Cash Management

A STUDY ON CASH MANAGEMENT AT

SRI KRISHNA SILKS Jagdeep pabba 12406045

Submitted to, St.Joseph’s Degree & PG College Osmania University

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Acknowledgement: I wish to express our sincere thanks to Ms. Venu gopal for providing us an opportunity to work in Srik Krishna Silks . I would also like to express my gratitude to Ms. Venu gopal (My company guide) for providing there valuable feedback and intense support relentlessly throughout the project.

I sincerely express my gratitude to Sangeetha (My faculty guide), for giving her valuable guidance, healthy support and suggestions to make the project a successful one. I am really thankful to my parents and friends for helping me to study and giving feedback in all possible ways to make me feel comfortable during my project. There have been numerous influences, big and small that have helped me to work on my project successfully. Regardless of the source, I thank all those who may have contributed to this project.

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CERTIFICATE This is to certify that Ms. Jagdeep pabba submitted the report on “Cash management” at Sri Krishna Silks limited in partial fulfilment for the award of the Degree of BBA (Bachelors of Business Administration) St. Joseph Degree & PG College for the academic year 2012-2015

PLACE:

PROJECT GUIDE

DATE:

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CHAPTER I INTRODUCTION

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CASH MANAGEMENT 1.1 INTRODUCTION: Cash is the important current asset for the operations of the business. Cash is the basic input needed to keep the business running on a continuous basis; it is also the ultimate output expected to be realized by selling the service or product manufactured by the firm. The firm should keep sufficient cash, neither more nor less.

Cash shortage will disrupt the firm’s

manufacturing operations while excessive cash will simply remain idle, without contributing anything towards the firm’s profitability. Thus, a major function of the financial manager is to maintain a sound cash position.

Cash is the money which a firm can disburse immediately without any restriction. The term cash includes coins, currency and cheques held by the firm, and balances in its bank accounts. Sometimes near-cash items, such as marketable securities or bank times deposits, are also included in cash. The basic characteristic of near-cash assets is that they can readily be converted into cash.

Generally, when a firm has excess cash, it invests it in marketable

securities. This kind of investment contributes some profit to the firm.

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NEED FOR THE STUDY

The importance of Cash management in any industrial concern cannot be overstressed. Under the present inflationary condition, management of Cash is perhaps more important than even management of profit and this requires greatest attention and efforts of the finance manager. It needs vigilant attention as each of its components require different types of treatment and it throws constant attention on exercise of skill and judgment, awareness of economic trend etc, due to urgency and complicacy the vital importance of Cash.

The anti-inflationary measure taken up by the Government, creating a tight money condition has placed working capital in the most challenging zone of management and it requires a unique skill for its management. Today, the problem of managing Cash has got the recognition of separate entity, so its study and management is of major importance to both internal and external analyst to judge the current position of the business concerns. Hence, the present study entitled “An Analysis on Cash Management” has been taken up.

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OBJECTIVES OF THE STUDY

 

o To analyze the cash management of Sri Krishna Silks. o To find out the liquidity position of the concern through ratio analysis. To study the growth of Sri Krishna Silks in terms of cash flow statement. To make suggestion and recommendation to improve the cash position of Sri Krishna Silks.

RESEARCH METHODOLOGY RESEARCH Research is a process in which the researchers wish to find out the end result for a given problem and thus the solution helps in future course of action. The research has been defined as “A careful investigation or enquiry especially through search for new facts in branch of knowledge” RESEARCH DESIGN The research design used in this project is Analytical in nature the procedure using, which researcher has to use facts or information already available, and analyze these to make a critical evaluation of the performance. DATA COLLECTION

 Primary Sources 1. Data are collected through personal interviews and discussion with FinanceExecutive. 2. Data are collected through personal interviews and discussion with Material Planning- Deputy Manager.

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 Secondary Sources 1. From the annual reports maintained by the company. 2. Data are collected from the company’s website. 3. Books and journals pertaining to the topic.

TOOLS USED IN THE ANALYSIS 

Cash flow statement



Trend analysis



Ratio analysis.

SCOPE OF THE STUDY

 It helps to take short term financial decision.  It indicates the cash requirement needed for plant or equipment expansion programmes.  To find strategies for efficient management of cash.  It helps to arrange needed funds on the most favorable terms.  It helps to meet routine cash requirement to finance the transaction.  It reveals the liquidity position of the firm by highlighting the various sources of cash and its uses.

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LIMITATIONS OF THE STUDY



The study is restricted only to SRI KRISHNA SILKS. Being a case study, the findings cannot be generalized.



The study does not take into account the inflation.



The study takes into account only the quantitative data and the qualitative aspects were not taken into account

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CHAPTER II REVIEW OF LITERATURE

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MEANING:

Cash is the money which a firm can disburse immediately without any restriction. The term cash includes coins, currency and cheques held by the firm, and balances in its bank accounts. Sometimes near-cash items, such as marketable securities or bank times deposits, are also included in cash. The basic characteristic of near-cash assets is that they can readily be converted into cash.

FACETS OF CASH MANAGEMENT:

Cash management is concerned with the managing of: (i) Cash flows into and out of the firm, (ii) Cash flows within the firm, and (iii) Cash balances held by the firm at a point of time by financing deficit or investing surplus cash. It can be represented by a cash management cycle. Sales generate cash which has to be disbursed out. The surplus cash has to be invested while deficit this cycle at a minimum cost. At the same time, it also seeks to achieve liquidity and 11

control. Cash management assumes more importance than other current assets because cash is the most significant and the least productive asset that a firm’s holds. It is significant because it is used to pay the firm’s obligations. However, cash is unproductive. Unlike fixed assets or inventories, it does not produce goods for sale. Therefore, the aim of cash management is to maintain adequate control over cash position to keep the firm sufficiently liquid and to use excess cash in some profitable way.

Cash management is also important because it is difficult to predict cash flows accurately, particularly the inflows, and there is no prefect coincidence between the inflows and outflows of cash. During some periods, cash outflows will exceed cash inflows, because payments for taxes, dividends, or seasonal inventory build up. At other times, cash inflow will be more than cash payments because there may be large cash sales and debtors may be realized in large sums promptly. Further, cash management is significant because cash constitutes the smallest portion of the total current assets, yet management’s considerable time is devoted in managing it. In recent past, a number of innovations have been done in cash management techniques. An obvious aim of the firm these days is to manage its cash affairs in such a way as to keep cash balance at a minimum level and to invest the surplus cash in profitable investment opportunities.

In order to resolve the uncertainty about cash flow prediction and lack of synchronization between cash receipts and payments, the firm should develop appropriate strategies for cash management. The firm should evolve strategies for cash management. The firm should evolve strategies regarding the following four facets of cash management.



Cash planning: Cash inflows and outflows should be planned to project cash surplus or deficit for each period of the planning period. Cash budget should be prepared for this purpose.

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

Managing the cash flows: The firm should decide about the properly managed. The cash inflows should be accelerated while, as far as possible, the cash outflows should be decelerated.



