geetha finance mba project in mini
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1. INTRODUCTIONFinance is regarded as the life blood of a business enterprise. This is because in
the modern money-oriented economy, finance is one of the basic foundations of all
kinds of economic activities. It is the master key which provides access to all sources
for being employed in manufacturing and merchandising activities. It has rightly been
said that business needs money to make more money. However it is also true that
money begets more money, only when it is properly managed. Hence, efficient
management of every business enterprise is closely linked with efficient management
of its finance.
DEFINITIONS OF FINANCE:
According to Howard, finance is that administrative are of set of
administrative function in an organisation which relate with the arrangement of
cash and credit; so that the organisation may have the means to carry out its
objectives as satisfactorily as possible.
Finance refers to the management to flows of money through an
organisation. It concern with the application of skills in the manipulation use and
control of money.
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There are three main approaches of finance
1. The first approach views finance as to providing of funds needed by a businesson more suitable terms.
2. The second approach relates finances to cash.3. The third approach views finance as being concerned with raising of funds and
their effective utilization.
BUSINESS FINANCE:
In general, finance may be defined as the provision of money at the time it is
wanted. However as a management it has a special meaning. Finance function may be
defined as the procurement of funds and their effective utilisation.
DEFINITIONS OF BUSINESS FINANCE:
Business finance is that business activity which is concerned with the
acquisition and conservation of capital funds in meeting financial needs overall
objectives of a business enterprise
Business finance can broadly be defined as the activity concerned with
planning .raising, controlling and administering of the funds used in the business.
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FINANCIAL MANAGERS ROLE:
Financial manager is a person who is responsible, in a significant way, to carryout the finance functions.
He or she is one of the members of the top management team, and his or herrole, day-by-day, is becoming more pervasive, intensive and significant in
solving the complex funds management problems.
The finance manger is now responsible for shaping the fortunes of theenterprise, and is involved in the most vital decision of the allocation of capital.
The financial manager has not always been in the dynamic role of decision-making.
ANALYSIS OF FINANCIAL STATEMENT:
Financial statement is formal and original statements prepared by a business
concern to disclose its financial details.
AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTS
(AICPA) says financial statement are prepared for the purpose of presenting a
periodical review or report on the progress by the management and dealt with:
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1. The status of investment in the business and2. The result achieved during the period under review.
The word financial statement have been widely used to represent two statement
prepared by accounts at the specific time period. They are:
1. Profit and loss account or income statement,2. Balance sheet or statement of financial position,3. A surplus statement or retained earnings statement.
MEANING OF FINANCIAL STATEMENT:
A financial statement is an organised collection of data according to logical and
consistent accounting procedures. Its purpose is to convey an understanding of some
financial aspects of a business firm.
DEFINITION OF FINANCIAL STATEMENTS:
Hampton J.J. the statement disclosing status of investment is known as
balance sheet and the statement showing the result is known as profit and loss
account.
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1.1 OBJECTIVE OF STUDY
To interpret the profitability and efficiency of various business activities withthe help of profit and loss account,
To measure managerial efficiency of the firm, To ascertain earning capacity in future period, To determine future potential of the concern, To measure the financial stability of the business,
FUNCTION OF FINANCIAL STATEMENT:
For Management, For Creditors, For Owners, For Employee, For Government Etc
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1. FOR MANAGEMENT:
Now a days financial statement are used to management for decision making.
Reliable information and effectiveness are extracted by management from financial
statements.
2. FOR CREDITORS:
Trade creditor is another class for whom financial statements are important
.trade credit implies extending facilities of deferred payments for credit purchase by
seller or buyer.
3. FOR OWNERS
It reveals the sound position of business and whether the funds supplied by
them in the form of capital and also the undistributed profit.
4. FOR EMPLOYEE
Financial statement care for all categories of employees in an organization. The
success or failure of the firm is linked with financial statements.
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5. FOR GOVERNMENT:
The performances of the government, central, state and local are derived with
preparation of financial statements.
1.2SCOPE OF FINANCIAL STATEMENTS:
Financial statements are prepared to check the nature of investment in a
business and result achieved during the specific time period.
The accuracy of the data shown in the financial statement are affected by the
following facts:
(1) Based on recorded facts,(2) Accounting conventions(3) Postulates
(4)
Personal judgements
(1)Based on recorded facts:
The transactions affecting the business are recorded in the books and shown in
the financial statement at the same values.
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Recently such facts are mentioned as footnotes tablemates the financial
statement more meaningful and useful.
(2) Accounting conventions:
The financial statements are prepared by following certain accounting
convention and principles. Accounting itself is a dynamic science and accountants
have developed, from time to time, a number of conventions on the basis of
experience.
(3) Postulates:
In simple words, accounting transactions are recorded on certain assumption
such as going concern, stable value of money, profit accrual etc. These postulates
or assumptions are reflected in the financial statements.
(4) Personal judgement:
Financial statement prepared by two different persons of the same concern give
dissimilar result and this is due to different personal judgement in using or applying
particular conventions.
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TYPES OF FINANCIAL ANALYSIS STATEMENT:
Types of financial analysis statement:
On the basis of information used on the basis of modus operandi of
analysis
1. External analysis 1.Horizontal analysis
2. Internal analysis 2.Vertical analysis
EXTERNAL ANALYSIS:
This analysis is based on published financial statements of a firm.
Outsiders have limited access to internal records of the concern.
Ex: creditors, suppliers, investors.
INTERNAL ANALYSIS:
This analysis is done on the basis of internal and unpublished records. It is
done by executives or other authorised officials.
Ex: employees, management.
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HORIZONTAL ANALYSIS:
This analysis is also known as dynamic or trend analysis. The analysis
is done by analysing the statements of a number of years.
If the years is taken as basis to calculate the percentage of increase or
decrease. Some analysts prefer to choose earlier year as basis, while some others
prefer to take just the preceding year as basis.
Ex: Trend ratio
VERTICAL ANALYSIS:
Vertical analysis is also known as static analyses or structural analyses. This
analysis is made on the basis of a single set of financial statement prepared at a
particular date.
Ex: common-size statement
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1.3 TECHNIQUES OF FINANCIAL ANALYSIS STATEMENTS:
RATIO ANALYSIS:
An analysis of financial statements based on ratios is known as ratio analysis.
A ratio is a mathematical relationship between two or more items taken from the
financial statements. It is the process if computing, determine, and presenting the
relationship of items.
TECHNIQUES OFFINANCIAL ANALYSIS
Trendanalysis
workingcapital
analysis
commonsize
statement
comparativefinancial
statements
Ratioanalysis
fundsflow
analysis
cashflow
analysis
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CASH FLOW ANALYSIS:Cash flow analysis depicts the inflows and outflows of cash. Cash flow statement
is the device for such analysis. It highlights causes which bring changes in cash
position between two balance sheet dates.
FUNDS FLOW ANALYSIS:
Funds flow statement signifies the sources and applications of funds. The term
funds refers to working capital. Funds flow analysis clearly shows internal and
external sources of working capital and the way funds have been used.
Funds flow analysis is helpful in judging credit worthiness, financial planning
and budget preparation.
COMPARATIVE FINANCIAL STATEMENTS:
This is yet another techniques used in financial statement analysis. These
statements summarise and present related data for a number of years incorporating
therein changes (absolute and relative) in individual items of financial statements.
