CONTENTS

S. NO PARTICULARS PAGENO

CHAPTER I

1.1 INTRODUCTION
1
1.2 INDUSTRY PROFILE

1.3 COMPANY PROFILE

1.4 REVIEW OF LITERATURE

CHAPTER II
2 2.RESEARCH METHODOLOGY

CHAPTER III
3 3.ANALYSIS AND INTERPRETATION
CHAPTER IV

4.1 FINDINGS

4.2 SUGGESTION
4
4.3 CONCLUSION

4.4 APPINDIX

4.4.1 BIBLIOGRAPHY

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 CHAPTER-I

1.1 Introduction 

     Finance is the blood and nerve center of any business and hence its management
is an essential is a one. Financial management is the concerned with the planning and
controlling of the financial resources of a firm. Financial management comprises of two
aspects and them management of fixed assets and management of current assets.
Management of fixed assets is usually considered to fall within, the son of capital
budgeting while the administration of current assets falls within the realm of working
capital. Capital required for purchase of raw material, and for meeting the day-to-day
expenditure on salaries, wages, rent advertising etc. is called working capital. In other
words it refers to that part of a firm’s capital which is employed for short-term operator.

  Working capital is the amount of funds necessary to cover the necessary to cover
the operating the enterprise. Working capital management may be regarded as lifeblood
of a business. The working capital manage involves the management and control of the
gross current assets. The assets mainly comprise cash, sundry debtors and inventories.
Effective management and control of the various components of the working capital has
been rated as one of the most important and vital junction of financial management in any
of the individual and business units. Working capital management also had known as
short term financial management, largely deal with the management and control of
current assets and current liabilities.    

       The problem of managing working capital has got a separate entity as against
different decision-making issues concerning current assets individually. Working capital
has to be regarded as one of the conditioning factors in the long run operation of firm
which is inclined to treat it as issues of short term analysis and decision. The skills for
working capital management are somewhat unique viz., to make an efficient use of funds
for minimizing the risk of loss to attain profit objective.

2
      Every business has to invest it’s for the purchase of land & building, furniture,
machinery and other fixed assets. Investment decision on fixed assets or long-term
investment is called capital budgeting decision. Since investment in current assets
represents a substantial portion of total investment, the study of working capital
management becomes the one part.

1.2 Meaning

      Working capital in simple terms is the amount of funds invested into a business to
finance its day-to-day operations. It can be regarded as that portion of total capital that is
employed to meet the short term operations. It represents the firm’s investments in cash,
marketable securities, accounts receivable, and inventories less the current liabilities used
to finance the current assets.   

1.3 Definition

      Weston and Copeland (1989) consider the working capital as what is left after
deducting the current liabilities. In the words, the management of current assets and
current liabilities and the inter-relationship that exists between them are termed as
working capital management. 

        It also known as current assets management, because it is concerned with the
problems that arise in attempting to manage the current assets, the current liabilities and
the inter-relationship that exists between them. 

      Long term funds are required to create production facilities through purchase of fixed
asset such as plant, machinery, land, building, furniture etc. investment in these assets
represents that part of firm’s capital which is blocked on a permanent or fixed basis and it
is called fixed capital. 

      Funds are also needed for short term purpose for the purchase of materials, payment
of wages and other day-to-day expenses etc. these funds are known as working capital. In
simple word’s , working capital refers to that part of firm’s capital, which is required for

3
financing short term of current assets such as cash marketable securities, debtors and
inventories. Working capital is the life of blood for maintaining life, working capital is
very essential to maintain the smooth running of a business.              

There are two concepts of working capital.

A. Gross working capital

B. Net working capital

A. Gross working capital      

      It refers to the firm’s investment in currents assets which can be converted into cash
within one accounting year and includes cash, short-term securities, debtors, bills
receivable and stocks. 

B. Net working capital      

      Net working capital refers to the difference between current liabilities. It claims of
outsiders which are expected to nature of payment within an accounting year and include
creditors, bills payable and outstanding expenses. 

1.4 Steps involved in operating cycle

 Conversion of cash into raw material
 Conversion of raw material into work in progress
 Conversion of work in progress into finished product
 Time for sale of finished goods cash and credit sales
 Time for realization from debtor and bills receivable into cash
 Credit period allowed by creditors for credit purchase of raw materials and cash
1.5 Need for working capital  
      
Working capital is, needed in every organization to met day-to-day business
activities. Since there is a time a long between the sale of produce and realization of cash,
every organization requires sufficient amount of working capital to meet the daily
requirement, to take the problem as and when arises for the smooth running of business. 

4
1.6 Advantages of working capital 

      Working capital is the life blood and nerve center of a business. Working capital is
very essential to maintain smooth running of a business. No business can run without an
adequate amount of working capital. The main advantages of maintaining adequate
amount of working capital are as follows.       

 Solvency of the business

      Adequate working capital helps to maintaining solvency of the business by providing

uninterrupted flow of production.   

 Good will

Sufficient working capital enables a business concern to make prompt payment

and hence helps in creating and maintaining good will. 

 Easy loan 

      A concern having adequate working capital, high solvency and arrange loans from
banks and others on easy and favorable terms. 

 Cash discount    

      Adequate working capital also enables a concern to avail cash discount on the
purchase and hence it reduces cost.

 Regular payment of salaries, wages and other day to day commitments

  A company which has sample working capital can make regular payments of
salaries, wages and other day-to-day commitments which raise the morale of its
employees, efficiency, reduces wastages and cost and enhances production and
profit.       

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  Exploitation of favorable market conditions

      Only concerns with adequate working capital can exploit favorable market condition
such as purchasing its requirements in bulk when prices are lower and by holding its
investment for higher prices.        

 Ability to face crises

      Adequate working capital enables a concern to face business crises in emergencies

such as depression during such periods. Generally, there is much pressure on working
capital.  
 
