Cash Management

1.1 MEANING:

Cash is the money which a firm can disburse immediately without any restriction. The term
cash includes coins, currency and cheques held by the firm, and balances in its bank accounts.
Sometimes near-cash items, such as marketable securities or bank time’s deposits, are also
included in cash. The basic characteristic of near-cash assets is that they can readily be
converted into cash.

1.2 FACETS OF CASH MANAGEMENT:

Cash management is concerned with the managing of: (i) Cash flows into and out of the
firm, (ii) Cash flows within the firm, and (iii) Cash balances held by the firm at a point of
time by financing deficit or investing surplus cash. It can be represented by a cash
management cycle. Sales generate cash which has to be disbursed out. The surplus cash has
to be invested while deficit this cycle at a minimum cost. At the same time, it also seeks to
achieve liquidity and control. Cash management assumes more importance than other current
assets because cash is the most significant and the least productive asset that a firm’s holds.
It is significant because it is used to pay the firm’s obligations. However, cash is
unproductive. Unlike fixed assets or inventories, it does not produce goods for sale.
Therefore, the aim of cash management is to maintain adequate control over cash position to
keep the firm sufficiently liquid and to use excess cash in some profitable way.

Cash management is also important because it is difficult to predict cash flows accurately,
particularly the inflows, and there is no prefect coincidence between the inflows and outflows
of cash. During some periods, cash outflows will exceed cash inflows, because payments for
taxes, dividends, or seasonal inventory build-up. At other times, cash inflow will be more
than cash payments because there may be large cash sales and debtors may be realized in
large sums promptly. Further, cash management is significant because cash constitutes the
smallest portion of the total current assets, yet management’s considerable time is devoted in
managing it. In recent past, a number of innovations have been done in cash management

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techniques. An obvious aim of the firm these days is to manage its cash affairs in such a way
as to keep cash balance at a minimum level and to invest the surplus cash in profitable
investment opportunities.

In order to resolve the uncertainty about cash flow prediction and lack of synchronization
between cash receipts and payments, the firm should develop appropriate strategies for cash
management. The firm should evolve strategies for cash management. The firm should
evolve strategies regarding the following four facets of cash management.

 Cash planning: Cash inflows and outflows should be planned to project cash surplus
or deficit for each period of the planning period. Cash budget should be prepared for
this purpose.
 Managing the cash flows: The firm should decide about the properly managed. The
cash inflows should be accelerated while, as far as possible, the cash outflows should be
decelerated.
 Optimum cash level: The firm should decide about the appropriate level of cash
balances. The cost of excess cash and danger of cash deficiency should be matched to
determine the optimum level of cash balances.
 Investing surplus cash: The surplus cash balances should be properly invested to earn
profits. The firms should decide about the division of such cash balances between
alternative short-term investment opportunities such as bank deposits, marketable
securities, or inter-corporate lending.

1.3 MOTIVES FOR HOLDING CASH

The firm’s need to hold cash may be attributed to the following three motives:
 The transactions motive
 The precautionary motive
 The speculative motive

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TRANSACTION MOTIVE

The transactions motive requires a firm to hold cash to conduct its business in the ordinary
course. The firm needs cash primarily to make payments for purchases, wages and salaries,
other operating expenses, taxes, dividends etc. The need to hold cash would not arise if there
were perfect synchronization between cash receipts and cash payments, i.e., enough cash is
received when the payment has to be made. But cash receipts and payments are not perfectly
synchronized. For those periods, when cash payments exceed cash receipts, the firm should
maintain some cash balance to be able to make required payments. For transactions purpose,
a firm may invest its cash in marketable securities. Usually, the firm will purchase securities
whose maturity corresponds with some anticipated payments, such as dividends or taxes in
the future. Notice that the transactions motive mainly refers to holding cash to meet
anticipated payments whose timing is not perfectly matched with cash receipts.

PRECAUTIONARY MOTIVE

The precautionary motive is the need to hold cash to meet contingencies in the future. It
provides a cushion or buffer to withstand some unexpected emergency. The precautionary
amount of cash depends upon the predictability of cash flows. If cash flows can be predicted
with accuracy, less cash will be maintained for an emergency. The amount of precautionary
cash is also influenced by the firm’s ability to borrow at short notice when the need arises.
Stronger the ability of the firm to borrow at short notice less will be the need for
precautionary balance. The precautionary balance may be kept in cash and marketable
securities. Marketable securities play an important role here. The amount of cash set aside for
precautionary reasons is not expected to earn anything; the firm should attempt to earn some
profit on it. Such funds should be invested in high-liquid and low-risk marketable securities.
Precautionary balances should, thus, be held more in marketable securities and relatively less
in cash.

SPECULATIVE MOTIVE

The speculative motive relates to the holding of cash for investing in profit-making
opportunity to make profit may arise when the security prices change. The firm will hold
cash, when it is expected that interest rates will rise and security prices will fall. Securities
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can be purchased when the interest rate is expected to fall; the firm will benefit by the
subsequent fall in interest rates and increase in security prices. The firm may also speculate
on materials prices. If it is expected that materials prices will fall, the firm can postpone
materials purchasing and make purchases in future when pric4e actually falls. Some firms
may hold cash for speculative purposes. By and large, business firms do not engage in
speculations. Thus, the primary motives to hold cash and marketable securities are: the
transactions and the precautionary motives.

