PROJECT REPORT

ON

WORKING CAPITAL MANAGEMENT

AT
PRAVARA SAHAKARI BANK LTD. LONI

FOR THE PARTIAL FULLFILLMENT OF THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION (MBA)
SUBMITED BY
MISS. ROHINI HARIDAS KHOBARE
TO
SAVITRIBAI PHULE PUNE UNIVERSITY

UNDER THE GUIDANCE OF

PROF.P.BORHADE
THROUGH

INSTITUTE OF BUSINESS MANAGEMENT

&ADMINISTRATION (IBMA)
LONI(BK),TAL- RAHATA, DIST-AHMEDNAGAR.

2016-2017

1
 DECLARATION

I declare that the Project entitled Working Capital Management of PRAVARA

SAHAKARI BANK LONIsubmitted by me for the partial fulfillment of the degree of
Master Of Business Administration (MBA) of University Of Pune is Record Of
Summer Internship Work Carried Out by me During the period from 1 June 2017 to
31 July 2017 Under the Guidance of Prof.P.Borhade has not formed the basis for the
award of any degree , diploma ,association ,fellowship ,titles, in this or any other
university or other institution of higher learning.
It is further declare that the material obtained from other sources has been duly
acknowledgment in the Project Report.

(Miss.ROHINI HARIDAS KHOBARE)

Place IBMA , LONI BK .

Date:

2
 ACKNOWLEDGEMENT

It is my pleasure in presenting this project on partial fulfillment of master

degree in business administration. I wish to take this opportunity to express my deep
of gratitude to all those people who directly and indirectly helped me in completing
my project successfully.

I would like to place all my gratefulness to my project guide Mr.Aghav sir (Branch
manager) for his contribution and suggestions which has helped me in bringing this
project. He has been a continuous inspiration throughout the project.

I am thankful to the director of my institute Director Mr.A.P.Unde sir and, my internal

guide Prof.P.Borhade-who has helped and guided me by providing their valuable
suggestions at every stage in bringing about this project.

Last but not the least, I am grateful to all employees of Kai SauKesharbaiTanpure
Multistate Co-Operative Credit So Ltd Rahuri to all my friends for the help and
support they have given to me.

MISS. R.H.KHOBARE

3
 INDEX

CHAPTER PARTICULARS PAGE

NO NO
Introduction
1. 1.1 Selection Of Topic 10
1.2 Background OfTopic 11
1.3 History Of Co-Operative Bank 12
1.4 History OfKaiSaukesharbaiTanpure MultistateCo-Operative 17
Credit So Ltd.
1.5 Scope Of Study 21
1.6 Objectives Of Study 22
Theoretical Background
2. 2.1 Introduction Of Working Capital 24
2.2 Sources Of Working Capital 26
2.3 Components Of Working Capital 28
2.4 Concepts Of Working Capital 30
2.5 Types Of Working Capital 32
2.7 Factors Determining Working Capital Management 37
2.8 Advantages Of Adequate Working Capital 39
2.9 Excess And Inadequate Working Capital 40
2.10 Working Capital Management 41
3. Research Methodology 47
4. Data Analysis And Interpretation
4.1 Calculation Of Net Working Capital 49
4.2 Analysis Through Various Ratios 57

4
5. Finding& Conclusion &Suggestions 58

6. Bibliography 62

5
 LIST OF TABLES

TABAL TITLE PAGE

NO NO

1 Calculation of net working capital of three year 51

2 Current Ratio 53
3 Quick Ratio 54
4 Net working Capital Ratio 56

6
7
 EXECUTIVE SUMMERY

PROJECT TITLE: Working Capital Management of Pravara sahakari bank loni

COMPANY NAME: The Pravara Sahakari bank loni.

THE DURATION OF PROJECT: 1ST June 2017 To 31st July 2017
INTRODUCTION:
As per the MBA curriculum, at the end of the first year, all student are
required to undergo a summer programme of 60 days. This summer training is an
integral part of the MBA course and its successful completion is a pre-requisite for the
fulfillment of the postgraduate degree in management.
On visiting Pravara co-operative bank Loni .I tried to highlight the whole
balance sheet of bank and working procedure of bank.
The pravara co-operative bank loni.
. is one amongst the well-known Co-operative Bank working since last 42 years.
To satisfy customer's need is the mission and purpose of every business.
Lending of funds to the constituents , mainly traders business and industials
enterprises , constitutes the main business of the banks. The major portion of the bank
funds is employed by way of loans and advances.Which is the most profitable
employment of its funds. The major part of income is earned from interest and
discount on the funds so lent. Rolling over of advances would be possible only if there
is timely recovery of money lent. Recovery of loans and advances increase banks
liquidity and profitability.

8
INTRODUCTION

9
 1.1 Introduction Of The Topic

Selection of the topic is one of the important things before starting with the project
work. It is, however, difficult to decide which topic should be selected so that it would
be beneficial for both organization as well as me to gain maximum knowledge.

The LPG phenomenon (Liberalization, Privatization and Globalization) have given

rise to immense competition in various sectors of Indian economy. In order to sustain
itself in such competitive market, any organization has to be well aware of its
strengths, weaknesses, opportunities and threats. It helps to estimate the capacity and
possible hurdles for its satisfactory performance.

While selecting the topic rapid changes which are taken in the economy, opportunities
and threats in front of an organization, changing environment and many other things
which an organization has to be aware with, are considered. Taking into consideration
all these things I selected the subject WORKING CAPITAL MANAGEMENT.

Capital is what makes or breaks a business, and no business can run successfully
without enough capital to cover both short- and long-term needs. Maintaining
sufficient levels of short-term capital is a constantly ongoing challenge, and in todays
turbulent financial markets and uncertain business climate external financing has
become both harder and more costly to obtain. Companies are therefore increasingly
shifting away from traditional sources of external financing and turning their eyes
towards their own organizations for ways of improving liquidity. One efficient but
often overlooked way of doing so is to reduce the amount of capital tied-up in
operations, that is, to improve the working capital management of the company.
Working capital is a financial metric of operating liquidity which describes the
amount of cash tied up in operations and defines the short term condition of a
company. A positive working capital position is required for the continuous running
of a companys operations, i.e. to pay short term debt obligations and to cover
operational expenses. A company with a negative working capital balance is unable to
cover its short-term liabilities with its current assets.

