Dissertion Project

7/29/2019 Dissertion Project

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Working Capital Management

CHAPTER I

Industrial profileCom pany profile

Theoreticalbackground

SVU Department of management studies, T.P.T. 1


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INDUSTRIAL PROFILE



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GENERAL INTRODUCTION

INDUSTRY PROFILE

INDUSTRIAL BACKGROUND

BIRTH OF AUTOMOBILES IN THE WORLD

Your automobile is probably the second most important investment made,

after the home. The simple or swanky addition to your persona has a fascinating

history and makes interesting reading. The cars on the road today are the products of

consistent progression, from horse-drawn carts to modern day automobiles. The

primary function has always been transporting passengers, with the help of a built-in

motor or engine. The use of these babies on the road for flaunting is restrained mostly

to the rich, who can afford the burn-out of fuel for a frivolous indulgence.

Automobiles or motor-cars are designed to seat between one and eight people.

The beginning of usage of automobile dated back four thousand years ago

when people learned to use wheel for transportation. People during that period used

carts made of wood. Then with the beginning of Iron Age, people mastered

themselves and started using vehicles made of metals and these vehicles are strong

and can carry heavy loads. Then with the air of technology blowing the world they

started developing vehicles that can run by power source. The first was Guido da

Vigevano in 1335. It was a windmill-type drive to gears and thus to wheels. Vitoria

designed a similar vehicle that was also never built. Later Leonardo da Vinci designed

Clock work driven tricycle with their steering and a differential mechanism

between the rear wheels.

In the early 15th century, the Portuguese arrived in Chaina and the interaction

or two cultures led to a variety of new technologies, including the creation of a wheel

that turned under its own power. By the 1600s, small steam-powered engine models

were developed, but it was another century before a full-sized engine-powered vehicle

was created.

James Watt when invented the steam engine in 1705, which were

revolutionary and it started a revolution around the world. Although by the mid-15th

century the idea of a self-propelled vehicle had been put into practice with the



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development of experimental vehicles powered by means of springs, clockworks, and

the wind.

Nicolas-Joseph Cygnet of France is considered to have built the first true

automobile in 1769. Designed by Cygnet and constructed by M.Brezin, it is also the

first vehicle to move under its own power for which there is a record. Evans was the

first American who obtained a patent for a self-propelled carriage. During the

1830s, the steam vehicles had made great advances. But stiff competition from

railway companies and crude legislations in Britain forced the poor steam vehicle

gradually out of use on roads.

Carl Benz and Gottlieb Daimler, both Germans, share the credit of changingthe transport habits of the world, for their efforts laid the foundation of the great

motor industry, as we know it today. First, Carl Benz invented the petrol engine in

1885 and a year later Daimler made a car driven by motor of his own design and the

rest is history.

France too had joined the motoring scenario by 1890 when two Frenchmen

Pan hard and Leasers began producing vehicles powered by Daimler engine, and

Daimler himself, possessed by the automobile spirit, went on adding new features tohis engine. He built the first V-Twin engine with a glowing platinum tube to explode

the cylinder gas-the very earliest form of sparking plug.

Charles Duryea built a motor carriage in America with petrol engine in 1982,

followed by Elwood Haynes in 1894, thus paving the way for motorcars in that

country.

For many years after the introduction of automobiles, three kinds of power

sources were in common use: steam engines, gasoline or petrol engines, and electrics

motors. In ten years from the invention of the petrol engine, the motorcar had evolved

itself into amazing designs and shapes. By 1898, there were 50 automobile-

manufacturing companies in the United States, a number that rose to 241 by 1908. In

that year, Henry Ford revolutionized the manufacture of automobiles with his

assembly-line style of production and brought out the Model T, a car that was

inexpensive versatile, and easy to maintain.



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Herbert Austin and William Morris, two different carmakers, introduced mass

production methods of assembly in the UK, thus paving the way for a revolution in

the automobile industry. Austin Seven was the worlds first practical four-seater

hutch bag car which brought the pleasures of motoring to many thousands of people

who could not buy a larger, more expensive car. Even the bull-nose Morris with

front mounted engine became the well-loved model and one of the most popular cars

in the 1920s.

Automobile manufactures in the 1930s and 1940s refined and improved on the

principles of Ford and other pioneers. Cars were generally large, and many were still

extremely expensive and luxurious; many of the most collectible cars date from this

time. The increased affluence of the United States after World War II led to the

development of large, petrol consuming vehicles, while most companies in Europe

made smaller, more fuel-efficient cars.

INDIAN HISTORY OF AUTOMOBILES

Although, vehicles has been used in India many years ago it was in the

limelight. In the early days, Indians has been using bullock carts and caravan as their

vehicles. They were also using ships that used to run wind. But along with the courseof time they were introduced to modern technology and the engineered themselves

along with the world.

The Indian two-wheeler industry made a small beginning in the earl 50s when

Automobile products of India (API) started manufacturing scooters in the country.

But today, India is the second largest manufacturer and producer of two wheelers in

the world. It stands next only to Japan and china in terms of the numbers of two-

wheelers produced

In 1948,Bajaj Auto began trading in important Vosper scooters and three-

wheelers. Finally. In 1960, it set up a shop to manufacture them in technical

collaboration with pigeon of Italy. The agreement in 1971. In the initial stages, API

dominated the scooter segment; Bajaj Auto later overtook it. Although various

government and private enterprises entered the fray for scooters, the only new player

that has lasted till today is LML. Under the regulated regime, foreign companies were

not allowed to operate in India. It was a complete seller market with the waiting



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period for getting a scooter from Bajaj Auto being as high as 12 years. The

motorcycles segment was no different, with only three manufacturers viz Enfield,

Ideal java and Escorts.

The two-wheeler market was opened to foreign competition in the mid-80s.

And Then market leaders-Escorts and Enfield- were caught unaware by the

Onslaught of the 100cc bikes of the four Indo-Japanese joint ventures. With

the availability of fuel-elf efficient low power bikes, demand swelled, resulting in

Hero Honda then the only producer of four stroke bikes (100cc category), gaining a

top slot.

The first Japanese motorcycles were introduced in the early eighties. TVs

Suzuki and Hero Honda brought in the first two-stroke and four-stroke engine

motorcycles respectively. These two players initially started with assembly of CKD

kits, and later on progressed to indigenous manufacturing. In the 90s the major growth

for motorcycle segment was brought in by Japanese motorcycles, which grew at a rate

of nearly 25% in the last five years. The industry had a smooth ride in the 50s, 60s

and 70s when the Government prohibited new entries and strictly controlled capacity

expansion. The industry saw a sudden growth in the 80s.

Enfield Bullet had a close competition with another sturdy bike named

Rajdoot; as the bike was strong enough to handle the rough Indian roads. When heavy

motorcycles were the order of the day, a relatively lighter bike had caught on the

imagination of the Indian two wheeler user. Ind-Suzuki bike launched by the then

TVS Suzuki group was an instant hit; however the bike could not sustain its initial

success due to the high import content in the vehicle and less of localization.

In scooters Bajaj Chetak has been hugely responsible for adding momentum to

the transport system of the country, till today it remains one of the most successful

brands to have come out of the Bajaj stable. Similarly LML Motors enjoyed a

reasonable success with the launch of LML select which came with new age

technology and improved performance.

The industry witnessed a steady growth of 14% leading to a peak volume of

1.9mn vehicles in 1990. In 1990, the entire automobile industry saw a drastic fall in

demand.



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India is one of the very few countries manufacturing three-wheelers in the

word. It is the worlds largest manufacturer and seller of three-wheelers. Bajaj Auto

commands a monopoly in the domestic market with a market share of above 80%, the

rest is shared by Bajaj Tempo, Graves Ltd and Scooters India. A variometric scooter

helped in providing ease of use to the scooter owners. India has also got a very huge

segment in four wheeler vehicles and has influenced the world as an attractive market

for four wheeler segment. It has also companies which produces trucks and buses.

India growth rate is causing every automobile company to get along with it.

