A STUDY ON ANALYSIS OF WORKING CAPITAL ON KMF KALABURAGI M.

Com

CHAPTER 1
INTRODUCTION
1.1Introduction regarding the working capital management at KMF
KALABURAGI

Working capital management refers to the process of making decisions on current assets
and liabilities, as well as short term financing. The link between a company’s short -term
obligations is at the heart of this concept.

Maintaining an adequate cash flow for both short-term debt repayment and future
operations costs is the primary objective of working capital management.

Working capital management in KMF involves effectively managing the short-term

assets and liabilities to ensure the company maintains sufficient liquidity to meet its
operational needs.

Working capital management also helps in the inventory management which manages the
raw materials (Dairy products) work in progress and finished goods to optimize storage
costs and reduce wastage. It ensures timely collection of payment from customers to
maintain cash flow. This may involve setting credits terms and monitoring customer
creditworthiness

Working capital management strategically maintains the accounts payable to ensure

timely payments to payments to the suppliers to maintain good relationships while
optimising cash flow

Working capital management effectively maintains an optimal level of cash to meet daily
expenses and invest excess cash in short term securities for better returns

Working capital management projects in future cash flows at KMF to plan for seasonal
variations and unexpected expenses. Effective working capital management ensures that
the sugar factory can operate smoothly, meet its short- term obligations, and avoid
financial distress.

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1.2 OBJECTIVES OF WORKING CAPITAL:

1. To calculate and examine the factory’s working capital.

2. To find out what influences NSL work limited’s working capital.

3. To better grasp the many facts of working capital, it is helpful to consider their
corresponding counterparts.

4. To get a sense of how much money NSL limited has on hand in comparison to its
liabilities.

5. To study gives information of company’s existing financial strengths and

weakness of the company.

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1.3 SCOPE OF THE STUDY:-

The study will help in analyzing the working capital for a period of
five years i.e. from 2015-16 to 2019-2020 of KMF. This is so because ratios
may not prescribe any practical standards, as they are several in numbers for
each element of study. The study helps us in finding out how well the
organization is managing the working capital.

1.4 IMPORTANCE OF THE STUDY:-

The study has got importance because working capital affects the day-
to-day operations of the business firm to larger extent. Thus, effective
management of the working capital is required for the smooth functioning of
the business firm.
There is always a need and much importance will be given for
working capital because there is always a time gap between the sales of
goods and receipt of sales proceeds. During this period, working capital is
required for sustaining or maintaining the sales activities.

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1.5 RESEARCH METHODOLOGY

All the details are collected from secondary sources only.
Secondary data includes, the annual reports, financial reports of the
company etc., discussion with the concerned officials has also helped to
verify and evaluate the variations and results either to confirm it..
The data is collected in two ways:
 Primary Data
 Secondary Data
Primary Data:-
 The primary data collection is one of the key tools used by the
researcher for data collection. It is the first hand information collected
by the researcher from the respondents directly. Primary data is
collected through observation and communication

Secondary Data:-
 The secondary data is another form of data collection, where
the data is collected from the existing records, company manual and
form previously carried out research work and also through internet.

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1.6 LIMITATIONS OF THE STUDY:-

The study covers a period of 3 years with the available sources i.e.
from 20017-18 to 2019-20.
 10 weeks being a very short time, I have done a study that I feel to be
comprehensive and possible in this time. However, some other details
of methods of analysis could definitely be found which I have missed
out there.
 The study has been restricted to the head office in Bangalore.
 The study is general.
 Inter firm and intra firm comparison is not possible.
 Interactions with the company professionals were limited due to their
busy schedule.
 Limitations of historical accounts.
 Conclusions will be drawn based on theory and supplemented by
figure wherever feasible.

CHAPTER 2

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CHAPTER 2

THEROTICAL BACKGROUND

2.1 WORKING CAPITAL MANAGEMENT

All elements of current asset and current liability management are covered under the term
“working capital” since it is commonly defined as current assets minus future obligations.
This is because working capital management is linked to the difficulties that develop
while managing current assets and liabilities and their interactions.
Accounting’s perspective of working capital, which is defined as current assets
minus current liabilities, doesn’t appeal to modern financial managers very much
anymore. Businesses that are in operations for long periods of time tend to have a pattern
in place that ensures that the company’s sales and supply positions are close to being paid
for, and that a minimum level pf inventory is maintained. The contemporary financial
managers role has expanded beyond simple fact-finding.
In order to make sure a firm runs smoothly, working capital, management involves
keeping track of and making the greatest use of a company’s current assets and
obligations.
Definition of Working Capital Management:
To ensure that a firm has adequate resources for its day-to-day operational
expenditures while ensuring that the resources are invested in a productive manner, the
term “working Capital Management” is used.
With Working Capital, we are referring to the quantitative connections between
two variables that enables us to make inferences. This may be used to represent the
connection between two variables or things.
a) Percentage:
For example : Net profit are 25% of sales
b) Fractions:
For example : Net profit is one fourth of sales
c) Proportion of numbers:
For example: Relations between net profit and sales is 1:4

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2.2 TYPES OF WORKING CAPITAL MANAGEMENT:

1) Permanent working capital

2) Regular working capital
3) Reserve margin working capital
4) Variable working capital
5) Seasonal variable working capital
6) Special variable working capital
7) Gross working capital
8) Net working capital

Permanent working capital:

That part of a company’s working capital that is always stashed away in the
company’s current assets, ready to be used whenever the firm needs it. When it comes to
doing business, the bare essential are the minimum quantity of current assets required.
Thus fixed operating capital is another name for it.

Regular working capital:

When it comes to funding a company’s day-to-day operations, this dividend is the
bare minimum. Paying worker’s salary and overhead costs for raw material processing
are two examples.

Reserve Margin Working Capital:

Unexpected events sometimes necessitate the requirement for a small quantity of
finance. A reserve margin is simply the amount of working capital that is held in reserve
and not used for day-to-day operations. These monies are held in a separate pool or fund
for unexpected events like strikes, natural, disasters etc

Variable Working Capital:

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The term “temporary Working capital” refers to the amount of money invested in
the company for a short period of time. The time “fluctuating working capital” has been
coined for this purpose. The amount of this kind of capital fluctuates in line with changes
in the company’s assets or its overall size. There are two subcategories of variable
working capital

Seasonal variable working capital:

During the busiest times of the year, businesses need more working capital to keep
up with demand. Its possible that a company’s working capital requirements may need a
loan. This kind of working capital is designed to satisfy the needs of seasonal businesses.

Special variable working Capital:

Exceptional activities or circumstances may necessitate an increase in a company’s

working capital. Special variable Working capital is the kind of capital needed in certain
situations. Marketing efforts require funding. Unforeseen incidents such as spontaneous
combustion and flooding

Gross working capital:

The total amount of money invested in the company’s present asset is referred to
here. To put it another way, gross working capital is the sum of a company’s current
assets.some of them are:

 Cash
 Accounts receivables
 Inventory
 Marketable securities
 Short-term investment

Working time the short-term financial stability of company cannot be fully assessed just
on the basis of capital. Both the firm and its operational effectiveness are not shown by
this piece of content.

