1

CHAPTER-1

INTRODUCTION
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Finance in the modern business world is regarded as life and blood of a business
enterprise. Finance function has become so important that it has given birth to financial
management as a separate subject. So this subject is acquiring a universal applicability.

Financial management is that managerial activity which is concerned with the planning
and controlling of the firm’s financial resources. As a separates activity or discipline is of recent
origin it was a branch of economics till 1890. Still today it has no unique body of knowledge of its
own, and it draws heavily on economics for its theoretical concepts.

The subjects of financial management are of immense interest to both academicians and
practicing managers. It is of great interest to academicians because the subject is still certain areas
where controversies exist for which no unanimous solutions has been reaching as yet. Practicing
managers are interested in this subject because among the most crucial decisions of the firm’s are
those which relate to finance and un understandings of theory of financial management provides
them with conceptual and analytical insights to make decisions skillfully.

The modern thinking in financial management accords a far greater importance to

management in decision making and formulation of policy. Financial management occupies key
position in top management and plays a dynamic role in solving complex management problems.
They are now responsible for shaping the fortunes of the enterprise and are involved in allocation
of capital.

DEFINITIONS:

“Financial Management is an area of financial decision making, harmonizing individual motives

and enterprise goals”.
→ Weston and Brigham
“Financial Management is the operational activity of a business that is responsible for obtaining
and effectively utilizing the funds necessary for efficient operations”.
→Joseph and Messi

OBJECTIVES OF FINANCIAL MANAGEMENT:

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1. To reduce the misuse of funds:

It is the objective of financial management to reduce the misuse of funds. I can take
my own example. I hate misusing of my hard earned money. Last month I have bought DVD
writer for starting business of CD& DVD of educational tutorials. But, after spending one month,
DVD writer is being used for the production or business purposes; I think this is misuse of my
fund. If I deposited it in Bank ,I can earn interest on saving account on daily basis. Like me,
company also misuses funds in bad projects. We should learn from objective of financial
management and reduce the misuse of even one rupee.

2. To maximize the profit in long run:

If a business invests his money and wants to earn high profit ,it means it is taking
high risk according to risk theory of financial management. This is not objective of financial
management, but to maximize the profit in long run is aim of financial management.

3. To maximize the wealth of company:

An investor only purchases shares, if he hopes that he will earn high profit on it,
otherwise he can deposit his money in saving account of bank. So ,it is the objective of financial
management to maximize the value of share. It can be possible by following way.

• To increase dividend per share

• To increase earnings per share

• To analyze the value of share in market

SCOPE OF FINANCE FUNCTIONS:

Three most important activities of a business firm are

• Finance
• Production
• Marketing
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The firm secures capital it needs and employ in its activities which generates returns on
invested capital. A business firm is an entity that engages in activities to perform the functions of
finance, production and Marketing.

The raising of capital funds and using them for generating returns and paying returns to the
supplies of funds is called the finance function of the firm. The main function of the financial
managers is to plan for analyzing and utilizing funds to make the maximum contribution for the
operation of the organization.

It realizes knowledge of the financial market from which the funds are drawn; it realizes
knowledge of how to make sound investment decisions and to simulate efficient operations in the
organizations. A large number of alternate choices involved in financial decisions. The choices
include the use of internal resources, external funds and long-term funds.

FUNCTIONS OF FINANCE:

The function of raising funds, investing them in assets and distributing returns earn from
asset to shareholders are respectively known as financing, investment dividend decisions, finance
functions or decisions include.
• Investment or long term asset mix decisions.
• Financing or capital mix decisions.
• Dividend or profit allocation decisions
• Liquidity or short term asset mix decisions.

1. Investment Decisions:
This comprises decisions relating to investment in both capital and current assets. The
financial manager has to evaluate different capital investment proposals and select the best
keeping in view of the overall objective of the enterprise.

The investment in the current assets will depend on the credit and inventory policies
by the enterprise. The credit policy is determined keeping in view of the need of growth in sales
and availability of finance. Similarly, the inventory policy will be setup taking in to account
requirement of production, the market trend to the price of raw material and availability of the
funds.
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2. Financing Decisions:
Financing decisions is the second important function to be performed by the financial
manager. Broadly, he must decide when, where and how to acquire funds to meet the firm’s
investment needs. The financial manager is concerned with determining the best financing mix
cum capital structure for his firm. Once the financial manager is able to determine the best
combination of debt and equity must raise they appropriate amount through the best available
sources

3. Dividend Decisions:

A dividend decision is the third major financial decision. The financial manager must
decide whether the firm should distribute all profits or retain them or distribute the portion and
retain the balance. The optimum dividend policy is which maximizes the market value of the
firm’s shares. Thus if shareholders are not indifferent to the firm’s dividend policy the financial
manager must determine the optimum dividend payout ratio.

4. Liquidity Decisions:

Current assets manager that affects a firm’s liquidity is yet another important finance
function, in addition to the management of long term assets. Current assets should be managed
efficiently for safeguarding the firm against the dangerous of liquidity and insolvency. Investment
in current assets affects the firm’s profitability, liquidity and risk.

Sugar Industry is one of the major industries in the world supplying important
products and providing employment to milling of farmers, workers technicians and
traders. No doubts, both from the view point of capital invested and labor employed,
sugar industry occupies a very prominent place in Indian Industry next to textiles. Its
importance in Indian economy cannot be under emphasized. It is the largest agro
processing industry in Indian with a 1.76 percent weight age in the annual industrial
production. The sugar factories located all over the country work to as the nuclei for
the development of rural areas by mobilizing rural resources,. Generating employment
 6

developing transport and communication facilities. The Industry caters to over the
7.5% or rural population of India. Every year over Rs.10,000 crore is paid out as
sugarcane price to farmers.

The Industry provides the most effective instrument for carrying progressive
trends into the country side. It is among the largest taxpayers to the Central and Stage
exchequers of around Rs 1600 crore. It has the potential to earn the nation Rs. 2000
crores of foreign exchange annually. It is a matter of pride the India is the largest
producer of sugar in the world the 11th year in succession.

Another factor responsible for high level of working capital is that the repair and
maintenance of work undertaken in the off seasons. But the rate of interests in short
term loans varies with the credit rating of factories as assessed by the banks. Generally
the credit rating of the most of the sugar mills is not high, so, the interest charged by
the banks is almost equal to 20%. This creates heavy burden and lead to financial crisis.

The profitability analysis of Reserve Bank of India in respect of a few selected

companies reveals that the sugar industry makes on an average only 90% on Total
Capital Employed.

The present study is undertaken with the aspiration that it would be useful in
maintaining various components of working capital and efficiency of “Working
Capital Management of K.C.P. Sugar & Ind Cor Ltd”.
 7

NEED OF THE STUDY

In a perfect world there would be no necessity for current assets and current
liabilities because there would be no uncertainty, no transaction costs, information
search costs, scheduling costs, or production and technology constraints. However the
world in which we live is not perfect.

So organization may be faced with an uncertainty regarding availability of

sufficient quantity of critical inputs in future at reasonable price. This may necessitate
the holding of critical inputs in future at reasonable price. This may necessitate the
holding of Inventory i.e., current assets.

To ensure that each of the current assets is efficiently managed to ensure the
overall liquidity of the unity and at the same time not keeping too high a level of any
one of them working capital management is a must.

Working capital management ensures smooth working of the unit without any
production held ups due to the paucity of funds.

Thus as working capital is the life blood and nerve center of a business. It is
managed in order to attain a smooth running of the business.
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SCOPE OF THE STUDY

The present study is undertaken with an intention that it would be helpful in

assessing the Working Capital position in the organization and to make
recommendations for the improvement of the working capital requirements of dodla
dairy Ltd.The Study also highlights the present scenario of the Sugar Industry in the
global market as a whole and the contribution of dodla dairy Ltd in the Indian Market
& State Market in Particular.The Study includes various aspects regarding the
future plans and diversification activities of dodla dairy Ltd; in Directors
Report.Thus a good deal of ground is covered in the study, including the trends of
various components of working Capital, so as to find the effect of each component on
working Capital.
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OBJECTIVES OF THE STUDY

 To determine the trends in working capital components, so as to find the

inference of each component on working capital of the firm.

 To determine the working capital position in the organization by interpreting

various ratios like working Capital Turnover ratio, Creditors Turnover ratio,
Debtors Turnover ratios & Liquidity ratios.

 To Study the Liquidity solvency and capability position of dodla dairy Ltd.

 To offer Suggestions for the improvement of financial position of dodla dairy

Ltd.
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RESEARCH METHODOLOGY

The basic method that is followed in the present study in Analysis and
interpretation of various information relating to working capital that is available in the
Financial Statements of the Company.

To graph the trends effectively the information of the 6 years was gathered form
the balance sheet and profit & Loss Account of the company.

Each department of the company is individually met so as to get familiarity of

the operations done by each department with a great deal.

Various ratios are calculated to interpret the working capital position of

company from the data i.e. obtained from the financial statements.
1.primary data:
The primary data comprises information obtained thriugh detailed discussion
whith managers and from the meeting with officials,staff and workers of the particular
company during the period to arrive at certain conclusions about the study.

2. Secondary data:
The secondary data is obtained from annual reports financial statements like
balance sheet and profit & loss accounts, reports, journals, and other information journals
of the organization and from the text books of financial management.
 11

LIMITAIONS OF THE STUDY

The study is made by secondary data collection and the calculation of various
ratios depend on the information in the annual reports of the company.

Through this study of the Capital Budgeting position in dodla dairy Ltd, the
sources of funds have affected a lot due to major fluctuation in the Capital Budgeting
decision.

 The analysis made on the basis of secondary data

 As there is more dependency is secondary data realistic conclusion may not

be possible to be made.

 There may be approximations

 The study was carried in dodla dairy Ltd, for a period of 6 weeks.
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CHAPTER-II

INDUSTRY PROFILE
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DAIRY INDUSTRY IN INDIA

India with 57milions cows and 39miiions buffaloes has the largest population of cattle in
the world. Mild production given employment to 70milion dairy farmers. In terms of the total
nd
production, India ranks 2 to USA with a production of 71 mtons in 1997-97. Milk production
is expected to cross 74m tons in 1998-99, making India the no I milk producing nations in
the world. Although milk production as grown at a fast pace during the last three decades, milk
yield per animals is very low in India at around 1.5Lt.per day. The main reason for the low
yield is lack of use of scientific practices in mulching. Inadequate availability of fodder in all
seasons. Unavailability of veterinary health services.