Optimum cash level:

the firm should decide about the appropriate level of cash

balances. The cost of excess cash and danger of cash deficiency should be matched to determine the optimum level of cash balances. 

Investing surplus cash: The surplus cash balances should be properly invested to earn profits. The firms should decide about the division of such cash balances between alternative short-term investment opportunities such as bank deposits, marketable securities, or inter-corporate lending.

MOTIVES FOR HOLDING CASH The firm’s need to hold cash may be attributed to the following three motives: 

The transactions motive



The precautionary motive



The speculative motive

TRANSACTION MOTIVE The transactions motive requires a firm to hold cash to conduct its business in the ordinary course. The firm needs cash primarily to make payments for purchases, wages and salaries, other operating expenses, taxes, dividends etc. The need to hold cash would not arise if there were perfect synchronization between cash receipts and cash payments, i.e., enough cash is received when the payment has to be made. But cash receipts and payments are not perfectly synchronized. For those periods, when cash payments exceed cash receipts, the firm should maintain some cash balance to be able to make required payments. For transactions purpose, a 13

firm may invest its cash in marketable securities. Usually, the firm will purchase securities whose maturity corresponds with some anticipated payments, such as dividends or taxes in the future. Notice that the transactions motive mainly refers to holding cash to meet anticipated payments whose timing is not perfectly matched with cash receipts.

PRECAUTIONARY MOTIVE The precautionary motive is the need to hold cash to meet contingencies in the future. It provides a cushion or buffer to withstand some unexpected emergency. The precautionary amount of cash depends upon the predictability of cash flows. If cash flows can be predicted with accuracy, less cash will be maintained for an emergency. The amount of precautionary cash is also influenced by the firm’s ability to borrow at short notice when the need arises. Stronger the ability of the firm to borrow at short notice, less the need for precautionary balance. The precautionary balance may be kept in cash and marketable securities. Marketable securities play an important role here. The amount of cash set aside for precautionary reasons is not expected to earn anything; the firm should attempt to earn some profit on it. Such funds should be invested in high-liquid and low-risk marketable securities. Precautionary balances should, thus, be held more in marketable securities and relatively less in cash.

SPECULATIVE MOTIVE

The speculative motive relates to the holding of cash for investing in profit-making opportunity to make profit may arise when the security prices change. The firm will hold cash, when it is expected that interest rates will rise and security prices will fall. Securities can be purchased when the interest rate is expected to fall; the firm will benefit by the subsequent fall in interest rates and increase in security prices. The firm may also speculate on materials prices. If it is expected that materials prices will fall, the firm can postpone materials purchasing and make purchases in future when pric4e actually falls. Some firms may hold cash for speculative purposes. By and large, business firms do not engage in speculations. Thus, the primary 14

motives to hold cash and marketable securities are: the transactions and the precautionary motives.

CASH PLANNING

Cash flows are inseparable parts of the business operations of firms. A firm needs cash to invest in inventory, receivable and fixed assets and to make payment for operating expenses in order to maintain growth in sales and earnings. It is possible that firm may be making adequate profits, but may suffer from the shortage of cash as its growing needs may be consuming cash very fast. The ‘poor cash’ position of the firm cash is corrected if its cash needs are planned in advance. At times, a firm can have excess cash may remain idle. Again, such excess cash outflows. Such excess cash flows can be anticipated and properly invested if cash planning is resorted to. Cash planning is a technique to plan and control the use of cash. It helps to anticipate the future cash flows and needs of the firm and reduces the possibility of idle cash balances ( which lowers firm’s profitability ) and cash deficits (which can cause the firm’s failure).

Cash planning protects the financial condition of the firm by developing a projected cash statement from a forecast of expected cash inflows and outflows for a given period. The forecasts may be based on the present operations or the anticipated future operations. Cash plans are very crucial in developing the overall operating plans of the firm. Cash planning may be done on daily, weekly or monthly basis. The period and frequency of cash planning generally depends upon the size of the firm and philosophy of management. Large firms prepare daily and weekly forecasts. Medium-size firms usually prepare weekly and monthly forecasts. Small firms may not prepare formal cash forecasts because of the nonavailability of information and small-scale operations. But, if the small firms prepare cash projections, it is done on monthly basis. As a firm grows and business operations become complex, cash planning becomes inevitable for its continuing success. 15

OTHER FACTORS THAT AFFECT THE SIZE OF CASH BALANCE

1. Availability of short-term credit: To avoid holding unnecessary large balances of cash, most firms attempt to make arrangements at borrow money is case of unexpected needs. With such an agreement, the firm normally pays interest only during the period that the money is actually used.

2. Money market rates: If money will bring a low return a firm may choose not to invest it. Since the loss or profit is small, it may not be worth the trouble to make the loan. On the other hand, if interest rates are very high, every extra rupee will be invested.

3. Variation in cash flows: Some firms experience wide fluctuation in cash flows as a routine matter. A firm with steady cash flows can maintain a fairly uniform cash balance.

4. Compensating balance: If a firm has borrowed money from a bank, the loan agreement may require the firm to maintain a minimum balance of cash in its accounts. This is called compensating balance. In effect this requires the firm to use the services of bank a guaranteed deposit on which it pays no interest. The interest free deposit is the bank’s compensation for its advice and assistance. 16

CASH MANAGEMENT – BASIS STRATEGIES

The management should, after knowing the cash position by means of the cash budget, work out the basic strategies to be employed to manage its cash.

CASH CYCLE:

The cash cycle refers to the process by which cash is used to purchase materials from which are produced goods, which are them sold to customers. Cash cycle=Average age of firm’s inventory +Days to collect its accounts receivables -Days to pay its accounts payable.

The cash turnover means the numbers of times firm’s cash is used during each year.

360 Cash turnover = ---------------Cash cycle

The higher the cash turnover, the less cash the firm requires. The firm should, therefore, try to maximize the cash turn. 17

MANAGING COLLECTIONS:

a) Prompt Billing: By preparing and sending the bills promptly, without a time log between the dispatch of goods and sending the bills, a firm can ensure earlier remittance.

b) Expeditious collection of cheques: An important aspect of efficient cash management is to process the cheques receives very promptly.

c) Concentration Banking: Instead of a single collection center located at the company headquarters, multiple collection centers are established.

The purpose is to shorten the period between the time

customers mail in their payments and the time when the company has use of the funds are then to a concentration bank – usually a disbursement account.

d) Lock-Box System: With concentration banking, a collection center receives remittances, processes them and deposits them in a bank. The purpose is to lock-box system is to eliminate the time between the receipt of remittances by the company and their deposit in the bank. The company rents a local post office box and authorizes its bank in each of these cities to pick up remittances in the box. The bank picks up the mail several times a day and deposits the cheque in the company’s accounts. The cheques are recorded and cleared for collection. The company receives a deposits the cheque in the company’s accounts. The cheques are recorded and cleared for collation. The 18

company receives a deposit slip and a lift of payments. This procedure frees the company from handling a depositing the cheques.