10
1.2 Background Banking Industry

Banking Activity
The banking sector is the lifeline of any modern economy. It is one of the
important financial pillars of the financial system, which plays a vital role in the
success or failure of an economy. Banks are one of the oldest financial intermediaries
in the financial system. They play an important role in the mobilization of deposits
and disbursement of credit to various sectors of the economy. The banking system is
the fuel injection system, which spurs economic efficiency by mobilizing saving and
allocating them to high return investment. Research confirms that countries with a
well-developed banking system grow faster than those with weaker one. The banking
system reflects the economic health of country. The strange of economy of any
country basically hinges on the strengths and efficiency of the financial system, which
depends on a sound and solvent banking system.
A sound banking system efficiently deploy mobilized saving in productive
sectors and a solvent banking system ensures that the is capable of meeting its
obligation to the depositors. The banking is dominant is India as it accounts for more
half the assets of the financial sector.
Banking Regulation Act of India,1949 defines Banking as accepting. For the
purpose of lending or investment of deposits of money from the public, repayable on
demand or otherwise and withdraw able by cheque.draft, order or otherwise,
Deriving from this definition and viewed solely from the point of view of the
customers, banks essentially perform the following function:-
Following are the basic function of banking:-

1) Accepting deposits from public

2) Lending money to public

3) Transferring money from one place to another
4) Credit creation
5) Acting as trustees
6) Keeping valuable in custody
7) Investment decision and analysis

11
1.3 History Of Co-Operative Bank

Meaning of Co-Operative Bank:-

A co-operative Bank is a bank which is based on the principles of co-

operation. This bank has no aim of making profit. Co-operative banks are the banks
operating in the economy under co-operative model of ownership. Co-operatives are
based on the values of self-help, self-responsibility, democracy, equality, equity and
solidarity. In the tradition of their founders, co-operative members believe in the
ethical values of honesty, openness, social responsibility and caring for others.
Co-operative banks are organized & managed on the principle of co-operation,
self help& mutual help.co-operative bank work on the basis of "One Member One
Vote".
A co-operative bank is a financial entity which belongs to its members, who
are at the same time the owners and the customers of their bank. Co-operative banks
are often created by persons belonging to the same local or professional community or
sharing a common interest. Co-operative banks generally provide their members with
a wide range of banking and financial services (loans, deposits, banking accounts...).
The 7 co-operative principles are:
1. Voluntary and open membership
2. Democratic member control
3. Member economic participation
4. Autonomy and independence
5. Education, training and information
6. Co-operation among Co-operatives
7. Concern for Community.

12
Definition Of Co-Operative Bank:-

"A Banks that holds deposits makes loans & provides other financial services
to co-operatives & members owned organization".
Banks that are operating in the economy under cooperative model of
ownership.
A co-operative Bank is a bank which is based on the principles of co-operation. This
bank has no aim of making profit. Co-operative banks are the banks operating in the
economy under co-operative model of ownership.
The beginning:-
The first known mutual aid society in India was probably the
AnyonyaSahakariMandali organized in the erstwhile princely State of Baroda in
1889 under the guidance of VithalLaxman also known as BhausahebKavthekar.
Urban co-operative credit societies, in their formative phase came to be organized on
a community basis to meet the consumption oriented credit needs of their members.
Salary earners societies inculcating habits of thrift and self help played a significant
role in popularizing the movement, especially amongst the middle class as well as
organized labour. From its origins then to today, the thrust of UCBs, historically, has
been to mobilize savings from the middle and low income urban groups and purvey
credit to their members - many of which belonged to weaker sections.
The enactment of Cooperative Credit Societies Act, 1904, however, gave the
real impetus to the movement. The first urban cooperative credit society was
registered in Canjeevaram (Kanjivaram) in the erstwhile Madras province in October,
1904. Amongst the prominent credit societies were the Pioneer Urban in Bombay
(November 11, 1905), the No.1 Military Accounts Mutual Help Co-operative Credit
Society in Poona (January 9, 1906). Cosmos in Poona (January 18, 1906), Gokak
Urban (February 15, 1906) and Belgaum Pioneer (February 23, 1906) in the Belgaum
district, the Kanakavli-Math Co-operative Credit Society and the Varavade Weavers
Urban Credit Society (March 13, 1906) in the South Ratnagiri (now Sindhudurg)
district. The most prominent amongst the early credit societies was the Bombay
Urban Co-operative Credit Society, sponsored by VithaldasThackersey and
LallubhaiSamaldas established on January 23, 1906..

13
 In the present day context, it is of interest to recall that during the banking
crisis of 1913-14, when no fewer than 57 joint stock banks collapsed, there was a
there was a flight of deposits from joint stock banks to cooperative urban banks.
Maclagan Committee chronicled this event thus.

Progress of Co-Operative Bank in India:-

Co-operative bank has posted high growth in credit & deposit during the year.
Co-operative occupy the important position in Indian financial system. Co-operatives
were the first formal institution to be conceived & developed to purvey credit to rural
India.co-operatives are important channels of financial inclusion of middle & low
income section in semi urban & urban areas enhancing the financial health of these
institution would further strengthen the efforts towards financial inclusion.

Structure of Co-Operative Bank:-

Co-operatives banks are important constitution of Indian financial system. The
co-operatives movement originated in west, but the important that such bank has
assume in India is rarely parallel in the world.co-operative is voluntary association of
members of self help, catering to the financial needs on a mutual basis.The co-
operative banking system is federal in nature / structure .structure of co-operative
banking system is three tier structures in India.

