SRM UNIVERSITY

KATTANKULATHUR CAMPUS
FACULTY OF ENGINEERING AND TECHNOLOGY

INTERNSHIP REPORT DONE IN

THE KERALA MINERALS AND METALS LIMITED

(A GOVERNMENT OF KERALA UNDERTAKING)
SANKARAMANGALAM, CHAVARA, KOLLAM
KERALA, INDIA - 691 583,

“WORKING CAPITAL MANAGEMENT”

For the partial fulfilment of the requirements for the degree of

MASTER OF BUSINESS ADMINISTRATION

BY
RAHUL RAJ R
3511210121

Under the GUIDENCE of

Mr. V SURESH
 ACKNOWLEDGMENT

First of all I thank Almighty God who has been with me throughout this
endeavour and helped me in completing this project successfully.
I have great pleasure in expressing my sincere and grateful thanks to my
internal guide professor V.suresh for continuous guidance throughout this project.
I owe my sincere and grateful thanks to the external guide of KMML,
Chavara, Mrs T.V. prasanna (Accounts officer) for guiding me through this project
work.
Last but not the least I thank all my faculty members, all employees and
managers of KMML, my parents and my friends who have been a source of
inspiration and also helped me throughout this project.
CHAPTER 1: INTRODUCTION

STATEMENT OF THE PROBLEM

A business is an economic activity so it needs to flourish, means expand. For

expanding the business it needs money, means sufficient amount of fund. A
business needs funds not only for flourishing but also for meeting its day to day
expenses. Funds are invested in the current asset for meeting the day to day needs is
called working capital or short term capital. Working capital= current asset-
current liabilities. The need for working capital arises because of the time gap
between the production and realisation of cash from sales. Management of working
capital is concerned with the problem that arises in attempting to manage current
assets, current liabilities and their relationship. Working capital management has a
vital important in every business towards the profitability, liquidity, structural
strength, smooth working of the business enterprise, etc. if a business need to run
smoothly it need sufficient amount of working capital. No business can run without
sufficient amount of working capital. Thus this study concentrate on the examining
of the working capital position of “ Kerala Minerals & Metals Ltd, Chavara,
Kollam, Kerala”, in order to satisfy its short term objectives and also to study how
efficiently firm manages its working capital
OBJECTIVES OF THE STUDY

x To study about the current position of working capital of KMML

x To analyse the liquidity position of the firm

x To study about the payment and collection period of KMML

x To get the knowledge about the functional and managerial aspects of

KMML.

x To get the practical knowledge of KMML.

x To brief study of KMML

SCOPE OF THE STUDY

The study is only conducted in Kerala Minerals & Metals, Chavara, Kollam, Kerala
regarding the working capital management. The in formation is extract from the
financial year from 2007-08 to 2011-12. So the project is only related to finance
department . The scope of the study is use financials tools like ratios , balance sheet
to analyse the working capital position of the company based on that, analysis the
finding and suggestions are given.

RESEARCH METHODOLOGY

In simple words research refers to a search for knowledge. In other words research
is scientific and systematic search for information on a specific topic. And research
methodology is the way which we conduct research to gather knowledge. In other
words research methodology is a way to systematically solve the research problem.

In this study of working capital management of Kerala Minerals and Metals Ltd I
have used the Historical research design, because all my study on the past data of
KMML, that is the secondary data, that includes the financial reports (balance sheet
profit & loss account) for the past 5 years.
LIMITATIONS OF THE STUDY

x The study is mainly based upon secondary data provided in the financial
statements

x The main limitation of the study is the limited time. The time of the study is
limited to 8 weeks to do the project are not sufficient to do the study.

x The annual report and A/C of the company were giving limited information
regarding the performance of the study.

x The study has been restricted to span of the 5 years only.

x The workers were busy with their work and had little time available for an
interview or conversation.

x This study is based on the historical data and information provided in the
annual reports therefore it may not be a future indicator.

INDUSTRY PROFILE

The world is rapidly shrinking with the advent of communication, transportation

and financial flows product development in one Industry are finding enthusiastic
acceptance in other industry. As the Industry, which is manufacturing Industry,
product definitely depends on the end user Industries.

Industry plays a significant sole in every firm. Industrial development has been
given on greater importance in Indian planning on account of Industrial
development. Industry is necessary in productivity, employment, national Income
and rate of capital formation in India witnessed large scale diversification India.

Now India occupies tenth place among the industrially developed countries in the
world.
TITANIUM DIOXIDE INDUSTRY IN INDIA

The Indian reserves of illmenite and rutile is expected to the around 60 million
tones. The most important sources of illmenite in India are beach sands of south.
Maharashtra, Orissa, Tamilnadu and in Kerala is around 45 million tones. There are
about 20 million tonnes reserves in Orissa.

This information threw light in to the possibilities of new manufactures and

competitions in Titanium Dioxide pigment Industry in the Indian Market with the
increasing demand for the paints, rubber, plastic and printing inks etc. The arrival of
new manufactures will be more in the near future. This will ultimately results in
tight competition.

CERTIFICATIONS OF KMML

1) ISO 9001:2000

Certificate from Bureau Veritas Quality International (BVQI)

and holes certification of United Kingdom Accreditations Service (UKAS). The

United Kingdom Accreditation Service is the sole national accreditation body
recognized by government to assess, against internationally agreed standards of an
organizations that provide certification for testing, inspection and calibration
services.

and accredits certification from ANSI-ASQ National Accreditation Board

(ANAB) is the U.S. accreditation body for management systems, ANAB is a
member of the International Accreditation Forum and a signatory of the IAF
Multilateral Cooperative Arrangements (MCA) , ANAB ensuring accredited
certificates which are recognized nationally and internationally for good quality
management system.

2) ISO 14001:2004

Certificate from Bureau VERITAS Quality International (BVQI)

and accredits certification of National Accreditation Board for Certification

Bodies (NABCB). NABCB is a member of International Accreditation Forum
(IAF) having Multilateral Recognition Arrangement (MLA) to certify ISO 14001
- Environmental Management System.

and holes certification of United Kingdom Accreditations Service (UKAS). The

United Kingdom Accreditation Service is the sole national accreditation body
recognized by government to assess, against internationally agreed standards of an
organizations that provide certification for testing, inspection and calibration
services.

3)OHSAS 18001:1999

Certificate from Bureau VERITAS Quality International (BVQI)

The Occupational Health and Safety Assessment Series (OHSAS) specification

gives requirements for an occupational health and safety (OH&S) management
system, to enable an organization to control its OH&S risks and improve its
performance.

National and International awards conferred on KMML

x National award for R & D efforts industry for the best research and
development efforts by department of Science and Technology(1992)

x FACT MKK NAIR Memorial productivity Award 1993-94,94-95 for the

best productivity performance by Kerala State Productivity Council

x Energy Conservation Award 1999in appreciation for outstanding

achievements towards energy conservation and management in the category
of large scale industries

x FACT MKK NAIR Memorial productivity Award 2001-02 for second in

productivity performance by Kerala State Productivity Council 2001

x FACT MKK NAIR memorial productivity Award 1999-2000,2000-01 for

first in productivity performance(Large Organization) by Kerala State
Productivity Council

x Energy Conservation Award 2001 for conservation and management in the

category of large scale industries by Energy management centre Kerala 2001
 x Award for Revenue performance 2003 for the best performance by central
excise, customs Kollam Division 2003

x Marketing campaign Award 2003 for best marketing campaign by Asia

pacific coating 2003

x International gold medal for the Quality of the product and efficiency of
the company by Forum Kerala Lumpur Global Rating UK 2003

x Special Export Award for export performance by chemicals and Allied

Export Promotion Council (CAPEXIL) sponsored by ministry of Commerce
Government of India 2002-03

EMPLOYEE STRENGTH

There are about 210 officers and 1122 workmen in KMML. The total
strength is 1332.

FUTURE PLAN

The company is studying the possibility of the productivity of more

economic titanium metal sheets. Recently, researchers established that the
Aeronautic Industry could use Titanium metal instead of Aluminium alloy or
Duraluminium coverings. The company is in the process of expansion and the target
expected is approximately as shown be1ow:

1. A new Mineral Separation Plant of capacity 2 lakhs tones per year

illmenite

2. A new Synthetic Rutile Plant of capacity 1.3 lakhs tones per year

3. A new 100 tones per day Oxygen Plant

4. Capacity enhancement of TiO2 pigment plant 1 lakh tones per year

POLLUTION CONTROL

KMML has elaborate Pollution Control system with respect to both water and
air pollution. The waste (acid) from illmenite Beneficiation Plant is sent to Effluent
Neutralization Plant (ENP). ENP consist of a Primary Neutralization Tank (PNT)
and Secondary Neutralization Tank (SNT) where it is treated with caustic soda
solution. The totally neutralized slurry from the SNT is pumped to 50000m3
capacity setting pond provided with impervious clay, polythene lining at bottom
side where the solids are settled. The dye solution from setting pond of 25000m3
capacity where the balance solids are allowed to settle. Then clean water from the
polishing pond meeting all specification stipulated by Pollution Control Board
authorities is pumped in to the Arabian Sea.

All gases from Chlorination, Oxidation, Illmenite Beneficiation Plant and Acid
Regeneration Plant are passed through scrubbed water or caustic solution to absorb
the toxic gases diluted with enough fresh air and only let out to the atmosphere
through tall slacks.

MAJOR COMPETITORS

The company has a monopolistic nature in TiO2 pigment industry in India.

The company has some competitors in the world market.

The main competitors in the world market are:

x Dupont (USA)

x Ishihara (Japan)

x Hoitex (USA)

x Millennium (Germany)

x Henduk (Seoul, Korea)

x Flectha Titanium Products (New Zealand)

x Tofins (Netherlands)
 COMPANY PROFILE

Kerala is blessed with rich and extensive mineral deposits. This deposits stretch
along the sea cost between Neendakara and Kayamkulam, a track generally known
as Chavara coast. This deposits stretch up to a distance of 18 Km along the coastal
strip and having a depth of 8m. The dark sands of Travancore coast are rich in
mineral deposits as Monazite, I1lmenite, Rutile, Zircon etc.