 1.7 FACTORING DETERMINING WORKING CAPITAL

 Nature of business
 Size of the business
 Length of the manufacturing business
 Credit policy
 Seasonal variations
 Production policy
 Operating efficiency
 Tax liability
 Period of the operating cycle
 Growth of business  
 Price level of changes

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1.8 INDUSTRY PROFILE: SUGAR INDUSTRY

 Sugar Industry is the one of the major industries in India. It ranks second among
the agro industries and play an important role in the economic life of India. The sugar
industry offers direct employment to over five lakes workers it provide subsistence 7.5
per cent of the nation rural population. India is the fourth major producing country of
sugarcane in the world next to Russia Brazil and Cuba. The co-operative sector occupies
an important place in the Sugar industry out of the 15000 tons of sugar produced in India
at about 9000 tones were from the cooperative sector. The sugar industry wants the
Centre to allow exports over the next four-five months, when peak crushing for the new
season starting October takes place.

This, according to it, is necessary on two counts.

First, mills would require substantial cash flows during the time when payments
are to be made to growers against cane purchases. In the current high interest rate regime,
it makes sense to minimize dependence on borrowed working capital and generate
sufficient internal liquidity, which is possible only with reasonable realizations from
sugar. The need for a better cash position would be even more for mills in Uttar Pradesh
in the context of Assembly elections early next year.

The State Government under Ms Mayawati is likely to announce a significant

hike in cane prices with an eye on farmer votes. But mills can obviously pay at those
levels only if domestic sugar prices are allowed to rise – for which exports are a
necessity. Secondly, the current high global prices are unlikely to sustain after around
March, by which time the next crop in Brazil and Thailand would start arriving. In fact,
this is apparent from the futures price that suggests a weak trend in the months ahead.

We are staring at a high sugar production year and require adequate cash flows to
start crushing,” said Mr.Abinash Verma, Director-General. Indian Sugar Mills
Association (ISMA). “We want policy initiatives to help us dispose surplus sugar in the
international market,” he said, adding that the current availability situation is more than
comfortable. ISMA estimates opening stocks for the ne w crushing season 2011-12 at 5.8

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million tonnes (mt). Production in 2011-12 is estimated to grow by 7.4 per cent to 26 mt,
while consumption is seen rising six per cent.

Managing surplus is important. Otherwise, domestic prices can reach abysmally

low levels. It is right time that another half-a-million tonne is allowed to export so that
farmers can be supported well,” said Mr. Sanjay Taparia, Chief Financial Officer,
Simbhaoli Sugars Ltd.

For the current 2010-11 season (October-September), the Centre has permitted 1.5
mt for exports under the open general licence. Besides, another 1.1 million or so have
been allowed as re-export obligations against advance licences issued to mills in the past.

Allowing export of surplus sugar would also help the industry reduce inventories.
ISMA's estimates an inventory of 9.8 mt by September 2012. Global sugar prices are
currently ruling at a high and futures prices indicate a weakening trend in the early part of
2012.

White sugar futures in London for October 2011 contract closed at $773.7 a
tonne, while that of December 2011 were down at $732.6. The succeeding contracts for
March 2012 and May 2012 were lower at $710.5 and $698 a tonne, respectively.

Similarly, the raw sugar contracts in New York for October 2011 delivery settled
at 29.57 cents per pound on Monday. Succeeding contracts were trading lower at 28.18
cents per pound for March 2012 and 26.83 cents per pound for May 2012. Just ahead of
the festive when the demand for sugar is at its peak, the industry has escalated its demand
for allowing export of the commodity, basing its arguments on availability of surplus
stocks.

` This is likely to lead to a spurt in prices, especially with the Maharashtra

government all set to pay higher prices to farmers in the key cane producing state, as
reported yesterday.

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 Claiming that exports will not affect retail prices of the essential commodity, the
Indian Sugar Mills Association (ISMA) said the government should allow export of at
least 4 million tonnes of sugar under the open general licence. This too, should start from
the beginning of the new sugar season, in October. They say that that the season is
expected to open with an estimated opening stock of 5.8 MT.

However, Food Ministry headed by KV Thomas does not seem too convinced
even though it has agreed to reconcile the discrepancies in the production figures
projected by the Agriculture Ministry and his ministry and promised to take steps to
maintain price stability both for industry and consumers.

Firm on its earlier projected figure of around 26 MT production in the new season
despite the Food Ministry last week pegging the sugar output at a much lower 24.6 MT,
ISMA said an estimated increase of 4 per cent in cane area the new season would result
in increase sugarcane production. The discrepancy in figures is a bone of contention
between the Agriculture Ministry headed by Sharad Pawar and Thomas. Pawar recently
pegged the production around 25.5-26 MT on the basis of good monsoon.

The estimated sugar cane crush during the next sugar season 2011-12 will be
around 264.5 MT, which translates into a sugar production of 26 MT. The total
availability of sugar, therefore, works out to 31.8 MT. The domestic consumption would
be around 22 MT and therefore sugar mills will be left with 9.8 MT of surplus sugar,”
ISMA argued.

1.8.i Production of sugarcane

      India is the one of the largest sugar producing countries of the world out of 100
million tons of sugar produced during 1991-92 in the world India’s contribution is 8.5
million.

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1.8.ii Distribution system

The supply of sugar in the market is controlled by the central government. The
government has fixed the ratio between levy sugar and free sale sugar at 15:85 the price
is also fixed by the central government besides it control the sugar under the free sale
quota .

1.8.iii Dual pricing policy

The dual pricing policy affects the variability for the sugar factories. The price
payable for levy sugar is fixed by the central government based on the recommendation
of the bureau of industrial cost of price. BCIP expand computer the manufacturing cost of
the basis of statutory minimum price which is again fixed by the central government but
the state government higher price it is called state advised price. The factories have to be
is price this considerably affects the working economy of the sugar factories as sugarcane
price constitute more than 70 per cent of the cost of production.