1) Primary credit societies

2) Central co-operatives banks
3) State co-operatives banks
4) Central co-operatives banks

State co-operatives banks

Central co-operatives banks

Primary credit societies

14
Function of Co-Operative Bank:-
The co-operatives banks in India plays an crucial role even
today in rural financing. The banking of co-operatives bank has
increased phenomenally in recent years due to sharp increase in
number of primary co-operatives banks.
Co-operatives bank in India finance rural areas under :-
Farming
Cattle
Milk
Personal Finance
Co-operatives bank in India finance urban areas under :-
Self Employment
Industries
Small Scale Units
Home Finance
Consumer Finance
Personal Finance

15
 BANK PROFILE

Name of the Bank:- Pravara sahakari Bank Ltd. (scheduled

bank)

Head Office Address :H.O.Loni,bk, 413 736 Tal-Rahata, Dist -

Ahmednagar

RegistrationNo . :ANR/BNK/132 Dt. 11 -12-1974.

Lic.No and Date. : ACD.MH.55P Dt.07-05-1975.

Working Areas :Maharashtra State

Branches : Head Office : 01

Branches : 19

Extension : 11

Total : 31

Shareholder :13628

Workers :204

HEAD OFFICE:-PAVARASAHAKARI BANK LTD. LONI BK.

16
 LIST OF BOARD OF DIRECTORS

SR NO. BOARD OF DIRECTORS DESIGNATION

1 Capt.V.V.Gune President

2 Shri.C.B.Ghogare Vice - President

3 Shri.L.M.Mhaske Director

17
 ORGANIZATION CHART

MEMBER OF
SHAREHOLDER

CHAIRMAN

VICE CHAIRMAN

CEO

DY.MANAGER DY. MANAGER

ADMINISTRATION
AUDIT INSPECTION
BANKING AND
AND PLANNING
DEVELOPMENT

1 ST GRADE 1 ST GRADE
OFFICER/BRANCH OFFICER/BRANCH

MANAGER MANAGER

ACCOUNTANT
ACCOUNTANT

SR.CLERK SR.CLERK

JR. CLERKS JR. CLERKS

TRAINEE STAFF TRAINEE STAFF

OTHER STAFF OTHER STAFF

18
 BRANCHES OF BANK

1) Pravara Sahakari Bank Ltd.LoniKd.

2) Pravara Sahakari Bank Ltd.Pravaranagar.

3) Pravara Sahakari Bank Ltd.Kolhar Bk.

4) Pravara Sahakari Bank Ltd.AshviKd.

5) Pravara Sahakari Bank Ltd.Dadh Bk.

6) Pravara Sahakari Bank Ltd.Songaon.

7) Pravara Sahakari Bank Ltd.Ahemdnagar.

8) Pravara Sahakari Bank Ltd. Shirirampur.

9) Pravara Sahakari Bank Ltd.Loni Bk.

10) Pravara Sahakari Bank Ltd.Shirdi.

11) Pravara Sahakari Bank Ltd.Viladghat.

12) Pravara Sahakari Bank Ltd.Shevgaon.

13) Pravara Sahakari Bank Ltd.Rahata.

14) Pravara Sahakari Bank Ltd.Babhleshwar.

15) Pravara Sahakari Bank Ltd, Shibalapur

16) Pravara Sahakari Bank Ltd, Sangamner

17) Pravara Sahakari Bank Ltd, Pune

18) Pravara Sahakari Bank Ltd, Nashik

19) Pravara Sahakari Bank Ltd, Aurangabad

19
EXTENSION COUNTOURS

1) P.V.P. College Loni Kd.

2) Pravara Medical & Dental College Loni Bk.
3) Woman Polytecniq Loni.
4) Pravara Public School Pravaranagar.
5) Rameshwar High School Chanegaon.
6) Late Shri Janardhan Kale Patil High School Chincholi.
7) Ahemdnagar Medical College ViladGhat
8) Pravara MadhyamikVidhyalayaGalnimb
9) R.P.W. Loni
10) A.P.CRahata
11) P.V.P. Junoir College ,Loni

20
BANKING PRODUCT OF PRAVARA SAHAKARI
BANK LTD.

1)DEPOSIT

a)Saving Account

INTEREST ON DEPOSIT

Sr.No. Type of Deposit Interest Rate from

11/03/2017
1 Saving Deposit
Up to 1lac 4.00%
1 lac up to 2 lac 6.00%
Above 2 lac
Deposit(all type of Deposit)
1)07 days up to 45 days 6.00%
2) 46 days up to 90 days 6.50%
3) 91 days up to 180 days 7.00%
4) 181 days up to 1 year 7.50%
5) 1 year up to 3 years 8.00%
6)3 year to 5 year 9.00%
7) above 5 year 8.50%
3 Pigmy(1 year and above) 2.50%

b)Current Account

c)Fixed Deposit(FD)

d)Recurring Deposit(RD)

21
 3)CORE BANKING

4)RTGS/NEFT

5)ATM

Particular 31 30-6 30-6 31-3- 31-3- 31-3- 31-3- 31-3-2016 31-3-2017

6-76 80 90 2000 2013 2014 2015

Share capital 2.44 9.47 124.97 1133.82 4186.82 4415.49 4807.51 3079.58

Deposit 6.90 88.00 1393.75 8551.65 34417.17 37001.53 40893.88 43485.12

Loans 6.56 66.12 983.24 6619.00 17803.80 20500.42 23528.29 270389.7

Investments 1.93 20.25 395.27 2296.33 17596.35 18437.22 18605.04 1687.20

Working 9.88 112.30 1533.61 10035.93 39282.74 42815.22 46490.93 49612.33

capital

Net Profit 0.19 2.55 14.90 62.93 181.82 331.08 448.66 504.13

Net Profit ratio 1.92 2.27% 0.97% 0.62% 0.46% 0.77% 0.96% 1.01
with w.c. %

22
 SCOPE OF THE STUDY:

1. The student had studied the procedure that is adopted for granting the loan by
Pravara sahakari bank ltd. Loni
2. The student has also collected the information about the procedure for
recovery of the loan amount.
3. The student had collected the document which required for the loan .
4. The student has studied the three years annual report published by the
concerned bank .

23
 OBJECTIVE OF STUDY:

1) To understand the Banking operation.

2) To understand the function of co-operative Bank.
3)To know the key issue in sanction and disbursement of Education Loan.
4) To study the various cases for the Education Loan disbursement.

