Chapter-I: "Working Capital Management", The Mysore Paper Mills LTD

“WORKING CAPITAL MANAGEMENT”, THE MYSORE PAPER MILLS LTD
CHAPTER-I
INTRODUCTION
S.D.G.S,COLLEGE,HINDUPUR. Page 1
INDUSTRY PROFILE
INTRODUCTION ON PAPER INDUSTRY
The new millennium is going to be the millennium of the knowledge. So demand for
paper would go on increasing in times to come. In view of paper industry's strategic role for
the society and also for the overall industrial growth it is necessary that the paper industry
performs well.
Government has completely delicensed the paper industry with effect from17th July,
1997. The entrepreneurs are now required to file an Industrial Entrepreneur Memorandum
with the Secretariat for Industrial Assistance for setting up a new paper mill or substantial
expansion of the existing mill in permissible locations .
The Paper industry is a priority sector for foreign collaboration and foreign equity
participation up to 100% receives automatic approval by Reserve Bank of India. Several
fiscal incentives have also been provided to the paper industry, particularly to those mills
which are based on non-conventional raw material.
PAPER INDUSTRY IN INDIA
The Indian Paper Industry is among the top 15 global players today, with an output of
more than 6 million tons annually with an estimated turnover of Rs. 150,000 millions.
(Approx. USD 3400 million).
Paper Industry in India is riding on a strong demand and on an expanding mood to
meet the projected demand of 8 million tons by 2010 & 13 million tons by 2020.
A large number of expansion programme & expansion of capacities with an outlay of
Rs. 10,000 crores have been announced covering the various sectors like paper, paperboard,
newsprint etc.
The Indian Economy is progressing well and targeting 8%+ growth. The economic
reforms coupled with the liberalized Government Policies, India today offers excellent
business opportunity for investments.
One of the first FDI Projects may come through the proposed Finnish proposal to set
up a 400000 TPA capacity plant with an investment of US$240 million.
HISTORY OF PAPER INDUSTRY
The word paper derives from the Greek term for the ancient Egyptian writing material
called papyrus which was formed from beaten strips of papyrus plants. The immediate
predecessor to modern paper is believed to have originated in China in approximately the 2nd
century AD, although there is some evidence for it being used before this date. Papermaking
is considered to be one of the Four Great Inventions of Ancient China, since the first pulp
papermaking process was developed in China during the early 2nd century AD by the Han
court eunuch Cai Lun. China used paper as an effective and cheap alternative to silk, letting
them sell more silk, leading to a Golden Age. The use of paper spread from China through
the Islamic world, where the first paper mills were built, and entered production in Europe in
the early 12th century. Mechanized production of paper in the early 19th century caused
significant cultural changes worldwide, allowing for relatively cheap exchange of
information in the form of letters, newspapers and books for the first time. In 1844, both
Canadian inventor Charles Fenerty and German inventor F.G. Keller had invented the
machine and process for pulping wood for the use in paper making. This would end the
nearly 2000-year use of pulped rags and start a new era for the production of newsprint and
eventually all paper out of pulped wood.
CAPACITY, PRODUCTION, RAW MATERIAL, AND IMPORT
There are, at present, about 515 units engaged in the paperboards and manufacture of
paper newsprint in India. The country is almost self-sufficient in manufacture of most
varieties of paper and paperboards. Import, however, is confined only to certain specialty
papers. To meet part of its raw material needs the industry has to rely on imported wood pulp
and waste paper. Production of paper & paperboard during the year 2002-03(up to December,
2002) is 24.52 lakhs tones. At present about 60.8 per cent of the total production is based on
non-wood raw material and 39.2 per cent based on wood.
Performance of the industry has been constrained due to high cost of production
caused by inadequate availability and high cost of raw materials, power cost and
concentration of mills in one particular area.
Several policy measures have been initiated in recent years to remove the bottlenecks of
availability of raw materials and infrastructure development. To bridge the gap of short
supply of raw materials, duty on pulp and waste paper and wood logs/chips have been
reduced. The capacity utilization of the industry is low at 60%. About 194 paper mills,
particularly small mills, are sick and /or lying closed. Several policy measures have been
initiated in recent years.
Imports of paper and paper products were growing over the years. However, it has
increased during 2001-02 after a fall in 2000-01. About 1, 40,000 tons of papers were
exported in 2000-01 mainly to the neighboring countries.
India's per capita consumption of paper is around 4.00 kg, which is one of the lowest
in the world. With the expected increase in literacy rate and growth of the economy, an
increase in the per capita consumption of paper is expected.
Growth and prospectus:
It is estimated that the paper industry would be growing at the present rate of 7-8% of
compounded rate and would require 9.5-10 million MT by the end of the decade from the
existing production of around 6.7 million tons.
Estimated Demand of Paper in the Country
9.2 9
9
8.8
8.6 8.5
8.4 2012-13
8.2 8 2013-14
8
7.8 2014-15
7.6 Linear
(2014-15)
7.4
1st Qtr
 The demand is growing @ 7% to 8% CAGR per Annum and is likely to reach to 9.5-
10 million MT by the end of decade
 Projected Demand in Million Tones is 8.100 by 2012-13, 8.500 by 2013-14 and 9.00
by 2014-15 respectively.
Growth of paper industry in India has been constrained due to high cost of production
caused by inadequate availability and high cost of raw materials, power cost and
concentration of mills in one particular area. Government has taken several policy measures
to remove the bottlenecks of availability of raw materials and infrastructure development. For
example, to overcome short supply of raw materials, duty on pulp and waste paper and wood
logs/chips has been reduced.
The Indian Paper Industry accounts for about 1.6% of the world’s production of paper
and paperboard. The estimated turnover of the industry is ` 25,000 crores (USD 5.95 billion)
approximately and its contribution to the exchequer is around ` 2918 crores (USD 0.69
billion). The industry provides employment to more than 0.12 million people directly and
0.34 million people indirectly. The industry was delicensed effective from July, 1997 by the
Government of India; foreign participation is permissible. Most of the paper mills are in
existence for a long time and hence present technologies fall in a wide Spectrum ranging
from oldest to the most modern.
The mills use a variety of raw material viz. wood, bamboo, recycled fiber, bagasse,
wheat straw, rice husk, etc.; approximately 35% are based on chemical pulp, 44% on recycled
fiber and 21% on agro-residues. The geographical spread of the industry as well as market is
mainly responsible for regional balance of production and consumption.
[
With added capacity of approximately 0.8 million tons during 2012-13 the operating
capacity of the industry currently stands at 9.3 million tons. During this fiscal year, domestic
production of paper and paperboard is estimated to be 7.6 million tons. As per industry
guesstimates, over all paper consumption (including newsprint) has now touched 8.86 million
tons and per capita consumption is pegged at 8.3 kg.
Demand of paper has been hovering around 8% for some time. During the period 2008-
13 while newsprint registered a growth of 13%, Writing & Printing, Containerboard, Carton
board and others registered growth of 5%, 11%, 9% and 1% respectively. So far, the growth
in paper industry has mirrored the growth in GDP and has grown on an average 6-7 per cent
over the last few years. India is the fastest growing market for paper globally and it presents
an exciting scenario; paper consumption is poised for a big leap forward in sync with the
economic growth and is estimated to touch 13.95 million tons by 2015-16. The futuristic
view is that growth in paper consumption would be in multiples of GDP and hence an
increase in consumption by one kg per capita would lead to an increase in demand of 1
million tons. As per industry estimates, paper production are likely to grow at a CAGR of
8.4% while paper consumption will grow at a CAGR of 9% till 2012-13. The import of pulp
& paper products is likely to show a growing trend.
Foreign funds interest in the Indian paper sector is growing. IFC, the investment arm
of the World Bank is already associated with at least three of the IPMA member mills.
OUTLOOK
The demand for upstream market of paper products, like, tissue paper, tea bags, filter
paper, light weight online coated paper, medical grade coated paper, etc., is growing up.
These developments are expected to give fillip to the industry.
Some manufacturers have started using a new, significantly more environmentally

friendly alternative to expanded plastic packaging made out of paper, known commercially as
paper foam. The packaging has very similar mechanical properties to some expanded plastic
packaging, but is biodegradable and can also be recycled with ordinary paper. With
increasing environmental concerns about synthetic coatings (such as PFOA) and the higher
prices of hydrocarbon based petrochemicals, there is a focus on zein (corn protein) as a
coating for paper in high grease applications such as popcorn bags.
PAPER POLLUTION:
The production, use and of paper has a number of adverse effects on the environment
which are known collectively as paper pollution. Pulp mills contribute to air, water and land
pollution. Discarded paper is a major component of many landfill sites, accounting for about
35% by weight of municipal solid waste (before recycling). Even paper recycling can be a
source of pollution due to the sludge produced during deinking.
"People need paper products and we need sustainable, environmentally safe
production." The amount of paper and paper products is enormous, so the environmental
impact is also very significant. It has been estimated that by 2020 paper mills will produce
almost 500,000,000 tons of paper and paperboard per year, so great efforts are needed to
ensure that the environment is protected during the production, use and recycling/disposal of
this enormous volume of material.
Pulp and paper is the third largest industrial polluter to air, water, and land in both
Canada and the United States, and releases well over 100 million kg of toxic pollution each
year.
Worldwide, the pulp and paper industry is the fifth largest consumer of energy,
accounting for four percent of the entire world's energy use. The pulp and paper industry uses
more water to produce a ton of product than any other industry.
Company profile
The Mysore Paper Mills Limited (MPM)
The Mysore Paper Mills Limited is an ISO 14001 Company engaged in the
manufacture and marketing of Newsprint, Writing, Printing and Packing Paper of different
varieties and Sugar at its plant at Bhadravati, Shimoga District with production capacity of
75000 MTA (Metric Tons per Annum) of Newsprint, 30000 MTA of Writing, Printing and
Packing Paper and 2500 TCD (Tone Crushing’s per Day) of Sugar and with a total manpower
of about 4800 employees.
It was incorporated on 20 May 1936 under the Mysore Companies Regulation, VIII of
1917 and became a Government Company in November 1977 when the State Government
acquired controlling interest in the company increasing its share holding to more than 51% as
required under Section 617 of the Companies Act, 1956. The Company has its Registered
Office at Bangalore.
For the purpose of providing pulp wood for the manufacture of paper, the
Government of Karnataka has leased 300 square kilometers of land to the company for
raising its own captive plantations. The sugarcane requirement of the company is procured
from about 15000 families of the cane growers who are directly dependent on this company.
Company introduction:
The Mysore Paper Mills Limited, (MPM) founded by Sri.Krishnaraja Wodeyar