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The operational efficiency of a company may be gauged by comparing its current

assets against its current liabilities. In other words, how well a company manages its
short-term assets in order to fulfil its day-to-day financial needs.

Net working capital:

The difference between a company’s current asset and current liabilities is know as
net working capital. The working capital equation is therefore defined as the difference
between current assets and current liabilities. When referring to current assets, we are
referring to the total amount of cash on hand. Current liabilities comprise accounts due
and accounts receivables, raw materials, and finished products inventories.

Classification of working capital:

A) On the basis of concept:

1) New working capital

2) Gross working capital

B) On the basis of time:

1) Permanent working capital
 Initial working capital
 Regular working capital
2) Variable working capital
 Seasonal working capital
 Special working capital

A) On the basis of concept:

1) New working capital:

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When current asset exceed current liabilities, the difference in working capital
is positive; however, if current liabilities exceed current assets, the difference in
working capital is negative.

2) Gross working capital:

When it comes to current asset, gross working capital refers to the sum of all
cash marketable securities, the amount receivables and inventory, their
significance cannot be overstated. The term current assets refers to the company’s
present investment.

B) On the basis of time:

1) Permanent working capital:
To run a firm during the slowest season of the year, you need a minimum
level of current assets known as “permanent working capital”. According to the
development of a firm and the period of the economic cycle in which it operates,
this amount might vary greatly. At a given moment in time, it is the amount of
money needed to create the products and services required to meet demand.

a) Initial working capital:

A corporation must have enough cash on hand to satisfy its obligations both at the
time of its founding and during its early stages of operation. When starting a new
business, its important to have enough money to get started.

b) Regular working capital:

Cash inventory into accounts receivable,and then those accounts receivables are
converted back into cash, so the least amount of liquid capital is needed in order
to keep the money flowing.

2) Variable working capital:

It’s the amount of working capital needed to satisfy seasonal needs that fluctuates
throughout time. At other words, it means preventing access to working capital in

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the places where it will be converted to cash in the future. Working cash is needed
for particular projects, such as establishing an executive marketing campaign or
doing research.

a) Seasonal working capital:

Seasonal fluctuations in demand need varying amounts of working capital across a wide
range of industries. Seasonal working capital refers to the amount of money needed to
satisfy the company's seasonal requirements.

b) Special working capital:

Special working capital refers to the funds necessary to complete any unique tasks,
such as testing out new goods or manufacturing procedures or creating an internal
advertising campaign.

WORKING CAPITAL CYCLE:

Meaning of working capital cycle

How long does it take to transform all of a company’s current assets and obligations into
cash? This is known as the working capital cycle. In order to keep their cash flow as
smooth as possible, companies often aim to control this cycle by selling merchandise
rapidly, receiving income swiftly from consumers, and paying debts slowly.

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Definition of working capital cycle:

Net current assets and current liabilities must be converted into cash over a period of time
known as the working capital cycle. The longer the cycle the longer a company’s
working capital remains stranded without yielding any profit. Because of this, businesses
try to shorten the time it takes to collect receivables and pay bills by increasing the length
of time it takes to extend accounts payable. Rapidly collecting income from clients and
paying bills slowly to maximise the flow of money.

The cycle of working capital:

1. To produce a product the corporation obtains materials on credit (for example, they have
90 days to pay for the raw materials)
2. The average time it takes to sell out the company’s inventory is 85 days (days of unpaid
invoices at the bank)
3. On average, buyers pay for the goods they buy within 20 days after purchase.

In the beginning if the process or procedure. First, the firm does not incur any financial
expenditure as, a result of receiving the resource it needs to manufacture inventory. It
will have to pay for the items within 90 days. The completed items are sold eighty- five
days after the firm purchased the supplies, but the company does not get instant payment
for them since they are sold on credit. A week after the products have been sold. In return
the corporation gets money. And with that, the cycle of working capital has come full
circle.

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Factors Affecting Working Capital Management:

Factors that affect a company’s working capital requirements include the following:

1) Nature of business:
A considerable amount of working capital is required for a company that
manufactures machine tools and sells its products mostly on credit due to its lengthy
sales cycles.
Services companies like an understanding or a transportation company, which
have short operating cycles and rely heavily on cash revenues, have a lower working
capital need than those that are more heavily reliant on bank loans.

2) Seasonality operations:
The working capital requirements of a company that makes seasonal goods like
fans coolers, wool, and so on, are very variable.

3) Conditions of supply:
It has the raw materials needed for manufacturing on hand throughout the years,
thus the company only needs minimal amount of cash for inventory. The company must,
however, retain a sufficient amount of raw materials on hand in case the supply runs low.

4) Marketing conditions:
There is a lot of competition in the market. But the competition is weak.
Customers may be serviced after a delay, therefore her company can get by with the
lower inventory of completed items. In case, the company has the option of just
accepting cash or even asking for a deposit up front. In-order to prevent tying up cash in
receivables, this is the best option.

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Estimation of working capital requirements:

Keeping a tight rein on working capital is a fine line to walk. When it comes to
short-term demands, companies need to have enough money to cover them. During the
process of evaluating the company’s working capital needs, the following factors were
taken into account:

 The sum of all material, labour and administrative expenses.

 The amount of time that raw materials remain in storage before being released for
use in manufacturing.
 The amount of time it takes to covert raw materials into final items within a
manufacturing cycle.
 The amount of time that completed items must be kept on the shelf before they
may be sold
 The average amount of credit that consumers have been given.
 The amount of money needed to cover a business’s ongoing operating expenditure
on a daily-basis.
 The typical amount of money needed for a down payment
 The export credit period for allergens to British Columbia permitted the provider.
 Payment or wage delays, as well as additional costs.

Advantages for working capital:

Helps in running business smoothly:

Because without working capital a company cannot pay its employees wages,
purchase raw materials from suppliers, or pay its regular administrative expenses on time,
leading to a complete breakdown. Without men, machine, and raw materials, a company
is like a body without a soul. The most important benefit of its capital is that it aids the
company in running its business effectively and smoothly.

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Goodwill of the company:

A lack of working capital can have a negative impact on the company’s reputation
if it is discovered by outside parties, such as creditors, suppliers and employees. This can
leads to a vicious cycle, since a lack of working capital means less business, which in
turn leads to a lack of working capital.

Helps in bargaining:

An organisation with plenty of available operating capital has the power to

negotiate and secure favourable conditions rather than having others impose their will on
the organisation. So supplies will be more ready to provide a discount to firms who pay
for raw materials in advance than those that accept raw materials on credit, for example,
if the company chooses to buy raw materials from suppliers.

Disadvantages of working capital:

No return on capital:

There is a major drawback to this capital in that all of the company’s surplus
working capital earns no interest, hence it might be referred to as zero return capital. It is
not a sensible financial choice on the side of the firm if it has locked up too much money
in working capital. Since a result, a firm must maintain a delicate equilibrium while
managing this money, as having more working capital on hand than is necessary is
likewise a bad indicator for the organisation.

Chances of overspending:

Another negative of having capital is that if the firm has surplus money, it is likely
that the corporation would spend or purchase items that are not required for the business.
Thus, in plain terms the company’s working capital is limited by the fact that it can’t
spend money on items it doesn’t need.

