a study on asset & liability management in avr manufacturers (2)
TRANSCRIPT
A STUDY ON ASSET & LIABILITY MANAGEMENT IN AVR MANUFACTURERS
ABSTRACT
This project deals with the “A Study on Asset & Liability Management with reference
to AVR Manufacturers”. Asset & Liability Management is concerned with the problems that
arise while attempting to manage the current assets, the current liabilities and the inter
relationship that exist between them. The goal of Asset & Liability Management is to manage
the firm’s current assets and current liabilities in such way that the satisfactory level of
working capital is mentioned. The current assets should be large enough to cover its current
liabilities in order to ensure a reasonable margin of the safety. AVR Manufacturers is a
software development and soft skills training company which offers world class application
development services and an unparalleled training in recruitment and soft skills.
The main objective of this study is that to study on the Asset & Liability Management
and the effectiveness of managing a working capital in a company. The secondary objectives
of this study are to study the optimum level of current assets and current liabilities of the
company, to study the liquidity position through various working capital related ratios, to
study the financial performance using trend analysis tool. Study of the Asset & Liability
Management is important because unless the working capital is managed effectively,
monitored efficiently planed properly and reviewed periodically at regular intervals to
remove bottlenecks if any, the company cannot earn profits and increase its turnover.
The study of working capital is based on tools like Trend Analysis, Ratio Analysis,
working capital leverage, operating cycle etc. Further the study is based on last 5 years
Annual Reports of AVR MANUFACTURERS. And even factors like competitor’s analysis,
industry analysis were not considered while preparing this project. For this study the
secondary data collection method is used. The data collection was aimed at study of Asset &
Liability Management of the company. There is a need for working capital in the form of
current assets to deal with the problem arising out of lack of immediate realization of cash
against goods sold. Therefore sufficient working capital is necessary to sustain sales activity.
Efficient Asset & Liability Management requires that firms should operate with some amount
of net working capital, the exact amount varying from firm to firm and depending, among
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other things; on the nature of companies. This study has some of the limitations like limited
data, limited period, limited area and the duration of the study is very low.
It should be realized that the working capital need of the firms may be fluctuating
with changing business activity. This may cause excess or shortage of working capital
frequently. The inadequate amount of working capital can be threatened for the solvency of
the firms because of its inability to meet its current obligation. The management should be
prompt to initiate an action and correct imbalance. The problems of the company are been
analyzed and the suggestions are been given for the company for its future estimation and
management of the working capital. The present study reveals that the liquidity position of
this company is comparatively good as it approaches the standard norms throughout the
period of study.
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TABLE OF CONTENTS
CHAPTER NO PARTICULARS PAGE NO.
Acknowledgement
Certificate
Contents
List of Tables
List of Charts
1.
1.1
1.2
1.3
1.4
1.5
Asset & Liability Management
Introduction
Need of Asset & Liability Management
Gross W.C and Net W.C
Types of working capital
Determinants of working capital
2.
2.1
2.2
Industry Profile
Industry Profile
Company Profile
3. Review of Literature
4.
4.1
4.2
4.3
4.4
Research Methodology
Introduction
Types of research methodology
Objective of the study
Scope and Limitation of the study
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5.
5.1
5.2
5.3
Data analysis and Interpretation
Working capital Analysis
Ratio Analysis
Trend Analysis
6.
6.1
6.2
6.3
Findings & Suggestions
Findings
Suggestion
Conclusion
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LIST OF TABLES
Table. no Name of Tables Page. no
5.1.1 Schedule of Changes in Working Capital (2008)
5.1.2 Schedule of Changes in Working Capital (2009)
5.1.3 Schedule of Changes in Working Capital (2010)
5.1.4 Schedule of Changes in Working Capital (2011)
5.2.1 Schedule of Changes in Working Capital (2012)
5.2.2 Current Ratio
5.2.3 Quick Ratio
5.2.4 Absolute Liquid Ratio
5.2.5 Inventory Turnover Ratio
5.2.6 Debtors Turnover Ratio
5.2.7 Creditors Turnover Ratio
5.2.8 Fixed Asset Turnover Ratio
5.2.9 Cash to Current Asset Ratio
5.2.10 Current Asset Turnover Ratio
5.2.11 Inventory to Sales Ratio
5.2.12 Working Capital Turnover Ratio
5.2.13 Inventory to Current Asset Ratio
5.2.14 Gross profit Ratio
5.2.15 Administrative Expenses Ratio
5.3.1 Trend Analysis- Current Asset
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5.3.2 Trend Analysis- Fixed Asset
5.3.3 Trend Analysis- Cash and Bank
5.3.4 Trend Analysis- Inventory
5.3.5 Trend Analysis- Sundry Debtors
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LIST OF CHARTS
Figure. No Name of Tables Page. no
5.2.2 Current Assets
5.2.3 Fixed Assets
5.2.4 Cash & Bank Balances
5.2.5 Inventory Turnover ratio
5.2.6 Sundry Debtors turnover ratio
5.2.7 Creditors Turnover ratio
5.2.8 Fixed Asset Turnover ratio
5.2.9 Cash to Current Asset
5.2.10 Current Asset Turnover
5.2.11 Inventory Turnover
5.2.12 Working Capital Turnover Ratio
5.2.13 Inventory to Current Asset Ratio
5.2.14 Gross profit Ratio
5.2.15 Administrative Expenses Ratio
5.3.1 Trend Analysis- Current Asset
5.3.2 Trend Analysis- Fixed Asset
5.3.3 Trend Analysis- Cash and Bank
5.3.4 Trend Analysis- Inventory
5.3.5 Trend Analysis- Sundry Debtors
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CHAPTER I
ABOUT THE STUDY
1.1) Introduction Asset & Liability Management
Asset & Liability Management is concerned with the problems that arise while
attempting to manage the current assets, the current liabilities and the inter relationship that
exist between them. The term current assets refers to those assets which in ordinary course of
business can be, or, will be, turned in to cash within one year without undergoing a
diminution in value and without disrupting the operation of the firm. The major current assets
are cash, marketable securities, account receivable and inventory. Current liabilities ware
those liabilities which intended at their inception to be paid in ordinary course of business,
within a year, out of the current assets or earnings of the concern. The basic current liabilities
are account payable, bill payable, bank over-draft, and outstanding expenses.
The goal of Asset & Liability Management is to manage the firms current assets and
current liabilities in such way that the satisfactory level of working capital is mentioned. The
current assets should be large enough to cover its current liabilities in order to ensure a
reasonable margin of the safety.
Definition:-
According to Guttmann & Dougall-
“Excess of current assets over current liabilities”
According to Park & Gladson-
The excess of current assets of a business (i.e. cash, accounts receivables,
inventories) over current items owned to employees and others (such as salaries & wages
payable, accounts payable, taxes owned to government).
1.2) Need of Asset & Liability Management
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The need for working capital gross or current assets cannot be over emphasized. As
already observed, the objective of financial decision making is to maximize the shareholders
wealth. To achieve this, it is necessary to generate sufficient profits. This will naturally
depend upon the magnitude of the sales among other things but sales cannot convert into
cash. There is a need for working capital in the form of current assets to deal with the
problem arising out of lack of immediate realization of cash against goods sold. Therefore
sufficient working capital is necessary to sustain sales activity. Technically this is refers to
operating or cash cycle. If the company has certain amount of cash, it will be required for
purchasing the raw material which may be available on credit basis. Then the company has to
spend some amount for labor and factory overhead to convert the raw material in work in
progress, and ultimately finished goods. These finished goods convert in to sales on credit
basis in the form of sundry debtors. Sundry debtors are converted into cash after expiry of
credit period. Thus some amount of cash is blocked in raw materials, WIP, finished goods,
and sundry debtors and day to day cash requirements. However some part of current assets
may be financed by the current liabilities also. The amount required to be invested in this
current assets is always higher than the funds available from current liabilities. This is the
precise reason why the needs for working capital arise
1.3) Gross working capital and Net working capital
There are two concepts of Asset & Liability Management
1. Gross working capital
Gross working capital refers to the firm’s investment in current assets. Current assets
are the assets which can be convert in to cash within a year includes cash, short term
securities, debtors, bills receivable and inventory.
2. Net working capital
Net working capital refers to the difference between current assets and current
liabilities. Current liabilities are those claims of outsiders which are expected to mature for
payment within an accounting year and include creditors, bills payable and outstanding
expenses. Net working capital can be positive or negative
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Efficient Asset & Liability Management requires that firms should operate with some
amount of net working capital, the exact amount varying from firm to firm and depending,
among other things; on the nature of companies. Net working capital is necessary because the
cash outflows and inflows do not coincide. The cash outflows resulting from payment of
current liabilities are relatively predictable. The cash inflow are however difficult to predict.
The more predictable the cash inflows are, the less net working capital will be required.
The concept of working capital was, first evolved by Karl Marx. Marx used the term
variable capital means outlays for payrolls advanced to workers before the completion of
work. He compared this with constant capital which according to him is nothing but dead
labor. This variable capital is nothing but wage fund which remains blocked in terms of
financial management, in work- in-process along with other operating expenses until it is
released through sale of finished goods. Although Marx did not mentioned that workers also
gave credit to the firm by accepting periodical payment of wages which funded a portioned of
W.I.P, the concept of working capital, as we understand today was embedded in his variable
capital.
1.4) Types of working capital
The operating cycle creates the need for current assets (working capital). However the
need does not come to an end after the cycle is completed to explain this continuing need of
current assets a destination should be drawn between permanent and temporary working
capital.
1) Permanent working capital
The need for current assets arises, as already observed, because of the cash cycle. To
carry on business certain minimum level of working capital is necessary on continues and
uninterrupted basis. For all practical purpose, this requirement will have to be met
permanent as with other fixed assets. This requirement refers to as permanent or fixed
working capital
2) Temporary working capital
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Any amount over and above the permanent level of working capital is temporary,
fluctuating or variable, working capital. This portion of the required working capital is
needed to meet fluctuation in demand consequent upon changes in production and sales as
result of seasonal changes
Graph shows that the permanent level is fairly constant; while temporary working capital is
fluctuating in the case of an expanding firm the permanent working capital line may not be
horizontal. This may be because of changes in demand for permanent current assets might be
increasing to support a rising level of activity.