Bahadur in 1937 the Maharaja of erstwhile Mysore State was incorporated on 20th May 1936
under the then Mysore Companies Regulation, VIII of 1917. Later it became a Government
Company in 1977 under Section 617 of the Companies Act, 1956. The Company has its
Registered Office at Bangalore and its plant located at Bhadravati, Shimoga District,
Karnataka State.
Market share and competitors

The Company has an Authorized Capital of 150 Crs. and paid up capital of about ` 120
Crs. The shares of the company are listed in the Bombay Stock Exchange and there are about
17,000 shareholders.
While Government of Karnataka holds 65% of the shareholding of the Company, IDBI
and other Financial Institutions hold 18% of the shares and shareholding by the General
Public is 17%. The company is managed by eminent Board of Directors consisting of IAS,
IFS and other professionals.
The Chairman & Managing Director of the Company is assisted by a team of
professionals in various fields who have expertise in production, finance, marketing etc., with
a dedicated team force. MPM with 5000 employees has its own township. About 15000
families of the cane growers who supply sugarcane to the company are directly dependant on
this company and many more depend indirectly the direct and indirect contribution by MPM
to the local economy is about ` 200 Cr P.A.
Government of Karnataka has leased 30,000 Ha, of forest land to the Company for
development of captive forestry. The Company, with the financial assistance of Government
of Karnataka, the Overseas Development Agency and the Commonwealth Development
Corporation, has fully developed the captive forestry, which at present meets about 75% of
the pulpwood (1,25,000 MT) requirements of the Company. In a situation of scarce
availability of raw-material in the Country, the pulpwood from the captive sources will be
sufficient for the Company from FY 2008 and onwards. The Company, in addition, has also
developed forestry in 330 acres of land, in association with M/s. BEML at its plant at Kolar
and Mysore. The species of pulpwood grown in the captive forestry are pines, Acacia,
Eucalyptus.
The balance quantity of 75,000 MT. of pulpwood is met by the company from the
Governmental sources like, KFD, KFDC and KSFIC and directly from the local suppliers and
farmers under gate purchase scheme.
The Company has submitted to Government of India, a 100% Grant-in-Aid Greening
India Project of `.12.00 Cr. for further development of infrastructure in nursery and
plantations of the Company . [
The company is in the process of obtaining carbon credit (` 3.00 to ` 4.00 Cr. per
annum), wherein, the biomass generated by the plantations will be sold and carbon credit
obtained from the donor agencies. Under Farm Forestry, the Company is developing high yielding
colonel varieties of pulpwood seedlings for its own use and also distributed to the local farmers at
subsidized rates.
TECHNOLOGY OF MPM LTD

FOR PRODUCTION ACTIVITY
The Company has an installed capacity of 30,000 tons per annum for production of
writing & Printing Paper, 75,000 tons per annum for production of Newsprint and Sugar Mill
with a capacity for crushing of sugarcane of 2,500 TCD. The water requirements of the
Company are met through adjoining Bhadra River 85% of the power requirements (41 MW
capacity) are met through captive power generation.
MPM is engaged in the manufacture of varieties of Cultural Paper, Standard and Pink
Newsprint and Sugar. MPM is the only company in India to have a sugar factory as an
integrated part of the Paper Mill wherein bagasse bye product of sugar is being used as raw
material for manufacture of WPP.
The average turnover of the Company is about `.415 Crs. Per annum of which 58% is
from Newsprint, 28% from Writing & Printing Paper and 17% from Sugar. The market share
of Newsprint is 11%.
For Sugar Division AT Sugar Mills

MPM established its Sugar Mill of 2500 TCD in 1984. Government has allotted 155 villages with 82,041
acres of irrigable land in Shivamogga and Chikkamagalur Districts. The land suitable for Sugarcane
cultivation is 36,000 acres. Due to higher remunerative price for jiggery & paddy from the last season,
Sugarcane growing area has reduced to about 9700 acres. Bagasse, the byproduct of sugar mill is used
partly for manufacture of pulp and for use as fuel in the boilers for captive generation of power.
Company produces white crystal sugar in S-30 and M-30 grade with color value of around 100 ICUMSA
units. When compared to previous seasons, the Sugar production has come down drastically due to non-
availability of Sugar cane. While, in the past, Sugar industry suffered on account of excess production and
lower open market prices, this time there is severe shortage Sugar cane supply and is expected to be normal
from 2010 -11 Season onwards.
ISO CERTIFICATION
The Environmental Management System of the Company has been certified to

conform to the coveted ISO 14001 standard since August 2004. The Scope of certification
covers manufacture of Newsprint, Writing, Printing & Packaging Paper and Manufacture of
Plantation White Sugar.
PHILOSOPHY
MPM’s philosophy on Corporate Governance is to attain highest level of transparency

in all its operations, to deal with integrity and equity with its stakeholders including
shareholders, employees, lenders and the Government, to employ skills that take pride in
satisfying customer needs with superior products and services, to contribute towards higher
productivity through team work and innovation, to consciously work towards conservation of
resources and minimization of wastes of all forms, to achieve customer satisfaction with
consistent supply of quality products at competitive prices.
Company`s vision
To be a world class enterprise offering paper, sugar and allied products & services,
enhancing stake holder`s value.
Company`s mission
 Creating a vibrant work culture

 Enhancing productivity
 Offering globally competitive products & services through continuous technology up
gradation and innovation
 To adopt eco –friendly processes and technologies and uphold corporate social
responsibility
COMPOSITION OF BOARD
Chairman Sri. Araga Jnanendra
Executive director Sri. B H Anil Kumar, IAS, Managing Director
Non executive director Sri. V.P. Baligar, IAS
Sri. Ajay Seth, IAS,
Nominee directors Sri. T.K. Ray
Smt. Meera C Saksena, IAS
Elected directors Sri. M. Lakshminarayana, IAS,
Sri. S. Parameshwarappa
Sri. C. Shivashankar
Sri. C. B. Patil Okaly
MANEGEMENT TEAM
FOR CORPORETE OFFICE
Managing Director Sri. B H Anil Kumar, IAS. Tel: 080- 22255459 (O) / 080- 22260323 (O)
E-mail: cmd@mpm.co.in
Tel: 080 – 22256881 (O), 97310 27648 (M)

General Manager (Finance) Sri. Shamraj H Tankasali E-mail: dirfin@mpm.co.in
General Manager Sri. M. R. Lokesh Tel: 080-22256936 (O), 98450 99566 (M)
(Marketing) E-mail: gmmktg@mpm.co.in
Tel: 080-2225459 (O), 98450 88588 (M)

Company Secretary Sri. H. S. N. Rao E-mail: cs@mpm.co.in
FACTORY
Director (Forests) Sri. K.S. Aralikatti, IFS Tel: 08282-270094 (O), 94481 50066 (M)
E-mail: dirforests@mpm.co.in
Director (Operations) Tel: 08282 - 270780 (O) / 9741925063 (M)

Sri. N.P. Prabhu E-mail: dirops@mpm.co.in
General Manager Sri. R.S.R. Murthy Tel: 08282-270664 (O), 99805 54470 (M)
(Production) E-mail: gmprod@mpm.co.in
Tel: 08282-270741 (O), 99451 76693 (M)

D G M [Projects] Sri. B. P. Ravindranath E-mail: dgmprojects@mpm.co.in
Asst.General Manager Sri. Viswanath S Malghan Tel: 08282-270832 (O), 99725 81037 (M)
(Fin) E-mail: agmfin@mpm.co.in
ORGANISATIONAL CHART
chairman
Board of
directors
Managing
Director
G.M
(H.R)
G.M
(Production)
G.M
(Finance}
G.M
(marketing)
PRODUCT PROFILE
The Product Mix consists of Writing Printing and Packing Paper (WPP), Newsprint
and Sugar .The By-Products are: Molasses and Bagasse.
1. Writing printing and packing paper (WPP)
The Major Varieties manufactured include Cream wove, Map litho, Azurelaid, Duplicating
and Kraft Paper.
New Product Development –

Test marketing of SS Maplitho is in progress, Also have planned to introduce Copier grade in
the market shortly.
Packaging:
Paper is supplied in Reels and Sheets.
Sturdy packaging with Kraft Paper, Hessian and HDPE.
Major Market Southern India with major market located in Karnataka
Export MPM is venturing into export market and currently exporting to Sri Lanka
Unique Product MPM Cream wove is known for its quality, excellent reeling of Paper and
feature bulkiness of Paper. MPM is a market leader in Kraft Paper which is a most
sought after product by market.
Packaging industry
Envelope making
Usage of MPM Explosive industry
Paper Book wrapping
Wedding Cards
Writing / Printing
Ledger manufacture
Text Books & Note Books
Calendar printing
Bus Ticket printing with security water mark.
Dealership Network:
Presently having a strong dealership network across the country, No. of dealers
presently is 80.
Warehousing –
Adequate warehousing at Bhadravathi and the various varieties are well segregated
and stored size-wise.
Pricing -
Comparable with ' A' Grade Mills of the country
2. News print
Newsprint marketed only to RNI Registered Newspaper Publishers.
Production Capacity 80,000 MTs per annum.
Production per day Make 250 to 270 MTs Beloit Wamsley
Variety White and Pink Newsprint
Grammage 49 and 45 Gsm >Major production is of 49 Gsm and

production of 45Gsm is limited depending upon
Imported Pulp availability
Deckle width of Newsprint Machine 660 to 665 cms
Common sizes of Newsprint Reels 70, 76, 35, 38 and 81.5 cms
Supplied by MPM
Characteristics
Excellent quality and can be used as import substitute.
Excellent services with customer satisfaction as our main objective.
Lead time between placement of order and dispatches is kept to the absolute minimum.
Major Customers
 The Times of India
 The Hindu
 Vijaya Karnataka
 Deccan Herald
 Samyukta Karnataka
 Eenadu
 Vaartha
 Deccan Chronicle
 Andhra Jyothi
3. SUGAR
Free Sale Sugar is sold to any Trader having KVAT/CST Registration.
Production Capacity 45,000 MTs per Annum.
Production per day Make 2500 TCD
Variety S-30 and M-30 White Crystal Sugar.
Specification
Polarization of the sugar is about 99.8 degree with moisture of 0.04 to 0.05% W/W and sugar
color in CUMSA is around 100 units. The packing of sugar is done in a 100kgs A-Twill
Gunny Bags. These are stored in 6 godowns with 42000 mts capacity at mills; the major
markets are Karnataka and Kerala.
CHAPTER-II
RESEARCH DESIGN
Title of the study

