interlinking the various constituents of the chain from farmers to consumer.
3. Establishing backward linkage with rice millers.
4. Standardization of agronomical practices.
5. Making quality seeds available.

Agri Export Zone for Potatoes


Potato is considered as the third major cash crop and plays a pivotal role in crop diversification;
India is the fourth largest producer of potatoes in the world. Markfed helps farmers by procuring
potatoes and organising their exports. The govt. of India has sanctioned an agri-export zone for
potatoes in Punjab. Being set up in collaboration with APEDA, the zone will be established in
Patiala with satellite centers in Jalandhar, Ludhiana, Batala and Muktsar. The objective of the
project is to provide remunerative returns to the farmers and also to help farmers in producing
quality which is at par with international market. Markfed has been declared the nodal agency for
setting up this AEZ (agri-export zone) to facilitate potato export from Punjab. The zone entails
partnership of farmers, processors, exporters, the state and the central govt. agencies to coordinate
for end to end development of potatoes and its processed output from farm to consumers. The
project will be implemented in two phases costing Rs.10.41crores and Rs.102crores respectively.
Markfed, the nodal agency for the project would coordinate the efforts of various organizations
like NHS, NFPI, APEDA, ICAR, MOA, revenue department and the various state govt. agencies
like the department of agriculture and industries and will also act as the main link between central
and state agencies and the stake holders who are farmers, exporters and processors.
Markfed has already started exports of potatoes to Middle East and Canada since July 2002 under
the agro export zone for potatoes. Major customers include duly hyper market which owns the
biggest chain of super markets in Dubai and other Gulf countries.

Potato Processing Unit

31

Punjab Markfed has signed an MOU with Canadian manufacturing company ltd. Vancouver,
Canada for setting up of a joint venture to manufacture potatoes, French fries/potato
flakes/granules/vodka. The cost of the project is approximately Rs.10crores.
The project will be put up in Patiala. The company will provide the technical know how to process
potatoes grown in Punjab and will assist in marketing the product both in domestic and
international markets.

Potato Cultivation In Sri Lanka


In a Novel move, Markfed has taken on lease a 1000 acre farm in Sri Lanka, offered by the Sri
Lankan government, for the cultivation of seed/tableware potatoes. The federation has agreed to
undertake this project to spread awareness about Punjabs expertise to shores far and wide, so that
Punjabs agro products gain in reputation and establish a market presence.

MARKFED AGRO-BASED ACTIVITIES

32

PROCUREMENT
& TRADING

WHEAT
CUSTOM
MILLING

PADDY

FERTILIZERS
DISTRIBUTION
AGRI INPUTS

WHEAT
EXPORTS

RICE
VEGETABLES
PROCESSED FOOD

PROCESSING
&
MARKETING

COTTON
AGRO.CHEM.
NON.EDIBLESS
EDIBLES
EDIBLES

PROCESSED FOOD

AGRI PRODUCTS

BASMATI RICE
EDIBLE OILS

33

FACTORIES AND UNITS

To fulfill its commitments to help the farmers and general public, MARKFED have processing
units and factories at different places in Punjab. These are: MARKFED Vanaspati & Allied Industries, Khanna.
MARKFED Refined Oil & Allied Industries, Kapurthala.
MARKFED Cotton Seed Processing Plant, Giddarbaha.
MARKFED Canneries, Jalandhar.
MARKFED Agro Chemicals, S.A.S Nagar.
MARKFED Modern Rice Mills, Rajpura, Nawanshahar, Macchiwara, Bhagapurana.
MARKFED Cotton Cell, Bhatinda.
34

MARKFED Rice Processing Plants Jaitu, Naushehra, Batala.

MARKFED AS A TRUE FRIEND OF


FARMERS

Markfed plays a pivotal role as a catalyst for integrated development and growth in rural area of
Punjab.
It helps in stabilizing the market rate of farm produce.
Ensures supply of quality goods.
Helps in generating employment.
Contributes substantially towards earning foreign exchange.
Service above profit.
In keeping with the latest and fast evolving trends. Markfed has adopted the worlds latest
techniques like electronic data processing such as Enterprise Resource Planning (ERP) for
online processing, analysis and dissemination of information to the people who need it the
most.
In spreading this vital information Markfed has joined hands with Punjab Marketing Board since
1984 to sponsor a farmer information program Mera Pind Mere Khet (My Land My Fields) on
television.
Over the years Markfed has been specialized in the activity of procurement and distribution of
agriculture produce from Punjab directly and on behalf of other agencies for contribution to the
central pool. Wheat trading operation have over the years alone contributed to 48% of the total
business turnover of Markfed, wheat and paddy being procured from different mandis under price
support scheme while cotton is being procured on commercial basis.
35

Markfed has been producing a number of agro-based products under the brand name Sohna
which is favoured by consumer section of Punjab and other northern state of the country. Some
products like Basmati and Sarson Ka Saag have experienced tremendous response in the
overseas market.

MARKFED AT A GLANCE
Regd No.

812

Regd Date
Member Societies
Employees
Business Turnover
Distribution
Agriculture Inputs
Procurement
Storage Capacity
Markfed Branches
Exports
Processing Units

2 September 1954
3068
2473
14152.25 crores
Fertilizers, Insecticides, Weedicides and Seeds
Pesticides and Herbicides, Cattle Feed
Wheat, Paddy, Cotton and Oil Seeds
14.85 lacs (MTS)
100
Wheat, Rice, Processed, Food, Cotton, Edible Oil, Potato products
Markfed Vanaspati and Allied industries at Khanna
Markfed Refined Oils and Allied Industries at Kapurthala
Markfed Cotton Seed Pressing Plant at Gidderbaha
Markfed Canneries Jalandhar
Markfed Agro Chemicals, S.A.S Nagar Mohali
Markfed Rice Processing Complex Macchiwara

Agro Services

Markfed Rice Processing Complex Bhagpurana


Mobile Soil Testing Laboratory Bathinda, Ropar, Hoshiarpur,
Kapurthala, Nihal Singh Wala Sangrur & Malout
Custom Spray Services for Pest Control & Anti Termite Treatment

36

REVIEW OF
LITERATURE

37

REVIEW OF LITERATURE
Working capital is the difference between the organizations current assets and its current
liabilities. Of more importance is its function which is primarily to support the day -to day
financial operations of an organization, including the purchase of stock, the payment of salaries,
wages and other business expenses and financing of credit sales. Working capital can be defined as
the capital available for conducting the day- to- day operations of an organization represented by
its net current assets.

