JANATA SHIKSHANA SAMITI

SHRI MANJUNATHESHWARA INSTITUTE OF UNDER-

GRADUATE & POST-GRADUATE STUDIES, VIDYAGIRI,
DHARWAD – 580004

AFFILIATED TO KARNATAKA UNIVERSITY, DHARWAD

A Project Report On
“A STUDY OF WORKING CAPITAL AND MANAGEMENT”
UNDERTAKEN AT

KARNATAKA MILK FEDERATION (DAMUL) DHARWAD

SUBMITTED BY:

Mr. PAVANKUMAR REVANNAVAR

U02BF22M0007
BBA FINAL YEAR

A Report submitted in partial fulfillment of the requirement for the award of

BACHELOR OF BUSINESS ADMINISTRATION
EXTERNAL GUIDE: INTERNAL GUIDE:
DR. VEERESH TARALI PROF.N.G.PUDAKALKATTI
MANAGER (DT) OF DAMUL HOD, BBA
 JANATA SHIKSHANA SAMITI
SHRI MANJUNATHESHWARA INSTITUTE OF UNDER-
GRADUATE & POST-GRADUATE STUDIES, VIDYAGIRI,
DHARWAD – 580004

AFFILIATED TO KARNATAKA UNIVERSITY, DHARWAD

A Project Report On
“A STUDY OF WORKING CAPITAL MANAGEMENT”
UNDERTAKEN AT

KARNATAKA MILK FEDERATION (DAMUL) DHARWAD

SUBMITTED BY:

Mr. PAVANKUMAR REVANNAVAR

U02BF22M0007
BBA FINAL YEAR

A Report submitted in partial fulfillment of the requirement for the award of

BACHELOR OF BUSINESS ADMINISTRATION
EXTERNAL GUIDE: INTERNAL GUIDE:
DR. VEERESH TARALI PROF.N.G.PUDAKALKATTI
MANAGER (DT) OF DAMUL HOD, BBA
 I

SELF DECLARATION

I Pavankumar Revannavar hereby declare that work

incorporated in this project report entitled “Working Capital
Management on Karnataka Milk Union Ltd ” prepared by me
under the guidance of Smt. Nagaveni Pudakalkatti Head of
BBA Department.

I also declare that this project is towards the partial fulfilment

of the requirement for the degree of Bachelor of Business
Administration (BBA) to Karnataka University Dharwad.

I have undergone a project for a period of 30 days. I further

declare that this project based on the original study undertaken
by me and it has been individually carried out as a part of
studies and is meant for academic purpose only.

Date: Pavankumar Revannavar

Place:
COMPANY CERTIFICATE
 JANATA SHIKSHANA SAMITI
SHRI MANJUNATHESHWARA INSTITUTE OF UG AND PG STUDIES,
VIDYAGIRI,DHARWAD-580004
[AFFILIATED TO KARNATAKA UNIVERSITY, DHARWAD]
RECGONISED BY GOVERNMENT OF KARNATAKA

BACHELOR OF THE BUSINESS ADMINISTRATION

CERTIFICATE

This is to certify that Mr. Pavankumar Revannavar, Bonafide student of JSS college

Dharwad, has satisfactorily completed the project work, for the partial fulfilment of the

requirements of the degree of Bachelor Of Business Administration of Karnataka

University Dharwad during the academic year 2023-24. The project report has been

approved as it satisfies the requirement in present of the project work prescribed for the

said degree.

Prof. N.G.Pudkalkatti Dr. Ajit Prasad

[Head of the department] [Principal]

 II

ACKNOWLEDGEMENT

I would like to express my sincere gratitude to all those who have contribute
to the completion of this college project report titled, “A study on Working
Capital Management” at Karnataka Milk Union Co-Operative Society,
Dharwad.

I express my deep sense of gratitude and respect to our beloved Principal and
Secretory of JSS SMI UG & PG STUDIES, Dharwad, Dr. Ajit Prasad for
providing me an opportunity to do the project work.

I appreciate Dr. Veeresh Tarali my external project guide, for his guidance
and for encouraging me to complete the project work.

I would also like to thank our beloved HOD of BBA Department Prof.
N.G.Pudakalkatti for providing necessary guidance and helping me to
successfully complete the project work. I also thank Prof. Avinash
Holihosur and Prof. Vinayak Ingalgi for their useful suggestions. I would
like to extend my sincere gratitude to my parents and friends who have
directly or indirectly contributed to this project.

PAVANKUMAR REVANNAVAR
 III
EXECUTIVE SUMMERY

This project report presents an in-depth study on the Working Capital

Management of the Karnataka Milk Federation (KMF), Dharwad Milk Union(DAMUL).
Conducted as part of the BBA academic curriculum, the study aims to understand
and analyze the efficiency of working capital practices within one of Karnataka’s
leading cooperative dairy institutions.
The study is primarily based on secondary data collected from DAMUL’s financial
statements over a three-year period (2021–22 to 2023–24), and includes key ratio
analyses, such as the current ratio, quick ratio, inventory turnover, debtor and
creditor ratios, and operating cycles. These ratios help assess DAMUL’s liquidity,
operational efficiency, and financial health in terms of managing its short-term assets
and liabilities.
The analysis revealed both strengths and areas for improvement in DAMUL’s working
capital structure. While the Debtors Turnover Ratio and Current Assets Turnover
Ratio showed impressive growth—indicating strong receivables management and
better asset utilization—there were concerns around liquidity, as reflected by a
declining current ratio and negative working capital in the final year.
Key findings include:
• Improved collection period from 20 to 7 days over three years, highlighting
efficient credit control.
• Quick Ratio increased from 0.52 to 0.86, reflecting improved short-term
liquidity.
 • Working Capital Turnover Ratio declined drastically in 2023–24, indicating
over-reliance on short-term liabilities.
• Net Operating Cycle decreased from 28 to 9 days, reflecting faster cash
conversion.
Based on the findings, the study offers several practical suggestions, such as
improving the current ratio by optimizing liabilities, investing in inventory
forecasting tools, and automating financial operations to track working capital in real
time.
In conclusion, while DAMUL demonstrates effective management in certain aspects
of working capital, especially receivables and inventory, it must address liquidity
challenges and improve capital structure to sustain long-term financial health and
operational stability.

