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A STUDY ON FINANCIAL PERFORMANCE THROUGH
WORKING CAPITAL MANAGEMENT
IN
SUDHA AGRO OIL AND CHEMICAL INDUSTRIES LIMITED
SAMALKOT
A project report submitted to Jawaharlal Nehru university Kakinada in
Partial fulfillment of the award of award of the degree of
MASTER OF BUSINESS ADMINISTRATION
BY
GANGA RAMA VASU CHINTA
(Regd. No. 09MR1E0012)
Under the esteemed guidance of
Mr.M.v. srinivas rao (MBA)
MBA programme
P.G. DEPARTMENT OF MANAGEMENT STUDIES
SRI VATSAVAI KRISHNAM RAJU COLLEGE OF ENGINEERING&
TECHNOLOGY , MANAGEMENT STUDIES
(AFFLIATED TO JNTU)
KAKINADA

ACKNOWLEDGEMENT
I am greatly indebted to many people for mailing the present study
possible and I shall be failing in my duty if I don’tacknowledge
the help and guidance extended to me by each of them.
I am the student to Mr .M.V.SRINIVASRAO, head of management
department, SRI VATSAVAI KRISHNAM RAJU COLLEGE OF
ENG IN-EERING & MANAGEMENT STUDIES , gollakoderu for his
kind co-operation extended to pursue the project work in sudha agro oil &
chemicallimited ,samalkot
I take this opportunity to express my deep sense of gratitude to Mr.
Rajendra lecturer of krishnam raju college ofpost graduate studies,
gollakoderu, for his valuable guidance in sharing his knowledge and
expertise was a pillar of supportin bringing this project in such an elegant
form.
I am especially thankful to S. MEERA executive in FINANCE
DEPARTMENT foraccepting to be for my representing for doing
project in SUDHA AGRO OIL &CHEMECAL INDUSTRIES LTD
And I want to convey my humble regards to all of my family
members and friends who have contributed their co-operation and helped me
in completing this report

DECLARATION
I here declare that the project report entitled “WORKING CAPITAL
MANAGEMENT” have been completed successfully and this project
report submitted towards the partial fulfillment of the requirement
the award of the degree of “MASTER OF BUSINESS ADMINIST-
RATION” in specialization finance . This report has not been sub
-mitted to any other university or institution for award of degree
Station:
Date:
Ganga rama vasu .chinta
{Regd no:09MR1E0012}

CERTIFICATE
This is certify that the project titled “A STUDY ON WORKING
CAPITAL MANAGEMENT “IN SUDHA AGRO AND
CHEMICAL
INDUSTRIES LIMITEDT ,SAMALKOT , being submitted by
GANGA RAMA VASU . CHINTA in partial fulfillment of the
award of m.b.a. degree to the P.G OF MANAGEMENT STUDIES ,
SRI VATSAVAI KRISHNAM RAJU COLLEGE OF
ENGINEERING
&TECHNOLOGY , GOLLAKODERU . Is a record of bonafied work
Carried out by him under my guidance and supervision
Project guide
P.G department of management studies
S v k r college gollakoderu

. PREFACE
The present study is conducted with objectives of identified the WORKING
CAPITAL MANAGEMENT fromthe five years balance sheets provided by the
SUDHA AGRO OIL AND CHEMICAL INDUSTRIES LIMITED.
 The first chapter deals with the introduction , where the information is
briefed about the oil & chemical industry
 The second chapter discuss the need of the study, the methodology used and
limitation thereof.
 The third chapter deals with the organization profile in detailed.
 The forth chapter deals with the literature review of the study.
 The fifth chapter deals with analysis and interpretation.
 The sixth chapter findings, suggestions, conclusions and Bibliography
regarding the study with the help of last five years balance sheets.

CONTENTS
CHAPTER-1 INTRODUCTION TO WORKING CAPITAL
MANAGEMENT
 Nature of working capital management
 Methodology
 Objective of study
 Significant of the study
 Limitations of the study
CHAPTER-2 INDUSTRY PROFILE COMPANY PROFILE
CHAPTER-3 THEORETICAL FRAME WORK OF WORKING CAPITAL
CHAPTER-4 ANALYSIS AND INTREPRETATION
CHAPTER-5 FINIDING&SUGGESTIONS
REFERENCES & BIBLIOGRAPHY

CHAPTER-1
 INTRODUCTIONTO WORKING CAPITAL MANAGEMENT.
 NATURE OF WORKING CAPITAL MANAGEMENT.
 OBJECTIVEOF THE STUDY.
 SIGNIFICANCEOF THESTUDY.
 METHODOLOGY.
 LIMITATIONS OF THESTUDY.

INTRODUCTION
Working capital management is significant in financial management. It plays a
vital role in keeping the wheel of the business running. Every business
requires capital ,without it can’t be promoted. Investment decisions is concerned
with investment in current assets and fixed assets .working capital plays a key role
in a business enterprise just as the role of heart in human body. it acts as grease
to run the wheels of fixed assets .its effective provision can ensure the success
of business while its inefficient management can lead not only to loss but
also to the ultimate downfall of what otherwise might be considered as a
promising concern . Efficiency of a business enterprise depends largely on its
ability to its working capital .working capital management is one of the
important facts of affirms overall financial management
For increasing shareholder’s wealth a firm has to analyze the effect of fixed
assets and current assets on its return and risk.working capital management of
current assets . the management of current assets on the basis of the following
points:
1. current assets are for short period while fixed assets are for more than one year
2. The large holding of current assets ,especially cash, strengthens liquidity
position but also reduce overall profitability ,and to maintain an optimal level of
liquidity and profitability , risk return trade off is involved holding current assets
3. Only current assets can be adjusted with sales fluctuating in the short run. thus
the firm has greater degree of flexibility in managing current assets. The
management of current assets help affirm in building a good market reputation
regarding its business and economic conditions.
Now first let us discuss the paradigms of working capital management.

CONCEPT OF WORKING CAPITAL:
The conceptof working capital includes current assets and current liabilities both.
There are two of working capital of working capital they are gross and net
working capital.
1.Gross working capital: Gross working capital refers to the firm’s investment in
current assets .current assets are the assets, which can be converted into cash
within an accounting year or operating cycle. It includes cash, short term securities
,debtors (accountreceivables or bookdebts),bills receivables and stock
(inventory).
2.Networking capital: net working capital refers to the difference between
current assets and liabilities are those claims of outsiders, which are expected to
mature for payment within an accounting year. It includes creditor’s or accounts
payables bills payable and outstanding expenses. Net working copulate can be
positive or negative. A positive working capital will arise when current assets
exceed current liabilities and vice versa.

NATURE OF WORKING CAPITAL
Working capital management 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. The term current refers to those
assets which in the ordinary courseof business can be ,or will 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, marketable securities, accounts receivables and inventory. current
liabilities are those liabilities, which are intended at their inception ,to be paid
in the ordinary course of business, within a year out of the current or the
earning of the concern .The basic current liabilities are accounts payable
,bills payable ,bank overdrafts and outstanding expense. The goal of working
management is to manage the firms assets and liabilities in such a way that a
satisfactory level of working capital is maintain. This is because if the firms
cannot maintain a satisfactory level of working capital ,it is likely to become
insolvent and may even be forced into bankruptcy. The current assets should
be large enough to cover its current liabilities in order to ensure a reasonable
margin of safety. Each of the short term sourceof financing must be
continuously managed to ensure that they are obtained and used in the way.
Interaction between current liabilities is ,therefore the main theme of the of
management of working capital.

METHODOLOGY
For the purposeof the study necessary information has been collected
through primary and secondary sources.
PRIMARY DATA:
DEFINATION
The primary data are those which are collected a fresh and for the first time,
and thus happened to be original in character . primary data include the
information collected from the officials and existing company through
discussions
SECONDARY DATA:
DEFINITION
The secondarydata ,on the other hand are those which have already been
collected by some one else and which have already been passed though the
stastical process.
The secondarydata include the information from the company annual reports
which include financial statement like balance sheet and income statements
and such other information from text books of financial management ,journals
and magazine has also been collected.

OBJECTIVES OF THE STUDY
Working capital is the most widely used and powerful technique of financial
analysis .The main objective of the present study is to know the financial
condition of the company.
 To know the overall operational efficiently and performance of the sudha
agro oil and chemical industries limited.
 To interpret the financial position of company of is appropriate (or) not.
 To asses the long term financial viability of company .to know whether the
management is constantly concerned about the over all profitability of the
company (or) not.
 To provide reliable financial information about economic resources and
obligation of a business enterprise.
 To provide reliable financial information those add ,it’s in estimating the
potential of the enterprise.
 To disclose to the extent possible other information related to the financial
statements users.

NEED OF THE STUDY
During the post –liberalization are the worlds assail as economic india’s
scenario has shown a great progress and is growing with increased phase this has
necessitated the complex and efficient ways of management .thinking practically
the main concern is of the influence of external environment on business providing
a modern dimension to business to management .they find solution for many
problems in the aspectof financial analysis .financial establishes inter relationship
that exists among. The different items appeared in the financial statements, which
are effectively helpful to describe the company should monitor key indication of
operating performance and where possible must compare, itself with the
competitors in the industry.
A systematic financial analysis of accounting figure
helps to analysis the probable caused relationship among different items after
analyzing scrutinizing the pastresult which helps the management to prepare
budgets ,to formulate company policy and to prepare future plan of action. It
focuses on company’s relative performance in sales growth margins and assets
management .It is a simple tool where by a company can make its internal audit to
evaluate internal strengths and weakness of the part of the strategic planning.

LIMITATIONS OF THE STUDY
The study conducted and done is analytical ,subject to the following limitations
1)The study is mainly carried out based on the secondarydata provided in the
financial statements .
2)this study is based on the historical data and information provided in the annual
reports therefore it may not be a future indicator .
3)There may be some fractional differences in the calculated ratios.
As the study was for short span of 8 weeks and due to lack of time other areas
could not be well focused.