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No bifurcation:

Working capital also carries the danger of corporation using it to the fund long – term
initiatives, resulting in lack of differentiation between short-term and long-term financing
methods. Just as one medicine cannot cure all aliments, working capital cannot be utilised
to support all sort of expenditure, which some firms prefer to do and compromise the
sort-term financial situation of the company.

WORKING CAPITAL MANAGEMENT:

1) Quick Ratio:
For short-term financial obligations, a company’s quick ratio serves as s gauge
referred to as the “acid-to-alcohol” ratio. Following are the steps to figure it out.
Cash is added to the fast ratio to get the figure. Investments and current
receivables that are cash equivalent short-term investments are combined and divided
by current liabilities.
Formula:
Quick ratio = cash+ cash equivalent + short term investments current receivables
Current liabilities
2) Debtors turnover ratio:
The receivables turnover ratio, or deborts turnover ratio, is a measure of how fast
credit sales are converted to cash. The efficiency of a company in maintaining and
collecting client credit is measured by this ratio.
Formula:
Debtor turnover = Net credit sales
Average account receivable

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3) Credit turnover ratio:

The creditor turnover ratio, also known as the creditors velocity, is calculated
by dividing the net credit acquired by the average account payable. Like the
receivable turnover ratio, it gauges how often on average the accounts payable are
paid throughout a certain time period. There are many ways to convey it.

Accounts payable/creditors turnover ratio = Net credit purchase

Average account payable

Only credit purchases are included in the numerator of the above calculation. The
total net purchases, on the other hand, should be utilised if the credit purchases aren’t
known.

4) Inventory Turnover Ratio:

Deficiency ratios reveal how poorly inventory is being managed by
comparing the cost of products sold to the average inventory over time. The inventory
turnover ratio is an efficiency ratio. An average number of times an items an item is
tuned on and sold over the course of a certain period is recorded here.

Formula:
Inventory Turnover Ratio: cost of goods sold/net sales
Average inventory

5) Cash Turnover Ratio:

You can figure out how much cash you need to make ale by looking at the cash
turnover ratio. An organisation’s efficiency in using its available capital to run its
company and create sales is measured by comparing its ratio to the same outcome
achieved by the organisations in the same industry the equation is as follows:

Cash turnover ratio = Annual revenue

Average cash balance

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6) Operating Cash Flow Ratio:

Operating cash flow ratio is an indicator of a company’s ability to meet its
short-term debt obligations.
The current liabilities of the company are multiplied by the cash flow from
operations to arrive at the cash flow calculations. The operational cash flow ratio
measures how many times operating cash flow can be used to pay off a current
obligation. A larger number is preferable.
Formula:
Operating Cash Flow Ratio = cash flow from operations
Current liabilities
7) Liquidity Ratio:
Liquidity ratios are financial ratios that show whether a company’s present
assets will be adequate to meet its financial commitments when they arise.
Formula:
Liquidity Ratio/ Current Ratio = = Current Assets
Current liabilities
8) Gross Profit Ratio:
There are many ways to measure a company’s profitability, but this is a good
starting point. Often expressed as a percentage, this reveals a company’s pricing
strategy by showing the gross profit percentage of net sales.
Formula:
Gross Profit = Gross Profit * 100
Sales
9) Net Profit Ratio:
As a result of the net profit ratio, the link between net profit and sales was
established a company’s profitability is measured by this ratio, which represent gross
profit as a proportion of net sales or gross margin. Companies might use the ratio as
an indicator of their pricing strategy.
Formula:
Net Profit Ratio = Net profit after tax *100
Net Sales

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CHAPTER 3
COMPANY PROFILE
Mother Dairy a unit of Karnataka Milk Federation which is
located in Nehru gunj in the Kalaburagi North Taluk, was established in a
total area of 2 acres during under of II with a processing capacity of 25000
liters per day on 7.12.2019 later, the processing capacity of the diary was
expanded to handle 25000 thousand liters per day during 2019-2020 with an
additional cost of Rs.2500000 Total of investment for this project is
Rs.10.61 corers. The Diary is processing and distributing on average 25
thousand liters of Milk per day to the consumers in kalaburagi city with the
increase in demand for liquid milk. It is planned to increase the processing
capacity of the Diary.
Milk is highly nutritive and majority of Indian population rely on milk
for their protein supplement milk is obtained by milking well bread cows
and buffaloes, either manually or through sterilized milking machine milk
cream, cheese ghee, condensed milk of milk-protein are the dairy products
which are separated from milk through various process.

BACK GROUND

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In June 1974, an integrated project was launched in Karnataka

restructure and reorganizes the Diary Industry on the co-operative principle
and to lay foundation for a new direction in diary development. Work on the
first are World Bank aided Diary development was initiated in 1975.
Initially the project covered its southern districts of Karnataka and
Karnataka diary Development Corporation was setup to implement the
project corporation was setup to implement the project. The multi level,
multiunit organization will total vertical integration of all Diary
development activities was setup with cooperative societies at grass root
level, milk unions at the middle level and Diary development cooperation at
the state level as on apex body vested with responsibility of implementing
Rs.51 Corers project. At the end of September 1984 the World Bank aided
project ended and diary development activates continued under operation
flood- II.
The Activities were extended to cover the entire state except costal
taluks ultra Karnataka district and the process of diary development was
continued in the second phase form April -1984 as a successor to KDDC.
After the closure of operation flood. II, the diary Development activates,
which continued under operation flood-III ended on 31.03.1996. The spills
over works are financed by NDDB from 1.04.1996 under different terms and
conditions.

COMPANY OBJECTIVES
Karnataka milk federation (KMF) is a cooperative apex body in the state of
Karnataka representing dairy farmers’ organization and also implementing dairy
development activities to achieve the following objectives.
Providing assured and remunerative market for the milk produced by the
farmer members.

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Providing quality milk to urban consumers. To build village level institutions

in cooperative sector to manage the dairy activities.
To facilitate rural development by providing opportunities for self
employment at village level preventing immigration to urban areas,
introducing cash economy and opportunity for steady income.
The Philosophy of dairy development is to eliminate middle men and organize
institutions to be owned and managed by the milk produces themselves,
employing professionals. Achieve economies of scale to ensure maximum
results to the milk producers at the same time providing whole some milk
producers at the same time providing wholesome milk at reasonable price to
urban consumers.

The Role of Milk Federation

The Karnataka Co-operative milk producers federated Ltd., came into
existence on 1/5/1984 by federating the milk unions in the state and thus
forming the state level apex organization. The federation is implementing
the project activities. The federation is implementing the project activities
when all the project activities are completed, the main role of the
federation will be to market surplus milk products and to produce and
supply centralized inputs.