Limitations Of Study:
While this study aims to provide a comprehensive understanding of working capital
management at DAMUL, there were several limitations that may have affected the
scope and depth of the findings:

• Time Constraint:
The internship duration was limited to 30 days, which restricted the depth of
primary data collection and analysis. A longer time frame might have allowed
for more in-depth research and wider interaction with various departments.
• Limited Access to Data:
Some critical financial and operational data were not accessible due to
confidentiality policies of the organization. As a result, the study primarily
depended on the available secondary data and publicly shared information.
• Geographical Limitation:
The study was confined to the Dharwad Milk Union under KMF. Hence, the
findings may not be representative of the working capital management
practices across other unions or the federation as a whole.

• Reliance on Secondary Data:

Much of the financial analysis was based on secondary data such as company
reports, publications, and internal documents. The reliability of these findings
depends on the accuracy of the sources.

• Limited Financial Period Covered:

The study is based on a three-year financial analysis (2021–22 to 2023–24). A
longer data set could have given a more robust picture of trends and patterns in
working capital management.

• Operational Constraints:
As a student, there were limitations in engaging deeply with all financial and
managerial functions. Full access to internal policies and decision-making
frameworks was not possible.
 TABLE OF CONTENTS

SL. NO. TITTLE

PAGE
NO.

Chapter 1 Introduction to Dairy Industry 1-2

Chapter 2 Introduction to the KMF 3-8

Chapter 3 Study Methodology 9

A Theoretical Background OF Working Capital

Chapter 4 10-16
Management

Chapter 5 Data Analysis and Interpretation 17-37

Chapter 6 Findings and Suggestion 38-39

Chapter 7 SWORT Analysis 40-41

Chapter 8 Annexure 42-47

Chapter 9 Bibliography 48
 CHAPTER 1
INTRODUCTION TO DAIRY INDUSTRY:

The dairy industry is a pivotal component of the global agricultural sector,

providing essential nutrition and contributing significantly to economies
worldwide. As of 2021, the global dairy market was valued at approximately $893
billion and is projected to reach about $1,243 billion by 2028.

Dairy Industry in India

The dairy industry in India is one of the most vital components of the
agricultural economy and plays a significant role in rural development. India is the
largest producer of milk in the world, contributing over 20% of global milk
production. This growth has been primarily driven by small and marginal farmers,
who own the majority of the country’s dairy animals.

Dairy farming in India is deeply intertwined with the country's culture, economy,
and daily life. Traditionally, milk and milk products have held a central place in

1
Indian cuisine and rituals. The industry provides livelihood to over 70 million
rural households, most of whom are small-scale producers with 1–3 animals.

The transformation of the Indian dairy sector began with the White Revolution in
the 1970s, led by Dr. Verghese Kurien, which aimed at increasing milk production,
improving infrastructure, and reducing India's dependence on imports. This
revolution resulted in the creation of a robust network of dairy cooperatives and
marked the beginning of Operation Flood, a program that significantly increased
milk production and made India self-sufficient.

Today, the Indian dairy industry encompasses a wide range of activities including
milk production, processing, distribution, and the production of value-added
products like cheese, butter, curd, ghee, and ice cream. The industry is supported
by both organized and unorganized sectors, with the organized sector growing
rapidly due to increased urbanization, rising incomes, and demand for quality dairy
products.

With increasing emphasis on innovation, sustainability, and animal health, the

Indian dairy industry is poised for further growth and modernization, contributing
significantly to nutrition, employment, and the overall economy of the country.

2
 CHAPTER 2
2(i)
INTRODUCTION TO KARNATAKA MILK
FEDERATION(KMF)

Karnataka Cooperative Milk Producers' Federation Limited (KMF) is the Apex

Body for the dairy co-operative movement in Karnataka. It is the second largest
dairy co-operative amongst the dairy cooperatives in the country. In South India,
it stands first in terms of procurement as well as sales. One of the core functions
of the Federation is the marketing of Milk and Milk Products. The Brand "Nandini"
is the household name for Pure and Fresh milk and milk products. KMF has 15
Milk Unions covering all the districts of the State which procure milk from Primary
Dairy Cooperative Societies(DCS) and distribute milk to consumers in various
Towns/Cities/Rural markets in Karnataka.
“NANDINI” as various Dairy products like Milk, Peda, Curd, Ghee, ice creams,
Paneer, Butter, Butter Milk, Cheese, Chocolates, Milk Powder.