Adeniji, 2008
The working capital is the life based and nerve centre of a business firm. It refers to firms
investment in short term assets. Current assets which can be converted into cash with in an
accounting year. It could also be regarded as the current assets less liability of the firm.

Akinsulire, 2008
It refers to working capital as the items that are required for the day to day operations and
production of goods to be sold by a company. It can be defined as the excess of current assets over
current liabilities.

Sagan, 1955
Perhaps the first theoretical paper on the theory of working capital management emphasized the
need for management of working capital accounts and warned that it could vitally affect the health
of the company. He realized the need to build up a theory of working capital management. He
discussed mainly the role and functions of money manager inefficient working capital
48management. Sagan pointed out the money managers operations were primarily in the area of
cash flows generated in the course of business transactions.

38

Walker, 1964
Made a pioneering effort to develop a theory of working capital management by empirically
testing, though partially, three propositions based on risk-return trade-off of working capital
49management. Walker studied the effect of the change in the level of working capital on the rate
of return in nine industries for the year 1961 and found the relationship between the level of
working capital and the rate of return to be negative. On the basis of this observation, Walker
formulated three following propositions:
Proposition I If the amount of working capital is to fixed capital, the amount of risk the firm
assumes is also varied and the opportunities for gain or loss are increased. Walker further stated
that if a firm wished to reduce its risk to the minimum, it should employ only equity capital for
financing of working capital; however by doing so, the firm reduced its opportunities for higher
gains on equity capital as it would not be taking advantage of leverage. In fact, the problem is not
whether to use debt capital but how much debt capital to use, which would depend on management
attitude towards risk and return. On the basis of this, he developed his second proposition.
Proposition II The type of capital (debt or equity) used to finance working capital directly
affects the amount of risk that a firm assumes as well as the opportunities for gain or loss. Walker
again suggested that not only the debt-equity ratio, but also the maturity period of debt would
affect the risk-return trade-off. The longer the period of debt, the lower be the risk. For,
management would have enough opportunity to acquire funds from operations to meet the debt
obligations. But at the 50same time, long-term debt is costlier. On the basis of this, he developed
his third proposition:
Proposition III The greater the disparity between the maturities of a firms debt instruments and
its flow of internally generated funds, the greater the risk and vice-versa. Thus, Walker tried to
build-up a theory of working capital management by developing three prepositions.

Weston and Brigham, 1972


Further extended the second proposition suggested by Walker by dividing debt into long-term
debt and short-term debt. They suggested that short-term debt should be used in place of long-term
39

debt whenever their use would lower the average cost of capital to the firm. They suggested that a
business would hold short-term marketable securities only if there were excess funds after meeting
short-term debt obligations. They further suggested that current assets holding should be expanded
to the point where marginal returns on increase in these assets would just equal the cost of capital
required to finance such increases.

Vanhorne, 1969
Recognizing working capital management as an area largely lacking in theoretical perspective,
attempted to develop a framework in terms of probabilistic cash budget for evaluating decisions
concerning 51the level of liquid assets and the maturity composition of debt involving risk-return
trade-off. He proposed calculation of different forecasted liquid asset requirements along with their
subjective probabilities under different possible assumptions of sales, receivables, payables and
other related receipts and disbursements. He suggested preparing a schedule showing, under each
alternative of debt maturity, probability distributions of liquid asset balances for future periods,
opportunity cost, maximum probability of running out of cash and number of future periods in
which there was a chance of cash stock-out.

Welter, 1970
Stated that working capital originated because of the global delay between the moment expenditure
for purchase of raw material was made and the moment when payment were received for the sale
of finished 52product. Delay centres are located throughout the production and marketing
functions. The study requires specifying the delay centres and working capital tied up in each
delay centre with the help of information regarding average delay and added value.

Lambrix and Singhvi, 1979


Adopting the working capital cycle approach to the working capital management, also suggested
that investment in working capital could be optimized and cash flows could be improved by
40

reducing the time frame of the physical flow from receipt of raw material to shipment of
53finished goods, i.e. inventory management, and by improving the terms on which firm sells
goods as well as receipt of cash. However, the further suggested that working capital investment
could be optimized also (1) by improving the terms on which firms bought goods i.e. creditors and
payment of cash, and (2) by eliminating the administrative delays i.e. the deficiencies of paperwork flow which tended to extend the time-frame of the movement of goods and cash.

Warren and Shelton, 1971


Applied financial simulation to simulate future financial statements of a firm, based on a set of
simultaneous equations. Financial simulation approach makes it possible to incorporate both the
uncertainty of the future and the many interrelationships between current assets, current liabilities
and other balance sheet accounts. The strength of simulation as a tool of analysis is that it permits
the financial manager to incorporate in his planning both the most likely value of an activity and
the margin of error associated with this estimate. Warren and Shelton presented a model in which
twenty simultaneous equations were used to forecast future balance sheet of the firm including
forecasted current assets and forecasted current liabilities. Current assets and current liabilities
were forecasted in aggregate by directly relating to firm sales. However, individual working capital
accounts can also be forecasted in a larger simulation system. Moreover, future financial
statements can be simulated over a range of different assumptions to portray inherent uncertainty
of the future.