24
CHAPTER NO-2.

THEORETICAL ASPECT OF STUDY

Cooperative Banking Operations Credit Management - Ratio Analysis & Break Even
Analysis

Ratio analysis is the relationship between two variables. It can be expressed as a

percentage (Profit of 20%) or as a simple ratio (like 2:1). Whenever we recast the
figures shown in the balance sheet or Profit and Loss Account, only the recasted
figures should be taken into account for analysis.

Any number of ratios can be obtained from a Balance Sheet and Profit and Loss
Account. However, a banker mainly focuses on key ratios falling under three main
groups viz. Liquidity, Solvency and Efficiency. Important ratios to be incorporated in
proposal / appraisal are given below:

1 Current Ratio:

The current ratio is arrived at by dividing, total value of current assets by current
liabilities i.e.

Current Ratio = Current Assets/Current Liabilities

This ratio reflects the current assets cover the current liabilities quantitatively at
any point of time. It is the barometer of short term liquidity of the company. In
other words, the working capital resources position is reflected in current ratio and
hence higher the ratio, better the liquidity. Slip back or fall in current ratio would
generally indicate diversion of short term funds (either for acquisition of fixed
assets or for outside investment) or cash loss. Hence, any adverse trend in
current ratio should be carefully examined. It should be kept in mind that it does
not reflect the quality of non-cash current assets that is the frequency of non-
cash current assets turning over to cash. Generally bankers consider a current
ratioof 1.33:1 as satisfactory.

Quick ratio indicates the ability of the firm to meet its urgent financial obligations.

25
 Quick Ratio = Quick Assets / Current Liabilities.

Inventories are deducted from the current assets. This is because, at times, it may
not be possible to convert inventories into cash quickly. The bench mark of this
ratio is 1.

2 Debt-Equity Ratio:

The debt equity ratio is arrived at as under:

Debt-Equity Ratio = Total Debt _

Equity
DER indicates relationship between the external borrowings and the own funds of
the concern. In certain cases, only the long term debt is taken into account
whereas in certain other cases all debts including current liabilities are taken
into account. Equity means net worth of the concern after making due provision
for bad/doubtful debts in advances, intangible and fictitious assets.

A debt-equity ratio of 2:1 is generally considered reasonable. In certain cases like

traders and SME advances a higher debt-equity ratio is generally allowed.

3 Fixed Assets Coverage Ratio:

This shows the number of times the value of fixed assets (after providing
depreciation) covers term liabilities.

Fixed Assets Coverage Ratio = Net Fixed Assets/Long/Medium Term Debts

This should be more than 1.

4 Debtors Turnover Ratio:

This refers to the borrower / clients credit policy as a part of its overall financial
management. Outstanding debtors signify that a part of the financial resources of
the concern are made available to outsiders. The larger the amount outstanding
there-under, the more the depletion of funds for the concern.

Debtors Turnover Ratio = Outstanding Debtors x 365

(Number of days) Credit Sales

This shows the average period of credit extended by the concern. Lower figure
would indicate that the concern is extending less credit and consequently more

26
 resources are available for its operations. Generally, the outstanding of 1 to 3
months is reasonable; various factors which affect this ratio are to be borne in
mind.

5 Creditors Turnover Ratio:

This is arrived at as under:

Creditors Turnover Ratio = Outstanding Creditors x 365

(Number of days) Credit Purchases

Large creditors may not be a healthy sign. When a concern is facing financial
stringency, there is a tendency to postpone payment to creditors. Such situations
should be distinguished from other usual situations. In such cases creditors
outstanding will be much beyond contracted period. Also liberal creditors may
cost the concern either in the form of inflated prices for purchases or by way of
payment of interest. This can be injurious in the interest of the concern. Branches
should note that there can be fraudulent transactions on the part of the firm
through debtors and creditors undermining the overall interests of the firm. In the
name of retaining the customers the firm may offer longer credit to
known/interested parties or agree to pay higher rate of interest or higher prices to
creditors under the guise of enjoying larger credit terms. These kind of dealings
can be observed only if market trends are analysed and purchases and sales
portfolios of the concern are critically examined. The desirable level will be
anything between half to two months purchase. However, depending upon the
industry trend, the levels may vary.

6 Material Management Ratio:

The basic ratio falling under this head is Inventory Turnover Ratio. Inventory
means raw materials, stores, stocks-in-process and finished goods. All these items
put together are related to cost of goods sold for the year. Cost of sales is
calculated as under :

Cost of Sales = Cost of Production + Opening Stock (FG& SIP) Closing Stock
(FG& SIP)

FG = Finished goods SIP = Stock in Process/Semi-finished goods

27
 The cost of production is arrived at by adding all direct costs, viz. raw materials
consumed, power and fuel, direct labour, consumable stores, repairs and
maintenance to machinery and other manufacturing expenses. Cost of sales
reflects the ability/production efficiency and as such has an important bearing on
the performance of a concern. This ratio is calculated in number of days'
consumption.

Inventory Turnover Ratio = Inventory x 365

(Number of days) Cost of Goods Sold

This shows the inventory held for number of days. The lower the ratio, the more
efficient is the inventory management.

Raw Material Turnover Ratio = Raw Materials on hand x 365

(Number of days) Raw Materials Consumed during the year

This shows stock of raw materials on hand in number of months. Here also the
endeavour should be on a lower ratio unless of course, the raw materials are
imported items or canalised items, in which case larger raw materials holding may
be permitted.

Finished Goods Turnover Ratio = Finished Goods on hand X 365

(Number of days) Cost of Goods Sold during the year

This shows how many months finished goods are on hand. Branches should study
the reason for holding the finished goods and especially beware of rejected goods,
defective goods and unsaleable goods being included in the value of finished
goods.

All the above ratios give an indication about the material management by the
concern.

7 Debt Service Coverage Ratio (DSCR):

Ability of a concern to service its term liabilities can be gauged from this ratio.
This ratio is applied while appraising all term loan proposals and investment
decisions. This ratio is studied when measures for rehabilitation of sick

28
 industrial units are examined and also while fixing/ rescheduling the repayment
schedule for term loans. Debt servicing means payment of interest and
installments on term loans. DSCR measures whether interest and installments can
be paid out of internal generation of funds. The ratio is worked out as under:

DSCR = PAT + DEPRECIATION + INTEREST ON TERM LOAN

INTEREST ON TERM LOAN + TERM LOAN INSTALLMENTS

A ratio of 2 would indicate the concern's internal generation of funds would be

twice of its commitments towards term loan obligations and interest thereon. This
ratio should be more than one in order to take care of any eventualities in the
profits position of the concern and also to leave certain surplus with the concern
for its normal growth and withdrawal.