CONTROL OF DISBURSMENT

a) Stretching Accounts Payable A firm should pay its accounts payables as late as possible without damaging its credit standing. It should, however, take advantages of the cash discount available on prompt payment.

b) Centralized Disbursement One procedure for rightly controlling disbursements is to cenrealise payables in to a single account, presumably at the company’s headquarters. Such an arrangement would enable a firm to delay payments and can serve cash for several reasons. Firstly, it increases transit time. Secondly, if a firm has a centralized bank account, a relatively smaller total cash balances will be needed.

c) Bank Draft Unlike an ordinary cheque, the draft is not payable on demand. When it is presented to the issuer’s bank for collection, the bank must present it to the issuer for acceptance. The funds then are deposited by the issuing firm to cover payments of the draft. But suppliers prefer cheques. Also, bank imposes a higher service charge to process them since they require special attention, usually manual.

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d) Playing the float The amount of cheques issued by the firm but not paid for by the bank is referred to as the “payment float”. The differences between “payment float” and “collection float” are the net float. So, if a firm enjoys a positive “net float”, it may issue cheques even if it means having an ever drown account in its books. Such an action is referred to as “playing the float”, within limits a firm can play this game reasonably safely. Thus management of cash becomes essential and it should be seen to, that neither excessive nor inadequate cash balances are maintained.

CASH FLOW ANALYSIS

The cash flow analysis is done with the help of cash flow statement. A cash flow statement is a statement depicting changes in cash position from one period to another. It is an important planning tool. Cash flow statement gives a clear picture of the source of cash, the uses of cash and the net changes in cash. The primary purpose of cash flow statement is to show that as to where from the cash to be acquired and where to use them.

UTILITY OF CASH FLOW ANALYSIS A Cash flow analysis is an important financial tool for the management. Its chief advantages are as follows.

1. Helps in efficient cash management

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Cash flow analysis helps in evaluating financial policies and cash position. Cash is the basis for all operation and hence a projected cash flow statement will enable the management to plan and co-ordinate the financial operations properly. The management can know how much cash is needed from which source it will be derived, how much can be generated, how much can be utilized.

2. Helps in internal financial management Cash flow analysis information about funds, which will be available from operations. This will helps the management in repayment of long-term debt, dividend policies etc.,

3. Discloses the movements of Cash Cash flow statement discloses the complete picture of cash movement. The increase in and decrease of cash and the reasons therefore can be known. It discloses the reasons for low cash balance in spite of heavy operation profits on for heavy cash balance in spite of low profits. 4. Discloses success or failure of cash planning The extent of success or failure of cash planning be known by comparing the projected cash flow statement with the actual cash flow statement and necessary remedial measures can be taken.

DETERMINE THE OPTIMUM CASH BALANCE

One of the primary responsibilities of the financial manager is to maintain a sound liquidity position of the firm so that the dues are settled in time. The firm needs cash to purchase raw materials and pay wages and other expenses as well as for paying dividend, interest and 21

taxes. The test of liquidity is the availability of cash to meet the firm’s obligations when they become due. A firm maintains the operating cash balance for transaction purposes. It may also carry additional cash as a buffer or safety stock. The amount of cash balance will depend on the riskreturn trade-off. If the firm maintains small cash balance, its liquidity position weakens, but its profitability improves as the released funds can be invested in profitable opportunities (marketable securities). When the firm needs cash, it can sell its keeps high cash balance, it will have a strong liquidity position but its profitability will be low. The potential profit foregone on holding large cash balance is an opportunity cost to the firm. The firm should maintain optimum – just to enough, neither too much nor too little – cash balance. How to determine the optimum cash balance if cash flows are predictable and if they are not predictable.

Optimum cash balance under certainty BAUMOL’S MODEL The Baumol model of cash management provides a formal approach for determining a firm’s optimum cash balance under certainty. It considers cash management similar to an inventory management problem. As such, the firm attempts to minimize the sum of the cost of holding cash (inventory of cash) and the cost of converting marketable securities to cash. The baumol’s model makes the following assumptions: 

The firm is able to forecast its cash needs with certainty.



The firm’s cash payments occur uniformly over a period of time.



The opportunity cost of holding cash is known and it does not change over time.



The firm will incur the firm sells securities and starts with a converts securities to cash.

Cash balance

C

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Baumol’s model for cash balance

Cost trade-off: Baumol’s model Optimum Cash Balance under uncertainty: The Miller-Orr Model The limitation of the Baumol model is that it does not allow the cash flows to fluctuate. Firms in practice do not use their cash balance uniformly nor are they able to predict do not use their cash inflows and outflows. The Miller-Orr model overcomes this shortcoming and allows for daily cash flow variation. It assumes that net cash flows are normally distributed with a zero

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value of mean and a standard deviation. The MO model provides for two control limits-the upper control limit and the lower control limit as well as a return point. If the firm’s cash flows fluctuate randomly and hit the upper limit, then it buys sufficient marketable securities to come back to a normal level of cash balance (the return point). Similarly, when the firm’s cash flows wander and hit the lower limit, it sells sufficient marketable securities to bring the cash balance back to the normal level (the return point)

1. The Latest Trends in North American Cash Management Steve Wilder, Senior Vice President and JPMorgan Chase Treasury Services Western Hemisphere Corporate and Financial Institutions Sales Executive The Drive towards Efficiency, Transparency, Standardization and Integration Fragmentation is a key driver of corporate inefficiency. This has long been the case in the movement of paper checks and related remittance documents within the U.S. payments system, and the flow of goods, trade-related documents and funds within the broader global supply chain. As corporate treasurers pursue end-to-end automation for treasury and supply-chain activities, they understand that to achieve straight-through processing — and the subsequent optimization of working capital globally — they must integrate the payment and information components of a transaction.

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Based on this drive for efficiency, three interrelated trends are shaping North America’s cash management landscape today. First, corporate treasurers and their banks are driving the convergence towards electronic payments to better integrate money and information flows. Second, there is a parallel convergence in international trade towards open account, electronic payment and the automation of information flows, as treasury pushes to integrate the physical and financial supply chains. On both fronts, solutions are emerging to digitize paper wherever it persists. Third, as companies continue to expand globally — and information and money flows follow — treasury is focused on standardizing processes and strengthening internal controls. The objective is to create transparency across a range of business activities to manage risk and ensure financial reporting integrity in compliance with Sarbanes-Oxley 2. CASH MANAGEMENT AND CAPITAL BUDGETING PRACTICES Virginia department of transportation Richmond, Virginia.

Our review has found that Transportation has made significant progress or completed most of the recommendations made in our 2002 special report. Complete implementation of these changes will take at least four to five years.

Over the last two years, Transportation’s management has started not only implementing recommendations, but more importantly begun implementing a change in the corporate and cultural structure of the organization. The success of change with Transportation will depend on whether a true structural change in organization takes place. The measure of success will require a substantial long-term commitment by management to not only making the change, but to prevent backsliding into Transportation’s old approaches.