The company is located at Sankaramangalam near Chavara, Kollam a coastal town

85 km north of Thiruvananthapuram. KMML is situated on the side of NH-47 to
about 285 acres in area. KMML has a worldwide reputation, a socially responsible
company with an eco-friendly image. The company derived strength from its
dedicated manpower and customer organization. KMML is fully owned Kerala
Government Enterprise. There are about 2000 employees in the company at present
that helps KMML to grow.

History of KMML

In the earliest periods of 19th century, precisely in 1909 a German scientist named
Mr. Schaumberg happened to discover traces of I1lmanite and monazite in the black
beach sands of Chavara coast in the Kerala state of India. Schaumberg who was
then working for an English firm got the sand exported to England. At that time
there was great demand for monazite because of its wide application in the mantle
making of gas lights. Continued efforts of German led to the discovery of other
minerals such as Rutile, Zircon, Silmanite etc in large volume in the sand of
Chavara coast between Neendakara and Kayamkulam.. The discovery of monazite
was quite accidental. Eventhough the German laid foundation for a mineral
separation plant at Chavara its activities were curtained by World War 2.

The first full fledged mineral separation plant in Chavara was established by
a private entrepreneur in 1932 as F. X. Pereira and Sons (Travancore) Pvt. Ltd.
They were involved in mining and separating mineral sands into various
constituents like Illmanite, Monazite, Rutile, Zircon, Leucoxene etc. During 1956
this concern was taken over by the state government and was placed under the
control of its industries department. The unit was converted as a limited company
with effect from 1.4.1972 in the name of "The Kerala Minerals and Metals Ltd".

Initially the company had only one unit known as 'Mineral Separation Plant'.
In 1974 the company received intent for the production of Titanium dioxide (Ti02)
pigment using Chloride process. In 1976 KMML registered its 2nd unit known as
Titanium dioxide Pigment Plant. Its construction started only in 1979 and total
capital cost was Rs.144 Crores. The plant was commissioned in December 1984.
KMML became the first and only Integrated Titanium dioxide plant in the world.

Even though KMML was commissioned in 1984 it was not able to operate
efficiently due to technical problems. Due to these problems the company has to
suffer an accumulated loss of more than the capital investment over a period of 8
years.

In the above circumstances it was in 1991 that the entire personnel of

KMML from top management to down to the lowest workers started to think
individually and collectively about the requirement of a 'Turn Around'. A strategy
was planed and implemented with the wholehearted support of the workforce during
the period 1991-1993.1t started to yield results and the Company attained the break
even level by 1993.From 1993-1994 onwards, the company started to make profits
and wiped out the entire accumulated loss within a few years and repaid the long
term loans. Thereafter, it is the story of success and growth.

INCORPORATION OF KERALA MINERALS AND METALS LIMITED

Kerala is a land enriched with heavy mineral deposit. This richness evolved
the formation of the company Kerala Minerals and Metals Limited (KMML).

It was all way back in 1909, when a German Chemist namely

Dr. Schaumberg noticed some brown sand particles sticking with coir exported from
India. He realized that the particles present were Monazite leading to the discovery
of vast deposits of Monazite in the black beach sands of Manavalakuriclll in the east
Travancore state. Late the Geological Survey of India established the occurrence of
Monazite and other earth minerals like limonite, Rutile, Leucoxene, Sillimanite and
Zircon.

Miss. F X Pereira & Sons (Travancore) Private Limited were the pioneers
who established the first full fledged Mineral Separation industry in Chavara area
way back in 1932 using the dry separation process. Gradually the company found
itself in financial crisis and in January 1956, the Kerala State Government took over
the company and continued under name F .X.P Minerals in 1972 the Government
renamed the name of the company as. The Kerala Minerals and Metals Limited
(KMML). At present KMML consists of two units, the Mineral Separation Plant
and the Titanium Dioxide Pigment Plant.

TECHNICAL COLLABORATION

The KMML entered in to technical collaboration with three

multinational corporations M/s. Kers MC Gee Chemical Corporation of USA. M/s.
Benedict Corporation of America. M/s. Woodall Dukham of UK respectively for the
above. The Metallurgical of Engineering Consultants India Limited (MECON) a
Government of India Undertaking did the detailed engineering

REVIEW OF LITERATURE

WORKING CAPITAL MANAGEMANT THEORY

MEANING AND DEFINATION:

 A part from investment in fixed assets, every enterprise has to arrange for
adequate funds for meeting day (operations) expenses to kept it a concern. So
originally speaking working capital refers to the flow funds , necessary for working
of enterprise however these is no agreement among the financial experts regarding
the meaning of working capital. They define working capital in the following ways.

ACCORDING TO MEAD MALLOT:

“Working capital means current assets”.

ACCORDING TO WESTON AND BRIGHAM:

“Working capital refers to a firm investment in short term assets, cash, short
term securities, accounts receivable and inventories”.

CONCEPT OF WORKING CAPITAL:-

There are 2 concepts of working capital : gross and net.

The term gross working capital also referred to as a working capital, means
the total current assets.

The term net working capital can be defined in 2 ways.

• The most common definition of net working capital is the different between

current assets and current liabilities

• Alternate definition of net working capital is that portion of current assets

which is financed with long term funds.

 The task of the financial manager in managing working capital efficiency is
to ensure sufficient liquidity in the operation of the enterprise. The liquidity
of a business firm is measured by its ability to satisfy short term obligations
as they become due. The three basics measures of a firm’s overall liquidity
are

• The acid test ratio

• The net working capital

• The current ratio

In brief , they are useful in inter firm comparison of liquidity . net working capital
as a measure of liquidity, is not very useful for comparing the performance of
different firms, but it is quite useful for internal control. The net working capital
helps in comparing the same firm over time.

NEED FOR WORKING CAPITAL:-

In order earn sufficient profits, a firm has to depend on its sales activities
apart from others. We know that sales are not analysis converted into cash
immediately. i.e., there is a time lack between the sale of a product and the
realization of cash so, an adequate amount of working capital is required by a firm
in the form of different current assets for its activities to continue un interrupted and
to tackle the problem that may arise because of the time lay. Practically this happens
simply owing to the “operating cycle”(or) “ cash cycle”, involves the following
steps.

• Conversion of cash into inventory.

• Conversion of inventory into receivables.

• Conversion of receivables into cash.

NATURE OF WORKING CAPITAL:-

The term working capital refers to current assets which may be defined as
 • Those which are convertible in to cash or equivalents with in a period of

one year and

• Those which are required to meet day operations.

This fixed assets as well as current assets, both required investment of funds. So, the
management of working capital and of fixed assets, apparently seen to involve same
type of consideration but it is not so. The management of capital involves different
concepts and methodology than the techniques used in fixed assets management.
The reason for this different is obvious. The very basics of fixed assets decision
process (i.e the capital budgeting ) and the working capital decision process are
different. The fixed assets involve long period perspective and therefore, the
concept of time value of money is applied where as in working capital the time
horizon is limited, in general, to one year only and the time value of money concept
is not considered. The fixed assets the long term profitability of the while the
current assets affect the short term liquidity position. Managing current assets may
require more attention than managing fixed assets. The financial manager must.

Therefore continuously monitor the assets to ensure that the desire levels are
being maintained. Since the amount of money invested in current assets can change
rapidly. So does the financing required. Mismanagement of current assets can be
costly. Too large an investment in current means tying up funds that can be
productively used else where (or it means added interest cost if the firm has
borrowed funds to finance the investment in current assets). Excess investment may
also expose the firm to undue risk e.g. In case, the inventory cannot be sold or the
receivable cannot be collected.

On the other hand, too little investment also can be expensive for ex:-
insufficient inventory may mean that sales are lost as the goods which a customer
wants are not available. The results is that financial managers spend a large chunk
of their time managing the current assets because level of these assets changes
quickly and a lack of attention paid to them may result in appreciably lower profits
for firm. So, in the working capital management, a financial manager is faced with
decisions involving some consideration as follows:
 • What should be the total investment in working capital of the firm?

• What should be the level of individual current assets?

• What should be the relative proportion of different sources to financial

the working capital requirements?

Thus the working capital management may be defined as the management of

firm’s sources and uses of working capital in order to maximize the wealth of the
share holders. The proper working capital management requires both the medium
term planning (say up to 3 years) and the immediate to changes arising due to
fluctuation in operating levels of the firm.

THE OPERTING CYCLE AND THE WORKING CAPITAL NEEDS:-

The working capital requirement of a firm depends, to a great extent up on the

operating cycle of the firm. The operating cycle may defined as the duration from
the procurement of goods or raw materials and ending with sales realization. The
length and nature of the operating cycle may differ from one firm to another
depending up or the size and nature of the firm.

In a treading concern there is a serious of activities starting from procurement of

goods ending with realization of sales revenue. Similarly in case manufacturing
concern . This serious start form procurement of raw material and ending with the
sales realization of finished foods. In both the cases however there is a time gap
between the happening of the first event and the happening of last event . this time
gap is called operating cycle. Thus the operating cycle of a firm consists of time
required for the completion of chronological sequence of some or all of the
following.

• Procurement of raw material and services

• Conversion of raw material in the work in progress.

• Conversion of work in progress in to finished goods.

 • Sales of finished goods. (cash or credit).

• Conversion of receivable into cash.

The firm is after required to extend credit facilities to customers. The finished
goods must be kept in store to take care of the orders and minimum cash balance
must be maintained. It must also have minimum of raw material to have smooth and
uninterrupted production process. So in order to have a proper and smooth running
of the business activities, the firm must make investment in all these current assets.
This requirement of funds depend up on the operating cycle period of the firm and
also denoted as the working capital needs of the firm.

OPERATING CYCLE PERIOD:-

The length or time duration of the operating cycle of any firm can be
defined as the sum of it’s inventory conversion period and the receivable conversion
period.

(1)INVENTORY CONVERSION PERIOD:-

It is the time required for the conversion of raw material in to finished goods
sales. In a manufacturing concern the ICP is consisting of raw materials conversion
period(RMCP), work in progress conversion period (WPCP), and the finished goods
conversion period (FGCP). The RMCP refers to the period for which the raw
material is generally kept in store before is issued to the production department. The
WPCP refers to the period for which the raw material remains in the production
process before it is taken out as a finished unit. The FGCP refers to the period for
which finished units remain in stores before being sold to the customers.

