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First of all I thank Almighty God for guiding me in all the ways of life.

I take this opportunity to express my profound gratitude to all those who were
helpful in completing this study.

I express my gratitude to my guide Mr. Vinayakumar, Lecturer, Department of

Commerce, MES College, Kunnukara, for this valuable guidance during the course of
this study.

I extend my sincere thanks to Mrs Sunitha P Nair, Head of Department of Commerce and
other teaching staff of Department of Commerce, MES College, Kunnukara for their
assistance to me in successfully completing this project report.

My heartful thanks to Mr. Jolly Thomas General Manager (H.R) and Madhavan p.k. and
other office staff of KAMCO Ltd, for the kind co- operation extended by them to me.

I thank my parents, friends and all those who have helped me in the
preparation of this project report.























IV -1A

Fund from operations ( 2008 - 2009)

lV- 1B

Schedule of changes in working capital (2008-2009)

IV- 1C

Fund flow statement ( 31- 3- 2009)

IV- 2A

Fund from operation ( 2009- 2010)

IV- 2B

Schedule of changes in working capital (2009-2010)

IV- 2C

Fund flow statement ( 31-3-2010)

IV- 3A

Fund from operation (2010-2011)

IV- 3B

Schedule of changes in working capital (2010- 2011)

IV- 3C

Fund flow statement (31-3-2011)

IV - 4A Fund from operation ( 2011-2012)

IV- 4B

Schedule of changes in working capital ( 2011-2012)

IV - 4C Fund flow statement (31-3-2012)

IV - 5A Fund from operation ( 2012- 2013)
IV - 5B Schedule of changes in working capital ( 2012 - 2013)
IV- 5C

Fund flow statement ( 31- 12 2013)

IV- 6

Fund from operations for the entire study period

IV- 7

Ratio of current asset to current liabilities


IV- 8

Ratio of quick asset to current liabilities

IV- 9

Ratio of absolute liquid asset to current liabilities

IV- 10

Ratio of sales to trade debtors

IV- 11

Ratio of debtors collection period

IV- 12

Ratio of purchase to trade creditors

IV- 13

Ratio of creditors payment period

IV- 14

Ratio of sales to inventory

IV- 15

Ratio of sales to working capital

IV- 16

Ratio of PBIT to working capital

IV- 17

Ratio of sales to current asset

IV- 18

Ratio of total debt to total asset

IV- 19

Ratio of inventory to working capital

Industrialisation in India started at the era of English colonial rule but it was having
its own soul. In the vast diversities India become a group of different kinds of civilisation
having a common soul. people crossed the barriers of states, languages, culture and
religion. The development of indian economy was very fast based on the Nehruvian
principles of mixing socialism and capitalism.

Globalization become more and more in action by the end of 20th century and
Indian become a major player of the Global village in the beginning of 21st century
especially in agriculture, Industry and I T. Indian industry, especially the manufacturing
industry is subject to drastic changes and serve competitions during the last five years.
Many national and international players are competing each other other with wide varied
products. In this scenario in order to survive in the market companies must be cost
conscious and should utilize its resources in the most economical way. Here liest he need
for the analysis of financial operations of an organisations. It helps to study the
performance in the past and to develop and improve the performance in the future. Fund
flow analysis is a tool for financial analysis of this kind. This study "Funds management
in KAMCO Ltd, Athani" is a conscious attempt to ascertain the efficiency with which the
KAMCO Ltd is able to mobilize and utilize its funds in business.

The Kerala Agro Machinery corporation Ltd (KAMCO ) was

established in the year 1973 as a wholly owned subsidiary of Kerala Agro industries

Corporation Ltd (KAIC), Trivandrum, for manufacture of agriculture machinery

especialy Power Tiller and Diesal Engines. Subsequantly KAMCO becom a separate
govt of kerala understanding in 1986 paid up capital is R.S. 6014.14 lakh. The total work
force at present is 567 certified for ISO 9001- 2000 version from september 2002.

Finance - a concept
It would be worthwhile to recall what Hendry Ford once remarked : "money is an arm or
leg. You either use it or lose it". This statement though apparently simple, is quite
meaningful. It bring home the significance of mioney or finance. In the modern money
oriented economy finance is one of the basic foundations of all kinds of economic
activities. It is the master which provides access to all the sources for being employed in
manufacturing and merchandising activities. It has rightly been said that business needs
money to make more money, only when it is properly managed. Hence, efficient
management of every business enterprises is closely linked with efficient management of
its finance. In conclusion we can say that finance is regarded as "The life blood of every

Financial Management
Financial management is broadly concerned with the acquisition and use of funds
by a business firm. Its Scope may be defined in terms of the following questions :
How large should the firm be and how fast should it grow?
What should be composition of the firm's assets?
What should be the mix of the firm's financing?
How should the firm analyze, plan and control its financial affairs?

The entire gamut of managerial efforts concerned with raising of funds at

optimum cost and their effective utilisation with a view to maximise the wealth of the
shareholders. Financial management is concerned with the efficient use of and important

economic and resource; namely capital funds. Thus financial management includes
Anticipating Financial Needs, Acquiring Financial Resources and Allocating funds in
business - i.e. Three A's of financial management.

Importance of financial management

Financial management is indeed the key to successful business operation. Without proper
Administration and effective utilization of finance, no business enterprise can utilize its
potential for growth and expansion. Successful promotion of a business concern is
depend upon efficient financial management. If the plan adopted fails to provide
adequate capital to meet the requirement of fixed and working capital and prticularly the
later, the firm cannot on its business successfully Sound financial planning is quite
essential for the success of a business firm.