8 Break Even Analysis:

Breakeven point (BEP) of a firm refers to that level of sales at which, it recovers
all its costs. This is the point where the unit neither makes profit nor loss. It is
important while assessing the performance or processing a credit proposal to
ascertain the level at which the firm breaks even, so as to know its shock
absorbing capacity. Thus, break even analysis is an important tool in the hands of
a credit officer while analysing a credit proposal.

To calculate the BEP, as a first step, the total cost has to be bifurcated into fixed
and variable items. While fixed costs refer to those costs which are incurred
regardless of the operation and/or level of activity of the unit. The examples are
rent, taxes, insurance, depreciation, maintenance of building, machinery, etc.
However, the fixed costs also undergo change over a period of time. The variable
costs on the other hand are expenses which vary directly in proportion to level of
activity or sales or production. The variable costs are also known as marginal
costs and example in this respect is raw materials, power & fuel, octroi,
consumables etc. While going through the profit and loss account, based on above
classification, the expenses should be analysed and following formula be applied
to ascertain the BEP.

29
BEP in Quantity = Fixed Costs / (Unit Sale Price - Unit Variable Cost) OR

BEP in Value (Rs.) = Fixed Cost x Sales / (Sales - Variable Cost (VC))

Sales mean Net Sales.

Sales - VC = Contribution

If a unit breaks even at a very high level of activity, there is every possibility of
the unit incurring loss, if any of the variables like fixed cost, variable cost,
sales change even marginally. Therefore, the proposal should be scrutinised
very carefully whenever BEP is reached at a very higher level of activity
instead of at a lower level.

30
Ratios at a glance:

Ratio Formula Interpretation and benchmark

Current Ratio Current Assets Ability to meet current liabilities

Current Liabilities Higher the ratio better the liquidity

(1.33 is desirable) Shortfall indicates diversion of short

term fund.
Solvency Net Tangible assets Ability to repay debt from assets.
Ratio
Total Outside Liabilities Higher the ratio betters the solvency.
Debt-Equity TDE= Total Outside Coverage of outside liabilities to own
Ratio Liab./Tangible Net worth/ fund. Lower the ratio higher the safety.
Equity

DE = Term Liabilities /

T. N. W.
Assets Coverage Net Block of Fixed Assets Extent to which FA covers Term
Liabilities.
Ratio Term Liability
More than 1 is desirable.
Debt-Service PAT + Dep. + Int. on Loan Debt Servicing Ability
Coverage Ratio
Instal. of TL + Int. on Loan To work out repayment schedule is
desirable.
Inventory Turn Net Sales Efficiency of Inventory Management
over Ratio OR
Inventory Holding Period of Inventory.
Inventory
Inventory x 365
(No. of days)
Cost of goods sold

31
Debtor turnover Average O/S Debtors x 365 Credit policy of the unit/ firm.
Ratio (No of
Credit Sales Average Period of the credit extended.
Days)
Creditor Average O/S Creditors x 365 Ability to get goods on credit.

Ability to repay
Turnover Ratio Credit Purchase
(No. of days)
Assets Net Sales Efficient use of assets
turnover ratio.
Net Operating Assets means FA + CA +
Net Operating Assets
NonCA- Investments.

Must have increasing trend.

Gross Profit Gross profit X 100 Margin available after meeting

Margin manufacturing cost.
Net Sales
Efficiency of Production and Pricing.
Net profit Net Profit After tax X 100 Net Profit margin on business.
Margin
Overall efficiency of the unit.
Net Sales

Earning left for Dividend.

Dividend per Total distributable profit to Total dividend payable to per shares
shares Equity holders

No of equity shares
Return on Equity Equity Earning Measures profitability on Equity

Equity Earning=PATPreference Dividends.

Net Worth

Price earnings Market Price of the share Price earning on present market value.
Ratio
Earnings Per share

32
Break Even Fixed Cost BEP of the Unit.
analysis
Unit sales price- Unit variable High BEP is risky
BEP in Qty. cost.
Contribution of Profit to meet Fixed
Fixed Cost x Sales
cost of the Unit.
BEP in Value Sales- Variable Cost
Sales Means net Sales.
(Contribution)

Margin of Safety Sales Value - BEP Sales % of variance sustainable by the unit.
MOS
Actual Sales Cushion available in case of variance.

PAT = Profit after Tax, FA = Fixed Assets, BEP = Break Even Point,

MOS = Margin of Safety.

FUNCTIONAL AREA

SERVICE DEPARTMENT

MAIN SERVICES PROVIDED BY ANSB

1. DEPOSITS

2. Saving account

3. Current account

4. Fixed deposit

5. Recurring deposit

6. Loans

HUMAN SEROURCE DEPARTMENT

1.Recruitment.
33
 Internal

External

2.Selection

Selection Procedure are as under

Receiving application

Scrutinize the application

Sending call letters

Arranging the interview

Re-interview (If required)

Final selection

Required Training & Development skill

Negotiable deal

Appointment

3. TRAINING

4.TRANSFER AND PROMOTION

MARKETING DEPARTMENT

1. PUBLIC RELATION

2. ADVERTISEMENT MEDIA
FINANCE DE PARTMENT

1.FINANCIAL REQUIREME

34
 2.CAPITALIZATION

SWOT ANALYSIS OF ANSB LTD.

STRENGHT:-

PSB Bank is taking short time in sanctioning the business loans in

comparison to nationalized banks and private banks i.e. micro
finance to rural people and businessmen.

PSB bank is able to position itself as one-stop-shop. Banking

service providers in Amreli city

In this competitive era, PSB bank is able to expose itself in the

rural market i.e. bank has number of customer and customer are
highly satisfied with banks services in rural areas.