Cohn and Pringle,(1973)


The extension of Capital Asset Pricing Model (CAPM)10 for working capital management
decisions. They tried to interrelate long-term investment and financing decisions and working
capital management decisions through CAPM. They emphasized that an active working capital
management policy based on CAPM could be employed to keep the firms shares in a given risk
class. By risk, he meant unsystematic risk, the only deemed relevant by CAPM. Owing to the
lumpy nature for long-term financial decisions, the firm is continually subject to shifts in the risk
41

of its equity. The fluid nature of working capital, on the other hand, can be exploited so as to off
set or moderate such swings. For example they suggested that a policy using CAPM could be
adopted for the management of marketable securities portfolio such that the appropriate risk level
at any point in time was that which maintains the risk of the companys common stock at a
constant level. Similarly, Copeland and Khoury (1980)11 applied CAPM to develop a theory of
credit expansion. They argued that credit should be extended only if the expected rate of return on
credit is greater than or equal to market determined required rate of return. They used CAPM to
determine the required rate of return for the firm with its new risk, arising from uncertainty
regarding collection due to the extension of credit. Thus, these studies show how CAPM can be
used for decisions involved in working capital management.

42

RESEARCH
METHODOLOGY

43

RESEARCH METHODOLOGY

There are certain steps which are followed for making an effective research. It depends upon
organization to organization and person to person who adopt a certain strategy in research called
research methodology. Research success depends on the development of an efficient plan for
gathering the required information. Data gathered may be primary and secondary in nature.
Secondary data consists of information that already exists with the institutions or from outside
sources.

SCOPE AND OBJECTIVES OF THE STUDY


OBJECTIVES : To study various elements of working capital at Markfed.
To study the working capital cycle of Markfed.
To study the impact of working capital on profitability.

SCOPE :The study of W.C. management is purely based on secondary data and all the information is
available within the company itself in the form of records. To get proper understanding of this
concept, I am studying the balance sheets, profit and loss a/cs, cash accounts, trial balance, cost
sheets. I am also conducting the interviews with employees of accounts and finance department
and stores department. So, scope of the study is limited up to the availability of official records and
information provided by the employees. The study is supposed to be related to the period of last
five years.

44

RESEARCH METHODOLOGY USED:


Visiting different departments
Conversation with highly skilled and qualified employees
Data collection from different sources.
Guidance from project guide
Preparation of project

TYPE OF HYPOTHESIS AND TYPE OF RESEARCH,TOOLS USED


FOR THE RESEARCH:
TYPE OF RESEARCH:
In the research study the research type is the ANALYTICAL RESEARCH.

HYPOTHESIS OF THE STUDY :


The study has been pursued to test the following hypotheses with reference to Cement Industry in
India:

A) That proper management of working capital improves both Liquidity and Profitability
position of a business firm.
B) That external sources of finance particularly bank borrowing are being liberally utilized in
financing the working capital requirement of industry in India. That the scope for improvement in
the management of working capital is greater in inventory as well as receivables management than
in cash management.

45

C) That the private sector of the industry is definitely in a better position than the public sector, as
far as management of working capital is concerned. We often start with as assertion or a
hypothesis and use our research data to prove or to disprove it. Every hypothesis put to test with
know statistical procedure and unless such tests are carried out a research is not complete.

SAMPLING DESIGN :Sampling unit:

Financial statements
Balance sheets

Sample size:

Last five year financial statements

Tool for the research study :

Ratio analysis

Working capital management of the organization

SOURCES OF DATA COLLECTION:


Primary sources:
The primary data has been collected from the personal interaction with the chief and senior
accounts officers if the Markfed.
Secondary data sources:

Annual reports

Published reports of company

Data from various department

Companies web site:- www.Markfedpunjab.com


46

Profit & loss account of five years.

INTRODUCTION
TO
WORKING CAPITAL
47

WORKING CAPITAL
INTRODUCTION
Every business needs funds for two purposes for its establishment and to carry out its day-to-day
operations. Long term funds are required to create production facilities through purchase of fixed
assets such as plant and machinery, land, building, furniture etc. Investment in these assets
represent that part of firms capital which is blocked on a permanent or fixed basis is called fixed
capital.
Funds are also needed for short term purposes for the purchase of raw materials, Payment of wages
and other day to day expenses etc. These funds are known as working capital.

WORKING CAPITAL
Working capital refers to that part of the firms capital which is required for financing short term
or current assets such as cash, marketable securities, debtors and inventories.
Working capital also known as net working capital represents operating liquidity available to a
business. Along with fixed assets such as plant and equipment, working capital considered a part
of operating capital. Along with fixed assets such as plant and equipment, working capital
considered a part of operating capital. It is calculated as current assets minus current liabilities. If
current assets are less than current liabilities, an entity has a working capital deficiency.

DEFINITON OF WORKING CAPITAL


In words of Shubin:48

Working capital is the amount of funds necessary to cover the cost operating the enterprise.

L.J. Guthmann defined Working Capital as :the portion of a firms current assets which are financed from longterm funds.

TYPES OF WORKING CAPITAL

On the basis of Concept:a) Gross working capital: It refers to all the current assets taken together.

b) Net working capital: It is the surplus of current assets over and above current liabilities.

On the basis of Time:-

49

a) Fixed working capital: It is that portion of the total capital that is required to be maintained
in the business on the permanent basis or uninterrupted basis. This working capital is
required to invest in fixed assets. The requirement of this type of working capital is
unaffected due to the changes in the level of activity.
b) Variable working capital: It is that portion of the total capital that is required over and
above the fixed working capital. This working capital is required to meet the seasonal needs
and some contingencies. The requirement of this type of working capital changes with the
changes in the level of activity.

DETERMINANTS OF WORKING CAPITAL

1) Nature of business The effect of the general nature of the business on working capital
requirements cant be exaggerated. Rail, roads and other public utility services have large
fixes investment so they have the lower requirements of current assets. Industrial and
manufacturing enterprises, on the other hand, generally require a large amount of working
capital.
2) Production policies If the production is evenly spread over the entire year, working
capital requirements are greater, because the inventories will be unnecessarily accumulated
during of season period. But if the production schedule favours a varying production plan as
per the seasonal requirements, working capital is required to a greater extent during a
specified season only. The production policies are affected by so many factors availability of
raw materials, labour, stocking facility etc & therefore, whatever the productions policies
are, the firm has to arrange its working capital requirements accordingly.
3) Proportion of the cost of raw materials to total cost - In those industries where
cost of proportion is a large proportion of total cost of the goods produced, requirements of
working capital will be comparatively large.