2.1.1 Operation Flood:

The transition of the Indian milk industry, from a situation of net import to that of
surplus has been led by the efforts of national dairy development board operation flood
programmed under the aegis of the former chairman of the board Dr. Kurien.
Launched in 1970, operation flood has led to the modernization of Indian dairy sector
and created a strong network for procurement processing and distribution of milk has increased
from 132 GM per day in 1950 to over 220GM per day in 1998. The main thrust of operation
flood was to organize dairy co-operatives in the milk-shed areas of the village, and to link them
to the four metro cities, which are the main markets for milk. The efforts undertaken by
NDDB have not only led to enhance production, improvement in methods of processing and
development of a strong marketing network, but have also led to the emergence of dairying as
an important source of the employment and income generation in the rural areas. It has also led
to an improvement in yields, longer location periods, shorter calving intervals, etc.,
through the use of modern breeding techniques. Establishment of milk collection centers
and chilling centers has enhanced life of raw milk enabled minimization of wastage due to
spoilage of milk. Operation flood has been one of the world largest dairy development
programme and looking at the success achieved on India by adopting the co-operative route a
few other countries have also replicated the model of India’s white revolution.
Market size for mil sold in loose/package form is estimated to be 33m tons valued at
Rs.429bn. the market is currently growing at round 4.5% pa in volume terms. It is one of
the single largest segments amongst food products.
Milk production is largely concentrated in few state namely Uttar Pradesh,
Gujarat, Punjab, Rajasthan and Haryana. Milk production grew by a mere pa between 1947 and
1970 and 1970. Since the early 1970’s under operation flood, production growth increased
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significantly averaging over 5% pa.

About 75% of milk is consumed at the household levels, which is not a part of
commercial dairy industry. Milk demand in four large metros is estimated to be 6m liters per day
about 40 % of which is supplied by 10 public sectors/ co-operative dairy plants. The bulk of the
remainders are supplied by the traditional unorganized sector. Loose milk has a larger market
in India as it is perceived to be fresh by most consumers. In reality however, it opposes a
higher risk of adulteration and contamination.

Operation flood achievements

Dairy Co-operatives Progress on Key Parameters during 2005 – 08

State/UT No. of DCS Farmer Women Milk Milk

Organized Members Members Procurement Marketing

Andhra Pradesh 4,647 779 144 1,087 1,130

Assam 66 3 0 3 7
Bihar 5,183 265 39 553 303
Chhattisgarh 526 25 6 26 31
Delhi NA NA NA NA 2,350
Goa 175 19 3 52 90
Gujarat 12,025 2,458 633 6,441 2,353
Haryana 5,382 261 38 405 278
Himachal 391 20 7 25 20

Pradesh
Jharkhand 80 2 0 6 191
Karnataka 10,114 1,838 527 2,961 1,711
Kerala 3,282 750 132 764 848
Madhya Pradesh 5,008 246 37 457 315
Maharashtra 19,537 1,637 398 2,802 2,749
Nagaland 78 3 0 4 4
Orissa 2,164 142 60 203 158
Pondicherry 104 36 16 57 70
Punjab 6,749 405 50 784 526
Rajasthan 12,714 594 152 1,557 1,014
Sikkim 209 7 0 8 8
Tamil Nadu 7,832 1,876 639 2,085 1,507
Tripura 84 4 1 3 9
Uttar Pradesh 18,776 861 246 828 430
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West Bengal 2,449 185 65 336 706

ALL-INDIA 117,575 12,416 3,194 21,447 16,808

2.2 MARKET SIZE AND GROWTH:

Market size for milk(sold in loose/package form) is estimated to be 33m tons valued at
Rs.429bn.the market is currently growing at round 4.5% pa In volume terms. It is one of
the single segments amongst food products.
Milk production is largely concentrated in few states namely Uttar Pradesh, Gujarat, Punjab,
Rajasthan and Haryana. Milk Production grew by a mere 1% pa. Between 1947 and a970. Since
the early 70’s under operation Flood, production growth increased significantly averaging
over 5%pa.

2.3 MAJOR PLAYERS:

The packed segment milk segment dominated by the dairy co-operatives. Gujarat co-
operative milk marketing federation(GCMMF) is the largest players. All other local dairy
co-operatives have their local brands(forEg. Goku,Varanasi in Maharashtra, Saras in Rajasthan,
Punjab, Dodla Dairy Limited in Telangana, Aavin in Tamil Nadu etc.).Other privative players
Include J K Dairy, heritage foods, Indiana Dairy, Dairy specialties etc. am rut Industries, Once
a leading players in the sector has turned bankrupt and is facing Liquidation.
The dairy industry was delicensed in 1991 with a view to encourage private investment and
flow of capital and new technology in the segment. The government promulgate the
MMPO(Milk and Milk Products Order)in 1992.MMPO prescribe state registration to plants
producing Between 10000 to 75000 liters of milk per day or manufacturing milk
products

Containing between 500 to 3750 tones of milk solids per year. Plants producing over 75000
liters per day or more that 3750 tones per year on milk solids have To be registered with the
central Government. The stringent regulations, Government controls and licensing requirements
for new capacities have Restricted large Indian and MNC players from making significant
investment in this product category. Most of the private sector players have restricted
themselves to manufacture of value added milk products like baby food, dairy whiteners,
condensed milk etc.
2.4 INDIA WORLD’S LARGEST MILK PRODUCER:
India has become the world’s No.1 milk producing country, with output In 1999-
2000(marketing year ending March 2000) forecasting at 78 million tones. United States, where
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the milk production is anticipated to grow only Marginally at 71 million tones, occupied the top
slot till 1997. In the year 1997, India’s milk production was on par with the U.S at 71 million
tones. The worlds milk production in 1998 at 557 million tons would continue the steady progress
In recent year further more, the annual rate of growth in milk Production in India is between 5-6
percent, against the worlds at 1 percent. The Steep rise in the growth pattern ahs attributed to a
sustained expansion in Domestic demand, although per capita consumption is modest at 70kg of
milk Equivalent.

ANNUAL MILK PRODUCTION HAS TREBLED:

India’s annual milk production has more than trebled in the last 30 years, rising from 21
milling tones in 1968 to an anticipated 80 million tones in 2001. this raped growth and
modernization is largely credited to the contribution of dairy co-operatives, under the operation
flood(of) project assisted by many multilateral agencies, including the European union, the
world bank, FAO and WFP(world food program’). In the Indian context of poverty and
malnutrition. Milk has a special role to play for its many nutritional advantages as well as
providing supplementary income to some 71 million farmers in over 500,000 remote villages.

2.4.1 Indian Dairy: Expanding Daily:

India’s modern dairy sector has expanded rapidly. From an insignificant 200,000
liters per day (lpd) of milk being processed in 1951, the organized sector is presently handling
some 20 million lpd in over 400 dairy plants. Already, one of the world’s largest liquid milk
plants is located in Delhi, handling over 800,000 liters of milk per day(Mohter Dairy, Delhi).
India’s first automated dairy (capacity: 1 million lpd)- Mother Dairy, Gandhi agar has been
established at Gandhinagar near Ahmedabad, Gujarat, in Western India. India’s biggest
dairy co-operative group, Gujarat Co-operative Milk Marketing Federation (FCMMF) in
Anand, owns id with an annual turnover in excess of Rs. 23 billion (US$500 million). Amul -
III with its satellite dairies, with total installed capacity of 1.5 million lpd has also been
commissioned. India’s first vertical dairy (capacity:400,000 lpd), owned by the pradeshik
cooperative Dairy federation (PCDF) has been commissioned at Nodia, outside Delhi.

The winning Edge:

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A vast market for dairy products is being built as disposable incomes increase. Its
focus is the increasingly affluent middle class, numbering some 300 million almost the
population of the United States – which is confined to well - defined urban pockets and is
easily accessible. Milk occupies pride of place as the most coveted food in the Indian diet,
after wheat and rice. Milk based sweets are a culinary delight in all homes throughout the
year.
The milk production is pre-dominantly rooted in the co-operative system. Its focus is on
the small rural farmer having one or two cows/buffaloes, yielding 2-3 liters of milk per animal.
This system is the basis of Operation Flood, the world’s largest dairy development program.
The preferred dairy animal is the buffalo. Some 65 percent of the world buffalo milk is
produced in India. It has 30 per cent higher total solids compared to cow milk - an average
of 16% vs. 12% for cow milk. Valued for its high fat content (7% vs. 3.5%), it is also high
in calcium, phosphorus, lactose and proteins, buffalo milk is the delight of the milk processor
for its more profitable handling.
Table 2.2
World’s Top Milk Producers:
Countries 1998 1997 1996
India 74 71 68
United States 71 71 70
Russian Federation 33 34 36
Pakistan 22 21 20
Brazil 22 21 19
Ukraine 14 15 16
Poland 12 12 11
New Zealand 12 11 10
Australia 10 9 9
EC 125 125 125
World(includes others) 557 549 542

2.5 EXPORT POTENTIAL:

India Has The Potential to Become One Of The Leading Players In Milk Product Exports.
Location Advantages: India is located admit major milk deficit countries in Asia and
Africa. Major importers of milk and milk products are Bangladesh, China, Hong Kong,
Singapore, Thailand, Malaysia, Philippines, Japan, UAE, Oman and other Gulf countries, all
located close to India.
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Low cost production: Milk production is scale insensitive and labour intensive. Due to low
labour cost, cost of production of milk is significantly lower in India.

Concerns in export competitiveness are:

2.5.1 Quality: Significant investment has to be made in milk procurement, equipments,
chilling and refrigeration facilities. Also, training has to be imparted to improve the quality to
bring it up to international standards.

2.5.2 Productivity: To have an exportable surplus in the long-term and also to maintain cost
competitiveness, it is imperative to improve productivity of Indian cattle. There is a vast
market for the export of traditional milk products such as ghee, shrikhand, rasgolas and other
ethnic sweets to the large number of Indians scattered all over the world.

