A

PROJECT REPORT

ON

WORKING CAPITAL MANAGEMENT

IN

By:

DONTHA RAJESH

H.T.NO:093-07-0174

Submitted to

KARUNA PG COLLEGE

OSMANIA UNIVERCITY

Hyderabad

In partial fulfillment for the award of

Masters Degree in Business Administration

2007 – 2009

DECLARATION

I DONTHA RAJESH hereby declare that the project report on “Working

Capital Management” submitted by me to the Department Of Business

Management, KARUNA PG COLLEGE e as a partial fulfilment for the

award of master’s Degree in Business Administration of OSMANIA

UNIVERCITYS is of my own and it has not been submitted to any other

institute or published any where before.

1

DATE:

PLACE: DONTHA RAJESH

H.NO; 093-07-0174

ACKNOWLEDGEMENT

I would like to have this opportunity to place it on a record that this

project would never been successful without the kind co-operation and

support of certain individuals. Though it not possible to name all of them, it

would be unpardonable on my part if I do not mention some of the most

important persons.

I would like to thank my project guide, Mr.K.VENKATESH

Deputy. Manager-Costing, for all his support and cooperation during the

course of my study. I would like to thank the Accounts and Finance

department members, for giving me this opportunity to understand the

various aspects of Financial Management in their organization and

understand the subject in a better sense.

It’s my duty to express deep sense of gratitude to (external guide),

HOD (MBA) Mr K.VENKATESH for her valuable suggestion and

guidance throughout the project.

Last but not the least; I would also like to thank my parents, friends

for making this project a successful, as without their support and guidance,

this achievement would have been an impossible task.

ABSTARCT

The present project is on working capital in Tecumseh share products India ltd. The position of the company was studied data was collected he regarding growth in assets and liabilities. Sales working capital ratio debtors on turnout ratio, current ratio and other ratios was calculated composition current of pass five year was collected sources and funds statement for five years was collected. Interpreted it was fund that working capital was increasing the begging and latter on it was the declaiming it was suggested to utilize the companies founds properly.

ONTENTS Page No.

CHAPTER – 1: 7 - 7

INTRODUCTION 8 - 8

NEED FOR THE STUDY 9 - 9

OBJECTIVES OF THE STUDY 10 - 10

METHODOLOGY OF THE STUDY 11 - 11

FRAMEWORK OF THE STUDY 12 - 12

LIMITATIONS OF THE STUDY 13 - 13

CHAPTER – 2: 14 - 14

COMPANY PROFILE

INDUSTERY PROFILE 15 - 15

REFRIGERATION COMPRESSOR 16 - 18

HISTORICAL DEVELOPMENT OF COMPRESSORS 18 - 19

STRUCTURE OF THE REFRIGERATION COMPRESSOR INDUSTRY 20 - 24

TECHNOLOGICAL STATUS OF INDIAN INDUSTRY 25 - 28

PROFILE OF TECUMSEH PRODUCTS INDIA 30 - 30

PRIVATE LIMITED, HYD

ORGANIZATION PROFILE 31 - 35

DEPARTMENTS OF TRIPL 36 - 36

5-S PHILOSOPHIES 37 - 40

STRATEGIES AND PROCESSES AT TRIPL 40 - 40

TRIPL’S VISON AND MISSION 41 - 44

PRODUCTS AND SERVICES 45 - 45

COMPETITORS ANALYSIS 46 - 47

Page No

CHAPTER – 3: 48 - 48

LITERATURE RIVEW 49 - 49

INTRODUCTION 50 - 51

WORKING CAPITAL CYCLE 52 - 54

CONCEPT OF WORKING CAPITAL 54 - 56

TYPES OF WORKING CAPITAL 56 - 59

COMPOSITION OF WORKING CAPITAL 59 - 62

OBJECTIVES OF WORKING CAPITAL 63 - 63

FACTORS DETERMING WORKING CAPITAL 64 - 66

RATIOS RELATING TO WORKING CAPITAL 67 - 71

SOURCES OF WORKING CAPITAL 71 - 76

CHAPTER – 4: 77 - 77

DATA ANALYSIS 78 - 78

CHART OF THE NET WORKING CAPITAL 79 - 80

CHART OF THE SALES TO WORKING CAPITAL TURNOVE RATIO 81 - 82

CHART OF THE DEBTORS TURNOVER RATIO 83 - 84

CHART OF THE CURRENT RATIO 85 - 86

CHART OF THE QUICK RATIO 87 - 88

CHART OF THE COMPOSITION OF CURRENT ASSETS 89 - 90

PROFIT AND LOSS ACCOUNTS 91 - 96

COMPARATIVE BALANCE SHEETS 97-107

CHAPTER – 5: 108 - 108

SUMMARY & FINDINGS 109 - 109

SUMMARY 110 - 115

FINDINGS & SUGGESTIONS 116 - 118

BIBLIOGRAPHY 119 - 119

CHAPTER -1

INTRODUCTION

- NEED FOR THE STUDY

- OBJECTIVES OF THE STUDY

- METHODOLOGY OF THE STUDY

- FRAMEWORK OF THE STUDY

- LIMITATIONS OF THE STUDY

NEED FOR THE STUDY

TRIPL (Tecumseh Products India Pvt. Ltd) is a successfully managed

company as evidenced in its financial performance. Evolution of financial

performance of company is a continues process for understanding the

direction in which the company is moving so as to decide and implement the

feature course of action with a view achieves the in the objectives in the best

interest of the organization

Financial performance can be done from the point of view of various interest

groups such as owners, management, leaders, etc.; however, here it is an

analysis to understand financial performance of TRIPL by using the

technique of the ratio analysis

OBJECTIVES OF THE STUDY

The present study has been conducted to achieve the following objectives.

1. To analysis and portray the existing position of TRIPL

2. To study the short term solvency position of TRIPL

3. To study the leverage position of the TRIPL.

4. Evaluate the efficiency utilization of assets of TRIPL.

5. To identify the problem, if any, in the overall performance of the

TRIPL and offer suggestions.

METHODOLOGY OF THE STUDY

With a view to achieve the objectives data and information for the study are

collected from both primary and secondary sources. The stress is however

more the later.

Primary data

The primary data was collected from the discussions with the concerned

officers and staff of the organization.

Secondary data

The secondary data was gathered from published and unpublished records

and annual reports of the company further magazines and the textbooks of

financial management and also from web sites of the company and from

other sources of secondary data

FRAME WORK OF THE STUDY

In the project report entitled financial performance of Tecumseh Products

India Private Limited, Hyderabad, is organized in six chapters.

The first chapter contains a brief description about the Objectives of the

study, frame work of the study, need for the study, methodology of the study

and Limitations of the study.

The second chapter provides industry profile.

The Third chapter provides the profile of TRIPL, Hyderabad.

The fourth chapter carries the theoretical aspects of the working capital and

ratio analysis.

The fifth chapter deals with the financial analysis of the TRIPL.

The sixth chapter presents the summary and findings.

LIMITATIONS OF THE STUDY

The study has been conducted in a systematic and comprehensive way so as

to make the project work an unable one. However, the topic under my study

may not be free from limitations due to the following factors

The major limitation of the project under study was time. Since it was

to be completed within a short period of time, which is not sufficient

to undertake a comprehensive study.

Since the financial matters are sensitive in nature the same could not

acquired easily.

The study is concerned to only the five years of TRIPL.

CHAPTER-2

COMPANY PROFILE

&

INDUSTERY PROFILE

- REFRIGERATION COMPRESSOR

- HISTORICAL DEVELOPMENT OF COMPRESSORS

- STRUCTURE OF THE REFRIGERATION COMPRESSOR

INDUSTRY

- TECHNOLOGICAL STATUS OF INDIAN INDUSTRY

REFRIGERATION COMPRESSOR

Refrigeration compressor is the heart of any refrigeration system. The

compressor can be: reciprocating, rotary, centrifugal, screw or an axial flow

type, based on the principle of compression. Depending upon the location of

the drive, compressors are classified as hermetic, semi-hermetic and open

type. Reciprocating and rotary compressors, which have the compressing

element and drive motor sealed in a single, welded-housing, are called

hermetically sealed compressors. Instead of single, welded-housing, if the

enclosure is bolted together, then the assembly becomes semi-hermetic. In

this type, in addition to reciprocating and rotary types, screw and centrifugal

compressors are also manufactured. However, if the compressors and drive

units are not in single housing, the compressors are called open type.

Compressors manufactured in India are mostly the reciprocating type.

Centrifugal compressors are characterised by large capacity, suitable for

extremely low temperatures and ability to carry varying loads. Rotary

compressor is a hermetic type compressor where the mechanical structure

and motor assembly are directly fitted in the same shell, and where the shell

is sealed by means of welding. Rolling piston and sliding vane are the main

types of rotary compressors.

In reciprocating compressors, a connecting rod is used to convert the rotary

movement of the crankshaft to the reciprocating movement of the piston.

The piston slides, in a cylinder to compress the refrigerant gas. When the

difference between condensing temperature and evaporating temperature is

high, the pressure ratio for compression also becomes high and conducting

compression in two stages becomes desirable. A screw compressor is a

positive displacement rotary machine. Depending upon mountings, there are

two types viz. vertical and horizontal screw compressors. Depending upon

the number of screws, there are mono- screw and twin-screw compressors.

Application of refrigeration compressors can be: for refrigerators, deep-

freezers, water coolers, bottle coolers, room air-conditioners, packaged air-

conditioners, water chillers, self-contained A/Cs, bus/train/ship air-

conditioning, refrigerated vans and cold-storages. End-uses of refrigeration

compressors can be in: domestic, commercial and industrial sectors. In

domestic sectors, the end- uses are for preserving and storing food and for

comfort air-conditioning. In the commercial sector, the end-uses are: in

central air-conditioning, water coolers, and commercial refrigerators. End-

uses in the industrial sector include preservation of food, fruit juice

concentrates, and alcoholic drinks; preserving systems for meat, fish, poultry

and dairy products. Other applications of refrigeration compressors are

process refrigeration such as in the drugs and pharmaceutical industry;

textile industry, rubber industry and thermal power generation.