CHAPTER -2
 INDUSTRY PROFILE
 COMPANY PROFILE

INDUSTRY PROFILE
Oils have come to play vital role in the economy of our country .These oils not
only for human diet but also provide essential raw materials for industries
products like soaps, paints ,varnishes and lubricants .there are many reasons for
ever growth demand for oils.
The main reason is due to various factors suchas increase in population,
rapid industrialization of the country and improved standard of living with the
recent liberalization of licensing and trade control policies of the government
,there is going to be further increase in the demand for oils human consumption
and industries purposenow a days india has been facing the problem of shortage
and raises in the price of oils. It is the burning problem from the 20 years . the
situation is due to the production of major oil seeds ground nut, mustered ,sesame,
sun flower ,soybean and linseed & caster seed.
The presently available sources of oil in india can be divided as follows.
1. perennial oil seed plant like coconutand palm.
2.Annual oil seed like groundnut , rapeseed, sesame, Niger, sunflower, soybean
caster and linseed are non –edible types.
3.minor oil seeds, like sal, neem, karanja, kusum, maharaj etc.
4.oils obtained through technological process suchas extraction from rice bran,
cottonseeds.
We are at present tapping about 25% to 30% of the available potential for
production in all the above sources .All these various oil seeds have different
yields of oil per unit area, depending in their oil content and yields of oil seeds
per unit area. The following table gives the average yields of oils per unit area for
various oil seeds.B?

AVERAGE YIELDS OF OIL PER UNIT AREA TABLE
Oil seeds Average oil
Palm 3200-3500
Coconut 1900-2000
Niger 175-200
Castor 200-225
Sesam 300-325
Mustard 350-375
Linseed 400-450
Ground nut 600-625
In India most of the productioncomes from rainfall areas, and hence there
are wide fluctuation in production owing to monsoons –progress in the evaluation
and introduction of high yielding hybrid varieties are poorwhen compared to rice
and cottonetc. owing to these factors ,yield projector is very low.
In these circumstances oil seeds productionhas to be stepped up and self
efficiency should be achieved as early as possible hence our goal is to achieve self
sufficiency in the production of the oils with in the shortest possiblespan of time.

ROLE OF CO-OPERATIVE SECTOR:-
Co- operator is assisted by N.C.D.C and N.D.D.B having oil seed
produceras their members have been supporting co-operative endeavour in
integrated development, storage and marketing. the approachadopted b then is
comprehensive enough to associated oil seed growers co-operated at the gross root
level with oil seed producers as the participants and beneficiaries it is important
that the formers who are actually engaged in productionof oil seeds are associated
with any strategies adopted for segment action oil seeds through co –operatives
.there action involvement would entire then to give further inputs for productionof
oils.
IMPORTANCE THE RODUCT
Non trading oil an lay an important part an important part in the
achievement of oil self-sufficient in our country cotton seed has already established
it self as an important oil source.rice bran is fast catching up with cotton seed. rice
bran is fast catching up seed rice bran has great potential in the future. the minor
oil seeds of free origin are slowly gaining importance mainly becauseof their low
cost. If the policy makers can encourage at even force to the industries to exploit
the vast qualities of minor seeds the edible in wild as non –edible industries)oil
demand can e satisfactory.
OIL FROM BY PRODUCTS OF OTHER INDUSTRIES:-
There are several by –productsofvarious agro –based industries
which and can be utilized to obtain oil either industries or edible purposecotton
seed, grossed nut cake rice bran are presently the important sources

ABOUT THE PRODUCT RICE BRAN OIL:-
The spectraof scarcity if oils has been hunting our national economy in
deferent every since the beginning of seventies lastly since 1977 huge be ports of
oils have becomea necessity to arrest the raise in price and met the demand and
supply gap by spending huge foreign exchange to crude oil.
The crisis has become the more serious on accountof standard in the
production of traditional oil seeds mainly ground nut and mustard on one hand and
ineffective utilization of the vast of resources of oil which can available by taping
rice bran and minor oil seed of origin and not adopting a concrete national policy
has made the crisis serious.
In fact the rice bran oil can argument substantial quality of oil in the
country like many Asain countries including Japan Herman’s thus land where rice
bran oil came to stay as a cooking medium and also for industrial purpose.

State wise processing capacity of rice bran oil in india
21STATE DAILY
PRODUCTION(MT)
ANNUAL
PRODUCTION(MT)
Andhra Pradesh 7425 22,27,500
Assam 110 33,000
Delhi 30 9000
Gujarat 1740 5,22,000
Haryana 1685
5,05,000
Karnataka 2050 6,15,000
Kerala 470 1,41,000
Madhya Pradesh 2690 8,07,000
Maharastra 1715 5,14,500
Orissa 140 42,000
Punjab 2580 7,74,000
Rajasthan 2680 2,04,000
Tamilnadu 1330 3,99,000
Uttar Pradesh 2932 879,600
West Bengal 720 2,16,000
Pondicherry 150 45,000

A conference organized by the solvent extract association of india on 1977
on rice bran oil of the significant trails taken up by or industrial organization on the
fields of oil since a slightest hike in import price crude oils brings a marked change
in Indian in markets especially of oils.
Solvent extractionindustry in india:-
Solvent extraction is pre –dominantly on agricultural on agricultural
based industry .in solvent extracting the oil contents in various agricultural
products .that is rice bran ,soya bean , sal seed –decorticated oil cakes etc, is
extracted without changing the other properties of the input material .in view of the
agricultural depend this industry occupies a significant place in india economy , the
overall installed capacity of the industry in india 22,66,10,000 MTS per year and
the total no of solvent interaction plant in india 42%.
The following is the state wise advent extraction plant and their
processing capacity

23STATE WISE SOLVENT EXTRACTION PLANTS IN INDIA:-
STATE NO.OF SOLVENT DAILY
PROCESSING
CAPACITY(MTS)
ANNUAL
PROCESSING
CAPACITY(MTS)
Andhra Pradesh 57 10,610 31,83,000
Assam 1 150 45,000
Delhi 1 45 13,500
Gujarat 55 11,645 34,93,500
Haryana 20 2,290 66,87,000
Karnataka 6 750 2,25,000
Madhya Pradesh 67 27,475 82,42,500
Maharastra 60 11,803 35,41,500
Orissa 5 330 99,000
Punjab 22 3,510 10,53,000
Rajasthan 27 7,125 21,37,500
Tamilnadu 21 2,660 7,98,000
Uttar Pradesh 26 4,000 12,00,000
West Bengal 12 1,060 3,18,000
Pondicherry 1 200 60,000
TOTAL 421 88,700 2,66,10,000

In view of the growing demand for oils and for cattle feed ,the importance of
the solvent extraction industry is very significant and it plays a very import role in
Indian economy .the present growth rate of industry is around 5%.
The inflation rate of general goods is above 20%.it is surprised that in case
of oils the inflation is above 30%.there is still a danger in as government has no
other growth expert to resort to fix the inflationary to be standard price in order to
fill reservoir of resources to meet the budget.
Many learned and eminent industries ,technologist and manufactures about
manufactures about modernization of rice bran .processing to producerquality with
low concernby installing stabilizers of three or four varieties and to extract oil
with 10%to15%suitable for industries purpose by refining scopeofexploitation of
complete bran available in Indian for production of bran oil , problem formed by
rice mills ,solvent extraction industries types of stabilizer to install to controlT.T.A
.rice bran is problem in refining the bran oil like maxell eimming dewoding
neutralization bleaching and deodorization and physical refining etc.
In view of the growing demand for oils and for cattle feed, the importance of
the solvent extraction industry is very significant and it plays a very import role in
Indian company .the present growth rate of industry is around 5%.
Previously the oils obtained by solvent extraction are used in the
manufacture of soaps ,detergents but with the recount development in technology
and solvent extraction plants are able to produceedible grade oils . which the fit
for refining in order producerefined cooling grade oils ,which is a source
commodity in India .thus this industry has major role to pay in India’s oil trade.
The activities of the industry are monitored by the solvent extractors moderation of
India, located at Mumbai .

COMPANYPROFILE
HISTORY OF THE COMPANY:-
SUDHA AGRO OIL AND CHEMICAL LIMITED , Sri E .Rajarao, who
has vast experience in the same line ,prompted an existing profit making company.
The company was incorporated on 7th December 1981 as a private limited
company and became limited company on 13th august 1988. Initially the promoters
brought Rs53.55lakhs as equity capital out of 750lakhs were sudscribed by apde
subsequently 5000 shares in the yaer 1987 and 2500 shares in the year 1992 were
brought back by promoters.
In the year 1993-94 the company issued a bonus shares of 42,840 shares of
rs.100 paid up at the ratio of 5:4 out of reserves of Rs 104-58 lakhs available with
the company . the equity capital was increased to Rs 177.61 lakhs by subscribing
26,775 shares at per and 54.445 shares at premium of Rs 50 per share of Rs 500
paid up.
In the year 1996-97 the equity capital was further increased to 225 lakhs by
subscribing 47,390 shares at per by the existing promoters . thus the equity capital
of the company stood at Rs 11.361lakhs as on 31st march ,1997.
The company paid 10% dividend on equity in the first year itself and is
continuously paying dividend for the eight years.

PROMOTORSOF THE COMPANY:-
The chief promoters of the company is sri E. Rajarao, B.A . who was earlier
associated with the promotion of Gowthami solvent oil ltd .as an executive director
,he has aged above 60 years of experience in the oil and fats business.
BOARD OF DIRECTORS
1. Sri E. RAJA RAO - CHAIRMAN&MANAGING
DIRECTOR
2. Sri E. RAMAKRISHNA - JOINT MANAGING
DIRECTOR
3. Sri E. SUDHAKAR ,MS USA - EXECUTIVE DIRECTOR
4. Sri V. BALA MOHAN DAS - NOMINEE OF IREDA
5. Sri G.M.K. MOHAN - DIRECTOR
6. Sri M. VENKANNA - DIRECTOR
..................................................................................................
AUDITORS:-
Ms. BRAHMAYYA& CO.
Charted accounts
3-16c-401,8th road
Gazette officers colony
Shanti nagar,
Kakinada.