• RECEIVABLES CONVERSION PERIOD: (RCP)

It is the time required to convert the credit sales in to cash realization. It refers
to the period between the occurrence of credit sales and collection of debtors.
 The total of ICP and RCP is also known as total operating cycle period
(TOCP). The firm might be getting some credit facilities from the supplier of raw
material wag earners etc. this period for which the payment it these parties are
deferred or delayed is known as deferral period. The net operating cycle of a firm is
arrived at by deducting the deferral period from total operating cycle period. Thus

NOC = TOCP-D = ICP+RCP- DP.

OPERATING CYCLE

The duration of time required for completing the following sequences of events in
case of manufacturing firm s called the operating cycle.

• Conversion of cash into raw material.

• Conversion of raw material into work in progress.

• Conversion of work in progress into finished goods.

• Conversion of finished goods into debtors & bills receivable through sale.

• Conversion of debtors & bills receivable into cash.

CASH
 ACCOUNTS RAW MATERIAL
RECIEVABLE

FINISHED GOODS WORK IN

PROGRESS

The duration of the operating cycle for the purpose of estimating working capital
requirement is equivalent to the sum of duration of each of these tables less the
credit period allowed by the suppliers of the firm.

TYPES OF WORKING CAPITAL

• NET WORKING CAPITAL:

The net working capital is the different between current assets and current
liabilities. The concept of net working capital enables a firm to determine how much
amount is left for operational requirements.

• GROSS WORKING CAPITAL:

Gross working capital is the amount of funds invested in the various components of
current assets.

• PERMANENT WORKING CAPITAL:

 Permanent working capital is the minimum amount of current assets
which is needed to conduct a business even during the dullest season of the year.
The amount varies from year to year depending up on the growth of the company
and stage of business cycle in which it operates. It is the amount of funds required to
produce goods and services which are necessary to satisfy demand at a particular
point.

• TEMPORARY OR VARIABLE WORKING CAPITAL:

It is represents the additional assets which are required at different

times during the operating year additional inventory, extra cash etc., seasonal
working capital is the additional amount of current assets particularly cash,
receivables and inventory which is required during the more active business seasons
of the year.

• BALANCE SHEET WORKING CAPITAL:

The balance sheet working capital is one which calculated from the items
appearing in the balance sheet. Gross working capital which is represented by the
excess of current assets, and net working capital which is represented by the excess
of current assets over current liabilities are examples of balance sheet working
capital.

• CASH WORKING CAPITAL:

Cash working capital is one which is calculated from the appearing in the
profit and loss account. It shows the real flow of money or value at a particular time
and is considered to be the most realistic approach in working capital management.
It is the basis of the operating cycle concept which has assumed a great importance
in financial management in recent years. The reason is the working capital indicates
the adequacy of the cash flow. Which is an essential pre-requisite of a business.

• NEGATIVE WORKING CAPITAL:

Numbers working capital emerges when current liabilities exceed current

assets. Such a situation is not absolutely theoretical, and occurs when a firm is
nearing a crisis of some magnitude.

DETERMINANTS OF WORKING CAPITAL:-

Numbers of rules are formulated to determine the working capital

requirement of the firm. a large number of factors influence the working capital
needs of the firm. All these factors have different importance, also the importance of
the factor change for a firm over time. Therefore analysis of the relevant factor
should be made in order to determine the total investment in working capital
requirements of the firm.

• Nature and size of business

• Seasonality of operation

• Production policy

• Marketing conditions

• Business cycle fluctuation

• Credit policy
 • Conditions of supply

• Working capital policy

• Current assets in relation to sales

NATURE OF BUSINESS:-

The working capital requirement of a firm is closing related to the nature of

its business. A service firm like an electricity undertaking or a transport corporation,
which has short operating cycle and sells on cash basis, has modest working capital
requirement. On the other hand manufacturing concern like machine tools units
which has long operating cycle and which sells largely on credit had varied
substantial working capital management.

SEASONALITY OF OPERATION:-

Firms which have market seasonally in their operation usually have highly
function working capital requirement. For a sugar industry the raw material i.e.,
sugar cane is available in particular season only. So sugar industry mainly depends
upon seasonality of operations.

PRODUCTION POLICY

A firm marked by pronounced seasonal fluctuations in its sales many pursue a

production policy which many reduce the shape variation is working capital
requirement.

MARKETING CONDITIONS:

In view of competitive conditions prevailing in the firm may have to offer

liberal credit terms, to customs resulting in higher debtors, even large inventories
many be maintain to serve an order as and when received. Thus the working capital
tends to be high as a result of investors in inventions & receivable.

BUSINESS CYCLE FLUCTUATIONS:-

Different phases of business cycle i.e boom, recession, recovery etc, also
effect working capital requirement. In case of born conditions inflationary pressure
appear and business activities expand. As a result the overall need for cash ,
inventories etc., increase resulting more and more funds blocked in these current
assets. In case of recession period. How ever, there is usually dullness in business
activities and there will be opposite effect on the level of working capital.

CREDIT POLICY:-

The credit policy means the totality of terms and conditions on which goods
are sold and purchased. At firm has interact with 2 types of credit policies at a time
one, the credit policy of the supplier of raw material, goods etc, and two the credit
policy relating to credit which it extends to its customer. In both the cases,
however,the firm while deciding its credit policy has to take care of credit policy of
the market for example affirm might be purchasing goods and services on credit but
selling foods only for cash the working capital requirement of this firm will be
lower than that of a firm which is purchasing cash, but has to sell on credit basis.

CONDITIONS OF SUPPLY:-

If the supply is prompt and adequate the firm can manage with small
inventory, if the supply is unpredicted and service then the firm has to ensure
continuity of production.

WORKING CAPITAL POLICY:-

Two important issue in formulation the working capital policy are:

• What should be the ratio of current assets to sales.

 • What should be the ratio of short term financing to long-term financing.

CURRENT ASSETS IN RELATION TO SALES:

It usually does the investment in current assets cannot be specified

unequally. In sales of uncertainty the outlook on current assets would consist of
base component meant to meet normal requirement and safety component mean to
copy with unusual demands and requirements. The safety assets policy of the firm .

• If the firm pursues a very conservation current assets policy is should carry a

high level of current assets in relation to sales.

• If the adopts a moderate current assets policy it would carry a moderate level

of current assets in relation to assets.

• If the term follows highly aggressive current assets policy. It would carry a

low level of current assets in relation of sales.

A conservative current assets policy trends to reduce risk. The surplus current
assets under the policy enable firm to copy rather easily with variations in sales.
54&55 An aggressive current assets policy seeking to minimize the investment
in current assets exposes the firm to greater risk.

RATIO OF SHORT TERM FINANCING TO LONG TERM FINANCING:-

What would be the relative proportions of short-term bank financing on one

hand and long-term sources of finance and the other hand. The board policy
alternatives in the respect are:

• A conservative current assets financing policy.

• An aggressive current assets financing policy. A conservative current assets

financing policy refills less on short-term bank financing and more long on
 term sources like debentures. An aggressive current financing policy relies
heavily on short-term bank finance and seek to reduce dependants on long –
term financing.

CHOOSING THE WORKING CAPITAL POLICY:-

The overall working capital policy adopted by the firm may broadly:-

• Conservative

• Moderate

• Aggressive

CONSERVATIVE:

A conservative overall working capital policy means that the firm chooses
conservative current assets policy along with conservative current assets financing
policy.

MODERATE:

A moderate overall working capital policy reflects a combination of a

conservative current assets policy and aggressive current assets financing policy or a
combination of an aggressive current assets policy and conservative current assets
financing policy.

AGGRESSIVE:

An aggressive overall working capital consists of an aggressive current assets

policy and aggressive current assets financing policy.

FINANCING OF WORKING CAPITAL:-

Normally, financing arrangements are planned for a combination of needs

including capital expenditure and working capital investment the assessment of
sources of funds from a package and rarely will be possible to concept upto a
particular shows to a specific application or use at the same time financing manager
does make an assessment of the investment needs as well as current assets and
decider an a proper mix of long and short term funds. Taking note of the internal
generation of funds for 56 &57 the period in question be decisions on the extent to
which the firm would resort to issue of share or long short-term borrowing to
mobile the required sources.

Typically the current assets of a firm are supported by the combination of

long term and short term sources of financing long term sources of finance are
equity, preference term loans and debentures which primarily are fixed assets and
secondarily provide working capital margin.

Where the commitments are certain but cash flows are not clearly
predictable, it would wise to cut down drastically the number and extent of short
term debts to manageable levels and prefer longer maturity schedules for debts.

Short term debts can take care of the seasonal needs of the organization even
here to take care of vagaries in cash flow, a past of the funds required may be
obtained from sources with longer maturity schedules of the debts. Thus usually
permanent and long-term finance is used to finance the permanent requirements or
fixed assets and the net permanent current assets and a apart of the reasonable short
term needs.

The important sources of finance which more or less exclusively support

current assets are:

• Trade credit

• Working capital advances by commercial bank.

• Public corporate deposits

• Inter corporate deposits

• Short term loans from financial institutions .

 • Rights debentures for working capital.

• Emerging sources commercial paper and factoring.

Of all the above the most significant sources of working capital finance are
trade credit and bank borrowings, after trade credit bank borrowing are the next
important sources of financing working capital requirements of firms in India.
Tanton committee has suggested guidelines for the ratio allocation and optimum use
of the bank credit for the working capital requirement.

CHANGES IN WORKING CAPITAL:-

The working capital of a concern is subject to changes due to several

reasons. As we know that the gross working capital is equal to current assets. But
net working capital we mean the excess of current assets over current liabilities. The
net working capital is therefore, affected by the following transactions.

•Which increase the current but not the current liabilities?

•Which decrease the current assets and current liabilities both increase in the

same direction by a transaction it does not bring any change in the net
working capital of the concern. Only the total of current assets and current
liabilities increase and decrease.

REASONS FOR CHANGES IN WORKING CAPITAL:-

• Changes in the level of sales and\ or operating expenses.

• Policy changes.

• Changes in the technology.

STATEMENT OF CHANGES IN WORKING CAPITAL:-

Until now any increase decrease in any individual item of current assets and
current liabilities was shown in the funds flow statement. But now a statement is
prepared to deficit the changes in working capital. The net increase or decrease is
then carried forward to the funds flow statement.