Key Points about KMF

3
 ❖ Full Name: Karnataka co-operative Milk Federation Ltd.
❖ Brand Name: NANDINI
❖ Function: Collection Milk from Farmers through a Network
Of dairy co-operative societies and sell process
Dairy products under the Nandini brand name.
❖ Key Features: Plays a crucial role in regulating milk supply
across Karnataka and ensuring markets access for
milk Procedure.
In 1984 the Organization was renamed KMF. KMF has 15 milk unions throughout
the Karnataka State, which procure milk from primary Dairy co-operative
societies. (D.C.S) & Distribute milk to the consumers in various urban & rural
markets.
The Karnataka Dairy Development Corporation (K.D.D.C) was Formed in 1974 to
implement a dairy Development. Project supported by the World Bank. In 1984
The Organization was Renamed KMF. In 1955 First Dairy was established in the
state of Karnataka, Belonging to “KODAGU” “Verghese Kurien” (V. Kurien) has
enabled India to became The largest Milk Producers in the World. A man with
Rare Vision, He has Devoted a lifetime to Realizing his dream empowering the
Farmers of India. & He also known as “Father of White Revolution” or “Dudhwala
of India”.
The Federation is striving to create a self-reliant and vibrant rural economy in
Karnataka by providing a supportive and conducive environment for the growth
of Dairy Cooperatives as autonomous economic and social institutions. The

4
Federation is largely successful in realizing the objectives of dairying during the
last four decades of dairy development in Karnataka State. It is by-and-large
successful in providing a viable subsidiary occupation to unemployed rural poor
so as to raise their income earning capacities and to supply adequate quantity of
quality milk at reasonable prices to urban consumers.
As a march 2024, The K.M.F had an annual Turnover of 23000 crore Revenue in
Financial Year 2024 was 5951 crore, which was lower than the Previous Year. The
Income from Operators of KMF was over 59 billion India rupees in Fiscal Year
2024.
The Products:
Milk Toned Milk, Full Cream Milk, Good Life, Standardized Milk, Flavored Milk,
Slim Butter Milk.
KMF Consists Of:

UNITS NO
Milk Union 16
Dairies 17
Liquid Nitrogen Silos 6
Product Plant 3
Training Center 3
Sperm Station 1
Cattle Feed Plant 4
Pouch Film Plant 1

5
Vision: (In their words…)
• To march forward with a missionary zeal which will make KMF a trailblazer of
exemplary performance and achievements beckoning other Milk Federations
in the country in pursuit of total emulation of its good deeds.
• To ensure prosperity of the rural Milk producers who are ultimate owners of
the Federation & to build the gap between price of milk procurement & sale
price.
• To promote producer oriented viable cooperative society to impart an impetus
to the rural income, dairy productivity and rural employment.
• To complete with MNCs & private Dairies with better quality of milk and milk
products and in the process sustain invincibility of co-operatives.

Mission: (In their words…)

• Heralding economic, social and cultural prosperity in the lives of our milk
producer members by promoting vibrant, selfsustaining & holistic
cooperative dairy development in Karnataka State.

6
 2(ii)
INTRODUCTION TO DAMUL

Dharwad Co-operative Milk Producers Union Ltd

DAMUL (Dharwad Milk Union Ltd.) is a district-level cooperative milk union
operating under the Karnataka Milk Federation (KMF). DAMUL has been registered
under Karnataka CO-operative act in March 1986 covering Dharwad, Haveri, Gadag
& Utter Kannada Districts. It plays a significant role in dairy farming, milk
procurement, processing, and distribution in the Dharwad, Gadag, and Uttar
Kannada districts of Karnataka. It has been three years since DAMUL separated
from Haveri and now they are covering Dharwad, Gadag and Utter Kannada.
Milk is procured from 709 societies across three districts, contributing to a total
daily collection of 1,70,000 liters. It has 31 Bulk Milk Coolers (BMCs) with capacities
of 5,000, 3,000, and 2,000 liters each. Total three Chilling centers outside Dharwad,
they are in Gadag, Sirsi, and Utter Kannada.
The approximate milk procurement from different regions is follows: 65,000 liters
from Dharwad, 39,000 liters from Gadag, & 46,000 liter from Uttara Kannada.
7
The Dharwad and Sirsi units serve as the primary milk production and processing
centers.
DAMUL has a strong distribution network, comprising 1,077 distributors and
dealers, 77 parlors, and 33 franchises. Additionally, there are 33 transport-cum-
distributors and 77 credit institutions supporting its operations.
DAMUL manufactures a variety of dairy products, including Milk, Toned Milk,
Standardized Milk, Curd, Peda, Laasi, Butter milk, Panner, Cova, Ghee, Mysore Pak
and Milk Powder.

Ownership Pattern:
DHAMUL builds and runs under the co-operative institutions such as
• District Co-operative Society (DCS)
• National Dairy Development Board (NDDB)

Departments Of DMU:

1. Administration Department
2. Purchase Department
3. Marketing Department
4. Procurement and Input Department
5. Production Department
6. Quality Department
7. Human Resource Department
8. Finance Department
8
 CHAPTER 3
STUDY METHODOLOGY

TITLE OF THE STUDY

A Study Of Working Capital Management

TYPE OF STUDY
Academic and descriptive study

OBJECTIVES OF THE STUDY

• The study is done for academic purpose.
• Partial Exposure to Business.
• Study & analyze the financial position of company through financial analysis.
• Partial Exposure to Business.
• To test firm’s efficiency in utilization of its Assets and Resources.
• To suggest measures for improving the financial performance of organization.

Data Collection for Study

Data collection is one of the most important aspects of the study. The Data is
collected through Primary & Secondary sources.
• Primary Data on company it’s operations & some facts Related to the Study
are obtained, by the student observations and Also by Discussing the matter
with Company Officials.
• Secondary Data on the Industry, on the Company, Theory related to the subject
Financial Data are collected or obtained from The Internet, Textbooks, &
Company Published Material.
“Sampling is not Applicable Here”
9
 CHAPTER 4
THEOROTICAL BACKGROUND OF “WORKING
CAPITAL MANAGEMENT”

Introduction:

Management of the working capital is nothing but the management of

current assets. The management of the current assets includes inventory,
received, debtors, book debts, short-term assets, cash and bank balances. The
management of fixed and current assets, however differs in three important
ways.