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1.8. CO-OPERATIVE SECTOR IN THE SUGAR INDUSTRY

The cooperative sector occupies an important place in the Indian sugar industry.
An effective starting point for the sugar industry in the cooperative sector was provide in
the established of cooperative sugar mills at Pravaranagar.The success of this cooperative
sugar mill inspires the government and state authorities elsewhere to promote similar
organization.

Tamil Nadu Sugar Corporation Limited a Government of Tamil Nadu

Undertaking was incorporated in the year 1974 with the main objective of setting up of
Sugar Mills in Public Sector, in the State of Tamil Nadu. Two Sugar Mills viz. Arignar
Anna Sugar Mills, Kurungulam, Thanjavur District and Madura Sugars,
Pandiarajapuram, Madurai District are functioning under the Corporation. Subsequently,
Perambalur Sugar Mills Ltd. It was established as the subsidiary Company of TASCO
Ltd., in the year 1976. Perambalur Sugar Mills Ltd. Established a Sugar Mill at Eraiyur,
Perambalur District. The Registered Office of Tamil Nadu Sugar Corporation Limited
and Perambalur Sugar Mills Ltd. are situated at Chennai. .

India s plays a prominent role in sugarcane around the world   especially in Uttar
Pradesh. Sugarcane witch raw material for producing sugar, cultivated in Tamil Nadu
more than 2121 lakes. The total production sugarcane in one hector is more than 110
tones. In India, Tamil Nadu is third place in sugarcane cultivation second in sugar
production particularly in the district like South Arcot, Vellore, Trichy, Coimbatore, and
Salem districts. Especially Dharmapuri, Salem and thesauri were played the vital role in
sugar cane production.

1.8.v Vision

To viewed by the sugar cane growers, sugar producers, processors and the
government as the essential co-coordinating link between the adoption of modern and
scientific methods of cultivation process and techniques, practicing progressive method
of developing the administrative efficient, technical development with modern
equipments towards increasing the production.

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1.8.vi Mission            

Creating all possibilities for increasing the cane production throughout the cane
area of the mill, stimulating the atmosphere for the increased production of sugar through
enhancement of Gushing capacity, maintaining the peace of labor by provision of welfare
measures and providing on effective and responsible regulating marketing system the will
promote vigorous, energetic and responsive sugar industry.

  1.8.vii Value statement

    The Dharmapuri District Co-operative Sugar Mills Ltd values and supports with
ongoing commitments to

i. superiority     - in service and performance

ii. leadership       - within the industry
iii. responsibility  - for all our actions

To open communication with all the producers of sugar cane growers the shareholders.
The government and all its officials with truthfulness. Trust respect and honesty in
action.     
2.9 Our goal

The main objectives focused to reduce the cost of production in the industry and
increase the profit. Increasing the productivity through specific target and there fulfilling
100 per cent capacity utilization in all the years. .

2.10 Quality cycle     

 To enhance operation efficiency      

 To enhance staff compliances and satisfaction    
 We are committed to provide excellent service and                                     
 To continually improve the way we excel meeting          
 Our customer and produces needs and exceptions

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2.2.1Phasycial features

       Palacode region is an undulating land with few hills and small non-perennials rivers.
Kotur is the major hills of this area located about 20km West of Palacode. West of
Palacode, Thambulihali is another dam which also gets its water from Chinnar. The
famous water fall of Hoganakkal across Cauvery is found to the south of Palacode at a
distance of about 45km.  

2.2.2soil

         The soil type ranges from black to mixed soil. Read Sandy soils and black and soil
found all over the Dharmapuri District generally the soil is low in nitrogen and phosphate
content with no market variation between Taluk. 

2.2.3 Agriculture   

   The District economy is many agrarian in nearly 70 per cent of the workforce is
depend on agriculture and allied activities. The District is one among the most backward
and through prone area in the state paddy, mills and sugarcane the dominant carps, this
region, pulls, coconut and tamarind are other crops normally found in this zone. Dry land
found in this region in more than the wetland.

3. ABOUT THE COMPANY 

        The Dharmapuri District Co-operative Sugar Mills limited is location in Palacode in
Dharmapuri District. Dharmapuri District is economically backward District in Tamil
Nadu under the Co-operative Society act of 1961. But the actual commencement of
production started with the intention of helping the sugar cane growers giving the
employment to rural people especially for the development of a particulars area of
Dharmapuri District. The sugar mill has capacity to crush 2000 tons per day.    

This institutional training and project work studies attempt to analysis origin and
establishment of sugar mill.

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PROFILE OF THE FACTORY:

NAME : The Dharmapuri District Co-operative

Sugar Mill Ltd, Palacode.606 347

LOCATION :  Thimmanahally (villa) Jarthalav (PO)

Palacode (Tk) Dharmapuri (DT)

DATE OF REGISTRATION            : 29.08.1966 under the Tamil Nadu

Co-operative Society act 1961.

DATE OF COMMENCEMENT       : 15.12.1966

PRODUCTION AND CAPACITY    : 20.02.1972, 1250

CAPACITY                                         : 28.02.1987, 2000 TCDS

AREA OF THE ALL                          : 171.73 acres

AREA OF THE CANE                       : 20 acres

AREA OF THE FACTORY               : 76.73 acres

HOUSING COLONY &

ADMINISTRATION OFFICE            : 45 acres

POLYTECHNIC AREA                     : 30 acres

AREA OPERATION                          : Entire Palacode, Dencanikotai,

Hosur, Pennagaram Taluk and part of
Dharmapuri.

SHARE CAPITAL                               : The authorized share of the society

Shall be 300/ lakhs

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   3.1 Scope of study: 

 The present study of working capital management in the Dharmapuri District Co-
operative sugar mill Ltd was entitled to find out the strength of working capital

 The scope of the study includes analysis study in the management of capital
current assets and current liabilities of The Dharmapuri District Co-operative
sugar Ltd.

 Working capital management for the period of 2005-10

 All the calculation and analysis are based on the firm’s financial statement.