Financial management provides scientific analysis of all facts and figures

through various financial tool such as ratio analysis, variance analysis, budgets etc such
an analysis helps management to evaluate the profitability of the plan the given
circumstances so that a proper decision can be to minimise the risk. The efficient
financial management helps the top management by providing solutions to the various
financial problems faced by it. Financial management is considerd as a yard stick to
measure the performance of the firm.

Scope and significance of the study

As far as manufacturing industry is concerned, it has to keep a large amount of
funds in the form of working capital. Even though keeping of funds in the form of current
assets helps a firm to conduct its business operation smoothly, holding of such assets
beyond a particular level shall adversely affect its profitability. This is because, till the
point of consumption/ usage it shall be a dead investment and the company hs to incur
huge cost for carrying those items on its asset portfolio. On account of this, the success of

an industry to a large extend depends on the efficiency shown by it in the management of

its funds. So a study relating to the management of funds by a manufacturing industrial
unit deserves much significance in assessing its financial prformance.

Period of the study

The study covers only the last five years financial performance of the company.

Tools used for the study

For the success of any company finance is very important. Fund flow statement is a
method by which study the changes in the financial position of a business enterprise
between begining and ending financial statement dates. It is a statement showing source
and application of funds. Usually, schedule of changes in working capital has to be
prepared before preparing fund flow statement. Fund from operation or the profit from
operations of the business are the most important and major source of fund. Here in this
study Fund flow statement and Ratio analysis is an important financial tool is illustrated
by analysing the financial statement of KAMCO Ltd. Areas which are weak that is where
effective control over funds has to be made can be identified and cost reducing method
can be employed to reduce cost and expenses and increase profits. This will help in
impoving the performance of the company.
Ratio analysis is a technique of analysis and interpretation of financial statement. It
is the process of establishing and interpreting various ratios for helping in making certain
decision. However, ratio analysing is not an end in its self. it is only a means of better
understanding of finacial strengths and weaknesses of a firm

Objective of the study

To know the source used by the KAMCO Ltd to finance its capital investment

To ascertain the volume of funds generated by the company from its business
To identify the major commitment of funds which has been made by the company.
To know the liquidity position of the company.
To evaluate the efficiency shown by the company in utilization of its asset.

Methodology of the study

Research Design
The study is discriptive in nature; in this an attempt is made to evaluate the performance
of the company through the financial data which are disclosed in accounting policies.

Sources of data
Primary as well as secondary data has been collected for the purpose of the study.
The secondary data consists of the five year balance sheet and profit and loss
account. Primary data collected from discussions with various finance executives of the

Data Analysis
Collected data were mainly analyzed by preparing the statement of fund from
operations, schedule of changes in working capital, fund flow statement and with the
help of liquidity and turnover ratios.

The study has been taken only from the published information covering the period
of five years and hence analysis can be only on micro basis.
Accounting policy disclosures alone is taken in to account, other external factors
are not included. So change may arise.
The result obtained from analysis will not be applicable to similar organisatons in
the industry.


The report is divided in to five chapters. The first chapters provides project
introduction. Which mainly deals with objective, scope, methodology, tools and
limitation of the study. The second chapters gives the company profile. The third
chapters focus on Theoratical frame work. The fourth chapters deals with analysis of
data interpretation. In this chapters an attempt is made to analyze the efficiency of the
company to manage the fund properly. The last chapters give recommendation.


> Company profile

* Company

Kerala Agro Machinery Corporation Ltd (KAMCO) was established in year 1973
as a wholly owned subsidiary of Kerala Agro Industires Corporation Ltd (KAIC),
Trivandrum, for manufacture of agriculture machinery specufically Power Tillers and
Diesel Engines. Subsequently KAMCO became a seperate Govt of Kerala undertaking
in 1986 paid up capital is R.S. 161 lakh present Net Worth of the is R.S. 6014.14 lakh.
The total work force at present is 567 certified for ISO 9001-2000 version from
september 2002.

At present, KAMCO has four units located at Athani and kalamassery in

Ernakulam District, at Kanjikode in palakkad District and at Mala, in Trichur District.
With the present work force KAMCO can produce 8400 Power Tiller & 1200 Power
Reaper per annum.





Shri charupara Ravi


Vasantha vilsom vithurapost

695551 Thiruvvanathapuram

Shri N.K.manoj


KAMCO Atani-68


Shri .K.S.Anil


Pomukhathu (h)
Plammothukada Neyyaattinkara



Thrivanathapuram Addl
secretary Agriculture dpt
government of kerala



Additional secretary
Finance department Govt of
kerala Thrivananthapuram

Shri .R.Ajith kumar


Director of Agriculture govt of

kerala Thrivananthapuram

Shri. K.P.Chandran


Rinil Nivas
Ruthoor p.o, Panoor
Kannur - 670692

Shri M.M. Hameed


Mercy Nagar
Kallikadu P.O.
Pallippuram, Palakad


Sri. Ramapuram


V.K. Sivanandan

Ananda Nivas
Karakkonam P.O.



Kottiyam Director

Kottayam P.O., Kollam


* Objective of the Company

The objective of the Company are to manufacture in India, either in collaboration
with or otherwise or important & trade agriculture machinery like Tractors, Power
Tillers, Power Reapers, Combine Harvester, Transplanter, Diesel Engines, Pumb Sets,
Implememts, Accessories and Spares thereto the objective also include establishment of
engineering work shops / repairs and servicing of agriculture machinery or other
machinery, equipement, implements, and tools.

Assembly unit was established in 1970 at Athani by m/s kerala Agro Industries
Corporation for the assembly of Kubota Power Tillers in Technical collaboration. With
m/s Kubota Ltd Japan, the world's leading manufacturers of Power Tillers and other
agriculture machinery on expiry of the collaboration, KAMCO manufacture Power
Tillers with their own facilities.
KAMCO Power Tillers have become the most sought after Power Tillers in India
because of their quality and reliability.