BANKERS :-
STATE BANK OF INDIA
Commercial branch
KAKINADA
FACTORY& REGD. OFFICE :-
19-1-422, G . Ragampeta,
Postbox no .9,
Samalkot - 533440
East Godavari district
Andhra Pradesh
MANAGEMENT
The following financial executives who have good amount of experience in
the oils and chemicals field further assist the managing director and executive
director
NAME AGE QUALIFICATION SERVICE FUNCTION
Sri A. Narendra 40 Engineering
Graduate
10 years Raw material
and oil sales
Sri T.
Narasimha rao
45 Oil Technologist 23 years Production
activity
Sri S. Meera 52 Commerce
graduate
26 years Accounts of
the company

PRODUCTION FACILITIES:-
The company initially started with 150 TPD rice bran solvent extraction
plant in 1982 and subsequently expended its acids ,glycerin and oxygen .
The particulars of the various plants installed in the company’s existing
premises given below.
NAME OF THE
PLANT
INSTALL
ED TPD
CAPACITY
TPA
DATE OF
COMMENCEMENT
OF PRODUCTION
Solvent extraction
plant
150 45,000 May 1983
Hydrogenation
plant
50 15,000 May 1986
Chemical refinery 40 12,000 Feb 1994
Fatty acids plant 40 12,000 Sep 1994
Glycerin 2 600 April 1996
Physical refinery 20 6,000 June 1996
Oxygen booting 1667 5,00,000 Feb 1997
Power plant 4 1,800 Dec 2000
The company had started the solvent the extraction plant on its own
fill in 1989-90 and it ran this on job work basis with minimum quality
guarantee to ITC limited and Essar Gujarath limited from September 1990
.due to shifting of job work processing the operating capacity of the plant of
the plant came down from 84%to 66% . now this plants running on its own.
The company has entered a processing agreement for its
hydrogenation plan with Colgate Pamolive (1)ltd. the process aminimum
quality of 2,400 Mt. per year and the agreement is renewable every year.
Colgate Palmolive (1) ltd also supplied electrolysis equipment on hire
purchase basis for the period of three years commencing from year 1995
november.

EXPANSION SCHEME EXECUTED:-
Company commanded its 150 TPD solvent extraction plan in may 1986 at a
costof 134 lakh and the project was partly financed by APSFC and APIDC by
sanctioning a term loan of 30 lakhs repaid in scheduled time .In may 1986 it
commenced a 30 PTW hydrogenation. Plant to harden commercial rice bran oil for
soap at a costof 66 lakhs. APIDC party financed this project by sanctioning the
term loan of 39.64 lakhs. This loan was also repaid in the scheduled time . in 1986
the company tooka term loan of Rs 5.80 lakhs from APTS for purchasing a
generator .in 1992 they took a term loan of Rs 19.60 lakhs from APIDC for
purchase of a boiler .these two term also repaid in time. In 1993 company added
seed prepatory system at a costof Rs 16.20 lakhs as its own funds.
In 1993 the company took an expansion and diversion programme in a
phase manner by obtaining the financial assistance from IDBI. In 1993 it took loan
of Rs 410 lakhs to part finance its 30 TPD chemical refinery and 20 TPD fatty acid
plant in 1994. In the year 1995 the company went for further expansion and
diversification it tookrs.350 lakhs from IDBI and increased capacity from 30 TPD
to 50 TPD.
The company is banking with state bank of india. Peddapuram branch
since inception and it presently enjoying working capital fund based limit of Rs 50
lakhs. The company is maintaining good financial relation with different finance
institutions. Which are extending loan facility. The repayment of loans is made in
time.
Dealing with financial institution and banks as on 31st august, 1997 is given in
the following table.

PERFORMANCE:-
The company is regular in both earning the profit and declaring the dividend
to its share holder. The turnover in 1992-93 and 1995-96 were low due to reason
that unit under tookjob works for ITC limited and Essar Gujarat limited. The turn
over started increasing from 1996-97 on words due to diversification of the
activities in a phased manner. The company could not show a net profit in 1998-99
as it changed the method of depreciation from straight line method to written down
value method. Due to availability of surplus in profit and loss accountthe company
declared dividend of 15% on its equity on proportionate basis.
RAW MATERIALS:-
The main raw material of this unit is rice bran oil. The unit requires a
quality of 150 Mt .of rice oil per day and 100 Mt of rice bran oil per day. The
company is located in the center of east Godavari district surrounded by huge
number of rice mills. Since the company is 15 years old it established a strong net
work for procurement of rice bran. The required rice bran is produced through
urgently brokers who collect rice bran from mills at the price indicated by the
company depending on the marketing fluctuation. The company has 30 bran agents
in Godavari district, srikakulam and southern Orissa.
Out of the 100Mt of rice bran oil around 15tones per day available from
the solvent extraction plant of the company.
The chemical such as nickel catalyst caustic soda, sulphuric acid,
phosphoric acid bleaching earth etc . Are available in the required capacities to run
the plan at envisaged capacities .

THE RAW MATERIALS:-
PRODUCTION PROFILE
The raw material for solvent extraction for is rice bran . there are two
verities of rice bran.
1. Raw rice bran.
2. Boiled rice bran.
The oil content is raw rice bran is 16% and increase as boiled rice bran
is 19% the purchase price of rice bran fixed on the basis of oil content
According if oil content is less than 16% the price will be reduced
proportionately and if oil content is more than 16% a premium will be paid
proportionately similarly in the caseof boiled rice bran rebate of premium is
considered on the basis of 19% oil content .
The bran is usually produced through agents appointed by company or
directly from the rice mills . the bran after is tested in the laboratory for its content
and FFA (free fatty acids) . based on this laboratory results the payment will be
mode.
In the case of boiled bran the F.F.Acontent in it will be around 4% to
7% if it is processedwith in 3 days from the day of production by the rice mills. By
F.F.Acontent in rice bran increased to maximum 60% if they are stored beyond 10
days . the advantage of low F.F oil
(I.e. 4% to 5%) is that it can be used for manufactures of refined rice bran oil.

The sweet water obtain at the splitting tower contain glycerine heating
process in the glycerine refine unit refines the crude glycerine. The refines
glycerine of 90% purity is the stored in drums for sale.
REFINERY PLANT FLOW CHART
EDIBLE GRADE
PRE TREATMENT & WASH WATER
NEUTRALIZATION
BLEACHING
FILTRING
DEO DORIZATION
FILTERING
REFINED OILFOR SALE
SOAP STOCK
SULPHURIC ACID TREATMENT
ACID OIL

DESCRIPTION
The commercial grade rice bran oils taken an autoclave. Hydrogen and nickel
catalysis are then put into autoclave and then stirred. In the process oil absorbs
the hydrogen gas. The hydrogenated oil then bleached to remove color and
other impurities the oil is then cooled to temperature 80°c. The cooled oil is
then filter and the final oil is stored for sale.
The soap stock( fatty acids obtain from the neutralization process is treated
with sulfuric acid and then washed ). The oil thus obtain is called as acid and is
stored for sale or for further use in the fatty acid plant.
SOLCANT EXTRACTION PLANT FLOW CHART
RICE BRAN OIL
PELLERISERS
EXRTACTION BY
HEXANE
DOB + HEXANE
DRIER TO ASTER
HEXANE AFOR
RECARCUILATION
DOB FOR SALE
MISCELLA
( HEXANE + R.B..OIL )
R.B.OIL
TO STRORAGE
TANKS
EVAPORATION
PROCESS
HEXANE FOR
RECIRCULATION

FATTY PLANT FLOW CHART
The commercial grade rice bran oil is taken into an auto calve. Hydrogen
and nickel catalysis are then put into autoclave and then stirred. In the process
oil absorbs the hydrogen gas. The hydrogenated then bleached to remove color
and other impurities. The oil is then cooled to temperature of 80° C. the cooled
oil is then filtered and the final oil is stored for sale.
RICE BRAN OIL
PRE TREATMENT
FAT SPLITING
COOLING
SWEET WATER TREATMENT
CRUDE GLYCERIN
GLYCERIN REFINING
REFINED GLYCERINE
DISTILLATION PROCESS
HYDROGENATION
STARIC ACID FLAKING

HYDROGENATION PLANT FLOW CHART
The commercial grade rice bran oil is taken into an auto calve. Hydrogen and
nickel catalysis are then put into autoclave and then stirred. In the process oil
absorbs the hydrogen gas. The hydrogenated then bleached to remove color and
other impurities. The oil is then cooled to temperature of 80°C. the cooled oil is
then filtered and the final oil is stored for sale.
COMMERCIAL GRADE
RICE BRAN OIL
NACKLE
CATALYST
AUTOCLAVE OIL
HYDROGINATION
BLEACHING
COOLINGTO 80° C
FILTRATION
HYDROGINATED OIL
HYDROGEN GAS

DESCRIPTION:-
The rice bran received from various rice millers is first fed into a Pelletier
machine to convent the bran, Which is in powderfrom into pellets. These pellets
which are run through a pellet cooler to reduce the heat in the pellets. These pellets
are fed into the extraction conveyor through conveyors. The extraction bed hexane
is poured on to the bran pellets. The hexane while passing through the bran pellets,
absorbs the oil content in the bran. This mixture of oil and hexane is called miscella.
The hexane in oil is then separated by condensation process.The oil thus obtain is
stored in storage tanks for sale or for further use in other plants.
The de-oiled bran . Which still contains traces of hexane, is run through
direct to aster to recover the hexane . The de-oiled bran (DOB) which is free from
hexane is bagged for sale.
The hexane recovered by condensation process is recalculated for use in
the extraction bed.