HISTORICAL DEVELOPMENT OF COMPRESSORS

For refrigeration compressors, development of technology started around the

year 1865. In the period 1865 to 1875, a few types of refrigeration

compressors were made each year. These were massive steam-engine driven

machines with their weights in tons, considerably in excess of their capacity

in tons of refrigeration. Before 1900, some compressors were equipped with

cylinder by-pass valves for capacity control. Electric motor belted-drives

also started to make their appearance. Rare use of sulphur dioxide as

refrigerant was made. In the period from 1900 to 1925, rotating seals were

tried in small compressors. Automatic capacity controls were developed.

Operating speed increased to 800 rpm. Compressors came to be directly

driven by synchronous motors. During the period 1925 to 1950, reed valves

began to appear. The 2-pole electric motors at 3500 rpm were used for drive.

Freon refrigerants such as R-ll, R-114, and R-22 were invented. During the

period 1950 to 1975, the refrigerant R-22 was used in place of R-12 and

2-pole motors in place of 4-pole motors were used. The ozone depleting

effects of chlorofluorocarbons (CFCs) have resulted in a large number of

countries signing the Montreal Convention, according to which the

developed countries have to phase out use of R-ll, R-12, R-113, R-114, R-

115, R-13, R-lll, R-112, R- 211, R-212, R-213, R-214, R-215, R-216 and R-

217 by the year 2000, and developing countries by the year 2015., The use

of new CFCs which are ozone friendly and are under development at present

necessitate modifications in compressor designs in some cases. They may

also affect the energy efficiency of compressors also. As regards the

compressor type wise development; the reciprocating compressors were the

pioneers, followed by, centrifugal, rotary and screw compressors. Among

these types, the reciprocating compressors have almost reached their

technological development limits. Regarding the future trend, scroll and

eccentric cam compressors are being developed in advanced countries.

STRUCTURE OF THE REFRIGERATION COMPRESSOR INDUSTRY

a) Manufacturers

The manufacture of the refrigeration compressors started in India around the

year 1960 for small hermetic compressors for refrigerators as well as the

larger capacity open type compressors. Today, a wide variety of

compressors are produced in India with the capacity as high as 700 HP. The

industry is composed of both organized sector of medium and large-scale

manufacturers and an unorganized sector of small-scale units. The small

units produce slow-speed compressor models, which are still used in India

for limited purposes. There are 14 manufacturers in the organized sector.

They are:

i) Sanden Vikas (India) Ltd., Faridabad (Haryana) - A/C compressor for

motor cars.

ii) Kirloskar Brothers Ltd., Karad (Maharashtra) – Hermetic

compressors.

iii) Shriram Refrigeration Industries Ltd., Hyderabad (A.P.) Hermetic

compressors.

iv) Godrej & Boyce Mfg, Co, Private Ltd Bombay – Hermetic

compressors.

v) Kelvinator of India Ltd., Faridabad (Haryana) – Hermetic

compressors.

vi) Hyderabad Allwyn Ltd., Hyderabad (A.P.) – Hermetic compressors.

vii) Voltas Ltd., Bombay & Warora (Maharashtra) - Hermetic, Semi-

hermetic and Open type compressors.

viii) Kirloskar Pneumatic Co. Ltd., Pune (Maharashtra) – Open type

compressors.

ix) Vulcan Laval Ltd., Satara (Maharashtra) - Open type compressors.

x) Frick India Ltd., Faridabad (Haryana) - Open type compressors.

xi) Air Control & Chemical Engineering Co. Ltd., Nandej (Gujarat) -

Open type compressors.

xii) Utility Engineers (India) Ltd., Dharuhera (Haryana) – Open type and

Semi-hermetic compressors.

xiii) Blue Star Ltd., Bombay (Maharashtra) - Open type compressors.

xiv) Batliboi & Co., Udhna (Gujarat) compressors.Semi-hermetic

b) Installed capacity and its utilisation

At present, the total licensed capacity of these companies is 13,87,250 Nos.

per annum, whereas the total installed capacity is 10,22,170 Nos. As regards

the utilization of installed capacity, the industry presents an unbalanced

picture for different types of compressors as shown in the following table.

Utilisation of capacity

(In Numbers)

Compressor typeTotal

Production(1985-86)

TotalInstalledcapacity

(1985-86)

Capacityutilisation

Air-conditioningcompressors for

automobile10,000 25,000 40%

Hermeticcompressors

7,78,614 8,81,000 88.4%

Open type andSemi hermeticcompressors(all varieties)

2,444 15,440 15.8%

c) Import and export

Refrigeration compressors are imported in India as part of initial import in

the phased production programme under the collaboration agreements or

some special types or capacities, which are not manufactured in the country.

Some compressors are also imported as part of projects awarded to foreign

companies. Export of compressors is usually as a part of an end-project or a

part of an air-conditioning or refrigeration project. The export performance

of the industry is not very encouraging.

The main reasons for this are:

Price The international prices are at least 40% cheaper than the

Indian export prices.

Quality The quality of products of advanced countries is superior

and more reliable.

Models The advanced countries do continuous product

improvement and are able to bring new models every

year in the market.

Marketing The marketing and after sale service is not properly

undertaken by the Indian manufacturers, barring a few

exceptions. The Indian manufacturers will have to

improve on all these disadvantages with appropriate help

from the Government.

d) Financial status and scale of operation:

Most manufacturers are multi-product companies producing compressors as

one of their products: hence the data of separate investment and costs for

compressors vis-a-vis income is not available. The financial health of a

company as a whole has, therefore, been studied. It was observed that all

companies, except ACCEL, are making profit. ACCEL had been making

losses for some years and it has been taken over by Best & Crompton Ltd.,

since 1986 and is under rehabilitation. Amongst the companies, Frick India

Ltd., Vulcan Laval Ltd., Blue Star Ltd., and Kelvinator of India show sound

financial health with the return on capital employed is consistently above

10% and return on share capital above 35%.

TECHNOLOGICAL STATUS OF INDIAN INDUSTRY

a) Sources of technology

Since the beginning of the refrigeration industry in India, refrigeration

compressors have been manufactured with foreign technical collaboration.

Even today, most of the established manufacturers continue to enter into

fresh foreign collaborations for producing new types of compressors or for

updating and expanding the present range. The only notable exception in this

regard is Godrej & Boyce Mfg. Co. Ltd. which has developed a hermetic

compressor for its refrigerator entirely with its own research and

development. .

There is no example of technology transfer among Indian manufacturers.

Moreover, collaborations with the same foreign companies have been

concluded at different times for updating or manufacturing new types of

compressors. All this goes to show that there is hardly any original design

and development work undertaken in India; or, whatever has been attempted

so far has not met with much success. The R&D effort in India is mainly

aimed at indigenisation of the compressors as per the collaborator's

specifications and according to the phased manufacturing programme.

b) Selection of foreign collaborator

The selection of foreign collaborator was found to be based on many factors

such as:

i) Quality of products

ii) Financial participation of collaborator

iii) Willingness of collaborator

iv) Previous trading relations i.e. the Indian company importing the

collaborator's compressor for use in own products or projects

v) Availability of collaborator for collaboration in India.

There are three companies, namely, Sanden Vikas (India) Ltd., Kelvinator of

India Ltd. and Frick India Ltd., in which there is a financial participation of

the collaborator in addition to technical collaboration.

c) Restrictive clauses in collaboration agreements

The restrictive clauses pertain to export, use of collaborator's brand name

and transfer of technology to other Indian manufacturers. Regarding exports,

most collaborators have barred the Indian manufacturers to export to

countries where the collaborators have their own licensing arrangements or

trade interests.

Regarding the use of collaborator's brand-name, in most cases the words

"manufactured under license of." etc., can be used during the period of

agreement.

The transfer of technology has not been allowed during the tenure of

agreement in the case of any company. After the tenure is over, the Indian

company is free to transfer technology to others.

d) Technical support of collaborator

In all the collaborations, the collaborator has agreed to give all technical

support for indigenisation of the compressor. Adequate training in

collaborator's plant as well as in Indian company's plant is provided.

e) Research and development activities

The research and development carried out by the Indian manufacturers is of

applied nature. The main effort is to indigenize the collaborator's design

within the agreement period. Once this is achieved, many manufacturers

have done development in compressor components by way of change of

material, little modification in design and such other improvements. Some

have developed compressor models of intermediate capacities in the range

by making suitable dimensional changes. No manufacturer has designed a

compressor on his own except Godrej & Boyce. The reasons for this state of

affairs are:

i) The low volume of turnover of business does not permit sizeable

investment in original research.

ii) It is faster to update technology through collaboration than through

own research.

PROFILE OF TECUMSEH PRODUCTS INDIA

PRIVATE LIMITED, HYD

- ORGANIZATION PROFILE

- DEPARTMENTS OF TRIPL

- 5-S PHILOSOPHIES

- STRATEGIES AND PROCESSES AT TRIPL

- TRIPL’S VISON AND MISSION

- PRODUCTS AND SERVICES

- PRODUCT PROFILE

- COMPETITORS ANALYSIS

ORGANIZATION PROFILE

Tecumseh Products India private Limited is an ISO 14001 and 9001 certified

American based multination company, with as core expertise in

manufacturing hermitically sealed compressors. Tecumseh India is a 100%

subsidiary to Tecumseh Products Company (TPC) USA, which the world’s

only full line independent manufacturer of compressors. TPC has 29

manufacturing locations in four continents. In India the company has 20

sales offices and in extensive networks of over 200 dealers and more than

600 registered small-scale manufacturers.

Tecumseh India is the preferred supplier to the who’s who of the AC & R

Industry in India and in the Middle Ease, SAARC courtiers. The company

was originally established and registered in 1963 under the name of the Usha

Refrigeration Industries Limited (URIL) started in 1963. URIL

manufactured compressors for water coolers, air coolers and air

conditioners, Lala Charath Ramji who was from a renowned industrial

family of DC and Ceremonial Group of Companies started URIL.

In 1970 the URIL was changed to C. Shriram Refrigerations Ltd., and the

business was also diversified towards manufacturing of diesel engines and

water coolers. Sriram Industries played a great role in the field and captured

more than 50% markets shares in India. Shriram Industries also kept its

hands in international trade and were successful in exporting their products

to the neighboring countries, Nepal and Bangladesh.

In 1980 Lala Charath Ramji son Mr. Siddharth C Shriram became the

chairman cum Managing Director of the Company. The period was sea

change in industrial policy, which resulted in a great change in the industrial

sector.