The study on working capital management of MYSORE PAPER MILLS LTD
Statement of Problem
Working capital is crucial either a manufacturing company or services company. Therefore
the study of this project is limited to four years (2009-2013) the study makes analyses of
various components and indices of working capital. It also makes a study about analyses on
working capital of MPM ltd.
Research and Methodology

Research methodology is a way to systematically solve the research problem. It may be
understood as a science of studying now research is done systematically. In that various
steps, those are generally adopted by a researcher in studying his problem along with the
logic behind them.
It is important for research to know not only the research method but also know
methodology. ”The procedures by which researcher go about their work of describing,
explaining and predicting phenomenon are called methodology.” Methods comprise the
procedures used for generating, collecting and evaluating data. All this means that it is
necessary for the researcher to design his methodology for his problem as the same may
differ from problem to problem.
Data collection is important step in any project and success of any project will be
largely depend upon now much accurate you will be able to collect and how much time,
money and effort will be required to collect that necessary data, this is also important step.
Data collection plays an important role in research work. Without proper data
available for analysis you cannot do the research work accurately.
Types of data collection

There are two types of data collection methods available.
 Primary data collection

 Secondary data collection
 Descriptive mode
1) Primary data
The primary data is that data which is collected fresh or first hand, and for first time
which is original in nature. Primary data can collect through personal interview,
questionnaire etc. to support the secondary data.
2) Secondary data collection method
The secondary data are those which have already collected and stored. Secondary
data easily get those secondary data from records, journals, annual reports of the company
etc. It will save the time, money and efforts to collect the data. Secondary data also made
available through trade magazines, balance sheets, books etc.
3) Descriptive
The major purpose of descriptive research is to give a description of the state of

affairs, as it exists in the present. The main characteristic of this method is that
researcher has no control over the variables. The researcher can only report what has
happened or what is happening. What, where, When, How are the researcher and not
“Why”.
Descriptive Report is that subscription which answers or addresses all these
questions. The study mainly based on the secondary data which refers to that form of
information that has been already collected and is available. These include some internal
sources within the company and externally these sources include books and periodicals,
published reports and data of MPM and the annual reports of the company. Interaction
with the various employees of the accounts department has also been a major source of
information. The Data & Financial result of the past FIVE years have been taken into
consideration for analysis and calculations of MYSORE PAPER MILLS LTD
OBJECTIVES OF THE S TUDY
Study of the working capital management is important because unless the

working capital is managed effectively, monitored efficiently planed properly and
reviewed periodically at regular intervals to remove bottlenecks if any the company
cann ot earn profits and increase its turnover. With this primary objective of the
study, the following further objectives are framed for a depth analysis.
 To study the working capital management of MYSORE PAPER MILLS LTD.
 To study the optimum level of current assets and current liabilities of the company.
 To study the liquidity position through various working capital related ratios.
 To study the working capital components such as receivables accounts, working
capital leverage , Inventory position and ratio analysis
 To study the way and means of working capital finance of the
MYSORE PAPER MILLS LTD
 To estimate the working capital requirement of MYSORE PAPER MILLS LTD.
 To understand the working capital management policies of the organization.
 To understand the importance of Working Capital Management.
 To analyze the short-term financing policies and patterns, which affect the working
capital of the organization
 To study the factor that affects the Working Capital Management of MPM ltd.
 To find out the Profitability and Operational efficiency of the organization.
SCOPE & LIMITATIONS OF THE S TUDY
Scope of the study
The scope of the study is identified after and during the study is conducted. The
study of working capital is based on tools like trend Analysis, Ratio Analysis, and
working capital leverage. Further the study is based on last four years Annual Reports
of MYSORE PAPER MILLS LTD and even factors like competitor’s analysis,
industry analysis were considered while preparing this project.
Limitations of the study

Following limitations were encountered while preparing this project:
1) Limited data:-
This project has completed with annual reports; it just constitutes one part of data
collection i.e. Secondary. There were limitations for primary data collection
because of confidentiality.
2) Limited period:-
This project is based on five year annual reports. Conclusions and

recommendations are based on such limited data. The trend of last five year may or
may not reflect the real working capital position of the company
3) Limited area:-
Also it was difficult to collect the data regarding the competitors and their financial
information. Industry figures were also difficult to get.
4) The inferences that have been framed only on the basis of financial statement.
5) Based on the limited information it is not possible to arrive at a proper

conclusion.
CHAPTER-III
CONCEPTUAL FRAME WORK
INTRODUCTION
FINANCE
In our present day, finance is like provision of money at the time when it is required.
Finance is one of the major elements, which activates the overall growth of the economy.
Every enterprise needs finance to carry on its operation and to achieve its target. Finance is
the “LIFE BLOOD” of an enterprise. Without adequate finance, no enterprise can possibly
accomplish its objectives.
MEANING
Finance deals with the analysis of principles and practices involved in managing one’s
own daily need of fund. Finance refers to the management of flow of money through an
organization.
DEFINITION
“The branch of economics that studies the management of money and other assets”.
-Internet
“It deals primarily with raising, administering and disbursing funds by privately owned
business units operating in non-financial fields of industry”.
-Prather and wert

SCOPE OF FINANCE
Firms create manufacturing capacities for production of goods; some provide services to
customers. They sell their goods or services to earn profit. They raise funds to acquire
manufacturing and other facilities. The three most important activities of business firm are:
 Production
 Marketing
 Finance
FINANCE ACTIVITY
A firm secures whatever capital it needs and employs it in activities, which generate
return on invested capital.
NEED OF FINANCE
Finance is very essential to smooth running of the business. Finance is needed to promote
or establish the business, acquire fixed asset, make investigation such as market surveys, etc.,
develop product, keep men and machine at work, encourage management to make progress
and create values. Even an existing concern may require further finance for making
improvement or expanding the business.
The importance of corporation finance has arisen because of the fact that present day
business activities are predominantly carried on company or corporate form of organization.
The success and growth of a firm depends upon adequate rate of return.
FINANCE FUNCTION AND DECISION
The functions of finance, production and marketing are inter-related, but they can be
identified individually. The function of raising funds, investing them in assets and
distributing returns earned from assets to shareholders are respectively known as financing
decision, investment decision and dividend decision. A firm attempts to balance cash inflow
and outflow while performing these functions is called as liquidity decision.
Investment
decision
Financing Dividend
decision decision
The finance function includes:

 Long-term assets-mix or investment decision
 Capital-mix or financing decision
 Profit-mix or dividend decision
 Short-term assets-mix or liquidity decision.
FINANCIAL MANAGER
A financial manager is a person who is responsible, in a significant way, to carry out the
finance function. In a modern enterprise, the financial manager occupies a key position.
ROLE OF FINANCIAL MANAGER

She or he is one of the members of the top management team, and his or her role,
day-to-day, is becoming more pervasive, intensive and significant in solving the complex
funds management problems. Preparing reports and raising funds when needed, and is
involved in the decision of allocation of capital. She or he has to ensure that the funds of the
enterprise are utilized in the most efficient manner. The financial manager has become an
important management person with the advent of modern or contemporary approach to the
financial management.
FUNCTIONS OF FINANCIAL MANAGER
The main functions of financial manager are-
 Funds raising
 Funds allocation
 Profit planning
 Understanding capital markets
 Working capital management.
EVOLUTION AND CONCEPT OF FINANCIAL MANAGEMENT
Financial management is that managerial activity which is concerned with the planning
and controlling with the firm’s financial resources. It was a branch of economics till 1890,
and as a separate discipline, it is of recent origin. It provides with it conceptual and analytical
insight to make decisions. It draws heavily on economics for theoretical concept even today.
MEANING
Financial management is the application of the planning and control function to the
finance function.
DEFINITION
“Financial management is the operational activity of a business that is responsible for
obtaining and effectively utilizing the funds necessary for efficient operation.”
-Joseph and Massie
OBJECTIVES OF FINANCIAL MANAGEMENT

The main objective of a business is to maximize the owner’s economic welfare. It can be
achieved by:
1. Profit maximization- Profit earning is the main aim of every economic activity.
A business being an economic institution must earn profit to costs and provide funds
for growth.
2. Wealth maximization- It is the single substitute for a stockholder’s utility. When the
firm maximises the stockholder’s, the individual stockholder can use this wealth to
maximise his individual utility.
3. Market value maximization- The wealth of the owner of a company is reflected by
the market value of the company’s shares. The market price of the shares reflects the
shares and it, in turn depends on the quality of financial decisions taken by the
management.
SCOPE OF FINANCIAL MANAGEMENT
It is mainly concerned with the mobilization of funds from different sources and it
includes the following:
 Procurement of funds from short-term and long-term sources like banks,
financial institutions etc.
 Mobilization of funds through various financial instruments such as shares,
debentures, commercial paper etc.
 Compliance of legal provisions relating to procurement and distribution of
funds.
 Orientation of finance function with the accounting functions.
AN OVERVIEW OF FINANCIAL MANAGEMENT
Financial management
Maximasation of share value
Financial decision
Investment Liquidity Financing Dividend

decision management decision decision
Return Risk
DECISION IN FINANCIAL MANAGEMENT
A decision has to directly contribute to the corporate goal of wealth maximization. The
function of finance involve the following decisions-
1. Investment decisions- It is referred to the activities of deciding the pattern of
investment. It covers both long-term and short-term investment, i.e., capital and
current asset.
2. Financing decisions- A business concern has to take maximum care in financing
different proposals. The appropriate mix of finance with debt to equity directly
contributes to the profitability of a business unit.
3. Dividend decisions-To fulfill the desire of equity shares like high percentage of share
holders, maximum return to share holders.
4. Current asset management-Involvement of reduction in fund. It is also termed as
“Working capital management”.
FUNCTIONAL AREAS OF FINANCIAL MANAGEMENT

