Working Capital Management @ Gadag Textile Project Report

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

EXECUTIVE SUMMARY The project has been under taken under as the part of master of business administration course as per the direction of Karnataka university dharwad. The second year MBA students will take part in this project were the summer inplant project for the period of two months and the project is related to finance and the topic of this project is “The study of working capital management” The Gadag co-operative textile mill ltd established in 1972 by late shri.K.H.Patil at Hulkoti in Gadag district. It is producing main product as yarn. The company started with a production cost of RS.220lakhs.It is started producing yarn in the year 1973. A G.C.T.M has an arrangement of different department of the dependent parts of functions and their interrelation in the structure form to provide the necessary efforts of groups of individuals will be directed towards a common objective. So as to identify the problems of such a title and give suggestions and conclusions. In addition to this concept studying the over all organization role of different department functions of their respective departments, procedures and policies. The project is mainly focuses on the industry profile, company profile, SWOT analysis, annual report and about working capital and ratios. this project studies different department at the Gadag co-operative textile mill ltd. The functions of each department and the organization in the company along with it covers the duties and responsibilities of all the staff members type of decision making followed by the mill and it also includes quality policy export oriented unit etc of the mill.

DESIGN OF THE STUDY Title of the study BABASAB PATIL

1

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. “To study on working capital management” at The Gadag Co-operative Textile Mill Ltd. Hulkoti”

OBJECTIVES OF THE STUDY: 1) To study the working capital management. 2) To know the sources of working capital. 3) To study the different components of working capital of the company. 4) To calculate the operating cycle of an organization. 5) To calculate the working capital of an organization. 6) To study the liquidity position of the company with the help of ratios.

METHODALOGY

BABASAB PATIL

2

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. PRIMARY DATA: The information collected from personal interaction with manager and other staffs SECOUNDRY DATA: The annual report of the company and company website

INDUSTRY PROFILE

BABASAB PATIL

3

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

The Indian Textile Industry occupies an important place in the Economy of the Country because of its contribution to the Industrial Output, Employment Generation and Foreign Exchange Earnings. At present, the contribution of the textile Industry to GDP is about 4 percent. The textile industry provides direct employment to about more than 35 million people and is the second largest employment provider in India next to agriculture. The contribution of this industry to gross export earnings is about 31% of the country. The Textile Industry is a self-reliant industry from the production of raw materials to the delivery of final products with considerable value addition at each stage of processing. The industry was delicensed in 1991 and under the current policy no prior government approval is necessary to set up textile mills. The per capita cloth availability in the country has increased from 24.1 square meters in 1991 to 30.7 square meters in 2000-01.The textile sector including the garment sector has a continual increase in the FDI inflow from Rs.80.99 million to Rs.234.73million. From growing its own raw material (cotton, jute, silk and wool) to providing value added products to consumers (fabrics and garments), the textile industry covers a wide range of economic activities, including employment generation in both organized and unorganized sectors. Manmade fibers account for around 40 per cent share in a cotton dominated Indian textile industry. India accounts for 15% of world's total cotton crop production. And it is the second largest employer after the agriculture sector in both rural and urban areas. India has a large pool of skilled lowcost textile workers, experienced in technical skills. Almost all sectors of the textile industry have shown significant achievement. India's cotton textile industry has a high export potential. Cost competitiveness is driving the penetration of Indian basic yarns and grey fabrics in international commodity markets. Besides natural fibers such as cotton, jute and silk, synthetic raw material products such as polyester staple fiber, polyester filament yarn, acrylic fiber and viscose fiber are produced in India. From 1st January 2005, all textile and clothing products would be traded internationally without quota-restrictions. And this impending reality brings the issue of competitiveness to the fore for all firms in the textile and clothing sectors, including those in India. With the dismantling of quotas in 2004 under mandate from the Agreement in Textile and Clothing of the WTO, the focus has clearly shifted to the BABASAB PATIL

4

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. future of the Indian textile and clothing exports. It is imperative to understand the true competitiveness of Indian textile and clothing firms in order to make an assessment of what lies over a period of time.

Global trade in Textile and clothing -India’s performance During the MFN period, the textile exporters from industrial countries and those from developing countries merely changed shares between themselves during 24 years .The share of industrial countries declined by almost as much (19.2%) as was the gain in the share of developing countries (18.8%). Clothing exporters, however, exhibit significant changes, with the share of top exporters having declined by 13.8%. New entrants have come in as well as some old ones have been knocked out. Of these new entrants, most- if not all- are from developing countries, since the share of industrial countries has declined during the period, and that of developing countries has increased. The countries that are gaining share in clothing exports are the ones whose industries are integrated to one or the other advanced country through some policy-induced preferential arrangements. Mexico, Caribbean region, East European countries and Mediterranean countries are capturing much of the space vacated. There has been a much deeper globalization in clothing than in textiles. Indeed, that has been one of the principal reasons for the developed countries agreeing to an eventual phase-out in the UR of negotiations. While in textiles, there was an inexorable shift away from developed countries in 1973 to1997 and to developing countries at large, in clothing the shift away from developed countries is increasingly being grabbed by ‘preferred’ developing countries. Thus, in clothing, the non-preferred group of developing countries is fighting amongst themselves for a pie that is increasingly declining. One should expect a much higher level of intra-industry and intra-firm trade in clothing than in textiles. This is entirely compatible with the fact that it is the trade in Clothing that is growing faster than that in textile. And this trend is likely to deepen, as Clothing retailers consolidate, and Outward Processing Trade (OPT) traffic increases. The Opportunity clearly lies much more in clothing, though the caveat is the exporting.

BABASAB PATIL

5

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. Country would have to achieve the ‘preferred’ status, and integrate its manufacturing with that of an importing country in order to continue exporting to the restricted markets. The pressure to export would intensify in the years to come since 80% of additional output during 1995-2005 is expected to be located in developing countries. On the other hand, only 50% of the additional fibre consumption would originate in developing countries.

COMPANY PROFILE COMPANY DETAILS:

Name of the mill

: - The Gadag Co-operative Text Mill Ltd Hulkoti.

BABASAB PATIL

6

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

Famous name Address

: - The G.C.T.M Ltd Hulkoti : - The G.C.T.M Ltd Hulkoti Post: Hulkoti 582205 Tq &Dist: GADAG Karnataka Phone no: 289042, 289371 Mobile: 9449570255 email:[email protected]

Registered office

: - Hulkoti Tq &dist: Gadag

Registration

: - The mill has been registered under The Karnataka co-operative society act 1959

Registration No

: - RCS 2022/72-73

Establishment

: - 08-07-1972

Production began

: - 1973

Sales turn over

: - 25 crores

Nature of business

: - production and sale of yarn

Background of the company

BABASAB PATIL

7

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. The village hulkoti comprises of various sections of people and since long it has been the cradle of co-operative movement in having the first primary credit co-operative society established in the erstwhile Bombay state. The occupation of the village is mainly agriculture. The farmer and farm laborers form a nucleus of this rural area. The main crops grown around hulkoti are jowar, cotton, groundnut, chilly and other pluses. Since there are no other major irrigation projects, dry land cultivation is the only way for the farming community. Agriculture produce particularly cotton, groundnut, jowar etc. were being marketed to the tune of Rs/90 to 100 crores per annum in and around gadag. Prior to the emergence of the Gadag Co-operative cotton sale Society Ltd., Gadag farming community was exploited by private traders and commission agents. It is at this juncture, realizing the need for upliftment of mach neglected farmers community and to improve the lot of rural area, Late Shri K.H.Patil, a son of soil and veteran co-operator devoted he time fully for the establishment of a

co-operative network around hulkoti providing various amenities and scope for

development of farmers which went ahead against all odds both traditional and political till he transformed a vision into a reality. This Endeavour had transformed into worthy institution located on either side of highway no 63 between hulkoti and Gadag After successful setting up of Ginning and pressing unit by the Gadag Co-operative cotton sale society, the next ambition of our Co-operator, was to establish a spinning Mill of 25,000 spindles capacity which would consume the main agriculture produce by paying remunerative prices to cotton growers and to save the farming community from the cluthes of private traders It is with this ideal background The Gadag Co-operative mill was established in the year 1972 with the project cost of Rs 220 lakhs and commenced its trail production in April 1973 we have a feather in the cap for having installed 25000 spindles capacity mill in a record time in the entire country. MODERNIZATION PROGRAM After a period of 18 years there was a need for upgrading technology of certain machines and to eater to the export needs, the Management proposed a Modernization Programme at a cost of Rs. 429.00 Lakhs. The term, lending institutions sanctioned Rs. 236.69 Lakhs and the balance Rs. 192.31 lakhs was from the internal resources of the Mills. The Mill replaced Carding Machines, winding machines and added one Open End Spinning machine and one Imported Auto Conner of latest BABASAB PATIL

8

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. technology. With the implementation of this Project there was improvement in the productivity and the quality of the finished product. To meet the standards of the quality yarn in demand, both in domestic as well as in International markets, the Management of the Mills thought it inevitable to launch another Modernization Programme covering Machinery from blow room to Spinning was planned. This programme, with an estimated cost of Rs. 920 Lakhs was approved by the national Co-operative Development Corporation (N.C.D.C.) and the Government of Karnataka. As part as Modernization Programme, N.C.D.C. has sanctioned Rs. 736.00 Lkahs, while Government of Karnataka contributed Rs. 136.00 Lkahs as share capital. The rest amount of Rs. 46.00 Lkahs was mobilized from Members of the Society through shares. With successful implementation of 2nd Phase of Modernization Programme, the latest version of Auto leveler Machinery at Carding and Drawing Sections are inducted and commissioned. Following this, efforts are being made to raise the productivity to high standards. Further, completion of Modernization enables us to qualitative requirement of requirement of International market Standards.