In the process for survival, Shriram went to Tech collaboration with Westing

House US and was named as Siel Compressors. Siel compressors were the

first Indian company to manufacture compressor. Later Westing House

stopped manufacturing compressors and Siel went into technological

collaboration with Tecumseh Products Company USA in1988. Tecumseh

means ‘Crouching Panther’ derived from chief of the Shawnee Tribe (1768 –

1813). It started its operations to offer new state of AW series to Indian

customer. Subsequently Tecumseh Products Company took over Siel group

in 1997 and Siel Group became 100% subsidiary to Tecumseh Products

Company. As soon as Tecumseh took over the company its stopped

manufacturing water coolers restricted its products to CFA / hermitically

sealed compressors.

Tecumseh Products Company invested $80 million in Indian operation

known as Tecumseh Products India Pvt. Ltd (TRIPL). TRIPL has two states

of art manufacturing facilities at Hyderabad, Andhra Pradesh and

Ballabgarh, Haryana with a CADEM Center at the Hyderabad plant to meet

global engineering needs.

TRIPL has gained core expertise in Research and Development, AW

assembly as a AW machine shop such that it acquired a lion’s share of the

Indian compressor market by gaining a 50% share.

HYDERABAD PLANT:

The Hyderabad plant is on a sprawling 54-acre land at the Balanagar

Industrial belt 15 km. Away from Hyderabad city on the highway line going

towards HMT Ltd Nassau road. At Hyderabad plant TRIPL manufacturers

Air conditioners, from 1200 BTU to 60000 BTU and compressors for deep

freezers, bottle cooler and water coolers which are considered to be world’s

No. 1 in the 150 million compressor market a year.

The Hyderabad Plant has a capacity of manufacturing more than 3000 units

per day. The Hyderabad has a technology development center with full

Research and Development facility. The plant is also supported by two

service vendors: AW service center and Mc Service center. The Hyderabad

plant has 6 regional offices among which four offices are at the Metro cities;

Delhi, Mumbai, Kolkata and Chennai and remaining two are at

Ahmedabad and Secunderabad. Besides these there are branch offices and

depots located in prime cities across the country. The Hyderabad plant also

has a network of about 177 dealers across the nation and are proffered

Suppliers to key original equipment manufacturers (OEM’s) like LG, Voltas,

Bluster, Gore, Videocon, Fodders, Matrix, Hitachi, etc.,

TRIPL, Hyderabad plant was successful in getting the ISO 9001 certification

for maintaining quality of the compressors in 1994 and for the Eco friendly

environment maintenance the company has got ISO 14001 certification

The Management has started development activities in the following areas:

Effluent treatment plant

Tree Plantation

Rain Water Harvesting is to increase the ground water level and

TRIPL has the distinction of being the first organization in thus record.

Vermi Culture is the process of utilizing the canteen food wastage for

converting into natural manner

Department of TRIPL:

Human Resource Management

Accounts Department

Attendance and Pay Office (A&PO)

Export Oriented Unit (AK Kit)

Technology Development Centre (TDC)

Maintenance and Engineering Department

Quality Development of A W assembly

A W Press Shop

A W Machine Shop

Service Center

Dispensary

Chemical and technological laboratories

TRIPL has a total of 766 permanent employees as on which include

o 172 officers

o 232 staff

o 362 workers

BALLABGARH PLANTS:

At Ballabgarh, Haryana TRIPL has invested Rs. 200 crores for

manufacturing if Non – CFC Compressors. The Ballabgarh Plant is one of

the best compressors manufacturing unit in Asia. The plant is extended on

21 – acre land on the Delhi – Matura National high way. The plant has a

capacity to manufacture 25000 units per month.

5 – S Philosophies

Tecumseh encourages its employees to follow these philosophies, which is

the Japanese way of working.

1) SERI(Sorting Out):

a. Look around your work area and ask yourself “Is it really necessary

for all items to be there? “

b. Separate items “O. K” re-workable a rejected items

c. Re-work there – workable items and dispose off the rejected items

2) SEITION (Systematic Arrangement):

a. Items must be place in prefixed locations so that they are accessible

and can be easily use

b. Items should be clearly identified by labeling them properly

3) SEISO (Spic and Span):

a. Clean the work place yourself

b. Clean all the equipment including table etc. yourself

4) SEIKETSU (Serene Atmosphere):

a. A clean work place properly selected with a proper arrangement will

soon become dirty if SEIRI, SEITON and SEISO are not practiced

regularly

b. To achieve serene atmosphere the three steps of SEIRI, SEITON and

SEISO should be continuously repeated

c. We would keep our area of work neat and clean including your own

attire

5) SHITSHUKE (Stick to Self Discipline):

a. Follow rules and regulation strictly

b. Adhere to timings and respect time.

c. Confirm to standards while working

d. Follow the prescribed operational standards

The company pays a incentives of Rs.75 per month to its employee for

following these 5 – S philosophies

ADVANTAGES OF 5’S:

By thoroughly enforcing 5-8 in each work area.

Operations can be performed without error proceeding in, well-

regulated fashion, resulting in fewer defective items. Thereby

increasing the overall quality of product.

Operations can be performed safely and comfortably, reducing the

chances of accidents.

Machinery and equipment can be carefully maintained, reducing

the number of breakdowns.

Operations can be performed efficiently, eliminating waste thereby

increasing the efficiency and productivity.

HOW TO ACHIEVE 5’S:

Every employee can achieve ‘5-S’ easily by having a close look at his/her

work place. He/she is to ensure that

No rejected /unwanted items are lying at his/her work place.

All items are kept in proper locations/order.

Everybody should co-operative in keeping his/her and other’s area

and the Machines clean.

Follow the rules and regulations and maintain required standards.

Strategies and Process of TRIPL

Work place improvements (5 – S philosophies)

Creativity club

KRA’s (improvements / suggestions)

Variable earnings – Sharing of value addition

Agreement process – organization needs

Non – conformance reporting / audits

Open / House communication meetings

Team Assessments and feedback

Changing life style

TRIPL’S VISION AND MISSION

VISION

It is our goal to be the global leader in all of the markets in which we choose

to participate. We will pursue disruptive technologies to redefine our

products.

MISSION

We will leverage our global expertise in mechanical, electrical, fluid

handling, related components and services to provide comprehensive

solutions for our customers needs – compressors, engines, electric

motors, pumps, electronics, and controls.

We will be best in class and the most effective producer by utilizing

the principles of TQM, 6 sigma and lean.

Our organization will modify itself in response to change in

environment at a pace and amount of change that can be made without

eliminating or impeding our ongoing effectiveness.

Incisive, continuous strategic thinking will be well communicated and

shared by the organization.

IMPORTANT EVENTS

2000-01

TECUMSEH FULLY ACQUIRED

SRIRAM, HYDERABAD

WHIRLPOOL’S COMPRESSOR.

Facility at Faridabad, Ballabgarh.

2001-02

Development of plant in Ballabgarh.

2002-03

Amalgamation with TIPL.

2003-04

Voluntary retirement scheme.

Industrial unrest and lockout in the first half of the year.

Export obligations not met during the year & high foreign outgo.

Obligations met towards customers by importing finished goods

and selling loss.

2004-05

Setting up of the CADAM center.

2005-06

Setting up of a 100% EOU for export of compressors and its parts.

Expansion in installed capacity at the Hyderabad plant.

Total foreign outgo reduced drastically.

Improvement in the market for compressors as a result of an

improvement in market for air-conditioners and refrigerators.

2006-07

This year exports showed a growth of three times over previous

years in volumes.

A W capacity has launched two new commercial models of MLA

sense country wide competition among the engineering industries.

Won the “GREENTECH environment excellence silver award” in

the countrywide competition among the engineering industries.

2007-08

Tecumseh compressors for china.

Tecumseh posts 84% rise in exports earnings.

Tecumseh India to set up rotary compressors unit.

2008-09

Won the “GREENTECH environment award” in the countrywide

competition among the engineering industries.

AWARDS AND RECOGNITIONS

Hyderabad plant was awarded the commendation in safety, health

& SHE conducted by CII Chennai.

Hyderabad plant achieved the GREENTECH ENVIRONMENT

EXCELLENCE GOLD AWARD in the countrywide competition

among the engineering achievement in environment management.

Products and Services

With a widely used range of Reciprocating, Rotary and Scroll

compressors for varied applications, Tecumseh caters to the entire spectrum

of cooling needs for Air Conditioning, Refrigeration, and Commercial

Refrigeration Application. The superior technology that is built into these

compressors ensures that they operate with high-energy efficiency and at

low noise levels. Compressors manufactured in India are trivialized to suit

the exacting Indian conditions. Which means that they with stand wide

voltage fluctuations and perform well even under extreme weather

conditions.

The range includes the energy efficient AW Series, super silent AWQ

Series, and the study, reliable and eco-friendly MLA series of compressors.

Product Range

1. Refrigerator Compressors.

2. Commercial Refrigeration Compressors.

3. Air-Conditioning Compressors.

4. Commercial Air-conditioning Compressors.

5. Condensing units.

COMPETITORS ANALYSIS

In India TRIPL has four man competitors viz., Kirloskar, Volts, Bluestar

and Carrier Air Con Ltd. TRIPL is the market leader with an overall 50%

market share impressed in terms of valued. In this segment of Air-condition

compressor, it has stiff competition with Kirloskar Copeland. The other

manufacturers i.e., Carrier Air con is looking for divestment of their

compressor division as a part of their comeback strategy they have been on a

downside since 1999 it has also delisted its share during their period.

Tecumseh Refrigeration and air condition products have concerned a large

chunk of the Indian market as its clients include most of the OEM’s

Tecumseh has a 40% of market share of the domestic Air-condition and 30%

of the refrigerator compressor market.

Kirloskar is 51:49 joint between Kirloskar brother and Copeland

Corporation, a global competitor of TPC, USA. The joint venture company

took over the compressors manufacturing and sell business of hermitic

compressors division at Karadand a title of Kirloskar brother limited started,

production, of hermetic compressor way back in 1996, at Kirloskar Wadi, it

was then with a technical collaboration with TPC,USA, Which had not yet

entered India, Kirloskar Copeland as part of their strategy to increase their

sales have started manufacturing of condensers, which are mainly used in

dairies, cold storage, industrial chillers and water coolers. The estimated

market size in India being RS.25 Crores.