  3.2 Objective of the study

 To study the working capital position of the industry

 The study the changes in the working capital.

 To study composition of current assets and current liabilities for fixed component of
working capital.

 To identify the working capital requirement of the company.

 To suggested the to improve the working capital management.

3.5 LIMITATIONS

 The study is based on secondary data and inadequacy of secondary data may be
reflected in the analysis

 Qualitative aspect such as interpersonal relation, motivation, morale and satisfaction

cannot be study.
 The period covered under this study is only five year.

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 CHAPTER II

RESEARCH METHODLOGY

2.1 Introduction     

Research methodology is a systematic way of solving the problem. It includes the

overall research design the sampling procedure, data collection method and analysis
procedure. 

2.2 Research design       

A research design is the arrangement of condition for collection and analysis of

data in a manner that may result in an economy in procedure. It stands for advance
planning for collection of the relevant data the techniques to be used in analysis, keeping
in view the objectives of the research and availability of time. As the researcher is
analyzing the past data and predicts the future trend it is naturally of analytical type. 

2.3 Research problem      

To find the financial performance, working capital trend analysis, operating cycle
analysis, comparative statement analysis of the company.

2.4. Data collection       

The analysis of financial condition and the performance of the enterprise

necessitate and reliable data therefore the data for the present study is collected with the
help of secondary data. 

2.5. Secondary data       

The secondary data is mainly used for the study. It is taken from published source
of the company like the annual reports magazine, reports and other financial official
records. 

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 Tools used

 Common size balance sheet

 Ratio analysis 
 Comparative balance sheet

17
 CHAPTER-III
ANALYSIS AND INTERPRETATION

3.1 Introduction      

Analysis of financial statements with helps of ‘ratios’ is termed as ratio analysis.

Ratio analysis involves the process of computing. Determining and presenting the
relationship of items or group of items of financial statement. Ratio analysis was
pioneered by Alexander wall who presented a system of ratio analysis in the year 1909.
Alexander‘s contention was interpretation of financial statements can be made easier by
establishing quantitative relationship between various items of financial statements. 

3.2. Meaning of Ratio

A ratio is a mathematical relationship between two items expressed in a

quantitative form. Ratio can be defined “relationships expressed in quantitative terms,
between figures which have cause and effect relationship or which connected with each
other in some manner or the other”. Ratio analysis is an old technique of financial
analysis. The information provided by the financial statements in absolute form is
historical and static, conveying a very little meaning to the user.

  
3.4. Steps in Ratio Analysis 

 Select relevant information

The first step in ratio analysis is to select relevant information from financial
statements and calculates appropriate ratios required for decision under
consideration

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  Interpretation and reporting

The second step in ratio analysis is to interpret the significance of various ratios,
draw inferences and to write a report. The report may recommend specific action
in the matter of the decision situation or may present alternative with comparative
merits or it may just state the facts and interpretation. 

 Significance of ratio analysis

The ratio analysis is one of the most powerful tools of financial analysis. It is used
as a device to analysis and interprets the financial health of enterprise. A financial
analysis is the financial statement with various tools of analysis before
commenting upon the financial health or weakness of an enterprise. It is with help
of ratio that the financial statements can be analyzed more clear land.

3.5 Advantages of Ratio Analysis

 Forecasting
 Managerial control
 Facilities communication
 Measuring efficiency
 Facilitating investment decision
 Useful In measuring financial solvency
 Inter firm comparison

3.6 Limitations of Ratio Analysis

 Practical knowledge
 Inter-relationship
 Non availability of standard or norms
 Accuracy of financial information

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3.7 Ratio Analysis

Current Ratio
 The ratio of current assets too current liabilities is called current ratio. In order to
measure the short term liquidity or solvency of the concern, comparison of current assets
and current liabilities is inevitable.
Current assets
Current Ratio =
Current liabilities

Table No: 3.i showing Current Ratio

YEAR CURRENT ASSETS (Rs) CURRENT LIABILITIES (Rs) RATIO

2005-06 503578170 344029365 1.46

2006-07 2005-2006 29927488 14.13
2007-08 689494992 59918989 11.50
2008-09 562266392 563828404 0.99
2009-10 679622013 160217120 4.24
 Source: Balance Sheet for various years, The Dharmapuri District Co-operative Sugar
Mills.  

The above table indicates the current ratio of the year 2005-06 was 1.46 as it
increase to 14.13 in the year 2006-07, and it decrease to 11.50 in 2007-08 suddenly it
decrease 0.99 in 2008-09 and find it was 4.24 in the year 2009-10, The table indicates
current ratio was flaunting trend and it was satisfactory in the year 2009-10.

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Liquid Ratio

The ratio is also called “Absolute Liquid” or “Super Quick Ratio”. This is a
variation of quick ratio. The ratio is calculated when liquidity is highly restricted in terms
of cash and cash equivalent.

Absolute liquid Assets

Absolute Liquid Ratio =
Current Liabilities
(Cash Ratio = Cash Bank + Short Term Securities)
Table No.3.ii showing  Liquid Ratio
YEAR LIQUID ASSETS (Rs) CURRENT LIABILITIES (Rs) RATIO
2005-06 76566715 344029365 0.22
2006-07 76524990 29927488 2.55
2007-08 85995503 59918989 1.43
2008-09 76051555 563828404 0.13
2009-10 74536642 160217120 0.46
 Source: Same as Table No. 3.i

The above table indicates the liquid ratio of the year 2005-06 was 0.22 as it
increase to 2.55 in the year 2006-07, and it decrease to 1.43 in 2007-08 suddenly it
decrease 0.13 in 2008-09 and find it was 0.46 in the year 2009-10, The table indicates
liquid ratio was flu acting trend and it was satisfactory in the year 2009-10.  
 