These statements help in making inter-period and inter-firm comparisons and also
highlight the trends in performance efficiency and financial position.
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COMMON SIZE STATEMENTS:
Common size statements indicate the relationship of various items with some
common items,(expressed as percentage of the common item). The percentages so
calculated are compared with corresponding percentages in other periods or other
firms and meaningful conclusions are drawn. Generally, a common size income
statement and common size balance sheet is prepared.
WORKING CAPITAL ANALYSIS:
Working capital statement or schedule of changes in working capital is
prepared to disclose net changes in working capital on two specific dates. It is
prepared from current assets and current liabilities on the specified dates to show net
increase or decrease in working capital
TREND ANALYSIS:
Trend signifies a tendency and as such the review and appraisal of tendency in
accounting variables are nothing but trend analysis. Trend analysis is carried out by
calculating trend ratios (percentage) and plotting the accounting data on graph paper
or chart.Trend analysis is significant for forecasting and budgeting. Trend analysis
discloses the changes in financial and operating data between specific periods.
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BENEFITS OF FINANCIAL STATEMENTS ANALYSIS:
Credit worthiness , Financial planning, Budget preparation,, The efficient business cash management, Diagnose financial health of a business concern, Measuring profitability, Determining solvency and activity if the firm, Trend analysis is significant for forecasting and budgeting, Trend analysis discloses the changes in financial and
operating data between specific periods.
LIMITATION OF FINANCIAL STATEMENT ANALYSIS:
Historical nature of financial statement, Different interpretation, Change in accounting methods, Price level changes.
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1.4 COMPANY PROFILE:
Ashok Leyland has six manufacturing plants - the mother plant at Ennore near
Chennai, two plants at Hosur (called Hosur I and Hosur II, along with a Press shop),
the assembly plants at Alwar and Bhandara. The total covered space at these six plants
exceeds 450,000 sqms and together employs over 11,500 personnel.
Spread over 135 acres, Ashok Leyland Ennore is a highly integrated Mother
Plant accounting for over 40% of ALL production. The plant manufactures a wide
range of vehicles and house production facilities for important aggregates such as
Engines, Gear Box, Axles and other key in-house components. Number of employees
in ennore plant are 4146 and number of models manufactured are 132.
Ashok Leyland is the flagship company of the hinduja group and is the
second largest manufacturer of commercial vehicles in India.
Ashok motor was set up in 1948 for the assembly of Austin cars. The company
name and objective changed with equity participation by British Leyland and Ashok
Leyland commenced manufacturer of commercial vehicles in 1955. It has since then
grown as a reputed manufacturer of quality automotive products ranging from light
commercial vehicles to heavy duty vehicles and for automotive, industrial and marine
applications. In 1987, the overseas hold by Land Rover Leyland International
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The company has the corporate office register at Chennai.
The marketing headquarter is at Chennai and the sales and services network,
dealer network and spare parts warehouse spread throughout India with regional sales
office and services centre located in all major cities and towns in the country. The
products are also exported to a range of overseas countries.
The marketing personal maintain constant interaction with customers for
application development and feedback for continuous improvement of the products.
The services function is carried out by qualified personal whose skills are
continuously upgraded through training to meet the servicing requirements of newer
or improved products. The design function is carried out by the product Development
Division operating through 4 centres viz. Product Development (Ennore) for R&D
related to Ashok Leyland engines, Technical centre vellivoyalchavadi for design,
proto-type developments of vehicle, vehicles and components testing; Engine R&D
(Hosur) for design and development of Hino engines and Advanced Engineering
(Chennai) for research related to future products.
The manufacturing units of the company are located at Ennore (TN), Hosur
(TN), Alwar (Rajasthan) and Bhandara (MR). The Ennore , Hosur (plant - 1),
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Hosur (plant-ii), Ambattur , Alwar and Bhandara manufacturing units are certified
ISO 9001:2000 and QS 9000:1998 certification by Indian register Quality system.
The company is also certified to ISO 14001:2000 Environmental
Management System for all the manufacturing units. The Bhandara unit of the
company has won the Golden Peacock Environmental Award 2002 of the world
Environmental Foundation in the Large/manufacturing category.
Ashok Leyland is also the 1st auto mobile company to receive the ISO/TS
16949 corporate certification in June 2006. TS 16949 reckon the nuances of
automobile Industry and is more customer centric. It integrates the salient concepts of
all the QMS standards has been accepted recognized and followed by all automobiles
manufactures in USA , Europe and Asia.
Ashok Leyland has also obtained ISO 27001 certificates for its Ennore Data
canter and Advanced Engineering group located in Chennai. Ennore data centre
obtained the certificate in May 2005 and advanced engineering in April 2007.
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HISTORY AND ORIGIN:
The origin of Ashok Leyland can be traced to the urge for self-reliance, felt by
independent India. Pandit Jawaharlal Nehru, India's first Prime Minister persuaded
Mr. Raghunandan Saran, an industrialist, to enter automotive manufacture. In 1948,
Ashok Motors was set up in what was then Madras, for the assembly of Austin Cars.
The Company's destiny and name changed soon with equity participation by British
Leyland and Ashok Leyland commenced manufacture of commercial vehicles in 1955
Since then Ashok Leyland has been a major presence in India's commercial vehicle
industry with a tradition of technological leadership, achieved through tie-ups with
international technology leaders and through vigorous in-house R&D.
In 2003, Leyland has reported a 70% increase in its sales. Ashok Leyland set to
increase HINO engine platform through in-house product development, to deliver
higher horsepower in tune with improving road infrastructure. Ashok Leyland Ltd has
supplied 25 buses to Afghanistan which is a part of Indian Governments Assistance
to the war-ravaged Afghanistan. Leyland bagged $46 million truck supply contract
from the United Nations.
In 2004, Ashok Leyland unveils new range of buses and trucks in a bid. It
launches Ecomet, a light commercial vehicle, in the Andhra Pradesh market. Ashok
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Leylands Hosur unit bags CIIs awards in safety, health and environment. Ashok
Leyland Ltd (ALL) and Indian Oil Corporation (IOC) have joined hands to offer
freight management services across the country. Ashok Leyland Ltd signs a
collaboration agreement with ZF of Germany local manufacturing of ZFs 9-speed
synchromesh gearbox. Now, Wipro InfoTech has signed up with Ashok Leyland for
strategic cost reduction.
Ashok Leyland vehicles have built a reputation for reliability and
ruggedness. The 5, 00,000 vehicles we have put on the roads have considerably eased
the additional pressure placed on road transportation in independent India.
In the populous Indian metros, four out of the five State Transport Undertaking
(STU) buses come from Ashok Leyland. Some of them like the double-decker and
vestibule buses are unique models from Ashok Leyland, tailor-made for high-
density routes.
In 1987, the overseas holding by Land Rover Leyland International Holdings
Limited (LRLIH) was taken over by a joint venture between the Hinduja Group, the
Non-Resident Indian transnational group and IVECO. (Since July 2006, the Hinduja
Group is 100% holder of LRLIH).
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The blueprint prepared for the future reflected the global ambitions of the
company, captured in four words: Global Standards, Global Markets. This was at a
time when liberalisation and globalisation were not yet in the air. Ashok Leyland
embarked on a major product and process up gradation to match world-class standards
of technology.
