COMPANY PROFILE

Year established : 1999

Business Scope : Kinematic trading limited .

No. of Employee : 100-150

Nature of Business : Production , Sales And service.

Ownership : Mr. K.MUTHURAMAN .

Board of Directors : Mr. M. MUKESH .

Main products : PPR piping , PVC pressure plumbing, HDPE piping

Registrations : Registration No.78514

Contract License at : UTTAR PRADESH ,(Supply)-License No.,5111

Service Tax No : AAACN 7158DST001

Department of labor : 49/317

Provident fund : 19076, ESI-53-17635-67

Legal Advisors : Mr. T. RAKESH SINHA, DELHI.

: Mr.R.VIJAY TAMBE, FARIDABAD.

Bankers : 1) Indian Overseas Bank, Thirubhuvanam

2) State bank of india , Thirubhuvanam
INTRODUCTION:

The most profitable function of an organization is to maintain sufficient

working capital, sanctioning credit to customer out of its current assets and current
liabilities at its disposal is one of the principal of an organization.

It is the current assets and current liabilities, which bring most of the
earning for an organization and establish valuable ties with the community. An
effective current assets and current liabilities policy provide funds to the vital
sector of the economy in appropriate amount and appropriate time, and there by
promoter economic development.

DEFINITION

Working capital management can be defined as the aspect of financial

management which is concerned with the safeguarding and control of the firm
current assets and controlling of the firm current assets, and planning for sufficient
funds to pay current bills.

Working capital management is concerned with all decisions and acts that
influence the size and effectiveness of working capital .The goal of working capital
management is to manage each of the firm s current assets and current liabilities
in such a way that an acceptable level of networking capital is maintained those
refer to those assets which in the ordinary course of business can be ,converted into
cash within one year without undergoing a diminution in value and without
disrupting the operation of the firm. The major current assets are cash, marketing
securities, account receivable and inventory.

CONCEPT OF WORKING CAPITAL:-

Working capital can be classified or understood with the help of the

following two important concepts.
NET WORKING CAPITAL:-

Net working capital is the specific concept, which considers both current
assets and current liability of the concern.

Net working capital is the excess of current assets over the current liability of
the concern during a particular period.

If the current assets exceed the current liabilities it is said to be positive working
capital: it is reverse, it is said to be negative working capital.

GROSS WORKING CAPITAL:-

Gross working capital is the general concept which determines the working
capital concept.

Thus, the gross working capital is the capital invested in total current assets of the
business concern.

COMPONENT OF WORKING CAPITAL:-

Working capital constitutes various current assets and current liabilities. This
can be illustrated by the following chart.

CURRENT ASSETS:-

- Cash in Hand
- Cash at Bank
- Bills Receivable
- Sundry Debtors
- Short-term loan Advances
- Inventories
- Prepaid Expenses
- Accrued Income
CURRENT LIABILITY:-

- Bills Payable
- Sundry Creditors
- Outstanding Expenses
- Short-term loan and Advances
- Dividend Payable
- Bank Overdraft
- Provision for Taxation

TYPE OF WORKING CAPITAL:-

Working capital may be classified into three important type on the basis of
time.
PERMANENT WORKING
CAPITAL SEASONAL WORKING
CAPITAL

WORKING CAPITAL SPECIAL WORKING

WORKING CAPI TEMPORARY WORKING
CAPITAL
CAPITAL

SEMI VARIABLE
WORKING CAPITAL

PERMANENT WORKING CAPITAL:-

It is also known as fixed working capital. It is the capital the business

concern must maintain certain amount of capital at minimum level at all times. The
level of permanent capital depends upon the nature of the business .permanent or
fixed working capital will be not change irrespective of time or volume of sales.

TEMPORARY WORKING CAPITAL:-

 It is also known as variable working capital: It is the amount of capital which
is required to meet the seasonal demand and some special purpose .It can be further
classified intone seasonal workingcapital and special working capital. The capital
required to meet the seasonal needs of the business concern is called as seasonal
working capital. The capital required to meet the special exigencies such as
launching of extensive marketing campaign researched ect

SEMI-VARIABLE WORKING CAPITAL:-

Certain amount of working capital is in the field level up to a certain stage

and after that it will increase depending upon the change of sales or time.

NEEDS OF WORKING CAPITAL:-

Working capital is an essential part of the business concern. Every business

concern must maintain certain amount of working capital for their day-to-day
requirement and meet the short-team obligation. Working capital is need for the
following purpose. It has already been stated in the preceding chapter that the basic
objective of financial management is to maximize shareholders wealth. There is
always a time gap between the sale of good and receipt of cash. Working capital is
required for this period in order to sustain the sales activity.in case adequate
working capital is not available for this period, the company will not be in a
position to sustain the sales since it may not be in a position to purchase raw
material, pay wages and other expenses required for manufacturing the goods to be
sold.