50

4) Length of period of manufacturing The time which elapses between the


commencement and end of the manufacturing process has an important bearing upon the
requirements of working capital. The manufacturing cycle may be shorter for certain
concerns & longer for others- it depends on the type of the product to be manufactured, work
to be done through machine labour & hand labour, degree of rationalization of
manufacturing procedures through times, motion & fatigue studies etc.
5) Terms of purchase - If suppliers allow continuous credit, payment can be postponed for
some time and can be made out of the sale proceeds of the goods produced. In such a case,
the requirements of working capital will be reduced.
6) Dynamic Attitudes As a company grows, it is logical to expect the large amount of
working capital will be required.
7) Business cycles Requirement of working capital also varies with the business. When the
price level is up due to boom conditions, the inflationary conditions create demand for more
working capital. During depression also a heavy amount of working capital is needed due to
the inventories being locked unsold and book debts uncollected.

8) Requirement of cash - The working capital requirements of a company are also


influenced by the amount of cash required by it for various purposes. The greater the
requirement of cash, the higher will be the working capital needs of the company.

9) Dividend policy of concern If the management follows a conservative dividend


policy the needs of working capital can be met with the retained earnings. The relationship
between dividend policy and working capital is well established and mostly companies
declare dividend after a careful study of their cash requirements.

51

10) Other Factors - Other factors, which affect the requirement of working capital, are lack
of co-operation in production and distribution policies, transport and communication
facilities, the fiscal and tariff policies of the government etc.

COMPONENTS OF WORKING CAPITAL


Main components of working capital are as follows:
1) Cash Cash is the most liquid and important component of working capital. Holding cash
involves cash in the sense that the present worth of cash held for a year is less than the value
of cash on today. During inflationary situations as exist today the cost of holding includes the
deterioration in the value of the cash due to inflation. Cash, therefore, results in enhanced
liquidity, but lower profitability. Despite in the cost involved it is pertinent to hold cash
because it facilitates the attainment of some important motives.
2) Marketable Securities Though marketable securities provides a such lower yield that
the firms operation assets. They serve two useful functions. Firstly, they act as a substitute
for cash, and secondly, are used as temporary investment. Where these securities are held in
lieu of the cash balance, they act as a substitute for transactional or precautionary balances.
Normally, these arent used as speculative balances, but only as a guard against the possible
shortage of bank credit.
52

Marketable securities (as temporary investment) may be held for one of the following
reasons:

Seasonal or cyclical operations

To meet known financial requirements. Construction of an


additional plant.

Immediately after the sale of long-term securities.

3) Accounts Receivable - Though accounts receivable are a vital investment of any


business organization, little analytical work as been done to determine credit policies.
Maintaining account receivable has its cost implications in that the firms monetary
resources are tied up. This is of greater significance in the inflationary economy, because of
the depreciation in the value of money. Basically, this is a two-step account. When goods are
shipped, inventories are reduced and accounts receivable is created. When payment is made,
this account is reduced and the cash level increases. Accounts receivables are, therefore a
function of the volume of credit sales and the average length of time between sales and
collections.
4) Inventory Inventories represent a substantial amount of a firms current assets.
Management of inventories should be efficiently carried out so that this investment doesnt
become too large, as it would result in blocked capital which could put to productive use
elsewhere. On the other hand, having too small an inventory could result in loss of sale or
loss of customer goodwill. An optimum level of inventory should therefore be maintained.

53

SOURCES OF WORKING CAPITAL IN MARKFED


Long-Term Loans
A loan is the amount of money that is given to an individual or a company on the agreement they
will repay the amount borrowed in a period that exceeds 12 months and at predetermined interest
rates. Long-term loans are usually secured against certain assets and are offered by commercial
banks, the government and financial institutions. This type of loan provides the long-term working
capital for the business.

Short-Term Loans
Short-term loans are loans that are to be repaid within a year from the time they are borrowed.
Savings banks, cooperatives and the government through the Small Business Administration are
some of the institutions that offer these loans. Bank overdraft is one such source of business
finance. A bank overdraft is a withdrawal made by a business that exceeds the amount of balance
in its bank account, although the amount of money does not exceed a set limit.
54

Line of Credit
This is a form of a loan agreement between the bank and the borrower that enables the borrower to
acquire some amount of the funds on demand, but the borrower does not have to take the loan. A
business may secure working capital through this service if it has recurring expenses at regular
intervals.

Trade Credit
This credit service offered by suppliers allows businesses to get goods and pay for them later. This
is a source of working capital that may be acquired from all suppliers depending on the business
arrangements, the type of business you conduct and the worth of the credit to be offered.

Asset-Based Financing
A business may use its assets to secure working capital from financial institutions that offer asset
based loans. The asset includes machinery, vehicle or accounts receivable. Accounts receivable are
financial documents of people or companies that owe money to the business and they may be
traded in to finance working capital at discounting companies.

Inventory Financing
These loans are secured with the business` inventory acting as the security. Finance for working
capital may be acquired through its inventory although the business cannot sell it until the loan is
repaid because the lender has the right to the inventory until the loan has been repaid.

PRINCIPLES OF WORKING CAPITAL FOLLOWED BY MARKFED

A) Principle of maturity of payment

55

A company should make every effort to relate maturity of payments to its flow of internally
generated funds. There should be the least disparity between the maturities of a firms short-term
debt instruments and its flow of internally generated funds, because a greater risk is generated with
greater disparity. A margin of safety should, however, be provided for any short-term debt
payment.
B) Principles of the risk variation
Risk here refers to the inability of firm to maintain sufficient current assets to pay its obligations. If
working capital is varied relative to sales, the amount of risk that a firm assumes is also varied and
the opportunity for gain or loss is increased. In other words, there is a definite relationship between
the degree of risk and the rate of return. As a firm assumes more risk, the opportunity for gain or
loss increases. As the level of working capital relative to sales decreases, the degree of risk
increases. When the degree of risk increases, the opportunity for gain and loss also increases.

