A Summer Training Report on

Working capital management In

JAMMU AND KASHMIR BANK LIMITED

SRINAGAR Submitted in partial fulfilment of Requirement for the degree of Masters of Business Administration in Finance to

PUNJAB TECHNICAL UNIVERSITY

2010-2012

Submitted by Manzoor ahmad M.BA-3rd Sem 100222243668

C.T.Institutions of management Studies Shahpur Campus,Jalandhar

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CT INSTITUTIONS OF MANAGEMENT STUDIES SHAHPUR CAMPUS,JALANDHAR STUDENTS DECLARATION

I hereby certify that the work which is being presented in this report entitled by WORKING CAPITAL MANAGEMENT by Manzoor ahmad (university roll no 100222243668) in partial fulfillment of the requirement for the award of degree of MASTERS OF BUSINESS ADMINISTRATION in the department of CT INSTITUTION OF MANAGEMENT STUDIES,SHAHPUR CAMPUS,JALANDHAR under the PUNJAB TECHNICAL UNIVERSITY , JALANDHAR is an authentic record of my own work carried out during the period from 22nd june to 7th auguest in 2011. The matter presented in this project is accurate and authentic.

(Manzoor) This is certify that the above statement made by the student is correct the best of my knowledge.

Lect. SUPREET KAUR Management department CT institution shahpur, Jalandhar.

ACKNOWLEDGEMENT
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This report would not have been possible without the help of certain people unstinting support of J&K Bank.

We offer our gratitude to all those who have spent their precious time, expressed keen interest and given continued encouragement through the study enabled the successful completion of my project. Practical training in Jammu and Kashmir Zonal Office, M.A. road Srinagar was very valuable to us and our special thanks are due to our project co-ordinator Mr. Mohammad Ashraf (Executive Officer) for his inspiring guidance, valuable help and angelic support for the completion of my project in WORKING CAPITAL.

In the J&K Bank, we would like to extend my gratitude to the management and staff of J&K Zonal Office for their cooperation during our training.

MANZOOR AHMAD

PREFACE
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On the job training in business organisation infuses among students a sense of critical analysis to apply of real managerial situation to which they are exposed. It gives them an opportunity to apply their conceptual, theoretical and imaginative skills to the real life situation and to evaluate the results thereafter.

I was lucky to have got an opportunity to work at J&K Bank to get the project of my interest. I visited the concern for six weeks and prepared my project Working capital management. I also got the practical experience in the field of management.

This report is written account of what I learnt, experienced and explored during my summer training.

CONTENTS
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INTRODUCTION HISTORY OF BANKS J&k BANK PROFILE HISTORY OF J&K BANK MISSION AND VISSION ACHIEVEMENTS ORGANISATIONAL STRUCTURE WORKING CAPITAL MANAGEMENT RESEARCH METHOLOGY OBJECTIVES FINANCIAL ANALYSIS SWOT ANALYSIS CONCLUSION RECOMMENDATIONS AND SUGGESTIONS BALANCE SHEET PROFIT AND LOSS STATEMENT BIBLOGRAPHY

6 8 11 12 14 15 17 18 22 23 39 47 47 48 49 51 53

Introduction to Banking Sector

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The banking system in India is significantly different from that of other Asian nations because of the countrys unique geographic, social, and economic characteristics. India has a large population and land size, a diverse culture, and extreme disparities in income, which are marked among its regions. There are high levels of illiteracy among a large percentage of its population but, at the same time, the country has a large reservoir of managerial and technologically advanced talents. Between about 30 and 35 percent of the population resides in metro and urban cities and the rest is spread in several semi-urban and rural centers. The countrys economic policy framework combines socialistic and capitalistic features with a heavy bias towards public sector investment. India has followed the path of growth-led exports rather than the exportled growth of other Asian economies, with emphasis on self-reliance through import substitution. These features are reflected in the structure, size, and diversity of the countrys banking and financial sector. The banking system has had to serve the goals of economic policies enunciated in successive fiveyear development plans, particularly concerning equitable income distribution, balanced regional economic growth, and the reduction and elimination of private sector monopolies in trade and industry. I order for the banking industry to serve as an
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instrument of state policy, it was subjected to various nationalization schemes in different phases (1955, 1969,and 1980). As a result, banking remained internationally isolated (few Indian banks had presence abroad in international financial centers) because of preoccupations with domestic priorities, especially massive branch expansion and attracting more people to the system. Moreover, the sector has been assigned the role of providing support to other economic sectors such as agriculture, small-scale indus tries, exports, and banking activities in the developed commercial centers (i.e., metro, urban, and a limited number of semi-urban centers). The banking systems international isolation was also due to strict branch licensing controls on foreign banks already operating in the country as well as entry restrictions facing new foreign banks. A criterion of reciprocity is required for any Indian bank to open an office abroad. These features have left the Indian banking sector with weaknesses and strengths. A big challenge facing Indian banks is how, under the current ownership structure, to attain operational efficiency suitable for modern financial intermediation. On the other hand, it has been relatively easy for the public sector banks to recapitalise, given the increase in nonperforming assets (NPAs), as their Government dominated ownership structure has reduced the conflicts of interest that private banks would face.

