142W1E0052

A STUDY ON
WORKING CAPITAL MANAGEMENT

With special reference to
VISWA TEJA SPINNING MILL, YEDLAPADU

A project report submitted to
JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY, KAKINADA

In partial fulfillment of the requirements for the award of the degree of
MASTER OF BUSINESS ADMINISTRATION
Submitted by
M.K.L.GAYATHRI
Regd. No. 142W1E0052
Under the guidance of
Mr.T.VASANTHA RAO
HOD OF MBA
DEPARTMENT OF MASTER OF BUSINESS ADMINSTRATION

G.V.R. & S COLLEGE OF ENGINEERING & TECHNOLOGY
(AFFILIATED TO JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY, KAKINADA)
GANGINENI PURAM, NEAR BUDAMPADU, GUNTUR 522013
(2014-2016)COLLEGE CODE: 2W
1
G.V.R. & S COLLEGE OF ENGINEERING & TECHNOLOGY
(Affiliated to Jawaharlal Nehru Technological University, Kakinada)
Ganginenipuram, Near Budampadu, Guntur-522013
DEPARTMENT OF
MASTER OF BUSINESS ADMINISTRATION
CERTIFICATE
This is to certify that this is a bonafide record of the project work entitled
WORKING CAPITAL MANAGEMENT with special reference to VISWA
TEJA SPINNING MILL,YEDLAPADU carried out by M.K.L.GAYATHRI
(142W1E0052) during the academic year 2014-2016 in partial fulfillment of the
requirements for the award of the degree of MASTER OF BUSINESS
ADMINISTRATION by JAWAHARLAL NEHRU TECHNOLOGICAL
UNIVERSITY, KAKINADA.
(Mr.T.VASANTHA RAO) (Mr.T.VASANTHA RAO)
PROJECT GUIDE H.O.D of M.B.A
External Examiner
2
3
4
DECLARATION
I, M.K.L.GAYATHRI student of MBA in G.V.R & S. College of
Engineering and Technology declare that the project entitled A STUDY ON
WORKING CAPITAL MANAGEMENT with special reference to
VISWA TEJA SPINNING MILL, YEDLAPADU has been prepared by me
under the guidance of Mr.T.VASANTHA RAO for the partial fulfillment of the
requirements for the award of degree in MASTER OF BUSINESS
ADMINISTRATION by JAWAHARLAL NEHRU TECHNOLOGICAL
UNIVERSITY, KAKINADA. Further, I declare that this project report is the result
of my own efforts and it has not been submitted to any university or organization for
the award of any degree or diploma.
Place: Guntur M.K.L.GAYATHRI
Date: Reg. No: 142W1E0052
5
ACKNOWLEDGEMENT
I am extremely grateful to our Director Dr. G. Venkateswara Rao for providing me a platform
to do my M.B.A Program.
I am very thankful to Dr.S.H.V Prasad Rao, Principal of G.V.R. & S College of

Engineering and Technology, Guntur for providing me an opportunity to complete my project work in
VISWA TEJA SPINNING MILL, YEDLAPADU.
I wish to express my sincere thanks to Mr.T.VASANTHA RAO, Head of Department of

MASTER OF BUSINESS ADMINISTRATION, G.V.R. & S College of Engineering and
Technology, Guntur for his encouragement in the completion of my project work.
My special thanks to Mr.T.VASANTHA RAO Project Guide in G.V.R. & S College of

Engineering and Technology, Guntur for giving an excellent guidance, Valuable suggestions and who
motivated me.
I am thankful to my faculty members Mr.AREESH BABU, Ms. M.Anusha, Mrs. P.SARITHA,

Ms. P.S.L.L.KAVYA, and Ms. M.TEJASWI who helped me to complete my project successfully.
I am blissful to express my deep sense of gratitude to K.SRINIVASA RAO for his splendid
guidance and encouragement that inspired me to complete this project successfully and then finally I
thank to all employees in the company who extended their cooperation during my work in VISWA TEJA
SPINNING MILL, YEDLAPADU.
I express my deep sense of gratitude to my Family members, and friends who helped me for
the completion of project work.
M.K.L.GAYATHRI
6
CONTENTS PAGE NO
CHAPTER-I INRODUCTION 1-13
Need for the study

Objectives of the study
Scope of the study
Limitations of the study
Methodology of the study
CHAPTER-II 14-34
INDUSTRY PROFILE
&
COMPANY PROFILE
CHAPTER-III 35-56
THEORITICAL FRAME WORK
CHAPTER-IV 57-83
DATA ANALYSIS
&
INTERPRETATION
CHAPTER-V 85-87
FINDINGS
SUGGESTIONS
CONCLUSION
BIBLIOGRAPHY
ANNEXURE 88-100
7
CHAPTER-I
INTRODUCTION
8
INTRODUCTION
An enterprise whether industry/Company acquires two types of assets to run its

business. They are fixed assets, which are necessary for carrying the production/business. It is
the current assets which are generally referred to as Working Capital.
In managing fixed assets the time factor is very important thats why discounting and
compounding play a very important role in any capital budgeting decision. But the time frame of
current assets is only one accounting period and the time value of money is significant in the
management of current assets.
In short run, the immediate need of the company is cash or adjustments to

fluctuations in sales can be made only through adjusting the levels of various components of the
Current assets. This calls for efficient management of current assets. Which forms part of
Working capital?
Working capital management involves not only managing the components of current
assets but also the managing of current assets but also the managing of current liabilities. A set of
financing pattern is evolved to meet the requirement of a unit for acquisition of fixed assets and
current assets. Fixed assets are to be financed by owned funds and long term liabilities raised by
a unit while current assets are partly financed by current liabilities and other short term loans
arranged from the bank.
Working capital management involves not only managing the different components of
current assets but also managing current liabilities or to be more precise, the financing aspects of
current assets. It is therefore appropriate to provide brief description of current assets and
liabilities.
9
NEED FOR THE STUDY
Working capital refers to current assets of the company that are changed in the ordinary
course of business and from one firm to another.
Current assets are the assets which can be converted in to cash within the accounting year
and include cash, short term securities, debtors, bills receivables and stock.
When current assets exceed current liabilities, the working capital is positives. Working
capital is needed for financing current assets.
Whenever the requirements of working capital funds arise due to the increasing level of
business arrangements should be made quickly to raise the finance
Therefore, the need of working capital to run the today business activities would be felt
essential. However, forms differ in their requirements of working capital.
10
OBJECTIVES OF THE STUDY
To analyze the working capital management strategies of VISWATEJA SPINNING
MILL.
To study the entire working capital cycle of the firm.
To analyze the inventory management in the firm through inventory turnover ratios
To find out the working capital policies and procedures of the firm.
To analyze the company receivables, cash, inventory techniques.
To study the liquidity position through cash inflows, outflows of the company.
To examine the cash management policies through liquidity ratios
11
SCOPE OF THE STUDY
The study is based on company analysis.
The study is based on five consecutive years from 2012-2013
The study is only for two months period of time.
The study is related with various aspects of working capital like current assets,
current liabilities
The information collected from primary data and secondary data.
The calculation may be done in various analyses through some selected ratio.
12
LIMITATIONS OF THE STUDY
Time is not sufficient.

Some aspects of financial information were not available because of the confidentiality.
Information provided is mostly of secondary nature, so the accuracy of the study is
limited.
The period of the study is limited to only six weeks.
The data and analysis given in the reports is applicable to similar purpose of the study.
13
METHODOLOGY
For the preparation of a project the collection data is very essential. There are two broad
methods, from which data is to be collected. They are primary data and secondary data.
Primary Data:
This is collected through discussions and by interviewing the personnel concerned within
the company.
Secondary Data:
This information is collected mainly from published information viz., annual reports,
journals, books, magazines, internet available on the subject.
Annual reports of the company.

Magazines.
Journal.
Internet.
14
CHAPTER-II
INDUSTRY PROFILE
&
COMPANY PROFILE
15
INDUSTRY PROFILE
Profile of Cotton & Textile Industry
The textile industry occupies a unique place in our Country .One of the earliest to
come into existence in India, it accounts or 14% of the total Industrial production, contributes to
nearly 30% of the total exports and is the second largest employment generator after agriculture.
India contributes to about 25% share in the world trade of cotton yarn. India, the
worlds third-largest producer of cotton and the second- Largest producer of cotton yarns and
textiles, is poised to play an increasingly important role in global cotton and textile markets as a
result of domestic and multilateral policy reform.
Indian textile industry contributes about 22 % to the world spindle age and about 6%
to the world rotor capacity installed .India has second highest spindle age in the world after
China with an installed capacity of 38.60 million spindles. Indian textile industry has the highest
loom age (including handlooms) in the world and contributes about 61% of the world loom age.
It contributes about 12% to the world production of textile fibers and yarns. India is one of the
largest consumers of cotton in the world, ranking second next to China in production of cotton
yarn and fabrics and first in installed spinning and weaving capacity.
Textile industry is providing one of the most basic needs of people and the holds
importance; maintaining sustained growth for improving quality of life. It has a unique position
as a self-reliant industry, from the production of raw materials to the delivery of finished
products, with substantial value-addition at each stage of processing; it is a major Contribution to
the country's economy.
Its vast potential for creation of employment opportunities in the agricultural, industrial,
organized and decentralized sectors & rural and urban areas, particularly for women and the
disadvantaged is Noteworthy.
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Although the development of textile sector was earlier taking place in terms of general
policies, in recognition of the importance of this sector, for the first time a separate Policy
Statement was made in 1985 in regard to development of textile sector. The textile policy of
2000 aims at achieving the target of textile and apparel exports of US $ 50 billion by 2010 of
which the share of garments will be US $ 25 billion. The main markets for Indian textiles and
apparels are USA, UAE, UK, Germany, France, Italy, Russia, Canada, Bangladesh, and Japan.
The main objective of the textile policy 2000 is to provide cloth of acceptable quality at
reasonable prices for the vast Majority of the Population of the country, to increasingly
contribute to the provision of sustainable employment and the economic growth of the nation;
and to compete with confidence for an increasing share of the global market vast pool of skilled
manpower; entrepreneurship; flexibility in production process; and long experience with US/EU
(European Union).
At the same time, there are constraints relating to fragmented industry, constraints of
processing, quality of cotton, concerns over power cost, labour reforms and other infrastructural
constraints and bottlenecks. E.g., cost of power was Rs.8 per garment in India whereas in China
it was only Rs.2 per garment.
Further, for the benefit of exporters, there should be a state-owned cargo