PSB bank also has a well reputation in Amreli city and branch in
chital. Both the branches are fully computerized banks.

WEAKNES:-

PSB bank cannot provide huge finance in huge amount to people.

It can provide micro finance to people.

Lack of highly professional staff is biggest weakness of PSB bank.

Now PSB bank is fully computerized bank, computers for

various, so it becomes serious problem, while operating, when
there is electricity problem or Internet linking problem.

35
 OPPORTUNITIES:-

PSB bank has an opportunity to still increase its market shares.

Saving account, current account and fixed account are getting good
response from the market. So bank may get benefit from them in
future.

PSB bank is able to build a brand, so it will be easy bank to launch

new products at ease

THREATS:-

Few private bank and public banks expanding branch network in

Amreli, may compete PSB bank in new future.

Pace of technology up gradation and technology adolescence.

Some nationalized banks are making their services faster and will
be going to adopt new technology

36
37
2.7 - Advantage of Adequate working Capital

1. Solvency of the Business:

Adequate working capital helps in maintaining the solvency of the

business by providing uninterrupted production.

2. Goodwill:

Sufficient amount of working capital enables a firm to make

prompt payments and makes and maintain the goodwill.

3. Easy loans:

Adequate working capital leads to high solvency and credit

standing can arrange loans from banks and other on easy and favourable terms.

4. Cash Discounts:

Adequate working capital also enables a concern to avail cash

discounts on the purchases and hence reduces cost.

5. Regular Payment of Salaries, Wages and other day to day

Commitments:
It leads to the satisfaction of the employees and raises the morale of its employees,
increases their efficiency, reduces wastage and costs and enhances production and
profits.

6. Quick and Regular Return on Investments:

Sufficient working capital enables a concern to pay quick and

regular of dividends to its investors and gains confidence of the investors and can
raise more funds in future.

38
2.8- Excess and Inadequate Working Capital:

Every business concern should have adequate amount of working

capital to run its business operations. It should have neither redundant or excess

working capital nor inadequate nor shortages of

working capital. Both excess as well as short working capital positions

are bad for any business. However, it is the inadequate working capital
which is more dangerous from the point of view of the firm.

2.9-Disadvantages Of Excessive Working Capital

Excessive working capital means idle funds which earn no profit for the firm and
business cannot earn the required rate of return on its investments.

1. Redundant working capital leads to unnecessary purchasing and accumulation of

inventories.
2. Excessive working capital implies excessive debtors and defective credit policy
which causes higher incidence of bad debts.
3. It may reduce the overall efficiency of the business.
4. If a firm is having excessive working capital then the relations with banks and
other financial institution may not be maintained.
5. Due to lower rate of return on investments, the values of shares may also fall.

The redundant working capital gives rise to speculative transactions.

39
2.10-WORKING CAPITAL MANAGEMENT

Working Capital Management is concerned with the problems that arise in attempting
to manage the Current Assets, Current Liabilities and the inter-relationship that exists
between them. It refers to the deployment of current assets and current liabilities
efficiently so as to maximize short-term liquidity.

Working capital management entails short term decisions - generally, relating to the
next one year period.

1. Basic Objective Of Working Capital Management:

1. The working capital concept focuses attention on two aspects of current
assets management which are the basic objectives of working capital
management,
a. How to optimize investment in current assets?
b. How should current assets be financed?
2. The consideration of the level of investment in current assets should
avoid two danger points- excessive or inadequate investment in current
assets. Investment in current assets should be just adequate to the needs of
the business firm. Excessive investment in current assets should be
avoided because it affects the firms profitability, as idle investment earns
nothing. On the hand inadequate amount of working capital can threaten
solvency of the firm because of its inability to meet its current
obligations. It should be realized that working capital needs of the firm
may be fluctuating with changing business activity.

40
 3. Another aspect of working capital management points to the need of
arranging funds to finance current assets. Whenever a need for working
capital funds arises due to the increasing level of business activity or for
any other reason, financing arrangement should be made quickly.

2. Need For Working Capital Management:

1. More than half of the total capital of the firm is generally invested in
current assets. It means less than half of the capital is blocked in fixed
assets. We pay due attention to the management of fixed assets through
the capital budgeting process. Management of working capital too,
therefore, attracts the attention of the management.
2. There is a positive correlation between the sale of the product of the firm
and the current assets. An increase in the sale of product requires a
corresponding increase in current assets. It is therefore indispensable to
manage the current assets properly and efficiently.
3. In emergency (non-availability of funds etc.) Fixed assets can be
acquired on lease but there is no alternative for current assets.
Investment in current assets, i.e., inventory or receivables can in no way
be avoided without sustaining loss.
4. Working capital needs are more often financed through outside sources
so it is necessary to utilize them in the best possible way.

41
3. Focusing On Management Of Current Asset

Net working capital is a qualitative concept. It indicates the liquidity position of the
firm and suggests the extent to which working capital needs may be financed by
permanent sources of funds. Current assets should be sufficiently in excess of current
liabilities to constitute a margin or buffer for maturing obligations within the ordinary
operating cycle of a business. In order to protect their interests, short-term creditors
always like a company to maintain current assets at a higher level than current
liabilities. It is a conventional rule to maintain the level of current assets twice the
level of current liabilities. However, the quality of current assets should be
considered in determining the level of current assets vis--vis current liabilities. A
weak liquidity position poses a threat to the solvency of the company and makes it
unsafe and unsound. A negative working capital means a negative liquidity, and may
prove to be harmful for the companys reputation. Excessive liquidity is also bad. It
may be due to mismanagement of current assets. Therefore, prompt and timely action
should be taken by management to improve and correct the imbalances in the liquidity
position of the firm.

Net working capital concept also covers the question of judicious mix of long-term
and short-term funds for financing current assets. For every firm, there is a minimum
amount of net working capital which is permanent. Therefore, a portion of the
working capital should be financed with the permanent sources of funds such as
equity share capital, debentures, long-term debt, preference share capital or retained
earnings. Management must, therefore, decide the extent to which current assets
should be financed with equity capital and/or borrowed capital.

