A Study on Working Capital Management at Karnataka Soap and Detergent Ltd.”
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“A STUDY ON WORKING CAPITAL MANAGEMENT AT KARNATAKA SOAP AND DETERGENT LTD.” Submitted by JAHFAR TM REG NO: 13P35H0245 Under the guidance of Mrs. PRASANNA PRAKASH NEW HORIZON COLLEGE BANGALORE-560103 MASTER OF BUSINESS ADMINISTRATION BHARATHIAR UNIVERSITY DECEMBER 2014 (IC: KA11B131) STUDENT DECLARATION I hereby declare that this project titled “A STUDY ON WORKING CAPITAL MANAGEMENT AT KARNATAKA SOAP AND DETERGENTS LTD.” was prepared by me during the year 2014-2015 and was submitted in partial fulfilment of the requirements for Master Degree in Business Management of Bharathiar University. I also declare that this project report is original and genuine and has not been submitted to any other university of the award of any degree, diploma or other similar titles or purposes. DATE: BANGALORE JAHFAR TM [REG NO: 13P35H0245] ACKNOWLEDGEMENT At first I thank God for being the source of inspiration strength to complete my project. I am grateful to Dr. R Bodhisatvan, Principal and DR. K Purushothaman,HOD,of New Horizon College for granting permission for me to take up this project work. I wish to express my sincere thanks toMrs.PRASANNA PRAKASH, Internal Guide and Sr.Asst.Professor, Department of management studiesNew Horizon Collegein guiding me for the project, co-operation and advice extended to me throughout this study. I extended my sincere gratitude to Mr K.C. SUNDARA MURTHY (Manager Accounts KS&DL) for giving me an opportunity to do my project in this esteemed organization and giving me all the necessary support and guidance to complete it successfully. Last, but not least, I express my heartfelt thanks to my friends, teachers and dealers (KS&DL) who gave me the valuable support to complete my project. JAHFAR TM [REG NO: 13P35H0245] GUIDE DECLARATION This is to certify that the project report titled “A STUDY ON WORKING CAPITAL MANAGEMENT AT KARNATAKA SOAP AND DETERGENTS LTD” submitted by JAHFAR TM bearing registration No. 13P35H0245 of Bharathiar University for the partial fulfilmentof Master Degree in Business Management is an outcome of genuine research work carried under my guidance and it has not been submitted for the award of any other degree, diploma or prize. DATE: BANGALORE Mrs PRASANNA PRAKASH (Sr.Asst.Professor) CERTIFICATE FROM COLLEGE TO WHOMSOEVER IT MAY CONCERN This is to certify that Jahfar tm is a bonafide student of this college. The project work entitled “A STUDY ON WORKING CAPITAL MANAGEMENT AT KARNATAKA SOAP AND DETERGENTS LTD” is a bonafide work carried out by JAHFAR TM in partial fulfilment of the requirements for Master Degree in Business Management of Bharathiar University during the year 2014-2015. HOD PRINCIPAL TABLE OF CONTENTS CHAPTERS TITLLE PAGE NO. NO. EXECUTIVE SUMMARY 1 INTRODUCTION 1-4 2 INDUSTRY AND COMPANY PROFILE 5-24 3 THEORETICAL BACKGROUND OF THE STUDY 25-38 4 ANALYSIS AND INTERPRETATION 39-67 5 SUMMARY OF FINDINGS, SUGGESTION AND 68-72 CONCLUSION BIBLIOGRAPHY ANNEXURE LIST OF TABLES TABLE NO. PARTICULAR PAGE NO. 1 A statement showing changes in working capital for the year 39 ending 2009-2010 2 A statement showing changes in working capital for the year 40 ending 2010-2011 3 A statement showing changes in working capital for the year 42 ending 2011-2012 4 A statement showing changes in working capital for the year 43 ending 2012-2013 5 Current ratio 46 6 Quick ratio 48 7 Cash ratio 50 8 Gross working capital turnover ratio 52 9 Net working capital turnover ratio 54 10 Debtors turnover ratio 56 11 Debtors collection period 58 12 stock turnover ratio 60 13 Credit turnover ratio 62 14 Operating cycle 64 15 Cash cycle 66 LIST OF CHARTS CHART NO. PARTICULAR PAGE NO. 1 Current ratio 47 2 Quick ratio 49 3 Cash ratio 51 4 Gross working capital turnover ratio 53 5 Net working capital turnover ratio 55 6 Debtors turnover ratio 57 7 Debtors collection period 59 8 stock turnover ratio 61 9 Credit turnover ratio 63 10 Operating cycle 65 11 Cash cycle 67 PROFIT & LOSS ACCOUNT Rs. In crores PARTICULER AMOUNT AMOUNT 2009-2010 2010-2011 INCOME Sales 169.39 178.90 Less-excise duty 16.02 14.12 Net sales 153.37 164.77 Other income 6.06 2.22 TOTAL INCOME 159.43 167.00 EXPENSES 80.19 77.53 Cost of material consumed - - Purchase of stock in trade - - Change in inventory of finished goods, in - - progress and stock in trade Employee benefit expenses - - Finance cost 39.69 49.82 Depreciation 73.44 79.97 Other expenses 154.03 158.01 TOTAL EXPENCES 12.43 14.31 Profit before exceptional and extraordinary items and tax 1.85 4.80 Provision for taxation Current tax 140.78 14.41 Prior period tax 203.58 89.30 Differed tax liability Dividend tax 11.68 9.31 PROFIT/(LOSS)AFTER TAX Proposed dividend 13.68 26.77 TOTAL PROFIT 200.18 220 Earnings per share(Rs) basic and diluted BALANCE SHEET OF KS&DL