A

STUDY ON
CASH MANAGEMENT
AT

SRI KRISHNA SILKS

Jagdeep pabba
12406045

Submitted to,
St.Josephs Degree & PG College
Osmania University

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.

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:

CHAPTER I
INTRODUCTION

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 firms

manufacturing operations while excessive cash will simply remain idle, without contributing
anything towards the firms 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.

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.

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.

 Secondary Sources
1. From the annual reports maintained by the company.
2. Data are collected from the companys 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.

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

\\\

CHAPTER II
REVIEW OF LITERATURE

10

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 firms holds. It is significant because it
is used to pay the firms 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 managements 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.

12

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 firms 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 firms 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 firms profitability ) and cash deficits (which can cause the firms
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.
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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 banks 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 firms inventory
+Days to collect its accounts receivables
-Days to pay its accounts payable.

The cash turnover means the numbers of times firms 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.
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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 companys
accounts. The cheques are recorded and cleared for collection. The company receives a deposits
the cheque in the companys 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 companys 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 issuers 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
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taxes. The test of liquidity is the availability of cash to meet the firms 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

BAUMOLS MODEL
The Baumol model of cash management provides a formal approach for determining a
firms 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 baumols model makes the following assumptions:

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

The firms 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

22
C/2

Baumols model for cash balance

Cost trade-off: Baumols 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

23

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 firms 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 firms 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.

24

Based on this drive for efficiency, three interrelated trends are shaping North Americas 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, Transportations 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 Transportations 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 Transportations 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.

26

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
Universitys 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 Universitys cash management
procedures. The University concurred with two and is still evaluating the third. However, they
27

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

4.

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)
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CHAPTER II
COMPANY PROFILE

29

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

30

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

31

Designer Bridal Lehenga

Designer
Colour

Sarre

Wine

Suit Dupatta - Sd 03

Suit Dupatta - Sd 01

Sri Krishna Silks is an India-based company engaged in the textiles business. The
Companys 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 Companys 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

33

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

The Indian Textile industry is highly fragmented sector.

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

Textile Industry comprises small-scale, medium-scale, large-scale, non-integrated,

spinning, weaving, finishing, and apparel-making firms and enterprises.

This is an unorganized sector and includes Handlooms, Powerloom, Hosiery,

Knitting, Readymade Garments, Khadi, Carpet and Handicrafts manufacturing units.

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

34

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.

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.

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

X2

5.3.1 INVENTORIES

Inventories
YEAR

X2

(Rs in lakhs)

XY

(Rs in lakhs)

09 10

-2

27,76,072

-55,52,144

10 11

-1

12,78,438

-12,78,438

11 12

18,45,511

12 13

36,01,087

36,01,087

13 14

47,08,000

94,16,000

10

1,42,09,108

61,86,505

TOTAL

1, 42, 09,108
5
41

2, 84,182.6

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

(Rs)

XY
(Rs)

Y
09 10

-2

20,69,513

-41,39,026

10 11

-1

28,05,805

-28,05,805

11 12

25,11,842

12 13

1,20,74,236

1,20,74,236

13 14

1,29,84,982

2,59,69,964

10

3,24,46,378

3,10,99,369

TOTAL

3, 24, 46,378

5
42

64, 89,275.6

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

X2

(Rs)

XY

(Rs)

09 10

-2

14,564

-29,128

10 11

-1

64,679

-64,679

11 12

61,858

12 13

63,582

63,582

13 14

2,78,410

5,56,820

10

4,83,093

5,26,593

TOTAL

= 4, 83,093

=
43

96,618.6

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

(Rs)

&
XY
(Rs)

Y
09 10

-2

1,00,065

-2,00,130

10 11

-1

8,26,377

-8,26,377

11 12

3,60,138

12 13

27,70,937

27,70,937

13 14

5,62,837

11,25,674

10

46,20,354

28,70,104

TOTAL

46, 20,354
5
44

9, 24,070.8

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

(Rs)

XY
(Rs)

Y
09 10

-2

22,58,576

-45,17,152

10 11

-1

57,45,442

-57,45,442

11 12

38,56,338

12 13

1,44,73,102

1,44,73,102

13 14

1,25,88,203

2,51,76,406

10

3,89,21,661

2,93,86,914

TOTAL

3, 89, 21,661

45

77, 84,332.2

2, 93, 86,914

29, 38,691.4

10
Inference:
The table shows that the companys 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

(Rs)

09 10

-2

21,27,277

-42,54,554

10 11

-1

41,48,921

-41,48,921

11 12

59,74,933

12 13

1,85,09,842

1,85,09,842

13 14

2,03,50,240

4,07,00,480

10

5,11,11,213

5,08,06,947

TOTAL

5,11,11,213

46

1,02,22,242.6

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 firms 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 firms liquidity and the firms 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
0.2
0.15
0.1

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
0.2
0.15
0.1

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

Cash Interval Measure

Ratio Increase /
Decrease

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

Cash Interval Measure

Ratio Increase /
Decrease

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

Cash Interval Measure Ratio Increase / Decrease

40
30

Cash Interval Measure

Ratio Increase /
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

Cash Interval Measure Ratio Increase / Decrease

40
30
20
10
0
-10
-20
-30
-40

Cash Interval Measure

Ratio Increase /
Decrease

Inference:
This ratio is an indicator of the firms 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

Cash Interval Measure Ratio Increase / Decrease

40
20

Cash Interval Measure

Ratio Increase /
Decrease

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 companys 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

Cash Interval Measure

Ratio Increase /
Decrease

0
-10
-20
-30
-40

Inference:
Super Quick Ratio is the healthy measure of the firms 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

Cash Interval Measure Ratio Increase / Decrease

40
20

Cash Interval Measure

Ratio Increase /
Decrease

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

2012 - 13

1.02: 1

2013 14

1.53: 1

0.51

Increase
Decrease

Cash Interval Measure Ratio Increase / Decrease

40
30
20
10
0
-10
-20
-30
-40

Cash Interval Measure

Ratio 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

Cash Interval Measure Ratio Increase / Decrease

40
20

Cash Interval Measure

Ratio Increase /
Decrease

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

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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 firms 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 years 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 years
income.

CHAPTER V
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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 companys Liquidity Ratio shows a satisfactory trend.

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 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 years 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.

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

Jaipur.

WEBSITE:

www.financeindia.org
www.fao.org

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