PROJECT REPORT ON STUDY OF WORKING CAPITAL MANAGEMENT AT VERKA MILK PLANT BATHINDA

Submitted T ! M$% S&'dee( Kum&$ )*e+%,

Submitted B"! # R&'-eet K&u$ R ** N % ./0 MBA)IC, 1$d

UNIVERSITY SCHOOL OF BUSINESS STUDIES GURU KASHI CAMPUS2 TALWANDI SABO

ACKNOWLEDGEMENT
I am highly indebted to the management of Verka Milk Plant Bathinda to undertake me as training in their organization. I would like to thank specially to Mr. S. K. Sharma !eneral Manager" for pro#iding me an opportunity to undertake training at Verka Milk Plant Bathinda. I wish to e$press my gratitude towards Mr. %. K. &adhwa for permitting me to work under his guidance and cooperation. I ha#e no words to e$press my gratitude to the profound interest taken by him at e#ery stage of the pro'ect. (is encouragement and support made my target easily achie#able. I would also like to thank other office and marketing staff of Verka Milk Plant Bathinda for their cooperation and helpful beha#iour. I also e$press my sincere thanks to my parents and friends who always ha#e been source of inspiration to me and supported me morally and financially in e#ery acti#ity during the training. %bo#e all I would like to thank almighty for showering his blessings to complete the pro'ect.

PREFACE
)or the completion of the BB% ll it has been mandatory to obtain an Industrial *raining in )inance. *his training session really help me in gathering knowledge of market. I ha#e prepared this pro'ect on the topic +)inancial %nalysis of Verka Milk Plant Bathinda, in which I ha#e written about how an organization can manage its working capital in its daily business operations. *his report is prepared during training is life-s greatest treasure as it is full of e$perience. obser#ation and knowledge. *he training held was #ery gainful as it took us close to real life. *his period also pro#ide a chance to gi#e theoretical knowledge a practical result. *his report is a result of /0 days training that I ha#e taken at #erka milk plant bti. It has been #ery educati#e and fruitful e$perience for me for it has gi#en mean insight into some practical e$perience. I wish this great organization success so it may flourish and ser#e the nation and ha#e to achie#e many goals.

STUDENT DECLARATION
I hereby declare that the summer training report entitled submitted in the partial fulfillment of the re1uirement for degree of BB%2II *o #erka milk plant Bathinda is my original work and not submitted for the award of any other degree. diploma or any other similar title or price.

Pro'ect guide3 Mr. %. K. &adhwa

4ame3 5an'eet kaur

CONTENTS
*(6 P57)I86
Introduction Indian dairy industry 9airy Plants MI8K)692P:4;%B MI8K P8%4* B%*(I49%

MANAGEMENT BOARD OF DIRECTORS

5

 7:*8I46 7) *(6 S*:9< 7b'ecti#es of the Study Scope of the Study 5esearch Methodology 8imitations of the Study Introduction to working capital 7b'ecti#es and types of working capital Importance of working capital M%;75 )I49I4!S

BIB8I7!5%P(<

Introduction
*he dairy sector in the India has shown remarkable de#elopment in the past decade and India has now become one of the largest producers of milk and #alue2added milk products in the world. *he dairy sector has de#eloped through co2operati#es in many parts of the State. 9uring =>>?2>@. the State had AB milk processing plants with an aggregate processing capacity of A million lac liters per day. In addition to these processing plants and /0 co2operati#es milk chilling centers operate in the State.
6

&ith the increase in milk production. Maharashtra now regularly e$ports milk to neighbouring states. It has also initiated a free school feeding scheme. benefiting more than three million school children from o#er =>.BBB schools all o#er the State.

I'di&' d&i$" i'du3t$" 9airy is a place where handling of milk and milk products is done and technology refers to the application of scientific knowledge for practical purposes. 9airy technology has been defined as that branch of dairy science. which deals with the processing of milk and the manufacture of milk products on an industrial scale. In de#eloped dairying countries such as the :.S.%.. the year =@0B is seen as the di#iding line between farm and factory2scale production. Various factors contributed to this change in these countries. #iz. concentration of population in cities where 'obs were plentiful. rapid industrialization. impro#ement of transportation facilities. de#elopment of machines. etc. whereas the rural areas were identified for milk production. the urban centres were selected for the location of milk processing plants and product manufacturing factories. *hese plants and factories were rapidly e$panded and modernized with impro#ed machinery and e1uipment to secure the #arious ad#antages of large2scale production. 4early all the milk in the :.S.%. before =>BB was deli#ered as raw natural" milk. !radually farmers within easy dri#ing distance began deli#ering milk o#er regular routes in the cities. *his was the beginning of the fluid milk2sheds which surround the large cities of today. Prior to the =@0Bs most milk was necessarily produced within a short distance of the place of consumption because of lack of suitable means of transportation and refrigeration. *he Indian 9airy Industry has made rapid progress since Independence. % large number of modern milk plants and product factories ha#e since been established. *hese organized dairies ha#e been successfully engaged in the routine commercial production of pasteurized bottled milk and #arious &estern and Indian dairy products. &ith modern knowledge of the protection of milk during transportation. it became
7

possible to locate dairies where land was less e$pensi#e and crops could be grown more economically. In India. the market milk technology may be considered to ha#e commenced in =>0B. with the functioning of the Central 9airy of %arey Milk Colony. and milk product technology in =>0A with the establishment of %M:8 9airy. %nand. *he industry is still in its infancy and barely =BD of our total milk production under goes organized handling. Hi3t $" 4 I'di&' M&$5et Mi*5 I'du3t$"! Beginning in organized milk handling was made in India with the establishment of Military 9airy )arms.

(andling of milk in Co2operati#e Milk :nions established all o#er the country on a small scale in the early stages. 8ong distance refrigerated rail2transport of milk from %nand to Bombay since =>/0

Pasteurization and bottling of milk on a large scale for organized distribution was started at %arey =>0B". Calcutta (aringhata. =>0>". 9elhi =>0>". &orli =>A=". Madras =>AE" etc.

6stablishment of Milk Plants under the )i#e2<ear Plans for 9airy 9e#elopment all o#er India. *hese were taken up with the dual ob'ect of increasing the national le#el of milk consumption and ensuing better returns to the primary milk producer. *heir main aim was to produce more. better and cheaper milk. D&i$" I'du3t$" i' I'di&

More than F.//0 million people economically acti#e in agriculture in the world. probably FGE or e#en more H of them are wholly or partly dependent on li#estock farming. India is endowed with rich flora I )auna I continues to be #ital a#enue for employment and income generation. especially in rural areas. India. which has AAD of economically acti#e population. engaged in agriculture. deri#es E=D of !ross 9omestic Product !9P from agriculture. *he share of li#estock product is estimated at F=D of total agricultural sector Contribution of li#e stock sector to gross domestic product

Percentage contribution"

=>0B20= =>>B2>= AE.0 =F.B /.= =.E =A.0 8i#e 4umber of stock animals in A?.B =A.B E.= B.E =B.B populations3 thousand"

Source3 production yearbook =>>0 G)%7 statistics di#ision"

Sheeps /0BBB Buffaloes ?>0BB

!oats Pigs Chickens Cattle ==>F/F ==?@B /E0 (orses Mules Camels >>B =?/F =0FB
9

=>/A00

Mi*5 P$ du+ti ' =>0B J =? million tonnes =>>A J ?B.@ million tonnes =>>? J ?/.E m* Pro'ected" FBFB J F/B m* 6$pected to reach2 FFB to F0B m* J FBFB India contributes to world milk production rise from =F2=0 D I it will increase upto EB2E0D year FBFB"

Mi*5 C m( 3iti '

Sr. Constituents no = Moisture gm"

Buffalo Cow

!oat 8i1uid skimmed milk

@=.BB @?.0B @A.@B >F.=B

10

F Protein gm" E )at gm" / Minerals gm"

/.EB A.0B B.@B

E.FB /.=B B.@B /./B

E.EB /.0B B.@B /.AB

F.0B B.=B B.?B /.AB

0 Carbohydrates gm" 0.BB

A 6nergy calories kcal" ==?.BB A?.BB ?F.BB F>.BB ? Calcium mg" @ Phosphorus mg" > Iron mg" F=B.BB =FB.BB =?B.BB =FB.BB =EB.BB >B.BB =FB.BB >B.BB B.FB B.FB B.EB B.FB