1.5) Determinants of working capital
The amount of working capital is depends upon a following factors
1. Nature of business
Some businesses are such, due to their very nature, that their requirement of fixed
capital is more rather than working capital. These businesses sell services and not the
commodities and that too on cash basis. As such, no funds are blocked in piling inventories
and also no funds are blocked in receivables. E.g. public utility services like railways,
infrastructure oriented project etc. their requirement of working capital is less. On the other
hand, there are some businesses like trading activity, where requirement of fixed capital is
less but more money is blocked in inventories and debtors.
2. Length of production cycle
In some business like machine tools industry, the time gap between the acquisition of
raw material till the end of final production of finished products itself is quite high. As such
amount may be blocked either in raw material or work in progress or finished goods or even
in debtors. Naturally the need of working capital is high.
3. Size and growth of business
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In very small company the working capital requirement is quite high due to high
overhead, higher buying and selling cost etc. as such medium size business positively has
edge over the small companies. Once the business grows beyond a certain limit, the working
capital requirements may be adversely affected by the increasing size.
4. Business/ Trade cycle
If the company is operating in the time of boom, the working capital requirement may
be more as the company may like to buy more raw material, may increase the production and
sales to take the benefit of favorable market, due to increase in the sales, there may be more
and more amount of funds blocked in stock and debtors etc. similarly in the case of
depressions also, working capital may be high as the sales terms of value and quantity may be
reducing, there may be unnecessary piling up of stack without getting sold, the receivable
may not be recovered in time etc.
5. Terms of purchase and sales
Some time due to competition or custom, it may be necessary for the company to
extend more and more credit to customers, as result which more and more amount is locked
up in debtors or bills receivables which increase the working capital requirement. On the
other hand, in the case of purchase, if the credit is offered by suppliers of goods and services,
a part of working capital requirement may be financed by them, but it is necessary to
purchase on cash basis, the working capital requirement will be higher.
6. Profitability
The profitability of the business may be vary in each and every individual case, which
is in turn its depend on numerous factors, but high profitability will positively reduce the
strain on working capital requirement of the company, because the profits to the extent that
they earned in cash may be used to meet the working capital requirement of the company.
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CHAPTER II
2.1 INDUSTRY PROFILE:
Automotive:
The Automotive industry in India is one of the largest in the world and one of the fastest
growing globally. India manufactures over 11 million vehicles (including 2 wheeled and 4
wheeled) and exports about 1.5 million every year. It is the world's second largest
manufacturer of motorcycles, with annual sales exceeding 8.5 million in 2009. India's
passenger car and commercial vehicle manufacturing industry is the seventh largest in the
world, with an annual production of more than 2.6 million units in 2009. In 2009, India
emerged as Asia's fourth largest exporter of passenger cars, behind Japan, South Korea and
Thailand.
As of 2009, India is home to 40 million passenger vehicles and more than 2.6 million cars
were sold in India in 2009 (an increase of 26%), making the country the second fastest
growing automobile market in the world. According to the Society of Indian Automobile
Manufacturers, annual car sales are projected to increase up to 5 million vehicles by 2015 and
more than 9 million by 2020. By 2050, the country is expected to top the world in car
volumes with approximately 611 million vehicles on the nation's roads.
A chunk of India's car manufacturing industry is based in and around the city of Chennai,
also known as the "Detroit of India". With the Indian city accounting for 60 per cent of the
country's automotive exports. Gurgaon and Manesar near New Delhi are hubs where all of
the Maruti Suzuki cars in India are manufactured. The Chakan corridor near Pune,
Maharashtra is another vehicular production hub with General Motors, Volkswagen/ Skoda,
Mahindra, Tata in the process of setting up or already set up facilities. Ahmadabad with Tata
Motors Nano plant and Halol with General Motors in Gujarat, Aurangabad in Maharashtra,
Kolkata in West Bengal are some of the other automotive manufacturing regions around the
country.
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Industry snapshots
Employment of automotive service technicians and mechanics is expected to increase
as fast as the average through the year 2014. Between 2004-2014, demand for
technicians will grow as the number of vehicles in operation increases, reflecting
continued growth in the number of multi-car families. Growth in demand will be
offset somewhat by slowing population growth and the continuing increase in the
quality and durability of automobiles, which will require less frequent service.
Additional job openings will be due to the need to replace a growing number of
retiring technicians, who tend to be the most experienced workers.
Most persons entering seeking employment in the automotive industry can expect
steady work, even through downturns in the economy. While car owners may
postpone maintenance and repair on their vehicles when their budgets become
strained, and employers of automotive technicians may cutback hiring new workers,
changes in economic conditions generally have minor effects on the automotive
service and repair business.
Opportunities in the automotive industry should be plentiful in vehicle maintenance
and repair occupations, especially for employees with formal automotive service
technician training.
Workforce Issues
Image and Promotion
Among the challenges automotive employers face is overcoming negative public
perceptions of the industry due to stereotypes and misinformation. Specifically, the
industry seeks to counteract this lack of awareness by demonstrating the availability
of viable occupations that pay well and have growth potential. The industry is also
working to develop a pipeline of young employees and transitioning workers from
which health care employers can recruit.
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Diversity of the workforce: recruitment and retention
The industry is also focused on increasing diversity in the workforce. To this end,
employers are working to improve the pipeline and the demographic make-up of the
workforce in areas such as race, gender and language diversity.
Capacity and Instruction
The automotive industry is working to assist employees in the attainment of basic soft
skills, such as communications, basic reading, writing and math, problem solving and
customer service skills. Training efforts must include the resources and curriculum to
stay current with today's technology. To aid industry employers in this effort, the
industry has focused on recruiting more teachers and trainers; ensuring that they are
industry-certified and current in their field of knowledge. There is also a need of
continuing education for instructors.
Training and Education
Another concern among industry employers is the availability of training for new
employees and the re-training of incumbent employees. Education centers will be
utilized to focus on the development of standardized curriculum and the importance of
industry-based certification for training programs.
Skill Sets
Automotive technology is rapidly increasing in sophistication, and most training
authorities strongly recommend that persons seeking automotive service technician
and mechanic jobs complete a formal training program in high school or in a
postsecondary vocational school or community college. However, some service
technicians still learn the trade solely by assisting and learning from experienced
workers. Courses in automotive repair, electronics, physics, chemistry, English,
computers and mathematics provide a good educational background for a career as a
service technician.
Opportunities in vehicle maintenance and repair should be plentiful, especially for
persons who complete formal automotive service technician training. The growing
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complexity of automotive technology increasingly requires highly trained automotive
service technicians and mechanics to service vehicles. Most persons who enter
maintenance and repair occupations in this industry may expect steady work because
changes in economic conditions have little effect on this part of the dealer's business.
Some automotive manufacturers and their associated dealers sponsor 2-year associate
degree programs at postsecondary schools. Students enrolled in these programs
typically spend alternate 10 to 12-week periods; attending classes full-time and
working full-time in the service departments of participating dealers.
For trainee positions, dealerships increasingly prefer to hire automotive service
technician graduates of postsecondary automotive training programs. Good reading
and basic math skills are required to study technical manuals, keep abreast of new
technology and learn new service and repair techniques as vehicle components and
systems become increasingly sophisticated.
Production workers account for three out of five motor vehicle and equipment
manufacturing jobs. These workers receive most of their training on the job or
through apprenticeship programs
Employment Training and Admistration (ETA) in action:
In June 2003, ETA announced the High Growth Job Training Initiative to engage
businesses with local education providers and the local/regional workforce investment system
to find solutions that address changing talent development needs in various industries.
In October 2005, the Community-Based Job Training Grants were announced to
improve the role of community colleges in providing affordable, flexible and
accessible education for the nation's workforce.
ETA is investing more than $260 million in 26 different regions across the United
States in support of the WIRED (Workforce Innovation in Regional Economic
Development) Initiative. Through WIRED, local leaders design and implement
strategic approaches to regional economic development and job growth. WIRED
focuses on catalyzing the creation of high skill, high wage opportunities for American
workers through an integrated approach to economic and talent development.
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These initiatives reinforce ETA's commitment to transform the workforce system
through engaging business, education, state and local governments and other federal
agencies with the goal of creating a skilled workforce to meet the dynamic needs of
today's economy.
Investments
ETA has invested over $20,681,511 in the automotive industry. This includes 12 High
Growth Job Training grants totaling $14,395,956 and five Community-Based Job Training
Grants totaling $6,285,555. Leveraged resources from all of the grantees total $39,061,021.
Resources
For additional background information about the industry and details on the grants,
information about employment and training opportunities and workforce development tools
for employers, educators and workforce professionals
Automobile Industry in India
The Automotive industry in India is one of the largest in the world and one of the fastest
growing globally. India manufactures over 11 million vehicles (including 2 wheeled and 4
wheeled) and exports about 1.5 million every year. It is the world's second largest
manufacturer of motorcycles, with annual sales exceeding 8.5 million in 2009.India's
passenger car and commercial vehicle manufacturing industry is the seventh largest in the
world, with an annual production of more than 2.6 million units in 2009. In 2009, India
emerged as Asia's fourth largest exporter of passenger cars, behind Japan, South Korea, and
Thailand.
As of 2009, India is home to 40 million passenger vehicles and more than 2.6 million cars
were sold in India in 2009 (an increase of 26%), making the country the second fastest
growing automobile market in the world. According to the Society of Indian Automobile
Manufacturers, annual car sales are projected to increase up to 5 million vehicles by 2015 and
more than 9 million by 2020.By 2050, the country is expected to top the world in car volumes
with approximately 611 million vehicles on the nation's roads.