1.4 CASH PLANNING:

Cash flows are inseparable parts of the business operations of firms. A firm needs cash to
invest in inventory, receivable and fixed assets and to make payment for operating expenses
in order to maintain growth in sales and earnings. It is possible that firm may be making
adequate profits, but may suffer from the shortage of cash as its growing needs may be
consuming cash very fast. The ‘poor cash’ position of the firm cash is corrected if its cash
needs are planned in advance. At times, a firm can have excess cash may remain idle. Again,
such excess cash outflows. Such excess cash flows can be anticipated and properly invested if
cash planning is resorted to. Cash planning is a technique to plan and control the use of cash.
It helps to anticipate the future cash flows and needs of the firm and reduces the possibility of
idle cash balances ( which lowers firm’s profitability ) and cash deficits (which can cause the
firm’s failure).

Cash planning protects the financial condition of the firm by developing a projected cash
statement from a forecast of expected cash inflows and outflows for a given period. The
forecasts may be based on the present operations or the anticipated future operations. Cash
plans are very crucial in developing the overall operating plans of the firm.

Cash planning may be done on daily, weekly or monthly basis. The period and frequency of
cash planning generally depends upon the size of the firm and philosophy of management.
Large firms prepare daily and weekly forecasts. Medium-size firms usually prepare weekly
and monthly forecasts. Small firms may not prepare formal cash forecasts because of the non-
availability of information and small-scale operations. But, if the small firms prepare cash

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projections, it is done on monthly basis. As a firm grows and business operations become
complex, cash planning becomes inevitable for its continuing success.

1.5 OTHER FACTORS THAT AFFECT THE SIZE OF CASH BALANCE

1. Availability of short-term credit:

To avoid holding unnecessary large balances of cash, most firms attempt to make
arrangements at borrow money is case of unexpected needs. With such an agreement, the
firm normally pays interest only during the period that the money is actually used.

2. Money market rates:

If money will bring a low return a firm may choose not to invest it. Since the loss or profit is
small, it may not be worth the trouble to make the loan. On the other hand, if interest rates are
very high, every extra rupee will be invested.

3. Variation in cash flows:

Some firms experience wide fluctuation in cash flows as a routine matter. A firm with steady
cash flows can maintain a fairly uniform cash balance.

4. Compensating balance:
If a firm has borrowed money from a bank, the loan agreement may require the firm to
maintain a minimum balance of cash in its accounts. This is called compensating balance. In
effect this requires the firm to use the services of bank a guaranteed deposit on which it pays
no interest. The interest free deposit is the bank’s compensation for its advice and assistance.

1.6 CASH MANAGEMENT – BASIS STRATEGIES

The management should, after knowing the cash position by means of the cash budget, work
out the basic strategies to be employed to manage its cash.

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CASH CYCLE:

The cash cycle refers to the process by which cash is used to purchase materials from which
are produced goods, which are then sold to customers.

Cash cycle=Average age of firm’s inventory

+Days to collect its accounts receivables
-Days to pay its accounts payable.

The cash turnover means the numbers of times firm’s cash is used during each year.

360
Cash turnover =
Cash cycle
The higher the cash turnover, the less cash the firm requires. The firm should, therefore, try
to maximize the cash turn.

MANAGING COLLECTIONS:
a) Prompt Billing:
By preparing and sending the bills promptly, without a time log between the dispatches of
goods and sending the bills, a firm can ensure earlier remittance.

b) Expeditious collection of cheques:

An important aspect of efficient cash management is to process the cheques receives very
promptly.

c) Concentration Banking:
Instead of a single collection center located at the company headquarters, multiple collection
centers are established. The purpose is to shorten the period between the time customers mail
in their payments and the time when the company has use of the funds are then to a
concentration bank – usually a disbursement account.

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d) Lock-Box System:
With concentration banking, a collection center receives remittances, processes them and
deposits them in a bank. The purpose is to lock-box system is to eliminate the time between
the receipt of remittances by the company and their deposit in the bank. The company rents a
local post office box and authorizes its bank in each of these cities to pick up remittances in
the box. The bank picks up the mail several times a day and deposits the cheque in the
company’s accounts. The cheques are recorded and cleared for collection. The company
receives a deposits the cheque in the company’s accounts. The cheques are recorded and
cleared for collation. The company receives a deposit slip and a lift of payments. This
procedure frees the company from handling a depositing the cheques.

CONTROL OF DISBURSMENT

a) Stretching Accounts Payable:

A firm should pay its accounts payables as late as possible without damaging its credit
standing. It should, however, take advantages of the cash discount available on prompt
payment.

b) Centralized Disbursement:
One procedure for rightly controlling disbursements is to centralize payables in to a single
account, presumably at the company’s headquarters. Such an arrangement would enable a
firm to delay payments and can serve cash for several reasons. Firstly, it increases transit
time. Secondly, if a firm has a centralized bank account, a relatively smaller total cash
balances will be needed.

c) Bank Draft
Unlike an ordinary cheque, the draft is not payable on demand. When it is presented to the
issuer’s bank for collection, the bank must present it to the issuer for acceptance. The funds
then are deposited by the issuing firm to cover payments of the draft. But suppliers prefer
cheques. Also, bank imposes a higher service charge to process them since they require
special attention, usually manual.