BASIC CONCEPTS USED IN TEXTILE MILL Fiber

: A slender filament ; a fine thread like part of a substance

. Kapas

: Cotton with seeds and impurities

Lint

: Cotton free from seeds and impurities

Ginning

: The mechanical process of separating the cotton Fiber from seeds

BABASAB PATIL

9

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. Bale

: A bundle or packages of cotton compressed and Bound with cord or wire weight round about 170 Kgs.

Spinning

: The process of drawing out and twisting the fiber of cotton, Wool etc. Into thread or yarn either by hand or machine.

Spindles

: The rods or pins of spinning machine known as The ring frame holding the bobbins on the which yarn wound as it is spun . Such spinning is expressed in terms of the number or spindles or rotors.

Rotors

: In the modern of spinning known as the open end spinning instead of spindles rollers are used.

Yarn

: A textile thread obtained by twisting of consecutively Disposed and Straightened ultimate composite fibers.

Hank & cones: Yarn is supplied to the market in to different forms hank yarn and cone yarn Hank yarn is convenient form of bleaching, and transport but needs winding before placing on the loanIt is used by hand loom weavers .Cone yarn however eliminates the Need form winding and can be directly used in power looms . Count

: A count is measure of thickness or fitness of yarn The various counts groups manufactured are 10s, 20s, 24s, 30s,32s,34s,40s, 60s, 80s 100s both in Hank and Cone. Lower counts indicates coarse yarn and higher counts indicates fine Yarn

BABASAB PATIL

10

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

Objectives of the company  To satisfy customers by integrating their needs in the mill yarn.  To sustain a mill of able and committed employees and provide opportunities for growth and development.  To improve the process of managing mill affairs through proper planning, timely improvement of plan and performance review.  To faster culture innovation with the application of new ideas and methods to solve the business problems.  To provide the employment opportunities to Men& women of rural area

Nature of business carried The first step the company purchases the raw material i.e. cotton from the farmers then it mixes it with different quality of cotton according to the quality of yarn they needed. The next step is cleaning the minor part and spraying the water to it. Then it kept one day in cool place. Next step it goes to the major cleaning part it goes to all the cleaning of the cotton.

BABASAB PATIL

11

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. The next process is carding here the cotton will become smoothly and white. Next goes to the simplex method in this method cotton becomes big layers and it makes the group of layers The next process is procedure is rolling and grilling here the big layers are rolled and it is separated from the group and comes in the form of loose thread and next process is drafting and twisting and the thread becomes strong and it comes layer by layer in the form of thin yarn. The next is nothing here if thread goes into two parts the machine will join it and it is called noting process. Finally after all these process the raw material is converted into the finished goods which are in the form of yarn.

VISION MISSION QUALITY

VISION: To be a premier textile company with a clear focus to become globally competitive, through growth and technology up gradation committed to excellence in quality service and co-operatives

MISSION: To purchase the creation of values for all its customers, share holders, employees and society at large

QUALITY POLICY: The company will give main importance to the satisfaction of the customers by producing good quality yarn and produce yarn to meet with the market position the company will not see with the quality of raw material. The company

BABASAB PATIL

12

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. is also having a quality control department to check out the yarn quality in overall stages to take any corrections required immediately.

PRODUCT PROFILE The following table indicates the production performances/ progress since 2003-04 to 2007-08 sl

Particulars

A.

Production

1.

Cotton consumed

2003-04

2004-05

2005-06

2006-07

2007-08

33.37

35.20

32.31

32.49

32.39

1894.90

1812.25

1375.00

1460.90

165615

28.01

29.57

26.80

27.53

27.83

kgs in lakhs 2.

Value in lakhs Rs.

3.

Yarn produced in lakhs kgs

BABASAB PATIL

13

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. B. Cac capacity Utilization an productivity 1.

Spdl utilization %

63.57

71.39

73.49

73.97

69.81

2.

Production

84.00

82.37

82.15

83.15

86.20

(converted to 40s)in gram per spindle

THE MARKET AREA The mill has its market overall the different areas of the country like N.H.D.C., K.H.D.C., malligov, sollapur, ichalkaranji, Bangalore.

OWNERSHIP PATTERN The G.C.T.M. ltd is situated in the village hulkoti of Karnataka. Shri D.R.Patil and H.M.Soppin are the chairman and vice chairman of the G.C.T.M. hulkoti. S.L.

Name

No: 1 2 3 4 5 6 7 8 9 10

Shri D. R. Patil Shri H.M. Soppin Shri R.M. Mulimani Shri V.B. Inamati Shri T.B. Mundavad Shri C.B. Karikatti Shri V. R. Naganur Shri S.B. Balaraddi Shri S.B. Bhasetti Shri S.C. Kanavi

BABASAB PATIL

Designation Chairman Vice Chairman Director Director Director Director Director Director Director Director

14

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. 11 12 13 14 15 16 17 18

Shri S.C. Huilgol Shri G.N. Patil Shri A.S. Patil Shri R.B. Hosamani Shri B.H. Dyavanashi Shri S. K. Kuradagi Shri D.S. Odugoudar Shri R.Y.

Director Director Director Director Director Director Director Director

Kempalinganagoudar

General Manager District Industries center Gadag

Director

Deputy Director of Handlooms And Textile

Inviters

Joint Registrar of Co-operative societies

Director

Shri T. Shantaveerappa Managing Director

Director

COMPETITORS INFORMATION The competitors for G.C.T.M are

BABASAB PATIL

15

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. •

Banhatti co-operative spinning mill. Banhatti.

•

Raitara sahakari noolina girani. Rannebennur.

•

The farmer’s co-operative spinning mill ltd. Hulkoti.

•

Sangoola mills solapur.

INFRASTRUCTURE FACILITY Head office: The head office of G.C.T.M is located in hulkoti the function of finance, marketing and raw material procurement are carried by head office only it doesn’t have its branch.

Land: The mill is established in the rural area near gadag at village hulkoti with approval of the site selection committee. The total area covered is of 90528.25 sq ft out of which build up area is 643.45 sq mt. there is the beautiful garden plantations pollution free and healthy environment in the mill area.

Other facilities: The mill has provided an quarters facilities to the workers and there is an rest room for workers and drinking water facility and also cultural activities in independence day, republic day, and workers day will be held and there is also an canteen facility provided by the mill

AWARDS

BABASAB PATIL

16

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. The mills has got an some awards for continuously three years in the year 1978-79, 1979-80, 1980-81, the mill has ranked first for India and second for Asia. The two awards were pretend to the mill as per the techno-economic data presentation which is made by the mill in the Pune on 10 th April 2005 the award for the operating net profit per installed spindle and operating cash profit per installed spindle has got

WORK FLOW OF MILL MIXING:

Bales of different counts are mixed along with usable wastes, on

different percentage in the mixing bins, cotton bales of different quality are opened and stacked, called stock mixing, 24 Hours for conditioning before it is process further.

BLOW ROOM:

Cotton in losses form is spending on mixing bale openers and

taken further of different cleaning points where the cotton is beaten and trash is extracted. Finally converted into Lap form of different length, weigh per yard, depending on the count.

CARDING: Lap form Blow room feed to Cards where the cotton is converted from Lap form to sliver form. During this process trash, short fibers and other impurities are extracted the different cleaning points, like licker in, Flats section Units. The sliver is produced of different Hank depending on the counts.

PREPARATORY: Cards sliver is drawn through different drafting Rollers and the sliver is elongated and increasingly the length of the sliver and radiating in the cross section by passing through different drafting rollers and convert into a suitable package by giving little twist to the material called Rove and wound on a Bobbin. BABASAB PATIL

17

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

SPINNING: The bobbins from the Preparatory process are feed to the drafting rollers as final treatment to the material and further increasing the length and reduction the cross section of the material. This process the material process through Ring and Traveler and would on the bobbin to form a suitable package the giving optimum of the twist depending on count of the yarn.