INDIAN TRADITIONAL MILK PRODUCTS

There are a large variety of traditional Indian milk products such as Makkhan unsalted butter.

Ghee - Butter oil prepared by heat clarification, for longer shelf-

life. Kheer - A sweet mix of boiled milk, sugar and rice.
Basundi - Milk and sugar boiled down till it
thickness. Dahi - A type of curd.
Lassi - Curd mixed with water and sugar /salt.
Channa / Panner - Milk mixed with lactic acid to
coagulate.
Khoa - Evaporated milk, used as a base to produce sweet meats.

The market for indigenous based milk food products is difficult to estimate as most
of these products are manufactured at home or in small cottage industries catering to local areas.
Customers while purchasing dairy products look for freshness, quality, taste and texture, variety
and convenience. Products like Dahi and sweets like Kheer, Basundi, and Rabri are perishable
products with shelf life of less than a day. These are several such small shops within the
vicinity of residential areas. Consistent quality, taste and freshness build consumerloyality.
There are several sweetmeat shops, which have build a strong brand franchise, and have several
branches located in various parts of a city.
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DAIRY DEVELOPMENT:

In 1960 pilot milk supply scheme was stared in the state for the dairy development. Its initial
capacity was 100 liters a day at the time of starting. Now it’s daily collection increased to
11 lakhs liters per day. It is also working as alien between milk producers of the towns by
providing reasonable price to the producers to maintain stable market.

OPERATION FLOOD:

In our state operation Flood was divide into three based as “Anand
Level”

 Village Level

 District Level

 State Level

OPERATIONAL FLOOD PROGRAM:

INDIAN dairy development Co-operation owns the responsibility of implementation of
operation flood program, which provides money assistance up to 70% towards loan and 30% as
subsidy. National Dairy Development Co-operation selected Districts of the State for
implementation of operation flood. It divided the districts into 10 milk collection mandals.
Districts selected under operation flood ograms:
Name of the District Mandal
1. Srikakulam Visakha
2. Dodla Dairy Limited, nagaram Visakha
3. Visakhapatnam Visakha
4. East Godavari Godavari
5. West Godavari Godavari
6. Krishna Krishna
7. Guntur Guntur
8. Prakasam Prakasam
9. Chittor Chittor
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10. Cuddapah Cuddapah

11.Kurnool Kurnool
12. Medak Medak
13. Nizamabad Nizamabad
14. Nalgonda Nalgonda

TABLE 2.5
DETAILS OF INSTALLED PROCESSING CAPACITIES
Capacities in 1000Lts. Or KGs. Per day
S.No Name of the Cheese Liquid Milk Powder Butter Ghee U.H.T
Dairy Processing Mfg Mfg Mfg Milk Lt/d
1 Visakha Dairy 300 13 8 50
2 Rajahmundry 150 4
3 Dodla Dairy Limited, 250 22 12 25
4 Ongole Dairy 300 30 8 10
5 Nellore Dairy 75 4
6 Chittor MPF 200 14 8
7 Nandyal MPF 150 10 4
8 Hyderabad 250 12 8 30
9 Mother Dairy 200 4 4
10 Other Dairies 249

The table shows details of installed capacities of various dairies in Andhra Pradesh. In liquid
milk processing Visakha Dairy and Ongole Dairy and top with 3,00,000 Lts. Per day
processing capacity and it is followed by Dodla Dairy Limited Milk products factory and
Hyderabad milk products factory with 2,50,000 Lts per day in powder manufacturing
Ongole dairy is having processing capacity with 30,000 kgs per day and it is followed by
Dodla Dairy Limited milk products factory with 22,000 kgs. Per day with regard to better
manufacturing there are only two dairies i.e., Ongole and Mother Dairy Hayathanagar with
8,000 kgs and respectively. Ghee manufacturing capacity is high in Dodla Dairy Limited milk
processing there are only 3 dairies, Visakha Dairy is having high processing capacity with
50,000 Lts. per day followed Dodla Dairy Limited milk products factory. Cheese is
manufactured only by Chittor factory with a processing capacity of 3,000 kgs a day
 21

TABLE 2.6: Details Of Milk Production sectors in A.P.

Number Of Co-operative Societies 4857

Number Of Other Centers 4297
Total Collection Centers 9154
Number Of Milk Procurement Routes Villages 10,249
Producers 886,800
Number Of Milk Chilling Centers 67
Number Of District Dairies 9
Number Of Milk Powder Plants 7
Number Of Cattle feed Plants 8

THE KDM PRODUCERS CO-OPERATIVE UNION LIMITED

1. Number of village covered 815

2.Number of cooperative societies 534
3.Number of milk routes 35
4.Number of chilling centers 6
5.Number of feed mixing plants 2
6.Milk products factory area 27.3 acres
7.Value of factory building Rs 120 lakhs
8.UNICEF aided equipment value Rs.57 lakhs
9. Value of other buildings and investment Rs.270 lakhs
10. Date of commissioning of milk products 11.4.1969
11.Total Staff 1854
12.Date of formation of union 6.7.1983
13.Date of transfer of management of union 8.2.1985

COMPANY PROFILE
 22

Dodla Dairy Limited is a Public Limited Company having its Head Quarters at
Hyderabad City of Telangana State. The company is established by a well-known family of
Nellore district of Andhra Pradesh in the year 1998. The company procures, process and
sells milk and milk products across 66 places in India.

Dodla Dairy is an ISO 22000: 2005 and ISO 50001:2011 (EnMS) Certified Organization.
The company is having 9 state of art technology Processing Plants, 30 chilling centres, 20 Bulk
Milk Chillers and 23 Associate Chilling Centers. The company has a wide distribution network
across pan India. The products and services are offered through 16 Sales offices.

The company offers wide range of Milk Products Comprising of Fresh Milk, Butter,
Ghee, Paneer, Curd, Flavoured Milk, Doodh Peda, Ice Cream and Skimmed Milk Powder.
These products are conveniently packed to suit various needs of consumers. The company grew
rapidly during the past one and half decades. Today it is one of the popular dairy companies in
India. The consistent growth of the organization reflects the customer confidence on the
products and services offered.

The company has gained the competitive advantage over the other players by
delivering the highest quality dairy products to the consumers. Now, the company is prepared to
face the future challenges by upgrading its systems and infusing new technology.

Directors

Mr. D.Sunil Reddy is the Managing Director of the company who is hailing from a
philanthropic family called DODLA of Nellore town,Andhra Pradesh,India. He is a graduate in
Industrial Engineering from Mangalore University. He was in Construction and Agro Products
Export business for about 6 years. Envisaging the need for high quality Milk & Milk Products in
the Urban Market, he entered into the Dairy Industry in the year 1995. During initial stages his
agricultural background helped to establish the roots of the company at various locations.
Mr.Reddy's family also involved in the veterinary research activities at USA.

He is actively involved in leading and directing the company towards new technology,
systems and finding new avenues for growth. He is providing the resources needed for
 23

transformation of ideas into reality. He takes the strategic decisions for the sustenance and
growth of the company.

Mr. D. Sesha Reddy an Arts Graduate from Osmania University is the Chairman of
the
Company. He is having more than 40 years of industrial experience in the capacity as
Managing
Director and Director in different industrial facets like Paper, construction, Software
and
Castings. Presently he is involved in guiding and mentoring the top executives of the
company.

Mr.Deepak Malik is the Director of the company. Mr.Malik joined Black River, an
independently managed subsidiary of Cargill, in 2007.
Mr. Malik has been with Cargill since 1995. Prior to Black River, he was a co-founder and
Managing Director of Cargill Ventures. Prior to Cargill Ventures, Mr. Malik worked in Cargill's
Strategy and Business Development Group, where he managed corporate strategies and mergers
and acquisitions within the petroleum, natural gas, coffee, grain and oilseeds, and meat
industries. Mr. Malik also spent one year in international sales for Cargill's fertilizer division. Mr.
Malik relocated to New Delhi, India in 2006 to provide regional oversight of several cross-border
investments. Previously, he worked with the JMA Group managing distribution operations,
principally motor parts and accessories for Telco (Tata Group) heavy vehicles.
Mr. Malik holds a Bachelor's degree in Economics from Delhi University, a Master's degree in
Economics from the Delhi School of Economics and an MBA from Cornell University. Mr.
Malik speaks English, Hindi and Punjabi.

Mr.Jim Sayre is the Director of the company. Mr.Jim Sayre joined Black River, an
independently managed subsidiary of Cargill, in 2007.
Mr. Sayre has been with Cargill since 1994. Prior to Black River he served as president and
founder of Cargill Ventures, a proprietary fund with $200 million in capital deployed across a
40- company portfolio. Prior to Cargill Ventures, Mr. Sayre was Director for global mergers and
acquisitions at Cargill. Previously, Mr. Sayre worked as a Senior Manager for Deloitte
Consulting and held a position with the United States Department of Agriculture.
Mr. Sayre holds a Master of Business Administration from Harvard Business School and
a Bachelor of Arts from the University of California at Davis.
 24

Team
Chief Executive Officer
(C.E.O)
Mr. B. V. K. Reddy sets overall direction and leads the Dodla Dairy Ltd's management team
in all aspects of company's operations in India as well as abroad. With the MD & board of
directors he also plays a key role in seeing the strategies of the company. He is focused on
enhancing Dodla's inherent strengths and securing future growth for the company through
people, product, market & capacity expansions. He has been instrumental in driving
company's operations and chief architect of the company's exceptional growth in the recent
years.BVK Reddy joined Dodla
in 1997,bringing with him extensive experience from across the dairy industry. BVK has 30
years experience in the dairy industry in a variety of roles including general management,
operations, supply chain, sales, marketing as well as dairy farmer interfacing. He was previously
associated with Amul Dairy and Premier Industries Ltd.
B V K Reddy is a B.Tech - Dairy Technologist from Osmania University in the year 1985.
During his professional tenure he also underwent various management and global leadership
programs offered by leading business schools such as Cornell University & Indian School of
Business. He travels across the world to remain updated on all latest developments in the
global dairy sector. He is well networked with various national and international
dairy /Veterinary Institutions as well as Secretary of Indian Dairy Association, Telangana
Chapter.