ESTIMATION OF WORKING CAPITAL


It is necessary for every business enterprise to properly estimate the working capital requirements
so that timely arrangements can be made to procure adequate working capital and any type of
shortage can be avoided.

56

The working capital requirements of a manufacturing concern can be estimated by preparing the
following statement:

PARTICULARS

DETAILS
(Rs.)

CURRENT ASSETS:
Stock of Raw Material
Stock of Work-in-Progress:

AMOUNT
(Rs.)

***

Material
Labour
Overheads
Stock of Finished Goods
Sundry Debtors (at cost)
Prepaid Expenses
Cash in Hand
Cash at Bank
Other Currents Assets (if any)
TOTAL CURRENT ASSETS

LESS:
CURRENT LIABILITIES:
Creditors for Raw Material
Expenses Outstanding
Other Current Liabilities (if any)
WORKING CAPITAL
ADD: Margin/Provision for Contingencies

***
***
***
***
***
***
***
***
***
***

***
***
***
***
***
***

NET WORKING CAPITAL REQUIRED

ASSESMENT OF WORKING CAPITAL


Any enterprise whether industrial, trading or other acquires two types of assets to run its business
as has already been emphasised time and again. It requires fixed assets which are necessary for
57

carrying on the production/business such as land and buildings, plant and machinery, furniture and
fixtures etc. For a going concern these assets are of permanent nature and are not to be sold. The
other types of assets required for day to day working of a unit are known as current assets which
are floating in nature and keep changing during the course of business. It is these 'current assets'
which are generally referred to as 'working capital'. We are by now already aware of the short-term
nature of these assets which are classified as current assets. It may be noted here that there may not
be any fixed ratio between the fixed assets and floating assets for different projects as their
requirement would differ depending upon the nature of project. Big industrial projects may require
substantial investment in fixed assets and also large investment for working capital. The trading
units may not require heavy investment in fixed assets while they may be carrying huge stocks in
trade. The service units may hardly require any working capital and all investment may be blocked
in creation of fixed assets.
A set financing pattern is evolved to meet the requirement of a unit for acquisition of fixed assets
and current assets. Fixed assets are to be financed by owned funds and long-term liabilities raised
by a unit while current assets are partly financed by long-term liabilities and partly by current
liabilities and other short-term loans arranged by the unit from the bank. The balance sheet of a
unit under such dispensation may be represented as in next page.
The total current assets with the firm may be taken as gross working capital whereas the net
working capital with the unit may be calculated as under:
Net Working Capital
(NWC)

Current Assets - Current Liabilities


(GWC)

(including bank borrowings)

This net working capital is also sometimes referred to as 'liquid surplus' with the firm and has been
margin available for working capital requirements of the unit. Financing of working capital has
been the exclusive domain of commercial banks while they also grant term loans for creation of

58

fixed assets either on their own or in consortium with State level/All India financial institutions.
The financial institutions are also now considering sanction of working capital loans.
The current assets in the example given in the earlier paragraph are financed as under:
Current Assets

Current liabilities + Working capital limits from banks + Margin from


long-term liabilities

The assessment of working capital may involve two aspects as under:


The level of current assets required to be held by any unit which is adequate for its day to
day functioning, and
The mode of financing of these current assets.
The value of inventory as given in the balance sheet is the position as on a particular day on which
the balance sheet is drawn and may not be the actual average requirement of the unit. We will have
to, therefore, evaluate the actual consumption pattern to arrive at a correct decision.

OPERATING CYCLE CONCEPT

59

The day to day business operations of a concern of any nature and, size involves many successive
steps and final working results would depend on the effective combination of all these steps. The
steps in general may include :
Acquisition and storage of raw material and other stores and spares required for
manufacture of any product.
Actual production process when the raw material is subjected to different processes to
bring it to final shape of finished goods.
Storage of finished goods awaiting sales.
Sales of finished goods and realisations of sale proceeds.
All these steps put together form an operating cycle which can also be represented diagrammatically as
under:

We start from cash to buy raw material etc. and after completing all the steps end up with the cash. The
intervening period required for completion of this entire process is the 'Operating Cycle'. The operating
cycle may thus be defined as the intervening period from the time the goods or services enter the business
till their realisation in cash.
The study of this operating cycle is obviously very important as the actual requirement of the unit may be
limited to the funds required to complete an operating cycle and the simplest formula for the working
capital requirement may be represented as under:
60

Total working capital requirement = Total operating expenses expecting during the year
No. of operating cycles in a year
This system of calculation of working capital requirement is not in vogue as it only helps to assess the total
requirement of a unit whereas the banks granting working capital limits would be interested in proper
classification of its various components. The concept of operating cycle, however, throws light on various
components of working capital required for the unit and these components may be classified as under:
Raw material stores and spares consumed in the production process. The unit must have some
stocks of these items for uninterrupted production.
Manufacturing expenses such as wages, power and fuel etc. to be incurred during the process of
manufacture.
Stocks of work-in-process/semi finished goods maintained by the unit to complete an operating
cycle.
Stocks of finished goods awaiting sale. All the finished goods may not be immediately sold.
Administrative and selling expenses during this process.
Bills receivable/debtors for credit sales.
All or some of these components in varying proportions are required for any business.

