Working Capital Project PMAI FInal - Copy

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“A Study of Working Capital Management”
For
SUNFRESH AGRO INDUSTRIES PRIVATE LIMITED.
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SANJIVANI RURAL EDUCATION SOCITY’S COLLEGE
OF ENGINEERING, DEPARTMENT OF MBA,
KOPARGAON
2015 – 2016

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SANJIVANI RURAL EDUCATION SOCIETY’S,
COLLEGE OF ENGINEERING,
DEPT. OF MBA
Certificate
This is to certify that Mr./Ms.______________________
has submitted a summer project on
“___________(Title)_______________”to Savitribai Phule Pune
University, Pune for the partial fulfillment of Master in Business
Administration (M.B.A.).
We further certify that to the best of our knowledge and belief, the
matter presented in this project has not been submitted to any other
Degree or Diploma course.
(Prof.V.M.Tidke) Dr. B. M. Londhe
Internal Guide Head of Department
External Examiner

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ACKNOWLEDGEMENT
Good opportunities are rare &
a wise person will never let one go by.
I think this is a good opportunity for me to thank those nice and wonderful people who
have helped me a lot in my second semester project work of FINANCE.
Our hard work never shines if we do not convey our heartfelt gratitude to those people
from whom we have got considerable support and encouragement during this project.
First of all I’m thankful to my college and the H.O.D. of our department Dr.
LONDE B.M to give me an opportunity to represent my ability.
I especially would like to thank for their active involvement in this project work.
I would like to thank my project guide Prof. TIDKE V. M for his motivation of
support during this project work. He has provided me a new direction to work.
I would like to thank all my friends who have directly or indirectly helped me.
And, at last I only want to mention that I have searched for better ways to do the
things and hope for the best.
DATE-
PLACE-KOPERGAON Mr.-Somase Vishal Vijay
MBA 2015-2016 (finance).

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DECLARATION
I the undersigned hereby declares that, the project titled “A Study of Working
Capital Management”is a genuine and bonfite work prepared by me under the
guidance of Prof.V.M TIDKE.
The empirical findings in this project report are based on the data collected by
myself. The matter presented in this report is not copied from any source. I
understand that any copy is liable to the punishment in the way university
authority dean fit.
The work has not been submitted for any degree or diploma either to University
of pune, or any other university.
This project report is report is submitted to the university of in the partial
fulfillment of the degree of Master of Business Administration.
Place: Kopargaon SIGNATURE
Date:

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EXECUTIVE SUMMARY
The present summer training report concerns project on study of ‘ Capital
Management’ of ‘Prabhat Milk & Agro Industries Pvt.ltd’ sister concern
sunfresh Agro& Industries Pvt.ltd Shrirampur’. It is one of the famous name in
the dairy product line. This company is established in July 1999. At Tilknagar, Tal.
Rahata, Dist. Ahmednagar.
“Working capital is the money and asset that a business use to finance the
day- to – day operation that produce the goods or service supplied to
customers”.
For any manufacturing industry management of working capital is an important
issue. It is the relationship between Current Asset and Current Liabilities. It is
important because it affect the level of inventory. To achieve the optimum level
of working capital is a crucial task.
The above topic is selected to study the efficiency of the management
of the company in managing current asset and current liability of the company
which are to be maintained for the proper day –to-day working of the company.
A firm use long term and short term source for managing the working
capital it includes, Issue of shares, Debentures, Long term loan, Bank credit,
Trade credit, Discounting Bill, Hire Purchase, etc.
In this project analysis is done by using primary data and secondary data. and
discussion with various staff member in the organization and use projected
balance sheet and other general data.

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INDEX
Chapter
No.
Chapter Name Page No.
Preface
Executive Summary
1. Introduction
2. Industry Profile
3. Profile of the organization
4. Product Profile
5. Objective of Study
6. Research Methodology
7. Theoretical Backgrounds
8. Data Analysis & Interpretation
9. Findings
10. Conclusion
11. Recommendations& Suggestions
12. Learning through the Project.
13. Bibliography
Annexure

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PREFACE
The MBA programmed is well structured and integrated course of business studies.
The main objective of practical training at BBA level is to develop skill in student by
supplement to theoretical study of business management. In general, Industrial training
helps to gain real life knowledge about the industrial environment and business
practices. The MBA programmed provides student with as an exposure to strategic
thinking of management.
In every professional course, training is an important factor. Professors give us
theoretical knowledge of various subjects in the college but we are practically exposed
to such subjects when we get the training in the organization. By this project I learnt
how an organization works with various departmental operations.
During this whole Project, I got a lot of experience and came to know about the
managerial practices in reality and how a theoretical knowledge and the practicality
work together even in life.
In today’s globalize world, where a cutthroat competition is prevailing in the market,
theoretical knowledge is not sufficient. Beside this one needs to have practical
knowledge, which would help an individual in his/her carrier activities and it is true
that “Experience is the best teacher”.
“For me presenting this project is like a voyage in the corporate ocean.”

