“EFFECTIVENESS OF CASH MANAGEMENT IN

THE COMPANY WITH REFERENCE TO

KARNATAKA FISHERIES DEVELOPMENT
CORPORATION (KFDC), MANGALURU”
Project Report Submitted to Mangalore University
in partial fulfillment of the requirement for the Award of the degree of
Master of Business Administration
By
Mr. MAHESH MALLIKARJUN ANGADI
Reg No. 175572449
(2017-2019)
Under the Guidance of
Dr. VISHNU PRASANNA K. N.
Dean

MANEL SRINIVAS NAYAK MEMORIAL BESANT INSTITUTE OF POST

GRADUATE STUDIES
BESANT VIDYA KENDRA, BONDEL
MANGALORE- 575008
 Manel Srinivas Nayak Memorial Besant Institute of PG Studies
(Affiliated to Mangalore University and approved by AICTE)
Besant Vidya Kendra, Bondel, Mangalore – 575 008
(Sponsored by: Women’s National Education Society)
Website: www.msnm.besant.edu.in, Email: msnmbesant@gmail.com, Phone No.: 0824-2482668 / 69,
Fax: 0824 – 2482669

CERTIFICATE

This is to certify that Mr. MAHESH MALLIKARJUN ANGADI

is a bonafide student of M.B.A. final year of this Institution. This project
titled as “EFFECTIVENESS OF CASH MANAGEMENT IN THE
COMPANY WITH REFERENCE TO KARNATAKA FISHERIES
DEVELOPMENT CORPORATION (KFDC), MANGALURU” has
been prepared by him in partial fulfillment of the requirements for the
award of Master’s Degree in Business Administration of Mangalore
University under the valuable guidance of Dr. VISHNU PRASANNA K.
N., Dean, MSNM Besant Institute of PG Studies, Mangalore.

Place: Mangalore Dr. NARAYAN KAYARKATTE

Date: Director
 Manel Srinivas Nayak Memorial Besant Institute of PG Studies
Besant Vidya Kendra, Bondel, Mangalore – 575 008.

Dr. VISHNU PRASANNA K. N.

Dean
MSNM Besant Institute of PG Studies
Besant Vidya Kendra
Bondel, Mangalore- 575008

CERTIFICATE
This is to certify that Mr. MAHESH MALLIKARJUN
ANGADI bearing Mangalore University Registration No. 175572449 has
prepared his project entitled “EFFECTIVENESS OF CASH
MANAGEMENT IN THE COMPANY WITH REFERENCE TO
KARNATAKA FISHERIES DEVELOPMENT CORPORATION
(KFDC), MANGALURU” in partial fulfillment of the requirements for
the award of the Degree of Master of Business Administration (MBA)
under my research guidance during the academic year 2018-19.
This project has not been submitted to the Mangalore University
or any other University for the award of any other Degree, Diploma or
any other similar title.

Place: Mangalore Dr. VISHNU PRASANNA K. N.

Date: DEAN
Mr. MAHESH MALLIKARJUN ANGADI
Reg. No. 175572449
Final Year MBA
MSNM Besant Institute of PG Studies
Besant Vidya Kendra
Bondel, Mangalore- 575008

DECLARATION
I hereby declare that the project entitled “EFFECTIVENESS OF
CASH MANAGEMENT IN THE COMPANY WITH REFERENCE
TO KARNATAKA FISHERIE DEVELOPMENT CORPORATION
(KFDC), MANGALURU” is an original work submitted by me under
the guidance and supervision of Dr. VISHNU PRASANNA K. N., Dean,
MSNM Besant Institute of PG Studies, Besant Vidya Kendra, Bondel,
Mangalore.
I also declare that the data and the information collected during the
project work are authentic and true to my knowledge. The above titled
project has not been submitted to any other University or Board for the
award of any other degree or discipline.

Place: Mangalore MAHESH MALLIKARJUN ANGADI

Date:
 ACKNOWLEDGEMENT

First and foremost, I would like to acknowledge my gratitude to

the almighty, the source of all wisdom and who wonderfully guided me
through each stage of this project.

I am thankful to my esteemed Director Dr. NARAYAN

KAYARKATTE M.S.N.M Besant Institute of P.G Studies Bondel,
Mangalore for having given me this opportunity to do my project.

This project was done under the able supervision and valuable
guidance of Dr. VISHNU PRASANNA K. N., Dean, who constantly
extended his support and encouragement.

Last but not the least, I would like to express my deep sense of
gratitude to the faculties and non-teaching staff of Besant Vidya Kendra,
for assistance to conduct my study and also to my parents, friends and all
my well-wishers for having rendered their constant guidance and support.

MAHESH MALLIKARJUN ANGADI

 EXECUTIVE SUMMARY
This project work has been undertaken “EFFECTIVENESS OF
CASH MANAGEMENT IN THE COMPANY WITH REFERENCE
TO KARNATAKA FISHERIES DEVELOPMEN CORPORATION
(KFDC), MANGALURU”. The effectiveness study of cash
management on the Karnataka Fisheries Development Corporation
(KFDC) has provided the clear view of the financial position of the
company.

For the present study, I collected the information from the

secondary data. Secondary data have been collected from sources such as
magazines, text books, study of existing literature by different authors in
this field, etc. The study indicates that company is having financial
difficulty and that company’s strategy to have low cash reserves. Then it
indicates company has same amount of Cash,
Cash equivalent and current liabilities. Cash flow from Investment
activity has negative impact and again slightly negatively increased
because of increase in purchase of fixed assets. This project becomes
very advantageous to learn about the cash management of the company.
This appraisal proved a great deal to the management to make a decision
on the regulation of funds to increase the sales and get profit to the
company.
 CONTENTS
CHAPTER PAGE
NO TITLE NO.

1. INTRODUCTION 1-5

2. CONCEPTUAL FRAMEWORK 6-20

AND LITERATURE REVIEW

3. RESEARCH DESIGN
21

4. INDUSTRY AND COMPANY

22-31
PROFILE

5. DATA ANALYSIS AND 32-50

INTERPRETATION

6. FINDINGS, SUGGESTIONS & 51-53

CONCLUSION

BIBLIOGRAPHY

ANNEXURE
 LIST OF TABLES
CHART TITLE PAGE NO.
NO.

Cash flow from Operating Activities 32

5.1
Cash flow from financing Activities 34
5.2

5.3 Net Increase / Decrease in Cash and Cash

35
Equivalents

Cash flow from Investment Activities 36

5.4

5.5 Cash Ratio 38

5.6 Current Ratio 39

Quick Ratio
5.7 40

5.8 Cash to Sales Ratio 42

5.9 Cash to Current Assets 43

5.10 Cash to Working Capital Ratio 44

5.11 Current Cash Debt Coverage Ratio 46

5.12 Working Capital Turnover ratio 47

5.13 Debtors Turnover Ratio 48

5.14 Debt Equity ratio 50

 LIST OF CHARTS

CHART TITLE PAGE NO.

NO.

5.1 Cash flow from Operating Activities 33

5.2 Cash flow from financing Activities

34

5.3 Net Increase / Decrease in Cash and Cash

35
Equivalents

5.4 Cash flow from Investment Activities

36

5.5 Cash Ratio 38

5.6 Current Ratio 39

Quick Ratio
5.7
41

5.8 Cash to Sales Ratio

42

5.9 Cash to Current Assets

43

5.10 Cash to Working Capital Ratio

45

5.11 Current Cash Debt Coverage Ratio 46

5.12 Working Capital Turnover ratio

47

5.13 Debtors Turnover Ratio 49

5.14 Debt Equity ratio 50

 Chapter -1

Introduction
 I. INTRODUCTION

Cash management is one of the most important areas in the day-to-day management
of the firm’s deals with the management of working capital, which is defined as all
the short-term assets used in daily operations. This consists primarily of cash,
marketable securities, accounts receivable and inventory. The balances in these
accounts can be highly volatile as they respond very quickly to changes in the firm’s
operating environment. A highly liquid firm has sufficient cash to pay its bills at all
times. An illiquid firm is unable to pay its bills when due.

Cash is the most important current asset for the operations of the business. It is the
basic input needed to keep the business running on a continuous basis. It is the
money, which the firm can disburse immediately without any restriction. The term
cash includes coins, currency, cheques held by the firm and balances in its bank
accounts.

In common parlance the term cash refers to all money items and sources that are
immediately available to help in paying firms obligations. In the balance sheet, cash
assets include deposits in financial institutions and cash equivalent in money market
funds or marketable securities. All highly liquid short-term securities are treated as
cash. Investment in government and corporate securities are treated as cash because
they may be liquidated through a short call notice.

J.M.Keyens postulated three motives for holding cash viz-Transactional motive,

Precautionary motive, and Speculative motive. These can be said to form the basis for
cash management in business enterprise. Cash is the oil that lubricates the wheel of
business. Inadequate cash slows down the production and on the other hand carrying
cash is expensive since it is a non-earning asset. A firm that holds cash beyond its
minimum requirement is lowering its potential earning. As per J.M.Keyens opinion
“Cash is the most important current asset. It is the cash, which keeps a business going.
It is the hub around which all other financial matters center.” No one can deny the fact
that cash is the blood inside the business enterprise. Healthy circulation of cash in the
entire business operation is the basis of business solvency. Cash is the basic input
needed to keep the business running on a continuous basis. It is the ultimate output
expected to be realized by selling the services or product manufactured by the firm.

1
Ultimately every transaction in a business results either in an inflow or an outflow of
cash.

Effective management of cash is the key determinant of efficient working capital

management. There should be sufficient cash with a firm all the time to meet the
needs of the business. Both excess and inadequate cash may degenerate a firm into a
state of technical insolvency and even lead to its liquidation. It will eventually disrupt
the firm’s manufacturing operation. Excessive cash remains idle, without contributing
anything towards the firm’s profitability.

Holding of cash balance has an implicit cost in the form of its opportunity cost. The
larger the idle cash, the greater will be its opportunity cost in the form of loss of
interest which could have been earned either by investing in some interest bearing
securities or by reducing the burden of interest charges by paying off the past loans.
The carrying of cash and near cash reserves beyond the irreducible needs cuts assets
turnover and rate of return. If the cash balance with a firm at any time is surplus or
deficit, it is obvious that the finances are mismanaged. Today, whim cash, like any
other asset of the company, is a tool for profits; the emphasis is on right amount of
cash at right time, at the right place and at the right cost.