Chapter-3
o THEORETICAL FRAME
WORK OF WORKING CAPITAL

WORKING CAPITAL MANAGEMANT THEORY
MEANING AND DEFINATION:
A part from investment in fixed assets , every enterprise has to arrange for
adequate funds for meeting day (operations) expenses to kept it a concern. So
originally speaking working capital refers to the flow funds , necessary for working
of enterprise however these is no agreement among the financial experts regarding
the meaning of working capital. They define working capital in the following
ways.
ACCORDING TO MEAD MALLOT:
“Working capital means current assets”.
ACCORDING TO WESTON AND BRIGHAM:
“working capital refers to a firm investment in short term assets, cash,
short term securities, accounts receivable and inventories”.

CONCEPTOF WORKING CAPITAL:-
There are 2 concepts ofworking capital : gross and net.
The term gross working capital also referred to as a working capital, means
the total current assets.
The term net working capital can be defined in 2 ways.
1. The most common definition of net working capital is the different between
current assets and current liabilities
2. Alternate definition of net working capital is that portion of current assets
which is financed with long term funds.
The task of the financial manager in managing working capital efficiency is
to ensure sufficient liquidity in the operation of the enterprise. The liquidity
of a business firm is measured by its ability to satisfy short term obligations
as they become due. The three basics measure of a firm’s overall liquidity
are
1. The acid test ratio
2. The net working capital
3. The current ratio
In brief , they are useful in inter firm comparison of liquidity . net working capital
as a measure of liquidity, is not very useful for comparing the performance of
different firms, but it is quite useful for internal control. The net working capital
helps in comparing the same firm over time.

NEED FOR WORKING CAPITAL:-
In order earn sufficient profits, a firm has to depend on its sales activities
apart from others. We know that sales are not analysis converted into cash
immediately. i.e, there is a time lack between the sale of a productand the
realization of cash so, an adequate amount of working capital is required by a firm
in the form of different current assets for its activities to continue un interrupted
and to tackle the problem that may arise because of the time lay. Practically this
happens simply owing to the “operating cycle”(or) “ cash cycle”, involves the
following steps.
(a) Conversion of cash into inventory.
(b)Conversion of inventory into receivables.
(c)Conversion of receivables into cash.
NATURE OF WORKING CAPITAL:-
The term working capital refers to current assets which may be defined as
(1)Thosewhich are convertible in to cash or equivalents with in a period of
one year and
(2)Thosewhich are required to meet day operations.
This fixed assets as well as current assets, both required investment of funds. So,
the management of working capital and of fixed assets, appearently seen to involve
same type of consideration but it is not so. The management of capital involves
different concepts and methodology than the techniques used in fixed assets
management. The reason for this different is obvious. The very basics of fixed
assets decision process (i.e the capital budgeting ) and the working capital decision
process are different. The fixed assets involve long period perspective and
therefore, the conceptof time value of money is applied where as in working
capital the time horizon is limited, in general, to one year only and the time value
of money conceptis not considered. The fixed assets the long term profitability of
the while the current assets affect the short term liquidity position. Managing
current assets may require more attention than managing fixed assets. The financial
manager must.

Therefore continuously monitor the assets to ensure that the desire levels are
being maintained. Since the amount of money invested in current assets can change
rapidly. So does the financing required. Mis management of current assets can be
costly. Too large an investment in current means tying up funds that can be
productively used else where (or it means added interest costif the firm has
borrowed funds to finance the investment in current assets). Excess investment
may also exposethe firm to undue risk eg. In case, the inventory cannot be sold or
the receivable cannot be collected.
On the other hand, too little investment also can be expensive for ex:-
insufficient inventory may mean that sales are lost as the goods which a customer
wants are not available. The results is that financial managers spend a large chunk
of their time managing the current assets becauselevel of these assets changes
quickly and a lack of attention paid to them may result in appreciably lower profits
for firm. So, in the working capital management, a financial manager is faced with
a decisions involving some consideration as follows:
1. what should be the total investment in working capital of the firm?
2. What should be the level of individual current assets?
3. What should be the relative proportion of different sources to financial
the working capital requirements?
Thus the working capital management may be defined as the management of
firm’s sources and uses of working capital in order to maximize the wealth of the
share holders. The proper working capital management requires both the medium
term planning (say up to 3 years) and the immediate to changes arising due to
fluctuation in operating levels of the firm.

THE OPERTINGCYCLE AND THE WORKING CAPITAL NEEDS:-
The working capital requirement of a firm depends, to a great extent up on
the operating cycle of the firm. The operating cycle may defined as the duration
from the procurement of goods orraw materials and ending with sales realization.
The length and nature of the operating cycle may differ from one firm to another
depending up or the size and nature of the firm.
In a treading concern there is a serious of activities starting from
procurement of goods ending with realization of sales revenue. Similarly in case
manufacturing concern. This serious start form procurement of raw material and
ending with the sales realization of finished foods. In both the cases however there
is a time gap between the happening of the first event and the happening of last
event . this time gap is called operating cycle. Thus the operating cycle of a firm
consists of time required for the completion of chronological sequence of some or
all of the following.
1. Procurement of raw material and services
2. Conversion of raw material in the work in progress.
3. Conversion of work in progress in to finished goods.
4. Sales of finished goods. (cashor credit).
5. Conversion of receivable into cash.
The firm is after required to extend credit facilities to customers. The finished
goods must be kept in store to take care of the orders and minimum cash balance
must be maintained. It must also have minimum of raw material to have smooth
and uninterrupted productionprocess. So in order to have a properand smooth
running of the business activities, the firm must make investment in all these
current assets. This requirement of funds depend up on the operating cycle period
of the fiem and also denoted as the working capital needs of the firm.

OPERATING CYCLE PERIOD:-
The length or time duration of the operating cycle of any firm can be
defined as the sum of it’s inventory conversion period and the receivable
conversion period.
(1)INVENTORY CONVERSION PERIOD:-
It is the time required for the conversion of raw material in to finished
goods sales. In a manufacturing concernthe ICP is consisting of raw materials
conversion period(RMCP), work in progress conversion period (WPCP), and the
finished goods conversion period (FGCP). The RMCP refers to the period for
which the raw material is generally kept in store before is issued to the production
department. The WPCP refers to the period for which the raw material remain in
the production process beforeit is taken out as a finished unit. The FGCP refers to
the period for which finished units remain in stores before being sold to the
customers.
(3)RECEIVABLES CONVERSIONPERIOD:(RCP)
It is the time required to convert the credit sales in to cash realization. It refers
to the period between the occurrence of credit sales and collection of debtors.
The total of ICP and RCP is also known as total operating cycle period
(TOCP). The firm might be getting some credit facilities from the supplier of raw
material wag earners etc. this period for which the payment it these parties are
deferred or delayed is known as deferral period. The net operating cycle of a firm
is arrived at by deducting the deferral period from total operating cycle period.
Thus
NOC = TOCP-D = ICP+RCP-DP.

OPERATING CYCLE
The duration of time required for completing the following sequencies of events
in case of manufacturing firm s called the operating cycle.
1. Conversion of cash into raw material.
2. Convertion of raw material into work in progress.
3. Conversion of work inprogress into finished goods.
4. Conversion of finished goods into debtors & bills receivable through sale.
5. Conversion of debtors & bills receivable into cash.
CASH
ACCOUNTS
RECIEVABLE
RAW MATERIAL
FINISHED GOODS WORK IN
PROGRESS
The duration of the operating cycle for the purposeof estimating working capital
requirement is equalant to the sum of duration of each of these tables less the credit
period allowed by the suppliers of the firm.

TYPES OF WORKING CAPITAL
1. NET WORKING CAPITAL:
The net working capital is the different between current assets and current
liabilities. The conceptof net working capital enables a firm to determine how
much amount is left for operational requirements.
2. GROSS WORKING CAPITAL:
Gross working capital is the amount of funds invested in the various components
of current assets.
3. PERMANENTWORKING CAPITAL:
Permanent working capital is the minimum amount of current assets
which is needed to conducta business even during the dullest season of the year.
The amount varies from year to year depending up on the growth of the company
and stage of business cycle in which it operates. It is the amount of funds required
to producegoods and services which are necessary to satisfy demand at a particular
point.
4. TEMPORARYOR VARIABLE WORKING CAPITAL:
It is represents the additional assets which are required at different
times during the operating year additional inventory, extra cash etc., seasonal
working capital is the additional amount of current assets particularly cash,
receivables and inventory which is required during the more active business
seasons of the year.
5. BALANCE SHEET WORKING CAPITAl:
The balance sheet working capital is one which calculated from the items
appearing in the balance sheet. Gross working capital which is represented by the
excess of current assets, and net working capital which is represented by the excess
of current assets over current liabilities are examples of balance sheet working
capital.

6. CASH WORKING CAPITAl:
Cash working capital is one which is calculated from the appearing in the
profit and loss account. It shows the real flow of money or value at a particular
time and is considered to be the most realistic approachin working capital
management. It is the basis of the operating cycle conceptwhich has assumed a
great importance in financial management in recent years. The reason is the
working capital indicates the adequacy of the cash flow. Which is an essential pre-
requisite of a business.
7. NEGATIVE WORKING capital:
Numbers working capital emerges when current liabilities exceed current
assets. Such a situation is not absolutely theoretical, and occurs when a firm is
nearing a crisis of some magnitude.
49 DETERMINANTSOF WORKING CAPITAL:-
Numbers of rules are formulated to determine the working capital
requirement of the firm. a large number of factors influence the working capital
needs of the firm. All these factors have different importance, also the importance
of the factor change for a firm over time. Therefore analysis of the relevant factor
should be made in order to determine the total investment in working capital
requirements of the firm.
1. Nature and size of business
2. Seasonality of operation
3. Production policy
4. Marketing conditions

5. Business cycle fluctuation
6. Credit policy
7. Conditions of supply
8. Working capital policy
9. Current assets in relation to sales
NATURE OF BUSINESS:-
The working capital requirement of a firm is closing related to the nature
of its business. A service firm like an electricity. A service firm like an electricity
undertaking of a transport corporation, which has short operating cycle and sells on
cash basis, has modest working capital requirement. On the other hand
manufacturing concernlike machine tools units which has long operating cycle and
which sells largely on credit had varied substantial working capital management.
SEASONALITY OF OPERATION:-
Firms which have market seasonally in their operation usually have highly
function working capital requirement. Fora sugar industry the raw material i.e.,
sugar cane is available in particular seasononly. So sugar industry mainly depends
upon seasonality of operations.
PRODUCTION POLICY
A firm marked by pronounced seasonal fluctuations in its sales many pursue
a production policy which many reduce the shape variation is working capital
requirement.