shipping mechanism. Several initiatives have already been taken by the government to overcome
some of these concerns including rationalization of fiscal duties; technology up gradation
through the Technology Up gradation.
17
Current scenario
Developing countries with both textile and clothing capacity may be able to
prosper in the new competitive environment after the textile quota regime of quantitative import
restrictions under the multi-fiber arrangement (MFA) came to an end on 1st January, 2005 under
the World Trade Organization (WTO) Agreement on Textiles and Clothing.
The mood in the Indian textile industry given the phase-out of the quota regime of the
multi-fiber arrangement (MFA) is upbeat with new statement lowing in and increased orders for
the industry as a result of which capacities are fully booked up to April 2005. As a result of
various initiatives taken by the government, there has been new investment of Rs.50, 000 cores
in the textile industry in the last five years.
Nine textile majors invested Rs.2, 600 core and plan to invest another Rs.6, 400 cores.
Further, India's cotton production increased by 57% over the last five years; and 3 million
additional spindles and 30,000 shuttles-less looms were installed.
The industry expects investment of Rs.1, 40,000 cores in this sector in the post-MFA
phase. A Vision 2010 for textiles formulated by the government after intensive interaction with
the industry and Export Promotion Councils to capitalize on the upbeat mood aims to increase
India's share in world's textile trade from the current 4% to 8% by 2010 and to achieve export
value of US $ 50 billion by 2010 Vision 2010 for textiles envisages growth in Indian textile
economy from the current US $ 37 billion to $ 85 billion by 2010; reaction of 12 million new
jobs in the textile sector; and modernization and consolidation for creating a globally competitive
textile industry.
There will be opportunities as well as challenges for the Indian textile industry in
the post-MFA era. But India has natural advantages which can be capitalized on strong raw
material base - cotton, man-made fibers, jute, silk; large production capacity (spinning - 21%
of world capacity and weaving - 33% of world capacity but of low technology)
18
Investment in Indian Textile Industry
The scenario of investment in the Indian textile industry started to change after the
inception of the special Textile Package during the 2003-2004 budgets. The recommendations
made in the budget included the reforms that are required to be made in the fiscal policy of the
Indian textile Industry for attracting investment in this industry. The policy matters associated
with restructuring of debt for financial viability of this industrial sector are also being addressed
in this budget. A fund was set up in accordance with the recommendations of the aforesaid
budget with an initial principal amount of Rs.3000 cores. This fund was meant for restructuring
of the textile sector.
Factors responsible for wooing the investors in Indian textile industry
The size of the textile along with apparel market in India is quite big.
Performance of this industry has been consistent right from the start of the new
millennium.
Availability of the skilled labor in India is comparatively cheap in relation to the same in
other parts of the world.
The policies related to the Foreign Direct Investment in India are comparatively lenient
and are transparent in nature among all the developing countries.
There is no limit on foreign direct investment in the textile industry and hence 100%
direct investment can be done by the foreign capitalists in the Indian textile industry.
Foreign Investments done in the Indian Textile Industry through the automatic route
offers a hassle-free way of investing. These investments are not required to be approved
by the government or the apex bank of India, RBI. The foreign investors are only
required to make a notification to the regional office of the apex bank only after receiving
the receipt of the remittance. This notification is required to be done within thirty days
from the date of receiving their remittance.
The ministry concerned with the development of Textile Industry in India
has formed a special cell for attracting FDI in this sector.
19
Objectives of this special cell for wooing FDI are
This cell helps the willing foreign companies to find out viable partners meant for
floating a joint venture company in order to produce textile products.
FDI special cell acts as the mediator between the foreign investor and the different
organizations for setting up the textile industry. The specialized helps that are given by
this cell involve advisory support along with assistance.
At the time of operation of the textile industry set by the foreign investor certain
problems may crop up. These problems are sorted out by the FDI cell.
FDI cell monitors as well as maintains the data related with the total production of the
textile sector. They also collect the stratified data of production by both domestic industry
as well as the industry set up by the foreign investor. It has been found out that the
percentage share of the textile industry in the total foreign investment done was 1.02%.
A major development has occurred in the textile industry when Blackstone, an

investment management company of USA has bought 50.1% stake of the domestic apparel
manufacturing company called Gokaldas Exports. The deal was sealed at the price of Rs 275 per
share. After the completion of the stake transfer the promoters of the Gokaldas Exports, the
Hindujas, were left with as hare amounting.
As a part of domestic textile sector expansion, the companies of Indian origin are also not
far behind in making investments. Arvin Mills Limited is expanding its production as well as
capacity base through the construction of two new industrial set ups in Bangalore and
Ahmadabad.
Another textile company of India named Super Spinning Mills is also acquiring two sick
units of Madurai for enhancing their production capacity for meeting the needs generated by the
USA market.
World largest terry towel producing company called Wels pun India Ltd. is setting up a
textile plant in the state of Gujarat at the initial capital of US$ 220 million.
20
Growth of Indian Textile Industry
Growth along with the investment of an industry depends heavily on the economic
health of the country. Indian economy grew rapidly during the fiscal year 2007-2008 posting a
growth rate of 9.4% p.a. Not only this, India has been performing significantly in the last three
years where its average yearly rate of growth has been estimated to be 8%.
The fruits of economic growth have trickled down to people of the state which can be
evidenced from the rising per capital income of India. Statistics reveal that during 2002-2008 (up
to March 2008) the per capital income of India has increased by sixty two percent and has
reached the level of Rs 25,778 or US$ 581.37 per annum.
One of the most beneficial classes of this economic growth saga has been the middle income
section of the society. The total strength of this class in absolute terms has been found out to be
216 million which is expected to rise to 351 million by 2010. The major demand that is being
generated is by a new class of people from the booming IT-BPO sector who are still at their
prime age and are outwardly fashion savvy. This has generated huge demand for fashionable
dresses which has consequently led to the emergence of some world class Indian designers with
their latest fashion apparels.
Propensity of consumption (after excluding all spending on essential items like

housing, health, education, etc.) by the average Indian people has increased at the rate of 5% to a
total amount of US$ 219 billion in the year 2005. At this time, the organized retail sector has
been able to tap a market of around US$ 8.2 billion which is projected to increase to US$ 25
billion by 2010.
Textile industry is one of the major contributors to the total output of the act growing
Indian industrial sector which is at present revolving around 4%. Textile sector's contribution to
GDP of India is also significant which currently amounts to 4%. It has been found out that Indian
textile industry s one of the major sources of foreign exchange earnings for India and contributes
around 16-17%.
21
From the above discussion it is quite clear to us that the market size of India is growing
at a very high pace. That is why the foreign investors are flocking to India for investment
purposes in order to get hold of a chunk of this expanding pie. With increasing demand for the
products of Indian Textile Industry, new players are jumping in the league to get a slice of the
profitable pie and the already existing textile mills are raising their capacity for increasing their
supply. Hence, the expansion process of the domestic industry is also not far behind.
Thus, it can be said that the whole Indian economy is on a growing trend which has
its obvious impact on every possible sector including the Indian Industry.
Multi Fiber Agreement was introduced in the year 1974 as a short term measure directed towards
providing a limited time period to the developed countries for adjusting their textile industries in
accordance with that of the developing countries. The textile industries are characterized by their
labor intensive nature of commodity production. Availability of surplus labor is abundant in the
developing countries. These countries have comparative advantage in the production of textile
related products and hence are able to supply goods at a very low price. The basic idea behind
this policy was to eradicate all sorts of quota system from the apparel and textile industry all over
the world so that a level playing field could be established.
Now, let us see some of the figures in order to understand the absolute as well as relative
change in the textile industry in terms of projections from the financial year 2002-2003 up to
2007-2008 where the final financial year represents the projected figure.
22
PROJECTED FIGURE
Total Produce of Indian Textile industry in Fabric Sector
60000
55000
TEXTILE PRODUCT
50000
TOTAL
45000
40000
35000 COTTON FABRIC
30000
25000
20000 BLENDED FABRIC
15000
10000 100% NON COTTON
5000 FABRIC
0
2002- 2003- 2004- 2005- 2006- 2007-
03 04 05 06 07 08
YEARS
The figure above shows total produce of Indian Textile Industry in fabric sector along with the
produce in all the sub sectors under it. This highlights the fact that the total production of
fabricated products by the Indian Textile Industry between the period 2002-2003 and 2004-2005
increased at a moderate rate from 41973 million square meters to 45378 million square meters.
But after the MFA period (i.e. after 01.01.2005), the same has increased from 45378 million sq.
mts to 54260 million sq. mts between the period 2004-2005 and 2006-2007. Hence it is evident
that the percentage increase in the fabric textile product during the period 2004-2005 and 2006-
2007 has seen a rise of around 16.37% whereas it was only 7.5% during 2002-2003 and 2004-
2005.
23
National Textile Policy
The National Textile Policy was formulated keeping in mind the following objectives:
Development of the textile sector in India in order to nurture and maintain its position in
the global arena as the leading and exporter of clothing.
Maintenance of a leading position in the domestic market by doing away with import
penetration.
Injecting competitive spirit by the liberalization of stringent controls.
Encouraging Foreign Direct Investment as well as research and development in this
sector.
Stressing on the diversification of production and its up gradation taking into
consideration the environmental concerns.
Development of a firm multi-fiber base along with the skill of the weavers and the
craftsmen.
Such goals are set to meet the following targets
The size of textile and apparel exports must reach a level of US 50 billion by the year
2010.
The Technology up gradation Fund Scheme should be implemented
The garments industry should be removed from the list of the small scale industry sector.
The handloom industry should be boosted and encouraged to enter into foreign ventures
so as to compete globally. The National Textile Policy has also formulated rules
pertaining to certain specific sectors. Some of the most important items in the agenda
happen to be the availability and productivity along with the quality of the raw materials.
Special care is also taken to curb the fluctuating price of raw materials. Steps have also
been taken to raise silk to the international standard preamble.
To comprehend the purpose of textile industry that is to provide one the most basic needs
of the people and promote its sustained growth to improve the quality of life.
24
To acknowledge textile industry as a self-reliant industry, from producing raw materials
to delivery of finished products; and its major contribution to the economy of the country.
To understand its immense potentiality for creating employment opportunities in
significant sectors like agriculture, industry, organized sector, decentralized sector, urban
areas and rural areas, specifically for women and deprived. Recognize the Textile Policy
of 1985, which boosted the annual growth rate of cloth production by 7.13%, export of
textile by 13.32% and per capita availability of fabrics by 3.6%.
To analyze the issues and problems of textile industry and the guidelines provided by the
expert committee set up for this specific purpose.
To produce good quality cloth for fulfilling the demands of the people with reasonable
prices.
To maintain a competitive global market.
Thrust areas
Government of India is trying to promote textile industry by giving emphasis on several