FEDERATION FUNCTIONS
Presently Mother Diary and Nandini Milk Products at Bangalore are
under the control of KMF fair cattle feed plants, a central training Institute
and centralized testing and quality control laboratory are functioning under
the direct control by KMF Co-operation of activities between the unions and
developing marketing in the area if union. The federation manager surpluses
and deficiencies of liquid milk amongst the member milk unions. However

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the federation organizes marketing of products. The major quality of the

milk is sold as liquid milk. This apart other products like butter, Ghee, SMP,
Peda flavored milk, Burfi, Panner, Khava, Jamoons, Mysorepak, Badam
powder and Ice cream are also sold. Nandini Good Life pure Cow Milk with
an ambient shelf life of 45 days has been introduced by adopting ultra high
temperature treatment technology. The products are sold under the family
brand name of Nandini. The federation organizes marketing of liquid milk
and products outside the state. Excellence in quality is maintained to lay a
solid foundation for widespread acceptance of Nandini Products.
PRODUCT PROFILE;

 Nandini Toned: Fresh and Pure milk containing

3.0% fat and 8.5% SNF. Available in 500ml and
1litre packs.

Nandini Homogenized Milk: is pure milk which is homogenized and

pasteurized. Consistent right through, it gives you
more cups of tea or coffee and is easily digestible.

 Full Cream milk: Containing 6% Fat and 9 %

SNF.A rich, creamier and tastier milk, Ideal for
preparing home-made sweets & savories.

 Cow's pure milk: UHT processed bacteria free in a

tamper-proof tetra-fino pack which keeps this milk
fresh for 60 days without refrigeration until opened.
Available in 500ml Fino and in 200ml Bricks

 Nandini Ghee: A taste of purity. Nandini Ghee,

made from pure butter. It is fresh and pure with a
delicious flavor. Hygienically manufactured and

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packed in a special pack to retain the goodness of pure ghee. Shelf life of 6
months at ambient temperatures. Available in 200ml, 500ml, 1000ml sachets,
5lts tins and 15.0 kg tins

 Nandini Curd: made from pure milk. It's thick and

delicious. Giving you all the goodness of homemade
curds. Available in 200gms and 500gms sachet.

 Nandini Peda: No matter what you are celebrating!

Made from pure milk, Nandini Peda is a delicious treat
for the family. Store at room temperature approximately
7 days Available in 250gms pack containing 10 pieces
each.
 Nandini Gulab Jamoon Mix: Great way to those soft
and juicy jamoon treats at home! Nandini Gulab
Jamoon Mix is made from Nandini skimmed milk
powder, maida, soji and Nandini Special Grade Ghee.
Available in 100gms and 200gms standy pouch with a
five layer foil lamination. Shelf life of 6 months.

 Nandini spiced Butter Milk: is a refreshing health

drink. It is made from quality curds and is blended with
fresh green chilies, green coriander leaves, asafoetida
and fresh ginger. Nandini spiced butter promotes health
and easy digestion. It is available in 200 ml packs and is
priced at most competitive rates, so that it is affordable to all sections of
people.

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 Flavored milk: Sterilized flavored milk, a nutritious and healthy drink and an
all-season wholesome drink available in five different flavors - pineapple, rose,
badam, pista.

 Nandini Butter: Rich, smooth and delicious. Nandini

Butter is made out of fresh pasteurized cream. Rich taste,
smooth texture and the rich purity of cow's milk makes
any preparation a delicious treat. Available in 100gms
(salted), 200gms and 500gms cartons both salted and
unsalted,
ORGANIZATIONAL STRUCTURE

BOARD
BOARD

Directors
Directors ExExofficers
officers
Govtnominees
Govt nominees
(8members)
(8members) (5members)
(5members)

Procurement
Procurement Productpresident
Product president Administrative
Administrative
Marketingdept
Marketing dept Financedept
Finance dept Securitydept
Security dept
Dept
Dept director
director dept
dept

Accounts&&
Accounts
Transport
Transport Qualitycontrol
Quality control F.G.S&stores
F.G.S& stores M.I.S
M.I.S purchase
purchase

DEPARTMENTS OF THE COMPANY:

 Production department
 Administration department
 Purchase department
 Procurement & input department
 Stores department
 Security department

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 Processing department
 Quality control department
 Finance department
 Marketing department
 Distribution department
 Human Resource development

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PURCHASE DEPARTMENT:
It also maintains records of all the suppliers calls for Tenders, quotations etc.
Quotations with lowest rate are sanctioned. Purchase up to 50,000, then the approval of
Managing Director.

The structure of Purchase Department is as shown:

Purchase officer

Purchase superident

Assistant purchase officer

Helpers

PRODUCTION DEPARTMENT:
Production department is the main department wherein the raw material is
converted into finished into products. At GUMUL production department is well planned
& adequately equipped manufacturing set up where the entire necessary infrastructure is
available. The quality of the product is also dependant on the production procedure.
In GUMUL the raw milk is processed to form the good quality of milk. During the
processing the milk is differentiated depending on the contract of FAT & SNF (Solids Not
Fat)
The different types of milk different in quality are
TYPES OF MILK FAT SNF
Full Cream Milk 6% 9%
Toned Milk 3% 8.5%
Standardized milk 4.5% 8.5%
Full Cream Milk 6% 9%
Shubham milk 6% 9%
.

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ORGANIZATION CHART OF PRODUCTION DEPARTMENT

MANAGER
MANAGER

Deputymanager
Deputy manager Officestaff
Office staff

Assistantmanager
Assistant manager Assistant(stores)
Assistant (stores) Assistant(account)
Assistant(account)

Technicalofficer
Technical officer Clerk
Clerk Typist
Typist

Seniorsupervisor
Senior supervisor

Juniorsupervisor
Junior supervisor

Dairyoperation
Dairy operation

Dairytechnician
Dairy technician

Dairyworker
Dairy worker

PRODUCTION PROCESS

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DCS

Fresh liquid milk Sample testing Fat & SNF

Chilling

Storing

Pasteurization

Separation

Homogenization

Storing

Packaging

Dispatching

THE PRODUCTION PROCEDURE AT GUMUL IS DONE UNDER

DIFFERENT STAGES. THE STAGES ARE AS FOLLOWS:
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COLLECTION OF MILK:
In this stage the milk is bought from the various district co-operative societies
(DSC) to the main dairy in a can of 40 litters capacity in tempo’s or in any other
vehicles. The cans marked with two different colors to differentiate between the cow
& the buffalo milk. One the milk is bought to the main dairy it undergoes into
following process.
UNLOADING:
The cans were unloaded is called as dock station. The cans are unloaded from
the vans manually.
ORGANOLEPTIC TEST
This test is carried out by a person manually without using any machines but
using his sense organs like nose & hence it is called as organoleptic test. This test is
conducted before the cans are weighed. In this test various sub-tests are conducted like
SMELLING (ODOUR) TEST:-
A man at dock station or platform checks the acidic nature of milk by smelling
or tasting the raw milk. If the tasted milk has bad odors then the dairy will pay lower
rate to such society members than the normal rate.
EXTRANEOUS-MATTER APPERANCES:-
In this test the raw milk is undergone into the test, which is conducted by the
chemist. The chemist checks for two aspects mainly whether the milk is contaminated
or not & the milk is in liquid form or curd form. He also checks for any extraneous
matters like dust, flies etc. which lead to spoilage of milk.
ACIDIC TEST
As the payment to the suppliers or DSC depends mainly on FAT & SNF
content of the raw milk. The supplier may add sugar to the milk so as to increase the
FAT & SNF content. Hence to avoid this adulteration sugar test is done.
Its procedure is 10ml of milk is shaken in a test tube & 1ml of hydrochloric
acid. Few crystals of resorcinol are mixed to it. The solution is shaken well & heated
for five minutes. If solution turns organ color it is demanded that sugar is mixed to it.