CONE WINDING: Here the yarn spun is cleaned by passing through cleaning devise called slub catcher and would through suitable package of required length and weight in the form of a Cone.

DOUBLING: Here two yarn of the same count are doubled by giving necessary twist in the form of package called bobbins.

REELING: Here single yarn or doubled yarn are wound on the swifting of the machine called Reel in the form of Hank and are make in the form of Knots. There are two types, a Plain or Cross Reel.

BUNDLING & BALING: Here the number of knots plain or cross is in a press depending on the count and weight of the boundless are as per requirements. Bundles are pressed in the form of Bale depending on the count, Plain or Cross as per the requirement from the market.

PACKING: Here number of cones or cheeses is bagged depending on the count of the yarn number of cones and weight of the cones. Depending on the requirement of the market.

BABASAB PATIL

18

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

DEPARTMENTAL STUDY

FINANCE DEPARTMENT Finance department is the department which looks after the financial position of the mill and takes over the investment decision, finance decision the mill has started with its project cost of Rs.220 lakhs which contributed of Rs. 40 lakhs from members share, Rs. 80 lakhs is of government share and remaining of Rs 100 lakhs is of term loan(I.F.C.I)

MEMBER AND SHARE CAPITAL

No of share Sl.no 1

Category “A”class

holders 3014

Paid up share Capital Rs.107.47 lakhs

((individual/society) 2 3

1

Rs.015.00 lakhs

1

Rs.695.26 lakhs

3016

Rs.817.73 lakhs

“B” Class (K.A.I.C) “C” Class (State govt) TOTAL

BABASAB PATIL

19

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. Mill has funds that may be raised 1) By issue of Shares 2) By receiving deposits from members. 3) By raising loans 4) By entrance fees 5) By accepting donations, subsidies and grants. 6) By commercial institutions.

After starting of mill after the 18 years the mill has been modernized at cost of Rs. 429 lakhs the leading institutions has sanctioned of Rs.236.69 lakhs and remaining balance of Rs.192.31 is from the mill itself and 2nd time modernization has done of Rs 920 lakhs which the amount is given by the N.C.D.C.( national co-operative development co-operation) and government of Karnataka as the part N.C.D.C has sanctioned Rs.736 lakhs and 136 lakhs by govt of Karnataka and rest of amount Rs. 46 lakhs is from members of society The mill is invested of Rs 1771.45 lakhs and of Rs. 40 lakhs share capital to the state government and paid the loan amount of Rs.100 lakhs of Rs. I.F.C.I term loan and also paid the first modernization loan of Rs. 236.69 lakhs The mill will be raised its fund by issuing of share, receiving deposit from members by taking loans and debentures and also accepting subsidies and donations and the sources of finance for the mill is from the K.C.C bank, N.C.D.C. loan, and bijapur D.C.C. bank ltd.

HUMAN RESOURCE DEPARTMENT The human resource department of the mill is recruiting, selecting seeing welfare of the employees and providing necessary facilities for the workers. Were as in the Gadag co-operative textile mill there are

744 workers here 85 are staff members, 650 workers

and 9 are securities

BABASAB PATIL

20

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. The facilities for the worker are transportation, medical, canteen, provident fund, gratuity There are 3types of workers are there first selected (fresh) workers will be taken as a trainee and in trainee there are two stages first stage trainee and second stage trainee and after trainee they will be treated as badli and then as permit. The mill works for 24 hours which is in 3 shifts no women workers are permitted for night shift and the labour turnover is of 30 to 35 the over time duty is also there and will be paid in double as per there working hours The salary for the workers are paid in as the basic salary + ESI (employee state insurance) + provident fund of 12% and bonus of 8.33% will be given and salary for 1st stage trainee is Rs.60 and for 2nd stage trainee Rs.65 and for badlis it depend on there work which is of Rs.75-103 and for permits also depend on there work load and shift allowance of Rs.250 for 26 days and of Rs 312 is attendance allowance for 26 attendance per month. The recruiting of staff will be done by managing director, general manager, asst manager and H.R. manager and other workers will be selected by the H.R department The G.C.T.M also provided quarters for workers with rent of Rs.20 per month and has a transportation facility from Gadag to hulkoti and in the G.C.TM. the cultural activities also be held on independence day republic day, and on workers day.

PRODUCTION DEPARTMENT

The G.C.T.M. is the mill which produces the yarn which are in of two types one is in cone and another as hank .The product has been done from cotton to final product i.e yarn. In the mill it has purchased machines from m/s lakshmi from coimbatore The mill works 24hour of its production and it has 3shifts the first shift is handled by production manager and 2nd shift by deputy spinning master and 3rd shift is handled by spinning supervisor and the has 7500kg of daily production

BABASAB PATIL

21

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

PROCESS OF PRODUTION MIXING:

Bales of different counts are mixed along with usable wastes, on

different percentage in the mixing bins, cotton bales of different quality are opened and stacked, called stock mixing, 24 Hours for conditioning before it is process further.

BLOW ROOM:

Cotton in losses form is spending on mixing bale openers and

taken further of different cleaning points where the cotton is beaten and trash is extracted. Finally converted into Lap form of different length, weigh per yard, depending on the count.

CARDING: Lap form Blow room feed to Cards where the cotton is converted from Lap form to sliver form. During this process trash, short fibers and other impurities are extracted the different cleaning points, like licker in, Flats section Units. The sliver is produced of different Hank depending on the counts.

PREPARATORY: Cards sliver is drawn through different drafting Rollers and the sliver is elongated and increasingly the length of the sliver and radiating in the cross section by passing through different drafting rollers and convert into a suitable package by giving little twist to the material called Rove and wound on a Bobbin.

SPINNING: The bobbins from the Preparatory process are feed to the drafting rollers as final treatment to the material and further increasing the length and reduction the cross BABASAB PATIL

22

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. section of the material. This process the material process through Ring and Traveler and would on the bobbin to form a suitable package the giving optimum of the twist depending on count of the yarn.

CONE WINDING: Here the yarn spun is cleaned by passing through cleaning devise called slub catcher and would through suitable package of required length and weight in the form of a Cone.

DOUBLING: Here two yarn of the same count are doubled by giving necessary twist in the form of package called bobbins.

REELING: Here single yarn or doubled yarn are wound on the swifting of the machine called Reel in the form of Hank and are make in the form of Knots. There are two types, a Plain or Cross Reel.

BUNDLING & BALING: Here the number of knots plain or cross is in a press depending on the count and weight of the boundless are as per requirements. Bundles are pressed in the form of Bale depending on the count, Plain or Cross as per the requirement from the market.

PACKING: Here number of cones or cheeses is bagged depending on the count of the yarn number of cones and weight of the cones. Depending on the requirement of the market. The mill has 32.39 lakh kg of cotton has consumed in 2007-08 and 27.86 lakh kgs of yarn is produced and 69.81% of spindle has been utilized

BABASAB PATIL

23

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

PURCHASE DEPARMENT The purchasing of cotton is made through the conducting business committee meeting were as the purchasing of cotton is made on every weekly of 500 to 600 bales were as every one bale consists of 165 kgs the mill purchases different variety of cotton such as NH44, J34, MBCH, BHARAMA, 26MM, and 28MM The purchase of cotton is made from local which is at open auction market by the Gadag co-op cotton sale society, T.A.P.C.S.M of annigeri were as these local cotton is graded by the A.P.M.C authority. The purchases are also made from CCI (cotton cooperation of India, maharastra co-operative federation, shanthi textile Mumbai, baradia cotton company Mumbai and B.M. kollar from gokak The price for the local is more of Rs.100-150 than the market rates and were as the department purchase right material, right quality, and right quantity of cotton for the mill and the mill collects the sample and makes the laboratory test and make sure of quality which they requires and make business committee meeting and gives order of purchasing and the payment of purchased material is made after 30 days of purchasing to the suppliers

STORE DEPARTMENT Objectives of the Stores Department : 1)

Concentrating towards smooth running of the production process.

2)

Facilitating all required equipments on time .

3)

Reduction of Inventory equipments on time .

4)

Working like a traffic signal to signalize to all equipments.

5)

Proper maintenance of all equipments

BABASAB PATIL

24

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. The mills storage has divided in 2 sub department which one is of material store and general stores and there are 11000 items are maintained in these department and the mill has an 7500 metric ton of storage capacity and stock of 2000 metric ton of capacity in godown. The store department’s construction costs of Rs 13.18 crores and the department is using two ledgers one is material receipt ledger and material issued ledger.