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A chunk of India's car manufacturing industry is based in and around Chennai, also known as
the "Detroit of India" with the India operations of BMW, Ford, Hyundai and Nissan
headquartered in the city. Chennai accounts for 60 per cent of the country's automotive
exports. Gurgaon and Manesar near New Delhi are hubs where all of the Maruti Suzuki cars
in India are manufactured. The Chakan corridor near Pune, Maharashtra is another vehicular
production hub with companies like General Motors, Volkswagen, Skoda, Mahindra and
Mahindra, Tata Motors, Mercedes Benz, Fiat and Force Motors having assembly plants in the
area. Ahmedabad with the Tata Nano plant, Halol with General Motors in Gujarat,
Aurangabad with Audi in Maharashtra and Kolkatta with Hindustan Motors in West Bengal
are some of the other automotive manufacturing regions around the country.
1.2.2 Supply chain of Automobile Industry :
The supply chain of automotive industry in India is very similar to the supply chain of the
automotive industry in Europe and America. The orders of the industry arise from the bottom
of the supply chain i. e., from the consumers and go through the automakers and climbs up
until the third tier suppliers. However the products, as channeled in every traditional
automotive industry, flow from the top of the supply chain to reach the consumers.
Automakers in India are the key to the supply chain and are responsible for the products and
innovation in the industry.
The description and the role of each of the contributors to the supply chain are discussed
below.
Third Tier Suppliers: These companies provide basic products like rubber, glass, steel, plastic
and aluminum to the second tier suppliers.
Second Tier Suppliers: These companies design vehicle systems or bodies for First Tier
Suppliers and OEMs. They work on designs provided by the first tier suppliers or OEMs.
1.2.2 Figure showing the Supply Chain of Indian Automobile Industry
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They
also
provide engineering resources for detailed designs. Some of their services may include
welding, fabrication, shearing, bending etc.
First Tier Suppliers: These companies provide major systems directly to assemblers. These
companies have global coverage, in order to follow their customers to various locations
around the world. They design and innovate in order to provide “black-box” solutions for the
requirements of their customers. Black-box solutions are solutions created by suppliers using
their own technology to meet the performance and interface requirements set by assemblers.
First tier suppliers are responsible not only for the assembly of parts into complete units like
dashboard, breaks-axel-suspension, seats, or cockpit but also for the management of second-
tier suppliers.
Automakers/Vehicle Manufacturers/Original Equipment Manufacturers (OEMs): After
researching consumers’ wants and needs, automakers begin designing models which are
tailored to consumers’ demands. The design process normally takes five years. These
companies have manufacturing units where engines are manufactured and parts supplied by
first tier suppliers and second tier suppliers are assembled. Automakers are the key to the
supply chain of the automotive industry. Examples of these companies are Tata Motors,
Maruti Suzuki, Toyota, and Honda. Innovation, design capability and branding are the main
focus of these companies.
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Dealers: Once the vehicles are ready they are shipped to the regional branch and from there,
to the authorized dealers of the companies. The dealers then sell the vehicles to the end
customers.
Parts and Accessory: These companies provide products like tires, windshields, and air bags
etc. to automakers and dealers or directly to customers.
Service Providers: Some of the services to the customers include servicing of vehicles,
repairing parts, or financing of vehicles. Many dealers provide these services but, customers
can also choose to go to independent service providers.
2.2 COMPANY PROFILE
ABOUT US
AVR Manufacturers established in the year 2003, with an immense industry
experience of 30 years, have achieved a prominent position in the manufacturing and
supplying of sheet metal components, pressed components and automotive components.
These encompass sheet metal parts, special type washer, precision sheet metal press
components, deep drawn components, and oil seal inner shells. Based on the latest
technology, these are widely used in industries such as Automobile, Automotive, and also in
other engineering firms.
With knowledge and expertise, AVR Manufacturers broadened its horizons into
manufacturing of automobile sheet metal components after surveying and studying both
technical and marketing aspects. Over the last 10 years, the company has achieved a distinct
place in the market. It has a strong and satisfying clientele.
We channel our endeavours towards achieving absolute customer satisfaction by
offering our clients with qualitative products. Our products, owing to its functionality,
durability, efficiency, and cost effectiveness are preferred by a wide list of clients across
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India. In addition to exhibiting finest quality, our entire product range is competitively priced,
enabling us to earn immense credibility and faith of our valued clients.
OUR VISION
AVR Manufacturers' mission is to help our customers in providing high quality precision
components at competitive cost. When the reputation and success depend on consistency and
quality of products and services
Our products comprise certain features which have made us a preferred company to work
with. Some of the highlighting features are:
- Cost effective
- Long lasting service
- Well tested
- Made from premium quality raw material
- Rust resistant
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- Closely monitored by experienced professionals
Our products are available in different dimensions and designs. They are manufactured from
quality raw material and are technologically advanced. Some of the industries where our
products are used are:
- Automobile industries
- Textile machineries manufacturing
- General Engineering
- Electrical Panel manufacturing
- Transformer manufacturing
- Valves manufacturing
- Switch gear manufacturing
POLICY
To satisfy our clients, we consistently put our generous efforts to provide quality
range of components and timely services to our clients. We make use of latest technology and
advanced techniques to work effectively even in fluctuating market conditions.
Our cost-effective specialties with the help of latest technology, we manufacture these
components and panel boxes in most efficient manner. This helps us in efficient utilization of
recourses and manufacturing quality range of products. Further, this also reduces the
production cost and enables us to offer these products at highly competitive prices.
Some of these facilities are :
- On Time Delivery (OTD)
- Efficient operations with economical machines
- Open cost system to customer
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- Hour rates for work center Systematic cost evaluation
- Operation wise actual production timings
- Wastage and scrap value deduction from cost
Customization:
With the help of our experienced team of professionals, we offer customization facility to our
clients. We manufacture these components and assemblies in various designs and sizes to
meet the specified requirements of our clients.
Quality Policy:
We have qualified people for inspection of components who keep a strict check on the quality
of the raw materials being procured as well as on the manufacturing process of the products.
Further, we ensure to check our products at various stage of manufacturing like :
Raw Material test
Dimensional measurements during production
Hardness tests
Finished test like Plating & Powder coating
Final Inspection as per client requirements
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OUR INFRASTRUCTURE :
With the support of our robust infrastructure, we successfully cater to the needs of our
reputed clients. Our sound infrastructure is spread over a vast area of 10,000 square feet,
which enables us to meet with the bulk of orders within set time frame.
Our well equipped Infrastructure includes the following machineries :
Lathe Machine
Welding Machine
Mechanical Power Presses
Surface Grinding machine
Fly Press
Drilling Machine
Round bar/Pin cutting machine
Testing & inspection Equipment
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PRODUCTS
Products Range :
Sheet Metal Components for Automotive industries
Sheet metal assemblies Deep Drawn Parts Pressed parts for Automotive industries
Metallic Gaskets Metal Inserts Electrical Switch Parts Automotive Jack Parts Special type Washers Fine Blanked Components
Product Features :
Long service life Temperature resistant Durable Corrosion resistant Dimensionally accurate
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PRODUCT PHOTOS
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CLIENTS:
As a customer-centric organization, we consistently strive hard to offer the finest quality
products at industry leading prices to our clients. To meet the unique needs of our clients, we
offer a highly customized range of automobile components. Based on our ethical business
policy, customized product range, transparent dealings, and ability to deliver any size
consignment within promised time frame, we have garnered a huge clientele.
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CONTACT US
AVR MANUFACTURERS
72, 5th Cross Street,
Thiru-Vi-Ka Industrial Estate,
Guindy ,
Chennai.
Tamilnadu – 600 032
Ph: 044 – 43322527
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CHAPTER III
REVIEW OF LITERATURE
Asset & Liability Management is the management of assets that are current in nature. Current
assets, by accounting definition are the assets normally converted in to cash in a period of one
year. Hence Asset & Liability Management can be considered as the management of cash,
market securities receivable, inventories and current liabilities. In fact, the management
of current assets is similar to that of fixed assets the sense that is both in cases the firm
analyses their effect on its profitability and risk factors, hence they differ on three major
aspects:
1. In managing fixed assets, time is an important factor discounting and compounding aspects
of time play an important role in capital budgeting and a minor part in the management
of current assets.
2. The large holdings of current assets, especially cash, may strengthen the firm’s liquidity
position, but is bound to reduce profitability of the firm as ideal car yield nothing.
3. The level of fixed assets as well as current assets depends upon the expected sales, but it is
only current assets that add fluctuation in the short run to a business.
To understand working capital better we should have basic knowledge about the various
aspects of working capital. To start with, there are two concepts of working capital:
Gross Working Capital
Net working Capital
Gross Working Capital: Gross working capital, which is also simply known as working
capital, refers to the firm’s investment in current assets: Another aspect of gross working
capital points out the need of arranging funds to finance the current assets. The gross working
capital concept focuses attention on two aspects of current assets management, firstly
optimum investment in current assets and secondly in financing the current assets. These two
aspects will help in remaining away from the two danger points of excessive or inadequate
investment in current assets. Whenever a need of working capital funds arises due to increase
in level of business activity or for any other reason the arrangement should be made quickly,
29
and similarly if some surpluses are available, they should not be allowed to lie ideal but
should be put to some effective use.
Net Working Capital: The term net working capital refers to the difference between the
current assets and current liabilities. Net working capital can be positive as well as negative.
Positive working capital refers to the situation where current assets exceed current liabilities
and negative working capital refers to the situation where current liabilities exceed current
assets. The net working capital helps in comparing the liquidity of the same firm over time.
For purposes of the Asset & Liability Management, therefore Working Capital can be said to
measure the liquidity of the firm. In other words, the goal of Asset & Liability Management
is to manage the current assets and liabilities in such a way that a acceptable level of net
working capital is maintained.