RISING INDIA

With the rising levels of per capita income of people, the Indian two wheelermarket offers a huge potential for Growth. This growth is relevant in the light of the

fact that 70 percent of Indias populating is below the age 35 years and 150 million

people will be added to the working Population in the next five years. The number of

women in the urban work force is also increasing; this will lead to the Growth of

gearless scooters.

INCREASE IN INDIAS ECONOMEY AND GROWTH

The growth prospects of the Indian rural economy offer a significant

opportunity for the motorcycle industry in India. The penetration of motorcycles

amongst rural households with income levels grater the US$ 2,200 per annum has

already increased to over 50 per cent. The current target Segment for two wheelers,

i.e., households belonging to the Income category of US$ 2,200 12,000 is expected

to grow at a CAGR of 10 per cent.

GREATER AFFORDABILITY OF VEHICLES

The growth in two-wheeler sales in India has been driven by an increase in

affordability of these vehicles. An analysis of the price trends indicates that prices

have more or less stagnated in the past. This has been part of the marketing strategy

adopted by the manufacturers to gain volume, as well as conscious efforts adopted to

bring down costs. The operating expenses of leading manufacturers have declined by

around 15 per cent in the last five years. With greater avenues of financing, the

customers capacity to own a two wheeler has improved.



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LACK OF PUBLIC TRANSPORT SYSTEMS

The economic boom witnessed in the country and the increased migration to

urban areas have increased the traffic congestion in Indian cities and worsened the

existing infrastructure bottlenecks. Inadequate urban planning has meant that transport

systems have not kept pace with the economic boom and the growing urban

population. This has increased the dependence on personal modes of transport and the

two wheelers market has benefited from this infrastructure gap.

FACTORS AFFECTING THE MARKET

Post 1991, the Indian two-wheeler industry comprising of motorcycles,

scooters and cars opened up tremendously. The Indian motorcycle industry has

expanded at a 24% CAGR over the last five years, It Captured almost 80% of the

market primarily at the cost of the scooter and Moped segment. The scooter segment

though has witnessed a revival with the launch of scooty aimed at young women and

adolescents.

Purchasing Power is relatively high with buyers becoming more

discriminating. Reliability and economy have become more of a hygiene factor.

Buyers now demand two-wheelers that fit their personality thus increasing the scope

for differentiation and branding. Provision of financing through EMIs has provided a

means to satisfy the need of posses a convenient and stylish mode of transport in the

form of a two-wheeler. This has resulted in higher growth in the 125-150cc segment.

With the introduction of Government policies such as reduction in excise duty

from 16% to 12% and allowing for 100% FDI Barriers to entry has reduced.

However, the investment required for setting up large distribution channels and

service stations can be a major entry barrier. Another significant entry barrier is the

brand building required. Thus, initially foreign players set up Joint Ventures with

indigenous companies. After establishing their brand they have launched their own

line of products. E.g. Honda with Hero Group and Yamaha with Escorts.

RISING CUSTOMER EXPECTATIONS

The growth witnessed by the Indian two wheeler industry has attracted a

number of new entrants to the market and it is expected that the Indian industry will



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become more competitive in the future. The excess of products introduced in the past

has also raised customer expectations with respect to reliability, styling, performance

and economy. Inflation is a big factor that may play a part in moving the loyalties and

aspirations of people away from the four to the much cheaper and economical two

wheeler segment. Moreover, the constantly increasing prices of oil and increasing

interest rates on finance are not helping the cause either. Environmental Concerns are

also quite big on the agenda these days and do play a part in the preference of

concerns are also quite big on the agenda these days and do play a part in the

preference of consumers choices. The rising global temperatures along with daily

snippets in the national and international media about the thinning of ozone and

imminent environmental disaster have all contributed to the making of a present day

environmentally conscious consumer.

ENVIRONMENTAL AND SAFETY ISSUES

The increasing demand for two wheelers will need to be managed to address

issues relating to overcrowding of roads. Another problem is the insufficient

infrastructure for inspection to ensure adherence to emission norms. As the industry

grows, it is important to regulate the sale of used two wheelers in a more organized

manner for which a mechanism needs to be evolved. Unregulated sale of two

wheelers, especially in the rural areas, are likely to create issues related to emissions

and safety of vehicles.



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COMPANY PROFILE



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COMPANY PROFILE

SUZUKI MOTORCYCLES GLOBAL HISTORY

In 1909, Michio Suzuki founds the Suzuki Loom Company in Hamamatsu,

Japan. He builds industrial looms for the thriving Japanese silk industry. 1937 to

diversify activities, the company experiments with several interesting small car

prototypes, but none go into production because the Japanese government declares

civilian automobiles non essential commodities at the onset of WWII. Suzuki

produced its first motorcycle in 1954 called the Collide (90cc). Suzuki built small

capacity bikes during the 50s and 60s and had only small export success until the

introduction of the X6 (T20 super six) which gave Suzuki much name credibility.

With a well established name Suzuki dared enter the big bike market and in 1967

Suzuki introduced T500. In 1971 the GT7 the Water Buffalo was introduced in 1971

in America and the kettle in Britain both the same GT750 bike and the start for

Suzuki to enter the super bike market. Most bikes produced around the middle 70s

had enough power but lacked a steady frame.

The introduction of the Suzuki GS 1000 in 1978 changed this problem once

and for all. Suzuki pulled a stunt within the motorcycle market by introducing the

GSX-R750, which was such a direct copy of their formula race bike with the only

difference that this GSX was, road legal. It turned the super sport motorcycle market

upside down and dominated the way super bikes would look for the future. In 1997

the TL 1000S is the first Suzuki sport bike with a V-Twin engine. It will be followed

a year later by a racier R version. In 1999 mat MladinA wins the AMA Super bike

Championship, beginning a run of unprecedented dominance. Mladin will win five

more times, and more sharp edged, the company is one of the first to recognize what

might be called the semi-sport market, as opposed to the first to recognize what

might be called the semi-sport market, as opposed to the super sport market. In 1999

Suzuki introduced the Hayabusa; Suzuki calls the Hayabusa the ultimate aerodynamic

sports bike. Its powered by a 11298cc liquid-cooled DOHC in line 4- cylinder

engine that becomes the darling of land speed racers. This sent the Honda Blackbird

packing and became the worlds fastest production bike at a whopping 190 mph (307

km/h). in 2001 Suzuki introduced and upgrade GSX-R750 engine and created the



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GSX-R 1000 (998cc), which is a super bike with outstanding performance. In 2003

the GSX-R 1000 was restyled but still kept its position as a super class bike. In 2005

Suzukis original 4 stroke motocross, the RM-Z450, is equipped with a 4stroke

449cc engine, which features the Suzuki Advanced Sump system (SASS). Troy

Courser gives Suzuki its first and only (so far) world Super bike Championship. In

2006 the M109R, Suzukis flagship V-90.5mm stroke. In 2008 the B-king is

launched, powered by the 1340cc Hayabusa engine, the B-King is Suzukis flagship

big Naked bike. Suzuki says it has the top-ranked power output in the naked

category.

SUZUKI MOTORCYCLES INDIA HISTORY

Suzuki Motorcycle India Pvt. Ltd. engages in manufacturing two wheelers.

The companys products include motorcycles and scooters. It offers its products

through a network of dealers. The company was incorporated in 1997 and is based in

Gurgaon, India. Suzuki Motorcycle India Pvt. Ltd. Operates as the subsidiary of

Suzuki motor Corp.

Suzuki Motor Corporation (SMC), a global giant of motorcycle manufacturing

is headquartered in Japan. It holds major stake in its Indian subsidiary, SuzukiMotorcycle India Private Limited (SMIL), SMIL was set up after Suzukis re-reentry

into the Indian two-wheeler market after it severed ties with partner TVS in 2000-01.

Suzuki was then the technology provider in the erstwhile joint venture company TVS

Suzuki.