* Activities of the Company

KAMCO's manufacturing facilities include special purpose machines specially
built General purpose machines, and imported machines. The inspection facilities include
modern inspection & testing equipment. KAMCO have their own metrology, calibration
& Engine Test Lab

The following are the main activities of the company.

Manufacturing and marketing of agriculture machines like Power Tillers, Tractors,
Power Reapers, Diesel Engines etc.
Power Tillers produced at Athani & Palakkad units. Major components for Power
Tillers are manufactured at Athani and all other components bought out from
dedicated venders in India. There are around 250 vendors now.
Kalamassery unit produce Engine for Power Tiller.
Power Reaper produce at Mala.
Trading/manufacturing of other farm machines.

> Product and servicing

* product list
KAMCO manufactures & market mainly two products.
KAMCO Power Reaper Model KR 120
KAMCO Stone Cutter KSC 625
KAMCO AGIRA 602 DE Power Tiller

* Marketing
The company has 45 dealers all over India

New Dealers appointed to cover selected districts in Tamil Nadu, Karnataka,

Maharashtra, Orissa and Andra pradesh.
Close interation with the Govt of India in the formulation of new schemes &
policies and farm mechanization.
Regular demonstration and service camps are being organized in various states.
KAMCO Power Reaper has been exported to Iran and sri Lanka recently.
machines has been well accepted by the customers.

* Memorandum of Association
The name of the company is "Kerala Agro Machinery Corporation Ltd.
The Registered office of the company will be situated in the state of kerala.
The main objects to be pursued by the company on its corporation

* Rules and Regulation

Standing order
Delegation of power
Staff Byelaws
Recruitment and promotion policies of officeres

* Recruitment and promotion policies of workers

Leave Rules
PF Trust Rules
Gratuity Rules
welfare centre functions.
Conveyance Advance
Medical Reimbursement

Group Personal Accident Insurrance Scheme

* Quality Systems and certifications

Quality Systems
Well defined quality procedures adopted covering all activities to ensure quality of
Impovements are made on regular basis based on the feed back from the customers
and dealers.
Regular interactions with all venders including site visits to maintain and improve
the acceptance level of components.
KAMCO Power Tiller certified for compliance with minimum performance
standard of govt of India.
KAMCO Power Reaper has been tested by SRFMT& TI, Ananthapur of Govt of
ISO 9001-2000 version
Improvement in the systems and improved Customer /Dealer satisfaction.
Comply with the requirement of customers and applicable statutory/regulatory
Improvements in the effectiveness of the established quality systems.
Addresses customer, Dealer, vendor, society Employees & shareholders for their
requirements & satisfaction
Quality policy
Total customer satisfaction through quality products and service with improved
technology and employee participation.
Comply with the requirements of customers and the applicable statutory/
regulatory requirements. The effectiveness of the established quality management
system is continually improved to enable achievement of the policy.

Quality objectives
To ensure that the quality requirements of the products and services offered are
maintained at all stages.
To create a culture among all employees towards total quality concepts and
productivity through total involvement and commitment of all employees.
To create healthy working environment for attainment of quality goals with
excellence andto make quality a way of life.
To detect and prevent non conformance and defects as early as possible and to
eliminate them through appropriate changes to the Quality Maintain System.
To achieve and maintain quality Leadership through continuous technology
upgradation, improvements in techniques, systems and procedures.

ISO procedures and manuals

Directory of Employees
Human Resources
o Total employee strength 567 persons.
o periodical training is being conducted to improve the performance level of
o Mainly management development programmes conducted for officers.
o Training programmes designed to specific requirements based on individual
o Periodical assessment of employee performance carried out after training.
Directory of Employees

KAMCO yesterday
Kerala Agro Industries Corporation Limited (KAIC) Trivandrum, promoted the
establishment of Kerala Agro Machinery Corporation Limited ( KAMCO). The KAIC
Limited entered in to a technical collaboration agreement with m/s Kubota Limited,
Japan in February 1972 on 5 1972.

KAMCO was incorporated on 24-03-1973 with an authorised capital of R.S. 2

crores as a subsidiary of m/s KAIC Limited, which held the entire paid up capital share
worth R.S. 15 lakhs in KAMCO. The company was licensed to manufacture 12000
tillers, 5000 numbers 4-5hp- diesel engine. The company has a carry over loss of 210
lakhs up to march 1984. This was completely wiped off by 1989 and the company is
paying dividend to the goverment for the last 13 years.

KAMCO Kalamassery unit was purchased outright from SIDCO during 1990
and converted as a viable diesel engine unit. More over KAMCO absorbed the workers
of the sick unit as permanent employees.

As an expansion activity, a new modern compact unit for manufacturing Power

Tillers was put up at Kanjikode, Palakkad District for a cost of 4.3 crores during the
begining of 1995. As per of diversification activity. The developed a compact small
harvesting machine'KAMCO' Power Reaper its production is carried out at Mala unit in
Trissur District.

KAMCO is synonymous with service to the small of marginal farmers of the
country. KAMCO through their precision of quality is revolutionizing the small and
marginal holdings through out the country. Today kAMCO Power Tiller is the most
sought after tiller in India, enjoying over 50% of the market share at national level.

The year 1998 was the silver jubilee year of KAMCO. The company with its four
plans of Athani, Kalamassery, Kanjikode and Mala unit is confidently meeting the
demands for KAMCO products in India abroad.

The main market for the Power Tiller is at west Bengal, Assam, Tripura,
Meghalya, and manipur; As in previous year, this year too the company recorded an all
time high in production and operating profit touched R.S. 98304 Lakhs. The year 2001-

02 recorded a production of 7431 no of power tillers and 722 no of power reaper as

against production of 7130 power tillers and 194 power reaper in 2000-01.