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d) Playing the float:
The amount of cheques issued by the firm but not paid for by the bank is referred to as the
“payment float”. The differences between “payment float” and “collection float” are the net
float. So, if a firm enjoys a positive “net float”, it may issue cheques even if it means having
an ever drown account in its books. Such an action is referred to as “playing the float”, within
limits a firm can play this game reasonably safely.

Thus management of cash becomes essential and it should be seen to, that neither excessive
nor inadequate cash balances are maintained.

1.7 CASH FLOW ANALYSIS:

The cash flow analysis is done with the help of cash flow statement. A cash flow statement is
a statement depicting changes in cash position from one period to another. It is an important
planning tool. Cash flow statement gives a clear picture of the source of cash, the uses of cash
and the net changes in cash. The primary purpose of cash flow statement is to show that as to
where from the cash to be acquired and where to use them.

UTILITY OF CASH FLOW ANALYSIS

A Cash flow analysis is an important financial tool for the management. Its chief advantages
are as follows.

1. Helps in efficient cash management

Cash flow analysis helps in evaluating financial policies and cash position. Cash is the basis
for all operation and hence a projected cash flow statement will enable the management to
plan and co-ordinate the financial operations properly. The management can know how much
cash is needed from which source it will be derived, how much can be generated, how much
can be utilized.

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2. Helps in internal financial management
Cash flow analysis information about funds, which will be available from operations. This
will helps the management in repayment of long-term debt, dividend policies etc.,

3. Discloses the movements of Cash

Cash flow statement discloses the complete picture of cash movement. The increase in and
decrease of cash and the reasons therefore can be known. It discloses the reasons for low cash
balance in spite of heavy operation profits on for heavy cash balance in spite of low profits.

4. Discloses success or failure of cash planning

The extent of success or failure of cash planning is known by comparing the projected cash
flow statement with the actual cash flow statement and necessary remedial measures can be
taken.

1.8 DETERMINE THE OPTIMUM CASH BALANCE

One of the primary responsibilities of the financial manager is to maintain a sound liquidity
position of the firm so that the dues are settled in time. The firm needs cash to purchase raw
materials and pay wages and other expenses as well as for paying dividend, interest and
taxes. The test of liquidity is the availability of cash to meet the firm’s obligations when they
become due.

A firm maintains the operating cash balance for transaction purposes. It may also carry
additional cash as a buffer or safety stock. The amount of cash balance will depend on the
risk-return trade-off. If the firm maintains small cash balance, its liquidity position weakens,
but its profitability improves as the released funds can be invested in profitable opportunities
(marketable securities). When the firm needs cash, it can sell its keeps high cash balance, it
will have a strong liquidity position but its profitability will be low. The potential profit
foregone on holding large cash balance is an opportunity cost to the firm. The firm should
maintain optimum – just to enough, neither too much nor too little – cash balance. How to
determine the optimum cash balance if cash flows are predictable and if they are not
predictable.

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1.8.1 OPTIMUM CASH BALANCE UNDER CERTAINTY

BAUMOL’S MODEL

The Baumol model of cash management provides a formal approach for determining a firm’s
optimum cash balance under certainty. It considers cash management similar to an inventory
management problem. As such, the firm attempts to minimize the sum of the cost of holding
cash (inventory of cash) and the cost of converting marketable securities to cash.

The Baumol’s model makes the following assumptions:

 The firm is able to forecast its cash needs with certainty.
 The firm’s cash payments occur uniformly over a period of time.
 The opportunity cost of holding cash is known and it does not change over time.
 The firm will incur the same transaction cost whenever it converts securities to cash.

Cash balance

C/2 Average

Time

0 T1 T2 T3

Baumol’s model for cash balance

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 Cost trade-off: Baumol’s model

1.8.2 OPTIMUM CASH BALANCE UNDER UNCERTAINTY:

The Miller-Orr Model

The limitation of the Baumol model is that it does not allow the cash flows to fluctuate. Firms
in practice do not use their cash balance uniformly nor are they able to predict do not use
their cash inflows and outflows. The MO (Miller-Orr) model overcomes this shortcoming and
allows for daily cash flow variation. It assumes that net cash flows are normally distributed
with a zero value of mean and a standard deviation. The MO model provides for two control
limits-the upper control limit and the lower control limit as well as a return point. If the firm’s
cash flows fluctuate randomly and hit the upper limit, then it buys sufficient marketable
securities to come back to a normal level of cash balance (the return point). Similarly, when
the firm’s cash flows wander and hit the lower limit, it sells sufficient marketable securities to
bring the cash balance back to the normal level (the return point).

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 The Latest Trends in North American Cash Management

Steve Wilder, Senior Vice President and JPMorgan Chase Treasury Services Western
Hemisphere Corporate and Financial Institutions Sales Executive

The Drive towards Efficiency, Transparency, Standardization and Integration

Fragmentation is a key driver of corporate inefficiency. This has long been the case in the
movement of paper checks and related remittance documents within the U.S. payments
system, and the flow of goods, trade-related documents and funds within the broader global
supply chain. As corporate treasurers pursue end-to-end automation for treasury and supply-
chain activities, they understand that to achieve straight-through processing — and the
subsequent optimization of working capital globally — they must integrate the payment and
information components of a transaction.