In some ways, the accomplishments to date are the easy part of change. The harder part lays ahead in funding and implementing new systems, continuing to make the changes to get closer to capital budgeting process, and overcoming Transportation’s corporate and cultural 25

structure to improve project management. The success of this effort is highly dependent on management guidance and direction, and current management has demonstrated their dedication towards this effort. If any management change occurs, it is essential that they have the same commitment; otherwise, progress may be negatively impacted.

Transportation is restoring fiscal accountability by implementing several budgetary and financial changes, including adopting a debt management policy and model. Additionally, they are establishing a methodology to identify statewide transportation priorities and developing project management policies. Transportation has completed several budgetary and financial changes, including attempts to make the Six-Year Improvement Program a realistic management tool and reduce the projects with a deficit status. However, to ensure accurate matching on cash inflows and outflows, Transportation must begin estimating the cost of projects by fiscal year. Transportation does not currently have sufficient controls and processes in place to manage the rate at which they spend funds. For major projects, Transportation has begun assigning a project management team that follows a project from its inception to its completion. However, it is still too early in the process to determine if the policies put into place will provide Transportation with better project management. However, the actions to date are those considered best practices in both the private and public for large organizations. Maintenance is still an area of concern at Transportation. The growing maintenance requirements and the limited ability to budget on a needs-based approach increases the risk of inappropriately applied funding. Once the asset management system is fully implemented a needs-based approach will be possible and Transportation will be able identify and prioritize maintenance projects.

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3. Ms. Katherine M. Landmann Controller Washington University in St. Louis Campus. This final report presents the results of our audit of the cash management procedures used by Washington University in St. Louis (University) to control the funds paid by the Payment Management System (PMS) during the three years ended June 30, 2000.

We found that the University did not have adequate policies and procedures in place to monitor daily cash balances and to precisely calculate interest earned on positive daily cash balances. In monitoring the daily cash balances, the University did not consider (1) outstanding checks and (2) overhead costs as incurred. In addition, the University did not use the appropriate interest rates when calculating the interest remitted to the Federal government.

We determined that the amount of excess interest remitted by the University was comparable to the amount of interest that should have been remitted if appropriate procedures had been used. We believe that this occurrence was a coincidence due to off setting factors in the University’s calculation of the amount to be remitted.

We are recommending that the University revise its written policies and procedures to effectively monitor the daily cash balance and to accurately compute the Federal remittance. We made four specific recommendations for improving the University’s cash management procedures. The University concurred with two and is still evaluating the third. However, they 27

did not accept our fourth recommendation. The University’s response is included in its entirety as Appendix A.

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Cash Management by Enid Beverly Jones It is a Financial Overview for School Administrators is a succinct overview of public school finance, presenting concepts of importance to both site-based and central-office leaders. A pragmatic blend of theoretical concepts and factual information provides readers with an excellent synopsis of public school finance. The economics and politics of education are discussed in the context of human capital and the role of public education in the United States as an investment in human capital. Author Enid Jones, who is an associate professor of school finance at Fayetteville State University, stresses the importance of investment in human capital and its necessity for an educated, productive workforce. The chapter on adequacy and equity provides an understanding of the two concepts so frequently debated in school finance. As more states struggle with funding issues, this subject matter is timely and useful. Cash Management seems intended for use nationwide with information on basic school business procedures, including budgeting and financing of school facilities. The use of lay terminology and relevant examples make the book valuable both in graduate school classes on educational leadership and in the hands of practicing administrators. (Cash Management: A Financial Overview for School Administrators, by Enid Beverley Jones, Scarecrow Press, Lanham, Md., 2001) 28

CHAPTER II COMPANY PROFILE

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SRI KRISHNA SILKS HISTORY/ MILESTONE:

Sri Krishna Silks Talangana. 8886161612



Personal Information Contact person  Venu Gopal





Designation  Director





Address  1-2-238/k genral bazar 50001





Mobile number  Verified 





Fax number  Verified

Trusted Profile 

Legal status  Partnership





PAN number  AAEFK0940P





Year of establishment  2008





Bank name  Bank of Baroda



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

Registered address  J 3 50 51, Katehar, Behind Yamuna Talkies, Patny





Proprietor name  Mr. Venu gopal





Number of employee  Upto 500 People





Reference number  Mar13/299/852265





Report enquiry date  25-Sept-14

Products & Services

Designer Lehenga Sarees

Suit Dupatta - Sd 02

Bridal Suit

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Designer Bridal Lehenga

Designer Colour

Sarre

Wine



Sri Krishna Silks is an India-based company engaged in the textiles business. The Company’s activities include manufacture of silk yarn, fabrics and made-ups, home 32

furnishings, fashion fabrics, handloom fabrics, double width fabrics, scarves, laces and belts and embroidered fabrics. It produces hand woven and hand embroidered, yarn dyed, prints, dobbies, jacquards and machine embroideries, as well as produces every type of silk fabric in Mulberry, Tussar, Eri or Muga. The Company’s products include furnishing fabrics and fashion accessories. Fashion accessories include fashion fabrics, readymade furnishings, scarves, cushion covers, curtains and kids furnishings. The Company has manufacturing units in Bangalore, Nanjangud, Karnataka, and Falta Special Economic Zone, 24 Parganas (South), West Bengal. From developing yarn to producing premium fashion fabrics and home furnishings, Eastern Silk is dedicated to enhancing the value of Silk ..... Queen of all fabrics. Our annual export of Euro 60 million is growing consistently as Eastern Silk has endeared itself to the sophisticated and discerning buyers across USA, Canada, European Union, UK, Japan, Australia, New Zealand and Scandinavian & EFFTA countries. From traditional hand woven and hand embroidered to contemporary yarn dyed, prints, dobbies, jacquards and machine embroideries, we are geared to produce every type of silk fabric in Mulberry, Tussar, Eri or Muga. In the area of self sufficiency the in house Research Wing has successfully developed a technology indigenously of Fast Color printing on fabrics that is the basic need for selling

in

the

overseas

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market.

Modernization and adoption of new technology has been the watchword of the company down the years.

The India based Sri Sai Silks is a company with multifaceted business activities. The list of activities include: • Manufacture of Silk Yarn • Fabrics & Made-Ups • Home Furnishings • Fashion Fabrics • Handloom Fabrics • Double Width Fabrics • Scarves, Laces & Belts • Embroidered Fabrics

TEXTILE INDUSTRIES

o

The Indian Textile industry is highly fragmented sector.

o

Industry is fully vertically integrated across the whole value chain and interconnected with various operations.

o

Textile Industry comprises small-scale, medium-scale, large-scale, non-integrated, spinning, weaving, finishing, and apparel-making firms and enterprises.

o

This is an unorganized sector and includes Handlooms, Powerloom, Hosiery, Knitting, Readymade Garments, Khadi, Carpet and Handicrafts manufacturing units.

o

The organized Mill Sector comprises of spinning Mills, and Composite Mills where spinning, weaving, and processing activities are done.