21
Proprietary Ratio
Profit earning is considered essential for survival of the business. A business
needs profits not only for its existence but also for expansion and diversification. A
business enterprise can enterprise can discharge its Table No: 3.7.ii obligations to the
various ratios are calculated either in relation to sales or in relation to investment

Proprietary ratio = shareholder fund / Total assets  

Table No.3.iii showing Proprietary Ratio

YEAR SHAREHOLDER FUND (Rs) TOTAL ASSETS (Rs) RATIO
2005-06 306047443 503578170 0.60
2006-07 321276992 423169715 0.75
2007-08 215829950 689494992 0.31
2008-09 212831688 562266390 0.37
2009-10 218589170 679622013 0.32
 Source: Same as Table No. 3.i

 From the above table indicates the proprietary ratio of the year 2005-06 was 0.60
as it increase to 0.75 in the year 2006-07, and it decrease to 0.31 in 2007-08 suddenly it
increase 0.37 in 2008-09 and find it was 0.32 in the year 2009-10, The table indicates
proprietary ratio was flu acting trend and it was not satisfactory in the year 2009-10.  
Inventory Turnover Ratio

This ratio establishes the relationship between cost of goods sold total during a
given period and the average amount of inventory held during that period. This ratio
reveals the number of times finished goods turnover during a given accounting period.

Sales
Inventory/stock turnover ratio =
Avg.Inventories

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Table 3.iv showing Inventory Turnover Ratio
YEAR NET SALES (Rs) INVENTORY (Rs) RATIO
2005-06 699171433 427011455 1.63
2006-07 358367180 346644725 1.03
2007-08 115823764 60349989 0.01
2008-09 716391117 486214837 1.47
2009-10 1118428187 299711442 3.73
Source: Same as Table No. 3.i
 
  From the above table indicates the inventory turnover ratio of the year 2005-06
was 1.63 as it decrease to 1.03   in the year 2006-07, and it decrease to 0.62 in 2007-08
suddenly it increase 1.47 in 2008-09 and find it was 3.73 in the year 2009-10, The table
indicates inventory turnover ratio was flu acting trend and it was satisfactory in the
year2009-10.  
  Working Capital Turnover Ratio  

A working capital should be the calculate the day to day expenses and it
find him.

Working capital turnover ratio = net sales / net working capital

Table No: 3.v showing Working Capital Turnover Ratio  

YEAR NET SALES (Rs) NET WORKING CAPITAL RATIO

(Rs)

2005-06 6991771433 159548805 4.38

2006-07 358367180 419324227 0.85
2007-08 115823764 629576003 0.18
2008-09 716391117 287148579 2.49
2009-10 1118428187 519404893 2.15

23
  Source: Same as Table No. 3.i

      From the above table indicates the working capital turnover ratio of the year
2005-06 was 4.38 as it decrease to 0.85 in the year 2006-07, and it decrease to 0.18 in
2007-08 suddenly it increase 2.49 in 2008-09 and find it was 2.15 in the year 2009-10,
The table indicates working capital turnover ratio was flexuating trend and it was not
satisfactory in the year 2009-10

Gross Profit Ratio 

Gross profit ratio measures the relationship between the gross profits to net sales
and usually represented as a percentage. Gross margin reflects the efficiency with which
management produces each unit of a product. A high gross profit margin is a sign of good
management.
Gross Profit
Gross profit ratio = X 100
Net Sales

Table No.3.vi  showing Gross Profit Ratio 

YEAR GROSS PROFIT (Rs) NET SALES (Rs) RATIO
2005-06 136438271 699171433 0.19
2006-07 146741410 358367180 0.40
2007-08 148161452 115823764 1.27
2008-09 150341623 716391117 0.20
2009-210 171344891 1118428187 0.15
  Source:  Same as Table No. 3.i

 From the above table indicates the gross profit ratio of the year 2005-06 was 0.19
as it increase to 0.40 in the year 2006-07, and it increase to 1.27 in 2007-08 suddenly it
decrease 0.20 in 2008-09 and find it was 0.15 in the year 2009-10, The table indicates
gross profit ratio was flu acting trend and it was not satisfactory in the year 2009-10.  
                       

24
 Net Profit Ratio

The ratio indicates net margin earned on income this ratio, helps to determine the
efficiency with which the affairs of business are being managed. A higher ratio indicates
better position.

Net profit
Net profit ratio = X 100
Net Sales
Table No.3.vii    showing   Net Profit Ratio              
YEAR NET PROFIT (Rs) NET SALES (Rs) RATIO
2005-06 128665694 699171433 0.18
2006-07 93019621 358367180 0.25
2007-08 48663611 115823764 0.42
2008-09 212463734 716391117 0.29
2009-10 431285750 1118428187 0.38
   Source: Same as Table No. 3.i 

 From the above table indicates the net profit ratio of the year 2005-06 was 0.18
as it increase to 0.25 in the year 2006-07, and it increase to 0.42 in 2007-08 suddenly it
decrease 0.29 in 2008-09 and find it was 0.38 in the year 2009-10, The table indicates net
profit ratio was flu acting trend and it was satisfactory in the year 2009-10.  
 

25
 Dept Equity Ratio

Debtor’s turnover ratio is called “Receivable turnover ratio” or “Debtors

Velocity”. Goods are sold on credit based on credit policy adopted by the firm. Those
customers who purchase a credit are called traded debtors or book debtors. Bills are
termed as bills receivables. The debtor’s turnover ratio can be calculated as follows:

Net credit Sales

Debtors turnover ratio =

Debtors

Dept equity ratio = external equities / internal equities

Table No: 3.viii showing   Dept Equity Ratio

YEAR EXTERNAL EQUITIES INTERNAL RATIO
(Rs) EQUITIES (Rs)
2005-06 3267466 61599979 0.05
2006-07 10413776 310863215 0.03
2007-08 22905347 530332352 0.04
2008-09 49065375 163765813 0.29
2009-10 53877122 164712047 0.32
 Source: Same as Table No. 3.i

      From the above table indicates the debt equity ratio of the year 2005-06 was 0.05 as it
decrease to 0.03 in the year 2006-07, and it increase to 0.04 in 2007-08 suddenly it
increase 0.29 in 2008-09 and find it was 0.32 in the year 2009-10, The table indicates
debt equity ratio was flu acting trend and it was satisfactory in the year 2009-10. 
 