Suzuki Motorcycle India Pvt. Ltd. (SMIL) is the latest entry into the already

crowded Indian two-wheeler segment with players like Hero Honda, Bajaj Auto,

Honda, and TVS. SMIL have started their Indian operations with a 125cc mass

market motorcycle. It has made an initial investment of Rs 200 corers to start their

Indian operations. Company sources have revealed that Suzuki would follow up this

125cc bike with a high performance 150-cc sibling in 2010.

Their setup in Gorgon has the capabilities of manufacturing one lakh

motorcycles and they are ready to step that up massively if the situation arises. They

already have setup 40 dealerships around the country.



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PLANT AREA & PRODUCTION CAPACITY

They have installed their manufacturing plant in Gurgoan (Haryana) having

the annual capacity of 2, 50,000 units. Total land area of the facility at Gurgaon is 37

acres out of which the present plant is constructed in an area of 6.5 acres of land. The

remaining area of 30.5 acres is left for land development and future expansion.

MISSION OF SUZUKI

The core philosophy of Suzuki is to provide VALUE-PACKED

PRODUCTS Since the founding of Suzuki Motor Corporation; the Organizations

Endeavour has always been to provide VALUE-PACKED PRODUCTS as one of

the manufacturing philosophies.

Suzuki believes that VALUE-PACKED PRODUCTS come from the effort

to carry out product development from customers point of view. This policy has been

in effect since companys inspection and has helped the organization to meet

customers needs. AS a result, Suzukis products have become well received

throughout the world.

Suzuki is fully committed to create products that meet customers demand byutilizing its dynamic, long-nurtured technological advantage coupled with its fresh

and active human resources.

Develop products of superior value by focusing on the customers

Establish a refreshing and innovative company through team work

Strive for individual excellence through continuous improvement.

GROWTH REPORT

It has reported a growth of 47.66% in sales in the month of November 09 at

14745 units compared to 9986 units same month last year.

It has sold 14806 units in December 09 listing a strong growth of 61% over

its sales in December 08 despite recession. This increase of sales is attributed to the

tremendous response from the new products GS 150R and ACCESS 125.



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It has reported 93% growth in sales during the month of January 2010.IT has

sold 20441 units in January 10 listing a strong growth of 93% over its sales in

January 09.

It has sold 21752 units in March 10 listing an impressive growth of 76% over

its sales in March 09. The increase of sales is attributed to the tremendous response

from the new product Gs 150r and ACCESS 125.

It has great plans for the coming year and this is only the beginning. Their

objective is to offer quality products and customer satisfaction to consumers. This

growth momentum will further accelerate in coming months.

ENVIRONMENT

The philosophy of keeping environment first is properly percolated

downwards. To comply with all applicable legislations and setting standards thereof

remains only a beginning. Company thrives to discover and invent mechanisms for

better environment management systems and its a continuous process which is

managed by a separate wing of experts and specialist in the field.

CARE FOR EMPLOYEE

The company takes very good care of the employee by providing them well

designed working environment. Company try to maintain zero accident record

through regular safety audit, frequent training for staff, line associates and contractors.

To take care of the health of all our employees, they maintain all international

parameters and standards for drinking water, treated water, ambient air shop floor,

office and the outside

SIZUKI-APPLE AUTO AGENCY PVT. LTD

Suzuki-Apple Auto Agency Pvt. Ltd. Was set up in Bangalore on 31 st March,

2005 as a dealership company to by, sell, stock, display, deal I and dispose of all types

of motor vehicles and their parts and accessories. It is a private limited company and

has automobile workshops, servicing stations, and garage or repair shops for the

purpose of undertaking, cleaning, servicing and repairing of vehicles. The authorized

capital of the company is Rs 25, 00, 000 divided in to 25000 Equity shares of Rs 100

each. The first directors of the company are sri. C. Chandra Shekhar, Smt. N. Sobha



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and Sri N. Jayaram. NO invitation is issued to the public to subscribe for any shares in

or debentures of the company. It has got the authorization to sell Suzuki products in

the market. It is selling Suzuki products such as Suzuki sling shot Motorcycle, GS-

150r in the 150cc segment of motorcycle, Zeus 125cc in the 125cc segment of

motorcycle, ACCESS 125 in the scooty segment all over in Bangalore and has a good

management system who works efficiently. It has got wide range of products of

Suzuki Company and it also does advertisement to promote sales. It is the last stop

store for Suzuki lovers.

It has got good number of employees in various departments such as sales

department, accounts department, maintenance department, marketing department, etc

and they take very good care of the employees. They provide flexible timing of

working hours and provide incentives and benefits to their employees. They train their

employee and always see to maintain customer satisfaction.

They carry out parts inspection to ensure the product, the dimensional,

material, aesthetic & performance being maintained. While servicing of vehicles they

take utmost care to make sure that it is done in well manner and is up to the

expectation of the customer. For carrying out inspection they have sophisticated

machines and equipments. They also encourage customer feedback and suggestions.

Overall it can be regarded as one of the best dealership company in Bangalore.



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THEORETICAL BACKGROUND

WHAT IS FINANCE?



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Finance is the set of activities dealing with the management of funds. More

specifically, it is the decision of collection and use of funds. It is a branch of

economics that studies the management of money and other assets.

Finance is also the science and art of determining if the funds of an

organization are being used properly. Through financial analysis, companies and

businesses can take decisions and corrective actions towards the sources of income

and the expenses and investments that need to be made in order to stay competitive.

DEFINITION

Finance addresses the ways in which individuals, business entities and other

organizations allocate and use monetary resources over time. The term finance may

thus incorporate any of the following:

The study of money and other assets

The management of those assets

As a verb, to finance is to provide funds for business.

NEED OF FINANCE

A basic level of financial understanding for business managers and decision

makers should incorporate financial planning, costing and budgeting. The following

areas of business finance may be considered essential;

Understanding financial reports: Profit and Loss, The Balance Sheet, Cash

Flow Statements.

Key financial ratios: Profitability, Capital Turnover, Return On Capital,

Current Ratios.

Business finance: The Business Cycle, Planning, Year End Activities, Expense

Control.

Budgeting and Costing: Budget monitoring and control, Variance Analysis,

Cost planning and control.

Finance is a powerful factor in the success of any business. Most businesses

fail not due to poor levels of business but due to poor cash management. As a



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business leader, you are probably not looking to become a finance expert, but want to

apply financial awareness to your situational leadership decisions. You will want to

find a coach or trainer that can explain it simply without the financial jargon yet in a

way that adds real value to your leadership skills.

TYPES OF FINANCE

Finance which acts as the lifeblood in the modern business types is one of the

most important consideration for an entrepreneur company. While Implementing

expanding, diversifying, modernizing or rehabilitating any project the meaning of

finance is better understood.

Generally the Business enterprises need funds to meet different types of needs.

All the financial needs of a business may be broadly grouped into three categories,

which are as follows:

Long-term financial need :- Here the requirements of funds are for a period

exceeding 5-10 year. Investments in plant, machinery, land, buildings, etc, are

considered as long term financial needs.

Medium term financial needs:- In case of the medium term financial needs the time

constraint is fixed at a period exceeding one year but not exceeding 5 years. In is

fulfilled from the medium term sources and thus the demand of medium term

financial needs are generated.

Short term financial needs:- Financial needs dealing with financing the current

assets such as stock, debtors, cash, etc comes under this category. Meeting the

working capital requirements comes under this. Here the accounting period is of one

year.

SCOPE OF FINANCE

In modern business society the scope of finance is not so narrow. The scope of

finance function is not confined simply to the raising of funds.

If we confine the scope of finance function to the process of raising funds it

cannot and does not provide answer to many problems which arise after the funds are

collected. Scope of finance deals with the application of finance knowledge in

different areas of organization.



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Various decisions regarding

1) Acquisition of assets,

2) Specific form of assets where money is to be invested and

3) The composition of its liabilities

They are covered under the scope of finance function. These three questions cover

almost all finance functions of a firm and affect the three major decisions. They are:-

a) Investment Decisions

b) Financing Decisions

c) Dividend Decisions

Investment Decisions: Investment decisions are concerned with investment of

financial resources in log term assets. The investments are made for expansion

modernization setting up of new plant R&D expenditure and replacement of old

machinery. Investment decisions are strategies decisions for company as it involves

investment of fund for long time but company will start to realize return for that

investment after a long time period.

