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WORKING CAPITAL MANAGEMENT

INDUSTRY PROFILE

History of Tyre industry:

In the year 1887 the word rubber industry came into existence, with the process of

tube vulcanization by Charles good year. However, the growth of the industry received a big

boost towards the end of the century, when the Bond Dunlop succeeded in making the

vulcanization rubber into inflatable pneumatic tyres. Since then the tyre industry has constituted

a major segment of the industry all over the worlds. Even in India, automotive tyres and tubes

account for a major part of the Indian rubber produce industry.

Tyre industry in India:

Indian tyre industry is about 60 years old. The tyre industry was and continues to be in the

core industry sector. Tyres are covered under the essential commodities Act. The predominance

of the foreign multinational prevailed in the foreign multinational prevailed in 60s has

considerably reduced. The history of the Indian tyre industry could be divided into 4 periods.

1920 to 1935 (multinational trading in tyre)

1935 to 1960 (multinational manufacturing era)

1961 to 1974 (Broadening of production base)

1974 to 1975

Trading tyres in India was first started in 1920 by firestone, followed by good year in

1922 and later by develop in 1926. Dunlop set up the first tyre factory at Saharganj, West

Bengal, in the year 1936. Firestone set up a factory at Mumbai.

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At present there are 20 licensed companies and 24 factories which include 11 large

companies manufacturing the full range of tyres and tubes. The Indian tyre companies are

having collaboration with tyres companies of U.S.A West Germany and Japan. Significant

changes occurred in the tyre manufacturing process, change over from rayon to nylon and

introduction of radial tyres of both steel belt and fiber glass are most important.

The hot cure conventional rethreading process is replaced with cold cure rethreading

process. The truck and bus tyre mileage and load carriage capacity has gone up by 25%. The

tyre industry in Rs.3500 crore plus which manufacture tyres for truck and buses, light trucks,

jeeps, cars, tractors, tractor trailer, power tiller, scooter, motor cycle, moped, cycle, earth

moving equipments and dumpers, aircrafts and special defense vehicles.

The large tyre units are APOLLO, Bombay tyres international, Ceat, Dunlop, good year,

J.K. Modi, M.R.F. premier, TCI, Birla tyres. The company which manufactures tyres

primarily for two and three wheelers are Metro tyres, Sri Chakra, Falcon, stallion, transport,

S.kumars.

The production of tubes by the large and medium sector is 80% of the tyre production. The

tubes are manufactured from natural rubber as well as imported butyl rubber. Tyre inner tubes

are covered under packaged commodities Act. The government for the industry set up various

committees in 1995, the tariff commission was set up. The major trust of the commission report

was the decentralization of the tyre industry.

Between 1974 and 1985 the government referred to Bureau of industry cost and price

(BICP) five timers for cost and price study of tyre industry. But the studies of the BICP were

not made public.

In May 1974 the government set up a committee on tyre industry with Mr. M. Satyapal as

chairman. The committee submitted its report to the government in 1985. Report has not been

published.



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MRF, Ceat, Dunlop, Apollo and Modi rubber dominates the industry together

accounting for much as 60% of total output. Among individual companies MRF is moving into

aircraft tyre manufacturing in collaboration with units Royal Goodrich. The total capacity of

ceat has gone up to 45 lakhs tyre with the commerce of walaj plant and has plans to

manufactures nylon cord tyres. Modi rubber industry has the modipuram plant and modinagar

plant and has plans to manufacture nylon cord tyres. Modi rubber industry has the modipuram

plant and modinagar plant is under implementation. A Vikrant tyre with a new all steel radial

tyre plant for trucks and buses is the only company modernizing the existing plant and

manufacturing and new technological tyres of international standards and acceptability Indian

tyre industry is all set to capture a major share in export market and increases its share of export

of various countries. The tyre industry is a raw material intensive industry. Raw materials

accounts for about 55% of the total production cost. Two of the four major raw materials used

in the tyre making i.e., nylon tyre cord and synthetic rubber and petroleum based derivatives.

Inputs for tyre industry:

The major raw materials and their weightage in the total raw materials structure are:

1. Natural rubber 25%

2. Synthetic rubber 14%

3. Carbon block 13%

4. Nylon tyre cord/yarn(fabric) 34%

5. rubber chemicals 14%

Natural rubber:

It is the most important rubber material used in the manufacture of tyres. Natural rubber

accounts for about 10% (by weight) of the total raw materials requirement in the manufacture of

a tyre. The productivity of natural rubber is India is one of the highest in the world, but still



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India is one of the highest consumption of natural rubber in the world. The tyre industry

consumes about 48% of the natural rubber produced in the country. Till the year 1988

government controls the price of natural rubber. Where as, now the government faces what is

known as BENCH MARK PRICE which is the minimum price to help small farmers to

maintain margins. There is no ceiling on the maximum price. Due to the above, the price of

natural rubber had been fluctuating widely.

Synthetic rubber:

Styrene butadiene rubber (SBR), manufactured from petroleum feed stocks, is mainly

used passenger car, jeep and LCV tyres.

Poly butadiene rubber (PBR), also manufactured from petroleum feed stocks is mainly

used in heavy duty truck tyres.

Butyl rubber is a synthetic rubber mainly used for making inner tubes used in tyres. Entire

quantum of 24,000 MT of this variety of tuber consumed in 96-97 was imported as no company

in India manufactures this kind of synthetic tuber.

Carbon block:

Carbon block is petroleum based in organic chemical in the form the quasi graphite

powder of extreme fineness and with high surface area composed essentially of elemental

carbon. The main inputs required in the manufacture of carbon block are carbon block feed

stock (CBFS) and furnace oil carbon block is generally divided into two grades viz. soft and

hard grade.

:

Nylon yarn/fabric/tyres cord

Nylon tyre cord is an essential reinforcement material. Weightage of nylon tyre yarn in

terms of cost of raw materials used the highest at about 27%. Caprolactum is a major raw

material to the tyre. It also reduced the wear the tear of the tyre. The tyre cord is placed below

the tyres treads, which is in contact with the road.



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Functions of the tyre:

Tyre provides steering response.

Durable and easy to drive.

Has loan carrying capacity.

Provides cushioning ability.

Cooler running and gives more mileage.

Having a minimum noise and vibration.

2. COMPANY PROFILE:

JK tyre a division of JK industries is the flagship company under the umbrella of JK

organization. The advent of JK organization on the industrial land space of India almost

synchronizes with the beginning of an era of industrial awareness and endeavor for self-reliance

and the setting up of a dynamic Indian industry. This was way back in the middle of the 19th

century and the rest, that followed is history.

JK organization has been a forerunner in the economic and social advancement of India.

It always aimed at creating job opportunities for a multitude of countrymen and to provide high

quality products. It has striven to make India self reliant by pioneering the production of a

number of industrial and consumer products, by adopting the latest technology as well as

developing its own know-how. It has also undertaken industrial ventures in several other

countries.

JK organization is an association of industrial and commercial companies and charitable

trusts. Its member companies, employing nearly 50,000 persons are engaged in the manufacture

of variety of products and in diverse fields of commerce.



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Indias ongoing automobile boom and expansion of the highway network have paved a

huge business opportunity for the countries tyre manufactures. Shrugging off a sluggish, phase

between the period 1999 and 2001, the industry is now climbing a steep growth curve that is

already peaking at an annual rate of 8% in an area marked by intense competition among home

growth players and imported brands, companies are recognizing their sales, Distribution,

marketing and brand strategies to stay one up in the battle. Though the competition is intense,

with several Indian and MNC players battling it out for top honors in reality the market is

veering around four or five type major who have already consolidated their position. These

companies constitute almost 80% of the total tyre production.