26
 Table No 3.8.i

Comparative Balance Sheet As On 2005 -06

Particulars 2004-05 2005-06 2006 Absolute % of

increase or increase or
decrease decrease
Share capital 33733000.00 34808250.00 1075250.00 3.08
Share deposit 3030385.50 3267466.50 237081 7.25
Reserve & 251221832.60 267971726.98 16749894.3 6.25
surplus
Secured loans 378600.00 143000.00 -235600 -62.22
Unsecured 76098864.00 114135998.00 38037134 33.32
loans
Fixed asset 133379016.26 136438271.47 3059255.2 2.24
gross block
Capital work in 133379016.26 26421918.00 -106957098.2 -80.19
progress
Investment & 1651143.75 2169129.75 517986 23.87
deposit
Inventories 323725518.04 427011455.01 103285937 24.18
Sundry debtors 560539.02 29598.34 -26454.68 -4.71
Cash & bank 1893847.08 7444861.28 5551014.2 74.58
balance
Loans & 62518136.61 66923126.48 4404989.87 6.58
advance
Current 291834214.66 344029365.21 52195150.6 15.17
liabilities
Provision 30915540.12 30883110.96 -32429.16 -0.10
  Source: Balance Sheet for various years, The Dharmapuri District Co-operative Sugar
Mills

27
 Interpretation

 Above table shows in the year 2005-06 share capital were increased 3.08 per
cent, share deposit were increased 7.25per cent, reserve and surplus were increased
6.25per cent, secured loans were decreased -62.22per cent, unsecured loans were
increased 33.32per cent, fixed assets were increased 2.24per cent, capital work-in
progress were decreased -80.19per cent, investment and deposit were increased 23.87per
cent, inventories were increased 24.18per cent, debtors were decreased 4.71per cent, cash
and bank balance increased 74.56per cent, loans and advances were increased 6.58per
cent, current liabilities were increased 15.17per cent, provision were decreased -0.10per
cent 
 
 
 
 
 
 
 
 
 
 

28
 Table No. 3.8.ii

Comparative Balance Sheet As On 2006- 07

Particulars 2005-06 2006-07 2007 absolute % of increase

increase or or decrease
decrease
Share capital 34808250.00 35943750.00 1135500 3.15

Share deposit 3267466.50 10413776.50 7146310 68.62

Reserve & 267971726.98 274919465 6947738.9 2.52

surplus
Secured loans 143000.00 0.00 -143000 -100

Unsecured 114135998.00 137132464 22996466 16.76

loans
Fixed asset 136438271.47 146741410.47 10303139 7.02
gross block
Capital work in 26421918.00 0.00 -26421918 -100
progress
Investment & 2169129.75 1794160.75 -374969 -17.28
deposit
Inventories 427011455.01 346644725.00 -80366730 -18.82

Sundry debtors 29598.34 913711.68 884113.32 96.76

Cash & bank 7444861.28 1599553.88 -5294437.7 -71.11

balance
Loans & 66923126.48 72217564.18 44754477 61.97
advance
Current liability 344029365.21 299274888.29 -7905.3 -2.29
Provision 30883110.96 30875205.66 -5845307.4 -18.92
 Source: Same as Table No. 3.i

29
Interpretation

 Above table shows in the year 2006-07 share capital were increased 3.15 per
cent, share deposit were increased 68.62 per cent, reserve and surplus were increased
2.25 per cent, secured loans were decreased -100 per cent, unsecured loans were
increased 16.76per cent, fixed assets were increased 7.02 per cent, capital work-in
progress were decreased -100 per cent, investment and deposit were decreased -17.28 per
cent, inventories were decreased 18.82 per cent, debtors were increased 96.76 per cent,
cash and bank balance decreased -71.11 per cent, loans and advances were increased
61.97 per cent, current liabilities were decreased -2.29 per cent, provision were decreased
-18.92 percent.  

 
 
 
 
 
 
 
 
 
 
 
 
 

30
 Table No 3.8.iii

Comparative Balance Sheet As On 2007-08

Particulars 2006-07 2007-08 2008 absolute % of increase

increase or decrease or decrease

Share capital 35943750.00 37489750.00 1546000 4.12

Share deposit 10413776.50 22905347.50 12491571 54.53
Reserve & 274919465 155434852.77 -119484613 43.46
surplus
Secured loans 0.00 0.00 0.00 0.00
Unsecured loans 137132464 276830929.00 139698465 50.46
Fixed asset 146741410.47 148161452.17 1420041.7 0.95
gross block
Capital work in 0.00 0.00 0.00 0.00
progress
Investment & 1794160.75 1544165.75 -249995 -13.93
deposit
Inventories 346644725.00 603499489.19 256854764.1 42.56
Sundry debtors 913711.68 3122338.50 2208626.84 70.73
Cash & bank 1599553.88 2899318.34 1299764.46 44.83
balance
Loans & 72217564.18 78429680.86 6212116. 68 79.20
advance
Current 299274888.29 599818989.74 50.10
300544101.5
liabilities
Provision 30875205.66 41012391.11 10137185.45 24.71

 Source: Same as Table No. 3.i

31
Interpretation

 Above table shows in the year 2007-08 share capital were increased 4.12 per
cent, share deposit were increased 54.53 per cent reserve and surplus were increased
43.46 per cent,  unsecured loans were increased 50.46 per cent, fixed assets were
increased 0.95per cent, investment and deposit were decreased -13.93 per cent,
inventories were increased 42.56 per cent, debtors were increased 70.73 per cent, cash
and bank balance increased -44.83 per cent, loans and advances were increased 79.20 per
cent, current liabilities were increased 50.10 per cent, provision were increased 24.71 per
cent.