Indian Buffaloes3 9airy business 9irectory =>>A" Buffaloes are classified into two categoriesK =" re#erine depending upon #ariation in their habitat I genome" F" Swamp buffaloes3 2 /@ chromosomes South 6ast %sian countries Stocky animals. marshy land habitat 5i#er Buffaloes3 2 0B chromosomes 2 Massi#e in size and curled horns 2 Prefer to enter clear water India3 leading most buffalo populated country ?@ millions most of re#erine

11

Mi*5 ($ du+ti '3 %bout >0D of world buffalo milk /0.E million tones" is produced in %sia IPacific. while A/./D is produced in India )%7.=>>F" )rom =>0B to =>>F milk production in the world increased by /.FAD *he D of total bo#ines slaughteredK*otal bo#ine slaughtered D" &orld =?.= to =?./D or 2 =.AD per annum India =0D per annum %sia A.AD Increasing trend of buffalo population in most of the %sian countries in Brazil and Italy Production performance G$ 6t73 *he a#erage birth wt. Indian buffaloes" low F= kg (igher Body in weight male at cal#es first than cal#ing2 in ranges (igh /= kg females from

%#erage daily gain of 0/@ gm between E2A months/B/ gm between birth to EA months EA?kg 9harwati"to0E=kg 4ili5a#i" (igher growth rate in re#erine breeds than swamp MILK Production performance of different breeds of Buffaloes3 PRODUCTION

%ge at =st cal#ing8actation. months" Buffalo %#g. 5ange <ield kg" %#g. 5ange

8actation 8ength days"

%#g 5ange"

Murrah /E.B E>.>20/.0 =@0B =/?A2F0=0 E=0 FA?2EA0"

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4ili 5a#i /F.B /=./2/?.E =?A0 =0>A2F@B@ F@B@ B>"

D&i$" P*&'t3! IndiaLs modern milk supply goes back to 9ecember =0. =>0B. when the %arey Milk Plant in Bombay launched the supply of pasteurized and bottled milk on large2scale for the first time in India. Subse1uently. o#er the years. the share of the organized sector increased after the launching of 7peration )lood in =>?B. )rom an insignificant FBB.BBB liters per day lpd" milk processing in =>0=. the organized sector is presently handling o#er FB million lpd in almost 0BB dairy plants. %lready. one of the world-s largest li1uid milk plants is located in 9elhi. handling o#er @BB.BBB liters of milk per day Mother 9airy. 9elhi". IndiaLs first automated dairy capacity3 = mlpd". Mother 9airy. !andhinagar. was commissioned at !andhinagar near %hmedabad. !u'arat. in &estern India. It is owned by India-s biggest dairy cooperati#e group. !u'arat Cooperati#e Milk Marketing )ederation !CMM)" in %nand. with an annual turno#er in e$cess of 5s FF billion :S M0BB million" in =>>>. 9airy Plants :pdate3 IndiaLs first #ertical dairy commissioned %mul2III with its satellite dairies at %nand in !u'arat. with total installed capacity of =.0 tone capacity3/BB.BBB lpd" has been commissioned at 4oida. outside 9elhi. in =>>>. It is owned and managed by the Pradeshik Cooperati#e 9airy )ederation 8imited. 8ucknow in :ttar Pradesh. Re3 u$+e3! D&i$" P*&'t3 In this section 9airy (*&'t3 are listed alphabetically and regionwise. including li1uid milk plants and product manufacturers. both &estern and indigenous. in the public. cooperati#e and pri#ate sectors. *he address. phone and fa$ numbers. list of products
13

manufactured and capacities and other details of these Plants can be obtained from 9%I5< I49I% =>>? or from us.

Ve$5& 2 Pun'abLs leading milk brand 7ne of the leading dairy brands of 4orth India. Verka. is yet another contribution from the state of Pun'ab. *he flagship brand of the Pun'ab State Cooperati#e Milk ProducersL )ederation 8td Milkfed". Verka is today en'oying the patronage of customers both within and outside the country. MilkfedLs future programmes can ne#er be complete without Verka. Verka is a brand leader in milk powders particularly in northern I eastern sectors. *he Milkfed brand commands a premium price o#er milk powders manufactured by competitors. which include multinational as well as pri#ate trade and other cooperati#e federations. Milkfed claims that Verka has car#ed a niche on the basis of the sheer strength of its 1uality. freshness and purity. Milkfed is ser#ing nationwide consumers through its network of 5egional offices and strong distribution channels. Milkfed markets a wide #ariety of products. which include li1uid milk. skimmed milk powder. whole milk powder. infant food. ghee. butter. cheese. lassi. S)M. ice cream. malted food and Verka Vigour etc. *he annual turno#er of Milkfed has touched to 5s /0B crore. Milkfed states that it has successfully le#eraged on the brand e1uity of Verka to launch new trends. needs. tastes and hopes. Verka brands included #aried #arieties of cheese like the processed cheddar cheese. cheese spread. and cheese singles. *here are also milk powders like 9airy &hitener. Skimmed Milk Powder and Infant Milk Powder. (ealth 9rinks like Verka Vigour. Verka 8assi. Sweetened )la#oured Milk and a mango drink called 5aseela ha#e also hit the markets. Milkfed has now come out with Verka Curd and a whole lot of different fla#ours of ice creams. Milkfed has also made
14

a foray into the international markets. *hey say that it was the domestic competition that dro#e them to alien destinations. (owe#er. Milkfed has already established its ghee market in the Middle 6ast. Verka ghee reaches all the 6mirates and is a#ailable in almost all super markets. In addition to ghee. SMP is also e$ported to %sian Countries like Philippines. Bangladesh and Sri 8anka. Verka Malt Plus Malted Milkfood" is being e$ported to Bangladesh also.

&ith *echnology Mission Programmes. e#er widening markets and increasing e$ports. Milkfed is preparing itself to take Verka to greater heights. *he federation has planned to introduce more #alue2added products like *etra2Pack Plain Milk and low calorie lassi. It has also sought technical assistance from the Israel 9airy Board to initiate breed impro#ement and milk production enhancement programme in the state. Milkfed not only pro#ides assured market to milk producers but also carries inputs to enhance milk to their doorsteps. *he 9istrict Cooperati#e Milk ProducerLs :nions and Milk Plants ha#e attained self2sufficiency or are on the threshold of attaining it. Milkfed has played a #ery #ital role in pro#iding a strong base for remunerati#e price to the producerK they get more money for their milk and payments are timely. In addition technical input ser#ices in feeding. breeding and management are easily accessible. Value addition is one of MilkfedLs thrust areas and the plants produce not only pasturised. homogenised milk but also buttermilk. cream. cheese. ice cream. butter and clarified butter2oil ghee" and se#eral other products. *he Milk :nions ha#e marketed milk and milk products of the #alue of 5s FBF.@? crore during the pre#ious year. It should be noted that the state go#ernment has recently announced a new pro'ect in which ?@ bulk milk coolers are to be installed by the central go#ernment at the le#el of milk cooperati#es in the districts of 5opar. 8udhiana. !urdaspur and Patiala under a Centrally Sponsored Scheme. )or this purpose. the !o#ernment of India has already released an amount of 5s =/E.=0 lakh for the installation of F/ bulk milk coolers for implementation of this programme in 5opar district. *his mo#e is e$pected to help the
15

farmers to produce 1uality milk and get better farm gate price and consumers shall get 1uality milk. *he budgetary outlay for the programme is 5s =./= crore. Milkfed is an ape$ body at the state le#el. It has == Milk :nions at district le#el operating =B milk plants and more than 0.BBB cooperati#e societies at #illage le#el with a total of E lakh members. %part from the main arena of collecting more and more milk and enrolling more and more milk producers. Milkfed and its units ha#e a work force of about 0BBB employees. 6#ery morning and e#ening milk is lifted from the #illages through pri#ate #ehicles 2 this means regular employment to about ABB transporters. most of whom are self2employed. Some =B.BBB workers man the milk procurement and technical input operations. MILKFED#PUNJAB *he Pun'ab State Cooperati#e Milk Producers- )ederation 8imited popularly known as MI8K)69 Pun'ab. came into e$istence in =>?E with a twin ob'ecti#e of pro#iding remunerati#e milk market to the Milk Producers in the State by #alue addition and marketing of produce on one hand and to pro#ide technical inputs to the milk producers for enhancement of milk production on the other hand. %lthough the federation was registered much earlier. but it came to real self in the year =>@E when all the milk plants of the erstwhile Pun'ab 9airy 9e#elopment Corporation 8imited were handed o#er to Cooperati#e sector and the entire State was co#ered under 7peration )lood to gi#e the farmers a better deal and our #alued customers better products.*oday. when we look back. we think we ha#e fulfilled the promise to some e$tent. *he setup of the organisation is a three tier system. Milk Producers Cooperati#e Societies at the #illage le#el. Milk :nions at 9istrict le#el and )ederation as an %pe$ Body at State le#el. MI8K)69 Pun'ab has continuously ad#anced towards its co#eted ob'ecti#es well defined in its byelaws. N (ome N 7rganisation N Procurement N Products N Marketing N %chie#ements N 8ooking Beyond.