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Introduction
India is the world’s largest producer of dairy products by volume, accounting for more
than 13% of world’s total milk production, and it also has the world’s largest dairy
herd. As the country consumes almost all of its own milk production, India was
neither an active importer nor an exporter of dairy products prior to year 2000.
However, since the implementation of Operation Flood Programme, the situation
changed significantly and imports of dairy products reduced to very small quantities.
From 2001, India has become a net exporter of dairy products and after 2003 India’s
dairy import has dipped while exports have increased at a fast rate. Yet the country’s
share in global dairy trade still remains at minor levels of 0.3 and 0.4 percent for
exports and imports respectively. This is due to the direct consumption of liquid milk
by the producer households as well as the demand for processed dairy products that
has increased with the growth of income levels, which have left little dairy surpluses
for export.
Nevertheless, India consistently exports specialty products such as casein for food
processing or pharmaceuticals. The Indian dairy sector is also different from other
dairy producing countries as India places its emphasis on both cattle and buffalo milk.
In 2010, the government and the National Dairy Development Board have drawn up a
National Dairy Plan (NDP) that proposes to nearly double India’s milk production by
2020. This plan will endeavour to increase the country’s milk productivity, improve
access to quality feeds and improve farmer access to the organised market. These
goals will be achieved through activities that focus on increasing cooperative
membership and growing the network of milk collection facilities throughout India.
The Indian dairy sector is also different from other dairy producing countries as India
places its emphasis on both cattle and buffalo milk. In 2010, the government and the
National Dairy Development Board have drawn up a National Dairy Plan (NDP) that
proposes to nearly double India’s milk production by 2020. This plan will endeavour
to increase the country’s milk productivity, improve access to quality feeds and
improve farmer access to the organised market. These goals will be achieved through

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activities that focus on increasing cooperative membership and growing the network
of milk collection facilities throughout India.
India is the world’s largest producer of dairy products by volume and has the
world’s largest dairy herd. The country accounts for more than 13% of world’s total
milk production and is also the world’s largest consumer of dairy products, consuming
almost all of its own milk production. Dairying has been regarded as one of the
activities that could contribute to alleviating the poverty and unemployment especially
in the drought prone and rain fed areas. In India, about three fourth of the population
live in rural areas and about 38% of them are poor.
Therefore among these people, as well as the large vegetarian segment of the
country’s population, dairy products provide a critical source of nutrition and animal
protein to millions of people in India.
Prior to year 2000, India was not noticed by most international dairy companies, as the
country was neither an active importer nor an exporter of dairy products. Although
India has imported some milk powder and butter oils as aid between 1970 and 1990,
exports from India were insignificantly small and it was not until 2000 onwards, when
Indian dairy products started having more presence in global markets.
Dairy Cooperatives account for the major share of processed liquid milk marketed in
the India. Milk is processed and marketed by 170 Milk Producers’ Cooperative
Unions, which federate into 15 State Cooperative Milk Marketing Federations. Over
the years, several brands have been created by cooperatives like Amul (GCMMF),
Vijaya (AP), Verka (Punjab), Saras (Rajasthan). Nandini (Karnataka), Milma (Kerala)
and Gokul (Kolhapur
Milk production in India has developed significantly in the past few decades from
a low volume of 17 million tons in 1951 to 110 million tonnes in 2009. Currently, the
Indian dairy market is growing at an annual rate of 7%. Despite the increase in
production, a demand supply gap has become imminent in the dairy industry due to
the changing consumption habits, dynamic demographic patterns, and the rapid
urbanization of rural India. This means that there is an urgent need for the growth rate
of the dairy sector to match the rapidly growing Indian economy.

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Below are some key statistics for India’s dairy industry:
Key Statistics: Annual Milk Production(2014-15) 108.5 Million Tonnes
Annual Export Volume (2014-15) 70,790 Tonnes
Share of world dairy production (2010)7 15%
Share of worldtrade in dairy products (2013-14) 0.3%
Milking herd size 9 115.5 million
Number of milk producers’ cooperative unions 170
Number of local dairy cooperatives 96,000
Number of state cooperatives 10 15
Per capita consumption (Drinking milk) 11 250g/day
Estimated percentage of dairy farmers in
organised sector 12
40‐50%
% of dairy produce consumed by unorganized
sector 13
65%
Dairy industry workforce 14 75 million women/ 15 million men

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Profile Of Firm :-
Established in the year 1998 by honorable founder Mr Sarang Nirmal, the
administration is looked after by three dedicated family directors Mr. Kishor Nirmal,
Mr. Arvind Nirmal and Mr. Vivek Nirmal.
The routine operational affairs are managed by experienced professionals from the
food industry in the area. The best team for Sales and marketing makes it easier for
the customers to get their favorites ‘Prabhat’ product in their area. This is supported
by the world-class E.R.P. software’s and ‘state-of-the-art’ infrastructure for processing
of various food products.
The company mainly caters to the domestic market and now is looking forward for
exports for its quality ready products and ingredients. The company has got all the
necessary quality certifications like ISI, FPO, AGMARK and ISO 22000 and HACCP.
PRABHAT’ an ISO 22000 & HACCP Certified is a group of industries engaged
mainly into Agri procurement, food processing and distribution activities since a
decade. Dairy business being the main stream, Fruit processing and Soybean
processing business is also growing on a faster pace.
Located in the Agri rich belt of Ahmednagar and near Holy land of Shri Shirdi
Saibaba, ‘Prabhat’ today collects the Agri produce from thousands of farmers
providing them sustainable source of income. Besides, we also provide Financial
Assistance, Farm inputs, Veterinary assistance to farmers, helping them to get better
realization for their produce.