HISTORY OF BANKS IN INDIA

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Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint Stock bank in India.(Joint Stock Bank: A company that issues stock and requires shareholders to be held liable for the company's debt) It was not the first though. That honour belongs to the Bank of Upper India, which was established in 1863, and which survived until 1913, when it failed, with some of its assets and liabilities being transferred to the Alliance Bank of Simla. When the American Civil War stopped the supply of cotton to Lancashire from the Confederate States, promoters opened banks to finance trading in Indian cotton. With large exposure to speculative ventures, most of the banks opened in India during that period failed. The depositors lost money and lost interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century. Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madras and Pondicherry, then a French colony, followed. HSBC established itself in Bengal in 1869. Calcutta was the most active trading port in
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India, mainly due to the trade of the British Empire, and so became a banking centre. The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in Lahore in 1895, which has survived to the present and is now one of the largest banks in India. Around the turn of the 20th Century, the Indian economy was passing through a relative period of stability. Around five decades had elapsed since the Indian Mutiny, and the social, industrial and other infrastructure had improved. Indians had established small banks, most of which served particular ethnic and religious communities. The presidency banks dominated banking in India but there were also some exchange banks and a number of Indian joint stock banks. All these banks operated in different segments of the economy. The exchange banks, mostly owned by Europeans, concentrated on financing foreign trade. Indian joint stock banks were generally undercapitalized and lacked the experience and maturity to compete with the presidency and exchange banks. This segmentation let Lord Curzon to observe, "In respect of banking it seems we are behind the times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome compartments." The period between 1906 and 1911, saw the establishment of banks inspired by the Swadeshi movement. The Swadeshi movement inspired local businessmen and political figures to found banks of and for the Indian community. A number of banks established then have survived to the present such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India. The fervour of Swadeshi movement lead to establishing of many private banks in Dakshina Kannada and Udupi district which were unified earlier and known by the name South Canara ( South Kanara ) district. Four nationalised banks started in this district and also a leading private sector bank. Hence undivided Dakshina Kannada district is known as "Cradle of Indian Banking". During the First World War (1914-1918) through the end of the Second World War (1939-1945), and two years thereafter until the independence of India were challenging for Indian banking. The
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years of the First World War were turbulent, and it took its toll with banks simply collapsing despite the Indian economy gaining indirect boost due to war-related economic activities. At least 94 banks in India failed between 1913 and 1918.

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BRIEF PROFILE OF JAMMU AND KASHMIR BANK

NAMES
MUSHTAQ AHMAD

DESIGNATION

CHAIRMAN

Mohammad Ibrahim Shahdad

EXECUTIVE DIRECTOR

Arnab Roy

DIRECTOR

Sudhanshu Pandey

DIRECTOR

NISAR ALI

DIRECTOR

Abdul Majid Matto

NON-EXECUTIVE DIRECTOR

HISTORY OF J&K BANK

The origin of Jammu and Kashmir Bank Limited, more commonly referred to as J&K Bank, can be traced back to the year 1938, when it was established as the first state-owned bank in India. The bank was incorporated on 1st October 1938 and it was in the following year (more precisely on 4th July 1939) that it commenced its business, in Kashmir (India). It was initially set up as a semi-State Bank, with its capital being contributed by State as well as the public under the
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control=of=state=government. Jammu and Kashmir Bank had to face serious problems in 1947 i.e. at the time of independence. With the partition of Pakistan, two out of the total ten branches of the bank, namely the ones in Muzaffarabad and Mirpur, fell to the other side of the line of control (now Pak Occupied Kashmir), along with cash and other assets. At that point of time, in keeping with the extended Central laws of the state, J&K Bank was categorized as a Government Company, as per the provisions of Indian Companies Act 1956. It was in the year 1971 that Jammu and Kashmir Bank was granted the status of a 'Scheduled Bank'. Five years later, it was declared as "A" Class Bank, by the Reserve Bank of India (RBI). As the years passed on, the bank started achieving more and more success. Today, it boasts of more than 500 branches across the country. It was only recently that Jammu and Kashmir Bank became a billion dollar company. Governed by the Companies Act and Banking Regulation Act of India, it is regulated by RBI and SEBI. It finds a listing on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) as well. Unique Characteristics & Services

J&K Bank carries out banking business of the Central Government

Inspite of a government equity holding of 53 per cent, Jammu & Kashmir Bank (J&K Bank) is regarded as a private sector bank J&K Bank is the one and only banker and lender of last resort to the Government of J&K Plan and non-plan funds, taxes and non-tax revenues are routed through the J&K Bank J&K Bank claims the distinction of being the only private sector bank that has been designated as agent of RBI for banking The services of J&K Bank are utilized for the purposes of disbursing the salaries of Government officials J&K Bank collects taxes pertaining to Central Board of Direct Taxes, in Jammu & Kashmir

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Products+&+services
Support Services

Anywhere Banking Internet Banking SMS Banking ATM Services Debit Cards Credit Cards Merchant Acquiring

Depository Services

Demat Account Other Services

Third Party Services

Mutual Funds Insurance Services - Life & Non Life Remittance Services

Cash Management Services

Real Time Gross Settlement (RTGS) National Electronic Fund Transfer (NEFT)