JK organization owes its name to late Lala juggilal singhania, a dynamic personality with

broad vision. Inspired by the swadeshi movement of Mahatma Gandhi, and driven by the zeal

to set up Indian enterprises, Lala kamlapat singhania, founded J.K. organization in the 19th

century and sharing in a new industrial era in India. The process of industrialization and

diversification was worthily and successfully carried on by Lala kamalapats three illustrious



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sons Sir Padampat, Lala Kailashpat and Lala lakshmipat, aided in no small measure by the

late Gopal Krishna son of Sir Padampat.

J.K Tyre:

Excellence come not from were words or procedures. It comes from an strive and deliver

the best. A mindset that says, when it is good enough, improve it. It is the way of thinking that

comes only from a power within. -H.S.Singhania.



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The organization:



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The advent of JK organization on the industrial landscape of India almost synchronized

with the beginning of an era of industrial awareness-an endeavor for self reliance and the setting

up of a dynamic Indian industry. This was Ray back in the middle of 19th century the rest that

followed is history.

Core values:

JK organization has been a forerunner in the economic and social advancement of the India.

It always a aimed at creating job opportunities for a multitude of country men and provides high

quality of product. It has driven to make Indian self reliant by pioneering the production of

number of industrial and consumer products by adopting latest as well as developing its own

know-how. It has also under taken industrial ventures in several other countries.JK

organizations & its member companies, employing nearly 50,000 persons are engaged in the

manufacture of variety of products and diverse fields of commerce.

2.1. BACKGROUND AND INCEPTION OF THE COMPANY:

1933 First in India to manufacture calico prints-{Juggilal Kamlapat cottons

spinning and weaving mills company, Kanpur.}

1940 First in India to manufacture steel bailing hoops for jute and cotton and to

make the country self sufficient by meeting the entire demand- J.K Iron and

steel Co .Ltd.., Kanpur.

1944 First in India to produce Aluminum Virgin metal for Indian Bauxite-Aluminum corporation of India Ltd.., Jaykayanagar.

1949 First in India to manufacture engineering files-J.K. Engineers files Bombay.

1959 First in India to set up a continuous process Rayon plant.

1960 First in India to set up a Hydraulically operated cane crushing mill for

kandsari sugar plant and completed 100 ton plant.



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1961 First in world to set up a plant for production of Hydrosulphite of soda by

sodium Amalgam process-J.K chemical Ltd.., Bombay.

1962 First in India to produce Nylon-6 with its own polymerized raw material-J.K.

Synthetics Ltd..,Kota.

1965 First to produce sodium sulphoxylate formaldehyde [Rangolite C of

formosul] in India-J.K. chemicals Ltd.., Bombay.

1968 First to manufacture TV sets in India J.K.Electronics, Kanpur.

1976 First in India to produce steel belted radial tyres for passenger car, trucks

and buses-JK tyre plant, Kankroli.

1980 First in the world to make steel belted radial tyres for 3 wheelers.

1984 First in India to produce white cement through dry process.

1985 First in India to produce cathonic dye able polyester fiber.

1989 First in India to produce magnetic tapes with cobalt technology.

1991 Banmore tyre plant {BTP} set up with the capacity of 5.7 lacks tyres pa.

1992 R & D centre setup at HASTERI.

1994 Indias first T-rated tyre launched Banmore tyre plant {BTP} crossed 100

TDP.

1995 Mercedes Benz launched on JK STEEL RADIALS first tyre manufacturer in

the world to get ISO 9001.

1996 Indias first dual contact high tractions steel radial- aqua sonic launched.

{Introduce steel wheelers}.

1998 First tyre manufacturer in the world to get QS 9000. Awarded CAPEXILS

highest export award for 1997-98.

1999 Synergy with VTL in procurement, marketing and production flexibility.

Completion of states of the art modernization of truck radials J.K tyres

ranked 16th largest tyre company in the world ISO-14001 accreditation for

environment and safety.

2000 JK introduced national Go-carting championships.



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2001 JK industries received FOCUS LAC EXPORT award for year 1999-2000.

Commendation certificate of CII ND National exam. Go- carting

championships held.

2002 JK industries ltd (JKI) has informed BSE that CRISIL has assigned a p1+

rating to the commercial paper programmed of the company.

2003 JK completes its comprehensive restructuring exercise of businesses that

Leads to its emergence as a pure automotive tyre company.

2004 JK industries ltd has informed that its securities are delisted from Delhi stock

exchange association ltd (DSE) w.e.f. Jan 29, 2004.

2007 JK industries ltd has informed that the name of the company has been

changed from JK industries ltd to JK tyre & industries ltd.w.e.f. April 02

2007.

2008 The company has issued rights in the ratio of 1:3 at a premium of Rs.75 per

share.

2009 Green tech environment award-Gold category

2010 Green tech safety award gold categoryOHSAS certification.

JK TYRES PLANTS:



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Kankroli - Rajasthan

Banmore - Madhya Pradesh

VTP 1 (Mysore) - Karnataka

RTP - 2 (Mysore) - Karnataka

OTR - 3 (Mysore) - Karnataka



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2.2. NATURE OF THE BUSINESS CARIED:

JK industries are engaged in manufacturing and marketing of Automotive tyres

and it also outsourcing the tubes and flaps.

Products involved:1

Cross ply and radial tyres for light commercial vehicles.

Cross ply tyres for passenger cars.

Cross ply tyres for agricultural vehicle.

Cross ply tyres for of the road (OTR) vehicles.

Automotive inner tubes for trucks, buses, light commercial vehicles.

2.3. VISSION, MISSION, QUALITY POLICY:

VISSION:

TO BE AMONGST THE MOST ADMIRED COMPANIES IN INDIA

COMMITED TO EXCELLENCE

MISSION:

To be a customer obsessed company.

To be a largest and most profitable tyre company in India.

To retain No 1 position in truck and bus segment and to be amongst top 2 in all

other 4 wheelers tyres.

To make truck/bus radial operation profitable and retain leadership in the

passenger radial market.

To enhance value to shareholders and services to all stake holders.



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To excel as a value driven organization.

To be the most preferred tyre brand in India.

QUALITY POLICY:

The people of JK tyre have an organization committed to quality in everything they do.

They continuously anticipate and understand customer requirement, convert these performance

standards for their product and services and to meet the standards every time.

CERTIFICATE OF QUALITY:

ISO 9001

QS 9000

Environment management system (ISO 14001).

ISO/TS 16949

DOT (department of transport)

INMETRO (Institute National De Materiologia - Brazil)

Quality management:

ISO 9001:

JK Tyre worlds first tyre company to receive ISO 9001 certification

for its entire operations in 1995 in one go. Their Quality Management System

is completely integrated into all aspects of our operations.

QS 9000:

JK Tyre the worlds first company to receive quality management

system certification QS 9000, in 1998 for multi location operations. They

are using QS 9000 system as tool for continuous incremental improvement.



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Environment Management System (ISO 14001):

JK Tyre recognizes the impact that our business has on the environment and takes our

responsibilities for maintaining harmony with nature. We are the first tyre company in India to

receive 'ISO 14001' certification for multi locationoperations in 1999

Total Product Management Policy:

JK Tyres are committed to TPM Methodology and strive to achieve:

Zero Accidents

Zero Breakdowns

Zero Losses

Zero Defects

Through total employee involvement and competency enhancement.

They are committed to enhance employee morale and costumer delight through

continual improvement in the entire sphere of their activities and create a clean and pleasant

work place in their endeavor to be amongst the most admired companies in India.

Environmental Policy:

JK tyre is committed to protect, consume and restore natural habitat and conduct

all their activities in an environmental friendly manner. They continually improve environment.

Complying with al legal environmental requirements.

Taking measures to protect the environment by being proactive innovative way.

Conserving natural resources and energy by optimizing efficiency minimizing waste &

supporting environmental friendly programs.

Enhancing effectiveness of the environmental management through reviewing its

objectives and targets.



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Increasing environmental awareness amongst their employees and sub contractors.

Environment Management System:

JK Tyre recognizes the impact that their business has the environment and takes the

responsibilities for maintaining harmony with nature. JK tyres are the first tyre company in

India to receive ISO 14001 certification for multi location operations in 1999.