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PRABAHT LOGO
“BEYOND THE SKY LIMITS”
The core idea behind the logo was to show growth, freedom & achievement of
impossible tasks in a calm manner without breaking our confidence and loss of temper
in any harsh condition.
The logo colors used are Sky Blue and Orange.
Blue:
A natural color from the blue of sky and universal color. Cool and Calm. It is
often associated with intelligence, stability, unity, and conservatism. It conveys our
achievements and the quality to remain calm in any condition and adversity, to
overcome it with intelligence and confidence.
Orange:
A power colour. It is one of the healing colours. It conveys enthusiasm and
creativity. Orange means vitality with endurance. It is a symbol of thoughtful and
sincere trait. Curiosity is a driving characteristic of orange, and with it comes
exploration of new things which is our main growth driver.
Pigeons:
It's a symbol of harmony, trust, love, happiness and probably inner peace. The
two pigeons here communicate the same meaning also it shows our never ending
curiosity and exploration of new things which can change meaning of an entire living.
The big pigeon guides the small pigeon after him showing the way of growth and care
which we do for all our employees.
Prabhat:
A simple font used, which communicates our belief in simplicity and harmony.
The logo has been developed to convey the messages of our never ending curiosity to
explore and create standards for better living. Freedom to work. Face the problems in
calm manner without losing temper and confidence. Our vast ambition like sky, in
business to grow bigger in a subtle and simple way through paths of honesty,
commitment and truth.

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BORAD OF DIRECTOR:
BORAD OF DIRECTOR & ADVISORS.
No. Name Post
1 Mr. Sarangdhar R. Nirmal Chairman Managing Director
2 Mr. Kishor R. Nirmal Whole- Time Director
3 Mr. Arvind J. Nirmal Whole- Time Director
4 Mr.Vivek S. Nirmal Chief Executive Officer
5 Mr. P.R. Jagdhane Advisor
6 Mr. Manoj Kulkarni Tax Advisor

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Organization structure:-
BOARD OF
DIRECTORS
SALES &
MARKTING
HR &
LEGAL
OPERATION PURCHASE FINANCE &
ACCOUNT
EXECUTIVE EXECUTIVE
GM/DGM
SENIOUR
EXECUTIVE
AGM
SENIOUR
EXECUTIVE
SENIOUR
EXECUTIVE
EXECUTIVE EXECUTIVE
AGM AGM AGM AGM
SENIOUR.
EXECUTIVE
MD/CEO
SENIOUR
EXECUTIVE
ASSISTANT
EXECUTIVE
ASSISTANT ASSISTANT ASSISTANT ASSISTANT

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Business areas:-
The plant is located at ‘Nirmalnagar, Shrirampur near the environs of Holy Sai Baba
Shirdi’, DIST: - Ahemednagar of Maharasthra.
Selling area of Industries is wide. Company sales its valuable milk products world
wide. Currently available in Asia, Europe, Africa, Australia and America continent.
REGISTERED OFFICE & WORKS:-
PRABHAT GROUP OF INDUSTRIES.
At-Nirmalnagar, Post-Tilaknagar,
Tal-Rahata, Dist-Ahmednagar
State-Maharashtra. India
Contact Nos. +91-2422-265666 / 265816
Telefax-+91-265500
Email :info@prabhatfresh.org

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Present Business Activities:-
1.Dairy Business: The overall dairy operations are conducted by our
sister concern PRABHAT DAIRY PVT LTD under the flagship brand of
PRABHAT, it is largely responsible for procuring raw milk, processing
and delivery of quality milk in pouches. Also, accountable for producing
value added quality dairy products like ghee, shrikhand, paneer, khowa,
lassi, masala chaas, varieties of sweets like traditional pedha, rasgullas,
gulabjamuns, soanpapdi, chamcham etc.
2.Beverages:SUNFRESH AGRO INDUSTRIES PRIVATELIMITED, is
largely responsible for manufacturing of Flavored milk in multiplicity of
flavours range, by the name of PRABHAT which is 2nd largest selling
brand in Maharashtra. SUNFRESH AGRO INDUSTRIES PRIVATE
LIMITED is largely responsible for manufacturing fruit drinks and
Packaged Drinking water.