1. In managing fixed assets time is a very important factor. Consequently,

discounting and compounding techniques play significant roles in capital
budgeting and latter one in the management of current assets.
2. The large holding of current assets, especially cash strengthens the firm‟s
liquidity position (reduces riskiness) but also reduces the overall profitability.
Thus a risk returns trade off is involved in holding current assets.
3. Level of fixed as well as current assets depends upon expected sales but it is
only current assets which can be adjusted with sales fluctuations in the short
run. Thus the firm has a greater degree of flexibility in managing current
assets.
Working capital refers to the amount of capital which is readily
available to an organization. That is, working capital is the difference between
resources in cash and readily convertible into cash (current assets) and
organizational commitments for which cash will soon be required (current
liabilities).
10
 Thus working capital involves activities such as arranging the short-term
finance, negotiating favourable credit terms, controlling the movement of cash,
administrating accounts receivables and monitoring the investments also a
great deal of time.

Types of working capital:

A) On the basis of concepts: There are two concepts of working capital –

1) Gross Working Capital:

It refers to the firm‟s investment in current assets. Current assets are the
assets which can be converted into cash within an accounting year and include
cash, short-term securities, debtors, bills receivables and stock (inventory).

2) Net Working Capital:

It refers to the difference between current assets and current liabilities.

Current liabilities are those claims of outsiders which are expected to mature for
payment within an accounting year and include creditors, bills payable and
outstanding expenses.

Net working capital can be positive or negative. A positive net working

capital will arise when curent assets exceed current liabilities. A negative net
working capital occurs when current liabilities are in excess of current assets.

11
Needs of Working Capital:
The need for working capital to run the day-to-day business activities
cannot be overemphasized. We will hardly find a business firm which does not
require any amount of working capital. Indeed, firms differ in their
requirements of the working capital.
The firm‟s aim is maximizing the wealth of shareholders. Earning a
steady amount of profit requires successful sales activity. The firm has to invest
enough funds in current assets for generating sales activity. Current assets are
needed because sales do not convert into cash instantaneously. There is always
an operating cycle involved in the conversion of sales into cash.

Objectives of WC management:
• Deciding optimum level of investment in various WC assets.
• Decide optimal mix of short-term and long-term capital.
• Decide appropriate means of short term financing.

12
Components of Working Capital:
There are two components of Working Capital
A. Current Assets.
B. Current Liabilities.
A) Current Assets:

Components of current assets are as follows:

1. Cash and bank balance

2. Stock of raw materials at cost- work in process and finished goods.

3. Advanced recoverable in cash or kind for value to be received.
4. Deposits under the company scheme.
5. Advanced payment of income takes credit certificates.
6. Outstanding debts for a period exceeding six months.
7. Cash and bank balance

B) Current Liabilities:
Components of Current Liabilities are as follows:
1. Sundry Creditors for the goods and expenses.

2. Income tax deducted at sources from contractors.

3. Expenses Payable.
4. Unclaimed Dividend.
5. Security Deposits.
6. Liabilities for bills discounted.
7. Bank overdraft acceptance.

13
Operating Cycle:

Operating cycle or working capital cycle indicates the length of time

between a firm‟s paying for raw materials entering into finished stock and
receiving cash on the sales of such finished stock.

This operating cycle differs from firm to firm. Longer the operating cycle
greater will be the amount of working capital required and vice versa. Thus it
plays an important role in determining the working capital needs of a firm.

Cash RawMaterials

Debtors

Milk& Milk WorkIn

Sales Process
Products

14
 Operating Cycle is the time duration required to convert sales, after the
conversion of resources into inventories, into cash. The operating cycle of a
DMU involves three phases.

a) Acquisition of resources such as raw material, labor, power and fuel etc.
b) Manufacture of the product which includes conversion of raw material
into work- in- progress into finished goods.
c) Sales of the product either for cash or on credit .

In the Dharwad Milk Union (manufacturing concern), the working

Capital operating cycle starts with the purchase of raw materials and ends with
the realization of cash from the sale of finished products. It is also called as cash
conversion cycle. It involves the purchase of raw materials and stores, fits into
stocks of finished goods through the work-in-progress with the progressive
increment of labour and service costs, conversion of finished goods (Milk & Milk
Products) into sales, debtors and receivables and ultimately realization of cash
and this cycle continues again from cash to purchases of raw material and so on.

Length of operating cycle:

A shorter operating cycle indicates efficient working capital management.
It occurs when raw materials, WIP, and finished goods move quickly, sales
generate fast cash realizations, and creditor payments are delayed strategically.

15
Sources of Working Capital:

There are two type of sources for financing the working capital requirement .

1. Permanent/Long term sources

2. Temporary/ Short term sources

1. Permanent/Long term sources:

❖ Shares capital
❖ Debentures
❖ Public deposits
❖ Ploughing back of profits
❖ Loan from financial institutions

2.Temporary/ Short term sources:

❖ Indigenous bankers are the short term source for financing the working capital
❖ Trade credits
❖ Instalment credits
❖ Income received in advance

❖ Customers‟ advance
❖ Bank loans which include cash credit and overdraft
❖ Commercial papers
❖ Purchasing and discounting of bills