  
 
 
 
 
 
 
 
 
 
 
 
 
 

32
 Table No 3.8.iv

Comparative Balance Sheet As On 2008-09

Particulars 2007-08 2008-09 2009 absolute % of increase

increase or or decrease
decrease
Share capital 37489750.00 38253500.0 763750.00 -2.0
Share deposit 22905347.50 49065375.50 26160028 114.20

Reserve & 155434852.7 125512813.17 -29922028 -19.25

surp 7
Secured loans 0.00 0.00 0.00 0.00

Unsecured 276830929.0 296829930.00 73244001 26.45

loans 0
Fixed asset 148161452.1 150341623.55 2180171.40 1.47
gross block 7
Capital work 0.00 273879.99 273879.99 100
in progress
Investment & 1544165.75 1566011.75 21846.00 1.42
deposit
Inventories 603499489.1 486214837.56 117284651 19.43
9
Sundry debtors 3122338.50 67996.45 -3054342 -97.83

Cash & bank 2899318.34 1389849.67 1509468.67 52.06

balance
Loans & 78429680.86 74595708.97 3833971.89 4.89
advance
Current 599818989.7 276679805.6 323139184 53.87
4

33
 liabilities
Provision 41012391.11 74684864.15 33672473 82.10

Source: Same as Table No. 3.i

Interpretation

 Above table shows in the year 2008-09 share capital were increased 2.0 per cent,
share deposit were increased 114.20 per cent, reserve and surplus were decreased -19.25
per cent, unsecured loans were increased 26.45 per cent, fixed assets were increased
1.47per cent, investment and deposit were increased 100 per cent, inventories were
increased 19.43 per cent, debtors were increased 97.83 per cent, cash and bank balance
increased 52.06 per cent, loans and advances were increased 4.89 per cent, current
liabilities were increased 53.87 per cent, provision were increased 82.10 per cent.  
 
 
 
 
 
 
 
 
 

 
 
 
 

34
 Table No 3.8.v

Comparative Balance Sheet As On 2009-10 

Particulars 2008-09 2009-10 2010 absolute % of

increase or increase or
decrease decrease

Share capital 38253500.0 39100250 846750 2.21

Share deposit 49065375.50 538771122.50 489705747 90.89
Reserve & 125512813.17 125611797.68 98984.51 0.08
surplus
Secured loans 0.00 0.00 0.00 0.00
Unsecured 296829930.00 296829930.00 0.00 100
loans
Fixed asset 150341623.55 171344891.82 21003268.27 13.97
gross block
Capital work 0.00 0.00 0.00 0.00
in progress
Investment & 1566011.75 305373927.75 303807916 100.5
deposit
Inventories 486214837.56 605085370.1 118870532.5 24.45
Sundry debtors 67996.45 55088.60 -6907.85 -11.14
Cash & bank 1389849.67 4932213.54 3542363.92 71.82
balance
Loans & 74595708.97 69549341 -5046367 -6.76
advance
Current 276679805.6 160217120.27 -116462685 -42.09
35
 liabilities
Provision 74684864.15 88119142.94 13434278.79 17.99
  Source: Same as Table No. 3.i

Interpretation

Above table shows in the year 2009-10 share capital were increased 2.21 per cent,
share deposit were increased 90.89 per cent, reserve and surplus were increased 0.08 per
cent, fixed assets were increased 13.97 per cent, investment and deposit were increased
100.5 per cent, inventories were increased 24.45 per cent, debtors were decreased -11.14
per cent, cash and bank balance increased 71.82 per cent, loans and advances were
decreased 4-6.76 per cent, current liabilities were decreased- 42.09 per cent, provision
were increased 17.9  per cent.

 
 
 

 
 
 
 

36
 Table No. 3.9.i

 Change In Working Capital As On 31st March 2005-06 

Particulars 2004-05 2005-06 Increase Decrease

CURRENT ASSETS
Inventories 323725518.2 427011455.1 103285936.
6 8
Sundry debtors 29598.34 560539.02 530940.68
Cash & bank balance 1893847.08 7444861.28 5551014.2
CURRENT
LIABILITIES
Sundry creditors 344029365.2 291834214.6 52195150.
1 6 6
Provision 3,08,83110.9 30915540.12 32429.16
6
                                    TOTAL 109400320. 52195150.
8 6
Working capital increase=5,72,05170.12    
   
Source: Balance Sheet for various years, The Dharmapuri District Co-operative Sugar
Mills

Interpretation

From the above table shows need of working capital in the year of 2004-05 and
2005-06 working capital where increased Rs.5,72,05170.12, where in the current assets
was increased 10,32,85936.8, sundry debtors were increased Rs.5,30940.68, cash and

37
bank balance were increased Rs.5,55,10142.2, creditors were decreased Rs.5,21,95150.6
andprovisionwereincreasedRs.32429.16.  
  

Table No. 3.9.ii 

Change In Working Capital As On 31st March 2006-07

Particulars 2005-06 2006-07 Increase Decrease

CURRENT
ASSETS
Inventories 427011455.01 346644725.00 80366730
Sundry debtors 560539.02 913711.66 884113.3
Cash & bank 7444861.28 1599553.88 5845307.4
balance
CURRENT
LIABILITIES
Sundry creditors 291834214.66 299274888.29 44754477
Provision 30915540.12 30875205.66 7905.3
TOTAL 884113.3 130974419.7
 Working capital decrease=13,00,90306.4  
  Source: Same as Table No. 3.i

 Interpretation       

From the above table shows need of working capital in the year of 2005-06 and
2006-07 working capital where decreased Rs.13,00,90306.4, where in the inventories was

38
decreased 8,03,66730, sundry debtors were increased Rs.8,84,113.3, cash and bank
balance were decreased Rs.5,84,5307.4, creditors were decreased Rs.4,47,54477 and
provision were decreased Rs.7905.3.