Cash Management originally means the management of liquidity in order to

meet their dayto-day commitment. There are many companies that do not put enough
focus on managing the liquidity of the firm. The result of poor focus on cash
management often means that the financial assets are bound. Instead of being bound,
it could be used to invest for example in material. According to recent studies they
found that small businesses have a poor cash management attention. To have efficient
and effective liquidity management is very important for the survival, especially for
smaller businesses. It is a matter of life and death for smaller companies because they
can survive for a long time without a profit but fails when they cannot meet a
payment. Liquidity means the level of cash and near cash assets held, together with
cash in and outflows of the assets. This concept is becoming more and more used in
Sweden. Managing the liquidity is not something new but cash management is a
modern way of doing that. Cash management do not focus on getting the most profit
margin on sales or reduce the cost in order to save money. This is about earning extra
money “between the lines”, by being smart and efficient with the payment

2
routines.Knowing where to invest the money and to know which accounts to use in
order to earn extra money through interests. The companies can through that earn cash
on cash.Most of the banks in Sweden offer cash management as a service for other
companies. Cash management is a very broad subject and there are a lot of factors to
consider when trying becoming more efficient. Which factors to consider depends on
the company and type of industry. There are still some main factors that all companies
should be aware of and those factors are discussed in this paper. Having payment
routines is crucial to be as efficient as possible. This will make it easier for the
company to have control over the customers and also earn extra money through
interests. The key here is to make the payments from the customer’s interests bearing
as fast as possible. It is also important to get the money as fast as possible from the
customer and how to do that will be discussed later. Accounts receivable is also
included in the payment systems. What the company wants to do is to manage the
accounts receivable in an effective way in order to get rid of unnecessary capital that
is tied up. If the payment routines are important then the pay-out systems are equally
important. By not having efficient pay-out routines can lead to unnecessary bounded
capital that the company wants to avoid. Using a liquidity-budget is also discussed
here to simplify and have control over the payment flows. The factors to consider for
budgeting are proposed such as the size of the liquidity reserve as well. Knowing
where to invest the money is very important and there are a lot of choices here.

Cash management is the management of the cash balance of a concern is such

a manner as to maximize the availability of cash not invested in fixed assets or
inventories and to avoid the risk of insolvency. According to Kayner these are three
motives for holding cash: the transactions motives, the precautionary motive, and the
speculative motive. The most useful technique of cash management is the cash
budget.

In simple terms, cash management may be defined as management tool to

ensure that sufficient cash is available to meet current and future liabilities, with any
surplus being safety invested to generate the maximum income. In a business,
anything done financially affect cash eventually. Cash is to a business is what blood is
to a living body. A business can’t operate without its lifeblood cash, and without cash
management, these may carmine no cash to operate. Cash movement in a business is
two-way traffic, inflow and outflow. Important aspects which is unique to

3
cashmanagement is time dimension associated with the movement of cash due to non-
synchronicity of cash inflow and outflow, the inflow may be more than the outflow or
the outflow may be more than the inflow at a particular point of time. This needs
regulations left to itself cash flow is apt to follow monsoonal pattern and shows of
cash may be heavy, scanty or just normal, hence there is a dire need to control its
movement through skilful cash management. The primary aim of cash management is
to ensure that there should be enough cash availability when the needs arise not too
much but never too little.

Cash management is the management of the cash balance of a concern in

such a manager. On to minimize the availability of cash not invested in fixed assets or
inventories and to avoid the risk of insolvency. According to Keygen these are three
motives or bolding cash. The transaction motive, the precautionary motive, and the
speculative are the most useful technique of cash management.

STATEMENT OF THE PROBLEM:

The study has been conducted for the purpose to analyse the cash management policy
techniques and policy in Karnataka Fisheries Development Corporation Mangalore.
Hence the study can be presented as “A study on Cash Management with Special
Reference to Karnataka Fisheries Development Corporation Limited” Mangalore.

NEED FOR THE STUDY:

Cash management is considered as one of the important element of business. It

involves managing Cash efficiently and effectively. This study helps to know the
current condition of the company regarding the cash position. And how effectively
and efficiently cash is managed. This study also helps to know about the cash
management impact regarding to different aspect of the business like net profit,
working capital, sales etc.

SCOPE OF THE STUDY:

The study is conducted at Managerial level in the organisation. It covers analysis of

cash, this is done through the different ratios like current ratio, quick ratio, cash ratio,
cash to sales ratio etc.,

4
Regration analysis using ‘T’ test - it covers cash to sales, Cash to working capital and
Cash to net profit, Cash flow statement analysis- it covers cash flow from operating
activity, cash flow from financial activity, Cash flow from investment activity. The
study is conducted for five years that is from 2012-13 to 2016-17

OBJECTIVE OF THE STUDY:

The main objective of the study is to find effectiveness of cash management in

Karnataka Fisheries Development Corporation Mangalore. Other objectives are

1. To analyse the liquidity position of the Company by using financial ratios.

2. To analyse the impact of cash management on overall performance of the
company.
3. To know about techniques and process regarding cash management in Karnataka
fisheries Development Corporation.
4. To know about how cash is being effectively managed by the company.
5. To interpret the reason for growth of the company with the help of cash flow
statement analysis.
6. To know about the short term solvency of the company.

5
 Chapter –2

Conceptual
frame work –
Literature
Review
 II. CONCEPTUAL FRAMEWORK AND LITERATURE REVIEW

THEORETICAL BACKGROUND OF THE STUDY:

Cash is the pure liquid asset that required for the process of every business. Cash
management helps the company to remain strong and minimise the shortage of cash.
Cash is necessary for the day today working of the business. If the company is giving
more credit facility this means that company looking for more current assets which
are easily convertible in to cash for the daily business operation. If the firm or
company hold excess cash than required that does not give capital income to the
company. Cash is the utmost liquid form of quick asset a company can hold. It
denominated in the money of the nation in which the company exist. Cash is called as
life blood of every firm. Finance department is called as heart of every firm.

Company operate to found itself, grow and sustain. In the process, it uses cash in
different creative activities such as obtaining of several inputs of production system
and conservation of a nominal level of inventory at proper steps to make a rational
and effective production and supply system; for payment of wages, salaries to the
personnel involved with the firm, contributing either directly or indirectly to the
production, distribution and marketing system; for payment of various manufacturing
costs; for payment of various distribution and selling overheads; for payment several
overhead expenses; for payment of government duties and taxes in time, and for
repayment of borrowed debt.

MEANING OF CASH MANAGEMENT:

The process of collection and controlling of cash is called Cash management.

Effective Controlling or management of cash involves timely collection of
receivables, minimise account receivable, maximising collection rates. Cash
management is the important function of a business. If there is more cash out flow
than cash inflow the shortage of cash arises. So company always look in to more cash
inflow than cash outflow. It helps the company efficient and effective management of
cash.

Cash management refers to collection and disbursement of cash in such a way that
company liquidity is maintained. Cash management involves the four basic problems

a. Controlling the level of outflow of Cash

6
 b. Optimum investment of surplus Cash
c. Controlling the level of inflow of Cash.
d. Controlling the level of cash.

Cash management and Optimum cash balance maintenance depends upon the amount
of cash available with the firm. Free cash available with the firm depends upon
various external and internal factors. External factors include policies of the
management, management of receivables and payables and Inventory management.
Thus, the overall cash management is not a simple task. It includes both the holistic
and specific efforts to manage optimum cash, keeping in mind the various motives for
which cash must be maintained.

THE NEED FOR CASH MANAGEMENT:

Cash management aims at decreasing the amount of excess cash that is being held by
the company. This leads to increase the firm’s profitability, as idle cash decreases and
cash for investment rises. However, while effective cash management decreases the
excess cash flows, it does not decrease entire business activities or gets the risk
structure of the firm about its financial requirements.

Thus, for attain all these objectives, the firms need cash. Cash at Hand also benefit in
getting trade and cash discounts from sellers, which diminishes the cost of inputs.
Trade discounts are obtained on huge purchases, and cash discounts are accessible on
speedy cash payments to suppliers. Company wants cash to meet Contingent
payments. To advantage from such discounts, the firm should have “ready” cash.
Moreover, when the firm preserves ready cash balances, it can meet difficulties such
as strikes, fires and collapse of equipment.

PURPOSE OR OBJECTIVES OF CASH MANAGEMENT:

The Objective of cash management generally considers two points:

1. To supply cash needed to meet the objectives of the Company.

2. To decrease excess cash held by the company.

Cash management and optimal cash amount preservation depend upon total cash held
by the company. Free cash obtain with the company depend upon several outside
factors include industry precise and market precise factors such as demand of the

7
goods and inflation. Internal factors include strategies of the management,
management of receivables and payables and stock management.

The finance manager does not want to hold too much of cash or too little cash. He
wants to maintain balanced cash amount. This is main purposes of risk return trade-
off. This risk –return trade off of any company can be minimised by following ways.
That is given below.

 Meeting the cash outflows:

The first important objectives of cash management are meeting the cash flows. Huge
cash must be held to meet the objectives of the day to day working of the business. It
means company have huge cash for the payment to creditors. This benefits the
company to get cash discounts for making prompt payment. It also benefits the
company to meet unanticipated cash outflows without many difficulties.

 Reducing Cash balances:

Reducing or Decreasing the Cash balances is another objective of cash management.

If company holds excess amount of cash balance advantage in fast payments, but in
some times it retained unused for the company and reduces success of business. On
the other hand, when company have little amounts of cash, company is not able to pay
its requirement in time. So company is requiring maintaining optimum cash balances.

However, the objectives cash management is to maintain required optimum or least

balances must be looked in to together with other objects. The minimum cash
balances will effect the company profitability and its liquidity. The entire cost of the
company controlled effectively if the company is possible to manage its cash and
marketable securities. And it helps the company to increase the profit of the firm. So
payment schedule most effects on the company liquidity.

STAGES OF CASH MANAGEMENT:

Cash management refers to controlling the cash flows into the firm and out of the
firm. If the cash inflow is more than cash out flow it means that there are huge cash
sales and debtors. Cash outflow in the form of tax payment, dividend, and payment to
suppliers.

8
The company should improve strategies to follow the facets or stages of cash
management

 Optimum cash balances:

It is also an important objective of cash management. The firm have to
maintain optimum level of cash balances which helps the company to maintain
proper liquidity. To maintain optimum cash balances company, prepare cash
budget.
 Investing surplus cash:
If the company have excess cash it must be spend in short-term instruments in
order to get profitability. The company must also plan in advance about other
sources for finance short term cash deficit. Company plan to invest in short
term investment securities such as Bank deposits, Marketable securities etc.
 Cash planning:
Company planning required cash for the project that is cash inflow and cash
outflow planned for the project and examining cash excess or shortage of cash
for each period of the forecasting or planning period. The company also
prepare cash budget to examine cash inflow and cash out flow.
 Managing the cash flows:
Company manage the cash flow effectively in systematic way. It means
company have to maintain balances between cash inflows and outflows. It
helps efficient and effective management of cash. Cash inflow should be
accelerated and Cash Outflow decelerated as far as possible.

MOTIVES FOR HOLDING CASH:

Cash management is not an easy task. Cash is known as most liquid and less
productive asset of a company. If cash remain unused, it does not earn anything. But it
incurred cost because interest is payable to funding it. The company hold certain
amount cash for marketable securities. There are four motives for holding cash. They
are as follows:

1. Precautionary motive
2. Compensating motive
3. Speculative motive
4. Transition motive

9
1. Precautionary motive:

The company hold cash to meet the unforeseen circumstances or contingencies in the
course of the business. This is called precautionary motive. Since the future is
uncertain, a company may have to face contingencies such as increase in the price of
raw material, lockouts, strikes, change in the demand, in order to meet this uncertainty
cash is held by the firm.

