This document discusses a study on working capital management at Sudha Agro Oil and Chemical Industries Limited in Samalkota, India. It provides background on the oil and chemical industry in India and the company. The methodology, objectives, and limitations of the study are described. The document outlines the various chapters that will analyze the company's working capital management based on its financial statements over the last 5 years. It aims to assess the company's financial position, profitability, and viability through financial ratio analysis and interpretation.
20. I am greatly indebted to many people for mailing the present study possible and I shall be failing in my duty if I don’t acknowledge
21. the help and guidance extended to me by each of them.
22. 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 & chemical limited ,samalkot
23. I take this opportunity to express my deep sense of gratitude to Mr. Rajendra lecturer of krishnam raju college of post graduate studies, gollakoderu, for his valuable guidance in sharing his knowledge and expertise was a pillar of support in bringing this project in such an elegant form.
24. I am especially thankful to S. MEERA executive in FINANCE DEPARTMENT for accepting to be for my representing for doing project in SUDHA AGRO OIL &CHEMECAL INDUSTRIES LTD
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26. The second chapter discuss the need of the study, the methodology used and limitation thereof.
40. To interpret the financial position of company of is appropriate (or) not.
41. 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.
42. To provide reliable financial information about economic resources and obligation of a business enterprise.
43. To provide reliable financial information those add ,it’s in estimating the potential of the enterprise.
53. 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.
54. NAME OF THE PLANTINSTALL ED TPDCAPACITYTPADATE OF COMMENCEMENT OF PRODUCTION Solvent extraction plant 15045,000May 1983Hydrogenation plant5015,000May 1986Chemical refinery4012,000Feb 1994Fatty acids plant 4012,000Sep 1994Glycerin2600April 1996Physical refinery206,000June 1996Oxygen booting16675,00,000Feb 1997Power plant41,800Dec 2000
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56. 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.
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58. 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.
59. Dealing with financial institution and banks as on 31st august, 1997 is given in the following table.
61. 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 took job 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 account the company declared dividend of 15% on its equity on proportionate basis.
63. 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.
64. Out of the 100Mt of rice bran oil around 15tones per day available from the solvent extraction plant of the company.
65. 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 .
71. 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
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73. 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 case of boiled rice bran rebate of premium is considered on the basis of 19% oil content .
74. 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.
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76. In the case of boiled bran the F.F.A content in it will be around 4% to 7% if it is processed with in 3 days from the day of production by the rice mills. By F.F.A content in rice bran increased to maximum 60% if they are stored beyond 10 days . the advantage of low F.F oil
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78. 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.
79. The hexane recovered by condensation process is recalculated for use in the extraction bed.
119. The bankers should finance only the genuine production needs 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.
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121. The banks while assessing the credit requirements from borrowers should fix separate limits where as feasible.
122. As far as possible the borrowers should be discouraged for approaching the bank frequently limitation in excess of sanction limits.
132. Regular payment of the interest they leverage ratio are calculated to measure the financial rest and firms abilities of using debt.
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136. The comparison is rendered difficult because of differences in situations of two companies or of one company over years.
137. 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.
138. The ratios calculated at a point of time or less informative and defective as they suffer from short term changes.
139. Difference in accounting policies and accounting period make the accounting data of firms non comparable as also the accounting ratios.
140. It is very difficult to generalize weather a particular ratio is good or bad.
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143. yearCost of goods soldAverage stockRatio2005-062939547.745.362006-073955.185567.112007-085207.77047.392008-097034.891023.216.882009-101812.891101.721.64
147. The ratio indicates the efficiency of the firm in selling its product it is calculated by dividing the cost of goods sold with average inventory.
148. For sudha 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 control over the inventory by the management
152. YearNumber of days in Number of days in yearInventory turnover ratioHolding period return2005-063655.3668.092006-073657.1151.332007-083657.3949.392008-093656.8853.052009-103651.31222.56
154. The ratio indicates the speed with which the stock or inventory gets converted in to cash i.e., sales the lower the period , the better liquidity of the inventory.
155. 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.
156. C) Statement showing changes in stock at the end of the year
160. 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.
170. 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.
171. 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 .
172. 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.
178. 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.
182. In this gross working capital of the firm, a major part is occupied by inventory and sundry debtors.
183. The current ratio is maintained by the company is 2:1; the company exceed minimum current ratio at all the years statement.
184. The quick asset ratio minimally maintained by the company are 1:1 , the company was satisfy this position up to 2010.
185. The absolute liquid ratio is not satisfied position fluctuations are take place it is high and some at the years 2007 to 2008.
186. Inventory turn ratio is well in satisfied position it is high at 2007-08. It is very poor at the current year of the study that is 1.64.
187. In the debtor turn 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.
189. In order to achieve to the goals of the organization as whole and achievement of performance appraisal technique is very useful .
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191. The company spends reasonable amount on inventory so that it should be followed.
192. 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.
193. Company is maintaining high quick assets to overcome current liabilities for better results.
194. For better results company has to maintain cash inflows to overcome current liabilities of the firm.
195. To gain good profits company has to improve the sales through inventory management.
196. The company b should try to reduce external liabilities, having pay high EPS & DPS.
197. The company should make arrangement of receivables and cash. <br />CONCLUSION<br />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 approach