THE PUNJAB STATE COOPERATIVE SUPPLY AND


MARKETING FEDERATION LTD.
61

CHANDIGARH
BALANCE SHEET AS ON 31-03-2012
(Amount in Crores)
LIABILITIES
AMOUNT
ASSETS
AMOUNT
SHARE CAPITAL
20.121
FIXED ASSETS
149.101
RESERVE &
279.89
LONG TERM
11.235
SURPLUS
INVESTMENT
PROFIT & LOSS
(230.30)
CURRENT
10476.67
APPROPRIATION
ASSETS
LOAN CASH
9883.18
CASH IN
49.688
CREDIT &
HAND &
OVERDRAFT
AT BANK
CURRENT
733.80
LIABILITIES &
PROVISIONS
TOTAL

10686.69

TOTAL

RATIO ANALYSIS
Q.1. What is meant by Accounting Ratios? How are they useful?
62

10686.69

Ans. A relationship between various accounting figures, which are connected with each other,
expressed in mathematical terms, is called accounting ratios.
According to Kennedy and Macmillan, The relationship of one item to another is expressed in
simple mathematical form is known as ratio.
Robert Anthony defined as ration as simply one number expressed in terms of another.
Accounting ratios are very useful as they briefly summaries the result of detailed and complicated
computations. Absolute figures are useful but they do not convey much meaning. In terms of
accounting ratios, comparison of these related figures makes them meaningful. For example, profit
shown by two business concern is Rs. 50,000 and Rs. 1,00,000. It is difficult to say which business
concern is more efficient unless figures of capital investment or sales are also available.
Analysis and interpretation of various accounting ratio gives a better understanding of the financial
condition and performance of a business concern.
Q.2. What do you mean by Ratio Analysis? What are the advantages of such analysis? Also
point out the limitations of ratio analysis.
Ans. Ratio analysis is one of the techniques of financial analysis to evaluate the financial condition
and performance of a business concern. Simply, ratio means the comparison of one figure to other
relevant figure or figures.
According to Myres, Ratio analysis of financial statements is a study of relationship among
various financial factors in a business as disclosed by a single set of statements and a study of end
of these factors as shown in a series of statements.

ADVANTAGES AND USES OF RATIO ANALYSIS:-

63

There are various groups of people who are interested in analysis of financial position of a
company. They use the ratio analysis to work out a particular financial characteristic of the
company in which they are interested. Ratio analysis helps the various groups in the following
manner:-

1. To work out the profitability: Accounting ratio help to measure the profitability of the
business by calculating the various profitability ratios. It helps the management to know about the
earning capacity of the business concern. In this way profitability ratios show the actual
performance of the business.

2. To work out the solvency: With the help of solvency ratios, solvency of the company can
be measured. There ratio show the relationship between the liabilities and assets. In case external
liabilities are more than that of the assets of the company, it shows the unsound position of the
business. In this case the business has to make it possible to repay its loan.

3. Helpful in analysis of financial statement: Ratio analysis help the outsiders just like
creditors, shareholders, debenture-holders, bankers to know about the profitability and ability of
the company to pay them interest and dividend etc.

4. Helpful in comparative analysis of the performance: With the help of ratio analysis
a company may have comparative study of performance to the previous years. In this way
company comes to know about its weak point and be able to improve them.

5. To simplify the accounting information: Accounting ratios are useful as they briefly
summaries the result of detailed and complicated computations.

6. To work out the operating efficiency: Ratio analysis helps to work out the operating
efficiency of the company with help of various turnover ratios. All turnover ratios are worked out
to evaluate the performance of business in utilizing the resources.

7. To work out short-term financial position: Ratio analysis helps to work out the shortterm financial position of the company with the help of liquidity ratios. In case short term financial
position is not healthy efforts are made to improve it.

64

8. Helpful for forecasting purposes: Accounting ratios indicate the trend of the business.
The trend is useful for estimating future. With the help of previous years ratios, estimates for
future can be made. In this way these ratios provide the basis for preparing budgets and also
determine future line of action.

LIMITATIONS OF RATIO ANALYSIS:In spite of many advantages, there are certain limitations of the ratio analysis techniques and they
should be kept in mind while using them in interpreting financial statements. The following are the
main limitations of accounting ratios:

1. Limited Comparability: Different firms apply different accounting policies. Therefore the
ratio of one firm cannot always be compared with the ratio of other firm. Some firms may value
the closing stock on LIFO basis while some other firms may value on FIFO basis. Similarly there
may be difference in providing depreciation of fixed assets or certain of provision for doubtful
debts etc.

2. False Results: Accounting ratios based on data drawn from accounting records. In case that
data is correct, then only the ratios will be correct. For example, valuation of stock is based on very
high price, the profits of the concern will be inflated and it will indicate a wrong financial position.
The data therefore must be absolutely correct.

3. Effect of Price Level Changes: Price level changes often make the comparison of figures
difficult over a period of time. Changes in price effect the cost of production, sales and also the
value of assets. Therefore, it is necessary to make proper adjustment for price-level changes before
any comparison.

4. Qualitative Factors are Ignored: Ratio analysis is a technique of quantitative analysis


and thus, ignores qualitative factors, which may be important in decision making. For example,
average collection period may be equal to standard credit period, but some debtors may be in the
list of doubtful debts, which is not disclosed by ratio analysis.

65

5. Effect of Window- Dressing: In order to cover up their bad financial position some
companies resort to window dressing. They may record the accounting data according to the
convenience to show the financial position of the company in a better way.

6. Costly Technique: Ratio analysis is a costly technique and can be used by big business
houses. Small business unit are not able to afford it.

7. Misleading Results: In the absence of absolute data, the result may be misleading. For
example, the gross profit of two firma is 25%. Whereas the profit earned by one is just Rs. 5,000
and sales are Rs.20,000 and profit earned by the other one is Rs. 10,00,000 and sales are Rs.
40,00,000. Even the profitability of the two firms is same but the magnitude of their business is
quite different.

8. Absence of Standard Universally Accepted Terminology: There are no standard


ratios, which are universally accepted for comparison purposes. As such, the significance of ratios
analysis technique is reduced.