areas of textile, which are as below:
Innovative marketing strategies

Diversification of product
Enhancement of textile oriented technology
Quality awareness
Intensifying raw materials
Growth of productivity
Increase in exports
Financing arrangements
Creating employment opportunities
Human Resource Development
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Government of India has set some targets to intensify and promote textile industry.
To materialize these targets, efforts are being made, which are as follows:
Textile and apparel exports will reach the US $ 50 billion mark by 2010
All manufacturing segments of textile industry will come under TUFS (Technology Up
gradation Fund Scheme)
Increase the quality and productivity of cotton. The target is to increase 50% productivity
and maintain the quality to international standards.
Establish the Technology Mission on jute with an objective to increase cotton
productivity of the country
Encourage private organization to provide financial support for the textile industry
Promote private sectors for establishing a world class textile industry
Encourage handloom industry for producing value added items
Encourage private sectors to set up a world class textile industry comprising various
textile processing units in different parts of India
Regenerate functions of the TRA (Textile Research Associations) to stress on research
works government policy on cotton and man made fiber.
One of the principal targets of the government policy is to enhance the quality and production of
cotton and man-made fiber. Ministry of Agriculture, Ministry of Textiles, cotton growing states
is primarily responsible for implementing this target
Other thrust areas
Information technology
Plays a significant role behind the development of textile industry in India. IT
(Information Technology) can promote to establish a sound commercial network for the textile
industry to prosper.
Human Resource Development

Effective utilization of human resource can strengthen this textile industry to a large extent.
Government of India has adopted some effective policies to properly utilize the manpower of the
country in favor of the textile industry.
26
Financing arrangement
Government of India is also trying to encourage talented Indian designers and technologists to
work for Indian textile industry and accordingly government is setting up venture capital fund in
collaboration with financial establishments.
Acts
Some of the major acts relating to textile industry include
a) Central Silk Board Act, 1948
b) The Textiles Committee Act, 1963
c) The Handlooms Act, 1985
d) Cotton Control Order, 1986
The Textile Undertakings Act, 1995 Government of India is earnestly trying to
provide all the relevant facilities for the textile industry to utilize its full potential and achieve
the target. The textile industry is presently experiencing an average annual growth rate of 9-
10% and is expected to grow at a rate of 16% in value, which will eventually reach the target
of US $ 115 billion by 2012.
27
COMPANY PROFILE
28
COMPANY PROFILE
VISWATEJA SPINNING MILLS LTD is a subsidiary company of SRINIVASA

COTTON & OIL MILLS, a deemed limited company having 60 cores turnover. It is a family
owned concern. The main promoters are basically cotton merchants & exporters and are in the
cotton field for the last 30 years.
VISWATEJA SPINNING MILLS LTD started in the year 2005 with an installed
capacity of 13104 spindles and expanded to 26208 spindles capacity in the year 2006 and to
43104 spindles capacity in the year 2007 and 45000 spindles in 2008.
With the support of well qualified directors and committed employee force the company
is progressing excellently in the last 3 years and become one of the top class companies in
Andhra Pradesh India.
MACHINERY
UNIT-1 UNIT-2 UNIT-3
Blow Room LMW line with vetel LMW line with vetel Tarmac line with
vetel Contamination
Contamination sorter Contamination sorter
sorters(2nos.)
Tarmac DK 800
Carding LMW LC 300A LMW LC 300A
Reiter E 65
Combers LMW LK-54 LMW LK-54
29
Manufacturing Process
Cotton bales and boras are opened, mixed and sent through Blow room. In Blow room
cleaning of cotton will be done thereby major impurities and foreign particles are removed from
cotton and cleaned cotton will be fed to the carding directly through chute feeding.
In Carding, Cotton fiber individualization and further cleaning will be done. Processed
material at this stage is called Card slivers. These Card slivers are filled in HDPE cans.
Card slivers received from carding are fed to breaker Draw Frame and from there to Lap
former, which are comber preparatory and then to combers where depending on the quality
requirement short fibers are removed and combed slivers are filled into cans.
Combed slivers received from combers will be fed to Finisher Drawing, where there will be
improvement of uniformity and parallelization of fibers. The processed material at this stage is
called Drawing Sliver.
Drawing Slivers received from drawing section will be fed to simplex, where yarn will be
formed as Roving Bobbins to feed conveniently to Ring Frames.
Bobbins received from Simplex will be fed to Ring Frames, where Final yarn is received in
the form of Cops.
Cops received from Ring Frames will be fed to Auto Corners/Cone winding where Auto
Cones/ Coned yarn, the finished product will be obtained.
30
Functions of Head of Departments in Viswateja Spinning Mills Ltd
The following are functions of the Heads of Departments that are mostly relevant to the
Project.
Functions of Finance Manager

He looks after day-to-day accounting and financial operations in the Accounts
Departments.
He is closely associated in completion of statutory audit of The Company under
Companies Act 1956 and also in connection with the annual Tax Audit under Income-tax
Act.
He is independently responsible for submitting working capital renewal application to
Banks and also furnishers required information under Quarterly Information System.
Further, he provides information to Board Meeting relating to Profit and Loss Account,
Balance Sheet, Turnover particulars and Un-audited results etc., for each quarter.
Apart from the above he looks after sales tax matters of the company and attends before Sales
Tax Departments for completion of Assessments.
Functions of Marketing Manager

He coordinates with production department, quality control & dispatch section for
planning of the production, supply of right product and at the right time to the customers.
He continuously explores new markets or customers.
In order to promote the produces of the organization regular customer contacts are
maintained.
In view of the limited growth of the industry, maintaining the market situation in order to
retain the customers.
He keeps an eye on the competitors strategies by analyzing the market situation in order
to retain the customers.
Monitoring the overall performance of sales organization is also one of the function
31
Functions of Production Manager
He is in charge of the Production Department.
He prepares requirements of raw materials as per the indents given by the Marketing
Department.
He takes total responsibility from the stage of processing raw material to the stage of
packing of finished products.
His efforts include minimizing the labor cost, inventory, wastage in order to achieve high
productivity.
His responsibility includes advising the Management with respect to capacity utilization
and further requirements.
Accounting Policies of Viswateja Spinning Mills Ltd
General
To Prepare financial statements in accordance with applicable with applicable accounting
standards in India.
The financial statements have also been prepared in accordance with relevant
presentational requirements of the companies act, 1956.
Revenues
It is the corporate policy to state turnover, which represents invoiced value of goods sold
net off taxes, insurance and freights.
The company is following mercantile system of accounting i.e., revenues/expenses are
recognized as and when they are earned/ incurred.
Inventories
In our opinion and to the best of our information and according to explanations given to
us, the said accounts read with the significant accounting policies, the Inventories are valued as
follows:
Raw materials, Stores & Spares and materials in transit have been valued at the lower of
cost or net realizable value.
Saleable Stock of scrap is valued at estimated net realizable value
32
Fixed Assets
Fixed Assets are stated at cost / original value according to the accounting standard-10.
Expenditure incurred for construction of new plant was capitalized.
Cost of fixed assets comprises of its purchase price and other costs directly attributable to
bringing the asset to its working condition for its intended use like site preparation, initial
delivery and handling charges, installation cost such as for special foundation and professional
fees paid to architects and engineers..
Depreciation
Depreciation on fixed assets is provided on SLM method at rates and in the manner
prescribed by the schedule XVI of the companies act, 1956 (as amended) and according to the
accounting standard 6 issued by ICA I
Prior period items
Insurance on plant and machinery and building was posted to building accounting i.e.
capitalized. The insurance expenditure Rs.204421/-. Wrongly capitalized during the financial
year 2004-05 was written back and claimed as revenue expenditure.
Speculation Business
Loss on foreign business (Loss in euro sales) Rs.5, 34,562/- was claimed as revenue
expenditure.
Contingencies
S.B.I. LC Loan RS. 28723860/- sanction for the purchase of machinery from Schlafhorst
Pvt. Ltd.
The liabilities will arise when the machinery received.
Taxes on Income
Current tax is determined as per the provisions of Income Tax Act, 1961 in respect of
taxable income for the year. Deferred tax liability is recognized. Subject to the consideration of
prudent on timing differences, being the difference between taxable incomes and accounting
income that originate in one period and is capable of reversal in one of more subsequent periods.
Deferred tax assets arising on account of brought forward losses and unabsorbed
depreciation as per Income Tax laws are recognized only when there is virtual certainty
supported by convincing evidence that such assets will be realized. Deferred tax assets arising on
other temporary differences are recognized only if there is a reasonable certainty of realization.
33
Dividends
Provision is made in the Accounts for the Dividends payable by the company as
recommended by the Board of Directors, pending approval of the Shareholders at the Annual
General Meeting, Tax on distributable Profits is provided for in the year to which such
distributable Profits relate.
Information Related to Viswateja Spinning Mills Ltd
The company has maintained proper records showing full particulars, including
quantitative details & situation of fixed assets is performed by the management in
accordance with a rotational plan, which is intended.
The management has conducted physical verification of inventory at reasonable intervals
during the year; the procedures of physical verification of inventory followed by the
management are reasonable & adequate.
There are adequate internal control procedures commensurate with the size of the
company and the nature of its business, for the purchase of inventory & financial
accounts and for sale of goods.
The company has accepted 64 lakes as deposits from the public.
The company has an internal audit system, commensurate with the size of the company
and the nature of the business.
The company has no accumulated losses at the end of financial year and it has not
incurred any cash losses in the current & immediately preceding financial year.
The company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore the
provisions of clause 4(xiii) of the companies (auditors report) order, 2003 are not
applicable to the company.
The company is not dealing in or trading in shares, securities, debentures and other
investments. Accordingly the provisions of clause 4(xiv) of the companies (auditors
report) order, 2003 are not applicable to the company.
The central government has not prescribed maintenance of cost records by the company
under section 209(1) (d) of the act.
34
According to the records of the company, the company is regular in depositing
undisputed statutory dues including withholding of taxes, provident fund, employees
state insurance, income tax, vat, wealth tax, custom duty, & other statutory dues with the
appropriate authorities.
The company has not given any guarantee for loans taken by others from bank or
financial institutions.
The term loans were applied for the purpose for which the loans were obtained - no term
loans for the company.
The company did not have any outstanding debentures during the year company is not
having debentures.
No fraud on or by the company has been noticed.
35
CHAPTER-III
THEORITICAL FRAME WORK
36
THEORETICAL FRAMEWORK
Though working capital is vital significance to an undertaking in several ways, the