MARKETING CONDITIONS:
In view of competitive conditions prevailing in the firm may have to offer
liberal credit terms, to customs resulting in higher debtors, even large inventories
many be maintain to serve an order as and when received. Thus the working capital
tends to be high as a result of investors in inventions & receivable.

BUSINESS CYCLE FLUCTUATIONS:-
Different phases of business cycle i.e boom, recession, recovery etc,
also effect working capital requirement. In case of born conditions inflationary
pressure appear and business activities expand. As a result the overall need for
cash , inventories etc., increase resulting more and more funds blocked in these
current assets. In caseof recession period. How ever, there is usually dullness in
business activities and there will be opposite effect on the level of working capital.
CREDIT POLICY:-
The credit policy means the totality of terms and conditions on which goods
are sold and purchased. At firm has interact with 2 types of credit policies at a time
one, the credit policy of the supplier of raw material, goods etc, and two the credit
policy relating to credit which it octends to its customer. In both the cases,
however ,the firm while deciding its credit policy has to take care of credit policy
of the market for example affirm might be purchasing goods and services on credit
but selling foods only for cash the working capital requirement of this firm will be
lower than that of a firm which is purchasing cash, but has to sell on credit basis.
CONDITIONSOF SUPPLY:-
If the supply is prompt and adequate the firm can manage with small
inventory, if the supply is unpredicted and service then the firm has to ensure
continuity of production.
WORKING CAPITAL POLICY:-
Two important issue in formulation the working capital policy are:
1. What should be the ratio of current assets to sales.
2. What should be the ratio of short term financing to long-term financing.
CURRENT ASSETS IN RELATION TO SALES:
It usually does the investment in current assets cannot be specified
unequally. In sales of uncertainty the outlook on current assets would consistof
base component meant to meet normal requirement and safety component mean to
copywith unusual demands and requirements. The safety assets policy of the firm .

1. If the firm pursues a very conservation current assets policy is should carry a
high level of current assets in relation to sales.
2. If the adopts a moderate current assets policy it would carry a moderate level
of current assets in relation to assets.
3. If the term follows highly aggressive current assets policy. It would carry a
low level of current assets in relation of sales.
A conservative current assets policy trends to reduce risk. The surplus current
assets under the policy enable firm to copyrather easily with variations in sales.
54&55 An aggressive current assets policy seeking to minimize the investment
in current assets exposes the firm to greater risk.
RATIO OF SHORT TERM FINANCING TO LONG TERM FINANCING:-
What would be the relative proportions of short-term bank financing on
one hand and long-term sources offinance and the other hand. The board policy
alternatives in the respect are:
1. A conservative current assets financing policy.
2. An aggressive current assets financing policy. A conservative current assets
financing policy refills less on short-term bank financing and more long on
term sources like debentures. An aggressive current financing policy relies
heavily on short-term bank finance and seek to reduce dependants on long –
term financing.
CHOOSING THE WORKING CAPITAL POLICY:-
The overall working capital policy adopted by the firm may broadly:-
1. Conservative
2. Moderate
3. Aggressive

CONSERVATIVE:
A conservative overall working capital policy means that the firm chooses
conservative current assets policy along with conservative current assets financing
policy.
MODERATE:
A moderate overall working capital policy reflects a combination of a
conservative current assets policy and aggressive current assets financing policy or
a combination of an aggressive current assets policy and conservative current
assets financing policy.
AGGRESSIVE:
An aggressive overall working capital consists of an aggressive current assets
policy and aggressive current assets financing policy.
FINANCING OF WORKING CAPITAL:-
Normally, financing arrangements are planned for a combination of needs
including capital expenditure and working capital investment the assessmentof
sources of funds from a package and rarely will be possible to conceptupto a
particular shows to a specific application or use at the same time financing
manager does make an assessment of the investment needs as well as current assets
and decider an a propermix of long and short term funds. Taking note of the
internal generation of funds for 56 &57 the period in question be decisions on the
extent to which the firm would resort to issue of share or long short-term
borrowing to mobile the required sources.
Typically the current assets of a firm are supported bythe combination of
long term and short term sources of financing long term sources of finance are
equity, preference term loans and debentures which primarily are fixed assets and
secondarily provide working capital margin.

Where the commitments are certain but cash flows are not clearly
predictable, it would wise to cut down drastically the number and extent of short
term debts to manageable levels and prefer longer maturity schedules for debts.
Short term debts can take care of the seasonal needs of the organization even
here to take care of vagaries in cash flow, a past of the funds required may be
obtained from sources with longer maturity schedules of the debts. Thus usually
permanent and long-term finance is used to finance the permanent requirements or
fixed assets and the net permanent current assets and a apart of the reasonable short
term needs.
The important sources of finance which more or less exclusively support
current assets are:
1. Trade credit
2. Working capital advances by commercial bank.
3. Public corporate deposits
4. Inter corporatedeposits
5. Short term loans from financial institutions .
6. Rights debentures for working capital.
7. Emerging sources commercial paper and factoring.
Of all the above the most significant sources of working capital finance are
trade credit and bank borrowings, after trade credit bank borrowing are the next
important sources of financing working capital requirements of firms in India.
Tanton committee has suggested guidelines for the ratio allocation and optimum
use of the bank credit for the working capital requirement.

TANDON COMMITTEE RECOMMENTIONS:-
1. The borrowers should indicate the likely demand for credit. For this purpose,
he should draw operating plans for the ensuring year and supply them
bankers. This procedure will facilitate credit planning at the bankers credit
needs in a realistic manner and the periodic follow up during the ensuring
year
2. The bankers should finance only the genuine productionneeds of the
borrower. The borrower should maintain the reasonable levels of the
investor and receivable. He should hold just enough to carry on his targets
production. Efficient management of resources should, therefore, be
ensured to eliminate slow moving and flabby inventories.
3. The working capital needs of the borrower cannot be entirely financed by
the bankers. They will finance only a reasonable part for the remaining
borrower should depend upon his own funds, generated internally and
externally.
CHORE COMMITTEE RECOMMENDATIONS:-
1. Borrowers should submit quarterly projection of cash credit banks.
2. The banks while assessing the credit requirements from borrowers should fix
separate limits where as feasible.
3. As far as possible the borrowers should be discouraged for approaching the
bank frequently limitation in excess of sanction limits.
4. Suitable provision should be made for charging of pena rate of interest in
even of any defaults in the timely repayment of working capital loan.

CHANGES IN WORKING CAPITAL:-
The working capital of a concern is subject to changes due to several
reasons. As we know that the gross working capital is equal to current assets. But
net working capital we mean the excess of current assets over current liabilities.
The net working capital is therefore, affected by the following transactions.
1. Which increase the current but not the current liabilities.
2. Which decrease the current assets and current liabilities both increase in the
same direction by a transaction it does not bring any change in the net
working capital of the concern. Only the total of current assets and current
liabilities increase and decrease.
REASONS FOR CHANGES IN WORKING CAPITAL:-
1. Changes in the level of sales and or operating expenses.
2. Policy changes.
3. Changes in the technology.

STATEMENTOF CHANGES IN WORKING CAPITAL:-
Until now any increase decrease in any individual item of current assets
and current liabilities was shown in the funds flow statement. But now a statement
is prepared to deficit the changes in working capital. The net increase or decrease
is then carried forward to the funds flow statement.
The statement of working capital is prepared with the help of current assets
and current liabilities of the two periods the figures of 2 periods are compared. If
there is an increase in the amount of any current liabilities in the current year in
comparison to that in that in the previous year, it will result to an increase in the
working capital. Similarly, a decrease in the amount of any current assets or an
increase in amount of current liabilities in the current year in comparison to that in
the previous year and total decrease in the end is compared and the different of
total increase and total decrease shows net increase or decrease in the working
capital.
Net increase in working capital is an application of funds and net decrease
in working capital in the source of funds. A form of statement is shown below.

CHAPTER-4
 ANALYSIS AND INTERPRETATION.
 CHANGES IN WORKING CAPITAL.
 RATIO ANALYSIS.