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o

The Fibre and Yarn Sector of the textile industry includes Textile Fibers, Natural Fibers such as Cotton, Jute, Silk and Wool; Synthetic / Man-Made fibers such as Polyester, Viscose, Nylon, Acrylic and Polypropylene.

o

The Man-Made Textile Sector includes Fibre and Filament Yarn manufacturing units of Cellulosic and Non-Cellulosic origin. The Cellulosic Fibre/yarn Industry is controlled by the Ministry of Textiles, and the Non-Cellulosic Industry is controlled by the Ministry of Chemicals and Fertilizers.

o

India is the largest producer of Jute, the 2nd largest producer of Silk, the 3rd largest producer of Cotton and Cellulosic Fibre/Yarn and 5th largest producer of Synthetic Fibers/Yarn.

Silk production is regarded as an important tool for economic development of a country. The Central Silk Board is a statutory body established for administrative control of the Ministry of Textiles, Government of India. It gives advise to the Central Government on all matters relating to the development of silk industry including import and export of raw silk. The textiles ministry is expecting that India's silk export is likely to touch ` 7,000 crore by 2012. The textiles ministry is creating more awareness to the farmers about silk and also giving training to use of new technologies to silk production. Silk industries are using modern and scientific production techniques for produce silk products and achieve high import to other countries. The Indian silk industry is an integral part of the Indian Textile Industry and is among the oldest industries in India. The silk industry in India engages around 60 lakh workers and it involves small and marginal farmers. Today, the textile industry is a global industry and we are living in a world full of volatility in commodity prices, foreign exchange, and interest rates. Since raw cotton presents such a large percentage of total input cost, bad judgments in price fixations can seriously affect the profitability of a company. More and more cotton growers and textile mills around the globe employ the services of consultants to assist them with their cotton pricing and risk management decisions. This is not surprising as cotton is the only major input cost item over which a textile mill has cont

35

Silk is a natural protein fiber, some forms of which can be woven into textiles. The protein fiber of silk is composed mainly of fibroin and produced by certain insect larvae to form cocoons. [1]

The

best-known

type

of

the mulberry silkworm Bombyx

silk

is

obtained

from

the cocoons of

the larvae of

mori reared in captivity (sericulture). The shimmering

appearance of silk is due to the triangular prism-like structure of the silk fibre, which allows silk cloth to refract incoming light at different angles, thus producing different colors. Silks are produced by several other insects, but generally only the silk of moth caterpillars has been used for textile manufacturing. There has been some research into other silks, which differ at the molecular level.[2] Many silks are mainly produced by the larvae of insects undergoing complete metamorphosis, but some adult insects such as webspinners produce silk, and some insects such as raspy crickets produce silk throughout their lives.[3] Silk production also occurs

in Hymenoptera (bees, wasps,

and ants),silverfish, mayflies, thrips, leafhoppers, beetles, lacewings, fleas, flies and midges.[2] Ot her types of arthropod produce silk, most notably various arachnids such as spiders (see spider silk). ORGANISATION STRUCTURE General Executives

Administrative

Sales

Production

Accounts

Auditor Manager

Salesman 36

3 Extruder

3 printer

3 Slitter operators

Data Entries

Human Resource

Collection

Supervisor

Supervisor

Security

Helpers

37

CHAPTER IV

DATA ANALYSIS & INTERPRETATION

5.1

CALCULATIONS

OF FUNDS

FROM

OPERATION AND

CASH

OPERATION FOR THE YEAR ENDED (Rs in Thousand) Particulars

2010-11

2011-12

2012-13

2013-14

Net Profit

621082

1183275

478738

400470

1440184

1620207

1800231

1881243

2623459

2098945

2200701

736292

293962

Depreciation during the 1260161 year FFO(FLO) ADD: Sundry debtors

38

FROM

Prepaid Expenses

43200

Sundry creditors

4731130

Outstanding liabilities

1009534

Bank O/D

2950464

1710210

10643203 91841 10801353

LESS: Stock

1497634

567073

Bank O/D

2950464

Outstanding liabilities

767131

Sundry Debtors

1755576

1106913

334244 9562393

Sundry Creditors

910746 1699354

CFO(CLO)

9854229

342963

1516020

8950797

5.2 CASH FLOW STATEMENT Inflow

2010-11

2011-12

2012-13

2013-14

Opening balance

14564

64678

104545

63582

Cash from operation

9854229

342963

1516020

8950797

Increase in loan funds

2410798

Sales of Asset Increase

in

797244 share

2800000

capital Total

9868793

1204885

39

6831363

9014379

Outflows Cash outflow from operation Purchase of Asset Decrease

in

9776411 loan 27704

6767781 900340

7004825 1731144

funds Decrease

in

share

200000

capital Closing balance

64678

104545

63582

278410

Total

9868793

1204885

6831363

9014379

Inference:

This table shows that the cash flow statements of SRI KRISHNA SILKS are to be efficient. The cash inflow of the company is to be increased for year after year. The fund from operation is also to differ from every year. The company should increase their share capital from 2013-14 for Rs. 28, 00,000. Its must be used as efficient for the next year for decrease their loan amount.

5.3 TREND ANALYSIS

Y = a + bX

Where a = ∑Y

;

b = ∑XY

40

n

∑X2

5.3.1 INVENTORIES

Inventories YEAR

X

X2

(Rs in lakhs)

XY

Y

(Rs in lakhs)

’09 – ‘10

-2

4

27,76,072

-55,52,144

10 – ‘11

-1

1

12,78,438

-12,78,438

’11 – ‘12

0

0

18,45,511

0

’12 – ‘13

1

1

36,01,087

36,01,087

’13 – ‘14

2

4

47,08,000

94,16,000

10

1,42,09,108

61,86,505

TOTAL

a

=

1, 42, 09,108 5 41

=

2, 84,182.6

b

=

61, 86,505

=

6, 18,650.5

10 Inference:

This table indicates that the volume of inventory has been increased every year. Its must be increased for the last year 11, 06,913. Inventories value in 2008 will be about 21, 40,134.1

5.3.2 SUNDRY DEBTORS

YEAR

Sundry Debtors

X2

X

(Rs)

XY (Rs)

Y ’09 – ‘10

-2

4

20,69,513

-41,39,026

10 – ‘11

-1

1

28,05,805

-28,05,805

’11 – ‘12

0

0

25,11,842

0

’12 – ‘13

1

1

1,20,74,236

1,20,74,236

’13 – ‘14

2

4

1,29,84,982

2,59,69,964

10

3,24,46,378

3,10,99,369

TOTAL

a

=

3, 24, 46,378

=

5 42

64, 89,275.6

b

=

3, 10, 99,369

=

31, 09,936.9

10 Inference:

This table shows that the Sundry Debtors has been more every year. It must be increased more than 6 times from the beginning of the period of the study. Sundry Debtors value in 2014 will be about 1, 58, 19,086.3.