MISSION AND VISION OF J&K BANK

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To catalyse economic transformation and capitalise on growth. Our vision is to engender and catalyse economic transformation of Jammu and Kashmir and capitalise from the growth induced financial prosperity thus engineered. Bank aspires to make Jammu and Kashmir the most prosperous state in the country, by helping create a new financial architecture for the J&K economy, at the centre of which will be the J&K Bank. The Jammu Central Co-operative Bank dedicates itself to all round of growth of PACS by providing required credit to them. It also swears to serve the general public by extending improved banking services and enhanced credit dispersal better than any other banking channel. As a corporate process, the uniqueness and distinct culture of the Jammu Central Co-operative Bank is our experience specialisation in the field of agricultural credit and vast clientele base. Therefore, as a corporate mission, our focus would be agricultural finance and needs of the rural people. In light of above, the corporate mission would be to double the flow of Agriculture Credit during the next three years. The organisational mission would be to inculcate sense of belongingness by bringing professionalization in true sense to introduce and upgrade technology based skill with human face and strengthen its resource base by broadening its customer base.

ACHIEVEMENTS
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Emerging as topper, the J&K Bank has disbursed Rs 631.76 crore out of the total credit of Rs 914.73 crore extended by the banks operating in J&K during Q1 of FY 2011-12. J&K Bank has been awarded as the best Bank in the prestigious Dun & Bradstreet (D&B) Polaris Software Banking Awards 2011. The award was conferred in the category for Rural Reach- Private Sector. The award was presented by R Bandyopadhyay, IAS (Retd.), Former Secretary, Ministry of Corporate Affairs, Government of India. J&K Bank Zonal Head (Mumbai) Surjeet Singh Sehgal received the award on Banks behalf in presence of Mohan Ramaswamy, Chief Operating Officer, Dun & Bradstreet India and Subhash Chand Aggarwal, Chairman & Managing Director, SMC Global Securities Limited. at a function held at ITC Maratha in Andheri (E) Mumbai that also marked the launch of the fifth edition of D&B Indias study on Indias Top Banks 2011. J&K Bank has been awarded as the best Bank in the prestigious Dun & Bradstreet (D&B) Polaris Software Banking Awards 2011. The award was conferred in the category for Rural Reach- Private Sector. J&K Banks Annual Report 2008-09 has won three awards at the prestigious LACP 2009 Vision Awards the worlds largest award programme for Annual Reports, organised by California-based League of American Communications Professionals (LACP), USA.

IDENTITY
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The new identity for J&K Bank is a visual representation of the Banks philosophy and business strategy. The three colored squares represent the regions of Jammu, Kashmir and Ladakh. The counter-form created by the interaction of the squares is a falcon with outstretched wings a symbol of power and empowerment.

The synergy between the three regions propels the bank towards new horizons. Green signifies growth and renewal, blue conveys stability and unity, and red represents energy and power. All these attributes are integrated and assimilated in the white counter-form.

Organizational structure of J&k bank

Chairman & CEO

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Executive Director (Chief Operating Officer)

Executive Director (Chief Financial Officer)

Sr. President (HRD/Reg.)

President (Strategy & Bus .Sup.)

President (Fin. Services)

President (Bus.
Supt/Tech)

President (Comp.Sec.)

President (Adv.& asset plng )

President (CTC)

Human Resources

Law & Regulatory

Treasury Supervision & Controls Financial Services

Finance & Risk Mgmtt

Strategy & Business

Technology & Information

Business Support

Company Secretary

Advances & Asset

Deposits & Liability

Departments Departments

Departments Departments

Departments

Departments

Departments

Departments

Departments

Departments

Departments

Departments

Concurrent Audit

CDW Personal Training Recruitm ent Terminal Benefits Placeme nts

I&V KYC Law Lead Bank RBI Comp & Regulatory Matters Sponsored Banks

ALM Balance sheet Branches Credit Risk Financial Reporting IBR Risk Mgmtt Portfolio Rating Rem. & St. Structured Risk Taxation

Card Issuing & Acquiring

Corporate

ATM Switch Credit Audit Depository Services Distribution Empanelmen t Of Valuers IS Audit Insurance RBI Internal Audit Stock Audit Information Technology Management & Information System Network Depository Services Distributio n Insurance

Call Centre
Connectivity

Estates & Engineering General

Company Secretary

communic -ation
Data Mining Financial Products Macro Economics Policy Plng Marketing Systems & Procedure

Zonal Office Kmr (Central )

Asset
Monitori -ng &
Inform ation

Corporat e Deposit Retail Deposit

Debit Forex Mon ey Deriv ative

Database E-Banking Finacle Hardware Public Relations & Customer Care R&D Security Stationery

Corporate Credit Financial Inclusion Micro Credit & Priority sector Retail Credit

WORKING CAPITAL MANAGEMENT

Software

Small & Medium Enterpris es

Every business needs finance for two purposes for its establishment and to carry out its day to day operations. Long term funds are required to create production facilities through purchase of fixed assets such as plant and machinery, land & building, furniture etc.
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funds are also needed for short term purposes : for purchase of raw material , payment of wages and other day to day expenses etc. These funds are known as working capital. In simple terms working capital refers to that part of firms capital which is required for financing short term or current assets such as such as cash, marketable securities, debtors and inventories etc. Funds thus invested in current assets keep revolving fast and are being constantly converted into cash and these cash flows out again in exchange for other assets. Hence it is also known as revolving or circulating capital or short term capital.