1. PURCHASE OF RAW MATERIALS AND SPARES:-

The basic part of manufacturing process is raw material. It should purchase

frequently according to the needs of the business concern.Hence, every business
concern maintain certain amount as working capital to purchase raw material,
components, spares.etc.

2. PAYMENT OF WAGES AND SALARY:-

 The next part of working capital is payment of wages and salaries to labour
and employees. Periodical payments facilities make employees perfect in their
work. So a business concern maintains adequate the amount of working capital to
make the payments of wages and salaries.

3. DAY-TO-DAY EXPENSES:-

A Business concern has to meet various expenditures regarding the

operation at daily basis like fuel, power.officeexpenses, etc.

4. PROVIDE CREDIT OBLIGATIONS:-

A Business concern responsible to provide credit facilities to the customer

and meet the short-term obligations the concern must provide adequate working
capital.

WORKING CAPITAL POSITION\ BALANCED WORKING CAPITAL

POSITION:-

A business concern must maintain a sound working capital position to

improve the efficiency of business operation and efficient management of finance.
Both excessive and inadequate working capital lead to some problem in the
business concern.

A.CAUSES AND EFFECTS OF EXCESSIVE WORKING CAPITAL:-

(I) Excessive working capital leads to unnecessary accumulation of raw

material, components and spares.

(ii) Excessive working capital results in locking up of excess working

capital.

(iii) It creates bad debts, reducescollection periods, etc.

(iv) It leads to reduce the profits.

B. CAUSE AND EFFECTS OF INADEQUATE WORKING CAPITAL:-

 (I) Inadequate working capital cannot buy its requirement in bulk order.

(ii) It becomes difficult to implement operating plans eland activate the

firms profit target.

(iii) It become impossible to utilize efficiently the fixed assets.

(iv) The rate of return on investment also falls with the shortage of working
capital

(v) It reduces the overall operation of the business.

FACTORS DETERMINING WORKING CAPITAL

REQUIREMENTS:-

Working capital requirement depends upon various factors. There are

no set of rules or formula to determine the working capital needs of the business
concern. The following are the major factors which are determining the working
capital requirements.

1. NATURE OF BUSINESS:-

Working capital of the business concern largely depends upon the nature of
the business.If the business concern follow rigid credit policy and sell goods only
for cash,they can maintain lesser amount of working capital.A transport company
maintain lesser amount of working capital while a construction company maintain
larger amount of working capital.

2. PRODUCTION CYCLE:

Amount of working capital depends upon the length of the production

cycle.If the production cycle length is small,they need to maintain lesser amount
of working capital.If it is not,they have to maintain large amount of working
capital.

3.BUSINESS CYCLE:-
 Business fluctuation lead to cyclical and seasonal change in the business
condition and it will affect the requirement of the working capital.In the booming
condition,the working capital requirement is larger and in the depression
condition,requirement of working capital will reduce.Better business result lead to
increase the working capital requirement.

4.PRODUCTION POLICY:-

It is also one of the factor which affect the working capital requirement of
the business concern.If the company maintains the continues production
policy,there is a need of regular working capital.If the production policy of the
company depends upon the situation or condition ,working capital requirement
will depends upon the condition laid down by company.

5.GROWTH AND EXPANSION:-

During the growth and expansion of the business concern,working capital

requirement are higher,because it needs some additional working capital and incurs
some extra expenses at the initial stages.

6.AVAILABILITY OF RAW MATERIAL:-

Major part of the working capital requirement are largely depends on the
availability of raw material. Raw material are the basis components of the
production p

rocess.If the raw material is not readily available,it leads to production stoppage.so,
the concern must maintain adequate raw material: for that purpose ,they have to
spend some amount of working capital.

7. EARNING CAPACITY:-
If the business concern consists of high level of earning capacity, they can
generate more working capital, with the help of cash from operation. Earning
capacity is also one of the factors which determine the working capital
requirement of the business concern.

OPERATING CYCLE

It is clear that working capital is required because of the time gas between
the sales and their actual realization in cash.

Conversion of cash into raw material;

Conversion of raw material into work- in process;
Conversion of work-in-process into finished goods;
Conversion of finished goods into accounts receivable, and
Conversion of accounts receivable into cash.
This cycle will be repeated again,
Following chart;

ACCOUNT RECEIVABLE

CASH FINISHED GOODS

RAW MATERIAL WORK IN PROGRESS

Operating cycle of a manufacturing business.

TECHNIQUES FOR ASSESSMENT OF WORKING CAPITAL
REQUIREMENTS:-

Following is a brief explanation of the various techniques for assessment of a

firms working capital requirement.

(1)Estimation of components of working capital method:since working capital

is the excess of current assets over current liabilities ,an assessment of the working
capital requirement can be made by estimation the amount of different
constituents of working capital e.g., inventories ,accounts receivable ,cash,
accounts payable, etc,.,.