16

Milkfed has formulated company specifications for its milk I milk products to pro#ide standard and 1uality of products to consumers.

17

Milk

Cheese I Paneer

9rinks

!hee I Butter )resh Products

Icecream I Sweets Packing

Milk Powder

7n the basis of 1uality with efficient administration. MI8K)69 has not only established new mile stone of pro#iding ser#ices to 9airy farmers but scaled new heights in delighting esteemed customers also. *his has resulted into tremendous achie#ements in all fields.
18

TURNOVER3 *he annual turno#er of Milkfed which was 5s.?AB crores in the year FBB?2B@ has hit the le#el of 5s.>E= crores in the year FBB@2B>.

E8UITY PARTICIPATION! *he paid2up e1uity of Milkfed as on E=.E.FB=B was to the tune of 5s./A.@A crores which comprises of 5s.F@.>E crores from the cooperati#e members and balance 5s.=?.>E crores from State !o#ernment. MI8K)69 !57&*( %* % !8%4C6

P%5*IC:8%5S ):4C*I74%8 S7CI6*I6S M6MB65S(IP

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19

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20

&orking on P%nand PatternP the process of organizing societies at #illage le#el started in Pun'ab as early as =>?@. Presently. there is strong 4etwork of about A=00 E=.E.FBB@" Milk Producers Cooperati#e Societies organized at #illage le#el. %bout E.A0 8akh milk producer members are attached to these societies. )resh milk is procured from the milk producers twice a day through #illage le#el societies directly without the assistance of any middleman. as on

I4P:* S65VIC6S3 It is one of the fundamental ob'ecti#es of MI8K)69 to carry out acti#ities for promoting milk production in the State. In #iew of this. #arious technical input ser#ices like #eterinary health care. artificial insemination ser#ices. #accination. supply of V65K% balanced cattle feed and 1uality fodder seed etc. are pro#ided for enhancing milk production and economic de#elopment of farming community. C86%4 MI8K P579:C*I74 P57!5%MM63 )or impro#ing 1uality of raw milk right from milk producerLs le#el. 1 massi#e programme called PCMPP has been launched under which =>0 Bulk Milk Coolers ha#e been installed in the societies and many more in pipe line. Besides. more than =BBB %utomatic Milk Collection Stations ha#e been pro#ided to the societies for bringing efficiency and total transparency in the system. *raditional manual method of milk testing at society le#el is being replaced with 6lectronic Milk *esters.

WOMEN DAIRY PROJECT!

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(ousehold le#el dairying is largely the domain of women especially in small and marginal household families. In #iew of this fact. Milkfed has undertaken &omen 9airy Pro'ect in si$ Milk :nions namely (oshiarpur. 5opar. Patiala. ;alandhar. 8udhiana and %mritsar with an ob'ecti#e to empower rural women in the field of dairy. *his Programme is being implemented under Support to *raining I 6mployment Programme S*6P" with the assistance of !o#ernment of India. :nder this programme. E>B women societies with =>@AB women beneficiary members will be organized.

S6**I4! :P 7) BI! C7MM65CI%8 9%I5< )%5MS3 In order to enhance the milk production and making the dairy farming a profitable and sustainable profession. Milkfed has planned to establish at least ten progressi#e big dairy farms in each Milk :nion by arranging soft terms loans from the banks.

P579:C*IVI*< 64(%4C6M64* P57!5%MM63 &ith a #iew to enhance milk production so as to reduce a#erage cost per Kg. of milk produced. Milkfed and its affiliated Milk :nions are pro#iding technical input ser#ices like animal health care. artificial insemination ser#ices. #accination. supply of balanced cattle feed. supply of 1uality fodder seeds etc. to specific target group i.e. Milk Producers Cooperati#e Members at their door steps.

22

C7MM:4I*< B%S69 SI8%!6 M%KI4! I4 K%49I %56%S3

Milkfed initiated community based silage making to fulfill shortage of green fodder in Kandi area of (oshiarpur I !urdaspur. *his will ensure a#alability of green fodder in the shape of Silage during scarcity period. *his will help in impro#ing milk production. 0B Silo pits of capacity =0B M.*. each will be constructed during the year FBB>2=B. 5s.=B.=0 crore shall be gi#en as capital grant for construction of Silo pits. chaff cutters. weighing balance and training.

)79965 S669 M:8*IP8IC%*I74 P57!5%MM63

23

4on a#ailabilty of 1uality fodder seed was a ma'or constraint. Milkfed established its own automatic fodder seed production I processing unit at Bassi Pathana of capacity 2 =0 M*G9ay. 9uring the year. Milkfed produced AFF@ 1uintals of 1uality fodder seed and during the year more than @BBB 1uintals of seed will be produced.

P57VI9I4! MI8KI4! M%C(I46SGMI8KI4! P%587:5S3

*o upgrade milking technology. Milkfed is pro#iding milking machinesGmilking parlours to dairy cooperati#e societiesGprogressei#e dairy farmers at 0BDGF0D subsidy. *ill date /0B Milking Macines and / Milking Parlours ha#e been pro#ided against the target of @BB milking machines for the year FBB>2=B. 5s.F.BB crore ha#e been recei#ed
24

from !o#t. of Pun'ab as financial assistance. *his will impro#e Bacterological 1uality of milk. hygenic conditions of teats of animals and reduce stress to animalsGMilkers and somatic cell counts. MARKETING 9 E:PORT MI8K)69 P:4;%B is ser#ing nation wide consumers through its net work of 5egional 7ffices and strong 9istribution channels. MI8K)69 markets a wide #ariety of products. which include 8i1uid Milk. Skimmed Milk Powder. &hole Milk Powder. 9airy &hitener. !hee. Butter. Cheese. 8assi. *etra Pack Sweetened )la#ored Milk. :(* milk in *etra Pack. Ice Cream. Malted )ood Verka Vigour. Khoa etc. etc% V65K% is brand leader in milk powders particularly in northern eastern sectors and Skimmed Milk Powder marketed by Milkfed commands a premium price o#er powders manufactured by competitors which include multi2national as well as pri#ate trade and other Cooperati#e )ederations. 4ow Verka has arri#ed on the sheer strength of its 1uality. freshness and purity. %nd of course. it-s home made taste at the most affordable price. *o people today. Verka is the part of their daily li#es.

25

Milkfed. Pun'ab. is making a#ailable pasteurised milk packed and processed under hygienic conditions at the doorsteps of the consumers.Keeping in #iew the modern days human stress. strains and undernourished persons. those do not get ade1uate Vitamin % I 9 from other sources. Milkfed felt its moral responsibility to take care of their health by enriching Verka milk with Vitamin % I 9. &ith competition in national market zooming up efforts to enhance e$port of Milk Products ha#e been made. Milkfed has established its ghee market in Middle 6ast market. Verka ghee reaches all the emirates and is a#ailable almost in all the super markets. *he penetration is so deep that #erka ghee is a#ailable in far off labour camps. )uture Planning Pun'ab is the State. which has pioneered the green re#olution in the country. It is because of the efforts of the Pun'ab farmers that India now occupies an en#iable position of self2reliance in respect of foodgrains on the &orld map. Conse1uent upon intensification of agriculture. Pun'ab agriculture has now reached saturation le#el beyond which further growth appears to be limited. *his necessitates a fresh look at the agricultural scenario pre#ailing in the State so that the Pun'ab farmer who is #ery enterprising and is recepti#e to new technology continues to reaps the fruits of his labour without permanent damaging his en#ironment.

*he programme aims at bringing a #oluntary shift in cropping pattern. introduction of incomeGemployment generatingGproducti#ity oriented programmes directly benefiting the farmer of Pun'ab. :nder the programme following schemes are proposed for 9airy 9e#elopment concerning Milkfed. Pun'ab32

Milk Production and (ygienic Quality Impro#ement %ssistance.