 Estimation of financial management.
 Selection of right source of funds.
 Allocation of funds.
 Analysis and interpretation of financial performance.
 Analysis of cost-volume-profits.
 Capital budgeting.
 Working capital management.
 Profit planning and control.
 Fair returns to the investors.
 Maintaining liquidity and wealth maximization.
WORKING CAPITAL MANAGEMENT

A study on working capital is of major importance to internal and external analysis
because of its close relationship with the current day-to-day operations of a business.
Accountants often view working capital as that portion of finance of the firm, which is used
to “OIL THE WHEELS OF BUSINESS” its effective provision can do much to ensure the
success of a business. It is an integral part of overall corporate management.
Working capital means the firm’s holding of current or short-term assets such as cash,
inventory, receivables and marketable securities. Working capital management is one among
the functional areas of financial management.
Louis Brandt observes: “We need to know when to look for working capital funds, how to
use them and how to measure, plan and control them”.
MEANING
It is the amount of funds necessary to cover the cost of operating the enterprise. Working
capital is the difference between the inflow and outflow of funds. It is the net cash inflow.
In other words it is “net current assets or net working capital”.
DEFINITION
“The excess of current assets over current liabilities and its provision”.
-Reddy & Appanaiah
COMPONENTS OF WORKING CAPITAL
On the basis of the components or items comprised in working capital; working capital
can be classified into the following concepts:
1. Gross working capital- It is a financial concept, it refers to total investments in
current asset, such as cash in hand, cash at bank, accounts receivables, stock of
finished goods, work-in-progress, stock of raw-materials, prepaid expenses etc. It is
also known as total current asset.
2. Net working capital- It is an accounting concept. It means net current asset that are
excess of current asset over current liabilities. Net working capital is also known as
net current asset.
IMPORTANCE OF WORKING CAPITAL

It is an index of solvency of the firm. It enhances the credit-worthiness of the firm. It
helps the firm to maintain good business relations. It helps the firm to avail of the cash
discount facilities offered by the suppliers for prompt payment. It improves the morale of the
executives & the employees of the firm. It helps in maintaining the sales activities of the firm.
NEED OF WORKING CAPITAL

There is always a time gap between the sales of goods and the receipt of sale proceeds.
During this period, working capital is need for sustaining the sales activities. If adequate
working capital is not maintained for this period, the firm will not be able to sustain or
maintain the sales, since it may not be in position to purchase raw-material and pay other
expenses and produce the goods required for the sale. Thus every firm requires working
capital to run its business smoothly and successfully. In fact, working capital forms the
life-blood of any business.
OBJECTIVES OF WORKING CAPITAL

1. By optimizing the investment in current asset and by reducing the level of current
liabilities, the company can reduce the locking-up of funds in working capital.
Therefore it can improve the return on capital employed in the business.
2. The company should always be in a position to meet its current obligations which
should properly be supported by the current asset available with the firm.
3. The firm should manage its current asset in not less than the cost of capital
employed to finance the current asset.
4. The firm should maintain proper balance between current asset and current liability
to enable and meet its day-to-day financial operations.
5. To provide credit facilities to the customers.
6. To maintain the inventories of raw-materials, work-in-progress, stores and spares
and finished goods.
Current operations are represented at any one time by the Operating cycle.
OPERATING CYCLE
MEANING
Operating cycle is the length of time involved in conversion of cash into raw-materials,
raw-materials into work-in-progress, work-in-progress into finished goods, finished goods
into debtors, debtors into cash again. Operating cycle is an important concept in management
of cash and management of working capital. The operating cycle reveals the time that elapses
between outlay of cash and inlay of cash. Quicker the operating cycle less amount of
investment in working capital is needed and it improves the profitability. The duration of
operating cycle depends on the nature of industry and the efficiency in working capital
management.
DEFINITION
“The time duration starting from the procurement of goods or raw-material and ending
with realization of sales”.
-Srinivasan and Sakthivel
The knowledge of operating cycle is essential for smooth running of the business without
shortage of working capital. The working capital requirement can be estimated with the help
of duration of operating cycle. The working capital of a concern goes on changing in shape
and volume. The longer the operating cycle, larger is the working capital requirement.
FORMULAS USED TO CALCULATE OPERATING CYCLE
The gross operating cycle of a firm is equal to the length of the inventories and
receivables conversion periods. Thus,
Gross operating profit = RMCP+WIPCP+FGCP+RCP
Where, RMCP = Raw Material Conversion Period
WIPCP= Work-In-Process Conversion Period
FGCP = Finished Goods Conversion Period
RCP = Receivable Conversion Period.
Further, following formula can be used to determine the conversion periods.
1. Raw Material Conversion Period = Average Stock of Raw Material
Raw-Material Consumption Per Day
2. Work-In-Process Conversion Period = Average Stock of Work-In-Process
Total Cost Of Production Per Day
3. Finished Goods Conversion Period = Average Stock of Finished Goods
Total Cost Of Sales Per Day
4. Receivable Conversion Period = Average Accounts Receivables
Net Credit Sales Per Day
DIAGRAMMATIC REPRESANTATION OF OPERATING CYCLE

DEBTOR RAW
S MATERIALS
WORK
IN
PROGRESS
FINISHED
GOODS
CASH CONVERSION OR NET OPERATING CYCLE

If depreciation is excluded from expenses in operating cycle, the net operating cycle
represents ‘cash conversion cycle’. For instance, a concern may have some cash in the
beginning. The cash may be used by the concern for the purpose of raw-materials, payment
of wages and other expenses. These elements of cost or items of expenses will result in work
in progress during the manufacturing process. On the completion of the production process,
the work-in-progress becomes finished goods. When the finished goods are sold on credit,
they are converted into accounts or debtors. When debts are collected, the firm gets cash
again. Thus, there is a complete cycle. This cycle will be repeated again and again.
The indicator of efficiency management of short-term funds is working capital. The

operating cycle calls for proper monitoring of external environment of the business.
However, a firm may acquire some resources on credit and thus defer payments for
certain period. In that case, net operating cycle period can be calculated as below:
Net operating cycle= Gross operating cycle- payable deferral period
Payables Deferral Period = Average Payables

Net Credit purchase per day
CASH CONVERSION CYCLE (CCC) COMPONENTS
 Production cycle – from when product is started until customer “buys” the product.
 Collection cycle – from time customer “buys” the product until customer makes
payment.
 Payment cycle – from the time company receives materials for production until the
company makes payment to supplier
CCC = Production + Collection - Payment
SIGNIFICANCE OF ADEQUATE WORKING CAPITAL

 Easy loan.
 Regular supply of raw-materials.
 Exploitation of favorable market condition.
 Solvency of the business.
 Ability to face crisis.

 Regular payment of salaries, wages and day to day commitments.
TYPES OF WORKING CAPITAL
1. Net working capital - The net working capital is the difference between current
asset and current liabilities. The concept of net working capital enables a firm to
determine how much amount is left for operational requirements.
Net working capital= current asset- current liabilities
2. Gross working capital- It is the amount of funds invested in the various

components of current asset it enables a firm to realize the greatest return-on-
investment and helps in the fixation of various areas of financial responsibilities.
3. Permanent working capital- It is the minimum amount of current asset which is

needed to conduct a business during the dullest season of the year. This amount
varies depending upon the growth of a company and the stage of business cycle it
operates. It is the amount of fund required to produce the goods and services which
are necessary to satisfy demand at a particular point.
4. Temporary working capital- It represents the additional assets which are required
at different times during the operating year additional inventory, extra cash etc. It is
temporarily invested in current asset.
5. Balance sheet working capital - It is one, which is calculated from items

appearing in the balance sheet.
6. Cash working capital - It is one which is calculated from the items appearing in
profit and loss account. It shows the real flow of money or value at a particular time
and is considered at be the most realistic approach in working capital management.
7. Negative working capital - Emerges when current liabilities exceeds current asset
such a situation is not absolutely theoretical, and occurs when a firm is nearing a
crisis of some magnitude.
DETERMINATION OF WORKING CAPITAL

The working capital requirements of a concern are affected by a number of factors. The
various factors which affect the working capital requirements of a concern are:
1. Nature of business- It affects the working capital requirements of a concern to a
great extent. For instance, public utilities like railways, electricity company etc, need
very little working capital, and because they need not hold large inventories and
operations are mostly on cash basis. On the other hand it is vice versa with ordinary
manufacturing company.
2. Demand of industry – Creditors are interested in the security of loans. They want
their obligations to be sufficiently covered. They want the amount of security in
assets that are greater than the liabilities.
3. Scale of operation- When there is growth and expansion in the business of a firm,
the working capital needs of the firm will also increase. A concern carrying on
activities on a small scale needs less working capital. On, the other hand a concern
under taking activities on a large scale needs large amount or working capital.
4. Operating efficiency - The operating efficiency of a firm affects its working capital
requirements. A firm enjoying operating can eliminate wastages, use its resources
efficiently, and thereby reduce its working capital needs considerably. So the affect
of operating efficiency is low as operating process is done efficiently.
5. Credit policy- Credit policy of a firm will affect its working capital requirements. A
firm which allows liberal credit to its customers will require larger working capital
than a firm which follows a tight credit policy.
6. Fluctuations in supplies- It affects the working capital requirements of a firm. For
instance, certain raw-materials have to be necessarily obtained and stored. This will
cause fluctuation in supplies and cause fluctuation in working capital.
7. Taxes- Imposed by the government affect the working capital of a firm. Higher
taxes are a strain on the working capital.
8. Length of the operating cycle- It influences the amount of working capital.
Generally, the longer is the operating cycle; the greater will be the requirements of
working capital.
METHODS OF ESTIMATING WORKING CAPITAL REQUIREMENTS