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DAIRY PRODUCT
1) Pasteurized Milk: Rich in Proteins and Calcium, ‘Prabhat’ Milk shares a deep
bonding with its consumers, as it is an integral part of the kitchen for various
preparations.
2) Pure Cow Ghee: Thousands of households enjoy the rich and ethnic taste of
‘Prabhat’ ghee, in their daily food giving a special place for ‘Prabhat’ in their homes
and hearts.
3) Sterilized Flavored Milk: ‘Prabhat’, the second largest player in Indian
market for Flavored Milk. Sold in 7 distinct colorful flavours, ‘Prabhat’ is a big hit
amongst kids and teenagers for its unmatched taste and qualit

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4) Prabhat chaas:-
Prabhat chaas is combination of health and taste in every sip.
Prabhat Manufactures plain and Masala Chaas. Prabhat Chaas is prepared from safe
and healthy milk processed through German Nutri Lock Technology. The active lactic
culture added in Prabhat Chaas makes it an excellent digester. It controls the acidity
level thus making you fit and active.
5)Prabhat Milk Magic:-
Prabhat’s MILK MAGIC sweetened condensed milk is homogenous uniform free
flowing viscous product obtained by condensing cow’s milk and addition of Sugar.
Sweetened condensed milk (SCM) is sold both as a finished product and as a vital
ingredient for the manufacturing of certain consumer foods (such as chocolates,
confectionaries, bakery products, etc.).
6) Prabhat Shrikhand:-
Prabhat Shrikhand is creamy and truly luscious in taste. Shrikhand is manufactured in
the state of art manufacturing facility from the whey separated from curd and further
good quality ingredients and flavours are added along with sugar.

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7) Prabhat’s Milk Magic:-
Prabhat’s Milk Magic is prepared from fresh Milk and Sugar, and packed in moisture
resistance packing material.
Prabhat is one of the few companies in India which has specially designed evaporator
and dryer to evaporate the Milk and sugar solution together
FOOD &BEVERAGES :-
1) Traditional Sweets: Launched recently, ‘Prabhat’ Soanpapdi, Rasgulla and
Gulabjamun has soon gained excellent consumer liking for its ethnic taste and best
quality, which lives to our philosophy of ‘world of health and happiness’.

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Chapter-5
Objective of Study

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OBJECTIVE OF STUDY
 To analyze the concept of Working Capital
 To find the determinants of Working Capital in Prabhat Milk and Agro Industries
Private Limited
 To studythe components of working capital in Prabhat Milk and Agro Industries
Private Limited.
 Calculation of various Ratios and analysis financial condition of the company
through Balance sheet.

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Chapter-6
Research
Methodology

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RESEARCH METHODOLOGY
Research may mean the first small step in an Endeavour to better understand
the change occurring and at times forced up on us as individuals or as a
society. Research as process involves-defining and redefining problems.
The research is said to be a good if the methodology is adopted properly. The
design and implementation is depended on data available. There are two types of
Data sources i.e. Primary data and secondary data.
Primary Data:
Primary data was collected through the personal interview, discussing and
meeting the various department heads and the concerned authorities. Preplanned
structured questionnaire was used to collect the requisite data.
Secondary Data:
Secondary data is ready made data, which have been already collected and
analyzed. It is details regarding working capital management, its process etc.
Secondary data is collected through various sources these sources are as follows,
1) The Annual reports of company.
2) Booklet of Prabhatfresh.
3) Bank Statements.
4) Website www.prabhatfresh.com

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Chapter-7
Theoretical Background of
the study

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MEANING OF WORKING CAPITAL:
The concept of working capital is very important because the term is used for
the capital needed for day-to-day operation; it’s called as circulating capital. This
capital is needed for regular business operations such as purchase of raw materials,
payment of direct and indirect expenses carry on production, investment in stock and
store, credit granted to customers, keeping balance etc.
There are two concepts of working capital; Net working capital and Gross
working capital. Net working capital is defined as the difference between current
assets and current liabilities of a business. The net concept is useful to judge financial
soundness of a firm and it is of special interest to sundry creditors and suppliers of
short-term loans and advances. It creates confidence among the creditors about the
security of their amount. Thus, Net working capital is the net current assets (difference
between current assets and current liabilities), whereas Gross working capital is the
sum of total of all current assets.

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IMPORTANCE OF WORKING CAPITAL:
Management of working capital is an extremely important area of financial
management as current assets represent more than half of the total assets of a business.
Fixed asset though essential for a business organization, does not by itself produce
revenue or income. Fixed assets act with current assets to generate revenue or income.
Therefore, working capital is necessary for utilizing the productive capacity remain
unutilized. While excess working capital leads to extra cost for want of productivity
capacity.
Working capital in business is just live blood in human body. Optimum and
appropriate movement of blood through the body is extremely necessary to continue
life. Like human blood, the proper circulation of working capital is almost necessary
to continue business. If the circulation of working capital becomes weak, the business
can hardly prosper and survive. An Enterprise should maintain optimum amount of
working capital so as to carry on all the activities smoothly. While, the determination
of optimum level of working capital involves fundamental decisions to an
organization liquidity, which in turn are influenced by a tradeoff between profitability
and Liquidity (risk). Thus, the main object of working capital management is to
arrange the needed amount of working capital at right time, from right source and for
the ways.