CHAPTER – 3

LITERATURE REVIEW

- WORKING CAPITAL CYCLE

- CONCEPT OF WORKING CAPITAL

- TYPES OF WORKING CAPITAL

- COMPOSITION OF WORKING CAPITAL

- OBJECTIVES OF WORKING CAPITAL

- FACTORS DETERMING WORKING CAPITAL

- RATIOS RELATING TO WORKING CAPITAL

What is Working Capital?

Firms need cash to pay for all their day-to-day activities. They have to pay

wages, pay for raw materials, pay bills and so on. The money available to

them to do this is known as the firm’s working capital. The main sources of

working capital are the current assets as these are the short-term assets that

the firm can use to generate cash. However, the firm also has current

liabilities and so these have to be taken account of when working out how

much working capital a firm has at its disposal.

Working capital is therefore: -

WORKING CAPITAL = Current Assets

||

stock + debtors + cash

- Current liabilities

Working capital management means management of current assets of the

firm. It can be defined in simple terms as excess of current assets over

current liabilities. In short it is the difference between inflow and outflow of

funds. Working capital includes stock of raw material, semi finished goods

including work in progress, cash in hand and bank and debtors after

deducting current liabilities i.e. sundry creditors for expenses ex: salaries

and other administration expenses, interest payable to term lending

institutions and other financial institutions with in 12 months and creditors

for purchase of Raw Material and any short term advances towards sale of

goods.

The working capital is an important part of the top half of the firm's balance

sheet. It is vital to a business to have sufficient working capital to meet all its

requirements. Many businesses have gone under, not because they were

unprofitable, but because they suffered from shortages of working capital.

Working Capital Cycle

Cash flows in a cycle into, around and out of a business. It is the business's

life blood and every manager's primary task is to help keep it flowing and to

use the cash flow to generate profits. If a business is operating profitably,

then it should, in theory, generate cash surpluses. If it doesn't generate

surpluses, the business will eventually run out of cash and expire.

The faster a business expands the more cash it will need for working capital

and investment. The cheapest and best sources of cash exist as working

capital right within business. Good management of working capital will

generate cash will help improve profits and reduce risks. Bear in mind that

the cost of providing credit to customers and holding stocks can represent a

substantial proportion of a firm's total profits.

There are two elements in the business cycle that absorb cash - Inventory

(stocks and work-in-progress) and Receivables (debtors owing you money).

The main sources of cash are Payables (your creditors) and Equity and

Loans.

Each component of working capital (namely inventory, receivables and

payables) has two dimensions: TIME and MONEY. When it comes to

managing working capital - TIME IS MONEY. If you can get money to

move faster around the cycle (e.g. collect monies due from debtors more

quickly) or reduce the amount of money tied up (e.g. reduce inventory levels

relative to sales), the business will generate more cash or it will need to

borrow less money to fund working capital. As a consequence, you could

reduce the cost of bank interest or you'll have additional free money

available to support additional sales growth or investment. Similarly, if you

can negotiate improved terms with suppliers e.g. get longer credit or an

increased credit limit; you effectively create free finance to help fund future

sales.

It can be tempting to pay cash, if available, for fixed assets e.g. computers,

plant, vehicles etc. If you do pay cash, remember that this is now longer

available for working capital. Therefore, if cash is tight, consider other ways

of financing capital investment - loans, equity, leasing etc. Similarly, if you

pay dividends or increase drawings, these are cash outflows and, like water

flowing down a plughole, they remove liquidity from the business.

CONCEPT OF WORKING CAPITAL:

There are three types of working capital, Gross working capital, Net working

capital and fixed working capital.

1. Gross Working Capital: It refers to the firms investment in current

assets i.e., mainly stock, debtors, bills receivables and cash. This is

also known as ‘Current capital concept’ or ‘Circulating capital

concept’. It is represented by the sum total of the current assets of the

enterprise. It is known as Circulating capital’ because current assets of

a company are changed from one form to another, for e.g. from cash

to inventories, inventories to receivable to cash.

The Gross capital concept focuses attention on two aspects of current

assets management:

a). Optimum investment in current assets and

b). Financing of current assets.

The gross capital concept takes into consideration that: every increase

in the funds of the enterprise would increase its working capital. This

concept is more useful in determining the rate of return on

investments in working capital.

2. Networking capital: It is Excess of Current Assets over Current

Liabilities. Alternatively it is that portion of the firm’s current assets,

which is financed by long-term funds.

Net working capital being the difference between current assets and

current liabilities is quantitative concepts.

It indicates the liquidity position of the firm.

Suggests the extent to which working capital needs may be

financed by permanent sources of funds.

3. Fixed working capital: Every firm is required to maintain a

minimum balance of cash, inventory etc, in order to meet the business

requirement even in the slack seasons. This part of current assets is

called as permanent or fixed working capital.

TYPES OF WORKING CAPITAL:

Depending upon the nature of the funds blocked, working capital can

be of two types

1. PERMANENT OR REGULAR WORKING CAPITAL

2. VARIABLE WORKING CAPITAL

PERMANENT WORKING CAPITAL:

The magnitude of the current assets depends upon the firms operating cycle.

The operating cycle is a continuous process and the need for current assets is

also continuously. But the level of current assets needed is not always same.

It increases or decreases overtime. However there is always minimum level

of current assets which is continues required by a firm to carry out its

business operations. The minimum level of current assets is called

permanent or fixed working capital.

It represents the minimum amount of investment in current assets that is

seemed necessary to carry on operations at time. It is also known as ‘hard

core’.

It is of two kinds:

a). INITIAL WORKING CAPITAL:

At its inception and during the formation period of its operations, a company

must have enough cash funds to meet its obligations. In the initial year it as

revenues may not be regular and adequate credit arrangements may not be

available from banks, financial institutions, etc till it has established its

credit standing, credit may have to be granted on sales to attract the

customers.

b). REGULAR WORKING CAPITAL:

It is the amount of working capital needed for the continuous operations of

the business of the company. It refers to the excess of current assets over the

current liabilities so that the process of conversion of cash into stock, stock

into sales, receivables and collections is maintained without any breaks.

VARIABLE WORKING CAPITAL:

This working capital required over and above the permanent working capital

depends upon changes in production and sales are called fluctuating or

variable working capital or temporary working capital. There may be

changes either increase or decrease in working capital. Many the variable

working capital required in season dependent.

It represents additional assets required at different times during the operating

year to cover any change or variability from the normal operations. It can be

of two parts:

A. Seasonal working capital

B. Special Working Capital

A. Seasonal working capital:

The amount to be blocked due to seasonal nature of industry. Examples are

package tours and summer tours. Obviously it refers to financial

requirement that cope up during that particular season. Beyond their initial

and regular circulating capital most business will require at stated intervals a

large amount of current assets to fill the demands of the seasonal busy

periods.

B. Special Working Capital:

Extra funds are needed to meet contingencies, festivals, and special

occasions.

All business enterprises have to be prepared to meet unforeseen eventualities

that may arise in the course of their operations. Therefore, they must have

extra funds at ‘Unstated Periods’ to meet contingencies.

COMPOSITION OF WORKING CAPITAL:

Working capital consists of

Current Assets

Current Liabilities

Current Assets:

Current Assets are those, which can be converted into cash with one year

without affecting the operations of the firm.

In the management of working capital, two characteristics of current assets

must be borne in mind:

1. Short life span

2. Swift transformation into other asset forms.

The life span of current assets depends upon the time required in the

activities of procurement, production, and sales.

List of Current Assets:

Cash and Bank Balances

Investments:

a) Government and Other Trustee Securities

b) Fixed deposits with Banks

Receivables arising out of Sales

Instalments of Deferred receivable due within a year

Raw Material and components used in the process of manufacture

including those in transit

Stock in Process including semi-finished goods

Other consumable spares

Advance payment of tax

Advance for purchase of raw materials, components and consumable

stores

Prepaid Expenses

Deposits kept with public bodies for the business operations.

Current Liabilities:

Current Liabilities are those, which are expected to fall due or mature for

payment in a short period not exceeding a year and represent short term

sources of funds.

List of Current Liabilities:

Short term Borrowings (including bills purchased and discounted)

from

a) Banks and

b) Others

Unsecured Loans

Public deposits maturing in one year

Sundry creditors for raw materials and consumable stores and spares

Interest and other charges accrued but not due for payment

Deposits from Dealers, Sellers agents, etc

Instalments of term Loans, Deferred payments, Credits, Debentures,

Redeemable preference shares and long term deposits, payable within

one year

Statutory Liabilities

a) P F dues

b) Provision for taxation

c) Sales tax and excise tax

d) Obligations towards workers considered statutory

e) Others

Miscellaneous Current Liabilities

a) Dividends

b) Liabilities for expenses

c) Gratuity payable within one year

d) Other provisions

e) Any other payment due within one year

OBJECTIVES OF WORKING CAPITAL:

The main aim of Working Capital Management is to attain a Trade-off

between Profitability and Risk. Here Risk refers to profitability that a firm

will become technically insolvent. Risk is commonly measured by using the

amount of net working capital or the current ratio. Thus, more the new

working capital, the more liquid the firm and therefore less likely it is to

become technically insolvent. On the other hand, Lower levels of liquidity

are associated with increasing levels of Risk. To increase the amount of

profits, a firm, may sacrifice solvency i.e. taking risk of technical

insolvency and maintain relatively low levels of current assets. When the

firm does so, its profitability would improve but would be exposed to greater

risk of technical insolvency. Thus, if a firm wants to increase profitability it

must also increase its risk and if it wants to decrease risk, it must decrease

profitability. Therefore, Working capital management involves a Trade-off

between Risk and Profitability.

FACTORS DETERMING WORKING CAPITAL:

There are no hard and past rules for determining working capital of the firm.

There are several factors which influence working capital need of the firm

and the factors may change from time to time. The following are the factors

that generally influence the working capital requirement of firm.

a. Nature & size of the business

b. Trading & service orient firms have very small investment in

fixed assets, but require a large sum of money to be invested in

working capital. Manufacturing business requires much

working capital but it also depends nature of business.

REVENUE GROWTH:

The working capital requirement of the firm increase as it revenue

grow. But to establish a direct relationship between volume of

revenue and working capital requires is difficult. Practically current

assets will have to employ before revenue growth takes place. It is

therefore necessary to make advance planning of working capital

requirement for a firm on a continuous basis.