2. Compensatory motive:

The company hold cash balances to compensate banks for providing services and
loans. Banks provide different type of services to the companies such as transfer of
funds, clearance of cheque, supply of credit information, sanction of loans. For above
services bank charge fees, commission, for other they collect indirect compensation.
Normally clients are required to maintain minimum bank balances which cannot able
to the company for utilising business operation. The bank uses that amount for other
purposes to earn a return.

3. Speculative motive:

The company hold huge cash over the precautionary level of cash balances to take
speculative investment opportunities, to improve prompt payment, to exploit
discounts for prompt payments. If the company have excess cash it uses for improve
production and sales ultimately profitability of the company increases. The company
hold cash for the speculative drives to avail the advantage of bargain procurements
that may arise in future. If the company feels the prices of raw material are likely to
decrease in the future, it will hold cash and wait till the prices actually fall.

4.Transaction motive:

The company produce products and rendering services. The requirement cash is to
meet the day to day working need of the business operation. In day to day operation
of the business the company require cash to make payment in the form of salaries,
interests, wages, dividends, Raw material purchased etc. Company also receives cash
from its sales, debtors, investments. Cash inflows do not match with cash outflow,
and hence, the cash is kept by the company to meet its daily operation.

10
IMPORTANTANCE OF CASH MANAGEMENT:

The cash management is considered to be important on the following reason:

A) Cash management assist the company to take benefit of discount, buying of

goods.
B) Cash management helps to meet the cash outflow.
C) It helps to estimate the capital expenditure.
D) Cash management helps to invest surplus cash in short or long term
marketable securities and keep the funds fully employed.
E) Cash management ensures the firm has sufficient amount of cash and it is
used for purchases and other purposes.

BENEFITS OF CASH MANAGEMENT:

The important advantage or benefits of cash management are given below:

A) It helps to find excess cash and is used for short term marketable security.
B) To use available cash flow more effectively and efficiently.
C) To estimate future cash flow.
D) Cash management helps to finance daily operation of the company.
E) Good cash management increase the profitability of the company.
F) Effective cash management helps to minimise shortage of working capital.
G) To increase the operation of the company.
H) Cash management helps in fast collection of account receivable.

CASH MANAGEMENT TECHNIQUES:

There are some technique for fast collection of receivables from customers and
slowing the problem of disbursements. They are as follows:

A. Fast Cash Collection:

There are two ways of speedy collection of cash. In the first the customers should
inspire to pay the cash as fast as possible. Secondly the payment from customers is
quickly converted in to cash.

11
 Timely payment by Customers:

Prompt billing is one way to ensure prompt payment. The customer has to be notified
in advance the amount and period of payment. For speedy payment company have to
use mechanical devise for billing along with the en close of a self-addressed return
envelope that helps fast payment by customers.

 Early Conversion of payments in to cash:

If the customer make payment in the form of cheque in favour of the firm .it should be
quickly converted in to cash.

B. Concentration Banking:
It is decentralisation of collection of account receivables. Large company which have
large number of branches at different places, company select some branches as
collection centres for receiving payment from the customers. Instead of all the
payments being collected at the head office of the company
C. Lock-Box System:

Lock box system is a facility provided by the bank to the companies for receipt of
payment from the customers. Under this facility the payment made by customers is
directly to the post office boxes instead of going to the company. The bank collects
amount and directly deposits company’s bank account.

D. Slowing Disbursements:

Apart from speedy collection of account receivable, the operating cash requirement
can be reduced by slow disbursements of account payable. Slow payment represents a
source of funds requiring no interest payments. The several ways of delay the cash
payment are

 Reducing early payments.

 Centralized payments
 Floats

CASH MANAGEMENT- BASIC STRATEGIES:

The strategies directly related to the cash income process are:

1. Cash turnover
2. Cash Cycle

12
1) Cash Turnover:

The cash turnover refers to the number of times company uses cash is repeatedly in
each year. Cash turnover represents following formula:

Cash turnover = Number of days in a year / Cash Cycle

2) Cash cycle:

The cash cycle refers to the period of time taken between payment for production
inputs and receipts of payment from the sale of the finished product. The company
receives cash from the customers. Again these steps continuous the company pay cash
for raw material and produced finished goods and supply to customers. The company
receive cash from customers and the cycle repeats continuously.

Cash cycle represents following formula:

Cash cycle= Avg. age of inventory + Avg. collection period – Avg. account payable
period.

CASH MANAGEMENT MODELS:

There are two important cash management Models

1. Baumol Model
2. Miller-Orr Model

1. Baumol Model:
William J. Baumol developed a model which says that the company is maintain
Optimum Cash balance under certainty. This was the first formal model of cash
management that incorporated opportunity cost and transaction costs. The total
opportunity cost of cash balance with the organisation is equivalent to the interest
earned on the cash balance. The transaction costs are associated with the frequency of
selling the marketable securities by the firm and converting it to cash.

Assumptions of Baumol model

The important assumptions of Baumol model are as follows:

 The first assumption of this model is that the firm able to forecast future cash
requirement.

13
 It helps the firm to make payment uniformly over a period of time.
 It helps the firm to know about Opportunity cost of the cash held by it.
 The transaction cost of the firm remains constant.

Formula for Baumol’s model:

C = √2𝐴 ∗ 𝐹

Where,

C = Optimum balance

A = Annual cash disbursements

F = Fixed cost per transaction

O = Opportunity cost of holding cash

Limitations of Baumol Model:

The important limitations of Baumol model are as follows:

1. Variation of cash not possible under Baumol model.

2. Baumol model not given the importance for Overdraft and It was ignored.

3. Baumol model assumes that there is uncertainty in future cash flows.

2. Miller and Orr Model:

The Miller and Orr model stated that cash balances take too erratic pattern of
distribution over time period. However, over long periods, they tend to show normal
distribution.

The Miller Orr Model basically states that there are two Control limits:

1. The upper control limit:

This states the upper limit for cash balance. If any time the Cash balance exceeds
this limit, then extra cash transferred to marketable securities and investments.

2. The lower control limit along with the return point:

This states the lower limit for cash balance. If at any time the cash balance exceeds
this limit, the investments are liquidated and liquidity of the firm is enhanced.

14
Thus when cash flows of the firm fluctuate randomly, they hit the upper limit. At this
stage firm purchase huge amount of marketable securities, which helps the firm to
reduce its free cash and thus return to a normal level of cash balance. In the same
way, when the firms cash flows deviate lower and hit the lower limit, the firm
liquidates its investments so that its cash balance returns to the normal level.

Assumption of Miller and Orr Model:

The important assumption of Miller and Orr Model are as follows:

 There is no underlying trend in cash balance over time.

 The optimal values of ‘h’ (Upper control limit) and ‘Z’ (lower control limit) not
only on opportunity cost, but also on the degree of likely fluctuations in cash
balances.

According to Miller-Orr model, the optimum cash balance (z) can be expressed
symbolically as

Z = [(3𝐹𝜎2)/4𝐾]1/3 + 𝐿

Where,

Z = return cash point or target cash balance

F = Transfer cost

σ = variance of daily cash balance

K = cost of holding cash in percentage

U* = Upper control limit

L = Lower control limit.

15
 LITERATURE REVIEW

Moncur, Jim (Dec 1987), suggested that The management of small amount of short
term investments is usually an obscure, routine task for cash managers, but when a
company’s cash balances increase rapidly, management of short term investments
becomes challenging, the content and term structure of the organisation portfolio.
However, an extremely large amount of cash available for short term investing also
can have political implications within the organisation.

Cooley, Philip L, Pullen, Richard J. (Oct 1979), suggested that cash management
consists of three basic elements. At the first company should forecast cash by
preparing cash budget. It identifies cash inflows and outflows and balances over a
specified planning period. Secondly if the company have excess cash it should be
invested. Finally, company should control cash inflows and cash outflows. Cash
balances can be reduced if future uncertainty is lessened, thus maximising return from
funds. Cash forecasting help the company to increase the profit and improve liquidity.

Morley, James E (Oct 1978), Effective cash management is essential to all business
enterprises. Development of program involves four steps 1. Identify cash available for
investments. 2. Setting of investment goals and guidelines. 3. Determination of
investment instrument to be utilized, 4. Cash management is done in continuous basis.
The program requires development of cash budget, or the schedule of anticipated
receipts and disbursements for the year. Additionally, it is imperative to prepare daily
cash reports. The costs of an elaborate cash management scheme may make it
inappropriate for a firm having inadequate investable funds.

Zorn, Paul (Oct 1986), suggested that Cash management serves two primary
functions. 1. Maximizing available cash, 2. Maximizing investment yield. Cash
managers need detailed and current answers to a wealth questions. The answer can be
provided quickly and accurately by well-designed cash management software, which
can be quite expensive. The main objective of cash management is Cash forecasting,
cash position management, investment management, debt management banking
service analysis and telecommunication.

Das, Somanath (June 2015), suggested that Cash management is the management of
a company’s short-term resources for it’s on going activities. Cash management

16
related to the well-known concept of treasury management which highlights on
liquidity by different factors and process for increasing profitability. Ineffective
management of cash may lead the company to bankruptcy. This study highlights the
factors like Cash conversion cycle, Cash Holding and credit risk which can be
controlled for the management of corporate cash of a company.

Beehler, Paul J (July/August 1973), recommended that Cash management is most

important as an Accounting tool used to meet future corporate cash needs. Cash
management primarily used to utilize idle cash to generate additional revenue.
Optimum utilization of financial management requires comprehensive Daily cash
forecast. Continued Evaluation of performance should be followed by corrective
action to optimize result of the Management Program. Through an adoptive cash
management program idle cash can be converted from a liability of doing business to
a working asset.

Pearce, Richard H. (September 1975), suggested that cash management help the
institution to have sufficient cash for maintain the short term Financial flexibility
needed to accomplish its objectives. There is a cost involved if the company have
excess cash or shortage of cash. The financial manager must maintain optimum cash
balance by preparing cash budget. It helps to forecast cash inflow and out flow. After
forecast manager has the base for developing cash flow plan.

Trenepohl, Gary L, Anderson, Dwight C, Rauschkolb, JameL (Feb 1978),

Suggested that Good cash management is necessary in order for any business to attain
maximum profitability. Cash collection and disbursement procedures should provide
optimum utilization of cash balances. Cash mobilization process is used to reduce the
time required for cash collection procedures and increase availability of cash
disbursement funds. Management of float period is a basic element of cash
mobilization. Three factors influencing the cash gathering process are funds
availability, float factors and clearing. Three Techniques should adopt to improve
cash gathering process that is use of lock box system, Preauthorised Checks and cash
concentration process. Cash budgeting requires projection of future cash flow to avoid
unexpected cash shortages.

Knight, Henry C (July/Aug 1981), Suggested that, the utilization of efficient cash
management can be providing numerous profit opportunities. There are many

17
techniques & approaches for the management of cash resources that is planning,
Organising and controlling required provide cash. If any surplus cash remained it
should be invested & expedition of conversion of other assets in to cash. The
company should control the disbursements. The scope of the evaluation should not be
unduly limited. Design of the cash management regime should be cost-effective and
capable of achieving reasonable savings.