KINDS OF WORKING CAPITAL

Working capital may be classified into two ways:

On the basis of concept. On the basis of time.

On the basis of concept, working capital is classified as Gross Working capital and Net Working capital. On the basis of time, working capital is classified as permanent or fixed working capital and temporary and variable working capital.

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TYPES OF WORKING CAPITAL

WORKING CAPITAL

BASIS OF CONCEPT

BASIS OF TIME

Gross Working Capital

Net Working Capital

Permanent / Fixed WC

Temporary / Variable WC Special WC

Seasonal WC
Regular WC Reserve WC

Gross working: It represents the amount of funds invested in

current assets. Thus the Gross working capital is the capital invested in the total current assets of the enterprise. Current assets are those assets which in the ordinary course of business can be converted into cash within a short period of normally one accounting year. Examples of current assets are: 1. Cash in hand and bank balance. 2. Bills receivables 3. Sundry debtors(less provision for bad debts). 4. Short term loans and advances. 5. Inventories of stock. 6. Temporary investment in surplus goods. 7. Prepaid expenses. 8. Accrued incomes.

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Net working capital: It is the excess of current assets

over current liabilities. Net working capital may positive or negative. When the current assets exceed the current liabilities, the working capital is positive and the negative working capital results when the current liabilities are then the current assets. Current liabilities are those liabilities which are intended to paid in the ordinary course of business within a short period of normally one accounting year out of the current assets or the income of the business. Examples of current liabilities are: 1. 2. 3. 4. 5. 6. Bills payables Sundry creditors. Accrued or outstanding expenses. Dividend payable. Bank overdraft. Provision for taxation, if it does not amount to appropriate to profits.

Net working capital = current assets current liabilities.

Permanent working capital: It is the minimum amount which is

required to ensure effective utilisation of fixed facilities and for maintaining the circulation of current assets. There is always a minimum level of current assets which is continuously required by the enterprise to carry out its normal business operations. For example, every firm has to maintain a minimum level of raw material, work in progress, finished goods and cash balance. The minimum level of current assets is called fixed or permanent working capital as this part of working capital is permanently blocked in current assets. As the business grows, the requirement of permanent working capital also increases de to the increase in current assets. The permanent working capital can further be classified as regular working capital and reserve working capital.
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Temporary or Variable working capital: it is that amount of

working capital which is required to meet the seasonal demand and some special exigencies. Variable working capital can further be classified as seasonal working capital and special working capital. Most of the enterprise have to provide additional working capital to meet seasonal and special needs. The capital requirement to meet the seasonal needs of the enterprise is called seasonal working capital. Special working capital is that part o working capital which is required to meet the special exigencies such as launching of extensive marketing campaigns for conducting research.

IMPORTANCE OF WORKING CAPITAL

The working capital is the life-blood and nerve centre of a business firm. The sufficiency of working capital assists in raising credit standing of a business because of better terms on goods bought, lesser cost of manufacturing due to the acceptance of cash discounts, favorable rates of interest etc. No business can run effectively without a sufficient quantity of working capital. It is crucial to retain right level of working capital. Finance manager is required to decide the amount of accurate working capital. A business enterprise with ample working capital is always in a position to avail advantages of any favorable opportunity either to buy raw materials or to implement a special order or to wait for enhanced market status. Cash is needed to carry out day-to-day workings and buy inventories etc. The shortage of cash may badly affect the position of a business concern. The receivables management is related to the volume of production and sales. For escalating sales there may be a need to offer additional credit facilities. While sales may ascend but the danger of bad debts and cost involved in it may have to be considered against the benefits. Inventory control is also a significant constituent in working capital management. The deficiency of inventory may cause work stoppage.
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On the other hand, surplus inventory may result in blocking of money in stocks. The overall success of the company depends upon its working capital position. So, it should be handled properly because it shows the efficiency and financial strength of company.

Research Methodology
In order to learn and observe the practical applicability and feasibility of various theories and concepts, the following sources are being used: Primary Sources of Information Discussions with the project guide and staff members. Discussions with various other department head. Secondary Sources of Information RBI guidelines regulating the activities of the banks Banks Credit policy and related circulars and guidelines issued by the bank. Research papers, power point presentations and PDF files prepared by the bank and its related officials. Study of proposals and manuals Website of Jammu and Kashmir bank and other net sources Analysis of data The information gathered are the policies and practices regarding management of the working capital. Analysis is done in terms of the theoretical concepts. Analysis of the working capital performance is done with the help of percentages by showing graphs, ratios and operating cycles etc.
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OBJECTIVES OF THE STUDY

To analyze the trend in various components of working capital. Evaluation of working capital management. To study the operating cycle of J&K Bank . To know the future requirements of the working capital. To give the suggestions regarding the proper management of working capital to the company.