DEMAND CONDITION:

Many firms are seasonal in nature and cyclical fluctuations in demand

for their products and services. These business variations effect the

working capital requirement i.e., temporary requirement of working

capital of the firm. Under the boom conditions the firm requires more

working capital. As they will invest huge funds infixed assets.

Seasonal fluctuations i.e., peek season demand in more resources a in

production, in certain month, will also effect working capital

requirement. Therefore financial arrangements for seasonal working

capital requirement can be made in advance. The financial plan should

be flexible enough to take care of some abrupt seasonal fluctuation.

OPERATING EFFICIENCY AND PERFORMANCE:

The operating efficiency and performance of the firm relates to the

optimum utilization of resources at minimum cost. If the firm can

efficiently controlling operating costs then it can effectively

contributing to its working capital. Better utilization of resources

includes profitability and internal cash profit can be utilized as a part

of working capital. The availability of cash generated will be available

for working capital depends upon taxation, dividend, retention policy

and depreciation policy of firm.

FIRM CREDIT POLICY:

Every firm must allowed credit to its customers. The credit period

depends upon the norms of the industry and market conditions. Effect

the credit policy i.e. credit to customers allowed after properly

accessing the credit worthily ness of the customers and firms

collections will maintain the level of book debts which anti effect the

working capital of the company.

RATIOS RELATING TO WORKING CAPITAL:

To evaluate the financial condition and the purpose of a firm the financial

analyst needs certain yardsticks frequently use are a ratio relating two pieces

of financial data to each other. Different types of ratios relating to working

capital management are

1) CURRENT RATIO:

The current ratio is calculated by dividing current assets by current

liabilities.

Current ratio =Current assets /Current liabilities

Current Assets include cash and those assets, which can be converted into

cash within a year, such as marketable securities, debtors, and inventories.

Prepaid expenses are also included in current assets as they represent the

payments that will not be made by the firm in the future. All obligations

maturing within a year are included in current liabilities. Current liabilities

include creditors, bills payable accrued expenses, short-term bank loan,

income tax liability, long-term debt5, maturing in the current year.

The current ratio is a measure of firm’s short-term solvency. it indicates the

availability of current assets in rupees for every one rupee of current

liability. A ratio of greater that one means that the firm has more current

assets than current claims against them.

2) QUICK RATIO

It establishment a relationship between quick or liquid assets and current

liabilities. An asset is liquid if it can be converted into cash immediately or

reasonably soon without a loss of value. Cash is the most liquid asset. Other

assets, which are considered to be relatively liquid and included in quick

assets, are considered to be relatively liquid and included in quick assets, are

debtor’s bills receivables marketable securities (temporary quoted

investments). Inventories are considered to be less liquid. Inventories

normally require some time to rely into cash; their value also has a tendency

to fluctuate. The quick ratio is found out dividing quick assets by current

liabilities.

Quick ratio = Current assets – inventories / Current liabilities.

Generally, a quick ratio of 1 to 1 is considered to represent a satisfactory

current financial position. Although quick ratio is more penetrating test of

liquidity than the current ratio, yet it should be used cautiously. A quick

ratio of 1 to 1 or more does not necessarily imply sound liquidity position. A

company with a high value of quick ratio can suffer from shortage of funds

if it has slow paying its current obligation in time if it has been turning over

its inventories efficiency, nevertheless, the quick ratio remains an important

indeed of the firm’s liquidity.

3) INVENTORY TURNOVER RATIO:

This ratio expresses the relation between the cost of goods sold during a give

period and the average amount of inventory outstanding during a period. The

formula for these ratios is as follows:

Inventory Turnover Ratio = cost of goods sold/Avg. Inventory at cost

Avg. Inventory = opening stock + closing stock / 2

Inventory turnover ratio may also be calculated by making use of the

following formulation.

Inventory turnover ratio = net sales / Avg. inventory at selling price

Inventory turnover indicates the velocity with which goods move through

the business. It gives the rate at which inventories are converted into sales

and then into cash. Thus it helps to measure the liquidity of the firm. A high

ratio indicates quick movement of inventories and the efficiency of

inventory control. A low ratio, on the other hand, indicates existence of slow

moving and obsolete stocks.

4) DEBITORS TURNOVER RATIO:

This ratio express the relationship between net credit sales of affirm and its

trade debtor’s bills receivable there by indicates the rate at which book debts

are converted into cash. In other words, it shows how many days credit is

outstanding by debtors or the time taken to collect the debts.

Debtors turnover ratio = Net credit sales / Avgas, debtors

To calculate the debt collection period just to following:

Debt collection period = Number of working days in a year / debtors

turnover ratio

Usually the number of working days in a year is taken as 365.

The debtor’s turnover ratio or the average collection period should be

compared with the period of credit allowed to judge the efficiency of the

collection department. As a rule of thumb, the average collection period

should no exceed 11/2 times the credit period.

Sources of working capital:

Out of the total current requirement of funds some portion of current funds is

more of permanent nature and its refers to fixed working capital. Balance

portion of funds cyclical and its refers to variable working capital. Every

industrial enterprise as to maintaining a minimum stock of raw material,

work-in-progress, finished goods. Loose tools and spare parts. It always

requires money for the payment of wages and salaries throughout the year.

Funds require for these is known as fixed or permanent working capital.

Depending upon the size and volume of the business, additional working

capital is required for buying materials and for meeting the current

operational expenses. This is the variable part of the working capital. The

fixed working capital should be financed from long-term sources and

variables working capital should be financed from short-term sources.

Sources of regular working capital

Issue of share:

Rising of funds by issue of shares has certain distinct edges over others

sources, especially borrowed capital. Once procure it is not refundable

except in cash of liquidation and does not create any changes on the assets of

the company .so it is advantages for affirm to finance its fixed working

capital out of proceeds of the issuing of shares.

Issue of debenture or long term borrowing

Debentures are fixed interest-bearing securities, besides being redeemable at

the option of the company. The entire surplus after payment of debentures

interest goes to the credit of equity shareholders either in the form of interest

goes to the credit of equity shareholders either in the form of increased rates

of dividend or in the form of increased relation. Similar advantages are also

accrued if working capital is financed by long term borrowing.

Retention

Retention in the form of general reserve and or credit balance of profit and

loss account may also be used to finance fixed working capital

Sources of seasonal or variable working capital

For firms, which are in seasonal character in their business a large amount of

working capital, is required for holding inventory in peak period. But as

soon as peak period is over, their working capital becomes idle. So such

firms may not prefer to finance working capital from long-term sources.

They may find it convenient to meet working capital from short-term

sources may find it convenient to meet their working capital from short-term

sources as follows

Cash Credit

This represent the over draft facilities as the hypothecation of inventories

and bad debts. The cash credit system is unique to the Indian banking

system. Such as flexible system of bank finance is nowhere in the world.

Discount of bills

Banks discount the bills raised on the buyers of companies’ goods. This

facility helps in realizing funds without wasting for the credit period to get

over.

Bank guarantees

A Banks Issues specific guarantee to facilities business transaction between

various parts is, including government agencies.

Determination of Working capital

The factors, which usually influence working capital needs in

manufacturing undertaking, cover;

1. The nature of and size of business.

2. Manufacturing process, technology and facilities.

3. Competitive forces.

4. Speed of operating cycle.

5. Growth and expansion activities

6. Credit terms

7. Dividend policy

8. Production policy

9. Attitude towards policy

10.Inventory procedures, depreciation policy, business cycle

management attitude etc.,

11.Infrastructure the abysmal economic and physical infrastructure in

India also effects to working capital needs adversely prolonging the

operating cycle

Working capital management is an integral part of overall corporate

management. The effective management of working capital like other

areas of management requires a clear statement of goals to be pursed and

responsibility to be allocated. Cash management and short-term loans

along with the level of debtors are the responsibility of financial

executives. Inventory and credit control are managed in the other

departments these division of responsibilities makes a coordinate

approach to working capital management.

Profitability and liquidity are the twin objectives of working capital

management. Profitability and liquidity frequently conflict with each

other. Attempts to procedure maximum profitability and out of various

elements of working capital do create severe liquidity problems. At the

same time, over concentration on liquidity does dilute profits.

Management of working capital establish the best possible credit off

between the profitability of net current assets employed and the ability to

pay current liabilities as there fall due. Working capital management

includes

1. Cash management

2. Receivable management

3. Inventory management

CHAPTER - 4

DATA ANALYSIS

- CHART OF THE NET WORKING CAPITAL

- CHART OF THE SALES TO WORKING CAPITAL TURNOVER

RATIO

- CHART OF THE DEBTORS TURNOVER RATIO

- CHART OF THE CURRENT RATIO

- CHART OF THE QUICK RATIO

- CHART OF THE COMPOSITION OF CURRENT ASSETS

- PROFIT AND LOSS ACCOUNTS

- COMPARATIVE BALANCE SHEETS

Size and growth of current assets and liabilities and Net working capital of

TRIPL during the period 2003-2004 to 2007-2008

(All amounts are in thousands)

Year Current Assets

Growth Rate (%)

Current Liabilities

Growth Rate (%)

Net W.C

Growth of W.C (%)

2004-05

1500977 100 862668 100 638301 100

2005-06

1688733 112.5 1029208 119 659525 103

2006-07

2307604 153.74 1155154 134 1152450 180

2007-08

2150110 143.24 1359165 157 790945 123

2008-09

2011272 133.99 1470284 170 540988 84

WORKING CAPITAL TURNOVER RATIO (All amounts are in thousands)

YearSales

Networking

CapitalRatio

2004 – 20052648791 638309 4.15

2005 – 20063423153 659525 5.19

2006 – 20074225506 1152450 3.69

2007 – 20083901375 790945 4.93

2008 – 20094748354 540988 8.77

Sales To Working Capital Ratio

0123456789

10

Ratio

Turnover Ratio: Debtors Turnover Ratio expresses the relationship between debtors and

sales. A high Debtors Turnover Ratio or low Debt collection period is

indicative of sound credit management policy.

