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1. INTRODUCTION OF THE STUDY

1.1GENERAL INTRODUCTION

"FINANCE" is the lifeblood and nerve system of any business organization. Just as circulation of blood is necessary in the human body to maintain life finance is very essential to the business organization for smooth running of the business.

Financial management involves managerial activities concerned with the acquisition of fund and the business purpose. The finance function does with procurement of money taking into consideration of today as well as future need and finance is required to purchase a machinery and raw materials, to pay salaries and wages and also for day-to-day expenses.

This study is carried out at Karnataka Soaps and Detergents Limited Bangalore. The company is owned by Government of Karnataka. It is well established company, which is in the business of manufacturing Sandal Soaps and detergents. It has got ISO 9002 certificate. In this company Senior Manager is the Head of the finance department. Under him there are five Deputy Managers and also there is an Account Officer, who is not under the direct control of Senior Manager.

1.2SCOPE OF STUDY

The field of working capital comprising of capital management, Inventory management, Receivable, Cash and Work in progress system. The study was confined to KS&DL only.

Analysis of financial performance with reference to working capital with the help of tables, ratios and graphs and suggestions for improving working capital procedures and capacity utilization system of the firm.

1.3CONCEPT OF STUDY

Introduction :

Working capital is concerned with the problems that arise in attempting to manage the current assets, the current liabilities and the interrelationship that exists between them.

Every firm tries to achieve financial stability. It can be repay its current outstanding debts from the income currently collected from its customer and meet future debts from future income. In addition, it must have adequate liquidity for meeting planned investment and also for meeting unplanned needs, which may come up from time to time in the life of the firm. Hence one of the most important areas in day-to-day management of the firm is the management of current assets and current liabilities.

Meaning:

Working Capital refers to that part of the firm's capital which is required for financing short term or current assets such as cash, debtors, marketable securities and inventories. In other words working capital represents the difference between current assets and current liabilities. It provides an indication of the extent to which a business is able to meet its current obligations out of the assets which are held for conversion into cash.

WORKING CAPITAL = CURRENT ASSETS - CURRENT LIABILITIES

1.4NEED FOR THE STUDY

The need for working capital (gross) or current assets cannot be over emphasized. As already observed, the objective of financial decision making is to maximize the shareholders wealth. To achieve this, it is necessary to generate sufficient profits. The extents to which profit can be earned with naturally depend upon the magnitude of the sales, among other things. A successful sales program is, in other words, for necessary for earning profit by any business enterprise. However, sales do not convert into cash instantly there is invariably a time lag between the sales of good and the receipts of cash. There is, therefore, a need for working capital in the form of current assets to deal with the problem arising out of the lack of immediate realization of cash against good sold. Therefore sufficient working capital is necessary to sustain sales activity.

1.5STATEMENT OF THE STUDY

KS&DL has mainly engaged in the business of production soap and detergents. It has a continuously increasing turnover. The debtors and the inventories are increasing at a higher rate due to increase in sales. The study will cover the...
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