Financial Decisions:- Financial decisions involve raising of funds from different

sources like equity share holders preference share holders and debt sources. In fact

this decision is related with determining the optimum capital structure.

Some key issues of financing decisions making are :-

What mix of debt and equity to be used?

Can value of company be changed by changing the capital structure?

What is optimal debt equity mix?

Dividend Decisions: - Dividend decision of a company is crucial financial decisions.

Dividend decision of a company determines the amount of earnings to be distributed

to the shareholders and amount to be retained in the firm. Dividend policy of a

company significantly affects the market value of the stock of the company.



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OBJECTIVE OF FINANCE

Long term target /projections planning.

Financial Monitoring & tracking. Financial Planning for sick diversified or modernized companies.

Management Decisions Support for finance & Planning.

Financial Planning and Budgeting for fresh and existing companies.

Project Appraisal & Feasibility Analysis.

FINANCIAL GOALS

1) Profit Maximization: - Profit earning is the main aim of every economic activity.

A business being an economic institution must earn profit to cover its costs and

provide funds for growth. No business can survive without earning profit. Profit is a

measure of efficiency of a business enterprise.

Profits also serve as a protection against risks which cannot be ensured. The

accumulated profits enable a business to face risks like fall in prices, competition

from other units, adverse government policies etc. Thus, profit maximization is

considered as the main objective of business. The following arguments are advanced

in favor of profit maximization as the objective of business :

When profit earning is the aim of business then profit maximization should

be the obvious objective.

1. Profitability is a barometer for measuring efficiency and economic prosperity

of a business enterprise.

2. Economic and business conditions do not remain same at all times. There may

be adverse business conditions like recession, depression, severe competition

etc. A business will be able to survive under unfavorable situation, only if it

has some past earnings to rely upon. Therefore, a business should try to earn

more and more when situation is favorable.

3. Profits are the main sources of finance for the growth of a business. So, a

business should aim at maximization of profits for enabling its growth and

development.



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4. Profitability is essential for fulfilling social goals also. A firm by pursuing the

objective of profit maximization also maximizes socio- economic welfare.

2) Wealth Maximization: - Wealth maximization is the appropriate objective of an

enterprise. When the firm maximizes the stockholders wealth, the individual

stockholder can use this wealth to maximize his individual utility. It means that by

maximizing stockholders wealth the firm is operating consistently towards

maximizing stockholders utility.

A stockholders current wealth in the firm is the product of the number of

shares owned, multiplied with the current stock price per share.

This objective helps in increasing the values of shares in the market. The

shares market price serves as a performance index or report card of its progress. It

also indicates how well management is doing on behalf of the shareholder.

However, the maximization of the market price of the shares should be in the

long run. Every financial decision should be based on cost benefit analysis. If the

benefit is more than the cost, the decision will help in maximizing the wealth.

WORKING CAPITAL MANAGEMENT

Working capital management is concerned with the problems arise in

attempting to manage the current assets, the current liabilities and the inter

relationship that exist between them. The term current assets refers to those assets

which in ordinary course of business can be, or, will be, turned in to cash within one

year without undergoing a diminution in value and without disrupting the operation of

the firm. The major current assets are cash, marketable securities, account receivable

and inventory. Current liabilities ware those liabilities which intended at there

inception to be paid in ordinary course of business, within a year, out of the current

assets or earnings of the concern. The basic current liabilities are account payable,

bill payable, bank over-draft, and outstanding expenses.

The goal of working capital management is to manage the firm s Current

assets and current liabilities in such way that the satisfactory level of working capital

is mentioned. The current should be large enough to cover its current liabilities in

order to ensure a reasonable margin of the safety.



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DIFINITION:

1. According to Guttmann & Dougall Excess of current assets over current

liabilities.

2. According to Park & Gladson The excess of current assets of a business

(i.e. cash, accounts receivable, inventories) over current items owned to

employees and other (such as salaries & wages payable, accounts payable,

taxes owned to government).

NEED OF WORKING CAPITAL

The need for working capital gross or current assets cannot be over

emphasized. As already observed, the objective of financial decision making is to

maximize the shareholders wealth. To achieve this, it is necessary to generate

sufficient profits can be earned will naturally depend upon the magnitude of the sales

among other things but sales can not convert into cash. There is a need for working

capital in the form of current assets to deal with the problem as\rising out of lack o

immediate realization of cash against goods sold. Therefore sufficient working capital

is necessary to sustain sales activity. Technically this is refers to operating or cash

cycle. If the company has certain amount of cash, it will be required for purchasing

the raw material may be available on credit basis. Then the company has to spend

some amount for labor and factory overhead to convert the raw material in work in

progress, and ultimately finished goods. These finished goods convert in to sales on

credit basis in the form of sundry debtors. Sundry debtors are converting into cash

after expiry of credit period. Thus some amount of cash is blocked in raw materials.,

WIP, finished goods, and sundry debtors and day to day cash requirements. However

some part of current assets may be financed by the current liabilities also. The amount

required to be invested in this current assets is always higher than the funds available

from current liabilities. This is the precise reason why the needs for working capital

arise.

TYPE OF WORKING CAPITAL

The operating cycle creates the need for current assets (working capital).

However the need does not come to an end after the cycle is completed to



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Explain this continuing need of current assets a destination should be draw

between permanent and temporary working capital.

1. PermanentWorking Capital

The need for current assets arises, as already observed, because of the cash

cycle. To carry on business certain minimum level of working capital is necessary on

continues and uninterrupted basis. For all practical purpose, this requirement will

have to be met permanent as with other fixed assets. This requirement refers to as

permanent or fixed working capital.

2. Temporary Working Capital

Any amount over and above the permanent level of working capital is

temporary, fluctuating or variable, working capital. This portion of the required

working capital is needed to meet fluctuation in demand consequent upon changes in

production and sales as result of seasonal change.

DETERMINANTS OF WORKING CAPITAL

The amount of working capital is depends upon a following factors:

1. Nature of business

Some businesses are such, due to their very nature, that their requirement of

fixed capital is more rather than working capital. These businesses sell services and

not the commodities and that too on cash basis. As such, no founds are blocked in

piling inventories and also no funds are blocked in receivables. E.g. public utility

services like railways, infrastructure oriented project etc. there requirement of

working capital is less. On the other hand, there are some more money is blocked in

inventories and debtors.

2. Length of product on cycle

In some business like machine tools industry, the time gap between the

acquisition of raw material till the end of final production of finished products itself is

quit high. As such amount may be blocked either in raw material or work in progress

or finished goods or even in debtors. Naturally there need of working capital is high.

3. Size and growth of business



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In very small company the working capital requirement is quit high due to

high overhead, higher buying and selling cost etc. as medium size business positively

has edge over the small companies. But if the business start growing after certain

limit, the working capital requirements may adversely affect by the increasing size.

4. Profitability

The profitability of the business may be very in each and every individual

case, which is in turn its depend on numerous factors, but high profitability will

positively reduce the strain on working capital requirement of the company, because

the profits to the extend that they earned in cash may be used to meet the working

capital requirement of the company.

5. Operating efficiency

If the business is carried on more efficiently, it can operate in profits which

may reduce the stain on working capital; it may ensure proper utilization of existing

resources by eliminating the waste and improved coordination etc.

RATIO ANALYSIS

Ratio analysis shows the relationship between two items expressedmathematically. It helps to make quantitative and qualitative judgment with regard to

concerns financial position and performance. Ratio analysis help the outsiders just

like creditors, shareholders, debenture-holders, bankers to know about the profitability

and ability of the company to pay them interest and dividend etc. Ratios are calculated

from current year numbers and are then compared to previous year.

1.Current Ratio (CR): The CR is used primarily to determine a companys ability to

pay back its short term liabilities (debt and payables) with its short term assets (cash,inventory, accounts receivable). A standard ratio of 2:1 is considered favorable.