66

DATA ANALYSIS
AND
INTERPRETATION

CALCULATION OF RATIOS
1. WORKING CAPITAL TURNOVER RATIO:
67

A measurement comparing the depletion of Working capital to the generation of sales over a given
period. This provides some useful information as to how effectively a company is using its
working capital to generate sales.
WORKING CAPITAL TURNOVER RATIO =

COST OF SALES
AVG. WORKING CAPTIAL
(Rs. in Crores)

YEARS

SALES

AVG.WORKING
CAPITAL

W.C
TURNOVER
RATIOS

2007-08

4689.210

228.33

20.53

2008-09

5530.170

215.69

25.64

2009-10

7528. 37

191.51

39.31

2010-11

9057.91

204.06

50.59

2011-12

9235.07

1064.63

221.89

INTERPRETATION: The working capital ratio is different in different organizations


depending on their nature. In 2010-11 the working capital ratio is less than in 2011-12.
2. INVENTORY TURNOVER RATIO
Inventory turnover ratio also known as stock velocity is normally calculated as sales/average
inventory or cost of goods sold/average inventory. It would indicate whether inventory has
68

efficiently used or not. The purpose is to see whether only the required minimum funds have been
locked up in inventory. Inventory turnover ratio (I.T.R) indicates the number of times been turned
over during the period and evaluates the efficiency with which a firm is able to manage its
inventory.
INVENTORY TURNOVER RATIO =

COST OR NET SALES


AVG.STOCK AT COST

YEARS

SALES

4689.210

AVG. STOCK
AT
COST
1096.16

INVENTORY
TURNOVER
RATIOS
4.27

2007-08
2008-09

5530.170

2538.95

2.18

2009-10

7528. 37

4322.20

1.74

2010-11

9057.91

4949.01

1.83

2011-12

9235.07

5205.46

1.77

INTERPRETATION:
Standard inventory turnover is different in different organization depending on their nature. An
increase in inventory turnover ratio can be visualized from the above data, the maximum being

69

achieved in the year 2007-08. Conversion of stocks into sales is almost totally dependent on Food
Corporation of India in Markfed.

3. CURRENT RATIO
Current ratio may be defined as the relationship between current assets and current liabilities. This
ratio could also be seen as a measure of working capital- the difference between current assets and
current liabilities. This ratio could also be seen as a measure of working capital-the difference
between current assets and current liabilities. A company with a lot of working capital will be in a
better position to expand and improve its operations.
CURRENT RATIO = CURRENT ASSETS
CURRENT LIABILITIES
(Rs. in Crores)
YEARS

CURRENT

CURRENT

CURRENT

ASSETS

LIABILITIES

RATIO

2007-08

3946.36

3713.77

1.06

2008-09

6461.88

6263.10

1.03

2009-10

8346.89

8162.55

1.02

2010-11

9662.59

9488.73

1.02

2011-12

10526.36

10616.96

0.99

70

INTERPRETATION:
A relatively high current ratio is an indication that the firm is liquid and has ability to pay its
current obligation in time as and when they become due Markfed followed a constant trend in its
current ratio in these years. But the ratio does not satisfy the standard norm of 30.01:1. However,
backed by government guarantee and good track record Markfed can avail longer credit period.

4. ABSOLUTE LIQUID RATIO


Although receivables, debtors and bills receivables are generally more liquid than inventories. Yet
there may be doubts regarding their realization into cash immediately or in time. Hence, some
authorities are of opinion that the absolute liquid ratio should also be calculated together with
current and acid test ratio so as to exclude even receivable from the current assets and find out the
absolute liquid assets.
ABSOLUTE LIQUID RATIO = ABSOLUTE LIQUID ASSETS
CURRENT LIABILITIES
ABSOLUTE LIQUID ASSET = CASH+BANK+MARKETABLE SECURITIES
71

(Rs. in Crores)
YEARS

ABSOLUTE

CURRENT

ABSOLUTE

LIQUID

LIABILITIES

LIQUID RATIO

2007-08

ASSETS
104.53

3713.77

0.029

2008-09

108.80

6263.09

0.017

2009-10

87.79

8162.55

0.010

2010-11

19.35

9488.74

0.002

2011-12

49.68

10616.96

0.005

72

INTERPRETATION:
The absolute liquid ratio of Markfed is too low than the standard norm. But Markfed has enough
borrowing powers to pay off its liabilities.

5. DEBTORS TURNOVER RATIO:Debtors turnover ratio indicates the velocity of debt collection of the firm. In simple words it
indicates the number of times average debtors are turned over during a year. Thus,
DEBTORS TURNOVER RATIO = NET CREDIT SALES OR ANNUAL TOTAL SALES
AVERAGE TRADE DEBTORS

73

YEARS

SALES

AVG. TRADE

(Rs. in Crores)
DEBTORS TURN

DEBTORS

OVER RATIO

2007-08

4689.21

548.29

8.55

2008-09

5530.17

719.59

7.68

2009-10

7528. 37

836.49

8.99

2010-11

9057.91

1364.80

6.63

2011-12

9235.07

1542.87

5.98

INTERPRETATION:
The higher the value of debtors turnover ratio, the more efficient is the management of debtors. It
is clear from the above data the turnover ratio started a decreasing trend from the year 2010-11.

6. TOTAL CURRENT ASSETS


Current assets are cash and other assets expected to be converted to cash or consumed either in a
year or in the operating cycle (whichever is longer), without disturbing the normal operations of a
business.
(Rs. in Crores)

74

YEARS

2007-08

2008-09

2009-10

2010-11

2011-12

TOTAL
CURRENT
ASSETS

3946.36

6461.88

8346.89

9662.59

10526.35

INTERPRETATION:
The total current assets of the Markfed organization have increase than the previous year. The
current assets are Rs.10526.35 in 2011-12 but in 2010-11 the current assets were Rs.9662.59. The
current assets are dependents on the nature of the organization.

7. TOTAL CURRENT LIABILITIES


Current liabilities are the debts a company owes which must be paid within one year. They are the
opposite of current assets. Current liabilities includes things such as short term loans, accounts

75

payable, dividends and interest payable, bonds payable, consumer deposits, and reserves for
federal taxes.
(Rs. in Crores)
YEARS

2007-08

2008-09

2009-10

2010-11

2011-12

TOTAL
CURRENT
LIABILITIES

3713.77

6263.09

8162.65

9488.73

10616.96

INTERPRTATION:
The total current liabilities have increased than the previous year. In 2011-12 the current liabilities
are Rs.10616.96 and in 2010-11 the liabilities were Rs.9488.73.