In the journey towards global standards of quality, Ashok Leyland reached a
major milestone in 1993 when it became the first in India's automobile history to
win the ISO 9002 certification. The more comprehensive ISO 9001 certification
came in 1994, QS 9000 in 1998 and ISO 14001 certification for all vehicle
manufacturing units in 2002. It has also become the first Indian auto company to
receive the latest ISO/TS 16949 Corporate Certification (in July 2006) which is
specific to the auto industry
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VISION:
Achieving leadership in the medium/heavy duty segments of the domestic
commercial vehicle market and a significant presence in the world market through
transport solutions that best anticipate customer needs, with the highest value to cost.
Be among the top Indian corporations acknowledged nationally and internationally for
Excellence in quality of its products. Excellence in customer focus and service.
MISSION:
Be a leader in the business of commercial vehicles, excelling in technology,
quality, value to customer, fully supported by customer service of the highest order
and meeting national and international environment and safety standards.
Identifying with the customer
Being the lowest cost manufacturer
Global benchmarking our products, processes & people against the best in the
industry.
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1.5 INDUSTRY PROFILE:
The automobile industry in India is the tenth largest in the world with an annual
production of approximately 2 million units is expected to become one of the major
global automotive industries in the coming years. A number of domestic companies
produce automobiles in India and the growing presences of multinational investment,
too has led to an increase in overall growth following the economic reforms of 1991
the Indian growth as a result of increased competiveness and relaxed restrictions.
History:
In 1953, the Govt of India and the Indian private sector initiated manufacturing
processes to help develop the automobile industry, which had emerged by the 1940s
in a nascent form. Between 1940 to the economic liberalization of 1991, the
automobile industry continued to grow at a slow pace due to many govt restrictions.
Japanese manufacturers entered the Indian market ultimately leading to the
establishment of Maruti udyog. A number of foreign firms joint ventures with Indian
companies.
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Indian Automobile Companies:
1. Ashok Leyland ltd2. Force motors3. Hindustan motors4. Mahindra & Mahindra ltd5. Maruthi Suzuki6. Tata motors
Market Share:
Table:
COMPANY MARKET SHARE
1.Tata Motors 62.4
2.Ashok Leyland Ltd 20.3
3.Volvo Eiecher 9.8
4. Others 7.5
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Chart:
Multinational Companies in India
1. Fiat2. Ford motors3. General motors4. Honda5. Hyundai6. Mercedes-Benz7. Mitsubishi motors
62.4%
20.3%
9.8%
7.3%
Tata motors
Ashok Leyland
Volvo Eicher
Others
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1.6 PRODUCT PROFILE:
1. Buses
2. Trucks
3. Engines
4. Defence & Special Vehicles
1. BUSES:
Leaders in the Indian bus market, offering unique models such as CNG, Double
Decker and Vestibule bus.
S.NO PRODUCT FIGURE S.NO PRODUCT FIGURE
1.Viking BS -
II
2.Viking BS -
III
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3. Viking BS
II
4. Viking SLF
BS-III
5. Viking
CNG BS-III
6. 12 M Bus -
BS II
7. Cheetah BSII 8.
12 M Bus BS-
II
9. Cheetah BS - II 10. Panther BSII
11. Lynx BS-II 12. Vestibule Bus
BSIII
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13. Double Decker 14.
Airport Tarmac
coach
15. Stag BS - II 16. Cheetah BS - II
2.TRUCKS:
Pioneers in multi axle trucks and tractor-trailers.
S.NO. PRODUCT FIGURE
1.4 X 2 Haulage Models
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2.
4 X 2 and Multi-axle Tippers
3.
Multi-axle Vehicles
4.
Tractors
5.
Ecomet
3.ENGINES:
S.NO PRODUCT FIGURE APPLICATIONS
1. Genset
Application
Engines ranging from 15KVA
to 250KVA
Industrial Segment Hospitals / Clinics
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Commercial /Residential Complexes
Theatres Shopping mall / Offices Rice Mills Hotels / Restaurants
2. Industrial
Application
Engines with power rating
from 40PS to 200PS.
Front End Loaders Excavators Compactors Pavers Road Sweepers Harvestor Combines Compressors Cranes Pumps
3. Engines with power rating
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Marine
Application
from 58PS to 193PS
Trawlers, Pure -Seiners,Gillnetters
Sailing Vessels Marine generating sets Pavers Speed Boats Passenger Launches Ferries Auxiliary drive in Vessels
4.
DG Sets for
exports
Diesel and Natural Gas
gensets trom 15KVA -
250KVA
Industrial SegmentHospitals / ClinicsCommercial /
Residential Complexes
Theatres
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Shopping mall / OfficesRice MillsHotels / Restaurants
4.DEFENCE & SPECIAL VEHICLES:
Largest provider of logistic vehicles to the Indian army.
S.NO PRODUCT FIGURE
1.
Special Vehicles
2.
Defence Vehicles
http://defenceproducts.ashokleyland.com/http://www.ashokleyland.com/productsdyn.jsp?CATId=4&subcatavail=y&subcatid=17http://defenceproducts.ashokleyland.com/http://www.ashokleyland.com/productsdyn.jsp?CATId=4&subcatavail=y&subcatid=17http://defenceproducts.ashokleyland.com/http://www.ashokleyland.com/productsdyn.jsp?CATId=4&subcatavail=y&subcatid=17 -
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CHAPTER-II
REVIEW OF LITERATURE
Working Capital Meaning :- Capital required for a business can be classified under
two main categories via,
1) Fixed Capital
2) Working Capital
Every business needs funds for two purposes for its establishment and to carry
out its day- to-day operations. Long terms funds are required to create production
facilities through purchase of fixed assets such as plant & machinery, land, building,
furniture, etc. Investments in these assets represent that part of firms capita l which is
blocked on permanent or fixed basis and is called fixed capital. Funds are also needed
for short-term purposes for the purchase of raw material, payment of wages and other
day to-day expenses etc.
These funds are known as working capital. In simple words, working capital
refers to that part of the firms capital which is required for financing short- term or
current assets such as cash, marketable securities, debtors & inventories. Funds, thus,
invested in current assts keep revolving fast and are being constantly converted in to
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cash and this cash flows out again in exchange for other current assets. Hence, it is
also known as revolving or circulating capital or short term capital.
NEED OF WORKING CAPITAL MANAGEMENT
For effective running of the day to day business transaction the working capital is
necessary. There is no such a business for which working capital is needed.
The main aim of every firm is to maximize shareholders wealth. Firm must earn
sufficient returns to increase the shareholder wealth. To earn steady amount of profit,
a successful sales activity is necessary. Firm can generate sales is sufficient amount is
invested in current assets. The need of current assets is necessary because sales do not
convert in to cash immediately. There is always in operating cycle involved in the
conversion of sales into cash.
CLASSIFICATION OF WORKING CAPITAL
Working capital may be classified in to ways:
o On the basis of concept.
o On the basis of time.
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On the basis of concept working capital can be classified as gross working
capital and net working capitalOn the basis of time, working capital may be classified
as:
Permanent or fixed working capital.
Temporary or variable working capital
GROSS WORKING CAPITAL AND NET WORKINGCAPITAL
There are two concepts of working capital management
Gross Working Capital:
Gross working capital refers to the firms investment I current assets. Current
Assets are the assets which can be convert in to cash within year includes cash, Short
term securities, debtors, bills receivable and inventory.