42
In summary, it may be emphasized that both gross and net concepts of working
capital are equally important for the efficient management of working capital. There
is no precise way to determine the exact amount of gross or net working capital for
any firm. The data and problems of each company should be analysed to determine
the amount of working capital. There is no specific rule as to how current assets
should be financed. It is not feasible in practice to finance current assets by short-
term sources only. Keeping in view of the constrains of the individual company, a
judicious mix of long and short-term finances should be invested in current assets.
Since current assets involve cost of funds, they should be put to productive use.

4. Focusing On Liquidity Management

The gross working capital concept focuses attention on two aspects of current assets
management:

1. How to optimize investment in current assets?

2. How should current assets be financed?

The consideration of the level of investment in current assets should avoid two danger
points- Excessive or inadequate investment in current assets. Investment in current
assets should be just adequate to the needs of the business firm. Excessive investment
in current assets should be avoided because it impairs the firms profitability, as idle
investment earns nothing. On the other hand, inadequate amount of working capital
can threaten solvency of the firm because of its inability to meet its current
obligations. It should be realized that the working capital needs of the firm may be
fluctuating with changing business activity. This may cause excess or shortage of
working capital frequently. The management should be prompt to initiate an action
and correct imbalances.

Another aspect of the gross working capital points to the need of arranging funds to
finance current assets. Whenever a need for working capital funds arises due to the
increasing level of business activity or for any other reason, financing arrangement
should be made quickly. Similarly, if suddenly, some surplus funds arise they should
not be allowed to remain idle, but should be invested in short-term securities.

43
Thus,the financial manager should have knowledge of the sources of working capital
funds as well as investment avenues where idle funds may be temporarily invested.

CHAPTER NO 3
RESEARCH METHODOLOGY

44
Research Methodology is a very organized and systematic medium through which a
Particular case or problem can be solved.
Research in common parlance refers to a search for knowledge. One can also define
research as a scientific and systematic search for pertinent information on a specific
topic. In fact research is an art of scientific investigation.
It is a step-by-step logical process, which involves:

1. Defining a problem
2. Laying the objectives of the research
3. Sources of data
4. Methods of data collection
5. Data analysis & processing
6. Conclusions & Recommendations

Research inculcates scientific and inductive thinking and it promotes the development
of logical habits of thinking and organization.

1. Primary Data:
The primary data are those which are collected anew and for the first time, and
thus happen to be original in character. Primary data was collected from Manager
of Pravara sahakari bank .This data includes information on company profile, its
products, financial statements etc.
2. Secondary Data:
Secondary data means data that are already available such that they refer to the
data which have already been collected and analyzed by someone else. Secondary
may either be published or unpublished data. It consists of collecting the relevant
information from different documents, reference books, journals, previous reports,
websites etc

45
3.2- LIMITATION OF THE STUDY

The current study aims to attain the described objectives in full earnest and accuracy.
It was disadvantaged due to the following limitations

1. This project information is only according to the information provided by the

co-operative firm.

2. The information obtained through the primary and secondary data is assumed
true

3. The study duration (summer plant) is short.

4. Analysis is limited to just 3years data study for financial analysis
5. Limited interaction with the concerned head due to their busy scheduled.

46
 CHAPTER NO.4
DATA ANALYSIS AND INTERPRETATION

47
 Table no 1-Calculation Of Net Working Capital Of PRAVARA
SAHKARI BANK LONI.

(Amount in Rs in Lacks.)

Year 2014 2015 2016 2017

CURRENT ASSETS

14728221 17728221 18728221

Sundry Debtors

Loan & Advances 40707478 43707478 44707478

Bills receivable 749345 3749345 4749345

Other Current Assets 7493458 10493458 11493458

Cash in bank 11240187 14240187

Total cur.assets

Less :-

A) CURRENT LIABILITIES:
Creditors

Advances

Provisions

Outstanding expenses

Total current Lab.

Net Working capital

(A)-(B)

(Source:-Annual Report Of Pravara sahakari bank loni.)

48
Analysis From the above table we can calculate the next working capital pravara
sahakari bank loni. in which we can observed that in last 3 year the net working
capital is show increased because of increase in current assets the net working capital
shows increased in last 3 years

Interpretation -

According to above statement, we can see there is increase in working capital. In the
year 2013 working capital is increased because of high increase in loan and advances.
It means companies working capital needs are increasing. In same year there is also
increase in cash and bank.

In the year of 2015 there is increase in net working capital. In this year in increased
to year in loan and advances provisions .and in 2014 there is also shows increased in
working capital because of increased in loan and advances.

Analysis Through Various Ratios

49
Table No 2. Current Ratio:-

Current Ratio is the ratio of total current assets to total current liabilities.

Current Ratio=

Current assets include cash and those assets that can be converted into cash within a
year, such as marketable securities, debtors and inventories. Prepaid expenses are
also included in current assets as they represent the payments that will not be made by
the firm in the future. All obligations maturing within a year are included in current
liabilities. Current liabilities include creditors, bills payable, accrued expenses, short-
term bank loan, income tax liability and long-term debt maturing in the current year.

The current ratio is a measure of the firms short-term solvency. It indicates the
availability of current assets in rupees for every one rupee of current liability. A ratio
of greater than one means that the firm has more current assets than current claims
against them.

Year 2014 2015 2016 2017

Total Current Assets

(Rs.)

Total Current
liabilities(Rs.)

Ratio(Times)

Sources secondary data (annual report)

Analysis through table in above table the calculations of current ratio in last
three year. in which we can see the changes in ratios in last 3 years .in 2014 the ratio
shows increased by 00.61 times and again in 2015 the ratio is decrease in 0.07 times .

Graph no-2 Graphical presentation:

50
 current ratio inratio times
2
1.8
1.85
1.6 1.77
1.4
1.2
1.24
1
0.8 ratio times
0.6
0.4
0.2
0
2013 2014 2015

Source:-secondary data (annual report the pravara sahakari bank loni).

Interpretation

The Pravara sahakari bank loni.

. has current ratio of 1.24: 1 in the year 2013. It is satisfactory according to standard
banking norms (1.20: 1).

In year 2014 Companys current ratio increased with 0.61 times. Because, there is
high increase in loan an advances as compared to year 2013.