Head - Procurement
(Milk)
Mr. V. S. R. Krishna Reddy is a Commerce graduate from Acharya Nagarjuna University.
He has more than 35 Years of experience in the field of Procurement of milk and animal
husbandry activities. He is instrumental in building the Milk Procurement activities
systematically in the organisation. He played a vital role in bridging the gap between the
company and the milk producers by establishing direct collection centres at the village level.He
was associated with National Dairy Development Board (NDDB) before joining us.
Head - Human Resources &
Admin
 25

Mr. A. Madhusudhana Reddy is playing key role in bringing the talent pool into the
organization and developing a value based culture in the organisation. He handles the Statutory
compliance, Legal affairs and Public relations of the organization. Mr. Reddy is leading the
SOPs implementation initiative. He plays a vital role in the acquisition of new process facilities
and lands. His current focus is on HR Automation and PMS in the company. Mr. Reddy is a law
graduate from SV university and holds PGDM in HR & IR from Pondicherry university and SV
university respectively.Has over 24 years of experience in HR, statutory compliance,
Administration and legal affairs. He is a life member of NHRD, Hyderabad chapter.

Head - Materials

Mr. S. David Raj is a Graduate in Economics with PG Diploma in Material Management with
over 34 years of experience in handling the Inventory and Purchase Management Functions. He
has established the Standards for the Materials purchase and inventory controls in a systematic
way.Prior to this company he was associated with Amul Dairy and HFL.

Head - Marketing (Bi-

Products)

Mr. T. Rama Krishnan is commerce graduate with more than 30 years in Sales & Marketing of
FMCG products. He is playing key role in expansion of product sales activities in the northern
parts of India.Currently he is working on business expansion in the uncovered states.
Previously he was associated with HLL and Emami Limited.

Head - Quality Assurance

Mr. Sebastian Joseph is a Post graduate in Engineering from IIT Kharagpur with more than 26
years of experience in Quality Assurance and project Management functions. He is involved in
implementation of Food Safety systems like ISO:22000 and EnMS:50001 in the organization.
Previously he was associated with the National Dairy Development Board(NDDB).

Our Values

We give top most priority to the Dignity of Labour & Moral Values.
 26

Our values are commitment, sincerity, hard work, transparency, integrity and honesty.
These values are our "CORE" and we will display them in all our actions. We believe in the best
quality right from Raw Material to Processing, Processing to Distribution and Management of
People. We are Prudent in guarding and conserving our resources effectively.
Products
 Milk
 Curd
 Ghee
 Paneer
 Doodh Peda
 Butter Milk
 Flavoured Milk
 Cooking Butter
Dodla Milk
Dodla Dairy has over one and half decade expertise in collection and processing of the
milk. The fresh milk from the Buffalos and cows brought to the nearest chilling centres and
then to the processing Plants with in a stipulated time period without breaking the cold chain.
The chilled milk will be pasteurised at the processing factories. This process will kill a
pathogenic microbe that causes spoilage of milk. It also kills harmful bacteria like Salmonella,
Staphylococcus, Listeria, Yersinia, Campylobacter and Escherichia etc. Pasteurization can
prevent diseases including Tuberculosis, Brucellosis, Diphtheria, Scarlet Fever and Q-Fever etc.
After the completion of serial process the milk will be safe for human consumption.
 27

The company offers different types of milk variants as per customer requirements like Full
Cream Milk, Toned Milk and Double toned milk, standardised milk etc. The customer can
choose between Cow & Buffalo milk as per their taste and habits.
Children upto the age of 10 years need Calcium, Potassium, Fibre and Vitamins. The cow's milk
will improve the levels of Vitamin-D. A research conducted in Toronto stated that, children
drinking only non-cow's milk were more than twice as likely to be Vitamin-D deficient
as children drinking only cow's milk.

Dodla milk is packed in high quality food grade pouches. These pouches are user friendly to the
 28

consumers. The product undergoes stringent quality checks before packing. Every time you buy
a pouch of Dodla milk, you are assured of fresh flavour, taste and nutritional value.

Dodla Curd
Curd is a natural dairy product made out of Milk. It is rich in calcium and is good for
digestion. The Dodla curd is made out of good milk from the best country buffalos and cows.
The product is made by using high quality Culture. Milk is fermented with lactic acid present in
curd under low temperatures (optimum 69 degrees F).
Dodla curd is available both in sachets and enclosed containers with good taste
and thickness. Dodla curd bears the un-compromised dairy expertise. A family consuming Dodla
curd daily stays healthy. The Dodla Curd is Packed in 200 Grams Food grade poly cups and
sachets.
The Cup curd is Packed in disposable food grade cups. The curd pack variants
are available in 100 and 200 grams. Dodla Curd is available in all supermarkets like Big bazaar,
Food World / Reliance Fresh, D Mart etc. Also, the products are available with local milk
vendors in all towns and cities of south India.

Benefits Of Curd
 Low fat or skimmed curd is good for people who are suffering from higher levels of cholesterol
as the fats are removed through processing.
 Those, who are lactose-intolerant, can consume curd, as bacteria present in it break down
the lactose, before it enters your body.
 The bacteria in curd can help digest food and thus check the problem of stomach infection.
 29

 Studies have suggested that consumption of curd might help reduce the risk of high
blood pressure.
 Being rich in calcium, curd is good for the health of bones as well as the teeth.
 Eating curd on a regular basis can help you absorb the nutrients in other foods as well.

Dodla Ghee
Dodla Ghee is made from Buffalo and Cow Fat. This is made by simmering unsalted butter in
a large pot until all water has been boiled and protein has been settled at the bottom. The
cooked
and clarified butter is then spooned off to avoid disturbing the milk solids on the bottom of
the pan. Dodla Ghee is made without adding any preservatives or chemicals. The natural
Aroma is the main feature for its success in the Ghee market. Ghee lover's first choice is Dodla
ghee.

Ghee is used in almost all varieties of Indian sweets. It is observed that, in case of sweets
made out of ghee, the flavour, aroma and taste obtained is entirely different when compared to
sweets made without ghee.
 30

Dodla Paneer

Dodla Paneer is an unaged, acid-set, non-melting farmer cheese made by curdling heated
milk with food acid. We usually find Paneer pressed into a cube and then sliced or chopped.
Paneer is one of the few types of cheese indigenous to the Indian sub-continent, and is
widely used in Indian cuisine and even some Middle Eastern and Southeast Asian cuisine.
Paneer is completely Lacto-Vegetarian. Paneer is a source of protein for vegetarians. Paneer is a
taste adding agent to many dishes in the modern world.
Dodla Paneer contains less moisture, It has got separate segment of buyers due to its good
taste and quality.

Dodla Doodh Peda

Doodh Peda is a Delicious sweet made from pure Buffalo Milk. The granule texture and mouth-
watering taste is assured. Doodh Peda is packed specially to retain the Freshness and Natural
flavour.

The product is available in the following

pack sizes.
 20 Grams
 200 Grams
 500 Grams

Dodla Butter Milk

During hot sunny days, due to high temperature people will get exhausted very fast. To revive
 31

our vitality and energy we require natural drink like butter milk. Dodla Butter Milk can meet
your
requirement. It has been introduced after conducting a research about our body
requirement during the summer. Buttermilk is a product of mixture of curd, water, salt, ginger,
green chillies, coriander and curry leaves.
The product is packed in 'Food Grade Pouch Film' which is available in 200 ML packs
only.

Beware of Artificial / Duplicate

Nowadays, most of the commercial milk dairies are using lactic acid bacterium culture to
pasteurized sweet whole milk or, more commonly skim milk or non-fat milk. They may or
may not have added butter flecks. After the addition of the culture, the milk is left to ferment for
12 to14 hours at a low temperature (optimum 69 degrees F). It is usually labelled cultured
buttermilk and may be salted or unsalted. So, for the customers who are under sodium
restricted diet, it is better to check the label well before you buy the buttermilk as it may be a
salted one or unsalted. Buttermilk has lower fat than any other regular milk, because the fat has
been removed to make butter. It is also high in potassium, vitamin B12, calcium, and riboflavin
as well as a good source of phosphorus. Those with digestive problems are often advised to
drink buttermilk rather than milk, as it is more quickly digested. Buttermilk has more lactic acid
than skimmed milk.
Dodla Flavoured Milk

Dodla flavoured milk , an emerging health drink that will refresh your senses. The product is
treated at high temperatures (UHT) and packed aseptically to ensure high quality and purity.
 32

Natural Flavours from Dodla

 Vanilla
 Elaichi
 Pista
 Badam
 Chocolate
 Strawberry

The flavoured milk is tastier and healthier. The drink is available in various flavours and is quite
colourful. So it would make the viewer to taste it. The good part is that without their conscious
knowledge consumer is taking milk. This milk sounds good especially for the consumers who do
not like milk.

Dodla Cooking Butter

Dodla Butter is made from the fat of cows' and buffaloes' milk. It's not pure fat. However, only
about 80 percent of ordinary butter is fat. The remaining 20 percent is made up of milk solids
and water.
No other product can come close to Dodla butter because of its rich, creamy mouth feel
and its sublime flavour. Butter is preferred fat being used in every preparation in the culinary
arts. Many consumers prefer having it plain i.e. without being served in a dish. Dodla
butter is prepared in two types. One is salted and the other is unsalted. Most of the consumers
prefer salted as it gives good taste with the bread.

Dodla Butter is available in three variants are

 White Butter (made from Buffalo Milk)
 Table Butter (made from Cow Milk)
 Yellow Butter (made from Cow Milk)Dodla Dairy Sales

Dodla Dairy's Milk products are available in Andhra Pradesh, Telenagana, Tamil Nadu,
Karnataka,Maharashtra,Madhya Pradesh, Rajasthan, Gujarat and West Bengal states. Dodla
Dairy has ultra-modern transportation facilities to ensure the freshness of milk products till it
 33

reaches the customer door step. At present the total liquid milk sale is more than 9 Lakh
Liters and 6
Tonns of Milk Products per day. The Company has established more than 3000 dealer
network for liquid Milk.