STORAGE OF CHILLED MILK:-

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Once all the tests are over, the milk is allowed to store in the SILOS (Storage
tank). So as to maintain its cold level of 4 degree calicoes. The unions having 7 storage
tanks, 3 tanks are vertical with 30000 litters’ capacity each and the remaining 4 are
horizontal among which 2 are having the capacity of 10000 litters each and other 2 of
15000 litters each. After chilling the milk is passed through pasteurizer for pasteurization.
PASTEURIZATION:-
This step of production includes heating every partical of milk at 72 degree
celcious in 15 seconds and it cold in less then 4 degree celcious. When it is passing
through pasteurization the cream is removed depending on the quality of the milk
required (standardization).
PACKING:-
Once the pasteurization closed is conducted the next step is to pack the milk.
The packing is done by the machine of fluid goods and were as it is done manually in
case of solid goods like pheda. The machine packs the raw milk in two sizes that is
500ml and 1000ml pouches. These machines are automatic with a capacity of packing
10000 to 14000 pouches per hour. The speed can be even altered according to
suitability. These machines are used to pack all different types of milk in plastic bags.
These plastics are polythene bags required for packing milk is bought from Bangalore.
STORAGE:-
The last but not the process is the whole of production process is storage. The
milk packed in 500ml and 1000ml pouches are arranged in the crates. Each cater contain
10 litters of milk. This caters are stored in cold room which has a temperature of about 5
degree Celsius or below

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ADIMINISTRATIONDEPARTMENT:

FUNCTOINS
 Maintenance of attendance.
 Establishment of billing.
 Maintenance of service records.
 Domestic enquiry.
 To maintain shifts timing.
 To look after recruitment process.
 Conducting training to the new employees and also to
the existing once.
RESPONSIBILITIES OF ADMINISTRATION DEPARTMENT
 To look after the overall administration of time office
management.
 Conducting training to the new employees and also to the
existing once.
 To look after over recruitment process.
 To maintain shifts timings.


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Organization chart of procurement and input department

Manager
Manager

Procurementwing
Procurement wing Technicalinput
Technical inputwing
wing

DeputyManager
Deputy Manager DeputyManager
Deputy Manager

Assistantmanager
manager Assistantmanager
Assistant manager
Assistant

Extensionofficers
officers Clerks
Clerks
Extension

Clerks
Clerks

Helpers
Helpers

The union carries procurement by setting up co-operative societies at village

level. Later milk is collected in the chilling center, milk collected from the milk center, is
first tested, there are milk testing equipments for this purpose. Then a survey on
availability of transportation facilitates and productive capacities of villages are
conducted. If the marketable surplus is more than 150 litters per day, a society is formed;
further 10 promoters selected from village and are given responsibility of collecting the
capital for society selling shares. Procurement is done twice a day and payment is made
on the basis of percentage of the content Fat and SNF in the milk
After this milk is sent to unions chilling center, whichever is near. At the chilling
center, milk is chilled up to 4 degree Celsius. Letter this chilled milk is to sent to union
insulated tankers for further processing. The main function of this department is to
procure milk from different areas throughout the year.

STORES DEPARTMENT:
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The stores Department in GUMUL follows the Codex system (Coded Control
System). A card is maintained for each item and a number is allotted. The card attached
to each article consists of amount balance, date of issue, purchase etc. this is later
recorded in separated ledger book. The inventories are of different types ranging from
mechanical, shares, packing items to animal drugs, and stationary and veterinary drugs,
there are at least 4000 different inventories.
This department has the following services:
 It tries to maintain maximum and minimum level of inventory so as to avoid
blockage of capital and storage.
 Ordinary and local available commodities are maintained at minimum possible
level.
 Items of urgent and not easily available are stored sufficiently for further
demand.
The structure of this department is as shown below:

FINISHED GOODS STORES:

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This Department acts as an interface between production and Marketing

Department . it is concerned with maintenance of finishes goods connected records. it
received all the finished goods and issues the stock to marketing department as per
indents. It ensures that the goods are maintained properly with respect to quality.

Accounts are maintained and daily and daily and daily and monthly report is
submitted to the production. Marketing finance Departments. As the products. As
finishable first in-first out method of inventory is followed.
Times FGS Department has the following Structure:

QUALITY CONTROL DEPARTMENT:

The Quality Control department has the following structure

In GUMUL at every stage, care is taken to ensure that the customer gets the
product, which has a very high quality. Hence there is separate department called Quality

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Department, where the quality testing is done. Quality control is very essential as to
maintain the freshness of the milk. All the containers, pipes and other equipments are
washed with hot water before starting off with new production. There are many tests
conducted here. The packed milk, we get will have undergone 3 quality tests. First test
is done on raw milk, which we get from chilling center. Next before standardization and
the last test before packing

TEST REASON

Temperature
Should be below 5 degrees

Clot on Boiling If mill curdles soon after

billing milk is rejected

Acidity Test To test the extent of acidity

Alcohol Test
To check the heat stability of
milk
Lactometer To check the density of milk
Fat Test Percentage of fat determined

SNF Percentage of SNF

determined for pricing
SNF=CLR+FAT/4

FINANCE DEPARTMENT:

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This department is responsible for keeping all the inward and outward flow of money
of union. It prepares budget every year and financial rules for receipts all payments are
framed. The functions of these departments. Are:
 To prepare monthly accounts (Receipts and payment P & I Account and Balance
sheet).
 To prepare quarterly financial statement
 To prepare integrated business plan.
 To prepare year ending financial statements.
 To get accounts audited from statutory books of accounts.
GUMUL Follows to types of auditing:
1. Pre-Audit System-done by Finance and Account Department every Year.
2. Statutory System-Done by Private charted accounts every year.
SECURITY DEPARTMENT:
KALABURAGI Milk occupies 25 acres of land the whole premise is been
guarded by the security personnel. The security people work in three shifts. All the
vehicles are checked before entering the premise. The departments is also maintains
separate registers like store-in Register, Attendance register etc.

Channels of distribution system:

I. GUMUL --- Transportation Vehicles --- Dealers
Door delivery boys -- Consumers
II. GUMUL ----Transportation Vehicles --- Institutions.
(institutions :hospitals, hotels , hostels etc.)
III. GUMUL ----Transportation Vehicles --- Parlours -- Consumers.

IV. GUMUL ----Transportation Vehicles---- Day Counters --Consumers.

Price list of milk and milk products.