STATEMENTS OF SUDHA AGRO OIL & CHEMICAL INDUSTRIES LIMITED FOR THE
YEAR 2005-06
PARTICULARS 2005-06 PERCENTAGE
CURRENT ASSETS,
LOANS AND ADVANCES
Inventory
Sundry Debtors
Cash & Bank Balance
Other current assets
Loans and advances
623.39
52829
105.58
5837
150.77
42.51
36.02
7.19
3.38
10.30
Gross working capital
(A)
1466.40 100.00
CURRENT LIABILITIES
&PROVISION
Current liabilities
Provision
Totalcurrent liabilities
and provisions(B)
411.21
61.90
472.03
87.06
12.94
100.00
Net working capital(A-
B)
994.10

STATEMENTSOF SUDHA AGRO OIL &CHEMICAL
INDUSTRIES LIMITED FOR THE YEAR 2006-07
CURRENT ASSETS,
LOANS AND ADVANCES
Inventory
Sundry Debtors
Cash & Bank Balance
Loans and advances
706.99
543.83
154.90
54.77
71.63
46.14
35.44
10.12
3.54
4.67
(A)
1532.14 100.00
CURRENT LIABILITIES
&PROVISION
Current liabilities
Provision
and provisions(B)
423.43
88.65
512.08
82.68
17.32
100.00
B)
1020.06

STATEMENTS OF SUDHA AGRO OIL &CHEMICAL
CURRENT ASSETS,
LOANS AND ADVANCE
Inventory
Sundry Debtors
Cash & Bank Balance
Loans and advances
991.05
630.62
217.39
90.43
65.32
49.68
31.61
10.89
4.53
3.27
(A)
1994.81 100.00
CURRENT LIABILITIES
&PROVISION
Current liabilities
Provision
and provisions(B)
534.43
154.94
689.37
77.52
22.47
100.00
B)
1305.44

CURRENT ASSETS,
LOANS AND ADVANCES
Inventory
Sundry Debtors
Cash & Bank Balance
Loans and advances
1411.41
521.80
105.58
104.65
63.62
59.06
21.83
12.05
4.37
2.66
(A)
2389.59 100.00
CURRENT LIABILITIES
&PROVISION
Current liabilities
Provision
and provisions(B)
661.73
216.50
878.23
75.34
24.65
100.00
B)
1511.36

CURRENT ASSETS,
LOANS AND ADVANCES
Inventory
Sundry Debtors
Cash & Bank Balance
Loans and advances
1164.56
482.37
162.31
91.93
93.23
58.40
24.18
8.14
4.60
4.68
(A)
1994.4 100.00
CURRENT LIABILITIES
&PROVISION
Current liabilities 567.43 83.73

STATEMENTOF CHANGES IN WORKING CAPITAL OF SUDHA AGRO
OIL &CHEMICAL INDUSTRIES LIMITED FOR THE YEAR 2005-06
PARTICULERS BALANCE CHANGES IN
WORKING CAPITAL
2005 2006 INCREASE DECREASE
CURRENT ASSETS
inventories
Sundry Debtors
Cash & Bank Balance
Loans and advances
658.25
709.36
147.95
26.30
226.37
623.39
528.29
105.87
58.37
150.77
--
--
--
32.06
--
34.85
181.06
42.08
--
75.59
TOTAL (A) 1768.25 1466.71
CURRENT
LIABILITIES
Current liabilities
Provision
515.25
12.00
411.21
61.09
104.04
--
--
--
49.09
--
TOTAL (B) 527.25 472.31
Working capital
(A-B)
Increasing in
working capital
1241.00
--
994.40
246.60
--
246.60
--
--
TOTAL 1241.00 1241.00 382.70 382.70

STATEMENT OF CHANGES IN WORKING CAPITAL OF SUDHA
AGRO OIL &CHEMICAL INDUSTRIES LIMITED FOR THE YEAR
2006-07
WORKING CAPITAL
CURRENT ASSETS
inventories
Sundry Debtors
Cash & Bank Balance
Loans and advances
623.39
528.29
105.87
58.37
150.77
706.99
543.83
154.90
54.77
71.63
83.60
15.53
49.03
--
--
--
--
--
3.59
79.14
TOTAL (A) 1466.71 1532.14
CURRENT
LIABILITIES
Current liabilities
Provision
411.21
61.09
423.23
88.65
--
--
--
12.21
27.55
--
TOTAL (B) 472.31 512.08
Working capital
(A-B)
Increasing in
working capital
994.40
25.65
1020.05
--
--
--
--
25.65
TOTAL 1020.05 102.05 148.16 148.16

2007-08
WORKING CAPITAL
CURRENT ASSETS
inventories
Sundry Debtors
Cash & Bank Balance
Loans and advances
706.99
543.83
154.90
54.77
71.63
901.05
630.62
217.39
90.43
65.32
284.06
86.79
62.48
35.66
--
--
--
--
--
6.31
TOTAL (A) 1532.14 1994.82
CURRENT
LIABILITIES
Current liabilities
provision
423.43
88.65
575.62
154.94
--
--
--
152.19
66.29
--
TOTAL (B) 512.08 730.57
Working capital
(A-B)
Increasing in
working capital
1020.05
244.19
1264.25
--
--
--
--
244.19
TOTAL 1264.25 1264.25.00 468.99 468.99

2008-09
WORKING CAPITAL
CURRENT ASSETS
inventories
Sundry Debtors
Cash & Bank Balance
Loans and advances
991.05
630.62
217.39
90.43
65.32
1411.41
521.80
288.11
104.65
65.32
420.36
--
70.72
14.22
--
--
108.82
--
--
1.7
TOTAL (A) 1994.82 2389.59
CURRENT
LIABILITIES
Current liabilities
Provision
575.62
154.94
661.73
216.50
--
--
--
86.11
61.56
--
TOTAL (B) 730.57 878.23
Working capital
(A-B)
Increasing in
working capital
1264.25
247.11
1511.36
--
--
--
--
247.11
TOTAL 1511.36 1511.36 505.30 505.30

2009-10
WORKING CAPITAL
CURRENT ASSETS
inventories
Sundry Debtors
Cash & Bank Balance
Loans and advances
1411.41
521.80
288.12
104.65
63.62
1164.54
482.38
162.32
91.94
93.23
--
--
--
--
29.61
246.85
39.42
125.80
12.71
--
TOTAL (A) 2389.61 1994.44
CURRENT
LIABILITIES
Current liabilities
Provision
661.73
216.51
567.44
110.30
94.29
106.21
--
--
--
--
TOTAL (B) 878.24 677.74
Working capital
(A-B)
Increasing in
working capital
1511.37
--
1316.70
194.67
--
194.67
--
--
TOTAL 1511.37 1511.37 424.78 424.78

INTERPRETATION
Sudha agro chemical industries pvt ltd has a current ratio in the year
2005-06 it was 3.11 and in the year 2006-07it was 2.99 after 2007-08 it was
decreasing trend but in the year 2009-10 the ratio is 2.94 which is above the
standard ratio .
The company in the years of 2005-06 and 2006-07 as 1.61 ,
where as in the year of 2007-08 ,it was in decreased to 1.37 and in the year 2008-
09it was decreased. At last the companies overall liquidity position is not in
good
The absolute liquidity ratio of the company was not upto the mark during
all the years. From the year 2005-06,it shows an increasing trendup to next year .
In the year 2007-08 is same . During the year 2007-08 it was declined that means
it has never reached the standard of 0.5 . Thesituation is due to very small
balance of cash maintain by the firm for itsworking capital requirements. In the
year 2000-10 the firm shows an
increasing trend .
For the company efficiency is decreasing .In the year 2006-07 it is 7.29,
which is highest recorded . After that it went on decreasing to lowest of 1.64 in
2009-10. It shows that there is no proper controlover 72the inventory by the
management
The company showed a holding period return of nearly 37 days in
the year 2005-06 which is very better compare to other years .Then it is gradually
increased to 98days in 2009-10which means liquidity of inventory is not better.
The above statement showing about the details of stock at the
opening of the year and at the closing .in the year of 2008-09 there is decrease in
the stock at the end of the year .

RATIO ANALYSIS
Several ratios calculated from the accounting date, can be grouped into
various classes according to financial activity or function to be evaluated. As
stated earlier, the parties interested in financial analysis are short and short and
long-term creditors, owners and management.
“Short-term creditors” main interest is in liquidity position or the
short-term solvency of the firm. Long-term creditors, on the other hand, and more
interested in the long-term solvency and profitability of the firm. Similarly, owners
concentrate on the firm’s profitability and financial conditions. Management is
interested on in evaluating every aspect of the firm’s performance. They have to
protect the interests of all parties and see that the firm grows profitably. In view of
the requirements of the various users of ratio, we may classify them into the
following four important categories.
TYPES OF RATIO:-
 Liquidity ratios
 Leverage ratios
 Activity ratios
 Profitability ratios

Liquidity ratio:-
The liquidity refers to the maintenance of cash, bank balance and those assets,
which are easily convertible into cash in order to meet the liabilities as and when
arising. So, the ratios study the firm’s short-term solvency and its ability to pay off
the liabilities.
Current ratio:-
Current ratio is the ratio of current and current liabilities. Current assets
are assets which can be converted into cash within one year and include cash in
hand and at bank, bills receivable, net sundry debtors, stockof raw materials,
finished goods and work in progress, prepaid expenses, outstanding and occurred
incomes, and short term or temporary investments. Current liabilities are liabilities,
which are to be repaid with in a period of 1 year and include bills payable, sundry
creditors, bank over drafts, and outstanding expenses, Income received in
advanced, proposeddividend, provision for taxation, unclaimed dividends and
short term loans and advances repayable within 1 year
Current assets
Current Ratio= -----------------------------------------------
Current liabilities
A current ratio 2:1 is considered as ideal: if a business has an undertaking
with its bankers to meet its working capital requirements short notices, a current
ratio of is adequate.
2) quick Ratio:-
Quick assets
Quick ratio= --------------------------------------------------
Quick liabilities
A quick ratio of 1 is considered as ideal. A quick ratio of less than 1 is
indicated of inadequate liquidity of the business. A very high ratio is also not
available as funds can be profitability employed.

Absolute liquid ratio:-
It is ratio of absolute liquid ratio assets to quick liabilities. However, for
calculation purposes, it is taken as ratio of liquid assets of current liabilities. Trade
investment or marketable securities are equivalent of cash therefore, they may be
included in the computation of absolute liquid ratio.
Absoluteliquidratio
Absolutequick ratio= -------------------------------------------------
Current liabilities
a) Leverageratios:
leverage ratio indicate the relative interest of owners and creditors in a
business. It shows the proportions of debtand equity in financing the firm’s assets
the long- term solvency of a firm can be examined by using leverage ratio. The
long-term creditors like debenture holders, financial institutions etc,. are more
concerned with firms long –term financial strength.
There are two aspects of the long-term solvency of a firm
1) Ability to repay the principal when due, and
2) Regular payment of the interest they leverage ratio are calculated to measure
the financial rest and firms abilities of using debt.