COMPOSITION AND LEVEL OF CURRENT ASSETS

The level of current assets is measured with the help of ratio i.e., current assets as a percentage of total assets. INVENTORY YEARS 2008 2009 INVENTORY (IN RS) 3597158 4646596 TOTAL ASSETS 15814404 16540326 (Rs in 000) INVENTORY IN % AGE 22.75 28.09

2010

2456396

17871565

32.02

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Inventory of total assets

2007 2008 2009

Inventory in %age
35 30 25 20 15 10 5 0 2007 2008 2009 Inventory in %age

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ANALYSIS
The percentage of inventory is clearly depicted in the table from the year 2008 to 2010. From 2008 to 2009 the percentage of the total inventory to total assets has increased from 22.7% to 28.09% and this has been further increased to 30.02%.

INTERPRETATION:The level of inventory is continuously increasing in the J&K Bank because of banks successful marketable strategies and its continuous increased market base.

DEBTORS (Rs in 000)

YEARS 2008 2009 2010 DEBTORS (IN RS) 879660 1122564 1314231 TOTAL ASSETS 15814404 165403326 17871565 DEBTORS IN %AGE 5.56 6.78 8.84

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DEBTORS IN %AGE

2008 2009 2010

DEBTORS TO TOTAL SSETS

20000000 18000000 16000000 14000000 12000000 10000000 8000000 6000000 4000000 2000000 0 2008 2009 2010 DEBTORS TO TOTAL SSETS

ANALYSIS:From the above table it is very evident that the debtors are increasing from 2008 to 2010. In 2008 debtors are 5.58% and in 2009 it is 6.78% and in 2009 %age of debtors to total assets has increased to 8.84%.
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INTREPRETATION:In the year 2010, debtors have increased from 1122564 thousand to 1314231 thousand indicating an increase from 6.78% to 8.84% of total assets. Such increase has been gained by bank due to increase in sales followed by expansion activities in spinning, weaving and processing units respectively.

CASH BALANCE
YEARS CASH TOTAL ASSETS CASH BALANCE %AGE

2008 2009 2010

2124541 1176715 1331970

15814404 16540326 17871565

13.43 7.11 10.95

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CASH BALANCE %AGE

2008 2009 2010

20000000 18000000 16000000 14000000 12000000 10000000 8000000 6000000 4000000 2000000 0 2008 2009 2010 CASH BALANCE TOTAL ASSETS

LOANS AND ADVANCES

YEAR 2008 LOANS AND ADVANCES 40,247.62 TOTAL ASSETS 8,334.12 LOANS AND ADVANCES %AGE 20.7
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2009

35626.96

10,418.42

29.24

2010

30,902.19

13676.39

44.25

LOANS AND ADVANCES %AGE

2008 22%

2010 47%

2009 31%

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LOANS AND ADVANCES TO TOTAL ASSETS

45000 40000 35000 30000 25000 20000 15000 10000 5000 0 2008 2009 2010 LOANS AND ADVANCES TOTAL ASSETS

ANALYSIS
From the above table it is clear that the loans and advances are continuously decreasing but consecutively its total assets are increasing. It is due to the reason that bank is using conservative mode of issuing loans and advances and is recovery the loans and advances by the effective means.

INTERPRETATION
From the table since loans and advance to total assets is consecutively increasing from 20.7% in 2008, 29.24% in 2009 and 42.25% in 2010, it means banks are optimally using their assets to gain the maximum profits and is relatively trying to attracting the more customers.

COMPOSITION AND LEVEL OF CURRENT LIABILITIES:PARTICULARS Current liabilities Sundry creditors 2008 Amt. 206132 % 1.95 2009 Amt. 346960 % 3.06 2010 Amt. 338128 % 3.72

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Security deposits 3329 Int. accrued Adv. From customers Stat liabilities Other liabilities Unclaimed dividend Provisions Total 2596 18382 90155 214454 214454 46838 584686

.0315 .0245 .174 .853 2.02 2.029 .4432 5.533

42160 2039 5211114 74619 359291 3592691 46838 1398012

.0372 .0180 4.600 .658 3.172 3.172 .4135 12.34

42999 426 11369 57720 342748 342748 46838 847318

.473 .0045 .125 .635 3.77 3.77 .515 9.329

Total liabilities

10567023

11326723

9082216

ANALYSIS:The above table shows the composition and level of current liabilities. The position of creditors of J&K Bank is revealed from the table. The creditors remain fluctuating in 2008, the creditors are of Rs 206132 and company has projected increase in creditor level in 2009 are 346960, in 2010 creditors are 338128. Advances from the customers have been increased immensely from 2008 to 2010. INTERPRETATION:The table shows that the creditors have been increased in 2009 with rise in inventory level. And in the year 2010, the level of inventory is decreased due to less prominent schemes.

COMPUTATION OF GROSS WORKING CAPITAL:31

PARTICULARS Inventory (+) sundry debtors

2008 3597158 879660

2009 4646596 1122564 1176715 1208673 8154548

2010 5456396 1314231 . 2331970 1814990 10917587

(+) cash balance 2124541 (+) loans and advances GROSS WORKING CAPITAL 1462490 8063849

INTERPRETATION:From the table it is evident that the gross working capital is constantly increasing in J&K Bank, this increase is due to the fact that in every successive year the J&K Bank has introduced or updated the new schemes for its customers and has efficiently improve the their service for customers. It is clear that in 2008 the GWC was 8063849, in 2009 it was 8154548 and in 2010 it has drastically increased to 10917587.