Working capital refers to the investment by the company in short
terms assets such as cash, marketable securities. Net current assets or net
working capital refers to the current assets less current liabilities.
Symbolically, it means,
Net Current Assets = Current Assets Current Liabilities.
Studies adopting a new approach towards Asset & Liability Management are reviewed
here.
Sagan in his paper (1955),
1 perhaps the first theoretical paper on the theory of Asset & Liability Management,
emphasized the need for management of working capital accounts and warned that it could
vitally affect the health of the company. He realized the need to build up a theory of Asset &
Liability Management. He discussed mainly the role and functions of money manager
inefficient working capital 48 management. Sagan pointed out the money manager’s
operations were primarily in the area of cash flows generated in the course of business
transactions. However, money manager must be familiar with what is being done with the
30
control of inventories, receivables and payables because all these accounts affect cash
position. Thus, Sagan concentrated mainly on cash component of working capital. Sagan
indicated that the task of money manager was to provide funds as and when needed and to
invest temporarily surplus funds as profitably as possible in view of his particular
requirements of safety and liquidity of funds by examining the risk and return of various
investment opportunities. He suggested that money manager should take his decisions on the
basis of cash budget and total current assets position rather than on the basis of traditional
working capital ratios. This is important because efficient money manager can avoid
borrowing from outside even when his net working capital position is low. The study pointed
out that there was a need to improve the collection of funds but it remained silent about the
method of doing it. Moreover, this study is descriptive without any empirical support.
Realizing the dearth of pertinent literature on Asset & Liability Management, Walker in his
study (1964)
2 made a pioneering effort to develop a theory of Asset & Liability Management by
empirically testing, though partially, three propositions based on risk-return trade-off of Asset
& Liability Management. Walker studied the effect of the change in the level of working
capital on the rate of return in nine industries for the year 1961 and found the relationship
between the level of working capital and the rate of return to be negative.
Vanhorne in his study (1969)4 ,
Recognizing Asset & Liability Management as an area largely lacking in theoretical
perspective, attempted to develop a framework in terms of probabilistic cash budget for
evaluating decisions concerning 51the level of liquid assets and the maturity composition of
debt involving risk-return trade-off. He proposed calculation of different forecasted liquid
asset requirements along with their subjective probabilities under different possible
assumptions of sales, receivables, payables and other related receipts and disbursements. He
suggested preparing a schedule showing, under each alternative of debt maturity, probability
distributions of liquid asset balances for future periods, opportunity cost, maximum
probability of running out of cash and number of future periods in which there was a chance
of cash stock-out. Once the risk and opportunity cost for different alternatives were
estimated, the form could determine the best alternative by balancing the risk of running out
of cash against the cost of providing a solution to avoid such a possibility depending on
31
management’s risk tolerance limits. Thus, Vanhorne study presented a risk-return trade-off of
Asset & Liability Management in entirely new perspective by considering some of the
variables probabilistically. However, the usefulness of the framework suggested by Vanhorne
is limited because of the difficulties in obtaining information about the probability
distributions of liquid-asset balances, the opportunity cost and the probability of running out
of cash for different alternative of debt maturities.
Welter, in his study (1970)
Stated that working capital originated because of the global delay between the moment
Expenditure for purchase of raw material was made and the moment when payments were
received for the sale of finished 52product. Delay centers are located throughout the
production and marketing functions. The study requires specifying the delay centers and
working capital tied up in each delay centre with the help of information regarding average
delay and added value. He recognized that by more rapid and precise information through
computers and improved professional ability of management, saving through reduction of
working capital could be possible by reducing the length of global delay by rescuing and/or
favorable redistribution of this global delay among the different delay centers. However,
better information and improved staff involve cost. Therefore, savings through reduction of
working capital should be tried till these saving are greater or equal to the cost of these
savings. Thus, this study is concerned only with return aspect of Asset & Liability
Management ignoring risk. Enterprises, following this approach, can adversely affect its
short-term liquidity position in an attempt to achieve saving through reduction of working
capital. Thus, firms should be conscious of the effect of law current assets on its ability to
pay-off current liabilities. Moreover, this approach concentrated only on total amount of
current assets ignoring the interactions between current assets and current liabilities.
Lambrix and Singhvi (1979)
Adopting the working capital cycle approach to the Asset & Liability Management, also
suggested that investment in working capital could be optimized and cash flows could be
improved by reducing the time frame of the physical flow from receipt of raw material to
shipment of 53finished goods, i.e. inventory management, and by improving the terms on
which firm sells goods as well as receipt of cash. However, the further suggested that
32
working capital investment could be optimized also (1) by improving the terms on which
firms bought goods i.e. creditors and payment of cash, and (2) by eliminating the
administrative delays i.e. the deficiencies of paper-work flow which tended to extend the
time-frame of the movement of goods and cash.
Warren and Shelton (1971)7
Applied financial simulation to simulate future financial statements of a firm, based on a set
of simultaneous equations. Financial simulation approach makes it possible to incorporate
both the uncertainty of the future and the many interrelationships between current assets,
current liabilities and other balance sheet accounts. The strength of simulation as a tool of
analysis is that it permits the financial manager to incorporate in his planning both the most
likely value of an activity and the margin of error associated with this estimate. Warren and
Shelton presented a model in which twenty simultaneous equations were used to forecast
future balance sheet of the firm including forecasted current assets and forecasted current
liabilities. Current assets and current liabilities were forecasted in aggregate by directly
relating to firm sales. However, individual working capital accounts can also be forecasted in
a larger simulation system. Moreover, future financial statements can be simulated over a
range of different assumptions to portray inherent uncertainty of the future.
Cohn and Pringle in their study (1973)9
Illustrated the extension of Capital Asset Pricing Model (CAPM)10 for Asset & Liability
Management decisions. They tried to interrelate long-term investment and financing
decisions and Asset & Liability Management decisions through CAPM. They emphasized
that an active Asset & Liability Management policy based on CAPM could be employed to
keep the firm’s shares in a given risk class. By risk, he meant unsystematic risk, the only risk
deemed relevant by CAPM. Owing to the lumpy nature for long-term financial decisions, the
firm is continually subject to shifts in the risk of its equity. The fluid nature of working
capital, on the other hand, can be exploited so as to offset or moderate such swings. For
example they suggested that a policy using CAPM could be adopted for the management of
marketable securities portfolio such that the appropriate risk level at any point in time was
that which maintains the risk of the company’s common stock at a constant level. Similarly,
Copeland and Khoury (1980) applied CAPM to develop a theory of credit expansion. They
argued that credit should be extended only if the expected rate of return on credit is greater
33
than or equal to market determined required rate of return. They used CAPM to determine the
required rate of return for the firm with its new risk, arising from uncertainty regarding
collection due to the extension of credit. Thus, these studies show how CAPM can be used
for decisions involved in Asset & Liability Management. 55 One more approach, used mainly
in empirical studies, towards Asset & Liability Management has been to apply regression
analysis to determine the factors influencing investment in working capital. Different studies
in the past have considered different explanatory variables to explain the investment in
inventory. A brief review12 of these studies is important as regression equation of investment
in working capital, in the present study, would be formulated on the basis of works on
investment in inventory. In inventory investment literature, there is basically one school of
thought according to which firms aim at an optimum or desired stock of inventories in
relation to a given level of output/sales. This is known as acceleration principle. Pioneering
work in this field has been done by Metzler (1941)13.
However, his work was mainly on simple acceleration principle which postulated that firms
liked to maintain inventories in proportions to output/sales and they succeeded in achieving
the desired level of inventories in a unit time period. That is to say, any discrepancy between
the actual level and desired level of inventories is adjusted within the same time-period.
Needless to say, that such an instantaneous adjustment is not a realistic assumption to make.
Modifications, therefore, have been introduced in the literature to provide for partial
adjustment. Goodwin (1948)14 assumed that firms attempted only a partial adjustment of the
discrepancy between the desired stocks as determined by the level of output and the existing
stock.
Similarly, Darling and 56Lovell (1965)15 modified Metzler’s formulation based on simple
acceleration principle and obtained, the relationship based on flexible accelerator principle.
There are several reasons physical, financial and technical those motivate partial adjustment.
Among the physical factors, mention may be made of procurement lags between orders and
deliveries. The length of such lags is connected with the source of supply, foreign or
domestic availability. Import licensing procedures on account of foreign exchange scarcity
could cause further delays in adjustment. Among the financial factors, cost advantages
associated with bulk buying and higher procurement costs for speedy delivery are also
mentioned. Uncertainties in the market for raw materials and in the demand for final product
also play a role in influencing the speed of adjustment. Technically, firms like to make sure
34
that changes in demand are of a permanent character before making full adjustment. The
acceleration principle has great relevance in inventory analysis than in the analysis of fixed
investment, as there are limits to liquidate fixed capital in the face of declining demand.
Other variables influencing inventories have been introduced in the literature in the context of
accelerator model. Rate of interest is used as a proxy for the opportunity cost of carrying
stocks or as a measure of the cost of funds needed to hold inventories. It has been found
significant in the studies of Hilton (1976)16 and Irwin (1981)17
. Time-trend is expected to be important because inventories generally accumulate with the
expansion of economic activities of the company. Anticipated 57price changes, measured by
changes in wholesale price index of inventories, are taken as an explanatory variable to
capture speculative element in inventory. This suggests a positive relationship between price
changes and inventory. An increase in sales is expected to increase the demand for stocks to
meet orders regularly. An increase in capacity utilization is also expected to increase the
demand for stock by increasing the demand for raw materials and increasing the inventories
of finished goods. Thus, the variable, capacity utilization, is postulated to have a positive
coefficient in the equation.
Abramowitz (1950)18 and Modigliani (1957)19
Highlighted the impact of capacity utilization on inventory investment. Existing stock of
inventories is expected to take account of adjustment process to the desired levels. Thus the
variable, existing stock of inventories, is postulated to be negatively related with the desired
stock. The ratio of inventory to sales may affect inventory investment positively because a
high ratio of stocks to sales in the past suggests the maintenance of high levels of inventories
in the past and thus also calling for high investment in inventories in the current period.