26

Modernisation of Milk *esting. 6stablishment of Method2cum25esult 9emonstration :nits.

In the field of dairy de#elopment. Commercialized 9airy )arming for producing more milk round the year of high 1uality was felt the only solution for the #iability of 9airy Industry in the present 4ational and International 9airy Scenario. It will help ?BD rural population of Pun'ab in increasing their income. &ith the ob'ecti#e to accelerate the pace of Milk Production in the State of Pun'ab and to impro#e the 1uality of milk right at the Society le#el and to increase the milk procurement to ha#e =BBD capacity utilisation of Milk Plants. a detailed %ction Plan. #ision FBB/ has been prepared 'ointly by Milkfed. 9istrict Milk :nions and Cooperati#e 9epartment spelling out therein the #arious acti#ities to be undertaken for 9airy 9e#elopment in the State of Pun'ab. *he broad ob'ecti#e of the Plan is to produce ma$imum milk of the best 1uality at the least cost per liter. collect. store and transport it at least cost in an idle way to be of best 1uality when recei#ed at Milk Plants dock to utilise it for high standard #alue added products to earn ma$imum income and inturn paying remunerati#e price for raw milk to the Milk Producers. It is hoped that with the implementation of Vision2FBB/ plan the number of Milk Producers Cooperati#e Societies will increase to @BBB from 0@/B in March2Fk and the membership of these societies will increase from E.E@ lacs in March2Fk to /.?0 lacs by the end of March2FBB/. Similarly the a#erage milk procurement will increase to =0.EB lac ltrs. per day in the FBBE2B/ from @.== lac ltrs. per day in =>>>2Fk. *he detailed in#estment proposals ha#e been submitted to 4ational dairy 9e#elopment Board for funding.

27

Milk Plant Bathinda

Milk Plant Bathinda was commissioned in September. =>?/ with a total outlay of 5s. =.A Crores by *he Pb. 9airy 9e#. Corporation limited. It was one of the select co2operati#es that were co#ered under the 7peration )lood2= Programme. Subse1uently on Ist March. =>@B. it was handed o#er by the State !o#t. to *he Pun'ab State Co2operati#es milk Producers federation 8td. MI8K)69" which is an ape$ le#el organization of milk producers operati#e in the State. )urther to this de#elopment. the Milk Plant was handed o#er to *he Bathinda 9istrict Co2operati#e Milk Producers :nion 8td. registered in the year =>?@ under Pun'ab co2operati#e %ct." on =st ;anuary =>@@. Milk Plant set up with a twin ob'ecti#e of pro#iding remunerati#e milk market to the milk producers in this area and also

28

supply good 1uality milk products to the consumers at reasonable rates and also marketing of milk producers at #illage le#el.

*he :nion has a processing capacity of =BB*8P9 and drying capacity of A.F M*9.It also owns four Milk Chilling Centres namely 5ampura =0*8P9". *alwando Sabo =B*8P9". Bhikhi =0*8P9" and sardulgarh FB*8P9". In addition the union has hired ice factory Bhagta with a capacity of FB*8P9. Milk and Milk products are prepared asper the norms by pasteurizing the milk and others re1uired process to fulfill the targetGnorms as per the market demand. Milk plan also got IS72>BB=3FBBB with (%CCP as per IS3 =0BBB3 >@" and also appro#ed by the 6$port Inspection %gency 4ew 9elhi for e$port the milk products. Milk products ha#ing standards norms of P)%GBISG6!! M%5K and our prescribed specification if International Standards for e$port of ghee and Milk Powder to 9ubai and Middle 6ast Countries. Products 3 2 B5%492V65K%"

Milk !hee Skimmed Milk Powder &hole Milk Powder *able Butter Paneer
29

Khoa S.).M. Milk Cake 8assi Kheer Ice Cream

*(6 6O*64SI74 7) *(6 B5%49 %fter winning faith of innumerable consumers. Verka did not stop. )or there was a scope for more. Changing times brought new trends. needs. tastes and hopes. Verka dynamic as e#er.too ac21uired newer forms.By adding #alue to milk to satisfy a 1uality 2 conscious society. %nd what successR for.consumers could ha#e their own pick as we came up with #aried #arieties of cheese like the Processed Cheddar Cheese. Cheese Spread. and cheese Singles. %nd there were milk powders like 9airy &hitener.Skimmed Milk Powder and Infant Milk Powder. (ealth 9rinks like Verka Vigour. Verka 8assi. Sweetened )la#oured Milk and a mango drink called 5aseela. *hen there were Verka Curd and a whole lot of different fla#ours of Ice Creams. Milk had ne#er meant so much before. OBJECTIVES OF VERKA MILK PLANT *he ob'ecti#e of milk plant is collected milk from different #illages. It utilize in proper way. It pro#ides best 1uality of product. *he #erka milk plant is played main roll in increase the dairy form. People are shown interest in dairy form. Its main purpose is made dairy business in rural area.
30

M%4%!6M64* B7%59 7) 9I56C*75S Sh. V.K.Singh I%S" S.Sandhura Singh S.Bikerm'it Singh S. 8abh Singh S.Sukhpal Singh S.;agsir Singh S.Sur'it Singh S.;awala Singh S.Balwinder Singh S.%mrik Singh Smt.Surinder P. Kaur S.Boota Singh !alib S.(.S.;atana S.Karnail Singh S.*.P.S.&alia Sh.M.9.Sharma M.9.milk fed Pun'ab Chairman Vice Chairman 9irector 9irector 9irector 9irector 9irector 9irector 9irector 9irector ;.5. Co2op.S7C.)erozpur 9y.5eg.co2op.S7C.B*I 9y.9ir. 9airy 9e# .B*I Milkfed 4ominee 4.9.9.B.4ominee
31

Sh.5.K.*iwari 7:*8I46 7) *(6 S*:9<32

!.M.Milk plant B*I

*he management of working capital is #ery important. It in#ol#es the study of day2to2 day affairs of the company. *he moti#e behind the study is to de#elop an understanding about the working capital management in the running business organization and to help the company in de#eloping the efficient working capital management. So it helps in future planning and control decisions. 7B;6C*IV6S 7) *(6 S*:9<32 *o learn and e$perience the practical functioning of the organization. *o e#aluate the composition of current assets and current liabilities. *o ascertain the companies financial strength and weakness. *o ascertain the company-s profitability position. *o know the future need of working capital in the running organization. *o find out how the working capital needs are fulfilled. *o find out whether #erka milk plant bti. is maintaining the satisfactory le#el of working capital.

%lso to study the following aspects of the working capital management32 a. Cash management b. 5ecei#ables management c. In#entory management
32

SC7P6 7) *(6 S*:9<32 *he study is conducted at #erka milk plant bathinda for A2@ weeks. *he concept of working capital i.e. both gross and net working capital is used. *o get the proper understanding of the concepts. balance sheet and profit and loss account ha#e been studied. *he scope of the study is limited upto the a#ailability of financial records and information pro#ided by employees. *he study is related to period of last two years.

Re3e&$+7 Met7 d * ;"

5esearch 9esign 3 % research design is the arrangement of conditions for collection and analysis of data in a manner that aims to combine rele#ance to the research purpose with economy in procedure .% research design is purely and simply the framework of plan for a study that guides the collection and analysis of data. It is a blue print that is followed in completing a study. Keeping in #iew the ob'ecti#es of the pro'ect. I opted for conclusi#e. statistical research methods. Statistical *echni1ues3 *hese techni1ues are used as they pro#ide more accurate results. *he method eases to identify indi#idual cases and focuses on classes. a#erage. percentages. measures of dispersion and others .%s a result the research can make much more accurate generalization than by any other method. 5ecognition of information3 *his step is the recognition of #arious types of information which are necessary for the study of working capital.

33

9ata Collection Methods3 Structured and non2disguised 1uestionnaire has been used to achie#e the ob'ecti#es of this report .*his pro#ed to be a cost effecti#e. accurate. and speedy way of achie#ing the desired ob'ecti#es. *he greatest ad#antage being its #ersatility. It opened a broad way of enticing the knowledge and opinions of the sample. %nother important reason for choosing the method was its unbiasedness. 4o bias of the researcher can creep in and it-s easy to tabulate and interpret. :nderstanding of reports being prepared by the units3 )or understanding the #arious types of reports being sent to finance department by different section. personal inter#iews ha#e been conducted with the concerned persons with prior permission from concerned department head. Suggestions3 Suggestions on the basis of working capital ha#e gi#en for better results. )or analyzing the concept the techni1ues ha#e been used32 5atio analysis Common size statement Statement of changes in working capital 7perating cycle

8IMI*%*I74S 7) *(6 S*:9<32 *hey do not prepare cash statement separately. Cash floe statement is prepared collecti#ely for whole of the units. *ime period for the study is limited.
34

%s the receipts from debtors is directed to the corporate office and hence not much information regarding the recei#able management could be obtained.