8. CREDITORS TURNOVER RATIO :


Creditors turnover ratio is an accounting liquidity metric that evaluates how fast a company pays
off its creditors (suppliers).
76

YEAR

(Rs. in Crores)
CREDITORS

NET

AVERAGE

PURCHASES

CREDITORS

TURNOVER

2007-08

4615.46

97.03

RATIO
47.56

2008-09

6811.31

110.97

61.37

2009-10

7729.90

109.94

70.31

2010-11

7699.42

76.69

100.4

2011-12

8527.49

131.54

64.82

77

INTERPRETATION:
It is clear that creditor turnover ratio changing over the years. It was 47.56 times in the year 200708. It increased to 5.061.37 times in the year 2008-09. There was subsequent increase in the year
of 2010, 2011 and 2012 with 70.31, 100.4 and 64.82 times respectively.
9. NET WORKING CAPITAL:
Net working capital is calculated as current assets minus current liabilities.
YEAR

(Rs. in Crores)
NET WORKING

CURRENT

CURRENT

ASSETS

LIABILITIES

CAPITAL

2007-08

3946.36

3713.77

232.59

2008-09

6461.88

6263.10

198.79

2009-10

8346.89

8162.55

184.24

2010-11

9662.59

9488.73

173.86

2011-12

10526.36

10616.96

(90.61)

78

INTERPRETATION:
It is clear that net working capital changes over the years. It was 198.79 crores in the year 2008-09.
It has decreased to 184.24 crores in the year 2009 or further decreased in the year 2010. There was
subsequent decrease in the year 2012 and have become negative i.e. (90.61).

FINDINGS
AND
RECOMMENDATIONS

79

FINDINGS
On analysis of the ratio I found that:

The current ratio was satisfactory as against the standard norm 2:76. This was mainly due to
peculiar nature of food grain activity. Being seasonal in nature it affects the level of current
assets and current liabilities. Since Markfed gets loans on the guaranty of stat govt. The low
current ratio does not affect that much on its borrowing capacity.
The activity ratio of Markfed is satisfactory which indicates the efficiency in the management
of its management.
The level of the net working capital affect the level of profit ability and risk i.e. with the
increase in networking capital profit ability and risk decrease and vice versa.

As much no technique are followed for management of components of working capital in


Markfed but ascertain variables are studied and analyzed for management purpose.

The approach to financing of current assets of Markfed is aggressive maximum use of short
term funds. Which is theoretically considered high, high-risk approach but Markfed manages
its funds in such a manner that its risk are minimized.

80

Markfed also undertakes swapping of high cost loan to low cost loan and thus save interest.

RECOMMENDATIONS

Markfed is a well established co-operative society, but still their also their as certain negative
points which require attention one of the main points of that profit abilities of plants shows
negative balance hence Markfed should pay more attention towards increasing the profit. For
improving this, attention should be given to the following points:-

No. of member society should be increased and this will ultimately result in more share capital
and hence debt equity ratio will improve.

Huge receivable are appearing in the balance sheet. Effort should be made to recover them so
that liquidity position improves.

Proper check should be there on the management of the company.

81

The advertisement network of Markfed should be improved.

Since Markfed is facing competition both in domestic as well as foreign market their fore it
should become more qualities conscious.

Cash conversion cycle should be shortened by raw material and producing them as quickly as
positively and speeding up collection.

In case manufacturing activities inventory management techniques such Economic Model,


ABC analysis should be applied for proper inventory management.

It should sell of out dated or absolute items.

SWOT ANALYSIS

STRENGTHS : Markfed has experienced staff.


It has adequate infrastructure, qualified manpower, office space and computer network to
support its activities.
Its product Basmati and Sarson Ka Saag have been well accepted in Indian and foreign
markets.
Main motto of the Markfed is quality assurance, which adds to its reputation and
performance in Asia.
82

It is one of the largest marketing federations in India.


It is one of the largest co-operative in Asia.
It enjoys the full support of the government and of the member co-operative societies.
It has a wide range of products.
It has extensive distribution of network
It has an understanding modernization program to keep competitive prices and improve
product quality.
It has high financial flexibility as a result of good relation with the banks and market
reputation.
Markfed takes care of its employees very well.

WEAKNESS : Since it is a government enterprise so change in the govt. policies may affect the
profitability.
Old plants require substantial modernization.
Weak distribution network outside Punjab.
Because of Government organization the time taken to make decision is long as there is
pong paper work process, which sometimes affects the purchase price of raw material.
Low returns from massive modernization.
Dependence on purchased raw material.

83

OPPORTUNITIES : Markfed purchase food grain on behalf of FCI, so storage income on that is assured in any
case.
Because of its confined customers it has spend little for advertisement and publicity.
Exports of heat and eat products hold the key for Markfed.
Favorable demand potential for growth in the economy led by the investment in
construction and infrastructure.
It has been accorded to the status of exports house by the Central Government.

THREATS : Being a government enterprise its business may be affected due to change in government
policy.
Slow down in expected demand of some canneries products.
Increasing competition from domestic and international market for Sohna Products.

84

LIMITATIONS OF THE STUDY

The study of working capital will be confined only to information available through balance
sheets and annual reports.
All the limitations of ratio analysis, common-size statements and comparative statements and
their interpretation is applicable to this study
The analysis was made with help of secondary data collected from the organization.

85

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

86

BIBLIOGRAPHY

Annual reports

Balance sheets

Profit and loss accounts

Bye laws of Markfed

Accounting manuals

Markfed web sites


www.punjabmarkfed.com
www.indiamart.com
www.apnapunjab.com

http://books.google.co.in/books?

id=pIk9ev12J9UC&pg=PA204&lpg=PA204&dq=major+problems+for+markfed&source=bl&ots
http://www.markfedpunjab.com/pages/general/delegation_of_financial_powers.pdf

Another websites
http://www.wikihow.com/Calculate-Working-Capital
http://smallbusiness.chron.com/sources-finance-working-capital-14472.html
http://www.ychange.com/ychangeblog/the-5-sources-and-5-uses-of-working-capital/
http://www.frontline.in/static/html/fl2208/stories/20050422002612100.htm

Brochures and Pamphlets Of Markfed


87

Reference from book: Bentone E. Cup., Principles of Financial Management, (New York, John Wiley &
Sons, 1983), p.418.

ANNEXURE:-

Balance sheets from the year 2008 to 2012:

88

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