Friend, William (March 1985), said that Cash management is an important activity
of every firm. It involves quickly collection of cash as much as possible and delay in
making payment until they are due. All ways keep the cash in working that means the
company does not hold excess cash. If cash remain idle it becomes liability for the
firm. Cash inflow can be improved by internal measuring such as determines delays in
invoicing and identifying slowpayers. In other way banks offer much way to speed up
cash collection that is lock box system, concentration banking etc. These techniques
generate surplus cash. It should be invested in short term instruments.

Murphy, Helen, Quinn, Lawrence (Dec 1993), suggested that cash management is
demonstrated that the cash flow timing effect on a cash management system has three
distinct components that is Overlap, acceleration and residual. The standard
evaluation procedure explicitly quantifies only one of these components – Overlap.
The importance of the Omission of the other two components depends upon two
factors that are the stability of the firm in cash collection over the time and life of the
proposed cash management system. It is further shown that even at low growth rates
over relatively limited time periods, the timing effect generated by a cash
management system during acceleration period.

Prose, Leonard, (1990) suggested that Cash management can be beneficial to the
company that is not experiencing cash flow problems. It can make funds available for
investment at very attractive rates. Some of the more sophisticated cash management
programs make full use of bank account float to maximize fund available for
investment. In planning, a cash budget should be developed that takes into account the
timing difference between a transaction and the related cash flow. Through planning,
budgeting and control, managers can be more aggressive in their money management
strategy and increase the profitability of their companies.

18
San Jose Ruiz de Aguirre, Leire (2006), said that Cash management meant own
management of available cash, in other words liquidity management focused on
keeping cash enough to deal all receivables and payments required for the correct
performance of the firm It is called restricted cash management. Cash management
would not only be focused on managing available cash level in the company, but also
would consider how to manage global cash circuit, collection circuit, available cash
and payment circuit.

Hines, Chip, Hurtt, David N, Langsam, Sheldon A (Nov/Dec 2000), suggested

that Cash management is generally viewed as one of the major components of
treasury management. The other components of treasury management include debt
management, Investment management and risk management. The first basic principle
of cash management is to accelerate cash receipts and delay cash disbursements. The
second basic principle of cash management is to centralize cash receipts. The third
basic principle of cash management relates to the investment of cash while it is in the
company possession. The last principle of cash management relates to the poling of
cash.

Caughlin, Garry w. (Mar 1988), suggested that in order to meet the objective of
cash management the following condition to be followed.1. Cash forecasting, 2.
Banking system administration. 3. Cash position management. 4.Financial market
administration, 5. cash accounting. The reason for establish a well-designed cash
management system is to manage cash flows, synchronization, and increased
operating efficiency and help to enchase efficiency of operation. To move the cash
management function from a cash handling –oriented activity to a cash flow
optimization activity capable of identifying new source of internal cash.

Das, Chandrika Prasad, Parida, Mamatanjali (Mar 2016), suggested that Cash is
the blood of any organization. A business cannot operate without cash and cash
management. Cash movement is a two-way traffic, cash inflow and cash outflow.
Cash management means management of liquidity in order to meet their day to day
commitment. Cash management fulfils certain motives like transaction, precautionary,
Speculative and tax motive. In particular firms with strong growth opportunities and
riskier cash flows hold high cash.

19
Burt, Barry B (Nov 1987), suggested that a cash management system should be
implemented which can identify and then coordinate the use of idle cash. The
elements of such program include expediting cash receipts, discovering non-balance
sheet cash items, optimizing banking relationships, maximizing short-term investment
opportunities, controlling disbursements, improving mail service, planning ahead
because cash management opportunities are pervasive in the bank, management must
organize itself to administer cash management procedures.

Carcione, Sandra G (Feb 1981), said that Cash management is a system by which
the corporate treasury department controls inflow and outflow of cash. Cash
management services use reporting system and analysis system, and banks can get in
the electronic cash management business with in-house operation or franchise
services. Banks are vying for the position of concentration bank or centralized
information gatherer.

Kuhlmann, Arkadi R. (Feb 1982), suggested that Cash management has

increasingly accepted by top management, due to such factors as the growth of cash
transactions, the volatility of foreign exchange, and the expansion of corporate
business. Corporate cash management decisions must be quick and accurate and are
based on timely information. Computers will provide the information to assist the
cash manager with the planning, organization, and control of cash management
activities to meet corporate objectives.

20
Chapter -3

Research
Design
 III. RESEARCH DESIGN

RESEARCH METHODOLOGY:

The Methodology used in the study entitled “Effectiveness of cash management at

“Karnataka Fisheries Development Corporation Ltd” is with help of both primary and
secondary data collected through various means.

SECONDARY DATA:

The major source of data for this report was collected from Annual reports, Profit and
loss Account, manuals, Company website, and some more information is collected
from internet.

LIMITATION OF THE STUDY:

 The major part of the study is based on secondary data, so the reliability of
information may not be ensured.
 Due to insufficient time the depth study was not possible.
 Some information about company was not disclosed due to its confidential nature.
 The cash budget does not prepare by the company so important aspect of cash
management like Miller-Orr model and Baumol model cannot able to apply.
 The officials were busy hence they were not able to give much time to explain
concept in detail.

21
 Chapter -4

Industry and
Company
Profile
 IV. INDUSTRY PROFILE

Fishing industry consists of many activities including culturing, processing,

preserving, storing, transporting, marketing and selling fish or fish products. FAO
defined it including recreational, subsistence’s and commercial fishing and the
harvesting, processing and marketing sectors.

Fisheries are one of the important sectors of food production which comes under
agriculture sector in India. It is one of the Quality food product containing protein and
nutrition. The fishery industry plays one of the major roles in the Indian economy.
India export fish and fish products to different countries. It stands 5th position in world
leading exporting countries of fish and fish products in the year 2017.Since
independence country has shown about 6.3% growth in fish production globally. It
contributes to 1.1% of the GDP and 5.15% of the Agricultural GDP.

The activities of this sector aims at supply of fish and value added fish products for
human consumption or input factors in other industrial process. Over 500 million
population of the country depends on the fisheries and aquaculture. It creates
employment opportunity to millions of people of rural areas and to the weakest
sections of the society.

Coastal region in India with 7500 kilometres has great potential, which stands 6th
largest in the world. Two million square kilometres is the fishing area available and
they yield about four million tonnes. India is one among the seven largest fish
producing countries in the world. Fishing sector plays an important role in the
economy of the country in employment generation, foreign exchange earnings and by
providing protein rich food to the people.

Technology inputs have changed the face of Indian marine fisheries which is now
characterised by plywood and fibre glass traditional fishing crafts fitted with outboard
motors, synthetic gear and large number of small mechanised fishing vessels which
are slowly linked to modern processing housing since fifth 5-year plan. Credit has
been provided by banks and NABARD for the development of aquaculture and
fisheries. The programme has been initiated by FAO & NABARD to provide micro
Finance. They also provide finance to women who have made fishing and aquaculture
as their occupation.

22
Marine fisheries play important role in the fishery sector. The marine fish production
increased six times over the past 55years. The much fish products come from coastal
resources. 0.933 Million people are employed in marine fisheries on full time basis.
1.01 million People are employed on a part time basis and 1.39 million people
employed on other fishery related activities. The stagnation of fish production inshore
waters combined with increased competitive effort, has affected profitability of small
scale fishers. Fishers become financially insecure because of poor financial services
and exploitative nature of existing financial sources.

Traditional fishing Industry:

In traditional fishing practices fisherman use traditional technique such as rod and
tackle, arrows and harpoons, throw net and drag nets, etc. It does not usually cover the
concept of fishing for sport, and might be used when talking about the pressures
between large scale and modern commercial fishing practices. And traditional
methods or when aid programs are targeted especially at fishing or near subsistence
level.

Fish farming:

Fish farming comprise of grow the fish commercially in pools and tanks for food.
Fish species increased in fish farms like carp, salmon, tilapia, cod, and catfish. In this
way increasing demand on wild fisheries and the result of this is wide spread
overfishing. Fish farming helps to increase demand for fish and fish protein.

The Government is providing subsidy to poor fishermen for motorizing their

traditional craft, which increases the fishing areas and frequency of operation with
consequent increase in catch and earning of fishermen.

Development of fishing Harbour:

The Government has been implementing a scheme with the objective of providing
infrastructure facilities for safe landing and berthing to the vessels. Since inception of
the scheme, six major fishing harbours i.e. Cochin, Chennai, Vishakhapatnam,
Roychowk, paradip and Season dock, 62 minor fishing harbours and 190 fish landing
centres have been taken up for construction in various coastal States.

23
Recreational sector:

Recreational fishing industry include production and retailing of fishing tackle and
apparel, licence fees payment to the regulatory authorities, fishing magazines and
books, the design and building of recreational fishing boats.

Major fishery industry sectors

There are three major principal fishery industry sectors.

 Traditional sector:

In traditional sector enterprises or individual involved with fisheries resources. From

which indigenous people derive products in accordance with their traditions.

 Recreational sector:

The recreational sector enterprises and individuals involved for the purpose of
recreation, sport or sustenance with fisheries resources from which products are
derived that are not for sale.

 Commercial sector:

In commercial sector individual or enterprises involved with wild catch and

aquaculture resources. And transfer these resources to value added products for the
purpose of sale.

The commercial fishery industry sector involves following steps.

1. Commercial fishing and fish farming which manufacture the fish.

2. Fish processing which manufactures fish products.
3. Fish product marketing.

MAJOR FORMS OF INDIAN FISHERIES:

The main forms of fisheries are
 Marine Fisheries
 Fresh water or Inland Fishery
 Estuarine Fisheries
 Pearl Fisheries

24
National Fisheries Development Board:

National development board was established for the development of fishery sector:

Major activities to be taken up by the National Fisheries Development Board are:

 Intensive aquaculture in ponds and tanks

 Domestic marketing
 Fish Dressing Centres and Solar Drying Fish
 Infrastructure for post-Harvest programs
 Seaweed Cultivation
 Sea Ranching
 Mari culture
 Brakish water Coastal Aquaculture
 Enchasing productivity from Reservoir Fisheries.

MAJOR FISH PRODUCTS OF INDIA:

Some of the major fish products of India are as follows.

 Fish Oil
 Fish Meal and Fish Guano
 Fish Flour
 Fish Silage
 Sharks Fin
 Fish Roes
 Fish Glue
 Fish Skin

TOP TEN BEST INDIAN FISHES:

The Top Best Indian fishes are

 Rawns (Indian Salmon)

 Katla (Indian Carp or Bengal Carp)
 Rohu (Roho or Carpo Fish)
 Bangda (Indian Makerel)
 Rani (Pink pernch)

25
  Surmai (Seer Fish / King Mackerel)
 Paplet (pomfret / Indian Butter Fish)
 Hilso (Herring / Indian shad)
 Kekda (Crab)
 Jhinga (prawns and Shrimps)

INSTITUTIONAL POLICY SUPPORT TO FISHERIES:

There are many financial institutions are established in India to give financial support
for fisheries and improve the performance of fishermen. India has established
different Research and Development institutes to conduct research in the fisheries
sector. Such institutes like Indian Council of Agricultural Research (ICAR), Ministry
of Agriculture; Ministry of Commerce; Ministry of food processing industries State
Agricultural Universities etc. NABARD and commercial banks provide loan for
fisheries and aquaculture. NABARD also offer credit schemes for marine, inland,
brackish water aquaculture. The company use this credit facility for processing,
packaging, preservation, transportation, and marketing of Indian fish, value added fish
products, prawn culture etc. The loan is also used for construction of new pond,
Expansion of existing pond, Manufacturing of quality feed and many other purposes.
Credit facility helps the company to adopt new or advanced technology. In this way
company can increase production of fish, exports and prawn culture.