2. Quick Ratio (QR): Quick Ratio also known as acid test ratio or liquidity ratio is

more rigorous test to liquidity than the current ratio. The two determinants are Quick

assets and quick liabilities. Quick asset includes inventories and Quick liabilities are

excluded of bank overdraft. Quick ratio may be defined as the relationship between

quick assets and quick liabilities. The ideal ratio for this is 1



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3. Absolute Liquidity Ratio: Also known as Super Quick ratio is a ratio where

inventories and receivables are excluded from current assets and only absolute liquid

assets such as cash in hand, cash at bank and readily realized securities are taken into

consideration. The desirable norm for this ratio is 1:2 i.e., Re. 1 worth of absolute

liquid assets are sufficient for Rs. 2 worth of current liabilities.

4. Fixed Assets Turnover Ratio: This ratio indicates the extent to which the

investments in fixed assets contribute towards sales compared with previous period. It

indicates whether the investment in fixed assets has been judicious or not.

5. Current assets over total Assets: This ratio indicates the contribution made by the

current assets over the total assets. There should be average amount current assets ascompared to total assets because too much amount of current assets locked would

raise the risk and care should be taken to see where the division really requires.

6. Working Capital Turnover Ratio: Working capital of a concern is directly related

to sales. The current assets like debtors, bills receivable, cash and stock changes with

increase or decrease in sales. The ratio measures the efficiency with which the

working capital is being used by a firm.

7. Cash to Current Assets Ratio: - This ratio indicates the relationship between cash

and current assets. It is that cash in well balanced company should not be less than 5

percent to 10 percent of current assets. It helps to determine the minimum level of

cash monthly control of cash and historical records gives the indication of trends.

8. Debtors Turnover Ratio: Debtors turnover ratio indicates the velocity of debt

collection of a firm. In simple words, it indicates the member of times average debtors

are turned over during a year.

9. Average Debt collection Period: The average collection period represents the

average collection number of days for which a firm has to wait before its receivables

are converted into cash.

10. Stock Turnover Ratio: Stock turnover ratio reveals the number of times the stock

in trade is turned over in business during a particular period. High turnover indicates

the quick turnover of finished goods. It enables the firm judge the adequacy of current



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ratio. However, a relatively high turnover ratio indicates a very low level of inventory

and frequent stock outs.

11. Stock Conversion Period: This indicates the clearing period of the stocks. It is

calculated by dividing number of days with the stock turnover ratio.

12. Sundry Creditors to inventory Ratio: This ratio shows the extent to which

inventories are procured through credit purchase and also explains the extent of

inventory obtained through cash purchase. If the ratio is more than one it denote the

entire inventory is purchased on credit.

13. Inventory to Net Working capital: Inventory to working capital indicates the

relationship between inventory and working capital. A reduction in inventory results

in small percentage of reduction in working capital and vice versa. A lower ratio

indicates a sound working capital position. The standard norm for this ratio is 1:1,

Preferably the inventory should be lower than the working capital.

CURRENT ISSUES

The automotive industry designs, develops, manufactures, markets, and sells

motor vehicles, and is one of the worlds most important economic sectors by

revenue. Around the world, there were about 806 million cars and light trucks on the

road in 2007, consuming over 26-0 billion gallons of gasoline and diesel fuel yearly.

This results in huge amount of pollution. These create a negative impacts fall on those

social groups who are also least likely to own and drive cars.

So, environmental pollution is one of the most concerned issue that is

surrounding the industry, maximum pollution is released by automobiles which is

why different countries have set standard for vehicles to lessen these harsh effects.

Now-a-days every automobile industry is taking this matter into concern and are

coming up with low emission vehicle and electric vehicles. These new kind of

vehicles creates less pollution. Moreover, vehicles which use hydrogen as fuel are

also developed which creates no smoke but water and is very suitable for

environment. Safety is also another issue and R&D is happening in this field to make

the vehicles safe to ride by inputting technologies like air bags, rapid brake system,

distance tracing system, GPS, etc. Moreover work is going on to develop self driving

remote vehicle to make the journey safer and even.



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CHAPTER II

Need for the studyScope of the Study

Objectives of the StudyResearch Methodology

Limitations of the Study



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NEED FOR THE STUDY

The problems which are common to most of the corporate entities

Capacity Utilization

Mainly working requirements of capital

They the importance of the study revels as to how efficiently

the working capital has been used so for in the organization.



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SCOPE OF THE STUDY

Working capital forms a significant investment in every manufacturing

industry. This study is to cover the significance of working capital in a manufacturing

industry which is specific to that study unit and not available to others. The study is to

analyze the operating cycle and how different management affects it.



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OBJECTIVES OF THE STUDY

The purpose of doing the study is to make a vivid investigation of the working

of the company from inception till date.

To access the company trend for the past four year.

To find out the movement of funds utilized by the company.

To overview the liquidity position of the company.

To evaluate inventory management.

To access the debt paying capacity of the company.



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REASEARCH METHODOLOGY

The data collected for this research can be classified as follows:

1) Primary data collection method: The primary data is that data which is collected

fresh or first hand, and for first time which is original in nature.

2) Secondary data collection method : The secondary data are those which have

already collected and stored. Secondary data are easily acquired from secondary data

such as records, journals, annual reports, Secondary data also made available through

trade magazines, balance sheets, books etc. The project is based on secondary

information collected through five years annual report of the company, supported by

various books and internet sites. The data collection was aimed at study of working

capital management of the company.

RESEARCH MEASURE TOOL

Ratio analysis: -

Tables

Graphs



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LIMITATIONS OF THE STUDY

Following limitations were encountered while preparing this project:

Limited data: - This project has completed with annual reports; it just constitutes

one part of data collection i.e. secondary. There were limitations for primary data

collection because of confidentiality.

Limited period: this project is based on four year annual reports. Conclusions and

recommendations are based on such limited data. The trend of last four year may

or may not reflect the real working capital position of the company.



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CHAPTER III

Data analysis

&

Interpretation



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WORKING CAPITAL ANALYSIS

Statement showing changes in working capital of Suzuki apple auto agency

pvt.ltd during the year 2006 2007

Particulars

2006 2007

Change in working

Capital

Increase Decrease

CURRENT ASSETS:

Cash 8,49,980 10,12,820 1,62,840 -

Sundry Debtors 19,20,661 26,18,716 6,98,055 -

Stock 31,81,942 44,90,006 13,08,0642 -

Bills Receivables 3,61,450 2,03,500 - 1,57,950

Total Current assets(A) 63,14,003 83,25,042

CURRENT LIABILITIES:

Provisions 6,18,715 5,68,972 49,743 -

Sundry Creditors 4,98,480 5,19,705 - 21,225

Bills Payables 2,10,796 2,56,541 - 45,745

Other current liabilities &

expenses

2,80,980 5,60,345 - 2,79,365

Total Current Liabilities(B): 16,08,971 19,05,563

WORKING CAPITAL(A-B)

Current assets-current liabilities

47,05,062 64,19,479

Net Increase in Working capital 17,14,417 - - 17,14,417

64,19,479 64,19,479 22,18,702 22,18,702

.INTERPRETATION

From the above table it observed that the working capital of the company

has increased to Rs.64, 19,479 in the year 2007 from Rs.47, 05,062 in the year

2006. Because the current assets have increased than current liabilities and the

net working capital has increased to Rs.17, 14,417.



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Particulars

2007 2008

Change in working

Capital

Increase Decrease

CURRENT ASSETS:

Cash 10,12,820 17,75,453 7,62,633 -

Sundry Debtors 26,18,716 45,92,292 19,73,576 -

Stock 44,90,006 50,53,159 5,63,153 -

Bills Receivables 2,03,500 2,03,500 - -

Total Current assets(A) 83,25,042 1,16,24,40

4


Provisions 5,68,972 9,82,005 - 4,13,033

Sundry Creditors 5,19,705 15,69,676 - 10,49,971

Bills Payables 2,56,541 8,99,089 - 6,42,548


expenses

5,60,345 24,29,090 - 18,68,742




64,19,479 57,44,544

Net Increase in Working capital 6,74,935 6,74,935 -

64,19,479 64,19,479 39,74,294 3974,294

.INTERPRETATION


has decreased from Rs.64, 19,479 in the year 2007 to Rs.57, 44,544 in the year

2008. Because the current liabilities has increased and the net working capital

has decreased to Rs.6, 74,935.