There are two methods which are usually followed in determining the working capital
requirements. They are:
1. Conventional method - According to the conventional method, cash inflow and
outflow are matched with each other. Greater emphasis is laid on liquidity and
greater importance is attached to current ratio, liquidity ratio etc which pertain to the
liquidity of a business.
2. Operating cycle method-This method is more dynamic and refers to working
capital in a realistic way. Different components of working capital are directed
scientifically in order that the fullest utilization of plant and material may be made.
This method helps in increasing the profitability of a business. It enables a company
to maintain its liquidity through profitability. This method considers production and
other business operation, and forecasts the changes that may be necessary in pursuit
of the future activities.
SOURCES OF WORKING CAPITAL

It can be through long term sources or short t sources. Some of the sources are:
1. Loans from financial institutions- The option is normally ruled out, because
financial institutions do not provide finance for working capital requirement.
2. Floating of debentures- Debentures issue of company’s in private sector not
associated with certain reputed and well-known groups generally fail to attract
investors to invest their funds in company’s in this context, the mode raising by
issuing convertible debenture or bonds is also considered, which may attract a
number of investors.
3. Accepting public deposits- The next alternative is public deposits. The issue of
tapping public deposits is directly related to the image of the company seeking to
invite public deposits. Bit the problem of low profitability in many industries is very
common.
4. Issue of shares- With a view to financing additional working capital needs, issue of
additional shares could be one way raise the equity base. Indian companies find
themselves in a bad shape in this context too. Low profit margins as well as lack of
knowledge about the company make the success of capital issue very dim.
5. Raising funds by internal financing- Raising equity by operational profits poses
problems for many companies because prices of their end-product are controlled and
do not permit companies to earn profits sufficient to pay reasonable dividend and
retain profits to cover margin money requirements to additional financial assets.
Still, a largely feasible solution lies in increasing profitability through cost control
and cost reduction measures managing the cash operating cycle, rationalizing
inventory stocks and so on.
COMPONENTS OF WORKING CAPITAL
Working capital plays a very important role in the business of every firm. This working
capital includes components which help in managing the accounts of the firm in a proper
way. The Components of working capital are:
1. Current asset- The working capital management to be more precise by
management, management of current asset is more important. The current asset is
cash or near cash resources. These include: cash & bank balance, temporary
investment, short-term advances, pre-paid expenses, receivables, inventory of
raw-materials, work-in-progress and finished goods.
2. Current liabilities- They are those which are to be paid in an ordinary course of
business. They include: short-term borrowings on secured loans, provident fund
dues, dividends, provisions for taxation, advance or progress payment from
customers.
IMPORTANT COMPONENTS OF WORKING CAPITAL
 CASH MANAGEMENT
 INVENTORY MANAGEMENT
 RECIEVABLE MANAGEMENT
CASH MANAGEMENT
Cash is the important current asset for the operation of the business. Cash is the basic
input needed to keep the business running on a continuous basis. The firm should keep
sufficient cash; hence the major function of the financial manager is to maintain a sound cash
position. The term cash includes coins, currency and cheques held by the firm and balance in
its bank account. It also includes marketable securities or bank time’s deposits. Cash in the
business firm is considered as the blood in the human body, which gives life and strength,
profits and solvency to the business.
MEANING OF CASH
Cash means cash and bank balance held by a concern. This cash includes even near cash
assets that is those assets which can be immediately converted into cash, whenever the need
arises such as time deposits kept by a concern with bank and marketable securities.
MEANING AND IMPORTANCE OF CASH MANAGEMENT

Cash management has assumed important because it is the most significant of the entire
current asset.
Cash management is concerned with the managing of:
1. Cash inflow and outflow of the firm.
2. Cash balance held by the firm at a point of time by financing deficit or investing
surplus cash.
Cash management needs strategies to deal with various facets of cash.
They are-
 Cash planning
 Cash forecasts and budgeting
MOTIVES FOR HOLDING CASH
The basic objective of holding cash is to conduct current operations smoothly. The firm’s
cash may be attributed to the following needs:
1. Transaction motive - The transaction motive requires a firm to hold cash to conduct
its business in the ordinary course. The firm needs cash primarily to make payments
for purchases, wages and salaries, other operating expenses, taxes, dividends etc.
2. Precautionary motive- The precautionary motive is the need to hold cash to meet
contingencies in future. The precautionary amount of cash depends upon the
predictability of cash flows.
3. Speculative motive - The speculative motive relates to the holding of cash for
investing in profit-making opportunity as and when they arise. The opportunity to
make profit may arise when the security prices change.
OBJECTIVES OF CASH MANAGEMENT
The following are the identified objectives of cash management-
1. To make cash payment
2. To maintain minimum cash reserve
ADVANTAGES OF ADEQUATE CASH

Working capital management requires maintenance of cash for several other specific
reasons.
1. It is essential that firm have cash to take settlement discounts.
2. The firm should have sufficient liquidity to meet emergencies, such as strikes,
fire, etc.
INVENTORY MANAGEMENT
Every enterprise needs inventory for smooth running of its activities. It serves as a link
between production and distribution processes. Inventories constitute the most significant
part of current assets or working capital in most of the undertakings. It refers to stocks,
raw-materials, components, spares or work-in-progress maintained in an organization to have
continuous production and sales. More than 60% of the working capital will normally be
invested in the inventory. The purpose of inventory management is to ensure availability of
materials in sufficient quantity as and when required and also to minimize investment in
inventories.
MEANING OF INVENTORY
Inventory refers to the stocks that a business firm keeps to meet its future requirements of
production and sales. Inventory of an industrial undertaking consists of stock of
raw-materials, work-in-progress, stock of finished goods and stores and spared or production
supplies held for consumption by machines.
DEFINITION OF INVENTORY
According to the institute of charter accountants in India in its accounting standard-2 it
is:
 For the sale in the ordinary course of business
 In the process of production of sale
 For consumption in the production of goods or services for sales including
maintenance, supplies and consumables.
NATURE OF INVENTORY
Inventories are stock of the product a company is manufacturing for sale components that
make up the product. The various forms in which inventories exist in a manufacturing are:
 Raw-materials - They are those basic inputs that are converted into finished products
through the manufacturing process. Raw-materials inventories are those units which
have been purchased and stored for future production.
 Work-in-progress - These are semi-manufactured products. They represent products
that need more work before they become finished products for sale.
 Finished goods - These are those completely manufactured products, which are ready
for sale. Stocks of raw-materials and work-in-progress facilitate production, while
stock of finished goods is required for smooth marketing operations.
Thus, inventories serve as a link between the production and consumption of goods.
MOTIVES OF HOLDING INVENTORIES

Although holding inventories involves blocking of a firm’s fund and the costs of
storage and handling, every business enterprise has to maintain a certain level of
inventories to facilitate uninterrupted production and smooth running of business.
1. Transaction motive - It emphasis the need to maintain inventories to facilitate
smooth production and sales operations.
2. Precautionary motive - It necessitates holding of inventories to guard against the
risk of unpredictable changes in demand and supply forces other factors.
3. Speculative motive - It influences the decision to increase or reduce inventory
levels to take advantage of price fluctuation.
INVENTORY MANAGEMENT
The investment in inventories is very high in most of the undertakings engaged in
manufacturing. A proper planning of purchasing, handling, storing and accounting should
form a part of inventory management. An efficient system of inventory management will
determine-
 What to purchase?
 How much to purchase?
 From where to purchase?

 Where to store? Etc.
OBJECTIVES OF INVENTORY MANAGEMENT
The main objectives of inventory management are operational and financial. They are:
1. To provide continues supply of raw-materials to carryout uninterrupted production.
2. To reduce the wastages and to avoid loss if pilferage, breakage and deterioration.
3. To exploit the opportunities available and to reduce the cost of purchase.
4. To introduce scientific inventory management techniques.
5. To provide right materials at right time, from right sources and right prices.
6. To meet the demand for goods of ultimate consumers on time.
TECHNIQUES AND TOOLS OF INVENTORY MANAGEMENT

The following are the important tools and techniques of inventory management and
control:
1. Fixation of levels - It is a tool through which the inventories are maintained by
fixing different levels namely-
a. Maximum level : It is a level set for materials beyond which it should not
be stored.
Maximum stock level=Re-order level+ Re-ordering quality-(minimum
Consumption X minimum Re-ordering
period)
b. Re-order level : It is that level fixed for the materials to indicate the
urgency of procuring them from the market.
Re-order level=maximum consumption x maximum Re-order period
c. Minimum level : It is also known safety stock, below which the storing of
materials leads to severe consequences.
Minimum stock level= Re-ordering level-(normal consumption x normal

Re-order period)
d. Danger level : It is the level beyond which storage of materials should not
fall.
Danger level=Average consumption x Maximum Re-order period

for emergency purchase
2. ABC analysis : The materials are managed by giving importance to its value.
Classification are made by grading the materials as A, B and C.
3. Economic Order Quantity (EOQ): It is the quantity of material to be ordered
where it will have least or minimum order placing and carrying cost.
4.
EOQ=
√ 2×S×OC
CC
VED analysis : Vital, Essential, Desirable (VED) is most suitable method for
industries specially to maintain spare parts. All the parts are classified into VED
components.
5. FSN analysis : Materials are grouped according to the movements like fast
moving, slow moving and non-moving items.
6. Just In Time (JIT) inventory control system : It involves the purchase of
materials in such a way that delivery of purchased material is assured just before
their use.
RECIEVABLE MANAGEMENT
Trade credit arises when a firm sells its products or services on credit and does not
receive cash immediately. A firm grants trade credit to protect its sales from the competitors
and to attract the potential customers to buy its products at favorable terms. Trade credit
creates receivable arising or book debts which the firm is expected to collect in the future.
MEANING OF RECIEVABLES
Receivable represent amount owed to the firm as a result of goods or services in the
ordinary course of business. These are claims of the firm against its customers and form part
of its current assets. Receivables are also known as accounts receivables, trade receivables,
customers receivables or book debts.
ACCOUNTS RECIEVABLE
It is a component of current asset. It shows the amount receivable from the purchasers.
Therefore, it is a “Trade debt” due to the firm from the purchaser who purchase goods or
avail service on credit basis.
ACCOUNTS RECIEVABLE MANAGEMENT
It is maintenance of debtors at optimum level, the degree of credit, sales to be made and
making the debtors turn fast. Its main objective is to maximize sales and profit with liberal
but sound credit policy.
Management of accounts receivables has three aspects. They are:
 Establishing the credit policy of the concern.