The Company has a wide network of more than 450 distributors and 14000 outlets across
India for Milk Products. The Products are also available at modern trade outlets like Reliance
and Food world etc.. Also the company has established exclusive parlors at various Cities and
Towns of south India.
Our Plants
 Nellore
 Badvel
 Koppal
 Kurnool
 Palamaner
 Penumur
 Sattenapally
 Tumkur
 Tanuku

Our Packing Stations

At present the company is having nine(9) milk processing and packaging plants spread across
various places in Telangana, Andhra Pradesh and Karnataka states. The unit locations are
Nellore, Palamaneru, Penumuru, Sattenapally, Badvel, Kurnool, Tanuku, Koppal and Tumkur.
Also there is a Skimmed Milk Powder (SMP) manufacturing unit at Nellore, Andhra
Pradesh State. The combined total capacity of all the 10 (Including SMP plant) processing and
packaging plants is 12 lakh litres per day.
 34

Safety Standards
All the products are conveniently packed in different pack sizes and types to suit various needs
of consumers .

ISO Approvals
Dodla Dairy is an ISO 22000 : 2005 and ISO 50001:2011 (EnMS) Certified Organization.

Premium Quality
We source the milk from farmers by deploying milk analyzers to ensure quality and food safety.
35

CHAPTER-III
 37

THEORETICAL FRAME WORK

WORKING CAPITAL MANAGEMENT

The working capital management or short term financial management is
concerned with decisions relating to current assets and current assets and current
liabilities. The key difference between long-term financial management and short
term financial management is in terms of timing of cash. Long term financial
decisions (like buying capital equipment or issuing debentures) involve cash flow
an extended period of time ( 5 to 15 Years or more); short term financial
decisions typically involve cash flows within a year or within the operation cycle
of the firm. The working capital management is a significant facet of the
financial management. Its importance stems from two reasons:

.Investment in current assets represents a substantial portion of total investment.

.Investment in current assets and the level of current liabilities have to be geared
quickly to changes in sales.

The importance of working capital management is reflected in the fact that

financial managers spend a great deal of time in managing current assets and
current liabilities. Arranging short-term financing, negotiating favorable credit
terms, controlling movement of cash, administering accounts receivable, and
monitoring the investment in inventories consume a great deal of time financial
managers. The management of working capital depends upon certain basic
principle.
 38

PRINCIPLES OF WORKING CAPITAL MANAGEMENT;

In examining the management of current assets (i.e. working capital

management) certain principle have to be borne in the mind. These principle are
the answers that are to be sought to the following question.
 The need of invest funds in the current assets.
 Amount of funds to be invested in each type of current assets.
 The required proportion of the long term and short-term funds to finance
current assets.
 The appropriate sources of funds needed to finance the current assets.

Constituents of Current Assets and Current Liability; CURRENT ASSETS

CURRENT LIABILITY

Inventories Sundry creditors

Raw material and Components Trade Advances

Work in progress Borrowings

Finished goods Commercial banks

OTHERS OTHERS

Trade debtor’s Provisions

Loans and advance

Investments
Cash and bank balances
 39

Short Life Span and Swift Transformation:

In management of working capital two characteristics of current assets must be

borne in mind.

 Short life Span

 Swift transformation into other asset form

Current assets have a short life span. Cash balances are held idle for a week or
two, accounts receivable may have a life span of 30 to 60 days, and inventories
may be held for 30 to 100 days. The life span of current assets depends upon the
time required in the activities of procurement, production, sales and collection
and the degree of synchronization among them.

The nature of current assets is that they are swiftly transformed into other
assets form. Cash is used for acquiring raw materials. Raw materials are
transformed into finished goods, finished goods are generally sold on credit are
converted into accounts receivable finally accounts receivable, on realization,
generate each.

The swift transaction of current assets and the short life span of the
components of working capital can be seen in the current asset cycle. However,
this short life span and swift transformation has certain implications.

 Decision relating to working capital management are repetitive and

frequent.
 The difference between profits and present value is insignificant.
 40

 The Close interaction among working capital components implies that

efficient management of one component cannot be undertaken without
simultaneous consideration of other components.

INVENTORY MANAGEMNT

Inventory is of three types: raw materials, work in progress, and finished goods.
Manufacturing firms generally hold all three types of inventories and distribution
firs hold mostly finished goods. Inventiories represent the second largest asset
category for manufacturing companies, next only to plant and equipment. The
proportion of inventiories to total assets generally varies between 15 and 30
percent.

Primarily executive in production, purchasing and marketing departments take

decisions relating to inventories, as inventory management has important
financial implications, the financial manager has the responsibility to ensure that
inventories are properly monitored and controlled.

NEED FOR INVENTIORIES:

A distinction may be drawn between process or movement inventories and

organization inventories. The former are required because it takes time to
complete a process/operation and move product from one stage to another. The
latter are maintained to widen the latitude in planning and scheduling successive
operations.
The tow basic questions relating to inventory management are:

• What should be the size of the order?

 41

• At what level should the order be palce ?

Three types of costs are incurred in inventory management.

1. Ordering costs

2. Carrying costs

3. Shortage costs

It is related to cost incurred in terms, preparation of purchase order, expediting,

transport, and receiving and placing in shortage etc., all the above costs are
included in ordering costs.

CARRYING COSTS:
These costs are like interest on capital locked up in inventory, storage,
insurance, obsolence and taxes.

SHORT AGE COSTS:

They arise when inventories are short of requirement for meeting the needs of
production or the demand of customers.

PRICING OF RAW MATERIAL AND VALATION OF STOCKS:

Several methods are used for pricing inventories used in production. The
important ones are:

1. F.I.F.O METHOD: this method assumes that the order in which materials
are received in the stores in the order in which they are issued from stores.
 42

2. L.I.F.O METHOD: this method is the opposite of the FIFO method. It

assumes that the material that is purchases last is issued first.

3 WEIGHTED AVERAGE COST METHOD: under this method material

issued are priced in the weighted average cost of material the stock.

MONITORING AND CONTROLLING OF RECEIVABLES:

ABC analysis: ABC analysis, based on the empirical reality, advocated, in the
essence a selective approach to inventory control which calls for a greater
concentration of efforts on inventories times accounting for the bulk of usage
values. This approach calls for classifying inventories into three broad
catergoreis, A,B,C CategoryA, represents the most important items generally
consists of 15 to 25% of inventory items and accounts for 60 to 75% of annual
usage value. Category B, represents items of moderate importance, generally
consists of 20 to 30% of inventory items and representing items of lease
importance, generally consists of 40 to 60% of inventory items and accounts for
10 to 15% of annual value.

JUST IN TIME INVENTORY CONTROL:

The just in time inventory control system implies that the firm should maintain a
minimum level of inventory and rely on suppliers to provide parts and
components "Just In Time" to meet its assembly requirements.

This system is difficult to implement because it involves a lot of change in the

total production and management system. Under this system a concerted efforts
is made to lower the ordering cost and also the safety stock by forgoing stronger
long-term relationship with the supplier.
 43

INVENTORY MANGEMENT INDIA:

Inventory management practices in India are citied below.

• Purchase executive are severely penalized for stock out.

• It pays to keep inventories high because of prices due to inflation.

• Companies carry large safety stocks.

• Due to lack of standardization there is a large variety of stores.

• The most commonly used tools of inventory management in Indian are

ABC ANALYSIS and FSN ANALYSIS, and inventory turnover analysis.

INVENTORY MANAGEMENT OF K.C.P LTD

The K.C.P Ltd is very efficient in the management of its inventory. The company
deals with the following inventores.

• Raw material.

• Work in progress

• Finished goods.

• Stores and Spares.

 44

The raw material that is supply of the cane to the company is manager and
controlled by the purchasing department present in the company this department
is responsible for the supply of cane to the company during its production season.
The cane, which has been brought to the factory has to be crushed within
24hours of its harvest from the fields. So the company sees to it that there is no
break in its production cycle arid the cane is crushed with24 hours of its harvest.
The purchase department effectively maintains the required safety stock and the
recorder level.

The operation department of the company handless the work in progress and
finished inventory. The cane brought to the company is crushed and processed to
get sugar and badges as the finished product. The duration of converting raw
materials into finished goods is about one and half days. And the finished goods
are sold according to the monthly dispatch and free sale depending on the market
trend.

The stores and spares inventory is handled by the general stores department
present in the company.

The general stores of the company consist of about 10000 items required by the
various departments present in the company/the valuations of stocks are done
under last in first out method. The department present in the company sends a
material requisition form, according to their requirements to the general stores.
The stores department issued material, according to the material requisition from
placed by the department. The general stores department handles its stores
through a stores receipt cum inspection report. This report consists of description
regarding the materials present in the general stores.
 45

The shortage of materials in the general stores is reported to the purchase

department. The purchase department after verifying the requirements, place the
necessary order to make purchases.

The inventory management of the company is very efficient. As inventories

represent the second largest asset category for the company. They are properly
monitored and controlled. The decisions in the company relating to inventories
are taken primarily by executives in production, purchasing and marketing
departments.

As inventory management has important financial implications, the financial

manager of the company undertakes the responsibility to ensure that inventories
are properly monitored and controlled.

CREDIT MANAGEMENT
Business firms would like to sell on cash. The pressure of competition and the
force of customers persuade them to sell on credit. Firms grant credit to increase
or facilitate their sales. The credit period extended by the business usually ranges
from 15 days to 60 days. When goods or sold on credit, finished goods get
converted into account receivable in view of seller. In the view of buyer, the
obligation arising from credit purchase is represented as account payable (trade
creditors).

Credit policy variables:

The important dimensions of a affirms credit policy are:
• Credit standards
• Credit period
• Cash discount
 46

• Collection effort

These variables are related and have a bearing on the level of sales, bad debts,
loss, discounts taken by customers and collection expenses.

Credit standards:
A company in its credit fixes some credit standards, which should be applied in
accepting or rejecting an account for credit granting.

A firm has a wide range of choice in this respect. At one end of spectrum, it may
decide not to extent credit to any customer, however strong his credit to all
customers irrespective of their credit rating. In general liberal credit standards
tend to push sales up by attracting more customers. This is however accompanied
by higher incidence of bad debts loss, a larger investment in receivables, and
high, collection costs. Stiff credit standards have opposite effects.