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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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.
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.
Temporary Working Capital:
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
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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
DETERMINANTS OF WORKING CAPITAL:
The amount of working capital is depends upon 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 founds are blocked in
piling inventories and also no funds are blocked in receivables. E.g. public utility
services like railways, infrastructure oriented project etc. There 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.
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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 there need of working
capital is high.
3) Size And Growth Of Business:
In very small company the working capital requirement is quit high due to high
overhead, higher buying and selling cost etc. As such medium size business
positively has edge over the small companies. But if the business start growing after
certain limit, the working capital requirements may adversely affect by the increasing
size.
4) Business/ Trade Cycle:
If the company is the 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 favourable market, due to
increase in the sales, there may more and more amount of funds blocked in stock and
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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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7) Operating Efficiency:
If the business is carried on more efficiently, it can operate in profits
which may reduce the strain on working capital; it may ensure proper
utilization of existing resources by eliminating the waste and improved coordination
etc.
8) Seasonal Variations:
Generally, during the busy season, a firm requires larger working capital than in
slack season.
9)
Working Capital Cycle:
The speed with which the working cycle completes one cycle determines the
requirements of working capital. Longer the cycle larger is the requirement of
working capital.
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CHAPTERIII
RESEARCH METHODOLOGY
METHODOLOGYOFTHESTUDY
RESEARCH
Research can be defined as the search for knowledge, or as any systematic
investigation, with an open mind, to establish novel facts, solve new or existing
problems, prove new ideas, or develop new theories, usually using a scientific method.
The primary purpose for basic research (as opposed to applied research) is
discovering, interpreting, and the development of methods and systems for the
advancement of human knowledge on a wide variety of scientific matters of our world
and the universe.
RESEARCH DESIGN
This research design is a comprehensive master plan of the research study to be
undertaken, giving a general statement of the methods to be used. The function of a
research design is to ensure that requisite data in accordance with the problem at hand
is collected accurately and economically. Simply stated, it is the framework, a
blueprint for the research study which guides the collection and analysis of data. The
research design, depending upon the needs of the researcher may be a very detailed
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statement or only furnish the minimum information required for planning the research
project.
DATA COLLECTION
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.
Secondary Data:
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
TOOLS FOR DATA ANALYSIS
Ratio analysis, Comparative balance sheet and Comparative income and expenditure
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Collection of information
The annual report and other records of Ashok Leyland were used for study of
working capital management. The information were collected from the reports of
Ashok Leyland.
PERIOD OF THE STUDY
The data were collected for five years from 2006-07 to 2010-11
CHAPTER SCHEME:
Chapter 1 deals with the introduction, objective, scope, need, company profile,industry profile and product profile.
Chapter 2 relates to the review of literature. Chapter 3 covers complete research methodology. Chapter 4 deals with analysis of the data which is being collected from the
company, and also about the inference of the data.
Chapter 5 relates to the findings from the data, and deals with suggestionsgiven by the researcher. The conclusion, which gives the ultimate result of the
study.
Chapter 6 deals with Bibliography, it includes the various sources from whichinformation is collected and Annexure.
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EXPECTATION FROM STUDY:
To be able know the financial position of the company. To be able know the working capital requirement of the company. To be capable to help the company in making better de
CHAPTER - IV
DATA ANALYSIS AND INTERPRETATIONS
WORKING CAPITAL ANALYSIS
As we know working capital is the life blood and the centre of a business.
Adequate amount of working capital is very much essential for the smooth running of
the business. And the most important part is the efficient management of working
capital in right time. The liquidity position of the firm is totally effected by the
management of working capital. So, a study of changes in the uses and sources of
working capital is necessary to evaluate the efficiency with which the working capital
is employed in a business. This involves the need of working capital analysis.
The analysis of working capital can be conducted through a number of devices,
such as:
1. Ratio analysis.
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2. Fund flow analysis.
3. Budgeting.
RATIO ANALYSIS
A ratio is a simple arithmetical expression one number to another. The
technique of ratio analysis can be employed for measuring short-term liquidity or
working capital position of a firm.
FUND FLOW ANALYSIS
Fund flow analysis is a technical device designated to the study the source from which
additional funds were derived and the use to which these sources were put. The fund
flow analysis consists of:
a. Preparing schedule of changes of working capital
b. Statement of sources and application of funds.
It is an effective management tool to study the changes in financial position (working
capital) business enterprise between beginning and ending of the financial dates.
WORKING CAPITAL BUDGET
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A budget is a financial and / or quantitative expression of business plans and
polices to be pursued in the future period time. Working capital budget as a part of the
total budge ting process of a business is prepared estimating future long term and short
term working capital needs and sources to finance them, and then comparing the
budgeted figures with actual performance for calculating the variances, if any, so that
corrective actions may be taken in future. He objective working capital budget is to
ensure availability of funds as and needed, and to ensure effective utilization of these
resources. The successful implementation of working capital budget involves the
preparing of separate budget for each element of working capital, such as, cash,
inventories and receivables etc.
ANALYSIS OF SHORT TERM FINANCIAL POSITION OR TEST OF
LIQUIDITY
The shortterm creditors of a company such as suppliers of goods of credit and
commercial banks short-term loans are primarily interested to know the ability of a
firm to meet its obligations in time. The short term obligations of a firm can be met in
time only when it is having sufficient liquid assets. So to with the confidence of
investors, creditors, the smooth functioning of the firm and the efficient use of fixed
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assets the liquid position of the firm must be strong. But a very high degree of
liquidity of the firm being tiedup in current assets. Therefore, it is important proper
balance in regard to the liquidity of the firm.
LIQUIDITY RATIOS
Liquidity refers to the ability of a firm to meet its current obligations as and when
these become due. The short-term obligations are met by realizing amounts from
current, floating or circulating assets. The current assets should either be liquid or near
about liquidity. The sufficiency or insufficiency of current assets should be assessed
by comparing them with short-term liabilities. On the other hand, if the current
liabilities cannot be met out of the current assets then the liquidity position is bad. To
measure the liquidity of a firm, the following ratios can be calculated:
CURRENT RATIO:
The ratio of current assets to current liabilities is called current ratio. In order to
measure the short term liabilities or solvency of the concern, comparison of current
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assets an current liabilities is inevitable. Current ratio indicates the ability of the
concern to meet its current obligation as and when they are due for payment.
Current assets include cash, marketable securities, bill receivables, sundry
debtors, inventories and work-in-progresses. Current liabilities include outstanding
expenses, bill payable, dividend payable etc.
A relatively high current ratio is an indication that the firm is liquid and has the
ability to pay its current obligations in time. On the hand a low current ratio represents
that the liquidity position of the firm is not good and the firm shall not be able to pay
its current liabilities in time. A ratio equal or near to the rule of thumb of 2:1 i.e.
current assets double the current liabilities is considered to be satisfactory
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TABLE NO:1
THE TABLE SHOWING THE CURRENT RATIO OF THE WORKING
CAPITAL
CALCULATION OF CURRENT RATIO(RS IN MILLION)
YEAR
CURRENT
ASSETS
CURRENT
LIABILITIES
RATIO
INDUSTRY
AVERAGE
2006-2007 26974.14 17558.55 1.54 1.55
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2007-2008 28752.58 22719.39 1.27 1.55
2008-2009 31656.16 21369.46 1.48 1.55
2009-2010 41396.84 29607.57 1.39 1.55
2010-2011 43672.45 35282.74 1.24 1.55
INFERENCE:
1. Here industry ratio is 1.55.2. Except in 2007-08 & 2010-11 remaining all years companys current ratio is
almost near to industry average ratio.