 Establishing the collection policy of the concern.
 Control of the accounts receivables.
FACTORS INFLUENCING THE SIZE OF RECEIVABLES

Besides sales, a number of other factors also influence the size of receivables.
The following factors directly and indirectly affect the size of receivables.
 Size of credit sales.
 Credit policies.
 Expansion plans.
 Relation with profits.
 Credit collection efforts.
 Habits of customers.
DETERMINANTS OF ACCOUNTS RECIEVABLE MANAGEMENT
There are several issues that govern the accounts receivables. They are:
1. Credit sales volume - In order to increase the profit and push sales, many firms will
have “credit sales”. Higher the volume of credit sales, higher will be accounts
receivable.
2. Credit policies - The policy adopted to extend credit sales which include-
 The period allowed in collecting the debts.
 The types of discount allowed.
 The assessment of customer’s credit worthiness.
 Collection policy etc.
3. Business terms - The volume of accounts receivables also depends on the term and
conditions relating to credit sales.
It include - The time period allowed to pay back the purchase price and types of
discounts allowed.
4. Competition- If a firm is having a competitive environment, it will have liberal
credit policy and this increases the size of accounts receivable.
5. Location- If the business firms are located in far off places, they are forced to adopt
a credit policy that attracts the customer.
6. New products- When the new products are introduced, the firm has to extend the
liberal credit policy until such time the product catches the market and even
afterwards, the policy has to continue to maintain customers.
CHAPTER-IV
DATA ANALYSIS
AND
INTERPRETATION
Working capital level

The consideration of the level investment in current assets should avoid two
danger points excessive and inadequate investment in current assets. Investment in current
assets should be just adequate, not more or less, to the need of the business firms.
Excessive investment in current assets should be avoided because it impairs the firm’s
profitability, as idle investment earns nothing. On the other hand inadequate amount of
working capital can be threatened solvency of the firms because of its inability to meet its
current obligation. It should be realized that the working capital need of the firms may be
fluctuating with changing business activity. This may cause excess or shortage of working
capital frequently. The management should be prompt to initiate an action and correct
imbalance.
Working capital trend analysis
In working capital analysis the direction at changes over a period
of time is of crucial importance. Working capital is one of the important fields of
management. It is therefore very essential for an analyst to make a study about the trend
and direction of working capital over a period of time. Such analysis enables as to study
the upward and downward trend in current assets and current liabilities and its
effect on the working capital position.
In the words of S.P. Gupta “The term trend is very commonly used in day-today
conversion trend, also called secular or long term need is the basic tendency of population,
sales, income, current assets, and current liabilities to grow or decline over a period of time.
According to R.C.galeziem “The trend is defined as smooth irreversible movement in
the series. It can be increasing or decreasing.”
Emphasizing the importance of working capital trends, Man Mohan and Goyal
have pointed out that “analysis of working capital trends provide as base to judge
whether the practice and privilege policy of the management with regard to working
capital is good enough or an important is to be made in managing the working capital
funds.
Further, any one trend by itself is not very informative and therefore
comparison with Illustrated their ideas in these words, “An upwards trends coupled with
downward trend or sells, accompanied by marked increase in plant investment especially if
the increase in planning investment by fixed interest obligation”.
Net working capital

(` In Lakhs)
Particulars 2009-10 2010-11 2011-12 2012-13
A) Current Assets
Inventories 11544.45 14263.80 15340.51 15893.91
Sundry Debtors 5081.73 8125.97 3909.74 5027.49
Cash &Bank Balances 159.63 42.17 70.27 84.12
Loans & Advances 2525.29 2923.99 3328.17 2625.86
Total of A 19311.10 25355.93 22648.69 23631.38
B) Current Liabilities
Sundry creditors 5555.60 7293.71 5802.36 3599.13
Trade Advances & Deposits 1044.86 1021.34 1051.03 917.83
Unclaimed Dividend 1.36 1.36 1.36 0.00
Other Liabilities 138.48 1144.04 455.24 456.50
Interest accrued but not due 75.88 1064.84 934.11 988.25
Provisions 1885.57 3147.82 3995.24 3378.53
Total of B 8701.75 13673.10 12239.34 9340.24
Net W.C(A-B) 10609.35 11682.83 10409.35 14291.14
Working capital size

(` In Lakhs)
Years 2009-10 2010-11 2011-12 2012-13
Net W.C 10609.35 11682.83 10409.35 14291.14

W.C indices 100 110.11 98.11 134.70
Working Capital indices

16000
14291.14
14000
12000 11682.83
10609.35 10409.35
10000
8000 Net WC
WC Indices
6000
4000
2000
100 110.11 98.11 134.7
0
2009-10 2010-11 2011-12 2012-13
INTERPRETATION:
From the above Working Capital Statement it can analyze that the net Working
Capital is increasing. But sundry Debtors and cash and Bank Balance are decreased and
provision is increased compared to previous year i.e., 2011-2012. Overall the Net Working
Capital is increasing year by year due to increase in the inventories.
Current assets:
Total assets are basically classified in two parts as fixed assets and current
assets. Fixed assets are in the nature of long term or life time for the organization.
Current assets convert in the cash in the period of one year. It means that current assets
are liquid assets or assets which can convert in to cash within a year.
Current assets indices
( ` in Lakhs)
Particulars 2009-10 2010-11 2011-12 2012-13
Inventories 11544.45 14263.80 15340.51 15893.91
Sundry Debtors 5081.73 8125.97 3909.74 5027.49
Loans & Advances 2525.29 2923.99 3328.17 2625.86
Total of C.A 19311.10 25355.93 22648.69 23631.38
C.A Indices (%) 100 131.30 117.28 122.37
INTERPRETATION:
It is observed that the current assets consists Inventories ,Sundry Debtors, Cash &
Bank balances and loans & advances where the current assets indices increases year by year
but during the year 2011-2012 observed decreasing because of decrease in debtors But
overall it seems to be good.
Composition of current assets:

Analysis of current assets components enable one to examine in which components the
working capital fund has locked. A large tie up of funds in inventories affects the
profitability of the business or the major portion of current assets is made up cash alone,
the profitability will be decreased because cash is non earning assets.
(No. in %)
Particulars 2009-10 2010-11 2011-12 2012-13
Inventories 59.78 56.25 67.73 67.25
Sundry Debtors 26.31 32.04 17.26 21.27
Loans & Advances 13.09 11.53 14.69 11.11
Total of Current Assets 100 100 100 100
INTERPRETATION:
It is observed that the current assets consists Inventories ,sundry Debtors, cash & bank
balances and loans & advances where the current assets indices increases year by year but
during the year 2010-2011 observed decreasing because of decrease in debtors But overall it
seems to be good.
It is also observed that the major portion of current assets includes Inventories almost
50% to 65% 1n each year and lowest portion is cash & bank balance i.e. around 1% which
seems to be good for growth of the company
Current liabilities:
Current liabilities mean the liabilities which have to pay in current year. It
includes sundry creditor’s means supplier whose payment is due but not paid yet, thus
creditors called as current liabilities. Current liabilities also include short term loan and
provision as tax provision. Current liabilities also includes bank overdraft. For some
current assets like bank overdrafts and short term loan, company has to pay interest thus
the management of current liabilities has importance
Current liabilities indices
(Rupees in Lakhs)
Particulars 2009-10 2010-11 2011-12 2012-13
Unclaimed Dividend 1.36 1.36 1.36 0.00
Provisions 1885.57 3147.82 3995.24 3378.53
Total of C.L 8701.75 13673.10 12239.34 9340.24
C.L Indices 100 157.13 140.65 107.33
Composition of current liabilities

(No. in %)
Particulars 2009-10 2010-11 2011-12 2012-13

Unclaimed Dividend 0.01 0.01 0.01 00
Provisions 21.66 23.02 32.64 36.17
Total of C.L 100 100 100 100
Showing composition of current liabilities
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
rs sit
s d es ue on
s .L
ito p o den iliti td iv si ofC
d i b l
re De Di
v Lia tn
o
ro ta
yc s& ed
r bu
P To
nd
r
ce he
n im Ot ue
d
Su va cla r
Ad Un cc
e sta
ad re
Tr In
te
INTERPRETATION:
 It is observed that the current liabilities includes sundry creditors, trade advances &
deposits, unclaimed dividends, interest accrued but due, other liabilities and
provisions.
 It is also observed that the major portion of current liabilities is occupied by sundry
creditors where it is decreased year by year approximately 6.2%
 The dividends have been paid to the maximum extent from 2005-2008 but in the
year 2008-09 it is fully paid.
 And the provisions are made approximately 37.17%.
Changes in working capital

There are so many reasons to changes in working capital as follow
1) Changes in sales and operating expenses:-
The changes in sales and operating expenses may be due to three reasons
A) There may be long run trend of change e.g. The price of row material say oil
may constantly raise necessity the holding of large inventory.
B) Cyclical changes in economy dealing to ups and downs in business activity
will influence the level of working capital both permanent and temporary.
C) Changes in seasonality in sales activities
2) Policy changes:-
The second major case of changes in the level of working capital is because
of Policy changes initiated by management. The term current assets policy may
be Defined as the relationship between current assets and sales volume.
3) Technology changes:-
The third major point if changes in working capital are changes in
technology
Because changes in technology to install that technology in our business more
Working capital is required.