PARTICULERS AMOUNT AS AT 31- AMOUNT AS AT 03-2009 31-03-2010 EQUTY AND LIABILITY 1. SHARE HOLDERS FUND a. Share capital 318221000 318221000 b. Reserve & surplus 267719129 343479146 c. Revaluation reserve Revaluation of land 1769358 - 5877009487 661700146 2. NON-CURRENT LIABILITIES a. Long term borrowings 190711112 1635989045 b. Other non-current liabilities 246650794 292361773 c. Long term provisions - 269166068 437361906 725126745 3. CURRENT LIABILITIES a. Short term borrowing 34042503 b. Trade payables 56632624 c. Other current liabilities 155975667 d. Short term provisions 204956560 TOTAL 1230027953 1386826891 ASSETS 1. NON CURRENT ASSETS a. Fixed assets 1.tangible assets 69775760 85830957 2.intangible assets - - TOTAL 69775760 85830957 b. non-current investment 100 100 c. deferred tax assets 52504866 61435241 d. long term loans & advance - 213953267 e. trade receivables 50000000 50000000 644820726 411219565 2. CURRENT ASSETS 407452487 517605839 a. Inventories 163529618 172641760 b. trade receivables 255132910 285359727 c. cash & cash equivalent d. short term loans advances 215257572 - e. other current assets 16374640 - TOTAL 1230027953 1386826891 PROFIT AND LOSS ACCOUNT PARTICULERS AMOUNT AMOUNT AMOUNT 2011 2012 2013 INCOME Sales 181.06 231.12 286.21 Less-excise duty 16.09 19.27 30.49 Net sales 164.97 211.85 255.72 Other income 3.44 3.8 3.06 TOTAL INCOME 168.41 215.65 528.78 EXPENCES Cost of material consumed 77.72 98.06 125.32 Purchase of stock in trade 4.08 9.06 4.35 Change in inventory of finished goods, work 2.47 9.34 -7.05 in progress and stock in trade Employee benefit expenses 36.48 35.79 44.56 Finance cost 0.52 0.67 - Depreciation 0.58 0.64 0.73 Other expenses 36.28 41.91 51.04 TOTAL EXPENCES 158.13 195.47 218.95 Profit before exceptional and extraordinary 10.28 20.18 39.83 items and tax Provision for taxation Current tax 3.4 50.87 10.83 Prior period tax 0.33 3.83 Deferred tax liability 0.11 0.85 3.42 Dividend tax 0.26 PROFIT/(LOSS)AFTER TAX 6.18 13.46 21.75 Proposed dividend 1.59 TOTAL PROFIT 4.59 13.46 21.75 Earnings per share(Rs)basic and diluted 200.97 423 683 BALANCE SHEET OF KS&DL PARTICULERS AMOUNT AS AMOUNT AS AMOUNT AS AT AT 31-03-2013 AT 31-03-2012 31-03-2011 EQUTY AND LIABILITY 1. SHARE HOLDERS FUND a. Share capital 318221000 318221000 318221000 b. Reserve & surplus 686584676 494601955 39520693 c. Revaluation reserve Revaluation of land 7758591370 - - 8763397046 812822955 709741693 2. NON-CURRENT LIABILITIES a. Long term borrowings 83506504 83506504 83506504 b. Other non-current liabilities 29118117 42745429 126175485 c. Long term provisions 260013594 175405233 209921377 9136035261 1114480121 1129345059 3. CURRENT LIABILITIES a. Short term borrowing - - - b. Trade payables 29376509 59829357 18521787 c. Other current liabilities 163748690 167055833 128835682 d. Short term provisions 161272037 146671937 79992885 TOTAL 9490432497 1488037248 1356695413 ASSETS 1. NON CURRENT ASSETS a. Fixed assets 1.tangible assets 7855306061 96957604 92983953 2.intangible assets - - - 7855306061 96957604 92983953 TOTAL 200000100 110000100 80000100 b. non-current investment 19816230 54041821 62571241 c. deferred tax assets 107825720 86492136 143008388 d. long term loans & advance 8112093 19905141 - e. trade receivables 8191060204 367396802 37856382 2. CURRENT ASSETS 496456170 489514320 525234558 a. Inventories 210356224 149062722 134735562 b. trade receivables c. cash & cash equivalent 431911843 377803712 240314138 d. short term loans advances 160648056 104259692 77847473 e. other current assets - - - 9490432497 1488037248 1356695413 TOTAL WORKING CAPITAL MANAGEMENT AT KS&DL LTD INTRODUCTION TO WORKING CAPITAL The working capital is the part of the firm's capital, which is required for financing short- term or current assets such as cash, marketable securities, debtors& inventories and current liabilities. This is the capital which is used for the day to day operations of the company and it measures the company's efficiency and financial health. The current assets- current liabilities= working capital. The study is conducted at KS&DL. This company requires more working capital for smooth running of the business. Hence, the study in this company would give more exposure towards understanding working capital management. STATEMENT OF THE PROBLEM To identify how the working capital is very much effective in the company for their day to day operations. The need for the working capital cannot be over emphasized. Every business needs some amount of working capital. The need for working capital arises due to the time gap between production and realization of cash from sales. Thus, in general working capital is needed for the following purposes: NEED OF THE STUDY The study to understand:- 1. For the purchase of raw materials, components and spares. NEW HORIZONE COLLEGE, RING ROAD, MARATHAHALLI Page 1 WORKING CAPITAL MANAGEMENT AT KS&DL LTD 2.