5.3.3 CASH / BANK

Cash / Bank YEAR

X

X2

(Rs)

XY

Y

(Rs)

’09 – ‘10

-2

4

14,564

-29,128

10 – ‘11

-1

1

64,679

-64,679

’11 – ‘12

0

0

61,858

0

’12 – ‘13

1

1

63,582

63,582

’13 – ‘14

2

4

2,78,410

5,56,820

10

4,83,093

5,26,593

TOTAL

a

= 4, 83,093

= 43

96,618.6

5

b

=

5, 26,593

=

52,659.3

10 Inference:

The cash value of the SRI KRISHNA SILKS has been increased and the estimated it should be decreased for the previous year. Cash value in 2014 will be about 254596.5.

5.3.4 LOANS & ADVANCES

YEAR

Loans Advances

X2

X

(Rs)

& XY (Rs)

Y ’09 – ‘10

-2

4

1,00,065

-2,00,130

‘10 – ‘11

-1

1

8,26,377

-8,26,377

’11 – ‘12

0

0

3,60,138

0

’12 – ‘13

1

1

27,70,937

27,70,937

’13 – ‘14

2

4

5,62,837

11,25,674

10

46,20,354

28,70,104

TOTAL

a

=

46, 20,354 5 44

=

9, 24,070.8

b

=

28, 70,104

=

2, 87,010.4

1 Inference: The table indicates that the loans and advances of SRI KRISHNA SILKS will be reduced from the year 2013-14. Loans & Advances value in 2014 will be about 17, 85,102.

5.3.5 CURRENT LIABILITIES

YEAR

Current Liabilities

X2

X

(Rs)

XY (Rs)

Y ’09 – ‘10

-2

4

22,58,576

-45,17,152

10 – ‘11

-1

1

57,45,442

-57,45,442

’11 – ‘12

0

0

38,56,338

0

’12 – ‘13

1

1

1,44,73,102

1,44,73,102

’13 – ‘14

2

4

1,25,88,203

2,51,76,406

10

3,89,21,661

2,93,86,914

TOTAL

a

=

3, 89, 21,661

=

5

45

77, 84,332.2

b

=

2, 93, 86,914

=

29, 38,691.4

10 Inference: The table shows that the company’s current liability will be increased from the every year. Current Liabilities value in 2014 will be about 1, 66, 00,406.4

5.3.6 CURRENT ASSET Current asset X2

X YEAR

(Rs)

XY

Y

(Rs)

’09 – ‘10

-2

4

21,27,277

-42,54,554

10 – ‘11

-1

1

41,48,921

-41,48,921

’11 – ‘12

0

0

59,74,933

0

’12 – ‘13

1

1

1,85,09,842

1,85,09,842

’13 – ‘14

2

4

2,03,50,240

4,07,00,480

10

5,11,11,213

5,08,06,947

TOTAL

a

=

5,11,11,213

=

5

46

1,02,22,242.6

b

=

5,08,06,947

=

50,80,694.7

10 Inference: This table shows that the current asset of the company will be grown at 9times. When compared to the beginning of the period of study its must be increased. Current Asset value in 2014 will be about 2, 54,64,326.7.

RATIO ANALYSIS: Ratio Analysis is a powerful tool of financial analysis. A Ratio is defined as “the indicated quotient of two mathematical expressions” and as “the relationship between two or more things”. In financial analysis, a ratio is used as a benchmark for evaluating the financial position and performance of a firm.

Ratio helps to summarize large quantities of financial data and to make qualitative judgment about the firm’s financial performance.

47

5.4 RATIO ANALYSIS 5.4.1 Current Assets to Fixed Assets Ratio

The formula for the ratio is

Current Assets Fixed Assets

Current Assets to Fixed Assets Ratio Increase/ Decrease

YEAR

RATIO

2009 – 10

0.94:1

2010 – 11

0.72:1

-0.22

2011 – 12

1.55:1

0.82

2012 - 13

1.28:1

-0.27

2013 – 14

1.62:1

0.34

48

Chart Title 1 0.8 0.6 0.4 0.2 0 -0.2 -0.4

Increase/ Decrease

. Inference: The level of Current Assets can be measured by using this Current Asset to Fixed Assets Ratio. The level has been fluctuating every year.

5.4.2

Current Assets to Total Assets Ratio The formula for the ratio is

Current Assets Total Assets

Current Assets to Total Assets Ratio Increase/ Decrease

YEAR

RATIO

2009 – 10

0.26:1

2010 – 11

0.48:1

0.22

2011 – 12

0.62:1

0.14

2012 - 13

0.59:1

-0.03

2013 – 14

0.59:1

49

Increase/ Decrease 0.2 0.15 0.1

Increase/ Decrease

0.05 0 -0.05 -0.1 -0.15

Inference: The Table shows the Current Assets to Total Assets ratio of the company, which registered a fluctuating trend throughout the study period. This ratio varied from 0.26 to 0.48 times during the study. There is no change for last year. 5.4.3 Net Working Capital Ratio The formula for the ratio is

Net Working Capital Net Assets

Net Working Capital Ratio Increase/ Decrease

YEAR

RATIO

2009 – 10

0.27:1

2010 – 11

0.12:1

- 0.15

2011 – 12

0.15:1

0.03

2012 - 13

0.21:1

0.06

2013 – 14

0.22:1

0.01

50

Increase/ Decrease 0.2 0.15

Increase/ Decrease

0.1 0.05 0 -0.05 -0.1 -0.15

Inference: Net Working Capital is used as a measure of a firm’s liquidity and the firm’s potential reservoir of funds. It can also be relate to net assets. The Net Working Capital Ratio from the table shows a fluctuating trend and the average Net Working Capital Ratio is 0.21 times of Net Working Capital to Net Assets. Hence it shows that SRI KRISHNA SILKS has an average liquidity position. 5.3.4 Inventories to Current Assets Ratio The formula for the ratio is

Inventories Current Assets

Inventories to Current Assets Ratio Increase/ Decrease

YEAR

RATIO

2009 – 10

1.30:1

2010 – 11

0.31:1

2011 – 12

0.31:1

2012 - 13

0.19:1

-0.12

2013 – 14

0.23:1

0.04

-0.99

51


Increase/ Decrease

0.05 0 -0.05 -0.1 -0.15

Inference: From the table it is known that the Inventories to Current Assets Ratio also register a fluctuating trend during the entire study period. The average ratio is 0.31 times and thus it is found that the investment in inventories (being one of the important Current Assets) is kept at the considerable level 5.4.5 Sundry Debtors to Current Assets Ratio The formula for the ratio is

Sundry Debtors Current Assets

Sundry Debtors to Current Assets Ratio Increase/ Decrease

YEAR

RATIO

2009 – 10

0.97:1

2010 – 11

0.68:1

-0.29

2011 – 12

0.42:1

- 0.26

2012 - 13

0.65:1

0.23

2013 – 14

0.63:1

-0.02 52


Increase/ Decrease

0.05 0 -0.05 -0.1 -0.15

Inference: From the table the Sundry Debtors to Current Assets Ratio shows a fluctuating trend throughout the study period from 2002-03 to 2006-07. The average ratio is 0.65 times. Hence it implies the credit policy followed by SRI KRISHNA SILKS is moderate. 5.4.6 Loans and Advances to Current Assets Ratio The formula for the ratio is