3.
The current ratio is high in 2006-2007 very nearest to the industry average.
CHART:CURRENT RATIO
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INVENTORY MANAGEMENT RATIOS:
INVENTORY TURNOVER RATIO = NET SALES
AVERAGE INVENTORY
TABLE:2
THE TABLE SHOWING INVENTORY TURNOVER RATIO:
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
current assetscurrent liabilities
current ratio
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
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YEAR NET SALES
AVG
INVENTORYITR
2006-07 71681.76 9864.41 7.27
2007-08 77425.80 11471.17 6.75
2008-09 59810.73 12769.64 4.68
2009-10 72447.10 14841.27 4.88
2010-2011 111177.09 22089.03 5.03
CHART NO:2
Chart showing inventory turnover ratio
INFERENCE:
0
2
4
68
INVENTORY TURNOVER RATIO
INVENTORY TURNOVER RATIO
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The company inventory turnover ratio is high 7.27 in 2006-2007when compared to
other year.
Inventory turnover ratio is slowly decreased from 2007-2008. In 2009-2010 it started increasing.
INVENTORY TURNOVER PERIOD:
INVENTORY TURNOVER PERIOD =DAYS OR MONTHS IN THE YEAR
INVENTORY TURNOVER RATIO
THE TABLE SHOWING INVENTORY TURNOVER PERIOD
TABLE NO :3
YEAR DAYS ITR
INV HOLDING
PERIOD
2006-07 365 7.27 50
2007-08 365 6.75 54
2008-09 365 4.68 77
2009-10 365 4.88 75
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2010-11 365 5.03 73
INFERENCE:
The highest inventory turnover period is 77 days in 2008-2009 The inventory turnover period is increased from 2006-2011 The lower inventory turnover period is 50 days in 2006-2007
CHART SHOWING INVENTORY TURNOVER PERIOD:
CHART NO :3
01020
30
40
50
60
70
80
INVENTORY TURNOVER PERIOD
INVENTORY TURNOVER
PERIOD
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WORKING CALCULATION:
NET WORKING CAPITAL = CURRENT ASSETS CURRENT
LIABILITIES
CURRENT ASSETS:
INVENTORIES
SUNDRY DEBTORS
BLLS RECEIVABLE
CASH AND BANK BALANCE
SHORT-TERM INVESTMENT
LOANS AND ADVANCE
CURRENT LIABILITIES:
CREDITORS
BANK OVERDRAFT
BILLS PAYABLE
OUTSTANDING EXPEES
INCOME RECEIVED IN ADVANCE
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OTHER LIABILITY
SCHEDULE OF CHANGES IN THE WORKING CAPITAL STATEMENT AS PER THE
YEAR 2006-07
TABLE NO:4 (Rs. IN MILLIONS)
PARTICULARS 2006 2007 INCREASE DECREASE
CURRENT
ASSETS
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Inventories 9025.61 10703.21 1677.06
sundry debtors 4243.37 5228.75 985.38
cash and bank
balances
6028.76 4349.39 1679.37
loan & advances 3026.39 6695.79 3669.04
(A) 22324.13 26977.14
CURRENT
LIABILITIES
liabilities 11468.95 16516.25 5047.30
provisions 2616.21 1042.30 1573.91
(B) 14085.16 17558.55
(A-B) WORKING
CAPITAL
8238.97 9418.59
INCREASE in WC 1179.62 1179.62
TOTAL 9418.59 9418.59 7906.29 7906.29
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INFERENCE:
In the above the statement showing changes in working capital of the ashok
Leyland Ltd, for the year ending 31st march has show the working capital in the year
2006-2007 has increase by 1179.62 million
CHART NO:4
CHANGES IN WORKING CAPITAL AS PER THE YEAR 20062007
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2006
20070
5000
10000
15000
20000
25000
30000
CURRENT
ASSETS CURRENT
LIABILITIESNET
WORKING
CAPITAL
2006
2007
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TABLE NO : 5
SCHEDULE OF CHANGES IN THE WORKING CAPITAL STATEMENT AS PER THE
YEAR 2007-08 (Rs IN MILLIONS)
PARTICULARS 2007 2008 INCREASE DECREASE
CURRENT ASSETS
Inventories 10703.21 12239.14 1535.93
sundry debtors 5228.75 3758.35 1470.40
cash and bank
balances
4349.39 4513.70 164.31
loan & advances 6695.79 8241.38 1545.59
(A) 26977.14 28752.58
CURRENT
LIABILITIES
liabilities 16516.25 19267.08 2750.83
provisions 1042.30 3452.31 2410.01
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(B) 17558.55 22719.39
(A-B) WORKING
CAPITAL
9418.59 6033.19
DECREASE in WC 3385.40 3385.40
TOTAL 9418.59 9418.59 6631.23 6631.23
INFERENCE:
In the above the statement showing changes in working capital of the
Ashok Leyland Ltd, for the year ending 31
st
march has show the working capital in the
year 2007-2008 has decrease by 3385.4 million
CHART NO:5
CHANGES IN WORKING CAPITAL AS PER THE YEAR 20072008
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(RS IN MILLION)
TABLE NO : 6
2007
20080
5000
10000
15000
20000
25000
30000
35000
CURRENT ASSETSCURRENT
LIABILITIES NET WORKING
CAPITAL
2007
2008
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SCHEDULE OF CHANGES IN THE WORKING CAPITAL STATEMENT AS PER THE
YEAR 2008-09
(Rs. IN MILLIONS)
PARTICULARS 2008 2009 INCREASE DECREASE
CURRENT
ASSETS
Inventories 12239.14 13300.14 1061.00
sundry debtors 3758.35 9579.74 5821.39
cash and bank
balances
4513.70 880.83 3632.86
loan & advances 8241.38 7895.44 346.25
(A) 28752.58 31656.14
CURRENT
LIABILITIES
liabilities 19267.08 18688.64 5784.43
provisions 3452.31 2680.82 771.49
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(B) 22719.39 21369.46
(A-B) WORKING
CAPITAL
6033.19 10286.67
INCREASE in WC 4253.50 4253.50
TOTAL 10286.68 10286.68 8232.32 8232.32
INFERENCE:
In the above the statement showing changes in working capital of the ashok
Leyland Ltd, for the year ending 31
st
march has show the working capital in the year
2008-2009 has increase by 4253.5 million
CHART NO:6
CHANGES IN WORKING CAPITAL AS PER THE YEAR 20082009
( RS IN MILLION)
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TABLE NO : 7
0
5000
10000
15000
20000
25000
30000
35000
current assets current liabilities net working capital
2008
2009
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SCHEDULE OF CHANGES IN THE WORKING CAPITAL STATEMENT AS PER THE
YEAR 2009-2010
Particulars 2009 2010 Increase Decrease
Current assets
Inventories 13300.14 16382.40 3082.26
Sundry debtors 9579.74 10220.61 640.87
Cash and bank
Balance
880.83 5189.20 4308.37
Loan and
Advances
7895.43 9604.62 1709.19
A 31656.14 41396.83
Current
liabilities
Liabilities 18688.64 25920.65 7232.01
Provisions 2680.81 3686.91 1006.10
B 21369.45 29607.56
(A-B) 10286.69 11789.27
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WORKING
CAPITAL
Increasing in
WC
1502.58 1502.58
TOTAL 11789.27 11789.27 9740.69 9740.69
INFERENCE:
In the above the statement showing changes in working capital of the Ashok Leyland
Ltd, for the year ending 31st march has show the working capital in the year 2006-