The studies of Metzler (1941)20 and Hilton (1976)21
Have found this variable, inventory-sales ratio, to be statistically significant. Fixed
investment is generally expected to affect inventory investment inversely because of
competing demand for the limited funds. However, in case of an expanding firm, the two
components may be complementary. Besides, availability of funds from retained earnings
and external sources, may affect investment 58decision by providing funds for financing
35
inventory investment. Therefore, retained earnings and flow of debt are postulated to have
positive coefficients.
CHAPTER IV
RESEARCH METHODOLOGY
4.1 NEED FOR THE STUDY
1. To provide reliable financial information about economic resources and obligation of a
business firm.
2. To provide other needed information about charges in such economic resources and
obligation.
3. To provide reliable information about change in net resources (recourses less obligations)
missing out of business activities.
4. To provide financial information that assets in estimating the learning potential of the
business.
4.2 OBJECTIVES OF THE STUDY
Study of the Asset & Liability Management is important because unless the working
capital is managed effectively, monitored efficiently planed properly and reviewed
periodically at regular intervals to remove bottlenecks if any, the company cannot earn profits
and increase its turnover. With this primary objective of the study, the following further
objectives are framed for a depth analysis.
1. To study the Asset & Liability Management of AVR MANUFACTURERS., Chennai
2. To study the optimum level of current assets and current liabilities of the company.
3. To study the liquidity position through various working capital related ratios.
4. To study the financial performance using trend analysis tool
36
4.3 SCOPE & LIMITATIONS OF THE STUDY
The scope of the study is identified after and during the study. The study of working capital
is based on tools like Trend Analysis, Ratio Analysis, working capital leverage, operating
cycle etc. Further the study is based on last 5 years Annual Reports of AVR
MANUFACTURERS. And even factors like competitor’s analysis, industry analysis were
not considered while preparing this project.
4.4 Limitations of the study
Following limitations were encountered while preparing this project:
1) Limited data:-
This project has completed with annual reports; it just constitutes one part of data
collection i.e. secondary. There were limitations for primary data collection because of
confidentiality.
2) Limited period:-
This project is based on five year annual reports. Conclusions and recommendations
are based on such limited data. The trend of last five year may or may not reflect the real
working capital position of the company
3) Limited area:-
Also it was difficult to collect the data regarding the competitors and their financial
information. Industry figures were also difficult to get.
37
Research Methodology
4.4) Introduction
Research methodology is a way to systematically solve the research problem. It may
be understood as a science of studying now research is done systematically. In that various
steps, those are generally adopted by a researcher in studying his problem along with the
logic behind them.
It is important for research to know not only the research method but also know
methodology. “The procedures by which researcher goes about their work of describing,
explaining and predicting phenomenon are called methodology” Methods comprise the
procedures used for generating, collecting and evaluating data. All this means that it is
necessary for the researcher to design his methodology for his problem as the same may
differ from problem to problem.
Data collection is important step in any project and success of any project will be
largely depend upon now much accurate you will be able to collect and how much time,
money and effort will be required to collect that necessary data, this is also important step.
Data collection plays an important role in research work. Without proper data available for
analysis you cannot do the research work accurately.
4.4.1 RESEARCH DESIGN
The research design has been considered as a "blueprint" for research, dealing with
at least four problems: what questions to study, what data are relevant, what data to collect,
and how to analyze the results.
RESEARCH DESIGN USED IN THE STUDY
In analytical research, the researcher has to use facts or information already available,
and analyze these to make a critical evaluation of the material.
4.4.2) Types of data collection
38
There are two types of data collection methods available.
1. Primary data collection
2. Secondary data collection
1) Primary data
The primary data is that data which is collected fresh or first hand, and for first time
which is original in nature. Primary data can collect through personal interview, questionnaire
etc. to support the secondary data.
2) Secondary data collection method
The secondary data are those which have already collected and stored. Secondary data
easily get those secondary data from records, journals, annual reports of the company etc. It
will save the time, money and efforts to collect the data. Secondary data also made available
through trade magazines, balance sheets, books etc.
This project is based on primary data collected through personal interview of head of
account department, and other concerned staff member of finance department. But primary
data collection had limitations such as matter confidential information thus project is based
on secondary information collected through five years annual report of the company,
supported by various books and internet sides. The data collection was aimed at study of
Asset & Liability Management of the company
Project is based on
1. Annual report of AVR MANUFACTURERS, 2008
2. Annual report of AVR MANUFACTURERS, 2009
3. Annual report of AVR MANUFACTURERS, 2010
4. Annual report of AVR MANUFACTURERS, 2011
5. Annual report of AVR MANUFACTURERS, 2012
39
CHAPTER V
DATA ANALYSIS AND INTERPRETAITION
WORKING CAPITAL ANALYSIS
Asset & Liability Management is concerned with the problems which arise in
attempting to manage the current assets, the current liabilities and the inter relationship that
exist between them. The term current assets refers to those assets which in ordinary course of
business can be, or, will be, turned in to cash within one year without undergoing a
diminution in value and without disrupting the operation of the firm. The major current assets
are cash, marketable securities, account receivable and inventory. Current liabilities ware
those liabilities which intended at their inception to be paid in ordinary course of business,
within a year, out of the current assets or earnings of the concern. The basic current liabilities
are account payable, bill payable, bank over-draft, and outstanding expenses.
The goal of Asset & Liability Management is to manage the firm s current
assets and current liabilities in such way that the satisfactory level of working capital is
mentioned. The current should be large enough to cover its current liabilities in order to
ensure a reasonable margin of the safety.
The consideration of the level investment in current assets should avoid two danger
points excessive and inadequate investment in current assets. Investment in current assets
should be just adequate, not more or less, to the need of the business firms. Excessive
investment in current assets should be avoided because it impairs the firm s profitability, as
40
idle investment earns nothing. On the other hand inadequate amount of working capital can
be threatened for the solvency of the firms because of its inability to meet its current
obligation. It should be realized that the working capital need of the firms may be fluctuating
with changing business activity. This may cause excess or shortage of working capital
frequently. The management should be prompt to initiate an action and correct imbalance
5.1 SCHEDULE OF CHANGES IN WORKING CAPITAL
TABLE 5.1
PARTICULARS
2008
AMOUNT
Rs.
2009
AMOUNT
Rs.
INCREASE
AMOUNT
Rs.
DECREASE
AMOUNT
Rs.
ASSETS:
CURRENT ASSETS
Inventory (ERP Software
Licenses)2,50,940
8,25,100 5,74,160 -
Sundry Debtors 12,63,430 15,90,440 3,27,010
Cash & Bank Balance 15,90,440 58,400 - 15,32,040
Loans and Advances 22,86,750 36,86,400 13,99,650
Prepaid Expenses 14,65013,730 - 920
Accrued Income 59,090 42,925 16,165
TOTAL CURRENT
ASSETS54,65,300 62,04,638 23,00,820 15,49,125
41
LESS:
CURRENT
LIABILITIES
Sundry Creditors 64,53,315 69,10,610 - 4,57,295
TOTAL CURRENT
LIABILITIES 64,53,315 69,10,610 - 4,57,295
NET WORKING
CAPITAL (9,88,015) (7,05,972) 23,00,820 10,91,830
INFERENCE:
Working capital is required to finance day to day operations of a firm. There should
be an optimum level of working capital. From the above calculations it is clearly found that
the company’s working capital is not at the best level. The current assets are lesser than the
liabilities.
42
5.2 SCHEDULE OF CHANGES IN WORKING CAPITAL
TABLE 5.2
PARTICULARS
2009
AMOUNT
Rs.
2010
AMOUNT
Rs.
INCREASE
AMOUNT
Rs.
DECREASE
AMOUNT
Rs.
ASSETS:
CURRENT ASSETS
Inventory 8,25,100
5,42,920
2,82,180
Sundry Debtors 15,90,440 30,93,060 15,02,620
Cash & Bank Balance 58,400 6,05,030 5,46,630
Loans and Advances 36,86,400 31,92,231 4,94,169
Prepaid Expenses 13,730 17,022 3,292
Accrued Income 42,925 96,426 53,501
TOTAL CURRENT
ASSETS
62,16,995 75,46,689 21,06,043 7,76,349
43
LESS:
CURRENT
LIABILITIES
Sundry Creditors 69,10,610 1,46,42,090 - 77,31,480
TOTAL CURRENT
LIABILITIES 69,10,610
1,46,42,090 - 77,31,480
NET WORKING
CAPITAL
(7,05,972) (70,95,401) 21,06,043 (69,55,131)
INFERENCE:
In the above the working capital is negative due to more fluctuations in inventory and
loans. The company has borrowed more from outsiders for their purchase of fixed asset. The
creditors are increased at a very high rate that causes the company for many bad debts. More
care should be taken to avoid such fluctuations in the later years.
44
5.3 SCHEDULE OF CHANGES IN WORKING CAPITAL
TABLE 5.3
PARTICULARS
2010
AMOUNT
Rs.
2011
AMOUNT
Rs.
INCREASE
AMOUNT
Rs.
DECREASE
AMOUNT
Rs.
ASSETS:
CURRENT ASSETS
Inventory 5,42,920 9,50,310 4,07,390
Sundry Debtors 30,93,060 44,31,190 13,38,130
Cash & Bank Balance 6,05,030 3,71,375 2,33,655
Loans and Advances 31,92,231 33,71,511 1,79,280
Prepaid Expenses 17,0223,11,020
2,93,998
Accrued Income 96,42623,160
73,266
Advance Tax 2,26,385 2,26,385 -
TOTAL CURRENT
ASSETS
75,46,689 96,84,951 24,45,183 3,06,921
45
LESS:
CURRENT
LIABILITIES
Sundry Creditors 1,46,42,090 93,96,631 52,45,459 -
TOTAL CURRENT
LIABILITIES
1,46,42,090 93,96,631 52,45,459 -
NET WORKING
CAPITAL
(70,95,401) 2,88,320 (28,00,276) 3,06,921
INFERENCE:
The company has an increased level in the year 2011. This is due to the control on
creditors. And increase in the inventory and loans. Moreover the company has to take a
special attention over this varying working capital.