16
 CHAPTER 6
Data Analysis and Interpretation

Dharwad Milk Union (DMU) is one of the most reputed companies

in the Karnataka. Dharwad Milk Union (DMU), leading milk and milk products
co-operative society, aims at providing health and toned milk to its consumer at
a better and reasonable price. Dharwad Milk Union(DMU) is facing competition
from various manufactures of milk & milk products. The study is conducted in
Dharwad Milk Union(DMU) to measure the working capital management is the
most important tool to measure the liquidity position of the company. Every
Company has to maintain good management of working capital, so this study is
undertaken to observe the management of working capital through ratio
analysis technique, because ratio analysis is the important tool to measure the
working capital management. So I have taken the three years annual reports to
measure the working capital management.
Note: For calculating operating cycle and also to understand the liquidity
position the following ratios are used: 1. Current Ratio
2. Quick Ratio 8. Creditor Payment Period
3. Inventory Turnover Ratio 9. Working Capital Turnover Ratio
4. Inventory Conversion Period 10. Current Assets Turnover Ratio
5. Debtors Turnover Ratio
6. Debtors Collection Period
7. Creditors Turnover Ratio
17
1)Current Ratio:
The current ratio of a unit measures firm’s short-term solvency. That is its
ability to meet short-term obligations. It is the ratio of total current assets to
total current liabilities. The current ratio measures the ability of the firm to
meet its current liabilities. Current assets get converted into cash in the
operating cycle of the firm and provide the funds needed to pay current
liabilities.

It is calculated by dividing total current assets by total current liabilities:

CURRENT RATIO = CURRENT ASSETS

CURRENT LIBILITIES

Current Assets include: Closing Stock, Deposits (asset), Loans & Advances, Sundry Debtors,
Cash-in-hand, and Bank Accounts.

Current Liabilities include: GRANTS, O.S.L, Other Liabilities, Salary Recovers, Security
Deposit A/C, Unpaid Salary/ Wages A/C, Duties & Taxes, Sundry Creditors.

Table-1 (Showing the Current Ratio)

Year Current assets Current Current
Liabilities Ratio
2021-22 60,66,42,687 50,05,00,231 1.21
2022-23 7,53,69,860 5,80,79,322 1.00
2023-24 9,85,39,092 7,56,55,623 0.92

18
 Chart-1
The Chart Showing Current Ratio

Current Ratio
1.8
1.6
1.4
1.2
1
0.8 Current Ratio
0.6
0.4
0.2
0
2021-22 2022-23 2023-24

Interpretation:
Based on the standard ideal current ratio of 2:1, the company’s liquidity position over
the three years is below the desired level, indicating potential concerns in working capital
management.
• In 2021–22, the current ratio was 1.21:1, which, while above 1, is still below the ideal
2:1, showing only a moderate ability to cover short-term liabilities.
• In 2022–23, it declined to 1.00:1, meaning current assets just equaled current
liabilities, leaving no safety margin.
• In 2023–24, the ratio further dropped to 0.92:1, falling below 1, indicating that the
company may face challenges in meeting its short- term obligations.
Overall, the company’s current ratio is consistently below the ideal 2:1, suggesting a need to
improve liquidity and working capital efficiency.

19
2) Quick Ratio / Liquidity Ratio:
This ratio is also termed as Acid-test ratio. A Quick ratio is concerned with
standard of 1:1 and the relationship between quick assets and current liabilities
The Quick Ratio is the ratio between quick current assets and current liabilities.

QUICK RATIO = QUICK CURRENT ASSETS

CURRENT LIBILITIES

Table 2(Showing Quick Ratio)

Year Quick Assets Current Quick Ratio

Liabilities
2021-22 236,44,35,399 50,05,00,231 0.52

2022-23 29,05,33,073 44,69,59,686 0.65

2023-24 43,43,07,157 45,05,38987 0.86

Chart-2 Showing Quick Ratio

Quick Ratio
1.2

0.8

0.6
Quick Ratio
0.4

0.2

0
2021-22 2022-23 2023-24

20
Interpretation:
The quick ratio, which excludes inventory and other less liquid current assets, reflects the
company’s ability to meet short-term obligations using only its most liquid assets.
• In 2021–22, the quick ratio was 0.52, indicating a weak liquidity position with
insufficient liquid assets to cover current liabilities.
• In 2022–23, it improved slightly to 0.65, but still remained below the ideal 1:1
benchmark.
• In 2023–24, the ratio increased to 0.86, showing further improvement but still not
reaching the desired level.
Overall, while the quick ratio shows a positive upward trend, it remains below the ideal
1:1, suggesting the company still lacks sufficient liquid assets to fully cover its short-term
liabilities and should continue focusing on strengthening its liquidity.

3) Inventory Turnover Ratio/Stock Turnover Ratio:

Every firm has to maintain a certain level of inventory of finished goods so as to meet
the requirements of the business. The inventory turnover reflects the efficiency of inventory
management. The higher the ratio, the more efficient the management of inventories & vice
versa.

This ratio establishes relationship between cost of goods sold during a given period of
time and average amount of inventory held during that period.

It can be ascertained by following formula:

INVENTORY TURNOVER RATIO = COST OF GOODS SOLD

AVERAGE INVENTORY

21
 Table 3 Showing Inventory Turnover Ratio
Year Cost of Goods Average Inventory Turnover
Sold Inventory Ratio
2021-22 3,747,812,303 26,15,92,610 14.32

2022-23 3,054,912,909 16,63,46,146 18.36

2023-24 2,877,576,050 17,05,15,628 16.87

Chart-3 Showing Inventory Turnover Ratio

Inventory Turnover Ratio

30
25
20
15
Inventory Turnover Ratio
10
5
0
2021-22 2022-23 2023-24

Interpretation:

From this, we can understand that the inventory turnover of Dharwad Milk
Union is increasing. This shows that the firm’s performance is better in selling its products.
Inventory turnover ratio measures the velocity of conversion of stock into sales. The
Inventory Turnover Ratio improved from 14.32 in 2021-22 to 18.36 in 2022-23, showing
better inventory efficiency and sales performance. In 2023-24, it slightly decreased to 16.87
due to a rise in average inventory, but remained higher than 2021-22, indicating overall
strong inventory management over the three years.