2007 has increase by 1502.58 million
CHART NO:7
CHANGES IN WORKING CAPITAL AS PER THE YEAR 20092010
( RS IN MILLION)
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0
5000
10000
15000
20000
25000
30000
35000
40000
45000
current assets current liabilities net working capital
2009
2010
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TABLE NO : 8
SCHEDULE OF CHANGES IN THE WORKING CAPITAL STATEMENT AS PER THE
YEAR 2010-2011
Particulars 2010 2011 Increase Decrease
Current assets
Inventories 16382.4 22089.03 5706.63
Sundry debtors 10220.61 11852.13 1631.52
Cash and bank
Balance
5189.20 1795.27 3393.75
Loan and
Advances
9604.62 7936.01 1668.61
A 41396.83 43672.44
Current
liabilities
Liabilities 25920.65 30379.47 4458.82
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Provisions 3686.91 4903.62 1216.71
B 29607.56 35282.74
(A-B)
WORKING
CAPITAL
11789.27 8389.70
Decrease in
WC
3399.57 3399.74
TOTAL 11789.27 11789.27 10737.89 10737.89
INFERENCE:
In the above the statement showing changes in working capital of the Ashok Leyland
Ltd, for the year ending 31st march has show the working capital in the year 2010-
2011 has decrease by 3399.74 million
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CHART NO:8
CHANGES IN WORKING CAPITAL AS PER THE YEAR 20092010
( RS IN MILLION)
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
current assets current liabilities Net working
capital
2010
2011
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WORKING CAPITAL TURNOVER RATIO:
W.C TURNOVER RATIO=SALES
NET WORKING CAPITAL
THE TABLE SHOWING WORKING CAPITAL TURNOVER RATIO
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TABLE NO:8
YEAR SALES NET.WORKING
CAPITAL
TURNOVER
RATIO
2006-07 71681.76 9418.59 7.61
2007-08 77425.80 6,033.19 12.83
2008-09 59810.73 10,286.70 5.81
2009-10 72447.10 11789.27 6.10
2010-11 111177.09 11789.27 9.43
THE CHART SHOWING WORKING CAPITAL RATIO:
CHART NO :8
INFERENCE:
0
20000
40000
6000080000
100000
120000
salesnet working
capital w.c turnover
ratio
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
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The working capital turnover ratio is high in 2007-2008 12.83
The ratio is decreased from 2008-2009.
In 2009-2010 the turnover ratio is start increasing as 6.1
In 2010-2011 the turnover ratio is slightly increased to 9.43
ANNEXURES
BALANCESHEET AS PER THE YEAR 2006-2007
TABLENO:9
ASHOK LEYLAND LTD
Balance Sheet as at 31st
March 2006 and 2007
A.
B.
C.
Sources of funds
Shareholders Funds
Share capital
Reserve and surplus
Loans and funds
As at march 31, 2007 As at march 31, 2006
Rs. Rs. Rs. Rs.
1323.87
17621.81
18945.68
1221.59
12902.94
14124.53
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D.
Secured loans
Unsecured loans
Deferred tax liability-net
3602.16
2801.82
6403.98
1969.29
1846.91
5072.37
6919.28
1796.89
Total 27318.95 22840.70
A.
B.
C.
Application of funds
Fixed assets
Gross block
Less: Depreciation
Net block
Capital work in progress
Investments
Current assets, loans and
advances
Inventories
26201.97
13131.64
15445.24
2210.94
21384.99
11952.28
10846.88
3681.78
13070.91
2374.91
9432.28
1414.17
10703.21
5228.75
4349.39
9025.61
4243.37
6028.76
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D.
Sundry debtor
Cash and bank balance
Loans and advances
Less:
Current liabilities:
Liabilities
Provisions
Net current assets
Miscellaneous expenditure
6695.79
26977.14
17558.55
9418.59
244.18
3026.39
22324.13
14085.16
8238.97
73.07
16516.25
1042.30
11468.95
2616.21
Total 27318.95 22840.70
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COMPARATIVEBALANCESHEETASAT31ST
MARCH2007AND2008
TABLENO:10
ASHOK LEYLAND LTD
Balance Sheet as at 31st
March 2007 and 2008
Sources of funds As at march 31, 2008 As at march 31, 2007
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A.
B.
C.
D.
Shareholders Funds
Share capital
Reserve and surplus
Loans and funds
Secured loans
Unsecured loans
Deferred income-net
Rs. Rs. Rs. Rs.
1330.34
20159.48
21489.82
8875.01
2538.20
1323.87
17621.81
18945.68
6403.98
1969.29
1902.40
6972.61
3602.16
2801.82
Total 32903.03 27318.95
A.
Application of funds
Fixed assets
Gross block
Less: Depreciation
Net block
Capital work in progress
29424.38
14168.88
20547.95
26201.97
13131.64
15445.24
15255.50
5292.45
13070.33
2374.91
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B.
C.
D.
Investments
Current assets, loans and
advances
Inventories
Sundry debtor
Cash and bank balance
Loans and advances
Less:
Current liabilities:
Liabilities
Provisions
Net current assets
Miscellaneous expenditure
6099.00
28752.56
5033.16
222.92
2210.94
26977.14
9418.59
244.18
12239.14
3758.35
4513.70
8241.37
10703.21
5228.75
4349.39
6695.79
19267.09
3452.31
22719.40
16516.25
1042.30
17558.55
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Total 32903.03 27318.95
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TABLE NO : 11
COMPARATIVEBALANCESHEETASAT31ST
MARCH2008AND2009
ASHOK LEYLAND LTD
Balance Sheet as at 31st
March 2008 and 2009
A.
B.
C.
D.
Sources of funds
Shareholders Funds
Share capital
Reserve and surplus
Loans and funds
Secured loans
Unsecuredloans
Deferred tax liability-net
Foreign currency monetary
As at march 31, 2009 As at march 31, 2008
Rs. Rs. Rs. Rs.
1330.34
33408.64
34738.99
19581.43
2634.36
384.11
1330.34
20159.48
21489.82
8875.01
2538.19
3044.13
16537.30
1902.40
6972.61
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item
Total 56993.20 32903.03
A.
B.
C.
Application of funds
Fixed assets
Gross block
Less: Depreciation
Net block
Capital work in progress
Investments
Current assets, loans and
advances
49532.72
15541.55
43974.05
2635.57
29424.38
14168.87
20547.94
6098.98
33991.16
9982.89
15255.50
5292.44
13300.14
9579.74
12239.14
3758.35
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D.
Inventories
Sundry debtor
Cash and bank balance
Loans and advances
Less:
Current liabilities:
Liabilities
Provisions
Net current assets
Miscellaneous expenditure
880.83
7895.43
31656.15
10286.69
968.82
4513.70
8241.37
28752.56
6033.16
222.92
18688.64
2680.81
21369.45
19267.09
3452.31
22719.40
Total 56993.20 32903.03
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85
TABLE NO : 12
COMPARATIVEBALANCESHEETASAT31ST
MARCH2009AND2010
ASHOK LEYLAND LTD
Balance Sheet as at 31st
March 2009 and 2010
A.