The statement of working capital is prepared with the help of current assets
and current liabilities of the two periods the figures of 2 periods are compared. If
there is an increase in the amount of any current liabilities in the current year in
comparison to that in that in the previous year, it will result to an increase in the
working capital. Similarly, a decrease in the amount of any current assets or an
increase in amount of current liabilities in the current year in comparison to that in
the previous year and total decrease in the end is compared and the different of total
increase and total decrease shows net increase or decrease in the working capital.

Net increase in working capital is an application of funds and net decrease

in working capital in the source of funds. A form of statement is shown below.

RATIO ANALYSIS
 Several ratios calculated from the accounting date, can be grouped into
various classes according to financial activity or function to be evaluated. As stated
earlier, the parties interested in financial analysis are short and short and long-term
creditors, owners and management.

“Short-term creditors” main interest is in liquidity position or the short-

term solvency of the firm. Long-term creditors, on the other hand, and more
interested in the long-term solvency and profitability of the firm. Similarly, owners
concentrate on the firm’s profitability and financial conditions. Management is
interested on in evaluating every aspect of the firm’s performance. They have to
protect the interests of all parties and see that the firm grows profitably. In view of
the requirements of the various users of ratio, we may classify them into the
following four important categories.

TYPES OF RATIO:-

• Liquidity ratios

• Leverage ratios

• Activity ratios

• Profitability ratios

Liquidity ratio:-
 The liquidity refers to the maintenance of cash, bank balance and those assets,
which are easily convertible into cash in order to meet the liabilities as and when
arising. So, the ratios study the firm’s short-term solvency and its ability to pay off
the liabilities.

Current ratio:-

Current ratio is the ratio of current and current liabilities. Current assets
are assets which can be converted into cash within one year and include cash in
hand and at bank, bills receivable, net sundry debtors, stock of raw materials,
finished goods and work in progress, prepaid expenses, outstanding and occurred
incomes, and short term or temporary investments. Current liabilities are liabilities,
which are to be repaid with in a period of 1 year and include bills payable, sundry
creditors, bank over drafts, and outstanding expenses, Income received in advanced,
proposed dividend, provision for taxation, unclaimed dividends and short term loans
and advances repayable within 1 year

Current assets

Current Ratio= -----------------------------------------------

Current liabilities

A current ratio 2:1 is considered as ideal: if a business has an undertaking

with its bankers to meet its working capital requirements short notices, a current
ratio of is adequate.

quick Ratio:-

Quick assets

Quick ratio = --------------------------------------------------

Quick liabilities

A quick ratio of 1 is considered as ideal. A quick ratio of less than 1 is

indicated of inadequate liquidity of the business. A very high ratio is also not
available as funds can be profitability employed.

Absolute liquid ratio:-

It is ratio of absolute liquid ratio assets to quick liabilities. However, for

calculation purposes, it is taken as ratio of liquid assets of current liabilities. Trade
investment or marketable securities are equivalent of cash therefore, they may be
included in the computation of absolute liquid ratio.

Absolute liquid ratio

Absolute quick ratio = -------------------------------------------------

Current liabilities

• Leverage ratios:

leverage ratio indicate the relative interest of owners and creditors in a

business. It shows the proportions of debt and equity in financing the firm’s assets
the long- term solvency of a firm can be examined by using leverage ratio. The
long-term creditors like debenture holders, financial institutions etc,. are more
concerned with firms long –term financial strength.

There are two aspects of the long-term solvency of a firm

• Ability to repay the principal when due, and

• Regular payment of the interest they leverage ratio are calculated to measure
the financial rest and firms abilities of using debt.

TOTAL DEBT RATIO:-

Total debt will include short and long-term borrowing from financial institution
debentures bonds. Capital employed will include total debt and net worth.

The firm may be interested in knowing the proportion of the interest bearing
debt in the capital structure by calculating total debt ratio. A highly debt burdened
firm difficulty in raising funds from creditors and owners in future. Creditors treat
the owner’s equities as a margin of safety.

Total Debt

Total Ratio = ----------------------------------------------

Capital Employed

• DEBT -EQUITY RATIO:-

It reflects the relative claims of creditors and shareholders against the assets of
the business. Debt, usually, refers to long-term liabilities. Equity include preference
share capital and reserves.

The relationship describing the lenders contribution for each refers of the
owner’s contribution is called debt equity ratio.
 A high ratio shows a large share of financing by the creditors relative to the
owner’s and therefore, large claim against the assets of the firm.

A low ratio implies a smaller claim of creditors. The equity indicates the
margin of satisfy to the creditors so, there is no doubt the Beth high and low debt
equity ratios are not desirable. What is needed is a ratio, which strikes a proper
balance between debt and equity.

Total Debt

Debt-Equity = -------------------------------------

Net worth

Some financial experts opine that debt should indicate current liabilities
also. However, this is not a popular practice. In case of preference share capital, it is
treated as a part of shareholders funds, but if the preference shares are redeemable,
they are taken as a part of long-term debt shareholder funds are also known as
proprietor funds and it indicates items equity share capital, reserve, and surplus. A
debt equity ratio of 3:1 is considered ideal.

• PROPRIETORY RATIO:-

It expresses the relation between net worth and total assets.

Net worth

Property ratio= ----------------------------------------

Total assets

Net worth= equity share capital + preference share capital + reserves –

fictitious assets.

Total assets= fixed assets + current assets (excluding fictitious assets)

Reserve earmarked specifically for a particular purpose should not be

included in calculation of net worth.

A high proprietor’s ratio is indicative of strong financial position of the

business. The higher the ratio, the better it is.
FIXED ASSETS RATIO:-

Fixed assets

Fixed Assets = ------------------------------------------

Capital employed

Capital employed – equity share capital + preference share capital + reserves +

long term liabilities – fictitious assets.

This ratio indicates the mode of financing the fixed assets. A financially well-
managed company will have its fixed assets financed by long term funds. Therefore,
the fixed assets ratio should never be more than

• A ratio of 0.67 is considered ideal

INTEREST COVERAGE RATIO:

This interest coverage ratio is computed by dividing earnings before

interests and taxed by interest charges.

Debt

Interest coverage ratio = ---------------------

Interest

This interest coverage ratio shows the number of times the interest
charges are covered by funds that are or demurely available for their payment. A
high ratio is desirable but too high ratio indicates that the firm is very conservative
in using debt and that is not using credit to the debt advantage of shareholder. A
lower ratio indicates excessive use of debt or inefficiency operations. The firm
should make efforts to improve the operating efficiency or to retire debt to have a
comfortable coverage ratio.

iii) ACTIVITY RATIOS:-

Activity assets turnover ratio, measures the efficiency of a firm in

managing and utilizing its assets. The higher the turnover ratio, the more efficiency
the management and utilization of the assets while low turnover ratio is indicate of
under- utilization of available resources and presence idle capacity. The total assets
turnover ratio is computed by dividing sales by total assets.

Sales

Total assets turnover ratio = -------------------------------------

Total assets
 WORKING CAPITAL TURNOVER RATIOS:-

Cost of goods sold

Working capital turnover ratio = -------------------------------------

Working capital

Where if cost of goods sold is known. Net sales can be taken in the
numerator.

Working capital = current assets – current liabilities.

A high working capital turnover ratio indicates efficiency utilization of the

firm’s funds. However, it should not result in over trading.

DEBTORS TURNOVER RATIO :-

Debtor’s turnover ratio expresses the relationship between debtors and

sales. It is calculated.

Net credit sales

Debtors turnover ratio = -------------------------------------

Average debtors

Net credit sales inspire credit sales after adjusting for sales returns. In case
information no credit sale is not available. “sales” can be taken in the numerator.
Debtors include bills receivable. Debtors should be taken at gross value, without
adjusting provisions for bad debts. In case, average debtors be found; closing
balance of debtors should be taken in the denominator. A high debtors turn over
ratio or a low debt collection period is indicative of a sound credit management
policy. A debtors turnover collection period of 30-36 days is considered ideal.
 DEBT COLLECTION PERIOD:-

The debt collection period measures the quality of debtors since it indicates
the speed of the collection. The shortest the average collection period implies the
prompt payment by debtors.

No. of days year

Debt collection period = -----------------------------------------

Debt collection period

An excessively long collection period implies a very liberal and inefficient

credit and collection performance. This certain delays the collection delays the
collection of each and impairs the firm’s liquidity. The average no. of days for
which debtors remain outstanding is called debt collection period or average
collection period.

CREDITORS TURNOVER RATIO:-

Creditor’s turnover ratio expresses the relationship between creditor’s and

purchases.

Net credit purchase

Creditors turnover ratio = ---------------------------------------------

Average creditors

Net credit purchase implies credit purchase after adjusting for purchases
returns. In case information on credit purchase is not available purchase may be
taken in the numerator. Creditors include bills payable. In case avenue creditors
can’t be found, closing balance of creditors should be taken in the denominator.

The creditor’s turnover ratio is 12 or more. However, very less creditors

turnover ratio, or a high debt payment period, may indicate the firm’s inability in
meeting its obligation in time.
 PAYMENT PERIOD RATIO:-

Creditors turnover rate can also be expressed in terms of number of days by

the business to pay off its debts. It is termed as debt payment period which is
calculated as:-

Number of days in a year

Payment period ratio = --------------------------------------------

Creditors turnover ratio

FIXED ASSETS TURNOVER RATIO:-

It is defined as

Net sales

Fixed assets turnover ratio = ---------------------------------

Fixed assets

Fixed assets imply net fixed assets i.e. after depreciation. A high fixed assets
turnover ratio indicates better utilization of the firm’s fixed assets. A ratio around 5
is considered ideal.

INVENTORY TURNOVER RATIO:-

Stock turnover ratio indicates the number of times the stock has turned over
into sale sin the year. It is calculated.

Cost of goods sold

Inventory turnover ratio = -------------------------------------------

Average inventory

Cost of goods sold = sales gross profit

Average stock = (opening stock and closing stock 1\2)

In case, information regarding cost goods sold is not known. Sales may be
taken in the numerator. Similarly, if average stock can’t be calculated, closing stock
should be taken in the denominator.
 A stock turnover ratio of ‘8’ is considered ideal. A high stock turnover ratio
indicates that the stocks are fast moving and get converted into sales quickly.
However, it may also be on account of holding low amount of stocks and
replenishing stocks in larger number of installments.