Based on this drive for efficiency, three interrelated trends are shaping North America’s cash
management landscape today. First, corporate treasurers and their banks are driving the
convergence towards electronic payments to better integrate money and information flows.
Second, there is a parallel convergence in international trade towards open account, electronic
payment and the automation of information flows, as treasury pushes to integrate the physical
and financial supply chains. On both fronts, solutions are emerging to digitize paper wherever
it persists. Third, as companies continue to expand globally — and information and money
flows follow — treasury is focused on standardizing processes and strengthening internal
controls. The objective is to create transparency across a range of business activities to
manage risk and ensure financial reporting integrity in compliance with Sarbanes-Oxley.

Cash Management by Enid Beverly Jones

It is a Financial Overview for School Administrators is a succinct overview of public school

finance, presenting concepts of importance to both site-based and central-office leaders. A
pragmatic blend of theoretical concepts and factual information provides readers with an
excellent synopsis of public school finance.

The economics and politics of education are discussed in the context of human capital and the
role of public education in the United States as an investment in human capital. Author Enid

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Jones, who is an associate professor of school finance at Fayetteville State University,
stresses the importance of investment in human capital and its necessity for an educated,
productive workforce.

The chapter on adequacy and equity provides an understanding of the two concepts so
frequently debated in school finance. As more states struggle with funding issues, this subject
matter is timely and useful.

Cash Management seems intended for use nationwide with information on basic school
business procedures, including budgeting and financing of school facilities. The use of lay
terminology and relevant examples make the book valuable both in graduate school classes
on educational leadership and in the hands of practicing administrators.

(Cash Management: A Financial Overview for School Administrators, by Enid Beverley

Jones, Scarecrow Press, Lanham, Md., 2001)

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 2.1 COMPANY PROFILE:-

Shree. Ravalanath Co-operative Housing

Name of the society
Finance Society Ltd, Ajara. (Multi-State)

In front of Ajara bank, Mydev building,

Address
Ajara.

14th October,1996 Reg No.

KPR/ARA/HSG/120/96
Registration No
18th March,2015 Reg No.
MSCS/CR/1206/2015 (Multi-State)

Phone No (02323) 246982, 2244293.

All Maharashtra, & Karnataka in Belagavi, &

Working Area
Dharwad Dist

Chairman Shree. M. L. Chougule.

Vice-Chairman Prof. V. K. Maydeo.

Manager Shree. S. S. Ghugare.

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2.2 HISTORICAL BACKGROUND:-

The SHREE RAVALNATH CO-OPERATIVE HOUSING FINANCE SOCIETY

LTD, AJARA have become increasingly popular. The Ravalanath co-operative Housing
Finance Society Ltd, Ajara established in 14th October 1996. At that time mainly in rural area
there is no any facility for housing on to construct a building need 5 to 10 lakh minimum. It is
not easy to get such funds in Ajara Taluka. Do not available free from income tax co-
operative society having housing loan, Ajara high-schools professors to request the housing
development finance corporate (HDFC) and national banks to provide housing loan. At that
time mainly in rural area there is any facility for saving account & current account. In 1996 to
having the permission about housing lone 1 to 2 lakh only. So, professors meet the national
bank many times 3 to 4 month essential to having the permission about the loan. They think
about to start Housing Finance Society and with the help of 18 members have 10,000 /-
capital in 1996 to start the SHREE RAVALNATH CO-OPERATIVE HOUSING FINANCE
SOCIETY LTD., AJARA.

BRANCHES OF THE SHREE RAVALNATH CO-OPERATIVE HOUSING

FINANCE SOCIETY LTD, AJARA.

Gadhinglaj Branch

Year of Establish 24th February 2002

Mohite complex, 1st Flore in of panchayat

Address
Semite, kacheri road, Gadhingla-416502

District Kolhapur

Phone No (02327) 226094

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Chandgad Branch

Year of Establish 18th June 2006-07

Bank of India, Guruwar Path, Main Road,

Address
Chandgad 416509.

District Kolhapur.

Phone No (02320) 224512

Nesri Branch

Year of Establish 24th Sept 2009

Don Pales Building, 1st Flore, Near Bus Stop,

Address
Nesri.

District Kolhapur.

Phone No (02327) 272830.

Kolhapur Branch

Year of Establish 25th June, 2013

Misal Pride, Bagal chouk, in front of Shahu

Address
Mill, Kolhapur

District Kolhapur.

Phone No (0231) 2534633.

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 Jaysingpur Branch

Year of Establish 26th April, 2015

Mahavir Hights, Station Road, 6th Lane

Address
Jaysingpur-416509

District Kolhapur.

Phone No (02322) 224293

Belagavi Branch

Year of Establish 3rd September, 2016

Datta Arcade, Near Bharat Petrol Pumb,

Address
Khanapur Road, Tilakwadi, Belagavi

District Belagavi (Karnataka)

Phone No (0831) 2474071

Nipani Branch

Year of Establish 15th August, 2017

Address Near Nipani Medical, Ashok Nagar, Nipani

District Belagavi (Karnataka)

Phone No (08338) 224933

2.3 LOCATION OF THE SOCIETY:-

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 SHREE RAVALNATH CO-OPERATIVE HOUSING FINANCE SOCIETY LTD.,
AJARA society is located in the heart of Ajara town. Ajara is Taluka place. This is crowded
by various small and medium size automobiles, industries, machinery spare parts, hardware,
electrical equipment, medical shops, primary schools, colleges, hospitals, post office, banks,
bakeries and other commercial shops and bazaars etc., there is very conductive circumstance
for development of banking industries. At present the society is located in it's the main road.