Sources of funds
Shareholders Funds
Share capital
As at march 31, 2010 As at march 31, 2009
Rs. Rs. Rs. Rs.
1330.34 1330.34
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86
B.
C.
D.
Reserve and surplus
Loans and funds
Secured loans
Usecured loans
Deferred liability
Deferred tax liability-net
Foreign currency monetary
item translation difference-
net
35357.23
7115.66
14923.25
36687.58
22038.91
765.48
3845.36
(124.50)
33408.64
3044.13
16537.30
34738.99
19581.43
2634.36
384.11
Total 63212.85 56993.20
A.
Application of funds
Fixed assets
Gross block
Less: Depreciation
60186.33
17690.74
49389.48
15398.31
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87
B.
C.
D.
Net block
Capital work in progress
Investments
Current assets, loans and
advances
Inventories
Sundry debtor
Cash and bank balance
Loans and advances
Less:
Current liabilities:
Liabilities
Provisions
Net current assets
42495.59
5614.69
48110.28
3261.54
41396.84
29607.57
11789.27
33991.16
9982.89
43974.05
2635.57
31656.15
21369.45
10289.69
16382.40
10220.61
5189.20
9604.62
1330.01
9579.74
880.83
7895.43
25920.65
3686.91
18688.64
2680.81
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88
Miscellaneous expenditure 51.74 96.88
Total 63212.85 56993.20
TABLE NO : 13
COMPARATIVEBALANCESHEETASAT31ST
MARCH2010AND2011
ASHOK LEYLAND LTD
Balance Sheet as at 31st
March 2009 and 2010
A.
B.
C.
Sources of funds
Shareholders Funds
Share capital
Reserve and surplus
Loans and funds
As at march 31, 2011 As at march 31, 2010
Rs. Rs. Rs. Rs.
13303.42
38299.27
39629.21
13303.42
35357.23
36687.58
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89
D.
Secured loans
Usecured loans
Deferred liability
Deferred tax liability-net
Foreign currency monetary
item translation difference-
net
11822.97
13859.67
25682.64
899.26
4438.86
-
7115.66
14923.25
22038.91
765.48
3845.36
(124.50)
Total 70650.40 63212.85
A.
Application of funds
Fixed assets
Gross block
Less: Depreciation
Net block
Capital work in progress
66918.88
20580.96
46337.91
3579.66
60186.33
17690.74
42495.59
5614.69
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90
B.
C.
D.
Investments
Current assets, loans and
advances
Inventories
Sundry debtor
Cash and bank balance
Loans and advances
Less:
Current liabilities:
Liabilities
Provisions
Net current assets
Miscellaneous expenditure
22089.34
11852.13
1795.72
7936.01
49917.57
12299.96
8389.71
431.45
16382.40
10220.61
5189.20
9604.62
48110.28
3261.54
11789.27
51.74
43672.45 41396.84
30378.47
4903.26
35282.74
25920.65
3686.91
29607.57
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91/120
91
Total 70650.40 63212.85
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92/120
92
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93/120
93
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94/120
94
COMPARATIVE INCOME STATEMENT FOR THE YEAR 2006-2007
particular 2006 2007 Increase/decrease
Amount
%
Sales
Less:
Excise duty
NET SALES
ADD:Other
income
60531.08
8054.51
83047.17
11365.41
22516.09
3310.90
37.19
41.10
52476.57 71681.76 19205.19 36.60
329.74 708.03 378.29 114.72
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95
(A)
521806.31 72389.79 19583.48 37.08
Less:
Manufacturing
expenses
depreciation
Financial
expenses
47075.87
1260.06
164.53
64654.91
1505.74
53.32
17579.04
245.68
(111.21)
37.34
19.50
(208.57)
(B)
48500.46 66213.97 17713.51 36.52
PBIT=C(A-B) 4305.85 6175.82 1869.97 43.43
LESS:
VRS
compensation
scheme
84.51
(301.66)
130.76
0
46.25
301.66
54.73
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96
Profit on sale on
undertaking
(D)
217.15 130.76 347.91 160.22
PBT=E(C-D) 4523.00 6045.06 1522.06 33.65
LESS:
Current tax
Deferred tax
Fringe benefit
tax
1130.50
72.30
47.00
1350.50
230.20
51.50
220.00
157.90
4.50
19.46
218.39
9.57
(F)
1249.80 1632.20 382.40 30.60
PAT=G(E-F) 3273.20 4412.86 1139.66 34.82
COMPARATIVE INCOME STATEMENT FOR THE YEAR 2007-2008
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97/120
97
Particular 2007 2008
Increase/Decrease
Amount
%
Sales
Less:
Excise duty
NET SALES
ADD:Other
income
53047.17
11365.41
89336.90
12045.67
6289.73
680.26
7.57
5.98
71681.76 77291.23 5609.47 7.83
708.03 739.99 31.96 4.51
(A) 72389.79 78031.22 19583.00 27.10
Less:
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98/120
98
Manufacturing
expences
depriciation
Financial
expences
64654.91
1505.74
53.32
69251.34
1773.61
497.40
17579.04
245.68
(111.21)
27.18
16.30
(208.57)
(B)
66213.97 71522.35 17713.51 26.75
PBIT=C(A-B) 6175.82 6508.87 1869.97 30.27
LESS:
VRS
compensation
scheme
Profit on sale on
undertaking
130.76
0
127.37
0
46.25
0
35.37
0
(D)
130.76 127.37 347.91 266.06
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99/120
99
PBT=E(C-D) 6045.06 6381.50 1522.06 25.17
LESS:
Current tax
Deferred tax
Fringe benefit
tax
1350.50
230.20
51.50
1014.00
604.40
70.00
220.00
157.90
4.50
16.29
68.59
8.74
(F)
1632.20 1688.40 382.40 23.43
PAT=G(E-F) 4412.86 4693.10 1139.66 25.82
COMPARATIVE INCOME STATEMENT FOR THE YEAR 2008-2009
Particular 2008 2009
Increase/Decrease
Amount
%
Sales
Less:
78725.97 66666.40 12059.57 15.32
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100/120
100
Excise duty
NET SALES
ADD:Other
income
12045.67 6855.66 5190.01 43.09
66680.30 59810.74 6869.56 10.30
739.99 492.62 247.37 33.43
(A) 67420.29 60303.36 7116.93 10.56
Less:
Manufacturing
expenses
depreciation
Financial
expenses
69251.34
1773.61
497.40
6465.91
1505.74
53.32
4596.43
267.87
444.08
15.10
89.28
71522.35 66213.97 5308.38 7.42
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101/120
101
(B)
PBIT=C(A-B) 6508.87 6175.82 333.05 6.64
5.12
LESS:
VRS
compensation
scheme
Profit on sale
on
undertaking
130.76
0
127.37
0
3.39
0
2.59
0
(D)
130.76 127.37 3.39 2.59
PBT=E(C-D) 6045.06 6381.50 336.44 5.56
LESS:
Current tax 1,350.50 1,014.00 336.50 24.92
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102/120
102
Deferred tax
Fringe
benefit tax
230.20
51.50
604.40
70.00
374.20
18.50
162.55
35.92
(F)
1632.20 1688.40 56.20 3.44
PAT=G(E-F)
4,412.86 4,693.10 280.24 6.35
COMPARATIVE INCOME STATEMENT FOR THE YEAR 2009-2010
Particular 2009 2010