QUALITY CONTROL DEPARTMENT FUNCTION OF THE QUALITY CONTROL DEPARTMENT : 

Random lab weight checking



Within lap variation



Cleaning efficiency



Waste study speeds



Wrapping checking



Naps study



Uniformity checking



Idle spindle



Top roller pressure checking



Rewinding study



Gauge and tension weight checking



Knot inspection



Knot weight checking

This is the department which checks out the quality of the cotton and the produced yarn in the mill. The department which checks quality before purchasing of cotton by taking sample from supplier. the G.C.T.M has its laboratory for testing of the cotton and

BABASAB PATIL

25

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. the lab has installed of 1.25 crore worth of machines which is of computerized machines the quality control also helps in minimizing cost and improves in working condition it also helps the G.C.T.M to know the cost of there product The cotton testing is having some steps of testing of cotton the cotton testing is made on H.V.I (high volume instrument) the testing of material is made out of one bale half kg will be taken testing is made of its length, strength (grass per tex), informative ratio, maturity ratio the mill is using 26mm type of cotton for coarser, 28mm for 30s, 34s, and 40s yarn, and 31mm for 60s and above. In blow room lap weight checking its speed and settings cleaning efficiency and next in carding department checking of the waste and C.V%(coefficient variation) unevenness testing 120mtrs of sliver and variation of length is made by oster testing monthly there will be wheel checking and next drawing is made and in drawing wrapping checking is made it is of weight checking and study of breakage and setting of an weight is by automation and next in simplex department spindles are checks hanks are also checks and its stretching percentage is tested and in spinning department checking of single yarn strength and double yarn strength and checks yarn fast per kms and next is of winding which in winding it is made of rewinding of auto counts and makes cone weight checking and next is reeling were as knot has been tested which is of starting end to finishing end has been checked and next is doubling in this checking for the covering of doubling and lastly baling and packing which checks the bale weight, packet weight, bundle weight and tare weight checking is made

MARKETING DEPARTMENT The marketing department has kept an long relationship with its customers from purchasers and suppliers. The mill manufacture hank yarn and cone yarn as per the market demands the sale of hank yarn and cone yarn is of 40:60 the daily production of yarn is about 7500 kgs

BABASAB PATIL

26

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. Were mill works 24 hours for all seven days a weak The selling of yarn is given to the weavers co-operative apex organization and Karnataka handloom development corporation the mill gets order by phones by there own sales depot and by local agents. The marketing department fixes the price of yarn before fixing of price the department look after the total cost of production and market demand and checking competitors price rate and quality and customers ability of purchasing The mill has direct and indirect channels of distribution were as in the direct channel is from direct mill to the traders and indirect channel it is from mill to the agents and then to the customers

ADMINISTRATIVE DEPARTMENT The administrative department is the department which looks after the payment of salaries, income tax purchasing and the department which maintains the files and records etc. up to the date and collecting and presenting data of record and the department which maintains office and provides the necessary required facilities The administration department which decides on giving yearly bonus and to provide the finance to all department and the department which conducts the meeting, implementing the polices, controlling of different department and finally it is a department which controls over all the activity of the mill.

MAINTENANCE DEPARTMENT It is the department which has an relationship with the production department. This department helps in maintaining of plant and machinery which to work properly. If there is of any cause in machines the technicians are there to look after and make repairs and maintain and look over all machines daily the department keeps the stock of important spare parts of machine and it maintains. The department which looks over the blow rooms its new lines, pre opener, mbo, mono-cylinder, unimix, ERM, VXL, in blow room these all machines will make cleaning for every 10 days and while cleaning if there is any repair then it that part will BABASAB PATIL

27

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. make repair if it is need of replacement it will be replaced. In carding room half setting is done for once in 15 days and full setting is done once in 3 months and larrikin wire changing has been done for every 9 months In the simplex department the general cleaning will be done for every 15 days and in spinning department there is also general cleaning will be done for every 10 days and spindle oil changing for every 6 months and spindle gauge also for 6 months and in winding general cleaning has been done once in a week and spindle servicing is done once in 30 days and in reeling oiling will been made once in a month and in packaging cleaning once in a month will be done like these the maintenance department will maintain the all department of the G.C.T.M.

SWOT ANALYSIS

STRENGTHS 1)

Good reputation in the market

2)

Good network of dealers

3)

Well connected with roads

4)

Well established in infrastructure facilities

5)

45% share capital given by the government

6)

New specialized types of machines

BABASAB PATIL

28

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. 7)

Good support from the farmers as well as from the society

8)

Financially strong

WEAKNESSES 1)

No nation wide brands

2)

Less sales promotion activities

3)

Large work force

4)

Partly automated

5)

Lack of R&D

6)

Low labour productivity

7)

Not concentrating towards competition

OPPORTUNITIES

1)

Land is available for expansion

2)

Company can tie with other reputed company

3)

Existence of a large market

4)

Possibility of 100% automations

5)

Market expansion

BABASAB PATIL

29

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. 6)

They are shortly getting the ISO 9001

THREATS

1)

Decreasing in agricultural production

2)

Globalization and liberalization

3)

Cut through the competition

4)

Taste and fashion of customers turning towards the ready Made Garments

5)

Negligence of Government as well as less guidance and low Support from the Government

WORKING CAPITAL MEANING AND DEFINITION OF WORKING CAPITAL Working capital is the amount of funds which a company has to finance its day to day operations it can be regards as the part of capitals which the capitals is basically classified into fixed and working. Fixed capital is normally invested in fixed assets and working capital in current assets. It is used in day to day operations. These are the funds that are invested in current

BABASAB PATIL

30

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. assets. The form of these current assets keeps on changing. Ex: Raw material to work in progress to finished product. , so it is also called circulating capital. A study of working capital is of major part of the external and internal analysis because of its close relationship with the current day to day operation of the business. Working capital consists of broadly for that the assets of a business that are used at related current operation and is represented by raw material, stores, work in progress, and finished goods merchandise, bills receivable.

Definition of working capital Gerstenberg “working capital means current assets of company that are changed in the ordinary course of business from one form to another, ex: from cash to inventories, inventories to receivables, receivables into cash” Shubin “ Working capital is the amount of funds necessary to the cost of operating the enterprise. Operating expenses involve investment in current assets, payment towards overhead and expenses. Investment made in these heads is classified as working capital”.

BABASAB PATIL

31

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

J. smith “ The sum of the current assets is the working capital of the business” ’’WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITY”

CONCEPT OF WORKING CAPITAL There are two concepts of working capital that are: 1) Balance sheet concept 2) Operating cycle concept.

1)

Balance sheet concept: Working capital as per this defined in terms of current assets and current liabilities.

Balance sheet concept further classifies working capital into a) gross and b) net working capital. a) Gross working capital: it refers to total investment made in current assets. It is also called circulating rotating from one head to another. Ex. Cash to raw material, raw material to finished products, finished products to debtors, and debtors to cash. This concept stresses on quantity aspect; i.e. to refer to total investment made in different

BABASAB PATIL

32

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. current assets. Bonneville and beway have defined gross working capital as ’’ any fund received which increases the current assets”. b) Net Working capital: as per this concept working capital is the difference between current assets and current liabilities. This concept stresses on quality aspect of working capital. The difference between current assets highlights on liquidity aspect and quality of current assets. A firm that has excess of current assets over liabilities is said to possess adequate liquidity. On the contrary firm that has excess of current liability over current assets means it does not have adequate liquidity. It means that part of current assets of such firm are financed through fixed assets.

2) Operating cycle concept: Operating Cycle or Working Capital Cycle indicates the length of time between affirms paying for raw materials entering into finished stock and receiving cash on the sales of such Finished Stock. This operating cycle differs from firm to firm. Longer the operating cycle greater will be the amount of Working Capital required and vice versa. Thus it plays an important role in determining the Working Capital needs of a firm.

OPERATING CYCLE CHART

BABASAB PATIL

33

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

Cash

Raw Materials

Debtors

Sales

Finished good

Work In Process

Operating Cycle is the time duration required to convert sales, after the conversion of resources into inventories, into cash. The operating cycle of a G.C.T.M

involves

three phases. 1. Acquisition of resources such as raw material, labour, power and fuel etc. 2. Manufacture of the product which includes conversion of raw material into work-In- progress into finished goods. 3.Sales of the product either for cash or on credit. Credit sales creates book Debts for collection. In the THE GADAG CO-OPERATIVE TEXTILE MILL LTD (manufacturing concern), the working capital operating cycle starts with the purchase of raw materials and ends with the realization of cash from the sale of finished products. It is also called as cash conversion cycle, production cycle etc. It involves the purchase of raw materials and stores, its into stocks of finished goods through the work-in-Progress with the BABASAB PATIL

34

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. progressive increment of labor and service costs, conversion of finished goods (Yarn Products) into sales, Debtors and receivables and ultimately realization of cash and this cycle continuous again from cash to purchases of raw material and so on.