PROFITABILITY RATIO:-

It measure the overall performance and effective of the firm. Poor

operational performance may indicate poor sales and hence poor profits. A lower
profitability may arise due to the lack of control over the expenses. Bankers,
financial institutions and other creditors look at the profitability’s. ratio as an
indicator whether or not the firm earns substantially more than it pays interest for
the use of borrowed funds and weather the ultimate repayment of their debt appear
reasonably certain owner are interest to know the profitability as it indicates the
return which they can get on this instruments.

Profitability ratio’s measure the profitability of a concern generally. They

are calculated either in relation to sales or in relation to investment.

NET PROFIT RATIO

It indicates the result of the overall operation of the firm.

The higher the ratio, per profitable is the business. The net profit ratio is
reassured by dividing net profit ratio indicates management efficiency in
manufacturing administration and selling the products. This ratio is the overall firms
ability to turn each rupee of sale into net profit. If the profit margin is inadequate,
the firm fails to achieve satisfactory return on share holder’s funds.

Profit after tax

Net profit ratio = ----------------------------------

Net sales

A firm with high net profit margin can make better use of favorable
conditions. Such as rising selling prices, falling cost of products or increasing
demand for the product. Such a firm will be able to accelerate its profits at a faster
rate than a firm with a low net profit margin. This ratio also indicates the firm
capacity to withstand adverse economic conditions.
RETURN ON NET WORTH RATIO :-

It indicates the return, which the shareholders are earning on their resources
invested in the business.

Profit after tax

Return on net worth ratio = ------------------------------------------

Net worth

Net worth = share holders funds = equity share capital + preference share
capital + Reserves – factious assets.

The higher the ratio, the better it is for the share holders. However, inter firm
comparisons should be made to ascertain if the returns from the company are
adequate. A trend analysis of the ratio over the past few years much is done to find
out the growth or deterioration in the profitability of the business.

RETURN ON ASSETS RATIO :-

Profit after tax

Return on assets ratio = ------------------------------------------

Total assets

Total assets do not include fictitious assets. The higher the ratio, the better it
is.

EARNINGS PER SHARE RATIO:-

Earnings per share are the net profit after tax and preferences dividend,
which is earned on the capital representative of one equity share. It calculated as :-

Profit after tax available to equity holders

Earnings per share ratio = -----------------------------------------------------------------

Number of ordinary share

ADVANTAGE OF RATIOS

• Useful of evaluation performance in terms of profitability and financial

stability.

• Useful for intra & inter firm comparison.

• Useful forecasting and budgeting.

• It is just in tabular form over a period of years indicated the trend of

business.

• Smile to understand rather than the reading but the figures of financial
statement.

• Key tool in the hand of modern financial management.

• Enable outside parties to assess the strength and weakness of the firm.

• Ratio analysis is very useful for ranking management decisions and also
highlights the performance in the area of profitability financial stability and
operational efficiency.

LIMITATIONS OF FINANCIAL RATIOS

The ratio analysis is widely used of technique to evaluate the financial position and
performance of business. But there are certain problems in using ratios.

The analyst should be aware of these problems the following are some of the
limitations of ratio analysis.

• It is difficult to decide on the proper basis of comparison.

• The comparison is rendered difficult because of differences in situations of two
companies or of one company over years.

• The price level changes make the interpretation of ratios invalid. the differences
in the definitions of items in the balance sheet and the profit & loss statement
make the interpretation of ratios difficult.

• The ratios calculated at a point of time or less informative and defective as they
suffer from short term changes.

• Difference in accounting policies and accounting period make the accounting

data of firms non comparable as also the accounting ratios.

• It is very difficult to generalize weather a particular ratio is good or bad.

For ex: a low current ratio may be said bad from the point of view of low
liquidity. But a high current ratio may not be good. As this may results from in
efficient working capital management.
CHAPTER 2: INTERGRATED PERSPECTIVE OF ALL
FUNCTONAL AREAS OF THE ORGANIZATION
ORGANIZATION STRUCTURE

MANAGING
DIRECTOR

GM PRODUCTION DGM P&A GM GM FINANCE

MARKETING

MAINTENANCE MANAGER AGM AGM

MANAGER

MANAGER
WELFARE
DEPUTY DEPUTY
ASST MANAGER MANAGER
MANAGER
PERSONNEL
OFFICER

SENIOR
PROCESS EMPLOYEES
ACCOUNTANT

EMPLOYEES EMPLOYEES
ASST TO SENIOR
ACCOUNTANT

MARKETING PURCHASIN
EMPLOYEES OF FIRM G OF FIRM
(DOMESTIC) ACCOUNTANT
GRADE 1

ASST TYPIST PEON

GRADE ACCOUNTANT
GRADE 2

EMPLOYEES EMPLOYEES
DEPARTMENTAL STUDY

Like any other public sector undertaking KMML has separate departments
and separate executive heads for each department Departments are based on the
functional basis. Each department specializes in its own area of operation. The
various departments in the KMML are:-

1) Personnel & Administration

2) Marketing

3) Finance

4) Production

5) Maintenance

6) Materials

7) Data processing

8) Fire & Safety

9) Technical

10) Research and development Department

11) Project
 1) PERSONAL AND ADMINISTRATIVE DEPARTMENT

Of all the factors of productions, man is by for the most important. It is a

matter of common knowledge that every business organization depends for its
effective functioning not so much on its material or financial Resources as on its
pool of able and willing Human Resources.

M J Jueius defines “personnel management as the field of management

which has to do with planning, organizing, controlling various operative activities of
procuring, developing, maintaining and utilizing a labour force in order that the
objectives and interest for which the company is established are attained as
effectively and economically as possible and the objectives and interest of all levels
of personnel and community are served to the highest degree”.

2) MARKETING DEPARTMENT

"Marketing is a social and managerial process by which individuals and

groups obtain what they need and want through creating and exchanging products

and value with others"------------Philip Kotler.

ABOUT KMML MARKETING

KMML have monopolistic in Titanium Dioxide (TiO2) pigment industry.

KMML is a public limited company that stands as a leader in production of TiO2.
The company has a large number of customers from all over the world and out side.

The marketing department is engaged in selling of the company's product.

There is no separate department for sales and marketing management also perform
these functions. The marketing section keeps detailed report about customers'
product, product group control, dispatch and payment.

Products of KMML always maintain very high standard perfection,

achieving technical excellence in every phase of production to offer a wide range of
products for quality conscious customers.

At KMML, one factor comes before everything else is customers and

KMML go out of their way to ensure customers satisfaction. A team of motivated
marketing experts, who make it their business to find out the firm's views,
highlights customer's consciousness. Maintaining close contacts, they are perfectly
aware of customer's needs and are instrumental in development of new products at
price and offering.

3) FINANCE DEPARTMENT

Finance is the lifeblood of every business. This is one of the most important
departments. In KMML a well organized finance department is functioning. The
finance position of the company can be understood by Balance Sheet and Profit and
Loss Account, prepared budget report according to the company's goal is also an
important function of the finance department.

Accounting Policy of KMML

1) Convention

The final statements are prepared under the historical cost convention in
accordance with applicable accounting standard that was relevant to presentational
requirement of the Companies Act 1956.

2) Fixed Assets

Fixed assets are stated at cost of acquisition and additional if any, less
accumulated depreciation, is provided at rates and methods prescribed in the
schedule XIV of the Companies Act on straight line method in respect of plant and
machinery and railway sliding belonging to TiO2 pigment unit. And written down
value method in respect of all the asset of the company. The depreciation is
calculated on the basis of Companies Act and for income tax audit it is added to the
profit and recalculated as per the audit rules.

3) Excise duty

Excise duty on manufactured is accounted for as and when goods. Are

dispatched is accordingly no provisions is made in respect of duty due on goods
manufactured, but not dispatched nor included in valuation of stock.

4) Gratuity

Gratuity liability and leave is accounted on the basis of actuarial valuation.

5) Inventory System

Work-in-progress is valued at the cost and stock of raw materials, chemicals,

fuel and stores are valued at weighted average cost on monthly basis

4) PRODUCTION DEPARTMENT

KMML always maintain high standard of perfection by achieving technical

excellence in every phase of production. Catering to strict guideline, KMML offers
a wide range of products for quality conscious customers. Their products go in to
the manufacture of variety of products used in every day life. Paint material, facial
creams, tablets, newsprint, rubber products, cosmetics and printing inks all contain
TiO2.

This department undertakes activities and decision regarding the production

work. Deputy General Manager (production and maintenance) controls the activities
of the department. Production of TiO2 is carried out in lot wise with specific lot
number. Each lot contain 15 MT of TiO2 samples are collected from production at
specific intervals and examined thoroughly in the laboratory or the company. If any
defect is identified, then the lot is considered as inferior quality. .

Mineral separation plant (MS unit) and TiO2 pigment plant (TP unit) is two
independent production units in KMML. The TP unit is divided in to three plants.

x Illmenite Beneficiation Plant

x Acid Regeneration Plant

x Pigment
 5) MAINTENANCE DEPARTMENT

The maintenance department of KMML can be grouped in to Electrical,

Mechanical and Instrumentation section. The Joint General Manager (maintenance)
is the top authority.

1. Electrical section:

This department is under the control of assistant general manager

(Electrical). It is the function of the department to ensure the flow of electricity
through out the company.

2. Mechanical section:

This department is under the control of assistant general manager

(Mechanical). Function of the department is to ensure the easy working of
machines. The company is doing periodical shutdown. to carryout necessary
maintenance and servicing of the plant.

3. Instrumentation:

Assistant General Manager (Instrumentation) is the apex authority of this

section. The section inspects safety of valves, mechanics etc. and working of
instruments. A statutory body occasionally visits the company to check the safety of
the plant.

4. Civil:

Manager (civil) controls the activities of this section. They undertake the
functions relating to implanting new machinery etc.