Increase/Decrease
Amount
%
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103
Sales
Less:
Excise duty
NET SALES
ADD:Other
income
66,666.40
6,855.66
78,725.97
6,278.87
12,059.57
576.59
18.09
8.41
59,810.74 72,447.10 12,636.36 21.13
492.62 704.45 211.83 43.00
(A)
60,303.36 73,151.56 12,848.20 21.31
Less:
Manufacturing
expences
depriciation
Financial
64,654.91
1,505.74
53.32
64,818.71
2,041.11
811.30
163.80
535.37
757.99
0.25
35.55
1421.99
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104
expences
(B)
66,213.97 67,671.10 1457.13 2.20
PBIT=C(A-B)
6,175.82 5,480.46 695.36 11.26
LESS:
VRS
compensation
scheme
Profit on sale on
undertaking
127.37
0
32.71 1240.66 974.05
(D)
127.37 32.71 1240.66 974.05
PBT=E(C-D) 6,381.50 5,447.75 933.75 14.63
LESS:
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105/120
105
Current tax
Deferred tax
Fringe benefit
tax
1,014.00
604.40
70.00
1,211.00
1014.00
606.60
70
100.00
100.36
100.00
(F)
1688.40 1211.00 477.40 28.28
PAT=G(E-F) 4,693.10 4,236.75 456.35 9.72
COMPARATIVE INCOME STATEMENT FOR THE YEAR 2010-2011
Particular 2010 2011
Increase/Decrease
Amount
%
Sales
Less:
Excise duty
78,725.97
6,278.87
120936.06
9758.97
42210.09
3480.10
53.61
55.42
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106
NET SALES
ADD:Other
income
72,447.10 111177.09 38729.99 53.45
704.45 153.34 551.11 78.23
(A)
73,151.56 111330.43 38178.87 52.19
Less:
Manufacturing
expences
depriciation
Financial
expences
64,818.71
2,041.11
811.30
99001.51
2674.31
1636.61
3418.28
633.2
825.31
52.73
31.02
101.72
(B)
67,671.10 103312.44 35641.34 52.66
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107/120
107
PBIT=C(A-B)
5,480.46 8017.99 2537.53 46.30
LESS:
VRS
compensation
scheme
Profit on sale on
undertaking
32.71
0
0- 32.71 100
(D)
32.71 0 32.71 100
PBT=E(C-D) 5,447.75 8017.99 2570.24 47.17
LESS:
Current tax
Deferred tax
Fringe benefit
tax
1,211.00
1111.50
593.50
1111.50
617.5
100
50.99
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108
(F)
1211.00 1705 494 40.79
PAT=G(E-F) 4,236.75 6312.99 2076.24 49
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109/120
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110
CHAPTER-V
FINDINGS AND SUGGESTION
The current ratio of ASHOK LEYLAND LTD, the maximum level of ratio is1.54
in(2006-2007) and the minimum level of ratio is1.27 in(2007-2008)
The inventory turnover ratio is decreasing from 2007 to 2009 7.27,6.75,4.68 and its
was continuous decline in the year 2010 is 4.88.
The working capital turnover ratio is high in 2007-2008 is 12.83.the ratio is decreased
from 2008-2009 is 5.81.In 2009-2010 .It starts increasing as 6.1.
Net working capital of the company 2006-2007(in millions 1179.62) was increased
In 2007-2008 Net working capital was decreased as(in millions 3385.4)
Net working capital of the company 200-82009(in millions 4253.50) was increased
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Net working capital of the company 2009-2010(in millions 1502.58) was increased.
SUGGESTIONS:
The company has to take steps to improve the management of working capital to meet
its short term obligations.
The has to take of better and proper utilization of assets for improving the efficiency
Working capital is the life blood of business. No firm can run its business
successfully without sufficient working capital
The company should increase the current assets in future to raise the profit of the
company
Conclusion:
Overall it to be concluded that the financial position of ashok Leylandlimited is good
Working capital of the company was increasing and showing positiveworking capital per year. It shows good liquidity position.
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Positive working capital indicates that company has the ability of paymentsof short terms liabilities.
Working capital increased because of increment in the current assets ismore than increase in the current liabilities.
BIBLIOGRAPHY:
BOOKS REFERRED:
M.Y. KHAN AND P.K. JAIN --FINANCIAL MANAGEMENT;--Tata McGraw-Hill Publication
I. M. PANDEYFINACIAL MANAGEMENT;--Vikas Publishing
House Pvt Ltd.
PRASANNA CHANDRAFINANCIAL MANAGEMENT--Tata
McGraw-Hill Publication
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WEBSITES:
WWW.ASHOKLEYLAND.COM
WWW.MENTORMYPROJECT.COM
WWW.SCRIBD.COM
WWW.MANAGEMENTPARADISE.COM
WWW.BIZSTATS.COM
WWW.FINDARTICLES.COM
WWW.BRITANNICA.COM
WWW.INDIAINFOLINE.COM
WWW.BIZRESEARCHPAPERS.COM
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WWW.OPPAPERS.COM
WWW.ALLBUSINESS.COM
WWW.DOCSTOC.COM
BALANCE SHEET:
(Rs.IN MILLIONS)
PARTICULARS 2006-07 2007-08 2008-09 2009-10 2010-11
Source Of Funds
Shareholders
Fund
Capital
1,323.87 1,330.34 1,330.34 1330.34 1330.34
Reserves And 17,621.81 20,159.48 33,408.65
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115
Surplus
18,945.68 21,489.83 34,738.99
Loan Funds
Secured Loans 3,602.16 1,902.40 3,044.13
Unsecured Loans 2,801.82 6,972.61 16,537.31
6,403.98 8,875.01 19,581.44
Deferred Tax
Liability-Net
1,969.29 2,538.20 2,634.37
Foreign Currency
Monetary Item
Translation
Difference-Net
Total 27,318.95 32,903.03 56,993.21
Application Of
Funds
Fixed Assets
Gross Block 26,201.97 29,424.38 49,532.72
Less Depreciation 13131.64 14,168.88 15,541.56
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Net Block 13070.33 15,255.50 33,991.16
Capital Work-In-
Progress
2374.91 5,292.45 9,982.89
15445.24 20,547.95 43,974.06
Investments 2210.94 6,098.99 2,635.57
Current Assets,
Loans And
Advances
Inventories 10703.21 12239.14 13,300.14
Sundry Debtors 5228.75 3758.35 9,579.74
Cash And Bank
Balances
4349.39 4513.7 880.836
Loans And
Advances
6695.79 8241.39 7,895.44
26977.14 28752.58 31,656.14
Less Current
Liabilities And
Provisions
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Liabilities 16516.25 19267.08 18,688.64
Provisions 1042.3 3452.31 2,680.82
17558.55 22,719.39 21,369.46
Net Current Assets 9418.59 6033.187 10,286.68
Miscellaneous
Expenditure
244.18 222.91 96.88
Total 27,318.95 32,903.03 56,993.21
(Source: annual reports of the company)
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