I) TOTAL DEBT RATIO:-
Total debt will include short and long-term borrowing from financial
institution debentures bonds. Capital employed will include total debt and net
worth.
The firm may be interested in knowing the proportionof the interest bearing
debt in the capital structure by calculating total debt ratio. A highly debt burdened
firm difficulty in raising funds from creditors and owners in future. Creditors treat
the owner’s equities as a margin of safety.
Total Debt
Total Ratio = ----------------------------------------------
Capital Employed
3) DEBT -EQUITY RATIO:-
It reflects the relative claims of creditors and shareholders against the assets
of the business. Debt, usually, refers to long-term liabilities. Equity include
preference share capital and reserves.
The relationship describing the lenders contribution for each refers of the
owner’s contribution is called debt equity ratio.
A high ratio shows a large share of financing by the creditors relative to the
owner’s and therefore, large claim against the assets of the firm.
A low ratio implies a smaller claim of creditors. The equity indicates the
margin of satisfy to the creditors so, there is no doubt the Beth high and low debt
equity ratios are not desirable. What is needed is a ratio, which strikes a proper
balance between debtand equity.
Total Debt
Debt-Equity = -------------------------------------
Networth

Some financial experts opine that debt should indicate current liabilities
also. However, this is not a popular practice. In case of preference share capital, it
is treated as a part of shareholders funds, but if the preference shares are
redeemable, they are taken as a part of long-term debt shareholder funds are also
known as proprietor funds and it indicates items equity share capital, reserve, and
surplus. A debt equity ratio of 3:1 is considered ideal.
1. PROPRIETORYRATIO:-
It expresses the relation between net worth and total assets.
Net worth
Property ratio= ----------------------------------------
Total assets
Net worth= equity share capital + preference share capital + reserves –
fictitious assets.
Total assets= fixed assets + current assets (excluding fictitious assets)
Reserve earmarked specifically for a particular purposeshould not be
included in calculation of net worth.
A high proprietor’s ratio is indicative of strong financial position of the
business. The higher the ratio, the better it is.
77 4. FIXED ASSETS RATIO:-
Fixed assets
Fixed Assets = ------------------------------------------
Capitalemployed
Capital employed – equity share capital + preference share capital + reserves +
long term liabilities – fictitious assets.

This ratio indicates the mode of financing the fixed assets. A financially
well- managed company will have its fixed assets financed by long term funds.
Therefore, the fixed assets ratio should never be more than
1) A ratio of 0.67 is considered idea
INTERESTCOVERAGE RATIO:
This interest coverage ratio is computed by dividing earnings before
interests and taxed by interest charges.
Debt
Interest coverage ratio = ---------------------
Interest
This interest coverage ratio shows the number of times the interest
charges are covered by funds that are or demurely available for their payment. A
high ratio is desirable but too high ratio indicates that the firm is very conservative
in using debt and that is not using credit to the debt advantage of shareholder. A
lower ratio indicates excessive use of debt or inefficiency operations. The firm
should make efforts to improve the operating efficiency or to retire debtto have a
comfortable coverage ratio.
iii) ACTIVITY RATIOS:-
Activity assets turnover ratio, measures the efficiency of a firm in
managing and utilizing its assets. The higher the turnover ratio, the more efficiency
the management and utilization of the assets while low turnover ratio is indicate of
under- utilization of available resources and presence idle capacity. The total assets
turnover ratio is computed by dividing sales by total assets.
Sales
78 Total assets turnover ratio = -------------------------------------
Total assets

2) WORKING CAPITAL TURNOVER RATIOS:-
Costof goods sold
Working capitalturnoverratio = -------------------------------------
Working capital
Where if costof goods sold is known. Net sales can be taken in the
numerator.
Working capital = current assets – current liabilities.
A high working capital turnover ratio indicates efficiency utilization of the
firm’s funds. However, it should not result in over trading.
3) DEBTORSTURNOVER RATIO :-
Debtor’s turnover ratio expresses the relationship between debtors and
sales. It is calculated.
Net credit sales
Debtors turnover ratio = -------------------------------------
Averagedebtors
Net credit sales inspire credit sales after adjusting for sales returns. In case
information no credit sale is not available. “sales” can be taken in the numerator.
Debtors include bills receivable. Debtors should be taken at gross value, without
adjusting provisions for bad debts. In case, average debtors be found; closing
balance of debtors should be taken in the denominator. A high debtors turn over
ratio or a low debt collection period is indicative of a sound credit management
policy. A debtors turnover collection period of 30-36 days is considered ideal.

1. DEBT COLLECTION PERIOD:-
The debt collection period measures the quality of debtors since it
indicates the speed of the collection. The shortest the average collection period
implies the prompt payment by debtors.
No. of days year
Debt collection period = -----------------------------------------
Debt collection period
An excessively long collection period implies a very liberal and inefficient
credit and collection performance. This certain delays the collection delays the
collection of each and impairs the firm’s liquidity. The average no. of days for
which debtors remain outstanding is called debtcollection period or average
collection period.
2. CREDITORSTURNOVER RATIO:-
Creditor’s turnover ratio expresses the relationship between creditor’s and
purchases.
Net credit purchase
Creditors turnover ratio = ---------------------------------------------
Averagecreditors
Net credit purchase imply credit purchase after adjusting for purchases
returns. In case information on credit purchase is not available purchase may be
taken in the numerator. Creditors include bills payable. In case avenue creditors
can’t be found, closing balance of creditors should be taken in the denominator.
The creditor’s turnover ratio is 12 or more. However, very less creditors
turnover ratio, or a high debtpayment period, may indicate the firm’s inability in
meeting its obligation in time.

3 .PAYMENT PERIOD RATIO:-
Creditors turnover rate can also be expressed in terms of number of days
by the business to pay off its debts. It is termed as debt payment period which is
calculated as:-
Numberof days in a year
Paymentperiod ratio = --------------------------------------------
Creditors turnover ratio
3. FIXED ASSETS TURNOVER RATIO:-
It is defined as
Net sales
Fixed assets turnover ratio = ---------------------------------
Fixed assets
Fixed assets imply net fixed assets i.e. after depreciation. A high fixed assets
turnover ratio indicates better utilization of the firm’s fixed assets. A ratio around 5
is considered ideal.
4. INVENTORYTURNOVER RATIO:-
Stock turnover ratio indicates the number of times the stock has turned over
into sale sin the year. It is calculated.
Cost of goods sold
Inventory turnover ratio = -------------------------------------------
Averageinventory
Costof goods sold = sales gross profit
Average stock= (opening stockand closing stock12)

In case, information regarding costgoods sold is not known. Sales may be
taken in the numerator. Similarly, if average stockcan’t be calculated, closing
stockshould be taken in the denominator.
A stockturnover ratio of ‘8’ is considered ideal. A high stock turnover ratio
indicates that the stocks are fast moving and get converted into sales quickly.
However, it may also be on account of holding low amount of stocks and
replenishing stocks in larger number of installments.
Iv) PROFITABILITYRATIO:-
It measure the overall performance and effective of the firm. Poor
operational performance may indicate poorsales and hence poorprofits. A lower
profitability may arise due to the lack of control over the expenses. Bankers,
financial institutions and other creditors look at the profitability’s. ratio as an
indicator whether or not the firm earns substantially more than it pays interest for
the use of borrowed funds and weather the ultimate repayment of their debt appear
reasonably certain owner are interest to know the profitability as it indicates the
return which they can get on this instruments.
Profitability ratio’s measure the profitability of a concern generally. They
are calculated either in relation to sales or in relation to investment.
1) NET PROFIT RATIO
It indicates the result of the overall operation of the firm.
The higher the ratio, per profitable is the business. The net profit ratio is
reassured by dividing net profit ratio indicates management efficiency in
manufacturing administration and selling the products. This ratio is the overall
firms ability to turn each rupee of sale into net profit. If the profit margin is
inadequate, the firm fails to achieve satisfactory return on share holder’s funds.
Profit after tax
Net profit ratio = ----------------------------------
Net sales

A firm with high net profit margin can make better use of favorable
conditions. Such as rising selling prices, falling costof products or increasing
demand for the product. Sucha firm will be able to accelerate its profits at a faster
rate than a firm with a low net profit margin. This ratio also indicates the firm
capacity to withstand adverse economic conditions.
3.RETURN ON NET WORTHRATIO :-
It indicates the return, which the shareholders are earning on their resources
invested in the business.
Profit after tax
Return on net worth ratio = ------------------------------------------
Net worth
Net worth = share holders funds = equity share capital + preference share
capital + Reserves – factious assets.
The higher the ratio, the better it is for the share holders. However, inter
firm comparisons should be made to ascertain if the returns from the company are
adequate. A trend analysis of the ratio over the pastfew years much is done to find
out the growth or deterioration in the profitability of the business.
2) RETURN ON ASSETS RATIO :-
Profit after tax
Return on assets ratio = ------------------------------------------
Total assets
Total assets do not include fictitious assets. The higher the ratio, the better
it is.

3) EARNINGS PER SHARE RATIO:-
Earnings per share are the net profit after tax and preferences dividend,
which is earned on the capital representative of one equity share. It calculated as :-
Profit after tax availableto equityholders
Earningsper share ratio = -----------------------------------------------------------------
Numberof ordinaryshare

ADVANTAGE OF RATIOS
 Useful of evaluation performance in terms of profitability and financial
stability.
 Useful for intra & inter firm comparison.
 Useful forecasting and budgeting.
 It is just in tabular form over a period of years indicated the trend of
business.
 Smile to understand rather than the reading but the figures of financial
statement.
 Key tool in the hand of modern financial management.
 Enable outside parties to assess the strength and weakness of the firm.
 Ratio analysis is very useful for ranking management decisions and also
highlights the performance in the area of profitability financial stability and
operational efficiency.