COMPUTATION OF NET WORKING CAPITAL:PARTICULARS 2008

Total current assets 8088407

2009
8168078

2010
8229289

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(-) Total current 584689 liabilities

1398012

847318

Net working capital

7503718

6770066

7381971

INTERPRETATION:Net working capital is the excess of current assets over the current liabilities. And from the table it is clear that in 2008, the NWC was 7503718 and it decreased to 6770066 in 2009 and again increased to 7381971 in 2010. The reason for this increase is the banks intervention in different financial fields (mutual funds, insurance, etc) and the profound customer base infrastructure.

OPERATING CYCLE AND CASH CYCLE All business firms aim at maximizing the wealth of the shareholder for which they need to earn sufficient return on their operations. To earn sufficient profits they need to do enough sales, which further necessitates investment in current assets like raw materiel etc. There is always an operating cycle involved in the conversion of sales into cash. The duration of time required to complete the following sequences of events in case of a manufacturing firm is called the operating cycle:1. Conversion of cash into raw material 2. Conversion of raw material into WIP 3. Conversion of WIP into FG 4. Conversion of FG into debtors and bills receivable through sales
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5. Conversion of debtors and bills receivable into cash Each component of working capital namely inventory, receivables and payables has two dimensions time and money. When it comes to managing working capital - Time Is Money. Therefore, if cash is tight, consider other ways of financing capital investment - loans, equity, leasing etc. Similarly, if you pay dividends or increase drawings, these are cash outflows remove liquidity from the business.

If you ....... Collect receivables faster Collect slower receivables

Then ...... (debtors) You release cash from the cycle (debtors) Your receivables soak up cash You increase resources You free up cash You consume more cash your cash

Get better credit from suppliers Shift inventory (stocks) faster Move inventory (stocks) slower

Operating Cycle Of Non Manufacturing Firms / Operating Cycle Of Service And Financial Firms

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DEBTORS

CASH CASH DEBTORS

STOCK OF FINISHED GOODS

Operating cycle of non-manufacturing firm like the wholesaler and retail includes conversion of cash into stock of finished goods, stock of finished goods into debtors and debtors into cash. Also the operating cycle of financial and service firms involves conversion of cash into debtors and debtors into cash. Thus we can say that the time that elapses between the purchase of raw material and collection of cash for sales is called operating cycle whereas time length between the payment for raw material purchases and the collection of cash for sales is referred to as cash cycle. The operating cycle is the sum of the inventory period and the accounts receivables period, whereas the cash cycle is equal to the operating cycle less the accounts payable period.
STOCK ARRIVES CASH RECD.

ORDER PLACED

INV. PERIOD

A/CS REC. PERIOD

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A/CS Pay. Period FIRM REC. INVOICE CASH Pd. FOR MATERIALS

OPERATING CYCLE

CASH CYCLE

DEBTORS COLLECTION PERIOD:-

2008
SALES SALES PER DAY BOOK DEBTS DCP 9077526 25215 879660 35 DAYS

2009
8792218 24423 1122564 46 DAYS

2010
100317765 27866 1314231 47 DAYS

ANALYSIS: In the year 2008 the DCP is 35 days which increases to 45 days in 2009. In 2009 there has been slight increase in DCP and it rises to 47 days.

INTERPRETATION:

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In the year 2008 bank is able to maintain its satisfactory debtors collection period but in the year 2009 and 2010, debtors collection period has been increased to 46 days and further to 47 days in 2010. This shows the bank is not able to maintain its debt collection policy. However bank enjoys its good debtor status.

FINANCIAL ANALYSIS:
Financial analysis is the process of identifying the financial strength & weakness of the firm by establishing relationship between the items of the balance sheet & profit & loss account. The purpose of financial analysis is to diagnose the information contained in financial statements so as to judge the profitability and financial soundness of the firm. Financial statements involve: Study of financial statements Analysis of data given in the financial statements. Interpretation of financial statements. Financial analysis of J&K Bank is as follows: Financial analysis is done on the basis of the published balance sheet and profit and loss account. Ratio analysis and Trend analysis is done to know the financial position of the company.

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COMPARATIVE BALANCE SHEET

For the period of 2009-2010
PARTICULARS 2009 LIABILITIES Share capital Reserve Long term Liabilities Current liabilities TOTAL ASSETS Current assets 552.34 Fixed assets Investment 517.94 10,736.33 714.95 561.35 13,956.25 162.61 43.41 3219.19 29.44 8.38 29.98
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2010 48.490 2,961.97 714.95 1,198.97 4924.38

CHANGE -387.6 162.61 129.3 679.26

%CHANGE -15.5 29.44 12.05 16.01

48.49 2,574.37 552.34 1,069.67 4245.12

Misc. expenses TOTAL

10,080.96 21887.57

12,091.51 27324.06

2010.55 5436.49

19.9 24.38

RATIO ANALYSIS:
A ratio is the simple arithmetic expression of the relationship of one number to another. Ratio analysis is a technique of analysis and interpretation of financial statements. It is the process of establishing and interpreting various ratios for the helping in making certain decisions. Following ratios are calculated for the 2009-2010.