E-mark:

JK Tyre is the only Tyre Company in India having the E-mark certification on their

products, a mandatory requirement for exporting tyres to European Markets.

2.4. PRODUCTS AND SERVICE PROFILE:

The major products of JK Company are automobile tyre (Nylon tube tyre, radial tube

and tubeless tyre) tubes and flaps.

The products are sold under different brand names.

1. Truck tyres:

a) Jet rib.

b) Vikrant truck king.

c) Star lug.

d) Super T.K.

e) JT king

f) Hi life.

g) Jet star.



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h) Jet truck.

i) Sand cum hiway.

j) Truck plus.

k) J T classic.

l) JETRK.

2. Light trucks:

a) Jet rib.

b) Star lug.

c) Fleet king.

d) Truck king.

3. O.T.R (Of the Road):

e) VEM 99 E-3 T/L.

f) VEM 99 E-4 T/T.

g) VEM 99 SS E-4 T/L.

h) EG04 G2 T/T.

2.5. AREA OF THE OPERATION:

JK Tyre has been successful in establishing its brand name in the world market. It

gives immense pride to India as JK tyre has been rated amongst premium brands in highly

sophisticated global tyre markets. The export account for over 30% of Indias total tyre export

and they sell their products across 75 countries over six continents in whole world, thus making

a leading mark in the industry. In order to meet the growing demand of JK tyre across the globe,

the company is enhancing out sourcing activities from China in its own brand.



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Today, JK tyres products compete with the best international players in the premium

international bias market in more than 75 countries in 6 continents. The exports operate through

a strong and distribution network, and our distributors are fully supported by the companys

technical team in terms of continued international accreditation for its products in the US,

Europe, South America and the Middle East.

JK export its products to over 75 countries. The major countries include United States

of America, Australia, United Kingdom and New Zealand, Hong Kong and Host of Middle

East, African and Asian countries.

2.6. OWNERSHIP PATTERN:

Category Sub category

No of securitiesheld

% of

Holding

Promoters Holding Indian promoters 16376700 43.72

Foreign promoters 0 0.00

Persons acting inconcept

0 0.00

Sub Total 16376700 43.72

Institutional

investors

Mutual funds and

UTI

33,904,248 8.82

Banks, FLS,

Insurances Cos,

Central/state govt.

35,87,706 9.57



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Non govt

Institutions

FIIs 26,29,787 7.02

Sub total 95,21,741 25.41

Others Private corporate

Bodies

37,48,225 10.01

Indian public 37,51,796 10.02

NRI/OCBS 40,60,884 10.84

Any other 0 0.00Sub total 1,15,60,905 30.87

Grand total 3,74,59,346 100.00

2.7. COMPETITORS INFORMATION:

Competitors for JK tyres in national market and international market:-

National market International m

1) MRF 1) Bridge stone

2) Good year 2) Copper

3) CEAT 3) Michelin

4) Apollo 4) Sumitomo

5) Falcon 5) Pirelli

2.8. INFRASTRUTURAL FACILITIES:

Infrastructure facilities mean the basic requirement that the company should look

after in order to ensure free flow of activities. The company is providing following



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infrastructural facilities in order to satisfy its workers, distributors and customers. The

company provides all facilities in order to satisfy its workers, distributors and customers.

The company provides all facilities stated by factories act of 1948.

1) SHE (SAFETY, HEALTH, AND ENVIRONMENT)

a) Safety:

Sec 21 stands for protection of hazardous. Management is providing its

employees with earplugs, goggles, gloves, fire extinguisher, etc as safety measures. The

employees are also trained on the safety measures. In order to encourage trade union

activities the 7 offices bearer who are elected are given only with general shifts.

b) Health:

Sec 16 stands for drinking facilities.

Sec 19 stands for rest room facilities

1. Management is providing pure aqua guard water facility to its employees and its staff

members.

2. In J.K. Industries provide rest room to the employers. During the interval the

employees can relax.

3.According to the section 46(1) it is obligatory on the part of every factory to providecanteen facility where in more than 250 employees are employed and hence Vikrant also

provides canteen facility for its employees, which is well constructed, furnished with good

furniture, equipments and also with good accommodation..

c) Environment:

a) First aid appliances:

If there is an accident, the workers will be taken to the health centre which is

inside the plant. All the minor and first aid is done here itself and when there is major

accident first aid is done in the health centre and then they are taken to the hospital. Every



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day at least 2 ambulances will be inside the plant, which will be kept ready to carry the

injured whenever there is a major accident.

2)Welfare activities: Sec 45 stands for ambulance.

Sec 43 stands for first-aid-appliances. (Occupational health centre).

Sec 46(1) stands for canteen facilities

Sports and cultural activities are conducted every year on Kannada Rajyothsava day for

employees, their spouses and children. This is conducted in order to provide recreation

facility to the employees and their family.

Outside experts for counseling is hired to conduct counseling serious on carries

guidance to employees children and health care to spouses.

2.9. ACHIEVMENTS/AWARDS:

JK tyres ranked 16th largest company in the world.

ISO 14001 accreditation for environment and safety.

Indias first T rated tyre launched.

Mercedes Benz launched on JK tyres radials first tyre manufacture in the world to

get ISO 9001.

Only tyre manufacture to get E mark certification.

First tyre manufacture in the world to get QS 9000.

Awarded CEPEXILS highest export for 1997-98.

JK introduced national Go-carting championships.



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JK industries received FOCUS LAC EXPORT award for the year 1999 and 2000.

Certified to ISO 9000 (1994 quality management system).

First Indian Tyre Company to adopt process based management process based

management through business re-engineering (BPRO).

It has ranked No.1 in customer satisfaction by the JD power Asia pacific study.

VTP own the prestigious Green tech environment award in gold category on 12-10-

2009.

JK tyres & industries ltd. wins the CAPEXIL Top export award for the year 2008-

2009.

Employee branding awards 2009.

JK team owns the top PAR EXCELLENCE AWARD in kaizen competition. Held

in Mysore on 25-04-2010.

2.10. WORK FLOW MODEL:



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Compound at Ban bury:



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Bladder press: there are two numbers of bladder presses namely 400 tones and 800 tones

presses. These presses operate with hydraulic pressure. The hydraulic pressure aid used is bill.

At first the bladder run is lowered down and the slugs are loaded. Then the lower portion of the

mould is raised to touch the upper pattern. After sufficient curing is specified time mould will

automatically opened and the bladder is released. It is then trimmed of for excess materials.

Some of the possible defects that occur during the manufacturing of bladders are.

a. Splice opening: this is due to improper joining caused by pressure.

b. Porosity: this is due to highly extrusion temperature.

Tyre moulding:

Before moulding operations, the green type has to be made ready for painting with inner

lubricants inside the tyre for easy release from the bladder and the side walls are to be coated

with blemish paints. Blemish paint contains carbon blacks, NAPTHA, styrene butadiene rubber

components and this enables easy flow of compound while curing to the, mould pattern. The

blemish paint is applied to minimize the surface flow marks. On the whole, to get better results,

green tyre should not be any contamination on the tyre surfaces.

Tyre moulding is a complex type of compression moulding normally cured in presses.

The raw tyre has to be placed over a bladder, then the bladder and tyre expands together due to

steam pressure and simultaneously the tyre gets compressed between 2 moulds in closed

position. In this operation cycle time, pressure, temperature, are important to get optimum

vulcanization during moulding on tyre.

Tyre Curing:

It is a process of cross linking the rubber compounds through heat and pressure. For the

process of curing tyres presses are used. These presses are pre warmed before loading of green



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3. Mc KINSEY 7-S MODEL

The 7-S model is better known as Mc Kinsey 7-S. This is because the two persons who

developed this model, Tom Peters and Robert Waterman, have been consultants at Mc Kinsey

& Co, at that time. They published their 7-S model in their article Structure Is Not

Organization (1980) and in their books, The Art of Japanese Management (1981) and In

Search of Excellence (1982).