In the year of 2015ratio decreased to 1.77: 1. Because High decrease in Bills

Receivable

51
Table no- 3. Quick Ratio:-

It is the ratio between quick liquid assets and quick liabilities. The normal value for
such ratio is taken to be 1:1. It is used as an assessment tool for testing the liquidity
position of the firm. It indicates the relationship between strictly liquid assets whose
realizable value is almost certain on one hand and strictly liquid liabilities on the other
hand. Liquid assets comprise all current assets minus stock.

Total Current Assets - Inventories

Quick Ratio=
()

BOD = Bank Over Draft.

Year 2014 2015 2016 2017

Total Quick Assets

(Rs.)

Total Current
liabilities (Rs.)

Ratio(Times)

Analysis -in the above table calculated the quick ratio in which we can see the ratio
is change in every year because of changes ii current assets .and changes in current
liabilities in every year .in year 2013 there is quick ratio is 1.13 times it increased in
2014 by 1.77 times and in year 2015it decreased in 1.22 times .

52
Graph no 3 graphical presentation ofquick ratio

Quick ratio in Ratio times

1.4

1.2

0.8

0.6 Ratio times

0.4

0.2

0
2013 2014 2015

Source:- Secondary data (annual report of The Kai SaukesharbaiTanpure Multistate

Co-Operative Credit So Ltd.)
Interpretation

In the year of 2014 quick ratio of the company is decreased by 0.36 times. Because
there is increase in creditors compare to year 2013.

In the year of 2015 it is increased up to 1.22: 1. Because in this year prepaid expenses
are increased compare to year 14

A quick ratio of 1 to 1 or more does not necessarily imply sound liquidity po1sition.
It should be remembered that all debtors may not be liquid, and cash may be
immediately needed to pay operating expenses. To a measurable extent, inventories
are available to meet current obligations. Thus, a company with a high value of quick
ratio can suffer from the shortage of funds if it has slow paying, doubtful and long-
duration outstanding debtors.

53
Table no 4- Net Working capital Ratio:-

Ratio indicates relationship between Net Working capital & Net Assets.
The difference between current assets and current liabilities is called Net Working
Capital or Net Current Assets. Net Working Capital is sometimes used as a measure
of firms liquidity.

Net Working capital Ratio =

Net Working Capital = Total curr. Assets (-) Total curr. Liabilities.

Net Assets = Total assets excl. Fictitious assets (-) Outsiders Liabilities.

Year 2014 2015 2016 2017

Net Working

capital (Rs.)

Net Assets (Rs.)

Ratio (Times)

Analysis through table- from the above table we calculated the net working capital
ratio

It shows ratio increased in last 3 years in 2013 ratio is 0.92 and 2014 it increased in
0.96 and in 2015 it little decreased by 0.95.

54
Graph no-4-Analysis through graph

0.97
0.96
0.96
0.95
0.95

0.94

0.93
0.92
0.92

0.91

0.9
2013 2014 2015

Ratio times

Source:-The information is collected from Annual Report Presented by Pravara co-

operative Bank for 2013,2014,2015.etc

INTERPRETATION

In above Table bank having Net working capital ratio of 0.92 in year 2013 & year
2014 and in 2015 it is increased up to 0.05. It means ratio is increased in the year of
2014 & 15.

NWC is sometimes used as a measure of a firms liquidity. It is considered that,

between two firms, the one having the larger NWC has the greater ability to meet its
current obligations. This is not necessarily so; the measure of liquidity is a
relationship, rather than the difference between current assets and current liabilities.
NWC, however, measures the firms potential reservoir of funds. It can be related to
net assets or capital employed.

55
CHAPTER NO-5-
FINDINGS,CONCLUSION&SUGGESTIONS

56
 1-FINDINGS

1. It is observed that the company is not using their Long term funds to meet short
term requirement and Short term funds in long term requirements.

2. On the whole, it is found that the firms overall Working Capital Management is
at desired level.

3. The present study reveals that the liquidity position of the firm in 2016 is
comparatively good as it approaches the standard norms.

4. Although the amount of working capital is actually increasing year after year as
per the increase in the operation of the company which is a good sign for the
company, the level of current assets to be maintained should be sufficient enough
to cover its current liabilities with a reasonable margin of safety.

57
2.-CONCLUSION

Learning From Internship:

On 1st June 2016 that day firstly I was visited the Pravara sahakari bank ltd. There
was I have done my summer internship project .There was so Many things I learned. Firstly I
learned What is bank Then How it works and How Employee are working . There are so
many different section which is token section, loan dept. loan recovery dept.Cashier section
etc .When I were go then I realize how actual they work. Mr.Udavant sir provide brief
information about education loan.I was learned about sanctioning process of education loan
and disbursement process of education loan.

1. From the current ratio and quick ratio it is concluded that the liquidity of the
company has increased. The quick ratio has increased because of increase in
loan an advances
2. Increase in Debtors is more than increase in creditors for the year of 2015. It
was the main factor which affected working capital requirement increased.
3. Other current assets which include various taxes increases as the assets also
have increases. Various taxes such as TDS, Sales

58
3. SUGGESTIONS

1. The company should follow its credit policy for debtors; they allowed bill
discounting to the debtors. The debtors collection period should be
maintained and the efficiency of receivables management should be increased.
This will reduce the working capital requirement of the company.
2. Company should decrease Inventory holding period. It will decrease working
capital requirement.
3. Blocking of funds in Cash and Bank should be minimized to the extent
possible.

59
CHAPTER NO-6-
BIBLIOGRAPHY

60
Books:

Financial Management :Financial Management

(M Y KHAN & P K JAIN)

Financial Management :Financial Management

(S.C Kuchhal) 16th Edition

Websites :

o www.rbi.com, 10 June 2017 7:00 p.m.

o www.google.com, 22 June 2017, 6:30 p.m.
o www.pravarabank.com 9 July 2017,5:30 p.m
o www.rrb.com, 25th July 2017,7:30 p.m
o Reports:-
o Pravara Co-operative Bank Ltd Loni Annual Report of financial year
2011-2012, 2012-2013, 2014-2015,2015-2016, 2016-2017

61