COMPANY PROFILE

INRODUCTION:

Karnataka Fisheries Development Corporation was started in a year 1970 with the
Authorized share capital of Rs.300 lakhs and paid up share capital is Rs.7.12 lakhs.
This company is registered under the company’s act 1956. This Corporation framed
for the development of the fishery sector and welfare of the fishermen. This
Corporation is the most established Corporation in the State and is pioneer in setting
up Cold Chain, promoting of marine fish in the inland cities and towns of Karnataka.
It sells fish and prawns to different nations. Other activities of the Corporation include

26
building of Mechanized boats, deep sea fishing operation, establishment of ice and
cold storages, Pure-seine fish marketing, running of fish canteens and fish stalls.

HISTORY:

K.F.D.C ltd completed 37 years by providing service to fishermen, supply of value

added fish product and fresh fish to its consumers. In this way it full fills its
objectives. The company face lot of competition over the last ten years because of
obsolete machinery, rigid competition from private sector and over staffing by the
K.F.D.C ltd. At this stage, a proposal is sent by K.F.D.C Ltd to state government
Corporation for rehabilitation and to make it viable. Rs. 412 crores sanctioned by the
state government during the year 2006-07 for the purpose of payment of statutory
dues, bank dues. The State government provide a lot of financial assistance to
K.F.D.C ltd. Because of that K.F.D.C ltd cleared most of the pending payments with
Banks; statutory bodies removed 47 staffs under and Voluntary Retirement Scheme.
Company has also deputed 56 staff to Karnataka State Beverages Corporation and
other Government Institutions to reduce establishment cost. At present K.F.D.C ltd
has 85 employees working in different branches.

Rs.10crores sanctioned by the Karnataka Government in the year 2007-08 has as

share capital for the growth of fish marketing and other similar activities of Company.
K.F.D.C Ltd has planned strengthening of its existing activities and taking up of new
ventures for the overall development of fisheries sector. At Present K.F.D.C ltd has
Authorised share capital of Rs.15crores and paid up share capital of 13.66crores.The
Government of India under the board of Ministry of Agriculture, Department of
Animal Husbandry, Dairying and Fisheries sanctioned Rs.1crores for establishing Ice
plants at Malpe and Mangaluru. 20 tons Ice plant at Malpe is commissioned during
the year and construction of 30-ton Ice plant in Mangaluru is under progress.

VISION:

“TO improve marketing and sale of fish, fishery products, value added fish products,
live fishes and ornamental fishes inculcating Total Quality Management culture
involving all the employees with commitments incorporating the scientific knowledge
of professionals and Research and Development institutions like Central Institute of

27
Fisheries Technology, Cochin, College of Fisheries, Mangalore, Agriculture
Universities etc

MISSION:

 Mission is to supply protein rich fish and value added quality fish products to
the consumers with a high degree of commitment to the philosophy of total
Quality Management.
 Creating eco-friendly environment with a social concept.
 The culture of delightful service to the customers at a competitive price.

OBJECTIVES OF THE COMPANY:

 To conduct fishing in territorial waters and high seas at all seasons and times
using fishing boats and gear of every description independently or in
collaboration with other agencies in India or abroad.
 To manufacture, stock, sell, purchase and use ice for fishing, processing and
other purposes and lease or hire refrigeration space, including transport
vehicles, freezing and other processing facilities.
 To construct, build, acquire, equip and maintain in India and elsewhere fish
reduction plants and oil extraction plants and manufacture and deal in fish
meal, fish oil and other products from fish.
 To undertake and execute contracts for boat building and all other works
usually carried on by the company in the course of its business and other
works.
 To undertake financial and commercial obligation, transactions and operations
of all kinds as are incidental to attainment of the main objective.
 Provide fair price to the fish catches.
 Marketing of fish.
 Establishment of fish restaurants and fish stalls.

SERVICE PROFILE OF KFDC LTD:

The Karnataka Fisheries Development Corporation provide following services in

different areas:

28
  KFDC-Mangaluru Branch:
 Three ice plants of 100MT capacity per day supply ice to the fishing boats
and fisher women.
 A consumer Diesel Bunk of HPC supply tax free diesel to the fishing
boats.
 The KFDC ltd constructed shopping complex in Mangalore and it is used
by the boat owners and fish merchants and it comprise 15 rooms.
 Maintenance of modern auction hall constructed by metro cash and carry
and also maintenance of chilled and ice storage and flake ice plant.
 KFDC- Malpe Branch:
 Two ice plants of 40MT capacity are supplying ice to fisher women and
fishing boats.
 A Consumer Diesel bunk of HPC supply tax free diesel to the fishing
boats.
 KFDC ltd constructed shopping complex in Malpe comprising 12 rooms
and it is used by boat owners and fish merchants.
 Provision of pre - processing plant with a blast freezer, chilled room and
frozen storage for the use of entrepreneurs and KFDC.
 KFDC is handling collecting of entry; wharf age and landing fee of Malpe
fishing harbour on tender from department of fisheries.
 KFDC- Gangolly Branch:
 Two ice plants of 30MT capacity are supplying ice to fisher women and
fishing boats.
 A consumer retail outlet of IOC supplying tax free diesel to the fishing
boats.
 Company acquired Shopping complex in Gangolly. It consists 6 rooms and
it is used by boat owners and fish traders.
 KFDC – Bhatkal Branch:
 A 10MT ice plant is supplying ice to fishing boats and fisher women.
 Marketing of purse –seine boat catches so as to get remunerative price to
catches.
 KFDC – Honnavar Branch:

29
  A20MT ice plant is supplying ice to fishing boats and fisher women.
 Company acquired Shopping Complex in Honnavar which consist 5 rooms
consist and it is used by boat owners and fish traders.
 KFDC – Bangalore Branch:
 Corporation is running very successfully the MATSYADHARSHINI
Cubbonpark. A novel idea to house a hygienic fish restaurant, fish retail
outlet and an aquarium
Sales unit under one roof for catering the requirement of public and is well
appreciated by one and all.
 Bangalore branch also controls MATSYADHARSHINI Yalahanka,
Indiranagar and Kolar.

AREAS OF OPERATION:

The Head office of KFDC Ltd located at Hoige bazar in Mangalore. The area of
operation of KFDC Ltd is co-operative for Procurement and processing of fish and
value added products. But for selling activities the region has been extended to the
different state and within the state. Purchasing process of Fish was stretched to
Karnataka only.

WORKING PROCESS OF KFDC LTD:

 Purchasing of Fish
 Processing of fish (cleaning)
 Separation of Fish on a quality base
 Fixing a price in diverse quality base.
 Producing value added fish product or supply of fresh fish to different sate or
within the state.

INFRASTRACTURE FACILITY:

Karnataka Fisheries Development Corporation situated in Hoige Bazar at Mangalore.

It has total 85 staffs working in different branches. It has total six branches situated in
Mangalore, Malpe, Gangolly, Bhatkal, Honnavar, and Bangalore. The Karnataka
Fisheries Development Corporation has set up Mathsyadarshini, an outlet for selling
fish situated in Mangalore, Puttur, Sullia, Madikeri, Theerthalli, Shimoga, Hassan,

30
Tumkur, Kolar, Cubbon Park, Indira agar, Chitradurga, Davanagere, Gokulam-
Mysore, Siddalingapur – Mysore. KFDC provide infrastructure facility for
preservation of fish for fishermen and for exporters. It also has Ice plants, Diesel bunk
to supply the ice for. fisher women and fishing boats. And supply tax free diesel to the
fishing boats. There are different department in KFDC LTD. they are Finance
department, Engineering department, Marketing Department etc.

FUTURE AND GROWTH PROSPECT:

The future plans of Karnataka Fisheries Development Corporation are:

 Establishing modern cold chain.

 Establishing diesel outlets.
 Establishment of integrated modern fish retail outlets along with restaurants in all
major cities of Karnataka foe selling fresh, chilled, frozen and value added fishery
products.
 Production and sale of attractive fishes, aquarium and other accessories by
mainstreaming rural womenfolk to the activities for their socio-economic upliftment.
 Development of inland fisheries and eco-friendly tourism.
 Online fish marketing on pilot basis in mangalore city.
 Introduction of mobile fish sales and mobile fish canteen in selected cities of
Karnataka.
 Initiation of Matsydharshinins in Hyderabad Karnataka and North Karnataka
Districts.
 Construction of fish market under NFDB and RKVY schemes.

31
 Chapter -5

Data Analysis
and
Interpretation
 V. DATA ANALYSIS & INTERPRETATION

CASH FLOW STATEMENT

Cash flow means actual flow in and out of the business. Cash flow statement is the
record of Cash receipts and Cash payments during the year. It shows sources of funds
and expenditure incurred. That means the way in which cash was generated the way
in which Cash was spent. There are two types of cash flows

A. Actual Cash flow.

B. Notional Cash flow.

If cash balance increases, it is indication that cash flows into business and when cash
or bank balance decreases it indicates that cash flows out of the business. The cash
flow statement shows the net increase or decrease in cash and explain causes for the
changes in the cash balance, during a certain time period.

CASH FLOW STATEMENT ANALYSIS:

Net Cash Flow from Operating Activities:

The Cash or amount of money comes from regular business activity which means
cash flow in the form of manufacturing and selling goods and services. Cash arising
out of operating activity is not considered as long term investment.

Table No 5.1: Cash flow from Operating Activities

Year Cash flow from Operating Activities (in Rs.)

2013-14 11,81,23,811

2014-15 1,41,35,024

2015-16 9,41,40,021

2016-17 21,38,83,748

2017-18 -13,06,62,823

Source: Annual Reports

32
 Graph No 5.1: Cash flow from Operating Activities

Cash flow from Operating Activities (in Rs.)

25,00,00,000

20,00,00,000

15,00,00,000

10,00,00,000

5,00,00,000

0
2013-14 2014-15 2015-16 2016-17 2017-18
-5,00,00,000

-10,00,00,000

-15,00,00,000

The above graphical representation shows net cash flow from operating activities. In
the year 2013-14 company has positive impact on operating profit. The operating
profit increased by Rs.11,81,23,811. This says that company’s sales position was
good. There is also increase in current liabilities such as Trade payables, short term
provisions and current assets are giving good return. In the year 2014-15 the
company’s operating profit slightly goes on decreasing. In the year 2015-16 and
2016-17 the net cash flow from operating increased gradually. In the year 2017-18 the
company had negative impact on cash flow from operating activity i.e. of RS -
13,06,62,823.

NET CASH FLOW FROM FINANCIAL ACTIVITY:

Cash flow from financial activity helps the company to raise the capital. It involving
the activities like Repayment of debentures, repurchase of company shares or debt,
changing loans, issuing new shares etc.