2.4 MANAGEMENT OF THE SOCIETY:-

Management is difficult word. It denotes not only functions but denotes a special
position and rank as well as discipline. It is an organ on which the performance and service of
the institution depends management is the organ of leadership planning promoters of the
society. Therefore the society's activities stated with various important aims objection,
direction, organizing, motivation, controlling, staffing, co-ordination and decision making.

 TOP

 MIDDLE

 LOWER

SHREE RAVALNATH CO-OPERATIVE HOUSING FINANCE SOCIETY LTD., AJARA

is organized by the middle class person with small amount of capital. The democratic
management is important features of this society. This is the society of members by the
members and for the members. This society has the general body of all members.
The management is an organ of higher control. The directors of the management are selected
by five (5) years. Intervals by general body on the basis of one member vote irrespective
considered in the board of directors, one director is selected as president and one director as
selected as vice president.

2.5 OBJECTIVES OF THE SOCIETY:-

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 1. SHREE RAVALNATH CO-OPERATIVE HOUSING FINANCE SOCIETY LTD.,
AJARA to maintain the always security, trust, easily service to the members.

2. This society always thinks about the member's welfare.

3. The society not only provides the housing loans, deposit but also to maintain the good
relationship with the members.

4. SHREE RAVALNATH CO-OPERATIVE HOUSING FINANCE SOCIETY LTD.,

AJARA helping to the various educational and social societies.

5. Also to the student give the various types of prizes, awards and so on.

2.6 FEATURES:-

1. SHREE RAVALNATH CO-OPERATIVE HOUSING FINANCE SOCIETY LTD.,

AJARA provides services for quick transaction MSEB electricity bills and telephone
bills insurance premium, mobile recharge also accepted.
2. To encourage members children their educational success for giving various types of
awards, such as-In HSC, SSC board exam degree course in B.A, [Link], and [Link].
and Engineering also other fields.
3. Seniors citizens' elicitation.
4. Member's welfare societies.
5. In SHREE RAVALNATH CO-OPERATIVE HOUSING FINANCE SOCIETY
LTD., AJARA a good procedure of internal control and audit. Internal audit and
statutory audit both completed every year. Income tax audit also provided for our
society. So there is no faulty work or misuse of funds. Audit is compulsory for every
year by the registrar of Co-operative society and as per the Maharashtra state Co-
operative Act-1960.

2.7 GROWTH OF THE SOCIETY:-

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1. Geographical coverage:-

The society covered Ajara taluka area for its observation but its branches at
Gadhinglaj, Chandgad and Nesri, so all development of the society and is included in its
branches and head office so the researcher has studied overall growth of the society.

2. Membership: -

The membership of the society consist of individual over 18 th year of age completed
to contract. The benefit person can become membership of the society divided in to two
classes viz. A and B, 'B' class members are exclude form the right of voting and participator
in to society management of the society. A person who intends to become a member of
society is required to submit a prescribed application from along with an entrance residual
attested by with necessary the final power of admitting new member has vested in the board
of directors.

The following chart reveals that the total membership during the period of 2009-2010
to 2013-2014.

Table No – 1.

Year 2012-2013 2013-2014 2014-15 2015-16 2016-17

Total
2214 2687 3164 3800 4557
members

(A) Share Capital:-

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 Mobilization of share capital was very difficult test at the time of starting the society's
business in 1996 due to lunches of money lender in the market. For this purpose first lender
of society who was also members of board of directors had struggled very much.
The authorized capital of the society in 2009-2010 the capital was 55, 98,300.

The share capital has raised during the period of 2009-2010 to 2013-2014 shows the
following table.

Table No – 2.

Year 2012-2013 2013-2014 2014-15 2015-16 2016-17

Total paid up
1,95,43,400 3,03,92,000 3,91,67,400 4,79,55,200 5,74,12,600
capital

(B) Reserve and other fund:-

Building up of permanent reserve fund has always been considered as on essential

conditions of prosperous business. It is an important of prosperous business. It is an important
component of working capital as it acts as a shock absorbing cushion at the time of financial
stringency.

The following chart indicates the position of reserve and other funds.
Table No – 3.

Year 2012-2013 2013-2014 2014-15 2015-16 2016-17

Total Reserve
and 1,68,60,115 2,40,38,738 3,29,45,172 4,11,49,524 5,36,57,622.6
other fund

(C) Profit and Dividend Declaration:-

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 Earning of profit is the main objectives of co-operative concerns. But, profit in the
name of surplus fund is an essential for future development of its organization. The same
principle is adopted by the SHREE RAVALNATH CO-OPERATIVE HOUSING FINANCE
SOCIETY LTD., AJARA.

Table No – 4.
The following indicates the position of earned Profit during the period 2009-2010 to 2013-
2014

Year 2012-2013 2013-2014 2014-15 2015-16 2016-17

Profit 21,94,669 38,48,144 55,06,150 72,77,818.66 90,29,015.08

Source:-
Compiled from annual report is the society.