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Particulars

2008 2009

Change in working

Capital

IncreaseDecrease

CURRENT ASSETS:

Cash 17,75,453 24,37,897 6,62,444 -

Sundry Debtors 45,92,292 53,47,235 7,54,943 -

Stock 50,53,159 34,77,596 - 15,75,563

Bills Receivables 2,03,500 9,53,500 7,50,000 -

Total Current assets(A) 1,16,24,40

4

1,22,16,22

8


Provisions 9,82,005 11,02,819 - 1,20,814

Sundry Creditors 15,69,676 18,55,946 - 2,86,270

Bills Payables 8,99,089 14,60,750 - 5,61,661


expenses

24,29,090 35,96,122 - 11,67,032




57,44,544 42,00,591

Net Increase in Working capital 15,43,953 15,43,953 -

57,44,544 57,44,544 37,11,340 37,11,340

.INTERPRETATION


has decreased from Rs.57, 44,544 in the year 2008 to Rs.42, 00,591 in the year

2009. Because the current liabilities has increased and the net working capital

has decreased to Rs.15, 43,953.



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Particulars

2009 2010

Change in working

Capital

Increase Decrease

CURRENT ASSETS:

Cash 24,37,897 53,23,547 28,85,650 -

Sundry Debtors 53,47,235 46,75,632 - 6,71,603

Stock 34,77,596 32,04,323 - 2,73,273

Bills Receivables 9,53,500 10,55,516 1,02,016 -


8

1,42,59,01

8


Provisions 11,02,819 19,09,496 - 8,06,677

Sundry Creditors 18,55,946 9,96,214 8,59,732 -

Bills Payables 14,60,750 17,99,016 - 3,38,266


expenses

35,96,122 11,19,559 24,76,732 -




42,00,591


84,34,733 84,34,733 63,23,962 63,23,961

.INTERPRETATION


has increased to Rs.84, 34,733 in the year 2009 from Rs.42, 00,591 in the year

2010. . Because the current assets have increased than current liabilities and the




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Particulars

2010 2011

Change in working

Capital

Increase Decrease

CURRENT ASSETS:

Cash 53,23,54

7

49,80,494 - 3,43,053

Sundry Debtors 46,75,63

2

41,51,214 - 5,24,418

Stock 32,04,32

3

30,28,401 - 1,75,922

Bills Receivables 10,55,51

6

11,75,492 1,19,976 -


8

1,33,35,60

1


Provisions 19,09,496 20,80,149 - 1,70,653

Sundry Creditors 9,96,214 4,05,411 5,90,803 -

Bills Payables 17,99,016 12,80,314 5,18,702 -


expenses

11,19,559 8,46,915 2,72,644 -




84,34,733 87,22,812


87,22,812 87,22,812 15,02,125 15,02,125

.INTERPRETATION


has increased from Rs.84, 34,733 in the year 2010 to Rs.87, 22,812 in the year



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2011. . Because the current assets have increased than current liabilities and the




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Current Ratio:

The CR is used primarily to determine a companys ability to pay back its

short term liabilities (debt and payables) with its short term assets (cash, inventory,

accounts receivable). A standard ratio of 2:1 is considered favorable.

TABLE 1

Table showing Current Ratio of Suzuki Apple Auto Agency Pvt. Ltd. From

the year 2006 07 to 2010-11

Formula:

Current AssetsCurrent Ratio = --------------------

Current Liabilities

Amount (Rs)

Year Current assets Current liabilities Ratio

2006-2007 83,25,042 19,05,563 4.36:12007-2008 1,16,24,404 58,79,860 1.98:1

2008-2009 1,22,16,228 80,15,637 1.52:1

2009-2010 1,42,59,018 58,24,285 2.45:1

2010-2011 1,33,35,601 46,12,789 2.89:1



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GRAPH 1

Graph showing Current Ratio of Suzuki Apple Auto Agency Pvt. Ltd. from

the year 2006-07 to 2010-11

CURRENT RATIO

4.36

1.98

1.52

2.45

2.89

0

1

2

3

4

5

2006-07 2007-08 2008-09 2009-10 2010-11

YEAR

RATIO

Ratio

Interpretation

The above graph indicates that the current ratio of the company was more than

standard in the year 2006-07 and after, it has decreased in the year 2007-08 and was

near to standard, and in 2008-09 it has decreased following an increase in the year

2009-10. an increase in the year 2010-11Hence, there is an ups and down trend in the

current ratio.



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Quick Ratio:

Quick Ratio also known as acid test ratio or liquidity ratio is more rigorous

test to liquidity than the current ratio. The two determinants are Quick assets and

quick liabilities. Quick asset includes inventories and Quick liabilities are excluded of

bank overdraft. Quick ratio may be defined as the relationship between quick assets

and quick liabilities. The ideal ratio for this is 1

TABLE 2

Table showing Quick Ratio of Suzuki Apple Auto Agency Pvt. Ltd. From

the year 2006 07 to 2010-11

Formula:

Quick Assets (Current Assets (Inventories + Prepaid Expenses)Quick Ratio = ------------------------------------------------------------------------------

Quick Liabilities (Current Liabilities Bank Overdraft)

Amount (Rs)

Year Quick Assets Quick Liabilities Ratio

2006-2007 38,35,036 18,64,406 2.06:1

2007-2008 65,71,245 58,10,414 1.13:1

2008-2009 87,38,632 80,15,637 1.09:1

2009-2010 1,10,54,695 58,24,285 1.89:1

2010-2011 1,20,13,753 46,12,790 2.60:1



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GRAPH 2

Graph showing Quick Ratio of Suzuki Apple Auto Agency Pvt. Ltd. from the year

2006-07 to 2010-11

QUICK RATIO

2.06

1.13 1.09

1.89

2.6

0

0.5

1

1.5

2

2.5

3

2006-07 2007-08 2008-09 2009-10 2010-11

YEAR

RATIO

Ratio

Interpretation

In this graph quick ratio was double the standard in the year 2006-07 and it

decreased in the year 2007-08 and 2008-09 touching nearly to standard in 2008-09

and it again bounced up, reflecting an increase and decrease in the movement.



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Absolute Liquid Ratio

Also known as Super Quick ratio is a ratio where inventories and receivables

are excluded from current assets and only absolute liquid assets such as cash in hand,

cash at bank and readily realized securities are taken into consideration. The desirable

norm for this ratio is 1:2 i.e., Re. 1 worth of absolute liquid assets are sufficient for

Rs. 2 worth of current liabilities.

TABLE 3

`Table showing Absolute Liquidity Ratio of Suzuki Apple Auto Agency Pvt.

Ltd. From the year 2006 07 to 2010-11

Formula:

Cash in hand and cash at bank + Marketable securitiesAbsolute Liquidity Ratio = -----------------------------------------------------------------

Current Liabilities

Amount (Rs)

Year Quick Assets Quick Liabilities Ratio

2006-2007 10,12,820 19,05,563 0.53:1

2007-2008 17,75,453 58,79,860 0.30:1

2008-2009 24,37,897 80,15,63 0.30:1

2009-2010 53,23,547 58,24,285 0.91:1

2010-2011 1,20,13,753 46,12,789 2.60:1



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GRAPH 3

Graph showing Absolute Liquidity Ratio of Suzuki Apple Auto Agency Pvt.

Ltd. from the year 2006-07 to 2010-11

Interpretation

The above graph indicates that the absolute liquidity ratio of the company was

0.53 with regard to 1 in the year 2006-07 and after that it has decreased in the year

2007-08 and 2008-09 and it has again increased in the year 2009-10. Hence, there is

an ups and down trend in the absolute liquidity ratio.