Table shows Debtors Turnover Ratio of TRIPL during the period 2003-

2004 to 2007-2008

(All amounts are in thousands)

Year Net Credit Sales Avg. Debt Ratio

2004 – 2005 2648791 567931 4.67

2005 – 2006 3043448 682289 4.46

2006 – 2007 3925325 612590 6.24

2007 – 2008 3614471 442498 8.17

2008 – 2009 4417677 47842 9.34

Debitor Turnover Ratio

02468

10

2004 –2005

2005 –2006

2006 –2007

2007 –2008

2008 –2009

Ratio

From the above table, it is observed that the TRIPL’s debtor’s turnover ratio

shows a good sigh. The company noted a maximum ratio of 9.34 in the year

2008 – 2009 and the maximum ratio of 4.46 in the year of 2004 -05.

If we observed the above table the ratio is increasing from 4.46 in the year

2005-2006 to 9.34 in the year 2008-09 in the year but it is decreased to 4.46

in the year 2005-06. It shows a good sign for the company.

Current Ratio:

It is the ratio of the current assets current liabilities this ratio is used to know

the company’s ability to meet its current obligations. The standard norm for

the current ratio is 2:1

Current ratio = current Assets / Current liabilities.

Table showing current ratio of TRIPL during the period 2004-2005 to

2008 -2009

(All amounts are in thousands)

Year Current Assets Current Liabilities Ratio

2004 – 2005 1500977 862668 1.74

2005 – 2006 1688733 1029208 1.64

2006 – 2007 2307604 1155154 1.99

2007 – 2008 2150110 1359165 1.54

2008 – 2009 2009547 1427828 1.40

Current Ratio

00.5

11.5

22.5

2004 –2005

2005 –2006

2006 –2007

2007 –2008

2008 –2009

Ratio

It is observed that the TRIPL’s current ratioowing a increasing trend;

the company’s liquidity position is satisfactory

The current ratio increased slightly up to 2007. But in 2008 it declined

because of increase in current liabilities, and then it started to decrease

further in2009 as 1.40. if the company maintains to increase the ratio it can

meet obligations.

Quick Ratio:

Quick ratio is relation between quick assets and current liabilities. The term

quick assets, which can be converted into cash with a short notice. This

category also includes cash bank balances short – term investments and

receivables.

Quick ratio = Quick Assets / current liabilities

Table showing quick ratio of TRIPL during the period 2004 - 2005 to

2008– 2009

(All amounts are in thousands)

Year Current AssetsCurrent

LiabilitiesRatio

2004 – 2005 870459 862668 1.01

2005 – 2006 923353 1029208 0.89

2006 – 2007 1056852 1155154 0.91

2007 – 2008 1005863 1359165 0.74

2008 – 2009 1082902 1427828 0.76

Quick Ratio

0

0.5

1

1.5

2004 –2005

2005 –2006

2006 –2007

2007 –2008

2008 –2009

Ratio

It is observed from the table that the TRIPL’s Quick Ratio is satisfactory.

The company has noted a maximum ratio of 1.01 in the year of 2006 – 2007.

Except the 2004 year, the remaining is below the standard of the norm 1:1.

But we observed the ratio of the company, it is decreasing gradually. so it is

a bad sign for the company.

Composition of current Assets(all the amounts are in thousands)

Particulars 2004 – 05 2005 – 06 2006 – 07 2007 – 08 2008 – 09 Avg.

Inventory

630518

(42%)

765380

(45.32%)

1250752

(54.2%)

1144247

(53.41%)

926645

(46.07%)

48.16

Sundry

Debtors

708107

(47.17%)

656472

(38.87%)

568707

(24.64%)

316288

(14.71%)

523360

(23.02%)

30.17

Cash and

Bank

56675

(3.77%)

35502

(2.1%)

25034

(1.08%)

58827

(2.74%)

17636

(2.74%)

4.11

Loans &

Advances

105677

(7.04%)

29032

(1.71%)

93380

(4.04%)

192467

(8.95%)

204545

(10.62%)

6.38

Other

current

Assets

-- 202347 369731 438281 339086 12.94

Total 1500977

(100%)

1688744

(100%)

2307604

(100%)

2150110

(100%)

2011272

(100%)

PROFIT AND LOSS ACCOUNT:

The income statement is also called as income statement, it is considered to

be the most useful of all financial statements. It prepared by a business

concern in order to know the profit earned and loss sustained during a

specified period. It explains what has happened to a business as a result of

operations between two balance sheet dates. For this purpose it matches the

revenues and cost incurred in the process of earning revenues and shows the

net profit earned or loss suffered during a particular period.

The nature of Income which is a focus of the income statement can be well

understood if business is taken as an organization that uses “Input” to

produce “Output”. The output of the goods and services that the business

provides to its customers. The values of these outputs are the goods and

services that the business provides to its customers. The values of these

outputs art the amounts paid by the customers for them. These amounts are

called “revenues” in the accounting. The inputs are the economic resources

used by the business in providing these goods and services. These are

termed “expenses” in accounting.

Statements of profit & loss for the year ended Dec 31, 2005 (All amount in thousands of rupees)

PARTICULARS Schedule 2004 2005

       

INCOMES      

       

sales and services      

sales (gross)   1,983,391 3,015,714

less: excise duty   286,365 366,923

Net sales   1,697,026 2,648,791

Add: service Incomes   224,878 173,847

    1,921,904 2,822,638

other incomes 13 125,693 114,172

TOTAL(A)   2,047,597 2,936,810

       

EXPENDITURES      

       

Material costs 14 1,232,971 1,737,661

decrease/increase in stock 15 (93,224) (28,949)

excise duty on stocks, scrap sales etc.,   29,236 32,655

employee costs 16 426,585 482,580

manufacturing and other expenses 17 314,637 382,604

Depreciation   157,225 143,832

Interest 18 24,758 25,793

miscellaneous expenditure written off   5,300 2,759

       

TOTAL(B)   2,097,488 2,778,935

       

profit before tax(A-B)   (49,891) 157,875

TAXATION   ---- -----

Deferred   ----- (46,315)

       

Net profit for the year   (49,891) 111,560

Profit & loss a/c beginning of the year   (420,294) (470,185)

       

Profit & loss a/c end of the year   (470,185) (358,625)

Earnings per share basic & diluted     5.60

Statements of profit & loss for the year ended Dec 31, 2006(All amounts in thousands of rupees)

PARTICULARS Schedule 2005 2006

       INCOMES             sales and services      sales (gross)   3,015,714 3,423,153less: excise duty   366,923 379,705Net sales   2,648,791 3,043,448Add: service Incomes   173,847 102,182    2,822,638 3,145,630other incomes 13 114,172 258,985

TOTAL(A)   2,936,810 3,404,615       EXPENDITURES             Material costs 14 1,737,661 2,219,601decrease/increase in stock 15 (28,949) (59,818)excise duty on stocks, scrap sales etc.,   32,655 1,933employee costs 16 482,580 588,770manufacturing and other expenses 17 382,604 378,026Depreciation   143,832 174,202Interest 18 25,793 44,428miscellaneous expenditure written off   2,759 ----       

TOTAL(B)   2,778,935 3,347,142       Profit before tax(A-B)   157,875 57,473TAXATION      

current(Net of excess provisions of earlier year written back rs.5086(2002 nil)

       ----- (86)

Deferred   (46,315) (40,971)       Net profit for the year   111,560 16,588Profit & loss a/c beginning of the year   (470,185) (358,625)       Profit & loss a/c end of the year   (358,625) (342,037) Earning per share basic & diluted   5.60 0.80

Statements of profit & loss for the year ended Dec 31, 2007(All amounts in thousands of rupees)

PARTICULARS Schedule 2006 2007

       INCOMES             sales and services      sales (gross)   3,423,153 4,255,506less: excise duty   379,705 330,181Net sales   3,043,448 3,925,325Add: service Incomes   102,182 66,668    3,145,630 3,991,993other incomes 13 258,985 426,626

TOTAL(A)   3,404,615 4,418,619       EXPENDITURES             Material costs 14 2,219,601 3,387,645decrease/increase in stock 15 -59,818 -315,934excise duty on stocks, scrap sales etc.,   1,933 17,657employee costs 16 588,770 668,065manufacturing and other expenses 17 378,026 446,527Depreciation   174,202 208,101Interest 18 44,428 36,532miscellaneous expenditure written off   ----- ------   

TOTAL(B)   3,347,142 4,448,593       Profit before tax(A-B)   57,473 (29,974)TAXATION      

current(Net of excess provisions of earlier year written back rs.5086(2002 nil)

       (86) ------

Deferred   (40,971) (3,779)       Net profit for the year   16,588 (33,753)Profit & loss a/c beginning of the year   (358,625) (342,037)       Profit & loss a/c end of the year   (342,037) (375,790) Earnings per share basic & diluted   0.80 1.55

Statements of profit & loss for the year ended Dec 31, 2008(All amounts in thousands of rupees)

PARTICULARS Schedule 2007 2008

     

INCOMES         sales and services    sales (gross)   4,255,506 3,903,005

less: excise duty   330,181 288,534

Net sales   3,925,325 3,614,471

Add: service Incomes   66,668 67,362

    3,991,993 3,681,833

other incomes 13 426,626 493,559

TOTAL(A)   4,418,619 4,175,392     EXPENDITURES         Material costs 14 3,387,645 2,828,104decrease/increase in stock 15 -315,934 186,135excise duty on stocks, scrap sales etc.,   17,657 10,414

employee costs 16 668,065 612,4

67 manufacturing and other expenses 17 446,527 508,751Depreciation   208,101 240,224Interest 18 36,532 69,032miscellaneous expenditure written off    

     

TOTAL(B)   4,448,593 4,455,127       Profit before tax(A-B)   (29,974) (279,735)Provision for taxation      

Current Tax   ---- (4000)Fringe benefit Tax   ---- (8056)

Deferred   (3,779) ----

       

Net profit for the year   (33,753) (291,791)Profit & loss a/c beginning of the year   (342,037) (375,790)       

Profit & loss a/c end of the year   (375,790) (667,581)

Earning per share basic & diluted   1.55 13.25

Statements of profit & loss for the year ended Dec 31, 2009(All amounts in thousands of rupees)

PARTICULARS Schedule 2008 2009

       INCOMES    

     sales and services    sales (gross)   3,903,005 4,748,354

less: excise duty   288,534 330,678

Net sales   3,614,471 4,417,676

Add: service Incomes   67,362 37,428

    3,681,833 4,455,104

other incomes 13 493,559 386,261

TOTAL(A)   4,175,392 4,841,365       EXPENDITURES             Material costs 14 2,828,104 3,722,053decrease/increase in stock 15 186,135 88,800excise duty on stocks, scrap sales etc.,   10,414 25,085employee costs 16 612,467 685,159manufacturing and other expenses 17 508,751 466,859Depreciation   240,224 292,689Interest 18 69,032 133,955miscellaneous expenditure written off      

       

TOTAL(B)   4,455,127 5,414,600     Profit before tax(A-B)   (279,735) (573,235)Provision for taxation    current taxation   (4000) ----fringe benefit tax   (8056) (7,355)

     

Net profit for the year   (291,791) (580,590)Profit & loss a/c beginning of the year   (375,790) (667,581)       

Profit & loss a/c end of the year   (667,581) (1,248,171)

Earnings per share basic & diluted   13.25 26.37

Balance sheet

Balance sheet is a statement of financial position of a business at a specified

moment of time. It represents all assets own by the business at a particular

moment of time and the claim of the owners and outsiders against those

assets at that time. It in a way of the financial condition of the business at

that time.