22
4) Inventory Conversion Period:
Inventory period is the time lag between the purchase of raw materials & sale of
finished goods. It includes:

• Raw Materials Conversion Period

• W-I-P Conversion Period
• Finished Goods Conversion Period

The Inventory Conversion Period can be ascertained by following formula:

INVENTORY CONVERSION PERIOD = NO. OF DAYS IN YEAR

INVENTORY TURNOVER RATIO

No. of Days in a year = 365 days

Table 4 Showing Inventory Conversion Period

Year No. of Days in a I.T.R Inventory Conversion

Year Period
2021-22 365 14.32 25.47

2022-23 365 18.36 19.87

2023-24 365 16.87 21.62

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 Chart-4 Showing Inventory Conversion Period

Inventory Conversion Period

25

20

15
Inventory Conversion
10 Period

0
2021-22 2022-23 2023-24

Interpretation:
From this we get to know the number of days Dharwad Milk Union is taking to convert
raw materials into finished products. In 2022–23, the DMU managed inventory most
efficiently, with the highest turnover (18.36) and the shortest conversion period (19.87
days). Efficiency slightly declined in 2023–24, while 2021–22 showed the lowest
performance with the slowest inventory movement.

5)Debtors Turnover Ratio/Accounts Receivable Turnover Ratio:

Debtors Turnover Ratio is an important part of current assets; it is determined by
dividing the net credit sales by average debtors outstanding during the year.

The analysis of the debtor’s turnover ratio supplements the information regarding the
liquidity of an item of current assets of the firm. The ratio measures how rapidly receivables
are collected.

24
It can be ascertained by the following formula:

DEBTORS TURNOVER RATIO = TOTAL SALES

DEBTOR

Table 5 showing Debtors Turnover Ratio

Year Total Sales Debtors Debtors Turnover

Ratio
2021-22 4,13,47,97,115 22,67,90,601 18.23

2022-23 3,42,62,32,032 8,06,89,756 42.26

2023-24 3,24,71,11,513 6,89,64,545 47.08

Table 5 Showing Debtor Turnover Ratio

Debtors Turnover Ratio

50
45
40
35
30
25
Debtors Turnover Ratio
20
15
10
5
0
2021-22 2022-23 2023-24

25
Interpretation:
From this we get to know the last 3 years debtors turnover ratio of Dharwad Milk
Union. The Debtors Turnover Ratio shows a strong upward trend from 18.23 in 2021–22 to
47.08 in 2023–24, indicating that the company has significantly improved its efficiency in
collecting receivables. Despite a decline in total sales, better credit control and faster
collection have led to improved liquidity and working capital management.

6) Debtors Collection Period:

The Debtors/Receivable Turnover ratio when calculated in terms of days is known as
Average Collection Period or Debtors Collection Period Ratio.

The average collection period ratio represents the average number of days for which a
firm has to wait before its debtors are converted into cash.

It can be ascertained by following formula:

DEBTORS COLLECTION PERIOD = NO. OF DAYS IN AYEAR

DEBTORS TURNOVER RATIO

Table 6 Showing Debtors Collection Period

Year No. of Days in a Year Debtors Turnover Debtors Collection
Ratio Period

2021-22 365 18.23 20

2022-23 365 42.46 8

2023-24 365 47.08 7

26
 Chart 6 Showing Debtors Collection Period

Debtors Collection Period

25

20

16

12 Debtors Collection Period

0
2021-22 2022-23 2023-24

Interpretation:

From this, we get to know the debts collection period of Dharwad Milk Union.
From 2021-22 to 2023-24, the Debtors Turnover Ratio improved from 18.23 to 47.08,
while the Debtors Collection Period reduced from 20 to 7 days. This indicates the company
is collecting receivables faster and managing credit more efficiently, reflecting improved
liquidity and stronger financial health.

7) Creditor’s Turnover Ratio:

This ratio shows the rapidity of debt payment by the firm. It expresses the
relationship between creditors and purchase. This ratio is similar to the debtors turnover
ratio. It compares creditors with the total credit purchases.

27
 It signifies the credit period enjoyed by the firm in paying creditors. Accounts
payable include both sundry creditors and bills payable. Same as debtors turnover ratio,
creditors turnover ratio can be calculated in two forms, creditors turnover ratio and average
payment period.

It is ratio between net credit purchase & the average amount of creditors
outstanding during the year.

It is calculated by following formula:

CREDIT TURNOVER RATIO = NET PURCHASE

AVERAGE

Table 7 Showing Creditors Turnover Ratio

Year Net Purchase Average Creditors Turnover

Creditors Ratio
2021-22 3,15,32,06,363 14,51,35,943 21.72

2022-23 2,67,52,52,847 13,65,20,328 19.59

2023-24 2,55,82,69,254 14,26,72,368 17.93

28
 The Chart Showing Creditors Turnover Ratio

Creditors Turnover Ratio

30
0
25

20

15 Creditors Turnover Ratio

10

0
2021-22 2022-23 2023-24

Interpretation:
From this, we understand that there are ups & downs in the ratio of credit turnover.
Between 2021-22 and 2023-24, the Creditors Turnover Ratio declined from 21.72 to 17.93,
indicating that the company is gradually taking more time to pay its suppliers. This suggests
a more relaxed payment approach, which might help with short-term liquidity management.
However, consistent delays in payments could strain relationships with suppliers. It is
important for the company to maintain a balance between managing cash flow & sustaining
healthy credit terms with creditors.