management of which did not receive adequate attention until recently the literature of finance
concentrated more on the infrequent episodic events mergers and liquidation neglecting
completely the management of working capital. Even now, the management of fixed assets is
getting precedence over the working capital.
It has been observed by shall and Haley that managing current assets requires more
attention than managing plant and equipment expenditure. Mismanagement of current assets be
costly. Too large an investment in current assets means tying up capital that can be productively
elsewhere. On the other hand, too little investment can also be expensive.
For example, insufficient inventory may result in loss of sales as the goods that
a customer wants to buy may not be available. The finance manager will be forced to spend a
large percentage of his time in managing current assets.
Working capital Definitions
The following are the some of the definitions given for working capital by experts in the
area of finance.
The sum of the current assets is the working capital of a business.

- J.S.Mil.
Any acquisition of funds which increases the current assets increased working capita
, for they are one and the same.
-Bonneville and Dewey.
Working capital has ordinarily been defined as the excess of current assets over current
liabilities.
-C.W.Gerstenberg
37
Working capital means current assets.
-MEAD MALLOT.
Working capital refers to a firm investment in short term assets, cash, short term
securities, accounts receivable and inventories.
- WESTON AND BRIGHAM
THE NEED FOR WORKING CAPITAL
The Working Capital is necessary to run the day-to-day business activities.

Which does not require any amount of working capital? However, firms their requirements of the
working capital. Companies aim at maximizing the wealth of shareholders.
In their efforts to maximize shareholders wealth, they should earn sufficient

return from their operations. Earning a steady amount of profit requires successful sales activity.
The firm has to invest enough funds in current assets for the efficient sales activity. There always
an operating cycle which involved in the conversion of sales into cash?
The organization may be faced with an uncertainty regarding the availability of

sufficient quantity of critical inputs in future at reasonable price. This may necessitate to holding
of inventory i.e., current asset. To ensure that each of current assets is efficiently managed ensure
overall liquidity of the unit and same time not keeping too high level of any one of them working
capital Management is must.
Nature of working capital management
Working capital management is concerned with the problems that arise in attempting to
manage the current assets. The term current assets refer to those assets which in the ordinary
course of business can be or will be converted into cash within one year without disrupting the
operating of the firm.
38
The major current assets are cash marketable securities, Account receivable
and inventory. The goal of working capital management is to manage the firms current assets
and liabilities in such a way that a satisfactory level of working capital is maintained. The current
assets should be large enough to cover its current liabilities in order to ensure reasonable margin
of safety. Each of the current assets must be managed efficiently in order to maintain liquidity of
the firm while not keeping too high a level of any one of them.
Each of the short term sources of financing must be continuous managed ensure that they
are obtained and used in the best possible way .The interaction between the current assets and
current liabilities, is there fore, the main theme of the theory of working capital management.
Working Capital Management involves the relationship between a firm short term assets
and its short term liabilities. The goal of working capital management is to ensure that a firm is
able to continue its operations and that is has sufficient ability to satisfy both maturing short term
debt and upcoming operational expenses. The management of working capital involves
managing inventories, account receivable and payable and cash to pay current liabilities as they
fall due.
TYPES OF WORKING CAPITAL
Working capital may be classified in two ways:
(a) On the basis of concept
(b) On the basis of time
On the basis of concept, working capital can be further classified into
1. Gross working capital
2. Net working capital
39
Based on time, working capital can be further classified into
1. Permanent or fixed working capital
2. Temporary or variable working capital
CONCEPTS OF WORKING CAPITAL
There are two concepts of working capital. They are Gross working capital, net working
capital.
Gross Working Capital
Gross working capital is also called as working capital. It refers to total current assets i.e.
the amount of funds invested in Current assets. Current assets include inventories, sundry
debtors, and cash in hand & bank, advances, investments, short term deposits etc. The gross
working capital concept is financial or going concern concept.
Net Working Capital
Net working capital is the excess of current assets over current liabilities. It refers to the
difference between current assets and current liabilities. Current liabilities include sundry
creditors, advances from customers, provision for taxation etc.
In narrow sense the term working capital refers to the net working capital.
Net working capital= current assets-current liabilities
Net working capital may be positive or negative. When the current assets exceed the
current liabilities, the working capital is positive and the negative working capital results when
the current liabilities are more than the current assets.Net working capital is an accounting
concept of working capital.
The two concepts of working capital are not exclusive; rather both have their own merits.
Gross concept is very suitable to the company form of organization where there is divorce
between ownership, management and control. The net concept of working capital may be
suitable only for proprietary form of organizations such as sole-trader or partnership firms.
40
Permanent Working Capital
Permanent or fixed Working Capital is the minimum amount, which is required to ensure
effective utilization of fixed facilities and for maintaining the circulation of current assets.
Temporary Working Capital

Any amount over and above the permanent level of working capital is temporary,
fluctuating, or variable working capital. This portion of the required working capital is needed to
meet fluctuations in demand, Consequent upon the change in production and sales as a result of
seasonal changes.
Seasonal working capital
Most of the enterprises have to provide additional working capital to meet the seasonable
and special needs. The capital required to meet the seasonal needs of the enterprise is called
Seasonal Working Capital.
Special working capital
Special working capital is that part of the working capital which is required to meet
special exigencies such as launching of extensive marketing campaigns for conducting research
etc.
COMPOSITION OF WORKING CAPITAL
The individual composite items of working capital are:
Current assets
It comprises items that would get converted into cash in short-term, within a year,
through the business operations. Current assets include.
Inventories
Including stocks of raw material and components, work-in-progress, finished goods, and
factory supplies, etc.,
41
Loans and Advances
Include Sundry Debtors, Bills Receivable and others including loans and advances,
prepaid expenses, etc.
Marketable Securities
Include Government Securities and semi-government securities.
Structure of working capital
For a proper appreciation of the problems of working capital management, a closer

look at the individual items of working capital is essential. The components of current assets and
current liabilities, which are constituents of working capital, are shown in the following table.
Current Assets Current liabilities
1. Cash in Hand 1. Bills Payable

2. Cash at Bank 2. Sundry Creditors
3. Bills Receivable 3. Accrued Expenses
4. Stock 4. Short Term Loans
5. Prepaid Expenses 5. Dividends Payable
6. Accrued income 6. Bank over Draft
7. Short-Term Investment 7. Provisions for Taxes
8. Working in progress
9. Finished goods
10. Stores and spares
11. Advances to suppliers
42
Dangers of Inadequate working capital
The following are the dangers of inadequate working capital
Loss of goodwill and creditworthiness

Firm cannot avail the favorable opportunities
Adverse effect on credit opportunities
Operational inefficiency
Low rate of return on fixed assets
Excessive working capital
If the working capital is excessive, excessive inventory is the main target. It results in the
operational inefficiency leading to low profitability. Ralph Kennedy and Mc Muller observed
that the availability of excessive working capital may lead to carelessness about costs and,
therefore, leads to inefficiency of operations.
Dangers of excessive working capital
It is not only inadequacy of working capital which is dangerous but also excessive working
capital leads to many problems, which are given below:
Low rate of return on capital

Decline in capital and efficiency
Loss of goodwill and confidence
Misapplication of funds
Evils of over-capitalization
Inefficient management
Determinants of working capital