The important distinct an income statement and balance sheet is that the

income statement is for a period while balance which is for a particular date.

Income statement is therefore a flow report, as contrasted with the balance

sheet which is a static report

Comparative Balance Sheets

The comparative balance sheet analysis is the study of the same items, group

of items and computed items in two or more balance sheets of the same

enterprise on different dates. The changes in periodic balance sheet items

reflect the conduct of a business. The changes can be observed by

comparison of the balance sheet at the beginning and at the end of a period

and these changes can help in informing an opinion about the progress of

and enterprise.

Balance Sheet of Tecumseh Products India Pvt. Ltd.

During the year 2003- 2004

**All amounts are in thousands 2003 2004 Inc/Dec Amount Amount Amount %SOURCES OF FUNDS Share Holders Funds Share Capital 1990534 1990534 0 0Reserves and Surplus 218647 362394 143747 66Advance share Application Amount 7

(A) 2209181 2352928 143747 Loan Funds Secured Loans 166539 200909 34370 25Unsecured Loans 0 180000 180000 0

(B) 166539 380909 214370 129 (A +B) = ( C ) 2375720 2733837 358117 15

APPLICATION OF FUNDS Fixed Assets Gross block 189464 1978628 83985 4LESS: Accumulated Depreciation 446313 588836 142523 32Net Block 1448330 1389792 -58538 4ADD: Capital Work in progress 3693 248639 212246 583(including Capital Advances), Net 10Fixed Assets held for disposal 856 0 -856 100

(D) 1485579 1638431 156852 10Investments (E) 1040 1040 0 0Deferred Tax Asset-Net (F) 0 97432 97432 100Current Assets, Loans and Advances Inventories 561630 630518 68888 12Sundry Debtors 387771 708107 320336 83Cash and bank balances 24837 56675 31838 128Loan and Advances 103140 105677 2537 2other current Assets

(G) 1077378 1500977 423599 39Less: Current Liabilities and Provisions Current Liabilities 614498 809145 194647 32Provisions 46723 53523 6800 15

(H) 661221 862668 201447 30Net Current Assets (G - H) = (I) 417053 638309 221256 53Miscellaneous Expenditure (written off) 2759 0 -2759 100Profit and Loss Account (J) 470185 358625 -111560 24

Total (D+E+F+I+J) 2375720 2733837 358117 15

Interpretation (2003-2004):

1. The comparative balance sheet of the company during the year 2003-

2004 records that the current assets have increased by 423599

thousands i.e.,39%

2. Because of increase in current assets we can say that the short – term

solvency of the company is good.

3. The current liabilities have increased by 201447 thousands i.e.,30.4%

4. Fixed assets have decreased by 153708 thousands i.e.,10%

5. The shareholders funds of the company have increased when

compared to previous year. So we can say that long-term solvency of

the company is satisfactory.

6. There is increase in working capital of 222152 thousands when

compared to the previous year. So we can say that the financial

position of the company is good.

Balance Sheet of Tecumseh Products India Pvt. Ltd.

During the year 2004- 2005

**All amounts are in thousands 2004 2005 Inc/Dec Amount Amount Amount %SOURCES OF FUNDS Share Holders Funds Share Capital 1990534 2101995 111461 5Reserves and Surplus 362394 362394 0 0Advance share Application Amount

(A) 2352928 2464389 111461 5Loan Funds Secured Loans 200909 136179 -64730 -32Unsecured Loans 180000 293101 113101 63

(B) 380909 429280 48371 13(A +B) = ( C ) 2733837 2893669 159832 6

APPLICATION OF FUNDS Fixed Assets Gross block 1978628 2401884 423256 21LESS: Accumulated Depreciation 588836 763652 174816 30Net Block 1389792 1638232 248440 18ADD: Capital Work in progress 248639 197374 -51265 21(including Capital Advances), Net 1638431 1835606 197155 12Fixed Assets held for disposal 0 0 0

(D) 1638431 1835606 197175 12Investments (E) 1040 40 -1000 -96Deferred Tax Asset-Net (F) 97432 56461 -40971 -42Current Assets, Loans and Advances Inventories 630518 765380 134862 21Sundry Debtors 708107 656472 -51635 -7Cash and bank balances 50675 35502 -15173 -31Loan and Advances 105677 231379 125702 118other current Assets 0 0 0 0

(G) 1500977 1688733 187756 -13Less: Current Liabilities and Provisions Current Liabilities 809145 904025 94880 12Provisions 53523 125183 71660 134

(H) 862668 1029208 166540 19Net Current Assets (G - H) = (I) 638309 659525 21216 3Miscellaneous Expenditure (written off) Profit and Loss Account (J) 358625 342037 -16588 -5

Total (D+E+F+I+J) 2733837 2893669 159832 6

Interpretation (2004-2005)

1. The comparative balance sheet of the company during the years 2004-

2005 records that the current assets have increased by 187756

thousands i.e.,13%

2. Because of increase in current assets we can say that the short – term

solvency of the company is good.

3. The current liabilities have increased by 166540 thousands i.e.,19%

4. Fixed assets have decreased by 197175 thousands i.e.,12%

5. The shareholders funds of the company have increased when

compared to previous year. So we can say that long-term solvency of

the company is satisfactory.

6. There is an increase in working capital of 212216 thousands when

compared to the previous year. So we can say that the financial

position of the company is good.

Balance Sheet of Tecumseh Products India Pvt. Ltd.

During the year 2005- 2006

**All amounts are in thousands 2005 2006 Inc/Dec Amount Amount Amount %SOURCES OF FUNDS Share Holders Funds Share Capital 2101995 2201861 99866 5Reserves and Surplus 362394 362394 0Advance share Application Amount

(A) 2464389 2564255 99866 4Loan Funds Secured Loans 136179 324407 188228 138Unsecured Loans 293101 549874 256773 88

(B) 429280 874281 445001 104(A +B) = ( C ) 2893669 3438536 544867 19

APPLICATION OF FUNDS Fixed Assets Gross block 2401884 2733711 331827 14LESS: Accumulated Depreciation 763652 964819 201167 26Net Block 1638232 1768892 130660 8ADD: Capital Work in progress 197374 87601 -109773 -56(including Capital Advances), Net 1835606 1856493 20887 1Fixed Assets held for disposal 0 1081 1081

(D) 1835606 1857574 21968 1Investments (E) 40 40 0 0Deferred Tax Asset-Net (F) 56461 52682 -3779 7Current Assets, Loans and Advances Inventories 765380 1250752 485372 63Sundry Debtors 656472 568707 -87765 -13Cash and bank balances 35502 25034 -10468 -29Loan and Advances 202347 369731 167384 83other current Assets 29032 93380 64348 222

(G) 1688733 2307604 618871 37Less: Current Liabilities and Provisions Current Liabilities 904025 1001083 97058 11Provisions 125183 154071 28888 23

(H) 1029208 1155154 125946 12Net Current Assets (G - H) = (I) 659525 1152450 492925 75Miscellaneous Expenditure (written off) Profit and Loss Account (J) 342037 375790 33753 10

Total (D+E+F+I+J) 2893669 3438536 544867 19

Interpretation (2005-2006)

1. The comparative balance sheet of the company during the years

2005-2006 records that the current assets have increased by 618871

thousands i.e.,37%

2. Because of increase in current assets we can say that the short – term

solvency of the company is good.

3. The current liabilities have increased by 125946 thousands i.e.,12%

4. Fixed assets have increased by 21968 thousands.

5. The shareholders funds of the company have increased when

compared to previous year. So we can say that long-term solvency of

the company is satisfactory.

6. There is increase in working capital of 492925 thousands when

compared to the previous year. So we can say that the financial

position of the company is good.

Balance Sheet of Tecumseh Products India Pvt. Ltd.

During the year 2006- 2007**All amounts are in thousands

2006 2007 Inc/Dec Amount Amount Amount %SOURCES OF FUNDS Share Holders Funds Share Capital 2201861 2201861 0 0Reserves and Surplus 362394 362394 0 0Advance share Application Amount

(A) 2564255 2564255 0 0Loan FundsSecured Loans 324407 384509 60102 19Unsecured Loans 549874 1003594 453720 83

(B) 874281 1388103 513822 15(A +B) = ( C ) 3438536 3952358 513822 15

APPLICATION OF FUNDSFixed AssetsGross block 2733711 3441023 707312 26LESS: Accumulated Depreciation 964819 1187425 222606 23Net Block 1768892 2253598 484706 27ADD: Capital Work in progress 87601 187512 99911 114(including Capital Advances), Net 1856493Fixed Assets held for disposal 1081 0 -1081 0

(D) 1857574 2441110 583536 31Investments (E) 40 40 40 0Deferred Tax Asset-Net (F) 52682 52682 52682 0Current Assets, Loans and AdvancesInventories 1250752 1144247 -106505 -9Sundry Debtors 568707 316288 -252419 -44Cash and bank balances 25034 58827 33793 135Loan and Advances 93380 192467 99087 106other current Assets 369731 438281 68550 19

(G) 2307604 2150110 -157494 -7Less: Current Liabilities and ProvisionsCurrent Liabilities 1001083 1192012 190929 19Provisions 154071 167153 13082 8

(H) 1155154 1359165 204011 18Net Current Assets (G - H) = (I) 1152450 790945 -361505 -31Miscellaneous Expenditure (written off)Profit and Loss Account (J) 375790 667581 291791 78

Total (D+E+F+I+J) 3438536

3952358 513822 15

Interpretation (2006-2007):

1. The comparative balance sheet of the company during the years 2006-

2007 records that the current assets have decreased by 157494

thousands i.e.,7%

2. Because of decrease in current assets we can say that the short – term

solvency of the company is not good.