2.8 FUTUER PLANNING:-

1. Increases Branches.

2. Increases dividend and loans in all branches.

3. To accept the telephone bills.

4. To have own buildings in all branches.

5. To increase the level of district to state level.

6. To increase the profit.

2.9 ORGANIZATION CHART OF THE SOCIETY:-

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Organization chart of the society

General Body

Board of Director

President

Vice-President

Manager

Branch Manager

Employees Employees Employees Employees Employees

of account of cash of deposit of loan of other
Department Department Department Department Department

2.10 BOARD OF DIRECTORES:-

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 Sr. No. Names of Directors Designation

1 Shri. M. L. Chougule Founder Chairman

2 Prof. V. K. Maydeo Vice Chairman

3 Prof. Dr. S. C. Upase Director

4 Prof. Dr. V. V. Aajgekar Director

5 Prof. Dr. M. P. Patil Director

6 Prof. Dr. S. B. Bhambar Director

7 Prof. Dr. K. G. Potdar Director

8 Prin. Dr. R. S. Nilpankar Director

9 Shri. S. M. Karoshe Director

10 Shri. P. K. Abhyankar Director

11 Prof. Dr. N. E. Shinde Director

12 Dr. Sou. S. S. Chougule Director

13 Sou. S. B. Patil Director

14 Shri. N. T. Shelake (C.A.) Expert Director

15 Prof. V. B. Ghugare Expert Director

2.11 EXECUTIVES:-

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 Sr. No. Names of Executives Designation

1 Shri. S. S. Ghugare Manager

Chief Accountant/ Internal

2 Shri. E. J. Kesarkar
Auditor

3 Shri. K. T. Patil Branch Manager, Chandgad

4 Smt. S. R. Chougala Senior Accountant

5 Shri. A. K. Sulkude Branch Manager, Ajara

6 Shri. S. S. Jadhav Branch Manager, Gadhinglaj

7 Shri. S. B. Gavandalkar Senior Accountant

8 Shri. U. D. Dalavi Branch Manager, Nesari

Incharge Branch Manager,

9 Shri. P. V Kumbhar
Kolhapur

10 Shri. S. A. Utture Branch Manager, Jaysingpur

Incharge Branch Manager,

11 Shri. D. L. Kole
Belagavi

12 Shri. K. C. Shaha Branch Manager, Nipani

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2.12 SERVICE OF SHRI RAVALNATH CO-OPERATIVE HOUSING FINANCE
SOCIETY LTD., AJARA:-

1. Types of Bank Account systems :-

A] Savings Bank Account.

B] Current Deposit Account.
C] Fixed Deposit Account.
D] Recurring Deposit Account.

2. Types of Bank loan Systems:-

A] Home Loan.
B] Education Loan.
C] Plot Loan.
D] Loan against Deposit

3.1 INTRODUCTION:

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Cash is the important current asset for the operations of the Shri. Ravalanath Co-operative
Housing Finance Society Ltd, Ajara. Cash is the basic input needed to keep the business
running on a continuous basis; it is also the ultimate output expected to be realized by selling
the sugar manufactured by Shri. Ravalanath Co-operative Housing Finance Society Ltd,
Ajara. The firm should keep sufficient cash, neither more or less. Cash shortage will disrupt
the firm’s manufacturing operations while excessive cash will simply remain idle, without
contributing anything towards the firm’s profitability. Thus, a major function of the financial
manager is to maintain a sound cash position.

Cash management is concerned with the managing of:

i. Cash flows into and out of the firm.

ii. Cash flows within the firm.

iii. Cash balances held by the firm at a point of time by financing deficit or investing
surplus.

The aim of cash management is to maintain adequate control over cash position to keep the
firm sufficiently liquid and to use excess cash in some profitable way. Cash management is
important because cash constitutes the smallest portion of the total current assets, yet
management’s considerable time is devoted in managing it.

In order to resolve the uncertainty about cash flow prediction and lack of synchronization
between cash receipts and cash payments, the firm should develop appropriate strategies for
cash management .The firm should evolve strategies regarding the following facts of cash
management.

Cash inflows and outflows should be planned to project cash surplus or deficit for each
period of the planning period. For this purpose cash budget is prepared. The unit prepares
cash budget every month.
As regards receipt: Receipt from saving accounts, current accounts, investments, fixed
deposits and other products.
As regards payments: Payments to be made for purchase of furniture, other office materials
and payment of salaries and wages.
3.2 STATEMENT OF PROBLEM:

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The Analysis of Cash Management in Shri. Ravalanath Co-operative Housing Finance
Society Ltd, Ajara.

3.3 OBJECTIVE OF RESEARCH:

 To understand cash inflow and outflow of Shri. Ravalanath Co-operative Housing

Finance Society Ltd, Ajara.
 To prepare cash flow statement of Shri. Ravalanath Co-operative Housing Finance
Society Ltd, Ajara.
 To determine optimum cash balance in Shri. Ravalanath Co-operative Housing
Finance Society Ltd, Ajara.
 To make suggestion and recommendation to improve the cash position of Shri.
Ravalanath Co-operative Housing Finance Society Ltd, Ajara.

3.4 RESEARCH METHODOLOGY:

1. DATA COLLECTION
 Primary Sources
1. Data is collected through personal interviews and discussion with Finance-
Executives, Human Resource Manager and branch Managers.

 Secondary Sources
1. From the annual reports maintained by the society.
2. Data are collected from the society record books.
3. Books and journals pertaining to the topic.