Credit Period:
The credit period refers to the length of time customers are allowed to Pay their
purchases. It generally varies from 15 days to 60days lengthening of credit
period pushes sales up by inducing existing customers to parches more. This
however accompanied by a larger investment in debtors and a high bad debt
loses. Shorting its period would have opposite influences.

Credit discount:
Companies generally offers cash discount to induce customers to make prompt
payment. The percentage discount and the period during which it is available are
reflected in the credit terms. Liberalizing the cash discount policy may mean that
 47

the discount percentage is increased and such action tend to enhance sales,
reduce average collection period and increase the cost of discount.

Collection Effort:
The collection program of the firm, aimed at timely collection of a receivables,
may consist of the following

• Monitoring the state of receivable.

• Dispatch of letters to customers whose due date is approaching.
• Telegraphic and telephonic advice to customers around the due date.
• Threat of legal action to over amounts.
• Legal action against overdue accounts.

Credit Evaluation:
Proper assessment of credit risk is an important element of credit management.
There board approaches are used for credit evaluation.

• Traditional analysis
• Numerical credit scorin
• Discriminate analysis

In tradition credit analysis, the customer is assessed in terms of five C’s of credit.
• Character-the willingness of customer to honor his obligations.
• Capacity-the ability of customers to meet credit obligations.
• Capital-the financial reserves of customer.
• Collateral –the security offered by the customer.
• Conditions-the general economic conditions that effect customer.
 48

Credit granting decisions:

Once the credit worthiness of a customer has been assessed the next question is,
should the credit be offered. If these is no repeat order, the situation may be
represented by a decision tree.

The expected profit for the action “offer credit” is

P-(REVENUE-COSTS)-( 1 –P)COSTS

The expected profit for the action ‘refuse credit’ is 0, obviously if the expected
profit of the course of action “offer credit” is positive, it is desirable to extended
credit, otherwise not.

Control of accounts receivables:

Traditionally two methods have been commonly suggested for monitoring

accounts receivable:

1. Day’s sales outstanding

2. Ageing schedule.

Days sales outstanding at a given time may be defined as the ratio of accounts
receivable outstanding at that time to average daily sales figures during the
receding 30days, 60days, 90days.

The ageing schedule (AS) classifies outstanding accounts receivable ata given
point of time into different age brackets. The Actual (AS) is compared with
standares (AS) to determine whether accounts receivable are incontrol.
 49

Credit management in practice needs to be strengthened along several lines:

3. Explicit articulation of credit policy.

4. Better co-ordination between sales, production, and finance departments.

5. A well-defined collection program.

CURRENT ASSETS CYCLE

OPERATING CYCLE AND CASH CYCLE

Investment in working capital is influenced by four key events in the production

and sales cycle of the company

Purchase of raw material

Payment for raw material

Sale of finished goods

Collection of cash for sales

 50

These key events affect the cash flows. The firm begins with the purchase
of raw material, which is paid for after a delay, which is paid for after a delay,
which represents the accounts payable period. Customers pay their bills
sometime after the sales the period that elapses between the date of sales and the
date of collection of receivables is the accounts payable period (debit period).
OPERATING CYCLE:
The time that elapses between the purchase of raw material and the
collection of cash for sales is referred as operating cycle. The operating cycle is
the sum of the inventory period and the accounts receivable period.

The behavior of the overall operating cycle and its individual components
of a firm is monitored through time series analysis and cross section analysis. In
time series analysis the duration of the operating cycle and its individual
components is compared over a period of time for the same firm. In the cross
section analysis the duration so the operation cycle and its individual components
is compared with that of other firms of a comparable nature.

Firma Receives
Invoice Cash Paid for
 51

Materials
OPERATING CYCLE

CASH CYCLE

The operating cycle of the firm begins with acquisition of raw materials
and ends with the collection of receivables. It may be divided into four stages.

 Raw material and stores stage

 Work in progress stage

 Finished goods inventory stage

 Debtors collection stage

Use of operating cycle:

The operating cycle is helpful to the company in two ways.

 It helps in forecasting working requirements.

 Control of working capital can be done efficiently by the use of operating

cycle.
 52

CASH MANAGEMENT CYCLE:

Sales generate cash, which has to be disbursed out. The surplus cash has to be
invested while deficit has to be borrowed. Cash management seems to
accomplish this cycle at a minimum cost. At the same time, it also seeks to
achieve liquidity and control. The management of cash is important because it is
difficult to predict cash flows accurately, particularly the inflows and that there is
no perfect coincidence between the inflows and outflows of the cash.

Cost of sales per day = selling and distribution expenses + excise duty + cost
production + opening stock of finished goods –
closing stock of finished goods/360.
Debtors stage:

The debtors stage of the company is calculated as follows:

Average debtors
Debtors stage =
Sales per day

Sales per day = Net sales/360

Creditor’s stage:

The creditor’s stage of the company is calculated follows:

Average Creditors
Creditor’s Stage =
Purchase per day

Purchase per day = Net purchases /360.

 53

CASHBUDGETING:

Cash budgeting or short term cash forecasting is the principle too of cash
management. Cash budgets, routinely prepared by business firms are helpful in:

 Estimating cash requirements

 Planning short term financing.

 Scheduling payments in connection with capital expenditure projects.

 Planning purchase of material.

 Developing credit policies.

The principal method of short term cash forecasting is the receipts and payments
method. Sometimes, The adjusted net income method is used though this method
is employed mainly for long term cash forecasting .

LONG-TERM CASH FORECASTING:

Long Term cash forecasts are generally prepared for a period ranging from two
to five years and serve to provide a broad brush picture of a firms financing
needs and availability of invest bile surplus in the future. The receipt and
disbursements method is used for preparing the long term cash forecast.

MONITORING COLECTIONS AND RECEIVABLES:

The efficiency of cash management can be enhanced by properly monitoring the

collections and disbursements.
 54

PROMPT BILLING:
By reparing and sending the bills promptly, a firm can ensure remittance.
It should be realized that it is in the area of billing that the company’s control I
high and there is a sizeable opportunity of free cash. To tap this oppertunitythe
reassure.

In order to resolve the uncertainties about the cash flows, the firm should develop
appropriate strategies for cash management. The firm should evolve strategies
regarding the following facets of cash management.

• Cash Planing: cash inflows and outflows should be planned to project cash
surplus or deficit for each period of the planning period.

• Managing the cash flows: the flow of cash should be properly managed.

• Optimum cash level: the firm should decide about the appropriate level of
cash balances.

• Investing surplus cash: the surplus cash balances should be properly invested
to earn profits.
MQVTIVES FOR HOLDING CASH:
The are three possible motives for holding cash:
 55

Transactive Motive:

Firms need cash to meet their transaction needs. The collection of cash is
not perfectly synchronized with the disbursement of cash. Hence, some cash
balance is required as a buffer.

Precautionary motive:

There may be some uncertainly about the magnitude and timing of cash inflows
from sale of goods and services, sale of assets, and issuance of securities. To
project it against such uncertainties, a firm may require some cash balance.

Speculative motive:

Firms would like to tap profit making opportunities arising from fluctuations in
commodity prices, security prices, interest rates, and foreign exchange rates. A
cash rich firm is better prepared to exploit such bargains. Hence, the financial
manager should establish reliable forecasting and report system, improve cash
collections and disbursements and achieve optimal conservations and utilization
of should work with the controller and others in accelerating invoice data,
mailing bills promptly, and identifying payment locations.

Control of Payables:

When a firm issues a cheque it reduces the balances in its books. The balance in
the banks book is not reduced till the bank makes the payment.
 56

The amount of cheques issud by the company but not paid for by the referred to
as the “payment float”, the amount of cheques deposited by the firm in the bank
not cleared is referred to as the “collection float”. The difference between “
payment float and collection float is referred to as net float”.

When the net float is positive the balance in the books of the bank is higher than
the balance in the books of the bank is less than the balance in the books of the
form. As long as the books of the bank show a positive balance, a negative cash
balance in the books of firm may not be viewed with alarm. If a firm enjoys a
positive net float it may issued cheques even if it means having an over draft.
Such an action referred to as “Playing the float”.

OPTIMAL CASH BALANCE

If a firm maintains a small cash balance it has to sell its marketable securities
(and perhaps buy them later) more frequently than if it holds a large cash
balance. Hence the trading or transaction costs will tend to diminish if the cash
balance becomes larger. However, the opportunity costs will tend to diminish if
the cash balance becomes larger. However, the opportunity costs of maintaining
cash rise as the cash balance increases. The optimal cash balance is one were the
total costs of holding cash ( Which consists of trading costs and opportunity
costs) are at minimum for a particular size of cash balances.
 57

TABLE – 1
The following table shows the Statement of changes in working capital for the
years 2014-2015.
CHANGES IN WORKING
PARTICULARS 2014(Rs) 2015(Rs) CAPITAL
Increase Decrease
Current
Assets(A)
Inventories 12449757.00 14295376.00 1845617 _
Sundry debtors 26901305.60 30734240.62 3832935.02 _
Loans&advances 11727492.04 5206437.35 _ 6521054.69
Cash &Banks 370422.58 1870447.34 1500024.76 _
Deposits 1557052.00 3959052.00 2402000 _
TOTAL (A) 53006076.22 56065553.31
Current
Liabilities(B)
Liabilities 2425554.21 4678450.34 _ 2252896.13
Provisions 4978759.00 3998965.78 979793.22
TOTAL(B) 7404313.21 8677416.12
Working capital 45601763.01 47388137.19
(A – B)
Net increased in 1786419.18
working capital
45601763.01 47388137.19 10560370 10560370
Analysis
During 2014-2015 the Net working capital dodla dairy LIMITED by increased
1786419.18. This is mainly due to an increase for current assets in sundry debtors.