33
Table No 5.2: Cash flow from financing Activities

Year Cash flow from Financing Activities (in Rs.)

2013-14 -1,69,85,423

2014-15 - 89,28,000

2015-16 1,37,31,008

2016-17 1,47,14,883

2017-18 3,08,41,994

Source: Annual Reports

Graph No 5.2: Cash flow from financing Activities

Cash flow from Financing Activities (in Rs.)

4,00,00,000

3,00,00,000

2,00,00,000

1,00,00,000

0
2013-14 2014-15 2015-16 2016-17 2017-18
-1,00,00,000

-2,00,00,000

The above graphical representation shows net cash flow from financing activities. In
the year 2013-14 and 2014-15 the company had negative impact on cash flow from
financial activity. That means company repaid long term borrowings, interest and
financial charges. In the year 2015-16, 2016-17 and 2017-18 Company had positive
impact on cash flow from financial activity. Which mean there is interest received and
decrease in long term loans and advances by the Company.

34
NET INCREASE / DECREASE IN CASH EQUIVALENT

Table No 5.3: Net Increase / Decrease in Cash and Cash Equivalents

Year Cash & Cash equivalents

Beginning of the End of the year Net Increase or
year (in Rs.) (in Rs.) decrease
2013-14 9,73,39,377 19,31,45,280 9,58,05,904
2014-15 19,31,45,279 18,40,93,012 -90,52,267
2015-16 18,40,93,012 29,06,23,582 10,65,30,571
2016-17 29,06,23,582 51,68,28,282 22,62,04,700
2017-18 51,68,28,282 43,77,71,041 -7,90,57,241
Source: Annual Reports

Graph No 5.3: Net Increase / decrease in Cash and Cash Equivalents

Net Increase / decrease in Cash

30,00,00,000

20,00,00,000

10,00,00,000

0
2013-14 2014-15 2015-16 2016-17 2017-18
-10,00,00,000

The above graph represents the changes in the cash and cash equivalent which include
Cash in hand, Cash at banks. In the year 2013-14 there is increase in Cash and Cash
equivalents because there is profit arising from operating activity and increase in cash
at bank. In 2014-15 again there is net decrease in cash and cash equivalents. Because
there is increase in investment activity and Decrease in long term borrowings. Later in
2015-16 and 2016-17, there is increase in cash and cash equivalents due to profit
arising from operating and financial. In the year 2017-18 there is future decrease in
cash and cash equivalents because there is profit arising from operating activity and
increase in cash at bank.

35
NET CASH FLOW FROM INVESTMENT ACTIVITY:

Cash flow from investment activities refers to Receipts and Payments arising from
Purchase and sale of long term assets such as plant and machinery, stocks and bonds,
equity instruments, debts etc.

Table No 5.4: Cash flow from Investing Activities

Year Cash flow from Investing Activities (in Rs.)

2013-14 -53,32,485

2014-15 -1,42,59,291

2015-16 -13,40,457

2016-17 -23,93,931

2017-18 2,07,63,588

Source: Annual Reports

Graph No 5.4: Cash flow from Investment Activities

Cash flow from Investing Activities (in Rs.)

2,50,00,000

2,00,00,000

1,50,00,000

1,00,00,000

50,00,000

0
2013-14 2014-15 2015-16 2016-17 2017-18
-50,00,000

-1,00,00,000

-1,50,00,000

-2,00,00,000

36
The above graphical representation shows net cash flow from Investment activities.
Net cash generated through the sale of the Old asset and the instalment of new assets
effects cash of the company. In the year 2013-14 also company has negative impact
but it goes on decreasing because of Increase in government grants, increase in
interest received. But in the year 2014-15 the negative impact on cash flow from
investing activity increase at high rate. Because of Huge purchase of fixed assets and
assets constructed under grant. In the year 2015-16 negative impact on cash flow from
investment activity decreased at high rate because of decrease in purchase of fixed
asset and capital expenditure. In the year 2016-17 cash flow from Investment activity
has negative impact and again slightly negatively increased because of increase in
purchase of fixed assets. In the year 2017-18 cash flow from Investment activity has
positive impact.

RATIO ANALYSIS:

Ratios are measures of results obtained from a business. In order to know the
performance of the KFDC Ltd the financial ratio analysis is an effective tool
providing the summation of the performance of the business organisation. The ratio
relating to liquidity, solvency, efficiency and profitability of the KFDC have been
analysed. To highlight each of the above aspect, different ratios under each category
have been worked out.

CASH RATIO:

The cash ratio calculates the company’s ability to pay short term liabilities or current
liabilities. Only Cash is used to pay current debts and it is most useful and preventive
than current ratio and Quick ratio. The company should maintain optimum cash
balance. If the company held less cash amount than require, latter company will face
financial difficulties to payoff current liabilities.

Cash Ratio = Cash and cash Equivalents / Current liabilities

37
Table No5.5: Cash Ratio

Year Cash+ cash Equivalents (in Current Liabilities Cash

Rs.) (in Rs.) ratio

2013-14 19,31,45,279 2,26,524,169 0.85

2014-15 18,40,93,012 22,33,85,621 0.82

2015-16 29,06,23,582 31,26,39,104 0.93

2016-17 51,68,28,282 56,05,33,202 0.92

2017-18 43,77,71,041 42,47,32,106 1.03

Source: Annual Reports

Graph No 5.5: Cash Ratio

Cash ratio
1.2

0.8

0.6

0.4

0.2

0
2013-14 2014-15 2015-16 2016-17 2017-18

The above table and graph shows the Cash ratio resulted in fluctuating in trend
throughout the study period from 2013-14 to 2017-18. In the year 2013-14, cash ratio
is 0.85. This condition shows that company still has excess cash after payment of
short-term debt. There was slight decrease in the cash ratio in 2014-15. In 2015-16,
the cash ratio increase to 0.93 and in 2016-17, there is decrease in the cash ratio 0.92.
In 2017-18, the cash ratio increase to 1.03. It indicates company is having financial
difficulty and that company’s strategy to have low cash reserves. If the company cash
ratio comes equivalent to 1. Then it indicates company has same amount of Cash,
Cash equivalent and current liabilities. So company is able to pay off its debts.

38
CURRENT RATIO:

The current ratio shows the total proportion of current assets and current liability
maintain by the KFDC. Current ratio of 2:1 considered to be satisfactory and
indicated the extent to which short term claims could be met by assets that could be
readily convertible into cash.

Current Ratio = Current Assets/Current liabilities

Table No 5.6: Current Ratio

Year Current assets (in Rs.) Current liabilities (in Current ratio (in
Rs.) Rs.)
2013-14 34,93,98,582 22,65,24,169 1.54
2014-15 34,67,37,820 22,33,85,621 1.55
2015-16 46,28,53,971 31,26,39,104 1.48
2016-17 75,45,20,116 56,05,33,202 1.35
2017-18 68,72,35,912 42,47,32,106 1.62
Source: Annual Reports

Graph No 5.6: Current Ratio

Current ratio (in Rs.)

1.65
1.6
1.55
1.5
1.45
1.4
1.35
1.3
1.25
1.2
2013-14 2014-15 2015-16 2016-17 2017-18

39
The above graphical representation shows the liquidity position of the company with
the help of current ratio. In the year 2013-14, the current ratio of the company 1.54.
In the year of 2014-15, the current ratio of the company 1.55 there were little bit of
increase in current ratio. In the year 2015-16, the current ratio of the company
decrease to 1.48. In the year 2016 -17, the current ratio of the company continuous
goes on decreasing to 1.35. In the year 2017-18, the current ratio of the company
increase to 1.62. This analysis shows variation in the liquidity position of the
company and it indicates that the current assets are just sufficient to meet the current
liabilities. In the year 2017-18, the current ratio of the company is on the upper side.
Generally, the Higher the value of ratio, better would be the safety margin and
technical solvency of any organisation.

QUICK RATIO:

The ratio would indicate whether the Organisation is depending on inventory

liquidity. A ratio 1:1 would be regarded as a suitable standard and a ratio of less than
could be considered unsatisfactory situation. Quick ratio shows the amount of current
assets which is readily available for readily convert in to cash. This helps the
company for quick payment of short term liability

Quick Ratio= Current assets – Inventory / Current liabilities.

Table No 5.7: Quick Ratio

Year Quick assets (in Rs.) Quick liabilities( inRs.) QR (in Rs.)

2013-14 33,71,83,214 22,65,24,169 1.49

2014-15 33,51,21,626 22,33,85,621 1.50

2015-16 44,95,66,094 31,26,39,104 1.44

2016-17 74,42,94,573 56,05,33,202 1.33

2017-18 68,72,35,912 42,47,32,106 1.62

Source: Annual Reports

40
 Graph No 5.7: Quick Ratio

Quick ratio (in Rs.)

1.8

1.6

1.4

1.2

0.8

0.6

0.4

0.2

0
2013-14 2014-15 2015-16 2016-17 2017-18

The above graph represents the relationship between the Quick assets and quick
liabilities. This represents how quickly the assets are converted in to cash. In the year
2013-14, the quick ratio of the KFDC is 1.49 times. In the year 2014-15, the ratios
will be slightly increased to the range of 1.50 times. But it maintains standard ratio of
more than 1. In the year 2015-16, there is slightly decrease in the quick ratio to 1.44.
But in the year 2016-17, the quick ratio decrease very high 1.33 and In the year 2017-
18, there is increase in Quick ratio by 1.62 times.

CASH TO SALES RATIO:

The cash flow to sales ratio reveals the ability of a business to generate cash flow in
proportion to its sale volume.

Cash to Sales Ratio = Cash / Sales

41
Table No 5.8: Cash to Sales Ratio

Year Cash (in Rs.) Sales (in Rs.) Ratio

2013-14 19,31,45,279 1,35,68,15,328 0.14

2014-15 18,40,93,012 1,51,14,77,911 0.12

2015-16 29,06,23,582 1,50,10,00,629 0.19

2016-17 51,68,28,282 1,94,49,59,137 0.27

2017-18 43,77,71,041 1,87,86,53,298 0.23

Source: Annual Reports

Graph No 5.8: Cash to Sales Ratio

Ratio
0.3

0.25

0.2

0.15

0.1

0.05

0
2013-14 2014-15 2015-16 2016-17 2017-18

In the year 2013-14, Cash to sales ratio of KFDC ltd was 0.14 times. After that there
is decrease in Cash to sales ratio by 0.12 times in the year 2014-15. In the year 2015-
16, the Cash to Sales ratio of the company go up to 0.19 times. It indicates credit sales
increased during the year. After that there is increase in Cash to sales ratio during the
year 2016-17, cash to sales ratio increase by 0.27 In the year 2017-18, Cash to sales
ratio decrease by 0.23times.

42
CASH TO CURRENT ASSET RATIO:

The Cash to Current Assets ratio measures the how much proportion of total current
asset is constituted by most liquid asset of the company.