There are no rules or formula to determine the working capital requirements of a firm. A
large number of factors influence the size of investment in working capital these include
43
Nature of the business
The working capital requirements of a firm are basically influenced by the nature of
its business. Firms engaged in trading and financing activities make very heavy investment in
current assets as compared to the investment in fixed assets, whereas in the case of rail and road
transport and other public utility services, steel, aluminum, automobile industries, working
capital forms a relatively low proportion of total assets.
Operating cycle
The operating cycle implies the stages or processes through which the raw materials
are processed to get the final product. If the process is lengthy and takes long time to get the
finished products, the requirements of working capital will be much larger than that of a unit
which has a relatively low operating cycle. The shortest manufacturing process will minimize the
investment in the form of work-in-
progress.
44
Seasonal elements
The requirement of working capital to a company is influenced by the demand for

the product. If the firms product is seasonal demand-oriented not only the amount of working
capital fluctuates from one season to the other, but also the composition of working capital to
changes over the time.
Growth and expansion of business
The working capital requirements of the firm will increase as it grows in terms of sales or
fixed assets. Current assets are closely related with that of sales. The requirements of working
capital for a growing firm will be more.
A growing company has to maintain proper balance between fixed and current assets in
order to sustain its growing production and sales. This will in turn increase the investment in
current assets to support the increased scale of operations.
Firms credit policy
The credit policy of the firm affects working capital by influencing the debtor balances.
The credit terms of a company may also depend upon the industry credit norms.
If a company follows a liberal credit policy, with out following the norms of credit, it will
result in more credit sales, increased book debts and increased investment in working capital.
Turnover of current assets
Turnover of current assets refers to the speed at which the components of current assets
can be converted into cash.
The greater the turnover is, greater will be the cash flow and lesser will be the level of
working capital. If the turnover is low, the company can witness heavy piling up of various
components of current assets and increased level of working capital.
45
Availability of credit
The level of working capital of a company also depends upon the credit facility available
to it. The firm will need less working capital, if liberal credit terms are available.
The availability of credit facility from commercial banks also influences working capital
needs of the firm. Generally, if a firm gets credit facility easily, on favorable conditions, it can
operate with less working capital than a firm without such facility.
Dividend policy
Dividends are paid to shareholders of the company out of the profits. The payment of
dividends results in cash outflow.
Further, a desire to maintain an established dividend policy may affect the company by
reducing the cash balances. It will cause changes in the level of working capital. Often, changes
in working capital also bring an adjustment in the dividend policy. Shortage of working capital
therefore, acts as a powerful reason for reducing or skipping a cash dividend.
Taxation
Taxation is a short-term liability payable in cash. Advance payment of tax may have to be
paid on the basis of anticipated profits. Tax is the first appropriation out of profits. Higher the
tax, greater is the strain on the working capital of the company.
Government regulations and restrictions
Regulations and restrictions by the government and reserve bank of India through such
controls, as credit control, import regulations, influence the working capital of companies. For
instance, the Tendon committee has prescribed norms for holding inventory and debtors who the
company is net expected to exceed.
Principles of the working Capital
With regard to management of working capital, three propositions will be there.

Propositions are also termed as the principles involving risk that serve as the basis of working
capital theory.
46
Investment risk and return
If working capital is varied relative to fixed asset investment, the amount of risk that a firm
assumes is also varied and the opportunity for gain or loss is increased.
This principle assumes that a definite relation exists between the degree of risk that a firm
assumes and the rate of return. The more the risk assumed, the greater is the opportunity for gain
or loss.
Contribution to net worth
Capital should be invested in each component of working capital as long as the equity
position of the firm increases. This principle is based on the concept that each rupee invested in
fixed or working capital should contribute to the net worth of the firm.
Techniques of working capital management
There are several techniques of control as regards working capital management. Some of
the important techniques are ratio analysis, systems approaches applied in the case of material
management, PERT as applied in the case of operating cycle analysis, mathematical models as
applied in determining economic order quantities.
Business fluctuations
Growth of the firm
Manufacturing cycle
Seasonal fluctuations
Credit policy
Production policy
Operational efficiency
Price changes
Technology
47
Approaches of Working Capital
Depending on the mix of short and long-term financing, the approach followed by any
company fall under these three categories.
Matching approach or Hedging approach

In matching approach, long-term sources of finance are used to finance permanent
working capital. Temporary working capital can be financed from the short-term funds. The
rationale of matching approach is that the maturity of source of funds should match the nature of
assets to be financed.
Conservative approach
According to this approach, most of the requirements of funds should be met from long-
term sources. Short term sources should be used only for emergency requirements. Under a
conservative plan, a firm finances all its permanent current assets and part of the temporary
current assets with long term sources. Conservative approach is less risky but more costly as
compared to matching approach. In other words, it is low profit & low risk approach.
Aggressive approach
In the aggressive policy, firm uses more short-term sources of financing than warranted
by the matching plan i.e., the firm finances apart of its permanent current assets with short term
financing. On the other hand more use of short-term financing makes the more risky but less
costlier.
SOURCES OF WORKING CAPITAL
External funds available for a period of one year or less are called short term finance.
In India short term funds are used as sources to finance the working capital. The sources that are
used to finance the working capital are as follows:
1. Trade credit.
2. Accrued expenses and deferred income.
3. Bank Finance.
48
1. TRADE CREDIT
Trade Credit refers to the credit that a customer gets from suppliers of goods in the
normal course of business. In practice, the firms do not have to pay cash immediately for the
purchases made. This deferral of payment is a source to finance the working capital.
2. ACCRUED EXPENSES AND DEFERRED INCOME
Accrued expenses represent a liability that a firm has to pay for the services which it has
already received. The most important component of accruals is wages, salaries, taxes and
interests. Deferred income represents funds received by the firm for goods and services which
they had agreed to supply in future.
3. BANK FINANCE
Bank finance of working capital takes the forms including
a. Over draft
b. Cash Credit
c. Purchase or Discounting of bills
d. Letter of credit and
e. Working Capital Loan
A.OVER DRAFT
Under the overdraft facility, the borrower is allowed to withdraw funds in excess of the
balance in his current account up to a certain specified limit during a stipulated period.
B. CASH CREDIT
Under cash credit facility a borrower is allowed to with draw funds from the bank up to
the sanctioned credit limit. Cash credit limit is sanctioned against the security of current assets.
C. PURCHASE OR DISCOUNT OF BILL
Under the purchase or discounting of bills, a borrower can obtain credit from a bank
against its bills. The bank purchases or discounts the borrowers bills.
49
D. LETTER OF CREDIT
A bank opens a letter of credit in favor of a customer to facilitate his purchase of

goods. Bank will give the letter to the customer which will be submitted by the customer to
supplier. Under this arrangement if the customer fails to pay the supplier the bank will pay to
supplier.
E. WORKING CAPITAL LOAN
A borrower may get working capital loans from banks. This will be over and above all
the other facilities. For these loans banks generally charge high interest rates. Banks will provide
these facilities against securities like hypothecation, lien, mortgage etc.
ADVANTAGES OF ADEQUATE WORKING CAPITAL
Working capital is the life blood and nerve centre of business. Just as
circulation of blood is essential in the human body for maintaining life, working capital is very
essential to maintain the smooth running of a business. No business can run successfully without
an adequate amount of working capital. The main advantages of maintaining adequate amount of
working capital are as follows:
1. Solvency of the business

Adequate working capital helps in maintaining solvency of the business by providing
uninterrupted flow of production.
2. Good will
Sufficient working capital enables a business concern to make prompt payments
and hence helps in creating and maintaining goodwill.
3. Easy loans
A concern having inadequate working capital, high solvency and good credit
standing can arrange loans from banks and others on easy and favorable terms
50
4. Cash Discounts
Adequate working capital also enables a concern to avail cash discounts on the
purchases and hence it reduces costs.
5. Regular supply of raw materials

Sufficient working capital ensures regular supply of raw materials and continuous
production.
6. Regular payment of salaries, wages and other day-to-day commitments

The company which has ample working capital can make regular payment of
salaries, wages and other day-to-day commitments which rises the morale of its employees,
increases their efficiency, reduces wastages and costs and enhances production and profits
DISADVANTAGES OF INADEQUATE WORKING CAPITAL

A concern which has inadequate working capital cannot pay its short-term liabilities in
time. Thus it will loose its reputation and shall not be able to get good credit facilities.
It cannot buy its requirements in bulk and cannot avail of discounts, etc.
It becomes difficult for the firm to exploit favorable market conditions and undertake
profitable projects due to lack of working capital.
The firm cannot pay day-to-day expenses of its operations and it creates inefficiencies,
increases costs and reduces the profits of the business.
It becomes impossible to utilize efficiently the fixed assets due to non-availability of
liquid funds.
51
DISADVANTAGES OF EXCESSIVE WORKING CAPITAL
Every business concern should have adequate working capital to run its business
operations.
Excessive working capital means idle funds which earn no profits for the business and
hence the business cannot earn a proper rate of return on its investments.
When there is redundant working capital, It may lead to unnecessary purchasing and
accumulation of inventories causing more chances of theft, waste and losses.
Excessive working capital implies excessive debtors and defective credit policy, which may cause
higher incidence of bad debts.
CASH MANAGEMENT
Effective management of working capital involves management of its components viz.,

cash, debtors, and stock. Out of all these current assets, cash assumes specific identification,
because the operations of business result in the conversion of cash into raw-materials. Cash is the
most liquid asset that a business firm possesses.
It includes money and such instruments as money orders, and bank drafts. Cash in the
enterprise maybe compared to the blood in the human body. Even though firms differ in terms
of nature of business, capital structure, and risk and so on, they have in common the basic
mechanism involving conversion of funds into saleable products and back into cash. But cash
balance in its own form will not yield any return
Functions of Cash Management

The following are the functions of cash after of any business concern irrespective of its
size, nature, volume of business, age etc. The same can also be said that management of receipts
and payments.
Forecasting cash needs.