(Rs in lakhs)
Changes in W.C
Particulars 2011-12 2012-13
Increase Decrease
A) Current Assets
Inventories 15340.51 15893.91 553.4
Sundry Debtors 3909.74 5027.49 1117.75
Cash &Bank Balances 70.27 84.12 13.85
Loans & Advances 3328.17 2625.86 702.31
Total of A 22648.69 23631.38
B) Current Liabilities
Sundry creditors 5802.36 3599.13 2203.23
TradeAdvances& Advances 1051.03 917.83 133.2
Unclaimed Dividend 1.36 0.00 1.36
Other Liabilities 455.24 456.50 1.26
Interest accrued but not due 934.11 988.25 54.14
Provisions 3995.24 3378.53 616.71
Total of B 12239.34 9340.24
W.C (A-B) 10409.35 14291.14
Net Increase in W.C 3881.79 0.00 0.00 3881.79
TOTAL 14291.14 14291.14 4639.5 4639.5
INTERPRETATION:
From the statement of changes in working capital of 2011-2012 and 2012-2013

reveals that there is an increase in working capital of ` 3881.79 Lakhs.
Working capital leverage:

One of the important objectives of working capital management is by
maintaining the optimum level of investment in current assets and by reducing the level of
investment in current assets and by reducing the level of current liabilities the company
can minimize the investment in the working capital thereby improvement in return on
capital employed is achieved. The term working capital leverage refers to the impact of
level of working capital on company’s profitability. The working capital management
should improve the productivity of investment in current assets and ultimately it will
increase the return on capital employed. Higher level of investment in current assets than is
actually required means increase in the cost of Interest charges on short term loans and
working capital finance raised from banks etc. and will result in lower return on
capital employed and vice versa. Working capital leverage measures the responsiveness of
ROCE (Return on Capital Employed) for changes in current assets. It is measures by

applying the following formula,
%changes in ROCE
Working capital leverage = -------------------------------------------------------------------
%changes in current asset
Where:
EBIT
Return on capital employed = ---------------------------------------------------
Total asset – current liabilities
The working capital leverage reflects the sensitivity of return on capital employed to
changes in level of current assets. Working capital leverage would be less in the case of
capital intensive capital employed is same working capital leverage expresses the relation of
efficiency of working capital management with the profitability of the company.
Calculation of working capital leverage

(NO in %)
Particulars 2010-11 2011-12 2012-13
ROCE % 13.57 15.17 13.65
% changes in ROCE 0.64 1.6 1.52
% changes in C.A 31.3 14.02 5.09
Working capital leverage(times) 0.02 0.11 0.29
Chart 4.6- showing working capital leverage
INTERPRETATION:
The working capital leverage of the company shows the positive trend i.e. the
leverage is increasing year by year which shows the efficient current asset management.
Ratio Analysis
Introduction
Ratio analysis is the powerful tool of financial statements analysis. A ratio is
define as “the indicated quotient of two mathematical expressions” and as “the relationship
between two or more things”. The absolute figures reported in the financial statement
do not provide meaningful understanding of the performance and financial position of the
firm. Ratio helps to summaries large quantities of financial data and to make qualitative
judgment of the firm’s financial performance.
Role of ratio analysis:
Ratio analysis helps to appraise the firms in the term of their profitability
and efficiency of performance, either individually or in relation to other firms in same
industry. Ratio analysis is one of the best possible techniques available to management to
impart the basic functions like planning and control. As future is closely related to the
immediately past, ratio calculated on the basis historical financial data may be of good
assistance to predict the future. E.g. On the basis of inventory turnover ratio or debtor’s
turnover ratio in the past, the level of inventory and debtors can be easily ascertained for
any given amount of sales. Similarly, the ratio analysis may be able to locate the point out
the various arias which need the management attention in order to improve the situation.
E.g. Current ratio which shows a constant decline trend may be indicate the need for further
introduction of long term finance in order to increase the liquidity position.
As the ratio analysis is concerned with all the aspect of the firm’s financial analysis
liquidity solvency, activity, profitability and overall performance, it enables the interested
persons to know the financial and operational characteristics of an organization and take
suitable decisions.
Limitations of ratio analysis
1) The basic limitation of ratio analysis is that it may be difficult to find a basis
for making the comparison
2) Normally, the ratios are calculated on the basis of historical financial
statements. An organization for the purpose of decision making may
Need the hint regarding the future happiness rather than those in the past. The
external analyst has to depend upon the past which may not necessary to
reflect financial position and performance in future.
3) The technique of ratio analysis may prove inadequate in some situations
4) As the ratio calculates on the basis of financial statements, the basic
limitation which is applicable to the financial statement is equally applicable In
case of technique of ratio analysis also i.e. only facts which can be expressed in
financial terms are considered by the ratio analysis.
5) The technique of ratio analysis has certain limitations of use in the sense that it
only highlights the strong or problem arias; it does not provide any solution to
rectify the problem arias.
Classification of working capital ratio
Working capital ratio means ratios which are related with the working capital
management e.g. current assets, current liabilities, liquidity, profitability and risk turnoff
etc. these ratio are classified as follows
1) Efficiency ratio:
The ratios compounded under this group indicate the efficiency of the organization
to use the various kinds of assets by converting them the form of sale. This ratio also
called as activity ratio or assets management ratio. As the assets basically categorized as
fixed assets and current assets and the current assets further classified according to
individual components of current assets viz. investment and receivables or debtors or as net
current assets, the important of efficiency ratio as follow
1) Working capital turnover ratio
2) Inventory turnover ratio
3) Receivable turnover ratio
4) Current assets turnover ratio
2) Liquidity ratio:
The ratios compounded under this group indicate the short term position of the
organization and also indicate the efficiency with which the working capital is being used.
The most important ratio under this group is follows
1. Current ratio
2. Quick ratio
3. Absolute liquid ratio
Efficiency ratio
1) Working capital turnover ratio:
It signifies that for an amount of sales, a relative amount of working capital is
needed. If any increase in sales contemplated working capital should be adequate and
thus this ratio helps management to maintain the adequate level of working capital. The
ratio measures the efficiency with which the working capital is being used by a firm. It
may thus compute net working capital turnover by dividing sales by working capital.
Sales
=
Net Working capita
Calculation of W.C Turnover ratio

(Rpees in lakhs)
Particulars 2012-13 2011-12 2010-11 2009-10
Sales 34927.31 41519.2 39405.45 42490.72
Net W.C 10609.35 11682.83 10409.35 14291.14
W.C TOR 3.29 3.55 3.78 2.97
Showing W.C Turnover ratio
INTERPRETATION:
During the period under study ratios are very high expect in the year 2008-
09. This ratio is increased every year because of increase in sale every year expect
in the year 2007-08 therefore the ratio has to be improved.
2) Inventory turnover ratio
Sree Vasavi Institute of Management Page 59

Inventory turnover ratio indicates the efficiency of the firm in producing and
selling its products. It is calculated by dividing the cost of goods sold by average
inventory:
Cost of goods sold
Inventory turnover ratio =
Average Inventory
The average inventory is the average of opening and closing balance of
inventory in a manufacturing company like MPM inventory of finished goods is used to
calculate inventory turnover ratio
(Rupees in lakhs)
Particulars 2012-13 2011-12 2010-11
COGS 28638.52 28388.31 30539.92
Avg Inventory 12094.12 14802.15 15617.21
Inventory TOR 2.23 1.91 1.95
INTERPRETATION:
It is observed that the amount of sales is higher than the inventories throughout
the year. That is, from the table it is evident that a standard turnover is observed
throughout the period.
3) Receivable turnover ratio

The derivation of this ratio is made in following way

Gross sales
Receivable turnover ratio = -----------------------------------------
Average account receivables
Gross sales are inclusive of excise duty and scrap sales because both may enter in
to receivables by credit sales. Average receivable calculate by opening plus closing
balance divide by 2. Increasing volume of receivables without a matching increase in
sales is reflected by a low receivable turnover ratio. It is indication of slowing down of
the collection system or an extend line of credit being allowed by the customer
organization. The latter may be due to the fact that the firm is losing out to competition.
A credit manager engage in the task of granting credit or monitoring receivable should
take the hint from a falling receivable turnover ratio use his market intelligence to
find out the reason behind such failing trend.
(Rupees in lakhs)
Particulars 2012-13 2011-12 2010-11
Gross sales 41519.2 39405.45 42490.72
Avg Debtors 6603.85 6017.85 4468.61
Receivable 6.28 6.54 9.50

TOR
Receivable turnover ratio

45000
40000
35000
30000
25000
20000
15000
10000
5000 6.28
0 6.54
2006-07 9.5
2007-08
2008-09
Gross sales Avg Debtors Receivable TOR
INTERPRETATION:
It is observed that receivables turnover ratio have an increasing trend
approximately 1.08% which is quite satisfactory from the future point of the company.
Current assets turnover ratio:

Current assets turnover ratio is calculate to know the firms efficiency of

utilizing the current assets .current assets includes the assets like inventories, sundry
debtors, bills receivable, cash in hand or bank, marketable securities, prepaid expenses
and short term loans and advances. This ratio includes the efficiency with which current
assets turn into sales. A higher ratio implies a more efficient use of funds thus high
turnover ratio indicate to reduced the lock up of funds in current assets. An analysis of
this ratio over a period of time reflects working capital management of a firm.
Sales
Current Asset TOR =