The model starts on the premise that an organization is not just structure, but consists of

seven elements.


STRUCTUE

STYLE

SYSTEMS

STAFF

SUPER

ORDINATEGOALS

SKILLS

STRATEGY


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The Mc Kinsey 7-S model is a widely discussed framework for viewing the inter-relationship of

strategy formulation and implementation.

It helps to focus managers attention on the importance of linking the chosen strategy to

a variety of activities that can affect the implementation of that strategy.

Originally developed as a way of thinking more broadly about the problem of

organizing effectively, the 7-S framework provides a tool for judging the do ability ofstrategies.

According to one of its developers, Robert H. Waterman Jr, the framework suggests that it is

not enough to think about strategy implementation as a matter only of strategy and structure, as

has been the traditional view.

The conventional wisdom used to be that if you first get right, the right organization

follows. And when most people in western cultures think about organization, they think

structure. We find in practice, however, that these notions are too limiting.

To think comprehensively about a new strategy and the problem with carrying in out, a

manager must think of his company as a unique culture and must think about the ability of the

company to get anything really fundamental (i.e., not tactical) accomplished as a matter of

moving the whole culture.

STRUCTURE:

The JK tyres has a very well developed structure, it consists of various departments

which contribute towards the operations of the organization.

It consists of departments such as:-

Production departments, engineering dept, technical dept, production planning dept,

quality assurance material dept, human resource dept, personnel and administration



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Referring to the organization structure of JK industries Ltd, (VTP Mysore) it can be said

that the company is following the type of Line and staff organization.

Reporting relationship at JK industries Ltd follows a formal channel. The

communication follows the routes formally laid down in the organization structure and

deliberately associated with the status or the position of the sender and the receiver. Both

downward and upward communication follows the path of formal channel.

STRATEGY:

The integrated vision and direction of the company, as well as the manner in which it

derives, articulates, communicates and implements that vision and direction.

The main strategy is to ensure maximum utilization of available resources. For this

purpose the company believes in mainly promoting from with in the organization and there by

encourages its people to strive for higher management stability. The set up also allows them to

take the advantage of common pool of technical and marketing talent of the highest quality.

SUB strategy and the functional strategies.

Waste elimination strategy:

The company insists on education on a continues basis both for the workers and the staff.

Total productivity maintenance (TPM) and quality circles are practiced from the lowest level, as

a management seeks continuous improvement from workers in every record. There exists



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clarity of vision and goal with the company as a result of which the productive efficiency of the

company goes up.

SYSTEM:

System refers to the procedure and the process such as the information system,

manufacturing process, budgeting and control process. The managerial function of controlling

or the measurement and correction of the performance in order to ensure that the enterprise

objectives and plans devised to attain them are being accomplished. It is a function of every

manager from of every manager from the president to the supervisor.

The JK has a wide scope and covers all most all areas of Human Resources, mainly it

covers the following areas:

a) Payroll package:

It has provision for deductions with respect to PF, VPF, HRA, Special allowance,

etc. Leave encashment, arrears, over time, loan details, deductions etc..

b) Attendance:

Attendance recording system is maintained daily, covering issue like daily attendance,

late punching reports, employees who have omitted to punch out details, pertaining to man-hour

utilization, obsentism etc.

c) Leave Maintenance:



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It is a part of time keeping, and has provisions for issues like, daily updating leave

cancellation, punching omissions, compensatory off, out door duty, indoor duty, leave details,

leave credit or change.

d) Personnel/HR:

It has a robust HR practices like Recruitment, selection, individual and career

development path succession plan, performance management system, talent management

system, training and development, etc.

STAFF:

The person in an organization is called staff. Here it is very useful to think not about

individual personality but corporate demographics.

An analysis of the corporate demographics of it reveals that most of the worker and

staff belong to the 30-40 age groups. As such they are very active and learning oriented. The

workers are quality conscious and aid the management to produce better quality of products, by

co-operating with them in the most efficient manner.

Almost all the employees are punctual and rate of accidents is very less in the staff as

compared to the workers. The workers are provided with the uniform this is the important way

of ensuring equality among the workers and there by aiding the concept of team work and

interdependence, for better production both qualitative and quantitatively.

The employees demographic are follows:

Workers - 1721

Executive - 368

Staff - 70



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Badly workers - 1090

Contractors - 1360

Total number of employees - 4609.

Duties and responsibilities of technical staff:

To maintain safe working conditions.

To maintain quality systems.

Operation and maintenance of equipment.

Issue of spares.

Following statutory norms like factories act, boilers act.

SHARED VALUES:

The values that go beyond, but might well include simple goal statement in determining

corporate destiny. To fit the concept, these values must be shared by most people in the

organization.

JK is a company that insist the following some core values most of these can be found in the

companies vision statements as well as quality policy. The company considers employees are

the greatest of its assets. Production and productivity is a derivative of employee welfare.

JK industries Ltd.., takes initiative to do social project such activities like literacy program

for village people. Conduct medical camps in villages, digging bore wells in villages, building

bus shelter and employee welfare program. Like wise the company is always willing to

participate in welfare activities.



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The companys focus on the customer and creating culture of interdependence are embodied

in its statements of vision and quality. While the concept of TQM, TPM and QC are visible in

the form of slogans, posters and well meaning cliches. The first serious attempt to

institutionalize has started.

Thus some of the values that are shared by the both employees and the management at JK

industries limited is as follows;-

Product and service quality.

Productivity efficiency.

Punctuality.

Compensation.

Employees and societal welfare.

Customer satisfaction.

Team work concept.

TQM (Total Quality Management)

TPM ( Total productivity maintenance)\

Quality circle.

4. SWOT ANALYSIS:

SWOT analysis stands for strengths, weakness, opportunities, and threats. It is a tool

for auditing and organization and its environment. It is the first stage of planning and helps

marketers to focus on key issues. Strengths and weakness are internal factors. Opportunities

and threats are external factors.



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STRENGTHS:

Strong brand image.

Being quality oriented rather than quantity oriented.

Large product width & line (product mix).

Economies of scale due to optimum capacity utilization.

Collaboration with Vikrant, know for their technological superiority bringing

together performance, economy, durability & comfort.

Strong financial position.

Very large distribution channel.

Reasonable price.

Effective employee in JK.

Well-knit distribution network.

Exports to more than 75 countries in the world.

It has 21% market share in India.

Tyre is easily available and serviced even in remotest parts of the country.

WEAKNESS:

Less brand awareness.

Target will be fixed by the head office.

It doesnt manufacture two wheelers tyres.

The company is incurring more cost compare to other tyre manufacturer.

Low productivity of labor, in comparison to world standards.

OPPORTUNITIES:

High growth potential for its exports as demand for JK tyres in Europe increasing.