Expediting cash collections.
Disbursing cash to meet firms obligations.
Gainful investment of surplus cash.
52
Importance of Cash Management
Cash is unique resource and not comparable with any other component of current asset. If
excess cash is held, it will not generate profits since cash is sterile. It will not be productive
directly as in the case of other assets. Inventory bought excess will be useful even after
sometime, without loss of value and many a time value of inventories tend to increase due to
inflation. Hence idle cash will not generate profit but causes loss of interest.
Motives of Holding Cash
Famous economist, Keynes said that businessmen hold cash for 3 motives, which are as
follows.
Transaction motive.
Speculation motive.
Precautionary motive
Transaction motive
Cash manager is expected to arrange appropriate amount of cash in right time to pay for a
right purpose. In fact, the cash receipts will never synchronize with cash obligations to pay for.
Hence to meet the expenses timely, a firm has to hold optimum amount of cash and keep
the firm comfortable in its cash transactions. Larger the business transactions more the amount of
cash balance to be maintained and vice versa.
Precautionary motive
Firms at times need cash without prior notice. They need cash under emergency
conditions such as break down of machines, fire, theft, accidents etc, failing which they have to
pay heavy penalties. In such cases, cash rich companies can with stand rather than nil less cash
complaints.
53
Speculative motive
Of course, not all firms do business with speculative motives. Occasionally, every
business firm comes across speculative conditions such as sudden and heavy fluctuations in
prices of raw materials and rates of interest leading to rise in market for goods.
INVENTORY MANAGEMENT
The term inventory comprises raw material, work-in-progress, finished goods and
stores and spares. Inventories represent a significant portion of assets in the case of most of the
manufacturing firms and require substantial investments.
Inventory management is concerned with the determination of optimum level of

investment for each component of inventory and the inventory as a whole, the efficient use of the
components, and the operation of an effective control and review mechanism.
Objectives of inventory management
Turning to the practical aspects of inventory management, the first step is to define its
objectives. Some of these are;
To assure continuity of operations in the most efficient manner possible, so that the
enterprise may reach its overall objectives.
To achieve a balance between economics of holding large inventories and of holding
small inventories.
To minimize direct and indirect costs associated with holding inventories.
Some of the important inventory policies relates to;
Procurement of raw materials and spares.
Fixation of stock levels

The store-keeper and stock manager or purchase manager therefore fixes
the maximum and minimum levels for important stores items on a regular basis. The various
stock levels that are usually considered are.
54
1. Maximum level
This is the level beyond which stock should not be maintained. In technical terms, it is
the sum total of the minimum quantity and the economic order quantity. If stock levels go
beyond this level, overstocking results in eating away capital, space and the energies of the
store-keeper.
Max. Stock level = (Reorder level + Reorder quantity) (Minimum consumption x

Minimum reordering period).
2 .Minimum level: (safety or buffer stock)

. This is the level below which the stock of an item should not fall. This is
essentially a safety stock and hence, it not normally touched. If the stock of an item goes
below this level, there is every possibility of production being held up for want of materials.
Consequently, the minimum level is fixed to avoid the danger of production dislocations due
to the non-availability of materials. This level is decided on the basis of rate of consumption,
the lead time, the availability of substitutes and reorder level.
Minimum stock level = Reorder level (Average rate of Consumption x Average lead time)
Minimum stock level =Reorder level (Normal consumption normal reorders period or
average delivery time).
3. Reorder level
This is the point at which the store-keeper should initiate purchase requisition for
fresh supply. This is normally the point lying between the maximum and minimum levels.
Reorder level = Maximum consumption x Maximum reorder period
Reorder level= Minimum level + consumption during the time required to get fresh supply.
55
4 .Danger level:-
This is the level below which the stock should never be allowed to fall under normal
circumstances. It is slightly less than the minimum level. When the materials reach danger
level, the store-keeper should make special efforts to get fresh supplies, so that production is
not held up for want of material
Danger level = Average rate of consumption x Urgent supply time.
Economic order quantity
It is the quantity of material which can be reasonably ordered at a time and purchased
most economically. It is the quantity which is most favorable to order when fresh supplies
needed.
Ordering cost
This is the cost of placing an order and securing the supplies. It depends on the number of
orders placed and the number of items ordered each time. Whenever orders increase in
number and fewer quantities are purchased on each order, the ordering cost would begin to
rise.
Annual ordering cost = D/Q x S.

Where D = demand for item.
Q = units to be purchased on each order.
S= cost for order. .
56
Carrying Costs
Warehousing, insurance, wastage, loss due to theft, deterioration, etc. are called
inventory-carrying costs. These costs are more, as the level of stock is higher. These costs are
also known as holding cost.
57
CHAPTER-IV
DATA ANALYSIS
&
INTERPRETATION
58
DATA ANALYSIS AND INTERPRETATION
Table No: 1
Statement of Changes in Working Capital during the Period 2010-2011
Particulars 2010 2011 Increase Decrease

Current Assets
Cash in Hand 603109 1206318 603209
Cash at Bank 6797011 42573957 35776946
Sundry Debtors 113790833 136188751 22457918
Closing Stock 188886937 131405030 57481907
Other current assets 321095175 309589967 11505208
Total (A) 631113065 620964023 58838073 68987115
Current Liabilities
Current liabilities 36387091 52990750 16603659
Provisions 174411546 117705280 56706266
Sundry creditors 23736244 2072957 21663287
Total (B) 234534881 172768987 78369553 16603659
Net working capital 396578184 448195036 137207626 85590774

(A-b)
Increase in working 51616852
capital
Total 137207626 137207626
59
INTERPRETATION
It was observed that the above working capital calculations for the year 2010-11we can
notice that the working capital is increase by 60.31% compared to the previous financial
year. There is overall increase &decrease in total current assets during the year 2010-11
when compared to the previous financial years. This is due of the decrease inventory,
increase sundry debtors and cash in hand; other current assets decrease There is overall
increase & decrease in total current liabilities during the year 2010-11when compared to
the previous financial year. This is due of the increase in tax. But increase of sundry
creditors.
60
Table No: 2

Current Assets
Cash in Hand 1206318 1129951 76367
Cash at Bank 42573957 24464397 18109560
Sundry Debtors 136188751 151096317 14907566
Closing Stock 131405030 105291435 26113595
Total (A) 620964023 505115978 74907566 130755611
Current Liabilities
Provisions 117705280 117294657 410623
Total (B) 172768987 188155206 1833718 17219937

(A-b)
Decrease in working 131234264
capital
Total 147975548 147975548
61
INTERPRETATION
notice that the working capital is decrease compared to the previous financial year.
There is overall increase &decrease in total current assets during the year 2011-12 when
compared to the previous financial years. This is due of the increase sundry debtors and
cashes in hand, other current assets, inventory; cash at bank decreased. There is overall
increase &decrease in total current liabilities during the year 2011-12 when compared to
the previous financial year. This is due of the increase in tax. But decrease of sundry
creditors.
62
Table No: 3

Current Assets
Inventories 105237435 133945023 28683588
Sundry Debtors 151096317 152291708 1195391
Cash bank balances 25594378 121034896 95440548
Loans & advances 223075892 236187286 1311394
Total (A) 505115978 644848761 139732783
Current Liabilities
Provisions 117294657 112988519 4306138
Total (B) 188155206 218116898 8331732 38273425

(A-b)
increase in working 93127626
capital
Total 131401051 131401051
63
INTERPRETATION
It was observed that the above working capital calculations for the year 2012-13 we can
notice that the working capital is increase. There is overall increase of 78.33% in total
current assets during the year 2012-13when compared to the previous financial years.
This is due of the increase inventory, sundry debtors, and cashes in hand, other current
assets, loans &advance by 78.57%, 99.21%, 21.15%, 57.18%and 81.96%.There is
overall increase &decrease in total current liabilities during the year 2012-13 when
compared to the previous financial year. This is due of the increase in tax by 96.33 %.But
increase of sundry creditors by 79.23%.
64
Table No: 4

Current Assets
Inventories 133945023 138918033 4973010
Sundry Debtors 152291708 206245483 53953775
Cash bank balances 121034896 64796749 56238147
Loans & advances 236187286 213370249 22817037
Total (A) 644848761 624866578 59073001 79055184
Current Liabilities
Provisions 112988519 125994772 13006253
Total (B) 218116898 198444364 13006259 32678787

(A-b)
decrease in working 309649
capital
Total 46376397 46376397
65
INTERPRETATION
notice that the working capital is decreased by 75.37% compared to the previous
financial year. There is overall increase &decrease in total current assets during the year
2013-2014 when compared to the previous financial years. This is due of the increase
inventory, sundry debtors, other current assets and loans &advance, Cash&bank balances
decrease. There is overall increase &decrease in total current liabilities during the year
2013-2014 when compared to the previous financial year. This is due of the increase in
tax. But decrease of sundry creditors.
66
Table No: 5

Current Assets
Inventories 138918033 168968061 30050028
Sundry Debtors 206245483 228771563 22526080
Cash&bank balances 64796749 239149881 174353132
Loans & advances 213370249 216409662 3039413
Total (A) 624866578 855177611 230311033
Current Liabilities
Provisions 125994772 183819408 57824636
Total (B) 198444364 329997588 111276432 20276792

(A-b)
Increase in working 98757809
capital
Total 119034601 119034601
67
INTERPRETATION
It was observed that the above working capital calculations for the year 2014-2015 we
can notice that the working capital is increase by 75.37% compared to the previous
financial year. There is overall increase of 73.07% in total current assets during the year
2014-2015 when compared to the previous financial years. This is due of the increase
inventory, sundry debtors, and cashes in hand, other current assets, loans &advance.
There is overall increase &decreased in total current liabilities during the year 2014-2015
when compared to the previous financial year. This is due of the increase in tax. But
decrease of sundry creditors.
68
RATIO ANALYSIS
Financial ratios are useful to measure and to provide a snapshot of a companys

financial position. A tool used by individuals to conduct a quantitative analysis of information in
a companys financial statement. Ratios are calculated from current year numbers and are then
compared to previous year, other companies, the industry, or even the economy to judge the
performance of the company. Ratio analysis is predominately used by proponents of fundamental
analysis.
Financial ratios give out a detail report about with reference to firms performance and financial
situation. Financial ratios are exercised to examine the trend and for comparing the firms
financial status with the other firms. Thus, by such means, it will not be difficult to come across
the potential problems.
Advantages and Uses of Ratio Analysis

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

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

With the help of solvency ratios, solvency of the company can be measured. These ratios
show the relationship between the liabilities and assets. In case external liabilities are more than
that of the assets of the company, it shows the unsound position of the business. In this case the
business has to make it possible to repay its loans.
69
3) Helpful in analysis of financial statement
: Ratio analysis help the outsiders just like creditors, shareholders, debenture-holders,
bankers to know about the profitability and ability of the company to pay them interest and
dividend etc.
4) Helpful in comparative analysis of the performance

With the help of ratio analysis a company may have comparative study of its performance
to the previous years. In this way company comes to know about its weak point and be able to
improve them.
5) To simplify the accounting information

Accounting ratios are very useful as they briefly summarize the result of detailed and
complicated computations.
6) To work out the operating efficiency

Ratio analysis helps to workout the operating efficiency of the company with the help of
various turnover ratios. All turnover ratios are worked out to evaluate the performance of the
business in utilizing the resources.
7) To workout short-term financial position