46
5.4 SCHEDULE OF CHANGES IN WORKING CAPITAL
TABLE 5.4
PARTICULARS
2011
AMOUNT
Rs.
2012
AMOUNT
Rs.
INCREASE
AMOUNT
Rs.
DECREASE
AMOUNT
Rs.
ASSETS:
CURRENT ASSETS
Inventory 9,50,310 47,08,450 37,58,140 -
Sundry Debtors 44,31,190 30,66,220 - 13,64,970
Cash & Bank Balance 3,71,375 9,25,410 5,54,035
Loans and Advances 33,71,511 - - 33,71,511
Advance Tax 3,11,020 5,89,870 2,78,850 -
Prepaid Expenses
23,160
1,43,770 1,20,610 --
Accrued Income 2,26,385 1,69,830 - 56,555
TOTAL CURRENT
ASSETS
96,84,951 96,03,550 47,11,635 47,93,036
47
LESS:
CURRENT
LIABILITIES
Sundry Creditors 93,96,631 60,53,015 33,43,616 -
TOTAL CURRENT
LIABILITIES
93,96,631 60,53,015 33,43,616 -
NET WORKING
CAPITAL
2,88,320) 35,50,535 13,68,019 47,93,036
INFERENCE:
It can be clearly inferred that the company has a fluctuating working capital. This
means that the management is not making a good attention to the flow of funds. The
company’s working capital for the year 2012 is again decreased at a very low rate this is due
to more Bad debts. Although the company has improved to an extent by decreasing its
liabilities.
48
5.2 RATIO ANALYSIS
5.2 MEANING OF RATIO:
A ratio is a mathematical relationship between two items expressed in a
quantitative form. Ratio can be defined as “Relationship expressed kin quantitative terms
between figures which have cause and effect relationship which are connected with each
other in some manner or the other.
DEFINITION OF RATIO:
According to Accountant’s Hand Book by Wixon, Kell and Bedford, a
Ratio” Is an expression of the quantitative relationship between two numbers.
LIQUIDITY RATIOS:
It measures the ability of a company to meet its current obligations, and indicate
the short term financial stability of the company. The parties interested in the liquid ratio
would be employees, bankers and short-term creditors.
CURRENT RARIO:
49
Current Ratio may be defined as the ratio of Current Assets to Current Liabilities.
It is also known as Working Capital Ratio 2:1 ratio. Current Ratio shows the relationship
between total current assets and total current liabilities expressed as a formula.
Current Assets
CURRENT RATIO =
Current Liabilities
QUICK RATIO:
A measure of company’s liquidity and ability to meet its obligations, Quick ratio,
often referred to as acid-test ratio, is obtained by subtracting inventories from current assets
and then dividing by current liabilities. Quick ratio is viewed as a sign of company’s financial
strength or weakness (higher number means stronger, lower number means weaker).
Liquid/Quick assets
QUICK RATIO =
Current Liabilities
ABSOLUTE LIQUIDITY RATIO:
This is also known as super Quick Ratio (or) Cash Ratio. This ratio
considers only absolute liquidity available with the firm. Absolute Liquid assets include cash
in hand, cash at bank marketable securities. A standard of 0.5: 1 absolute liquidity ratio is
considered an acceptable norm. It is calculated as follows:
Cash & Bank Balances
ABSOLUTE LIQUIDITY RATIO =
50
Current Liabilities
INVENTORY TURNOVER RATIO:
Inventory Turnover Ratio also known as stock turnover ratio in the
traditional language; usually establishes relationship between the cost of goods sold during a
given period and the average amount of Inventory outstanding during that period. Inventory
Turnover Ratio can be calculated by of the following formula:
Net Sales
INVENTORY TURNOVER RATIO =
Average Inventory
DEBTORS TURNOVER RATIO:
Receivables (or) Debtors normally include both debtors and Bill
Receivable and represent the uncollected portion of Credit sales receivables constitute an
important component of Current Assets and therefore the quality of receivables to a great
extent determines the liquidity of a firm. This Ratio can be calculated as follows:
Credit Sales
DEBTORS TURNOVER RATIO =
Debtor
CREDITORS TURNOVER RATIO:
This Ratio is similar to receivable turnover ratio. It compares the
Accounts Payable with the total credit purchases. It signifies the credit period enjoyed by the
firm in paying creditors. Accounts payable include both sundry creditors and bills payable. It
is calculated as follows:
Net Purchase
CREDITORS TURNOVER RATIO =
Average creditors
51
FIXED ASSET TURNOVER RATIO:
This ratio indicates the extent to which the investment in fixed assets
contributes towards sales. If compared with a previous period, it indicates whether the
investment in fixed assets has been judicious or not, the Ratio is calculated as follows:
Sales
FIXED ASSET TURNOVER RATIO =
Net Fixed Assets
WORKING CAPITAL TURNOVER RATIO:
A measurement comparing the depletion of working capital to the generation
of sales over a given period, this provides some useful information as to how effectively a
company is using its working capital to generate sales.
Net Sales
WORKING CAPITAL TURNOVER RATIO=
Net Working Capital
CASH TO CURRENT ASSET RATIO:
The cash asset ratio is similar to the current ratio, except that the current
ratio includes current assets such as inventories in the numerator. Some analysts believe that
including current assets makes it difficult to convert them into usable funds for debt
obligations. The cash asset ratio is a much more accurate measure of a firm's liquidity
Cash
CASH TO CURRENT ASSET RATIO=
Current Assets
CURRENT ASSET TURNOVER RATIO:
52
The ratio is calculated to ascertain the efficiency of use of current
assets of the concerns. With an increase in sales, current assets are expected to increase.
However, an increase in the ratio shows that current assets turned over faster resulting in
higher sales for a given investment in current assets. Higher ratio is generally an index of
better efficiency and profitability of the concern. This ratio gives a general impression about
the adequacy of working capital in reaction to sales.
Sales
CURRENT ASSET TURNOVER RATIO=
Current Assets
INVENTORY TO SALES RATIO:
Inventory to Sales Ratio indicates the manner in which a firm’s inventory in
turning. The inventory to sales ratio indicates the efficiency with which inventory turnover
into sales.
Inventory
INVENTORY TO SALES RATIO=
Sales
INVENTORY TO CURRETN ASSETS RATIO:
It indicates the amount of inventory in Current Assets. Any increase
amount of inventory indicates the lower liquidity as compared to the other Current Assets.
Average Inventory
INVENTOTY TO CURRENT ASSETS RATIO=
Current Assets
DEBT UTILIZATION RATIOS
53
The debt utilization ratio measures the proportion of debt and low
efficiently management used the debt capital. The higher the ratio, the greater the amount
other people’s money being used in an attempt to generate profits
DEBT RATIO:
The Debt Ratio measures the proportion of total assets financed by the time’s
creditor. The lighter the ratio the greater the amount other people’s money being used in an
attempt to generate profits, the ratio is calculated as follows,
Total Liability
DEBT RATIO=
Total Assets
PROFITABILITY RATIOS:
These measures the overall effectiveness in terms of returns generated, with
profits being related to sales and adequacy of such profits as to sales or investment. The
profitability ratios are important to internal management, to bankers, to investors, and to the
owners.
GROSS PROFIT RATIO:
Gross Profit Ratio expresses the relationship of gross profit of sales to net sales
in terms of percentage, representing the percentage of gross profit earned on sales.
Gross Profit
GROSS PROFIT RATIO= *100
Net Sales
ADMINISTRATIVE EXPENSES RATIO:
54
This Ratio is also known as supporting ratio’s operating ratio. They
indicate the efficiency with which business as a whole functions. It is better for the concern to
known how it is able to save or waste over expenditure in respect of different items of
expenses. Therefore each aspect of cost of sales & operation expenses are analyzed.
Administrative Expenses Ratio
ADMINISTRATIVEEXPENSESRATIO= *100
Net Sales
5.2.1 CURRENT RATIO:
Current Asset
CURRENT RATIO =
Current Liabilities
TABLE 5.2.1
INTERPRETATION:
55
YEAR CURRENT ASSETS
Rs
CURRENT LIABILTIES
Rs
RATIO
2008 54,65,300 64,53,315 0.85
2009 62,04,638 69,10,610 0.90
2010 70,06,659 1,46,42,090 0.48
2011 96,84,951 93,96,631 1.03
2012 96,03,550 60,53,015 1.59
The Current Ratio measures the ability of the firm to meet its Current Liabilities.
The standard norms of Current Ratio are 2:1. From the above table it can be inferred that
the Current Ratio of AVR MANUFACTURERSPvt. Ltd Shows higher in the year 2012(i.e.)
1.59
CURRENT RATIO:
FIGURE 5.2.1
56
5.2.2 QUICK RATIO:
Liquidi
ty Assets
Quick
Ratio =
Current Liabilities
Where as (Quick Assets = Current Assets - (Stock + Prepaid Expenses)
Table 5.2.2
57
YEARS QUICK ASSETS
Rs
CURRENT LIABILTIES
Rs
RATIOS
2008 36,92,880 64,53,315 0.57
2009 53,78,165 69,10,610 0.78
2010 69,86,747 1,46,42,090 0.48
2011 84,23,621 93,96,631 0.90
2012 34,72,361 60,53,015 0.57
INTERPRETATION:
The Quick Ratio (or) Liquidity ratio gives a measure of Liquidity the expected
industry standard is 1:1. From the above table it can be inferred that the Quick Ratio of AVR
MANUFACTURERSPvt. Ltd fluctuating in trend from the year 2008 to 2012. The ratio has
been decreased in the current year due to higher current liabilities.