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Profit & loss a/c Information:


PARTICULARS SEPT 04-

05

SEPT 05-

06

SEPT 06-

07

SEPT 07-

09

SEPT 09-

10

SOURCE OF FUNDS

Total Share Capital 37.46 37.46 30.79 30.79 41.06

Reserves 818.76 745.14 560.93 503.13 534.77

Net worth 856.22 782.6 591.72 533.92 575.83

Secured loans 656.51 671.28 724.77 686.82 850.31

Unsecured Loans 94.16 159.22 219.1 228.13 251.49

Total Debt 750.67 830.5 943.87 941.95 1101.8TOTAL LIABILITIES 1606.89 1613.1 1535.59 1448.87 1677.6

PARTICULARS SEPT 04-

05

SEPT 05-

06

SEPT 06-

07

SEPT 07-

09

SEPT 09-

10

APPLICATION OF FUNDS

Gross block 1884.26 1938.72 2084.22 2156.07 2270.3

Less: Accumulated depreciation 677.15 764.74 860.03 957.27 1101.5

Net Block 1207.11 1173.98 1224.19 1198.9 1168.8

Working Capital Progress 16.43 61.63 22.51 20.34 240.19

Investments 252.26 250.04 61.46 62.6 89.75

Inventories 178.17 244.03 368.59 502.85 414.45

Sundry Debtors 449.52 411.79 477.89 435.52 442.47

Cash& Bank balance 26.83 30.22 33.03 23.87 39.27

TOTAL CURRENT ASSETS 654.52 686.44 879.51 962.24 896.19

Loans & Advances 112.71 134.92 144.14 155 217.54

Fixed Deposits 11.4 5.89 6.29 5.35 2.72

TOTALCA , LOANS &

ADVANCES

778.63 826.85 1029.94 1122.59 1116.4

Deferred Credit 0 0 0 0 0

Current liabilities 641.54 686.44 784.08 927.78 883.08

Provisions 21.42 25.9 27.59 35.9 59.77Total CL&Provissions 662.96 712.34 811.67 963.68 942.85

Net Current Assets 15.42 12.94 9.16 8.22 5.21

Miscellaneous Expenses 15.42 12.94 9.16 8.22 5.21

TOTAL ASSETS 1606.89 1613.1 1535.59 1448.87 1677.6

Contingent Liabilities 121.77 131.32 84.74 78.94 117.41

Book Value 228.57 208.92 192.15 173.38 140.24


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6. LEARNING EXPERIENCE:

During my visit to JK TYRE, I learnt extensively about company, its products, and their

mission; vision etc. a brief study was conducted at their various departments like marketing,

finance, production, human resource, vigilance, welfare, safety, productivity, dispatch,

management information system etc. each department has its own specific function to do. Some

of the departments contain some sections in it for example the finance departmentconsists of

the establishment section, internal audit section etc in the mean time I also come across the

companys different strategies.

I gathered information about the recruiting process. I was also briefed about how the final

settlement will be done when employee leaves the organization. In JK tyre & industry the

human resource department takes care of functions like training and developing the employees

of the company, training of the management trainees, providing the support in the arrangement

of the functions like seminars, workshops, conferences, etc

From the study we came to know that management can play a vital role in every

organization, when the management is efficient in its performance, there is absence of lockout,

strike, fear of loss & other managerial problems.

I also learned the peoples attitude towards his job & organization plays a major role in the

success of every organization. The people should feel their work as their own work & should

maintain good attitude towards their job, this attitude will provide more support to the

development of the organization, if the people who are appointed by the company work for the

sake of getting salary & other benefits then it will results in inefficiency & failure of

organization.

It was really a very good experience to carry out my in project work at JK industries because

it gave a clear idea about the working of each department practically.



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INTRODUCTION

JK Tyre a division of JK Industries is the Flagship Company under the umbrella of JK

organization. The advent of JK Organization on the industrial landscape of India almost

synchronizes with the beginning of an era of industrial awareness and endeavor for self-reliance

and the setting up of a dynamic Indian Industry. This was way back in the middle of the 19 th

century and the rest, that followed is history.

JK Organization has been a forerunner in the economic and social advancement of India.

It always aimed at creating job opportunities for a multitude of countrymen and to provide high

quality products. It has striven to make India self reliant by pioneering the production of a

number of industrial and consumer products, by adopting the latest technology as well as

developing its own know-how. It has also undertaken industrial ventures in several other

countries.

JK Organization is an association of industrial and commercial companies and

charitable trusts. Its member companies, employing nearly 50,000 persons are engaged in the

manufacture of variety of products and in diverse fields of commerce.

Trusts are devoted to promoting industrial, technical and medical research, education,

religious values and providing better living and recreational facilities with the spirit of social

consciousness uppermost in mind, JK Organization is committed to the cause of human

advancement.

JK Tyre increased production and sales volumes. It out performed the industry by

registering a growth of 4% against a negligible growth of 0.2% of the industry, in the 4



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wheelers tyre segment. In the commercial tyre segment, this constitutes 70% of the Rs. 10,000

crores in Indian tyre markets. The company holds number one position in the country. JK

Tyre along with Vikrant Tyre further improved the market share to 23% in the truck / bus

category.

JK Tyre continues to be the dominant player in the passenger car radials and his stepped

up its production capacity during the year. The current year will have full benefit of increased

production of passenger car radials.

JK Industries achieved these results in the wake of reduction in tyre prices during the

year on the one hand and increase input costs, particularly in the petro-based raw materials on

the other. Its export turnover was Rs. 140 crores with exports to 75 countries across the 6

continents. JK Tyre is a preferred brand in many leading international markets. JK Tyre

along with Vikrant Tyre maintained its leadership, both in the domestic as well as export

markets. With a view to cater to the growing demand for JK Tyre in the world markets; the

company has entered into an alliance with an international manufacturer to out-source tyre for

export.

The other divisions of the company are Sugar and Agri-genetics have also performed

well during the year. JK Sugar has recorded a massive increase of 35% in production. Sale of

power of UP Power Corporation has also increased by 30%. Besides, JK Sugar has completed

the expansion of its Sugar Mill to 4300 TCD. With substantial investments having made in the

cane development, JK Sugar is poised for further growth in the years ahead.

JK Agri-genetics, an established player in the Hybrid Seed industry has continued to

show encouraging results. The company has stepped up investment in Research and

Development Centre at Hyderabad to bring out technologically superior products in major

agricultural crops. In addition, a new R & D centre has also been set up at Jaipur, which will

help JK Seeds to serve over 6 lakh formers across 9 states covering average of over 2 million

acres of farming land.



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To understand and analyze the working capital position of JK Tyres during the period

of 2004-05 to 2009-10.

To study various source of funds used for financing the working capital of JK Tyres.

To study the efficiency and effectiveness of working capital management of the

company.

To calculate the operating cycle of JK Tyres for the above period.

To analyze the rank correlation between liquidity and profitability position of JK Tyres

for the above period.

SCOPE OF THE STUDY:

The study gives fair idea of improvement in efficiency of working capital

management.

This study will help JK Tyres Ltd., to have proper control over the components of

working capital and mange of efficiency.

METHODOLOGY:

The methodology used in the present study entitled To know the efficiency of working

capital management and working capital policy of JK Tyres Limited given in this chapter.

This is prepared with the help of both secondary and primary data collected.

DATA COLLECTION METHOD:

In order to fulfill the objectives of the study, the data was collected from primary and

secondary sources.

Secondary Sources

Annual report of 2001 to 2010



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Journals, magazines

Newspapers

Websites

Text books of financial management

Primary Sources

Discussion with accounts manager and other departments executives.

By personal observation of the activities of organization.

LIMITATIONS OF THE STUDY:

The study is purely of academic interest. The inexperience makes the analysis less

precious when compared to professional analysis. Hence conclusions from analysis of

statement are not sure indicators.

The study in this project does not solve into the problems of capital budgeting, fund

flow analysis, tax and finance planning, foreign exchange, management and treasury

operations.

The study is limited to the study of published financial statements.

Through a complete attempt has been made to include all the factors affecting the case

study putting into writing, there is every possibility of some factors being left out due to the

shortage of time and some due to the policy of the management to keep them confidential.



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ANALYSIS AND INTERPRETATION:

The findings of the present study titled, A study on working capital management at JK

Tyres Ltd., is presented and discussed in this chapter.

INTRODUCTION TO WORKING CAPITAL:

Working capital may be regarded as the life blood of business. Working capital

management is an important aspect in the study of financial management. The goal of working

capital management is to maintain the firm current assets and liabilities in such a way that a

satisfactory level of working capital is maintained. This is so because if the firm cannot

maintain a satisfactory level of working capital, it is likely to become insolvent and may even

be forced into bankruptcy. The interaction between current assets and current liabilities is

therefore, the main theme of the theory of working capital management.