8) Creditor’s Payment Period:

The Creditors Payment Period Ratio represents the average number of days taken by
the firm to pay the creditors. It is calculated by following formula:

CREDITOR’S PAYMENT PERIOD = NO. OF DAYS IN AYEAR

CREDITORS TURNOVER RATIO

29
 Table 8 Showing Creditors Payment Period
Year No. of Days in a Creditors Turnover Creditor's Payment
Year Ratio Period
2021-22 365 21.72 16

2022-23 365 18.62 18

2023-24 365 20.35 20

The Chart 8 Showing Creditors Payment Period

Creditor's Payment Period

24

20

16

12
Creditor's Payment Period
8

0
2021-22 2022-23 2023-24

Interpretation:

In 2021-22, the Creditor's Payment Period was 16 days with a turnover ratio of
21.72. In 2022-23, the payment period increased to 18 days as the turnover ratio dropped
to 18.62. By 2023-24, the payment period further extended to 20 days, with a turnover ratio
of 20.35. This trend shows the company is gradually taking more time to settle dues, which
may help cash flow but could affect supplier terms if prolonged.

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9) Working Capital Turnover Ratio:

This ratio indicates whether the working capital has been properly utilized in making
sales or not. This ratio measures the efficiency with the working capital.

It is taken as one of the primary indicators of the short-term solvency of the business.
It establishes the relationship with the net sales. This ratio represents the number of times
the working capital is turned over in course of a year i.e. it measures the efficiency with
which the working capital is being used by the firm.

It is calculated by following formula:

WORKING CAPITAL TURNOVER RATIO = COST OF GOODS SOLD

NET WORKING

Cost of Goods Sold = Sales – Gross Profit

Net Working Capital = Current Assets – Current Liabilities

Table 9 Showing Working Capital Turnover Ratio

Year Cost of Goods Net Working Working Capital Turnover
Sold Capital Ratio
2021-22 374,78,12,303 10,61,42,456 35.30

2022-23 305,49,12,909 19,78,94,507 15.43

2023-24 2,93,75,75,990 -3,34,29,093 -87.87

31
 The Chart 9 Showing Working Capital Turnover Ratio

WORKING CAPITAL TURNOVER

40
35
30
25
20
15
10
5
0
2021-22 2022-23 2023-24

Series 1

Interpretation:
In 2021–22, the company had a high Working Capital Turnover Ratio of 35.30,
indicating efficient use of working capital. In 2022–23, the ratio declined to15.43, showing
reduced efficiency. By 2023–24, the ratio dropped sharply to -87.87 due to negative Net
Working Capital, signaling potential financial distress. This downward trend highlights
weakening liquidity and operational efficiency, with the negative ratio in 2023–24
suggesting over-reliance on short-term liabilities to fund operations.

10) Current Assets Turnover Ratio:

This ratio reveals the relationship between cost of goods sold and current
assets. The higher the ratio, the better is the firm in utilizing its current assets. The lower
ratio indicates that investment in current assets has not brought commensurate gain to the
firm. It is calculated by following formula:
WORKING CAPITAL TURNOVER RATIO = TOTAL SALES

CURRENT ASSETS

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 The Table 10 Showing Current Assets Turnover Ratio

Year Total Sales Current assets Current Assets Turnover

Ratio
2021-22 4,13,47,97,115 60,66,42,687 6.81
2022-23 3,42,62,32,032 45,71,09,894 7.59

2023-24 3,24,71,11,513 41,71,09,894 7.78

Chart 10 Showing Current Assets Turnover Ratio

Current Assets Turnover Ratio

8
7
6
5
Current Assets Turnover
4 Ratio
3
2
1
0
2021-22 2022-23 2023-24

Interpretation:

This helps us know how Dharwad Milk Union has utilized its current assets. In
2021–22, the Current Asset Turnover Ratio was 6.81, indicating that the company generated
₹6.81 in sales for every ₹1 of current assets. In 2022–23, the ratio improved to 7.59, and
further to 7.78 in 2023–24, reflecting increasing efficiency in utilizing current assets to drive
sales. Despite a decline in total sales over the years, the improved ratio suggests better
management of current assets and stronger operational performance in asset utilization.

33
11) Gross Operating Cycle:

The time lag between the purchase of raw materials & collection of cash for sale
is Gross Operating Cycle. It refers to the sum of inventory period and debtor’s collection
period.
It is calculated by following formula:
GROSS OPERATING CYCLE = Inventory Conversion Period + Debtors Collection Period

Table 11 Showing Gross Operating Cycle

Year Inventory Debtors Gross Operating

Conversion Collection Period Cycle
Period
2021-22 2,54,765 4,54,985 45.49
2022-23 2,84,834 2,84,834 28.48
2023-24 2,93,813 2,93,813 29.38

Chart 10 Showing Gross Operating Cycle

Gross Operating Cycle

60
50
40
Gross Operating Cycle
0
30
20
10
0
2021-22 2022-23 2023-24

34
Interpretation:

The Gross Operating Cycle (GOC) has significantly improved from 45.49 days in
2021-22 to 28.48 days in 2022-23, indicating better efficiency in managing inventory and
receivables. In 2023-24, the GOC slightly increased to 29.38 days but remains lower than
2021-22. Despite rising inventory and debtor values, the shorter cycle suggests improved
operational efficiency and quicker cash conversion, reflecting positively on the company’s
working capital management and overall financial health.

12) Net Operating Cycle:

Net Operating Cycle is the time length between the payment for raw material
purchases & the Collection of cash for sale. It is difference between gross operating cycle &
creditors conversion period.