TABLE-2
The following table shows the Statement of changes in working capital
for the years 2015-2016.
 58

CHANGES IN
PARTICULAR
2015(Rs) 2016(Rs) WORKING CAPITAL
S
Increase Decrease
Current
Assets(A)
Inventories 14295376.00 22130257.00 7834881 _
Sundry debtors 30734240.62 15605706.67 _ 15128533.95
Loans&advances 5206437.35 5560132.71 353695.36 _
Cash &Banks 1870447.34 1748382.44 _ 122064.9
Deposits 3959052.00 3759052.00 _ 200000
TOTAL (A) 56065553.31 48803530.82
Current
Liabilities(B)
Liabilities 4678450.34 3754194.95 924255.39 _
Provisions 3998965.78 4498766.78 _ 499801
TOTAL(B) 8677416.12 8252961.73
Working capital 47388137.19 40550569.09
(A – B)
Net decreased in 6837568.1
working capital
47388137.19 40550569.09 15950399.85 15950399.85
Analysis
During 2011-2012 the Net working capital of dodla dairy LIMITED by
decreased 6837568.1. This is mainly due to an increase for current assets in
sundry debtors.
TABLE-3
The following table shows the Statement of changes in working capital
for the years 2016-2017.

CHANGES IN WORKING
PARTICULAR CAPITAL
2016(Rs) 2017(Rs)
S
Increase Decrease
Current
Assets(A)
 59

Inventories 22130257.00 35426638.00 13296381 _

Sundry debtors 15605706.67 22052643.12 6446936.45 _
Loans&advances 5560132.71 5787663.52 227530.81 _
Cash&bank 1748382.44 980821.40 _ 767561.04
Deposits 3759052.00 3768052.00 9000 _
TOTAL (A) 48803530.82 68015818.04
Current
Liabilities(B)
Liabilities 3754194.95 8408916.44 _ 4654721.49
Provisions 4498766.78 5064434.78 _ 565668
TOTAL(B) 8252961.73 13473351.22
Working capital 40550569.09 54542466.82
(A – B)
Net Increased in 13991897.73
working capital
40550569.09 54542466.82 19979848.26 19979848.26

Analysis
During 2016-2017 the Net working capital of dodla dairy LIMITED by
increased 13991897.73. This is mainly due to an increase for current assets in
Inventory

TABLE-4
The following table shows the Statement of changes in working capital for
the years 2017-2018.

CHANGES IN WORKING
PARTICULAR
2017(Rs) 2018(Rs) CAPITAL
S
Increase Decrease
Current
Assets(A)
 60

Inventories 35426638.0 52744207.00 17317569 _

0
Sundry debtors 22052643.1 38736599.23 16683956.11 _
2
Loans&advances 5787663.52 10496398.84 4708735.32 _
Cash & bank 980821.40 26931010.40 25950189 _

Deposits 3768052.00 5120052.00 1352000 _

TOTAL (A) 68015818.0 134028267.47

4
Current
Liabilities(B)
Liabilities 8408916.44 29058657.58 _ 20649741.14
Provisions 5064434.78 4723655.28 340779.5 _
TOTAL(B) 13473351.2 33782312.86
2

Net Increased in 54542466.8 100245954.61 45703487.79

working capital 2
54542466.8 100245954.61 66353228.93 66353228.93
2
Analysis
During 2017-2018 the Net working capital of dodla dairy LIMITED by increased
45703487.79. This is mainly due to an increase for current assets in cash and bank balance

TABLE-5
The following table shows the Statement of changes in working capital for
the years 2018-2019.
CHANGES IN WORKING
PARTICULARS 2018(Rs) 2019(Rs) CAPITAL
Increase Decrease
Current
Assets(A)
Inventories 52744207.00 60208507.00 7464300 _
 61

Sundry debtors 38736599.23 34884617.19 _ 3851982.04

Loans& advances 10496398.84 9702506.30 _ 793892.54
Cash & bank 26931010.40 8803450.40 _ 18127560
Deposits 5120052.00 4615542.00 _ 504510
Deferred tax net _ 381168.00 381168.00
TOTAL (A) 134028267.47 118595790.89
Current
Liabilities(B)
Liabilities 29058657.58 36571620.48 _ 7512962.9
Provisions 4723655.28 7550537.78 _ 2826882.5
TOTAL(B) 33782312.86 44122158.26
Working capital 100245954.61 74473632.63
(A – B)
Net decreased in 25772321.98
working capital
100245954.61 74473632.63 33617789.98 33617789.98

AnalysisDuring 2018-2019 the Net working capital of dodla dairy

LIMITED by decreased 25772321.98. This is mainly due to an increase in
current liabilities.
62
 63

CHAPTER-IV

DATA ANALYSIS AND INTERPRETATION

CURRENT RATIO;

CURRENT RATIO = CURRENT ASSETS

CURRENT LIABILITIES

Year Current Assets Current Liabilities Ratio

2014-2015 176,18,14,461 1,25,07,21,521 1.408
2015-2016 174,18,02,606 84,64,14,549 2.056
2016-2017 184,21,67,909 82,77,24,756 2.22
2017-2018 152,17,01,505 71,33,95,897 2.13
2018-2019 159,11,18,664 149,84,40,764 1.06
 64

Ratio
2.5 2.22
2.06 2.13
2
1.5 1.41
1.06
1
0.5
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Ratio

INTERPRETATION:

A relatively high current ratio is an indication that the firm is liquid and has the ability to
pay current liabilities in time. A relatively low current ratio represents that the liquidity
position of the firm is not good and the firm shall not be able to pay its current liability.

As a convention the minimum of "2.1" ration is referred to as Bankers Thumb.The

company's current ratio position is for better than required. But the of year 2008 the current
ratio is relatively high than the Bankers rule. This is due to slow moving stocks, this is an
adverse condition because of funds are looked in stocks.

QUICK OR ACID TEST RATIO;

Quick Assets = Quick Ratio

Current Liabilities

Current Assets - Stock - Prepaid Exp

Quick Assets =
Current Liabilities

Year Quick Assets Current Liabilities Ratio

2014-2015 46,92,59,679 84,69,14,549 0.554
2015-2016 63,44,27,179 82,77,24,756 0.766
 65

2016-2017 42,18,83,192 71,33,95,897 0.59

2017-2018 44,04,57,851 149,84,40,764 0.60
2018-2019 56,65,41,326 179,28,41,176 0.625

Ratio
0.9
0.8 0.77

0.7
0.6 0.63
0.59
0.6 0.55
0.5
0.4
0.3
0.2
0.1
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

INTERPRETATION:

The quick ratio is very useful in measuring the liquidity position of the firm.

As a rule of thumb or a convention quick ratio of 1:1 is considered satisfactory.

The quick ratio of the company is unsatisfactory when compared to the rule of
thumb that is (1:1). The company quick ratio represents an unsatisfactory current
financial position.

This does not mean that it is a bad liquidity position because inventories are not
absolutely non-liquid.
 66

ABSOLUTE LIQUID RATIO OR CASH RATIO:

Absolute liquid assets

Cash Ratio = ------------------------------
Current liabilities

Year Absolute Liquid Assets current Liabilities Ratio

2014-2015 20,84,05,389 84,69,14,549 0.246

2015-2016 8,48,30,174 82,77,24,756 0.102

2016-2017 3,54,21,210 71,33,95,897 0.05

 67

2017-2018 20,36,38,099 149,84,40,764 0.1359

2018-2019 17,98,9,322 179,28,41,176 0.01

Ratio
0.3

0.25

0.2

0.15
0.25
0.1
0.14
0.05 0.1
0.05
0 0.01
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

INTERPRETATION:

The acceptable norm for this ratio is 50% or 5:1 or 1:2 that is Rs. 1 worth current
liability in time.

The absolute liquid ratio is far beyond the required that is (1:2) even though the
company cash balance has increased last year.
 68

RECIVABLES TURN OVER RATIO:

Total Sales
DEBTORS TURN OVER RATIO = -------------------------
Debtors

Year Total sales Debtors Ratio

2015 309,97,71,437 6,09,19,428 50.88
2016 250,35,27,432 19,71,06,107 14.18
2017 258,96,17,083 5,05,57,226 51.22
2018 212,79,48,833 12,27,53,455 17.335
2019 338,99,96,179 11,10,06,879 30.539
 69

Ratio
60
50.88 51.22
50

40
30.54
30

20 17.34
14.18

10

0
2015 2016 2017 2018 2019

INTERPRETATION:

Debtors velocity indicates the number of lines the debtors are furred over during
a year. Generally a higher value of debtors turnover the more efficient is the
management of debtors or more liquid are the debtors. Low debtors turnover
implies inefficient management of debtors/sales and less liquid debtors.

The company's position in the debt collection aspect is good because of the
duration for the payments is less and major part of the sale is to civil supplies
where the dealing are on the basis of government levy.
 70

INVENTORY TURNOVER RATIO:

Net Sales
Inventory Turn over Ratio = --------------------------
Inventory

Year Net Sales Inventory Ratio

2014-2015 47,40,23,767 126,77,78,839 0.373
2015-2016 225,31,05,705 134,99,04,346 1.57
2016-2017 258,96,17,083 110,98,19,602 2.34
2017-2018 205,67,54,175 210,08,49,092 0.99
2018-2019 4051984302 2348481515 1.72
 71

2500000000 2348481515

2000000000

1500000000

1000000000

500000000

0 0 0 0
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Inventory Ratio

INTERPRETATION:

Inventory turnover ratio indicates whether inventory has been efficiently

used or not. The purpose is to see whether only the required minimum funds
have been looked up in inventor/.

Inventory should either be too high nor too low.