Cash to Current Asset Ratio = Cash / Current Assets

Table No 5.9: Cash to Current Assets

Year Cash (in Rs.) Current Assets (in Rs.) Ratio

2013-14 19,31,45,279 34,93,98,582 0.55

2014-15 18,40,93,012 34,67,37,820 0.54

2015-16 29,06,23,582 46,28,53,971 0.63

2016-17 51,68,28,282 75,45,20,116 0.69

2017-18 43,77,71,041 68,72,35,912 0.64

Source: Annual Reports

Graph No 5.9: Cash to Current Asset Ratio

Ratio
0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0
2013-14 2014-15 2015-16 2016-17 2017-18

43
The above table and graph shows Cash to Current asset ratio resulted in fluctuating
trend throughout the study period from 2013-14 to 2017-18. In the year 2013-14,
company Cash to Current Ratio is 0.55 slightly less because there is less cash in hand
or company has least cash in hand in proportion to its current assets. In the year 2014-
15, Cash to Current Asset Ratio of the KFDC ltd slightly decreased by 0.54 times.
Then again it was increased by 0.63 times in the year 2015-16. In the year 2016-17,
again it was increased by 0.69 times. In the year 2017-18, it was slightly decreased to
0.64 times. It indicates Company easily convert the non-liquid assets in to cash.

CASH TO WORKING CAPITAL RATIO:

The Cash to working Capital ratio measures the promotion of cash held by the firm to
meet day to day working capital needs or how well company will pay its short term
liabilities using liquid asset short term liabilities.

Cash to Working Capital Ratio = Cash / working capital

Table No 5.10: Cash to Working Capital Ratio

Year Cash (in Rs) Working Capital (in Ratio

Rs)

2013-14 19,31,45,279 12,,28,74,413 1.57

2014-15 18,40,93,012 12,33,52,199 1.49

2015-16 29,06,23,582 15,02,14,867 1.93

2016-17 51,68,28,282 19,39,86,914 2.66

2017-18 43,77,71,041 26,25,03,806 1.67

Source: Annual Reports

44
 Graph No 5.10: Cash to working capital Ratio

Ratio
3

2.5

1.5

0.5

0
2013-14 2014-15 2015-16 2016-17 2017-18

The above table and graph shows Cash to Working Capital Ratio resulted in
fluctuating and increasing throughout the study period from 2013-14 to 2017-18. In
the year 2013-14 Cash to working capital ratio of KFDC ltd is 1.57times. In the year
2014-15 further it slightly decreased to 1.49 times. The decline in Cash to Working
Capital ratio indicates the company has low cash reserves and is not be able to meet
its financial requirement. Then onwards it increased at high rate by 1.93 and 2.66
times in the year 2015-16 and 2016-17. But in the year 2017-18 cash to working
capital decrease to 1.67 times. It indicates the company held more proportion of
working capital in the form of cash.

CURRENT CASH TO DEBT COVERAGE RATIO:

Current cash debt coverage ratio measures the capability of the company to pay off its
current liabilities out of business operation. It also represents the relationship between
Cash flow from operating activity and average current liabilities.

Current Cash Debt Coverage Ratio = Net cash from Operating activities /
Average Current liabilities.

45
Table No 5.11: Current Cash Debt Coverage Ratio

Year Net Cash flow from Average Current Ratio

Operating Activity (in Rs.) Liabilities (in Rs.)

2013-14 11,81,23,811 11,32,62,084.5 1.04

2014-15 1,41,35,024 11,16,92,810.5 0.13
2015-16 9,41,40,021 15,63,19,552 0.60
2016-17 21,38,83,748 28,02,66,601 0.76
2017-18 -13,06,62,823 21,23,66,053 0.62
Source: Annual Reports

Graph No 5.11: Cash Debt Coverage Ratio

Ratio
1.2

0.8

0.6

0.4

0.2

0
2013-14 2014-15 2015-16 2016-17 2017-18

In the year 2013-14 Current cash debt coverage ratio moving towards Positive
direction. There is increase in by 1.04 times. It indicates a better liquidity position of
the company. In the year 2014-15, cash debt coverage ratio decreased by 0.13 times.
It implies the company may have financial stability problems in near future because it
will not be able to sustain debt payments. There is further increase in cash debt
coverage ratio in the year 2015-16 and 2016-17.but in the year 2017-18, slightly
decreased cash debt coverage ratio. The Current cash debt coverage ratio 1:1 is
considered as standard Current cash debt coverage ratio because of company has able
to pay its current liabilities from cash flow from business operation.

46
WORKING CAPITAL TURNOVER RATIO:

Working capital turnover ratio measures how company effective in using its working
capital. The working capital turnover ratio measures the effectiveness involved from
purchase of raw material till it reaches in to sales or working capital turnover shows
the relationship between money that put into the operation and sales get from this
operation.

Working Capital Turnover Ratio = Net sales / working capital

Table No 5.12: Working Capital Turnover ratio

Year Net sales (in Rs.) Net working capital (in Rs.) Ratio

2013-14 1,35,68,15,328 12,,28,74,413 11.04

2014-15 1,51,14,77,911 12,33,52,199 12.25

2015-16 1,50,10,00,629 15,02,14,867 9.99

2016-17 1,94,49,59,137 19,39,86,914 10.03

2017-18 1,87,86,53,298 26,25,03,806 7.16

Source: Annual Reports

Graph No 5.12: Working Capital Turnover ratio

Ratio
14

12

10

0
2013-14 2014-15 2015-16 2016-17 2017-18

47
In the year 2013-14 the working capital turnover ratio of KFDC ltd was 11.04 times.
There is increase in working capital turnover ratio by 12.25 times in the year 2014-15
and In the year 2015-16 there is a decrease in the working capital by 9.99 That
indicates company is running under good condition. In the year 2015-16 the working
capital ratio of the company came down. It indicates inefficient utilization of working
capital during the period. After that there is slightly increase in working capital
turnover ratio during the year 2016-17 by 10.03 times. But in the year 2017-18 there
is very low working capital turnover ratio 7.16 times. It indicates the company has
sufficient working capital to meet its business operation and generate sales revenue.

DEBTORS TURNOVER RATIO:

Debtor’s turnover ratio is an accounting measure that calculates effectiveness of

company in collection of debt and extending credit to the customers. If company give
less importance for collection of debt and extend more credit, The Company may face
more difficulties in future.

Debtors Turnover Ratio: Sales / Sundry Debtors

Table No 5.13: Debtors Turnover Ratio

Year Sales (in Rs.) Sundry Debtors (in Rs.) Ratio

2013-14 1,35,68,15,328 13,52,11,185 10.03

2014-15 1,51,14,77,911 13,19,38,934 11.46

2015-16 1,50,10,00,629 13,71,38,990 10.95

2016-17 1,94,49,59,137 20,58,42,795 9.45

2017-18 1,87,86,53,298 19,97,59,427 9.40

Source: Annual Reports

48
 Graph No 5.13: Debtors Turnover Ratio

Debtors Turnover Ratio

14

12

10

0
2013-14 2014-15 2015-16 2016-17 2017-18

In the year 2013-14, Debtors Turnover ratio of KFDC ltd was 10.03 times. There is
increase in Debtors Turnover Ratio by 11.46 in the year 2014-15. That indicates that
the company is efficient in collection from debtors Collection. After that there is
slightly decrease in Debtors Turnover ratio during the year 2015-16, 2016-17, and
2017-18 by 10.95, 9.45 and 9.40 times. However, a high ratio indicates that the
company has better credit policy for collection and extension of credit. A low ratio
implies that the company should shorten the length of debtor’s collection period and
change its credit policies in order to ensure the timely and faster collection of debtors.

DEBT EQUITY RATIO:

The Debt equity ratio refers to the relative proportion of debt and equity maintain by
the company to finance its assets. Normally company prefer equity. It is less risk
involved comparing to debt. If the company prefer more on debt it should pay regular
interest but debentures only get tax benefit. The company pay dividend to the equity
share holder on the basis of profit earned by the company.

Debt Equity Ratio = Long term debt / Shareholders Fund

49
Table No 5.14: Debt Equity ratio

Year Long term debt (in Shareholders Fund (in Ratio

Rs.) Rs.)
2013-14 6,38,36,324 20,60,80,584 0.31
2014-15 6,44,01,926 14,34,84,325 0.45

2015-16 5,75,31,174 17,39,12,182 0.33

2016-17 3,26,22,148 23,46,65,953 0.14

2017-18 3,30,24,103 30,85,46,551 0.11

Source: Annual Report

Graph No 5.14: Debt Equity ratio

Debt Equity Ratio

0.5
0.45
0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
2013-14 2014-15 2015-16 2016-17 2017-18

In the year 2013-14 the Debt equity ratio of KFDC ltd was 0.31times. There is
increase in Debt equity ratio by 0.45 times in the year 2014-15. After that there is
decrease in debt equity ratio in the year 2015-16, by 0.33 times. It indicates a lower
amount of financing by debt via lenders versus funding through equity via
shareholders. There is decrease in Debt equity ratio during the year 2016-17 and
2017-18, by 0.14 and 0.11 times. The KFDC ltd prefers less debt and more on equity.
Low debt equity ratio represents high protection to the company.

50
Chapter -6

Findings,
Suggestions
and
Conclusion
 VI. FINDINGS, SUGGESTIONS AND CONCLUSION

FINDINGS

1. There is also increase in current liabilities such as Trade payables, short term
provisions and current assets are giving good return. In the year 2017-18 the
company had negative impact on cash flow from operating activity
2. Company had positive impact on cash flow from financial activity. Which
mean there is interest received and decrease in long term loans and advances
by the Company.
3. There is increase in cash and cash equivalents due to profit arising from
operating and financial. But there is a decrease in cash and cash equivalents
because of profit arising from operating activity and increase in cash at bank.
4. Cash flow from Investment activity has negative impact and again slightly
negatively increased because of increase in purchase of fixed assets.
5. This analysis shows variation in the liquidity position of the company and it
indicates that the current assets are just sufficient to meet the current
liabilities.
6. In the year 2016-17, the quick ratio decrease very high 1.33 and in the year
2017-18, there is increase in Quick ratio by 1.62 times. This represents how
quickly the assets are converted in to cash.
7. There is a high fluctuation in cash to sales ratio with greater change to year to
year. But in case of cash to current assets the fluctuation is with less changes.
8. This study indicates an inefficient utilization of working capital during the
period. But in upcoming year company had sufficient working capital to meet
its business operation and generate sales revenue.
9. The KFDC ltd prefers less debt and more on equity. Low debt equity ratio
represents high protection to the company.
10. It indicates the company has sufficient working capital to meet its business
operation and generate sales revenue.

51
SUGGESTIONS

1. The study indicates that company is having financial difficulty and that
company’s strategy to have low cash reserves. If the company cash ratio
comes equivalent to 1. Then it indicates company has same amount of Cash,
Cash equivalent and current liabilities. So company is able to pay off its debts.
2. The decline in Cash to Working Capital ratio indicates the company has low
cash reserves and is not be able to meet its financial requirement.
3. This study indicates that the company is efficient in collection from debtors
Collection.
4. High ratio indicates that the company has better credit policy for collection
and extension of credit and a low ratio implies that the company should
shorten the length of debtor’s collection period and change its credit policies
in order to ensure the timely and faster collection of debtors.
5. When cash to working capital decreased, it indicates that the company held
more proportion of working capital in the form of cash.