CLASSIFICATION OF WORKING CAPITAL Working capital can be classified on the basis of concept and on the basis of time. Various types of working capital are as follows

BABASAB PATIL

35

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

KINDS OF WORKING CAPITAL

1. ON THE BASIS OF CONCEPT

GROSS WORKING CAPITAL

2. ON THE BASIS OF TIME

NET WORKING CAPITAL

REGULAR 1)

TEMPORAR Y OR VARIABLE

PERMANEN T OR FIXED

RESERVE

SEASONAL

SPECIAL

On the basis of concept : Working capital on this basis of concept is classified into A)

Gross working capital: It refers to total investment made in current asset. Current assets are the asset which can be converted into cash within a short period of an accounting year. Current assets include cash, debtors, bills receivables and short term securities etc.

B)

Net working capital: It is the difference between current assets and current liabilities. Current liabilities are those claims of outsiders which are expected to mature for payment within an accounting year and include creditors, bills payable and outstanding expenses. Net working capital can be positive or negative. Positive net working capital will arise when current asset exceeds current liabilities. A negative net working capital occurs when current liabilities are in excess of current assets.

2)

On the basis of time : Classification of working capital in this case is made on the basis of time for which investment is required. Kinds of working capital in

BABASAB PATIL

36

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. this category are: 1) Permanent : Some portion of working capital always remain permanent or fixed. This refers to minimum investment a firm has to make and keep in certain current assets. Firm has to always maintain minimum cash balance, inventory, debtors etc. as there current assets are required permanently. They are normally financed through long term capital. Such permanent working capital is further classified into a) regular and b) reserve a) Regular: regular permanent working capital is used in routine business operations. b) Reserve: reserve working capital refers to some portion of working capital that is kept as reserve to meet any contingency.

2) Temporary working capital: required of such capital varies or fluctuates depending on season. Its requirement is not continous it is normally finance through short term sources, like overdraft, cash credit and other short term liabilities. Temporary working capital is further classified into: A)

Seasonal working capital: requirement of working capital is based on particular seasons ex; winter, summer or festival seasons etc during these seasons there will be additional demand for the products. To meet out such demand firm has to make additional arrangement of working capital. B) Special working capital: requirement of such working capital is necessitated to meet demands of special occasion’s ex. Occasion of world cup cricket, Olympics, kumba mela, elections. During these special occasions demand for goods and service will increase. To meet such special demand firm has to make temporary arrangement of working capital

DETERMINANTS OF WORKING CAPITAL

BABASAB PATIL

37

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. Requirement of working capital differs from one firm to other. This is because of business conditions and policies of conducting business differ. Working capital required by each from is determined by following factors. 1)

Nature of business: important factor that determines requirement of working capital is

nature of business a firm is undertaking. Firm that are engaged in production and marketing need more working capital compared to the firm that are in trading or service oriented business. This is because manufacturing units need more current assets compared to service oriented units. 2)

Size of business: Size of the business obviously determines the requirement of the

working capital bigger the size more is the requirement of the working capital. Larger the scale of operations, larger the investment required in current assets. 3)

Operating cycle: Operating cycle means period from which investment is locked up

in different operations. Longer the period of inventory holding, work in progress, finished goods etc more is the investment needed in the operations. This necessities more investment in current assets. 4)

Stock turn over: stock turnover refers to number of times stock is turned over that is

it refers to sales. Quicker the stock turn over (quick sales) less is the working capital. Slow pace of stock turnover demands more investment is locked up in operation. 5)

Credit policy: Credit policy of the firm will influence requirements of working

capital. Firms that offer liberal credit to the debtor have make more investment in production operations. Such firms need more working capital to keep their production operation continuous. Requirement of working capital will be much more if the firm buys on cash and sells on credit. On the contrary firms that buy on credit and sell on cash basis need less working capital. 6)

Production policy: Firms that undertakes all production operations within the

organization need more working capital. Such firms have to make investment to manufacture every component or part. On the contrary, firms which undertake outsourcing that is buying some of the components or parts from out side agencies need less working capital. 7)

Growth of business: Firms that are experiencing growth need more working capital.

Such firms have to constantly increase their production levels. To meet rising needs of sales targets. They need to continuously increase investment in current assets. 8)

Earning capacity and its appropriation: firms that earn sufficient profits and invest a

portion of profit in business needs less working capital. Ploughing back of profits and accumulated reserves will minimize dependency on external capital for working capital BABASAB PATIL

38

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. needs. On the contrary firms that follow liberal divided policy are firms that do not have adequate surplus need to borrow more to meet regular working capital needs. Needs of Working Capital: The need for working capital to run the day-to-day business activities cannot be overemphasized. We will hardly find a business firm which does not required any amount of working capital. Indeed, firms differ in their requirements of the working capital. The firm’s aim is that maximizing the wealth of shareholders. Earning a steady amount of profit requires successful sales activity. The firm has to invest enough funds in current assets for generating of sales activity. Current assets are needed because sales do not convert into cash instantaneously. There is always an operating cycle involved in the conversion of sales into cash. Therefore Working Capital required for: 1) To meet the cost of inventories including total of raw materials purchased parts, operating Supplies, work in progress, finished goods. 2) To pay wages, salaries, for indirect labor, clerical staff, managerial and supervision staff. 3) To meet overhead costs, including those of maintenance services activities, fuel, power charges, taxes and general expense administration. 4) To bear the expansion (with regard to promotion of sales) e.g. expenses on packing, advertisement, salesmanship, Sales Servicing, After requires, Credit Facilities, Delivery Services, etc. IMPORTANCE OF WORKING CAPITAL Even though the skills for maintaining the working capital are somewhat unique, the goals are the same-viz. to make an efficient use of funds for minimizing the risk of loss to attain profit objectives.

BABASAB PATIL

39

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. Firstly, the adequate of working capital contributes a lot in raising the credit-standing of a corporation in terms of favorable rates of interest on bank loan, better terms on goods purchased, reduced cost of production on account of the receipt of cash discounts, etc. Secondly, a company with sufficient working capital is always in a position to take the advantage of any favorable opportunity either to purchase raw materials or to execute a special order or to wait for better market position. In the third place, the ability to meet all reasonable demands for cash without inordinate delay is a great psychological factor to improve the all rounds efficiency of the business. Lastly, during slump the demand for working capital, instead of coming down, shoots up. A good amount of working capital is locked up in the inventories and book debts. Concerns having ample resources can tide over that period of depression. Thus, working capital is regarded as one of the conditioning factors in the long run operations of the firm, which is often inclined to treat it as an issue of short run analysis and decision making.

Components of Working Capital: There are two components of Working Capital A. Current Assets B. Current Liabilities A) Current Assets: Components of Current Assets are as follows: 1. Cash & Bank Balance 2. Stock of Raw Material at cost- work in process and Finished Goods. 3. Advanced Recoverable in Cash or kind or kind or for value to be received.

BABASAB PATIL

40

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. 4. Deposits under the company scheme. 5. Advanced payment of income takes credit certificates.. 6. Outstanding debts for a period exceeding six months. 7. Balance with central excise authorities. B) Current Liabilities: Components of Current Liabilities are as follows: 1. Sundry Creditors for the goods and expenses. 2. Income tax deducted at sources from contractors. 3. Expenses Payable. 4. Unclaimed Dividend. 5. Security Deposits. 6. Liabilities for bills discounted. 7. Bank Overdraft Acceptance.

Working Capital Management concerned with the following aspects: 1. Cash Management: Cash is the important current asset for the operation of the business. cash is the basic input needed to keep the business running on a continuous basis; it is also the ultimate output expected to be realized by selling the service or product manufactured by the firm. The firm should keep sufficient cash, neither more nor less. Cash is the liquid form of an asset. It is the ready money available in the firm or with the business, essential for its operations. A firm needs the cash for the following three purposes: (a) The Transaction Motive: (b) The Precautionary Motive: (c) The Speculative Motive: 2. Receivables Management: Receivable represents amounts owed to the firm as a result of sale of goods or services on the ordinary course of business. These are claims of the firm

BABASAB PATIL

41

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. against its customers and form part of its current assets. These receivables are carried for the customers. The period of credit and extent of receivables depends upon the credit policy followed by the firm. The main purpose of maintaining or investing in receivables is to meet competitors, to increase sales, and to maintain a cordial relationship with the clients.

3. Inventory management: Every enterprise needs inventory for smooth running of its activities. It serves as a link between production and distribution process. There is, generally a time lag between the recognition of a need and its fulfillment. The greater the time lag, the higher the requirements for inventory. The unforeseen fluctuations in demand and supply of goods necessitate the need for inventory. Moreover, it provides a cushion for future price fluctuations.