SVU Department of management studies, T.P.T.

ABSOLUTE LIQUID RATIO

0.530.3 0.3

0.91

2.6

0

0.5

1

1.5

2

2.5

3

2006-07 2007-08 2008-09 2009-10 2010-11

YEAR

RatioRATIO

46


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Fixed Assets Turnover Ratio: This ratio indicates the extent to which the

investments in fixed assets contribute towards sales compared with previous period. It

indicates whether the investment in fixed assets has been judicious or not.

TABLE 4

Table showing Fixed Asset Turnover Ratio of Suzuki Apple Auto Agency

Pvt. Ltd. From the year 2006 07 to 2010-11

Formula

Net SalesFixed Asset Turnover Ratio = -----------------------

Fixed Assets

Amount (Rs)

Year Net Sales Fixed Assets Ratio

2006-2007 4,58,69,570 15,80,731 29.02

2007-2008 5,56,69,956 44,39,180 40.93

2008-2009 9,49,29,062 44,39,180 21,38

2009-2010 12,29,30,200 36,44,013 33.73

2010-2011 18,07,44,421 61,90,072 29.1

GRAPH 4



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Graph showing Fixed Asset Turnover Ratio of Suzuki Apple Auto Agency

Pvt. Ltd. from the year 2006-07 to 2010-11

FIXED ASSETS TURNOVER RATIO

29.02

40.93

21.38

33.73

29.1

0

5

10

15

20

25

30

35

40

45

2006-07 2007-08 2008-09 2009-10 2010-11

YEAR

RATIO

Ratio

INTERPRETATION

The above graph indicates that the fixed asset turnover ratio of the company

was less in the year 2006-07 and after that it has increased in the year 2007-08 and it

has decreased in the year 2008-09 and was the lowest and then it has again increased

in the year 2009-10. Hence, there is a variation trend in the fixed asset turnover ratio.



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Current assets over total Assets: This ratio indicates the contribution made by the

current assets over the total assets. There should be average amount current assets as

compared to total assets because too much amount of current assets locked would

raise the risk and care should be taken to see where the division really requires.

TABLE 5

Table showing Current Assets over Total Assets Ratio of Suzuki Apple Auto

Agency Pvt. Ltd. From the year 2006 07 to 2010-11

Formula

Current AssetsCurrent Assets over Total Assets Ratio = -------------------- x 100

Total Assets

Amount (Rs)

Year Current Assets Total Assets Ratio(in%)

2006-2007 83,25,773 99,05,773 84.04

2007-2008 1,16,24,404 1,29,48,361 89.53

2008-2009 1,22,16,228 1,66,55,408 73.35

2009-2010 1,42,59,018 1,79,03,031 79.642010-2011 1,33,35,601 1,95,59,550 68.17



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GRAPH 5

Graph showing Current Assets over Total Assets Ratio of Suzuki Apple

Auto Agency Pvt. Ltd. from the year 2006-07 to 2010-11

CURRENT ASSETS TURNOVER RATIO

84.0489.53

73.3579.64

68.17

0

20

40

60

80

100

2006-07 2007-08 2008-09 2009-10 2010-11

YEAR

RATIO

Ratio

INTERPRETATION

The above graph indicated that the current assets over total assets of the

company was lowest in the year 2006-07 and after the it has maximized in the year

2007-08 and it has decreased in the year 2008-09 and then it has again increased in

the year 2009-10. Hence, there is an up and down trend in the current assets over

total assets ratio.



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Working Capital Turnover Ratio: Working capital of a concern is directly related to

sales. The current assets like debtors, bills receivable, cash and stock changes with

increase or decrease in sales. The ratio measures the efficiency with which the

working capital is being used by a firm.

TABLE 6

Table showing Working Capital Turnover Ratio of Suzuki Apple Auto


Formula

Net Sales

Working Capital Turnover Ratio = ----------------------------------------------------------Working Capital (Current Assets Current Liabilities)

Amount (Rs)

Year Net Sales Working Capital Ratio(in Times)

2006-2007 4,58,69,570 64,19,479 7.14

2007-2008 5,56,69,956 57,44,544 9.69

2008-2009 9,49,29,062 42,00,591 22.60

2009-2010 12,29,30,200 84,34,733 14.57

2010-2011 18,07,44,4421 87,22,812 20.72



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GRAPH 6

Graph showing Working Capital Turnover Ratio of Suzuki Apple Auto

Agency Pvt. Ltd. from the year 2006-07 to 2010-11

WORKING CAPITAL TURNOVER RATIO

7.14

9.69

22.6

14.57

20.72

0

5

10

15

20

25

2006-07 2007-08 2008-09 2009-10 2010-11

YEAR

RATIO

Ratio

INTERPRETATION

The above graph indicated that the working capital turnover ration of the

company was higher in the year 2006-07 and after that it has minimized in the year

2007-08 and it has increased in the year 2008-09 and then it has again decreased in

the year 2009-10. Hence, there is a fluctuation trend in the working capital turnover

ratio.



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Cash to Current Assets Ratio: - This ratio indicates the relationship between cash

and current assets. It is that cash in well balanced company should not be less than 5

percent to 10 percent of current assets. It helps to determine the minimum level of

cash monthly control of cash and historical records gives the indication of trends.

TABLE 7

Table showing Cash to Current Assets Ratio of Suzuki Apple Auto Agency


Formula

CashCash to Current Assets Ratio = ---------------------- x 100

Current Assets

Amount (Rs)

Year Cash Current Assets Ratio (in%)

2006-2007 10,12,820 83,25,042 12.16

2007-2008 17,75,453 1,16,24,404 15.272008-2009 24,37,897 1,22,16,228 19.95

2009-2010 53,23,547 1,42,59,018 37.33

2010-2011 94,44,024 1,33,35,601 70.81



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GRAPH 7

Graph showing Working Capital Turnover Ratio of Suzuki Apple Auto


CASH TO CURRENT ASSETS RATIO

12.1615.27

19.95

37.33

70.81

0

10

20

30

40

50

60

70

80

2006-07 2007-08 2008-09 2009-10 2010-11

YEAR

RAT

IO

Ratio

INTERPRETATION

The above graph indicates that the cash to current assets ratio of the company

was high in the year 2006-07 at 26.41 and after that it has decreased in the year 2007-

08 and was the lowest and it has increased in the year 2008-09 and then it has again

increased in the year 2009-10 where it is the highest. Hence, there is a variation trend

in the cash to current assets ratio



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Debtors Turnover Ratio: Debtors turnover ratio indicates the velocity of debt

collection of a firm. In simple words, it indicates the member of times average debtors

are turned over during a year.

TABLE 8

Table showing Debtors Turnover Ratio of Suzuki Apple Auto Agency Pvt.


Formula

Net SalesDebtors Turnover Ratio = -----------------

Average Debtors

Amount (Rs)

Year Net Sales Average Debtors Ratio (in Times)

2006-2007 4,58,69,570 26,18,716 17.52

2007-2008 5,56,69,956 45,92,292 12.12

2008-2009 9,49,29,062 53,47,235 17.75

2009-2010 12,29,062 46,75,632 26.29

2010-2011 18,07,44,421 76,22,272 23.71



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GRAPH 8

Graph showing Debtors Turnover Ratio of Suzuki Apple Auto Agency Pvt.


DEBITORS TURNOVER RATIO

17.52

12.12

17.75

26.29

23.71

0

5

10

15

20

25

30

35

2006-07 2007-08 2008-09 2009-10 2010-11

YEAR

RATIO

Ratio

INTERPRETATION

The above graph indicates that the debtors turnover ratio is low in 2007-08,

2008-09 and 2009-10. The lowest was in the year 2007-08. In 2009-10 the debtors

turnover ratios increased and attain the highest.



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Average Debt collection Period:

The average collection period represents the average collection number of

days for which a firm has to wait before its receivables are converted into cash.