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SL. Products’ name Net Amt Commission MRP

1 Tonned milk/ltr 24.40 0.60 25.00
2 Standard milk/ltr 25.00 1.00 26.00
3 Double tonne milk/ltr 25.00 1.00 26.00
4 Homogenized std 27.00 1.00 28.00
milk/ltr
5 Curds 24.00 1.00 25.00
6 Butter milk 11.40 1.60 13.00
7 Peda/kg 116.00 12.00 128.00
8 200ml Ghee 186.36 18.64 205.00
9 500 ml Ghee 180.90 18.10 199.00
10 1000ml Ghee 177.27 17.73 195.00
11 S.F.M/bottle 10.48 1.52 12.00
12 Jamoon mix/200gm 27.83 4.17 32.00
pack
14 Mysore pack/kg 196.40 23.60 220.00
15 Paneer 115.00 10.00 125.00
16 Butter 500gm 151.79 18.21 170.00

The structure of finance Department is as shown:

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Deputy Manager:

PRICING STRATERGY
Pricing decisions are subject to an incredibly complex arry of environmental and
competitive forces. A Company sets not a single price but rather a pricing structure that
covers different items in its line.this pricing structure changes over time as products move
through their life cycle. The company adjusts product prices to reflect changes in costs
and demand and to account for variations in buyers and situations. As the competitive
environment changes, the company considers when to initiate price changes and when to
respond to them.

GUMUL’s PRICING STRATERGY

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GUMULproduces different milk products to cater efficiently the variety milk needs
of the urban and semi urban consumers of the jurisdiction covering many district Viz.,
KALABURAGI, Gadag, Haveri, Dhavanageri etc.
Diferent prices are changed to different types of milk on the basis of content of
FAT and SNF (Solid not FAT)
Sl. SELLING PRICE(in
No. TYPE OF MILK FAT &SNF Rs.)
Double Toned 1.5% FAT 9.0%
1 Milk SNF 11
3.0%FAT 8.5%
2 Toned Milk SNF 13

Standardised 4.5% FAT 8.5%

3 Milk SNF 14.5

6.0% FAT
4 Full Cream Milk 9.0%SNF 18

MILK PRODUCER CO-OPERATIVE SOCIETY’s

PRICING:

Sl.
No. TYPE OF MILK FAT &SNF SELLING PRICE(in Rs.)

1 Cross Breed Cows 3.0%FAT 8.5% SNF 8.6

2 Local Breed Cows 4 to 5% FAT 8.5% SNF 9.5

3 Local Buffaloes 6% FAT 9%SNF 10 to 10.50

4 Cross Breed Buffaloes 8 to 10%FAT 9 to 10% SNF 11 to 12.00

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CHAPTER 4
ANALYSIS AND INTERPRETATION
GUMULis one of the most reputed companies in the Karnataka. GUMUL, leading
milk & milk products co-operative society, aims at providing health and toned milk to its
consumer at a better and reasonable price. GUMULis facing competition from various
manufactures of milk & milk products.
The study is conducted in GUMULto measure the working capital
management of the company. The working capital management is the most important tool of
measure the liquidity position of the company. Every company as to maintain good
management of working capital, so the working capital of a GUMULsince its establishment
is cause of worry, as it has fails to produce desired results. The GUMUL, instead of
generating trading surplus for economic uplift of milk producers has become a loosing
venture. So, this study is undertaken to observe the management of Working Capital through
Ratio Analysis Technique, because ratio analysis is the important tool to measure the
working capital management. So I had taken the five years annual reports to measure the
working capital management.
Note: we have used the ratio analysis in this project in order to substantiate the managing of
working capital. For this, we used some of the ratios to get the required output.
The present study ascertained with the help of following ratios:
1. Current Ratio
2. Quick Ratio
3. Inventory Turnover Ratio
4. Debtors Turnover Ratio
5. Creditors Turnover Ratio
6. Working Capital Turnover Ratio
7. Current Assets Turnover Ratio
8. Working Capital to Sales Ratio

Current Ratio:
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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 liabilities-
current 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 Liabilities

Current Assets include – Closing Stock, Deposits (asset), Loans & Advances, Sundry
Debtors, Cash-in-hand, and Bank Accounts.

Current Liabilities include – GRANTS, O.S.L, Other Liabilities, Salary Recoveres, Security

Deposit A/C, Unpaid Salary/ Wages A/C, Duties & Taxes, Sundry Creditors.

Table:-01

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The Table Showing Current Ratio

Year Current Assets Current Liabilities Current Ratio
2019-20 6,07,17,987 3,26,52,240 1.85
2020-21 7,11,81,059 4,35,76,692 1.63
2021-22 6,36,58,413 3,59,78,861 1.76
2022-23 9,25,79,781 5,15,95,821 1.79
2023-24 7,21,28,952.41 5,07,41,016.54 1.42

Chart:-1
The Chart Showing Current Ratio

Interpretation:
The Table 1 revels that the Liquidity position of KALABURAGI Milk Union is
Satisfactory even though the ratio of all five years less than the conventional norm i.e
2.because the KALABURAGI Milk Union is a Public Utility firm, as for the conventional
rule concerned the Public Utility firm’s liquidity position is satisfactory even though the
current ratio is less than the conventional norm. There for the liquidity position of
KALABURAGI Milk Union is Satisfactory.

Quick Ratio = Quick Current Assets

Current Liabilities

Quick Current Assets = Current Assets – Inventory

Table:-02

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The Table Showing Quick Ratio

Year Quick Assets Current Liabilities Quick Ratio
2019-20 3,09,21,237 3,26,52,240 0.95
2020-21 4,94,41,661 4,35,76,692 1.13
2021-22 3,94,99,292 3,59,78,861 1.09
2022-23 6,24,35,658 5,15,95,821 1.21
2023-24 48710020.15 50741016.64 0.96

Chart:-02
The Chart Showing Quick Ratio

Interpretation:
It may be inferred from Table 2 the liquidity ratio of KALABURAGI Milk Union is
good in the three years i.e. 2005-06, 2006-07& 2007-08 respectively but in the years 2003-
04, 2004-05 & 2008-09 the liquidity ratio is less than standard norm i.e 0.71, 0.95& 0.96
respectively. It indicates that liquidity ratio of GUMULis not good. But in 2005-06 to 2007-
08 the liquidity ratio is more than the standard norm. There for it indicates that company is
able to pay its current liabilities with quick assets. The GUMUL is able to utilize its current
assets properly & the Inventory movement is quicker and debt payment is also faster.

Inventory Turnover Ratio = Cost of Goods Sold

Average Inventory

Cost of Goods Sold = Sales – Gross Profit

Average Inventory = Opening Stock + Closing Stock / 2

Table:-03

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The Table Showing Inventory Turnover Ratio

Year Cost of Goods Sold Average Inventory Ratio

2019-20 346684070 57588517 6.02

2020-21 446321775 51536148 8.66
2021-22 397561561 45898519 8.66
2022-23 440936818 54303244 8.11
2023-24 49,5708694.15 26788827.39 18.51

Chart:-03
The Chart Showing Inventory Turnover Ratio

Interpretation:
It may be found from Table 3 the Inventory turnover of KALABURAGI Milk Union is
increasing & decreasing trend. The GUMULis increases its efficiency of selling the products.
In 2004-05 decreases its inventory turnover i.e 7.19 to 6.02.But in 2005-06 to 2008-09 years
the firm performance is better to selling its products. The GUMULis maintain this way he
sells the Inventory very fast & the efficiency of the firm in selling its product is better.
Inventory Conversion Period:

Inventory Conversion Period = No. of Days in a Year

Inventory Turnover Ratio

No. of Days in a Year – 365 days

Table:-04

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The Table Showing Inventory Conversion Period