In#estment o funds are also made by corporate office. so it becomes difficult to know that how much in#estment is made in different ways for continuous a#ailability of funds. %n Introduction *o &orking Capital Management

+&orking capital means the part of the total assets of the business that change from one form to another form in the ordinary course of business operations., Concept of working capital32 *he word working capital is made of two words =.&orking and F. Capital *he word working means day to day operation of the business. whereas the word capital means monetary #alue of all assets of the business. &orking capital &orking capital may be regarded as the life blood of business. &orking capital is of ma'or importance to internal and e$ternal analysis because of its close relationship with the current day to2 day operations of a business. 6#ery business needs funds for two purposes. S 8ong term funds are re1uired to create production facilities through purchase of fi$ed assets such as plants. machineries. lands. buildings I etc. S Short term funds are re1uired for the purchase of raw materials. payment of wages. and other day2to2day e$penses. It is other wise known as re#ol#ing or circulating capital. It is nothing but the difference between current assets and current liabilities. i.e.
35

&orking Capital T Current %sset J Current 8iability. Businesses use capital for construction. reno#ation. furniture. software. e1uipment. or machinery. It is also commonly used to purchase in#entory. or to make payroll. Capital is also used often by businesses to put a down payment down on a piece of commercial real estate. &orking capital is essential for any business to succeed. It is becoming increasingly important to ha#e access to more working capital when we need it. Concept of working capital32 U !ross &orking Capital T *otal of Current %sset U 4et &orking Capital T 6$cess of Current %sset o#er Current 8iability. Current %ssets Current 8iabilities

Cash In handG at Bank Bills 5ecei#able Sundry 9ebtors Short *erm 8oans In#estmentsG stock *emporary In#estment Prepaid 6$penses %ccrued Incomes

Bills Payable Sundry Creditors 7utstanding 6$penses %ccrued e$penses Bank o#erdraft

&orking capital in terms of fi#e components3 =. Cash and e1ui#alents3 2 *his most li1uid form of working capital re1uires constant super#ision. % good cash budgeting and forecasting system pro#ides answers to key 1uestions such as3 Is the cash le#el ade1uate to meet current e$penses as they come dueV &hat is the timing relationship between cash inflow and outflowV &hen will
36

peak cash needs occurV &hen and how much bank borrowing will be needed to meet any cash shortfallsV &hen will repayment be e$pected and will the cash flow co#er itV F. %ccounts recei#able3 2 Many businesses e$tend credit to their customers. If you do. is theamount of accounts recei#able reasonable relati#e to salesV (ow rapidly are recei#ables being collectedV &hich customers are slow to pay and what should be done about themV E. In#entory3 2 In#entory is often as much as 0B percent of a firmLs current assets. so naturally it re1uires continual scrutiny. Is the in#entory le#el reasonable compared with sales and the nature of your businessV &hatLs the rate of in#entory turno#er compared with other companies in your type of businessV /. %ccounts payable3 2 )inancing by suppliers is common in small businessK it is one of the ma'or sources of funds for entrepreneurs. Is the amount of money owed suppliers reasonable relati#e to what you purchaseV &hat is your firmLs payment policy doing to enhance or detract from your credit ratingV 0. %ccrued e$penses and ta$es payable3 2 *hese are obligations of your company at any gi#en time and represent a future outflow of cash..>#rrf Management of Cash It is the duty of the )inance Manager to pro#ider ade1uate cash to all segments of the organization. (e has also to ensure that no funds are blocked in idle cash this will in#ol#e cost in terms of interest to the business. % sound cash management scheme. therefore. maintains the balance between the twin ob'ecti#es of li1uidity and cost. Meaning of Cash .

37

'he term +cash, with reference to cash management is used in two senses. In a narrower sense it includes coins. currency notes. che1ues. bank drafts held by a firm with it and the demand deposits held by it in banks. In a broader sense it also includes +near cash assets, such as marketable securities and time deposits with banks. Such securities or deposits can immediately be sold or con#erted into cash ifG the circumstances re1uire. *he term cash management is generally used for management of both cash and near cash assets. M%4%!6M64* 7) I4V64*75I6S In#entories are goods held for e#entual sale by a firm. In#entories are thus one of the ma'or elements that help the firm in obtaining the desired le#el of sales. Kinds of in#entories In#entories can be classified into three categories3 5aw Material3 *hese are goods. which ha#e not yet been committed to production in a manufacturing firm. *hey may consist of basic raw materials or finished components. &ork2in2process3 *his includes those materials. which ha#e been committed to production process but ha#e not yet been completed. )inished goods3 *hese are completed products awaiting sales. *hey are the final output of the production process in a manufacturing firm. In case of wholesalers and retailers. they are generally referred to as a merchandise in#entory. *he le#els of the abo#e three kinds of in#entories differ depending upon the nature of business. )or e$ample. a manufacturer will ha#e le#els of all the three kinds of in#entories. &hile a retailer or a wholesaler will ha#e a high le#el of in#entories of finished goods but will ha#e no in#entories of raw materials or work2in2progress.
38

Moreo#er. depending upon the nature of the business. in#entories may be durable or non2durable. #aluable or ine$pensi#e. perishable or non2perishable. etc. Management of In#entory In#entoWries often constitute a ma'or element of total working capital and hence it has been correctly obser#ed. +!ood in#entory management is good financial management,. In#entory management co#ers a large number of issues including fi$ation of minimum and ma$imum le#elsK determining the size of the in#entory to be carriedK deciding about the issue price policyK setting up receipt and inspection procedureK determining the economic order 1uantityK pro#iding proper storage facilitiesK keeping check on obsolescence and setting up effecti#e information system with regards to the in#entories. (owe#er. management of in#entories in#ol#es two basic problems3 Maintaining a sufficiently large size of in#entory for efficient and smooth production and sales operations. Maintaining a minimum in#estment in in#entories to minimum the direct2 indirect costs associated with the holding in#entories to ma$imize the profitability. In#entories should neither be e$cessi#e nor inade1uate. If in#entories are kept at a high le#el. higher interest and storage costs would be incurred. 7n the other hand. a low le#el of in#entories may result in fre1uent interruption in the production schedule resulting in underutilization of capacity and lower sales. *he ob'ecti#e of in#entory management is. therefore. to determine and maintain the optimum le#el of in#estment in in#entories. which helps in achie#ing the following ob'ecti#es3 6nsuring a continuous supply of materials to production department facilitating uninterrupted production. Maintaining sufficient stock of raw material in a period of short supply.
39

Maintaining sufficient stock of finished goods for smooth sales operations. Minimizing the carrying cost.

M%4%!6M64* 7) %CC7:4*S 56C6IV%B86S %ccounts recei#able also popularly termed as recei#ables" constitute a significant portion of the total current assets of the business ne$t after in#entories. *hey are a direct conse1uence of +trade credit- which has become an essential marketing tool in modern business. &hen a firm sells goods for cash. payments are recei#ed immediately and. therefore. no recei#ables are created. (owe#er. when a firm sells goods or ser#ices on credit. the payments are postponed to future dates and recei#ables are created. :sually. the credit sales are made on open account which means that no formal acknowledgements of debt obligations are taken from buyers. *he only documents e#idencing the same are a purchase order. shipping in#oice or e#en a billing statement. *he policy of open account sales facilities business transactions and reduces to a great e$tent the paper work re1uired in connection with credit sales. Meaning of 5ecei#ables 5ecei#ables are assets accounts representing amounts owed to the firm as a result of sales of goods or ser#ices in the ordinary course of business. *hey. therefore. represents the claims of a firm against its customers and are carried to the +assets sideof the balance sheet under titles such as accounts recei#ables . trade recei#ables. customers recei#ables or book debts. *hey are. stated earlier. the results of e$tension of credit facility to the customers .*he ob'ecti#es of such a facility is to allow the customers a reasonable period of time in which they can pay for the goods purchased by them. Meaning of 5ecei#able Management

40

5ecei#ables are a direct result of credit sales. Credit sale is resorted by a firm to push up its sales that ultimately result in pushing up the profits earned by the firm. %t the same time. selling goods on credit results in blocking of funds in accounts recei#ables. %dditional funds are. therefore. re1uired for the operational needs of the business that in#ol#e e$tra costs in terms of interest. Moreo#er. increase in recei#ables also increases chances of bad debts. *hus. creation of accounts recei#ables is beneficial as well as dangerous. *he finance manager has to follow the policy. which uses the cash funds as economically as possible in e$tending recei#ables without ad#ersely the chances of increasing sales and making more profits. Management of accounts recei#ables may. therefore be defined as the process of making decisions relating to the in#estment of funds in this assets that will result in ma$imizing the o#erall return on the in#estment of the firm. *hus. +the ob'ecti#e of recei#ables management is to promote sales and profits until that point is reached where the return on in#estment in further of recei#ables is less than the cost of funds raised to finance that additional credit i.e. cost of capital",. Policies for Managing 5ecei#ables % firm should established recei#ables policies after carefully considering both benefits and costs of different policies. *hese policies relate to3 Credit Standards. Credit *erms. Collection Procedures.