TABLE 9

Table showing Average Collection Period of Suzuki Apple Auto Agency


Formula

Number of Working Days (365 days)Average Collection Period = -----------------------------------------------

Debtors Turnover Ratio

Amount (Rs)

Year No. of working

Days

Debtors Turnover

Ratio

Ratio (in days)

2006-2007 360 17.52 20.54

2007-2008 360 12.12 29.70

2008-2009 360 17.75 20.28

2009-2010 360 26.29 13.69

2010-2011 360 23.71 15.18



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GRAPH 9

Graph showing Average Collection Period of Suzuki Apple Auto Agency


AVERAGE COLLECTION PERIOD RATIO

20.54

29.7

20.28

13.6915.18

0

5

10

15

20

25

30

35

40

2006-07 2007-08 2008-09 2009-10 2010-11

YEAR

RATIO

Ratio

INTERPRETATION

The above graph indicates that the average collection period is highest in

2007-08 and in 2006-07 and 2008-09 it was almost the same time period but in 2009-

10 the debt collection period was lowest.



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Stock Turnover Ratio:

Stock turnover ratio reveals the number of times the stock in trade is turned

over in business during a particular period. High turnover indicates the quick turnover

of finished goods. It enables the firm judge the adequacy of current ratio. However, a

relatively high turnover ratio indicates a very low level of inventory and frequent

stock outs.

TABLE 10

Table showing Stock Turnover Ratio of Suzuki Apple Auto Agency Pvt.


Formula

Net SalesStock Turnover Ratio = -----------------

Inventory

Amount (Rs)

Year Net Sales Inventory Ratio (in times)

2006-2007 4,58,69,570 44,90,006 10.21

2007-2008 6,56,69,956 50,53,159 11.02

2008-2009 9,49,29,062 34,77,596 27.30

2009-2010 12,29,30,200 32,04,323 38.36

2010-2011 18,07,44,421 53,41,667 33.83



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GRAPH 10

Graph showing Stock Turnover Ratio of Suzuki Apple Auto Agency Pvt.


STOCK TURNOVER RATIO

10.21 11.02

27.3

38.36

33.83

0

10

20

30

40

50

2006-07 2007-08 2008-09 2009-10 2010-11

YEAR

RATIO

Ratio

INTERPRETATION

The above graph reflects that the stock turnover ratio has increased from 2006-

07 to 2009-10 and was the highest in 2010-11



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Stock Conversion Period:

This indicates the clearing period of the stocks. It is calculated by dividing

number of days with the stock turnover ratio.

.TABLE 11

Table showing Average Stock Turnover Ratio of Suzuki Apple Auto


Formula

Number of working days (365 days)Average Stock Turnover Ration = --------------------------------------------

Stock Turnover Ratio

Amount (Rs)

Year No. of working

Days

Stock Turnover

Ratio

Ratio (in days)

2006-2007 360 10.21 35.25

2007-2008 360 11.02 33.66

2008-2009 360 27.30 13.18

2009-2010 360 38.36 9.38

2010-2011 360 33.83 10.64



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GRAPH 11

Graph showing Average Stock Turnover Ratio of Suzuki Apple Auto


AVERAGE STOCK TURNOVER RATIO

35.2533.66

13.18

9.38 10.64

0

5

10

15

20

25

30

35

40

45

2006-07 2007-08 2008-09 2009-10 2010-11

YEAR

RATIO

Ratio

INTERPRETATION

The above graph indicates that the average stock turnover ratio has decreased

from 2006-07 to 2009-10 and was the highest in 2006-07 and slowly started falling

down and reached the lowest in 2010-11



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Sundry Creditors to inventory Ratio:

This ratio shows the extent to which inventories are procured through credit

purchase and also explains the extent of inventory obtained through cash purchase. If

the ratio is more than one it denote the entire inventory is purchased on credit

TABLE 12

Table showing Creditors to Inventory Ratio of Suzuki Apple Auto Agency


Formula

Sundry CreditorsCreditors to Inventory Ratio = --------------------------

Inventory

Amount (Rs)

Year Sundry Creditors Inventory Ratio (in times)

2006-2007 5,19,705 44,90,006 0.11

2007-2008 15,69,676 50,53,159 0.31

2008-2009 18,55,946 34,77,596 0.53

2009-2010 9,96,214 32,04,323 0.31

2010-2011 4,05,411 53,41,667 0.07



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GRAPH 12

Graph showing Creditors to Inventory Ratio of Suzuki Apple Auto Agency


CREDITORS TO INVENTORY RATIO

0.11

0.31

0.53

0.31

0.07

0

0.1

0.2

0.3

0.4

0.5

0.6

2006-07 2007-08 2008-09 2009-10 2010-11

YEAR

RATIO

Ratio

INTERPRETATION

The above graph indicates that in 2006-07 the creditors to inventory turnover

ratio was the least and then it increased in 2007-08 and 2008-09 and reached the

highest in 2008-09 and again dropped in 2009-10.



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Inventory to Net Working capital:

Inventory to working capital indicates the relationship between inventory and

working capital. A reduction in inventory results in small percentage of reduction in

working capital and vice versa. A lower ratio indicates a sound working capital

position. The standard norm for this ratio is 1:1, Preferably the inventory should be

lower than the working capital

TABLE 13

Table showing Inventory to Net Working Capital of Suzuki Apple Auto


Formula

InventoryInventory to Net Working Capital = ----------------------------- x 100

Net Working Capital

Amount (Rs)

Year Inventory Net working

Capital

Ratio (in %)

2006-2007 44,90,006 64,19,479 96.94

2007-2008 50,53,159 57,44,544 87.96

2008-2009 34,77,596 42,00,591 82.78

2009-2010 32,04,323 84,34,733 37.98

2010-2011 53,41,667 87,22,812 61.23



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GRAPH 13

Graph showing Inventory to Net Working Capital Ratio of Suzuki Apple

Auto Agency Pvt. Ltd. from the year 2006-07 to 2010-11

INVENTORY TO NET WORKING CAPITAL RATIO

69.94

87.9682.78

37.98

61.23

0

20

40

60

80

100

2006-07 2007-08 2008-09 2009-10 2010-11

YEAR

RATIO

Ratio

INTERPRETATION

The above graph indicates that the inventory to net working capital ratio has

increased from 2006-07 to 2007-08 and after that it has decreased in the consecutive

years, i.e., 2008-09 and 2009-10 and was the lowest in 2010-11.



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CHAPTER IV

FINDINGSSUGGESTIONS



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CONCLUSION

BIBLIOGRAPHYFINDINGS

1. The company current ratio in the all years is up to the standards in 2007 it is

4:1, but in the year 2008, 2009 is not good

2. The company current asset over total assets ratio was high in all the years with

sudden up and down movement and reflects that there might be high amount

of current assets locked up which should be treated efficiently.

3. The working capital ratio has increased in the consecutive three years starting

from 2006-07 to 2008-09 reflecting increase in the sales and decrease in the

working capital. But, it again increased in the year 2009-10 because ofincrease in the working capital.

4. The cash to current asset ration has increased in all the years because of

increase of cash reflecting the contribution of cash in current assets.

5. The debtors turnover ratio has shows a fluctuation in its trend and though there

is an increase from 2007-08 to 2008-09 it was very low in all the years and it s

because of increase in the debtors.

6. The average collection period more in the year 2006-07 to 2008-09 with an

average of 20 days but in the year 2009-10 it decreased and can be said that

there is an improvement in 2009-10.

7. The stock turnover ratio has increased thoroughly during all the years which

mean that the inventory is appropriately maintained.

8. The average stock turnover ratio has also decreased which means that there is

an improvement in maintaining the inventory.



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9. The inventory to working capital ratio indicates that the ratio is more in the

year 2007-08 and 2008-09 because there was good proportion of inventory as

to working capital but it decreased in the year 2009-10 because of low

inventory to working capital.

SUGGESTIONS

A study of the working capital management is of prime importance for both

internal and external analysis. Hence the study is undertaken to analyze the working

capital management of Suzuki-Apple Auto Agency Pvt. Ltd. This chapter has been

designed to recapitu

Dissertion Project

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