(2)percent of sales approach :this is a traditional and simple method of estimating

working capital requirement.accounts capital requirement in future .For example .if
the past experience shoes that working capital has been 30% of sales and it is
estimated that the sales for the next year would amount to Rs.one lac,the amount
of working capital requirement can be assessed as RS 30,000.

The basis criticism of this method is that is that it presume a liner relationship
between sales and working capital.This is not true in all cases and method is not
universally acceptable.

(3)Operating cycle approach:according to this approach,the requirement of

working capital depends upon the operating cycle of the business.

The operating cycle begin with the acquisition of material and ends with the
collection of receivables.It may be broadly classified in to following four stages
viz.

(A) Raw material and stores storage:

(B) Work in process stage:
(C) Finished goods inventory stages:and
(D) Receivable collecting stages:
 The duration of the operatingcycle for the purpose of estimating working
capital requirement is equivalent to the purpose of estimating sum of the
duration of each of those stages the credit stages the credit period allowed
by the supplier of the firm.

O=R

O=DURATION OF POERATING CYCLE:

R=RAW MATERIAL AND STORES STORAGE PERIOD

W=WORK IN PROESS PERIOD:

D=DEBTORS COLLECTION PERIOD:

F=FINISHED STOCK STORAGE PERIOD:

C=CREDITORS PAYMENT PERIO

Each of the component of the operating cycle can be calculated as following.

Average Stock of raw material And Stores

R=
Average Raw material and Stores Consume
Average worth in process inventory

W=
Average cost of Production Per Day.
Average Finished Stock Inventory
F=
Average Cost of Goods Sold Per Day.

Average Book Debts

D=
Average Credit Sales Per Day.

Average Trade Creditor

C= _____________________
 Average Credit Purchase Per Day
After computing the period of the one operating cycle,the total number of
operating the cycle that can be completed during a year can be computed by
diving 365 days with number of operating days in a cycle of operating
expenditure in the year when divided by the number of operating cycle in a year
will give the average amount of the working capital requirement.

IMPROTANTANCE OF THE STUDY

Adequate working capital creates certainty, security and confidence in the minds
of the persons In the management as well as in the minds of creditors and workers.
It creates a good credit standing for the firm because credit standing depends
upon the ability to pay promptly. A company with adequate working capital is
always able to meet current liabilities.

It ensures solvency and stability of the enterprise It also ensures continuity in

production and sales .It enables the company to take advantage of cash discount
offered by the supplier of raw material or merchandise .It enhanced the prestige of
the company and moral of its workers because a company with adequate working
capital is always able to pay wages and salaries promptly and regularly.

It enable the company to procure loans from banks on easy and competitive
terms. In times of boom, it enable the company to meet increasing demands for its
products. In times of depression the company to overcome the crisis successfully.
It enable the company to hold carry on its business successfully and active
continued progress and prospective. It enabled the company to carry on its business
successfully and active continued progress and prosperity.

RESEARCH DESIGN:

The descriptive research design is adopted for the study. The descriptive
study is adopted for the purpose of detail study of Sri Ambika sugar factory.
DESCRIPTIVE STUDY:-

After carrying out initial exploratory studies to bring clarity on the subject
under study, descriptive study will be carried out to know the actual consumer
expand perception, behavior factors. Process is need to document the process and
suggest improvement in the current in the current system to make it more
effective.

DATA COLLECTION:-

The study is based on secondary data. Secondary data was the important
sources for this study, which include annual reports, journal and contents gathered
from internet. Secondary data is gathered discussion with the personal of the
company. Balance sheet and profit and loss account.

METHODOGY DATA COLLECTION AND ANALYSIS:-

The primary as well as secondary data were collected from the mill for
the study. The collected information were suitably tabulated and interpreted for the
outcome of the study.
CHAPTER SCHEME:

Chapter 1: Introduction and design of the study

Chapter 2:Company profile and industry profile
Chapter 3: Review of literature
Chapter 4: data analysis and interpretation
Chapter5: finding suggestion and conclusion

FINDING, SUGGESTION AND CONCLUSION

FINDINGS

Fixed of Kinematic Trading and Company Coimbatore has been

increasing by year.
Current Asset ratio indicate in flouting trend during the
study.Period 2012 to 2015. If ranges between 0.86 to 0.89.
Over All analysisof current asset showed increasing trend &
current liability increase the trend.
Working capital was not in favorable position.

REVIEW OF LITERATURE
Weston and Brigham., in his book stated that working capital management refer to
the administration of both current assets and current liabilities.

Smith K.V., working capital management concerned with the problem that arise in
attempting to manage the current assets the current liabilities and the relationship
that exit between them.