A major milestone for the company was the award of the international quality
excellence certificate under ISO 9002 in octobar 1996. KAMCO is the second public
sector undertaking who has got ISO 9002 certification justifying the high standards of the
products for their three units. From 15 march 2002 on wards KAMCO becomes an ISO
9001-2000 registered company by KPMG quality registration accredited by the Dutch
council for certification.

Future of KAMCO
KAMCO is looking proudly ahead in to more promising future. Future will also
see KAMCO's diversification products in the farm mechanization field contributing
significantly in food production and predicting it self to the cause of self reliance and
social responsability in the service of people with respite.

Today KAMCO is a multi- product, multi location company with two production
units at Ernakulam district, another production unit at Palakkad district and one prodution
unit at Thrissur disrict. KAMCO has a number of diversification plans on the anvil. It's
proposed research development activities will hopefully help it to develop new products
in the future and live up to its promise, that its products will be " A boom for the farmers
and again for the nation". The quality policy of KAMCO is "Total customer satisfaction
through quality products and services with improved technology and employee

satisfaction". Kerala Agro Machinery CorporationLtd starts its products diversification

activities and the negotiation is going on to starts the Tractor units near the plant of
Athani units.

As per the decision of board of directors to diversify in to production of low HP

Tractor and various kinds of pesticides, sprays action has taken to acquire the technology.
Mou has signed with Barabiria Italy for providing tchnology for tactor.As per the plan
approved by board company proposed to bring out the Tractor in November 2010. For
the Tractor project Government of Kerala alloted 10 acres of land to the company on 8-809.

Business Environment of KAMCO

As far as KAMCO Ltd is concerns the business environment is in positive side in
all respect KAMCO Ltd products are having heavy demand in the market, but they are
unable to meet the requirement of the customers. The company is functioning in a cordial
and happy atmosphere. The officers and staff in the company are very co-operative and
friendly. The Cochin port and Cochin Aerodrome are situated very near to the company
and this also helps to boost the business. The company is running subsidised canteen for
their employees to maintain a harmonious atmosphere resulting resulting to make
maximum productivity.

Miles stone of the company

1973 - KAMCO Ltd was established as wholly owned subsidiary of KAIC.

1986 - KAMCO become a seperate Govt of Kerala understanding.

1992 - The second unit established at Kalamassery.
1995 - witnessed the setting up of the third unit of KAMCO at Kanjikode in
1996 - KAMCO won Inter National Quality Excellence Certification of ISO 9002.

KAMCO is the second public sector undertaking in Kerala getting this

coveted certificate and the only public sector undertaking. Which has got ISO 9002
certification justifying in the high standard of the products for their 3 units.
2000 - Latest additional unit was being started at Mala in Thrissur District.
2002 - KAMCO become an ISO 9001-2000 registered company by Quality
registration accredited by Dutch council for certification.
2008 - Further unit at Mala got ISO 9002 certification.

Pollution Controlling system of KAMCO

Athani, Palakkad and Mala units of the company have installed effluent treatment
systems designed by the LBS centre for Science and Technology and approved by state
pollution control Board. All the new engines will reduce pollution and it will also reduce
the fuel consumption than the ordinary engine.

ISO 9001- 2000 certification

Athani, Palakkad and Kalamassery units of the company are working with ISO 90012000 certification.

Corporate Governance
Being a non listed governance company, provision of the company's Act 1956 with
regard to corporate governance is not applicable.

Industrial Relations
The industrial relation in the KAMCO is cordial which forms the basis for sustained
growth of the organisation.

Major products of KAMCO

KAMCO power tiller Model KMB 200
KAMCO Super DI power tiller
KAMCO Power Reaper Model KR 120
KAMCO Agira Garden Tiller.

Power Tiller
Power Tiller is the versatile machine that has radically changed the old labour
incentives method of agriculture by making all most all farming operations faster,
cheaper and easie. Power Tiller is a popular as the complete farming unit. It can deal with
a host of farming operating like tillering, ploughing, puddling, etc. The renowned Tiller
comes to you with the following built advantage.
Simple movement and control for case of handling.
Perfectly balanced and vibration free engine to reduce operator fatigue.
Fail- safe safety device to prevent accident.
Automatic fuel control save precious energy.
Distinctive radiator coding systems for continuous operations.

Power Reaper harvests and makes windows at the rate of 3-4 hours per hector. It is
light enough to be carried by two persons. Smooth chain conveyor action delivers plants
gently making clean windvows.

Diesel Engines
Economical with minimum fuel cost
Smooth starting
Easier operation
Equipped with radiator
Less vibration and noise
Increased durability

AGIRA Power Tiller

The eco friendly Power Tiller with a petrol engine is deal for paddy and wheat
cultivation and inter cultivation, applications, landscaping, gardening, harvesting, for
land operations at horticulture farms. This makes Agira Power Tiller highly fuel effluent
and power tiller which is easy to control.

Agriculture is a very important sector of the Indian economic. It contributes
sizably to the domestic product as also to export, more than two third of the work force in
agriculture products agro based industries etc.

India being an adriculture based economy provides live hood to more than
75% of the population major part of over income that is about 70% is earned from
agriculture activities. Inspire of the very dominant place of agriculture. It is a depressed
industry because of the low productivity in agriculture, small size of farm, finance and
defective equipments. Once governments believe that only large land holding were the

most efficient and they could use the latest techniques in cultivation. However is recent
years the emphasis has been shifted from large land holdigs to small land holdings.