Ratio analysis helps to work out the short-term financial position of the company with
the help of liquidity ratios. In case short-term financial position is not healthy efforts are made to
improve it.
8) Helpful for forecasting purposes

Accounting ratios indicate the trend of the business. The trend is useful for estimating
future. With the help of previous
70
LIMITATIONS OF RATIO ANALYSIS
1) Limited Comparability
Different firms apply different accounting policies. Therefore the ratio of one firm cannot
always be compared with the ratio of other firm. Some firms may value the closing stock on
LIFO basis while some other firms may value on FIFO basis. Similarly there may be difference
in providing depreciation of fixed assets or certain of provision for doubtful debts etc.
2) False Results
Accounting ratios are based on data drawn from accounting records. In case that data is
correct, then only the ratios will be correct. For example, valuation of stock is based on very high
price, the profits of the concern will be inflated and it will indicate a wrong financial position.
The data therefore must be absolutely correct.
3) Effect of Price Level Changes

Price level changes often make the comparison of figures difficult over a period of time.
Changes in price affect the cost of production, sales and also the value of assets. Therefore, it is
necessary to make proper adjustment for price-level changes before any comparison.
4) Qualitative factors are ignored

Ratio analysis is a technique of quantitative analysis and thus, ignores qualitative factors,
which may be important in decision making. For example, average collection period may be
equal to standard credit period, but some debtors may be in the list of doubtful debts, which is
not disclosed by ratio analysis.
5) Effect of window-dressing
In order to cover up their bad financial position some companies resort to window
dressing. They may record the accounting data according to the convenience to show the
financial position of the company in a better way.
6) Costly Technique
Ratio analysis is a costly technique and can be used by big business houses. Small
business units are not able to afford it.
71
TYPES OF RATIOS
Current ratio
Quick ratio
Absolute liquid ratio.
Debtors turn over ratio.
Creditors turn over ratio.
Working capital ratio.
Meaning of Ratio
A ratio is simple arithmetical expression of the relationship of one number to another. it

may be defined as the indicated quotient of two mathematical expressions.
According to Accountants Handbook by Dixon, keel and Bedford, a ratio is an

expression of the quantitative relationship between two numbers.
1. CURRENT RATIO
Current ratio is an indicator of the firms commitment of its short term liabilities. This
ratio is an index of the concern financial stability since it show the extent of the working capital
which is derived by the current assets with the current liabilities.
CURRENT RATIO = CURRENT ASSETS / CURRENT LIBILITIES
CURRENT ASSETS INCLUDED
Cash in hand, cash at bank debtors, bills receivables, stock, prepaid expenses and short
term investments etc
CURRENT LIABILITIES INCLUDED
Creditors, bills payable, out standing expenses, bank overdraft and short term loans etc
TABLE 1.1
72
YEAR CURRENT CURRENT RATIO
ASSETS LIABILITIES
2010-11 50,51,15,978 16,88,62,312 2.99
2011-12 64,48,48,761 20,28,29,598 3.17
2012-13 62,48,66,578 19,04,79,571 3.28
2013-14 63,87,67,949 11,79,36,595 5.41
2014-15 74,55,51,890 15,23,11,749 4.89
73
CURRENT RATIO
0
2010-11 2011-12 2012-13 2013-14 2014-15
INTERPRETATION
The current ratio defined as the relationship between current assets and current
liabilities. As can be from the table 1.1 current ratio was 2.99 & 3.17 in 2010-11, 2011-
12 years respectively. In the years 2010-11&2011-12 the ratio was increases gradually.
In 2012-13 it was increases to 3.28 because of increase in current assets but later it will
continues increased to 5.41 in 2013-2014, year respectively. In the year 2014-15, the
ratio was decreased to 4.89.the ratio maintain normally graph 1.1.It is showing an
inconsistent ratio denoting stability. The company is maintaining the current ratio, which
is more than the ideal ratio 2:1 in all years
74
2) QUICK RATIO
Quick ratio is also termed as acid ratio. Current assets include inventories and
prepaid expenses which are not easily convertible into cash with in a short period. If an asset is
liquid it can be converted into cash immediately or reasonably soon without a loss of value. It
measures the firms capacity to pay off current obligations immediately and is more rigorous test
of liquidity than current ratio.
QUICK RATIO = CURRENT ASSETS / QUICK LIABILITIES
TABLE 1.2
LIQUID QUICK
YEAR LIABILITIES RATIO
ASSETS
2010-11 39,98,24,543 16,88,62,312 2.36
2011-12 51,09,03,378 20,28,29,598 2.51
2012-13 48,59,48,545 19,04,78,571 2.55
2013-14 46,97,99,888 11,79,36,595 3.98
2014-15 45,96,09,258 15,23,11,749 3.01
75
QUICK RATIO
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
2010-11 2011-12 2012-13 2013-14 2014-15
INTERPRETATION
The standard norm of quick ratio is 1:1 the quick ratio of company. Was 2.36in 2010-11it
was increased to the quick ratio 2.51 in the year 2011-12.It was increase the quick ratios
2.55, 3.98 in the year 2011-12, & 2012-13 respectively. In the year 2014-15 the quick ratio
was 3.01.it is decreased gradually. The above all quick ratios maintain and increase
manually.
So from the above ratios of Viswateja spinning mills it is clear that the company
maintains a high percentage of quick ratios.
76
3) ABSOLUTE LIQUID RATIO
Absolute liquid ratio is represented by cash and near cash items. It is a ratio of
absolute liquid assets to current liabilities. The absolute liquid assets are cash, bank and
marketable securities. It is to be observed that receivables (debtors / accounts receivables and
bills receivables) are eliminated from the list of liquid assets in order to obtain absolute liquid
assets since there may be some doubt in their liquidity.
ABSOLUTE LIQUID RATIO = ABSOLUTE LIQUID ASSETS / QUICK LIBILITIES
TABLE 1.3
ABSOLUTE LIQUID QUICK

YEAR RATIO
ASSETS LIABILITIES
2010-11 2,55,94,348 16,88,62,312 0.15
2011-12 12,1,34,896 20,28,29,598 0.53
2012-13 6,47,96,749 19,04,79,571 0.34
2013-14 23,91,49,881 11,79,36,595 2.02
2014-15 10,37,57,796 15,23,11,749 0.68
77
ABSOLUTE LIQUID RATIO
2.5
1.5
0.5
0
2010-11 2011-12 2012-13 2013-14 2014-15
INTERPRETATION
A standard normal of 0.5:1 absolute liquidity ratio is considered as an acceptable

norm. Hear the company absolute liquid showed that 0.15, & 0.53, in the year 2010-11,
& 2011-12.the ratio was increased. In the year 2012-13 the ratio was decreased to
0.34.But after it increased to 2.02 in 2013-14 due increased in absolute liquid assets. And
it remain decreased the ratio into 0.68 in 2014-15
In the year 2011-2012 the company maintained a standard from of absolute

liquid ratio.
78
4) DEBTORS TURNOVER RATIO
Debtors turnover ratio indicates the velocity of debt collection of a firm. In simple
words it indicates the number of times average debtors are turned over during a year. Generally,
the higher the value of debtors turnover, the more efficient is the management of the credit. The
analysis of the ratio supplements the information regarding the liquidity of one item of current
assets of the firm. The ratio measures how rapidly receivable are collected. A higher ratio
indicates shorter time-lag between credit sales & cash collection. A low ratio that debits are not
being collected rapidly.
DEBTORS TURNOVER RATIO = NET CREDIT SALES / AVERAGE DEBTORS
TABLE 1.4
YEAR NET SALES AVERAGE DEBITORS RATIO
2010-11 73,02,58,572 21,17,36,910 3.44
2011-12 84,55,85,494 22,72,42,171 3.72
2012-13 1,12,91,96,244 25,54,14,450 4.42
2013-14 1,93,41,67,617 22,87,71,563 8.45
2014-15 3,01,66,21,129 35,53,16,081 8.48
79
DEBTORS TURNOVER RATIO
0
2010-11 2011-12 2012-13 2013-14 2014-15
INTERPRETATION
The debtors turnover ratio was 3.44 in the year 2010-11.And it is increased to 3.72 & 4.42
in the years 2011-12& 2012-13 respectively. It increased to 8.45 in the year 2010-11and
later it increased to 8.48 in the 2011-12because of increased in sales. The ratio was in
decreasing tendency up to first 3 years later it has increasing tendency.
The turnover ratio is to maintain increasing process in every year.
80
5) CREDITORS TURNOVER RATIO
Creditors turnover ratio compares creditors with the total credit purchases. It
signifies the credit period enjoyed by the firm on paying creditors. Accounts payable both sundry
creditors and bills payable.
CREDITORS TURNOVER RATIO = CREDIT PURCHASE / AVERAGE TRADE