6) MATERIALS DEPARTMENT

All functions relating to purchase and storage of materials for the company
is carried out by this department. This department is headed by the Deputy General
Manager (materials). There is around 27000 items of raw materials in KMML. The
functions of material department can be grouped in to three:

x Purchase

x Storage

x Inventory control

7) MANAGEMENT INFORMATION SYSTEM

Management Information System (MIS) is under the supervision of the

data processing department. Assistant General Manager (EDP) is the top authority
of the department. There are 70 personal computers in the company. 53 personal
computers in the company are in local area network. Company is having 10 Mega
Bytes personal computers back borne copper cabling. It has four signals:

1. Stores

2. Plant technical service

3. Illmenite Beneficiation plant! Acid regeneration plant

4. Pigment processing unit/laboratory

There is a direct connection from IBM server to Purchase, Finance,

Marketing and Personnel department. The entire Information Technology activities
are monitored by Electronic Data Processing (EDP) section. KMML is using Oracle
Related Database management system at backend and Power Builder as front-end.
An integrated online application module developed in power builder is being used
among finance, purchase, stores, marketing, personnel and production departments.
The database is fed to the system by each department, which is required to generate
various Management Information Systems to the management. A strict security
control is incorporated in the operations of various modules.

8) FIRE AND SAFETY DEPARTMENT

Fire and safety is a main department of KMML. It manages the process of

giving security to the employees by giving successful training and giving license to
employees and machines. The sections under fire and safety are:
1. Employee details managing: - In this section the details of the employees
are identified by separate employee codes. Here in employee code, employee name,
designation, date of birth, date of joining and qualifications are recorded. These
section supplies the details of employee to another section.

2. Employee training: - All the employees are trained for the successful
running up of KMML. The details of training is recorded when they gives each
training. Employee code, serial number, date of training, course and remark are
recorded. When an accident occurs the details of the training given to the employee
is produced.

3. Employee accident: - This section handles the details of accident occurs to

the employee. Employee code, serial number, accident data, description of accident,
the body part which was injured, unsafe condition or unsafe act, whether lost time
accident or not lost time accident, the days lost are recorded.

4. Expo- Petr o-License: - This section stores the details of the license
provided to each machines. A different agency provides this license. It must have to
be renewed after the validity is lost. This section stores the serial number, item
name, license number, tag number, last test, test type etc.

5. Lifting machines and tackles: - There are different lifting machines in

different location. These machines have to be tested and if any defect it is stored.
The machines are given a hoist no., location, last test, tested by, defect, next test and
remarks are stored.

6. Pressure vessel: - This section handles different machines, which handle the
substance of high pressure such as LPG, CHLORINE etc. It is very difficult to
handle these types of machines. It needs high security and to confirm whether the
equipment is running smoothly. It contains serial no., section, pressure vessel, last
test etc.
7. Mock-drill: - It is a section contains trained person to maintain the security.
If any accident occurs, the help of this person is supplied and reduces the
complexity of accident. An accident controller is the head of this section

9) TECHNICAL DEPARTMENT

Assistant General Manager (technical) is the head of this wing. This wing
functions as a third agency to the production and maintenance department. The
technical wing takes charge to research and development, Quality control,
Laboratory and technical services.

10) RESEARCH AND DEVELOPMENT

KMML maintain a fully equipped research and Development facility in the

area of Pigment and paint technology with a view to establish world- class products
and competitiveness. This excellent facility undertakes research, development and
product improvement. Scientists and Engineers continuously pursue innovative
technologies in the area of TiO2 pigment, quality improvement and other allied
products. The technical and sales service wing extends all helps to customer in the
field of applications and users.

KMML's Research and development has achieved following tasks in recent

times:

1. Developed new grade RC-802 with excellent balancing properties of glass

and weather ability.

2. Successfully developed an improved process of oxidation plant.

3. Developed know how to convert iron oxide waste to bricks used for
construction.

4. Developed grade RC- 808, special grade for automotive coating.

11) PROJECT DEPARTMENT

Joint General Manager (Project) is the head of the wing. This wing is
engaged in the expansion program of the company. They are engaged in the
building up of new products etc. they also decide up on the future plans of the
company.

Some major projects on which they are working upon include:

1. A new MS plant of 2 lacks tones illmenite capacity per year

2. A new synthetic rutile plant of capacity 1.3 lacks

3. A new 100 tone per day Oxygen plant

4. Capacity enhancement of Ti02 plant in to one lacks tones per year

CHAPTER3- ANALYSIS AND INTERPRETATION

TABLE 1

Table showing CURRENT RATIO of KMML

Current ratio= current assets/current liabilities

A current ratio 2:1 is considered as ideal: if a business has an undertaking with its
bankers to meet its working capital requirements short notices, a current ratio of is
adequate.

CURRENT
YEAR CURRENT ASSET LIABILITY CURRENT RATIO

2007-08 42959.03 22728.01 1.88

2008-09 32429.76 12864.53 2.57

2009-10 33035.54 14066.5 2.35

2010-11 36862.77 27265.53 1.35

 2011-12 36270.02 26404.87 1.37

INTERPRETATION

The table evaluates the current ratio of KMML from 2007-08. The ideal current
ratio should be 2:1. it means that every 1 rupee of current liability should be covered
by 2 rupees of current asset. The table shows that in 2007-08 the ratio is less than
required and in 2008-09 and 2009-10 it is above the ideal rate, but in 2010-11 and
2011-12 it is again less than required
 CURRENTRATIO
3

2.5

1.5
CURRE RATIONT
1

0.5

0
2007-08 2008-09 2009-10 2010-11 2011-12

TABLE 2

Table showing QUICK RATIO of KMML

Quick ratio=Quick assets/current liabilities

A quick ratio of 1 is considered as ideal. A quick ratio of less than 1 is indicated of

inadequate liquidity of the business. A very high ratio is also not available as funds
can be profitability employed

YEAR QUICK ASSET CURRENT LIABILITY QUICK RATIO

 2007-08 19049.41 22728.01 0.838146851

2008-09 24574.25 12864.53 1.910233021

2009-10 26096.84 14066.5 1.855247574

2010-11 30052.32 27265.53 1.102209273

2011-12 21065.68 26404.87 0.797795255

INTERPRETATION
The table evaluates the quick ratio of KMML from 2007-08. The ideal quick ratio
should be 1:1. It means that every 1 rupee of current liability should be covered by 1
rupees of quick asset. The ratio shows an increasing trend in 2007-08 and 2008-09.
then onwards it shows decreasing trend. So the company is finding it difficult to
maintain the ratio at ideal level as year passes.
 QUICKRATIO

1.5

1 QUICK RATIO

0.5

0
2007-08 2008-09 2009-10 2010-11 2011-12

TABLE 3

Table showing CASH AND BANK TO CURRENT ASSET RATIOof KMML

cash and bank to current asset ratio =cash and bank/current assets

CASH & BANK CURRENT CASH &BANK TO CURRENT

YEAR BALANCE ASSET RATIO

2007-08 8827.1 42959.03 0.205477172

2008-09 14076.2 32429.76 0.434051933

 2009-10 13808.32 33035.54 0.417983784

2010-11 12144.93 36862.77 0.329463304

2011-12 7740.61 36270.02 0.213416204

INTERPRETATION
In the year 2007-08 and 2008-09 ratio is showing increasing trend. But gradually it
is falling. This is because of investing in securities
 CAS &BANKTO CURRENTRATIOH

0.5

0.4

0.3
CAS &BANK TOH
CURRE RATIONT
0.2

0.1

0
2007-08 2008-09 2009-10 2010-11 2011-12

TABLE 4

Table showing INVENTORY TURNOVER RATIO of KMML

Inventory turnover ratio =sales/inventory

Stock turnover ratio indicates the number of times the stock has turned over into
sales in the year.
 INVENTORIE INVENTORY TURNOVER
YEAR SALES S RATIO
2007-

08 30748.69 6338.5 4.85109884

2008-

09 41908.91 8341.2 5.024326236

2009-

10 48398.2 6735.46 7.18558198

2010-

11 53938.54 6810.45 7.919967109

2011-

12 57302.87 15204.34 3.768849552

INTERPRETATION
The inventory turnover ratio shows an increasing trend from 2007-08 to 2010-11
and decreases in 20011-12, due to increase in inventories.
 INVENTORYTURNOVERRATIO
9
8
7
6
5
INVENTORY
4 TURNOVE RATIOR
3
2
1
0
2007-08 2008-09 2009-10 2010-11 2011-12

TABLE 5

Table showing DEBTORS TURNOVER RATIO of KMML

Debtors turnover ratio =sales/debtors

Debtors turnover ratio expresses the relationship between debtors and sales. It is
calculated.

YEAR SALES DEBTORS DEBTORS TURNOVER RATIO

2007-08 30748.69 2606.48 11.79701743

2008-09 41908.91 3203.56 13.08198067

2009-10 48398.2 4709.92 10.27580086

2010-11 53938.54 6421.85 8.399221408

2011-12 57302.87 6594.03 8.690113633

INTERPRETATION
The debtors turnover ratio increases in 2007-08 and 2008-09 and then onwards
shows deceasing trend. This is due to increase in sales.
 DEBTORSTURNOVERRATIO

2011-12

2010-11

2009-10 DEBTORS TURNOVER

RATIO
2008-09

2007-08

0 5 10 15

TABLE 6
Table showing AVERAGE COLLECTION PERIOD of KMML

Average collection period =365/debtors turnover ratio

.
The debt collection period measures the quality of debtors since it indicates the
speed of the collection. The shortest the average collection period implies the
prompt payment by debtors
NUMBER OF DAYS DEBTORS AVERAGE COLLECTION
YEAR IN YEAR TURNOVER RATIO PERIOD
2007-

08 365 11.797 30.94006951

2008-

09 365 13.082 27.90093258

2009-

10 365 10.276 35.51965745

2010-

11 365 8.399 43.45755447

2011-

12 365 8.69 42.0023015

INTERPRETATION
The table shows average collection period which decreased in 2008-09, it shows
that the company has tighten its collection period for reducing the rate of delay in
payment by debtors, and it increased during the years 2009-10 and 2010-11, it
shows the company has liberalized the collection period for getting more sales and
company has tighten its collection period during the year 2011-12 for reducing the
rate of delay in payment by debtors.
 AVERAGECOLLECTION PERIOD

