A Presentation on

Summer Training ReportOn

Working Capital Management

At

Escorts Ltd.

Submitted to:Prof. A.S. Ramnarayan

Submitted By:Norang Lal2K10/PGPM/A25

The Escorts Group is among India's leading engineering conglomerates operating in the high growth sectors of Agri-machinery, construction & material handling equipment, railway equipment and auto components.

they manufacture and market a diverse range of equipment like cranes, loaders, vibratory rollers and forklifts.

Over a million tractors and over 16,000 construction and material handling equipment that have rolled out from the facilities of Escorts, complemented by a highly satisfied customer base, are testimony to the manufacturing excellence of Escorts.

Introduction

Various divisions of escort’s Ltd.

Escorts Group

Agri Machinery

Construction Equipment

Engineering division

Auto Suspension Parts

Railway Equipment

Division

CURRENT SCENARIO

Beta: 1.64

Market Cap (Mil.): Rs 17,869.13

Shares Outstanding (Mil.): 94.32

Annual Dividend: 1.5

Yield (%): 0.52

Working Capital of Escorts

2007-08 2008-09 2009-10

-50

0

50

100

150

200

250

189.52

-19.31

72.32

Working Capital

Working Capital

Years

In R

s Cro

res

Financing of working capital

After determining the optimum level of working capital, the finance manager

determines the sources of finance in such manner that is most profitable to the

company. The various sources of finance are:-

1. Trade credit.

2. Short term bank credit for working capital:

Cash credit.

Letter of credit.

Bills finance

Working capital demand loan.

Overdraft facility.

3. Factoring of receivables.

4. Commercial paper.

5. Long term sources comprising of equity capital and long term borrowings.

Measuring of liquidity of company

2007-08 2008-09 2009-100

0.2

0.4

0.6

0.8

1

1.2

1.41.28

0.970000000000001

1.09

Comparison of Current Ratio

Escorts

Years

1. Current Ratio

2. Quick ratio

2007-08 2008-09 2009-100

0.2

0.4

0.6

0.8

1

1.2

0.98

0.690000000000001 0.690000000000001

Comparison of Quick Ratio

Escorts

Years

Analysis of inventory through Ratios

2007-08 2008-09 2009-100

2

4

6

8

10

12

9.58

7.55

6.6

Inventory Turnover ratio

Escorts

Years

1.Inventory turnover

2. Raw material turnover ratio

2007-08 2008-09 2009-1011.5

12

12.5

13

13.5

14

14.5

15

15.5

13.36

12.94

15.03

Raw material turnover ratio

Raw material turnover ratio

Years

3. Finished goods turnover ratio

2007-08 2008-09 2009-100

5

10

15

20

25

30

35

40

4540.91

24.88

21.12

Finished goods turnover ratio

Finished goods turnover ratio

Years

Analysis of receivables through ratios

2007-08 2008-09 2009-100

1

2

3

4

5

6

7

8

9

0.25

6.61

8.32

Comparison of Debtors Turnover ratio

Escorts

Years

1. Debtors turnover ratio

2. Average debt collection period

2007-08 2008-09 2009-100

10

20

30

40

50

60

70

80

90

100

89.59

71.66

43.98

Average collection period

Average collection period

Years

Days

→

Analysis of payables management through ratios.

2007-08 2008-09 2009-100

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

3.753.57

4.29

Creditors turnover ratio

Creditors turnover ratio

Years

1. Creditor’s turnover ratio:

2. Average payable period

2007-08 2008-09 2009-1088

90

92

94

96

98

100

91.55

94.93

97.76

Average Payable Period

Average Payable Period

Years

Days

→

Suggestions:At the earliest stage, major projects should be broken

down into defined stages and analyzed for their impacts on the company's working capital position.

For each and every activity, a standard or target should be fixed and made clear to one and all.

Company should form a working capital management committee with the operational head of respective departments for better working capital management.

Escorts do credit analysis of its customers on the basis of financial statements. It should enhance that by introducing credit evaluation form to ensure that credit facility is provided to sound parties.

A Company should try to replace the traditional accounting definition of working capital with a 'total' approach to working capital that covers all the company's activities relating to the vendor, the customer and the product.

Shorten the operating cycle further.

Thank You...