QUICK RATIO
FIGURE 5.2.2
58
5.2.3 ABSOLUTE LIQUIDITY RATIO:
Cash & Bank Balances
Absolute Liquidity Ratio =
Current Liability
TABLE 5.2.3
YEARS
CASH & BANK BALANCE
Rs
CURRENT LIABILITIES
Rs RATIOS
200883,610 64,53,315 0.013
200958,400 69,10,610 0.008
20106,05,030 1,46,42,090 0.04
59
20113,71,375 93,96,631 0.04
20129,25,410 60,53,015 0.15
INTERPRETATION:
From the above table it can be inferred that the AVR MANUFACTURERSPvt. Ltd
has a high Absolute Liquidity Ratio in the year 2012 (i.e.) 0.15. The ratios are being in a
increasing position which means that the company has a good cash utilization. The ideal cash
position is .05:1. So the company’s cash position ratio is satisfactory.
ABSOLUTE LIQUIDITY RATIO
FIGURE 5.2.3
60
5.2.4 INVENTORY TURNOVER RATIO:
Net Sales
Inventory Turnover Ratio =
Average Inventory
TABLE 5.2.4
YEAR
NET SALES
Rs
AVERAGE INVENTORY
Rs RATIO
2008 39377300 2,50,940 1.56
2009
57364800 8,25,100 0.69
61
2010 63273350 5,42,920
1.16
2011 77237255 9,50,310
0.81
2012 89967680 47,08,450
0.19
INTERPRETATION:
From the above table it can be inferred that the company’s
Inventory increase in year 2010 and get decreased in the next following years due to more
fluctuations in the sales.
INVENTORY TURN OVER RATIO:
FIGURE 4.2.4
62
5.2.5 DEBTORS TURNOVER RATIO:
Credit Sales
Debtors Turnover Ratio =
Debtors
TABLE 5.2.5
63
YEAR CREDIT SALES
Rs
DEBTORS
Rs
RATIO
200839377260 12,63,430 0.31
200957364800 15,90,440 0.36
201063273345 30,93,060 0.20
201177237255 44,31,190 0.17
201289967680 30,66,220 0.29
INTERPRETATION:
From the above table it can be inferred that the Debtors Turnover Ratio of
AVR MANUFACTURERSPvt. Ltd increase in the year 2008 to 2012 (i.e.) 0.31 to 0.29
shows high in the year 2009 (i.e.) 0.36 .When compare to previous years.
DEBTORS TURN OVER RATIO:
FIGURE 5.2.5
64
5.2.6 CREDITORS TURNOVER RATIO:
Net Purchase
65
Creditors Turnover Ratio =
Average Creditors
TABLE 5.2.6
YEAR
NET PURCHASE
Rs
AVERAGE CREDITORS
Rs RATIO
2008 34098755 64,53,315
5.28
2009 55053125 69,10,610
7.97
2010 56214265 1,46,42,090
3.84
2011 75714395 93,96,631
8.06
2012 77310590 60,53,015
12.77
INTERPRETATION:
From the above table it can be inferred that the AVR MANUFACTURERSPvt.
Ltd company’s creditors turnover ratio in year 2008 to 2012 (i.e.) 5.28 to 12.77. The
company has decreased its creditors that make the ratio to increase.
CREDITORS TURNOVER RATIO:
FIGURE 4.2.6
66
5.2.7 FIXED ASSET TURNOVER RATIO:
Sales
67
Fixed Assets Turnover Ratio =
Net Fixed Assets
TABLE4.2.7
YEAR SALES
Rs
NET FIXED ASSETS
Rs
RATIO
200839377260 7340010 5.36
200957364800 9586730 5.98
201063273345 95,08,586 5.91
201177237255 12621370 6.11
201289967680 12664270 7.10
Source: Annual Reports AVR MANUFACTURERSPvt. Ltd, Chennai from 2005-10
INTERPRETATION:
From the above table it can be inferred that the Fixed Asset Turnover Ratio of
AVR MANUFACTURERSPvt. Ltd, has increased by 6.11% in the year
FIXED ASSET TURNOVER RATIO:
FIGURE 4.2.7
68
5.2.8 CASH TO CURRENT ASSET RATIO:
Cash
69
Cash to Current Asset Ratio=
Current Assets
TABLE 5.2.8
YEAR CASH
Rs
CURRENT ASSET
Rs
RATIO
200883,610 64,53,315 0.01
200958,400 69,10,610 0.08
20106,05,030 1,46,42,090 0.004
20113,71,375 93,96,631 0.04
20129,25,410 60,53,015 0.15
INTERPRETATION:
From the above table it can be inferred that the Ratio increase in the year 2008 to
2012 (i.e.) 0.01 to 0.15.The Cash to Current Asset Ratio shows higher in the year 2012 (i.e.)
0.15. this is due to increase in the cash balance and decrease in the sundry creditors.
CASH TO CURRENT ASSET RATIO:
FIGURE5.2.8
70
5.2.9 CURRENT ASSET TURNOVER RATIO:
71
Sales
Current Asset Turnover Ratio =
Current Assets
TABLE 5.2.9
YEAR SALES
Rs
CURRENT ASSETS
Rs
RATIO
2008 39377300 64,53,315 6.10
2009 57364800 69,10,610 8.3
2010 63273350 1,46,42,090 6.37
2011 77237255 93,96,631 8.21
2012 89967680 60,53,015 14.86
INTERPRETATION:
From the above table it can be inferred that the Current Asset Turnover Ratio
of AVR MANUFACTURERSPvt. Ltd in year 2008 to 2012. It has been increased which
shows the satisfactory level of current asset correspondence to the sales in the subsequent
years and the ratio finally increases in the year 2012 (i.e.) 14.86 when compared to the
previous years
CURRENT ASSET TURNOVER RATIO:
FIGURE 5.2.9
72
5.32.10 INVENTORY TO SALES RATIO:
Inventory
73
Inventory to Sales Ratio=
Sales
TABLE 5.2.10
YEAR INVENTORY
Rs
SALES
Rs RATIO
2008 5825100 39377300 0.15
2009 5429251 57364800 0.09
2010 3880120 63273350 0.06
2011 9150310 77237255 0.11
2012 4708450 89967680 0.05
INTERPRETATION:
From the above table it can be inferred that the Inventory to Sales Ratio of AVR
MANUFACTURERSPvt. Ltd.Has been increased in the year 2010 (i.e.) 0.11.When
compared to previous years. But I the year2011, the ratio have been fall down to 0.05.
INVENTORY TO SALES RATIO:
FIGURE 5.2.10
74
5.2.11 WORKING CAPITAL TURNOVER RATIO:
Net Working Capital
75
0.15
0.09
0.06
0.11
0.05
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
RATIOS
2008 2009 2010 2011 2012
YEARS
INVENTORY TO SALES RATIO
RATIO
WORKING CAPITAL TURNOVER RATIO =
Current Liabilities
TABLE 5.2.11
YEAR NET WORKING CAPITAL
Rs
CURRENT LIABILITIES
Rs
RATIO
2008 -988015 64,53,315 -0.15
2009 -705972 69,10,610 -0.10
2010 -7635431 1,46,42,090 -0.52
2011 288320 93,96,631 0.03
2012 3550535 60,53,015 0.59
INTERPRETATION:
From the above table it can be inferred that the Working Capital Turnover Ratio of AVR
MANUFACTURERSPvt. Ltd. The Working Capital Turnover Ratio shows a negative ratio
in the first three years i.e.2008, 2009, 2010 . But on 2011 and 2012 there has been
continuously increase in the working capital due to decrease in the current liabilities.
WORKING CAPITAL TURNOVER RATIOS
FIGURE 5.2.15
76
5.2.12 INVENTORY TO CURRE NT ASSET RATIO:
Average Inventory
77
Inventory to Current Asset Ratio =
Current Assets
TABLE 5.2.12
INTERPRETATION:
From the above table it can be inferred that the company’s Inventory to
Current Asset Ratio in the year 2008 to 2012. There is a fluctuating in this ratio. The highest
ratio is on 2009, 0.94 and get decreases and finally comes to 0.49
INVENTORY TO CURRENT ASSET RATIO
FIGURE 5.2.12
78
YEAR
AVERAGE INVENTORY
Rs
CURRENT ASSET
Rs RATIO
2008 582510054,65,300
1.06
2009 542925162,04,638
0.12
2010 388012070,06,659
4.94
2011 915031096,84,951
0.33
2012 470845096,03,550
0.49
5.2.13 GROSS PROFIT RATIO:
Gross Profit
Gross Profit Ratio= * 100
79
Net Sales
Where as (Gross Profit = Net Sales- Cost of Goods Sold)
Cost of Goods Sold = (Opening Stock+ Purchase Less Returns-Current
Liabilities)
Net Sales = (Sales- Sales Return).
TABLE 5.2. 13
YEAR GROSS PROFIT
Rs
CURRENT ASSET
Rs
RATIO
2008 3753500 54,65,300
0.68
2009 4172000 62,04,638
0.09
2010 5509950 70,06,659
0.70
2011 6793055 96,84,951
0.24
2012 8215230 96,03,550
0.86
GROSS PROFIT RATIO
80
FIGURE 5.2.13
INTERPRETATION:
From the above table it can be inferred that the company’s Gross Profit Ratio
increase in year 2005-06 (i.e.) 9.53. But from 2005-06 to 2011-10 there has been slowdown
to some extent, when comparing to the previous years.