CREDITORS
TABLE 1.5
YEAR PURCHASES AVERAGE CREDITORS RATIO
2010-11 26,86,99,572 5,33,06,331 5.04
2011-12 37,72,89,705 6,24,18,972 6.04
2012-13 47,16,13,793 7,26,98,363 6.48
2013-14 1,26,59,82,728 8,82,03,419 14.35
2014-15 2,023,272,750 14,07,00,731 14.37
81
CREDITORS TURNOVER RATIO
16
14
12
10
0
2010-11 2011-12 2012-13 2013-14 2014-15
INTERPRETATION
The company Particulars of credit turnover ratio was 5.04 in 2010-11.Where it is

increased to 6.04 in 2011-12due to decrease in purchases later the purchases is increased.
So the ratios increased gradually 6.48, 14.35 & 14.37 in the last three years 2012-13,
2013-14, and 2014-15. Respectively. The creditors turnover ratio is increase gradually the
purchases are increased.
82
6) WORKING CAPITAL TURNOVER RATIO
The ratio indicates the velocity of utilization of net working capital & the number of
times the working capital over in the covers of years. It measures the efficiency with which the
working capital is being used by the firm. A higher ratio indicates efficient utilization of working
capital.
WORKING CAPITAL TURNOVER RATIO = NET SALES / WORKING CAPITAL
TABLE 1.6
YEAR NET SALES WOKING CAPITAL RATIO
2010-11 73,02,58,572 33,62,53,666 2.17
2011-12 84,55,85,494 44,20,19,163 1.91
2012-13 1,12,91,96,244 43,43,87,007 2.59
2013-14 1,93,41,67,617 55,34,21,608 3.49
2014-15 3,01,66,21,129 63,36,36,251 4.76
83
WORKING CAPITAL TURNOVER RATIO
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
2010-11 2011-12 2012-13 2013-14 2014-15
INTERPRETATION
Working capital turnover ratio measures the relationship between working capital and the
sales. The companys working capital turnover ratio was 2.17 in 2010-11 where it 2011-
12 decreased to 1.91.In the next year due to decreased in sales and later it increased to
2.59 in the 2012-13.It remains increased to 3.49 in the 2013-14 and later it increased to
4.76 in the 2014-15 hear the ratio is showing a mixed trend.
84
CHAPTER-V
FINDINGS
SUGGESTIONS
CONCLUSION
85
FINDINGS
Current assets management needs to be more efficient. As a conventional rule, a

current ratio of 2:1.
In the light of the current assets made, it is suggested that the company should decline
its investment in current assets. So that it achieves 2:1 current ratio.
The suggested quick ratio is generally considered as 1:1, company is maintaining more
than the suggested proportion of quick assets. Company has to reduce their quick
assets.
The debtors turnover is showing a decreasing tendency up to the later is showed an
increasing tendency. In the year 2012-13 the ratio is 4.42 implies the firm collects the
debts rapidly.
The return on investment is much effective in generating profits with available assets.
But the overall performance is good, since the risk and hard work by all the staff of
company yielded very good results and reputation all over the state.
86
SUGGESTIONS
The company has to reduce the cost of production in order to attain reasonable gross
margin to ensure adequate coverage for operating expenses.
Average collection period should be reduced as much as possible for quick payments by
debtors.
Net profit of company is to improve as ensure adequate return to the owners.
The company should try to improve pre-tax operating income to cover fixed financing
charges.
In order to increase this ratio, sales should be increased. To increase the sales company
has to concentrate in capturing the foreign markets.
The investment in loans and advances should be minimized to the possible extent.
It is suggested that the company should concentrate on the management of current assets
and current liabilities more effectively
87
CONCLUSION
By conducting the study about working capital management it is found out that working
capital management of viswa teja spinning mil is too good.Viswateja spinning mill has sufficient
funds to meet is current obligation every time which is due to sufficient profits & efficient
management of viswa teja spinning mill.
Cash management & receivable management are too much good because of centralized
control on these. Raw material for the all units of OSWAL group purchased by corporate office
in bulk which is the best way. Safety measures for inventories are alo quite sufficient in viswa
teja spinning mill over all working capital management of viswa teja spinning mil is very much
efficient
88
BIBLIOGRAPHY
89
BIBILOGRAPHY
K.ASWATHAPPA- Human resource management-5TH Edition-Tata Mc Grow Hill

publishing Ltd.
DR.P.SUBBARAO- Personnel and Human Resource Management- Himalaya
Publishing House
ARUN MONAPPA-Industrial Relations- Tata Mc Grow Hill publishing Ltd.
C.B.MAMORIA, S.V.GANKAR-Personnel Management-Himalaya Publishing House-
2009.
A.M.SHARMA-Personnel and Human Resource Management- Himalaya Publishing
House-2009.
Managing for the Future P.F. Drunken
Industrial Manner Edwin Flipped
Personal Management Ruder BasavaRaj
INTERNET SITES
WWW.ERCAP.ORG
WWW.WIKIPEDIA.COM
WWW.NWDA.GOV.INS
WWW.CUIL.COM
WWW.ORICLEFINANCE.COM
90
ANNEXURE
91
BALANCE SHEETS
BALANCE SHEET AS ON 31st MARCH, 2011
31-3-2010 31-3-2011
SOURCES OF FUNDS
Share holders funds:
Capital 44410500 44410500
Reserves & surplus 717863339 721953222
Loan funds:
Secured loans 2072957 19292894
Unsecured loans 14816364 16340490
Net differed tax liability 54170912 66217738
Total 833334102 8681214844
Application of fund:
Fixed assets:
Gross block 766750485 980309537
Less depreciation 3974154118 450684539
Net block 369335067 529624998
Capital work in progress 8100280 --------------
377435347 529624998
92
Investments 2133500 2336180
Current Assets, loans and Advances:
Inventories 131405030 105291435
Sundry debtors 136188751 151096317
Cash and bank balances 43780275 25594348
Other current assets 307761 57986
Loans & advances 312779468 223075892
624461285 505115978
Less: current liabilities & provision
Current liability provisions 52990750 51567655
Provisions 117705280 117294657
170696030 168862312
Net current assets 453765255 335253666
TOTAL 833334102 8681214844
93
31-3-2011 31-3-2012
SOURCES OF FUNDS
Capital 44410500 44410500
Loan funds:
Secured loans 19292894 15287300
Total 8681214844 920213490
Fixed assets:
Gross block 980309537 983303759
Net block 529624998 474591203
Capital work in progress -------------- 1266944
529624998 4758147
94
Inventories 105291435 133945023
Sundry debtors 151096317 152291708
Loans & advances 223075892 236187286
505115978 644848761
Provisions 117294657 112988519
168862312 202829598
TOTAL 8681214844 920213490
95
31-3-2012 31-3-2013
SOURCES OF FUNDS
Capital 44410500 44410500
Loan funds:
Total 920213490 963233154
Fixed assets:
Gross block 983303759 1081678271
Net block 474591203 522215183
Capital work in progress 1266944 374784
4758147 522589967
96
Inventories 133945023 138918033
Sundry debtors 152291708 206245483
Loans & advances 236187286 213370249
644848761 624866578
Provisions 112988519 125994772
202829598 190479571
TOTAL 920213490 963233154
97
31-3-2013 31-3-2014
SOURCES OF FUNDS
Capital 44410500 44410500
Loan funds:
Total 963233154 1057151105
Fixed assets:
Gross block 1081678271 1093852232
Net block 522215183 483340925
522589967 497473317
98
Inventories 138918033 168968061
Sundry debtors 206245483 228771563
Loans & advances 213370249 216409662
624866578 855177611
Provisions 125994772 183819408
190479571 301756003
TOTAL 963233154 1057151105
99
31-3-2014 31-3-2015
SOURCES OF FUNDS
Capital 44410500 44410500
Loan funds:
Secured loans 28241585 34793615
Total 1057151105 1268809590
Fixed assets:
Gross block 1093852232 1210002136
Net block 483340925 550574891
497473317 625160214
Investments 6256180 10010125
100
Inventories 168968061 285942551
Sundry debtors 228771563 355316081
Loans & advances 216409662 279719429
855177611 1025271238
Provisions 183819408 239320244
301756003 391631987
TOTAL 1057151105 1268809590
101

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A STUDY ON

WORKING CAPITAL MANAGEMENT

VISWA TEJA SPINNING MILL, YEDLAPADU

JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY, KAKINADA

Under the guidance of

DEPARTMENT OF MASTER OF BUSINESS ADMINSTRATION

GANGINENI PURAM, NEAR BUDAMPADU, GUNTUR 522013

Ganginenipuram, Near Budampadu, Guntur-522013

(Mr.T.VASANTHA RAO) (Mr.T.VASANTHA RAO)

PROJECT GUIDE H.O.D of M.B.A

Engineering and Technology declare that the project entitled A STUDY ON

WORKING CAPITAL MANAGEMENT with special reference to

VISWA TEJA SPINNING MILL, YEDLAPADU has been prepared by me

requirements for the award of degree in MASTER OF BUSINESS

ADMINISTRATION by JAWAHARLAL NEHRU TECHNOLOGICAL

the award of any degree or diploma.

Place: Guntur M.K.L.GAYATHRI

Date: Reg. No: 142W1E0052

I am very thankful to Dr.S.H.V Prasad Rao, Principal of G.V.R. & S College of

I wish to express my sincere thanks to Mr.T.VASANTHA RAO, Head of Department of

My special thanks to Mr.T.VASANTHA RAO Project Guide in G.V.R. & S College of

I am thankful to my faculty members Mr.AREESH BABU, Ms. M.Anusha, Mrs. P.SARITHA,

CHAPTER-I INRODUCTION 1-13

Need for the study

THEORITICAL FRAME WORK

An enterprise whether industry/Company acquires two types of assets to run its

In short run, the immediate need of the company is cash or adjustments to

Time is not sufficient.

Annual reports of the company.

Profile of Cotton & Textile Industry

Further, for the benefit of exporters, there should be a state-owned cargo

Factors responsible for wooing the investors in Indian textile industry

A major development has occurred in the textile industry when Blackstone, an

Propensity of consumption (after excluding all spending on essential items like

Total Produce of Indian Textile industry in Fabric Sector

Such goals are set to meet the following targets

Government of India is trying to promote textile industry by giving emphasis on several

Innovative marketing strategies

Other thrust areas

Human Resource Development

VISWATEJA SPINNING MILLS LTD is a subsidiary company of SRINIVASA

UNIT-1 UNIT-2 UNIT-3

Functions of Finance Manager

Functions of Marketing Manager

Accounting Policies of Viswateja Spinning Mills Ltd

Information Related to Viswateja Spinning Mills Ltd

Though working capital is vital significance to an undertaking in several ways, the

Working capital Definitions

The sum of the current assets is the working capital of a business.

- WESTON AND BRIGHAM

THE NEED FOR WORKING CAPITAL

The Working Capital is necessary to run the day-to-day business activities.

In their efforts to maximize shareholders wealth, they should earn sufficient

The organization may be faced with an uncertainty regarding the availability of

Nature of working capital management

TYPES OF WORKING CAPITAL

Working capital may be classified in two ways:

(a) On the basis of concept

(b) On the basis of time

On the basis of concept, working capital can be further classified into

1. Gross working capital

2. Net working capital

1. Permanent or fixed working capital

2. Temporary or variable working capital