The Indian agriculture industry is on the ring of a revolution that will

modernize the entire food chain as the total production in India is likely to double in the
next 10 years. Excellent export prospects, completive pricing of agriculture products and
standard that one internationally comparable has created trade oppurtunities in the agro

One of the major problems of Indian economy is uncertainity of agriculture

production, Since agriculture still gambling with the mosoon. "Instability of agricuture
also results in causing instability in the related sector". Thus a major development issue
for the Indian economy is device a strategy of agriculture development. Which can
promise a steady growth of agriculture output.

It is significant to note here that, it is the failure on the agriculture from,

which has upset the whole system of planning. Therefore, it is clear that agriculture is the
back-bone of Indian economy and prosperity of agricuture can also be largely stand for
the prosperity of the Indian economy. As the same time, it is true that precipitate
productivity in agriculture is less than in industry.

The real problem of indian agricuture is that, there are too many people who
depended on agriculture. The natural increase in production could not be absorbed in
industries and even there who followed traditional handicrafts have to give them up and
adopt agriculture overcrowding and the consequent pressure of population on land have
led to subdivision and fragmentation of holding and decline in the area of land per capita.

Fund Flow Analysis- Meaning
The basic financial statement, i.e.,the balance sheet and profit and loss account or
income statement of business, reveal the net effect of the various transactions on the
operational and financial position of the company.The balancesheet gives a summary of
the assets and liabilities of an undertaking at a particular point of time. It reveals the
financial status of the company. The profit and loss account reflects the result of the
business operations for a period of time. It contains a summary of expenses incurred and
the revenue realized in an accounting period. Both these statement provide the essential
basic information on the financial activities of a business, but their usefulness is limited
for analysis and planning purposes. The balance sheet does not disclose the causes for
changes in the assets and liabilities between two different points of time. The profit and
loss account, in a general way, indicates the resources provided by operations. But there
are many transactions that take place in an undertaking and which do not operate through
profit and loss account.Thus, another statement has to be prepared to show the change in
the assets and liabilities from the end of one period of time to the end of another period
of time. The statement is called a statement of changes in Financial Position or a Fund
Flow Statement.
The Fund Flow Statement is a statement which the shows the movement of funds
and is a report of the financial oprations of the business undertaking. It indicates various
means by which funds were obtained during a particular period and the ways in which
these funds were employed.In simple words, It is a statement of sources and applications
of funds.

Meaning and Concept of Funds

The term 'Funds' has been defined in a number of ways.
In a narrow sense, it means cash only and a funds flow statement prpared on this
basis is called a cash flow statement. Such a statement enumerates net effects of
the various business transactions on a cash a takes in to account receipts and
disbursements of cash.
In a broader sense, the term 'funds' rafers to money values in whatever form it may
exist. Here funds means all financial resources used in business whether in the
form of men, material, money, machinery and others.
In a popular sense the term 'funds' means working capital, i.e., the excess of current
assets over current liabilities. The working capital concept of funds has emerged
due to the fact that total resources of a business are invested partly in fixed assets
in the form of fixed capital and partly kept in the form of liquid and near liquid
form as working capital.
The narrower concept of 'funds' i.e., cash or working capital concept, fails to reveal
the changes in the total financial resources of a business. Some significant items, such as
purchase of building in exchange of shares or payment of bonus in the form of shares,
which do not directly affect cash or working capital are not revealed from the analysis
based on these concept.However, the concept of funds as working capital is the most
popular one and we shall generally refers to funds as 'working capital' and a funds flow
statement as a statement of sources and application of funds.

Meaning and Concept of 'Flow of Funds

The term 'flow' means movement and includes both 'inflow' and 'outflow'. The
term 'flow of funds' means transfer of economic values from one asset of equity to
another. Flow of funds is said to have taken place when any transaction makes changes in
the amount of funds available before happening of the transaction. If the effect of
transaction results in the increase of funds it is called a source of funds and if it results in
the decrease of funds, It is known as an application of funds. Further, in case the

transaction does not change funds it is said to have not resulted in the flow of funds.
According to the working capital concept of funds, the term 'flow of funds' refers to the
movement of funds in the working capital . If any transaction results in the inrease in
working capital, it is said to be a source or inflow of funds and if it results in the
decrease of working capital it is said to be an application or out flow of funds.

The flow of funds occurs when a transaction changes on the one hand a non
current account and on the other a current account and vice-versa.
When a change in a non current account e.g.,fixed assets, long term liabilities,
reserves and surplus, fictitious assets, etc., is followed by a change in another non-current
account, it does not amount to flow of funds. This is because of the fact that in such case
neither the working capital increase nor decreases. Similarly when a change in one
current account results in a change in another current account, it does not affect funds.
Funds move from non-current to current transactions or vice versa only. In simple
language funds move when a transaction affects
A current asset and a fixed asset, or
A fixed asset and a current liability, or
A current assets and fixed liability, or
A fixed liability and current liability ;
And funds do not move when the transaction affects fixed assets and fixed liability
or current assets and current liabilities.

Meaning and Definition of Funds Flow Statement

Funds Flow Statement is a method by which we study changes in the financial
position of a business enterprise between begining and ending financial statements dates.
It is a statement showing sources and application of funds for a period of time.
Flouke define this statement as :"A statement of sources and application of funds is a technical device designed to
analyze the changes in the financial condition of a business enterprise between two
I.C.W.A. in Glossary of Management Accounting terms defines Funds Flow
Statement as "a Statement prospective or retrospective, setting out the sources and
application of the funds of an enterprise. The purpose of the statement is to indicate
clearly the requirement of funds and how they are proposed to be raised and the efficient
utilization and application of the same."
Funds flow statement is called by various names such as Sources and Application
of Funds; Statement of Change in Financial position ; Sources and Uses of funds;
Summary of Financial Operations; Where came in and Where gone out Statement; Where
got Where gone statement; Movement of Working Capital Statement; Movement of
Funds Statement, etc.