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NEED FOR WORKING CAPITAL
Working capital is significant because of:
1) Equate amount of working capital is being required for continuous and
2) Uninterrupted business operations.
3) It is essential to run day to day business activities.
4) Greater value of working capital is required to be invested in current
assets for the success of sale activities.
5) To increase the operational efficiency of firm.
6) To meet the short term obligation of a business enterprise
7) To maintain a financial position and goodwill of the company in
market.
Scope FOR ORGAIZATION
The management of working capital helps us to maintain the working capital at a
satisfactory level by managing the current assets and current liabilities. It also helps to
maintain proper balance between profitability, risk and liquidity of the business
significantly.
By managing the working capital, current liabilities are paid in time. If the firm makes
payment to it creditors for raw material in time, it can have the availability of raw
material regularly, which doesn’t cause any obstacles in production process. Adequate
working capital increases paying capacity of the business but the excess working
capital causes more inventory, increases the possibility of delay in realization of debts.
FOR RESARCHAER
It help to researcher understand the working capital position.
FOR SOCIETY
It creates an environment of security, confidence, and overall efficiency in a business.

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Factors Determining Working ‘Capital Requirement’
The needs & problems for every business are different but generally the following
factors must be considered while determining the requirement of working capital: -
 Credit policy
 Availability of raw material and bank credit
 Turnover of inventory
 Operating efficiency
So, the main objective of working capital management is to manage current assets and
current liabilities so that: -
 There should be full utilization of fixed assets.
 There is an increase in Debt capacity and Goodwill.
 There is the advantage of favorable opportunities.
Determinant of working capital in Prabhat Milk and Agro Industries
Private Limited.
Following are the main determinants in the working capital requirement
Product cycle time:The company is engaged in milk processing and manufacturing of
milk based product. The product cycle is of very few days, ranging from
approximately 2/3 days to 7 days max.
a) Credit policy: The company pays mainly to it’ suppliers ( the suppliers of
milk mainly) after a period of 10 to 15 days depending upon their tie up
arrangement.
b) Terms of sales: The company is getting deposit from dealer for supply of it’s
product. Normally the dealer who purchase milk and milk product pay within
10 to 15 days

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c) Seasonal demand: One of the factor for determining for working capital is the
seasonal demand for product, which is in festival season. Also there are some
periods, when the supply of milk also gets affected.
d) Manufacturing Process: The manufacturing process doesn’t take more time
for converting the milk purchased into manufacture of milk based product.
This is very important factor which is determining the working capital
requirement.
e) Cash Requirement:Many time the purchase and sale are made on cash basis
depending up on circumstances. This also is a factor which is important for
determining working capital requirement.
 Components of Working Capital
Current Asset: Current assets are those assets which are convertible into cash within
a period of one year and are those which are require to meet the day to day operation
of the business. The current asset is cash or near cash resources. These include:
 Temporary investment.
 Short- term advances.
 Prepaid expenses.
 Receivables.
 Inventory of raw materials,
 stores and spares.
 Inventory of work in progress.
 Inventory of finish goods.
 Cash at Bank.

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Current Liabilities: Current liabilities are those claims of outsider which are
expected to mature for payment within an accounting year. These include:
 Creditor for goods purchased
 Outstanding expenses
 Short- term borrowings
 Advances received against sales
 Taxes and dividends payable
 Other liabilities maturing within a year
 Components of Working capital in Prabhat Milk and Agro Ind Pvt
Ltd
Following are the major components of working capital in Prabhat Milk and
Agro Ind Pvt Ltd.
a) Raw material: The major raw material is milk.
b) Work in progress: The working in progress for the company is a very small
component of total current assets, as the production cycle is for a very short
period may be a few day.
c) Stock of finished goods: Since the products manufactured have shelf life, the
finished goods stock is very less as compared to other industries.
d) Trade credit: The Company is getting a trade credit form its supplier from to
maximum 15-20 days. Sometime it has to make cash payment for procuring
milk.
e) Debtors: Normally the debtors for Prabhat Milk and Agro Industries Private
Limited are an very lower side .Many time the company is taking advance
deposit from dealers for supply of milk and milk product.

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Sources of working capital
Short TermLong Term
f) Cash: Cash is forming one of the major or important components of the
working capital. The company sometimes has to purchase the milk by cash
payment depending upon circumstances, seasonal demand due to festivals etc.
Sources of Working Capital
1) Issue of shares 1) Bank credit
2) Long term loans 2) Trade credit
3) Private loans 3) Depreciation
funds
4) Lease finance 4) External
deposit.
5) Public deposit

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A) Long term source: It includes the following sources
 Issue of shares :
Issue of shares is one of the important sources for to fulfill the need of working
capital,but generally this sources is used for purchasing of fixed assets or long term
assets.
 Loan from financial institution :
This option is normally rules out because financial institution generally do not provide
finance for working capital. The IDBI, FCI, and ICICI these various types of financial
institution sat in each and every state for providing finance to the business concern.
But these institution do not provide finance for working capital requirement.
 Public deposit:
The next alternative is public deposit. This sources of finance is quite useful to the
company
(B) Short term sources:
Internal sources:
 Depreciation Fund :
The depreciation funds constitute important sources for working capital. Some
authorize of business finance do not accept them as a sources of funds but it is
not reasonable.