Ajay Kumar Agar warn., in his articles- working capital a tool control operation
suggested that:

Effort of reducing working capital is continuous exercise and it is an

opportunityfor investment.
Every organization should institution alive the purpose of colleting and
reporting working information to top management should review these
statement regularly.

Mr.AbbacyRamachandrakulkarni in his article title.., process ivestment through

meaning working capital states that top management.Has major role to play as a
facilitator controlling ,working capital is not a man short.It is a term effort and
encompasses the whole organization.

Mr.S.G.Das in his articles titled,, working capital in pharmaceutical better the

companies has analyzed accepting the norm of higher the capital turnover
management .It has been observed that in all cases the company were active to
sure.

Risk and reduce the sizes of working capital in relation to sales which resulted in
increase in the working capital turnover.

It is also turn that if the relation is maintained at a very high to extremely high
level. Firm might not have sufficient working capital for sales.This type situation
has been observed in few cases.On the whole the pharmaceutical company have
maintained only the size of working capital sufficient to the requirement of
production and sales.
 CHAPTER-IV

TABLE-1
WORKING CAPITAL RATIO FORMULA

Current Asset
Working Capital Ratio Formula= ---------------------------------
Current Liability

Current Current
S. No Years Ratio
Asset Liability
1 2011-12 30735 81129 0.37
2 2012-13 87894 101670 0.86
3 2013-14 72124 88586 0.81
4 2014-15 28711 31941 0.89
5 2015-16 22073 36133 0.61

INFERENCE:
In the current ratio the lowest ratio in the year 2011 and 2016. It Indicate that
the factory is liability to pay. But highest in the ratio in the year 2015and 2012.
TABLE-1
WORKING CAPITAL RATIO FORMULA

100%

90%

80%

70%

60%
Ratio
50%
Current Liability
40% Current Asset

30%

20%

10%

0%
 TABLE-2
DEBT RATIO

Total liability
Debit Ration = ------------------------------
Total asset

Total Total
S. No Years Ratio
Liability Asset
1 2011-12 48430 60901 0.79
2 2012-13 140310 180886 0.71
3 2013-14 1465452 17611 0.82
4 2014-15 45679 58150` 0.78
5 2015-16 47736 55319 0.86

INFERENCE:
In 2014 and 2016onwards gradually decrease it is overstocking in 2015 and
2011 higher than started.
 TABLE-2
DEBT RATIO

100%
90%
80%
70%
60%
Ratio
50%
Current Liability
40% Current Asset
30%
20%
10%
0%
 TABLE-3
EQUITY RATIO

Net Sale
Equity Ratio = ------------------------------
Average total asset

Average
S. No Years Net Sale Ratio
Total Asset
1 2011-12 12470 60901 0.20
2 2012-13 12891 58442 0.22
3 2013-14 10631 55321 0.19
4 2014-15 13571 42004 0.32
5 2015-16 12891 584112 0.22

INFERENCE:
The above table indicate equity ratio continuously decrease in the year 2012-
2013 to 2014. So it indicates the equity ratio are not been used.

TABLE-3
 EQUITY RATIO

100%

90%

80%

70%

60%
Ratio
50% Current Liability
Current Asset
40%

30%

20%

10%

0%

TABLE-4
 CURRENT RATIO

Current Asset
Current Ratio = ---------------------------------
Current Liability

Current Current
S. No Years Ratio
Asset Liability
1 2011-12 30735 81129 0.37
2 2012-13 87894 101670 0.86
3 2013-14 72124 88586 0.81
4 2014-15 28711 31941 0.89
5 2015-16 22073 36133 0.61

INFERENCE:
In the current ratio the lowest ratio in the year 2011 and 2015. It Indicate that
the factory is liability to pay. But highest in the ratio in the year 2014 and 2012.

CURRENT RATIO
 Current Asset

FINDING, SUGGESTION AND CONCLUSION

FINDINGS
 Fixed of Kinematic Trading and Company Coimbatore has been
increasing by year.
Current Asset ratio indicate in flouting trend during the
study.Period 2012 to 2015. If ranges between 0.86 to 0.89.
Over All analysisof current asset showed increasing trend &
current liability increase the trend.
Working capital was not in favorable position.

SUGGESTION
 Kinematic Trading and Company Coimbatore liability were to
increase to the 2011 to 2016 for five year the company has
takes source action to the control the current liability.
The equity ratio of the factory is average to satisfaction to the
equity ratio of 3:1
The Kinematic Trading and Company Coimbatore has to improves
on investment and current asset

CONCULSION
 Kinematic Trading and Company Coimbatore of the
organization satisfied factory over all analsis of positive
trend.
The main reason from as finding for the factory average and
due to the expiation the project.

To reduce the losses by the way of productivity and take good

financial measure to the improve the profit.\ It improve for
sub- ordinate control.