Uses, Significance and importance of Funds Flow statement

A funds flow statement is an essential tool for the financial analysis and is of
primary importance to the financial management. Now a days, it is being widely usde by
the financial analysts, credit granding institutions and financial managers. The basic
purpose of a funds flow statement is to reveal the changes in the working capital on the
two balance sheet dates. It also describes the sources from which additional working
capital has been financed and the uses to which working capital has been applied. Such a
statement is particularly useful in assessing the growth of the firm, its resulting financial
needs and and in determining the best way of financing these needs. By making use of
projected funds flow statements, the management can come to know the adequacy or

inadequacy of working capital even in advance.One can plan the intermediate and long
term financing of the firm, repayment of long term debts, expansion of the business,
allocation of resources, etc. The significance or importance of funds flow statement can
be well followed from its various uses given below:
It helps in the analysis of financial operations. The financial statements reveal
the net effect of various transactions on the operational and financial position of
a concern. But it does not disclose the causes for changes in the assets and
liabilities between two different points of time. The funds flow statement
expains causes for such changes and also the effect of these changes on the
liquidity position of the company.
It helps in the formation of a realistic dividend policy. Sometimes a firm has
sufficient profits available for distribution as dividend but yet it may not be
advisable to distribute dividend for lack of liquid or cash resources. In such
cases, a funds flow statement helps in the formation of a realistic dividend
It helps in the proper allocation of limited resources. A projected funds flow
statement constructed for the future which helps in making managerial
decisions. The firm can plan the deployment of its resources allocate them
among various applications.
A projected funds flow statement also acts as a guide for future to the
management. The management can come to know the various problems it is
going to face in near future want of funds. The firm can arrange to finance
future needs more effectively and avoid future problems.
It helps in appraising the use of working capital. A funds flow statement helps
in explaining how efficiently the management has used its working capital and
also suggests ways to improve working capital position of the firm.
It helps knowing the overall creditworthiness of a firm.The financial institutions
and banks ask for funds flow statement cnstructed for a number of years before
granting loans to know the creditworthiness and paying capacity of the firm.

Hence, a firm seeking financial assistance from these institutions has no

alternative but to prepare funds flow statements.

Limitations of funds flow statement

The funds flow statement has a number of uses; however, it has certain limitations
also, which are listed below: It should be remembered that a funds flow statement is not a substitute of an
income statement or a balance sheet. It provides only some additional
information as regards changes in working capital.
It cannot reveal continuous changes.
It is not an original statement but simply an arrangement of data given in the
financial statements.
It is essentially historic in nature and projected funds flow statement cannot be
prepared with much accuracy.
Changes in cash are more important and relevant for financial management than
the working capital.

Ratio analysis is considered as one of the powerful tools of financial statement
analysis. The relationship between two inter-related accounting figures expressed
mathematically is known as an accounting ratio.
For the purpose of the study, mainly two type of ratios are computed. They are as


Liquidity ratios refers to the ability of a concern to meet its current obligations as
and when they arise. The current assets are converted in to cash for paying the
obligations of short term nature. To measure the liquidity of a firm the following ratios
can be computed :-

It is a measure of general liquidity of a firm and most widely used to measure the
short term financial position or solvency of a firm.Current ratio of 2:1 is normally
considered satisfactory.

Current assets
-------------------------Current liabilities

Current Ratio =

It is also known as acid- test ratio which establishes the relationship between quick
assets and current liabilities. It is a measurement of firm's ability to convert current assets
quickly into cash in order to meet the current liabilities. The standard quick ratio of 1:1 is
considered satisfactory.

Quick assets
--------------------Current liabilities

Quick Ratio =


It is also known as absolute liquid ratio is the most rigorous measure of the firm's
liquidity position. It is the ratio between cash and marketable securities to current
liabilities. The acceptable norm for this ratio is 0.5:1.

Absolute Liquid Ratio =

Absolute liquid assets

------------------------Current liabilities.

The turnover ratios also known as activity ratios indicate the efficiency with which
the capital employed is rotated in the business. It also indicates the speed with which
certain assets are converted in to cash. Major turnover ratios used for the study are listed


This ratio indicates the velocity of debt collection of a firm that is the number of
times average debtors are turned over during a year.

Debtors turnover ratio =

Net credit sales

-------------------------Average trade debtors

Higher the value of debtors turnover ratio, the better it is as it shows efficient
collection of debtors. There is no standard debtors turnover ratio. What a good turnover
ratio will depend on the nature of business.


This ratio shows the relationship between months /days in a year and debtors
turnover ratio.
Average collection period =

Month or days in a year

-----------------------------Debtors turnover ratio


This ratio indicates how much time the firm is likely to take in repaying the trade
creditors. The ratio measures the velocity with which the creditors are turned over in
relation to purchases.

Creditors turnover ratio =

Net credit purchases

------------------------Average trade creditors

A low ratio may mean sound liquidity position of the firm with the result that the
firm is able to take the advantage of cash discounts allowed by the supliers. A high ratio
may imply less discount facilities availed or higher prices paid for the goods.


The average payment period ratio represents the average number of days taken by
the firm to pay its creditors.
Average payment period =

Month or days in a year

------------------------------Creditors turnover ratio


Inventory turnover ratio or stock turnover ratio measures how fast the inventory is
moving through the firm and generating sales.

Inventory turnover ratio =

----------------------Average inventory

A lower inventory turnover ratio indicates poor quality of merchandise, ineffcient

selling and poor management of working capital. A higher inventory turnover ratio also
cannot always be viewed as a signal of efficiency, this is because, sometimes it may due
to under investment in inventory.


Working capital turnover ratio indicates the velocity of the utilisation of net
working capital. This ratio indicates the number of times the working capital is tuned
over in the course of a year.