ANALYSIS AND INTERPRETATION Statement of changes in working capital

BABASAB PATIL

42

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

Particulars

As @

As @

Effect of

31/3/05

31/3/06

wc

decrease

Increase A. Current assets Cash on hand

15143

41550

Cash at bank

5027449

4634497

392952

F.D with bank

16051822

246822

15805000

4628150

4630150

35371142

51579031

255296

255296

Loan to FCSM

8500000

8500000

Advances

1616172

4062468

633633

631633

52948390

53043163

125047200

127624611

40050746

49098335 1280042

9047589 25794 623252

Deposits Sundry debtors Pre university college

Other receivables Closing stock Total current assets

26407

2000 16207888

2446296 2000 94773

B. Current liabilities Current liabilities Bonus provision payable

1254248

Other payables

2090328

2713579

43395322

53091956

81651878

74532655

Total current liability Net working capital(A-B) Increase or decrease in

18777364

7119223

7119223

81651878

25896588

25896587

working capital Total working capital

81651878

25896558

INTERPRETATION

BABASAB PATIL

43

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

The statement shows that the changes in working capital in the year 2004-05 and 2005-06. It shows how the current assets and current liabilities are changes in two years the different between current asset and current liabilities i.e. net working capital of two years 2004-05 and 2005-06 is Rs 81651878 and Rs 74532655 respectively it shows the working capital decreases of Rs 7119223 in 2005-06 which compare to 2004-05. Here due to decrease the firm is not satisfactory with its working capital

In current assets 1. cash in hand increases of Rs 26407 2. cash at bank is decreasing of Rs 392953 3. F.D with banks is also decreased Rs 15805000 4. deposits has increased of Rs 2000 5. sundry debtors has increased of Rs 16207888 6. advances has increased to Rs 2446296 7. other receivables has decreases of Rs 2000 8. closing stock has increased to Rs 94773

In current liabilities 1. bonus provision is increasing of Rs 25794 2. other payables is increasing of Rs 623252 3. other liabilities are increased to Rs 9047589

BABASAB PATIL

44

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

Statement of changes in working capital

Particulars

As @

As @

Effect of

31/3/06

31/3/07

wc

Decrease

Increase A. Current assets Cash on hand Cash at bank F.D with bank Deposits Sundry debtors Pre university college Loan to FCSM ltd Advances

41550

21020

4634497

20530 18446450

13811952

246822

265078

18256

4630150

4630150 47320434

51579031 255296 8500000

255297 8500000 1088953

631633

5151421 500000

53043163

62356456

9313293

127624611

147445816

49098335 1280042

58462247 1395879

9363912 115837

2713579

2972036

258457

Net working capital(A-B)

53091956 74532655

62830162 84615654

Increase or decrease in

10082999

Other receivables Closing stock Total current assets

4062468

4258597

131633

B. Current liabilities Current liabilities Bonus provision payable Other payables Total current liability

24232454

14149456 10082999

working capital Total working capital

BABASAB PATIL

84615654

84615654

24232454

24232454

45

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

INTERPRETATION This statement shows that the changes in working capital in the year 2005-06 and 2006-07. it shows the current assets and current liabilities i.e net working capital of two years is 2005-06 and 2006-07 is rs 74532655 and rs 84615654 respectively. It shows the working capital increases Rs 10082999 in the year 2006-07 compare to 2005-06 by increasing the firm is satisfactory with its working capital.

In current assets 1. cash in hand has decreased by Rs 21020 2. cash at bank is increased to Rs 13811952 3. F.D with bank is increasing of Rs 18256 4.

there is no increase or decrease in deposits

5. sundry debtors is decreased to Rs 4258597 6. advances paying increased to Rs 1088953 7. other receivables has decreased to r 131633 8. closing stock is increased to Rs 9313293

In current liabilities 1. bonus provision is increased of Rs 115837 2. other payable is also increased of Rs 258457 3. other liabilities is increased to Rs 9363912

Statement of changes in working capital

BABASAB PATIL

46

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

Particulars

As @

As @

Effect of

31/3/07

31/3/08

wc

decrease

Increase A. Current assets Cash on hand

40460 16228726

19930

Cash at bank

20530 18446450

Fd with bank

265078

275078

10000

4630150 47320434

4431466 51709943

4389509

255297 8500000

255297 8500000

5151421 500000

5687379 535374

535958 35374

62356456

58071755 1319412

1319412

Deposits Sundry debtors Pre university college Loan to fcsm ltd hulkoti Advances Other receivables Closing stock Recvd from NCDC Total current assets B. Current liabilities Current liabilities Bonus provision payable Other payables NCDC payable Total current liability Net current assets(A-B) Increase or decrease in working capital Total working capital

BABASAB PATIL

-

--------------------------

2217724

198684

4284700

147445816

147054890

58462247 1395879

49593596 1564000

8868651

2972036

2971114 1319412 55448122 91606768

922

62830162 84615654

168121 1319412 15179756

6991114

6991114

91606768

8188641

91606768

15179756

15179756

47

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

INTERPRETATION The statement shows that the changes in working capital in the year 2006-07 and 2007-08 it shows how the current assets and current liabilities are changes in the two years the difference between current assets and current liabilities i.e. net working capital of the two years is 2006-07 and 2007-08 is Rs 84615654 and 91606768 respectively. It shows the working capital increases of Rs 6991114 in the year 2007-08 compare to 2006-07 by the increase in the net working capital firm is satisfactory with its working capital

In current asset 1. cash in hand increased of Rs 19930 2. cash at bank increased of Rs 2217724 3. F.D. with bank has increased of Rs 10000 4. deposits has decreased to Rs 198684 5. sundry debtors has increased to Rs 4389509 6. advances paying is increased to Rs 535958 7. other receivables also increases of Rs 35374 8. closing stock has decreased of Rs 4284700 9. there is a receivables from NCDC of Rs 1319412

In current liability 1. bonus provision has increased of Rs 168121 2. other payable has decreased of Rs 922 3. payable of received of NCDC of Rs 131912 4. other liabilities has decreased to Rs 8868651

Statement of changes in working capital

BABASAB PATIL

48

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

Particulars

As @

As @

Effect of

31/3/08

31/3/09

wc

decrease

Increase A. Current assets Cash on hand Cash at bank Fd with bank Deposits Sundry debtors Pre university college Loan to fcsm ltd hulkoti Advances Other receivables Closing stock Recvd from NCDC Total current assets

40460 16228726

277094 19346310

275078 4431466

275078 4052950

378516

51709943

51003132

706810

255297 8500000

255297 8500000

5687379 535374 58071755 1319412

4858428 1021508 46289123 -----------

147054890

135628920

49593596 1564000

52486226 1227535

2971114

4744789

13366 3117584

828951 486134 11782632 1319412

B. Current liabilities Current liabilities Bonus provision payable Other payables NCDC payable

2892630 336465 1773675 1319412

Total current liability

1319412 55448122

58458550

Net working capital (A-B)

91606768

77170370

5259595

14436398

14436398

Increase or decrease in

19695992

working capital Total working capital

91606768

91606768

19695992

19695992

INTERPRETATION

BABASAB PATIL

49

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. The statement shows that the changes in working capital in the year 2007-08 and 2008-09 it shows how the current assets and current liabilities are changes in the two years the difference between current assets and current liabilities i.e. net working capital of the two years 2007-08 and 2008-09 is Rs 91606768 and Rs 77170370 respectively it shows the decreasing of Rs 14436398 in 2008-09 which compare to 2007-08 by decreasing in net working capital the firm is not satisfactory with its working capital

In current assets 1. 2. 3. 4. 5. 6. 7. 8. 9.

cash in hand has decreased of Rs 13366 cash at bank is increased of Rs 3117584 F.D with bank has no changes deposits has been decreased of Rs 378516 sundry debtors has decreased to Rs 706810 advances is decreased of rs828951 other receivables has increased of Rs 486134 closing stock is decreased to Rs 11782632 received from NCDC of Rs 1319412 is decreased

In current liability 1. 2. 3. 4.

bonus provision is decreased to Rs 336465 other payables is increases of Rs 1773675 NCDC payables in decreased of Rs 1319412 other liabilities has increased of Rs 2892630

CALCULATION OF OPERATING CYCLE OF THE G.C.T.M. LTD

BABASAB PATIL

50

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. Investment in working capital is influenced by four key events in the production and sales cycle of the G.C.T.M • • • •

Purchases of raw materials Payment of raw materials Sale of finished goods Collection of cash for sale

The firm begins with the purchase of raw material which are paid for after a delay which represent the account payable period. The firm converts the raw material into finished goods and then sells the same. The time lag between the purchase of raw materials and sale of finished goods is the inventory period customers pay there bills some time after the sales. The period that elapses between the date of sales and date of collection of receivable is the accounts payable period. The time that elapses between the purchase of raw materials and the collection of cash for sales is referred to as the operating cycle. Where as the time length between the payment for raw material purchases and the collection of cash for sales is referred to as the cash cycle. The operating cycle is the sum of the inventory period and the accounts receivable period, whereas the cash cycle is equal to the operating cycle less the accounts payable period. From the financial statement of the firm we can estimate the inventory period, the accounts receivable period and accounts payable period.