5.2.14 ADMINISTRATIVE EXPENSES RATIO:
Administrative Expenses
Administrative Expenses Ratio= *100
81
Net Sales
TABLE 5.2.14
YEAR
ADMINISTRATIVE EXPENSES RATIO
Rs NET SALES
Rs
RATIO
2008 6660620 39377300 16.91
2009 9805870 57364800 17.09
2010 11598640 63273350 18.33
2011 13919615 77237255 18.02
2012 14236375 89967680 15.82
INTERPRETATION:
From the above table it can be inferred that the company’s
Administrative Expenses Ratio in year 2008 to 2012 (i.e.) 16.91 to 15.82.has been increased
in the year 2008 (i.e.) 16.91. In the year 2012 the Administrative Expenses Ratio has been
decreased (i.e.) 15.82.When compared to previous years
ADMINISTRATIVE EXPENSES RATIO
FIGURE 5.2.14
82
TREND ANALYSIS
5.3 MEANING TREND ANALYSIS:
83
16.9117.09
18.3318.02
15.82
14.5
15
15.5
16
16.5
17
17.5
18
18.5
RATIOS
2008 2009 2010 2011 2012
YEARS
ADMINISTRATIVE EXPENSES RATIO
RATIO
Trend analysis is one of the important tools of analyzing the financial
data. It computes the percentage changes for different variables over a long period and then
makes a comparative study of them. The trend percentage helps the analyst to study the
changes that have occurred darning the period. Such an analysis indicates the progress by
showing ups and downs in its activities
FINANCIAL TREND ANALYSIS is the process of analyzing financial statements of
a company for any continuing relationship. Generally, an analysis is made to find out what
direction a concern is going, how rapidly, and whether there are enough resources to
complete proposed projects.
An aspect of technical analysis that tries to predict the future movement of a stock based on
past data. Trend analysis is based on the idea that what has happened in the past gives traders
an idea of what will happen in the future.
There are three main types of trends: short-, intermediate- and long-term.
CURRENT ASSET:
TABLE 5.3.1
YEAR
CURRENT ASSET
84
(Y) X XY X2 Y = a + b x
200855,09,660
-2 -11019320 4 5153980.3
20094,43,54,495 -1 -4,43,54,495 1 6271271.8
201078,46,689 0 0 0 57,18,534
20112,78,84,951 1 2,78,84,951 1 9889807.5
201296,03,550 2 19207100 4 11838135
∑Y=36942826.5 ∑X=0 ∑XY=
11172925
∑X2=
10
Y = a + bX Where a = ∑Y ; b = ∑XY
n ∑X2
CURRENT ASSET:
FIGURE 5.3.1
85
FIXED ASSET:
TABLE 5.3.2
86
YEAR
FIXED ASSET
(Y) X XY X2 Y = a + b x
2008740010.600 -2 -1480021.2 4 845992.897
2009986728.600 -1 -986728.6 1 1094308.666
20101700745.121 0 0 0 1342624.435
20111621368.217 1 1621368.217 1 1590940.204
20121664269.636 2 3328539.272 4 1839255.973
∑Y=6713122.174 ∑X=0 ∑XY=2483157.689 ∑X2=10
Y = a + bX Where a = ∑Y ; b = ∑XY
n ∑X2
Fixed assets value for 2012 – 11 will be about Rs. 2, 08, 75,71.738
FIXED ASSET
FIGURE 5.3.2
87
CASH & BANK BALANCE:
88
YEAR CASH & BANK X XY X2 Y = a + b x
2008 58403.077 -2 -116806.154 4 210601.589
2009 605026.901 -1 -605026.901 1 360637.041
2010 593151.324 0 0 0 510672.493
2011 371374.749 1 371374.749 1 660707.945
2012 925406.415 2 1850812.83 4 810743.397
∑Y=2553362.466 ∑X=0 ∑XY=1500354.524 ∑X2=10
TABLE 5.3.3
Y = a + bX Where a = ∑Y ; b = ∑XY
n ∑X2
89
CASH & BANK BALANCES
FIGURE 5.3.3
90
INVENTORY
YEARS INVENTORY X XY X2 Y = a + b x
2008 5825092.799 -2 -11650185.6 4
3879602.726
2009
5429251.165 -1 -5429251.165 1
5649866.627
2010
3880115.603 0 0 0
5798643.734
2011 9150310.374 1 9150310.374 1
5947420.841
2012
4708448.732 2 9416897.464 4
6096197.948
∑Y=28993218.67 ∑X=0 ∑XY=1487771.073 ∑X2=10
TABLE 5.3.4
Y = a + bX Where a = ∑Y ; b = ∑XY
n ∑X2
INVENTORY
91
FIGURE 4.3.4
SUNDRY DEBTORS
92
TABLE 4.3.5
YEARS SUNDRY DEBTORS
(Y)
X XY X2 YC= a + b x
2008 1590439.776 -2 -3180879.552 4 1488553.358
2009 3093057.061 -1 -3093057.061 1 1917521.847
2010 2311550.508 0 0 0 2346490.336
2011 4431187.152 1 4431187.152 1 2775458.825
2012 3066217.179 2 6132434.358 4 3204427.314
∑Y=11732451.68 ∑X=0 ∑XY=4289684.897 ∑X2=10
Y = a + bX Where a = ∑Y ; b = ∑XY
n ∑X2
SUNDRY DEBTORS
FIGURE 5.3.5
93
CHAPTER VI
94
FINDINGS:
In the year of 2008, 2009 and 2010 shows increase in Working
Capital. This indicates that the company has ability of payment of
short-term Liability.
The fixed assets ratio indicates that the working capital of this
company is funded by long-term funds which indicate efficient funds
management.
The Short –term Liquidity and long- term Liquidity position of the
concern were studied to evaluate the Working Capital of the concern.
During the study period 2008 to 2012 the current ratio of the concern
varied from 8.63 to 2.21.But 2010 - 2011 is varied from 0.77 to 1.80.
This was much less than the prescribed of 2:1. The inference is that
the Current Liability may not be easily met out of Current Asset by
the Company.
The Quick ratio of the concern during the period 2008 - 2012 the
study is varied from 7.22 to 1.67.Which was much greater than the
prescribed standard of 1:1.So the company Liquidity level is
satisfactory.
In Trend analysis the Cash &Bank Balance have been increased from
2008 to 2011.So it shows the Cash position of the company is good.
CHAPTER VII
SUGGESTION:
95
The company is a profit seeking one; it has to commit all of its
resources to achieve its goal. To achieve this, profitability, liquidity
and solvency position a crucial elements to be monitored carefully,
thereby the trade off can be reached
This company’s ability to meet its current obligations is satisfactory
though it does not meet the conventional norm. This company
maintains current liabilities more than the amount of current assets
which has to be viewed seriously and improvement of this ratio is
required to achieve the optimum level.
Stock Turnover Ratio should be maintained at the constant level.
The Cash & Bank Balances of the company is good.
Using trend analysis it can be suggested that the fixed assets curve
shows steady upward direction much than the current assets curve,
which enable us to understand the company’s funds are dumped in
fixed asset, it is not a favorable condition to the company
CHAPTER VIII
CONCLUTION
96
The present study reveals that the liquidity position of this company is comparatively good
as it approaches the standard norms throughout the period of study. On the whole, it can be
concluded that the company’s overall risk evaluation process is not at desired level and the
author has made the realistic recommendation for the improvement in operational and
managerial efficiency of the company as to maintain and increase further by effective
utilization and control of all the assets.
CHAPTER IX
BIBILIOGRAPHY
97
Management accounting - S.N.MAHESHWARY
Financial management - I.M.PANDEY
Research methodology - C.R.KOTHARI
Management accounting - R.S.N.PILLAI
&
BAGAVATHI
Web site:
www.google.com
www.finance.org
CONSOLIDATED BALANCESHEET AS ON 31ST MARCH 2008 TO 31ST MARCH 2012
98
PARTICULARS 2008 2009 2010 2011 2012
ASSETS:
CURRENT ASSETS:
a. Inventory2,50,940
8,25,100
5,42,920 9,50,310 47,08,450
b. Sundry Debtors12,63,430 15,90,440 30,93,060 44,31,190 30,66,220
c. Cash and Bank83,610 58,400 6,05,030 3,71,375 9,25,410
d. Prepaid
Expenses14,650
13,730 17,022 3,11,020 5,89,870
e. Accrued Income59,090 42,925 96,426 23,160
1,43,770
f. Advance tax - - -2,26,385 1,69,830
g. Loans and
Advances22,86,750 36,86,400 31,92,231 33,71,511 -
TOTAL CURRENT
ASSETS: 39,58,470 62,16,995 70,06,659 96,84,951 96,03,550
FIXED ASSET:
Fixed assets 73,40,010 95,86,730 95,08,586 1,26,21,370 1,26,64,270
TOTAL FIXED
ASSETS: 73,40,010 95,86,730 95,08,586 1,26,21,370 1,26,64,270
TOTAL ASSSET 1,12,98,480 1,58,03,725 1,65,15,245 2,23,06,321 2,22,67,820
LIABILITIES:
CURRENT
LIABILITIES:
99
a. Sundry
Creditors64,53,315 69,10,610 1,46,42,090 93,96,631 60,53,015
RESERVES AND
SURPLUS:
Capital Reserves 7,50,000 10,50,000 - 1,00,00,000 1,00,00,000
General Reserve 15,00,000 25,00,000 15,00,000 15,00,000 15,00,000
UNSECURED
LOAN:
Fixed Deposit 3,50,000 3,50,000 3,50,000 3,50,000 3,50,000
Short term loan and
Advances
10,00,000 20,00,000 - 10,00,000 19,85,000
Other loans and
Advances
- 5,00,000 - - 3,00,000
PROVISIONS:
a. Provision of tax 20,000 20,000 20,000 20,000 20,000
b. Provident Fund
Scheme
10,55,590 21,75,960 - - 20,00,000
c. Pensions,
Insurance,
Similar staff
benefits
1,65,000 2,90,000 - 30,000 50,005
d. Other
Provisions
4,575 7,155 3,155 9,690 9,800
100
TOTAL LIABILITIES 1,12,98,480 1,58,03,725 1,65,15,245 2,30,15,255 2,22,67,820
101