Year No. of Days in a Year I.T.R I.C.P

2019-20 365 6.02 61

2020-21 365 8.66 42
2021-22 365 8.66 42
2022-23 365 8.11 45
2023-24 365 18.51 20

Chart:-04
The Chart Showing Inventory Conversion Period

Interpretation:
The Table 4 depicts that the KALABURAGI Milk Union is taking how many days to
convert the Raw Materials into finished products. In last five years the company is improved
its conversion period yearly. In the year 2003-04 & 2004-05 the GUMULhas taken more
days to convert inventory. But in 2005-06 to 2008-09 the GUMULis taken less days to
convert inventory. It indicates that fast to conversion of inventory & sells the goods fast.
There for the GUMULis maintain better Inventory conversion period.
Debtors Turnover Ratio:

Debtors Turnover Ratio = Total Sales

Debtors

Total Sales includes – Sale-cattle feed, Sale of Milk, Sale of Milk Products, Sale of P & I,
Other Sales.
Table:-05

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The Table Showing Debtors Turnover Ratio

Year Total Sales Debtors Ratio

2019-20 39,05,65,568 1,25,55,600 31.10

2020-21 48,90,14,708 1,85,99,457 26.29
2021-22 46,82,83,461 1,09,67,229 42.69
2022-23 51,18,17,364 2,05,58,529 24.89
2023-24 573720167.78 21607761.25 26.55

Chart:-05
The Chart Showing Debtors Turnover Ratio

Interpretation:
The Table 5 shows that the in last five years Debtors turnover ratio of KALABURAGI
Milk Union. In 2003-04 to 2005-06 the debts are not collected rapidly. But in the year 2006-
07 the debts are collected rapidly i.e 42.69. In 2007-08 again the debts turnover ratio is
decreases 42.69 to 24.89.in 2008-09 the debts turnover Ratio is in increases 24.89 to 26.55.
There for the GUMULis maintaining better sales but managing its debts collection is not
efficiently.
It can be ascertained by following formula:

Debtors Collection Period = No. of Days in a Year

Debtors Turnover Ratio

Table:-06

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The Table Showing Debtors Collection Period

Year No. of Days in a Year D.T.R D.C.P

2019-20 365 31.10 12

2020-21 365 26.29 14
2021-22 365 42.69 9
2022-23 365 24.89 15
2023-24 365 26.55 14

Chart:-06
The Chart Showing Debtors Collection Period

Interpretation:
The Table 1 revels that the debts collection period of KALABURAGI Milk Union. In
2003-04 to 2005-06 the debts collection period increasing trend. It indicates that the
customers are not made payment promptly. but in the year 2006-07 the debts collection
period decreased to 9 days. It indicates that the customers had made the payment in time in
the year. But in the year 2007-08 again the collection period is increasing 9 to 15 days.but in
the year 2008-09 the debts collection period decreased 15 days to 13 days. This continues it
is effects to liquidity position of the company.
It is calculated by following formula:

Creditors Turnover Ratio = Net Purchase

Average Creditors

Table:-07

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The Table Showing Creditors Turnover Ratio

Year Net Purchase Average Creditors Ratio

2019-20 30,37,70,823 84,52,411 35.93

2020-21 37,12,88,997 1,19,87,131 30.97
2021-22 34,09,07,386 1,25,74,396 27.11
2022-23 38,39,44,340 87,28,998 43.98
2023-24 422383354.32 5624981.38 75.09

Chart:-07
The Chart Showing Creditors Turnover Ratio

Interpretation:

It may be inferred from Table 7 there is ups & downs in the ratio of credit turnover. The
ratio is low in 2003-04 it indicates that the KALABURAGI Milk Union credit payment is not
good i.e 22.19. It is not good to point of liquidity position but in 2007-08 & 2008-09 the
credit payment of GUMULis increasing i.e 43.98 & 75.09 respectively. it indicates that
GUMUL has paying credit properly.

It is calculated by following formula:

Creditors Payment Period = No. of Days in a Year

Creditors Turnover Ratio

Table:-08

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A STUDY ON ANALYSIS OF WORKING CAPITAL ON KMF KALABURAGI M.Com

The Table Showing Creditors Payment Period

Year No. of Days in a Year C.T.R C.P.P

2019-20 365 35.93 10

2020-21 365 30.97 12
2021-22 365 27.11 13
2022-23 365 43.98 8
2023-24 365 75.09 5

Chart:-08
The Chart Showing Creditors Payment Period

Interpretation:

It may be found from Table 8 there is ups & downs in a credit payment period of
KALABURAGI Milk Union. In the year 2003-04 the credit payment period of GUMULis
high i.e 16 days. It indicates the company is not maintaining credit payment properly. But in
the year 2007-08 & 2008-09 the credit payment period is low ie 8 days & 5 days. It indicates
that the GUMULhas taken less credit facility & paying the credit in time. It is good sign of
company to utilizing the credit facility properly.
It is calculated by following formula:

Working Capital Turnover Ratio = Cost of Goods Sold

Net Working Capital

Cost of Goods Sold = Sales – Gross Profit

Net Working Capital = Current Assets – Current Liabilities

Table:-09

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A STUDY ON ANALYSIS OF WORKING CAPITAL ON KMF KALABURAGI M.Com

The Table Showing Working Capital Turnover Ratio

Year Cost of Goods Sold Net Working Capital Ratio

2019-20 34,66,84,070 2,80,65,747 12.35

2020-21 44,63,21,775 2,76,04,367 16.16
2021-22 39,75,61,561 2,76,79,552 14.36
2022-23 44,09,36,818 4,09,83,960 10.75
2023-24 495708694.15 21387935.87 23.18

Chart:-09
The Chart Showing Working Capital Turnover Ratio

Interpretatio
The Table 9 depicts of Working capital turnover ratio is decreasing trend. In the
year 2003-04 & 2005-06 the ratio is high i.e 18.38 & 16.16 it shows the GUMULis properly
utilized the working capital for making the sales. It reflects the working capital management
is efficient. But in the year 2007-08 the working capital turnover ratio is low compared the
first four years i.e 10.75. It indicates the GUMULis not properly utilized the working capital.
It is not good to company; it affects the sales of the company.but in the year 2008-09 again
increased i.e 23.18.
It is calculated by following formula:

Current Assets Turnover Ratio = Total Sales

Current Assets

Table:-10

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A STUDY ON ANALYSIS OF WORKING CAPITAL ON KMF KALABURAGI M.Com

The Table Showing Current Assets Turnover Ratio

Year Total Sales Current Assets Ratio

2019-20 39,05,65,568 6,07,17,987 6.43

2020-21 48,90,14,708 7,11,81,059 6.87
2021-22 46,82,83,461 6,36,58,413 7.36
2022-23 51,18,17,364 9,25,79,781 5.53
2023-24 573720167.78 72128952.41 7.95

Chart:-10
The Chart Showing Current Assets Turnover Ratio

Interpretation:

The Table 10 shows that how the KALABURAGI Milk Union is utilized its Current
Assets. In the year 2003-04 to 2006-07 the ratio is increasing 6.05 to 7.36 it indicates that
GUMULis utilizing its current assets more efficiently. It reflects the good current assets
management. But in the year 2007-08 the ratio is decreases 7.36 to 5.53. it indicates that the
GUMULis decreasing its current assets utilization. There for the GUMULis inefficiently
manage its current assets. But in the year 2008-09 the ratio is increases 5.53 to 7.95. it
reflects the good current assets management.
It is calculated by following formula:

Gross Operating Cycle = Inventory Conversion Period + Debtors Collection Period

Table:-11

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A STUDY ON ANALYSIS OF WORKING CAPITAL ON KMF KALABURAGI M.Com

The Table Showing Gross Operating Cycle

Year I.C.P D.C.P G.O.C

2019-20 61 12 73
2020-21 42 14 56
2021-22 42 9 51
2022-23 45 15 60
2023-24 19.72 13.75 33

Chart:-11
The Chart Showing Gross Operating Cycle

Interpretation:
The Table 11 revels that the KALABURAGI Milk Union is taking more days in 2004-
05 i.e 73 days comparing to five years to convert the raw materials into finished products &
the collection of debts. In 2006-07 the GUMULhas taken less day’s i.e 51 days to inventory
conversion & debts collection. For seeing last five years the gross operating cycle of
GUMULis not good because it takes more time to conversion of inventory & also not
effective in collection of debts. There for the GUMULis not maintaining the efficient gross
operating cycle.in 2008-09 the GUMUL has taken less days I,e 33.47 days to inventory
conversion and debt collection.
It is calculated by following formula:

Net Operating Cycle = Gross Operating Cycle – Creditors Payment Period

CHAPTER 5

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A STUDY ON ANALYSIS OF WORKING CAPITAL ON KMF KALABURAGI M.Com

FINDINGS SUGGESTIONS AND CONCLUSION

FINDINGS

1) In the Current Ratio shows that in the year 2018-19 the Liquidity position of the
KALABURAGI Milk Union is less i.e 1.47 compare to all five years.
2) Quick ratio of the KALABURAGI Milk Union is increasing in the year 2018-19 to 0.96
compare with 2023-24 (0.95.).
3) The Inventory Turnover Ratio of the KALABURAGI Milk Union is decreased by 6.02 in
the year 2004-05 compare to 2018-19 ratio i.e 18.51. & in 2007-08 again decreasing i.e
8.11 compared 2005-06 & 2006-07 i.e 8.66.
4) The KALABURAGI Milk Union has taken more days to convert the raw materials into
finished products i.e 61 days in the year 2004-05.
5) Debtor’s turnover ratio of KALABURAGI Mlk Union is decreases i.e 26.55 in the year
2008-09 compared to 2006-07 i.e 42.69 & 2004-05 i,e. 31.10
6) The Debtors collection period of KALABURAGI Milk Union is increasing i.e 14 days in
the year 2008-09 compare to the year 2004-05 i.e 12 days.
7) The Creditors Turnover Ratio of the KALABURAGI Milk Union is increasing to 75.09.
in the year 2007-08 compare to 2004-05 ratio i.e 35.93.
8) Credit Payment Period of KALABURAGI Milk Union is also decreasing to 5 days in the
recent year compare to 2004-05 i.e 10 days.
9) Working Capital Turnover Ratio of the KALABURAGI Milk Union is increasing in the
recent year i.e 23.18 compare to 2004-05 the ratio is 12.35.
10) The Current Assets Turnover Ratio of KALABURAGI Milk Union is high in the recent
year i.e 7.95 compare to last four years.

11) The KALABURAGI Milk Union has taken more days to complete the Net Operating
Cycle i.e 63 days in the year 2004-05.
.
12) In the statement of changes in Working capital for the year 2004-05 & 2005-06. The
working capital decreasing Rs 4, 61,380 in the year 2005-06.
13) In the statement of changes in Working capital for the year 2005-06 & 2006-07. The
working capital is increasing Rs 75,185 in the year 2006-07.

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A STUDY ON ANALYSIS OF WORKING CAPITAL ON KMF KALABURAGI M.Com

14) In the statement of changes in Working capital for the year 2006-07 & 2007-08. The
working capital is increasing Rs 1, 33, 04,408 in the year 2007-08.
15) In the statement of changes in Working capital for the year 2007-08 & 2008-09. The
working capital is increasing Rs 1, 40,87,931 in the year 2008-09.

16) The study is shows that the KALABURAGI Milk Union has not using latest technology
& also there is excess work force on some departments than required.

17) The KALABURAGI Milk Union is not having any Freedom in Marketing &
Promotional activities, because most of the decisions are taken by K.M.F.

SUGGESTION

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A STUDY ON ANALYSIS OF WORKING CAPITAL ON KMF KALABURAGI M.Com

1) It is suggested that the GUMULhas to reduce Inventory and increases investment in the
form of quick assets, so that it can maintain good liquidity position.
2) In the recent years, the debt turnover ratio of GUMULis decreases so, it is suggested to
increases the debt turnover it help to maintain the debt collection.
3) In the recent years, the debts collection period of GUMULis increasing, So it is advised
to GUMULto reduce the collection period, so that it can maintain sufficient liquid
working capital.
4) The study of Inventory utilization ratio of GUMULnot properly utilized their inventory.
It is advised to adopt scientific inventory management to improve “working capital”.
5) The working capital turnover ratio in decreasing trend in the recent year, it is suggested
to GUMULto increase working capital turnover ratio, so that it can maintain a sufficient
working capital.
6) It is suggested that GUMULreduce its operating cycle, so that it can maintain sufficient
working capital in the liquid form.
7) The current assets turnover ratio is in the recent year, it is suggested to
GUMULincrease current assets turnover, so that it can generate more revenue by
investing in the current assets.
8) It is suggested that GUMULshould reduce the time length of Net operating cycle by
taking appropriate measures.

9) GUMULshould have to appoint skilled and qualified employees and also new
technology in machineries. It increases efficiency and quality of the firm.
10) GUMULshould have to computerize all the departments in order to increase efficiency
and productivity of employees.
11) GUMULshould have take sales promotion measures like free home delivery to urban
consumers. This help to increase the market share through increase sales.

CONCLUSION

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A STUDY ON ANALYSIS OF WORKING CAPITAL ON KMF KALABURAGI M.Com

The study of “Working Capital Management” in the GUMULis satisfactory. I got

more information on working capital management of the GUMUL, it is more helpful to my
study. The study of last five years liquidity position of the company is better. In last five
years company is facing several problems in finance & Marketing promotional activities.
GUMULhas suffered losses due to financial problems & less quantity of milk supply in the
previous years but in the recent year it is better position. It shows that GUMULis improving
its financial conditions & also utilizing its assets & resources properly. If GUMULcontinues
the same performance as in the current financial year, it can earn more profits.

BIBLIOGRAPHY

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A STUDY ON ANALYSIS OF WORKING CAPITAL ON KMF KALABURAGI M.Com

 I.M. Pandey – Financial Management. Vikas Publishing House Pvt. Ltd.

 M.Y. Khan and P. K. Jain – Financial Management. Tata Mcgraw –Hill
publishing company Ltd. New Delhi.
 Prasanna Chandra – Fundamentals of Financial Management. Tata Mcgraw
Hill Publishing Company Ltd. New Delhi.
 Web Site:. www.KMF Nandini.com

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