CONCEPTS OF WORKING CAPITAL:



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The working capital can be classified into two concepts;

Gross working capital

Net working capital

GROSS WORKING CAPITAL:

It refers to the firms investment in current assets. Current assets are the assets which

can be converted into cash within an accounting year (generating cycle) and include cash, short-

term securities, debtors, (accounts receivable books debts) bills receivable and stock

(inventory).

NET WORKING CAPITAL:

It refers to the difference between the current assets and current liabilities. Current

liabilities are those claims of outsiders, which are expected to major for payment within an

accounting year and include creditors (accounts payable), bills payable, and outstanding

expenses. Net working capital can be positive or negative. A positive net working capital will

arise when current assets exceeds current liabilities. A negative net working capital occurs

when current liabilities are in excess of current assets.

Management of working capital encompasses the following problems

Problem of deciding the optimal level of investments in current assets.

Problems of deciding the optimal mix of short-term funds in relation to long term

capital.

Location of sources of short-term financing.

The study of working capital management is incomplete unless we have an overlook

on the management of current liabilities.



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DEFINITION OF WORKING CAPITAL:

Working capital can be defined as the excess of current assets over current liabilities.

Current assets are those assets, which can be converted into cash within the current accounting

period and current liabilities are the debts of the firm that have to be paid during the current

accounting period or within a year.

According to Prof. Harry G. Guthaman and Hebert I Dangall, working capital is the

excess of current assets over current liabilities.

WORKING CAPITAL MANAGEMENT:

Working capital management refers to the administration of all aspects of current assets,

namely cash, marketable securities, debtors and stock and current liabilities.

COMPONENTS OF WORKING CAPITAL MANAGEMENT:

1. Management of Cash and Marketable Securities

Cash is the most important current assets for the operation of the business. Cash is

the basic input needed to keep the business running on a continuous basis; it is also the

ultimate output excepted to be realized by selling the service or product manufactured

by the firm. The management of cash raises similar issues to those raised in relation to

the management of stocks. There are costs involved in holding too much cash and also

costs in holding too little cash (e.g. interest costs, lost goodwill etc.). Thus, there is a

need for careful planning and monitoring of cash flows overtime.

2. Receivables Management

The term receivables mean the amount due from the debtors. They also include the

bills receivables. An efficient management of these receivables in necessary because it

involves a large amount of investment in current assets. It is funding that 1/3rd of the

current assets and nearly 11% to 15% of total assets are constituted by these receivables.



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In order to keep current customers and attracts new ones. Most manufacturing firms

find it necessary to offer trade credit. Trade credit thus creates receivables as book debts,

which the firm accepts to collects in near futures.

3. Inventory Management

Inventories constitute the most significant part of current assets of a large majority of

companies in India. On an average, inventories are approximately 60% of current assets

in public limited companies in India. Because of the large size of inventories

maintained by firms, a considerable amount of funds in required to be committed to

them. It is, there fore, absolutely imperative to manage inventories efficiently and

effectively in order to avoid unnecessary investment. A firm neglecting the

management of inventories will be jeopardizing its long-run profitability and may fail

ultimately. It is possible for a company to reduce its levels of inventories to a

considerable degree, e.g. 10% to 20% without any adverse effect on production and

sales, by using simple inventory planning and control techniques. The reduction in

excessive inventories carries a favorable impact on a companys profitability.

OBJECTIVE-1

TO UNDERSTAND AND ANALYZE THE WORKING CAPITAL POSITION OF

JK TYRES DURING THE PERIOD OF 2001-02 TO 2009-10 (18 MONTHS)

ANALYSIS OF WORKING CAPITAL:

The financial management always tries to maintain an adequate working capital at every

time, so as to carry on day-to-day operations of the firm successfully and economically. These

are dangers in having too little or too more working capital. Therefore a through scouting into

the current assets and current liabilities is to be made to control the working capital. The

working capital balance of a concern has a positive value but often due to the intensive user of

working capital, if it exceeds the sources thus indicating a deficit. These deficits must be



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detected and set off immediately. This process is known as analysis of working capital. It is a

test of short-term solvency.

The analysis of working capital becomes necessary to know;

If the management is using the working capital effectively.

If the amount of working capital is adequate.

If the current financial position is improving.

The needs for the analysis are

To maintain adequate working capital at every time.

To minimize the cost of short term financing.

To choose from the various sources of short term finance and employ them in times

of need.

To asses the effectiveness of the management of current assets.

To study the trends in working capital positions.

To maximize the earning per share of the equity shareholders.

ANALYSIS OF WORKING CAPITAL AT JK TYRES:

Important functions of the management and the prime duty of the finance department as

to maintain an optimum level of working capital has got such an important position because of

its nature of revealing the clear cut position of the liquidity of the firm.

Though there are several tools of analyzing working capital, the below mentioned are

note worthy.

Statement of changes in working capital.



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Working capital ratios.

STATEMENT OF CHANGES IN WORKING CAPITAL AT JK TYRES:

Statement of changes in working capital shows the trend to the changes in working

capital. This statement is prepared with the help of current assets and current liabilities of two

periods. It is comparative statement that is used to calculate increase or decrease in working

capital. It also indicates the overall effects of the changes, which shows the trend in changes of

working capital and its components.

Statement of changes in working capital at JK Tyres shows the changes in working

capital over the period of 2001-02 and 2009-10 (18 months). The net working capital of the

company has Rs. 200.95 crores from year 2002-03. It decreased to Rs. 127.14 crores from year

2003-04, and again decreases to Rs. 111.46 crores from year 2004-05. And in the year 2005-06

there was increase the working capital of Rs. 216.66 crores. There is an increase of Rs. 251.67

crores in the working capital over the period of 5 years. The main reasons for this are increase

in the receivables, inventory and cash. But 2007-08 (18 months) its decreased to Rs. 170.88.

The sales of the company also increased from Rs. 3195.71 crores to Rs. 5490.32 crores. It

made the company to have a huge stock as inventory and receivables. These things mainly

changes in the working capital requirements over the period of time. .

WORKING CAPITAL OF JK TYRES UNDER GROSS CONCEPT:

It refers to the firms investment in current assets. Current assets are the assets which

can be converted into cash within an accounting year and include cash, short-term securities,

debtors (accounts receivable or book debts) bills receivable and stock.

The gross working capital of the JK Tyres in the year 2006-07 was Rs. 117.24 crores

and in 2007-09 was Rs. 1113.73 crores which shows that the gross working capital is increased

due to more investment on current assets.



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Table 3.6 shows the working capital of JK Tyres under Gross concept.

WORKING CAPITAL OF JK TYRES UNDER NET CONCEPT:

It refers to the difference between the 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 (accounts payable), bills payable, and outstanding

expenses.

The net working capital of JK Tyres in the year 2006-07 was Rs. 153.56 crores and in

2007-09 (18 months) was Rs. 170.88 crores. There is an increase of Rs. 17.32 crores which

indicates the company can meet its short term obligations and enjoys the liquidity position.



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Statement of Changes in Working Capital for the year 2002-03 when compared

To 2003-04.

(Rs. In crores)

Particulars 2002-03 2003-04 Increase Decrease

Current Assets

Inventories 187.07 211.31 24.24 0

Sundry Debtors 342.49 412.59 71.1 0

Cash and Bank

Balance

39.07 25.32 0 13.75

Loans and Advances 148.13 137.14 0 10.99

Total Current Assets

(A)

716.76 786.36

Current Liabilities (B)

Current Liabilities 545.19 585.41 0 40.22

Net Working Capital

(A-B)

171.51 200.95 0

Increase in Working

Capital

29.38 0 0 29.38

Total 200.95 200.95 94.24 94.24


To 2004-05.