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External Deposit
 Trade Credit:
Trade credit refer to the credit that a customer gets from suppliers of goods in
the normalCourse of business. Normally the buying firm does not have to pay
cash immediately for the purchase made by them. The gap between receipt of
goods and services and payment there of provide a firm with a source of
finance i.e. Trade credit. Tread credit can be in the form of an open account or
bill payable.
 Bank Credit :
The bank credit is the primary institutional source of financing workingcapital.The
amount approved by bank for the company’s working capital is called credit limit.
Credit limit thus denote the maximum limit of finance, which the firm can raise in the
form of loan from the bank.
 Cash credit :
This type of credit is provide mainly to individuals of enterprises engaged in
manufacturing trading activities. The amount of cash credit facility to be sanctioned to
a unit is need based and the worked out as perwell-defined parameters in each bank.
The guidelines of RBI may also affect the quantum of facility in some cases. This
facility is generally granted against the security of stock of goods, bills/books debts
representing genuine sales.
 Working Capital Demand Loan :
In compliances of RBI direction, bank presently grant only small part of the fund
based working capital facilities to a borrowed by the way of running cash credit
amount, a major portion is in the form of working capital demand loan. These
arrangements are presently applicable to borrower having working capital facilities of
Rs. 10 cores or above.

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 Overdraft Facility:
Under this arrangement the borrower is allowed to withdraw the amount up to a
certain limit from his current account over and above actual credit balance. Within the
stipulated limitany number of withdrawals are permitted by the bank.
OPERATING CYCLE
The working capital requirement of a firm depends, to a great extent upon the
operating cycle of the firm, the operating cycle is defined as the time duration
starting from the procurement of goods or raw materials and ending with the sales
realization. The length and nature of the operating cycle differs from one firm to
another depending upon the size and nature of the firm.
A company's operating cycle typically consists of three primary activities:
purchasing resources, producing the product and selling the product. These
activities create fund flows that are both unsynchronized and uncertain. They are
unsynchronized because cash distribution usually takes place before cash receipts.
They are uncertain because future sales and costs, which generate the respective
receipt and disbursements, cannot be forecasted with complete accuracy.

42
 CHART FOR WORKING CAPITAL CYCLE
Cash at Bank
Purchase of Row
Material
Conversion into
finished Goods
Inventory of WIN
finished goods
Sales to
customer on
Account
Collection of
Debtors Money
The
Operating
Cycle

43
Chapter-8
Data Analysis and
Interpretation

44
DATA ANALYSIS AND INTERPRTATION
Data analysis:
Data analysis is referred to computation of certain measures along with
watching for patterns of relationship that exists among data group simply analysis can
be define as the ordering or breaking of the data in to constituent parts in order to
obtain answer to research question.
Interpretation:
After collection and analyzing the data, the researcher has to accomplish the ink of
drawing inference followed by the report writing. This has to be done very carefully
otherwise misleading conclusions may be drown.
Interpretation refers to the task of drawing inference from the collected fact after an
analytical or experimental study. In fact, it is a search for broader meaning of research
finding.
Interpretation is essential for the simple reason that the usefulness and utility of
research finding lie in proper interpretation.
RATIO ANALYSIS
THEORY:
Financial ratio indicates the financial position of the company. Ratio analysis helps to
apprise the firm in term of there profitability and efficiency of performance, either
individually or in relationto those of other firm in the same industry. The process of
appraisal is not complete until the ratios so computed can be compared with
something, as the ratios by themselves do not mean anything. Ratio analysis is one of
the techniques of planning and control available to the management.

45
The following ratios are computed.
LIQUIDITY GROUP :
a) Current ratio.
b) Liquidity ratio.
TURNOVER GROUP :
a) Working Capital Turnover Ratio :
b) Inventory Turnover Ratio.
c) Debtors Turnover Ratio.
d) Profitability Ratio.
I. Net Profit
II. Gross Profit

46
CHANGE IN WORKING CAPITAL STATEMENT
Net Working Capital
Net Working Capital = Current asset – Current Liability.
Net working capital refers to the difference between current asset and current liability.
Current liabilities are those claim of outsider which are expected to mature for
payment within an accounting year and include creditors (account payable), bill
payable, and outstanding expenses.
Net working capital can be positive or negative. A positive net working capital will
arise when current asset exceed current liabilities.