Inventory period =

Average receivable period =

Accounts payable period =

average inventory Annual cost of goods sold/365

average accounts receivable Annual sales average accounts payable Annual cost of goods sold/365

Financial information of THE G.C.T.M. Ltd 2005-2006

Particulars

P&l a/c data

BABASAB PATIL

Particular

Beginning

Ending 51

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

Sales 231390442 Cost of 206149519 goods sold

Sales =

Inventory A/c receivable A/c payable

46919052 633633 1254248

46274537 631633 1280042

sales + yarn sales + other sales 228943400 + 700864 + 1746178 = 231390442

Cost of production Add opening stock of finished goods Less closing stock of finished goods Cost of goods sold

Inventory period = =

BABASAB PATIL

average inventory Annual cost of goods sold/365 46596794 206149519/365

=

46596794 564793

=

82.50

Average receivable period =

210628618 20107336 230735954 24586435 206149519

average accounts receivable Annual sales

52

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

=

632633 231390442/365

=

632633 633946

=

0.99

Accounts payable period =

=

average accounts payable Annual cost of goods sold/365 1267145 206149519/365

=

1267145 56479320

=

2.24

Operating cycle = inventory period + accounts receivable period = 82.50 + 0.99 = Cash cycle

83.49

= operating cycle – accounts payable period = =

83.49 – 2.24 83.49

Financial information of THE G.C.T.M. Ltd 2006-2007

Particulars

P&l a/c data

BABASAB PATIL

Particular

Beginning

Ending 53

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

Sales Cost of goods sold

Sales =

254655866 Inventory 215192439 A/c receivable A/c payable

46274537 631633 1280042

50785141 500000 2972036

sales + yarn sales + other sales 3484623 + 250490529 + 680714 = 254655866

Cost of production Add opening stock of finished goods Less closing stock of finished goods Cost of goods sold

Inventory period =

average inventory Annual cost of goods sold/365

=

48529839 21519439/365

=

48529839 589568

=

82.31

Average receivable period = =

BABASAB PATIL

220852642 24586435 245439077 30246638 215192439

average accounts receivable Annual sales 565816 254655866/365

54

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

=

565816 697687

=

0.81

Accounts payable period =

average accounts payable Annual cost of goods sold/365

=

2126039 215192439/365

=

2126039 589568

=

3.60

Operating cycle = inventory period + accounts receivable period = 82.31 + .81 = Cash cycle

83.12

= operating cycle – accounts payable period = =

83.12 – 3.60 79.52

Financial information of THE G.C.T.M. Ltd 2007-2008

Particulars

P&l a/c data

BABASAB PATIL

Particular

Beginning

Ending

55

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

Sales Cost of goods sold

Sales =

274253348 Inventory 244014252 A/c receivable A/c payable

55889767 500000 2972036

50785141 1854786 4290526

sales + yarn sales + other sales 262156033 + 1131833 + 10965481 = 274253348

Cost of production Add opening stock of finished goods Less closing stock of finished goods Cost of goods sold

Inventory period =

average inventory Annual cost of goods sold/365

=

106674908/2 244014252/365

=

53337454 668532

=

79.78

Average receivable period = = = BABASAB PATIL

235780335 30246638 266026973 22012721 244014252

average accounts receivable Annual sales 2354786/2 274253348/365 1177393 56

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

751379 =

Accounts payable period =

= = =

1.56

average accounts payable Annual cost of goods sold/365 7262562/2 244014252/365 3631281 668532 5.43

Operating cycle = inventory period + accounts receivable period = 79.78 + 1.56 = Cash cycle

81.34

= operating cycle – accounts payable period = 81.34 – 5.43 = 75.91

Financial information of THE G.C.T.M. Ltd 2008-2009

Particulars

P&l a/c data

BABASAB PATIL

Particular

Beginning

Ending

57

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

Sales Cost of goods sold

Sales =

256739185 Inventory 231802183 A/c receivable A/c payable

50785141 1854786 4290526

39186088 1021508 5972323

sales + yarn sales + other sales 13609228 + 242486231 + 643726 = 256739185

Cost of production Add opening stock of finished goods Less closing stock of finished goods Cost of goods sold

Inventory period =

average inventory Annual cost of goods sold/365

=

89971229/2 231802183/365

=

44985614 635074

=

70.83

Average receivable period = = =

BABASAB PATIL

233038800 22012721 255051521 23249338 231802183

average accounts receivable Annual sales 2876294/2 256739185/365 1438147

58

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

703395 =

Accounts payable period =

2.04

average accounts payable Annual cost of goods sold/365

=

10262849/2 231802183/365

=

5131424 635074

=

8.08

Operating cycle = inventory period + accounts receivable period = 70.83 + 2.04 = Cash cycle

72.87

= operating cycle – accounts payable period = 72.87 – 8.08 = 64.79

Years

Inventory Account period receivable period 2005-06 82.50 0.99 2006-07 82.31 0.81 2007-08 79.78 1.56 BABASAB PATIL

Account payable period 2.24 3.60 5.43

Operating cycle

Cash cycle

83.49 83.12 81.34

81.25 79.52 75.91 59

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

2008-09 70.83

2.04

8.08

72.87

64.79

days

operating cycle 86 84 82 80 78 76 74 72 70 68 66

Series1

2005-06

2006-07

2007-08

2008-09

years

INTERPRETATION : Here the firm’s operating cycle has continuously decreased from 83 days during 2005-06 to 73 days during 2008-09. The operating cycle of the firm is satisfactory because it has come down by 10 days. The firm’s cash cycle is also satisfactory as it has decreased from 82 days to 65 days during 2005-06 to 2008-09. However it is also observed that the debtor’s collection period has increased from 0.99 days to 2.08 days during the same time period.

BABASAB PATIL

60

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

RATIO ANALYSIS

BABASAB PATIL

61

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. INTRODUCTION

The ratio analysis is one of the most important and powerful tools of financial analysis. It is the process of establishing and interpreting various ratios. It is with the help of ratios that the ratios that the financial statement can be analyzed more clearly and decisions made from such analysis.

CONCEPT OF RATIO

A ratio is a simple arithmetical expression of the relationship of one number to another. It may be defined as the indicated quotient of two mathematical expressions. According to Accountant’s handbook by Wixonkell and Bedford, a ratio “is an expression of the quantitative relationship between two numbers”.

RATIO ANALYSIS

Ratio analysis is the technique of calculation of number of accounting ratios from the data found in the financial statements, the comparison of the accounting ratios with those of the previous years or with those of other concerns engaged in similar line of activities or with those of standard ratios and the interpretation of the comparison.

CURRENT RATIO

BABASAB PATIL

62

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. The current ratio of a unit measures firm’s short-term solvency, that is, its ability to meet short-term obligations. It is the ratio of total current assets to total current liabilities. The current ratio measures the ability of the firm to meet its current liabilitiescurrent assets get converted into cash in the operating cycle of the firm and provide the funds needed to pay current liabilities. It is calculated by dividing total current assets by total current liabilities:

CURRENT RATIO = CURRENT ASSETS/CURRENT LIABILITES

Sl.no

Years

Current ratio

2004-05

Current assets Current liability 125047200 43395322

1 2

2005-06

127624611

53091956

2.40

3

2006-07

147445816

62830162

2.34

4

2007-08

147054890

55448122

2.65

5

2008-09

135628920

58458550

2.32

2.88

current ratio 3.5 3

ratio

2.5 2

Series1

1.5 1 0.5 0 200405

200506

200607

200708

200809

years

BABASAB PATIL

63

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

INTERPRETATION: The standard for current ratio is 2:1 but the firm’s current ratios are more than the standard the highest ratio is 2.88 in the year 2004-05 and the lowest ratio is 2.31 in the year 2008-09. And also it found that there is an excess amount in current assets its shows that the firm is not utilizing the funds from current assets properly the firm need to concentrate on its excess amount.

QUICK RATIO This ratio is also termed as Acid-test ratio. A Quick ratio is concerned with, the relationship between quick assets and current liabilities. It is a measure of liquidity calculated dividing current assets minus inventory and prepaid expenses by current liabilities. The Quick Ratio is the ratio between quick current assets and current liabilities. It is calculated by dividing the Quick Current Assets by the Current Liabilities.