Liquidity ratios: These ratios are used to measure the firms ability to meet its short term obligations.

LIQUIDITY RATIOS: 1. Current ratio = PARTICULARS TOTAL CURRENT 2008 current assets / current liabilities. 2009 2010

486.47

552.34

714.95
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ASSETS TOTAL CURRENT LIABLITIES CURRENT RATIO ANALYSIS:

1,102.02

1,069.67

1,198.97

0.44 : 1

0.5 : 1

0.59 : 1

The current ratio is consecutively increasing from the year 2008 to 2010. In 2008 it was 0.44 :1 , in 2009 it went up to 0.5 : 1 and in 2010 it reached to 0.59 : 1. INTERPRETATION: As a rule 2:1 ratio is referred to as bankers thumb rule. Since the current ratio of the firm for the past 3 years is more than 2:1, therefore the firm has been in good liquid position. So, this implies that the funds of the company since last 3 years have been decreased to pay off liabilities.

LIQUID ASSETS RATIO = LIQUID ASSETS / CURRENT LIABILITIES.

PARTICULARS Total liquid assets Total current assets

2008 4231077

2009 3084654

2010 4023228

584689

1398012

847318

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Liquid Ratio

7.20:1

2.20:1

4.70:1

ANALYSIS: In the year 2008 the liquidity ratio is 7.20:1 which has decreased in the 2009. And in the year 2010 the ratio is increased to 4.70:1 INTERPRETATION: As a convention ratio of 1:1 is considered satisfactory, hence company is enjoying satisfactory liquidity position. In the year 2009 ratio has been decreased to 2.20:1 from 7.20:1. This is due to the decreasing cash balance and increasing debtors

PARTICULARS

2008

2009

2010

Sales

9077576

8792218

10031765

OC

7653262

7944110

9491037

OR

84.30%

90.35%

94.60%

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OPERATING RATIOS = Operating cost / Net sales*100

ANALYSIS: From the above table it shows that in 2008 the OR was 84.30% and in 2009 OR has been increased to 90.35. in year 2010 it reached to 94.60

INTERPRETATION: As the above table shows that the operating cost of the bank increased over three years, this is mainly due to increasing sales of schemes and term loans.

Profitability ratio:Gross profit ratio:- Gross profit / net sales * 100 Particulars Sales (-)COGS GP 2008 9077576 6943782 2133794 2009 8792218 7076586 1715632 2010 10031765 8589141 1442624

GPR

23.50%

19.51%

14.38%
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ANALYSIS:From the above table it shows that the GP ratio was 23.50% in 2008 and it decreases to 19.51% in 2009. In 2010 GPR has been further decreased to 14.38.

Net profit ratio= Net profit / net sales * 100

Particulars SALES NP NPR

2008 9077576 678633 1%

2009 8792218 23664 1.03%

2010 10031765 42875 1.04%

ANALYSIS:In the year 2008 the NP ratio of the company is 1% but in the year 2009 the companys NP has increased immensely to 1.03% and in 2010 it reached to 1.04%

INTERPRETATION:-

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The companys increasing NP ratio is due to its strong support and easy providence of term loans to the different class of customers.

TREND ANALYSIS:The financial statements may be analysed by computing trend series information. The method determines the direction upward and downward and involves the computation of the percentage relationship that each statement item bears to the same in the base year. The information for the number of years has been taken up and one year generally 1st year is taken as the base year. The figures of the base year have been taken as 100 and trend ratios for the other years are calculated on the basis of the base year. The analysis is able to see the trend of figures, whether upward or downward.

SALES TREND
YEARS SALES IN RS TREND IN %AGE

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2008 2009 2010

9090163 8837285 10067849

100 97 110.7

SWOT ANALYSIS
Strength
1. 2. 3. 4. 5. Resources and capabilities. Strong brand name. Good reputation among customers. Good quality schemes. Latest machines and advanced technology.

Weakness
1. Lack of stress on research and development. 2. Lack of innovation. 3. Lack of commercial schemes.

Opportunities
1. Arrival of new technology. 2. New market.

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3. J&K Bank is not stressing on its advertising for attracting the customers.

Threats
1. Cut-throat competition in industry. 2. The other banks because of their large financial base, better technology are threat to the J&K banking sector.

CONCLUSION
Most of the banking companies make substantial investments in current assets so proper management of working capital in a large concern assumes importance as it reflects the sound financial health of the corporation. Achieving budgeted growth rate and excelling past performance n sales turnover do not necessarily indicate the proper management of working capital as even a highly working capital as even a highly profitable company may be having a poor cash position. A thorough analysis of the working capital position, drawing of appropriate action plans for improvement, thorough revamping of existing system. From the study of working capital management of J&K Bank , it concluded that: The level of inventory is increased in 2009 from 22.75% to 28.09% due to huge disbursement of loans. And in the year 2010, the level of inventory is decreased to 16.51% due to less production and that is why there is an excess of opening stock in 2010 and bank try to sell to the maximum.
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 In the year 2010 debtors have been increased from 1122564 thousands to 1314231 thousands indicating an increase from 6.78% to 8.84% of total assets, such increase has been gained by bank due to increase in sales followed by expansion activities in mutual funds, term loans, etc. Net working capital is the excess of current assets over the current liabilities. It indicates the financial strength of the company. In 2008 net working capital of the bank decreased because of increase in the current liabilities of the bank. But in year 2010 the net working capital of the bank decreased due to substantial decrease in the inventory of the bank which resulted in decrease in the overall current assets of the bank.