(Rs. In crores)


Current Assets

Inventories 211.31 178.17 0 33.14

Sundry Debtors 412.59 449.52 36.93 0

Cash and Bank Balance 25.32 38.23 12.91 0

Loans and Advances 137.14 110.38 0 26.76

Total Current Assets (A) 786.36 776.3



Net Working Capital (A-

B)

200.95 127.14 0

Increase in Working

Capital

0 73.81 73.81 0

Total 200.95 200.95 123.65 123.65



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To 2005-06(Rs. In crores)


Current Assets

Inventories 178.17 244.03 65.86 0

Sundry Debtors 449.52 412.17 0 37.35

Cash and Bank Balance 38.23 36.11 0 2.12

Loans and Advances 110.38 120.18 9.8 0


Current Liabilities (B)Current Liabilities 649.16 701.03 0 51.87


B)

127.14 111.46 0

Increase in Working

Capital

0 15.68 15.68 0

Total 127.14 127.14 91.34 91.34

Statement of Changes in Working Capital for the year 2005-06 when comparedTo 2006-07.

(Rs. In crores)


Current Assets

Inventories 244.03 368.59 124.56 0

Sundry Debtors 412.17 478.07 65.9 0

Cash and Bank Balance 36.11 39.32 3.21 0

Loans and Advances 120.18 127.54 7.36 0.33Total Current Assets (A) 812.49 1013.52




B)

111.46 216.66 0

Increase in Working

Capital

105.2 0 0 105.2

Total 216.66 216.66 201.03 201.03



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To 2007-09.

(Rs. In crores)


(18 Months)

Current Assets

Inventories 368.59 502.85 134.26 0

Sundry Debtors 478.07 435.52 0 42.55

Cash and Bank Balance 39.32 23.87 0 15.44

Loans and Advances 127.54 155 27.46 0




Net Working Capital (A-B) 216.66 153.56 0

Increase in Working Capital 0 63.1 63.1

Total 216.66 216.66 224.81 224.81

Statement of Changes in Working Capital for the year 2007-09 (18 months) when

compared to 2009-10.(Rs. In crores)


(18 Months)

Current Assets

Inventories 368.59 502.85 134.26 0

Sundry Debtors 478.07 435.52 0 42.55

Cash and Bank Balance 39.32 23.87 0 15.44Loans and Advances 127.54 155 27.46 0




Net Working Capital (A-B) 216.66 153.56 0

Increase in Working Capital 0 63.1 63.1

Total 216.66 216.66 224.81 224.81



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Working Capital at JK Tyres under Gross Concept:

(Rs. In Crores)

Particulars 2007-09 2009-10

Current Assets

InventoriesSundry Debtors

Cash Bank Balance

Loans & Advances

Gross Working Capital

502.85435.52

23.87

155.00

1117.24

414.42442.47

39.27

217.54

1113.73

Working Capital at JK Tyres under Net Concept:

(Rs. In Crores)

Particulars 2007-09 2009-10

A. Gross Working Capital

Current Liabilities

Liabilities

Provisions

1117.24

927.78

35.90

1113.73

883.08

59.77

B. Current Liabilities

Net Working Capital (A B)

963.68

153.56

942.85

170.88



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OBJECTIVE-2

TO STUDY VARIOUS SOURCES OF FUNDS USED FOR FINANCING THE

WORKING CAPITAL OF JK TYRES LIMITED.

TRADE CREDITS:

Trade credit refers to the credit extended by the supplier of raw materials in a normal

course of business. According to trade practices cash is not paid immediately for purchase but

after an agreed period of time. At present day commerce is built upon credit arrangement of a

concern with its suppliers is an important source of short term finance.

The JK Tyres limited also uses trade credit period of 10-20 days from its tyre suppliers.

The cash payment will be done 15 days after the procurement of tyre.

LOANS AND ADVANCES:

Loans and advances are another type of working capital source. The JK Tyres Ltd., also

uses loans and advances to finance its working capital.

The loans raised by the company are short term working capital loans. The company

usually raises its funds from the Bank of India, Canara Bank, Corporation Bank, UTI Bank and

SBI Bank. It also has over draft facility from the above banks. The loans takers by the

company are for 2-5 years repayable as half yearly or yearly installment.

DEFERRED INCOME:

Another source used by JK Tyres Ltd., is deferred income or advance collected from

dealers of the company. The company follows a policy of collecting advance before

dispatching the goods to the dealers. The dealers have to pay an advance amount with the order



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they place in the company. The advances thus collected by the company are used to meet the

day to day requirement of the company.

ACCRUED EXPENSES:

Accrued expense represents a liability that a firm has to pay for the service, which it has

already received. They are spontaneous interest free sources of financing the most important

component of accrued are wages and salaries, taxs and interest.

The JK Tyres Ltd., use accrued expenses as a source of working capital. It has a policy

of paying the workers and other employees of the company monthly. The workers in the factors

are paid according to the amount of work done by the workers.

The cash credit facility is similar to the over draft agreement. The JK Tyres Ltd., has its

cash credit facility in SBI, UTI Canara Bank. The company can borrow funds up to sanctioned

limit of credit periodically when it is need of fund. The repayment will be done through the

credit account only. Usually cash credits are transformed upon the security of current assets.

OBJECTIVE-3

To study the efficiency and effectiveness of working capital management of the

company.

Ratio Analysis

A ratio is a statistical yardstick that measures the relationship between the two

concerned terms. The important of the ratio analysis lies in the fact that it presents facts

on a competitive basis and enables the drawing of influences regarding the performance

of the given terms.

With the help of ratios the following can be determined;



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The overall operating efficiency and performance of the company.

The efficiency with which the firm in utilizing its various assets in generating

revenues.

The ability to the firm to meet its current obligations.

WORKING CAPITAL ANALYSIS THROUGH RATIOS OF JK TYRES

The liquidity position of JK Tyres can be determined by application of the following ratios.

The financial executive to check upon the efficiency with which working capital is being used

in the enterprise can use ratio analysis of working capital following are the important working

capital ratios.

Leverage Ratios

Total debt ratio

Debt equity ratio

Coverage ratio

Activity Ratios

Debtors turnover ratio

Cash turnover ratio

Inventory turnover ratio

Inventory to working capital ratio

Net assets turnover ratio

Working capital turnover ratio

Fixed assets turnover ratio

Current assets turnover ratio

LEVERAGE RATIOS:

Long-term solvency or leverage ratios convey a firms ability to meet the interest costs

and repayment schedules of its long term obligations.



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ACTIVITY RATIOS:

Activity ratios are the ratios calculated to measure the efficiency with which the

resources of a firm have been employed. These ratios are also called as turnover ratios because

they indicate the speed with which assets are being turned over into sales. They help the

management to judge how effectively the facilities available at its command have been utilized.

LEVERAGE RATIOS:

TOTAL DEBT RATIO:

Debt ratios may be used to analyze the long term solvency of the firm. The firm may be

interested in knowing the proportion of the interest bearing debt in the capital structure.

The debt ratio compares a company's total debt to its total assets, which is used to gain a

general idea as to the amount of leverage being used by a company. A low percentage means

that the company is less dependent on leverage, i.e., money borrowed from and/or owed to

others. The lower the percentage, the less leverage a company is using and the stronger its

equity position. In general, the higher the ratio, the more risk that company is considered to

have taken on.

FORMULA:

CALCULATION OF TOTAL DEBT RATIO:


TOTAL DEBT RATIOTOTAL

LIABILITIES

TOATAL ASSETS


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INTERPRETATION:

This ratio indicates percentage of amount with the lender as invested in the current

assets; JK Tyres total debt ratio 0.94 in the year 2009-10 as against 0.76 in the previous year

2007-09. This says that the lenders invest only 0.94 of the net fixed assets. Debt has increased

due to non-repayments.

DEBT-EQUITY RATIO:

Debt Equity Ratio is also known as External Internal Equity Ratio, it is used to analyze

the long-term solvency of the firm. Debt-Equity ratio expresses the relationship between debt

and equity.

It is also known as external internal equity ratio. It is determined to ascertain soundness

of the long term financial policies of the company.

FORMULA:

.