Loans and Advances Current Assets

Loans and Advances to Current Assets Ratio Increase/ Decrease

YEAR

RATIO

2009 – 10

0.02:1

2010 – 11

0.19:1

0.17

2011 – 12

0.06:1

-0.13 53

2012 - 13

0.15:1

0.09

2013 – 14

0.02:1

- 0.13

Increase/ Decrease 0.2 0.15

Increase/ Decrease

0.1 0.05 0 -0.05 -0.1 -0.15

Inference: From the table it is noted that the Loans and Advances to Current Assets Ratio have registered a fluctuating trend. It implies that a quarter positions of the Current Assets are kept in for Loans and Advances; thereby it is found that SRI KRISHNA SILKS value of Loans and Advances is considerable. 5.4.7 Cash to Current Assets Ratio The formula for the ratio is

Cash Current Assets

Cash to Current Assets Ratio

YEAR

RATIO

2009 – 10

0.006:1

2010 – 11

0.015:1

Increase/ Decrease

0.09

54

2011 – 12

0.01:1

-0.14

2012 - 13

0.003:1

- 0.007

2013 – 14

0.013:1

0.01

Cash Interval Measure Ratio Increase / Decrease 40 30

Cash Interval Measure Ratio Increase / Decrease

20 10 0 -10 -20 -30 -40

Inference: The table shows the details of Cash to Current Assets Ratio and registered a fluctuating trend throughout the study period from 2002-03 to 2006-07. Hence we find that SRI KRISHNA SILKS had maintained a moderate level of cash in proportion to Current Assets 5.4.8 Cash to Working Capital Ratio The formula for the ratio is

Cash Working Capital

Cash to Working Capital Ratio

YEAR

RATIO

2009 – 10

0.11:1

2010 – 11

0.04:1

Increase/ Decrease

- 0.07 55

2011 – 12

0.03:1

- 0.01

2012 - 13

0.07:1

0.04

2013 – 14

0.06:1

-0.01

Cash Interval Measure Ratio Increase / Decrease 40


20 0 -20 -40

Inference: The Cash to Working Capital Ratio registered a fluctuating trend during the study period this is noted from the table. It was 0.11 times in 2004-05, which sharply increased to 0.04 times in the next year and later for the following years it is fluctuating. Hence it is found that 4% of the Working Capital ratio is managed by using the cash & bank balance available in the company. The policy regard financing the Working Capital in SRI KRISHNA SILKS can be said as aggressive policy. 5.4.9 Cash to Sales Ratio The formula for the ratio is

Cash Sales

Cash to Sales Ratio

YEAR

Increase Decrease

RATIO

56

/

2009 – 10

0.0007:1

2010 – 11

0.0026:1

0.0019

2011 – 12

0.0028:1

0.0002

2012 - 13

0.0069:1

0.0041

2013 – 14

0.0064:1

- 0.0005

Cash Interval Measure Ratio Increase / Decrease 40 30 20 10 0 -10 -20 -30 -40


Inference: This is one of the important ratios of controlling cash. A study of cash to sales ratio will provide a deep insight into the cash balances held in the concerns. Evident from the table shows Cash to Sales registered a fluctuating trend throughout the study period.

5.4.10 Cash Ratio The formula for the ratio is

Cash Current liabilities

Cash Ratio Increase

57

/

YEAR

RATIO

2009 – 10

0.0064:1

2010 – 11

0.0112:1

0.0048

2011 – 12

0.0160:1

0.0048

2012 - 13

0.0044:1

-0.0116

2013 – 14

0.0221:1

0.0177

Decrease



20 10 0 -10 -20 -30 -40

Inference: From the table it is noted that the cash position of the SRI KRISHNA SILKS is satisfactory. It is found that the cash required to meet out the current liabilities is maintained at a normal level. 5.4.11 Current Ratio The formula for the ratio is

Current Assets Current liabilities

Current Ratio

58

Increase Decrease

YEAR

RATIO

2009 – 10

0.94: 1

2010 – 11

0.72: 1

-0.22

2011 – 12

1.55: 1

0.83

2012 - 13

1.27: 1

-0.28

2013 – 14

1.62: 1

0.35

/



Inference: This ratio is an indicator of the firm’s commitment to meet its short – term liabilities. From the table it is clear that the Current Ratio of SRI KRISHNA SILKS has been fluctuating from the starting of the study period, later for last year it has been increasing; hence the Current Ratio is quite satisfactory. Thus the Current Ratio shows that the company has sufficient funds to meet its short-term obligations. 5.4.12 Liquidity Ratio The formula for the ratio is

Liquid Assets Current liabilities 59

Liquidity Ratio Increase Decrease

YEAR

RATIO

2009 – 10

0.94: 1

2010 – 11

0.50: 1

-0.44

2011 – 12

1.07: 1

0.57

2012 - 13

1.03: 1

-0.04

2013 – 14

1.24: 1

0.21

/



0 -20 -40

Inference: This ratio helps the management to measure short-term solvency. The ideal liquid ratio is 1:1 From the table it is clear that SRI KRISHNA SILKS liquid ratio is more than the ideal ratio during the starting of the study period and later in 2004 - 05 it had reduced slightly, yet for the rest of the period current liabilities were fully secured by liquid assets because the liquid assets were more than the current liabilities and hence the company’s liquidity is satisfactory.

5.4.13 Super Quick Ratio 60

The formula for the ratio is

Super Quick Assets Quick liabilities

Super Quick Ratio Increase Decrease

YEAR

RATIO

2009 – 10

0.65:1

2010 – 11

0.32:1

-0.33

2011 – 12

0.58:1

0.26

2012 - 13

0.62:1

0.04

2013 – 14

0.64:1

0.02

/

Cash Interval Measure Ratio Increase / Decrease 40 30 20 10


0 -10 -20 -30 -40

Inference: Super Quick Ratio is the healthy measure of the firm’s liquidity position. From the table 4.21 it is noted that the liquidity of SRI KRISHNA SILKS had a steep slope in between during the year 2003-04, yet it was able to have a slow increase in the rest of the study period and able to maintain its position. Hence it shows that SRI KRISHNA SILKS is able to meet its current obligations (liabilities).

61

5.4.14 Working Capital Turnover Ratio The formula for the ratio is

sales Working Capital

Working Capital Turnover Increase Decrease

YEAR

RATIO

2009 – 10

12.36: 1

2010 – 11

17.70: 1

5.34

2011 – 12

11.55: 1

-25.15

2012 - 13

31.55: 1

20.00

2013 – 14

5.45: 1

-26.15

/



0 -20 -40

Inference: This ratio indicates whether Working Capital has been effectively utilized in making sales or not. From the table it is noted that Working Capital had some fluctuation in the middle of the study period, yet the company was able to increase it in the later years. Hence the turnover indicates that SRI KRISHNA SILKS had utilized its Working Capital efficiently and the company can also try to work on this to get more effective values.