52
CONCLUSION

The effectiveness study of cash management on the Karnataka Fisheries

Development Corporation(KFDC) has provided the clear view of the financial
position of the company. The Cash flow statement analysis helps to find liquidity and
Solvency position of the company as well as the Cash management technique of the
company. This study also helps to find how effectively cash manage by the company
and how effectively Cash is utilized by the company for the day today working of the
business.

This Internship becomes very advantageous to learn about the cash

management of the company. This appraisal proved a great deal to the management to
make a decision on the regulation of funds to increase the sales and get profit to the
company. There is increase in cash and cash equivalents due to profit arising from
operating and financial. But there is a decrease in cash and cash equivalents because
of profit arising from operating activity and increase in cash at bank.

The study indicates that company is having financial difficulty and that
company’s strategy to have low cash reserves. If the company cash ratio comes
equivalent to 1. Then it indicates company has same amount of Cash, Cash equivalent
and current liabilities. So company is able to pay off its debts. Cash flow from
Investment activity has negative impact and again slightly negatively increased
because of increase in purchase of fixed assets.

53
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M.Y. Khan and P.K Jain, (2012), Financial Management, Text, Problems and Cases,
New Delhi: Tata McGraw – Hill Publishing Company Ltd.
Prasanna Chandra,(2008), Financial Management Theory and Practice , New Delhi:
Tata McGraw – Hill Publishing Company Ltd.
I M Pandey, (2008), Financial Management, New Delhi: Vikas Publishing House Pvt.
Ltd.
Sheeba Kapil, (2013), Fundamentals of Financial Management, Noida-UP: Dorling
Kindersley (India) Pvt. Ltd.

Websites:
Kfdcfish.com
www.wikipedia.org
www.fisheries.com
www.siamindia.com
Annexure
 Balance sheet of Karnataka Fisheries Development Corporation Limited for the
year ended 31-03-2014 to 31-03-2018.
Particulars 2018 2017 2016 2015 2014
I. EQUITY & LIABLITIES
1.Share Holders Funds
A. Share Capital 17,84,12,700 17,84,12,700 16,15,92,700 16,15,92,700 16,15,92,700
B. Reserves and Surplus 13,01,33,851 5,62,53,253 1,23,19,482 -1,81,08,375 4,44,87,884
Non-Current Liabilities
A. Long Term Borrowing - 58,39,068 1,69,97,537 2,36,93,537 3,26,21,537
B. Deferred Tax Liabilities - - - - -
C. Long Term Provisions. 3,30,24,103 2,67,83,080 4,05,33,637 4,07,08,389 3,12,14,787
Current Liabilities
A. Trade Payables 1,80,72,638 4,32,69,772 2,31,33,210 1,15,16,592 1,81,74,218
B. Other Current Liabilities 39,32,18,409 51,19,38,766 28,21,37,021 20,83,70,988 20,49,59,457
C. Short- Term Provision 1,34,41,059 53,24,664 73,68,873 34,98,041 33,90,495
Total Balance 76,63,02,760 82,78,21,303 54,40,82,460 43,12,71,873 49,64,41,077
II. ASSETS
1.Non – Current Assets
A. Fixed Assets - - - - -
Tangible Assets 4,90,95,696 4,96,99,804 5,10,94,460 5,14,80,027 5,60,56,073
Intangible Assets 1,46,980 8,755 - 34,146 70,778
Capital work in progress 29,72,909 3,73,145 - - 4,44,54,026
B. Deffered Tax Asset 18,41,175 6,34,649 7,38,402 7,54,363 -3,63,711
C. Long Term Loans &
Advance 2,50,10,089 2,25,84,834 2,93,95,628 3,22,65,516 4,68,25,330
D. Other Non-Current Assets
1. Current Assets
A. Inventories 1,56,71,251 1,02,25,543 1,32,87,877 1,16,16,194 1,22,15,368
B. Trade Receivables 19,97,59,427 20,58,42,795 13,71,38,990 13,19,38,934 1,35,25,11,185
C. Cash & Cash Equivalents 43,77,71,041 51,68,28,282 29,06,23,582 18,40,93,012 19,31,45,279
D. Short-Term Loans &
advance 1,09,70,755 10,80,736 1,27,79,193 1,32,49,861 32,80,006
E. Other Current Assets 2,30,63,439 1,08,22,760 90,24,329 58,39,820 55,46,744
Total Balance 76,63,02,760 82,78,21,303 54,40,82,460 43,12,71,873 49,64,41,077
 Profit and Loss Account for the year
March March March March March 31
Particulars
31,2018 31,2017 31,2016 31,2015 2014
Amount (in Amount (in Amount (in Amount (in Amount (in
Rs.) Rs.) Rs.) Rs.) Rs.)
Revenue:
Revenue from
1,915,221,573 1,980,991,211 1,541,973,724 1,540,297,622 1,375,905,534
operation
Other income 51,332,662 50,432,430 26,146,858 19,435,872 9,450,993

Total Revenue 1,966,554,234 2,031,423,641 1,568,120,582 1559733494 1,385,356,527

Expenses:
Purchases for
1,755,141,502 1,809,507,196 1,378,111,711 1388143603 1,249,191,821
trading
Changes in stock in
trade:
Opening stock 10,171,658 13,240,230 11,599,989 12,155,977 11,946,782
Less: Closing
15,628,348 10,171,658 13,240,230 11,599,989 12,155,977
Stock
Employee benefit
76,873,712 82,859,104 67,302,040 73,915,054 51888494
expense
`Finance costs - - - 565,500
Depreciation &
Amortization 4,714,989 5,297,521 5,555,271 6,953,778 4810764
expense
Other expenses 61,858,291 70,543,919 77,866,704 7,48, 54,023 67045944
Total Expenses 1,893,131,804 1,971,276,312 1,527,195,485 1,544,422,446 1,373,293,328
Exceptional &
680,515 - - - -
Extraordinary item
Profit before tax 74,102,946 60,147,328 40,925,097 15,311,048 12,063,199
Tax expenses and
Tax Adjustment:
Less: Current Tax 25,066,800 16,221,300 12,255,000 6,200,000 4,400,000
Profit for the
50,242,672 43,822,275 28,654,136 10,229,122 7,274,210
Year
Earnings per
share of Rs.100
each.
Basic 28.16 26.93 17.73 6.33 4.5
Diluted 28.16 26.93 17.73 6.33 4.5
 Cash Flow Statement of Karnataka Fisheries Development Corporation Limited
for the Last Five Years
CASH FLOW STATEMENT FOR THE LAST FIVE YEARS

2017-18 2016-17 2015-16 2014-15 2013-14

Cash flow from
operating activity
Net profit before tax 7,41,02,946 6,01,47,328 4,09,25,097 1,53,11,048 12,063,199
Adjustment for:
Depreciation 47,14,989 52,97,521 55,55,271 69,53,778 48,10,764
Loss on sale of Assets - - 87,173 - -
Profit on sale of Assets -6,80,515 - 1,44,723 - -
Interest and Finance - - - 5,65,500
charges paid
Reversal of Excess - - - - -5,68,315
Depreciation Expenditure
Transfer from Deferred -11,46,681 -17,79,339 -19,63,829 -26,82,305 -17,38,589
Government Grant
Provision for Doubtful 6,57,005 1,98,208 27,26,559 1,70,928 3,501,138
Debt
Provision for Doubtful - - 74,336 1,30,937 -
advance
Decrease in Provisions -10,24,905 -19997 -4,578,657 -1,27,304 -7,30,472

Excess provision for Bad -5,31,923 -6,57,735 -4,28,012 -4,58,976 -

debt Reserve
Excess provision for IT -59,377 - - - -
reversed
Interest income -3,50,12,628 -3,28,13,115 -17,796,088 -1,37,70,859 -52,37,892

Operating Profit before 4,10,18,911 3,03,72,870 2,44,57,128 55,27,248 1,26,65,333

Working Capital
Changes
Adjusted for:
Decrease/increase in -54,45,708 30,62,334 -16,71,683 5,99,173 -1,87,762
inventory
Increase/ decrease in -1,59,723 19,78,458 4,60,548 - 10,76,648
short term loans and 1,01,00,792
advance
Decrease/ increase in 69,72,895 -6,82,24,281 -29,19,945 36,87,603 -
Receivables 1,99,43,600

Decrease or increase in -1,22,40,679 -17,98,431 -31,84,509 -2,93,076 -2,25,622

other current assets
Decrease/Increase in - - - 1,45,59,814 13,69,133
loans and advances
Borrowing

Decrease /Increase in - - - - -
Other Long Term
Liabilities
Decrease /Increase in - - - 94,93,602 -17,34,513
Long term Provisions
Decrease /Increase in -2,51,97,134 2,01,36,561 1,16,16,618 -66,57,626 15,96,844
Trade payables
Decrease /Increase in - - - -32,80,871 2,50,427
Short term provision

Decrease/Increase in -11,87,20,357 24,66,21,745 7,37,66,033 34,11,532 12,42,74,970

Other Current Liabilities

Income tax paid -1,68,91,028 -1,82,65,509 - 83,84,168 - 28,11,582 -10,18,046

Net Cash From -13,06,62,823 21,38,83,748 9,41,40,021 1,41,35,024 11,81,23,811

Operating Activities

Cash Flow From

Investing Activity
Increase in Government 4,02,61,301 99,45,500 1,44,73,430 95,11,204 6200000
Grants (Net)
Interest Received - - - 1,37,70,859 52,37,892

Amount spent on Capital -71,19,434 -42,84,766 -54,09,760 4,21,12,925 -93,46,937

Work in Progress
Capital expenditure on - -45,58,459 -89,74,570 -63,83,188 -7,03,606
Asset handed over to 1,01,61,040
Civil bodies
Purchases of Fixed -31,68,319 -34,96,206 -17,61,310 -73271091 -67,19,835
Assets and assets
constructed under grant

Net Cash From 2,07,63,588 -23,93,931 -13,40,457 -14,259,291 -5,33,485

Investing Activities
Cash from Financing
Activity
Decrease in Long term -58,39,068 -1,11,58,,469 - 66,96,000 -89,28,000 -
1,64,19,923
Decrease /(Increase) in -24,25,255 68,10,794 28,05,672 - -
long term loans &
Advance
(Decrease) / Increase in 62,41,023 -1,37,50,557 -17752 - -
Long term provision
Interest Received 3,50,12,628 3,,28,13,115 1,77,96,088 - -565500

Dividend distribution tax -21,47,334 - - - -

Net Cash From 3,08,41,994 1,47,14,883 1,37,31,008 -8928000 -16985423

Financing Activity

Net Increase in Cash - 22,62,04,700 10,65,30,571 -90,52,267 9,58,05,904

and Cash Equivalent 7,90,57,241
(A+B+C)
Opening Cash &Cash 51,68,28,282 29,06,23,582 1840930112 193145279 97339377
Equivalents
Closing Cash & Cash 43,77,71,041 51,68,28,282 29,06,23,582 1,84,093,012 19,31,45,280
Equivalents