CALCULATION OF DEBT EQUITY RATIO:


DEBT EQUITY RATIO DEBT

EQUITY


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Years Total Debt Net Worth Ratio

2002-03 850.04 912.91 0.93

2003-04 838.06 893.99 0.94

2004-05 750.67 856.22 0.88

2005-06 830.5 782.6 1.06

2006-07 943.87 591.72 1.6

2007-09 914.95 533.92 1.71

2009-10 1101.8 575.83 1.91

GRAPH SHOWING DEBT EQUITY RATIO,



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INTERPRETATION:

The standard ratio for the debt equity mix is 2:1, compared to that of the last year; the debt

equity ratio has increased, which implies that the financial structure of the company is unsound.

This ratio indicates the contribution in the business i.e., 1.91 is the creditors contribution is the

business of JK Tyres, that the financial structure of the company is sound

COVERAGE RATIO:

Coverage ratio is also known as net income to debt service ratio or interest coverage

ratio. It is computed by dividing earnings before interest and taxes by interest charges.

A ratio used to determine how easily a company can pay interest on outstanding debt. The

interest coverage ratio is calculated by dividing a company's earnings before interest and taxes

(EBIT) of one period by the company's interest expenses of the same period

FORMULA:

CALCULATION OF COVERAGE RATIO:


coverage RatioEBIT

INTEREST

EXPENSE


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Years EBIT Interest Ratio

2002-03 243.94 155.68 1.57

2003-04 196.88 98.7 1.99

2004-05 141.45 85.51 1.65

2005-06 139.64 67.33 2.07

2006-07 177.32 79.06 2.24

2007-09 271.62 91.01 2.98

2009-10 404.36 244.24 1.65

GRAPH SHOWING COVERAGE RATIO,



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INTERPRETATION:

This ratio indicates the coverage of interest payable from the total profit earned by the

company. As per the table coverage ratio in the 2002-03 is. 1.57, 2003-04 is 1.99, 2004-05 is

1.65, 2005-06 is 2.07, and 2006-07 was 2.24. In the year 2007-09 and 2009-10 are 2.98 and

1.65 respectively it shows the coverage ratio is increased from year to year. These trends show

the companys debt serving capacity is sound.

DEBTORS TURN OVER RATIO:



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Debtors turnover ratio indicates the velocity of debt collection of the firm. In simple

words, it indicates the number of time the debtors are turned over during a year. Generally, the

higher value debtors turnover the more efficient management of debtors/sales or more liquid

are the debtors. Similarly, a low debtor turnover implies inefficient is the management of

debtors / sales and less liquid debtors. But a precaution is needed while interpreting a very high

ratio may imply a firms inability due to lack of resources to sale on credit thereby losing sales

and profits. There is no rule of thumb, which may be used as a norm to interpret the ratio, as it

may be different from firm, depending upon the nature of business. This ratio should be

compared with ratio of other firm doing similar business and a trend may also be making a

better interpretation of the ratio.

FORMULA:

CALCULATION OF DEBTORS TURNS OVER RATIO:

Years Sales Average

Debtors

Ratio

2002-03 2315.29 270.49 8.55 Times2003-04 2077.34 377.54 5.50 Times

2004-05 2257.87 431.05 5.23 Times

2005-06 2383.82 430.84 5.53 Times

2006-07 2952.69 445.12 6.63 Times

2007-09 3195.71 456.7 6.99 Times

2009-10 5490.32 439 12.50 Times


debtors turn over ratio

TOTAL

SALES

AVG

DEBTORS


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GRAPH SHOWING DEBTORS TURNS OVER RATIO,

INTERPRETATION:

This ratio indicates the number of times the debtors are collected in a year. In JK Tyres

Ltd., debtors turnover ratio was 8.55 times n 2002-03, it is decreased to 5.50 times in 2003-04

and again decrease to 5.24 times in the year 2004-05 and also decreased to 5.52 times in the

year 2005-06 and it increases to 6.63 times in the year 2006-07 and it increase to 6.99 times in

the year 2007-09 and also increase to 12.50 times in the year 2009-10. The increasing trend

shows the more efficient management of debtors.



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GRAPH SHOWING CASH TURNOVER RATIO,

INTERPRETATION:

The company as a cash turnover ratio was 59.26 in 2002-03 it was increased to 82.04 in

2003-04 and it was decreased to 84.15 in 2004-05 and it was increased to 78.88 in 2005-06 and

again increases to 89.39 in the year 2006-07 and again increase to 133.87 in the year 2007-09

and it was increase to 139.8 in the year 2009-10, which indicates the cash in the firm is being

used efficiently. The increasing the cash ratio is due to increase in total sales.



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INVENTORY TURNOVER RATIO

Inventory turnover ratio also known as stock velocity is normally calculated as sales /

average inventory or cost of goods sold / average inventory. It would indicate whether

inventory has been efficiently used or not. Inventory turn over ratio indicates the number of

times the stock has been turned over during the period and evaluated the efficiency with which

a firm is able to manage its inventory.

FORMULA:

CALCULATION OF INVENTORY TURNOVER RATIO:

Years Sales Average Inventory Ratio

2002-03 2315.29 181.99 12.72

2003-04 2077.34 199.19 10.42

2004-05 2257.87 194.74 11.59

2005-06 2383.82 211.1 11.29

2006-07 2952.69 306.31 9.63

2007-09 3195.71 435.72 7.33

2009-10 5490.32 458.65 11.97


inventory turnover Ratio

COST OF GOODSSOLD

AVG INVENTRY


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GRAPH SHOWING INVENTORY TURNOVER RATIO,

INTERPRETATION:

This ratio is indicates the efficiency of the firm in selling its product. The inventory

turnover ratio in the JK Tyres was 12.72 times in the year 2002-03, it starts decreases to 10.42

times in the year 2003-04, again it increases to 11.59 times and 11.29 in the years 2004-05 and

2005-06 respectively. In the year 2006-07 and 2007-09 again it decreases to 9.63 and 7.33



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times respectively. In the year 2009-10 it increased to 11.97. As compared to previous years in

the year 2009-10 the inventory turnover ratio is increased, it indicates that efficient utilization

of inventory.

INVENTORY TO WORKING CAPITAL RATIO:

This ratio indicates the relationship between inventory and working capital. Inventory to

working capital ratio, defined as a method to show what portion of a companys inventories is

financed from its available cash, is essential to businesses which hold inventory and survive on

cash supplies. In general, the lower the ratio, the higher the liquidity of a company is. However,

the value of inventory to working capital ratio varies from industry and company.

FORMULA:

CALCULATION OF INVENTORY TO WORKING CAPITAL RATIO:

Years Inventory Net Working

Capital

Ratio

2002-03 187.07 171.57 1.09

2003-04 211.31 200.95 1.05

2004-05 178.17 127.14 1.4

2005-06 244.03 111.46 2.19

2006-07 368.59 216.66 1.7


inventory to working capital

Ratio

INVENTRY

WORKING

CPITAL


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2007-09 502.85 153.56 3.27

2009-10 414.45 170.88 2.42



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GRAPH SHOWING INVENTORY TO WORKING CAPITAL RATIO

INTERPRETATION:

In the year 2002-03 the inventory to working capital ratio is 1.09, than it decreased to

1.05 in the year 2003-04 and it increased to 1.4 and 2.19 in the year 2004-05 and 2005-06. In

the year 2007-09 the inventory to working ratio is 3.27, than it decreased to 2.42. It shows the

inventory and working capital is good, the firm is able to pay off its current liabilities, and the

ratio will increases with the standard ratio.



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GRAPH SHOWING NET ASSETS TURNOVER RATIO,

INTERPRETATION:

The net assets turnover of JK Tyres was 1.78 times in the year 2002-03 and decreased in

the year 2003-04. Again it started to increases and in the year 2006-07 it reached to 2.41 times

at 2009-10 it reach to 4.69. It indicates that JK Tyres is producing Rs. 4.69 of sales for a rupee

of capital employed in net assets.

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