Table No.3.9.iii

 Change In Working Capital As On 31st March 2007-08

Particulars 2006-07 2007-08 Increase Decrease

CURRENT ASSETS
Inventories 346644725.00 603499489.19 256854764.1
Sundry debtors 913711.66 3122338.58 2208626.92
Cash & bank balance 1599553.88 2899318.34 1299764.46
CURRENT LIABILITIES
Sundry creditors 299274888.29 599818989.74 300544101.5
Provision 30875205.66 41012391.11 10137185.45
TOTAL 57144442.4
Working capital increase=5,71,44442.4    
   Source: Same as Table No. 3.i

Interpretation

From the above table shows need of working capital in the year of 2006-07 and
2007-08 working capital where increased Rs.57144442.4, where in the inventories was
increased Rs.2,56,854764, sundry debtors were increased Rs.2,20,8626.92, cash and bank

39
balance were increased Rs.1,29,9764.46, creditors were increased Rs.30,05,44101.5 and
provision were increased Rs.1,01,37185.45.

  

Table No.3.9.iv 

Change in Working Capital As On 31st March 2008-09

Particulars 2007-08 2008-09 Increase Decrease

CURRENT ASSETS
Inventories 603499489.19 486214837.56 117284651
Sundry debtors 3122338.58 61996.45 3060342
Cash & bank balance 2899318.34 1389849.67 1509468
CURRENT LIABILITIES
Sundry creditors 599818989.74 276679805.44 323139184
Provision 41012391.11 74684864.15 33543927  
                                    TOTAL 33543927  
Working capital increase= 4,11,44,9718    
  Source: Same as Table No. 3.i

Interpretation

From the above table shows need of working capital in the year of 2007-08 and
2008-09 working capital where decreased Rs.4,11,44,9718, where in the inventories was
decreased Rs.1,17,28,4651, sundry debtors were decreased Rs.30,60,342, cash and bank

40
 balance were decreased Rs.15,09,468, creditors were decreased Rs.3,23,13,9184 and
provision were increased Rs.3,35,43927.

 Table No.3.9.v

 Change In Working Capital As On 31st March 2009-10

Particulars 2008-09 2009-10 Increase Decrease

CURRENT
ASSETS
Inventories 486214837.56 605085370.1 118870533
Sundry debtors 61996.45 55088.60 6907.5
Cash & bank 1389849.67 4932213.59 896628.08
balance
CURRENT
LIABILITIES
Sundry creditors 276679805.44 160217120.27 116462685.2
Provision 74684864.15 88119142.09 13434277.94
TOTAL 1,33,20,1439
Working capital increase= 1,33,20,1439  
   Source: Same as Table No. 3.i
  
 Interpretation      

41
 From the above table shows need of working capital in the year of 2008-09 and
2009-10 working capital where increased Rs.1,33,201439, where in the inventories was
increased Rs.1,18,87,0533, sundry debtors were decreased Rs.6,907.5, cash and bank
balance were increased Rs.89,6628.08, creditors were decreased Rs.11,64,62685.2 and
provision were increased Rs.1,34,34277.94. 

  

    

CHAPTER IV
FINDINGS, SUGGESTION AND CONCLUSION

4.1 FINDINGS

 Current ratio in the year 2006 is 1.46 & next year increased to 14.13 and suddenly
decreased 2008 is 11.50, and 2009 is 0.99 respectively and during 2010 it is
increased to 4.24.
 Liquid ratio in the year 2006 is 0.22 & next year it is increased to 2.55, and
suddenly decreased 2008 is 1.43 and 2009 is 0.13 respectively and during 2010 it
is increased to 0.45.
 Absolute liquid ratio in the year 2006 is 0.27 & next year it is decreased to 0.21
and suddenly increased 2008 are 2.46, and decreased 2009 are 0.13 respectively
and during 2010 it is increased to 0.46.
 Proprietary ratio was constant in the year 2007-2008 is 0.31 and increased 2008-
2009 is 0.37.
 Inventory turnover ratio for the year 2009-10 is 3.73’
 Working capital turnover ratio for the year 2006 is 4.38 is shown inefficient
utilization of working capital.
 In the year 2008 the gross profit ratio is 1.27.
 In the year 2008 the net profit ratio is 0.42

42
  In the year 2010 the debt turnover ratio is 0.32
 Comparative balance sheet of the mills was satisfactory for all the year from
2006-10.

  
    
 

4.2 SUGGESTIONS

 Now day’s co-operative sugar mill factories have been facing heavy loss due to
the vulnerable government policies on the sugar sales procedure. During the year
2000-01(the sugar factories have lost Rs.360 cores in the co-operative sugar
factories are not able to run in an effective manner. Due to these losses the co-
operative sugar factories are facing a huge financial burden.

The main recommendation are summarized below

i. Phased decontrol of sugar prices over two years.

ii. Discontinuation of sugar supply though public distribution system.
iii. Contribution of monthly release of sugar quota.

  
  
 
 
 
 

43
 . 
 

4.3 CONCLUSION

Managing of finance is backbone of all the enterprises. The study was undertaken
to analyze the WORKING CAPITAL MANAGEMENT IN CO-OPERTIVE SUGAR
MILL LTD., DHARMAPURI. To fulfill the objective of the study, selected ratios and
working capital analysis were calculated and inference drawn. To eradicate the falls of
working capital management of Dharmapuri District CO-operative Sugar Mills Ltd. The
researchers have made some valid suggestions. To sum – up the factory has been
inconsistent in making use of the total assets, capital and the working capital for effective
operations and better profitability. Therefore, the factory should make necessary
arrangement to see that these assets are utilized and service for the possible to make
adequate surplus for its, sustained service for the betterment of member former in the
future.
 
  
  
  
 
 
 
44
 
 

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  . Clark, Robert, and Madeleine D’Ambrosio. 2003. “Ignorance is Not Bliss: The
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46