3. The current liabilities have increased by 204011 thousands i.e., 18%

4. Fixed assets have increased by 583536 thousands i.e.,10%

5. The shareholders funds of the company have increased when

compared to previous year. So we can say that long-term solvency of

the company did not yield any increase when compared to previous

year.

6. There is an decrease in working capital of 361505 thousands

compared to the previous year.

7. Hence the financial position of the company is not satisfactory.

Balance Sheet of Tecumseh Products India Pvt. Ltd.During the year 2007 – 2008

**All amounts are in thousands 2007 2008 Inc/Dec Amount Amount Amount %SOURCES OF FUNDS Share Holders Funds Share Capital 2201861 2201861 0 0Reserves and Surplus 362394 362394 0 0Advance share Application Amount

(A) 2564255 2564255 0 0Loan FundsSecured Loans 384509 318621 -65888 17Unsecured Loans 1003594 1202681 259087 26

(B) 1388103 1501302 193199 14(A +B) = ( C ) 3952358 4145556 193198 5

APPLICATION OF FUNDSFixed AssetsGross block 3441023 3668021 226998 7LESS: Accumulated Depreciation 1187425 1477290 289865 24Net Block 2253598 2190732 -62866 -3ADD: Capital Work in progress 187512 70620 -116892 -62(including Capital Advances), NetFixed Assets held for disposal 0 0 0 0

(D) 2441110 2261352 -179758 -7Investments (E) 40 40 0 0Deferred Tax Asset-Net (F) 52682 52682 0 0Current Assets, Loans and AdvancesInventories 1144247 926645 -217602 -19Sundry Debtors 316288 629396 313108 99Cash and bank balances 58827 17637 -41190 -70Loan and Advances 438281 231325 -206956 -47other current Assets 192467 204544 12077 6

(G) 2150110 2009547 -140563 -7Less: Current Liabilities and ProvisionsCurrent Liabilities 1192012 1225515 33503 3Provisions 167153 202313 35160 21

(H) 1359165 14127828 68663 5Net Current Assets (G - H) = (I) 790945 581720 -209225 -26Miscellaneous Expenditure (written off)Profit and Loss Account (J) 667581 1249702 582181 87

Total (D+E+F+I+J) 3952358 4145556 193198 5

Interpretation (2007-2008)

1. The comparative balance sheet of the company during the years 2007-

2008 records that the current assets have decreased by -157497

thousands i.e.,7%

2. Because of decrease in current assets we can say that the short – term

solvency of the company is not good.

3. The current liabilities have increased by 204011 thousands i.e.,18%

4. Fixed assets have decreased by 179758 thousands i.e.,7%

5. The shareholders fund of the company is decreased when compared to

previous year.

6. There is a decrease in working capital of 2029225 thousands

compared to the previous year.

7. Hence the financial position of the company is not satisfactory.

CHAPTER - 5

SUMMARY & FINDINGS

SUMMARY

FINDINGS & SUGGESTIONS

BIBLIOGRAPHY

SUMMARY

Tecumseh Products Company’s (TPC) global vision of providing Comfort,

health and convenience to million worldwide, gives an impetus for the

company’s steady diversification into new frontiers. And today, this cooling

giant’s products are available in over a 100 countries across the globe.

TPC entered India through a dual acquisition of SIEL compressors limited-

Hyderabad and the compressor division of whirlpool India limited-

Hyderabad and the compressor division of whirlpool India limited at

Ballabgrah in July 1997.

Tecumseh products India private limited (TRIPL) is a fully owned

subsidiary of TPC. Tecumseh products India private limited is largest

independent manufacturer of compressors in the country.

Since acquisition, TPC has invested about US&85 million into its facilities

in India for capacity and quality infrastructure improvement.

India’s No.1

Today TRIPL is the largest independent manufacturer of both Air

conditioner and Refrigerator compressor in India.

Testimonials to Excellence

The superior products and services offered by TRIPL have made it the first

choice of leading multinational brands in the Air conditioning and

Refrigeration business in India. TRIPL has also begun exports to Middle

East, U.S.A, Pakistan, Bangladesh, Sri Lanka and other countries.

Just the Right compressor

Covering the entire gamut of cooling needs, Tecumseh’s range of

compressors is widely used in Air conditioners, Refrigerators, and

commercial Refrigeration Applications.

Hyderabad facility:

This is the first compressor manufacturing facility in India. Built on 55 acres

of land, the manufacturing facility at Hyderabad, Andhra Pradesh caters to

Air-conditioning and commercial Refrigeration Application. The facility is

both ISO 9001 and 14001 certified.

One of the four global technology Development centers (TDS) of TPC is

located in this facility.

The in-house Application Engineering testing facility is well equipped to

optimize and ensure performance improvement of the appliance.

Ratio Analysis:

The ratio analysis is one of the most powerful tools of financial analysis. it is

the process of establishing and interpreting various ratios (Quantities

relationship between figures and groups of figures).it is with the help of

ratios that the financial statements can be analysis more clearly and decision

are made from such analyses.

A ratio is simple arithmetic expression of the relationship of one to another.

According to accountants Handbooks by Ixen and Bedford a ratio is an

expression of the quantities relationship between two numbers.

Types of Ratios:

i. Liquidity Ratios

ii. Leverage Ratios

iii. Profitability Ratios

iv. Activity Ratios

i. Liquidity Ratio

Measures firms ability to meet its obligation; leverage ratios show the

proportions of the debt equity in financing the firm’s assets; activity

ratios reflect the firm efficiency in utilizing its assets, and profitability

ratios measure overall performance and effectiveness of the firm.

ii. Leverage Ratio

The short-term creditors, like bankers and suppliers of raw materials,

are more concerned with the forms current debt paying ability. On the

other hand, long term creditors like debenture holder’s financial

institution etc. are more concerned with the firm’s long term financial

strength. A firm should have strong short as well as long-term

financial position.

iii. Profitability Ratio

Profitability refers to net result of business operation two types of

ratios are used to measure profitability. These are profit margin ratios

rate of return ratios. While profit margin ratios shows the relationship

between profit and investment.

The important profit margin ratios are:

Gross profit Ratio,

Operating profit ratio,

Net profit Ratio.

The important rate of return ratios are:

Return on assets Return of capital employed,

Return on shareholders’ equity,

Return on equity share capital.

iv. Activity Ratio

These ratios are also referred to activity ratios asset management

ratios. They measure how efficiency a firm employs the assets. They

are based on the relationship between level of activity and levels of

various assets. The important turnover ratios are inventory turnover

ratio, debtors’ turnover ratio, creditors’ turnover ratio, fixed turnover

ratio, total assets turnover ratio.

Comparative balance sheet

The comparative balance sheet analysis is the study of the trend of the same

items, group of items and computed items in two or more balance sheets of

the same enterprise on different dates. The changes in periodic observed by

comparison of the balance sheet at the end of a period and these changes can

help in informing an opinion about the progress of and enterprise.

While interpreting comparative balance sheet the interpreter is expected to

study the following aspects;-

1. Current interpreting comparative and liquidity

position

2. Long term financial position

3. Profitability of the concern

Findings & Suggestions

1. The TRIPL’s net working capital is satisfactory between the years

2003- 2006 since it shows increasing trend ; but after that it is in

declining position

2. The current ratio of TRIPL is satisfactory during the period of study

2003 – 2004 to 2005-2006. It is increased from 1.74 to 1.99 but after

that it is declining.

3. The average quick ratio of TRIPL is not good though the quick ratio is

showing maximum value of 0.91 in the year 2005-06 and then it is

declining to be deal

4. Fixed assets turnover ratio of TRIPL increased from .84 times to 1.95.

The company has to maintain this.

5. Inventory turnover ratio of TRIPL is also increased gradually, without

any fit falls up to 2005-06. But in the year 2005-06 it is declined to

3.02, and again it has increased to 4.02 in the year 2007-2008. Good

inventory management is good sign for efficient management

6. Total Assets turnover ratio of TRIPL is not satisfactory because it is

always below one, except in the year 2007 – 2008 having a value of

1.03

7. Return on investment is not satisfactory. This indicates that the

company’s funds are not being utilized in a better way.

8. Return on Net worth is not satisfactory since it is decreased from 4.95

to 0.69 in the year 2004 -2005, -1.34 in the year 2005 – 2006, -11.61

in the year 2005 – 2006 and -23.1 in the year 2007 – 2008

9. The TRIPL’S Net Profit Ratio is showing negative profit in the year

2005 – 2006. These event is an expected one because since from the

previous two years it is showing the decline stage in Net Profit Ratio

10.The TRIPL’S Gross Profit Margin of TRIPL increases in decreases

due to the increase in sales

11.Profit Margin of TRIPL is decreasing and showing negative profit

because there is increase in the price of copper

12.The TRIPL’S Net Working Capital Ratio is satisfactory.

13.The total Debt ratio is increased from 0.14 to 0.59 during the years

2001 to 2006 this means the company is borrowing money from the

banks well.

14.The TRIPL’s return on Total Assets ratio shows a negative sign in the

year 2005 – 2006

15.The Operating Ratio of TRIPL increase from 64.24 to 101.16 in the

year 2005 -06, 114.3 in the year 2006-07 and reached to 124.1 in the

year 2007-08. So the company has to reduce its operating costs.

16.The Operating Ratio of TRIPL isn’t satisfactory. Due to increase in

cost of production, this ratio is decreasing. So the has to reduce its

office administration expenses

17.Improve position funds should be utilized properly.

18.Better Awareness to increaser the sales are suggested.

19.Cost cut down mechanics can be employed.

20.Better production technique can be employed.

BIBLIOGRAPHY

www.evanimics.com

www.damodaram.com

www.investopedia.com

www.valuebasedmanagement.net

www.nepz.org

www.Lsbn.ac.uk

www.lmu.ac.uk

www.isixsigma.com

www.tecumsehindia.com

BOOKS

Financial Management Written By M.Y. Khan & P.K. Jain

Financial Management Written By Prasanna Chandra

Financial Management Written By I. M. Pandey

Financial Management Written By S. N. Maheswari