 Period of study:

The present study has taken into account Five years of financial data.

4.1 CASH INFLOW AND OUT FLOW STATEMENT

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 (In Thousands)

2014-15 2015-16
PARTICULARS 2016-17

INFLOW

Net profit before tax 5506 7277 9029

Depreciation 1056 1728 3728
Interest - - -
Preliminary expenses written off - - -
Decrease in Trade and Other Receivables 9814 9853 1870
Increase in Loans and Advances 631036 901977 1145642
Increase in Trade Payable 27296 29580 40142
Income received from Interest 101666 133483 168559
Increase in Investments 311052 400454 529858
Proceeds from Borrowing on Term Loan - - -
Increase in Share Capital 39167 47955 57412
Other Income 1570 865 919

TOTAL 1128163 1533172 1957159

OUTFLOW

Reserves and Surplus 32945 41149 53657

Interest Income 4482 10365 6566
Inventories - - -
Purchase of fixed assets 21524 22917 36447
Pre-operative expenses capitalized - - -
Repayment on Borrowing on Term Loan 8327 15908 27740
Bank Borrowing on Working Capital - - -
Interest paid on Term Loan 77160 104945 130014
Interest paid on Unsecured Loan - - -

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 TOTAL 144438 195284 254424

4.2 CASH FLOW STATEMENT

(In Thousands)

Sl No. PARTICULARS 2017

CASH FLOW FROM OPERATING
A
ACTIVITIES
Net Profit before Tax and Extraordinary Items 9029
Reserves and Surplus (53657)
I Adjustment for :
Depreciation 3728
Interest -
Dividend -
Interest Income (6566)
Preliminary Expenses written off -
Depreciation written back -
Operating Profit Before Working Capital Charges (47466)
II Adjustment for Increase/Decrease in :
Trade and other Receivables 1870
Loan and Advances 1145642
Inventories -
Trade Payables 40142
Current Tax -
Cash flow from operating activities 1187654
Net Cash flow Operating Activities 1140188

B CASH FLOW FROM INVESTING ACTIVITIES

Purchase of fixed assets (36447)

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 Pre-operative expenses to be capitalized -
Income Received from Interest 168559
Increase in Investments 529858
Net Cash flow from Investing Activities 661970

C CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from Unsecured Loans -

Repayment of Borrowing on Term Loans (27740)
Bank Borrowing on Working Capital -
Interest paid on Term Loans (130014)
Interest paid on Unsecured Loans -
Share Capital 57412
Interest Subsidy on Excise Duty Term Loan -
Other incomes 919
Share Premium -
Net Cash flow from Financial Activities (99423)

Net Increase / Decrease in Cash and Equipments

1702735
(A+B+C)

Cash and Bank or Cash Equivalent 29770

Notes:
i. Figures in brackets represents outflow of cash.

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INFERENCE:

This table shows that the cash flow statements of are to be efficient. The cash inflow of the
company is to be increased for year after year. The operating profit before working capital
increasing/decreasing year by year it is Rs. (47466) Thousands to year ended (31.03.2017).
Also Cash flow from operating activities is Rs. 1187654 Thousands and Net Cash flow
Operating Activities Rs. 1140188 Thousands. Cash outflow was also increasing year by year.
Net Cash flow from Investing Activities is Rs. 661970 Thousand and Net Cash flow from
Financial Activities is (99423) Thousands. Net increase in Cash and Cash Equipment is Rs.
1702735 Thousand. Total Cash and Bank or Cash Equivalent as on 31.03.2017 is Rs. 29770
Thousand.

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 4.3 TREND ANALYSIS

Y = a + bX

Where a = ∑Y
N

b = ∑XY
∑X2

1. Reserve & Other Fund

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 Reserve &
YEAR X X2 Other Fund XY
(Y)
2012-13 -2 4 16860.11 -33720.22
2013-14 -1 1 24038.73 -24038.73
2014-15 0 0 32945.17 0
2015-16 1 1 41149.52 41149.52
2016-17 2 4 53657.62 107315.24
TOTAL 10 168651.15 90705.81

a= 168651.15
5
= 33730.23

b = 90705.81
10
= 9070.581

Y = a+ bX
Y = 33730.23+9070.581
= 42800.811

Inference:

The above table and calculations indicates that the volume of reserve and other funds has
been increased every year. Reserve and other funds value in 2018 will be estimated to be Rs.
42800.811 Thousands.

2. CASH / BANK

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 Cash / Bank XY
YEAR X X2 (Y)
2012-13 -2 4 10576.40 -21152.8
2013-14 -1 1 6008.53 -6008.53
2014-15 0 0 10170.35 0
2015-16 1 1 12446.91 12446.91
2016-17 2 4 29770.63 59540.7
TOTAL 10 68972.54 44826.28

a = 68972.54
5
= 13794.508

b = 44826.28
10
= 4482.628

Y = a+ bX
Y = 13794.508 + 4482.628
= 18277.136

Inference:

The above table and calculations indicates that the volume of cash/bank has been increased
every year. Cash/bank value in 2018 will be estimated to be Rs. 18277.136 Thousands.