The company inventory ratio position is quite satisfactory. All the views
from 1999-2007 are equal stocks of app (-1.5). There was a large in the two year
2005, 2006 because of the fast moving stocks due to the government levy
changer it is (-1-0).
 72

TRENDS IN WORKING CAPITAL COMPONENTS

CURRENT ASSETS:

INVENTORIES;

Year Inventory(crores)
2014-2015 132.75
2015-2016 134.99
2016-2017 110.98
2017-2018 210.08
2018-2019 234.84
 73

Inventory(crores)
250 234.84
210.08
200

150 132.75 134.99

110.98
100

50

0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Trend
X Y X XY X2 Values
2014-2015 135.93 -1 -135.9 1 136.04
2015-2016 132.75 0 0 0 131.89
2016-2017 134.99 1 134.99 1 132.03
2017-2018 128.43 2 256.86 4 127.02
2018-2019 125.31 3 375.94 8 124.42

Sig 673.92 sig x = 0 sigxy = -27.47 sig x2 = 10

Calculation:

Trend line = "y =a+bx"

Sigma Y = Na + b Sig X
 74

Sig XY = a sig y + b sig X2

A = sigy/n = 673.92/5 = 134.78

b = sig xy/sigx2 = -27.47/10 = -2.47

Trend Equation : Y = 134.78+ -2.747 X

SUNDRY DEBTORS:

Year Sundry Debtors ( Crores)

2014-2015 11.45
2015-2016 19.71
2016-2017 10.80
2017-2018 11.48
2018-2019 11.10
 75

Sundry Debtors ( Crores)

25

20 19.71

15

11.45 10.8 11.48 11.1

10

0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
 76

Trend
X Y X XY X2 Values
2014- 11.45 -1 -11.45 1 11.45
2015
2015- 19.71 0 0 0 19.71
2016
2016- 10.8 1 10.8 1 10.8
2017
2017- 11.48 2 22.96 4 11.48
2018
2018- 11.1 3 33.3 9 11.1
2019

Sigy= 106.84 sig x = 0 sigxy = 97.08 sig x2 = 10

Calculation:

Trend line = “y=a+bx”

Sig y = Na+b sig x

Sig xy = a sigx +b sig x2 Sig x = 0

A = sig y/n= 106.84/5 = 21.368

B = sig xy/sigx2 = 97.08/10 = 9.708

Trend equation y = 21.368+9.706 X

CASH AND BANK BALANCE:

 77

YEAR CASH(CRORES)

2014-2015 12.02

2015-2016 6.81
2016-2017 17.67
2017-2018 8.48
2018-2019 6.81

CASH(CRORES)
20
16
12 CASH(CRORES)

8
4
0
1 2 3 4 5 6 7 8

Trend
X Y X XY X2 Values
2014-2015 17.67 -1 -17.67 1 10.66
2015-2016 8.48 0 0 0 13.26
2016-2017 6.81 1 6.81 1 15.501
2017-2018 8.68 2 17.36 4 10.66
2018-2019 9.28 3 27.84 9 13.081

Sig y = 55.86 Sigx = 0 Sig xy= 43.29 Sigx2=10

 78

Calculation:

Trend line = "y=a+bx"

Sig y = Na+b sig x

Sig xy = a sigx +b sig x2 Sig x = 0

A = sig y/n= 55.86/5 = 11.172

B = sig xy/sigx2 = 43.29/10 = 4.329

Trend equation = y= 11.172+4.329X

There is an increasing trend in the cash & bank balances. This is acceptable and
shows the positive trend as the costs raise year to year. The increase in cash and
bank is essential to meet the increased costs of over heads. The slope of the trend
equation is also +ve.

OTHERE CURRENT ASSETS:

 79

YEAR OTHER CURRENT ASSETS

(cros)
2014-2015 28.08
2015-2016 18.15
2016-2017 15.13
2017-2018 22.48
2018-2019 23.03

OTHER CURRENT ASSETS (LAKHS)

30

25

20
OTHER CURRENT ASSETS
(LAKHS)
15

10

0
1 2 3 4 5 6 7

Trend
X Y X XY X2 Values
2014-2015 28.08 -1 -28.08 1 15.65
 80

2015-2016 18.15 0 0 0 16.72

2016-2017 15.13 1 15.13 1 21.719
2017-2018 22.48 2 44.96 4 21.979
2018-2019 23.03 3 69.09 9 22.57

Sig y = 83.06 Sigx = 0 Sig xy=51.07 Sigx2=10

Calculation:

Trend line = "y=a+bx"

Sig y = Na+b sig x

Sig xy = a sigx +b sig x2

Sig x = 0

A = sig y/n= 83.06/5 =16.612

B = sig xy/sigx2 =51.07/10 = 5.107

Trend equation = y= 16.612 + 5.107X

The decrease in the current assets show that the slope of the trend equation is
negative. It is appreciated only when the current liabilities are also decreasing
with respect to current assets.

LOAN AND ADVANCES:

YEAR Loan & Advances

Cros
 81

2014-2015 14.02

2015-2016 20.85

2016-2017 46.65

2017-2018 18.74

2018-2019 35.89

Loan & Advances cros

100
80
60 Loan & Advances cros

40
20
0
1 2 3 4 5 6 7

Trend
X Y X XY X2
Values
2014- 14.02 -1 -14.02 1 28
2015
2015- 20.85 0 0 0 30.78
2016
2016- 46.65 1 46.65 1 25.527
2017
2017- 18.74 2 37.48 4 29.91
2018
2018- 35.89 3 107.6 9 41.92
2019 7

Sigy = 125.93 Sig x = 0 Sig xy = 3.41 Sig x2=10

 82

Calculation:

Trend line = “y=a+bx”

Sig y = Na+b sig x

Sig xy = a sigx +b sig x2 Sig x = 0

A = sig y/n= 125.93 /5 = 25.186

B = sig xy/sigx2 = 3.41/10 = 0.341

Trend equation = y= 25.186 +0.341 X

The slope of the trend equation is positive stating that the loans and advance4s
are increasing year by year. There is down fall in 2007 and sharp raise in the year
2008. This type of fluctuations are not desirable.
 83

CHAPTER-V

FINDINGS
 84

 The inventory has varied year to year. It is maximum in the year 2016 and
minimum in the year 2017. This is proportional to the demand in the
market for the products of that company.
 There is an increasing trend in the cash & bank balances. This acceptable
and shows the positive trend as the costs raise year to year. The increase in
cash and bank is essential to meet the increased costs of overhead. The
slope of the trend equation is also +ve
 The decrease in the current assets show that the slope of the trend eq is
negative. It is appreciated only when the current liabilities are also
decreasing with respect to current assets.
 The slope of the trend equation is positive stating that the loans and
advances are increasing year by year. There is down fall in 2012 and sharp
raise in the year 2008. This type of fluctuations are not desirable.
 The slope of the trend equation is positive, indicating that the C.L are
increasing year by year. But the CA are decreasing year by year. This is
contradict as per the quick ratio is considered. The ideal value should be
one which means the CA & CL should be equal But, the situations show
that they are inversely related and the quick ratio is approaching the value
zero.
 85

SUGGESTIONS

 The basis objective of a company is to maximize shareholders wealth.

This is possible only when the company earns sufficient profits. The
amount of such profits depends largely upon the magnitude of sales. There
is always time gap between the sale of goods and receipt of cash. The
level of any firm depends upon its efficient management of working
capital.

 To ensure higher profitability, liquidity and sound structural health of

organization it is essential to use the sources of funds and cash effectively.

 During the year 2006-2007 the total income of the company was
14,947.76 lakhs and also they paid a higher tax rate of 20.34%.

 There has been major fluctuation in the working capital that will effect the
current assets and liabilities and sources of funds have effected a lot. So
the firm has to find ways to increase the sources of funds.

 There has been no issued of share capital during the years, which may
affect the expansion of the company. So the company has to go for the
issuing of shares. The relationship between the employees and
management must besatisfactory as there have not been any strikes
occurred during the years on account of negotiations.
 86

CONCLUSION

To ensure that each of the current asset is efficiently managed to ensure that
overall liquidity of the unity and at the same time not keeping too high a level of
any one of them working capital management is a must.

Working capital attains a proper balance between the amount of current assets
and the current liabilities in such liabilities in such a way that the firm is always
able to meet its short term obligations.

Working capital management ensures smooth working of the unit without any
production held ups due to the paucity of funds.

Thus as working capital is the lifeblood and nerve center of a business. It is

managed in orders to attain a smooth running of the business.

During the years under the review working capital fluctuated as the year 2002-
2003 the working capital increased to 16.87 crores. But the following years
working capital showed downward trend year by up to 2006-2007.

During the years under the review that over all Financial Position of Dodly Dairy
Ltd is good.
87
 88

BIBLIOGRAPHY

 PANDEY, "FINANCIAL MANAGEMENT" eight edition Vikas

publishing house Pvt. Ltd., New Delhi.

 Khan & Jain, "Financial Management", third edition TATA Mcgraw hill
publishing company Ltd, New Delhi.

 S.N.Maheswari --F.M.

 www.managementmentor.com

 www.bseindia.com
35

BALANCE SHEET

Income Statement ( In Rs Lakhs)

Year 2019 2018 2017 2016 2015 2014

4106.0 2145. 1403.

Total Revenue 7 1418.1 1 1215.3 1384.7

3365.6 1856. 1038.

Cost of Revenue 2 1091.4 9 887.8 781.4

317.5 289.0
Gross Profit 5 326.7 364.2 327.5 603.3

       

Operating Expenses        

Selling and Administrative        

Non Recurring 38.35 43.45 103.2 156.9 151.8 354.9

Others        

Operating Profit/Loss 264.2 245.6 223.5 207.3 175.7 248.4

Income from Operations        

Earnings Before Int&Taxes 317.50 221.1 223.5 207.3 175.7 248.4

Interest Expense 59.8 67.4 151.9 93.8 58.9 45.5

Income Before Tax 155.2 132.8 71.6 113.5 116.8 202.9

Income Tax Expense 55.8 13.2 5.4 9.0 9.8 24.8

Net Income From 99.8 127.0

Operations 66.2 104.5 107 178.1

Discontinued Operations        

         

Net Income 264.2 127.0 66.2 104.5 107 178.1

 2

Balance Sheet (In Rs Lakhs)

Year 2019 2018 2017 2016 2015 2014

Assets

Current assets

Net Receivables 22.48 26.62 39.97 32.67 22.62

Other Current Assets 67.63 53.08 36.06 52.8 81.68

Total Current Assets 90.11 79.7 76.03 85.47 104.3

Long Term Investments 0.05 0.05 0.05 0.05 0.36

Property Plant and 179.75

Equipment 94.88 100.85 107.7 115.94

Total Fixed Assets 179.8 94.93 100.9 107.75 116.3

246.5 174.6
Total Assets 3 176.93 193.22 220.6

Liabilities

Current Liabilities

Other Current Liabilities 43.5 26.77 40.12 32.67 22.62

Long term Debt 63.8 57.41 62.1 81.2 126.96

Stockholder’s Equity

Preferred Stock

Common Stock 7.77 7.77 7.77 7.77 7.77

Retained Earnings 0.15 0.15

 3

Capital Surplus 55.5 82.68 66.9 71.4 63.1

244.36 174.6
Total liabilities 3 176.93 193.22 220.6