Current Asset
(Rupees in lakhs)
Particulars 2012-13 2011-12 2010-11 2009-10
Sales 34927.31 41519.2 39405.45 42490.72
Current Asset 19311.10 25355.93 22648.69 23631.38
C.A TOR 1.80 1.63 1.73 1.79
INTERPRETATION:
It is observed that the company has been able to hold back its current asset
flowing out from the first two year i.e. from 2010-11 and rest of the year the company
has used more amount of its current asset.
Liquidity ratio:

1) Current ratio:
The current is calculated by dividing current assets by current
liabilities:
Current Asset
Current Ratio =
Current Liabilities
Current assets include cash and those assets which can be converted in to cash
within a year, such marketable securities, debtors and inventories. All obligations
within a year are include in current liabilities. Current liabilities include creditors,
bills payable accrued expenses, short term bank loan income tax liabilities and long
term debt maturing in the current year. Current ratio indicates the availability of
current assets in rupees for every rupee of current liability
Calculation of Current ratio
(Rupees in lakhs)
Particulars 2012-13 2011-12 2010-11 2009-10
C.A 19311.10 25355.93 22648.69 23631.38

C.L 8701.75 13673.10 12239.34 9340.24
Current ratio 2.21 1.85 1.85 2.53
(times)
INTERPRETATION:
2:1 is considered ideal for the concern. From the table it is observed that
the ratio 2.53 was achieved in 2008-09 which is considered to be good for the
concern. In 2010-11 the current assets were 25,355.93 were as in 2007-08 the
current assets has been declined to 22,648.69.The ratio is less than 2 which
indicates the problem in meeting short term fund in the year 2010-11 & 2007-08.
2. Quick (acid test or Liquid) ratio:

This is the ratio of liquid assets to liquid liability 1:1 ratio is considered
ideal ratio for a concern because it is wise to keep the liquid assets at least equal to
liquid liability at all times. Liquid assets are those assets which are readily
converted into cash and will include cash balances, bill receivables, sundry debtors
and short term investments. Inventories and prepaid expenses are not included in
liquid assets. Liquid liabilities except bank overdraft. This ratio is the ‘acid test’
of a concern’s financial soundness.
Quick assets
Quick ratio = -------------------------------------
Current Liabilities
Table 4.14- Calculation of Quick ratio

(Rupees in lakhs)
Particulars 2012-13 2011-12 2010-11 2009-10

Quick assets 7766.65 7766.65 7766.65 7766.65
Current Liabilities 8701.75 8701.75 8701.75 8701.75
Quick ratio 0.892 0.892 0.892 0.892
(times)
Chart 4.12- showing Quick ratio
INTERPRETATION:
During the period under study in the year 2005 to 2009 ratios is below the
standard norm which is 1:1, which means liquid liability is more than liquid assets
which indicates firm is having difficulty in meeting current liability.
3 Cash Ratio (Absolute Liquidity Ratio)

Since cash is most liquid asset to get an idea about absolute liquidity of a
concern, both receivables and inventories are excluded from current assets and
only absolute liquid assets such as cash, bank and readily realizable securities are
taken into consideration. Standard norm is 5:1. This is still more rigorous test of
liquidity.
Cash + readily realizable securities
Cash ratio = --------------------------------------------------------------------------
Current Liabilities
Calculation of cash ratio
(Rupees in lakhs)
Particulars 2012-13 2011-12 2010-11 2009-10
Cash + readily realizable 159.74 159.74 159.74 159.74
securities
current Liabilities 8701.75 8701.75 8701.75 8701.75
Cash ratio 0.018 0.018 0.018 0.018
(times)
Showing cash ratio
INTERPRETATION:
It is observed that the amount of cash was high in the year 2009-10. The
cash ratio during all the years was below the ideal ratio which is 5:1. The ratio
however was not satisfactory during all the years.

CHAPTER-V
FINDINGS
AND
SUGGESTIONS
FINDINGS
Working capital management is important aspect of financial management. The

study of working capital management of Mysore paper mills ltd. has revealed that the
current ratio was as per the standard industrial practice but the liquidity position of
the company showed an increasing trend. The study has been conducted on working
capital , working capital leverage, working capital components and ratio analysis which
helped the company to manage its working capital efficiency and effectively.
 Working capital of the company was increasing and showing positive

working capital per year. It shows good liquidity position.
 Positive working capital indicates that company has t h e a b i l i t y of
payments of short terms liabilities.
 Working capital increased because of increment in the current assets is more
than increase in the current liabilities.
 Company’s current assets were always more than requirement it affect on
profitability of the company
 Current assets components show Inventory were the major part in current assets
it shows the efficiency of the receivables collection management.
 In the year 2007-08 working capital decreased because of increased the
expenses as manufacturing expenses and increase the price of raw material as
increased in the inflation rate.
 Lack of technology, the company has not yet adapted to the latest technology
hence the company is investing for production activity.
 Lack of control, since it is a government company the chairman and the managers
are transferred frequently leads to inefficient management control.
 There is a decrease in Net Working Capital during 2007-2008 and again there is
an increase in NWC during 2008-2009. NWC is maximum during 06-07 and 08-
09. This is mainly because of increase in inventories and decrease in current
liabilities.
 During 08-09, 68% of current assets have been locked up in inventory, which may
affect the liquidity position of the company.

 Current ratio trend shows that the ratio is above the standards of 2:1. Based on
this data, liquidity position of the company shall be considered as satisfactory.
 Quick ratio is also higher than the standard of 1:1, which shows that the company
has good liquidity position.
 Receivables turnover ratio have an increasing trend approximately 1.08% which
is quite satisfactory from the future point of the company.
 The increasing trend in working capital turnover ratio indicates that low
investment in working capital relation to sales is required for the company,
company has utilized less off working capital during the last year i.e. 2008-09
compared to last two years

SUGGESTIONS
Recommendations and suggestions:

Recommendation can be use by the firm for the betterment increased of the firm
after study and analysis of project report on study and analysis of working capital. I
would like to recommend.
 Company should raise funds through short term sources for short term
requirement of funds, which comparatively economical as compare to long term
funds.
 Company should take control on debtor’s collection period which is major
part of current assets.
 Company has to take control on cash balance because cash is non earning
assets and increasing cost of funds.
 Company should reduce the inventory holding period with use of zero
inventory concepts.
 The company should aim for a higher technology.
Conclusion:
The study conducted on working capital management of Mysore paper mills ltd
revels that as it is a financial project no company will willing to revel its financial
performance/ highlights so easily which may leads in the approximation of the result, and
the time duration given to conduct the project is very less hence it is not be able to collect
all the necessary information regarding the project.

BIBLIOGRAPHY
 Financial management -M.Y khan & P.k jain
Vikas publishing house
New Delhi.
 Financial management theories& practices-prasannachandra
Tata Mc Graw Hill publishing
Company ltd.new Delhi
 Financial decision policy -james vnhorn
Tata mg graw
 Financial management - I.M.panday
Vikas publishing house
New Delhi.
WEB SITES :
www.mpm.com
www.google.com

Chapter-I: "Working Capital Management", The Mysore Paper Mills LTD

Uploaded by

Copyright:

Available Formats

Chapter-I: "Working Capital Management", The Mysore Paper Mills LTD

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Chapter-I: "Working Capital Management", The Mysore Paper Mills LTD

Uploaded by

Copyright:

Available Formats

“WORKING CAPITAL MANAGEMENT”, THE MYSORE PAPER MILLS LTD

HISTORY OF PAPER INDUSTRY

CAPACITY, PRODUCTION, RAW MATERIAL, AND IMPORT

Some manufacturers have started using a new, significantly more environmentally

The Mysore Paper Mills Limited (MPM)

The Mysore Paper Mills Limited, (MPM) founded by Sri.Krishnaraja Wodeyar

Market share and competitors

TECHNOLOGY OF MPM LTD

For Sugar Division AT Sugar Mills

The Environmental Management System of the Company has been certified to

MPM’s philosophy on Corporate Governance is to attain highest level of transparency

 Creating a vibrant work culture

Chairman Sri. Araga Jnanendra

Executive director Sri. B H Anil Kumar, IAS, Managing Director

Non executive director Sri. V.P. Baligar, IAS

Sri. Ajay Seth, IAS,

Nominee directors Sri. T.K. Ray

Smt. Meera C Saksena, IAS

Elected directors Sri. M. Lakshminarayana, IAS,

Sri. C. B. Patil Okaly

FOR CORPORETE OFFICE

Tel: 080 – 22256881 (O), 97310 27648 (M)

Tel: 080-2225459 (O), 98450 88588 (M)

Director (Operations) Tel: 08282 - 270780 (O) / 9741925063 (M)

Tel: 08282-270741 (O), 99451 76693 (M)

1. Writing printing and packing paper (WPP)

New Product Development –

Major Market Southern India with major market located in Karnataka

Production Capacity 80,000 MTs per annum.

Production per day Make 250 to 270 MTs Beloit Wamsley

Variety White and Pink Newsprint

Grammage 49 and 45 Gsm >Major production is of 49 Gsm and

Deckle width of Newsprint Machine 660 to 665 cms

Production Capacity 45,000 MTs per Annum.

Production per day Make 2500 TCD

Variety S-30 and M-30 White Crystal Sugar.

Title of the study

Research and Methodology

Types of data collection

 Primary data collection

The major purpose of descriptive research is to give a description of the state of

OBJECTIVES OF THE S TUDY

Study of the working capital management is important because unless the

 To study the working capital management of MYSORE PAPER MILLS LTD.

 To estimate the working capital requirement of MYSORE PAPER MILLS LTD.

 To understand the working capital management policies of the organization.

 To understand the importance of Working Capital Management.

 To find out the Profitability and Operational efficiency of the organization.

SCOPE & LIMITATIONS OF THE S TUDY

Scope of the study

Limitations of the study

This project is based on five year annual reports. Conclusions and

5) Based on the limited information it is not possible to arrive at a proper

-Prather and wert

The finance function includes:

ROLE OF FINANCIAL MANAGER

OBJECTIVES OF FINANCIAL MANAGEMENT

SCOPE OF FINANCIAL MANAGEMENT

AN OVERVIEW OF FINANCIAL MANAGEMENT