RECOMMENDATIONS AND SUGGESTIONS

The following are the recommendations and suggestions for the efficient working of J&K bank Year 2009 has revealed an increase of cash and balance of the Bank from 3.43% to 7.11% of total of the company as huge amount of the cash has been diverted to higher loan disbarments and mortgage loans. In the year 2010 the bank was able to gain an increase of liquidity position by 2.84% of the total assets as the major expansion activities have already been implemented in the year 2008. The company should also made remarkable stress on the advertisement so as to attract the customers of all the sectors. The banks growing profitability is sound for the activities of the management but the bank should try to attract new customers by different schemes. The J&K Bank should also take an edge in the other states as we can see that there is a cut-throat competition at the national
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level but there is also a chance of huge profitability and expansion of bank in terms of monetary and customers. The J&K Bank should consistently increase the numbers of branches in different states and also in the home state and should adopt new means to attract new customers by its attractive loans schemes.

BALANCE SHEET
Mar ' 11 Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07

Sources of funds
Owner's fund Equity share capital Share application money Preference share capital Reserves & surplus 48.49 3,430.19 48.49 2,961.97 48.49 2,574.37 48.49 28.10 2,232.34 48.49 1,960.24

Loan funds
Secured loans -

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Unsecured loans Total

44,675.94 37,237.16 33,004.10 28,593.26 25,194.29 48,154.62 40,247.62 35,626.96 30,902.19 27,203.03

Uses of funds
Fixed assets Gross block Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress Investments 788.10 396.47 391.64 2.13 561.35 358.54 202.81 1.32 517.90 321.61 196.29 3.13 471.32 289.10 182.22 9.79 8,757.66 433.63 256.94 176.69 6.76 7,392.19

19,695.77 13,956.25 10,736.33

Net current assets

Current assets, loans & advances Less : current liabilities & provisions Total net current assets Miscellaneous expenses not written Total 676.17 1,248.88 -572.71 714.95 1,198.97 -484.01 552.34 1,069.67 -517.33 486.47 1,102.02 -615.55 8,334.12 377.19 823.31 -446.12 7,129.52

19,516.83 13,676.37 10,418.42

Notes:
Book value of unquoted investments -

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Market value of quoted investments Contingent liabilities Number of equity shares outstanding (Lakhs)

3,840.87

26,979.34 12,091.51 10,080.96 11,892.97

484.78

484.78

484.78

484.78

484.78

INCOME STATEMENT
Income
Operating income

Mar ' 11

Mar ' 10

Mar ' 09

Mar ' 08

Mar ' 07

3,936.63 3,418.03 3,133.64 2,603.50 2,002.79

Expenses
Material consumed Manufacturing expenses Personnel expenses Selling expenses Adminstrative expenses 523.61 5.99 321.40 366.36 6.23 317.84 278.77 7.36 208.01 225.77 7.72 167.96 220.07 4.94 185.86

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Expenses capitalised Cost of sales Operating profit Other recurring income Adjusted PBDIT Financial expenses Depreciation Other write offs Adjusted PBT Tax charges Adjusted PAT Nonrecurring items Other non cash adjustments Reported net profit Earnigs before appropriation Equity dividend Preference dividend Dividend tax

851.01 916.15 100.23 1,016.38

690.43 790.05 93.90 883.95

494.15 651.63 57.45 709.08

401.45 578.25 56.51 634.76

410.87 460.44 38.62 499.06

2,169.47 1,937.54 1,987.86 1,623.79 1,131.48 37.93 -1,191.01 329.54 615.20 615.20 615.20 126.04 20.94 36.93 847.01 280.45 512.38 512.38 512.38 106.65 18.13 32.51 676.57 222.26 409.84 409.84 409.84 81.97 13.93 32.16 602.60 218.16 360.00 360.00 360.00 75.14 12.77 33.14 465.92 140.71 274.49 274.49 274.49 55.75 9.47

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Retained earnings

468.22

387.60

313.94

272.09

209.26

BIBLIOGRAPHY
BOOKS
KHAN, M.Y. JAIN, P.K, Financial management, TATA MCGRAW HILL PUBLISHERS, I/e, 20000 Shashi k gupta, Neeti gupta, Financial management, Kalyani publishers / lyall bk depot 2008 Mir Geelani and Afsal khan financial outlook, MAMTA PUBLISHERS. Showkat Rah and Abdul Rahim, banking, MAMATA PUBLISHERS.

COMPANY ANNUAL REPORTS

Balance sheet Profit and Loss Account

Notes and Accounts.

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WEBLINKS
WWW.JKBANK.COM karran@jkbmail.com Netbanking@jkbmail.com www.jkbankonline.com jkbmail.com

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