2011-12

2010-11

2009-10 AVERAGE COLLECTION

PERIOD
2008-09

2007-08

0 10 20 30 40 50

TABLE 7

Table showing CREDITORS TURNOVER RATIO of KMML

creditors turnover ratio =net purchases/creditors

Creditor’s turnover ratio expresses the relationship between creditor’s and purchases

CREDITOR CREDITORS TURNOVER

YEAR NET PURCHASE S RATIO

2007-08 7303.35 1559.63 4.682745267

2008-09 7979.3 1540.7 5.179009541

2009-10 10717.37 1468.77 7.296833405

2010-11 11758.46 3672.55 3.201715429

2011-12 10170.08 3376.43 3.012080807

INTERPRETATION
The table shows the creditors turnover ratio is increasing from 2007-08 to 2009-10,
it shows that the company get more payment period for its creditors. And the ratio
decreases in 2010-11 and 2011-12 ,the company is finding it difficult to pay in time
 CREDITORSTURNOVERRATIO

8
7
6
5
4
3 CREDITORS TURNOVER
2 RATIO
1
0

2007-08 2008-09 2009-10 2010-11 2011-12

TABLE 8
Table showing AVERAGE PAYMENT PERIOD of KMML

Average payment period =365/creditors turnover ratio

Creditors turnover rate can also be expressed in terms of number of days by the
business to pay off its debts. It is termed as debt payment period

NO: OF DAYS IN CREDITORS AVERAGE

YEAR YEAR TURNOVER RATIO PAYMENT PERIOD

2007-
08 365 4.68 77.99145299

2008-
09 365 5.18 70.46332046

2009-
10 365 7.297 50.02055639

2010-
11 365 3.2 114.0625

2011-
12 365 3.012 121.1819389

INTERPRETATION
The ratio shows fluctuations in the years. In the year 2009-10 it was 50.02 which is
good and in 2011-12 it is 121.182. it shows that the company is taking more time in
paying its creditors.
 AVERAGEPAYMENTPERIOD

2011-12

2010-11

2009-10 AVERAGE PAY NTME

PERIOD
2008-09

2007-08

0 50 100 150

TABLE 9
Table showing CURRENT ASSET TURNOVER RATIO of KMML

Current asset turnover ratio =net sales/current assets

This ratio indicates the extent to which the company invest in current assets with
regard to its sales. Higher ratio shows that the firm is in good position.

NET CURRENT CURRENT ASSET TURNOVER

YEAR SALES ASSETS RATIO

2007-08 30748.69 23688.82 1.298025398

2008-09 41908.91 33079.7 1.266907197

2009-10 48398.2 33035.54 1.465034324

2010-11 53938.54 36862.77 1.463225363

2011-12 57302.87 36270.02 1.579896289

INTERPRETATION
The table shows that the ratio shows flexible trend. The company is trying to attain
good current asset turnover position.
 CURRENTAS ET TURNOVERRATIOS
1.8
1.6
1.4
1.2
1
0.8
0.6
CURRE AS ETNT S
0.4
TURNOVE RATIOR
0.2
0

2007-08 2008-09 2009-10 2010-11 2011-12

TABLE 10
Table showing FIXED ASSET TO CURRENT ASSET RATIO of KMML

Fixed asset to current asset ratio =net sales/current assets

The ratio shows relationship between fixed asset and current asset.

FIXED CURRENT FIXED ASSET TO CURRENT

YEAR ASSET ASSETS ASSET RATIO
2007-

08 12862.52 23688.82 0.542978502

2008-

09 17942.43 33079.7 0.542400022

2009-

10 17803.97 33035.54 0.538933827

2010-

11 21883.4 36862.77 0.593645025

2011-

12 22967.57 36270.02 0.633238416

INTERPRETATION
The table shows fixed asset to current asset ratio in 2007-08 and 2008-09. The ratio
shows constant trend in the first two years and from 2009-10 and 2011-12 it shows
increasing trend.
 FIXED AS ET TO CURRENTAS ETSS
RATIO

0.64
0.62
0.6
0.58
0.56
0.54 FIXE AS E TO CURRED STNT
0.52 AS E RATIOST
0.5
0.48

TABLE 11
Table showing WORKING CAPITAL TURNOVER RATIO of KMML

Working capital turnover ratio =net sales/net working capital

This ratio indicates the extent to which the company invest in current assets with
regard to its sales. Higher ratio shows that the firm is in good position.
A high working capital turnover ratio indicates efficiency utilization of the firm’s
funds. However, it should not result in over trading.
This ratio indicates whether a company has enough short term assets to cover its
short term debt. Anything below 1 indicates negative working capital. While any
thing between 1.2 to 2 is considered sufficient

NET NET WORKING WORKING CAPITAL

YEAR SALES CAPITAL TURNOVER RATIO
2007-

08 30748.69 20231.02 1.519878385

2008-

09 41908.91 20215.17 2.073141606

2009-

10 48398.2 18969.04 2.551431174

2010-

11 53938.54 9597.24 5.620213728

2011-

12 57302.87 9865.15 5.808616189

INTERPRETATION
The working capital turnover ratio shows an increasing trend. This is because sales
is more than the net working capital. The working capital turnover ratio is
increasing every year due to increase in sales and gradual reduction in working
capital, since in the working capital ratio of the firm’s performance was at
increasing level the working capital performance is satisfactory.
 WORKINGCAPITALTURNOVER
RATIO

2011-12

2010-11

2009-10 WORKING CAPITAL

TURNOVER RATIO
2008-09

2007-08

0 2 4 6

TABLE 12
Table showing NET PROFIT RATIO of KMML

Net profit ratio = profit after tax/net sales

It indicates the result of the overall operation of the firm.

The higher the ratio, per profitable is the business. The net profit ratio is
reassured by dividing net profit ratio indicates management efficiency in
manufacturing administration and selling the products. This ratio is the overall firms
ability to turn each rupee of sale into net profit. If the profit margin is inadequate,
the firm fails to achieve satisfactory return on share holder’s funds.

NET PROFIT
AFTER TAX
YEAR AVAILABLE SALES net profit ratio

2007-08 612.74 30748.69 0.019927353

2008-09 449.76 41908.91 0.010731847

2009-10 6063.23 483898.2 0.01252997

2010-11 2811.92 53938.54 0.052131926

2011-12 11545 57302.87 0.201473329

INTERPRETATION
The net profit ratio is is showing decreasing trend in the years 2007-08,2008-09 and
2009-10. but it is showing an increasing trend in 2010-11 and 2011-12, it means the
managerial efficiency is increased.
 net profit ratio

2011-12

2010-11

2009-10
net profit ratio

2008-09

2007-08

0 0.05 0.1 0.15 0.2 0.25

TABLE 13

Table showing EARNINGS PER SHARE RATIO of KMML

Earnings per share ratio = profit available to equity share holders/number of shares

Earnings per share are the net profit after tax and preferences dividend, which is
earned on the capital representative of one equity share

NET PROFIT AFTER TAX NO: OF

YEAR AVAILABLE SHARES EPS RATIO

2007-08 612.74 30.93 19.81053993

2008-09 449.76 30.93 14.54122211

2009-10 6063.23 30.93 196.0307145

2010-11 2811.92 30.93 90.9123828

2011-12 11545 30.93 373.262205

INTERPRETATION
The eps ratio although is less in the first 2 years(2007-08 & 2008-09) compared to
the following years. The eps ratio for the next years 2009-10,2010-11,2011-12 are
comparatively high. So the company is earning a good earning for its shareholders
lately.
 EPSRATIO

400
350
300
250
200
150
100 E RATIOPS
50
0

2007-08 2008-09 2009-10 2010-11 2011-12

ANNEXURE BALANCE SHEET AS AT 31 MAR 2008
PARTICULARS AS PER31/3/11(IN LAKHS)
SCHEDULE

SOURCES OF FUNDS

Share holder’s funds

Share capital A 3093.27
Reserves and surplus B 40826.56
Deffered tax liability C 224.73

44144.56
Total

APPLICATION OF FUNDS

Fixed assets R 12862.52

Capital work in progress F 11033.42

Investments G 17.60

Current assets H 23688.82

Loans and advances I 19270.21

Less:
current liabilities D 10081.66
Provisions E 12646.35

Net current assets J 20231.02

Misc exp ( to the extent not written off or 0.00

adjusted)

Significant accounting policy S

Notes forming part of account T

Total

44144.56
STATEMENT OF PROFIT & LOSS FOR THE YEAR ENDED 31/3/2008

PARTICULARS AS PER 2007-08

SCHEDULE

INCOME
Revenue from operations
Gross sales 34322.50
Less: excise duty 3573.81
 Net sales 30748.69

other income O 1043.46

stock differential P (664.57)
31127.58
Total revenue

EXPENDITURE
22297.20
Manufacturing expenses K 6358.93
Payment & benefits to employees L 521.73
Admn, selling, & other expenses M 69.40
Interest & finance charges N 836.68
Depreciation R

300083.95
Total expenses

1043.63
profit before tax

28.91
less: prior period items Q
0.00
less: provision for bad & doubtful adv

1014.72
profit after prior period adjustment

325.00
less: provision for current taxation
(41.98)
add/(less): provision for deferred tax
35.00
less: provision FBT
612.74
profit for the year
24445.12
P&L account balance brought forward
25057.86
Amount available for appropriations
309.33
Proposed dividend
52.57
Tax on dividend
45.95
Transfer to reserve
24650.00
Surplus transferred to balance sheet
19.81
Earnings per share( Basic and Diluted)

Refer note26 of schedule 7

Significant accounting policy S

Notes forming part of account T

BALANCE SHEET AS ON 31/3/09

PARTICULARS AS PER31/3/09(IN LAKHS)
SCHEDULE

SOURCES OF FUNDS

Share holder’s funds

Share capital A 3093.27
Reserves and surplus B 40914.41
Deffered tax liability C 768.07

44775.75
Total

APPLICATION OF FUNDS

Fixed assets
Gross block N 32593.71
Less: Depreciation 14651.28
Net block 17942.43
Capital work in progress 7250.49
F
25192.92
17.60
Investments

Current asset, loans and advances

Current assets: H

Inventories 7691.26
Sundry debtors 3203.56
Cash and bank balance 14076.20
Other current assets 423.50
Loans and advances 7035.24
I