6ach of these has been e$plained below3 *he term credit standard represents the basic criteria for e$pansion of credit to the customers. *he le#els of sales and recei#ables are likely to be high if the credit standards are relati#ely loose. as compared to a situation when they relati#ely tight.
41

*he fi#e +Cs, generally determines the firm-s credit standards3 Character. Capacity. Capital. Collateral and Condition. Character denotes the integrity of the customer. i.e.. his willingness to pay for the goods purchases. Capacity denotes his ability to mange the business. Capital denotes his financial soundness. Collateral refers to the assets. which the customer can offer by way of security. Conditions refer to the impact of general economic trends on the firm or to special de#elopment in certain areas as of economy that may affect the customer-s ability to meet his obligations. Information about the fi#e +Cs, can be collected both from internal as well as e$ternal sources. Internal sources include the firm-s pre#ious e$periences with the customer supplemented by its own well de#eloped information system. 6$ternal resources include customer-s de#eloped information system. 6$ternal resources include customer-s references. trade associations and credit rating organizations such as 9on I Brad Street Inc. of :S%. *his organization has more than hundred years e$perience in the field of credit reporting. It publishes a reference book si$ times year containing information about important business firms region wise. It also supplies credit reports about different firms on re1uest. %n indi#idual firm can translate its credit information into risk classes or groups according to the probability of loss associated with each class. 7n the basis of this information. the firm can decide whether it will be ad#isable for it to e$tend credit to a particular class of customers. *wo different concepts of working capital are32 XBalance sheet or *raditional concept X7perating cycle concept. Balance sheet or *raditional concept32 It shows the position of the firm at certain point of time. It is calculated in the basis of balance sheet prepared at a specific date. In this method there are two type of working capital32 !ross working capital
42

4et working capital

!ross working capital32 It refers to the firm-s in#estment in current assets. *he sum of the current assets is the working capital of the business. *he sum of the current assets is a 1uantitati#e aspect of working capital. &hich emphasizes more on 1uantity than its 1uality. but it fails to re#eal the true financial position of the firm because e#ery increase in current liabilities will decrease the gross working capital. 4et working capital32 It is the difference between current assets and current liabilities or the e$cess of total current assets o#er total current liabilities. &orking capital T current assets 2 current liabilities. 4et working capital3 2 It is also can defined as that part of a firm-s current assets which is financed with long term funds. It may be either positi#e or negati#e. &hen the current assets e$ceed the current liability. the working capital is positi#e and #ice #ersa. 7perating cycle concept3 2 *he duration or time re1uired to complete the se1uence of e#ents right from purchase of raw material for cash to the realization of sales in cash is cycle or working capital cycle.

43

SI!4I)IC%4C6 7) &75KI4! C%PI*%8

PAYMENT TO SUPPLIER S EASY LOAN FROM BANKS SIGNIFICAN CE OF WORKING CAPITAL INCREAS E EFFECIE NCY

DIVIDEND DISTRIBUTI 0N

INCREAS E DEBT CAPACIT Y

INCREAS E IN FIX ASSETS

)actors re1uiring consideration while estimating working capital. *he a#erage credit period e$pected to be allowed by suppliers.

44

 *otal costs incurred on material. wages.

*he length of time for which raw material are to remain in stores before they are issued for production.

*he length of the production cycle or" work in process.

*he length of sales cycle during which finished goods are to be kept waiting for sales.

*he a#erage period of credit allowed to customers.

*he amount of cash re1uired to make ad#ance payment.

45

Y*ypes of &orking Capital32

Types Of Wor !"# C$p!%$&

O" T'e B$s!s Of B)S Co"*ep%

O" T'e B$s!s Of T!(e

Gross Wor !"# C$p!%$&

Ne% Wor !"# C$p!%$&

Re#+&$r Wor !"# C$p!%$&

Te(por$ry Wor !"# C$p!%$&

Se$so"$& Wor !"# C$p!%$&

Spe*!f!* Wor !"# C$p!%$&

46

Importance of &orking Capital 5atios 5atio analysis can be used by financial e$ecuti#es to check upon the efficiency with which working capital is being used in the enterprise. *he following are the important ratios to measure the efficiency of working capital. *he following. easily calculated. ratios are important measures of working capital utilization. %4%8<SIS 7) &75KI4! C%PI*%8 )57M 9I))6564* %SP6C*S 74 *(6 B%SIS 7) *(6 (IS*75IC%8 9%*%32 *here are the number of de#ices to analyze working capital like 5atio %nalysis. Common Size Statement. etc. &e will discuss them one by one as follows 32 =. 5atio %nalysis32 5atio analysis is a techni1ue of analysis and interpretation of financial statements. It is the process of establishing and interpreting #arious ratios for helping in making decisions. *he main ratios related with the working capital are as follows32 a" 8i1uidity 5atios32 8i1uidity refers to the ability of a concern to meet its current obligations as and when these becomes due. It measures short term sol#ency of the firm. *o measure the li1uidity of a firm. the following ratios can be calculated. =.C:5564* 5%*I73

47

*he current ratio is the relationship between current assets and current liabilities. It is also known as working capital ratio because it is a measure of general li1uidity and is most widely used to make the analysis of short2term financial position.

It is calculated by di#iding total of current assets by current liabilities.

*he current assets of a firm represents those assets which can be con#erted into cash within a short period of time normally one year. *he current liabilities are those obligations which are payable within a short period of generally. one year. C7MP7464*S 7) C:5564* 5%*I732 Current %ssets =. Cash in (and F. Cash at Bank F.Bills Payable E. Marketable Securities E.Sundry Creditors /. Short2term In#estments /.Short2term %d#ances 0. Bills recei#ables 0.Income *a$ Payable A. Sundry debtors A.9i#idendsPayable ?. In#entories ?.Bank 7#erdraft if not permanent"
48

Current 8iabilities =.7utstanding e$penses

@. &ork2in2progress >. Prepaid e$penses Bank o#erdraft can be taken as short term arrangement as well as permanent or long term arrangement with a bank. But when it is taken as long term. it should be e$cluded. I4*65P56*%*I74 7) C:5564* 5%*I732 % ratio e1ual or near to the rule of thumb of F3= i.e. current assets double the current liability is considered to be satisfactory.*his means to pro#ide for delays and losses in the realisation of current assets. (owe#er. the rule of F3= should not be blindly followed while making interpretation of the ratio. because firms ha#ing less than F3= ratio may be ha#ing a better li1uidity than e#en firms ha#ing more than F3= ratio. *his is so because the current ratio measures only the 1uantity of current assets and not 1uality of current assets. C:5564* 5%*I7 7) V65K% MI8K P8%4* )75 *(6 <6%5 FBB@2 FBB>I FBB>2 FB=B I4 5:P66S" Particulars Cash in (and Cash at Bank In#entories Current %ssets Sundry Creditors %d#ances )rom Customers 7ther 8iabilities Current 8iabilities b" a" <ear FBB>2FB=B" F@>>>A.0= =BE==AB >F>//>EB.B= >00@AF/E.= E=/>E@EA.>? >A@B=0@.A= 0/00BB>>.AB >0?F/B>0.@ <ear FBB@2FBB>" EBB=A@.>@ =/A>0FE.FF >B@@/?@>.?B >FA0//@=.> FE0F=>0B.=B >=BFB>A.EB =A0=?0E>.EF />=/=0@0.?F
49