62

5.4.15 Inventories Turnover Ratio The formula for the ratio is

Cost of Goods Sold Average Stock

Inventories Turnover YEAR

RATIO

2009 – 10

1.36: 1

2010 – 11

1.02: 1

-0.34

2011 – 12

1.02: 1

0

2012 - 13

1.02: 1

0

2013 – 14

1.53: 1

0.51

Increase Decrease

/



Inference: This ratio indicates whether investment in inventory is efficiently used or not and whether the investment is within proper limits. From the table it is found that the Inventory turnover Ratio of SRI KRISHNA SILKS had some fluctuations in the starting of the study period then it had a growth in it. Hence the efficiency of inventory control in SRI KRISHNA SILKS shows a satisfactory position. 63

5.4.16 Debtors Turnover Ratio The formula for the ratio is

Sales Sundry Debtors

Debtors Turnover Increase Decrease

YEAR

RATIO

2009 – 10

7.84: 1

2010 – 11

8.54: 1

0.70

2011 – 12

8.49: 1

-0.05

2012 - 13

3.30: 1

-5.19

2013 – 14

3.26: 1

-0.04

/



0 -20 -40

Inference: This is one of the techniques employed by the company with regard to the collection of the receivables through effective management of collection policy with the help of factoring services.

64

From the table it shows that the Debtors’ turnover Ratio had satisfactory increase in the starting of the study period. However, in middle of the study period it had slight fluctuations, the company was able to raise it in the next year.

5.4.17 Debt Collection Period Ratio The formula for the ratio is

Days in a Month Sundry Debtors turnover

Debt Collection Period Ratio Increase Decrease

YEAR

RATIO

2009 – 10

46.5

2010 – 11

42.7

-3.8

2011 – 12

81.29

39.79

2012 - 13

110.6

29.31

2013 – 14

111.9

1.3

160 140 120 100 80 60 40 20 0 -20 -40

Cash Interval Measure Ratio Cash Interval Measure Ratio Increase / Decrease

Inference:

65

/

This ratio indicates the extent to which the debts have been colleted in time. It gives the average debt collection period. SRI KRISHNA SILKS use this ratio to find out whether their borrowers are paying on time. From the table it is found that throughout the study period the collection period is fluctuating and is within the average.

5.4.18 Cash Interval Measure Ratio The formula for the ratio is

Current Assets – Inventories Avg. Daily Operating Exp.

Cash Interval Measure Ratio Increase Decrease

YEAR

RATIO

2009 – 10

135.14

2010 – 11

104.27

-30.89

2011 – 12

136.44

32.17

2012 - 13

144.72

8.28

2013 – 14

146.13

1.41

66

/

160 140 120 100 80 60 40 20 0 -20

Cash Interval Measure Ratio Cash Interval Measure Ratio Increase / Decrease

-40

Inference: This ratio examines the firm’s ability to meet its regular cash expenses. The defensive interval measures the time period for which a firm can operate on the basis of present liquid assets without resorting to the next year’s revenue. This ratio of SRI KRISHNA SILKS, from the table shows that the company can meet its operating cash requirements within a period of 105 to 146 days without resorting to next year’s income.

CHAPTER V 67

FINDINDS

 The cash management of SRI KRISHNA SILKS has been working well in the organization.  The Funds from operations of a company has been increased from year by year.  The cash from operations has been find that it used as efficient.  The cash inflow and outflow of cash flow statement have a cash balance will be increased 4.2 times when compared to last year balance.  Current Ratio shows that the company has sufficient funds to meet its short-term obligations.  The company’s Liquidity Ratio shows a satisfactory trend.

68

 Super Quick Ratio shows that SRI KRISHNA SILKS is able to meet its current obligations (liabilities)..  The efficiency of inventory control in SRI KRISHNA SILKS shows a satisfactory position..  The Cash Ratio shows that the cash required to meet out the current liabilities is maintained at a normal level hence, it shows that SRI KRISHNA SILKSfollows an average policy.  Interval Measure Ratio shows that the company can meet its operating cash requirements within a period of 105 to 146 days without resorting to next year’s income.  The Current Assets to Total Assets Ratio implies that SRI KRISHNA SILKS is maintaining a considerable level of Current Assets in proportion to Total Assets.  The average Cash to Current Assets is maintained at 0.009 times. Hence, it is found that the company had maintained a moderate level of cash in proportion to Current Assets.  The average ratio of Inventories to Current Assets is 0.46 times and thus it is found that the investment in inventories.  The average ratio of Sundry Debtors to Current Assets is 0.67 times. Hence it implies that the credit policy followed by SRI KRISHNA SILKS is moderate.  The loans and Advances to Current Assets ratio of the company imply that a quarter positions of the Current Assets are kept in for loans and advances, which is considerable.  The policy regard financing the Working Capital in SRI KRISHNA SILKS can be said as Aggressive policy according to the Cash to Working Capital Ratio.  The average cash to sales ratio is 0.004 times and which indicates that only 0.4% of sales has been maintained as cash with the business.

69

SUGGESTIONS & RECOMMENDATIONS

 SRI KRISHNA SILKS should try to match their Cash with the sales. In case of surplus Cash, it should be invested either in securities or should be used to repay borrowings.  The company should try to prepare a proper ageing schedule of debtors. This will help them to reduce the bad debts and speed up collection efforts.  The company should be prompt in making payments so as to enjoy cash discount opportunities  The company should determine the optimum cash balance to be kept.  The company followed an aggressive policy of financing working capital should try to finance 50% of their working capital using long term source and improve their status. 70

 The current Ratio of 2:1 is considered normally satisfactory. SRI KRISHNA SILKS should try to improve the current ratio. So it should invest large amount in current ratio, in order to maintain liquidity and solvency position of the concern.  The company should try to follow a matching policy for financing current Assets (i.e.) using both long term and short-term sources of finances.

CONCLUSION

The Cash Management Analysis done on the financial position of the company has provided a clear view on the activities of the company. The use of the ratio analysis, trend analysis, Cash Flow Statement and other accounting and financial management helped in this study to find out the financial soundness of the company. This project was very useful for the judgment of the financial status of the company from the management point of view. This evaluation proved a great deal to the management to make a decision on the regulation of the funds to increase the sales and bring profit to the company. 71

Before I conclude I wish to convey my thankfulness in regard to the training given to me in SRI KRISHNA SILKS. It gave me extreme satisfaction and practical knowledge of the financial activities carried out in the company. The kindness, attention, and immense cooperation extended to me buy all the officials in the company made my project easy and comfortable. Really it was a very pleasant experience in SRI KRISHNA SILKS.

BIBILIOGRAPHY

BOOKS:  S.N. Maheshwari, Financial management, Eleventh Edition 2006, Sultan Chaqnd & Sons, Educational Publishers. New Delhi.  I.M Pandey, Financial management, Ninth Edition, Vikas publishing house pvt Ltd.  M.Y Khan- P.K Jain, Management Accounting, Third edition, Tata Mc Graw-Hill Publishing co. Ltd 72

 B.L. Gupta, Management of Liquidity and Profitability, Arihant Publishing House, Jaipur.

WEBSITE:

 www.financeindia.org  www.fao.org

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Cash Management

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