32429.76
Less: current liabilities and provisions
12037.61
current liabilities D 826.92
Provisions E 12864.53

19565.23
Net current assets

Significant accounting policy S

Notes forming part of account T

44775.75
Total
PROFIT AND LOSS ACCOUNT FOR THE YEAR 31/3/09

PARTICULARS AS PER2008-09(IN LAKHS)

SCHEDULE
INCOME
Gross sales O 46359.35
Less: excise duty 4450.44
Net sales
41908.91

Other income P 1748.02

Stock differential Q (2977.67)
Total 40679.26

EXPENDITURE 24442.13
Manufacturing expenses J 9735.98
Payments and benefits to employees K 912.34
Admn,selling and other expenses L 30.10
Interest &finance chrgs M 884.45
Depreciation N 36005.00
Total

Profit
Prior period income/(expenses)-(net) 4674.26
R
4674.26

EXCEPTIONAL ITEMS
Prov for expenditure on abandoned projects 1638.34
Prov for diminution in the value of land 0.00
Profit before tax 3042.90
Prov for taxation
-current taxation 2000.00
-fringe benefit tax 43.00
-deferred tax(net) 543.34
-excess provision for taxation in earlier year 6.80

449.76
Profit after tax
24650.01
P&L account balance brought forward
25099.77
Amount available for appropriations

Appropriations:
-proposed dividend 309.33
-tax on dividend 52.57
-transfer to reserve 33.73
Surplus transferred to balance sheet
24704.14
EPS(basic and diluted)
14.54
Significant accounting policy S

Notes forming part of accounts T

BALANCE SHEET AS ON 31/3/10

PARTICULARS AS PER31/3/10(IN LAKHS)
SCHEDULE

SOURCES OF FUNDS

Share holder’s funds

Share capital A 3093.27
Reserves and surplus B 45174.12
Deffered tax liability C 1184.47

49451.86
Total

APPLICATION OF FUNDS

Fixed assets
Gross block N 33707.00
Less: Depreciation 15903.03
Net block 17803.97
Capital work in progress 12661.25
F
30465.22
17.60
Investments

Current asset, loans and advances

Current assets: H

Inventories 6735.46
Sundry debtors 4709.92
Cash and bank balance 13808.32
Other current assets 707.91
Loans and advances 7073.93
I

33035.53
Less: current liabilities and provisions
11667.93
current liabilities D 2398.57
Provisions E 14066.50

Net current assets

18969.04

Significant accounting policy S

Notes forming part of account T

49451.86
Total
PROFIT AND LOSS ACCOUNT FOR THE YEAR 31/3/10

PARTICULARS AS PER2009-10(IN LAKHS)

SCHEDULE

INCOME
Gross sales O 51903.99
Less: excise duty 3505.79
Net sales
48398.20

Other income P 1654.35

Stock differential Q (1304.10)
Total 48748.45

EXPENDITURE 25486.40
Manufacturing expenses J 8937.12
Payments and benefits to employees K 3814.37
Admn,selling and other expenses L 19.60
Interest &finance chrgs M 1245.94
Depreciation N 39503.43
Total

Profit 9245.02
Prior period income/(expenses)-(net) R 9245.02

EXCEPTIONAL ITEMS 179.26

Prov for expenditure on abandoned projects 680.70
Prov for diminution in the value of land 8371.50
Profit before tax
Prov for taxation
-current taxation 1900.00
-fringe benefit tax 0.00
-deferred tax(net) 416.40
-excess provision for taxation in earlier year (8.13)

6063.23
Profit after tax 24704.14
P&L account balance brought forward 30767.37
Amount available for appropriations

Appropriations: 1546.64
-proposed dividend 256.88
-tax on dividend 606.32
-transfer to reserve
Surplus transferred to balance sheet
28357.53

EPS(basic and diluted) 196.01

Significant accounting policy S

Notes forming part of accounts T

BALANCE SHEET AS ON 31/3/11
PARTICULARS AS PER31/3/11(IN LAKHS)
SCHEDULE

SOURCES OF FUNDS

Share holder’s funds

Share capital A 3093.27
Reserves and surplus B 46188.50
Deffered tax liability C 1232.85

50515.62
Total

APPLICATION OF FUNDS

Fixed assets
Gross block N 39210.24
Less: Depreciation 17326.84
Net block 21883.40
Capital work in progress 15516.38
F
37399.78
3517.60
Investments

Current asset, loans and advances

Current assets: H

Inventories 6810.45
Sundry debtors 6241.85
Cash and bank balance 12144.93
Other current assets 559.83
Loans and advances 10925.71
I

36862.77
Less: current liabilities and provisions
24897.30
current liabilities D 2368.23
Provisions E 27265.53

9597.24
Net current assets

Significant accounting policy S

Notes forming part of account T

50514.62
Total
PROFIT AND LOSS ACCOUNT FOR THE YEAR 31/3/11

PARTICULARS AS PER2010-11(IN LAKHS)

SCHEDULE

INCOME
Gross sales O 58468.52
Less: excise duty 4529.98
Net sales
53938.54

Other income P 1805.33

Stock differential Q 238.55
Total 55982.42

EXPENDITURE 30617.30
Manufacturing expenses J 14602.73
Payments and benefits to employees K 3044.49
Admn,selling and other expenses L 26.71
Interest &finance chrgs M 1419.86
Depreciation N 49711.09
Total

Profit 6271.33
Prior period income/(expenses)-(net) R (12.16)

EXCEPTIONAL ITEMS 0.00

Prov for expenditure on abandoned projects 0.00
Prov for diminution in the value of land 6259.17
Profit before tax
Prov for taxation
-current taxation 3350.00
-fringe benefit tax 0.00
-deferred tax(net) 48.38
-excess provision for taxation in earlier year (48.87)

2811.92
Profit after tax 28357.53
P&L account balance brought forward 31169.45
Amount available for appropriations

Appropriations: 1546.64
-proposed dividend 250.90
-tax on dividend 281.19
-transfer to reserve
Surplus transferred to balance sheet
29090.72

EPS(basic and diluted) 90.90

Significant accounting policy S

Notes forming part of accounts T

BALANCE SHEET AS ON 31/3/12

PARTICULARS NOTE AS AT 31/3/12

NOS

Equity and liabilities

Share holder’s fund
Share capital 2 3093.27
Reserves and surplus 3 55037.20
 58130.47

Non current liabilities

Deferred tax liability(net) 4 1047.89

Long term provisions 5 896.99

Current liabilities

Trade payables 6 3439.38

Other current liabilities 7 19530.63
Short term provisions 8 3434.86 26404.87
86480.22

Assets
Non current assets
Fixed assets
Tangible assets 9.10
Capital work in progress 22967.51
9.11 13969.46
Non-current investments 10
Long term loans and advances 3517.60
11 9755.63 50210.20

Current assets
Inventories 12 15204.34
Trade receivables 13 6594.03
Cash and bank balance 14 7140.61
Short term loans and advances 15 5995.69
Other current assets 16 735.35 36270.02
86480.22

STATEMENT OF PROFIT & LOSS FOR THE YEAR ENDED 31/3/12

PARTICULARS NOTE 2011-12

NO

INCOME
IRevenue from operations
Gross sales 17 61700.50
Less: excise duty 4397.63
 Net sales 57302.87

II other income 18 2083.52

III Total revenue( I+II) 59386.39

EXPENSES
Cost of materials consumed 19 9948.05
Changes in inventories of finished goods and WIP 20 (6999.77)
Employee benefits expenses 21 13203.72
Finance cost 22 4206
Depreciation & amortization expense 9.1 2021.75
Other expenses 23 25672.12

43977.93
IV Total expenses

V profit before exceptional and extraordinary

items and & tax( III-IV) 15403.46

VI Exceptional items

15408.46
VII Profit before extra ordinary items and tax
(V-VI)
VIII Extraordinary items

15408.46
IX profit before tax(VII-VIII)

X Tax expenses
(1) current tax 4048.42
(2) deferred tax(net) (184.96)
4

11545.00
XI Net profit for the year(IX-X)

XII Earning per share(basic & diluted in rupees)

of face value of 100 373.23
24

Significant accounting policies

CHAPTER4- FINDINGS AND SUGGESTIONS

FINDINGS

• Company has no debt capital in its capital structure

 • Working capital turnover is increasing year by year

• Firms current ratio is not desirable currently

• Cash & bank balance of the company is decreasing year by year due to

investment is securities

• Sales of the company is increasing year by year

• The firm keeps on liberalizing the collection period from debtors

• The company is taking more time to pay its creditors currently

• The company is currently giving good earnings to its shareholders

• The company is showing signs of increased managerial efficiency

SUGGESTIONS

1. Company must try to include debt capital in its structure this will
benefit the company in getting tax advantage
2. Company should try to maintain sufficient amount of cash and bank
balance
3. Company should maintain a good current asset position
4. Company should try to control its liberalization policy as to much
liberalization in collection period may lead to bad-debts

CHAPTER 5

Conclusion
This study in KMML has been a unique learning experience.
All the staff members and employees are disciplined, punctual & helpful.
A good support is extended to me by my guide and She was always there to share
his views, ideas, knowledge.

The study is conducted in KMML ON the topic WORKING CAPITAL

MANAGEMNT. I emphasized on the study of the financial analysis of the company
with the help of various ratios. It could be understood that KMML is one the most
profitable companies in Kerala under the state government. It has been earning good
returns for its share holders.

BIBILOGRAPHY
Books
1. Financial Management
2. Ratio analysis

Website
• www.kmml.com

• www.wikipedia.com

• www.google.com

Annual Reports
KMML annual reports for the years
• 2007-08

• 2008-09

• 2009-10

• 2010-11

• 2011-12

APPENDIX

Questionnaire
1. What is the primary activity of KMML?

2. What are the missions and visions of KMML?

3. What are the strengths, weaknesses, opportunities, and threats of KMML?

4. What is the value of current asset?

5. What is the value of current liability?

6. What is the value of quick assets?

7. What is the value of cash and bank balances?

8. What is the value of sales?

9. What is the value of inventories?

10. What is the value of debtors?

11. What is the value of net purchases?

12. What is the value of creditors?

13. What is the value of net sales?

14. What is the value of net working capital?