=.@@0/0>?0 Current 5atio aGb" B.>>@00>>

%s of march E=. FB=B. with amounts e$pressed in rupees. V65K% MI8K P8%4*-s current assets amounted to 5s. >00@AF/E.= balance sheet". which is the numeratorK while current liabilities amounted to 5s. >0?F/B>0.= balance sheet". which is the denominator. By di#iding. the e1uation gi#es us a current ratio of B.>>@00>>. %s of march E=. FBB>. with amounts e$pressed in rupees. V65K% MI8K P8%4*-s current assets amounted to 5s. >FA0//@=.> balance sheet". which is the numeratorK while current liabilities amounted to 5s. />=/=0@0.?F balance sheet". which is the denominator. By di#iding. the e1uation gi#es us a current ratio of =.@@0/0>?0. 7BS65V%*I7432 *he analysis shows that the current ratio of V65K% MI8K P8%4* is lower than the rule of thumb i.e. =.@@ in year FBB@2FBB>. *he lower ratio is primarily due to the reason that huge amount of sundry creditors and the cash at is comprising in the current assets. But the current ratio decreases in the year FBB>2FB=B and lower than the accepted rule of thumb. *he decrease in the ratio is attributable to increase in Sundry creditors which is to finance the in#entory. %s the current ration in both the years under obser#ation is not fairly . *he current ratio is used e$tensi#ely in financial reporting and is relied upon by the bankers and financial institutions while e$tending short term finance. (owe#er. while easy to understand. it can be misleading in both a positi#e and negati#e sense 2 i.e.. a high current ratio is not always necessarily good. and a low current ratio is not necessarily bad.

50

%nalysis through Chart

year-2010, 0.9985599 year-2009, 1.88545975

year-2009 year-2010

F. Quick 5atio *he 1uick ratio is also known as 1uick assets ratio or acid2test ratio. *he 1uick ratio is the relationship between 1uick assets and current liabilities. %n asset is said to be li1uid if it can be con#erted into cash within a short period without loss of #alue. So we can say that the cash in hand and cash at bank are the most li1uid assets. 7ther 1uick assets are bills recei#ables sundry debtors marketable securities. *he 1uick ratio is more conser#ati#e than the current ratio because it e$cludes in#entory and other current assets. which are relati#ely more difficult to turn into cash within a gi#en period of time. *herefore. a higher ratio means a more li1uid current position. Quick 5atio Current 8iabilities 8i1uid %ssets T current assets J in#entories Z prepaid e$penses" T QuickG8i1uid %ssets

51

C7MP7464*S 7) Q:ICK G8IQ:I9 5%*I732

QuickG 8i1uid %ssets =. Cash In (and F. Cash at Bank

Current 8iabilities =.7utstanding 6$penses F.Bills Payable

E. Bills 5ecei#ables E.Sundry Creditors /. Sundry 9ebtors 0. Marketable Securities /.Short *erm %d#ances 0.Income *a$ Payable

A. *emporary In#estments A.9i#idend Payable ?.Bank 7#erdraft *he basics and use of this ratio are similar to the current ratio in that it gi#es users an idea of the ability of a company to meet its short2term liabilities with its short2term assets. %nother beneficial use is to compare the 1uick ratio with the current ratio. If the current ratio is significantly higher. it is a clear indication that the companyLs current assets are dependent on in#entory. I4*65P56*%*I74 7) Q:ICK 5%*I732 :sually. a high acid test ratio is an indication that the firm is li1uid and has the ability to meet its current or li1uid liabilities in time and on the other hand a low 1uick ratio represents that the firm-s li1uidity position is not good. %s a rule of thumb of the acid test ratio is =3= is considered satisfactory. It is generally thought that if 1uick assets are e1ual to current liabilities than the concern may be able
52

to meet its short term obligations. % 1uick ratio of =3= does not necessarily means satisfactory li1uidity position if all the debtors can not be realized and cash is needed immediately to meet the current obligations. In the same manner. a low 1uick ratio does not necessarily means a bad li1uidity position as in#entories are not absolutely non li1uid. (ence. a firm ha#ing a high 1uick ratio may not ha#e a satisfactory li1uidity position if it has a slow paying debtors. 7n the other hand. firm ha#ing a low 1uick ratio may ha#e a good li1uidity position if it has fast mo#ing in#entories. Q:ICK 5%*I7 7) V65K% MI8K P8%4* )75 *(6 <6%5 FBB@2 FBB> I FBB>2 FBB=B I4 5:P66S" Particulars Cash In (and Cash %t Bank Quick %ssets Sundry creditors %d#ances from customers 7ther liabilities Current 8iabilities Quick 5atio b" aGb" a" <ear FBB>2FB=B F@>>>A.0= =BE==AB =BAB=0>.0 E=/>E@EA.>? >A@B=0@.A= 0/00BB>>.AB >0?F/B>0.@ B.B==B?0=0@ <ear FBB@2FBB> EBB=A@.>@ =/A>0FE.FF =?A>A>F.FB FE0F=>0B.=B >=BFB>A.EB =A0=?0E>.EF />=/=0@0.?F B.BEAB=F==

%s of march E=. FB=B. with amounts e$pressed in rupees. V65K% MI8K P8%4*.-s 1uick assets amounted to 5s.=BAB=0>.0 balance sheet"K while current liabilities amounted to 5s. >0?F/B>0.@ balance sheet". By di#iding. the e1uation gi#es us a 1uick ratio of B.B==B?0=0@.
53

%s of march E=. FBB>.. with amounts e$pressed in rupees. V65K% MI8K P8%4*-s 1uick assets amounted to 5s. =?A>A>F.FB balance sheet"K while current liabilities amounted to 5s. />=/=0@0.?F balance sheet". By di#iding. the e1uation gi#es us a 1uick ratio of B.BEAB=F==. 7BS65V%*I7432 %s pre#iously mentioned. the 1uick ratio is a more conser#ati#e measure of li1uidity than the current ratio as it remo#es in#entory from the current assets used in the ratioLs formula. By e$cluding in#entory. the 1uick ratio focuses on the more2li1uid assets of a company. *he 1uick ratio of the year FBB>2FB=B and FBB@2FBB> is much lower than the rule of thumb. *herefore. we can easily say that the short term li1uidity position of the #erka milk plant is not mo#ing towards more acceptable situation. %nalysis through Chart

year-2010, 0.011075158 year-2009 year-2010 year-2009, 0.03601211

E.C%S( 5%*I7 *he cash ratio. which is most conser#ati#e of the current ratios. is calculated in con'unction with the current ratio and the 1uick ratio by taking into account only of cash. cash e1ui#alents and in#ested funds out of current assets to co#er current liabilities.
54

Cash

ratio

Cash

Bank

Short2term

Securities

Current 8iabilities C7MP7464*S 7) C%S(G %BS78:*6 5%*I732 QuickG 8i1uid %ssets =. Cash In (and F. Cash at Bank F.Bills Payable E. Marketable Securities E.Sundry Creditors /. *emporary In#estments /.Short *erm %d#ances 0.Income *a$ Payable A.9i#idend Payable ?.Bank 7#erdraft Cash ratio is also known as absolute li1uid ratio. It includes cash in hand and cash at bank and marketable securities or temporary in#estments. *he acceptable norm for this ratio is =3F or B.03= or 0BD. C%S( 5%*I7 7) V65K% MI8K P8%4* )75 *(6 <6%5 FBB@2 FBB> I FBB>2 FB=B I4 5:P66S" Particulars Cash in hand Cash at bank Marketable securities %bsolute a" Sundry creditors E=/>E@EA.>? FE0F=>0B.=B
55

Current 8iabilities =.7utstanding 6$penses

<ear FBB>2FB=B F@>>>A.0= =BE==AB B

<ear FBB@2FBB> EBB=A@.>@ =/A>0FE.FF B =?A>A>F.FB

8i1uid

%ssets =BAB=0>.0

%d#ances from customers 7ther liabilities Current liabilities Cash aGb" b"