It is calculated by following formula:

NET OPERATING CYCLE = Gross Operating Cycle - Creditors

- Payment Period

Table 12 Showing Net Operating Cycle

Year Gross Operating Creditor's Payment Net Operating
Cycle Period Cycle
2021-22 45 16 28

2022-23 28 18 9

2023-24 29 20 9

35
 Chart 10 Showing Net Operating Cycle

Net Operating Cycle

30

25

20

15
Net Operating Cycle
10

0
2023-24 2022-23 2023-24

Interpretation:

The Net Operating Cycle has improved from 28 days in 2021-22 to just 9 days in both
2022-23 and 2023-24. This positive shift is driven by a decrease in the Gross Operating Cycle
and an increase in the Creditor's Payment Period. The company is now able to convert its
inventory and receivables into cash more quickly while benefiting from extended credit terms.
This reflects strong operational efficiency and better working capital management, enhancing
overall liquidity and financial stability.

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 CHAPTER 7
FINDINGS AND SUGGESTIONS

Based on the data provided for three years, the following key findings highlight
the working capital management efficiency at KMF Damul Dharwad:
1. Improving Liquidity Management:
• The Current Ratio declined from 1.21 (Y1) to 0.92 (Y3), indicating a potential
strain on short-term solvency.
• However, the Quick Ratio improved from 0.52 to 0.86, suggesting better
availability of liquid assets to meet immediate obligations.
2. Efficient Inventory and Debtors Management:
• Inventory Turnover Ratio improved overall, peaking at 18.36 in Y2, showing
faster movement of inventory.
• Debtors Turnover Ratio increased significantly from 18.23 to 47.08, with the
Debtors Collection Period dropping from 20.02 days to 7.75 days — a strong
sign of efficient receivables management.
3. Creditors Management:
• The Creditors Payment Period increased from 16.80 to 20.53 days, indicating
the company is taking slightly longer to pay its creditors, possibly to manage
cash flow better.
4. Cycle Efficiency:
• Gross Operating Cycle reduced from 45.49 days to around 29 days, and the Net
Operating Cycle dropped sharply from 28.69 to just 9.02 days in Y3. This
indicates significantly faster cash conversion and improved working capital
efficiency.

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 5. Strong Utilization of Working Capital:
• The Working Capital Turnover Ratio rose from 15.43 to a high of 86.07, implying
the company is generating more sales per unit of working capital.
6. Consistent Asset Utilization:
• Current Assets Turnover Ratio improved from 6.81 to 7.78, suggesting better
use of current assets to generate revenue.

Suggestions
• Improve Current Ratio:
Work on maintaining a current ratio above 1 by increasing current assets or reducing
short-term liabilities to strengthen liquidity.

• Enhance Inventory Management:

Adopt better inventory control systems and forecasting methods to reduce holding
costs and ensure steady inventory turnover.

• Sustain Efficient Receivables Collection:

Maintain strict credit policies and continue timely collections to keep the Debtors
Collection Period low.

• Balance Creditors Payment Period:

Avoid excessive delays in payments to suppliers to maintain healthy relationships and
avoid loss of creditworthiness.

• Invest in Financial Automation:

Use financial software to track and optimize working capital in real-time, enabling
faster and more accurate decision-making.

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 CHAPTER 8
SWOT ANALYSIS

Strength:
• Nandini enjoys good brand image. Dharwad Milk Union is one the leading producer
of milk products & it has wide area of market, “Nandini” is a trusted household brand
name, more than two lakhs farmer members were supplying milk.
• It has large procurement system.
• It has large procurement system.
• Huge infrastructure for processing.
• Competitive prices for all products.
• Wide distribution network leads to regular & timely supply.
• DMU is giving highly remunerative &timely payment to its producers & this has a
good on suppliers & made Union to be in good condition.

Weakness:
• Inadequate sales promotional activity.
• Due to bad smell that Persists cause low sales.
• DMU organizational structure does not permit incentive or reward for good
performance of an employee.
• DMU Company should distribute their product directly to sellers without keeping
any middlemen & agents because part of profits is divided between middlemen and
agents.

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OPPORTUNITIES:
• There is a phenomenal scope for innovation in product development, packing &
presentation.
• Steps to taken to introduce value added products like shrikhand, ice cream, paneer,
khova, flavoured milk, dairy sweets etc. this led to a greater presence & flexibility
in the marketplace along with the opportunities in the field of brand building.
• Increasing market demand for milk and milk products.
• There is scope for developing in an explored areas for milk processing as Nandini
can extend its equity of brand
• Diversification of milk products Peda, Mysore pak, cashew burfi, lassie, milk powders,
butter milk.

THREATS:
• Increase of competitor's milk vendors in organized sector
• No entry barriers for private players.
• Low level of consumer awareness in Dharwad & Surrounding areas.
• The competition of from co-operatives live Dodla, Heritage, Kamadenu they are
producing different milk products which are giving a good competition.
• * Private dairies procure milk at low cost from producers and sell milk resorting to
unethical trade practices. It is marketing war in which union must fight by the rules
and other private dairies do not fight by the rules. Hence, there is no level playing
field for organization with social responsibilities to compete with organizations
with purely profit motive.
• Plans of major companies like Reliance, ITC to enter in to market in future.

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CHAPTER 9
ANNEXER

41
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 CHAPTER 9
BIBLIOGRAPHY

Text Books:

❖ I.M. Pandey – Financial Management. Vikas Publishing House Pvt. Ltd. (Published
in 2004)
❖ M.Y. Khan and P. K. Jain – Financial Management. (Published in 2005)

Web Site: http://www.kmfnandini.com

http://www.openai.com

Other:
Company’s Financial Statements

47