3. LOANS & ADVANCES

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 Loans &
Advances XY
YEAR X X2
(Y)
2012-13 -2 4 386948.10 -773896.2
2013-14 -1 1 522284.53 -522284.53
2014-15 0 0 631036.14 0
2015-16 1 1 901977.38 901977.38
2016-17 2 4 1145642.8 2291285.6
TOTAL 10 3587888.95 1897082.25

a = 3587888.95
5
= 717577.79

b = 1897082.25
10
= 189708.22

Y = a+ bX
Y = 3587888.95+ 1897082.25
= 5484971.2

Inference:

The above table and calculations indicates that the volume of Loans and Advances has been
increased every year. Loans and Advances value in 2018 will be estimated to be Rs.
5484971.2 Thousands.

4. CURRENT LIABILITIES

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 Current
Liabilities
YEAR X X2 XY
(Y)
2012-13 -2 4 504217.00 -1008434
2013-14 -1 1 667816.72 -667816.72
2014-15 0 0 1245723.53 0
2015-16 1 1 902133.93 902133.93
2016-17 2 4 1602315.77 3204631.54
TOTAL 10 4922206.95 2430514.75

a = 4922206.95
5
= 984441.39

b = 2430514.75
10
= 243051.475

Y = a+ bX
Y = 984441.39+ 243051.475
= 3414956.14

Inference:

The above table and calculations indicates that the volume of Current Liabilities has been
increased every year. Current Liabilities value in 2018 will be estimated to be Rs.
3414956.14Thousands.

5. CURRENT ASSETS

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 Current Asset
YEAR X X2 (Y) XY
2012-13 -2 4 535995.66 -1071991.32
2013-14 -1 1 714611.46 -714611.46
2014-15 0 0 985955.15 0
2015-16 1 1 1335097.47 1335097.47
2016-17 2 4 1686708.33 3373416.66
TOTAL 10 5258368.07 2921911.35

a = 5258368.07
5
= 1051673.61

b = 2921911.35
10
= 292191.135

Y = a+ bX
Y = 1051673.61+ 292191.135
= 1343864.75

Inference:

The above table and calculations indicates that the volume of current assets has been
increased every year. Current assets value in 2018 will be estimated to be Rs. 1343864.75
Thousands.

 FINDINGS:

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  Net profit before tax is increasing year to year.
 The cash management of society has been working well in the organization.
 The Funds from operations of a society has been increased from year by year.
 The cash from operations has been found to be used efficiently.
 The cash inflow and outflow of cash flow statement have a cash balance, which is
increase by 1.1 times when compared to last year balance.
 Cash flow that the society has sufficient funds to meet its short-term obligations.
 The efficiency of inventory control in society shows a satisfactory position.
 The Reserve and Other funds value for next year calculates will be Rs. 42800.811
Thousands.
 The Cash or Bank value is estimated will be Rs. 18277.136 Thousands.
 Loans and Advances value will be estimated Rs. 660972.359 Thousands.
 The Current Liabilities value calculates will be Rs. 3414956.14 Thousands.
 The Current Assets Value calculates will be estimated Rs. 1343864.75 Thousands.

 SUGGESTIONS AND RECOMMENDATION:

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  If cash purchases are affected, the society may save in cost of purchases by
availing the cash discount on bulk purchases. This may add up to higher
profitability.
 The society has to increase the efficiency of its operation by increasing its
manpower.
 Society has to maintain more cash assets to meet standard and to meet immediate
day to day obligations as when they arise.
 The amount of borrowing should be reduced in order to improve the interest
 The operating efficiency needs to be improved in order to increase the profit
margin like increase its loan interest, service charges ect…
 The cash needs to be efficiently utilized in making more customers should open
their accounts to improve the cash inflow.
 The profit of the society can be maximized by reducing operating expenses.
 The gross profit has to be improved by reducing cost of capitalization and
member’s expenses. Because it improves efficiency of management

 CONCLUSION:

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The co-operative societies are modern banks of India. It is based membership industry
occupies an important place in the economy it has an immense potential for transforming the
rural economy into self-generating one. The industry can expect to grow and emerge as key
player in the international arena.

The term “cash” with reference to cash management is used in two senses. In a narrower
sense it includes coins, currency notes, cheques, bank drafts held by a firm with it and the
demand deposits held by it in banks.

In a broader sense it also includes “near-cash assets” such as, marketable securities and time
deposits with banks. Such securities or deposits can immediately be sold or converted into
cash if the circumstances require. The term cash management is generally used for
management of both cash and near-cash assets. There are two basic objectives of cash
management. One to meet the cash disbursement needs as per the payment schedule and
second to minimize the amount locked up as cash balances.

In cash flow there two types direct method and indirect method company using indirect
method. Company’s Cash position is good but the amount of borrowing should be reduced.

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 BIBLOGRAPHY:

BOOKS:

 Pandey I. M.: Financial Management, Vikas Publishing House private ltd, Tenth
Edition2010. Pp 719-731.
 Khan & Jain M. Y.: Financial Management-Text, Problems And Cases: Tata
McGraw-Hill Publishing Company Limited, Fifth Edition2008. Pp 14.1-14.6.
 Jawahar Lal: Accounting for Managers, Himalaya Publishing house, Fifth
Edition2009. Pp 310-321.
 Ibid, pp 349-352.

REPORTS:

Annual Reports of Shri Ravalnath Co-Operative Society, Ajara from last 5 year
20012-13 to 2016-17.

WEBSITES:

 [Link] [Link]/[Link]
 [Link]
 [Link]
 [Link] co-operative societies

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