Working capital =

Cost of sales
------------------------Average working capital

This ratio measures the efficiency with which the working capital is being
used by a firm. A high ratio indicates the efficient utilisation of working capital and a
lower ratio indicates otherwise. This ratio can at best be used used by making of
comparitive and trend analysis for different firms in the same industry and for various


Return on working capital =

------------------------- 100
Working capital


This ratio indicates the relationship between current assets and sales. It shows how
cash is affected by utilization of current assets. The higher the ratio, the better will be
the utilization.
Current assets turnover ratio =

---------------curent assets

The long term financial soundness or solvency of any business is examined by
calculating ratio popularly, known as leverage of capital structure ratios.These ratio help
us to interpreting capacity of the business, to make periodic payments of interest or fixed
commitment charges and to rapay long term debt as per installments stipulated in the

Solvency ratio =

Total Debt
-------------------Total Assets


Inventory to working capital ratio =

--------------------Working capital

This chapter is considered to be the core part of this this project work.In this
chapter ,an attempt is made to analyze the efficiency of the company to manage the funds
properly . For the purpose of the analysis , financial statement analysis tools such as fund
flow analysis and ratio analysis are used .Important ratios computed for the study include
working capital ratios and turnover ratios.

Shedule of changes in working 2008-2009

1.The above table shows the schedule changes in working capital as on 2008 and
2009.The current liability for the year 2007- 2009.The current for the year R.S.1122.81
lakhs and later it increased to 1329.851 lakhs.The net increase in working capital is
703.02 lakhs and here in 2008-2009.the

management cook adequate measure for

increasing the size of working capital.that means the firm had adequate current assets for
meeting its current liabilities in those periods.In 2008-2009,the firm sold more goods on
credit basis.It leads to increase in the size of working capital.
(2) 2009-10
The abovetable shows the schedules of changes in working capital as on 2009 and
2010.The assets have increased from 8825.085 lakhs in the working capital is 698.26
lakhs.Here the major cause of increasing the working capital is that the firm increases its
size of its credit sales an the level of inventory of the firm . We can find that the firm
takes adequate measure for the working capital management.But the firmis increasing its
credit sales year by year .This will create problems of baddebts in future.
(3) 2010-2011
The above indicates the schedule of changes in working capital as on 2010-11.The
current assets have increased in the year 2010-2011 from 10760.183 lakhs.The current

liabilities for the year 2010 are 2223.455 lakhs.It has decreased to 2137.236 lakhs.The
net working capital is increased in this year.It is increased to 429.452.

(4) 2011-2012
The above table shows the schedule of changes in working capital as on 20102011 and 2011-2012.Assets have increased from 10686.836 to 11706.632 lakhs.The
current liability was 2737.236 lakhs which also increased to 38737.864 lakhs. The
company has utilized its cash and bank balance to pay off the liabilities and the
(5) 2012-2013
The above indicates the schedule changes in working capital as on 2012-2013.The
current assets have increased in the year 2012-13 from 11706.632 lakhs to 12796.768
lakh.The current liabilities for the year 2012 are 3837.864 lakhs .There is a small increase
in net working capital is there .The net working capital is increased to 472.984 but still
cash and bank balance is decreasing.This means company still using cash and bank
balance to pay off the liabilities and provisions.

Fund Flow Statement

Table IV-IC


Funds flow statement 2009

Table IV-IC indicates the flow of funds in KAMCO Ltd for the year ended
In 2006-2009,the company has raised funds amounts to R.S. 2051.69 from its
business operations .The company also raised funds from the issue of shares
(R.S.111.90).The total fund generated during the period is R.S.3263.58 amount of R.S.
321.27 were committed for capital investments and the balance amount of funds were
applied for redemption of preference share, and also for the payment of dividend and
financial charges

Table IV-2C 2010

The business operation in KAMCOLtd in2009 -2010 has brought in to the fund of
R.S. 3454.22.The result of net increasing working capital is 698.26.The company also
raised funds from the issue of shares of Rs. 107.13. If also generates funds amounts to

R.S. 158.75 by way of sale of Fixed assets. The company received dividend of Rs.
109.58. The amount of redemption of preference shall is 192.52. The company acquired
fixed assets for Rs. 1726.13 and the rest of the funds were applied for the payment of
dividend and other financial charges.

Table IV-3C 2011


Table IV-3C reveals that during the financial year 2010 2011, the total funds inflow to
the business is Rs. 5382.02 out of this, Rs. 3013.86 was raised by the concern from its
business operations and the balance amount is raised from the sale of fixed assets and by
way of dividend. Funds amounts to Rs. 1987.75 were invested in fixed assets in addition
to this Rs. 243.89 were also come into the business by way of its net increase in short
team obligation and the rest of the finds utilized for the payment of dividend and other
financial charges.

Table IV-4C 2012

Table IV-4C reflects that the business operations of KAMCO Ltd. In 2011-2012 have
brought into it the fund of Rs. 2108.91. In addition to this, Rs. 80.832 was also come into
the business by way of its net increase in short term obligations. The company also raised
funds amounts to Rs. 233.36 and Rs. 54.96 through the sale of fixed assets and
investments respectively. The company generates funds by way of share issue 161.46.
Fund of Rs. 108.72 and Rs. 470.81 were received through dividend and interest
respectively. Out of the total fund 4948.90 the company acquired fixedc assets for Rs.
1987.55. The rest of the amounts were applied for dividend and other financial charges.