47
CHART SHOWING POSITION OF CURRENT ASSETS, CURRENT
LIABILITIES AND NET & GROSS WORKING
Statement showing changes in working capital
Particulars 2012-13 2013-14 2014-15 2015-16
A) Current Assets:
Deposit(assets) 13,29,17 1,32,917 32,917 43,423
Advances 15,61,85 18,49,540 17,53,487 49,60,425
Sundry Debtors 70,92,318 76,55,375 77,89,460 72,55,883
Cash I
n hand
37,396 2,84,761 70,337 71,271
Stock 22,62,118 18,08,654 21,71,025 20,24,322
Statuatary current assets ----- ----- 4,21,797 2,88,797
TDS ----- 36,944 10,122 94,327
A) Total Current Assets 96,80,334 1,17,68,191 1,24,29,143 1,47,38,448
B)Current liabilities
Provision 1,98,241 68,514 2,26,631 75,132
Sundry Creditors & others 38,73,571 52,08,779 21,12,747 94,72,995
Total Current Liabilities
(B)
40,71,812 52,77,293 23,39,378 95,48,127
Gross Working Capital 96,80,334 1,17,68,191 1,24,29,143 1,47,38,448
Net Working Capital
(A-B)
56,08,522 64,90,898 1,00,89,765 51,90,321

48
Interpretation:
The working capital is increase from the year 2012-13 to 2014-15up to Rs. 5608522 to
10089765. It indicates the inefficient use of Working capital in the industry. But the
year 2015-16 new working capital till less than previous year.
0
2000000
4000000
6000000
8000000
10000000
12000000
2012-13 2013-14 2014-15 2015-16
NET
WORKING…

49
A)Liquid ratio:-
Formula: -
Liquid Asset
Liquid ratio = -----------------------
Liquid Liabilities
Liquid Asset: -
= Current Asset – Inventory – Prepaid Expenses
Liquid Liabilities: -
= Current liabilities – Bank overdraft
Year Liquid Assets Liquid Liabilities Liquid Ratio
2012-13 96,80,334 40,71,812 2.37 : 1
2013-14 1,17,68,191 52,77,293 2.22 : 1
2014-15 1,24,29,143 23,39,378 5.31 : 1
2015-16 1,47,38,448 95,48,127 1.54 : 1

50
Interpretation
Liquidity ratio was in year 2012-13was 2.22 and in year of 2012-13 is 5.31. Standard
Liquidity Ratio is normally considered as 1:1
Companies Liquidity Ratio for first three year is more than one.
Overall Liquidity Ratio is Satisfactory till the year 2014-15 but there father it is
decrease in2015-16 is 1.54.The company has to maintain sufficient stock level in
factory as well as at store houses, considering the nature of product manufactured, and
hence the liquidity ratio is more than one.
0
1
2
3
4
5
6
2012-13 2013-14 2014-15 2015-16
2.37 2.22
5.31
1.54
Liquid ratio
Current Ratio

51
B)Working Capital turnover ratio
Formula:-
Net Sales
W/C Turnover Ratio =
Net Working Capital
Net working capital = Current Assets - Current liabilities.
Year Net Sales Net Working
Capital
Working capital
turnover ratio
2012-13 10,20,63,295 56,08,522 18.19 Times
2013-14 11,08,20,645 64,90,898 17.07 Times
2014-15 11,76,45,321.43 99,09,766.72 11.87 Times
2015-16 14,79,27,541.96 51,90,321 28.50 Times

52
Interpretation :
The decrease in these ratio indicates lack of utilization of working capital in the
year of 2014-15 but this year 2015-16 it is increases by28.5 times.
0
5
10
15
20
25
30
2012-13 2013-14 2014-15 2015-16
W/C turnover Ratio
W/C turnover Ratio

53
Cost of goods sold
Inventory turnover ratio = ------------------------------------
Avg. inventory during that period
C)Inventory turnover ratio:-
Formula: -
Avg. inventory = Opening Inventory + Closing Inventory / 2
Year Cost of goods
sold
Avg.
inventory
Inventory
turnover
ratio
2012-13 9,87,82,207 54,67,427.5 18.06
2013-14 10,76,46,468 20,35,386 52.89
2014-15 11,42,66,304 19,89,839.5 57.42
2015-16 1,43,50,529.13 20,97,673.5 6.84

54
Interpretation :
The ratio is showing increasing trend, there is a very good turnover of the product and
the sales are made against cash. The company is keeping minimum inventory level
since the product manufactured have a limited shelf life & mostly manufactured
against order from dealer. (the milk based product )
0
10
20
30
40
50
60
2012-13 2013-14 2014-15 2015-16
18.19
52.89
57.42
6.84
Inventory Turnovr Ratio
Inventory Turnovr Ratio

55
Gross Profit
Gross profit = ----------------- x 100
Net Sale
D)Profitability Ratio :
a) Gross Profit Ratio:-
0
0.5
1
1.5
2
2.5
3
3.5
2012-13 2013-14 2014-15 2015-16
3.21
2.8 2.87
2.49
Gross Profit Ratio
Gross Profit Ratio
Year Gross Profit Net Sales G/P Ratio
2012-13 32,81,087.98 10,20,63,295 3.21%
2013-14 31,74,177 11,08,20,645 2.86%
2014-15 33,79,011 11,76,45,321 2.87%
2015-16 3577012.83 1436247.20 2.49%

56
Net profit
Net profit = -----------------x 100
Sales
b)Net profit=
Formula: -
Year Net Profit Net Sales Net profit
2012-13 898366.00 102063295.00 0.88 %
2013-14 925137.00 110820645.00 0.83 %
2014-15 1078165.36 117645321.43 0.92%
2015-16 1436247.20 145498493.27 0.98%
0.75
0.8
0.85
0.9
0.95
1
2012-13 2013-14 2014-15 2015-16
Net Profit

57
Interpretation :
1.There is a slight improvement in the ratio for year 2012-13.Again there is
decreased in this ratio in the year 2013-14 it indicates that administrative expenses
are increased. In the year of 2015-16 the N/P is increased. Higher the ratio, the
better it is.