>A@B=0@.A= 0/00BB>>.AB >0?F/B>0.@

>=BFB>A.EB =A0=?0E>.EF />=/=0@0.?F B.BEAB=F==

ratio B.B==B?0=0@

%s of march E=. FB=B. with amounts e$pressed in rupees. V65K% MI8K P8%4*-s cash assets amounted to 5s. =BAB=0>.0 cash ratio of B.B==B?0=0@. %s of march E=. FBB>. with amounts e$pressed in rupees. V65K% MI8K P8%4*-s cash assets amounted to ratio. 7bser#ation32 *he cash ratio is the most stringent and conser#ati#e of the three short2term li1uidity ratios current. 1uick and cash". It only looks at the most li1uid short2term assets of the company. which are those that can be most easily used to pay off current obligations. It also ignores in#entory and recei#ables. as there are no assurances that these two accounts can be con#erted to cash in a timely matter to meet current liabilities. *he analysis shows that both in the year FBB@2FBB> and year FBB>2FB=B. the cash ratio is not satisfactory on the parameters of rule of thumb. *his is because cash in hand and bank are less than the current liabilities. 5s. =?A>A>F.FB balance sheet"K while current liabilities amounted />=/=0@ balance sheet". By di#iding. the e1uation gi#es us a cash balance sheet"K while current liabilities amounted to 5s. >0?F/B>0.@ balance sheet". By di#iding. the e1uation gi#es us a

56

%nalysis through Chart

year-2010, 0.011075158 year-2009 year-2010 year-2009, 0.03601211

/. &75KI4! C%PI*%8 *:547V65 5%*I73 &orking capital turno#er ratio indicates the #elocity of the utilization of the net working capital. *his ratio measures the efficiency with which the working capital is being used by a firm. % higher ratio indicates efficient utilization of working capital and #ice2 #ersa. *his ratio can be calculated by di#iding cost of sales by a#erage working capital. &orking capital turno#er ratio T Cost of sales cost of goods sold"G %#erage working capital

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&75KI4! C%PI*%8 *:547V65 5%*I7 7) V65K% MI8K P8%4* )75 *(6 <6%5 FBB@2 FBB> I FBB>2FB=B I4 5:P66S" Particulars Sales a" !ross b" Cost cTa2b" %#erage d" &orking cGd" capital turno#er ratio =.=/FEEFB@@ =.B?E>@=FB0 working capital /AAF@/@E0.? /=EB@?/EA.= of !oods Sold 0EFA0F=F>.> //EA/@=/F.E Profit =AB?>?0=./B =0?FBFF0. <ears FBB>2FB=B 0/@?E=@@=.EE <ear FBB@2FBB> /0>EA@EA?.E0

%s of march E=. FB=B. with amounts e$pressed in rupees.V65K% MI8K P8%4* -s Cost of Sales amounted to 5s.0E0A0F=F>.> balance sheet"K while a#erage working capital amounted to 5s. /AAF@/@E0.? balance sheet". By di#iding. the e1uation gi#es us a working capital turno#er ratio of =.=/F times. %s of march E=. FBB>. with amounts e$pressed in rupees. V65K% MI8K P8%4*-s Cost of Sales amounted to 5s. //EA/@=/F.E balance sheet"K while a#erage working
58

capital amounted to 5s. /=EB@?/EA.= balance sheet". By di#iding. the e1uation gi#es us a working capital turno#er ratio of =.B?E

7bser#ation32 *he analysis shows that the working capital turno#er ratio of #erka milk plant is slightly higher than the pre#ious year. !enerally. the higher the working capital turno#er. the more efficient is the management of working capital. Meaning thereby. that there is proper utilization of working capital and the span between deployment of resources and realization thereof by way of sales is less. which will ultimately result in less cost of capital. %nalysis through Chart

year-2010, 1.142332088

year-2009, 1.073981205

year-2009 year-2010

B" C7MM74 SI[6 S*%*6M64* %4%8<SIS32

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*his analysis is mainly to see the composition of working capital.

C7MM74 SI[6 S*%*6M64*

Particulars

<ears FB=B

FBB>2

<ear FBB> P65C64*%!6

FBB@2

%M7:4* C:5564* %SS6*S In#entories >F>//>E@.B=

%M7:4*

P65C64*%!6

F@.@@ B./=

>B@@/?@>.?@ =/A>0FE.FF

FF.0@ B.EA

Cash I Bank =EF==0A.0= Balances 8oans I FF?0BAA?>.EF

?B.?B

E=BB/??A>.E= ??.B/

%d#ances *7*%8 C:5564* 8I%BI8I *I6S Sundry Creditors %d#ances 7ther 8iabilities *7*%8 >0?F/B>0.=@ =BB />=/=0@0.?F =BB
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EF=??F??E.@

=BB

/BF/BFB@F.=

=BB

E=/>E@EA.>?

EF.>B

FE0F=>0B.=B

/?.@A

>A@B=0@.A= 0/00BB>>.AB

=B.== 0A.>@

>=BFB>A.EB =A0=?0E>.EF

=@.0F EE.A=

%4%8<SIS of FBB@2B> IFBB>2=B32 % big portion of current assets are in#ol#ed in in#entories is near about F@D in the year of FBB>2=B andFF.0@D in FBB@2B>. *he share of loans and ad#ances are decreased by A.E/D. although the share of cash and bank balances has increased with the figures about B.0D. 7n the other hand sundry creditors are EF.>BD in year FBB>2=B and /?.@AD in year FBB@2B> and other liabilities are increase at FE.E? D from the ma'or portion of current liabilities. So altogether we may say that in FBB@2FBB>. current assets ha#e increased due to increase in in#entories. cash I bank balances as compared to pre#ious year. &hile on a side of current liabilities though this has also increased due to increase in other liabilities as compared to pre#ious year . Schedule of Changes in &orking Capital FBB>2FB=B"

Particulars

7P64I4!

C87SI4!

6))6C* 7)

&75KI4! C%PI*%8

I4C56%S6 C:5564* %SS6*S In#entories Cash I Balances 8oans I %d#ances E=BB/??A>.E = *7*%8 C:5564* 8I%BI8I*I6S /BF/BFB@F.= FF?0BAA?>.E F EF=??F??E.@ >B@@/?@>.?@ Bank =/A>0FE.FF >F>//>E@.B= =EF==0A.0= FBAB=/B.?@

96C56%S6

=/@EAA.?=

@F0/=B>B

61

Sundry Creditors %d#ances 7ther 8iabilities

FE0F=>0B.=B >=BFB>A.EB =A0=?0E>.EF

E=/>E@EA.>? >A@B=0@.A= 0/00BB>>.AB

?>?=@@A.@? 0?@BAF.E= E@BEF0AB.F @

*7*%8

/>=/=0@0.?F

>0?F/B>0.=@

&orking Capital C.%.2 C.8." 4et decrease &orking Capital *7*%8 in

E0EFAB/>A./

FFAB/@A?@.A

=F?F==@=?.@

=F?F===@=?.@

E0EFAB/>A./

E0EFAB/>A./

/@A/FA0B.F /

=E0/@B=F?/

%nalysis of changes of working capital in FBB>2=B 32 *he most important part of current assets the in#entories are increase in the closing but the cash and bank balance and loans and ad#ances are decrease in the closing of the year. 7n the other hand in the liabilities the sundry creditors and the ad#ances and the other liabilities are increase in the closing of the year. So the result of the increase of the liabilities the working capital is be decrease. So the o#er all performance of working capital is not good.

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CONCLUSION After doing the analysis of The Verka Milk Plant, it is observed that company. Current %ssets of the company are decreased e#ery year. Verka milk Sales of the #erka milk plant increased e#ery year this means the plant is doing e#erything to further increase current assets in future. competitors. %lmost all the ratios of the #erka milk plant. are decreasing and .the
63

% satisfactory le#el of working Capital is not maintained in the

company growing its share in the market and gi#ing though competition to its

ratios are not at satisfactory le#el. It is due to hea#y amount e$pended on e$penditure.

*his means the company policies are not working effecti#ely and position of company is not so good. M%;75 )I49I4!S =. F. V65K% MI8K P8%4* sales is increasing day by day from last two years. 7#erall all ratios of the #erka milk plant are not good and company need to work with more efficiency. E. /. 8ack of ad#ertisement can be said as weak point the V65K% MI8K P8%4*. Membership of the #erka milk plant is increasing. 4ow its total members are FA@EE. 0. A. Its achie#ements in the current year are positi#e. Milk is the main raw material for production in the #erka milk plant.

BIBLIOGRAPHY B77K %:*(75 5.K. Sharma Shashi k. !upta

=" Management %ccounting F" )inancial Management &6BSI*6S www.google.com

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www.milkfed .nic.in 7*(65 S7:5C6 7) I4)75M%*I74 %nnual 5eports of V65K% MI8K P8%4*.

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