LIMITATIONS OF FINANCIAL RATIOS
The ratio analysis is widely used of technique to evaluate the financial position and
performance of business. But there are certain problems in using ratios.
The analyst should be aware of these problems the following are some of the
limitations of ratio analysis.
 It is difficult to decide on the proper basis of comparison.
 The comparison is rendered difficult because of differences in situations of two
companies or of one company over years.
 The price level changes make the interpretation of ratios invalid. the differences
in the definitions of items in the balance sheet and the profit & loss statement
make the interpretation of ratios difficult.
 The ratios calculated at a point of time or less informative and defective as
they suffer from short term changes.
 Difference in accounting policies and accounting period make the accounting
data of firms non comparable as also the accounting ratios.
 It is very difficult to generalize weather a particular ratio is good or bad.
For ex: a low current ratio may be said bad from the point of view of low
liquidity. But a high current ratio may not be good. As this may results from in
efficient working capital management.

LIQUIDITY RATIO
A)Current ratio
Current ratio= Current assets
Current liabilities
Year Current assets Current liabilities Ratio
2005-06 1468 472.31 3.11
2006-07 1533 512.08 2.99
2007-08 1995 730.57 2.73
2008-09 2390 878.23 2.72
2009-10 1994.4 677.73 2.94

Interpretation
The current ratio is calculated by dividing current assets with current
liabilities .it is a measure of firms short-term solvency. As conventional rules a
current ratio of 2:1 is satisfactory.
Sudha agro chemical industries pvt ltd has a current ratio in the year 2005-
06 was recorded 3.11 and in and in the year 2006-07 it was 2.99 after 2007-08 it
was in decreasing trend but during in the ratio is 2.94 which is above the standard
ratio
2.5
2.6
2.7
2.8
2.9
3
3.1
3.2
2005-06 2006-07 2007-08 2008-09 2009-10
Ratio
Series 1

B) quick Ratio:
Quick Ratio = quick Assets
Current liabilities
year Quick assets Current liabilities Ratio
2005-06 844.61 472.31 1.79
2006-07 826.01 512.8 1.61
2007-08 1003.95 730.57 1.37
2008-09 978.59 878.23 1.11
2009-10 829.84 677.73 1.22

INTERPRETATION
This ratio establishes relation between the quick assets &current liabilities.
As assets is liquid if it can be converted into cash immediately or reasonably soon
without loss of value .the accepted standard is 1:1
The quick ratio of sudha agro chemical ltd was favorable in the years of
2005-06 and 2006-07 as 1.79 and 1.61 ,where as in the years of 2007-06 ,it was in
decreased to 1.37 and in the year of 2008-09,it was decreased .At last the
company’s overall liquidity position is not in good
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
2005-06 2006-07 2007-08 2008-09 2009-10
Ratio
Ratio

C) Absolute liquid ratio
Absolute liquid ratio = cash
Current liabilities
year cash current liability Ratio
2005-06 105.58 472.31 0.22
2006-07 154.90 512.8 0.30
2007-08 217.39 730.57 0.30
2008-09 105.58 878.23 0.12
2009-10 162.31 677.73 0.24

INTREPRETATION:
The ratio establish the relation between cash and current liabilities. Cash
is the most or absolute liquid asset for any firm. The accepted standard ratio
The absolute liquidity ratio of sudha agro chemical ltd was not up to the
mark during all the years 2005-06, it shows an increasing trend up to next year.
In the year of 2007-08 is same. During the year of 2008-09 it was declined that
means it has never reached the standard of 0.5.The situation is due to very small
balance of cashmaintain by the firm for its working capital requirements. In the
year 2009-10 the firm shows an increasing trend.
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
2005-06 2006-07 2007-08 2008-09 2009-10
Ratio

2. INVENTORY TURN OVER RATIO
a) Inventory turnover ratio:
Inventory turn over ratio= costof goods sold
Average stock
year Costof goods
sold
Average stock Ratio
2005-06 2939 547.74 5.36
2006-07 3955.18 556 7.11
2007-08 5207.7 704 7.39
2008-09 7034.89 1023.21 6.88
2009-10 1812.89 1101.72 1.64

INTERPRETATION:
The ratio indicates the efficiency of the firm in selling its productit is
calculated by dividing the costof goods sold with average inventory.
Forsudha agro chemicals limited ,the efficiency is decreasing .in the year of
2006-08.it is 7.39 ,which is highest recorded. After that it went on decreasing to
lowest of 1.64 in 2009-10. It shows that is no proper controlover the inventory by
the management
0
1
2
3
4
5
6
7
8
2005-06 2006-07 2007-08 2008-09 2009-10
Ratio
Ratio

HOLDING PERIOD RETURN:
Holding period = 365
ITR
Year Number of days
in Number of
days in year
Inventory
turnover ratio
Holding period
return
2005-06 365 5.36 68.09
2006-07 365 7.11 51.33
2007-08 365 7.39 49.39
2008-09 365 6.88 53.05
2009-10 365 1.31 222.56

INTERPRETATION:
The ratio indicates the speed with which the stockor inventory gets
converted in to cash i.e., sales the lower the period , the better liquidity of the
inventory.
Sudha agro chemicals limited showed a holding period return of nearly
Sudha agro chemicals limited showed a holding period return of nearly 37 days in
the year of 2005-06 , which is very better compare to other years then it is
gradually increased to 98days in 2009-10 which means the liquidity of inventory
is not better.
0
50
100
150
200
250
2005-06 2006-07 2007-08 2008-09 2009-10
Holding period return
Holding period return

C) Statement showing changes in stock atthe end of the year
year Opening stock Closing stock Increase/decrease
2005-06 623.39 707 83.61
2006-07 707 991.05 284.06
2007-08 991.05 141141 420.35
2008-09 1411.41 1164.56 246.85
2009-10 1164.56 1316.70 152.13

INTREPRETATION:
The above statement showing about the details of stock at the opening of the
year at the closing .in the year of 2005-06 there is decrease in the end of the of the
year.
0
50
100
150
200
250
300
350
400
450
2005-06 2006-07 2007-08 2008-09 2009-10
Increase/decrease
Increase/decrease

3.RECEIVABLE MANAGEMENT .
a) Debtors turnover ratio:
DTR= sales
Average debtor
Year sales Average
debtors
ratio
2005-06 5214.83 271.91 13.93
2006-07 3680.32 264.14 19.17
2007-08 6553.88 315.31 20.78
2008-09 8746.55 260.90 33.52
2009-10 6497.69 241.18 26.94

INTREPRATATION:
Book debts are expected to be converted in to cash over a short period and
therefore are included in current assets .the liquidity position of the firm depends
on the quality of a great extent.
The ratio indicated the number of items on an average that the turn over
takes place each year .generally the ratio the more efficient is the management of
credit .
Sudha agro limited ,maintain a good ratio of 33.52 in the year 2008-09 it
was decreased to 13.93 in the year of 2005-06 ,which not good compared to all the
previous years.
0
5
10
15
20
25
30
35
40
2005-06 2006-07 2007-08 2008-09 2009-10
ratio
ratio

b)Average collectionperiod:
ACP = 365
Debtor turnover ratio
Year No. of days Dtr period
2005-06 365 13.91 26.25
2006-07 365 19.17 19.04
2007-08 365 20.78 17.56
2008-09 365 33.52 10.88
2009-10 365 26.94 13.54

INTREPRETATION:
The ratio indicates the period in which debt can be recovered. From the
above table in the year 2005-06are 26.25 which is good, where it was decreased in
the year 2008-09 ,which is not good.
0
5
10
15
20
25
30
2005-06 2006-07 2007-08 2008-09 2009-10
period
period

CHAPTER-5
o FINDINGS & SUGGESSIONS
o REFERECE & BIBLIOGRAPHY

FINDINGS
 With reference to the working capital study of SUDHA AGRO OIL AND
CHEMICALS quantity of working capital is contributed by short source of
finance
 In this gross working capital of the firm, a major part is occupied by
inventory and sundry debtors.
 The current ratio is maintained by the company is 2:1; the company exceed
minimum current ratio at all the years statement.
 The quick asset ratio minimally maintained by the company are 1:1 , the
company was satisfy this position up to 2010.
 The absolute liquid ratio is not satisfied position fluctuations are take place it
is high and some at the years 2007 to 2008.
 Inventory turn ratio is well in satisfied position it is high at 2007-08. It is
very poorat the current year of the study that is 1.64.
 In the debtorturn over ratio is also at well satisfied position it is highly
obtain at the year of 2008-09. The current position is less than that of
previous year that is 26.94.
 Average collection period high is at the 2006 and is poorat 2009.
 In order to achieve to the goals of the organization as whole and
achievement of performance appraisal technique is very useful .
 The company has been maintaining sufficient amount of working capital in
all the years

SUGGESTIONS
1) suggested the company should follow the present working capital.
2) The company spends reasonable amount on inventory so that it should be
followed.
3) The current ratio is maintained at a satisfied level. So that company peruses
this much of current assets to meet the objective of the firm.
4) Company is maintaining high quick assets to overcome current liabilities for
better results.
5) For better results company has to maintain cash inflows to overcome current
liabilities of the firm.
6) To gain good profits company has to improve the sales through inventory
management.
7) The company b should try to reduce external liabilities, having pay high EPS
& DPS.
8) The company should make arrangement of receivables and cash.

CONCLUSION
Working capital management analysis is an in depth analysis .,overages the
entire financial management the with refers to integrated. The SUDHAAGRO OIL
AND CHEMICALS is company, which give preference to the common mans
privilege. Hence ,it is on integrated approachand constant measure may be
adopted for better managerial performance. working capital analysis itd criteria is
distinctive work while and commendable technique in postulating the financial
behavior of business enterprise.
Thus, working capital management which integrated ,internal, intermediate,
and organization based financial and analytical measurement the study always a
strategic measurement with reference in performance ,growth expansion and
modernization of the business

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