59
A) Determinants of working capital
From the observation it was observed that following are the major determinants of the
working capital for the company:
(i.) Product cycle time of very few day.
(ii.) Term of purchases and sales.
(iii.) Requirement of cash.
B) The major components of Working capital as under
(i.) Raw material i.e. milk
(ii.) Trade credit
(iii.) Cash
(iv.) Bank balance and short term deposits.
(C) Overall performance of the Company:
Following are the observation for judging the overall performance:
(i.) The sales are increasing for past 4 year.
(ii.) The current ratios are satisfactory when compared to ideal ratios.
(iii.) The net working capital to sale ratio is showing an decreasing trend which
indicates inefficient use of working capital.
(iv.) Gross profit is declining and probably due to increase in expenses.

61
The following suggestions are made on the basis of observations made and some
discussion with the staff members:-
 The study suggests that the other factor of working capital management
like Inventory Management, Receivables Management, Payables.
Management are running effectively in Prabhat Agro pvt. Industries LTD.
So the efforts must be given to maintain the current trend in future.
 The company should increase its Gross Profit margin or increase the
turnover. If it which has to increase its Net Profit.
 The company has to maintain sufficient stock level in factory as well as at store
houses, considering the nature of product manufactured, and hence the liquidity
ratio is more than one and also they should have to maintain the optimum level of
working capital in the firm.
 The company should try to restore the Credit period from its Creditors so that
more funds are available to the Company.
 The company is keeping minimum inventory level since the product manufactured
have a limited shelf life & mostly manufactured against order from dealer. (the
milk based product )
.

63
CONCLUSION
The profit is declining due to increase in milk price and company is not getting
proportionate increase in price of processed mild and milk product. There is a stiff
competition in the market from branded players. (Warna, Amul, Mahanand etc)
There is also competition from local manufacturer such as Ashok milk, Rajhanse, S
.R.Thorat etc.The company will have to cut down its cost of production to increase its
profit margins. Some innovation method are required to procure good quality milk at
reasonable price.
I learn how to calculate different ratio from financial statements, analysis of financial
statement to understand about the financial position of the company and overall
performance of the company. From the observation in the company I could understand
about determinants for working capital and components of working capital especially
for “Dairy Unit”

64
Chapter-12
Learning through the
Project.

65
 I have done my SIP in prabhat Milk & Agro Industry Private Limited.
 I have learn about the dairy industry.
 I learn how to bhehaour & how to make good relation with employee in the
organization.
 I learn how to calculate different ratio from financial statements, analysis of
financial statement to understand about the financial position of the company
and overall performance of the company.
 From the observation in the company I could understand about determinants
for working capital and components of working capital especially for “Dairy
Unit”

67
BIBLIOGRAPHY:-
 D.K. Chatterjee ,“ Basic accounts and finance for non-accountants ”
Published by : Himalaya publishing house .Reference: Page .No :
 S.C. Kuchhal , “Financial management ” 16th Edition reprint 2007
Published by: Chaitanya publishing house .Reference: Page .No :
 Dr.N.M.Vechalkar“Financial management
”NiraliprakashanReference: Page .No : 7.13 – 7.23, 4.3-4.4
 www.prabhatfresh.com

69
7.2) CHART SHOWING POSITION OF CURRENT ASSETS,
CURRENT LIABILITIES AND NET & GROSS WORKING
Statement showing changes in working capital
Particulars 2012-13 2013-14 2014-15 2015-16
A) Current Assets:
Deposit(assets) 13,29,17 1,32,917 32,917 43,423
Advances 15,61,85 18,49,540 17,53,487 49,60,425
Sundry Debtors 70,92,318 76,55,375 77,89,460 72,55,883
Cash in hand 37,396 2,84,761 70,337 71,271
Stock 22,62,118 18,08,654 21,71,025 20,24,322
Statuatarycurrent assets ----- ----- 4,21,797 2,88,797
TDS ----- 36,944 10,122 94,327
A) Total Current Assets 96,80,334 1,17,68,191 1,24,29,143 1,47,38,448
B)Current liabilities
Provision 1,98,241 68,514 2,26,631 75,132
Sundry Creditors & others 38,73,571 52,08,779 21,12,747 94,72,995
Total Current Liabilities (B) 40,71,812 52,77,293 23,39,378 95,48,127
Gross Working Capital 96,80,334 1,17,68,191 1,24,29,143 1,47,38,448
Net Working Capital
(A-B)
56,08,522 64,90,898 1,00,89,765 51,90,321

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