Table IV-5C

Table IV-5C reveals that during the financial year 2012-2013, the total inflow of funds to
the business is Rs. 2942.77. Out of this 1600.81 was raised by the company from its
business operations and the balance amount is raised through the sale of fixed assets of
Rs. 234.52. The company also received funds by way of dividend amounts to Rs. 72.48.
The acquisition of fixed asset for Rs. 267.19 and for purchasing the investments
amounting to Rs. 266.25. The rest of the fund is fully applied for the payment of dividend
of Rs. 771.94 and financial charges amounting to Rs. 355.40

Ratio Analysis Current Ratio

Interpretation:- The standard form of current ratio is 2:1. From the table it can be
interpreted that the current ratio of KAMCO has been more than the ideal current ration
in the year 2009 it is 6.64. This creates an impression that the current assets are not
utilized properly, But in the year 2013, it drastically declined to 2.87. Even though it is
more than the ideal ratio, efforts must be taken to reduce it so that more profitable can be
attained by the firm.
Quick Ratio
The standard form of liquid ration is 1:1 for KAMCO. The liquid ration was very high
during the year 2009. In the later years, the ratio started declining and in the year of 2013
it came down to 1.8. This levels that the company is making huge profits and products
are being sold out with any hindrance.
Absolute liquid ratio
The standard form of this ratio is 0.5: 1. From the above table, the absolute quiels ratio of
KAMCO was high during the year of 2009. But in 2013, company was able to maintain
the ration as 1:1. This indicates that the company is running in profit and if any liability
arises, it can be sorted out by the company its self but cash and bank balance of the
company was increasing during the years 2008-2009 to 2012 2013. But in the last two
years the cash and bank balance were come down. This will affect the company badly in
future years.
Debtors turnover Ratio

In the Year of 2009, the ration was reached till 4.6 In the later years, there was a step
decrease. But in the year of 2011, It again increased to 6.3 Measures were taken by the
company to control the credit sales and the dept collection and the ration came down to
3.4 in the year 2013.
Debtors collection period
The average collection period was in an increasing trend from 2009 to 2010. In those
particular years was a very poor debt realization. The company was able to bring it down
to in the year 2010 2011 and 2011 12. But later in 2012 13 it again by the company
to bring down the average collection period as it indicates the good debt realization.
Creditors Turnover ration
From this we can identify that the KAMCO has the better position among creditors. The
payment is made on a planning based entity. The turnover ration is declining year to year
i.e. possessing the good management of accounts payable. The longer credit payment
period will cause profitability of the business in a satisfactory way
Average payment period
Inventory turnover ration
The inventory turnover ratio is not constant in last 5 years analysis. This shows that there
no proper inventory management within the firm. The company was able to increase its
sales in an increasing rate. But the company also needs to false care of their inventory
Working capital Turnover Ratio
A higher working capital turnover ration indicates the efficient utilization of working
capital and low ratio

The success of such an organisation shall to a large extend depend on the efficiency
with which it is managing its funds. The present study "Funds Management in KAMCO
Ltd" is undertaken with the following objectives: To know the sources used by the company to finanace its capital investment
To ascertain the volume of funds generated by the company from its business
To identify the major commitments of funds have been made by the company.
To know the liquidity position of the company.
To evaluate the efficiency of the company in its utilization of assets.

The major findings of the study are listed below: Liquidity position of the company is found satisfactory during the study
period.The Liquidity ratios computed for this purpose meet the standards during
the five years of study.
The firm had adequate current assets for meeting its current liabilities in the year
2008-2009. In 2009- 10 the firm sold more goods on credit basis. It leads to
increase in the size of sundry debtors and also the size of working capital.There is
a decrease in sundry receivables and other current assets in the year 2010-2011.
This shows that company started controlling their credit sales.
The company has utilized its cash and bank balance to pay off the liabilities and
provision. This is the reason for the net decrease in working capital during the year

and 2011-12. The working capital is again increased in 2012-2013, but cash and
bank balance is still decreasing.
The current ratio experiencing a decreasing trend but it still above the standard
rate. Quck ratio indicates the liquidity position of the firm. The company was able
to bring down the ratio from 5.2 to 1.8 this shows the good liquidity position of the
company. The absolute liquid ratio shows that the firm was able to repay its short
term liabilities as and when required. But the company has to look that the
decrease in the cash and bank balance in the last two years. The cash and bank
balance need to improve otherwise the company will be in trouble to meet its short
term liabilities in future.
As per the study it is found that the company's credit sales are little bit high in the
year 2011 and 2012. The reason behind this is during these periods the company
outsourcing more goods.
The average collection period was in an increasing trend from 2007- 08 to 200910. In those particular years there was a very poor debt realization. The company
was able to bring it down to in the year 2010-11 and 2011-12. But later in 2012 13 it again rose to 107.35. Effort must be taken by the company to bring down the
average collection period as it indicates the good debt realization.
Throughout the study current assets turnover ratio shows fluctuating trend. But in
the year 2011 and 2012 drastic increase happend in the ratio and it is decreased in
the next year.


Based on the above findings, the following suggestions and recommendations are
made: The company should design suitable strategies for strengthening its working
capital position.

In order to mobilize more funds from operations, the management should take
necessary steps for reduction of cost and wastage in consumption of resources
and should launch innovative marketing programs for increasing revenue.
The company's investment in inventory is very high. In order to reduce such an
investment, combined initiative of both sales and inventory management, if
possible shall be taken.
Credit policy can be taken by the company as the sales promotion tool. Since
the company is enjoying relatively larger credit period from its suppliers,
relaxation of existing policy shall bring into additional sales without incurring
proportionate increase in cost.

"Fund Management in KAMCO Ltd" concentrates on the analysis of flow of funds
in the company during the period of 2008-2009 to 2012-2013 . This analytical
observations and findings will be an indicator of the weak points where more attention
should be made by the management and shall give inspiration to it to receive further
srength. No doubt, the result of this study shall give well vision to the company over its
future prformance and position in the industry.


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