BABASAB PATIL

64

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

QUICK RATIO = QUICK ASSETS/QUICK LIABILITES Quick asset = current assets –inventory, prepaid expenses Quick liability = current liability – bank overdraft Sl.no

Years

Quick assets

Quick liability Quick ratio

1

2004-05

72098810

30847985

2.33

2

2005-06

74581448

53091956

1.40

3

2006-07

85089360

62830162

1.35

4

2007-08

88983135

55448122

1.60

5

2008-09

89339797

58458550

1.52

quick ratio 2.5

ratio

2 1.5 Series1 1 0.5 0 200405

200506

200607

200708

200809

years

INTERPRETATION: The standard ratio for quick ratio is 1:1 but the firms quick ratio are more than the standard the highest quick ratio is 2.33 and lowest quick ratio is 1.35 so it found that there is quick ratio is more than the standard by having more the ratio it shows that th. So the has to concentrate for collection of funds.

BABASAB PATIL

65

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

INVENTORY TURNOVER RATIO Inventory turnover ratio is the ratio, which indicates the number of times the stock is turned over i.e., sold during the year. In other words, it is the ratio between the cost of goods sold and closing stock. This ratio can be calculated as follows.

INVENTORY TURNOVER =

Sl.no

years

1

COST OF GOODS SOLD AVERAGE INVENTORY

Average Inventory 46438421

Ratio

2004-05

Cost of goods sold 256843587

2

2005-06

206149519

46596794

4.42

3

2006-07

215192439

51082152

4.21

4

2007-08

244014252

53337454

4.57

5

2008-09

231802183

44985614

5.15

BABASAB PATIL

5..53

66

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

inventory turnover ratio 6 5 ratio

4 3

Series1

2 1 0 200405

200506

200607

200708

200809

years

INTERPRETATION: The inventory turnover ratio shows how the inventory is turning into receivables through sales. Here in the firm highest inventory turnover is 5.53 in 2004-05. it indicates that there was a good inventory management in 2004-05 whereas in the year 2006-07 there is low inventory turnover which implies that in 2006-07 there was excessive inventory levels than warranted by production and sales activity. In the year 2008-09, the inventory turnover is 5.15.

GROSS PROFIT RATIO. The gross profit ratio reflects the efficiency with which management produces each unit of product. This ratio indictes the average spread between the cost of goods sold and the sales revenue

GROSS PROFIT RATIO = GROSS PROFIT /SALES

Sl.no

years

BABASAB PATIL

GROSS PROFIT

SALES

RATIO

67

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. 1

2004-05

2536378

269932512

0.93

2

2005-06

15767888

231390442

6.81

3

2006-07

27291869

254655866

10.71

4

2007-08

10816537

274253348

3.94

5

2008-09

4049865

256739185

1.57

RATIO 12

RATIOS

10 8 6

RATIO

4 2 0 200405

200506

200607

200708

200809

YEARS

INTERPRETATION: . The gross profit ratio is not satisfactory because this ratio is not stable it is fluctuating widely by year by year from the year 2004-05 to 2008-09. the highest ratio is 10.71 and the lowest ratio is 0.93 here the firm has higher the sales in 2006-07 so the ratio is high and due to lower the sales or higher the cost of good so in the year 2004-05 it is low.

BABASAB PATIL

68

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

WORKING CAPITAL TURNOVER RATIO

The ratio, which expresses the relationship between the working capital and sales, is called as Working capital turnover ratio. It is calculated as follows

NET CURRENT ASSETS TURNOVER = SALES/ NET CURRENT ASSETS

Sl.no

Years

Sales 269932512

Net current assets 81651878

Net current asset ratio 3.30

1

2004-05

2

2005-06

231390442

74532655

3.10

3

2006-07

254655866

84615654

3.00

4

2007-08

274253348

91606768

2.99

5

2008-09

256739185

77170370

3.32

BABASAB PATIL

69

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

Net current asset ratio 3.4 3.3 ratio

3.2 Net current asset ratio

3.1 3 2.9 2.8 2004- 2005- 2006- 2007- 200805 06 07 08 09 years

INTERPRETATION: A working capital turnover ratio indicates that of high working capital turnover and low net working capital here in the firm there is an continuous decrease for 4 years but in last year it has been increased in working capital turnover ratio. The firm is satisfactory with its last year turnover ratio. The firm has to maintain in increasing the working capital turnover ratio.

BABASAB PATIL

70

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

FINDINGS AND SUGGESTION 1. The current ratio of the firm is not satisfactory because the firm is not utilizing available recourses properly. The highest ratio is 2.88 recorded in the year 2004-05 and the lowest ratio is 2.31 recorded in the year 2008-09. So the current ratio is not satisfactory. The firm needs to concentrate on current assets. By utilizing the available resources properly the firm may improve the current ratio. 2. The quick ratio of firm is not satisfactory because in the firm’s quick assets there excess amount than requirement it shows that the company is not utilizing available resources properly. The highest quick ratio is 2.33 recorded in the year 2004-05 and the lowest ratio 1.35 recorded in the year 2006-07. The company needs to concentrate on quick assets. By utilizing quick assets properly the firm may improve this ratio. 3. the inventory turnover ratio is satisfactory because from the year 2004-05 it is go on decreasing but in the year 2008-09 it increased to 5.15 from 4.57 in the year 2007-08 so this ratio is satisfactory. The highest ratio 5.53 recorded in the year 2004-05 and lowest is 4.21 recorded in the year 2006-07. 4. .The gross profit ratio is not satisfactory because this ratio is not stable it is fluctuating widely by year by year from the year 2004-05 to 2008-09. the highest ratio is 10.71 and the lowest ratio is 0.93 here the firm has higher the sales in 2006-07 so the ratio is high and due to lower the sales or higher the cost of good so in the year 2004-05 it is low. 5. A working capital turnover ratio indicates that of high working capital turnover and low net working capital here in the firm there is an continuous decrease for 4 years but in last year it has been increased in working capital turnover ratio. The firm is satisfactory with its last year turnover ratio. The firm has to maintain in increasing the working capital turnover ratio.

6. Here the firm’s operating cycle has continuously decreased The

BABASAB PATIL

71

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG. operating cycle of the firm is satisfactory because it has come down by 10 days. The firm’s cash cycle is also satisfactory as it has decreased from 82 days to 65 days during 2005-06 to 2008-09. However it is also observed that the debtor’s collection period has increased from 0.99 days to 2.08 days during the same time period 7. The changes in working capital of 2004-05 and 2005-06 is 81651878 and 74532655 respectively it shows working capital decreased to 7119223 in 2005-06 which compare to 2004-05 here the decreasing the net working capital firm may not satisfactory with its working capital. 8. the changes in working capital of 2005-06 and 2006-07 is 74532655 and 84615654 respectively it shows the working capital increased of 10082999 in the year 2006-07 compare to 2005-06. By increasing net working capital the firm may satisfactory with its working capital. 9. the changes in working capital of 2006-07 and 2007-08 is 84615654 and 91606768 respectively it shows the working capital increased of 6991114 in the year 2007-08 compare to 2006-07. By increasing in net working capital the firm may satisfactory with its working capital. 10. the changes in working capital of 2007-08 and 2008-09 is 91606768 and 77170370 respectively it shows the working capital decreased of 14436398 in the year 2008-09 compare to 2007-08. By decreasing net working capital the firm is satisfactory with its working capital.

BABASAB PATIL

72

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

SUGGESTIONS 1. To improve the current ratio and quick ratio the company need to concentrate on current assets by utilysing available resources in the current assets the company may improve its current ratio and quick ratio 2. The gross profit ratio is not satisfactory because there is more fluctuating in the ratios so company need to concentrate in its profits 3. during the year 2005 and 2006 the companies working capital is decreased due to less current assets and more liability so it has to make proper use of its current assets and to make improve. 4. during the year 2008 and 2009 the companies working capital again decreased so the firm has to has to concentrate on its current assets to maintain the business transaction .

BABASAB PATIL

73

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

CONCLUTION: This study helps to know that the companies financial position. The sale of the company is decline in the year 2009. There is an increases cost in some years so it is needs to reduce its costs. As the study helps to know that the changes in financial statements i.e. increase or decrease in the liabilities and assets. By the ratio analysis we come to know that the companies solvency. The company have to take some measures to control the costs. By working capital we comes to know its working capital management This study helps us to know that the companies financial position is not appreciable because there is loss in the present year due to high expenses. so it has to control the costs. By the analysis of financial statements I conclude that, overall financial performance of the company is not satisfactory. The company can try to take a some measures to increase profit i.e. proper utilization of available resources.

BIBLIOGRAPHY

BABASAB PATIL

74

THE GADAG CO-OPERATIVE TEXTILE MILL LTD, GADAG.

BOOKS : • FINANCIAL MANAGEMENT : • FINANCIAL MANAGEMENT :

BABASAB PATIL

KHAN AND JAIN I.M.PANDEY

75